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December 18, 1953
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-I 4, --=?Approved Fo1/r Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 S-E-C-R-E-T THE Ecopow OF THE soym pipp A Brief Guidg CIA/RR IP-352 18 December 1953 WARNING TIM MATERIAL CONTAINS INFORMATION AFFECTING THE NAT/ONAL DEFENSE OF THE UNITED STATES WTTHIN THE MEANING OF THE ESPIONAGE LAW, 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. RETURN TO ARCHIVES I RECORDS CENTER CENTRAL INTELLIG IMM AIRY AFTER Ug, ENCE AGENCY JOB 00X, Office of Research and Reports Approved For Release 1999/09//7 : CIA-RDP79T01049A00 1.1 PgAeriXi APproied FOr Release 1-999109/27 : CIA-RDP79T01049A000900030013-2 S-E-C-R-E-T FOREWORD The purpose of this guide is to provide a summary statement of the economic situation in the Soviet Bloc. It is not intended to provide exhaustive coverage but rather to serve as a guide for thoie who must perforce "run while they read." The discussion covers the present Soviet Bloc under three main geographical subdivisions: the USSR, the European Satellites, and CoMmunist China. The topical coverage includes a survey of the economic organization and an evaluation of its effectiveness; a description of the salient features Of the economic base; includ- ing population, agriculture, industry, and transportation; an outline of the broul economic objectives of the system; and an indication of the levels of achieve- ment which have been reached. As the situation warrants, the economic interdepen- dence of the various political entities is pointed out in a general way. Approved For Release' 1999/WAURDP79T01049A000900030013-2 APprovedFOrRelease?999/09/27:CIA-RDP79T01049A000900030013-2 commas I. Economic Organization and Control Page 1 A. USSR 3. B. European Satellites 5 C. Communist China 7 U. Economic Base 9 A. Population and Manpower 9 B. Agriculture 11 C. Industry 15 D. Transportation 18 III. Major. Trends in Economic Policy 20 A. In the USSR B. In the European Satellitea C. In Communist China 20 20 21 rv. Gross Production of Goods and Services . . .... 22 , Appendix, Table 1. Date on Population and EMployment in the USSR, Selected Years, 1939-57 . . . . . ................. . . . . . . 24 Table 2. Data on Population and EMployment in the European Satellites, Selected Years: 1947-57 25 Table 3. Agricultural Production in the Soviet Bloc? Prewar and Postwar 28 Table 4. Estimated Gross National Product of the USSR by Final Use, Selected Years, 193M1 ..... . . . ....... . . . . . . 27 , Table 5. Estimated Gross National Product of Poland: Czechoslovakia, and East Germany, by Final Use, Selected Tears, 1938-52 . . . . . . 28 Table 6. Estimated Gross National Product of the USSR and the US, Selected Years, 1938-51 29 Table 7. Comparison of Increases in Gross national Product of the Soviet Bloc Countries and the US, Annual /ncreases: 1949-51, and Total Increases for the Period 1938-51 29 Table 8. Breakdown of the Gross National Product of the USSR by Sector of Origin, 1948-51 30 ? Chart Ministerial Organization Changes in the USSR on 15 March 1953 . 2 S-E-C-R-E-T Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 APproved Fdr Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 CIA/RR IP-352 (ORR Project 9) TIE ECONOMY OF THE SOVIET BLOC A Brief u'de I. Economic Oreanizatton end Control. The organization,and..control of the Soviet Bloc economies are designed to centralize and concentrate the functions of planning and decision in the hands of the political leadership, A, USSR. At the apex of the economic administration of the USSR is the Presidium (formerly- the Politbureau) of the Communist Party. To carry out its decisions, the Presidium utilizes the machinery of the Soviet state. On the basis of the policy decisions of the Party. Presidium, designed to meet what are regarded az the ceuctal internal and external problems which eonfront the nation, general direceives are tsoued to the State Planning Commission (Gosplan), a staff attached to the Council of Ministers. Goeplan, with the assistance of other agencies, translates thee directives into Five Year Plans and, subsidiary plans, which even- tually are given the rubber stamp of approval by the Supreme Soviet (theoretically the hiehest legislative body). Virtually all economic activity in the USSR is included in the state plan, The only economic activity of any bmportance not in- cluded is the colleceive farm market, where? the state does not, control the price and only indirectly controls the supply. It is important to note that in Soviet jurisprudence the all-inclusive state economic plan has the status of lave which means that a Soviet citizen may be prosecuted for failure to fulfil obligations aria ng thereunder. In addition to their duties on the Party Presidium, leading members of the Party hold governmene executive posts .in the Council of Miniaters. Of much greater significance is the fact that certain key meMbers constitute the Presidium of the Council, of Ministers, in which capacity they operate outside the ministerial chan- nels and are reeponsible forelhole sectors of the econamy. Lazar Kaganovich, now. a Deputy Chairman of the reoncil of Ministers, has for years been responsible for heavy industry end. transport. Implementation of the state economic plans involves two basic operations -- the allocation of resources to production and,the distribution of the output to various uses, These funetiono are performed by the economic ministries auboeilnated to the Council of Miniseers and by the Various staffs attached thereto The einie- tries are of three basic types: (1) the All-Union ministries of overriding national significance, which have no counterparts in, the Republics; (2) the Union-Republic ministries. az, for example, the. Ministry of Agriculture of the USSR, which has a counterpart in each, or the 16 constituent republics; and. (3) the Republic minis- tries, such as the various Ministries of Local Induotry, which are concerned with the local affairs of each republic and have no counterpart for the USSR as a whole, Each ministry ts headed by a council consisting of the minister and several deputy menisters and is further divided into several Main Administrations, for salea, supply, producelon, and ao on. Prior to the death of Stalin thc ministerial otruc- ture had two outatanding characteristics! specialization according to production activity and proliferation of extraemiaisterial control and verification staffs. Since the death of Stalin, important changes have taken place Inethio structure, The number of ministries has been drastically reduced from 50-odd to half that number, and many staffs have been abolished These changes are summarized in the accompanying chart e* With the one important exception of agriculture, virtually all production of goods and services in the USSR is carried on directly by state-owned enterprises, At the present time, socialized. enterprises account for more than 98 percent of all industrial production and for practically all banking) transportation, and foreign trade. Co-operatives .account fer only an insignificant part of industrial produc- tion. Education, medical care, communicationalAhe press, and social services are P 2. below, Approved For Release 9 79T01049A000900030013-2 , , Approved For Release 19/09/27_:_Cipi-RgingsyligeosogoNoggoi3-2 Ministerial Organization unanges n e Before 15 March 1953 Manufacturing ???????11.0.011 After 15 March 1953 Chemical Industry 0-Chemica1 Industry Coal Industry Coal Industry - Oil industry Oil Industry . fjonstruction of Machinel)uilding Enterprises Construction 1.Construction of Heavy Industrial EnterpriSee 1 .`Aviation Industry s Defense Industry 'LArmaments . ftlectrieal Industry Electrical Industry -Communications Equipment Industry and ?Power Stations ' Electric Power Stations fMachine Tool Building 'Agricultural Machine Building ,Machine and Instrument Building (Automobile and Tractor Industry fkOnferrous,Metallurgical Industry Ferrous Metallurgical IndustrY- rleavy Machine Building ' )Construction and Road Machine puilding .: 1Ship1Duilding , 4,Transport Machine Buildlng _ Construction Materials IndustrY , tq.,ight Industry; Fish Industry ' Meat and Dairy Industry.' food Industry - ? -', ilNper and WoodproceSsing Industry Tipber Industry .pgriculture Cotton Growing Forestry tate Farms Communications Agriculture Machine Building Metallurgical Industry Transport and Reavy Machine Building Construction Materials Industry Light and Food Industries Timber and.Paper Industry Agriculture and Procurement rransport and Communications , p. !Merchant Marine )River Fleet Oain Administration of the Northern iTransport 'ZIA? Transport " ITrade 1Poreign Trade (produrement Pea . ? ... aealth s Jigher Education I Labor Reserves CinsmatoGraphy ---?-C .Main Administration for Printing and Publishi ulture 1....1 , Arts Comittee 8roadcasting Committee Trade Communications and River Fleet r-Transport Internal and Foreign Trade Social and Cultural 711 .tiary ? War - Finance- Defepee- ? ? Administration and Control Finance Pffairs State Coltrol /- j,.T.nternal Affairs (MVD) tgtate Security (MOB) Justice 4 Foreign Affairs -1--,...4--,---State Control tr Internal Affairs m justice - 2 - S-E-C-144-T ????? ?????? 11?11P ???? ?????? Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 S-E-C-R-E-T APproved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 all controlled by the governmental apparatus. The state distribution system accounts for practically all internal wholesale trade and.for an estimated 85 per- cent of all retail trade. The free but restricted collective farm market accounts for the remainder. Agriculture is the one sector where at the present time "socialist produc- tive relationehips" peen something other than direct oeeration bythe state. Approximately 85 percent of agricultural production is carried out by the collective farms (ialp.215Sa), ostensibly free associatiope of the peasantry for the communal cultivation of land assigned for use in perpetuity. Direct production by the state is limited to the state farm (aovkhoz). In addition, the state owns and operates the Machine Tractor Stations (L04'4), Which control the entire tractor park and the bulk of all other agriceltural machinery. Although all productive activity on the collective farm land. enters inte the state plan, the plannin4 apparatus is relatively ineffective in this sector, owing to the incompleteness Of control and natural vagaries such as the weather. Thus in the agricultural sector the state plans for certain commodities, Aptably aeat and dairy products, have been repeat- edly underfulfilled. The only remaining economic activity of any importance which the state simply regulates bat does net operate or even plan is the collective farm market. Thie is an open market where the Peasants may sell their surplus produce, which is derived primarily from private cultivation on individual plots which the aol- lectiee farm members are permitted to retain. In the collective farm market the Soviet government has neither price no credit controls. Although the existence of the privet Plot on the Collective farm 1.4 not regarded with favor by the regime, the USSR simply could not afford the loss of production ehich could be expected to follow the abolition of the private plot. Control of the distribution process iavolves the allocation of land, pro- ducers goods, cOnsumers' geoids, labor, and income. In tbe ppsi, all land rights are vested in the state. Agricultural land 14 granted to the eollective farms for use in perpetuity without right of transfer. Manufacturieg and extractive industries, transportation, and other enterpriees receive use rights to land in accordance with state plans for these activities. The use rieht to urban lands for nonindustrial purposes is controlled by local government. Most raw materials, the important intermediate products, heavy equipment, and military end items are allocated directly' by the Council o' Ministers in physical units. Prices of these items tend to reflect coat of' production and serve as the basis for reimbursement. There were 1,600 of these so-called "funded commodities" in 1952. Each individual producer receives an allocetion of these commodities based upon centrally established input-output norms. Prices are used in some instances to encourage substitution of one grade of a commodity for another -- for example, the brown coal from the Moscow basin has long been sold at a subsidized price -- and in a feu instances they peform the traditional role of allocating scarce resources for example high rates are set for railroad trans- portation. In general, prices of industrial goods have a limited allocation function. The system for distributing consumers.' goods is equally complex. Most of the food supply is produced on the collective fan end brought into state distribution channels through contraetaal deliveries, in part at fixed low prices (in effect a tax in kind), or is predueed by State-owned food industries such as fishing and the state farms. Other coneupera' goods are produced by state enter- prises or by producers' cooperatives.: Trodaetion of the cooperatives is trans- ferred to the state at established prices. . .At the retail level the price of consumers' goods includes a turnoaar tax which is one of the important sources of income to the state. Thus the idtaa price is determined in part by revenue considerations and in part by sumptuary eppaiderations. Generally, prices have been established ate sufficiently high e3. to hold down the standard of living and to free resources for military production and investment in heavy industry. Free prices prevail only for such rod as is sold throughathe collective farm market. The supply is erratic., however, sinceAt depends on wtpt the eaaarit saves out of his incdme in kind, from the collective farm and from prOductioe e? -;3 rk. Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 S-E-C-R-E-T APproxied Far Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 his private plot. Since transportation is limited, and since no marketing organi- zation for such produce exists, the peasant is limited to a narrow geographical. market. In order to direct labor into the industries and. locations as neceasary to fulfil the state plans, various direct manpower controls are employed, the most .important currently being the passport end 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 job change, and the absence of this approval usually means no housiag. The role Of the labor union la primarily recruitment, . propaganda, and administration of soCial security: Since 1940 the USSR has operated a labor reserve gystem by which 15-year-o1ds are co-opted into technical trainiag end then eseigned to I4ante enjoying the highest Current priorities. All these direct centrotex however, have PrgYeall, rather ineffective, and. the compulsorY'AYSten is deelining. ;labor is One faCtor forwhtch pricerhas remained the primary allocationel mechaniaa A astam Or incentive "Plebe" W'90 rates prevails. . 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 anti ohligeterY deliveries the State bass fair .degree of control of the income of the collective farm houSeholda.: in recent years the state loans (compulsory interest-freeloana with 0 lottery bonusleature) are estimated to have absorbed the equivalent of one month's eplary fOr. all wage eerners. However, for 1953 the Malenkov regime out:the loan to half. The turnover -tax also absorbs a censiderable portiOn of boUsellold 141c9mg. The 040 collects at very eubstentiaI. tax from the profit? Or the Pt00-aunccl:enterPriseS, sone so b4llion rnbles_out of a planned total Ofslll billion rubles In 3953. The amorttzatiOn allovances of the enterprises and the greater Part Or.nror1.4.0 ester tae are intteste0. by the enter- prises'in acoordanep Twitb the state plan.- Only 44P14.14 fraCtiet of the profits accrue to the manage*. fund, whiehMeyThe used for yr4.ious? worker-benefits. .Collee- 'tively these souFceacoMprise the lergest4srt og the'nOtionls'investment funde which are, then, allecated in the All-Union budget. Foreign trade ts a state monopoly, which historically has served several purposes: (1) to iselate the internal market from the external; (2) to adjust for Soviet deficiency in capital goods, materials, and teebuical'pervices 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 materials 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 resenrees to insure againat boarding, and to provide a strategic stockpile. Although the .maintenance o thia inventory undoubtedly involves a large social cost, the Stailet government believes that the social cost of lost production and hoarded resonrc00 would be even eater The lifeblood of this vast production and allocation process is information and control. The USSR has a large aWvery comprehensive atatistical reporting system. Soviet handbooks describe statiatical forms which are to be submitted at frequent intervals to the Central Statptical Directorate in Mcscav for report- ing everything from the number of beehives on collective farms to the output of steel plants. The control and verification apparatue of the state has three basic parts: the banking system, the verification pita pnait4ve ministries, and special steffs for particular purposes. In addition, the CepOunist Party organization constitutes an ?independent and parallel control and.verifieetion apparatus. The state-owned bulldog systeercOntr4S all long-term and abort-term credit for every sector of the economy in accordOce'llth plans. All working capital and investment accounts and transactions are pOntr011ed with a, view to enforcing the plan. The banking system, together withtbileat accounting apparatus operates the monetary side of the plan to provide' S known in Soviet terminology as II control by the ruble." The state has, of 00 se, a. sindIer monopoly of all bank- , ing and credit for private individuals'? The specialized verification nrinietries Ore exemplified by the 145.oistry of State Control, which has ?weeping Pavers 4 inveatigate violations of procedure and general laxity or inefficiency through04:the economic structure. Violations 84-0-tt442 Approved For Release 1999/09/27.:XIA-RDP79T01049A000900030013-2 Approved F6r Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 B-E-C-R-E-T may be dealt with by administrative recommendations to the central organs or by referral to the Procurator General for prosecution, or by both means, depending upon the situation. The Ministry of Justice and the Procurator General are con- cerned with the violation of economic. as well aa civil and criminal law. The Council of Collective Farm Affairs is an example of a-special staff for a special purpose. The council was created after the war to rectify the encroachment on collective farm .land by the private plots which bad taken place on a large scale during the war, and to provide continuous surveillance of the collective farms. The Soviet extraministerial control staff somewhat reseedbles a US commission but also bas punitive powers. Finally, the Communist Party acts as an organ of control and. verification of everything, penetrating the government, the secret police, tbe trade unions, the collective farms -- in short, every aspect of Soviet life economic Or political. The Party of course reports to the Party Presidium, which coarols the entire state apparatus. _.1,!EE222..antelliteEa. The Soviet long-term economid program for the European Satellites envisions their complete transformation into planned economies on the Soviet model. Although this goal has not been achieved, the degree of socialization in the Satellites is such as to provide thsz basis for centralized direction of the econopy. The principal difference between the Soviet and Satellite economies is that a larger porportion of industry, trade, and agriculture is still in private hands in the Satellites. While the number of private firms is still fairly large, their con- tribution to industrial production is relatively small In East Germany, about 20 percent of gross industrial output is produced by private firms, most of which are handicraft firms such as bakeries and dressmaking and woodworking establishments. In Czechoslovakia, all ?firms employing more that 50 persons and all concerns of any size operating in key industries have been nationalized. Asubstantial part of retail trade is still carried in private bands in several of the Satellites. Probably the greatest variation in the degree of socialization among the Satellites is in the field of agriculture. East Germany, with approximately 18 percent of arable land, collectivized, has the mrallest degree of socialization of agriculture, whereas i33. Bulgaria about 6o percent of the arable land is collectivized. The existence of a larger private sector in the Satellite economies than in the USSR makes very little difference in the degree of control exercised by the governments over the economies. The private sector of industry and trade not only Is small but also is fragmented. In each of the Satellites the socialized sector of the economy controls all basic, large, and strategic industry as well as all commercial transportation, communications, banking, insurance, wholesale trade, and ftureign trade. Private trade and industry are effectively controlled by taxa- tion, and the allocation of raw materials is controlled by the central government. In agriculture, controls take the forms of taxation, compulsory delivery quotas, allocation of seed and other supplies, and the oanership of virtually all agricul- tural machinery by the Machine Tractor Stations. Probably moreis known about the process of economic planning in East Germany than in the other Satellites. Since eaeh, of the Satellites explicitly models its economic planning on that of the USSR, the process is probably quite similar throughout the Satellites. The greatest degree of difference is probably in the process of price formation. Each of. the Satellites inherited a price structure from its capitalist predecessor. The speed with which thesenerice struc- tures have been changed to accord with Soviet practice has depended largely upon internal conditions in each Satellite. According to the West German Ministry for All-German Questions., the East German State Planning Commission has taken over the forms, nomenclature, and commodity code unchanged from the Soviet models. The same source reports that East Germapy and each of the other European Satellites receive yearly from the USSR mandatory goals for the production of key products. These mandatory goals comprise the most important products of the basic and machine building industries. It also is reported that the USSR dictates investment and import and export plans in considerable detail. - 5 - S-E-C-R-E-T Approved For Release 1999/013/2n:CIA;RDP79T01049A000900030013-2 Approved FOr Release 1.999/09/27 : CIA-RDP79T01049A000900030013-2 S-E4-R-E-T The mandatory production,goald dictated by Soviet authorities are expanded by the State Planning Commission arid then transmitted to the responsible minis- tries. The ministries spell outthasoals in more detail and transmit them in turn to the nationalized firms. The nationalized firms then work out requirements plans incorporating the material; labor investment, and subsidies necessary to meet the Plan goals. The requi;itMants plans follow the same route back to the State Planning Commission, and are adjusted at each higher administrative level. The State Planning Commission theh "balances' the material requirements with avail- able resources and, in consultatibn with the Ministry for Finance, draws up plans for production, investment, finandel export, import, and supply of material and labor. The individual plans are reported to be synchronized exactly in quantita- tive terms only with reepecit to the key positions laid down by the Soviet authorities. For other products, only a general aggregative balancing takes place. In East Germanyoproductibt is planned for key products in quantitative terms and also in terms of plan prices, or Messwerten. Planning of other produc- tion is largely in terms of thelesswerten only. The Nesowerten are based on the prices used in the 1950 Pla4, which were, for the most part, current prices. The Messwerten were fixed for the duration of the Five Year Plan and were intended to take the place of a price index -- that is, to permit the measurement of the change in production in constant price. After the =elusion of the current Five Year Plan in 1955, the Messwertet will be abandoned, and planning will be on the basis of prices during the preceding year. It is planned to gradually recalculate all prices on the basis of the Marxian labor theory of value. The Soviet planners do not seem to have solved in theory the problem of expressing relative scarcity in the price system. In practiCe the problem is partially solved on an ad hoc basis by