The Day After Russia Attacks
What War in Ukraine Would Look Like—and How America Should Respond
THE rates of economic growth projected in the Sixth Five-Year Plan of the Soviet Union are impressive. National income in 1960 is planned to be 160 percent of that in 1955, an increase of about 10.5 percent per year. Although these figures are slightly lower than those claimed for the preceding Five-Year Plan, they are three times those for the United States in the period 1950-55. Similarly, it is planned that by 1960 real wages in the Soviet Union will be 130 percent of the 1955 level, slightly less than the increase claimed for the previous five-year period but still far above the rate in Western capitalistic countries. If these Soviet figures reflect reality the consequences are fateful in terms either of military potential or of winning in a race of competitive coexistence. But are the planned rates attainable? Have the even higher rates of increase claimed in the past been accurate?
It is, of course, quite impossible in a brief space to discuss adequately the validity of Soviet statistics. The publication of a statistical abstract for the Soviet Union by the State Statistical Publishing House in Moscow in the summer of 1956 has, however, raised this complex question once again.[i] Far more data are included than have been available since before World War II. Likewise, numerous data which have been previously available only in percentages of uncertain bases are now stated in terms of absolute figures. Preliminary examination indicates a rather close correspondence between the figures published in the new statistical abstract and those built up by statisticians in the United States through the laborious process of putting together data gleaned from a variety of Soviet sources.[ii] This proves only that figures now published are generally consistent with those previously derived from heterogeneous sources. It does not prove that these data were correct. The new statistical abstract does little to correct the strong inflationary bias in the statistics of past performance of the Soviet economy, but there is evidence that statistics for more recent years come closer to reality.
The publication of the new statistical abstract is likely to strengthen the convictions of those economists and statisticians who accept substantially at face value current Soviet claims of annual rates of increase in industrial production and in national income three times as great as those of the United States and other capitalistic countries. Almost none of the economists and statisticians who have worked in the Russian field had indeed ever believed that Soviet statistics were either completely falsified for propaganda reasons or were totally unusable as many nonspecialists have assumed.[iii] Yet it is obviously impossible to test directly the accuracy of Soviet statistics on any really comprehensive scale. The very idea of a count by some impartial statistical body of the actual annual production of, say, steel is patently absurd. What has been done is to see whether these statistics are internally consistent and consistent with other official data such as statistics for the end uses of steel.[iv]
The primary reason why non-Soviet economists and statisticians rule out wholesale fabrication and falsification of Soviet statistics is the insuperable difficulty of trying to keep "two sets of books," one for the general public, including foreigners, and another for those Soviet officials who must use statistics in running the economy. Now that the new statistical abstract has been issued in an edition of 100,000 copies, with another large edition announced to follow, the hopeless confusion which would be entailed in maintaining another comprehensive set of statistics is obvious. However, this does not eliminate the possibility that the statistics in the new abstract are inaccurate, conceivably on a large scale. Past official estimates of the annual increase in national income have probably been from two to three times too high. It is now admitted that agricultural statistics have been defective. The method of using "biological yield" instead of actual "barn yield" led to a serious overstatement of grain production. Although this practice was changed, it is admitted that the correction was not large enough and that statistics of grain production published in the past have been much too high.
It is certain that aggregate figures which purport to show increases in the output of consumer goods have been greatly exaggerated.[v] Thus, according to the new statistical abstract the physical volume of production of consumer goods at the end of 1955 was nine times that of 1928. The claimed increase for producer goods during the same period was 39 times, and for both types of goods together, 21 times. During the same period in the United States industrial production increased threefold.
This claimed and planned increase of ninefold in the industrial output of consumer goods is in contrast with the output of meat and dairy products. The numbers of cattle and especially hogs have risen sharply since 1952; yet in terms of meat consumption per capita the Soviet people are little, if any, better off today than they were in 1928 at the beginning of the First Five-Year Plan. The meat and dairy situation is only the most extreme aspect of the generally unfavorable agricultural production.
