CURRENT INTELLIGENCE WEEKLY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A000200100001-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 20
• Document Creation Date: December 15, 2016
• Document Release Date: December 18, 2002
• Sequence Number: 1
• Publication Date: January 29, 1954
• Content Type: REPORT

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OCI NO. 2863
DOCUMENT NO.
/"" ''~5. TO- T ; S
hdC 13`_V'f-1A/DATE:
NO CHANGE H CLASS
fry ?LAs?(r r' j
25X1
29 January 1954
CURRENT
INTELLIGENCE
WEEKLY
CENTRAL INTELLIGENCE AGENCY
OFFICE OF CURRENT INTELLIGENCE
E
25X1
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 AM,
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THIS MATERIAL CONTAINS INFORMATION AFFECT-
ING THE NATIONAL DEFENSE OF THE UNITED STATES
WITHIN THE MEANING OF THE ESPIONAGE LAWS,
TITLE 18, USC, SECTIONS 793 AND 794, THE TRANSMIS-
SION OR REVELATION OF WHICH IN ANY MANNER TO
AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW.
The Current Intelligence Weekly has been prepared prima-
rily for the internal use of the Central Intelligence Agency.
It does not represent a complete coverage of all current
situations. Comments and conclusions represent the im-
mediate appraisal of the Office of Current Intelligence.
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THE SOVIET WORLD . . . . . . . . . . . . . . . . . . . lage 3
NEW VIETNAM GOVERNMENT HAS GREATER APPEAL FOR
NATIONALISTS . . . . . . . . . . . . . . . . l age 5
The new Vietnam government is moderately nationalist:
and at least approaches the popular concept of independ-
ence without unduly alarming the French. It is thus
better able to undercut the Viet Minh?s pretensions to
being the guardian of national ideals,
READJUSTMENTS IN THE EAST GERMAN MILITARY BUILD-UP . . I-age 7
East German plans for a rapid military build-up were
sharply cut back during 1953 because of deteriorating
economic conditions and doubts of the reliability of the
armed forces raised by the June riots.
YOSHIDA GOVERNMENT BEGINS AUSTERITY PROGRAM FOR JAPAN . Fage 9
To curb Japan?s unsound economic boom, the Yoshida
government is now taking steps which, if successful, may
remove a potential threat to Japan's pro-Western orienta-
tion.
COMMUNISTS EXPAND TRAINING OF LATIN AMERICAN LEADERS. . Page 11
The Communists are trying to strengthen their anti-
American "united national front" strategy in Latin America
by increased training of Communist leaders locally and an
expanded program of travel and training within the Orbit.
SPECIAL ARTICLE. A SOVIET SURVEY: II. INTERNAL POLICY
AND THE SATELLITES . . . . . . . . . . . . . . . . . . . Page 13
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The ceremonies on the occasion of the 30th anniversary
of Lenin's death provided a marked contrast to those of pa3t
years, notably in the mild tone employed toward capitalist
countries,including the United States, in the lack of specific
charges of Western aggression, and in the almost complete neglect
of Stalin.
The main address was delivered by P. N. Pospelov, all-union
party secretary and theoretician, who devoted a comparatively
brief portion of his speech to international affairs. The
themes stressed the possibilities of peaceful coexistence with
the United States, of establishing more friendly relations with
England and France, and of expanding trade relations with
capitalist countries in general. If, as appears likely, tae
present regime is groping its way toward a theoretical position
more nearly consistent with current policy, Pospelov's rem_a:?ks
can be read as an ideological progress report.
Pospelov cited various pronouncements by Lenin as evidence
that current policy fits an orthodox mold. For example, t10
present regime's ostensible solicitude for the material wel.fare
of the population was said to have been shared by Lenin. ;cur-
rent agricultural policy is justified by reference to Lenin's em-
phasis on the need for strong ties between worker and peas.nt.
By increasing the economic interest of collective farm pea=,ants,
Pospelov stated, "the party and government are basing themselves
. , . on Lenin's directions." A similar technique was used to
buttress the current propaganda line which exalts the party
central committee and collective leadership while execratig the
"cult of the individual."
