PRINCETON CONSULTANTS MEETING OF 18-19 NOVEMBER1954

• Document Type: FOIA
• Collection: FOIA Collection
• Document Number (FOIA) /ESDN (CREST): 02922970
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 8
• Document Creation Date: December 28, 2022
• Document Release Date: August 9, 2018
• Case Number: F-2013-02252
• Publication Date: December 4, 1954

Consultant's
EdgarfM. *over*
man y;.: 10 3 3 Prall*
Measly
:0118P4' R. S*Aror
Willtiet*L. Langer**
Geproi:A. Lincoln**
Wil1i4th H. Dunham"
bTiL Reiteel**
Board of;Nritional Estimates
" DeFareit Tan Slyek
I. TREAMEllf OF THE SOVIET EGO
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CENTRAL INTELLIGENCE AGENCY
OFFICE OF NATIONAL ESTIMATES
4 Daeszaber 1954
STAFF MEMORANDUM NO. 92-54
SUBJECT: It.incetint Consultants! Meeting of 18-19 November 1954.
Partieitsubs
cildnth ORR
AbbotSMith Rush Greenslade*
Leo S�weeny*
Howard Wiedemann
Et3MMemberipen�
NIE
--$111:1-31nadar**
Itobert W. &see*
AND IN FUTURE NEI
1. The bulk of the morning session on 18 Noveuter� covered here
only briefly, vas devoted to Kelly technical and specialized aspects
of measuring Soviet ,GNP, particularly the methodological problems in-
volved in getting behind ruble values in determining their meaning
under Soviet conditions, and in making valid international comparisons.
Some of the peculiarities of the Soviet price structure were pointed
DOCUMENT NO.
18 November only
19 November only
NO CHAt4GE IN CLASS. Ll
CI DECLASSIFIED
CLASS. CHANGED TO: TS S
NEXT REVIEW DATE:
AUTH: HR 70.2
10 REVIEWER
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out: the distortion resulting from large turnover taxes, the relatively
small role that prices in the USSR play as an allocation mechanism, mad
the wide disparities between the pries struoture of the USSR and the
West. It was shown that these factors greatly complicate the task of
finding strictly comparable neasures of Soviet and Western economic ac-
tivity. It was generally agreed that since there was no ideal set of
prices valid for all economies an effort should be node to present dif-
ferent breakdoene of Soviet GNP in future estimates one using ruble
values and representing Soviet relationships, the other using dollar
values and representing US standards. The former method would be helpful
in determining economic trends, the latter in estimating capabilities.
The Soviet CirWARtea
2. In the afternoon session the discussion ranged over the whole
area of Soviet economic development, and attention was focused on methods
of improving the economic analysis in future estimates. liose3r,made the
recommendation, which was supported by MiLlIkare that future papers should
examine nore closely the effect on the Soviet growth rate of alternative
allocations of investment. Milliken added that more attention should be
paid to the impact of different patterns of growth on Soviet military po-
tential and to the more difficult problem of determining the relation-
ships between living standards and economies growth. To illustrate his
point, Nosey stated that the transfer of resources to the small and under-
developed light industrial sector might offset any possible decline in the
growth rates of other industrial sectors, and that, consequently, there
might not be an over-all decline in the growth rate of Soviet GNP between
2956-59, as vas estimated in NIS 11-4-54. Sweenr countered this argument
by pointing to the relatively manlier capital returns in Soviet light
industry then in heavy industry, as well as to the tighter manpower situ-
ation during 1956-59.
3. lelliken explored some of the methods that could be used to esti-
mate the effect of alternative patterns of investment,, He supported
Sweeny's proposal that more attention be devoted in futere estimates to
examining the capital structure of the Soviet economy, the seotoral break-
down of capital astetse and the composition of capital Investment, par-
ticularly the extent to which the investment flows to the various sectors
of the eceneey were competitive or complimentary. =sea argued that
this kind of structural analysis could provide a basis for determining
the relationships between investment flows and resultant increases in
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output and for estimating the effects of various alternative allocations
of investment. Be made the point also that input-output analysis was
superior to national income analemis in solving this kind of problem.
(It should be noted in passing that ORR has initiated a study of Soviet
capital structure, but it will probably not be completed before the prep-
aration of the next Soviet estimate.)
IIISA-MELIEURE
4.. Smith expressed the need for a clear, definite, and agreed esti-
mate of SG;NE agricultural capabilities. In this connection, letollikan
suggested that future papers should contain more economic geograp4y in
order to ascertain the inherent physical capabilities of Soviet agriculture.
