THE SOVIET ECONOMIC CHALLENGE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88-01315R000300160040-1
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 181
• Document Creation Date: December 16, 2016
• Document Release Date: November 1, 2004
• Sequence Number: 40
• Content Type: REPORT

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PROCEEDINGS OF THE FIFTH ANNUAL NATIONAL MILITARY-INDUSTRIAL
CONFERENCE ? A PROJECT OF I HE INSTITUTE FOR AMERICAN STRATEGY
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Copyright 1959 by the INSTITUTE FOR AMERICAN STRATEGY
A not-for-profit, tax-exempt corporation dedi-
cated to increasing American public understand-
ing of the strategic problems of the cold war.
The Institute for American Strategy
140 South Dearborn Street
Suite 1191
Chicago 3, Illinois
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Foreword
Forty years ago Communism was confined to
a rented room in Zurich. Today, it has engulfed
two-fifths of the earth. Another fourth of man-
kind is being swept ever more swiftly toward the
cataract of the Kremlin and the whirlpool of
Peking.
Trained Communist cadres already saturate the
precincts of Southeast Asia. They manipulate
puppets in the Middle East; they have won elec-
tions in India. They swarm through all of Africa
and on to our Latin doorstep to the south.
Lenin's "strategy of encirclement" is being ful-
filled to the letter-and ahead of schedule. In
another ten short years, Moscow may wrest from
America many of her remaining allies, overseas
military bases, foreign investments, and our access
to raw materials and markets all without fight-
ing a major war.
No one can afford to discount the threat of
Soviet missiles, nuclear submarines and vast
land armies that can be used to blackmail the
West into inaction if local Communist parties in
Afro-Asian lands launch insurrections, coup d'elals
or civil war. The U. S. and its allies dare not
lose the race in science and military power.
But catching up, or staying ahead, in science will
not automatically insure survival.
In the past, the Communists have made
staggering gains in spite of U. S. supremacy in
technology and industrial know-how. They have
applied subversion and other irregular tactics to
achieve their goals. Now they are exploiting
economic warfare to accelerate the thrust of their
political and propaganda spearheads. With them,
trade does not follow the flag; but rather the
reverse. The hammer and sickle are hidden in
Soviet foreign portfolios.
First the easy credit terms from Moscow. Then
barter deals that lock trade in Communist chan-
nels. After that, machine tools made in Russia
that require spare parts made in Russia. And
Russian technicians, Russian engineers, Russian
economic consultants. Finally, it is time for
flassian arms, Russian military advisors, and
pro-Russian governments that expropriate private
investments and order the evacuation of American
military power from "neutral" soil.
What must be done to avert this sort of non-
military checkmate? To answer this question,
the fifth annual Military-Industrial Conference,
hold at the Palmer House in Chicago on April 6,
7 and 8, 1959, brought together leading U. S.
and world authorities. Participants in this Con-
ference were men who presently, or in the imme-
diate past, have themselves helped plan and
execute national strategy, or are personally
responsible for the efficiency and stable growth
of the free enterprise base of America's defense
structure. The audience of some 1200 men in-
cluded bankers, university presidents and cap-
tains of industry; the commandants of America's
various War Colleges; atomic scientists and
missile experts; leaders from our technical soci-
eties; British air marshals and German business-
men: high government officials concerned with
foreign aid, propaganda and military readiness;
and a group of distinguished scholars whose fields
are geopolitics, engineering, international eco-
nomics, Russian studies, defense management,
and psychological warfare.
The purpose of the Conference was to formulate
specific recommendations for action to strengthen
the free world position : by government; by
private foundations and professional societies;
by higher education and the public schools: by
foreign commerce and international business con-
cerns which have a vital role to play in expanding
economic growth at home and abroad, and
increasing the. ranks of the middle class in over-
seas areas.
The Soviet challenge, of course, is multi-dimen-
sional; but economic penetration of the under-
developed areas by the Communists can cripple
and cut our military, political, diplomatic and
industrial sinews. For that reason, every student
of strategy, whatever his particular discipline,
has an obligation to consider plans to reduce the
shock of Sino-Soviet economic warfare against
the ramparts of free wcrld defense.
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 O ear Major Lohr:
Please give my greetings to those attending the
Fifth National Military-Industrial Conference
in April.
The growing power of the Soviet economy is a
challenge to American enterprise and to the de-
velopment of the world. The nature anddimen-
sions of this challenge require careful study and
the full use of all our resources, both spiritual
and material. We must meet it as resolutely-
and imaginatively-as we are meeting the better
known military and scientific challenges.
Your conference will focus needed public attention
on this vital field, and I wish you all success.
Sincerely,
Major Lenox B. Lohr
President, Board of Directors
National Military--Industrial Conference
140 South Dearborn Street
Chicago 3, Illinois
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Contents
Page i
FORP,WOR D ....................................................................... .
LETTER FROM PRESIDIONT 1',1S11,NIIOWh,R .........................................Page ii
PART ONE
Dimensions of The Challenge
1. RUSSIAN ROULET I'I : ...................................................
by Frederick H. Mueller, Under Secretary of Conunerce
2. THv, SOVIET UCONOMIC CIIALh11;NGI!;- (i
ITS MEANING AND MUNACF, .... .......................... ...
by George Meany, President, American Uederation of Labor-Congress of Lrdustrial
Organizations
;. WHAT IS TIIE Po'l'l+:N'PI Al 01'' '1`II:I~; SOVl l~~'I` 1~ CONOMIC CI1:A],LI NG 1~~'' ... 1
by Joseph L. Singleton, N "ice President, Industries Group, Allis-Chalmers Manu-
facturing Company
PART TWO
Technological Aspects of The 't'rade Threat
1. TRADE WITH SOVII,,T 10 iSSIA ..... ......... ....... ..... ... . 19
by Gen. John I,,. Hull (IRet1), President, Manufacturing Chemists' 'lssociation, Inc.;
Former United States and United Nations Commander-in-Chief in the Far Fast
5. AN ENGINI,I,11 LOOKS AT Ii,CONOMIC WA11.I'AR,1........................ 2-1
by Lieutenant General I;. C. Itsehner Chief of Engineers U.S. Army
6. CHEMICAL WAIt1~ARl~; 1!,CONO~MIC STYLI . ............................ 40
by Gen. Anthony C. McAuliffe (Rot.), dT ice President, American Cyanamid Co.;
Former Commander-in Chief of the U.S. Army, Europe
PART TZIRLF,'
Military Ramifications
7. TIlE SIGNIFICANCE, OF RUSSIAN SEA POWEM .......................... 45
by Admiral James S. Russell, Vice Chief of Naval Operations, U.S. Navy
8. CIIALLENGE IN SPACE ............ .... ...... 50
by I)r. Wernher von llraun, Director, Development Operations Division, Army
Ballistic Missile Agency
9. WHAT PRICE DEM1.RRItNCI . ........................................... 55
by General Thomas 1). White, Chief of Staff, U.S. Air Force
PART FOUR
Area Case Studies: The Middle East, Latin America, and Asia
10. ARAB ASPIRATIONS AND TILE COLD WAIL IN THI; MIDDLE EAST .. 63
by his Excellency Nadim Dimechkie, Ambassador of Lebanon to the United States
M THE INDIVISIBILITY OF PEACE ....................................... 73
by His Excellency Fatin Rustu Zorlu, Foreign. Minister of Turkey and Permanent
Representative to the North Atlantic Council, with the tank of Ambassador
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12.
BUILDING A MIDDLE CLASS FOR MIDDLE AMERICA ................
by Edmund S. Whitman, Director of Public Relations, United Fruit Company
77
I3..
A I`NITED AMERICA VERSUS COMMUNIST PROPAGANDA .............
by Admiral Felix 13. Stump (Ret.), Vice Chairman and Chief Executive Officer,
[Freedoms foundation at Valley Forge, Former C-in-C, U.S. Forces in the Pacific
and Eastern Asia.
PART FI I/F,
Some Suggestions fo;r ; Iction
84
14.
COUNTERING SOVIET ECONOMIC PENETRATION .....................
by Harry A. Bullis, Chairman, International I )evelopment Advisory Board; Re-
tired Chairman of the Board, General Mills, Inc.
89
Li.
WHY WE All) .............. ............ ..........
..................... . .
by George C. McGhee, Former U.S. Ambassador to Turkey
94
I(i.
COUNTERING THE SOVIET CHALI;h',NGE ...............................
by Leo Cherne, Executive Director, The Research Institute of America, Inc.
100
17.
THE AMERICAN DILEMMA-AN ANALYSIS BY AN AMATIUR..........
by C. Kerr Weidner, Dean, School of Engineering, American University of Beirut.
105
Is.
WHAT IS TO BE DONE?....
by frank Rockwell Barnett, Director of.Research, The Richardson 1'ourrdation, Inc.
114
P/IFT SIX
Panel Symposium: The Economic, Psvcliological and Propaganda Aspects of Soviet
lxpansionism
19. PREPARED) STATE,MENTS: QUESTIONS AND ANSWERS
Normal statements were submitted in advance of the Conference by 15 participants
in, the Symposium. Their presentations elicited questions from the other members,
and this chapter contains the record of this phase of the Conference. Statements
were submitted by:
Hear Admiral Rawson Remictt, USN,
Chief of Naval Research 125
William Mackie, Executive Tice President,
Q "aterpil lar Tractor Co.................................................. 12(i
I)r. Anthony 'I'. Bouscaren, Associate Professor,
LeMoyne College....... ........... 127
Jack L. Camp, Uirertor, Foreign Operations,
International harvester Company........... 127
....................
Charles S. Dennison, Special Assistant to the President, Foreign Operations,
International Minerals and Chemicals Corporation .......................... 128
1ia,j or General Ilarold C. Donnelly, U.S. Air Force, Assistant Deputy Chief of Stall',
Plans and Programs, Department of the Air Force .......................... 129
Ferdinand A. Ilermens, Professor of Political Science,
University of Notre Dame .............. .
. _ 1:50
Colonel William H. Kintner, Foreign Policy Research Institute,
U niversity of Pennsylvania .............................................. 132
Cleveland lane, Assistant to the President,
Manufacturing Chemists' Association .................................... 133
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Dempster McIntosh, Managing Director, Development Loan Fund
(Questions answered by Mr. F. T. O'Brien for Mr. McIntosh, who was unable 134
to be present) .........................................................
Dr. Howard A. Meyerhoff, Executive Director,
Scientific Manpower Commission ........................................ 135
Gerhart Niemeyer, Professor of Political Science, 136
University of Notre Dame ...............................................
A. M. Strong, International Business Consultant ............................. 736
Admiral Felix B. Stump (Rot.), Vice Chairman and Chief Executive Officer of the
Freedoms Foundation at Valley Forge, Pennsylvania .......................... 137
20. In addition to the exchanges contained in Chapter 19, there were several questions
addressed either to main speakers who were present at panel discussions or to other
members of the symposium who had not submitted prepared formal statements,
as had those in Chapter 19. Such questions were addressed to:
Dr. Howard A. Meyerhoff, Executive Director,
Scientific Manpower Commission ........................................ 139
Leo Cherne, Executive Director,
The Research Institute of America ........................................ 140
Col. William Kintner, Deputy Director, Foreign Policy Research Institute, 140
University of Pennsylvania ..............................................
Dr. Kenneth R. Whiting, Special Advisor,
Air University, Maxwell Air Force Base .................................. 140
Dr. Anthony T. Bouscaren, Department of Political Science,
Marquette University 142
W. Cleon Skousen, Author, 142
The Naked Communist .................................................
Jack L. Camp, Director, Foreign Operations, 143
International Harvester Company .......................................
E. S. Whitman, Director of Public Relations, 143
United Fruit, Company ................................................
Brig. Gen. Cecil E. Combs, Commandant,
Air Force Institute of Technology 144
Robert Bruce Wright, Chief, Economic Defense Division,
U.S. Department of Statee ............................................... 144
J. Mishell George, Economic Defense Adviser, Office of the Assistant Secretary 144
for International Affairs, U.S. Department of Commerce .................
N. Jordan-Moss, Financial Counsellor,
British Embassy ....................................................... 145
Admiral Felix Stump (Ret.), Vice Chairman & Chief Executive Officer,
Freedoms Foundation of Valley Forge .................................... 145
F. A. Ilermens, Professor, Political Sience Dept.,
University of Notre Dame .............................................. 146
Dr. Meyerhoff .......................................................... 1.47
Dean C. Ken Weidner, Faculty of Engineering,
American University of Beirut .......................................... 148
Cleveland Lane, Assistant to the President,
Manufacturing Chemists' Association ..................................... 149
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.1. 4'Iishell George .......................... .............. . ..............
150
ProfessorBouscaren ........................ .._.............. .
150
N..1ordon-Moss .......................
...........................
151
Iran k T. ()' Rriei i,
Development Loan Fund ........... . .... ..
152
Jw. k L. (ainp ............ .. ..............
1,52
Or. (,erhart Niemeyer,
t `niversity of Notre Danre ................
15:3
Brig. Gear. Kenneth F. Zitznaaaa, Deputy Coinma,ndant,
I ndustred College of the Armed Forces ..................................
151
("hark+s S. I)ennison, Vice President, Overseas Operation,
International 'Minerals and Chemical Corporation
I:;1
N. Jordon Moss .... .............. I+J
Frail k T. O' Brieo ......... _ . 1 57,
J \I shell (;eorgr........
................ 151
.5'arr;rrurn?11, of / /,e Can/'er"wre
'.1. SOIVIV OBSI+:IiVATIONS AND CO C.I"SIOIS AI30L'C '1'III ECONOMIC
PSYCHOLOGICAL, AND I>UOPACAND:1 ASPl.CTS OF SOVIET I+;AI'AN-
IONISM 161
................ I
by Thom rs 11. Coulter, Chief Lsecut ive Officer,
Jhieago Association of Commerce and Tndustr~r
P.1R7' P IG/I7'
hio,crrap/iies., Cooperating f gencies and Committees
:?'?. iogr:iphies of Conference Speakers and Panel \lembers ......................... I'l:I
Coops main; Agencies ....................... ..............................
185
looninig and Tnrplemeutation Convniltee............................. .......
185
I";dnca,tional Projects Committee .............
......................
155
Washington Liaison Committeee ..................... .......................
Iti a
Advisoa'y Connnittce on Foreign A
ffairs. .. ...... . ............................
I86
The Board of Directors... _ ...
.. . ................................
136
I'he 1?xeciitive Committee . . . . . . . .. . . . . . . . .
ISi
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Part One
Dimensions of the Challenge
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 Approved For Release 2005/01/11 : CIA-RDP88-01315R000300160040-1 CHAPTER ONE
By I''nEDERICK If. MUELLER, Under-Secretary of Commerce
During World War 11 1 was privileged to head
a fairly large organization of woodworking com-
panies combined in a pool to produce wings and
tail surfaces for CG4A troop-carrying gliders and
other components of aircraft for the war effort.
At the time I had a civilian pilot license and was
flying my own plane. During the course of my
work it was frequently necessary to fly to Wright
Field in Dayton, Ohio, on urgent business with
the Airforce.
One such trip started out on a rather dis-
agreeable day-partly overcast and squally -
so I went "upstairs" to find better flight condi-
tions --feeling that the overcast or cloud-cover
was not more than 50%/-o and thus within the
limits permitted at that time under Visual Flight
Rules (VI'R). I found in a short time that the
clouds had closed in underneath me and that I
was above them without any apparent opening.
I flew on by compass trying to guess what drift
I was encountering, although this was impossible
as the clouds also were drifting and I had no
reference to the ground. My only instruments
were compass, rate-of-climb, tachometer, turn
and bank indicator-no radio. After flying for
an hour or so, and being well off established
airways, I determined to go down through the
overcast to 500 feet to sec if I could break through
and get my hearings by visual observation. I set
my throttle at a normal descent rate - set my
compass on due south, and started flying by
the seat of my pants. At 500 feet I broke through
above a small lake-hut found that instead of
going south I had completely forgotten to watch
my compass heading and was flying north-just
180 degrees wrong. I quickly found the "iron
compass"-railroad tracks -located where I was
by the name of the town on the water tank, and
high-tailed it for home base at a very low altitude
in the darndest storm I had ever flown in.
Now why do I tell this story? The point is that
while I had a destination and an objective --I did
not know all of the facts! I was relying on in-
formation and instruments that were adequate,
if not elaborate, in fair weather-or reasonably
so - but absolutely incapable of dealing with
storms or foul weather.
Now I submit that today we are dealing with a
situation in respect to Russia--and especially
trade with Russia--where we have the facts. We
know their objective and ruthless determination---
but; we either ignore them or are foolish enough
to believe that the ruling clique in the Kremlin
will change its ways.
We didn't believe Hitler either, although he
spelled out his program and determination in
"Mein Kampf" for the world to read.
The Russians tell us what they propose to do -.
and how-and are driving with a crusading spirit
that defies our imagination. Make no mistake
about it: They are out to destroy us economically
if not physically, and keep repeating that threat.
It is the policy of the Eisenhower Administra-
tion to favor an expansion, under certain condi-
tions, of peaceful trade with the Soviet Union- -
and such trade is being conducted. But it is im-
portant for the American business community
to have a frank and reasoned picture of the many
problems presented by Soviet trade practices.
I propose to discuss both the opportunities and
and difficulties -including hazards--in any cur-
rent approach to unlimited commerce with the
Soviet Union.
There are some who feel that by trading with
them-by exporting without limit and by giving
them our "know-how" on production methods
and items --we will help them to satisfy their
craving for material things. The assumption is
that they will grow more peace-loving if they
have both guns and butter.
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But are we so sure we will not instead allow
them to concentrate their efforts ott military
hardware? (ranted that we might stitnulal:c
tlieir desire for more and more of the items that
boost L heir standard of living, aren't we making
it easy for thcoz to shorten the period involved
in product development? And at our expense
aren't we helping them to become competitors of
ours in Lite world market''
You Ina, ask, so what. --isn't that the kind of
contpet,ition in world trade that our policy Seeks
Lo promote?
The .a,nsrv-er is, '.AO something new and sinister
has been added. The Soviets use foreign trade
IS :1, 1)o1ilira0 weapon. They can uuderfirice us
no nUlli:er what I heir costs may be and destroy
our markets.
BnI you rusty ask, ca,n'( we reach trade agrec-
rnettts such as we have i'i1,lr many connta?ies?
.1gn ii how about their veracity? Cat.n we believe
them? is their word good:'
All of us know the many instances when they
halve ~Jenouiu?.ed ag, reemenl,s previously e>tered
into wilh all the formalities of tra,dit.ioual di-
plomacy. The Special. Committee on Com-
ruunist, Tactics, Strategy and Objectives of the
American Bar Association recently reported that
(he Soviet (lov ernrncnl, has violated 50 of its
last. Ii2 treaties. 'for have we forgotten that, ill
facc of incorntrovertdble proof' in the torn of a
tape-recording of their own pilots talking to each
other at the. (Hoe of shooting down all unarmed
t `. S, airpla,ue H WY halve i he effrontery to deny
this fact.
Whaat, sort of people are these leaders of Russia?
hook at their t.reattrnent of Macmillan, when he
.vas aa: guest in 1 heir country. At one moment
1 hey say they want to improve trade and other
relations with England and the \Vest--anal at
Hie next, moment they say, do business on our
(errs, or suffer the consequences.
1)o they seek to frighten tts into renouncing
our responsihili(ies and obligations? if so, they
are in for a. great disappointment. When it
comes to trading, generations of experience in
f 'cc capirialistic enterprise have made its wary of
haying a pig in a poke. And as for honest
s,:arnpetition we practically invented it. That
s,tnre experience makes its pretty shrewd judges
of gold bricks, wooden nickels and people who
would bluff us into financing our own competitive
fr.,ilure.
No, my friends, if America is ever worsted in
(!his game of Russian roulette, it will be because
we were stupid enough to play their game of
making trade a weapon, making people into
cogs iri the State's machine, making individuals
into instruments of class warfare and world con-
quest.
Ifere's an interesting paradox. Rvcn sonic
American businessmen who are welt acquainted
with the cornpetilive fallacy of imifaliug or
pirating another man's product, alien faced with
Soviet competition think that perhaps inrilalion
is the answer. But attempting to beat them at
their own game is Russian roulette and gambling
with suicide.
Admiral Burke ably highlighted the fallacy of
this idea in the military sphere in it speech at,
Charleston, South Carolina, last February, "There
is uo point trying to equate our regirircmeuts and
caa,patbilities with the enemy's," he said. "Our
requirements are entirely different and our
capabilities must he developed around our oven
needs." The Admiral adds that, there is a fill-
greater psychological advantage for the United
States ill having the assured capability of desl,roy-
ing Russia than and I quotc "allowing etrr?-
selves to be drawn ini o a frurttess a.nd unnecessary
race on Soviet term s."
Of course the Admiral sees not only the military
but the economic fallacy of playing a "numbers
game'' with Russia. Onc is reminded of a sage
saying of that. great English wit, Samuel Johnson:
''Almosi all absurdity of conduct; arises from the
imitation of those w-hoin We cannon resemble."
Let me make it perfectly clear, as has the
President inhis letterof Julvi-1, 195S to Khrt_ischev,
i,haa the [Triite(1 States favors expansion of'
peaceful trade with the Soviet Union. We would
like to add to the individual well-being of the
Russian people. It is a matter of historical
record (hat, after World War I, the American
people :give over $200 million in food Co the
Ilrissian people through ,Mr. Hoover's American
Relief 1ldmfraistration. And during World War I I
and its ,cfterinath we provided them with goods
valued art $11 billion.
Ili tha.t connection and particularly in view of
the Soviet desire to trade on credit the Soviet
Nation is already in default. We have asked for
partial payment for $2.6 billion in civilian-type
goods only on lend-lease account. Our last offer
was to settle for $800 mill ion-which was rej ected.
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Nor have they shown any disposition to resume
talks looking towards a reasonable settlement.
In this state of affairs, extending credit would
be illegal under the Johnson Act. Under that
1934 legislation, long-term private credits to any
defaulting country are prohibited. Short-term
credits are freely available to the Soviet state
trading agency on normal commercial terms.
Lacking credit, how would the Soviet Union
pay for any increase in American trade with them?
By shipping goods to us. But-and this is very
important-there are no Soviet exports needed
by the United States which are not adequately
supplied to us now from sources in the free world
and the uncommitted nations.
Is it not clear that to substitute Soviet for
present sources is wholly inconsistent with our
policy of strengthening our allies and aiding the
underdeveloped countries? Is it not folly to help
Khruschev and Mikoyan to bury us by weakening
the friends we seek to help and becoming de-
pendent on Soviet sources of supply? At the
very least the countries we are now aiding would
require more aid from us.
It is not the Russian people but their rulers who
create obstacles to expansion of peaceful trade.
Their books and speeches make it obvious that
they prefer to do battle than do business in this
field. As for their complaints about our system
of export controls, in recent months, in addition
to the 900 products which require no specific
licenses, the Department of Commerce has
licensed such items as agricultural machinery,
scientific and. professional instruments, antibiotics,
polio vaccine and steel sheet. On the other hand,
the Soviets maintain complete export control
through their state-trading monopoly and use it
.for political objectives.
To say that our ways of thought and action do
not resemble those of the Kremlin is the under-
statement of the week. Permit me a few current
examples :
1. When Secretary Strauss was visited by
Anastas Mikoyan, you will recall that the
Secretary, taken by surprise when his visitor
presented him with a gift of caviar and vodka,
gave Mr. Mikoyan a leather-bound copy of
Washington's Farewell Address and called at-
tention to the words: "Reason and experience
both forbid us to expect that national morality
can prevail in exclusion of religious principle."
Mikoyan replied to the effect that they have a
religion, too -his illustration being sending their
sons off to battle for the Soviet Fatherland.
Secretary Strauss responded that this was not
religion, as we define it, but merely the instinct of
self-preservation on a national. scale---a virtue of
ancient pagan nations as well as modern ones.
At this point Mikoyan declared, "you have
preached the brotherhood of man for 2,000 years
and you have achieved absolutely nothing." To
which Secretary Strauss replied, "That is an
indictment of man but not of religion. You over-
look the fact that the brotherhood of man was
successful in that it eliminated slavery, until you
reinstated it." That ended the conversation.
2. Stemming from the idea that morality has
its origin in the State, the Soviets easily move to
define right and wrong in terms of the objectives
of the State, not in terms of man's destiny as a
child of God.
It is difficult for Americans to grasp the sig-
nificance of this fact, but we must in order to deal
with these men whom J. Edgar Hoover calls
"Masters of Deceit" in his book by that title.
Peace to them means the condition of the world
when it is all communized-in that sense only are
they "peace-loving." Lying, cheating, breaking
agreements solemnly entered into-these are the
highest morality in this nightmare philosophy,
by definition, if they advance the spread of
Communism.
3. From these propositions derives a third:
Soviet trade is a vital weapon in the cold war and
nothing else. The Kremlin apparently does not
think of trade in terms of mutual profit arising
out of exchange of things they have in surplus
for things they need of which others have a
surplus.
In fact, "profit"-in our sense of the term-
doesn't even enter the picture. Under their
pricing system no one--including themselves-
can determine their costs, let alone their profits,
if any. Manpower and other resources, and
their products, are directed internally to a forced
draft development of heavy industry and ex-
ternally wherever they can cause the most
disruption of free world markets and entice
underdeveloped nations into their political web.
Furthermore, the Soviet-true to its Com-
munist principles-seeks no permanent trade
relations with other countries as we do. They
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don't want "satisfied customers"-they want
dependents. And for themselves they seek
eventual autarky, a condition of economic self-
sufliciency based upon a policy of establishing
independence of imports from other countries.
To those who think they can do business with
a regime so conceived and so dedicated I say-
in the American vernacular-"there's no future
in it!"
So far I've been dealing in what Secretary
>trauss calls "constructive negatives." But in
keynoting this Conference, which will address
itself to the problem of how to deal with the
:langers we face in the years ahead, we must also
oe positive. If we do not want to play the game
A 'Russian roulette, what should we do?
The first step is to choose our own target --one
.vhich, unlike Russian roulette, does not involve
,he death and destruction of the players. We
iced to set our sights again on the American
cream of peace, prosperity and progress for all
mnen, everywhere. We need to reassert the values
Ho clearly expressed in the Declaration of Inde-
pendence: that man was born to be free, to enjoy
certain God-given rights which no group--not
even the Government -can legitimately destroy.
Along with political freedom must go economic
freedom. For--in the words of Wendell Willkie-
"Only the strong can be free and only the pro-
ductive can be strong."
The implications of the Communist economic
threat to our security and that of the free world
are clear. The American people, and especially
the American business community, should be
made aware of them and act accordingly. Unless
v: e propose to be "the biggest economic sitting
cock in history," as Herbert Prochnow told the
American Bankers Association here in Chicago
last September, such action must take the form
of hard work, thrift and personal sacrifice -
not leisure, extravagance and personal indulgence.
It's high time for the leaders of American
opinion in all walks of life to put first things
first. For even the Kremlin has learned that the
future we and they hope for while very dif-
ferent in kind requires abundant production
that in turn takes dedicated work and careful
attention to necessary incentive.
]'resident Eisenhower has put first things first
in his uphill, but thus far successful struggle to
relate our economic growth and stability to
our military requirements. Ile sees clearly that
unbalanced budgets and spending the people's
money on nonessentials divert manpower and
other resources to ends which weaken our re-
sistance to the Soviet menace. But he can't go
it alone, or with only minority support.
When at the outset I told of my flying experi-
ence in stormy weather with fair-weather instru-
ments, 1 emphasized that my trouble came of
not knowing the facts. I have tried to sketch the
world environment in which we as a nation now
find ourselves: the danger of playing Russian
roulette; the need to pick our own target and
to make it a good one, one which will achieve
support, both here and abroad. And I noted that
this is no time for what has been called "the high
tide of mediocrity, the great era of the goof-off,
the age of the half-done job ... a stampede away
from responsibility."
So where do we go from here? I have some
suggestions, building upon those which President
Eisenhower has reiterated in his State of the
Union Message, his Economic Report and his
Budget Message.
1. Have faith in freedom as the real revolu-
tionary wave of the future, because it is God-given
and cannot fail so long as it is recognized by us as
God-directed.
2. Know your enemy at home is the greed and
selfishness which may lead any individual or
group to put their short-run and apparent inter-
ests ahead of the public welfare and to worship
the State as the source of all good.
3. IFIaving faith, be missionaries-build a better
public understanding of what are the stakes in
this great struggle for something more than mere
survival.
4. And finally, practice what you preach--for
there is no saving force in hypocrisy.
No one group in our economy can win the
world conflict with communism. We share
responsibility if only because it is contrary to our
traditions and principles to permit such con-
centration of power in any one individual or
group as would be required.
Our Founding Fathers knew that power cor-
rupts and that absolute power corrupts absolutely
----so they established a Constitution with built-in
checks and balances on the governing powers.
Our later response to over-concentration of
economic power was embodied in the Anti-Trust
Laws, but the principle was the same.
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Now that the world has grown smaller and
more inter-dependent, a new power seeks to make
itself absolute. The free world looks to us for
leadership in finding the answer, the checks and
balances which-in God's good time- -will permit
the free peoples, the new and uncommitted na-
tions, and those held in bondage behind the Iron
Curtain, to emerge as brothers to a better life.
So stated, our challenge is not in terms of
material things. These hold no magic to stir
men's souls to great achievement. Instead let
us affirm, with the poet Dryden, that ours is an
"eternal house, not built with mortal hands."
Meanwhile, all mortal hands to the plow-but
let's be sure we have the right soil-and the
right seed to plant!
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THE SOVIET ECONOMIC CHALLENGE: ITS MEANING AND MENACE
by GEORGE MEANY, President, American Federation of Labor-Congress of Industrial Organizations.
(Mr. Meany's schedule made it impossible for him to be present so his address
was transcribed and delivered to the conference electronically on.April 7, 1959)
I appreciate this opportunity to present the
viewpoint of American labor towards a problem
yvhich is of the greatest concern to our country
a id liberty-loving people everywhere. To my
regret, f am unable to be with you in person, as
I had planned. At this moment, f am tied up
with an earnest AFL-CIO effort to strengthen our
country's economy by eliminating one of its most
serious weaknesses -unemployment.
Those who have preceded me on your program
h,uve, I am sure, dealt ably and thoroughly with
the statistical phases of the problem. I want to
p ace before you some considerations of the
" boviel Economic Challenge" as it affects our
working people and the industrially under-
developed areas which are of vital importance in
the world crisis.
1'nless we understand the nature of the Soviet
Sate, we cannot meet its economic threat. The
is a Big Power which is both national and
Communist at the same time. It is a totalitarian
power seeking to conquer and remold the world
on the Soviet pattern. We cannot, therefore,
meet the Soviet economic challenge by applying
the standards we apply to non-totalitarian
countries like Britain, France or Germany. Nor
crn the character of the Soviet economic chal-
lenge he judged simply by statistics about the
volume of its foreign trade, credits or technical
assistance to other countries. The fact that the
Soviet Union, now and then, resorts to the com-
monly accepted normal practices of international
tozde is, likewise, no cue to the aims of its eco-
nomic offensive.
Vor the Soviet Union, foreign trade, aid and
investment policies are primarily political weap-
on s. And by that I mean weapons of Communist
penetration and subversion of the countries
traded with or aided. The economic phase of
the Soviet threat is increasingly important in
Moscow's strategy for world subversion and
conquest -especially of the industrially under-
developed countries.
As you know, the Soviet Union has already
become the second industrial power in the world.
For several decades, Moscow has been concentrat-
ing on the development of heavy industry as
indispensable to the attainment of its overriding
objective -world conquest. We can discount all
the pomp and ceremony surrounding the January
1959 21st. Communist Party Congress where Khru-
schev boasted about Soviet economic achieve-
ments. The Communist boss would have us
believe that Russia is on the threshhold of
economic super-abundance. Ile promised that,
in fifteen years, the U.S.S.R.. would "take first
place in the world not only in total output but
also in per capita production." With the dictator
TKhruschev, as with his predesessor Stalin, every
economic. program is a political manifesto. Yet,
making full allowance for Communist exaggera-
tion, we dare not be complacent. Despots can
organize and increase production-especially,
instruments of war. Hitler has shown that. With
far less resources at its disposal, the Nazi dictator-
ship almost won the war. It is important also
for us to recognize that at current comparative
rates of industrial growth, Communist Russia is
narrowing the gap between its output and ours.
The Soviet economy is organized on a centrally
directed basis. It is a totally regimented economy
-run by a totalitarian dictatorship which denies
all human and democratic rights. This gives
Moscow certain advantages--inhuman advantages
in international power politics and economic
advantages in the world market. The totalitarian
state, based on modern industrial technique and
gigantic military power, is far more dangerous
than were the slave empires of old.
The AFL-CIO is fully aware of the menace of
the Soviet slave system not only to the American
way of life but also to our standard of living.
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Production for world conquest, not consumption
for the people, is the dominant objective of the
Soviet economy. Here is a threat not only to our
livelihood but to our lives as free Americans.
American labor has never been fooled by the
Soviet claim to be a worker's state based on
economic justice and social equality. We know
that the Soviet wage system is more reactionary
than any that exists in so-called capitalistic
countries. There are more than 1,900 different
wage scales in the plants of the twenty-four
industrial ministries. No free people would ever
take the extreme wage differentials of the Soviet
economic system. Even if Khrushchev's most
recently promised wage increase for the lowest
paid Soviet workers were fulfilled, many millions
would still be getting a pitifully low, an inhuman
wage.
Wherever workers are free, they have always
sought a shorter work-week. Modern industrial
techniques make the shorter workday not only
possible, not only desirable from the human
cultural point of view, but even necessary from
the economic viewpoint. In the ranks of world
labor, the American trade union movement has
been. the pioneer and the pacesetter for the
shorter workday. That is why we have been
particularly interested to see how the Soviet
rulers have treated the problem of the shorter
workday as their modern industry was being
developed. One of the very first decrees of the
Soviet dictatorship (October 29, :191.7) was that
the workday must not exceed tight hours. Yet,
six years later, the 12th Soviet Communist Party
Congress had to admit that there was no real
enforcement of the labor laws regarding the
"length of a working day for the various categories
of workers." Nearly thirty-two years ago on
October 1.5, 1.927-the Soviet Communist Party
Central Executive Committee promised even
more-a seven-hour day. But this promise was
only a maneuver by Stalin to strengthen. his hand
in his fight against the Trotskyite opposition. On
January 26, 1940, the eight-hour day was officially
re-established on the ground that "the strained
international situation and the threat of war
compelled the Soviet state to abandon temporarily
the level of legal guarantees already reached."
The Khrushchev promise for a 7-hour five-day
week--or the shortest work week in the world by
1965-should be considered in the light of all
past similar Soviet promises to its working people.
Khrushchev assumes that we in America and the
workers in the rest of the world will stand still. and
make no progress in securing a shorter workday.
Furthermore, all. of Khrushchev's promises to have
Soviet labor share in the benefits of the progress
of Soviet industry are contingent upon speeded-up
production, upon intensified exploitation of the
workers. Thus, if there should be any shortening
of their hours of toil, the Soviet workers would,
first of all, have to work much harder to receive
as much pay as they received before.
You might ask: flow can Khrushchev get away
with such intensified exploitation of the Soviet
workers? The answer is clear: Under the Soviet
system, no citizen can question, let alone resist
Communist state domination and despotism.
In the so-called Soviet Paradise, the working man,
like every one else, is denied every democratic
right. Free trade unions and all other democratic
institutions are prohibited. The all-powerful
Communist Party bosses rule and run everything,
everybody, every institution. The so-called
trade unions behind the Iron Curtain are pitiful
and pliant tools of the Communist Party. Thus,
the central news organ of the Soviet Communist
Party, Pravda, just two weeks ago declared on the
opening day of the 12th Congress of the so-called
Soviet, trade unions:
"The entire work of the Soviet trade unions
is being directed by the Communist Party.
Here lies their great strength and the basis
of their successes. The 12th Congress will
demonstrate the mighty unity of Soviet
trade unions and all the working people of
our country around the Communist Party
and their determination to implement suc-
cessfully the decisions of the 21st C.P.S.U.
Congress." (March 23, 1959).
This degradation and exploitation of labor is
inherent in and inseparable from totalitarian
Communism. This sinister feature of the Com-
munist system must never be lost sight of by us
when. we seek to keep our economy free and try
to improve and strengthen it as a free economy so
that we can meet the Soviet economic challenge.
In the hands of the Berlin-Tokyo Axis, bilateral
trade arrangements and dumping were potent
weapons in. its drive for world power. In. the
hands of the Moscow-Peking Axis such weapons
are extremely dangerous. During the Thirteenth
United Nations' General Assembly sessions,
Bolivia, Indonesia, Malaya, and Thailand com-
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plained against the Soviet Union (which is a
tin purchaser and not a tin producer) dumping
tin. on the world market. The Bolivian delegate
said that the U.S.S.R. was guilty of "economic
aggression designed to bring about the collapse
of the international tin market." Bolivia was
hardest hit when world tin prices suffered a drop
of 127. At the same time that Moscow was
striking at Bolivian economy and inflicting
misery on its working people, the Soviet fifth
column in Bolivia, the Communists, were violently
denouncing the United States and the Bolivian
government for the unemployment caused by
their masters in Moscow. Here we have a typical
example of the tactics of international Commu-
nist gangsters operating both sides of the street.
Make no mistake about it. Soviet dumping--
whether it be tin, aluminum, wheat, rice or
cotton -is not due to any economic compulsion
at home. If the Soviet people were given more
consumer goods, Russia would today be short of
tin, aluminum and cotton. In fact, the Soviet
Government often resells at lower prices, in the
very countries where it had previously purchased
the particular commodity. Egyptian cotton is a
case in point. In his interview with a group of
United States Senators in 1955, Khrushchev gave
the real reason for such Soviet economic practices
when he said: "We value trade least for economic
reasons and most for political purposes."
The Chinese Communist dictatorship apes the
Kremlin's dumping policies. In this connection,
the daily Malaya Mail of Kuala Lampur recently
arrived at a very significant conclusion. Coin-
uienting on Chinese Communist dumping in
Southeast Asia, it stressed that trading with the
Communist countries "carries with it the seeds of
economic colonialism far worse than anything
which the Western powers imposed in the last
century." (The Eastern Economist, January 6,
1959, Page 210).
Moscow has made much noise about its attach-
ing no strings to any credits or economic aid it
may give. The experience of Communist Yugo-
slavia exposes the fraud of this Kremlin claim. It
was not economic competition, but political
differences between two Communist regimes
which led Khrushchev to withhold credits from
Tito. And while Moscow attacks Tito for seeking
credits from the United States, its Minister of
Foreign Trade, N. S. Patolichev, pleads for
Wall Street granting "long-term credits on
customary terms" to the Kremlin. (Pravda,
February 18, 1959).
In reality, the Soviet Union attaches not strings
but ropes to the "aid" it is prepared to give other
countries. Nasser could say much to enlighten
the world on this score. And the Burmese Govern-
ment could tell quite a story about the oper-
ations of the Bank of China in Burma in finan-
cing the Communist conspiracy and its military
operations against this courageous Asian people.
It is not concern for the needs of the people
but only interest in advancing Communist im-
perialism which explains Peking's recent gift of
six factories to Yemen, although this extremely
backward country has no labor force to operate
these plants. The same imperialist interest
accounts for Moscow's rushing into the Middle
East (Egypt, Syria and Iraq) hundreds of millions
of dollars of arms-obsolete by present interna-
tional standards. Surely, in such Soviet aid there
is not a trace of desire to promote the stability
and prosperity of these impoverished peoples.
The most serious impact of the expanded
Soviet industrial power is on the newly estab-
lished and economically underdeveloped countries
of Africa and Asia. These countries are in a great
hurry to industrialize and prosper. Because of
the vast industrial advances made by the U.S.S.R.
in forty years, some leaders of these newly in-
dependent nations tend to look upon Communist
Russia as a model for a short cut to rapid in-
dustrialization and prosperity. In their oft
nobly motivated impatience some of these leaders
fail to see that the Communist shortcut can only
short-circuit their newly-won national inde-
pendence and destroy the democratic liberties
they won after many years of bitter struggle.
The Soviet bloc has been rather skillful in its
demagogy, timing and tactics --all calculated to
give the impression of Communist interest in the
well-being of the people. Soviet economic
penetration of these young nations would bring
rewards to the U.S.S.R. far exceeding in value the
volume of Soviet credit, loans, trade and aid.
Should Communist Russia ever equal or exceed
United States industrial productive capacity,
this phase of the Soviet threat would become even
more serious.
While we cannot overemphasize the impact of
the Soviet economic offensive on the under-
developed areas, we must realize that these areas
are not really the primary target of the economic
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phase of the Soviet drive for world power. Through
its economic and other operations in these areas,
Moscow is trying to hit the more industrially
developed and stronger democracies like our own
country and its allies. Soviet trade with and
assistance to certain countries in Asia, Africa and
Latin America are, in large measure, back-door
Kremlin operations against our country and our
allies. Though the U.S.S.R. is today the biggest
and most ruthless colonialist power, Moscow and
its agents and apologists throughout the world
are hypocritically posing as enemies of coloni-
alism. Thus, some of our allies who still cling to
colonial policies have armed the Communist
demagogues with a most powerful weapon against
us in the countries which have recently won their
national independence and in those still struggling
for national freedom.
Though the volume of Soviet economic effort in
the arena of international trade and aid is still
small in comparison with ours, though Moscow
may often fall behind in translating its promises
into performances for the economically under-
developed areas, we have no reason to be com-
placent. The Kremlin rulers are tireless, shrewd,
alert. They are not restrained by any moral
compunctions or human values in exploiting
differences, divisions and difficulties in the camp
of the free world. Everything they do is geared to
undermining and destroying the free world
defensive alliances and barriers to their plans for
world conquest and Communist enslavement.
Khrushchev was engaged in far more than
, vishful thinking when he boastfully said on
November 18, 1956: "Whether you like it or not,
history is on our side. We will bury you." And
he will, if we lot him. He will, if we do the wrong
thing or do nothing to stop him.
I am not going to try to give you a blueprint
for meeting the Soviet economic challenge. We
should not try for blueprints in the face of so
complex a danger and so dangerous an enemy.
All I want to offer is a few guiding lines to show
the direction which we of American labor believe
our country should take in order to meet the
gravest menace of our age.
Our country should develop a well-rounded
program of economic growth. We can and should
increase the growth of our production with a view
of simultaneously raising our levels of consump-
tion and standard of living. We must make
America again the indisputable model of eeo-
nomic efficiency and prosperity. This means
American leadership in every phase of scientific,
technical and economic achievements. The best
minds of our country should be utilized to over-
come the unemployment-particularly the tech-
nological unemployment due to automation-
plaguing our economy even during a period of
recovery from recession.
Our country should improve and expand its
foreign aid program. Our foreign aid and technical
assistance program should be on a two-year
instead of an annual basis. This would remove
much of the uncertainty surrounding our country's
present mutual security and overseas aid program.
The "Development Loan li und" and the Export
and Import Bank can and should play an expand-
ing role in our nation's stepped-up effort to meet
the Soviet economic challenge.
Our economic and technical assistance should
be increasingly accompanied by efforts to en-
courage the development of voluntary organiza-
tions in the countries we help. American in-
vestors, engineers, tradesmen, educators, trade
unionists and scientists should encourage the
setting up of cultural bodies, friendship societies,
free trade unions and trade associations. Such
voluntary institutions can serve as the best
instruments for vitalizing the young rising
democracies. In this regard, American business
groups can learn from the experience of American
labor which has, for years, been pursuing active
and expanding relations with the free trade
union movements abroad.
Our government, foundations, churches, uni-
versities and other voluntary organizations should
coordinate and expand their efforts to increase sub-
stantially the number of scholarships available to
students, especially from economically under-
developed countries, in American schools and
special study projects.
Soviet imperialism and its international sub-
versive Communist conspiracy have torn a huge
gap in the free world economy. The Moscow-
Peking Axis has taken a billion people out of the
world market, put them behind the Iron Curtain,
and established a tight economic bloc of its own
to deal with and fight against the non-Communist
economics. This gap must be filled by the free
world. Otherwise, it can never meet the Soviet
economic challenge. The economies of the free
nations must be invigorated and expanded and
their prosperity assured and enhanced.
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Towards this end, our country should take the
lead in organizing a free world prosperity con-
ference. This free world economic conference
should devise measures to stabilize basic com-
modity and raze material prices; reduce,
gradually and systematically, the barriers to
expanding trade between the free nations; raise
their living standards; increase the productivity
and purchasing power within each free country,
and establish a substantial international con-
sumers' credit fund for facilitating and buying of
goods by the free peoples of Asia, the Middle
lust, Africa and Latin America.
Let the free world stop trying to expand its
trade with the Soviet Union and its satellites. Let
us stop giving the Moscow-Peking Axis credits.
1,ct us stop providing the Communist dictator-
ships with technicians to help them overcome the
backwardness and weaknesses in their agricultural
and certain industrial sectors (chemical industry)
of their economy. Let no free nation. seek
through trade, technical aid and credits to help
Communist China build a modern industrial
economy geared to conquering all Asia for
Communism. One Tibet is tragedy enough! It
is more than enough! Let no free nation seek,
through expanding commercial and financial
relations with Peking, to ease the burdens and
strains on Soviet economy resulting from its
having to help ll.ed China. We should do nothing
to facilitate Moscow's efforts to build a powerful
Chinese industrial and military machine for
conquering all Asia for Communism.
Our proposals are made in the hope of stimulat-
ing thought and additional proposals by others.
Our nation's foreign economic and political
policy does not suffer from rigidity. It suffers
from timidity. Let us not be afraid of the new.
Let us do more than meet the enemies' moves
with countermoves. Let us come forward with
our own proposals, so as to take away the initia-
tive and offensive from the Communists who are
mortal enemies of our free way of life and the
moral and. ethical values we cherish so highly.
American labor is fully aware of the Soviet
threat to our democratic way of life, to human
freedom and well-being and to world peace.
Today, in the face of the crisis over Berlin, the
American people realize more than ever before
that Soviet imperialism is the gravest threat to
our national security and peace. Of course, we
must be strong enough militarily to meet and
defeat the threat of Soviet military aggression.
But, since the Soviet economic challenge is a
vital phase of Moscow's drive for world conquest
and Communist control, we must simultaneously
be able to meet the economic phase of the Soviet
threat with the same sense of urgency as we view
the military menace.
The American people have achieved the greatest
prosperity known to man through the highest
freedom. Our nation is now on the threshhold of
a new period in its progress and prowess. This
stage in the growth of our national freedom,
security and prosperity demands that we make
an all-out effort to help other nations also be-
come enriched in human liberty and material
well-being.
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 CHAPTER THREE
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WHAT IS THE POTENTIAL OF THE SOVIET ECONOMIC CHALLENGE?
By JOSLPII L. SINGLETON, Vice President, Industries Group, Allis-Chalmers Manufacturing Company.
The general subject of this conference --the
Soviet Economic Challenge -is a challenging one
indeed for anyone in the world. The subject I
have been asked to talk about, namely, what is
the potential of the Soviet economic challenge,
is certainly a challenge to me.
In order to discuss this subject I will fall back
on my limited knowledge of economics, what I
have been able to read, and impressions received
on my recent visit behind the Iron Curtain into
Russia itself.
IF would like to list five assumptions from which
my discussion proceeds :
1 - I do not believe that Russia wants war and
because of this, I am assuming that there will be
no global war in the foreseeable future and that
there will remain a balance of military power.
2 - The fight for world influence or allegiance
exists not between the United States and Russia
but rather between the Sino-Soviet Bloc and the
committed Western powers.
3 - Economic warfare will be directed chiefly
toward the uncommitted, underdeveloped nations
of the world. In this assumption we must realize
that the Soviet directed bloc will attempt to
"chip away pieces" from the committed Western
powers by making them economically less inter-
dependent.
4 - My fourth assumption is that the under-
developed, uncommitted countries of the world
9.rc presently striving toward industrial growth.
We must realize that they are becoming more
nationalistic and are ready to pay the price of
growth. Consequently, they are very much
interested in acquiring capital goods rather
than consumer items and luxury goods food
excepted.
5 - My fifth and final assumption is that among
the committed Western powers, there will exist
sufficient cooperation, integration and direction of
strategy so that we can expect to win an economic
war if we have equal or superior economic re-
sources.
On the basis of these five assumptions, I would
like to discuss the subject assigned to me.
I think you all realize that each one of these
assumptions could very well be a subject of a
speech or for that matter, a book, but in order
to get into my particular part in this program I
had to state them so that you would know the
context of the reasoning which I will put forth.
I think I can best approach this problem of the
potential of the Soviet economic challenge by
tying it to three main points: power, resources and
people; for I think they are basic in this discussion.
First then, let's look at power and the need for
it in Russia, as well as here in the United States
and the world. One could say that to know the
story of power generation is to know why man has
advanced more in the last few years than in the
uncounted centuries before. Power is vital to our
everyday living in this country and power is vital
to the everyday living and the economic advances
of any country on the face of the globe.
When we speak of power I think that we refer
to two sources: one, electrical power, which is all
important to the industrial advance of any
country; and two, mechanical power, which is
vital in other areas of any economy.
Right here I will discuss Russia's need for
electrical power. Later I would like to touch,
very briefly, on some of my impressions of
Russia from a mechanical power standpoint.
Premier Khrushchev on August 10 of last year,
in making a speech dedicating the Kuibyshev
Electrical Power Plant, stated - more dra-
matically and forcefully than I can possibly do-
the Russian need for electrical power. Because
of this, I would like to read some excerpts from
his speech which point up, in his mind, the im-
portance of electrical power in this economic
struggle between the East and the West.
"Reduction in construction time of the
power plants will help to accelerate the
solution of the basic economic problem-
to reach and to overtake the advanced
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capitalistic countries in per capita
productivity. Time here is of prime
importance."
"The idea is to give preference to the
steam power plants in order to gain time
in competition with capitalism-to reach
and to overtake the United States of
America in per capita production."
"The time factor in this deal is more
expensive than the immediate material
costs involved, because no money can
compensate for the time lost. In our
peaceful competition with the capital-
istic countries we have to gain 10-15 years."
"Therefore, in connection with the new
discovered resources of energy in the
form of cheap coal, natural gas and oil,
it is necessary for us to step up the build-
ing of steam power plants. It will give
us a fast return on the money invested
in power plants, and what is more im-
portant, will provide the country with
needed electrical energy in a short time."
These short excerpts from a very long speech
point to the fact that power generation is of
prime importance in the Russian economic war
with the West.. We should also note, that while
this economic warfare will be conducted by the
Sino-Soviet Bloc against the committed Western
powers the United States is Russia's personal
opponent. The Russian goal is to surpass the
United States in the matter of power generation.
While in Russia I gathered a large quantity of
pamphlets and statistical information booklets.
We have translated just enough of the statistical
data, technical bulletins, etc., to definitely con-
clude that there are many inconsistencies, making
it, dif licult to place very much trust in any data
and figures which were given to our party by our
Russian hosts from a power generation standpoint..
It seems obvious that technical reports and
related statistics are prepared by sincere scientists
and engineers. It is believed that for the most
part they stick to the facts; nevertheless, it also
seems obvious that these reports have been
reviewed by others and politics injected. The
politicians are apparently not familiar with
technical terms, hence most of their reports are
quite inconsistent since, in many instances, data
from closely related reports do not form a con-
sistent coordinated pattern.
It is my own personal reaction, therefore, that
when they refer to a total kilowatt generating
capacity of 48 million kilowatts they are definitely
including all power, whether it is utility or in-
dustrial. Personally, I would reduce this to
closer to 30 million. Then this would compare
with our 160 million kilowatts, which was the
predicted total capacity for the United States by
the end of 1958.
They have indicated a program of increasing
their generating capability by 60 million kilowatts
in the seven years ending in 1965. Our estimates
of their manufacturing capacity, while of necessity
based on scant information, indicate that it will
take them approximately seventeen years to
reach their goal.
Although we were shown some of their nuclear
power developments, and know of the Geneva
press release on September 8, of last year, which
told of the placing in operation of a 100-megawatt
nuclear plant in Siberia, it is my feeling that
Russia is not emphasizing its nuclear energy
developments.
From my personal observations, it hardly
seems possible that the Soviet Union has actually
placed in service, under load, a nuclear heat
source power generating plant of 100-megawatt
electrical output. The August 10, 1958 speech by
Nikita Khrushchev, from which I quoted earlier,
indicates a definite trend in favor of steam power
plants which employ fossil fuels, instead of large
hydroelectric power developments, because of
the shorter construction time involved. Mr.
Khrushchev did not mention nuclear power plants
at all in this talk.
In any event, it is conceded that they are
making a tremendous effort to develop power.
There is little question but that the Soviet
engineers are working hard at their long-distance,
high voltage transmission line development and
that they are achieving a measure of success in
operating these systems. One cannot be certain
that they are achieving transmission efficiencies,
as high as we are in the United States.
In concluding this portion of my talk concerning
electrical power generation in. the Soviet Union,
I would like to say that the Russians showed us a
great deal while we were in their country. I
believe their theory is on a par with ours or ahead
in some areas, but they lag behind us in practical
application of science and engineering. Their
design is sound but also behind ours. Their
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workmanship and quality of materials do not
measure up at all. I estimate that they are 25
years behind us in steam turbines, transformers,
motors-in fact, I think they are behind us in
just about everything with the possible exception
of hydraulic turbines. Most of the products I saw
would not be good enough to sell in. this country.
