CENTRAL INTELLIGENCE AGENCY OFFICE OF RESEARCH AND REPORTS The Role of ORR in Economic Intelligence

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82-00283R000100180017-0
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 22
• Document Creation Date: November 9, 2016
• Document Release Date: July 21, 1998
• Sequence Number: 17
• Publication Date: August 1, 1951
• Content Type: REPORT

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INTELLIGENCE AGENCY'
OFFICE OF RESEARCH AND REPORTS '
The Role of ORR in onomio Intelligence
1 August 1951
NW. 411611
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COBTENTS
I. Introduction --What Is Our Problem? . . . I
A. Why does the solution of our national security problems
depend in part upon adequate foreign economic
intelligence? 3.
H. What is economic intelligence? ? 0 ? 0 . ? ? . ? ? 3
C. What is the role of ORR in foreign economic intelligence? . 5
D. Peculiarities of economic intelligence concerning the
Soviet Bloc 6
II. General Methods Hoy Shall We Go about It? . . a
A. The dilemma of the clamorous custecer versus the basic
study ? ?0?0?.? ?00 ?too?00000 o.** *08
B. Hey do we determine basic research priorities? . 040 ? 0 9
C. The Method of Successive Approximations . . 0 ? . 11
D. Problems in applying the method . ? OOOOOOOOO 12
III. ORR's Production Program 0 .
a?
? ??
So
? ***
**
14
A. Ways of describing our ignorance . . . . So . . 0 . ? . 0 . 14
B. The need for more study of goals, plans, and organization . 13
C. The need for more systematic study of Soviet military
Intentions as revealed in economic events . . . 0 . * . 0 0 16
D. The need for more study of the relations among industries . 16
E. The need for more study of the economic requirements of
military operations 0 ********* . 0 . . ? ? 00 0 . 18
P. The need for more study of particular industries,
commodities, and services. ***** ..??.??? . . . 18
G. The need for more study of technical aspects of Soviet
Industry . ******** 9 atia 000 ? 0a? 0 oae a 19
R. The need for more stair of the interdependence of arm, . . 19
I, The need for more study of the index number problem . . . . 20
WARNING
This document captains information affecting the national
defense of the United States, within the meaning of Title 18?
Sections 793 and 794 of the U.S. Code, as amended. Its trans?
mission or revelation of its contents to or receipt by an =?
authorized person is prohibited by lav.
4.PIVIPL
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CIA/RR Project 3-51
Waalkiar
The Role of ORR in Economic Intelligence
I.. Introduction ?What Is Our Problem?
The purpose of this pawls to set forth the nature and magnitude
of the tasks which the Office of Research and Reports, Central Intelli?
gence Agency, must perform to discharge its new mission as set forth. in
NSCID /5. This directive calls upon the central Intelligence Agency to
coordinate foreign economic intelligence relating to the national security
throughout the US Government and to produce ouch 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 responaibilitiee of
ORR.
During the first half of 1951, ORR was engaged in taking an inventory
of its ignorance concerning the economy of the Soviet Bloc. The Main
purpose of this inventory was to establish a basis for planning a program
of basic research to which ORR Should address itcelf. Such a program must
spring from a clear conception of Av. 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.
A.
Foreign economic intelligence serves at least five purposes in the
design of policies to preserve our national security. These five purposes,
which should be kept continuously in mind in planning our economic research
program, are as follows:
1. To estimate The of of possible present or future military
or other threats to ourselves and our allies. A potential enemy canunderia
take successfully only those military operations which its economy is capable
of sustaining. /n 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 necessary to support the civilian economy as well as those
necessany,to produce and operate the instruments of war.
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A clear picture of the
future military or other threat is
magnitude of the defense effort in
serve our freedom? in the event of
magaitude of the present end poseible
needed to gide us as to the over-all
which we must engage in order to pre-
war.
2. To eatimate to gbatasta and losalion, of possible present or
future military or other threats. Decisions which the USSR or any other
potential enemy make with regard to how they will al/ocate their resources
limit what they can choose to do. If they elect to invest largely in
military installations in the Far East s their potential for attack in
Europe in correspondingly 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 reeources.
A principal purpose of thus estimating the character of
military or other threats with which we me,y possibly be faced is to guide
us in designing our own defense effort so that it will protect us againet
real rather than imaginary dangers.,
3. To (mast ue in estimating,, uithin the range of the possible:,
the intentima 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 ection. Within
this range certain economic events may furnish indications as to which
alternatives the Soviets intend to pureue and here and when.
