WEEKLY SUMMARY SPECIAL REPORT SOVIET ECONOMICS PLAN FOR 1971-75

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001500030012-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 17
• Document Creation Date: December 22, 2016
• Document Release Date: January 6, 2011
• Sequence Number: 12
• Publication Date: March 26, 1971
• Content Type: REPORT

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Secret
DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
Special Report
Soviet Economic Plan For 1971-75
DSB FILE COPY
RETURN TO I E-61
Secret
N? 666
26 March 1971
No. 0363/71A
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The draft directives of the Five-Year Plan for 1971-75, which will be discussed
at the 24th party congress next week, reveal that the Soviet economy will be
oriented roughly as it has been for the past several years. The plan implies an average
annual rate of growth of nearly 6 percent in the gross national product (GNP),
which is only moderately better than the 51/2-percent average of the past five years.
No major shifts are apparent in the allocation of resources among the principal
claimants-defense, investment, and consumption, As before, investment is to grow
at a slightly higher annual rate than the GNP (61/2 percent) and consumption at a
lower rate (5 percent). The directives place unusual emphasis on bettering the lot of
the consumer, but the figures given imply that the rate of progress planned for the
standard of living is somewhat lower than that achieved in 1966-70.
To achieve even the modest improvement planned in over-all growth, however,
the regime must depend upon a substantial increase in productivity (etficiency). The
projected rate of growth of man-hours and the stock of plant and equipment are to
rive somewhat less rapidly than during the last half of the 1960s. In order to squeeze
a greater return from these inputs, the directives hammer away at the need to
accelerate the pace of technological progress, although no new strategy or new
organizational schemes are revealed to ensure the attainment of this goal.
The plan's other main theme places emphasis on the quality, durability, and
reliability of producer and consumer goods. The twin goals of a rapid increase in
efficiency and an improvement in the quality of output, long a part of regime plans,
have never been fulfilled. In short, when viewed from the standpoint of resources
available for inputs, the five-year plan appears substantially more ambitious and less
realistic than the production targets alone would suggest.
Normally, assessment of the directions of the Soviet economy based on
medium-term plans is hazardous because of the preliminary nature of the data
presented in the plans. The unusual paucity of data in the published directives for
this plan adds to this uncertainty. The sparseness of data may be associated with a
lack of balance between planned inputs and goals for output, particularly in the
materials and machinery branches of industry. In this sense, the directives may
reflect an effort to cover up a set of goals that would otherwise convey a pessimistic
outlook for Soviet economic growth.
Special Report - 1 - 26 March 1971
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USSR Plans Boost in Productivity of Capital and Labor
(Average Annual Rate of Growth in Percent)
Inputs of Capital
and Labor Combined
Gross
National
Product
1961-65
66-70
71-75
1961-65
66-70
71-75
1961.65
Productivity of Capital
and Labor Combined 66-70
71-75
551188 3-71 CIA
"'- ":-y Actual average
annual increase
Planned average
annual increase
All aggregate measures used in this report are computed in 1968 prices. Previously,
19130 prices were used in computing CIA indices of Soviet economic performance.
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26 March 1971
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Gross
National
Product
SELECTED INDICATORS OF SOVIET ECONOMIC PERFORMANCE
(Average Annual Rate of Growth in Farcent)
1961-65
66-70
71-75
M
PRODUCING SECTORS
1961-65
Agricultural 66-70
Production
1961-65
Industrial
Production 66,70
PRINCIPAL CLAIMANTS
1961-65
Defense 66-70
71-75
Total
Investment
1961-65
Consumption 66-70
(per capita)
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L7:~ ~~~~
~~~~~
Mfa
M
Actual average
annual increase
7 , r Planned average
A annual increase
O.
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slow trend downward. Although declining as a
share of GNP, the rate of progress for consump-
tion for the 1966-70 period was greater than for
either of the previous two five-year periods
(1956-60 and 1961-65). Moreover, the share of
consumer-oriented investment rose somewhat
more rapidly than that of producer-oriented in-
vestment when compared with 1961-65. This
modest shift was designed to compensate partially
for the neglect of housing and consumer goods
production during 1961-65.
