U.S.A. vs. U.S.S.R.

June 23, 1958

One of the groundless myths encouraged by the Russian sputnik is that Khrushchev is on the verge of achieving his boasts of “catching up and surpassing the United States in per capita production” and “conquering capitalism with a higher standard of living.”

Allen W. Dulles, director of the Central Intelligence Agency, made a speech on April 28 which seemed to give color to this claim. He declared that in the recent rapid growth of the Soviet economy, “at a rate roughly twice that of the economy of the United States . . . we have the most serious challenge this country has ever faced in time of peace.”

Now all published Soviet figures are designed primarily as propaganda, not as objective information. In Newsweek of May 27, 1957, I discussed here the careful study by Prof. G. Warren Nutter covering 37 leading industries from which he concluded that “Soviet industry seems still to be roughly three and a half decades behind us in levels of output and about five and a half decades in levels of per capita output.” He has now published a supplementary study (American Economic Review, May 1958) emphasizing the growth rate of the Soviet economy in the short period of 1950 to 1955. He calculates that the annual growth rate in the Soviet economy in these five years ranged from 7.7 percent to 11.7 percent as compared with an annual growth rate in the same five years in the U.S. of only 4.6 percent. This is apparently the comparison that so impressed Allen Dulles.

PRODUCTION COMPARED

But just how significant is this comparison? Germany and Japan have shown equally striking growth rates following catastrophes. And the United States, in the war period 1939–43, showed the astonishing annual growth rate of 21 percent, based on the Federal Reserve index of industrial production, and even of 10.5 percent based on Geoffrey Moore’s index of industrial-material production. This wide difference even in American indexes shows how tricky and elusive growth-rate comparisons can be even when they are honestly and conscientiously compiled.

The most nearly reliable comparisons we can make are of physical output. A pamphlet just published by the National Industrial Conference Board of New York (Economic Comparisons, U.S.A., U.S.S.R., $1.50) shows that in Russia there is one agricultural worker for every 10 sown acres as against one worker for every 60 sown acres in the U.S. Yet Russia produces only a third as much meat, half as much sugar, and half as much grain per capita as the U.S. The Russian occupies less than a fifth as much dwelling space as an American. “In the U.S.S.R.,” said a study prepared for the Joint Economic Committee of Congress, “most families have only a single room in which all members sleep.”

OVERALL VS. MILITARY

Even these comparisons ignore quality. Once an economy gets beyond the subsistence level, economic growth—in food, clothing, housing, amenities—is reflected less and less in quantitative terms and more and more in qualitative terms. We must question, therefore, the conclusion of Professor Nutter that there is “a long-run tendency . . . for the industrial growth rates to slow down, or retard, as the level of production gets higher.” Physical growth rates slow down; but not necessarily economic growth rates in the wider sense. All belief that Russian Communism can compete with American capitalism in overall growth must be dismissed as baseless.

But this does not mean that we can be complacent about the Russian military threat. Allen Dulles declared that the Russian gross national product in 1950 was about 33 percent that of the United States, and had increased to about 40 percent in 1956. Suppose, for the sake of argument, we accept these comparisons as meaningful. We are spending about one-eighth of our national income on defense. Suppose Russia is devoting one-half of its own national production to war purposes. One-eighth of 100 is only 12½, but one-half of 40 is twenty. Such a hypothetical comparison reminds us that a much inferior economy can outmatch us in military growth by a more determined and ruthless concentration on such growth.