The gross
national
product declined slowly in 1949 from the peak reached in 1948 ($262 billion in 1948 to an annual rate of $256 billion in the last six months of 1949), and in terms of constant prices declined by about 20 percent between 1944 and 1948.
NSC-68
?
?
CONSUMPTION
? ? ? ? ? ? ? USSR
? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 25. 4
? ? 13. 8
? ? ? ? ? ? ? ? ? ? ? ? 60. 8
? ? ? ? ? ? ? Soviet Orbit
? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 22. 0 (a)
? ? ? ? ? ? ? ? ? ? ? ? 4. 0 (b)
? ? ? ? ? ? ? ? ? ? ? ? ? ? 74. 0 (a)
? ? ? ? ? ? ? ? ? ? ? U. S.
? ? ? ? ? ? ? ? ? ? 13. 6
? ? ? ? ? ? ? ? ? ? 6. 5
? ? ? ? ? 79. 9
? ? ? ? ? ? ? ? ? ? ? European NAT countries
? ? ? ? ? ? ? ? ? 20. 4
? ? ? ? ? ? ? ? 4. 8
? ? ? ? ? 74. 8
? ? ? ? ? ? ? ? ? Table 2. Comparative Statistics on Economic Capabilities of East and West
Population (millions)
Employment in non- agricultural establishments (millions)
Gross National Production (billion dollars)
National income per capita (curent dollars)
Production data (b):
Coal (million tons)
Electric power (billion kwh)
Crude petroleum (million tons)
Pig iron (million tons)
Steel (million tons)
Cement (million tons)
Motor vehicles (thousands)
EUROPEAN
U. S. 1948-49 NAT TOTAL
COUNTRIES
149 173 322
45 - -
250 84 334
1700 480 1040
582 306 888 356 124 480
277 1 278
55 24 79 80 32 112 35 21 56 5273 580 5853
USSR (1950 SATELLITES
PLAN) TOTAL 1948-49
198 (a) 75 273
31 (a) - -
65 (a) 21 86
330 280 315
250 88 338 82 15 97
35 5 40
19. 5 3. 2 22. 7 25 6 31 10. 5 2. 1 12. 6 500 25 525
(a)1949 data. [Footnote in the source text. ]
(b) for the European NAT countries and for the satellites, the data include output by major producers. [Footnote in the source text. ]
It should be noted that these comparisons understate the relative position of the NAT countries for several reasons: (1) Canada is excluded because comparable data were not available; (2) the data for the USSR are the 1950 targets (as stated in the fourth five-year plan) rather than actual rates of production and are believed to exceed in many cases the production actually achieved; (3) the data for the European NAT countries are actual data for 1948, and production has generally increased since that time.
Furthermore, the United States could achieve a substantial absolute increase in output and could thereby increase the allocation of resources to a build-up of the economic and military strength of itself and its allies without suffering a decline in its real standard of living. Industrial production declined by 10 percent between the first quarter of 1948 and the last quarter of 1949, and by approximately one-fourth between 1944 and 1949. In March 1950 there were approximately 4,750,000 unemployed, as compared to 1,070,000 in 1943 and 670,000 in 1944.
The gross national product declined slowly in 1949 from the peak reached in 1948 ($262 billion in 1948 to an annual rate of $256 billion in the last six months of 1949), and in terms of constant prices declined by about 20 percent between 1944 and 1948.
With a high level of economic activity, the United States could soon attain a gross national product of $300 billion per year, as was pointed out in the President's Economic Report (January 1950). Progress in this direction would permit, and might itself be aided by, a buildup of the economic and military strength of the United States and the free world; furthermore, if a dynamic expansion of the economy were achieved, the necessary build-up could be accomplished without a decrease in the national standard of living because the required resources could be obtained by siphoning off a part of the annual increment in the gross national product. These are facts of fundamental importance in considering the courses of action open to the United States (cf. Ch. IX).
2. Intentions. Foreign economic policy is a major instrument in the conduct of United States foreign relations. It is an instrument which can powerfully influence the world environment in ways favorable to the security and welfare of this country. It is also an instrument which, if unwisely formulated and employed, can do actual harm to our national interests. It is an instrument uniquely suited to our capabilities, provided we have the tenacity of purpose and the understanding requisite to a realization of its potentials. Finally, it is an instrument peculiarly appropriate to the cold war.
The preceding analysis has indicated that an essential element in a program to frustrate the Kremlin design is the development of a successfully functioning system among the free nations. It is clear that economic conditions are among the fundamental determinants of the will and the strength to resist subversion and aggression.
United States foreign economic policy has been designed to assist in the building of such a system and such conditions in the free world. The principal features of this policy can be summarized as follows:
1. assistance to Western Europe in recovery and the creation of a viable economy (the European Recovery Program);
2. assistance to other countries because of their special needs arising out of the war or the cold war and our special interests in or responsibility for meeting them (grant assistance to Japan, the Philippines, and Korea, loans and credits by the Export-Import Bank, the International Monetary Fund, and the International Bank to Indonesia, Yugoslavia, Iran, etc. );
3. assistance in the development of underdeveloped areas (the Point IV program and loans and credits to various countries, overlapping to some extent with those mentioned under 2);
4. military assistance to the North Atlantic Treaty countries, Greece, Turkey, etc. ;
5. restriction of East-West trade in items of military importance to the East;
6. purchase and stockpiling of strategic materials; and
7. efforts to reestablish an international economy based on multilateral trade, declining trade barriers, and convertible currencies (the GATT-ITO program, the Reciprocal Trade Agreements program, the IMF- IBRD program, and the program now being developed to solve the problem of the United States balance of payments).
In both their short and long term aspects, these policies and programs are directed to the strengthening of the free world and therefore to the frustration of the Kremlin design. Despite certain inadequacies and inconsistencies, which are now being studied in connection with the problem of the United States balance of payments, the United States has generally pursued a foreign economic policy which has powerfully supported its overall objectives. The question must nevertheless be asked whether current and currently projected programs will adequately support this policy in the future, in terms both of need and urgency.
