THIS IS BACKGROUND INFORMATION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87M00539R001101430003-6
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 14
• Document Creation Date: December 22, 2016
• Document Release Date: April 26, 2010
• Sequence Number: 3
• Publication Date: June 17, 1985
• Content Type: MEMO

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MEMORANDUM FOR: p[ T ~'`
This is background information.
Rarely do we see articles about the joint issue
of arms control and economic performance. Attached
is one of these rare articles. I found it interesting
reading.
I don't know enough about the Soviet economy to
know whether there is anything to this story or not.
If I can do more to assist you here, please call.
C/ACIS
ACIS-1288/85
cc: D/SOVA
NI0/USSR
NIO/9P'
Date 12 June 1985
STAT
FOR,, 101 USE PREVIOUS
S.7S r?
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JOURNAL of
CONTEMPORARY WINTER/SPRING 1985 (2 JUNE) Pg.37
,,,STUDIES
THE SOVIET ECONOMY AND
THE ARMS CONTROL
DELUSION
Dwight R. Lee
Negotiations between the United States and the Soviet Union to
reverse or at least slow down the arms race have wide appeal.
Ideally, by negotiating a mutual reduction-or failing that, a leveling
off-of the manufacture of deadly armaments, each country would
reduce the economic demands of its military without compromising
national security. Indeed, some hold that achieving a reduction
would even increase security.
Realizing either goal is not an easy task. Negotiations to reduce
military stockpiles have been taking place since the early 1960s, when
the two superpowers had barely 2,000 warheads between them. By
the early 1980s the U.S. and the USSR had a combined total of ap-
proximately 40,000 warheads. Negotiations are still perceived to be
the best way to do what it is widely assumed both countries desire to
do: namely, reduce the resources devoted to an arms race without los-
ing military parity with the other power. But what of this presump-
tive shared goal? It may well be that the respective motivations of
both nations to come to the bargaining table are not identical. And if
their motivations turn out not to be identical, it then remains to be
seen whether their ultimate bargaining goals are identical either.
It is commonly argued that the Soviet Union's present motivation
to reach an evenhanded arms reduction accord is the weakness of its
economy. After all, how can a country with a per capita GNP of less
than half that of at least six Western countries-West Germany,
Japan, Switzerland, France, Belgium, and the United States-hope to
compete militarily against the West? An example of this reasoning
can be found among the advisors to President Reagan, some of whom
recently said that the Soviet economy has been performing so poorly
that pressures are building within the Kremlin to enter into
meaningful arms reduction negotiations.' In a similar vein, former
Secretary of Defense Clark Clifford, after considering Soviet econom-
ic problems, concluded:
The pressure on Soviet decision-makers makes us reasonably confident
that their expressed interest in strategic arms talks is genuine. For the .
Soviet Union even to attempt to keep pace in a strategic arms race of large
proportions would be enormously costly for them in financial terms, and
it would divert badly needed resources from the civilian economy.2
There can be no disagreement that the centrally directed Soviet
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economy performs extremely poorly compared to the U.S. economy.
which relies primarily Qn decentralized markets to allocate resources.
And there is certain plausibility to the view that a weak economy in-
creases the need to scale down military spending if it can be accom-
plished without increasing military vulnerability.
But no matter how plausible it may be, the theory of "poor makes
peace-loving" fails when considered in the light of actual events.
Despite the Soviet economy's less than robust condition during the
1970s,3 the Soviets expanded their military strength at a rapid pace
throughout this decade.' Why did the Soviets continue to build apace
during the 1970s? In answering this question, we may discover some-
thing drastically wrong with the conventional view that poor Soviet
economic performance could or does motivate the Soviets to negotiate
to reduce military expenditures. My purpose here is to argue that the
inefficiencies that characterize the Soviet economy go a long way in
explaining, not an imagined eagerness, but a probable reluctance to
engage in meaningful negotiations to reduce arms.
Of course this is not to imply that, conversely, an economically
healthier Soviet Union would be more interested in negotiating an
arms reduction or would be less of a threat to world peace. For it is not
just the low level of wealth generated in the Soviet Union, but the en-
tire structure of the USSR's political economy that mitigates against
interest in arms reduction. The influence that poor economic perfor-
mance has on the military policy of the Soviet Union cannot be
divorced. from the centralized poltical and economic structure that
guarantees the poor economic performance.
It is in this connection that important differences exist between the
Soviet Union and the U.S. In contrast with the U.S. and its system of
democratic capitalism, the Soviet system can be expected to possess
important advantages in mustering the political resolve necessary to
sustain an arms race.
Keeping superpower status
When reference is made to the two superpowers, everyone knows
which countries are being discussed. It is unanimously accepted that
the United States and the Soviet Union are the two most powerful
countries in the world today. As obvious as this fact is, it is worth-
while to consider the basis for each country's claim to superpower
status.
