THE SOVIET ECONOMIC SYSTEM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP62S00545A000100090002-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 22
• Document Creation Date: December 9, 2016
• Document Release Date: August 30, 2000
• Sequence Number: 2
• Publication Date: September 3, 1959
• Content Type: REPORT

U.S. Army War College
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Owera1 Ennis, gentlemen of the Army War College:
it is a pleasure to be back at Carlisle Barracks again and
to have the opportunity to speak to you on the subject
Soviet Eco c System." n I received your kind invitation,
ced, that I vas 66va for two lectures instead of the usual
.ate reaction was that such scheduling represented
tribute to the fortitude and endurance of the offices of the
United States Arty. TWO hours of _ should be rewarded by
peacetime counterpart of the Purple Heart; perhaps a new
can call the "idea Bar."
a brief sketch of the Russian
This year is the base for r Soviet studies
and as. There is a great amount of misinformation about
the size of the econoasy the Co w sts inherited from the Tsars
On the one hand, the Soviets try
icture prerevolutionary
e the couaterpart of Bieck Africa today. The official
relative backwardness of Xqperial Russia : been
deliberately cream so that ComaAnist economic achievements
ei. cc that time will appear to be even greater than they in fact
have been.
On the other hand, certain 'Western writers
grossly overstated the output of Russian industry in
1933 in order to play down end P 00h pooh its growth since the
25X1A
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C st takeover. The Soviet party line taould have you believe
1913, 1iuasi sr industrial output vas lc: s than 7 percent
United States in the same year. in cortrast,
the work o rotes3or Nutter, as I understand it,
lesion that this figure should be 22 perc
absolute size, then, we are confronted with a rEr
In these estimates. To borrow a cirr.,ile from the C..nine world,
we a told that, in the lea u years of the Tsars, Russian industry
d either a toothless, uade ?+
able to move your head in one easy
Recently, the most respected eeo;:nomist in the Soviet Union,
Academician Str .l in, published a pamphlet whichh, in effect
demolished official Co maiist claim-L/ He placed 1913 Russian
output at 11-12 percent of that of the U8. 11av-Ing passed his 80th
birthday, Stein undoubtedly :e:lt that he could w?ite objectively
tho subject, a carefully prepared po
World
of Nations study placed 191:3 Russian outpu
at slightly over 12 percent of that Of the U.
studies
corn a b1e conclusions.
Our
landent
A~C~igu
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ch were, of co
rev utione y Russia as the sixth or seventh largest Industrial
oer its time. WhUe backward by then exietin, Western
European surds, of per capita output, Russia was not as
wer vel d as either MAia or China is tom.
of t keys for rapid economic
ustrial base which bad been
evi ruse, as I See it, you place pre-
of about 5 percent a year for the previous 50
10 percent or nati+
Cer over by the Coasts.
d. the respectable rate of about
.h is above the "takooff" three
put was not only able
diet for its ,maple, but also to ge
ooc3 resources.
,nsUy, to country van richly endued vtlth c., iron
ntials for bui x
at the time of takeover , T?
first major problem that faced the revolutionists were political
bring the internal eivil var to a s oes
resolve the battle for eontrol within the or .at Part~y itself
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First, St*Un emerged the absolute victor
ftcord, the coo,
.3. Of Oul
ar-ship bad molded
ymezw of a is set o f Bch to serve for the
long -;rum future.
. .. ^ tor 'price slalfle
did not a,
obectiv
but sexes
lives to Uh eh otber
itz of
ilea of the Soviet Ec r; ".
v York, 1943.
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see of the State, not of
xing decided on the objective of forced draft industriallrAtion,
to inpl+ent their decision
rigid allocation of
necessary. The creation
of a formidable military machine vas, of course,, a prim objective
L Lion drive. A logical result is that the
Soviet anion has treated t3 are of its maple as a
requirnt In planning$ and essential as a residm,t iu plan
cutiou.
this baetc tact by emm4ning hov total outpu
vision of the production p
(Briefing Aid 1)
in the last y
You can see that:
1. Soviet GNP in to
45 percent
ces our people enjoyed. Because of the larger Sava
means that on a 21r _:
vine standards vas even greater than this
2. However., cote ation, or what the cons rs
received in Asia, vac only about oue-third of the Vxds
chart shows.
