Page:NATIONAL INTELLIGENCE SURVEY 18; CZECHOSLOVAKIA; THE ECONOMY CIA-RDP01-00707R000200110014-8.pdf/25

 APPROVED FOR RELEASE: 2009/06/16: CIA-RDP01-00707R000200110014-8

modules were purchased from Denmark in 1972. Production was to begin in late 1973. The share of prefabricated parts in total building materials in use is to rise to 18% by 1980, compared with a share of 12% in 1965. In 1972, over 80% of housing construction involved some prefabrication.

Recent years have also witnessed an aggravation of the housing shortage. Available housing has barely kept up with population growths and movements to urban centers. Only one-fifth of the nation's housing units have been built since 1960. In Czechoslovakia as a whole there is an estimated shortage of 200,000 apartments. Government planners are committed to begin the expansion of apartment construction during 1971-75. The supply of housing barely increased over the 20-year period 1950-70, and there are acute shortages in the cities. If the construction sector receives in the 1971-75 period the 100% increase in machinery investments proposed over the previous 5-year plan period, housing construction should be speeded up (although the increase is also intended to reduce the long construction times in all sectors and to lower the stock of unfinished construction). The planners hope to attain an annual construction rate of 110,000 new dwellings (this was approximately the rate proposed for 1969 but it fell short by about 20,000 dwellings), sufficient to increase the housing supply slightly faster than the population. In order to do so, the construction industry will probably turn increasingly to the use of prefabricated structures, in which Czechoslovakia has lagged behind other Communist countries. Through 1972 the plan was being fulfilled.

C. Government finance and economic policy

1. National economic planning and policy (C)

As a result of the 1968 Soviet-led invasion, economic policy has been dominated by a "normalization" theme; stability, not change, has been the doctrine. After coping with the initial inflation of 1969 through a series of administrative price increases, controls on wages, and curtailment of new investment projects, Husak focused on political affairs. As a result, the Fifth Five Year Plan (1971-75) was late in being announced, contained only modest goals, and the priorities strongly resembled the Novotny years—a stress on heavy industry and closer ties to CEMA. The only departure from this pattern has been a conscious effort by the leadership to improve the consumer's standard of living. Central control has not solved the old problems of excessive production costs, unfinished construction projects, and lagging worker productivity.

Czechoslovakia's current economic troubles can be traced to the decision to push growth in the 1960's at the high rates of the late 1950's, and a reluctance to take action when that decision proved unwise. Even by U.S. estimates, which somewhat discount the Czechoslovak official indexes, GNP rose at an average rate of nearly 7% in 1955-59, after several years of slow growth. The Novotny regime expected continued growth at about these rates through 1965 and beyond. The rate of increase in industrial output, which had been averaging 10% per year, was to decline only slightly—to 9%. The growth of agriculture was to be somewhat faster; that of construction somewhat slower.

Much to the surprise of the regime, an abrupt drop in growth occurred in the early 1960's, and in 1962-64 there was no net increase in overall output. Output actually went down in 1963. The immediate causes of the slowdown were export shortfalls in 1961 and exceptionally bad crops in 1962, which led to shortages of materials for industry and in turn to further shortfalls in output and exports by the light machine building industries. The foreign trade squeeze was tightened by a sharp drop in 1961-62 in Czechoslovakia's lucrative trade with Communist China after that country's break in relations with the Soviet Union. The effect of these developments was aggravated by already existing bottlenecks in supply and capacity, resulting from the high-pressure growth of the late 1950's.

If the regime had recognized the early symptoms, the crisis could have been avoided by changes in the plan in 1961. Exports could have been expanded and industrial growth somewhat curtailed. Instead, the regime continued to give priority to investment and domestic consumption until late in 1962, when the disorder throughout the economy and the 1962 crop failure forced abrupt retrenchment. The regime then announced a revised, and obviously extemporized, plan for 1963, in which industrial output was barely to increase. An overriding priority was given to increasing exports and eliminating major bottlenecks in the economy, at the high price of widespread underutilization of labor and capital through 1963 and 1964.

During the recession of 1962-64, solid opposition to the Novotny regime developed on economic issues. Many party officials for the first time began to question the regime's insistence on forcing economic growth and maintaining tight controls over economic

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APPROVED FOR RELEASE: 2009/06/16: CIA-RDP01-00707R000200110014-8