The last year has been indecisive in the economic field. The Soviet Union has made considerable progress in integrating the satellite economies of Eastern Europe into the Soviet economy, but still faces very large problems, especially with China. The free nations have important accomplishments to record, but also have tremendous problems still ahead. On balance, neither side can claim any great advantage in this field over its relative position a year ago. The important question therefore becomes: what are the trends?
Several conclusions seem to emerge. First, the Soviet Union is widening the gap between its preparedness for war and the unpreparedness 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 economic 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 to the Western European economy and to the maintenance of the Western orientation of certain countries, particularly Germany and Austria. Fourth, despite (and in part because of) the Titoist' defection, the Soviet Union has accelerated its efforts to integrate satellite 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 equilibrium 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 toward 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 governments, which are more in sympathy with our purposes than any probable successor regimes would be, is doubtful. The problem is only in part an economic one. Assistance in economic development is important as a means of holding out to the peoples of Asia some prospect of improvement in standards of living under their present governments. But probably more important are a strengthening of central institutions, an improvement in administration, and generally a development of an economic and social structure within which the peoples of Asia can make more effective use of their great human and material resources.
Seventh, and perhaps most important, there are indications of a let-down of United States efforts under the pressure of the domestic budgetary situation, disillusion resulting from excessively optimistic expectations about the duration and results of our assistance programs, and doubts about the wisdom of continuing to strengthen the free nations as against preparedness measures in light of the intensity of the cold war.
Eighth, there are grounds for predicting that the United States and other free nations will within a period of a few years at most experience a decline in economic activity of serious proportions unless more positive governmental programs are developed than are now available.
In short, as we look into the future, the programs now planned will not meet the requirements of the free nations. The difficulty does not lie so much in the inadequacy or misdirection of policy as in the inadequacy of planned programs, in terms of timing or impact, to achieve our objectives. The risks inherent in this situation are set forth in the following chapter and a course of action designed to reinvigorate our efforts in order to reverse the present trends and to achieve our fundamental purpose is outlined in Chapter IX.
C. Military
The United States now possesses the greatest military potential of any single nation in the world. The military weaknesses of the United States vis-a`-vis the Soviet Union, however, include its numerical inferiority in forces in being and in total manpower. Coupled with the inferiority of forces in being, the United States also lacks tenable positions from which to employ its forces in event of war and munitions power in being and readily available.
It is true that the United States armed forces are now stronger than ever before in other times of apparent peace; it is also true that there exists a sharp disparity between our actual military strength and our commitments. The relationship of our strength to our present commitments, however, is not alone the governing factor. The world situation, as well as commitments, should
govern; hence, our military strength more properly should be related to the world situation confronting us. When our military strength is related to the world situation and balanced against the likely exigencies of such a situation, it is clear that our military strength is becoming dangerously inadequate.
If war should begin in 1950, the United States and its allies will have the military capability of conducting defensive operations to provide a reasonable measure of protection to the Western Hemisphere, bases in the Western Pacific, and essential military lines of communication; and an inadequate measure of protection to vital military bases in the United Kingdom and in the Near and Middle East. We will have the capability of conducting powerful offensive air operations against vital elements of the Soviet war-making capacity.
The scale of the operations listed in the preceding paragraph is limited by the effective forces and material in being of the United States and its allies vis-a`-vis the Soviet Union. Consistent with the aggressive threat facing us and in consonance with overall strategic plans, the United States must provide to its allies on a continuing basis as large amounts of military assistance as possible without serious detriment to the United States operational requirements.
If the potential military capabilities of the United States and its allies were rapidly and effectively developed, sufficient forces could be produced probably to deter war, or if the Soviet Union chooses war, to withstand the initial Soviet attacks, to stabilize supporting attacks, and to retaliate in turn with even greater impact on the Soviet capabilities. From the military point of view alone, however, this would require not only the generation of the necessary military forces but also the development and stockpiling of improved weapons of all types.
Under existing peacetime conditions, a period of from two to three years is required to produce a material increase in military power. Such increased power could be provided in a somewhat shorter period in a declared period of emergency or in wartime through a full-out national effort. Any increase in military power in peacetime, however, should be related both to its probable military role in war, to the implementation of immediate and long-term United States foreign policy vis-a`-vis the Soviet Union, and to the realities of the existing situation. If such a course of increasing our military power is adopted now, the United States would have the capability of eliminating the disparity between its military strength and the exigencies of the situation we face; eventually of gaining the initiative in the "cold" war and of materially delaying if not stopping the Soviet offensives in war itself.
VII. Present Risks
A. General
It is apparent from the preceding sections that the integrity and vitality of our system is in greater jeopardy than ever before in our history. Even if there were no Soviet Union we would face the great problem of the free society, accentuated many fold in this industrial age, of reconciling order, security, the need for participation, with the requirement of freedom. We would face the fact that in a shrinking world the absence of order among nations is becoming less and less tolerable. The Kremlin design seeks to impose order among nations by means which would destroy our free and democratic system. The Kremlin's possession of atomic weapons puts new power behind its design, and increases the jeopardy to our system. It adds new strains to the uneasy equilibrium-without-order which exists in the world and raises new doubts in men's
minds whether the world will long tolerate this tension without moving toward some kind of order, on somebody's terms.
The risks we face are of a new order of magnitude, commensurate with the total struggle in which we are engaged. For a free society there is never total victory, since freedom and democracy are never wholly attained, are always in the process of being attained. But defeat at the hands of the totalitarian is total defeat. These risks crowd in on us, in a shrinking world of polarized power, so as to give us no choice, ultimately, between meeting them effectively or being overcome by them.
