(Classified) ECONOMIC POLICY IN 1954

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00935A000300170001-3
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 17
• Document Creation Date: November 9, 2016
• Document Release Date: August 27, 1998
• Sequence Number: 1
• Publication Date: June 1, 1955
• Content Type: IM

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1 June 1955
WARNING
THIS DOCUMENT 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 TRANSMISSION OR REVELATION
OF WHICH IN ANY MANNER TO AN UNAUTHORIZED PERSON IS PROHIBITED BY
LAW.
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
INTELLIGENCE MEMORANDUM
SOVIET ECONOMIC POLICY IN 1954
CIA/RR IM-410
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FOREWORD
Although this memorandum on Soviet economic policy is focused
on 1954, the continuous nature of economic policy formulation and
the time-consuming process involved in the implementation of a
complete economic program render highly artificial any uniform time
period such as a calendar year. The present review attempts to
reflect the real continuity of the process by relating the events
of the year to policies introduced before 1954 and by including,
insofar as possible, the major economic policy developments in the
early months of 1955. No attempt has been made, however, to treat
systematically the policy changes in the current year.
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CONTENTS
Page
Summary . . . . . . . . . . . . . . . . . . . . . . . . . .
..
1
I. Introduction . . . . . . . . . . . . . . . . . . . . .
?
3
II. Agriculture . . . . . . . . . . . . . . . . . . . . . .
..
4
III. Industry . . . . . . . . . . . . . . . . . . . . . .
.
8
IV. Transport, Trade, and Housing . . . . . . . . . . . . .
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12
Planned Total Profits, Planned Deductions from Profits, and
Planned Retained Profits in Soviet Industry, 1951-54 . . .
.
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CIA/RR IM-410
(ORR Project 14.434)
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SOVIET ECONOMIC POLICY IN 1954*
Summary
The achievements of the Soviet economy by the end of 1953, with
only 2 years remaining in the Fifth Five Year Plan (1951-55), were
not sufficiently impressive to guarantee the successful fulfillment
of the 1955 Plan goals. The Plan, belatedly adopted by the 19th Party
Congress in October 1952, apparently had suffered from the lack of an
effective, detailed program at the outset of the 5-year period. Fur-
thermore, the various economic adjustments attendant on the revised
economic policy introduced by the new leadership in 1953 had had a
depressing effect on the performance of the economy. As a consequence,
there was no margin to allow for any further interruptions in the
functioning of the economy. Thus at the beginning of 1951E the pros-
pect for achievement of the Fifth Five Year Plan goals hinged largely
on the success of the new economic policy -- a policy which, as yet,
had not been in operation long enough to prove its effectiveness in
-meeting the two basic problems which had become increasingly acute
during the course of the Fifth Five Year Plan: diminishing gains in
labor productivity and slow growth in agricultural production.
In 1954 the Soviet leadership tried to strengthen those aspects
of the 1953 policy which bore most directly on these two basic prob-
lems. Their solution was complicated by the fact that both problems
were products of the most fundamental of all Soviet economic objec-
tives -- the forced development of the industrial sector of the econ-
omy. The principal aim of Soviet policy in 1954 was to boost labor
productivity and agricultural production with a minimum of interrup-
tion to long-term industrial development. The task of increasing the
productivity of labor was essentially one of increasing the availabil-
ity of consumer goods, thereby making more meaningful the system of
incentive wages. The problem of lagging agricultural production was
more complex, involving deficiencies in the institutional organi-
zation of production and also unique problems of investment as well
as the problem of agricultural income incentives.
* The estimates and conclusions contained in this memorandum repre-
sent the best judgment of ORR as of 1 May 1955.
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Implementation in 195+ of the consumer gooc .s aspect of the revised
policy was designed to provide an immediate increase in manufactured
consumer goods by depriving the defense establishment s meat of its cusmuchry
share of the increase in the growing product
of the consumer ;cods program involved a shift in final demand items
from military to civilian use rather than a shift from investment goods
to consumption goods, thereby lessening considerably the effect of the
program on the traditionally high ratio of .investment to consumption.