There can be no doubt that the supply of manufactured consumer goods is indeed far more adequate than is the supply of food. Yet it does not seem likely that the contrast between the two categories is so great as is indicated by Soviet statistics. One reason is that the shortage of agricultural raw materials must in itself have been a limiting factor on the production of some consumer goods. It is much more likely that the figures for industrial production are too high rather than that the figures on food production are too low. The statistics for meat and dairy production could not depart so far from reality since the whole population would be acutely aware of these shortages. Furthermore, it was necessary to publicize these depressing statistics in 1953 in order to facilitate the drastic change in agricultural pricing policy announced at that time by Khrushchev. There was not the same pressure to deflate statistics for production of consumer goods.
The inaccuracy of Soviet statistics is most pronounced in claimed rates of increases in national income. For example, according to the new statistical abstract, national income in 1955 was more than 14 times as large as in 1928. During the same period in the United States real national income roughly doubled. It is not feasible to check the Soviet figure with precision, yet such an increase is certainly far beyond observed reality.
The apparent paradox of the observable low standard of living in the Soviet Union and the high claimed rates of Soviet economic growth has sometimes been explained by reference to high rates of saving and investment and the heavy emphasis on the production of producer goods. Soviet statistics do indeed show high rates of saving and investment and higher rates of production of producer goods than consumer goods. But Soviet statistics also purport to show far higher rates of increase in the production of consumer goods than in capitalistic countries.
While claimed rates of increase in Soviet real wages are much more modest than those for national income and for production of consumer goods, they are much above those in capitalistic countries. These Soviet claims appear far too high. Janet Chapman in a careful study published in The Review of Economics and Statistics in May 1954 shows that real wages in Soviet Russia declined substantially between 1928 and 1952. This means that the reductions in consumer goods prices after 1948 had not by 1952 restored real wages to their 1928 level. Real wages have been improved, however, by price reductions since 1952.
If, then, one were to judge Soviet statistics by the reliability of aggregates such as those we have examined, Soviet statistics would have to be accorded a very low rating. It is certain that the statisticians who translated absolute figures into aggregates knew quite well that statistics showing high rates of increase would commend themselves to the Soviet hierarchy. The cumulative effect of this wish to please can be very important, even without actual falsification of component data.
The means for translating absolute figures into large percentage increases lay readily to hand. In the early stages of mass production of goods not previously produced, percentage increases will naturally be large. Also statistics for industries where growth rates were low can be conveniently dropped. Similarly national income statistics may include commodities and services previously produced and consumed by peasant households.
Nevertheless, there is substantial evidence that the quality of Soviet statistics is improving. Some distortions due to the use of an obsolete pricing basis were corrected some years ago, and successive corrections have improved methods of estimating crop production. In general, however, past statistical exaggerations have not been corrected in the new statistical abstract, although an effort is apparently being made to place current statistics on a somewhat more realistic basis.
The new ruling directorate in the Soviet Union gives the impression of being much more willing than Stalin to allow Russian statisticians and economists to produce and publish objective data. A foreword to the new statistical abstract promises that further data will be published soon, and meanwhile new figures are appearing in the Soviet press--not merely percentages but absolute figures as well. The very fact that a larger volume of statistics is being published today may serve to improve their accuracy.
The absurdity of any attempt at direct and independent check of Soviet production statistics has been pointed out. It is not wholly out of the question, however, to make some sort of test through actual observation of the standard of living. During recent years the pricing of goods by means of actual "shopping" would have meant the danger of arrest for economic espionage. This is no longer true, however, and Soviet prices of consumer goods and their availabilities can now be ascertained in this way.
