SOVIET STRUCTURAL STUDIES TECHNIQUES AND ANALYSES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01093A001000120001-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 52
• Document Creation Date: November 9, 2016
• Document Release Date: July 14, 1999
• Sequence Number: 1
• Publication Date: February 20, 1956
• Content Type: IR

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PROVISIONAL INTELLIGENCE REPORT
SOVIET STRUCTURAL STUDIES
TECHNIQUES AND ANALYSES
CIA/RR PR-134
20 February 1956
CENTRAL INTELLIGENCE AGENCY
OFFICE OF RESEARCH AND REPORTS
rww"-AmqUrKwT --
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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.
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PROVISIONAL INTELLIGENCE REPORT
SOVIET STRUCTURAL STUDIES: TECHNIQUES AND ANALYSES
CIA/RR PR-134
(ORR Project 13.429)
The data and conclusions contained in this report do not
necessarily represent the final position of ORR and should.
be regarded as provisional only and subject to revision.
Comments and additional data which may be available to the
user are solicited.
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
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FOREWORD
This report represents an attempt to put into use for intelli-
gence purposes some of the techniques of intersectoral analysis. It
is a sequel to earlier studies of the intersectoral accounting struc-
ture of the Soviet economy.
In particular, this report is an explication of the precise
analytical processes of intersectoral analysis and includes examples
of analysis using these techniques. A brief investigation of the
implications of an increase in petroleum output, an examination of
the investment program of the Soviet electric power industry, and
a study of the impact on the domestic economy of Soviet trade with
the Western countries have been selected to test the techniques
and demonstrate the usefulness of intersectoral analysis in economic
intelligence research.
The analytical work undertaken in this report is suggestive rather
than definitive. As the basic data improve and as more experience
with the techniques of analysis is gained and they become more refined,
the intelligence community will be able to analyze accurately and in
detail many phenomena of the Soviet economy which now must be treated
with qualitative and highly aggregative techniques.
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CONTENTS
Page
Summary and Conclusions . . . . . . . . . . . . . . . . . . . 1
I. Structural Description of the Soviet Economy . . . . . . . 2
A. Reduction of the Number of Sectors . . . . . . . . . .
B. Accounting for Foreign Trade . . . . . . . . . . . . .
C. Accounting for Government, Defense, Trade,
and Services . . . . . . . . . . . . . . . . . . . .
II. General Analytical Techniques . . . . . . . . . . . . . .
III. Use of Analytical Techniques to Explore Specific
Problems . . . . . . . . . . . . . . . . . . . . . . 13
A. Increased Output of Petroleum Products . . . . . . . . 13
B. Investment in the Electric Power Industry . . . . 16
1. Expansion of Installed Capacity . . . . . . . . . 16
2. Investment Program in Value Terms . . . . . . . . 17
3. Impact of Investment Program on the Economy . . . 18
4. Soviet Capabilities to Meet the Program 20
C. Trade with the West . . . . . . . . . . . . . . . . . 21
1. Valuation . . . . . . . . . . . . . . . . . . . . 22
2. Direct and Indirect Requirements . . . . . . . . . 25
3. Labor Requirements . . . . . . . . . . . . . . . . 29
4. Conclusions . . . . . . . . . . . . . . . . . . . 31
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Appendixes
Appendix A. Mathematical Note . . . . . . . . . . . . . . . .
Appendix B. Computational Note . . . . . . . . . . . . . . .
Appendix C. Source References . . . . . . . . . . . . . . . .
Tables
Page
33
37
39
1. A Demonstration, Using the Iterative Process, of the Impact
of a 1-Million-Ruble Increase in the Final Demand for
Petroleum Products on the 28 Processing Sectors . . . . . 11
2. Soviet Investment in the Electric Power Industry,
1951-60 . . . . . . . . . . . . . . . . . . . . . . . . 19
3. Soviet-Western Trade, 1951 . . . . . . . . . . . . . . . . 23
4. Representative Bill of Soviet Export and Import
Replacements Based on Soviet-Western Trade, 1951 . . . . 27
5. Labor Requirements of Soviet-Western Trade, 1951 . . . . . 30
Charts
Figure 1. USSR: Intersectoral Transactions, 1951 . . . . .
Figure 2. USSR: Intersectoral Transactions (28 Sectors),
1951 . . . . . . . . s . . . . . . . . . . . . . .
Inside
Figure 3. USSR: Direct Purchases per Ruble of Output, Back Cover
1951 .......................
Figure II. USSR: Direct and Indirect Purchases per Ruble
of Final Demand, 1951 . . . . . . . . . . . . . . .J
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CIA/RR PR-1.34 S-E-C-R-E-T
(ORR Project 13.429)
SOVIET STRUCTURAL STUDIES: TECHNIQUES AND ANALYSES'
Summary and Conclusions
When presented with concrete problems such as the implications
for an economy of an investment program, an increase in production,
or the impact of foreign trade upon the economy, economic intelligence
has been forced to rely upon scattered aggregative data, qualitative
judgments, and intuition. It has frequently not been possible to
make use of available data about an economy, because no over-all ana,
lytical framework existed.
This report presents the intersectoral accounting system as one
possible analytical framework. It is a method of describing and
analyzing the Soviet economy in terms of the interrelationships
among all the separate sectors. The analytical framework is designed
for tracing through the production structure of the economy a postu-
lated change which affects any or all sectors.
After a discussion of the structural description of the Soviet
economy (Section I) and the general analytical techniques (Section
II), three specific analytical problems are examined. The first
problem is to estimate and classify the production of goods and
services implied in additional deliveries of a given value (1
million rubles) of petroleum products delivered to final demand.
The second problem is to examine the Soviet electric power invest-
ment program between 1951 and 1960. The third problem is to
determine the nature and characteristics of Soviet trade with the
West by comparing the domestic requirements generated by exports
and those generated by the replacement of a comparable volume of
imports.
The problems discussed in this report are suggestive of the kind
of analyses which may be undertaken using these techniques. The
absence of necessary corollary information prevents the presentation
of definitive conclusions.
The estimates and conclusions contained in this report represent
the best judgment of ORR as of 15 January 1956.
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The example of increased deliveries to final demand of petroleum
products indicates clearly that a given change in final demand will
have multiple repercussions throughout the economy, thus demonstrating
the extent of the interrelationships in the economy. In addition,
the immediacy with which a change in a single sector fans out and is
felt in every sector of the economy indicates the strength of these
interrelationships.
The requirements of the electric power investment program,
traced through the Soviet economy, draw attention to the sectors
in which these may be limiting factors. The analysis is a prototype
of that which must be applied to the entire investment sector, pro-
gram by program, in order to point up the sensitive areas within
the Soviet economy.