In addition to the revision of production priorities stmentin du
factured consumer goods, the pattern of state
slightly in favor of light industry and housing at the expense of
heavy industry . The investment plan for the total ad sector
investment of he e 2 n
omy was increased from the usual 1 percent of
percent, reflecting the planned increase :Ln consumer goods as well as
a continuation cf the policy of drawing trade linto state and cooper-
ative markets.
Implementation in 195+ of the agricultur aspect of the revised
policy took sevoral forms. The most dramatic was the diversion of a
large portion of new agricultural machinery d tradtor
previously uncu:_tivated lands. Although of g
of uncertain cl_matic conditions, these lands were calculated to give
an immediate re';urn of grain with little sacrifice to production on
the old lands, iahich in recent years had shown little response to new
applications of machinery and tractors. Thislaction was planned to
play a significant part in the formulation in 1955 of an expanded 5-
year livestock program.
aug-
]less dramatic were the steps taken in 195 to continue iand ncentive
ment the agricultural policies"introduce: in 953?
features of the 1953 version of the agticult al tax were retained,
and the incentive of higher state procurement prices for agricultural
products was extended to include grain as welL as livestock and
vegetables. These measures permitted a highe level of investment
by kolkhozes. In addition, state investment in agriculture was con-
siderably expanded. State and kolkhoz investment together was nearly
4+0 percent greF;ter than in 1953?
In implementing the new agricultural policy, greater freedom was
plan-
given the kolklioz in planning ethe ffortitozimpr manpower and in
ofen
ning, the crop pattern. In an
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machine work, large numbers of workers were transferred from seasonal
to permanent work in the Machine Tractor Stations. The method of
determining obligatory workday minimums for labor on kolkhozes was
revised. It was hoped that these measures would correct some of the
more serious defects in the collective organization of agricultural
production.
The effects of the 1954 policy on the economy were varied. Con-
sumer goods production, excluding food-processing industries, is
estimated to have increased over the 1953 level by 11 percent, a per-
formance nearly equal to that of the producer goods industries. Food
products remained scarce, however, and agricultural production, set
back by adverse weather conditions, was not so great as planned, in
spite of the success of the new-lands program. The industrial. wage
fund was again overexpended. These and other cost pressures stemming
from the new policy created a large gap between actual and planned
profits, as in 1953. As a result, fewer wholesale price reductions
were made in either year. In 1954, in order to combat further the
growing inflationary pressures, a smaller and more selective retail
price reduction was granted. No retail price reduction has been
granted thus far in 1955, and the state loan from the population has
been doubled to absorb some of the excess purchasing power. In spite
of the mixed effects of the new policy, however, it appeared at year's
end that the consumer was slightly better off, that the Five Year Plan
goals were more certain to be fulfilled, and that the defense effort
could be restored to its original level.
I. Introduction.
The economic course of action, or program, set forth in 1953 after
the death of Stalin was pursued in a reasonably faithful and generally
successful fashion in 1954, the first full year of the new economic
policy. Throughout the year it became necessary from time to time to
make certain revisions in the policy to keep the economy bearing true
to course. These policy revisions in 1954, touching upon nearly every
facet of economic activity in the USSR and involving a number of types
of economic control mechanisms (including prices, taxation, wages,
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profits, and direct allocation of commodities),?, did not add up to a
significant alteration of the basic economic policy formulated in 1953.
They did indicate, however, the nature and extent of the stresses im-
posed on the economic system by the tasks of the new program and the
degree to which the administration was willing to make the adjustments
necessary to carry out successfully its progran commitments.
Certain of the actions taken in 1954 a:?parently were designed to
:realize even greEter agricultural and consumer .' goods goals than orig-
inally set forth in 1953, but it was also evident, especially during
the last few months of 1954 and in January-February 1955, that neither
the basic industrial development of the economy nor the defense estab-
lishment was to be allowed to suffer noticeably as a result. These
actions, although halting the rapid rate of increase in consumer goods
activity attained. in 1954, were designed to maintain this sector at
its newly creates. level and at the same time t$ provide the defense
establishment with a substantial increase in expenditure which would
more than restore the reduction permitted in 1 54 in order to support
the initial costs of the new program.
