Russia's Economic Challenge

...I have referred to rate of growth and rate of investment...

...Thirdly, the pace of economic advance in Russia no doubt also owes something to the economies of large scale production in particular to the high degree of standardization and the pooling of knowledge in the manufacture of engineering products...

...But they certainly also reflect a deliberate attempt to relate material rewards to different degrees and kinds of effort and skill and ability in accordance with the respective contributions made by these to what the Government regards as the needs of the economy...

...levels and, of course, still further below U.S...

...It is, indeed, a remarkable historical coincidence that the democracies have been given the protection of this particular weapon in the very decade in which the balance of economic power and, therefore, of conventional military power seems to be turning against them and in favor of the Communist dictatorships...

...It seems that for the moment, while Russian industrial strength, though growing fast, is still far less than that of the West and while the demands made by China upon her must still be very heavy, they should be in a position to provide far more aid for the uncommitted countries than Russia is likely to offer...

...Nor can one avoid the less comfortable conclusion that the most dangerous event for the easy-going, luxury- and liberty-loving West (in the absence of all-round disarmament) would be the discovery by Russia as well as the West of an effective defense against nuclear attack if this meant returning to a position where power lay once again with those countries which enjoy overwhelming quantitative predominance in manpower and in the instruments of war...

...They are there as it were for the taking, because the Government can determine the structure and organization of an industry...

...The Russians have made a huge investment here, and without doubt it is already contributing and will contribute still more to the achievement of unusually high rates of growth in industrial output...

...But here again there is no room for doubt on the broad conclusion...

...Thus, coal output is to rise from 390 to 590 million tons making Russia easily the largest producer in the world...

...A comparable expansion 50 to 100 per cent in five years is planned for oil and heavy engineering...

...Is the relative economic power of the democracies certain to decline...

...The small requirement of steel for consumer goods means that, out of every ton produced, far more than in the U.S...

...It can fairly be said that there is no need as yet to become alarmist...

...than to Britain, it is only because the size of the American national product (both in total and per head) is so much greater, and not because her rate of growth is more rapid than Britain's...

...The plan provides that only so much capital and labor is available for producing consumer goods and the goods in the shops are limited accordingly...

...But the urgency of acting now is not in doubt...

...They are closely connected...

...There remain the more fundamental questions...

...Such economies are obtained in Western countries by larger firms, but in Russia there is no question of waiting for them to become available slowly...

...I have neither the knowledge and ability nor the time and space to trace out all the implications of Russian and Chinese industrial progress...

...In Russia, with a steel output already twice as great as Britain's, the number of passenger cars produced and available for the home market will be 100,000 to 150,000 compared with 500,000 now in Britain...

...Unless, however, we are all the victims of a gigantic international hoax, it is possible to draw from the information now available several important conclusions...

...Precisely because democracy rejects force and fraud the weapons of the dictator it must rely on a far higher degree of national understanding and cooperation by the people...

...Those who talk so glibly about the great success of American economic freedom, and argue that we must choose either this or a Russian totalitarian system, ignore the figures...

...Total production of heavy industry in Russia has now passed and is moving well ahead of the combined output in this field of Britain and West Germany...

...But the pace of U.S...

...Such a discovery, however, seems unlikely...

...Of course, they may not do this and, of course, like the rest of us they will have to balance these claims against those of their own people...

...The only effect would be longer queues, a growth of the black market and a rise in prices...

...It is able by direct instructions, and by the free use of material incentives, to obtain the pattern of labor distribution as between different skills and industries which it wants...

...The prospect in food is better the plan envisages doubling the consumption of meat per head but the increase in output of cotton fabrics is to be only 23 per cent in the five years, while durable consumer goods will continue very scarce...

...as a people they are certainly as industrious...

...And what can they do to prevent this...

...And the ensuing discontent which in a democracy could bring down a government can be ignored in a dictatorship...

...The same type of development also appears to be planned in the satellite states, where the emphasis is also on a high rate of investment...

...If Soviet economic development is less of a threat to the U.S...

...for with every year that goes by the Russians are more likely to be able and willing to step up their program of economic penetration...

...Secondly, the proportion of resources devoted to consumption is much lower and to defense and investment much higher in Russia than in the West...

...There is no reason to suppose their regime is in any way less ruthless...

...Electricity is to rise from 166 to 320 billion kilowatts (half the U.S...

...And while no doubt the call on this from China will be substantial, there should be no great difficulty in time in supplying certain other countries as well...

...Whereas in a free economy this could easily lead to a balance of payments crisis, in a fully planned economy no such consequence follows...

...It can be argued that there is nothing abnormal about this, that she is simply building a large enough base on which to rest, a little later, an equally sensational growth in the output of consumer goods...

...The fact remains that, since the dictatorship in Russia is now clearly making a success of its economic policy, it will be very much better able to afford an aggressive foreign economic policy than ever before...

...Keeping down consumption by direct decision of a government which does much as it likes is certainly part of the explanation of Russia's swift industrial development...

...All I can do is to pick out a few of the more obvious questions which arise...

...output per head...

...It does so for short periods as unemployment declines in the upswing of the minor trade fluctuations which still continue...

...But in Russia, where no sectional groupings are allowed to challenge the absolute power of the state, such complications do not arise...

...Exact comparisons of investment consumption ratios in different countries are notoriously difficult...

...Interpreting statistics of economic growth is always tricky...

...It may be so...

...This is true, in particular, of coal, steel and electricity...

...But supposing there is an excess of consumer demand, an attempt by the people to buy more than the Government has decided shall be available...

...How to obtain this in a period of cold war is the greatest challenge of our time...