In the case of the United States, superpower status is supported by
two pillars: economic power and military power. If by some stroke of
good fortune we suddenly found ourselves in a world with no inter-
national tensions and no weapons or military potential of any type,
the U.S. would still be a superpower by virtue of its enormously pro-
ductive economy. This would not be true of the Soviet Union. In
terms of the per capita GNP measure, the Soviet Union is closer to the -
Third World countries than to the major industrial democracies. A
reduction in the military might of the Soviet Union, even
if accomplished by a corresponding reduction in the mili- A reduction in the military
tary might of the United. States, would erode the Soviets' might of the Soviet Union
claim to superpower status, a status that depends entirely would erode its claim to
on a massive arsenal of armaments and a large military superpower status.
establishment.
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From the vantage point of the governments in the wealthy Western
democracies, including Japan, it is easy to understand the desire for
-mutual reductions in the destructive capacity possessed by the two
superpowers. Such a move is perceived as one that would reduce the
risks of a nuclear holocaust and allow more resources to be devoted to
consumer goods.5 For those who are moved by this approach, there is
a strong impulse to assume that it is also attractive to the Soviet
Union. Unfortunately, from the vantage point of the leaders of the
Soviet Union, bilateral arms reduction would be the same as
unilateral status reduction. 7 he international standing and prestige of
the Soviet leaders is solely the consequence of the military power
they control. And it is quite obviously the case that the Soviet leader-
ship places enormous personal value on their standing and prestige in
the world community.
Nikita Khrushchev is a case in point. In his memoirs, Khrushchev
acknowledged the "pleasure and pride" he experienced at the Paris
Summit in-1960 when Prime Minister Macmillan of Great Britain and
President de Gaulle of France conceded that the USSR had surpassed
their countries militarily and had to be recognized, along with the
United States, as one of the world's superpowers.' Clearly, the stand-
ing of the Soviet Union in the Third World depends almost entirely
on military strength. The Third World continues to seek the favor
and involvement of the USSR, but as Dimitri Simes points out, "these
requests ... almost never reflect the belief that communist Russia is a
model for Third World development. Moscow's military power and
its willingness to provide arms and geopolitical protection, not the
appeal of Soviet ideas and accomplishments, are what normally
motivate Third World overtures to the Soviet Union."? Simes adds,
"The nationalist, conservative Soviet police state has no genuine ap-
peal beyond the reach of its tanks." This view of the real attraction of
Soviet socialism is acknowledged by the Soviets themselves, as when
Sergei Gorshkov, an admiral in the Soviet Navy, stated, "visits of
Soviet navy men make it possible for the peoples of many countries to
become convinced with their own eyes of the creativity of the ideas of
Communism.... They see warships as embodying the achievements
of Soviet science, technology, and industry."9
The implication here is clear, and precisely opposite that of the
conventional wisdom. The pathetic economic performance of the
Soviet economy emphatically does not increase the benefits that the
leaders of the USSR perceive to be gotten from mutual arms reduc-
tion. Rather, poor economic performance guarantees that Soviet
leaders will see reductions in the military might of the USSR, even if
the U.S. reduces its military might in tandem, as equivalent to
sacrificing its political influence.
Not all American policymakers fail to grasp this. Stansfield Turner,
former Director of the Central Intelligence Agency, has said, "One of
the reasons they, the Soviet leaders, are putting such emphasis on
their military strength is that they are trying to convert military
power into political advantage.... Military is all that they have."10
The hope that the leaders of the Soviet Union are sincere in the effort
to reach a mutual and verifiable arms reduction agreement with the
U.S. is misplaced in large measure because the Soviet economy is so
weak.
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e prisoner's dilemma
This view is fundamentally at odds with the standard perspective
on the problem of reaching an arms reduction agreements. Typically,
it is assumed that the U.S. and the USSR are faced with the classic
prisoner's dilemma problem in their attempt to negotiate a mutual
reduction in arms. As applied to arms control, the prisoner's dilemma
setting can be described as follows. If both countries cooperate with
each other, they can each reduce their military burden with no
sacrifice in national security. This is preferred to the non-cooperative
result that finds each country making large military expenditures
without gaining any advantage over the other. But, from the perspec-
tive of each country, the best possible outcome is a unilateral reduc-
tion in the other country's military strength, and the worst possible
outcome is a unilateral reduction in its own military strength. Under
these circumstances, a necessary condition for one country to behave
cooperatively (reduce its arms) is complete confidence that the other
country will also reduce its arms. This is not a sufficient condition,
however, since if it is known that one country is going to make the
cooperative choice it will pay the other country to behave non-
cooperatively. Therefore, if each country has to commit itself to a
choice without knowledge of what the other country will choose,
then the only logical choice, from the perspective of each country, is
to remain armed at the present level. Only if the decisions of the two
countries can be tied together through some form of information
transfer and mutually binding agreement will there be any realistic
hope that the disarmament solution will prevail.