On the subject of East-West trade, Pospelov slanted h..s
discussion to imply that current Soviet trading practice would
also meet with Lenin's approval. He cited an obscure 1920 ,,tate-
ment in which Lenin had asserted that the USSR was prepared to
pay in gold and raw materials for "goods useful in transpo:-{a-
tion and production."
In contrast to last year's anniversary speech, Stalin was
relegated to a distinctly secondary place. This is seen most
clearly in allusions to Lenin's formulation of Soviet nationali-
ties policy and the theory of "socialism in one country," hitherto
credited to Stalin.
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In the East European Satellites, efforts of the Communist
regimes to obtain the support and participation of the party
rank and file and of the general populace in their new pro-
grams were reflected in the current high level of political
activity. The spate of party and governmental meetings and
elections recently held and to be held pointed up the quickened
tempo of major decisions to implement the new programs and to
deal with the serious economic and political difficulties being
experienced under them.
In late December and January the Polish, East Germa,
Hungarian, and Czech party central committees met in extra-
ordinary sessions to consider agricultural difficulties and to
propose legislation which was subsequently passed by unusual
national assembly meetings. The Czech party central committee
met again on 11 January to consider the critical problem of
lagging coal production, and the National Assembly was called
into special session on 14 January to deal with this problem.
Communist party congresses, scheduled in all the Satellites
except Albania during the first half of this year, can be ex-
pected to consider the achievements of the new policy.
As part of a program to emphasize mass participation in
the activity of the regimes, government elections were held in
Bulgaria and Rumania on 20 December, while Czech government
elections and Hungarian Workers Party elections are scheduled
for the near future. At the same time, all the Satellite govern-
ments with the possible exception of Poland are attempting to
reduce internal tensions by moderating their attacks on such
dissident elements as the kulaks, bourgeoisie, and Social Demo-
crats. Czech and Hungarian leaders in particular have iLdicated
a modification of "class warfare" by emphasizing the neec to
utilize formerly proscribed groups, particularly the intelli-
gentsia and kulaks.
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NEW VIETNAM GOVERNMENT HAS GREATER APPEAL
FOR NATIONALISTS
The Vietnamese cabinet sworn in on 16 January is a marked
improvement over its predecessors, in terms of professional
competence and in geographic representation. Its moderately
nationalist orientation, while disappointing to Vietnamese of
extreme views, is realistic in that it at least approaches the
popular concept of independence without unduly alarming tha French.
The new government, therefore, should in general hold more
appeal for the Vietnamese people than its predecessors and thus
appears better able to undercut Viet Minh pretensions of being
the guardian of national ideals. Buu Loc, who is Bao Dai's
cousin and long-time associate, can be expected to work smoothly
with the chief of state rather than engage in a constant struggle
for power as previous premiers have done.
The new government retains two of the strongest personalities
of the outgoing cabinet, notably Phan Huy Quat as defense minis-
ter and Le Thang as information chief. Both are members of
Vietnam's largest political party, the Tonkin-based Dai Viet.
New figures include Nguyen Quoc Dinh as foreign minister and
Nguyen Trung Vinh as vice premier in charge of agrarian reforms.
The former, who has served as a professor of international law
at the universities of Paris and Toulouse, is young, strongly
nationalistic, and believed to favor social reform and vigorous
pursuit of the war. The latter has been described as Vietnam's
foremost economist.
A popular departure from the pattern of previous cabinets
is that.a large number of the portfolios are now held by men
from Tonkin, the traditional seat of nationalism. In the past,
the premiership had invariably been awarded to a Cochinchit,ese,
and most cabinet posts had gone to men identified with nat:.ve
and French economic and bureaucratic interests.
Bao Dai in the past had appointed premiers who enjoyed wide 25X6
confidence among the French and who were themselves natura=_ized
French citizens. F_ I
The announced program of the new government consists mostly 25X6
of the usual generalizations on realizing national and social
aims. Strong emphasis is apparently to be placed, however, on
the "nationalization" of the Vietnamese army through further
French transfers of territorial and command functions, by
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discarding certain European concepts of warfare, and by
wider use of the Vietnamese rather than the French language.