Now let's turn our attention to my impressions
of the other facet of the power picture, namely,
mechanical power.
Going through the manufacturing plants I saw
only one fork lift truck. On all the farms, I saw
only one type of crawler tractor--an indication
of extensive standardization. Horses and beasts
of burden are used to a large extent in rural areas.
The wheat is cut with a mechanized unit one
might calla "combine." This threshing operation
does not do a good job in separating the chaff from
the grain, for we passed numerous areas in
farming communities where women had spread
the wheat on the highway to dry and then
further clean it.
The shortage of passenger automobiles is very
noticeable but the abundance of standardized
trucks is in evidence everywhere. For example,
we saw open trucks with metal bodies hauling
concrete.
The shortage of cement in Russia is amazing.
At one power plant being built near Stalingrad,
I saw a cement plant erected on the very site. ] n
discussing this with my guide I received the
impression that this plant was moved from job
to job. Thinking back, I cannot remember
seeing a single portable concrete mixer in all of
our travels in that country.
From these scattered impressions, which I.
have just related to you, and others which I do
not have time to discuss here today, I have
arrived at the conclusion that Russia is far
behind us in the use of mechanized power, just
the same as they are far behind us in the avail-
ability of electric power.
Therefore, in assessing the potential of the
Soviet economic challenge to the West I am
firmly convinced that Russia and the Sino-Soviet
Bloc are not close to us in the power field at the
present time. However, I don't think that this
country or its friends should become complacent,
for I believe that we must maintain our leadership
in the overall field of power if we are to stave off
the Soviet challenge.
Now let us consider the other area of this po-
tential economic challenge which Russia presents,
namely, in the area of resources.
When t speak of resources, I am talking about
three types: natural resources, capital resources
and human resources. They are all important; to
speak of one without the other two would be
leaving the story incomplete. Because of the
importance I place on "power," I discussed it as
a separate part of this talk, even though it is a
capital resource as such.
To begin with, it must be remembered that
practically all of the Soviet Union lies north of
the latitude of Montreal, Canada and that
Moscow itself is located at a latitude that runs
through Hudson Bay. The Soviet Union is a
large country about three times the size of ours.
They are not blessed with natural resources in
desirable economic locations such as we enjoy in
the United States. The size of the country and
the widespread distribution of these natural
resources impose terrific problems from an
industrial, transportation and sociological stand-
point, in Russia's advance.
For example, the committed Western nations
have greater known reserves of coal, crude oil and
iron ore than does the Sino-Soviet Bloc. We
know that abundant iron ore reserves exist in
Africa and oil exists in the Middle East, but
neither Africa nor the Middle East desires to be
dominated by Russia and it seems to me that we,
and the other Western nations, must be vigilant
that this situation does not change.
Siberia is the storehouse of Russia's natural
resources. It is a thinly populated area and
transportation networks such as roads, and
railroads are at best, poor, if existent at all. The
weather is cold and it becomes extremely impor-
tant as to how effectively people may be forced
to develop this area or to mine its resources.
]even as we talk about the lack of an adequate
transportation system in Siberia one must realize
that Russia, as a country, lacks adequate trans-
portation facilities and therein lies the secret as
to why the natural resources of this tremendous
area have not been developed before now. The
lack of an adequate transportation system has
made it necessary for these people to locate their
power plants in many instances far from where
the power is actually needed and. near the source
of coal. This, then, is the reason why the Russians
must use very high voltage transmission lines-
higher than those used in the United States.
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The rivers in the Urals and Siberia flow north
and are frozen over during a large part of the
year. Because of this they are not suitable for
year round water transportation nor development
of hydro-electric power.
In my mind, Russia has tremendous problems
in making use of its natural resources and until
these problems can be solved, the men planning
the technological development have their work
cut out for them.
The next area of resources which I would like
to discuss is that of capital equipment. Some
of you in the audience today may not agree that
capital equipment is a resource. To you l would
like to point out that capital equipment is vitally
necessary if Russia or any other nation is to com-
pete in economic warfare.
The capital requirements to :meet planned Rus-
sian industrial growth could consume every
capital item produced by the Sino-Soviet Bloc.
Meanwhile there will be pressures on Russia to
export capital goods to Communistic China and
other countries within the Bloc. In considering
the potential of the Soviet economic challenge we
niusi; bear in mind that the underdeveloped, un-
cormnitted nations of the world need capital
goods to improve their lot. With capital goods
these nations want the "know-how" which must
accompany there. If Russia is to develop her own
industries then she cannot export sizable amounts
of capital goods.
'Moreover, during my visit to Russia, I was
amazed to observe that under the Russian in-?
dustrial bonus system these people are taking
care of only the essential elements of repair. In
short, they are doing just enough repair work to
keep the equipment running. I believe this lack
of maintenance on their part will cause them
difficulty in the future. When a piece of equip-
ment becomes so badly rundown that it can no
longer be repaired, it will have to be replaced.
Replacing this equipment will not have the effect
of building additional capacity to any large
extent, except for that due to improvement in
design and operation.
'I'hc industrial shops we saw were not as neat
or as well lighted as ours and the machine tools
seemed much older. In fact, I saw many machine
tools which had been sent to Llussia under lend-
lease and are still in use. In visiting these plants
one cannot help but notice the lack of concern of
the Soviet industrialists for effective controls
over air and water pollution and the admittedly
poor safety practices which are taking their
toll of human resources.
:411. of these things indicate to me that Russia
has tremendous problems confronting her and a
long way to go before attaining the production
strength we have in this country.
Finally, in reference to human
Russia and her satellites are obviously made up
of people the same as the Western powers.
History shows that people will not remain
frustrated indefinitely without improvement in
their living standards. For this reason it can be
expected that an increasing share of the output
in the communistic countries will go for housing,
transportation, communications and the like.
And as their living standards improve, these
people will demand more along this line.
We saw tremendous apartment projects being
built in the large urban centers of Russia. How-
ever, when we traveled out into the countryside,
we found log cabins and thatched roofs are the
rule. These apartment houses could easily
become slums in the future. In addition, the
rural people are going to demand more of their
Russian leaders' attention. These, then, are
two potential trouble spots.
The Soviets are making great strides in training
their people. However, I don't believe that the
rapid growth of the number of educated people
has been matched by the quality of their college
graduates. I bring this point up because I do not
believe they can turn out professional teachers
as rapidly as they are trying to do without some
loss of quality in the teaching profession. One
need only to look back on. our own problems in
this country of adequately staffing our universities
and the problems we face in the future along this
line. We must remember that the technical
ability of the peoples comprising the committed
Western powers have been developed over many
generations. It is unlikely then that the Soviet,
Bloc can develop in one generation, a qualified
technical force of professionals equal to ours. To
point out the problems they are having one
need only to look back a few months and note
that PRAVDA recently published the fact that
they would probably change from a ten-year
compulsory schooling program to a seven-year
program. The weight of this education problem
is certainly upon them.
I would also like to submit this question to you
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today. How can you continue to educate people
without having them eventually demand more
as a result of their increased knowledge? This,
I think, is the problem facing Russia today as
far as her people are concerned. I don't think
the Russian leaders can constantly show people
things in store windows, which people find
difficult to purchase, without making more of
these things available to them and satisfying
their desires in this area.
I could go on and point out to you the lack of
refrigeration, more dramatically illustrate the
lack of housing and other facilities; but I think it
will suffice to say that the demands of the Russian
people, as well as the people in the satellites, will
have to be met eventually.
In conclusion I would like to point out that the
production levels of the Western committed
nations are vastly larger than the Sino-Soviet
Bloc. For example, the West produces three
times the crude steel, four times the crude pe-
troleum and almost twice the coal. Comparing
the United States with Russia directly, we exceed
Russia by a substantial margin in the production
of almost every item necessary to make capital
goods and consumer goods.
I do think that Russians are capable of doing
anything that they feel is important to them in a
particular technical area. But I am also con-
vinced that they lack depth in technical personnel
as well as breadth. I don't know how many
important projects they could do all it once.
however, I think that we must realize, that in
any specialized area, the Soviet Union does pose
a threat to our way of life.
Throughout this discussion, I have given you
my candid opinion of the potential of the Soviet
economic challenge. I chose to discuss the subject
from the standpoint of power, resources and people
because of .my firm belief that these three elements
constitute that challenge. I have every confidence
that we can meet this challenge successfully, not
only as a nation but, more importantly, in cooper-
ation with the other committed Western Nations.
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Part Two
Technological Aspects of the Trade Threat
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 Approved For Release 2005/01/11 : CIA-RDP88-01315R000300160040-1 CHAPTER FOUR
TRADE WITH SOVIET RUSSIA
By GEN. JOHN F. HULL, (Ret.), President, Manufacturing Chemists' Association, Inc.; Former United
States and United Nations Commander-In-Chief, Far Fast.
I will begin my remarks with three quotations.
The time when each of these statements was made
is important.
On the eve of the October Revolution, 1917,
Lenin stated: "War is inexorable. It poses the
question with ruthless sharpness: To perish, or
to catch up with the leading countries and out-
strip them economically."
1~'rom "Stalin oil Revolution," 1948: "The goal
is to consolidate the dictatorship of the proletariat
in one country, using it as a base for the overthrow
of imperialism in all countries."
Khrushchev stated in May 1957: "We think
capitalism should be destroyed not by means of
war and military conflict, but through an ideo-
logical and economic struggle."
This implacable enmity on the part of Soviet
Russia for the Western Democracies has remained
steadfast for 42 years. It is the central theme of
whatever we are discussing at this conference. It
is clear that now the Russians feel strong enough
to engage in open economic conflict, with the
often declared objectives of "out-stripping, over-
throwing" and eventually controlling the western
world -all the world.
This is the new dimension I was referring to.
Formerly, when military and industrial men got
together, they were chiefly interested in how
much military hardware could be produced with
minimum disruption of civilian production. But
today industry and all segments of the economy
are at the front; the military is simply their
reserve, to step in if they should fail.
The stark fact is that we are now, and have
been for some time, engaged in. economic war.
It will be long, bitter and costly. It can be lost,
and if it is, our children may live in communes,
ruled by Russia. When no shots are being fired,
these may sound like strong words. But recent
world history has made such words disastrously
realistic.
I have no fear that the United States and its
Allies cannot win this contest. The true eco-
nomic strength of the United States and the West
has been openly demonstrated in the Marshall
Plan aid and the recovery of Western Europe
and Japan from the devastation of World War IT.
At the same time, the United States economy has
burgeoned at a faster rate than ever before.
I have another reason for confidence. The tide
of history, as far back as we can go, has moved
steadily toward greater liberty and dignity of the
individual and away from tyranny. Under every
economic system man has been able to devise, his
aspirations have been unchanged. Canute-like,
the Russian dictators have ordered this tide to
turn back. 't'hey seem to forget the fates of King
John, the Bourbons, Napoleon, Hitler and
Mussolini.
But this is not a contest we can win by com-
placency or bungling. It is the biggest, most
complex, and for the largest stakes, of any
economic contest the world has yet seen. Our
job now is to see how it will be won.
I suppose it would be academic for me to try to
prove, in this gathering, that we are in an economic
war. I simply want to remind you that the
Russians have been saying so for some time,
have continuously reiterated their objective
of world domination, and have been backing up
their words by action. When Khrushchev says
he wants to destroy capitalist democracies by
economic, rather than military, means-I believe
him. I also believe he meant it when he said,
"But of course we must realize that we cannot co-
exist eternally. One of us must go to his grave.
We do not want to go to the grave. They (the
Western Powers) don't want to go to their graves
either. So what must be done? We must push them
to their graves."
I do not believe, moreover, that we should be
lulled into any sense of false security by his
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protestations for peace, or relax our military
guard. Naturally, the Russians hope to gain
their ends by methods short of military war,
but this does not alter the ends. And the Soviets
have repeatedly shown their willingness to use
military threats and adventures as a means to
-achieve these ends. Witness Berlin, Lebanon,
the Formosa Straits, Korea, Greece, Hungary,
Indochina, and the rest.
Their economic and military policies have the
lame goals. And even though they may honestly
hope to avoid total war, their economic policies
nurture the seeds of war.
As some of you may know, I have had some
experience dealing with the Communists. I
was at Yalta. I was at Potsdam. When I was
"ommander-in-Chief of the United Nations
Forces in the Far East, my representative sat
across the table from the Communists week after
,veek and month after month at Pan-munjom.
4 basic characteristic of their creed is that the
end justifies the means. To them, the sanctity
of an agreement has no value unless it serves the
purpose they have in mind at the time. It's
difficult for an American to understand people
who will look you straight in the eye and lie
to you when you know they are lying and they
know you know they are lying. But this is some-
thing we must always remember in dealing with
them.: It's the end they seek, and any procedure
that will assist them in obtaining their objective
is all right in their view. Truthfulness, frankness,
ethics -just simply do not matter or exist.
I want to speak from the viewpoint of the
American chemical industry, of which I am
now a part. The IT. S. chemical industry is the
one Khrushchev specifically courted in his efforts
to get American industry to support his efforts.
You may recall that in May 1958 Khrushchev
made a speech to the Plenary Session of the Cen-
tral Committee of the Communist party about
the needs for chemical production in Russia.
"The chemical industry," he said, "is assuming
growing importance in the development of the
country's economy and in the development of
r iany branches of the national economy."
After pointing up vividly how important chem-
ir.al production is to the whole Soviet economy,
which it certainly is, he castigated his predecessors
f >r failing to build it up.
Then, on June 2nd, 1958, Khrushchev wrote to
President Eisenhower proposing the Russian
purchase of U. S. chemical production equipment
and technical information. (It was natural,
I suppose, for him to "go to the top" for this type
of deal, although the President doesn't own any
chemical production facilities that I know of.
The President, quite correctly, referred Khrush-
chev to the proper parties. I have often wondered
whether the Russians or others abroad got this
point about the difference between our way of
doing business and that of a state-controlled
economy. The Russian Government did, to a
certain extent, because it very soon opened
direct negotiations with American firms.)
The chemical industry quickly saw the implica-
tions of Khrushchev's bid. This was not a casual
or routine trade matter which, as the Russians
said, would alleviate the American recession.
After all, he was offering only $100 million for
what he wanted. It was a calculated, bold foray
in the economic war. Members of the industry
quickly decided that the full implications of this
action should be called to the attention of our
Government.
The chemical industry's position was carefully
studied and then checked with the members of the
Manufacturing Chemists' Association. Not one
member replied that he was in favor of selling
what the Russians wanted to buy. Our position
was spelled out carefully in a letter to the Sec-
retary of Commerce, and representatives of
leading chemical firms joined me in calling on
Commerce Department and State Department
officials to discuss the problem. Our position has
been reiterated to Secretary Strauss, to Senator
Fulbright, Chairman of the Senate Foreign
Relations Committee, and to Representative
Morgan, Chairman of the House Foreign Affairs
Committee.
We have made it clear that the U. S. Chemical
Industry is unalterably opposed to selling to the
Russians the chemical plants, processes and
technology they are so anxious to acquire. We
have also made it clear that we have no objection
to selling them finished chemicals, within the
restrictions of security policy, or even buying
goods from them in legitimate trade.
This is a simple statement of our position, but
it deserves closer examination so that it will be
clearly understood. We strongly suspect that the
same position should apply in other branches of
American technology, and we feel that national
policy should reflect and support this position.
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Among the very great advantages the United
States has over Soviet Russia and the Communist
Bloc nations are our technological advances and
the know-how which exists in the chemical
industry in this country. This is evidenced by the
fact that Mr. Khrushchev is seeking assistance
from the United States in this very field. In the
economic war which Mr. Khrushchev himself has
declared, these are major factors in international
economic competition. Soviet Russia has seen
fit to devote the energies of her scientists to the
development of the sinews of war. She now asks
us to sell her the technical knowledge which would
bring her abreast of this country in the field of
industrial chemistry.
Chemical know-how cannot be isolated to a
particular product but covers many other fields
of production. Often times, the same products in
the very fields referred to by Mr. Krushchev as a
primary area of chemical development in Russia,
for example, synthetic materials such as fibers,
plastics and synthetic rubber, have military uses
as well as peaceful uses. Even though the end
products may have different specifications for
military use as against civilian use, the very
processes and know-how employed to make both
are substantially the same.
Soviet Russia has offered to purchase chemical
plants complete. A chemical manufacturing
plant differs somewhat from many other manu-
facturing plants. Built into the chemical plant
designed to produce a particular product is neces-
sarily the technical knowledge and know-how
necessary to produce that product. In other
words, chemical plants cannot be sold to the
Russians and the Russian personnel trained to
operate them without giving them the benefit of
our advances in this field.
As Mr. Khrushchev has said, plant purchases
and know-how from capitalist countries would
save Soviet time in the "creation of plans and
mastering the production of new types of equip-
ment." The importance of this proposed short
cut is emphasized when one recalls the frequent
reports that more scientists, engineers and tech-
nicians are being trained in the Soviet Union than
in the United States. We should not contribute to
an even more dangerous concentration of Soviet
skills which are already available for direct mili-
tary applications by relieving them of the need to
develop the chemical know-how which the West
has acquired with such effort and at such cost.
We are becoming increasingly familiar with
Russia's use of trade and goods to weaken other
economies or to capture markets for her exclusive
province. This is not a plan the Russians have
for something they are going to do. This is
a practice now going on at a scale larger than
many of us realize. The key to it is that Russian
prices do not have to be related to their own
economy, and are related to the world economy
only insofar as they can disrupt segments of that
economy. In other words, the Russians can
and do cut prices to drive out competition, but
when they are sure of their markets, as in their
dependent countries in Europe, they set their
prices high.
They have followed these practices in con-
centrated spots, especially in the Middle East,
Africa, the Far East and South America. They
have been steadily pushing economic penetration
in Europe and Japan. They have dumped
commodities on the American market, not in
huge amounts so far, but apparently in. sufficient
quantity and at periods calculated to break
domestic prices. In virtually every case the
reason for this trading can be traced to the
Russian policy of economic war. In fact, Khrush-
chev has told us of this intention.
In 1955 he said to a visiting American Congress-
man: "We value trade least for economic reasons
and most for political purposes."
It seems to me that these are reasons enough
to be very wary of trade with Russia. But in
addition, it is well known that they observe the
amenities and rules of trade only when it suits
their convenience. They belong to no patent
convention. Their record for payments on
royalties and similar agreements is notoriously
bad. They have resold and will resell Western
technology in the face of agreements not to do so.
And they will steal information if they can.
Their technical and scientific intelligence opera-
tions undoubtedly surpass anything the world
has ever seen.
The Soviet interest in the chemical industry
is a natural outgrowth of their industrial develop-
ment. In this country and in Western Europe
the chemical industry has had its greatest impetus
from consumer demand. This impetus, of course,
has been lacking in Russia. In a dictatorship
the rulers can decide whether or not ladies will
wear nylons. In America the ladies themselves
make this decision. The existence of independent
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consumer decisions like this is the main reason
the chemical industry in this country has become
the world's greatest. In Russia the rulers
determined to put their main efforts into building
their war machine and heavy industry.
There is one technical point, however, which
they were very late in realizing. The U. S.
chemical industry is not solely a convenience
or luxury for the consumer. It is essential to
every other type of production, including all
production of military goods.
This fact was made abundantly clear during
World War II, but chemical production has
become much more important to military strength
in the rapid developments since. You simply
cannot have modern missiles, atomic submarines,
supersonie aircraft, radar, nuclear weapons,
or any of the other modern accouterments of
war without the support of a strong chemical
industry. An adequate defense posture is depen-
dent upon a strong industrial economy, which in
turn is dependent upon a strong chemical industry.
One of the amazing phenomena is that the
Russians were so long in catching on to this fact.
Khr-ushchev's speech of last. May proves that he
has seen the error of his ways. in a character-
istically giant wrench to correct the situation,
his new seven-year plan calls for the expenditure
of $25 billion to rebuild and expand the Russian
chemical industry.
"The fulfillment of this task," says Krushchev,
"nnist become a nationwide cause."
While he does not, in his published statements,
tie this project lit with the military necessity of
his country, and speaks piously of building up
his chemical industry to raise the Russian standard
of living, there is good reason to believe that the
military necessities are uppermost in his mind.
lint he does clearly state his intentions to use
this new chemical industry to help Russia
dominate world markets. If you put all his
published statements together, he is plainly
telling its that one of the main reasons lie wants
such a huge chemical industry is to weaken the
chemical industries of the Western Democracies.
These industries clearly stand as an obstacle
in his path.
(gentlemen, I submit to you that chemical
technology of the West is one of the most im-
portant advantages over Russia we now possess.
Russian scientific achievements indicate that they
may be able to catch up with this technology
in time without Western help, but time is the
factor too precious to sell at any price the Rus-
sians can now pay.
I would like to give you some indication of
what I mean. The Russians have sought only
to buy technical know-how, new plants and
processes, not in. amounts to supply Russian
needs but only to serve as prototypes to be
imitated, and the service of Western chemists
and chemical engineers. The specific types of
equipment and know-}row they have asked for
all are in the class of the most advanced chemical
production-new synthetic fibers and plastics,
elastomers, new metal technology, and the like.
We have examined these lists and evaluated
some of them in terms of time. In five specific
types of technology, we learned that it look
American industry just about 10,000 man-years
to bring these developments from the laboratory
stage through production. To reach Russia's
goals in these products within the seven-year
plan would require the full time of more than
1,400 of their best chemists and chemical engi-
neers, and since, as Rrushchev told his people,
the research and training in these areas has been
sadly neglected, I do not believe even this many
could reach these goals without Western aid.
In other words, to accomplish the goals for
the Russian chemical industry in the next seven
years will mean that she must take at least 1400
of her best technologists away from working on
military technology and from technical exploita-
tion of world markets.
This she must do unless we help her. What
would we gain? The Russians have mentioned a
price tag of 100 million dollars if, incidentally,
the United States will grant credits. Once the
Russians got the technology they so urgently
need, the trade would stop. Soon after, the,
United States in all probability would begin to
lose world markets. In other words, there simply
would not be any economic or political gain for
the United States.
If the Russian proposals on chemical technology
were accepted, this would, of course, hurt Amer-
ican, Canadian and all Western chemical indus-
try. But I believe the danger of such a deal would
seriously affect the whole position of the Free
World. It goes much beyond that of one industry.
What, then, should our announced National
Policy be concerning trade with Soviet Russia?
I can summarize it as follows:
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Within the limits of security, and the demands
of the economy of ourselves and our allies, trade
with the Russians in finished goods should be
carried on.
We must all realize that we are in a serious
economic struggle, and we must live with it in the
same manner we have with the cold war of the
past 15 years.
As a part of this, we must realize that any
technical advantages we have are some of our
most precious possessions, and they must not
be traded away.
Both our Government and our industrialists
should point out these facts to our allies and urge
them to adopt similar policies.
We should, as we have done in Europe and
the Far East, do all we can to build up the true
independence of underdeveloped areas, so that
they need never become dependent upon Russia.
Let us always remember that the ultimate
objective of our people and the people of the
Western World is to provide the fullest possible
dignity and freedom of the individual, living in a
peaceful world. This includes Russians, Chinese,
Africans, and all the people of the world.
Americans can honestly say in their hearts that
they wish this for the Russian people, along with
the best standard of living they can achieve. I be-
lieve every American would gladly support these
objectives for the Russians, just as we have for the
Germans and Japanese, if doing so did not involve
the very real threats the Russian dictators pose.
I am sad to say, however, that I see no real
chance of this friendly relationship in our lifetime.
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AN ENGINEER LOOKS AT ECONOMIC WARFARE'
13y MAJOR GENERAL E. C. ITSCHNER, Chief of Engineers, United States Army.
The rising interest of the American people ---
particularly business and professional leaders-
in. the Soviet challenge to economic warfare is a
most encouraging sign.
Too few people are aware that the conflict
between the East and the West probably will be
resolved by economic and political measures
rather than by military action. Too many are
etill ill-informed as to the ability of the Com-
inunist nations to develop extremely powerful
industrial societies in the years ahead.
Though the United States is highly competent
to defend itself in economic warfare, Ave are at a
political. and psychological disadvantage at the
present time because the public has not been
prepared to accept the responsibilities and
:,acrilices required to meet this aspect of the
Soviet challenge. Once our people understand
the nature and significance of economic warfare
and what we must do to win such a conflict, I am
confident that we shall do as good a job defending
ourselves on that score as we would in the event
of military aggression.
In these circumstances, the efforts of the
National Military-Industrial Conference to ex-
amine into economic warfare and the threat it
poses to the United States and the Free World
is a hopeful sign. However, if the effort is to be
fruitful, it must be both penetrating and sus-
tained. We urgently need leadership in this
omplex. field of internal and international crisis.
Now just what is meant by economic warfare?
The answer, I think, is rather obvious to anyone
who has closely observed what the Communist
leaders are saying and doing. Both their words
End their actions demonstrate their belief that a
Communistic society will be able to out-produce
one based on enterprise and better provide the
fantastically increasing populations of our crowded
planet with a great abundance of goods.
We dare not discount the fact that this argu-
ment has a powerful appeal to many nations
already having difficulty in supporting their
teeming populations at a low standard of living.
The Soviets will not be content merely to
demonstrate by example. As goods and technol-
ogists become more plentiful behind the Iron and
Bamboo Curtains, large quantities of equipment
and material ---- capital, if you please ---- ac-
companied by skilled technologists, propagandists
and political fifth-columnists will be diverted to
the underdeveloped and discontented countries.
After becoming established they will seize control,
first of the economy and then of the governments.
Should these countries fall, one by one, into the
Communist orbit, then it may be only a question
of time until. the Soviets would be in a position to
dominate the rest of the Free World.
Our defense is to keep our own economy
expanding with the greatest dynamic force we
can muster; stimulate and facilitate the growth
of the economies of the other nations of the 1"'ree
World to the best of our ability; and take strong
action to keep them within the economic sphere
of the Free World.
My contribution to your exploration of this
subject will be to tell you and show you with
slides and words what the Sino-Soviet countries
are doing to develop their water resources one
of the essential pillars upon which any expanding
economy must solidly rest. This is a good
indicator of the bold concept with which they are
approaching their tasks and it is indicative of
their rising technological capability and industrial
strength. I believe you will reach the conclusion,
as I have, that the Soviets are thinking big and
are accomplishing much.
Picture No. 1 shows the vast geographical
sweep of the gigantic power and water develop-
ment programs undertaken by the Sino-Soviet
Bloc, stretching from the Danube to the Pacific.
The Communists are pouring great investments
into these programs, with major emphasis on
power and transportation.
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WATER RESOURCE DEVELOPMENT OF THE SINO-SOVIET BLOC
e J ( ,/'~ ?Leeinera
1 16 ^~ Kiev
7 : MOSCOW
~e1~I
LEGEND
HYDRO PLANTS
EXISTING
UNDER CONSTRUCTION
PLANNED
WATERWAYS
NAVIGABLE
PLANNED DEVELOPMENT-
IRRIGATION AREAS
EXISTING
PLANNED
PREPARED BY U.S. ARMY
CORPS OF ENGINEERS
REPUBIIC_)- --MeklfA
Cry MONGOLIAN l 1.5
f. oeosi rs ) I
L. of kL-k . .$I 'J
R A' ?NA , Lake Baykal ? . ~f~
The Soviets are making phenomenal gains in
hydroelectric development and they are planning
to initiate construction of projects soon that will
exceed anything we have ever done. For ex-
ample, take Bratsk on the Angara River in
Central Siberia now under construction: This
plant when completed will have a 3,600,000
kilowatt capacity. Our largest, Grand Coulee,
has 1,974,000 kilowatt capacity. Planned for the
future -though possibly some years off, is a
plant on the Yenisey which would have a ca-
pacity of about 6 million kilowatts. This is
greater than the capacity of all of the power
plants at all the dams ever constructed by the
Corps of Engineers. Their inland waterway
projects rival ours and their planned develop-
ments probably surpass ours, though they
have not yet caught up with us in water-borne
commerce. The Soviets have larger irrigation
projects than. ours and they are irrigating new
a,II~sgo,,,,Ill
STATUTE MILES
acres probably at least as fast as we are. In
other aspects of water resources development,
such as flood control, water supply and recrea-
tion, they do not have projects equal to ours but
appear not to need them at this time. Their
engineering and construction appear to be equal
to ours. Their power equipment and engineering
in items such as generators and transmission lines
are excellent and in some respects more advanced
than ours.
The most remarkable fact about Soviet water
resources development is the rate of growth. Of
course the level from which they started after
World War II was very low compared to ours.
Most of their progress has been accomplished
within the past eleven years; in fact, the bulk of
it in the last six years. The Soviets are basing
the creation of new economic provinces, including
new industrial and agricultural complexes,
squarely upon. multiple purpose river develop-
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rneiit plans. They are using water resource
I(velop rnent as a means of dispersing industrial
tind other strategic installations throughout their
vast domain, an area two and one-half times as
large as the United States.
Let us look on the map at the geography on
which the Soviets are basing their great water
resource developments. First the rivers: The
1)amibe, running from Germany and Austria
through the Balkans to the Black Sea: the
the Vistula in Poland; the Dnieper and the Don
in the Ukraine; the Volga in Central Russia; the
great Siberian rivers-the Ob, the Venisey, the
Lena, and the Amur; and two huge Chinese
rivers, the Yellow and the Yangtze.
There are large industrial areas around Moscow,
hear the Crimea, around Kuybyshev on the
Volga, in the Urals, and in the upper Ob and
Yenisey valleys.
Some of the developments which I will discuss
in more detail later are Kuybyshev on the Volga,
the largest power plant the Russians now have
in operation; Bratsk on the Angara, which when
completed will be larger than any of our plants;
Krasnoyarsk on the Yenisey, which will be
even larger. On the Danube, Rumania and
Yugoslavia are planning a large project at the
Iron Gate. Near Canton is the Shang-yu Chiang
plant, which, though relatively small by United
States and by Soviet standards, is the largest
yet completed by the Iced Chinese.
In the navigation field, the Soviets are develop-
ing the Volga-Don River system in a very
ambitious project which will connect the Arctic
and Baltic Seas in the north with the Caspian
and Black seas in the south. Gorky, on the
Volga, is rapidly becoming amodern inland port.
One of the relatively few navigation developments
in Red China is on the Huai Ito.
One of the many Soviet: irrigation projects is at
Chumysh in Soviet Central Asia.
Let's look now at the relative positions of
the ljnited States and the Sino-Soviet bloc with
respect to electric power.
While the chart indicates that the Sino-Soviet
bloc is still far behind the United States in total
installed thermal and hydro capacity, their
hydro rate has just about caught up with ours.
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It is very likely that their rate of increase will
exceed ours within the next five years unless ours
is stepped up. Since our stage development is
so much higher than theirs, however, we can
expect to continue to add more electrical generat-
ing capacity per year than they do for some years
to come. Our present hydro capacity is about
30 million kilowatts as against about 15 million
kilowatts for the Soviet bloc, while our thermal
capacity is 126 million kilowatts as compared
to their 42 million kilowatts.
Whereas the United States has no completed
plants that will reach two million kilowatts ca-
pacity name plate rating and only one under
construction, the USSR has ten plants ranging
from two million kilowatts to six million kilowatts
of which one is complete, three are under con-
struction, and six are in. the planning or prepara-
tory stages. Five of their Siberian plants will
have a capacity half again as great as the total
hydro capacity of all Federal projects in the
United States.
The Soviets also have developed a great capa-
bility for the construction of thermal electric
plants. In order to expedite the overall installa-
tion of power to accelerate their industrialization
they have now slowed down their rate of hydro
growth and speeded up the construction of steam
plants, which can be gotten into service more
quickly. However, they have, in no sense, aban-
doned their enormous hydro programs, for they, as
well. as we, will need all of the power that can be
developed from all sources in the long run.
And now, let us look at some of their giant
hydro projects. Kuybyshev on the Volga is
the largest they now have in operation. Its
capacity is 2,100,000 KW, or slightly more than
that of Grand Coulee Dam on the Columbia
River, our own largest plant.
Kuybyshev, which has 20 generators, each rated
at 105,000 kilowatts, compares with the 108,000
kilowatts rating of our largest generators at
Grand Coulee Dam. Each generator and turbine
is as high as a nine-story building. An impression
of the size is gained from the men in the picture
as compared with the exciter at the top of the
generator.
Shown on pg. 28 is the giant, six-vane rotor,
30 feet in diameter, for the turbines. The normal
operating head is relatively low, only 63 feet.
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The reservoir behind the dam extends over :300
miles upstream and covers more than 2,1110
square miles, an area about the size of Delaware.
It contains over -12 million acre feet of water, or
about one-third more than the capacity of Lake
head behind ITom er I)am, our largest reservoir.
The Russians are installing even larger gener-
ators at [lie giant Staliiigrad plant, to be
completed in 19G].
The power plants in central Siberia are to be
even more gigantic. The one at Bratsk on tlic
Angara river, shown on pg. 29 under construction,
will probably have IS generators, each 200,000
kilowatt-, capacity. This 3,600.000 kilowatts
plant will have nearly twice the capacity of Grand
Coulee.
to the Yenisev River, about :360 miles to the
west from Bratsk, aunt lier and even more powerful
hydro plant has been started near the city of
Krasnovarsk. It will have 1-1 giant generators,
each with a capacity of 285,000 K\V, for a com-
bincd capacity of about 4 million IM
All this will give you an idea of the bold
concept with which the Soviets have under-
taken their water resources development. Their
programs are extremely large in size and compre-
hensive in scope and are directed to the fullest
possible capitalization of the tremendous hydro
resources behind the Iron Curtain.
The I`SSII is progressing much faster than
either the European or Asian satellites. Large
Scale plans for lied Europe are concerned chiefly
with multi-national projects for the Danube
River, where the forceful methods of the Com-
rmtnists may push aside political difficulties
which in the past have handicapped the harness-
ing of that river.
Their most important European site is at the
Iron Gate (see pg. 29) where the Danube breaks
through like Carpathian Mountain range in a
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deep gorge only 550 feet wide. This is one of the
great dam sites of the world. Here Yugoslavia
and Rumania intend to build a 2,200,000 KW
plant about the size of the -Niagara Plant, now
under construction by the New York State
Power Authority, (2.190,000 KW). The Yugo-
slav-Rumanian plan calls for 12 generators driven
by turbines that would exceed in size any now
in existence, anywhere.
Thus far the Red Chinese have succeeded in
building only about 400,000 KW of new capacity
and their largest project completed thus far
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is the 00,000 KW Shang-Vu Chiang plant north
of Canton, shown above. However, the Red
Chinese are at work on the 1,100,000 KW San--
mcii Ilsia plant, and the 1,050,000 KW Lui-chia
Isia project, both on the Yellow River, where
they are combining- hydro development with
massive flood control.
The potential hydro resources of China are
estimated at more than six times the potential
of the United States. Some 40 percent of this
potential is in the densely populated basin of the
Yangtze River in central China. There are
possibilities there for construction of plants even
larger than those planned by the Soviets.
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One of the most famous Chinese sites is at
I-ch'ang, shown on page 30, where the United
States was helping the Nationalist Chinese to plan
what, was to have been the world's largest multi-
purpose dam before the Reds seized control of
that country. This project, as previously
planned, would have incorporated power, flood
control, navigation and irrigation and un-
doubtedly would have exerted a revolutionary
influence over the economy of the region.
Red Asia, however, is handicapped in the
development of power capability at the present
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Iiine for lack of means to produce the equipment
required, and must depend upon the USSR
o nd European Satellites for this support.
In their eagerness to speed up power production
fm- industrial expansion to support their race
against the West, the Soviets have slowed dower
hydro development for the time being and have
expedited the construction of steam plants. On
pg. 31 is shown on a test stand at the manufactur-
ing plant their largest thermal turbine, which
has a capacity of 200,000 KW. While the Soviets
have shown themselves capable of building large
steam units, their equipment in this field is
still considerably inferior to our own. They
are concentrating on the standardization of plants
and on stepping up the mass production of large
units.
The Soviets are making rapid strides in the
technology of long-distance, high-voltage trans-
inissioon of electrical energy. Shown on pg. 31 is 400
KV switching equipment being installed at a sub-
station --which will operate at voltages higher than
any utilized commercially in the tinted States.
By 1965, the Soviet Union will probably have a
single, unified power grid serving most of I':n-
ropean Russia. The first big steps towards this
are the recently completed 400-kilovolts lines
from the Kuybyshev hydro-electric station on
the Volga, westward to Moscow and eastward
to the Urals.
The second big step will unite this system with
the industrialized Donets Basin and lower
Dnieper River regions. This step is scheduled
for completion about four years hence. One of
the lines, they say, will operate on direct current
at 800 KV.
By the mastery of even higher voltage 1)C
transmission, the Soviets hope to be able to
transport power economically from the giant
Siberian plants into the highly industrio_rlizcd
l',uropean part of Russia, over distances of
1,500 to 2,500 miles. This would be comparable
to transmitting power from Grand Coulee Darn
to Chicago, Pittsburgh and New York.
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Also, several large thermal plants, such as the
1,000,060 KW plant in the Southern Ural moun-
tains (see pg. 32) are now under construction at
sites adjacent to the vast fuel reserves in Western
Siberia, where power can be produced at extremely
low costs. These plants would be teamed with
the hydro installations in providing enormous
blocs of power for expanding Soviet industry.
In the development of their power resources,
hydro and thermal, the Sino-Soviet Bloc is laying
the foundation for tremendous economic strength.
Should they fail in their drive to realize ambitious
economic goals it most certainly will not be for
lack of capability in the production and trans-
mission of electrical energy. Now let us see what
they are doing on inland waterway development.
Though the Soviet progress in inland waterway
development is coming up fast, they are still far
behind us in this aspect of water resources work,
particularly in ability to use their navigation sys-
temms. Map above shows the famous Volga-Don
navigation system, by which they are integrating
the heart of European Russia with modern water-
ways connecting the Baltic and the Arctic, to
the north, with the Caspian and Black Seas and
thence to the Mediterranean on the south. This
system, when completed, could even serve for the
transit of small ocean going vessels, including
destroyers and submarines.
The development of this system, now far along
and already in use, is being carried out in con-
junction with hydroelectric power. The naviga-
tion channels are for the most part a succession of
lakes, formed by the reservoirs, with modern
locks at the dams. The system also takes ad-
vantage of the opportunities to link the natural
lakes of Northern Russia together by canals.
The Soviets are now concentrating on improv-
ing the northern reaches of the system, between
Moscow and the Baltic, and expect to have a
modern waterway, with depths of ten feet or
more, in service from Leningrad to the Caspian
Sea via Moscow, by 1965. It would be joined
subsequently by waterways nearly as deep
extending to the Arctic Ocean and by only
slightly shallower routes to the Black Sea and
into the Ural industrial area. Improvements
also are being made or planned on certain of the
great Siberian rivers, though various of these are
navigable for long reaches in their natural state.
Soviet plans call for great increases in the ca-
pacity of the river fleet and port facilities by 1965.
On pg. 34 is one of the new, modern. towboats,
1,200 horsepower, now being built for use on the
inland waterways. They also are building more
powerful craft, up to 2,200 horsepower, along
with large barges, tankers and self-propelled
freighters for use on the inland waterways. These
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towboats are small by our standards our largest
towboat, recently completed, has 8,500 horse-
power.
Soviet economic planning seems to have fallen
behind their engineering achievements in the use
of their waterways. The principal. factors prevent-
ing increased use of water transport appear to
be the scarcity of modern river craft and of
high-performance cargo handling equipment.
Great stress is now being placed on modernization
of the fleet.
Plans call for nearly doubling the cargo handling
capacity of the inland waterway ports through
the installation of modern mechanical equipment,
such as shown on pg. 34 at the modern port of
Gorky on the Volga.
The expansion and modernization of the river
fleet and port equipment should allow the di-
version of much bulk freight from the over-
burdened Soviet railroads. The use of inland
waterway transport for a greater share of the
nation's haulage has long been a goal of the
Soviet transportation planners, and it now
appears that the country soon will be in much
better position to realize this objective. The
effects on expansion of industrial capability
undoubtedly will be great.
The opportunities for inland waterways de-
velopment are markedly less in the European
satellites. There the principal navigation system
is the Danube, long an artery of traffic. How-
ever, work is under way to enlarge the connec-
tions between the Danube and the Rhine and
Main rivers in West Germany, which will create
a waterway system of unprecedented economic
importance, bisecting Europe from the Atlantic
to the Black Sea.
The rivers of China have even greater potential
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for navigation improvement. At present only
7,000 miles of the country's waterways can.
accommodate large river craft, but nearly 100,000
miles are used by small native craft, chiefly for
local traffic. [n navigation as in power, China
has not yet begun large scale development, but
the potential is there.
Certain improvements, however, have been
built, including this one of a series of large locks
built on the Iluai Ho in central China, where
parts of the 200-mile system will accommodate
vessels drawing up to 13 feet.
For some time to come, waterway improvement
in tied China will probably be confined largely
to the improvement of navigation aids, small
scale dredging and the removal of minor obstruc-
tions. The situation is similar in North Viet
Nam, where the Red River and its tributaries
form it waterway network intensively used by
small local craft. The rivers of mountainous
North Korea have gradients too steep for naviga-
tion.
In flood control, however, China has far out-
stripped the other members of the Sino-Soviet
Bloc, chiefly by the application of mass human
labor on an unprecedented scale, as shown above
with soldiers repairing a dike.
While the flood problem is relatively minor in
other members of the Bloc, it is an acute one for
China and her teeming millions, many of whom
live and work on the flood plains of great rivers.
In their first five years of power, the Red
Chinese claim to have built and repaired 26,000
miles of levees, dredged 3,750 miles of waterways
and built large numbers of dams, sluices and
reservoirs, but these, for the most part, are small
projects.
The Sanho regulati rig structure on the Huai Ho
in central China, see pg. 37, is one of their more
impressive works. The river is directed into a
105-mile long canal to the Yellow Sea. t'rom
this canal, much of the water is diverted south-
'ward to provide increased irrigation water.
Virtually the entire Sino-Soviet. Bloc is placing
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considerable stress, though greater in the Soviet
Union and China than elsewhere, on irrigation
as a means of increasing and stabilizing agri-
cultural production. On pg. 38 are the control
works for serving irrigation from Chumysh Dam
in Soviet Central Asia. The Soviets claim to have
nearly trebled the area under irrigation. The
area under irrigation in the USSR. appears to
have increased by a million acres, or 24.8 percent,
from 1951 to 1955; while our own irrigated
acreage increased about 5.5 million, or 21.(5 per-
cent. Some of the irrigation developments far
outstrip the biggest American projects, ranging
in size frcm 3% million acres to one in the South
Ukraine which embraces 8% million acres.
A major share of China's agriculture has been
conducted with irrigation for centuries, and the
country had some 50 million acres under irrigation
when the Reds took over. The Communists are
placing great stress on the modernization of the old
systems as well as the construction of new ones.
Hungary and Bulgaria are most concerned
with irrigation among the European Satellites
and the great project for harnessing the Danube
would provide for irrigating large acreages in
Rumania and Yugoslavia. Work on the system
is not to be initiated however, until the com-
pletion of other phases of the project. In all
the extension. of irrigation within the East
European countries will likely be relatively slight
over the next five to ten years.
What are the conclusions to be drawn from
the Sino-Soviet water resources programs?
First, I think, is the fact that the Communistic
countries have a tremendous industrial potential,
the capability for capitalizing upon it, and are
looking far ahead in the prosecution of gigantic
schemes for developing the water resources base.
This places the strength of action behind words
with which they have delivered an economic
challenge to the free world.
The fact is that they are making significant
progress in the rate of water resources develop-
ment, generally speaking, and particularly with
respect to power, a basic factor in industrial
expansion.
However, the problem in the United States is
not to increase our own water resources develop-
ment just for the sake of outdoing the Soviets,
but to make certain that our development is
sufficient to support our own requirements for
economic expansion.
In the long conflict with the Communist world,
we shall need economic expansion which ulti-
mately will require the fullest possible develop-
ment and use of our water resources.
The long way the Communists have yet to go
will give us time to put our own programs in
order; but we have no time to waste. For the
present, we are much better prepared than the
Communists for seizing the initiative aggressively
and maintaining it indefinitely with respect to
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economic warfare. However, we cannot expect
to maintain this advantage permanently unless
we deliberately plan for it, for the Soviet nations
are now in the early stages of developing tre-
mendous economic power which some day could
outstrip our own capability if we fail in our own
preparations.
Secondly, we must realistically accept the fact
that our preparations must be pointed towards
an extremely long period of economic conflict, in
which the strength and the durability of the
economic, social and political systems of both our
country and the Soviet Bloc will be put to the
severest test ever experienced.
The period of trial which we are entering could
endure for centuries. We have such a precedent,
in the past. For example, another powerful
nation for its day, the Turkish Empire, once
arose out of the East, seized half of Europe,
erected an impenetrable Iron Curtain, presented
a great military challenge to the rest of the world,
and in general provided a situation similar in
many ways to the one now confronting us. For
over 200 years, from late in the 14th century
until early in the 17th, western civilization, the
forerunner of our own, had to live co-existent with
an unprecedented threat of being overwhelmed.
The Sino-Soviet Bloc presents a much more
formidable adversary by today's standards than
the Turks presented to Western Europe during
the Dark Ages. II. R. Trevor-Doper, the brilliant
Oxford historian, points out that the power of the
Turf finally crumbled because of his inability
to create new wealth, for lie lived as a scavenger
on the productive capability of the peoples he
had conquered and his system lacked the dynamic
economic drive to endure indefinitely.
Our opponents today do possess this economic
drive and the potential resources against which
to apply it, which in many ways are greater than.
those of the free world.
And they have something else equally im-
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portant: serious dedication to purpose by the We need to be sure about this aspect of our de-
average individual. Do we have such dedication, fenses in an economic war, as well as the material
too; and is it informed and strong enough to wits? side of the question. Here is another facet of the
Or are our cares for tomorrow dominated largely complex challenge of the Soviet which must be
by such things as the latest styles in automobiles? examined if western civilization is to endure.
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CHEMICAL WARFARE-ECONOMIC STYLE
By GEN. ANTHONY C. McAULIFFu, (Ret.), Vice ]'resident, American Cyanamid Company; Former
Commander-In-Chief, United States Army, Europe.
An Old high school chemistry teacher of mine
this was many years ago -had a favorite dem-
onst.ration which he never failed to trot out on
the first day of every new class. He would pick
up a bottle of colorless liquid, hold it up and say,
"'t'his, gentlemen, is sulfuric acid. TI2SO,c. I
evill give a dollar to anyone who can name a single
object in this room which could have been made
without it."
It- was his way of impressing the practical
importance of chemical products, and it was a
good one. The fact is that an adequate supply of
chemicals -not just sulfuric acid but thousands
of others as well --is absolutely essential to the
welfare and orderly growth of any modern in-
dustrial economy, such as ours---or that of the
Soviet Union. It is one of the crucial considera-
tions in any nation's capability to wage war
military or economic.
In the context of the theme chosen for this
Conference, the chemical industry therefore
occupies a particularly strategic position.
The Russians are well aware of this. Their
current seven-year plan, announced only a few
months ago, puts special emphasis on the ex-
pansion of their chemical industry. The overall
plan calls for an 80 percent increase in total
Soviet production. As its share, the Soviet
chemical industry is supposed to triple its volume
by 1965, on a planned capital investment of 100
billion roubles. That, at the official rate, is 25 bil-
lion dollars, or more than two and one halt.' times
as much as the record-breaking expansion of our
own chemical industry over the past seven years.
By 1965, Soviet output of plastic materials and
synthetic resins is to be increased seven times,
that of synthetic fibers between 12 and 13 times.
111 all, 140 large new chemical enterprises are to be
built, and another 130reequipped and modernized.
This is what Mr. Khrushchev has called for.
This, as proclaimed by Moscow, is the scope of
the challenge.
Fortunately for us, it is not enough -even in a
dictatorship ---to demand so-and-so-many new
chemical plants in order to have them appear, on
schedule. They have to be designed, built and
put into efficient operation. 't'his requires con-
siderable technical know-how. And the fact is,
surprising as it may be in view of the sputniks,
that the Russians don't have it, or at least not
nearly enough of it. All is by no means well with
the Soviet chemical industry.
ITow do we know this? Because Mr. Khrushchev
told us so. For once, in appraising Soviet po-
tentials, we don't need to guess, or piece together
bits of information. We have it all, as it were,
from the horse's mouth.
Mr. Khrushchev called a special meeting of the
Central Committee on May 6 of last year to take
up the crucial and immediate problem of the
chemical industry. The Soviet, press carried
lengthy verbatim accounts of the proceedings.
It reported, for instance, the full-dress tongue-
lashings given to two Deputy Ministers of
Chemical Production for "their failure to intro-
duce new scientific developments and to recognize
newer uses of chemicals in heavy industry."
The Soviet chemical industry again made the
front page of Pravda in August. This time, a
number of regional planning officials were publicly
punished for delaying the construction of chemical
plants by diverting the funds appropriated for
them to other, less pressing projects.
1958 was a great economic year for the Soviet
Union, the best they have ever had. Vet the
program for the chemical industry failed to
meet any of its quotas. Unless something drastic
is done, it doesn't stand a chance of achieving the
1965 goals set out for it. And if it does not
achieve these goals, the overall seven-year plan
has no chance of succeeding.
Khrushchev knows this. Ike even has plans for
what the drastic solution should be. They too
were made public during that May 6 meeting.
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After polishing off the two offending Deputy
.~Mlinisters, Khrushchev took up in some detail the
development of the Soviet chemical industry.
He admitted readily that it is lagging behind
Western accomplishments, that it is suffering
from a wide technological lag. In particular, he
pointed to the newer branches of industrial
chemistry-petrochemicals, plastics, synthetics
as areas where the U.S. was far ahead. Ile spoke
of the large-scale waste of raw materials caused
by the use of obsolete equipment and outdated
processes. Re mentioned the potential uses of
plastic materials as substitutes for metal in
various items of military hardware such as tank
armor, rocket engines and aircraft. He dwelt on
the need to expand production of synthetic
fabrics for consumer items such as clothing and
footwear -both of which are now extremely
expensive and scarce in the Soviet Union.
And then, to explain how he was planning to
get all these things, he suggested that it would
be a wise idea for Russia to speed up the import
of chemical machinery and equipment. And,
even better, to solicit the assistance of foreign.
technicians and engineers. In this connection,
he recalled the rapid and large-scale Soviet
industrialization program of the '30's, made
possible because thousands of Western tech-
nicians came in to set up factories and train
Russians in how to operate them. His suggestion
was, in effect "Let's do it that way again."
A month later, in one of his many letters to
President Eisenhower, he spelled out the proposal:
why didn't we send over some technicians,
especially chemical engineers, to help out?
In July, he made a speech in East Germany and
again made the same, obviously sensible proposal
to the West. Last February, in another speech at
Stalinogorsk, one of Russia's huge secret industrial
complexes, he dwelt on the same subject. Obvi-
ously, it is close to his heart.
The main purpose of the recent elaborately
casual and unofficial visit of Mr. Mikoyan seems
to have been to put the same proposition to as
many top businessmen as he could. The Soviet's
number one salesman, and purchasing agent,
smiled for the cameras, chatted with the press,
spent a busy morning on Wall Street, and only
lost his temper on the last day of his visit, when
the State Department turned down his proposals.
One of Mr. Mikoyan's principal arguments --
and we'll be hearing it often in the months to
come is that the areas in which he would like to
initiate trade are purely non-military in nature.
Ile wants us to help build plastics plants, and
what could be less warlike than auto seat covers,
back-yard swimming pools for the kids, perhaps
even hula-hoops?
The fact is that chemical technology cannot be
isolated to certain particular products. The
very fields referred to by Mr. Khrushchev as
being of primary interest ---synthetic fibers, plastics
synthetic rubber -have as many military as
peaceful. uses. As American. production men,
including many in this room, learned in 1940
and in 1941, it is not difficult to swing from one
type of production to the other.
But the basic flaw in Mr. Mikoyan's argument
is that in a country such as the Soviet Union
there is, in the final analysis, no such thing as
non-military production. Every sinew of the
state is given its role to play in the total economic
war. If Mr. Khrushchev and his economic planners
decide to make more shoes for the Russian
people, it is not because there is a shortage and
therefore a ready market for shoes --there has
been one for 40 years --but because at that
particular moment it is more important, in the
overall view, to make shoes than to make some-
thing else. In this light, therefore, any techno-
logical contribution we agree to make would
release Soviet manpower and skills for other uses.
There is another important consideration too.
The Soviet bloc is an economic monolith. Any
technological know-how which is made available
to the Soviet Union will automatically also be-
come available to every satellite country and to
Red China. No one would seriously suggest that
it is in the best interests of the U.S. to render
technical assistance to Red China, yet that is
exactly what we would be doing if we were to
agree to give it to the Soviet Union. The previous
record of the Soviet Union in living up to its
agreements has not been such as to inspire
confidence in any assurances they might give
regarding the restricted application of any
technical know-how we might sell them.
I think it is clear that we are now engaged in a
gigantic economic war with the Soviet Union.
Possibly some of us may not think so, but Mr.
Krushchev certainly does. He said so. These
were his exact words : "We declare war upon you-
excuse me for using such an expression--in the
peaceful field of trade. We declare a war we will
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win over the United States. The threat to the
United States is not the ICBM, but in the field of
peaceful production. We are relentless in this,
and it will prove the superiority of our system."