Although a major lesson of the prisoner's dilemma is the danger of
trusting one's opponent, paradoxically it is easy, in this view,
enthusiastically to urge arms control negotiations with the Soviet
Union. This is because the prisoner's dilemma view assumes that both
sides would be better off with the same outcome-i.e., a mutual
reduction in arms instead of the current arms race. Hence it is used to
endorse negotiations as the road to the realization of our common
interests.
Another reason the prisoner's dilemma model is favored by arms
controllers is that its main problem, distrust, is thought to be cancelled
out when the dilemma is applied to a series of steps toward a common
objective as opposed to a "once and for all" confrontation and resolu-
tion. If two parties in a prisoner's dilemma setting know that they
will, once their choices are made, never encounter each other again,
then acting cooperatively toward what is likely to be an uncoopera-
tive opponent cannot provide any long-run benefits. On the other
hand, if the two parties are contemplating a series of choices, then it is
thought that cooperative behavior will more likely be rewarded with
cooperative responses. It is for this reason that Robert Axelrod, who _
sees reaching agreement on disarmament as a prisoner's dilemma,
suggests breaking negotiations down into a series df stages in order to
promote cooperation and reciprocity."
However, if one accepts the contrary view that the superpower
status of the Soviet Union would be eroded by reductions in military
strength, even when matched by comparable reductions in U.S. mili-
tary strength, and that this superpower status is highly valued by the
relevant Soviet decision-makers, then the prisoner's dilemma is no
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DELUSION... from Pg.5-F_
longer appropriate for analyzing the problem of achieving a genuine
arms reduction agreement with the USSR. Indeed, it may lead to
seriously flawed and *dangerous policy decisions. If the Soviet leader-
ship sees itself as better off with both countries armed than with both
countries disarmed then, no matter how negotiations are structured,
the Soviets have no incentive to agree to a reduction in arms. This re-
mains true even if the Soviet leaders know that they could never
achieve a dominant position.
Furthermore, as long as there is a widespread view in the U.S. that
reaching an arms reduction agreement with the USSR is simply a
matter of solving the distrust-or prisoner's dilemma-problem, it is
not totally unrealistic for the Soviets to consider trying to achieve
military dominance. While the U.S. is in a position to realize clear
benefits from a mutual reduction in military force, and U.S. public
opinion incorrectly assumes that the Soviet Union is in a similar posi-
tion, the temptation will be for the U.S. to make futile concessions in
arms control negotiations in the hope of eliciting Soviet coopera-
tion.12 The delusion that lies behind this temptation becomes all the
more persistent when the arms reduction agreement is cast, as it
necessarily must be, in vague terms. (Even where the terms are unam-
biguously stated, the difficulties in detecting violations serve the same
deluding purpose.)
The cost of Soviet military strength
Given that a weak economy may serve to increase the Soviet de-
mand for military strength, the effect the weak Soviet economy has
on the supply, or cost, of military strength, should be examined.
Those who argue that the poor economic performance of the Soviet
Union motiviates a desire in them for an effective arms reduction
agreement seldom, if ever, make clear whether they are talking about
demand side or supply side influences. One thing they do make clear,
however, is their belief that the inefficiencies in the centally planned
Russian economy make it more costly for the Soviets than for the U.S.
to supply the manpower and hardware required by an arms race. But
it may turn out to be the case that the inefficiency of the Soviet econo-
my actually serves to reduce the cost of the military, at least as this
cost is perceived politically.
The cost of providing anything, whether bombs or Band-Aids, has
to be evaluated relative to the alternatives sacrificed. Evaluation in
these terms follows the economic concept of "opportunity cost."
Because there is a scarcity of resources in all societies, "opportunity
cost" is always positive. For example, if Soviet leaders devote more
resources to military objectives it is necessarily the case that fewer
resources will be available for the production of civilian goods and
services. Therefore, in order to assess the cost of producing and man- -
ning armaments in the Soviet Union we have to consider first the
efficiency of their military sector relative to that of their civilian
sector.
The utterly dismal performance of the Soviet economy in satisfying
consumers' demands is one of that country's least debatable charac-
teristics-The reason for this deficiency is the highly centralized pro-
cess that directs economic decisions in the Soviet Union. Instead of
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relying on decentralized markets to allocate resources over alterna-
tive producers and products, socialist ideology and bureaucratic self-
interest in the Soviet Union dictate the making of these decisions, to
the maximum extent possible, by central planning authorities. But
since Hayek, it has been recognized that "the knowledge of the par-
ticular circumstances of time and place" is indispensable to the deli-
cate adjustment of resource allocation over a multitude of alternatives
so that as much value as possible is coaxed from society's limited
means.13 It is impossible to accumulate this time- and place-specific
information in the minds of a few authorities. In the absence of de-
centralized market exchange, and the market prices that result, there
can be no accurate measure of the relative values that individuals
place on competing resource uses. Rational economic calculation is
quite literally impossible in a regime of central economic planning."
