THE ROLE OF ORR IN ECONOMIC INTELLIGENCE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP75-00662R000300030001-8
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 22
• Document Creation Date: December 12, 2016
• Document Release Date: July 9, 1998
• Sequence Number: 1
• Publication Date: August 1, 1951
• Content Type: REPORT

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CEMTRAL IFTEILIGENCE AGEECY
OFFICE OF RESEARCH AND REPORTS
Tho Role of ORB in Economic Intelligence
1 August 1951
OMNI WSW 411111. 0111011.
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CONTENTS
I. Introduction --What Is Our Problem? . . . . . .
Why does the eaution of our national security problems
depend in part upon adequate foreign economic
intelligence? . ea a ?0 ???aM ea .4?00
What in economic intelligence? . a 09.00??0
What is the role or ORB in foreign economic Intelligence?
Peculiarities of eeonomic intelligence concerning the
Soviet Bloc ?0 . OO 4, ? esta a
1
?09+0 1
?0000 a3
? 5
coca Oa 6
IL General Methods -- Hoy Shall We Go about It? . a a alga ma a 8
A. The dilemma of the clamorous customer versus the basic
study.... ? a a a a a a a a a a . ? ?e0.20908
B, Roy do we determine basic research priorities? . 1904000 9
Co The Method of Succeesive Approximations a ? a a a a,a . 11
D, Problems in applying the method I a a a a a ? ^ 12
14
III o ORR'S Production Progrem a . 0
Oa ? Off Oa Oat, a *Oa ,,GO
Weis of deacribing our Ignorance et00.1900044.00e,
The need for more study of goals plans, and organization
The need for more systematic study of Sovlet military
intentions as revealed in economic evente a a . ? ?
The need for more study of the relations among Industries
The need for more study of the economic requirements of
military operatioao
The need for more study of
commodities, and services
The need for more study of
Industry a a a a a . ?
The need for more etude of
The need for more study of
40?00?04 a a a 0 mom as
particular industries,
a0?009,49000,9r..0,
technical aspects of Soviet
?411 mit??09 9?a OM o
the interdependence of areas
the index number problem .
WARNING
This document centaine information. affteting the nationel
defense of the United States, within the meaning of Title
Sections 793 and 794 of the U.S. Code, as amended. Its trane?
mission or revelatioe of its contents to or reoe4t by sn un?
enthorized person is prohibited by late,
..mi309.404.
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CIA/RR Project 3-51
The Role of ORR in Economic Intelligence
I. Introduction --What Is Our Problem?
The purpose of this paper is to sot forth the nature and magnitude
of the tasks which the Office of Research and Reports, Central Intelli-
gence Agenoy, must perform to discharge its new as set forth in
NSCID 15. This directive calls upon the Central Intelligence Agency to
coordinate foreign economic intelligent? relating, to the nationel uecurity
throughout tho US Government end to produce such economic intelligence as
may be needed to supplement that which other agencies must produce in the
discharge of their regular missions. This paper is concerned primarily
with the producing rather than with the coordinating responsibilities of
ORR.
During the first half of 1951, ORR wan engaged in taking an inventory
of its ignorance concerning the economy of the Soviet Bloc. The main
purpose of this inventorywas to establish a basis for planning a program
of basic research to which ORR should address itself. Such a program must
spring from a clear conception of Why the US Government needs foreign
economic intelligence, What foreign economic intelligence is, What role
ORR should play in the total economic intelligence effort, and how the
peculiar character of the Soviet economy and of our information about it
influences the methods that we use This introduction is devoted to some
comments on these four topics.
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Foreign econcmic intelligence serves at 2eaet five purposes in the
design of policies to preeerve our national secnrity. These five purpoceo,
which should be kept continuously in mina in planning our economic reeeeech
program, are as follows:
1. To estimate the pg=t142 of possible present or future military
or other threats to ourselves and our allies. A potential enemy can under-
take successfully only those military operations which its economy is capable
of crestaininns. In the very short run, its strength may be measured in terms
of the manpower Which it can mobilize and the stocks of finished weapons of
war and military supplies which it has on hand. Increasingly in modern
times, however, military potential for anything but the briefest campaigns
has come to depend upon the total economic resources available to a nation,
including those noceesary to sapport the civilian economy as well as those
necessary to produce and operate the inetraments of var.
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A clear picture of the magnitude of the present end possible
future military or other threat is needed to guide LIB as to the aver-all
magnitude of the defense effort in which we must engage in order to pre-
serve our freedoms in the event of war.
2. To estimate the ghwadez and 102.110 of possible present or
future military or other threats. Decisions which the USSR or any other
potential many make with regard to how they will allocate their resources
limit What they can Choose to do. If they elect to invest largely in
military installations in the Far East3 their potential for attack in
Europe is correspondiney restricted. This is not a matter of judging
their intentions but rather of seeing What limitations are placed on the
courses of action open to them in the future by decisions which they make
today about the allocation of their total resources.
A principal purpose of thus estimating the character of
military or other threats with which we may possibly be faced is to guide
un in designing our own defense effort ao that it will protect us against
rather than imaginary dangers,
3. To assist us in estimating, within the range of the pezeible,
the intentipex of the USSR or any other potential enemy. The economic
resources of the enemy and their present distribution permit him to
select any of a range of possible or probable courses of cction, Within
this range certain economic events may furnish indications as to which
alternatives the Soviets Intend to pursue and Where and Whom,
These indications of intentions may be very important in
assisting us to adjust our defenee preparations to most the most probable
dangers,
4. To help policy-makera decide what we can do to aft92 possible
or probable military or other throats by impairing an enemyls economic
capabilities to carry them out. This Includes measures that can be taken
to weaken him in advance of hostilities and thus delay or prevent his
decision to engage in Usem, as well as measures to weaken or destroy the
economic basis of his military power should he choose to commit it in
general unr.
Economic intelligence can help in suggesting such measures, in
estimating their effectiveness, and in forecasting the eneny7s probable
reaction to than.
