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OCI NO. 2923
24 December 1954
CURRENT
INTELLIGENCE
WEEKLY
CENTRAL INTELLIGENCE AGENCY
OFFICE OF CURRENT INTELLIGENCE
CONFIDENTIAL
DQCUMENT NO. /
MO CHANGE IN CLASS. ^
0 DECLASSIFIED
CLASS. CHANGED TO: S S~
! XT REVIEW DATE:
State Dept. review completed AUTH: 70-2
PAT REVIEWER: 2 25X1
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THIS MATERIAL CONTAINS INFORMATION AFFECT-
ING THE NATIONAL DEFENSE OF THE UNITED STATES
WITHIN THE MEANING OF THE ESPIONAGE LAWS,
TITLE 18, USC, SECTIONS 793 AND 794, THE TRANSMIS-
SION OR REVELATION OF WHICH IN ANY MANNER TO
AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW.
The Current Intelligence Weekly has been prepared prima-
rily for the internal use of the Central Intelligence Agency.
It does not represent a complete coverage of all current
situations. Comments and conclusions represent the im-
mediate appraisal of the Office of Current Intelligence.
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CONFIDENIIAA
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SUMMARY OF CONTENTS
THE SOVIET WORLD . . . . . . . . . . . . . . . . . . Page 2
Soviet moves to upset ratification of Paris agree-
ments and set stage for threatened countermeasures--
Congress of the Union of Soviet Vrriters.
LAOTIAN POLICIES MAY LEAD TO COMMUNIST GAINS . . . . Page 6
The new Laotian premier, Katay Sasorith, has set
forth policies which are likely to generate consider-
able controversy and could result in a cheap Communist
victory in Laos. Katay's program includes reconcilia-
tion with the Communist-backed Pathet Lao organization,
a speed-up in the liquidation of French influence, and
closer relations with Thailand.
WEST GERMAN REARMAMENT AS A DOMESTIC PROBLEM . . . . Pale t'
Popular sentiment against rearmament in West
Germany and the political problems involved in re-
militarization are becoming matters of increasing
concern to the Adenauer government. Most of the
present vocal opposition to rearmament will probably
evaporate once West Germany has its sovereignty, but
sharp disputes over the nature and control of the
armed forces are foreseen.
YUGOSLAV-ORBIT TRADE TO EXPAND . . . . . . . . . Page
Yugoslav trade with the Orbit will probably rise
from its present 4-percent total of foreign trade as
a result of forthcoming government-level trade talks
and subsequent negotiations. After a few years, such
trade may approach the pre-1939 level of 25 percent
with the area, but it will almost certainly not
achieve the level of 40 to 50 percent which prevailed.
at the time of Tito's break with the Cominform.
INDIAN-PORTUGUESE TENSION MOUNTS AGAIN . . . . . . . Page 1'
The dispute between India and Portugal over
enclaves on the subcontinent continues, and Portugal's
alarm has intensified again. The Lisbon government's
international attitude is colored by the issue, and
a renewed effort -to gain American support appears
likely.
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COMMUNISTS GAIN IN JORDAN . . . < . . . . . . . Page
The Communist Party of Jordan, although illegal,
emerged from the October parliamentary elections as
the strongest and best organized party in the country.
The party now is in a position to win further popular
support,
THE SOVIET DRIVE FOR INCREASED ADMINISTRATIVE ECONOMY
AND EFFICIENCY . . . . . . . . . . . Page
The program of the Soviet government to reduce
administrative costs and increase efficiency, which
began shortly after Stalin's death, is one aspect of
the regime's efforts to raise economic output by in-
creasing the effectiveness and productivity of the
total labor force.
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As the time for the French assembly's decision on
the Paris agreements approached, Soviet diplomacy moved
into the final stage of its campaign to upset ratification
and, failing this, to build the strongest possible posi-
tion for "countermeasures" outlined during the recent
Orbit security conference in Moscow. The unusually heavy
volume of notes and propaganda addressed to the Western
powers last week consistently emphasized the finality
and irrevocability of the acts of ratification and stressed
the pointlessness of negotiations after ratification.
. Last week's notes and warnings to the Western powers
were designed to buttress Moscow's current thesis that the
West bears sole responsibility for the fateful consequences
of the "remilitarization" of Germany and that this action
will introduce an entirely new phase in East-West relations.
