THE IMPLICATIONS OF THE NEW SOVIET ECONOMIC POLICY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00935A000200300009-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 46
• Document Creation Date: December 9, 2016
• Document Release Date: September 9, 1998
• Sequence Number: 9
• Publication Date: December 30, 1953
• Content Type: IM

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63
INTELLIGENCE MEMORANDUM
THE IMPLICATIONS OF THE NEW SOVIET ECONOMIC POLICY
CIA/RR IM-383
THIS MATERIAL CONTAINS INFORMATION AFFECTING THE
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MEANING OF THE ESPIONAGE LAW, TITLE 18, USC, SECS.
793 AND 794+, THE TRANSMISSION OR REVELATION OF
WHICH IN ANY MANNER TO AN UNAUTHORIZED PERSON IS
PROHIBITED BY LAW.
Office of Research and Reports
c r- RETURN TO LW WES ft RECORDS CENT EL
IMMEDIATELY AFTER USE
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CONTENTS
Page
Summary and Conclusions . . . . . . . . . . . . . . . . . . . . . 1
I. Scope of the Revised Plans and Indicators of Their
Implementation . . . . . . . . . . . . . . . . . . . . . . . 5
A. Changed Policy Emphasis . . . . . . . . . . . . 5
B. Indications of Implementation of the New Policy . . . . . 7
C. Comparison of Revised Plans with Original Plans,
1950-55 8
D. Comparison of Revised Official Plans with ORB
Estimates, 1950-55 . . . . . . . . . . . . . . . . . . . 10
II. Soviet Economy in 1953, 1954, and 1955 under the New Plan . . 13
A. Gross National Product by Economic Sectors under the
New Plan . . . . . . . . . . . . . . . . . . . . . . . . 13
1. Industrial Output . . . . . . . . . . . . . . . . . . 13
2. Agricultural Output . . . . . . . . . . . . . . . . . 16
3. Other Economic Sectors . . . . . . . . . . . . . . . 17
B. Gross National Product by Economic Sectors under the
Original Plan . . . . . . . . . . . . . . . . . . . . . 17
C. Allocation of Gross National Product by End Uses . . . . 19
III. Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . 23
A. Feasibility of Production Plans . . . . . . . . . . . . . 23
1. Feasibility of Fulfillment of Related Investment
Plans . . . . . . . . . . . . . . . . . . . . . . . 23
2. Constraints Imposed by Raw Material, Manpower,
and Equipment Limitations . . . . . . . . . . . . . 26
a. Agricultural Products . . . . . . . . . . . . . . 26
b. Consumer Nondurables . . . . . . . . . . . . . . 27
c. Consumer Durables . . . . . . . . . . . . . . . . 28
d. Consumer Services . . . . . . . . . . . . . . . . 29
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B. Feasibility of the Revised Retail Distribution
Plan . . . . . . . . . . . . . . . . . . . . . . .
.
29
1. Extent to Which Foreign Trade Will Aid in Fulfilling
the Revised Retail Distribution Plan . . . . . . .
.
30
2. Stockpiling Depletion as a Source of Supply for
Implementing the Revised Retail Distribution
Plan . . . . . . . . . . . . . . . . . .
.
33
3. Extent to Which a Shift in Distribution from Non-
market to Market Channels May Implement the
Achievement of the Revised Retail Distribution
Plan . . . . . . . . . . . . . . . . . . . . . . .
.
33
Appendixes
Appendix A: Indicators Suggesting Implementation of the New
Soviet Economic Policy . . . . . . . . . . . . .
?
35
Appendix B. Indexes of Output of the Soviet Economy by Sectors
and Branches . . . . . . . . . . . . . . . . . .
.
41
Appendix C. Sources . . . . . . . . . . . . . . . . . . . . .
..
43
I. Comparative Soviet Goals for Increases in Production and
Retail Distribution of Selected Commodities under Old and
Revised Official Plans, 1950-55 . . . . . . . . . . . . .
.
9
2. Soviet Gross National Product by Sector of Origin . . . . .
.
iL
3. Changes in Estimates of Percentage Increase in the Production
of Selected Economic Activities, 1952-55, Occasioned by the
Revised Soviet Economic Policy . . . . . . . . . . . . . .
?
18
Soviet GNP by End Uses under the Revised Estimate . . . . .
.
20
5. Soviet GNP in 1955 under Varying Estimates . . . . . . . .
.
21
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6. Soviet Gross Investment in Total and by Selected
Sectors, 1952-54, as Indicated by Official
Announcements . . . . . . . . . . . . . . . . . . . . . . 24
7. Differences between Soviet Official Goals and ORR
Estimates for Selected Consumer Goods Aggregates,
1954-55 . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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(ORR Project 7)
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THE IMPLICATIONS OF THE NFW SOVIET ECONOMIC POLICY
Summary and Conclusions
The Soviet economic policy announced by Malenkov in August
1953 and amplified in the following month by numerous decrees and
speeches purports to be a reversal of the long-standing policy of
stressing industrial development to the neglect of improving the
lot of the Soviet consumer, and it specifically modifies the con-
sumption goals of Stalin's Fifth Five Year Plan (1951-55). Soviet
leaders have also implied that their peaceful intentions are
evidenced by the very small increase in budgeted defense expendjtures
in 1953. A careful analysis of the announced policy goals and of
measures subsequently taken to inaugurate the program leads ORR to
conclude that Soviet leaders genuinely intend to implement the
program and that the growth of defense expenditures will be drasti-
cally reduced in the period 1953-55.
Essentially the new program contemplates a leveling off of
military expenditures, a moderate rise in consumption, and a change
in composition of investment, but little change in the trend of the
investment total. Under the recent revisions of the Fifth Five Year
Plan the rate of growth of the economy for the next 2 years will be
the same as previously forecast under the original plan -- that is,
about 6.5 percent annually. The output of consumer goods will in-
crease at an annual rate of about 7.5 percent and that of producer
goods at about 10 percent.
Military production will rise at a rate of the order of 5 percent
per year, an amount sufficient to re-equip the existing armed forces
with new types of military hardware. This is a significant reduction
from the rate of growth of military production in 1950-52, which was
27 percent annually. The rates of increase under the revision in the
Plan are such that the share of consumption in the gross national
product will remain almost constant at about 54 percent instead of
continuing its recent decline, which was projected by the original
Fifth Five Year Plan. The share of investment in the total will rise
somewhat, and that of defense will decline significantly. Although
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the new program involves a substantial decrease in the rate of
growth of the military establishment, it probably does not imply
any considerable slowing down in growth of Soviet industrial
capacity to support war.
One impact of the shift in Soviet economic policy, according to
ORR estimates, is that consumers will receive 5 percent more real
income in 1955. than under the Fifth Five Year Plan, investment ex-
penditure will be about the same amount, and defense expenditure
will be about 25 percent less. The rate of growth of the gross
national product will not be affected, except for transitional
adjustments in 1953. These adjustments occur principally in the
fabricated metals industries, which were required to change their
output mix, and in defense industries, which markedly reduced their
rate of growth in 1953. There also has been a rapid temporary
decline in the rate of new investment as a result of the reforjmi-
lation of the whole construction program.
Qualitatively the rise in the scale of living will be proportion-
ately larger than the aggregate increase would indicate. The
major emphasis in the food products sector is upon the achievement
of greater availabilities of quality dietary items such as meat,
dairy products, vegetables, and canned goods. The emphasis in
textile production is similarly upon the higher quality items of
apparel. The largest relative increases in output are slated for
consumer durables, which have been conspicuously absent from the
Soviet market basket.
The conclusions above are based on ORR. estimates, which do not
accept some of the announced goals as feasible. The most difficult
goals to fulfill in the new consumer goods, program will be the
agricultural goals. The expansion of agricultural output is the
most important phase of the new program. To facilitate its
execution, the government has adopted far-reaching measures aimed
at increasing incentives through greatly increased procurement
prices, lower delivery quotas, reduction of tax rates, larger in-
vestments in equipment and fixed facilities, higher priorities for
the output of machinery and chemical plants and for transportation
and construction services, and a redirection of skilled labor back
to the countryside. Despite these measures, shortages of mineral
fertilizers, specialized equipment, and trained personnel probably
will prevent full achievement of the agricultural production plans.
The revised consumer nondurable goods program is in part dependent
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upon agricultural production and also probably will not be completely
fulfilled. It should, however, come close to fulfillment than the
agricultural goals. The consumer durables and trade objectives will
be least affected by limitations upon the agricultural sector.
