HARRY ROWEN'S TESTIMONY BEFORE THE JOINT ECONOMIC COMMITTEE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85M00363R001002340029-5
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 13
• Document Creation Date: December 21, 2016
• Document Release Date: September 2, 2008
• Sequence Number: 29
• Publication Date: January 11, 1983
• Content Type: MEMO

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11 January 1983
NOTE FOR:
k/DCI/IA
FROM: Acting Director, Office of External Affairs
SUBJECT: Harry Rowen's Testimony Before the Joint Economic Committee
1. Here are the materials we discussed regarding Harry Rowen's
testimony before the JEC. While some of the early reporting reflects
mainly the Proxmire press release, the more thoughtful coverage is more
balanced and reflects an analysis of the statement itself. See the
New York Times article by Bernie Gwertzman, the AP article by Barton
Reppert, and the Reuters item, all attached.
2. We have had no inquiries (except to request Rowen's statement),
but are prepared to say we believe the Proxmire release emphasizes only
one theme from the statement which covers several important points such as...
(We would take these from the list provided by Rowen in his attached-note.)
3. We see no need to initiate an attempt, from this Office to "correct
the record" based on the reporting we see. While the points emphasized are
understandably not the ones Rowen would highlight, it is obvious the
reporting is based on the statement and not just on Proxmire's release.
Attachments:
As Stated
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7 January 1983
MEMORANDUM FOR: Director of Central Intelligence
Deputy Director of Central Intelligence
FROM : Henry S. Rowen
Chairman, National Intelligence Council
SUBJECT : My JEC Testimony
1. Regarding my JEC Testimony, Proxmire's staff director apologizes for
the press release which has already been distributed, says that the lead is
intended to be Proxmire's statement not a quote from mine, and that they will
make this clear.
2. I told him that the impression created by the press release was very
misleading and that this was bad business especially right after Rep. Reuss'
distorted statement on the earlier CIA publication on the Soviet economy. He
said that they would encourage the press to read my testimony which was short
and readable.
3. I didn't say that we might put out a statement of our own depending
on the press treatment of my testimony. If we decide to, a copy of what
Public Affairs might say is attached.
Henry S. Rowen
cc: DDI
AD/OEA
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Possible Public Affairs Statement
In his press statements accompanying the release of testimony by Henry.
Rowen, Chairman of the National Intelligence Council, on the Soviet economy,
Senator Proxmire chose to emphasize one theme: the self reliance and strength
of the Soviet economy. The testimony, in fact, presented a more complex
picture:
-- The marked slowdown in the Soviet economy in recent years.
-- Despite this slowdown, the continued increases in Soviet
military forces.
-- The underlying strengths of the Soviet economy, its size,
access to natural resources, strength of its human capital
assets.
-- The importance of Western imports in relieving critical
shortages even though, as a whole, the Soviet economy is highly
self sufficient.
-- The much harder choices faced by the Soviet leadership among
consumption, investment and defense.
The Soviet economy is not going to collapse, only grow very
slowly.
We encourage the press to read the full statement.
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~RTiCI~E AFPi,ARED NEW YORK TINES
on RAAB- 9 JANUARY 1983
C.I.A. Says Soviet Can Almost Do Without
An Ability 'to Remain Viable'
"can play an important role in re-
WASHINGTON,
WASHINGTON, Jan. 8- The Central keyin
critical r
eyin
rll
and
y
g
g
Agency, in a study of the
technological progress s and generally,
f
Soviet economy,- concludes that the improving Soviet economic peform-
! Mr: Raven said me C.I.A. agreed
Soviet Union's ability to live without im- horn " But he added that "the ability of
with
d
ind
li
ll
i
econo-
ze
possibly a
, other
uct
a
mies.
The report, delivered to the Joint
Economic Committee of Congress on
Dec. 1 by Henry Rowen, chairman of
the C.I.A.'s National Intelligence Coun-
cil, seems to support the argument that
American trade embargoes against the
Soviet Union have only limited effect.
The Reagan Administration has
sought to tighten Western controls on
trade to the Soviet Union to bring politi-
cal pressure on Moscow, a policy often
at odds with European allies and with
some American businessmen.