As a final step in documenting the West's rejection of
Soviet efforts to ensure European peace and security,
Moscow addressed similar notes on 17 December to all those
countries, except the United States, Eritain, and France,
which had been invited to the Moscow security conference?
These notes rebuked them for their refusal to attend the
conference and formally transmitted the conference dec-
laration of 2 December.
There has been an indication that the much publicized
but vague "countermeasures" outlined in this declaration may
now be under discussion in Moscow. Ambassador Bohlen'
who had observed a group of unidentified Satellite mili-
tary officers and civilians at th3 Eolshoi theater on 19
December, suggested that they may be in Moscow to work
on implementation of the 2 December declaration..
While Moscow has shifted to a harsh policy line to-
ward the West, its internal measures continue to be
indulgent and -to spell greater intra-Orbit co-operation.
The tone and content of the major speeches at the opening
of the Congress of the Union of Soviet Writers--the first
in 20 years --indicated that the bitter condemnation of
liberal stirrings in the art world last spring did not
lead to a complete reimposition of the harsh Zhdanov
line of 1946.
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Now SECRET
The principle that literature's role is basically
propagandistic was -;ffirnied.. There was no clear
directive as to how this principle is to be carried out
or what limitations in form and content are to be imposed
by the regime. This vagueness probably results from an
attempt to avoid two extremes--throttling creative
initiative on the one hand and allowing the growth of an
undesirable literary trend on the other.
A more charitable attitude toward deviations from the
party line also is being pursued. Several literary officials
who lost their jobs under heavy fire this spring were
elected to the presidium of the congress. Delegates at
the congress were cautioned not to attack straying writers
personally but to concentrate on their mistakes.
The attention accorded Stalin on the anniversary of
his birth indicates that he has now taken a place along with
Marx, Engels and Lenin as one of the founding fathers of
communism. This evaluation of him as a "prominent theo-
retician and a great continuer of Lenin's cause" appears
to represent a stabilization of his position, midway be-
tween the inordinate prominence he received while living
and the negligible role ascribed to him a year ago.
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The new Laotian premier; Kata,y Sasorith, has set forth
policies which are likely to generate considerable controversy
and could result in a cheap Communist victory in Loas. Katay's
program includes reconciliation with the Communist-backed
Pathet Lao organization, a speed-up in the liquidation of French
influence, and closer relations with Tha, :land.
The trend toward reconciliation with the Pathet Lao,
despite the royal government's anti-Communist orientation, is
explained by the reluctance of most Laotian officials to
believe that the Pa.thet Lao leaders--notably Prince Souphanou-
vong, the half-brother of the present defense minister--are
genuine Communists, and by pressure from the Indian members of
the International Control Commission. The Indian chairman's
view is that the role of the commission is "to bring the two
sides together," rather than to attempt to enforce rigorously
the terms of the cease-fire agreement. The Indians also
regard the Pathet Lao as "not really Communist."
The Pathet Lao, speaking through the Viet Minh radio,
has taken a, conciliatory attitude toward the royal government
and has welcomed the government's plan for meeting of leaders
of the two sides. No concrete concessions have been made,
however, and, in direct contrast to any idea of subordinating
itself to royal government control, the Pathet Lao has been
attempting since the truce to consolidate its hold on the
provinces of Phong Sealy and Sam Neua and has been laying the
groundwork for expanded military and political activities
throughout Laos.
French officials in Laos take a, pessimistic view of the
royal government's capacity to maintain internal security,
pointing out that the rapid replacement of French army
officers by Laotians is seriously weakening the royal array.
The government's meager military capabilities may be behind
the wish to win over the Pathet Lao rather than attempt to
destroy it,
The American minister in Vientiane believes that the
Laotian government is yielding unduly to nationalistic motives,
and that French influence is being whittled. down too fast.
Under the cease-fire agreement, the French retain a garrison
of 3,500 in Laos and a training mission of 1,500, but the
morale of these forces is dangerously low.
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The reduction of French influence in Laos will probably
be accompanied by a Laotian move toward closer relations with
Thailand. Premier Katay favors such a development and
apparently does not intend to press the issue of suspected
Thai involvement in the murder of the Laotian defense minister
last September.
