FOREIGN RELATIONSy, 195,0, VOLUME I


preparedness of the free world for war. It is devoting a far greater
proportion of its resources to military purposes than are the free
nations and, in significant components of military power, a greater
absolute quantity of resources. Second, the Communist success in
China, taken with the politico-economic situation in the rest of South
and South-East Asia, provides a springboard for a further incursion
in this troubled area. Although Communist China faces serious eco-
nomic problems which may impose some strains on the Soviet economy,
it is probable that the social.and.economic problems faced by the free
nations in this area present more than offsetting opportunities for
Communist expansion. Third, the Soviet Union holds positions in
Europe which, if it maneuvers skillfully, could be used to do great
damage tothe Western European economy and to the maintenance of
the Western orientation of certain countries, particularly Germany
and Austria. Fourthl, despite (and in part because of) the Titoist de-
fection, the Soviet Union has accelerated its efforts to integrate satel-
lite economy with its own and to increase the degree of autarchy within
the areas under its control.
  Fifth, meanwhile, Western Europe, with American (and Canadian)
assistance, has achieved a record level of production. .However, it faces
the prospect of a rapid tapering off of American assistance without
the possibility of achieving, by its own efforts, a satisfactory equilib-
rium with the dollar area. It has also made very-little progress toward
"economic integration"', which would in the long run tend to improve
its productivity and to provide an economic environment conducive
to political stability. In particular, the movement towards economic
integration does not appear to be rapid enough to provide Western
Germany with adequate economic opportunities in the West. The
United Kingdom still faces economic problems which may require a
moderate but politically difficult decline in the British standard of
living or more American assistance than is contemplated., At the same
time, a strengthening of the British position is needed if the stability
of the Commonwealth is not to be impaired and if it is to be a focus
of resistance to Communist expansion in South and South-East Asia.
Improvement of the British position is also vital in building up the
defensive capabilities of Western Europe.
   Sixth, throughout Asia the stability of the present moderate govern-
 ments, which are more in sympathy with our purposes than any prob-
 able successor regimes would be, is doubtful. The problem is only in
 part an economic one. Assistance in economic development is im-
 portant as a means of holding out to -the peoples of Asia some prospect
 of improvement in standards of living under their present govern-
 ments. But probably more important are-a strengthening of central
 institutions, an improvement in administration, and generally a de-


260-