BRIEF GUIDE TO THE ECONOMIES OF THE SOVIET BLOC

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01093A000600060003-4
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 65
• Document Creation Date: November 9, 2016
• Document Release Date: January 8, 1999
• Sequence Number: 3
• Publication Date: November 5, 1954
• Content Type: REPORT

Approved For Release 1999/0902 : CIA-RDP79-01093A000600060003,4~ _F
PROVISIONAL INTELLIGENCE REPORT
BRIEF GUIDE TO THE ECONOMIES OF
THE SOVIET BLOC
CIA/RR PR-74
5 November 1954
.. .
MEtV1't~C~. ~-
crc~.~s~
t~C~ r~ ` ? IN C! P.SS. CJ
PaJ r H t ? ~ .,`?
.- ~.
CENTRAL INTELLIGENCE AGENCY
OFFICE OF RESEARCH AND REPORTS
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060 3-4
 Approved For Release 1999/09/02 : CfA-RDP79-01093A00060006p003-4
WARNING
This material contains information .affecting
the National Defense of the United States
within'. the meaning of the espionage laws,
Title 18, USC, Secs. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
PROVISIONAL INTELLIGENCE REPORT
~r
BRIEF GUIDE TO TfiE ECONOMIES OF THE SOVIET BLOC
CIA/RR PR-74
(ORR Project 13.344)
NOTICE
The data and conclusi-ons 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 data which may
be available to the user ase solicited.
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
~~~
~:~~,
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
S -E -C -R -E -T
FOREWORD
This report is designed for the reader who has a very general
interest in the facts of Soviet economic life. It contains the
necessary minimum of background information on the history, organi-
zation,-and goals of the economic systems of the countries concerned
and also the most recent data pertaining to the actual operation
of these--economies in the aggregate and in some detail. Thus it is
hoped that this handbook will enable the reader to view the current
economic pursuits of the peoples in the Soviet sphere with some
historic perspective and some .appreciation of their dynamism.
S -E -C -R -E -T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
S-E-C-R-E-T
CONTENTS.
Page
I. Description 1
A . USSR . 1
B. European Satellites 12
C . Communist Ck~.tna 13
II. Recent Developments in the Bloc Economies 16
B. European .Satellites .- 20
C . Communist China 21
III. National Accounts . . 22
A. Gross National Product. . 22
B. Gross National Product by Use . ? 24
C. Gross National Product by Industry of Origin. 25
IV. Economic and Industrial Base. 26
A. Population and Manpower 27
1. USSR . . 2'~
2. European Satellites 31
3. Communist China . 3~
B. Agriculture 34
1. USSR . 34
2. European Satellites 37
3. Communist China 39
C . Industry. 41
1. Energy. 41
2 . Metals . ~ 46
3. Building Materials. 48
4. Chemicals 48
5. Manufacturing 50
6. Military End Items. 51
S -E -C -R -E -T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
S -E -C -R -E -T
D .
Transportation
51
1. USSR .
51
2. European Satellites.
54
3. Communist China.
55
E.
Services ...
56
F.
Foreign Trade. .
57
1. Gross Natiional Product of the Soviet Bloc and NATO Powers
by Principal Areas, 1938-53 .
3.
Division of Gross National Product by End Use~USSR,
Selected Years, 1838-53; US, 1953 .
Gross National Product by Industry of Origin~USSR,
Selected Years, 1938-53~ US, 1953. .
26
~+.
Population and Employment in the USSR as of 1 January 1939,
1947, 1950, and 1953. . .
5?
Population and Employment in the European Satellites,
1 January 1947 and 1953 ?
32
6.
Production of Major Crops in Communist China, 1949-52.
40
7.
Production of Selected Commodities in the Soviet Bloc.
42
8.
Freight Transportation in the USSR by Major Carrier Type
1950 to Mid-156. ..
53
S-E~-R-E-T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 ": CIA-RDP79-01093A000600060003-4
cIA/~t ~ _7~
(ORR Project 13.3~~+)
I. Description.
A. Ufl~R .
S-E-C-R-E-T
~L22EF GUIDE TO TAE ECONOMIES
t?F TAS SOY.~T B.LOC*
1. Soviet Economic Policy.
a,. Role of the. State.
Economic decision-making in the USSR is almost ex-
clusively a function of central political bodies rather than a market
mechanism. The concrete economic policies. laid down. by the central
authority to channel economic activity toward the attainment of long-
range goals are thus implemented directly by the state planning
organs. In this way the attainment of the state's goals is not left.
to the market place, where consumer sovereignty could dictate a pace
of industrial development and military expansion quite at variance
with the wishes of the central authority.
A wide gap between the interests of the population
and the government, induced by the policy of a high rate of invest-
ment and a low rate of consumption, has necessitated the extension
of centralized control over an ever-increasing number of commodities
and activities. Control over agricultural production was relaxed
somewhat during World War II, to provide greater personal incentives,.
but was resumed almost i.mYaediately thereafter. In 1952, about 1,600
commodities were subject to strict priority allocation by the central
authority to avoid the possibility of their being diverted into uses
of lesser importance in terms of the state's economic goals.
The basic commitment of the Soviet economy to rapid
military and industrial growth has necessitated the direction of a
~ The estimates and conclusions contained in this report repre-sent
the best judgment of the responsible analyst as of 16 August 195+?
S-E-C-R-E-T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02: C1A-RDP79-01093A000600060003-4
S-E-C-R-E-T
large portion of the country's resources into investment in the pro-
ducer goods industries. This direction has been accomplished by
economic policies designed to depress consumption and thereby free
resources. for other uses. For example, pricing p.alicy is designed
to. ration scarce consumer goods by means of a huge tax component in
their price, while the absence- of a tax in the prices of producer
goads provides the state with relatively cheap supplies of industrial
materials.. .And collectivization in agriculture., by making deliveries
of produce to the state obligatory at prices which are probably lase
than the cost of production, has had the same effect of depressing
the real income of the rural population.
Soviet economic policy has aimed at achieving a
maximum redistribution of the labor Porce in favor of the urban
industrialized areas with a minimtum expansion of investment, es-
pecially in urban housing. Housing construction as a percentage
of total investment in the USSR in the pr-ewer period from. 192$
to 1937 was only about 9 percent annually in contrast to the US,
where housing has ranged i'rom 15 to 25 percent of total investment
annually since 1880. In 1939, only about ~+3 square feet of living
space per person was available in Soviet urban areas. This condition
was the result of the low level of housing investment accc~panied by
a net movement of 25 million persona frown rural to urban areas in the
period 1926-39. During the postwar period, Soviet investment. in
housing increased to a level of 15 to 18 percent. of total imrestment.
Although a substantial portion of this increase can be attributed to
reconstruction of war-damaged housing, its continuation since 19+8
may indicate a more lasting change in policy.
c. Growth of Industrial Production..
The Soviet policy of allocating investment- in favor
of industrial rather than non.-industrial sectors and in favor of pro-
ducer goods over consumer goods within the industrial sector has
achieved a very rapid change in the volume and c~positian of i.n-
dustriel output. This industrial revolution was accoanpanied by a
general inflationary trend in prices beginning shortly after the
launching of the First Five. Year Flan in 1928. Increases in indus-
trial wages tended to outstrip increases in labor productivity, and
the demand for agricultural raw materials caused extreme pressure an
.agricultural prices.
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
Rising prices in industry were met initially by a
policy of extensive industrial. subsidies. This. policy continued un-
til 1936, when the first in a series. of subsidy reductions was made,
accompanied by substantial upward revisions in the prices. of indus-
trial products. After the major reorganization of wholesale indus-
tfii$1 prices in 19+9, the use of subsidies in Soviet, industry was
.partially discontinued although high-coat operations such as the
timber industry and certain favored activities continued to receive
them.
These pricing problems and other technical considera-
tions make it difficult to measure realistically the actual increases
in industrial production since 1928. It is probable, however, that
the average annual rate of growth in Soviet industrial production
throughout the First and Second Five Year Flans (1928-37) was in the
neighborhood of 15 pe.rce~. In the period of the Third Five Year
Plan (1938-~+2), several factors can be isolated which contributed to
the substantial drop in the average annual rate of growth of indus-
trial production to a level of approximately 5 percent--growth of
the industrial labor force was less rapid because of inductions iota
the armed forces; a diversion of resources into military production
from investment by its nature caused a decline in the rate of growth.
Industrial production during the war years declined
absolutely as a result of the German. invasion. The level of indus-
trial output in 19+6 was only slightly above that of 1935? The high
average rate of growth of industrial production during the Fourth
Five Year Plan (about 20 percent annually) was the result in large
part of postwar reconstruction.
Over-all measures of Soviet industrial growth
present an incomplete picture of the economy. Productivity growth
has varied widely from one industry to another. The rate of growth
of labor productivity in the basic heavy industries such as steel,
metals and machinery manufactures has been far above the average for
industry as a whole. C onsumer goods industries have lagged far
behind the average, as would be expected in light of Soviet invest-
ment policy, given the usual high degree of correlation between
labor productivity and investment growth.
S-E-C-R-E-T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
S-E-C-R-E-T
d, Problems of Inventories.
The forced rate of industrialization in the USER has
created a number of problems of disproportionate development. Indus-
trial plant development, for example, has leaned fore toward self-
contained factories independent of a network of parts suppliers in
order to minimize inventory and. transportation requirements. Where,
however, planned inventory or transportation facilities were actually
inadequate, delays and bottlenecks inevitably developed. This situa-
tion could have been altered only through larger allocations of in-
vestment to the transportation system and to the building up of more
adequate inventories of component parts and raw materials.
The Soviet planners have elected instead an. economic
course of action highly tempered with military considerations--the
building up of centrally owned stocks of reserve materials subject to
greater control over their release into production cYtannels than
would be the case if such materials were dispersed throughout the
industrial machine in the form of larger inventories at the lisp-osal
of individual plants. The extensive Soviet stockpiling program has
created a highly liquid military asset which at the same time is
available for release to industry to break major bottlenecks in
supply .
e. Problems of Agriculture..
