USSR: Measures of Economic Growth and Development, 1950-80

Approved for Release: 2019/07/19 C05210421
distribution of Soviet GNP by sector of origin for a
base year with constant-price activity indexes for each
sector to estimate the real growth of Soviet GNP in
the prices of the base year. The most recent study is
by Lee, who constructed end-use accounts for 1955-
75.‘
This paper combines the sector-of-origin and end-use
approaches to estimating the real growth of Soviet
GNP. First, the GNP accounts are constructed for
1970 in established prices following the Bergson
model. Second, the income side of the GNP account is
rearranged by sector of origin. Third, GNP by sector
of origin is converted to factor-cost prices, and the
factor-cost correction is carried over to GNP by end
use via an estimated 1970 input-output table. Fourth,
indexes in 1970 prices are constructed for each sector-
of-origin and end-use component. Finally, the compo-
nent indexes are combined using the 1970 weights in
factor-cost prices to estimate the real growth of Soviet
GNP both by sector of origin and end use. The results
are intended to measure changes in both production
potential and actual resource allocation over time.
Soviet National Income Data
The Central Statistical Administration of the Soviet
Union compiles its own measure of aggregate econom-
ic activity, usually labeled net material product
(NMP) in the West.’ The annual Soviet statistical
handbook, Narkhoz I9—, provides data on total
Soviet NMP, including five sector-of-origin and two
end-use components. There are three principal reasons
for compiling an independent index of Soviet econom-
ic activity rather than accepting the Soviet measure:
(1) there are important differences in coverage be-
tween NMP and GNP, (2) we do not have sufficient
knowledge of the methodological base of the NMP
data, and (3) the Soviet data in purported constant
prices are subject to major price distortions.
' W. T. Lee, “USSR Gross National Product in Established Prices,
1955-1975,” Jahrbuch der Wirtsc/la/I Osteuropas, vol. 8, 1979, pp.
399-429. _
° The actual Soviet term (natsional 'niy dokhod) translates as
“national income.” Since the same term is used in Western GNP
accounting for a different concept, the Soviet term is referred to as
net material product; it measures the net value added in the
production of material goods.
The main difference between NMP and GNP is that
NMP does not include the value added in the produc-
tion of most services, or a capital consumption allow-
ance.'° To build an estimate of GNP from Soviet data,
these two quantities, which represented about 25
percent of GNP in 1970, must be estimated in the
desired detail. Historically, production of the exclud-
ed services has grown more slowly than the other
components of GNP and, therefore, this difference in
coverage has imparted an upward bias to the growth
of NMP.
The omission of depreciation from NMP affects the
growth rate if total depreciation grows more rapidly
than the other elements of value added, or if the base-
year distribution of depreciation among the sectors of
origin differs markedly from the distribution of the
remaining components of value added. The available
data are not sufficient to infer the direction of the bias
in the growth rate of NMP due to the omission of
depreciation. The exclusion of depreciation does, of
course, affect the absolute size of NMP.
The Soviet Government regularly publishes annual
data on total NMP produced in both current and
constant prices, but the five sector-of-origin compo-
nents are given only in current prices. Annual data
are also published in current prices for “NMP used,”
disaggregated into two end uses—“consumption” and
“accumulation and other outlays”; similar data in
constant prices have been published only for recent
five-year periods. Even if suitable deflators could be
devised, the published sectoral disaggregations are far
too few to support systematic analysis of structural
changes in the economy or to provide adequate data
for economic modeling.
The problems in using the NMP data are complicated
by gaps in our knowledge about the methodology used
to compile the data. The Soviets have never published
'°
See USSR' Toward a Reconciliation of Marxist and Western
Measures of National Income, US Central Intelligence Agency,
Washington, D.C., 1978, for a more detailed discussion of the
differences between the GNP and NMP concepts.
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Approved for Release: 2019/07/19 C05210421