manipulating the turnover tax rates on retail sales and by the use of a priorities system for allocating raw materials within the nationalized economy. The Ibalancing" of planned production and material requirements by the State Planning Commission is intended to =itch supply with demand but has not succeeded in achieving this result. Goods Which could not be sold (at fixed prices) have been produced according to plan, while at the same time raw materials used in their production have been in short supply. The import and export plans seem never to be fulfilled on time and raw material shortages are chronic. East German law provides that within a month after the distribution of Plan goals to the firms they must complete contracts with ether firms and with import and export agencies for both their material requirements and the sale of their production. This has not worked in practice either. In short, the planning process is not efficient, but it does work fdr the achievement of a limited number of high priority goals. Financial planning in East Germany, and probably the Other Satellites as well, serves the purpose of ?patrol rather' than direction, the latter being deter- mined by the productiOn plan. The progress of production is checked not only by a myriad of reports on physical production but by the flow of credits through the banking system. The East Germans have tried to limit the use of cash to payment of wages and purchases at retail. Since the central bank knows the wage bill, retail turnover and savings of any given period, the bank can theoretically cal- culate the amount of cash being hoarded or going into illegal trade. Many aspects of the economy are planned other than production and finance. The national plans include such factors as research, transport, labor productivity, cost reduction, scale of living of the population, health, culture, and sports. Each firm must draw up a yearly plan covering its contribution to each part of the national plan. The paper work involved is enormous. The incentives offered both labor and management to fulfil plans are a combination of rewards and penalties. Management receives high salaries, privileges with respect to housing and rationed commodities, and less tangible honors of various kinds and, on the other hand, is always in danger of being prosecuted for economic sabotage if plans are not fulfilled. Labor is paid on a piecework basis wherever possible. Workers are given extra financial rewards if they exceed production norms and thus provide a basis for raising norms. Ideological propaganda seeks to convince workers that only by working harder and submitting to the regulations can the general welfare of the country be raised. On the other hand, the inefficient worker is threatened with being drafted into the army or sent to prison for economic sabotage or (in East Germany and Czechoslovakia) is threatened with being sent to work in the uranium mines. - 6 - S-E-C-R-E-T Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 F. ? Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 SaE-C-R-E-T The instrument used by the USSR to force these conditions upon the popu- lace of the Satellites is the communist parties of those countries, which are in turn backed up by the Red Army. An auxiliarymeana of Soviet economic control in the Satellites has been Soviet ownership (complete or partial) of some of the most important corporations in the Satellites. These are being retUrned to local owner- ship. C. Communist China* The best way to sumMarizethe,Chiaatee economic organization and adminis- tration . is to characterize it as an gmbryonic Soviet system. While the fully devel- oped structure may prove to have some'signiftcant differences in detail, on the basis of present knowledge it must be prepumedthat the essentials will be the same. Indeed, one of the more notable Soviet technical exports is its system of economic administretion. After the basic ideology it is probably the strongest unifying factor in the Soviet Bloc. Although many details are not kaown,,it is clear that in China, as in the USSR, the Communist Party controla the economic Activities of the government appara- tus. As in the USSR, one or the,princiPal functions of the state is the adminis- tration of the economy -- that is, aupervision over the productioa and distribution of goods and services. However, in Communist China the degree of state participa- tion in production and the effectiveness of the control of resources allocation are considerably less than ip the USSR. In China) as in the USSR, the Communist Party determines the major elements of national economic policy. Instructions are passed on to the Government Adminis- trative Council (GAC)? to which the State Planning Committee is attached. This committee is still very inexperienced- Failure to publish the current Five Year Plan is probably due to the tentative or provisional nature of many of its goals and the lack of detailed elaboration of the major targets. In direct, line of command below the GAC is the Committee on Finance and Economics caFE), to which the economic ministries,are subordinate and to which the Central Statistical Bureau is attached. The organizatioa and functions of each ministrY are roughly analogous to Soviet models. At this pointa.nowever, very significant differences appear, for the Chinese Communist state owns but *a part of the modern industrial sector, and virtually all agricultural production is in the hands of individual peasants. The share of the state sector in total industrial production is best summarized by the following quotatiOn from the communique released by the Central Statistical Bureau: Of the 1952 total valUe of output of State-owned and private industry, State-owned industry accoturted for 50 percent, joint State and privately owned industky for 5 percent, cooperatives fall* 3 PerCent, and private industry for 42 percent. Of the total value of output of the larger State-owned and private itdustrial enterprises, State-owned industry accounted for 60 percent, joint State and privately owned industry 6 per- cent, cooperatives 3 percent, and private industry 31 percent.* However, indirect controls are extensive: (1) the state has a monopoly of all banking)(2) the state is the largest single customer for the private sector, and (3) the state controls a large part of the supply of goods and services to the private sector. Almost all new construction is concentrated in the state sector. All railroads, airlines, telecomiumications, and most of the shipping is owned by the state. A few banks are still privately owned, but the state controls their operations. State control of agriculture is exercised through the political control of the countryside, primarily by heavy taxes in kind and by various changes in the ownership of land under the program for "agrarian reform' With the exception of a few state farms in the Northeast and Northwest, all agricultural production is carried out by the individual peaSantS. The state also exercises an important measure of control over peasant agriculture through state operation of transport and trade channels. * FB1S, 2 October 1953, PP. AAA 19-20. - 7 - S-E-C-R-E-T Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 Approved For Release 1.999/09/27 : CIA-RDP79T01049A000900030013-2 1-11-21,41. In the ease of produoersr goods end essential raw materials the central planning organs are able to ctert more control. Alloaationa of these resources are made by the Commdttee onlinanee-end EcOncMics. itaverently the Soviet gystma O f funded commodities provide* the model, although the Chinese here yet to work out a suitable system, or Input-umUmb norms- Consequently, the central planning COOnns seem to have considerable difficulty in making imulmasso cir 412.4# espitel geode requiremente for their investment program and the indirect* Wats of these requirements On the economy. Goods and. servioee 'which are not centrally ellasetet enter the free market, except for certain agricultural commodities 'Where state-owned distribution channels dominate trade. The state hes an effective apparatus for determining the aggregete volume of sewing. Reveoue from the sarlea1tar63. in kind is estimated at approxiastelv 30 mIllion tons of pain per year, and an Waimea amount of.grein, estimated. at 10 million tons is obtained in smohengator (mousers' goods which. the state pro. cores at wholes;le prices. he timula oportMons of private and government corporations are required to pass thrOngh the state balking eysteet, thus permittinG the central authorities to monitor and control the ec000my of theism etterprises. Bente the collection of tames on tettimess profit* is relatively sample, and these taxes total about 70 pereent of tote. tats Immo. Yorelipx trade le divided between public and private corporation*, hut 411 financial operations of the latter are spin handled by the state-oontrolled banks. ? Ocmernment investment in eatoultur* tBprinarily in irrigation, flood control, sad. general conservetion work. MA the exottption or investment by the peaeantry and the small private bendicrart kit service enterprises, state control of investment is virtually ellAnelnettoe. As far as is known et present, nisi reserves ere limited to grain stocks. It is likely that this activity will be extended es the economy develops. Little is known about the Mines. labor market. Apparently labor is allocated, by manipuletion of mega rates, which ere controlled by the central govern. mont. The operation of the itoeimlimadiecommty is directly supervised by the eco- nomic ministries and their adeordlnite egenotes. As far is is knownr there are on4 two important external orgea0 atalentrol andveritication: tbebanking system and the Party. The latter les organimeklika the Communist Party -of the USW and bas its cells scattered throngh the ehtire fabric of the society. It is iMportatt to note on* Crucial difference hewer between Communist . China and the USSR. In 1917-18 the *meet= pemesat made his own reVolution in the countryside be seisea the land sad burned the manor houses mills OVA initietiVe% The =MOO peasantry, Oaths other pond, was organized to carry out "land reform" by professional revalOtionariesio the Party "cadres," who accompanied theArmies of "Ilberaticee and geinedadditional recruits in the villages ae their murk prooeeded. Xi Chins., "land reform! vas a. reftlution from above. These cadres not, constitute the principal aPparatus of political control in the countryside. Thus the Chinese Communists have alreadY eateblishedS felrAY effective mechanism for mobilising investmentresoaramsimad. for controlling the allocation of producers' goods and essentielima, materiels. Te industry tbe State sector is the "commanding hoistitiasnimra credit ea marketing Controls are atm- prehensive and effective. Agrionitare is tr far the weakest link in the control struoture. However, the regime le cepehle or collecting the ctiid tax in kind and does control insestmese in irrigOtide and Ow& control. In comparison with the current Boviet =eel, the COmenniat Chinese *yam of economic planning and control is es yet primitive and inomaplete. Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 r- Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 11 Ecmonic Base. ? -kC ? A ;.Lance at the resources.,0tithin Wis of ';he 'Soviet, Bloc . _ugh to esulblfsb the fact that 'a fOrmidable ecOnomie base 1,; at tbr dispoenl:ofo-he - USSR. The Bloc comprises the'', "artland" of w asieal land mass, wItn i-, popu- latipn of neuly 800 million asycompared -nMdllion In the VS and 5.C.) millior, in ail of North American and UkStern Euro s Bloc is entirely self-seffletert in, ID04, :HI, has a hcory,indnstri to the ,.. ..... . n of whict every noeernMeneal resoU'ree is being. devoted 'and poisesses 4ai-Iall the raw materials required. eo keep that industry alive- The .SateiLlitfenotiataies,have,been ruthlessly inte- grated with that of he USSR in an eftdri4..0 ceapensate for ail points of weaknest in the-SoViet indust:rial'machine.