The revised goals for retail trade are significantly larger than
the goals for consumer goods production. The success of the retail
trade program is dependent on foreign trade, reduction of subsistence
agriculture, and perhaps stockpile withdrawals, in addition to
domestic production. Recent sharp increases in Soviet purchases of
consumer goods in the Free World suggest use of non-Soviet Bloc
sources of supply to help fulfill the distribution program. Gold
sales may be regarded as only one of several means the. USSR may
employ in increasing export volume to pay for expanding imports of
both consumer and capital goods. The size of the deficit between
production and retail trade in perishable food items probably also
indicates an intention to bring about a shift from direct home and
farm consumption to distribution through retail marketing channels.
It seems clear that the increment to consumption will not come out
of resources devoted to investment. The increase in consumer goods
output is impossible without additional investment in consumer goods
industries. The new program involves a change in the composition of
investment (for example, a transfer from heavy industrial equipment
to light and medium industrial equipment) but does not imply a re-
duction in the aggregate magnitude of investment.
The probable increase in consumer welfare under the new policy is
such that a reduction in the rate of growth of military output and in
some lines of producer goods output becomes a necessity if the revised
program is to be achieved. Continuation of the consumer goods program
on its contemplated scale is premised on little change in the 1953
level of military procurement. The present and immediately foreseeable
international climate evidently must appear to the USSR not to require
any extensive growth in the size of the military establishment. The
only additional defense outlays required would be those necessary to
provide new, technologically advanced equipment for a defense force of
relatively constant size. In addition to replacing obsolescent equip-
ment of the active military force, provision probably has been made to
keep military inventories supplied with the latest equipment. Inventory
accretions of conventional weapons may well have been substantially
curtailed.
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Using US experience as a guide, ORR analysts have concluded that
the cost of supplying a military force of a given size with a
representative sample of newly developed military hardware would in-
crease military procurement outlays by an annual rate of 4 to 5 percent.
The rise in explicit budgetary defense allotments between 1952 and
1953, interestingly enough, also lies within this rouge. Calculation
of defense expenditures as a residual after consumption, investment,
and other government expenditures gives a range of rate of growth of
defense of the same order of magnitude.
The scope of the available policy pronouncements, the volume and
detail of the decrees, and numerous local and provincial press. state-
ments indicate a genuine intention to carry out the portion of the
new program related to consumer goods. Whether or not goals now are
being, and in the future will be, fulfilled cannot be conclusively
determined at this time, but at least Soviet intentions to implement
the revised plan are apparent.
The motives behind the policy changes are mixed. Although the
regime probably is influenced by keen awareness of the benefits
accruing, in terms of labor productivity, from its allocation of a
larger share of available resources to consumers, its. ability to
raise consumer goods targets is postulated upon a basic decision not
to increase substantially the size of the defense establishment.
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I. Scope of the Revised Plans and Indicators of Their Implementation.
A. Changed Policy Emphasis.
Before the death of Stalin, basic postwar Soviet economic
policy exhibited very pronounced trends. In the 4 years after the
war, 19+6 to 1949, emphasis was placed on economic recovery and expan-
sion, with stress on the capital goods industries. Defense claims
upon the economy dropped back to the relative position held during
the late 1930's. The individual consumer commanded a smaller share
of the gross national product (GNP) than was available to him in the
immediate prewar years.
Just about the time recovery was substantially completed,
international tension increased, leading the USSR to accelerate greatly
its defense program. Although some of the resource burden for accel-
erated military production involved a diversion of resources from in-
vestment activities, the consumer, already in a tightened situation
relative to his prewar position, was obliged to undergo a relatively
larger sacrifice. Analysis of the Fifth Five Year Plan (1951-55)
discloses Soviet intentions to continue to increase the defense share
and reduce the consumption share of GNP. The share of investment was
to rise slightly. Similar conclusions were reached by ORR studies
based upon information available at that time.
Six months after the death of Stalin the new regime announced
a dramatic and startling change in economic policy. In Malenkov's now
famous speech on 8 August, he outlined a program for improving the lot
of the long-suffering Soviet consumer. The announced program implied
a revision of the Fifth Five Year Plan and reversed, as Malenkov
pointed out, a 20-year Soviet policy of giving first priority to the
development of heavy industry. This speech was followed in the next
few months by a series of speeches and decrees giving detailed form
to the general program that Malenkov outlined. The emphasis and
accompanying propaganda of these decrees left no doubt that the Soviet
administration intended the world, including the Soviet people, to
believe that a significant reallocation of resources in favor of con-
sumer goods was being inaugurated.
Prior to Malenkov's speech before the Supreme Soviet in
August, there were several indications of a change in policy. These
indications included a substantial retail price cut in April, coupled
with the announcement of a 50-percent reduction of the State loan in
June. These actions resulted in a substantial increase in consumer
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purchasing power. A Pravda editorial of 11 June indicated that there
existed a plan for a substantial increase in the production of con-
sumer goods over the production previously planned for 1953. Thus
early indications existed demonstrating Soviet intent to increase the
supply of goods simultaneously with the increase in purchasing power.
A Pravda editorial on 8 July illustrated something of the magnitude
of the previously indicated revision in the consumer goods program:
" ... An increased output of consumer goods amounting to over 20 bil-
Lion rubles in excess of the envisaged annual plan for consumer goods
turnover. The later announcement of the first half-year plan fulfill-
ment showed a significant increase in the retail turnover and in the
distribution of many commodities.
In this earlier period a thorough reorganization in the min-
isterial structure of the government was carried out which reduced
the number of ministries from 50-odd to half that number. The reor-
ganization appeared to be directed mainly toward administrative econ-
?AAy and increased decentralization in management of the economy, as
is evidenced by the transfer of some industrial control from Gossnab
to the economic ministries. An organizational development related
to the imminent new policy was the transfer of the wholesale and
marketing offices of the light and food industries and the rubber
footwear sales enterprises of the chemical industry to the Ministry
of Trade. Essentially this step tends to allow the consumer a larger
voice in the determination of the composition of consumer goods pro-
duction. In mid-September, following the announcement of the new
policy, additional ministerial changes were instituted which seemed
more closely related to the new policy. These changes allowed for
specialization in the sectors scheduled for high priority under the
new program by dividing the Ministry of Light and Food Industry into
wo ministries, creating a Ministry of State Farms and a Ministry of
Procurement separate from the Ministry of Agriculture.
The timing of the announcement of the new policy along with
the 5-month delay in presentation of the 1953 budget suggests that
the new policy, while it may have been considered prior to Stalin's
death, had not been developed in any detail. The 6 months from
Stalin's death to the meeting of the Supreme Soviet apparently was
required by the new regime to work out the voluminous detail and
ramifications of the new program.
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B. Indications of Implementation of the New Policy.
The contrast of the new program with the long-continued his-
torical Soviet economic policy of "heavy industry first" was so
dramatic that its announcement was at first greeted by many observers
with legitimate skepticism and caution. By now, however, the accumu-
lation of evidence appears to leave little doubt that the Soviet
leadership is genuinely determined to carry out the new policy. A
summary of this evidence follows.
One of the most impressive indications of Soviet intent is
the volume and detail of the speeches and decrees following Malenkov's
original announcement of the policy. These decrees have given exten-
sive detail regarding goals, operational procedures, organizational
changes, price adjustments, employment shifts, and plans for redirec-
tion of output. The economic sectors, covered by the various speeches
and decrees, included agriculture, food processing, other consumer
goods (both durable and nondurable), retail trade, and, to a lesser
extent, foreign trade. The only major area where no announcement has
been forthcoming as yet is housing, where drastic improvement is
urgently needed.
Additional evidence of Soviet intent to implement the new plan
is shown by a comparative analysis of Soviet press and radio broad-
casts reporting on successes and problems in the consumer goods indus-
tries, especially food processing. Beginning in the summer, the number
of such news items relating to these industries was impressively
larger than the number of items in the corresponding period of 1952.
One implication of an extensive reallocation of resources is
the appearance of decline in some types of investment, which in turn
tends to make possible an increase in investment in other fields. The
curtailment of activity and partial abandonment of the Main Turkmen
Canal, one of the prized "great socialist construction projects," is
one of several indications of such a transfer of resources.
In addition to the evidence cited above, a considerable num-
ber of specific items in some of the Soviet press and radio broad-
casts give further details concerning implementation of the new
policy at the local or enterprise level (for a list of these news
items, see Appendix A). Especially impressive are the measures
apparently being carried out in agriculture to improve the quality
of personnel and all phases of production and marketing.