Capital, Technology and Food
than that of most, possibly all, other in-
dustrialized economies."
"Consequently,". he concluded, "the
susceptibiity of the Soviet Union to eco-
nomic leverage tends to be limited."
The Soviet Union has always put
great emphasis on self-sufficiency. This
dates from the earliest days after the
1917 revolution, when most foreign
countries did not recognize the Soviet
regime, and it continued as a result of
the isolation the country experienced in
World War II.
Mr. Rowen's report was prepared at
the request of Senator William Prox-
mire, Democrat of Wisconsin. The
Senator, who is vice chairman of the
subcommittee on international trade,
finance and security economics, hid
asked for "a balanced assessment" of
the strengths and weaknesses of the
Soviet economy.
This was the second C.I.A. report in a
month to point out strengths in the
Soviet economy.
decade the Soviet Union has used trade
with the West to help modernize its
economy and make it more efficient. It
said that the Russians had relied on im-
ports of capital and technology to in-
crease or maintain production of some
raw materials and that food imports
had "become critical" to maintaining a
quality diet.
Imports of grain and other agricul-
products, it said, meant primarily
tural
to prevent a decline in meat consump?
tion, cost the Russians $12 billion in
1981, or 40 percent of their hard-cur-
rency purchases that year.
But Mr. Rowen said that "despite the,
large-scale expansion in agricultural
imports, the Soviet Union remains basi-
cally self-sufficient with respect to
food."
Re said the average Soviet citizen
consumes about 3,300 calories a day, as,
against 3,520'for an American. The re-
port showed that the Soviet diet consists
of far more grain` and potatoes than the
American diet, but less fish and meat
and less sugar. And Mr. Rowen said
that grain production in the Soviet
Union "is more than sufficient to meet
consumer demand for bread and other
cereal products."
The report said trade with the West
amounted to only 5 percent of the Soviet
gross national product. But it seemed to
agree with some Administration policy
I makers when it said the Russians would
have to import 15 million to 20 million
tons of steel pipe in the next seven years
to build the pipelines it has planned, and
will need "sophisticated" exploration
equipment- for its oil and natural gas
fields. The Administration has tried to
block those exports in particular,
provoking feuds with Western govern
?' ments that have contracted to provide
the equipment.
rounding the Soviet economy abounds."
"Western observers have tended to
describe Soviet economic performance
as 'poor' or 'deteriorating' at a time
when Soviet defense spending continues
to rise, overall Soviet gross national
product in real terms continues to in-
crease and Soviet G.N:P. is second in
size only to that of the United States,"
he said, noting the apparent contradici-
tons.
As a result of recent declines in the
rate of growth, the gap between per-
formance and expectations, and the
lack of economic efficiency, "the
record compiled by the Soviet economy
in recent years has indeed been poor,"
he said.
"Results that are unsatisfactory
when measured by this yardstick, how-
ever, do not mean that the Soviet econ-
omy is losing its viability as well as its
dynamism," the C.I.A. official said.
"In fact, we do not consider an eco-
nomic 'collapse' - a sudden and sus-
tained decline in G.N.P. - even a re-
mote possibility," he said.
The- C.I.A. projects, he said, that
Soviet economic growth "will remain
slow but positive," averaging 1 to 2 per-
cent "for the foreseeable future," al-
though per capita consumption might
level off ordrop slightly.
Energy Production Rises
Mr. Rowen said that natural gas pro-
duction had continued to increase at a
rapid rate, 8 percent in 1982, and that
energy as a whole was increasing, with
oil up by about 1 percent and coal 2 per-
cent in the past year. The Russians
,:have also improved their trade with the
West, cutting their deficit from $4 bil-
lion in1981to$2billion in1982.
1982 was estimated at $1.6 trillion, or
$6,000 percapita, roughly 55 percent of
the American gross national product.
The C.I.A. estimated Soviet gold re-
serves at 200 million troy ounces, giving
pit 35 percent of the world total. Produc-
tion in 1981 was estimated at 325 tons .
and its stock at about 1,900 tons, worth
over$25 billion at current prices.
