Russia: Who's Burying Whom?

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For all Nikita Khrushchev's boasts of overtaking the West by 1970, an extensive report released by the Central Intelligence Agency last week argues that the Russians are actually falling far behind. In 1962 and 1963, according to the agency's analysis, the Russian economy grew at a rate of less than 2.5% annually, while the U.S. growth rate averaged 5.5% and is expected to expand at that level in 1964 as well. Even if the Russians doubled their gross national product (1962 level: $260 billion) in the next decade, a feat that most experts consider impossible, Soviet output in 1972 would still be less than the $555 billion total logged by the U.S.

a whole decade earlier.

Five straight years of poor harvests not only helped crimp Russia's economic expansion, but, by forcing the government to buy grain abroad, also reduced its gold reserves to a level estimated by the CIA at considerably less than $2 billion. There was a slight drop in industrial production, which grew at a rate of nearly 6% annually in the past two years v. 7% in the U.S. Moreover, the CIA sees little chance that Russia will again be able to achieve the sustained high overall growth rate (7.4% on average) that marked its economy in the 1950s. The government, it said, "is trying to do too much with too few resources," notably in space and defense spending—upwards of $40 billion in 1962—which drains off ill-spared capital, plant and brains from the civilian economy.

Main significance of the report, which was derided by some academic economists as painting too dark a picture of the Soviet economy, is that Russia is already "living on borrowed capital" and cannot possibly realize its plans for massive expansion of chemical and fertilizer industries without greatly increased credits from the West—credits which the U.S. Government clearly hopes that the Russians will not get.