Soviet trade with the West is shown to be labor intensive. This
represents a confirmation of an already established judgment. It is
further shown, within the framework of this analysis, that the replace-
ment of imports by domestic production would represent a substantially
greater sacrifice than the benefits which would be gained by domestic
retention of exported items on a per unit basis.
Despite the fact that the conclusions cannot be regarded as
final, the analyses undertaken in this report indicate clearly that
the techniques employed, while still crude, are those which are
capable of providing answers to many of the questions required of
the intelligence community.
I. Structural Description of the Soviet Economy.
The purpose of intersectoral accounting systems is to describe
the operations of an economy, to indicate the interrelationships
among all sectors of the economy, and to provide the basis for anal-
ysis of the economy. Analysis proceeds from the implicit assump-
tion that intersectoral transactions in fact reflect the dependency
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of a given sector upon the other parts of the economy. For example,
the production of steel is directly dependent upon the supplies of
manpower, iron ore, coal, and other materials and upon electric
power made available to the steel sector. Similarly, the output of
these products and their supply to the steel sector are dependent,
directly or indirectly, upon steel deliveries.
These intersectoral relationships for the Soviet economy employed
in this analysis are presented in Figures 1, 2, 3, and 4-. Figure 1*
is the basic intersectoral transactions table for the Soviet economy
in 1951. Figure 2* presents a simplified intersectoral transactions
table for the Soviet economy in the same year. Figure 3,* which is
derived from Figure 2, presents the direct requirements by a given
sector per ruble of deliveries to a consuming industry. Figure 1i,*
which is derived from Figure 3, presents the direct and indirect
requirements by a given sector per ruble of deliveries to final
demand. The conceptual basis of intersectoral accounting and the
mathematical formulation of intersectoral analysis are presented
in Appendix A.
The intersectoral transactions table (Figure 2) upon which this
report is based has been derived from the transactions table (Figure 1)
presented in an earlier report. / The differences between these
tables are as follows: the current table is smaller (there are fewer
processing sectors); imports in the current table are treated as a
negative output rather than as an input; the government and defense
sectors of the earlier table have been combined, as have the trade
and services sectors.
A. Reduction of the Number of Sectors.
The smaller intersectoral transactions table was employed
in this research aid to reduce the computational requirements of
analysis. Computing the inverse (see Appendix B) of a transactions
table requires n(n2 + n) individual computations, where n represents
the number of processing sectors. The original table has 61 processing
Inside back cover.
For serially numbered source references, see Appendix C.
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sectors. Thus about a quarter of a million computations would be required
to obtain the inverse. The transactions table employed in the current
study has 28 processing sectors. Only about 25,000 computations were
required to calculate the inverse.*
The process followed in reducing the size of the transactions
table was to combine those sectors whose products were similar. The
rows and the columns of those sectors whose products were similar were
added. The resulting new row presents the distribution of output of
the new combined sector, and the resulting new column presents the
distribution of inputs of the combined sector. Intrasectoral trans-
actions, as in the earlier table, have been removed from the diagonal
cells and from the totals.
This combining, or aggregation, of sectors is not without its
effect upon the usefulness of the intersectoral tables as analytical
tools. First, the process of aggregation may obscure important inter-
relationships among the components of the aggregated sectors. In some
instances it is possible that the detailed information sacrificed
may be of greater importance than the more general information made
available by the process of aggregation.
A second effect of aggregation is upon the numerical results
derived from the use of the transactions table as an analytical device.
A different grouping or combining of sectors from that employed in
this report will yield more or less different numerical results for
the problems discussed below. If the "correct solution" to a given
problem is known, then by comparing the different shortcut answers
with the "correct solution" it is possible to measure the comparative
"goodness" of different aggregative classifications. However, because
the data, even in their most detailed state, are already aggregated,
it is not possible to determine the "correct solution" if it is not
given.
Two general characteristics of the process of aggregation
are as follows: the more highly aggregated systems, when employed
for analytical purposes, tend to overestimate the attainable levels
* Even so, large-scale electronic computing machinery was required.
Appendix B outlines the computational procedure.
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of production for an economy; similarly, the more highly disaggregated
systems tend to underestimate the capabilities of an economic system.
These characteristics develop from implicit assumptions regarding the
substitutability among both inputs and outputs for a given aggregated
sector. The process of aggregation tends implicitly to widen the
range of "feasible" substitute inputs and outputs. Conversely, the
process of disaggregation.tends to narrow the range of "feasible"
substitutes.
The implications of these characteristics may be seen from
the following example. Assume, for instance, that large quantities
of a certain type of electric motor are essential to aircraft con-
struction. These motors might be, and indeed are, grouped with a
number of other electrical parts and form only a small portion of the
aggregate. If increased aircraft production were attempted, the
number of motors needed might exceed the number which could be pro-
duced. A large aggregated sector, however, in which motors were
only a small part would not reveal such a shortage. On the contrary,
it would imply that material inputs and factors of production could
be converted from the manufacture of other commodities within the
sector to satisfy the requirement. Conversely, aluminum is a
"feasible" substitute for copper in the production of electrical
equipment. The disaggregation of these two commodities, by
narrowing the range of substitutes, will tend to cause an under-
statement of the ability of the economy to meet its requirements
for electrical equipment.
B. Accounting for Foreign Trade.
A comparison of Figure 1* with Figure 2* reveals that, in
the latter transactions table, imports are treated as though they
were negative exports (or negative output), whereas in Figure 1 they
are handled as inputs to the import-competing sectors. That is,
in Figure 1, imports are channeled through those sectors which
produce comparable domestic products rather than being charged di-
rectly to the consumer's industry. The effect of this change is
that in Figure 2 each sector's total output is expressed as domestic
production, whereas in Figure 1 it is expressed as domestic
production plus imports.
* Inside back cover.
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This modification is not without its effect upon the input
coefficients derived from the transactions table. The effect is
to increase the input coefficients for the sectors in which this
change takes place. This may be demonstrated as follows. Assume
an industry which has the following input pattern:
Inputs of Goods and Services
into Industry "i"
Rubles
Percent
Industry 1
40
40
Industry 2
30
30
Industry 3
20
20
Imports
10
10
A shift of imports from inputs to negative exports will display the
following input pattern:
Inputs of Goods and Services
into Industry
Rubles
Percent
Industry 1
40
45
Industry 2
30
33
Industry 3
20
22
Total 9o
The second input pattern, in which imports do not appear
as a cost to the sector which produces similar commodities, furnishes
a more accurate basis for computing, for example, the requirements
generated by a postulated change in final demand. It also clarifies
the treatment of imports, since it leaves the determination of net
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import requirements for each class of commodities to be determined as
the algebraic difference between the requirements generated and the
domestic production forthcoming under the postulated conditions.
