FOREIGN RELATIONS, 1950, VOLUME I


tial within ourselves would evoke the potential strength within others
and add it to our own.
B. Economie
  1. Capabilities. In contrast to the war economy of the Soviet
world (cf. Ch. V-B), the American economy (and the economy of
the free world as a whole) is at present directed to the provision of
rising standards of living. The military budget of the United States
represents 6 to 7 percent of its gross national product (as against
13.8 percent for the Soviet ,Union). Our North Atlantic Treaty allies
devoted 4.8 percent of their national product to military purposes in
1949.
  This difference in emphasis between the two .economies means that
the readiness of the free world to support a war effort is tending to
decline relative to that of the SovietUnion. There is little direct invest-
ment in production facilities for military end-products and in dis-
persal. There are relatively few men receiving military training and a
relatively low rate of production of weapons. However, given time to
convert to a war effort, the' capabilities of the United States economy
and also of the Western European economy would be tremendous. In
the light of Soviet military capabilities, a question which may be
of decisive importance in the event of war is the question whether there
will be time to mobilize our superior human and material resources
for a war effort (cf. Chs. VIII and IX).
   The capability of the American economy to support a build-up
of economic and military strength at home and to assist a build-up
abroad is limited not, as in the case of the Soviet Union, so much
by the ability to produce as by the decision on the proper allocation
of resources to this and other purposes. Even Western Europe could
afford to assign a substantially larger proportion of its resources to
defense, if the necessary foundation in public understanding and will
could be laid, and if the assistance needed to meet its dollar deficit were
provided.
   A few statistics will help to clarify this point.
 Pereentage of Gross Available Resources Allocated to Inestnent,
     National Defense, and Consumption in East & West, 1949
                          (in Percent of total)
                                      Gross
          Country                   investment  Defense  Consumption
 U.S.S.R.                             25. 4      13.8        60. 8
 Soviet Orbit                         22.0*       4. Ot      74.0*
 U.S.                                  13.6       6.5        79.9
 European NAP countries               20. 4       4. 8       74.78
   *Crude estimate. [Footnote in the source text.]
   tlncludes Soviet Zone of Germany; otherwise 5 percent. [-Footnote in the
 source text.]


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