Regarding French Union relationships, the new government, with
Commissioner General Dejean's endorsement, has insisted politely
but firmly that the French Union shall be a partnership of
equals. Buu Loc has assured the French that their economic
and cultural interests in Vietnam will not be threatened.
Although the new government marks a net improvement, cer-
tain liabilities are evident. Buu Loc is primarily a diplomat,
not a leader with a strong personal following. His government
for the most part is one of technicians, rather than of repre-
sentatives of political parties, and there is little prospect
that responsible parliamentary government will be introduced
in the near future. Several religious groups with strong polit-
ical influence are not represented in the cabinet. Although the
Catholics, through their native clergy, will probably support
the government, the warlord tendencies of-the Hoa Hao and Cao
Dai sects in Cochinchina may constitute a major nuisance.
The significance of the Buu Loc government lies in Bao Dai's
strategy for gaining independence. Faced with frequent reminders
from the French that their continued prosecution of the war would
be impossible unless nationalist demands were moderated, Bao Dai
has avoided demanding sweeping concessions while he lacks the
strength to back them up. Instead he has begun the formation
of Vietnam's political institutions with the apparent intention
of assuming a more active leadership as these institutions in-
crease in strength. The appointment of Buu Loc, who is neither
pro-French nor violently anti-French, probably marks the end
of the period during which Bao Dai took the side of pro-French
politicians against those called ultranationalist by the French.
Bao Dai's current strategy is to adopt a somewhat sts_ffer
policy toward France, while holding in reserve the threat of a
government so nationalistic as to force the French to reconsider
their policy. The present government is not calculated to have
the widest possible support of Vietnamese nationalists, but
it does have greater drawing power than its predecessors. Such
a moderately nationalist government may ultimately prove a_
realistic compromise between the often conflicting objectives
of appeasing the French and undercutting the Viet Minh.
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READJUSTMENTS IN THE EAST GERMAN MILITARY BUILD-UP
East German plans for a rapid military build-up were
sharply cut back during 1953 because of deteriorating economic
conditions and doubts of the reliability of the armed forces
raised by the June riots. The first indication of a modi-
fication in plans was noted in the early months of 1953,
when growing financial difficulties led to a reduction in
allocations for military construction. The new economic
plan of early June apparently provided for a reduction in
planned military expenditures in order to improve living
conditions.
At an early stage of the riots, Soviet authorities
became convinced that the East German army, or KVP, would be
incapable of effective action even as an internal security
force. Both the extent of the uprisings and the poor perform-
ance of the KVP apparently contributed to the decision that
plans for military expansion which had already been modified
on economic grounds were now to be further curtailed for
political reasons.
It is not possible, on the basis of present evidence, to
determine the weight of each factor in bringing the armed forces
to their present status. It seems clear, however, that actions
taken in late June and early July -- including the suspension
of recruiting, the purging of "unreliables" from the armed
forces, and the suspension of flying activity in the VPL,
the air arm -- were a direct result of the political unreli-
ability evidenced during the civil disturbances.
In the two months during which these measures were in
effect, revised plans for the military build-up were evolved.
It was not until the last months of 1953, however, that tha
extent of the changes in the organization and activities of
the various services became manifest.
At the end of 1953 tactical units of the KVP comprised
a Corps North at Pasewalk and a Corps South at Leipzig, each
with three subordinate divisions, and an independent mecha-vized
division at Potsdam. Troop strength was about 100,000, th..
same as at the beginning of the year. Current strength of the
KVP is thus approximately fifty percent of the goal planned
in late 1952, when Ministry of Interior reports increasing
allocations of food and money indicated plans to double it-3
size by the end of 1953. At the same time there were indi-
cations that the KVP would reach a strength of four corps
and twelve divisions during this period.
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The principal effect of the revised plans on the VPI,
has been the cessation of training in jet aircraft. Pricr
to the suspension of all flying following the June riots, it
appeared that the VPL was to be developed into an effective
Satellite air force, and approximately 100 MIG-15's had been
delivered to East German airfields for eventual use by VPL
units. The continued restriction of flying, which was
resumed in early September, to a small number of piston-
type aircraft shows the extent to which earlier plans for
the VPL have been altered.
