THE CHALLENGE OF SOVIET INDUSTRIAL GROWTH

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP71T00730R000100010024-5
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 23
• Document Creation Date: December 9, 2016
• Document Release Date: April 8, 1999
• Sequence Number: 24
• Publication Date: December 12, 1956
• Content Type: REPORT

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'''I' THE t4I?A.1.,LE'NGE OF SOVIET INDUSTRYA.I, GROWTH"
by
A.LT,EN WE11.8H DULLES
DIRECTOR OF CENTRA.L INTELLIGENCE
before
d.['.lE CCNPE.R.CNCE
EST
'11 December 1956
Princeton, Ne-: ' Jersey
It is a pleasure to return to Princeton to take part in your
discussions on the "Challenge of Soviet Industrial Growth".
During the past two days a group of outstanding experts, meeting
here, have been thoroughly canvassing this subject. I shall endeavor not
to retread the ground they have been over.
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A sober understanding of the facts of life about the Soviet Union is
fundamental. to any appreciation of the security position cf the United States.
It has always been a source of great comfort to us in Washington to know
that so many throughout the country, of which this Princeton Conference
is evidence, are also working on this problem. 'dire, in -Washington, are
being ably assisted by scholars, educators and directors of research
foundations; by leaders of business and representatives of labor, and others
t=;,:rlsin individually and in gr-:,ups, to help toward a better appreciation of
the true nature of the cviet challenge.
Tonight, I shall sun up briefly the character and dimensions of the
Soviet industrial system as it has been built up, and particularly as the
leaders of the Scviet themselves view it; and then rn. ve on to the external
manifestations of the Soviet industrial power, particularly the impact it
has had on less industrialized nations in various parts of the, world. Here,
the Soviet economic shortcuts tD industrial strength are glamcroucly
attractive but correspondingly politically danger-.,,us., since few in these
countries have had fir st--hand experience with the toll pail by pe :gip' e who
come under Communist influence.
Then, I prop,-,se we have a lurk at the S :,viet challenge in its impact
on our security interests, particularly in areas where Soviet ambitions
most directly conflict with the policy of the United States and the :Free V orld
in building a base of peace and stability.
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1..nd finally, I shall deal with the danger which Soviet industrial
and scientific progress represents for the system of government of the
Soviet Union itself, and the reflection of this problem in the troubles which
the Soviet leaders are encountering in Eastern Europe.
A measure of industrialization today is viewed as a necessary
adjulict for any state that aspires to be a power in the world. Obviously in
the atomic age, no state can develop real military strength unless it has
a substantial industrial base. But even thcs. countries that have no such
aspirations do nevertheless feel that they will continue to be labelled as
backward and undeveloped unless they industrialize. Almost everyone
must have a steel mill there days.
Hence, we see some states attempting, possibly too abruptly for
their own good, to achieve a deree of industrialization which wiser counsels
might have told them should have been sought more modestly and with more
regard for the proper balance between heavy industry, light industry, and
agriculture.
The spectacular industrial advances made by the Soviet Union,
particularly over the past decade, and the p-?werful position it has assumed
in the world, in part as a result of its industrial growth, have had a great
influence on the thinking of the non-industrialized countries of the world
which comprise approximately three-quarters --f the states now members
of the United Nations.
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A great industrial machine maybe put to rood or evil ends. It is
not always a good in itself The industrialization in Germany both in the
early part of the century and in the period between the two wars, keyed as
they were to a military machine, tended t-) build ambitions and to create
pressures whi.ch 1.ed to world conflict The present trend in the Sov,Ji.et Union,
with its emphasis on heavy industry and the building ^f a vast military
e 7tabl.ishm:ent, has forced upon the United Stater and many other free
c ountrie rim expenditures for armament
The Free World, however, cannot be expected to ignore the possible
consequences -'f the far-flung, ec-n-)mic and industrial strength that has been
developed in the Soviet Union and has male it, in a short space of time, the
second most powerful nation in the world
If the leader. s of the Soviet Union can be raid t - have any p.ui.d ng
philosophy, I suppose it is their deep respect for power -- political and
military power They have always been obsessed with the brute fact of
strength You remember that Stalin, at ;ne of the World jTjar II ----nferencc~.
with Churchill and Rno~evelt, contemptuously rli,mis.-e l the influence of the
spiritual lea ler of the nil.'.ions of Catholics in the world with the rheto-ical
question ; "The P-)pe - ?- how many divisions doer he 'nave ?"