The basic commitment of the central authority tc a
rapid rate of industrialization has considerably influenced Soviet
agricultural policy. IQot only has it limited significantly the
magnitude of imrestment allocated to the agricultural sector, but
the direction of that investment has been aJ.med toward labor-saving
forms (machinery and equipment) rather than the more labor-intensive
forms such as fertilizers.. This policy of emphasizing mechanization,
which was made possible through the collectivization program (which
greatly increased the average size of farms) freed large numbers of
rural-workers for urbanization.
After the connpletion of postwar reconstruction in
19+8, when industrial production generally had reached the prewar
level, some shift in investment policy in favor of agriculture took
place. The proportion of total investment allocated to industry
declined steadily from a 19~+E-~+8 average of 63 percent of budgetary
expenditure to about ~+5 percent in 1952. Agriculture gained a
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
substantial portion 4f this diverted budgetary expenditure in connec-
tion with large-scale plans of afforestation and irrigation. Prior
to 19+8, significant expansion of agriculture to sub marginal land
was prevented by the reluctance of the central authority to provide
the large amounts of capital in the form of irrigation shelter-belts,
transportation facilities, fertilizers,. and bybrid seed necessary to
the expansion of the sown area.
The stringent Soviet agricultural investment policy
has denied to this sector the possibility of altering the relative
proportions of grain and fodder crops to allow for increased live-
stock production. The necessity for feeding the population even at
the low level of consumption in the USSR precluded, during the pre-
war years, the- more lavish use of resources required in the produc-
tion of livestock. Further, in prewar years, the predominant share
of livestock was owned privately by the members of ko7_khozes
(collective farms.), who were limited in their holdings both by
statute and by their ability to obtain feed. The development of
livestock breeding was thus actua]_ly retarded by Soviet agricultural
policy. Thee number of livestock, which had been greatly reduced
during the early period of collectivization, did not regain the pre-
collectivization level until the last prewar years. In. the postwar
years, especially after 19+8, agricultural policy has emphasized
livestock breeding on the collective farms as opposed to private
livestock breeding by members of the kolkhozes, a policy which re-
quired the allocation of a large amount of investment in building
animal shelters and fodder storage space. Relative prices of meat
and feed grains, however, have been such as to make livestock pro-
duction unprofitable. The amalgamation of smaller collectives into
larger ones which began in 1950, is partially in response to the
needs of the livestock program, although statements of Soviet
officials explain the policy of further amalgamation of collectives
in terms of the achievement of a more rational foundation for com-
plex, all-round kolkhoz development as opposed to one-sided pro-
duction. The extent of the amalgamation which was begun in 1950 is
evidenced by the decrease in the number of kolkhozes from 252,000
in 1950 to 97.,000 by October 1952..
f. Problems of Geography.
Much of Soviet economic policy has been influenced
by the disadvantages associated with the immense size of the Soviet
land area and the unfavorable distribution of economic resources
within that area. The policy of regional self-sufficiency in the
S-E-C-R-E-T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
S-E-C-R-E-T
postwar period has undoubtedly been to some degree a response to this
problem, although the influence of strategic military considerations
is obviously great also. The high proportion of productive effort
which must be expended in the USSR to overcome space barriers has
caused the central authority to lay great stress on minimizing the
transport component of total costs. About 30 percent of total coal
production is consumed by the transportation effort. Postwar economic
policy has concentrated on the reduction of this transportation
burden by developing local sources of energy and by reducing .regional
interdependence. The maldistribution of high-quality energy re-
sources, however, has hindered the implementation of this policy.
Soviet industrialization had increased the average length of haul of
coal from x+85 :kilometers in 1913 to 695 kilometers in 19+6. The 1950
plan goal called for a reduction to 650 kilometers.
2. The Organization and Control of Economic Activity
in the USSR.
a. The Communist Party.
At the apex of the economic administration of the USSR
is the Presidium (formerly the Politburo) of the Communist Party. To
carry out its decisions,. the Presidium utilizes the machinery of the
Soviet state. On the basis of the Party Presidium:!s policy decisions,
designed to meet what are regarded as the crucial internal and ex-
ternal problems which confront the nation,. general directives are
issued to the State Planning Commission (Gosplan), a staff attached
to the Council of Ministers. Gosplan with the assistance of other
agencies translates these directives into Five Year Plans and sub-
sidiary plans which axe eventually given the. rubber stamp of approval
by the Supreme Soviet (theoretically the highest legislative body).
Virtually all economic activity in the USSR is included. in the state
plan.. The only economic activities of any importance not included
are the collective farm market, where the state does not control the
price and only indirectly controls the supply, and the disposition by
farmers of produce grown .on their individual plots and of income in
kind they recetve from. the collectivE farms.
In addition to their duties on the Party Presidium,
leadixig members of the Party hold government executive posts in the
Council of Ministers.. In recent years,. certain individuals who are
members of both the Party and Ministerial Presidiums are responsible
for several ministries and thereby control whole sectors of the
economy.
-6-
S-E-C-R-E-T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02: CIA-RDP79-01093A000600060003-4
b. The Ministries..
Implementatipn of the state econa~mie pl.as~.s involves
two basic operations: (1) allocation of resources to productions
and (2) distribution of the output to various uses. These functions
are performed by the economic ministries subordinated to the Council
of Minister's and by the various staffs attached thereto. The minis-
tries are of three basic types:- (1) the ,~.-Union ministries of
overriding national significance, which have. no counterparts in the
Republics (for example, the Defense Ministry); (2) the Union-Repub-
lic ministries (for example, the Ministry of Agriculture of the USSR)
each of which hag a counterpart in each of the sixteen constituent
republics; and (3)-the Republic Ministries (such as the- various
Ministries of I~oea1 Industry), which are concerned with the local
affairs of each republic and have no counterpart for the USSR as a
whole. Recently there has been a shift in Soviet organizational
doctrine from an emphasis on centralization in the Administration of
Heavy Industry to limited decentralization, which has been reflected
ire;` a transfer of ministries from. All-Union to Union-Republic status.
.Each ministry is headed by a council consisting of the Minister and
several deputy Ministers and is further divided into several main
administrations (for example, for sales, supply', and. production).
Historically the Soviet ministerial structure has had two outstanding
characteristics: specialization according to productive- activity
and proliferation of extra-ministerial control and verification
staffs.
With the important exception of agriculture,
virtually all production of goods and services in the-USSR is
carried on directly by state-owned enterprises. Socialized enter-
prises account for more than 98 percent of all-industrial production,
and practically all banking, transportation, and foreign trade; co-
operatives account for only an insignificant part of industrial pro-
duction. Education, medical care,. coamiunications, the press, and
social services are all controlled by the governmental apparatus.
The state distribution syste~i, accounts for practically all internal
wholesale trade and for an estimated 85 percent of all retail trade.
The free but restricted collective farm market accounts for the
remainder.
In agriculture, approximately 85 percent of produc-
tion is carried out by the kolkhozes, supposedly free associations
of the peasantry for the communal cultivation of land assigned for
S-E-C-R-E-T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
S-E-C-R-E-T
use in perpetuity. Direet production by the state is limited to the
state farm. (sovkhoz~. In addition, the state owns and operates the
Machine Tractor Stations, which control the entire agricultural
tractor park and the bulk of all other agricultural machinery which
it rents to the collective farms. Although all productive activity
on the collective farm land enters into the state plan, planning in
this sector is relatively less precise, owing td the greater diffi-
culty of control and the uncertainty of agricultural production.
The peasants' attitude of antipathy to a socialized system, in addi-
tion to resentment of specific deprivations under it, has added to
the poor record of performance. Thus in the agricultural sector the
state plans for certain commodities, notably meat and dairy products,
have been repeatedly underfulfilled.
The only remaining economic activity of any importance
which the state simply regulates but does not operate or even plan is
the collective farm market. This is an open market where she peasants
may sell their surplus produce, which is derived primarily from pri-
vate cultivation on individual plots which the collective farm members
are permitted to retain. In the collective farm market the state has
neither price nor credit controls.
Control of the distribution process involves the al-
location of land, producer goods, consumer goods, labor, and income.
In the USSR all land rights are vested in the state. Agricultural
land is granted to the collective farms far use in perpetuity without
right of ~,ransfer. Manufacturing and extractive industries, trans-
portation, and other enterprises receive use right to land in accord-
ance with state plans for these activities. The use right to urban
lands for non-industrial purppses is controlled by local government.
Most raw materials, the important intermediate pro-
ducts, investment goods, and military end items are allocated directly
by the Council of Ministers in physical unite. Prices of these items
tend to reflect cost of production and serve as the basis for re-
imbursement. Each individual producer receives an allocation based
upon centrally established input-output norms. Until its absorption
into Gosplan in March 1953, the work of making these direct alloca-
tions and of establishing the norms was carried out by the State
Committee for the Material-Technical Supply of the Econcm~Y, a staff
function of the Council of Ministers. Prices are used in some
S-E~C-R-E-T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
instances to encourage substitution of one grade of a co~nodity for
another (far example, the brown coal from the Mascow basin has. long
been s?ld at a subsidized price). In a few instances they perform
the traditional role of allocating scarce resources (for example,
high rates for railroad transportation). but in general, the- allocat-
ing function of prices of industrial goods must be supplemented by
administrative- controls.
In order to direct labor into the industries and
locations necessary to fulfill the state plans, various direct man-
power controls are employed, two important devices being the pass-
port system and the labor record book (both carried by every Soviet
worker). The former limits the worker's geographical movement;
the latter requires the approval of the local authority with every
,jab change, and the absence of this approval usually means no
housing, The labor union's role is limited. to recruitment, propa-
ganda, and administration of social security. Since 1940 the USSR
has operated a labor reserve system by which thane 14 to 17 years old
are assigned into technical training and then to plants enjoying the
highest current priorities. All these direct controls, however,
have not been strictly enforced since about 1948. Labor is one
factor for which price has remained the primary allocational mechanism.
d.. Distribution of Production.