It only takes one side to declare a war, and the
Soviet Union has already begun mounting its
offensives. Soviet trade missions are busy
traveling through the underdeveloped portions
of Asia, Africa, Latin America and Europe.
They've been successful. Free world trade with
the Soviet bloc has increased from 3.5 billion
dollars in 1951 to 6 billions in 1957. Czecho-
slovakia is building a sugar refinery in Ceylon,
a tire factory in Indonesia. Rumania is selling
oil drilling equipment to India, and sending
along the inevitable teams of technical observers.
ll,ven Red China, which is having massive
economic difficulties at home, is extending aid
to Burma in establishing textile mills. The
Soviet Union itself is helping India to build a
large and well-publicized steel mill at Bhilai.
In tfce three years from 1953 to 1956, Communist
trade with India has gone from $22,000,000 to
$122,000,000.
Any considerations of technological aid to
Russia must take into account this record. An
expanded and revitalized Soviet chemical industry
would of course be geared to produce and sell
according to the interests of the state, rather than
the ordinary principles of economics exemplified
by a competitive economy. In other words, the
Soviet Union would try, as they already have
in the past with other commodities, to grab
world markets and disrupt Western industries
through dumping and price cutting. Red China
has already begun doing just this in several areas
of basic chemicals.
Thus by helping the Soviet Union we would
be cutting our own throats ... twice. First, by
giving their economic offensive added ammuni-
tion to use in the world's market places, and
second by putting possibly insuperable obstacles
in the path of our own economic progress, and
that of our allies.
One argument which is frequently advanced is
that the Russians are not idiots, certainly not
in scientific fields. Sooner or later, they will
acquire this know-how for themselves. Why
then shouldn't we take advantage of their present
ignorance and sell it to them?
The answer is simple. One well-known Ameri-
can chemical company which pioneered the pro-
duction of nylon, polyethyle and the polyure-
thanes estimated that it invested more than
2,100 man-years of scientific and technical effort
in perfecting these developments. Another
U.S. producer estimates that it took 1,100
man-years of development work to make butyl
rubber a practical reality. Certainly, we could
sell our technical know-how to the Russians, but
could they pay what it is worth -what they
would have to invest, or will have to invest if
they must get there without our help? Many
American visitors to Russia are bringing back one
common impression : that every Russian they
meet is preoccupied with snatching America in
production. They recognize that they are still
behind, but they're convinced that in 10 or 15
years they'll be able to do it, and sooner if they
work still harder. This competition is, ironically
enough, the strongest incentive Communism
has yet been able to find.
As far as the Kremlin is concerned, matching
and eventually surpassing the U.S. is a matter of
national policy. For decades, the United States
has been the shining model before the eyes of
the world. Our way of life, and especially our
prosperity and security, have been the most
eloquent arguments ever advanced in favor of
democracy as a political form, and of free enter-
prise as an economic system.
Now, Russia wants to be that model, so that
the peoples and nations of the world will in the
same way be attracted to Communism.
They are convinced that if they can overtake
the U.S., then all the great uncommitted areas
of the world-Asia and Africa-and even parts
of Europe and Latin America will swing to their
side.
Probably they're wrong. Man still does not
live by bread, or by steel capacity, alone. The
current Soviet seven-year plan may set quotas on
everything from hydro-electric power to new
chicken coops, but it leaves out one important
item which has always been in short supply under
communist regimes: personal freedom.
We know that this single commodity, which
we have and they don't, is more important than
all the rest. But we cannot afford to sit back
and let it go at that. The challenge has been
issued. We must meet it, on whatever ground
it comes.
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Part Three
Military Ramifications
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THE SIGNIFICANCE OF RUSSIAN SEAPOWER
By ADMIRAL JAMES S. RUSSELL, Vice Chief of Naval Operations, United States Navy.
(Delivered April 8, 1959)
The members of this conference represent a
good cross-section of American life, as well as
the best of our cultural and economic, our political
and religious institutions. That you, who are
extremely busy men in your own fields, take
the time to attend this conference to study the
nature of the Soviet challenge is most encourag-
ing. It is an exemplification of democracy at
work. An informed citizenry has always been
the bedrock of our national growth; it becomes
now a vital factor in our national survival.
Although the orbiting of the first Soviet
satellite set off a perhaps overdue scrutiny of
U.S. strength and leadership, that scrutiny was
largely confined to government research programs
and the status of science in our schools. It has
been only in the last eight months or so that the
press has carried with increasing frequency
articles which encompass critically the whole
fabric of American life as it is being lived today.
The questions asked are not new -they have
appeared sporadically before in occasional thought-
ful speeches and articles--but they are appearing
with such frequency that they portend it broad
and deep reassessment of basic attitudes in the
United States. They also indicate a growing
and painful recognition that the United States
is in an historical crisis.
The program for your three-day conference
bears evidence to the thoroughness with which
you are studying all facets of the Soviet challenge.
I am privileged to discuss here one facet of that
challenge -the challenge at sea--the Soviet
Navy-and the significance of growing Soviet
sea power.
The Soviet Navy is the least understood of the
Soviet armed forces. This lack of appreciation
of Soviet sea power and its implications is
probably due to two things. First is the great
secrecy with which the Soviets have cloaked
their naval development in the post war period.
Except for occasional dark hints that the Navy,
too, is equipped with all modern weapons, Soviet
propaganda has aided this secrecy by focusing
attention in the field of missilery and aviation.
The second reason concerns our traditional
view of Russia as it land power rather than a
naval power. The pattern of World War II gave
us little appreciation for Russian sea power or
its possible future trends.
In World War II Soviet Russia was our ally.
During the course of the war, under the pro-
visions of the Lend Lease Act of 1941, some
$11 billions in U.S. materials were sent to the
Soviets. Over 17 million tons of materials of
various categories were provided by the U.S.
alone, and additional large quantities were
supplied by our British allies. The Soviet Navy
was directly assisted by the loan of nearly 600
U.S. naval ships and craft; and their hard pressed
merchant fleet was bolstered by 120 cargo ships.
(During the period 1953 to 1955 all serviceable
major naval types were returned; however, only
29 of the 120 merchant ships have been returned.)
At the height of the German submarine
campaign in WWII, one of the most dangerous
and uncomfortable convoy routes was that
through the Norwegian and Barents Seas to
Murmansk and Archangel. In 1942, 27 convoys
over this route lost 74 ships; shipping losses over
this route in the first three months of 1943
amounted to 16 ships. In early 1943, it tragic
reminder of a gallant effort to support a be-
leaguered ally existed in the 1300 survivors from
sunken British and American merchant ships who
were housed in schools and similar buildings in.
Murmansk and Archangel.
Nonetheless, despite all obstacles, urgently
needed supplies continued to be provided to the
Russians. Shipments doubled, and doubled
again with the opening of supply routes from the
head of the Persian Gulf through the precipitous
Iranian mountains to the Russian border, and
with the institution of air ferry routes through
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Alaska to Siberia and through Africa to Iran.
The scope of the overall U.S. effort may be
measured by citing a few representative items
contained in the 2660 shiploads of U.S. material
delivered: 460,000 motor vehicles-7,000 tanks--
II million tons of foodstuffs, metals, and pe-
troleum products and some 14,700 aircraft,
msniy of which were delivered by air.
Oar efforts to save Russia from defeat in
WWII cost American lives and quantities of
American material. Further, we attached such
importance t,o the delivery of supplies to the
Soviets that to meet the priority of their supply
we reduced the flow of badly needed equipment
to our other allies.
To the Western mind aril to the democracies
of the West it, is almost inconceivable that at
the same time the Soviets were accepting our
WWII aid they were carefully laying their plans
for our destruction in the post war period to
follow. Yet that is precisely what Stalin was
doing. To its such treachery was incompre-
hemible.
All the end of WWII, despite her war losses,
Russia was in a most favored position. She had
defense in depth on all fronts. Friendly, or
fellow-traveling governments controlled all the
border states. The benevolence of the powers
who were winning the war against Japan in the
Pacific had opened the gates to permit the
Russian flood to engulf Manchuria, Sakhalin,
the Kuriles, and half of Korea. In the United
States, Britain and France, a highly emotional
mood of goodwill toward Russia prevailed.
Germany, the arch-enemy, was in ruins and
under military occupation. Japan, the enemy
in the East, was in ashes. The Western nations
were disarming at breakneck speed. If Russia's
own security was the goal, it had been achieved.
Al, this time, when one would have expected
the subtle line of restraint, there suddenly ap-
peared the "tough line,"- -ruthless pressure for
the direct control of the satellite nations, interven-
tion in Greece and Iran, obstructive opposition
to the Marshall Plan and the Austrian Treaty,
the Berlin blockade, and the creation of the
Cominform.
Post war history is replete with one Russian
violation after another of the solemn agreements
made between the Allies. Time and again the
Russian leaders callously disregarded all obliga-
tions, contracts, treaties, customs and traditions
in order to expand their power and control.
While proclaiming the evils of colonialism on
the part of others, they perfected their own
methods of colonizing which gained for there
large areas and populations incapable of re-
sisting the persistent and uncompromising ag-
gressor.
Russia's post WWII intransigence and the
unfolding of her inflexible adherence to the Com-
munist doctrine caused a startled, divided and
rapidly disarming West to face about and to
begin to unite in protection against this Franken-
stein which had been a WWII ally.
Since this awakening, the U.S. has joined
together with no less than 42 other nations in
cooperative defense treaties. NATO, SEATO,
ANZ US, and the RIO pact of the Western
Hemisphere, are mutual defense organizations
in which we have membership.
At this point I'd ask you to place in your
mind's eye a map of the world and note that
these free nations, who together make an im-
pressive strength, lie overseas or draw power
from the sea. These free nations can be described,
quite properly, as the World Sea Confederation, -
a single body politic of the sea. At the center,
the t?. S. and Canada form the surging heart.
Overseas to the East lie the sturdy limbs of our
NATO allies, to the west ANZUS and SEATO.
and south the RIO pact members of South and
Central America. Each nation by itself may be
small in comparison to the Russian Bear in
Eurasia, but, united in freedom, their combi-
nation is unmatched.
Overseas also, and giving vigor to the whole,
are the U. S. bases and deployed military units
our Army divisions in Germany and Korea, our
deployed tactical air units, and the numbered
fleets of the Pacific, Atlantic, and Mediterranean.
Joining together these far flung components
of free world strength and giving life and being
to the body politic are the arteries of the sea.
1'o Soviet leaders, this truth stands out: if
only they can cut these arteries, mortal damage
may be done to the West. If the West loses the
sea, it loses all.
l"ew people realize the enormous mass and
volume of raw material and finished products
which flow across the seas in peacetime and
which must flow in any kind of war. As an
example, our own nation is dependent upon
seaborne commerce for the import of some 66
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out of 77 strategic raw materials. Further,
to stay within the realm of economic feasibility,
the great bulk of raw materials and finished
products can be transported only in, surface
ships. One hears a great deal about air lift,
yet, expressed in ton-miles of passengers and
cargo coming into and departing from our shores,
less than one fifth of one percent of overseas
traffic is moved by air. I do not belittle airlift,
-it is truly an indispensable thing. When time
is of the essence and the cargo is of acceptable
magnitude, there is simply no substitute for
good airlift. However, it is important to face the
fact that airlift actually adds to what ships
must carry, because aircraft can't fly without
fuel-fuel must be moved by sea to way stops
and terminals for the use of aircraft. For ex-
ample, in an airlift of 6000 miles, as across the
Pacific, three and one-half tons of fuel must
be placed along the route for each one ton. of
cargo carried by air.
It is often asked, "Why not ship by submarine
to gain the safety which comes from concealment
in the ocean depths? Here again we are up
against an economic impracticality. A sub-
marine must preserve neutral buoyancy. Three
to 30 times as many submarines as surface ships
are required to transport cargo, depending on
the type of cargo and the manner of stowage.
A striking example of the free world's de-
pendence on the seas is found in the support of
the United Nations' forces in the Korean conflict.
From 1950 to 1953, the ships of the U. S. Military
Sea Transport Service, alone, carried, in support
of allied forces in Korea, 54 million tons of cargo,
and 22 million tons of petroleum products. Of
the latter, a little over five million tons or about
342 tanker loads, were aviation gasoline and
jet fuel. During the height of the fighting,
about a million tons a year of bombs and high
explosives were required.
To control the seas and ensure the flow of
such materials is a prime purpose of navies.
In war, the objectives of our own Navy are
to deny the sea to the enemy, to ensure the
unrestricted use of the sea by our own and allied
shipping, and to exploit the advantages of sea
forces to defeat the enemy. Thus naval power
permits us to project and sustain the effort of
our armed forces overseas-to give assistance
to our allies, --and to ensure an essential seaborne
supply of critical materials required in the
economy of our own nation and that of our allies.
To accomplish these objectives, the United
States has balanced naval forces. Our numbered
fleets are powerful and highly mobile forces,-
offensive and defensive -surface, subsurface and
in the air. Ifigh performance aircraft flying
from the decks of aircraft carriers can strike
targets afloat or ashore with either conventional.
or atomic weapons; amphibious ships carry
highly trained Marines, who under the protection
and support of the fleet, can quickly establish a
beachhead if that is required (as it was at Leb-
anon); our antisubmarine forces have balanced
numbers of aircraft carriers, destroyers, killer
submarines, and aircraft. Adapted to either
general war or limited war, our fleets can meet
aggression precisely and with discrimination.
In contrast to our Navy, the Russian Navy is
heavily slanted towards submarines, and there
is, of course, good reason for this. Russia has
been impressed with the near success in two
World Wars of submarines as an implement
useful to a continental power for cutting the
seaborn life lines of belligerents who otherwise
ruled the seas.
Prior to World War II, Russia's naval strategy
was restricted largely to the protection and
support of the seaward flank of her Army. Por
this she had amphibious and coastal craft, mine
layers and mine sweepers, coastal submarines,
motor-torpedo boats, and a few larger ships with
heavy guns.
Post World War II, however, Russia has
engaged in a most impressive and significant
building program. This program has provided
her, today, the second largest navy in the world
with approximately 28 cruisers, 150 destroyers,
over 3000 naval aircraft, and, importantly, about
450 submarines. This fleet reflects Russia's
trend away from a continental outlook, and also
her particular interest in the submersible weapons
system.
No power in world history has ever had in
peacetime so large a submarine force. Two-
thirds of Russia's 450 submarines are new long
range ocean patrol types developed in the years
after WWII with the aid of German submarine
designers. Between 1.950 and 1956 submarine
construction increased each year, reaching a
phenomenal peak in 1956 of about 100 sub-
marines. This means that Soviet shipyards
were turning out a complete submarine every
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and or -nth day throughout the year- an impres-
sive rate indicative of what the machinery of
dictatorship can accomplish with its total control
of government, industry, materials, facilities, and
people whose standard of living can be depressed
a1 will. Thus in the single year of 1956, Russian.
shipyards turned out as many submarines as we
have in service in the entire U. S. Fleet.
Suddenly this massive rate of production was
cut oft. In 1957 there was practically no sub-
niri.rine building. In 1958, however, production
of a new long range type was initiated, but at
,c much slower pace than before.
Quantitatively we may expect the Soviet
submarine fleet to remain at about its present
level; qualitatively, however, the threat to the
tree world will continue to grow as the older and
smaller submarines are phased out of service
and the number of new long range types increases.
These long range submarines pose a threat not,
only to our vital traffic across the seas, but to
our industrial centers as well, for the Soviets
have the capability for arming these submarines
with missiles and it must be assumed that some
:ire already so equipped.
Although the U. S. Navy has a long lead in
nuclear power, sooner or later nuclear power
will appear in Soviet submarines and give them,
too, that great tactical advantage which accrues
when the ability to remain submerged indefinitely
combines with high submerged speed. We must
assume also that the Soviets are working on
their own version of Polaris submarine-launched
ballistic missiles. All. of this gives an added
dimension to seapower and poses a vastly in-
creased danger from Russia's numerous under-
seas fleet.
Russia's Navy is modern. Eighty percent
of all her combatant ships have been built since
1915, a degree of modernness in sharp contrast
to the twenty percent of ours built during the
same period.
Russia's Navy is beginning to show itself.
Shortly after Stalin (lied, the Soviets relaxed the
closik of secrecy on their naval program to the
extent of sending some of their ships abroad on
good-will visits. The loss of security by such
visits has been minimized through sending the
same classes of ship -a new cruiser and de-
stroyer-on all subsequent visits. Visits have
for the most part been to Scandinavian and
Western European countries, but on one oc-
casion.-in the fall of 1957-to Latakia, Syria,
as a demonstration of Soviet interest in the
area.
The Soviets have a double purpose in making
these visits. First, by showing first-class, im-
pressive warships abroad they demonstrate their
military strength which in turn facilitates diplo-
cnatie pressure and intimidation. Second, the
crews of these Soviet ships are very carefully
indoctrinated as to their behavior toward the
local populace. Their purpose, of course, is to
convince the inhabitants that there is nothing
to fear from Russia, and that alliances such as
NATO are plainly unnecessary. The Soviets
may have some success with this, but the stilted,
unn,ctural behavior of their personnel is quite
frequently too obvious to the discerning observer
They travel always in groups of three or four,
never mix too freely with the inhabitants, and
generally behave as few people expect a sailor
to behave.
A recent development is the announced Soviet
decision to equip a number of submarines to do
research in oceanography and on fishery problems.
The first of these submarines is in service, and
others will probably follow. Although their
purpose may be primarily what the Soviets
claim, their value for the collection of military
intelligence is great.
Still another cold war activity of the Soviet,
N say which aids political penetration, is the
selling of Soviet warships to neutral nations.
Egypt is the best example. Some Soviet de-
stroyers, several submarines, and some smaller
craft have already been turned over to Egypt.
The Egyptians will have trouble assimilating
these warships and will depend heavily on Soviet
technical assistance and training for some time
to come. This, coupled with other Soviet military
aid Co Egypt, gives the Soviets a considerable
influence in the military establishment of the
United Arab Republic. The Soviets have offered
naval vessels to other neutral countries, par-
ticularly in Southeast Asia.
In Russia's past perfidy, her unwavering
adherence to the concept of a worldwide dictator-
ship of Moscow controlled communism, and in
Khrushchev's own words, "We will bury you,"
there is abundant evidence that Soviet Russia
is in a ferment of expansionism. Her Navy is
designed to further her purpose at a time when
to fulfill her ambitions she must turn more and
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more to the sea. Her Navy exists as a direct
threat to the free world's defensive alliances
which depend upon the sea for their strength.
To meet this challenge at sea we must look to
the strength of our Navy and to the efficiency
and number of the ships which make up our
Merchant Marine.
What does the future hold? Of one thing we
can be sure,-the pressure will continue. The
Taiwans, the Lebanons, and the Berlins will
occur at regular intervals. These crises are
planned situations each in turn designed to test
the free world alliances and the strength of
democratic principles. The vast Russian nation,
the masses of whose people are being educated
for the first time in history, will some day learn
that Marx and Lenin, Stalin and Khrushchev,
do not provide the answer to man's existence, but
that the true revolution lies in the West where
man has his freedom and enjoys the highest
standard of living in history. Meanwhile, we in
the West must remain true to our innermost faith
in the basic freedom of nations and individuals,
and above all, we must not shrink from the
burden of preserving the freedom of the seas
without which the world cannot prosper.
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CHALLENGE IN SPACE
By 1)a. WimNrn R VON BRA(-N, Director, Development Operations, Army Ballistic Missile Agency.
The Fifth National Military-industrial Con-
ference has focused attention upon the Soviet
economic challenge to the l+'ree World. It is one
of the most formidable weapons to be employed
against our welfare and security by a ruthless
competitor. Not, the least significant fart about
this situation is the obvious testimony this bears
to the degree of success achieved in the Soviet
drive towards industrialization. The Kremlin
would deny to the Russian people the potential
benefits of increasing productive capacity to
whatever extent is necessary to exploit the
products of that capacity to our disadvantage.
I understand you have been engaged in formu-
lating strategy and tactics by which to defeat
this threat in response to the call of our President.
Ile has said that "we must meet it as resolutely
and imaginatively as we are meeting the better
known military and scientific challenges, through
the full use of all our resources, both spiritual and
material."
I propose to examine another Soviet challenge.
It is directly related in resources to some of
those aspects of Russian expansionism explored.
in your discussions. It is intended to extend
Communist influence into area,, remote from,
earthbound relationships. We dare not, under--
est.imate Soviet capabilities and objectives in
the limitless dimensions beyond the Earth's
sensible atmosphere. We must understand the
total implications to our future welfare if the
Soviets succeed in their drive to achieve a domi-
nant position in outer space.
Not many months ago these matters would
have seemed incredible to most of our people.
Subsequent events have lent substance and
credibility to them. No longer do the loud
etrics of Soviet propagandists disturb our trap.--
quility, although they cannot be lightly dismissed
because of their impact upon the neutral and un-
committed peoples. Rather, it is the undisputed
existence of a substantial capability in space
technology and inmissile-oriented industry behind
the Iron Curtain. in the space of only seventeen
months, the Communists have surpassed our
best efforts.
This is riot an isolated phenomenon. it is
integral to the Soviet plan to achieve supremacy
by defeating free rneu in almost every phase of
lunar activities. No single area of that plan
for conquest can be evaluated competently
without regard to contributing elements. Thus
the spectacular demonstrations of Soviet rocketry
reflect astonishing progress in many fields:
electronics, chemicals, metallurgy, missile guid-
ance, propulsive systems and others.
The breadth, depth and momentum of the
Soviet space program clearly indicates that it has
received and will continue to enjoy the aggressive
support of the Communist regime. The results
achieved, and the profound influence they have
exercised upon the international scene, have given
the Kremlin dictators ample opportunity for
vodka toasts. We can only guess at the echoes of
these technological feats heard in the obstreperous
boastings of the Soviet leaders. Not all the
repercussions of satellite arid space probe launch-
ings are confined to the scientific community.
In the. phases of the Russian space ventures
about which information is available in the open
literature, a close parallel can be found to rnucir
of the current and projected space research and
investigations of this country. This is by no
means surprising. It is as if two nations of widely
different political and ideological philosophies
decided, almost simultaneously, to explore the
same unknown seas. Note that I said "almost";
the advantage of initiative is with the competi-
tion. The state of the art compels employment
of much the same type of ship. The information
available to the ship builders and to the crews
about winds, currents, reefs, and fueling stations
is quite comparable. The differences have to do
with propulsion, possibly the navigational equip-
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ment, and certainly with the ultimate goals of the
explorers and those who expect to capitalize on
the fruits of discovery.
Prudence dictates that we should carefully size
up that rival fleet and try to determine its goals
if we are to avoid Russian custom stations on the
Moon and Mars and ensure that the results of
exploration in space will not jeopardize the
security of free men. The Communists have al-
ways employed human and other resources to
subjugate helpless peoples and to extend their
empire. I find no reason to expect any radical
change in that strategy with respect to outer
space and worlds beyond our own.
A brief summary of what is known about the
Soviet program may be helpful. I would qualify
it, however, with the observation that the data
published in Russia suggests a tremendous,
well-coordinated effort and that the disclosures
themselves are by no means unpremeditated.
They are assuredly intended to convince the un-
wary of Communist mastery and thus serve its
strategic purpose.
The first conclusion which I have already
mentioned is that the Russian space program
parallels much of the current and planned space
programs of this country.
The second is that a substantial part of the
Soviet effort is directed towards manned space
flight and the eventual exploration of the Moon
and nearer planets by human crews.
The third is that Soviet scientists and tech-
nicians are exclusively concerned with their own
work and pay little heed to any possible competi-
tion from another quarter.
Finally it must be remembered that Soviet
policy is to withhold specifics about any one
project until it has achieved success, then to
exploit it to the maximum. While they seem
ready and willing to boast of the scientific aspects
of their program, there is an ominous absence of
any reference to possible military implications.
Like the iceberg, we only know what the Russians
want to tell us-the great mass of their work is
shrouded in secrecy.
While we are concerned with the so-called
"race into space" and its ominous portent, the
Russians appear so sure of their technological
leadership and their ability to retain the initiative
that they do not even consider the possibility
someone else might beat them to the Moon.
Frankly, f do not know who could.
I have chosen a few items at random from
Russian publications to serve as indicators. In
December, 1958, the President of the Soviet
Academy of Sciences, Professor Nesmeyanov,
discussed a new Seven Year Plan for the advance-
ment of science. Ile pointed out that "consider-
able attention will be given to the development
of new means of astronomical investigations by
cosmic rockets and artificial earth satellites."
According to other Russian technical writers,
each Soviet orbiter is the product of a continuously
elaborated design program which draws upon the
experience of previous launchings. More satellites
are programmed for near and distant orbits, of
prolonged and relatively short useful lifetimes,
according to the publications.
Much attention is being paid to re-entry
methods preliminary to manned space flight.
Dogs and other animals are employed in these
experiments-without criticism, I suspect, from
well-meaning pct lovers who decry the same kind
of useful studies here. The Russians claim a suc-
cessful recovery in August, 1958 of a capsule con-
taining two dogs which were carried to a height of
450 kilometers in a payload of over one and one-
half tons. Whether they acquired the ability to
bark at their masters on this short excursion into
freedom, the literature does not report.
A recent Soviet book on astronautics talks of
permanent earth satellites useful as inter-cosmic
way stations, of manned flights to the Moon, of
human visits to the nearest and then the most
distant planets of the solar system, finally of visits
to planets of another system. Russian technicians
suggest galactic propulsion systems employing
ionic and nuclear energy, even quantum rockets
propelled by the flow of electro-magnetic waves.
At points as far separated as Franz Josef Land
and the Antarctic, Soviet rockets and satellites have
been fired that were equipped with instrumenta-
tion to study the upper layers of Earth's atmos-
phere and phenomena unique to outer space. We
are told that satellite sensors confirmed the
distribution of cosmic radiation according to
longitude and latitude. This is strongly remi-
niscent of the Van Allen radiation belt discovered
and measured by the Explorer earth satellites and
the Pioneer space probes launched by the U.S.
Army's rocket team in connection with the In-
ternational Geophysical Year.
The successful launchings of earth satellites,
in the words of one Soviet writer, "paved a clear
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road into cosmic space." Ile said these ac-
complishments "indicate the regular advance of
the level of Soviet science and technology and
the might of Soviet industry." I believe much the
sarne thing could and should be said about the
space achievements of this country, but for one
reason or another too many commentators seem
to be preoccupied with our alleged inferiority as
to deprecate some very solid demonstrations of
our capabilities.
Other technical papers appearing in Russia of
late disclose a keen interest in solar batteries and
plans for larger energy sources of this type which
would, again I quote, "make possible world-wide
transmission of television programs beamed from
satellites, the establishment of astronomical
observatories beyond the atmosphere, and the
continuous observation of meteorological proc-
esses." You will find the same applications
discussed in the national advertising of the larger
missile-related corporations of the United States.
The Soviets claim they accomplished direct
measurement of certain atmospheric character-
istics with. Sputnik III. Also they measured the
composition of ionized gases in upper layers of
the atmosphere, the concentration of positive
ions and the air pressure. These phenomena are
important to the calculation of trajectories of
space vehicles and to the maintenance of radio
contact with them in flight.
Another indicator of the direction of Soviet
interest was the claim that Sputnik III carried
magneto-sensitive transducers to assist in orient-
ing the vehicle in space. This orientation would
be essential to accomplish photography of Earth's
surface from a satellite, to return satellites to
H,arth, and to assist the navigation of ships.,
aircraft or interplanetary vehicles. A Russian
writer claimed Sputnik III could carry one or, two
human passengers and equipment on a ten-day
space journey. This vehicle, I might add,
utilized thousands of semi-conductors and its
programming unit was completely transistorized.
I believe this sampling indicates the Soviet
program is at least as comprehensive as is ours
at this point in time. It makes use of tracking,
recording and experimental stations spotted
throughout the Communist world so that the
peoples of satellite nations are supposed to be
persuaded that they are contributing to it.
The Lunik space probe, in the opinion of U. S.
rocketeers, proved once more that the Russians
have rocket engines of substantially higher
thrust than any we have fired. Chances are that
for this flight they employed the same booster
utilized to launch Sputnik 111. An addil i,mal
stage was probably placed oil the two-stage
booster to push injection velocity up to the level
necessary to break out of 1,arth's gravitational
field. The velocity actually achieved may have
exceeded expectations. Russian sources reported
the final stage weighed approximately :3,000
pounds. The payload itself and its electrical
power supplies weighed approximately 700 pounds
compared to the Pioneer IV probe of 14 pounds
which became the first made-in-the USA satellite
of the Stilt.
It is obvious that substantial accuracy was
required for the Lunik rocket trajectory. We
must therefore conclude that the Russians have
an impressive long-range rocket guidance system.
It may also be surmised, on the basis of the
evidence that Soviet guidance systems can
constrain rockets carrying warheads over inter-
continental ranges and hit cities or relatively
small target areas. This is the grim fact and
there should be no misunderstanding about it.
Flow many of these rockets may be in the arsenal,
I do not know. It, should also be kept in mind
that due to the geographical situation, the
Soviets can exploit medium range missiles of
lesser ranges, perhaps only a few hundred miles,
to blackmail our NATO allies.
I am convinced the Soviet intention is to re-
inforce penetrations on economic, political and
psychological fronts wherever and whenever op-
portunity affords by the naked threat of thermo-
nuclear destruction instantly available in the
guise of missile carriers. Of vastly greater sig-
nificance in the days and years ahead, they
expect to attain dominance in space the better
to compel the recognition of Soviet supremacy
upon the peoples of Earth. Both objectives
could, in my opinion, be achieved without ever
firing a missile against a target in the Free World,
or without ever releasing a glide bomb from a
military vehicle in space that could be directed
to any spot on Earth's surface. Remember
whether a satellite carries scientific equipment
or lethal warheads is simply a matter of choice
exercised by the authority controlling the vehicle.
I say these things are possible and indeed they
are. What then is the alternative open to us?
It seems quite clear the only recourse, and I do
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not for an instant believe we intend to sit idly by
and await the day of Communist judgment, is to
forge ahead with all possible speed and achieve
an overwhelming competence in space by the
exploitation of our impressive technological and
industrial resources. Then even the most
ambitious among the Red dictators may be
persuaded of our determination to keep space
free of political implications and to search out
its mysteries and wonders in the best interest of
all men. The prospect of communization of
other worlds is one from which we can only recoil
in disgust unless we assert the necessary leader-
ship.
It is one thing to state this determination and
quite another to accomplish it. Admittedly a
gap exists between our rocket capabilities and
those of Russia in the space area. It is very
difficult to say when that gap can be closed
because this would require complete knowledge
of the competition's resources and the speed
of his advance -information we do not have or
which is not available for the purpose of this
discussion.
I would call your attention to a little matter
of history just to afford some perspective. The
assumption that nothing was done in this country
during the years when the Soviet Union was
busily engaged in rocket development climaxed
by the Sputnik simply does not jibe with the fact.
It may be quite true that not enough was done,
but let me cite a few statistics from the Army's
files about which I have personal knowledge. For
example, the first modern U. S. military ballistic
research vehicle was fired December 1st, 1944.
The first U. S. high altitude sounding rockets
were fired in September, 1945, attaining altitudes
in excess of 40 miles. The first American surface-
to-surface guided missile was fired in May, 1947,
over a range of 62.5 miles. The first ballistic
missile to attain an. altitude of 250 miles was
fired in February, 1949. In December, 1955
we fired over the full. range the first inertially
guided large ballistic missile, the Redstone, now
deployed with U. S. Army troops in NATO.
In September, 1956 an Army Jupiter C multi-
stage rocket attained an altitude of 682 miles
and a range of 3,300 miles, the first deep penetra-
tion of space.
The groundwork for space vehicle instrumenta-
tion was laid at White Sands Missile Range
during the years following World War IT. Rockets
carried aloft sensing devices, photo cells, density
and pressure meters, even live monkeys. When
we turned to satellite launchings, beginning with
the first Explorer in .January, 1958, the instru-
ment packages borrowed heavily upon the early
knowledge obtained in the period from 1945
through 1949.
We did not work on large rocket engines of
the Lunik order for the reason that such power
plants were not required for the military missile
systems development from 1.955 on. We are at
work now and have increased the speed of our
effort. It may still require as long as five years
to overtake the Soviets and move out in front
and stay there, Unless we continue to accelerate
our momentum, I advised the United States
Senate that within ten. years it will be too late--
we could not then hope to catch up and by then
the Russian foothold on the nearer planets
might have attained stature which could not be
challenged.
One of the most vital of the current programs
is Project Saturn, a clustered booster we are
assembling for the Advanced Research Projects
Agency. This will make available a thrust of
more than 1,000,000 pounds, twice as powerful as
the largest so far fired by our competitors. Saturn
is really the first of the second generation of
U. S. space vehicles. Those of the first genera-
tion, and we are still within that time frame,
depend entirely upon existing missile systems
developed by the armed forces to meet the require-
ments of national defense. Our space payloads
have consequently been limited to the thrust
potential of these systems and this situation
will obtain until true space vehicles are ready
for use.
With the Saturn vehicle it will be possible to
launch a communications satellite capable of
serving the world-wide needs of the Strategic Air
Command of the Air Force, the submarine fleets
of the Navy, and the tactical commands of the
army.
The National Aeronautics and Space Ad-
ministration supports a project aimed at obtaining
boosters larger than Saturn. Since this program
is essentially new it must recognize the time
required for engineering and its availability is a
matter of several years away.
Meanwhile, we should be prepared for other
dramatic Soviet experiments: man in space,
possibly the landing of an instrumented vehicle
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on the Moon, terrestrial and weather observation
satellites, photography and mapping of the
entire Earth's surface. We must expect such
happenings because they are part of the logical
development of that broad program I have
described.
I)r. Keith Tllennan, the Administrator of the
National Aeronautics and Space Administration,
recently told Congress his agency is proceeding
at all possible speed with the expanding space
program. I can assure you no grass is growing
under the feet of the Army team in Alabama,
even though, in my opinion, they might move
faster if added funds are provided. We would
rather wear out, shoe leather now than to be
trading in a Soviet state store a generation hence.
Those of us who are closest to the situation
sometimes feel our concern is pretty much a
private matter not generally shared by the
country as a whole. In some quarters this is
taken to be a rivalry between competing fireworks
manufacturers with little consequence except
possible damage to national pride.
I am reminded of the. tale from Terrence. A
certain seer warned Caesar to be on his guard
against a great peril on the day of the month of
March which the Romans call the Ides; and when
that clay had come and Caesar was on his way to
the Senate, he greeted the seer with a jest and
said : "Well, the Ides of March are come" and
the seer said to him softly, "Aye, they are come,
but, they are not gone."
We have not succeeded, I believe, in awakening
America to the peril so grave it cannot be over-
stated.
We should, in my opinion, substantially in-
crease basic and supporting research programs
which extend beyond the immediate defense need.
A great deal of engineering effort has gone into
the exploitation in recent years of the discoveries
of science. Rocketry is but one of many areas
in which this logical process has occurred. But
we have reached that point where the well of
fundamental knowledge in the natural sciences
is about exhausted and pitifully few people are
trying to refill it. Soon we must reach the stag-
nation point if everyone continues to take out
-what he can use and does nothing about replenish-
ing the source.
I have suggested that project funds ought to
be increased in all areas to provide money for
promising investigations which may crop up in
the course of development. No one can anticipate
their occurrence or their possible yields, but I
believe sizable returns could come out of rela-
tively small investments. Even if many proved
unfruitful, we should at least have learned what
not to try next time and that negative informa-
tion would save money and time later.
It is also essential to approach space projects in
much the same manner in which we carry on the
development of complex weapons systems; that
is, by system, rather than piecemeal. Instead of
developing a booster, then deciding what upper
stages will be adapted to it, what guidance system
should be used, and what kind of experiment
should be launched, the whole project should
become an. integrated undertaking in the interest
of compatible design and telescoped scheduling.
The nature of the competition and its momentum
do not permit the leisurely approach--we must
work with a genuine sense of urgency.
As a final warning I would restate my convic-
tion that this is not a technical struggle between
competing teams of rocket builders. We are
under heavy attack on all fronts by an energetic
and resourceful adversary who has built up a
massive technological effort. This is being
strengthened by an enormous reservoir of scien-
tific and engineering talent constantly replenished
by a state-directed educational program. While
the attack has been at least temporarily deterred
from military adventure, it is being pushed in all
other directions. This is becoming a test of the
stamina, the resourcefulness, the courage, faith,
skill and ingenuity of every American. At stake
is the future of freedom, human progress and now
the Universe itself.
Ttte Age of Space can for our children become
the greatest of all the periods of history, or it
can end in catastrophe so terrible that the mind
cannot grasp the consequences. The choice is
ours to make but only if we exercise our selection
in time. A long time ago the philosopher,
Machiavelli, said that "God is not willing to do
everything and thus take away our free will and
that share of glory that belongs to its." Let's
get to work!
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 CHAPTER NINE
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WHAT PRICE DETERRENCE?
By GENERAL THOMAS D. WHITE, Chief of Staff, United States Air Force.
(Delivered April 6, 1959)
t have chosen as my subject today, "What
Price Deterrence?" It seemed to me that this
subject, would be appropriate in view of the
purpose of this year's conference "The formula-
tion of specific recommendations for action to
strengthen the free world position."
Deterrence of the "hot" war and the conduct
of a successful "cold" war have a significant and
vital impact upon one another. In fact, all
actions taken by this country today, whether
they be diplomatic, military, economic or political,
are interdependent each one affecting the others
to a greater degree than ever before. This also
applies to our actions as individuals both at home
and abroad. It is true with regard to our news-
papers, our periodicals and other methods of
communicating the American way. Thus, the
recommendations formulated by this conference
could well influence military considerations as
well as the economic, the political and the diplo-
matic.
What is Deterrence?
All of us are well aware that "deterrence" today
is an expensive proposition. Further, the in-
creasing aggressiveness of world Communism
and its great technological achievements can only
lead to the conclusion that "deterrence" will
continue to be expensive. What the exact dollar
cost will be in the future, is difficult to say. To
answer the question proposed in the title of my
talk, I propose to define deterrence and tell you
what I feel is necessary to deter the Soviets
militarily. Therein will be the price and to repeat
what I said. a moment ago -the price will be
high.
Deterrence-in the military sense -if it is to be
truly effective, must be based upon three im-
portant factors. First, substantial forces, ready
and available for immediate action, are needed.
We can no longer depend upon time and distance
as allies. We must be prepared to meet the threat
immediately. Second, we must possess the na-
tional will and determination to develop and
provide these forces and to use them when
required. And Third, our forces and our de-
termination must be credible in the eyes of any
potential enemy. I might add that if we are to
maintain solid alliances with our friends, all these
things must also be apparent to our allies.
I would now like to discuss each of these
factors in detail. When f use the term "sub-
stantial forces," I am talking about forces which.
have the undeniable ability to destroy the
enemy's war making capacity and to prevail in
ease war should occur. ?Nothing less can be
an adequate deterrent. Possession of such forces
does not require matching a potential. enemy,
gun for gun--man for man--ship for ship -
aircraft for aircraft or missile for missile. It does
require the capability to apply substantial and
selective firepower against decisive targets.
Because the Air Force is my particular business,
I will dwell primarily on how it fulfills its share
of this requirement. However, I would like to
point out that the United States Army, Navy,
Marine Corps and Air Force comprise a defense
team of over two and one half million men in
uniform. Each service contributes to the team
effort in its own way and their combined forces
form a well coordinated, power-packed military
capability. Added to the strength of the United
States defense team is the significant power of our
allies on land, at sea and in the air. In 1958,
these allied forces consisted of 5 million men,
14,000 jet aircraft and 1.700 combat vessels.
Air Force offense strength today is available in
our strategic bombing force, our tactical fighters
and missiles. Initially, strategic missiles are
being used to augment our bombers. As we
learn more about missiles and prove them out as
effective dependable weapons we want them to
promptly replace a portion of our piloted force.
This I feel sure will appeal to the imagination of
those air crews who are training hard and standing
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by right now to conduct an attack if called upon
to do so. Most of the aircraft commanders in the
Strategic Air Command, for example, have had
the experience of attacking heavily defended
targets before. They didn't like it then and I
doubt very much if they would like it again.
From what I have just said, you may have
deduced that the Air Force is approaching the
missile age with enthusiasm tempered by a
certain degree of caution. This is true and for
good reason. The manned systems we have in
1:he Air Force today are dependable and we know
they can do the job. One reason we know they
can perform their missions is because they have
an "emergency" system aboard called man.
With this "emergency" system whether it be in a
bomber, a fighter, a ship or a tank, equipment
failures or design and production deficiencies can
oftentimes be compensated for 1)y on the spot
human judgment and skill. When automatic
features fail, men are there to crank the bomb
hay doors open, free the jammed guns or make
minor repairs. Unmanned weapon systems
present an entirely different problem. They
must operate perfectly to be effective --they must
he completely reliable. This puts a greater
burden of performance upon missile design,
development and production processes. The
manner in which the men behind the weapon
systems -- the engineers and the production
workers --do their jobs, will have a greater
impact upon our combat effectiveness than ever
before. I cannot stress this point too strongly---
particularly as increasing numbers of ballistic
missiles enter our weapons inventory and repre-
sent a larger portion of our total. combat capa-
bility. This is a most vital problem one which
should be understood by every man associated
with our weapon systems. Every individual--
civilian or military--who has anything to do
with our weapon systems must recognize his
individual responsibility for the ultimate per-
formance of these systems-and assume a
personal pride in their contributions to our
national effort.
Assuming superior reliability in our manned
systems of the future, the Air Force approach to
the problem of mixed forces, i.e.: missiles and
aircraft, will follow the pattern already set in our
choice of weapon systems over the years-mission
performance. If missiles can do a job better,
they wi11 be used. On the other hand, if manned
aircraft can do a better job, they will be employed.
From what we can see right now, it appears that
we will have to combine the best features of each
system to guarantee optimum mission accornplish-
rnent. In this way we can capitalize on the
strong points of each system, thereby using one
to complement and fill in the weak points of the
other.
The second factor of deterrence I mentioned
was national will and determination. Military
strength without public support--that is not
backed by strong national will---cannot be fully
effective. Today, when time is so critical -and
decisions so far reaching --our national detcrrnina-
tion must never waiver. Just as important, it
must not be hidden. Its existence in direct
support of national policy must be there for all
to see.
And this leads me to the third factor of de-
terrence---the credibility of our forces and our
determination in the eyes of an enemy. The
effectiveness of our forces and our determination
to use them if necessary are of little value as a
deterrent if an enemy does not fear the con-
sequences to him of an aggressive move on his
part. He .must believe both in our capability and
our will to employ it. There must be no doubt in
an enemy's mind that what we have is good, that
we can and will use it if necessary, and that if we
do use it--we will prevail.
Any lesser deterrent capability is to all intents
and purposes inadequate. A lesser capability
would not, for example, accommodate for limited
conflicts getting out of hand due to unforeseen
developments. It would not allow for mistakes or
miscalculations on the part of either opponent.
Neither would it prevent the brutal trade-off of
millions of casualties by those who have no regard
or concern for the importance of the individual
as a human being.
To define effective military deterrence then,
I would say it is the capacity to wage war on a
scale sufficient to prevail in event of war-backed
up by the national will and determination to
develop and employ this capacity in support of
national policy-with all of this recognized and
believed in by friend and foe alike.
What is the Price?
Now, as to costs: Like anything else, the price
of our deterrent effort depends upon its quantity
and quality., To match an opponent gun for gun,
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aircraft for aircraft or missile for missile could
turn out to be a numbers game-it could turn
this country into an armed camp- --and would
eventually undermine our economic foundation
and our standard of living. I have no doubt that
this country could match any opponent in
quantity of materiel-that we could build forces
of every conceivable kind and shape to meet
every possible situation-if this were what we
wanted. However, I am equally convinced that
this would not only be unwise but that it is
unnecessary. We can provide the deterrence we
need at lesser cost-always bearing in mind what
the ingredients of deterrence are.
This is how the Air Force is going about its
share of this overall task. Over 90% of this
country's retaliatory effort -the primary general
war deterrent-is contained in the Air Force's
Strategic Air Command and in. its tactical air
forces at home and abroad. Over the last ten
years, these forces have been procured, main-
tained and trained for slightly over 200]0 of the
annual Department of Defense budget. The sum
involved has bought and maintained the aircraft
and missiles, built the bases and operated the
forces which have served and still serve today as
the free world's primary deterrent to general war.
Contained within. the primary general war
deterrent is the Air Force's strength for limited
war. Our tactical air forces, world-wide, are dual
capability forces, with a particular adaptability
to limited conflict. Of the 105-wing force,
planned for the end of the current Fiscal Year,
35 wings will be in the tactical category. These
wings and their supporting units comprise over
1.25 squadrons of various types including tactical
fighters and bombers, reconnaissance aircraft,
tactical missiles and transport and tanker aircraft.
These units can, either from in-place overseas
bases, or after rapid deployment from domestic
bases, engage in limited war without seriously
detracting from the backbone of our general war
strength. Their high mobility was demonstrated
twice during this past year during the Lebanon
and Formosan situations. In both instances,
tactical aircraft were dispatched from domestic
bases and arrived at the scene of the action in a
relatively short period of time. In fact, in the
Mid-East situation, F-100's from Myrtle Beach,
South Carolina touched down at Adana Air Base,
Turkey after a nonstop flight of less than 13
hours.
The Strategic Air Command also plays a dual
role. Although its primary purpose is the
deterrence or successful conclusion of general
war, it acts as the strong right arm backing up
the employment of free world forces in limited
conflict. Ground, naval, marine and tactical air
forces can move promptly and openly into trouble
areas, firm in the knowledge that their deploy-
ments are covered by the invisible but ever
present might of our strategic power.
Another important part of our deterrent
posture is the Air Defense capability backing up
our offensive forces -that capability which would
provide the warning of incoming attack, protect
our own forces and direct the aero space battle.
Approximately 750/0 of the capital outlay for
the facilities and equipment currently devoted
to the Air Defense effort of this country has
been purchased with funds allocated to the
Air Force at a cost of less than 10% of the annual
Department of Defense budget over the last ten
years. This money has developed and purchased
the radars, the communications, the fighter
interceptors, the missiles and the control network
which comprise the area air defense of this
country and enables us to destroy enemy attackers
at long distances from their targets on this
continent.
From the figures I have given you, you can see
that about one-third of the nation's overall
defense budget has served to provide the great
proportion of this nation's general war deterrent
posture. What the cost will be in the future,
however, is difficult to estimate. Rapid techno-
logical advances are continually imposing new
and expensive requirements. One of them, of
course, is the necessity for better warning-the
key to the speed of our reaction in case of surprise
attack. Although our current warning system
against air-breathing missiles and aircraft is 90%
complete, it must be continually improved to
keep pace with the ever increasing performance
capabilities of the newer air-breathing weapons.
In addition, the advent of ballistic missiles
creates an urgent requirement for the develop-
ment of an extensive ballistic missile early warn-
ing system-construction of which is now under-
way.
As you well know, however, warning is not the
whole answer. Even with an effective missile
early warning system we will receive less than
30 minutes warning of an incoming ballistic
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missile attack. Thus we must devise other
methods of protecting our own forces. A variety
of such methods are being developed. In the
case of Air Force weapons, for example, we can,
and are dispersing our offensive forces. This
requires the enemy to attack more targets and
also has the advantage of providing additional
locations from which we can launch our forces
more quickly. Dispersal of our strategic bomber
force is being expedited. Construction of our
strategic missile sites has been programmed to
emphasize both dispersal and hardening. Harden-
ing -going underground- is particularly adapt-
able to missile systems. However, in order to
attain the earliest possible ICBM operational
capability, we are not hardening our first sites.
Later sites will be hardened and dispersed and
thus much better protected.
In addition to affording better protection to
our forces, dispersal and hardening also have a
significant impact upon an opponent's force
requirements. Naturally, the accuracy, reli-
ability, and warhead yield of an opponent's
weapons all affect his capabilities. But even
assuming a high degree of reliability, accuracy
and yield, the degree of our target hardening
comprises another factor which we must take
into consideration. For example, with a given
degree of accuracy and warhead yield, where one
weapon is needed to attain a 90%o probability of
destruction against an unprotected target, ap-
proximately four weapons are needed to attain
the same probability of destruction against
targets hardened to 25 PSI and some 13 weapons
are required against targets hardened to 100
PS I. Thus, our dispersal and hardening of
strategic missile sites greatly compounds an
enemy's attack problem. Should we be able to
incorporate mobility into the system -a measure
which is under serious study for the latest genera-
tion solid propellant missiles -- the enemy's
chances of successful attack will be further
degraded.
Another course of action available to us is to
increase our alert capacity. At this very moment,
substantial numbers of our strategic bombers
are on a 15-minute alert, that is, they can be
off the ground and on their way to their targets
within 15 minutes of an initial warning. Natur-
ally, the more weapons and crews we have on
alert, the better will be our reaction when warning
is received. Additional facilities are now being
constructed to increase our current capability.
Whenever enemy ICBM capabilities force us
to counter the shorter warning time available,
we also have the capacity to maintain a sig-
nificant portion of our strategic bombers on
airborne alert. This type of alert is made possible
through employment of air-refueling operations
and carefully scheduled and precisely flown flight
routes which permit the strike aircraft to be
diverted to their targets while in. the air. Such
forces would be invulnerable to surprise ballistic
missile attack and capable of immediate retalia-
tion.
The courses of action I have outlined to you
will all cost money--a lot of money. There is,
however, one ray of sunshine in an otherwise dark
fiscal picture and that is the development and
eventual deployment of the Air Force solid
propellent intercontinental ballistic missile called
the Minuteman. This weapon which we expect
to have in an operational configuration in the
early 1960's will greatly improve our strategic
position. It's adaptability to hardening, the fact
it can be left unattended for long periods of time
and its fast reaction through remote control
firing make it an excellent weapon irrespective
of purely economic considerations. On the other
hand, this weapon can be procured at "cut rate"
prices as far as ballistic missiles go. Our forecast
is "one in the hole" for a million dollars. This
means that one Minuteman, hardened and
underground and capable of almost instantaneous
reaction will cost one million dollars. This is a
large sum of money, but in contrast with other
ballistic missile systems and in consideration of
its very reduced manpower and operating costs,
the Minuteman is the cheapest yet.
Conclusion
In discussing the price of deterrence today,
I have primarily stressed the costs of equipment
and facilities. But the price will also be high
in human effort and time on. the job. Already,
thousands of our warning radar and our fighter
and bomber crews are on alert around the globe.
These men and the men backing them up are
putting their jobs and their country above
personal convenience. So far, it isn't a shooting
war but these men know that the better they
do their job, the less likely it is that there will
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be a shooting war. The point I want to make
is that thousands of men in the military services
are, at this very moment, and during every hour
of every day throughout the year on guard,
many of them in remote and isolated locations.
They are not getting extra pay for their minimum
comforts, nor overtime for the long hours--it
is part of their j ob and their duty to their country.
If their tasks are to be meaningful, it occurs to
me that our entire nation must also put forth
extra effort comparable to theirs----effort com-
parable to that which. built this country.
All of us know, but we sometimes forget, that
this wonderful country of ours is the result of the
effort and drive of millions of Americans before
us. They succeeded in their struggles against
hostile Indians, Colonial masters, the elements,
famine and disease -problems which, in. their
time, were as serious as those that we face today.
They succeeded because they were determined
and willing to exert additional effort to achieve
their goals. If we are to continue to survive as
a free nation, this feeling---this philosophy-can
not be allowed to die.
I am confident that with resolute public support
the military services can continue to provide the
military security required for this nation.'s
survival as a member of the free world. Strong
military power will continue to furnish the answer
to the Communist military challenge. But
military security is only one part of the national
task that lies ahead. If we are to overcome the
total Communist threat, national determination
and effort on all fronts is required. In this way we
can guarantee the continuance of the principles
for which this nation stands.
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Part Four
Area Case Studies:
THE MIDDLE EAST, LATIN AMERICA, AND ASIA
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ARAB ASPIRATIONS AND THE COLD WAR IN THE MIDDLE EAST
By H. E. NADIM DIMEcIIKIE, Ambassador of Lebanon to the United States.
The theme you have chosen for your Fifth
Conference (The Soviet Economic Challenge)
is one of universal appeal. The great debate that
is raging today as to the future of Communism
and Democracy in. our world is no longer merely
an. ideological debate. Nor does it concern the
principal advocates and contenders for power
of the two systems to the exclusion. of others.
Indeed the frightful aspects of modern warfare
have joined hands with the universal appeal of
both Communism and Democracy to render the
question of their respective challenges a matter
of vital and continued concern to all the States
of the world, regardless of their size, location
or physical prowess. Under the circumstances,
it is gratifying that you have seen fit to engage
part of your attention in this Conference with
the area of the Middle East.
