Rubles, Dollars, and Power: U.S. Intelligence on the Soviet Economy and Long-Term Competition

Rubles, Dollars, and Power: U.S. Intelligence on the Soviet Economy and Long-Term Competition

This response essay explores some of the key areas of agreement and disagreement between two recent articles on Cold War-era assessments of the Soviet economy.

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Bill and Boris: A Window Into a Most Important Post-Cold War Relationship

Against the backdrop of an enormous power differential between their two countries, Clinton and Yeltsin established a close personal rapport. They used those positive feelings to interact effectively even when they were being frank in their disagreements, the…

Assessing Soviet Economic Performance During the Cold War: A Failure of Intelligence?

Assessing Soviet Economic Performance During the Cold War: A Failure of Intelligence?

For years, scholars have argued that economists and the CIA failed to see that the Soviet Union's economy was headed toward collapse. But are they right?

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Editorial Note: This essay is the first of a new feature for the Texas National Security Review. From this point forward, we will be publishing thoughtful and original responses to scholarship and essays published here and in other journals.

  Andrew W. Marshall and Abram N. Shulsky, “Assessing Sustainability of Command Economies and Totalitarian Regimes: The Soviet Case,” Orbis 62, no. 2 (Spring 2018), https://doi.org/10.1016/j.orbis.2018.02.011. Marc Trachtenberg, “Assessing Soviet Economic Performance During the Cold War: A Failure of Intelligence?” Texas National Security Review 1, no. 2 (March 2018), http://hdl.handle.net/2152/63942.   The 2018 National Defense Strategy articulates a clear vision that “[t]he central challenge to U.S. prosperity and security is the reemergence of long-term, strategic competition” with authoritarian Russia and China.[1] Such long-term competition has many facets, but perhaps the most salient component is the economic performance of these competitors. Economic growth, financial power, and technological development are the engines for military capability and diplomatic leverage.[2] To paraphrase Cicero, the sinews of competition are infinite money. As U.S. policymakers consider this new era of long-term strategic competition, it is useful to reflect on the economic component of the last such era: the Cold War. U.S. intelligence analysts struggled to understand the opaque Soviet economic system. How well was it doing compared to the United States’ economic system? Could this authoritarian model sustain or perhaps even prevail in long-term competition? The answers to these questions were difficult, contested, and politically charged, both during the Cold War and in its aftermath.[3] Similar questions are being asked today about the Chinese economy, making this more than an issue of historical interest.[4] Fortunately, two recent articles revisiting Cold War-era intelligence on the Soviet economy provide an accessible entry point for those grappling with such questions today. The first is by two participants in the original debate about the Soviet economy. Andrew Marshall was founding director of the Office of Net Assessment in the Office of the Secretary of Defense after more than two decades as an economist at the RAND Corporation. Abram Shulsky was minority staff director for the Senate Select Committee on Intelligence before joining the Defense Department during the Reagan administration. The second article was written by Marc Trachtenberg, one of the preeminent historians of U.S. strategy and the Cold War.[5] The two articles are strikingly different in tone: Marshall and Shulsky are critical of U.S. intelligence and Trachtenberg is more laudatory. Nevertheless, a deeper examination shows they are much more complementary than contradictory. This “Response” essay intends to highlight some of the key areas of agreement and disagreement between the two articles and provide additional context for readers. It proceeds in five parts: First, it summarizes the basic arguments put forward in each article. Second, it describes, based on the domestic context and declassified records, the impact that intelligence regarding the general state of the Soviet economy had on U.S. policymaking in the late Cold War (roughly from 1974 to 1989). Third, it examines in more detail the critical question of the Soviet economy’s ability to support its military and foreign policy commitments. Fourth, it highlights an area not addressed substantially by either article, namely Soviet acquisition of Western technology through both lawful and illicit means. Finally, the essay concludes with observations on intelligence, economics, and long-term competition.

The Stansfield Turner Paradox: Opposing Views on Economic Intelligence

The different perspectives of the two articles are encapsulated in the paradox of one former official: the recently deceased retired Adm. Stansfield Turner, who was director of central intelligence under President Jimmy Carter (1977–1981). Marshall and Shulsky quote Turner’s 1991 Foreign Affairs article in their introduction: “We should not gloss over the enormity of this failure to forecast the magnitude of the Soviet crisis.”[6] They later quote Turner’s article again: “Neither I nor the CIA’s analysts reached the conclusion that eventually something had to give: that there would be a political and economic crisis.”[7] Yet Trachtenberg quotes Turner’s testimony to Congress in 1979, in which he said, “The low growth rates we envision for the mid-1980s could squeeze their resources to the point where something has to give.”[8] How could Turner argue in 1991 that the CIA never concluded “something had to give” when he had testified in 1979 using almost exactly those words? Marshall and Shulsky address this paradox by first discussing views within economics on command economies and how they evolved from the 1930s to the 1970s. They report that economists were generally positive about the economic potential of command economies, such as the Soviet Union, into the early 1960s. They then describe some of the challenges for CIA analysts seeking to estimate the size and growth of the Soviet economy. These included reliance on deeply suspect Soviet statistics, which were almost surely inflated intentionally, both by Soviet leaders for propaganda purposes and by Soviet producers, who had incentives to misreport or otherwise “game” the presentation of results. Marshall and Shulsky highlight the example of Soviet glass manufacturers having their output measured in square feet (or meters) of glass and then making the glass thinner to meet planned goals. Never mind that the rate of glass breakage went up. Quotas were met, if not exceeded. Yet how to account for this inflation in estimates? One could apply a discount to Soviet data, but how much? Without hard data, any such adjusted estimate would be subject to attack for being merely “anecdotal.” Marshall and Shulsky quote Anders Aslund’s summation of this problem:
Any specialist is caught in a dilemma: whether to settle for a conservative assessment that can be defended by traditional arguments but is bound to be too high, or to attempt a realistic assessment based more on subjective evaluations and less on hard facts.[9]
Marshall and Shulsky concede that whatever the challenges and limitations of CIA analysis of the Soviet economy, by the 1960s CIA analysts recognized that Soviet economic growth was slowing. Throughout the 1970s and 1980s, the CIA reported falling productivity as well as other challenges to the Soviet economy. However, Marshall and Shulsky argue that “the numbers did not convey any sense of crisis.”[10] Marshall and Shulsky then turn from analysis of overall Soviet economic performance to specific assessment of the Soviet defense burden — a crucial question for long-term competition. How much of the Soviet economy was being consumed by the Soviet military in order to compete with the United States? Here the CIA faced analytic hurdles at least equal to those faced in assessing the size of the Soviet economy. Prices for Soviet defense goods were set not by the market but by fiat. Prices for Soviet defense labor were likewise decreed (and suppressed by conscription). Some activities that were nominally civilian were, no doubt, underwriting military activities. Marshall and Shulsky also note how difficult cost calculations can be even with official figures, citing a RAND study from the 1950s:
Even with access to official budgetary figures, the [RAND] team discovered it could only account for about half of the USAF [U.S. Air Force] budget; the other half represented various forms of ‘overhead’ that could not be allocated by mission.[11]
These challenges meant that, through the mid-1970s, the CIA persistently underestimated the defense burden on the Soviet Union. In 1976, Marshall and Shulsky note, after obtaining new information, the “CIA doubled its estimate of the defense percentage of Soviet GNP [Gross National Product] from 6-8 percent to 11-13 percent.”[12] Yet, Marshall and Shulsky then quote Robert Gates, the CIA deputy director of intelligence in the early 1980s (who would later serve as defense secretary):
I believed instinctively that, in this communist variant of Sparta, the burden of military-related spending was far greater than the 14-16 percent of Soviet Gross National Product that CIA was saying — perhaps somewhere between 25 and 40 percent.[13]
Marshall and Shulsky conclude their essay with a call for intelligence to exploit non-traditional sources of information, such as émigrés and figures on general standards of living, as a way to improve intelligence analysis of opaque economies. Their answer to the Stansfield Turner paradox is that in 1979 Turner may have used the words “something has to give” but those words did not convey crisis. Since the numbers the CIA produced were not intuitively indicative of crisis (indeed, how could they be?), policymakers believed the Soviets could carry their defense burden for years if not decades to come. Even when the CIA revised its numbers upward, there was still a belief, as Gates indicated, the estimates remained low. There was, however, no way to prove this in a systematically and scientifically defensible manner. Thus, Turner was correct in 1991 despite his words of 1979. Trachtenberg reaches the opposite conclusion about the Stansfield Turner paradox. Citing sources as varied as headlines in the New York Times, declassified CIA products, and a wealth of information from prominent U.S. economists, he demonstrates that the decline of Soviet economic growth after the mid-1960s was well understood. He further shows that, by the late 1970s and early 1980s, it was generally understood that the Soviet economy was in such dire shape that the entire Soviet system of government was in trouble, if not already in crisis. [quote id="1"] Trachtenberg demonstrates both CIA and academic economists understood why the Soviet economy was stagnating. The answer was that “the Soviets could not sustain a high rate of economic growth just by plowing more and more capital into the economy.”[14] After years of building new plants and opening up “virgin lands” for agriculture, “by the mid-1960s all the low-hanging fruit had been harvested.”[15] Future growth would require improvements in Soviet productivity, which had declined at times in the 1970s. Trachtenberg, again citing both CIA and academic economists, concludes that by the 1970s at the latest it was clear “that the USSR’s economic problems could be expected to worsen unless the Soviet economy changed in fundamental ways.”[16] Neither CIA analysts nor academics could predict whether the Soviets would attempt reform or live with continued stagnation and relative decline. Nor could they determine whether, if the Soviets attempted reform, they would succeed without undermining their entire system. Yet, Trachtenberg argues,
while the analysis might not have enabled people to see precisely how the USSR was going to develop, it did provide a certain window into the future — a hazy and uncertain window to be sure, but one of real value nonetheless.[17]
Trachtenberg concludes by observing that the wide public acceptance of Turner’s view on intelligence and the Soviet economy in 1991, despite the availability of his testimony in 1979 as well as other evidence, illustrates the weakness of the supposed democratic “marketplace of ideas” — the concept that contesting information leads to better decisions. This argument is in keeping with other arguments about the failure of this marketplace, particularly with regard to the 2003 invasion of Iraq.[18] Trachtenberg does not speculate why Turner might have contradicted himself, though Turner’s poor relationship with the CIA is a plausible cause. As one CIA history notes, Turner bluntly let the CIA’s analytic cadre know its products were unsatisfactory and he intended to take steps to improve them. This account dryly concludes this “was probably a purposeful instrument of leadership, but it did not foster links between Turner and the professionals in the community, especially in [the] CIA.”[19] At first glance, these two articles appear contradictory — and so one must be right and the other wrong. On the question of intelligence on the overall Soviet economy, however, the two articles are not so far apart. Marshall and Shulsky believe that if CIA analysis were better it could have been less equivocal in predicting crisis (note Turner’s 1979 formulation — “could squeeze,” not “will squeeze”). Trachtenberg concedes that the CIA gave policymakers only a “hazy window” to the future — a more positive assessment than that offered by Marshall and Shulsky, but not wildly divergent. The dispute between the articles is not about the quality of the intelligence per se, which both agree was imperfect. It is instead about the utility of that intelligence to policymakers in assessing and planning long-term competition. The next section addresses this question.

Malaise vs. Stagnation: Policymaker Views of Economic Competition, 1974–1989

Competition is not a one-sided affair. As such, it is important to place analysis of the Soviet economy in the context of the state of the U.S. economy. By the mid-1970s, though the Soviets were mired in what they called the “era of stagnation” (Период застоя), the United States’ problems looked almost as grim.[20] The Bretton Woods economic system was in tatters following President Richard Nixon’s suspension of dollar-gold convertibility.[21] President Gerald Ford was confronted with rising inflation, unemployment, and the 1973 oil shock.[22] Of the late Cold War presidents, President Jimmy Carter confronted the most serious economic challenges. In his famous 1979 “malaise” or “crisis of confidence” speech, Carter declared, “The erosion of our confidence in the future is threatening to destroy the social and the political fabric of America.” Among his proposed solutions: “I ask Congress to give me authority for mandatory conservation and for standby gasoline rationing.”[23] The U.S. crisis was sufficiently deep that the president sought to impose new elements of a command economy — hardly a ringing endorsement of capitalism’s triumph over communism. Policymakers in the 1970s were unsure whether economic problems in the West were any more soluble than those in the Soviet Union. Moreover, if the United States could reform itself, it was plausible the Soviets might be able to do so as well. Indeed, the communist People’s Republic of China had begun substantial reforms in 1978, which the Soviets monitored closely.[24] As Chris Miller demonstrates, Mikhail Gorbachev’s attempted reforms were, in part, inspired by China’s efforts.[25] This point bears emphasis, as the ultimate impact of such efforts was largely unknowable to both CIA analysts and Soviet leaders before reform was attempted, underscoring the difficulty in predicting Soviet crisis or collapse. It is also important to note that, even within the CIA, views differed about the depth of Soviet problems, with some analysts more pessimistic than others about prospects for the Soviet economy.[26] American intelligence on the overall Soviet economy was, nonetheless, sufficiently compelling to illuminate future, if not immediate, opportunities for U.S. policymakers even in the Carter administration. An August 1977 meeting of Carter’s Policy Review Committee (composed of senior figures including Turner and Treasury Secretary W. Michael Blumenthal) concluded,
At the present time, we cannot exert significant influence upon Soviet behavior by economic means. … Yet, we may be missing an important point. If economic growth in the Soviet Union slows as projected, the Soviets will face difficult choices in the 1980’s regarding the allocation of resources. Does this have implications for US policy? Conceivably, our economic leverage may be much stronger than now, and we may have a unique opportunity to use it.[27]
Carter personally recognized the importance of the Soviet Union’s economic challenges. In June 1977, William Hyland, a top Soviet analyst at the CIA serving on the National Security Council staff, wrote to the president on enduring Soviet problems: “While it is always dangerous to project Soviet restraint because of their economic dilemma, it may be true for the first time that long-term problems will impinge on foreign policy decisions.” Carter made a margin note, “may be most important of all,” next to this paragraph.[28] By the early 1980s, the United States had begun its reformation and recovery, while the Soviet Union’s problems were deepening. One example is the taming of U.S. inflation under Federal Reserve Chairman Paul Volcker, with inflation rates declining from about 13 percent in 1979 to less than 4 percent in 1983.[29] The Reagan administration began receiving intelligence on the worsening Soviet problem in the context of this U.S. economic recovery. This provided exactly the sort of opportunities the Carter administration thought would come. As early as October 1981, Director of Central Intelligence William Casey sent President Ronald Reagan a CIA paper that underscored the dire straits the Soviets were in:
Slower economic growth will present President Brezhnev and his colleagues with some increasingly tough and politically painful choices regarding resource allocation and economic management. Annual increments to national output in the early 1980s will be too small to permit them simultaneously to meet mounting investment requirements, to maintain growth in defense spending at rates of the past, and raise the standard of living appreciably. Simply stated, something will have to give.[30]
The paper went on to note that Western imports were needed to ameliorate Soviet weaknesses, which could, in turn, create opportunities for pressuring the Soviets. In August 1982, Reagan’s national security adviser, William Clark, wrote to the president reiterating this theme:
The CIA has prepared a report which raises the question whether the Soviet Union, facing mounting economic problems, may at some point decide to shift resources from arms production to civilian uses … Western policies would play a major role in such a development. ‘The credit, goods, food and technology provided by the West have helped Moscow maintain its current resource allocation scheme.’ Denial of such assistance would produce additional pressure on the leadership to shift resources from military to civilian uses.[31]
Things did not improve for the Soviets, and in November 1987 Deputy Director of Central Intelligence Gates wrote to Reagan:
There is general agreement among the Soviet leaders on the need to modernize their economy — not so much for its own sake or to make Soviet citizens more prosperous but to strengthen the USSR at home, to further their own personal power, and to permit the further consolidation and expansion of Soviet power abroad. … The roots of Gorbachev’s dynamic foreign policy are to be found at home and in the need for a prolonged breathing space.[32]
Gates was skeptical that reform and the pursuit of “breathing space” would fundamentally change the nature of the Soviet regime, but he recognized that economic issues were changing Soviet domestic and foreign policy. Hyland’s view in 1977 had been borne out 10 years later. While Gates did not foresee impending collapse, he clearly believed the Soviet system was under pressure. Notably, Reagan absorbed these messages: As Trachtenberg describes, he referred to the Soviet Union as an “ec.[onomic] basket case” in a 1985 diary entry.[33] It is also worth noting that the Commission on Integrated Long-Term Strategy, a bipartisan effort chartered to offer the U.S. government strategic advice on long-term competition, released a final report in January 1988. It argued that Soviet economic difficulties were potentially a major element of a changing security landscape and concluded, “In the long run, the Soviet leaders would have difficulty maintaining the country’s present military position if economic reform fails.” Marshall chaired one of the committee’s working groups, as did other alumni from RAND’s economics department.[34] [quote id="2"] Intelligence on the Soviet economy appears to have been sufficiently accurate and compelling to convince policymakers in the Carter and Reagan administrations that Soviet economic weakness created opportunities for the United States in long-term competition. While it is true that, through 1988, the CIA did not foresee a collapse or fundamental change in the Soviet system, it was nonetheless clear that something had to give — a phrase that appears in multiple sources throughout the period. The available evidence suggests that Trachtenberg’s “hazy window” on the Soviet economy was sufficient to aid policymakers in formulating strategy.

How Weary the Red Titan? The Soviet Defense Burden and Long-Term Competition

If Trachtenberg is correct about the utility of U.S. intelligence on the overall Soviet economy, he says little about the crucial question of the Soviet defense burden. If the Soviet economy was stagnating in the 1980s but the defense burden was relatively small, the Soviet leadership might be able to soldier on with long-term competition as it had in the 1960s and 1970s. The hard choices CIA analysts believed were coming could be put off. In contrast, if the defense burden was high and the economy was stagnating, the Soviet leadership might not be able to delay those hard choices, even if they gained the “breathing space” Gates believed they sought. Marshall and Shulsky are right to highlight the weakness of the CIA’s assessment of the Soviet defense burden through the mid-1970s, echoing arguments Marshall made while in government.[35] These internal critiques were mirrored by external critics, such as former CIA analyst William T. Lee and University of North Carolina professor Steven Rosefielde.[36] The doubling of the CIA’s estimate of the defense burden in the mid-1970s underscores the validity of these critiques, at least to that point. Marshall and Shulsky say little about efforts to improve analysis of the defense burden, which the CIA and the intelligence community generally took as a serious challenge. One of the most notable efforts was the formation, in 1972, of the Military-Economic Advisory Panel. This panel was chartered “to help insure [sic] that intelligence on Soviet defense spending provided to the US decision maker was of the highest quality.” Members of the panel were to be granted “access to the full range of information and methodologies in use and will have full access to all intelligence community resources involved in this work.”[37] The panel was, in 1976, chaired by Herbert Levine, a professor at the University of Pennsylvania and one of the leading authorities on the Soviet economy. Other members included Abraham Becker, a Soviet expert at RAND and Lt. Col. Lee Badgett, an economics professor at the Air Force Academy who previously had been a military assistant to Marshall at the Office of Net Assessment. Throughout its existence, the panel would maintain a record of distinguished members and consultants, including Ivan Selin, a former RAND and Defense Department analyst; Soviet émigré economist Igor Birman; and Massachusetts Institute of Technology professor Stephen Meyer. Outside expert panels have a mixed track record, but available CIA records, including the panel’s reports to Turner when he was director of central intelligence, seem to indicate that this panel provided helpful recommendations without calling into question the CIA’s basic methodology.[38] One minor note of irony regarding the presentation of information: The CIA’s computer model for estimating the costs of Soviet military expenditures was known as the Strategic Cost Analysis Model, or SCAM.[39] To my knowledge, the Military-Economic Advisory Panel never suggested that this acronym was infelicitous branding. Yet by 1983, after several rounds of reviewing CIA methodologies, the panel concluded that one of the major problems with CIA estimates of the Soviet defense burden was the extent to which those estimates were misunderstood and politicized.[40] The panel made recommendations for changing the presentation of the estimates; these were broadly accepted at a meeting on Soviet defense estimates between Defense Secretary Caspar Weinberger and Director of Central Intelligence William Casey in July 1984.[41] Casey wrote to Weinberger in 1985 to confirm these changes were being implemented.[42] In a 1986 CIA report, these changes are clear: The estimate of the Soviet defense burden displayed the burden in a different format and also counted the costs of Soviet programs related to defense, such as the cost of maintaining the Soviet global position, sometimes referred to as the cost of Soviet empire.[43] The “cost of empire,” which included military and economic assistance to the Soviet bloc, had been defined and explored in research by RAND economist Charles Wolf, funded by the Office of Net Assessment.[44] While some in the CIA debated the magnitude of Wolf’s findings, the eventual inclusion of such costs meant that assessments in 1986 retrospectively showed the Soviets devoting 16 percent to 18 percent of their economy to defense in the late 1970s and early 1980s.[45] In addition to improving analytic methods, CIA analysts also took seriously Marshall and Shulsky’s charge to find new sources of data. One of the most remarkable — though not specific to the defense burden — was undertaken in 1967 by CIA analyst Gertrude Schroeder (later an economics professor at the University of Virginia). Schroeder, on temporary assignment to the U.S. embassy in Moscow, took the opportunity to travel around the capital and other parts of the Soviet Union incognito, relying on her excellent Russian and “a tacky outfit consisting of gray-green skirt, nondescript tan blouse, much-worn brown loafers, and of course head scarf,” with no stockings. After observing life from the perspective of a Soviet citizen during these excursions, she concluded, “[O]ur measurements of the position of Soviet consumers in relation to those of the United States (and Western Europe) favor the USSR to a much greater extent than I had thought. The ruble-dollar ratios are far too low for most consumer goods.”[46] [quote id="3"] Accessing such novel sources was challenging. For example, Vladimir Treml, a Duke University economics professor serving on the Military-Economic Advisory Panel in 1982, recommended the intelligence community explore unpublished material in various Eastern European libraries to collect data deleted from official Soviet publications. While reasonable, collecting the material required “language[-]trained economists,” who were in short supply. Further, CIA leaders concluded that the sources would be compromised by CIA analysts seeking to access them and nongovernment economists were “reluctant to work with us [the CIA].” The director of the Office of Soviet Analysis at the CIA nonetheless cheerfully (if perhaps cynically) concluded, “Somewhere in this mess, however, there must be a pony! We’ll keep looking.”[47] Estimates of the Soviet defense burden remained a challenge through the end of the Cold War and afterward. As William Wohlforth has observed, even after the Soviet Union collapsed there was debate about the size of the defense burden.[48] One of the most authoritative efforts, by Russian historian Irina Bystrova, concludes that the Soviet military-industrial complex accounted for about 25 percent of Soviet gross domestic product in the 1980s while absorbing 75 percent of research and development as well as the best technical people.[49] Although Bystrova’s estimate of the defense burden is significantly higher than the 1980s CIA estimate (16 percent to 18 percent), the goal of making such estimates was not finding the exact figure. As with assessments of the overall economy, the objective was to inform policymakers of how well the Soviet economy could carry the burden of competition. Here, it seems clear by the 1980s the intelligence was telling policymakers that the Soviet Union was struggling under that burden. In a note to Gates two days before the July 1984 meeting between Casey and Weinberger, National Intelligence Officer for Economic Issues Maurice Ernst wrote:
Evidence is accumulating that medium-term projections of Soviet force levels … would require a growth of military expenditures and military procurement in particular that many Soviet analysts believe to be greatly in excess of what the Soviet economy can probably support. Something will have to give. I don’t believe we can hazard an answer at this point, but simply point out to the Director and Weinberger that at a minimum a severe conflict is shaping up in the USSR over the allocation of key resources between defense and other uses, and that the outcome of the conflict remains in doubt.[50]
Marshall and Shulsky’s criticisms of CIA estimates of the Soviet defense burden are thus valid up to a point, but they give too little credit to subsequent efforts to improve those estimates. Indeed, Marshall may be selling himself short — his bureaucratic advocacy and willingness to support outside research seems to have been an important contribution to the improvement in estimates. The result was that, by the mid-1980s, policymakers were well-informed that the Soviet defense burden was becoming unsustainable. That the burden of competition could even be sustained into the 1980s seems to have been due in no small part to Soviet acquisition of Western technology, as described in the next section.

Been Caught Stealing: The Rise and Fall of Soviet Technology Acquisition

As noted earlier, by the late 1970s CIA estimates recognized the extent to which Western exports had supported the Soviet economy. Yet the extent of Soviet reliance on the acquisition of Western technology would not become clear until the early 1980s. A summit in July 1981 between Reagan and French President François Mitterrand was crucial. There, the French revealed intelligence on Soviet acquisition of technology. The “Farewell Dossier” was derived from a French human intelligence source inside Soviet technical intelligence (KGB Line X).[51] By 1982, the U.S. intelligence community described the sprawling scope of the Soviet program, which was directed by the Soviet Military Industrial Commission.[52] It included both the KGB and Soviet military intelligence, which provided clandestine acquisition, and the Soviet State Committee for Science and Technology, which oversaw licit acquisition. The Soviet program was massive. One former Reagan administration official told me that when a new technical endeavor was proposed in the Soviet Union, Soviet practice was to try to obtain the technology from the West, through legal or illicit means, before agreeing to fund any major research and development.[53] This claim was echoed in a CIA assessment from April 1982, which noted, “Soviet military designers carefully choose the Western designs, engineering approaches, and equipment most appropriate to their deficiencies and needs.”[54] A 1985 update on Soviet acquisition of Western technology noted that, by a conservative estimate, the Soviets had saved more than $1 billion in development costs from 1976 to 1980 thanks to their technology theft. The assessment noted the Soviets had saved five years in development due to acquisitions related to the U.S. F-18 fighter-jet radar alone. This undoubtedly helped the Soviet Union continue competing with the United States, even as its economy tottered toward collapse.[55] The Reagan administration’s recognition of the importance of Soviet technology acquisition led to a major counterintelligence and export-control campaign. This effort, which began in early 1982, required extensive coordination among the CIA, the FBI, and military counterintelligence organizations, with the regular involvement of very senior U.S. officials.[56] The campaign had four parts. The first and simplest was for the United States and many of its allies to expel Soviet intelligence officers engaged in technical espionage.[57] The second was to enforce Western export controls more seriously, including acting against the sale of equipment by Norwegian and Japanese firms that enabled Soviet improvements in submarine manufacturing.[58] The third part of the campaign was, apparently, to tailor the focus of other U.S. counterintelligence efforts to protect sensitive programs. For example, a U.S. Air Force officer, approached by Soviet intelligence, became a double agent pretending to provide the Soviets with information on stealth. This led to the arrest and expulsion of the senior Soviet air attaché in Washington.[59] The fourth, and most complex, part of the campaign was allegedly to feed the Soviets faulty technology and false data about U.S. programs, which required careful selection of some real data as “feed material.”[60] [quote id="4"] This campaign was broadly effective, reducing Soviet acquisition of Western technology and, presumably, curtailing the effective subsidization of the Soviet defense burden. While the extent to which cutting off Soviet access to Western technology accelerated the end of the Cold War is probably unknowable, it almost surely contributed by raising the cost of competition for the Soviets.