These indicatione of intentions may be very important in
assisting ue to adjust our defense preparations to meet the most probable
dangers.
4. To hap policy-makers decide at we can do to jetteee possible
or probable militaey or other threats by impairing an enemyls economic
capabilities to carry them out. This include measures that can be taken
to weaken him in advance of hostilities and thus delay or prevent his
decision to engage in them, as well an moasuree to Weaken or destroy the
economic basis of his military power should he choose to commit it in
general war.
Economic intelligence can help in suggesting such measuress in
estimating thefr. effctivoneass and in forecasting the enemyos prebable ?
reaction to them.
5. To assist in estimating the probable development of the Leaeetleee
strengths of the East and the Pest over the next feu years if global hostili-
tiem are avoided. A major purpose of these comparisons is to gid e US polioy-
makers. The preceding four objectives are concerned eith atepe which the
United States can take to defend itself againet actions of a hostile power.
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Equally important is the design of that political policy uhich will have
the best chance of achieving our objectives without hoatilities. Essential
to the planning of such a policy is the most accurate estimate poesible of
the relative economic strengths of both sides. There are equally grave
dangers in a cerious underestimate and in a serious overeetimate of future
Soviet economic strength. Either will produce policiee more likely to briug
on ear 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, yeakneeses to very conaider-
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 produoss should reflect an awareness
of these objectives of economic intelligence.
13. nittettetrapaggelatalete9112.1#
Briefly, economic intelligence is intelligenoe relating to the basic
productite resources of an area or political unit, the goals and objectives
which those in control of the resourcee widh them to serve, and the weye in
which and the effectiveness with which these resources are in fact allocated
in the service of theao various goals. There are a number of confueions as
to the nature and limits of economic intelligence which call for clarification.
1. In the first plaoe, there ie sanetimes a tendency to regard the
whole of economic intelligence as encompaseed in a mere inventory of avail-
able resources of labor, raw materials, 4rd instruments of production. Thie
inventory is a necessary part but only a part of the total economic problem.
An inventory of resources by itself without an understanding of the goals
which they are designed to eerve or of the methodn employed to allocate them
in the .service of those goals oan tell us little about capabilities, leaner..
abilities, or intentions. The Allied Powers have a total ateel capacity
Which is more than four times as great as that of the Soviet Bloc, but such
a comparison is highly mieleading. For the United States to achieve ite
minimum goals, even in a time of oriels like the preeents steel muat be
allooated to nary uses which the Soviet? regard as of low or negligible
priority.
Fumthermore, a modern economy- is characterized by a highly
complex web of interconnections among its various parts. The oepacities
of the economy mey be limited less by the over-all availability of resources
than by a failure to keep eil the complex interrelatione in balance. Thus
tank production, for instance, may be limited not wily by the availability
of steel from Which to manufacture the tanks but also by the steel available
to make the rails and the freight cars necessary to carry ateel fram steel
plant to tank plants, or, more remotely, by the steel required for the
maehinery necessary to mine the coal to operate the railroads. Thum
economic intelligence must be as much concerned with the goals which resources
are to serve, and the ways in ehich they are related to each other, as with
the physical inventory of the resources themeelves.
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2. Another problem relaten to where economic intelligencd 'mese
off and political, military, and valentine intelligence begin. Since the
social organism is a whole and these ways of dividing it are somehat
arbitrary analytic inventions, precise lines between the segments are
impossible to dram In very rough terms, acientific intelligence fellows
the progrees abroad of now scientific ideas through the research and
development phaaes. When these techniques end methodn begin to be employed
broadly in production, they become the province of economic intelligence.
Military intelligence in concerned with the character and capacities of
the military establiehments of foreign countries and with foreign targets
for our own terntary efforte. Where the character of the military eetablish?
ment depends upon rates of production or where the target of cur military
effort is the economy of the potential enemy, the lines between military and
economic became blurred. The output of final military equipment and the
physical targets on which our military force? must concentrate are clearly
a prime concern of military intelligence. On the other hand, econemic
analysis is required to portray the complex nexus of economio sapport on
Whioh military production depends and to pursue the economic chain
reactions which might result teem the destruction of particular producing
facilities.
