THE ECONOMIC FRONT LECTURE TO THE NATIONAL STRATEGY SEMINAR FOR RESERVE OFFICERS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP75-00001R000200550005-1
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 21
• Document Creation Date: November 11, 2016
• Document Release Date: February 22, 1999
• Sequence Number: 5
• Publication Date: July 17, 1959
• Content Type: SPEECH

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TEE ECONOMIC MONT
ORAL STRATEGY SEMINAR TOR MERU OFFICERS
The National War College
Washington, D.C.
41351aM
ST4
Cont!!!!!!!!!!!!!!!!!!!"4
25X1A9a
reciate the opportunity to speak to this distinguis udience
and to participate in the *Atonal Strategy Seminar for Reserve Officers.
general Arastrong has quite appropriately asked ms to talk
about the economic front. The Soviet challenge, as you all know,
le more than economic -- it is military, subversive and political
S s well. Ity remarks will of necessity touch on all these fields.
I hope thereby to gain In perapective more than is lost by departing
from e movie purity -- if it in not 4 contradiction in terms to
put the word "economic" next to the word ?purity.*
trat of all, the regimes in *scow and Peiping are governed
by the principles of international Communism. Their single purpose
is the liquidation of our form of free society and the emergence of a
Sovietised communized =rid order. The aims of international
Communism, with its headquarters in Moscow, are vorld-vide in score;
its Objectives axe unlimited. Soviet leaders firmly believe and
eloquently preach, that Communism is the system which mill eventually
rule the world. Each move they make is directed to this end.
It follows togically that the economic development of the !
which is the vanguard of world Communism, is Shaped to serve
the a of international Communism, not of the Soviet people,
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To
diversion of oecnonic
tbe Soviet Union is uitbout
in L1atO17 uf the wad. I define notional
s*a to include defense' research and devologinant foreign
Invsetnent in industry.
ot ir objectives Oily bays detorianed cost titheit
forsidable nilitary ostabliebnent and a strong
ichwin provide a secure bone Woe n1111i? to
foreign activities.
te fact by oneadning bee totol outputs
ins elloostod in the trkV last year,
vn vision of the productina Plo?
itiatisa AU 3.)
of the &sods and services
larger torriart population*
tin dispsrity in living
t snows
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wenta
The or
ro oar
shopping treaters,
Td building props*
tiara fer the military
;rat in absolute dollarti
ow national products theY ors
to military pxrpores ae se ems
40, 41K 4111, Olt
fort
Further, am moar typos
to largo stocks of obsolomont or me
nest motel. eon ba need by the Commesist loaders to *tames
Conesdats
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et
isle Tho September 33 sri tt pt
*involute to sinks roma, affeoutlitsit sad
as tabs meld my hams, these have been pnfttabZa
Or.Possession of modern areamente also is
ge by the leaders of the ace Africee
Communist same have pams to Citilmoa es
by a militaxymissios. There
taloa nationals in Wilma,
Thus, ger too first time*
?f Cot tionisdevalopiug, in the
will tome/am fronwilitsry
Ow se* outlays are so high in the
of emesomio growth
In the short space of 30 par*, ths awrist 4high hata Pawn
from & relatively beeboard motion to become the second largeot
Issinstriulisod usioomy is the world. It is true that the ismaang
pose ef induetriallsation hes slowed moderately innocent years.
liewever# its growth is still sell over twice that which we aehUreed
during ths *weds of the 19$0,6
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on his e
rent military strength. lie is convinced that the final victarf
ccemanien ecn be edlienced wanly b.: tion-ialitia7 MIMI*
thresisehger explained soviet piennse develspiont tor tne resit
wrest years in those verdeb to ausrarise tce ten booze of his
opening end sliming remarks at the 21st Piuti Congresor
The ernmonic eight of the Soviet Union ie hosed on
part of beim indestry. This still Inver*
the Soviets victor7 in pearmfol estosostie emipet.ition elth
oefitalist countries. arrolopment of swit soonomic eight
mill give Ccemenisa the decisive edge in the international
balance of povr it iii sttrahorss ta
Atla
in on
way to progrens
In toe
$!r*.s lees
of
of the sect.
es, p.respit* income
are half those
s the rasa Int
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4 to establieh quidral
f rapid eceneate
appeal.