It is not surprising then that the Soviet economy has done very
poorly at producing that precise combination of goods that conforms
to the preferences of the Soviet consumers. Poor quality, drab unifor-
mity, wasteful production bottlenecks, and chronic shortages charac-
terize the civilian sector of the Russian economy.'5 The Soviet central
planners simply do not have the information necessary to keep
resource allocation decisions responsive to the varied, diffused, and
changing preferences of millions of individual consumers. And even
if through some miracle the planning authorities did obtain the re-
quisite information for directing resources efficiently into the produc-
tion of consumer products, it is doubtful they would have the incen-
tive to act on their knowledge. In the absence of markets, consumers
have no way to reward those who expand the production of valued
products and punish those who do not. The rewards go to those who
best serve the interests of the political leadership, not the interests of
the consumer.16 In comparing economic systems, one
conclusion is obvious: less is sacrificed by the Soviet Less is sacrificed by the
Union when resources are transferred out of the civilian USSR when resources are
sector of the Soviet economy than when an equivalent transferred out of its
amount of resources are transferred out of the market- civilian sector.
directed civilian sector of the U.S. economy.
When we turn from the civilian sector of the Soviet economy to the
military sector, we find some rather significant differences. The suc-
cesses in the military sector are as obvious as the failures in the
civilian sector. There is no question but that in the areas of military
and space technology the USSR can claim major achievements. In-
terestingly, these successes can be traced to the same source that ex-
plains the failures of the civilian economy: central planning.
Central planning's advantage
The problems of central economic planning are moderated when
there are relatively clear straightforward objectives, as is the case in
military planning. When the task is increasing military power rather
than accommodating the diversity of consumer demands, technical
engineering considerations become more important and subjective
preference evaluations and tradeoffs become less important. Central
planners are capable of directing resources in such a way as to over-
come well-specified technical problems and achieve narrowly
specified goals. Indeed, a major strength of a centrally planned econo-
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my is its ability to mobilize the entire society for the purpose of ac-
complishing one overriding objective, such as preparation for war.17
It is not surprising that during wartime all countries rely extensively
on central planning and control, and even during times of official.
peace the military itself is organized on a command and control basis.
There is no reason to believe that, organizationally, the Soviet mili-
tary is any less efficient than the U.S. military.
But even if the military sector of the Soviet Union is less efficient in
an absolute sense than the military of the U.S.,18 this does not imply
that the Soviet military is less efficient in any relevant sense. Given
the relative efficiencies of the non-military sectors of the U.S. and
Soviet economies, there can be no doubt that the Soviet Union has a
tremendous comparative advantage in the production of arms and
military power.19 It costs less to increase military strength in the
Soviet Union than in the U.S. because doing so requires a smaller
reduction of civilian output in the inefficient Soviet economy than in
the more efficient U.S. economy.
This comparative advantage in military strength will certainly in-
fluence the decisions the Soviet leadership makes with regard to dis-
tribution of resources between the civilian and military sectors of
their economy. And it will work its influence in predictable ways.
A Soviet Union that was distributing its resources between the mili-
tary and civilian sectors of the economy in the same proportion as the
U.S. would not be a superpower. It would have a relatively weak
military and, because of the inefficiencies of central planning, it
would also have a weak civilian economy. From the perspective of
the leadership in such a Soviet Union, it would be rational to capital-
ize on their comparative advantage in the production of military
strength and shift resources into the military sector. It is easy to see
that this counter-factual Soviet Union would soon become the factual
Soviet Union whose military might we confront today. The demand
the Soviet leadership has for military power, and the comparative ad-
vantage of the Soviet economy in producing it, work together to
make it highly improbable that the USSR will see any advantage in a
verifiable arms reduction agreement with the U.S.
DELUSION... from Pg. F
Special interest vs. the public interest
We should consider the incentives that guide decisions on the pro-
vision of military power within a system of democratic capitalism
such as that of the U.S. In contrast to centrally planned political
economies, democratic capitalism places the locus of decision-making
control with individuals in their roles as constituents and consumers.
In democratic capitalism, which has done more than any other
system to foster the creation of wealth, the politically perceived cost
of the military tends to be greater than that cost in a command con-
trol system.
The evolution of democratic institutions reflects the hope of keep-
ing political decisions responsive to citizen preferences just as the in-
stitutions of capitalism keep productive decision's responsive to con-
sumer preferences. Although the ideals of democratic capitalism have
been achieved to an impressive degree, no system in the real world is
ever fully faithful to the ideals that inspireit. The discrepancy be-
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tween the ideal and the real is uncomfortably apparent in a demo-
cratic society, even when the success of democracy in comparison to
its real-world alternatives is acknowledged. The problems associated
with the effective transmission of the desires of the citizens through
the democratic process are particularly visible in the case of the de-
mand for national security.