B. Specific
It is quite clear from Soviet theory and practice that the Kremlin seeks to bring the free world under its dominion by the methods of the cold war. The preferred technique is to subvert by infiltration and intimidation. Every institution of our society is an instrument which it is sought to stultify and turn against our purposes. Those that touch most closely our material and moral strength are obviously the prime targets, labor unions, civic enterprises, schools, churches, and all media for influencing opinion. The effort is not so much to make them serve obvious Soviet ends as to prevent them from serving our ends, and thus to make them sources of confusion in our economy, our culture, and our body politic. The doubts and diversities that in terms of our values are part of the merit of a free system, the weaknesses and the problems that are peculiar to it, the rights and privileges that free men enjoy, and the disorganization and destruction left in the wake of the last attack on our freedoms, all are but opportunities for the Kremlin to do its evil work. Every advantage is taken of the fact that our means of prevention and retaliation are limited by those principles and scruples which are precisely the ones that give our freedom and democracy its meaning for us. None of our scruples deter those whose only code is "morality is that which serves the revolution. "
Since everything that gives us or others respect for our institutions is a suitable object for attack,
it also fits the Kremlin's design that where, with impunity, we can be insulted and made to suffer indignity the opportunity shall not be missed, particularly in any context which can be used to cast dishonor on our country, our system, our motives, or our methods. Thus the means by which we sought to restore our own economic health in the '30's, and now seek to restore that of the free world, come equally under attack. The military aid by which we sought to help the free world was frantically denounced by the Communists in the early days of the last war, and of course our present efforts to develop adequate military strength for ourselves and our allies are equally denounced.
At the same time the Soviet Union is seeking to create overwhelming military force, in order to back up infiltration with intimidation. In the only terms in which it understands strength, it is seeking to demonstrate to the free world that force and the will to use it are on the side of the Kremlin, that those who lack it are decadent and doomed. In local incidents it threatens and encroaches both for the sake of local gains and to increase anxiety and defeatism in all the free world.
The possession of atomic weapons at each of the opposite poles of power, and the inability (for different reasons) of either side to place any trust in the other, puts a premium on a surprise attack against us. It equally puts a premium on a more violent and ruthless prosecution of its design by cold war, especially if the Kremlin is sufficiently objective to realize the improbability
of our prosecuting a preventive war. It also puts a premium on piecemeal aggression against others, counting on our unwillingness to engage in atomic war unless we are directly attacked. We run all these risks and the added risk of being confused and immobilized by our inability to weigh and choose, and pursue a firm course based on a rational assessment of each.
The risk that we may thereby be prevented or too long delayed in taking all needful measures to maintain the integrity and vitality of our system is great. The risk that our allies will lose their determination is greater. And the risk that in this manner a descending spiral of too little and too late, of doubt and recrimination, may present us with ever narrower and more desperate alternatives, is the greatest risk of all. For example, it is clear that our present weakness would prevent us from offering effective resistance at any of several vital pressure points. The only deterrent we can present to the Kremlin is the evidence we give that we may make any of the critical points which we cannot hold the occasion for a global war of annihilation.
The risk of having no better choice than to capitulate or precipitate a global war at any of a number of pressure points is bad enough in itself, but it is multiplied by the weakness it imparts to our position in the cold war. Instead of appearing strong and resolute we are continually at the verge of appearing and being alternately irresolute and desperate; yet it is the cold war which we must win, because both the Kremlin design, and our fundamental purpose give it the first priority.
The frustration of the Kremlin design, however, cannot be accomplished by us alone, as will appear from the analysis in Chapter IX, B. Strength at the center, in the United States, is only the first of two essential elements. The second is that our allies and potential allies do not as a result of a sense of frustration or of Soviet intimidation drift into a course of neutrality eventually leading to Soviet domination. If this were to happen in Germany the effect upon Western Europe and eventually upon us might be catastrophic.
But there are risks in making ourselves strong. A large measure of sacrifice and discipline will be demanded of the American people. They will be asked to give up some of the benefits which they have come to associate with their freedoms. Nothing could be more important than that they fully understand the reasons for this. The risks of a superficial understanding or of an inadequate appreciation of the issues are obvious and might lead to the adoption of measures which in themselves would jeopardize the integrity of our system. At any point in the process of demonstrating our will to make good our fundamental purpose, the Kremlin may decide to precipitate a general war, or in testing us, may go too far. These are risks we will invite by making ourselves strong, but they are lesser risks than those we seek to avoid. Our fundamental purpose is more likely to be defeated from lack of the will to maintain it, than from any mistakes we may make or assault we may undergo because of asserting that will. No people in history have preserved their freedom who thought that by not being strong enough to protect themselves they might prove inoffensive to their enemies.
VIII. Atomic Armaments
A. Military Evaluation of U. S. and USSR Atomic Capabilities
1. The United States now has an atomic capability, including both numbers and deliverability, estimated to be adequate, if effectively utilized, to deliver a serious blow against the war-making capacity of the USSR. It is doubted whether such a blow, even if it resulted in the complete
destruction of the contemplated target systems, would cause the USSR to sue for terms or prevent Soviet forces from occupying Western Europe against such ground resistance as could presently be mobilized. A very serious initial blow could, however, so reduce the capabilities of the USSR to supply and equip its military organization and its civilian population as to give the United States the prospect of developing a general military superiority in a war of long duration.
2. As the atomic capability of the USSR increases, it will have an increased ability to hit at our atomic bases and installations and thus seriously hamper the ability of the United States to carry out an attack such as that outlined above. It is quite possible that in the near future the USSR will have a sufficient number of atomic bombs and a sufficient deliverability to raise a question whether Britain with its present inadequate air defense could be relied upon as an advance base from which a major portion of the U. S. attack could be launched.
It is estimated that, within the next four years, the USSR will attain the capability of seriously damaging vital centers of the United States, provided it strikes a surprise blow and provided further that the blow is opposed by no more effective opposition than we now have programmed. Such a blow could so seriously damage the United States as to greatly reduce its superiority in economic potential.