Long-Term Competition and Economic Intelligence in the 21st Century

The Cold War experience of economic intelligence and long-term competition is instructive. First, in developing strategy for long-term competition, intelligence on competitors’ economic capabilities is just as important as intelligence on their military capabilities. This point underscores the continuing need for robust economic analysis in the intelligence community, ideally drawing on appropriately cleared, outside experts like those on the Military-Economic Advisory Panel. One difference between analysis of the Soviet Union in the Cold War and assessments of China and Russia today is that there is far greater private-sector interest in, and therefore analysis of, the Chinese and Russian economies. This is a mixed blessing for the intelligence community. There are many more experts and sources of data, but many of those experts have a financial (rather than strictly academic) stake in the Chinese and Russian economies and therefore may not be entirely unbiased. Second, it highlights the necessity (and difficulty) of appropriately measuring a defense burden. While Chinese growth will undoubtedly continue to underwrite defense expenditure to some extent, China may, like the Soviet Union (and the United States), face hard choices. For example, Peter Robertson and Adrian Sin argue that China’s defense expenditures, measured with a relative cost-price index, are larger in nominal terms than commonly believed but smaller in real terms due to rising labor costs.[61] Similarly, the Chinese may have “costs of empire,” such as spending on the Belt and Road Initiative, which should not be viewed in isolation from the military burden.[62] Economic growth does not automatically and seamlessly translate to military budgets, much less real military power. Policymakers need a window, however hazy, on the economic future of adversaries. Third, while the U.S. relationship with China is different than that with the Soviet Union, it is likely that the licit and illicit acquisition of Western technology supports the Chinese defense burden at least as much as it did the Soviet burden.[63] Given the recent scrutiny of Chinese trade and espionage by both the Trump administration and Congress, lessons of the anti-Soviet counterintelligence campaign are worth examining. Former national counterintelligence executive Michelle Van Cleave has called for just such a proactive strategic counterintelligence campaign.[64] Paired with greater scrutiny of China’s licit technology acquisition, as called for in pending legislation, such a campaign could make a significant difference in long-term competition.[65] The return of long-term competition is not simply the Cold War redux. Yet neither should the lessons of the Cold War simply be discounted. Marshall, Shulsky, and Trachtenberg have done contemporary analysts a great service in reviewing the critical question of economic intelligence during that long twilight struggle. Acknowledgements: The author thanks Peter Clement, Ken deGraffenreid, and other former government officials who wish to remain anonymous for their insight on this subject and Frank Gavin, Josh Rovner, Bill Wohlforth and an anonymous reviewer for helpful feedback on an early draft.  Austin Long is a senior political scientist at the nonprofit, nonpartisan RAND Corporation. Image: serouj [post_title] => Rubles, Dollars, and Power: U.S. Intelligence on the Soviet Economy and Long-Term Competition [post_excerpt] => [post_status] => publish [comment_status] => open [ping_status] => closed [post_password] => [post_name] => rubles-dollars-and-power-u-s-intelligence-on-the-soviet-economy-and-long-term-competition [to_ping] => [pinged] => [post_modified] => 2018-09-06 14:17:28 [post_modified_gmt] => 2018-09-06 18:17:28 [post_content_filtered] => [post_parent] => 0 [guid] => http://tnsr.org/?p=691 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw [lead] => This response essay explores some of the key areas of agreement and disagreement between two recent articles on Cold War-era assessments of the Soviet economy. [pubinfo] => [issue] => Vol 1, Iss 4 [quotes] => Array ( [0] => Array ( [author] => [style] => left [text] => Trachtenberg demonstrates both CIA and academic economists understood why the Soviet economy was stagnating. ) [1] => Array ( [author] => [style] => right [text] => As early as October 1981, Director of Central Intelligence William Casey sent President Ronald Reagan a CIA paper that underscored the dire straits the Soviets were in. ) [2] => Array ( [author] => [style] => left [text] => Estimates of the Soviet defense burden remained a challenge through the end of the Cold War and afterward. ) [3] => Array ( [author] => [style] => right [text] => The Reagan administration’s recognition of the importance of Soviet technology acquisition led to a major counterintelligence and export-control campaign. ) ) [style] => framing [type] => Framing [style_label] => The Foundation [download] => Array ( [title] => PDF Download [file] => ) [authors] => Array ( [0] => 138 ) [endnotes] => Array ( [title] => Endnotes [endnotes] => [1] U.S. Department of Defense, Summary of the 2018 National Defense Strategy of the United States of America: Sharpening the American Military’s Competitive Edge, 2, https://dod.defense.gov/Portals/1/Documents/pubs/2018-National-Defense-Strategy-Summary.pdf. [2] See for example Aaron L. Friedberg, In the Shadow of the Garrison State: America's Anti-Statism and Its Cold War Grand Strategy (Princeton, NJ: Princeton University Press, 2000); Rosella Cappella Zielinski, How States Pay for Wars (Ithaca, NY: Cornell University Press, 2016); Francis J. Gavin, Gold, Dollars, and Power: The Politics of International Monetary Relations, 19581971 (Chapel Hill: University of North Carolina Press, 2004); and William H. McNeill, The Pursuit of Power: Technology, Armed Force, and Society Since A.D. 1000 (Chicago: University of Chicago Press, 1982). [3] See Noel E. Firth and James H. Noren, Soviet Defense Spending: A History of CIA Estimates, 19501990 (College Station: Texas A&M University Press, 1998); and Andrew F. Krepinevich and Barry D. Watts, The Last Warrior: Andrew Marshall and the Shaping of Modern American Defense Strategy (New York: Basic Books, 2015), esp. 149–74 for contrasting views. [4] Keith Bradsher, “China’s Economic Growth Looks Strong. Maybe too Strong,” New York Times, Jan. 18, 2018, https://www.nytimes.com/2018/01/18/business/china-gdp-economy-growth.html. [5] Truth in reviewing requires me to disclose connections to two of the authors. My first job in defense analysis was doing research for a project on military innovation sponsored by Marshall’s Office of Net Assessment. Marshall was later extremely generous with his time and expertise when I wrote about the development of deterrence theory at the RAND Corporation. Trachtenberg has likewise been extraordinarily generous with his time and expertise for subsequent projects on nuclear strategy in the United States and Soviet Union. [6] Stansfield Turner, “Intelligence for a New World Order,” Foreign Affairs 70, no. 4 (Fall 1991), quoted in Marshall and Shulsky, “Assessing Sustainability,” 220. [7] Marshall and Shulsky, “Assessing Sustainability,” 241. [8] U.S. Congress, Joint Economic Committee, Allocation of Resources in the Soviet Union and China—1979, Part 5 (Executive sessions, June 26, 1979) (Washington: Government Printing Office, 1980), quoted in Trachtenberg, “Assessing Soviet Economic Performance,” 99. [9] Anders Åslund, “How Small Is Soviet National Income?” in The Impoverished Superpower: Perestroika and the Soviet Military Burden, ed. Henry S. Rowen and Charles Wolf Jr. (San Francisco: Institute of Contemporary Studies, 1990), quoted in Marshall and Shulsky, “Assessing Sustainability,” 232. [10] Marshall and Shulsky, “Assessing Sustainability,” 236. [11] Marshall and Shulsky, 237. [12] Marshall and Shulsky, 240. [13] Robert M. Gates, From the Shadows: The Ultimate Insider’s Story of Five Presidents and How They Won the Cold War (New York: Simon and Schuster, 1996), quoted in Marshall and Shulsky, “Assessing Sustainability,” 241. [14] Trachtenberg, “Assessing Soviet Economic Performance,” 86. [15] Trachtenberg, 88. [16] Trachtenberg, 89. [17] Trachtenberg, 92. [18] See Chaim Kaufmann, “Threat Inflation and the Failure of the Marketplace of Ideas: The Selling of the Iraq War,” International Security 29, no.1 (Summer 2004), https://doi.org/10.1162/0162288041762940; and debate in Ronald R. Krebs and Chaim Kaufmann, “Correspondence: Selling the Market Short? The Marketplace of Ideas and the Iraq War,” International Security 29, no. 4 (Spring 2005), https://doi.org/10.1162/isec.2005.29.4.196. [19] Douglas F. Garthoff, Directors of Central Intelligence as Leaders of the U.S. Intelligence Community, 19462005 (Washington: Center for the Study of Intelligence, 2005), 133, https://www.cia.gov/library/center-for-the-study-of-intelligence/csi-publications/books-and-monographs/directors-of-central-intelligence-as-leaders-of-the-u-s-intelligence-community/dci_leaders.pdf. [20] For an overview, see Charles S. Maier, “‘Malaise’: The Crisis of Capitalism in the 1970s,” and Alan M. Taylor, “The Global 1970s and the Echo of the Great Depression,” in The Shock of the Global: The 1970s in Perspective, ed. Niall Ferguson, Charles S. Maier, Erez Manela, and Daniel J. Sargent (Cambridge, MA: Harvard University Press, 2011). [21] Peter M. Garber, “The Collapse of the Bretton Woods Fixed Exchange Rate System,” in A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform, ed. Michael D. Bordo and Barry Eichengreen (Chicago: University of Chicago Press, 1993), http://www.nber.org/chapters/c6876. [22] Yanek Mieczkowski, Gerald Ford and the Challenges of the 1970s (Lexington: University Press of Kentucky, 2005). [23] Jimmy Carter, “Address to the Nation on Energy and National Goals,” July 15, 1979, http://www.presidency.ucsb.edu/ws/?pid=32596. As many commentators have noted, Carter never used the word “malaise” in his speech, yet the term has stuck. [24] For an overview, see Odd Arne Westad, “The Great Transformation: China in the Long 1970s,” in Ferguson et al., Shock of the Global. [25] Chris Miller, The Struggle to Save the Soviet Economy: Mikhail Gorbachev and the Collapse of the USSR (Chapel Hill: University of North Carolina Press, 2016). [26] My thanks to an anonymous reviewer for making this point, which was echoed in a conversation I had with a former CIA analyst, April 26, 2018. [27] “Summary of Conclusions and Minutes of a Policy Review Committee Meeting,” Aug. 31, 1977, in Foreign Relations of the United States, 1977–1980, vol. VI, Soviet Union (hereafter FRUS) (Washington: Government Printing Office, 2013), https://history.state.gov/historicaldocuments/frus1977-80v06/d46. [28] “Memorandum From the President’s Assistant for National Security Affairs (Brzezinski) to President Carter,” June 24, 1977, in FRUS, 1977–1980, vol. VI, Soviet Union, https://history.state.gov/historicaldocuments/frus1977-80v06/d32. [29] See data at https://www.inflation.eu/inflation-rates/united-states/historic-inflation/cpi-inflation-united-states.aspx. For an overview of Volcker’s policies, see Allan H. Meltzer, A History of the Federal Reserve, vol. 2, book 2, 1970–1986 (Chicago: University of Chicago Press, 2009), chaps. 7 and 8. [30] “Memorandum From Director of Central Intelligence Casey to President Reagan,” Oct. 29, 1981, in FRUS 1981–1988, vol. III, Soviet Union, January 1981–January 1983. [31] “Memorandum From the President’s Assistant for National Security Affairs (Clark) to President Reagan,” Aug. 9, 1982, in FRUS 1981–1988, vol. III, Soviet Union, January 1981–January 1983. The quotation within the quotation is from the referenced CIA assessment. [32] “Memorandum Prepared by the Deputy Director of Central Intelligence (Gates),” Nov. 24, 1987, in FRUS 1981–1988, vol. VI, Soviet Union, October 1986–January 1989. [33] Trachtenberg, “Assessing Soviet Economic Performance,” 93 fn 85. The diary entry referenced is from Nov. 13, 1985. In contrast, Reagan wrote in his diary on Nov. 5: “Had an Ec. Briefing—our recovery is continuing—or by now I should say our expansion & growth is progressing at a slow but steady rate & on employment we’re doing extremely well. A higher percentage of the potential work force (all between 16 & 65) is employed than ever in our history.” See the full diary entry at the Reagan Foundation site: https://www.reaganfoundation.org/ronald-reagan/white-house-diaries/diary-entry-11051985/. [34] Discriminate Deterrence: Report of the Commission on Integrated Long-Term Strategy (Washington: Government Printing Office, 1988), quotation on page 8. Other working-group chairs included Paul Gorman, Charles Herzfeld, Fred Hoffman, Henry Rowen, and Charles Wolf — the latter three were RAND alumni. [35] See, for example, Marshall’s statement in U.S. Congress, Joint Economic Committee, Allocation of Resources in the Soviet Union and China—1975 (Washington: Government Printing Office, 1975) and CIA, Memorandum for the Record, “Conversation with Andy Marshall,” March 12, 1976; available at CIA’s Freedom of Information Act Electronic Reading Room: https://www.cia.gov/library/readingroom/ (hereafter ERR). Marshall’s CIA interlocutor in this latter document was Richard Lehman, the deputy for national intelligence. [36] William T. Lee, CIA Estimates of Soviet Military Expenditures: Errors and Waste (Washington: American Enterprise Institute, 1995), and Steven Rosefielde, False Science: Underestimating the Soviet Arms Buildup (New Brunswick, NJ: Transaction Books, 1982). [37] CIA, Memorandum, “Background on the Military-Economic Advisory Panel,” April 13, 1977, ERR. [38] CIA, Memorandum, “Talking Points for DCI Meeting with the Military-Economic Advisory Panel (MEAP),” Aug. 24, 1977, ERR. [39] CIA, Memorandum for Deputy Director of Intelligence, “Request for Approval of ADP Project- SCAM-1,” July 19, 1967, ERR. [40] CIA, “Reports of the Working Groups on Military-Economic Analysis,” July 20, 1983, ERR. For an excellent overview of intelligence politicization, see Joshua Rovner, Fixing the Facts: National Security and the Politics of Intelligence (Ithaca, NY: Cornell University Press, 2011). [41] CIA, Memorandum for the Record, “Conversation on Soviet Defense Expenditures,” Aug. 1, 1984, ERR. [42] Letter to Caspar W. Weinberger from William J. Casey, April 16, 1985, ERR. [43] CIA, USSR Review, September–October 1986, 11, ERR. [44] Charles Wolf et al., The Costs of the Soviet Empire (Santa Monica, CA: RAND Corp., 1983), https://www.rand.org/pubs/reports/R3073z1.html. [45] On the debate, see Maurice C. Ernst, Memorandum for Director of Central Intelligence and Deputy Director of Central Intelligence, “The Costs of the Soviet Empire: A Rejoinder,” Sept. 12, 1984, ERR. For the estimated defense burden, see USSR Review, 11. [46] Gertrude Schroeder, “Soviet Reality Sans Potemkin,” Studies in Intelligence 12, no.2 (Spring 1968): 51, 57, https://www.cia.gov/library/center-for-the-study-of-intelligence/kent-csi/vol12i2/html/v12i2a06p_0001.htm. [47] Memorandum for Director of Central Intelligence and Deputy Director of Central Intelligence, “MEAP Proposal for Additional Sources of Information of Soviet Economics Information,” June 14, 1982, ERR. The “pony” reference is to a joke much beloved of President Reagan. See Peter Robinson, How Ronald Reagan Changed My Life (New York: HarperCollins, 2003), 15–16. [48] William C. Wohlforth, “No One Loves a Realist Explanation,” International Politics 48, no. 4–5 (July 2011), https://doi.org/10.1057/ip.2011.17. See also William C. Wohlforth, The Elusive Balance: Power and Perceptions During the Cold War (Ithaca, NY: Cornell University Press, 1993). [49] Irina Bystrova, Советский военно-промышленный комплекс: Проблемы становления и развития (1930-1980-е годы) (Soviet Military-Industrial Complex: Problems of Creation and Development [1930s1980s]) (Moscow: Russian Academy of Sciences, 2006). For an English-language summary, see Irina Bystrova, “Russian Military-Industrial Complex,” (Helsinki: Aleksanteri Institute, 2011). [50] Maurice C. Ernst, “Note for Bob Gates: Soviet Defense Spending,” July 18, 1984, ERR. [51] Sergei Kostin and Eric Raynaud, Farewell: The Greatest Spy Story of the Twentieth Century (Las Vegas: AmazonCrossing, 2011). [52] CIA, Soviet Acquisition of Western Technology, April 1982, ERR. [53] Conversation with former official, April 26, 2018. [54] Soviet Acquisition of Western Technology, 6. [55] CIA, Soviet Acquisition of Militarily Significant Western Technology: An Update, September 1985, 8–12, ERR. [56] Michelle K. Van Cleave, Counterintelligence and National Strategy (Washington: National Defense University, 2007), 8–9; and Gus W. Weiss, “The Farewell Dossier,” Studies in Intelligence 39, no. 5 (1996), https://www.cia.gov/library/center-for-the-study-of-intelligence/kent-csi/vol39no5/pdf/v39i5a14p.pdf. I have also benefited from substantial off-the-record conversations with participants in this campaign. [57] See for example, State Department, Foreign Affairs Note, “Expulsions of Soviet Officials Worldwide, 1986,” January 1987, http://insidethecoldwar.org/sites/default/files/documents/Department of State Report on Expulsion of Soviet Officials Worldwide 1986 January 1987.pdf. [58] Robert A. Rosenblatt, “Toshiba Sale ‘Criminal,’ Japanese Says,” Los Angeles Times, July 18, 1987, http://articles.latimes.com/1987-07-18/news/mn-736_1_japanese-government. [59] Ronald J. Ostrow, “FBI Arrests Top Soviet Air Attache as Spy: Colonel Seized When Digging Up ‘Secrets’ Left by Double Agent,” Los Angeles Times, June 21, 1986, http://articles.latimes.com/1986-06-21/news/mn-19627_1_fbi-agents. [60] See Weiss, “The Farewell Dossier.” [61] Peter E. Robertson and Adrian Sin, “Measuring Hard Power: China’s Economic Growth and Military Capacity,” Defence and Peace Economics 28, no. 1 (Spring 2017), https://doi.org/10.1080/10242694.2015.1033895. [62] The size of China’s Belt and Road Initiative is unclear at the unclassified level, which underscores the need for high-quality economic intelligence analysis. See Jonathan E. Hillman, “How Big is China’s Belt and Road?” Center for Strategic and International Studies, April 3, 2018, https://www.csis.org/analysis/how-big-chinas-belt-and-road. [63] See William C. Hannas, James Mulvenon, and Anna B. Puglisi, Chinese Industrial Espionage: Technology Acquisition and Military Modernization (Abingdon, UK: Routledge, 2013); U.S.-China Economic and Security Review Commission, Annual Report to Congress (2016), 289–311, https://www.uscc.gov/Annual_Reports/2016-annual-report-congress; Justice Department, “Chinese National Pleads Guilty to Conspiring to Hack into U.S. Defense Contractors’ Systems to Steal Sensitive Military Information,” press release no. 16-342, March 23, 2016, https://www.justice.gov/opa/pr/chinese-national-pleads-guilty-conspiring-hack-us-defense-contractors-systems-steal-sensitive; Helene Cooper, “Chinese Hackers Steal Unclassified Data From Navy Contractor,” New York Times, June 8, 2018, https://www.nytimes.com/2018/06/08/us/politics/china-hack-navy-contractor-.html; and National Counterintelligence and Security Center, Foreign Economic Espionage in Cyberspace 2018https://www.dni.gov/files/NCSC/documents/news/20180724-economic-espionage-pub.pdf. [64] Michelle Van Cleave, Statement on “Chinese Intelligence Operations and Implications for U.S. National Security,” U.S.-China Economic and Security Review Commission, June 9, 2016. [65] Stephanie Zable, “The Foreign Investment Risk Review Modernization Act of 2018,” Lawfare, Aug. 2, 2018, https://www.lawfareblog.com/foreign-investment-risk-review-modernization-act-2018. ) [contents] => Array ( [title] => [contents] => ) ) [1] => WP_Post Object ( [ID] => 696 [post_author] => 60 [post_date] => 2018-08-28 05:00:23 [post_date_gmt] => 2018-08-28 09:00:23 [post_content] => Editorial Note: In light of the public interest in U.S.-Russian relations, especially in the aftermath of President Donald Trump’s meeting with President Vladimir Putin in Helskinki this summer, the Texas National Security Review will be publishing a series of essays in our “Strategist” section on past U.S. presidents and their engagements with Soviet and Russian leaders. As many were decrying the lack of any formal record of the one-on-one meeting between President Donald Trump and Russian President Vladimir Putin in Helsinki, the Clinton Presidential Library in July posted online nearly all of the declassified memoranda of conversation (“memcons”) from the in-person meetings and telephone conversations (“telcons”) between President Bill Clinton and Russian President Boris Yeltsin from Jan. 23, 1993, to Dec. 31, 1999, when Yeltsin abruptly resigned from office and made way for Putin. With 18 memcons and 56 telcons available through the library’s website, it is possible to view directly the key discussions between these two leaders over time, from the early days when Clinton publicly backed Yeltsin in his bloody political standoff with the Russian parliament to their later disagreements over NATO enlargement and Kosovo, along with numerous conversations about arms control, Chechnya, Iran, and other global issues.[1] As someone who worked in the Clinton administration and has written about U.S.-Russian relations in this period,[2] I found that the documents allow a much deeper and broader understanding of three core features of the Clinton-Yeltsin interactions. First, the two leaders established a close personal rapport and used those positive feelings to interact effectively even when they were being frank in their disagreements, the most serious of which were over NATO enlargement and the Kosovo War. Throughout, from the 1993 political turmoil in Russia through the 1998 Russian financial crisis and beyond, Clinton offered Yeltsin his full personal support. Second, the two men used their meetings and phone calls to build trust in one another by explicitly referring to delivering on promises made in their prior conversations. This proved particularly important in their discussions of NATO enlargement. Clinton was trying to thread a needle: He sought to keep the issue from harming Yeltsin’s reelection bid in the summer of 1996 while ensuring that the United States responded to Central and Eastern European desires to join the Western alliance. Because Clinton believed the issue would affect his own reelection bid, he wanted to make clear to voters of Central and Eastern European descent in the Midwest before November 1996 that he was moving forward with enlargement. From 1994 to 1996, Clinton reminded Yeltsin often of his assurances about the timing. Third, and perhaps most important when their interactions are compared with those of other U.S. and Soviet (and later Russian) heads of state during the Cold War and after, an enormous power differential existed between the two countries in this period and was the backdrop to their conversations. Yeltsin’s Russia was extremely weak, a country in economic free-fall and strategic decline. Clinton’s America was enjoying its unipolar moment.[3] In no other era before or since has the Russian president been in such a weak position when meeting with his American counterpart, and the declassified memcons and telcons from this period show how that imbalance of power permeates the discussions. The meetings largely consist of Yeltsin agreeing to Clinton’s requests after some back and forth. But also clear is Yeltsin’s desire for Russia to be seen as an equal to the United States, something that was important for his predecessors and successors alike and a factor in U.S.-Russian relations often underappreciated by many in the West.

Clinton’s Support for Yeltsin and the Building of a Personal Rapport

In his first term, Boris Yeltsin needed Bill Clinton’s support as he battled domestic Russian opposition to his policies. It was not just financial support for Russia that was critical, although that assistance was important, including when Clinton publicly endorsed what became a $10.2 billion loan from the International Monetary Fund announced in the midst of the 1996 Russian presidential campaign.[4] Clinton also offered Yeltsin complete public support when the latter used military force in a standoff with the Russian parliament in the fall of 1993. Clinton did so because he believed he needed Yeltsin — a Russian president committed to good relations with the West who could thereby enable the American president to shrink the U.S. defense budget to pay for cherished domestic programs. One of the first big moments in their relationship came in April 1993, when Yeltsin held a referendum that asked voters whether they trusted him, approved of his socioeconomic policies, and believed new presidential and parliamentary elections should be conducted ahead of schedule. Russia experts in the U.S. government thought that Yeltsin would lose overwhelmingly, and Clinton’s top Russia adviser, Strobe Talbott, wrote later that the president “followed the referendum as though it were an American election.” Remarkably, given the state of the Russian economy, 58.7 percent of voters affirmed their trust in Yeltsin and 53 percent approved his socioeconomic policies. Clinton happily threw his support behind the Russian president.[5] In a call the next day, Clinton told Yeltsin, “I’m about to issue a statement in support of your policies. I want you to know that we’re in this with you for the long haul.” Yeltsin closed the call by saying, “I hug you from the bottom of my heart.”[6] By September, however, parliamentary opposition to Yeltsin grew stronger. Clinton called Yeltsin early that month to convey his continued support amid the standoff in Moscow. In a follow-up call on Sept. 21, Yeltsin told him, “Bill, the Supreme Soviet [the Russian parliament] has totally gone out of control. It no longer supports the reform process. They have become communist. We can no longer put up with that.” He added, “I think there will be no bloodshed,”[7] which turned out to be mistaken. The battle between Yeltsin and the opposition legislators came to a head on Oct. 3, when Yeltsin ordered his military to shell the parliament building. A bloody clash between the executive and legislative branches was not exactly a sign of a healthy democracy, but Clinton phoned two days later to tell Yeltsin, “I wanted to call you and express my support.” Yeltsin responded, “Now that these events are over, we have no more obstacles to Russia’s democratic elections and our transition to democracy and market economy.” Yeltsin even mused that he might hold elections for president at the same time as parliamentary elections in December and told Clinton that he “might end up in the Guinness Book of World Records for standing for election three times in three years.” (He did not carry out this plan.) Yeltsin closed by telling Clinton once again, “I embrace you with all my heart.”[8] [quote id="1"] Clinton continued to emphasize his personal support for Yeltsin over the course of their terms in office. In late 1994, Russia invaded the breakaway province of Chechnya. Clinton expressed concern about the impact of this war on Yeltsin’s image. Referring to an upcoming speech by the Russian president to parliament, Clinton told him, referring to Yeltsin’s pivotal role during the August 1991 coup against Soviet leader Mikhail Gorbachev, “It is also an opportunity to remind the world of why you are the best hope for continued reform in Russia. I want everyone to see you as the person who stood on the tank and stood up for freedom.”[9] In the run-up to the first round of the Russian presidential election in June 1996, Yeltsin was growing desperate for financial assistance. He told the U.S. president, “Bill, for my election campaign, I urgently need for Russia a loan of $2.5 billion.” Yeltsin explained that he was not seeing results yet from the rescheduling of Russia’s debt by the group of major creditor countries known as the Paris Club, and the bulk of the recently announced IMF loan would not arrive until later in the year. “But the problem,” said Yeltsin, “is I need money to pay pensions and wages.” Clinton assured him, “I’ll check on this with the IMF and some of our friends and see what can be done.”[10] No matter what challenges they faced, domestically or in their relationship, they maintained a strong personal bond. In a telephone exchange in late October 1997, months after the two had met in Denver in June, Yeltsin told Clinton, “You know, I started missing your voice.” Clinton replied, “I miss you too.” (They had a similar exchange in February 1998 only three weeks after their previous call!)[11] Clinton saw Yeltsin as a significant figure in Russian history, and he tried to convey that at various points. At a meeting in May 1998, Clinton said, “You know, Boris, we really are working with the stuff of history here. I’m convinced that 20 years from now, when the Russian economy is booming, people will look back and say we were right; we did the right things. I just hope you get all the credit you deserve while you’re still around, because you’ve done a terrific job of leading your country during one of the two or three most important moments in Russian history.”[12] The greatest test of their personal relationship came during the Kosovo bombing campaign in March 1999. Clinton and his European counterparts believed that NATO needed to carry out airstrikes against Serbia to bring its leader, Slobodan Milosevic, to the bargaining table. Yeltsin was stridently opposed to any use of force, not just because of the close ties between Russia and Serbia but partly because, unlike the situation in Bosnia a few years earlier, this would mean military intervention in the internal affairs of a sovereign country. Russia’s ability to wield a veto in the U.N. Security Council meant that authorization for the war from that body would not be forthcoming.[13] In a phone conversation between the two men as NATO was about to launch airstrikes, Clinton, after rehashing all that Milosevic had done, told Yeltsin bluntly, “Basically, it will be your decision if you decide to let this bully destroy the relationship we worked hard for over six and a half years to build up.” He reminded Yeltsin of all his public and private support over the years, including providing economic assistance to Russia and his multiple visits to Moscow. “You may decide to let this get in the way of our relationship, but I’m not going to because I do not think he’s that important. I’m sorry he is a Serb. I wish he were Irish or something else, but he is not.” Clinton tried telling Yeltsin that maybe after a few strikes, Milosevic would seek diplomacy; after all, he had come to the table in 1995 to end the earlier Balkan war. Yeltsin would have none of it: “[O]ur people will certainly from now have a bad attitude with regard to America and with NATO. I remember how difficult it was for me to try and turn the heads of our people, the heads of the politicians towards the West, towards the United States, but I succeeded in doing that, and now to lose all that. Well, since I failed to convince the President, that means there is in store for us a very difficult, difficult road of contacts, if they prove to be possible.” He signed off with “Goodbye,” with no added embrace.[14] The latter part of the war led to quite an up-and-down in their conversations. In early May 1999, as they were coming to agreement on what needed to be done, Yeltsin told Clinton, “I owe you a bear hug.” Clinton replied, “Yes, I want a bear hug.”[15] Clinton called Yeltsin on June 10, after discussions between Russian Prime Minister Viktor Chernomyrdin, Finnish President Martti Ahtisaari, and Milosevic appeared to end the conflict, and Yeltsin told him, “I would like to hug and kiss you, and I am sincerely glad that in such a difficult situation our friendship wasn’t broken.”[16] [quote id="2"] Alas, in the next few days, Russian forces occupied the airport in Pristina, and it looked like NATO and Russian forces might come into conflict. Clinton and Yeltsin spoke multiple times by phone. Clinton made clear that a failure to resolve the conflict would harm the upcoming Group of Eight meeting in Germany: “We were about to have in Cologne a celebration of Russia in the peace operation,” an angry Clinton remarked. “Instead, we face day after day, international embarrassment that Kosovo will be wrecked.”[17] Russia’s weakness and Yeltsin’s desire to be feted by his G-8 colleagues in Cologne were key factors in the ultimate resolution of the conflict but so, too, was the importance of the relationship the two presidents had built, a relationship that was tested over the years by the U.S. decision to expand NATO eastward.