During the Eighth Five-Year Plan (1966-70),
Soviet GNP grew at a average annual rate of 5.5
percent. By comparison the rate posted in
1961-65 was about 5 percent and for the decade
of the 1950s 6 percent. Because of the wide
fluctuation in agricultural production, however,
growth in GNP has varied considerably during the
past five years-from 2.6 percent in 1969 to 7.7
percent in 1970. All of the increase in the growth
of GNP since 1961-65 can be attributed to an
improved performance in agriculture and con-
struction. Industry, the major contributing sector
to GNP, grew at about the same pace as in the
first half of the decade. The rate of growth of
Soviet GNP for the past five years was less than
half that of Japan, roughly the same as that of
France and Italy, but substantially above that of
the US, Germany, and Great Britain.
The modest improvement in the rate of
growth of Soviet GNP in the last half of the
decade was due entirEly to a boost in the rate of
increase of factor productivity (output per unit of
combined inputs of capital and labor): the rate of
growth of inputs of capital and labor in this
period was about the same as in 1961-65, but the
rate of growth of factor productivity increased
from an average of 1.3 percent to 1.8 percent.
The moderate upturn in over-all growth in
1966-70 was reflected in an increased tempo in
allocations to all the principal resource claimants
(consumption, investment, and defense) in com-
pi'?ison with 1961-65. As in the past, outlays for
investment continued to grow at a somewhat
higher rate and outlays for defense and consump-
tion at a somewhat lower rate than GNP. These
moderately diverging trends led to a further in-
crease in the share allocated to investment-from
29 percent in 1965 to 31 percent in 1970-and a
small decline in the share of defense expendi-
tures-from 71/2 percent in 1965 to 7 percent in
1970.
The share of consumption, the largest GNF
claimant, decreased slightly, continuing its long,
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The pace of growth of industrial output is
scheduled to accelerate somewhat during 1971-75
to an average annual rate of increase of aboit 8
percent compared with the rate of nearly 7 per-
cent averaged for 1966-70. The over-all targeted
rate of progress for industry, however, reflects the
combination of a continued slow rats of growth
in basic industrial materials and a remarkably
accelerated rate of growth in machinery. In the
past, the planned rate of growth for both major
sectors has been roughly the same. The sharp
divergence in the current plan between the
growth rate of the materials and machinery sec-
tors raises doubts about the statistical basis of the
machinery plan. In keeping with the central
themes of the directives, the tasks assigned to
industry call for marked increases in productivity
and an improvement in product quality and as-
sortment.
Among the major sectors of industry, the
output of industrial materials is scheduled to
grow at about the same rate as that averaged in
1966-70. Indeed, with the exception of chemicals
and paper products, the planned rates of growth
of industrial materials are somewhat lower. The
traditionally rapid-growing chemicals sector, how-
ever, is slated for a boost averaging more than 11
percent a year, about twice the rate for other
materials. The new plan repeats the emphasis of
the 1960s on rapid expansion of the output of
fertilizers, plastics, man-made fibers, and syn-
thetic rubber. In all these areas, assortment
changes are planned to improve quality, and
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INDUSTRIAL MATERIALS UNDER NEW SOVIET FIVE-YEAR PLAN
Percentage figures show average annual growth. Absolute figures are in million metric tons (MMT),
thousand metric tons (TMT), billion cubic meters (BCM), billion kilowatt-hours (BKH), and
million tons of standard fuel (MTSF).