No discussion of the Middle East situation in
any one context could escape a few historical
remarks as a necessary prerequisite to a proper
understanding of the area. The Middle East
after all is the birthplace of history, for it is in
the Middle East that man's earliest civilizations
and religions emerged. Yet throughout recorded
history, the Middle East has been the arena of
interminable conflicts and disputes--a tribute
to its strategic importance in the world, and
one that has become a liability rather than an
asset to its inhabitants. I say so because the
peoples of the Middle East, like those of other
areas, have been overcome since the end of the
Second World War with the awareness that their
fate and security cannot be isolated, in the
event of conflict, from those of the rest of the
world. The necessary consequences of this
dynamic and irrevocable awareness have been
the desire to master to the fullest extent possible
control over their affairs with a simultaneous
readiness to recognize the legitimate interests
of others, once those interests do not conflict
with the independence or sovereignty of the
countries concerned. The present period, there-
fore, is one of crucial significance in the history
of the Middle East. For the peoples of the Middle
East are rapidly crystallizing in. their own think-
ing a concept of themselves and their role in the
community of nations that is clear and meaning-
ful. At the same time, they are seized with an
eagerness to define their relationship with other
countries and areas in a manner that is consistent
with their national aspirations and that could
lay down the bases for future cooperation in the
interest of their development and world peace.
With this state of affairs in mind, allow me to
attempt a review of the historical forces which
have left an impact on the area in its recent
past. By that I mean the period of the Nine-
teenth Century and the period of the two World
Wars.
I. The Nineteenth Century:
The significance of the nineteenth century in
the history of the Middle East is two-fold. This
was the century during which the impact of the
modern conflict of power was first experienced and
during which the rivalry for the control of the
area between the West European Powers and
Tsarist Russia reached its peak and continued un-
abated until the First World War and the October
Revolution in Russia. This was also the century
during which Arab Nationalism emerged to throw
off the yoke of Ottoman control and to establish
the foundations of the Arab World as we know
it today. In these two phenomena - not neces-
sarily isolated from or unrelated to one an other -
one can see the origins of the present conflict
of power.
During this period, the rivalry between Western
Europe and Russia centered around the Ottoman
Empire which then controlled, and had con-
trolled for the past three centuries, modern
'T'urkey which was the seat of power, the Balkans,
the entire Eastern Mediterranean littoral and
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North Africa, to the exclusion of Morocco. The
primary interest of Russia was to secure a warm-
water outlet into the Mediterranean as a means
of extending her commercial and political in-
fluence throughout the Mediterranean basin.
Western Europe, on the other hand, had already
established its influence and/or direct control
over a considerable part of Asia and practically
the entire African Continent. Expansion for
Britain meant the extension of British imperial
power and authority in the manner that Rudyard
tripling has described so eloquently. For France,
expansion meant in most cases, particularly in
North Africa, compensation for defeats and
reversals to French policies in Europe as well as
what the French fondly refer to as their civilizing
mission. While a considerable share of this
Western influence fell to the British Empire
and France, Britain and France undertook, each
for its own reasons, to offset every Russian
maneuver aiming at the establishment of a foot-
hold in the Eastern Mediterranean which they
regarded as a vital link in their imperial com-
niunications and the gateway to India, Indo-
China and in other parts of Asia and the h'ar East.
Yet Western policy during this period had few
of the aspects of solidarity and cohesion that de-
veloped after the First World War. Indeed the
colonial ambitions of the various European
countries left them more often than not with
contradictory interests and irreconcilable policies.
With the exception of the period of the Crimean
War and other less important episodes, there was
little cooperation or coordination of policies
among these powers. Not until the year 1904
was this effected in the Entente Cordiale between
Britain and France. For long at loggerheads
with each other, Britain and France succeeded in
this agreement in arriving at an accommodation
by which the French recognized the fact of
Britain's occupation of Egypt since 1882 in
return for a free hand for France in Morocco
which was declared a Protectorate of France
eight years later. The spirit of this agreement
continued to guide Anglo-French policy in the
Middle East and carried through the period of
the First World War during which secret, accords
were concluded dividing between them the vast
domain of the Ottoman Empire.
The impact of the rivalry between Western
l urope and Russia during this period was felt
keenly in the chancelleries of the Powers eon-
corned. Those who were most directly affected
among the peoples of the Ottoman Empire were
the inhabitants of areas of conflict such as the
Balkans, Turkey and Central Asia, while the
impact on the Arab provinces of the Empire was
largely that of Western Europe as a result of
Anglo-French occupation of Egypt, the Sudan
and the rest of North Africa, as well as through
their commercial and missionary activities in
the Arab. East. This leads us to consider the
second most relevant aspect of the nineteenth
century, the emergence of the Arab National
11vlovement.
The Arab National Movement emerged in the
latter part of the nineteenth century and mani-
fested its early beginnings in the form of secret
societies that were organized by Arab intellectuals
in what used to be known as Natural Syria which
included Jordan, Syria proper, the Lebanon and
Palestine. The basic ideological component of
the Movement was the conviction that the Arabs
constitute a nationality and that, as such, they
should no longer suffer subject status within the
Ottoman Empire. The concept of nationality
came therefore to supersede and finally reject
the factor of religion as the basis of political com-
munity organization-a concept which was in-
herent in the founding of the Arab Empire during
the seventh century and which made possible
the inclusion of the Arab world within the Otto-
man Empire in the fifteenth.
Significantly, a number of the early founders
of the Arab National Movement were Christian
Arabs of established heritage. As Christians,
they had consistently entertained a feeling of
separatism from the Ottoman order which rested
basically upon the religion of Islam. Moreover,
as Christians, they were more closely associated
with the modern trends in European thought and
were thus better qualified at that early stage to
interpret theories of nationalism than others.
Significant also in the rise of the Arab National
Movement was the impact of the West and its
institutions-a process which some trace back to
the Napoleonic invasion of Egypt in 1798 and
which had stimulated Arab thought along the
lines inspired by the successful American and
French revolutions and. the unification of Italy
and Germany. The principle of an Arab nation-
ality gained recognition and was espoused by the
rank and file of the Arab community, and as the
Arabs agitated for their independence with
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greater vigour, their movement gained indirect
momentum and support with the rise of the
movement of the Young Turks in Turkey itself as
a reaction to which the emancipation of the non-
Turkish elements of the Empire was set in motion.
In a sense, the emergence of Arab Nationalism
and the Young Turks movement in. the Arab
East and Turkey signified the advance of the
force of Nationalism from Western Europe
eastward into Central Europe, the Balkans,
Turkey and the Near East, later to spread as we
now bear witness into Asia, North Africa and
Africa below the Sahara.
Thus it would seem that the most relevant facts
in the history of the Middle East during the
nineteenth century to the consideration of Arab
aspirations and the cold war would be the follow-
ing three:
In the first place, the threat of Russian ex-
pansion into the Middle East left no perceptible
impact upon the Arabs and did not by con-
sequence form part of their historical experience.
And while this is true of the Arabs, it does not
apply to the peoples of the northern periphery
of the Ottoman Empire, Turks, Persians and
others, who had intimately experienced and
suffered at the hands of this threat. Considerable
and repeated though Russian efforts were, they
became the concern of Britain and France
primarily, both of whom for reasons of their own,
considered the maintenance of the Ottoman
Empire a vital and necessary condition for the
peace of Europe.
Secondly, during this period of rivalry over
the Ottoman Empire, the success of the West in
containing the Russian threat at a time of growing
Ottoman weakness enabled the Western Euro-
pean powers to lay down the foundations for their
control of the area-a fact which after the first
World War, and in disregard of the Arab desire
for independence, made possible an era of Euro-
pean control in the Middle East with complete
mastery over the area and its resources.
Thirdly, as a result of the advance of the
concept of nationalism and Western ideas into
the Arab East at a time of growing Ottoman
weakness and mounting suppression of subject
peoples, the Arabs espoused the ideas of national-
ism., insisting upon their separate identity, there-
fore demanding political independence. This
was the beginning of the Arab National Move-
ment as we know it today.
II. The Period of the Two Wars 1914-1945:
Of far greater significance to us for the purpose
of this discussion is the period of the two world
wars. During this period of three decades, the
Middle East was in a state of almost continuous
turmoil. In pursuit of their liberation and
independence, the Arabs openly revolted against
the Ottomans in 1916 and, joining hands with
the Western Allies, they spared no effort or
sacrifice for the attainment of their goals. Yet
when the victorious powers met at Versailles to
discuss the terms of the peace settlement, the
Arabs were excluded from the deliberations of
the Conference. A Commission which, at the
behest of ]'resident Wilson, was sent to the Arab
East to determine the aspirations and desires of
the Arab peoples found a unanimous desire for
freedom and independence and a rejection of
both Zionism and foreign rule. Unfortunately,
however, the colonial ambitions of Britain and
France proved stronger than the Wilsonian ideals
and principles of the time. With the establish-
ment of the League of Nations, the de facto
wartime occupation of Arab territories was
translated in terms of mandatory administrations
who were to promote through their policies the
conditions of self-government in preparation
for eventual independence. The wartime designs
and secret agreements among the allies to par-
tition the Arab World into spheres of influence
became a reality, in. violation of the solemn
pledges made to the Arabs before their revolt
guaranteeing them freedom and independence.
Indeed, the first Arab attempt to establish inde-
pendence in Syria under the leadership of King
Faysal was suppressed militarily by the French
who bombarded Damascus and forced Faysal to
leave the country. And with the establishment
of the Mandates System, Anglo-French occupa-
tion of the Arab East acquired in their estimation
a juridical. status. As a result, the entire Arab
World was placed under effective West European
occupation and control. Algeria, Syria and
Lebanon were under French domination while
Britain was in control of Egypt, the Sudan,
Palestine, Transj ordan and Iraq. In addition,
Britain controlled the entire southern coast of
the Arabian Peninsula, always careful to have
her relations with the local rulers regulated
through treaties of "friendship." The withdrawal
of the United States from the scene, after the
ratification of the League of Nations Covenant
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failed to win Senate approval, dealt a heavy blow
to the success of the principle of self-determina-
tion, and the Mandate System became the facade
for continued British and French domination.
In view of all these circumstances, it was
natural that the Arabs should concentrate on the
achievement of political independence and to
that end they tried both the road of negotiations
as well as that, of armed resistance when peaceful
rnenns failed. From this intercourse between the
Arabs and the Mandatory European regimes
emerged it pattern by virtue of which both
political independence and financial and coin-
inercial relations were governed by treaties with
prejudicial and onerous conditions. Thus the
fictitious independence of Egypt in 1922 could
become more real only on conditions allowing
continued British influence such as could be
found in the Anglo-Egyptian Treaty of 1936.
By similar tol.en, the granting of independence
to Iraq and support of her application for member-
ship in the League of Nations in 1932 were
conditional upon the right of Britain to retain
certain occupation rights and considerable in-
fluence over the foreign policy of the country.
And in Palestine, Britain acted on her own with-
out inhibition or restraint to implement the
Balfour Declaration. The same pattern was
repeated in Syria and Lebanon by the French,
varying only insofar as British and French
colonial moods and tempers differ.
'l'h.e Question of Palestine to which I just
referred crystallized during this period. World
Zionism made capital on the emergencies of the
two world wars. During the first, it succeeded
in. securing a British commitment in favour of
establishing a Jewish national home in Palestine,
while during the second, it capitalized on Nazi
persecution of the Jews to justify its claim for
the establishment of it Jewish State. In Palestine
the policy of the mandatory power was opposed
to the wishes of the majority of its inhabitants
and, as a result, therefore, was in violation of the
principle of self-determination. The problem
created (luring this period is still with us, and in
magnified proportions.
Another significant aspect of this period was the
discovery of oil and its exploitation on ever-
widening scales. This discovery naturally en-
hanced the strategic importance of the area. It
also introduced a new kind of American. to the
Middle East. In sharp contrast to his missionary
counterpart, the U. S. oilman and businessman
brought with him the revolutionary impact of
technology and technical know-how. his advent
to the Middle East is it phenomenon of unique
importance. For unlike the European business-
man, his protection was largely the bargain he
struck, and as long as he has been faithful to it,
it has been scrupulously observed.
To all these developments during the period
of the two wars, one must add the relative isola-
tion of the United States and the Soviet Union
from Middle Eastern affairs. The withdrawal
of the United States from what could have been
an era of expanded cultural and commercial
relations with the Middle East coincided with
the withdrawal of Russia from the involvements
of the Eastern Question of the nineteenth century.
While the United States returned to the warp of
isolationism and Soviet Russia began consolidat-
ing the gains of the Revolution, the Middle ],,as[,,
powerless and defenseless on its own, was left a
province, a sphere of influence, or a preserve
(as it was variously described) of Britain and
France. This state of affairs inevitably led to
dangerous consequences due to no small an
extent to the psychological attitude it implanted
in British and French official and public opinion
whereby the Middle East carne to be considered
as their backyard.
What now are the conclusions that one can
draw from this survey'
The first conclusion naturally concerns the
relationship between the Arabs arid the European
countries involved in their affairs. The establish-
ment of European domination in the Arab World
made the Arab peoples fearful and suspicious of
the motives of the Colonial Powers. The employ-
ment of treaty arrangements by these powers as
instruments of control over the area left the
Arabs wary and suspicious of future entangle-
ments through treaties-regardless of what they
purported to achieve.
Secondly, the creation of the Palestine Problem
further accentuated Arab fears of the European
Powers who sponsored the Zionist program. It
became the primary preoccupation of the Arabs
and, to that extent, made them less concerned
about, or responsive to, outside threats or
menaces.
Thirdly, the involvement of the United States
in the establishment of Israel seriously impaired
the unequalled popularity and unrivalled prestige
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that the United States as a Great l.'ower enjoyed
among the Arabs. The vast repository of good
will created for the United States by American
missionaries, educators, and business men; the
quick American recognition of the independence
of Syria and Lebanon; and American assistance
to the Arab States in becoming Charter members
of the United Nations-all these and many other
factors that augured well for future Arab-Ameri-
can relations were severely undermined by
American support of the Zionist program in the
United Nations and in other material and moral
respects.
The fourth and final conclusion pertains to
Arab independence. The Arab struggle for inde-
pendence from the Colonial Powers aimed at the
achievement of genuine and real independence
as contrasted with independence through treaties.
This objective naturally precluded the concept of
the existence of a void or power vacuum within
the area.
IIL Arab Aspirations:
The historical remarks I have just concluded
reflect on most present day Arab aspirations, and
it is this knowledge that has caused me to dwell
on them at such length. My purpose in so doing
has been to show that the Arab aspirations in
the news today-freedom, independence, the
desire for social and economic development-
all these aspirations have deep-seated origins in
the development of modern Arab society over
the last five decades. They are not the product
of the past ten or twelve years, although the
unrest experienced in the Middle East during this
period has helped bring them to world attention.
In this respect, the advent of the Cold War to the
Middle East has helped even further to bring
these popular clamors under sharper focus. This,
however, leaves much to be desired ...
May I suggest, before discussing Arab aspira-
tions at greater length, that in trying to under-
stand and fathom Arab aspirations today, it
might be helpful to try and view them as the
Arabs themselves view them. In times like
these when the Arabs are not the only people to
entertain nationalistic moods and- ideas, one is
often inclined to find a common denominator for
the various nationalisms that have sprung on
the world scene in the hope of achieving a well
rounded or, shall I say, a comprehensive feeling
for all these movements. While this approach
is certainly not without merit, I feel that it is
misleading as it leads to a tendency to equate
by drawing comparisons. There are emerging
nations in Asia and Africa today who are making
their first appearance in the comity of nations.
This I say without disparaging intent; indeed,
one can say the more the merrier, for those in
the world who have a sense of nationhood could
better serve the world and themselves should
they be allowed the laurels of sovereignty and
independence and have the opportunity to
cultivate a sense of international responsibility as
they refine and develop their own nationalism.
This is not, however, the case with the Arabs or
their nationalism. The Arabs already have a
place in history and it is from this vantage point
that Arab aspirations are moulding themselves.
Whether it is in the social or exact sciences or
religion, the Arabs have made contributions that
were, and are to this day, best recognized by the
fair and impartial minds of Western philosophers
and historians. If one could detach one's self
from the recent disputes and antagonisms that
have marred Arab-Western relations, one could
discover a deep and magnificent heritage of
spiritual, artistic and intellectual intercourse
between the Arab mind and the Western mind.
Western historians tell us that the Renaissance
and the revival of Europe after the Dark Ages
are much indebted to the Arabs for their preserva-
tion of the heritage of classical Greece and for
the advances they made in the various fields of
knowledge. We know ourselves that had it not
been for the Western ideals and values that were
communicated to us through Western education
in the decadent days of Ottoman rule, Arab
nationalism might not have emerged when it
did or acquired the substance it has today. These
are truths and realities which we should always
bear in mind and not allow to be obscured by
the tensions enveloping the world.
If I were to say what is the force or basic drive
that feeds Arab aspirations and gives Arab
nationalism its power and momentum, I would
say it is the sense of mission with which the
present Arab generation is seized. The Arabs
today are in a race with time, trying to accomplish
within a lifetime what has taken others decades
of work and effort. It is this trait, I believe,
which gives Arab nationalism the sense of urgency
that one can detect in its manifestations. It
is also an understandable trait. The Arabs are
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anxious to regain for themselves that state of
national health and vigor which was dulled by
centuries of foreign domination and exploitation.
i'lius Algerian independence can not wait until a
formula is found by France and her allies. And
along the same line of thinking, schools, hospitals
and roads must be built, and industrialization
must develop. The revolution that has overtaken
the Aral) world in recent years was not limited to
changes of regimes and government institutions.
The real revolution is the one that, has changed
f he patterns of thinking among the masses of the
Arab peoples, and this is now in full swing.
The Arabs today want freedom and inde-
pendence and by that is meant not the unre-
strained and unfettered type of freedom, but
freedom from foreign domination or erploitatioii
of any kind. They wish for those of their brethren
who are still fighting for independence success in
their struggle and support them morally to the
fullest extent possible. They are also determined
to safeguard the rights of those Arabs whose
rights were usurped in Palestine through inter-
national calumny and naked force. In the area
of Arab cooperation and unity, the Arabs have
a universal desire for closer cooperation among
their governments and leaders. Day to day
events and occasional inter-Arab misunder-
standings may convey the contrary impression,
but this is the casual impression that does not
betray real Arab sentiment. So long as the
sentiment is true and genuine, then it and it
alone will determine how soon and in what form
Arab unity will be accomplished. In the field
of economic development, the Arabs wish to
industrialize their economics as much as possible,
in an attempt to bridge the gap that exists
between their national income and standard of
living and that of the more developed industrial
countries. And in the social and educational
fields, the Arabs aspire to more social equality
amongst themselves and expanded educational
opportunities for all, men and women alike.
I V. The Impact of the Cold War:
!1 now turn to the impact of the Cold War on the
Aral) aspirations we have just surveyed. Obvi-
ously, the ultimate and decisive impact of the
Cold War in the Middle East is not easily discern-
ible or predictable. The more immediate impact,
however, is already clear and if the events of the
last six or seven years are carefully examined,
they may reveal patterns of policy and action
that. could elucidate the course of events in the
future.
The first observation I wish to make in assessing
the impact of the Cold War pertains to basic
differences in approaching the question by the
West and the Arabs. It seems that the Cold
War has two dimensions for the West of which it
is one and the Sino-Soviet bloc the other. There
is consequently the tendency to regard the
power struggle as between the West and the
Soviet camp in terms of the Soviet drive for
world domination and the weakening of N A'l'O
and other Western defenses. While we do not
deny the West the approach it chooses to deter-
mine what its best security interests are or
involve, we nevertheless feel that this approach
has complicated Western policy towards different
areas of the world, particularly our own. There
are issues which are capable of solution, the
settlement of which has been complicated by the
attempt to involve them in terms of NA'T'O,
and the Algerian problem could be considered
one such example. The Arabs have consistently
regarded the extension of the Cold War to the
Middle Cast as an unwelcome development.
Arab recognition of the Cold War as a Middle
East reality is a reluctant and grudging recogni-
tion and we still hope that the conditions of the
Cold War are only temporary. Rather than view
the advent of the Cold War in terms solely of
Soviet calculated strategy for world domination,
we believe that it was made possible as a result
of outstanding disputes between the Arabs and
the West and the failure to find satisfactory
solutions for these disputes. The basic issue
involved in the Cold War over the Middle East,
is therefore a crisis between the West arid Arab
Nationalism. It is this fact that is responsible
more so than Soviet strategy for making the
Cold War in the Middle East an East-West
struggle when in reality this is true only in a,
derivative and not an original sense. I' ailure
on the part of the West to come to terms with
Arab Nationalism since the end of the Second
World War created the opportunity for Soviet
Russia to penetrate the Middle East. They
can hardly be blamed for exploiting an oppor-
tunity that was tailored to suit their designs.
Allow me to elaborate further by examining
the impact of the Cold War on Arab political
and economic aspirations.
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The cardinal aspiration of the Arabs is that of
independence. The Arab States generally con-
ceive of their independence in terms of three
factors: armed strength, economic strength and
stability, and independence of initiative in the
field of foreign relations.
Armed strength through the maintenance of
defensive forces and adequate armaments is an
awkward and costly necessity throughout the
Arab World. In the Arab East, the menace of
Israel which, until recently, boasted tirelessly of
her armed superiority to all the neighboring
Arab States and in fact committed aggression
against them on more than one occasion, left
the Arabs with little choice but to build tip their
defenses. A similar situation exists in North
Africa where the Algerian war continues to spill
over the territories of neighboring Tunisia and
Morocco, forcing these two States to divert some
of their needed resources to armaments and
defense. In both these situations, the question
of the supply of arms has provided major irritants
to Arab-Western relations. Indeed, there are
some who consider the arms agreement between
Egypt and Czechoslovakia in September 1955
as marking the beginning of the Cold War in the
area. Be that as it may, the failure of the West
to provide the Arabs with credit for defensive
weapons and the insistence upon conditions
limiting their use is responsible for the readiness
of some Arab States to purchase arms from the
Communist camp.
In the absence of political settlements to such
outstanding disputes as Israel and Algeria, the
need for armaments, however deplorable and
regrettable, is nevertheless real. Furthermore,
short of a general relaxation of tension in the
world as a whole and a measure of disarmament
among the Great Powers, it is too much to hope
for a system of international embargo on arms
to an area like the Middle East; or less still to
expect some self-imposed reduction of armed
strength when the dangers have not been reme-
died. The resultant situation today is that key
and strategic countries in the area have turned
to the Russian camp for their supply of arms
while the West has more or less withdrawn from
this field, except with regard to special areas
involving Western commitments in less strategic
spots.
In the field of economic development, the
Arab States, not unlike other countries in the
Middle East and Asia, have aspired since the end
of the Second World War to bridge the gap arising
out of the difference in the rate of increase of
their national income and that of the developed
countries. The lavish amount of aid extended
to Europe after the War was largely a question
of rehabilitating an economy-the basic in-
gredients of which were already in existence but
in a temporary state of suspense. Soon after the
basic task of rehabilitation was accomplished,
further efforts in the direction of economic
integration and the development of basic in-
dustries have enhanced the economic well-being
of Europe to the high level of employment, in-
dustrial production, capital formation and trade
activity we witness today. In the developed
countries of the West, national income rose
rapidly and steadily while in the Soviet Union,
and by general agreement, the increase has been
even more spectacular. The inflationary pres-
sures of a highly industrialized economy under
conditions of full employment resulted in very
unfavorable terms of trade for the underde-
veloped countries. Thus there has developed
over the last decade a curious situation by virtue
of which the gap in income levels between the
recently independent and underdeveloped coun-
tries and those more advanced economically
widened considerably instead of narrowing. This
phenomenon is true of most countries in Asia and
the Middle East and applies to the Arab States
as well.
Naturally the underdeveloped countries became
anxious over the prospect of their continued role
in the Western Pattern of the World economy as
primarily agricultural countries and raw material
suppliers for the developed countries. As
industrialization seemed the only way out of their
economic plight, they began soliciting outside
help for the purpose. The West has for political
reasons been reluctant to offer assistance in this
direction with regard to the Arabs. The Rus-
sians, on the other hand, seized on these anxieties,
while posing themselves and more recently Com-
munist China as examples of the efficiency and
rapidity of industrially developing an unde-
veloped economy, and began offering their
avowedly unconditional assistance in the form of
long-term low-interest credits and technical
know-how. Here again, the West was caught
unprepared for that challenge. The dramatic
and large scale Russian aid to the United Arab
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Ilepablic for the development of the high Aswan
"all is but one illustration of their awareness of
the problem, and its psychological impact on the
underdeveloped countries. Subsequently, an
economic aid agreement was signed with Iraq
last month, the details of which are not yet fully
known. Asa result of these long-term credit
arrrtiugemenIs, the underdeveloped countries are
necessarily diverting in repayment a much larger
proportion. of their exports to Soviet bloc coun-
tries. Obviously, all this involves a shift in
what used Co be a normal pattern of trade be-
!'ween the West and the underdeveloped countries
ill favour of Russia.
I now come to the third aspect of independence
the independence of initiative ill the formula-
tion and execution of foreign policy.
it is generally axiomatic in the history of
nations large and small that they should desire
upon their attainment of independence to chart
a course of their own and steer away from what
your first distinguished President referred to as
"entangling alliances." Changing circumstances
may indeed make it necessary for countries to
group themselves together and establish such
bonds of cooperation between them as they see
fit. One of the more realistic articles of the
United Nations Charter takes cognizance of this
;fact, for the experience of previous wars has
demonstrated that there are no hard and fast
,Inhibitions to the rise of aggressive powers. Arid
so we find that the course of events during and
following the Second World War led to several
such alliances and groupings. The Arab States,
anxious Co promote cooperation among them in
furtherance of their common objectives, estab-
lished in March .1945 the League of Arab States
which then included five, and now includes ten,
member States. Subsquent to the Berlin crisis
of 1918 and later developments ill other parts of
the world, the West established the North
Atlantic Treaty Organization in an attempt to
bolster its defenses and contain what it considers
the threat of Communist expansion. Since the
establishment of this alliance, Western policy
has attempted to extend similar defensive ar-
rangements from Europe to the Middle East and
Asia. I think with the recent demise of Iraq's
participation in the Baghdad Pact, it is safe to
say that this policy has not been successful in
the Middle East, as far as the Arab countries are
concerned.
As our brief review of the ninetenth century
and the period of the two wars suggested it, the
historical context of Arab-Western relations,
the Arab States were suspicious of treaty ar-
rangements with the West because the West
Europeans had employed these arrangements
for the perpetuation of their colonial interests ill
the Aral) World. Furthermore, at the time that
the West began initiating proposals for Arab
participation in anti-Communist alliances, the
wounds of the Palestine tragedy were less than
four years old. One million Arab Christians and
Moslems became destitute and hopeless refugees
as a result; of Western policy, and Arab public
opinion was in no mood for alliances with the
West. Moreover, the historical survey we
attempted earlier in this discussion demonstrated
how Russian expansionist designs and ambitions
in the past did not form part of the historical
experience of the Arabs. Regardless of the genu-
ineness with which the West viewed the Com-
munist threat, Western appeals could make no
appreciable argument when the Arabs had
suffered not at the hands of Communism but
from. Anglo-French Colonialism and American
supported world Zionism.
It is perhaps one of the most unfortunate
aspects of recent history that the West failed at
that particular stage to come to terms with Arab
Nationalism and grasp its fundamental realities.
Rather it persisted in the policy of alliances and
convinced the Government of Iraq to conclude
the Baghdad Treaty with Turkey, though Egypt
and other Arab States had refused to do so. This
was considered by the Arabs as another example
of Western disregard of the Arab national
sentiment for unity and solidarity. Where the
West erred then was in its failure to appreciate
the essential differences in the position of the
Arab States and that of non-Arab States in the
area. It was only natural for Greece, for example,
to join the Western alliance. Turkish history is
replete with records of conflict with Russia, and
Iran had sufficient cause for complaint against
the policies of her neighbor to the north. All
these instances, however, do not necessarily
provide a parallel with the Arab situation.
It was inevitable that this basic disagreement
between the Arabs and the West should lead to
varying policies-or policies at variance with one
another. The Arabs were not attracted to
membership in Western alliances for reasons
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that I detailed earlier. Neither were they
inclined to make common cause with Soviet
policies because of fundamental ideological dif-
ferences between the two as well as by reason of
a measure of estrangement arising from the lack
of a tradition of Soviet-Arab relations. Thus
the course of non-alignment in world affairs
suggested itself as the most suited to the psycho-
logical temper of the Arab World at that time.
Here again, the Soviets saw in this development
an opportunity for cultivating ties with the Arab
World by stating specifically that they demand
of the Arabs nothing but neutrality; while the
West adopted a posture of non-approval bordering
on hostility towards that mood.
V. Recommendations:
Such has been the immediate impact of the
Cold War on Arab aspirations. The West may
now take respite in the fact that Soviet policies
in the Middle East are subjecting Soviet inten-
tions to fresh reappraisal by the Arab States most
directly concerned. That, however, is no substi-
tute for a decisive and clear policy on the part of
the West. And until the West can arrive at an
understanding with Arab Nationalism that would
make possible the settlement of outstanding
;problems between the West and the Arabs, the
conditions of the Cold War will continue to
prevail. Understandably then, few would dare
to venture what the ultimate and long-term
impact of the Cold War on the Middle (fast
would be. One of those who is at least certainly
qualified to do so is the distinguished British
historian, Dr. Arnold J. Toynbee. In an essay
entitled "The West and the Arabs" that was
written for the 1959 edition of the Book of the
Year, the annual supplement of the ENCYCLO-
1'ED.IA BRITTANICA, Dr. Toynbee has this
to say in referring to American policy towards
the Arab World :
"Here, then, are the two lines of policy
between which a choice has to be made.
On the two tests of what is right and what
is practicable, which of the two policies
should America choose? I myself feel that
the policy of trying to suppress the Arab
National Movement would be morally un-
justifiable; and I also believe that it would
be bound to end in failure. Believing as
I do in the power of the American shot
(revolution of 1776) heard round the world,
I believe that the Arabs are going to succeed
in completing the achievement of Arab
independence and unity sooner or later, by
one means or another ... The open question,
as I see it, is whether the Arabs are going
to attain their acceptable objectives-and
most of their objectives, though perhaps
not all, do seem to me to be acceptable
with the good will and assistance of the West,
or whether they are going to attain the same
objectives . . . in the teeth of Western
opposition, thanks to Russia's support. The
answer that is going to be given to this
open question matters less to the Arabs than
it matters to Russia and the West. The
Arabs, I guess, are going to win most of what
they want either way. But the way in which
they win it will decide whether they join
our camp or Russia's camp; and in the
competition between the West and Russia,
this might prove to be one of the decisive
events, whichever way it falls out." (p. 35)
May I comment on this distinguished view by
expressing the hope - parallel with my conviction
in the eventual realization of Arab aspirations--
that they will be realized with the friendship
and cooperation of the West, the United States
in particular. With our beliefs and concepts of
Man and Society basically in agreement, we
should be able to harness the elements of friend-
ship and good will among our two peoples in
order to restore and strengthen the tradition of
true friendship we experienced in the past. And
towards this end I wish to submit for your con-
sideration the following recommendations.:
-That in order to better appreciate the hopes
and aspirations of the peoples of the Arab
World and other Middle Eastern peoples, and
thereby achieve a more balanced and sym-
pathetic, understanding of their role in in-
ternational life, morestudy should be encour-
aged of the history of the area and the cul-
tural legacy of its people. Increased cultural
exchange of students and distinguished cit-
izens would obviously be helpful and needs
also to be encouraged.
-That in order to enhance the stability and
peace of the Middle East area, the West
should take the initiative in bringing about
settlements of the Algerian and Israeli
conflicts, the two outstanding disputes in
the area. Both these problems are as much
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problems for the West as they are for the
Arabs and their poisoning effect on Arab-
Western relations has been substantial. In
both these problems, the United States is
capable of a proper and constructive initia-
tive, in view of its position of influence in
the Western alliance and its apparent
special relationship with Israel and Zionism.
't'hat in order to further enhance the stability
and promote the general prosperity of
underdeveloped nations in the Middle East
and elsewhere, the West needs to regard the
economic aspirations of the peoples involved
with greater sympathy and deeper under-
standing. This is not only morally impera-
tive but also a practical necessity, if the
balance of forces in the world were to be
adequately maintained. More specifically
with reference to the Arab World, Western
efforts in the direction of economic assistance
to the Arab countries could perhaps be more
successful should such efforts be channeled
through U. 'N. agencies or administered by
Western countries that have an insignificant
or else forgotten colonial past and no
material involvement in the establishment of
the State of Israel.
Through bold, statesmanlike and constructive
action, the United States can still continue to
raise high the banner of hurna.n freedom, and
spread around the globe the ideals of the great
American Revolution, the strength of which still
motivates and inspires free men of all nations
throughout the world.
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 CHAPTER ELEVEN
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THE INDIVISIBILITY OF PEACE
By II. E. FATIN RUSTU ZOnLU, Foreign. Minister of Turkey, and
North Atlantic Council with the rank of Ambassador.
The first few years that followed the conclusion
of the Second World War confronted us in the
international field with trends or currents tending
to develop in totally opposite directions. On one
side we had the democratic camp, with faith in
peace and in the United Nations Charter, which
started to reduce its armaments and demobilize
its armies. Imbued with the noble aspirations of
the Charter, this same democratic front set about
the task of bestowing the benefits of independence
on hundreds of millions of people. On the other
side of the fence there was the Communist bloc
which not only increased its armaments but also
started to bring under its yoke other nations
which had lived free and independent for cen-
turies.
There finally came a time when the community
of free nations realized that it could not continue
to withstand this threat without creating a
defensive system. It established NATO, and in
Korea was forced to defend the indivisibility of
peace by force of arms. This marked the definite
division of the world into two camps; and every
effort of the peace front to come to an under-
standing with the other bloc, every attempt to
find a modus vivendi within the framework of the
U.N Charter, was blocked by the veto. However,
the fact remains that efforts by the Communist
bloc to expand its sphere of influence have been
blocked since 1955, and to the great benefit of
humanity, thanks to the establishment and
strengthening of the camp to which we belong.
In its attempt to destroy the resistance that
confronts it the Soviet bloc has resorted to a total
strategy which it is endeavoring to develop in
different fields that complement one the other.
This strategy has for its basis three major
foundations-namely, (1) that the Soviet bloc
shall enhance itself economically with utmost
possible speed, (2) that the Soviets shall make
every effort, by way of a war of nerves composed
of peace offensives mingled with threats, to
weaken the unity and solidarity of the democratic
camp; and (3) that the democratic camp, meaning
the Western Hemisphere, shall be isolated from
the other continents by way of ensuring that
the nations of Asia and Africa, and even of
South America, shall be brought under Soviet
influence by one means or another.
Whether it be the matter of Soviet peace
offensives and threats, or that of isolating the
Western Hemisphere from the other continents,
the success of Russian efforts in both directions
is dependent on their degree of success in Soviet
economic potential surpassing that of the Western
bloc.
From the information imparted by authorita-
tive personalities during your deliberations which
I have been following for quite some time, and
from that gleaned from other sources, we are
thankful to observe that the superiority of power
as between the Soviet bloc and the community
of free nations continues to rest with the camp to
which we belong.
In talking about the "superiority of power" it
is only natural that I use this term in its most
comprehensive sense; for by this is meant not
only retaliatory power but economic potential
as well.
However, there is one point which must be
kept in mind: despite all economic strength, and
due to certain deficiencies in preparedness, we
were confronted with some by no means pleasant
surprises when brought face to face with the
aggressor bloc in Korea in 1950. If these surprises
did not result in truly critical consequences, we
owed this to the latent atomic retaliatory power
of the United States; and also to the tremendous
economic potential and speedy organizational
capability of your great nation.
At this point I would like to digress briefly from
our immediate subject to recall certain memories
of the past. I am sure we all remember that
when Hitler came to power in 1933, military as
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well as economic superiority rested completely
with the victors of the first world war, But by
I he time that war broke out in 1939, superiority
at least in the ability to deal a sudden blow, and
superiority to utilize industrial might in con-
centrated form for military purposes, had passed
into the hands of Germany. By making the most
of this superiority in the first two years of the war,
Germany not only succeeded in occupying almost
every European country in a very short time, but
also found it possible to overrun half of Russia.
And in order to liberate those territories, it was
necessary to fight for close to another four years
and to sacrifice the lives of hundreds of thousands
of human beings. Europe was extricated from
this situation thanks mostly to the sacrifices of
the United States of America.
Faced with this great German effort to increase
their economic potential, instead of increasing
their own economic potentials and defensive
preparedness, European statesmen of that day,
instead of manufacturing defensive weapons, set
about increasing their holdings of gold and foreign
exchange; they chose to look for compromises;
I hey sought to reach some form of co-existence.
These concessions failed to curb the appetite of
the aggressor group; they merely served as
further encouragement; and in the end all the
stocks of gold hoarded in national banks fell to
(he invading armies.
Now let me go back to our topic and say one
thing; the very establishment of a body such as
the National Military-Industrial Conference with
the participation of those who occupy the most
responsible posts in the industry of the United
States, which is the fortress of the free world; and
the fact that such topics are being debated at
this Conference, naturally constitutes the best
guarantee for the future of the free world.
'T'oday we are on the eve of a meeting among
the three nations both of the Soviet world and
of the democratic and freedom-loving group that
have assumed the greatest measure of special
responsibility.
Turkey is a country that has a common border
with Soviet Russia. Therefore, she warmly de-
sires understanding and the realization of agree-
ment between Russia and the NATO bloc (of
which Turkey is a member) on the basic condi-
tions that could lead to the establishment of
international security which is non-existent today.
Remember that Turkey has been subjected to
continuous Soviet threats for fourteen years; like
each of the other nations of the democratic
front, the Turkish nation too has had to assume
extremely heavy burdens for defensive pre-
cautions for its preservation against such threats.
Not only does she allocate 40% of her budget
to national defense she also keeps a force of
560,000 men under arms.
The establishment of a genuine peace would of
course give Turkey great pleasure; but Turkey
realizes that if no new war has broken out in
Western Europe or in her own immediate area so
far, this is only because of the strength and
solidarity displayed by NATO against possible
aggression. Therefore, although she hopes the
Geneva meeting in May will yield good results
and thus be followed by a summit conference
conducive to equally positive results; Turkey
believes that the sole hope for success at such
conferences resides in the ability of the West to
maintain superiority and preserve its solidarity.
I have already said that the Soviet bloc is
making every possible effort to increase its
economic potential; and she is scoring successes
in this field. A glance at the statistics shows that
the Russia of 1959 has increased its economic
potential in a large measure; that she now ranks
second greatest in the world. It is with utmost
difficulty that the countries of West Europe
manage to maintain economic balance with
Russia without American potential.
It, is true that a comparison of the reciprocal
economic status of the Soviet bloc and that of
the United States shows that the difference is
tremendously in favor of the United States; but
it is equally true that Russia is sparing no effort
to close this gap.
In this situation, if it is desired that the Soviet
bloc shall pursue a truly peaceful policy, it is
essential that the countries of the democratic
front other than the United States should also
work to increase their economic potential in
step with Russia; they must maintain their
collective superiority towards the Soviets. As a
matter of fact, the underlying cause of the policy
of domination applied by the Soviet bloc towards
Europe and other continents resides in the fact
that post-war Europe had lost its economic
superiority compared to Russia.
Superiority from the viewpoint of retaliatory
power is in our favor. It is natural that Russia
is fully aware of this fact. It is because she
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does know it that Russia is now applying the
tactical and global strategy which I have men-
tioned. If we keep cool, remain united, and
maintain unimpaired our determination to resist
in the face of such tactics, it is inevitable that the
current competition will last for many long years.
Therefore, it .is imperative for the West to employ
political and economic tactics formulated for
long-range application.
It goes without saying that in our capacity as
a defensive bloc we constitute no threat to the
Soviet bloc. But Russia has made the most of
the lack of watchfulness born of the good will
shown by the West in the early years; she has
already brought under her influence a great deal
of territory to which she has no right whatsoever.
The time has long since arrived to take all these
points carefully into consideration; to adopt a
firm policy which leaves no room for unrecipro-
cated concessions, but inspires confidence in the
whole free world. It is essential for the Soviet
bloc to be fully convinced that it cannot get a
single additional inch without a fight. When
the Matsu and Quemoy Island incidents oc-
curred in the fall of 1958, many views were
expressed as to what was or was not strategically
possible to defend, what was or was not essential
to retain. The firm stand of the United States
acting in full consciousness of its responsibility
blocked the Communist invasion of those islands;
it also gave new confidence to all the nations of
the freedom front. When we remember that
certain circles may again be counting on the
same doubts arising in the matter of Berlin today,
this only serves to prove how appropriate was
the United States' stand on Matsu and Quemoy.
I can but repeat that it is more than high time
to stop giving place to thoughts which can only
lead to more concessions, and merely wet the
appetite of the potential aggressor.
To return to the field of economy, the economic
offensive launched by the Soviet bloc tends to
develop in two directions. First, the progress
which it has marked in the techniques and
production of conventional as well as non-
conventional weapons, and second, the eco-
nomic aid which it uses as a means of in filtrating
into the underdeveloped countries of Asia and
Africa.
Let me hasten to say that, thanks to the efforts
of the United States, and probably for the first
time in world history, a group of nations which
aims at nothing but peace and the ability to
defend itself finds it possible to hold the initiative
in the matter of obtaining new weapons with
which to ensure the security of the whole free
world. Naturally, the free world is gratified at
this situation; but it is imperative not to slacken.
this effort, and on the contrary to unite with
other allied nations and encourage them to joint
efforts.
There remains the second point, that of the
Soviet's economic offensive of aid to under-
developed countries. We are all aware that
located mainly in Asia and Africa, these countries
ardently desire economic improvement. They
are also influenced by the economic success of
Soviet Russia and Red China; and there is the
intensive propaganda to which they are sub-
jected in this connection. We have also the
fact that the Soviet bloc misses no opportunity
to benefit in large measure from the lack of
confidence towards the West that exists in these
countries.
From the viewpoint of economic and political
independence it is of the greatest importance for
the Western nations to coordinate their efforts and
work as a single unit to prevent the Asian and
African nations from being lured into the Soviet
sphere of influence. Despite all its efforts in this
direction, the economic potential of Soviet
Russia has not yet reached a level that will permit
the fulfillment of its promises of aid to the
underdeveloped nations. It is observed that
they are already encountering difficulties arising
from the inability to make deliveries at the
stipulated time. There is also the fact that,
despite the outward appearance of allegedly
unselfish motives that cloaked their arrival on the
scene, the Communists have resorted even to the
use of force in their efforts to settle down in cer-
tain areas. Naturally this is serving gradually to
open the eyes of the Asian and African countries.
In short, the situation is such as makes it
possible for the coordinated efforts of the West
to stand up squarely and be measured successfully
against the Soviets. It is only necessary for
the West to present an integrated front and to
devise jointly the means of increasing their
economic production, instead of being in con-
tinuous economic competition with each other.
The Western states have made a good start in
granting independence to hundreds of millions
of people as per the principles of the U. N.
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Charter. Still within the framework of con-
structive aid, they must assume the new and
equally noble task of ensuring also their eco-
nomic recovery. If the Western Hemisphere is
to retain cooperation with Asia and Africa, and
if Communist infiltration into those zireasis tobe
blocked, this is conditional in large degree on eco-
nomic cooperation which needs to be organized.
Such cooperation would make it possible for
the Western l lemisphere itself to attain a greatly
expanded economy, and increase its volume of
tirade. The application of such an economic sys-
tem would also make it possible in a short time
for the Western Hemisphere to regain the position
that it held compared to Russia before the
Second World War.
Ili brief summary, let me say that the main te-
nance of peace and the preservation of the
legitimate rights of the free world cannot be
secured by making additional concessons to
Soviet Russia, but above all by increasing the
economic and defense potential. Only thus can
we hope to find a basis of arriving at the under-
standing with the Soviet bloc which ww-e so
ardently desire.
In conclusion, 1 would like to thank you for
bearing with me so patiently for so long. At
the same time, let, me express the firm conviction
that, in the future as in the past, the West will
assuredly succeed in achieving peace by main-
taining its existing solidarity and increasing ii s
undeniable economic capability.
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 CHAPTER TWELVE
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BUILDING A MIDDLE CLASS FOR MIDDLE AMERICA
By EDMUND S. WHITMAN, Director of 1'ublic Relations, United Fruit Company.
A year ago, our country was proposing to meet
the thrust of atheistic Communism in terms of
security. Today, I am. glad to say, our country
is meeting this thrust in terms of survival. Llli E
Magazine put it well in its February, 1959
editorial, which stated in part that "nothing
but an intense national effort can halt the hugely
purposeful Soviet assault on free civilization."
For survival and for triumph of freedom, the
United States, Middle America and the Western
Hemisphere must have a growing and spiritually
strong Middle Class.
Aristotle said: "It is clear that the best political
association is the one which is controlled by the
Middle Class. Its weight turns the scale and
prevents the predominance of one extreme or
the other. If there is no Middle Class . . . the
consequence is failure and speedy destruction
of the State."
The Communist extremists, wanting to destroy
all free states, seek to wipe out the Middle Class --
"the bourgeoisie"---by abolishing private property
and religion, and by subverting social and
cultural traditions.
Today, the real worth of the Middle Class in
a free society is becoming more and more evident.
Father James Keller, Director of The Christo-
phers, says: "The proper characteristic of the
Middle Class is economic independence by means
of which it is possible for it to attain social
stability and the production of wealth, thus
bringing about a harmonious balance between
personal work and private property."
Doctor John J. Johnson, Professor of History
at Stanford University, shows the good influence
of the growing Latin American Middle Class in
his book, "Political Change in Latin America-
The Emergence of the Middle Sectors." Pro-
fessor Johnson says that in each of the five
Republics he studied the middle sectors' political
position is being strengthened in an evolutionary
way, and that they are experiencing rapid nu-
mcrical growth. He says: "The middle sectors'
cultural experience may be their greatest political
asset. It gives them access to the great avenues
leading to the past. But it also gives thorn, more
than any other group, faith that the golden age
lies not behind but ahead."
The time is ripe for people of the Middle Class
here in the United States to get to know and work
closely with people of the Middle Class in Middle
America.
By the terra "Middle America" I mean the
people, the land, the culture and the economic
potential of the area. It is bounded by the Rio
Grande on the north and the northernmost
Republics of South America on the south. It
also includes the island Republics of Cuba and
Haiti, and the Dominican Republic.
In a sense, this is the bread basket of the
Western Hemisphere. This predominantly agri-
cultural area of the Caribbean is enormously
important in a geopolitical sense, for it embraces
the gateway to the Panama Canal, the Canal
itself, the petroleum reserves of Venezuela, vast
mineral resources and the strategic crop potential
of the farmlands.
I lived in the area for many years, and it is
there that my entire life's work has been con-
centrated, not only in my career with United
Fruit Company but also as the author of novels,
travel books, articles on Middle America and a
a student of the archaeology of the Maya.
Middle America stands now at the threshhold
of a new way of life. The area has to a great
extent moved from an ox-cart to an airplane
economy, virtually skipping automobiles and
railroads. In the near future, as the Pan Ameri-
can Highway, new local thoroughfares, and
railroads are expanded, there will be greater
growth in the more remote areas and better
communication.
An essential element for the good growth and
stability of the Middle Class is effective radio,
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press, and TV communications. Today, many
communities in Middle America get their radio
news from receivers in public parks. But short
and longwave transmission is improving day by
day, and use of radio is increasing. Newspapers
are burgeoning in the area; the quality of Latin
American journalism is high. There is much
intercommunication between Middle and North
American editors, reporters and journalists.
'T'elevision in Middle America is just emitting its
first plaintive cry, but the infant is lusty and its
future looks bright.
Spanish-language publications edited in this
eon retry are well received and read by the opinion-
molders of Middle America. These include
l.I+;CCIONES (the Spanish edition of
It I+:ADI+,RS' DIGEST), LIFE EN I+;SPANOL,
VISION, LA HACIENDA, AGIIICULTUR:A
DI+; LAS AMERICAS, SERVICIOS PUB-
LIGOS and others. Perhaps the good acceptance
of these magazines by Latin readers may be
traced to the fact that the editorial boards are
staffed largely by Latin American journalists
and persons knowledgeable in Latin American
affairs. Through editorials and institutional
advertisements carrying messages fromcompani.es
with overseas investments, these magazines make
an impact upon those Latin Americans who largely
direct the destinies of their countries.
Happily, there is plenty of evidence to show
that the Middle Class is growing in Middle
America, and that our own North American
private enterprise system is fostering this good
growth.
Here are a few examples, among the many
that I could cite:
I. In Guatemala, Goodyear has opened a
tire plant, working with a group of Guate-
malan businessmen.
2.--In Venezuela, a North American realtor
is building a new city of 5,000 homes. His
corporation has bought the land, cleared it
of forest, graded and drained it. The plan
is to sell three-bedroom homesat prices from
$6,000. to $8,000., and to build industrial
and commercial structures for lease or sale.
Within a ten-mile radius of this development
are major production units of such North
American companies as General Tire, General
Foods, Celanese Corporation, Sherwin-Wil-
liams, Firestone Tire, Palmolive, Coca-Cola,
Owens-Williams, duPont, Creole Oil, Shell
Oil, Singer Sewing Machine, Goodyear Tire,
and U.S. Royal Tire.
3. -In Chile, Anaconda is building an
$8 million, 230-bed hospital for employees.
4. -W. R. Grace && Co. has given aid to Latin
Americans in trucking, furniture rnanufact ur-
ing and plastics.
5. -Standard Brands conducts schools for
bickers in Brazil and Cuba.
6. -Creole Petroleum has 30 scholarship
students in U. S. schools and 1051n Veuzuclan
schools.
These activities highlight the wise effort being
made by North American companies to rid
philanthropy of the kind of paternalism which
the Communists utilize to harass and hinder
the development of a Middle Class. Some U.S.
firms are turning their overseas operations in
housing, education, recreation, medicine and
hygiene over to local individuals and organiza-
tions. For example, more than 700 employees
have applied for loans under Creole's program
of home ownership a step away from company
housing. Private businessmen in Middle America
show increasing interest in operating various
services, and have taken over from Creole such
operations as ice plants, laundries, bus services,
gas stations, garages and a movie theatre.
A major factor behind the push for more
training in incentive is the decision reached by
most U. S. firms to accelerate the progress of
nationals toward top management posts in their
countries. Even before there were local social
laws demanding it, managements of North
American companies showed a willingness to
develop nationals on the managerial level.
Executives recognize that over the long haul it
is better business---and better public relations--
to groom nationals for top positions. United
Fruit has already appointed a national to one
of its two tropical General Manager posts and
has also raised many nationals to Department
Dead status.
To develop Middle Class stability, it is impera-
tive to foster Middle Class responsibility.
As second generation Fruteros join United
Fruit Company ranks in tropical America, there
are increasing instances of the father having been
employed as a laborer or mechanic, while his
son joins the Company as a lawyer or a doctor.
Because I am most familiar with the operations
of United Fruit (and not to miss a chance to get
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in a few "Chiquita Banana" commercials, I
confess) permit me to review some of the ac-
tivities through which United is helping to build
a Middle Class in Middle America. While this
review deals largely with. one specific company,
you will realize, I am confident, that it accurately
reflects similar programs conducted by other
companies. It is this recognition of overall
impact that enables me to put real. heart into
my review. In this connection, I should like to
direct your attention to the continuing series of
Case Studies of United States Business Per-
formance Abroad that bear the imprimature of
the National Planning Association. In recent
years, these Case Studies have included mono-
graphs on Sears, Roebuck do Mexico--Casa
Grace in Peru-Creole Petroleum in Venezuela -
and United Fruit Company in Middle America.
The authors of the Fruit Company study are
Dr. Galo Plaza, former President of Ecuador,
and Stacy May, internationally-known economist.
Both authors were given full access to all relevant
Company accounts and reports.
While there are inevitably some points of dis-
agreement between NPA and Company manage-
ment on certain conclusions, there are neverthe-
less many broad areas of agreement. Some of
these, pertinent to Middle Class development,
include:
7.--A report on the Company's contract
arrangements with 225 local farmers in
Colombia, operating 12,900 acres of mature
banana plantings and producing 3.6 million
stems (in 1955). Gross revenues per ton
were at least 50 percent higher than the
average gross return on coffee land. "The
merits of the Colombia contract system
are so striking," says NPA, "that it would
seem that every effort should be made to
extend it to other producing areas where con-
ditions permit."
As an aside, I might say that 32 percent of
the Company's entire banana output is purchased
from independent farmers in areas ranging all
the way from Guatemala south to Ecuador.
2.-On the measurement of yield per acre of
land put to agricultural use, the return from
land owned or contracted to the United Fruit
Company was more than 20 times the aver-
age for all other improved agricultural land
in the area as a whole, and from United Fruit
cropland it was three times the average from
all other cropland.
3. - On the measurement of yield per worker
employed in agriculture, the returns from
United Fruit operations were about five times
the average for the six countries. In all
cases, the wages paid by the United Fruit
Company were substantially higher than the
average for agricultural employees.
4.-By every economic measure that NPA
has been able to apply, the contribution of
the United Fruit Company to the economies
of the six countries is enormously advantage-
ous when regarded from the viewpoint of
their national interest. The fact that it has
been leaving within the production area
more than seven dollars for every dollar in
profits withdrawn is an impressive but
perhaps not the most important factor in
determining the degree to which these host
nations have gained by offering it their
hospitality. Of even greater significance is
the fact that the enterprise which the United
Fruit Company pioneered, and for which it
has played a continuing leading role in do-
velopi.ng large temperate zone outlets, is one
that is enormously productive compared to
any other agricultural pursuit in which these
countries engage.
