SOVIET TARGETS FOR TECHNICAL ADVANCES IN THE ECONOMY, 1959-65: A GENERAL CONSIDERATION

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• Document Creation Date: December 23, 2016
• Document Release Date: August 15, 2013
• Sequence Number: 1
• Publication Date: December 1, 1962
• Content Type: REPORT

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SECRET N? 3
Economic Intelligence Report
SOVIET TARGETS
FOR TECHNICAL ADVANCES IN THE ECONOMY, 1959-65:
A GENERAL CONSIDERATION
CIA/RR ER 62-42
December 1962
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
SECRET
GROUP
Excluded from outomatk
downgrading end
declassification
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SECRET
Economic Intelligence Report
SOVIET TARGETS
FOR TECHNICAL ADVANCES IN THE ECONOMY, 1959-65:
A GENERAL CONSIDERATION
CIA/RR ER 62-42
WARNING
This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Secs. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
SECRET
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FOREWORD
This report contains the general and summary sections of a more de-
tailed project in which are surveyed the directive plans for technical
advance in the nonagricultural sectors of the Soviet economy.
The project as a whole is designed (1) to summarize the plans for
technical advance in the nonagricultural sectors of the Soviet economy,
(2) to provide a comprehensive basis for comparing the plans of the indi-
vidual branches with one another and with the total program, and (3) to
examine the requirements for capital and labor implicit in the plans.
It is hoped that the various programs may be placed into some perspec-
tive so that "glamorous" prograns with minor economic significance are
not given undue weight and so that "unglamorous" programs with major
economic significance are not ignored. In many respects the project is
intended to raise questions to be answered, hopefully in subsequent re-
ports, either of this Office or of the many other groups and individuals
engaged in studying the Soviet economy.
The attention of the reader is directed to the fact that this report
is a survey of Soviet plans and intentions prepared as a preliminary step
to future evaluation of the prospects for the Soviet plans. The summari-
zation of the Soviet plans as found herein should not be interpreted as
an evaluation that the plans will be fulfilled, for the Soviet programs
face serious problems arising in the processes of planning, administra-
tion, and implementation.
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CONTENTS
Summary
I. Background
A. State-of-the-Art
B. Objectives of Soviet Technical Development
II. Technical Change and Industrial Employment
Page
1
5
5
7
9
A. General Plans for Change in Productivity, 1959-65 . 9
B. Plans for Reductions in the Workweek 10
C. Labor Force Requirements, 1965 and 1980 10
D. Some Significant Trends, 1959-65
III. Technical Change and Capital Formation 19
A. Capital Cost of Programs for Technical Advances . . 19
B. Capital Investment and Increases in Labor Produc-
tivity 20
IV. Problems of Planning Equipment Supply and Technical
Changes
27
A. Shortages of Equipment 27
B. Criteria for Decisions on Investment as a Cause of
Shortages of Equipment 27
C. Equipment Supply for Priority Projects 30
D. Planning and Administrative Framework for Technical
Advances 31
V. Preliminary Evaluation of the Impact of Technical Changes
on Future Soviet Industrial Growth 35
Appendix A. Methodology
Appendixes
39
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Tables
Page
1. USSR: Employment of Wageworkers and Implied Labor Sav-
ings from Change in Productivity, by Branch of Industry,
for the Seven Year Plan (1959-65) 15
2. USSR: Industrial Investment, by Branch of Industry, for
the Seven Year Plan (1959-65) 21
3. USSR: Comparison of Change in Fixed Capital per Worker
and Output per Worker, by Branch of Industry, for the
Seven Year Plan (1959-65) 25
4. USSR: Estimation of Industrial Fixed Capital, by Branch
of Industry, Selected Periods, 1958-65 4o
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SOVIET TARGETS
FOR TECHNICAL ADVANCES IN THE ECONOMY,-1959-65:
A GENERAL CONSIDERATION*
Summary
The USSR plans to achieve an increase of 80 percent in industrial
production during the Seven Year Plan (1959-65) with an increase of
about 20 percent in the employment of industrial wageworkers. Although
some part of the increased labor productivity is scheduled to result
from better management -- that is, less interruption of work because of
faulty uneven flow of material and power -- the major share of the in-
crease is to come from the application of better production techniques
or advanced technology. The advances in applied industrial technology
must be related to the low average level existing in the base period.
The USSR claims for 1959 an industrial labor productivity of 40 to 50
percent of that in the US. Because of differing methods of estimating
the value added in the industries of the two countries, the Soviet
worker is to be credited with producing little more than one-third of
the product of his US counterpart. In any event, measured in terms of
labor productivity, the average level of Soviet industrial technology
lags far behind that of the US, leaving much room for technological
advances without the introduction of any technology new either to the
USSR or to the West.
Previous Soviet preoccupation with increasing the total industrial
output, together with a limited capacity to supply the needed capital
equipment, has resulted in a failure to retire otherwise obsolete plant
and equipment. In other cases, efficient main-process equipment has
been installed but not the labor-saving materials handling and other
auxiliary equipment. In other words, scarcity of capital and an abun-
dance of labor supply, coupled with a high demand for the product, have
made profitable the continued operation of outmoded plant and equipment
in spite of the wide discrepancy in efficiency of the use of labor com-
pared with plants of more recent design.
During the Seven Year Plan period the relative availability of the
factors of production will change markedly. If the investment program
of the Seven Year Plan is carried out, the fixed capital of industry
will increase by more than 125 percent while production is planned to
increase 80 percent and the labor force by about 20 percent. Capital
per worker is planned almost to double while capital per unit of out-
put is planned to increase by one-fourth. It is apparent that, for
* The estimates and conclusions in this report represent the best
judgment of this Office as of 1 December 1962.
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planning purposes at least, large infusions of labor are not available
for transfer into industry from agriculture. Rather than make the in-
vestment in agriculture that would permit shifting even more workers to
industry, the Soviet planners have chosen to make a sizable investment
in reducing the labor requirement per unit of output in industry.
The lesser weight assigned to the growth of the labor force in the
Seven Year Plan may be illustrated by a comparison with recent trends.
During 1959-65 the average annual increase in industrial employment of
wageworkers is planned to be only 2 to 3 percent; in industrial fixed
capital, more than 12 percent; and in output, almost 9 percent. The
corresponding average annual increases realized during 1956-60 were
5 percent, 10 percent, and 10 percent, respectively. During 1959 and
1960, industrial employment, industrial fixed capital, and industrial
output all grew at rates greater than planned.
The Soviet labor force in industry in 1958 included 16.3 million
wageworkers. Given the planned increase in output, if there were no
increase in annual labor productivity, more than 29 million workers
would be required to achieve the planned output in 1965. Because of
the planned increases in labor productivity, 19 million to 20 million
wageworkers are expected to suffice in 1965.
Planned investment in Soviet industry during the period of the
Seven Year Plan is 104 billion rubles.* It is estimated that 15.7
billion rubles of investment are required to replace assets physically
retired during the period. A total of 64.3 billion rubles in addition
would have been required to expand fixed assets proportionately to out-
put for each of the 12 industrial branches included. There is then a
residual investment of 24.0 billion rubles in excess of that required
if production in 1965 were to be achieved with the same capital-labor
factor mix as existed in 1958. One might say that the Soviet planners
expect to save about 10 million workers by investing 24 billion rubles,
or about 2,300 rubles per worker displaced, but unfortunately an
industry-by-industry look quickly dispels the notion. The excess in-
vestment ranges from a negative 3,900 rubles per worker displaced in
the electric power industry to 81,000 rubles in the oil and gas industry.
The wide disparity calls for further refinement of the data before con-
clusions can be reached. For instance, investment data for oil and gas
include a substantial amount for construction of pipelines that displaces
railroad workers, not oil and gas workers.
* Ruble values in this report are given in new rubles established by
the Soviet currency reform of 1 January 1961. A nominal rate of exchange
based on the gold content of the respective currencies is 0.90 ruble to
US $1. This rate, however, should not be interpreted as an estimate of
the equivalent dollar value of similar US goods or services.
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Of perhaps more pertinence to the increase in Soviet labor produc-
tivity is the planned increase in industrial fixed assets per worker
from 4,290 rubles in 1958 to 8,310 rubles in 1965. There is again,
however, a wide and growing disparity between industries in assets per
worker. In 1958 the electric power industry had 29 times the 1,300
rubles per worker of light industry. By 1965 it will have 32 times
the 2,130 rubles per worker of light industry but will be surpassed by
the oil and gas industry, which is planned to have 4o times the capital
per worker of light industry.
Much of the improvement in Soviet labor productivity will come fro];
investment in mechanization -- that is, the provision of some tool or
implement to'reduce the physical effort required of the worker. In mid-
1959, almost one-half (47 percent) of the industrial workers performed
significant amounts of manual labor. Achievement of the goal of the
Seven Year Plan would not entirely eliminate workers performing manual
labor by 1965. By 1970, however, most of the feasible reductions of
manual labor will have been made. The continued growth of labor pro-
ductivity to achieve the goals of 1980 will depend, after 1970, on the
introduction of new technologies more sophisticated than the mere reduc-
tion of manual labor. At the same time, unless capital investment is
to grow inordinately, the Soviet planners will need to find technologies
that are capital-saving as well as labor-saving. With respect to auto-
mation the period of the Seven Year Plan may well be regarded as a period
of experimentation and intensive application in selected plants to pre-
pare for the broader applications to be made during the 1970's.