He suggested that attention be directed also to the question of the prob-
able Soviet reaction to continuation of the agricultural leg. The possi-
batter of a shift in the pattern of Soviet comparative advantage in trade,
from agricultural products to capital goods, should not be overlooked in
future papers. Eclegg:cheerved that, with the exception of the program
to increase fertilizer output, present Soviet agricultural policy appeared
to be concentrating on short-tern goals, as evidenceihythe land expansion
campai . Be noted that the present tactic in the new agricultural areas
was probably regarded an the most expedient amthod of rapidly building up
a cushion of grain reserves.
Economic
5. To a (motion raised by Greenslade about the economictmeNextund
of Soviet military capabilities, Millibukreplied that examination of ag-
gregate economic costs or effects of Soviet military effort was the �kW"
stone of the intelligence archP regard to this problem, Nil-liken
noted, the vast economic research program now in progress was not very
meaningful. He asserted that research va2 required an such subjects as
the recuperative eapabilities of the Soviet economy' and Soviet 000210010
capabilities to support a major gramXtoffecelve ever both the short and
long rum. rbagx.suggested that an Improvement could be made in the com-
parisons of Soviet and Western nilitery effort. Be recommended that our
estimates compere the 'military-technological thrust' of the USSR and the
West, and not the pay and nainteuence of troops. eee pointed out that
such an estimate had been attempted by ORB on the Mres of estimates of
Soviet military end-item production but that inconsistencies remained
between the estimates of Soviet militareeprocurmenft based on budget
analysis and the estimates of militszy end-item production.
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CO NTIAL
6. Strayer felt that we could not yet be sure of ratification.
While the individual obstacles might not be too great, although the
Saar problem alone would scuttle ratification, their cumulative effect
might be formidable. Unels weed, adding that Afienaumes death could
have a deoisive effect; also what President Eisenhower we Nemdes-Tranoe
said or did not say about a unified Gennaey. Both Langer and Denham felt
that the importance to the Germans of a unified Germany was played down
too much in the paper; the unification question definitely affects rati-
fication prospects. There was general agreement that no politician would
dare to oppose unification -- everyone was for it. But in the hands of
a demagogue, this issue could be a potent threat to ratification, and
also a running score in the future. Lava, felt the Paris Accords would
go through, since Adenauer would not have signed then if he thought he
could not get them through the Bundestag. Although the Consultants mere
apprehensive over the many stumbling blocks, the majority felt that the
Accords would be ratified.
Wee.....%LeNge 3.--MMS.).00111
7. age said it mould not be possible for the new army to adopt
the role of the old one. The heart of the control lies in the NATO and
=ties; also the watch dogs in the Bundestag would be vigilant. The
generals may try, but it will not be possible to repeat the past per-
formance. ...22.11u1s,Va and Dunham suggested that we might have to watch the
civilian element more closely than the military. It was also suggested
that the real problem might be a lack of enthusiasm for rearmament, rather
than renascent militarism.
S. Beitzel agreed Mith this, and said that even if both the gov-
ernment and the army were aggressive, the international situation, was
entirely different, particularly from 1938-39. He commented that it MOB
the international situation in 1938 that offset the German military in-
feriority vis-a-vis the Czechs, and gave Ultler the -confidence to act.
9. Lincoln suggested that if each class of conscripts were given a
dose of unification propaganda onceamonth in anI&Eprogram it mighty.
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in tine, time, offset a large segment of the population. Mostly argued,
however, that while the Weimar Army had been responsible only to Hin,
detburg as chief of state, the new my would be responsible to the
cabinet and hence to parliament. There would therefore be a subjection
of the military to civilian control never before achieved in German
history.
10. Impl, considered that it was not so much the army per se,
but the government plus the army' that was important. Bonn was likely to
bring continuous pressure on the West, particularly over recovering East
Germany and the eastern territories. Idamegn and Reitzel agreed. In
their view the new Germany would not necessarily be logical about this
issue; moreover, the Germans would be in a position to precipdtate a
crisis between NATO and the 1)S& and the fact that they would be male
to control the situation thereafter mould not deter them. Lamer pointed
out that the new Germany might want to make a deal with the Bloc -- a
possibility would be Western concessions in the Far East in return for
unification. All agreed that Germany would be a dynamio element in the
Western coalition and very difficult to control. This possibility that
Germany might drag NATO eastwards was what really frightened the UK and
France.