The concept of negotiations with the Pathet Lao, although
generally favored by Laotians, has encountered the strong and
perhaps decisive opposition of Prince Savang--the most power-
ful political figure in Laos. Savang's stand probably derives
in some degree from his fear that his own influence might be
diminished by a grant of amnesty. or political office to the
rebel Prince Soup:ha,nouvong, a member of a rival branch of the
royal family. Similarly, Foreign Minister Phoui Sananikone's
opposition to Katay's policies toward the Pathet Lao and
Thailand may be partly attributable to his long-standing
rivalry with the premier.
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WENT GEfMAN 2.EARMAMENT AS A DOMESTIC PROBLEM
Popular sentiment against rearmament in West Germany
and the political problems involved in remiiitarization are
becoming matters of increasing concern to the government
of Chancellor Adenauer. Although most of the present vocal
opposition to rearmament will probably evaporate once Rest
Germany has its sovereignty and the formation of an army is
begun, continuing sharp disputes are forseen over the nature
and control of the new armed forces,
Young West Germans have become progressively less
enthusiastic about conscription in the past year, particu-
larly since the defeat of EDC, which had been viewed as
offering an idealistic justification for military service.
The proximity of the draft, fear of reviving the caste
system of the old German army, and the'decrease in public
fear of Soviet attack are all factors in this antimilitary
feeling,
This sentiment is strongest in the opposition Social
Democratic Party (SPD), which for some months has been waging
a widespread campaign against the projected army. Convincing
evidence of the success of SPD tactics are the resolutions
against rearmament passed last September by overwhelming
majorities at the conventions of the West German Federation
of Trade Unions and the Trade Union Youth Federation. The
drive against rearmament. is also being pushed independently
by some 300 Evangelical pastors led by Martin Niemoeller.
The West German Communists have had considerable success in
organizing anticonscription demonstrations.
Nevertheless, rearmament is still supported by a
substantial majority of the general population. A recent
public opinion poll, sponsored by the American high
commission, showed 61 percent of those interviewed as favoring
rearmament and only 22 percent opposing it. The Social
Democrats themselves se .a to have little hope of success in
their present campaign, and the party is reported to have
hired a former German General Staff officer to advise its
deputies in the Bundestag on technical points of defense
legislation. Officials of the government's Defense Planning
Office, headed by Theodor Blank, believe that the current
resistance to military service can be kept within manageable
limits provided the Paris a4reeriaents are ratified without
undue delay.
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Aside from this problem of politically stimulated anti-
rearmament sentiment, the Blank office faces a number of
serious difficulties in building a permanent army cadre.
Virtually all World War II lieutenants and noncoms -ire now
over 30, and their ability to got along well with younger
recruits is questionable. The age problem is even more
acute for the air force.
Many of those best qualified for military commissions
are reluctant to leave their civilian jobs. Moreover,
according to officials of the Blank office, the Finance
Ministry will not agree to a satisfactory military pay scale
and refuses to make funds available for the establishment of
committees to select and examine candidates for officer
posts down to the rank of major.
Meanwhile the status of the future Ce.rman soldier is a
subject of controversy. Blank and Generals peidel and
P.eeusinger favor giving him the rights and privileges enjoyed
by his American counterpart, but are opposed by a group of
former officers who consider the old type of Prussian
discipline essential. Parliament and most veterans' organ-
izations support the plans for democratization of the new
army.
The question of control over the new army is an
extremely serious one for most Germans. Adenauer and many
responsible West German leaders have had misgivings about
rebuilding an army on a national basis rather than the supra-
national basis envisaged in EDO.. Great care is accordingly
being taken to see that the army will be strictly controlled
by the civilians in the Defense Ministry, and will be under
constant scrutiny by a parliamentary committee. Opposition
to such arrangements is reported within the defense office,
however. Blank believes strongly in civilian control, but
Meusinger and other officers want a semi-independent
Military Division within the ministry. The ability of the
Federal Republic to keep this military group subordinate
will remain uncertain for some time.