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I. Background
A. State-of-the-Art
Any consideration of Soviet targets for technical advances must
take some account of the state-of-the-art in the application of indus-
trial technology. To do so completely would require an examination shop
by shop, plant by plant, and industry by industry far beyond the capaci-
ties of this report.* In this report, there will be illustrated only
those general characteristics that have a bearing on subsequent attempts
to analyze the Soviet plans for technical advances in state industry.**
As measured by labor productivity, the level of Soviet industrial
technology in 1958 was low. The Soviet industrial worker in that year
produced less than the claimed 40 to 50 percent of the level of out-
put of a US industrial worker -- perhaps as little as one-third as much.
Not only was the average low, but the application of technology was very
uneven as between industries and also as between plants in an industry
and even as between shops in a plant. Perhaps the greatest contrast is
typified by an old Soviet woman sweeping the street with a twig brpom
in preparation for a parade of guided missiles. The USSR without doubt
has demonstrated great technological skills that have been preponderantly
applied to military production rather than to satisfying the wishes of
consumers -- hence the complaints of the textile industry of low produc-
tivity resulting from the continued use of spinning and weaving equipment
more than 40 years old. In the iron and steel industry in the Urals
region not far from Magnitogorsk, in the largest steel mill in the world,
small crude plants using charcoal rather than coke, which were typical
of the early Tsarist industry, are still in operation. Even in the
larger steel mills where output of pig iron per yard of blast-furnace
capacity is equal to that in the US, the total employment of labor per
ton of steel produced is about two and a half times as high.
It would appear, therefore, that in spite of the failure in Soviet
cost accounting to make adequate allowances for the cost of capital, the
scarcity of capital has forced the continued use of fixed assets that in
a competitive sense are obsolete. Or, put another way, the Soviet pre-
occupation with growth of output has been such that the management could
not afford the luxury of shutting down inefficient units. The capability
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** In this report, references to "industry" pertain to state industry
only and exclude handicraft and cooperative industry.
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of adding new units of capacity was so limited that each new unit had
to be planned as a net addition to capacity in order to satisfy more
nearly the total demand for the end product. In terms of marginal
analysis the effective demand for product has been so great as to toler-
ate the continued operation of old and technologically inefficient plant
and equipment at the relatively low wage rates that have prevailed.
The continued operation of technologically less efficient equipment
has a number of implications for an understanding of Soviet claims and
plans for technological advances in industry. First, a clear distinc-
tion needs to be made between the average level of technology and the
marginal capability. The latter can be improved only by research and
development at home or abroad leading to new techniques of production.
The average industrial technology, on the other hand, can be greatly
increased, with no increase at the margin, simply by replacing obsolete
processes with already known improvements or by making all new additions
at the upper end of the range of technologies represented in the industry.
It is with the average technology measured in terms of the average labor
productivity that Soviet plans for the introduction of new technology
in industry are concerned. Therefore, it is impossible to jump from the
planned improvement in the average level of technology applied in an
industry to any conclusion about the scientific achievements of the USSR.
Dealing with the average technology measured in terms of labor pro-
ductivity, it is impossible to isolate such marginal considerations as
"How much was the USSR willing to invest in order to make the last re-
duction in labor force requirements?" Yet the fact that the measurement
of the relative value of capital and labor is not so refined need not
cause too much concern, because an economy is being dealt with in which
the values of capital equipment, of labor, and of their product are all
determined independently of the relation of supply to effective demand.
Limitations of supply have often not been reflected in the price but
rather in some administered system of allocations. The pragmatic choice
to keep scarce capital equipment in use long after it would competitively
have been obsolete has already been commented on. Conversely, in the
case of labor, up to now it has been the practice to divert additional
labor from agriculture to meet the needs of industry. These actions
recognize, as the Soviet price structure does not, the very real scar-
city of capital and the relative abundance of labor. During the period
of the Seven Year Plan these relationships will be changing rapidly.
Capital assets in industry are planned to double and more while the
amount of labor planned to be diverted from agriculture to industry is
very modest. Although wages and prices of capital equipment may change
during the period, it will not be in recognition of their changing
availability. At best, in the subsequent analysis, only some general
evaluations of the Soviet plans for introducing new technology into
industry can be arrived at, and for this purpose an indication of some
changes in the average level of technology will suffice.
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B. Objectives of Soviet Technical Development
Soviet political theoreticians see the Soviet economy as being
in a stage of evolution toward the creation of the material-technical
basis necessary to the final achievement of Communism. The achieve-
ment of this basis is to be characterized by the prevalence of large-
scale production founded on electrification; full automation of produc-
tion; the large-scale use of chemical processes; the use of atomic energy
for economic purposes; and the development of workers who are widely
educated, highly qualified, and culturally advanced. In slightly more
pragmatic terms, the USSR links the achievement of this high level of
technology to victory in the race to overtake and surpass the "capital-
istic countries" in per capita production.
Although it would not be fruitful to dwell now on the ephemeral
visions of the Communist future, three conclusions can be drawn from
them. First, technical change is viewed as a necessary part of the evo-
lution of the Soviet economy. Second, technical change is a proper area
for competition with the Western economies. Finally, technical change
is viewed as somehow related to the development of Communist man -- in
other words, it has significant sociopolitical implications.
If technical change is inevitable, indeed essential, then the
specific programs for the development of the Soviet economy must attempt
to control and manipulate such change. Yet, because technical change
has elements of randomness and of response to circumstances that cannot
be readily foreseen, there is a large element of unpredictability.
On the positive side, there is evidence from research that tech-
nical progress is related to the resources devoted to research and de-
velopment, to the skills and attitudes of the people, to the growth of
capital investment and the structure of investment, to the nurturing of
a social and institutional environment favorable to productive changes,
to the availability and the dissemination of new techniques, and to the
criteria used to judge successful management. By careful attention to
all these factors, the leadership of the USSR hopes to create conditions
in which technical progress can flourish.
Recognition that the USSR is making a conscious effort in this
direction should not be a prejudgment that the effort will succeed.
There are many areas where conflicts in policy may inhibit timely choices
favorable to technological development. First, the concern of the regime
for economic growth is more obvious than are the objectives of that
growth, and certainly to many within the USSR will occur a doubt as to
the desirability of growth for growth's sake. Second, the preoccupation
with establishing the material-technical basis of Communism is more
obvious than the shape and nature of the new Communist society that is
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being planned for. Third, there are obvious areas of conflict in the
fact that changes in the economic structure imply changes in effective
power (the command over resources) to the possible detriment of one
group and to the benefit of another.
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II. Technical Change and Industrial Employment
A. General Plans for Change in Productivity, 1959-65
In the context of Soviet plans, technical advances are viewed
in the form of technical programs that change the efficiency of inputs
and, more particularly, that change labor productivity. Technical
change so defined would include the effects of structural change in the
economy (as the shift in the fuel base); economies of scale; improve-
ments in education; 'changes in the mix of final products; changes in
economic institutions and in the organization of the economy; improve-
ments in the utilization of labor; and, finally, technological changes
in the prodliction function (that is, changes in the alternative ways
of performing production processes).
In economic analysis these topics usually can be simplified to
three major groups: changes in technological coefficients and produc-
tion functions, changes in input prices, and changes in efficiency be-
cause of economies of scale, but the Soviet source material usually does
not make such distinctions, and in this report it will not be possible
to make these distinctions. As a consequence, it is necessary to focus
on the plans for increasing labor productivity and on the plans for in-
vestment that support this program.
It is a leading objective in Soviet plans for technical advances
that labor productivity be increased significantly, and achievement of
this objective is a major consideration in the detailed formulation of
actual programs. For this reason, it is of importance to consider the
plans for increasing labor productivity even though an important share
of such increase can be obtained without qualitative changes in equip-
ment or processes. Labor productivity can change in several ways with-
out representing a change in a production function -- as the result of
economies of scale or as the result of changes in the cost of labor
relative to capital that alter the optimal combination of capital and
labor among the available production alternatives. Such changes in
factor cost, however, are rarely instantaneous, and both factor costs
and production functions are likely to change during the passage of
time.
During the period of the Seven Year Plan the relative avail-
ability of the factors of production will change markedly. If the in-
vestment program of the Seven Year Plan is carried out, the fixed assets
of industry will increase by more than 125 percent while the labor force
is planned to increase about 20 percent and production is planned to
increase 80 percent. Capital per worker is planned almost to double
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while capital per unit of output is planned to increase by one-fourth.
It is apparent that, for planning purposes at least, large infusions
of labor were not available for transfer into industry from agriculture.
Rather than make the investment in agriculture that would permit shift-
ing more workers to industry, the Soviet planners chose to make a siz-
able investment in reducing the labor requirement per unit of output in
industry.
The lesser weight assigned to the growth of the labor force in
the Seven Year Plan may be illustrated by a comparison with recent
trends. During 1959 through 1965 the average annual increase in indus-
trial employment of wageworkers is planned to be only 2 to 3 percent;
in industrial fixed assets, more than 12 percent; and in output, almost
9 percent. The corresponding average annual increases realized during
1956 through 1960 were 5 percent, 10 percent, and 10 percent, respec-
tively. During 1959 and 1960, the first 2 years of the Seven Year Plan,
industrial employment, industrial fixed capital, and industrial output
all grew at rates greater than planned.
B. Plans for Reductions in the Workweek
Analysis of changes in annual labor productivity must recognize
the complications introduced by changes in the length of the workweek.