5.-United Fruit Company has made numer-
ous contributions to the progress of economic
development . . . Its enterprise has opened
up vast areas of low, hot, humid and heavily
forested terrain that otherwise might have
remained closed to settlement and productive
use for many decades at best. It has supplied
Lite basic facilities -roads, railways, port and
communication facilities, electric power es-
tablishments, hospitals and schools that have
made this possible. It has introduced modern
scientific agricultural methods and equip-
ment and has trained hundreds of thousands
of local inhabitants in their use over the span
of its existence. It has pioneered in the
introduction of the health and sanitation
measures without which operation in the
banana-producing areas is virtually unten-
able. It has played a leading role in the
introduction to the area of new crops such as
African oil palm, abaca and a variety of
timber species that have been far more
profitable to the local economies than to
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itself. It has vastly improved the available
planting stock and cultural procedures in
planting and maintaining others, like cacao,
and has contributed to the improvement of
tropical agricultural practices in the area of
its operations in literally hundreds of other
vv-attys.
Now let's have a look at the Company's pre-
occupation with education, which is basic in
building a Middle Class:
In the first place, United Fruit Company has
provided and is providing the large sum of money
required to develop and maintain the Pan
American School of Agriculture in Honduras--a
suns in excess of $6 million. During its less
1 han twenty years of life, this school, which is
entirely divorced from the personnel requirements
of the Company, has more than 600 graduates
on the job around the world, but particularly in
Middle America. All but seven of these young
men are now working in some phase of agriculture
today. More than twelve qualified applicants
take the school examinations for each boy ac-
cepted; by comparison, Yale University this year
had eight applicants for each man accepted. The
school has been sending a number of its top
ranking students to United States universities
and more than 75 percent of these have made
honor rolls. Last year the student who graduated
Number One in his class at the University of
Vlorida was Carlos Luis Gonzalez, a Costa Rican
youngster from the Pan American School of
Agriculture.
In addition to this institution of higher learning,
United Fruit maintains the following educational
programs at its various tropical divisions through-
out Middle America:
1. -Twenty-one primary English-language
schools in Company divisions, with an en-
rollment of 1,000.
2. --Primary Spanish-language schools are
operated in tropical divisions with annual
student body of 20,000.
Cost of operating above described primary
schools is approximately $1 million per year.
3. Financial aid to high school students:
American and Latin American employees
stationed in the tropics receive assistance in
the high school education of their children
in amount $1,000 annually per student for
the last two years of high school training,
provided they have completed the first two
years in the U.S. or Canada.
1. Fourteen or more special scholarships
are provided by United Fruit Company in
agriculture, public health, tropical. plant
research, forestry, botany, medicine and law.
5. Company contributes extensively to
American schools in Latin American coun-
tries in capital cities and also to various
denominational schools. In addition, the
Company provides free round-trip trans-
portation at least once a year to all students
who are children of employees (both Latin
and American) who are attending school in
the United States. Such transportation is
given from grammar school through college.
In addition to its school program, both United
T'ruit and its tropical employees take part in
programs at the community level, which are very
much in the interest of developing a Middle Class.
Some examples:
1. -The La Lima, Honduras Ladies Welfare
Society, functioning for nineteen years. The
Society raises funds through voluntary con-
tributions, through teas, parties, etc., and
uses money to distribute milk and bread
daily to 300 children-to maintain children's
playground in old Lima in assistance to
poor families-in supporting institutions for
orphans and aged-in training handicapped
hospital cases to lives of usefulness.
2. --Company employees sponsor and guide
Boy Scout organizations in Guatemala,
Panama, Honduras.
3. - Company employees who are parents
of teen-age children in Honduras have
organized and established a Spanish-language
high school accommodating 200 teen-age
children in four grades. The company pro-
vided land and loaned the money, teachers
are mostly volunteers, although some are on
salary. Company employees are repaying
the loan at the rate of $3,000 annually.
4.- -Widespread sponsorship of local athletics
of various Company employees: football in
Guatemala and Colombia, golf in Panama,
baseball in Honduras.
5. In Panama and Costa Rica employees
have been helpful in the establishment of
Credit Unions.
6.--Company individuals participate in the
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direction and administration of private local
schools in San Jose, Costa Rica, and Tegu-
cigalpa, Honduras.
7.-Company employees throughout tropical
divisions have been instrumental in organiza-
tion of churches of various faiths.
Finally, before I put "Chiquita Banana" back
into the refrigerator, let me tell you about
United Fruit's setup in its Research staff, because
I think this illustrates the direction in which
private enterprise is going in its desire to give a
leg-up to the Middle Class. In. 1947, there were
23 Research staff members in our Company with
degrees of Ph.D., MS or BS. In 1.959, the staff
totals 105. In 1947, research expenditures
amounted to $200,000; in 1959, the figure is
$2,500,000. And let's bear in mind that the staff
-people fit, willing, and able to study, explore
and recommend in all manner of things having to
do with the soil-are bound to come up with sug-
gestions and programs beneficial to citizen farmers
in Middle America. All this apart from improve-
ments in banana production, which, while they
are obviously in the self-interest of the Company,
also benefit the Republics where we are privileged
to grow bananas because of the tax contracts that
have been entered into, based on allocating a cer-
tain portion of the profits of the tropical country
in question. This makes us partners with our
farming opposite numbers in Middle America.
The benefits of all kinds of research cannot,
however, be enjoyed by a society unless govern-
ments foster capitalist conditions favorable to
the Middle Class. This fact is appreciated by
farsighted government leaders in Middle America.
President Ramon Villeda Morales, of Honduras,
when he was Ambassador in Washington, told
The Pan American Society of the United States
that "foreigners residing in Honduras may
freely engage in commerce or industry; they
enjoy the same rights and have the same obliga-
tions as the nationals of the country."
[n 1955, Honduras signed a treaty with the
United States assuring investors that they would
run no risk of expropriation or inconvertibility.
Last year, President Ydigoras Fuentes, of
Guatemala, said at his inaugural: "And to the
American capitalists I expressed my intention,
which I confirm here today, to offer all the neces-
sary security to any investments they may wish
to make in Guatemala which may benefit and
aid the economic development of the country and
contribute with new sources of work for Guate-
malan labor." President Ydigoras offered the same
guarantees to national and foreign capitalists.
From bitter experience during the Red-con-
trolled Arbenz regime, Guatemla learned what it
is like to live in a land where Communists work
for the destruction of private property and the
Middle Class and to enslave the farmers and
laborers. Today, all freedom-loving Latin Ameri-
cans know that the Kremlin seeks to impose
"the method of Guatemala" on Middle America,
What is this method? It is that of inter-
national Communism, which Secretary of State
Dulles defined at Caracas in 1954 as, "that
farfiung clandestine political organization which
is operated by the leaders of the Communist
Party of the Soviet Union. Since 1939, it has
brought 15 once independent nations into a
state of abject servitude. It has a hard core of
agents in practically every country of the world.
The total constitutes not a theory, not a doctrine,
but an agressive, tough, political force, backed
by great resources, and serving the most ruthless
empire of modern times."
Here in the United States and also in Middle
America, I hear much use of the expression
"peaceful coexistence" vs employed by the inter-
national Communist conspiracy.
To the Soviets, "peaceful coexistence" is
strictly a cocktail theme for the gullible ac-
ceptance of foreign visitors at the Kremlin.
A careful check of Soviet school textbooks fails
to disclose any utilization of the term "peaceful
coexistence." Children in the Soviet Union are
continuing to be taught the dog-eared dogma
of an all-out struggle against capitalism, in terms
of hate and violence. In other words, what goes
on at high echelon cocktail parties is one thing,
but the Soviet children are getting the straight
Communist line, as always.
To demonstrate that "peaceful coexistence"
is a story fabricated strictly for foreign consump-
tion, Khrushchev said to members of his own
Communist Party in 1958: "Of course, we must
recognize that we cannot coexist externally. One
of us must go to the grave. We do not want to
go to the grave. They (the West) don't want
to go to their graves either. So, what must be
done? We must push them to their graves."
That the disciplined Moscow agents are busily
engaged in this shoving technique is indicated
by the fact that the Soviets are currently peddling
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trade agreements and technical assistance mis-
sions in Latin America. The big "gimmick"
to remember here is that trade between the
Soviet and our friends in Latin America involves
Soviet "technicians." This is just another term
for the trained agents and propagandists being
spotted right in the areas where they can make
maximum trouble.
Now let's have a quick look at Latin American
exports to the Soviet bloc, bearing in. mind that
these are mainly from the more industrialized
countries lying to the south of Middle America.
Chase Manhattan Bank's "Latin American
Business Highlights" expresses the belief that
these exports may have risen to $160 million
in 1958, while imports may have increased to
$100 million. Soviet bloc trade with Latin
America, still relatively small, has been growing
at a rate of 40 percent a year since 1952, and the
Soviet directs its trade primarily to the soft
spots to those nations which, due to various
econonne problems, have difficulty in disposing
of the exports at world prices. Latin America's
principal imports from the Soviet bloc have been
coal, machine tools, industrial and farm ma-
chinery and petroleum. The principal exports
have been meat, hides, sugar, coffee and wool.
Propaganda-wise, the Communist Party in
Latin America is moving forward on several,
significant fronts:
1. It is spending more. Today's propa-
ganda budget may total $1 10,000,000 a year,
of which less than $10,000,000 is raised in
Latin. America. This budget is at least
twice that of three years ago.
2. --The recent student riots staged os-
tensibly to support the claims of labor unions
against governments are in reality the result
of activity by Moscow-trained Latin Amer-
ican Communists working in the guise of
students and at the campus level. This is
an extremely dangerous and sensitive area of
operation.
3.--The Party has largely survived the
I icmgarian setback by propagandizing Com-
rnunism as an intellectual approach to eco-
nomics and politics, and by merchandising
to the hilt the Sputnik situations.
1. --The strategy continues to be fluid and
flexible. The Communists use radio time,
literature, public demonstrations, subsidies
and goon tactics to suit the local situations.
To defeat the empty Communist promises in
Middle America, we have demonstrable economic
and social weapons. What distinguishes our
society from the communist distatorship is a
recognition of the dignity of the individual. Our
system provides for each member of society to
enjoy freedom of worship and speech, free choice
of employment and free choice of consumption.
The Middle Class stability which we seek to
foster does not entail social rigidity. Our free
system encourages each individual to seek an
ever-improved standard of living for himself and
his family.
In building a Middle Class for Middle America,
the basic need is the ability and energy to search
for and create new opportunities for the more
productive use of national resources. This is
the right time and Middle America is the right
place for us to promote the positive concepts of
the Free Way of Life.
We are, however, not doing all we could and
should.
J. Peter Grace, President of W. It. Grace &
Co., said in an address a few months ago: "Some-
how during recent years, we have allowed our-
selves, in our preoccupation with other world
areas, to be less aware of the fact that Latin
America is our largest trading partner. It is
the area where we have the largest amount of
our direct private investment abroad-almost
$9 billion. It is the principal source of our most
needed strategic minerals and of countless items
to maintain our daily life-from sugar and coffee
to petroleum, from copper and iron ore to man-
ganese. It has tremendous land mass--twice the
size of ours; and its population of 171 million is
growing almost twice as fast as our own. It. has
a great wealth of natural resources that have not
even been touched, rich soil, and energetic,
capable people. Its importance today is great.
Its future potential is enormous. And it, is
right next door to us.
"Our heritage is the same our people all came
here, primarily from Western Europe, in search
of freedom and opportunity. Our traditions are
the same ... Yet with all of our common heritage
and our economic interdependence, we are not
getting on well enough together."
As you can see from this review, it is imperative
for the survival of freedom that we---the people
of the Western Hemisphere--prove ourselves to
be good friends and good neighbors. We must
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be everlastingly demonstrating mutual usefulness
and mutual interdependence. Our Middle Class
here must be doing a People-to-People job with
the Middle Class there. And for action purposes
at a Conference such as this one, it seems to me
eminently proper that one of the things we should
be constantly talking about is the superiority of
our system over the bitter, negative and divisive
philosophy of international Communism. When
we talk about trade relations of the Soviet in
Latin America, we should drive home with our
good neighbors the fact that between 1917 and
1957 the Bed leaders made twenty-six major
international agreements with the non-Com-
munist world and violated all twenty-six! If
they violate major international agreements,
what respect may they be expected to give to a
trade agreement? We need to be searching out
and. putting the pitiless light of publicity on the
arrogant statements made by Communist leaders
wherein they contemptuously refer to the capital-
istic countries as stupid and. decadent-countries
that will leap at a chance to be friends and will
rejoice to cooperate in their own destruction.
I say we here cannot afford to miss an oppor-
tunity of exposing the shoddy merchandise of
international Communism on every display
counter at our disposal--and to do so with
imagination and celerity!
These are propaganda activities which seem
to be our job while we go about building com-
munities and developing citizen. farmers.
By this language you will gather that I am
action-minded. What I hope we can avoid is
the technique of Japanese Sumo wrestling. This
highly respected, ritualistic athletic activity
consists principally of body movement and
psychological warfare, rather than hand-to-hand
combat. The actual wrestling, in which forty-
eight holds can be used, usually lasts only a
few seconds before one contestant is downed or
put out of the unroped ring, thus ending the
match. It is those few seconds of hand-to-hand
combat that I hope we will be contemplating
at this Conference.
The most fitting punch line that I can think of
is that all of us at one time or another have
punched out on the typewriter :
NOW IS TIIE TIME FOR ALL GOOD MEN TO
COME TO THE AID OF THEIR COUNTRY.
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 CHAPTER THIRTEEN
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A UNITED AMERICA VERSUS COMMUNIST PROPAGANDA
By ADMIRAL FELrx B. STUMP, (Ret.), Vice Chairman and Chief Executive Officer, Freedoms Fourrda-
t.ion at Valley Forge; Former Commander-In-Chief of F. S. Forces in the Pacific and Eastern Asia.
Much Communist propaganda in Asia centers
on the "Taper Tiger" persuasion that the United
States is too weak to defend its allies and that
the United States will abandon them if they are
attacked, for the reason that the people of the
United States will not support a fighting war.
Therefore, say the Communists, it is inevitable
that Communism will prevail and therefore the
man who is wise will get on the winning side in
order to survive.
In the early days of SEATO, Communist prop-
aganda by radio and newspapers attacked the
mutual treaty between the United States and
South East Asian countries, saying that we would
not fight to defend them -that the treaty was
meaningless.
To the SEATO attack, John Foster Dulles
effectively assured the SEATO Council Session
in 1955, when the question was raised, that the
United States, unlike Soviet Russia, had a history
of adherence to its treaties, that we would always
stand firmly by our treaties, that the word "act"
in our treaties meant just what it said, that we
would ACT in case of Communist aggression.
Recently in Cleveland another Communist
propaganda attack was brought on by the action
of a group purporting to represent the National
Council of Churches and therefore millions of
Protestant churchmen who advocated recognition
of Red China.
Again the damage done by the Cleveland group
was somewhat counteracted by a poll taken of
the ministers of the denominations, who sup-
posedly were represented by the Cleveland group,
showing that at least 87% of the churchmen were
strongly opposed to the recognition of Red China.
Americans must realize that we are in a seri-
ously dangerous psychological war, which can
be just as fatal in its results as a shooting war.
We must fight these dangers at home as well as
abroad.
The assurance of Mr. Dulles, although tempo-
rarily effective, is not lasting in the face of future
actions and evidence of dissention among our-
selves in the United States.
Asians fully realize that in our republic, action
of our government must depend on the will of its
people. Writings, statements and speeches of
Americans in private, as well as in public life,
which reflect American policy or criticism of that
policy, are widely published and read throughout
Eastern and Southeastern Asia. Any disunity
on our part causes great apprehension to our
Asian friends, leading them to fear that we will
waiver in the face of Communist aggression.
We are targets for psychological warfare, with
often. our own free press being used for this
purpose. We balk at spending money for the
same purpose against the enemy.
I would like to outline here some of the thinking
of our Asian allies:
In 1954, the head of an Asian state said in a
cabinet meeting, "Maybe we are not wise to align
ourselves with the free world. If we do so, we
may invite Communist attack. If we are at-
tacked and liquidated it will little matter to us
who wins the war."
The heads of four Asian nations discussed with
me, at different times, the effectiveness of Ameri-
can military support if they were attacked.
Their questions expressed in different words
were similar :
Will the United States retain power to defeat
Russia?
Does the United States have today, and will it
maintain in the future, forces of the proper
composition and of sufficient strength to win a
war of local aggression?
Are these American military forces so positioned
that they can arrive in time, wherever they may
be needed, to stave off Communist aggression?
Do the American government and the American
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people have the courage, the fortitude, the de-
termination and the unity to act promptly to
resist Communist aggression?
To these questions ... it is my belief that the
American people are determined to keep ahead
of Russia in the ability to deliver the massive
blow. However, let us not forget that the forces
required to fight and win little wars are the ones
in danger of being neglected or dangerously
curtailed. We can lose World War III piecemeal
just as surely as we can by massive blows in a
general war.
Another line of Communist propaganda would
lead our allies to believe that the Communists
are more advanced than we in weapons. This
was particularly stressed by them after "Sputnik."
Last May, to offset this propaganda, I, as Com-
mander-in-Chief Pacific, invited the military
heads of all free nations of the Pacific, east of
India, to a weapons demonstration by the Army,
Navy, Air Force and Marines at sea, and at
Okinawa. Sixteen nations were invited, and
sixteen accepted. The military leaders came
from countries which covered every political hue
of the spectrum, from staunch and determined
allies, to neutrals and fence sitters.
For them to visit some of our bases to see the
power of the Army and Air Force in new weapons,
to see the power of the Seventh Fleet, with day
and night demonstrations of modern fleet jet
aircraft, day and night Sidewinder firings, the
launching of the Regulus from a submarine and
from. a cruiser, day and night bombing and
rocket firing, including the toss delivery of a
bomb which could have been atomic, was a
demonstration of mobile air-sea power that was
reassuring indeed. In Okinawa they saw planes
land from Korea with an. Army Honest John,
which was rolled out and made ready for action
in a matter of minutes. Of the entire demonstra-
tion, possibly they were most impressed by a
big chart in which the Army showed the number
of hours it would take to move this tactical
atomic Army missile to each of their capitals,
from Auckland to Karachi, and from Seoul to
Djakarta. I was startled by the presentation
of this chart, but in later discussions with the
Asian leaders present, I found that they referred
to this evidence of the ability of the United
States to come instantly to their aid with a
modern atomic tactical weapon as being most
comforting and consoling to each of them.
Atomic missile submarines, long range Air
Force bombers, intercontinental and intermediate
range missiles, are vitally necessary. But so
are carriers with their aircraft and mobile marines,
and battle ready army divisions. In fact,
many parts of the world which we need to defend
can be reached only by naval forces. We must
have all these forces in proper balance, and
properly located, if the small free nations are to
have confidence in American leadership-a leader-
ship which only the United States can exercise
and which we must exercise if we are to survive.
We cannot survive alone.
Just as important as the possession of superior
armed forces, is the willingness and determination
to use them to defend the free world, anywhere,
against Communist aggression.
The loss of additional free territory to the
Communists because we do not want to risk a
general war will have a devastating effect on our
small. allies close to Soviet Bloc borders.
Last fall, during the heavy Quemoy bombard-
ment, a reception was held in an American
Embassy in a neutralist country of Southeast
Asia. Two ambassadors of small Asian nations,
firmly on the side of the free world, remarked
that unless United States stood firm in support
of Free China, American prestige in Asia would
drop to its lowest point in history. I was sur-
prised to hear that the ambassador of a small
neutralist Asian nation spoke up to agree with
them, and the foreign minister of the neutralist
nation in which the embassy was located said,
"Thank God for the United States."
We sometimes have heard the question in time
of crisis, "Is Quemoy or Berlin worth the risk of
a major war?" I say no place is itself alone
worth a general atomic holocaust, but the risk
of not defending any free peoples from Com-
munist aggression will involve a greater risk-
a greater risk to the free world as a whole-a
greater risk to the United States.
A small nation will question the determination
of the United States to risk a greater war to help
them if we give in to Communist aggression
elsewhere. The first step a small nation will be
tempted to take if it loses confidence in the United
States will be to make a dangerous and later fatal
compromise with Communism. Also small nations
will question our determination to keep the world
free from Communism if we do not use every tool
we have to combat their propaganda.
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1 happened to be in Asia during our Vice
].'resident's visit in South America. The head
of an Asian nation questioned why we let the
South Americans demonstrate against our Vice
President. They want strength in the United
States, which is the sole hope of escape from
Communism.
When the lJnited States Circuit Court of
Appeals meeting in San Francisco set seven
convicted Communists free, an Asian statesman
asked "What can the American people be think-
ing of? Don't they realize the danger of Com-
munists in their midst." I said our fault was in
our laws, not in that particular Court. Ile said,
" You must change your laws." I agreed.
We have Communist and fellow-traveler pene-
tration into every walk of American life-into
our schools and universities, into some of our
labor organizations and charitable organizations,
even into public life.
It is essential to our world position that
America be united and strong internally if we
are to exercise the leadership which is ours in
the world fight against Communism.
The massive challenge of today is the Socialist,
Communistic-Atheistic world conspiracy that
vows to put all peoples in the yoke of bondage.
We have a job to do vital to the security of the
United States. The expense and effort will be
great. The time will be long. But we can will
if we are determined to do so.
We must have a morally strong United States
composed of a people who understand the great
moral values of our constitutional government.
We must maintain strong armed forces.
We must act immediately with force to stop
Communist aggression.
We must keep steadfast and unwavering a
bipartisan strong foreign. policy in defense of the
free countries of the world, thus giving courage
to our allies and restraint to our enemies.
We must be willing to spend money to fight
the Communists with their own tool, PROPA-
GANDA.
The best way to strengthen America internally
is to promote a study and understanding of our
Constitution and Bill of Rights with its indivisible
"bundle" of political and economic freedoms-
freedoms which have made our people great.
I am with the Freedoms Foundation because
after over 40 years of military service, I feel I
must continue to fight for a stronger America.
Theodore Roosevelt stated a great truth,
adherence to which would help us today to have
the moral strength to win over Communist
propaganda at home and abroad. Ile said:
"Americanism means the virtues of courage,
honor, justice, truth, sincerity and hardihood--
the virtues that made America. The things
that will destroy America are prosperity-at-any-
price, peace-at-any-price, safety-first, instead of
duty-first, the love of soft living, and the get-rich-
quick theory of life."
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Part Five
Some Suggestions for Action
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CHAPTER FOURTEEN
COUNTERING SOVIET ECONOMIC PENETRATION
By MARRY A. BuLT.Is, Chairman, International Development Advisory Board; Retired Chairman of the
Board, General Mills, Inc.
I am honored to be part of this Fifth National
Military-Industrial Conference, which brings
together the people and organizations that give
the United States much of its might. This is a
highly important meeting. It seeks ways to
counter what I believe to be the greatest threat in
history to our future security and well-being. I
refer to the new and massive economic onslaught
of the Communist bloc against our free enterprise
system.
I certainly do not minimize the Communist
military menace. I am convinced, however, that
the economic weapons which the Communists
are deploying with such skill now present a greater
danger than the submarines or missiles. If we
are to meet and counter this Soviet economic
challenge, we shall need to use every means at our
command to strengthen the economic capacity of
the Free World. Therefore, I should like to dis-
cuss with you how the Soviets are threatening---
and how we must respond.
The Nature of the Challenge
The President of the United States has de-
scribed the actions and intentions of the Soviets
as "a fantastic conspiracy of international Com-
munism." The latest and most dangerous
chapter in that conspiracy is this increasing
economic drive. But since the Soviet Politburo
aims every action on the economic front at a
political objective, in appraising this drive we
must never forget that its essential purposes are
political and psychological. The Soviets intend
to destroy free governments now in power. And
they intend to spread Soviet economic influence
so that carefully selected, now free, countries
can first be made dependent upon Soviet as-
sistance, and then controlled by Soviet power-
and all this without any need to fight a military
war.
Therefore, this Soviet economic challenge is
essentially the newest form of communist political
offensive--with high priority for the uncom-
mitted peoples of Asia, the Middle East, Africa
and Latin America. It is not based on the profit
motive and "good business" in the American
sense. When it can, the Communistic Bloc
strikes very hard bargains, but the Politburo is
willing, if necessary, to incur a financial loss for a
sufficiently large political gain. The Soviets are
not concerned with profits or wages or fringe
benefits. Inflation, or freedom of the individual,
are not vital under their system. It follows that
American business simply cannot meet such a
challenge by applying normal business profit
judgment. We have no choice but to join issue
with the Soviets in the political and psychological
arena.
The political and psychological impact of expan-
ding Soviet trade is out of proportion to its size.
Availability of Soviet aid and trade has reduced
the cooperation of underdeveloped countries
with the United States, and has encouraged their
foreign and domestic policies to drift toward
Communism. Soviet trading practices have
caused alarm, since sensational trade agreements
have materialized with countries such as Burma,
Iceland, Egypt and Iraq. The Soviets have also
"dumped" products, such as tin, in world markets,
thus injuring producing countries and disrupting
international stabilization schemes. Chinese
textiles, at subsidized prices, have been exported
into the Asiatic markets of some of our allies
and of friendly neutral countries.
I am convinced that if American industry is
to survive the Communist push it must enter
this newest economic competition with the same
type of determination and creative imagination
that we used to plan and fire our orbiting missiles
into outer space.
Establish A State Trading Agency
The Soviets now deliver both raw materials
and finished goods at prices destined to wreck
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existing mavkets. r i l~ussian advantage is
based not so much on lower costs as on a willing-
ness to incur losses. The Politburo is willing and
able to balance losses in one commodity or in one
nation with profits elsewhere. 'thus it is enjoying
a tremendous technical advantage from its policy
of state trading. Should not this threat be met
by the United States through some sort of state
trading agency, an American government corpora-
tion which would be able to compete with the
Soviets on terms of equality?
because the government might have to bear a
substantial trading loss if this corporation paid
the various domestic suppliers of materials and
goods the prevailing market prices within. our
own economy, it might be argued that such a
new tool would, in effect, represent a subsidy to
American industry. But this need not be so if
efforts are made to keep prices at home competi-
tive. An American. government agency of this
type would gain cost-reducing advantages like
those which often result from a merger of large
corporations. At any rate, in one way or another,
while maintaining our free enterprise system
inside the United States, we still must fashion
some sort of now and more powerful economic
weapon to compete with the Russians.
Continued Financial Aid
In addition to creating new mechanisms to
better focus our strength against the economic
threats from abroad, we of course must continue
to join with other Free World countries to create
and maintain a sound financial basis for trade
and international financial stability through
the International Monetary Fund. At the same
time, we must continue to proceed with other
industrially advanced countries to provide ca-
pacity for many fundamental facilities -roads,
harbors, irrigation projects and the like, which
are necessary to the development of newly-
emerging nations.
Our basic institution for this purpose is the
International Bank for Reconstruction and De-
velopment, better known as the World Bank. Its
offshoot, the International P'inance Corporation,
is designed to provide capital funds on a non-
governmental basis for private enterprises in
foreign countries. The Bank and Fund draw
upon the talents and resources of the entire Free
World and have proven their effectiveness over
the years. Since the work of both the Bank and
t~e lnt0r]1tlj,ional Monetary Fund is outstripping
their resources, the Congress has approved the
recommendation of President Eisenhower that
the United States join with other members of the
Bank and 1?und to increase their commitments.
The United States is also working with our
Latin American neighbors toward the establish-
ment of a new billion-dollar Inter-American Bank
for Development designed to support economic
growth in the Americas.
Turning towards the financial aid which the
United States can give, we come to the very
important Development Loan Fund, which
finances development projects which, while eco-
nomically sound, are not easily financed by other
institutions. This Fund offers newly-developing
nations perhaps their greatest hopes for foreign
capital. It is far too important to the Free
World to permit its operations to slow down or
halt because of inadequate financing. I urge you
to give it your fullest support through your
representatives in Congress.
Offer Technical Assistance
Then, if we are to meet the Communist chal-
lenge, we must support the work of the Inter-
national Cooperation Administration. Through.
its technical assistance programs in health,
education, agriculture, industry and public ad-
ministration, we are providing other people and
their struggling, desperate leaders with the human
skills they must have before their countries can
become self-supporting. Mere we are conveying
far more than skills. We are teaching as well
our all-important democratic attitudes and values.
We have a moral responsibility to teach and
spread attitudes and values in which we believe.
The Communists do precisely that on a three-
shift basis, twenty-four hours a day, and it is
one of their greatest strengths.
Activities in the field of technical assistance
occupy a large part of the staff of the Inter-
national Cooperation Administration - nearly
6,000 people working overseas in some sixty
countries on 2,000 different projects. Our
foreign aid programs require a steady supply of
competent operating personnel. Here, Congress
could help significantly to obtain such personnel
for our overseas tasks if it acts to insure some
real long-term continuity in our foreign aid
programs. As long as budgets of agencies like
ICA must be reviewed every year by Congres-
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sional committees, such agencies will have great
difficulty in obtaining qualified specialists and can
hardly undertake the one or two year training
programs for skilled personnel which are necessary
for truly effective performance overseas.
In the case of many foreign nations, the export
of able personnel is the best contribution we can
make to their development. And this contribu-
tion is of key importance in the political and
psychological contest. Our problem is in persuad-
ing technically competent people to live abroad
for years, and to acquire a necessary grasp of the
language and culture of the country in which
they work. It is particularly difficult to find
people who will live outside an American "Golden
Ghetto," and experience some of the incon-
veniences which are part of the daily life of the
people they are serving. Yet, if instead, our
technicians abroad carry on the typical American
way of life in the midst of poverty and backward-
ness, the result is too often ostentatious and
offensive to the nation concerned.
This year marks the tenth anniversary of the
United States Point Four Technical Assistance
Program. Judging from what we have been
able to achieve in the past ten years, it is obvious
that this program, which provides technical
knowledge and skills for underdeveloped coun-
tries, will go on for years. All of the reports on
Mutual Security from non-governmental sources,
like the businessmen of the Fairless group,
indicate that this program should go forward for
a long period. However, a critical study and
analysis is now being made to find improved
methods for operating this technical assistance
program.
The Communist Bloc is rapidly stepping up
its program of technical assistance. Although
the Soviets entered this field only lately, by the
last half of 1958, some 4,000 Communist Bloc
technicians were assigned for one month or more
to seventeen underdeveloped free World nations.
The United States, which has been in technical
assistance much longer, had 4,600 in the same
general area Asia and Africa. And it is indica-
tive of the new direction of the Soviet efforts that
in 1958 .the number of technicians in the economic
field rose from 1,600 to 2,800. In addition, there
were 1,200 Communist bloc military technicians
serving in these countries. Nearly 85 percent of
these were in five countries E'gypt, Syria, Af-
ghanistan, India and Indonesia.
Maintain Domestic Prosperity
As another part of our economic counter-
offensive against the Soviets, here at home we
'must maintain a high level of domestic produc-
tivity and prosperity. We are committed to a
long-range, world-wide competition between two
vast systems and two ways of life. But the
underdeveloped nations are largely uncommitted
and undecided. The future structure of their
political systems and the future outlines of their
economic systems are still undetermined. To a
very considerable extent, the future role of
democracy and free enterprise in these nations
will depend upon the example which we set here
in the United States. Vigorous internal economic
health, employment, and adequate rates of
growth in the United States are beacons that will
do a great deal to attract the uncommitted
nations to our way of life.
What Can Private Business Do?
Considerations like these point up the responsi-
bilities and power of United States private
business in the struggle against the Soviet eco-
nomic drive.
Hall the Wage-Price Spiral
First of all we businessmen have the prime
responsibility to keep our economy healthy. If
we are to compete successfully with the Soviet
trade offensive, I believe our greatest national
economic problem right now is to adopt policies
that will equate wage increases to average
productivity gains. In the years since the Second
World War, the excess of wage increases has
produced higher prices rather than more goods.
If we are to preserve our own economic strength,
we must bring the inflationary wage-price spiral
under control. This problem is assuming the
proportions of a national issue.
Build Foreign Trade
Then while we keep our economy vigorous, we
must also work for the elimination of artificial
barriers to trade, including those of our own
making. We should not forget that by keeping
our markets open to their goods, we help enor-
mously in the struggle of the peoples of the under-
developed nations to earn their livelihood and to
obtain the capital needs to finance their own
progress. We make them more attractive
prospects for private foreign investment by
buying their products.
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As another part of our counterattack, private
American business and industry must do every-
thing possible to export capital, administrative
know-how, and technical skills to the newly-
ernerging areas. We should build additional
plants in both developed and underdeveloped
countries. The products of such plants would,
of course, reflect local labor costs and could be
offered at attractive prices to the local markets
while simultaneously the plants would create
employment and thus raise local purchasing
power. Also, by putting our funds and our
management talents to work abroad, we not only
develop effective enterprises and gradually create
new markets for ourselves, but we also stimulate
business groups in the various countries by the
influence of our example.
This will be expecially true if we businessmen
will become much more familiar with areas of
national interest where historically our trade and
investment have been small areas such as Asia
and Africa. While our long-term flow of private
investment has reached the impressive total of
billion dollars, this flow has been largely
concentrated in Canada, Latin America and
l,;urope. All of Africa, all of the Middle East, and
al.l of Asia including Japan have received rela-
tively little of our total overseas private invest-
rnerat, and these are precisely the areas where
Russia is concentrating almost all of her effort:
Provide Technical Personnel
One very significant way in which business
could increase its cooperation with the govern-
nrerat would be to contribute more to a pool of
technical experts which could be loaned to the
International Cooperation Administration for
projects in underdeveloped countries. It has
been difficult to obtain technical men, especially
from industry.
A definite effort should be made by business and
by our universities and medical centers to permit
more and more of our talented specialists to par-
ticipate in technical assistance programs. Busi-
ness and industry could help by protecting job
security and the seniority rights of specialists who
wish to accept International Cooperation Admin-
istration assignments, and then return to private
industry after their term of duty is completed.
Certainly it will riot be impossible for businessmen
to find ways to make it financially possible for tech-
nically trained men to contribute to their country's
future by making their talents available to their
government for a limited period of time.
INCREASE PUBLIC UNDERSTANDING OF
THE FOREIGN AID PROGRAM
Businessmen and leading citizens in all walks
of life--industry, labor, agriculture and educa-
tion--can help achieve greater public understand-
ing of the reasons for the Mutual Security
Program. The object of this program is to assist
the countries of the Free World, and in assisting
them, to help and protect our own country. It is
unfortunate that many Americans have either
an imperfect or a false understanding of the need
and value of this program. One effective way to
improve public understanding is for leaders in
various fields to increase their understanding by
learning the facts, by participating themselves
and by getting their associates to participate in
the program. My first-hand experience as chair-
man of the V. S. Government team which evalu-
ated Mutual Security operations on 1,'ormosa in
1953, as a member of the 't'ask Force on Overseas
Economic Operations of the Hoover Commission
in 1954-55, and now as chairman of the Inter-
national Development Advisory Board convinces
me that the Mutual Security Program is an
excellent investment for our own security and
that it should be supported. Of course, there
should be a continual close re-appraisal of all
parts of the program to eliminate waste, duplica-
tion, and inefficient administration.
THE SOVIET PROGRAM
We have a long, hard fight ahead of its. We
are going to have to struggle on every level. with
all our might and determination. Important as
have been the military struggles in Korea and
Indochina and the war of nerves over Berlin,
no less important, and probably more decisive,
is the less dramatically exciting new Soviet
Economic War. The Soviet economic challenge
is nothing but plain, unvarnished economic war-
fare with no holds barred. The Soviets are play-
ing the game for keeps, and they have no scruples
about what weapons and techniques they use.
The increase in tempo of the offensive is
indicated by the fact that, during 1958 alone,
Soviet Bloc credits and grants to underdeveloped
Free World countries amounted to one billion-
dollars, as compared with about 300 million
dollars in the previous year. These bloc totals,
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on a world-wide basis, add up to considerably
less than the total United States dollar aid; how-
ever, the Soviet aid is not directed at helping a
wide range of nations. It is directed at penetrat-
ing a few carefully selected countries. The
principal recipients of Communist Bloc aid have
been the United Arab Republic of Egypt and
Syria, Indonesia, India, Yugoslavia, Iraq and
Afghanistan. leach of these countries has re-
ceived credits of more than 150 million dollars.
Together they account for 82 percent of the total
Soviet economic aid.
To sixteen strategically located nations, the
Soviets have provided 1.6 billion dollars in
economic aid, while we have provided 3.3 billion
dollars in the same period. Just because in many
areas, we are ahead in aid, does not mean that
the Soviets are not gaining and gaining perilously
fast. In the meantime, we waver, wondering
whether to give President Eisenhower his ba.l-
anced budget or enlarge domestic outlays by
the very dangerous expedient of reducing our
foreign aid budgets.
LOOKING AHEAD
We American businessmen must recognize that
the Soviet economic offensive is one which
concerns us, not just as businessmen in particular,
but as citizens in general. We businessmen must
evaluate the Soviet economic challenge with the
same sort of urgency with which We judge the
threats of missiles and other weapons. Where
military considerations are involved, we recognize
that costs and profits must be subordinated, when
necessary, to the expensive and unprofitable
requirements of national safety. I sometimes
wonder if many of us businessmen recognize the
threat to our national security from the new
Soviet economic challenge. We should realize
that this challenge requires as tough and immedi-
ate focus of our best minds and our greatest know-
how as does the military challenge.
The job American businessmen have done in
shaping the present world has created a set of
know-hows, procedures and products that the
Soviets are now copying to use against us. We
have already used those procedures. So let us go
on from there. Let us tackle this new challenge-
this new frontier --with the same imagination
and creativity we have used in the past.
Certainly one of our greatest American char-
acteristics is our optimistic, fact-facing, willing-
ness-to-change-anything-if-it-pays-off-better
know-how and inventiveness. It is high time we
again put this know-how and inventiveness to
work against the new Soviet threat. Does any-
one think we haven't the pioneering qualities or
the courage to lick this newest problem? Well
then, let's get on with the job.
And in doing the job-the job we alone can
do - we have one enormous advantage on our side.
Every struggle, every action of man comes down
to a spiritual base: the good for which he strives,
the service for which he lives. In our concept
of human dignity and freedom--the divine right
of each individual to grow to his own broadest
and most nearly divine capacity---we have a
compass that can. show us how to meet the
Communists' new challenge and to help the rest
of the world work towards real peace and greater
opportunities for life and for progress.
The vaunted Soviet offensive is only in part a
challenge of our enemies. Far more importantly,
it is a challenge to us to live up to our own values
and convictions. Our ability to respond and our
determination to help free other peoples from
the bitter slavery of poverty, these are twin tests
with a single purpose. They will prove, beyond
our words, whether we really want to give inter-
national validity to the spiritual and moral values
by which we live.
Only by sharing these values do we prove our
own right to enjoy them. Only by sharing these
values can we continue to enjoy them.
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CHAPTER FIFTEEN
WHY WE AID
By GEORGE C. MCGHnE, Former U. S. Ambassador to 'Turkey.
(Delivered April 7, 11159)
I am pleased to be able to appear before the
National Military-Industrial Conference, meeting
here in the great city of Chicago to discuss "The
Soviet Economic Challenge." .I do this as a
private citizen., since it has now been some six
years since I have been associated with our
government; however, I appear also as a member
of the President's Committee to Study the
United States Military Assistance Program, the
so-called "Draper Committee." Our Committee,
since its appointment by the President on No-
vember 24, 1958, has devoted itself through
travel, study and discussion to an investigation
of the American reaction to the Soviet threat
through military aid and related aspects of
economic aid. Our preliminary conclusions,
therefore, which were published on March 17,
1959, should be of interest to this group.
My membership on the Draper Committee is
as one of the Democratic representatives, since the
President wisely elected to make this a bipartisan
study. It would, however, be more appropriate
to consider the Committee a non-partisan group,
since in my judgment partisanship ends at our
country's borders. There is no room for partisan-
ship in consideration of such important aspects
of United States foreign policy as our military
end economic aid programs. Indeed, our delibera-
Jons up to this point have been entirely without
partisanship and our preliminary findings have
been unanimously arrived at.
Many of your speakers have already docu-
mented for you the nature of the current Sino-
Soviet; econoric threat. Representatives of our
t;overnrnent and others will, I am sure, recite to
you the figures relevant to current Soviet eco-
r ornic aid and trade with other countries, and in
particular with the so-called "less developed"
countries. You will, I am sure, require no proof
f -om me that a threat exists.
I might, however, just say that this is a question
which the Draper Committee has gone into very
thoroughly. In our discussions with the Secretary
of State, the head of the Central Intelligence
Agency and with the Joint Chiefs of Staff, in our
perusal of classified documents and in our travels
to the various areas of the world currently
threatened by the Communist offensive, we have
given. careful study to evidence available as to
the nature and magnitude of the threat.
It was our unanimous conclusion, as stated in
our preliminary report that: "(l) The Com-
munist military threat is greater than ever, and
(2) that the Communist economic and political
threat and capabilities are expanding."
With regard to the military threat, events at
Quemoy, Berlin and now Tibet, are too much in
the public eye to leave any shadow of a doubt that
the Chinese and Russians are willing and able to
display openly their military might in achieve-
ment of local objectives. The modernization of
the Soviet army, unreduced in size, has been
pushed at a pace much more rapid than ours.
Russia continues to boast of her advances in the
field of nuclear weapons and long range missiles
and to threaten their use. Of the approximately
$2.4 billion of foreign aid extended by the Rus-
sians to other countries in the period 1954-1958,
approximately one-third has been for direct
military aid.. Over $120 million worth of military
aid has been given to Iraq alone in the short
period since the successful revolution of the
Kassim government.
On the economic front the volume of credits
and grants extended by t:he Soviet Union in 1958,
mostly in agreements with the "less developed"
countries, involve about $1 billion, as contrasted
with only $1.4 billion in the years 1954 through
1957. Although trade data for 1958 is incomplete,
for the first half of the year Soviet exports to the
less developed countries continued to rise at a sig-
nificant rate... about 157-0. Imports showed a de-
cline of 5%, reflecting in part the drop of world
prices in some major commodity components.
During the latter half of 1958, about 2,800 non-
military technicians from the Sino-Soviet Bloc
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spent a month or more in the 19 free world
countries the Soviets are aiding. Corresponding
military personnel numbered about 1,200. A
minimum of 1,000 students have accepted
scholarship offers in universities in the Soviet
Bloc. As compared with 50 bilateral trade
agreements at the end of 1953, Bloc countries
had 1.77 agreements in force with 32 countries
at the end of 1958.
It is, of course, possible to exaggerate the
importance of certain Sino-Soviet activities. One
would expect the second greatest industrial nation
in the world to engage in international trade on. a
considerable scale. Indeed, Russian. trade with
the rest of the world has lagged behind that of a
normal nation. Comparisons with the free world
must take into consideration the tremendous
volume of normal trade between the Western
nations and the "less developed" countries, and
the large investment and numbers of Westerners
normally residing in these countries, not just
government aid. As long as trade with Russia
does not constitute a sufficiently large component
of the trade of another country to give the Soviets
actual or potential control of undue pressure over
the country, its results are not all bad and can in
some cases be beneficial to the country concerned
and the free world. Insofar as Soviet develop-
ment projects assist the country concerned
without creating possibilities for control, undue
pressure or exaggerated propaganda effects, the
result may be to reduce the needs of the country
for development assistance from us and other
countries.
Taken as a whole, however, and particularly
in conjunction with the prospect of an increase
in the Russian Gross National Product over the
next few years (in accordance with the Western
concept) of about 6% per annum, as contrasted
with a United States gross rate of increase of 4?Jc,
the Sino-Soviet threat places the United States
in a position of great peril.
The response of the Sino-Soviet challenge is a
matter for the American people as a whole.
Involved is our own national economic strength
and the will and determination of our people,
as well as our national military strength. Mil-
itary and economic aid to our friends and allies
abroad constitute, however, an important element
of our response to the challenge, and it is to the
scale and nature of this aid that the Draper
Committee has directed its attention.
In the field of military aid, the conclusion
unanimously arrived at in our preliminary report
was that $400 million additional funds are
required for new commitments, but not for
expenditures, during Fiscal Year 1960. This
sum is needed in order to place firm orders for
certain advanced weapons, mainly for the NATO
area.
The Committee also found that increased
appropriations would be required in future years
in order to maintain deliveries of military equip-
ment to other nations at the annual rate estab-
lished in recent years of approximately $2.4
billion. This is because of the drastic decrease
of funds in the so-called "pipeline" of unexpended
balances for military aid, which has been reduced
from a peak of $8 billion a few years ago to $2.5
billion at the end of this Fiscal Year. With
increasing prices for weapons, exhaustion of
stocks even of conventional weapons in the
hands of our services, and longer lead times for
deliveries, the recommended increase for Fiscal
Year 1960 over the $1.6 billion requested by the
Administration, is needed to maintain our present
military commitments and aid policies.
The Committee also, and perhaps more im-
portantly, found that "the Mutual Security
Program, both in its military and economic
aspects, is a sound concept . . . and is now and
will remain an essential tool of foreign policy."
The Committee proposed that "the Congress and
the Executive Branch take the necessary legis-
lative and administrative steps to put the Mutual
Security Program on a continuing basis." Only
in this way can certain administrative defects in
the program be corrected, full efficiency and
economy be achieved and confidence given to our
friends and allies.
Although more publicity has been given to the
preliminary conclusions of the Committee on
the military side, the Committee, in accordance
with its instructions from the President, is in-
vestigating thoroughly the related economic
aspects of our Mutual Security Program. In its
preliminary report, it presented certain con-
clusions from this study.
In the first place, the Committee concluded
that the President's request for economic aid
under the Mutual Security Program for Fiscal
Year 1960 of $2.3 billion was minimal and should
be appropriated. During its investigation of
military aid, the Committee had also investi-
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gated the related question of "defense support,"
Which is a type of economic aid calculated to
'elieve the impact on the economy of a "less
developed" country from a military effort in
'xeess of its own capacities to support. The
Committee found that the amounts requested
by the President for Fiscal Year 1960 were an
austere minimum, and considered that assistance
to this type should be put on the same continuing
basis as military assistance itself.
In the field of loans for development assistance,
the Committee felt that the $700 million re-
quested by the ]'resident for Fiscal Year 1960
for the Development Loan Fund, which is over
and above the $225 million supplementary
request for Fiscal Year 1959 now before the
Congress, is the minimum needed. Its pre-
liminary conclusion was, moreover, that by
Fiscal Year 1961 "loans for economic develop-
ment under the Mutual Security Program will
probably be needed at a rate of at least $1 billion
a year." This is at a rate of $300 million a year
above this year's request, and $650 million a
year over the average appropriation rate for the
last two years.
Since it is a subject frequently discussed, and
since a letter from certain interested senators on
this point was one of the reasons which prompted
the President to establish the Draper Committee,
I would like at this point to address myself
briefly to the question of the relationship between
military and economic aid.
As you are probably aware, there has recently
developed in this country, probably as a result of
the Sino-Soviet economic offensive, the feeling
that we should shift the balance of our aid from
military to economic. Most people concerned
with foreign aid programs would, as a natural
instinct, wish to see American assistance go for
productive economic purposes rather than for
military purposes if this could be achieved without
sacrifice of American security interests. Our
investigations up to this point have indicated,
however, that this problem is a complex one,
and that there is no magic formula by which
the ratio between economic and military aid
can be determined.
Obviously this is a matter which must be
studied country by country. The net results of
the Committee's findings is that the point raised
by the senators is essentially right, i.e., that with
respect to the "less developed" countries there
is aced for an increased emphasis on economic
assistance over military, as indeed is reflected in
this year's appropriation request for the Mutual
Security Program. Six hundred million dollars
of the $700 million increase in the 1960 Fiscal
Year request over the 1959 appropriation, is for
economic assistance. The Committee found in
effect that no substantial additional funds are
required for military assistance for the "less
developed" countries, whereas at least by Fiscal
Year 1961 a further increase over this year's
appropriation request of $300 million would
probably be needed for development lending to
these countries.
A brief explanation of the relationship between
military and economic aid assistance in the
"less developed" countries would, I believe, be
helpful.
First of all let me say that there is, contrary to
the popular view, no example to my knowledge
of a country which, as a result of United States
aid or insistence, is making a greater military
effort than it in fact wishes to make. Quite the
contrary, the countries we are aiding today would
like to make a greater effort if it could be sup-
ported and would make as great an effort as they
could, even at the expense of their own economies,
without our assistance. In many cases, our
military assistance to other countries is a result
of treaties and commitments made to these
countries and plans developed over a long period
of time. We have, as a nation, a considerable
investment in their military forces which it would
be contrary to our interests to sacrifice. More-
over, as stated previously, since there is an
increase rather than a decrease in the Soviet
military threat on all fronts, force levels needed
in the past to meet the threat cannot be reduced
without rendering the countries we aid and our-
selves greatly more vulnerable.
A certain level of military force is needed in all
countries, and in particular in the weak "less
developed" countries, both to provide internal
security and some degree of confidence in the
ability to meet external. aggression, if there is
to be any hope of economic stability or improve-
ment. This is not to say that the military effort
is more important than the economic effort, but
merely that if either is to succeed the military
effort must come first in time.
In Greece, we found during the guerilla war
that it was futile to rebuild bridges and railways
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subversive and economic war with the Soviet
power bloc; nor need I here point out that the
economic aspects of this war cannot be separated
from the strategy of the total war. But, the im-
portant point is that the American people and
many of their leaders still are not more than
superficially aware of these truths.
Second, as a free people, we are hammering out
vital economic and political policies in a market
place of inadequately expressed aims, defective
leadership, a largely uninformed electorate, and
self-seeking pressure and political groups. This
is, of course, one of the basic problems of de-
mocracy. Yet, as in any war, we can only plan
and light well if we know our war aims and if each
of the instruments of a complex society play their
inter-related roles in the achievement of those
aims. For the Soviets, this is no problem. For
them, the answer is simple and they make no
bones about it. They are a colonial, imperialist
power, seeking by world domination to perpetuate
their power and to profit by exploiting the people
they bring under their influence.
And, incidentally, one of our own enemies is
our own semantics. Inescapably, even those most
informed use euphemisms, words, tags, descrip-
tions which do not serve our purpose and actually
help the Soviets. For example, this is not a war
between East and West. If it is, we have lost;
because most of the world is in the East or
identifies itself with the Fast not the West. This
is not a war between the United States and Russia
-it is a war between the United States or the
free world and the Soviet empire. (As a matter
of fact, I am just content with the phrase, the
Soviet Union, or the Union of Soviet Socialist
Republic.) They are an empire --they are
an imperialist force in a world highly sensitized
to the word "empire."
Now, what are our war aims --are we simply
trying to outdo the Soviets? To read many of
the speeches being made (and some by people
who know better), one would think that our only
goal is to build more cars, graduate more
engineers, produce more hours of television
entertainment or even larger percentages of
growth in the Gross National Product. Some of
these goals are desirable, but they are not war
aims. As a matter of fact, I am not even certain
they are national aims.
We and the Soviets know that the Western
system of free democracies is superior to the
Eastern totalitarian system. We know that free,
prosperous, well-fed and well-informed people
will choose the free world if they are given half
a chance to make the choice if, in a real sense,
that choice is ever really freely atailable. We also
know that just as surely poor, ill-fed, ill-informed
people are most likely to choose the Soviet camp
as a short cut to the highest standard of living
they Si) badly want. But here, too, the picture
is much more complicated. There has been a
vastly over-simplified assumption that poor
peoples are more likely to go Communist, and
that the more prosperous in developed countries
are more likely to remain free.
Not so long ago, France and Italy came so
perilously close to a Communist course chosen
by a free electorate that we must question this
easy conviction. If, indeed, India falls finally
within the Communist Bloc, starvation and
population will be a less consequential factor
than the skill of the Communist Party in the
misleading and mis-using a handful of intel-
lectuals. A preponderance of India's college
graduates and the elite who are not among the
poor and illiterate are used by the Soviets to
serve their purposes. If India is to remain free,
the horrible adjacent reality of Tibet is almost
certain to accomplish what the entire effort of
the United States Information Agency has been
unable to do in years-with no criticism of the
Agency.
Similarly, in the present troubled Caribbean,
Cuba in many respects the most prosperous
island, is in greater jeopardy of Communist danger
than the dreadfully impoverished, panic-stricken
illiterates of Haiti.
This is not to deny the urgent importance of
the economic environment. It is merely to urge
that that importance not be misread and that
we recognize that Communists --not poverty-
make Communism. Communists-not poverty-
are the backbone of Soviet imperialism-and
intellectuals, not illiterates, the vehicle by which
the bridge is crossed.
In this respect there is one new element. Both
the Soviet and Chinese plans for economic
development, boasts as well as successes, will
increasingly provide their own build-up in
attraction.
Third, we have been attempting to protect and
serve each separate agricultural, industrial, labor
and financial piece of the jigsaw that is our
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national economy, and fight and win a world-
wide economic war at the same time -and that
just is not possible. Ilere is just one example of
the problem: Let me cite the Lead and Zinc
Import Quotas put into effect last year: serving
understandable, domestic, industrial needs, the
I ,,ad and zinc imports were cut by twenty per cent,
seriously affecting Australia, Bolivia, Canada,
./fexico, fern and South Africa. One of the things
that happened immediately was that 12,000
Peruvians were made unemployed. In addition,
many thousands of other workers in industries
such as railways, shipping, retail trade, etc.,
have either been thrown out of work or put on
shorter hours. The estimated loss of $20,000,000
or more in export income yearly will mean that
Peru must cut her imports, largely of industrial
machinery and equipment, and largely from us-
L11 of this during a period when our position
in Latin America has been aggravated severely.