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YUGOSLAV-ORBIT TRADE TO EXPAND
By February 1955, Yugoslavia will have negotiated of-
ficial long-term trade agreements with the USSR and nearly
all the Satellites, thereby formalizing on a government level
the trade which has been developing slowly since the spring
of 1954. For both political and economic reasons the Yugo-
slavs will undoubtedly try in these agreements to increase
their trade with the Soviet bloc, which stands now at less
than 4 percent of their total goods exchanges. While such
trade may, after a few years, reach the pre-1939 proportion of
25 percent with the area, it will almost certainly not climb
to the 50-percent level prevailing at the time of Tito's break
with the Cominform.
The USSR was first to suggest trade negotiations at govern-
ment level to extend the three-month agreement signed on 1
October. On 11 December, the Yugoslav radio announced forth-
coming talks, also apparently of an official nature, with
Hungary, Czechoslovakia, Bulgaria, Poland, and Rumania. "Un-
official" agreements between Yugoslav and Satellite firms or
chambers of commerce have been signed since May 1954 with
Hungary, Czechoslovakia, East Germany, and Bulgaria. Three of
these early arrangements with the Satellites expire at the end
of 1954, but that with East Germany extends until July 1955.
No short-term agreement between Yugoslavia and Poland or
Rumania has been announced for 1954.
Orbit trade will be attractive to Yugoslavia as an ad-
ditional source of the raw materials necessary for its in-
dustrial expansion, and transport costs will in most cases
be lower than from the West. Even internal transport costs
may play a role in this. Yugoslavia intends to import some
Hungarian cement inexpensively by way of the Danube, freeing
for export equivalent amounts of cement produced near the
Yugoslav Adriatic coast.
Although they may be somewhat overoptimistic, the Yugo-
slavs hope that the USSR and the northern Satellites will
provide industrial equipment, needed in quantity. Belgrade
may also be motivated by a desire to place its trading pat-
tern, on a sounder basis in anticipation of a gradual decrease
in American and other Western aid which has served as an
economic buoy.
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Although trade with Yugoslavia would not be of much economic
importance to the bloc, the USSR probably sees it as a means of
fostering Western suspicions concerning Yugoslav intentions and
of proving to Belgrade the sincerity of "normalization." Offers
of commodities which are particularly desirable to the Yugo-
slavs may be used as bait. For example, Soviet crude oil,
artificial fertilizers from East Germany, and Czech spare parts
and machinery were included in the first Orbit trade lists.
The Soviet Union was not, however, willing to grant Yugoslavia
a large quantity of wheat, which would have made..a deep-impression
on the government because of the drought-caused shortage in
Yugoslavia this year.
Efforts to broaden Yugoslav-Orbit trade may be complicated
by problems of unfulfilled commitments and debts dating from
the period before 1948. The trade debts of Hungary, Albania,
and Rumania to Yugoslavia are estimated at $5,500,000 more than
those of Yugoslavia to the USSR, Czechoslovakia, East Germany,
Poland, and Bulgaria. If the Yugoslavs press collection of
this debt, the Soviet Union would probably be willing to back
financial concessions by the debtor Satellites. Yugoslavia
is not likely to press the point, however, because it owes
$72,000,000 to the USSR on a separate account for military
equipment and industrial goods received before the break.
Barring spectacular trade offers from the bloc, the Yugo-
slavs are not likely to alter radically the Western orientation
of their trading pattern, nor to cease their general co-operation
with Western export controls. They turned down Soviet and Czech
requests that strategic goods be included in the first trade
lists and in mid-September reasserted their intention to co-
operate "to the fullest extent possible" in controlling such
exports.
Moreover, in the past year, the Yugoslavs have shown
special interest in cultivating South American and Middle
Eastern markets, and their economic relations with Austria,
West Germany, and Italy, all important Western trading partners,
have improved. The incipient co-operation of the three Balkan
Pact powers in economic matters constitutes another Yugoslav
economic tie with the West.
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INDIAN-PORTUCUESE TENSION MOUNTS AGAIN
The dispute between India and Portugal over enclaves
on the subcontinent continues, and Portugal's alarm has in-
tensified again (see map, p.14). The Lisbon government's
international attitude is colored by the issue, and a re-
newed effort to gain American support appears likely.
India recently has been harassing the Portuguese en-
claves, administered from Goa, with the economic pressure any:
tactics that proved so successful against the French estab-
lishments on the subcontinent. The Portuguese fear that if
New Delhi's present tactics fail, it will try more forceful
measures. They also fear that Indian takeover of the enclaves
might encourage an Indonesian move against Timor, a Chinese
move against Macao, and nationalist agitation in Portuguese
Africa.
