COMMENTS ON SPEECH BY MR. STAATS 'NATIONAL SECURITY AND ECONOMIC GROWTH'

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP62S00545A000100090034-0
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 17
• Document Creation Date: December 12, 2016
• Document Release Date: October 2, 2000
• Sequence Number: 34
• Publication Date: October 22, 1959
• Content Type: MF

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959
Deputy Director/lntelLUMnce
Assistant Director, Ke an and Reports
nts on Speech by W. Meats " tia 3,
Security and Inc Gr"
W. Carey accept
in a revision
14,
*OMB Waiver Letter In ERU File*
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1 ;# T.i.. M.m 5!CU TY A -1k), ONWJI tC W O'
X59
Perhaps it would be best to begin by making sure that we all have the
ndinr of the term "national security" in the context of the
ale today. I shall not be speaking of it in the
ng sense of direct military programs, but in the much broader frame
k of our total posture in confronting the versatile challenge of
problem in equally versatile tem*
For it in essential not only that we recognize this basic
y of communism's program, but also that we view our national
if you were struck,
n with respect
short 4rsg raphe from Lippmann'e
as, by the recent observations
hhev' a visit. Let read three
of September 171
is the chief adversary of the United States. He
.cushy with the Presidents and to persuade the si merie
people that while he is their challenger, their rival and their coretitor,
he is not their enemy.
he seriousness of the challenge which he poses. For the
-them in all fields of intellectual endeavor.
sobering prospect, and it cannot be said that Mr. 1hrushohev
rsrdness of this challenge is aimed dire
not bent on destroying
noes of our society.
on outdoin
the time being our
not have great purposes rich they are united in wanting to
achieve. The ,ubli.c mood of the country is defensive, to hold on and to
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sty, one which has achieved its
rat +ower, nor assured by drtic demonstrations in outer space,
ugh ul merican, this is severe criticism.
We have by no me
a bearing on what we are considering, here today.
ie can and ehoaild ask ourselves whether are making the
ecurity can't be bought solely with huge appropriations for
by a blind belief that communism must inevitably meet a bad
*r is even more pertinent than what we a against.
great basinass to transact*"
pith this goes the issue of how a free society in the present age goes at
the k of defining its objectives, calculating the costs and the
sacrifices, and
s to produce the desired results
n Puts It, the task is to rediscover our
at decade or so of the cold war, w were preoccupied with
military and ideological aspects of the Soviet threat, Then,
nly, we were mode aware of unexpected Soviet Wives in science,
education,
. Now the threat takes a decisive now
hruehchev himself in his celebrated declaration
gnomic competition within the. framework of coexistence. ! think we
~he2
even though the propa,gn
1 preset
economics, The Soviet offensive will continue to
h to be owe
on the free world,
d toward cow
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chniques.
Yets, the buildup in economic competition cannot be discounted,
no other reason than that it Is basic to cotsnunism's strong aps
United States in economic
way of life. The longstanding leadership
world in the sense of holding out the pros .ee of a better
an a factor which we have taken for granted in inter-
show we are being challenged by co
ion's determine-
pass us, and we must not fail to recognize that
is a matter of no small importance to the subject we are here to
consider today, nu el
national security.
.ng reviewing comparativ
economic growth. The Soviets, with a
40 percent of o
n l rate two or three times
They
1970. 1 think it is important that we recof,
able progress has been concentrated in basis industries aW agricultural
and that we are in no sense comparing simultaneous performance by tuv
evenly-matcheed industrial systems. They are i through a stage of
industrial expansion that lies in our past record, and they
from a starting-point that in no way reflects Va
find ourselves as fully-developed industrial society. Moreover, as me-
one has pointed out, their goal of outproducing us by 1970 seem to require
that our own growth rate will slip back to about two percent a year, which
is certainly an aseueaati.on we are not obliged to swallow,
sktical as to the Soviets' economic timetable, we have to face the
National
y been advancing at an
an our a~m 3 t,
1965s, and forge ahead by
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time, thi
S. and the Soviets could be more closely
balance
rr of these resources, their system presents formidable
cold-blooded managerial determinism ,which they can brine
t rc:?ber that Cross National Product is not
necessarily a qualitative indicator of economic growth, or balance. :t is
an expression of aggregates, and comparisons de in those terms can be
very mieles4ix . Measures of raw economic power, it rfect as they a rep
are
;pdtive p
This is a sobering prospect. riven the pler tth
;h the Soviets can back up their coming ind
e of social nroa
nredic ti tie long-term n j eal of a
t hopeful bas
e in the two s tems is
public oolicy as
system, public
va,r in economic develoT
public investment in he&,
6uatere deprivation in other ca
of production.
rktnr condition , earnings, the levels of industrial
investment, and taxes are all settled at the level of public policy. 7
o say that this gives the Soviets a strategic advantage that
both lack and have no disposition to emulate. Except for , rods of
warts mobil.i nation, public
aside the stem of private choices ooetitive bar/
free market forces aich characterize the process of economic dev
under capitalism.