PLANS FOR METALS EMPHASIZE QUALITY AND
ASSORTMENT OVER QUANTITY
USSR US
Actual Planned Planned
% Increase % Increase Goal* Output
1966.1970 1971-1975 1975 1970
Basic metals
Crude steel 5 434 146 MMT 120 MMT
Rolled steel (finished) 5% 5 103 MMT 85 MMT**
Aluminum 7% 9 2,372 TMT 3,600 TMT
Copper 9 63 1,650 TMT 2,100 TMT
AMBITIOUS TARGETS FOR OIL AND
GAS HIGHLIGHT ENERGY PLANS
USSR
US
Actual
% Increase
1966-1970
Planned
% Increase
1971.1975
Planned I
Goal*
1975
I 1
Output
1970
Total Primary Energy***
531
5
1,595 MTSF
1
868 MTSF**
Cas .
9
9
310 BCM
,
620 SCM
Oil.
8
7
490 MMT
472 MMT
Coal
1%
2
690 MMT
515 MMT
Electric Power
8
7
1,050 BKH
1,750 BKH
*Mldpolnt of range
!"~15J69 figure, latest available.
***Not Including hydroelectric power.
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large-capacity production units are to be installed
to reduce costs.
Qualitative goals for metals receive greater
stress than quantitative targets, even more so than
in the case of chemicals. Only aluminum among
the major ferrous and nonferrous products is
slated to grow at a rate comparable to that
achieved in the last five years. Despite a scheduled
slowdown in the rate of growth of crude steel
output, the USSR remains a candidate for the
title of the world's number one steel producer in
1975. More important to long-term Soviet pros-
pects, however, is the fulfillment of new targets
for a wider assortment and an improvement in the
quality of steel products. The 1971-75 campaign
for quality is a direct reaction to the ineffective-
ness of measures taken to accomplish this goal
during the past decade.
The production of primary energy is to in-
crease at an average annual rate of about five
percent during 1971-75, slightly less than during
the past five years. If energy plans are met, the
share of oil and gas in the over-all fuel balance
will increase from a level of about three fifths in
1970 to two thirds by 1975, and the share of coal
will drop to less than one third. The fulfillment of
oil and gas goals, however, will be very difficult
and will require a major spurt in investment and
in the output of pipeline.
The oil target for 1975 is higher than projec-
tions previously announced by Soviet officials.
Reaching it will require extensive development of
oil deposits in permafrost regions of West Siberia
and the Far North, where the extremes of climate
and difficult terrain and the lack of modern
equipment and requisite technology will greatly
impede progress. Moreover, the required forced
expansion of production in the new fields may
lead to a serious loss of reserves, which will jeop-
ardize future development of the petroleum in-
dustry.
As with crude oil, much of the increase in
gas output must come from West Siberia and will
face similar and perhaps even more difficult tech-
nical problems of exploitation. The most serious
difficulty in meeting plans for natural gas produc-
tion, however, is the installation of the necessary
pipelines. The goals for oil and gas pipelines re-
quire a supply of at least 16 million tons of pipe.
This amount of large-diameter pipe is at least six
million tons more than the USSR can produce or
plans to import for the 1971-75 period.
The goal to increase electric power output
by about 7 percent annually during 1971-75
represents a reversal of the traditional practice of
planners to set higher goals for electric power
than for industrial output. This changed relation-
ship suggests that Soviet planners are counting on
increased efficiency in the consumption of elec-
tric power by industry.
Soviet machinery output-the source of in-
vestment equipment, military equipment, and
consumer durables-is slated to increase by more
than 11 percent per year, or nearly a third above
the rate attained in the past five years. As indi-
cated above, however, there is evidence at this
target may have been deliberately inflated to be
consistent with the official index of machinery
for 1966-70-a claimed 11.8%. This official index
is known to be overstated by double-counting and
inflated pricing. The production of consumer
durables is to grow at a whopping average annual
rate of 17 percent, with a targeted annual increase
of nearly 30 percent in passenger-car output lead-
ing the way. The draft plan also places heavy
emphasis on the continued high rate of growth of
electronic equipment and computers; the over-all
output of the instrument industry, including com-
puters, is to double between 1970 and 1975. The
main task for the computer industry is to produce
third-generation machines. The plan for the elec-
tronics industry also emphasizes the development
of silicon device technology on an industrial scale
in order to provide the integrated circuits for
third-generation computers and for miniaturized
electronics equipment for both civilian and mili-
tary purposes.