# ,..,
1 ~-a.nin Zr~~d
l':',hruncchev can be just as cavalier in dealing-, with z e )ples ith l'.ttle mtlit=~ry
might There soul,' hha.rl.y be a better case in point t4-t the uruta.l -.t cmpt
to crush the Huns Tian revolutionaries
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The leaders of the Soviet Union know full well that military power art.
political power, which they also cherish, rest on a foundation of industrial
power. Soviet devotion to the rapid growth of heavy industry is one of the
most unhappy love affairs of the 20th Century. They subordinated the
personal welfare of a whole generation of Soviet people: to forced-draft
production of steel, oil, and machinery.
If any capitalistic country in the world had set its priorities so heavily
in favor of steel and so markedly against humanity, that country would be
thoroughly castigated, and rightly so. In contrast, the Soviet Union is p.rou.1
of its success in grinding the makings of a great modern industrial system
out of the flesh of its people.
The price the USSR has paid for its rapid industrialization must not
blind us to the physical accomplishments of the Soviet Union in this field.
At the 20th Party Congress of the Communist Party of the Soviet Union in
M,.-scow last February, a full-dress presentation of Soviet policy was given,
and on many occasions since, Soviet leaders have described their industrial
achievements and their program for the future. They have literally issue.)
a challenge to the United States to compete with the USSR economically,
and -- through the world-wide use of their economic power 'or international
p~Aitical influence, This is a grave challenge.
Soviet leaders believe they have grounds for the high self-confidence
they have been showing.
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T -.day the gross national pro suction -f the USSR is slightly more than
one--third that of the U. S . ; it is about three-quarters again as large as that
of the United Kingdom which ranks third. We still have a very g--eat le-1,1,
but the Soviet rate of progress is rapid. M, reover, in the Soviet Union,
capital goods and basic industrial materials form a much greater share of
overall production than in the United States. Thus, while 'heir gross national
production is only ,ne-third of curs, their pr-)~:Iucti..an of capital equipment
is about 4516 . f ours. Soviet production of machine to^ls actually exceeds
that of the United States.
The resources for investment in heavy industry are male available
by a deliberate policy c,f withholding cc-nomic benefits from the Soviet
cc:nsumer. Thus, Soviet pr xluction : f passenger automobiles is between
I% and 2% o our own. The United States produces 50 washing machines for
every one produced in the USSR, and 5 radix, and TV sets for each one they
produce for a population almost one-quarter larger than ours.
As I have in=dicate 1, the Soviet industrial base is still only a fraction
of our own. It is nevertheless large enough to permit the Soviet lea:lers to
expand their military capability impressively, to plan an increasingly active
economic role in undevelcpe1 areas, and.-1 tc. speak confidently at the 20th
Party Congress of closing the nap between their out.,,)ut and yours.
The Soviet leaders point boastfully tc. the fact that the value .;f Soviet
total economic output has increased almost threefold from 1928 to date and
this despite a devastating war which set therm back severely during the period
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' c'41,-45. The rate of their industrial growth during this period has been
abut twice as high as the rate of their giver-all growth. This has been
possible because important parts of their economy have been permitted to
la behind, particularly agriculture and consumer goods.
One key factor in achieving this rapid rate :J industrial growth is
Soviet investment policy, which of course is set by the Soviet Government
not in accord with demand but according t- what the traffic will bear. A
large part of the total national production of the USSR has consistently been
devoted to investment,
We estimate that 24% of the USSR gross nati.^nal production went
directly into capital investment in 1955 to. increase the base for future
industrial growth and expanded military capabilities.