The changes in military planning appear to have had
little effect on the East German navy, or VPS. Its primary
function, as in the past, appears to be the maintenance of
security in coastal waters. Although organizationally a
miniature of the Soviet navy, it is equipped only with
patrol, minesweeper, and service vessels. Little is known
of plans for the VPS, but any further build-up will probably
emphasize coastal defense activities ashore.
Although the planned expansion of the armed forces has
been significantly curtailed, East German authorities are
continuing serious efforts to improve the combat effectiv3-
ness of the KVP. The organization of additional tactical
units, the receipt of new Soviet equipment, and the launcaing
of an intensive training program reflect a growing capability.
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YOSHIDA GOVERNMENT BEGINS AUSTERITY PROGRAM FOR JAPAN
The long-needed first steps toward curbing Japan's un-
sound economic boom are now being taken by the Yoshida govern-
ment, primarily through its proposed "austerity budget" for
1954-55. If a depression is avoided and Yoshida's program
results in lower prices, the present severe inflation will be
alleviated and a potential threat to Japan's pro-Western
orientation removed.
Japanese wholesale and retail prices, fairly stable in
1952, moved upward again in 1953 and recently surpassed the
peaks reached in the fall of 1951. Fed by rising wages, deficit
financing, expanding credit, and special dollar receipts, the
inflationary change was highlighted by consumer prices, which
increased over 12 percent in 1953. The inflation was charac-
terized as a "consumption boom" because of such developments
as the 25-percent increase in 1953 department store sales over
1952 and decreased savings between April and September of 1953,
even though incomes were up. Japanese wholesale prices in-
creased in 1953 at about one half the rate of retail prices,
but also topped their previous peak.
These developments were important in the further deteri-
oration of Japan's foreign trade position in 1953, which :yaw
merchandise imports almost double exports and the accumulation
of a record $1.1 billion trade deficit. The yen was quoted on
international markets at a discount of around 20 percent eider
its official value, foreign exchange reserves decreased by
almost 20 percent, and there was an increasing resort to sub-
sidies, dual price systems, and cartels in an effort to p:'omote
exports. A general price rise is in prospect for 1954 beeeause
of scheduled increases in rice prices, rail and utility charges,
and wages.
Firm government action to reverse this trend, howeve-, is
apparently in the offing. The major present effort is the
drafting of an "austerity budget" for 1954-55 which aims att a
reduction of price levels by from five to ten percent by ,'e-
trenching on most government expenditures. In addition, he
Bank of Japan has tightened restrictions on lending, and the
government has adopted a policy of limiting the import of
certain consumer goods. Plans are also under study to restrict
private credit and to change the tax structure to penalize
consumption and encourage saving.
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Premier Yoshida is chiefly responsible for this austerity
drive. The recent return of former dissidents to the Liberal
Party has strengthened his hand, and he is also supported by
the press and by financial circles. While the necessity for
such action is generally recognized, intense opposition to
specific remedies is being encountered. Yoshida, however, is
determined and recently replaced the ministers of international
trade and industry and of welfare, both active in opposing budget
cuts, with men believed more amenable to his program.
If the current boom is followed by a severe depression,
Japan may feel that its policy of economic cooperation with the
West has failed and may turn toward the Communist bloc as an
alternative. But if the planned austerity program is successful
in lowering prices without a depression, in making exports more
competitive, and in putting Japan on a more self-sustaining
basis, it will tend to solidify the country's pro-Western
orientation.
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Growing attention to the indoctrination of Latin Ame-!~can
Communist leaders is reflected in the rising attendance of Latin
Americans at international front meetings in Europe, in ii-
creased travel and study within the Soviet Orbit, and in in-
tensified training locally within Latin America. This effort
is probably part of long-range plans to broaden and stren411hen
popular movements directed against the United States.
Since last July, about 900 Latin Americans represent;ig
all 20 republics and several European colonies have trave'.oyd
behind the iron curtain. Over 140 visited the Soviet UniD1.