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Time has not permitted a comprehensive compilation of all
the indications noted in the press. The appended list, however, is
considered to be indicative and supports the view that implementation
of the new consumer goods policy is progressing vigorously throughout
the USSR. The ORR conclusion is that the Soviet leadership is
genuinely dedicated to the fulfillment of the new program. The
intelligence problems that remain are to measure the magnitude of
the new policy and the feasibility of carrying it out, as well as
its effect on the rest of the economy. These questions are con-
sidered in the following sections of this memorandum.
C. Comparison of Revised Plans with Original Plans, 1950-55.
Although there are extensive details furnished in official
statements on plan revisions, comparison with the original plans
is made difficult by the paucity of comparable data provided in the
original Five Year Plan. The revisions are concerned only with con-
sumer goods. Thus conclusions as to the changed behavior of the
rest of the economy must be based on sources other than official
releases. The same qualification applies to those consumer goods,
such as cereal products, for which no new goals have been advanced.
For some products, only comparative targets for retail trade have
been issued. Here, deductions concerning changes in production must
take into account evidence of foreign trade patterns and judgments of
changes in retail trade as a proportion of total distribution.
Despite the extensive publicity given to specific consumer
goods production goals, only a few comparative statistics have been
made available. They have been assembled in Table 1.* Comparisons
also are listed for available retail distribution targets.
No official statement has been made in regard to revisions
of the aggregate goal for consumer goods production other than
Malenkov's declaration that the 65-percent increase contemplated
in the Fifth Five Year Plan would be fulfilled considerably before
1955, probably by the end of 1954. J** The rise in production of
foodstuffs under the revised plan will be 85 percent, while under
the old plan the increase was set at 71 percent, an upward revision
of 20 percent over original goals. Within the foodstuff category less
than the 20-percent average increase in production for the 5-year
period has been planned for meat, fish, butter, sugar, and beer.
* Table 1 follows on p. 9.
# Footnote references in arabic numerals are to sources listed in
Appendix C.
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Table 1
Comparative Soviet Goals for Increases in Production
and Retail Distribution of Selected Commodities
under old and Revised Official Plans
1950-55
Production
Retail Distribution
Old Plan
New Plan
Old Plan
New Plan
Product
Meat
92
100
8
90
0
110
Fish
58
3
7
o
Butter
72
76
70
100
9
Vegetable Oil
77
92
3
Sugar
84
97
1
00
1
0
Canned Fruits and Vegetables
100
122
Beer
70
80
Textiles
Cotton Goods
61
64
Woolen Goods
50
68
Silk Goods
235
340
100
120
Socks and Stockings
120
170
Knitwear
80
140
Clothing
Leather Footwear
55
6o
200
300
Furniture
250
450
Bicycles
140
410
Sewing Machines
100
34O
Radio and TV Sets
120
100
Watches
71
85
70
100
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The average rate of increase has been planned for vegetable oil.
Greater-than-average production increase has been planned only
for canned fruits and vegetables among the enumerated items. The
only important items excluded from specific mention are grain prod-
ucts. Since the whole stress of the new food program is on quality
items, it seems likely that the grain product target has not been
raised. Omitted products in which large upward revisions may have
been planned include milk, cheese, and confectionOry products. Their
total weight in the food index, however, is small. Therefore, the
increase in the new production goal for foodstuffs is inexplicably
higher than the weighted total for enumerated component products.
Upward revisions in the retail distribution goals for many
products are much larger than the increase in their respective pro-
duction indexes. These and similar discrepancies will be analyzed
in Section III, B, below.
The increase in the textile targets is not large. A weighting
of the cotton and woolen production indexes indicates a revision of
about 14 percent. Comparative retail distribution goals yield a
similar result. The leather footwear increase is somewhat lower.
No comparative production aims have been delineated for con-
sumer durables. The explicit retail distribution indexes, however,
disclose changes in intentions of larger relative magnitude than for
food or textiles. For this group of items there should be little
discrepancy between growth of production and retail distribution,
except as explained by imports.
D. Comparison of Revised Official Plans with ORR Estimates
1950-55?
ORR estimates that Soviet production capabilities are sub-
stantially below official goals for food products, are lower to a
lesser extent for textiles, and tend to be in close agreement on
consumer durables. Whereas the new planned increase in the output
of food for the 5-year period is set at 85 percent, the ORR esti-
mate :indicates a production increase of only 40 percent. The
largest divergence between planned goals and ORR production esti-
mates is in meat, fish, dairy products, sugar, and vegetable oils.
The degree of difference ranges from 18 percent for butter to 67
percent for meat products. Soviet growth estimates for production
of the highly processed food items, such as canned fruits and
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vegetables, confectionery products, and alcoholic beverages, are
generally accepted by ORR. On the two enumerated textile items,
cotton and woolen cloth, ORR accepts the official cotton cloth
index of growth and sets an increase for woolen cloth at 23 per-
cent less than the announced Soviet goal. The ORR growth estimate
for leather footwear is 23 percent below the Soviet goal. It is
not possible to make comparisons on consumer durables, as no
official indexes have been published. ORR analysts have been in-
clined, however, to accept the official physical output targets
for 1954 and 1955.
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II. Soviet Economy in 1953, 1954, and 1955 under the New Plan.
A. Gross National Product by Economic Sectors under the New Plan.
During the period 1948 to 1952, Soviet GNP increased at an
average annual rate of over 10 percent. During 1950 the increase
still exceeded 9 percent. In 1953 the increment to GNP fell off
sharply to less than 4.5 percent. In 1954 and 1955 the growth rate
is expected to increase again to an average annual rate of about
6.5 percent.
1. Industrial Output.
The rate of growth of GNP may be best approached by a
detailed examination of the economic sectors which comprise the GNP
index. Industrial output, which had risen by 12.5 percent in 1952,
increased by only 7 percent in 1953 and is expected to advance by
approximately 8.5 percent per year in 1954 and 1955 (see Table 2).*
The decline in the rate of expansion of industrial output has been
most evident in the defense, food processing, and fabricated metals
sectors. Defense outlays exercise an important influence on the be-
havior of industrial growth as a whole, the decline in the growth rate
being less than half as large if military production is excluded.
It is assumed that the rate of increase in military production will
be the same in 1954 and 1955 as in 1953, between 4 and 5 percent.
This assumption is based on the belief that military requirements in
the period will not occasion extensive growth of military output.
Rather, the military situation will entail only an annual increment
in value of output necessitated by providing a given defense establish-
ment with improved, more complex equipment. The estimated annual in-
crease is based upon the rise in explicit budgetary outlays for defense
between 1952 and 1953? This estimated increase of 4 to 5 percent is
the same as ORR's estimate of the annual increase in cost due to in-
creased complexity of military equipment and hence allows for the
* Table 2 follows on p. 14.
The constant size of the defense establishment permits one to
assume that personnel and maintenance costs are constant. If re-
search and development outlays are included in the final cost of
finished equipment, the change in the defense appropriation is re-
flected entirely in the military procurement component.
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continual re-equipment of the Soviet military forces with the latest
types of military equipment. Any marked deterioration in Soviet
foreign relations would compel reconsideration of the military out-
put estimate.
A further check on the estimated growth in defense out-
lays is provided by considering defense as the residual component in
GNP remaining after estimated trends in investment and consumption
have been considered. Since it is estimated that the rise in GNP in
1954 and 1955 will range from 6 to 7 percent per year, the margin
left for expansion of defense ranges from zero to 8.5 percent annually.
Food processing and certain fabricated metals sectors
constitute the other areas in which there was a significant reduction
in the rate of growth for 1953. The slackening in the expansion of
the processed food industry resulted from the poor grain harvest and
a reduction in the. slaughter of livestock. This reduction is oc-
casioned by adverse weather conditions and may be assumed to be re-
versed by average weather conditions. Under the new agricultural
program, livestock deliveries and meat output will exceed the 1952
level. Together with expansion of food production in other areas
on both an extensive and an intensive basis, the new program should
enable the processed food industry to increase the value of its out-
put by about 6 percent a year during 1954-55.
The partially arrested expansion in fabricated metals
production in 1953 is a reflection of the readjustment to a new
economic policy. The energy, chemicals, and metals industries are
unaffected by the switch in policy emphasis, but the fabricated
metals industry has to change the composition of its production. No
decline in total output of the industry is implied. There will
probably be, however, a temporary slowdown in its growth. After
adjustments to the revised plan have been completed, the expansion
in output of the fabricated metals subsector in 1954 and 1955 will
be equal to the rate obtained from 1950 to 1952. The adjustment is
particularly marked in the automotive equipment industry. The neces-
sity to change the structure of tractor output explains the small 1953
increase and the return to the 1952 percentage increment in production
for 1954 and 1955.
