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

Approved for Release: 2019/07/19 C05210421
Indexes require modification to correct for distortions in So-
The indexes of total consumption and major compo- viet prices, which fail to reflect either full resource
nents provide, it is believed, a reasonably reliable costs (production potential) or consumers’ marginal
measure of the growth of real consumption in the utilities as they would be expressed in a free market.
USSR since 1950. Because the index is designed to Where the concern is with production potential (and
measure as closely as possible real consumption of perhaps also with welfare in terms of planners’ prefer-
goods and services as measured in the West, this enees), ruble Dfioes need to be adjusted (ll to remove
overall judgement lends confidence to international turnover taxes, now levied mainly on soft goods,
l
comparisons of relative progress in raising levels of durables and alooliolio beverages; (2) to add Subsidies.
living in the USSR and in other countries. The index now applicable mainly to food and to housing; and (3)
is also a better indicator of the growth of consumption to allow for a fesollfoe eliafge for Capital A faetof
in the postwar period than are the Soviet official cost adjustment to 1970 ruble values has been made
statistical series intended for that purpose, because for GNP and its end-Ilse Components-'7 For Consump-
the index is more inclusive and because it largely tion the procedure resulted inia net reduction in total
avoids the use of the unreliable official retail price consumption of 3-3 billion rubles, of l-6 Dement-
indexes. Table 5 co\mpares the growth rate of consumption and
its major components aggregated (l) with established
The index is considered much more reliable for price weights and (2) with 1970 ruble factor cost
depicting long-run trends than year-to-year changes. weights. The factor cost weights reduce the growth of
lnaccuracy in measuring the latter stems from the total consumption by about one-tenth for the period as
limitations of data availability. Absence of data for a whole because the adjustment Faises tlie Weight oi
particular years necessitated interpolation in a num- the relatively slow-growing housing component and
ber of cases, or resort to estimates based on a variety reduces the weight of the fast~growing durables com-
of evidence in other cases. Also, use of production ponent. Also, the index of food, beverages, and tobac-
data to represent some series may distort annual co grows more slowly when factor cost weights are
changes in actual consumption, especially for agricul- Used, beeallse the iaotof eost adjustment raises the
tural products; however, adjustments for inventory weight of the relatively slow-growing animal products
change and net foreign trade were made where avail- sub-index and sharply reduces the weight of the very
able data permitted doing so. fast growing index of beverages. Meat prices are'
heavily subsidized, and alcoholic beverages are heav-
The individual time series selected to measu_re con- ily mX¢d_
sumption of particular categories of goods and serv-
ices necessarily were constrained by the availability of The adjustment ;¢du¢¢5 the Share of consumption in
data. Every effort was made to scour the literature GNP in 1970 from 55_1 pgfcent to 54_2 p¢;c¢m_ The
and to select or construct data series that seemed most gffeqts on relative; Shares of major cawgorics within
suitable as measures of changes in real consumption Cgngumption in 1970 am Shown in Table 2_
over time. Some series are based on measures of '
production or of consumption expressed in physical Adjusggd Market Pfices
Units (kilograms, square meters, kilowatt-hours and Bergson also considered the question of the extent to
the like); Others are based On deflated retail Sales, which relative prices in consumer goods markets in
while others are deflated government expenditures. the USSR conform to his "consumer utility Stan-
The series are of uneven quality, a point that will be dard.” '8
For retail prices to reflect relative utilities in
elaborated later for eaeh major Component indeX- the Soviet context, consumers must be free to dispose
of money incomes as they choose and government
price-fixing must succeed, by and large, in limiting
Indexes at Factor Cost and in Adjusted Market Prices demand to Suppl;/_ Consumption in kind, in mm,
should be valued at retail prices that reflect consumer
Faetof Cost utilities. Similarly, housing rents should reflect the
AS Bergson has shown.“ measures of Soviet e0nsumr>- levels that would obtain in an open market.
tion in established prices (prevailing ruble prices)
:1
Igor a description of the procedure, see JEC, GNP, I950-80.
'~
Bergson, 1961, pp. 103-126. °"*‘°“~ lg“ PP- 157471
331
Approved for Release: 2019/07/19 C05210421