From 1959 through 1961, there was a reduction in the average workweek
in Soviet industry from approximately 44 hours to approximately 40
hours. Although it was intended that the various industries begin
transition to a 35-hour workweek during 1964-68, the new Twenty Year
Plan states only that the transition to the workweek of 34 to 36 hours
will be effected "during the coming 10 years" (that is, by 1970). II/
This vagueness in commitment makes it unwise to count on any further
reduction in the workweek by 1965.
For this reason, and for the further reason that the directive
plans have been prepared primarily on the basis of requirements for the
labor force as derived from plans for changes in annual labor produc-
tivity, the analysis in this report has been conducted in terms of the
plans governing annual productivity. On the basis of the reduction in
the workweek already accomplished, the targets for changes in labor
productivity on an hourly basis in 1965 would imply an increase rela-
tive to 1958 almost one-third greater than the targets on an annual
basis.
C. Labor Force Requirements, 1965 and 1980
In terms of the wageworkers and excluding the salaried personnel,
the Soviet economy in 1958 employed 16.3 million in industry, 3.9 million
in construction, 2.0 million in railroad transport, and 0.7 million in
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communications. 2/ Without gain in productivity (in annual terms), the
requirements for employment in 1965 would be as follows: for industry,
more than 29 million; for construction, 6.3 million; for railroad trans-
port, 2.8 million; and for communications, 1.1 million. Achievement of
the targets for annual gain in productivity would permit reduction of
these figures by about 10 million industrial wageworkers, 2.4 million
construction wageworkers, 0.7 million railroad wageworkers, and 0.3 mil-
lion communications wageworkers.
The industrial labor requirements stated in the foregoing para-
graph and subsequently throughout this report are derived from a branch-
by-branch application of the planned increase in production and in
productivity to the 1958 labor force. Unfortunately the data on labor
productivity and the planned increase in production by branch of in-
dustry may or may not
precisely equate to the unknown numbers used by the Soviet authorities
in the preparation of the Seven Year Plan. In the case of industrial
labor productivity the Seven Year Plan announcement set a goal of an
increase of 45 to 50 percent. The computations by branch of industry
shown in Table 1* imply an increase of 55 percent. This discrepancy,
which is small enough not to affect the validity of any conclusions
that might otherwise be drawn from this preliminary survey of Soviet
plans for the introduction of new technology, can arise in whole or in
part from a number of variations, among which are the following:
1. Data on productivity by branch of industry are from
sources subsequent to the plan announcement and may in some cases repre-
sent higher goals than those on which the original plan announcements
were predicated;
2. For several branches of industry, data on productivity
either have been estimated or perhaps have been rounded in the official
announcement;
3. In some cases the measure of increase in productivity
for a branch of industry may have been based on a definition of the
labor force different from that used in preparation of the plan.
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Had the total number of workers required in industry increased in
proportion to the index of increase in production of the plan announcement,
the 1965 labor force requirement for industry would have been 29.3 mil-
lion workers rather than 29.5 million, with no increase in productivity.
The labor saving in industrial employment resulting from the midpoint of
the announced increase in productivity of 45 to 50 percent would have
been only 9.4 million. It would be the rarest of coincidences, however,
* P. 15, below.
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if the labor requirement without change in productivity rose exactly in
proportion to the index of change in the gross value of product. The
only conditions that would satisfy such a result would be an exact
equality in output per worker in each branch of industry or a constant
rate of increase in gross value of output for each branch of industry.
Neither of these conditions appears to be true either for the base
period or for 1965. Differential rates of change in labor productivity
by branch of industry and its correlation with the introduction of new
technology through investment are the very subject toward which this
study is a small beginning. The differential in planned rates of
growth between heavy and light industries is already too well known to
require comment. Essentially it is to be expected that the weight of
any branch of industry in the total industrial labor force will differ
from its share in total gross value of product. With differential
rates of growth by branch of industry the total gross value of produc-
tion will increase at a rate to some degree different from the increase
in total labor requirements even though the labor requirements expand
proportionately to production in each branch of industry.
As indicated above, when calculated by branch of industry the
increase in labor force requirements with no change in productivity is
81 percent rather than the 80 percent indicated by the announced planned
increase in total gross value of output. This apparent high degree of
correlation is partly to be expected because the USSR gives a high
weight to labor cost in the value of product. On the other hand, the
correlation may not be so close as it appears. The indexes of increase
in production during the period of the Seven Year Flan are the best
estimates of responsible branches in this Office and are based on
numerous Soviet announcements. Not all of the announcements, however,
are linked to the original plan. In some cases the plan announcement,
like that for the coal industry, gives a planned increase in tonnage
to be produced without regard to differential price or quality or
place values. Furthermore, in the case of gross value of industrial
output, there is no base period total or breakdown by branch of in-
dustry against which indexes of growth can be tested to determine how
far the estimates by branch of industry differ from the increase of
80 percent of the announced plan.
In spite of the lack of Soviet value of output data, which would
permit a much more accurate calculation of labor productivity, capital
output, and increase in production, it is believed that the indexes of
production and the data on labor productivity available will permit of
meaningful analysis at least for the purpose of determining the advis-
ability of expending effort on future refinement. As can not be re-
peated too often, an estimate or calculation by branch of industry that
appears to differ from the plan announcement does not mean that the
plan has been revised any more than the statement of a plan figure means
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that it will be accomplished. Rather, the discrepancies are the result
of the inability, to reconstruct fully the
Soviet calculations in order to make a matrix consistent in precise de-
tail with all parts of the Seven Year Plan, if indeed the Soviet author-
ities themselves had such a matrix.
With full recognition that the data by branch of industry may
be only a close approximation of the information on which the Soviet
authorities based the Seven Year Plan announcement, the analysis can be
continued as long as the basing of major conclusions on minor vari-
ations in the numbers is avoided.
The rapid growth planned for industrial output will permit an
increase in industrial employment in spite of the vast labor savings
created by the increase in labor productivity, planned savings that
will amount to about 1.5 million industrial wageworkers as the annual
average during 1959-65.
During 1948-60, in the US, the increase in productivity of pro-
duction workers in industry has been more rapid than increases in indus-
trial output, and the number of production workers has declined from
13.9 million workers in 1947 to 13.2 million workers in 1960.* Given
an increase in output amounting to 28 percent in mining, 63 percent in
manufacturing, and 187 percent in gas and electric utilities and weight-
ing these indexes by employment in 1947, the industrial employment re-
quired for 1960 would have been more than 23 million workers in the
absence of increases in productivity. W Hence the total labor saving
during the 13 years from 1947 through 1960 totaled almost 10 million
in US industry, for an average annual saving of some 760,000.
The Soviet Seven Year Plan schedules a rate of increase in
annual labor productivity averaging 5.5 to 6.0 percent, somewhat less
than the average rate of 7.0 percent during the 5 years 1954 through
1958.** Indeed, the average annual increase realized during the 3 years
1959 through 1961 did fall to 5.7 percent. This decline, however, may
be attributed in large part to the effect of reduction in the workweek.
Evidently the Soviet planners expect a resumption of high annual rates.
The Twenty Year Plan would require an average annual increase in labor
productivity of more than 7 percent during 1961 through 1970 and of
* For rough comparability with the Soviet data, the data include only
production workers, not total employment, in mining, in manufacturing,
and in the gas and electric utilities.
** These rates are based on official Soviet data and tend to be biased
upward in relation to rates calculated using
Western methods of calculation.
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7 to 8 percent during 1971 through 1980. The longer term plans, however,
are less a summary of the expected effects of a concrete development
program than they are a statement of the objectives to be sought in
future formulation of programs. In this respect they are not particu-
larly useful for present consideration.
On the other hand, because the Seven Year Plan has been worked
out now in terms of specific investment programs and plans for technical
advances, it is worthwhile examining it in greater detail. In Table 1*
the implied labor savings from changes in productivity in Soviet indus-
try during the Seven Year Plan are summarized on the basis of the output
targets and the planned change in output per wageworker. In terms of
fixed capital per wageworker (see Table 3**), the five most labor-
intensive branches of industry are light industry; wood, paper, and
allied products; machine building and metal working; construction ma-
terials; and the food-processing industry. In 1958 these five indus-
tries employed 76 percent of the industrial wageworkers. During 1959-65
they are expected to achieve 77 percent of the total labor savings. As a
result of relative differences in the rate of growth in output and in
labor productivity, their share of the total employment should decline
slightly to 74 percent in 1965. Although this decline does not seem
very marked, it does mean that one-third of the increment in employment
during 1959-65 will be allocated to the capital-intensive industries,
which in 1958 employed only one-fifth of the labor force.
D. Some Significant Trends, 1959-65
From the available Soviet plan data, several important conclu-
sions may be drawn, as follows:
1. Approximately three-fourths of the total reduc-
tion in requirements for wageworkers in industry
is to come from the most labor-intensive branches
and in large part as the consequence of labor-
saving measures of mechanization and organiza-
tional change.
2. Among the branches of industry a larger share of
the net additions in the employment of wage-
workers is to be directed toward branches re-
quiring greater skills in labor than are usually
required in the labor-intensive branches.
* Table 1 follows on p. 15.