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Growth in Major Sectors of Soviet Industrial Production
(Average Ann,. -! Rate of Growth In Percent)
Industrial Materials
to
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Actual average ~~ Planned average
annual increase ,, . annual increase
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The success of the light and food industries
in meeting their relatively modest targets is
closely tied to trends in agricultural output. If
farm output targets are met, presumably there
will be enough raw materials flowing to food
processing, textile, and other iight industry plants
to fulfill the production goals.
As before, the performance of the agricul-
tural sector will be a decisive factor in the success-
ful fulfillment of the regime's economic plans. At
first glance, the agricultural goals for 1971-75
appear only moderately ambitious. The achieve-
ment of the planned average annual rate of in-
crease in farm output of 4.2 percent would
require only a small boost over the rate attained
in the 1966-70 period. The growth rates recorded
in the earlier period, however, were based in a
very unfavorable weather year (1965) and ended
in a generally favorable year (1970), while the
current goal begins on the high plateau of 1970.
The regime's 1971-75 goals for agriculture as
contained in the new directives are essentially the
same as those released last July at a party plenum.
Highlights of the plan follow: (a) total direct
investments in agriculture, including rural housing
and services, are scheduled to be over 128 billion
rubles-a 10-percent average annual rate of in-
crease compared with a 91/2 percent average for
1966-70; (b) the flows of other types of industrial
goods to the farms are to expand at an average of
about 61/2 percent a year compared with a rate of
just over 5 percent in 1966-70; (c) the output of
the most important of these industrial goods-
mineral fertilizer-is scheduled to reach an ambi-
tious 90 million tons by 1975, with deliveries to
farms of 75 million tons; (d) nearly 71/2 million
acres of land are to be newly irrigated and 12
million acres are to be drained. In summary, the
average annual rate of increase in total inputs is
estimated to be about 11/2 percent per year, a
moderate boost over the rate ut about 1 percent
posted in 1966-70.
The implied output goals for meat and other
quality foods are relatively; conservative, espe-
cially considering the pressing need for a marked
improvement in the quality of the Soviet diet.
1966 - 70 Plan
1971 -75 Plan
Actual
First Brezhnev
Actual
Second Brezhnev
1961- 65 Program
1966 - 70
Program
1.
OUTPUT GOALS MODERATELY AMBITIOUS
TOTAL OUTPUT' - % increase over previous five-year period
12
20
21%
21
GRAIN - million metric tons -
106
136
135
158
% increase over previous five-year period
1'h
28
27
17 i
MEAT - million metric tons -
8
9'h
10
12'
% increase over previous five-year period
16
19
25
25
II.
RESOURCE FLOWS TO FARMS TO RISE MODERATELY
TOTAL INPUTS - % increase during five-year period
11
12
5
7'h
INVESTMENT - % average annual rate of growth
11
161/2
9'h
10
DELIVERY OF FERTILIZER = % average annual rate of growth
19
15
11
10'h
GROSS ADDITIONS OF IRRIGATED AND DRAINED LAND -
millions of acres - average for five years
2.2
4.4
2.9
4.0
CIA estimates.
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Success in reaching the livestock targets as well as
the over-all agricultural output goal depends
heavily on achieving the projected growth in grain
output.
Ail of the increase in grain output is sched-
uled to come from higher yields, as no further
expansion in acreage is expected. The decisive
factor in raising grain and other crop yields will
be the availability of fertilizer. Of the 75 million
tons of fertilizer scheduled for delivery to the
farms in 1975, about 33 million tons are to be
applied to grain, raising the share of fertilizer
allocated to grain crops from 35 percent in .1970
to 44 percent in 1975. Soviet planners expect
that nearly two fifths of the gain in total output
in 1971-75 will be attributable to the increased
use of fertilizers.
