NCPA - National Center for Policy Analysis

CIA Estimates Of Soviet Growth Were Close

March 22, 1999

During the Cold War, there was a major, 40-year effort by the Central Intelligence Agency to estimate the growth and size of the Soviet economy. The CIA's effort was a difficult one because Soviet economic statistics were virtually useless. In the communist economic system only material production was counted. Services, such as health and transportation, were completely excluded on the grounds that they were "non-productive." In 1987, the CIA's estimate of the Soviet Union's gross domestic product was 22 percent higher than its own estimate (called the gross material product) due to the exclusion of services.

Periodically, the CIA would present its research to the Joint Economic Committee of Congress, which published it for review by scholars. This led to frequent criticism that the CIA was overstating Soviet growth, which made the burden of its military spending appear smaller than it actually was. Partially in response to such attacks, the CIA discontinued its Soviet economic growth research in 1991.

Now economist Angus Maddison, the world's leading authority on comparative international economic growth, writing in the Review of Income and Wealth (Sept. 1998), has come to the CIA's defense. The CIA did its job "rather successfully," be believes, and criticism of its work "was not well founded." Discontinuation of its growth project has led to a deterioration in the quality of information we now have about the former communist economies, in Maddison's view.

Comparing the CIA growth figures to independent academic estimates, Maddison finds that they are close to the mark. The CIA consistently showed Soviet growth to be far below Soviet official figures. This alone was a key insight during a period when many Western intellectuals and journalists really thought the Soviet Union was growing significantly faster than the U.S.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, March 22, 1999.


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