Unfortunately the same process is not as feasible when applied to wages. It is indeed possible to obtain information on wage rates from the managers of Soviet industrial plants and even to ask individual workmen about their wages. But obviously this is not a very precise method of testing actual wages and is not at all comparable to ascertaining retail prices by shopping. Very rough estimates of changes in the standard of living over periods of time can nevertheless be made. The margin of error in any purely individual observation would of course be great, particularly in the absence of facilities for the construction of actual index numbers of prices and wages.
It was with these thoughts in mind that I revisited Soviet Russia in the summer of 1956, some 27 years after I had spent my first year there and 17 years after my last previous visit. (I also made one short trip to Russia in 1933.) By coincidence, my personal observation of prices and wages was during the same month, namely July, in both 1939 and 1956.
I found economic conditions in the Soviet Union better than I had expected. This suggests that I had too greatly discounted Soviet statistics of rates of economic growth. On the other hand, the evidence from all available sources, including personal observation, does not support Soviet claims of improvement in the standard of living at anything like past rates referred to above.
There was no doubt that there had been some improvement in the standard of living since 1939. People are still not nearly so well clothed as in Western Europe or in the United States but a degree of improvement was noticeable. General rationing of consumer goods no longer exists, although some limitations are set on purchases by each customer. Queues for milk were frequently in evidence and supplies of particular goods were often sold out.
In view of the unimpressive improvement which I was to observe in agricultural efficiency compared to 1939, I felt surprise that the food situation was no worse than it was. The Soviet Government had succeeded in keeping the price of black bread of excellent quality at 1 ruble 25 kopecks per kilo.[vi] Since I estimated the average wage of urban workers in the summer of 1956 at around 700 rubles per month, with the lowest wage of urban workers at a little under 300 rubles,[vii] it will be seen that this is not exorbitant. However, the price of black bread is maintained at a price relatively far below that of other foods, largely through a system of compulsory deliveries of a high proportion of the grain crop at low prices. This produces anomalies; for example, a price for grain per kilo on the free market double that at which black bread is sold at the fixed price. As a result, many peasants feed bread to their cows in spite of severe penalties for doing so.
Although the price of black bread is not exorbitant in terms of current wages, the same could hardly be said of beef at 12.50 rubles per kilo in state stores (usually not available) and at 22 to 24 rubles per kilo in the free kolkhoz market, and of pork at 18.50 rubles per kilo in state stores and 23 rubles on the free market. Other per kilo prices in state stores were butter at 26 rubles; sugar, 9 rubles for the cheapest grade; cheese, 26 to 32 rubles. Eggs were approximately a ruble each. Cabbage could be purchased at 1 ruble per kilo in state stores when available, while the price went to 6 rubles per kilo in the free market when it was not available in state stores. Potatoes were selling at 60 kopecks per kilo when available in state stores, and at 1 ruble 25 kopecks on the free market. The price of a 100-gram chocolate bar was from 12 to 16 rubles in state stores.
Men's leather shoes sold at from 180 to 400 rubles, depending upon quality. A man's worsted suit of medium quality cost 1,500 rubles. What appeared to be a good quality woman's rayon dress which might have sold for $15.00 in the United States was priced at 582 rubles. Another, of summer weight, was priced at 319 rubles. A woman's rayon slip which might have cost $3.00 in the United States was priced at 280 rubles. A small, somewhat crudely made electric refrigerator cost 680 rubles, an electric washing machine, 2,250 rubles. When compared with the minimum wage and average wage referred to above, these prices of consumer goods, observed at random, afford a means of sorts for judging the current standard of living. It must be added that rental costs, particularly for old housing, are quite low and medical services are free.
The foregoing figures indicate that in comparison with 1939 the price of black bread had gone up 46 percent, butter 25 percent, eggs 33 percent, chocolate bars 100 percent, sugar 137 percent, milk 29 percent. The comparison of vegetable prices between the two periods is very difficult because vegetables were often available only on the free market where the price fluctuated widely from season to season. Roughly, one might estimate that food prices were some 60 percent higher than in 1939. Prices of shoes had apparently increased substantially less, probably no more than 20 percent, although variations in quality made comparisons difficult. Prices of men's worsted suits had apparently increased by some 60 percent, although here also differences in quality made comparison unreliable. In 1939 almost no electrical appliances had been on sale.