C. Accounting for Goverment, Defense, Trade, and Services.
The aggregation of government and defense and of trade and
services from 4 into 2 sectors was conducted for the purposes of
analytical convenience. The combined government and defense sec-
tor now includes all purchases of the government (including the
purchases of the defense industries) with the exception of outlays
for health, education, and retail trade. The latter expenditures
are included in the combined services and trade sector. These
modifications have no direct impact upon the analytical results
derived from the application of intersectoral techniques to a
given problem. Furthermore, the loss of detail in the final demand
sector does not hamper seriously the interpretation of these results.
II. General Anal tical Techniques.
The description of an economic system, ideally, may be conducted
in the absence of assumptions regarding the nature or structure of
the economy. Most frequently, however, the complexities of modern
societies force the use of simplifying assumptions in order to form
a frame of reference for the accumulation and processing of informa-
tion. To the extent that these simplifying assumptions abstract
from reality, the description itself abstracts from reality.
In addition, because man is not omniscient, the prediction of
economic events always requires two primary sets of assumptions.
The first is the postulation of the future activity -- for example,
a change in final demand or a technological innovation. The second
is the necessary assumptions regarding the interrelationships within
the economy over the period involved.
The primary postulate of intersectoral transactions accounting
systems is that there exists a relationship between some of the
transactions which take place within an economy and the structure
of that economy. Therefore, an accounting of these transactions
may be employed to make meaningful statements regarding the structure
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and nature of an economy. It was upon the basis of this postulate
that an attempt to construct an intersectoral transactions model
for the USSR was undertaken.*
A further limiting condition was imposed in the construction of
the basic transactions table to reduce the areas of conjecture and
to evolve a useful tool for analysis. This was to restrict the
transactions estimated to those on current account. Thus the trans-
actions table employed in this report presents only the intersectoral
transactions on current account. The capital account transactions
have been accumulated into the investment sector of final demand.
To employ the transactions table for the analysis of particular
problems, it is necessary to make an additional postulate. This
additional postulate may be stated as follows: the intersectoral
transactions in an economy are some function of the output level
of the various sectors. For example, it is postulated that the
purchase of coal by the iron and steel sector is some function of
the output of the iron and steel sector.
Operationally, in the absence of adequate information regarding
these transactions (that is, the purchase and sales among processing
sectors), it has been necessary to specify arbitrarily the nature
of the functional relationships among the sectors of the economy.
It is assumed specifically that the purchases a given sector makes
from another processing sector are a constant proportion of the
level of output of the purchasing sector. Purchases of coal by
the iron and steel sector are assumed to be a constant proportion
of the value of the output, and thus of the total costs, of the
iron and steel sector. In economic terms, it is assumed that all
sectors are experiencing constant costs. These assumed character-
istics are displayed in Figure 3.** Here the input requirements
of each sector are expressed as a constant proportion of the sec-
tor's cost. By moving the decimal point two places to the right,
these input requirements may be expressed as a percentage of total
cost.
*. The theoretical structure and the analytical applications of
intersectoral accounting are discussed in a previous report. J
** Inside back cover.
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Intersectoral analysis has its primary application in the examination
of the implications of changes in the economy which influence the levels
of output of the various sectors. These may be characterized as (l)
changes in final demand; (2) changes in technology; and (3) restrictions
imposed upon the economy from outside, such as trade controls and indus-
try destruction as from air war or sabotage. The validity of the results
derived from intersectoral analysis of problems of this type rests upon
the extent to which the data approximate the conditions in the Soviet
economy and the extent to which the assuihptions needed for the analysis
are a reflection of Soviet economic and industrial experience.
Two general methods may be employed to analyze problems of the
type outlined in the preceding paragraph. One is the iterative process,
using the sector input coefficients. The other is the application of
an algebraic device known as an inverse. (Both represent methods for
the solution of the system of equations outlined in Appendix A.) Thus,
given a change in the economy, such as an increase in final demand,
these methods permit an estimate of the impact of this change upon the
individual sectors of the economy.
By way of example, it can be assumed that there is a 1-million-
ruble increase in final demand for petroleum products. The goal
is to determine the total impact, not only upon this sector of the
economy but also upon all sectors of the economy of this increase
in demand. The increased demand postulated for petroleum products,
if met by increased production, will induce increased purchases by
this sector from its suppliers. The amount of these purchases from
each supply sector is determined by the input coefficients of the
petroleum sector (column 11 of Figure 3*). This is the initial,
or first-round, impact of the postulated change in final demand
and is represented in Table 1** by the first column.
The suppliers to the petroleum sector are assumed to meet these
increased purchases by increases in output. The increases in the
output of the petroleum sector suppliers cause them to increase
their purchases from their supplying sectors, the amount of each
purchase being determined by the appropriate input coefficient.
* Inside back cover.
** Table 1 follows on p. 11.
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This is the second-round impact of the change in final demand and is
represented sector by sector in Table 1 by columns 2 through 15. This
procedure is continued, tracing the increased purchases through the
economy until the changes become negligible. The sum of all these
increased sales (output) for a given sector is the total effect upon
that sector of the increased demand for petroleum products. The
final column in Table 1 presents for each sector the total impact
upon that sector of the increased demand for petroleum products.
In effect, this column presents the direct and indirect requirements
needed from each sector to fulfill the increased output of petro-
leum products.
Fortunately, for some purposes, this laborious procedure may be
shortened. Figure 4* shows the results of a systematic, simultaneous,
and complete set of computations of the desired type, carried through
by means of a high-speed electronic computer.** Technically, the
result of these computations is the derivation of the "inverse" of
the input-coefficients table, Figure 3, or the matrix (I - A)-l,***
For purposes of exposition, Figure 4 is a transposed inverse:
that is, the rows and columns have been interchanged. Each row of
Figure 4 shows the output in 1951 required directly and indirectly
from each sector to support the delivery to final demand of 1
ruble's worth of product by the sector named at the beginning of
the row. For example, in row 1 the delivery of 1 ruble's worth
of food crops in 1951 required a total output (exclusive of intra-
industry sales) of 1.003794 rubles of food crops (sector 1),
0.5419586 ruble of industrial crops (sector 2), 0.0008144 ruble
of coal and coal products (sector 12), and varying amounts from
all others.
Each column in Figure 4 shows the gross output required from
the sector named at the top directly and indirectly per ruble of
deliveries outside the processing system by each of the sectors.
The entries in the first column, for example, reflect the depen-
dence of food crops production on the demand for grain, mill, and
bakery products; other foods and kindred products; chemicals; and
so on.
* Inside back cover.
See Appendix B, Computational Note.