- 4 A. Populationenlanleillwejere% - ?? Collectively the SovieteDioe.tbday inpludes two of the three ,111,0St ,poptavls the world, the USSR -and COMmunistjNitaa, A description fol.iews,of ehe saliene features of the tfrOPOOlon ena. labor force of the ehree,broad geographel ares, the USSR, the Eurepean-Batellites, and Communist4hina. 1. USSR. Ln 1953. the USSR)eith el0 Millio4 people ranks.third lmonn theeemntrnee of the world. its 1950 population was'aVout one;-thind larger than that of the VS. Despite recurring :turtUlencednd CeaStroPhe the Population within the pre-I939 boundaries ethat is, 4.hose established hy the Treaty of Brest-Litovsk) alm,st tripled, from 60 million in 1950 to 1.70 niiiJ..i in 1939. See Appendix,,Teble.1L)4 By the end of 1940, annexation added some 23 $fl.lon people, principally frem Eastern Poland, the Baltic States, and -Northern Bukovina. Further annexaelons were made at th clbse of World VT* 11. Roughly speaking, these annexa ion replaced the Loses in the USSR which resulted,ihdiwtair, or dlreetly.from the . Ac in bt.her countries undergoing economic development, bieth end dearh renee have declined. The excess of births ,over deaths,:however,,baos rueeined high th 1939, 36 i)ercent, of the populstion.was anar 15 years of age, and aboue.57 per- cent was IL the 15 to 60 age group. The proportional size of this iieeer group is expected to rise at least until 1955. _ - The Soviet govetnmentehas .triedto suotain a high birth rate-and-has suceeeded in reducing the death rite,., while inadequate, is ftee., ,:eo Abort:ion etas nrencrthed in 1935, and in the:fnialowing.yeqr the government 141;14,2d a comprehensive pro-naralisn decree. T1]6.meafure.(a.1 strengthened the law pro- hibiting abortions, ;,b) prdvided annual allowances -for mothers of large families, kc; made itemore difficult to secure divorces, and (d) provided for expansien-of i- nurseries and. kindergartens. , . , Projections for the military 4te group (males 'X to 31! ;Rare of ..e, indicate that the USSR will continue to:bige Oubatantially largeryeeerves of mili- tary manpower than the US. The 1953 estimAte of persona In the Soviet armed forces was million, - - ? ? ^ ? %,t'As indecated in the Appendik, Able 1,ti there 'has been a eurplus of women, in the.USSIL Even before the war, in 1939 for example, there were 6bout 7 million more women than men. This iMbalanmremained in 1950 nn4 is expected e ee to continue, for years to come. . ? . Under the Soviet regime, urbanization has proceeded an a rapid rate: For 30 years prior to the intrOduction of-theTFiVe, Year Plene the urban populateon constituted less than e0 percent of the total... .After 19.28, in heeping with the general Industriaa develOpment progremin a 1=6i-scald Shift, from the farms to urban areas was encouraged and frequent1y'f6tded; Ain1950,,about 0 percent of the e population-of the USSR, orealiiint 80 mi1lt647:beaple, lived in urban areas. At the same tied the USSR has beceime a:land of bifie cities. Between 1926 and 1939 the number of Soviet cities of more than 100,000 population increased from 31 to 8e. Estinstes for the total labor force vary, as a result partly of scar- city of official information and partly of the existence of large numbers of polleical prisoners and unrcpatriated prisoners of war. In other countries the labor eentributeu by orisonera is negligible, but estimates of the size of ,his fore t- in the OSSe range bett,wen 35 and 12 million peopLe * P- 2:4. below. -9-. - - Approved For Release 1999/U9727 7 _ P79T01049A000900030013-2 - ? - Approved FOr Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 S-E-C-R-E-T The most recent census, in 1939, reported civilian employment of 76.4 million in a population of 170 million. The total labor force, however,' including the armed forces, slave workers, and .prisoners, was 90.7 million. In 1951, something like 97 percent of the Soviet working population was employed. in state-owned enterprises or on collective farms. Excepting the armed forces the labor force was estimated at 94 million in 1947 and at 98 million in 1953. In the 6 years following 1947 the agricultural civilian labor force is estimated to have declined. by 4 million, whereas the nonagricultural labor force gained 10 million persons. One noteworthy feature le that in this ahifting process the agricultural community seems to have lost a great many essential skilled workers, such as mechanics. Of the nonagricultural workers (see Appendix, Table 1), the comae,- tration in industry, mining, and construction is high, reflecting the emphasis on heavy industry in the USSR. The number of skilled workers is increasing,. and technical education programs are being expanded to augment this group. The compulsory labor service .education program for 14 and 15 years old has sharply declined in recent years as the USSR has gradually shifted to a bropaer technical educational base for the entire population. 2. European Satellites. The populationof the European Satellites is believed to have increased somewhat from 1947 to 1952, from about 88 million to about 91 million. (See Appendix, Table 2.*) The population increase in the Satellites between 1947 and 1957 is projected at about 6 million, a rate of increase of 7.3 percent in 10 years, or less than half of the expected rate of increase for the USSR during the same period. Individual rates of increase for the Satellites range from zero in the Soviet Zone of Germany to 22 per thousand in Albania. In 1953 the number of males in the European Satellites in the 15 to 49 age group was 21.4 million. The number of physically fit males was 14.6 million. The total on military duty in this year is estimated at 1.6 million, which is ? compared with 4.4 million =military duty in the USSR. By 1957 the Satellites are expected to have increased civilian employ- ment 6.4 miliion over the 1947 figure of 38.4 million. This is a 16 percent in- crease and is larger than the projected increase in the USSR. As shown in the Appendix Table 2, the Increase will be a net Increase resulting from a decrease of 1.9 million agricultural workers and an .increase of 8.3 million nonagricultural workers. Involved it this shift will be the more extensive employment of women, since the increase in civilian labor force is approximately equal to the total increase in population for the period. Nevertheless, considerable additional labor would still be available if average Edropean wicultural productivity were attained in the Satellites. A About 90 percent of the total increase in nonagricultural workers is expected-to be employed in industry, mining, and. construction -- these sectors of the economy considered most vital by the Caimunists. The addition of 7.5 million employees will result in a total of 16.1 million in these sectors in 1957. This totaa is to be compared with a projected 19.1 million for this group in the USSR for the same year. In 1952 there were 3.9 million skilled workers in the Satellites, which is to be compared with 8.3 million in the USSR. There were 1.9 million in the engineering, professional, and technical group in the Satellites and 4.9 million in the USSR. However, there Vert 14.1 million unskilled workers in the Satellites as compared with 27.6 million in the USSR. The European Satellites are adopting the system of vocational training which has been evolved in the USSR. Under pressure for more highly trained personnel, they are also acceleratiug per- sonnel 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. 3. Communist China. Little is known about the population of China. There has never been a census, as we use the term. The latest estimate of Chinese population in 1952, which was promulgated for adoption apd use, is 476 million. (The Communists have given the figure of 483 million, but this includes the 7.7 million in Formosa.) * P. 2'i-, below. -10- Approved For Release 1999/01114-M3ZDP79T01049A000900030013-2 Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 S-E-C-R-E-T mow. 1???? .011 MID For several decades to come tee possibility of population growthaill be determined by the extent of control aebieved over the death rate, since the birth rate probably will remain high. Tr China improves the pane health ser- vice, the rate of growth might conceivably approximate that of India for the 1931-)41 period -- 1.5 percent per year. In 5 years this would raise the popula- tion by 35 million. Indications are that by 1957 a total population of 00 million could be supported with only a slight lowering of the individual caloric intake per day. The age distribution of a population is-determined by the birth and death rates. China with its high birth and death rates probably has a yeanaer population than the major industrial countries of the world. Specific information oh this subject iS, unfortunately, not available. One estimate, resulting fram surveys, indicate that 37 percent or the population is under 15 years ola 60 percent is between 15 and 65 years, and =1y Lpercent is over 65 years. Ihe caa ratio has been estimated. at 110 males to 100 females. China possesqas mare than adequate military manpower. There are about 280 million persons in the 15 to 65 age group. Although the majority Of the Chinese people live it rural areas, the total urban pepulation is among the largest in the world. In China, about 73 million people live in cities 'of more than 10,000 population. In the US in 1940, 6o million people lived in citied of equivalent size. Relative percentages of urban to total population for tbANtwo countries were, however, 10 percent for China and 48 percent for the U. Of a total labor forte estimated at 229 million to 267 million workers in 1950-51, about 85 percent (195 million to 227 million) were rural workers. Most of these, or about 75 percent (172 million to 200 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 fisherman on inland lakes, rivers, and ponds probably are pert-time farmers. From 20 to 25 percent of the labor force is nonagricultural, only a small part of which (possibly 3 million to 4 million) is employed in Modern type industry. In addition to this, there are probably about 12 million workers in the handicraft trades. Available material indicates that skilled labor is as scarce as commcn labor is abundant. In a few categories of top level engineers and scientists there is a limited supply ok 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 are adopting the system of adult and workers schools and Vocational high schools common to the Soviet Bloc. The demands upon trained manpower, however, are expected to be so great as to jeopardize the successful completion of the plans. B. Agriculture. Agriculture presents a unique and complex picture in the Soviet Bloc countries. Of the approximately 80o million people living 'within the Bloc, about 70 percent are dependent on agriculture for their support. With its variety of climate and soil, every crop known in the temperate and subtropical zones can be grown in the Bloc. 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 sub- sistence diet, some exports, and at least limited state reserves of food. The situation in agriculture is discussed below for each of the major areas. 1. USSR. 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 unsuitable 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 2.47 acres) in 1930 (1930 boundaries) to about 155 million hectares in 1952 (1952 boundaries). This expansion has taken place both through territorial acqui- sitions and through the extension of the cultivated area into regions of erratic -111 - S-EaC-R-E-T Approved For Release 1999/09/17 : EIA-k15P79T01049A000900030013-2 Approved For Release /999/09/27 : CIA-RDP79T01049A000900030013-2 S-E-C-R-E-T production. There is hardly a crop of the temperate and subtropical zones that is not grown in the USSR. Grains dominate the crop pattern, and potatoes, sugar beets, cotton, flax, feed. crops, and sunflower seed are the most important nongrain crops. Soviet agricultural policy has been the main obstacle to increasing production. Since the Bolshevik Revolution a vicious struggle has been waged be 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 the strange anachronism that "capitalism existed in the village alongside socialism in the city" caused a. vigorous renewal of the collectivization program in 1928. By 1940, 20 million farm households, constituting 97 percent of the peasant population, had been amalgamated into 236,000 col/ective farms. FUrtheramalgamaa tion 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. Ccalective farms represent a pooling of the land and labor resources of many small peasant farms.- Theoretically., a collective is a democratic institution, governed by a model 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 produc- tion which has been necessary to implement the industrialization of the country. 