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Analyzing Soviet Defense Programs, 1951 1990.PDF

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comparisons showed the dollar-equivalent cost ofNA TO defense programs 15 percent larger than
Warsaw Pact programs over the period 1976-86.

Figure 3. Dollar cost of US and Soviet military programs, 1965-89 (1988 dollars). (U)
Comparisons of Soviet and US GNP first presented by CIA in the 1950s had a receptive audience, given
the concern then that the Soviet Union was on its way to overtaking the United States in the economic
realm. When DCI Allen Dulles testified before Congress in 1959, he projected Soviet GNP growth
through 1965 at 6 percent per year and industrial growth at 8 to 9 percent per year. These rates, he said,
would raise Soviet GNP to about 55 percent of the US level by 1970 and Soviet industrial production to
perhaps 60 percent of the US level. Dulles concluded by saying:

The Communists are not about to inherit the world economically. But while we debunk the
distortions of their propaganda, we should frankly face up to the very sobering implications ofthe
Soviets' economic program and the striking progress they made over the last decade.l
The most recent CIA estimates of Soviet and US GNP show Soviet GNP rising from a little more than a
third of US GNP in 1950 to a little less than half in 1965 to 60 percent in 1975 before falling to less than
half in 1990. These calculations, which represent the geometric average of comparisons made
alternatively in ruble and dollar prices, have been criticized as being overly generous to the Soviets, but
subsequent research by Russian statisticians suggests that they are not badly out of line. The point is
that, by the mid-1970s, it was clear from the Agency's publications that the fears of the USSR's
becoming the foremost world economic power were unfounded. The dollar comparisons of Soviet and
US GNP--and later of NATO and Warsaw Pact GNP--proved to be invaluable in forecasting the relative
strengths of the East and West blocs--Millikan's fifth objective for the US Government's foreign
economic intelligence ..:!

How the CIA Estimates Were Used
Analysis of Soviet economic prospects provided the framework for analysis of the Soviet economy both
in the US Government and in the academic community after the original partners--Harvard and the
RAND Corporation--left the field. In the early 1960s, the Agency's estimates disclosed a sharp slump in
Soviet economic growth to a skeptical world. In December 1963, DCI John McCone told President
Johnson and the NSC about the Agency's most recent assessment of the Soviet economy: economic
growth had slowed drastically, and the USSR's grain and gold reserves were lower than previously
estimated, accounting for Soviet attempts to find long-term credits in the West.
Gradually, the CIA estimates of slumping Soviet growth and then stagnation gained general acceptance.
Between the early 1960s and the early 1980s, the few critics ofthe GNP estimates thought they
understated Soviet achievements. Only recently have revisionist claims been heard that the CIA
estimates overstated the rate of increase in Soviet GNP.

The Defense Spending Estimates
The focus of interest in CIA's estimates of Soviet defense spending shifted over time. During the 1950s,
when the USSR's economy was on a roll and the Soviet armed forces were in the midst of a partial
demobilization, Max Millikan's first objective of foreign economic intelligence had been met. The
estimates of the cost of defense programs and the size of the Soviet economy demonstrated that the
economy could continue to support the then existing level of defense effort and more.
Then, in the Kennedy administration, the Pentagon pressed hard for finer breakdowns of Soviet defense
spending as an aid in defense planning. This was the era of cost effectiveness calculation in the DoD.
Fred Kaplan, in his book The Wizards ofArmageddon, describes the use of CIA's dollar estimates in
Pentagon deliberations over a damage-limiting strategy to employ against Soviet strategic forces ..2 The
calculations indicated that any combination of civil defense, an ABM system, and anti bomber defense

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