The rate of expansion of energy production is fairly uni-
form over the whole period from 1950 to 1955, except for a substantial
increase- in electric power generation in 1954 and 1955 as hydroelectric
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projects come to completion. The behavior of the growth pattern
in nonferrous metallurgy is irregular, but it appears to be in no
way correlated with broader economic policy changes. The growth
picture in ferrous metallurgy is steady. The chemicals and con-
struction materials indexes do not appear to vary in accordance
with the basic policy shifts. Forest products output still moves
along at its slow, regular pace.
Greatly accelerated rates of increase in output will be
forthcoming in 1954 and 1955 in the branches of fabricated metals
production which furnish equipment for consumer goods production --
agricultural machinery, food-processing machinery, textile machinery,
woodworking machinery, and refrigeration machinery. Since these
branches comprise only a small fraction of the total fabricated
metals output, their production can be greatly enlarged without
forcing a significant reduction in the expansion of other branches
of metals fabrication. In fact, there will be an acceleration of
total machinery output sufficient to cover the output of the newly
emphasized branches and to maintain production growth rates elsewhere.
The rate of increase will rise from less than 8 percent in 1953 to
over 11 percent in 1954 and 1955.
Manufactured consumer goods production will increase
about 8 percent in 1953 as compared with an increase of about 8.5
percent in 1952. The factor chiefly responsible for the reduction
in the rate of growth of this area was the lack of expansion of
leather footwear output. As the results of the policy shift become
evident in this sector, the rate in 1954 will slightly exceed that
of 1952. In 1955, manufactured consumer goods output is expected to
increase by 9 percent.
2. Agricultural Output.
The agricultural production index for 1952 and 1953 has
been strongly affected by cyclical weather factors. Abnormally
favorable weather in 1952 led to a 4.5-percent increase in output as
compared with an average annual increase of. 3 percent for the post-
war years. Meteorologically speaking, 1953 was a poorer than average
year, and farm output declined by over 4 percent. The increase fore-
seen for 1954 and 1955 will average about 3 percent per year, average
weather conditions being assumed. Total output in 1955 will be only
slightly higher than in bountiful 1952. The food crop and livestock
increment index closely parallels that for agriculture as a whole.
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The growth possibilities for industrial crops are brighter. Since
relative increases in output in 195+ and 1955 are expected to be
at least twice as high for consumer goods processed from basic agri-
cultural materials as for the farm crops themselves, it is apparent
that other factors, such as improved distribution, foreign supply
sources, and more complicated processing, will be operative if the
planned goals are to be realized. Discussion of these other variables
will be found in Section III, B, below.
3. Other Economic Sectors.
The behavior of the construction index reflects the
change in basic economic policy. In 1951 and 1952 the value of
construction had increased by 12 percent and 11 percent, respectively.
During 1953, general economic policy changes compelled a reshuffling
of the investment program, particularly a cessation of spectacular
river-control projects and increased allocations of productive factors
to consumer goods industries and agriculture. As a consequence of
these shifts, total construction in 1953 rose only about 7 percent.
Regularization of construction activity in 1954 and 1955 probably will
result in expansion at an annual rate of at least 9.5 percent. This
increase will be sufficient to secure the 60-percent growth in con-
struction announced in the original Fifth Five Year Plan. ORR esti-
mates indicate no change in the total volume of investments in the
revised plan.
The trade sector will experience a somewhat more rapid
expansion of activity in 195+ and 1955 than in the three previous years.
Such an increase will derive both from a larger output of consumer
goods and from the redirection of distribution from nonmarket to market
channels. As far as can be foreseen, the basic policy shift will not
affect the pattern of growth in the transportation, communications,
and services sectors. It would have seemed consistent for the regime
to have announced additional expansion of service elements of con-
sumption, particularly housing. No such announcements had been made,
however, at the time of this writing.
B. Gross National Product by Economic Sectors under the Original
Plan.
Compared with the most recent published estimate on Soviet
economic aggregates, / there has been a reduction from 7.2 percent
to 5.7 percent in the anticipated average annual growth in Soviet
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GNP between 1952 and 1955. The growth forecast for the entire
period 1950-55, however, was almost identical. The old estimate
did not anticipate the bountiful harvest of 1952 and thus under-
stated the growth for that year. This understatement was offset
by overstatement of the 1953 growth. The old forecast did not
foresee the leveling-off of defense outlays and the short-run re-
adjustment resulting from the current policy change.
Using the period 1952-55 as a basis of comparison, important
differences in the rate of growth of GNP components are evident from
Table-3. The growth of industrial production as a whole is about the
same in both estimates. As a result of revision of Soviet economic
policy, expansion of producer goods output (excluding military produc-
tion) is expected to be somewhat lower, and consumer goods output is
Changes in Estimates of Percentage Increase
in The Production of Selected Economic Activities, 1952-55
Occasioned by the Revised Soviet; Economic Policy
Economic Activity
Present Estimate
Old Estimate
Industry
26
28
Producer Goods
27
32
Consumer Goods
,?4
17
Defense Goods
='13
37
3"+
24+
Electrical Machinery
39
30
Electrical Equipment
55
45
Automotive Equipment
11
7
Agricultural Machinery
50
0
Food-Processing Industry
16
Manufactured Consumer Goods
28
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expected to be significantly higher, than under the old program.
The growth of defense production will be reduced to less than
40 percent of the former rate of increase.
There are also substantial increases in production forecast
for certain machinery sectors which equip industries engaged in the
production of consumer goods. Differences in estimates for growth
of the transportation, communications, agriculture, construction,
and services sectors are minor. The same condition obtains in the
energy and metals sectors of industry. Comparison of the two sets
of estimates (see Table 3) bears out the general thesis that the only
substantial relative reduction in production emphasis that has oc-
curred has been in military output.
C. Allocation of Gross National Product by End Uses.
The military establishment of the USSR had been receiving
an ever-increasing portion of Soviet GNP over the period 1950 through
1952 (see Table 4).* Increased military expenditures were made pos-
sible by a decline in the rate of growth throughout the rest of the
Soviet economy. Consumption expenditures which had been sharply re-
duced from pre-World War II levels bore a major share of the burden
of increased military outlays. Over the period 1950 through 1953,
during which Soviet GNP increased about 24 percent and Soviet mili-
tary outlays increased 54 percent, Soviet investment expenditures
increased 23 percent and Soviet consumption expenditures increased
by only 19 percent.
The most prominent change in the allocation of GNP between
1953 and 1955 will occur in the share accruing to the military
establishment. There will be a small relative gain by consumption
and a larger gain by investment. Apparently, increased welfare for
the consumer will not entail any significant sacrifice in the rate
of economic growth except during the transitional year 1953. Rather,
both consumer and investment objectives will benefit from a slackened
rate of increase in the armament program. Consumers will receive
14 percent more in 1955 than in 1953, and investment will be 17 per-
cent better endowed. Defense outlays will be increased only 5 per-
cent during the same period. GNP,will increase about 13 percent.
* Table T+ follows on p. 20.
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Table 4
Soviet GNP by End Uses under the Revised Estimate
Percentages of GNP
Use
1950
1951
1952
1953
1954
1955
Consumption
56.2
55.6
54.6
54.0
51+.3
54.4
Administration
3.7
3.4
3.2
3.2
3.1
3.1
Defense
12.0
13.2
15.3
14.9
14.3
13.8
Investment
28.1
27.7
26.8
27.8
28.3
28.7
Billion 1951 Rubles
Use
1950
1951
1952
1953
1954
1955
-
Consumption
502
541
581
599
641
684
Administration
33
33
34
36
37
39
Defense
107
128
163
165
169
173
Investment
251
270
285
308
334
361
GNP
893
973
1,063
1,108
1,181
1,257
The magnitude of the revised Soviet economic policy may be
drawn in sharper relief if the present consumption targets are com-
pared with consumption targets based upon the original Fifth Five
Year Plan and ORR estimates of the likely achievement of targets un-
der the original plan (see Table 5).* Estimates based upon the
original Fifth Five Year Plan indicated a continuous decline in the
share of consumption expenditure through 1955, at which time con-
sumption expenditure would be 50 percent of GNP.
Proportions developed from official plan data fully supported
this contention. In absolute terms, consumers will be better off by
31+ billion rubles in 1955 than would have been the case under the old
* Table 5 follows on p. 21.
