Documents / FOIA release
This Joint Committee Print, dated December 8, 1982, gathers studies that the Central Intelligence Agency's Directorate of Intelligence prepared for the Joint Economic Committee of the US Congress. It gives estimates of Soviet gross national product for 1950 to 1980, with indexes of industrial production, agricultural production and consumption, and explains the methods and data behind them. The foreword says official Soviet statistics inflate growth and that the CIA measures offer a more accurate picture. The document contains no UFO material.
“Gross”60+ pages
Approved for Release: 2019/07/19 C05210421 a permanent price. Because innovation is risky given the incentives confronting the Soviet manager, specifi- cations of old products often change only slightly. This is enough, however, to allow him to charge a substantially -higher price for this “new” product and to lead him to halt production of the older and cheaper model. Purchasers have little choice but to accept the more expensive item. As a consequence, value of production has increased more than could be justified by the degree of product change. An inflationary bias is also introduced into the value series by the way constant or, in Soviet terminology, comparable prices (sopostavimye tseni) are set. For items in production before the base year for the comparable prices, the prices in effect in the base year are used in the series. For products introduced subse- quently, the first permanent price is the comparable price. The output series therefore reflects a mixture of constant and current prices; the presence of price inflation will then bias the output index upward. New-product pricing represents the serious measure- ment problem in industries where products are hetero- geneous, where value measures would provide the only meaningful measure of output, and where many op- portunities for innovation exist and product complex- ity makes it difflcult to distinguish between real and cosmetic improvements. Although these features exist to some degree in all industrial branches, they are most characteristic of machinery and chemicals. The study already referred to (An Analysis of the Behavior of Soviet Machinery Prices, 1960-73), can be used to gain some notion of the possible impact of disguised inflation on the value series. One type of machinery analyzed in that study is machine tools, for which SPIOER relies on the offlcial value series in the Narkhoz. According to the value series, machine tool output in 1970 was 2.33 times the 1960 level—an average annual increase of 8.8 percent. The machin- ery price study concludes, however, that machine tool prices in 1970 were 28.7 percent above the 1960 level after allowance for changes in product characteristics. Deflating the value series by this price increase suggests that output in 1970 was only 181 percent above 1960 or that machine tool output increased at an average rate of only 6.1 percent per year, 2.7 percentage points per year less than the value series used by SPIOER. If the wholesale price index derived in that paper based on a sample of several types of machinery is representative of all of the value series incorporated in SPIOER, the hidden price changes incorporated in the value series and hence wrongly counted as real growth, would be significant: Implied Price Inflation Average Annual Percent in Machinery 1961-66 2.7 1967-70 5.7 1971-73 — 1.6 This would suggest that in the 1960s the value series are upward biased and that at least in the early 1970s the value series are downward biased. Over the entire 13-year period, the implicit rate of inflation in the value series would average 2.6 percent per year. Not all value series are subject to a large upward bias arising from price inflation. In some of the rapidly developing industries like precision instruments and electronics, prices have been reduced repeatedly to prevent the excessive accumulation of profits. Because those industries are in a relatively early phase of development, expansion of output generates substan- tial economies of scale and cost savings. In such cases the amount of disguised inflation would be much smaller than in more developed branches that are also represented by value series. The relative importance of this kind of sample bias in the branch indexes can be determined from the composition of the sample in each branch. Six of the branch indexes are completely based upon quantity series. Distortions in the value series reported by the CSA could carry over to the synthetic indexes for the wood, pulp, and paper industry, light industry, chemi- cals, and machinery. The tabulation below indicates 214 Approved for Release: 2019/07/19 C05210421
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FOIA release, from the cia-readingroom collection. The PDF is mirrored here; the original link is under it. 399 pages are in the text index: search them above, or from the library's search.