Direct pressure by the Indians was partially successful
last summer when "volunteers," in part Communist-led, took
over two isolated Portuguese subdistricts. A later march
of "volunteers" on Goa fizzled when the Indian government,
apparently impressed by international disapproval and the
Portuguese resolve to shoot any invaders, took steps to
discourage it. The Indian government's subsequent economic
blockade has led to a cessation of trade with Goa; and the
other Portuguese enclaves, and Indian refusal to transship
Portuguese goods. Besides trade with India, three of the
largest sources of Goa's income have been tourism, smuggling,
and remittances, all of which have been curtailed. Although
Portugual will try to make up the loss caused by the blockade
and to keep the colonies afloat economically, in the long run
the embargo is likely to have a serious effect. Most Goans
have found it more profitable in the past to live under the
Portuguese flag. If it becomes apparent that this is no
longer true, popular sentiment might turn toward union with
India.
In his opening address to the Portuguese National
Assembly on 30 November, Prime Minister Salazar mentioned and
rejected three possible methods of settlement: (1) transfer
of sovereignty to India through negotiations; (2)war; and
(3) granting Goa its independence. He then called for negotia-
tions to establish a "peaceful coexistence" and implied a
willingness to make concessions, as long as they did not
involve a transfer of sovereignty. In what appeared to be an
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answer to Indian allegations that civil rights are denied the
Goans.,Salazar announced a forthcoming basic statute for
Portuguese India, implying that it would be more liberal than
present legal provisions.
Most Portuguese officials fear that India is determined
to annex Goa, and that if this is not accomplished peaceably,
the Indians will again send large numbers of "volunteer"
agitators across the borders to create an excuse for an Indian
army "police action." In a direct clash with Indian armed
forces, the 7,000-odd Portuguese and African troops in Goa
would probably put up a strong initial resistance, but-with
little chance of holding out for long. There is no present
indication, however, that India is planning military action.
The Portuguese, on the other hand, have shown some signs
of wanting to re-invade their lost territory. They have been
working to complete an airport near Murmagao in Goa within a
year. The defense minister recently told an American official
of a scheme for parachuting troops into Nagar-Aveli, and the
Portuguese have shown interest in buying American helicopters
for use in India. Although officially New Delhi has no connec-
tion with the provisional government set up by the "volunteers"
to administer Nagar-Aveli and Dadra, any Portuguese military
move against it would undoubtedly meet Indian counterforce.
From the beginning of the Indian controversy, Lisbon has
been hypersensitive about the American policy of remaining
publicly aloof. The Goan crisis has aroused so much patriotic
emotionalism among government leaders that anger at Indian
"aggression" can easily be translated into bitterness at United
States "nonsupport." If Indian pressure'should increase sharply,
Portugal can be expected to employ the leverage provided by
its NATO membership and the bilateral base rights agreements
with the United States to appeal more insistently for American
support.
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72
DILL' ISLAND'
PORTUGUESE INDIA
ft ENCLAVES IN DISPUTE
t r
NAGAR-AV E LI
(Occupied by Indians in July, 1954)
ARABIAN
I N D I A
72 I ANGEDIVA 1
ISLAND
"I tCEYLON
V
I N D IAN D C E A N
PRESENTATIONS DIVISION 22 DECEMBER 1954 41216-7
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COMMUNISTS GAIN IN JORDAN
The Communist Party of Jordan, although illegal, emerged
from the October parliamentary elections as the strongest and
best-organized party in the country, and it is now in a pos i.
tion to win further support. Communists, running as inde- 3W
pendents, won two seats in the Chamber of Deputies, giving
the party parliamentar representation 1
Jordan's history. 1 11
The Jordanian Communist Party is small, with an estimated
250 hard-core members and 4,000 active supporters, but it has
greater discipline, more energy, and a better organization
than any other political group in the country. The impover-
ished conditions of some 470,000 Arab refugees among the
1,300,000 population, as well as strong antigovernment senti-
ment in West Jordan (Arab Palestine), offer the Communists
unusual opportunities for exploitation.
