SOVIETS PLAGUED WITH SHORTAGES, INFLATION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88B00443R001103940168-2
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 1
• Document Creation Date: December 20, 2016
• Document Release Date: November 27, 2007
• Sequence Number: 168
• Publication Date: January 10, 1981
• Content Type: OPEN SOURCE

Approved For Release 2007/11/28: CIA-RDP88B00443RO01103940168-2
? THE WASHINGTON POST
10 January 1981
is
Sjiiets Plagued nth Shortages,
Inflation
By Dusko Doder
Washington Post Foreign Service
MOSCOW-The Soviet economy,
the world's largest state-run enter-
prise, is entering the new year amid
clear signs of crisis.
Food shortages and soaring infla-
tion have been created by three suc-
cessive bad harvests, the strain of
military competition with the United
States, and the overall costs involved
in?I;naintaining an empire ranging
from Cuba to Vietnam to Afghan-
istan:to Poland.
& there are growing indications
orftsie structural weakness that the
ifikially planned system is imposing
bn",iie Soviet economy, which today
1 *ond in size, complexity and
Angth only to America's.
[ le the rule by decree may
hair-been effective in previous de-
cades in laying the infrastructure for
industrialization of a young Soviet
state, the system now appears in
danger of choking itself in its own
cumbersomeness.
There are two additional and
long-term factors that are only be-
ginning to affect the economy.
One is the harsh fact that the So-
viet Union is no longer a producer of
low-cost energy conveniently located
in European Russia. Rather, it is
becoming a high-cost producer and
poorly efficient consumer of abun-
dant resources located in distant Si-
beria and becoming increasingly
costly.
The other is posed by an acute
demographic problem. The country's
rate of population growth has been
falling since 1960, when it was twice
the current level of 0.84 percent per
year. Economic forecasts warn that
acute labor shortages should be ex-
pected "in the most immediate fu-
ture."
The Kremlin leaders have intro-
duced reforms to refine the existing
system. New financial incentives and
modest decentralization steps have
been taken in an effort to raise labor
productivity. But there has been re-
sistance to these reforms at the local
level.
There was a note of near despair
in recent speeches by President
Leonid Brezhnev when he called for
harder work, increased motivation
and new improvements.
The economic system has also
come under public attacks in the'
Soviet press. "We obviously have an
abnormal situation here," the Com-
munist Party newspaper Pravda said
last week. "The planning mechanism
was supposed to have been im-
proved, yet we did not get rid of old
sins." Pravda directly attacked the
state planning commission for var-
ious economic setbacks.
A commentary in the daily
Sovyetskaya Rosiya also minced no
words about the difficulties. Criticiz-
ing low labor productivity, the paper
said that new reforms were not being
implemented. "The labor organiza-
tion in factories is not functioning,"
it added, "and the second misfortune
lies in the fact that the economic
system itself is not working" as it
should.
Despite growing frankness in the
media about the nature of Soviet
economic difficulties, there are no
new or radical ideas on remedies to
be applied. .
The lack of a rational pricing sys-
tem has burdened the $460 billion
annual budget with the costs of ever-
growing subsidies. At the same time,
Moscow had to budget a 50 percent
increase in its energy investment
plan-to over $170 billion over the
next four years-to produce margin-
al net increments in oil, coal and
electrical energy output.
According to official figures,' 27
percent of the entire investment al-
locations continue to be channeled
into the weak agricultural sector,
while well over $6 billion will have to
be spent for grain and fodder im-
ports again this year.
The exact figures for military ex-
penditures are not disclosed here.
But there are clear signs that the
Russians felt compelled to divert
some additional resources for de-
fense purposes in response to Pres-
ident Reagan's plans to rebuild U.S.
strategic strength. The Kremlin has
reduced its planned capital expend-
itures on capital construction by $42
billion during the current five-year
plan.
The Polish crisis has posed addi-
tional economic strains. Soviet raw
material, energy and food shipments
to Poland have been extensive. The
Poles and other Soviet allies are get-
ting Soviet oil at 50 percent of the
,OPEC price. Meat shipments to Po-
land have further reduced availabil-
ity of meat in the Soviet Union.
The Polish crisis also has pro-
duced economic dislocations within
the Soviet bloc economies. This is
taking place at a time when the cost
of supplying 10 million tons of oil to
Cuba and supporting clients in Af-
rica and Asia are steadily increasing.
The economic situation with its
accumulated difficulties provide eco-
nomic evidence for Moscow's sincer-
ity in arms reduction talks with the
United States.
It also provides an insight into the
proverbial lethargy of Soviet bureau-
cracy, which has resisted changes in
the economic system.
The combination of adverse long-
term trends and the pressure to
match America's military spending
may create conditions here for rad-
ical changes in the economy. The
present leadership, however, is com-
mitted to modest changes and cau-
tious rejiggering of resources.
Approved For Release 2007/11/28: CIA-RDP88B00443RO01103940168-2