5. To assist in estimating the probable development of the jalatlgs
strengths of tho East and the Pest over the next feu years if global hostili-
ties are avoided. A major purpose of these comparisons in to guide US policy-
makers. The preceding four objectives are concerned with steps which the
United States can take to defend itself against actions of a hostile power.
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Equally important is the design of that political policy which will have
the best chance of achieving our objectives without hostilities. Essential
to the planning of such a policy is the most accurate estimate possible of
the relative economic strengths of both sides. There are equally grave
dangers in a serious underestimate and in a serious overestimate of future
Soviet economic strength. Either will produce policies more likely to bring
on war than will an accurate estimate. The evaluation of Soviet strength
implicit in various of the proposals for US policy now being advanced in
this country varies widely from great economic weaknesses to very consider-
able economic power. A prime goal of authoritative economic intelligence
is to provide the information that will narrow the "guess area.*
All the studies that ORR produces should reflect an awarenees
of' these objectives of economic intelligence.
130 NbALIP-222DOLS-Walkagagg0
Briefly, economic intelligence is intelligence relating to the basic
productive resources of an area or political unite the emir.; and objectives
which those in control of the resources idea them to serve, and the ways in
which and the effectiveness with which these resources are in fact allocated
in the service of these various goals. There are a isembee of coansions as
to the nature and limits of economic intelligence which call for clarification.
1. In the first place, there is canetimes a tendency to regard the
whole of economic intelligence as encompassed in a mere iaventory of aveil-
able resources of labor, raw materials, and instratente of peeduotion. This
inventory is a necessary part but only a pert of the total economic problem
An inventory of resources by itself without an underetanding of tho goals
which they are designed to serve or of the neehodn employed to allocate them
in the service of those goals can tell us little about capabilities, velner-
abilities, or intentions. The Allied Powers have a total steel capacity
which is nom than four times as greet as that of the Soviet Bloc? but such
a cemearinon is highly mieloading. For tho United States to achieve its
minimum goals, oven in a time of crisis lihe the present, steel muct be
allocated to many 'USW WhiCh the Soviets regard as of low or negligible
priority.
Furthermore, a modern econoey is elle:motorized by a highly
complex web of interconnections among its various parts. The capacitioc
of the econow Trey be limited loss by the over-all availability of recourcee
than by a failure to keep all the complex interrelationo in balance Thus
tank production, for instance, may be limited not only by the aveflability
of steel from which to manufacture the tanks but also by the steel available
to rake the rails and the, freight cars neeoesary to eaery steel from cteel
plants to tank plants, ore wee rsmo'sely, by the etes1 eceeirerl for the
machinery necessary to mine the coal to operate the eailreade, Thus
economic intelligence must be as much cone/al-noel with the goals ehioh resources
are to serve, and the ways in which they are related to each other, as with
the physical inventory of the resources theeeelvoe
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2. Another problem relates to where economic intolligenco leovos
off and political, militaryo and scientific intelligence begin. Sinoe the
social organism is a whole and these way? of dividing it are somodiat
arbitrary analytic invontionz, precise lines between the segments are
impossible to draw. In very rough terms, scientific intelligence follows
the progress abroad of nay scientific Moos through the research and
development phases. When these technique nd methods begin to be emplofed
broadly in production, they become the province of economic intoltigenoo
Military intelligence is concerned with the character and capacities of
the rnitary establiahments of foreign countries and with foreign targets
for our own military offorts. Where the character of the military establish-
ment depends upon rates of production or whore the target of our nilitary
effort is the economy of the potential envoy, the linen between military and
economic become blurred. The outpat of final military ecoolpment and the
physical targets on which our military fto-cos mast concontrate are clearly
a prime concern of military intelligence. On the other hand. economic
analysis is required to portray the conplos zeros of socuomio support on
which military production depends and to pursue no econonio chain
reactions which might result from the destruction of partLoolar p-oduciug
The overlapping between politionl and 00,02Mie sntell.tgonoe is
even grantor. One or the bast ways of studying the goolo loh4ob a collecU.
vizod ?tato lashes its economy to servo is to co:Amino the institutional
machingry that it establishes to vide economic poocessea Thus certain
of the institutions of governEoat, although In a aeoze p lit.cclpilonomena,
nay have profound economic aignIficatoc. On the othoo hand, oconomic condi-
tioas aro of course an important doterminant of the atticodss, laoolties,
and composition of politically important groops, in those boraor'ino aroas,
it is the purpose and object of invostisatiol rather than thm disoiplines
omployod that detormino whether i_ntolligence is prop-zr2y to be tc,Inc0 economic
or political
3, A final point of importance 5c the fswIlyot maat !mop in miaa
ic that econonic intellluTLeo is rot always the same iLlpinc as oconomin
information. Even the nost basic economic f.ntolligonos ahould alvve be
produced in relation to no 5.1etsdc of some inellineo coasur, Inc Central
Tatelligence Agency is clia%Tt-d with preducin: foroicn oe,7zomic iligenco
relating to the national eaculltyv riad the consunors of Its pno:att are
those US GOVerraMit officials ftha2Led glth E;,:trr(Ung the ya,xlitonal F,avaritc
A vast nmount of inforoation olme::t all infolmaZlionvJut
foreign economies my be rolavant to untloall scovrty problos, 0.7'c it is
not economic lamziausa until Its ro )vnco to those di.-oblunn i nade clear
It Is the function of inteIligoaco not to ynixsue Imo-olefige for it aun scko
1,11t rot;'?_er to throw Light on col2qquer,aeos of yxen.c, or l'uLuro
acton, Thcur:h tne intollionce i;3t is :!ot a polict-mkor he nast
conotontly P3'6170 to hocp 1a 17,'...the.". ".1.17) relcv:?alco or in::wmaUoll to policy
proacmo, which clone can 7;ra;%-;fo7: leerLaton)Lnto
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OOP low es* Yd.
