HOW much of Soviet Russia's national product is she allotting currently to military preparedness? A partial basis for an answer to this much-discussed question is provided by the data in the following table, which have been assembled from Russian sources.[i] The figures given represent the defense expenditures reported in the annual budgets of the Soviet Government. Those for the period 1933-46 represent realized expenditures, while the figure for 1947 is a budget forecast.

Year Billions of rubles
1947 (forecast) 67.0
1946 72.6
1945 128.2
1944 137.9
1943 125.0
1942 108.4
1941 80.0
1940 56.7
1939 39.2
1938 23.1
1937 17.5
1936 14.9
1935 8.2
1934 5.0
1933 1.4

The budget figures for defense, it should be observed, are not entirely comprehensive of Soviet military outlays. One omission, military pensions, is not of special concern here, since outlays for this item reflect previous rather than current military activities.[ii] Beyond this, the defense figures apparently do not include the outlays of the N.K.V.D., which reportedly engaged in some military as well as internal police operations during the war. The expenditures of the N.K.V.D. in 1937, the most recent year for which data on this organization are at hand, amounted to three billion rubles.

In respect of the figures for postwar years, there is a question also as to the extent to which two other items are covered. One of these is atomic energy research. In the budget there is a separate heading "scientific research," which may possibly include some work on atomic energy. The total outlay for scientific research in 1947 is to reach the sum of about 6.5 billion rubles, which is three times greater than the prewar figure. The other possible omission is supplies requisitioned by the Red Army in occupied countries. Reportedly somewhat over a million Soviet troops were quartered outside the Soviet borders early this year. According to rule-of-thumb calculations, the total value of foodstuffs consumed by these troops probably would not exceed, at the very outside, five billion rubles per annum.

The presumption is that the budget figures do include capital outlays for the construction of war plants, as well as current expenditures for munitions. Since there is no explicit Soviet statement to this effect, however, a reservation must be introduced in the subsequent discussion on this account.

In interpreting the data in the table, we must for our present purposes take into account the changes in the prices of military goods and services which have occurred in the period under consideration. The budget figures represent money outlays in terms of current prices; necessarily, unless price changes are allowed for, the figures cannot be taken to represent the changes in defense expenditures in real terms.

On the extent of the changes in prices, there are two bits of information worth noting here. First, according to A. G. Zverev,[iii] the Minister of Finances, if allowance is made for the rise in prices and in the pay of troops from 1946 to 1947, the defense expenditures in real terms in 1947 will be 24 percent below those for 1946. Taken together with the figures on money expenditures, this means that the prices of defense goods and services rose 21 percent from 1946 to 1947. Second, according to a rough estimate of the present writer, the general level of money wages has risen about 85 percent since 1939.[iv] This figure on the rise in money wages tends to corroborate reports from all sources that since the outbreak of the war the Russians, despite their planning system, have experienced a wage-price spiral of very considerable dimensions. In the case of munitions, however, the increase in prices probably has been appreciably less than 85 percent. While money wages in the munitions industries may have risen even more than elsewhere, there were very real gains in techniques during the war, and working hours in industry generally are now somewhat longer than they were before 1940;[v] hence, wage costs per unit of output probably have not risen by nearly as much as wages.[vi]

Let us try now to answer the question that was posed. Bearing in mind the limitations in the data that have been referred to,[vii] the available information would seem to indicate a twofold conclusion:

(1) The Soviet military establishment is now far smaller than it was during the war. The figures in the table show a decline in money outlays of more than 50 percent from 1944 to 1947. (The year 1944 was the last full war year and the one in which money outlays were at an all-time peak.) If allowance is made only for the 21 percent increase in the prices of defense goods and services from 1946 to 1947, and not at all for the rise in these prices which presumably occurred from 1944 to 1946, this would mean that in real terms the defense outlays of 1947 were 40 percent of those of 1944.

The same general conclusion regarding the progress of demobilization in the U.S.S.R. is, of course, indicated by a great deal of other information reaching the United States. Reportedly, the Soviet armed forces now number about 3,500,000 to 4,000,000 men, while in wartime their strength is said to have reached about 12,500,000. In the Soviet press itself, there have been many reports on the demobilization of various classes of the armed forces, as well as on the reconversion of various branches of industry to the production of reconstruction goods. Reference to the foregoing facts inevitably calls to mind the forecasts that circulated in this country some time ago to the effect that the Russians planned to keep their military establishment on something like a wartime footing. Clearly these forecasts were wrong.

(2) By peacetime standards, however, the present outlays are still quite substantial. The current expenditures in real terms are perhaps about as large as, if not larger than, those of 1939, the year after Munich and the one in which the European war broke out. This allows for an increase of fully 85 percent in the prices of defense goods and services from 1939 to 1947 -- the amount by which, as indicated above, the general level of wages rose in the same period.

According to rough calculations, Soviet Russia's military outlays probably amounted to about one-seventh of her gross national product in 1939. As a result of the war's destruction, the Russian national income is now less than it was in 1939;[viii] hence the defense expenditures now must be a larger share of a reduced total product.