Effective opposition to this Soviet capability will require among other measures greatly increased air warning systems, air defenses, and vigorous development and implementation of a civilian defense program which has been thoroughly integrated with the military defense systems.
In time the atomic capability of the USSR can be expected to grow to a point where, given surprise and no more effective opposition than we now have programmed, the possibility of a decisive initial attack cannot be excluded.
3. In the initial phases of an atomic war, the advantages of initiative and surprise would be very great. A police state living behind an iron curtain has an enormous advantage in maintaining the necessary security and centralization of decision required to capitalize on this advantage.
4. For the moment our atomic retaliatory capability is probably adequate to deter the Kremlin from a deliberate direct military attack against ourselves or other free peoples. However, when it calculates that it has a sufficient atomic capability to make a surprise attack on us, nullifying our atomic superiority and creating a military situation decisively in its favor, the Kremlin might be tempted to strike swiftly and with stealth. The existence of two large atomic capabilities in such a relationship might well act, therefore, not as a deterrent, but as an incitement to war.
5. A further increase in the number and power of our atomic weapons is necessary in order to assure the effectiveness of any U. S. retaliatory blow, but would not of itself seem to change the basic logic of the above points. Greatly increased general air, ground, and sea strength, and increased air defense and civilian defense programs would also be necessary to provide reasonable assurance that the free world could survive an initial surprise atomic attack of the weight which it is estimated the USSR will be capable of delivering by 1954 and still permit the free world to go on to the eventual attainment of its objectives. Furthermore, such a build-up of strength could safeguard and increase our retaliatory power, and thus might put off for some time the date when the Soviet Union could calculate that a surprise blow would be advantageous. This
would provide additional time for the effects of our policies to produce a modification of the Soviet system.
6. If the USSR develops a thermonuclear weapon ahead of the U. S. , the risks of greatly increased Soviet pressure against all the free world, or an attack against the U. S. , will be greatly increased.
7. If the U. S. develops a thermonuclear weapon ahead of the USSR, the U. S. should for the time being be able to bring increased pressure on the USSR.
B. Stockingpiling and Use of Atomic Weapons
1. From the foregoing analysis it appears that it would be to the long-term advantage of the United States if atomic weapons were to be effectively eliminated from national peacetime armaments; the additional objectives which must be secured if there is to be a reasonable prospect of such effective elimination of atomic weapons are discussed in Chapter IX. In the absence of such elimination and the securing of these objectives, it would appear that we have no alternative but to increase our atomic capability as rapidly as other considerations make appropriate. In either case, it appears to be imperative to increase as rapidly as possible our general air, ground, and sea strength and that of our allies to a point where we are militarily not so heavily dependent on atomic weapons.
2. As is indicated in Chapter IV, it is important that the United States employ military force only if the necessity for its use is clear and compelling and commends itself to the overwhelming majority of our people. The United States cannot therefore engage in war except as a reaction to aggression of so clear and compelling a nature as to bring the overwhelming majority of our people to accept the use of military force. In the event war comes, our use of force must be to compel the acceptance of our objectives and must be congruent to the range of tasks which we may encounter.
In the event of a general war with the USSR, it must be anticipated that atomic weapons will be used by each side in the manner it deems best suited to accomplish its objectives. In view of our vulnerability to Soviet atomic attack, it has been argued that we might wish to hold our atomic weapons only for retaliation against prior use by the USSR. To be able to do so and still have hope of achieving our objectives, the non-atomic military capabilities of ourselves and our allies would have to be fully developed and the political weaknesses of the Soviet Union fully exploited. In the event of war, however, we could not be sure that we could move toward the attainment of these objectives without the USSR's resorting sooner or later to the use of its atomic weapons. Only if we had overwhelming atomic superiority and obtained command of the air might the USSR be deterred from employing its atomic weapons as we progressed toward the attainment of our objectives.
In the event the USSR develops by 1954 the atomic capability which we now anticipate, it is hardly conceivable that, if war comes, the Soviet leaders would refrain from the use of atomic weapons unless they felt fully confident of attaining their objectives by other means.
In the event we use atomic weapons either in retaliation for their prior use by the USSR or because there is no alternative method by which we can attain our objectives, it is imperative that the strategic and tactical targets against which they are used be appropriate and the manner in which they are used be consistent with those objectives.
It appears to follow from the above that we should produce and stockpile thermonuclear weapons in the event they prove feasible and would add significantly to our net capability. Not enough is yet known of their potentialities to warrant a judgment at this time regarding their use in war to attain our objectives.
3. It has been suggested that we announce that we will not use atomic weapons except in retaliation against the prior use of such weapons by an aggressor. It has been argued that such a declaration would decrease the danger of an atomic attack against the United States and its allies.
In our present situation of relative unpreparedness in conventional weapons, such a declaration would be interpreted by the USSR as an admission of great weakness and by our allies as a clear indication that we intended to abandon them. Furthermore, it is doubtful whether such a declaration would be taken sufficiently seriously by the Kremlin to constitute an important factor in determining whether or not to attack the United States. It is to be anticipated that the Kremlin would weigh the facts of our capability far more heavily than a declaration of what we proposed to do with that capability.
Unless we are prepared to abandon our objectives, we cannot make such a declaration in good faith until we are confident that we will be in a position to attain our objectives without war, or, in the event of war, without recourse to the use of atomic weapons for strategic or tactical purposes.
C. International Control of Atomic Energy
1. A discussion of certain of the basic considerations involved in securing effective international control is necessary to make clear why the additional objectives discussed in Chapter IX must be secured.
2. No system of international control could prevent the production and use of atomic weapons in the event of a prolonged war. Even the most effective system of international control could, of itself, only provide (a) assurance that atomic weapons had been eliminated from national peacetime armaments and (b) immediate notice of a violation. In essence, an effective international control system would be expected to assure a certain amount of time after notice of violation before atomic weapons could be used in war.