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Many US Government agencies are engaged in the production and
collection of foreign economic intelligence. Therefore, we cannot
determine our program of research on the basis of the foregoing statement
of the purposes and natenoe of economic intelligence alone. We ret also
consider hog our activities can be made to reinforce rather than to
duplicate the great amount of work Which others must carry on in the div..
charge of their own missions. Our recent survey of foreign economic
intelligence throughout the US Government suggests a number of conclusions
as to what the focus of our activities should be.
1. First, our survey revealed that one of the most urgent needs
of the Government is for soma central spot where all the economic
intelligence collected aoa produced throughout the Government can be brought
together and focuaed on national security fxsues. In recognition of this
need the National Security Council hen directed that the Central In' gence
Agency shall perform this coordinating fanotion. Although this paper is
directed at our production program, our plans for intelligence production
within OR must take full =count of these coordinating responsibilities
ml,ich go along with our substantive effort.
2. A second conclusion of our survey has been that the area most
in need of substantial additional economic intelligence effort is the
Soviet Bloc. This is partly because the Iron Curtain has undo access to
Soviet economic intelligence more difficult, psotly because the Soviet
economic potential is perhaps the most critical key to our national security,
and partly because, for a variety of reasoner., the economic potential of
other areas crucial for OM national security, such an Western Europe, has
been much more extensively studied. The mnture economics of Western Europe
have long been an object of study by both academic and governmental
oconorainta. Tho European Recovery Program has stimulated intensive analysis
of the characteristics, needs, and prospects of the rshall Plan countries.
Thus the economic research effort in mars-hours directed at the USSR and its
Satellites has been vastly less than that applied to Western Europe, although,
because of the Iron Curtain, the effort required to produce comperable under.
standing is maw tine e greater. For these modem, oe :neve concluded that
the principal effort of OR R in intelligence production nnet be focused for
the immediate future on the oconeoic problems of the Soviet Bloc.,*
3. We began this research effort sith an inventory of onr knowledge
of the USSR itse/f. This, of coerce, is only a part of the problem. The
economies of the European Satellites, whose analysis was our second task,
* The Soviet Bloc excludes Yugoslavia and Finland and includes the Edropean
Satellites (East Gerrely? East Austria, Po/and, Czechoslovakia, Rumania,
Hungary, Bulgaria, and Albania) and the Eastern Satellites (Commnnist China
and Communist Korea), ,
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raze likewise crucial to the Soviet economic potential, Recent events
have highlighted the importance of China to our estimates of Soviet
etrength and intentions. A final source of Soviet strength, which mus
be another object of our efforts, is the resources that the USSR could
draw upon either now or as a consequence of future developments outside
the present boundaries of the Bloc.
4. A final weakness of the intelligence effort as revealed by
eur inventory is that the demands which have been placed on the 'fretted,
number of analysts working on the Soviet economy have been so frequent
and insistent that analysts have had little or no time to do the basic
research necessary to supply answers in a confident and authoritative
form. If our effort is to be useful at all, it must be on a sufficient
scale and of sufficient depth to provide a much firmer factual founda?
tion for the estimating process than economic intelligence has been
able to produce in the past.
There are a number of special characteristics of the Soviet economic
intelligence problem Which shape in important ways the methods that can be
used to study it. These are not, however, All characteristics which make
the problem more difficult than that of other areas. We may consider first
some of the things about the Soviet economy Which simplify our problem and
then look at some of the factors which make it difficult,
I. The fact that the Soviet economy is centrally planned to antiwee
the goals of a small group of men acting collectively facilitates anelysis
enormously. In the free economy of the United States the tastes and desires
of 150 million different unpredictable people all have an influence on that
in fact occurs. The behavior of major sectors of the econamy is greatly
affected by the individual plans of countless consumers, each with a
different and somewhat unpredictable quantitative weight. In the USSR there
is one set of plans which dominates all others. Thus it is only by in-
advertence that anything can occur which, from the point of view of the
master plan, is irrelevant or unimportant. This makes the second job of
econonic intelligence described above -- namely, the elucidation of the goals
and objectives which those in control of resources wish them to serve -- a
great deal easier, Almost anything that happens can give us some clue.
2,, A related point, true to sane extent of every economy but
eepecially true of the &mime, is that everything depends on everything
else. The interconnectedness of the economy and its subservience to the
master plan mean that there are many different ways in which an economic
fact can be ascertained. Steel production can be estimated directly from
evidence as to the location and capacity of steel mills or indirectly from
evidence of the manpower employed and of the iron ore or coal or alloy metals
or other inputs available, from the total output of all the products made
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with steel, or from the capacities of transportation facilities serving
the steel industry. The lack of direct evidence on some of the things
that we moat want to know, as revealed in the results of our inventory
ie
of ignorance, empts:sleep the very great importance of giving priority
to the interrelationa of the parts of the economy. Thus the third task
of economic intelligence, to explain all the complex ways in which
resources are in fact allocated to various uses, is peculiarly essential
to building a consistent picture of the Soviet economy.
3. A third fact that shapes our methods is that technology andi
the laws of nature are no respecters of Iron curtains. The Soviete do j
many things differently from the way in which we do than, but in many
other things they have no choice but to follow the only industrial
technique that exists. Thus the electrelytic process which produces sodium
hydroxide and chlorine inevitably produeep them in the same ratio in the
USSR as in the United States. VC can learn many of the technical limita?
tione on what they are able to do from a study of US industrial practices,'
But this must be done with care, since we know that in some casts the
Soviets appear to be incapable of applying our techniques oven where they
know about them, whereas in other cases they have devised superior methods.
Weverthelese? with appropriate caution, useful first approximations can be
reached by the comparative method.
One implication of this for research plans in that there must
be present in our work a much heavier dose of technical and engineering
thinking than is customary in economic studios.
4. A characteristic which has advantages and disadvantages is that
prices, markets, and money flows, the stock in trade of much economic
analysis, have limited moaning in the USSR. Tie are spared the uncertainties
of the capitalist business cycle, and monetary dislocationo are of little
significance. On the other hand, we are largely denied the benofite of
money as a common measure of otherwise incommeneurable activities. Nest of
our thinking must be not in terms of rubles but of tons and bushels and
bales, of numberc of machines of innumerable different kinds, of car?miles?
kilowatts per hour, and the like. To add all these things up to an index
of capabilities, we must concoct our own common measuring rod, a task of
no mall complexity.
