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

Approved for Release: 2019/07/19 C05210421
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income is excluded. Thus, Soviet net material product. omits about one-fourth
of the resources used to produce goods and services in the USSR. In addition,
‘there is an upward bias in oflicial measures of activity. The result is that Soviet
statistics on net material product provide an incomplete and distorted view of
the size and growth of the Soviet economy.
The need for independent measures of economic performance is heightened
by the sparseness of oflicial data and their inconsistencies. The oflicial data
tend to be published in insuflicient detail. the price base of some series are
periodically changed, and the -product coverage may be altered without notice.
For example, because the oflicial measure of consumption referred to as
“real incomes of the population,” is not described adequately, its validity or
usefulness cannot be fully assessed. The official series shows a higher growth
rate than does the synthetically construdted index of consumption, in part
because of the failure of the official series to take inflation into account.
The Soviet indices of industrial and agricultural production are based
on gross output rather than value added. As a consequence, double counting
of materials used in production is incorporated in the indices, There is con»-
siderable evidence that the oflicial index for industrial production has serious
short-comings due to the treatment of price and quality changes. There is much
evidence that prices assigned to new industrial products are too high relative
to prices for older products in view of the changes in technology and quality
taking place.
In the consumer sector, there is considerable evidence that new, high-priced
but only slightly altered products are deliberately sutbstituted for equivalent,
low-priced products to syphon-off consumer purchasing power. The oflicial data
treat such changes as if there were no real price increases, thus incorporating
hidden inflation.
THE GENERAL APPRoAcn
The value of GNP can be calculated in two ways. One way is to derive
GNP as the sum of the various end uses of the goods and services—consumption,
investment, and government (both military and civilian). GNP can also be
computed as the sum of value added in the several production sectors—indust-ry,
agriculture, and the like.
The intent of these studies is to replicate as far as possible, on both the
sector of origin and end use sides of the accounts, the methodologies developed
by the U.S. Department of Commerce and the OECD for the construction of
Western economic accounts. Precise conformity is not possible, primarily be-
cause the organization of the Soviet economy and the limited amount of data
published by the Soviet Union require modifications and simplifications of the
VVestern accounting framework. Defense expenditures are the most conspicuous
example. Total defense is not identified separately in the Soviet GNP accounts
contained in this volume because other GNP components, primarily investment
and research and development expenditures, are thought to include substantial
amounts of defense expenditures. As a separate exercise, the CIA estimates
total defense expenditures directly from a detailed description of their defense
programs and activities. The defense estimates have been explained and dis-
cussed in the Joint Economic Committce’s annual hearings on the “Allocation
of Resources in the Soviet Union and China.”
Despite the limitations, it is believed that the measures developed—both the
configuration of trends and absolute size~are reasonably accurate representa-
tions of Soviet economic performance, can be compared with confidence with
similar measures for Western economies, and are far more acceptable indicators
ofstgonomic performance than the corresponding measures published by the
U R.
Gross national product is defined as the market value of the final goods and
services produced by a given country. As applied to the Soviet economy, this
Approved for Release: 2019/07/19 C05210421