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Table 5
Soviet GNP in 1955 under Varying Estimates
Percentages of GNP
Use
ORR
Estimate
Official
Estimate 3/
ORR
Estimate
Official
Estimate
Consumption
51,
50
54.4
56.5
Administration
2
3
3.1
2.9
Defense
18
18
13.8
13.2
Investment
29
29
28.7
27.3
GNP
100.0
100.0
100.0
100.0
Billion 1951 Rubles
Use
ORR
Estimate
Official
Estimate 3/
ORR
Estimate
Official
Estimate
Consumption
650
676
684
744
Administration
26
40
39
39
Defense
229
243
173
173
Investment
369
392
361
361
GNP 1,274 1,351 1,257 1,317
estimate. In relative terms, consumer welfare will have gained by
5 percent. This more favorable situation for the Soviet consumer
will occur despite a decline of 17 billion rubles in total GNP from
the original plan to the revised plan.
The investment allocation is virtually unchanged from the
estimate based upon the original Fifth Five Year Plan. The defense
share has been radically lowered from the old estimate. It is
56 billion rubles, or 24 percent, less. The reduction from the of-
ficial plan goal is even larger.
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If it were possible to fulfill all of the consumer goods
goals in the new program, the relative gain of consumption would
be larger. The investment share would decline relatively in 195+
and 1955, and the drop in the percentage of resources devoted to
defense would decline even more sharply than in the present esti-,
mate. Consumers would receive 27 percent more in 1955 than in 1953.
Growth of the other end uses is assumed to be unchanged from the
new ORR estimate, but total GNP would rise by 19 percent.
Note on Methodology
The basis for constructing estimates of GNP by end uses was an
unpublished paper on 1951 Soviet GNP. 1+/ The breakdown computed by
the author was considered insufficient, as no adjustment for turn-
over tax was made among the components. The distribution of the
turnover was based on a previous RAND report 5/ modified by adjust-
ment of an intuitive nature to correct for subsequent policy changes.
Once the 1951 distribution was established, the percentage breakdowns
were converted to ruble terms. The 1951 values were then moved by
relevant sector indexes. Consumption was moved by the consumer goods
index, investment by the nondefense components of the producer goods
index, defense by the defense industry index, and administration by
the services index. This method is subject to important qualifications
which will be considered in future studies on Soviet economic aggregates,
but it serves well as a first approximation.
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III. Conclusions.
A. Feasibility of Production Plans.
1. Feasibility of Fulfillment of Related Investment Plans.
Official Soviet pronouncements in recent months have in-
cluded figures on investment allocations to the principal activities
benefiting from the new policy. The impact of the shift in investment
allocations and the probability of realizing the larger allotments can
be measured by comparing total planned allocations to the affected
activities unifier the new policy with total investment in the economy
and by comparing the increase in investment requirements for the
newly favored activities with the increase in total investment
availabilities.
It is difficult to obtain precise data on investment
allocations by economic branches and sectors, especially for agriculture.
The figures in Table 6,* based on plans or ORR estimates, are not exact,
as they represent approximate orders of magnitude upon which to base
conclusions. The rate of increase in investment announced by the
Russians for the first half of 1953 over the corresponding period in
1952 was only 4 percent, as compared with a rise of 11 percent in 1952
and more for previous years. This fact, coupled with the probability
of the suspension of large spectacular projects, such as the Main
Turkmen Canal, makes it appear likely that a readjustment of investment
priorities was in process. Soviet claims that total investment could
be accelerated to such an extent in the last half of 1953 that a growth
of 9 to 10 percent for the year could be obtained appear extravagant.
The statements, however, do indicate a belief that the new investment
pattern was sufficiently crystallized to allow investment to proceed
more smoothly than in the first 6 months of the year.
During the first half of 1953 there appeared to be no shift
of investment resources to agriculture or the consumer goods industries,
since the increase in investments in the light and food industries was
less than the 1952 percentage increase. In early 1953, therefore, the
new policy had the effect of reducing the total availability of invest-
ment funds rather than changing their composition.
# Table 6 follows on p. 24.
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Table 6
Soviet Gross Investment in Total and by Selected Sectors, 1952-54
as Indicated by Official Announcements
1952
1953
1954
J.
Manufactured Consumer Goods
3.0 J
3.1 b
5.9 b
2.
Food Processing
4 4
4 8 d
8
3.
Trade
0.4 :ey
0.8
1.7
4.
Supplements to Local Enter-
prises by 1, 2, and 3 J
1.3
1.5
2.7
5.
Agriculture (Budgetary
Allotments) J
9.0
14.0
17.0
6.
Collective Farm Investments
12.0
17.0 J
20.0 J
Total
30.1
41.2
55.8
Total Investment 256.9 J 274.9 J 303.2 J
a. Source gives total investments for 1951-53 as 9 billion rubles.
The 1953 figure is known, and the 1952 index is known to be 109 per-
cent of 1951. J
b. J
c. Extrapolation of official indexes of investment in the light
and food industries on 1945 base yields, 1952 figures, which are
converted to 1953 prices by deflator. Subtraction of manufactured
consumer goods industry investment leaves food industry investment
as residual.
d. J
e. Estimate based on lesser responsibility of trade ministry.
f? J
g. Represents investments by producer and consumer cooperatives.
Their employment total is one-half that of manufactured consumer
goods, food, and trade ministries. Capital per worker is assumed
to be one-third of that in these State ministries; so investments
are assumed to be one-sixth of latter.
h. Based on extrapolation of official index; moved by budget
figure, assuming investment to constitute 18 percent of total
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Table 6
Soviet Gross Investment in Total and by Selected Sectors, 1952-54,
as Indicated by Official Announcements
(Continued)
allotment; 195 figure based on Khrushchev estimate.
J. Extrapolation of previous index, adjusted by behavior of State
investments in agriculture.
j. 10
k. Estimate of S/CST analysts.
1. Based on official index.
m. Based on official increase of 4 percent in first half of year and
assumed average 5-year growth rate of 10 percent in last half.
n. Based on average 5-year period growth rate of 10 percent.
In the last half of 1953 there appears to have been a small
transfer of investment resources to the newly favored activities, even
though it is, assumed that total investment has risen by the approximate
5-year average of 10 percent. The transfer does not seem to be of such
magnitude that it would impinge upon the total available investment
outlay. Requirements of the newly stressed activities have risen by
11 billion rubles over 1952, as shown in Table 6, and total investments
have risen by 18 billion rubles, which allows for a 3-percent increase
in investment in other sectors. Since the average for these other
sectors was less than 4 percent in the first half of 1953, the rise
in the latter part of the year will be about 3.5 percent.
In 1954 the pressure of agriculture and consumer industries
on general investment requirements appears to be somewhat less
stringent. Out of an estimated increase in total investment of 28 bil-
lion rubles, requirements of agriculture and consumer goods industries
will increase by 14.6 billion rubles. Remaining new investment re-
sources would allow for a 6-percent increase in allotments to other
activities.
In 1955 the proportion of investment outlays available for
other economic activities should rise. The announced 1956 goal in
production of agricultural products and consumer goods indicates re-
latively modest increases over 1955 and therefore would not require any
significant rise in investment in 1955. Therefore, a larger proportion
of new resources could be allotted to other sectors.
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2. Constraints Imposed by Raw Material, Manpower, and
Equipment Limitations.
ORR does not believe that all of the consumer goods goals
are feasible, for the reasons outlined below. Differences between
official goals and ORR estimates for selected consumer goods
aggregates are given in Table 7.
Table 7
Differences between Soviet Official Goals
and ORR Estimates for Selected Consumer Goods Aggregates
1954-55
(1950 =-100)
ORR Index
Official Index
Sector _
1954
1955
1954
1955
Food Products
133
140
140
169
Manufactured Consumer Goods
149
163
149
171
All Consumer Goods
142
154
145
168
The resource limitations on the ability of the Soviet
economy to fulfill the consumer goods program can be roughly divided
into manpower, material, and equipment limitations. The goals them-
selves can be conveniently classified by agricultural products, con-
sumer nondurables (processes food and textile products), consumer
durables, and consumer services. The effect of production limitations
for each broad type of goa:L in turn are considered below.
a. Agricultural Products.
Revised agricultural production goals seem least
likely of achievement. All three types of limitations cited above will
be operative in limiting achievement of planned agricultural production
goals, materials being the most serious limitation. Since Soviet
agricultural expansion must henceforth be largely intensive in nature,
the availability of mineral fertilizer is essential to c anpletion of
the proposed program. The official increase anticipated for the pro-
duction of mineral fertilizer is not deemed sufficient in 1954 and 1955
to enable agricultural output to expand to the desired level. ORR
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estimates of agricultural production for 1955 are 15 percent below
official Soviet goals.
Equipment shortages constitute a less certain
factor. The announced goals for row-crop tractor and agricultural
machinery production indicate peak production rates occurring in
1955 and 1956. Whether or not the late 1953 and 195+ rates of output
will limit crop output in 1954-55 is conjectural.