5. On the negative side is the obvious fact that information
currently coming out of the Soviet Bloc is very limited incleed. This does
not mean, however, as is sometimes concluded, that our knovlodge is
inevitably correspondingly limited. Radical economic chanes do not occur
overnight even in the USSR, and information on earlier periods is a good
deal more abundant. Piecing this together with what we are getting now
exercising some ingenuity in making inferences from the,seiew about the
unknown (thr(yaoh the interrelations of e:be sooner.) and directing the
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collection of crucial missing pieces of information through the channels
available to Wilf it is possible to put together a surprisingly reliable
picture. What the scarcity of current information moans is not that
we are condemned to ignorance about the Soviet economy but rather that
to find out what we need to know takes a great many more hours of paine
staking research, of imaginative interpretation, and of fitting and
adjusting than would be necessary in the study of an open economy. The
documentation of this conclusion is to be found in the estimates of
research time required which were compiled by the various divisions
during the course of the inventory.
6. A firn, characteristic of the Soviet problem is that because
of the costs and difficulties of collecting information, much more time
and thought must be devoted to determining what pieces of additional
information would be most revealing if we could secure them. This
point Should not be overemehasized. As the inventory discloses, the
information required to give the nnewery that we need about a good
subjects is believed to be largely available in Washington. In those
eases, what is needed is principally much more intensive mieing of a
rather lowegrado ore. In other cases, however, field co/lection appears
to be the only way of filling in certain critical gaps. In studying
an open economy one would normally ask for much more information than
one expected to use and then sort out the useful parts when it came.
When the cost of information in money and lives is bleb:, however, much
more careful consideration must be given to which piece? of information
are the vital ones. One of the principal responsibilities of GM is to
give this kind of guidance to the information collecting agencies.
The considerations set forth in this intradection.do not determine
the details of our research program or of our method of tackling it, but they
do provide a framework of ideas within which the reaoareh program may be
carried forward. The next task is to opal out method and content somewhat
more precisely.
II. General Methods ee Bow Shall We Go about It?
2114Q-dgaMM2-91-tho c2022,MAXEIZ.P.-1,91tanDeeteli
The central question of how we should allocate our time has already
been referred to. The problems to whose solution we are asked to contribute
are very urgent. Events will not wait for the orderly, patient, exhaustive
research which alone can give satisfactory ennwers to these problems. If
we were to devote ourselves exclusively to amassing all the facts we need,
we would have to toll harried policy-makers that we would be glad to advise
them -e beginning in about 2 years. We neither ehould nor can stay in an
Ivory tower that long. Even if it were posaible to devote ourselves
exclusively to exhaustive and encyclopedic studies for the next 24 months,
it is highly likely that at the end of that period many of the problems
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that we would be ached to lolp with 1100(1 have e:Lang.erl. no that our moults
ur,uld no longer be partieiC.arly applicable.
On the ether hand, if wo sucaumb =:-,.Act(711y to the veri real procc;Irs
upon W. to answer all cuzmnt requests for proa9.6 informtiea, 7se will =Tor
have apy information better than the slim fraE2leiats that1:cs can now supply.
Thus our dilemma is, 2n a cInse, whothor to be enejclepeCis and Irrelevant
or operational end inelompcixot.
Clearly the only tolerable solution is a coTrmine botweea these
two =trona-so Ve must try to anavor the most i7,,Derta:_t of the problems put
to 11,0 from day to day an glielly and an competently u3 possible. But we
munt rosorvo a major 'Part of our cneraios for inl.)rovi21g the foundation of
knoyledgc from which ;nette?rquicic answers can be given,,
The necessity for this co,npromice has two further implications.
The first is that it is pefsible to varese this twofoat objective only if
me have n certain mininum cf research recourses subotntially larger than
that ':hich the US Goverawrt has allocated to those 7teroblems in the past.
This minism we are on tho way to ansemblinv30
Tio other implication of olv compromise is that s:;_aco vo cannot ho2s
to have ?-.,nough resources fully to exploit ell the avLilable information about
the U359 we MIllt be 7ory sure that we use our coarse roseqrnh resources to
fill in tso are of our ignerancs mhish most coriesly limit orr estimating
ability. Vs aiznt coscontrrto our scare? man:mucr on fiadins out thoco thiugo
that the 70 Govoent eves to Rnau rost. Tho .ileatfrication of these
priority is ono of the mc st pusalit-Ig probloau facing
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The not coCuctivo answer to this clustion is contained in what
VO Ilay oalA the 'Ibottloseck fallacy." Sipco aconvais 1:17,1Tnr.,12 cold or hot,
vas first thought of, esonclints have sought for the icttlenceh, the sime-lo
crittcal ?t'=? the key facility -vcl.thout which the oriqoyle mitt esancmy
would celtn*Pelet, The Meteri of the sonra for ac,s21 tottlemeeKs 15 a record
of failro-:t? confirming the aconsmistls Valth that, givon a little time,
resources c.ro highly sahnti'mtablo for one mothcr. This Coco not mean that
economic -parfare is bcpnd t) be inefoctivc, Cu t'In toztra.,7, the very f=t
that resvarcen are inte7oba-lsoab1e VOS28 that to deny an enmy any rano-I:woo
is to weaken directly or inlirectiv his oilitery :potarttisl. This is parti?
cularly tract in an ec;:aav -7hich? Uke the Soviet, has for year been dirocted
toward a Dingle sot of gon:11. Ary economic asti..7 xecegn:lc?cd by the ITZZE0112
as not stsontial to those gorls would have been Ph:aril:mod long since, Thn.;
wherever we elke an ceJnomic attner urea the USQ? it in to hurt, rzt
it 2s a c'auzion to mooct that a 131:litoa 11,pcm a arall scsment of the
Soviet ocoamy -All cripple Soviet strwgth. it is not the capacity of a
particulr.r facility or the s.vailability of a pw2ticuir commodity which
ultimtelzr limits the capabilitnes of the Soviets co much as their total
resources and their ability to organize them effectively.