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tai practice
g stex? construction of co rciei facilities (
total U.S. investment van higher vas because of our far
.ble
3apoible for the
rapid growth of Soviet industry. The zwjor
4. P Uy, Soviet
a proportion of mss' ti
s of industr.
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Soviet investment, in contrast,
building proms.
,ve-inn movies M the like) and because of our
xach to ndliteax
strikingly different
every rub:
t. That is, Soviet Industrial production
this year
io. Ind:, Soviet production
basic teri.sle producer goods is already about equ . to
a. the other land, their output of
corresponding U.S. love.
b4 be close to 43 percent of our ow.
Stever, the output of capital goods in
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eific figures.
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ee t
ut of shine tools was
by about rcnr te
3. Soviet output 0
about 70
14.. im over
consumer goods
s that Soviet output at auto biles,
a h1 g neeMnes and refrigerators was only a s i
teation of our own. This
different in the two countries. The Soviets use
t it steel to produce capital goods and to expand
basic asteria3.s industries. As this chart shy, v
do not.
To s rite the first part of this presentation,
e that the Soviets have succeeded in vat they set
base vhiah is second
of 30 y rs
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our comtry ci
or theft USSR.
ency. On the contrary, cared the
u a few figures.
(Briefing Aid 3)
have "Out 177 Mi L1ion
This is a &igh pu-tici s ou rate;
2. this 1
e nave
ee t over 47 percent. t et> only about 38 percent ot
or 67 lion a in the labor force.
alwat ?7 lion
aoee
ea t lees f tbaa
7 lion f keris.
StatOer
surprising t*t the UM 4as
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is to the soviet Union, sod a trying to
4. Tu=ix to industry, you. c,
s-,
In more than, twice
:d States - At
.uctivity in Eavie'
gits sivs
t thin,
side sciexcee and
375, iuc
e in the scientific or tees;
iustitutes. otter five or six
t r ui is a ;tic
the United 8?
tt the Soviet
industr,v is less
st of our labor
Dverum t, Most x
tstitutee, at . ch there
of a-U duates
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~f course, offer much brae .e
jor fie 3A, such a cherdstry.
cted program 23ee brou&t the Soviet won
point vh it eov is n rie1 superiority over the i .ited. Staten
For ex=Tle.. there are now about 976, 000 1
the U.S.
or not this - e a ong
Tbore are many competent, observers
s riority presents a reel ch .er
this vieV.
possible sense is a ratter of debat
,gutitative
Loy MWW *n.ne
S,.. thecae jobs are filled bY P0091-0
ng, but who VX* not ec.ege
gruates
Furtbe
Col.,
ire.
output of U.S. industry
,, but al
r ect:s one Ame
kl. -ifion!
issibie
SECRET
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point on professional manpower.
and biologie fields: the United States has a
scientists
the organization of control over economic doe
i atior4l poltcy Importance. so, this is a fault
Gate sm~plqyad as do the Soviets, but our lead vill
Lion inthe met Union.
rh it in being
its effect on Soviet economic de i o
all,, the Communist Party is in complete
etiou and emotion. At the apex,
moil, Is the r'
pr*Btded over by Xhrusfthey
secret police, a
et voice in
41
rsnsib for
rrrot@Lti?n at
cure longer than Mr abc
the sole member who does not ove hie present position to Mr.
; hchev..