particular system of
and h
e role of
. in the Soviet
ch have provided
industry, along
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inhered in assessing the ,Ovieta
recent ~v,,*wtb- rate is that they have taken full 4dvanta a of the
accumulatod technological
the ':est. 7't has been p*$8jb
thorn to profit 42111 the short run from the triald-error experience or the
free-enterprise system over a whole century. Professor
his Economist papere on growth, sheds a historical perspe
regard,, and cote him "Once the United States and continental western
.: grope had completed their take- 0
the British lead was gone;
co,ild bring the backlog of technology to bear more rapidly than
technological gap on the .,?eetg China, India, Brazil and others promise, to
t the trick again on the older nature powers, includin a uesia, in
date has been acco ied by better utilisation of npo r--
production will plant the
rea.t r r at, ri ty and further advances in
seeds of slower growth in other ways as well. The rapid growth, of Zwoviet
particularly transfers from agriculture to heavy industry. This cannot be
nued indefinitely at as hi h a rate. Also, Soviet authorities have
d. The story is being repeated now as Russia closes the
tury or so. 0
easingly difficult to keep consuption
.on of total output as the planners might desire. ;Evidence accumulated
to date (or published recently by the Joint Economic Co sit tee)) indicates
artson vi
g rate has In fact slowed significantly in
rates in the i .ediate postwar period.
lifter have sold all this, the unpleasant fact reins that have
o~,j.r work out out for us. e problem we face is t a develop a greater
awareness of ! 4 real meaning of the Soviet undertaking, and an
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w 6 ..
awareness of our own s tional purposes in r p;
ho: tha
~l rate of output to
our present annual
not very many months ao slid
be to aim for a consistent annual rate of 5 percent. (`# third
to regard our present rate of output as repress
achieve exaneion.
l most everyone. The ra c of alterna-
percent growth of a certain kind can arovide more
industrial strength and cal
than 5 percent growth of some other kind.
think it should be clear that we must act be stampeded into a
orced expansion simply for the sake of l,keepin up with the
ao a recession which some leading economists blamed upon a fling with
over-e anston of capacity and inventories. That should have taught us
cause it led to business failures? unemploy n
fits, and
the degree of stability in our ec
by the ways that we slimed off
n t of worry around the world as to
Another
it is interesting to note,
decline at the crest
of expansion in which the annual growth in the dollar value of
'_ ' had been 5 percent.
for s eculation,, but the coincidence to an interesting on
s will be aided by minimizing economic fluctua
tions and inflation.
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achieve, in the short run, a dou rlin or tripling of our annual
could call for ;,--overnnta.l intervention in the private
econ on a scale unp-reced ted in peacetime. % e might have to return
to time oduction control surest together with a price and were
stabilisation system to avoid disastrous inflation. You might, reply that
and ruble
the issue than this al
enterpri
of a dictated economy versus a
'te-entez rise economy. That to the point that we must not `or t.
to do, since we are in reality fighting a
on a basis that rovei
achieves sustained and striking growth under its own
without becomin ; an instrument of thinly-disguised ovox^n ..
management and regulation.
S?ecretary Anderson recently eu d up th
on, when he said
Government cannot force growth in a free acono
nable economic progress," he sugt
look behind the broad measures of asserted growth,, such an GNP, to ask
questions as these:
rh has taken "lace, how much did consumption
to Government use o ! goods and services? How much of the . overn nt
consisted of military hardware as o posed to schools
d other
nublic facilities? HHow much Of the output was cOMPoeed of c odss that people
did not want.-goods which ended in Governs t warehouses, being
dyed, or sold for lees than true Valuer
devoted to enlarge nt and modernization of b
equipment a to ree arch? ... Now were the fruits of the growth
utput
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ribsrted anong various groups in the econo,
Jas the growth character-
ized by distortions and imbalances that would hamper future Xro
treo choice of individuals and ins
by actions that ringed
short, we are not to be misled by the illusion of
concentrate on the reality. And in this process of
h, but
is be candid enough to ask whether Ooverr sent' e part In
creating what passes for rah is all that we sometimes take for granted.
7t is probably inevitable that the al r istae who see xi,s being Wove
to en!' in the area of economic growths as we supposedly have been overtaken
in the areas of science, education, and missiles, will seize upon the
Gavernz?nt's budget policy as a factor inflaencia our economic fortunes,
field day when the annual Soviet " t" is
made public. They take particular pains to compare the claimed Soviet
ations to education, science, and public health wd,
the comparison is invariably odious,
o ble of coaara
bility in the two budgets is actually very f r'a trati_n . The Soviet budget,
as we get it, consists of perhaps two sheets of f.iptu'ee under very
generalized headings, and even our intelligence community leans over back-
ward to point out that the official budget of the "oviet Government cannot
be taken at anythin resembling face value.