It is typically the case that the broader the benefits provided by a
government program, the smaller will be the political demand for
that program. It is the demand for government programs promising
narrowly focused benefits that will be transmitted most effectively
through the democratic political process. There is a straightforward
reason for this unfortunate feature of representative democracy.
When a program's benefits are spread over a large group, no one in
that group will see an advantage in attempting to organize it for the
purpose of exerting political influence in favor of the program. Not
only will the payoff to each individual from organizing the group be
low, but the costs of doing so will be high because of the group's large
size. However, when benefits are concentrated on a relatively small
group, individuals within the group have a much stronger incentive
to contribute to an organizational effort and the costs of succeeding in
that effort will be lower. It is the demand for special interest pro-
grams, then, that typically activates the political process, not the de-
mand for broad.public interest programs.
The implications of this special interest bias for the maintenance of
a strong military are clear. No government activity generates more
generalized benefits than does providing for the national
The benefit any one security. Increasing our military strength increases pro-
American receives from tection to the entire country. Although when spread over
another submarine or the entire population the resulting benefit may be great,
missile will go unnoticed. the benefit any one individual receives from another sub-
marine or missile will be so small as to go unnoticed.
Therefore, as a beneficiary of military strength, an individual citizen
has no incentive to organize to fight for more, or against less, money
for the military budget.
The lesson here is clear for politicians who are interested in main-
taining the advantages of political office. Even though congressmen
recognize that their constituents value national security, they also
recognize the political gains from transferring funds out of the mili-
tary budget and into a constituency-specific program. (This explains,
for example, why Republican senators recently "jumped ship" on the
President's non-military budget cuts to reduce the deficit.) The loss in
national security will be spread over the whole of the population and,
as a consequence, will be politically invisible, whereas the benefits to
a local interest group will be visible, appreciated, and remembered.
This does not mean, of course, that the military budget in a democ-
racy will be depleted completely by special interest politics. It is fortu-
nate that the disadvantage the military faces as a result of the
generalized benefit it provides is moderated by the interests of nar-
rowly motivated groups that benefit from military expenditures. The
influence of the military-industrial complex is, contrary to its
' popular image, a force for genuine good in a democracy.
"sinister,
Without the special interest gains that activate this complex there
would be little hope that the demand for national defense would be
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transmitted through democratic institutions.
The common defense
But the political clout of the military-industrial complex is a David
against a Goliath of political pressures pushing for the expansion of
non-defense programs. Non-military spending can take a wide
variety of forms, can be targeted to almost every conceivable group,
and constitutes the most politically effective vehicle elected represen-
tatives have for serving their constituents. There is always, except
during times of national emergency, persistent pressure on political
decisionmakers to sacrifice the general advantages provided by a
strong military for the special interest advantages realized by expand-
ing domestic programs. This was less harmful when, as was true dur-
ing most of our history, few problems were deemed the direct respon-
sibility of government, and local governments addressed most of
those that were. Providing for the common defense was considered to
be the primary responsibility of the national government.
Not until the view that the federal government possessed both the
responsibility and the ability to solve a whole host of social problems
became well entrenched did the primary, constitutionally mandated
responsibility of defense find itself in funding competition with an
escalating number of special interest programs. The result has been
that for almost thirty years there has been a persistent decline, only
slightly interrupted by the Vietnam War and the Reagan administra-
tion, in the percentage of the federal budget allocated to national
defense. In 1955, 58.1 percent of the federal budget went to national
defense outlays. By 1982 this percentage had declined to 25.7.20
The opponents of defense expenditures inevitably couple their
strong support for social programs with enthusiasm for the benefits
that can be realized from arms reduction negotiations with the Soviet
Union if only the U.S. will pursue such negotiations in good faith.
Good faith translates into being willing to do whatever it takes to en-
sure that negotiations continue, even if that means ignoring that the
Soviets are violating the terms of existing agreements. Strong evi-
dence that the Soviets are actively in violation of the 1972 ABM
treaty, the 1975 Biological Weapons Convention, and the 1979 SALT
II agreement, is seen as a concern only because it may delay further
arms agreements with the Soviets.
As an expert on foreign policy, Richard Nixon has few illusions
about the motivations of the Soviet Union or the usefulness of
negotiating arms agreements with them. But as a politician he recog-
nizes the political hazards of being forthright about the limitations of
arms negotiations. In his recent book, Real Peace, Nixon points out
that "detente without deterrence leads to appeasement," but then
follows immediately with the statement that "deterrence without de-
tente leads to unnecessary confrontation and saps the will of Western
peoples to support the arms budgets deterrence requires."2' This sug-
gests that political reality dictates engaging in arms control efforts if
for no other reason than to get political support for military ap-
propriations that are in the national interest.22
But even this is overly optimistic. Political opposition to military
spending will not be.moderated by commitment to arms negotiations
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with the Soviets. Rather,. the pretense of success in such negotiations
will be seized upon by the opponents as justification to continue
diverting resources out of military programs and into special interest
programs. Unrelenting political pressures will continue to push for
the pretense of success in arms negotiations even though this means
making concessions that erode our national security.