We are a rasesd to examine the ec
(Briefing Aid 4)
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It. be that heave not
boor of 14 mabers
,at
fessssriona industria3t , errs
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1. At the top left, you can see the Presidium o:
b,i:ch knave alre y discussed.
in the Presidium of the Councl
of rhi,ch
body char
hey is also chairman. This is the top
h the i rlsrn~ent .titan o
isiona of the Party leadershi;
deputies are Mtkoyan and ozlov. tzlov is a to
party boss, vho is now the designated "heir apparent
remember his visit to the United States earlier this
3. The r eor Zi satiau or industry and
hall Of 1957, has fitly enhanced the roi
is not only responsible for developing short and long-
Its new chairman is losy , vbo is also, a deputy
the Council of Ministers.
but is also partially responsible for plan
4. There are a nu nber of State Coax ttees - for Automtion an,
ins, f
s, and for Scientific and
a. T ese eoa ttees clearly hays is rtant unction,
but by thei r very n&t=e are of lesser
to the center of the cart, the Council
esponsible to its Presidium. Sew
e of the Council of Ministers. Also, the Cot
s. a political flavor than formerly because members of t
sit on is
on Republics have direct con
of national econor in their respective territories. These
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come Us of zu ti
xxnts.
of industri
of 1957, than
ipoib for
Of
trot over industrial plants. It
ontrol from the center by spoci
ced teprevious
of the repub1ie and regional 00uncils is
on. of the Communist Party?
lea of the ms's reestebl
e who run the perty c
a hohev is pereOnai attentil
deminds that part! PDOPIO M"
in the d '-to-day. Ope:
a shift away from post c ntro1 of industry by the
the former induetri 1 ministers.
access. Xndustri al production
the old
first pelf of 1959.
7?
economic z*t z , hi
of ecow=i0sy sue:
urses for
govt in 1956 which it enjoys under
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then are 3 interrelated sub -pis cb same
our next cb&rt the more . apt o n e s are ht U i ,
Ad 5
ct
o tc;'
:ui se a terry esti tes
Of output for industry, agriculture
fore gn tr . the valiu, n f
18 eu -PIAW gists of the output schedules
ties in physical units in Vmst detail aud is
of the o er-aU n.
O tcal co-
a' 'scents, or Input-output ratios.
:r 1, 000 c ties.
I'. anal DIV-0-stment. The capital invests t sub
rit preys
be ueces
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kxet rourcea in acc ce with
on by the Soviet legs.
tion of new tetioca pro-
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Year because of the need to increase labor prodtivity.
Co tt on Science and Technolo r bas been retained as
directly to the Council of Ministers, one of two such
Fin? in the rear xaization of 1957.
6. r az'ea This part of the plan schedules incre -_
production
tbor force in accordance with over-a.
d average increase in output per
7. Qg~V of L"AucliM ( beotoiz
estimates prepared for each cow
are combined to provide an eati
of time limitations, I shan skip
u. a:4k
The pry function
Re+e a production
next three items?
is to mobilize the financiea resources of the eco
,production objectives. The
of heaven. mina with alt the pager work
&bt aire&4 concluded, the
rki on the production line.
a the income aide, the income
enterprises and the turnover task. An the a en&Lture
ii rtant a: ations a to in' tment and defer,
the bureaucracy.
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36
accordinZ to a a
ice, th
ries s been consiEt
of resources These include t so-called "leadi,
is yove
to Of pan fuIfii nt.
e for these sectors have been decided
very ,one caught! in the
provided for, the bulk of availab
Lion is the grea
Is, or
nce of setting highly
econozr is chronically a
s are considered evidence that the economy is out of joint.
tat on and people are rked at, or close to,
To son Western obserrs, these outd
,d its subs nen
rigid priorities. A limited
pxuc
very old eau
ies, and the
eved tarough, the eyes of the Russian leaders, the scene
ppaara very different. They decided on the relsti priorities to
pull a backward notion up by its industrial bootstraps. They planned
ievedthe results tb
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17 -
c
briefly the major Shil
yolicy bin
stick . "
ntion laid to living. at snd, .s . In part, I think, this
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avlet domestic and tared economic
it policy
to the ration of police terror, but also to the
cousind by the pers i force of his srgutente rather th by
liver, his method of le erehi..p also reflects the rmliti'
when labor
world war
reflection of l shchev rs own personality.
by biter carrotts snd sms.Uer sticks.
