(UNTITLED)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP62S00545A000100020120-1
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 4
• Document Creation Date: December 9, 2016
• Document Release Date: October 30, 1998
• Sequence Number: 120
• Publication Date: July 8, 1958
• Content Type: MEMO

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Pre Memorandum ? UNITED STATES GOVERNMENT
AD/RR
TO DD/I and DAD/CI DATE: A July 1958
25X1A9a
A "net evaluation: you may find of interest. It is a part
of a confidential document prepared by the economist for
25X1A5a1 the d circulated to that company's
president and board of directors.
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Within the next five to ten years there is a substantial pos-
sibility that the USSR will overtake the United States in any areas of
science mad techl9ology, aid their military applications, use experts
2
X1 A5a 1 foar ex ple) believe nothing we can do at this time
can prevent this ram occurring. He claims that "ten years from now the
best scientists will be found in Russia...I an not saying that this will
happen unless we take this or that aura, I an simply saying that it is
gout to happen." Some, experts believe there is still a chance for the
United States to stay abreast by caking determined long-range commitments
5X1A5a1 too train people and build un~ivereitiee, laboratories and institutes on
grand scale. robabiy the most qualified man in this
country to make u n, believes th
On the production frost, there is virtual amity among ex-
perts on the current statue of the U. S. ? USSR economic competition. Soviet
industrial production in 1956 was about 40% as large as that of the U. S.
But Soviet investment in heavy industry is proportionately larger than
our own 8M the output of specific industries has now approached ours.
During much of the post-war period the USSR has produced more, and in 1958,
probably twice as many machine tools as the United States. Soviet output
of coal in 1958 will about equal U. S. production. Russia's steel capacity
is now 50% that of the United States, and her steel output in the first
half of 1958 will be about the same as our own.
In 19 ( Soviet investment in the electric power, metallurgical
base, and producers' goods industries (in real terms) was very close to
our own. In 1958 this investment will undoubtedly exceed ours. As
a result,, the Soviet econa y ( ) is expected to continue to grow, through
1962, at a rate about twice that of the U. S. economy." Annual growth of
industrial production alone is expected to continue at 10% to 120, as roam.
pared to the U. S. 1950-55 rate of 4.4%.
The USSR now produces about 25% to 30% as much crude petroleum
as the United ? tes. Me will probably produce one-third of our output in
1958.
This does not purport to cover the whole range of U. S. - Soviet
economic competition. For example, agriculture and consumer goods,
and the resulting standard of living of the ;people, in which areas
the U. S. has a ceding and perhaps widening lend, are omitted
from consideration,
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Approximate comparative average annual rates of growth in crude production
are l
Years
1926-55
3.8%
5.9*
1950?55
13.3
1955-60
2.0 to 3.0%
13.8 (Eat.)
Khruehchev has announced that the USSR inter As to reach cur-
rent U. S. petroleum output by 1972 and experts believe this goal is not
unreasonable. Current annual domestic Soviet consumption to probably
in the neighborhood of million barrels. Commenting on Soviet ex*
port capabilities in 1972, Allen Dulles recently made this point, "Even
allowing for substantial increases in dcoestic consumption, they could
export about 2 mi3lton barrels a day. Today, all of w : stern Europe con-
sumes about 3 mullion barrels". The USSR is already a major factor in the
international export markets for aluminum and certain other non ferr s
metals and ferro.ai,loys.
Barring rapid, substantial changes in the eaount and direction
states industrial at educational investment programs, and
assuming the USSR continues its present proved rate of scientific, tech-
nological and industrial grcawth, a time table such as the followi
probable:
by 1965: USSR would, overtake us in may major fields of scientific
sad technical research and development. These include, most
fields having important military applications,
by 1970: USM would: begin to cut the absolute gap between their own and
U. S. output.
by 1975
1980; USSR voul.d reach or surpass the U. S. in output of
industrial goods.
To eIia r r dictatorship to achieve such goals would mean great danger
to the U. S. If, for a xezAple, the USSR had such power now, our political
ann: economic dozina ice in the Middle East would be severely challenged.
The possibility of internal revolt mraki the Soviet goals
uzmmaintainable appears to be remote. As a consequence, our hope for
continued superiority in science, technology, and heavy industry, if this
is thought tobeeaceasary element of ztion policy, lies in increasing,
at a very rapid rate, our own investment and efficiency in those spheres.
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In W opinion, there is great doubt whether this will be done
without Federal stimulation and guidance. I have in mind specifically the
possibility that our present degree of reliance on consumer direction of
invest nt, already limited by Federal conei ption of of our national
product, will have to be further modified, in order to insure that a
larger share of our national production is invested rather than consumed.
This, of course, implies an increa etrig degree of Federal direction of use
*anpc r as of education resources. This would be distasteful, but
should not prevent consideration of the possible necessity of such a
reorientation of our investment goale, and the meths of achieving these
goals without loss of economic and political freed.
Th my opinion, a t the r e -nt ltm. part of the recess;
orientation of investment could be acccnplished through substantial increases
in Federal expenditures on education, resew ?ch, and development, within
the frawwork the free enterprise system. To prevent inflation, this
would necessitate an increase in taxation, but this would have to be de
laved until such time as the current cession is clearly ended. If,
however, such steps are long delayed, ani the i is permitted to match
overall industrial strength, as they have already in flow of military
industrial invests t, I believe that in the Ors mobilization
our economic resources under strict Federal control might be d d
in the face of the threat to our national security.
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