Cost-Price Relationships and the Location of Soviet Industry: A Case Study

Abstract

WESTERN KNOWLEDGE of the Soviet economy has expanded rapidly since World War II. Little systematic attention, however, has been devoted to the relationship between pricing policy and resource utilization. Timber has played a significant role in Soviet economic development and although logging output has declined in recent years [11], the present structure of timber consumption and its method of allocation attest to both the continual importance and scarcity of wood in the Soviet economy. Approximately 80 per cent of all industrial timber, and 72 per cent of all lumber, is allocated on the basis of centralized supply procedures; i.e., it originated in enterprises subordinate to the more than 100 regional economic councils or sovnarkhozy. (These regional councils were abolished in the fall of 1965, and industry was again organized by branch rather than by region, as was the case prior to 1957.) Also, there is continuous pressure to centralize supply further by eliminating logging organizations which are directly subordinate not to the sovnarkhoz in which they lie but to a parent organization in a wide variety of lines (railroads, food, iron and steel, fishing, etc.) ilnterested in ensuring uninterrupted supplies of timber. About five-sixths of all industrial wvood is used directly in production and construction, and the remainder is sold to the population, used for inventories, and exported [18]. Soviet forest reserves approximate 70 billion cubic meters of standing timber on an area of 637 million hectares. This is approximately five timees the timber volume possessed oy the United States orL four times the forest area. Alhnost three-fourths of the total standing timber is situated east of the Urals. The economic impact of this uneven distribution is magnified by the fact that only about one-fourth of the population resides in this region. Further, the dominant wood-processing centers lie West of the Urals. Although there is a relatively low concentration of timber per unit of forest area, most timber is mature or over-mature coniferous, i.e., ideal for immediate industrial use. Growth rates are low, reflecting the northerly, continental Soviet climate, with rates of growth in Western sparsely-forested regions almost double those of northern and eastern (heavily-forested) regions. Gross annual forest increment is 700-800 million cubic meters, roughly twice the current annual amount of timiber logged. In the sparsely-forested southern and western areas growth may be matched or exceeded by drain (utilization),