The lmsd*rs at world Connuatima ars alert to the opportimmi4,
transformation afforde then. In their radio creed.
musts to Af the Middle Last and Asia, and %breath t&ir local
front genisations, the Soviets ple4eet the image of the &ovt
spasm se tht nagie blueprint for achieving rapid preaess.
should not underestimate the attractios vnieh Audi an beige has
nen of influence in underdeveloped countries nhe are denperately
to lead their people Into Us Twentieth Cantu*.
I* so sem moo one piece of Seelet prepaondb nhica
in India last year.
(Briefing Aid 2)
in the Soviet Unless ceeparee
177S1.1. and in the rated States in a highlp
green fiw tines &IF fast as that in
t IA beth
Zovis
But in *As of metros*
ek recession
of 1958.
the
Soviet output ems still ouch deprmiummitmeasse of the ver'is destruction
it 2vsla relay the line l*Prios.ritingt g?-S.1 you SOO 'Wit as this
cMrt Um* the first quarter &aline in 1958 vlOod Out 454.
product.ton increees in recent sears.
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Tou see Uncle 8i - pot-bellied and dark-spectacled, bending
backwardly; to vlev the exalted level of Soviet prodictioi. As an
added bit of Socialist realism, Uncle Sam's leg is conveniently
placed to hide our best years of growth.
- IN, VON
d a
its beiieye tbst the underdeveloped countries
es heel of the WeEtern World. These countries
similar to that of the proletariat in early
inleaders, the free World underdeveloped
z thegreatest opportUnities for an extension of Corn-
the
*duty 0/the USSR as the valward of the
o invest some of its resources in promoting this
?xtensioz.
The tactical shift in Soviet foreign policy to aid the newly
emerging bourgeois governments was unveiled to the vorld in 19$4.
The party line turmed from the "armed struggle" phase of the late
talin e2s,t,This!4ce "peaceful coexistence." Since then,
pesefui. coexistence has become more than a tact cal maneuver;
ineed, it is the battle itself. What is "peaceful coexistence?
voidsXn the of former Soviet foreign mi*ster She ilov, and
Rere I quote
*P.sc.tui coexi5teuce does not mean a quiet life.
long as different social and political wartime exist,
contradictions between them are inevitable. Peaceful co-
existence lea struggle -- a political struggle: an
economic struggle an ideologioal struggle."
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When the Communist economic of nsive started, many Western
observer3 belittled Soviet capabilities to provide aid to under
developed nations. These observers believed that internal Soviet
requirements for machinery and equipment, generated by the
program of forced draft industrialization, would leave no surplui
for export.
The judgment overlooked the fact that the Soviet Union had
become a major industrial power in the world. Br 1955, its
annual production of industrial goods we already running over
V billion dollars a year. Furtiler, industrial
at an annual rate of nearly. 10 percent.
It clearly follows that the 3ov1ets possessed the industrial
muecle to step up Communist activities in the Free World by
economic means) all that vas needed was the political decision to
do eo. A diversion of lecs than one percent of annual oatput
W44 enough to support an aid program of significant proportione.
The aid program is not a large one by United States standards,
Total credit extensions by the USSR over the past four years
have only amounted to 1.8 billion dollars, and the net annual
drain that is the difference between drawings anci repayments, has
never amounted to more than half a billion dollars.
The main point is that of all 5oviet outlays for na
purpose defense, domestic investment, etc. .- foreign
aid impo?s far and away the smalls drain on resources. It
could be increased substantially if the Communist leadership saw
politically profitable opportunities to do so.
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put was increasing
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By 1965, the Soviets could have a forign aid program
Wal to ours with still no obacrable stziz on its econcaorip
it seems inescapable that the economic compettion will grow.
This is part of what Kbruohchev meant when be told Walter
Lippman, rFeonomically speaking, We Will cause you Americans
more trouble every year.*
Up to this point in time soviet Bloc &d to fal, under..
developed countries of the Free World has been dwarfed by 'Western
aid. However, it is important to keep in mind that Communiet
economic aaflatance is heavily concentrated in a few key target
countries.
In these countries, the Soviet program is eitt*r arger than
the *id provided by the United States, or is sizeable enough
to be of considerable importances Here are some examples,
(Briefing Aid 3)
The bars in this chart compare U.L aid and Bloc
tid tram 954 to the first quarter of 1959 Xor ie1ected
can see that in Egypt, Syria, Iraq, Afghistw.