Then, to add the ironic touch of insult to this
very real injury, we did not send our top college
learn to the world-wide basketball champion-
s hips in Lima --not even any of our college teams.
We sent a pick-up team. To the Peruvians, who
ore rabid basketball fans, sending anything but
the best was a slap in the face which made head-
line news throughout South America. Is it any
wonder when a Soviet trade mission arrives in a
country like Peru, bearing flowers, speaking the
native dialect, observing local customs, and
dribbling a basketball, that they receive a warmer
reception than would otherwise seem possible
iii an intensely Catholic country.
I wish there were time to make some observa-
tions on the competition between the United
States and the Soviet Union at the Brussels
World Fair. We had the most brilliant buildings;
in my judgment, they were remarkable exhibits,
considering how little was spent and how late
the appropriation was enacted. But we fell on
our face--in the area in which we happen to be
the strongest -- entertainment -- because the
actors, the entertainers, the night club stars and
the motion picture luminaries and their agents
saw no reason to go to Brussels free and be put
rip at a second-rate hotel. You can be sure the
name considerations did not apply in the world
of Soviet entertainment.
There are elements in this warfare to which
the traditional aspects of a market society will
simply not prove an adequate response, and
they are by no means the least important aspects
of the struggle we face. It is riot by accident
that for the first time in the entire Christian era,
in the last four years, the most widely distributed
book in the world is no longer the Bible. For the
previous 1600 years, it had been the most widely
distributed book in the world. Now it happens
to be that Lenin is number one. The Bible is now
number four. It was number three last year.
It was number two the year before. The first
American who appears on that list is in seven-
teenth place; a corrosive, anti-American novel
written more than 40 years ago by Jack London
is in seventeenth place. Abraham Lincoln and
Thomas Jefferson are down in the forty's. 1,
have nothing but the deepest sympathies for
agencies like the U.S.LA., which must struggle
valiantly to counter the massive Soviet efforts,
costing well in excess of one billion dollars annu-
ally, on an American budget of little more than
one hundred million.
Fourth, and not unrelated, we are appalled at
the high costs of government, yet the fact is that
absolutely nothing can reduce that cost with
safety in our lifetime; and perhaps a recognition of
that fact, especially among responsible people in
business, who pay the bulk of that taxation, will
serve some urgent purpose.
Fifth, we are a totally international power, yet,
we still carry the weight of the lag, both cultural
and economic, that flows from our having so long
been an isolated, self-sufficient and self-satisfied
nation.
The economics of even minor industries and
international trade have an important impact
which is rarely understood. For example,
America's motion picture industry is not one of
our giant industries. But it is a major voice on
the world scene, good and bad shaping not
only the world's view of America but also the view
of our friends and neighbors and of our enemies.
Only a handful of people within the industry ever
talk about the fact that no American motion
picture company can aff ord to make a film with
an articulate, anti-Communist scene. That is
not because of subversion in the industry-it's
because they cannot afford to. The absence of
such films persuades some that it is subversion.
The most subverting fact is purely economic.
It is a truism in the industry that almost all
successful films today, except for the handful of
the giant, best-selling pageants ---the ten million
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dollar films that make a play for a fifty-sixty
million dollar gross-except for these -all other
films can
at best.
only break even in the United States,
They can only meet their costs from
revenues paid by audiences in the United States.
An anti-Communist film might go big here --it
will never be exhibited in Europe. No motion
picture tycoon sets out to make a film with the
hope of breaking even. It is just as simple as
that.
Who, then, has the budget to put anywhere
from three to seven million dollars into a techni-
color, cinemascope, anti-Communist film. The
United States Information Agency? Or some
quixotic picture tycoon? Neither one has. There
are, however, ample funds to make a film like
a current release which I urge you to see. It
may do more than any of my words to bring an
awareness of this dilemma to you. To quote
the radio advertisements throughout the country,
"bringing together Yul Brynner and Deborah
Kerr for the first time since `The King and I'--
climaxed by a moment of truth between
and a woman-`The Journey."
"The Journey," which shockingly enough, less
than two and one-half years after the Hungarian
Revolution, uses Budapest as its background,
glorifies and humanizes the Russian soldier, makes
the Hungarian Freedom Fighters purposeless
people, with whom the audience cannot identify
and makes the family of a young American diplo-
mat selfish, unpleasant and unfeeling. In fact, it
is the pregnant American girl, returning from a
tour of duty in the Middle East, (which is
described by her husband as six years of nothing
but the stink of oil and fly)-it is his wife who
urges an. English woman that she sleep with
the Russian colonel so that they can get out and
be rid of Hungary and its people. I have not over-
simplified, believe me. I have understated the
message of this film.
The ignorance of the importance of psycho-
economics, as a cold war weapon, is appalling.
Recently, for example, a large Wall Street broker-
age house put out an expensively gotten-up book
on the "]Russian Economic Threat"-an important
subject. The climactic chapter, entitled "Meet-
ing the Threat," turned out to be a list of stock
tips to companies whose business was not likely
to be too badly hurt by the new aggressive Soviet
trade offensive.
Sixth, we have an acute shortage of diplomatic,
managerial and technical skills at a time when all
three are very badly needed for our efforts at
home and abroad. To conduct this war of ours in
the field, we must recruit, train and put into ac-
tion more than just a trained foreign service, more
than trained diplomats (although we certainly
need more of them as well). We have to make
foreign service more attractive for economists,
agricultural experts, engineers, public health
specialists, doctors-people with all the many
skills that are needed. It has been estimated
that even now the Soviet Union already has twice
as many skilled teams operating in the under-
developed countries as we have.
Seventh, we are mere children in psychological
warfare, and the psychological aspects have
become a most important factor in the larger
struggle. Pinpointed, psychologically guided,
and oriented aid has enabled the Soviet Union
to get more mileage out of its limited funds
than we have gotten out of our much more ex-
pensive programs. The Soviets stand ready to
use all of their psychology and demagogy, and
they are willing to use these without conscience,
which enables them, for example, to gain credit
for providing things that it is utter nonsense for
the recipients to have. An illustration--we spent
millions of dollars to build a dam in Afghanistan,
a hundred and fifty miles from where anybody
could see it --in what happens to be the only
logical place such a dam can be. Dams are not
usually on Main Street and, in that country,
water was the most urgent, single need of the
country. The Soviets paved the Main Street of
Kabul, the capital, built a modern, aluminum
bakery and, unhappily, they achieved more of
their purpose with a paved street and bakery
than we did with our dam-and at a fraction of
the cost.
The question is -could we, or should we, have
done otherwise? This is one of the dilemmas
repeatedly faced by a free and responsible
people. The answer may well be that having
accepted the challenge, we will find ourselves
doing both things-providing the symbolic, the
highly visible, even the foolish, as well as meet-
ing the real and urgent needs for which we derive
less immediate psychological and political ad-
vantage.
We are the victims of the most curious, self-
serving assumptions that are little more than
pacifying beatitudes, such as "people will seek
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to be free"-- "atheistic Communism will be
re.;i.sted by religious nations." Whatever merit of
truth there may be in these phrases exists only
to the extent that there are trained, competent
people to give the truth an equal chance with
fa'sehood. But the availability of such trained,
competent people is, for all practical purposes,
either accidental or non-existent except as
they are already employed within a handful of
companies functioning abroad, in the State
D,,partment, the Central Intelligence Agency or
the Arn:rcd Forces. There is no free world
academy in existence to train the business people,
the technicians, the agricultural experts, the
doctors, public health officials, tourists and ex-
cLange groups --or to train students, labor leaders
and political figures from overseas countries. Yet
this motley assortment--untrained- is pitted
against doctors, scientists, peasant leaders, union
agitators, technicians, roadbuilders and a variety
of other occupations and professions in the Soviet
Union who are indoctrinated in the techniques of
political and psychological warfare and who
t?.lk the languages necessary to set their knowl-
edge into motion throughout the world.
E,ighth, we are the leading proponents of the
advantages of free enterprise and yet we make
p tifully little use of American business enterprise
it certain tactical areas of our world economic
p;-ogram. The means of encouraging further par-
ticipation by private business, interestingly
enough, are not very complicated, but they need
doing. The importance of redesigned tax laws
a extra incentive for profit-making foreign
investment, as well as government contracts for
specific projects by private enterprise, should be
considered.
Ninth, we are a non-colonial, anti-imperialist
nation; yet we often seek to sustain the positions
of our colonial, imperialist allies.
In economic terms, it is time we put the full
weight of our influence and leadership behind
the formation of more large regional economic
organizations. In areas such as Latin America,
the South Pacific, the Near East, such free market
areas will be the fastest and surest way to pro-
mote the growth of local industry and trade --and
the will to resist the blandishments of the Soviet
Bloc.
Tenth, we are both a moral. and self-righteous
people, but we do not always realize that these
are not the same thing. If we are to succeed in
our objectives, we must drop our stiff-necked,
morn, listic attitude toward the other peoples of
the world.
To take an example of what I mean by this
tendency to view everything as falsely black or
white -a leading American diplomat should
never have been quoted, as he was a while ago, as
saying that the religious nations of the world are
all on our side. This must have seemed a calcu-
lated affront to the deeply religious Moslems of
Indonesia--to name just one national group
whose sympathies we have not so far been able
to enlist.
At a time when ignorance is worse than sinful,
we know even less about the cultures, customs
and languages of the peoples of the world than
does the Soviet Union. We are a predominantly
white, Protestant culture in a world that is now
and will be increasingly non-white and non-
Christian. We have no realistic program to deal
with the fantastic population explosion in the
world, which. we ourselves have largely created
with American science and medicine. I am not
suggesting that anybody has. I am suggesting,
however, that we were awfully quick with
penicillin -we were awfully ready to lengthen
the life span-we were urgently involved in the
efforts to keep children aliveall urgent, decent,
vital, normal objectives of a free society. But
each of these has produced a problem which
makes even the maintenance of an economic level
equal to yesterday's all but an impossibility for
almost half of the world.
We have no sense of national history or of
destiny. Our time span is the fiscal year. Our
enemy's is the period until victory. Most tragic
of all, history has shown that we can fight well
and win only when we have first lost---and we
do not know yet that in this war there is much
that we have already lost, and ultimate victory
becomes more, not less, difficult with the passage
of time---and yet, we must not lose. Nor need we
if we apply our resources, our intelligence, our will,
and some capacity for discipline, mobilized by
leadership adequate to the undertaking to counter
effectively Soviet imperialism.
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CHAPTER SEVENTEEN
THE AMERICAN DILEMMA-AN ANALYSIS BY AN AMATEUR
By C. KEN WEIDNEn, Dean, School of Engineering, American University of Beirut.
Believing that before we can. successfully attack
the Soviet Economic Challenge we must first
examine our own weaknesses-1 wish to dis-
cuss ourselves and the dilemma in which we
find ourselves. At the risk of seeming rude -I
shall try to be completely frank.
Whether a man dies as a result of accidental
violence, suicide or cancer, he ends equally dead.
Whether a society dies as a result of defeat in
armed conflict, internal revolution or from follow-
ing false concepts to its own destruction, it ends
equally dead.
Nature's evolutionary system is based on the
survival of the fittest in unlimited competition.
We may lull ourselves into smug complacency by
ignoring this basic natural law but we cannot
change the ruthless universal application of it.
Believing that the identification of a problem is
an important part of the solution, the Soviet
Economic Challenge is welcomed because it is
concrete enough and urgent enough to force all
Americans to be concerned about it. This
concern may create an atmosphere in which it
may be possible to gain public recognition of our
real problem and get support for a workable
solution to it.
Two hundred years ago our colonial forefathers
stood at a "point of no return". Their decision
to commit themselves to the cause of freedom
made this nation possible. One hundred years
ago the people of this nation again stood at a
"point of no return" and their decision to further
the cause of freedom preserved the nation. Today
we stand at a "point of no return." What we
decide to do or not do will also determine the
continuation or extinction of the United States of
America.
Throughout our two hundred year old struggle
the basic dilemma has always arisen from the
question of whether or not it is possible to increase
the degree of federal power permitted by the un-
amended Constitution without destroying our
system of indirect democratic government which
preserves our individual rights and freedoms. Or,
stated another way, how much of those practices
and concepts which were repudiated and dis-
carded by our founding fathers can, we reaccept
without destroying ourselves and our nation?
Without exception the founding fathers of this
country believed that a system of indirect demo-
cratic government is the best method of support-
ing and protecting private enterprise and that the
development of direct democratic federal govern-
ment is the greatest possible threat to all private
enterprise and a free society.
Indirect democracy can be defined as a system
of pyramiding, on a cooperative basis, self-
governing units with progressive dual representa-
tion. Each larger unit must have representation
of the people affected and of each of the smaller
units which make it up.
On the other hand direct democracy is a system
wherein the cooperating self-governing units do
not exist in fact and wherein the central govern-
ment is maintained essentially on a people's
plebiscite basis. This produces only a strong
central government and the people "en masse"
with no moderating devices in between. Direct
democracy is the natural media for and the first
step in the production of dictatorship and bureau-
cratic despotism.
Indirect democracy requires at least two effec-
tive and competing political parties and a literate
participating classless society which has a uni-
versal understanding and acceptance of the
importance and responsibility of moral govern-
ment at all levels. Without either one of these
requirements-direct democracy in some degree
results.
During the past hundred years, ignorance of
and disregard for our founding concepts have
brought changes and modifications under the
guise of expediencies, without regard for the
pyramiding problems they created.
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Get us review our transition from the indirect
democracy we were and think we are, to the
direct democracy we have actually become.
Maritime commerce in the days of wind-
powered sailing ships was one of the strongest
free enterprise developing agents known. The
'Thirteen Colonies that founded these United
States were essentially maritime provinces in a
socio--economic sense. Consequently the conceptof
free private enterprise was indigenous in. all parts
of the country when. the heat-powered Industrial
Ilevolution began in North America. The various
phases of the heat-powered industrial Revolution
in America were welcomed from the beginning by
all and absorbed into the socio economic fabric for
the benefit of all without question.
This led to a concept of owner-employer
management which was simple and direct. It
was based on the American democratic idea that
both the employer and the employee were free
responsible people; that the employer who was
risking his capital had a right to expect a full
day's work of acceptable quality in return for a
fair regular wage; that loyalty and respect were
two-way functions of successful employer-em-
ployee relationship; and that the boss was the
boss because he could himself, if necessary, do
the job better than his help and because he had
the capacity and courage to make and implement
decisions on his own responsibility. This de-
veloped the basis of American Capitalism, i.e.:
that everyone is entitled to retain his share of the
fruits of his honest labor or risk in ethical competi-
t:,i on.
While there were many and varied interpreta-
tions and even abuses of this concept-this
concept nevertheless was the base on which
American private enterprise was founded. And
the attitude of the government that it supported
was one of imposing the minimum possible
control and taxation because American private
enterprise i.e. the people, then actively confined
their government to those political activities for
which they had created it.
In Europe, however, this was not the case. The
Guild system was in complete control of all the
free enterprise of the wind and water power era.
And, as is too frequently the case, having been
successful in establishing an organization which
literally dictated the social and economic life
of the, free classes, the Guilds had become re-
actionary and arbitrarily opposed to anything
new, particularly if it originated outside the
Guild structure.
However, the Guilds did not control the noble
feudal landowner nor his serfs and agricultural
workers. Rather the guilds of the incorporated
cities had grown up in bitter opposition to the
feudal system, and, their success had been at the
expense of the feudal system.
By the beginning of the heat-powered In-
dustrial Revolution in Europe the Guilds of the
cities had evolved a complete set of moral and
ethical codes controlling the socio-economic life
of all the free classes below nobility. These codes
were a rigidly enforced structure of restrictive
protections to the Guild society and its activities.
The landed nobility on the other hand were in
sore straits economically. The old feudal agri-
cultural system could not compete with the free
enterprise society. Their situation was desperate
when the vast opportunities of the heat-powered
Industrial Revolution which were rejected by the
Guilds burst upon them.
In a relatively short time the landed nobility
became the capitalist owners of new factories
built on their land and operated by serfs and
workers whom they owned in varying degrees.
Being outside the limits of the incorporated cities
and therefore free of the moral and ethical codes
which the free classes had developed for the
adequate control of competition, each feudal
industrial capitalist was free to establish his own
code of behavior and competition.
The Industrial Revolution in Europe destroyed
the free industrial Class and their free economy
and revitalized the monarchial national system of
government which again dominated all "free"
society. The resulting human misery, which
this form of exploitive slave-based capitalism
brought to Europe, spawned the subsequent class
revolutions which have since spread to all parts
of the world. It was this form of exploitive
capitalism-the only form known outside of the
United States----which produced the great revolu-
tionary writers such as Engels, Marx, etc. in
protest.
The heat-powered Industrial Revolution that
occurred in Europe, where the free classes op-
posed it and forced it to develop in the privileged
exploitive segment of society, was an entirely
different thing from the natural development of
the heat-powered industrialization in the classless
free enterprise society of America.
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But by 1.850 the economy of our slave based
agricultural South and the economy of our free
industrial North were becoming increasingly in-
compatible. The ancient and recurring contest
between the slave-based economy and a free-
based economy always presents a choice of one
of only two approaches; either find some way
of keeping the free-based economy sufficiently
virile and efficient to out compete it, or resort
to war in the hope of destroying it.
In 1860 our Federal. Government having failed
in all other attempts, resorted to War and de-
stroyed the slave-based economy of the South.
With the end of our Civil War came the end of
our isolation from European class consciousness.
The conquest of our West which drained off much
of the required manpower for our industrial
expansion was followed by the wholesale importa-
tion of Middle European immigrant labor. In.
the beginning this was not serious. Most of the
first waves of immigrants were absorbed into our
social. fabric without difficulty. But as this con-
tinued and the class strife became greater in
Europe the immigrants began, not only importing
the virus of class hatred but to consciously con-
gregate into "Old Country" type communities in
their newly adopted country. This self-segrega-
tion naturally led to the development of class
feeling with all of its attendant un-American ills.
These signs of growing danger were either un-
noticed or ignored and by 1.912 we had imported
enough infected groups to infect our whole body
politic. From then on we became progressively
more and more conscious of the fact that we in
America had a "Working Class." An odd thing
indeed to develop as a separate group in a classless
society where everybody works! But still we did
not see the danger. Our organized "Do Gooders"
were in clover. But those who were so proud of
making us the "melting-pot" :forgot that it takes
the untempered heat of true individual competi-
tion to make a classless American out of a class
conscious immigrant; and, that intelligent com-
prehension and acceptance of the American
concept of the separation of church from state,
and religion from politics is mandatory if the
immigrant and his descendents are not to render
lip service to the American way of life while
giving the loyalty of their souls to a concept
which is diametrically opposed to it.
Meanwhile the three great Revolutionary
parties of Europe, the Bolsheviks and the Menshe-
viks of Russia and the Syndicalists of France had
become potent forces in the class struggle in
Europe. Although each one of these groups
believed in a different technique for the usurpa-
tion and assumption of political power by the
"working class," each one believed that usurpa-
tion by the working class was essential. And
because each one at various times used the type
of organizatior referred to in French as the
`Commune', great confusion developed over the
use of the name Communist. Actually they can
all properly be called Communists.
About 1912 the Syndicalists began operations
in the United States. Believing in the control
of government by labor unions, the Syndicalists
proceeded to develop their organization in the
immigrant "Working Class" by promoting "Labor
Unionism" as a political force.
In 1913 .the people of the United States ac-
cepted two Amendments to their Constitution
which, when accompanied by the growing
governmental bureaucracy that was made in-
evitable by the establishment of a permanent
Civil Service without sufficient means of restrict-
ing its basic tendency toward self-propagation,
made the rapid departure from our concept of
indirect democracy inevitable. They were the
Sixteenth and the Seventeenth Amendments.
The Sixteenth Amendment was the first major
constitutional departure from our basic system of
indirect democracy. And it, without doubt,
constitutes the greatest possible threat to our
system of indirect democracy that can be im-
agined. This Amendment which gives the Federal
Government the direct power to levy taxes on
the incomes of all the citizens without regard for
the sovereign governmental units in between,
ignored the very essence of the concepts on which
this nation was founded. It placed irr the hands
of a central governmental bureaucracy the means
whereby it could support and expand itself with-
out effective control or restraint from either the
elected or the electorate.
This Amendment was accompanied by the
Seventeenth which further destroyed our system
of indirect democracy by transferring to the
voters the right of each State Legislature to elect
the two Senators who are supposed to represent
their sovereign. State as a political unit. This
completely destroyed the vital dual representa-
tion feature so essential to our system of indirect
democracy.
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"These two Amendments set the stage for and
made inevitable the chain of events which have
followed.
World War I with its accelerated interchange
between European and American industry con-
cerning ideas of production, personnel manage-
ru.ent and financial control, transplanted the
European class-conscious aspects of management
to American industry. Along with this came the
concept of management by an elite group specially
trained outside of industry.
The practice of concentrating and consolidating
industrial units into huge centralized complexes
with all of the attendant social and political ills
was transferred intact from the European system
without regard for the fact that it was the very
device the feudal capitalists had used to destroy
the free European society of the Renaissance.
We in one decade naively transferred the basic
social, industrial and political ills of European
exploitive, class-conscious capitalism to America
and departed from our own system of a free class-
less industrial society in the process. The results
should have terrified any thoughtful person. But
they passed almost unnoticed. Everyone was
too busy getting more creature comforts and
higher wages of less value.
As we emerged from that war, we embarked on
that wild socio-adolescent spree known as the
Roaring Twenties. 't'his was a strange mixture
of financial and industrial irresponsibility, govern-
mental opportunity and socially immature mo-
rality. The average American changed from a
moral, law respecting citizen to a hypocritical,
law evading person. Our society developed the
'diddle European type of organized gang lawless-
ness and public corruption which can and does
destroy any civilized society.
There developed the demoralizing un-american
concepts of something for nothing, unearned
support and the host of destructive social ills
which came with the prolonged diet of the F.D.R.
welfare state alphabetical soup of the thirty's.
Our State Governments lost their sovereign
identity and became little better than poor,
hungry, competing, feudal retainers of the Federal
Administration. Statesmanship in the interest of
the people was rapidly replaced by politicianship
oil behalf of special interest lobbies. Everything
was measured by material values. Our sacred
American concept of a free individual governed
by moral and ethical values -America's birth-
right-was sold for a mess of potage called se-
curity.
Karl A. Wittfogel in his remarkable hook
"Oriental Despotism" makes two facts very clear.
1"irst, once governmental bureaucracy is allowed
to assume managerial powers over a society's
economy, private enterprise disappears, and
second, when a bureaucratic government gains
control of the basic power supply of that society,
despotism results.
The F.D.R. device of bipartisan adrninistral ion
progressively and effectively destroyed our es-
sential two-party system of political competition
and his violation of the two-term precedent set by
George Washington established the concept of
the indispensable man in Public Office. His
governmental relief agencies extended the man-
agerial bureaucracy of our central government
to a magnitude that insured its autonomous
expansion and perpetuation.
The failure to maintain a strong system of
indirect democracy, so entrenched the bureau-
cratic system of direct democracy that it has now
become a far greater danger to our survival as
free men that any Soviet Economic Threat could
ever be.
prom the very beginning, our growing federal
managerial bureaucracy was the vehicle through
which the central government tried repeatedly to
gain control over the supply and distribution of
basic power. Of course, all such schemes were
put, forth as a way in which the central govern-
ment could"save" the taxpayer from the exploita-
tion of private power capitalists! That this is
the natural route from freedom through state
socialism to bureaucratic despotism. has always
been kept well hidden. These attempts after
1911, became progressively more successful. Fi-
nally the "F.D.R. welfare state" was able to
establish, along with the Columbia River develop-
ment scheme and many others, the T.V.A. -and
the Federal Government was in the power business
in a big way at last.
During the depression of the thirty's, private
industrial management made a desperate effort
to reassert itself. Competition was ruthless and
only those individuals who could and would act
independently with responsibility remained in
executive and supervisory positions. Had the
war not interrupted, it is possible that industrial
management might have put its house in order
and stemmed the tide in spite of the efforts of
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government bureaucracy and politically protected
union labor to the contrary.
But our entrance into World War 11 destroyed
that chance. The men with the ability to make
independent decisions and accept full. responsi-
bility for their actions were the ones urgently
sought after by the Armed Services for their
greatly undermanned officer corps. Their recruit-
ment left industry with a preponderance of those
who were the least able to act in a responsible
and effective manner.
The inevitable happened. More and more
persons had to be assigned to do the work formerly
handled by individual executives of all grades, and
the committee idea of management was born and
matured. This, of course, brought into being a
rapidly expanding industrial bureaucracy which,
fed. by government contract money, became by
the end of the war, as firmly entrenched in
industry as the political bureaucracy was in the
central government.
As we emerged from World War II, the prac-
tices which were made possible by the Sixteenth
and Seventeenth Amendments and the "melting-
pot" immigrant concept, blossomed into full and
devastating fruition, But this was ignored in
the presence of our vast new atomic technology.
Within two years after the end of the War in
Europe, a new Government Bureaucracy, the
A.E.C. was in complete, absolute and exclusive
control of the great new source of power on which
our technological development must be based in
the future.
The Defense bureaucracy retained after the
war the full control of almost all the research and
development phases of industry under the excuse
of military secrets, weapons developments, etc.
Viewed as a whole the bureaucracy of our
federal government emerged from World War If
in complete control of every facet of our industrial
life except that which it reserved for its fair-haired
child, organized labor.
We now come to the present. The events which
have led us from the status of a nation of free,
independent, solvent, moral people to the status
of a nation of bankrupt, conforming, subservient
hypocrites, have none of them seemed to be of
any individual significance in the face of the
arguments put forth by the false prophets of
expediency. These false prophets have led the
American Public around one mythical corner
after another, looking for the Utopia which they
promise must come as a result of their planned
economy, planned subsidies, planned deficit
financing, planned inflation, in sort, planned
.everything except the inevitable results of ignoring
the basic laws of nature controlling man.
The "melting-pot" concept continues to add
needlessly to our social problems. We are still
importing every foreign malcontent and op-
portunist who can claim either pauperism or hate
of Russia. We are suffering from a progressively
acute case of social indigestion because we have
assumed erroneously that by making foreigners
American citizens they automatically become
American. Obviously we should always welcome
any worthwhile person who wishes to immigrate
to the United States to become an American in
fact. But we should NOT continue the importa-
tion or retention of those who wish to become
American in name only and regard American
citizenship as a convenient laissez-passer for
irresponsible or selfish exploitation of the Ameri-
can System. The origin or immediate antecedents
of most of our gangsters, hoodlums, racketeers,
etc. should have drawn public attention. to this
matter long ago.
Syndicalist Organized Labor has from its
specially protected position, gained control over
every facet of our industrial and economic life.
Its extra-legal status allows it to dictate the terms
under which every part of our economy is per-
mitted to operate.
We have witnessed many "witch hunts"
dedicated to ridding our country of the Com-
munists. But all of these have carefully avoided
doing anything about the growing ruthless power
of syndicalist labor which is just as communistic
as the Bolshevik or Menshevik. Organized Labor
can be a vital and powerful force for good if it
works within the concepts of the Society to
maintain standards of performance, quality and
fair practice. But just so long as organized labor
retains a special status outside the laws which
apply to corporations and business and just so
long as it retains any political aspirations and
activities --it will remain basically syndicalistic
and to all intents and purposes a serious Com-
munist threat to the government of free people.
When it is appreciated that Syndicalist Organ-
ized Labor in. America has always used the basic
inflationary device of divorcing productivity from
wages, while its first cousin, Soviet Labor, has
always closely related wages to productivity, the
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real Soviet Economic Threat to American free
enterprise becomes apparent.
Onr 1'ederal Government, is the most shocking
example of how far down the road to Bureaucratic
I Despotism we have travelled. In November of
1955 "The London Exonomist" printed an article
entitled "Parkinson's Law." This was later
reprinted in Fortune. This article, although
presented in what was regarded as half jest, sets
forth the danger inherent in any kind of staff
organization. As Parkinson so ably proves seven
employees can be made to do the work. of one.
And although the work will not be done as well
or as efficiently as if done by one, it does support
more senior employees and is therefore desirable
in any corporate or government staff organiza-
(ion.
When (:he lack of legal controls allows Parkin-
son's Law to become operative, the rate of
increase in bureaucratic size will be at the rate of
from 5.17 to (i.56 percent annually, irrespective
of any variation in the amount of work (if any)
to be done. These are provable minimum rates
of increase.
L'he Iepartment of Defense is a fair example.
In 1945 the Armed Services were to be unified for
economy and effective coordination. The Air
l' oree was first created as a separate Service and
the three were unified. The resulting Department
of Defense is probably the most fantastic bureau-
cratic monstrosity in the annals of history.
When you consider that our War Department
of 1942, a mere shadow of the present Department
of the Army, was too complicated to fight World
War 11 and had to be reorganized and simplified
in order to place an effective army in the field,
you cannot help but wonder at the fiasco that
would result if we had to fight a major war now.
1 ranee disappeared in ignominious defeat in
1.940 not because the French are not brave and
effective fighters who love their country and
believe in freedom. France fell because her
military effectiveness had been destroyed by the
bureaucratic despotism which had replaced repre-
sented government. Ifer armed forces were
helpless and collapsed in disgrace.
But the Department of Defense is not unique.
Rather it represents the standard pattern. The
cost of this gigantic bureaucratic structure which
has been mushrooming since the invention of
deficit financing is staggering. It is so far beyond
what this or any country can afford, that ruinous
inflation followed by financial and economic
collapse is the only possible end if it continues.
No nation is so wealthy that it can continue a
public debt in excess of the annual average
personal income. Already ours is beyond that.
l''rorn the passing of the Income Tax Amend-
merit in 11)13 the central government bureaucracy
has progressively taken away from the individual
citizen and his private industry more and more
of his and its income to feed its own maw. When
it had taken all it could take without producing
a revolutionary reaction, it their resorted to deficit,
financing as a device for stealing the birthright of
our future generations by passing on to them an
unpayablc public debt.
No bureaucracy in history has ever been able
to get enough funds to satisfy its desires which it
always presents to the public as needs. And every
bureaucracy that has ever been allowed to gait.
It dorninant position. has contributed materially
to the destruction of that country through the
inevitable economic collapse which it produces.
Ours is not far off. Already foreign faith in the
stability of our money is waning rapidly.
There is hardly any group i.n our social structure
regardless of how loosely it is organized, nor how
traditionally free it should be, that is not showing
the pernicious spread of bureaucratic theory and
application of organization. ilven our uni-
versities and other educational institutions which
should be completely free of this ill are pretty
badly infested, to the detriment of their effec-
tiveness.
One of the most devastating things that has
happened in this bureaucracy has been the
insidious growth of the concept of the indispens-
able man in public office. This contradiction of
the laws of biology has compounded every other
governmental ill since it was invented by the
"brain trust" of the F.D.R. Welfare State.
Bureaucracy is to a representative government
of free people what cancer is to the physical body
of the individual. This bureaucratic cancer if
left in political government spreads throughout
the whole social order. And the only cure is
quick radical surgery.
Since foreign policy is really the reflection of our
true domestic character on the mirror of world
opinion, it is here that our present condition
becomes the most obvious to the rest of the world,
if not to us.
In 1776 we became the greatest political and
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social revolutionaries of all time. We defied the
age old concept of government. We demonstrated
to the world that free literate men could cooperate
in an industrial economy and maintain a free
moral society. And above all we said and meant
that all men, not just Americans, are born in-
herently free.
From 1776 to 1917 this thesis of ours provided
the secret hope of two-thirds of the population
of the world. To them we were the great revolu-
tionary missionaries who were the spiritual and
moral lighthouse showing them how to become
free!
in 1917 came the unexpected Kerensky revolu-
tion in Russia led by intelligent, hard-pressed,
patriotic men who looked hopefully to us for
support in their effort. Did we fulfill our destiny
as the great revolutionary leaders of the world?
We did not! We understood the matter so little
and handled things so badly that we accomplished
nothing effective in support of constitutional
government in Russia. Our bungling has been
regarded by some as having made the Bolshevik
Revolution which followed inevitable.
From that time on the progressive hypocrisy
of our position has become increasingly apparent
to all except us, in our foreign. policy. We
continue to make loud noises in our time-honored
revolutionary pattern-but--our actions are those
of a static, status quo, bureaucratically controlled
people.
The people who for years have looked to us for
moral revolutionary guidance have found us so
status quo reactionary when their own oppor-
tunity has arrived that they have had no choice
but to turn to Soviet Russia for help in their
hour of crisis.
The world revolutionary cycle which we
started in 1776 has been constantly disowned by
us since 1917. Since then, this great moral force
for the liberation and elevation of humanity has
been left to others to pervert and abuse for the
enslavement of humanity.
This has happened because we ourselves have
departed from our own founding concepts. It
may have been unconscious, but unconscious or
not it has made us hypocrites! Hypocrites have
no friends because no one feels that they can.
trust them in time of crisis. Since all nature
abhors a hypocrite, is it any wonder that we are
so hated throughout most of the world today?
All of this has come about so quietly, so
progressively, always under circumstances which
seemed to justify each step along the way, that
most Americans are still only superficially dis-
turbed by what they think is a passing phase.
Yet apparent in every facet of our present situa-
ion is the unmistakable result of our departure
from the system of indirect democracy on which
this nation was founded and the disregard of
every admonition passed on to us by our founding
fathers about avoiding the transfer from Europe
of its social and political ills. By ignoring that
"the price of liberty is eternal vigilance," and by
disregarding the fact that the dilemma which
faced our founding fathers will always face every
generation of Americans who wish to be free, we
have closed this centenary cycle facing an even
greater crisis than either that of 1760 or 1860.
Again we Americans must decide how much
federal concentration of power we can permit
without losing our American birthright forever.
Certainly, since .1913 we have gone a long way
down the path of federal concentration. And we
must decide what un-American political and social
concepts we can absorb and remain American.
Certainly since 1860 we have imported more un-
American social and political concepts than we
have refused.
The choice is now squarely up to us, even
though we may not know it. Do we wish to
continue down the path to labor dictatorship and
bureaucratic despotism or do we wish to re-
establish the original American concept of free
enterprise under the American. political system
of indirect democracy.
If we do nothing, we will get the former in less
than fifteen years whether we wish it or not.
If we wish to again become what we think we are
and return to basic American social and political
concepts, we will have to take positive action
immediately.
To be successful, whatever is done must be
done within the moral and spiritual concepts on
which this nation was founded.
At present, man stands on the threshold of a
vast new body of basic dynamic knowledge.
Throughout history every great extension of
human knowledge has been accompanied by an
equally great revival of the dynamics of spiritual
religion. These revivals have always been re-
ferred to as nondenominational protestant move-
ments.
This means that assimilation of this vast new
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body of knowledge which is being discovered and
correlated, and the re-evaluation of existing
knowledge, will unavoidably produce another
great "protestant" change in our religious
concepts and mankind will again move forward
at least one more step.
'Che quest for real knowledge and the unremit-
ting search for truth within a moral and ethical
framework is the essence of the American way of
life. It is in harmony with the laws of infinite
Nature and, as the first paragraph of the Declara-
tion of Independence says, Nature's God.
Those farsighted framers of our founding
concepts foresaw the need to make the basic
American Nondenominational protestant concept
clear for posterity.
"When in the course of human events, it
becomes necessary for one people to dissolve
the political hands which have connected them
with another, and to assume among the Powers
of the earth, the separate and equal station to
which the laws of Nature and of Nature's God
entitle them ..."
The key to the whole concept of the American
Revolution lies in this first paragraph of the
Declaration of Independence -particularly in the
phrase . . . "to which the Laws of Nature and
of Nature's God entitle them ..." This is the
essence of intellectually induced and supported
nondenominational protestantism.
The American Revolution is probably the
greatest and most far-reaching nondenomina-
tional protestant upheaval to date. But it, like
all protestant movements-stands in constant
danger of being reabsorbed by the orthodox base
from which it sprang, of becoming encrusted with
a static dogma of its own which will smother its
dynamics.
The War of the Rebellion of the North Ameri-
earl Colonies against the abuses of the British
Crown made the American Revolution possible.
But this War of Rebellion and Independence was
not the American Revolution.
The American Revolution was the concept that
established for the first time a system of govern-
nrent which separated church from state in
government. The Constitution guarantees re?
Iigious freedom to all United States citizens, and
thereby prevents the establishment of a national
church and through it the union of religion and
politics.
Is our basic American protestantism, as
established by the first paragraph of the i)eclara-
tion of Independence, sufficiently strong and
virile now to accommodate the inevitable changes
in religious thinking which must come from the
absorption of this great new body of knowledge
without disastrous reaction? Or has the dynamic
protestantism which founded us two hundred
years ago become static and un-American? The
future will tell.
Obviously to attack the existing conditions
and practices would be useless because it would
be to attack the results rather than the cause.
The only successful method possible, is to attack
the cause.
To do this every American must:
First: Get serious about, and vitally interested
in who is elected to every public office in every
level of government beginning with the smallest
political subdivision.
Second: By public moral pressure, force all
candidates for office, to state clearly what they
and their Party stand for and who they represent.
I n this way it may be possible to force the leader-
ship of our so-called two Parties to justify their
existence. This will inevitably produce a new
and virile party which is truly American and
which would force the urgently needed house
cleaning in all levels of our party politics.
Third: Insist on the repeal of the Sixteenth
and Seventeenth Amendments. By repealing the
Income Tax amendment the whole problem of
taxation and governmental activity will have
to be restudied and brought into a reasonable
perspective. By repealing the Senate Election
amendment, the built-in controls in our basic
system of indirect democracy can again become
operative. With the repeal of both of these
amendments the two strongest checks against
bureaucratic despotism will be re-established.
Fourth: Insist that the "Indispensable Man"
thesis be eliminated from our thinking about
public office.
Fifth: Insist that all labor organizations be
placed under laws similar to those controlling
corporations and that their extra-legal privileges
be removed; and, that the basic Constitutional
right of every American citizen to work where
he pleases regardless of union affiliation be re-
established.
Sixth: Insist that the Immigration laws be
changed and enforced so that only those who
show reasonable promise of becoming responsible
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citizens are allowed to immigrate and only those
who prove their worth are allowed to stay.
Seventh: Insist that our National Government
become financially responsible: that henceforth
we operate on a balanced budget which includes a
substantial debt retirement payment, and that
no further deficit financing be tolerated.
Eighth: Insist that the government get com-
pletely out of all public utility and power business,
including atomic energy.
Ninth: Insist that the Government be greatly
reduced and reorganized; that all of its present
activities which are NOT primarily and un-,
mistakably direct government activities, be
transferred back to private industry.
And Tenth: Understand that we have to fear
no one in this world but ourselves: that every
democratic system contains the power of self-
destruction: and that no democratic society has
ever been destroyed by others; those that have
disappeared have all committed suicide.
Those who will say that such a program is
impractical, unrealistic or impossible, are re-
minded that every important accomplishment in
the long history of the human race has been
regarded as impractical, unrealistic or impossible
by the majority of the people before it became a
reality.
With this in mind let us consider how our
forefathers met the challenge of 1760. They said
and successfully implemented the following:
(From the second paragraph of the Declaration
of Independence)
"We hold these truths to be self-evident,
that all men are created equal, that they
are endowed by their Creator with certain un-
alienable Rights, that among these are Life,
Liberty and the pursuit of Happiness. That to
secure these rights, Governments are instituted
among Men, deriving their just powers from the
consent of the governed. That whenever any
Form of Government becomes destructive of these
ends, it is the Right of the People to alter or to
abolish it, and to institute new Government,
laying its foundation on such principles and
organizing its powers in such form, as to them
shall seem most likely to effect their Safety and
Happiness. Prudence, indeed, will dictate that
Governments long established should not be
changed for light and transient causes; and ac-
cordingly all experience hath shown, that man-
kind are more disposed to suffer, while evils are
sufferable, than to right themselves by abolishing
the forms to which they are accustomed. But
when a long train of abuses and usurpations,
pursuing invariably the Same Object evinces a
design to reduce them under absolute Despotism,
it is their right, it is their duty, to throw off such
Government, and to provide now Guards for their
future security."
By establishing these founding concepts the
great Americans of 1760 made the establishment
of this Nation possible in 1776. By following
these concepts the great Americans of 1860
preserved this Nation in 1864. The question
now before the Nation. is whether or not there are
enough Americans of 1960 who adhere actively
to these concepts to re-establish them and pre-
serve the Nation. If there are, then-` `this
nation under God will have a now birth of freedom
-and government of the people, by the people,
for the people will not perish from the earth."
But if there are NOT, then government of the
people, by the people, for the people will perish
from the earth and its place in this proud home
of freedom there will be government of the people,
by despotism, for exploitation and slavery-in
less than twenty years.
Victor Hugo once said: "The future has several
names; for the weak it is the impossible; for the
faint-hearted it is the unknown; for the thoughtful
and the valiant it is the Ideal."
Fellow Americans, the future of this nation
and our civilization is up to us. History and
the generations of Americans yet unborn will
judge, and bless or damn us for what we do or
do not do. We cannot escape the responsibility
any longer. Or time is out!
We are on trial before the completely impartial
court of nature and nature's God. Our council
for the defense -Jesus of Nazareth said-
"Physician, heal thyself."
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 CHAPTER EIGHTEEN
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WHAT IS TO BE DONE?
By FRANK ROCKWELL BARNETT, Director of Research, The Richardson Foundation, Inc.
Fifty-seven years ago, an unemployed lawyer
wrote an obscure little hook. It; had a limited -
almost private - circulation. Its title had no
sex appeal. It was called, very simply, What Is
To Be Done?
What was (lone - by the writer and his heirs -
affects the lives, fortunes and future of every
American. When the book was published in 1902,
its author was in exile, living in a dingy boarding
house. He had been in prison and had held no
regular job for nearly ten years. Living frugally
)n small subsidies from the political underworld -
dressed in a cheap suit - and scorning all the
values of his middle class heritage -- this bald,
r,quat lawyer was the self-appointed leader of a
Handful of other outcasts from society.
To the property-owners, statesmen and generals
of the Victorian World, this man and his circle
of impractical agitators were "rabble." The
,`power elite" of that day ignored his pamphlets
and didn't read his book. Nor, for the most
part, have the property-owners, statesmen and
generals of mid-century America read his book.
With the exception of the reporters from. the
Russian News Agency, TASS, who are here to
cover this Conference, it is not likely that more
than two men in this room have the hook in
their personal libraries.
Yet the man who wrote it and his pauper
ciseiples --exploiting the practical, concrete ideas
set forth in What Is To Be Done? - seized two
continents and set fire to all the others by engi-
reering the most, skillfully executed power-grab
i i human history. Today, whole libraries, as
well as the graves of 20 nations and 40 million
people, bear witness to the deadly political science
(if a movement whose cumulative conquests now
exceed the combined empires of Alexander, Hit-
ler and Tamburlane --- and whose accelerating
capability to lay waste the great globe itself must
lie the touchstone for determining our national
and even our private objectives. The lawyer's
name, of course, was Lenin.
Five thousand miles and nearly six decades
removed from the publication of What Is To Be
Done?, Americans who never heard of Vladimir
Ulyanov confront the consequences of his mind,
and will, and fearful talent. Until Lenin, various
forms of socialism were sentiments, quack experi-
ments, futile terrorism in the night. But to Lenin,
Communism was not simply an idea; it was a
power technique. Communism, after Lenin, was
more than a philosophy. It was a triumph of
organization. Under his tutelage, Communists
became "managers" - conflict-managers. They
learned how to integrate and co-ordinate almost
every form of human activity to achieve the
goals of a heartless Policy Committee. And the
"business ethics" of these conflict-managers were
modeled on those of IIimmler and the Borgias.
They formed a cartel that controls two-fifths
of the earth. They are picking up options on
another third of mankind. They libel their com-
petition; they suborn the courts of public opinion;
they bribe juries and blackmail Parliaments.
'T'hey steal patents and ignore copyrights. They
almost never keep a contract. Lying is a way of
life for their Board of Trustees. And their presi-
dent, who once admitted the deceased chairman
was a murderer and sadist, has himself nailed
some of his own general managers into unmarked
coffins.
Yet, owing to the most ubiquitous press agentry
and political gamesmanship the world has ever
seen, the firm of Lenin & Co. never wants for
new customers, never lacks apologists, neverfails
to find a banker to overlook the 50 frauds and
forgeries on the record. And, since decent men
are sometimes naive and ofttimes easily pressured,
the conflict-managers can always persuade some
officer of an honest corporation to give them a
good character certificate, amidst the blazing
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publicity of a world ceremonial. And it all started
with Lenin who, weary of the talk, asked the
question that all practical men with a purpose
must bring themselves to ask: What Is To Be
Done?
To phrase the same question in moral terms
has been the business these past five years of the
Military Industrial Conference. Some of the
best minds in this country - and some from
Allies across the sea - have spelled out what must
be clone: in basic research, in missile defense, in
education, mutual aid and psychosocial warfare.
Perhaps it is now time for the Institute for
American Strategy to help do some of the things
talked about in this forum. Lenin did not stop
with a book or fiery speech. Lenin and his Bol-
shevik colleagues followed through.
The position of America in 1959 is, of course
not nearly so hopeless as the plight of Lenin in
1.902 or of General Washington in the winter of
Valley Forge. But the odds against this Republic
are far heavier than some may suppose. Because
no cascading bombs illuminate the dark precinct
politics of Communists in Afro-Asia, too many
imagine there is still time to refer the conduct
of the battle to another research committee.
Because our defeats have been chiefly in the
twilight, undeclared war of nerves, propaganda
and sheer tenacity in trading, no dramatic score-
board signals the loss of a free world bishop or
the enemy's ambiguous gambit to advance the
Red Queen., 15 moves hence, to check and mate.
Indeed, for amateurs at chess or geopolitics, each
move of an opponent seems to present an isolated
crisis; the pattern is concealed; the savage end
game not even imagined.
A struggle for markets, a clash between armies,
competition in research and development: these
are not static affairs. To the untrained eye, the
contest is evenly matched at a particular time
and place; yet triumph and disaster have been
foreordained by "lead time" in logistics and the
laboratory. Although Nazi Germany and Japan
seemed to sweep the board in 1942, their fate
had been unobtrusively influenced in a laboratory
in Chicago and on. the production lines of Detroit.
The Chinese Communist fighter pilots who
died not long ago, in sky battles over Quemoy,
were doubtless brave and skillful airmen. But,
they were dead airmen when "side-winder" mis-
siles uncoiled from American jets. However,
those Communist pilots hurled their planes in
desperate gyrations through the heavens, the
heat-seeking robots closed in behind. Technically,
those pilots were still "alive" until the missile
actually struck; or were they dead when the
release button was pushed, since no skill or
courage or wishful-thinking on their part could
avert the predetermined end? Were they not,
in a sense, already doomed when the blueprints
for the "side-winder" were approved for pro-
duction?
The conflict-managers and chess players of
Russia have planned on a century of conflict if
need be-though they are now arrogantly con-
fident we will not last that long. The conflict-
elite do not need to debate their one clearcut
objective; their tactics, rather than their policies,
are flexible; and their economy is geared to the
cost accounting of the battlefield. And they have
gained a "lead time" of more than 40 years in
the arts of non-military warfare, deception, and
the training of professional cadres for idealogical
combat and subversion.
Our democracy, sensitive to the variable breezes
of public opinion and the random tides of pressure
groups, improvises "strategy" from one election
to another. As free men, we would not dispense
with elections or limit debate. But surely, for
all our individualism, we can achieve a working
consensus on the need to survive -on the ob-
ligation to preserve intact - and with its Charter
of Incorporation unchanged in principle - this
unique laboratory called America - a cooperative
research institute where, on a voluntary basis,
men from all lands join together to conduct
experiments in liberty and opportunity. When
more Americans become serious students of
strategy, there is little doubt that our response
will be adequate to the enemy's challenge. But
first we must place the problem on the agenda
of business groups, universities and professional
societies as well as government. That is the why
of this Conference and the what for of the Insti-
tute for American Strategy.
This year's Conference focuses on the menace
of Soviet economic warfare; but that particular
threat will be considered in the context of the
infinite variety of other instruments which the
Communists orchestrate in the symphony of
total conflict. In keeping with the tradition of
this Chicago Seminar in Strategy, experts from
many fields will relate their diversified disciplines
to overall national defense and free world security.
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In the past, this Conference was never so hyp-
notized by science and sputniks that it forgot
the other battlefronts of foreign language train-
ing, propaganda analysis, international trade,
and our domestic economic growth.
This year's Conference is intended primarily
Co evaluate the challenge of Soviet trade, aid,
patronage and manipulation of the markets. It
will not, however, ignore the clenching of the
Soviet mailed fist -- or the jostling of Moscow's
political elbow. This is a seminar on"strategy";
and "strategy" connotes perspective, the selec-
tion of the right priorities, relating the parts to
ille whole.
If it is true that our Strategic Air Force can-
not, -- with massive retaliation -- prevent Mos-
cow's subtle penetration of Latin American
markets, it is equally true that economic aid
to India cannot avert coup d' etat and assassination
in Iraq. Expanding technical assistance and U. S.
business investment in Africa is vital to our
security; it will not, however, avert butchery in
I I ungary or Tibet. It will not carry the cold
war, by non-military means, into the restless,
vulnerable empire of the enemy, where the people
of eastern Europe and Asia groan under Russian
carpetbaggers and Peking's cruel dogma of the
yellow man's burden.
P;eonomic aid to emerging new nations is im-
portant to our own future as a free people; but,
by itself', this assistance will not blunt the danger
of Communism. One does not win a non-military
war -- whose victories thus far have gone to the
enemy - by simply denying that enemy a fur-
ther series of advances on the free world soil.
On the most extravagant assumption that (he
defense of the poverty-stricken, neutralist, area,,
could be 900/0 successful, we can be pushed to,
the grave ten yards at a time, vainly chasing
about the ever-expanding perimeter of the Marx--
ran Commonwealth of Nations on a time-table
fixed by strategists in Moscow and Peking.
American aid, whether private or governmental,
will not offset the Soviet economic thrust unless
the managers of U. S. economic activities are
themselves sensitive to ideological, political and
Strategic nuances. Random largesse, with no
regard to specific goals or national priorities, may
be "humanitarian." It has nothing to do with
"strategy," and the science of conflict-manage-
mnent. The best-selling book, The Ugly American,
amply illustrates how the Communists have
applied Gresham's Law to international politics
i.e., bad propaganda drives out good deeds. To be
specific, $1 million worth of Communist agitation,
covert activity and blackmail can sometimes off-
set, $100 million worth of American economic aid,
distributed with "no strings attached" - indeed
not even the strings of requiring prudent, manage-
ment and accounting. Of course we need to do
more in the economic sphere, both through
government and the private sector; but we need
"strategists" and "conflict-managers" of our own
to disburse and coordinate those sums to ensure
better returns for free world survival.
Finally, in any discussion of strategy, it is
imperative to keep science and military readiness
on the agenda. A nuclear war over Berlin this
spring may he "improbable." But we dare not
delude ourselves with the wishful cliche that
hydrogen bombs have made general war " un-
thinkable." The categories of thought employed
by the heirs of Ivan the Terrible and Lenin are
not necessarily the same as those which prevail
in the peace-loving democracies of the West,.
Stalin cheerfully scorched the Russian earth and
sacrificed 25 million countrymen to stop the
Nazis. Hitler was prepared to let all Germany
burn, in some mad, Wagnerian sacrifice to Thor
and Woolen. Mao and Chou en Lai will not blink
at the loss of 100 million Chinese, upon whose
broken bodies, in the next decade, they intend
to rear the heavy industry acrd nuclear armaments
of the sweatshop, anthill state.
Khrushchev, who stood at Stalin's side while
three million Ukrainians were deliberately starved
to death, is not likely to be more squeamish about
liquidating Americans en masse, if he ever burs
the chance. Let the Russians spend more For
basic research; let them shorten the lead times
between invention and production. Let Moscow
develop some as yet unknown electronic defense
against our aircraft and missiles. Let Soviet
engineers erect that defense system only six
weeks before we have a similar capacity to ward
off their rocket-launching subarines and ICBM's.
In short, let the Kremlin but once enjoy over us
the weapons advantage we doubtless still hold,
but with ever more precarious grasp, and the
world will have another demonstration of how
Khrushchev defines "peaceful coexistence." In
this country, not even our military leaders talk
of preventive war; but Soviet military journals
are full of the doctrine of strategic surprise, the
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use of deception in the nuclear age, and the
problem of pre-emptive war.
What is to be done? Lenin's question challenges
us not only to think but to implement. Some
responses to the question can only be made by
government, for example: $20 million for a special
political warfare fund to organize intensive, per-
sistent propaganda throughout all Afro-Asia
against Chinese machine guns in the monasteries
of Tibet; or $100 million if necessary to form a
NATO Board of Economic Warfare to make
"flooding the market" bad business for the
Kremlin.
But What is to be done by private citizens in this
room - and by the institutions to which they
belong? What is to be done by the Institute for
American Strategy? Many concrete proposals
have been mailed to the headquarters of this
Conference in the past six months. Time permits
the presentation of only a few; but these will
serve as samples of the literally dozens of sound
ideas which could be translated into action once
funds and staff were allocated to the prosecution
of non-military strategy. The five ideas which
follow represent a consensus on priorities, sub-
mitted by men who have attended this Conference
in other years. They are draft suggestions only
and need the critique of other minds. But, they
indicate that our problem is far from insoluble.
