COMMENT ON JULY 1958 FORTUNE EDITORIAL, THE RUSSIAN RECESSION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80B01676R002500160002-8
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 7
• Document Creation Date: December 15, 2016
• Document Release Date: September 6, 2002
• Sequence Number: 2
• Publication Date: July 1, 1958
• Content Type: MF

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THR
~.~~11~aer~cae
Deputy Director l, Intelligence
This aoraadurea to for
t yesterday for ceem rat on -ee 6
a. Soviet GNP to *car",
our key assertions:
production
dustriial
ased only about 6 percent in 1957 aes4 t
9 probably still .tallt* .
year tay.
+d. State investment in
virgin lands Sambty has been a 4
O-S3 period to 3
mis faatL r..
using faciltttss gtee w
s 1957 and the pia head
EGIB
was only 4 percent; further these ft tires are in rubles
wbicb xsest be g4justed downward to allow ter the recent
a nation in they MR. '.
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l SE,CT> t . at on July 108 Fort*n , .editosiserl
estimates Soviet econernic devee rttent,
?rtioes are:
ly (P percent to 1957, sad our preliminary
of a i ectine is agricultural output, Soviet
estimate for A S is for an Iacrt ase at I to r percent.
trt&l
acreaae of to 10 percent for
yet made an estirer ate for 1 ?59. The 1965 tts recently
announced by the' Soviets for ceyr +cs odities imply a future
rate of growth of slightly better than 10 percent annually.
b. It is true that Soviet industrial labor pr: ducttvtty
ad 1957.
to ?.4 peerrcnt) However, produc
the 19 0-5
ed y-> 8 percent in 1957, and should at least
Ise t95=. This is far above ortrss-e`s
4 for
not correct to say that Soviet agriculture to
second successive bad year or that the virgin
an a dlsastarou* failure, The 1 57
barveat died not equal the record harvest of 1956. but It was
a thoroughly respectable one. Sugar beet output was at an
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t +sM rat on July i95b ?ortu
oats is 1M'SY. ., Mt1ah bad years
156.
Soviet $TaLU harvest in 1156 and almost 15 percent in
. it has tended to even out year?to-y sr
is in the size of ti-le bar
h by the Soviet leads
s to Soviet #gain
td for racaure than tt percent
d. Soviet state inslvestrn( t to s
aunt 7r,
th 1 % (
d just ul
1$r a& in any postwar
of now, we expect that the L5 harvast
at 4 pe antra
the Fortune article
ad). In 1
Informal contact with Domitri
e their *Ott
Assistant Director
rcb aad Reports
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i'aclit
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U. S. GOVERNMENT PRINTING OFFICE : 1955-CH342531
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IAWOa-A 1%
E
July 1958
Managing Editor Hedley Donovan
Assistant Managing Editors Duncan Norton-Taylor
William H. Whyte Jr.
Art Director Leo Lionni
Board of Editors: Gilbert Burck, John Davenport, Jay Gold, William B. Harris, Mary E. John-
ston, Freeman Lincoln, John McDonald, Charles J. V. Murphy, Herbert-Solow, Perlin Stryker
Associate Editors: Daniel Bell, Francis Bello, George A. W. Boehm, Samuel W. Bryant, Walker
Evans, Seymour Freedgood, Mary Grace, Katharine Hamill, Natasha von Hoershelman, Spencer
Klaw, Todd May, Lawrence A. Mayer, Thomas P. Murphy, Sanford S. Parker, Carl Rieser, Daniel
Seligman, Robert Sheehan, Charles E. Silberman, Richard Austin-Smith, Edward T. Thompson,
Selma Wolff
Research'Associates: Louise Bacon, Jane Bussiere, Eleanore Carruth, Lorraine Carson, Maria Nekos
Davis, Shirley Estabrook, Mia Fritsch, Betty Fullen, Patricia Hough, Helen Howard, Marjorie
Jack, Carol Junge, Mary Melville, Ruth Miller, Eleanor Nadler, Haynes Roberg, Edith Roper,
Shirley Armstrong Small, Betsy T. Stilwell, Renata von Stoephasius, Eleanor Johnson Tracy, Jane
D. White
Art Staff. Deborah Calkins, Max Gschwind (assistant directors), Alexander Semenoick (layout),
Ronald N. Campbell, Elsieanna Graff, Elaine Gundacker, Vincent J. Loscalzo, Seville McCarten,
Jane Mull
Publisher Ralph Delahaye Paine Jr. Advertising Director- L. L. Callaway Jr.