*** See Appendix A. Mathematical Note.
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 Approved For Release 1999/09/26 -CI" RDP79
Total First, Total Direct
Becom, and Third and Indirect
Bounds srfects
27
28
1,059.4
1,260
352.8
7,183.5
7,720
1,816.1
1,816.1
2,090
0.1
1.1
0.3
0.2
158.3
1,129.9
1,240
0.4
11.0
5.3
1.1
32-9
822.0
870
.0
0.4
21.8
12.7
1.7
2.0
g
3
70.5
1,500
41.4
1.9
2.9
0.03
1.4
9.4
3.0
7.1
1.7
0.4
:
3
39.0
N
2,270
2.3
1.0
0.2
0.1
0.05
0.3
0.3
1.5
97.4
110
101.8
37.9
9.9
1.2
0.4
2.1
80.2
5.9
0.9
5.6
1.1
1.8
934.9
7,635.3
8,060
5
120.1
42.1
8.5
1.9
0.3
6.3
73.0
2.0
2.1
32.8
16.0
1.1
1.1
1#345-5
42,353.0
42,710
.1
67.3
4.1
2.1
0.5
0.1
0.6
3.9
0.7
23.2
94.5
224.7
226.4
0.7
3,709.2
4,430
22.5
3.7
1.9
0.5
0.1
0.5
3.4
0.5
270.1
1,100.7
4.7
5.1
2,030.4
15,065.9
16,150
0.9
2.9
4.3
8.9
1.2
0.3
15.1
0.1
1.1
0.3
138.8
1.5
0.2
398.0
1,741.8
1,870
.6
21.9
21.7
5.0
2.3
0.1
5.1
33.0
0.4
35.1
4.
1-4
358.9
4,660.9
4,930
49.4.
317.7
99.6
28.6
13.I
28.3
72.2
38.0
62.2
5.1
0.2
944.9
3198.2
300
05
94.2
31.2
2.6
0.6
10.0
179.2
3.5
38.1
1.3
0.2
531.3
2,924.9
3,210
3
14.1
38.9
15.4
2.7
7.2
108.3
11.5
1.8
14.0
9.7
4.2
1.1
892.7
5,471.5
6,100
.2
5.3
25.5
23.5
7.6
8.8
25.9
20.4
3.1
22.1
7.1
216.2
9,645.7
9,800
.9
13.3
0.3
0.2
4.8
2.2
135.4
1.5
304.5
5,984.0
6,230
2
38.3
0.05
2.5
1.0
1.2
332.2
191.5
230
13.6
29.8
0.1
1.9
25.1
7.9
3.0
3.6
85.0
550
.0
0.5
17.5
12.8
8.4
0.4
11.8
5.2
43.6
8.6
7.1
17.9
145.7
2,340.8
2,450
20.7
0.5
137.5
172.0
462.6
510
5
12.0
5.6
0.8
0.4
1.3
30.1
1.7
52.0
1.7
3.
1,064.7
50,853.0
51 310
2.5
27.7
9.8
3.5
1.1
2.5
16.0
3.5
86.4
32.8
7.6
8
1.
30,740.8
11,490
.0
24.6
5.3
2.1
0.7
0.2
0.6
6.7
1.0
34.0
37.5
1.3
0.9
M6
2,766.3
2,990
.4
4.0
1.4
0.5
0.2
- 0.04
0.1
0.8
0.4
29.0
7.0
22.5
0.2
262.5
4,547.1
.9
11.2
5.8
2.8
0.3
0.2
0.8
6.4
0.6
31.0
7.3
26.6
5.9
200.8
14,464.2
14,E
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 Approved For Release 1999/09/26 : CIA-RDP79-01093A001000120001-4
The use of the inverse is most suited to those problems in which
one wishes to examine many different changes in final demand. The
one inverse can be used an indefinite number of times with variations
in final demand. When changes in elements other than final demand,
such as changes in the -technical structure, are to be subjected to
examination, the inverse is not a helpful device. In such instances,
the process of iteration, which permits changes in technical coeffi-
cients and allows more flexibility in the tracing of indirect effects,
is utilized. Iteration also is used where it is desired to introduce
time explicitly into the problem, as in analyzing some investment
programs.
III. Use of Analytical Techniques to Explore Specific Problems.
It is the purpose of this section to introduce the methodology
and the limitations of intersectoral accounting as they are exhibited
in the analyses of three specific economic problems. The first is.a
hypothetical increase in the output of the petroleum products sector,
employed as an illustration in the preceding section. The second is
an estimate of the requirements generated by the proposed Soviet
investment program for the electric power industry. The third is an
evaluation of the impact of alternative trade control programs upon
the Soviet economy.
It must be pointed out that the numerical results proceeding from
this type of analysis are of relative rather than absolute signifi-
cance. A complete evaluation of these problems can be made only in
the light of additional information (not available in the transactions
structure used in this report) regarding the Soviet economy. The role
of this additional information and its nature will be noted with regard
to the specific problems treated in this section.
A. Increased Output of Petroleum Products.
The determination of the demands imposed upon the Soviet economy
by an increase in the output of petroleum products is one type of eco-
nomic problem to which intersectoral accounting techniques may be applied.
Postulating a given increase in the output of this sector, it is pos-
sible to indicate by means of the iterative process or the inverse the
demands which would be levied directly and indirectly upon the economy
to meet this increased output goal. The requirements bill resulting
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 Approved For Release 1999/09/26 : CIA-RDP79-01093AO01000120001-4
from this analysis (Table l,* last column) reflects only purchases on
current account and provides no direct measure of the capital require-
ments for the increase in output.
The capability of the Soviet economy to produce that bill of
goods (requirements on current account) needed to expand the output of
petroleum products depends upon three factors: (1) the availability
of natural resources including labor, (2) the existence of unused
plant capacity, and (3) the position of the petroleum products sector
in the schedule of priorities of the Soviet decision-makers. It may
be seen that (1) and (2) cover the ability of the Soviet economy to
meet the requirements of the higher level of output, without reference
to changes in other requirements. The Soviet capability to allocate
resources and plant capacity as needed, to meet the desired level
of output, also depends, of course, on the extent of higher priority
requirements. Thus it may be seen that the data resulting from the
computational procedure are of limited use and have real significance
only in connection with other information regarding the Soviet economy.
If it is determined that in order to meet the required levels
of output, the existing plant of certain sectors, including possibly
the petroleum products sector, must be expanded, it is possible then
to estimate the requirements of the subsequent capital investment
program. This demands the determination of capital coefficients and
then of the inputs required to achieve the required increase in plant
capacity. Given this input information, it is possible to estimate
(again using the iterative process or the inverse) the impact of the
capital program upon the output levels of all sectors in the economy.
The total impact upon the economy, then, is the sum of the input
requirements induced by the expanded output of the petroleum products
sector plus the requirements generated by the accompanying capital
program.
The petroleum products sector has substantial charges outside
the processing sectors. Of the 1-million-ruble expenditure, only
about 130,000 rubles are expended in the 28 processing sectors. The
first-round column in Table 1 shows how these expenditures are allo-
cated.