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aril. ow oras a ego
leis does not melte that all things are equally important. The
c!').c/atL'_,n tho nore critical cennodities and industriee is one way of
cuttinq t'%?a eeoblem down to elec. But When one has dons all the peunimg
? bl ths nueber of critieal sectors of the econour retains too greet
to teckle thee ell exhauatively at once.
A. second method of determining priorities for research is to
ono w7tat 7:21ola rataarch mild be moat relevant to the problems to vbieh
ate) "coiee %eked to give current answers now. The dangers in this problon?
approade te priorities are obvious. It loads one Oxeye to concentrate
ones research on yesterdey'ls rather than on tereerowls problems. Basic
research, 3ey definition, tAkes time. The problems which may be urgent
uhen the tasic research that Ye start today is finished cannot be clearly
foreeeen end are Almost certain to be different from those which are
plaguing es now.
Furthermore, ay attempt to list even the most urgent of the
p::?:,1111cmc; :cing us at the moment reveals how many there are and how much
of the total wad econoeic picture is relevant to their solution. AS
pt of our study of foreien econcmic Intelligence for the National Security
Ceenell? the Central Intelligence Agency attempted to outline the require?
:to for such intelligence in terms of current problems. A very incomplete
ciplz yielded a list of 42 top priority problems, some of them as broad as
nte total military potential of the USSR.*
Again, we cannet wholly discard this critorien. We must try to
:eec tomorrawls problem and guide our research accerdingIy. There ere
eeee aspects of the Soviet economy which vs. osn take the ria: of neglecting
flee es must do a broad enough job to hedge ourselves eomeWhat against the
eeeee in our own forecaetimg.
3. A third possibility is to take acme aapect of the study of emeh
and concentrate on that aspect alone for all cemmodities acroes
toard. Then one could take some section of the tline for a Basic
-edity Study used in the preparation of the inventory eiel fill in that
on for every item first, leaving other sections entil later. One ceu16
rteote the entire energies of CR to the study of requiremente, for eenzele,
to techniques and methods of production, or to the ceganisation and ptena
each industry, or to levels of output, or to some other eepeet.
This principle or selection is almost certain to be unmatisfectery
77 itself, since the anevere to most of the questions which polioyemakere are
ng to ask involve putting together all of the parts of a basic study to get
et the conclusion. 'Mum an estimate of capabilities retrairos an estinate of
31.?.131.1%1111.611i,
* 'Toreign Economic Intellieence Requirements Relating to the Eationel
Socuritypo Appendix B to Ebnoeereum for the Intelligemce Advisory Committee
from the Director of Central Iutelligence, dated 31 May 1951.
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144
the balance between supplies and requirements to achieve whatever may be
the goals and plans of the Soviet rulers. An estimate of vulnerabilities
involves a knowledge of the availability of materials at present production
rates and also an estimate of how goals and plans would be affected if that
availability were to be cut by our action to a point far below requirements.
If the design of a basic study is properly drawn, information about all the
parts of that study is required to arrive at conclusions, and no single part
can be left out entirely if satisfactory conclusions are to be reached.
40 The investigation of each of these methods of determining
priorities on our research time leads us back to the unacceptable conclusion
with Which we started -- namely, that the encyclopedic and exhaustive
analysis of most of the parts of the whole economy is the only way in Whidhj
we can arrive at sound and authoritative answers to the questions that are
being asked. But we have already determined that we do not have the time
or the resources to carry through this number of systematic basic studies
from beginning to end. Hew, then, can we resolve this puzzling dilemma?
The answer is suggested by looking at the present state of our
knowledge. What we have just proved is that we need to know something about
most aspects of most sectors of the Soviet economy to make a sensible estimate
of capabilities, vulnerabilities, or intentions. But we have not proved that
we must know everything about every aspect. What we already know permits us
to set certain outer limits to the area of the possible. We know the Soviet
Union is at 102/ capable of certain minimum actions, and we can set certain
ceilings on what they a:m.0.4mm/ capable of. Our problem is to bring the
"at least" and the "at most" closer and closer together. This calls for a
research program guided by What we may cal the method of emcees/vs
approximations.
C . Imet0.11.......?atestatztAzzaamatilsaa.
1. The first step in the Method of Successive Approximations is to
lay out in general terms the specifications of what you wadi like to know.
What is the list of all the significant industries, conmedities? and services
which ahould be studied, and what are the principal problems about them vbieh
we would like to solve? This was the first assignment in our inventory and
resulted in the outlines produced as a guide to it.
2. The second step is to see how much of the outline you can fill
in and with What degree of precision Thin will reveal that our information
about some aspects of each of our problems Is better than our information
about other aspects. It may not be very good. The best information that
we possess may have a very wide margin of error, but other parts of cur
outline will be still weaker. Our inventory was designed to bring us through
this second state -- to tell us what we know and what we do not know abort
each of our major problems with respect to the USSR. It has revealed what
it was intended to show -e namely., that our ignorance of certain importart
matters is much greater than our ignorance of others.
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3. The third stage of our Method of Successive Appromimations is
to concentrate our most earnest efforts for a brief period on the important
parts of our problem which we know least about. This does not mean that we
seek authoritative or final answers in these areas of ignorance but merely
that we focus on them until our knowledge is brought up to a level equal to
or soneuhat better than our knowledge of the other parts of the picture.
4. When we have been working in this manner an weak spots for a
period of 2 or 3 or 4 months, we must stand off and take another look at
where we are then in relation to the total outline? The week spots may
still be weaker than anything else, or we may have gone far enough with
them so that, although we still do not know much about theme they will be
in better shape than what formerly was our best evidence. It our second
over-all look reveals this to be the case, we must tackle whatever other
sectors of our problem are now the weakest, not again with the notion that
we are going to find out ever7tbing about them, but only that we are going
to work on them until our ignorance of some other matter requires more
pressing attention. In this business, knowing a little about a great maga
things is likely to be more helpful than knowing everything about a very
few things and nothing about others. Each substantial drive to cover an
area of ignorance met be intensive enough and substantial enough to permit
us to make real progress toward solutions and not merely to had our Own.