The system for distributing consumer goods is
complex. Disregarding the collective farm market, most of the food
supply produced on the collective farm is brought into-state distribu-
tion channels through contractual deliveries, in part at fixed low
prices (in effect a tax in kind) or is produced by state-owned food
industries- such as fishing and the state farms. Other constnner goods
are produced by state enterprises or by producers' cooperatives.
Production of the cooperatives is transferred to the state at es-
tablished prices. At the retail level the price of consumer goods
includes. a high turnover tax calculated to. absorb consumer purchasing
power, given the meager supplies of consumer goods available to the
population..
In the collective farm market free- prices prevail.
The supply, however, is erratic, since it depends on what the peasant
saves out. of his income in kind from the collective farm and from
production in his private- plot. Since transportation is limited, and
since no marketing organization for such produce exists, the peasant
is limited to a narrow geographical market.
S-E-C-R-E-T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
S-E-C-R-E-T
Since virtually every Soviet citizen except the
collective farmer is on the payroll of the state, the state has
direct control of most income. Through the system of taxation and
obligatory deliveries the state has a fair degree of control over
the income of the collective farm. households. In recent years the
state loans (compulsory interest-free loans with a lottery bonus
feature) are estimated to have absorbed the equivalent of one month's
salary for a1:1 wage earners. The turnover tax also absorbs a con-
siderable portion of household income. The state collects a very
substantial tax from the profits of the state-owned enterprises. The
amortization allowances of the enterprises and the greater part of
profits after taxes (which themselves are planned are invested by
the enterprises in accordance with the state plan. Only a small
fraction of the profits accrues to the manager's fund, which may be
used for various worker benefits. Collectively these sources com-
prise the largest part of the nation's investment funds, which are
then allocated in the All-Union budget.
Foreign trade is a state monopoly, which historically
has served several purposes; (1~ to isolate the internal market from
the external, (2~ to adjust for Soviet deficiency in capital goods
and materials and technical services needed for the fulfillment of
plans, and (3) to serve as an instrument of Soviet foreign policy.
Through the Ministry of State Reserves the state
takes control of a large inventory of material and equipment in the
USSR. The functions of this inventory are to adjust for planning
errors, to compensate for failure to meet production goals, to
regulate the flow of resources, to insure against hoarding, and to
provide a strategic stockpile.
The lifeblood of this vast production and allocation
process is information and control. The central planners have a
large and comprehensive statistical reporting system. Everything
fro~- collective farm beehives to the output of steel plants is re-
ported at frequent intervals to the Central Statistical Directorate
in Moscow.
The control and verification apparatus of the state
has three basic parts; the banking system, the verification and
punitivh ministries, and special staffs for particular purposes.
S-E-C-R-E-T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
E-G R-E-T
zn ad,dttion,. the Cc~unist Party organization constitutes an inde-
pendent and parallel control and verification apparatus.
The state-owned banking system. controls all long-
and short-term credit for every sector of the economy in accordance
with floe plan. All working capital and investment accounts- and
transactions are controlled with a view to enforcing the plan. The
banking system together with the cost accounting apparatus operates
the monetary side of the plan to provide what is known in the USSR
as '"control by the ruble." The state has a similar monopoly of all
banking and credit activities of private individuals.
The- specialized verification ministries are ex-
emplified by the Ministry of State Control, which has sweeping
powers to investigate violations of procedure and general laxity
or inefficiency throughout the economic structure. Violations may
be dealt with by administrative recommendations to the central
organs or by referral to the Procurator General far prosecution,
or by both means. The Ministry of Justice and Procurator General
are concerned with the violation of economic as well as criminal
.and civil law.
The Council of Collective Farm Affairs illustrates
the special staff for a special purpose. Created after the war to
deal with broad problems of agricultural policy and to provide
continuous surveillance of the collective farms, the council was
dissolved in early 1953? The Soviet extraministerial control staff
resembles the regulatory Commission of parliamentary governments
except that the former has punitive powers.
Finally, the Party acts as an all-pervasive organ
of .control and verification, penetrating the government, the secret
police, the trade unions, and the collective farms -- in short,
every aspect of Soviet life, economic, social, or political. The
Party, of course, reports to the Presidium, which controls the
entire state apparatus.
S-E-C-R-E-T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
S-E-C-R-E-T
B. European Satellites.
In most cases the European. Satellites were brought into the
Soviet sphere rather gradually during and after World War II. Mili-
tary occupation made it passible for the USSR either to set up puppet
governments or to insure dominance by the C~nist Party in the
leftist coalitions that controlled these countries. Since 19+8 the
governments of all the present Satellites--East Germany, Poland,
Czechoslovakia, Hungary, Bulgaria, Albania, and Rumania--have been
firmly under Communist control with little organized resistance.
The Communist Parties in the Satellites are the primary in-
strument for implementing Soviet aims in this area. In addition,
various kinds of Soviet personnel operate within the Satellite coun-
tries, as inspectors to check production for conformity with Soviet
specifications and as economic or commercial missions to maintain
close liaison with the appropriate Satellite ministries. Amore
direct control is exercised through Soviet ownership of industrial
property in these countries, either complete, or jointly with the
Satellite government. In the latter case the chairman of the board
of directors has generally been a national of the Satellite country,
but the general manager has been a Soviet citizen empowered to ne-
gotiate agreements and to carry out banking, personnel,. and other
administrative transactions.
The Council for Economic Mutual Assistance (CEMA) provides
the USSR with another mechanism of control over the Satellite
economies. CEMA was created in 19+9, apparently in part to counter
the psychological effects of the Marshall Plan for Western Europe.
Officially its stated purpose is to channel Soviet aid to the
"people's democracies" of Eas-~ern Europe and to promote cooperation
among "equal partners of the Soviet Bloc." It has a Council and a
Secretariat General located in Moscow, to which each country sends
permanent delegates, who are typically high officials in the re-
spective planning commissions. It seems clear that the CEMA has
furthered the economic integration of the Bloc countries and is a
potential instrument for forming and administering economic plans
Which embrace both the USSR and the European Satellites.
In general the European Satellites have already adopted the
Soviet pattern of economic organization and techniques of administra-
tion. Long-term trade agreements have furthered their integration
into the Soviet orbit. I`here is little doubt that the plans of the
Satellites reflect the broad goals established by the USSR.
S-E-C-R-E-T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999109/02 :CIA-RDP79-01093A000600060003-4
S-E-C-R-E-T
C. Communist China.
Chinese Communist economic policy is directed toward rapid
development of industrial and military power on the Soviet model.
The difficulties which the Communists face in achieving their goals
for industrialization are considerable. China is predominantly an
agricultural country and most of its income comes either from agri-
cultural production or from processing and trading in agricultural
products. The Communists consider that the present economic organi-
zation of society represents a transition period to socialism, in
that cooperatives and private enterprises continue to function but
under the general direction of the state along with state-operated
and joint state and private enterprises. While Communist China. is
still far behind the-other countries of the Soviet Bloc in this
regard, Communist control over the economy has increased rapidly
in the few years since 1949 when the Communists took over the whole
of the China mainland.
In 1949 the Communists were confronted with an economy which
had been strained and disrupted, not only by the preceding four
years of civil war but also by the earlier Sino-Japanese war and the
loss of Manchuria. From 1945 to 1949, Manchurian output was far
below the level that prevailed during the period of Japanese occupa-
tion, as a result of the Russian removal of key items of industrial
equipment as well as destruction and disorganization during the
civil war. A period of hyper-inflation had also had its effect.
By the end of 1950 the Chinese economy was subjected to the addi-
tional strains of the Korean War and the drastic reduction in trade
with non-Communist countries. On the other hand, during the period
from 1950 to 1952 China, for the first time since the early 1930ts,
experienced the relative political stability of a single government.
The Communists also had the benefit of the large investments in
heavy industry, transportation, and electric power that the
Japanese had made in Manchuria.
Over-all output of goods and services increased by 6 percent
from 1950 to 1951, by nearly 8 percent from 1951 to 1952, and by 7
percent-from 1952 to 1953? The general increase in output was ac-
companied by a reorientation of trade from the West to the USSR. By
1952, output in nearly all sectors of the economy was restored to the
highest pre-Communist levels (which in China proper had occurred in
1936, in Manchuria in 1943). Agricultural output was still slightly
below the level attained in 1936. In iron and steel production, in
railroad transportation, and in the production of military end-items,
1952 output was well above pre-Communist levels.
S-E-C-R-E-T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 : CfA-RDP79-01093A000600060003-4
S-E-C-R E-T
The Communist government exercises an increasing degree of
direct control over the economy. According to the communique released
by the Central Statistical Bureau:
Of the 1952 total value of output of state-owned and
private industry, state-owned industry accounted fur 50
percent, ,joint state and privately owned industry for 5
percent, cooperatives for 3 percent, and private indus-
try for ~+2 percent .
In the producer goods industries, state-operated enterprises produce
80 percent of all output. All railroads, airlines, telecommunications,
and most of the shipping is owned by the state; moreover, much privatel,}r
owned industrial production is under direct government contract, Little
banking is undertaken by other than state banks and then only under
strict state supervision.
The government also exercises considerable direct control over
trade. In 1952 one-half of all trade was carried on by state trading
companies or cooperatives, while 80 percent of grain and agricultural
products was handled by state trading companies. International trade,
which is subject to strict export and import controls, is for the
most part handled by state organs.
Communist control of agriculture is exercised via a direct
control over most trade in agricultural products and also through
the political control of Commuxist cadres. Chinese Communist policy
relating to the organization of agricultural production may be
divided into three distinct stages: land reform, the present mixed
policy of encouraging various types of cooperative cultivation, and
the collectivization scheduled for the future.