** P. 25, below.
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Table 1
USSR: Employment of Wageworkers and Implied Labor Savings
from Change in Productivity, by Branch of Industry,
for the Seven Year Plan (1959-65)
Employment
(Thousand Persons) 11/
Branch of State Industry
1965 Indexes (1958 = 100)
1958
1965
1959-65
1959-65
Increase
in Implied
Employment
Production
Output
per Worker
If No Change
in Productivity
If Change
in Productivity
Implied
Labor Saving
Total industry E/
180
145 to 150 si
16,279
29,302
19,866
9,436
3,587
Aggregate of branches
29,491
19,044
10,447
2,765
Machine building and metalworking
188
170
4,932
9,272
5,454
3,818
522
Light
150
136
2,515
3,772
2,774
998
259
Wood, paper, and allied products
159
153
2,252
3,581
2,341
1,240
89
Food processing
172
150
1,649
2,836
1,891
945
242
Construction materials
250
160
1,072
2,680
1,675
1,005
603
Coal
123
130
1,071
1,317
1,013
304
-58
Chemical
300
150
700
2,100
1,400
700
700
Ferrous metallurgy 1/
160
145
678
1,085
748
337
70
Nonferrous metallurgy
200
180
400
800
444
356
44
Electric power
24o
190
222
533
281
252
59
Oil and gas 17
250
150
138
345
230
115
92
Other Ei
180
147.5
650
1,170
793
377
143
b. Data are for average annual employment of wageworkers in industrial production and exclude salaried employees and employment in industrial co-
operatives. Labor savings have been calculated according to the equation given in Appendix A.
c. The Soviet announced goal for output per worker in industry during 1959-65 is an increase of 45 to 50 percent. The midpoint of this range has
been used for calculations including the "other" category.
d. Data. include wageworkers in ore mining.
e. Centralized electric power only, excluding distribution.
f. Production and refining only.
g. The "other" category in almost every case is a residual or average category and, as such, it is subject to a greater degree of inaccuracy than
the categories where more detailed and specific information is available.
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3. Within branches, there will be shifts in require-
ments for training and education as manual labor
is eliminated in large part and as the need in-
creases for workers who can supervise and service
the new machinery.
According to a recent survey, in mid-1959, 47 percent of the
Soviet industrial workers performed a significant amount of manual
labor. 2/ Fulfillment of plans for mechanization will displace most
of these laborers and necessitate training them for other jobs. At
the present time, one-third of the industrial workers have had train-
ing equal to some high school education or higher. 12/ In December
1960, 494,000 specialists with a college education or higher were
emilloyed in industry, including 377,000 engineers. A large part of
this total was employed in machine building -- 224,000 specialists in-
cluding 178,000 engineers. 11/ During the period of the Seven Year
Flan it is planned that the number of industrial specialists with a
college education or higher be increased by 50 percent above the num-
ber in 1958 and the number of engineers employed by industry be in-
creased 70 percent. 1.2../ Such personnel usually are salaried employees,
and it is significant that these increases are much higher than the
increase of about 20 percent in employment of industrial wageworkers
(see Table 1).
4. The greatest gains in productivity are to be real-
ized in the following industries (see Table 1):
electric power, nonferrous metallurgy, machine
building and metalworking, and construction ma-
terials. In the latter three, programs of mecha-
nization and the introduction of more productive
machinery play an important role; in the former,
great weight is being attached to automation
even though most of the labor saving results from
economies of scale from using larger, more pro-
ductive units of equipment.
5. The potential gains from the mechanization of
materials handling, plant transport, and stor-
age operations are very large. In 1958, 3.69
million wageworkers in Soviet industry were
employed in such functions, and 70 percent of
these were employed in the five most labor-
intensive industries. 1.3../
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6. Soviet writers have estimated the relative magni-
tudes of the main factors for increase in indus-
trial labor productivity, although the methods
of calculation are sometimes arbitrary. Thus
Aganbegian writes that industrial labor produc-
tivity is to increase 34 to 37 percent because
of the introduction of new equipment, new tech-
nology, new procedures, and specialization and
that it is to increase 11 to 13 percent because
of factors relating to the quality and nature
of the labor force. 1V
A Gosplan study in 1959 concluded that the possibilities of in-
crease in labor productivity had been underestimated in the Seven Year
Plan. This study stressed the importance of factors that did not in-
volve the supply of new equipment. Thus it found that improved organi-
zation of production and labor will account for the following shares of
the total increase in labor productivity: in ferrous metallurgy, 24 per-
cent; in machine construction, 32 percent; and in chemicals, 22 percent.
This study relates only 60 percent of the total increase in labor produc-
tivity in industry to capital investment in equipment and technology.* ly
By implication, approximately 60 percent of the total labor
saving of about 10 million wageworkers would be attributable to the use
of new equipment and to technological changes. Of these 6 million, al-
most 2 million would be freed through the mechanization of materials
handling work. 11/ Mechanization of a large part of the operations now
performed manually and the acquisition of more productive equipment,
either new or modernized, will account for most of the labor savings
attributable to capital formation. There does not appear to be any basis
to expect any acceleration in technical progress before 1965 from appli-
cations of automation in the industrial economy. But if a serious effort
is made to achieve the goals for industrial output and labor productivity
for 1980, there are major implications for the level of technology that
must be achieved. It is too early to judge the reality of these goals
and the feasibilities of programs that have not been worked out yet in
detail.
Much of the preceding discussion has been in terms of plans for
a total change in labor productivity. Now it will be useful to examine
* This figure may be equivalent to another statement that expenditures
for equipment, mechanization, and automation in industry would lead to
an increase of 30 percent in labor productivity; this statement was based
on a survey of 11 branches of industry with an implicit employment of
more than one-half of industrial employment. 12/
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the plans for capital investment during 1959-65 in order to estimate
the capital investment required to displace a worker in each of the
various branches of industry or conversely the planned increase in
capital per worker needed to facilitate the planned increase in labor
productivity. From these estimates, some judgment can be made con-
cerning the degree of substitution of capital for labor that has
already occurred in the various branches of Soviet industry and the
extent to which labor productivity depends on capital investment.
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III. Technical Change and Capital Formation
A. Capital Cost of Programs for Technical Advances
The chief instrument of production has become the machine, di-
rected ultimately by man. During the period of the Seven Year Plan the
total expenditures for the acquisition of machinery for the state sector
of the economy will be more than 60 billion to 65 billion rubles. 1.?_/
Of this total, approximately two-thirds, or some 40 billion rubles, are
for equipment to be used in industry.*
Various Soviet writers have made ambiguous statements about the
total capital investments in "integrated mechanization and automation"
during the Seven Year Plan. One source states that the "principal meas-
ures" will cost 10 billion rubles, a figure apparently not limited to
industry. 22/ Another says that the total will be "more than 10 billion
rubles" and in the context implies that this total also includes some ex-
penditures in the nonindustrial branches, including agriculture and trans-
portation. 21/ Another states that in 11 major branches of industry, 7.6
billion rubles will be spent. From these statements it seems reason-
able to expect that "expenditures for complex mechanization and automa-
tion" in all industry will amount to 7.6 billion to 10 billion rubles,
or somewhat less than one-fourth of the total expenditures in industry
for equipment.
It is not clear just what kinds of equipment are being procured
in this category of "expenditures for complex mechanization and automa-
tion." One likely hypothesis would be that the category covers all ex-
penditures for instrumentation, control devices, servomechanisms, com-
puters, and hoist-transport equipment (including conveyors and materials
handling equipment).
This hypothesis may be checked for consistency against what
is known about production of these lines of equipment. Thus the total
production of "instruments and the means of automation" is planned to
total 9.3 billion rubles during 1959-65, slightly more than one-half of
which, 23./ or 4.7 billion rubles, would be for industry. The total pro-
duction of hoist-transport equipment during 1959-65 is valued at 2 bil-
lion to 3 billion rubles, although not all of this equipment is desig-
nated for industry. Expenditures on these two categories of equipment
solely for industrial use would amount to about 6 billion to 7 billion
rubles. The total expenditures probably would include certain types of
* In 1959 an estimated 41 percent of industrial capital investment went
for equipment. 12/
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automated equipment, such as automatic lines (worth 0.14 billion
rubles2/11) and perhaps various expenditures on the "experimental
model plants," of which there are 81. 2.5./ It does not appear that
this particular hypothesis can be established firmly, but at least
it is not inconsistent with the facts.
B. Capital Investment and Increases in Labor Productivity
Conceptually the USSR could have planned to achieve the output
goals for 1965 by proportionate increases in labor and capital (fixed
assets). As already seen in the preceding section, the increase in
industrial employment during the period of the Seven Year Plan is to
be less than proportionate to the increase in output. In this section
the investment plans will be considered to see whether or not and to
what extent they deviate from such proportionality. Theoretically a
more than proportional increase in capital might be expected to make
up for the labor saving. It is also to be expected that there would
be some basic uniformity (roughly equivalent to the uniformity of wage
rate) as between industries in the amount of above-norm investment made
to save a worker and that lower-than-norm investment per worker saved
in any particular industry would be some gauge of the more rapid tech-
nological gain in that industry.
The USSR plans to invest 104 billion rubles in industry during
the 1959-65 period. The replacement value of fixed capital at the be-
ginning of the period was estimated to be about 70 billion rubles. A
planned increase in production of 80 percent would have required a
theoretical net increase of 56 billion rubles in fixed assets. Because
more than a proportionate share of the increase in production is to
take place in industries with a higher share of capital than of value
of output, the application of the varying increases in production to
fixed assets of each industrial sector shows that the increased capital
requirements total 64.3 billion rubles if the capital/output ratio of
each industry is to be maintained. From the 104 billion rubles of in-
vestment, provision first must be made for the replacement of fixed
assets estimated at 15.7 billion rubles to be retired during the Seven
Year Plan to determine the net increase of fixed assets, which is 88.3
billion rubles. Deducting the 64.3 billion rubles required to main-
tain the capital/output ratio of the component industrial sectors leaves
a residual "above-norm" investment of 24.0 billion rubles. Thus the
first expectation of an increase in capital more than proportional to
the increase in output is fulfilled. It remains to be seen, however,
whether the "above-norm" investment can be directly related to labor
saving.