The report said a major weakness in
the economy was the declining growth
of the work force, with only 9 million ex-
pected to join in this decade as against
19 million in the 1970's.
Agriculture remains the weakest'.
link. Grain production achieved a
record high of 237 million tons in 1978
but has not reached 190 million tons
since then. The report also highlighted
problems in poor administration, bot-
tlenecks in industry, an overworked
railroad system and depletion of many
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ASSOCIATED PRESS
8 JANUARY 1983
CTA SEES NO ECONCKIC COLLAPSE IN SOVIET UNION
By BARTON REPPEPT
WASHINGTON
The Central Intelligence Agency does not consider an economic collapse
of the Soviet Union "even a remote possibility," a senior CIA official says it
declassified testimony released Saturday.
The judgment by Henry Rowen, chairman of the spy agency's National
Intelligence Council, was less harsh than those about the Soviet economy by
President Reagan and other administration officials, but Rowen also defended the
administration view that the Soviet economy is "deteriorating."
He said in testimony Dec. 1 before a subcommittee of Congress' Joint Economic
Committee that Soviet economic growth has "slowed markedly" in recent years,
forcing harder choices by the kremlin leadership on how to allocate money for
military and civilian uses.
He still concluded, however, that signs of Soviet economic weakness do not
mean the country's economy is losing its "dynamism."
In releasing a declassified version of Rowen's testimony, Sen. William
Proxmire, D-Wis., vice chairman of the subcommittee on international trade,
finance and security economics, stressed aspects of the CIA assessment
pointing to basic strengths of the Soviet economy.
"One of the worst things we can do is to underestimate the economic strength
of our principal adversary," Proxmire said. He contended that "the Soviet Union
is perhaps the most self-reliant industrialized nation."
Release of Rowen's testimony came two weeks after the Joint Economic
Committee issued a massive CIA study analyzing growth and development of the
Soviet economy over the past three decades.
The study found that overall Soviet economic output grew roughly four-fold
from 1950 to 1980, at an average rate of 4.7 percent a year, although the
economy has been in "a strong growth slide" since the late 1960s.
Rep. Henry S. Reuss, D-Wis., who is retiring as chairman of the Joint
Economic Committee, said the CIA study "helps put into perspective for
Americans the fact that the U.S.S.R., far from being on the verge of collapse,
has experienced major growth."
Proxmire's and Reuss' comments appeared to be aimed at countering arguments
by hard-line Reagan administration officials that the Soviet Union is in dire
economic trouble and thus should be vulnerable to Western economic sanctions.
Reagan himself said last May that "the Soviet empire is faltering because it
is rigid _ centralized control has destroyed incentives for innovation
efficiency and individual achievement.".
He also stressed "the decay of the Soviet experiment" and the "deep economic
difficulty" of the U.S.S.R. in an address two months later before the British
Parliament.
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In his remarks, Proxmire noted that "the Soviet Union has been weakened by
such harmful developments as the inefficient performance of the farm sector and
the heavy burden of defense."
At the same time, he said, "it is the world's second largest economy in terms
of GNP (Gross National Product), has a large and well-trained labor force, is
highly industrialized, and possesses enormous reserves of natural resources,
including oil and gas and the relatively scarce minerals and. precious metals."
Rowen, in his testimony, defended Western characterizations of Soviet
economic performance as "poor" or "deteriorating" at a time when Soviet GNP is
continuing to rise.
"Given past rates of economic growth, the gap between Soviet performance and
plans and expectations, and the marked departure from standards of economic
efficiency, the record compiled by the Soviet economy in recent years has indeed
been poor," the CIA official said.
But he added: "Results that are unsatisfactory when measured by this
yardstick, however, do not mean that the Soviet economy is losing its viability
as well as its dynamism."
"In fact, we do not consider an economic 'collapse' _ a sudden and sustained
decline in GNP _ even a remote possibility," Rowen told the panel.
He said CIA analysts "expect annual growth to average 1 to 2 percent for
the foreseeable future. Per capita consumption could level off or even fall
slightly."