Assuming that food represents 50 percent of a family budget, and figuring an increase of 30 percent in the prices of all other goods and services, one could estimate that the cost of living had increased some 45 percent in comparison with 1939. When I had been in Moscow in 1939 the average wage of urban workers, according to the best available information, had been around 350 rubles per month. Thus from 1939 to 1956 the money wage had doubled in comparison to an increase in the cost of living of some 45 percent. This meant that real wages of urban workers increased by somewhat less than 40 percent over the past 17 years. This should be regarded, however, primarily as a subjective estimate rather than as a statistical calculation.
This personal estimate is in contrast with the official calculation in the new statistical abstract which shows an increase of 90 percent in the real wages of industrial workers from 1940 to 1955. Although not precisely comparable, average real hourly earnings of workers in manufacturing industries in the United States during roughly the same period increased by nearly 50 percent. Average annual earnings of non-agricultural workers in the United States increased by very nearly the same percentage.
Housing continues to be exceedingly bad in spite of huge new programs for the construction of apartment houses for urban workers. The low quality of Soviet housing reflects not only the lag in compensating for the growth in urban population by new construction, but also the almost unbelievably low standards in the inside and outside finishing of housing and in maintenance after construction. Yet judging by the modest improvement in some other fields, such as railroads, standards of maintenance even in housing may well improve in the future.
There is now a substantial number of private automobiles in the Soviet Union, although it is still minuscule compared with the United States. Television sets are on sale and so are radios. Rather crudely made electrical appliances such as refrigerators are available in increasing numbers. In a society where there is such a great inequality in compensation as there is in Soviet Russia, and with average wages so low, these luxury products are restricted primarily to members of the Soviet political, military and economic bureaucracy, the more highly paid workers and to some peasants from the more productive collective farms who manage to sell considerable amounts of food products from their individual plots. Yet, it must be said that there are signs of an increase in numbers of what might be called the Soviet upper middle class whose higher standard of living is gradually being achieved by a widening number of Soviet citizens.
A substantial fraction of Soviet national income has gone into monumental and grandiose projects such as the Leningrad and Moscow subways, new railway passenger stations and airports, the new Moscow University and hundreds of costly, ornate and even luxurious sanatoria, particularly in the Black Sea area. These expensive projects never have to meet the test of consumer sovereignty in the market place. Neither do they depend upon public approval expressed through voting on bond issues nor upon appropriations made and taxes levied through parliamentary processes. Nevertheless a considerable number of people do benefit from these monuments. The quality of their construction demonstrates, as does the quality of Soviet armaments, that in areas of highest priority poor standards are not an inevitable feature of Soviet industrial production.
An improved system of old-age pensions announced during the summer of 1956 provides for a minimum payment at retirement age of 300 rubles per month. A minimum wage of 300 rubles per month in cities and 270 rubles per month in non-urban areas was to go into effect in January 1957. A reduction in working hours in industry from 48 to 46 hours was also announced. These particular improvements in well-being were of relatively greater benefit to the lower income classes, since the pension payments are relatively larger at lower income levels and there are maximum limits on pension payments. There have also been references in the press to the desirability of reducing excessively large bonus and other "incentive payments" to industrial executives.
The food situation is still unsatisfactory, with meat and dairy products in short supply. Nevertheless, measured in calories, the food supply is apparently not so low as to limit labor productivity drastically, except to the extent that the insufficiency of agricultural raw materials limits industrial production.
One reason why the food situation, in particular with regard to meat, was not as bad as I had expected was because the Russian population had not increased during this period as much as we had believed. According to the new Soviet statistics, about 10 percent fewer people had to be fed than I had previously supposed. Moreover, the supply of pork had been increased substantially since the time of Khrushchev's speech and the supply of fish products had much improved also.