The overlapping between political and eoonomic intelligence is
even greater. One of the best ways of studying the goals which a collecti?
vized state viahes its economy to serve is to examine the institutional
machinery that it establishes to guide economic processes. Thms certain
of the institutions of government, dlthough in a seem political phenoneme
may have profound economic significance. On the other hand, economic condi
tions are of couree an important determinant of the attitodes loyalties,
and composition of politically important groups. In the boLerline areas,
it in the purpose and object of investigation rather then the disoiplines
employed that determine whether intelligence is properly to be termed economic
or political.
3. A fivlal point of importance which the analyst must keep in nind
is that economic intelligence is not always the same thing as economic
information. Even the most basic economic intelligence should alneys be
produeed in relation to the no of some intelligenee eonzumer. The Central
Intelligence Agency is Charged with producing foreign economle intelligence
relating to the national security, and the consumers of Ito product are
those US Government officials charged vith guerding the national'security.
A vast amount of information -- indeed, almost al/ information -- about
foreign economiee may be relevant to national security problems, but it is
not economic Antallinanna until its relevance to those problems is made clear.
It la the function of intelligemee not to pursue knoviedge for it awn sake
but rather to throw light on the probable ccasequences of present or future
action. Though the intelligence analyst is not a policy-maker, he must
constantly strive to keep in mind the relovateo of information to policy
problem, vhich alone can tranaform information into intelligence.
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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 nature of economic intelligence alone. We must also
consider hoar our activities can be made to reinforce rather than to
duplicate the great amount of work which others must Gamy on in the dis-
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 some central spot UthGWO all the economic
intelligence collected and produced throughout the Government can be brought
together and focused on national security issues. In recognition of this
need the National Security Council has directed that the Central Intelligence
Agency shall perform this coordinating function, Although this paper is
directed at our production program, our plans for intelligence production
within ORR must take full account of these coordinating responsibilities
which 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 pertly because the Iron Curtain has made access to .
Soviet economic intelligence more difficult, partly because the Soviet
economic potential is perhaps the most critical key to our national security,
and partly-because, for a variety of reasons the economio potential or
other areas crucial for our national security, such as Western Europe, has
been much more exteneivay studied. The mature economies of Western Europe
have long been an object of study by both academic and governmental
economists, The European Recovery Program has stimulated intensive analysis
of the tharacterietics, needs, and prospects of the Marshall Plan countries.
Thus the economic research effort in man-hours directed at the USSR and its
Satellites has been vastly less then that applied to Western Europe, although,
because of the iron Curtain, the effort required to produce comparable under-
standing is many times greater. For them reasons, we have concluded that
the principal effort of ORR in intelligence production mast be focused for
the inmediato future on the economic problems. of the Soviet Bloc.*
3. We began this research effort with an inventory of our knowledge
of the 'USSR itself. This, of mime, 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 European
Satellites (East Geemany? East Austria, Poland, Czechoslovakia, Rumania,
BUngary? Bulgaria, and Albania) dnd the Eastern Satellites (Communist China
and Communist Urea). ,
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are likewise crucial to the Soviet economic potential. Recent events
have highlighted the Importance of China to our estimates of Soviet
/strength and intentions. A final source of Soviet strength, which must
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
our inventory is that he demands which have been placed an the limited,
number of analysts working on the Soviet economy have been go frequent
and insistent that analysts have had little or no time to do the basio
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.
D.:Jolla -Alem_sirstcszats jataitimagaemiata2egiajeadereg2.
There are a number of special characteristics of the Soviet (mimic
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 econoey which simplify our problem and
then look at some of the factors which make it difficult.
1. The fact that the Soviet economy is centrally planned to achieve
the goals of a small group of men acting colleetively facilitates analysis
enormously. In the free economy of the United States the tastes and desires
of 150 million different unpredictable people all have an influence on utat
in fact occurs. The behavior of major sectors of the econopy 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 bet .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
economic intelligence described above -- namely, the elucidation ell the goals
and objectives which those in control of resources wish than to serve -- a
great deal. easier, Almost anything that happens can give us some clue.
2. A related point, true to same extent of every economy but
especially true of the Soviet, is thateverything 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 fran
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 me most want to know, as revealed in the results of -cur inventory
of ignorance, emphaelzes the very great importance of giving priority
to the interrolatione of the parts of the economy. Time the third teak
of economic intelligence, to explain all the cceplex ways In which
resources are in fact allocated to various uses, ie peculiarly essential
to building a consistent picture of the Soviet econoey.