Clinton’s Promises on Enlargement

Perhaps no issue provides a greater window into the nature of the relationship between the two presidents than their lengthy discussions from 1994 to 1997 about NATO enlargement. An undercurrent of their exchanges involved Clinton’s efforts to ensure that he did not harm Yeltsin politically while giving him a very bitter pill to swallow. Another recurrence was Yeltsin’s explanation of the damage this issue was doing to him while ultimately going along with Clinton’s various proposals. There was a brief moment in the fall of 1994 when Yeltsin believed that Clinton was reneging on a commitment not to rush the process and exploded at a Conference on Security and Co-operation in Europe (CSCE) summit. The huge power imbalance between the two countries hung over the relationship and punctuated the presidents’ interactions.[18] In their meetings and phone calls, Clinton drove the agenda, as he did for nearly all of the issues they discussed over seven years. The two men genuinely got along, partly because they were similar political animals. But at the end of the day, the United States called the shots in the relationship. Clinton was always trying to make sure that Yeltsin knew he was giving him what he could, and Clinton expected Yeltsin to go along with his proposals. Generally, Yeltsin did. Throughout their conversations on enlargement, Clinton was eager for Yeltsin to know that the United States was keeping a promise Clinton made in September 1994 in one of their discussions in Washington (the declassified memcon of this exchange is not among the cache of documents recently released): namely, that he and his NATO colleagues would go slowly on expanding the alliance given Clinton’s (publicly unstated but understood) desire to see Yeltsin safely reelected in 1996. Meanwhile, Yeltsin focused Clinton’s attention on the domestic political ramifications of NATO enlargement. Interestingly, he did not raise the issue (as others later would) that the United States and its Western European allies had assured Soviet leader Mikhail Gorbachev during the 1990 negotiations over German unification that NATO would not expand eastward.[19] In October 1993, when discussions first began in earnest about NATO’s future, the possibility of enlargement seemed quite distant. Secretary of State Warren Christopher explained to Yeltsin at the latter’s country dacha that the United States planned to pursue the “Partnership for Peace,” which would include all members of the former Warsaw Pact, and NATO enlargement would be considered only as a “longer-term eventuality.”[20] Christopher told Yeltsin, “There could be no recommendation to ignore or exclude Russia from full participation in the future security of Europe. As a result of our study, a ‘Partnership for Peace’ would be recommended to the [January 1994] NATO summit which would be open to all members of the [North Atlantic Cooperation Council] including all European and [former Soviet] states. There would be no effort to exclude anyone and there would be no step taken at this time to push anyone ahead of others.” Yeltsin was obviously relieved. “This is a brilliant idea, it is a stroke of genius,” he said. “It is important that there is an idea of partnership for all and not new membership for some.” Yeltsin exclaimed, “It really is a great idea, really great,” adding, “Tell Bill I am thrilled by this brilliant stroke.”[21] In late December, a few weeks before Clinton was to meet Yeltsin in Moscow after the NATO summit, the two men spoke by phone. The primary purpose was to discuss the recent Russian parliamentary elections and for Clinton to remind Yeltsin of how the United States had delivered on the economic assistance announced at their first meeting, in Vancouver, the previous April. Clinton stated simply, “I will be in Brussels for the NATO summit and in Prague before I see you and will want to discuss Russian participation in NATO’s Partnership for Peace proposal.” Yeltsin responded that he had recently met with NATO Secretary General Manfred Woerner: “We discussed a plan of action for the countries of Eastern Europe to cooperate with NATO in a way that would not be at the expense of Russia and also a plan of action for Russia to join NATO.” While Clinton did not respond to Yeltsin’s comment, their discussion was quite cordial; after all, as far as Yeltsin understood, NATO enlargement was not on the table in a serious way.[22] While the Clinton Library collection does not contain the declassified memcon from the presidents’ January 1994 summit in Moscow, nor the specific discussion they had regarding NATO that September in Washington, Clinton’s top Russia adviser, Strobe Talbott, has written that in the latter meeting Clinton told Yeltsin that NATO was going to expand but tried to reassure him that he had no timetable yet. “We’re going to move forward on this, but I’d never spring it on you.” Clinton said there would be “no surprises, no rush, and no exclusion.” He then added, “As I see it, NATO expansion is not anti-Russia. … I don’t want you to believe that I wake up every morning thinking only about how to make the Warsaw Pact countries a part of NATO — that’s not the way I look at it. What I do think about is how to use NATO expansion to advance the broader, higher goal of European security, unity and integration — a goal I know you share.”[23] Clinton knew Yeltsin was not going to be happy, so he kept emphasizing that he was promising not to spring anything on Yeltsin and that “no exclusion” meant that Russia would be eligible to join someday. In reality, it was no exclusion in theory but not in practice. Russia was not going to become a NATO member. Even so, Clinton had reason to believe he was managing the process well; after all, Yeltsin told him in a phone call on Oct. 5, 1994, that “the Washington Summit proved a success.”[24] At their September meeting, Yeltsin asked Clinton to come to the CSCE summit in Budapest that December. The CSCE was being upgraded to the OSCE (Organization for Security and Cooperation in Europe), and Yeltsin wanted to signal that perhaps there could be alternatives to NATO in addressing European security. Clinton agreed to go. He kept that promise even after the 1994 midterm elections resulted in a Republican takeover of both houses of Congress for the first time in four decades. His White House team scheduled a congressional reception the night of the Budapest summit precisely to try to keep the president from leaving town. But Clinton’s foreign policy team said he had to go, and he did.[25] It turned out to be the most disastrous public encounter the two presidents would have. On Dec. 1, the NATO foreign ministers announced that they would complete a study by the end of 1995 (i.e., a half-year before the 1996 Russian presidential election) on how NATO would enlarge. Russian Foreign Minister Andrei Kozyrev, who had gone to Brussels to sign Russia’s Partnership for Peace program document and a document on a NATO-Russia dialogue, was ordered by a furious Yeltsin not to sign. At the Budapest summit a few days later, Clinton gave what his deputy secretary of state, Talbott, described later as the “most in your face” manifestation of the U.S. position on NATO enlargement. In remarks Talbott said were drafted not in his office but within the National Security Council (where National Security Adviser Anthony Lake had been pushing NATO enlargement for more than a year), Clinton declared, “We must not allow the Iron Curtain to be replaced by a veil of indifference. We must not consign new democracies to a gray zone.” He added that “no country outside will be allowed to veto expansion.”[26] Yeltsin publicly responded, “Europe, not having yet freed itself from the heritage of the Cold War, is in danger of plunging into a cold peace.”[27] Clinton was stunned and angered by the tone of Yeltsin’s remarks. Talbott, who was not on the trip, thought he might be fired for not having adequately prepared his boss for what would occur.[28] Soon, however, Clinton had things seemingly back on track thanks in part to visits by others in his administration, including Vice President Al Gore, to see Yeltsin. In advance of his own trip to Moscow in May 1995, Clinton called Yeltsin to discuss NATO. “We recognize how sensitive this issue is for you. That is why I want to assure you that this process is proceeding along a path that is consistent with what you and I agreed upon last September and that Vice President Gore reiterated to you when he saw you in December.” Yeltsin responded, “I fully agree with you on that.” Clinton added, “For the future stability of Europe, it is important that Russia is a vital part of the new security structures that are emerging. That means OSCE, the post-COCOM [the Coordinating Committee for Multilateral Export Controls established by the West after World War II] regime, the new NATO—all of them. None of this can develop normally unless Russia is involved in the process.” Yeltsin stated, “We’ll both have difficult discussions with regards to NATO, but I’m confident we’ll be able to find an acceptable solution for this issue.” Clinton then reported that Secretary of State Christopher and Russian Foreign Minister Andrei Kozyrev had just described to him a proposal for the upcoming NATO foreign ministers’ meeting that would again affirm that there would be no acceleration of the enlargement process, announce a strengthening of the Partnership for Peace, and begin discussions about a NATO-Russia special relationship.[29] [quote id="3"] Nevertheless, the issue remained an enormous sore spot for Yeltsin and a domestic political problem. In a three-hour meeting at the Kremlin on May 10, 1995, Yeltsin asked for a better understanding of what Clinton was doing on NATO enlargement “because now I see nothing but humiliation for Russia if you proceed. How do you think it looks to us if one bloc continues to exist while the Warsaw Pact has been abolished?” He called it a “new form of encirclement” and repeated his plea to develop a new pan-European security architecture. “You and I are heading for elections,” Yeltsin said. “The extremists and hardliners are exploiting this issue for their own purposes — on both sides. I am being attacked from both the right and the left on this. We need a common European space that provides for overall security. So let’s postpone any change in NATO until 1999 or 2000. … But for me to agree to the borders of NATO expanding toward those of Russia — that would constitute a betrayal on my part of the Russian people.” Instead, Yeltsin said in desperation, “Let’s say that Russia will give every state that wants to join NATO a guarantee that we won’t infringe on its security.” When Clinton asked rhetorically whether the United States still needed to maintain a security relationship with Europe, Yeltsin fired back, “I’m not so sure you do.” Clinton tied his approach to the Victory Day ceremony for which he had come to Moscow and the lessons of history. “Our goal is for the U.S. to stay in Europe and promote a unified, integrated Europe.” He was doing that, he said, by trying to make the Partnership for Peace important, keeping open the door to Russian NATO membership, creating a special NATO-Russia relationship, and ensuring that the NATO membership review process was a deliberate one. Clinton reminded Yeltsin of how this process had unfolded, that he had told Yeltsin in January 1994 that NATO was open to taking in new members, and that in December NATO had agreed to study how to do it. Responding to that study would take the first half of 1996, said Clinton. For Yeltsin, this time frame was vital, because, the Russian leader noted, “my position heading into the 1996 elections is not exactly brilliant.” Clinton, however, had his own political concerns. He explained to Yeltsin that the Republicans were using NATO expansion in their effort to win over voters of Central European descent in Wisconsin, Illinois, and Ohio. He suggested to Yeltsin that they accept what each other needed to do politically. Yeltsin would not have to embrace expansion. Clinton would not say he was slowing down the process. And meanwhile Yeltsin should sign the documents for Russia to join the Partnership for Peace and to establish a NATO-Russian dialogue:
So here is what I want to do. I’ve made it clear I’ll do nothing to accelerate NATO. I’m trying to give you now, in this conversation, the reassurance you need. But we need to be careful that neither of us appears to capitulate. For you, that means you’re not going to embrace expansion; for me, it means no talk about slowing the process down or putting it on hold or anything like that.
Then Clinton told Yeltsin to sign the two documents. Yeltsin asked again that NATO move forward only after his election. Clinton reiterated the timetable, trying to reassure Yeltsin that nothing concrete would happen until after the summer of 1996. Yeltsin said they should publicly say they discussed the issue, understood each other, and would discuss the issue further at their next meeting. Clinton responded, “Good. So join PFP.” Yeltsin agreed.[30] A few months before the NATO leaders’ 1997 announcement in Madrid that the alliance was inviting Poland, Hungary, and the Czech Republic to join, Yeltsin made one last effort to shape the future at a small meeting with Clinton in Helsinki on March 21. He opened by acknowledging the inevitable. “Our position has not changed,” Yeltsin said. “It remains a mistake for NATO to move eastward. But I need to take steps to alleviate the negative consequences of this for Russia. I am prepared to enter into an agreement with NATO not because I want to but because it is a forced step. There is no other solution for today.” Yeltsin sought a legally binding accord, signed by all 16 NATO members, that would make clear that NATO decisions would not be made “without taking into account the concerns or opinions of Russia.” He also wanted assurance that no nuclear or conventional arms would move into the new members’ territory, “thus creating a new cordon sanitaire aimed at Russia.” Then he put on the table what he most wanted. “[O]ne thing is very important: enlargement should also not embrace the former Soviet republics. I cannot sign any agreement without such language. Especially Ukraine.” Recognizing he was unlikely to receive this, he changed tack slightly,
I propose that in the statement we could accept the fact that Russia has no claims on other countries. In fact, regarding the countries of the former Soviet Union, let us have a verbal, gentlemen’s agreement — we would not write it down in the statement — that no former Soviet republics would enter NATO. This gentlemen’s agreement would not be made public.
Clinton responded that he was “trying to change NATO.” He had language in the proposed agreement between NATO and Russia on nuclear and conventional forces. And he wanted to make sure they signed something before the NATO summit “so we can say to the world that there is a new NATO and a new Russia and that’s the right spirit,” to which Yeltsin agreed. But Clinton added that he couldn’t make an agreement on former Soviet republics: “it would be a bad thing for our attempt to build a new NATO, but it would also be a bad thing for your attempt to build a new Russia.” NATO was assisting the process of building an “integrated, undivided Europe,” Clinton argued what Yeltsin was proposing would mean “Russia would be saying, ‘we have still got an empire, but it just can’t reach as far West.’” Clinton didn’t want to come out of the meeting having discussed new lines being drawn in Europe, and he wouldn’t be able to go forward with a treaty because of Senate opposition. Yeltsin tried again, saying that the Duma would likely make this a condition of its ratification of a NATO-Russia charter. He asked Clinton to tell him what he wanted to hear “one-on-one — without even our closest aides present — that you won’t take new republics in the near future; I need to hear that. I understand that maybe in ten years or something, the situation might change, but not now.” Clinton shot back,
If I went into a closet with you and told you that, the Congress would find out and pass a resolution invalidating the NATO-Russia charter. I’d rather frankly that the Duma pass a resolution conditioning its adherence on this point. I just can’t do it. A private commitment would be the same as a public one. … I know what a terrible problem this is for you, but I can’t make the specific commitment you are asking for. It would violate the whole spirit of NATO.
Yeltsin tried one last time to get what he wanted, but to no avail, and so they moved on to other items. [31] At their last meeting, in Istanbul in November 1999, Yeltsin said to Clinton, “I ask you one thing. Just give Europe to Russia. The U.S. is not in Europe. Europe should be the business of Europeans. Russia is half European and half Asian. … Bill, I’m serious. Give Europe to Europe itself. We have the power in Russia to protect all of Europe, including those with missiles.”[32] This was, of course, not a statement the United States would take seriously, and it was hard enough for Russia to be taken seriously by the United States as an equal.

The Imbalance of Power and Russia’s Drive for Equal Status

Yeltsin’s desire to be seen as an equal, and Clinton’s efforts to provide window dressing to help with appearances, permeated their conversations throughout the two presidents’ time in office, and not only during their conversations over NATO enlargement. During the September 1994 Washington summit, Yeltsin said, “[T]here are some people in the White House and Congress who believe that Russia has lost its superpower status. Of course, not you personally, Bill.” Clinton responded, “I have tried in every way to relate to Russia and to you as a great power and to enhance your role, whether in the G-7 or bilaterally.”[33] Still, neither could escape the fact that the two countries occupied completely different status levels in the international system. At their May 1995 meeting in Moscow, Clinton said to Yeltsin, “You have to walk through the doors that we open for you.”[34] The Russians wanted to be treated as equals, and the idea of walking through doors the United States was opening for them made clear that they were not. The dynamic was such, however, that when Yeltsin got spun up on these issues, Clinton would soothe him. In a one-on-one meeting (with Talbott and Yeltsin’s assistant Dmitry Ryurikov as notetakers) in Moscow in April 1996, Yeltsin came into the meeting clearly angry because Foreign Minister Yevgeny Primakov had told him that the United States was trying to sideline Russia in the Middle East. Clinton said, “That’s not correct. No one’s sidelining anybody.” When Yeltsin said he was not convinced, Clinton reminded him of all they had done together since their first meeting three years earlier: “We’ve done a remarkable job in getting a lot done and also in being honest about our differences. My objectives are first, an integrated, undivided Europe; and second, a cooperative equal partnership with a democratic, economically successful Russia which is influential in the world.” He added, “I want historians fifty years from now to look back on this period and say you and I took full advantage of the opportunity we had. We made maximum use of the extraordinary moment that came with the end of the Cold War.” Yeltsin zeroed in on the one word that mattered to him: “The key word you just used was ‘equal’ partnership. This will restore trust and confidence.” Clinton explained how Russia could play an important role in the Middle East due to its influence with Syria and Hezbollah. Yeltsin appeared mollified.[35] One of the major issues in their relationship was Russia’s ascension to the group of advanced industrialized democracies. The G-7 was to become the G-8. Clinton faced significant opposition to this move from his own Treasury Department, which was concerned about diluting a body of the world’s leading market economies with membership for a country that did not yet have a market economy and whose gross domestic product was quite small.[36] At a larger meeting of the two leaders and their teams in April 1996 at the Kremlin, Clinton explained that the G-7’s work coordinating fiscal policy “among the world’s richest countries” was important and that if Russia were included, countries such as Mexico, South Korea, and Brazil would ask to join as well. Yeltsin argued, “Russia will be on the rise. I cannot agree to the ‘7 plus 1’ formula; I also understand that we cannot reach the level of a full G-8. You have to keep in mind that we are a great power, which affects how people think about this.”[37] A year later, at their March 1997 meeting in Helsinki, Clinton publicly stated:
We will work with Russia to advance its membership in key international economic institutions like the W.T.O., the Paris Club, and the O.E.C.D. And I am pleased to announce, with the approval of the other G-7 nations, that we will substantially increase Russia’s role in our annual meeting, now to be called the Summit of the Eight, in Denver this June.[38]
At a bilateral meeting of the two presidents and a small group of advisers in Paris in advance of the “Summit of the Eight,” Yeltsin raised the issue of how Russia’s economy was labeled. National Security Adviser Samuel R. Berger explained that by law, Russia would be far worse off in terms of trade preferences being labeled a market economy than if it were designated a non-market economy or a transition economy. Yeltsin did not care for the designation, seeing it as an insult: “Russia is not a transition economy. We have transformed. It is a market economy.” Labels mattered to him; Yeltsin wanted Russia to be seen as a great power on par with the other leading world powers.[39]

Conclusions

These records are an important reminder that notes of presidential meetings and phone calls are not simply documents for scholars trying to make sense of history. They are critical in real time for officials who need to follow up on what their bosses have discussed. The recently released Clinton White House records show the distribution of these conversations, typically to the secretary of state, Deputy Secretary of State Talbott (who often was with the president for the meetings and phone calls), and the U.S. ambassador to Moscow. The role these documents play in developing policy is a major reason why there was so much concern when Donald Trump met with Vladimir Putin one-on-one for more than two hours in Helsinki in July 2018 with no notetakers present.[40] [quote id="4"] Reading these memcons and telcons as a narrative record of the seven years of interactions between Clinton and Yeltsin left me feeling rather sad. The two leaders certainly accomplished a great deal: Yeltsin ensured that Russian troops left the Baltic countries, worked to keep Russian entities from transferring missile technologies to Iran, and participated in the Implementation Force in Bosnia alongside NATO and under American command. The two presidents worked with their counterparts in Belarus, Kazakhstan, and Ukraine to transfer to Russia the strategic nuclear weapons those countries inherited upon the collapse of the Soviet Union. It is notable that many of their accomplishments occurred during their first terms and were largely issues related to the collapse of the Soviet Union such as the removal of Russian troops from the Baltics and the stationing of strategic nuclear weapons. They had big plans throughout their two terms for new arms-control agreements, but domestic political constraints got in the way. Ultimately, neither the United States nor Russia found a place for Russia in the basic architecture of European security. Meanwhile, Georgia, Moldova, and Ukraine ended up in a zone of insecurity, not able to join NATO and each with Russian military forces on its territory. A conversation at the end of their time together regarding Yeltsin’s successor was more hopeful than was warranted. In September 1999, Yeltsin informed Clinton by phone,
It took me a lot of time to think who might be the next Russian president in the year 2000. Unfortunately, at that time, I could not find any sitting candidate. Finally, I came across him, that is, Putin, and I explored his bio, his interests, his acquaintances, and so on and so forth. I found out he is a solid man who is kept well abreast of various subjects under his purview. At the same time, he is thorough and strong, very sociable. And he can easily have good relations and contact with people who are his partners. I am sure you will find him to be a highly qualified partner. I am very much convinced that he will be supported as a candidate in the year 2000.[41]
In their in-person conversation in Istanbul in November 1999, Clinton asked who was going to win the Russian presidential election the next year, and Yeltsin did not hesitate: “Putin, of course. He will be the successor to Boris Yeltsin. He’s a democrat, and he knows the West.” He added, “He’s tough. He has an internal ramrod. He’s tough internally, and I will do everything possible for him to win — legally, of course. And he will win. You’ll do business together. He will continue the Yeltsin line on democracy and economics and widen Russia’s contacts. He has the energy and the brains to succeed.”[42] On Dec. 31, 1999, Clinton called Yeltsin just after Yeltin’s announcement that he was stepping down in favor of Putin, who of course went on to win the presidential election a few months later. In that final call, Clinton said, “You have guided your country through a historic time and you are leaving a legacy that will leave Russians better off for years to come. … Boris, I believe that historians will say you were the father of Russian democracy…” After telling Clinton once again that Putin would win and that he was a strong, intelligent democrat, Yeltsin ended their call as he had done so often over the previous seven years: “I would like from the bottom of my heart to embrace you.”[43]   James Goldgeier is a professor of international relations at American University, visiting senior fellow at the Council on Foreign Relations, and the 2018-19 Library of Congress chair in U.S.-Russia relations at the John W. Kluge Center. You can follow him on Twitter: @JimGoldgeier. Image: FDR Presidential Library [post_title] => Bill and Boris: A Window Into a Most Important Post-Cold War Relationship [post_excerpt] => [post_status] => publish [comment_status] => open [ping_status] => closed [post_password] => [post_name] => bill-and-boris-a-window-into-a-most-important-post-cold-war-relationship [to_ping] => [pinged] => [post_modified] => 2018-09-05 18:44:41 [post_modified_gmt] => 2018-09-05 22:44:41 [post_content_filtered] => [post_parent] => 0 [guid] => http://tnsr.org/?p=696 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw [lead] => Against the backdrop of an enormous power differential between their two countries, Clinton and Yeltsin established a close personal rapport. They used those positive feelings to interact effectively even when they were being frank in their disagreements, the most serious of which were over NATO enlargement — a major sore spot for Yeltsin — and the Kosovo War, the greatest test of the two leaders' personal relationship. [pubinfo] => [issue] => Vol 1, Iss 4 [quotes] => Array ( [0] => Array ( [author] => [style] => left [text] => In no other era before or since has the Russian president been in such a weak position when meeting with his American counterpart. ) [1] => Array ( [author] => [style] => right [text] => No matter what challenges they faced, domestically or in their relationship, they maintained a strong personal bond. ) [2] => Array ( [author] => [style] => left [text] => Perhaps no issue provides a greater window into the nature of the relationship between the two presidents than their lengthy discussions from 1994 to 1997 about NATO enlargement. ) [3] => Array ( [author] => [style] => right [text] => [N]otes of presidential meetings and phone calls are not simply documents for scholars trying to make sense of history. They are critical in real time for officials who need to follow up on what their bosses have discussed. ) [4] => Array ( [author] => [style] => left [text] => ) ) [style] => strategist [type] => Strategist [style_label] => The Strategist [download] => Array ( [title] => PDF Download [file] => ) [authors] => Array ( [0] => 60 ) [endnotes] => Array ( [title] => Endnotes [endnotes] => [1] The documents are in two files labeled “Declassified Documents Concerning Russian President Boris Yeltsin.” The first covers the period from Jan. 23, 1993, to April 21, 1996, and can be found at https://clinton.presidentiallibraries.us/items/show/57568. The second covers the period from April 21, 1996, to Dec. 31, 1999, and can be found at https://clinton.presidentiallibraries.us/items/show/57569. The letters they sent one another have not been declassified. [2] James M. Goldgeier and Michael McFaul, Power and Purpose: U.S. Policy Toward Russia After the Cold War (Washington, DC: Brookings Institution Press, 2003). [3] Charles Krauthammer, “The Unipolar Moment,” Foreign Affairs 70, no. 1 (1990/1991), https://www.foreignaffairs.com/articles/1991-02-01/unipolar-moment. [4] Paul Quinn-Judge, “Clinton Gives Yeltsin a Vote of Confidence; Declares Support for $9 Billion Loan,” Boston Globe, Jan. 31, 1996. The agreed-upon loan amount ended up being $10.2 billion. See Michael Gordon, “Russia and I.M.F. Agree on a Loan for $10.2 Billion,” New York Times, Feb. 23, 1996, https://www.nytimes.com/1996/02/23/world/russia-and-imf-agree-on-a-loan-for-10.2-billion.html. See also the Clinton-Yeltsin discussion of the loan in Memorandum of Telephone Conversation, “The President’s Discussion with President Yeltsin on the Russian Election, Bilateral Relations, START II Ratification and NATO,” Feb. 21, 1996, https://clinton.presidentiallibraries.us/items/show/57568, 357. [5] Goldgeier and McFaul, Power and Purpose, 125; Strobe Talbott, The Russia Hand: A Memoir of Presidential Diplomacy (New York: Random House, 2002), 70. [6] Memorandum of Telephone Conversation, “Telcon with President Yeltsin of Russia,” April 26, 1993, https://clinton.presidentiallibraries.us/items/show/57568, 51–52. [7] Memorandum of Telephone Conversation, “Telcon with President Boris Yeltsin of the Russian Federation,” Sept. 7, 1993; Memorandum of Telephone Conversation, “Telcon with President Boris Yeltsin of Russian Federation,” Sept. 21, 1993, https://clinton.presidentiallibraries.us/items/show/57568, 95, 107. [8] Memorandum of Telephone Conversation, “Telcon with President Boris Yeltsin of Russian Federation,” Oct. 5, 1993, https://clinton.presidentiallibraries.us/items/show/57568, 119–21. [9] Memorandum of Telephone Conversation, “Telephone Conversation with Russian President Yeltsin: Chechnya, START II,” Feb. 13, 1995, https://clinton.presidentiallibraries.us/items/show/57568, 269. [10] Memorandum of Telephone Conversation, “Telephone Conversation with Russian President Yeltsin on CTBT, Chechnya, Economics, CFE and Russian Election,” May 7, 1996, https://clinton.presidentiallibraries.us/items/show/57569, 26–27. [11] Memorandum of Telephone Conversation, “Telephone Conversation with Russian President Yeltsin,” Oct. 30, 1997; Memorandum of Telephone Conversation, “Telephone Conversation with Russian President Boris Yeltsin, Feb. 23, 1998, https://clinton.presidentiallibraries.us/items/show/57569, 183, 253. [12] Memorandum of Conversation, “President Boris Yeltsin of Russia,” Birmingham, England, May 17, 1998, https://clinton.presidentiallibraries.us/items/show/57569, 316. [13] John Norris, Collision Course: NATO, Russia, and Kosovo (New York: Praeger, 2005). [14] Memorandum of Telephone Conversation, “Telephone Conversation with Russian President Yeltsin,” March 24, 1999, https://clinton.presidentiallibraries.us/items/show/57569, 432–36. Note that the document is dated 1998, but given the content and the placement in the records, it is clear the call was from 1999. [15] Memorandum of Telephone Conversation, “Telephone Conversation with Russian President Yeltsin,” May 2, 1999, https://clinton.presidentiallibraries.us/items/show/57569, 472. [16] Memorandum of Telephone Conversation, “Telcon with President Yeltsin of Russia,” June 10, 1999, https://clinton.presidentiallibraries.us/items/show/57569, 488. [17] Memorandum of Telephone Conversation, “Telephone Conversation with Russian President Yeltsin,” June 13, 1999, https://clinton.presidentiallibraries.us/items/show/57569, 535. [18] For more on the impact of NATO enlargement on their relationship, see Goldgeier and McFaul, Power and Purpose. [19] See Mary Elise Sarotte, “Perpetuating U.S. Preeminence: The 1990 Deals to ‘Bribe the Soviets Out’ and Move NATO In,” International Security 35, no. 1 (Summer 2010): 110–37, https://doi.org/10.1162/ISEC_a_00005; Mary Elise Sarotte, “Not One Inch Eastward? Bush, Baker, Kohl, Genscher, Gorbachev, and the Origin of Russian Resentment toward NATO Enlargement in February 1990,” Diplomatic History 34, no. 1 (January 2010): 119–40, https://doi.org/10.1111/j.1467-7709.2009.00835.x; Joshua R. Itzkowitz Shifrinson, “Deal or No Deal? The End of the Cold War and the U.S. Offer to Limit NATO Expansion,” International Security 40, no. 4 (Spring 2016): 7–44, https://www.mitpressjournals.org/doi/pdf/10.1162/ISEC_a_00236. For arguments that the notion of promises or assurances are mistaken, see, for example, Mark Kramer, “The Myth of a No-NATO-Enlargement Pledge to Russia,” Washington Quarterly 32, no. 2 (2009): 39–61, https://doi.org/10.1080/01636600902773248; James M. Goldgeier, Not Whether But When: The U.S. Decision to Enlarge NATO (Washington, DC: Brookings Institution Press, 1999); Steven Pifer, “Did NATO Promise Not to Enlarge? Gorbachev Says ‘No,’” Brookings Institution, Nov. 6, 2014, https://www.brookings.edu/blog/up-front/2014/11/06/did-nato-promise-not-to-enlarge-gorbachev-says-no/. [20] “Secretary Christopher’s Meeting with President Yeltsin,” Moscow, Oct. 22, 1993, https://nsarchive2.gwu.edu/dc.html?doc=4390822-Document-08-Secretary-Christopher-s-meeting-with. This document was posted by the National Security Archive at George Washington University earlier this year and was declassified through a Freedom of Information Act request I made many years ago. [21] For a discussion of this meeting’s importance for future developments, see James Goldgeier, “Promises Made, Promises Broken? What Yeltsin Was Told About NATO in 1993 and Why It Matters,” War on the Rocks, July 12, 2016, https://warontherocks.com/2016/07/promises-made-promises-broken-what-yeltsin-was-told-about-nato-in-1993-and-why-it-matters/. [22] Memorandum of Telephone Conversation, “Telcon with President Boris Yeltsin of the Russian Federation,” Dec. 22, 1993, https://clinton.presidentiallibraries.us/items/show/57568, 144–45. Unfortunately, the declassified memcon from their meeting in Moscow in January 1994 is not included in the cache of documents recently made available by the Clinton Library. [23] Talbott, The Russia Hand, 136; Ronald D. Asmus, Opening NATO’s Door: How the Alliance Remade Itself for a New Era (New York: Columbia University Press, 2004), 90. For an explanation of how U.S. policy developed from January to September 1994, see Goldgeier, Not Whether But When. [24] Memorandum of Telephone Conversation, “Telephone Conversation with Russian President Yeltsin,” Oct. 5, 1994, https://clinton.presidentiallibraries.us/items/show/57568, 227. Note that the document itself is dated 1993, but the content and the date on the transmittal memorandum make clear that it is from 1994. [25] Goldgeier and McFaul, Power and Purpose, 189–90. [26] Talbott, The Russia Hand, 141; “Remarks by the President at Plenary Session of 1994 Summit of the Council on Security and Cooperation in Europe,” White House Office of the Press Secretary, Dec. 5, 1994, https://clintonwhitehouse6.archives.gov/1994/12/1994-12-05-president-remarks-at-csce-summit-in-budapest.html. [27] Daniel Williams, “Yeltsin, Clinton Clash over NATO’s Role,” Washington Post, Dec. 6, 1994, https://www.washingtonpost.com/archive/politics/1994/12/06/yeltsin-clinton-clash-over-natos-role/19b7b3a1-abd1-4b1e-b4b2-362f1a236ce9/. [28] Goldgeier and McFaul, Power and Purpose, 192. [29] Memorandum of Telephone Conversation, “Presidential Telephone Call,” April 27, 1995, https://clinton.presidentiallibraries.us/items/show/57568, 281–82. [30] “Summary report on One-On-One Meeting Between Presidents Clinton and Yeltsin,” St. Catherine’s Hall, The Kremlin, May 10, 1995, https://clinton.presidentiallibraries.us/items/show/57568, 290–96. [31] Memorandum of Conversation, “Morning Meeting with Russian President Yeltsin: NATO-Russia, START, ABM/TMD,” Helsinki, March 21, 1997, https://clinton.presidentiallibraries.us/items/show/57569, 106–10. [32] Memorandum of Conversation, “Meeting with Russian President Yeltsin,” Istanbul, Nov. 19, 1999, https://clinton.presidentiallibraries.us/items/show/57569, 562–63. [33] Memorandum of Conversation, “Meeting with President Boris Yeltsin,” Sept. 27, 1994, https://clinton.presidentiallibraries.us/items/show/57568, 214–15. [34] “Summary report on One-On-One Meeting Between Presidents Clinton and Yeltsin,” St. Catherine’s Hall, The Kremlin, May 10, 1995, https://clinton.presidentiallibraries.us/items/show/57568, 293. [35] “POTUS-Yeltsin One-on-One,” Presidential Ceremonial Office, The Kremlin, April 21, 1996, https://clinton.presidentiallibraries.us/items/show/57568, 381–85. [36] Goldgeier and McFaul, Power and Purpose, 207. [37] Memorandum of Conversation, “Luncheon Meeting with Russian President Boris Yeltsin,” The Kremlin, April 21, 1996, https://clinton.presidentiallibraries.us/items/show/57569, 11–12. [38] “The President’s News Conference with President Boris Yeltsin of Russia in Helsinki,” March 21, 1997, http://www.presidency.ucsb.edu/ws/index.php?pid=53904. [39] Memorandum of Conversation, “Meeting with Russian President Yeltsin: NATO-Russia, Arms Control, Economics, Denver Summit of the Eight, Afghanistan, Iran,” Paris, May 27, 1997, https://clinton.presidentiallibraries.us/items/show/57569, 148–49. [40] James Goldgeier, "Trump and Putin one-on-one is not a good idea. Here’s why." Monkey Cage blog, July 19, 2017 (revised and republished July 13, 2018), https://www.washingtonpost.com/news/monkey-cage/wp/2017/07/19/there-are-no-notes-on-trumps-meeting-with-putin-thats-a-big-deal/. [41] Memorandum of Telephone Conversation, “Telephone Conversation with Russian President Yeltsin,” Sept. 8, 1999, https://clinton.presidentiallibraries.us/items/show/57569, 548. [42] Memorandum of Conversation, “Meeting with Russian President Yeltsin,” Istanbul, Nov. 19, 1999, https://clinton.presidentiallibraries.us/items/show/57569, 565–66. [43] Memorandum of Telephone Conversation, “Telcon with Russian President Boris Yeltsin,” Dec. 31, 1999, https://clinton.presidentiallibraries.us/items/show/57569, 582–84. ) [contents] => Array ( [title] => [contents] => ) ) [2] => WP_Post Object ( [ID] => 402 [post_author] => 97 [post_date] => 2018-02-08 04:00:31 [post_date_gmt] => 2018-02-08 09:00:31 [post_content] => The swift and peaceful collapse of the Communist order, first in Eastern Europe and then in the Soviet Union itself, was an extraordinarily important historical event, and people at the time were amazed to see the Soviet system end the way it did. But why did it come as such a surprise? Shouldn’t the experts in the West who had devoted their lives to the study of the Soviet Union have been able to see that such enormous changes were in the making? Many observers felt that social scientists in general, and economists in particular, had failed, as Martin Malia put it, to understand “the deeper dynamics driving Soviet reality.” Their writings, in Malia’s view, had suggested that the Soviet system was perfectly viable. They had assumed that the Soviet Union was “just another” modern society — that it was “as much a going concern as its ‘capitalist’ adversary.” Viewing things through that social scientific lens, he thought, had prevented Western scholars from seeing how serious the USSR’s problems were; this was the main reason so many of them had “been so wrong about so much for so long.”[1] Western economists in particular, he said, had been unable to see that the USSR had to deal with some very grave and perhaps even fatal problems; the more pessimistic line taken by some émigré Russian economists had mistakenly been dismissed out of hand. Mainstream economists in the West, he believed, had greatly overestimated Soviet economic performance; and had it not been for that, political scientists, sociologists, and historians would scarcely have painted such a rosy picture of Soviet performance in the areas they studied.[2] Malia was by no means the only scholar writing after the collapse of Soviet Union to argue along those lines. Vladimir Kontorovich, for example, claimed flatly that Western specialists in this area had failed to “‘diagnose observable tendencies,’ such as the continued decline of economic growth rates.”[3] According to Igor Birman, another émigré economist — and one much admired by Malia — it was “only in 1981, or maybe in 1982,” that people began “talking about problems within the Soviet economy.”[4] Even today, many observers still take it for granted that the economics profession, and indeed scholars more generally, essentially missed what was going on in the USSR — a major failure, given the importance of the issue.[5] And it was not just academic economists who were criticized for their supposed failure to understand what was happening in the USSR. The economic analysis produced by the CIA, it was said, had also failed to bring out how serious the Soviet economic problem was. Sen. Daniel Patrick Moynihan, himself a former academic, was by far the most prominent critic. “For a quarter century,” he wrote, “the C.I.A. has been repeatedly wrong about the major political and economic questions entrusted to its analysis.” For thirty years, according to Moynihan, “the intelligence community systematically misinformed successive Presidents as to the size and growth of the Soviet economy.” It had portrayed the USSR “as a maturing industrial society with a faster growth rate than the United States,” a country “destined, if the growth rates held, to surpass us in time, and in the interval well able to sustain its domestic military and its foreign adventures.” The Soviet economy, he said, was thought to be roughly “three times as large as it turned out to be.” That “was the conventional wisdom among economists,” but the fact that economists had taken that view was scarcely an excuse, since “the C.I.A. was meant to do better.”[6] Indeed, in Moynihan’s view, the CIA had done such a poor job in this area that he wanted to abolish the agency. The CIA, he repeatedly claimed, had utterly failed to see how serious the USSR’s economic problems were. “For 40 years,” he wrote in 1990, “we have hugely overestimated both the size of the Soviet economy and its rate of growth. This in turn has persistently distorted our estimates of the Soviet threat — notably, in the 1980s when we turned ourselves into a debtor nation to pay for the arms to counter the threat of a nation whose home front, unbeknownst to us, was collapsing.”[7] Moynihan later boasted that he had been able to see as early as 1979 that “Soviet economic growth was coming to a halt” and that “the society as well as the economy was sick.” “But our intelligence community,” he said, “just couldn't believe this. They kept reporting that the economy was soaring!”[8] In the public discussion, and to a certain extent even in the scholarly literature, such claims were treated as established fact. “As the Bay of Pigs was to intelligence operations,” the columnist William Safire wrote in the New York Times in 1990, “the extended misreading of the Soviet economic debacle is to intelligence evaluation.”[9] According to a 1992 article in the Wall Street Journal, the CIA’s track record “on the really big developments” was “hit-or-miss at best,” with “the downward spiral of the Soviet economy” counting as one of the “more spectacular misses.”[10] In 1994 a Newsweek columnist noted in passing that the CIA story was “one of repeated intelligence failures,” culminating in the “monumental miscalculation of the size of the Soviet economy, which the CIA judged to be three times as big as it really was.”[11] And in 1995 the Washington Post columnist Mary McGrory asked rhetorically whether any government department had “goofed up more than the Central Intelligence Agency”: “Their most egregious and expensive blunder about the Soviet economy we are still paying for.”[12] The same basic point was made by a former CIA officer, Melvin Goodman, in 1997; it was not until the mid-1980s, Goodman wrote, that the CIA “finally began to report lower growth rates for the economy.” The CIA, he wrote, “completely misread the qualitative and comparative economic picture and provided no warning to policymakers of the dramatic economic decline of the 1980s.”[13] And some leading scholars also took the view that “CIA estimates dramatically underreported the severity of the decline that preceded Gorbachev and accelerated during his leadership.”[14] [quote id="1"] It was not just the Americans, the argument ran, who had failed to understand what was going on in the USSR. The Soviets themselves, it was commonly argued, had “reason to be confident in their economy,” at least until around 1975; it was only later that “serious weaknesses” showed up.[15] Moscow, according to the well-known historian Christopher Andrew, for example, “was in economic denial.” “Though the naïve economic optimism of the Khrushchev era had largely evaporated,” he wrote (referring to this period), “the ideological blinkers which constricted the vision of Brezhnev, Andropov, and other Soviet true believers made it impossible for them to grasp the impossibility of the increasingly sclerotic Soviet command economy competing successfully with the market economies of the West.”[16] Soviet leaders, according to O.A. Westad, another distinguished scholar, were “cushioned from the grim reality of technological backwardness and lack of productivity by what today’s Russian economists call a political economy of illusions.”[17] Because of the nature of the Soviet system, according to Robert English, a leading specialist in this area, the Politburo, at least until the late 1980s, was not “subject to anything like the pressures that would weigh on the leaders of a pluralistic state in similar economic straits”; Soviet leaders could thus feel, until the very end, that the system was stable and that strategic retreat was not their only option.[18] Part of the problem, it was sometimes said, was that the leadership relied on inflated figures generated by its own bureaucracy; it therefore had little sense for what was really going on. “For all one knows,” Walter Laqueur wrote, “the Soviet leaders (certainly under Brezhnev) were as ignorant as the Sovietologists about the real state of the economy, because they were misled by their underlings, who, in turn, were misinformed by the local informants.”[19] Or maybe the regime simply did not want to know the truth — that it was determined to turn a blind eye to the country’s problems and to pretend, even to itself, that nothing was really wrong.[20] The goal here is to examine some of these arguments in the light of the massive body of evidence we now have bearing on the subject. This, of course, is not the first time these issues have been dealt with. A number of writers have defended the performance of Western economists specializing in this area; Gertrude Schroeder’s “Reflections on Economic Sovietology” (1995) is of particular interest in this context.[21] There is, moreover, a certain body of work dealing with — and mainly defending — the CIA’s work on the Soviet economy.[22] But those studies of the CIA’s performance focused mainly on the mid- and late 1980s. The focus here, however, will be on an earlier period:  the period from the mid-1960s to about 1985. The goal is to give some feel for the sort of thinking that went into the economic assessments, both on the part of the CIA analysts and their academic colleagues (who, it is important to note, were part of the same intellectual community). I want to show, in fact, how impressive that thinking was, how early the key ideas took shape in those circles — and indeed how the Soviets themselves came to approach the problem in much the same way. What is the point of doing this kind of analysis? The aim is not just to set the record straight as a kind of end in itself. The story is worth telling only because it has a certain larger importance. For one thing, the findings here have a major bearing on how the later Cold War is to be understood. A sense for how serious the USSR’s economic problems were, to the extent that it was shared by the political leadership, was bound to play a key role in shaping policy on both sides. That basic point needs to be kept in mind as we try to make sense of great power politics not just in the late 1980s, but in the whole period from 1963 to 1991. But beyond that the story tells us something important about the way the American political system works. We like to think that when policy issues are discussed in democracies like our own, intellectual standards are maintained because people are held accountable for making claims that turn out to be baseless. What this case suggests, however, is that there is much less accountability in our system than people realize — even on issues of fundamental political importance, and even when the evidence is readily available.