Communist activities have increased steadily during the
past two years, and the party has gained substantial support
from non-Communist groups as it has managed to identify it-
self with popular grievances against the government.
Exploiting the particularly strong antigovernment and
anti-Western sentiment in West Jordan, the Communists are
likely to intensify their efforts to bring about the fall of
Abul Huda and his replacement by a weak, neutralist prime
.minister.. While such an opportunity does not seem to exist
now, it might arise if the government became involved in a
serious frontier incident with Israel like the Qibya attack
of last year and then failed to satisfy popular Jordanian
sentiment for a tough approach.
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THE SOVIET DRIVE FOR INCREASED ADMINISTx1ATIVE
ECONOMY AND EFFICIENCY*
The effort of the Soviet government to reduce admin-
istrative costs and increase efficiency, which began shortly
after Stalin's death, has brought about the transfer of many
workers in government and industry from administrative to
production jobs, and the movement of workers from the central
government in Moscow to regional or field organizations. Con-
currently, managerial flexibility and responsibility at lower
administrative levels in both government and industry have
increased, and serious attempts are being made to bring the
administrative apparatus closer to the working level.
Numerous articles on the need for better administration
have been published in the USSR since mid-1954, suggesting
that the drive for greater efficiency has accelerated in recent
months. By October 1954, according to a recent article by
Minister of Finance Zverev, 200 chief directorates or inde-
pendent offices, 147 trusts, 895 supply organizations, and
4,500 other smaller units had been abolished in 46 ministries
and departments of the central government. Furthermore, he
stated that "the measures being undertaken now are only the
beginning of the great work of perfecting the government
apparatus."
These administrative changes are one aspect of the regime's
efforts to raise industrial and agricultural output by in-
creasing the effectiveness and productivity of the total labor
force. Because of the high degree of centralization inherent
in the Soviet dictatorship, however, the chances for lasting
success of present efforts to erase the stultifying effects of 25X1
bureaucracy are dubious. 25X1
One recent indication of the magnitude of these changes
that over a million workers were to
be transferred from government administrative posts to pro-
ductive sectors of the economy. This figure probably represents
the total administrative reduction throughout the USSR since
Stalin's death, in addition to future planned reductions..
Finance Minister Zverev wrote that "from. 1952 to 1954"
the size of "the central apparatus of ministries and depart-
ments" was reduced by 20.6 percent. This probably refers only
to the Moscow area, and includes both the reduction of admin-
istrative workers there and the transfer of many from Moscow
to other administrative jobs in regional or field organizations,
*Concurred in by the Office of "esearch and Reports.
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Complementing this economy drive have been serious
efforts to bring the bureaucracy closer to the working level,
and even to "humanize" Soviet administration in small measure.
Khrushchev, in a February 1954 speech, urged that administra-
tion be moved closer to production, so that the bureaucrats
would no longer sit in Moscow and "cast from there their paper
nets." The most striking action of the regime in this direction
was the establishment during the first half of 1954 of minis-
tries in individual Soviet republics for several key industries,
such as ministries of ferrous metallurgy and the coal industry
in the Ukraine, and a ministry of nonferrous metallurgy in
Kazakhstan. In agriculture, also, administrators have been
urged to move from the district centers to the collective farms,
from the provinces to the districts, and from Moscow to the
provinces.
A major corollary of these measures has been a moderate
increase in the authority of lower-level officials, and a large
reduction in the number of details concerning the country's
economic production accounted for in the National Economic Plan.
Many details are now to be included only in the plans of in-
dividual ministries or regional bodies. According to a recent
article by two staff officials of the State Planning Commission
(GOSPLAN), the list of commodities whose allocation is strictly
controlled by the central government will only be half as large
in 1955 as in 1953.
This does not, by any means, imply a decentralization of
control in this magnitude, since most of the decrease results
from a merger of individual items into broader categories. For
example, in 1953, 106 different types of centrifugal pumps were
carried individually on this list, while in 1955 the number of
types will be reduced to 18 simply by making each type a broader
category.
The same kind of change has been effected in the central
plan for 1955 in such fields as agriculture, labor, and capital
investment. While all these changes do not appreciably reduce
the over-all central control of the government, they should
substantially increase the flexibility of administration at min-
isterial levels and below, and lead to an improvement in indus-
trial management
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