A more modest objective
It has been argued here that, because of its weak economy, the
Soviet leadership has no interest in a verifiable and enforceable arms
reduction agreement with the U.S. A reduction in Soviet military
strength would undermine the standing of the Soviet leadership in
the international community. But what about the hope of realizing a
more modest objective than arms reduction; say an arms control ac-
cord that puts a cap on the arms race without either side having to
reduce its existing military strength? Would not such an agreement be
in the Soviets' interest? No doubt it would be, because it would allow
the Soviet Union to maintain its superpower status without the enor-
mous resource commitment that a futile arms race would require.
. If one entertains the comforting assumption that the Soviet leaders
are convinced they could not win an arms race with the United
States, that such a race would indeed be futile, then one is led to con-
clude that they would be very interested in reaching an arms control
accord with the U.S. But even if one assumes the worst-namely, that
the Soviet leaders think they could prevail in an arms race with the
United States-they would still ostensibly be interested in negotia-
ting an arms control agreement with the U.S.
The reason for Soviet interest in arms control as opposed to reduction
even if the worst is true is that the Soviets have every reason to think
arms control negotiations can be instrumental in an attempt to pre-
vail in an arms race. The Soviets can use, as indeed they already have
used, arms control as a means of exciting those powerful forces in the
U.S. that favor reductions in military spending. These forces see arms
control agreements as the measure of success in foreign policy. And,
of course, this view practically guarantees that the Soviets will have
the upper hand in arms negotiations. Not only does this result in
pressure on U.S. negotiators to make concessions if that is what it
takes to reach an arms agreement (and the Soviets will make sure that
it is), but it also makes it more likely that the Soviets will enter into
such agreements with the intention of violating them.
The cost of cheating
Cheating on an arms control agreement is not without the potential
for costs, of course, and this potential has to be considered, as well as
the benefit potential, when assessing the likelihood of cheating. There
are two components to the expected cost of cheating: one, the pro-
bability that cheating will prompt the other country to return to the
arms race; and two, the loss from a breakdown in an agreement.
Consider first the loss from a breakdown in an agreement. Given
the comparative advantage the Soviet system has in the production of
military strength, the Soviets can be expected to attach a cost to the
mutual abrogation of an arms agreement that is small relative to the
cost the U.S. would attach to such an abrogation. The higher cost the
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U.S. would attach to discarding an arms agreement reflects the strong
political opposition to expanding military preparedness.
Next, consider the likelihood that if one side does cheat on the
agreement, the other side will do likewise. If the U.S. were known to
be violating the agreement, the USSR would be expected to respond
"tit for tat." This reflects the tremendous decline in international
status the USSR would experience if it became a second rate military
power. On the other hand, the U.S. would be much less likely to res-
pond in kind if the USSR were known to be cheating. Unless there
was a full and open acknowledgement of the serious threat the U.S.
would face if the USSR achieved significant superiority in military
power (an acknowledgement that faces strong political resistance in
the U.S.), the perceived well-being of the relevant political decision-
makers in the U.S. (voters and political coalitions) would be little
affected by the change in the relative military positions of the U.S.
and the USSR. This suggests, then, the strong possibility that for all
except the most blatant Soviet violations, the U.S. political process
will not be moved to respond. Certainly this is consistent with the
period of detente during the 1970s when the U.S. allowed the Soviet
Union to develop superiority in the crucial areas of weaponry and
military preparedness under the cover of arms control agreements.
The history of U.S. complacency, and the underlying weakness in
the democratic process that explains it, has not been lost on the Soviet
leadership. The Soviets surely see arms control negotiations as a
means of-increasing not the probability that they can prevent an arms
race, but the probability that they can prevail in an arms race. There
is a clear and present danger that arms control agreements will serve
to mask Soviet designs for military superiority while providing a ra-
tionale within the U.S. for ignoring the unpleasant realities of inter-
national conflict and military competition.
Cause for caution
Military power is very much a private good to those who exercise
political control in the USSR and, barring uncharacteristic renun-
ciatory impulses on the part of those in command, there is no reason
for expecting Soviet leaders to negotiate away this power so vital to
their personal well-being. On the other hand, military power is best
characterized as a public, or collective, good to the diverse political
coalitions that shape political decisions in a democracy.
It is convenient to believe that military spending can yield to
special interest spending without sacrificing national security if only
arms negotiations are approached seriously. This convenient belief is
based on the implicit, though completely unwarranted, assumption
that the incentives to subordinate military spending to civilian con-
sumption operate in the Soviet Union just as they do in the U.S., a
social order based on democratic capitalism. This assumption, and the
arms control hopes that rest upon it, is both a justification for, and an
ostrich-like response to, the persistent tendency to let our military
preparedness decline.