? ? ? ? ? ? ? USSR
? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 25. 4
? ? 13. 8
? ? ? ? ? ? ? ? ? ? ? ? 60. 8
? ? ? ? ? ? ? Soviet Orbit
? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 22. 0 (a)
? ? ? ? ? ? ? ? ? ? ? ? 4. 0 (b)
? ? ? ? ? ? ? ? ? ? ? ? ? ? 74. 0 (a)
? ? ? ? ? ? ? ? ? ? ? U. S.
? ? ? ? ? ? ? ? ? ? 13. 6
? ? ? ? ? ? ? ? ? ? 6. 5
? ? ? ? ? 79. 9
? ? ? ? ? ? ? ? ? ? ? European NAT countries
? ? ? ? ? ? ? ? ? 20. 4
? ? ? ? ? ? ? ? 4. 8
? ? ? ? ? 74. 8
? ? ? ? ? ? ? ? ? Table 2. Comparative Statistics on Economic Capabilities of East and West
Population (millions)
Employment in non- agricultural establishments (millions)
Gross National Production (billion dollars)
National income per capita (curent dollars)
Production data (b):
Coal (million tons)
Electric power (billion kwh)
Crude petroleum (million tons)
Pig iron (million tons)
Steel (million tons)
Cement (million tons)
Motor vehicles (thousands)
EUROPEAN
U. S. 1948-49 NAT TOTAL
COUNTRIES
149 173 322
45 - -
250 84 334
1700 480 1040
582 306 888 356 124 480
277 1 278
55 24 79 80 32 112 35 21 56 5273 580 5853
USSR (1950 SATELLITES
PLAN) TOTAL 1948-49
198 (a) 75 273
31 (a) - -
65 (a) 21 86
330 280 315
250 88 338 82 15 97
35 5 40
19. 5 3. 2 22. 7 25 6 31 10. 5 2. 1 12. 6 500 25 525
(a)1949 data. [Footnote in the source text. ]
(b) for the European NAT countries and for the satellites, the data include output by major producers. [Footnote in the source text. ]
It should be noted that these comparisons understate the relative position of the NAT countries for several reasons: (1) Canada is excluded because comparable data were not available; (2) the data for the USSR are the 1950 targets (as stated in the fourth five-year plan) rather than actual rates of production and are believed to exceed in many cases the production actually achieved; (3) the data for the European NAT countries are actual data for 1948, and production has generally increased since that time.
Furthermore, the United States could achieve a substantial absolute increase in output and could thereby increase the allocation of resources to a build-up of the economic and military strength of itself and its allies without suffering a decline in its real standard of living. Industrial production declined by 10 percent between the first quarter of 1948 and the last quarter of 1949, and by approximately one-fourth between 1944 and 1949. In March 1950 there were approximately 4,750,000 unemployed, as compared to 1,070,000 in 1943 and 670,000 in 1944.
The gross national product declined slowly in 1949 from the peak reached in 1948 ($262 billion in 1948 to an annual rate of $256 billion in the last six months of 1949), and in terms of constant prices declined by about 20 percent between 1944 and 1948.
With a high level of economic activity, the United States could soon attain a gross national product of $300 billion per year, as was pointed out in the President's Economic Report (January 1950). Progress in this direction would permit, and might itself be aided by, a buildup of the economic and military strength of the United States and the free world; furthermore, if a dynamic expansion of the economy were achieved, the necessary build-up could be accomplished without a decrease in the national standard of living because the required resources could be obtained by siphoning off a part of the annual increment in the gross national product. These are facts of fundamental importance in considering the courses of action open to the United States (cf. Ch. IX).
2. Intentions. Foreign economic policy is a major instrument in the conduct of United States foreign relations. It is an instrument which can powerfully influence the world environment in ways favorable to the security and welfare of this country. It is also an instrument which, if unwisely formulated and employed, can do actual harm to our national interests. It is an instrument uniquely suited to our capabilities, provided we have the tenacity of purpose and the understanding requisite to a realization of its potentials. Finally, it is an instrument peculiarly appropriate to the cold war.
The preceding analysis has indicated that an essential element in a program to frustrate the Kremlin design is the development of a successfully functioning system among the free nations. It is clear that economic conditions are among the fundamental determinants of the will and the strength to resist subversion and aggression.
United States foreign economic policy has been designed to assist in the building of such a system and such conditions in the free world. The principal features of this policy can be summarized as follows:
1. assistance to Western Europe in recovery and the creation of a viable economy (the European Recovery Program);
2. assistance to other countries because of their special needs arising out of the war or the cold war and our special interests in or responsibility for meeting them (grant assistance to Japan, the Philippines, and Korea, loans and credits by the Export-Import Bank, the International Monetary Fund, and the International Bank to Indonesia, Yugoslavia, Iran, etc. );
3. assistance in the development of underdeveloped areas (the Point IV program and loans and credits to various countries, overlapping to some extent with those mentioned under 2);
4. military assistance to the North Atlantic Treaty countries, Greece, Turkey, etc. ;
5. restriction of East-West trade in items of military importance to the East;
6. purchase and stockpiling of strategic materials; and
7. efforts to reestablish an international economy based on multilateral trade, declining trade barriers, and convertible currencies (the GATT-ITO program, the Reciprocal Trade Agreements program, the IMF- IBRD program, and the program now being developed to solve the problem of the United States balance of payments).
In both their short and long term aspects, these policies and programs are directed to the strengthening of the free world and therefore to the frustration of the Kremlin design. Despite certain inadequacies and inconsistencies, which are now being studied in connection with the problem of the United States balance of payments, the United States has generally pursued a foreign economic policy which has powerfully supported its overall objectives. The question must nevertheless be asked whether current and currently projected programs will adequately support this policy in the future, in terms both of need and urgency.