...It is the same story with technical training, about which so much has recently been said and written...

...Moreover, if the Russians have advanced so far in less than forty years despite the colossal task of creating the new state and the heavy losses and tremendous devastation of the Second World War, it seems highly probable that the Chinese will in time follow the same road...

...Russia has still a long way to go before she catches America as she is today and, after all, America is not standing still...

...Russia's Economic Challenge By Hugh Gaitskell Leader, British Labor party Drab life for the people facilitates huge expansion of productive capacity In the last few months, a spate of articles have appeared about Russian industrial progress what it has been recently and what it is likely to be in the next few years...

...current output...

...In face of this challenge, what should the democracies do...

...Steel is to rise from 48 to 68 million tons (still less than two-thirds of U.S...

...A high rate of investment makes possible a high rate of growth in as it were the subsequent period...

...The large differences in pay and privileges which exist in the Soviet Union have often been noted...

...If the Government thinks it right to pay scientists more, they are paid more...

...Thus we must regard as the most vital condition of Russia's success her ability to restrict consumption, to hold down the standard of living now so as to devote an exceptionally high proportion of her resources to investment for the future...

...Whether the democracies possess either the will to do such a thing or the political skill effectively to counter Communist propaganda and infiltration is another matter...

...industrial output is not rising exceptionally fast...

...instead of a more gradual increase between now and then...

...The Soviet worker is still among the worst fed, clothed and housed of the industrial countries of the world...

...The difficulty of doing any such thing in a democracy where there is a most uneven distribution of wealth, a still far from democratic system of education and at the same time complete freedom for individuals to organize themselves into groups to protect their interests, need hardly be stressed...

...Whereas in the West the proportion of resources devoted to consumption is of the order of 70 per cent, in Russia it is not much more than 40 per cent...

...If, in the future, this kind of difference continues, it cannot but be of the most profound importance...

...Her Government can do this, of course, by direct decision...

...Two things, therefore, stand out...

...Indeed, contrary to common belief, U.S...

...The power of dictatorship is also evident in another way...

...advance is certainly much slower than that of Russia...

...I do not myself rank high among these possibilities open, military aggression, begun with a full realization that it means a major war...

...They will certainly be in a position, if they so desire, to provide economic and technical aid on a very large scale...

...First, the general rate of expansion of output is very high, much higher than that of any Western country about 10 per cent per annum...

...But there is no denying there are other possibilities which, so long as the rulers of Russia still believe that it is the destiny of Communism to expand over the whole world and that it is their duty to do all in their power to assist this development, must be taken seriously...

...Nevertheless, since the population of Russia is over twice that of Britain and West Germany, output per head in heavy industry is still only half as great as in Western Europe...

...The level of consumption in the next five years is also to rise, but less rapidly, although existing standards are very low...

...The deterrent effect of the hydrogen bomb is probably decisive...

...But over a longer period, including recessions, the average rate of expansion has been recently no greater than in Britain where, indeed, output per head has actually risen faster...

...Both because of the need to provide far more adequate assistance for the still uncommitted and underdeveloped areas of the world and because of the longer-term danger of Communist economic supremacy, it seems to me clear, however, that the democracies ought to be devoting more of their resources to investment both at home and overseas and less to consumption...

...For example, in the new Five Year Plan the increase in the wage bill provided for is only 30 per cent, compared with a 60 per cent increase in National Income...

...But, judging by the success of the last plan, we cannot assume there will be any serious failure...

...What are the consequences of Russia's swift industrial development, especially in the heavy industries...

...The execution of the new industrial plan will be of great help to them in their task...

...There is no difficulty in preventing a wage-price spiral where free collective buying does not exist and trade unions are simply the instruments of state policy...

...It may even be added that perhaps the rise in living standards when it comes will bring with it strong pressure for a more liberal regime, for opportunities to travel, for all those freedoms which other industrially advanced nations enjoy...

...is available for the manufacture of investment goods...

...It is a subject which might well repay further study...

...output today...

...The Russians could hardly be expecting a 50 per cent increase in coal and steel production if they had not had an exceptionally high rate of investment in the last few years, for example, in sinking new pits, developing old ones, erecting capacity for producing coal-cutting machinery, coke ovens and steel works, etc...

...when they are statistics about Russia, there is special need for caution...

...that she prefers to have a sudden, very large increase in the standard of living in say, ten years' time with a flood of cars, refrigerators, washing machines, etc...

...To some extent they may be just the result of the new ruling class establishing itself...

...and they will receive much help from Russia...

...First of all, how do the Russians do it...

...The plan is only a plan and may not be fulfilled...

...Exactly how this can be brought about is beyond the scope of this article, although it is a matter to which a great deal of thought has been and still needs to be given...

...There would be no rise in imports or fall in exports because both imports and exports, being directly controlled, would not he affected by the pull of consumer demand...

...A levy of one per cent of their national income means only that they must defer a further rise in their relatively high living standards for six months-and it is doubtful whether Russia as yet could or would outbid even this...

...The amount of housing space per person in the Russian towns is about 50 square feet, and it does not seem that there will be much improvement in the next five years, even though twice as many houses are to be built...

...Most of the Russian targets for total industrial output in 1960 are well below present U.S...

...The plan for the next five years involves what by Western standards is a further sensational advance in heavy industry...

...I share the widely held view that the Russian tactics, for the moment at least, are to expand the power and influence of Communism through economic and political penetration, especially in the so-called uncommitted areas...

...In contrast to the other reasons for Russian progress, this advantage is not nearly so closely dependent upon the political system...

...In fact, efforts would certainly be made in Russia to prevent any excess of demand from materializing at all...