The detailed distributions of investment by industrial sector
are shown in Table 2.* In order to facilitate subsequent thinking about
* Table 2 follows on p. 21.
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Table 2
USSR: Industrial Investment, by Branch of Industry,
for the Seven Year Plan (1959-65)
Billion Rubles a/
Branch
Gross Capital
Investment Required
to Maintain 1958 Capital/Output Ratios
Investment Available
to Increase
Ratio of Added Investment
to Labor Savings
To Equip
Available
to Increase
of State Industry
Investment12/
Retirements
New Workers
Capital per Worker
Capital/Output Ratios
(Thousand Rubles 2/ per Worker)
Total industry
104.0
15.68
14.89
49.45
23.98
2.30 sj
Machine building and
metalworking
11.8
2.86
1.60
11.71
-4.37
-1.14
Light
3.3
0.66
0.34
1.30
1.00
1.00
Wood, paper, and
allied products
5.8
0.91
0.16
2.29
2.44
1.97
Food processing
4.7
1.26
1.00
3.92
-1.48
-1.57
Construction materials
7.7
0.91
1.96
3.26
1.57
1.56
Coal
7.5
1.32
-0.34
1.79
4.73
15.56
Chemical
10.0
0.94
2.93
2.93
3.20
4.57
Ferrous metallurgy
10.0
1.50
0.69
3.33
4.48
13.29
Nonferrous metallurgy
5.5
0.70
0.31
2.51
1.98
5.56
Electric power
12.5
1.87
2.21
9.41
-0.99
-3.93
Oil and gas
17.0
1.47
2.76
3.45
9.32
81.04
Other
8.2
1.28
1.27
3.55
2.10
5.57
a. 1955 rubles converted to new rubles established by the Soviet currency reform of 1 January 1961.
b. Where the planned investment in an industrial sector has been announced as a range, the lower of the range has been used. Had the upper
limit been used instead, 2.4 billion rubles additional would have been distributed by the industrial sector, and "other" would have dropped to
5.8 billion rubles.
c. Derived as the quotient of the sum of the added capital investment of the individual branches divided by the sum of the labor saving of the
individual branches.
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the increase in fixed assets per worker employed, the investment required
to maintain the capital/output ratio of the component industrial sectors
has been subdivided into that which equips new workers to the level per
worker in 1958 and that which is planned to go to increasing the capital
per worker. The result of this analysis is to distribute the investment
as follows:
Total
Estimated requirements to replace the
assets retired
Estimated requirements to increase the
fixed assets of each industrial com-
ponent in proportion to output
Including:
To equip new workers planned to
be employed
To increase capital per worker
Estimated additional investment that
raises both capital per worker and
capital/output ratios
Billion Rubles
104.00
15.68
64.34.
14.89
4-9.45
23.98
In Table 2* the 23.98 billion rubles of investment available
to substitute for labor have been divided by the labor saving shown in
Table 1.** It would have been very easy to conclude that the Soviet
planners expected to displace about 10 million workers for the addi-
tional investment of 24 billion rubles and therefore placed a value of
about 2,300 rubles on each displacement. Upon looking at the individual
industrial sectors, however, a wide variation is found. The additional
planned investment per worker displaced ranges from a negative 3,900
rubles in the electric power industries to a high of 81,000 rubles in
the oil and gas industry. If those industries in which planned invest-
ment is less than that required to maintain the capital/output ratio --
food processing, electric power, machine building and metalworking, and
"other" industries -- are left out of account, 28.7 billion rubles are
planned to be invested to displace 5.1 million workers, or some 5,700
rubles per worker displaced. The range is only slightly narrowed --
from 1,000 rubles in light industry to the 81,000 in the oil and gas
industry. Any search for some rough uniformity in investment per
* P. 21, above.
** P. 15, above.
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worker saved and a consequent ability to detect deviations from that
standard is therefore not crowned with success.
A number of considerations in fact preclude the determination of
a capital-labor substitution ratio or any final conclusions about the in-
troduction of technology from the data in Table 2.* For example, in the
oil and gas industry, planned investment includes construction of pipe-
lines for transporting petroleum, but in the base period the investment
and any workers to be displaced were in the transportation sector, not
in industry. Conversely, in the case of coal, high cost (and hence by
definition high-value output** of brown coal in the Moscow Basin and in
the Northern Urals) is to be reduced and replaced by low cost - low value
production of better steam coal in more remote fields such as at Ekibastuz.
The result will be cheaper and better fuel to the consumer but with a large
part of the final value credited to output of transportation and a smaller
part to the coal industry. Much of the required investment in the Seven
Year Plan is in the coal industry rather than in transportation facilities
that were built in preceding plan periods. In the case of electric power
a large part of the planned investment is for the purpose of raising the
relation of capacity to output. In other words, investment per unit of
capacity is going down but, measured in terms of output in 1965, is in-
creasing because the plan calls for a reduction in the hours of use. Re-
ductions in the hours of use -- or increased standby capacity -- together
with large investments to be made in the distribution system will provide
safeguards against interruptions in electric service that have high real
value. Certainty of service is not normally fully reflected in the value
of output, because it relates to quality rather than quantity of service.
Planned investments in ferrous and nonferrous metallurgy are complicated
by the necessity to process lower grade ores and to improve the finishing
of metal. Capital saving improvements in blast-furnace and refining tech-
nology such as the larger furnaces with oxygen and natural gas injection
to be used in the steel industry are obscured by the large investment in
mining and beneficiating low-grade ores.
Even in the case of the food-processing and machine building and
metalworking industries, where there is clearly a planned saving both of
capital and of labor in relation to output between 1958 and 1965, there
is no way to determine from the gross data the extent, if any, to which
such saving should be attributed to payoff on past investments or con-
versely to the introduction in the period of new technologies. In the
case of machine building and metalworking, there is a growing suspicion
that the fixed asset data and investment plans do not include those for
facilities producing military equipment, whereas in the labor force data
those employed in such production are counted in this sector.
* P. 21, above.
** Soviet plan data are in terms of gross value of output, which in
most cases varies directly as production cost.
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All of the industrial sectors contain such a heterogeneity of ac-
tivities as to necessitate a much closer look at the component branches
than is possible here prior to any final judgments on the effect of
planned changes in technology on investment requirements.* Along such
lines it would be of interest to examine the association between the
growth of fixed capital and increases in labor productivity for indi-
vidual branches of industry in recent years. Time series data for the
fixed capital of individual branches, however, are very scarce, and
more research is required. Such research is now underway.
Bearing in mind the necessity for more detailed subsectoral
analysis before final conclusions can be drawn, it is nevertheless of
interest to compare the planned rate of growth of assets per worker
with the planned1 rate of increase in output per worker. The estimated
value of assets per worker at the end of 1958 and 1965 in thousands of
rubles and-as an index with 1958 as a base is shown in Table 3.** The
value of assets used here is conceptually the undepreciated replacement
cost as of 1955 of all assets used and usefUl in the industry as inven-
toried by the USSR at the end of 1959 moved back to 1958 and forward
to 1965 on the assumption that the planned investment of the Seven Year
Plan will be made in increasing increments starting at 10 percent of the
planned investment in 1959 and about double that in 1965. Allowance also
has been made for assets estimated to be physically retired in the 1959-65
period (see Table 4, Appendix A***).
For industry as a whole the value of assets per worker is planned
to increase from 4,290 rubles to 8,310 rubles, or by 94 percent. In five
of the industrial sectors -- oil and gas, electric power, coal, ferrous
metallurgy, and nonferrous metallurgy -- the investment per worker in
1958 was above the average for all industry. In each of those industries,
except electric power, the increase in assets per worker is planned at a
greater rate than for all industry. Assets per worker in the chemical
industry are planned to more than double and will move from just below the
industrial average to just above it. On the whole, however, those indus-
tries that had above-average capital per worker in 1958 are planned to
have relatively more capital per worker in 1965. Leaving out the "other"
category -- which is subject to the compound errors of all residuals --
the electric power industry had 29 times the capital per worker of light
industry in 1958. According to plan, by 1965 the disparity will have
grown somewhat, with the oil and gas industry having more than 40 times
the capital per worker of light industry and the electric power industry
about 32 times. In other words, there is a clear tendency for the most
capital-intensive industries to grow even more so.
** Table 3 follows on p. 25.
*XX P. 40, below.
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Table 3
USSR: Comparison of Change in Fixed Capital per Worker and Output per Worker,
by Branch of Industry, for the Seven Year Plan (1959-65)
Branch of State Industry
Fixed Capital per Worker
(Thousand Rubles) 2/
1965 Indexes (1958 =
100)
Fixed Capital
per Worker
Output
per Worker
Capital/Output
1958
1265_
Total industry 12/
4.29
8.31
194
145 to 150
125
Machine building and metalworking
3.07
4.41
144
170
85
Light
1.30
2.13
164
136
121
Wood, paper, and allied products
1.84
3.86
210
153
137
Food processing
4.15
5.44
131
150
87
Construction materials
3.25
6.13
189
160
118
Coal
5.89
12.33
209
130
161
Chemical
4.19
8.56
204
150
136
Ferrous metallurgy
9.88
20.32
206
145
142
Nonferrous metallurgy
7.05
17.16
243
180
135
Electric power
37.39
67.37
180
190
95
Oil and gas
30.00
85.52
285
150
190
Other
8.88
16.00
180
147.5
122
a. 1955 rubles converted to new rubles established by the Soviet currency reform of 1 January 1961.
b. All data for total industry are aggregates of branches except the official plan for output per worker
(see the discussion on p. 11, above).