3. A third fact that shapes our methods is that teehnology and
the lams of nature are no respectere of iron curtains. The Soviets do
many things differently from the way in ehich we do them, but in many
other things they have no choice but to follow the oily industrial
technique that exists. Thus the electrolytic process whit& produce odium
hydroxide and chlorine inevitably produces than in the same ratio in the
USSR as in the United States.- We can learn many of the teohnical
tions on what they are able to do from a study of US industrial practical.
But this must be done with care, since we know that in tome cases the
Soviets appear to be incapable of applying our .techniques even ehere they
know about them, whereas in other cases they have devised seperior methods.
Nevertheless, with appropriate caution, unefel first approximatione can be
reached by the comparative method.
One implication of this for reeearch plans ie that there muat
be present in our work a mudh heavier dose of technical and engineering
thinking than is customary in economic studies.
A characteristic whedh has advantages and disadvantages is that
prices, maeketes and money flown, the stock in trade of mush economic
analysie? have limited meaning in the USSR. We are spared the uncertainties
of the capitalist business cycle, and monetary dislocations are of little
significance. On the other hand, we are largely denied the benefits of
money aa a common measure of otherwise incommensurable activities. Most of
our thitking meet be not in terms of reblee but of tons and bushels and
bales, of numbers of machines of innumerable different kinds, of caremiles,
kilowatts per hour, and the like. To add all theme things up to an index
of capabilities we must concoct our awn common measuring rod, a task of
no small compl4ity.
5. On the negative side is the obvious feet that information
currently coming out of the Soviet Bloc is very limited indeed. This does
not mean, however, as is sometimes concluded, that oer knewledge is
inevitably coerespondingly limited. Radical economic changes 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 setting neap
exercising some ingenuity ineeeking inferences from the knoqabout the
unknown (ehrough the interrelations of the economer)? and die4eting.the
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eollection of crucial missing pieces of information through the channels
available to um, it le possible to put together a surprisingly reliable
picture. it the scarcity of current informationnmeans is not that
my are condemned to ignorance about the Soviet economy but rather that
to find out what we need to know takes a great many more henna of' pain-
staking research, of imaginative Interpretation, and of fitting and
adjupting 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 vihich were compiled by the various divialons -
during the course of the inventory.
6. A final characteristio. 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 piece? of additional
intemation would be most revealing if we could secure them.: Thin
point ahould not be overemphasized. As the Inventory discloses the
information required to give the answers that we need about a good many
subjects is believed to be largely available in Washington. In those
oases, what is needed le principally much more intensivnnitg,of AL
th
raer /crepe& ore. In otherOn appears
WTThayo` filling in certain critical gaps. In stidying
an open economr ono would normally ask for much more information than
one expected to une and then sort out the ueeful parts ehen it came.
When the cost of information in money and lives is high, however, much
more careful consideration must be given to Whioh pleoes of information
are the vital ones. One of the principal reepaasibilities of ORR la to
give this kind of guidance to the information collecting agencies.
The considerations set forth in this istroduction do not determine
the details of our research program or of oun nettled of tackling it, but they
do provide a framework of ideas within which the research program may be
carried forward. The next task is to spell out method and content someWhat
more precieely.
II. General Methods -e How Shall WS Go about It?
.40-212.4aSSMeigneVe9.1-4252E222.2121011LIM3Inntlatiantnenanik.,
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
aro very urgent. Events will not wait for the orderly, patient, exhaustive
research ehlch alone can give satisfactory annwers to these enobleme. If
we were to devote curse/yea exclusively to amassing all the tants we need,
we would have to tell harried policy-makers that tie would be glad to advice
them -e beginning in about 2 years. We neither phould nor can at in an
ivory tower that long. Even if it were poseible to devote ourselves
exclusivarto oxIntuetive and encyclopedic L./U.141es 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 asked to help with would have chenged me that our results
would no longer be particularly applicable*
On the other hand, if we succumb completely to the very real pressure
upon us to answer all current requests for prompt iecamation, we will never
have any information better than the slim fragments that we can nor supply.
Thus our dilemma is, in a seise, whether to bo encyclopedic and irrelevant
or operational and incompetent.
Clearly the only tolerable solution is a compromise between these
two extremes. We muet try to answer the most important of the problems put
to us from day to day as qaickly and as competently as possible. But we
must reserve a major part of oar energies for improving the foundation of
knowledge from which bettor quick answers can be given.
