NATIONAL SECURITY POLICY


   But it is said, the dollar in which the calculations are made goes
 much further in the Soviet Union. This is undoubtedly true for labor
 (and military pay) but so far as machinery and capital goods are con-
 cerned, the argument is not at all clear. Their costs are extremely high.
   Furthermore, it is not clear that the USSR has such a tremendous
 capacity for rapid expansion. The 25% now alleged to being applied
 to gross investment is a very high rate for any country to maintain.
 Furthermore, rapid expansion on their part requires general develop-
 ment which inevitably runs into bottlenecks. Oil is one case in point,
 and transportation is another.
   I have made no study of this subject. It may be true that the lower
 expenditure on defense by the USSR is more productive, and the case
 can of course rest on the military budget apart from the more general
 investment figures. However, the broader economic case is clearly not
 proven. In fact, all the evidence in the report points the other way,
 that the actual gap is widening in our favor.
   Even if the case could be made, I am not sure of its significance. If
 one compares the total economic capacity, the gap is so tremendous
 that a slight and slow narrowing would have little meaning. Our
 economy has doubled its capacity about every twenty years for at least
 four such periods, and it has not stopped growing. Population in.,
 crease, technology and compound interest take care of that. And the
 USSR will have great difficulty in making comparable gains in abso-
 lute terms because it starts from so much lower a, base,.
   2. On the economic side, I feel that we cannot emphasize enough
 the disaster which an economic depression would be. This could de-
 stroy the entire structure even ..though we might weather the storm
 ourselves. The inventory adjustment in early 1949 did plenty of harm
 in the international field Thisis not only the hope of the Kremlin but
 the fear of our friends. We may be doing all that we can to stabilize
 internally and we hope to be successful. However, there are waysg in
 which we could protect our friends somewhat from our own economic
 wrongs, if we really were concerned about the problem. At least the
 fears and doubts could be reduced.
 3. So far as the military picture is concerned, it seems to me that
 some consideration should be given not only to the drain which must
 be involved in the maintenance of a non-productive army, but to the
 extent to which it is immobilized by the necessity of demonstrating
 the iron hand in the Soviet Union itself and in the various satellites&.
 Money spent to maintain a huge standing army is not necessarily
 money which is widening th6 gap of preparedness. The comparisons of
 military budget figures should take this into account.
 4. On page 5, it seems to me that the relations with the satellites in-
volves.more than a vulnerability. It must be a continual strain and


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