The manpower limitation in agricultural production
has-two basic aspects. One concerns the incentives provided to
kolkhoz members, and the other concerns the training of skilled opera-
tives to man the large increased machinery park. Since ORR assumes
that the manufactured consumer goods program will be substantially
fulfilled, the increased availability of consumer nondurables and
durables to the rural population will be substantial. Together with
increased monetary incomes, the incentive effects of the program
should be important. A manpower limitation may be apparent in the
provision of trained and experienced MTS personnel. Training periods
require from 6 months to a year, and at least another 2 years are
needed to give the operators adequate field experience. The end result
of this training requirement is to introduce a lag in the attainment of
maximum utility of power machinery that may retard desired crop ex-
pansion.
b. Consumer Nondurables.
Consumer nondurables utilize agricultural products as
basic inputs in their productive processes. To the extent that
agricultural goals are incapable of fulfillment, consumer nondurable
goals may not be realized, assuming no withdrawals from stockpiles, no
expansion of imports, and no reduction in exports. Items most likely
to be affected by this type of limitation are woolen cloth and
clothing, linen cloth and sewn products, meat products, and dairy prod-
ucts.
There is little indication that lack of industrial
equipment will seriously affect production of textile and food products.
The output of both textile and food-processing machinery is expected to
rise enough in late 1953 and in 1954- to insure that they will not be
the restraining inputs on production. There should be adequate manpower
forthcoming for these newly favored industries. Relative wage rates
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have recently been raised in the two branches. Female workers will
probably provide most of the new labor force requirement.
c. Consumer Durable s .
The consumer durable goals are those most likely to
be attained. The basic materials consist of metallurgical, mechanical,
and fabricated electrical equipment inputs. The resource problem is
one of diversion of existing and/or new capacity in the metals, metal
fabrication, and electrical machinery industries from heavy industrial
and military enterprises to manufacturers of consumer goods. The
degree of diversion is slight. The planned rise in consumer durable
goods production in 1953 will be equivalent to less than 2 percent*
of the total output of the fabricated metals and defense industries.
If the entire burden of the increase in consumer goods output were con-
fined to the last half of the year, the diversion from other enterprises
would amount to only about It percent.
The increase in consumer durables production of 10 bil-
lion rubles in 1951+ will amount to less than 1..5 percent of the total
value of output in defense industry and fabricated metals. In 1955
the increment of 18 billion rubles in consumer durables production
will comprise less than 7 percent of total value of output in the
aforementioned industries.
The equipment limitation is subject to the same
restriction imposed by material inputs. Since plants producing consumer
durables would compete for capital equipment with those producing
machined products and armaments, the limitation on the production of
consumer goods is contingent upon Soviet willingness to divert equipment
originally ticketed for heavy industry and armaments. On this basis,
equipment does not appear to be a restrictive factor.
The same conclusion advanced in regard to the manpower
problem in consumer nondurables is applicable to the category under
discussion. For the most part, these products would be produced in
industries which have long enjoyed high relative wage rates and high
priority in securing the services of new entrants into the industrial
labor force.
This estimate is based or.. an official statement concerning retail
sales of consumer durables End on ORR estimates of the percentage of
total output comprised by consumer durables.
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d. Consumer Services.
The proposed expansion of State and cooperative trade
needs to be examined in the light of the equipment and manpower
limitations. The "materials" of trade are consumer goods produced by
other ministries; so their adequacy will depend on the output
achievements of the manufacturing ministries.
The equipment requirements of trade consist mainly of
buildings, refrigeration machinery, store equipment, and transport
equipment. Directives giving the needs of the Ministry of Internal
and Foreign Trade a higher priority on construction materials and
automotive equipment indicate a concerted interest to fulfill these
requirements. There is no inclination on the part of ORR analysts to
challenge the refrigeration machinery goals.
As for manpower, there should be no limitation exercised.
The additional labor force required is relatively small. The Ministry
of Internal and Foreign Trade has announced a comprehensive training
program for both new and present sales personnel.
B. Feasibility of the Revised Retail Distribution Plan.
The feasibility of the revised retail distribution plan for
1955 (see Table 1*) is essentially a function of four variables, as
follows:
1. Production levels for specific commodities outlined in the
distribution plan.
2. Foreign trade (imports) in specific commodities outlined in
the distribution plan.
3. Stockpiling status of specific commodities outlined in the
distribution plan.
4+. Marketing channels employed for specific commodities outlined
in the distribution plan.
Inasmuch as the increase in Soviet production levels stipulated
in the revised Fifth Five Year Plan are in almost every case less than
the indicated increase in retail turnover, each of the variables outlined
above assumes a role of some significance in assessing the probability of
: P. 9, above.
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Soviet achievement of the planned retail turnover. Imports, reduction
of stockpiles, and revision of marketing channels of the commodities
indicated in Table 1 may individually or in some combination close the
gap between Soviet and ORR production estimates and Soviet retail turn-
over estimates. A discussion of the feasibility of production levels
for specific commodities outlined in the distribution plan is contained
in III, A, 3, above, and is the point of departure for the discussion of
the remaining variables outlined above.
The USSR probably can achieve the stipulated program of expansion
of retail turnover if its gambit (see III, B, 3, below) of change to a
system of incentives and rewards as opposed to a system of threats and
punishments is successful. If the individual Soviet citizen responds
to the gambit in the fashion that Soviet planners anticipate, the
program will succeed. If the Soviet citizen fails to respond in the
manner in which the planners anticipate, the series of enticing'moves
outlined in III, B, 1 and 2, below) may provide the added incentive,
out, more likely, should the initial response be negative, the program
may well collapse. It is believed that, while the Soviet authorities
have dedicated substantial effort to the realization of the revised
plan, failure of the plan would not significantly jeopardize the
position of the Soviet economy and fulfillment of the plan might well
considerably enhance the position of the Soviet economy at least
through the period 1956-60. This estimate is based upon the prop-
osition that a workable system of incentives to Soviet working people
might push back for a few years a rather rapid decline in labor
productivity.
1. Extent to Which Foreign Trade Will Aid in Fulfilling the
Revised Retail Distribution Plan.
Several recent changes in the structure of Soviet foreign
trade indicate that the USSR intends to achieve a portion of the planned
Increase in retail distribution from imports of specific commodities for
which increases in trade turnover have been planned. The USSR has
concluded a new trade agreement with Denmark, increasing Soviet imports
of butter and meat. The USSR has also concluded a new trade agreement
with Argentina which will make available to the Russians substantial
quantities of wool, cheese, :Lard, and meat. A sharp increase in
:3oviet sales of precious metals since mid-1953 seems to have been
directed at redressing adverse Soviet balances of hard currencies,
especially sterling, that here been built up over several months. Gold
sales are not believed to be the result of a direct increase in the
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current purchases of consumer goods. The USSR has negotiated agreements
with both Iceland and the Netherlands calling for imports of specialty
fish items, and in July orders were placed with the Netherlands for
immediate delivery of 500,000 meters of woolen goods and 500,000 meters
of rayon goods. Additional increases in textile purchases from France
were negotiated during 1953. The foregoing measures indicate at least
a short-run effort to implement the revised retail distribution of
consumer goods by foreign trade activity. It is impossible from the
data currently available to draw the conclusion that the USSR will
continue to expand imports of consumer goods over the period of the
revised plan. However, Soviet ability to implement the plan by foreign
trade and an inference of Soviet intent to implement the plan by
foreign trade seem to be indicated by the above actions.
The commodity composition of USSR-Soviet Bloc trade for
1954-55 probably will be much the same as that which obtained for
1950-52. It may be noted that the 1953 trade pattern between the USSR
and European Satellites was gravely distorted by the poor harvest in
the latter area. The general increase in attention to production of
consumer goods over the Bloc may result in some minor increases in the
role of consumer goods in the intra-Bloc trade. It is unlikely that
the USSR will be able to increase its import$ of the critical items on
its consumer goods list from Communist China or the Satellites. China
may be able to increase its exports of edible oils and fruits by a
small amount, but if China were able to trade with the West, the amount
of edible oil available to the USSR might well be reduced below present
levels. It is also unlikely that the USSR will be able to increase im-
ports of critical consumer goods items from the European Satellites,
which are simultaneously (with the USSR) engaged in attempting to ex-
pand the production and availability of the identical consumer goods.
The USSR exports a considerable volume of food (primarily
cereals and cereal preparations) to secure foreign exchange to finance
required imports. The absence of revision of cereal and cereal product
output and distribution goals tends to indicate that the present and
planned production and distribution for cereals is of such a magnitude
as to allow the USSR to continue to export substantial quantities of
these items without interference with the revised Fifth Five Year Plan.