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When the planned increase in capital per worker is compared with
the planned increase in output per worker, capital rises more rapidly.
There are three exceptions noted above -- the food-processing industry,
the electric power industry, and the machine building and metalworking
industry, in which labor productivity is expected to rise more rapidly
than the capital per worker. On the basis of the six industrial sectors
in which capital per worker is planned to exceed the average in 1965
the index of capital per worker ranged from 180 to 285, whereas for the
other five sectors it is only 131 to 210. For the same two groups,
there is no corresponding discrepancy in the index of output per worker,
which ranged from 130 to 190 for the first group and 136 to 170 for the
second. There is a strong implication, therefore, that the ratio of
capital to output is rising more rapidly in the first group than in
the second.
It should be pointed out that the five industrial sectors that
will have below-average capital per worker in 1965 employed 76 percent
of the industrial labor force in 1958 but had only 47 percent of the
fixed assets in that year. During the Seven Year Plan, only 32 percent
of the planned investment is scheduled for those industries, but they
will nevertheless contribute about three-fourths of the reduction in
labor requirements resulting from planned increases in labor produc-
tivity. Because the planned labor saving is so high in relation to
the modest capital investment, it is apparent that gains in labor pro-
ductivity will result from several factors of varying importance, in-
cluding gains arising from organizational and administrative measures --
particularly the more even flow of materials; the improvement of plant
layout; the addition of instrumentation; and the extension of mechaniza-
tion, especially in materials handling.
In the six industrial sectors that will have above-average capi-
tal per worker in 1965, 20 percent of the industrial workers utilized
45 percent of the fixed assets in 1958. By 1965 these same six indus-
tries are planned to have more than half of the industrial fixed assets
and only about one-fifth of the workers. The growth of output in these
industries is clearly associated with extensive additions to fixed capi-
tal. It is not surprising, therefore, that these are the industries
most often mentioned in the context of eventual applications of forms
of automation involving capital saving.
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IV. Problems of Planning Equipment Supply and Technical Changes
A. Shortages of Equipment
Although various Soviet authorities have complained about a lack
of initiative on the part of plant managers with reference to the instal-
lation of new equipment where feasible and appropriate, the facts indi-
cate that orders for equipment exceed production, that deliveries have
fallen behind schedule, and that it has been necessary to increase out-
put of equipment faster than originally planned in the Seven Year Plan.
The mechanization of materials handling, for example, is a very
inexpensive way to get gains in labor productivity. Yet in 1957-58,
shortages of hoist-transport equipment made it necessary to increase the
number of railroad loaders by 40,000 in the RSFSR. In 1959, output of
hoist-transport equipment in the economy satisfied only 40 to 50 per-
cent of demand (in the sense of requests for delivery of equipment). Li
There are still numerous complaints of inadequate increase in production
of this equipment. L3i In 1959, delayed delivery of equipment and the
failure to produce some necessary models of equipment led to nonfulfill-
ment of a large number of the assignments for automation.
Production has lagged behind requests for delivery in many lines
of equipment, including various models of chemical equipment Li; radio
tubes Li; office machines Li; instruments and equipment for automa-
tion Li; petroleum equipment Li; forge-press equipment Li; non-
standard equipment for nonferrous metallurgy Li; equipment for the coal
industry Li; food-processing machinery Li; textile machinery Li;
equipment for the logging, wood, and paper industries )i.2i; construction
equipment)11i; and equipment for the cement industry. _.2.1 In this con-
nection, a Soviet industrial economist has stated; "There is no branch
of heavy and light industry which has not presented and which will not
present serious demands on our machine construction industry to insure
supply of more modern machines, mechanisms, and instruments. The tasks
of machine construction in this relation are enormous." In order
to meet this demand, the expansion of the machine building industry is
being accelerated beyond the original pace of the Seven Year Plan.
B. Criteria for Decisions on Investment as a Cause of Shortages
of Equipment
The problems besetting those who plan production and allocation
of equipment have been widely discussed in Soviet publications. In
large part the problems stem from difficulties in forecasting the demand
for equipment and rest upon biases in investment criteria used in the
USSR.
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To clarify this point, it is necessary to summarize some of the
steps in supply procedure. For any given planning period the plant
managers are given approved targets for production, for assortment of
products, and for reduction in costs. On the basis of these targets
they estimate their equipment requirements for the planning period and
after approval submit equipment orders to the supply organizations.
These supply organizations place purchase orders with the enterprises
producing equipment, and should the latter not have the production
capacity to satisfy immediate demand, the supply organizations allo-
cate the available production according to the priority of the request-
ing plant. The supply organizations dealing with the more important
lines of equipment notify Gosplan of any outstanding supply deficits,
and Gosplan then takes measures to improve the supply.
If production of equipment could be adjusted promptly in re-
sponse to changes in the demand for equipment, the problem would be
slight. But this is not the case, for to increase production of any
given item in an economy operating at full capacity would involve the
diversion of capacity from other production (either creating new pro-
duction capacity or transferring capacity from other uses as an interim
measure) directly or for creating new production capacity for the item.
Creating new capacity may involve a time lag; transferring capacity
directly may produce complications in the supply of some other important
equipment item.
If demand could be centrally planned and regulated, ex ante,
there would be no problem at all. But this situation would defeat the
basic concept of the Soviet approach toward the achievement of tech-
nical advances -- that is, the encouragement of the adoption of improved
production practices on the initiative of those who know the most about
the opportunities, the managers and the workers.
If the proper investment criteria were made available to the
plant managers, there would still be some problem in planning production
to satisfy the demand for equipment as derived from the individual in-
vestment decisions, but there would be little likelihood of any general
imbalance between demand and supply of equipment. But there are some
Soviet economists who question the adequacy of the present investment
criteria and imply that there might indeed be chronic imbalances. This
situation is especially true in those cases where the planning price
for equipment in deficient supply is kept low. L01/
The full argument for the possibility of chronic supply problems
is not developed by any Soviet economist, although it is hinted at by
several. The implicit case is summarized briefly as follows. The basic
premises to the case are four: (1) that the Soviet concept of value
(stoimostr) is strongly biased toward consideration of labor inputs
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while denying any scarcity value to capital inputs; (2) that efficiency
changes are measured in terms of reduction of stoimostr (and thus pri-
marily in terms of changes in labor productivity); (3) that Soviet
pricing policy is dictated by considerations of income distribution
rather than the efficient allocation of scarce resources;* and (4) that
the opportunity cost arising in the use of scarce capital resources is
not fully included in the costing of goods produced with the use of
scarce capital. If these statements are true, one would expect to find
empirical evidence that the substitution of capital for labor is carried
too far, given the available resources of each; that the demand for
many types of equipment exceeds the supply (evidence would be the ration-
ing of new equipment and delays in the supply of equipment to users);
and that the output plans tend to favor the growth in output of products
that are capital-consuming relative to the labor inputs (oil, electric
power, and the like). Furthermore, if the hypothesis is true, the pres-
sures to increase the share of capital investment within the uses of
national income would be quite severe.
As the USSR increases its capital resources relative to its labor
resources, it is to be expected that the wage level will rise relative
to the unit costs of capital investment and that the cost of construction
(which has a large wage component) will rise relative to that of equip-
ment. Any biases in the Soviet pricing system would tend to intensify
these tendencies, some of which are illustrated below in the tabulation
on changes in the relative costs of equipment, construction, and wages
in the USSR)12/:
Index
1960 Index
(1950 = 100)
Equipment unit costs
67
Construction estimate costs
92
Average money earnings of workers and
128
employees (estimate of this Office
based on Soviet source material)
Average money earnings in industry
129
* Hence the prices of new technical equipment are to be kept low to
encourage the purchase of the equipment by plant managers. The economic
gains are thus to be passed on to the using plant rather than to the
firm producing the equipment (which loses a source of capital for the
needed expansion of output).
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These indexes show that, during the last decade, there indeed
have been cost movements decreasing the cost of equipment relative to
the cost of construction, which is strongly influenced by trends in
the wage level. The expected result would be to stimulate the demand
for equipment as against the demand for construction, which could take
such form as an intensified emphasis on reequipping existing plants in
preference to building new plants. Soviet statistics demonstrate, how-
ever, that the share of equipment in the total capital investment fell
at the time of the Korean War, rose again during 1954-56, and fell again
during 1957-60. LY The latter decline is difficult to explain, although
part of the explanation lies in the emphasis on housing construction
during these years that tended to increase the relative share of con-
struction in the total capital investment and although part lies in
problems that appear to be associated with the supply of equipment be-
cause the plans for acquisition of equipment were not fulfilled during
several of these years.
C. Equipment Supply for Priority Projects
On the supply side, there has been a significant trend toward
centralization of the responsibility for supply of equipment for priority
projects. In the 1961 Plan, 434 construction projects were designated
as of national priority (osobo vazhnyy), and there was to be centralized
allocation of equipment to 613 enterprises.
A new system of supply organization is being developed in con-
junction with the supply of equipment to priority consumers. In a sense
the new organizations are an outgrowth of the industrial reorganization
of 1957, which created a problem of coordinating supply flows among the
new Councils of National Economy and among republics.