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 individual 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 livestock have been a primary source of con- cern 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 collec- tive farm, is the goal of the Communist Party of the USSR. As a source of investmeet, 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 mechanization, use of mineral fer- tilizers, irrigation, and improved agro-techniques have resulted in only modest increases in aver-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 an them. Sugar production has increased from 2.48 million metric tons in 1936 to 2.75 million metric tons in 1952, and cotton from 731,691 metric tons in 1938 to 874,000 metric tome (ginned basis) during the same period. Grain production increased slightly from 88.5 million metric tons in 1938 to 91.6 million tons in 1952. -Production of potatoes, vegetables, and live- stock, however, has 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 some sectors such as livestock (chiefly caws) is even less than it was in 1928. Mechanization, which Was facilitated. by collectivization, released millions of workers for other industries. Machine Tractor Stations (S's) were set up to service the needs of the collective farms. Tractors in the MTS's in- creased from 66,000 units of 15 horsepower in 1930 (1930 boanaaries) to 1 million units of 15 horsepower in 1952 (1952 boundaries) 4 Production of other agricultural machinery also increased during this period." The large increases in agricultural output the Soviets had envisioned through mechanization, however, did not materialize, because ofthe inefficient use of the machines. In 195Q the output of work per 15-horsepower unit was only about the same as in 19370 despite marked technological improvements. Use of chemical fertilizers has increased from 228,000 metric tons in 1928 (1923 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 potatoes and vegetables, which comprise- less than 20 percent of the diet. The scarcity of meat and dairy products is even greater; they comprise oaly about 5 percent of the diet. - 12 - S-E-C-R-E-T, Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 S-E-C-R-E-T 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 plots has been relaxed temporarily, and. production of livestock and vegetables is being encouraged. by a series of measures, including the follow- ing: a. A greater emphasis on material incentives. ProcUrement prices for livestock products and vegetables have been increased. Taxes on private plots have been lowerei considerably and slight tax exemptions granted to encourage the farmers to obtain livestock. b. Increased investment in machinery necessary for the cultivation of vegetables. c. Agricultural loans to provide more buildings and barns on the collective farms. d. Individual responsibility, especially an the part of tractor drivers, designed. to increase machine productivity. e. Improvement in agro-techniques -- more chemical fertiliSere, impraved seed stock, and more agricultural and livestock specialipts. In general, it can he said that the USSR produces sufficient food and industrial crops for its ova use, SilrVil 0 low standard of living. Despite the noted insuffieieacies, the agricultUral economy has riten friva a lulif primi- tive to a fairly modern status since 194: Sown acreage has just about reached a peak, and the USPR prop,ses to achieva0SeglIent increases in procluction'hy increasing yields through a greater use or chemics4 fert1401ers, by greater mechanization, and. by irrigation and improved. agro-techniqUaa. Wit4 appropriate priorities the USSR *ay he able within the next 5 Rr 6 years to ach4eye ita goals of providing more and varied rood to the populace and sufficient `.6asfaxaterialp to the industrial plant. 2. European Satellites. 1r f, The transformation of farming in Eastern Europe from Mall indepen- dently owned plots to large socialist eaterPrieeS in the form of 011ectivelvand state farms has been the'of the Onpilinist governments eatablished since World War II. The rate en& eNtellt'or 13944111W. farming, however, varies consider- ably among the Satellites. The 'Percent of agricultural land farmed by the socialist sector ranges from approximately 1 percent in East Germany to about 60 percent , ? ? In Bulgaria. ' Agriculture has presented the Ceaunnist governments with the greatest problems in their attempt to nationalize the production facilities of the Satellite economies- In implementing their ambitious industrialization programs, the Satellites are dependent upon the egriculture-sector'of the economy to supply needed manpower 80. 4 1a4e ahere or the experts reciutie4to finance im.?erts of machinery and. raw materials. the Oeth641441ed, 14Y, Vie ?Pirerztlents to release agriculture manpOwitte Indust* eq4 040404 47,64p Share Of the indiEenous production have been C4mpu1sory delivery qu9tas'3nd 9ollacAiVizat1on. This policy has had the over-all effeet of depressing agricultural production instead of increasing production according to plans. Despite Communist concern for increased production agricultural output has not yet attained, prewar levels. Lack of natural and chemical fertili- zers, shifts of population, and the general apathy of the peasantry bralght on, by collectivization contribute to low productivity. Grains dominate the crop pattern, although considerable emphasis is being given to industrial crops, mainly sugar beets. Sown acreages and production for the Satellites as a whole are given in the Appendix, Table 3* with a prewar comparison. As a direct result of government policies and adverse weather con- ditions, 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. This has resulted in a serious shortage for the indus- trial population in meat, fats, and dairy products. The primary emphasfs of the *. P.20, below. . 13 _ Approved For Release 1999/139/2704CATRDP79T01049A000900030013-2 ' - ApproVed For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 1-E-C-1144 recently adopted "new course" as pertains the antnal husbandry industry. ? to agriculture is placed on improving The mechanization of 'agriculture; baa been emphasized in the Satellites, but with slight success. Bumbers of tractors and complemeatery eqpipment have increased, but not to the extent called. for bathe Plans. To foster and support collectivization, the mechanical draft power base must be increased. This fact was revealed in the self-criticiam contained in the recent announcements by. most of the Satellites of the "near coUrse" for agriculture. Increased emphasis will now be given to supplyine agriculture with more machinery to relieve the labor and draft power shortage during thezext 2 years. The immediate outlook for an increase in agricultural production and .food eqP111,7 in the Satpllites is not very favorable, despite the fact that invest- ments and, lacentive goods are to be increased. and coppuloory delivery quotas reduced. Cereals will continue to constitute the major share of the diet of the population, and meat, feta, and oils will remain in short supply. 3. Communfot China. Chinese agriculture is characterized by too many people on too little land, utderaapitalizetion, iutensive cultivation, and Primitive technolou. At least 80 pereent of the 450 million to 500 million people in China live on the land. The arable land of China probably does not exceed 35. million acres, or 16.7 per- cent of the total landtrea and the cultivated. area,is.estimated at 272 million acres. Thus there is approximately 0.6 acre of cUltiVated land per person: To ? increase yielfib, much of the cultivated land is. irrigated. Cereal grains, potatoes', and other foods deriVed, from plants constitute 85 to,90,percent of the total food' =Par. Inmost mate of China, little is providelikaye*the alnimum:Onliy caloric intake recessarY for 'survival, and the diet is.uaually defieient in one pr ,more of the nutritive elements essential to optimuni health. Chinese agriculture, moreover, is extremely susceptibliito the vagaries of nature. Mel of the -agricultural prodnatida is conceptrated in river lowlands, where it is subject to floods. trought frequentlY oedurs in the plairs of North China, typhoons often ravage the coeStal areas,' insect Teets are numerous, ahd insecticides virtually ? unknown.: Zap Chinese Communist 711tha reform" program has been a revolution from above, organized lathe villages by: Oadres of profeesieual Communist reVolutionaries. AS a result of this "reform' t the average size of the Chinese farm has been slightly reduced, which makes the acqpisition Of capital equipment even more difficult than before. The ComMunists have encouragel several forms of mutual cooperation in agriculture. The cooperative forms range from seasonal pooling of labor with ne change in ownership of land or implements to joint farming of pooled. land hold- ings with common ownership of some. implements and drattpower. Ownership of ibe land even in the most advanced form is still retained by the individual. the bUrdea of the agricultural tat in kind (levied at progressive rates) is believed to be heavy. It La estimated that 30 million metric tons of grail:rare collected in taxes each, year, and 10 Million tons in addition through the state cooperative network. This represents one of the most important sources of income te the states the grain tax provides the food for the cities ani the armed forces, and the prindipal source of foreign exchange. It is believed that the agricultural sector Accounts for se Much as 75 percent of the exports of Communist China, the bulk of which are used to pay' tor imports of capital goods from. other Soviet Bloc countries. ,tbe Chinese Communists, howatera have e achieVements to their credit: (a) they have energetically WO continued certain Vationalist-initiated flood control and irrigation projects, such as the Mai BiVer project, and have begun Others with a consequent increase lathe iboteljtrigated area, and (b) they have improved the transportation gyetem so that surpluses can be shirttail to deficit areas. Itt 1952, production of the major agricultural crops approximated prewar. levels. Calectivizatioe of agriculture remains the explicit objective of the Chinese Comunist PttUy. Apparently it Will be delaYed for some time, almost certainly until the next Pive Year Platt, which should begin in 1937. One must presume that the coat of collectivization in lost graduation and in human lives would be even more appalling in China than in the USSR. - lh S-E-C-R-E4 Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 S-E-C-R-E4 Production of Major Cropa in Communist China 1949-52 Thousand Metric Tons 1949 1950 1951 1952_ Grains 2, 104,310 107,810 106,840 111,890 Potatoes:1h/ 24,500 28,987 31,490 34,221 Cotton c 370 529 653 609 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. In attempting to increase the productivity of Chinese agriculture the Chinese Communists face a difficult problem. With the exception of irrigation aM flood control measures, the Chinese Communist actions to date probably have tended to aggravate rather 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 mechanization for 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 obtains in the USSR. C. Industry. The development of the industrial base of the USSR has been the object of much attention on the part of the Soviet planners. As the Satellites and China were brought into the Soviet Bloc, a similar emphasis was placed on their indus- trial development. The pattern followed is first to place greatest importance and highest priority on heavy industry and producers' goods. In the USSR the 1930s were devoted to the accumulation of basic capital equipment, especially by impor- tation,with concomitant eMphasis on teChnical'training of the labor force. The USSR is now in a position to go forward-in a rather balanced fashion, with primarY reliance upon indigenous resources. The "future pattern can be expected to show relatively more emphasis on basic materials, including energy, required to support its industrial MAChine ,Bowevw,the current "new course" indicates an evolving cbsmge in the direction of making iiiittitraftertfortilaemip and expand consumers' goods industriea. In the folloWing secttoz tbe ir4uOrral4Ase,olf the Bloc will be described under tbe headings of energy, metals, caMent, chaWiaals;, rubber,; manufacturing, and ,military end items. ' 1. Energy. The potential energy resources of the Soviet Bloc are adequate to support\sizable increase* in industrial capacity on a long-term basis. By and large coal is the