SOVIET ECONOMY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80M01009A001402430014-1
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 10
• Document Creation Date: December 27, 2016
• Document Release Date: February 28, 2013
• Sequence Number: 14
• Content Type: REPORT

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SOVIET ECONOMY
1. Soviet economic development is dominated by obsession
with rapid growth of heavy industry. A large part of reason
for this is their desire for strong military posture which is
made possible by continuing emphasis on investment at the
expense of consumption.
a. We estimate that 23% of Soviet gross national
product, equivalent to approximately 27 billions
of dollars, goes directly into capital invest-
ment?the base for expansion of future military
capabilities. Only 15% of our own gross national
product is used for capital investment purposes.
b. The Soviet forced draft expansion of heavy industry
is reflected in their low level of consumption and
resultant low standard of living.
1. About 60% of Soviet gross national product,
equivalent to 53 billions of dollars, is
devoted to consumption. In the United States
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consumption accounts for equivalent to
240 billions of dollars or nearly five times
that of the USSR.
c. Thus although the proportion of Soviet product
allocated to direct military expenditures is
about the same as in the U.S. (12%), the Soviets
are investing more o
of military production than any other country.
2. Hence before discussing the economic, industrial and
setentific position of the Soviet Union, I propose to discuss
what we believe its military posture to be.
3, The Soviet Bloc implacably believes in eventual
triumph of international communism. It expects and hopes to
achieve this end without a global war but feels it must be
prepared for war if other means fail or if it should be
attacked.
output in the means
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4. Soviet position due to their fear that global war,
while it might destroy the capitalist system and eventually
lead to a communist world, might also bring about their own
destruction and quite different group of men would rise from
ashes of a global struggle.
5. Therefore, estimate the Soviets will probably try
to avoid global war for the immediate future for this and
other reasons.
a. At the present time and pendingthe development
of an effective long-range bomber force, or long-
range guided missiles, they are not assured of
being able to destroy the Amer can industrial base
and our retaliatory power and hence win out in
the long ru
b. At the present time they are somewhat behind us
in the nuclear race and probably do not haveAW
an adequate nuclear stockpile for global war
purposes. They do, however, probably have a
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WO.
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stockpile which, if surprise were achieved, could
effect devastating damage.
c. They seem to feel a general military inferiority
to the United States except in ground forces and
possibly in guided missile development.
d. The Soviet consider themselves appreciably
encircled by American overseas bases and that
we have, unless they can neutralize these bases, a
more effective jumping off point to attack them
than they have to attack us.
6. I conclude that over the next decade they will continue
to devote of their gross natio al product every ounce of
strength which they think their people will stand to heavy
industrial development-the basis for military strength in
even more dis a t decades.
a. They will give lip service to the increase of
consumer goods although not so recklessly as
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during the alenkov regime.
b. It is clear from the new Sixth Five -Year Plan
that the real prtorty of heavy industry will
remain unchanged for some time.
7. We will, thereforeprobably have a situation during
the next decade or a good part of it where the So
t Union
will continue to devote as they do today about 35% of
gross national product to military ends or to capital investment.
a. This moans emphasis on heavy industry, atomic
weapons, aviationguided missiles, and related
fields of electronics, etc.
b. Where do they stand in this situation today?
Have here chart showing their industrial
production as compared in billions of dollars
to the United States. (See chart)
8. During quarter of century since Stalin consolidated
power position in 1928, USSR has risen from relatively
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undeveloped country to second largest economy in the world.
a. This growth particularly remarkable considering
destructive effects World War II.
b. It has involved transfer of millions of workers
from agriculture to urban occupations paralleled
by prodigious efforts to educate them in modern
skills and technology.
c. The Soviets have diverted an unusually large
portion of total national product to investment--
one and a half times that of U.S.A. The result
has been:
1. While capital goods output was raised ten-
fold, agricultural production failed to
match growth in population.
2. Planned goals for heavy industry have usually
been reached or surpassed while modest goals
for consumer goods have been chronically
unfulfilled.
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9. As indicated above, total output of USSR now is one-
third of U.S.A. but about 1.75 that of U.K. However, USSR
production of capital goods far larger proportion of total
national product than for U.S.A.
a. For example, USSR production of coal almost
equals that of U.S.A. while the number of machine
tools produced exceeds slightly that of U.S.A.
Its output of automobiles less that 5% of ours.
10. Sixth Five-Year Plan 1956-1960 follows traditional
Soviet line of heavy industrial output which will bring Soviet
industrial production in 1960 to nearly 2/5 of U.S.A. as against
1/5 in 1950.
a. Electronic output - -largely a military item
particularly for guided missiles - -will be tripled
or quadrupled. In field of special heat resistant
alloys where Soviets have done much fundamental
research a six-fold increase in production
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contemplated.
b. (See attached sheet for comparison of present
capital goods and consumer goods production in
certain key fields.)
11. I have read with interest your publication Resources
of the World. As applied to the Soviet Union, the problem of
food availability appears to be more difficult of solution
than hose of raw material, energy resource, and technical
manpower scarcities.
a. Both historical review and current analysis of
Soviet economic policy disclose greater success
and determinatton in coping with the latter three
problems than with that of adequacy and variety
of diet.
12. In their struggle to provide an adequate and varied
diet the Soviets have inaugurated their "new lands" program
to increase grain supplies. Whether or not this program will
in the long run be the hoped for success remains a big question.
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1 The lack of adequate rainfall makes success doubtful.
a. Soviet land resources are not unlimited as pointed
up by the experience encountered this year in
seeding areas to grain that are even now being
abandoned to return to grass.
b. The increase in land expansion will eventually
reach its limit and alone cannot be expected to
solve the problem of feeding an ever-increasing
1
population.
13. if the Soviets over expect to fulfill their promises
of a more varied and higher quality dist for their people,
they must invest heavily to greatly increase availability of
such things as fertilizers and special purpose machinery for
tilling and harvesting corn, vegetables and other crops as
well as those required in developing their animal industry.
14. Sven with a maximum effort of expanding acreage
and heavy,investment in the means of production, it is probable
that the increasing population will overtake availabilities
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and the Soviets will be forced to increase thports of quality
foods.
SCIENCE AND TECHNOLOGY
15. Kaganovich in a recent public speech said;
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