Measuring Soviet Economic Performance

Was it true, as many observers have claimed, that academic economists had failed to see what was going on with the Soviet economy, that the CIA analysts had presented much too rosy a picture, and that the Soviet leadership itself did not really understand what was going on? If true, that conclusion would have a major bearing on how the period should be interpreted. But is it in fact correct? In a word, the answer is no. There is, for example, no basis for the claim that Western economists had failed to “‘diagnose observable tendencies,’ such as the continued decline of economic growth rates.”[23] Experts in this area had little trouble recognizing that the Soviet growth rate was falling. It was widely understood by the mid-1960s that the Soviet economy was growing less rapidly than in the past. As the CIA’s leading expert on the Soviet economy, Rush Greenslade, pointed out in 1966, “the slowdown of economic growth in the U.S.S.R. is now a well-known story.” Abram Bergson, professor of economics at Harvard and the most prominent scholar working in this area, referred to it in a 1966 roundtable as a “very familiar fact.”[24] That general point, moreover, was commonly noted in the press at the time. Even a casual reader of the New York Times — someone who merely glanced at the headlines — could scarcely fail to note that the Soviet growth rate had declined (See Table 1). Subsequent CIA calculations simply underscored that basic point. The growth rate was worse in the early 1970s than it had been in the late 1960s; it was worse in the late 1970s than it had been in the first part of that decade; and in the early 1980s it was lower still (See Table 2). As one scholar put it in 1995 looking back on this whole period: “The Soviet economy seemed to be gradually running out of steam, being dragged to stagnation and decline by some inexorable underlying process.”[25]   Table 1: New York Times Articles Relating to Soviet Economic Performance, 1958-1985 [table id=Trachtenberg1 /] *Front-page articles are marked with an asterisk   Table 2: CIA Estimates of Average Annual National Income Growth Rates* [table id=Trachtenberg2 /] * Gross National Product for USSR; Gross Domestic Product for OECD countries ** From 1982 estimate *** For 1976 to 1980 Sources: 1967 estimate: Central Intelligence Agency, “Soviet Economic Problems and Prospects,” NIE 11-5-67, May 25, 1967, 3-4, CIA Freedom of Information Act Electronic Reading Room [CIAERR] (https://www.cia.gov/library/readingroom/), Document no. 0000272916. 1982 estimate: Central Intelligence Agency (John Pitzer), “Gross National Product of the USSR, 1950-80,” Tables 1 and A-2, in USSR: Measures of Economic Growth and Development, 1950-80 (Washington: Government Printing Office, 1982), 20, 55. 1990 estimate: Central Intelligence Agency (Laurie Kurtzweg), “Measures of Soviet Gross National Product in 1982 Prices,” November 1990, 58, Table A-2, published by Congress’s Joint Economic Committee.   What about Moynihan’s claim that the CIA had given the impression that the Soviet economy was growing a lot faster than America’s and that the USSR might well out-produce the United States in the not-too-distant future? That certainly had been the CIA’s view in the late 1950s. At that time, the Soviet economy seemed to be growing rapidly; the U.S. economy appeared sluggish in comparison. If that trend continued, the USSR might actually be able to overtake the United States not too far down the road. The Soviet leader Nikita Khrushchev repeatedly predicted that by around 1970 the USSR would catch up with and surpass the United States in per capita production, and in 1961 the goal of surpassing America by the end of the decade was even included in the official party program.[26] The political implications were clear: If the Soviet Union was able to out-produce the United States, the “correlation of forces” would shift, and the Communist side would soon have the upper hand in its conflict with the West.[27] In the United States these Soviet boasts were by no means dismissed as mere propaganda. The Eisenhower administration’s CIA director, Allen Dulles, sounded the alarm in a 1958 speech. The Soviet economy was expanding rapidly; the USSR seemed to be catching up. The United States thus had to deal with “the most serious challenge” it had ever faced in peacetime. “If the Soviet industrial growth rate persists at 8 or 9 per cent per annum over the next decade, as is forecast,” he told a congressional committee the next year, “the gap between our two economies by 1970 will be dangerously narrowed unless our own industrial growth rate is substantially increased from the present pace.” The New York Times praised Dulles for “brilliantly” warning the country “of the perils that threaten our survival.” The paper agreed that “future Soviet growth to at least 1970 seems sure to be rapid” and that America’s “margin of superiority over the Soviet Union” would be “narrowed dangerously” if the United States did not speed up its own growth rate.[28] Those concerns were widely shared within the American political class, and the issue played a major, and perhaps decisive, role in the 1960 presidential election. Soviet output might be only 44 percent of America’s today, the Democratic nominee, Sen. John F. Kennedy, said in the first presidential debate. But the narrowing of that gap posed a real threat to American security. Kennedy did not want to see the day when Soviet production was “60 percent of ours and 70 and 75 and 80 and 90 percent of ours, with all the force and power that it could bring to bear to cause our destruction.” America’s independence, indeed America’s survival, was at risk; the Eisenhower policy was too passive; a far more active policy was in order.[29] And the U.S. economy did revive after the change of administration, in part thanks to some modest expansionist policies put into effect during the Kennedy presidency. Gross domestic product grew by more than 6 percent in 1962 and by more than 4 percent in 1963, and this was no mere flash in the pan. The annual growth rate, according to recent calculations, was twice as high in the four years after Kennedy took over (5.7%) as it had been during Eisenhower’s second term (2.8%).[30] The Soviet economy, on the other hand, had started to run into trouble. In January 1964, the CIA reported that the Soviet growth rate had dropped from between 6 and 10 percent in the 1950s “to less than 2.5 percent in 1962 and 1963.”[31] That finding was considered extraordinarily important; the new president, Lyndon Johnson, sent a special delegation to Europe to brief the NATO allies on what had been learned.[32] To be sure, those exceptionally low growth rates could be attributed in large part to shortfalls in agriculture brought on by unusually bad weather, and Soviet performance did improve somewhat in subsequent years. But the rebound was limited. According to one estimate at the time, the Soviet economy was growing at a rate of about 4 percent annually in the early 1960s, well below what had been predicted.[33] All of this, in fact, came as quite a surprise to U.S. experts, in the CIA and in academia, who followed these issues. As one of them pointed out in 1966, most analysts had expected a certain slowdown in Soviet economic growth, “but the suddenness of the change, like a horse going lame, surprised many, including this writer.”[34] Thus, while it is indeed true that both the CIA and, to a certain extent, the academic economists, had taken the view in the late 1950s and very early 1960s that the Soviets were quickly gaining on America in the “great economic race” (as Bergson called it), that view faded rapidly in the early Johnson period and a rather different picture took shape. The Soviet economy was still gaining on the United States, but more slowly than before. The ratio of Soviet to American gross national product, according to a 1970 CIA estimate, increased from about 48 percent in 1961 to only about 51 percent in 1969.[35] By the late 1970s, the tide seemed to have turned. The USSR now seemed to be losing ground. Soviet GNP, according to an estimate the CIA produced in 1984, was only 55 percent of America’s, down from 58 percent in 1975; the ratio was no greater than it had been in 1970 (See Figure 1). And if one compared the two blocs, the picture was even clearer. In 1960, America and its allies were producing three times as much as the Warsaw Pact countries; in both 1970 and 1980, according to CIA calculations, the picture was basically the same.[36] Perhaps the precise ratio was off, but in this context it is mainly the trend that matters: In the CIA’s view, America’s economic lead was not being threatened by a rapid build-up of Soviet economic power.   [amcharts id="chart-9"] * Geometric mean of estimates based on Soviet and U.S. prices ** Preliminary figures Source: Reproduced from CIA Office of Soviet Analysis, “A Comparison of Soviet and US Gross National Products, 1960-83,” August 1984, CIAERR/0000498181, iii. See also Noren, “CIA’s Analysis of the Soviet Economy,” 45-48.   What finally is to be made of the claim that the CIA had grossly overestimated the size of the Soviet economy — that it had mistakenly portrayed it as being three or four times larger than it really was? CIA estimates, it now appears, were probably too high, but they were not nearly as bad as Moynihan and others had suggested.[37] The evidence supporting the claim that the CIA estimates were grossly inflated — that the agency had overestimated Soviet GNP by a factor of three or four (meaning that the U.S. economy was at least five times as big), or even that the USSR was just an “Upper Volta with nuclear weapons” as was sometimes said — is quite weak, if only because an Upper Volta could never have built the sort of military establishment the Soviet Union created. Some critics seem to assume that because various Russian (and other) economists had come up with much lower estimates, that in itself shows that the CIA figures were unrealistically high.[38] But the mere fact that alternative estimates were put forward scarcely proves that the CIA figures were grossly inflated, especially since those alternative estimates, and the methods that produced them, have come in for their share of criticism.[39] And not every Russian scholar in the post-Soviet period took the view that the CIA estimates were deeply flawed. As Angus Maddison points out, V.M. Kudrov (whom Maddison calls a “leading Soviet Americanologist”) thought the CIA had done a good job in this area.[40] Maddison himself, a highly respected authority on national income accounting, wrote in 1998 that the CIA “estimates of Soviet growth performance” were “the best documented and most reasonable estimates we have.”[41]

Analyzing the Problem

The key issue, however, is not really about numbers. It is much more about how good the qualitative assessments were — about whether, and if so when, analysts were able to see that the Soviet economy was in real trouble. Did economists, both in academia and in the CIA, think that there was nothing fundamentally wrong with the Soviet system? To the extent that they recognized that there were major problems in this area, how were those problems understood? Did they interpret what they saw — the declining growth rate, most notably — in essentially conjunctural terms? Did they view the problems as resulting, for example, from bad weather, excessive military spending, changes in the international price of oil, and so on — that is, the sort of thing that could easily change from year to year? Or did at least some of them, at some point, come to the conclusion that the USSR’s problems were deep-seated — that the fundamental problems were structural in nature and would therefore probably worsen with time? Did they, in other words, develop the sort of theoretical framework that would enable them to see beneath the surface and understand the basic problem the Soviets would have to deal with? The answer is that a powerful theoretical framework did develop, but it took a while for it to take root among economists working in this area. In the early 1960s, when the decline in the Soviet growth rate was first noticed, the falloff was not interpreted in structural terms. U.S. officials instead attributed it mainly to increased military spending — that is, to a readily reversible factor. The CIA, for example, in a January 1964 press release, said that “much of the blame for recent reductions in the rate of growth falls on the sharp increase in Soviet defense spending, which between 1959 and 1963 increased by about a third,” and the agency took much the same line in classified reports at the time.[42] But there were problems with that argument, both conceptual and empirical. Military end-products are as much a part of GNP as consumer goods are, and while increased defense spending certainly hurt the civilian economy it would not in itself necessarily affect the overall rate of economic growth. If an increase in military spending resulted in a reduction in overall investment, GNP would grow more slowly than it otherwise might, but a shift in priorities toward the military sphere might be accompanied not by a cut in overall investment but, rather, by a reallocation of resources within the capital-goods sector — that is, in an increased emphasis on investment in industries that supplied the military at the expense of industries that mainly produced consumer goods. Such a shift in priorities could actually have had a positive impact on the overall growth rate, if common assumptions about higher productivity in the military sector were correct.[43] By 1970 CIA analysts had in fact reached the conclusion that military spending was not the fundamental cause of the slowdown. It certainly had not resulted in a reduction in the share of GNP earmarked for investment. That share actually rose slightly from about 23 percent in the late 1950s to about 25 percent in the early 1960s and then to about 27 percent by 1969; it never fell below that level through at least 1987, according to CIA estimates released in 1982 and 1990.[44] On the other hand, the share of GNP devoted to defense had decreased from a high of about 15 percent during the Korean War period down to about 13 percent in the mid-1950s and finally down to about 9 percent in 1960-61, more or less remaining at that level for the rest of the decade. Looking at those latter figures, one CIA analyst concluded that the idea that the burden of defense was to blame for the slowdown was something of a “bugaboo.” If the economy was growing rapidly when the military burden was high and the slowdown took place as the burden was being reduced, how could defense spending be to blame for the decline in the growth rate?[45] [quote id="2"] And indeed by the late 1960s the prevailing view among Western analysts was that the real problem had deeper causes and that Soviet leaders were going to have to make some very tough choices. Specialists like Bergson had previously assumed that the Soviets would be able to maintain a high growth rate because they, unlike their rivals in the West, could exercise “political control over the rate of investment.”[46] It was for that reason that in 1961 he had been cautiously optimistic about the USSR’s economic prospects.[47] But he soon came to see that things were not so simple. It would be hard, he pointed out, for the Soviets to make sure that their capital stock continued to grow at even its present rate, since that would mean a constant rise in the share of national income devoted to investment. The share allocated to consumption, he thought, would have to decline correspondingly.[48] For if investment as a share of national income remained constant, investment and national income would grow at the same rate. Since in the long run the growth rate for investment determined the rate at which the capital stock grew — indeed, the two rates tended to converge — sooner or later the capital stock would grow no more quickly than national income as a whole.[49] Yet it would have to if the present rate of economic growth were to be sustained simply by expanding the capital stock: Given that the workforce was growing less rapidly than the economy as a whole, the capital stock would have to expand more rapidly, since those two growth rates together (assuming no increase in productivity) essentially determined the growth rate for the economy as a whole.[50] The fact that, with a large and aging capital stock, an increasing amount of investment would have to go toward replacing worn-out plant and equipment simply compounded the problem.[51] All this, Bergson had come to feel, lay “at the very heart of the Russian problem.”[52] What this kind of analysis suggested was that the Soviets could not sustain a high rate of economic growth just by plowing more and more capital into the economy. If productivity did not rise substantially, the Soviet leadership would confront major problems. Investment policy alone could not do the job — a finding that perhaps had a special resonance, given the way Western economists had by this point come to understand the whole phenomenon of economic growth, and especially the leading role that technological change played in the growth process. The implications were clear. Investment policy on its own could not guarantee a high growth rate; if a high growth rate was to be sustained, capital and labor would have to become more productive. The productivity problem was thus of fundamental importance. And this was why findings about productivity loomed so large in the analysis. Indeed, perhaps the most striking empirical fact to emerge from the study of the Soviet economy was that “total factor productivity” — a measure of the part of the growth of output not accounted for by growth in factor inputs (essentially labor and capital) — was not increasing at anything like its earlier rate. A 1964 CIA study had revealed that the annual growth rate for factor productivity in industry had fallen from almost 5 percent in the late 1950s to only about 2 percent in the early 1960s.[53] Three years later another CIA study pointed out that the decline in the Soviet growth rate (from about 6.5 percent in the last half of the 1950s down to about 4.5 percent in the first half of the 1960s) could “be attributed primarily to the sharp drop in the rate of growth of productivity” in the economy as a whole (from 2.8 percent down to a mere 0.6 percent in the same period).[54] According to an important July 1977 CIA study, the growth rate had turned negative: factor productivity actually declined in the early 1970s.[55] The basic trend here was clear to academic economists. Bergson, for example, in a major 1973 article, noted that total factor productivity had grown at an annual rate of 1.7 percent from 1950 to 1958; that rate, he pointed out, had fallen to 0.7 percent in the period from 1958 to 1967.[56] The corresponding growth rates were much higher even in the most sluggish Western economies (See Tables 3 and 4).   Table 3:  Estimates of Average Annual Growth Rates of Total Factor Productivity for the Soviet Economy [table id=Trachtenberg3 /] Sources: CIA 1967: “Soviet Economic Problems and Prospects,” NIE 11-5-67, May 25, 1967, 3-4; CIA 1977: “Soviet Economic Problems and Prospects,” July 1977, 10; Bergson, “Toward a New Growth Model,” 3; Easterly and Fischer, “Soviet Economic Decline,” 353, Table 4.   Table 4:  Comparative Average Annual Growth Rates of National Income and Total Factor Productivity (TFP) [table id=Trachtenberg4 /] * From Simon Kuznets, Economic Growth of Nations: Total Output and Production Structure (Cambridge: Harvard University Press, 1971), 74, Table 9, Part B, Columns 1 and 5, except for national income growth rate figure for USSR. ** From Angus Maddison, The World Economy in the 20th Century (Paris: Organization for Economic Cooperation and Development, 1989), 81, Table 6.10. ***  Figures for OECD countries are given for “national income,” with no further specification. **** Figure is for GNP, calculated from CIA (Laurie Kurtzweg), “Measures of Soviet Gross National Product in 1982 Prices,” 54-55, Table A-1.   How then was what one analyst referred to in 1966 as a “precipitous decline” in the rate at which productivity had been growing to be explained?[57] This issue lay at the heart of much of the work done on the Soviet economy from the mid-1960s on.[58] The answers were not obvious, but by the late 1960s certain ideas were widely accepted. First, it was assumed (as basic economic theory would lead one to expect) that diminishing returns had set in as capital had become more abundant relative to labor.[59] Certainly the evidence showed, as Bergson put it, that the Soviets were “suffering from a rising capital-output ratio” — that is, it was taking more and more capital to produce a given unit of output.[60] A second major point was that by the mid-1960s all the low-hanging fruit had been harvested: easily exploitable resources had already been exploited (Khrushchev’s “virgin lands” program being a good example here); relatively simple, and thus easily importable, foreign technologies had already been imported; and as their economy had become more developed, the Soviets were no longer able to benefit as much from the “advantages of backwardness” as they had in the past (an argument developed most notably by Bergson’s Harvard colleague and friend Alexander Gerschenkron).[61] Western economies were embedded in a vast international economic system, in which technology transfer was relatively easy and the level of competition — and thus the spur to innovation — was relatively high. With their much more autarchic and bureaucratically run economy, the Soviets could not benefit from that system to nearly the same extent. They might try hard to import Western technology through both legal and illegal means, but as technology advanced the barriers to technology transfer inherent in the Soviet system were bound to loom larger.[62] It was clear what those barriers were, as Joseph Berliner, a leading specialist in this area, pointed out in a 1973 essay. “The international flow of technological knowledge,” he wrote, “takes place through the movement of publications, products, and persons. The Soviets have relied most heavily on the first, less on the second, and least on the last. The effectiveness of technological transfer, however, is in the reverse order.” They therefore had not benefited, and by implication could not benefit, from technological advances to the same extent as their rivals in the West.[63] A third and somewhat related argument focused on the fact that the Soviet economy was far more complex than it had been in the past. The assumption was that the well-known inefficiencies and rigidities of the Soviet system would cause more problems than they had in earlier years, when economic goals (such as vastly increased steel production) were relatively simple and the strategies for achieving them were more or less obvious. But an enormously complex modern economy could not be run efficiently in such a centralized way.[64] What all this suggested was that the USSR’s economic problems could be expected to worsen unless the Soviet economy changed in fundamental ways. In the past a rapid increase in factor inputs — essentially capital and labor — had been the main engine of growth, but that strategy appeared to have run its course. The old “extensive” growth model, as it was called, had to be replaced with a new “intensive” growth model, focused on improving productivity — either that, or the USSR’s economic problems would become even more serious.[65] This was one of Bergson’s main points. His main article laying out these ideas, called “Toward a New Growth Model,” concluded with the observation that the traditional Soviet model “may not survive its dictatorial originator much longer.”[66] Other scholars went a bit further and as early as 1966 actually used the word “crisis.”[67] Gregory Grossman, a professor of economics at Berkeley and a leading specialist in this area, was particularly prescient. In an extraordinary article published in 1962, Grossman argued that some of the most basic features of the Soviet economy — the absence of a market mechanism, the limited role that money played in economic life and the limits on labor mobility — were increasingly counterproductive. They clashed with “some of the most fundamental requirements of a modern economy and society”:
The lack of a market mechanism, that is, the command principle, obstructs decentralization and thus conflicts with a modern economy’s enormous complexity, the need for dispersed initiative to take full advantage of industrialism’s productive and growing potential, and the modern consumer’s quest for quality and variety of goods and services. Demonetization, albeit partial, stands in the way of effective decentralization and bars the use of a rational calculus even within the framework of the command economy. And lastly, direct controls over labor — trained and educated labor at that — offend against human dignity and the sense of justice.
The conclusion he drew was of fundamental importance: “In terms of the historical contrast with the West,” he wrote, “the wheel is set for another turn.”[68] The basic assumption here was that the absence of a market, or at least of market-like mechanisms, lay at the heart of the productivity problem; it followed that a solution would depend on economic decentralization. But would the Soviets be able make the transition — that is, would they be able to move toward a more efficient, and thus more decentralized, system? On the one hand, they certainly had enormous incentives to do so. For both domestic and foreign policy reasons, a vibrant economy was of fundamental importance. The Soviet government, as Bergson pointed out in 1966, had over time become “committed to the notion that rapid growth was the success criterion for the system as a whole,” so the decline in the growth rate was “politically and ideologically very disturbing.”[69] The CIA economist Rush Greenslade made much the same point that same year. It was hard, he said, to see how the Soviets could accept “slower growth and give up hope” of catching up with the West. They had always justified the sacrifices their people had to make “as the necessary price of Utopia in the future.” Could they lower their sights now, settle for just moderate growth, and aim merely for a society that was “a pale and lagging imitation of Western life”? It was hard to imagine how that could happen after all that had been said, especially given what the domestic political consequences might be.[70] It was also clear that a strong economy was needed to generate the resources to build a military establishment that would enable the USSR to hold its own against rivals or even to pursue more ambitious goals. And Soviet influence in the Third World depended in part on the Soviet Union’s ability to hold up its system as a model — one that could lead to rapid economic growth. On the other hand, a thorough reinvigoration of the economy called for fairly radical economic reform, and it would be extremely difficult for the Soviets to dismantle the command economy, not just for ideological reasons. Strong bureaucratic interests were bound to oppose far-reaching reform of that sort, even if the leadership wanted to move in that direction.[71] And it was far from obvious that the leadership would even want to do so, given that partial marketization was problematic even for purely economic reasons: “co-existence between the command principle and the market mechanism would seem to be unstable and ephemeral,” so perhaps there was “no half-way house between a market economy and a command economy.”[72] But at its core the problem was political: At stake was “the whole centralized structure of the Soviet economy, the command economy itself, and ultimately, the location and distribution of power in the society.”[73] No one could tell where even partial marketization might lead, a point perhaps underscored by what had happened in Czechoslovakia in 1968.[74] Fear of the unknown — that is, of a possible unraveling of the system, political as well as economic, once the reform process had begun — could easily hold the Soviet leaders back. [quote id="3"] Yet, as Grossman pointed out in 1963, the issue was not quite that simple. Partial marketization could not be ruled out entirely. Over time, he thought, the Soviet system might become more relaxed. An improvement in the international environment, “a greater sense of security and comfort due to material progress,” “the waning of the ideological élan,” “the embourgeoisement of the population, the growing expertise and self-confidence of the professionals,” and so on — might not such developments, he wondered, “lead to a more relaxed attitude toward resource mobilization and the enforcement of priorities?” In that case, “certain sectors might be separated out of the command pyramid and ‘marketized’; for example, agriculture (albeit still largely socialized) and construction (or some parts thereof).” “But then,” he went on to speculate, “such a hybrid structure might prove to be only a transitional stage, for the same political developments would probably make it more difficult to resist the lure of a thoroughgoing socialist market economy à la yougoslave.” “But we are now,” he concluded, “on very ‘iffy’ ground.”[75] The point here is that the sort of analysis economists had developed in the 1960s did not quite allow one to see with any certainty how things would change. Its main value was that it enabled one to understand the structure of the problem the Soviets would face and thus could serve as a framework for informed speculation about how things might develop. The fundamental question had to do with the core issue of stagnation or marketization. The command economy lay at the heart of the Soviet system, Greenslade pointed out in 1966, but it was “as clear as can be that no commands can cure the economic troubles of the U.S.S.R.” Yet the Soviets’ justification for their system, and for all the sacrifices the Soviet people had been forced to make, was that it would produce material well-being in the future. It was hard to see how they could give up on that, but it was equally hard to see how they could give up on the command economy. One could see the Soviets’ problem: Their dilemma, Greenslade thought, was “that the causes of the slowdown and the party’s tangible raison d’être are rooted equally deep in the system.”[76] But no one could tell how they would resolve it. Assuming, moreover, that the Soviets were not able to liberalize their economy in any significant way and that the slowdown continued, how were the resources they did have to be divided between their three main uses: consumption, investment, and defense? The problem was obvious. Increasing investment was one of the few things they could do to increase the growth rate, even if it was becoming less and less effective in that regard, but allocating a greater share of national income to investment would mean that the share going to defense or consumption or both would have to be cut. It was difficult to cut defense spending, given that the USSR was competing with a much richer and more technologically advanced group of powers (not to mention China). On the other hand, to cut back on what was going to the consumer might be difficult, in part because the whole basis of the regime’s policy in the post-Stalin period was to change the relationship between state and society — so that it rested not on brute force and terror but on at least a degree of consent; the regime’s legitimacy in the eyes of the people, and to a certain extent in its own eyes as well, rested in large measure on its ability to deliver the goods and improve the material well-being of the population as a whole. And the consumer’s interests had to be taken into account for purely economic reasons. “The methods used for forced industrialization,” as a CIA analyst pointed out in 1970, were “increasingly ill-suited for the management of a complex, modern economy. The highly skilled, technical labor force now required is more motivated by incentives than by coercion. This means, in turn, that consumers can be no longer treated as residual claimants.”[77] But all this meant that the Soviets were going to have to face some very hard problems. As the economy slowed down and the allocation problem began to bite, they might be forced to take the basic question of marketization more seriously, but given the fundamental nature of their system would they really be willing to move in that direction? “I have the feeling,” Bergson said in a 1966 roundtable of economists devoted to this issue, “that it’s going to be terribly difficult for the Russians to work out a solution for the problems they are dealing with.” Another economist in that roundtable, G. Warren Nutter, went a bit further. The Soviets, he thought, were “facing extremely difficult problems of choice as to which way they will move — to the point of whether they will fundamentally change their economic system.”[78] Again, no one could tell how the issues would be resolved, but given the seriousness of this set of problems it was hard to think that things would just go on as they had. Perhaps gradual change was possible, but it was also possible that Soviet society would not be able to evolve in that way. In that case, three analysts wrote in 1966, “if substantial changes do occur, they may occur rapidly and have far-reaching and immeasurable impacts on the whole fabric of society.” Even the modest reforms the Soviets seemed to be contemplating, might, if implemented, “take them well beyond the dimensions anticipated by those who have unleashed the forces of change. The end result may well be a second economic revolution comparable in scope and depth to that launched by Stalin in the thirties.”[79] Those words, of course, have a special resonance today given what happened during the Gorbachev period. So while the analysis might not have enabled people to see precisely how the USSR was going to develop, it did provide a certain window into the future — a hazy and uncertain window to be sure, but one of real value nonetheless. What was particularly impressive was that this conceptual framework took hold very early on — in the mid- and late 1960s, that is, at a time when the Soviet growth rate still seemed quite respectable by Western standards.[80] The economists had been able to see beneath the surface and give some feel for the seriousness of the problem and for why those problems were likely to grow over time. It was certainly not the case that mainstream American economists took a rosy view of Soviet economic performance and prospects well into the 1980s (as people like Malia had claimed). They not only saw, very early on, that the Soviets faced major problems, but also saw why those problems were likely to worsen in the not-too-distant future.