21. Mosey agreed in general, but pointed out that since there is
no really practical way of achieving unification and since all parties
actually would agree on the question once the Paris Accords were ratified,
the issue would simmer down. au= disagreed, pointing out the use
which a demagogue could make of the issue,
22. It was agreed that since the Soviet conditions would be so dis-
advantageous to Germany, the latter would not make a deal on unification.
Smith said that a permanently divided Germany would be a frustrated
country; this would be fertile ground for another Hitler.
The Possibility of a Grand Coalition
13. Dunham pointed out that Adenaner had said that a Grand Coa,
lition would leave the voter little for which to vote as in France
and Italy. Dunham felt that a Grand Coalition would jeopardize democracy.
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It any eese he had strong doubts an the strength of democracy in Gemmel
tkepreeent goveremeet had been in operation for only five years, the
Weimar Republic lasted only 22 years, and seventeen years of German deme
ocratfee experience etas not much to go on.
14. The main conclueions of the discussion wares
a. Although there are many stumbling blocks, the Paris
Accords would probably be ratified.
lb. The German Army per as was not so nuch to be feared
as the Bonn government plus an army. This (mai-
nation would bring continuing pressure to bear within
the Western coalition.
c. Unification would continue to be a goal for all parties.
d. The Bonn government's drive for unification would be
the most trying problem for the Western coalition.
(Wsely disagreed.)
e- A Grand Coalition is =likely. But if it did come,
there would be no change in foreign policy.
III, YUGOSLAVIA
15. Prose" stated that the most important fact of the new era of
Yugosley-Bloc relations was that it was not the normalization of re-
lations between Communist Parties, but between states. Then turning to
the question of Tito's policy, he said that Tito's response to Bloc over-
tures was an effort to be flexible and retain freedom of movement.
Another aspect of this policy was Titols desire to buildup better re-
lations with non-imperialist, noneCominform states each as India and
Burma. It is part of his search for a sterdieg ground that is not clearly
capitalistic in the US sense, and at the same time is not Cominformist.
It is not a Third Force, but is a search for a place outside the Gamin-
form. Langer felt that Tito saw the situation as an opportunity to be a
sod/atom between East andWest.
16. said that Tito did not feel that there had been a basic
change in Kremlin policy, but that the Soviets want a temporary period
of peaceful coexistence. He is tele;eg advantage of the lull to develop
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a separate niche for himself. ',Weever, the softening of the Soviet
attitude toward Yugoslavia pays internal dividends -- it will enhance
his internal !vestige. In coy/elusion, he said that Tito was not itwi
East and West; he is a variant an the Western position. If he were
really between East and West he would have to give up the Balkan Al-
liance.
� 17. &yam said that, in the event of war, Tito mould carefully
examine the odds and then make his terms, if necessary with the Bloc.
Lincoln asked what Tito's motive would be in returning to the Bloc; he
added that in his opinion, no, motive was apparent.
18. Neselv said that the Nremlinwas probably aware that its over-
tures to Tito would generate suspicions of him in the West. Langer and
Vesely felt that it was just another facet of the Soviet peace offensive.
19. Nos& then turned to the internal effeot of the new
Now that the big foreign bogey is gone, the partyragrwish to push ahead
with its program in the countryside. But the bulk of the population,
utich is anti-Communist, will want more freedom. Ulm Tito may have in-
ternal trouble, particularly since he has thus far failed to solve Itgo-
slavia's most pressing economic problems.
20. The Consultants mere al/ agreed that it was unlikely that Tito
mould return to the Bloc/.
IV. SOME numamtuasT_AsIoNq
21. Lincoln said he felt -that Nehru's declaration that India's
interests go to the eastern frontiers of Laos and Cambodia sounds reason-
able. Nehru must sense that if the Chinese Communists overflow into the
rest of Southeast Asia, India's prestige might be greatly reduced. It
was not a military vestion, except insofar as wiilitary force lends it-
self to a posture of power.
22. Lamer said that while the Viatlenh will do their best to get
South Viet Ma, they will go very slowly on Laos and Cambodia. Strayer
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agreed; be doubted that Communist Chimmould want to acquire these
remote areas if doing so would alienate India.
23. The Consultants agreed that France would not fight for South
Vietnam.
24. Langer urged that a study be made to aecertainwhetherthe
close-out in Korea had led to a. backsaash in Indoohina. Did the re-
lease of their forces in Korea permit the Chinese Communists to give
increased military aid to the list Minh, or was the impact of the Korean
truce on Indochina marelypolitical? He suggested that this question
offered an opportunity for ONE to test the validity of its estimates,
something it ought to be doing periodically, and particularly whenever
an Intelligence problem, as in this case, was closed out by the movement
of events.
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