The land redistribution program of 19+9-50 enabled the Commu-
nists to consolidate their political power with no serious interruption
of production. In order to maintain output, rich peasants were not
liquidated, although some of them lost part of their land along with
those landowners who were completely dispossessed. The program of
land reform, involving as it did smaller land holdings-, and bringing
about a more equal income distribution, reduced the margin between
production and consumption and thus inhibited capital accumulation.
This made the peasant more dependent on the government or other
sources for credit and assistance. About ~+0 percent of farm house-
holds have been organized for some form of ,joint economic action.
S-E -C -R-E-T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 ~: CIA-RDP79-01093A000600060003-4
S-E~-R-E-T
About 8 million mutual aid teams have been organized, which, pool
draft animals and implements for important field tasks. In 1.952
there were about 4,000 producer cooperatives, a form of association
in which land is cultivated jointly and returns aY'e apportioned
according to the. land, labor, and equipment contributed. There are
only about 23 collective farms in all China.
After a period in 1950 when prices continued to rise
sharply, a reversal of price movement occurred, and by the end of
1951 the price level for consumer goods was very little above. that
prevailing at the end of 1950. Producer goods prices continued to
rise during 1951, but by 1952 the price level had, apparently been
stabilized.
The budget has served as the apparatus for determining
the aggregate volume of saving, for there is probably very little
private investment. In 1951, expenditures for defense, for invest-
ment, and for education and propaganda were double those of 1950. In
1952 military expenditures remained at about the same level, but
investment again doubled, while expenditures for education and propa-
ganda increased by two-thirds over their 1951 level. About 73 percent
of gross national product in 1952 was devoted to consumption, and of
the remainder about half went for government expenditures for military
forces and administration and the other half for state investment.
(See page 24, below for similar data on the Soviet economy.)
The grain tax takes between 20 and 25 percent of the
total value of the main crops and serves as a fundamental source of
government revenue. The urban business taxes; which hit the private
trader as well as state enterprises, are increasingly important in
the Communist budget, contributing 36 percent of 1953 revenues. Two
campaigns in the spring of-1952 against alleged economic vices were
important steps in enforcing this tax structure and in consolidating
effective control over all economic activity. Problems in balancing
their budgets continued until the time of this campaign.
Revenue from. state enterprises also increased from
1949 to 1952? The percentage of total revenue derived from state
profits doubled between 1950 and 1952, reflecting high profits from
industry and also the dominant position of the state in rural-urban
trade. The importance of profits of state industrial enterprises
also reflects a price structure in which the prices of foodstuffs
and raw materials are much lower relative to prices of industrial
products than was true before the Sino-Japanese war.
S-E-C-R-E-T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 : CAA-RDP79-01093A000600060003-4
S-E-C-R-E-T
II. Recent Developments in the Bloc Economies.
A. USSR.
1. Political Developments.
The death of Stalin in March 1953 was immediately followed
by extensive personnel and organizational changes. The locus of power
shifted from the absolute and arbitrary dictatorship of a single man,
Stalin, to a small group of successors, none of whom has yet achieved
Stalin's full powers.
Authority now rests in a group of ten men, with a highly
uneven distribution of power among them. G.M. Malenkov occupies first
place, with leadership in both the Party and Government, followed by
N.S. Krushchev who runs everyday party affairs and dictates agricultural
policy. The others in the group handle specialized fields such as
foreign affairs, trade, military affairs, and so forth.
On Stalin's death, the new regime immediately reorganized
the government apparatus, consolidating the number of ministries from
52 to 25 and dissolving a number of extraministerial bodies in order
to concentrate broad decision-making and executive powers in a small
group .
During the winter and spring of 1953-54 new ministries
gradually emerged, some with.the same functions which they had
exercised before Stalin's death, others combined or reorganized along
lines fitting more closely with the new policies of the regime. By
April 1954 the number of ministries had been raised t-o 46, indicating
perhaps the completion of an initial phase of administrative read~ust-
ment.
The authority of the new Soviet regime remains no less
supreme than it was under Stalin. The Soviet political system
remains a one-party dictatorship, and the enforced primacy of state
interest over that of society continues to color and shape every
aspect of Soviet life.
There has, however, been a significant change in the
manner in which the new regime exercises its power. The regime has
taken steps to improve living standards, especially in rural areas,
to provide a greater measure of individual security through a more
- 16 -
S-E-C-R-E-T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
s -E -C -R -E -T
strict observance of legality and has reassured the people of a peace-
- ful international policy. In addition, the post-Stalin regime has
taken steps to broaden its base of support among important social
groups --military, managerial,. and intellectuta;l -- by granting them
wider prerogatives and by relaxing the rigid pattern of cultural con-
formity. The motivation lies less in a fear of popular discontent
than in a reinterpretation of the best interests of the regime aaad ways
of implementing its long-term goals.
2. Economic Developments.
The present regime in the USSR has not changed its
traditional policy of placing primary emphasis on the rapid develop-
ment of heavy industry and war potential. The new regime has, however,
devoted a great deal of its attention and energies to a revision of
current ecanomic plans-aimed at speeding up the production. of agri-
cultural commodities, especially foodstuffs, .and manufactured consumer
goods. Soviet leaders have stated that this goal is to be achieved
without decreasing the tempo of heavy industrial development, but
defense outlays for military end items and maintenance of the armed
farces, which had increased rapidly from 1949 to 1952, have remained
at about the same level since then. This modification of Soviet
economic programs is designed to overcome the deficiencies in the
development of certain sectors of the economy, particularly agri-
culture, and to facilitate amore balanced growth of the economy.
a. Heavy Industry.
Although new lines of emphasis in the economy are
intended to raise the output of consumer goods and agriculture, they
are not on such a scale as to affect the primary focus of Soviet
economic policy of building up the base of heavy industry. The 1954
plan for investment in heavy industry is quite adequate to maintain
present growth rates and constitutes over 50 percent of total Soviet
investment.
b. Defense Expenditures..
Defense expenditures rose rapidly from 1949 to 1952 and
then through 1953 and 1954 as planned remained about the same, at a level
considerably above that of 1948. The constant rise in expenditures
from 1949 through 1952 was-the result of a program of modernization and
reequipment of the armed forces. Expenditures leveled off in 1953
S-E-C-R-E-T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
S-E-C-R-E-T
and planned expenditures for 1954 remain at about the same level. The
Soviet rulers apparently feel that the current size of the armed forces
and the current rates of military production are adequate, so that
additional resources can now be allocated to other sectors of the
economy.
c. Agriculture.
The growth of Soviet agriculture has lagged consistently
behind the growth of Soviet industry throughout the postwar period.
Whereas industrial production reached prewar (193$) levels by 1948,
production of foodstuffs did not reach maximum prewar levels until 1952.
And while industrial production increased 230 percent from 1940 to 1952,
according to Soviet statistics, agricultural productionyincluding
technical crops, rose by only 10 percent in the same period. The new
Soviet leaders have recognized that a continued serious lag in agricul-
tural growth, accentuated in.the last three years, could ultimately
threaten not only the food requirements of a rapidly growing urban
population but also the raw material requirements of an expanding
industrial economy and the agricultural export requirements of Soviet
foreign trade.
In response to this situation the post-Stalin regime
has embarked on a program to strEngthen what has now been admitted to
be a weak link in the Soviet economy. The main lines of this program.
were indicated in the measures announced in the fall-and winter of
1953-54, which call for a sharp increase during the next few years
in the production of foodstuffs and agricultural raw materials. The
new program modifies some of the more pronounced shortcomings of
previous agricultural policies, while leaving basically intact the
existing structure of the collective farm system of agriculture.
Essentially the new program represents a shift in resources and
attention to a heretofore relatively neglected area of Soviet economic
development.
Responsibility for the lag in agricultural output has
rested on (1) the lack of experienced trained personnel; (2) the per-
petually antagonistic attitude of the peasants to the collective system;
(3) the lack of building materials, equipment and fertilizer; (4) rigid
systems of taxation, compulsory state deliveries, and bonus and wage
payments which largely negated incentives to produce; and (5) a general
lack of attention and guidance by the state and party.
- 18 -
S-E-C-R-E-T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
S E-C-R-E-T
The present regime is trying to overcome these
deficiencies by (1) channeling greater investment to agriculture in
the farm of buildings, equipment, and fertilizer; (2) increasing
incentives to produce in both the communal and private sectors by
raising the prices paid for obligat.ary deliveries and purchases of
same products by the state and by lowering the amounts of obligatory
deliver-.ie~s; (3) providing the farms with a larger supply of qualified
technicians; ( ) increasing incentives for private production by
liberalizing the agricultural taxation system and facilitating
.marketing of products; (5) channeling a larger supply of consumer
goods and materials to-rural markets; and (6) bringing under culti-
vation-vast areas of semi-arid land in the eastern USSR and Central
Asia.
Through these and other measures the new regime is
trying to achieve a sharp upsurge in agriculture in the next two or
three years. The success of this effort will determine to a large
extent the success of the program to increase consumer goods, which
depends heavily on agricultural raw materials.
Since the wax, investment in consumer goods industries
has been given lowest priority, with requirements for defense and for
the reconstruction and rapid development of heavy industry providing
the chief determinants of resource allocations. In 1953 the Soviet
leaders promised to increase substantially the volume of consumer
goods available to the people. The commodities emphasized in the
official pronouncements were foodstuffs, textiles, and consumer
durables. Subsequently, it appeared that only moderate increases
over original plan levels were scheduled for basic foodstuffs, textiles,
and footwear, the production of which is limited by the supply of
agricultural raw materials. Mueh larger increases are planned for
consumer durables, which have traditionally been produced in small
quantities. Essentially the implementation of this program requires
the reversal of the persistent trend of recent years, which showed
the consumption sector of the economy slipping well below plan levels
as a result of priority in the allocation of resources to heavy
industry and armaments production.