The Widening Circle

The core analytical framework that had taken hold by the late 1960s remained intact for the remainder of the pre-Gorbachev period, but the basic picture that came across was increasingly bleak: The Soviet economy was slowing down, and the slowdown was expected to continue in the years to come. An important July 1977 CIA paper called “Soviet Economic Problems and Prospects” is a good case in point. The document began by noting that the Soviet economy faced “serious strains in the decade ahead”; the basic problems that had long been noted “were likely to intensify”; “a marked reduction in the rate of economic growth in the 1980s,” it concluded, down to between 2 and 3½ percent a year, seemed “almost inevitable.”[81] Similar views can be found in many other CIA documents from the period. The CIA director in the late 1970s, Adm. Stansfield Turner, took the same line year after year in testimony before Congress.[82] These increasingly gloomy assessments were widely reported in the press (See Table 1 above). In the late 1970s, the basic message was that the Soviet leadership would eventually have to deal with some very difficult problems. By the start of the 1980s, the situation was viewed as even more serious. The veteran New York Times correspondent Harrison Salisbury, for example, referred to “debilitating Soviet weaknesses” and to the “crushing problems” Soviet leaders had to face in an important article published in the New York Times Magazine in February 1981, at the beginning of the Reagan presidency; he concluded by talking about how the Soviets had to “fight their way out of the quagmire into which failed Marxian precepts and their own rigid bureaucracy” had led them.[83] Ivan Selin, a former Pentagon official who for years had been deeply involved with Soviet affairs, expressed much the same view in a 1982 roundtable. The Soviets, he said, were “in a terribly difficult situation,” “probably the worst situation they’ve faced at least since the early 1950s”; “their prospects are pretty grim — at least out to the end of the century.”[84] That same year Thomas Reed, formerly a consultant to the Reagan National Security Council and then a special assistant to the president, called the Soviet Union “an economic basket case”; the Soviet government, Reed said, could not “feed its own people”;  “the potential for corruption and decay,” he added, had “mushroomed in the dank darkness of the Soviet dictatorship.”[85] During the presidential transition at the end of 1980, CIA analysts had in fact made it clear to President-Elect Reagan that “the Soviets are really suffering” and that “these guys are in a lot of trouble.”[86] By 1983, when the economist Marshall Goldman, associate director of Harvard’s Russian Research Center, published his book U.S.S.R. in Crisis: The Failure of an Economic System, the view that the Soviet Union was in deep trouble was quite common.[87] Indeed, Goldman noted in his preface that other scholars had come to the perspective reflected in the book’s title earlier than he had.[88] A CIA document issued in early 1981 noted that the Soviet leadership’s apparent belief “that the decline in Soviet economic performance can be kept within manageable bounds without major policy change diverges from the perception of most Western observers, who foresee more severe consequences stemming from this business-as-usual attitude.”[89] The reference to “Western,” and not just American, observers is worth noting: Many Europeans, such as the highly respected French journalist Michel Tatu, took much the same view.[90] The consensus by the early 1980s, in other words, was that the economic problem was already quite serious and would probably worsen in the next few years. A new element was incorporated into the analysis beginning in the late 1970s. For the first time, serious attention was given to the social problems the Soviets had to contend with — alcoholism, corruption, absenteeism and so on — and to the demographic indicators suggesting that Soviet society had taken a sharp turn for the worse.[91] The most important work in this area was done not by the CIA (which did not pay much attention to issues of this sort) but by the demographer Murray Feshbach.[92] Feshbach and his co-author Christopher Davis presented their findings in a Wall Street Journal article in 1978. “Unlike the rest of the industrialized world,” they began, “the Soviet Union is experiencing a rising infant mortality rate and falling life expectancy.”[93] The evidence was outlined in some detail in a paper they released two years later, and Feshbach published several other articles on the subject in the early 1980s.[94] Their findings were extraordinary. The Soviet infant mortality rate had “shot up by over 50%” in the 1970s; it was three times as high as the U.S. rate.[95] Life expectancy for males had fallen from 67 years in 1964 to about 62 years in 1982.[96] It seemed clear, moreover, that a leading cause for all this was what Feshbach called the “pandemic” of alcoholism in the USSR, a point developed in greater depth by Feshbach’s sometime collaborator, the Duke economist Vladimir Treml.[97] Infant mortality figures were considered a good indicator of the overall health of a society; it thus seemed that the general health of the Soviet population was deteriorating and that the USSR’s health-care system was not able to cope with the problem. Recent studies had suggested, one leading analyst, Nick Eberstadt, wrote in 1981, that the Soviet health-care system had “deteriorated dramatically in the past 15 years” and that “many believe its lapses may now have reached epidemic proportions.”[98] [quote id="4"] The press paid a good deal of attention to what these scholars were saying. The Feshbach-Davis study, for example, was the subject of a front-page article in the Washington Post after it came out in 1980.[99] Eberstadt published an important piece in the New York Review of Books in early 1981 discussing Davis and Feshbach’s “startling report” and drawing out some of its implications. Looking at the “bits of information” they and others had supplied, Eberstadt asked: “What do these things say about alienation and depression, the desire of people to look after their health and to keep others alive?” To him, they suggested that “some virulent strain of anomie” was “running rampant” and that the Soviet social order was “in the midst of deadly decay.” He referred to the “debilitation of the workforce” and the “demoralization which underlies it”; the 1960s and 1970s, he thought, had “proved devastating to Soviet society.”[100] Another analyst was even more blunt. “The health data,” he was quoted as saying, “simply reflect that some things may be cracking up there.”[101] Other observers interpreted Feshbach’s findings in much the same way. They were, for example, a key basis for Moynihan’s argument in 1979 that the USSR might “blow up.”[102] Other information pointed in the same general direction. Corruption, it was learned, had become pervasive; in 1978 a Soviet dissident, Konstantin Simis, published an important article on the subject in Survey, one of the main journals in the field.[103] Even the family of Soviet leader Leonid Brezhnev was not beyond reproach in this regard — and Brezhnev’s hold on power at the end, in 1982, was so shaky that Yuri Andropov, the head of the KGB, was able with impunity to leak some damaging information about Brezhnev’s daughter, her lover (“Boris the Gypsy”), and a diamond scam they were involved with.[104] Brezhnev himself, clinging to power despite obvious physical and mental decline, seemed to personify all that was wrong with the system. Unable toward the end even to “utter a few phrases in public unless they were printed out for him,” and barely able to stand unaided, “he became a symbol,” Dmitri Volkogonov writes, “of the entire decrepit leadership.”[105] People were increasingly coming to feel that the Soviet system was in decline. In 1967, the economist Joseph Berliner was struck during a visit to the USSR that the Soviet economists he spoke with took a gloomy view of their country’s economic prospects — quite different from the “mood of exuberance and of confidence in the vitality of the Soviet economic system” he had observed in another visit a decade earlier.[106] Other observers came away with similar impressions: One scholar, who had spent four years in the Soviet Union in the early and mid-1970s, published an article when he returned home called “The ‘New Soviet Man’ Turns Pessimist.”[107] William Odom remembers “several chance conversations” he had while serving as assistant U.S. military attaché in Moscow from 1972 to 1974: “middle-level bureaucrats and officers expressed deep concern over the state of the economy and the military burdens it carried.”[108] Some Europeans had come to see things in a similar light. Georges Pompidou, for example, just before his election to the French presidency in 1969, had already concluded that the Soviets had lost the economic competition with the West. He approvingly quoted Milovan Djilas, the former Yugoslav Communist leader, as saying that “as an ideology, Communism was in the process of falling apart, and as a society was in a state of unrest”; and he clearly shared Djilas’s view that “the political and social structure of the Soviet Union was radically inconsistent with modern ideas and contemporary realities.”[109] Some — but by no means all — journalists’ accounts gave much the same impression. In 1969, Anatole Shub, after serving as Moscow correspondent of the Washington Post, published a series of articles in that newspaper summing up what he had learned about the Soviet Union. His views are of particular interest in this context. “The sense of suffocation and choking among the educated,” he wrote, “is matched by the sullenness and permanent irritability of the masses.”[110] The following year he wrote in Survey commenting on his friend Andrei Amalrik’s famous essay “Will the USSR Survive until 1984?” which that journal had recently published. Nothing in the past six years, Shub said, including his two years in Moscow, had “significantly altered” his view that the Soviet regime was in a state of what Amalrik called “decrepitude” and that the great problem for the USSR’s leaders, as well as for the population they ruled, was to find a way out “of the cul de sac” the Communists had created in Russia. He thought that as time passed and the regime became “more and more clearly anachronistic,” the discontent would spread through the intelligentsia into the Communist Party itself, and perhaps to some parts of the leadership. “A definite intellectual osmosis” between dissidents, “loyal but critical intellectuals, economic managers and Party officials,” he wrote, had been going on for some time and was bound to continue; “the current Soviet economic crisis should, I would think, accelerate the process.’”[111] In the course of the 1970s more and more people came to see things this way — that is, they were coming to think not merely that the economy was sluggish and that the USSR had to deal with a series of discrete yet manageable problems but, rather, that the whole system was in trouble. That conclusion had by no means been universally accepted. As late as 1983 some experts still took a relatively rosy view.[112] But among specialists, and to a certain extent in the educated public as a whole, by around 1980 a certain picture had come into focus. The USSR’s prospects appeared grim; the Soviet populace seemed increasingly disaffected. “Over the past several years, and especially over the past several months,” a 1982 CIA document reported, “a number of Western observers in Moscow have detected in Soviet society an air of general depression and foreboding about the future.”[113] It seemed that even the Soviet leadership had lost faith in the system; the widespread corruption was one major sign of this. And if the leadership no longer took the ideology seriously, that was bound to have an effect on ordinary citizens. “Under Brezhnev,” Volkogonov writes, “Communism was talked about from habit, though no one believed in it any longer”; as Anatoly Chernyaev, then an important official in the International Department of the Central Committee, noted in 1972, “our ideology is for internal consumption only.”[114] Brezhnev himself, according to David Remnick, “began privately calling Leninist ideology tryakhomudiya — a term of derision that might best be translated as ‘crapola.’”[115] The Soviet leader sneered at officials who kept “going on about imperialism this, imperialism that” and even asked for “quotations from the [Marxist] classics to be cut” from his speeches, saying, ‘And who’s going to believe I ever read Marx?’”[116] People on the outside had little trouble seeing how hollow the ideology had become. Brezhnev had become an object of ridicule. One joke, widely reported in the West, was particularly telling. In it, Brezhnev’s mother, after a lapse of many years, visited her son in Moscow. As he showed off his sumptuous apartment, his fine clothes, his vast collection of luxury cars (Volkogonov says he had no fewer than eighty!), the old lady looked increasingly disconcerted. “What’s the matter, mom?” he asked. “Aren’t you pleased with my success?” “Well, of course I am, Leonid,” she replied. “There’s just one thing that worries me. What are you going to do when the Communists get back?”[117] Did the Soviet leadership understand that it would have to deal with some very serious problems? It is often said that only at the very end of the Brezhnev period in the early 1980s did the leadership come to see how serious the problem was and that before that point it had the sense that things were going pretty well. In reality, Soviet leaders had long been aware that their economy was in trouble. “The top echelons of the Soviet leadership,” according to two scholars who have studied this issue, “had been getting confidential reports critical of the economy’s performance since at least the 1960s.”[118] Another scholar refers to an important 1968 report laying out the problems; it had been prepared, at Prime Minister Alexei Kosygin’s request, by the economic section of the Soviet Academy of Sciences.[119] Brezhnev himself discussed the situation at some length in Central Committee plenums in 1972 and 1973. Chernyaev, who gives an account of both speeches in his diary, came away from the 1973 discussion with “a gnawing feeling about the lack of prospects.” It was not that economic collapse was imminent; indeed, the assumption was that the system would probably endure. But the outlook was fairly dismal and it seemed that, given the existing structure, not much could be done. “Have we formed,” Chernyaev wondered, “some kind of inert, bureaucratic, ossified force of hopeless indifference (following the principle — just to survive a few more years), a force that will swallow anyone who tries something new?”[120] [quote id="5"] In fact, the problems were discussed openly. “Never has there been such widespread and frank discussion of the defects of the planning system,” Alec Nove, a leading specialist in this area, said in May 1963. “To an ever greater extent,” Nove reported, “Soviet economists express the view that a new stage has been reached, that the old methods of planning cannot any more cope with the problems of an increasingly mature and sophisticated industrial system. The pages of Pravda and of the specialized press are filled with debates on radical reforms.”[121] The political leadership frequently discussed these problems, and its pronouncements were widely reported in the Western press. A handful of New York Times and Washington Post headlines gives some feel for what was being said: “Premier Says Soviet Economy Is Beset by Lag in Production” (Dec. 14, 1964); “Brezhnev Reports Wide Economic Ills, Asks Tight Control” (Jan. 17, 1970); “Soviets Ponder Ailing Economy” (March 29, 1971); “‘72 Growth Rate Lowest in 10 Years, Kosygin Says” (Dec. 14, 1972). “Dissatisfaction of the Soviet leaders with the performance of the economy,” a CIA analyst reported in 1970, was evident not just in their speeches but “in a flood of press articles that urge better and more intensive work and announce new measures to alleviate specific difficulties.”[122] The details reported in the Soviet press about the inefficiencies of the Soviet system had a major impact on the thinking of Western economists in the 1960s and beyond: “when we’re being told these things with increasing frankness and incisiveness,” one U.S. economist noted in 1966, “something sinks in.”[123] The interesting thing here is that the Soviets analyzed the problem in much the same way U.S. economists did. The basic problem, according to the Americans, was that the “extensive” growth model had run its course and one had to shift to an “intensive” model and focus on making both capital and labor more productive. Some of the most talented Soviet economists took essentially the same line. The academician V.S. Nemchinov, most notably, had argued as early as 1964 that a far-reaching liberalization of the economy was needed if the productivity problem was to be solved — and indeed if the whole economic system was not to break down.[124] The idea that the centralized planning system might have made sense in an earlier period but no longer suited the needs of a modern, complex economy was quite common. It even made its way into the military journals.[125] Indeed, even top Soviet leaders expressed views of that sort. Prime Minister Alexei Kosygin himself, in a famous 1965 speech, outlined (in Vladimir Treml’s words) “practically all the shortcomings and defects of the existing system.” Productivity, Kosygin admitted, was growing less rapidly than in the past; making capital more productive was the “central problem” the country had to face. That meant that the present system had to be liberalized: existing forms of management were “no longer in conformity with modern technico-economical conditions”; “the rights of enterprises are cramped and their area of responsibility is insufficient.” In making those arguments, as Treml points out, Kosygin was presenting ideas that had been developed by leading Soviet economists and had been discussed thoroughly in the press.[126] And Soviet thinking, one should note, was also influenced by the writings of Western analysts; major Western studies were translated into Russian and made available to researchers in this area.[127] Soviet economists, in fact, seemed to have a high regard for the work done by their American colleagues and in particular by the CIA. The academician Abel Aganbegyan, for example, noted in 1965 that the CIA had given “an absolutely accurate assessment of the situation in our economy.”[128] And Gennadii Zoteev, who worked in the Soviet planning agency in the 1980s, later said that it was “thanks primarily to Western literature on the Soviet economy” that he realized how “inflexible, sluggish, and inefficient” the planning system was.[129] Even Yuri Andropov, general secretary from 1982 to 1984, thought the CIA’s figures were more reliable than the statistics the Soviet system itself generated; that was the view of the most astute Soviet leader of the pre-Gorbachev period, a former head of the KGB and a man who (as Volkogonov put it) “knew far better and in greater depth than any of his colleagues the true state of the economy.”[130] The problem, as Dimitri Simes pointed out in 1982, was not that the Soviets were “unaware of the sad state of their economy. They know very well how pitiful their economic situation is.” The problem, under Brezhnev at least, was that they could not bring themselves to do much about it. When you read the speeches given by Soviets leaders, Simes said, you are struck by how huge a gap there was “between the frankness with which they admit their shortcomings and difficulties and the solutions which they’re willing to offer.” It was “almost pathetic” to see how incapable they were of rising to the challenge.[131] Chernyaev had come to much the same conclusion a decade earlier. He reported in his diary the reaction of one prominent figure in Soviet industry to Brezhnev’s December 1972 speech to the Central Committee plenum about the problem: “we’ve heard it all before more than once. The speeches get nicer and nicer, while things get worse and worse.” “He said all this out loud,” Chernyaev noted, in the crowd of Central Committee members, “but it didn’t turn a single head. The others must have been occupied with similar thoughts.”[132]

Why Does It Matter?