The last year has been indecisive in the economic field. The Soviet Union has made considerable progress in integrating the satellite economies of Eastern Europe into the Soviet economy, but still faces very large problems, especially with China. The free nations have important accomplishments to record, but also have tremendous problems still ahead. On balance, neither side can claim any great advantage in this field over its relative position a year ago. The important question therefore becomes: what are the trends?
Several conclusions seem to emerge. First, the Soviet Union is widening the gap between its preparedness for war and the unpreparedness 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 economic 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 to the Western European economy and to the maintenance of the Western orientation of certain countries, particularly Germany and Austria. Fourth, despite (and in part because of) the Titoist' defection, the Soviet Union has accelerated its efforts to integrate satellite 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 equilibrium 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 toward 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 governments, which are more in sympathy with our purposes than any probable successor regimes would be, is doubtful. The problem is only in part an economic one. Assistance in economic development is important as a means of holding out to the peoples of Asia some prospect of improvement in standards of living under their present governments. But probably more important are a strengthening of central institutions, an improvement in administration, and generally a development of an economic and social structure within which the peoples of Asia can make more effective use of their great human and material resources.
Seventh, and perhaps most important, there are indications of a let-down of United States efforts under the pressure of the domestic budgetary situation, disillusion resulting from excessively optimistic expectations about the duration and results of our assistance programs, and doubts about the wisdom of continuing to strengthen the free nations as against preparedness measures in light of the intensity of the cold war.
Eighth, there are grounds for predicting that the United States and other free nations will within a period of a few years at most experience a decline in economic activity of serious proportions unless more positive governmental programs are developed than are now available.
In short, as we look into the future, the programs now planned will not meet the requirements of the free nations. The difficulty does not lie so much in the inadequacy or misdirection of policy as in the inadequacy of planned programs, in terms of timing or impact, to achieve our objectives. The risks inherent in this situation are set forth in the following chapter and a course of action designed to reinvigorate our efforts in order to reverse the present trends and to achieve our fundamental purpose is outlined in Chapter IX.
C. Military
The United States now possesses the greatest military potential of any single nation in the world. The military weaknesses of the United States vis-a`-vis the Soviet Union, however, include its numerical inferiority in forces in being and in total manpower. Coupled with the inferiority of forces in being, the United States also lacks tenable positions from which to employ its forces in event of war and munitions power in being and readily available.
It is true that the United States armed forces are now stronger than ever before in other times of apparent peace; it is also true that there exists a sharp disparity between our actual military strength and our commitments. The relationship of our strength to our present commitments, however, is not alone the governing factor. The world situation, as well as commitments, should
govern; hence, our military strength more properly should be related to the world situation confronting us. When our military strength is related to the world situation and balanced against the likely exigencies of such a situation, it is clear that our military strength is becoming dangerously inadequate.
If war should begin in 1950, the United States and its allies will have the military capability of conducting defensive operations to provide a reasonable measure of protection to the Western Hemisphere, bases in the Western Pacific, and essential military lines of communication; and an inadequate measure of protection to vital military bases in the United Kingdom and in the Near and Middle East. We will have the capability of conducting powerful offensive air operations against vital elements of the Soviet war-making capacity.
The scale of the operations listed in the preceding paragraph is limited by the effective forces and material in being of the United States and its allies vis-a`-vis the Soviet Union. Consistent with the aggressive threat facing us and in consonance with overall strategic plans, the United States must provide to its allies on a continuing basis as large amounts of military assistance as possible without serious detriment to the United States operational requirements.
If the potential military capabilities of the United States and its allies were rapidly and effectively developed, sufficient forces could be produced probably to deter war, or if the Soviet Union chooses war, to withstand the initial Soviet attacks, to stabilize supporting attacks, and to retaliate in turn with even greater impact on the Soviet capabilities. From the military point of view alone, however, this would require not only the generation of the necessary military forces but also the development and stockpiling of improved weapons of all types.
Under existing peacetime conditions, a period of from two to three years is required to produce a material increase in military power. Such increased power could be provided in a somewhat shorter period in a declared period of emergency or in wartime through a full-out national effort. Any increase in military power in peacetime, however, should be related both to its probable military role in war, to the implementation of immediate and long-term United States foreign policy vis-a`-vis the Soviet Union, and to the realities of the existing situation. If such a course of increasing our military power is adopted now, the United States would have the capability of eliminating the disparity between its military strength and the exigencies of the situation we face; eventually of gaining the initiative in the "cold" war and of materially delaying if not stopping the Soviet offensives in war itself.
VII. Present Risks
A. General
It is apparent from the preceding sections that the integrity and vitality of our system is in greater jeopardy than ever before in our history. Even if there were no Soviet Union we would face the great problem of the free society, accentuated many fold in this industrial age, of reconciling order, security, the need for participation, with the requirement of freedom. We would face the fact that in a shrinking world the absence of order among nations is becoming less and less tolerable. The Kremlin design seeks to impose order among nations by means which would destroy our free and democratic system. The Kremlin's possession of atomic weapons puts new power behind its design, and increases the jeopardy to our system. It adds new strains to the uneasy equilibrium-without-order which exists in the world and raises new doubts in men's
minds whether the world will long tolerate this tension without moving toward some kind of order, on somebody's terms.
The risks we face are of a new order of magnitude, commensurate with the total struggle in which we are engaged. For a free society there is never total victory, since freedom and democracy are never wholly attained, are always in the process of being attained. But defeat at the hands of the totalitarian is total defeat. These risks crowd in on us, in a shrinking world of polarized power, so as to give us no choice, ultimately, between meeting them effectively or being overcome by them.