Agricultural production shows every evidence of continuing to be the weakest element in the Soviet economy and this was officially admitted to be true. By American standards, the number of agricultural workers on collective and state farms in proportion to output is unbelievably large. This is true in spite of substantial increases during recent years in the output of agricultural machinery. Large numbers of horses and even oxen are still in evidence on some collective farms, in addition to the large tractors furnished by the Machine Tractor Stations and the small tractors which some of the collective farms themselves maintain. In spite of the large numbers of men, draft animals and machines being used, they do not seem adequate for the job. This was shown, on the one hand, by the weedy condition of the fields newly planted to corn, and on the other, by government efforts to induce young men and women from the cities to take up agricultural work in the arid regions of Middle Asia.[viii]
Khrushchev's program for opening up new lands larger than the total area sown to wheat in the United States is likely to prove decisive not only for grain production but for the rate of growth of the whole economy. If this program can be carried out while maintaining an adequate supply of labor, machinery and fertilizer to the other areas, the chronic Soviet food crisis will largely be solved.
The difficulties of checking Soviet claims of past performance by personal observation are as nothing compared to the problem of estimating the feasibility of future goals. Our only recourse here is to compare the planned rates of Soviet economic growth with those which have been attained by capitalistic countries and then to consider whether there are particular characteristics of the Soviet economic system which might enable it to surpass the performance of the West. Personal observation plus one's judgment of the validity of current Soviet statistics will then play a part in our final estimate.
It has been pointed out that the projected rate of annual increase in national income for the Sixth Five-Year Plan is roughly 10.5 percent, or about 60 percent for the five-year period.[ix] This is somewhat lower than the 68 percent claimed as having been achieved during the recently completed Fifth Five-Year Plan. If one discounted this planned rate of increase in national income by as much as we believe the earlier increases to have been exaggerated, the figure of 10.5 percent would have to be much more than cut in half. But there is reason to believe that the greatest overestimation in Soviet claimed rates of economic growth was in the earlier periods and that current Soviet statistics have reduced this overestimation somewhat. Nevertheless, the rate of estimated growth for the Sixth Five-Year Plan is twice as high as that attained by any important capitalistic country over any considerable number of years and is three times as high as the average annual rate of increase in the United States during the past 80 years.
There are some reasons why rates of economic growth in the Soviet Union might be expected to be higher than those of capitalistic countries. A collectivistic, authoritarian state does not have to fear that its average economic growth will be reduced by recurrent depressions, and in fact Soviet economic growth has not been retarded in this way. When all the important elements of an economy are centrally directed a depression such as the United States experienced in the thirties is out of the question. (Indeed it may be that our so-called capitalistic economies are now subject to such effective controls that a major depression is impossible in the West also.) The evidence indicates in addition, however, that Russia has not even experienced brief recessions such as the United States felt in 1938, in 1949 and in 1954.
The management of Soviet industry apparently does not have to reduce production in order to prevent excess inventories. This is partly because virtually all commodities are in such short supply that almost everything which can be produced is taken off the market without much question of price or quality. It may be that if per capita production were as high in the Soviet Union as in the United States this situation would change. However, in the nature of the Soviet economic system, industrial managers do not have to compete with each other in satisfying the needs, preferences or whims of the consumer. Likewise, neither research effort nor advertising and promotion cost is incurred simply to entice additional dollars from consumers. If excess inventories pile up in some industries, production is not necessarily cut back, although further investment and employment of manpower may be reduced during the next planned period until increased demand restores equilibrium in inventories.
A related advantage of the Soviet system is that the volume of investment is limited only by the amount of saving which the Soviet Government feels it can require of the population. This means not only that the percentage of national income saved can be much higher than in a democratic, capitalistic economy but also that national income does not decline because of insufficient investment. The business expectations of individual managers do not affect the volume of investment as they do under capitalism.