The I to 2 percent figure contrasts with annual growth rates of Soviet GNP
averaging about 6 percent during the 1950s, 5 percent during the 1960s and 4
percent between 1970 and 1978
Rowen testified that the Soviet-Union is "highly self-sufficient" because of
its abundant natural resources.
"Imports, particularly from the West, can play an important role in relieving
critical shortages, spurring technological progress and generally improving
Soviet economic performance," the CIA official said.
He added, However, "The ability of the Soviet economy to remain viable in the
absence of imports is much greater than that of most, possibly all, other
industrialized economies. Consequently, the susceptibility of the Soviet Union
to economic leverage tends to be limited."
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FEUTFFS
8 JANUARY 1983
WASHT.NGTON
The CIA today sounded a new warning to Western policy makers that it would
be a mistake to underestimate the economic strength of the Soviet Union.
That is the principal message in previously secret CIA testimony to the
Joint Economic Committee of Congress. The testimony was made public today.
"We do not consider an economic collapse --. a sudden and sustained decline in
(the Soviet) gross national product -- even a remote possibility," testified
Henry Rowen, chairman of CIA's National Intelligence Council.
It was the second report from the Central Intelligence Agency in the
last two weeks that portrayed the Soviet economy as generally self-sufficient
and growing, although at a slower rate than in recent years.
The views of the CIA's Soviet experts run counter to the publicized Reagan
administration perception of the Soviet Union as militarily strong but an
economic cripple.
Rowen acknowledged an "unusual amount of confusion" in official circles and
among the public as to the strengths and. weaknesses of the Soviet Union.
Western observers, he noted, have pictured the Soviet economy as
deteriorating at a time of a rapid defense buildup despite the continued Soviet
economic growth.
He did not mention a CIA analysis of the Soviet economy during the 1970's
when the agency predicted Moscow would be a net oil importer, rather than
exporter, in the 1980's.
In the last two years, the CIA has reversed itself on this point.
Rowen said the CIA believed the Soviet economy would be growing at a slow
rate and predicted a growth of one to two per cent "for the foreseeable future."
. Soviet growth averaged 4.6 per cent annually from 1950 through 1981, faster
than the United States, which grew 3.4 per cent a.year, according to the CIA.
Since 1978, however, there has been a steady slowdown in the Soviet Union's
yearly growth with 1981 economic activity rising about 1.5 per cent. This pace
has paralleled a slowdown in growth rates of Western industrial countries.
The Soviet slowdown reflects four consecutive poor harvests but the CIA
notes industrial performance has been slack too.
Some retarded growth is from inefficiencies and bottlenecks in the Soviet
system that even its new leader, Yuri Andropov, will not be able to change,
according to the CIA.
Rowen said Andropov's succession to power did not alter the CIA's view of
economic prospects in the Soviet Union.
He also commented. that Andropov's remarks to the Soviet Central Committee
suggest no significant change in economic policy,. indicating a cautious approach
to economic reform.
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Z
In its generally cautious view of the economic future of the Soviet Union,
the CIA believes that if Andropov introduces major policy changes the forecast
of one to two per cent growth could be off the mark, Rowen said.
He said growth could be faster, for example, if the Andropov regime has good
harvests, reallocates money from defense to investment and consumer demands and
improves productivity and efficiency.
On the other hand, he said slower growth would follow bad harvests,
accelerated defense spending or any active unrest among the Soviet people.
Of the possibilities for a marked slowdown in economic growth, Rowen said
widespread unrest, as in Poland, would hurt economic production the hardest.
"However, we consider such an eventuality unlikely," Rowen said.
"It would probably require a steep and prolonged drop in living standards in
the first instance," he added. "Large scale labor disturbances might also occur
if Andropov pursued with excessive zeal his promised campaign to impose greater
discipline in the work place."
The testimony was requested by Sen. William Proxmire, a Wisconsin Democrat,
who said the CIA report showed "the Soviet Union is perhaps the most
self-reliant industrialized nation."
The Soviet Union probably has more ability than any other nation to remain
viable in the absence of imports because of its vast raw materials, he said.