On the All-Union level the keystones of the new supply organi-
zation are five outfitting administrations under Gosplan USSR -- the
glavkomplekty. On behalf of priority customers, for a list of equipment,
instruments, and cable allocated on an All-Union basis, the outfitting
administrations screen requests, place production orders, and oversee
delivery. Similar outfitting administrations exist at the Republic level
and supervise supply of priority items under supply procedures central-
ized at the Republic level. L/ To date, the coordination between these
organizations has been relatively poor, and their operations have not
been of spectacular success. Nevertheless, the outfitting trusts are in
a position to become the vital link in coordinating the planning of pro-
duction of equipment with the equipment requirements of the plans for
technical advances. Lly
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D. Planning and Administrative Framework for Technical Advances
During the last 6 years the emphasis of the regime on raising
the level of production technology has shifted from the concern ex-
pressed in 1955 over the backwardness of Soviet industry, construction,
and transport (see the speech by N.A. Bulganin in 1955112/) to a more
positive emphasis on the opportunity provided by technical advances for
realizing output targets more rapidly. 22/ This shift from gloom to
hope is largely psychological in nature, resting on a new pride in
Soviet scientific achievement characteristic of the post-sputnik era
but supported only modestly by the actual implementation of plans for
technical advance. Serious problems have been encountered in the ex-
pansion of the chemical industry, in the design of economical plants
utilizing nuclear energy for production of electric power, in the con-
struction of adequate secondary refining capacity for oil, and in the
addition of plant capacity for processing complex nonferrous ores. On
the positive side, there have been some significant successes in
strengthening the capabilities of ferrous metallurgy and in the develop-
ment of a more rational (that is, less expensive) fuel and energy base
for the economy. 21/
During this transition period, covering 1955 to date, there has
been extensive experimentation in the forms of organization of govern-
mental and Party control over the planning and execution of measures for
technical advances. In response to the charge that weak leadership on
the part of ministers and heads of departments was a major cause for the
unsatisfactory execution of plans for the introduction of new equipment
into the national economy*, in 1955 the State Committee of the Council
of Ministers for New Techniques (Gostekhnika) was formed as a central-
ized federal agency with broad powers of planning, control, and in-
spection. J1/
With the reorganization in 1957 of the Soviet economy into a
system based on regional planning units (the Councils of National Economy)
rather than ministries, Gostekhnika could not survive, because its oper-
ation was based on a ministerial system centralized in Moscow. LI/
Following the reorganization the responsibility for charting the
course of technical development within Soviet industry has not been
tightly held within any single governmental agency. Rather, it is char-
acteristic in recent years for plenary sessions of the Central Committee
of the Communist Party to assign various aspects of the planning respon-
sibility to Gosplan, Gosekonomsovet, the State Committee for Automation
* This charge was openly made in Bulganin's speech in July 1955 but may
have prevailed earlier and may have been instrumental in the formation
of Gostekhnika in May 1955. 22/
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and Machine Building (GKAM), the State Scientific-Technical Committee
(GNTK) (now defunct) and to detail specific tasks to other agencies
such as the various State Committees concerned with industry, with
construction, and with labor and wages.* The Academy of Sciences has
played an important role in preparing perspective planning studies,
performing research and development assignments, and providing skilled
personnel to the line governmental agencies for planning assignments.
Within the Central Committee of the Party and the governmental bodies
it may be possible to identify some members of the Central Committee
as being specifically interested in topics related to technical change.**
It now appears that recently there may have been some competi-
tion between Gosekonomsovet and the GNTK for a position of predominance
in technical planning. Gosplan has lost most of its long-term planning
function to Gosekonomsovet, although a recent revision of the organiza-
tion of technical supply has given Gosplan an important operative re-
sponsibility in technical planning. The GKAM has major planning re-
sponsibilities, but its sphere is relatively limited -- that is, to
applications of automation in the economy and to technical advances in
machine building.
The GNTK had been formally vested with the authority to control
and to supervise the development and introduction of new technology in
the Soviet economy, 22/ yet, because it was not granted significant
operational powers, it had to function as a staff agency, supplying re-
search facilities, publishing scientific information, and coordinating
the activities of line organizations -- especially where interbranch
and interrepublic activities were involved. 2/ Early in 1960 it was
suggested authoritatively that its powers be broadened, at least in
sufficient degree to permit overseeing the fulfillment of the plans
adopted for the introduction of new technology. 22/
Rather suddenly, in April 1961, the GNTK was replaced at the
All-Union level by a new State Committee for the Coordination of Scien-
tific Research. The new committee was given greater powers to coordinate
scientific research. It was not, however, chartered as an organization
to plan technical advance as such in the economy. Rather, coordination
of research and economic planning would be insured through the partici-
pation of the Deputy Chairman, respectively, of Gosplan and of Gosekono-
msovet in the new committee.
** Thus Koslov, Kosygin, and A.P. Rudakov, the latter being head of the
Heavy Industry Section of the Central Committee, were prominent among
scientific and planning personnel at the funeral of M.I. Antipov, who
headed the scientific research institutes under Gosekonomsovet. 2_61
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Actual authority for any operational planning in the area of
technical advance appears to rest with the normal All-Union and republic
planning authorities, the Councils of National Economy, Gosplan, Gose-
konomsovet, and the other organizations associated with production plan-
ning. Given this structure, it is not possible to speak of any single
agency fully responsible for operational planning of technical advance.
In fact, Soviet experts observe that the demise of Gostekhnika in 1957
represented the end of technical management by a single Federal organ. 22
In the pattern of decentralization of responsibility for tech-
nologic advance the plan for the introduction of automation and inte-
grated mechanization emerges as an exception. In this case, there seems
to be a greater degree of advance administrative planning (largely in
the State Committee for Automation and Machine Building) and more feel-
ing that the possible social and economic effects will be of such scope
as to require advance planning.
Planning without some means of control over performance is in-
effectual. In an administered economy the basic controls are adminis-
trative. In the USSR, there is in being an elaborate system of adminis-
trative control over the execution of the national economic plans, but a
large body of evidence suggests that the Party does not consider the
system to be particularly effective in dealing with the stimulation of
technical change, suggesting in turn that new forms of administration
and control will be developed.* Careful evaluation of new measures to
increase control over execution of technical programs and to heighten
incentives to improve technical performance as they develop will cast
some light on both the Soviet objectives and the degree of success in
achieving the desired improvement in technology.
* At the date of the publication of this report a new reorganization
of Soviet industry is being undertaken, an important characteristic
being a return to greater centralization of control over the planning
for the introduction of new technology.
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V. Preliminary Evaluation of the Impact of Technical Changes on Future
Soviet Industrial Growth
Maintenance of a high rate of increase in industrial labor produc-
tivity will be made possible by programs to train the labor force to
the qualifications needed by the newly mechanized economy, to utilize
labor more effectively, to supply the labor force with more productive
machinery, and to improve industrial organization to take greater ad-
vantages of the economies of scale. On the other hand, industrial
growth is becoming increasingly dependent on the expansion of fixed
capital resources and on the introduction of advanced technology.
The Soviet government is devoting resources and efforts to indus-
trial development on such a scale that it seems reasonable to conclude
that a high rate of increase of labor productivity will be maintained
during the next 5 and possibly the next 10 years. There is no evidence
of any immediate likelihood that new developments in technology will
permit an acceleration in the rate of increase of labor productivity
during this period.
Soviet industrial labor productivity, in spite of its rapid rise,
lags behind that of the US and Western Europe. It may be argued that
the rapid advances in recent years represent the inevitable outcome of
the large Soviet investment program and the relative availability of
advanced Western technology for Soviet utilization but that the rate
of change in productivity must taper off as Soviet labor productivity
reaches Western levels. On the other hand, Soviet long-term plans
postulate a continuation of the rapid growth of labor productivity and
apparently are based on a premise that Soviet research and development
efforts will provide an adequate basis for technical changes. This
issue is quite basic to any analysis of Soviet growth and must be the
subject of intensive research.
In all economies the most immediate incentive to technical improve-
ment is one of cost-minimization in industrial development plans. In
all economies the social and personal consequences of automation are
profound. The Soviet planners hope that a high rate of growth will
permit avoidance of any high degree of frictional unemployment through
absorption of labor into the general industrial expansion. They do not
ignore, however, the heavy requirements for educational advance and for
the retraining of workers.
The problems faced by the US of accommodating technical advances
in an economy characterized by a moderate rate of growth may be faced
some day by the USSR and cannot be dismissed as an intrinsic difference
in the two systems.
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It remains to be seen how effectively the USSR can stimulate capital-
saving technical change. Until now its capital-output ratios have con-
tinued to rise. If it cannot reverse this trend, it may find that con-
sumption and investment will increase competition for resources; that
the rate of economic growth eventually will be retarded; and that some
of the technical problems of deceleration will arise, especially the
problem of overcapacity in some industries. Although automation is
potentially capital-saving in large part and although the successful
introduction of such automation should have a beneficial effect on capi-
tal efficiency, the excessive emphasis of Soviet investment criteria
on the labor-saving effects may prevent full achievement of feasible
capital savings. It cannot be proved conclusively from the scanty data,
but the possibility exists that many of the present difficulties in
provision of equipment may originate in poor estimates by planners of
the extent and types of equipment required to achieve the planned tar-
gets for productivity change.
In spite of the great amount of propaganda about applications of
automation, the facts indicate that the most significant gains in labor
productivity during the next 5 to 10 years will stem from replacing
manual labor with machines and instruments and that the applications
of computers in industrial production technology will occur on a very
limited scale. In this period of time the mechanization of materials
handling and the addition of instrumentation to industrial processes
will have far more economic impact than the introduction of full auto-
mation. In addition, there will be significant productivity gains from
measures affecting the organization of production and the efficiency
of utilization of labor.