Only 18%a of American
gross national production is currently being us l for capital investment, and
this is the highest percentage we have achieved in the post-war period.
Of course, it is consoling to note that 18% for us amounts t_:, a far
greater absolute total than 24% for them. In their case, however, heavy
industry has been the major beneficiary and is now absorbing about 50% of
their total investment. Thus, industrial plant and equipment in the Soviet
Union has nearly tripled since 1940, and their investments have been
allocated predominantly t.. the coal, oil and electric power industries, to
metalworking and metallurgical industries.
While capital gaols output was rising; over tenfold, agricultural
production has barely kept pace with the growth of po_o.pulation.
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Ambitious g ;als for heavy industry set in their five year plans are
usually met or surpaslied; unimpressive ,E'Cals for consumer go ?s and
agriculture have fared ba,-.lly.
For the future, the principal economic task of the Soviet Union as
expressed in the Sixth Five Year Plan, which cover, 1956-1960, is "t -
overtake and surpass the most developed capitalist countries as re ;ard
per capita production. "
This general objective has been spode-_' ; ut by Saburcv, Chief Soviet
planner, as
f. ;llcws.
"It is true that we have net yet cauolit up to the United States either
in the volume of pr ,auction per capita, and so, far in the volume of industrial
production per capita," "However, " he a "'del, "the pace of our level _)pment,
which by many times exceeds the pace-,f the growth of industry in the United
States, permits us t--) cve-re.:me this lag within a very sh-,.'rt historic perio
of time."
From the context, it is clear that Saburov was thinking in terms of
fifteen to twenty years.
This, in simplest terms, is the industrial challenge of the USSR.
Without going into the difficulti.: s that the Soviet Union unJ:;ubte fly will meet
in striving to build an industrial base rn,.re lirectly c; mparakbL~ t,-. our own,
we have to admit that Soviet industry is powerful and rapidly gr ;win? and
that the political effects in the nor.-Communist w :rid -f Soviet industrial
strength arc bound t. be far-reach'nr
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There is no doubt that in many countries, particularly among the
countries of Asia which have obtained freedom over the past few decades,
the rapid industrial progress of the Soviet Union has made a very deep
impact, This impact has been increase,! as the Soviet Union has come for-
ward with tempting offers in the field of military and industrial equipment,
an! of technicians to help in its installation and use,
Before dealing with the Soviet program of economic penetration, it
is worth considering why it is that their program in this field seems to have
had such an initial impact. After all, over the last ten years, the U. S. has
expended far more to aid the undeveloped areas of the world than the Soviet
Union has Liven or even promise.
Here are some of the considerations upon which Soviet diplomacy
has played with cunning effect.
At least until the events of the past few weeks, the "have-not"
countries, ?- many of them formerly colonial areas, -- have believed that
the U. S, was so tied in with the colonial powers that it was not free to exercis,_.
an index enlent attitude.
The complexes resulting from the long period of colonial status, have
caused many of these countries to react toward the U.S. in the classic way
of self-assertion and opposition. The Soviets, until forced to show their
hand in Hungary, have be- -n very astute in their approach. They have manage
to create in the countries of Asia and Africa the impression that they do not
look upon these ec r
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by the West.
Hence, we have the strange situation where the most ruthless colonial
power in the world --- the power that has dealt most cruelly with its own
minorities -- is viewed as a liberator in areas where Soviet conduct and
policies are little known.
The Soviet leaders have also been very flexible in their net otiations.
They have promised liberally. They have not been tied down by legal
restrictions which sometimes hamper .our own. ability to compete with the
Soviets in many crisis areas. They have tailored their demands as to
interest rates, terms of repayment and the like, to the capabilities of the
receiving state.
