COMPARISON OF THE NATIONAL PRODUCTS OF THE EUROPEAN SATELLITES

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• Document Creation Date: December 23, 2016
• Document Release Date: August 12, 2013
• Sequence Number: 1
• Publication Date: November 1, 1963
• Content Type: REPORT

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CONFIDENTIAL
Economic Intelligence Report
N? 3
COMPARISON OF THE NATIONAL PRODUCTS
OF THE EUROPEAN SATELLITES
CIA/RR ER 63-36
November 1963
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
CONFIDENTIAL
GROUP 1
Excluded from automatic
downgrading and
declassification
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L
-0)
CONFIDENTIAL
Economic Intelligence Report
COMPARISON OF THE NATIONAL PRODUCTS
OF THE EUROPEAN SATELLITES
CIA/RR ER 63-36
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
CONFIDENTIAL
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FOREWORD
Comparative estimates Of gross national product (GNP), industrial
production, agricultural production, and personal consumption in the
European Satellites are presented in this report. Comparisons are
made with West Germany, the. US, the USSR, and other countries and
groupings. The estimates of GNP for the European Satellites In US
dollars supersede and differ somewhat from those previously published
by this Office, although the methodology behind them is similar in
most respects. Comparisons of levels of industrial production, agri-
cultural production, and personal consumption are presented for the
first time,. with the exception of a preliminary calculation of indus-
trial levels undertaken for the Joint Economic Committee of Congress.*
The report summarizes the concepts and methods underlying the estimates
without providing detailed supporting data or 'sources, which will be
made available on request.
Except for comparisons involving GNP and industrial production in
the USSR, the estimates in this report are wholly from unclassified
sources.
* Joint Economic Committee, Congress of the US, Comparisons of the
United States and Soviet Economies, Supplemental Statement on Costs
and Benefits to the Soviet Union of Its Bloc and Pact System: Com-
parisons with the Western Alliance System, US Government Printing
Office, Washington, D.C., 1960.
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1
1 4. European Satellites and Selected Other, Countries': Com-
parisons of Gross National Product and Industrial
Production, 1950, 1955, and 1961 5
1 5. European Satellites and West Germany: Comparisons of
National Products, Selected End Uses, and Sectors Of
1 Origin, 1955 10
'1 6. European Satellites and West Germany: Final Estimates
of National Products, Selected End Uses, and Sectors
of Origin, 1955 . 14_
1
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CON2ENTS
Page
Summary and Conclusions 1
I. Concepts 7
II. General Methodology 8
Appendixes
Appendix A. Description of Particular Methods 17
Appendix B. Selected Bibliography 27
Tables
1. European Satellites and Selected Other Countries:- Gross
National Product, 1961 2
2. European Satellites and Selected Other Countries: Gross
National Product Per Capita and Personal Consumption
Per Capita, 1961 3
3. European Satellites and West Germany: Comparisons of
Gross National Product, Industrial Production, and
Agricultural Production, 1961
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1. Poland, Czechoslovakia, and Hungary: Conversion of Gross
National Products into West German Marks, 1955
8, European Satellites and West Germany: Quantity Indexes
'of. Personal Consumption Per Capita, 1955 . . ....
Page
20
? European Satellites and West Germany: Quantity Indexes
of Industrial Production, 1955 22
Charts
Figure 1. European Satellite's and Other Selected Countries:
Gross National Product, 1961 following page . . .
Figure 2. European Satellites and Other Selected Countries:
Gross National Product Per Capita and Personal
Consumption Per Capita, 1961 following page . . .
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' COMPARISON OF THE NATIONAL PRODUCTS OF THE EUROPEAN SATELLITES*
Summary and Conclusions
The European Satellites,** although small individually, together
represent a significant addition to the economic strength of the
USSR. In 1961 the gross national product (GNP) of the Satellites
as a group was approximately $79 billionl*** 36 percent as large as
the Soviet GNP. The aggregate GNP of the Satellites, however,
amounted to only 22 percent of that of the NATO allies of the US
and is matched by the GNP of West Germanyt or the UK alone. The
Satellite with the largest GNP in 1961 1,:ths Poland, followed closely
by East Germany and Czechoslovakia and (at a much lower level) by
Rumania, Hungary, and Bulgaria, as shown in Figure ltt and in
Table 1.ttt
On the average the Satellites have achieved a level of economic
development somewhat lower than that of the USSR. The per capita
GNP of the Satellites combined in 1961 was about 80-percent of the
Soviet level, little more than one-half of the West German level,
and about one-third of the US level. In degree of economic develop-
ment the Satellites fall into three groups of countries, as shown in
Figure 2tt and in Table 2.* Czechoslovakia and East Germany are
at the top with per capita GNP's of about 85 percent and 75 percent,
respectively, of the West German level. Poland and Hungary are in
an intermediate position, about 4-5 to 50 percent of the West German
level, and Rumania and Bulgaria are at about one-third of this
level.**
* The estimates and conclusions in this report represent the best
judgment of this Office as of 15 October 1963.
** The terms European Satellites and Satellites as used in this
report include Bulgaria, Czechoslovakia, East Germany, Hungary,
Poland, and Rumania. Albania is excluded unless otherwise indicated.
XXX All dollar values in this report are given in terms of 1955
US dollars.
t The term West Germany as used in this report excludes the Saar
and West Berlin.
tt Following p. 2.
-I-ti- Table 1 follows on p. 2.
* Table 2 follows on p. 3.
** Albania, with essentially a Middle Eastern economy, probably
has a per capita GNP of no more than one-half of the Bulgarian level.
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Table 1
European Satellites and Selected Other Countries:
Gross National Product
.1961
Country or Area Billion 1955 US $
US
453.4
Other NATO countries, excluding the US
357.3
West Germany ,a,/
81.3
USSR
222.0
European Satellites12/
79.2
Poland
20.7
East Germany
19.3
Czechoslovakia
17.7
Rumania
9.9
Hungary
7.5
Bulgaria
4.1
a. Excluding the Saar and West Berlin.
b. Excluding Albania.
