RUSSIAN v. U.S. GROWTH: The Latest International Numbers Game

IS the Russian economy growing faster than the U.S.’s? Budget Director Maurice Stans last week decried the “cult of growth,” which would spur federal spending, unbalance the budget, and touch off another burst of inflation. But International Business Machines’ Thomas J. Watson Jr. called for new federal taxation, if necessary, to combat Russian expansion (see State of Business).

What are the facts of Russia’s claim to be outstripping the U.S. in growth? The one unarguable fact, Central Intelligence Agency’s Allen Dulles recently told the Boiling “growth” subcommittee of Congress, is that at the outset of World War I, Russia was the world’s sixth or seventh industrial power. But, said Dulles, “in the short space of 30 years since 1928, despite the ravages of four war years and several years of reconstruction, the Soviet Union has become second.” Today, Dulles estimated, Russia’s gross national product is around 45% of the U.S.’s G.N.P.

From these undisputed facts, Dulles proceeded to the hotly disputed question of comparative growth rates. Since 1950, he said, Russia’s G.N.P. has been expanding at a rate of 7% a year—”at least twice” the rate of about 3% for the U.S. in the past six or seven years. Dulles estimated that Russia will continue to grow through 1965 at a rate of 6% a year. Thus, even if the U.S. G.N.P. increase rises to “our best postwar rate” of 3½% to 4%, Dulles predicted that by 1970 Russia’s output will be 55% of the U.S.’s. The industrial gap may close even faster, says Dulles, since the Russians are expanding their industrial sector 8% or 9% a year, thus should attain 60% of U.S. industrial production by 1970 even if the U.S. industrial growth rate steps up to 4½%.

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Another warning came from Professor W. W. Rostow of the Massachusetts Institute of Technology’s Center for International Studies, who advocated “sharply increased public expenditures” for both defense and foreign aid. Russia’s superior growth rate and her power-bent use of it, Rostow said, threaten the U.S. on half a dozen fronts, ranging from brush-fire wars to all-out attack, political penetration of underdeveloped areas and “diplomatic blackmail.” Worst of all, said Rostow, Russia is creating among neutrals the “psychological image of an ardent competitor closing fast on a front runner who prefers to go down in style rather than make the effort to maintain his status.”

But to many another Russian expert, all these arguments add up to a numbers game. Professor G. Warren Nutter of the University of Virginia told the committee that statistics on Russia are no better than their source —the Kremlin. It plays up what it wants to call attention to, hides unpleasant truths. Said Nutter: “The official Soviet index shows industrial output as multiplying 27 times between 1913 and 1955.” By Western reporting methods the growth was, at most, five or six times. Furthermore, economists have made the point that Russia’s high growth rates are characteristic of a young economy. Since the base is smaller, the percentages distort the actual growth. Thus a 3%-a-year growth in the U.S. is bigger—in goods—than a 6% growth for the smaller Red economy.

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Up to now, Professor Morris Bornstein of the University of Michigan told the congressional committee, Russia has had vast amounts of idle technology, manpower, land and mineral resources. She has grown fast just as the U.S. did at the same stage. Now, as the slack has been taken up, she faces the more difficult task of employing her resources more efficiently. Professor Willard Thorp of Amherst’s Merrill Center for Economics underlined another point: Russia faces a slowdown as she shifts to producing more consumer goods, will find gains in basic industries tapering off. In a more mature economy such as the U.S., Thorp pointed out, there is a phase beyond consumer-goods production when growth increasingly takes the form of more and better services. Some of these, e.g., better medical care, may not even show up in conventional G.N.P. reporting.

Is Russia’s growth rate a threat to the U.S.? Not in a military sense, say the experts, because the U.S. and Russia already have the economic base for anything they wish to do. The threat of a major Soviet trade offensive exists, said Thorp, is already being countered by the U.S. program of lowering trade barriers, extending development loans and technical assistance.

Where the competition is serious, said the Committee for Economic development’s Howard Petersen, is between “systems, not between growth rates.” Russian growth should occasion neither amazement nor despair, said Petersen: “It was probably inevitable, regardless of the form of Russian government. What Russia is doing other nations have done with less feverish haste and far less human cost.”