The attitude of many of the Asian countries has also been influenced
by the fact that they have suspected- that the manufacturing interests in the
Western world rather wished to di,:scourae industrialization in Asia in
order to keep them as good customers,
The general world trade pattern also looms large in the thinking of
some of the Afro-Asian countries. For example, the United States as an
exporter of rice is a competitor _f countries like Burma and Thailand whose
economy is based largely an their rice exports. At the same time, due
largely to our incrense-_l use of synthetics, we have a diminishing interest in
acquiring certain surplus raw materials, cotton and rubber, for example,
from countries such as Egypt, Ceylon, and Indonesia. Thus, strange as it
may seem, failures in the Soviet Bloc which have forced them to become a
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purchaser of agricultural products have led the Soviet to adopt policies whicl:
have tended to improve their relations with countries in Asia and Africa,
Agric(:O.tural deficits have thus become an asset,
Perhaps more impelling; than any of these factors is the attitude of
these countries toward the achievement of their economic rev lution. Many
of thorn thought that when their colonial status ceased, their economic advanc
would progress rapidly. It did not, and we have tended to remind them that
progress must of necessity be slow, and requires the laying of sound
founclations and the undertaking of long-term projects.
The countries in the Afr;--Asian area, impatient for progress, have
been profoundly impressed by developments in the Soviet Union. Thirty
years or more ago the USSR was as backward industrially as they now are.
The Soviets claim their transformation in a generation into the world';
second greatest power is the result of the Communist system. Through
subtle and persistent propaganda, they have tended to make many people in
these countries believe that such is true and at possibly, by cooperating
with the Communist Bloc, they too, can somehow achieve a measure of
growth similar to that which they see in the Soviet Union.
Communist China, they feel, is following the same course as the
USSR; adz--' many of t ose people believe that, wi.thian a limited space of time,
Communis3t Chia, too, w.dl achieve a comparable goal.
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Finally, many of these countries believe that they can now have the
best of both the free and the Communist 'Worlds, can play one off against
the other, and that very likely the fact that they are the beneficiaries of
Soviet aid will make the United States even more anxious to give them
counter-balancing or even greater aid. Havingg, in general adopted a neutralist
role, they feel that they can best continue to maintain this if they accept both
United States and USSR aidl.
A cart;ooon in the NEW YORKER not so long ago, pointedly illustrates
this particular problem. It showed the Chief of a cannibal tribe sitting in
his hut with his council of war around him. The Cannibal Chief was saying:
"Now, here's the plan. We let word out that we're in a state f
political ferment, Russia smells an opportunity and makes overtures. The
West gets worried. They snake overtures. Russia asks to send cultural
amb-assadcrs and we let them,. The West asks for equal representation, and
we invite them. Then, when we've got there all here, -- we eat them."
Few of the target countries of the Soviet economic drive are so naive
as to fail to recognize the cons as well as the pros of becoming economically
dependent on the Soviet Union. This is increasingly true as the Soviet
repression of Hungary's freedom becomes l own to these target countries.
Moreover, actual performance, whether American or Russian, always
involves frictions, frustration any a measure of disillusion. Surplus
commodities taken from an undeveloped country in an initially attractive
barter deal reappear as competing sales for that country's established
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markets. Cement deliveries exceeding a country's storage facilities lie
under thr:. monsoon deluge and harden into :-,orthlessness, Some customer,
Corn nioat China, for example, fail to get all they want from Russia.
I think we can safely say that on equal terms, Free-World products
and economic assistance will be preferred to Soviet equivalents, But we
must recognise that the Soviet's prices, terms and conditions are always
adjustable so as to confront the underdeveloped country , with an unequal
proposition, And suspicious of Communism as many countries are, their
urge for capital goods is su-;h that they will remain sorely temptel to accept
the cheapest proffers.
In addition to its strictly economic assets for playing up to these
nations, the USSR has the advantage of possessing an enormous supply of
obsolescent military equip_xs.ent, which the smaller nations hunger for, as
elements of prestige and power. These arms have only marginal or scrap
value to the USSR, and they can be parcelled out on generous credit terms.
The USSR quickly found it had a valuable combination package to
dispose of: cheap armaments, industrial equipment, exportable technical
skills in the form o:f Soviet advisors available on request, a ready market
for raw raL,.t rIals, subtle prcpa.gan~la, and a total a5sence of political scrupik.