* P. 11, above.
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 Approved For Release 1999/09/26 : CIA-RDP79-01093AO01000120001-4
S-E-C-R-E-T
Table 1 indicates how each of the first-round effects fans out
through the economy as the sectors whose outputs are increased in the
first round force their suppliers to expand their output. In the
second round, many sectors on which direct demands are not made have
their outputs increased.
In the third round, all the sectors are affected, so that by
the end of the third round every sector has an expanded output. In
fact, at the end of the third round, the output of all sectors is
about 58 percent greater than the direct expenditures of the 28
processing sectors. It is interesting to note that more than 15
percent of the direct and indirect effects is represented by output
from sectors where there are no direct expenditures.
The relationship between the direct and indirect expenditures
as revealed at the end of the third round of transactions and the
final conclusion of the iterative process, as shown by the inverse,
has some meaning. About 96 percent of the total impact of the initial.
expenditures has been worked out by the end of the third round. This
indicates the strength and extent of the interdependence of the economy
and the immediacy with which an impulse in one sector is communicated
to all other sectors.
Intersectoral analysis also indicates labor expenditures
generated by the increased demand for petroleum products. The
direct labor expenditures generated are 202,000 rubles. As has
been indicated earlier, however, the increased output has repercussions
throughout the economy. Multiplying the direct and indirect demands
for all 28 sectors by their respective labor input requirements indicates
that the total labor requirement is 271,000 rubles, or about 35 percent
more than the direct labor requirements.
It can be seen readily that should the USSR decide upon an
expansion of petroleum products, not only must it count upon a con-
siderable expansion of other industries, but also its labor require-
ments will be substantially more than is indicated by direct costs.
The problem, as described above, has been assumed to be timeless:
that is, the response of the economy to changes in the output of the
petroleum sector has been assumed to be, in effect, instantaneous. More
detailed knowledge of the Soviet economy and its decision-making processes
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 Approved For Release 1999/09/26 : CIA-RDP79-01093AO01000120001-4
would permit a modification of the analytical technique to account for
the time period between the initial decision and its fruition. This
would require the leading or lagging of particular sectors so that
their position in the iterative process would correspond more closely
to their position, in time, in the production process. It must be
noted here that the use of a single inverse provides an instantaneous,
or timeless, solution, and it is not possible to modify the technique
to account for the leads and lags of individual sectors in the
productive process.
B. Investment in the Electric Power Industry.
The purpose of this section is to analyze the implications of
the Soviet electric power development program between 1951 and 1960.
The use of intersectoral accounting techniques permits the examination
of the investment program which underlies the growth trend of the
production of electric power from 90 billion kilowatt-hours (kwh) in
1950 to the proposed goal of 320 kwh in 1960. These techniques
indicate those sectors of the economy which will feel not only the
direct but also the indirect impact of investment in electric power.
1. Expansion of Installed Capacity.
The Fifth Five Year Plan (1951-55) for the electric
power industry was to double electric power capacity, which was 19.2
million kilowatts (kw) at the beginning of 1951, while increasing
electric power output by 80 percent. This program would have reduced
the high plant factor obtaining at the beginning of the period,
almost 4,800 hours per year, to about 4,300 hours per year.* By the
end of 1955 the USSR had increased the output of electric power by
more than the planned amount though falling short of the goal estab-
lished for generating capacity. Electric power production, calculated
from Sixth Five Year Plan (1956-60) information, / was 170 billion
kwh in 1955, whereas generating capacity is estimated to be 37.0
million kw. This represents no reduction from the plant factor
experienced in 1950.
The Sixth Five Year Plan J implies a generating capacity
in 1960 of about 2.3 times the 1955 plant, or approximately 84.4
million kw. The planned capacity, in conjunction with the output
goal, results in a plant factor of about 3,800 hours per year, a
reduction of nearly 1,000 hours per year from the 1955 level. The
Using end-of-year output and capacity.
- 16 -
S-E-C-R-E-T
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 Approved For Release 1999/09/26 : CIA-RDP79-01093AO01000120001-4
reduction in plant factor embodied in the Sixth Five Year Plan is
twice that planned for the 1951-55 period. This suggests that the
electric power investment program in the Sixth Five Year Plan is,
in part, an attempt to make up for time lost in the previous program.
The 1950 Soviet electric power plant of 19.2 million kw
is estimated to have been composed of 16.2 million kw of thermal
capacity and 3.0 million kw of hydroelectric capacity. For the
period 1951-55 it is estimated that 14.8 million kw of thermal
capacity and 3.0 million kw of hydroelectric capacity were added.
The Sixth Five Year Plan calls for a thermal capacity in 1960 of 2.2
times the 1955 level and a hydroelectric capacity of 2.7 times the
1955 level. / This represents an increase of 37.2 million kw in
thermal generating capacity and 10.2 million kw in hydroelectric
generating capacity.
In addition to generating capacity, it also will be
necessary for the USSR to add to its transmission and distribution
facilities during 1956-60. It is estimated that transmission and
distribution facilities will increase proportionately to increases
in generating capacity.*
2. Investment Program in Value Terms.
For use in the intersectoral framework it is necessary to
convert the investment program described above into the same units as
those used in the analytical device: that is, 1950 rubles. There are
not sufficient Soviet data to convert the entire physical program
directly into rubles. Hence recourse was taken to technical data for
the US, modified wherever possible by Soviet information. Extensive
studies have been made in the US on the capital equipment and con-
struction requirements for the addition of electric power capacity.
The US capital equipment data are in 1947 US dollars.** It was
necessary to adjust these data to 1950 dollars. The dollar data
* The procedure employed in this report assumes that approximately
1.00 kilometer (km) of 100 kilovolt (kv) line is constructed per
1,000 kw of added generating capacity. This is in keeping with the
Soviet experience of 1.75 km in 1951 and 0.75 km in 1954 as reported
by A. Marinov, Director of Chief Urals Power Administration.
** See source J for a collection of US capital studies.
XXX The US data were for 1947. The price indexes used for moving
the data to 1950 were from source.
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 Approved For Release 1999/09/26 : CIA-RDP79-01093AO01000120001-4
were then converted to rubles for each category of inputs by means of
studies of ruble-dollar ratios for nearly all sectors of the economy. 91
The same treatment was given construction data. 10 The difference
in the proportion of thermal to hydroelectric power between the US and
USSR was taken into account, and Soviet data were used wherever avail-
able. All these data were organized into the classification system
of Figure 2.* They are presented in columns 1 and 3 of Table 2.*
The investment program as outlined conforms closely to
that which has transpired in the USSR so far. In 1950 rubles the
investment program carried out in 1951-53 and planned for 195+ amounted
to 47 billion rubles. 11 Table 2 shows the 1951-55 electric power
program to be 64 billion rubles. The ratio of value of capital
expenditure to capacity is 3,600 rubles per kw. This figure is some-
what higher than that for the early postwar period, when smaller
expenditures could bring partly destroyed plants into production. 12/
3. Impact of Investment Program on the Economy.
Using the inverse matrix, Figure 4, - it is possible to
determine the implications of the electric power investment program
and its impact upon every sector of the economy. The direct and
indirect expenditures of the program are given in columns 2 and 4 of
Table 2.
