SOVIET ECONOMISTS ADVANTAGEOUSLY EMPLOY DOLLAR NATIONAL INCOME COMPARISONS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T01003A001000260002-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 4
• Document Creation Date: December 12, 2016
• Document Release Date: June 24, 2002
• Sequence Number: 2
• Publication Date: May 2, 1961
• Content Type: BRIEF

Approved For Release 2002/07/12 : CIA-RDP79TO1003AO01000260002-0
CIA/RR CB-61-26 S-E-C-R-E-T
Copy No.
2 May 1961
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CURRENT SUPPORT BRIEF
SOVIET ECONOMISTS ADVANTAGEOUSLY EMPLOY DOLLAR NATIONAL
INCOME COMPARISONS
,OFFICE OF RESEARCH AND REPORTS
CENTRAL INTELLIGENCE AGENCY
This report represents the immediate views of the
originating intelligence components of the Office
of Research and Reports. Comments are solicited.
This document contains information affecting the national defense of
the United States, within the meaning of the espionage laws, Title 18
USC, Sections 793 and 794, the transmission or revelation of which
in any manner to an unauthorized person is prohibited by law.
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S-E-C-R-E-T
SOVIET ECONOMISTS ADVANTAGEOUSLY EMPLOY DOLLAR NATIONAL
INCOME COMP RI N
Soviet press reviews of comments on the recently published
Soviet statistical compendium The USSR in Figures: 1960 have con-
tained several comparisons of Soviet and U economic indicators.* 25X1C
Wh
t i
l i
h
a
s nove
n t
e set of comparisons apparently appearing in
the handbook are estimates of per capita national income in dol-
lar terms for the USSR, US, Great Britain, France. In the Soviet
comparison, the USSR's per capita national income is half that of
the US, and greater than that of the UK and France, two of t
leading economies of Western Europe. On the other hancj0R
ates of per capita gross national product (GNP) show the USSR to
be considerably smaller than all three Western economies. The
sharp differences in results between the two estimates can be ex-
25X10
plained in terms of differing concepts as to national income and
different conversion ratios, not only between rubles and dollars,
but also between dollars and pounds sterling and dollars and francs.
Dollar Estimates of Per Capita National Income
and Per Capita, GNP, 1959
Country
Soviet Estimate 1/ ;'
e
stimate 2/
of National Income I-_ _- , of GN
US
1,655 2,722
USSR
804 1,050
UK
738 1,516
France
733 1,395
Effects of Differing Concepts of National Income
Conforming to the traditional Marxist concept that "produc-
tion" is limited to the sphere of material production of goods or
of services directly connected with their production, the Soviet
concept of national income excludes incomes generated in what the
Soviets term non-productive sources. These incomes are included
in Western measurements of both national income and gross national
product (GNP), Non-productive incomes aside, the Soviet concept
of national income is equivalent to the Western concept of GNP.
In our national accounting methodology, GNP equals national income
plus capital consumption allowances plus indirect business taxes.
Since the services have been the most rapidly expanding sectors in
highly advanced economies, the effect of using the Soviet concept
of national income is to lower the magnitudes of national product
of the US and Western European economies relative to those of less
advanced countries, In addition, since most of these excluded ser-
vices are consumption-oriented, their exclusion rebounds to the
propaganda advantage of an economy like that of the USSR in which
the consumer is accorded a low priority on resources.
Since it may be assumed that the Soviet measurement of US
national income is derived directly from adjustment of
US
data,
comparison of the Soviet an ORR er capita estimates
of
US na-
tional product provide a direr measure of the degree
to
which
substitution of the Soviet concept reduces US product
in
measure-
ment.
* The actual publication does not contain the relevant information.
2 May 1961
CIA/RR CB-61-26
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In the above table the reduction aaaounts to nearly 40 percent.
The effect of the use of the two different concepts in determining
Soviet product cannot be directly computed from the table as the
differences between the two sets of estimates involve other vari-
ables in addition to that of concept of national product. It is
possible, however, to estimate the approximate extent of under-
statement by deduction from the ORR i stimate of Soviet GNP of those
elements of national product whit are excluded within the Soviet
context. The reduction amounts to about 20 percent_, or about half
the relative reduction in US national product. ORR'ss omputed ra-
tio of per capita Soviet GNP to US GNP is about three-eighths; the
effect of using the Marxist concept of national income is to raise
the ratio to over half.
The effect of using the narrower Soviet definition of nation-
al income leads to similar understatements of per capita UK and
French GNP relative to that of the USSR.
If the announced per capita dollar national income of the USSR
is compared with ari :esti.me,'te o:f Ab6dt 6,400 rubles per capita, de-
rived from official souree's, 3/ a ruble-dollar ratio of about 8
rubles to I dollar emerges. This is about the same as the ratio
,eu *RR.an its comparison of 1957 rubles and 1959 dollars.
25X10 compu
This identity in conversion ratios vanishes, however, when vari-
ations in concepts of national product are taken into account.
Ruble-dollar ratios are lowest on those services expenditures
whi re, excluded if the Soviet income concept is adopted. Thus,
25X1C if QR uble-dollar ratio were adjusted to conform to the
Soviet measuhe resulting._, ruble-dollar ratio would be much
25X10 higher than tTW existin< 5 estimate.
The conversion ratio error is even more glaring in its ef-
fects on the estimates of UK and French per capita dollar national
products. The technique by which the Soviet economists derived
dollar estimates for the three countries cannot be deduced from
the data presented, but the relationships between their per cap-
ita national products and that of the US are similar to those
that would be obtained by converting estimates in pounds and francs.
into US dollars at prevailing exchange rates. Studies by Western
scholars have concluded that exchange rates seriously understate
the internal purchasing power of Western European currencies rela-
tive to the US dollar. 4/
The (RR estimates in the table are based on conversion ratios
representing the geometric average of dollar and European prices
for a selected sample of goods and services in 1955. The effect
of this adjustment is to raise UK per capita GNP by 18 percent and
French by 21 percent over the values obtained by exchange rate con-
versions. 5/ Therefore, the Soviet measure understates the posi-
tions of UK and France relative to the USSR not only by using the
narrower Marxist concept of national product, but also by over-
stating pound-dollar and franc-dollar ratios in the UK and French
estimates.
2 May 1961
25X1 C
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