Ceylon and Indonesia, the Bloc has put in far more economic
*id than we have. Although not shown in the chart the
same is true for Tamen.
3. in Burma India, and Nepal, while Bloc economic
aid is less than our own, it ia neverless substantial.
This applies to Cambodia as veil.
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ountries have been willing to expand
economic
eontact? h the Soviet Bloc for a variety of reasons but a
buie tion of the success of the Soviet aid program lies
the a the underdeveloped countries are capital-etarved.
Many leadere in these countries, in fact, have voiced their suspicions
of Soviet intentione, but have defended their acceptance of Bloc
assistance on the ground that the great need for additional
capital requirements of the underdeveloped countries will become
even greater in the future, and unless the Soviets commit
serious blundere the Bloc mill continue to find numerous potential
eutlete for it assistance offers.
So far, however, the Bloc has made acme blunders but has cornmitte
Tell yelp. ferwmajor mistakes in its aid program. Its program, in
fact has bEen cleverly formulated so as to have a general *Lopes' to
all underdeveloped countries. Yeah offer of assistance seem
specifically designed to offer a solution to an immediate problem
facing the target country.
In certain instanceg where the Bloc prornm difera from
that or the U.S. the Bloc progrem suffers in comparison. !fever-
s there are interrsting contrasts between the Bloc and the
U.S. mai &nee programe.
First of all, Bloc eoDnomlc aid is peddled on integrated
and a continuing basis. A lin of credit is offered simuItaneoulsy
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a
increased trade
e having diffioul
e.e1MtaflC, training, and in particular,
ties. Now,if an underdeveloped country
elling tt products at adequate prices
So'et'$ 1ong.teri trade offers have
the size of their program is not subject
vie, the Sovi.ets are not inhibited
r.elnente In contrast, U.S. trade is
e aid.progran. We would find it
ible to provide a guaranteed
cotton or Burmese rice, to cite only two
argely outsi
politically
market for
Sr*
as SOVtSt Bt?c eid is
d has consisted primarily o grnnt.
on the Development Loan !Undo however, will
y reIie the importance of credits in the U.S. program.
arry a two and one-half percent Interest
goods to begin the year after the projects
has been brought into production. Further
repayment prtcea are ub5eet to annual negotiations, which gives
401 or lenient, depending on
on a
the Soviets an opportunity to
W things are go
burden is c
lo*n averigee 12 ear ? WL wet
s
our amortisation terms on loans are
20 to 1O year pe oda, so that the annua1 loan
previous Western aid had taken
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;chi
to service further oanstoder would
be dubiauL
s largely for nduetrtsl devLop"
d is intended to appeal to the desire for immediat01,7
in industrialization. It is rarely, for
h as under our PL 450 program,
t part of total U.s. aid. This
remains ea a visible and
assistance
Fourth, the &atrial development programs
are almost always in the public sector of the ec omz, o
r. Thia encourages Socialist thinking on economic
development as
as stimulating government ownership rether
e enterprise.
aid programs are free of military acts
articular e
in uncommitted countries.
d le a member of a Bloc militia)* alliance. in cor..
own aid goes to countries with *doh the U.S.
arramemente.
the Communist aid and ide prog
4etned and packaged with the target in mind. It pea1s to
neutralist sentiment it prcvides an attractiv aupplement or
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are there,
Policy of economic, pens ion fits like * glove
There are over
ans in the Free World, helping to train military
?
no obvious
de com3atgi of.subvers
nd to build various indu?trial plants the 3arg8et cshieh
initians do engage in prop-
. Together with the Oamrmnizt
hese tecirnioians do serve to establish * peat
oviet presence; to lend credence to Soviet statements of dia.
ted help in sthie
the Commun
economic progress,
propeganda goes out through the front
reoted overtly or covertly from Moscow. One of
gtona in India is the Indo-Zoviet Cultural Society.
alook at it.
diibted by such
4)
tbis Indo*Soviet Cult
ociety
of
its br es are located in MadhYR Pr4desh
steel mill is being comPleted
propagani, siqdlar to the slide I showed
?S? and USSR industrial growth, is
organisations,
Ii
tok,
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Wt you have seen on this ?Ude is only ne Coiawi1st front
zation.? But the Soviets and their Chinese Communist allies
ganlzed a vast number of fronts, covering almost every branch
enterprise. They include youth and student groups, labor
&no organisations, women's groups, and, of course, the
World Peace Council with its inznsicrable peace societies. In total,
the olailmodsmnbership of all fronts runs into several hundred
million people.