The total investment program, including construction, is
spread over 13 of the 28 sectors, with substantial purchases in many
of them. Many of these expenditures are such as to give rise to
indirect expenditures of considerable magnitude. For the investment
program as a whole, the direct and indirect expenditures are one-
half again as much as the direct expenditures.
The relationship between the direct expenditures and the
direct and indirect expenditures is an indication of the distribution
(or composition) of the burden which the economy assumes when
Inside back cover.
Table 2 follows on p. 19.
XXX This conformity is in terms of funds invested rather than in
terms of additions to capacity actually put into operation during the
period. The difference between the ways of measuring the program
would be indicated by the difference in the volume of work under way
at the beginning and end of the period.
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 Approved For Release 1999/09/26 : CIA-RDP79-01093AO01000120001-4
C4 Ui
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 Approved For Release 1999/09/26 : CIA-RDP79-01093AO01000120001-4
undertaking the program. As would be expected, the relationship in
the electrical equipment sectors is nearly 1 to 1. This results
from the fact that most of the output of these sectors is delivered
directly to final demand, especially the investment sector.
Indirect effects are not felt evenly through the economy.
The petroleum products, rubber, automotive equipment, and communi-
cations sectors experience considerable indirect demands resulting
from the investment program. Sector by sector the ratio of direct
and indirect to direct expenditures ranges from 1.04 (electrical
equipment) to 4.2 (communications). There are even considerable
indirect expenditures in sectors where there are no direct expendi-
tures. In the period 1951-55, over 10 billion rubles of expendi-
tures, more than 20 percent of the direct expenditures, are in
sectors in which there are no direct expenditures. A similar ratio
holds for 1956-60.
4. Soviet Capabilities to Meet the Program.
Any single-sector investment program such as that for
electric power, is within the capabilities of the-USSR. Only by
testing the entire investment, consumption, and military program
would it be possible to determine economic feasibility. On the
basis of the limited information on investment in electric power
and its impact upon the economy, 1951 sector outputs, and the
potential growth of all sectors, however, something may be said
about the relative impact of the program, and an indication may be
given as to the economy's ability to carry the burden.
It is possible to dismiss most of the sectors from
consideration because the demands, direct and indirect, of the
electric power program are so small. There are, however, a few
industries in which the impact is substantial. For instance, in
nonmetallic minerals, which includes building materials, the direct
and indirect demands for the period 1956-60 are about 70 percent of
1951 output. For nonferrous metals the total demands are almost
90 percent of 1951 output. Iron and steel, fabricated metal products,
and industrial equipment also will feel a considerable impact from
the electric power investment program. It cannot be said, however,
on the basis of evidence here, that the Soviet economy will not be
able to absorb these demands, which are spread over a period of 5
years.
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 Approved For Release 1999/09/26 : CIA-RDP79-01093AO01000120001-4
S-E-C-R-E-T
There are two substantial direct requirements, however,
which may well impose important choices between investment in the
electric power industry and other goals. One is the requirement for
turbines, generators, transformers, and electrical equipment (in-
cluding cable for transmission lines), which amounts to about three-
eighths of the direct cost of the program. Since a great deal of
this equipment is produced specifically for the electric power
industry, the principal competing requirement would appear to be
that of defense and defense-related programs. Whatever the reason,
the production of turbines and generators during the Fifth Five
Year Plan has been below the target set, and this presumably is
related to the cutback in investment in the electric power industry.
The other major direct requirement of the program is construction
labor, which accounts for about one-third of the direct and indirect
labor costs, or 14.6 billion out of 42.6 billion rubles in the years
1951-55 and 21+.5 billion out of 71.2 billion rubles in the years
1956-60. The direct construction-labor cost alone amounts to about
one-quarter of the direct cost, and the cutback in investment in the
electric power industry may be related to the failure to meet planned
targets for increasing the productivity of construction labor. The
greater part of the construction of electric power capacity deferred
from the Fifth Five Year Plan seems to consist of two very large
hydroelectric projects in the Volga region, which together have a
planned capacity of 33.9 million kilowatts.
The 1956-60 electric power investment program, designed
to sharply reduce plant utilization, is more than 2.5 times the
1951-55 program. Whatever the reason, the 1951-55 program failed
to achieve the original goals whereas over-all investment and
electric power output both achieved the proposed levels. It would
seem evident that the Fifth Five Year Plan objectives of reducing
plant utilization (and of increasing the proportion of hydroelectric
capacity) had a lower priority than some of the objectives with which
they were in competition.
C. Trade with the West.
This section presents a preliminary evaluation of Soviet
trade with the West in 1951. The analysis includes a study of the
impact of this trade upon the Soviet domestic economy. Both the
exports and imports are examined in order to determine what sectors
of the economy are involved and the extent of demand upon these
sectors.
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The technique of intersectoral analysis permits an examination
of the nature and characteristics of Soviet foreign trade. It has the
signal advantage of permitting an estimate of the direct and indirect
requirements generated by both exports and domestically produced re-
placements for imports where imports are reduced or eliminated as a
result of non-Soviet action, such as Western trade controls. The
technique points out those sectors upon which these demands would
impinge, thus indicating some of the forces underlying Soviet trade
patterns.
It must be noted that the grouping of all processing activity
into 28 sectors of the economy represents a considerable sacrifice of
detail. These large categories tend to obscure Soviet trading activity,
which is characteristically highly specific. Some restrictions,
therefore, must be placed upon the conclusions because of the high
degree of aggregation.
1. Valuation.
Presented in Table 3* are estimates of Soviet trade with
the West. Soviet exports to the West are assigned to those sectors
of the economy producing the export. Imports from the West are
assigned to those sectors of the Soviet economy which produce
domestically goods that compete with, or are similar to, the imports.
For example, Soviet imports of electric motors, generators, and
transformers are assigned to sector 21, which produces those prod-
ucts domestically.
Available estimates of Soviet trade with the West are
compiled in dollars on the following basis: Soviet exports c.i.f.
Western ports and Soviet imports f.o.b. Western ports. Before con-
verting these estimates to a ruble base, it is necessary to adjust
for transportation charges. Available estimates of the cost of
shipping goods indicate that transport charges are about 13 percent
of the total value of Soviet exports and 10 percent of the total
value of Soviet imports. 13 These percentages, in the absence of
other data, were applied across the board to the commodity esti-
mates in dollars for the trade with the West.