On the other hand, it must not be pursued with such perfectionist seal that
we neglect other areas in which our ignorance may be only slightly' less
serious.
5. In summary, the Method of Successive Approximations involves
a repeated cycle of review and examination, planning, and several months?
production followed by another review in the light both of progress and of
changes in the character of the problems to be solved. We have devoted a
good deal of time recently to the review and planning phases and are now
launched upon a production program. Sometime in the fall, another vele
of review and reexamination of plans will be caned for.
D.ibmaisiajamaziagjia_a_tbstie meth.
In attempting to apply the Method of Successive Approximations,
certain common problems and difficulties arise which are worth a brief comment.
1. A particularly bothersome problem is that the things which we
know least about, and thus the things which it is most important to study,
are likely to be the things on which we have least information. In general,
we know more about rates of production of important commodities and products
in the Soviet Union than we do about patterns of distribution of those
products. This is partly because much more evidence is available an rates
of production. The temptation is to study the material that we have and
draw such generalizations few it as it seems to contain.
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In terms of getting answers to our vital prchlemslehowever, ye
car not permit the available evidence to dictate the nature of our inquiry
too completely. Several weeks spent searching for every possible way to
button down an illusive fact by ingenious reasoning from other related
facts, by working out limits on ethat its magnitude could possibly be from
What we know about other parts of the economy, or by laying on collection
requirements may be worth many times the same amount of time devoted to
extracting*, setting down, and presenting all the facts that may happen to
be in a given body of documents.
Both methods must be employed. Until we have systematically
examined the available material, we do not know what can be got out of ite
But the material available was not designed to answer our questions, and
it must be made to be the servant of our investigation and not its mestere
2. An irritating feature of the Method of Successive Approxima-
tions is that it may well involve us in going over the same material several
times in search of the answers to a series of different questions. This
repetition is unfortunate and can be avoided to some extent by investing
some time in indexing and abstracting, either by ORR analysts themselves
or by an expanded staff in CCD, If, however, we examine exhaustively all
the material available to us for every implication that it contains the
first time we study it, we will not complete our inveatigation for many,
mazer? months. It is unfortunate that research by the Method of Successive
Approximations involves some manta and some repetition, but it is better
than being able to produce no answers until 1954.
3. The natural instinct of the researcher Who has plenty of time
is to follow the logical process of trying to build up a picture of a
whole sector of the econoey by first getting an idea of each of its smaller
component parts. Thus the logical way to estimate the value of resources
used in chemical production is to find out what resources are used in the
production of each of the many different kinds of dhemicals. Again this
logically involves breaking each particular chemical into the quantities
produced in each specific plant. This suggests that the first step in
anseering the over-ell question is to try to identify all the physical
producing facilities and their capacities and rates of operation. In malts
cases, however, a first approximation to the aggregate figure. can be acWeved
by short cuts which avoid the necessity of knowing What in detail it is made
up of.
Thum one can start, for example, with total resources engaged it
chemical production in the United States, or in the war economy of Nazi
Germany, as a proportion of total resources. One can then consider knowm
respects in which the proportion in the USSR. must deviate from these examples.
Soap is rare in the USSR, and every household does not have its DDT apra;yo
Such estimates of the whole before you know the parts usually have wide
margins of error, but when current problems are pressing, they are frequently
better than nothing at all.
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4. Finally, fer this method to be effective, it should ideally
be applied not simply to ORRIs schedule of research production but to that
of the US Government as a Whole. Our delineation of areas of ignorance
should be on eGovernmenb.wide basis, and our production to remedy these
weaknesses should be planned in collaboration withother agencies so that
we do not all concentrate on the same gaps at once. As the coordinating
part of our activities progresses, it should be closely integrated with
our production so that the Government as a 'whale may approach more rapidly
an adequate understanding of the Soviet wawa,.
III. ORR's Production Program.
A. Are qUescribina ouzianoreace.
Our inventory was designed to reveal our major areas of ignorance
as a basis for paanning our future research production program. In trying
to generalise on what we have learned from this study, we face the problem
that just as there are mazer ways of classifying knowledge, so there are
mew ways in ski& we can classify areas of ignorance. We can do this in
terms of eammodities, industries, or services about which our general
economic knowledge is particularly weak; or we can consider those espeets
of our knowledge which are weaker for all commodities than other aspects,
such as, for example, production, distribution, requirements, stooks,
techniques, etc.; or we can consider which of the basic purposes of sconoMiu
intelligence we are least wall?equipped to serve, such as the study of
capabilities, vulnerabilities, or Intentions; or we can look at our weakness
in terms of the three fundamental aspects of the 000b0Mic problem described
at the beginning of this paper namely, the estimating of the productive
resources of the eoonoay, the understanding of the goals and objectives which
those in control of the resources wish them to serve, and the waya in which
the resources are in fact allocated in the service of these goals.
An attempt is made in this section to suggest what seep to be some
of the most serious weaknesses in the present knowledge of CRR as revealed
by our inventory. Each of these weaknesses is drawn from a different way
of looking at our problem. Thus they are not commensurable with each other,
in many cases they overlap, and hence they do not add up to any single
priority principle for determining what ue should do next. It is inherent
in cur problem that we require studies based upon a wide variety of different
ways of slicing that problem into its pieces. Indeed, we must be constantly
alert for still other ways of subdividing the issues to be tackled which may
throe more light on certain of our questions than any of the ways we have
thought of so far.
It should also be kept In idol in what follows that the generalizations
made in this section apply in different degrees to different brandhes of R.
There are certain weaknesses that appear to be generally prevalent in much of
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our eorkc: but their relative impoetance varies widely from branch tee
branch.
FinalIy? in planning our woe* in such a way as to limit the arees
of isnorance described below we must make full allowance for the reseeeeh
and production plane of other agencies. Since Whet follows ha e not Nee%
&lammed outside the Central Intelligence Agency, our plans will pre
curably be modified someWhat as a result of discussions in the Economic
Intelligence Committee as to the plans for intelligence production
throughout the Government.