-lg-
S-E-C-R-E-T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
S-E-C-R-E-T
The regime has initiated a series of measures to
achieve revised consumption goals. Planned investment in the
light and food industries and the trade network has been doubled
in 1954 over 1953? Heavy industries which have customarily pro-
duced consumer durables have been directed to speed up their
production of these commodities. Higher priorities have been
assigned to consumer goods output in the allocation of resources
and services, including transportation. Also the regime is
apparently attempting to make more consumer goods available until
new productian capacity can be put into operation, by large-scale
releases of foodstuffs from stockpiles in 1953 and by increased
imports of consumer goods from outside the Bloc.
e. Implementation of the Program.
In order to provide the necessary resources of man-
power and material to implement the new agricultural and consumer
goods program, a series of shifts in planning have occurred, by far
the most significant of which was the leveling off of defense
spending. In addition, in 1953 a number of the grandiose Stalin
projects, including the Main Turkmen Canal and the afforestation
program, were abandoned as well as other investment projects which
were not expected to produce initial returns for several years.
In order to cut down overhead costs, a number of organizational
and personnel changes have occurred at all levels. Measures are
being taken to lower production costs and increase productivity by
lowering transport charges, shifting material priorities, decreasing
staffs, reweighing wage and bonus payments, and so forth. While
there is considerable speculation as to whether these measures are
adequate to provide the resources for the agricultural and consumer
goods program in the light of 'the large increases planned for heavy
industry, there is no doubt that the Soviet leadership is genuinely
determined to carry out its new policy, which has been popularly
received by a people whose living standards are little better today
than they were before World War II or even before the Revolution.
B. European Satellites.
The economic plans Df all the European Satellites were
revised at the same time as those in the USSR. The extent of re-
visions varied from country to country, but in most instances they
represent some reallocation of resources from industry to agriculture,
from heavy industry to light industry for the production of consumer
goods, anc{ a decrease in defense expenditures.
S-E-C-R-E-T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/0'2 :CIA-RDP79-01093A000600060003-4
S -E -C -R -E -T
C . Communist China.
The first Chinese version of a five year plan appeared in
1953. No complete set of targets has been announced in connection
with it, but its general goal seems to be a doubling of industrial
output by 1957. In 1953, industrial production (excluding handicraft
output) was raised by 19 percent over the 1952 level. Efforts under
the plan are concentrated on 141 projects for which the Russians agreed
to give economic and technical assistance, and of which 91 were new
and 50 were under way.
There is no evidence in the Chinese Communist Five Year Plan
of the greater emphasis placed on output of consumer goods which
characterizes policy in the rest of the Bloc. In official Chinese
Communist theory, the output of consumer goods will increase along
with the over-all development of the economy, but the needs of
industrialization are to be met first. If anything, Chinese Com-
munist propaganda stresses the need for greater austerity in the
coming years rather than the reverse.
The existence of planning difficulties appeared with the
reduction of 1953 targets for capital construction in the middle of
that year, largely because of the inability to acquire the equipment
and technical assistance necessary to raise investment by 40 percent
over 1952.
Not only did the 1953 capital construction program fall short
of the goal set for it, but agricultural output also failed to pro-
gress as planned, remaining at about the 1952 level. Shortages of
vegetable oils developed in the cities as a result of the quantities
that were exported. In 1953 the Communists resorted to a program of
monopoly purchase of all grain to help solve the problem of supplying
the growing urban labor force and to gain complete control over the
supply of food.
Plans for agriculture call for a sharp increase in the number
of producer cooperatives from 4,000 to 14,000 in 1953 and 800,000 by
1957. The private commercial class is already being pressed out of
existence by state ownership and heavy taxation. Private industry is
already completely dependent upon the state for all important decisions,
and the primary emphasis- at present is to turn private enterprises into
public-private jointly operated enterprises as well as to organize
handicraft shops into producer cooperatives.
S-E-C-R-E-T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
S-E-C-R-E-T
III. National Accounts..
A. Gross National Product.*
The total output of goods and services (gross national product)
of the combined Soviet Bloc countries in 1953, measured in 1951
dollars,. is estimated at $212 billion. By way of comparison, at the
same time the gross national product of the US measured in the same
dollars was $353 billion, or larger than that of the entire Bloc by
about two-thirds, while the combined output of the US and European
NATO powers -- $513 billion -- was nearly two and one-half times
grater than that of the Soviet Bloc.
The rates at which total production has been increasing in
recent years have been higher in the Bloc than in the West, however,
as shown in Table 1,~~ with the result that the difference in the
level of output will become smaller. By 1953~B1oc output was 37 per-
cent above its prewar (1938) level. This ratio, however, averages the
much higher level of recovery of the USSR (70 percent above prewar),
one of no over-all change in output in the European Satellites (by 1953
they had just regained the prewar level), and a very small increase in
the .total output of China. Over the same period (1937 to 1953), total
output in .the US, where war-destroyed productive capacity did not have
to be replaced, grew at an average annual rate of 6.3 percent to a
level more than twice as high as the prewar level. (The implicit com-
parison between rates of growth for the US and USSR is somewhat dis-
torted in favor of the US, however. For 1937, while the most
prosperous year of the late 1930's, still was a year of widespread
unemployment. Since 14 percent of the civilian labor force was
unemployed in 1937, as compared with approximately full employment in
1953, the US average annual growth rate is overstated, perhaps by about
1 percent . )
During the recent postwar period, on the other hand, the rates
of growth of both the Bloc as a whole and the USSR in particular have
been quite spectacular. Between 1948 and 1952 the total output of the
Bloc increased on the average at 8.4 percent per year, that of the USSR
at 9.6 percent annually. The growth of Bloc production is impressive
even in view of the fact that it was partly based on non-recurring gains
~ Gross national product is the total value of all goods and services
produced in an economy during a given period of time.
*~ Table 1 follows on p. 23
S -E -C -R -E -T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
S -E -C -R -E -T
Table 1
Gross National Product of the Soviet Bloc
and NATO Powers by Principal .Areas
1938-53
Billion 1951 US Dollars
1938
1948
1952
1953
Soviet Bloc
155
147
202
212
USSR
74
81
llg
124
European Satellites
45
33
43
45
China ~
36 ~
33 J
40
43
NATO Powers ~
290
423
497
513
us
165
283
340
353
Other ~
125
140
157
160
a. Total output valued in US prices.
b. 1936 estimate.
c. 1948 estimate.
d. Excluding Turkey and Canada.
for example, rehabilitation of war-damaged facilities, accelerated
borrowing of Western technology, and conversion of plant and equip-
ment from limited military production to full peacetime production.
During the same period the total output of the US and NATO powers
combined grew at the much lower average rate of 4.1 percent annually,
while that of the US was increasing at 5 percent.
Since 1848 the relative difference between the volumes of
production turned out by the Soviet Bloc and the West has steadily
narrowed. Bloc production in 1848 was only about one-third as large
as that of the West, whereas by 1953 Bloc output had risen to 41
percent. The improvement in the relative position of the Bloc
economies is likely to continue, at least through 1956, while at the
same time the absolute differential favoring the West will widen, but
at a declining rate.
S -E -C -R -E -T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
S -E -C -R -E -T
The rapid rate of growth of Bloc economies, and especially
the Soviet economy, which prevailed until 1952, declined markedly
in 1953, from an annual rate of over 10 percent in the USSR for the
years 1950-52, to one of 3.7 percent, as a result of the shift in
Soviet economic policy described above (in Section II). The rate
of growth is expected to rise again, however, as the new policy is
put into effect and to level off in the USSR at about 6.0-6.5 per-
cent annually for the period through 1956. Even. this lower rate
is substantially higher than the long-run average rate of 3 to ~+
percent expected in the US.
B. Gross National Product by Use.
Comparisons of gross national product and long-run growth
rates, however, are indicative only in a very broad sense of the
aggregate productive capacities of the economies concerned. The
internal composition of production is more instructive in revealing
the industrial areas of strength and growth and showing how the
output of the society is distributed among various component groups.
Table 2 shows the effects of the emphasis placed in the USSR
on investment and defense, especially the latter in the postwar
period and indicates how the expense of each fell on consumption.
Division of Gross National Product by End Use
USSR, Selected Years, 1938-53; US, 1953
ussR a/
us
Use
1938
1948
1952
1953
1953
Consumption
71.5
65.7
58.9
57.8
66.7
Administration
2.5
3.0
2.5
2.5
2.6
Defense
8.3
9.1
13.0
12.9
13.6
Investment
17.7
22.2
25.6
26.8
17.7
Total 100.0 100.0 100.0 100.0 100.0
a. The Soviet data assume that one.-half of the turnover tax
is a non-cost element.
S -E -C -R -E -T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 `. CIA-RDP79-01093A000600060003-4
S -E -C -R -E -T
Investment and defense together accounted for 39 percent of total
production in 1952 compared with 31 percent in 1948. The slower
tempo of the rearmament program during 1952 and 1953 shows up in the
increased share of resources devoted to investment; an increase in
the relative position of consumption is expected for 195+?
From the amount, in dollars, of gross national product that
flows to consumption uses, it is possible to derive a very rough
notion of relative living standards in the two countries. Dividing
the dollar figure by the total population yields a measure of $319
(in 1951 'US prices) as the average volume of goods consumed per
person in the USSR, as compared with $2,192 in the US. The com-
parison is extremely rough, for differences in the quality of
consumer goods, variety, ease of acquisition, and other such con-
siderations, all of which favor the US, axe not reflected.
The stress on consumer goods and a higher standard of living
contained in the recent policy shift is likely to bring only small
changes in the relative importance of the various uses of total out-
put. It is anticipated that by mid-1956 consumption will account
for about 59 percent of total output and defense 11 percent, compared
with 58 percent and 13 percent~respectively~in 1953?