Tile fru'et 3 ofJI this we have becn seeing in the recent troubles centering
around :k e S-ciez Canal.
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It may not be too much of an oversimplification to say that the
eruption of the Middle East into a complex, dangerous crisis stems from a
Soviet decision in April 1955 to buy its way into a power position in the area
with diplomatic and economic support for the Arab states, During the summer
of 1955, some eighteen months ago, the Czechs, fronting for the USSR,
entered into serious negotiations with Egypt, offering economic aid in general
and, of particular interest to the Arabs, the opportunity to acquire Soviet
Bloc armaments.
The first Soviet arms deal with Egypt was finalized in September 1955.
Similar deals on a smaller scale were made with Syria and Yemen, and offers
were extended to Saudi Arabia, Jordan, Lebanon, the Sudan, and Libya.
This was no casual commercial enterprise, but deliberate Soviet intervention
in an area where a plentiful supply of arms was almost certain to inflame
ancient animosities and simultaneously reduce the chances for the Western
Powers to exercise restraint on the Arabs, It looked like a tidy little
strategic investment for the USSR almost any way it worked out.
In fact, it worked out explosively. The USSR poured into Egypt,
planes, tanks, guns, and all the items and equipment that go with them for
over a year up to the value of about a quarter-billion dollars, Understand-
ably, in view of this build-up and a series of Arab raids, Israel began to
fear for its very existence, Britain and France for their economic life lines.
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In this strained situation, it would have been possible for Soviet
leaders to say to the Arabs, -- take the Suez Canal, the oil resources and
pipe lines, and even Israel itself. It is easy to tell people to appropriate
the property of third parties.
It is questionable whether the USSR in fact calculated on the dramatic
developments which ensued. The Soviet reaction t ; the situation has been
belligerent in words, cautious in action,
As events developed, the fighting ceased, and the USSR gained some
undeserved credit with the Arabs for having stopped it. The USSR is almost
certainly ready to re-supply Egyptian military stockpiles. It has given
Egypt firm diplomatic support at every stage, and will undoubtedly bend
,very effort, behind the scenes, to make a political shambles cut of the
U.N. negotiations lookingtt?.award real settlement of the Canal Zone issue
and the Arab-Israeli conflict. It sees in the continued blocking of the Suez
Canal a seriously disruptive factor for the Western Alliance.
At the same time, the USSR has shifted its attention to other states
sus-ceptible to Soviet influence, notably Syria. Here the government has
moved toward a pro-Soviet position, lured by USSR offers of modern weapons
and planes and Soviet instructors to teach the Syrians how to use them.
The situation is still explosive, and I will not venture to predict the
outcome, Out of what has so far transpired, one conclusion is clear enough:
with a minimum investment of Soviet economic resources, particularly
military equipment, in an area already torn by rivalries and disputes,
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M. sc::w has reaped at least short-range strategic dividends. It is far
eas-er to create chaos in an area than to stabilize it,
The USS probably will continue to use these tactics to disrupt the
Middle East -- and any other areas where it can find similar fuel to set fire.
This is a challenge to American policy planning, and I would say, one of the
most irnrnediate threats arisin. out of the USSR's industrial strength.
There are some compensatory factors. As the Arab states today
review the balance sheet of recent events, sober second thoughts are becornir)Cj
evident, and there may come a reassessment of the net advantage or dis-
advantage of the entire operation.
What, after all, has been the result for the Arab world of following
Soviet advice and of listening to its alluring promises?
U
Egypt has lost much of the Soviet arms for which it mortgaged its
cotton and its relations with the West. It sacrificed for a time, at least,
the revenue from the Canal. Senseless sabotage operations have caused
consternation in other Arab countries. Egypt's economy has suffered
severely; its leadership is questioned,
Oil revenues of Iraq, Saudi Arabia, Kuwait and Iran are declining
due to the blocking of the Canal, the consequent tanker shortage, and the
wanton destruction of pipe lines and pumping stations,
In fact, on any balance sheet you draw of the Arab world today, the
flirtation with the Soviet Union has been a costly adventure both for those
who indulged in it, and for the innocent bystanders,
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There would be far more reason to be disturbed about the long-range
implications of the Soviet export of industrial assets and "know how" and
their recent windfall profits in the Middle East, if it were not for the gravity
of the crises which the Soviet Union is now facing both at home and in the
satellite areas.