Such revisions as were made in Soviet economic policy in 1954 in
favor of the consumer or of agriculture were aimed at fulfilling the
limited objectives of the 1953 policy. They were not intended to
challenge the classic Soviet emphasis on heavy' industry. In fact,
the expansion in consumer goods and agriculture was calculated, to a
considerable extent, to remove certain barrier6 to further expansion
of the industrial base of the economy,, Dimini0hing gains in labor
productivity and chronic shortages in the agricultural sector had
become increasin,3ly serious during the first y :ars of the Fifth Five
Year Plan (1951-35). It was to these problems; in particular that many
of the policy revisions of 1954 were directed.l
II. A&culture.
The original Fifth Five Year Plan, adopted by the 19th Party
Congress in October 1952, envisioned substantial increases in the
level of agricultural production by 1955. The;; goal for grain produc-
tion in 1955, for example, was set at one and one-half times the 1950
level. The goals formulated in 1952 were to be achieved by means of
an agricultural policy designed to increase ti4e yields of grain.
Malenkov stated at the Party Congress that since the prewar level of
sown acreage had been reached, the correct method of achieving an in-
crease in output was to increase yields comprehensively. Before the
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death of Stalin, however, there was no discernible effort to trans-
late these ambitious goals into an effective program of agricultural
development. Without such a program the great agricultural expecta-
tions of the Fifth Five Year Plan were unrealistic.
It was not until August 1953 that a realistic effort was made to
formulate and carry out an agricultural policy designed to produce
significant increases in the level of agricultural production.
Malenkov then stated, at the meeting of the Supreme Soviet, that the
serious failures in agriculture must be overcome by a program of in-
creasing the economic incentive of kolkhozes and kolkhoz members.
The program adopted a month later by a }lenum of the Central Committee
of the Communist Party provided measures for the improvement of live-
stock, potato, and vegetable production. Procurement prices paid by
the state for the delivery of compulsory quotas of these products were
increased. For some of the products, the increases were the first
granted in 20 years. In addition, certain compulsory delivery quotas
were reduced. The agricultural tax levied on the rural population
also was revised in September 1953. The former tax schedule, which
varied according to the value of the crop, was replaced by a uniform
tax rate levied on land area regardless of the type of crop raised.
The separate tax on individual livestock holdings was abolished in
order to encourage private livestock breeding by members of the
kolkhoz. It was hoped that these procurement price changes and tax
changes would produce a redirection of effort toward those food prod-
ucts most urgently needed and would provide, at the same time, ad-
ditional income to the kolkhozes and kolkhoz members as further
production incentives. That the production of processed foods in-
creased by little more than half the amount scheduled for 1.954 was
the result of adverse weather conditions rather than of inappropriate
changes in agricultural policy.
The agricultural policy developed in August and September 1953
offered few details as to how the Fifth Five Year Plan goal for grain
production, as set forth in 1952, was to be realized. It was men-
tioned only that grain production should be developed through further
increasing yields. Between September 1953 and March 1954, however,
Soviet leaders apparently reassessed the efficacy of a policy devoted
solely to the intensification of the production effort on existing
cultivated lands. It was announced by Khrushchev at the February-
March 1954 plenum of the Central Committee that the major effort to
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increase grain Production in 1954 and 1955 wasjto be focused on the
extension of grain cultivation to new lands, primarily in Kazakhstan
but also in Alt,-,y Kray and West Siberia. I
The significance of the new policy was notl in the decision to
increase grain production, for this had been made in the formulation
of the original Plan. The significance was i the decision to augment
the program of :Intensive development of agricture by a concerted
effort to extend the margin of cultivation to ,+++; the new lands. The com-
paratively low :^eturn on additional investment in equipment on the old
lands, especially in heavy tractors, was enda gering the achievement
of planned prodaction goals. The new-lands program had the short-run
attraction of an immediate production return and the longer run attrac-
tion of permitting some lands traditionally devoted to food. grain pro-
duction to be converted to the production of feed grains in. support of
an expanded livestock program. This, in turn, eventually would reduce
the need for livestock raising by individuals~', which of necessity had
been encourages. by the 1953 changes in agricultural tax ancL procurement
price policy. Furthermore, the extension of icultivation into the new
lands, with a ? neater ratio of state farms tc~ kolkhozes than in the
old lands, constituted another small step to4ard the eventual elimi-
nation of private plots and kolkhozes and assured the state of a
larger marketed share of new production thanIwould have been obtained
from a comparable increase in production. on the old lands.