The distribution plans for fish, fats and oils, and textiles
are largely dependent on foreign trade for their ultimate achievement.
Certainly a part of the planned increase in meat turnover must be
achieved by increased imports, although the major portion of the planned
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increase in meat will derive from expected changes in marketing
channels. It is not feasible to try to estimate the physical
magnitude of imports of the above-indicated items and thus to tie
import availabilities directly to domestic availabilities of specific
consumer goods items. Two limitations dictate this situation. First,
trade data are couched in almost all cases in monetary terms; thus
preci se estimates of physical quantities made available cannot be de-
rived from trade date.. Second, the future pattern of foreign trade is
an unknown quantity. It is believed that should the USSR be willing
to continue to revise import trade in the direction of increased
availability of fish, meat, fats and oils, and textiles and textile
fibers that the portion of the revised distribution plan to be supplied
from foreign trade could be achieved without significant disorganiza-
tion of the internal Soviet economy.
A rapid increase in Soviet sales of gold and other precious
metals has taken place since mid-1953. It should be noted that, despite
this increase, Soviet sales of these metals for the first 11 months of
1953 are running at an annual rate of about 85 percent of the 1951 rate,
v hen little notice was taken of Soviet gold shipments and when the in-
ternational price of gold was not believed to be unduly depressed.
Should the monthly rate of Soviet sales of gold since September be
maintained, it would be necessary to reassess the role of gold in Soviet
foreign trade. The substant-al gold exports of recent months appear to
be aimed at a redress of adverse Soviet balances of hard currencies,
most of which adverse balances had been apparent before implementation
of the revised plan had been initiated. Although the restoration of
balance in the hard currency area may be an indication of Soviet desire
or intent to increase imports of consumer goods from this area in the
future, it may not be construed to indicate a Soviet decision to finance
imports of consumer goods from goldstocks.
The USSR has a ltLrge highly diverse economy upon which it
may draw for commodities to enhance its export trade. Gold is only one
of the commodities that may be drawn. The sharp decline in the price of
gold that has occurred in the past few months would certainly make future
use of gold for export a more questionable alternative than it has been
in the past. There exists at present insufficient knowledge of Soviet
gold and other precious meta]. stocks to support a contention that the
USSR could undertake a substantial expansion of import trade financed
in large part by such metals,
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2. Stockpiling Depletion as a Source of Supply for Implementing
the Revised Retail Distribution Plan.
The Soviet stockpiling program, like its entire economy, has
in the past been directed at assuring the maintenance and growth of
production and the defense of the country. For this reason, the USSR
has accumulated' large reserves of only those consumption items needed
to achieve these goals. Primary among these is grain, but meat, sugar,
and other foods are also included. Stockpiles of such quality foods
as milk, vegetables, and butter are not believed to be large, while
most manufactured consumer goods have not been stockpiled at all.
For this reason, even though the present situation is the type of
contingency in which Soviet doctrine calls for the release of stockpiles,
these reserves are not likely to provide more than temporary and limited
contributions to the revised retail turnover plan. Their chief use may
lie in providing increased supplies in particular localities at particular
times when performance threatens to be conspicuously below promises.
Grain stockpiles also can be used to provide increased exports.
No information has been received to suggest any revision in
the original Fifth Five Year Plan goal for a doubling of state food
and material reserves. Any plans to reduce stockpile accretions for
the sake of the increased retail turnover plans would signal a reversal
of Soviet stockpiling policy, which regards the accumulation of reserves
as a first step in the solution of a distribution problem.
3. Extent to Which a Shift in Distribution from Noxmiarket to
Market Channels May Implement the Achievement of the
Revised Retail Distribution Plan.
It seems apparent from the difference between revised produc-
tion and distribution targets in Table 1* that Soviet planners intend to
make up a major share of this discrepancy by attracting production from
subsistence consumption to traditional market channels. Should the
planners be able to effect a significant diversion of the output of
meat, butter, edible oils, dairy products, and fruits and vegetables
from nonmarket to market channels, the battle of increased retail turn-
over would be substantially won. The Soviet agricultural population
currently consumes a significant portion of the production of the
above commodities on the farm, and some production unquestionably is
p, above.
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diverted to illicit trade channels. The commodities thus consumed
do not become incorporated into retail turnover figures.
Two main attacks have been launched to bring a considerable
portion of the nonmarket distribution into the organized market place.
First, the Ministry of Agriculture has substantially increased the real
price which the farmer received for his meat, dairy, and vegetable
products in organized state markets. 11/ Thus the farmer will be able
to increase his money income significantly by increasing production,
and he will not be penalized pricewise for what he sells to the State.
Furthermore, the industrial worker in the city will be encouraged to
increase output to buy the increased supply of food which will be
available. Second, a concerted effort is to be made to distribute a
larger portion of the increased production of manufactured consumer
goods to stores in rural a_^eas than hitherto has been the practice. 12/
Thus the farmer will be ab:Le to use his newly increased money to
purchase consumption goods which have previously been unavailable.
If this circuitous system of incentives and rewards instead of threats
and punishment were successfully implemented, the USSR would likely
achieve the indicated production and distribution goals.
In general, the intense initial effort made to implement
the revised plan (see I, B. and III, By 1, above) is crucial to the
success of the plan. Only if the Soviet farmer and industrial worker
can see the tangible result of the program and respond to its stimuli
at an early stage is there any likelihood that the plan may bear ,
fruit over such a short period. It is difficult to forecast with any
even remote degree of accuracy the possibility that such a radically
different approach to Soviet production and distribution will be
embraced by the Soviet citizenry. Increases in trade turnover for
the second quarter of 1953 show a substantial advance (almost 100 per-
cent) over the rate obtaining in any quarterly period since the first
quarter of 1951. 13/ This indication is sufficiently isolated as not
to be considered definitive, and it is also sufficiently high as not
to be disregarded.
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APPENDIX A
INDICATORS SUGGESTING IMPLEMENTATION OF THE NEW SOVIET ECONOMIC POLICY
The following indicators are submitted as evidence which suggests
a new policy toward agriculture and consumer goods in the USSR.
FBIS 223, 16 November 1953:
1. At the plenary session of the Central Committee of the Con-
sumer Goods Cooperation Workers Trade Union, the Chairman of the Board
of the Central Union of Consumer Goods Societies illustrated the rise
in goods turnover in the rural trading network by saying that "the
average daily turnover in rural cooperatives enterprises in October
of last year equaled 277 million rubles, but ft-ha f during the
corresponding period of this year, despite low prices, it already
amounted to 340 million rubles."
FBIS 222, 13 November 1953:
2. Pravda article by Gatovsky, "Growth of Popular Consumption
and Development f Soviet Trade":
In 1953 as compared to 1940, production of consumer
goods has grown 72 percent ... . If during the previous years, goods
turnover was, on the average, growing annually, in comparative prices,
13 percent, in 1953 it has already grown 20 percent."
3. Pravda, 8 July 1953, Current Digest of Soviet Press,
Vol. V, No. 27, pp. 31-32, "Steadily Improved Soviet Trade';
"In 1953, in conformity with government orders, consumer
goods output will increase by a sum totalling more than 20 million
rubles above the annual volume established earlier for the trade
volume."
25X1 A2g
4. In the first half of 1953 the Moscow Dynamo Plant imeni
S.M. Kirov ... increased production of consumer goods by one-third.
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FBIS, 23 October 1953, pp. :3B40:
5? It has been reported that for the Ukraine 12,784 specialists
and skilled workers are said to have returned to agriculture before
November. Of these, 10,598 are agronomists and zootechnicians.
FBIS 223, 16 November 1953, pp. AA31:
6. On 5 October 1953 the USSR Council of Ministers ordered
supply ministries to consider deliveries of raw materials and equip-
ment to light industry as first priority irrespective of fulfillment
of deliveries to other consumers.
MCI Contribution to ORR Project 7:
7. Indications that the government's new policy is being
implemented by the food industry are suggested chiefly by the following:
a. An influx of monitored radio broadcasts, unprecedented
in volume, reporting on overfulfillment and preterm fulfillment of
1953 plans by food enterprises from all areas of the USSR.
b. The unusual (in comparison with previous years) amount
of press coverage which, since the spring of 1953, has been devoted
to successes and problems in the development of the food industry.
c. The decree issued by the USSR Council of Ministers
and the Central Committee of the CPSU "On the Increasing Production
of Foodstuffs and Improving Their Quality."
