Page 140 19. This table, however, over-estimates the net output of the United Kingdom, since a
since a large proportion of its manufactures have to be exported in exchange for food-stuffs and raw materials which in the case of the U.S.S.R. and the United States are produced at home. Account can be taken of this factor if a comparison is made of net national incomes. Such a comparison can only be given with all reserve owing to the difficulty inherent in estimating the purchas- ing power of the various types of roubles used in Soviet national income statistics.*
Indices of Net National Incomes in 1948
U.S.S.R.
United Kingdom
United States
Total
100
61
354
Per head
100
243
468
The Distribution of Resources
20. In spite of the relatively low level of total output in the Soviet Union, its distribution between various uses provides for a high rate of investment expenditure at the expense of current consumption. In comparisons of national income distributions between the U.S.S.R. and other countries one of the diffi- culties in the past has been the estimate of the proportion devoted to armaments. Total defence expenditure has not been a very good guide, since this includes a considerable element of " consumption" corresponding to the pay, allowances, &c., of Service personnel. It is, however, now possible to estimate from figures published for the year 1940 the amount of defence expenditure which excludes personal consumption of Service personnel "-i.e., armaments expenditure proper. Corresponding estimates have also been made for the United Kingdom and the United States.
Percentage Distribution of Net National Incomes in 1948
U.S.S.R. United Kingdom United States
Net investment
Consumption
21
71
8
Investment
Expenditure on defence goods
15
791 51
11
85
4
21. The high level of net investment in the U.S.S.R. has been the most striking feature of its economy ever since the beginning of the five-year plans in 1928. This rate of investment, which is higher than the highest rate achieved in the United States during its period of greatest expansion, has made possible the emergence within less than a generation of the U.S.S.R. as a first-class indus- trial Power. There is no evidence that there is likely to be any decrease in this rate of progress in the near future. Nevertheless, by combining the totals in paragraphs 19 and 20 it can be seen that the total net addition to real capital in the U.S.S.R. in 1948 was about half what it was in the United States, though double the United Kingdom figure. Even making allowances for cyclical fluctua- tions in United States economic activity it is clear that the task which the Soviets have set themselves to catch up with the United States will be long and arduous.
Consumption
22. Large investments in the U.S.S.R. have only been made possible by holding down consumption. The tables in paragraphs 19 and 20 suggest that total consumption in the U.S.S.R. is no more than 40 per cent. higher than in the United Kingdom, and consumption per head only about 35 per cent. of the United Kingdom level. This is in large part due to the very low level of non-food con- sumption of the rural population of the U.S.S.R., but even the urban population has a much lower standard of living than in the United Kingdom. Nevertheless, it would be unwise to conclude from this that the Soviet authorities are not making very considerable efforts to increase the supplies of consumer goods. In terms of calories food supplies are quite adequate though lacking the variety Pagich event 300 is available to United Kingdom agend of 3 The quality of
* For an analysis of the national income in the U.S.S.R. see Appendix II.
7
housing accommodation is much lower in the Up 41 36 textus verbalif;faele and even in new houses the amount or pace av able per head is only a quarter of that in the United Kingdom. Great efforts have nevertheless been made to increase the quantities made available.
23. Some indication of the comparative efforts made since the end of the war by the U.S.S.R. and the United Kingdom in satisfying certain basic consumer needs is given by the following figures :-
Production per Head in the Three Years 1946-8 (Approximate figures)
U.S.S.R.
United Kingdom
New urban houses built (sq, yds.)
.968
1.130
Rural dwellings built or repaired
·012
·015
Cotton textiles (sq. yds.)
45.56
88.0*
Woollen textiles (sq. yds.)
1.84
18.0*
Rubber footwear (pairs)
.77
Leather footwear (pairs)
1.99
* Includes a certain amount of exported made-up industrial cloth.
1.1
7.2
24. The available evidence suggests that the present distribution of resources in the U.S.S.R. enables the authorities to supply the civilian population with an increasing quantity of consumer goods (doubtless of low quality), and to establish a standard of living still far below the standards of Western Europe but approaching Soviet pre-war standards and likely substantially to improve in the future.
25.
Expenditure on Defence Goods
The figures given in the tables in paragraphs 19 and 20 indicate that expenditure on defence goods in the U.S.S.R. in 1948 was about 24 times as great as in the United Kingdom. This expenditure supported armed forces roughly five times as great. Although precise comparison is impossible it seems that the U.S.S.R. is forced to spend a higher proportion of its total defence expenditure on the maintenance of service personnel and a lower proportion on defence goods. In each case expenditure on defence goods is a relatively small proportion of national income, although net investment could be increased by 35 per cent. if armaments could disappear, and an additional burden is that the man-power needs of the armed forces mean the withdrawal from productive employment of about 4 per cent. of the labour force in each country.
#r
Conclusion
26. The analysis of the national incomes of the U.S.S.R. and the United Kingdom indicates that their distribution between various uses is not so widely different as is sometimes supposed. The fact that the United Kingdom has a
>> mature economy and the U.S.S.R. a young and expanding one is itself a reason for the greater proportion of resources devoted to consumption in the United Kingdom. Another reason is the greater proportion of old persons in the United Kingdom population. In each case the proportions devoted to consump- tion seem to be reasonable given the standards of living to which the peoples of the two countries have been accustomed. The residue could in the absence of international fears be entirely devoted to reconstruction and expansion, and for this there is clearly larger scope in the U.S.S.R. than in the United Kingdom. The proportions of this residue which each country devotes to arms production is roughly similar.
Economic Intelligence Department,
Foreign Office,
10th May, 1949.
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