The new-lands policy set forth in March X954 was rapidly imple-
mented and with such initial success that the Plan goal for 1955 of
13 million hectares of new lands was enlaxge ., calling for 28 to 30
mil:Lion hectares by 1956. In addition, the patio of state farms to
kolkhozes was to be still greater on the additional new lands. Al-
though the new-lands program was proceeding apace, certain short-
comings were discussed at the June 1954 ple4mi of the Central Committee.
Construction of the necessary buildings, especially housing, was
stressed as the greatest need. Throughout tihe remainder of 1954, con-
siderable effort was made to insure an incr4ased supply of building
materials to the new areas.
The June 1954 plenum was concerned not only with the new-lands
program. Inadequacies of the entire agricultural program also were
discussed at length. Several policy decisions were continued from
1953 or newly initiated in 1954 to deal with these problems. The
short supply of foodstuffs was recognized npt only by the continua-
tion of the higher procurement prices and lpwer tax provisions
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established in 1953 but also by the introduction in August 1954 of
seasonal variations in prices of foodstuffs. Furthermore, the annual
retail price reduction in April 1954 was considerably smaller than in
1953. In keeping with the relatively greater scarcity of foodstuffs
the bulk of the reduction was in manufactured goods.
Several steps were taken in 1954 to increase the share of grain
production procured by the state from kolkhozes. In June, grain pro-
curement prices were increased, and arrangements were made to continue
the practice established in 1953 of releasing manufactured consumer
goods and certain building materials to kolkhozes on the basis of their
record with regard to above-quota deliveries of bread grains to state
procurement agencies.
The agricultural labor force was affected on several counts in
1954, partly as a byproduct of the new-lands program and partly as a
result of measures concerned specifically with agricultural labor.
That portion of the agricultural labor force working for wages, and
hence subject to greater state control, was increased by the transfer
of large numbers of workers from seasonal to permanent employment in
the Machine Tractor Stations and by sending cadres to the new lands
on a wage basis. Kolkhoz members, who are not on a wage basis, were
subjected in 1954 to a new system of determining obligatory workdays.
The significance of the new system was twofold. The new obligatory
minimum of workdays for able-bodied kolkhoz members was higher than
the minimum for the preceding year, thus furthering the effort to
increase agricultural production on the old lands. But perhaps of
greater significance was the fact that the new system gave the kolkhoz
greater freedom in planning the utilization of manpower. It provided
for the establishment of the workday schedule, both for the year as a
whole and for the various seasons of farm work, by a general meeting
of the kolkhoz members, who were to take into consideration the
specific conditions on the individual kolkhoz.
Khrushchev had stressed at the February-Maxch 1954 plenum that
agricultural planning was too centralized, thereby impeding the use
of available production alternatives, inhibiting local initiative, and
weakening any general interest in increasing yields. He reminded the
plenum that as far back as 1939 the Party and the government had
abolished the order under which kolkhozes were given obligatory plans
for each separate grain crop but that Gosplan and the agricultural
ministries had ignored the action. The decentralization of workday
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planning introduced in 1954 presaged the introduction of a decree in
March 1955 which formalized Khrushchev's sentiments toward greater
decentralization in the planning of agricultural crops. Both actions
indicated an inc:^easing recognition of the fact that central planning
had not taken account adequately of local variations in the circum-
stances of agricultural production.