B. AgereMiefSeeereVSLIZ11-227-liSila.....1.1
in most sectors of the economy we appear to 'snow a good deal MOY0
about the recources and facilities of the Soviet Union than we do about
vhat the Soviet are trying to do with those resourcee and facilities
oadly speaking, we believe that they are trying to devote them to the
increase of their military strength, but we cannot go far bend this
master generalization into What products and uses are ragarded as most
impoetent? what will be given priority in the event of e shortfall, ane;
Why, and what goals and objectives pill shape the future develapLent of
their economic program.
We have, of course, a separate branch whose function it in to study
eeonamic organizations and programs as such, but the effort needed in this
fiele. Is much broader than a single branch can make aad mach more intit4tte1y
tied in with the problems of each of the other branches than might at fi.rst
applar
Superficially the problem of how we go about the study of goalt
and plans is a difficult one. The USSR has publiehed 5eyear plans in tha,
oat, but there is considerable doubt as to Whether it will continue te
Jo this in the future. In any case, these plans have lontained only the
beoadost sort of production targets, with no analysis of the reasons for
them or of their relative priority In this case, as in many others,
however, we can learn much more by indirection and inference than at first
appears.
In the first place, the plans themselves have meny'implicatione-
- which need further etudy. Goals for a series of interconnected comsoditioe.
cuoh as coell steel, railroad equipment, etc? can be studied to see how
the piecoe fit together arvi what they imply as to the desired pattern of
use of resourcec.
In the mecond place, we can learn a great deal cheat the plans and
goals or the Soviets from the structure of the organizatien set up to achieve
them. The ministries establiehedothe breakdown of functions within those
ninistries the distribution of authority between Moscow and regional
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headquarters, the kinds of people appointed to handle the various jobs
thus defined, can all give 11/3 much information about what the USSR Is
trying to do.
Finally, as already pointed out, we are helped in this investigation
by the fact that everything that happens in the USSR is intended to contribute
to the central design. The study of all kinds of events can thus give 11.4
hints which can be pieced together into a picture of what the authorities
are trying to do with available resources. Information on diversions of
material from one use to another, priorities on transportation, marked trends
in the production of particular commodities, exhortations to workers in
particular areas, and literally thousands of other things of which news
reaches us give us clues in putting together the pattern of Soviet economic
plans.
The pattern will not emerge automatically, however, from a passive
examination of the material? Pe must seek the answers systematically by
initiating special projects on Soviet organizations co Soviet plans* and
on Soviet goals as revealed in events? This is one field in which many
of our branches need to concentrate a larger part of their efforts for the
time being than they have done in the past.
fb
4
?
0..
ag_zonsaladJammats..asale
A related but different weakness is the lank of adequate attention
in the past to eccateic indicators of the military intentions of the USSR.
We have been talking above of the general economic goals of the Politburo
and the elucidation of What the SwieU are trying to do with their total
resources. We can look at the same problem from the other end, examine all
of the alternative courses of military action open to them* and then try
to see what observable encomia events would take place differently today
if they 'were planning one course of action rather than another in the future.
The evidence to be examined in answering this question will, in most cages,
be the same evidence that we have been examining to estimate capabilities.
What we need is to establish some machinery for periodically focusing our
minds on the evidence looked at from this point of view. A continuing office
project designed to do this is being planned?
Do zug_ntife...tsz_mmiluaLar.sag.,EadiugagmAang.lashiassan..
Partly because MR is organized largely by industries, commodities*
and services, there is a tendency for us to concentrate too heavily on
techniques, facilities, and rates of output in the separate sectors of the
economy and to pay too little attention to the way in which they are related
to each other. This shows up in our inventory in the great relative weakness
of those parts of the papers which call for information on the demands of one
industry for the products of other industries or sectors (input requirements)
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and those sections devoted to the pattern of distribution of an industryna
output among other industries or final consumers.
This weakness is particularly serious because it is not unique to
ORR but is common throughout the intelligence community. Other agencies
likewise are focusing their attention on individual facilities and their
productive capacity. As suggested earlier, however, the capabilities and
especially the vulnerabilities of the Soviet economy probably depend much
more on the efficiency of the connections between its parts than on the
resources available in any one sector.
Like all of the judgments of this section, this is an estimate
of relative and not of absolute weakness. Some notion of how much of a
commodity is produced is clearly a prerequisite to an estimate of Where
that production goes, though in actual analysis it is frequently possible
to reverse the logic and estimate rates of production from what we know
meet be the distribution. Thus it may be very useful to try to estimate
the consumption of electric power in the Chemicals industry before we
have firm evidence on either the total production of electric power, plant
by elant? or the total production of each of the many special kinds of
chemicals that require electric power in their manufacture.
There are many ways of getting at an estimate of this kind indirectly.
One can take parallel experience in a number of other countries, noting the
correlation of this figure with other quantities that can be observed in the
USSR. One may have information about the general geographic location of
production and the character of the power grid serving these arena. Margins
of error in this kind of calculation are 'usually very high, but it may be
possible to set limits on orders of magnitude Width bring our ignorance about
these factors below the level of our ignorance on other matters.
There are various ways in which our efforts on interindustry relations
can be intensified. In the first place, in basic studies on particular
industries, commodities, and services, more attention can be paid to estimating
input requirements and the distribution of output. This, however, is not
likely to he enough. The evidence on these interindustry problems, from their
very nature, can best be assembled by examining both ends of the interindustry
pipe. This means that the aluminum consumption of the aircraft industry is
a problem for both the Aircraft Branch and the Nonferrous Metals Branch.
To insure that a spotlight is turned on some of the more important of these
interindustry problems, it is proposed that a number of joint projects be
set up to make estimates of this kind.
As the number of sectors of the economy involved in such an inter?
industry study expands, it becomes the concern of most of ORB. We have
initiated one project, the study of the pattern of utilization of energy
resources in the USSR, which will require contributions from virtually every
branch.