C. Gross National Product by Industry of Origin.
-The relative importance of various broad categories of
.industry in the USSR, and the changing industrial structure over
time axe indicated in Table 3.~ .The emphasis placed by the
Soviet planners on industry (that is, production of finished prod.uoer
goods, consumer goods, and military end items) and construction is
reflected in the increasing relative importance of these two groups.
The relative importance of industry in the USSR today is little
different from that of .the US. The greater relative importance of
transportation in the USSR is a reflection of the larger land mass
over which the interrelationships among various activities of the
economy must be integrated by means of a transport network. Both
the larger relative importance of agriculture and the smaller relative
importance of trade and service in the USSR are sometimes cited as
a reflection of the lower stage of economic development of the USSR as
compared with the US. As the per capita volume of output of a maxket
economy increases, the relative importance of primary and secondary
~- Table 3 follows on p. 26. '
S -E -C -R -E -T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
S-E-C-R-E-T
Table 3
Gross National Product by Industry of Origin
USSR, Selected Years, 1938-53; US, 1953
Pe
rcent
USSR
1938
19+8
1952
1
US
953
1953
Industry
25.3
-28.2
35.9
x+2.3
39.9
Agriculture
X6.0
36.1
30.9
19.3
5?~+
C onstruction
3.5
~-.5
5.2
6.2
4.9
Transportation
5.5
6.7
7.6
8.8
6.0
Communications
0.5
0.9
O.g
1.1
1.3
Trade
~- . 5
6.5
5.2
6.0
16.5
Services
1~-.4
17.1
1~+.3
16.3
25.9
Total
99.3
100.0
loo.o
loo.0
99
9
.
industries (that is~agriculture and industry) typically declines,
whereas that of the tertiary industries (public utilities and the
service industries) increases. Whether the relatively iuip ortant role
of the tertiary industries in an advanced market economy ever will
characterize the planned Soviet economy, it is difficult to say. In
any event, stages of economic development in two economies controlled
by such diverse motivating forces should probably not be compared.
IV. Economic and Industrial Base.
A glance at the resources within the borders of the Soviet Bloc is
enough to establish the fact that the USSR has at its disposal a for-
midable productive potential. The Bloc comprises the "heartland" of
the Eurasian land mass, with a population of over 800 million, as com-
pared to 160 million in the US and over 500 million in all of North
America and Western Europe. The Bloc is entirely self-sufficient
in food. Every governmental resource is being devoted to the expansion
of its heavy industry; moreover, the Bloc possesses nearly all the raw
materials required to keep that industry alive. The Satellite
economies have been ruthlessly integrated with that of the USSR in an
effort to compensate for all weaknesses in the Soviet industrial machine.
- 26 -
S -E -C -R -E -T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
S -E -C -R -E -T
The production of basic economic goods and services in the Soviet
Bloc, however, falls considerably short of the levels achieved in the
US and its Western Allies (that is, the other NATO powers together
with Spain and Western Germany . In grain, the Soviet Bloc produces
about the same output as the Western Allies and exceeds the US output.
Meat production in the US is four times that of the USSR, while the
entire Soviet Bloc produces little more meat than the Western Allies.
The US and Western Allies outstrip the USSR at least ~+ to l in energy
production. The Soviet Bloc is far behind the US and Western Allies
in the production of metals, and munitions expenditures are more than
twice those of the USSR. In making such comparisons, however,
differences in patterns of production and habits of consumption in
the two countries must be borne in mind. In considering munitions
expenditures, for example, the US .reveals a strong tendency to sub-
stitute machines for men in its armed forces; close tolerance s
throughout its materiel are required; and the ratio of materiel to
numbers in the armed forces is large. In the USSR close tolerances
are required only when absolutely necessary for efficiency, and
materiel expenditure per capita is much lower than in the US.
A. Population and Manpower.
Collectively the Soviet Bloc today includes two of the three
most populous nations in the world, the USSR and Communist China.. A
description follows of the salient features of the population and
labor force of-the three broad geographical areas, the USSR, the
European ?~atellites, and Communist China.
In mid-1953 the USSR, with 212 million people, ranked
third among the countries of the world, its population being 30 per-
cent larger than that of the US. Since 1939 the population of the
USSR has expanded both as the result of annexations of new territories
and of natural population increases. During the war, losses of man-
- power in battle were balanced by gains from new territories acquired.
Since the war, population gains have resulted from natural increase.
.Apart from the effects of annexations and war, the Soviet
population is increasing at a relatively high natural rate, altYiough
one which is only slightly higher than that of the US at present. It
is estimated that ~,n the decade after 19+7 the population will increase
by an average of about 1.7 percent a year. While birth and death
- 27 -
S -E -C -R -E -T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
S -E ~ -R -E -T.
rates have both declined, the excess of births over deaths has re-
mained large and the population relatively young. While in 1939,
36 percent of the population was under 15 years of age, in 1953 the
proportion had declined only to 34 percent.
The Soviet government has tried to sustain a high birth
rate and has succeeded in reducing the death rate. Medical care is
free and approximately as adequate as that in the US, ,judging by the
ratio of doctors to the total population. Abortion was proscribed
in 1935, and in the following year the government issued a com-
prehensive pro-natalist decree. This measure (a) strengthened the
law prohibiting abortions, (b) provided annual allowances for
mothers of large families, (c) made it more difficult to secure
divorces, and (d) provided for expansion of nurseries and kinder-
gartens.
Even before World War II the Soviet population was
characterized by a surplus of women. This imbalance was intensified
during the war years and is expected to prevail for scene time to
came. The drawing of women into the labor force, especially into
skilled occupations and professions, has long been a policy of the
USSR, with the result that today over one-half of the female popu-
lation between the ages of 15 and 65 years is employed outside the
home. By law, women receive equal pay for equal work.
In 1939 about 57 percent of Soviet citizens were between
the ages of 15 and 60 years; the relative importance of this group
has increased to nearly 59 percent in 1953 and will probably con-
tinue to grow for several years more. This age bracket supplies
about 90 percent of the civilian labor force and armed services.
Almost 98 percent of the men and 60 to 70 percent of the women in
this group are in the total labor force .
Estimates of the size of the lobar force in the USSR
vary depending on how inclusive they are. The official Soviet data
usually exclude workers in private employment, at forced labor, and
in the armed forces or on collective farms, but include all others.
The importance of the supply of forced labor .(political prisoners
and unrepatriated prisoners of war) is indicated by estimates of its
size, which range from 3.5 to 12 million people. Excluding the
.armed forces (which are estimated at 4.4 million in 1953) and forced
labor, the size of the civilian labor force in mid-1953 was estimated
at 94 million people, of which agricultural employment accounted for
more than half (52 million).
S -E -C -R -E -T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02': CIA-RDP79-01093A000600060003-4
S -E -C -R -E -T
The decline in the importance of agricultural employment
in the total labor force reflects the- stress on industrialization of
past Soviet policy. In the immediate future, however, it appears
likely that this trend will be reversed and the number cif agricultural
workers will increase as part of the recently announced policy emphasis
on increased quantities of consumer goods. It is interesting to note.
that the new goals for food output necessitate the transfer of a
large body of technical personnel from industrial to agricultural
communities. During the earlier period of rapid industrialization
the agricultural sector lost a large fraction of its youth to
industrial centers and consequently now suffers a shortage of essential
skilled workers.
Despite the larger total population, the nonagricultural
labor force of the USSR is somewhat smaller than that of the US
f42 as compared with 48 million in 1953), but the relative importance
of employment in manufacturing, mining, and. construction is approxi-
mately the same in each (about 40 percent). On the other hand,
the greater geographic distances involved in the operation of the
Soviet economy and the tremendous drain they impose on Soviet pro-
ductive resources are revealed in the fact that 12 percent of the
Soviet nonagricultural labor force is employed in the transportation
industries alone, as compared with 9 percent of the US total which is
employed in both transportation and public utilities.
In nonagricultural employment the declining impartance of
unskilled workers mirrors the effects of expanded technical educational
programs. The compulsory labor reserve training program for youth
was sharply curtailed in recent years as the country broadened the
educational base of the entire population. Plans for 195+, however,.
indicate an expansion of the labor reserve training program, with
emphasis on agricultural training.
Summary data on population and employment in the USSR
are given in Table ~+.~
Table follows on p. 30.
- 2g -
S-E-C-R-E-T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
S -E -C -R -E -T
Table 4
Population and Employment in the USSR a~
as of 1 January 1939, 1g47, 1950 and 1953
ulation
Po
~9
19+7
1950
1953
p
Total b~
170
lgl
200
210
Males
82
88
g2
g8
Females
89
103
108
112
Civilian Employment c~
Total b/
76
84
87
go d/
Agricultural Labor
~+6
52
50
~+8
Nonagricultural Labor b~
30
32
37
42
Skilled
6
6
9
Unskilled
24
24
28
Engineering, Technical,
and Professional
3
5
Industry, Mining
and Construction ~~
12
18
a. According to current boundaries.
b. Columns-not additive, because of rounding.
c. Excluding military personnel.
d. As compared with g4 million in mid-1953. This apparently unreasonably
large increase results from the inclusion of labor that previously had
been excluded as forced.
e. Includes skilled, unskilled, and technical and professional labor.
S-E-C-R-E-T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/0'2 :CIA-RDP79-01093A000600060003-4
S-E-C-R-E-T
2. European Satellites.
The population of the European Satellites is estimated
at less than half (43 percent) that of the USSR, or about 92 million
people. For the decade from 1947 through 1956 the population increase
is expected to be about 7.3 percent or less than half of the expected
rate of iBerease for the USSR over the same period. On the basis of
these estimates, the Satellites as a group will attain the prewar
population level of about 95 million by 1956. Rates of increase for
the individual Satellites range from 0 in the Soviet Zone of Germany
to 22 per thousand in Albania.
The armed forces of the Satellites are estimated roughly
to have numbered 2 million in 1953 as compared with 4.4 million on
military duty in the USSR.