Similar relationships among the Satellites also are found for per
capita personal consumption, but these countries lag somewhat farther
behind West Germany than in the case of per capita GNP, reflecting
the Communist emphasis on investment and the large role of government
activities in planned economies. The relative disparity between GNP
and personal consumption is especially great in Czechoslovakia, which
has by far the largest investment per capita in the Satellites and
also has substantial armed forces.
The European Satellites are less industrialized than West Geimany
and are more oriented toward agriculture. As shown in Table 3,* all
the European Satellites except East Germany are smaller relative to
West Germany in industrial production than in GNP, while all are con-
siderably larger in agricultural production than in'GNP. In the
aggregate, Satellite industrial production is less than 90 percent
of that of West Germany, but Satellite agricultural production is
2.3 times that of West Germany. East Germany is the largest indus-
trial producer among the Satellites but is followed closely by Poland
* Table 3 follows on p. 4.
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igure 1
EUROPEAN SATELLITES AND OTHER SELECTED COUNTRIES
GROSS NATIONAL PRODUCT, 1961
Billion /955 US Dollars
Comparison of the European Satellites
with the US, Other NATO Countries, and the USSR
453.4
US
357.3
//
OTHER NATO
222.0
USSR
*Excluding Albania
79.2
EUROPEAN
SATELLITES*
Comparison of the European Satellites
with West Germany
WEST GERMANY**
81.3
POLAND
20.7
11?11111111110
EAST GERMANY
19.3
111=1111M11
CZECHOSLOVAKIA
MUM 17.7
RUMANIA
9.9
HUNGARY
7.5
BULGARIA
ill 4.1
**Excluding the Soot
38507 10-63
5 OX 1
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EUROPEAN SATELLITES AND OTHER SELECTED COUNTRIES
GROSS NATIONAL PRODUCT PER CAPITA
AND PERSONAL CONSUMPTION PER CAPITA, 1961
1955 US Dollars
US
USSR
WEST GERMANY*
EUROPEAN
SATELLITES**
CZECHOSLOVAKIA
2,470
1,540
1,020
450
1,520
910
810
420
1,280
540
1,130
EAST GERMANY
600
750
HUNGARY
420
700
POLAND
530
GNP Per Capita
RUMANIA
iiliM;!1, 290
Personal Consumption Per Capita
520
BULGARIA
290
*Excluding the Soar
**Excluding Albania
38508 10-63
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Table 2
1
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1
European Satellites and Selected Other Countries:
Gross National Product Per Capita
and Personal Congumption Per Capita a/
1961
1955 us $
Country or Area
US'
USSR
West Germany12/
European Satellites
Gross National Product Personal Consumption
Per Capita Per Capita
2,470 1,540
1,020 450
1,520 910
810 420
Czechoslovakia 1,280 540.
East Germany 1,130 600
Hungary 750 420
Poland 700 390
Rumania 530 290
Bulgaria 520 290
,a. Based on midyear population. Personal consumption in West
Germany and the European Satellites represents all expenditures for
consumption from personal incomes. Personal consumption in the
US and the USSR represents expenditures for consumption from personal
incomes less those for educational and health purposes. Personal
expenditures for education and health appear to have made up only
about 1 percent of total personal expenditures in West Germany and less
than 1 percent in the European Satellites (compared with about 8 per-
cent in the US). Hence the comparison is not significantly affected
by the difference in the treatment of education and health expenditures.
b. Excluding the Saar and West Berlin.
c. Excluding Albania.
and Czechoslovakia. Poland is by far the largest agricultural pro-
ducer of the area, with Rumania taking second place.
The European Satellite regimes have set as one of their long-term
goals the surpassing of the income and output levels in the advanced
countries of Western Europe. To date, however, there has been little
progress toward this objective. Since 1950, aggregate Satellite GNP
has increased at about the same rate as the combined GNP of the
Common Market countries and that of the European NATO countries, as
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Table 3
,
European Satellites and West Germany:
Comparisons of Gross National Product, Industrial Production,
and Agricultural Production
1961
West Germany = 100
Gross
National
Industrial
Agricultural
Country or -Area
Product
Production
Production 2/
European Satellites12/
97
89
231
Poland
25
23
84
East Germany
24
24
29
Czechoslovakia
22
21
32
Rumania
12 .
11
45
Hungary
9
7
23
Bulgaria
5
3
18
a. Value added in agriculture.
b. Excluding Albania.
'is shown in Table 4.* Over-all Satellite growth was slower than that
of West Germany but faster than that of the US and the UK. In indus-
trial production the European Satellites have gained, at least slightly,
on Western groupings and have lost only a little ground to West
Germany since 1950.
* Table 4 follows on p. 5.
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Table 4
European Satellites and Selected Other Countries:
Comparisons of Gross National Product and Industrial Production
1950, 1955, and 1961
Percent
Gross National Product Industrial Production
European Satellites 2/
as a Percent of:
1950
1955 ,
1961
1956
1955
1961
US
14
15
17
10
12
18
UK
75
89
102
53
68
96
West Germany 12/
118
102
97
95
81
89
Common Market countries
37
37
36
35
35
38
European NATO countries
23
24
24
20
22
26
Total NATO
8
9
lo
6
8
lo
USSR
40
39
36
N.A.
N.A.
N.A.
Soviet Bloc 1/
28
28
26
29
28
28
a. Excluding Albania.
b. Excluding the Saar and West Berlin.
c. Including France, West Germany, Italy, Belgium, Luxembourg, and the Netherlands.
d. Including the USSR and the European Satellites and excluding Albania.
