THE COST OF SOVIET DEFENSE FACT VS. FICTION, I

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90-00965R000100440064-6
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 1
• Document Creation Date: December 22, 2016
• Document Release Date: December 28, 2011
• Sequence Number: 64
• Publication Date: March 17, 1983
• Content Type: OPEN SOURCE

ST A T
Declassified in Part - Sanitized Copy Approved for Release 2011/12/28: C
ARTICLE APPEARED WASHINGTON TIMES
ON PAGE_. .-.. 17 MARCH 1983
]heCost:Qf:SOY1etd*1).Se
Arnold Beichman,,a.;Visiting
writing a biography of YuriAndropov
I U.S.S.R's gross national product goes
arrived at - say, 5.-percent or 12
percent or whatever - the producer
of the statistic then compares it with
that percentage of GNP which the
United States devotes to defense.
Then the debate begins between the
two sets of figures, one of which is
sual quantity, that of the United
at .best a guesstimate, that of the
Soviet Union.
And.the debate rests on the base
of a false premise: that it is possible
to compare the Soviet budget and
the U.S. budget.
GNP and that percentage devoted
debate on America's defense pro-
gram hinges on what we-know or
can know about Soviet defense
expenditures. Is the U.S. defense
effort adequate or super-adequate?
Are the CIA or Pentagon deliberately
manipulating Soviet "statistics" to
further their own interpretative
prejudices?
validity.
As an example of how misleading
the comparative U.S.-U.S.S.R. statis-
recent article in The New York Times
4+4defense expenditures had exceeded
l'~,ihose of the United States by hun-
dreds of billions of dollars.
The author, Professor Franklyn
D., Holzman of Tufts University,
argued that there is no military
spending gap between the United
States and the U.S.S.R. True wages
in America are considerably higher
than they are in the U.S.S.R. but,
Holzman said, U.S.S.R. production)
costs of machinery and equipment,
especially high-tech weapons, is
many times more expensive than in
the United States. Wrong.
Machinery and equipment are far
less expensive to produce in the
Soviet Union because there is no
profit to be shared by the produc-
ing factories involved in supplying
the raw and semi-finished products
that go into the production, say, of
tanks. (Of course, certain precious
metals used in hi-tech items and not
readily available in the U.S.S.R. must
be purchased abroad for hard
the total cost of weapons.)
Ii
As Professor Mikhail Bernstam
of the Hoover Institution has pointed
out, the cost of each particular item
of each piece of military machin-
or equipment for a particular-!.
ery
factory is in no way the eventual 1
cost of the same item for the Soviet
state as a whole. Arguing against
the Holzman methodology, Bernstam
offers the following model: a j
A Soviet airplane factory prices
ftghter plane it will sell to the Soviet-
:'' . state at$10 million. It pays out to its
? :suppliers of raw materials, energy,
research and development $5
1 million. It. then pays out $3 million
. "for labor, including executive and
mapagement salaries. The total cost,
then, to the factory is $8 million, so
that'when it sells the fighter to the
state it enjoys a profit of $2 million.
- Bur' the "profit" vanishes instantly,
since it is appropriated by the state.
The $5 million, presumably paid out
by the airplane factory producer for
raw materials, energy and R&D, also
belongs to the state, except for a
certain amount - say, $1 million -
which is the cost of labor for mining
metal, coal, for refining oil and for ?I
the technologists and scientists
engaged in R&D and so on.
Since the $2 million "profit" has
disappeared and since the $5 mil-
lion for raw material, energy and
R&D is really $1 million and since
the producing factory's labor cost
is $3 million, the total actual cost of
the fighter plane to the Soviet state
is really $4 million - $3 million fos
its own direct labor costs and $1
million to indirect labor costs.,
In the United States, the cost of,
the fighter plane would be a true
cost to the Pentagon because-
expenditures are real, not fictitious,
and the profit, if any, is real and not
fictitious. In other words,af the same
plane costs out at $10 million in both'
countries, the U.S.S.R. can produce,
2.5 airplanes vs. one airplane in.the-
,United States.
The only real measurable cost to
the Soviet state for the production
of armaments, or, for that matter, ;',
any other item, is labor. Since there,
are no free trade unions in the
U.S.S.R., labor costs are as low a?`
the working conditions are miser' j
able.
Declassified in Part - Sanitized Copy Approved for Release 2011/12/28: CIA-RDP90-00965R000100440064-6