The civilian labor force of 43 million in the Satellites
as shown in Table 5,~' is nearly evenly distributed between agri-
cultural and nonagricultural employment, the preponderance of
industrial workers in Czechoslovakia, East Germany and Hungary
balancing the preponderance of agrarian employment in the others.
Agriculture has been losing workers to nonagricultural pursuits since
1947; whether or not this trend continues will depend on the implemen-
tation of the new policy aiming at expanded output of consumer goods
and food. Amore extensive employment of women is also anticipated.
Whereas 66 percent of the nonagricultural labor force of the USSR is
composed of unskilled labor, the latter accounts for over 70 percent
of the total in the Satellites.
On 1 January 1953 there were. 4.2 million skilled workers.
in the Satellites, which is to be compered with 8.7 million in the
USSR. There were 2.1 million in the engineering, professional, and
technical group in the Satellites and 5.4 million in the USSR. 2'ne
European Satellites are adopting the system of vocational training
which has been evolved in the USSR. Under pressure for more highly
trained personnel, they axe also accelerating personnel training by
shortening the time before graduation. The training system is
expected to double the supply of skilled labor and of engineering,
professional, and technical personnel between 1947 and 1957?
~ Table 5 follows on p. 32.
- 31 -
S -E -C -R-E -T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
S -E -C -R -E -T
Table 5
Population and Employment in the European Satellites
1 January 1947 and 1953
Industry, mining,
and construction
9 13
3? C ommunist China.
Until 1953 there had never been a census in China. A
preliminary announcement of the first census indicates that China's
population was about 580 million in 1953, 20 percent higher than a
previous official estimate of 487 million in 1950.
For the next decade, population growth will probably
depend on the degree to which the high death rate can be controaled,
for it seems likely that the birth rate will remain high and
relatively stable. If the country succeeds in its program for
economic development and improved public health services, the growth
rate might reach as high as 1.5 percent per year; with a slower rate
of development, however, the population growth might not exceed 1
percent per year.
S -E -C -R -E -T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
S-E-C-R-E-T
The age distribution of the population is determined by
the birth and death rates. China with its high birth and death rates
has a younger population than the major industrial countries of the
world. Specific information on this subject is, unfortunately, not
available. One estimate, resulting from surveys, indicates that
37 percent of the population is under 15 years old, 60 percent is
between 15 and 65 years, and only 3 percent is over 65 years. The sex
ratio has been estimated at 110-males to 100 females. China possesses
more than adequate military manpower.
Although the majority of the Chinese people live in rural
areas, the total urban population is among the largest in the world.
In China, about 87 million people live in cities of more than 10,000
population. In the US in 1950, about 80 million people lived in
cities of equivalent size.
Of a total labor-force estimated at 278 million to 329
million workers in. 1953, about 85 percent (233 million to 277 mil-
lion were rural workers. Most of these, or about 75 percent (210
million to 250 million) of the total labor force, were farm workers.
Farm labor is difficult to classify in China, since much of the
labor is seasonal or part-time. For instance, most of the 18
million fishermen on inland lakes, rivers, and ponds probably are
part-time farmers. From 20 to 25 percent of the labor force is
nonagricultural, only a small part of which (possibly 3 million
to ~+ million is employed in modern-type industry. In addition
to this, there are probably about 20 million workers in the handi-
craft trades.
Available material indicates that skilled labor is as
scarce as common labor is abundant. In a few categories of top level
engineers and scientists there is a limited supply of foreign-trained
Chinese, but in the fields needed for the development of heavy
industries the supply is wholly inadequate for the proposed expansion.
To remedy this lack of trained personnel, the Chinese axe adopting
the system of adult schools, training on the job, and vocational
high schools common to the Soviet Bloc. Higher education also has been
expanded, with a shift from liberal arts to technical training in
colleges. The demands upon trained manpower, however, are expected to
be so great as to provide a serious deterrent to the successful com-
pletion of the plans.
S -E -C -R -E -T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
S -E -C -R -E -T
B. Agriculture.
Agriculture presents a unique and complex picture in the
Soviet Bloc countries. Of the approximately 800 million people
living within the Bloc, about 70 percent are dependent on agri-
culture for their support. With its variety of climate and soil,
the Bloc can grow every crop known in the temperate and subtropical
zones. Farms range from the fairly modern state and collective
farms of the USSR, often encompassing thousands of acres, to the tiny,
hand-cultivated plots of China. At the present time, production is
sufficient to permit a subsistence diet, some exports, and at least
limited state reserves of food. The situation in agriculture is
discussed below for each of the major areas.
The USSR occupies one-sixth of the total land surface of
the world, but little more than 10 percent of this area can be
classed as arable, and of this arable land only about 65 percent is
cultivated. Because of unfavorable climate, much of the land is un-
suitable for agriculture, and most of the arable land is found in
the "fertile triangle" which extends from Leningrad to Odessa to Lake
Baikal. Sown acreage increased from 127 million hectares (1 hectare
equals 2.x+7 acres) in 1930 (1930 boundaries) to about 157 million
hectares in 1953 (1953 boundaries}. This expansion has taken place
both through territorial acquisitions and through the extension of
the cultivated area into regions of erratic production. There is
hardly a crop of the temperate and subtropical zones that is not
grown in the USSR. Grains dominate the crop pattern. Potatoes,
sugar beets, cotton, flax, feed crops, and sunflower seed are the
most important non-grain crops.
Agriculture, especially food production, has been and will
continue to be an area of weakness in the Soviet economy. Anew
agricultural program, designed in part to bolster food production,
aims to bring 13 million hectares of new land into cultivation and
envisages a considerable increase in the investment program for agri-
culture. It apparently is recognized by the new leaders that the
continued failure of food output to exceed population growth or to
keep pace with the rest of the economy constitutes a future threat to
the economic welfare of the Soviet people and to the strategic position
of the Soviet state .
-3~+-
S-E-C-R-E-T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
S -E -C -R -E -T
Soviet agricultural policy has been the main obstacle
to increasing production. Since the Bolshevik Revolution a vicious
struggle leas been waged between the Communists and the peasantry.
Following the disastrous attempts of the Communists to collectivize
the peasantry forcibly in the early 1920's, agriculture enjoyed a
period of relative independence and prosperity. But in 1928 the USSR
undertook -to eliminate the strange paradox that "capitalism existed
in the village alongside socialism in-the city," with a vigorous
renewal. of the collectivization program. By 1940, 20 million farm
households, constituting 97 percent of the peasant population, had
been amalgamated into 236,000 collective farms. Further axaa,lgation
reduced the number of collective farms to 94,000 by 1953?
At present, collective farms account for over 90 percent
of total Soviet agricultural production, state farms accounting for
most of the remainder. State farms are operated by the state, with
the farmers being paid fixed wages. C ollective farms represent a
pooling of the land and labor-resources of many small peasant farms.
Theoretically, a collective is a democratic institution, governed by
charter, 'but the obligations required of the farmers are such that
the collective has became merely a tool whereby the state not only
controls the peasantry but also assures itself of the major portion
of agricultural production. each worker is paid according to the
amount and type of work performed, measured in "labor days," the
value of which depends upon the productivity and income of the
indi~ridual collective. Each household has a private garden plot and
the right to maintain a specified number of livestock. Because of
its capitalistic nature, the garden plot and privately owned live-
stock have been a primary source of concern on the part of the
regime. The eventual liquidation of rural capitalism, with the
resultant complete dependence of the peasant upon the income of the
collective farm, is a goal of the Communist Party of the USSR.
As a source of savings, Soviet agriculture during the past
two decades has been forced to carry a considerable portion of the
burden of the industrialization of the country. Extensive mechani-
zation, use of mineral fertilizers, irrigation, and improved agro-
techniques have resulted in only modest increases in over-all
agricultural production during the last 15 years. The output of
certain industrial crops has increased, however, reflecting the
special emphasis the government .has placed on them. Sugar production
has decreased from 2.48 million metric tons in 1938 to 2.3 million
metric tons in 1952, and cotton has increased from 731,691 metric tons
S -E -C -R -E -T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
S-E-C -R-E-T
in 1938 to 874,000 metric tons (ginned basis) during the same period.
Grain production increased slightly from 88.2 million metric tons
in 1938 to 91.2 million tons in 1952, then declined to 80.7 in 1953.
Production of potatoes, vegetables, and livestock, however, lagged
seriously and has not kept. pace with the growth of the population.
As a result of great losses suffered during the collectivization
period of the early 1930's and as a result of World War II, production
in sane sectors such as livestock (chiefly cows) is even less than it
was in 1g28.
Mechanization released millions of workers for other
industries. Machine Tractor Stations (MTS's) were set up to service
the needs of the collective farms. Tractors in the MTS's increased
from 66,000 15-horsepower units in 1930 (1930 boundaries) to 1 million
15-horsepower units in 1952 (1952 boundaries). Production of other
agricultural machinery also increased during this period. The large
increases in agricultural output the Russians had envisioned through
mechanization, however, did not materialize, because of the inefficient
use of the machines. In 1950 the output of work per 15-horsepower
unit was only about the same as in 1937, despite marked technological
improvements. Use of chemical fertilizers has increased from 228,000
metric tons in 1828 (1828 boundaries) to about 4 million metric tons
in 1952 (1952 boundaries).
Although during the 1952-53 consumption year the available
food supply in the USSR was sufficient to provide about 2,800 calories
daily per capita, over 65 percent of the food base is represented by
grains. There is a paucity of meat and dairy products, which com-
prise less than 5 percent of the diet.
During the past few months, significant shifts in
agricultural policy in the USSR have occurred. The struggle for the
immediate liquidation of the private garden plats has been relaxed
temporarily, and production of livestock and vegetables is being
encouraged by a series of measures, including the following:
a. A greater emphasis on material incentives: procure-
ment prices for livestock products and vegetables have been increased,
takes on private plots have been lowered considerably and slight tax
exemptions granted to encourage the farmers to obtain livestock.
b. Investment in machinery necessary for the cultivation
of vegetables has been increased.