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I. Concepts
The comparisons in this report, like all international comparisons
of economic aggregates, are imprecise and ambiguous. Standard prac-
tice in comparing any economic aggregate between a pair of countries
is to value the quantities of goods and services produced (or used)
in each of them in the prices of the other. The two resulting sets
of comparisons can be expected to differ widely. The reason for the
differences is that relative quantities of goods and serviCes pro-
duced (or used), as well as the relative prices of these goods and
services, vary considerably among countries. In general, the com-
parison is more favorable to a country when the aggregate being
compared is valued in the prices of the other country. The reason
is that countries tend to specialize in goods for which their re-
sources are particularly suited and which therefore are relatively
cheap. For example, if personal consumption in West Germany is
being compared with that in Italy, the calculation in marks will
tend to give results more favorable to Italy than the calculation
in lira because products such as wine and olive oil, which are
more important in Italian consumption than 41 West German con-
sumption, have higher prices in marks than.in lira relative to
other goods that serve generally similar purposes (such as beer
and butter). In other words, wine and olive oil are given heavier
weight under the West German system of prices. The difference
between the two valuations is, of course, greater the more different
the economies -- that is, the greater the difference in degree of
industrialization and in climatic and other natural conditions.
Because of the differences actually found in relative quantities
and prices between countries, the two measures described above can
be so far apart that almost any crude estimate of relative size
would fall between them. To obtain a single measure, it is cus-
tomary to calculate the geometric mean of the measures in the two
currencies, but the choice of any such intermediate measure is es-
sentially arbitrary. Nevertheless, intermediate (that is, compromise)
solutions can be useful, and in practice it is also necessary to
compromise at other stages in the calculations. In calculating price
ratios, for example, products that are not strictly identical in the
two countries unavoidably must be assumed to be equivalent in some
instances. The practice has the effect of narrowing the range of
valuations obtained by the two different pricing methods.
The complexity of the prOlem of international comparisons and
the ambiguity of the results increase with the number of countries
being compared. Proper methodology demands that the economic
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aggregates in each country be valued in the prices of all the other
countries. This task is too laborious, however, when a large number
of countries are involved. For example, if 10 countries were being
compared, there would have to be 9 conversions per country, or 90
conversions in all.
The imprecision and ambiguity of all international comparisons
of economic aggregates should be kept in. mind whenever such com-
parisons Are used. Thus only the broadest and most qualified con-
clusions -- for example, on relative economic strength or consumer
welfare -- can be drawn from such comparisons. Because of the large
number of countries being compared and the incompleteness of the
data, this caution applies with full force to the present estimates.
A particular effort was made, however, to bring all available infor-
mation to bear in the comparisons so as to increase the chances of
obtaining reasonable results. Where possible, more than one method was
used for obtaining comparisons of the main aggregates. The results are
believed to be reliable for making the kinds of generalizations pre-
sented in the previous section for example, no amount of refinement
would be likely to change the ranking of the three groups of Satellites
in per capita production and consumption. The particular estimates
are subject to a wide margin of error, however, and a great deal of
care must be exercised in determining their appropriateness for any
particular purpose.
II. General Methodology
The comparisons used in this report involved several steps: (1) a
comparison of the European Satellites with West Germany in 1955; (2) a
comparison of West Germany with other countries and areas in 1955, and,
by linking, of these countries and areas with the European Satellites;
and (3) an updating of the comparisons by means of indexes of volume
for the relevant aggregates. (The calculation of the indexes for the
European Satellites will be described in a report now in preparation.
The indexes for Western countries are from official sources.)
1. The comparison of the Satellites with West Germany in
1955 was made for GNP, personal consumption, industrial production,
and agricultural production. For some of the Satellites, comparisons
were also made of investment and government purchases of goods and
services, but the individual estimates of these categories were not
considered to be reliable enough for any use other than the calcula-
tion of GNP. West Germany was selected as the base for comparison
because of its considerable similarities with the northern Satellites
in regard to economic structure. To compare the Satellites with West
Germany in 1955, Satellite aggregates were first calculated in marks,*
* The term mark as used in-this report refers to West German marks
(Deutsche -8-Mark) 8 -
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and then the original mark calculations were adjusted to account
for differences in relative prices between the Satellites and West
Germany.
The calculations in marks are the heart of the present com-
parisons. They entailed two principal methods: (1) the conversion
of Satellite values into marks by means of price ratios and (2) the
calculation of quantity indexes relating Satellite aggregates to
those in West Germany.
. Method (1) -- the value conversion method -- was used for
comparisons of GNP and its main end-use components (personal con- -
sumption, government expenditures, and gross investment) in Poland,
Czechoslovakia, and Hungary with West Germany. Method (2) -- the
quantity index method -- was used for comparisons of personal con-
sumption, industrial production, and agricultural production in each
of the Satellites (except Albania) with West Germany. The quantity
index method was used both as a check on the value conversion method
and as a supplement to it -- that is, to extend the comparisons to a
larger number of countries and to provide comparisons that could not
be.obtained through the other method. Estimates based on these two
methods were supplemented by independent estimates from other sources.*
The results of all these calculations for 1955 and the independent
estimates are shown in Table 5.**
In general, preference was given to the value conversion
method over the quantity index method. There are two reasons for
this preference. First, variations in relative prices among prod-
ucts within given categories in international comparisons probably
tend to be smaller than variations in relative, quantities, so that
price indexes of passable quality can be calculated from a much
narrower sample of items than would be needed for an adequate quan-
tity index. Second, because a narrower sample 'can be used in a
price index, the items selected can be defined much- more precisely
in regard to quality and other special characteristics than would
be possible in a quantity index. For example, an appropriate price
index for the category "wool fabrics" was obtained from one or two
narrowly defined items which were taken to be representative of
the entire category, but the quantity index had to be calculated
from a series on total wool fabrics. The latter comparison would
be expected to overstate the relative size of production in' the
country with the simplest or lowest quality mix of wool fabrics.'