The travelers included Communist front officials, party l~ders,
delegates to front meetings, students, and a few prominent non-
Communists invited for propaganda purposes. Some are taking
training courses to last up to two years.
Most top Communist leaders in Latin America have received
training or indoctrination in the USSR. For example, the party
chief in.Guatemala, Jose Manuel Fortuny, who first visitei the
Orbit in 1949, is only one of several Guatemalan Communist
leaders who have recently returned from Moscow. Dionisio Encina,
secretary general of the Mexican Communist Party, who visited
Moscow in 1952, has just returned from a course in politi--al
orientation at the Lenin Institute.
Typical of the lesser leaders undergoing this training is
Jorge Arellano, an Ecuadoran reportedly receiving two year, of
schooling in Eastern Europe as part of his "grooming" for ;i
vice presidency in the International Students Union. Pab_:a
Ovidio Mesa, a Cuban negro who has been directing Communi5
activities among sugar workers in Camaguey, is scheduled to
attend the Lenin Institute. Other labor leaders reported1
receiving Communist training in Europe last year included ;ine
Guatemalans, a Panamanian, and possibly three Bolivians.
On their return to-Latin America, these leaders join
the effort to expand Communist indoctrination on a local level,
Thus,in Mexico, WFTU vice president Lombardo Toledano is ?e-
ported planning to use two unionists who studied in Budap=>,;t
last summer to help organize a new labor front. In Cuate.la,
the Jacobc Sanchez school, reactivated last February as a?.
"'internal party school for cadres," recently announced try,`.
31 "middle level" officials and 17 cell leaders had conpl-':ed
a course.
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In Brazil, where the Communist party has been building up
a school system throughout the country since 1950, the party
has stepped up its political indoctrination in Sao Paulo and
recently established there a primary course for Communist sympa-
thizers and an advanced course for party members. In Chile,
preparations were under way last September for a series of in-
tensive courses and a self-study program.
Delegates to the international front meetings have also
been active in spreading pro-Soviet and anti-US propaganda.
For example, Brazilian delegates returning from the World
Medical Congress in Vienna last May gave a series of lectures
in small towns. Guatemalan delegates to the World Youth Con-
gress in Bucharest last summer are now helping plan a Central
American Youth Congress for mid-1954.
The present emphasis on travel and training is directed in
part toward gaining the sympathy of liberal and anti-American
elements. For example, the non-Communist 25X6
president of the Chilean Chamber of Deputies was invie to
make a five-week trip to the Orbit. On his return in late
December he announced that he had discussed copper sales in
Moscow and that Chile would receive "great advantages" from
trade with the USSR. In Mexico, Lombardo Toledanovs projected
labor front is designed to appeal to nationalist, pacifist,
and anti-imperialist sentiment.
The Guatemalan Communists are also continuing to build a
popular front. In Brazil, similarly, the party's manifesto
of 1 January, which states that the country "is not now ready
for socialism," calls for "a broad front of all social classes,"
and asks for the support of industrialists and bourgeois in-
tellectuals "whether Communist or not." In the other countries
as well, the Communist line clearly reflects the strategy of
the "united national front" against the "economic imperialism"
of the United States. This strategy, which has received renewed
emphasis since the 19th Soviet Communist Party Congress of 1952,
is well adapted to Latin America.
Failing restrictive action by the other western hemisphere
powers, the subsidized travel of Latin Americans to the Orbit
is likely to increase. At the Tenth Inter-American Conference
at Caracas in March, the United States will attempt to gel
the other countries to introduce controls on this traffic and
on other Communist activities. Opposition to such measures,
however, has already been hinted by a number of the Latin Ameri-
can nations.
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A SOVIET SURVEY:
II. INTERNAL POLICY AND THE SATELLITES*
The major changes in Soviet policy since Stalin's death appear
to be the result of a new assessment of the Orbit situation in
relation to Western strength and a new concept of how the Soviet
leaders can best achieve their over-all purposes, which remain the
same as those of the previous regime.