In the context of longer term estimates, beyond 10 years, great
significance will attach to developments in the following areas:
1. The development of procedures and organizations for the
purpose of planning, administering, and controlling long-term programs
of technical advance.
2. The development of planning techniques to permit better
balancing of the demand and supply of modern technical equipment.
3. The expansion of industrial research and development organ-
izations to encourage development and application of indigenous technol-
ogy.
4. The development of decision criteria and planning techniques
to permit more efficient use of capital resources.
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It is by no means assured that the Soviet economy will solve these
problems. Effectively to plan technical advance in the long-term plans,
the old desire of the planner for a "safety factor" in his calculations
must be overcome,* new mathematical planning techniques must be devised
to cope with the many variables, and new data on trends of technical
change must be made available to planners.
To improve planning in the supply of equipment, problems of indus-
trial organization must be resolved. Especially, centralized controls
over capital investment must be reconciled with decentralized control
over production of equipment. Again, better planning techniques would
be needed to permit more adequate advance forecasts of the structure
of demand for equipment.
The greatest potential gains in labor productivity often lie in
industries where the least priority has been assigned to the various
scientific institutes concerned with process development. Resources
assigned for the purpose of industrial research and development must
be assigned to a broader range of industries.
The need to improve investment criteria has been chronic and has
been recognized by the Soviet authorities. Yet the present criteria
are inadequate until the price system becomes an allocative system
rather than one primarily concerned with the administration of income
flows.
Industrial development is the arena in which all aspects of eco-
nomic life come into play and affect the final outcome -- the avail-
ability of resources, the objectives of development, the price system,
the technical alternatives of production, the production schedule
desired by those planning the economy. In its nature it is a complex
topic and one for which all conclusions are tentative, subject to
change as the variables change and as knowledge improves. Yet the in-
dustrial development of the USSR in future years will affect US national
affairs and the lives of its citizens in numerous ways. For this
reason, the topic must be studied, the data must be improved, better
analytical techniques must be developed, and the development plans of
the USSR must be continuously evaluated in detail.
* As the Soviet economist Strumilin has observed, technical advances
themselves have often been considered the safety factor that would
permit fulfillment and overfulfillment of long-term plans. The more
technical advances are built into the plans, the less they remain a
safety factor (and the more the pressure for effective planning).
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APPENDIX A
METHODOLOGY
The estimate of labor saving is based on the assumption that the
labor requirement in 1965 would bear, in the absence of change in
productivity, the same relation to labor employed in 1958 as output in
1965 bears to output in 1958. The labor requirement in 1965 with no
change in productivity has been estimated, therefore, by multiplying
the labor force in 1958 by the 1965 index of production. The projected
labor force in 1965 (including a change in productivity) has been esti-
mated by dividing the labor requirement with no change in productivity
by the 1965 index of productivity. Implied labor saving is the differ-
ence between the projected labor force and the labor requirement with
no change in productivity. The labor saving may be calculated more
directly by the following formula:
Labor force in 1958 x index of production x Increase of productivity
Index of productivity
An estimated breakdown of gross capital investment during 1959-65
is given in Table 2.* The amount for retirements is taken from Table 4.**
Investment required to equip new workers at the 1958 capital-output ratio
was calculated for the branches of industry by multiplying the increase
in employment (as shown in Table 1***) by the fixed capital per worker
in 1958 (as shown in Table 3t). Total investment for industry was taken
as the sum of the investment in the branches of industry. Investment
available to increase capital per worker at the 1958 capital-output
ratio was obtained by multiplying the fixed capital in 1958 (see Table ))
by the increase in production during 1959-65 (see Table 1) and subtrac-
ting investment to equip new workers. Investment for total industry was
taken as the sum of the branches of industry.
Gross capital investment during 1959-65 less investment required
to maintain 1958 capital-output ratios and excluding retirements equals
investment available to increase capital-output ratios. The ratio of
added investment to labor saving is the amount of investment available
to increase capital-output ratios divided by the implied labor saving
(as shown in Table 1).
P. 21, above.
Table 4 follows on p. 40.
P. 15, above.
P. 25, above.
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Table 4
USSR: Estimation of Industrial Fixed Capital, by Branch of Industry 2/
Selected Periods, 1958-65
Branch of State Industry
Gross Capital
Investment
1959-65
(Billion Rubles) 12/
Data on Fixed Capital (Billion Rubles) LV
Fixed Capital per Worker
(Thousand Rubles) 22/
Inventory
Retirements
1959-65
Net Investment
1959-65
Implied Stock
31 December 1965
31 December 1958
(Estimated)
31 December 1959
(Actual)
1958
1965
Total Industry
104.0
69.86
78.89
15.68
88.32
158.18
4.29
8.31 2/
Machine building and metalworking
11.8
15.13
16.01
2.86
8.94
24.07
3.07
4.41
Light
3.3
3.28
3.55
0.66
2.64
5.92
1.30
2.13
5.8
4.15
4.65
0.91
4.89
9.04
1.84
3.86
Wood, paper, and allied products
6.0
4.13
0.92
5.08
9.21
1.83
3.93
4.7
6.84
7.18
1.26
3.44
10.28
4.15
5.44
Food processing
5.3
6.78
1.28
4.02
10.80
4.11
5.71
7.7
3.48
4.18
0.91
6.79
10.27
3.25
6.13
Construction materials
7.8
3.47
0.91
6.89
10.36
3.24
6.19
7.5
6.31
6.94
1.32
6.18
12.49
5.89
12.33
Coal
7.8
6.28
1.33
6.47
12.75
5.86
12.59
10.0
2.93
3.87
0.94
9.06
11.99
4.19
8.56
Chemical
10.5
2.88
0.96
9.54
12.42
4.11
8.87
Ferrous metallurgy
10.0
6.70
7.57
1.50
8.50
15.20
9.88
20.32
Nonferrous metallurgy
5.5
2.82
3.31
0.70
4.80
7.62
7.05
17.16
12.5
8.30
9.39
1.87
10.63
18.93
37.39
67.37
Electric power
12.9
8.26
1.88
11.02
19.28
37.21
68.61
17.0
4.14
5.76
1.47
15.53
19.67
30.00
85.52
Oil and gas
17.3
4.11
1.48
15.82
19.93
29.78
86.65
8.2
5.77
1.28
6.92
12.69
8.88
16.00
Other
5.8
6.02
6.48
1.19
4.61
10.63
9.26
13.40
a. Because of rounding, components may not add to the totals shown.
b. 1955 rubles converted to new rubles established by the Soviet currency reform of 1 January 1961.
c. Derived as the quotient of the sum of fixed capital of the individual branches divided by the sum of the employment of wageworkers of the individual branches.
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The calculations used in estimating fixed assets per worker in 1958
and 1965 for Table 3 are shown, inter alia, in Table 4.* The inventory
of fixed capital at undepreciated replacement cost on 31 December 1959
and the planned gross capital investment during the period of the Seven
Year Plan (1959-65) were officially announced. Wherever planned invest-
ment in a branch of industry was announced as a range, calculations
have been made at both the upper and the lower limit of the range, al-
though for simplicity of presentation only those based on the lower
limit were used in Tables 2** and 3. Fixed capital on 31 December 1958
was estimated to be equal to fixed capital on 31 December 1959 less
10 percent of the planned investment during 1959-65 (to allow for invest-
ment made during 1959) plus 2 percent of the adjusted figure (to allow
for plant and equipment retired during 1959.)
The amoutt of investment required to replace capital retired during
1959-65 has been calculated as 15 percent of the estimated fixed capital
on 31 December 1958 plus 5 percent of the gross capital investment during
1959-65. This calculation approximates roughly the replacement of 2 per-
cent of fixed assets annually. A study of Soviet amortization practices
as yet unpublished discloses no branch of industry in which the composite
rate of recovery of the value of fixed capital is set as high as 4 per-
cent. The average life of the capital, therefore, is expected to exceed
25 years. Theoretically the capital to be retired this year is that
installed 25 years (or more) ago. With the rate of investment doubling
every 10 years, the theoretical value to be retired would not exceed
1.3 percent of the cumulative investment. While 25 years appears to be
a rather long-life expectancy, two Soviet practices make it more than
plausible. First, in Soviet industrial investment some 60 percent of the
total is for construction, and 40 percent is for equipment. The Soviet
tendency to use heavy structures, which would have an average life of at
least 40 to 50 years in US practice, gives a great weight to long-lived
items in the composite inventory. Second, the Soviet practice of planned
capital repairs (for which a separate amortization account is accumulated)
is deliberately designed periodically to restore equipment to its origi-
nal condition and hence extend its useful life. The Soviet planners
have indicated that during the Seven Year Plan the percentage of invest-
ment for structures will be reduced and the retirement of equipment for
obsolescence will be expanded. Consequently, an estimate approximating
2 percent per year of the year-end inventory has been used for retire-
ment of fixed capital. In order to simplify the calculation, however,
15 percent of the estimate of fixed capital in 1958 plus 5 percent of
those to be added during the plan period has been taken for the estimate
of retirements during the 7-year period.
* P. 40, above.
** P. 21, above.
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Net investment during 1959-65 has been estimated from the gross
capital investment by subtracting retirements. Net investment plus the
capital stock on 31 December 1958 gives the implied capital stock on
31 December 1965. Fixed capital per worker in 1958 and 1965 has been
estimated by dividing fixed capital in 1958 and 1965 by employment (as
shown in Table 1*) in 1958 and 1965 (including a change in productivity),
respectively.
* P. 15, above.
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