1. National Strategy Record Album
A. Background
1. For five years, U. S. and world ex-
ports - in every discipline relating to
Strategy and Security - have lectured
in the forum of the National Military-
Industrial Conference.
2. The Proceedings of those Conferences
have had a very limited circulation -
chiefly to participants and a few others.
Moreover, by their very nature, col-
lections of speeches are bulky and not
very useful as a teaching aid.
3. Hence, the essays on Strategy presented
to the Conference have not been used
to their fullest advantage.
B. Assumptions
1. There is a virtually untouched and
"ready" market for sound, provocative
material on National Security Af%irs:
in college history and political science
courses; in high school social studies
classes; in Reserve Officer and R.O.T.
C. units; in Foreign Policy discussion
groups in every major American city;
etc.
2. Just as lectures on modern art, music
appreciation and Shakespeare have
been "packaged" successfully in long
playing record albums - and distrib-
uted through commercial channels -
there is no reason. why Adult Education
in Survival cannot be similarly pack-
aged and distributed.
C. Proposal
1. Edit, digest and up-date the best of
the materials presented to the five
Conferences.
2. When necessary, rewrite material to
make it "dramatic and interesting" -
while preserving the scholarly sub-
stance. (The goal is to do for National
Strategy what Dr. Frank Baxter has
done for Shakespeare.)
3. Add sound effects by borrowing from
the film and radio libraries of NBC
and CBS, the Army Signal Corps, etc.
Some examples:
a. the count-down and blast-off of a
Moon Rocket:
b. the voice of Khrushchev ;
c. a Communist agitator denouncing
American germ warfare in Korea;
d. a Red Army Chorus;
e. a Red Chinese trade delegation
arriving in Egypt or India.
4. Include - with the album - a World
Map, showing the Sino-Soviet eco-
nomic and psychosocial offensive, and
a select bibliography on Strategy. (The
bibliography would include many ma-
terials produced by University groups
and professional societies which co-
sponsor the Institute.)
5. The lectures in the Album might in-
clude :
a. The history, nature and objectives
of World Communism;
h. Military and scientific capabilities
of the Sino-Soviet Empire;
c. Non-military conflict : propaganda,
economic warfare, subversion;
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d. The challenge to American educa-
tion and basic research;
e. Problems of Civil Defense;
f. The impact of missiles on geopolitics;
g. The Free World Alliance System;
h. The role of the private sector in non-
military strategy;
i. Communist ideology vs. American
ideals.
D. Next Steps
1. Get permission from Speakers and
Panel Members -- at all past Confer-
ences - to use their material. Where
they have published their lectures in
magazines and books, get permission
from publishers.
2. Commission a script-writer and Master
Lecturer.
3. Contact officials in the Department of
Defense and. the Armed Forces to see
if:
a. Reserve Officer, National Guard and
R.O.T.C. units could get official
credit for a study course based on
this Record Album;
b. Army, Navy, Air Force and Marine
Corps Troop Information. units could
use the Album for the education of
servicemen all over the world;
c. The various War Colleges could use
the Album and/or would like to
mail it to their "alumni" as a re-
fresher course;
d. Various civilian groups affiliated with
DOD or the Armed Forces would
like to have the Album -- such as
National Defense Executive Re-
serve
Civil Defense groups
Defense Orientation Conference
Association
National Defense Transportation
Association; etc.
1. Contact other groups which have a
wide membership interested in National
Security Affairs, such as
The American Legion
American Society for Industrial Se-
curity
Association of the U. S. Navy
Air Force Association
The Navy League
Society of American Military Engi-
neers; etc.
5. In other words, there are enough groups
potentially interested in such a project
that it should be possible to get an
"advance guarantee" to purchase, say,
50,000 Albums. Ultimate sales could
reach 200,000.
6. With this guarantee, make the best;
contract possible -possibly with a
Record-of-the-Month producer -- and
get on with the job.
7. Profits - after royalties and expenses
-would go to the Institute.
1 Goal
To make the study of Strategy a feasible
and serious "hobby" for a minimum of
one million Americans-many of
whom are opinion-formers.
If. A Dynamic History of the American Experi-
ment with Liberty, Opportunity and Volun-
tarism
A. The Problem
1. There are missionaries for Communist
dogma. There are high priests of So-
cialism.. Fascism had its philosophers
and publicists. There are exponents
of "classical economics," disciples of
Adam Smith and followers of Lord
Keynes.
2. But there are almost no articulate
spokesmen for the constantly evolving,
dynamic system that is 20th century
America. Modern capitalism is as dif-
ferent from the monopoly capitalism
assailed by Karl Marx as it is from
Chinese Communism. But American
business has no party theoreticians;
hence the enemies of the system monop-
olize the international networks of com-
munication.
3. Some American union leaders talk the
language of the British Labour Party's
discredited efforts to achieve Utopia
through nationalization of industry.
Some American business leaders - -who
are learning how to integrate autorna-
tion, atomic energy and the behavioral
sciences - nevertheless prefer to think
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in the cherished symbols of 19th cen-
tury capitalism.
4. What few have realized is that Com-
munism - which is really State Capi-
talism, exploited by Russian Robber
Barons - is obsolete. Socialism has
been tried and found wanting in West-
ern Europe, Britain and Australia.
Cartel capitalism, which fed the maw
of empire, is rightly on its way out.
5. American-style capitalism -which
might be called the "private, voluntary
we] rare state" - could be the wave of
the future. It is incredibly productive.
It is consumer-oriented rather than
government-directed. It concentrates
on products that bring an easier life
to the masses, rather than on luxury
items for the few. And, increasingly,
American-style capitalism is not only
efficient; it is attentive to social, ethical
and cultural values.
6. Socialists argue that America is a
political democracy, but not an eco-
nomic democracy owing to private
ownership and the profit system. Quite
to the contrary! America is more of
an economic democracy than Socialist
Sweden or Britain under the Labour
Party. In a Socialist system, voters
cannot appeal the day-to-day decisions
of administrators and politicians who
make economic decisions. Short of
turning the Government out at the
polls, they must live with arbitrary
policies for years on end. In. America,
every citizen casts economic votes every
day - by the choice he makes when
he buys one product and declines an-
other, purchases one stock and sells
another, changes his occupation, agi-
tates for an increased pension plan,
lobbies for or against a Tariff, quits
his job to start a new business for him-
self, goes on strike or votes not to go
on strike. Socialism has somehow
palmed itself off to the world's un-
committed nations as the "moderate
third force" which stands midway be-
tween reactionary capitalism and the
police terror of the Communist Empire.
This is sheer nonsense. American-style
capitalism is the only effective "third
force" in the world, but we have not
been able to get that image across either
to foreign nationals or to some of our
own intellectuals and new generations
of students.
7. No one has adequately described the
American phenomenon - an ever-flex-
ible and self-renewing pattern of self-
government, diffusion of power, part-
nership between Washington and the
private sector, voluntary welfare, cre-
ative altruism, citizen action, checks
and balances, and idealism mixed with
practical business and material bene-
fits for almost everyone. Where but
in America is giving money to good
causes one of the 15 largest industries?
Where but in America are there more
than 4,000 private organizations which
labor to solve social, economic, health
and education problems by non-govern-
mental action? Where do men more
earnestly seek to accomplish objectives
by persuasion, cooperation. and good
will?
B. Proposal
1. Inventory books, unpublished manu-
scripts, speeches and journals to see if
a "capitalist manifesto" is already in
being -although scattered about in
bits and pieces. If so, edit random
articles into a coherent whole.
2. If not, commission a scholar - with a
flair for popular writing-to do the job.
3. Establish liaison with college and pub-
lic school authorities to ensure that the
finished product will be used in our
own educational system.
4. See if USIA could not use a paperback
edition of this work for widespread
distribution all over the world.
5. Conceivably, new material for this
book could be elicited from a number
of scholars by offering a sizable prize,
similar to the Atlantic prize novel
contest.
III. Propaganda Analysis Newsletter
A. The Problem
1. There is nowhere any persistent, sophis-
ticated daily effort to analyze Com-
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munist propaganda for American audi-
ences and reveal it for what it really is.
2. Owing to the structure of our mass
media, statements by Communist po-
litical leaders are reported as "news"
on the front page. Thus -- in a sense
-- the press, radio and TV of capitalist
America give millions of dcllars worth
of publicity to Communist propaganda
themes.
3. American leadership must expand half
of its energies in debating spurious and
irrevelevant themes which the Com-
munists put before the courts of world
opinion. This is one of the reasons
why we seem always to react to Com-
munist initiative.
13. The Proposal
1. See if a group of editors, publishers,
columnists and editorial writers would
volunteer to form a Committee to re-
fute Communist propaganda.
2. Scholars associated with the Institute
could prepare a series of papers, an-
alyzing persistent Soviet themes and
setting forth --in historical perspec-
tive -- the true facts.
3. These scholarly materials could be re-
duced to a News Letter and mailed
out to, say, 1,000 editors and editorial
writers.
4. Perhaps some newspapers would even
agree to print a brief front Page Box
entitled The Current Party Line. This
could serve as a touchstone for the
reader who is bewildered by the gyra-
tions and seeming "concessions" of
Khrushchev and his associates, which
serve to delude-and-conquer.
IV. A National Strategy Lecture Bureau
A. The Opportunity
1. There are more than 4,000 trade associ-
ations, professional and educational
societies, veterans groups, women's
clubs, youth forums and other organi-
zations in America.
2. This means-roughly-there are 4,000
Annual Conventions and 198,000 State
or Regional Conventions every year.
3. Many of these Conventions would wel-
come at least one address on a subject
of national - as opposed to profes-
sional or technical - interest.
4. Busy Program Chairmen, however, are
often at a loss as to where to find an
outstanding speaker - sometimes at
short notice.
B. The Proposal
1. Prepare a roster of good speakers on
matters relating to American Strategy.
This list would include relatively un-
known men who, nevertheless, are good
on the platform. and who, with a little
help, could develop into first-class lec-
turers. Some of these men would be
reserve officers; others would be busi-
nessmen or scholars who have had some
connection with diplomacy, military
affairs, economic aid, the research and
development of weapons, etc.
2. Set up liaison with the Program Chair-
men of state and national conventions
of various groups and offer them a
choice of speakers representing the
Institute for American Strategy.
3. With efficient management, this job of
adult education can be done inexpen-
sively. For example, if a convention
is meeting in San Francisco, the Insti-
tute should furnish from its roster
speakers from the California area
thus minimizing travel expenses.
4. The editors of trade journals can also
be approached to reprint speech ma-
terial and/or other papers developed
by the Institute for trade publications.
In this way, the influential private
networks of commerce, industry, engi-
neering and education can carry
with no overhead expense --- a number
of messages designed to strengthen the
overall posture of national readiness.
V. Business Training for Overseas Community
Relations
A. The Problem
1. The Communists have trained, liter-
ally, tens of thousands of professional
propagandists and agitators. These
cadres are saturating the precincts of
the Afro-Asian world, the Middle East
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and Latin America. Their job is to
create a climate of opinion that is
hostile to American diplomacy, to
American military bases, to American
investments and business opportunities.
2. American business trains executives for-
labor relations, industrial relations and
public relations here at home. There
is very little training as yet, however,
for the delicate job of "community
relations" in an overseas area that is
threatened by Communist penetration,
insurrection, economic pressure and
coup d'etat
B. The Proposal
1. In cooperation with a Business School
- Research Institute or Management
Association - set up a special Seminar
that will concentrate on overall prob-
lems of management in a specific tar-
get area, including political, strategic
and community relations factors that
bear both on national and investment
security.
2. To that Seminar would be invited
representatives of all corporations and
banks with present investments and
business in --or future plans for - -
Area X, let us say one of the new
nations in Africa, or Southeast Asia.
3. The Seminar would include what might
be called the "normal" components of
a management course:
a. Economic feasibility reports on Area
X;
b. Market research data;
c. Currency exchange problems;
d. Training and personnel matters; etc.
4. However, in addition to this, there
would be discussion of
a. Communist objectives, strategy and
tactics in that part of the world;
b. Analysis of leading Soviet propa-
ganda themes and how to refute
them;
c. The social responsibilities of modern
capitalism - in other words, prac-
tical case studies in how American
corporations can be good citizens
of a foreign community;
d. An inventory of Free World insti-
tutions that might be helpful in
promoting stability in Area X -
including:
Universities which sponsor private
technical assistance programs;
Private foundations, welfare agen-
cies, church groups, youth clubs,
and labor unions with contacts
in that Area;
Trade associations and interna-
tional professional societies.
5. Conceivably, to this Seminar for Busi-
nessmen might come also a few officials
from the Department of State and
USIA, plus two or three officers about
to be assigned as military attaches in
that Area.
6. The object of including some govern-
ment personnel would be informally
to "build a team" - through personal
contacts and joint training-- that
would be better able to cope with the
integrated, disciplined cadres dis-
patched by the Communists to various
parts of the world. Joint training at
the National War College and the In-
dustrial College of the Armed Forces
is building understanding and respect
among officers of all the rival services.
That principle can. be extended to im-
prove cooperation between American
businessmen overseas and U. S. Gov-
ernment personnel.
7. Freedom, in short, rests on economic
know-how and political skill as well as
military power. The American busi-
nessman overseas, the foreign service
officer and the military attache each
have a vital role to play - and, if
possible, they should play it more in
harmony with each other. The ex-
pansion of the private sector overseas
and the growth of foreign middle classes
can greatly strengthen our diplomatic
and military alliances.
8. Just as success in World War If re-
quired "combined operations" by all
branches of the Armed Forces, the
battles of the Cold War require a new
dimension of combined operation be-
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twcen State Department personnel,
technical assistance people, military
experts and the businessman, the bank-
er and the exchange professor.
What would it cost to finance this scope of
activity? $5,000 a year from each of 60 cor-
porations, banks and insurance firms. $25,000
a year from each of five foundations. $425,000
a year for adult education in survival. Granted,
that's a lot of money! But the stakes are enor-
mous; and U. S. National strategy unlike the
strategy of the clique in the Kremlin requires
tenacious public support based on sophisticated
public understanding. Cancer, heart disease,
tuberculosis: vast campaigns of education alert
our people to their danger signals. But failure
to read the danger signs of strategy can lead
beyond tragedy for the individual to death for
entire civilizations.
Who will do the work? Conference head-
quarters, quite literally, has been overwhelmed
by the number and quality of volunteers from
industry, education, science and government who
are willing to serve on research committees and
prepare study papers in their own fields. More
than ten major universities are now associated
with the Institute. Able scholars are ready for
assignments. But although one can expect in
the future, as in the past, that tons of thousands
of dollars worth of time and brainpower will be
contributed gratis to this enterprise, it is obvious
that a task of this serious nature requires sys-
tematic funding.
Funds and staff alone, however, cannot do an
adequate job without the enormous "leverage"
these funds will have if projects produced by the
Institute for American Strategy are "chain-
stored" and distributed through the facilities
of the many powerful groups who co-sponsor this
Conference. Already at least three of the societies
who cooperate with the Institute are using their
own professional journals to reprint ideas pre-
sented here. You will find examples on the
Exhibit tables outside, together with other mater-
ials on strategy which you may wish to have for
colleagues back home. Using these materials
(and the papers of the Speakers) fifty men in
this room can appoint, themselves committees
or one to induce fifty more industrial and educa-
tional associations to transmit messages on
strategy.
What is to be done? For the next three days,
some of the ablest masters of strategy in the free
world will offer their thinking for the considera-
tion of this audience. By Wednesday evening
this hall will be empty and this brave company
dispersed. But though we part, in body, to
attend our separate chores, can we agree not to
part in courage and conviction? Can we here
highly resolve to make certain through this
Institute - or whatever other machinery is re-
quired - - that Lenin's question will be answered,
in deed as well as thought, by men whose an-
cestors pledged their lives, their fortunes and
their sacred honor? Whatever is to be done, we
can do it!
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Part Six
Panel Symposium:
"THE ECONOMIC, PSYCHOLOGICAL AND PROPAGANDA ASPECTS
OF SOVIET EXPANSIONISM"
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Formal statements were submitted in advance of the Conference by 15 participants in the Symposium.
Their presentations elicited questions from the other members, and this chapter contains the record
of this phase of the Conference. Statements were submitted by:
REAR ADMIRAL RAWSON BENNETT, U. S. N., Chief of Naval Research.
We may call it a cold war, a hot war, or an
economic challenge. The name does not affect
our biggest problem, to awaken people to a
national purpose.
In the USSR those who dominate, whether in
the party or out of it, feel a sense of national
purpose. For the long term this makes them the
implacable foes of every other government. For
the short term, the national goal is to beat the
United States.
Our steel people surveyed the USSR from the
mines to the finished product shipping floor.
One of the three things that impressed the party
the most was the Russian driving urge to beat
the United States.
In the United States there is no such purpose.
There are many with the conviction that any
issue can be solved by compromise, by negotia-
tion, even with the USSR. In the general. and
long term sense this is simply impossible.
The next working generation is coming along
very fast. What is their motivation? It is to
get the most for the least effort. It is firmly
based on personal security without the thoughtful
realization. that personal security is only as good
as national integrity.
The simple patriotism of a Patrick Henry, a
Stephen Decatur, or an Abraham Lincoln, is alien
to most of our children. Worse yet, to the many,
a belief in the United States, a willingness to
serve her in our common interest is socially
unacceptable, and those who in simple language
are called patriots are also called fools.
In the United States today fables and platitudes
are in disrepute. Still one or two might relate
to the economic challenge.
For the United States :
"The Fable of the Ant and the Grasshopper."
"United we stand, divided we fall."
Because in the USSR people obviously believe
"Hard work never hurt anyone."
"Divide and conquer."
So far, only the United States has been con-
sidered because whether we like it or not, whether
anyone likes it or not, this country has been thrust
by events into a position of world leadership.
The same thoughts apply in varying degree to
all the nations of the free world. In the free world
we rightly feel that the individual has his rights
and privileges as opposed to those of the state,
and yet our people feel no challenge, no sense
of urgency.
Vice President Nixon was speaking of the
Mikoyan visit recently. Ile felt Mikoyan's intel-
ligence, his obvious ability and his knowledge
of the United States were no more than natural
for a leader of a great country. Mr. Nixon was
much impressed with Mikoyan's complete con-
viction and burning faith in the Soviet system
and its principles.
It is interesting to note the words of Patrick
Henry and apply them to today.
"It is in vain, sir, to extenuate the matter.
Gentlemen may cry peace, peace - but there
is no peace. The war is actually begun! The
next gale that sweeps from the North will
bring to our cars the clash of resounding arms!
Our brethren are already in the field! Why
stand we here idle? What is it that gentle-
men wish? What would they have? Is life
so dear, or peace so sweet, as to be purchased
at the price of chains and slavery? Forbid
it, Almighty God! I know not what course
others may take; but as for me, give me
liberty, or give me death!"
This is no call to arms, no call for the marshal-
ling of the armed forces for preventive war. It
is a call to arms for all of us to muster our forces
to the end that all of our citizens learn of the
challenge that our enemies throw down to us.
It is a call to every citizen to give heed and
service to our national problems when such
services are required.
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WILLIAM BLACKII9,
la,xecutive Vice President, Caterpillar Tractor
Company.
Speaking only in the limited capacity of a
businessman employed to work with and safe-
guard other people's capital, the basic trade
problem is primarily one which is not particularly
different from the usual one of meeting foreign
competition in foreign markets. To be sure,
Soviet competition may have insidious aspects
not present in other forms, but in any event the
essential trade objective is to "get the business" in
the face of whatever competition there may be- --
British, German, Italian, Japanese or Sino-Soviet.
Within the limitations of private business, the
basic attack must concentrate largely on price.
Other considerations are also important, but
without a competitive price reflecting value to
the buyer these other factors are generally likely
to be secondary.
Irr terms of price, we in the U. S. have been
remarkably successful in competing against nearly
all corners -- and to do it in spite of costs derived
from the highest level of wage rates in the world.
In manufactured goods, the economies of scale
have been efficiently developed by progressive
managements which have provided the capital
tools necessary to minimize costs per unit of
output. In some fields this ability may con-
tinue; in others it has already begun to decline
and will, perhaps, be extinguished as two major
factors come increasingly into play: ore the one
hand -the development and industrialization
of foreign countries (much on the L. S. pattern);
on the other - wage rates outrunning gains in
productivity in U. S. industry. Under the com-
pounding of these forces, many industries will
have to make a choice: (a) lose their foreign
markets to foreign competition or (h) substitute
foreign production for export of U. S. production.
But before foreign markets are lost, we here
in the U. S. can take constructive action to
defend ourselves. And where foreign investment
is the indicated course of action, we can do things
which will serve to make this more attractively
acceptable to the U. S. businessman and investor.
We should first face up to the fact that in our
prices - at home and abroad - there is one cost
element completely beyond our control the
IT. S. corporate income tax. Furthermore, since
ours is the highest in the world, no foreign com-
petitor has to carry as heavy a handicap. The
foreigner working in his own country pays only
his own income tax: and when doing business
in a third party country, lie generally pays little,
if any, more than the tax prevailing in the
country where liability falls.
But we who are the U. S. source of either
exported product or exported capital invested
abroad are required--sooner or later--to pay
the full U. S. tax. (Where initially favored
by a foreign tax which is lower, the difference
has to be made up on the later remittance of
earnings.) There is, furthermore, strong investor
opinion that, in view of great risks, the rewards
for doing business abroad should be somewhat
greater than they are at home. So the general
direction of effort is to try to obtain a better
margin of profit - a better return on invest-
ment - and still be competitive with foreigners
who enjoy both lower wage rates and lower
income taxes.
About foreign wage rates, we can do nothing.
About U. S. corporate taxes on foreign businesses:
we can eliminate them entirely when all parts
of a business transaction are made in a foreign
country; and we can reduce them when the
transaction involves directly related work both
inside and outside of the U. S.
Sound precedent and principle exist for such
action - and it should be taken now before it
is too late.
Other opportunities whereby we could help
ourselves would include, briefly:
{a) Greater use of foreign currencies received
by our government agencies from the sale of
surplus commodities --- e.g. wheat sold under P.L.
480 - by- U. S. investors able to employ such
currencies for the support of their foreign opera-
tions. The U. S. could only gain from such a
policy and no foreign country should ever be
harmed by it.
(b) More receptive import policies - to be
adopted for three main reasons:
(1) We cannot expect foreign countries to
resist Sino-Soviet overtures to buy their goods
while we deny them access to our markets;
(2) We cannot continue indefinitely to sell
to foreign countries unless we also buy from
them; and
(3) The competition offered by foreign
imports will serve to stimulate industry at
home while helping to keep prices and living
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costs lower. (This, in turn, might soften labor
union wage demands and would certainly curtail
the amount or frequency of automatic wage
increases based on a cost-of-living index.)
(c) Greater restraint on the part of big labor
unions and big business against ever increasing
wages and prices. It is high time the unions
matured to a more responsible recognition of
their place and function as part of one total
nation., and business must recognize that apparent
ability to pass on cost increases to U. S. customers
-- never a good reason for yielding to exorbitant
union demands - does not portend any equal
ability or willingness of foreign customers to pay
higher prices. We are cost-pricing ourselves out
of good export markets, and the effect can only
be bad for our citizenry as a whole.
In advocating these changes, I am not seeking
favor for any part of industry. Instead, I seek
to obtain for American industry a greater oppor-
tunity to do its part in combating the Soviet
trade offensive and in. promoting better inter-
national relations through better world trade.
DR. ANTHONY T. BOUSCAREN,
Associate Professor, LcMoyne College
The international Communist movement, in
its psychological. and propagandistic aspects, has
a two-fold view of its expansionism, and the
Powers which are in a position to check it and
even roll it back.
First of all, Moscow and Peking want the
West to accept the status quo according to which
Communist control of East-central Europe, main-
land China, North Korea and North Viet Nam
is recognized as pernmanent.
Once the Western leaders say that "there is
a certain finality" about Communist control of
the areas absorbed between 1945 and 1955,
hhrushchev and his disciples will have demon-
strated to the enslaved persons behind the iron
and bamboo curtains that further resistance to
Communist rule is useless.
Psychologically and propagandistically, cul-
tural exchange programs and the avoidance by
the Communists of any discussion at international
conferences of the future of East-central Europe
and the Communist dominated areas of the Far
East serves to further nail down the lid on the
new Soviet empire.
Having obtained de facto and in some cases
de jure recognition by the West of its imperial
holdings, Moscow and Peking are free to increase
their pressures on the West for future concessions
leading to an enlargement of the Soviet empire
and ultimately to its global victory. These pres-
sures in their psychological and propagandistic
aspects include: a. "Why war over Quemoy and
Matsu?" b. "Why war over Berlin?" c. A
nuclear test ban agreement. d. Greater "flexi-
bility" in Western policy. e. United States
recognition of Communist China. f. Admission
of Communist China into the United Nations.
g. Fanning nationalist and Anti-Western passions
in Africa, the Middle East, and Latin America.
h.. Summit conferences to consider Western con-
cessions to relieve "tensions" created by Moscow
or Peking. i. "There is no alternative to peaceful
coexistence except all-out nuclear war."
The men in Moscow and Peking have suc-
ceeded in the past not due to their own efforts
alone. Hitler had less success against Churchill
than he did against Chamberlain. Communist
expansionism will continue to the extent to which
Communist leaders can exploit pacifism in the
West and gain Western acceptance of the doctrine
of "peaceful coexistence" (surrender on the install-
ment plan).
JACK L. CAMP,
Director, Foreign Operations, International
Harvester Company.
The subject of the Soviet economic challenge
brings to mind various statements made during
the past year and a half by Russian Premier
Nikita Khrushchev, such as "We declare war
upon you in the peaceful field of trade. We will
win over the United States.," or "We boldly
challenge the capitalist world. Let us compete
to see who can reach the highest level of pro-
ductive forces -- who will produce more per
capita - who will insure the highest material
and cultural standards of living for the people -
where are the best opportunities created for the
development of all the capabilities of mankind --
which regime insures the best conditions for the
people," or "We shall conquer capitalism with a
high level of work and a higher standard of living."
These statements undoubtedly mean different
things to different people and consequently are
given different interpretations depending upon
the interests and outlook of the individuals in-
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volved. The average American who gets his
opinions about world affairs from the newspaper
and the radio has probably entirely forgotten
many of these statements and is much more
concerned about the threat of a hot war, the
Berlin crisis, the Intercontinental Ballistic Mis-
sile, or Hydrogen Warheads.
Many American manufacturers are much more
concerned about the imminent threat to their
domestic markets from Japanese and European
imports into this country than they are about
the long-range possibilities and implications of
the Communist's getting a foothold in many
countries throughout the world whose trade his-
torically has been with the Western Democracies.
Only those few who have seen the Communist
economic machine in operation and have wit-
nessed. the devastating effect it can have on the
economics and natural trade of many nations are
able to appreciate fully the serious implications
that this all-out economic and trade war has,
not only for our world commerce and our inter-
national political and economic position but also
for our own national defense and security.
in a democracy, sales are made to anyone
requiring our goods who is willing to pay the
price we ask, provided that such sales are not.
contrary to the interests of the United States of
America as in the case of sales to Red China.
Purchases are made from all friendly countries
and are dependent on such things as specifications,
quality, price and delivery. It is Communist
practice, on the other hand, only to buy from
and sell to those countries where sales and pur-
chases of given commodities or goods will accom-
plish some specific political objective: this might
be the embarrassing of the Western Democracies,
the creating of an entree for Soviet propagandists
in the guise of traders, technicians, etc., or pos-
sibly the placing of some given country under
an obligation to Russia which would force that
nation closer to the Communist orbit.
Many times I have heard the statement that
talk about the Soviet economic threat is too
general and that specific eases are too isolated
to be alarming. however, experience has shown
that Communists have been quite consistent in
attempting to reach the objectives which they
themselves have announced and publicized. Wit-
ness the consistent efforts to follow the declara-
tions of Marx, Lenin and Stalin. We must not
forget that Mr. Khrushchev's economic war has
just started and the serious effects will be felt
more and more in the months and years ahead.
Our government and those of other free
countries should do more about documenting
individual cases of Communist penetration and
its destructive effects, publicizing them so that
the threat may be more generally understood and
appreciated by the free peoples of the world.
Suitable coordinated and powerful countermeas-
ures must be taken promptly everywhere to com-
bat this great offensive.
Cin 1R.L F:s S. DENNISON,
Special Assistant to the President, Foreign Op-
erations, International Minerals and Chemicals
Corporation.
In November, 1957, Nikita Khrushchev chal-
lenged - "We declare war on you in the peaceful
field of trade. We will. win over the United States.
The threat to the United States is not the ICBM,
but in the field of peaceful production. We are
relentless in this, and it will prove the superiority
of our society."
This arrogant threat coming from the dictator
head of the potent and aggressive USSR is
directed at the very foundation. of America's
strength, its economic system. In considering
this threat which could ultimately result in the
defeat of our nation, we believe the following
fundamental propositions must be examined:
(1)
Strength of democratic vs totalitarian states
in an economic war.
Can our democratic system with its free-
dom of choice and action match the efficacy
of the controlled totalitarian state when the
resources available to each are approxi-
mately equal?
(2) The capacity of the American people to engage
in economic war.
Are the American people capable of con-
ducting a long-term all-out economic war
which will inevitably involve considerable
sacrifice on their part, particularly when
an economic war does not have the hot
war's shock effect on the people's sense of
survival?
(3) Dynamism of America's economy.
Can, America's free economy expand at a
sufficiently dynamic rate to match that of
the Sino-Soviet bloc over the next 20 years,
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enabling it to win the confidence and follow-
ing of the less powerful countries?
The danger of inflation.
Will our economy be able to achieve this
expansion in a real sense, or will inflation
sap our productivity and destroy the effec-
tiveness of our growth?
(12) Our use of propaganda.
Has America the means and skill in propa-
ganda to exploit its public and private con-
tributions to the underdeveloped countries?
(13) America's foreign policy.
Does America have the foreign service and
the non-state department staff of a caliber
needed to match the expert and dedicated
Russian force available for use in an eco-
nomic war?
(5) The importance of consumer vs heavy indus-
trial output.
Can America continue its incredible output
of consumer goods in relation to Russia's
intense concentration on heavy industry,
technology and weapons?
(6) The strength of our educational system.
Is the American educational system capable
of meeting the organized and potent chal-
lenge of the Reds in the fields of science
and technology, in the imposition of intel-
lectual discipline, and in providing a favored
climate for intellectual activity?
America's flexibility in foreign policy.
Is America's foreign policy so heavily geared
to military aid and containment that it is
incapable of meeting the challenge of rapidly
developing and constantly changing eco-
nomic warfare?
(8) The burden of private industry.
Can American private industry alone meet
the disruptive Soviet market-breaking
thrusts in such commodities as aluminum,
oil, potash, etc.?
(9) The role of private enterprise abroad.
Are changes in government policy required
to provide America's private enterprise with
tax relief, and credit and investment assist-
ance for overseas operations which will
permit it to play a stronger role in the
economic war?
(10) International private enterprise cooperation.
Can increased cooperation among private
companies from different countries of the
free world strengthen our economic position
vs the Sino-Russian block?
(11) The role of technical training.
Could a large scale, long term program for
training technicians from underdeveloped
countries in the United States and the free
world for employment in constructive
projects in those countries be of benefit
in the economic war?
MAJOR GENERAL HAROLD C. DONNELLY,
United States Air Force, Assistant Deputy
Chief of Staff, Plans and Programs, Depart-
ment of the Air Force.
The Russians are continually challenging the
United States in every field of endeavor. They
have made notable progress in many fields and
they are presenting a series of challenges to the
United States. On many occasions they vocalize
this challenge in a form that appears threatening
to our position. When their position in any given
situation becomes intolerable, they change their
approach, always leaving room for hope and
action on our part. The current Berlin situation
is typical. From what appeared to be a firm
initial position on their part they have changed
to where a negotiated settlement of this situa-
tion now seems possible, even though the basic
problem remains essentially unchanged.
What is the United States doing about these
threats and challenges to the Western way of life?
In my opinion we can and are doing very much.
In the military sphere we are maintaining a
strong military position. We have the power to
defend the United States and Free World interests
around the world. Our President's speech to the
American people on the 16th of March clearly
indicated that we have the will to use this power
if need be. Both this capability and the national
will to use it are prerequisites for any dealings
with the Communists.
In this fight a strong military position and
the will to use it, while prerequisite to other
actions, is not by itself enough. In addition to
the military challenge, the Russian Communists
are also challenging us in political, cultural and
economic fields. It is conceivable that we might
suffer heavy losses in these other fields of en-
deavor while we a.re militarily strong. Such losses
could force us to drastically change our way of
life.
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In addition to a strong National Defense
Program, we also have a national program for
action in these other areas where we are being
challenged. These programs are exemplified by
our mutual security, aid and trade agreements
throughout the Free World. The military serv-
ices, being located in many countries around the
world, have definite programs for and are actively
engaged in supporting these non-military pro-
grams. This coming summer our National War
College is presenting, under the direction of the
Foreign Policy Research Institute*, a seminar on
Cold War Strategy for 200 carefully selected
Reserve Officers. The purpose of this seminar
is to build a bridge between our civilian groups
and our military services to more closely link
our common efforts.
That American industry recognizes these chal-
lenges is clearly evidenced by the existence of
this conference. The economic warfare challenge
is long-range, complex and perplexing. The
Soviets are united, determined, persistent and
they openly boast of their ultimate victory. We
must unite and effectively meet this challenge
so that we will not need to resort to Military
force. We must support our national cold war
program by supplementing it with private enter-
prise wherever possible. We as free citizens are
assuming this responsibility in conferences of
this kind.
*Co.-sponsored by the Institute For American Strategy and the Re-
serve Officers Association.
I' IdRDINAND A. IIRRMENS,
Professor of Political Science, University of
Notre Dame.
Opponents of Communism are liable to make a
mistake which Communists never make: They
think exclusively in general social, in particular
economic, terms. This means that they ignore
the specific political framework within which all
decisive action must take place. Lenin, in his
first, and most important, publication, What Is
To Be Done, heaped scorn on those members
of the Russian Left who wanted to improve the
lot of the working man by economic and social
reforms alone. In contrast to them, he emphasized
the political nature of the revolution, and be made
it clear that a special instrument of political
action was necessary in order to make the revo-
lution successful: A highly centralized political
party, capable of being what Philip Selznick has
called "the organizational weapon." This was to
be the sharp sword that would cut through all
the complications of social and economic life and
promote the success of Communist totalitar-
ianism.
Those interested in thwarting these efforts
should know that they can counter the political
weapons of Communism with weapons of their
own, weapons which are in no way contrary to
the requirements of free government. The Com-
munist (and Nazi) movements of our time re-
semble in many ways the"factions" against which
James Madison tried to put us on our guard in
No. 10 of The Federalist. In his words:
If a faction consists of less than a majority,
relief is supplied by the republican principle,
which enables the majority to defeat its
sinister views by regular vote. It may clog
the administration, it may convulse the so-
ciety; but it will be unable to execute and mask
its violence under the forms of the Consti-
tution..
In the more important of the countries in which
Communists have been a very disturbing factor
in recent years they would, indeed, not be able
to take the hurdle of majority voting. They are
but a minority in the vast majority of the con-
stituencies formed on a geographic basis, such
as our congressional districts. This means that
they can do but little under majority voting.
On the other hand, if the system of voting called
proportional representation (P.R.) is used they
can do a great deal. They will, first of all, secure
the full percentage of seats in a parliamentary
body which corresponds to their percentage of
the popular vote.
'IChey will, in the second place, be able. to
disrupt the government. The moderate parties
;
are, in their turn, divided by the effects of P.R.
in election campaigns they do not cooperate but
fight one another, emphasizing what separates
them rather than what unites them. This, of
course, is what the Communists want: Wherever
they cannot control the government themselves
they want to paralyze it.
After these stages have been reached the Cout-
munists will, under P.R., gain votes as well as
seats. Moderate parties, including the Socialists,
will then have to cooperate with parties with
which they differ on essential points of policy
in. order to give governments a parliamentary
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majority. This discredits them and drives more.
votes into the arms of the Communists.
Allen W. Dulles has, a few years ago, drawn
our attention to this fact. In his words:
". . . insofar as the electoral procedures are
concerned they (the Communists) abhor any-
thing in the nature of a two-party system and
majority rule which by and large has been
a bulwark of free institutions. Their effort
is to favor a multiplicity of parties. This
opens the door to intrigue and helps to build
up the minority and weaken the majority ...
"In general, they like the idea of the voting
systems under which even small minorities
have a chance of gaining deputies in par-
liament. In fact, they have often found that
the proportional system of voting could serve
them as a secret weapon... .
"As a New Yorker, I well recall. that we in-
troduced proportional representation in voting
for the New York City Council shortly before
World War II. As a result of this, two Com-
munists were elected to the City Council on
an open Communist ticket. Under a majority
system the Communists would not have
elected anybody."
The Communists are, of course, well enough
informed to know what they owe to P.R. Pal-
miro Togliatti, the Italian Communist leader,
had this to say in the Moscow Pravda of March 8,
1956, in an article entitled "On the Possibility
of Using the Parliamentary Path for the Tran-
sition to Socialism":
"However, the achievement of universal suf-
frage in many countries has not yet given
the opportunity to the popular masses to
have in parliament the number of representa-
tives which would correspond to the real
number of the electorate voting for them. In
order that this might occur it was necessary
to achieve the establishment of a system of
proportional representation. For, if a maj ority
electoral system operates, the minority can-
not be represented in accordance with its
actual strength ; its representatives splinter
into small groups in Parliament and some-
times disappear altogether.
A few months ago the world saw what hap-
pens when. the weapon of majority rule is
turned upon the Communists. In the France of
do Gaulle this was done first on the occasion of
the referendum of September 28, 1.958, which
ratified the no,,, constitution. Such popular
decisions require a clear "yes" or "no," which
means that they follow the principle of majority
rule. There is, in such decisions, no room for
Communist obstruction. Furthermore, the French
people at large had a chance to demonstrate that,
contrary to all that had been said about them,
they were very well aware of the fact that a
democracy, too, needs a government able to
govern. At least a million Communist voters
responded to this appeal by voting "yes".
There followed elections to the new National
Assembly, held under a modified form of majority
voting on November 23 and 30. Again the Com-
munists took a tumble; of the 145 seats which
they and their allies had held before the elections
only ten remained. This means that, so far as
France's major parliament is concerned, the Com-
munists will no longer be able to play the game
of disruption. Nor will there be extremists of
the Right, such as the Poujadists, to support
them.
Governments based on clear majorities have
a chance to act decisively on behalf of the general
welfare. In France the country had lived beyond
its means. For years American assistance helped
to veil this fact; in addition, there was always
inflation and, during the last years, loans to
France from other European countries. General
do Gaulle knew that this situation could not
continue. He appointed a committee of experts
headed by the internationally known economist,
Jacques ltueff, which drew up the necessary plans.
Inflation was to be stopped, and an end put to
the need for those controls over exchanges and
foreign trade which had been the consequence of
an inflation and an overvalued currency. This
plan entailed hardships; also, it was formulated
too exclusively by technical experts, without the
proper "feeling" for popular reactions. Thus, a
number of psychological mistakes were made.
This led to much popular unrest, and was ex-
ploited, with a considerable measure of success,
by the Communists in the local elections of
March, 1959.
Still, there remains a government able to act,
and to act in the future as it has done in the past.
Where, in minor matters, measures have been
overdone, corrections can easily be made. At
any rate, the new French economic policy is
based upon the same principles which proved so
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effective when applied by Professor Erhard and
his friends in Germany. There is no reason why
they should be less effective in France. When
the new upturn begins it will be possible to face
the Communists with confidence on both the
political and the economic front. Their work of
political sabotage has already been stopped; all
that is needed along those lines is "more of the
carne.." As soon as economic conditions improve
it, will also be possible to eliminate, step by step,
the factors the protest against which has provided
so much of the Communist vote in thce past.
'these experiences are, for the time being,
limited to France. Some time or other Italy
will have to tackle the problem of Communist
subversion of her parliamentary institutions in
it, similar manner, and other countries have reason
to work along similar lines.
GULUNEL WILLIAM It. KINT'NER,
foreign Policy Research Institute, University
of Pennsylvania.
Until recently, the Western capitalist system
could operate as if only one international economy
exists. This was unquestionably true until the
first World War brought about dislocations which
led to the disintegration of the single world
economy. But after World War 11, Stalin, the
director of an international socialist bloc economy,
boasted that Communism. would gradually over-
take and ultimately stifle the capitalist system.
Stalin envisioned an interval of prolonged eco-
nnnnic conflict which would be characterized by
the growth of a Communist "parallel world
market."
World War 11 enabled the Soviet Union to
integrate the economics of the countries of
Eastern Europe with that of the Soviet Union.
The Satellite countries of Eastern Europe,
which prior to the war had carried on the bulk
of their trade with the West, were now locked
into the international socialist bloc. Once Soviet
control of Eastern Europe was assured, emphasis
was placed upon heavy industrial development
in Poland, Czechslovakia, Hungary and East
Germany, countries in which agricultural in-
terests had predominated before the war. Thus
Stalin laid the foundations for what he called
the "parallel world market" of socialist states,
existing outside and independent of the capitalist
world market. In terms of economic wealth and
power, this new socialist world market was
initially weak and not yet entirely self-sufficient.
A certain amount of direct trade with the West.
was still considered indispensable. But the Corn-
munists were confident that, with the passage
of time, their market would grow stronger in
comparison with the contracting capitalist mar-
ket. By 1950, not only Eastern P',urope had been
torn away from the capitalist system and incor-
porated into the Communist economic bloc, but
China -- the "limitless market" of which Western
capitalists had dreamed for years - had shifted
from the old side to the new.
Henceforth, at the root of the world struggle
is an irreconcilable conflict between two irnconn-
patible international economic systems. The
newer socialist bloc, so the Communists believed,
would expand at the expense of the older capi-
talist system, which would gradually lose its
vitality. Communist propaganda and diplomacy,
meshed with the activities of the Soviet foreign
trade and aid programs, are designed to bring
about the eventual withdrawal of Western capi-
talism from the penetrated areas and to tie the
economies of underdeveloped countries to the
Communist bloc economy.
The Communist bloc is now engaged in all-out
economic warfare directly against the Western
capitalist system. All possible efforts are made
to hamper Western programs of economic ration-
alization and integration which might serve to
strengthen the economy of the free nations. The
Soviets oppose every international stabilization
and development institution which is based on
the principles of it free-market economy.
Communist planners also seek to outflank the
capitalist system by gradually re-orienting selected
underdeveloped national economics toward the
expanding communist bloc, causing it concomitant
contraction of Western markets and supply
sources. Egypt and now Iraq are cases in point.
In their drive into the underdeveloped areas, the
Communist bloc enjoys some natural advantages.
Overemphasis on heavy industry, combined with
agricultural failures, enables communist planners
to equate "foreign aid" with "foreign trade."
By carefully directing their low-interest indus-
trial credit agreements, the Soviets probably hope
to manipulate primary commodity prices to their
own advantage and to gain an economic throttle-
hold upon selected underdeveloped countries,
prior to possible political take-over.
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The United States must meet the challenge
of the growing Communist bloc economy and
thwart the Communist penetration. of under-
developed areas. To do this, the United States
must develop a trade and economic assistance
program which will serve to strengthen the Free
World economy and prevent the expansion of
the Communist "parallel world market."
CLEVELAND LANE,
Assistant to the President, Manufacturing
Chemists' Association.
It has long been recognized that industrial
strength is the keystone of military power. The
United States has not become a premier military
power because it is aggressive or has a traditional
Junker class, but primarily because of its tre-
mendous industrial growth and strength.
Economic warfare is not new, but like military
warfare it has achieved its greatest potentials in
the modern world. Industrial capacity and raw
material resources are even more important in
this type of struggle than in military conflict.
Russia has the natural resources equal to or more
than the U. S. A. and the West. She is striving
to outstrip the West in. industrial capacity. And
she has definitely declared and is waging eco-
nomic war on the United States and the West.
One of the main targets of the Soviet Seven
Year Plan is to build a modern chemical industry
"second to none." The plan calls for an invest-
ment of $25 billion in chemical facilities during
this seven years. Note that the U. S. chemical
industry now has assets of about $20.4 billion, and
is investing about one
facilities.
billion a year in. new
The Soviets require an extensive, modern
chemical industry for these reasons: Such an
industry is essential to all other segments of the
industry she is trying to build. It is perhaps
even more essential to modern military strength.
A modern chemical industry would give Russia
the best means of upgrading her abundant raw
materials for more profitable world trade. And
lastly, it is indeed essential to provide the stand-
ard of living Khrushchev has promised his people.
What are her prospects of reaching this chemical
production goal?
The Russian chemical industry is believed to
have a capacity about one-third that of the
United States. She has strong and well-developed
production of basic inorganics, such as chlorine
and caustic soda, soda ash, calcium carbide,
sulfuric acid and fertilizers. She also has fairly
modern and sizable production. in some organics,
including synthetic fibers, plastics, man-made
rubber and in chemically produced metals.
It is in the latter categories that Khrushchev
has acknowledged serious deficiencies and in which
his Seven Year flan calls for greatest develop-
men t.
The Russian land mass itself is tremendously
rich in raw materials. It is estimated that the
Russians take 80 percent of the raw material
output of her dependent satellites in Europe and
Asia. She is especially rich in. the raw materials
for organic chemicals. Her estimated reserves of
coal are 8.7 billion metric tons; of petroleum,
168 billion barrels.
The Soviets have demonstrated first-class scien-
tific and technical ability, probably ample, in
time, to develop the type of chemical industry
she desires. But at present the one requirement
she lacks is the chemical engineering, the highly
developed processes and the production skills
which have been built up in this country to meet
the demands of our consumer economy.
Unless the Soviets can make up this one serious
lack, their seven-year goals are probably unattain-
able. She has two choices. She can divert her
best chemists and engineers from priority military
or economic warfare projects, providing she has
enough skilled chemists and chemical engineers
for modern production. She may not have this
manpower, however, simply because Soviet plan-
ners have not required sufficient production to
build the kind of chemical experience she now
requires.
Her only other alternative is to acquire skills
and technology from the West. This was pre-
cisely the objective of Khruschev's letter to
President Eisenhower last June, offering to buy
$1.00 million worth of chemical equipment and
technology. It appears to have been the main
objective of Mikoyan's very unusual visit to the
U. S. in January. In recent days Amtorg settled
a debt of $1.5 million owed to an American pro-
ducer for technology acquired 15 years ago. This
payment was made, the Soviets said, to show
good faith in. their efforts to acquire new tech-
nology.
The Soviets, in all their talk about IT. S. trade,
have said nothing noticeable about buying fin-
133
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i.;hed chemical products, which U. S. producers
would willingly sell. They are interested only
in the most advanced technology, and plants and
processes, which they evidently intend to copy.
h;ussia is not a party to international patent
c~ rnventions.
With all her raw materials, evident technical
a nlity, and state-controlled economy, the tech-
oology she lacks, and which we have, is now one
o' the greatest advantages the West has in the
economic war the Soviets have launched.
What is it worth? We have calculated the
time involved in just a few of the items on the
Russian technology shopping list. More than
10,000 man years of our best technical and scien-
tilic talent were necessary to bring these few
developments to their present stage. The time
involved for all. of them is certainly much more.
But this gives us only a partial evaluation.
I submit that the technology the Soviets now
want is worth more than any price they would
now be willing to pay.
The L nited States controls shipments of U. S.
gc ods or technology which we know would con-
tr Bute to the Soviet military potential. Khrush-
chev has told us that Russian world-trade aims
are to overthrow the Western democracies. Since
she poses a constant military threat, and now
practices economic aggression, both with the
objective of overthrowing us, why should we not,
with equal vigilance, control aid to her economic
war potential? Since Russian aims are the same
in all areas, why should not all our policies be
eq pally uniform? The MCA and leaders of the
chemical industry have actively proposed this
policy to our Government, and have proposed
that the same policy be urged on our Allies.
Some scientists may object to such restrictions
because they believe scientific information, like
music, art and literature, should be universal.
A pragmatic distinction between science and
these other parts of our culture has obviously
been made by the Soviets. Must we not make
the same distinction?
The world-wide free play of all man's intellect
is certainly a desirable ideal. But it cannot work
when one party has sworn to use any means at
his command to cheat you; has proven that he
will; and has also sworn to bring you ultimately
to defeat. Our moral obligation to the uni-
versality of man's intellect must, regrettably,
take second place to our moral obligation to the
political and economic freedom of our fellow-
men.
I)EMPSTER MCINTOSrr,
Managing Director, Development Loan Fund.
The operations and purposes of the Develop-
ment Loan Fund form an integral part of our
country's effort to maintain and defend freedom
throughout the world. The establishment of the
Institute forAmerican Strategy as an outgrowth of
these conferences is a recognition of the fact that
American defense has broadened out beyond the
purely military sphere. Our country is now
being attacked by a Communist economic offen-
sive which is as grim and deadly a threat as the
military threat which our military engineers
helped stave off when they built a ring of defense
installations around the Free World.
The Development Loan Fund is a principal
instrument of our government's foreign economic
policy. It, was established to provide help, on it
business-like basis, to underdeveloped countries
which are struggling to improve their economic
conditions while at the same time holding off the
pressures and blandishments of the Sino-Sovet
bloc. Sonic of those countries have great potential
resources. But they lack technical and managerial
skills, their economies are not stable, and some-
times their political institutions also are not
securely grounded. Above all, they lack capital.
Their incomes are so low, and their populations
are growing so fast, that the needs of daily living
use up their production. Hence not enough can
be saved for investment in undertakings that
would help increase productivity.
It is the function of the Development Loan
Fund to provide capital to help such countries
develop their resources and increase their pro-
duction. Once their economic development has
reached a certain level, which we believe to be
attainable within the foreseeable future, they
will he able to save investment capital of their
own, and thus to continue their growth without
the need of further outside aid.
T be Development Loan Fund does not make
grants, but only loans. These loans must be
technically and economically feasible and offer
reasonable prospect of repayment. We do not
allocate funds country by country in advance,
but make loans only for specific, well-investigated
projects which will contribute to economic growth
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and increased production in some underdeveloped
free country. We make loans only when financing
for the project cannot be obtained on reasonable
terms from any other source, either from private
investors or from agencies like the Export-Import
Bank or the World Bank. In deciding whether
to approve a loan, we are required by law to
consider the possible adverse effects of the
project upon the United States economy. Since
our purpose is to stimulate long-range economic
development, normally we do not make loans to
exporters to finance sales to foreign buyers, nor
to finance imports for resale, nor for working
capital, nor for purposes of refunding and re-
financing.
The Development Loan Fund differs from other
foreign-investment agencies in that its authority
has been tailored to meet the needs of under-
developed countries as revealed by more than a
decade of experience with foreign assistance. Its
powers are very flexible. It can make loans, or
guarantee loans, to American or foreign private
individuals or firms, to governmental agencies,
to banks of various kinds, and to international
agencies. One important fact is that the Develop-
ment Loan Fund can lend dollars and if necessary
accept repayment in the currency of the bor-
rowing country.
The Development Loan. Fund began actual
operations in January of last year. So far it has
been provided by Congress with $700 million in
capital funds. Up to the end of last February
we had loaned all but about $15 million of our
available capital. At that time we had on hand
some $1,500,000,000 worth of screened loan ap-
plications still under consideration. We have
asked the Congress to provide us with $225,000,-
000 more in capital in the supplementary budget
for fiscal year 1959, and are asking for an ad-
ditional $700,000,000 in the fiscal year 1960
budget. These amounts, if granted in full, would
still fall far short of enabling us to meet all the
applications that have already been presented to
us --to say nothing of those still to come.
Of course, not all the applications brought
before us have equal merit. More than $600,000,-
000 worth of applications have already been
either withdrawn by the applicants, or rejected
by us, or turned over to other agencies. Never-
theless, the volume of the applications presented
to us is evidence of the great need for investment
capital in the underdeveloped countries of the
free world, and of the eagerness of those countries
to improve their economic welfare. The people
in the underdeveloped countries are demanding
more progress in one year than their ancestors
had in a hundred years. If they cannot make
such progress as free nations in cooperation with
us, there is grave danger that they will become
victims of the great economic offensive of the
Communist powers. Today, territories can be
lost by economic warfare as surely as by military
campaigns.
That is why we believe that our program is as
vital to the interest of our nation, and to the
welfare and security of every American citizen,
as is the military defense program itself.
HOWARD A. MEYERHOFF,
Executive Director, Scientific Manpower Com-
mission.
A nation's economic growth is limited by the
availability of energy resources. What is Russia's
energy potential - developed and undeveloped?
We in the United States are concerned about
strategic minerals in short domestic supply. Is
Russia also faced with domestic shortage of
critical raw materials that may make her vul-
nerable?
Aren't the discoveries of important mineral
deposits in northeastern China, in provinces long
under Russian Communist influence a possible
source of friction between Russia and China?
Are the Russians short of oil? If not, what
would be the advantage of gaining control of
production and distribution in Iraq? Or in the
entire Middle East?
Do Russia's natural resources provide any basis
for I%hrushchev's boast that the USSR economy
will surpass U. S. economy by 1965? Or at any
time in the future?
Last year Russia dumped tin and aluminum
on the world market, causing serious economic
upsets. Does Russia have surpluses of the metals?
Will she try it with any other commodity?
Russia is reputed to have the world's largest
reserves of manganese and was once our major
source of supply. Was the trade in manganese
stopped by us or by the Communists? What is
our manganese situation as a result of the
stoppage?