Izvestiya, 15 July 1953, p. 2, "Improve Quality of Local Industry
Products":
8. The Director of Technical Administration of the Ministry of
Local Industry, RSFSR, stated that surveys of consumer goods manufactured
by local and cooperative industry in RSFSR were being conducted (July
1-953) as a step to improve the quality of output. He also added that
trade organs, specialists, and consumers were participating in surveys.
lzvestiya, 10 August 1953,
p. 5, speech by A.Ye. Petruchev:
9. A.Ye. Petruchev, Chairman of the Board of USSR Central Soviet
of Producer Cooperatives, stated that Union-Republic Councils of
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Ministers and the Central Soviet of Producer Cooperatives had worked
out measures, on the instructions of the Soviet government, for the
improvement of the furniture production in the Central Asian republics
and the eastern districts of the RSFSR and for the increasing of pro-
duction and broadening the assortment of enamelware, hardware, and
loudspeakers.
FBIS, 10 September 1953, Armenian SSR meeting of the Supreme Soviet:
10. At a meeting of the Supreme Soviet of the Armenian SSR, as
a result of discussion of the question of increasing production of
consumer goods during the next 2 to 3 years, it was planned that the
Ministry of Local Industry of the Republic in 1954-55 would construct
enterprises for the production of bedsteads, enameled and aluminum
containers, furniture, and beer.
Pravda, 21 November 1953, p. 2, "Vital Tasks of Local Industry and
Producer Cooperatives":
11. The Chief of the Department of Local and Cooperative In-
dustry, Gosplan, USSR, announced that local and cooperative industry
had been assigned the supplementary. task for 1953 for production of
consumer goods in the sum of more than 3 billion rubles in retail
price.
M/Ag Contribution to ORR Project 7, "Indicators of Implementation of
Recent Agricultural Decrees":
12. Numerous FBIS messages and newspaper items from Moscow and
the provincial areas of the USSR indicate the following6
a. The return of considerable numbers of machinists and
other specialized personnel in industry to work on collective farms
and in machine-tractor stations (MIS's).
b. The reorganization of existing schools of mechaniza-
tion and general agriculture.
c. The increase in enrollment of students in tractor-
driving and maintenance schools as a result of the recent decrees.
d. The holding of seminars to instruct directors of
MTS's in the use of the square-cluster (check-row) method of
planting and seeding crops.
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e. The assigning of political organizers to collective
farms and MI'S's, where they are being treated with "care and
solicitude."
f. The use of facilitates of the Central Administration
for Road Transport and }Eghways to transport agricultural products
from collective farms to markets.
g. The sale of collective farms products in increasing
quantities by consumer cooperatives shops on a commission basis.
h. The sale of automobiles, trucks, feed, and building
materials to collective farms which have sold products to the State
in excess of their compulsory delivery quotas.
i. The construction of additional numbers of hotbeds
and coldframes for use ir.. vegetable production.
j. The construction of marketing facilities (sales
booths and stalls) by consumer cooperative organizations to handle
the products of collective farms and collective farmers.
Soviet Home Service, 11 November 1953, speech by Bardin:
13. "The development of Soviet machine building technique as
well as the needs of the industry producing consumer goods demand
from our metallurgy an increased production of deficient kinds of
rolled metal, in particular thick sheet metal, light section steel,
rolled wire, and rust-free steel."
Significant is the priority given to increased, pro-
duction of light section steel and rolled wire in the Five Year Plan.
The increased production of these steel varieties needed by the light,
food, and local industries is one of the indices of the peaceful
development of Socialist economy."
Pravda, 14 August 1953, ""tractor Plant Expands Output of Consumers'
Goods":
14. The consumer goods shop of the Chelyabinsk Tractor Plant
is to produce 95 tons of aluminum ware in 1953, 20 tons more than
produced in 1952.
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M`SF Contribution to ORR Project 7:
15. An unchanged indicator is the continuing preference or
priorities assigned to the coal industry by the allotment of a rel-
atively large sum of investment into housing for coal miners. For
example, the coal industry in Kirghiz was assigned 4+4.7 million
rubles (1953 ?), of which 11.3 million were to be spent for
miners' housing. Coal miners, however, have long been one of the
priority classes of industrial workers and have received preferred
treatment in many ways.
FBIS, 2 October 1953, Moscow, Soviet Home Service:
16. "The Ministry of Transport has outlined and carried out
the necessary measures which insure correct transport of foodstuffs
and consumer goods by railway staff. Already in September the bulk
of transport foodstuffs and consumer goods has increased noticeably."
FBIS, 14 August 1953, Moscow, Soviet Home Service:
17. "A high rate of development in the industries producing
consumer goods and the further expansion of trade largely depend on
the work of the transport system. Freight for agriculture must be
given special attention by transport workers. Unfortunately, ...
transport is not paying sufficient attention to carrying freight
for the light and food industries and goods for the population."
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APPENDIX B
INDEXES OF OUTPUT OF THE SOVIET ECONOMY BY SECTORS AND BRANCHES
I.
Maj
or S
ectors
1950
1951
1952
1953
1954
1955
1.
Industry
100 a/
112
123
133
145
158
loo b/
114
128
4
6
137
1
9
2
1
a. Producer Goods
100 a/
112
122
133
147
161
100 b/
114
130
140
152
165
b. Consumer Goods
100
113
124
132
142
154
2.
Agriculture
100
103
108
103
106
109
3.
Transportation
100
113
123
130
136
142
4.
Communications
100
109
119
129
140
154
5.
Construction
100
112
124
134
146
160
6.
Trade
100
105
109
114
120
127
7.
Services
100
105
111
117
123
130
II.
Indu
stry
1.
Energy
a.
Electric Power
100
114
130
147
167
188
b.
Solid Fuels
100
108
114
121
128
136
c.
POL
100
113
129
145
161
177
a.
Nonferrous
100
109
120
14o
168
201
b.
Ferrous
100
115
129
143
156
170
100
114
125
134
149
167
a.
Shipbuilding
100
103
105
105
106
107
b.
Bearings
100
122
139
151
163
169
c.
Construction Equipment
100
105
120
136
152
168
d.
Automotive Equipment
100
110
115
117
122
128
e.
Electrical Machinery
100
117
132
145
159
183
f.
Electronic Equipment
100
138
172
203
228
266
a. Excluding defense industry.
b. Including defense industry.
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1950
1951
1952
1953
1954
1955
3.
Fabricated Metals
(Continued)
g. Railroad Equipment
100
109
115
119
124
128
h. Metalworking Machinery
100
130
164
210
260
320
i. Agricultural. Machinery
100
115
126
137
164
189
j. Mining Machinery
100
108
117
127
137
147
k. Textile Machiner;yr
100
141
148
153
162
182
1. Machine Tools
100
104
108
111
115
119
m. Food-Processing Machinery
100
113
127
141
272
410
n. Woodworking Machinery
100
120
144
173
208
250
o. Refrigeration Machinery
100
108
131
192
292
415
4.
Chemicals
100
112
122
134
150
164
5.
Construction Materials
100
121
148
160
187
211
6.
Forest Products
100
101
104
107
110
110
7.
Food Products
100
109
121
126
133
140
8.
Manufactured Consumer Goods
100
117
127
137
149
163
9.
Defense Industry
100
125
161
168
175
182
1.
Food Crops and Livestock
Increments
100
103
108
103
106
109
2.
Industrial Crops
100
105
97
107
110
113
GNP
100
109
119
124
132
141
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APPENDIX C
SOURCES
l.. FBIS, 10 Aug 1953, p? AA5? 25X1A5a125'
2. CIA/RR IP-333, ORR Contribution to NIE-90, Economic Factors
S
8
.
.
Affecting Bloc Capabilities through Mid-1955, pp. 1, 2, , and
25X1A5a1 3.
4. Alexander Nove, Soviet National Income in 1951, unpublistiect.
5. Abram Bergon and Hans Heymann, Jr., Disposition of the Gross
National Product of the USSR in 19 in Terms of Adjusted Ruble
Prices, RAND Project RM-2 7, 17 Nov 19 9, pp. 7-11.
6. FBIS, 16 Nov 1953, p? AA32.
7. Pravda, 28 Oct 1953.
8. Pravda, 30 Oct 1953.
9. FBIS, 26 Oct 1953, p. CC39? C.
10. Pravda, 9 Aug 1953.
11. FBIS 189, USSR and Eastern Europe, 1953, pp. AAll-A14.
14
FBIS 192, USSR and Eastern Europe, 1953, pp. AA22-AA26.
A22- .
AA12. FBIS 209, USSR and Eastern Europe, 1953, pp.
13. Vestnik Statistiki No. , 1953, p. 7.
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.Approved For Release 2000/08/04: CIA-RDP79T00935A000200300009-1