In addition to the front organizations, and native Communist
pszttea, as devices to spread the arguments for Communiert, massive
sap programa are beamed daily to Africa, Asia and the Middle East.
These arelmotritin scores of languages. They cage from clandestine
transmitters as wall as those which are opmayacknowledged.
There is no set pattern to these =sears. Moscow carefully
tailors broadoasta to fit the particular vulnerabilities of each
target area and audience.
stress this point because one of the b)ecttves of the Sino
t Bloc aid program is to place ita radio broadcasting cqip-
nt in areas. Complete radio stations are offered
either at cut prices under very liberal credit terms or as a eft.
Bloc technicians are always employed in the survey, installotion
and initial operating stages at these projects.
Mat does Bloc boe to gain by having its transmitters
installed in undereveioped countries?
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nationd by
e 8
rally the SOTiet8 have little trouble
countries cabinet members or other le
Br
set facilities
stern revolutionary
the tic
Communism. Charges of brutality by Western colonial powers not only
please Moscow but undoubtedly are more permissive to local populatione
when broadcast from one of their own countries than when beemed frma
MbecoWl
At the leaders of the Bloc hope that.,
Tadio etationa, they will receive the right to broadcaet their own
pro am material on these stations. For examples the Chinese
Cntmists have presented Cambodia with a gift of a rodio trna-
titter. Now
the Chinese axe trying to set, the Cambodians to allocate
several hours a day for rebroadcasts of Peiping radio programs.
would like to Shaw you where the Bloc has built or is of Bring
buildto oadcarting facilities in the Free World.
(Priefing Aid 5)
of i1, there are the two stations in Egypt
o come. There are two scheduled for Syria
member of the UAR. Perhaps this investment dose
fitable to MosooW today as it did a year ago.
2. Eawever, the USSR is now putting up four trans-
fers in Iraq, where the Communists are a most powerfe
e in and ott of the government.
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3. Moving from the /4 ddle East to Africa, you can see
the otter of a transmitter to Guinea. Rumors suggest that
other newly emergent African nations will receive similar
offers.
h. The bodian station, supplied by China, I have
ersa4y mentioned.
sa. mo, *No oN? OM am
now from the Communist aid program to
with the Free World.
In wry opinion, thea La a sharp and clear cut
I
nee in
vation between Communist trade with the industrial West and
Cctmit trade with the underdeveloped countries of the Free World.
st Soviet trade with the Free World is with the industrial
Ws The Russians seek to buy chemical equipment, electronics
tonation equipment tire plants, and are interested in
purchasing facilities to improve their ferrous metallurgical industry.
This trade is motivated prarily by internal economic considerations,
not by it political impact on the West. Soviet imports of machinerY
from Strops, embodying advanced technology, are important to the
rapid expansion of Communist industry in certain key areas. This
was frankly admitted by Khrushchev when he stated that through such
imports; and here I quote,
Soviet Union could be given the opportunityof quicker
fulfillment of it program without waatint time.
? 16 -
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of those ma
from the Vest in
of raw materials, fuels and iednufa
ovi*t goods available
marketo for Soviet machinery in Germany
lee in England.
t sales of tin end aluminum at low
aeries of "dtng0 from Free World suppliers
Rewever such charges overlook the fact that
Soviet silos of industrial raw materials to Europe are designed
to gain foreign exchange needed to pay for increased imports of
ahiz7. The Soviets have always charged as muCh as they thought
th. market would bear. When in 1958 Western commodity merkets
Acing *recession, Russian prices were low; the recent
rise 1 platinum prices, however, misled by Soviet sellers. /n my
Qinioflj the Soviets have nothing to gain by disorganising markets
and driving prices down in this area -- on the contrary, lower prices.
Soviet materials have to be s.nt to secure a, given
of ign exchange.