The Soviet budget, like all other reasions of Soviet policy, borders
~r;itable. The significance of specific appropriations can only
on of chimes -from other years. we can't even
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* 9 ..
accept aa
the relative at** of individual budget i
considering whether some, costs (as for military r asures) may 'be charged
The translation of ruble
into dollar equiw
fly fruitless because of the continual variations in purchas-
iav~ p
zit and defame. oreover, you get one result if you
n the various sectors of consumer goodso,
a), ruble-dollar exchange rate of four-t4-one, a cd quite
another if you use the unofficial rates,
even greater hirrier to comparison of the Soviet ar U. S` budgets
from tkhe a tr a differences i n the construction of the two bud. ets,
budget covers the majority of investment outlays,, the planing
ion of the econor,
n,, whereas these activities
d in the ;, S. by private on
or local governments, In short
budget; is a
on of what our own budget might look like- if i. t contained the
as of our private economy, plus the ;atate and local goverrnr n
rderal Government Itself. Co abi ity bet wee,
efore, is practically impossible in tti absence of access to the real
1 accounts hick are employed by the Soviets.
1 doubt, for insta ce, that any of us
buds
to 1 percent of the whole budget, as compared with about,
d States. !here are up a??;ainet
o a problem in classification
budget definition of defense a endituree is narrower than our
ould take seriously t Soviet
at provision for defense, which, indicates that these a endi->
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- A ..
aI~nna ,2rent . y', ker4ei ?s pro?z.7 rrt have to look Ar s S,1e q
htk.yst .o s to find the o.8t7 ya for munitions factories
nuclear mte r ,y prom. i`or a
probably bidden eider educational
button `corn enterprise fu . ^ro rax for
clear energy might have to trucked down as a TArt of the exraiditure s
and by the same token, the
is inherently questionable,
OW that It takes
T'n short, mks- guess would be th t the
defense is very considerably derstated,#
facie anin of every
budget entry
enterprise. Director Dulles of CIk, in a
public address, pointed out that the soviet Union maintalas 4n *row of
2 million mien. !fie stated that the Soviet :arm has been fully re .eq ppod
dern n ,,Ana, tanks.,
lie has reason to believe that the
n trained 1r the use of tactical nuclear weapons. In
addition, they have modern airplanes and a Tar s number of s rin , and
,soviet "Won c ot arehe is a
lative p
nta a of their QNP than
they can Stand and still ac a alish their objective of economic develop
.. F~
:. t is no wider that under these cora,n
a,;:: nt. i
~ ~s~e di.tiocas, their industrial
growth, as been achieved in stark cire tances, and that the current
prugmtic objective of a
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d 4 large effort into space vehicles and
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n the a: viet budget with our own will have the
prof
much more in the way of strenuous research tnto this
it accomplishes nothin ,, F more than
inces which obstruct ob, eCtive corgi:arieons,f it w!.
should serve to p?tit a dar on
of our own budgetary policies.
deal with the question of Wither, asst
th the resulting unacceptable conse
sent budget and fiscal policy of the `ederal ovesnmen
the Nation's need for growth. fa highly vocal sector znon,
economists have said flatly that a
din ? to station and not growth. :oiled d
egoal ofa
result that needed .e enditu s beyond
foreseeable revenues are inadmissible regardless of merit. They contend
s, after all,
direr;
ey are contending is, of course,, that deficit
to economic activity and hence create now
well-being,, while incidentally aufMenting tax revenues.
death.
t our economic system can afford
qi rely. Sore say the needs should, be met even though
emit budget policy
as the doctrine of spe ding oneself into prosperity. It dies a
0e:3 budget has been allowed to becoh.
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'"h short and -MrC
e has been evidence of .rowin disinterest on the
today, after 2b. deficits in Vie past thirty years.
Is 429 billion, well over hall' of our annual '? eruivalsnt. The
on the moneiy, that has been borrowed by the Fed
over billion in the annual buJget* and from the way
tins look now, it will be even higher in future years as the Treasury is
t of investors in uovornment bonds. I cannot bring myself to believe
:Nation's interest in sound economic growth would be served best
the nroble of mounting debt, crushing interest charges,
d public credit, and inflation.
critics of our present budget policy are willing to pay higher
for an increase in Government services.
Icing
to look at where
rntial is
Wed to preserve incentive in our kind of system, and
he Goverment share of the ems. y indefinitely without
initiative and investment on ortunities.
ee:, on the other hand, that we find ourselves with a real
rustic problem which we might call the i ud zet Cap.', phis
on for the mounting list of unmet social needs beyond the
of today's Federal tax and expenditure system. an the taxing
e of the structu
short-terns refinancing at high rates of interest.
de,
Tre Bur l a income under D resent law, partly
of eti.ons, credits, and enforcement techniques.
expenditure side, rost of the available money goes for defense,
subsidies of various kinds, and. the pa nt of interest to the overnmnt's
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find sufficient flexibill.ty to 'Permit n
se, sorrth
-festin ; considerable interest in an overhaul of
On the expenditure side, the "resident has rude 18
road recommendations to the Congress f'or statutory revision of the basis
and subsidy programs are now authorized.
ful process,, and to date we have little that
in the way of either sympathy or results.
~wil.'Ltnw to be taxed beyond orosent rates
think 1 orta nt, and if we are equally unprepa
side operations which now eat uw our taxes, t
choice but to either ,)ostnone new programs or dig ourselve
less,
deeper financial hole through deficits and bigger debts. Call it
t