This expectation was consistent with the findings in the case of***
** Table 5 follows on p. 10.
*** Text continued on p. 12.
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Table 5
European Satellites and West Germany:
Comparisons of National Products, Selected End uses, and Sectors of Origin
1955
Calculated indexes
Personal consumption
West Germany = 100
Ciecho7 East European
slovakia 'Germany Hungary Poland Rumania Bulgaria Satellites 2i*
Quantity index 12/
23.3
29.4
12.9
36.7
18.9
7.3
128.5
Value conversion 2/
19.8
11.5
29.4-
Gross investment
(value conversion) 2/
23.1-
9.3
23.9
Government purchases
(value. conversion) 2/
40.9
16.4
41.0
GNP (value ponversion)_5/
Industrial production d
23.6
19.1
25.7
11.6
7.7
29.4
23.3
8.8
2.9
87.5
Agricultural production 2/
37.2
38.4
29.2
77.2
52.5
21.2
255.7
Industrial and agricultural
production 1/
22.2
27.8
11.3
32.4
16.2
6.0
115.9
Additional estimates
Personal consumption
26.1 E/
23.5 to
32.5 h/
Gross investment
19.2 E./
* Footnotes for Table 5 follow on p. 11.
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Table 5
(Continued)
West Germany = 100
Czecho- East European
slovakia Germany Hungary Poland Rumania Bulgaria Satellites 2/
Additional estimates
(Continued)
Government purchases 43.5 E/
GNP 26.9 E/
Industrial production 26.1 E/
Agricultural production 36.1 E/
Industrial and agricultural
production 27.8 E/
a. Excluding Albania.
b. From Table 8, multiplied by population (see Appendix A, p. 20, below).
c. West German values from official sources; Satellite values in West German marks from Table 7,
Appendix A, p. 18, below.
d. From Table 9, Appendix A, p. 22, below.
e. Value added in agriculture (see Appendix A, p. 19, below).
f. Indexes of industrial production and agricultural production weighted by value added in West Germany.
g. Estimates by this Office in 1936 marks.
h. Range of estimates given by price ratios calculated by the. Polish Central Statistical Office (Glowny
Urzad Statystyczny -- GUS) (see Appendix A, p. 23, below). -
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personal consumption, where both a value conversion and a quantity
index could be calculated. The Satellites were uniformly larger
compared with West Germany in the quantity indexes of consumption
than in the value conversions.
Thus there is every indication that the quantity index com-
parison considerably overstates consumption in the Satellites relative
to that of West Germany because of an inadequate sample, including lack
of adjustment for differences in quality. On the other hand, the value
conversion estimate of personal consumption was based on value data
that are believed to be generally reliable and from a considerable
amount of information on prices.
The estimates of investment and government expenditures that
are obtained by the value conversion method are considerably less
reliable than those for personal consumption because of the crude
nature of the price comparisons made for these components.
Among the quantity indexes, the most reliable undoubtedly is
that for agricultural production because of the large size of the
sample and the fact that the lack of adjustments for quality differ-
ences is unlikely to be a source of very large errors in the aggre-
gate. The quantity index of personal consumption undoubtedly is the
worst, for reasons mentioned above. The index of industrial pro-
duction suffers from some of the same weaknesses as the quantity
index of personal consumption, but to a far lesser degree, because
part of the sample could be adjusted for quality differences and the
most difficult area -- metalworking -- was compared by the value con-
version method.
Although it was sometimes necessary to use a mixed set of
weights, Satellite quantity weights generally were used in the price
indexes and West German price weielts were used in the quantity
indexes. Formally a quantity index with West German price weights
is equivalent to an index obtained by means of a price conversion
with Satellite quantity weights. For reasons given earlier, the
resulting estimates in Marks almost certainly favor the Satellites.
If parallel estimates could have been made by converting West German
magnitudes into the respective Satellite currencies, these would
have ,favored West Germany. However, such parallel estimates could
not be calculated. It was necessary, therefore, to approximate a
reasonable middle ground by rule of thumb.
The final estimates in marks for 1955 are intended to ap-
proximate the results that might be obtained by an average of esti-
mates with Satellite weights and West German weights. In arriving
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at these estimates it was necessary to choose between alternative
measures of various aggregates, to link series obtained by one method
with series obtained by another method, and to adjust the original
.estimates in marks to account for differences in weighting systems.
The original estimates in marks (shown in Table 5*) were lowered by
factors of 5 to 10 percent varying from country to country and aggre-
gate to aggregate, the largest adjustments being made for the least
developed countries.
2. To compare the Satellites with countries and areas other
than West Germany, estimates of Satellite GNP and personal consumption
were converted from marks to US dollars, and estimates of Satellite
industrial production relative to West Germany were linked to estimates
of West German industrial production relative to other countries.
Mark estimates of GNP and personal consumption were converted
to 1955 US dollars by means of mark/dollar price ratios given in a
thorough study of relative purchasing power done for the Organization
for European Economic Cooperation (OPRC).** This study presents price
ratios for several Western European countries with both US and European
quantity weights and also gives the geometric mean of these ratios.
The geometric mean of the two sets of mark/dollar ratios was used for
the present purpose. The dollar values of Satellite GNP and personal
consumption, then, are compromise figures involving rough judgments and
a mixture of weights. These compromise figures may differ significantly
from the figures that might be obtained by taking the mean of the results
of direct comparisons between the Satellites and the US. Table 6***
summarizes the final estimates for 1955 in terms of relatives, marks,
and US dollars. The derivation of the final estimates is explained
in Appendix A.t
In the case of industrial production, the estimates were kept
in the form of relatives -- that is, in terms of indexes, not dollar
values. The indexes relating the Satellites to West Germany were
linked to indexes relating West Germany to the other Organization for
Economic Cooperation and Development (OECD) countries. The latter
set of relatives is the set of weights used by the OECD to calculate
the combined index of industrial production of, the member countries. ,
These weights are estimates based on comparisons of consumption of
some industrial.materials, industrial employment, and value added in
industry converted into a common currency at both official exchange
rates and the purchasing power exchange rates calculated by the OEEC.