I stress this because & distortion of Soviet mtives 40s
zr good in the long run. it 3at cozi.fuass the
po3itics3 challenge of international iatmuniat in Weitevn Europe
has been met and turned beck. Stimelated by Marshall Plan aid,
Western Europe has undergone rapid economic growth over the pas
decade; unemployment has largely disappeared, most currencies are
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stable? and Communist
every-
loped nations dif nt
its political iact on the
d. Its ult motivation is to export Communism.
ago v atated,
tatiorLe is that obtaining between
the nomically underdeveloped
of course sgy that in this case
OflOTdC relations are bated on mutual advantage
from the commercial viewpoint, our economic
cal aid to the underdeveloped countries is even
arm
unp'ofttab3. for us.
Soviet motivation behind much of the created trade
vity between the Communists and the newly independent countriee
Ultimately to bring those countries into what Moscow calls,
the Socialist camp.* This is not to be done in one step, of course.
The initial stage consists of replacing traditional Western trade
In these areas by Soviet Bloc trade. This has already been done in a
limited number of countries. For example Iceland's fish now goes
to the Soviet Bloc, not to the United Kingdom. Over 60 percent
et Egypt's cotton exports are now to the Blocs not to Western
Europe. Iraq is currently deriving more and more of its imports
from the Mop less from the West. Soviet oil is now crucial to
several small countries, and all nations receiving Soviet plant
and equipment must return to the Bloc for maintenance and spare
parts.
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woke of ear
t.t's effort is Welly selective, About
trade in underdeveloped areas is with only
the same pattern of concentration which I
aid is also true of Bloc trade a concen-
tration on key target oountries.
Theme expanded trade activities are, more re based on ihly
complementary economies. Mbat the underdeveloped countries have
to mill is overwhelmingly food, fibers, and industrial raw materials
predmcts which can easily be absorbed by the Bloc. The 'European
Satellites as a whoa* are now a deficit food producing area, and
sbrqi were dependent upon imports for raw materials, The present
low level of per capita consumption in the Soviet Bloc implies a
great oapacity for absorbing the exports of many underdeveloped
sountries.
It follows logic
te Soviet presence
th the shift in marketing patterns,
underdeveloped areas grows While that
of the West diminishes, If Bloc economic blandishments and tha
leaseive use of propaganda do not lead to an increase in the domestic
appeal of Communion over time, there is no reason to believe that
the Soviets will hesitate to use economic pressure to bring about
state of affairs more to their liking. Once the economic vulnera
bility has been created its exploitation along with other Soviet
devices is a matter of timing.
There
we many fresh examples of the use of trade as a weapon
the Soviet
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Soviets have thre*trnid to cut off
it tMt t on allows SATO missile bases to be
ir territory.
*scow for a Seviat
year by the withholding of for
a, for Which the traditional has been the
UI
List ).cbsr, the Fizistt government fell, a victim of
to ott sconade pressure. Angered by
*fleet* of the linnish government to a etoisr to the West the
Sevlots mere quick to react. ?hey cut oft petrels= Implies
samoelled orders for menufactured goods refused to negotiate
a trade agreement. Soviet economic pressure, vas *Mihaly
seeramsted with political pressure by the linnieh Communiet Pertly-
end with strong attacks by Soviet press and radio on the government
of Finland /ram the beginning of the )lbsoow drive to the toppling
of the ?eyehole goverment took only two months,
suissarise this sommohat radia1:4/ presentation on the eoonsm
frt, the 'lowing points appear to me most important.
The !Wrists, year in and year out, devote a very
montage of their economic resources to purposes of
utimd policy, most prominently to defense and investment
in heavy industry.
w An * rri].t, the;r aohieved a rate of
development Which nww 310t ort3,7 provide s thee with
muscle needed to promote the external expansion
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Communism,bt also serves a, powerful propaganda
in sell Marxism to the peoples of the underdeveloped
countries.
). the sbility to provide arms at out rate prices and
v.1op*nt capital on attractive reelyment terms opens the
to the pread of Communist 'monocle influence in kw
underdeveloped countries. In these countries a pressure
to reorient trade awe, from the West to the Bloc inevitably
fellows.
4
economic penetration, to be understood, must
the light of the total Soviet offensive
propaganda, subversion, and political
penetration in the underdeveloped nations. Trade and aid
estiblieh the Soviet presence and provide a plausible front
of disinterested helpfulness.
5. The Soviet leaders frankly admit that thefr
vation in economic dealings with the new and fragile
dineoracies is ultimately-to move these countries beyond
neutralism into the Communist empire. Ones a condition of
vaneribility has been brought about, history clearly shows
the Kremlin will take advantage of its bargaining position.
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