In the latest swing of the policy pendulum
toward private economic activity, it appears that
there will be official support during 1971-75 for
the private farm sector, which produces about 30
percent of total agricultural output. Recent of-
ficial statements and press articles have stressed
the need to raise livestock in the private sector, to
sell feed and young stock to private owners, and
to extend pasturing and haying rights to them. An
added incentive is a 35-percent boost in the gov-
ernment's purchase price for hogs and poultry,
announced in February 1970. Moreover, the
planned rate of growth for private agricultural
production in 1971 appears to be above the rate
posted in recent years and equal to that of the
immediate post-Khrushchev period, when a re-
laxed attitude toward the private sector prP-
domi nated.
Although the new resource plans of the
"Second Brezhnev Program" are less grandiose
than those of the unfulfilled "First Brezhnev Pro-
gram" of 1966-70, the new program is costly and
will require a steady effort, free from meddling
by the political leadership. As in the past, how-
ever, altered circumstances could bring about
change:, in the current program. If several disap-
pointing harvests occur during 1971-75, for
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example, pressure would build for immediate and
larger allocations for agriculture. Alternatively,
unusual success in increasing farm output could
seriously weaken priority for the agricultural sec-
tor and lower present resource plans. Finally,
increased military requirements could lead to u
rapid erosion of the new program.
The recently published plans for the
1971-75 period are notably uninformative on in-
vestment details, except for the agricultural sec-
tor. The announced production targets for ma-
chinery are limited to six categories, less than half
the number released in the precongress directives
for 1966-70. This reticence on new capital forma-
tion as well as in other sectors and the failure to
hold the traditional central committee plenum to
approve the directives suggest indecision or even
opposition within the leadership over the planned
pattern of resource allocation.
In 1966-70, new fixed investment grew at an
average annual rate of more than 7 percent, about
one percentage point higher than that averaged
during the first half of the decade. Despite this
rise, the growth in total capital stock declined
from an average of about 81/2 percent in 1961-65
to 7112 percent in 1966-70, reflecting a step-up in
retirements of buildings and equipment. Although
no plans for growth in the total capital stock of
-buildings and equipment have been released for
1971-75, the relatively higher level of retirements
observed in recent years probably will be main-
tained during 1971-75. If so, an average growth in
capital stock of about 7 percent per year can be
expected in 1971-75, with an average gro?vth in
investment of between 6 and 7 percent per year.
During 1971-75 the agricultural sector will
receive a larger share then previously of total
investment allocations, reflecting the renewed
priority for increasing farm output. The invest-
ment share for the farms rose from 171/2 percent
in 1965 to 19 percent in 1970, and will reach
about 221/2 percent in 1975 if plans are met.
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Consumer Welfare
According to the new plan directives, Der
capita consumption will rise by 4 percent an-
nually during 1971-75. This rate is slightly lower
than that achieved during 1966-70, when the
average annual rate of growth of per capita con-
sumption was 4.3 percent. The cirrent goal seems
to be a continuation of the recent trend toward
greater realism it dealing with the consumer.
Khrushchev maje pie-in-the-sky pledges of in-
creases in consumption but did not allocate suf-
ficient resources to fulfill these promises. In
1966-70, for the first time in Soviet planning
history, medium-term goals for consumption were
met.
Despite the improved performance in con-
sumer welfare during the Brezhnev regime, con-
sumer discontent may be greater now than in
1965. This paradox is a result of several factors.
First, despite recent gains, the level of living in
the Soviet Union remains very low, even by East-
ern European standards. Soviet consumers gen-
erally are aware of this fact, and recent gains have
only whetted their appetites for faster progress.
Second, the expansion of incomes at a much
faster rate than the growth of goods and services
has added to consumer frustration. Third, poor
assortment, low quality, and shortages still
abound. Fourth, those areas in which consumer
dissatisfaction is the greatest-housing and quality
foods-have been among the slowest to improve.
