Soviets Say CIA Overestimates Size of Their Economy : Foreign affairs: The U.S. view of gross national product is rosy compared to reality, panel asserts.

A panel of high-ranking Soviet economists contended Monday that the CIA has consistently overestimated the size of the Soviet economy--possibly by a factor of three--and has underestimated the proportion that Moscow devotes to military spending.

Several members of the Soviet Congress of People’s Deputies, the Soviet Parliament, were among the group that painted a picture of the Soviet economy that was decidedly more bearish than the one that the CIA made public last week.

The panel, which just completed a four-day seminar with CIA Sovietologists, asserted that the Soviet economy is actually only 14% to 28% as large as that of the United States, rather than half as large as the U.S. economy, as the CIA has estimated for the past several years.

It also said that Soviet military outlays amount to about 25% of the country’s total output, not the 15% to 17% that the CIA has calculated. By contrast, the United States spends only about 5% of its gross national product on defense.

The irony was not lost on the Soviets.

“A strange thing is happening here,” Grigory Khanin, one of the Soviet economists, said with obvious bemusement. “According to the CIA estimates, we are in much better shape. So how come we do not recognize our achievement?”

The CIA, however, stood behind its estimates. An agency spokesman noted that “there were great differences” at the conference “in the conceptual approach to measuring GNP.”

One U.S. official familiar with the dispute dismissed the estimate that the Soviet economy is only 14% the size of the United States’ as “ridiculously low.”

The meetings marked the first time that CIA analysts and high-ranking Soviet economists had met to exchange views on the makeup of and outlook for the Soviet economy. The conference was organized by the American Enterprise Institute, a conservative think tank.

“Even two years ago, a meeting of this kind would have been unthinkable,” Nicholas Eberstadt, an institute researcher who served as chairman of the meeting, told a press conference. About 17 Soviet economists and economics writers attended the session.

Oleg Bogomolov, director of the Institute of Economics of World Socialist Systems, agreed. Bogomolov credited glasnost in the Soviet Union for the new attitude.

“We are more frank that we used to be,” he said.

The Soviet economists on the panel offered these new assessments:

The Soviet economy ranks seventh- or eighth-largest in the world--behind Britain and Italy--rather than second, as the CIA has argued, according to Victor Belkin, economist at the Soviet Commission for Studies of Productive Forces and Natural Resources.

Living standards in the Soviet Union were only about one-fifth as high as those in the United States in 1985--lower than they were in Brazil--while Soviets consume an average one-third as much as Americans, said Yuri Dykhanov, a researcher at the Soviet Institute of Economics.

Because of waste and inefficiency, the Soviet Union is losing as much as half its industrial output each year and at least 40% of its total agricultural production--and these losses are increasing almost daily, Belkin asserted.

The market for consumer goods already has collapsed, leaving Soviet citizens unable to buy even the most basic household items, from sugar and soap to appliances.

The Soviet delegation offered several possible reasons that the CIA may have been overstating the size of the Soviet economy--mainly that U.S. intelligence analysts may not have taken adequate account of how much much lower quality standards and productivity are in the Soviet Union.

“We have the same number of people working as the United States, and our educational level is not much lower, so they (the CIA) thought it was simply not possible (that the Soviet Union’s GNP could be) less than 50% of that of the United States,” Belkin said.

He said the CIA also failed to take into account such factors as the purchasing power of the Soviet ruble and the fact that the Soviet economy is primarily based on manufacturing rather than services, which are the major component of the U.S. economy.