The CIA testimony said expanded Soviet demands for agricultural imports
were intended mainly to prevent a decline in meat consumption and were not
essential to maintaining an adequate quantity of food.
Proxmire agreed with a basic theme of the CIA report that the Soviet
economy was viable.
"One of the worst things we can do is to underestimate the economic strength
of our principal adversary, " he said in an introduction to the report.
The first CIA report on strong Soviet economic growth was issued on
Christmas. rti= =--. =Mm
Rowen acknowledged an "unusual amount of confusion" in official circles and
among the public as to the strengths and weaknesses of the Soviet Union.
Western observers, he noted, have pictured the Soviet economy as
deteriorating at a time of a rapid defense buildup despite the continued Soviet
economic growth.
He did not mention a CIA analysis of the Soviet economy during the 1970's
when the agency predicted Moscow would be a net oil importer, rather than
exporter, in the 1980's.
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J.
In the last two years, -the CIA has reversed itself on this point.
Rowen said the CIA believed the Soviet economy would be growing at a slow
rate and predicted a growth of one to two. per cent "for the foreseeable future."
Soviet growth averaged 4.6 per cent annually from 1950 through 1981, faster
than the United States, which grew 3.4 per cent a year, according to the CIA.
Since 1978, however, there has been a steady slowdown in the Soviet Union's
yearly growth with 1981 economic activity rising about 1.5 per cent. This pace
has paralleled a slowdown in growth rates of Western industrial countries.
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REUTERS
8 JANUARY 1983
American and Soviet citizens eat about the same amount of food each day but
the Soviet diet may be more nutritious.
According to a CIA report released today both nationalities may be eating
too much for good health.
The CIA drew no conclusions about the nutritional makeup of the Soviet and
American diets but commonly accepted U.S. health views suggest the Soviet diet
may be slightly better.;
According to the Central Intelligence Agency, an average Soviet citizen
consumes 3,280 calories a day, compared to 3,520 calories for the American.
The average daily calorie intake in the Soviet Union is: grain products and
potatoes, 44 per cent; sugar, 13 per cent; dairy and eggs, 11 per cent; fats and
oils, 17 per cent; meat and fish, eight per cent, with seven per cent other
products.
The American consumes daily: grain products and potatoes, 26 per cent; sugar,
17 per cent; dairy and eggs, 12 per cent; fats and. oils, 18 per cent, meat and
fish, 21 per cent, and six per cent other products.
Americans eat more meat and fish, more sugar, more dairy products and eggs,
and more fats and oils and less grain than the average Soviet citizen, and
consume more calories.
Generally held nutritional standards suggest individuals need fewer calories,
less meat, less sugar and more grain to stay fit.
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? 27r= 1\y~n i V1LL1. gP 1.L.VU.A J
~ 9 JAI~*t3ARY 1983
fla PAi~S
Soviet Diet.Standbys
Cereals and Potatoes
SPedaltoTeNewYortT(me8 .
WASHINGTON, Jan. 8-A study by
the Central Intelligence Agency on the
Soviet economy showed that the aver-
age Soviet diet contains far more
grains and potatoes than the Ameri-
can diet and far less fish and meat.
prepared for a commit-
teeOf Can . said the average Rus-
sian consumes almost the same num-
ber of calories a day as the average
American, '3,300 for the Russian as
against 3,520 for the American.
make grain cereals and potatoes
up 44 percent of the Russian
diet, as against only 26 percent of what
the average American eats, the study
said. Meat and fish represent 21 per-
cent of the American diet but only 8
percent of the Russian's diet, it said.
Otherwise, except for sugar, the
diets are almost identical:' Fats and
oils made up 17 percent of the Soviet
diet and 18 percent of the American;
dairy products and eggs, 11 percent of
the Soviet and 12 percent of the Ameri-
can; sugar, 13 percent. of the Soviet
and 17 percent of the American; other
foods, 7 percent of the Soviet and 6
percent of the American diet.
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f
Henry S. Reuss, Wis.
Chairman
Roger W. Jepsen, Iowa
Vice Chairman
House:
Richard Bolling, Mo.