The foregoing remarks inevitably raise but scarcely answer the question of the day: What are the Russians after? Regarding the Soviet military outlays, as regarding the military outlays of other countries, one is free to speculate as to whether they are for offensive or defensive purposes, for aggressive or peaceful aims. It might be surmised that expenditures on something like the 1939 scale are intended to support a foreign policy involving large risks; or it might be surmised that expenditures of this magnitude merely reflect Soviet feelings of insecurity in a threatening world. If the defense allocations are considered alone, there is difficulty in deciding which viewpoint is right. All that can be said is that we have here one more commentary on the tense state of world affairs.

In this connection, the fact that the Russians have demobilized much below peak wartime strength must be read in the light of their urgent reconstruction tasks and long-term plans for the development of their basic industries (steel, coal, machinery, etc.). As the recent war has shown, these industries are the core of military power. The resources that were freed by demobilization in the U.S.S.R. are being used currently for the purposes of reconstruction in general, and according to all indications for the further building up of basic industries in particular.

The Soviet defense allocations raise a question also as to the nature of Russia's more immediate military aims and strategy. Here, one feature would seem to be of special interest: in the atomic era, the Russians apparently are continuing to invest heavily in preparedness of a conventional sort, including a large standing army in particular. One need not be a military expert to perceive that this fact must be connected with another to which such experts in the United States recently have called attention. Now that the German Army has been destroyed, it is said, the Russians in case of war could occupy all of Europe in a matter of weeks. As far as this writer can see, there is no basis for thinking that such action by the Russians is imminent; but it is easy to believe that they would wish to be sufficiently prepared to take advantage of this possibility and to hold the Continent in case of need. The facts assembled here suggest that, whatever their underlying intentions, an immediate objective may be to be prepared for this eventuality. The Russians now are no longer menaced by a great land army either in Europe or in Asia; but considerable preparedness of the conventional sort, including a large standing army, would still be needed for the occupation of the Continent.

Perhaps, however, the Russians have not yet finished demobilizing and are planning to scale down further their military establishment. While, as the table shows, the money outlays for defense in 1947 are to be just about as large as for 1946, this does not mean that the expenditures in real terms have ceased to decline; as was indicated above, the expenditures in real terms in 1947 will be 24 percent below 1946. Further cuts in defense outlays still may be in prospect. This is, of course, speculative. The reverse is also possible.

[i] Data for 1946 and 1947 from A. G. Zverev, "O gosudarstvennom biudzhete SSSR na 1947 god" (On the State Budget of the USSR for 1947), Moscow, 1947, p. 16; for 1945, from "Zasedaniia Verkhovnogo Soveta SSSR, Vtoraia sessiia, 15-18 oktiabria 1946 g." (Meeting of the Supreme Soviet of the USSR, Second Session, October 15-18, 1946), Moscow, 1946, p. 7; and for all other years except 1940 and 1938, K. N. Plotnikov, "Biudzhet sovetskogo gosudarstva" (Budget of the Soviet Government), Moscow, 1945, pp. 71, 79, 90, 93. The figure for 1940 is calculated from data in A. G. Zverev, "O gosudarstvennom biudzhete SSSR na 1945 g." (On the State Budget of the USSR for 1945), Moscow, 1945, p. 7; in Plotnikov, op. cit., p. 93; and the data for the years 1941-1944 in the table. The figure for 1938 is from Alexander Baykov, "Development of the Soviet Economic System," Cambridge (England): Cambridge University Press, 1946, p. 397.

[ii] Pension payments already have mounted to a very considerable sum by Soviet standards. In the budget, military pensions are included under the same heading as pensions paid to certain special categories of persons not covered by the workman's social insurance system (scientists, invalid children, etc.); it seems clear, however, that the military pensions would be the main element in the total outlay for all these persons together, which is to be 21 billion rubles in 1947.

[iii] "O gosudarstvennom biudzhete SSSR na 1947 god," p. 17.

[iv] This relates to the sector of the Soviet economy covered in the current reports of the central Soviet statistical agency (TSU), which sector apparently pays out about 80 percent of the total Soviet wage bill for the whole economy. (See A. Bergson, "A Problem in Soviet Statistics," an article to appear in a forthcoming issue of the Review of Economic Statistics.) The figures on wages for 1947 and 1939, respectively 7,090 and 3,768 rubles, are calculated on the basis of data in the annual plan for 1947 (Pravda, March 1, 1947) and in Bergson, op. cit.

[v] The Russians are now on a 48 hour, six-day-out-of-seven work week, introduced in June 1940. Previously the usual working hours were five seven hour days out of six, which is equivalent to about 41 hours on a seven-day week basis.

[vi] This discussion, of course, assumes that the Government fixes prices on the basis of costs, which seems to have been the case since 1936, when the practice of subsidizing heavy industries generally was discontinued.

[vii] For reasons which the writer has set forth elsewhere, he believes that, while there are many pitfalls in the interpretation of Soviet statistics, they are not basically false. Cf. A. Bergson, "A Problem in Soviet Statistics."

[viii] Some data on Russia's postwar economy are presented in A. Bergson, "The Fourth Five-Year Plan: Heavy Industry versus Consumers' Goods," Political Science Quarterly, June 1947.

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  • ABRAM BERGSON, Associate Professor of Economics, Columbia University; member of the Allied Reparations Mission, Moscow, 1945; author of "The Structure of Soviet Wages"
  • More By Abram Bergson