Industrialization and the building of a modern military establishment
calls for a very high degree of scphistication.. It requires education on a
massive scale. While this can be scientific and technical in part, there is no
feasible way of limiting the educational processes solely to the technical and
scientific fields. It is true that at the present time the Soviets are putting
relatively more emphasis on the scientific side than we. At the present time
the percentage of Soviet graduates in these fic:'ds is roughly 60 percent of
the total, whereas in the United States about 30 percent of the graduates are
in scientific and 70 percent of our graduates are in other fields of education.
Some 18 months ago in an address at Columbia University, I did
some speculating about the dilemma which the Soviet was then beginning to
face as a result of the broadening of their education system, and I ventured
to make this prediction: In introducing mass education the troubled Soviet
leaders have loosed forces dangerous to themselves. It will be very difficult
for them henceforth to close off their own people from access to the realities
of the outside world. " These forces are now beginning to plague the Kremlin.
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After all, even in the USSR a policy of rapid industrialization alone
is not enough to satisfy human longings for a better life. This forced-draft
industrial policy has partially succeeded in economic terms, but it has caused
serious strains within Soviet society.
Under Stalin, many years of extreme emphasis on heavy industry
had depressed living standards, and together with the dictatorial system of
police terror needed to keep the people at the job, produced a lack of
initiative among industrial workers, the peasants, the massive government
bureaucracy, and the "intelligentsia.
Realizing that this situation was becoming serious enough to slow down
further industrial growth, the Soviet leaders, after Stalin's death, began
gradually to improve the people's living standards, and to moderate some of
the harsher aspects of the dictatorship. While there has been some backing
and filling as Malenkov's attempt to meet the needs of the people for
of
consumer goods gave way to a policy/renewed emphasis on heavy industry,
byand large the old Stalinist policies have been somewhat relaxed at home,
and Stalin's reputation thrown to the wolves.
Gradually, an industrial "intelligentsia" is being built up. To
run the present Soviet industrial machine requires a vast army of highly trained
technicians from factory foreman to plant manager. A. certain measure of
decentralization has been forced upon the Soviet system. As high production
norms are set, the standards of work and accomplishment of the plant
manager rnust be correspondingly raised.
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Even though a highly materialistic society has been created, the
reasoning, thinking processes of the workers at all levels have been
stimulated. They are thinking not only of industrial production, but about
the efficiency of the governmental machine itself and what it is doing to give
them a better life.
There is growing up in Russia today, not only in industry but in all
walks of life, a race of human beings who are becoming inquisitive about the
fundamental principles that make it possible for men to live together in
political societies. In particular, there are well substantiated reports that
the students are becoming restive, inquisitive and outspoken in their demands
for a critical examination of the infallibility of a system which produced
the abuses of Stalini.sm.
Pride of country, desire for power, some measure of appreciation to
the Soviet state, which has given them an education and a position of influence
plus fear and uncertainty about the consequences of deviation, may, for a timr
continue to hold most of the Soviet intelligentsia in line. But the leaven of
education has begun its work; the men in the Kremlin have a hard task ahead
to hold this process in check,
Events in the satellites have vastly complicated the task.
It would be an oversimplification of the Present struggle for liberty
and freedom in Eastern Europe, and one that would not do justice to the cold
courage of the Hungarians and the restrained determination of the Poles,
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to ascribe recent events in these countries to mistaken headlong
industrialization. The causes and motivations of the Polish and Hungarian
developments go much deeper? They have chosen freedom, and the long
struggle to achieve it has now only begun.