B. Specific
It is quite clear from Soviet theory and practice that the Kremlin seeks to bring the free world under its dominion by the methods of the cold war. The preferred technique is to subvert by infiltration and intimidation. Every institution of our society is an instrument which it is sought to stultify and turn against our purposes. Those that touch most closely our material and moral strength are obviously the prime targets, labor unions, civic enterprises, schools, churches, and all media for influencing opinion. The effort is not so much to make them serve obvious Soviet ends as to prevent them from serving our ends, and thus to make them sources of confusion in our economy, our culture, and our body politic. The doubts and diversities that in terms of our values are part of the merit of a free system, the weaknesses and the problems that are peculiar to it, the rights and privileges that free men enjoy, and the disorganization and destruction left in the wake of the last attack on our freedoms, all are but opportunities for the Kremlin to do its evil work. Every advantage is taken of the fact that our means of prevention and retaliation are limited by those principles and scruples which are precisely the ones that give our freedom and democracy its meaning for us. None of our scruples deter those whose only code is "morality is that which serves the revolution. "
Since everything that gives us or others respect for our institutions is a suitable object for attack,
it also fits the Kremlin's design that where, with impunity, we can be insulted and made to suffer indignity the opportunity shall not be missed, particularly in any context which can be used to cast dishonor on our country, our system, our motives, or our methods. Thus the means by which we sought to restore our own economic health in the '30's, and now seek to restore that of the free world, come equally under attack. The military aid by which we sought to help the free world was frantically denounced by the Communists in the early days of the last war, and of course our present efforts to develop adequate military strength for ourselves and our allies are equally denounced.
At the same time the Soviet Union is seeking to create overwhelming military force, in order to back up infiltration with intimidation. In the only terms in which it understands strength, it is seeking to demonstrate to the free world that force and the will to use it are on the side of the Kremlin, that those who lack it are decadent and doomed. In local incidents it threatens and encroaches both for the sake of local gains and to increase anxiety and defeatism in all the free world.
The possession of atomic weapons at each of the opposite poles of power, and the inability (for different reasons) of either side to place any trust in the other, puts a premium on a surprise attack against us. It equally puts a premium on a more violent and ruthless prosecution of its design by cold war, especially if the Kremlin is sufficiently objective to realize the improbability
of our prosecuting a preventive war. It also puts a premium on piecemeal aggression against others, counting on our unwillingness to engage in atomic war unless we are directly attacked. We run all these risks and the added risk of being confused and immobilized by our inability to weigh and choose, and pursue a firm course based on a rational assessment of each.
The risk that we may thereby be prevented or too long delayed in taking all needful measures to maintain the integrity and vitality of our system is great. The risk that our allies will lose their determination is greater. And the risk that in this manner a descending spiral of too little and too late, of doubt and recrimination, may present us with ever narrower and more desperate alternatives, is the greatest risk of all. For example, it is clear that our present weakness would prevent us from offering effective resistance at any of several vital pressure points. The only deterrent we can present to the Kremlin is the evidence we give that we may make any of the critical points which we cannot hold the occasion for a global war of annihilation.
The risk of having no better choice than to capitulate or precipitate a global war at any of a number of pressure points is bad enough in itself, but it is multiplied by the weakness it imparts to our position in the cold war. Instead of appearing strong and resolute we are continually at the verge of appearing and being alternately irresolute and desperate; yet it is the cold war which we must win, because both the Kremlin design, and our fundamental purpose give it the first priority.
The frustration of the Kremlin design, however, cannot be accomplished by us alone, as will appear from the analysis in Chapter IX, B. Strength at the center, in the United States, is only the first of two essential elements. The second is that our allies and potential allies do not as a result of a sense of frustration or of Soviet intimidation drift into a course of neutrality eventually leading to Soviet domination. If this were to happen in Germany the effect upon Western Europe and eventually upon us might be catastrophic.
But there are risks in making ourselves strong. A large measure of sacrifice and discipline will be demanded of the American people. They will be asked to give up some of the benefits which they have come to associate with their freedoms. Nothing could be more important than that they fully understand the reasons for this. The risks of a superficial understanding or of an inadequate appreciation of the issues are obvious and might lead to the adoption of measures which in themselves would jeopardize the integrity of our system. At any point in the process of demonstrating our will to make good our fundamental purpose, the Kremlin may decide to precipitate a general war, or in testing us, may go too far. These are risks we will invite by making ourselves strong, but they are lesser risks than those we seek to avoid. Our fundamental purpose is more likely to be defeated from lack of the will to maintain it, than from any mistakes we may make or assault we may undergo because of asserting that will. No people in history have preserved their freedom who thought that by not being strong enough to protect themselves they might prove inoffensive to their enemies.
VIII. Atomic Armaments
A. Military Evaluation of U. S. and USSR Atomic Capabilities
1. The United States now has an atomic capability, including both numbers and deliverability, estimated to be adequate, if effectively utilized, to deliver a serious blow against the war-making capacity of the USSR. It is doubted whether such a blow, even if it resulted in the complete
destruction of the contemplated target systems, would cause the USSR to sue for terms or prevent Soviet forces from occupying Western Europe against such ground resistance as could presently be mobilized. A very serious initial blow could, however, so reduce the capabilities of the USSR to supply and equip its military organization and its civilian population as to give the United States the prospect of developing a general military superiority in a war of long duration.
2. As the atomic capability of the USSR increases, it will have an increased ability to hit at our atomic bases and installations and thus seriously hamper the ability of the United States to carry out an attack such as that outlined above. It is quite possible that in the near future the USSR will have a sufficient number of atomic bombs and a sufficient deliverability to raise a question whether Britain with its present inadequate air defense could be relied upon as an advance base from which a major portion of the U. S. attack could be launched.
It is estimated that, within the next four years, the USSR will attain the capability of seriously damaging vital centers of the United States, provided it strikes a surprise blow and provided further that the blow is opposed by no more effective opposition than we now have programmed. Such a blow could so seriously damage the United States as to greatly reduce its superiority in economic potential.