By restricting the supply of consumer goods and withholding consumer purchasing power while devoting correspondingly large proportions of national income to the construction of capital equipment, the Soviet Union is assuring that a relatively larger stream of goods can be expected in the future. As the ratio of capital equipment to labor rises, the national income will also rise.
A collectivist, authoritarian economic system also has an advantage in carrying out new industrial construction because the managers of expanding enterprises do not need to fear that competitors may simultaneously build new plants with resulting excess capacity in a particular industry. Paradoxically, this can mean that the Soviet economic system may push new plant construction more continuously up to the limits of economic resources than in a corporate "free enterprise" economy.[x]
It is true that these advantages of the Soviet economic system may be offset, or more than offset, by some of the well-known advantages of an economic system such as that of the United States. The competitive spur which still functions even under corporate capitalism is, of course, missing in the Soviet economy. The cumbersomeness of a centrally planned and directed economy is evidenced by repeated reorganizations of the Soviet economy in an effort to reduce confusion and rigidity. The efforts to create a substitute for the incentives of the profit system have indeed put a high premium on the fulfillment of the yearly plan. But so high a premium as the standard 30 percent bonus to management for plan fulfillment operates as a penalty against risk-taking through experiments with new methods and processes which may pay off only in later years. The general advantages in productive efficiency of both labor and management working in a system of personal freedom might indeed be expected of themselves to offset some or all of the economic advantages of a directed economy and an authoritarian society.
The hypothesis might be advanced, however, that once machinery embodying a given technology is in place and operating (and assuming a given set of natural resources), rates of increase in productivity in modern industrial plants depend in the short run primarily upon the rate at which capital investment takes place and the relative continuity of production and investment, almost regardless of the nature of the economic system. It has been pointed out that the Soviet economic system has had the advantage in terms of continuity of production and construction of new capital facilities and in the ratio of savings-investment to national income. This leaves the advantage in terms of improvement in quality and in terms of the development of new products, new methods and new processes with the quasi-capitalistic economies of the West.
This would suggest that, measured in purely quantitative terms, the Soviet rate of growth may be comparable to that attained in capitalistic countries during periods when production is carried on uninterrupted by recurrent falling off in demand for goods or unfavorable entrepreneurial expectations. Such a rate of increase might be put at some 6 percent annually, or a little more than half that projected in the current Five-Year Plan.
It is only fair to say that this estimate of an annual economic growth rate of 6 percent instead of 10.5 percent probably represents a greater discount of Soviet potentialities than would be acceptable to most specialists in the field. Such a rate of growth, however, is not far from the figure of 6 to 7 percent estimated by Grossman as the probable real rate during the past and attainable during the next decade or so. This rate is higher than I would have considered probable before my visit this past summer. The high subjectivity of this estimate, based upon my observation of industrial and agricultural production, standard of living and statistical analysis, is of course undeniable.
A rate of increase of some 6 percent is apparently not much higher than that physically attainable by economic systems such as those of the United States and Western Europe. It is, however, almost double the rate at which national income in the United States seems to increase so long as it is necessary to put brakes on business expansion to prevent inflation.
If our estimate is reliable, it will be roughly a decade and a half before the productivity of the Soviet economy could equal that of the United States at the present time. It would take somewhat longer to attain the present per capita level of production in the United States. The components of production in the two econoomies would of course be different, with raw materials and producer goods representing a higher proportion of total income in the Soviet economy. Also, the comparative rates of economic growth in the two countries will naturally be affected by the percentage of the national income which is devoted to armament. However, these proportions are not independent variables, since the rate of one country influences that of the other.