Stalin apparently believed in maintaining strong pressure
against the West and in building short-range strength for the Orbit,
in terms of heavy industrial output, war materiel, and military man-
power. The Soviet people were forced to build and maintain this
military power with a minimum of satisfaction of their own needs.
Stalin's program necessitated heavy armament expenditures, extreme
emphasis on heavy industry, and the neglect of consumer welfare was
rationalized as a necessary and acceptable sacrifice to security.
This emphasis was of course increased by the logistical demands of
the Korean war.
The shifts in policy since Stalin's death are partly a normal
consequence of the change in personalities and certainly in part a
result of the end of the hostilities in Korea. In addition, how-
ever, the present leaders apparently rejected the Stalinist cam-
bination of constant external pressure and short-run strength
because they realized that the old policy was solidifying the c,:ap-
italist world instead of exacerbating its rivalries. In addition,
they probably felt that it led to an Orbit economy so unbalanced
that it retarded long-range progress. They may also have lacked
confidence that they could deal with the internal strains and inter-
national risks which the Stalinist policy entailed.
The Soviet leaders are now concentrating on a more balanced
program, designed to provide stability and increasing strength over
the long run within the Orbit, as well as on the reduction of inter-
national tension. Such a program makes possible some satisfaction
of popular demands and the present leadership apparently attaches
more value to popular favor as such than did its predecessor. How-
ever, the new policies probably stem less from apprehension over
* This is the second of two articles. The first one dealing with
Soviet foreign policy appeared in the CIR dated 21 Jan 54.
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internal strains and weaknesses than from a belief that these
stresses are no longer necessary or desirable. The new leaders
apparently feel that their control will be further stabilized and
strengthened by concessions to remove popular grievances, and they
are attempting to increase over-all efficiency by streamlining and
rationalizing their control apparatus.
A major shift has been ordered in economic policy both in-
side the USSR and throughout the Orbit. The previous extreme
emphasis on development of defense industry is being modified in
favor of a more balanced program. Compared to the original plan,
output of consumer goods is to be rapidly increased and the share
of the populace in gross national product is to be raised. This
contrasts with a continual decline in the share indicated under the
old plan.
The police terror of the Stalinist regime is being somewhat
de-emphasized, as exemplified by the treatment of the Beria affair.
While Beria's arrest and trial would have been a logical sta=?ting
point for extensive terror, there has been no public purge iLke that
of the 1930'x?
This course has not been pursued at the expense of centralized
control, however, as evidenced by the failure to revise the harsh
Stalinist nationalities policy. This is at variance with other
attempts to liberalize Stalinist procedures and seems to spring
from fear that concessions to minority nationalities might encourage
a local sectionalism which could weaken centralized control and pro-
vide opportunities for individual empire-building.
Adoption of the new policy would have been unlikedly if he
USSR expected to be involved in war in the next two years. The
new plans will probably not be fulfilled, however, particulArly in
agriculture. Official statements have admitted lags in performance
in .other aspects of the program as well.
The program calls for sharp increases compared to the original
plan in the availability of consumer goods in the rest of 1953 and
in the two following years. In place of the increase stipulated
in the original Five-Year Plan from retail sales of about 300
billion rubles in 1950 to about 510 billion in 1955, the govccrnment
now calls for sales to reach some 600 billion in 1955. The rate
of increases is to taper off somewhat in 1956.
The bulk of the additional consumer goods is to come from
domestic production. A small proportion will come from increased
imports and probably from some releases from Soviet reserves and
inventories. These latter measures are significant in bridging the
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time gap between planning of resource reallocation to boost
domestic production of consumer goods and the actual appearance
of quantities of those goods on the market.
Expanding agricultural output is the most important phase
of the new program. The importance attached to it is indicated by
the promotion of leading agricultural administrators in the hier-
archy of the USSR and some of its republics. To encourage in-
creases in the near future the government has raised from two to
five times the prices paid to collective farms and farmers for the
delivery of livestock, milk, vegetables and fodder. Delivery norms
have also been reduced and credits advanced to collectives.