The fulfillment of goals for increases in the
supply of quality foods during 1971-75 will per-
mit a substantial decline in the share of daily
calories obtained from the starchy staples-
potatoes and grain. Meat consumption, for ex-
ample, is slated to rise by 20 percent and that of
dairy products by 12 percent. Even if the goal for
meat production is met, however, supply will fall
short of demand (at prevailing prices) and con-
sumer discontent will continue. Throughout 1970
there were frequent reports of a complete absence
of meat in state stores in many provincial cities.
Per capita consumption of meat in the USSR is
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only about half the level of that in West Germany
and approximately 60 percent of that in Czech-
oslovakia.
Housing ranks with quality food at the top
of the list of unsatisfied demands. The housing
situation has gradually ;mproved, but even if the
new five-year plan goal is achieved, per capita
housing space will remain about 10 percent short
of the minimum standards set for health and
decency by Soviet officials and far short of the
conditions enjoyed by other Europeans. In the
late 1960s, for example, West Germans enjoyed
about twice as much housing space per capita as
CONSUMER'WELFARE UNDER
NEW SOVIET.FIVE YEAR PLAN
CONSI1MPT1ON PLANS EMPHASIZE CONSUMER DURABLES
Average Annual Percentage Rate of Growth
Actual Actual ? Plan
1961 -,6S-.:,',A,966 ;;-40 1971 75
Consumption is Sncasured in ' 1968 prices at Factor cost ;
PACE OF WAGE BOOS P.TO SLOW:
Non-faim.workers
' Public' consumption fun~lsa.
Actual `Actual`: Plan::
.1961 -6S.- 1966 -'70 1971 `'-':75
6 6 494'''
3% 5 314;
14 ? 9 7 ...,
a includes? the financing; ofttenrs such
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the citizens of the USSR. Moreover, Soviet
housing plans have been habitually underfulfilled.
There is some evidence of an improved
climate in 1971-75 for private housing construc-
tion, which provides about one third of the new
housing constructed each year. The implied 1971
plan goal for private housing is 27 percent above
the actual 1970 level and some 161/2 percent
above the average annual quantity constructed
during 1966-70. Past performance in fulfilling
private housing targets, however, suggests that
this goal is unlikely to be achieved.
Production of consumer durables is sched-
uled to expand during 1971-75 at a rate con-
siderably in excess of the rate recorded during
1966-70. If plans are met, most Soviet families
will have basic appliances by 1975. According to
Soviet claims, of every 100 families 72 will have
television sets and washing machines, 64 will have
refrigerators, and 85 will have radios. These
claims are somewhat exaggerated inasmuch as
they make no allowance for the retirement of
wo; n-out appliances.
The availability of automobiles during the
current planning period is the major issue in the
durables category. The Soviet Union is only now
coming into the age of mass automobiles. Out of
a production of 344,000 cars in 1970, slightly less
than one third were sold to the public. Plans call
for an increase to 1.2 - 1.3 million cars, including
sales to the public of 800,000 by 1975. If plans
are met, car sales to the public during 1971-75
could absorb approximately one fourth of the 46
billion rubles currently held in saving accounts
and this ease inflationary pressures while boost-
ing consumer morale. Production is considerably
behind schedule already, however, and the best
that a senior planning official could promise re-
cently was that by 1975 queues would be "sub-
stantially shorter." It is estimated that in 1975
there will be about 21/2 million privately owned
cars in the USSR, about three times the number
in 1970, but there will still he only about one car
per 100 Soviet citizens.
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Planned growth in the consumption of soft
goods is down somewhat from the level of the
past five years. This may reflect a further decline
in the level of imports of soft goods-chiefly
ready-made clothing and shoes-which boosted
consumption sharply in 1967 and 1968. In ad-
dition, it may reflect the elimination of, or at
least a substantial reduction in, the production of
poor-quality goods, preventing an inventory ac-
cumulation problem.