The necessity for this compromise has two further implications.
The first is that it is pocsible to pursue this twofold objective only if
we have a certain minimum of research resources pubstantially larger than
that which the US Government has allocated to these problems In the past.
This minims we are on the way to ansembling.
The other implication of our compromise is that since we cannot hope
to have enough resources fu/ly to evloit all the available information about
the USSR, we must be very sure that we use our scarce research resources to
fill in those areas of our ignorance which most seriously limit our estimating
ability. We must concentrate our scarce manpower on finding out those things
that the US Government needs to know most. The identification of these
priority areas is one of the most puzzling problems facing into/licence.
lellielitadLtikaistiL.122liarserMiEhe-1227.1.malege
1. The most seductive answer to this question is contained in what
we may call the "bottleneck fallacy." Since economic warfare, cold or hot,
was first thought of, econceists have sought for the bottleneck, the single
critical item, the key facility without which the enemy/s military economy
mould collapse. The history of the search for such bottlenecks is a record
of failure, 'confirming the economistes faith that, given a little time,
resourcee are highly substitutable for one another. This &nu not mean that
economic warfare is bound to be ineffective. On the cottrary? the very fact
that resources are interchangeable means that to deny an enemy any resource
is to weaken directly or indirectly his military potential. This is parti-
cularly true in an econamy which, like the Soviet, has for years been directed
toward a single set of goals. hoy economic activity recognised by the Kremlin
as not essential to these goals would have been abandoned long since. Thus
wherever we make an economic attack upon the USSR, it is likely to hurt. But
it is a delusion to expect that a limited attack upon a small segment of the
Soviet economy will cripple Soviet strength. It is not the capacity of a
particular facility or the availability of a particular ocromodity which
ultimately limits the capabilities of the Soviets so much as their total
resources and their ability to organize them effectively.
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This does not mean that all things are equally important. The
selection of the more critical commodities and industries is one way of
cutting the problem down to size, But when one has done all the pruning
possible, the number of critical sectors of the econorel remains too great
to tackle them all ishaustively at once.
2. A second method of determining priorities for research is to
Bee what basio monarch would be most relevant to the problems to which we
are being aaked to give current answers nov. The dangers in this problem-
approaCh to priorities are obmious. It leads one always to concentrate
ones research on yesterday' rather than on tomorrowle problems. Basic
research, by definition, takes time. The problems uhidh me7 be urgent
when the basic research that we start today is finished cannot be clearly
foreseen and are almoat certain to be different from those which are
plaguing us now.
Furthermore, any attempt to list even the most urgent of the
problems facing us at the moment reveals how many there are and how 'much
of the total world economic picture is relevant to their solution. As
part of our stmAT of foreign economic, intelligence for the National Security
Council, the Central Intelligence Agency attempted to outline the require-
ments for audh intelligence in terms of current problems. Avery incomplete
sample yielded a list of 42 top priority problems, some of them as broad as
the total militiwypetential of the USSR.*
Again, we cannot %Melly discard this criterion. We must try to
foresee tomorrow's problems and guide our research accordingly. There ere
acme aspects of the Soviet ecomegr which we can take the riak of neglecting.
But we must do a broad enough job to hedge ourselves someWhat against the
errors in our own forecasting.
3. A third possibility is to take some aspect of the study of each
commodity and concentrate on that aspect alone for all commodities across
the board. Thus one could take some section of the Outline for a Bade
Commodity Study used in the preparation of the inventory and fill in that
Beetles for every item first, leaving other sections until later. One could
devote the entire energies of ORR to the study of requirements, far example,
or to techniques and methods of production, or to the organisation and plans
for each industry, or to levels of output, or to some other aspect.
This principle of selection is almost certain to be snsatisfactory
by itself, since the answers to most of the questions which polioptaakers are
going to ask involve putting together all of the parts of a basic study to get
at the conclusion. Thus an estimate of capabilities requires an estimate of
* *Foreign Economic Intelligence Requirements Relating to the National
Security," Appendix B to Memorandum for the Intelligence Advisagy Committee
from the Director of Central Intelligence, dated 31 Hey 19510
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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 ettely 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.
4. 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 ekheustive
analysis of most of the parts of the whole economy is the only way in which
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 =mbar of systematic basic etudiea
from beginning to end. Beer, 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 knot:the Soviet
Union is Algal capable of certain minimum actions, and we can set certain
ceilings on what they are most 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 call the method of successive
approximations.