If in the future the Soviet populace should begin to exercise control over the proportion of national income devoted to consumption as compared to investment this might reduce future rates of Soviet economic growth. While the rulers of Soviet Russia, of course, take into account both the actual and potential resistance of the Soviet populace to capital saving as it affects consumption, there is as yet no parliamentary or market mechanism by which the populace can express this resistance directly. Consequently Soviet rates of economic growth are not likely to be limited by this factor in the foreseeable future.
On the other hand it is not out of the question that our modified systems of capitalism in the West may develop new techniques of monetary and credit control which will make it possible to control inflation without limiting the physical productivity of the economy. In this case there would be little reason to expect the Soviet rate of economic growth to be greater than that of modern capitalistic countries. In the meantime, a Soviet rate of economic growth almost twice that of the United States (if my crude estimates can be assumed to represent reality) would reflect a factor of great force in the present world conflict. This is particularly true with respect to the underdeveloped countries of the world, which are likely to be impressed by the Soviet example even though the pattern of their own resources may not make the Soviet experience applicable.
[i] "Narodnoe Khoziaistvo SSSR. Statisticheskii Sbornik." Moskva: Gosudarstvennoe Statisticheskoe Izdatel'stvo, 1956. (Hereinafter referred to as "the new statistical abstract.") In a foreword, the Central Statistical Administration states that "the statistical compilation contains the most important data which reflect the development of the U.S.S.R. national economy by comparison with the years 1928, pre-war 1940 and pre-revolutionary 1913."
[ii] The estimate of the population of the Soviet Union as approximately 200 million published in the new statistical abstract is a conspicuous exception to this statement. This is in conflict with the estimate of about 220 million based on Soviet sources previously known.
[iii] Probably the best analysis of Soviet statistics is the symposium, "Soviet Economic Growth," participated in by most of the American specialists in the field and published in 1953 under the editorship of Abram Bergson. It made new efforts to reduce the past strong inflationary bias in Soviet statistics and to subject these statistics to re-analysis. Thus Dr. Gregory Grossman, who deals with Soviet national income in the symposium, arrived at an annual rate of growth in Soviet national income for 1928-37 and for 1928-50 of 6.5 to 7 percent, compared with Soviet statistics of 16 percent and 19 percent for the two periods.
[iv] During the past two years the National Bureau of Economic Research has been carrying out, under the direction of Professor Warren Nutter, the most comprehensive critical analysis of Soviet statistics of economic growth undertaken so far. This study, to be published shortly, should afford us as definitive a test of the validity of Soviet statistics as can be obtained from internal analysis.
[v] This statement was underscored when Prime Minister Gomulka, following the overturn in Poland, disclosed the unreality of the highly optimistic statistics previously published.
[vi] At the official rate of exchange the ruble is worth 25 cents. Americans resident in Moscow generally estimate it to be worth about 7 cents.
[vii] An announcement was made in the Soviet press on September 8, 1956, of the intention to establish minimum wages on January 1, 1957, of 270 rubles monthly in non-urban areas and of 350 rubles in urban industry. It was stated that this would increase the compensation of workers affected by 33 percent and that the total Soviet wage bill would be increased by 8 billion rubles. Consequently both the lower wage limit and the average wage which I have estimated for July 1956 may be somewhat too high.
[viii] What I saw in a limited number of factories indicated a high ratio of men to machines there also, reflecting the large lag in Soviet labor productivity behind that of the U.S.
[ix] According to the Sixth Five-Year Plan, more than 80 percent of the increase in industrial production is to be accounted for by the increase in labor productivity. Apart from expansion of the labor force, labor productivity in industry during the period is planned to increase to 150 percent of 1955. This is a slight increase over the 144 percent claimed for the period 1950-1955. The annual rate of increase in per capita labor productivity in the United States has been estimated at some 2 percent per year during the present century.
[x] In the past, the advantage which any less developed economy has in importing the techniques of more advanced countries has favorably influenced the rate of growth of Soviet industry. This advantage has largely been exploited, however, and is unlikely to affect future rates of growth greatly.