* Table 3 follows on p. 23.
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N L PIN ~pI~t N C\ (3\60 NOON U- N ~
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Aside from some scattered statements indicating total trade
turnover, available information regarding Soviet foreign trade is pre-
sented in currencies other than the ruble. Detailed statistics of
Soviet commodity trade with the West are available in dollars. For use
in the exercise they must be converted from dollars to rubles. Two
ruble estimates of Soviet trade with the West are presented in Table 3.*
The first is the result of employing ruble-dollar ratios based upon
Soviet domestic prices. 14 The second estimate is an attempt to value
trade in consumer goods and petroleum products in ruble prices which
exclude the turnover tax and trade in agricultural products in ruble
prices which are assumed to represent Soviet procurement and contract
prices. These are referred to as adjusted domestic prices. The re-
sults are su?rized (from Table 3) as follows :
US Prices
(Thousand Dollars)
Soviet Domestic
Prices
(Million Rubles)
Adjusted Soviet
Domestic Prices
(Million Rubles)
Exports
(f.o.b. USSR)
345,097
4,768
1,483
Imports
(c.i.f. USSR)
425, 945
4,276
2,924
Total
771,042
9,044
4,407
On the basis of Table 3, the USSR, when its trade with the
West is valued in dollars, has an import balance which is approximately
10 percent of total trade turnover. When these same traded items are
valued in Soviet domestic prices, the USSR has an export balance of
slightly more than 5 percent of the total value of trade. Finally,
when the traded items are valued in adjusted domestic prices, the
USSR has an import balance of almost 33 percent of total trade.
If Soviet commodity trade with the West were in balance in
dollars and trade were being conducted rationally, it would be expected
that the valuation of this trade in rubles would result in an import
* P. 23, above.
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balance. This proposition assumes that relative Soviet prices reflect
relative costs and scarcities and that the USSR exports those items
with relatively low domestic prices while importing those items with
relatively high domestic prices. The failure for such a pattern to
emerge may be attributed to one or a combination of the following:
(a) Soviet trade decisions are dictated by factors which run counter
to rational economic motives, and (b) the prices used for the con-
version do not reflect relative cost and scarcities as viewed by the
Soviet authorities.
The use of unadjusted domestic prices to value Soviet
imports and exports, instead of resulting in an import balance, as
anticipated from the above, results in an export balance. On the
other hand, the use of adjusted domestic prices does result in an
import balance of trade as expected. If, therefore, Soviet trade
decisions are in accord with rational economic motives, the price
base upon which these decisions are made lies between the adjusted
and the unadjusted domestic prices.
Additional information in the form of official Soviet
statements is in keeping with the above hypotheses and seems to
indicate that the price base used is nearer to the adjusted than to
the unadjusted prices. Soviet spokesmen have indicated that total
trade turnover in 1951 was 18 billion rubles and that trade in 1952
with the rest of the Sino-Soviet Bloc accounted for about 80 per-
cent of the total turnover. Soviet-Western trade, valued in
domestic prices, is 50 percent of the announced total, whereas
this trade, valued in adjusted domestic prices, is approximately
24 percent of the announced total. The apparent confirmation of
the hypotheses stated above should be taken only as suggestive, in
view of the extremely roundabout procedure involved in valuing
Soviet-Western trade in rubles.
2. Direct and Indirect Requirements.
A glance at Soviet trade with the West shows that Soviet
exports consist primarily of agricultural and light industry products,
whereas Soviet imports consist primarily of industrial products. It
would be expected that the requirements levied upon the Soviet
economy by exports would fall, for the most part, on the agricultural
and light industry sectors. Conversely, it would be expected that
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if imports were cut off, the requirements levied upon the Soviet
economy to replace these imports would fall largely upon the
industrial sectors.
This conclusion may be demonstrated by studying the
direct and indirect impact of trade upon the domestic economy.
The methodology employed is to estimate, using the inverse, the
direct and indirect requirements levied upon the Soviet economy to
produce a bill of goods exported to the West in 1951. Similarly,
the direct and indirect requirements also are determined for a
bill of goods which represents import replacements: that is, the
bill of goods which would have to be produced by the Soviet
economy to replace (or substitute for) imports from the West, if
these imports were cut off.
The bills of goods which represent exports and import
replacements are determined as follows: it is assumed that the
West reduces its exports to the USSR and its imports from the USSR
by $100 million. These reductions are distributed proportionally
over the 1951 trade bill. The resulting bills of goods are then
revalued in unadjusted Soviet domestic prices (including the turn-
over tax). The use of prices including the turnover tax was
necessitated by the nature of the prices employed in the con-
struction of the original model of the Soviet economy.
The hypothetical bills of goods, valued in dollars and
rubles, are presented in Table 4* together with the direct and
indirect requirements generated by the production of these bills.
The direct and indirect requirements levied upon a given sector
include not only the output required to meet its direct export
(or import replacement) demands but also the additional output
which is consumed by other sectors in meeting their requirements.
From Table 4+ it may be seen that in order to produce the bill of
export goods postulated, output valued at 763 million rubles is
required from sector 1, output valued at 38 million rubles is
required from sector 2, output valued at 52 million rubles from
sector 3, and so on for each of the sectors.
* Table T+ follows on P. 27.
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4. Conclusions.
The analysis of Soviet trade with the West in 1951 indi-
cates that if Soviet trade decisions are motivated by economic fac-
tors, the price base upon which these decisions are made appears to
be comparable with the adjusted domestic prices used above. It thus
would appear that Soviet-Western trade is being conducted rationally
in terms of the Soviet definition of costs.
As a result of the Soviet definition of costs, products
of the extractive and light industries are predominant in Soviet
exports, and the products of heavy industries are predominant in
Soviet imports. This pattern is reflected in the direct and
indirect requirements and in the labor requirements generated by
the export and import-replacement bills. The USSR exports unskilled
and semiskilled agricultural and extractive labor to the West, while
importing skilled industrial labor from the West. This has the effect
of permitting the USSR to expand its skilled labor force (and the
related industrial capacity) without incurring the attendant costs.
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APPENDIX A
MATHEMATICAL NOTE
An intersectoral model has as its primary function a description
of activities within an economy. In addition, with certain assump-
tions, the model may also be employed as an analytical or predictive
device. The starting point for such use of an intersectoral model is
the assumption that the intersectoral transactions are functions of
the output of the purchasing sectors.
It is possible to represent the accounting for intersectoral
transactions by a set of equations, one for each sector of the
economy. These equations take the following form:
Equation 1:
Xl - x12 - xl3 - xlj - ... - Xlm = xie
-x21 + X2 -x23 - x2j - ... - X2m = x2e
-x31 - x32 + X3- x3j - ... - x3m = X3e
. . . ... . ...