-36-
S-E-C-R-E-T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 ": CIA-RDP79-01093A000600060003-4
S -E -C -R -E -T
c. Agricultural loans to provide more buildings and
barns on the collective farms.
d. Individual responsibility,. especially on the part
of tractor drivers, designed to increase machine productivity.
e. Improvement in agro-techniques -- more chemical
fertilizers, improved seed stock, and more agricultural and live-
stock specialists.
In general, it can be said that the USSR produces
sufficient food-and industrial crops for its own use, given a low
standard of living. Despite the noted insufficiencies,~the agri-
cultural economy has risen from a half-primitive to a fairly
modern status since 1928. Sown acreage has just about reached a
peak, and the USSR proposes to achieve subsequent increases in
production by increasing yields through a greater use of chemical
fertilizers, by greater mechanization, and by irrigation and
improved agro-techniques. With appropriate priorities the USSR
may be able within the next 5 or 6 years to achieve partially its
goals of providing more and varied food to the populace and
sufficient raw materials to the industrial plant.
2. European Satellites.
The transformation of farming in Eastern Europe from
small independently owned plots to large socialist enterprises in
the form of collectives and state farms has been a primary aim of
the Communist governments established siy~ce World War II. The
rate and extent of socialized farming, however, varies considerably
among the Satellites. The percent of agricultural land farmed by
tY~e socialist sector ranges from approximately 18 percent in East
Germany to about 60 percent in Bulgaria.
Agriculture has presented the Communist governments
with the most thorny problems in their attempt to nationalize the
production facilities of the Satellite economies. In implementing
their ambitious industrialization programs, the Satellites are
dependent upon agriculture to supply needed manpower and a large
share of the exports required to finance imports of machinery and
raw materials. The methods used by governments to release agri-
cultural manpower to industry and obtain a sizable share of the
indigenous production have been compulsory delivery quotas and
- 37 -
S-E-C-R-E-T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
S -E -C -R -E -T
collectivization. This policy has had the over-all effect of
depressing agricultural production despite the provision for increased
output in the plan.
Notwithstanding Communist concern for increased production,
agricultural output has not yet attained prewar levels. Lack of
natural and chemical fertilizers, shifts of population, and the general
apathy of the peasantry brought on by collectivization contribute to
low productivity. Grains dominate the crop pattern, although con-
siderable emphasis is being given to industrial crops, mainly sugar
beets.
As a direct result of government policies and achrerse
weather conditions, livestock numbers in the Satellites, like crop
production, have not reached prewar levels. Numbers of the primary
meat-producing animals, cattle and swine, have suffered especially.
Slaughter weights are also considerably below the prewar level. As a
result a serious shortage exists for the industrial population in
meat, fats; and dairy products. The primary emphasis of the recently
adopted "new course" as it pertains to agriculture is placed on
improving animal husbandry.
The mechanization of agriculture has been emphasized in
the Satellites, but with slight success. Numbers of tractors and
complementary equipment have increased, blot not to the extent. called
for in the plans. To foster and support collectivization, the
mechanical draft power base must be increased. This fact was re-
vealed in the self-criticism contained in the recent announcements
by most of the Satellites of the "new course" for agriculture.
Increased emphasis will now be given to supplying agriculture with
more machinery to relieve the labor and draft paver shortage during
the next 2 to 3 years.
The immediate outlook for an increase in agricultural
production and food supply in the Satellites is not very favorable,
despite the fact that investments and incentive goods are to be
increased and compulsory delivery quotas reduced. Cereals will con-
? tinue to constitute the major share of the diet of the population;
and meat, fats, and oils will remain in short supply.
- 38 -
S-E-C-R-E-T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/0~~~1~4 ~t~P79-01093A000600060003-4
3. C ommunist China.
Chinese agriculture is characterized by too many people
on too little land, under-capitalization, intensive cultivation,
and primitive technology. At least 80 percent of the 580 million
people in China live on the land. The arable land of China probably
does not exceed 357 million acres, or 16.7 percent of the total Viand
area, and the cultivated area is estimated at 272 million acres.
Thus there is Somewhat less than 0.5 acre of cultivated land per
person.. To increase yields, much of the cultivated land is irrigated,..
Cereal grains, potatoes, and other foods derived from plants con-
stitute 85 to 90 percent of the total food supply. In most areas of
China, little is provided beyond the minimum daily caloric intake
necessary for survival, and the diet is usually deficient in one or
more of the nutritive elements essential to health. Chinese agri-
culture, moreover, is extremely susceptible to the vagaries of nature.
Much of the agricultural production is concentrated in river low-
lands, where it is subject to floods. Drought frequently occurs in
the plains of North China, typhoons often ravage the coastal areas,
insect pests are numerous, and insecticides are virtually unknown.
The Chinese Communist "land reform" program has been a
revolution from above, organiz@d in the villages by cadres of pro-
fessional Communist revolutionaries. As a result of this "reform"
the average size of the Chinese farm has been slightly reduced,
and the acquisition of capital equipment has become even more
difficult than before. The Communists have encouraged several forms
of mutual cooperation in agriculture. The cooperative forms range
from seasonal pooling of labor with no change in ownership of land
or implements to joint farming of pooled land holdings with common
ownership of some. implements and draftpower. Ownership of the land
even in all cooperative forms except the collective is still retained
by the individual.
The burden of the agricultural tax in kind (levied at
progressive rates) is believed to be heavy. I~t is estimated that
30 million metric tons of grain are collected in taxes each year
and 10 million tons in addition through the compulsory purchase
program. This represents one of the most important sources of income
to the state: the grain tax provides the food for the. cities and
the armed forces, and the principal source of foreign exchange . It
is believed that the agricultural sector accounts for as much as 75
percent of the exports of Communist China, the bulk of which is used
to pay for imports of capital goods from other Soviet Bloc countries.
-39-
S -E -C -R -E -T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
S-E-C-R-E-T
The Chinese Communists, however, have two solid achieve-
ments to their credit: (a) they have energetically continued certain
Nationalist-initiated flood control and irrigation projects, such as
the Hwai River project, and have begun others, with a consequent
increase in the total irrigated area, and (b) they have improved the
transportation system so that surpluses can be shifted to deficit
areas.. In 1952, production of the major agricultural crops approxi~
mated prewar levels. Table 6 shows the production of major crops
in Communist China, 1949-52.
Production of Major Crops in Communist China
1949-53
Thousand Metric Tons
1949
1950
1951
1952
1953
Grains ~
104,310
107,_810
106,840
112,361
111,786
Potatoes ~
24,500
28,887
31,490
34,221
31,035
Cotton ~
370
529
653
618
724
a. Grains consist of rice paddy , wheat, oats, corn, millet,
sorghum and other grains, kaoliang, and barley.
b. Potatoes are approximately 85 percent sweet potatoes and are
not on a grain-equivalent basis.
C. Cotton as shown here is on a ginned basis.
Collectivization of agriculture remains the explicit
objective of the Chinese Communist Party. Apparently it will be
delayed for some time, almost certainly until the next Five Year
Plan, which should begin in 1957? One must presume that the cost
of collectivization in lost production and in human lives would be
even more appalling in China than in the USSR.
In attempting to Increase the productivity of Chinese
agriculture the Chinese Communists face a difficult problem. With
the exception of irrigation and flood control measures, the Chinese
Communist actions to date probably have tended to aggravate rather
- 40 -
S-E-C-R-E-T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
S -E -C -R -E -T
than to ameliorate the basic difficulties. It is highly unlikely
that the planned increases in production over the next few years
will be achieved. Also, it is doubtful whether the Chinese Communists
will have available the resources necessary for mechanisation fox a
good many years, perhaps a decade. Unless its position in natural
resources improves greatly, it is highly unlikely that in the near
future China will be able to support the degree of mechanization of
agriculture which prevails in the USSR.
C. Industry.
The development of the industrial base of the USSR and
especially of large-scale industry has been the primary goal of the
Soviet planners. As the Satellites and China were brought into the
Soviet orbit, a similar goal emphasized their industrial development.
The pattern followed has initially placed greatest importance and
highest priority on heavy industry and producer goods as a means
toward the end of ultimate self-sufficiency and industrial and
military power. In the USSR the 1930's were devoted to the accumu-
lation of basic capital equipment, especially through imports, with
concomitant emphasis on technical training of the labor force. The
USSR may now be in a position to go forward with rather more balance
in the production of consumer and capital goods and with primary
reliance upon their own resources. The future pattern can be expected
to show relatively more emphasis on the development of basic materials,
including energy,? required to support their own industrial machine.
The current "new course" indicates a special effort to equip and
expand consumer goods industries in the immediate future, a change
which may prove to be a temporary political expedient, or an
evolutionary shi~'t toward consideration of consumer. welfare. In the
following sections the industrial base of the Bloc will be described
under the headings of energy, metals, building materials, chemicals,
manufacturing, and military end items. Table 7~- shows trends in
the production of selected commodities together with a comparison
with US output.
1. Energy.
The potential energy resources of the Soviet Bloc are
adequate to support sizable increases in industrial capacity on a long-
term basis. Coal is the main source of energy of the Bloc countries.
~ Table 7 follows on p. ~+2.
S -E -C -R -E -T
Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
 Approved For Release 1999/09/02 :CIA-RDP79-01093A000600060003-4
W
U
~~
MI
O
.-1
ON~Mi~~ ~
Ol ~
ri
~~~~~ ~
~~~~
o,cp~~ooo 0
H H ~ H
~ O
~. ~
v ~ 2qqf ~ ~ ~ Sc~~ .q~q O SyW.~~ ?ayyC~ ra N ~ ai
~1 O cd ... S-i ~ H cd ~ agg7 cd al N ~' ~
~~a? ~ or~az ~