Of longer range significance for agricultural development are
the measures to check the movement of labor from agriculture to
industry and to train technical personnel. Planned investment in
agriculture has been very sharply increased. Preliminary planning
is under way to procure agricultural machinery from the Satellites
and import capital goods from the West to expand Soviet production
of agricultural machinery. The government has called for much
greater support to agriculture by the machine building, chemical,
electric power, transport and construction industries. Even the
Ministries of Defense Industry and Aviation are to manufacture
limited quantities of agricultural machinery.
To increase production of consumer goods, the government has
stepped up investment in light industry and raised its raw materials
priorities. Heavy industry has also been directed to expand its
manufacture of consumer goods. The Soviet domestic trade network
is to be swiftly enlarged through the construction and staffing of
large numbers of new stores and warehouses. Moreover, consumer
purchasing power this year has been substantially raised. Reduc-
tions in consumer goods prices were much larger than in immediately
preceding years, and the state "loan" collected from the populace
was only half as large in 1953 as in 1952.
The effort to implement the new program has entailed a leveling
off in defense production and a shift in heavy industrial output
to provide larger amounts of machinery and equipment for consumer
goods industries and agriculture. Selective cutbacks may be forth-
coming in production of those conventional armaments already stock-
piled in large quantities.
The Soviet leadership may have revised the pattern of military
expenditures. The former pattern provided the armed forces with
large stocks of conventional weapons after World War II and per-
mitted modernization with new equipment at a moderate rate in the
ground and naval forces and more rapidly in the air forces.
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It now seems likely that the USSR has decided on some reduction
of the effort to amass weapons of existing types. This decision
may have involved a shift of military allocations from existing
production plans to the development of new weapons. Over-all
annual military expenditures could be limited to much smaller
increases than in past -years without sacrifice of Soviet military
capabilities, and still permit planned increases in expenditures
elsewhere in the economy.
No reduction in existing military strength has been revealed
to date. Moreover, sensitivity regarding the military security
of the Soviet Orbit and emphasis on a high state of preparedness
:continue to characterize all current training activity.
In the East European Satellites, the "new look" made its
appearance in East Germany on 9 June when the politburo of the
Socialist Unity Party announced a series of concessions to peasants
and industrial workers designed to improve labor productivity by
replacing the former emphasis on coercion with a program of in-
centives. Despite the widespread riots among East German workers
which followed the publication of this new policy of moderation,
other Satellites gradually followed suit until by 5 November all
had announced similar shifts in their domestic economic policies.
The common denominator which underlies the new policy through-
out the Orbit is the shift in emphasis from the rapid expansion of
heavy industry at the expense of food and consumer goods production
to a more moderate and balanced development of the national econ-
omies within the capabilities of the various countries. One of
the chief economic difficulties necessitating the "new look" gas
apparently the absorption of the rather limited financial resources
of the Satellite regimes by the industrialization programs, which
had been significantly increased in 1950 and 1951 over the originally
announced Five Year Plan goals.
Several of the Satellite leaders admitted in policy statements
that the industrialization aims had exceeded their capabilities
and that they would henceforth base their economic development on
local potentialities and rely more on imports of capital equipment
from other parts of the Orbit. In every country the new policy
called for planned capital investments to be reduced and the rate of
expansion of heavy industrial production to be slowed. Some major
long-range construction projects were canceled or cut back. For
the most part, however, these were programs which were not essential
to the economic well-being of the Orbit. The Communist regimes
promised to appropriate the funds thus made available for investment
in agriculture, light industry and housing.
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Low labor productivity, raw materials and power shortages,
and inefficient distribution caused chronic underfulfillment of
the long-range economic plans which was particularly serious in
the more highly industrialized northern Satellites. To overcome
this, the new economic programs in East Germany, Czechoslovakia
and Hungary called for apparent sharp increases in production of
electric power, and especially in Czechoslovakia, of coal anc.
metallic ores. Some of the Satellites apparently hope to increase
their raw materials supplies through increased trade with nor-Orbit
countries as well. Transportation and marketing reforms werc planned
to improve distribution.
The measures by which the Satellite governments hoped to regain
the full support of the urban workers included lowered price; on
foods and consumer goods, promises of improvements in the qua.ntity
and quality of consumer goods, improved distribution and increased
investments for the construction of sorely needed urban housing.