* p. 10, above.
** Milton Gilbert and Associates, Comparative National Products
and Price Levels, Paris, ?EEC, 1958.
*** Table 6 follows on p. 14.
t P. 17, below.
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Table 6
European Satellites and West Germany:
Final Estimates of National Products, Selected End Uses, and Sectors of Origin
1955
Indexes: West Germany - 100
, West
Germany
Czechoslovakia
East
22Maa
Hun ary
Poland
Rumania
Bulgaria
European ,
Satellites
Personal consumption
100
18.9
24.9
10.4
26.7
13.7
5.3
99.9
Gross investment
100
23.1
19.2
9.3
23.9
.
Government purchases
100
40.9
43.5
16.4
41.0
GNP
100
21.4
25.6
10.5
26.8
13.4
'5.0
102.7
Industrial production
100
18.2
24.5
7.0
21.2
8.0
2.6
81.5
Agricultural production
100
37.2
38.4
29.2
77.2
52.5
21.2
255.7
Billion 1955 West German marks
Personal consumption
102.4
19.3
25.5
10.6
27.3
14.0
5.4
102.1
GNP ,
175.6
37.6
44.9
18.4
47.1
23.5
8.8
180.3
Billion 1955 us $
Personal consumption
32.9
6.2
8.2
3.4
8.8
4.5
1.7
32.8
GNP
57.6
12.3
14.7
6.0
15.4
7.7
2.9
59.0
Per capita: 1955 us $ -
Personal consumption
669
473
457
347
323'
260
224
353
GNP
1,171 ,
939
821
612
564
444
383
636
Per capita indexes:, West Germany . 100
, Personal consumption
100
71
68
52
48
39
33
53
GNP
100
80
70
52
48
38
33
54
a. Excluding Albania.
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The above weights show a relationship between the US and the UK that is
fully consistent with the findings of another thorough OEEC study* --
the only one of its kind for comparisons by sector of origin.
* Deborah Paige and Gottfried Bombach, A Comparison of National Output
and Productivity of the United Kingdom and the United. States, Paris,
OEEC, 1959.
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APPENDIX A
DESCRIPTION OF PARTICULAR METHODS
1. Value Conversions
GNP and its main end-use components in Poland, Czechoslovakia, and
Hungary were converted into marks by applying calculated price indexes
to values in the national currencies. The calculation is summarized
in Table 7.* The value at domestic market prices of GNP and its com-
ponents in these three countries for the year 1955 was made available
by Thad Alton and his associates from the work of the project at Coiumbia
University on national income in Eastern Europe. Data on personal con-
sumption in the national accounts were broken down in as much detail as
possible and were supplemented by information on the composition of re-
tail trade and other data. The result was a distribution of consumption
by category of consumption (for example, retail purchases and farm con-
sumption in kind) and, wherever possible, by type of goods purchased.
Price ratios for each category of goods were calculated from various
sources of West German and Satellite price information. The principal
sources of price data were official statistical publications, but price
data collected by US Embassy personnel for purposes of calculating cost
of living adjustments also were used, both to fill gaps in the official
data and to verify the comparability of products for which official
price data were available. Where a category was represented by more
than one item, detailed weights were obtained from consumer budget
studies, retail sales data, and other sources. The most detailed
weights were available for Poland, and these were also used to calcu-
late some price indexes in Czechoslovakia and Hungary. The result of
the calculation was a detailed breakdown of the value of personal con-
sumption in the three Satellite countries in marks. In calculating the
price ratios, efforts were made to compare items of equivalent quality,
but errors no doubt were made in many instances.
In the cases of investment and of government purchases of goods, it
was not possible to obtain either a distribution of expenditures by type
of goods or useful price data. Calculation of price indexes for invest-
ment goods from comparisons of prices for typical products would have
required a much more intensive and time-consuming effort than could be
attempted here. Instead, a shortcut was used that may be as reliable
as, or even more reliable than, the sample method. Price ratios for
investments and for government purchases of goods were calculated from
* Table 7 follows on p. 18.
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Table7
Poland, Czechoslovakia, and Hungary:
Conversion of Gross National Products into West German Marks
, 1955
Value 2/
In National Currency
(Billion)
In West German Marks
(Billion)
Price Ratios
Poland
(Zlotys)
Czechoslovakia
(Crowns)
Hungary
(Forints)
Poland
" Czechoslovakia
Hungary
Zlotys/
Marks
Crowns/
Marks
Forints/
Marks
Personal consumption
173.0
83.2
66.4
30.1
20.3
11.8
5.7
4.1
5.6
Retail purchases
115.0
63.9
38.2
17.7
14.4
6.4
6.5
4.4
5.9
Foods
47.5
33.9
15.8
7.3
5.9
2.4
6.5
5.7
6.7
Alcoholic beverages
13.8
4.8
4.1
2.2
1.4
1.1
6.4
3.4
4.o
Tobacco
6.2
2.5
1.5
0.8
0.6
0.4
7.5
4.3
4.3
Textiles, clothing, and leather
28.9
10.5
10.1
2.2
1.3
0.8
13.0
8.1
12.1
Other nonfood items
18.6
12.2
6.7
5.2
5.1
1.9
3.6
2.4
3.6
Farm market purchases
8.2
' 1.1
4.0
1.4
0.2
0.5
5.8
4.6
7.6
Services and housing
13.3
11.6
9.0
4.9
4.0
2.4
2.7
2.4
_
3.7
Farm consumption in kind
29.6
5.7
10.5
5.4
1.6
2.0
5.4
3.6
5.2
Other consumption
6.9
0.9
4.7
0.7
0.1
0.5
9.9
9.0
9.4
Government purchases
11.:1-
31.4
17.0
9.8
9.8
3.9
3.8
3.2
4.3
Health, culture, and welfare
13.9
15.7
6.0
3.6
4.9
1.4
3.8
3.2
4.3
Administration
9.0
3.1
4.8
2.4
1.0
1.1
3.7
3.2
4.2
Defense and public security
14,4
12.6
6.2
3.8
3.9
1.4
3.8
3.2
4.4
Gross investment
66.6
ILI
37.2
11.8
11.4
4.6
5.6
3.2
6.0
Additions to fixed capital
45.4
31.3
16.4
8.7
9.8
2.7
5.2
3.2
6.0
Increase in inventories
15.9
4.6
10.3
3.1
1.4
1.7
5.2
3.2
6.0
Net foreign investment
5.3
0.7
10.4
0.2
0.2
,
GNP
276.9
151.2
120.6
51.7
41.5
20.3
5.3
3:6
5.9
a. Because of rounding, components may not add to the totals shown.