Effective opposition to this Soviet capability will require among other measures greatly increased air warning systems, air defenses, and vigorous development and implementation of a civilian defense program which has been thoroughly integrated with the military defense systems.
In time the atomic capability of the USSR can be expected to grow to a point where, given surprise and no more effective opposition than we now have programmed, the possibility of a decisive initial attack cannot be excluded.
3. In the initial phases of an atomic war, the advantages of initiative and surprise would be very great. A police state living behind an iron curtain has an enormous advantage in maintaining the necessary security and centralization of decision required to capitalize on this advantage.
4. For the moment our atomic retaliatory capability is probably adequate to deter the Kremlin from a deliberate direct military attack against ourselves or other free peoples. However, when it calculates that it has a sufficient atomic capability to make a surprise attack on us, nullifying our atomic superiority and creating a military situation decisively in its favor, the Kremlin might be tempted to strike swiftly and with stealth. The existence of two large atomic capabilities in such a relationship might well act, therefore, not as a deterrent, but as an incitement to war.
5. A further increase in the number and power of our atomic weapons is necessary in order to assure the effectiveness of any U. S. retaliatory blow, but would not of itself seem to change the basic logic of the above points. Greatly increased general air, ground, and sea strength, and increased air defense and civilian defense programs would also be necessary to provide reasonable assurance that the free world could survive an initial surprise atomic attack of the weight which it is estimated the USSR will be capable of delivering by 1954 and still permit the free world to go on to the eventual attainment of its objectives. Furthermore, such a build-up of strength could safeguard and increase our retaliatory power, and thus might put off for some time the date when the Soviet Union could calculate that a surprise blow would be advantageous. This
would provide additional time for the effects of our policies to produce a modification of the Soviet system.
6. If the USSR develops a thermonuclear weapon ahead of the U. S. , the risks of greatly increased Soviet pressure against all the free world, or an attack against the U. S. , will be greatly increased.
7. If the U. S. develops a thermonuclear weapon ahead of the USSR, the U. S. should for the time being be able to bring increased pressure on the USSR.
B. Stockingpiling and Use of Atomic Weapons
1. From the foregoing analysis it appears that it would be to the long-term advantage of the United States if atomic weapons were to be effectively eliminated from national peacetime armaments; the additional objectives which must be secured if there is to be a reasonable prospect of such effective elimination of atomic weapons are discussed in Chapter IX. In the absence of such elimination and the securing of these objectives, it would appear that we have no alternative but to increase our atomic capability as rapidly as other considerations make appropriate. In either case, it appears to be imperative to increase as rapidly as possible our general air, ground, and sea strength and that of our allies to a point where we are militarily not so heavily dependent on atomic weapons.
2. As is indicated in Chapter IV, it is important that the United States employ military force only if the necessity for its use is clear and compelling and commends itself to the overwhelming majority of our people. The United States cannot therefore engage in war except as a reaction to aggression of so clear and compelling a nature as to bring the overwhelming majority of our people to accept the use of military force. In the event war comes, our use of force must be to compel the acceptance of our objectives and must be congruent to the range of tasks which we may encounter.
In the event of a general war with the USSR, it must be anticipated that atomic weapons will be used by each side in the manner it deems best suited to accomplish its objectives. In view of our vulnerability to Soviet atomic attack, it has been argued that we might wish to hold our atomic weapons only for retaliation against prior use by the USSR. To be able to do so and still have hope of achieving our objectives, the non-atomic military capabilities of ourselves and our allies would have to be fully developed and the political weaknesses of the Soviet Union fully exploited. In the event of war, however, we could not be sure that we could move toward the attainment of these objectives without the USSR's resorting sooner or later to the use of its atomic weapons. Only if we had overwhelming atomic superiority and obtained command of the air might the USSR be deterred from employing its atomic weapons as we progressed toward the attainment of our objectives.
In the event the USSR develops by 1954 the atomic capability which we now anticipate, it is hardly conceivable that, if war comes, the Soviet leaders would refrain from the use of atomic weapons unless they felt fully confident of attaining their objectives by other means.
In the event we use atomic weapons either in retaliation for their prior use by the USSR or because there is no alternative method by which we can attain our objectives, it is imperative that the strategic and tactical targets against which they are used be appropriate and the manner in which they are used be consistent with those objectives.
It appears to follow from the above that we should produce and stockpile thermonuclear weapons in the event they prove feasible and would add significantly to our net capability. Not enough is yet known of their potentialities to warrant a judgment at this time regarding their use in war to attain our objectives.
3. It has been suggested that we announce that we will not use atomic weapons except in retaliation against the prior use of such weapons by an aggressor. It has been argued that such a declaration would decrease the danger of an atomic attack against the United States and its allies.
In our present situation of relative unpreparedness in conventional weapons, such a declaration would be interpreted by the USSR as an admission of great weakness and by our allies as a clear indication that we intended to abandon them. Furthermore, it is doubtful whether such a declaration would be taken sufficiently seriously by the Kremlin to constitute an important factor in determining whether or not to attack the United States. It is to be anticipated that the Kremlin would weigh the facts of our capability far more heavily than a declaration of what we proposed to do with that capability.
Unless we are prepared to abandon our objectives, we cannot make such a declaration in good faith until we are confident that we will be in a position to attain our objectives without war, or, in the event of war, without recourse to the use of atomic weapons for strategic or tactical purposes.
C. International Control of Atomic Energy
1. A discussion of certain of the basic considerations involved in securing effective international control is necessary to make clear why the additional objectives discussed in Chapter IX must be secured.
2. No system of international control could prevent the production and use of atomic weapons in the event of a prolonged war. Even the most effective system of international control could, of itself, only provide (a) assurance that atomic weapons had been eliminated from national peacetime armaments and (b) immediate notice of a violation. In essence, an effective international control system would be expected to assure a certain amount of time after notice of violation before atomic weapons could be used in war.