C. Successive Anromationa.
1. The first step in the Method of Successive Approximations is to
lar out in general terms the specifications of what you would like to know.
What is the list of all the significant industries commodities, and services
Which should be studied, and what are the principal problems about them which
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 eith what degree of precision. This 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 beat information that
we possess may have a very wide margin of error, but other parts of our
outline will be still weaker. Our inventory was designed to bring us through
thin second state to tell us what we know and what we do not know about
each of our major problems with respect to the USSR. It has revealed whet
it was intended to show -- namely, that our ignorance of certain important
matters is much greater than our ignorance of others.
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3. The third stage of our Method of Successive Approalmations lv
to concentrate our most earnest efforts for a brief period on the importent
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 merelT
that we focus on them until our knowledge in brought up to a level equal to.
or somewhat better than our knowledge of the other parts of the picture.
4.. When we have been marking in this manner on weak spots for a
period of 2 or 3 or 4months, we must stand off and take another lank at
where we are then in relation to the total outline. The weak 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 muoh about them, they will be
in better shape than what formerly was our best evidence. If our second
over-al/ look reveals this to be the case, we must tackle whatever other
sectors of our problee are now the weakest, not again with the notion that
we are going to find out everything about them, but only that we are going
to work= them until our ignorance of some other matter requires more
pressing attention. In this business knowing a little about a great many
things is likely to be more helpful than knowing everything about a very
few things and notbing about others. Each sastantial drive to cover an
area of ignorance must be intensive enough and sutetantial enough to permit
UB to make real progress toward solutions and not merely to hold our own.
On the other hand, it must not be pursued with such perfectionist seal thet
we neglect other areas in Which our ignorance may be only slightly less
serious.
5. In eumnary, the Method of Successive Approximations involves
e
a repeated cycle of review and examinatione planning, and several months
production followed by another review in the light both of progress and of
changes in the character of the problens to be solved. We have devoted a
good deal of time recently to the review and planning phasee and are now
launched upon a production program. Sonetime in the fall, another cycle
of review and. reexamination of planswill be called for.
zramujajoaajz.22.312s4.
In attempting to apply the Method of Successive Approacimatiolui,
certain common problems and difficulties arise which are worth a brief Garment.
1. A, particularly bothersome problem is that the things whidh we
know least about, and thus the things which it is most important to atudy,
are likely to be the things on which we have least information.- In generale
re 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 on rates
of production, The temptation io to study the material that we have and
draw such generalizations ream it .as It aeons to contain.
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In terms of getting answers to our vital problems, however, wa
cannot 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 what 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
extractingoesetting 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 it.
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 master.
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 he 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 investigation for many,
many months. It is unfortunate that research by the Method of Successive
Approximations involves SWIG waste and sone 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 ?mew 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 chemleals. Again this
logically involves breaking each particular chemical into the quantities
produced in each specific plant. This suggests that the first step in
answering the over-all question is to try to identify all the physical
producing facilities and their weenies and rates of operation. In mapy
cases, however, a first approximation to the aggregate figure can be achieved
by short cuts which avoid the necessity of knowing utat in detail it is made
up of.
Thus one can start, for example, with total resources engaged in
chemical production in the United States, or in the war economy of Nazi
Germane, as a proportion of total resources. One can then consider known
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 spray.
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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44 lrinallys, for 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 &Whole. Our delineation of areas of ignorance
should be one Goverment..wide basis, and our production to remedy- these
weaknesses Should be planned in collaboration -with other agencies so that
we do not all concentrate on the same gaps at once. As the coaritatting
part of our activities progresses, it &mid be closely integrated with
enr production so that the Government as a whole may approach more rapidly
an adequate understanding of the Soviet economy..
III. (R's Production Program.
A. lignajeat
Our inventory was designed to reveal our major areas of ignorance
as a basie for pleatedng our future research production program. In trying
to generalise on, what we have learned from this study, we face the prebled
that just as there are maw ways of classifying knowledge, so there are
maw ways in whieh we can classify areas of ignorame. We oan do this in
terms of commodities, industries, or services about vbidh our general
soonomic knoWledge.is particularly weak; or we can conpider those aspects
of our knowledge which are weaker for all commodities than other aspects,
=A est for example, production, distribution, requirements,. stocks,
techniques, etc.; or we can consider which of the basic purposes of economic
intelligence we are least wellwequipped to serve, sudh aa the study of
capabilitiea, vulnerabilities, or Intentions; or we can look at our weakness
in terms of the three fundamental aspects of the economic problem described
at the beginning of this paper namely, the estimating of the productive
resources of the economy, the underatanding of the goals and objectives which
those in control of the resources wieh them to serve, and the ways in *Jab
the resources are in fact allocated in the service of these goals.