-xml - xm2 - xm3-... - xmj - ... +Xm = xme
in which Xi (i = 1, 2, 3, ..., m) represents the value of the output
of the iTH sector net of its sales to itself. xij represents the sale
by sector i to sector j (i, j = 1, 2, 3, ..., m, i ~ j) and x1e (i = 1,
2) 3, ... M) represents the sales by sector i to the nonprocessing, or
final demand, sector. Equation 1 represents only an accounting descrip-
tion of the economy.
The assumption that the purchases by a given processing sector are
functions of that sector's output may be expressed as xij = fi (Xj)
X j (i, j = 1, 2, 3, ... , m, i ~ j). Substituting in Equation 1, we
have
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Equation la:
Xl - fl (X2) X2 - fl (x3)x3 - ... -fl (Xj)Xj - ... -fl (Xm)Xm = xie
- f2 (xl) xl + x2 -(x3)x3- -f2 (Xj)X j
- f3 (xl) X1 - f3(X2)X2 + X3-...-f3(Xj)Xj -
-f2 (Xm)Xm = x2e
-f3 (*m)Xm = X3e
+ Xm
fm (X1)1-fm(X2)X2-fm (X3)x3...-fm (Xj)Xj- ...
= Xme
The absence of adequate data makes it necessary to restrict the
purchase, or input, functions to the following form:
fi(Xj) = xij + Xj (i, j = 1, 2, 3, ..., m; i ~ j)
That is, the purchases by sector j are assumed to be a constant propor-
tion of sector j output (or cost). This is tantamount to saying that
all sectors experience constant costs. If fi(Xj) is denoted by aij
(i / j), Equation la may be written in the following manner:
Equation ib:
Xl
- al2X2 = al3X3 -
aijxj
-
- a2lXl
+ X2 - a23X3 -
a2jXj
- ...
- a31X1
- a32X2 + X3 -
aijxj
-
almXm = xie
a2mXm = x2e
a3mXm = x3e
- amlxl - am2X2 - am3X3 - ... - amjXj - ... + Xm = xme
The set of equations in Equation lb may be expressed in conventional
matrix notation as
Equation 2:
Equation 2a:
X = (I - A)-1 E
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Here X refers to the diagonal matrix of net vector outputs; (I - A)-l*
the inverse, the transpose of which is presented-in Figure 4+ for the
current model; and E, the sector of final demands.
The mathematical formulation presented above is specifically the
model used in this report. In intersectoral accounting and analysis
there are many different formulations depending on the purpose of the
analysis and empirical content of the accounting system. The tech-
nical term for the model used in this research aid is the "static
open end quantitative Lnumerair7 current transactions model."
* The operation (I - A) results in all the elements in the matrix
negative except those along the main diagonal, which in this use have
the value of 1.
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APPENDIX B
COMPUTATIONAL NOTE
The number of computations required to invert a matrix of the
Figure 2 type is n(n2 + n), where n is the number of processing
sectors. In the case at hand this means 22,736 computations. A
matrix of this size can be computed on desk calculators, but the
time required is considerable.
It was decided to compute the inverse on a large-scale electronic
computer. The Standards Eastern Automatic Computer (SEAC) of the
National Bureau of Standards was selected. This machine is an
electronic binary digital computer with a memory consisting of cathode
and mercury tubes.
There are three distinct steps in employing the SEAC. First,
the machine program, or method of computation, must be selected. The
program employed is conditioned by size and nature of the matrix to
be inverted. For the current matrix the power-series method was used.
The program is encoded on wire as instructions to the machine for the
operations to be performed. The second step is the encoding and
recording on wire of the data included in the matrix to be inverted.
Actual computation time was only about 15 minutes. The third step
is reading the inverted matrix out of the machine. With the SEAC
the answer can be read out directly on teletype.
The computational method, which is self-checking, precludes com-
putational errors. Its limited memory capacity, however, forces the
machine to round the data at particular steps of the operation. Inde-
pendent checks of the resulting inverse have indicated that this
rounding error is negligible.
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APPENDIX C
SOURCE REFERENCES
Evaluations, following the classification entry and designated
"Eval.," have the following significance:
Source of Information
Doc. - Documentary
1 - Confirmed by other sources
A - Completely reliable
2 -
Probably true
B - Usually reliable
3 -
Possibly true
C - Fairly reliable
4 -
Doubtful
D - Not usually reliable
5 - Probably false
E - Not reliable
F - Cannot be judged
6 - Cannot be judged
"Documentary" refers to original documents of foreign governments
and organizations; copies or translations of such documents by a staff
officer; or information extracted from such documents by a staff
officer, all of which may carry the field evaluation "Documentary."
Evaluations not otherwise designated are those appearing on the
cited document; those designated "RR" are by the author of this report.
No "RR" evaluation is given when the author agrees with the evaluation
on the cited document.
1. CIA. CIA/RR PR-112, The Structure of the Soviet Economy,
1 May 55 . S-
2. Ibid., p. 3-9. S.
CIA. CIA/RR RA (ORR Project 13.)+), The Role of Interindus-
try Studies in Economic Intelligence, 29 Jan 54, p. 2-11.
S.
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STATSPEC6
if.
5. Ibid.
6. CIA, FDD. Current Digest of the Soviet Press, vol 7, no 33,
28 Sep 55, p. 22. U. tr of Izvestiya, 1 Aug 55, p. 2. U)
7. Treasury, Bureau of the Budget. Capital Requirements for the
Expansion of Industrial Capacity, by R.N. Grosse, 30 Nov 53.
U.
8. Labor, Bureau of Labor Statistics. Unpublished tabulation. U.
9. CIA. CIA/RR 55, Construction of Soviet Gross National
Product Accounts for 1950-55, 19 Jan 55., p. 41. s.
RAND Corporation. RM-14 3+3, A Comparison of 1950 Wholesale
Prices in Soviet and. American Industry, 1 May 55. U.
10. Labor, Bureau of Labor Statistics. I-0N244, "Electric Light
and Power Construction," by D. Siskind, New and Maintenance
Construction, Aug 52. U.
11. CIA. CIA RR 54, Postwar Investment in Industry in the USSR,
11 Feb 55, p. 21. S.
12. Ibid., p. 24. S.
13. CIA, EIC. EIC-R-11, The Balance of Payments of the Soviet
Bloc and Communist China with the Free World 1947-53,
11 Jul S.
14. CIA. CIA/RR 55 (9, above).
RAND Corporation. RM-1443 (9, above).
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 r
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 Approved For Release 1999/09/26 : CIA-RDP79-01093AO01000120001-4
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Approved For Release 1999/09/26 : CIA-RDP79-01093AO01000120001-4
 Approved For Release 1999/09/26 : CIA-RDP79-01093AO01000120001-4
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Approved For Release 1999/09/26 : CIA-RDP79-01093AO01000120001-4