main source of energy in the Bloc. Reserves of anthracite, bitumihaus coal and lignite are very large'and are thought to be adequate for almost any conceivable future needs. The long-term goal for the product Ion of all types of coal in the USSR Is 500 million metric tons by about 1960. Total Soviet Bloc output of anthracite and bituminous coal in 1952 was 372 million metric tons, of which 59 percent was produced in the USSR, 30 percent in the Satellites, and 11 percent in China. Pram 1940 to 1952, production in the USSR increased by 58 percent, to 220 million metric tons in 1952. In the Satellites the production of coal increased, but little between 1940 and 1952, from 103 million to 110 million metric tons. This production 50 percent that of the USSR, was confined mainly to the Silesian coal fields, which are divided politically between Poland and Czechoslovakia. In 1952, Poland produced 76 percent and Czechoslovakia 18 percent of all the coal produced by the Satellite countries. China in 1952 produced 48 million metric tons, about twice as much as Czechoslovakia. In addition to anthracite and bituminous coal, large quantities - 15 - S-E-C-R-E1 Approved For Release 1999/09/27,: CIA-RDP79T01049A000900030013-2 Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 S-E-C-R-E-T of lignite are produced. In 19524 outpnt of lignite in the Bloc was 325 million metric tons -- 82 million metric tonin the USSR and 243 million metric tons in the European Satellites. The largest Satellite producer, East Germany, accounted for 73 percent of the total Sate/lite output. The emphasis placed on liquid fuels in the USSR is indicated by the present announced intention to double crude oil distillation and cracking capac- ity between 1950 and 1955 in order to produce annually 70 million metric tons of petroleum products. The limiting factor at present is not the inadequacy of crude petroleum but of refining and cracking facilities. In 1952, production of crude petroleum in the Soviet Bloc was 58.8 million metric tons, representing an increase of 55 percent over 1940. The USSR produced 80 percent of the Bloc total in 1952. The European Satellites, principally Rumania, accounted for substantially all of the balance, with only token production occurring in China. In addition to production from crude petroleum, the Bloc produced about 2 million metric tons of shale oil and synthetic liquid fuels. East Germany produced about two-thirds of this total, with the USSR, Czechoslovakia, and, to a lesser extent, China accounting for the balance. Soviet preoccupation with the development of sources of electric power dates from the announcement of the Goelro Plan in 1921. Continuing emphasis on this energy source is indicated by the announced long-run goal of 250 billion kilowatt-hours to be met between 1960 and 1965. Production of electric power in the Soviet Bloc in 1952 was 180 billion kilowatt-hours. Of the Bloc total, 65 percent was produced In the USSR, 31 percent in the Satellites, and only 4 percent in China. The Soviet output increased by 144 percent between 1940 and 1952, to 117 billion kilowatt-hours, about 15 percent of which was hydropower. Output in China in 1952 was 6.3 billion kilowatt-hours. The European Satellites produced 56 billion kilowatt-hours in 1952, almost half as much as the USSR. East Germany was the largest of the Satellite producers, accounting for 41 percent of total Satellite output. The next two largest Satellite producers were Poland with 23 percent and Czechoslovakia with 21 percent., 2. Metals. Since 1928 the growth of metals production in the USSR has been im- pressive. By 1951, despite the effects of the war, production had increased almost tenfold over 1928. As a result of the ambitious investment program, the concentration on heavy industrial production and the growth of over-all indus- trial activity, metal supplies in general seem to have remained tight. The position in specific metals, however, is subject to considerable variation. Neither the European Satellites nor China has so well balanced a position as the USSR, but they do produce substantial quantities and, in a number of important cases, serve to round out the supplies of the Soviet Bloc as a whole. Steel is naturally a major item of interest on the part of the Soviet planners. The USSR has announced a long-run goal for 1960 calling for 50 million metric tons of pig iron and 60 million metric tons of steel. In 1952 the USSR accounted for 77 percent of Soviet Bloc production, having increased output from 18 million metric tons in 1940 to 34 million metric tons. European Satellite production, which was 9.4 million metric tons in 1952, was concentrated in Czecho- slovakia, Poland, and East Germany. These three countries accounted for 86 per- cent of the 1952 production of the Satellites. Chinese production was 1.2 million metric tons in 1952, and it is on the increase. Primary copper production in the Soviet Bloc, at 320,000 metric tons in 1952, is believed to have fallen short of requirements. The USSR is the major source, having produced 287,000 metric tons in 1952, or 90 percent of the Bloc output. This represents a 109 percent increase over 1940. The European Satellites contributed 29,000 metric tons, or 9 percent of the total Bloc output. China, a small producer, accounted for only 5,000 metric tons in 1952. Aluminum, in addition to its use in the aircraft industry and for long-distance electrical transmission, can serve adequately in, many instances as a substitute for copper. The USSR in 1952 accounted for 89 percent of the total Soviet Bloc production of primary aluminum. The Soviet output of 220,000 metric tons in that year represented a 267 percent increase over its 1940 production. The balance of Bloc production, 27,000 metric tons, was divided between BUngary, 22,000 metric tons, and East Germany, 5,000 metric tons. It is significant to S-E-C-R-E-T Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 ? APproAd For Release '1'999/09/27 : CIA-RDP79T01049A000900030013-2 S-E-C-RT note that more than 50 perpent of thesupplyof bauxite available to the USSR in 1952 was derived from eonindigenous resources. RUhgaryeUpperted the Soviet deficiency and. provided the total supply for the rest of t3e'.,/3log. ? The Soviet Bloc countriee Are interdependent for Upplies of .a number of other metals. The 'USSR is the primary BlOC:aource of the*loying Materials necessary for high*qualityend special steels, :and is practleally"the-only source of nickel, cobalt, and'nee8anese, although Czechoslovakia and Rumania produce mimor amounts of manganese.' ?Albania prodUced slight44more than 10 percent of the Bloc simply of chromite in 1952, with,puldsiaend PUmania, providing minor amounts of this material. Chine predUeed 7VVertent of the Bloc supply of tungsten in 1952, and semething like 10 percent of the Vital Bloc supply of both molybdenum and vanaCium, the USSR accounting for, the balance: Tungsten is particularly important both for itself and in partial sthatitUtien for possible deficiencies in. molybdenum. Vanadium is similarly-of so te importance as a substitute for cobalt. There is some indication -that cobalt aid nickel are in short supply in the Bloc as a whole. Zing and tin illustrate very well Soviet Bloc interdependence. In 1952 the Bloc produced 267,000 metric tons of zinc, divided almost equally between .the USSR and the Satellites, Chinese production being insignificant. The USSR accounted for 49 percent of Bloc production, and the Satellites 51 percent. Of the Satellite output, Poland produced. 93 Percent. .At that, Polish production was only equal to its 1940 output and can be expected to Increase considerably by 1955. Tin production in the Paw, at 18,000 metric tons in 1952, was divided between the USSR and China, with outputs of 10,000 and 80opo metric tons, respectively. 3. Cement. The expanding produOtion of cement, a 4ay.ConstructionSiaterial, renects the vest building program which is in Pr9Sreae in the countries of the Soviet Bloc. Singe 1940, Soviet production of cement bee increased almost three? fold. In 1952 the USSR. accounted. for 60 percent of the a4.3 million metric tons produced in the Bloc. Satellite countries accounted for 33 percent of this oUt- put, while China produced the remaining 7 perceet. 4. Chemicals. . , The general dheMieal industry of the USSR grew rapidlifellowing the program of induptrialigation; BY 1648, production of chemicals had mcire than - recovered from the effects of the War, and. production had increased by 1951 to roughly &able the peak. Xn the European Satellites the Soviet Bloc acquired a chemical industry Which is substantial relative to that of the USSR; . Soviet production of sulfuric acid more than doubled betWeen.1938 and 1952, when output was 3,6270000 metric tons. In 1952, USSR was 75 percent of the Soviet Bloc utast, vith a sUbstantial proportion of production (23 percent) being the satellite0 Czechoslovakia, Eat Germany, and Poland. were the major Satellite produaere,_with outputs of 300,000, 372,000, and 330,000 metric tons, respectively. 102.oter es Sulfurous materiali are con- cerned, the USSR probably is self-sufficient, but the European Satellites seem to depend largely on imports from. the West; Production of chlorine in the USSR increased from anegligible amount in 1930 to 261,000 Metric iond in 1952. The Satellites outprOduged the USSR in this ,chemical in 1952 contributing 52 percent 4 Soviet BlocOOdUction. The USSR provided practically all Of the.balante, Or4/,percent of the. Bloc total of 560,000 metrie tons. The MajOr Satellite producer was Bast aermany, with 68 per- cent of the output Of the Satellite oduntriee. 'The next largest Satellite producer, CzechosloVakia? Contributed 17 percent Of the Satellite output. Caustic soda, prodUction follows a similar pattern in the Soviet Bloc. The Satellites outproduced the USSR in 1952, accounting for 386,000 metric tons, or 54 percent of the .Bloc total:: The rest of the Bloc output, 333,000 Metric tons, was produced in the USSR. Of the Satellite Prodbotion, Bast OerAaMy contributed 53 percent; Poland., 26 percent; Ciechoslovakia, 15 percent; 'and RuMania, the re- maining 6 perbeet; On the other hand, the USSR was the Major producer or nitric acid. in 1952, contributing 75 percent of the 1.6 million metric tons produced in the Soviet - 17 - Approved For Release 1999/097277 CIA-RDP79T01049A000900030013-2 * Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 S7E-C-R-E-T Bloc. The remaining output vas in the European Satellites. East Germany produced 65 percent of the output of the Satellites, and Bulgaria and Rungary produced 17.5 percent each. 5. Rubber. Except for one synthetic plant in East Germany, the USSR is the only important producer of rubber in the Soviet Bloc. In recent years the Soviet Bloc has imported substantial quantities of natural rubber. Out of the total of 171,000 metric tons imported in 1951, 64l000 tons went directly to the USE. The USSR also received a considerable part of the 74,000 tons imported. by Communist China, and the 33,000 tons imported. by the European Satellites. Synthetic production is the main indigenous source or rubber in the Soviet Bloc. In 1951 the USSR produced 77 percent of the 224,000 metric tons of synthetic rubber produced in the Bloc. EWA Germany produced practically all of the rest, of which over 4o percent (21,000 metric tons) went to the USSR. Also in 1951 a negligible amount of natural rubber, 2,600 metric tons, was produced in the USSR. For low-grade formulations, the rubber supply of the Soviet Bloc was augmented by the reclamation of 68,000 metric tons of ribber, including 50,000 tons in the USSR. Generally speaking, the Soviet Bloc has excess blending and fabricating facilities. Through allocation of stocks, the USSR can guide the production of finished products according to it interests. 