During the early 1960s immense stocks of
unwanted soft goods accumulated in warehouses;
the urban population, finally adequately supplied
after the war years, refused to pL+rchase goods of
poor quality and limited assortment. The problem
diminished during the late 1960s when the plan-
ners distributed many of these goods to rural
areas where residents had money to spend for the
first time. At present, however, rural residents are
apparently becoming more sophisticated and are
rejecting poor-quality goods. Reports of un-
wanted goods accumulating on store shelves are
once again common.
Planned income goals for 1971-75 indicate a
renewed effort by the regime to stifle inflationary
pressures. Altho""gh substantial increases are
planned for all the major sources of income in the
current planning period, these gains will be less
than those achieved during 1966-70. Moreover,
the fastest growing segment of real income will be
from services rendered from the public consump-
tion fund, such as education and health care,
rather than direct money outlays.
Past efforts to maintain a balance between
incomes and the availability of goods and services
have failed largely because the cost of new wel-
fare measures has exceeded estimates. The exces-
sive cost of wage adjustments such as the boost in
the minimum wage in 1968, for example, caused
the average earnings of wage and salary workers
to grow approximately one third faster than
planned for 1966-70. The current plan calls for
another boost in the minimum wage, which may
again lead to across-the-board wage adjustments
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in order to maintain drsired wage differentials.
Together with the normal wage creep associated
with increasing productivity, this could thwart
efforts to check the rising rate of wage increases.
With most prices fixed by the state, the
excessive amount of money in the hands of the
public has resulted in longer queues for scarce
items, an astronomical rise in total personal
savings-increasing more than fourfold since
1960-and a decline in the incentive effect of
wage increases. The rise in savings during 1966-70
was equal to approximately one half of the to'cal
increase in personal income between 1965 and
1970. Although strict state controls have pre-
vented most overt signs of discontent, the gap
between income and goods continues to breed
worker cynicism.
As in the past, the directives for 1971-75
were reticent on the planned allocation of labor,
the principal resource required to achieve output
goals. Considering the additional manpower avail-
able in the early 1970s and the past history of the
growth of labor productivity, however, the out-
put goals for 1971-75 appear overly ambitious.
With Soviet workers only about half as
productive as their US counterparts, labor pro-
ductivity growth has been an Achilles' heel in
Soviet economic development. Shortfalls in the
goals for productivity growth in the major sectors
of the economy have been a persistent problem.
Until the mid-1960s, however, deficiencies it
labor productivity growth were partially over-
come by transferring farm workers to urban jobs
and by bringing housewives and youths into the
labor force.
Since the mid-1960s these sources have been
largely exhausted. Surplus labor no longer exists
in large quantities on farms, and approximately
95 percent of the work-age population have jobs
or attend school on a full-tine basis. Success for
the Soviet plans for 1971-75 thus depends on
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achieving gains in labor productivity considerably
above the rates recorded during the preceding five
years. Indeed, four fifths of economic growth
from 1971-75 is to result from greater produc-
tivity, and only one fifth from the use of addi-
tional labor. In contrast, during the 1960s, ap-
proximately two thirds of economic growth was
due to greater productivity and one third to an
increase in the number of workers.
The current productivity goal for socialized
agriculture is particularly ambitious, calling for a
rate of growth some ten percent higher than that
achieved during the preceding five years. Yet, the
rate recorc, 4 during 1966-70 was helped by the
fact that the period began with a very bad agricul-
tural year (1965) and terminated with a generally
favorable year (1970), while the current goal is
based on the high plateau of 1970 and its fulfill-
ment depends on exceptional weather conditions
during the period. The planned gains in produc-
tivity for construction and industry are as lofty as
those for agriculture and are unjustified by any
new developments on the labor scene.
In the past, an almost infinity variety of
incentives and coercion has been r pplied in an
effort to achieve productivity gcals. No past
scheme has proved to be a panacea, and antici-
pated changes are not likely to make a significant
contribution to improved efficiency. During the
current plan period the regime is counting on
improved managerial techniques to spur produc-
tivity growth.