Agricultural investment policy in 1954 wasl,consistent with the
requirements imposed by the new program. State investment in agri-
culture rose from 12 billion rubles in 1953 to 118 billion rubles in
1954. Although -;his increase did not represent fulfillment of the
planned goal of 21 billion rubles, the shcrtfall appeared to be the
result; of inability to translate rubles into gods, especially con-
struction materials and equipment, at so rapidia rate, rather than a
failure of the s-;ate to pursue its stated agricultural investment
policy. In addi--Jion to the state agriculturalinvestment of 18 billion
rubles in 1954, ;agricultural investment by thelkolkhozes from their
own funds and loans amounted to 21 billion rubles, an increase of 5.5
billion rubles orer the 1953 level of 15.5 billion rubles. This
sizable increase in investment by kolkhozes was made possible by the
1953-54 revision3 in state procurement prices and tax policy, which
had increased ko.Lkhoz income, reportedly by 13'~billion rubles in 1953
and 35 billion rubles in 1954. In additicn, the state intensified
its policy of en.-,ouraging kolkhozes to obtain long-term loans for
investment purposes from the Agricultural Bank Agricultural invest-
ment policy in 1954 thus produced an increase In total agricultural
investment (state and kolkhoz) of approximately 40 percent over 1953.
The 1955 plan for.- total agricultural investment indicates that agri-
cultural investment policy will be geared to approximately the same
level of activity as in 1954, the planned figure of 41 billion rubles
for 1955 lying between the 42 billion rubles p .anned for 195+ and the
39 billion rubles actually achieved.
III. Industry.
An indicatioi of Soviet economic policy with regard to industry
is to be found i:a the record of the relative share of total state in-
vestment allocated to the industrial sector of the economy and in the
pattern of distribution of that share between heavy industry and the
consumer-orientei light and food industries. ]wring the Fourth Five
Year Plan (1946-50) an average of 64 percent of total state investment
was allocated to the industrial sector, ae compared with an average
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of 50 percent in the late prewar years. All of the increase during
this period was allocated in favor of heavy industry, while the light,
food, and textile industries received a smaller share of total state
investment than in the prewar period.
Until 1954 the pattern of distribution of state investment between
heavy and light industry changed only slightly from the pattern set in
the Fourth Five Year Plan. In 1953, heavy industry received 58 per-
cent of total state investment, and light industry received 5,.5 percent,
together accounting for 63.5 percent of total state investment. The
1954 plan contemplated a shift in this pattern in favor of light indus-
try. It was planned that heavy industry's share in total state invest-
ment would be reduced to 53.2 percent and light industry's share would
be increased to 8.5 percent. The full extent of the planned shift in
the relative shares to heavy and light industry was not realized. The
share to heavy industry was reduced only to 55.7 percent, and the share
to light industry was increased only to 7.3 percent, of total state
investment. Yet this degree of change was a significant departure from
the pattern of the past and was an indication that one of the various
policy revisions made in conjunction with the new program was an actual
shift in the pattern of state-allocated resources for investment.
Industrial production, as well as the investment pattern, showed
some of the effects of the 1954 revisions in economic policy. The
order of priorities for the allocation of materials, applicable to a
large number of material inputs to industrial production, apparently
was revised to some extent in favor of the consumer goods industries at
the expense of the defense industry. It is estimated that consumer
goods production (excluding food processing) increased 11 percent over
the 1953 level. This performance nearly equalled the increases in the
producer goods industries (energy, 10 percent; metals, 13 percent;
chemicals, 14 percent; construction materials, 14 percent; and forest
products, 10 percent). By contrast, production of military end items
by the defense industry showed no increase, 1954 production. being
only 98 percent of the 1953 level.