The Russian "Recession"
While the U.S. economy is showing new
signs of strength, the economy of the Soviet
Union is in serious trouble. The evidence
for the former statement may be found in
FORTUNE'S Business Roundup (see page 37).
The evidence for the latter will be detailed
below; but first it may be relevant to note
that the Soviet economic difficulties, unlike
our own, have been a fairly well kept se-
cret. Indeed, many Americans have allowed
themselves to be bamboozled into believing
all sorts of legends about a prodigious So-
viet economic growth that will enable the
Russians to surpass us soon, at least in
'idustrial production. Nikita Khrushchev's
epeated assertions to this effect-"I don't
know about the time, but the lines are
bound to cross"-have not been challenged
in many places. llen Dulles, the_ Director
ofhU,I.S..; Central _In_telligence Agency,
contributed- to .the legend with a speech de-
livered in April, in which lie cited, without
challenging, the Russians' claim that their
industrial production was up 11 per cent in
the past year. Worse yet, the U.S. State
Department recently credited them with
"an average increase of possibly as much as
7 per cent yearly in-gross national product."
Statements like this, coming at the bot-
tom of a U.S. recession, seemed to lend an
especial urgency to the appeals of Americans
who wanted the federal government to "do
something" drastic about the slowdown in
U.S. business activity. The logic was always
a bit cloudy, but somehow or other it ap-
peared that the Russians' relentless econom-
ic growth provided an argument for des-
perate measures here-for big tax cuts and
public-works projects, at least. The bright-
ening in our own economic situation will
presumably silence this talk now. In any
case, the talk was scarcely in line with the
facts about the Soviet economy.
Soviet industrial production is not grow-
ing by 11 per cent or any such awesome fig-
ure, and Soviet G.N.P. is scarcely grow-
ing at all. There are serious distortions
and imbalances in the Soviet economy. It
seems likely, in fact, that Soviet economic
difficulties are responsible for the bizarre
performance put on by Khrushchev in the .
matter of trade and aid.
,.onsistency has never been his strong
point, of course; his record has been that of
a master improviser, of a man who will em-
brace any eternal principle that serves his
immediate requirements. But in his state-
ments on Yugoslavia and American aid he
has got his principles tangled almost com-
ically. First, he denounced the Yugoslavs for
accepting American aid, which, -he asserted,
has political strings attached to it. Then
he demonstrated that Soviet aid has some
strings attached when he unilaterally can-
celed a $285-million credit to Tito, who is
again out of favor in Moscow. At about the
same time, Khrushchev dispatched a? note
to President Eisenhower suggesting some
American aid for the U.S.S.R.-in the form
of credits to be used for the purchase of
consumer-goods manufacturing equipment.
But he did not explain why American dol-
lars were less tainted in his hands than in
Tito's; nor did he explain why the faltering
front-runner in a race should have to help
out a rival supposedly about to pass him.
The fact is that Khrushchev's economy
needs all the help iti can get. The pressures.
on him are clear enough, in any case.
One part of his problem is the declining
rate of growth in Soviet industrial produc-
tf n. It was gaining by 9 per cent a year in
the early 1950's, about 8 per cent in 1956,
and about 6 per cent last year; the rate is
probably still receding somewhat. The ear-
lier growth rates''xeflected the recovery from
wartime dislocation, and they were made
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FORTUNE July 1958 81
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