6. Manufacturing. Prewar growth of Soviet production of machinery and equirment was much more rapid than general industri* growth. Output increased sevenfold between 1928 and 1937. The 1937 level was regained in 1947-48, and production has since increased to the point that in 1951 it was 17 times greater than the output in 1928. During the same period (1928 to 1951) the output of the light and textile industries increased only about two and one-half tines. - In 1952 the Soviet Bloc produced 157,000 tractors, 439,000 trucks, and 98,000 freight cars, principally in the USSR. The European Satellites, mainly Czechoslovakia and Fast Germany, produced 36,000 tractors, 29,000 trucks, and 25,000 freight cars. In other Important categories, the European Satellites accounted for a greater proportion of the total production of the Soviet Bloc. This area in 1952 accounted for 60,000 of the 145,000 machine tools, 8 million of the 21! million kilowatts of electric motors 1.7 million of the 5.9 million kilowatts of elec- tric generators, 1,087 of th; 3,336 steam locomotives, and 195,000 of the 667,000* gross registered tons of merchant ships produced in the Soviet Bloc. The contribution of the Chinese Communists in these categories was limited to an estimated 5,000 machine tools and 102,000 gross registered tons of merchant ships, 7. Military End Items. Production of military end items In 1952 tended to be concentrated in the USSR. The USSR produced 203,000 standard displacement tons of naval vessels, while the rest of the Soviet Bloc produced only 13,000 tons. The Soviet output of 13,000 artillery pieces was the major Bloc, contribution of this item; 720 pieces were produzed by China and 600 pieces by Czechoslovakia. The 1952 estimated pro- duction of tank and. assault guns was 10,950 units, all produced in the USSR D. Transportation. Before the war the increase in the volume of rail and water transport outstripped the rate of industrial growth in the USSR. The great distances and the relatively adverse distribution of resources have created large demands tea transportation. This growth has taken place despite the regional self-sufficiency policy of the USSR, which has as one of its aims the "bringing of industry closer to the sources of raw materials and to the consuming areas in order to eliminate an uneconomic and excessively long freight haulage.** * 1951 data. Balzak? Vasyutin, and. Feigin, Economic Geography of the USSR, Vey York, MacMillan, 1952, p. 137. Approved For Release 1999/09/27 18IA-RDP79T01049A000900030013-2 " ? Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 S-E-C-R-E-T There are indications that this thinking may have led to some suppression of investment in the transport field. A degree of self-sufficiency has been sought in fuel supplies, particularly in. the Soviet Far East, where strategic con- siderations are important. The Soviet authorities have in fact recognized the benefits of regional specialization of production, with a consequent increase in transportation input per unit of national product and some resultant congestion in the transportation system. The European Satellites are rather well endowed with transport capacity. The Chinese system is quite inadequate, and expansion of capacity is currently being emphasized. In the Soviet Bloc as a. whole, rail transportation cOnnecting the three major sections is complicated by transloading or by the provision of special arrangements such as adjustable axles made necessary by the differences in gauge. The utilization of inland water transport has grown with heavy industry and has been encouraged by the construction of such projects aa the Volga-Don Canal. The fact that the 1951-57 growth in rail and water transportation is not expected to keep pace with general industrial expansion may be explained in part as indicating an increase in the utilization of truck transportation, especially for local traffic. Pipeline transportation has not yet achieved amy position of prominence in the Soviet transportation system. - 19 - 19rE_-_C-11=B-T Approved For Release 1999/09127-:-CtArRDP79T01049A000900030013-2 Approved For Release .1999/09/27 : CIA-RDP79T01049A000900030013-2 S-E-C-R-E-T III. Ma'or Trends in Economic Policy. The major economic policies of the Soviet Bloc countries, as reflected in their current economic plans, include the following. A. In the USSR. 1. Continuing rapid expansion of the industrial base of the economy. The amount of resources allocated to gross investment in recent years has not only increased in absolute terms as gross national product has risen but has also represented an increasing percentage of the total (see the Appendix, Table 4*). Some shifting away from grandiose plans for the transformation of nature, such as the grand Turkmen Canal, is evident in the distribution of investment funds. 2. Provision of adequate supplies of modern equipment for the Soviet armed forces and, to a lesser extent, for the Satellite armed forces. Since no significant increase in the size of the Soviet military establishment is apparent, the emphasis probably has centered on modernization, air defense, and the pro- duction of unconventional weapons. 3. An increase in comsumption. Only a modest fraction of the year-to- year increase in total output has been permitted in the consumers goods sector. As a result, consumption constituted a declining proportion of gross national product between 1938 and 1951, as shown in the Appendix, Table 4. Since the rate of increase in consumption exceeds the growth in population, a modest improve- ment in the standard of living during this period may be inferred. The Fifth Five Year Plan and recent policy pronouncements indicate an intention on the part of the regime to accelerate the improvement of the living standard. While it is possible that consumption in 1955 may absorb something like the proportion it did in 1938, the expectation is that total output will have almost doubled in the interval. 4. In the industrial sector of the economy, concentration on the pro- duction of capital goods rather than consumers' goods and high priority for the supporting sectors of transportation, communications, and construction. 5. In the agricultural field, some expansion of production, primarily through capital inputs. This expansion is subsidiary to, industrial growth and has resulted in little more than maintenance of per capita food supplies at historical levels. 6. Emphasis on education and training of engineers and skilled workers to inculcate the more efficient techniques of production and increase labor pro- ductivity. 7. Increasing integration of Satellite economies with that of the USSR. This involves considerably more than exploitation of these countries by the USSR, having the broader aims of speeding the industrial growth of the more important Satellites and taking advantage of their special capabilities to attain the greatest over-all economic power for the Soviet Bloc. Although there is some effort in the direction of promoting regional self-sufficiency, the advantages of a policy pointed toward regional specialization have not been ignored. Trade among the Dloc countries has consequently grown considerably. B. In the European Satellites. 1. Broad efforts to complete the socialization of their economies, particularly the nationalization of all important industrial and commercial enter- prises.. Thus the long-range policy is one of transformation to planned economies on the Soviet model, involving a high degree of centralized decision-making and direct administrative control. *-157r,--Berar. - 20 - S-E-C-R-E-1 Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 S-E-C -R -E-T 2. Substantial industrial growth, though not to the extent pursued in the USSR because of the Satellites' more limited resources and their problems of transition to economies of the Soviet type. Priority is given to expansion of the metallurgical and engineering industries to obtain capital goods for further industrial growth, and to expansion of implement and fertilizer production to increase agricultural output. Production of consumers' goods is permitted to the extent consistent with these objectives. (See the Appendix, Table 5,* for data on the three most important European Satellites.) A "new course" in the Satellites was inaugurated in East Germany in June 1953. Some measures to reduce the rate of investment in heavy industry and improve living standards were announeed shortly before the riots of 17 June, and other changes in this direction followed the disturbances. Similar steys have since been taken in the other European Satellites. Communist officials have emphasized, however, that these measures will effectively advance the program of "building socialism" and thus do not indicate a change in broad economic policy. 3. Collectivization of agriculture as an ultimate goal. This is being approached cautiously in the face of strong resistance from the farmers. C. In Communist China. 1. Pursuit by the mainland regime of the typical Communist objectives of industrialization, economic self-sufficiency, and military preparedness. In the planned expansiaa of industry, emphasis is placed on basic heavy industry, coal, steel, electric power, chemicals, and machine building; on tecanical train- ing in schools and on the job; on geological exploration to discover additional natural resources; and on effective utilization of Soviet technical and material assistance. Resources are to be diverted from the agricultural and consumers'? goods sectors through direct controls and through fiscal and price policies.** ? Special programs for the economic development of Manchuria and the Northwest have been adopted. 2. Socialization of agriculture. So far, this has consisted largely of the land reform program (that is, the confiscation and redistribution of certain lands). This has been coupled with an effort of the government to increase its control over the allocation of resources to agriculture and over th production and distribution of agricultural commodities. The organization of mutual aid teams among the peasants has been encouraged, and taere is little doubt that the ultimate aim is collectivization- 4-1-1)7=1?Delow. ** Gross investment through the government budget is believed to account for a large part of the total expenditures of Communist China for this purpose. The recent growth in this item and in military expenditures is shown by the following data derived from the budgets for 1950 to 1952 and the planned budget for 1953: BilliOne of Current.juans ______ 1951 1952 1953 Investment 17,356 35,110 73,699 103,528 Military EXpenditures 26,274 50,656 ? 42,777 5,254 -21- S-E-C R-E-T Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 S-E-C-R-E-T IV. Gross Production of Goods and Services. The policies outlined in the preceding section are reflected in the growth of the gross national product of the Soviet Bloc countries and in the changing proportions of these products originating in the various sectors of their economies. By valuing their gross outputs over a period of years at prices in the US in a given year, a common denominator is obtained for measuring purposes,. the trend in physical output without regard to price changes is shown, and soviet atoc-GS comparisons are mace more meaningful. Calculated in this the estimated gross products of the?iignificant Bloc counaraep in 1938 (1936 for China) and in 1948 through 1951 are as shown in the Appendix, Table 62* with US values included for comparison. The following relationships drawn from the information appear to be most significant: 1. The gross production ofrathe USSR was a little leas than one-third that of the US in 1951. This may be compared with the ratio of about 42 percent in 1938, when the US economy was still seriously depressed. 2. The combined, gross production of the Soviet Bloc countries declined from 90 percent of the US figure in 1938 to about 56 percent in 1951. These relationships reflect the fact that, from 1938 to 1951, US output doubled and USSR output increased by one-half, While there was no over-all change in the gross production if China and the European Satellites. 3. Although the production of the Satellites had barely reached the pre- war level by 1951, it accounted for about 24 percent of the total production of the Soviet Bloc in that year, which is to say almost 45 percent as great as the output of the USSR. The largest relative increases since 1938 occurred in the Satellites with the smallest outputs -- namely, Hungary, Bulgaria, and Czechoslovakia. . The larger economies of East Germany and Poland had not yet reached prewar production levels by 1951. Gross pro- duction of the Soviet Bloc coUfitrlei has increased substantially since World War II. On the other hand, the annual rates of increases have generally declined. Year-to-year percentage increases in gross production and the total increase from 1938 (1936 in the case of China) to 1951 for the Bloc countries and the US are presented in the Appendix, Table 7.