In addition to improving the relative position of consumer goods
industries in the allocation of inputs, 1954 changes in allocational
policy served to increase the freedom of all producing ministries to
plan the utilization of centrally allocated materials. At midyear
1954 the list of funded commodities (those subject to direct state
allocation) was redrawn so as to reduce greatly the number of specific
commodity entries, leaving in their stead more generalized categories
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which afforded the ministries greater leeway or substitution and de-
tailed allocation. This action marked the reversal of a trend which,
by 1952, had increased to 1,600 the number of commodities subject to
detailed allocation by Gossnab, the organization established in 19+8
to administer the funded commodity system.
Soviet profits tax policy in 195+ continued the trend, prevailing
since 1950, of reducing the portion of total profits retained by the
producing ministries and enterprises for their own use. During World
War II, nearly all of the profits of enterprises were taxed. into the
state budget. This policy was relaxed after the war to permit the
necessary reinvestment of profits into reconstruction, which was re-
quired general= throughout industry from 1945 through 191+8, and to
facilitate the adjustment of enterprises to he new wholesale price
structure introduced in 191+9. The portion o total profits retained
by industry wa;3 permitted to rise from about 10 percent in 191+6 to
nearly 50 perc,.nt by 191+9, reflecting the high level of investment
in all areas of industrial activity. After the reconstruction and
price reform period, Soviet profits tax poli4y, which perm-Lts only a
very small por,ion of profits to be retained+by consumer goods indus-
tries, worked to bring an increasingly large) portion of total profits
of industry back into the state budget, as t}ie high-profit consumer
goods industries began to regain their prewa4 levels of production.
The following table shows that planned d.eductions from profits to
the state budget nearly doubled from 1951 toj1951+, whereas the portion
planned for retention remained at virtually the same ruble level
throughout the period, thus reducing to 25 p :rcent, by 1954, that por-
tion of planned total profits which the state was willing to commit
to reinvestment within the particular ministries originating the
profit.
Planned 'Total Profits,
Planned Deductio
s fr
om Profit
s, a/
and Planned Retained Profits ..n So
net
Industry
1951-51+ 1
Bil
lion
Current R
ubles
1951 195
1953
195+
Planned total profits
.
76.8 88.
1-
1
111.5
123.2
Planned deductions from
profits
1+7.2 62.1
0
80.7
92.6
Planned retained profits
29.6 26.1
1
30.8
30.6
a. For j-emission to the state budget.
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The number of workers entering industry in 195)+, as in the previous
years of the Fifth Five Year Plan, exceeded the planned increase in
the industrial labor force, and labor productivity did not increase so
rapidly as planned. As a consequence, the planned wage fund was again
overexpended -- a chronic symptom of the Soviet system of forced de-
velopment, which exerts constant pressure on the labor supply. With
the operation of such a policy, the system of incentive bonuses and
other wage premiums is misused frequently to attract workers on a com-
petitive basis and thus is not always geared exclusively to production
performances. The Council of Ministers continued in 195+ to point
out the weakening of control over the expenditure of the wage fund in
several areas and ordered the ministries to take serious measures to
strengthen this control.
Overexpenditure of the planned wage fund and other cost pressures
led to an underfulfillment of the planned profit goal in 1952 and a
still greater underfulfillment in 1953. Evidence to date indicates
that the government's reaction to this situation both in 1953 and in
195+ was a slackening off of the wholesale price reductions which had
been carried out sporadically since 1949, pursuant to the policy
announced at that time of passing along all cost savings through whole-
sale price reductions. The degree of fulfillment of the 195+ goal for
planned profits has not yet been reported, but it is possible that
fewer and smaller wholesale price reductions were made in 195+ so that
such cost savings as were realized could be used to avoid a repetition
of the large gap of the previous year between actual and planned profits.