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price ratios for goods entering foreign trade. In all three countries,
data were available, or could be estimated, on the value of imports and
exports (and sometimes on the value of imports and exports of machinery
and equipment) in internal prices. By comparing these values with the
values of imports and exports in foreign prices (devisa currency,*
which can readily be translated into marks), aggregate price ratios
were obtained.
The conversion of value added by government (wages of government
employees) necessarily is somewhat arbitrary. Satellite expenditures
of this type were converted into marks by using ratios of average wages,
on the assumption that a person employed in government services is as
?productive in the Satellites as in West Germany.
2. Quantity Comparisons
Personal Consumption
The quantity indexes were constructed from a sample of con-
sumer goods and services in physical units weighted by West German
prices and values. The sample consists of data on broadly defined
commodities (such as grain products, milk, cotton fabrics, and bicycles)
that are unadjusted, or little adjusted, for differences in quality and
assortment. Price-weighted samples were constructed for six categories
of consumption, and the indexes for these categories were averaged using
as weights the distribution of consumer expenditures in West Germany.
The indexes are shown in Table 8.** Because inadequate allowance is
made for quality, these indexes almost certainly dverstate consumption
in the Satellites relative to West Germany and also in the less developed
Satellites relative to the more developed ones. The comparison among
the Satellites, however, is better than that of the Satellites with
West Germany because it involves a large sample.
b. Agricultural Production
The quantity index for agricultural production (including for-
estry and fishing) represents a calculation of value added in the sector
in each of the\Satellites in terms of 1955 marks. Estimates of value
added were obtained by deducting the value of industrial inputs for
agriculture from the value of agricultural output (the value of agri-
cultural output is.equal to gross production minus inputs of agricul-
tural products). To obtain the value of output, the quantity of each
* Devisa currency is the domestic equivalent of foreign currencies
at official rates of exchange. In Soviet Bloc countries the official
rates of exchange frequently have little or no economic significance.
** Table 8 follows on p. 20.
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Table 8
European Satellites and'West Germany:
Quantity Indexes of Personal Consumption Per Capita
1955
West Germany = 100
Czechoslovakia
East Germany
Poland
Hungary
Rumania
Bulgaria
Foods
101
88
81
80
72
Eiio
Alcoholic beverages
111
102
62
' 73
64
64
Tobacco and products
187
113.
150
125
65
39
Textiles, clothing, and leather
71
76
49
42
32
32
Other consumer goods
32
42
21
19
11
12
Housing and utilities
84
83
' 58
58
46
47
Total personal consumption
87
81
66
65
54
47
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major agricultural item produced (after deduction for the use of this
product for feed, seed, and waste) was multiplied by the average price
paid to West German farmers in 1955. To obtain the value of industrial
inputs, the main categories of such inputs in West Germany (such as fer-
tilizers, fuel, and repairs) were represented by a sample of inputs (such
as the various types of fertilizers) or by rough indicators (such as the
size of the tractor park). Both output and inputs then Were given their
full West German weight, and value added was obtained by subtraction.
c. Industrial Production
The industrial indexes, presented in Table 9,* are methodologi-
cally similar to most industrial indexes which compare production in one
country at different times. They are constructed mainly from production
data in physical units for a sample of products. The weights for in-
dustrial categories are estimates of value added in West Germany in 1955
(based on West German ratios of value added to value of sales in 1950
and 1954 and on data for value of sales in 1955). The weights for indi-
vidual commodities within categories (when a category is represented by
More than one item) are West German prices in 1955 or, in a few cases,
estimated value added per unit. The index of metalworking output, how-
ever, was obtained differently. For East Germany, Czechoslovakia,
Poland, and Hungary it represents a conversion of value of metalworking
production in domestic currencies (after deduction of sales to other
plants within the same industry) into marks. The conversion ratios were
obtained mainly from price relationships of machinery and equipment in
foreign trade (the ratios between the internal and the devisa value of
exports or exports plus imports of machinery and equipment). These
ratios do not reflect the relative prices of a selected sample but re-
present a much larger number of items than could possibly be covered
in such a sample. For Rumania and Bulgaria the index of production of
machinery and equipment was obtained by assuming that the value of pro-
duction per metric ton of steel consumed in these economies was the
same as in Poland. Steel consumption data also provided a check on the
reasonableness of the value conversion for the other countries. These
data and the estimates obtained by the conversion of values of metal-
working production imply that inputs of steel underwent more process-
ing in East Germany than in West Germany, slightly less in Czechoslovakia,
considerably less in Hungary, and about half as much in the other Satel-
lites.
. The industrial index is believed to be most reliable for mining,
energy, and some types of basic materials because of the broad cov-
erage of the sample and the fact that quality differences either are
small or in some cases could be adjusted for (for example, expressing
* Table 9 follows on p. 22.