Given the less devastating military weaponry of the past, and the
geographic isolation of the U.S., it was possible for the U.S. to slide
into a state of military vulnerability and still;have time to respond
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DELUSION... from Pg.12-F
adequately, if belatedly, to a military threat. And indeed, this is ex-
actly what the U.S. has done historically. For example, the U.S. ap-
proached World War" 11 with a relatively small army, a prevailing
mood of isolationism, and Roosevelt campaigning with a promise to
keep America out of war. But unfortunately, isolationism and a casual
attitude toward military preparedness are luxuries we can no longer
afford. Current military technology has stripped the U.S. of the pro-
tection it once had by virtue of geography, and has made it highly
unlikely that we can prevail in a major armed conflict unless fully
prepared at the outset.
If the U.S. is to be fully prepared to protect its vital interests, it is
necessary to face squarely the realities of the conflict we are in with
the Soviet Union. At the very minimum this requires jettisoning the
seductive notion that we can depend on the sincerity of the Soviets in
arms negotiations because their economy performs so poorly.
1. See Karen Elliot House and Walter S. Mossberg, "U.5. Sees Economic, Military In-
centives Prompting Soviets to Accept Arms Treaty," the Wall Street Journal, June
29, 1982, p. 6.
so d Nearly Kingdoms Cos of Them Blind: have Life (Durham, NC: Carolina
2. Quoted u in theiFolliesN Rood,
Academic Press, 1980), p. 237.
3. Over the decade of the 1970s, the Soviet economy, measured on a per capita GNP
basis, grew less rapidly than did the U.S. economy. This quite bad, considering the
lackluster economic performance in the US. during that time and the fact that per
capita GNP in the Soviet Union is only 45 percent of what it is in the-U.S.
4. During the 1970s the military expenditures of the Soviet Union exceeded those of
the U.S. not only as a percentage of GNP, but in absolute terms as well. According
to the U.S. Arms Control and Disarmament Agency, over 14 percent of the Soviet
GNP went to the military every year during the 1970s, while over the same period
the military never consumed more than 6.2 percent of the American GNP.
5. It should be pointed out that this perception may be dangerously flawed. Assume,
for example, that an agreement is reached between the Soviet Union and the U.S.
to reduce nuclear missiles to some small number, say 100 each. If it is possible to
hide a certain number of nuclear missiles, again assume 100, without the
possibility of detection, the temptation for one side to cheat on the agreement
would be heightened by the large relative increase in strength this cheating would
generate. Furthermore, with the cheater having a two to one numerical advantage
in missiles, the possibility of a successful first strike may become a temptation. Cb-
viously, the smaller the number of "legal" missiles, the greater the probability a
cheater can carry out a successful first strike. See Herman Kahn, On Thermonuclear
War, 2nd edition (New York: The Free Press, 1969), p. 248.
6. See Khrushchev Remembers: The Last Testament translated and edited by Strobe
Talbott (Boston: Little, Brown and Company, 1974), pp. 459-460.
7. Dimitri K. Simes, "The New Soviet Challenge," Foreign Policy 55 (Summer 1984):
124.
8. Ibid.
9. Quoted in Joseph L. Nogee and Robert H. Donaldson, Soviet Foreign Policy Since
World War 11 (New York: Pergamon Press, 1981), p. 149.
10. Interview in the U.S. News & World Report, May 16, 1977, p. 24.
11. See Robert Axelrod, The Evolution of Cooperation (New York: Basic Books. 1984), p.
132. By comparing the success of different strategies in a prisoner's dilemma set-
ting, Axelrod concludes that the best strategy is "tit for tat," with the opening
move being a cooperative one. requires 12.
impor-
tant political differences between the the Soa consideration viet Union, to behd discussed
later.
13. See Friederich A. Hayek, "On the Use of Knowledge in Society," American Econom-_
is Review (September 1945): 519-30.
14. The impossibility of rational economic calculation under socialist planning was
first put forth by Mises. See Ludwig von Mises, "Economic Calculation in the
Socialist Commonwealth," in Collectivist Economic Planning, ed. F. A. Hayek (Lon-
don: George Routledge and Sons, 1935) pp. 87-.130, For an interesting and concise
history of the literature that Mises' article spawned, see Karen 1. Vaughn, "Eco-
nomic Calcuation under Socialism: The Austrian Contribution," Economic Inquiry
(October 1980): 535-54.