Western Sovietology, Martin Malia charged in 1990, had “done nothing to prepare us for the surprises of the past four years.”[133] The CIA, according to Melvin Goodman in 1997, had “completely misread the qualitative and comparative economic picture” and had “provided no warning to policymakers of the dramatic economic decline of the 1980s.”[134] It is clear, however, that such claims are not supported by the historical record, at least as far as the economists were concerned. To be sure, neither the CIA analysts nor the academics were able to predict that the Soviet system would collapse when it did; even in retrospect, it is hard to see how anyone could have foreseen exactly how events would run their course. But what the specialists in this area had been able to do was create a framework for analysis — to give a good sense for what the major problems were and to suggest that some very fundamental choices were going to have to be made. “The low growth rates we envision for the mid-1980s,” CIA Director Turner told a congressional committee in 1979, “could squeeze their resources to the point where something has to give.”[135] But what exactly would give could not be predicted — though Turner did think that fairly radical change was a real possibility. “By the mid-1980s,” he thought, “a new, well-established Politburo could be persuaded that more radical policies were necessary.”[136] But no one could tell specifically what the future would bring, and at that point the Soviets themselves probably did not know how they would deal with their problems. One needs only to think of the Chinese experience to realize that things could have turned out very differently.[137] This story is important for many reasons. It matters, first of all, because of the light it sheds on the way the political process works in countries like the United States. Many people like to think that “the marketplace of ideas” ensures that public discourse in liberal democracies will meet certain standards — that because public figures, including prominent journalists, will be held accountable for misrepresentation, they have a strong interest in getting their facts right, so if an idea is broadly accepted, one can pretty much assume that it is correct. But those mechanisms are a good deal weaker than many think, and it is in fact shocking to see what even major figures were able to get away with. Consider, for example, Moynihan’s charge in 1990 that while he had been able to see in 1979 that Russia might blow up, in large part because Soviet economic growth was coming to a halt, “our intelligence community just couldn’t believe this. They kept reporting that the economy was soaring!” If the U.S. government had been able to see what he had seen, it would not have had to virtually bankrupt itself by engaging in a massive but utterly unnecessary military buildup and could have just waited the Soviets out.[138] But in the 1979 article he was referring to, the economic data he cited were quite similar to the data the CIA was releasing at the time and may well have been where Moynihan’s figures came from.[139] He had also predicted that the Soviets, as a power in decline (like Austria-Hungary in 1914, he said), would pursue an increasingly aggressive policy and might try to seize the “oil fields of the Persian Gulf”: Soviet military power had “never been greater”; “the short run looks good, the long run bad. Therefore move.” But that argument scarcely suggested that a major U.S. military buildup was unwarranted. [quote id="6"] There was also a problem with Moynihan’s evidence, or really the lack of it. In his many writings and speeches dealing with the subject, he did not cite specific assessments the CIA had made at the time. As Bruce Berkowitz points out, he relied instead mainly on one striking source: former CIA director Turner’s admission, in a 1991 Foreign Affairs article, that no one in the agency appeared to recognize how serious the USSR’s economic problem was. The CIA analysts, Turner suggested, had failed to see that the Soviets were suffering from a “growing, systemic, economic problem.” “Neither I nor the CIA’s analysts,” he wrote, “reached the conclusion that eventually something had to give.” His basic point was clear: “We should not gloss over the enormity of this failure to forecast the magnitude of the Soviet crisis.”[140] Yet the major CIA study on the subject released in August 1977, not long after Turner had taken the top job at the agency, analyzed the issue in some detail: the “long-standing” economic problems, it said, were “likely to intensify”;  solutions would not be “easy to find”; “a marked reduction in the rate of economic growth in the 1980s seems almost inevitable”; given the seriousness of the problem, Soviet leaders were very likely “to consider policies rejected in the past as too contentious or lacking in urgency.”[141] Turner himself, in congressional testimony for four years in succession, took much the same line. The Soviet growth rate, he said, had fallen and the decline would continue; the economic outlook was “bleak”; Soviet leaders would try to “muddle through” but that policy was not “tenable in the long run”; indeed, “the economic picture might look so dismal by the mid-1980s that the leadership might coalesce behind a more liberal set of policies.”[142] Indeed, in his first speech after assuming the directorship he said the Soviet economy was in trouble and predicted that the Soviet leadership was “going to be facing some very difficult periods.”[143] And as noted above, he himself had stated in 1979 — and this contradicts, almost word for word, his claim in the Foreign Affairs article — that the “low growth rates we envision for the mid-1980s could squeeze their resources to the point where something has to give.”[144] All this was a matter of public record; it should have been easy to see how misleading Turner’s remarks in the Foreign Affairs article were, and it should have been easy to see that Moynihan’s claim that the CIA had “kept reporting” that the Soviet economy was “soaring” was baseless. Yet no one pointed out these things at the time; the press tended to take at face value what Moynihan, and Turner, had said about a huge intelligence failure. This is just one case among many, but it does suggest that there is much less accountability in the U.S. political system than many scholars would like to believe. And that point is certainly worth noting, not least because it relates to common ideas in the international relations literature about “audience costs,” the “open marketplace of ideas,” and so on. But the findings here are also important because they shed light on the issue of whether social science can be of real value in practical political terms. Malia, of course, had argued that when it came to giving insight into the big issues, social science in general, and economics in particular, had not made much of a contribution. Other writers took much the same view. Even so careful a scholar as David Engerman, in his important book on America’s Soviet experts, saw economic Sovietology peaking in the early 1960s before going into a “steady decline that long preceded the Soviet Union’s.” The scholars in that field should have helped other Soviet experts understand what was going on with the USSR’s economy but, according to Engerman, they failed to do so.[145] My own assessment is obviously rather different. The body of thought developed by economists working in this area was quite impressive in conceptual and not just empirical terms; it provided real insight into what was happening in the USSR and even some insight into how things might develop. Economists like Bergson did not provide the world with a crystal ball. What they did provide was a very useful framework for thinking about the Soviet Union and indeed, in principle, for thinking about what U.S. policy toward that country should be. There is a third reason this whole story matters: It casts light on what was going on in the Soviet Union during the Brezhnev period. It was common, especially in the late 1980s, to view the Brezhnev years as an “era of stagnation,” and it certainly seemed that the Soviet leadership could not bring itself to even consider fundamental changes in the basic structure of the system. But it is now clear that below the surface the sense was growing that things could not go on indefinitely as they had, and that sooner or later major decisions would have to be made. Gorbachev himself had reached that conclusion well before he became general secretary of the Communist Party; he kept his views mostly to himself, but he eventually opened up with others who had also reached fairly radical conclusions — with Alexander Yakovlev during a trip to Canada in May 1983 and with Eduard Shevardnadze in December 1984.[146] The conservative journalist Bernard Levin had predicted in 1977 that this was the way fundamental change would take place: that people were coming into positions of power in the USSR who had “admitted the truth about their country to themselves” and had “vowed, also to themselves, to do something about it,” and that eventually they would “look at each other and realize that there is no longer any need for concealment of the truth in their hearts.” At that point, he wrote, the match would be lit.[147] And that seems to sum up what actually happened during the Gorbachev period. But the most important reason this story is of interest, at least from my point of view, is that it has a direct bearing on how international politics in the later Cold War period is to be understood. The economic problem was clearly of enormous political importance and not just because it affected what was going on in the USSR. It was also bound to have a substantial impact on the way the Soviets related to the rest of the world and on how the United States framed its own policy. That issue, however, is too important to be treated in passing here. It deserves to be analyzed in some depth — but that is something that will have to be done elsewhere.   Marc Trachtenberg, a historian by training, is research professor of political science at UCLA. The author of a number of works on twentieth-century international politics, he is currently working on a study of the Soviet economic decline and great-power politics from 1963 through 1991. Another version of this article, with direct links to most of the sources cited, is available online at http://www.sscnet.ucla.edu/polisci/faculty/trachtenberg/cv/chap1(9).docx. ISSN (Print): 2576-1021 ISSN(Online): 2576-1153 Image: Ceri C, Flickr [post_title] => Assessing Soviet Economic Performance During the Cold War: A Failure of Intelligence? [post_excerpt] => [post_status] => publish [comment_status] => open [ping_status] => closed [post_password] => [post_name] => assessing-soviet-economic-performance-cold-war [to_ping] => [pinged] => [post_modified] => 2018-04-26 05:46:29 [post_modified_gmt] => 2018-04-26 09:46:29 [post_content_filtered] => [post_parent] => 0 [guid] => https://tnsr.org/?p=402 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw [lead] => For years, scholars have argued that economists and the CIA failed to see that the Soviet Union's economy was headed toward collapse. But are they right? [pubinfo] => [issue] => Vol 1, Issue 2 [quotes] => Array ( [0] => Array ( [author] => [style] => right [text] => The economic analysis produced by the CIA, it was said, had also failed to bring out how serious the Soviet economic problem was. ) [1] => Array ( [author] => [style] => left [text] => By 1970 CIA analysts had in fact reached the conclusion that military spending was not the fundamental cause of the slowdown. ) [2] => Array ( [author] => [style] => right [text] => It would be extremely difficult for the Soviets to dismantle the command economy, not just for ideological reasons. ) [3] => Array ( [author] => [style] => right [text] => For the first time, serious attention was given to the social problems the Soviets had to contend with — alcoholism, corruption, absenteeism. ) [4] => Array ( [author] => [style] => left [text] => In reality, Soviet leaders had long been aware that their economy was in trouble. ) [5] => Array ( [author] => [style] => right [text] => The findings here are also important because they shed light on the issue of whether social science can be of real value in practical political terms. ) ) [style] => scholarly [type] => Scholarly [style_label] => The Scholar [download] => Array ( [title] => PDF Download [file] => 558 ) [authors] => Array ( [0] => 97 ) [endnotes] => Array ( [title] => Endnotes [endnotes] => [1] Martin Malia, The Soviet Tragedy: A History of Socialism in Russia, 1917-1991 (New York: Free Press, 1994), 5-9. [2] Malia, Soviet Tragedy, 362; and Martin Malia, “Out of the Rubble, What?” Problems of Communism 41, nos. 1-2 (January-April 1992): 96-97. [3] Vladimir Kontorovich, “Economists, Soviet Growth Slowdown and the Collapse,” Europe-Asia Studies 53, no. 5 (2001): 676. The internal quotation is from a passage in a book by Joseph Schumpeter that Kontorovich had referred to on the previous page. [4] Igor Birman, “The Soviet Economy: Alternative Views,” Survey 29, no. 2 (Summer 1985): 113. [5] Note, for example, the characterization of the conventional wisdom among scholars even in the early 1990s in Stephen Brooks and William Wohlforth, “Economic Constraints and the End of the Cold War,” in Cold War Endgame: Oral History, Analysis, Debates, ed. William Wohlforth (University Park: Pennsylvania State University Press, 2003), 275; and also the works referred to in William Wohlforth and Randall Schweller, “Power Test: Evaluating Realism in Response to the End of the Cold War,” Security Studies 9, no. 3 (Spring 2000): 86. [6] Daniel Patrick Moynihan, “Do We Still Need the C.I.A.?” New York Times, May 19, 1991. [7] Daniel Patrick Moynihan, “The Soviet Economy: Boy, Were We Wrong!” Washington Post, July 11, 1990. [8] Daniel Patrick Moynihan, “How America Blew It,” Newsweek, Dec. 10, 1990. He was alluding to his article “Will Russia Blow Up?” published in the Nov. 19, 1979, issue of Newsweek. [9] William Safire, “Intelligence Fiasco,” New York Times, April 27, 1990. [10] Marvin Ott, “Reform Task for Woolsey at the CIA,” Wall Street Journal, Dec. 23, 1992. [11] Jonathan Alter, “Not-So-Smart Intelligence,” Newsweek, March 7, 1994. [12] Mary McGrory, “Spies Are Never Out in the Cold,” Washington Post, March 14, 1995. [13] Melvin Goodman, “Ending the CIA’s Cold War Legacy,” Foreign Policy, no. 106 (Spring 1997): 141. [14] Brooks and Wohlforth, “Economic Constraints,” 276. [15] Richard N. Cooper, “Economic Aspects of the Cold War, 1962-1975,” in The Cambridge History of the Cold War, eds. Melvyn Leffler and O. A. Westad, vol. 2 (Cambridge: Cambridge University Press, 2010), 50. See also William Wohlforth, “Realism and the End of the Cold War,” International Security 19, no. 3 (Winter 1994-95): 109-110; Stephen Brooks and William Wohlforth, “Power, Globalization, and the End of the Cold War: Reevaluating a Landmark Case for Ideas,” International Security 25, no. 3 (Winter 2000-2001): 28; “Z” [Martin Malia], “To the Stalin Mausoleum,” Daedalus 119, no. 1 (Winter 1990): 322; Hal Brands, What Good Is Grand Strategy? Power and Purpose in American Statecraft From Harry S. Truman to George W. Bush (Ithaca: Cornell University Press, 2014), 10; and Tim Weiner, Legacy of Ashes: The History of the CIA (New York: Doubleday, 2007), 417. [16] Christopher Andrew and Vasili Mitrokhin, The World Was Going Our Way: The KGB and the Battle for the Third World (New York: Basic Books, 2005), 23. [17] O. A. Westad, “The Fall of Détente and the Turning Tides of History,” in The Fall of Détente: Soviet-American Relations During the Carter Years, ed. O. A. Westad (Oslo: Scandinavian University Press, 1997), 13. [18] Robert English, “Power, Ideas, and New Evidence on the Cold War’s End,” International Security 26, no. 4 (Spring 2002): 71. [19] Walter Laqueur, Fin de Siècle and Other Essays on America and Europe (New Brunswick: Transaction, 1997), 136. (Brezhnev was general secretary from 1964 to his death in 1982.) Note also the foreword by Georgi Arbatov in Re-viewing the Cold War: Domestic Factors and Foreign Policy in the East-West Confrontation, eds. Patrick Morgan and Keith Nelson (Westport: Praeger, 2000), xiii; and Andrew and Mitrokhin, World Was Going Our Way, 23. [20] See, for example, Alexander Chubarov, Russia’s Bitter Path to Modernity: A History of the Soviet and Post-Soviet Eras (New York: Continuum, 2001), 149. [21] Gertrude Schroeder, “Reflections on Economic Sovietology,” Post-Soviet Affairs 11, no. 3 (1995). [22] See David Kennedy, “Sunshine and Shadow: The CIA and the Soviet Economy,” Kennedy School Case Study C16-91-1096.0 (Harvard University, Kennedy School of Government, 1991); Kirsten Lundberg, “The CIA and the Fall of the Soviet Empire: The Politics of Getting It Right,” Kennedy School Case Study C16-94-12510 (Harvard University, Kennedy School of Government, 1994); Bruce Berkowitz and Jeffrey T. Richelson, “The CIA Vindicated: The Soviet Collapse Was Predicted,” National Interest, no. 41 (September 1995); Bruce D. Berkowitz, “U.S. Intelligence Estimates of the Soviet Collapse: Reality and Perception,” International Journal of Intelligence and Counterintelligence 21, no. 2 (2008); Douglas J. MacEachin, CIA Assessments of the Soviet Union: The Record Versus the Charges (Washington: CIA Center for the Study of Intelligence, 1996); Abraham Becker, “Intelligence Fiasco or Reasoned Accounting? CIA Estimates of Soviet GNP,” Post-Soviet Affairs 10, no. 4 (1994); and James Noren, “CIA’s Analysis of the Soviet Economy,” in Watching the Bear: Essays on CIA’s Analysis of the Soviet Union, eds. Gerald Haines and Robert Leggett (Langley: CIA Center for the Study of Intelligence, 2003). In 1991, a congressional committee asked a panel of specialists to assess the CIA’s work in this area. For its report, see James Millar et al., “An Evaluation of the CIA’s Analysis of Soviet Economic Performance, 1970-1990,” Comparative Economic Studies 35, no. 2 (Summer 1993). [23] Kontorovich, “Economists, Soviet Growth Slowdown and the Collapse,” 676. [24] Rush Greenslade, “The Soviet Economic System in Transition,” in U.S. Congress, Joint Economic Committee, New Directions in the Soviet Economy (Washington: Government Printing Office, 1966), Part I, 4; and Abram Bergson et al., “Soviet Economic Performance and Reform: Some Problems of Analysis and Prognosis (A Round-Table Discussion),” Slavic Review 25, no. 2 (June 1966): 231 (henceforth cited as Slavic Review Roundtable). [25] Schroeder, “Reflections on Economic Sovietology,” 209. [26] See, for example, Gur Ofer, “Soviet Economic Growth: 1928-1985,” Journal of Economic Literature 25, no. 4 (December 1987): 1798; Zbigniew Brzezinski, The Grand Failure: The Birth and Death of Communism in the Twentieth Century (New York: Scribner, 1989), 35, 53; and Geir Lundestad, The Rise and Decline of the American “Empire”: Power and Its Limits in Comparative Perspective (Oxford: Oxford University Press, 2012), 18. A July 1963 CIA document quoted Khrushchev as saying in 1961: “I am asked, ‘Mr. Khrushchev, what do you think?  In what year will you catch up with America?’ … My reply is: ‘you can write down in your little notebook that we will overtake you in per capita industrial production by 1970.’” “Post-Mortem on ‘Trends in the Soviet Economy (1950-63),’” July 26, 1963, CIA Freedom of Information Act Electronic Reading Room (https://www.cia.gov/library/readingroom/), Document no. 0000496588 (to be inserted in search box). Henceforth cited as “CIAERR,” with document number. [27] See Gareth Porter, Perils of Dominance: Imbalance of Power and the Road to War in Vietnam (Berkeley: University of California Press, 2005), 21. [28] Allen Dulles speech to U.S. Chamber of Commerce, New York Times, April 29, 1958; “Allen Dulles Sees U.S. Peril in Soviet’s Economic Rise,” New York Times, April 29, 1958; “Soviet Closing Output Gap, Allen Dulles Warns U.S.,” New York Times, Nov. 14, 1959; and “Allen Dulles’ Warning,” New York Times, Nov. 16, 1959. [29] Transcript of the first Kennedy-Nixon debate, Sept. 26, 1960, 73, 91-92 (http://www.maryferrell.org/showDoc.html?docId=145159#relPageId=87). Even during the campaign, the CIA continued to predict that the Soviet economy would grow rapidly in the 1960s. See Harry Schwartz, “CIA Forecasts Soviet Output Will Grow 80% in Next Decade,” New York Times, June 23, 1960. It was not just Democrats who expressed concern. A number of leading Republicans, most notably New York Gov. Nelson Rockefeller, also stressed the seriousness of the problem. A number of works deal with the Soviet economic challenge as an issue in American domestic politics; probably the best account is in Chapters 5-7 of John Kestner’s dissertation, “Through the Looking Glass: American Perceptions of the Soviet Economy, 1941-1964” (University of Wisconsin, 1999). [30] See U.S. Bureau of Economic Analysis, National Income and Product Account (NIPA) Historical Tables https://www.bea.gov/iTable/index_nipa.cfm, Table 1.1.1: Percent Change from Preceding Period in Real Gross Domestic Product,” line 1, and Table 1.1.6: Real Gross Domestic Product, Chained Dollars, line 1. For historical data, click the “modify” link in the table and enter appropriate dates. [31] Edwin Dale, “U.S. Will Cite Lag in Soviet Growth to Deter Credits,” New York Times, Jan. 9, 1964. See also Rush Greenslade, “CIA Meets the Press,” Studies in Intelligence 31, no. 2 (Spring 1969); and the Jan. 9, 1964, press release cited in the Greenslade article, “Soviet Economic Problems Multiply,” CIAERR/0000500555. [32] Noren, “CIA’s Analysis of the Soviet Economy,” 19. [33] Greenslade, “Soviet Economic System in Transition,” 4. [34] Greenslade, “Soviet Economic System in Transition,” 5. Note also the reactions of a number of leading scholars to the CIA data disclosed in January 1964 in Harry Schwartz’s article “Some Experts Skeptical,” New York Times, Jan. 9, 1964. [35] Computed from Table 1 (slide 9) in CIA Office of Economic Research, “Soviet Economic Growth: Proposed Presentation to the Naval War College,” Aug. 24, 1970, CIAERR/0000307690. For an earlier estimate, see Table 2 of “US and USSR: Comparisons of Size and Use of Gross National Product, 1955-64,” March 1966, 23, CIAERR/0000316278. This showed the Soviet economy growing at an annual rate of 4.6 percent from 1961 to 1964, compared with a U.S. growth rate of 3.9 percent in that period. [36]  Noren, “CIA’s Analysis of the Soviet Economy,” 48. See also Abram Bergson, “Development Under Two Systems: Comparative Productivity Growth Since 1950,” World Politics 23, no. 4 (July 1971), and Central Intelligence Agency (John Pitzer), “Gross National Product of the USSR 1950-80,” in U.S. Congress, Joint Economic Committee, USSR: Measures of Economic Growth and Development, 1950-80 (Washington: Government Printing Office, 1982), 19-23. See also Table 4 below. [37] Keep in mind that all such estimates, which try to sum up in a single figure a massive and constantly shifting outpouring of goods and services, are necessarily based on a large number of assumptions, some rather arbitrary, and that none of the figures generated in such a calculation should be taken as representing objective reality. When I say that the CIA estimates were probably too high, I mean simply that the most reasonable calculations today yield lower estimates of Soviet national income than those the CIA generated at the time, not that there is a single, unambiguously correct figure we are now better able to see. [38] The passage on page 141 in Goodman’s “Ending the CIA’s Cold War Legacy” is an egregious example. [39] Schroeder, “Reflections on Economic Sovietology,” 206, and Abram Bergson, “The USSR Before the Fall: How Poor and Why,” Journal of Economic Perspectives 5, no. 4 (Autumn 1991): 40-41. See also Kennedy, “Sunshine and Shadow,” 25. [40] Angus Maddison, “Measuring the Performance of a Communist Command Economy: An Assessment of the CIA Estimates for the U.S.S.R.,” Review of Income and Wealth 44, no. 3 (September 1998): 309. [41] Maddison, “Measuring the Performance,” 322. In retrospect, however, Maddison did view the CIA figures as a bit too high. Maddison’s own figures, posted on his website in 2009 (shortly before his death in 2010) showed the Soviet economy as peaking relative to America’s around 1975 at about 45 percent, as compared with the CIA’s estimate of about 58 percent. See the Excel file “Statistics on World Population, GDP and Per Capita GDP, 1-2008 AD,” posted on Maddison’s website (http://www.ggdc.net/maddison/oriindex.htm). [42] CIA press release, “Soviet Economic Problems Multiply,” Jan. 9, 1964, and CIA Special National Intelligence Estimate 11-5-64, “Soviet Economic Problems and Outlook,” Jan. 8, 1964, CIAERR/0000272915, which claimed (on page 1) that the “demands of defense and space have greatly encumbered economic growth since 1958.” Many observers still argue that the economic problem had a good deal to do with high levels of military spending. See, for example, Brooks and Wohlforth, “Economic Constraints and the End of the Cold War,” 277. But some economists who have studied the issue have concluded that the role increased defense spending played in causing the economic slowdown of the 1980s was “so modest as to be unimportant.” See William Easterly and Stanley Fischer, “What We Can Learn From the Soviet Collapse,” Finance and Development 31, no. 4 (December 1994): 3. Wohlforth himself a few years ago referred to recent work by economists suggesting that there is not much of a connection between military spending and economic growth. See William Wohlforth, “Hegemonic Decline and Hegemonic War Revisited” in Power, Order and Change in World Politics, ed. G. John Ikenberry (Cambridge: Cambridge University Press, 2014), 117. [43] It was commonly argued in the specialized literature at the time that “military R & D and production benefit from the close, interest, and demanding supervision of the consumers of the product,” and that this “effective communication of users with producers is missing at all stages of civilian production.” Rush Greenslade, “The Many Burdens of Defense in the Soviet Union,” Studies in Intelligence 14, no. 2 (Fall 1970): 10. See also William Odom, “The Riddle of Soviet Military Spending,” Russia 2 (1981): 56-57. [44] CIA (John Pitzer), “Gross National Product of the USSR 1950-80,” 76-78, Table A-11; CIA (Laurie Kurtzweg), “Measures of Soviet Gross National Product in 1982 Prices,” 82-83, Table A-10. [45] “Soviet Economic Growth: Proposed Presentation to the Naval War College,” Aug. 24, 1970, Table 9, CIAERR/0000307690; and CIA Office of Economic Research, “The Soviet Economy: Proposed Briefing,” Aug. 25, 1970, 5 (with chart), CIAERR/0000307692. More recent figures, though higher for all periods, show the same basic trend (albeit with a less dramatic decline) — they show that the defense burden was higher in the 1950s, when the economy was vibrant, than it was later on — and in the present context it is the trend that is important. See Noel Firth and James Noren, Soviet Defense Spending: A History of CIA Estimates (College Station: Texas A&M Press, 1998), 129-30, Table 5.10; Noren, “CIA’s Analysis of the Soviet Economy,” 33. The general point about the lessening of the defense burden is important because (as Noren notes in the passage just cited) even scholars had gotten a very different impression. To be sure, even the most recent CIA figures have been challenged; some scholars say the Soviet defense burden was much higher. Brooks and Wohlforth, for example, cite Mark Harrison’s “How Much Did the Soviets Really Spend on Defence? New Evidence From the Close of the Brezhnev Era” (PERSA working paper No. 24, University of Warwick Economics Department, 2003), to support their claim that the Soviets “devoted up to a third of their economic output to the generation of military power.” Stephen Brooks and William Wohlforth, A World Out of Balance: International Relations and the Challenge of American Primacy (Princeton: Princeton University Press, 2008), 55. Harrison’s new evidence did seem to show that the Soviets were spending more on defense than many had thought; his main document suggested that the figure was equivalent to perhaps 24 percent of GNP. But Harrison, after reading various comments on his paper, concluded that the document in question (the “Konoplev Report”) was probably a forgery. See the postscript to the description of the original paper on Harrison’s website. On the other hand, according to Chernyaev, Gorbachev at one point received a top-secret briefing that suggested “‘defense’ was consuming about a third of national income”; that estimate was in line with a similar estimate made at the time by the Defense Department’s Office of Net Assessment. See Gordon Barrass, The Great Cold War: A Journey Through the Hall of Mirrors (Stanford: Stanford University Press, 2009), 323, 254. According to another respectable estimate, the military sector accounted for about a quarter of Soviet GNP in the late 1960s and early 1970s. See Vladislav Zubok, “The Soviet Union and Détente of the 1970s,” Cold War History 8, no. 4 (November 2008): 430. [46] Bergson letter to the editor, New York Times, Oct. 16, 1960; and Abram Bergson, The Real National Income of Soviet Russia Since 1928 (Cambridge: Harvard University Press, 1961), 294-95. Bergson had made much the same point when testifying before a congressional committee in 1956. See Kestner, “Through the Looking Glass,” 266. [47] And I do mean cautiously optimistic: The key sentence reads almost like a parody of ultra-cautious academic prose. “In the coming years,” Bergson predicted toward the end of a major work in 1961, “the rate of growth of Soviet Russia’s output per worker may decline below its recent high level, but if so one hesitates to assume that the reduction will soon be very consequential.” “Khrushchev’s plans for the future,” he went on, “may often be overoptimistic, but they have some basis in fact.” Bergson, Real National Income, 295, 298. Newspaper accounts, however, gave the impression that he had taken a more alarmist view. See Harry Schwartz, “Output of Soviet May Remain High: Study Shows It May Exceed U.S. Production by 1975,” New York Times, Nov. 26, 1961; “Soviet Growth,” Washington Post editorial, Dec. 16, 1961. [48] Abram Bergson, “The Great Economic Race,” Challenge 11, no. 6 (March 1963): 5; Slavic Review Roundtable, 232, 237-38, 243; Abram Bergson, “Toward a New Growth Model,” Problems of Communism 22, no. 2 (March-April 1973): 7-9. It is striking that Bergson did not pay much attention to military spending in this context, even though it was fairly standard in discussions of this issue at the time to refer to consumption, investment, and defense as the three main end-uses for the national product, with the implication that there was a three-way, not just a two-way, competition for resources. This point was noted by Gur Ofer, who, in an article on Bergson, wrote that Bergson at this time merely “mentioned only in passing the burden of defense” and that while he later gave it more attention — referring to an article Bergson published in 1981 — the issue of military spending by and large “did not play a major role in Bergson’s analysis of the slowdown of Soviet economic growth.” Gur Ofer, “Abram Bergson: The Life of a Comparativist,” Comparative Economic Systems 47, no. 2 (2005). For the passage in the 1981 article Ofer referred to, see Abram Bergson, “Can the Soviet Slowdown Be Reversed?” Challenge 24, no. 5 (November/December 1981): 41-42. [49] Bergson, “Toward a New Growth Model,” 4. This important article was a revised version of a paper Bergson had presented at a conference in Brussels in 1971. A shorter version was published in Challenge 17, no. 2 (May-June 1974), and the whole article was republished in Bergson’s Productivity and the Social System: The USSR and the West (Cambridge: Harvard University Press, 1978). [50] See, for example, Abram Bergson, “The Soviet Economic Slowdown,” Challenge 20, no. 6 (January-February 1978), 23-24. It was widely recognized that the two “reservoirs” the Soviets had traditionally drawn on as a source of industrial labor — women and low-productivity rural labor — had by the mid-1960s been largely depleted. An increasingly urbanized population, moreover, tended to have fewer children per family, in large part because of the unsatisfactory housing situation. According to projections provided to Congress in 1970 by Murray Feshbach, the leading expert in this area, the working-age Soviet population was expected to grow by only about 1 percent a year from 1970 to 1990, significantly less than its previous growth rate. Calculated from Murray Feshbach, “Population,” 66-67, Table 4, in U.S. Congress, Joint Economic Committee, Economic Performance and the Military Burden in the Soviet Union (Washington: Government Printing Office, 1970), the source Bergson relied on for his population growth figures in his 1973 article “Toward a New Growth Model.” [51] “The growing burden of attrition of the capital stock,” as Robert Campbell noted, “will also slow growth in productive capacity. In the early stages of growth, depreciation of the capital stock is relatively small compared to new additions. As the stock ages and becomes obsolete, depreciation increases as a share of increments, and net increments are squeezed further.” Robert Campbell, “The Economy,” in After Brezhnev: Sources of Soviet Conduct in the 1980s, ed. Robert Byrnes (Bloomington: Indiana University Press, 1983), 69. [52] Slavic Review Roundtable, 243. [53] Noren, “CIA’s Analysis of the Soviet Economy,” 20. [54] “Soviet Economic Problems and Prospects,” NIE 11-5-67, May 25, 1967, 3-4, CIAERR/0000272916. [55] “Soviet Economic Problems and Prospects,” July 1977, 3, 10, CIAERR/0000292354. [56] Bergson, “Towards a New Growth Model,” 3, Table 1. More recent calculations show the same trend. See, for example, William Easterly and Stanley Fischer, “The Soviet Economic Decline,” World Bank Economic Review 9, no. 3 (September 1995): 353; Ofer, “Soviet Economic Growth,” 1778 (Line 7); and Angus Maddison, The World Economy in the 20th Century (Paris: Organization for Economic Cooperation and Development, 1989): 100. “What was most striking after 1973,” Maddison writes, “was that total factor productivity became substantially negative, with labor productivity slowing down dramatically, and capital productivity very negative indeed.” Note also the data in Tables 3 and 4. [57] James Noren, “Soviet Industry Trends in Output, Inputs, and Productivity,” in U.S. Congress, Joint Economic Committee, New Directions in the Soviet Economy, Part II-A (Washington: Government Printing Office, 1966), 287. See also Stanley Cohn, “Soviet Growth Retardation: Trends in Resource Availability and Efficiency,” in U.S. Congress, Joint Economic Committee, New Directions in the Soviet Economy, Part II-A (Washington: Government Printing Office, 1966), 102. [58] For a brief survey of the early literature on this question, see Martin Weitzman, “Soviet Postwar Economic Growth and Capital-Labor Substitution,” American Economic Review 60, no. 4 (September 1970): 678. [59] See, for example, the Slavic Review Roundtable, 238, 243; Weitzman, “Soviet Postwar Economic Growth,” 685; and Terence Byrne, “Recent Trends in the Soviet Economy,” in U.S. Congress, Joint Economic Committee, Economic Performance and the Military Burden in the Soviet Union (Washington: Government Printing Office, 1970), 5. The point is also emphasized in some post-Cold War accounts. See, for example, Easterly and Fischer, “What We Can Learn From the Soviet Collapse,” 4-5. [60] Slavic Review Roundtable, 243-44. [61] See Gerschenkron’s famous article “Economic Backwardness in Historical Perspective,” in The Progress of Underdeveloped Areas, ed. Bert F. Hoselitz (Chicago: University of Chicago Press, 1952) and his comment on Gregory Grossman’s article “National Income” in Soviet Economic Growth: Conditions and Perspectives, ed. Abram Bergson (Evanston: Row, Peterson, 1953), 25. [62] See John Prados, How the Cold War Ended: Debating and Doing History (Washington: Potomac Books, 2011), 165-67. See also U.S. Senate, Committee on Governmental Affairs, Permanent Subcommittee on Investigations, Transfer of U.S. High Technology to the Soviet Union and Soviet Bloc Nations (Washington: Government Printing Office, 1982), Exhibit 1, CIA, “Soviet Acquisition of Western Technology,” April 1982; and U.S. Department of Defense, “Soviet Acquisition of Militarily Significant Western Technology: An Update,” September 1985, Defense Department Freedom of Information Act Reading Room. In a March 1981 report to Brezhnev, the KGB chief, Andropov, described some of the agency’s accomplishments in this area: “On military-industrial questions about fourteen thousand items and two thousand types of design have been obtained; the work of strengthening illegal intelligence has continued.” Quoted at length in Dmitri Volkogonov, The Rise and Fall of the Soviet Empire: Political Leaders From Lenin to Gorbachev (New York: HarperCollins, 1998), 340. [63] “Some International Aspects of Soviet Technological Progress,” South Atlantic Quarterly 72, no. 3 (1973), republished in Joseph Berliner, Soviet Industry From Stalin to Gorbachev: Essays on Management and Innovation (Ithaca: Cornell University Press, 1988), 212-13. [64] See, for example, Bergson in the Slavic Review Roundtable, 230-31; and Ofer, “Soviet Economic Growth,” 1815. This line of argument builds on important work done before World War II by Hayek and Mises, partly in the context of a famous debate with the “market socialists” Abba Lerner and Oskar Lange. Bergson and others cut their teeth intellectually grappling with these issues. See Friedrich von Hayek, “The Present State of the Debate,” in his Collectivist Economic Planning (London: Routledge, 1935) and Abram Bergson, “Socialist Economics,” in A Survey of Contemporary Economics, ed. Howard Ellis (Philadelphia: Blakeston, 1949), reprinted in Bergson’s Essays in Normative Economics (Cambridge: Harvard University Press, 1996). For discussions of the debate, see Agnar Sandmo, ch. 14 in Economics Evolving: A History of Economic Thought (Princeton, Princeton University Press, 2011); Peter Boettke, ch. 3 in Calculation and Coordination: Essays on Socialism and Transitional Political Economy (London: Routledge, 2011); and Donald Lavoie, Rivalry and Central Planning: The Socialist Calculation Debate Reconsidered (New York: Cambridge University Press, 1985). [65] This terminology was common. See, for example, Ofer, “Soviet Economic Growth,” 1786, and the sources cited there. [66] Bergson, “Toward a New Growth Model,” 9. [67] See the Slavic Review Roundtable, 233-36. [68] Gregory Grossman, “The Structure and Organization of the Soviet Economy,” Slavic Review 21, no. 2 (June 1962): 208. [69] See the Slavic Review Roundtable, 231-32. [70] Greenslade, “Soviet Economic System in Transition,” 8-9. [71] John Hardt, Dimitri Gallik, and Vladimir Treml, “Institutional Stagnation and Changing Economic Strategy in the Soviet Union,” in U.S. Congress, Joint Economic Committee, New Directions in the Soviet Economy (Washington: Government Printing Office, 1966), Part I, 62; Grossman, “Structure and Organization,” 217; Gregory Grossman, “Notes for a Theory of the Command Economy,” Soviet Studies 15, no. 2 (October 1963): 122. [72] Grossman, “Notes for a Theory,” 119, paraphrasing an argument made by Peter Wiles. [73] Grossman, “Structure and Organization,” 215. [74] See Malia, Soviet Tragedy, 360. As economic and political liberalization are linked in many ways, this problem was related to the fear that the whole Soviet system might be overwhelmed by forces released once the political controls were relaxed. “If we open up all the valves at once,” Andropov said, “and people start to express their grievances, there will be an avalanche, and we will have no means of stopping it.” Quoted in Barrass, Great Cold War, 355. [75] Grossman, “Notes for a Theory,” 122-23. A decade later, however, in a review of Moshe Lewin’s Political Undercurrents in Soviet Economic Debates, Grossman seemed to argue that partial marketization was not a viable strategy. “Yet one may wonder,” he wrote, “whether the obstacles to effective marketization of the economy — and, therefore, also to socio-political liberalization — are to be found only in the leadership’s tenacious attachment to power. By this time equally important may be the tacit acknowledgment by both ruler and ruled of the public’s right to full employment, job security, and an easy pace of work, while its consumption levels must be steadily raised. This conjunction of imperatives virtually ensures the persistence of excess aggregate demand together with tight control of official retail prices. Under these conditions, a fledgling market mechanism may not have much chance against an entrenched command economy. Objectively, to use a favorite Soviet word, the masses may thus be on the side of the powerful and privileged in protecting the command economy from fatal attack. Again, the Czechoslovak experience is not without its lessons.” Journal of Economic Literature 14, no. 3 (September 1976): 915. That someone of Grossman’s intellectual stature found it hard to reach definitive conclusions is a measure of how difficult this problem of partial marketization was, and yet the whole issue of whether gradual economic and political change was possible turned in large measure on how that question was to be answered. The scholarly literature on the semi-legal “second economy” is of particular interest in this context, since the “second economy” represents a form of partial marketization. For an early account, see Zev Katz, “Insights From Emigrés and Sociological Studies on the Soviet Economy,” U.S. Congress, Joint Economic Committee, Soviet Economic Prospects for the Seventies (Washington: Government Printing Office, 1973), 87-120. For more extensive studies of the subject, see the many works published by the Berkeley-Duke Project on the Second Economy in the USSR, headed by Vladimir Treml, Gregory Grossman, and Michael Alexeev. Note in particular Gregory Grossman, “The ‘Second Economy’ of the USSR,” Problems of Communism 26, no. 5 (September-October 1977), and Grossman, “Sub-Rosa Privatization and Marketization in the USSR,” Annals of the American Academy of Political and Social Science 507 (January 1990). See also Steven L. Sampson, “The Second Economy of the Soviet Union and Eastern Europe,” Annals of the American Academy of Political and Social Science 493 (September 1987) and the references cited there. [76] Greenslade, “Soviet Economic System in Transition,” 8-9. This theme was echoed in many writings and even some key leaders came to view the problem in these terms. For example, as one document pointed out, none of the USSR’s leaders “can suggest a new program of reform which would spur economic progress and at the same time preserve central political control. This is a central Soviet dilemma.” President Nixon highlighted those passages and wrote in the margin: “The critical point.” Kissinger to Nixon (drafted by Kissinger’s assistant Helmut Sonnenfeldt), Feb. 2, 1970, FRUS 1969-74, 12:370. See also Georges Pompidou Le Noeud gordien (Paris: Flammarion, 1974), 112, and Ronald Reagan, as quoted in Peter Schweizer, Victory: The Reagan Administration’s Secret Strategy That Hastened the Collapse of the Soviet Union (New York: Atlantic Monthly Press, 1994), xiv. And see Henry Kissinger, “Les fondements de la politique étrangère des Etats-Unis,” Politique étrangère 47, no. 4 (1982): 922: “Le dilemme du communisme est qu’il semble impossible de faire marcher une économie moderne avec un système de planification totale alors que la survie d’un Etat communiste pourrait bien s’avérer impossible sans un tel système de planification!” [77] “Soviet Economic Growth: Proposed Presentation to the Naval War College,” Aug. 24, 1970, 3, CIAERR/0000307690. [78] Slavic Review Roundtable, 235. [79] Hardt, Gallik, and Treml, “Institutional Stagnation and Changing Economic Strategy in the Soviet Union,” 62. [80] According to a 1982 CIA estimate, the Soviet economy was growing at a rate of 5.2 percent a year in the late 1960s. The U.S. growth rate for the same period was 3.1 percent, and the growth rate for the whole OECD area was 4.8 percent. CIA (John Pitzer), “Gross National Product of the USSR 1950-80,” 20, Table 1. See also Table 2 above. [81] Central Intelligence Agency, “Soviet Economic Problems and Prospects,” July 1977, i, ii, v, CIAERR/0000292354. This important paper was also released to the public by the Joint Economic Committee a month after it was prepared. [82] For a series of excerpts from CIA documents and statements expressing similar views, see “Excerpts From Cited References” in Douglas MacEachin’s monograph “CIA Assessments of the Soviet Union: The Record Versus the Charges,” available online at https://www.cia.gov/library/center-for-the-study-of-intelligence. [83] Harrison Salisbury, “The Russia Reagan Faces,” New York Times, Feb. 1, 1981. [84] U.S. Congress, Joint Economic Committee, Subcommittee on International Trade, Finance, and Security Economics, and Library of Congress, Congressional Reference Service, Soviet Military Economic Relations: Proceedings of a Workshop on July 7 and 8, 1982 (Washington: Government Printing Office, 1983), 270. [85] Michael Getler, “Soviet Economy Called ‘Basket Case’: Presidential Aide Says U.S. Should Continue Pressures on Trade and Credit,” Washington Post, June 17, 1982. This is of particular interest given the later view that CIA estimates were too rosy because the political leadership at the time refused to accept the idea that the Soviets were in trouble. Note, for example, a comment by Michael Nacht, then dean of the Public Policy School at the University of Maryland and a well-known expert in this area. “Frankly,” Nacht said in a 1992 interview, “the reporting of intelligence has been extremely politicized. In the Casey period, any kind of study showing the Soviet Union was an economic basket case would have been shelved. It didn’t comport with the overarching view of a communist threat.” Rodman Griffin, “The New CIA,” CQ Researcher 2, no. 46 (Dec. 11, 1992). Reagan himself, incidentally, also referred to the Soviet Union as an “ec. basket case” in a diary entry in November 1985. See David E. Hoffman, The Dead Hand: The Untold Story of the Cold War Arms Race and Its Dangerous Legacy (New York: Doubleday, 2009), 226, 520. [86] Kennedy, Sunshine and Shadow, 18. [87] See, for example, Richard Pipes, “L’URSS en crise,” Politique étrangère 47, no. 4 (1982); and Kissinger, “Les fondements de la politique étrangère des Etats-Unis,” 920. [88] “A few years ago,” he wrote, “Soviet prospects looked far more promising to me. When American Sovietologists painted a picture of the Soviet Union showing it on the verge of doom, if not collapse, I invariably responded that they were viewing something radically different from what I knew. Now I am not so sure.” Marshall Goldman, U.S.S.R. in Crisis: The Failure of an Economic System (New York: Norton, 1983), xii. The journalist Drew Middleton had pointed out a few years earlier that “some analysts” believed that “the Communist system is incapable of dealing with [the USSR’s economic and political] problems and that their growth could lead in time to disintegration of the Soviet Union.” “West Expects Soviet Might, and Ills, to Peak in Mid-80’s,” New York Times, June 29, 1979. [89] CIA Office of Economic Research, “Soviet Perceptions of Economic Prospects,” March 1981, iv, CIAERR/0000496623. [90] See Michel Tatu, “Les Relations Est-Ouest: Gérer la tension,” Politique Étrangère 46, no. 2 (1981): 288. [91] On corruption: see Konstantin Simis, “The Machinery of Corruption in the Soviet Union,” Survey 23, no. 4 (Autumn, 1977-78); Simis, USSR — The Corrupt Society: The Secret World of Soviet Capitalism (New York: Simon & Schuster, 1982); Ilya Zemtsov, La Corruption en Union Soviétique (Paris: Hachette, 1976); and CIA, “Soviet Elite Concerns About Popular Discontent and Official Corruption” (December 1982), CIAERR/0000496810. On crime: Valery Chalidze, Criminal Russia: Essays on Crime in the Soviet Union (New York: Random House, 1977) and Lydia S. Rosner, Soviet Way of Crime: Beating the System in the Soviet Union and the U.S.A. (South Hadley, Mass.: Bergin & Garvey Publishers, 1986). On alcoholism: Vladimir Treml, Alcohol in the USSR: A Statistical Study (Durham: Duke University Press, 1982) and Mark Schrad, Vodka Politics (New York: Oxford University Press, 2014). On social issues in general, see Gail Lapidus, After Brezhnev: The Sources of Soviet Conduct in the 1980s (Bloomington: Indiana University Press, 1983) and Lapidus, “Society Under Strain,” Washington Quarterly 6, no. 2 (Spring 1983). [92] On Feshbach, see Cullen Murphy, “Watching the Russians,” Atlantic Monthly, February 1983, and Schrad, Vodka Politics, 249-51. For the CIA’s neglect of social issues, see Lundberg, “CIA and the Fall of the Soviet Empire,” 8, 12. [93] Murray Feshbach and Christopher Davis, “Life Expectancy in the Soviet Union,” Wall Street Journal, June 20, 1978. [94] Christopher Davis and Murray Feshbach, Rising Infant Mortality in the U.S.S.R. in the 1970’s, U.S. Commerce Department, Census Bureau, Foreign Demographic Analysis Division, International Population Reports, Series P-75, no. 74 (September 1980). For background and a discussion of related work, see Christopher Davis, “Commentary: The Health Crisis in the USSR: Reflections on the Nicholas Eberstadt 1981 review of Rising Infant Mortality in the USSR in the 1970s,” International Journal of Epidemiology 35, no. 6 (December 2006): 1400-05. [95] Murray Feshbach, “Health in Russia: Statistics and Reality,” Wall Street Journal, Sept. 14, 1981; Spencer Rich, “Infant Mortality Soars in Russia, U.S. Study Finds,” Washington Post, June 26, 1980. [96] David Satter, “Soviet Death Rates Rising, Report Says; Trend Is Unique in the Developed World,” Wall Street Journal, Oct. 18, 1982. See also Murray Feshbach, “Between the Lines of the 1979 Soviet Census,” Population and Development Review 8, no. 2 (June 1982): 351. [97] Satter, “Soviet Death Rates Rising,” 38, and Treml, Alcohol in the USSR. [98] Nick Eberstadt, “Ultimate Verdict on the Soviet Health System: Shorter Lives,” New York Times, Oct. 11, 1981. [99] Rich, “Infant Mortality Soars in Russia.” [100] Nick Eberstadt, “The Health Crisis in the Soviet Union,” originally published in the New York Review of Books, Feb. 19, 1981, and republished in Nick Eberstadt, The Poverty of Communism (New Brunswick: Transaction Books, 1988). The quotations appear on pages 12, 18-19, and 25 of the book version. [101] Daniel Greenberg, “Ivan’s Declining Health,” Washington Post, Dec. 16, 1980. [102] See John Diamond, The CIA and the Culture of Failure: U.S. Intelligence From the End of the Cold War to the Invasion of Iraq (Stanford: Stanford University Press, 2008), 32. [103] Simis, “The Machinery of Corruption in the Soviet Union.” [104] Martin McCauley, The Rise and Fall of the Soviet Union (New York: Routledge, 2013), 372, 382-83; Robert Gates, From the Shadows: The Ultimate Insider’s Story of Five Presidents and How They Won the Cold War (New York: Simon & Schuster, 1996), 185-86; John Burns, “2 Scandals Have All Moscow Abuzz,” New York Times, Feb. 27, 1982. The message was that someone had to put an end to the rot and that Andropov was the man to do it. The fact that he could leak the message while Brezhnev was still alive shows that he understood that there was real support in the party for fundamental change, and he was appealing to those elements. [105] Dmitri Volkogonov, Autopsy for an Empire: The Seven Leaders Who Built the Soviet Regime (New York: Free Press, 1998), 302; Stephen White, Russia’s New Politics: The Management of a Postcommunist Society (Cambridge: Cambridge University Press, 2000), 5, 294. In the mid-1970s, Brezhnev suffered two strokes (one of which “left him clinically dead for a time”) and several heart attacks. “Incoherent from arteriosclerosis and tranquilizer overdoses,” in his last few years he “worked no more than two hours a day, and politburo meetings often lasted just twenty minutes”; he was, however, able to remain in his position even after he “began drooling on himself in appearances on Soviet television.” Stephen Kotkin, Armageddon Averted: The Soviet Collapse, 1970-2000 (New York: Oxford University Press, 2008), 49-50. See also Dimitri Simes, After the Collapse: Russia Seeks Its Place as a Great Power (New York: Simon and Schuster, 1999), 28. This situation was quite clear at the time. “Underlying the stagnation,” Moshe Lewin writes, “but also constituting its main symptom — was a deadlocked Politburo around a brain-dead Brezhnev: a humiliating impasse exhibited before the whole world.” Moshe Lewin, The Soviet Century (New York: Verso, 2005), 261. [106] Quoted in Alexander Dallin, “Causes of the Collapse of the USSR,” Post-Soviet Affairs 8, no. 4 (October-December 1992): 283. [107] John Bushnell, “The New Soviet Man Turns Pessimist,” Survey 24, no. 2 (Spring 1979). [108] William Odom, “The Sources of ‘New Thinking’ in Soviet Politics,” in The Last Decade of the Cold War: From Conflict Escalation to Conflict Transformation, ed. Olav Njølstad (London: Frank Cass, 2004), 121. [109] Pompidou, Le Noeud gordien, 103, 111-15. This book was written mainly in the brief period after Pompidou was dismissed by Charles de Gaulle as prime minister following the events of May 1968 and before he was elected to the presidency in 1969; it was published in 1974, the year he died in office. The idea that the Soviet economy was in trouble was a common theme in published French and German diplomatic documents even for the 1960s. See, for example, Wilson-Erhard meeting, Jan. 15, 1964, Akten zur Auswärtigen Politik Bundesrepublik Deutschland 1964, 1:50 (note 6); and de Gaulle-Heath meeting, Nov. 22, 1965, Documents diplomatiques français [DDF], 1965, 2:624. Note also de Gaulle’s comments in a meeting with West German Chancellor Kurt Georg Kiesinger, Jan. 13, 1967, DDF 1967, 1:69. [110] Anatole Shub, “Soviet Leaders Reject Reform, Cast Future in a Stalinist Mold,” Washington Post, June 13, 1969. [111] Anatole Shub, “‘Will the USSR Survive…?’ A Personal Comment,” Survey, no. 74/75 (Winter-Spring 1970): 88, 92. [112] See, for example, Stephen Cohen, “The Soviet System: Crisis or Stability?” in his Sovieticus: American Perceptions and Soviet Realities (New York: Norton, 1986). This article originally appeared in the Nation in August 1983. See also Hedrick Smith, The Russians, 2nd ed. (New York: Times Books, 1983), 555-58. Note Smith’s later admission about how he had gotten it wrong there in Hedrick Smith, The New Russians (New York: Random House, 1990), xv-xvi. [113] CIA Directorate of Intelligence, “Soviet Elite Concerns About Popular Discontent and Official Corruption,” 1. See also Barrass, Great Cold War, 284, which discusses a British intelligence report on The Malaise of Soviet Society. The report was given to the Americans and, according to Barrass, made a big impression on its readers in Washington. [114] Volkogonov, Autopsy for an Empire, 318; Anatoly Chernyaev 1972 diary, entry for Oct. 17, translated and edited by Anna Melyakova and Svetlana Savranskaya, 33; the diary for 1972 is linked to National Security Archive Electronic Briefing Book no. 279 (May 2012). See also Zubok, “The Soviet Union and Détente of the 1970s,” 434-35. [115] David Remnick, “Patriot Games,” New Yorker, March 3, 2014. [116] For the first point: Anatoly Chernyaev 1974 diary, entry for July 13, translated and edited by Anna Melyakova and Svetlana Savranskaya, 24; the diary for 1974 is linked to National Security Archive Electronic Briefing Book no. 471 (May 2014). (Brezhnev was referring to a prominent Soviet ideologue, B.N. Ponomarev, head of the International Department of the Central Committee.) For the latter point: see Georgi Arbatov, The System: An Insider’s Life in Soviet Politics (New York: Times Books, 1992), 123. [117] See Ben Lewis, Hammer and Tickle: A Cultural History of Communism (New York: Pegasus, 2010); and Volkogonov, Autopsy for an Empire, 302-03. McCauley, Rise and Fall, has many of the best jokes from the period. For Brezhnev’s automobile collection, see Volkogonov, Autopsy for an Empire, 307. The view that the ideology was just a shell of its former self is, of course, by no means universally shared. Even so hard-core a realist as Wohlforth, writing in 1994, thought it was striking “how very late in the game” Soviet leaders clung to their “basic ideological faith.” Wohlforth, “Realism and the End of the Cold War,” 98. Mark Kramer, who probably is more familiar with the historical evidence from Eastern sources than any other Western scholar, takes a balanced view but clearly believes ideology was more important than realist scholars are inclined to think. “The latest evidence,” he concludes in an important article on the subject, “suggests that Marxism-Leninism was far more than a charade or a smokescreen.” “It was an ideology,” he writes, “that underlay and guided the Soviet regime,” and a certain emphasis on ideology in explaining Soviet foreign policy “seems largely warranted.” Kramer, “Ideology and the Cold War,” Review of International Studies 25, no. 4 (October 1999): 574-75. [118] Michael Ellman and Vladimir Kontorovich, “The Collapse of the Soviet System and the Memoir Literature,” Europe-Asia Studies 49, no. 2 (March 1997): 260. See also Woodrow Wilson Center, “U.S. Assessments of the Soviet and Post-Soviet Russian Economy: Lessons Learned and Not Learned,” Kennan Institute Occasional Paper 283 (Washington: Woodrow Wilson Center, 2002), 14; and Volkogonov, Rise and Fall of the Soviet Empire, 318-19, 321 (referring to Andropov’s special notes, beginning in about 1975, “warning Brezhnev of hard times to come”). [119] Lewin, Soviet Century, 261. [120] Anatoly Chernyaev 1972 diary, entry for Dec. 31, translated and edited by Anna Melyakova and Svetlana Savranskaya, 37-39; the diary for 1972 is linked to the National Security Archive Electronic Briefing Book no. 279 (May 2012); Anatoly Chernyaev 1973 diary, entry for Dec. 17, translated and edited by Anna Melyakova and Svetlana Savranskaya, 74-77; the diary for 1973 is linked to National Security Archive Electronic Briefing Book no. 430 (May 2013). Note also Chernyaev’s postscript to the 1973 diary, on page 80, written in 2002. The economy, he wrote, was not doing well; indeed, a period of “stagnation and irreversible decline” had begun; this was “starting to be felt, if not understood, by the ruling stratum”; and it “became clearer and clearer that ideology was falling victim to the hopeless economic stagnation.” [121] Alec Nove, “Prospects for Economic Growth in the U.S.S.R.,” American Economic Review 53, no. 2 (May 1963): 544. [122] Byrne, “Recent Trends in the Soviet Economy,” 3. [123] Alexander Erlich in Slavic Review Roundtable, 244-45. See also Schroeder, “Reflections on Economic Sovietology,” 210. [124] For the key passages, see Lewin, Soviet Century, 252, 260; and Moshe Lewin, Political Undercurrents in Soviet Economic Debates: From Bukharin to the Modern Reformers (Princeton: Princeton University Press, 1974), 157, 177-79. See also Vladimir G. Treml, “The Politics of ‘Libermanism,’” Soviet Studies 19, no. 4 (April 1968): 569-72; and Vladimir Treml, “Interaction of Economic Thought and Economic Policy in the Soviet Union,” History of Political Economy 1, no. 1 (1969): 207-16. The 1964 Nemchinov article is of particular interest since Gorbachev “in a crucial speech on economic reform singled it out as the theoretical inspiration for the economic reforms of perestroika.” Pekka Sutela, Economic Thought and Economic Reform in the Soviet Union (Cambridge: Cambridge University Press, 1991), 62. Nemchinov was by no means the only economist to call for fairly radical changes. V.V. Novozhilov and L.V. Kantorovich are often mentioned in this context, and, as Bruce Parrott points out, the academician N.N. Inozemtsev, head of a major Soviet research institute, also took a fairly radical line. In 1969, Inozemtsev “stressed the need to identify the ‘objectively progressive’ tendencies in the growth of capitalist productive forces which could be emulated by the USSR”; Inozemtsev was later made a candidate member of the Central Committee. See Bruce Parrott, Politics and Technology in the Soviet Union (Cambridge: MIT Press, 1983), 236-37, 248, 251-53. The record of the economist Abel Aganbegyan’s June 1965 talk to a group of editors in Leningrad, published in a samizdat journal and made available in the West, is another well-known document from the period bearing on this issue. See Aganbegyan, “The Real State of the Economy,” in An End to Silence: Uncensored Opinion in the Soviet Union: From Roy Medvedev’s Underground Magazine “Political Diary,” ed. Stephen Cohen (New York: Norton, 1982), 223-27; and “L’Affaire Aganbegyan, Its Economic Revelations,” CIA/RR EM 65-27, November 1965, cited in Julie Kerlin, “Military-Economic Estimating: A Positive View,” Studies in Intelligence 10, no. 4 (Fall 1966): 36. The rather radical ideas put forth by some Soviet economists received a certain amount of attention in the West at the time. Note, for example, the references to Novozhilov and Kantorovich in Pompidou, Noeud gordien, 110. On Soviet economic thought during the Brezhnev period, see also Robert English, Russia and the Idea of the West: Gorbachev, Intellectuals and the End of the Cold War (New York: Columbia University Press, 2000), 141-47. [125] See the passage from T. Bul’ba, “The Fundamental Question of the Economic Policy of the Communist Party of the Soviet Union,” Kommunist vooruzhennykh sil, no. 10 (1973): 16, quoted and discussed in William Odom, “Who Controls Whom in Moscow,” Foreign Policy¸ no. 19 (Summer 1975): 114. See also Leslie Gelb’s account of a remarkable interview he had with Marshal Nikolai Ogarkov, chief of the Soviet General Staff, in 1983. “We will never be able to catch up with you in modern arms,” Ogarkov essentially said, “until we have an economic revolution. And the question is whether we can have an economic revolution without a political revolution.” Leslie Gelb, “Who Won the Cold War?” New York Times, Aug. 20, 1992. [126] Treml, “Economic Thought and Economic Policy,” 214; A.N. Kosygin speech to Central Committee Presidium, Sept. 28, 1965, Vital Speeches of the Day 32, no. 4 (Dec. 1, 1965), 116, 118. The chapter on “The Brezhnev Administration, 1969-1975” in Parrott, Politics and Technology in the Soviet Union, is of particular interest in this context. See also Soviet leaders’ remarks in plenary meeting of the CPSU Central Committee, December 1969, quoted in CIA Directorate of Intelligence, “Investment and Growth in the USSR,” March 1970, 2, in CIA’s Analysis of the Soviet Union, 1947-1991, eds. Gerald Haines and Robert Leggett (CIA: Center for the Study of Intelligence, 2001); and Lewin, Political Undercurrents, 128-30. For more evidence on this general issue, see CIA, Office of Economic Research (M. Elizabeth Denton), “Soviet Perceptions of Economic Prospects,” March 1981, 1-2, 7 (and especially the Brezhnev remarks from 1970-71 quoted there), CIAERR/0000496623; this study was published in U.S. Congress, Joint Economic Committee, Soviet Economy in the 1980s: Problems and Prospects (Washington: Government Printing Office, 1983), 30-45. [127] See Vladimir Treml, Censorship, Access, and Influence: Western Sovietology in the Soviet Union (Berkeley: University of California Press, 1999), 1-46, and Treml, “Western Analysis and the Soviet Policymaking Process” (with discussant comments), in Haines and Leggett, Watching the Bear, 187-219. The Czech economist Václav Klaus, who was president of the Czech Republic from 2003 to 2013, reminisced about how it was possible under a Communist regime for young economists to read works such as Friedrich von Hayek’s article “The Use of Knowledge in Society,” which was published in the American Economic Review in 1945. It was impossible to read periodicals like Newsweek or the Wall Street Journal, “but in the libraries of academic institutions we could get the American Economic Review and similar journals. They were sufficiently scientific and, therefore, incomprehensible for the communist censors.” Václav Klaus, “Hayek and My Life,” in F.A. Hayek and the Modern Economy: Economic Organization and Activity, eds. Sandra Peart and David Levy (New York: Palgrave Macmillan, 2013), 230-31. [128] Aganbegyan, “The Real State of the Economy,” in Cohen, An End to Silence, 227. [129] Gennadi Zoteev, “The View From Gosplan,” in Destruction of the Soviet Economic System: An Insiders’ History, eds. Michael Ellman and Vladimir Kontorovich (Armonk: Sharp, 1998), 87. [130] According to former CIA director Robert Gates, the CIA “had clandestine reporting to the effect that even Andropov regarded our reporting on the Soviet economy as the best available to him.” Robert Gates, “U.S. Intelligence and the End of the Cold War,” Nov. 19, 1999, https://www.cia.gov/news-information/speeches-testimony/. Gates had made the same point in a speech when he was director of central intelligence seven years earlier. See Robert Toth, “CIA Defended on Assessing Soviets,” Los Angeles Times, May 21, 1992. Volkogonov, Rise and Fall of the Soviet Empire, 339. [131] Dimitri Simes, in Soviet Military Economic Relations, 244. [132] Anatoly Chernyaev 1972 diary, entry for Dec. 31, translated and edited by Anna Melyakova and Svetlana Savranskaya, 38; the diary for 1972 is linked to National Security Archive Electronic Briefing Book no. 279 (May 2012). See also the discussion in Parrott, Politics and Technology, 239-40. According to information provided by a samizdat publication at the time, Parrott writes, “three Politburo members (Shelepin, Suslov, and Mazurov) circulated a private letter condemning” a speech Brezhnev had given in the December 1969 Central Committee Plenum discussing the problem “for producing ‘only hysteria’ without providing any solution to the difficulties it depicted.” [133] “Z” [Martin Malia], “To the Stalin Mausoleum,” 297. [134] Goodman, “Ending the CIA’s Cold War Legacy,” 141. [135] U.S. Congress, Joint Economic Committee, Allocation of Resources in the Soviet Union and China — 1979, Part 5 (Executive sessions, June 26, 1979) (Washington: Government Printing Office, 1980), 11. [136] Joint Economic Committee, Allocation of Resources in the Soviet Union and China, 1980 (Washington: Government Printing Office, 1980), 113-15. [137] Note, in this context, Marshall Goldman, “Soviet Perceptions of Chinese Economic Reforms and the Implications for Reform in the U.S.S.R.,” Journal of International Affairs 39, no. 2 (Winter 1986). [138] Moynihan, “How America Blew It.” For the 1979 article, see Daniel Patrick Moynihan, “Will Russia Blow Up?” Newsweek, Nov. 19, 1979. [139] Thus he referred in that 1979 article to how the Soviet economy had been growing at “better than 6 percent in the 1950s” but was “barely half that” in the 1970s. He also noted that “productivity increases are about at zero.” Those figures are in line with CIA estimates at the time: In the important CIA paper “Soviet Economic Problems and Prospects,” released by Congress’s Joint Economic Committee in 1977, the Soviet economy was said to be growing at a rate of 5.8 percent in the 1950s but only 3.7 percent in the first half of the 1970s (page 2), and factor productivity was presented as actually declining slightly in that period (page 10). [140] Stansfield Turner, “Intelligence for a New World Order,” Foreign Affairs 70, no. 4 (Fall 1991), 162, and Berkowitz, “U.S. Intelligence Estimates of the Soviet Collapse,” 244-45; a slightly different version of the Berkowitz article originally appeared in Blindside: How to Anticipate Forcing Events and Wild Cards in Global Politics, ed. Francis Fukuyama (Washington: Brookings Institution Press, 2007). [141] Central Intelligence Agency, “Soviet Economic Problems and Prospects,” July 1977. All the quotations come from the summary at the beginning of the report. [142] Quoted in MacEachin, CIA Assessments of the Soviet Union, appendix. MacEachin gives extracts from Turner’s testimony to Congress in 1977, 1978, 1979, and 1980, all of which make the same basic point. [143] “Soviet Economy Said Unwell,” Washington Post, Aug. 6, 1977. [144] U.S. Congress, Joint Economic Committee, Allocation of Resources in the Soviet Union and China — 1979, Part 5 (July 1979), 11. [145] David Engerman, Know Your Enemy: The Rise and Fall of America’s Soviet Experts (New York: Oxford University Press, 2009), 125-26. [146] Hoffman, Dead Hand, 183-85. Gorbachev is quoted as telling his wife “We can’t go on living like this” just before he became general secretary in 1985 (page 187) . [147] The original article appeared in the Times of London in September 1977. It was republished as Bernard Levin, “One Who Got It Right,” in National Interest 31 (Spring 1993): 64-65 and is quoted in Seymour Martin Lipset and Gyorgy Bence, “Anticipations of the Failure of Communism,” Theory and Society 23, no. 2 (April 1994): 200-10. ) [contents] => Array ( [title] => [contents] => ) ) ) [post_count] => 3 [current_post] => -1 [in_the_loop] => [post] => WP_Post Object ( [ID] => 691 [post_author] => 138 [post_date] => 2018-09-06 05:00:14 [post_date_gmt] => 2018-09-06 09:00:14 [post_content] =>