If productivity goals are not attained, it is
doubtful that sufficient additional manpower can
be found to take up the slack. It is estimated that
the highest attainable rate of growth of the total
Soviet labor force will be about 1.7 percent an-
nually during 1971-75, slightly higher than the
rate registered in 1966-70. Moreover, because of
structural shifts within the labor force, the aver-
age annual rate of growth of total man-hours may
be slightly less than the rate of growth of the
labor force, and 15 percent lower than the rate
achieved during the preceding five years. Faster
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growth in the labor force would require cutting
the size of the armed forces or restricting educa-
tional opportunities, neither of which seems
likely.
Economic Refor,n
If the section in the directives under the
heading "Improving Management and Planning" is
a guide to the regime's plans for economic re-
form, there will be no significant now initiatives
during 1971-75. Nevertheless, experimentation
with new methods of planning and management
will continue during the period. Two highly pub-
licized projects-organization of enterprises into
"production associations" and the realization of
labor savings via the "Shchekino" method-prob-
ably will be sustained. The past reluctance of
central authorities to relinquish control over
lower administrative echelons, coupled with the
failure to effect drastic reforms of prices, incen-
tives, and planning, however, suggests that such
new methoc's are unlikely to have a substantial
effect on the Soviet economy during 1971-75.
Production associations are groups of enter-
prises that use similar production technology or
manufacture similar products. The member enter-
prises are usually close to each other geographi-
cally. By merging individual enterprises into lariat
ones, the proponents of associations hope to al-
leviate some of the more persistent Soviet eco-
nomic problems, including a lack of specializa-
tion, an unsatisfactory rate of technical progress,
excessive costs due to duplication of management
structure, uneconomic production in small enter-
prises, and the poor quality of intermediate
goods. Current emphasis on production associa-
tions may foreshadow an official decree proclaim-
ing them the standard organizational unit in
industry, but further experimentation may be
required.
The Shchekino experiment, wherein speci-
fied enterprises cut their work forces while meet-
ing higher production targets, has been hailed as a
success at many of the involved enterprises. It has
Special Report
also led to worker discontent and the problem of
finding jobs for fired workers. Until the expori-
mont is introduced throughout the economy on a
long-term basis, its full impact cannot be assessed.
Its failure to provide managers with incentives to
operate efficiently, however, suggests that, like
earlier reforms, the Shchekino experiment will
not fundamentally improve the efficiency of the
Soviet economy.
The new plan directives mention the eco-
nomic reform of 1965 only briefly, noting that
the last industrial enterprises will finally be trans-
ferred to the reform system by the end of 1975.
This is only the most recent of a number of
indications that the 1965 reform, as originally
envisioned, is dead, although it has not been given
a formal burial. The brief flirtation with the par-
tial replacement of administrative commands by
economic levers, such as prices and profits, ap-
pears to be over.
The main features of the 1965 reform-
reduction in the number of economic indicators
set from above, greater emphasis on profitability
and sales, and expansion of decen!ralized invest-
ments-were intended to give enterprise directors
more freedom and the workers more incentive. A
failure to change the basic operating principles of
the Soviet economy, however, seriously limited
any chance for success. To be effective, the re-
form should have been accompanied by more
rational and flexible prices, less central control
over the allocation of materials, and relief from
the chronic shortage of most materials. The lead-
ership has given no indication that the radical
changes necessary to improve matters in these
areas will be introduced.
The new rallying cry is "scientific-technical"
progress, linked with a better control of the com-
mand economy by the party. There is no indica-
tion in the directives, however, of plans for a
major change in the system for introducing
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technology, although the party for good reason
has expressed considerable dissatisfaction with it.
Instead there is simply a list of plans for specific
innovations. In this connection, the directives'
emphasis on improving the state planning system
by the greater use of computers and improved
communications suggests that the regime hopes
such tactics will obviate the need for future re-
forms. The current use of computers in manage-
ment is neither effective nor efficient and, with
the considerable lag that exists in the USSR be-
tween computer development and application, it
is unlikely that computers will have a significant
impact on the Soviet economy during the current
plan period.
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