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Table 9
European Satellites and West Germany:
Quantity Indexes of Industrial Production
1955
West Germany = 100
Energy (electric power
East
Germany
Poland
Czecho-
slovakia
Rumania
Hungary
Bulgaria
European
Satellites 2/
and gas)
31.2
22.7
18.7
4.6
7.9
2.7
87.8
Mining
13.7
39.8
15.2
16.6
6.4
1.5
93.2
Manufacturing
26.5
21.9
19.5
8.3
7.8
3.0
87.0
' Metallurgy
10.8
18.6
16.4
3.9
6.7
0.4
56.8
Metalworking
21.9
10.2
17.6
2.9
5.0
0.7
58.3
Chemicals and rubber 12/
40.2
18.7
14.2
14.7
4.7
1.7
94.2
Construction materials
23.7
25.7
18.9
10.3
10.7
5.8
95.1
Wood and paper
31.1
40.1
31.6
a7.2
3.3
5.6
129.0
Textiles and leathers
24.5
32.8
21.1
13.0
16.1
5.6
113.1
Foods
43.9
60.1
33.0
18.1
18.5
12.5
186.1
Total industry
(West German weights)
25.7
23.3
19.1
8.8
7.7
2.9
87.5
a. Excluding Albania.
b. Including petroleum refining.
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coal production in standard units). The sample is much less adequate
for the consumer goods industries such as textiles and foods, and it
is largely unadjusted for what are undoubtedly very large differences
in quality (for example, a square meter of "wool" fabrics probably has
a:much lower wool content in Poland than in West Germany).' Moreover,
a number of important consumer industries (for example, clothing, shoes,
plastics, and wood products) are not covered at all because of a lack of
usable data and the fact that the output of such items by handicrafts
is included to different degrees in the statistics of the various coun-
tries. Undoubtedly the indexes for the consumer goods industries are
strongly biased in favor of the Satellites. Because of the relatively
small weight given to these industries in the calculated index for all
industry, however (all of the metalworking industry but only 55 per-
cent of value-added in the consumer industries are covered), the bias
probably does not have a very great effect on the over-all index.
No'explicit estimate is made for handicraft production because
of the varying statistical treatment of handicrafts in the countries
being compared and the lack of comparable production and employment
data for handicrafts. Instead, an attempt was made to select the sample
of products so as to leave out the types of items that are usually pro-
duced to a substantial extent by handicrafts. This was the reason for
leaving the production of shoes out of the sample. The only included
industry where the sample series probably reflects a significant amount
of handicraft production is the food industry.
3. Other Estimates
The estimates described above were supplemented by or compared with
independent estimates of some of the same relationships. The principal
one of these is this Office's comparison of East Germany with West Ger-
many by sector of origin and end use of GNP. The comparison uses a
common prewar (1936) standard of valuation for both parts of Germany
and relies mainly on quantity indexes, but also to some extent on de-
flated values.
Another independent calculation is the comparison made by the Polish
Central Statistical Office (GlownyUrzad Statystyczny -- GUS) of the re-
lative purchasing power of the zloty and the mark with respect to con-
sumer goods and services. This calculation made use of detailed Polish
and West German workers' budgets rather than of a breakdown of consump-
tion in the national accounts. The zloty/mark price ratios obtained in
this study are remarkably consistent with those estimated here. As might
be expected because of the greater detail and probably also the pre-
cision of the Polish study, the zloty/mark ratio for the Polish consumer
basket is somewhat lower (the purchasing power of the zloty is higher)
than in the present study -- 5.3 zlotys per mark compared with 5.7. On
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the other hand, the zloty/mark ratio for the German consumer basket
(not calculated in the present study) is mush higher -- 7.3 zlotys
per mark. The final estimate of Polish consumption implies a ratio
of 6.3 zlotys per mark.
Various other international comparisons involving the Satellites
also appear in Soviet Bloc publications, although there is nO infor-
mation on how they were obtained. On the whole, they are roughly
consistent with the estimates of this study.
4. Derivation of Final Estimates (Table 6)*
a. Indexes
-(1) Personal Consumption
The final estimate is intended to approximate the results
that might have been obtained using an average of estimates with
Satellite weights and West German weights. To arrive at the final
estimate, first, a consistent series was calculated with Satellite -
quantity weights (or West German price weights), and, second, these
figures were lowered by various percentages. ,
The value conversion estimates for Poland, Czechoslovakia,
andEungary were accepted as rough approximations of consumption with
Satellite quantity weights. This Office's estimates for East Germany
were assumed to give similar results to those of a hypothetical esti-
mate with East German quantity weights. This Office's estimate for
East Germany and the value conversion estimate for Czechoslovakia imply
that total East German consumption was 32 percent higher than total
Czechoslovak consumption, compared with a figure of 26 percent higher
according to the calculated quantity index for consumption a suf-
ficiently close relationship for present purposes. The estimates for
Rumania and Bulgaria were obtained by multiplying the value conversion
estimate for Poland by the calculated quantity indexes for consumption.
On the assumption that the range of results obtained with
alternative sets of weights is greater the larger the difference in
per capita income or output relative to West Germany, the estimates
with Satellite quantity weights were lowered by 5 percent for East
Germany and Czechoslovakia and by 10 percent for the other Satellites
to obtain the final estimates. The results for Poland are near the
midpoint of the range of results obtained by using the GUS price
ratios.
* P. 1-4, above.
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(2) Gross Investment and Government
The value conversion results for Czechoslovakia Poland
and Hungary and this Office's results for East Germany as shown in
Table 5* were used. Because the conversion ratios for these catego-
ries were not calculated with a selected set of weights, no adjust-
ment of the data in Table 5 was called for.