Editorial Note: This essay is the first of a new feature for the Texas National Security Review. From this point forward, we will be publishing thoughtful and original responses to scholarship and essays published here and in other journals.

  Andrew W. Marshall and Abram N. Shulsky, “Assessing Sustainability of Command Economies and Totalitarian Regimes: The Soviet Case,” Orbis 62, no. 2 (Spring 2018), https://doi.org/10.1016/j.orbis.2018.02.011. Marc Trachtenberg, “Assessing Soviet Economic Performance During the Cold War: A Failure of Intelligence?” Texas National Security Review 1, no. 2 (March 2018), http://hdl.handle.net/2152/63942.   The 2018 National Defense Strategy articulates a clear vision that “[t]he central challenge to U.S. prosperity and security is the reemergence of long-term, strategic competition” with authoritarian Russia and China.[1] Such long-term competition has many facets, but perhaps the most salient component is the economic performance of these competitors. Economic growth, financial power, and technological development are the engines for military capability and diplomatic leverage.[2] To paraphrase Cicero, the sinews of competition are infinite money. As U.S. policymakers consider this new era of long-term strategic competition, it is useful to reflect on the economic component of the last such era: the Cold War. U.S. intelligence analysts struggled to understand the opaque Soviet economic system. How well was it doing compared to the United States’ economic system? Could this authoritarian model sustain or perhaps even prevail in long-term competition? The answers to these questions were difficult, contested, and politically charged, both during the Cold War and in its aftermath.[3] Similar questions are being asked today about the Chinese economy, making this more than an issue of historical interest.[4] Fortunately, two recent articles revisiting Cold War-era intelligence on the Soviet economy provide an accessible entry point for those grappling with such questions today. The first is by two participants in the original debate about the Soviet economy. Andrew Marshall was founding director of the Office of Net Assessment in the Office of the Secretary of Defense after more than two decades as an economist at the RAND Corporation. Abram Shulsky was minority staff director for the Senate Select Committee on Intelligence before joining the Defense Department during the Reagan administration. The second article was written by Marc Trachtenberg, one of the preeminent historians of U.S. strategy and the Cold War.[5] The two articles are strikingly different in tone: Marshall and Shulsky are critical of U.S. intelligence and Trachtenberg is more laudatory. Nevertheless, a deeper examination shows they are much more complementary than contradictory. This “Response” essay intends to highlight some of the key areas of agreement and disagreement between the two articles and provide additional context for readers. It proceeds in five parts: First, it summarizes the basic arguments put forward in each article. Second, it describes, based on the domestic context and declassified records, the impact that intelligence regarding the general state of the Soviet economy had on U.S. policymaking in the late Cold War (roughly from 1974 to 1989). Third, it examines in more detail the critical question of the Soviet economy’s ability to support its military and foreign policy commitments. Fourth, it highlights an area not addressed substantially by either article, namely Soviet acquisition of Western technology through both lawful and illicit means. Finally, the essay concludes with observations on intelligence, economics, and long-term competition.

The Stansfield Turner Paradox: Opposing Views on Economic Intelligence

The different perspectives of the two articles are encapsulated in the paradox of one former official: the recently deceased retired Adm. Stansfield Turner, who was director of central intelligence under President Jimmy Carter (1977–1981). Marshall and Shulsky quote Turner’s 1991 Foreign Affairs article in their introduction: “We should not gloss over the enormity of this failure to forecast the magnitude of the Soviet crisis.”[6] They later quote Turner’s article again: “Neither I nor the CIA’s analysts reached the conclusion that eventually something had to give: that there would be a political and economic crisis.”[7] Yet Trachtenberg quotes Turner’s testimony to Congress in 1979, in which he said, “The low growth rates we envision for the mid-1980s could squeeze their resources to the point where something has to give.”[8] How could Turner argue in 1991 that the CIA never concluded “something had to give” when he had testified in 1979 using almost exactly those words? Marshall and Shulsky address this paradox by first discussing views within economics on command economies and how they evolved from the 1930s to the 1970s. They report that economists were generally positive about the economic potential of command economies, such as the Soviet Union, into the early 1960s. They then describe some of the challenges for CIA analysts seeking to estimate the size and growth of the Soviet economy. These included reliance on deeply suspect Soviet statistics, which were almost surely inflated intentionally, both by Soviet leaders for propaganda purposes and by Soviet producers, who had incentives to misreport or otherwise “game” the presentation of results. Marshall and Shulsky highlight the example of Soviet glass manufacturers having their output measured in square feet (or meters) of glass and then making the glass thinner to meet planned goals. Never mind that the rate of glass breakage went up. Quotas were met, if not exceeded. Yet how to account for this inflation in estimates? One could apply a discount to Soviet data, but how much? Without hard data, any such adjusted estimate would be subject to attack for being merely “anecdotal.” Marshall and Shulsky quote Anders Aslund’s summation of this problem:
Any specialist is caught in a dilemma: whether to settle for a conservative assessment that can be defended by traditional arguments but is bound to be too high, or to attempt a realistic assessment based more on subjective evaluations and less on hard facts.[9]
Marshall and Shulsky concede that whatever the challenges and limitations of CIA analysis of the Soviet economy, by the 1960s CIA analysts recognized that Soviet economic growth was slowing. Throughout the 1970s and 1980s, the CIA reported falling productivity as well as other challenges to the Soviet economy. However, Marshall and Shulsky argue that “the numbers did not convey any sense of crisis.”[10] Marshall and Shulsky then turn from analysis of overall Soviet economic performance to specific assessment of the Soviet defense burden — a crucial question for long-term competition. How much of the Soviet economy was being consumed by the Soviet military in order to compete with the United States? Here the CIA faced analytic hurdles at least equal to those faced in assessing the size of the Soviet economy. Prices for Soviet defense goods were set not by the market but by fiat. Prices for Soviet defense labor were likewise decreed (and suppressed by conscription). Some activities that were nominally civilian were, no doubt, underwriting military activities. Marshall and Shulsky also note how difficult cost calculations can be even with official figures, citing a RAND study from the 1950s:
Even with access to official budgetary figures, the [RAND] team discovered it could only account for about half of the USAF [U.S. Air Force] budget; the other half represented various forms of ‘overhead’ that could not be allocated by mission.[11]
These challenges meant that, through the mid-1970s, the CIA persistently underestimated the defense burden on the Soviet Union. In 1976, Marshall and Shulsky note, after obtaining new information, the “CIA doubled its estimate of the defense percentage of Soviet GNP [Gross National Product] from 6-8 percent to 11-13 percent.”[12] Yet, Marshall and Shulsky then quote Robert Gates, the CIA deputy director of intelligence in the early 1980s (who would later serve as defense secretary):
I believed instinctively that, in this communist variant of Sparta, the burden of military-related spending was far greater than the 14-16 percent of Soviet Gross National Product that CIA was saying — perhaps somewhere between 25 and 40 percent.[13]
Marshall and Shulsky conclude their essay with a call for intelligence to exploit non-traditional sources of information, such as émigrés and figures on general standards of living, as a way to improve intelligence analysis of opaque economies. Their answer to the Stansfield Turner paradox is that in 1979 Turner may have used the words “something has to give” but those words did not convey crisis. Since the numbers the CIA produced were not intuitively indicative of crisis (indeed, how could they be?), policymakers believed the Soviets could carry their defense burden for years if not decades to come. Even when the CIA revised its numbers upward, there was still a belief, as Gates indicated, the estimates remained low. There was, however, no way to prove this in a systematically and scientifically defensible manner. Thus, Turner was correct in 1991 despite his words of 1979. Trachtenberg reaches the opposite conclusion about the Stansfield Turner paradox. Citing sources as varied as headlines in the New York Times, declassified CIA products, and a wealth of information from prominent U.S. economists, he demonstrates that the decline of Soviet economic growth after the mid-1960s was well understood. He further shows that, by the late 1970s and early 1980s, it was generally understood that the Soviet economy was in such dire shape that the entire Soviet system of government was in trouble, if not already in crisis. [quote id="1"] Trachtenberg demonstrates both CIA and academic economists understood why the Soviet economy was stagnating. The answer was that “the Soviets could not sustain a high rate of economic growth just by plowing more and more capital into the economy.”[14] After years of building new plants and opening up “virgin lands” for agriculture, “by the mid-1960s all the low-hanging fruit had been harvested.”[15] Future growth would require improvements in Soviet productivity, which had declined at times in the 1970s. Trachtenberg, again citing both CIA and academic economists, concludes that by the 1970s at the latest it was clear “that the USSR’s economic problems could be expected to worsen unless the Soviet economy changed in fundamental ways.”[16] Neither CIA analysts nor academics could predict whether the Soviets would attempt reform or live with continued stagnation and relative decline. Nor could they determine whether, if the Soviets attempted reform, they would succeed without undermining their entire system. Yet, Trachtenberg argues,
while the analysis might not have enabled people to see precisely how the USSR was going to develop, it did provide a certain window into the future — a hazy and uncertain window to be sure, but one of real value nonetheless.[17]
Trachtenberg concludes by observing that the wide public acceptance of Turner’s view on intelligence and the Soviet economy in 1991, despite the availability of his testimony in 1979 as well as other evidence, illustrates the weakness of the supposed democratic “marketplace of ideas” — the concept that contesting information leads to better decisions. This argument is in keeping with other arguments about the failure of this marketplace, particularly with regard to the 2003 invasion of Iraq.[18] Trachtenberg does not speculate why Turner might have contradicted himself, though Turner’s poor relationship with the CIA is a plausible cause. As one CIA history notes, Turner bluntly let the CIA’s analytic cadre know its products were unsatisfactory and he intended to take steps to improve them. This account dryly concludes this “was probably a purposeful instrument of leadership, but it did not foster links between Turner and the professionals in the community, especially in [the] CIA.”[19] At first glance, these two articles appear contradictory — and so one must be right and the other wrong. On the question of intelligence on the overall Soviet economy, however, the two articles are not so far apart. Marshall and Shulsky believe that if CIA analysis were better it could have been less equivocal in predicting crisis (note Turner’s 1979 formulation — “could squeeze,” not “will squeeze”). Trachtenberg concedes that the CIA gave policymakers only a “hazy window” to the future — a more positive assessment than that offered by Marshall and Shulsky, but not wildly divergent. The dispute between the articles is not about the quality of the intelligence per se, which both agree was imperfect. It is instead about the utility of that intelligence to policymakers in assessing and planning long-term competition. The next section addresses this question.

Malaise vs. Stagnation: Policymaker Views of Economic Competition, 1974–1989

Competition is not a one-sided affair. As such, it is important to place analysis of the Soviet economy in the context of the state of the U.S. economy. By the mid-1970s, though the Soviets were mired in what they called the “era of stagnation” (Период застоя), the United States’ problems looked almost as grim.[20] The Bretton Woods economic system was in tatters following President Richard Nixon’s suspension of dollar-gold convertibility.[21] President Gerald Ford was confronted with rising inflation, unemployment, and the 1973 oil shock.[22] Of the late Cold War presidents, President Jimmy Carter confronted the most serious economic challenges. In his famous 1979 “malaise” or “crisis of confidence” speech, Carter declared, “The erosion of our confidence in the future is threatening to destroy the social and the political fabric of America.” Among his proposed solutions: “I ask Congress to give me authority for mandatory conservation and for standby gasoline rationing.”[23] The U.S. crisis was sufficiently deep that the president sought to impose new elements of a command economy — hardly a ringing endorsement of capitalism’s triumph over communism. Policymakers in the 1970s were unsure whether economic problems in the West were any more soluble than those in the Soviet Union. Moreover, if the United States could reform itself, it was plausible the Soviets might be able to do so as well. Indeed, the communist People’s Republic of China had begun substantial reforms in 1978, which the Soviets monitored closely.[24] As Chris Miller demonstrates, Mikhail Gorbachev’s attempted reforms were, in part, inspired by China’s efforts.[25] This point bears emphasis, as the ultimate impact of such efforts was largely unknowable to both CIA analysts and Soviet leaders before reform was attempted, underscoring the difficulty in predicting Soviet crisis or collapse. It is also important to note that, even within the CIA, views differed about the depth of Soviet problems, with some analysts more pessimistic than others about prospects for the Soviet economy.[26] American intelligence on the overall Soviet economy was, nonetheless, sufficiently compelling to illuminate future, if not immediate, opportunities for U.S. policymakers even in the Carter administration. An August 1977 meeting of Carter’s Policy Review Committee (composed of senior figures including Turner and Treasury Secretary W. Michael Blumenthal) concluded,
At the present time, we cannot exert significant influence upon Soviet behavior by economic means. … Yet, we may be missing an important point. If economic growth in the Soviet Union slows as projected, the Soviets will face difficult choices in the 1980’s regarding the allocation of resources. Does this have implications for US policy? Conceivably, our economic leverage may be much stronger than now, and we may have a unique opportunity to use it.[27]
Carter personally recognized the importance of the Soviet Union’s economic challenges. In June 1977, William Hyland, a top Soviet analyst at the CIA serving on the National Security Council staff, wrote to the president on enduring Soviet problems: “While it is always dangerous to project Soviet restraint because of their economic dilemma, it may be true for the first time that long-term problems will impinge on foreign policy decisions.” Carter made a margin note, “may be most important of all,” next to this paragraph.[28] By the early 1980s, the United States had begun its reformation and recovery, while the Soviet Union’s problems were deepening. One example is the taming of U.S. inflation under Federal Reserve Chairman Paul Volcker, with inflation rates declining from about 13 percent in 1979 to less than 4 percent in 1983.[29] The Reagan administration began receiving intelligence on the worsening Soviet problem in the context of this U.S. economic recovery. This provided exactly the sort of opportunities the Carter administration thought would come. As early as October 1981, Director of Central Intelligence William Casey sent President Ronald Reagan a CIA paper that underscored the dire straits the Soviets were in:
Slower economic growth will present President Brezhnev and his colleagues with some increasingly tough and politically painful choices regarding resource allocation and economic management. Annual increments to national output in the early 1980s will be too small to permit them simultaneously to meet mounting investment requirements, to maintain growth in defense spending at rates of the past, and raise the standard of living appreciably. Simply stated, something will have to give.[30]
The paper went on to note that Western imports were needed to ameliorate Soviet weaknesses, which could, in turn, create opportunities for pressuring the Soviets. In August 1982, Reagan’s national security adviser, William Clark, wrote to the president reiterating this theme:
The CIA has prepared a report which raises the question whether the Soviet Union, facing mounting economic problems, may at some point decide to shift resources from arms production to civilian uses … Western policies would play a major role in such a development. ‘The credit, goods, food and technology provided by the West have helped Moscow maintain its current resource allocation scheme.’ Denial of such assistance would produce additional pressure on the leadership to shift resources from military to civilian uses.[31]
Things did not improve for the Soviets, and in November 1987 Deputy Director of Central Intelligence Gates wrote to Reagan:
There is general agreement among the Soviet leaders on the need to modernize their economy — not so much for its own sake or to make Soviet citizens more prosperous but to strengthen the USSR at home, to further their own personal power, and to permit the further consolidation and expansion of Soviet power abroad. … The roots of Gorbachev’s dynamic foreign policy are to be found at home and in the need for a prolonged breathing space.[32]
Gates was skeptical that reform and the pursuit of “breathing space” would fundamentally change the nature of the Soviet regime, but he recognized that economic issues were changing Soviet domestic and foreign policy. Hyland’s view in 1977 had been borne out 10 years later. While Gates did not foresee impending collapse, he clearly believed the Soviet system was under pressure. Notably, Reagan absorbed these messages: As Trachtenberg describes, he referred to the Soviet Union as an “ec.[onomic] basket case” in a 1985 diary entry.[33] It is also worth noting that the Commission on Integrated Long-Term Strategy, a bipartisan effort chartered to offer the U.S. government strategic advice on long-term competition, released a final report in January 1988. It argued that Soviet economic difficulties were potentially a major element of a changing security landscape and concluded, “In the long run, the Soviet leaders would have difficulty maintaining the country’s present military position if economic reform fails.” Marshall chaired one of the committee’s working groups, as did other alumni from RAND’s economics department.[34] [quote id="2"] Intelligence on the Soviet economy appears to have been sufficiently accurate and compelling to convince policymakers in the Carter and Reagan administrations that Soviet economic weakness created opportunities for the United States in long-term competition. While it is true that, through 1988, the CIA did not foresee a collapse or fundamental change in the Soviet system, it was nonetheless clear that something had to give — a phrase that appears in multiple sources throughout the period. The available evidence suggests that Trachtenberg’s “hazy window” on the Soviet economy was sufficient to aid policymakers in formulating strategy.