Lee H. Hamilton, Ind.
Gillis W. Long, La.
Parren J. Mitchell, Md.
Augustus F. Hawkins, Calif.
Clarence J. Brown, Ohio
Margaret M. Heckler, Mass.
John H. Rousselot, Calif.
Chalmers P..Wylie,?Ohio
Senate:
Willian V. Roth, Jr., Del.
James Abdnor, S. Dak.
Steven Symms, Idaho
Pau!a Hawkins, Fla.
Mack Mattingly, Ga.
Lloyd Bentsen, Tex.
V^tlliam Proxmire, Wis.
Edward M. Kennedy, Mass.
Paul S. Sarbanes, Md.
EMBARGOED FOR RELEASE TO
6:00 P.M.. SATURDAY, JANUARY 8, 1983
SOVIET ABILITY TO PROGRESS WITHOUT IMPORTS
EXCEEDS OTHER INDUSTRIALIZED COUNTRIES
Washington, D. C. -- Senator William Proxmire (D-Wis. )
today released a previously classified report which shows
"the Soviet Union is perhaps the most self-reliant indus-
trialized nation."
According to a report delivered last month to a
Proxmire subcommittee hearing by a high-ranking Central
Intelligence Agency official, "...the ability of the
Soviet economy Co re.maain viable in the absence of imports
is much greater than that of most, possibly all, other
The author of the report is Henry Rowen, Chairman,-
National Intelligence Council, CIA, who submitted the
report at a closed hearing of the Joint Economic Sub-
Press: committee on Internati onal Trade, Finance, and Security
.Bill Maddox
Economics, of which Proxmire is Vice Chairman.
HAI
Proxmire said in a statement from his Washington,
Economist: D. C., office, "Analysts in the West typically have focused
Richard Kaufman on Soviet economic problems. The Soviet Union is our
224-0377 principal potential adversary. This is all the more
:reason to have accurate balanced assessments of the state
982 - 117 of its economy.
oil and gas and the relatively scarce minerals and
precious metals.
-possesses enormous reserves of natural resources, includin
;.ell-trained labor force, is highly industrialized, and.
second largest econozry in terms of GNP, has a large and
while the SovieUnion has been weakened by such harmful
developments as"-the inefficient performance of the farm;
sector and the heavy burden of defense,. it is the world's
"One of the worst things we can do is to underestimate
the economic strength of our principal adversary.
Proxmire continued, "It needs to be understood that,-
"It is sobering to reflect on the possibility that
Soviet economic trends might improve rather than grow.,
worse."
. ? On Soviet trade, Rowen's report says, ,Despite the
large-scale expansion in agricultural imports, the Soviet
Union remains basically self-sufficient with respect to
food. These imports are intended mainly to' prevent a
decline in meat consumption and are not essential to
maintaining an.adequate quantity.of food consumption."
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 "Desi Approved For Release 2008/09/02 : CIA-RDP85M00363R001002340029-5 "we do not
conszder an economic 'collapse' -- a sudden and sustained decline in
GNP -- even a remote possibility."
The report concludes that the Soviet economy will continue grow-
ing slowly -- at an average rate of 1 to 2 percent for the foreseeable.
future, while per capita consumption could level off or even fall
slightly.
Rowen's report says the consequences of the recent slowing of
economic growth will have two major effects:
1. Soviet leadership will face much harder choices in allocating
resources in consumption, investment, and defense.
?2. There could be further invalidation of the USSR's claim
that its economy is an appropriate model for the rest of
the world, particularly the Third World.
the report also says, "Despite some experimentation with
decentralized forms of economic administration, the Soviet leader-
ship has remained firmly committed to strict central planning and
management of most economic activity. The justification has been that
rigorous centralization is required for fulfillment of national
objectives.
"There are weaknesses in the Soviet economic system,"the
report states, "that even the new Andropov regime is not likely
to change."
Copies of the report are available from the Publications
Department, Joint Economic Committee, G-133 Dirksen Bldg., Wash-
ington, DC, 20510, or by calling (202)-224-5321.
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