(3) GNP
For East Germany, Czechoslovakia, Poland, and Hungary the
sum of the estimates for consumption (with Satellite quantity weights),
investment, and government were used after the following adjustments: -
East Germany, a 5-percent reduction; Poland and Hungary, a 10 percent
reduction; and Czechoslovakia, a 10 percent reduction. The reduction
in Czechoslovakia is larger for GNP (10 percent) than for personal
consumption (5 percent) because it is believed that?the estimates for
investment, government, or both, are overstated. The basis for this
belief is the fact that the unadjusted estimate of GNP in Czechoslovakia
is higher (in relation to West Germany) than the unadjusted estimate of
industrial and agricultural production combined, whereas it is lower in
the other Satellites for which direct GNP calculations could be made.
It does not appear that a difference of this kind and extent can be jus-
tified by available data on services.
In Rumania and Bulgaria, GNP is assumed to be in the same
relation to that in Poland as is the case for the sum of industrial
and agricultural production.
(4) Industrial Production
Calculated indexes with West German price
Table 5 were reduced by 5 percent in East Germany and
and by 10 percent in the other Satellites.
weights in j
Czechoslovakia
(5) Agricultural Production
The calculated indexes shown in Table 5 were used.
b. Values in Marks
West German values for personal consumption, gross investment,
government, GNP, and income originating in industry and agriculture are
from the official series first published in 1956. Satellite values in
marks are the products of the West German values and the calculated
* P. 10, above.
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quantity indexes or of the Satellite values in domestic currencies
and the ratios of mark prices to Satellite prices.
c. Values in US Dollars
West German dollar values for GNP and investment are the geo-
metric means of the values obtained by Milton Gilbert and Associates
for the OEEC, using US and Western European weights. In the case of
personal consumption and government expenditures the OEEC values had
to be adjusted to account for the fact that the present comparisons
and the official West German data for personal consumption exclude
government expenditures for Services used by the population (that is,
public education and health) and place them under government expendi-
tures, while the OEEC study includes these services under personal con-
sumption and not under government expenditures. The adjustment of the
OEEC figures consists in applying the OEEC mark/dollar ratio for govern-
ment to the more comprehensive, mark value of government expenditures
used here and in calculating the dollar value of personal consumption
as a residual in the dollar value of GNP.
d. Per Capita Dollar Values
To obtain per capita values, the dollar values of total GNP and
personal consumption were divided by the following population figures for
1955:
Country or Area
Thousand Persons
(Midyear or Yearly Average)
West Germany (excluding the Saar
and West Berlin)
49,203
East Germany
17,944
Czechoslovakia
13,093
Poland
27,278
Hungary
9,805
Rumania
17,325
Bulgaria
7,575
European Satellites
93,020
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APPENDDC B
SELECTED BIBLIOGRAPHY
Official statistical publications of the individual countries
being compared are the principal sources used in this report. These
were supplemented by a large number of other sources, mainly period-
ical articles but also Monographs and UN and US government publica-
tions. The official sources most generally used throughout the com-
parisons are the yearly statistical yearbooks published by the sta-
tistical offices of the individual countries':
West Germany -- Statistisches Jahrbuch fuer die Bundes:
republik Deutschland, 1957-61.
East Germany -- Statistisches Jahrbuch der Deutschen
Demokratischen Republik, 1956-61.
Czechoslovakia Statisticka rocenka, 1956-62.
Poland -- Rocznik statystyczny, 1956-62.
Hungary -- Statisztikai evkonyv, 1949-55 and 1961.
Rumania -- Anuarul statistic al R.P.R., 1957-62.
Bulgaria Statisticheski godishnik, 1958-60.
In addition, the following sources were important for particular
purposes:
1. Value of national product and its components in Poland, Czecho-
slovakia, and Hungary in terms of domestic currencies: manuscripts
provided by Thad Alton and his associates from the project at Columbia
University on national income in Eastern Europe.
2. Calculation of price ratios for the above countries relative
to West Germany:
Poland -- Annex to BiUletyn statystyczny, No. 1, 1959.
Poland -- Statystyka Polski, Series F, Statystyka
cen, 1957.
Hungary -- Statisztikai idoszaki kozmenyek, arakulas
Mayarorszagan, 1938 ban es 1949-1955 ben.
All countries -- US Department of State despatches
(UNCLASSIFIED) providing comparative price infor-
mation for purposes of calculating cost of living
adjustments for US government personnel living -
abroad.
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3. Calculation of quantity index of consumption: various UN,
ECE, and FAO documents, as well as those listed under 5, below;
special West German and Polish official publications on agriculture,
and foreign trade.
4. Index of industrial production:
All countries.-- UN Statistical Yearbooks.
Poland Statystyka Polski, Series E, Statystyka
przemyslu, 1956.
East Germany -- Wolfgang Stolper, The Structure of
the East German Economy, Cambridge, Massachusetts,
Harvard University Press, 1960.
West Germany -- Der Aussenhandel der Bundesrepublik
Deutschland.
5. Index of agricultural production:
West Germany 7- Statistisches Jahrbuoh ueberErnaeh-
rung? Landwirtschaft, und Forsten.
'Poland Statystyka Polski, Produkdja globalna i
brutto rolnictwa.
East Germany, 'Hungary, Rumania) Bulgaria -- US
Department of Agriculture publications under the
series The Agricultural Situation in Eastern
Europe.
Czechoslovakia -- Gregor Lazarczik, Production and
Productivity in CzechoslovakAgriculture,,Ph.D.
dissertation, Columbia University.
6. Supplementary estimates:
Poland, consumption -- article by Bohdan Szulc on
a comparison of consumption in Poland and West Ger-
many in Gospodarka planowa, No. 7, 1959.
50X1
- Conversion from marks to US dollars -- Milton Gilbert
and Associates, Comparative National Products and
Price Levels, Paris, OEEC, 1958.
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Comparison of industrial production -- West Germany
and other Western countries:
OECD, General Statistics.
OECD Statistical Bulletins Indexes of Industrial
Production.
Eeborah Paige and Gottfried Bombach, A Comparison
of National Output and Productivity of the United
Kingdom and the United States, Paris, OEEC, 1959.
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CONFIDENTIAL
CONFIDENTIAL
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