How Weary the Red Titan? The Soviet Defense Burden and Long-Term Competition

If Trachtenberg is correct about the utility of U.S. intelligence on the overall Soviet economy, he says little about the crucial question of the Soviet defense burden. If the Soviet economy was stagnating in the 1980s but the defense burden was relatively small, the Soviet leadership might be able to soldier on with long-term competition as it had in the 1960s and 1970s. The hard choices CIA analysts believed were coming could be put off. In contrast, if the defense burden was high and the economy was stagnating, the Soviet leadership might not be able to delay those hard choices, even if they gained the “breathing space” Gates believed they sought. Marshall and Shulsky are right to highlight the weakness of the CIA’s assessment of the Soviet defense burden through the mid-1970s, echoing arguments Marshall made while in government.[35] These internal critiques were mirrored by external critics, such as former CIA analyst William T. Lee and University of North Carolina professor Steven Rosefielde.[36] The doubling of the CIA’s estimate of the defense burden in the mid-1970s underscores the validity of these critiques, at least to that point. Marshall and Shulsky say little about efforts to improve analysis of the defense burden, which the CIA and the intelligence community generally took as a serious challenge. One of the most notable efforts was the formation, in 1972, of the Military-Economic Advisory Panel. This panel was chartered “to help insure [sic] that intelligence on Soviet defense spending provided to the US decision maker was of the highest quality.” Members of the panel were to be granted “access to the full range of information and methodologies in use and will have full access to all intelligence community resources involved in this work.”[37] The panel was, in 1976, chaired by Herbert Levine, a professor at the University of Pennsylvania and one of the leading authorities on the Soviet economy. Other members included Abraham Becker, a Soviet expert at RAND and Lt. Col. Lee Badgett, an economics professor at the Air Force Academy who previously had been a military assistant to Marshall at the Office of Net Assessment. Throughout its existence, the panel would maintain a record of distinguished members and consultants, including Ivan Selin, a former RAND and Defense Department analyst; Soviet émigré economist Igor Birman; and Massachusetts Institute of Technology professor Stephen Meyer. Outside expert panels have a mixed track record, but available CIA records, including the panel’s reports to Turner when he was director of central intelligence, seem to indicate that this panel provided helpful recommendations without calling into question the CIA’s basic methodology.[38] One minor note of irony regarding the presentation of information: The CIA’s computer model for estimating the costs of Soviet military expenditures was known as the Strategic Cost Analysis Model, or SCAM.[39] To my knowledge, the Military-Economic Advisory Panel never suggested that this acronym was infelicitous branding. Yet by 1983, after several rounds of reviewing CIA methodologies, the panel concluded that one of the major problems with CIA estimates of the Soviet defense burden was the extent to which those estimates were misunderstood and politicized.[40] The panel made recommendations for changing the presentation of the estimates; these were broadly accepted at a meeting on Soviet defense estimates between Defense Secretary Caspar Weinberger and Director of Central Intelligence William Casey in July 1984.[41] Casey wrote to Weinberger in 1985 to confirm these changes were being implemented.[42] In a 1986 CIA report, these changes are clear: The estimate of the Soviet defense burden displayed the burden in a different format and also counted the costs of Soviet programs related to defense, such as the cost of maintaining the Soviet global position, sometimes referred to as the cost of Soviet empire.[43] The “cost of empire,” which included military and economic assistance to the Soviet bloc, had been defined and explored in research by RAND economist Charles Wolf, funded by the Office of Net Assessment.[44] While some in the CIA debated the magnitude of Wolf’s findings, the eventual inclusion of such costs meant that assessments in 1986 retrospectively showed the Soviets devoting 16 percent to 18 percent of their economy to defense in the late 1970s and early 1980s.[45] In addition to improving analytic methods, CIA analysts also took seriously Marshall and Shulsky’s charge to find new sources of data. One of the most remarkable — though not specific to the defense burden — was undertaken in 1967 by CIA analyst Gertrude Schroeder (later an economics professor at the University of Virginia). Schroeder, on temporary assignment to the U.S. embassy in Moscow, took the opportunity to travel around the capital and other parts of the Soviet Union incognito, relying on her excellent Russian and “a tacky outfit consisting of gray-green skirt, nondescript tan blouse, much-worn brown loafers, and of course head scarf,” with no stockings. After observing life from the perspective of a Soviet citizen during these excursions, she concluded, “[O]ur measurements of the position of Soviet consumers in relation to those of the United States (and Western Europe) favor the USSR to a much greater extent than I had thought. The ruble-dollar ratios are far too low for most consumer goods.”[46] [quote id="3"] Accessing such novel sources was challenging. For example, Vladimir Treml, a Duke University economics professor serving on the Military-Economic Advisory Panel in 1982, recommended the intelligence community explore unpublished material in various Eastern European libraries to collect data deleted from official Soviet publications. While reasonable, collecting the material required “language[-]trained economists,” who were in short supply. Further, CIA leaders concluded that the sources would be compromised by CIA analysts seeking to access them and nongovernment economists were “reluctant to work with us [the CIA].” The director of the Office of Soviet Analysis at the CIA nonetheless cheerfully (if perhaps cynically) concluded, “Somewhere in this mess, however, there must be a pony! We’ll keep looking.”[47] Estimates of the Soviet defense burden remained a challenge through the end of the Cold War and afterward. As William Wohlforth has observed, even after the Soviet Union collapsed there was debate about the size of the defense burden.[48] One of the most authoritative efforts, by Russian historian Irina Bystrova, concludes that the Soviet military-industrial complex accounted for about 25 percent of Soviet gross domestic product in the 1980s while absorbing 75 percent of research and development as well as the best technical people.[49] Although Bystrova’s estimate of the defense burden is significantly higher than the 1980s CIA estimate (16 percent to 18 percent), the goal of making such estimates was not finding the exact figure. As with assessments of the overall economy, the objective was to inform policymakers of how well the Soviet economy could carry the burden of competition. Here, it seems clear by the 1980s the intelligence was telling policymakers that the Soviet Union was struggling under that burden. In a note to Gates two days before the July 1984 meeting between Casey and Weinberger, National Intelligence Officer for Economic Issues Maurice Ernst wrote:
Evidence is accumulating that medium-term projections of Soviet force levels … would require a growth of military expenditures and military procurement in particular that many Soviet analysts believe to be greatly in excess of what the Soviet economy can probably support. Something will have to give. I don’t believe we can hazard an answer at this point, but simply point out to the Director and Weinberger that at a minimum a severe conflict is shaping up in the USSR over the allocation of key resources between defense and other uses, and that the outcome of the conflict remains in doubt.[50]
Marshall and Shulsky’s criticisms of CIA estimates of the Soviet defense burden are thus valid up to a point, but they give too little credit to subsequent efforts to improve those estimates. Indeed, Marshall may be selling himself short — his bureaucratic advocacy and willingness to support outside research seems to have been an important contribution to the improvement in estimates. The result was that, by the mid-1980s, policymakers were well-informed that the Soviet defense burden was becoming unsustainable. That the burden of competition could even be sustained into the 1980s seems to have been due in no small part to Soviet acquisition of Western technology, as described in the next section.

Been Caught Stealing: The Rise and Fall of Soviet Technology Acquisition

As noted earlier, by the late 1970s CIA estimates recognized the extent to which Western exports had supported the Soviet economy. Yet the extent of Soviet reliance on the acquisition of Western technology would not become clear until the early 1980s. A summit in July 1981 between Reagan and French President François Mitterrand was crucial. There, the French revealed intelligence on Soviet acquisition of technology. The “Farewell Dossier” was derived from a French human intelligence source inside Soviet technical intelligence (KGB Line X).[51] By 1982, the U.S. intelligence community described the sprawling scope of the Soviet program, which was directed by the Soviet Military Industrial Commission.[52] It included both the KGB and Soviet military intelligence, which provided clandestine acquisition, and the Soviet State Committee for Science and Technology, which oversaw licit acquisition. The Soviet program was massive. One former Reagan administration official told me that when a new technical endeavor was proposed in the Soviet Union, Soviet practice was to try to obtain the technology from the West, through legal or illicit means, before agreeing to fund any major research and development.[53] This claim was echoed in a CIA assessment from April 1982, which noted, “Soviet military designers carefully choose the Western designs, engineering approaches, and equipment most appropriate to their deficiencies and needs.”[54] A 1985 update on Soviet acquisition of Western technology noted that, by a conservative estimate, the Soviets had saved more than $1 billion in development costs from 1976 to 1980 thanks to their technology theft. The assessment noted the Soviets had saved five years in development due to acquisitions related to the U.S. F-18 fighter-jet radar alone. This undoubtedly helped the Soviet Union continue competing with the United States, even as its economy tottered toward collapse.[55] The Reagan administration’s recognition of the importance of Soviet technology acquisition led to a major counterintelligence and export-control campaign. This effort, which began in early 1982, required extensive coordination among the CIA, the FBI, and military counterintelligence organizations, with the regular involvement of very senior U.S. officials.[56] The campaign had four parts. The first and simplest was for the United States and many of its allies to expel Soviet intelligence officers engaged in technical espionage.[57] The second was to enforce Western export controls more seriously, including acting against the sale of equipment by Norwegian and Japanese firms that enabled Soviet improvements in submarine manufacturing.[58] The third part of the campaign was, apparently, to tailor the focus of other U.S. counterintelligence efforts to protect sensitive programs. For example, a U.S. Air Force officer, approached by Soviet intelligence, became a double agent pretending to provide the Soviets with information on stealth. This led to the arrest and expulsion of the senior Soviet air attaché in Washington.[59] The fourth, and most complex, part of the campaign was allegedly to feed the Soviets faulty technology and false data about U.S. programs, which required careful selection of some real data as “feed material.”[60] [quote id="4"] This campaign was broadly effective, reducing Soviet acquisition of Western technology and, presumably, curtailing the effective subsidization of the Soviet defense burden. While the extent to which cutting off Soviet access to Western technology accelerated the end of the Cold War is probably unknowable, it almost surely contributed by raising the cost of competition for the Soviets.

Long-Term Competition and Economic Intelligence in the 21st Century

The Cold War experience of economic intelligence and long-term competition is instructive. First, in developing strategy for long-term competition, intelligence on competitors’ economic capabilities is just as important as intelligence on their military capabilities. This point underscores the continuing need for robust economic analysis in the intelligence community, ideally drawing on appropriately cleared, outside experts like those on the Military-Economic Advisory Panel. One difference between analysis of the Soviet Union in the Cold War and assessments of China and Russia today is that there is far greater private-sector interest in, and therefore analysis of, the Chinese and Russian economies. This is a mixed blessing for the intelligence community. There are many more experts and sources of data, but many of those experts have a financial (rather than strictly academic) stake in the Chinese and Russian economies and therefore may not be entirely unbiased. Second, it highlights the necessity (and difficulty) of appropriately measuring a defense burden. While Chinese growth will undoubtedly continue to underwrite defense expenditure to some extent, China may, like the Soviet Union (and the United States), face hard choices. For example, Peter Robertson and Adrian Sin argue that China’s defense expenditures, measured with a relative cost-price index, are larger in nominal terms than commonly believed but smaller in real terms due to rising labor costs.[61] Similarly, the Chinese may have “costs of empire,” such as spending on the Belt and Road Initiative, which should not be viewed in isolation from the military burden.[62] Economic growth does not automatically and seamlessly translate to military budgets, much less real military power. Policymakers need a window, however hazy, on the economic future of adversaries. Third, while the U.S. relationship with China is different than that with the Soviet Union, it is likely that the licit and illicit acquisition of Western technology supports the Chinese defense burden at least as much as it did the Soviet burden.[63] Given the recent scrutiny of Chinese trade and espionage by both the Trump administration and Congress, lessons of the anti-Soviet counterintelligence campaign are worth examining. Former national counterintelligence executive Michelle Van Cleave has called for just such a proactive strategic counterintelligence campaign.[64] Paired with greater scrutiny of China’s licit technology acquisition, as called for in pending legislation, such a campaign could make a significant difference in long-term competition.[65] The return of long-term competition is not simply the Cold War redux. Yet neither should the lessons of the Cold War simply be discounted. Marshall, Shulsky, and Trachtenberg have done contemporary analysts a great service in reviewing the critical question of economic intelligence during that long twilight struggle. Acknowledgements: The author thanks Peter Clement, Ken deGraffenreid, and other former government officials who wish to remain anonymous for their insight on this subject and Frank Gavin, Josh Rovner, Bill Wohlforth and an anonymous reviewer for helpful feedback on an early draft.  Austin Long is a senior political scientist at the nonprofit, nonpartisan RAND Corporation. Image: serouj [post_title] => Rubles, Dollars, and Power: U.S. Intelligence on the Soviet Economy and Long-Term Competition [post_excerpt] => [post_status] => publish [comment_status] => open [ping_status] => closed [post_password] => [post_name] => rubles-dollars-and-power-u-s-intelligence-on-the-soviet-economy-and-long-term-competition [to_ping] => [pinged] => [post_modified] => 2018-09-06 14:17:28 [post_modified_gmt] => 2018-09-06 18:17:28 [post_content_filtered] => [post_parent] => 0 [guid] => http://tnsr.org/?p=691 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw [lead] => This response essay explores some of the key areas of agreement and disagreement between two recent articles on Cold War-era assessments of the Soviet economy. [pubinfo] => [issue] => Vol 1, Iss 4 [quotes] => Array ( [0] => Array ( [author] => [style] => left [text] => Trachtenberg demonstrates both CIA and academic economists understood why the Soviet economy was stagnating. ) [1] => Array ( [author] => [style] => right [text] => As early as October 1981, Director of Central Intelligence William Casey sent President Ronald Reagan a CIA paper that underscored the dire straits the Soviets were in. ) [2] => Array ( [author] => [style] => left [text] => Estimates of the Soviet defense burden remained a challenge through the end of the Cold War and afterward. ) [3] => Array ( [author] => [style] => right [text] => The Reagan administration’s recognition of the importance of Soviet technology acquisition led to a major counterintelligence and export-control campaign. ) ) [style] => framing [type] => Framing [style_label] => The Foundation [download] => Array ( [title] => PDF Download [file] => ) [authors] => Array ( [0] => 138 ) [endnotes] => Array ( [title] => Endnotes [endnotes] => [1] U.S. Department of Defense, Summary of the 2018 National Defense Strategy of the United States of America: Sharpening the American Military’s Competitive Edge, 2, https://dod.defense.gov/Portals/1/Documents/pubs/2018-National-Defense-Strategy-Summary.pdf. [2] See for example Aaron L. Friedberg, In the Shadow of the Garrison State: America's Anti-Statism and Its Cold War Grand Strategy (Princeton, NJ: Princeton University Press, 2000); Rosella Cappella Zielinski, How States Pay for Wars (Ithaca, NY: Cornell University Press, 2016); Francis J. Gavin, Gold, Dollars, and Power: The Politics of International Monetary Relations, 19581971 (Chapel Hill: University of North Carolina Press, 2004); and William H. McNeill, The Pursuit of Power: Technology, Armed Force, and Society Since A.D. 1000 (Chicago: University of Chicago Press, 1982). [3] See Noel E. Firth and James H. Noren, Soviet Defense Spending: A History of CIA Estimates, 19501990 (College Station: Texas A&M University Press, 1998); and Andrew F. Krepinevich and Barry D. Watts, The Last Warrior: Andrew Marshall and the Shaping of Modern American Defense Strategy (New York: Basic Books, 2015), esp. 149–74 for contrasting views. [4] Keith Bradsher, “China’s Economic Growth Looks Strong. Maybe too Strong,” New York Times, Jan. 18, 2018, https://www.nytimes.com/2018/01/18/business/china-gdp-economy-growth.html. [5] Truth in reviewing requires me to disclose connections to two of the authors. My first job in defense analysis was doing research for a project on military innovation sponsored by Marshall’s Office of Net Assessment. Marshall was later extremely generous with his time and expertise when I wrote about the development of deterrence theory at the RAND Corporation. Trachtenberg has likewise been extraordinarily generous with his time and expertise for subsequent projects on nuclear strategy in the United States and Soviet Union. [6] Stansfield Turner, “Intelligence for a New World Order,” Foreign Affairs 70, no. 4 (Fall 1991), quoted in Marshall and Shulsky, “Assessing Sustainability,” 220. [7] Marshall and Shulsky, “Assessing Sustainability,” 241. [8] U.S. Congress, Joint Economic Committee, Allocation of Resources in the Soviet Union and China—1979, Part 5 (Executive sessions, June 26, 1979) (Washington: Government Printing Office, 1980), quoted in Trachtenberg, “Assessing Soviet Economic Performance,” 99. [9] Anders Åslund, “How Small Is Soviet National Income?” in The Impoverished Superpower: Perestroika and the Soviet Military Burden, ed. Henry S. Rowen and Charles Wolf Jr. (San Francisco: Institute of Contemporary Studies, 1990), quoted in Marshall and Shulsky, “Assessing Sustainability,” 232. [10] Marshall and Shulsky, “Assessing Sustainability,” 236. [11] Marshall and Shulsky, 237. [12] Marshall and Shulsky, 240. [13] Robert M. Gates, From the Shadows: The Ultimate Insider’s Story of Five Presidents and How They Won the Cold War (New York: Simon and Schuster, 1996), quoted in Marshall and Shulsky, “Assessing Sustainability,” 241. [14] Trachtenberg, “Assessing Soviet Economic Performance,” 86. [15] Trachtenberg, 88. [16] Trachtenberg, 89. [17] Trachtenberg, 92. [18] See Chaim Kaufmann, “Threat Inflation and the Failure of the Marketplace of Ideas: The Selling of the Iraq War,” International Security 29, no.1 (Summer 2004), https://doi.org/10.1162/0162288041762940; and debate in Ronald R. Krebs and Chaim Kaufmann, “Correspondence: Selling the Market Short? The Marketplace of Ideas and the Iraq War,” International Security 29, no. 4 (Spring 2005), https://doi.org/10.1162/isec.2005.29.4.196. [19] Douglas F. Garthoff, Directors of Central Intelligence as Leaders of the U.S. Intelligence Community, 19462005 (Washington: Center for the Study of Intelligence, 2005), 133, https://www.cia.gov/library/center-for-the-study-of-intelligence/csi-publications/books-and-monographs/directors-of-central-intelligence-as-leaders-of-the-u-s-intelligence-community/dci_leaders.pdf. [20] For an overview, see Charles S. Maier, “‘Malaise’: The Crisis of Capitalism in the 1970s,” and Alan M. Taylor, “The Global 1970s and the Echo of the Great Depression,” in The Shock of the Global: The 1970s in Perspective, ed. Niall Ferguson, Charles S. Maier, Erez Manela, and Daniel J. Sargent (Cambridge, MA: Harvard University Press, 2011). [21] Peter M. Garber, “The Collapse of the Bretton Woods Fixed Exchange Rate System,” in A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform, ed. Michael D. Bordo and Barry Eichengreen (Chicago: University of Chicago Press, 1993), http://www.nber.org/chapters/c6876. [22] Yanek Mieczkowski, Gerald Ford and the Challenges of the 1970s (Lexington: University Press of Kentucky, 2005). [23] Jimmy Carter, “Address to the Nation on Energy and National Goals,” July 15, 1979, http://www.presidency.ucsb.edu/ws/?pid=32596. As many commentators have noted, Carter never used the word “malaise” in his speech, yet the term has stuck. [24] For an overview, see Odd Arne Westad, “The Great Transformation: China in the Long 1970s,” in Ferguson et al., Shock of the Global. [25] Chris Miller, The Struggle to Save the Soviet Economy: Mikhail Gorbachev and the Collapse of the USSR (Chapel Hill: University of North Carolina Press, 2016). [26] My thanks to an anonymous reviewer for making this point, which was echoed in a conversation I had with a former CIA analyst, April 26, 2018. [27] “Summary of Conclusions and Minutes of a Policy Review Committee Meeting,” Aug. 31, 1977, in Foreign Relations of the United States, 1977–1980, vol. VI, Soviet Union (hereafter FRUS) (Washington: Government Printing Office, 2013), https://history.state.gov/historicaldocuments/frus1977-80v06/d46. [28] “Memorandum From the President’s Assistant for National Security Affairs (Brzezinski) to President Carter,” June 24, 1977, in FRUS, 1977–1980, vol. VI, Soviet Union, https://history.state.gov/historicaldocuments/frus1977-80v06/d32. [29] See data at https://www.inflation.eu/inflation-rates/united-states/historic-inflation/cpi-inflation-united-states.aspx. For an overview of Volcker’s policies, see Allan H. Meltzer, A History of the Federal Reserve, vol. 2, book 2, 1970–1986 (Chicago: University of Chicago Press, 2009), chaps. 7 and 8. [30] “Memorandum From Director of Central Intelligence Casey to President Reagan,” Oct. 29, 1981, in FRUS 1981–1988, vol. III, Soviet Union, January 1981–January 1983. [31] “Memorandum From the President’s Assistant for National Security Affairs (Clark) to President Reagan,” Aug. 9, 1982, in FRUS 1981–1988, vol. III, Soviet Union, January 1981–January 1983. The quotation within the quotation is from the referenced CIA assessment. [32] “Memorandum Prepared by the Deputy Director of Central Intelligence (Gates),” Nov. 24, 1987, in FRUS 1981–1988, vol. VI, Soviet Union, October 1986–January 1989. [33] Trachtenberg, “Assessing Soviet Economic Performance,” 93 fn 85. The diary entry referenced is from Nov. 13, 1985. In contrast, Reagan wrote in his diary on Nov. 5: “Had an Ec. Briefing—our recovery is continuing—or by now I should say our expansion & growth is progressing at a slow but steady rate & on employment we’re doing extremely well. A higher percentage of the potential work force (all between 16 & 65) is employed than ever in our history.” See the full diary entry at the Reagan Foundation site: https://www.reaganfoundation.org/ronald-reagan/white-house-diaries/diary-entry-11051985/. [34] Discriminate Deterrence: Report of the Commission on Integrated Long-Term Strategy (Washington: Government Printing Office, 1988), quotation on page 8. Other working-group chairs included Paul Gorman, Charles Herzfeld, Fred Hoffman, Henry Rowen, and Charles Wolf — the latter three were RAND alumni. [35] See, for example, Marshall’s statement in U.S. Congress, Joint Economic Committee, Allocation of Resources in the Soviet Union and China—1975 (Washington: Government Printing Office, 1975) and CIA, Memorandum for the Record, “Conversation with Andy Marshall,” March 12, 1976; available at CIA’s Freedom of Information Act Electronic Reading Room: https://www.cia.gov/library/readingroom/ (hereafter ERR). Marshall’s CIA interlocutor in this latter document was Richard Lehman, the deputy for national intelligence. [36] William T. Lee, CIA Estimates of Soviet Military Expenditures: Errors and Waste (Washington: American Enterprise Institute, 1995), and Steven Rosefielde, False Science: Underestimating the Soviet Arms Buildup (New Brunswick, NJ: Transaction Books, 1982). [37] CIA, Memorandum, “Background on the Military-Economic Advisory Panel,” April 13, 1977, ERR. [38] CIA, Memorandum, “Talking Points for DCI Meeting with the Military-Economic Advisory Panel (MEAP),” Aug. 24, 1977, ERR. [39] CIA, Memorandum for Deputy Director of Intelligence, “Request for Approval of ADP Project- SCAM-1,” July 19, 1967, ERR. [40] CIA, “Reports of the Working Groups on Military-Economic Analysis,” July 20, 1983, ERR. For an excellent overview of intelligence politicization, see Joshua Rovner, Fixing the Facts: National Security and the Politics of Intelligence (Ithaca, NY: Cornell University Press, 2011). [41] CIA, Memorandum for the Record, “Conversation on Soviet Defense Expenditures,” Aug. 1, 1984, ERR. [42] Letter to Caspar W. Weinberger from William J. Casey, April 16, 1985, ERR. [43] CIA, USSR Review, September–October 1986, 11, ERR. [44] Charles Wolf et al., The Costs of the Soviet Empire (Santa Monica, CA: RAND Corp., 1983), https://www.rand.org/pubs/reports/R3073z1.html. [45] On the debate, see Maurice C. Ernst, Memorandum for Director of Central Intelligence and Deputy Director of Central Intelligence, “The Costs of the Soviet Empire: A Rejoinder,” Sept. 12, 1984, ERR. For the estimated defense burden, see USSR Review, 11. [46] Gertrude Schroeder, “Soviet Reality Sans Potemkin,” Studies in Intelligence 12, no.2 (Spring 1968): 51, 57, https://www.cia.gov/library/center-for-the-study-of-intelligence/kent-csi/vol12i2/html/v12i2a06p_0001.htm. [47] Memorandum for Director of Central Intelligence and Deputy Director of Central Intelligence, “MEAP Proposal for Additional Sources of Information of Soviet Economics Information,” June 14, 1982, ERR. The “pony” reference is to a joke much beloved of President Reagan. See Peter Robinson, How Ronald Reagan Changed My Life (New York: HarperCollins, 2003), 15–16. [48] William C. Wohlforth, “No One Loves a Realist Explanation,” International Politics 48, no. 4–5 (July 2011), https://doi.org/10.1057/ip.2011.17. See also William C. Wohlforth, The Elusive Balance: Power and Perceptions During the Cold War (Ithaca, NY: Cornell University Press, 1993). [49] Irina Bystrova, Советский военно-промышленный комплекс: Проблемы становления и развития (1930-1980-е годы) (Soviet Military-Industrial Complex: Problems of Creation and Development [1930s1980s]) (Moscow: Russian Academy of Sciences, 2006). For an English-language summary, see Irina Bystrova, “Russian Military-Industrial Complex,” (Helsinki: Aleksanteri Institute, 2011). [50] Maurice C. Ernst, “Note for Bob Gates: Soviet Defense Spending,” July 18, 1984, ERR. [51] Sergei Kostin and Eric Raynaud, Farewell: The Greatest Spy Story of the Twentieth Century (Las Vegas: AmazonCrossing, 2011). [52] CIA, Soviet Acquisition of Western Technology, April 1982, ERR. [53] Conversation with former official, April 26, 2018. [54] Soviet Acquisition of Western Technology, 6. [55] CIA, Soviet Acquisition of Militarily Significant Western Technology: An Update, September 1985, 8–12, ERR. [56] Michelle K. Van Cleave, Counterintelligence and National Strategy (Washington: National Defense University, 2007), 8–9; and Gus W. Weiss, “The Farewell Dossier,” Studies in Intelligence 39, no. 5 (1996), https://www.cia.gov/library/center-for-the-study-of-intelligence/kent-csi/vol39no5/pdf/v39i5a14p.pdf. I have also benefited from substantial off-the-record conversations with participants in this campaign. [57] See for example, State Department, Foreign Affairs Note, “Expulsions of Soviet Officials Worldwide, 1986,” January 1987, http://insidethecoldwar.org/sites/default/files/documents/Department of State Report on Expulsion of Soviet Officials Worldwide 1986 January 1987.pdf. [58] Robert A. Rosenblatt, “Toshiba Sale ‘Criminal,’ Japanese Says,” Los Angeles Times, July 18, 1987, http://articles.latimes.com/1987-07-18/news/mn-736_1_japanese-government. [59] Ronald J. Ostrow, “FBI Arrests Top Soviet Air Attache as Spy: Colonel Seized When Digging Up ‘Secrets’ Left by Double Agent,” Los Angeles Times, June 21, 1986, http://articles.latimes.com/1986-06-21/news/mn-19627_1_fbi-agents. [60] See Weiss, “The Farewell Dossier.” [61] Peter E. Robertson and Adrian Sin, “Measuring Hard Power: China’s Economic Growth and Military Capacity,” Defence and Peace Economics 28, no. 1 (Spring 2017), https://doi.org/10.1080/10242694.2015.1033895. [62] The size of China’s Belt and Road Initiative is unclear at the unclassified level, which underscores the need for high-quality economic intelligence analysis. See Jonathan E. Hillman, “How Big is China’s Belt and Road?” Center for Strategic and International Studies, April 3, 2018, https://www.csis.org/analysis/how-big-chinas-belt-and-road. [63] See William C. Hannas, James Mulvenon, and Anna B. Puglisi, Chinese Industrial Espionage: Technology Acquisition and Military Modernization (Abingdon, UK: Routledge, 2013); U.S.-China Economic and Security Review Commission, Annual Report to Congress (2016), 289–311, https://www.uscc.gov/Annual_Reports/2016-annual-report-congress; Justice Department, “Chinese National Pleads Guilty to Conspiring to Hack into U.S. Defense Contractors’ Systems to Steal Sensitive Military Information,” press release no. 16-342, March 23, 2016, https://www.justice.gov/opa/pr/chinese-national-pleads-guilty-conspiring-hack-us-defense-contractors-systems-steal-sensitive; Helene Cooper, “Chinese Hackers Steal Unclassified Data From Navy Contractor,” New York Times, June 8, 2018, https://www.nytimes.com/2018/06/08/us/politics/china-hack-navy-contractor-.html; and National Counterintelligence and Security Center, Foreign Economic Espionage in Cyberspace 2018https://www.dni.gov/files/NCSC/documents/news/20180724-economic-espionage-pub.pdf. [64] Michelle Van Cleave, Statement on “Chinese Intelligence Operations and Implications for U.S. National Security,” U.S.-China Economic and Security Review Commission, June 9, 2016. [65] Stephanie Zable, “The Foreign Investment Risk Review Modernization Act of 2018,” Lawfare, Aug. 2, 2018, https://www.lawfareblog.com/foreign-investment-risk-review-modernization-act-2018. ) [contents] => Array ( [title] => [contents] => ) ) [comment_count] => 0 [current_comment] => -1 [found_posts] => 3 [max_num_pages] => 1 [max_num_comment_pages] => 0 [is_single] => [is_preview] => [is_page] => [is_archive] => 1 [is_date] => [is_year] => [is_month] => [is_day] => [is_time] => [is_author] => [is_category] => [is_tag] => [is_tax] => 1 [is_search] => [is_feed] => [is_comment_feed] => [is_trackback] => [is_home] => [is_404] => [is_embed] => [is_paged] => [is_admin] => [is_attachment] => [is_singular] => [is_robots] => [is_posts_page] => [is_post_type_archive] => [query_vars_hash:WP_Query:private] => 1f18978e7e53b7a6b6ded1ba3cee3d08 [query_vars_changed:WP_Query:private] => [thumbnails_cached] => [stopwords:WP_Query:private] => [compat_fields:WP_Query:private] => Array ( [0] => query_vars_hash [1] => query_vars_changed ) [compat_methods:WP_Query:private] => Array ( [0] => init_query_flags [1] => parse_tax_query ) )