Nevertheless, the tough Stalinist program of forcing industriali tion
on Poland and Hungary a policy that was continued by Moscow's puppet
leaders, Beirut and Ra'cosi, even after Stalin was buried and his acts
repudiated by Moscow was one of the factors which led to the revolts.
Neither the overlords in Moscow, nor the puppet leaders in the
satellites fully appreciated that a scale of industrialization which might be
tolerable for a time in the USSR could not be imposed to the same degree
in smaller and very differently constituted states.
Actually, the people in the satellites who were supposed to benefit
did not. Instead, they suffered from tyranny and mismanagement. The
satellite nations found in practice that the Soviet magic formula of forced-draft
industrialization simply was not a good model for small and relatively
resource-poor states. Soviet pretensions to leadership of non-.communist
nations seeking to industrializ-e, find no support in the miserable failure of the
Soviet economic system throughout Eastern Europe.
After the event, even Moscow has admitted this.
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,An extraordinary editorial in PRA.VDA. of November 23, referred to
serious miscalculations in Hungary, and "the building of large undertakings
far beyond the strength of so small a country as Hungary." The writer went
on to say that the slogan, "Increase the tempo of industrialization" which he
claimed was quite correct under conditions prevailing in the USSR, was
mechanically ;:r-ansferred to Hungary s a matter of routine, "without any
due economic justification, " "Large undertakings, " the writer added,
"were built without being assured of sufficient raw materials,"
Characteristically, the editorial writer claimed that it was local
stupidity in Hungary operating against Soviet advice that brought disaster.
We are Justified in questioning this after-.thought.. Certainly Rakosi in
Hungary and Beirut in Poland thought that they were doing their bounden duty
as prescribed by Moscow even after in Russia itself, the word had gone out
to temper somewhat the Stalinist pattern of industrialization.
Gomulka, in his speech of October 22, n reviewing Poland's economic
plight, put the issue in even stronger terms; '''Te contracted important
investment credits for the expansion of industry, and when the time came for
the payment of the first installment we found ourselves in the situation of an
insolvent bankrupt.
Whatever else the situation in the Soviet satellites shows, it
demonstrates beyond doubt that a policy of headlong pursuit of industrial
strength is not enough to guarantee even economic welfare, let lg good
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government and good life in general, I hope that this lesson may gradually
sink into the minds of peoples in small nations outside the Soviet Bloc who
are tempted to trade their political birthright for a mess of Soviet-..style
industrialization,
It is clear also that the Soviet leaders must now revise their views
not only as to the value of the satellite military establishment, but also the
value of the industrial contribution which they can expect to receive in the
future, particularly from Poland and Hungary. At the same time, the Soviet
Union will have the problem of making up agricultural shortages in these
former surplus areas which now, due to overemphasis on industrialization,
will have to look either East or West to supplement their deficit in food.
The Soviet Union has made a fetish of industrial and military power.
In doing so, as I have suggested, it has sacrificed the interest and welfare
of many of its people, and it has dealt recklessly with the economies of the
European satellites. In following this program, the USSR has failed to give
either to their own people or to the people of the satellite states, their fair
share of industrial production in the form of consumer goods, or the raising
of the standards of living.
As justification for their actions, the Soviet have asserted that the
development of heavy industry was necessary to their war machine and that
in turn, this was required because the Soviet was threatened and encircled.
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They have built up the war menace and invented the war mongers.
In accomplis?iing their primary objec,:ve of building a modern
inaus''.~ al state, they have, however, produced a new generation of highly
technical, sophisticated and competently educated men and women. This
new generation is making itself felt not only in the satellite areas where
there is a historical hatred for the Russian oppressors, It is also beginning
to be heard in the Soviet Union itself where youth is not prepared to accept
the strictly materialistic and militaristic bases of Soviet society,
Hence, the challenge of Soviet industrial growth is not only directed
outward to the Free World, it is also a challenge addressed inward to the
peoples of the Soviet Bloc. It threatens the very basis of C .-mmunist
doctrine and the type of government set up in the Kremlin.
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