** These data on gross production do not, of course, indicate the extent of changes in labor productivity, because the sizes of the labor forces are not taken into account. Similarly, the data do tot show how living standards are affected, because changes in total population and in the portion of national output devoted to capital formation and military expenditures are not reflected. The population of the Soviet Bloc is increaaing at a slow and decreasing rate and was in 1951 only 5 or 6 percent higher than in 1938. Rates of change in the production of, goods and services per capita in the Bice are therefore only slightly less than the rates for the aggregate production. It should also be noted that gross production cannot be equated with the success which a country maa have in attainina a certain rate of arowth in its productive facilities (which will have its full effect on production later) or its ability to support a certain level of military spending. Levels of capital formation and military spending depend fundamentally on national policies con- cerning desirable or necessary living standards. Soviet and US policies in this respect and the relative living standards in the two areas are such that the rate of economic growth and of military expenditures in the Soviet Bloc is much greater as compared with the US than the gross production data suggest. It is useful in this connection to consider the portions of gross product generated by the major sectors of the Soviet economy. The percentages of gross product oricinating in the various sectors in 1948 through 1951 are shown in the Appendix, Table 8.*** The figures make it clear that the pattern of pro- duction in the USSR has given increasing emphasis to industrial, transport, and ber-o\tr. ** p.290 below. *** P.30, below. -22 S-EC-R-E-T Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 Approved For Release.1999/09/27 : CIA-RDP79T01049A000900030013-2 S-E-C41-E-T communications activity. Conversely, a progressively smaller share of the national product has been accounted for by the agricultural, services, and trade sectors. Though the corresponding percentages are somewhat different for the Satellites, these over .all trends of the Soviet economy are generally descriptive of their economies as well. Within the industrial sector, Soviet policy has called historically for an accelerated growth of production facilities at the expense of consumers? goalie. This is illustrated by .recent annual percentage increases in the two components of Soviet industrial output, as follows: 1948 to 1949 1949 to 1950 1950 to 1951 Total 1938 to 1951 Producers' Goods 20.0 18.3 10.6 96.3 consuners? Goods 11.8. 11.0 8.4 29.1 Totml Industrial Pr.quction 18.0 15.2 11.8 72.7 The current Five Year Plan calls for a 65-percent increase in the output of con- sumers? goods and 70-percent increase in the output of netify ikmustry in 1555 as compared with 1950, indicating that a serious attempt has tee untier um for some time to redress the balance somewhat in favor or coniuMOtiCh. The "new course" recently announced calls for an Meceleration in sonsumera' goods pro- duction in order to reach 1955 goals in 1954. - 23 - 13-E-C-111-E-T Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 Approved For Release .1999/09/27 : CIA-RDP79T01049A000900030013-2 S-E-C-II-E-T APPENDIX TABLES Tablel Data on Population and Employment in the .USSR Selected Years, 1939-57'2/ Mill ons Popul t7jon 1939 191,7 . 1950 1953 1955 1957 17012/ 191 200 210 217 224 Males 88 92.5 98 101 1U4.9 Females 88.8 103 107.8 112 115 119.5 Military ,ge Group (2c to 34 Year) 23.5 25.9 26.3 Slave Labor 10.0 8.o O.0 Civaltah Employment 2/ 76.4 84.2 87 89.7 93.2 ?grcultuxal Labor 45,7 52 50 48 47 Nonagrcultural Labor 30.7 32 37 41.7 46.2 Industry, Mm ng, tnn Construction 12.5 18.1 19.1 Skilled 5.5 8.6 10.1 Unskilled 23.7 27.7 284 Engineering, Professional, .and TechninL1 5,4 7,7 WS 26, Sections 41 and 44. C. C1770-PR-32. Postwar Tre?d tn 4Am poJer of the USSR and the European Satellites, 1947-57, 27 May 1953. C. 1)-341, Economic Intelligence Handbook: Statistical Summary, 25 Aug 1953- S. b. This figure is for the pre-1939 area of the USSR. The figure for the latter part of the year, including new Lainexations, is 186 millY,on, .'.11 the folio iing years :re on the basis of territory occupied. c. The 3e figures exclude military personnel. -24- S-E-C-R-E-T Approved For Release 1999/G9127 : CIA-RDP79T01049A000900030013-2 - - " ? Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 S-E-C-R-E-T Table 2. Data at PopulatiOn ankftployment in tbe Edropean Satellites Selected Years, 1947-57 !V Millions 1947-57 1947 202 1957 Increase Population 87.8 90.8 94.2 6.4 Civilian Employment 38.4 41.9 44.8 6.4 Agricultural Labor - 23.0 22.0 21.1 1.9(-) Nonagricultexal Labor 15.4 19.9 23.7 8.3 Industry, Mining, and Construction 8.6 13.2 16.1 7.5 Skilled 2.9 3.9 5.8 2.9 Unskilled 11.1 14.1 14.9 3.8 Engineering, Professional, and Technical 1.4 1.9 3.0 1.6 a. CIA/RR PR-32, Postwar Trends Inflompower of the USSR European Satellites, 1947-57, 27 May 1953. C. nd the - 25 . S-E-C-R-E-T Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 . Approved For Release .1999/09/27 : CIA-RDP79T01049A000900030013-2 S-E-C-R-E-T Te.ble 3 Agricultural Production in the Soviet Bloc Prewar and Postwar Sown Area (million hectares) Grains 2/ Sugar Beets (China, in- cbotng cane) Cotton 2/ Potatoes I/ Production (million metric tone) Grains ei Sugar (retu) Cotton (rau) 2/ Potatoes 1/ Livestock (million head) g/ Horses Cattle Sheep and Goats grine 198.A 3.952 113.2 108.4 1.3 4/ 1.5 4/ 2.1 .9 9.0 9.5 88.5 91.6 2.48 d 2.75/ 2.5 2.7 76.9 78.9 1953 pAropeas. Satellites communist China 1935-39 1952 Prewar 32.5 0.6 2/ 4.8 45.9 2.6/ 65.3 28.8 0.9 2/ 4.5 34.2 1.9 s/ 40.4 75.1 12/ 0.2 2/ 3.1 114.3 4.o 2/ 22.7 19.9 1543 1/ 7.6 59.2 Iv 56.6 f 25.7 73.1 12X 109.9 1/ 30.4 31.6 f 8.5 A/ 25.0 , 1952 , 77.8 0.2 2/ 4.o 111.9 4.c 2/ 1.5 29.6 1937 6.4 A/ 6.0 Li/ 4.8 11/ 20.3 A/ 57.5 2/ 36.3 ill/ 32.2 40.5 1/ 35.2 W 22.6-1/ 65.0 65.0 W a. Area: estimates xdept for Ch ? or w 1 igures are 1 am US Consulate Report*, Hong Kong. Production: USSR and EhrOpean Satellites, ORR Contribution to DIE-90, XP-333, Economic Factors Affect Bloc Ca 11 ties thr. Mid-195 2 Apr 1953. S. Cadna, US Consulate epoi s 01145 b. 1931-37. _ c. CIA/RR 1M-376, Production and lUtilizatiOn of Sugar in Soviet Bloc, 14 AUG 1953. S. d. Revised CIA estimate dated 1 Dec 1933; 1952 estimate given in office-wide Project No. 7, Current Trends in the SoViet Econ.:?,4 S. e. CIA/RR IM-3'13,`Produaion saa fitilizat on of Cotton In the Soviet Bloc 1952, 4 Jim 1953. S. f. CIA/RR I4-378, 23 SeP 1953, S. g. Beginning of year, numbers. h. Postwar boundariet, CIA/RE PR-28, Livestock iembere and Neat Production in the USSR, 17 Jun 1953, P. 204 S. 1. Pravda, 15 Sep 1953. j. Postwar boundaries, ORR Contribution to NIE-90, gst. cit. k. Total horses, mules, and donkeys: 1937, 20.2; 1951,-I5A. Contribution to ORR Project 0.4, Regional Distribution of Production in the Soviet Bloc, 20 Oct 1953, unpliblished. S. 1. Contribution to ORR Project 0.4, 21. cit. st. Memorandum to ORR D/A. dated 27 Oci-largiving change in estimates for 0.4 for 1951 (also carried for 1952). - 26. Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 ApproVed For Release1999/09/27 : CIA-RDP79T01049A000900030013-2 S-E-C-R-E-T Table 4 Estimated Gross Rational Product of the USSR by FinA Use Selected Years, 1937-51 2/ Gross Investment Billion 1948 Bales Percent Increase Uses as Percents of Total 1937 1948 154 1211. 232 1937 to 1951 1937 1948 1951 125 86 23 24 27 Defense 44 83 129 193 8 13 15 Gove nment Administration 16 32 26 62 3 5 3 Personal and Communal Consumption 360 371 473 31 66 58 55 Total 545 64o 860 58 loo loo loo a. IA RR-231 The Econov of he Soviet Bloc: oduct on Ite...; and 15 Potential, 20 May 1953. S. -27- S-E-C-R-E-T Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 4 ApproVed For Release1999/09/27s.C.MEROP79T01049A000900030013-2 Table 5 . Estimated Gross National Product of Poland, Czechoslovakia, and East Germany by Final. Use Selected /ears, 1938-52 a/ Poland Gross Investment Defense Government Ekpenditures (non-defense) y ? ? Personal ConsuMption Teta 1938 ZlotyS 1938 1950 1221 Am 2.8 4.2 4.3 4.7 1.5 1.0 1.2 1.4 2.7 3.9 4.3 4.7 20.5 16.7 25.8 15.9 27.5 25.8 2216 26.7 ? Percent ?increase . ;pees as Percents of Total 2938 to 1,952 1938 1950 1951 1952 68 10.2 16.3 16.9 17.5 4 5.4 4.0 4.6 5.3 74 10.0 15.1 16.7 17.5 -22 74.4 64.6 61.8 59.7 -3 100 100 100 100 , .1.1?????????? vaimmegi? Czechoslovakia Billion 1938 Koruna RV, 1950 1221 1952 10.5 11.1 11.7 3.2 3.7 4.2 12.2 12.8 13.9 41.6 41.8 42.2 Gross Investment 10.3 Defense 4.6 Government EkpendituAss (non-defense) 7.3 Personal Consumption 2/ 43.3 Total 65.5 63.12 9.k Rs_ Percent Increase Uses as Percents of Total 1938 to 1952 1938 1950 1951 2.-9 14 15.7 15.6 16.0 16.2 .9 7.0 4.8 5.3 5.9 90 11.1 18.0 18.4 19.3 .3 66.2 a (-) 60.3 58.6 10 ioo loo2229. East Germtny Gross Investment Defense Government Expenditures (non-defense) .12/ Reparations .Personal Consumption 2/ Ibtal 1938 Reichemarks 1238 3.950 22.21. 2222 3.3 1.4 1.7 2.2 4.1 0.6 .9 1.2. 1:4 2.9 2.6 2.2 2.0 211 2.1 13.2 8.7 10.1 11.1 22.0 15.6 17.4 18.7 Percent Increase Uses as Percents of Total 1938 to 1952 120. 1.950 1951 1952 -33 15.0 8.7 10.0 12.0 -73 18.8 4.o 5.0 6.0 57 6.2 18.6 15.0 12.0 Dr.A. - 12.6 1.2.0 11.0 .16 6o.o 56.1 58.0 59.0 -15 100 100 100 100 a. ORR Contribution to NXE-7, IP-332, Satellites, 7 ANT 1953, S. b. This use maybe regarded as consumption determined collectively rather than through individual choices. It consists largely of services (for example, that of police ? forces) to which the indiVidual does not give great weighb in considering his standard of living despite their classification as consumption uses of the national product. c. These figures should be adjusted- for population changes in forming an impression of how living standards have. changed. Population indexes of the three countries, on the basis of current international borders and taking 1936 as 100, are as follows: 1950, 1951,, Poland 80.0 80.2 Czechoslovakia 84.4 85.2 East Germany 113.3 111.4 - 26 - S-E-C-R-E-T ? Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 ? Apprdved For Re1ease-1999/09/27 : CIA-RDP79T01049A000900030013-2 S-E-C-R-E-T Table. 6 Estimated Gross National Product of the USSR and the US Selected/ears, 1938-51 Billion $ US at 1951 Prices 1938 2/ 1948 1949 1950 1951 USSR 69 77 86 95 104 Bulgaria 1.0 1.2 1.2 1.2 1.3 C .echoslovskl a 7.3 7.0 7.4 7.9 8.3 East Germany 16.1 9.7 10.7 12.8 14.7 liturtgaXy 2.4 2.5 2.7 2.9 3.3 Poland 14.6 11.8 12.6 13.7 13.7 Rumania 3.0 2.5 2.5 2.7 3.0 EUropean Satellites Total. 44.4 34.7 37.1 41.2 44.3 Communist China 36.3 ILA. 30.2 34.7 36.4 Soviet Bloc Total. 149.7 N.A. 153.3 170.9 184.7 US 165.8 283.3 284.3 308.5 329.8 a. 1936 for China. Table 7 1IIIINIMMI.OIMIsmegel.101M.?????? Comparison of Increases In Gross National Product of the Soviet Bloc Countries and the us Annual Increases, 1949-51, and Total increases for the Period 1938-51 Percent 1948-49 1949-50 1950-51 1938-51 2/ USSR Bulgaria 11.7 0 . 10.5 1.7 9.5 , 8.3 50.7 31.0 Czachosumakia 6.4 6.6 4.0 13.2 East Germany 10.019.5 14.6 ? -8.9 Magary 9,3 6.5 13.3 35.5 Poland 7!3 8.3 0 ,..6.4 Rumania 0 6.3 13.1 1.0 Communist China N.A. 14.9 4.9 0.2 Soviet Bloc Average 10.2 12/ 11.5 8.1 23.4 US 0.4 8?5 ?12 99.0 . 193.-51 for a. b. Exclusive of China. -29- Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 4 Approved For Re1ease-1999/09/27 : CIA-RDP79T01049A000900030013-2 81,40-C-R-E4 Table 8 Breakdown of the Gross National. Product of the USSR :by Sector Of Origin 1948-61_ Percent Sector 1948 129? 1220_ 1,951 Industry 36.2 38.8 41.1 42.9 Agricu1ture 23.4 22.1 21.0 20.2 Transport and CounaMications 9.3 9.8 10.1 10.2 Building 5.6 5.6 5.6 5.7 Services 21.9 20.4 19.2 18.2 Trade 3.6 3.3 3.0 2.8 100.0 100.0 100.0 100.0 - 30 - ???? ????? moo 0? Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 9/09/27 ';,CIA-RDP7r9T01049Watio-g0603 ved For Release 1999/09/27 : CIA-RDP79T01049A0009000 ed For Release 1999/09/27 :.CIA-ROP79T01049A000900031 25X1A OAA-(7 ? 3 g 71^0 Aryl"? 25X1A l? ed For Release 1999/09/27 : CIA-RDP79T01049A000900031 4' Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 SOVIET UNION JOB 79T01-er9-3A- .0 rA BOX qv' of 3i ri FOLDER ? Approved For Release 1999/09/27 : CIA-RDP79T01049A000900030013-2 ? .1 .?> =74 ?,?,? el., 31, 1' ??":., I *F?Rk4i:4490 S lOPEIQUEST- EDITIONS ? ' ? RECORDS CENTER: 4. UPON RECEIPT OF MATERIALSETDTE9 COPY FOR SUSPENSE._ 3. 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