An atteopt is made in this sortion to suggest what Bose to be some
of the most serious. 'weaknesses In the present knowledge of ORR as revealed
* our inventor,. Each of these weaknesses is drawn from a different way
of lodking at our problem. Thus they are not censurable with each other,
in mroy cases they overlap, and hence they do not add up to any single
priority principle for determining What tie should do next. It is inherent
in our preblem 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 eubdividing the issues to be tackled which may
throw more light on certain of :our questions thanaey'of the ways we have
thought of so far.
It dhould also be kept iu mind in What fellows that the generalisations
made in this notion apply in different degrees to different branches of ORR.
There are certain weaknesses that appear to be generally prevalent in much of
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our work, but their relative importance varies widely tram branch to
branch.
-
Finally, in planning our work in nu& a way aa to limit the areas
of ignorance described below we must make full allowance for the reseaeth
and production plans of other agencies,. Since That follows has not be
discussed outaide the Central Intelligence Agenty, our plena will pre-.
aumabIy be modified somewhat as a result of discuasiots in the UO=10
Intelligence Committee as to the plans for intelligence production
throughout the Government. .
B. afejazdjeruzantjeafejameareekLugna
In moat sectors of the ?canopy we appear to know a good deal more
about the resources and facilities of the Soviet Union than we do about
what the Soviets are trying to do with those resourcee and facilities.
Broadly speaking, we believe that they are trying to devote them to the
increase of their military strength, but we cannot go far beyond thie
master generalization into What products and uses are regarded' as moat
important, what will be given priority in the event of a shortfalls nn0
why, and what goals and objectives will shape the future development of
.their economic program.
We haves of course a separate branch whose function it is to study
economic organisations and programs as auohs but the effort needed in this
field is much broader than a single branch can make aad much more intimately
tied in with the problems of each of the other branches than might at first
appear,
Superficially the problem of how we go about the ;shady of goels
and plans is a difficult one. The 'USSR has published 57year plans in the
pasts but there is considerable doubt as to Whether it will continue to
do this in the fUture. In any case, these plans have contained only the
broadest sort of production targets, with no analysis of the reasons for
them or of their relative priority. In this case, as fn many others,
however, we can learn much more by indirection and inference than at first
appears.
In the first place, the plans themeelves have many 'implications
Which need further study. Goals for a series of interconnected commodities
such as coal, steel, railroad equipment, etc., can be studied to see how
the pieces fit together and What they imply as to Ube daaired pattern of
use of resources.
In the eeSend placse,av caple a,geeet deal a t thie oluA
6ale 6f th6 SoIviete fr6sh the structure flthe organizat n set up to achieve
them. The miniatries established ,the breakdown of functions within those
ndnistriess the distribution of authority between Moscow and regional
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headquarters, the kinds of people appointed to handle the various jobs
time defined, can all give us much information about what the USSR is
trying to do4
rintaly, as already pointed out, we are helped in thia 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 us
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 areae, 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, Vs must seek the answers systematically by
initiating special projects on Soviet organization, on 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 efforte for the
time being than they have done in the past.
C. pie need for awe intemptlp 04a7 pf Soviet milgarriAtenttcps
se revealed in econo4q evento.
A related but different weaknesa in the lack of adequate attention
in the past to economic indicators of the military intentions of the USSR0
We have been talking above of the general economic goals of the Politburo
and the elucidation of What the Swiets are trying to do vith 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 economic events would take place differently today
if they were planning one course of action rather than mother in the future.
The evidence to be examined in answering this question viii, in most cases,
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 Pram this point of view. A continuing office
project designed to do this is being planned.
D.
s- ?
IQ!
Part17 because ORR is organised largely by industries, oommodities,
and services, there le a tendency for us to concentrate too heavily on
techniquee facilities, and rates of output in the separate sectors of the
economy and to pey too little attention to the way in which they are related
to each other. This above up in our inventory in the great relative weakness
of those parte of the papers which call for information on the demands of one
industry for the products of ether industries or sectors (input requirements)
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and those sections devoted to the pattern of distribution of an industry e
output among other industries or final consumers.