The increasing overexpenditure of the industrial wage bill. in 1953
and 1954, as well as the smaller state loan and the higher state pro-
curement prices of those years, contributed to the building up of un-
used consumer purchasing power. In an effort to preserve a balance
in the income flows between the state and the population, the annual
state retail price reductions were granted on a scale considerably
smaller than in previous years. By the end of the year it was
apparent that price policy alone was insufficient to counter the
increased purchasing power in the hands of the population. Con-
sequently, the plan for subscription by the population to the
annual state loan, which had been halved in 1953 to assure a
purchasing power adequate to absorb the planned increase in con-
sumer goods, was returned in 1955 to the higher level which
prevailed prior to 1953.
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IV. Transport, Trade, and Housing.
Most of the economic policy adjustments in 1954 were in agriculture
and industry, art indication of the size and the complexity of these
sectors as well as of their importance to the functioning of the econ-
omy. Transport; trade, and housing -- much smaller activity sectors
by any standard of measurement -- were, however, the subject of some
policy considerations during the year, most of which were necessary
adjuncts to the adjustments made in agriculture and industry.
From the point of view of state investment policy, the slighting
of these three sectors has been a traditional; feature of Soviet eco-
nomic developmert. The allocation of state investment to the trans-
portation and communications system has continually declined as a
portion of total. state investment since t:ze period of reconstruction
in the Fourth Five Year Plan. The continuation of this trend in 1954
reduced to 11 percent the share of total stat investment allocated
to this sector in contrast to 21 percent during the Fourth Five Year
Plan. Thus in 1954 the predominant emphasis In transportation policy
continued to be placed on a more intensive utilization of existing fa-
cilities and a continuation of the drive to reduce the average length
of haul and to eliminate crossfreight. T:aerelwere some indications
during the year that this policy would be augmented in the near future
by the introduction of new equipment and facilities at a greater rate.
In part, this was in connection with the :aew lines needed to support
the new-lands program, but, in addition, an impressive dieselization
program was announced, production of electric'. locomotives increased
significantly, End production of steam locomotives increasedL nearly
to the level acb.ieved during reconstruction'in 1949.
Investment policy in 1954, because of the consumer goods aspect
of the new program, had a pronounced effect on the trade sector of
the economy. Traditionally the smallest :recipient of investment al-
locations, this sector was to receive almost ~ percent of total in-
vestment in 1952 instead of the usual 1 percent. Although evidence
indicates that this higher level probably was 'not quite attained,
the actual increase -- as well as the intention of the plan -- was a
significant departure from the past.
The share of the gross national product of the USSR originating
in the trade sector continued to grow relative to other sectors in
1954 as the coneumer goods supply increased. Soviet economic policy
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continued to draw an increasing portion of total retail trade into
state and cooperative markets and away from the kolkhoz markets.
Basically this trend is a product of urbanization, but, in 1954 as
in past years, Soviet policy has been designed to encourage the
shift. The 1953 order of the Ministry of Trade making consumer coop-
erative organizations responsible for acceptance of agricultural
products on a commission basis from kolkhozes and kolkhoz members was
continued in 1954. Another example of such a policy was the provision
to extend credit in 1954 to consumer cooperatives for the purchase of
agricultural products at purchase and ceiling-purchase prices, in-
cluding advance payment to suppliers on contracts, regardless of the
status of their settlements for Gosbank loans.
State investment allocations to housing, which had averaged be-
tween 12 and 13 percent of total state investment throughout the post-
war period, were increased to 15 percent in the 1954 investment plan.
Although an increase of such small magnitude was insufficient to pro-
vide a spectacular rise in housing accommodations, it appeared to be
an upward revision of the housing policy originally guiding the new
economic program. No mention was made of an increased allocation to
housing in the 1953 pronouncements of the new program.
In addition to the increase in the proportion of total state in-
vestment allocated to housing, a significant aspect of Soviet housing
policy in 195+ was the greater opportunity for construction of private
housing. Throughout the year a continual effort was made to keep
construction materials flowing to the open market. In the past the
major deterrent to construction of private housing was the inability
to obtain supplies, so that loans for construction, which could have
been obtained at a nominal interest charge, went begging. Another
boon to private housing, though limited in scope, was the granting of
nonreturnable building loans to settlers in the new lands, the first
time that outright grants have been made to private housing.
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