15. The Russian consumer would be in an even less enviable position if it were not for
the Soviet underground economy that illegally produces a significant amount of
DELUSION... Pg. 14-F
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WEEKEND EDITION -- 2 JUNE 19135
Adm 'stration analysts do not an-
ticipate 'et moves in this area in the
new round o lks. Rather, they expect
Moscow to of reductions of some
as a wedge to gain A inistration con-
cessions on space syste
Proposals on Strategic pons
in a second area of negot ions,
Moscow Is expected to reintrodu a
proposal made two years ago to redu
the number of intercontinental-range
missiles and bombers to 1,800, .from
about 2,500 on the Soviet side and about
2,200 on the American side. In addition,
as Mr. Gorbachev said several weeks
ago, Moscow could propose unspecified
"radical" cuts from that level in the fu-
ture.
The Russians could also propose a
specific ceiling far below current levels
on what they call "nuclear charges."
This would include ballistic missile
warheads, air-launched cruise missile
warheads, bombs and air-launched
short-range missile warheads. 7-hocid
now number about 12,000 for the U ed
States and almost 10,000 for th oviet
Union.
and ballistic mis
now, but there is no indication that the
Administration will go further and
count -bombs and short-range nuclear
missiles in this total.
The Administration has also pro-
posed a reduction in the number of
intercontinental-range missiles on
each side, to about 1,200. This level
could be raised to bring It closer to
Moscow's higher but unspecified level,
and the time to reach this level could be
extended from 5 to perhaps 10 years.
Mr. Reagan could also propose t
Moscow be permitted a greater n-
r of missiles while Washi n re-
ed a greater number tubers
and r-launched cruis issiles, as
long a e overall to was the same
for both es.
The Admi ion has also insisted
on equal 1ev missile throw weight
tego
n might
substantial reductions in the num
its large missiles.
Medium-Range Forces
N rheads, guidance
ces that a mis-
et. The Rus-
3
ept un-
On the question of medium-range
forces, Administration officials say it
appears clear that Moscow has altered
a key demand and no longer insists on
the removal of 134 or so American
medium-range missilet'&4 already e-
ployed in Europe. In effect, cow
has proposed a freeze at cu levels.
This would leave the viet Union
with about a 10-to-I a ntage over the
warheads. Bu is does not include
French an British nuclear forces,
which M ow insists must be counted
in a W ern total; if they are included,
th oviet advantage is about 3 to 1.
The clearest indication of Soviet will-
ingness to accept some American de-
ployments came in a Pravda editorial
last week. It read in part, "The Soviet
side expressed its readiness, in case
the U.S. missiles now being deployed in
Western Europe are withdrawn," to re-
duce to levels equal to British and
French forces. The phrase "in case"
does not suggest that removal of all the
missiles is required, as previous state-
ments have twisted.
The United States says it wants an
agreement allowing equal overall
levels of Soviet and American medium-
range missiles, but it says It would ac-
tually match Soviet deployments only
in Europe, and not in Asia.
The present Geneva round Is sched-
pled to end July 16. The first round
Untt en, there had been a 15-month
hiatus t e arms talks after a Soviet
walkout ov the deployment of new
American mis in Europe.
DELUSION... from Pg.13-F
consumer goods. See Konstantin Simis, USSR: the Corrupt Society-The Secret World
of Soviet Capitalism (New York: Simon and Schuster, 1982). Also see Gregory Gross-
man, "The Second Economy of the USSR,'' Problems of Communism (September-Oc-
tober 1977): 25-40.
16. According to John H. Moore, "it should be realized that the lSovieti planning
system is an instrument used to promote the ends of the leadership, a tool whose
use is the reward for the successful politician. It will be used to promote the ends
that those at the top deem important." John H. Moore, "Agency Costs, Technologi-
cal Change, and Soviet Central Planning," Journal of Lain and Economics (October
1981): 189-214.
17. In this regard, Joseph S. Berliner distinguishes between mission-oriented activity
and economic activity and argues that the Soviet success in the former provides no
evidence that it can be expected in the latter. See Joseph S. Berliner, The Innovative
Decision in Soviet Industry(Cambridge, Mass.: The MIT Press, 1976), pp. 505-510.
18. Which is likely to be the case, since the efficiency of the military sector in any
country will be somewhat dependent on the overall efficiency of the economy.
19. According to Richard Perle, Assistant to Secretary of Defense Caspar Weinberger,
"I expect farms control) to do in the future what it has done in the past. I am
pessimistic because the Soviets have shown virtually no interest in significant
reductions. And that is because the one area in which they excel is in the produc-
tion of weapons." Ncu'su'rek, October 1, 1984, p. 30.
20. Statistical Abstract of U.S., U.S. Department of Commerce Bureau of Census, 104th
edition, 1984, table 551, p. 343.
21. Richard Nixon, Real Peace (Boston: Little, Brown and Company, 1984), p. 96.
22. See Seymour Weiss, "Mr. Nixon's Chimerical Detente," Wall Street Journal, June 4,
1984, editorial page.
DWIGHT R. LEE is Research Fellow at the Center for the Study of Public
Choice at George Mason University.
1 Ll_F
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