This weakness is particularly serious because it is not unique to
ORB 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 vermavIdlities of the Soviet emmumr probably depend =Oh
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 emotion, 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 end estimate rates of production from what we know
must 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 plant, or the total production of each of the many special kinds of
chemicals that require electric power in theirnmmufacture.
There are many ueys of getting at an estimate of this kind indirectly.
One can take parallel experience in a number of other ccuntries? noting the
correlation of this figure 'with other quantities that can be observed in the
USSR. One WI have information about the general geographic location of
production and the character of the power grid serving these areas. Margins
of error in this kind of calculation are usually very high, but it may be
possible to set limits on orders of magnitude which bring our ignorance about
these factors below the level of our ignorance on other matters.
There are various ways in which our efforts on intertmlusiAlrrelations
can be intensified. /n 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 be enough. The evidence on these interindustry problems, fran their
very nature, can best be assembled by examining both ends of the interindustry
pipe o 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 same 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 ORR. 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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11.0,44
clt_e_erzatterz
operatioeg.
Our inventory reveals that we are almost totally ignorant as to
the burden placed upon the econagy 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 economy. The relations between military consumption and the industries
and services 'which supply it can be regarded as one of the most important
caees of interindustry relations. Bore what we need to knor goes beyond the
actual distribution of products and services to military use at the presont
time and encompasses a study of what that distribution would be under
various alternative assumptions as to the nature of possible future military
operations'. This clearly is a kind of study in Which the military intelli-
gence services must play a major role.
We should look to A-2, G-2, and ONI for estimates of the volume of
military end itemn 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 steel, fros planes to instruments to vacuum tubes, from bombs to
TNT to ammonia, we move into areas where the responsibility Testa squarely
upon us. Thus in the field of interindustry relations generally, special
importance attaches to the relations between industries which directly or
indirectly serve a military effort. Our role in the analysis of weapons and
amnunition should focus especully 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 for various
types of military operations.
F.
46Assegslittim_avi
IM13122A.
This is discussed in detail in the reports of the separate divisions*
Broadly speaking, as might be supposed, our principal gaps in CR 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 analyses
in the Central Intelligence 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 on the
transportation system, and is an important requfrement 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 well-covered by OSI and other agencies,
but the relations between communications and all other industriee are almost
untouched. This includes an analysis of the requirements laid upon the
communicationa network of the Soviet Bloc by the needs of the Bloc's economic
system, 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 services. But the burdens
that they place on the rest of the econasysand, on the other side, the limits.-
tions 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 requim..
ments are all matters on which we must put more erphasis.
G.
11110 ? ' P 111 I
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 a-given output, we ssst frequently fall
back on US experience. Yet we know that this is in many instances grossly mis-
leading. For example, the PS coal miner produces on the average about four
times as much coal per day as his European counterpart. In other respects,
Soviet techniques may well be ahead of ours. Unless we can set limits to
the possible range of technical methods that the Soviets may be using, our
estimates will be subject to wide margins of error.
This information is not easy 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 econaay. We can, of course,
- find out What went to the USSR under Len&Lease. For more recent information
wel Must depend on the visual observations of defectors prisoners of war,
occasional travelers, and the like; on items in the Soviet 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.
In a broad sense this can be described as the need for more attention
to trade. We have examined in our recent work on the European Satellites some
of the ways in which they are dependent upon the USSR and the USSR in turn is
dependent upon them. A miOnt gap revealed in this project, however, was the
absence of even approximate information: on the composition and volume of
Intra-Bloc trade. Studies on China have revealed a simIlRr weakness in our
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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 temmome connections with the rest of the Soviet Union? How salt..
sufficient is the Urals industrial complex? What are the economic relations
between the Caucasus and other Soviet areas? These questions are important
to the analysis of the capabilities of transport, power, and communication
nets; of vulnerabilities of many kinds; and, to some extent, of intentions.
Z . maj22.0.,fmxIL_IudLaLlIm
Almost any investigation of a major sector of the Soviet economy
leads one back to the problem of how to add up incommensurables. Suppose
we can estimate the output of various kinde of madhine tools. Hoy are we
to measure changes in the total economic effort that gees 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, mays in tlestern Europe? One is stepped on
the problem of how to measure resources devoted to such expansion.
This is a problem on Whieh a good deal of work has been done outside
the Government. Pethapa 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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