of Lenfn rather
The USSR had arrived at a time in its history
working a was
persons a year. To lip industrial growth rates hi &
lov birth of
to be virtua,y" static for a
a combination a,
ghrukshchev Deriod
7s. It had. been growing at an annual rate of tra one
ivi
by
diet and housing conditions.
cond., the ar .tae ? improve industrial Ucba olosy
. First, the z a surss
signed to achie this
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LS 06 otepchild in Um distribution
nt ids. Collectivization in the 1930'x, by insuring
in ,d.. years a bad:, mod industry for over
restraints which mi
tb= in 1937, Of course, per pits Output vas very much love!
MW than in 1928. In 19541 the
importer of food for the
worker incentives. A typical cwWlaint of
s when all they will b
be bread?
1955 Soviet diet beat
vay, our own peopi.'
of agricultural ou ' . &taznat
Aid 6)
it diet
2. Furt r, the Russian diet
widest discrepancy vas
in the USM comeued
nn total gain output vas lower
output, had been - - nr
eat. in the tint
-was accounted for by at r zd
sed by
i t s-7
iciont in. fats
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E
core of i hruehohev' a agricultur l,. ;p`o - were the "mow
IWASI and corn pmjecta, Even though the "new lands"
been
About 75 million acres were
about ham' in
zakhat n:. The torn project, carried out in
the backbone of the at and
-"A ricanis i g"
by ,96O-6i
a vtole is eating better today than ever before,
0 percent
Stalin, hieing conditions vere wore than their bAd been
Aaiun proi
iprogrma eoncerue4 housing. At the tip of the
th4t the 'Italians c o ed r And Italy, by Western European stUrA ,
quarters for its oution.
The &te Soviet goal t to brim about a 25 percent in
in living she per capita by 1960, cared to 1954- longer
The
r;tur new 0
tion bee begun to have ical and norale
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PushOd cui.ti tiara Into d
term plan is to put as end to the housing shorts 10 12 years.
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1956 when we were vArried., a,
Soviet
building
to of
Of an Mi nt by 1.962, "
attar housins.
ial Plant to
A Paul Henri &A" Is re rk that it is re difficult
to Provide a . re of t 'b* with a< rte.. Vie, and
to to launch an
briefly
t r for
cnno,
t l"dOrB renounced
of technical
SECET
A-S
points of 4octr to clear
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The second point, of doctrine was that Soviet excaUence made
of os it iet acct 1is nts unnecessary,
This policy, Vh ch vas ,psrt of a broader ca ign ea inst
"kowtowing to the West.," bad to be ridiculed ate:. replaced by
Insistence on constant attention to the techz ica l achie - its of
capitalism. As part of the proms of borrowing tec log r from the
others -- in exchange for reciprocal visits to the USSR.
ing 1959, about 1,,000 Soviet representatives. of industry and
States. Others wiU tour modern
in Western 2urope.
idea, the LJSW ter to step up its trade
ing Aid 7)
rose from. a low point 1953 of about
Ilion by 1957?
to throughout this
s embarked on a brc exchange program -- visits
reel to steael plants, electronics producin facilities
its of machinery and
50 million to a3
chinory a equ px ut lVorts accounted for
'gin its ability to absorb
Soviet Uni
reed in 1959 for the Soviets have been act
several
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se, 1 think the
t inrpoxnt:
1. When the Cun?sts took over coz .tions in the Soviet
for rapid economic deve o 3tit. The natux C,. az
in t resources were at band; there was no pressure of pops Lion
ource base.
2. The program of forced & -aft Inc ust .ta1ia t3 on ti h the
s based on forced draft industrialization
The necessary coo rl&r7 vas that pre-revolutionoxy
living standsrds were held constant,
possible ruble was plowed back
Of St
i
stick" ax it le and
policy for 30 years as the und?i sput:ed ruler of the Soviet Uni
actioon has brought the USSR a position
in the world, able to
the basic goala
industriftlization &Ud ilit `
at policy -
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sed, vb le r r