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for
H. ; .01 ?
sansgseas
e ?Jei
*tea Aegie
?
Our inventory reveals that we are almost totally ignorant as to
the burden placed upon the economy by specific military operations of various
kinds. In a sense, this is a special instance of the general point just
discussed. Military operations can be conceived of as a consuming sector
of the econopy. The relations between military consumption and the industries
and services Obi& supply it can be regarded as one of the most important
cases of interindustry relations* Rere what we need to know goes beyond the
actual distribution of products and services to military use at the present
tine and encompasses a study of what that distribution would be under
various alternative assumptions as to the nature of possible future militery
operations. This clearly is a kind of study. in Weide the mil4tary
gence services must play a major role.
We Should look to Ae2, G-2, and ONI for estimates of the volume or
military end items required for and consumed in probable operations of
various kinds. The burden which these rates of consumption of men, muni-
tions, weapons, and supplies place upon the producing facilities turning out
the final military product is a problem which the military intelligence
services and ourselves will have to work out jointly*
As we move farther up the chain of production, going from tanks to
parts to steal, from planes to instruments to vacuum tubes, from bombs to
TNT to ammonia, we move into areas where the responsibility rests squarely
upon us. Thus in the field of interindustry relations generally, special
importance attaches to the relations between industries Welch directly or -
indirectly serve a military effort. Our role in the analysis of weapons end
ammunition ;Should focus especially heavily on what it takes to make these
things and thus on the implication for the rest of the economy of whatever
levels of military output the defense agencies estimate are needed far various
types of military operationSe
F.agungsl jarezzleLeelade.gfeeeedislaer jedgetelezieggemeljagges Area
sszkieg.
This is discussed in detail in the reports of the separate divisionsv
Broadly speaking, as might be supposed, our principal gaps in ORR are in those
areas where we have had no analysts available to work on the problem* Several
are urgent and outstanding. For example, we have no satisfactory analyse
in the Central Intelligente Agency of the general field of construction of
all kinds in the USSR. This is important for many reasons. Construction
absorbs a very large volume of resources, places a heavy burden an the
transportation system, and is an important requirement for military installa-
tions of all kinds as well as a prerequisite for industrial expansion.
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Another outstanding weakness is in the communications field. The
technical side of this problem is wellecovered by OSI and other agencies,
but the relations between communications and all other industries are ainest
Intouched. This includes an analysis of the requirenents laid upon the
communications network of the Soviet Bloc by the needs of the Bloc's economic
mysten? as well as of the volume and character of Soviet resources required
to sustain and expand that network.
Another broad field of serious relative weakness is the analysis of
the industries producing military equipment, including ships, aircraft,
tanks, ordnance, and ammunition. As already mentioned, some aspects of these
industries are covered by the military intelligence sorvicea. But the burdens
that they place on the rest of the econoey,and, on the other side, the 'Melte.-
tLons which the rest of the economy imposes on capabilities in these fields,
their vulnerabilities to the interruption of the supplies that they need, and
the indications of intentions that we can derive from their peculiar require-
ments are all matters on which we must put more emnhasia.
G. nsuogalszzomaingt_g_tobnieal asnewkr or Soytet indesla.
Many of our estimates of Soviet capabilities and vulnerabilities are
based upon the assumption that the Soviets are using methods similar to ours.
In computing input requirements for ar-given output, we muat ftecinently fail
back on US experience. Yet we know that thin is in many instances grossly. mis-
leading. For example, the US coal miner produces on the average about four
times as much coal per day as his Etrepoan counterpart. In other reppectap
Soviet techniques may well be ahead of ours. Unless we can set limits to
the posuible range of technical methods that the Soviets may be using, our -
eetimates will be subject to wide margins of error.
This information is not &Ley to get. We know or can learn a good
deal about prewar methods, both from the literature and from the people who
participated in the design of their industrial economy. We can, of course,
find out What went to the USSR under Lend-Lease. For more recent information
elo must depend on the visual observations of defectors prisoners of war,
occasional travelers, and the like; on items in the Sglet press, radio, and
technical publications; on inferences from what we can learn about inputs
for given outputs, etc. We must have more studies on Soviet industrial
techniques.
H. 212a_nf _mom jainAaae.,Mat jatargenonsisastuaLamo.
In a broad Benne this can be described as the need for more attention
to trade. We have examined in our recent work on the European Satellites name
of the ways in will& they are dependent upon the USSR and the USSR in turn is
dependent upon them. A main:. gap revealed in this project, however, was the
absence of even appreximate information on the composition and volume of
intra.-Bloc trade. Studies on China have revealed a sieilan weakness in our
lo
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knowledge of what China is getting from and giving to the USSR.
Of equal importance is the development of more information on the
interdependence of major areas within the USSR itself. To what extent
does the Soviet Far East depend for its economic potential upon its
somewhat tenuous connections with the rest of the Soviet Union? Roy self..
sufficient is the Urals industrial complex? What are the economic relations
between the Caucasus and other Soviet areas? These questions are important
to the enelyaie of the capabilities of transport, pavers and communication
nets; of vulnerabilities of many kinds; and, to some extent, of intentions.
To Th
41
I*,
z 4..P. 1t.
Almost any investigation of a major sector of the Soviet economy
leads one back to the problem of how to add up incommensurablee. Suppose
we can estimate the output of various kinds of machine tools. How are we
to measure changes in the total economic effort that goes into machine tool
production as the composition of output changes? It is common knowledge
that the prices put upon goods traded by the USSR with the Satellites are
sharply distorted for political reasons. What then is the over-all volume
of trade between the USSR and Hungary in each direction? How does the
proportion of Soviet resources being devoted to expansion of productive
facilities compare with that, say, in llostern Europe? One is stepped on
the problem of how to measure resources devoted to such expansiaa.
This is a problem on Which a good deal of work hes been done outside
the Government. Perhaps more can be put in progress by external research
contracts. But a good deal of effort is needed to bring the remelts into
such a form that they can be used to answer pressing problems now baffling
Government analysts.
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