Price reductions were decreed in Hungary, Czechoslovakia, Bulgaria,
East Germany and Poland. There is evidence that flour and meat
were released from stockpiles in East Germany, Hungary and Rumania
to offset the extreme food shortages of last winter and spring.
However, work norms apparently would not be reduced. F(=].lowing
the 17 June riots the East German government rescinded general norm
increases effected in April, but on 17 September Deputy Prime Min-
ister Ulbricht stated that selective increases could again be ex-
pected. In the other Satellites, pressure on the workers to in-
crease production continued unabated.
The emphasis to be placed on the rapid increase of agricultural
production was an outstanding characteristic of the new economic
policy throughout the Satellites. Past inadequacies of both food
and industrial crop production were readily admitted by the Satel-
lite regimes. Shortages, especially serious in Hungary and P:he
Balkans because of the 1952 drought, had been aggravated by peasant
apathy and inadequate field work. In East Germany, Poland, Czech-
oslovakia and Hungary, peasant resistance to the Communist agricul-
tural policies had increased this year as a result of the stepped-up
collectivization drive which took place during the last half of
1952 and the first three months of 1953.
In an effort to overcome peasant resistance, specific con-
cessions were promised to both collectives and independent farmers
and large sums were scheduled to be allotted to the improvement of
agricultural techniques. The concessions consisted mainly of can-
cellation or deferment of debts, reduction of taxes in some of the
Satellites, reduction or "revision" of agricultural quotas, increased
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prices and bonuses for crop deliveries and, particularly in
Hungary and Czechoslovakia, a renewed pledge that pollectivi -
zation was to be solely on a "voluntary" basis. Large sums of
money were to be allocated for the extension of credits to both
collectives and private farmers, to permit the expansion of
mechanization and the purchase of fertilizer, seed, livestock
and equipment. In most cases these concessions have favored the
collectivized area in order to convince farmers of the desirability
of socialized agriculture.
A slackening of the collectivization program was announced,
either directly or by inference, in all the Satellites except
Bulgaria, which is also the only country to neglect the indeaendent
farmer in its promises of concessions. The reason for this may be
that whereas in the other Satellites the regimes depend on tie in-
dependent farmers for 50 to 90 percent of the agricultural pro-
duction, Bulgaria has collectivized over 60 percent of all arable
land.
The ultimate Communist goal of collectivization of all land
was not forsaken, however. This was made particularly clear in
Hungary, where.a large number of peasants apparently misinter-
preted Premier Nagy's promise on 4 July 1953 that they could leave
the collectives. Some began to withdraw immediately. The resultant
threat of wholesale withdrawals forced the regime to modify its
emphasis on incentives and relaxation of pressure on the peasants,
and to resort to a policy of strong discrimination in favor of col-
lectives and threats to those peasants who intended to withdraw.
On 28 September Czech president Zapotocky indicated that his govern-
ment had no intention of permitting wholesale withdrawals from the
cooperatives.
With minor variations, Hungary, Czechoslovakia and Albania
imitated the USSR in streamlining their governmental organizations
and reshuffling political leaders. There was no evidence tha.t the
reorganizations were associated with Beria's fall or that, et.ept
in East Germany, they represented a purge.
The professed Soviet policy of detente in foreign affairs was
also adopted by the European Satellites. Apparently this detente
does not include either West Germany or the United States, which
after a short period of relaxation are again the targets of vili-
fication and internal "vigilance" campaigns.
The Satellites were not forced to institute a new economic
policy because of fear of imminent rebellion. Political control
remains securely in the hands of the regimes and despite symptoms
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of unrest, no organized resistance movements exist with the possible
exception of East Germany. It is apparent, however, that the
industrialization and socialization programs ordered by the USSR
had exceeded the financial, material and human capabilities of
the Satellite economies. The coercive measures by which the
regimes had tried to force increased industrial and agricultural
production from their citizens and the lack of concern for the
wo'rkers'well-being had caused considerable apathy or disaffection,
to the detriment of both the economic and political programs
CO f TIM
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