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0L101Atrr NIEMiE.YER,
Professor of Political Science, University of
Notre Dame.
Soviet economic activities are a" challenge" to
the West insofar as they are campaigns of politi-
cal warfare. Their purely economic effects are,
by themselves negligible. The real challenge to
IN is the drive of the Soviets through economic
activities to get across a political message, win
organizational footholds, and attract people's
loyalties.
The underdeveloped countries are particularly
suitable for this kind of political warfare because
their underdevelopment is not merely economic
but also political. They need higher income., but
they also need to find and institute a workable
political order. The Soviets offer to them, along
with the Communist model of industrialization,
a politico-historical conception including a rejec-
i.i0n of Western society as an order based on
"exploitation."
The Soviet economic challenge must therefore
be met by Western economic activities Which
carry a political message and are designed to Will
political loyalties. They must refute the Soviet's
concepts of social order and economic develop-
ment, they must clearly point to alternatives,
and they must offer political as well as economic
guidelines relevant to the future of the under-
developed peoples. In order to have maximum
effect they should, moreover, be concentrated on.
particular countries in terms of particular politico-
economic conditions.
The specific content of our message must, of
course, be carefully worked out. At this point,
one can only suggest certain possibilities.
As our goal for the future we should stress,
by word and action, the concept of a multi-
centered world and a multi-centered society, as
opposed to the monopolistic: pattern of Soviet
society, and the notion of government as an
instrument of social peace rather than of class
struggle.
In opposition to the Soviet emphasis on the
whole of society, we should insist that greater
wealth of the whole is based on the greater
earning power of the parts of society. (The
distinctive feature of our society is not the con-
centrated wealth of our rich people but rather
the diffused wealth of our farmers, workers, and
employees.)
As contrasted with the Soviet practice of forced
rapid industrialization by controlled saving and
preferential investment in heavy industry, we
should point to the key role of a productive
agriculture in economic development, as well as
to the importance of the energy, enterprise, and
skill of people and the need for education and
incentives to stimulate these qualities. We also
should insist on economic development without
sacrificing the interest of the living generation
(slow rather than rapid industriali.zation).
Finally, in the field of pure propaganda, we
must take pains to refute the Soviet notion of
their own and of our system. With their statistics
of economic growth we should compare the sta-
tistics of our own economic history, plus the
price paid on either side for forty years of growth.
To their thesis of Western " mon opoly capitalism"
(Lenin's Imperialism) we must oppose an equally
cogent. analysis of the truly monopolistic Soviet
society, plus a corrected picture of our own.
1.,'inally, we must not neglect the need for propa-
ganda in the form of spectacular achievements
in science, technology, and production.
A. M. STRONG,
International Business Consultant
We are now in an economic war with the
Soviet Union. The war is not of our choosing.
It Was declared by Mr. Khrushchev, Prime
Minister of Russia. Let us not underestimate
this threat, or lull ourselves with the idea that
Russia cannot compete with us. Let us face the
hard realities.
Russia has made great strides since the Second
World War. The Soviet Union which had a
population of 170 million before the war now has
under its control 945 million people. Their
national production which. was 330/0 of ours in
1950 increased to 45% in 1958. Within 15 years
their production may equal or exceed that of the
United States. Their export trade increased last
year by 15 /0 while ours declined by 14%.
In 1938 Russia's exports and imports amounted
to $1.3 billion dollars; in 1957 to $8.2 billion
dollars. In 1938 Russia ranked twenty-second
in exports; in 1957 - sixth. Although the bulk
of Russian exports has been to Soviet countries
they are now expanding their trade to areas out-
side the Soviet Bloc. They export approximately
one billion dollars worth of goods to the free
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world. The Soviet Grnion has intensified its
efforts to penetrate the Latin American, African
and Asian markets. They are buying raw
materials and extending credits for local develop-
ments.
Red China is making great strides in its
economic expansion. If nothing interferes with
its present economic growth, Red China with. a
population of 650 million will become, within
ten years, one of the leading industrial countries.
What is the answer to the economic war pro-
mulgated by Khrushchev? There is no single
solution to the problem. However, the Russian
threat can be met by the coordinated efforts of
our government, business and industry. Neither
government nor business can do it alone,.
Our first effort should be to maintain a high
rate of growth in our production. Our economy
must continuously expand and become stronger;
we cannot stand still and. let Russia overtake us.
We must arrest the creeping inflation created by
the wage-price spiral and excessive government
spending. We must maintain the stability of
the dollar; diminishing confidence in our currency
abroad is the greatest comfort we can give the
Russians.
We must establish a firm and coordinated
.foreign economic policy aimed at the maintenance
and expansion of our trade and investments
abroad. Such a policy should be devised by
government and business. A special Board, with
a membership recruited predominantly from
private enterprise, to study and propose such a
policy should be appointed by the President.
The membership of the Board should consist of
persons of independent thought, with practical
experience in commerce, industry and inter-
national trade.
The proclaimed policy of our government is
to encourage foreign investments to offset Rus-
sian economic penetration in the free world. We
must therefore recognize the special risks assumed
by private enterprise in investing and selling in
foreign countries. The laws governing taxation
of income from foreign sources should be over-
hauled and clarified by Congress to make it less
difficult to administer and apply.
The facilities of government lending agencies
should be made more flexible to help small and
large companies in their foreign operations.
Particularly, the foreign currency funds generated
by the disposal of agricultural commodities abroad
should be primarily used to assist American
companies in their foreign operations. The present
provisions of Public Law 480 which limits loans
to American companies to a maximum of 25%
of the sales should be abolished and a minimum
of 50?%o should be made available to them.
The overtures of Russia to trade with us should
be fully explored. While no important volume
of business can be expected, trade in non-strategic
products may reduce the tensions between East
and West and lead to improved relations. Normal
trade, however, cannot be conducted while an
economic war exists. A prerequisite to trade
negotiations is therefore the creation by the
respective governments of an atmosphere con-
ducive to the development of business on a
normal basis.
We can unquestionably win an economic war
with Russia. The same initiative and ingenuity
that has made our country great can find the
means to meet the Russian economic threat.
ADMIRAL FE Ix B. STUMr, U.S. Navy (Ret.),
Vice Chairman and Chief Executive Officer,
Freedoms Foundation at Valley Forge, Pa.
In the psychological war with the Soviet Bloc,
the United States must continually instill in the
minds of our allies and in uncommited neutrals
our unwavering determination to resist with all
force necessary any further spread of the Com-
munist empire.
Our Government, in order to achieve this end,
must have the full support of its people. This
means that the American people must have an
understanding of the insidiousness of Com-
munism, must be alert to the danger of each
new Communist maneuver for power, and must
be determined to fight Communist tactics on
every hand.
Failure to resist Communist expansion for fear
of "risking general war," whether it be Quemoy,
Lebanon, or Berlin, will undermine confidence
of smaller nations in the leadership of the United
States, and give credence to the Communist
"Paper Tiger" propaganda, and result in destruc-
tion of Free World alliances.
Fears of Asian nations, bordering on Soviet
Bloc countries, with which I have been most
familiar for the past six years, center upon these
three questions:
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l' irst : Does the United States have today,
and will it maintain in the future, military forces
of the strength and composition necessary to stop
local Communist aggression?
Second: Will the United States have the unity
of purpose and the steadfastness of determination
to act, soon enough to resist and stop Communist
aggression?
Third: Does the United States have today,
and will it maintain in the future, enough power
to destroy Russia?
headers in the smaller, more exposed, nations
: f the Free World are apprehensive and even
Fearful of the indifference most Americans show
l o internal subversion in. the United States. They
realize that our Government, to be effective,
must have the solid backing of the American
people. They read of infiltration of Communists
r,nd fellow travelers into all phases of American
life. Many innocent, but naive, Americans give
voice to Communist aspirations, such as advo-
cating recognition of Red China, negotiating to
the point of our giving up something and gaining
nothing, compromising with Soviet expansion
instead of stopping such expansion, attacking
the 11'.IB.I.
The Soviet Government is intent on conquering
the entire world, holding all peoples in a state of
slavery. They have never deviated from that
determination. "Peaceful Co-existence" to the
Communists means non-interference with Soviet
expansion.
As the leader and the hope of the Free World,
we must strengthen our own internal structures.
We must stop allowing Communists to operate
with impunnity. Congress must strengthen our
laws, making it possible to fight the Communists
in our own country, and with such. new laws, to
prevent our courts from further setting free Com-
munists already convicted.
It should. be made impossible in this country
for a Communist or fellow traveler to hold
political office, hold a position of responsibility
in a labor union, in an industry, in a charitable
organization, or in a church.
The best answer to Communist propaganda
abroad is a. strong America - determined and
united in cleaning out Communists and left-
wingers who are among us here at home - strong
in spirit and courage -- strong in our military
forces -- strong in our schools - strong in our
faith in GOD.
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In addition to the exchanges contained in Chapter 19, there were several questions addressed either
to main speakers who were present at panel discussions or to other members of the symposium who had
not submitted prepared formal statements, as had those in Chapter 19. Such questions were addressed to:
DR. HOWARD A. MxYERHOFF, Executive Director, Scientific Manpower Commission.
Are not the discoveries of important mineral
deposits in Northeastern China and provinces long
under Russian-Communist influence a possible
source of friction between Russia and China?
This question, of course, could be expanded,
and I would like to expand it just a little. A
great deal has been discovered along the Chinese
border in recent years, particularly in. the province
of Sinkiang and, of course, that province was
under very considerable Communist dominance
during Chang Kai-shek's rule, and there is still
a great deal of Communism plus Communists
from Russia in that particular area. I thought
it rather significant in studying the recent de-
velopments there to find that the Chinese, under
the present government, had moved in there very
rapidly and have, with Russian-Communist aid,
developed the resources in that area, the chief
of which is oil. There has been rapid settlement,
water developments, and intensive exploration
for base metal deposits, of which Russia is woe-
fully short.
Let us go back just a short distance in time
and recall that Russia conducted a chiseling
operation along the Northern border elsewhere,
notably in Outer Mongolia and more or less
weakened the ties between Inner Mongolia and
the Chinese Republic. There, it seems to me,
there is not only a wealth of mineral resources
but also an area for friction, and I wonder whether
this country is not smart enough to promote
friction between the allies and point out some
of the historical facts, which led to steady ter-
ritorial losses on China's part. The mineral
wealth in that area has not been wholly assessed
but we might note that it is at the moment
China's most important source of petroleum,
and that is only part of it, because the adjacent
mountains along the border have already yielded
the promise of supplies of base metals that I
think will portend an important economic de-
velopment in that area, perhaps on both sides
of the boundary if they remain of peace, but
on one side of the boundary, whichever nation
dominates, because most of the deposits are on.
the Chinese side.
Also to Dr. Meyerhoff:
Are the Russians short of oil? If not, what would
be the advantage of getting control of production
and distribution in Iraq or in the entire Middle
Fast by the Communists?
No, the Russians are not short of oil. In fact,
although the Baku field along the West side of
the Caspian has not grown to any great extent,
not yielded a larger production in spite of very
intensive development in the last three years,
nevertheless, during the war and immediately
after it, the Russians developed what we might
call the Permian Basin field. We are perhaps
familiar with the Permian Basin in West Texas
and Eastern New Mexico. The Russians have a
comparable Permian field, incidentally, in the
province of Perm from which the Permian System
of rocks was named. It is along the West flank
of the Urals in European Russia and it extends
pretty well over toward the Volga. That field is
now called the Second Baku in USSR and,
actually, it is likely to become a First Baku from
the developing importance of production, and
that right now more than suffices for Russia's
petroleum needs.
In addition, there are further explorations in
progress between the Caspian Sea and Turkmen
and they are fairly successful, although we are not
quite sure how to evaluate them yet. You know
that Russia starts off with a discovery and
describes it in superlative terms.
The USSR is keenly interested in Mideast oil
primarily for control, and I think, too, we might
foresee some struggle for control among three
different groups - the Arabs, who own it; the
United States and Europe, because this is the
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main source of supply for Europe; and Russia,
which would like to control Europe's source of
supply. The loss of oil in Iraq, of course, is of
considerable seriousness, but if the Russians play
the game stupidly, it will be of greater seriousness
to Iraq. We can readily understand why. Each
one of these countries that is an oil producer,
Saudi-Arabia, Iran, Iraq-is primarily con-
c ~rned about a monetary return for their oil.
I f the Russians use it without supporting Iraq
i i the style to which it has become accustomed --
v its regard to oil revenues -- there is going to
1,e the devil to pay internally in Iraq, just as
there was in Iran a few years ago. So, here is
.pother potential explosive point which I think
American diplomacy could make good use of.
The USSR has no need whatever for any Mid-
easterrc oil at the present time or for Iraquian
oil in particular.
Liao CrueRNL;, Executive Director, The Research
Institute of America.
The Boeschenstein Committee has recommended
that our anti-trust laws be amended to exempt
arrangements which are important to mutual secur-
ity and foreign aid. Do you believe this is necessary
or desirable and, if so, is the suggested process of
approval by the Secretary of State and the Attorney
General really practical?
I do not believe the normal process of economic
life,which is an essential part of our own domestic
activities, will serve its well in many aspects of
economic warfare abroad. If we are, in fact, to
wage economic warfare, then there is the need
for an agency that performs some of the central
functions of economic warfare, as (lid the Board
of l+;eonomic Warfare during the last war. If
it is to be effective, such an agency must be
given proper legislative authority with decision
vested on the cabinet level in order to conduct
the necessary aggressive and defensive measures.
To the extent that anti-trust laws or tax laws
at present inhibit or make less effective the
activity of U. S. enterprise functioning abroad,
they should be changed. If we are, in fact, en-
gaged in economic warfare, I would think there
is no question whatever that the law should be
amended in order to enable a government agency
to pass upon or direct those activities which,
while normally in violation of domestic law, serve
the interests of the nation's defense abroad.
Col,orlrn, WILLIAM KINTNIat, Deputy Director,
Foreign Policy Research Institute, University
of Pennsylvania.
Why have our colleges and universities neglected
the field of education which would produce better
educated leadership in the ranksof organized labor?
As far as I know, many of our labor unions
are much better qualified than many of our
business representatives to deal with the type
of problem that we are discussing at this Seminar.
They understand the human aspect of the prob-
lem; they understand political organization much
better than many members of the business com-
munity do; they have succeeded in expanding
their own power in this country. Their efforts
abroad aimed at preventing the trade union
movements in many countries being taken over
by the Communists have served this country
very well indeed. I think their understanding
is something which should be appreciated. Their
efforts to hold the labor union movements of the
underdeveloped areas, particularly LatinAmerica,
on our side of the fence, should be given much
more encouragement and support than they have
actually received.
The Communists now dominate half the labor
union movements in Latin America. They domi-
nate the movements in the key industries, trans-
portation? oil., metal mining, and communications.
This is particularly true in Brazil and in Mexico,
our nearby neighbor. The effort to move in with
our idea of a free trade movement, which in
its bests sense means cooperation between labor
and[ management, is something which has just
really gotten underway, and demands much more
financial support than has been given to it, so
I would --- rather than say that our labor union
movement lacks training in this critical field of
dealing with the Communists - I think that
the training they have received can be spread
and the use to which this training is put in the
total battle for the preservation of our free society
throughout the world greatly encouraged.
Dii. KENNETH R. WHITING, Special Advisor, Air
University, Maxwell Air Force Base.
.Is the Seven-Year Plan of the Russians hampered
by an insufficiency of manpower, and are the latest
USSR reforms in education, private ownership,
etc. giving land ownership back, arrived at because of
an increasing manpower requirement on their part?
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The truth of the matter is that Khrushchev is
going to have a little trouble with the Seven-Year
Plan. Strangely enough, the 8.6% yearly in-
crease that the Seven-Year Plan calls for is
slightly below that which they have claimed for
1957-58, so that, really, they are lowering their
sights a little in comparison with the previous
two or three years. I think there is no doubt
that they have the resources to make the Plan,
that is, their increase in steel is scheduled to rise
from 60 million tons in 1958 to about 100 million
tons, oil to be doubled from 125 million to about
250, etc. I think they will make those goals
without much struggle. They have been in the
habit of making most of their goals in the heavy
industrial group area fairly well, but there is this
difficulty with labor.
Up until now, all plans have called for some-
thing like about two million young people corning
into the labor market per year. This year they are
counting on about 1,600,000 and as the hive-Year
and Seven-Year Plan goes on, that is about what
they figure on for every year at least up to 1963.
The Seven-Year Plan calls for raising heavy
production about 80%, and agricultural and con-
sumers goods about 70%. The labor force is
going to be increased by 21%. Obviously, some-
thing has to give here. There are two sources
you can get this labor from. One is the traditional
Soviet source of the farmland - that is, when
the revolution occurred, the Soviets had about
86% of their population farming and at the
present time something like 56% of the popula-
tion is on farms. But, unless productivity on
the farm can be increased and increased radically,
that reservoir is going to run dry. In order to
get 70% more production. off the farm, it is
going to be pretty hard to tear labor away. If
it is done, it will have to be done by intensive
agriculture. Khrushchev has tried to face this,
I think fairly reasonably. As most of you know,
the collective farm was an institution that Stalin
invented and was almost perfectly made for
reducing productivity. You just could not get
much enthusiasm up in raising farm goods in the
way the collective farm was operated.
Khrushchev has - One: given the local col-
lective farms more autonomy in choosing what
they will produce and how they will produce it;
Two : he has abolished the MTS station, (machine
tractor station), and many of these farms are
now going to operate their own machinery and
they think more rationally, and the farms have
been reduced in number from some 250,000 down
to about 76,000. In. other words, he is putting
his money on a more independent collective farm,
on a little more reward to the worker. This
may increase productivity - but whether it ups
it or not enough to supply surplus labor for
industry, I do not know.
Another method he used is to try to keep people
from leaving industry. For instance, the lower
wage levels in industry over the Seven-Year
Plan are going to be raised but the upper levels
are going to stay more or less at the level they
are. This does two things-it draws more
women into industry in view of the higher wages,
and it keeps the mothers, daughters and sisters
of the higher priced workers still in industry
because it is rather uneconomic for the family
to cut down its labor force.
The educational reforms that were referred to
in the question. - this is a comme si come sa
situation right now. There seems little doubt that
Khrushchev had an. idea that if you reduced a
good percentage of the schooling down to eight
years, and then put the young student out into
two years or three years work in a factory, em-
phasizing night schools, correspondence schools,
etc., you can increase the working population.
But, the Soviet Union, like the United States,
has a built-in educational group and they, I
think, are going to more or less flummox this
plan to a certain degree at least. The legislation
just evolved about a couple of months ago seems
to leave enough loop-holes.
Therefore, the way in which the goals of the
Seven-Year Plan will have to be reached, I think,
will be by more efficiency in industry - Soviet
journals are filled with articles on how to increase
labor productivity. They talk eternally about
more automation in industry, etc. and, as every-
body knows, the longer economic enterprise goes,
there seems to be a gradual increase in the
efficiency of labor. I think that will probably
be one of the greatest assets in making the
Seven-Year Plan.
When I say they will make the goals of the
Seven-Year Plan., I mean in the heavy industrial
field, that is, in. the steel, oil, gas, heavy machines,
military goods, etc. I think they will probably
make those goals. As to whether they make the
70%o increase in consumers goods or agriculture,
I am very dubious. They never have and I do
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not think in a non-consumer oriented society
Such as the Soviet Union, they will make them
this time either.
1)R. ANTHONY T. BoUSCAREOrr, Department of
Political Science, Marquette University.
First, are we losing the cold war; second, are we
holding our own; or third, are we winning the cold
war? Just where are we?
With respect to part three of the question, I
would say "No". With respect to part two, I
think that we have been holding our own in
certain ways since 1955. With respect to part
one of the question, I think the answer is "Yes."
1''hen the Third World War began with the
Communist invasion of Greece in December of
1994, the Soviet Union controlled 170 million
persons. Today, the Soviet Empire comprises
970 million persons. When the Third World
War began, the Soviets controlled 8 million
Square miles of territory and today they control
16 million square miles of territory, so that there
is little question who is winning the war and
who is losing the war, although I think, thanks
largely to Secretary Dulles and his inflexibility,
the Soviets have done less well. In fact, they
have made practically no headway at all since
the last concession which was in the spring of
1955. Since that time, there has been a stale-
mate on the territorial side of the war, although
the Soviets retain the offensive, particularly in
the non-military areas of World War Three.
Their objective, I think, since 1955, has been
to induce us to accept their imperial holdings in
East Central Europe and in China and to pre-
lude a discussion of their imperial holdings at
international conferences. All of the play in this
war has been on the free world's side of the
50 yard line. None of it, at least as far as we are
concerned, has been on their side of the 50-yard
dine, and I think that so long as this continues
to be the case, that we cannot win. the contest.
At best, we can only maintain a holding action
end this situation favors them. The only action
,)n their side of the 50-yard line has taken place
through the initiative of persons behind the Iron
and Bamboo Curtains . . . the Germans, the
Vorth Koreans, the people of Mainland China,
the Hungarians, etc.
It is interesting to note that in the Soviet
alave empire, generally speaking, everybody is
trying to get out and nobody is going in - in
Berlin, about 900 people every (lay coming from
Fast to West -- in Hong Kong, about 300 people
every day coming into Hong Kong from Red
China - nobody going the other way except a
few credulous Western newsmen.
Among the Chinese and Korean prisoners-of-
war that we took in the Korean war, 80% chose
freedom in South Korea or Formosa rather than
going back to Communism. I think that unless
and until we demonstrate that we are for the
enslaved and that we are against their tyrannical
governments - and unless and until we carry
the discussions, and perhaps even the action to
their side of the 50-yard line, we shall at best
only contain Communism by leaving the initia-
tive to the Communists; and this means, I think,
acceptance of peaceful co-existence which is, in
fact, surrender on the installment plan.
I think everything we do in this war should
depend on an affirmative answer to the following
question: Does the contemplated policy weaken,
hurt and embarrass the Soviet Bloc? I think,
therefore, we should re-evaluate existing pro-
grams, particularly cultural exchange and trade,
to see if those programs do, in fact, lead to an
affirmative answer to that question. I think that
we could embark on certain activities on their
side of the 50-yard line, possibly experimenting
with certain attempts such as subverting Albania
which. is not contiguous to the Soviet empire.
I think we could take selected Chinese escapees
from the Communes and send them on tours
throughout Southeast Asia and, in this country,
to tell people outside Communist China what the
Communes are really like. I think, too, that we
need to educate our own people that we are now
in the fifteenth year of World War III and that we
are losing it. We have gone through two stages.
First, we were in the retreat stage, then we were
in the containment or co-existence stage, and I
think if we can pass on to the stage of the offen-
sive, the stage of liberation, we can win this war.
W. CLN;onr SKOUSEN, Author, The Naked Com-
munist.
Regarding the matter of subversion, is this a threat
in the United States? If so, in what way and to
what extent?
I think possibly the answer to that would come
most authoritatively from Mr. Hoover's recent
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statement that subversion is not only continuing
to increase in our country but that the attitude
of some of our judicial officers has encouraged
the open operations of the party which always
is a forerunner to the subversive groups that
work behind them. It has always been very
difficult in the United States to clearly define a
subversive person from just an open-minded
liberal, and we have had a great need for grass
roots education of the issues that are involved
in World War III, so that the man. who is
working out there in the labor union - so that
the man who is writing newspaper articles, can
tell when he is a victim of propaganda and acting
as a front for subversive elements.
Our investigations, I know, in the Federal
government, during World War II, revealed that
some of the most dangerous and devastating
espionage and subversion was done by people
who, in their own minds, were relatively innocent
of anything criminal. Even Mr. Greenglass, who
worked for the Rosenbergs and captured the
trigger device at Los Alamos, who permitted the
Russians to explode their first atomic bomb, did
his work more or less as a favor to his brother-
in-law and his sister. We have not built a moral
fiber of resistance in our people sufficient to
resist these subversive elements, as of this date.
If we could succeed in this, a lot of our other
programming would be much more successful
because the Russian system is inherently sluggish.
It continually gets behind in its economic develop-
ment. It had to come to the United States to
drain off our technology, in 1930, '31, and '32.
All during World War H, it was engaged in
draining off, either through diplomatic or sub-
versive channels, our latest technological develop-
ment. I remember, while working in Washington,
that the annex to the Russian Embassy had its
lights on all night, every night, seven days a
week, copying transcripts from the patent office
which, through somebody's liberality,were opened
and made available to them.
As soon as the Korean War was over, the sub
versive elements, that is, I should say, those who
were plotting the strategy in Russia, recognized
that once again they were behind us techrrologi-
cal.ly in spite of the stealing of the basic data
that went into Sputnik to space islands, and
some other information they have not yet used
but may; they still recognize they were behind
in many aspects of their program, therefore, we
got a thaw in Russia, in which they invited our
people over there so that they would have an
excuse to have their people come over here
Every time we do this, it is only for one purpose -
and that is to help a sluggish slave state catch
up with us.
We should have learned one thing from Adolph
Hitler - that if you will give a slave state tech-
nological development, they can beat the de-
mocracy. It is most important, therefore, that
we take advantage of free enterprise science and
free enterprise industrial development, and some-
how isolate it from the subversive infiltration to
which it has been subjected for over 30 years.
We can beat them if we lay down a few funda-
mental rules of security for ourselves. This we
have not been willing to do to date, and part of
it has been because of our failure to get down to
the grass roots and inform our people sufficiently
and firm up their moral resistance and their
sense of loyalty and ambition for this great
country that we represent, so that they would
not allow themselves to become dupes of these
people who would use them for the advantage of
this potential enemy.
* * *
JACK L. CAMP, Director, Foreign Operations,
International Harvester Company.
Can Central and South American country
promises on non-expropriation be relied upon?
My personal experience and the experience of
my company has been that they can be relied
upon. I do not have any doubt about their
promises being perfectly good. I will admit that
if you take the expropriation of oil. in Mexico
some years ago, the expropriation of oil in Bolivia,
the expropriation of the tin mines there and the
recent situation of the increase in taxes in Vene-
zuela, which changed the fifty-fifty ratio be-
tween the government's take and the oil com-
panies take, you would say that some people
might have a reason for saying that it could not
be relied on, but 1. think those are exceptional
cases, and I believe that in the majority of
instances, so far at least, their words have been
good.
E. S. WHPPNLAN, Director of Public Relations,
United Fruit Company.
If such companies as United Fruit present a
united front in helping to spread democracy through-
143
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out Latin America, why is the United States con-
sistently blamed for dollar diplomacy in this areal'
In the Western Hemisphere, unlike the other
areas that we have been exploring today, inter-
national Communism has not made any great
economic penetration. It is in Uraguay, in Brazil,
it is in Argentina to be sure, but principally,
the function of international Communism in Latin
America has one central goal and that is to
separate the continent from the capitalist bloc,
namely us. The separation is to be effected by
means of a three-pronged attack -- 1. discrediting
of the U. S. among labor leaders, businessmen
and intellectuals; 2. frightening away of IT. S.
and European investment: by fomenting labor
unrest; and :3. attaining a sufficiently strong
position in the Hemisphere strategic industries
to sabotage them, should it be necessary on the
part of Moscow.
Obviously, this dollar diplomacy semantic is
made to order for t:he enemy. In the case of
United Fruit, for instance, a book was written
by a disgruntled employee of ours who left at
least 25 years ago, and wrote a book called
"Banana Empire." This book has been picked
up by Communists, has been translated into
Spanish, and it is distributed from Mexico today,
with no indication of a time factor whatever.
Entirely out of context - and so is the smear
of dollar diplomacy.
13u?[(,. GEN. CECIL E. COMBS, Commandant, Air
Force Institute of Technology.
What will be the effect on international Com-
munism when small countries such as Turkey and
Greece ultimately get If-bombs and ICBMs?
I think there must, be considerable divided
Opinion on this point. I have felt that it might
be that greater stability might actually result
if some of our allies had at their command some
of these modern weapons, particularly some of
our European allies in NATO. I am not sure
how widespread this atomic club might come
without becoming unstable. I do happen to
recall having talked to ('general Norstad about
this once, and I believe he felt that if some of
our allies possessed these weapons with some
feeling of the independence of decision that they
might have as a result of not being dependent
upon us for the bang, as it were, that perhaps
that might really strengthen NATO.
Supplement to the question -
Admiral Felix B. Stump.
I would be inclined to agree with what has
just been said, and at the same time it is a very
dangerous thing to put in the hands of a small
nation which may depart completely from the
policies of the Great Powers which certainly
have to control an aggregation such as NATO
to the extent of where they can precipitate an
atomic war. On balance, I think now it is best
to retain atomic weapons in the hands of the
nations that are able to develop them.
ItonERT BRUCE WRIGHT, Chief, Economic De-
fense Division, U. S. Department of State.
Will you explain the functions of your Economic
Defense Division of the Department of State?
I suppose it is always a pretty mysterious
thing to try to explain what a government office
really does, particularly if you do not happen to
have a chart which you can use, but I think I
can very briefly explain what we try to do in
my Division.
We deal with the foreign relations aspects,
both from a policy and an operating standpoint,
with respect to getting parallel action from other
friendly governments on strategic controls to-
wards the Soviet Bloc. This requires the day--
to-day back-stopping of the multi-lateral organi-
zation in Paris, that perhaps you are familiar
with, which deals with these export control
questions and also the handling of problems which
come up in our relations with free world countries
outside this Paris organization, that have a
relationship to the objective of preventing stra-
tegic exports to the Soviet Bloc by the United
States or the countries that cooperate with us.
J. MJSUELL GEORGE, Economic Defense Adviser,
Office of the Assistant Secretary for .Inter-
national Affairs, U. S. Department of Com-
imerce..
Short of military conflict, at what point can it be
said that an economic war had definitely been won
or lost? Is this point reached only with the complete
collapse of either the Communist or the capitalist
system?
Economic warfare and its results are very
difficult 'to separate from all the other aspects
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of war, except military, which may well accom-
pany it. For example, it seems to me that the
activities of the Soviet Bloc, while they have
during recent years focused more openly on
economic aspects, have continually been involved
with open psychological and political aspects,
as well as a number of covert aspects, of warfare
against the free world.
Assessing the accomplishment of a particular
economic effort that might be exerted either by
the Bloc against the West or by the West against
the Bloc, I think, is equally difficult. To the
extent this can be done, it would probably have
to be associated with fairly specific objectives
which are set forth as part of a particular pro-
gram. It is, in a sense, like a military war, in
that there are many battles which may be identi-
fied as being won or lost. It is not as clear just
when a particular economic war ends nor is it
always perfectly clear who, in the end, has won it.
Nevertheless, the economic warfare effort,
which the Bloc is directing, I think, can be
analyzed to point to successes and failures.
Comparably, I believe, any effort which the free
world would exercise toward the Sino-Soviet
Bloc could, to some degree, be specifically assigned
"success" or "failure." I do not believe that in
the end economic warfare alone will result in the
destruction of either system. This is particularly
true, I believe, with respect to the larger countries.
If, however, economic warfare measures are
directed by a larger and powerful group, such
as the Sino-Soviet Bloc, toward smaller and
weaker countries which may not have either
the military or economic strength to withstand
economic penetration by the Sino-Soviet Bloc,
it is quite conceivable that these smaller and
weaker countries will lose their economic and
political independence. This, I believe, is the
primary stake in. terms of the current economic
warfare activities of the Soviet Bloc, and I
believe it is to a solution of this particular part
of the problem that much of the attention of
this meeting is really addressed.
N. JORDAN-MOSS, Financial Counsellor, British
Embassy.
Are we waging economic warfare alone or are our
allies with us?
The short and quick answer is that the eco-
nomic warfare effort is indeed an allied one; and
that we cooperate in every way we can with the
United States and with our other allies by talks
in NATO and in the Paris group, and in other
forums to maintain our share of this carefully
graded control of East-West trade. We are in
very close contact, in Washington in particular,
with the State Department, Treasury, Depart-
ment of Commerce, and there is constant dis-
cussion between us and between the United
States and her, and our, other allies of ways and
means in which the allies all together can best
pull their weight in this effort.
Supplement to above question -
Mr. Cleveland Lane, Assistant to the Presi-
dent, Manufacturing Chemists' Association,
Inc.
I think it is true that there is a great deal of
good cooperation in this field. However, I think
that there are some places where this cooperation
might be tightened. I have here a rather short
list of items which Mr. Khrushchev said he has
purchased from our European allies in various
phases of technology. This is the kind of thing
which we feel should be tightened - -some of
these are very important. Several of these are
the results of commercial cooperation between
our industries and European industries. One
of the things that we have proposed very strongly
is that not only should our own government try
to hold down on this kind of trade, but that we
should also seek a similar policy on the part of
our allies, including the Federal Republic of
Germany, Great Britain, Italy, France, and the
others.
ADMIRAL FLLIX STUMP.
In many selected areas American economic aid
exceeds Soviet assistance on a dollar basis, yet, the
Soviets are reportedly making significant gains on
us. How do they do it, and why is this possible?
Is not this the biggest and most fruitful area for us
to work on? Should not these discrepancies be over-
come before we simply add more dollars to those
already being inefficiently spent?
I think that sometimes we have certainly made
mistakes. I, myself, thought in Bangkok, for
instance, that we might have accomplished more
if we had built a nice wide boulevard from the
center of the city of Bangkok out to the airport,
instead of building some highways further inland
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and where they were very much needed in order
to allow the poor elements of the population in
that part of the country to got their produce to
market. I felt, too, that we are suffering under
a very great handicap in that we cannot get
enough. of the proper kind of people that we
want:, to work abroad - they just do not like
to live there.
Don't forget that the iiussians make mistakes,
too. Thev told about the concrete but I saw
that concrete sitting on the docks in the rain,
in bags, hard as a rock, and I had quite some
interesting discussions last May with some of
the Indonesians, and they told me a lot about
that wonderful sugar mill that Czechoslovakia
built in Indonesia. It was a wonderful sugar mill
but it was built for beet sugar not cane sugar,
so they could not use it.
F. A. ILIaiMluNS, Professor, Political Science
Department, University of Notre Dame.
(given as a major goal of the American people
national security and economic growth and welfare
what amount of our gross national product can
we employ for national security during the next
ten or f /'teen years, without seriously impairing
economic growth and welfare? Today the United
States uses about 1101o of its gross national product,
and the Soviets about 20010 for national security.
The U. S. Economy grows at a 3% rate and the
,Soviets at 6 to 8?10 rate. What do you think we
can afford to spend?
There is no definite limit as to the part of our
gross national product that we can use for
defense. We could, even in terms of percent, go
as far as the Soviets; this would only mean a
shift from the production of consumers' goods
to that of military needs. We can always balance
the budget by raising taxes. Presumably our
national security is something for which we are
willing to pay.
Resides the problem should be presented in its
proper terms. Those who are anxious to see more
done for our defense effort, both in regard to
conventional and to nuclear weapons, do not
reach for the skies: the amount of money for
which they would settle is quite manageable.
Furthermore, if we do the right things, we can
increase our gross national product by more than
the additional amount needed for defense. We
should remember that our economy has performed
a greal deal better since the war than was ex-
pected. Stalin was certain of a prolonged post-
war depression, and official Russian theory still
credits our economy with a tendency to collapse.
Actually, in virtually every free country (except-
ing, of course, the "underdeveloped" ones) there
has been a vigorous increase not only of produc-
tion in general but also in per capita income.
't'here is no reason why this trend should not
continuo. Economic progress does not mean a
simple expansion of existing production; it im-
plies a constant shift of production methods, and
of production goals. We are dealing with what
Professor Schumpeter called "innovations." Dur-
ing the past those innovations would "hunch
up"; there was a concentration in boom years
and a severe contraction in depression years.
By now several factors favor a "dynamic equi-
librium." First, technological inventions, the
basis of most "innovations," have been insti-
tutionalized. The inventor operating in his garage
still exists and still performs a vital function.
But we also have large research institutes with
the men and the means to produce a constant
supply of inventions. We make the career of
these men sufficiently attractive to secure the
talent we need, even if our educational system
fails to do its part in providing the proper prepa-
ration for such careers.
Furthermore, the specific tasks of the entre-
preneur in the process of carrying through
innovations are now performed by a group, the
members of which have been selected by a
competitive process certain to produce results.
Our society wants these men and it provides the
channels for their selection. (It is another
question whether their incentive is not unneces-
sarily lessened by certain types of taxation and
other factors.) Also, the work which they have
to do is no longer as hazardous as it used to be.
Extensive market research has made it easier to
ascertain what the public wants, and how much.
Finally, public authorities are in a better
position now to mitigate those monetary changes
which, in the past, had so much to do with
the alternation of boom and slump. I do not.
have to defend myself against the charge of
being a, "Keynesian." But it was known long
before Keynes that in addition to the "primary
depression," caused by certain disproportional-
ities, there is a "secondary depression," the
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proximate cause of which is a fall in the price
level and which can, indeed, lead to a "cumulative
downward trend." While economists have not
yet given up their habit of disagreeing among
themselves most of them would concede, (a) that
whenever there appears such a cumulative down-
ward trend it must be stopped, and (b) that it
can be stopped.
This realization alone suffices to make a repe-
tition of the world economic crisis impossible.
More is, of course, to be achieved if we want a
constantly growing national product without
inflation. Yet, a look at the economic history
of the post-war world is encouraging. German
production, for example, has, for some years now,
expanded more vigorously than our own and yet
inflation has been kept fairly well under control.
What they have done, we can do.
So far as the obstacles standing in the way of
such a result are concerned the brevity of these
remarks makes it necessary to be blunt. Com-
pare the annual increase in wage rates in Germany
and in the United States and you have the answer.
American wage rates have, for some time now,
increased faster than productivity; they should,
perhaps, increase less fast in order that certain
benefits of increased productivity be passed on
to the consumers, of whom the workers, after all,
constitute a substantial part. If our public does
not notice what is wrong here one of the reasons
is a rather naive version of the "purchasing
power" theory. It is assumed that any increase
in wage rates means more purchasing power for
the workers. For those directly concerned it does
so if the "elasticity of the demand" (for labor)
is less than unity if, in other words, an increase
in the hourly rate of wages exceeding the level
of marginal productivity, is not followed by a
loss in the number of hours worked which causes
the overall purchasing power of these workers to
decline. Besides, if the elasticity of demand is
less than unity and the workers in a particular
group secure a gain for themselves, the gross
national product will be less than what it would
otherwise be and workers in other branches will
suffer. In this country we have seen how cer-
tain products, such as coal, priced themselves out
of the market. We may reach the point where
the country as a whole prices itself out of the
market -- witness what has happened to our
automobile exports. Labor may price itself out
of the market too; automation, for example,
would be less rapid if wage rates were not so
high.
If, then, our gross national product is to
expand as rapidly as possible without inflation we
must see to it that our major cost item, wages,
does not increase faster than marginal produc-
tivity. In a democracy, however, matters such
as these are not, and cannot be, decided by a
small group in authority. The decisions are made
by a. welter of competing groups, each of which
has its own internal pressures to cope with.
When, for example, a particular labor leader
wants to be reasonable, the more radical element
in his union will immediately start "gunning"
for him.
Still, something can be done. The public must
realize what is at stake, and where the more
potent errors have been made. It must then
exert every possible pressure to bring business
and labor together on the basis of a sensible
program. There do exist beginnings of such a
development and they would progress faster if
those who work at this job received a little more
support.
One thing is certain: We need a constantly
expending production not only in order to cope
with constantly increasing demands for growing
defense expenditures; we need it also in order
to be able to compete with the Communist
countries in the markets of the world, in aid to
"underdeveloped countries" (provided such aid
is given and used with a minimum of common
sense), and in prestige. Mr. Allen W. Dulles is
one of those who have referred to this need with
a wealth of detail to which I must refer. What
he wants done, can be done, if enough. people,
and enough organized groups in this country
(and that ought to include the churches, which,
in the past, have allowed themselves to be guided,
at times, by people none too well informed on eco-
nomic matters) put their shoulders to the wheel.
Dim. MEYlrtnoFF:
Will you bring us up to date on what comparison
there is now between the engineering resources of the
United States and Russia, and also, would you
qualify it in terms of quality?
That is a moot question so far as statistics
are concerned because it depends upon who
you count. If we count all the bachelors in
chemistry and physics, who perhaps are not much
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more than good, well-trained scientific tech-
nicians -- then, of course, we come up with a
pretty good score. On that basis, however, we
are still substantially behind the Russians numer-
ically, because they have been turning out some
50 to 60,000 engineers a year from 195-1 on, and
the number - they say ambitiously - is to be
100,000 per year by 1960 in. engineering fields
alone. Likewise, in the scientific field, their
output has exceeded ours if we can measure it
solely on the basis of Ph.D's. Again, it is difficult
to make strict comparisons between the Soviet
equivalent and our own but, nonetheless, since
they direct their students into specific fields, we
do know that these people who have reached the
highest level of training in scientific fields out-
number our own. We have only about 8,000 to
8,500 Ph.D.'s and only two-thirds of them are
in science and engineering and related fields. If
we take the rough calculations that have been
given recently, I should say that we perhaps
might count, if we stretch our numbers, about
one million technicians and good technologists
at graduate levels and in engineering training.
't'hey presumably have one million and a quarter.
However, we must remember the fact that
the Russians have a tremendous internal prob-
lem. No matter how much they direct their
scientific manpower and engineering manpower
to military hardware and related matters, they
still have such internal questions as the develop-
ment of their mineral resources, the development
of plants, and likewise, the development of their
rather questionable transportation system over
a territory that is a couple of times larger than
ours, with 6,000 miles from Vladivostok to
Leningrad against our 3,000 miles from San
Francisco to Boston. So, they have internal
problems which do absorb a great many more
people at this time than we turn to the same
activities. We are at a general higher industrial
level than they are, particularly in the soft goods
or civilian consumer goods, and a great deal of
our manpower, of course, goes into that field.
You. asked about the level of training - again,
it is difficult to make any firm statement, because
the Soviet training is somewhat different than
our own. They believe in vertical training so
that the fields of physics that relate to electricity,
for example, are all taught in the same school
and you get the theoretical physics and you get
the applications. And, on the other hand, if you
go to Civil Engineering, they deal strictly with
hydraulic,; and the phases of engineering and
science that bear solely upon that particular area
of activity.. The result is that their men are less
able to cross over from one engineering activity
to another than our own more broadly trained
engineers. The same is true of their scientists.
On the other hand, there is other reason to
believe that within. these somewhat more spe-
cialized areas, their men are every bit as good as
ours, and if you take the run of the mill, they
are somewhat better in that they do have a more
intensive mathematics and scientific training than
we give, particularly in our high schools, hence
they have this head start in their institutions of
higher learning, and go somewhat further than
we do. I do want to stress, however, the fact
of a higher degree of specialization makes their
people less versatile than our own.
Again to Dr. Meycrhoff :
has any effort been made to create a national
roster of professional and scientific personnel in the
United States, similar to the one that existed during
World War II -and, would not such a roster help
reduce the vast expenditures and recruiting on the
part of the Defense Department industry?
There is such a roster. It is now called the
Register of Scientific and Engineering Personnel.
It is being carried on by the separate scientific
and engineering organizations. It is not com-
plete. In the engineering field, for example, only
a finders' list of people is being maintained. That
list consists of 20,000 people who are supposedly
able to put their finger on the specialists that
may be needed in an emergency. In the scien-
tific fields, however, a somewhat more compre-
hensive job has been done, but rather inadequate
use and maintenance are being made of the
Register of Scientific Personnel. The work is in
charge of the National Science Foundation, and
they are contracting with such agencies as the
American Institute of Physics, the American
Chemical Society, the American Institute of
Biological Sciences and the Engineers ,Joint Coun-
cil, to name only half the number.
DP:AN C. KEN WEIDNER, Faculty of Engineering,
American 1". niversity of Beirut.
What do your students at the Amerizan University
think of United States policy in the Mideast?
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Our students represent the people from East
Pakistan to Morocco and from Afghanistan down
to Ethiopia and the Sudan. Consequently, they
all have a great number of different reactions.
If you are referring to their reactions to what
went on last summer in Lebanon, Iraq and
Jordan, that is one thing. If you are referring
to how they regard American foreign policy in
general, that is another thing. I will try to put
it as clearly as possible.
The population of the Middle East still is very
friendly and likes the Americans very much, but
they make no bones about the fact that they
hate the American government because they
think it hypocritical. I could spend much time
telling you why -- and, I think, maybe convince
you. The Arab group, of which this Middle East
group is part, is trying desperately to re-establish
itself. It firmly believes that as long as the whole
world is polarized into two camps, no possible
chance of peaceful activity in any part of the
world exists. I think they honestly believe that
there is a place in the world, just as there is in most
of nature, for a third neutral but modifying force.
I am constantly bombarded whenever I arrive
here in. the States with the question - Are the
Arabs for us or against us? This is nonsense.
The Arabs are for the Arabs. As an American
friend of mine out there said -- "Our trouble is
that we can only see black and white . . . We
forget that most of life is made up of grey pages,
and we are so used to looking at heads or tails
on a coin, we forget that the thing has an edge
which is an infinite number of sides."
.As to what went on last summer, most of the
local people were more amused than anything
else, I think. We had our survey camp, as usual,
which consists of 100 students. Last summer we
had some nine or ten different passport national
itics in that group. They represented every shade
of political and religious thinking that you can
find in that part of the world. We ran the camp
in the mountains, as usual, right in the midst of
where -- according to your papers -- - there was
tremendous commotion. Fortunately, we make
it our business to be on good terms with all.
They understand why we are there. We ran all
summer without any difficulty in camp, without
any internal problems and without any external
interference. The University also ran all during
the summer session without any interference and
without any difficulty.
Our faculty represents as broad a segment of
humanity as the student body, and they insist
on academic freedom, limited only by the restric-
tion that to be a gentleman, you must be able
to disagree without being disagreeable. I think
that the only time there was any loss of time
during the whole summer was the afternoon
when everybody went up on the hills to watch
the Marines' landing operations.
I think this is the best way I can tell you how
they have reacted. The Arabs are not anti-
American. I do not think it is safe to say they
are pro-American any more than we are pro
something else. I think that the one thing I
can say which is pertinent to the purpose of this
meeting is that they cannot understand some of
the things we say, and they cannot relate some
of the things we say to what we do.
It is the belief of most of the world outside
of North America, that our whole concept, since
the end of World War II, has been to form what
we refer to as the "Free World." Now if we
mean "Free," then it cannot be committed .. .
Yet you have heard here today-reference to
the "Free World" and the "Uncommitted Coun-
tries." What is the difference? It seems that
we are playing with words.
Also, if we do recognize that we are at war and
that the war is a cold war based primarily on
economics, then most certainly, in those areas
we now refer to as "Uncommitted" hoping that
they will be our friends, we must make a work-
able common market. We cannot put up arti-
ficial barriers here, there and elsewhere and
exclude ourselves as something different if we
do not want others to exclude themselves as
something different from us and thereby make a
workable common market and their normal re-
lations impossible.
CLEVELAND LANE, Assistant to the President,
Manufacturing Chemists' Association.
how much is the United States spending on
research presently? Is it true that the Russians are
offering high salaries to attract American chemical
engineers to go to work in Russia?
I do not have the overall figures on the U. S.
expenditures for research, because you have to
take in the very large military research expendi-
tures. I can answer only for the chemical. in-
dustry which is spending approximately four
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hundred millions dollars a year. I think you
would have to total in a great many other figures.
As to the attempts to hire American engineers,
etc., f do not know of any specific cases, but I
have heard that offers have been made. They
have been made in some cases directly to in-
dividuals and in some cases in attempts to
purchase equipment for technology, the Russians
have offered to hire engineers to go along with a
new plant -- or something like that.
could produce more. We are importing a great
deal partly to help our allies. The same is true
in copper and, of course, the recent oil con-
troversy, with the quotas that have been estab-
lished, has been before all of you and there is no
point in my going into that. We could actually,
at the moment, produce all of our oil needs be-
cause we have a shut-in capacity in excess of
what we are importing. On the other hand, we
are worried about the depletion of our reserves
and for that reason feel that we should supple-
ment our domestic production by importations.
.I. MI.innii GEORGE, Economic Defense Adviser,
Office of the Assistant Secretary of Inter-
national Affairs, U. S. Department of Com-
nrerce.
flow dependent is the United States on foreign
sources for essential raw materials, and how much
of them do the Russians control?
Generally speaking, we are dependent on Free
World sources for a number of our raw materials.
However, for these raw materials we are in no
way dependent upon the Soviet Bloc. As to the
amount of the Soviet Bloc production of these
materials, this would be difficult to indicate in
any detail.
Supplement to above question
1)in. MEYERHOFF:
I would like to stress that-if the previous
speaker does not mind me going into a little
more detail ---we are capable, of course, of pro-
ducing most of our needs except in certain
critical things like manganese and tin. Russia
does have the largest reserve of manganese in
the world, and our trade with Russia in that
commodity has been cut off in retaliation for our
attitude on exports to Russia. Nonetheless, we
have been able to gather up manganese from
Africa and India, and more recently, the develop-
ment of the Bethlehem Steel Company jointly
with the Government of Brazil, has given us a
fairly ample supply. But, we must remember that
such things as tin, tungsten, manganese, chrom-
ium and most of the ferrous alloys must come
from abroad so that we are dependent on remote
sources of supply, except for nickel which we
can get from Canada and from Cuba. We are
also, of course, importing a great many other
things to supplement our own production. Lead
and zinc have given us a problem because we
Back to Mr. George:
What do the Russians want mainly from the
United States in terms of products or raw materials,
and what would they propose to trade in return?
Our experience has varied in this. For a
number of years we have had very little real
indication of what they wanted from us. During
more recent periods, we have had a much wider
and broader interest shown. However, the major-
ity of the materials that they seek lie either in
areas of advanced industrial materials or ad-
vanced plants and technology. These requests
are, of course, sweetened here and there by
various small requests for sundry materials that
are neither large in volume nor of particular
security significance to them.
PItoF i,EssoR BOUSCAnnN :
how do the Russians use economic penetration
to get political control of the nation, and can you
give an example of this?
I think a recent example was when the Soviets
tried to use their economic strength in an attempt
to bribe the Iranian Government, and the Iran-
ian Government resisted these economic bland-
ishments. I suppose that with respect to Red
China's attempt to subvert Laos there was
similar economic pressure. The Soviets, some
years back, made a barter deal with Burma by
which they got a lot of rice, and they sent Burma
enough cement to last that country for the next
150 years. That cement is now a testimonial to
the value of economic barter deals with the
Soviet Union. There probably are a lot of other
examples -- I am not a specialist in this field,
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and I would defer it to perhaps some other
member of the panel.
Supplement to above question -
Brig. Gen. Kenneth F. Zitzinan, Deputy
Commandant, Industrial College of the Armed
Forces.
Recently, there was a very dramatic example
when the Finnish government was forced to make
some changes in its cabinet. Immediately after
World War II, Finland was required to orient
its own industry toward Russia. Russia did this
by forcing Finland to pay heavy reparations with
specific types of products that the Finns did not
ordinarily make. This has made Finnish in-
dustry rely heavily on continued Russian orders.
A few months ago, Finland was in the process
of building three large icebreakers for Russia
which represented a considerable amount of
money in proportion to the size of her industry.
Russia took exception to the activities of a coup]('
of members of the Finnish cabinet recently and
demanded their removal. The alternative given
was cancellation of the orders for the icebreakers
in which considerable money had already been
invested by the Finns. The Prime Minister was
forced to acquiesce because it was obvious his
cabinet would have fallen if he had been forced
to absorb that blow to the country's economy.
N. JORDAN-Moss, Financial Counsellor, British
Embassy.
What are the advantages and disadvantages of
trade with Red China--and, do you think we ought
to do it?
I was, at one time, a British representative
on the Coordinating Committee Group in Paris,
where we had many battles on this subject.
There seemed to be two main questions on this.
I cannot supply the answers, but at least I can
point out the questions.
The question as far as trade with China is
concerned is always complicated by the question
of how much flows across the frontier between
Russia and China. The American view, I know,
is that practically anything for the Soviet Bloc
or the Sino-Soviet Bloc - practically any goods
you can send, from oranges to tanks -- con-
tributes in one way or another to the ability of
this great Bloc to wage economic or even physical
war. You therefore embargo all trade with
China - yet you continue to trade with Russia,
despite its common frontier with China. We,
on the other hand, are a nation who have to trade
to live. Our entire existence depends on the
exchange of goods, their manufacture, the taking
in of raw materials and the conversion of them
into high quality, high-conversion products which
we can trade to the rest of the world.
Now, for us, any interruption whatsoever in
world trade is extremely serious. It is not gen-
erally known and comes as a surprise to some
American friends of mine, that rather over half
of the trade of the world is conducted in sterling
and that we are the bankers for that trade, and
that London is the plain merchanting house of
much of that trade. Therefore, you can see that
there is a natural dichotomy of view between us
on this, a natural tendency to divergence of
viewpoint. The United States is naturally pre-
occupied with the strategic considerations in-
volved in trading at all with the Russian Bloc
and Red China, and we, whilst appreciating
those strategic considerations, are naturally con-
cerned also with the part we consider we play
in maintaining the defensive strength of the free
world by helping to keep its great veins of trade
open and flowing.
Now, the interaction of those two points of
view, I think, is a very healthy one and it is
brought together in committees such as the
Coordinating Committee in Paris, where the
two points of view (together with the points of
view of the other countries of Europe who are
generally somewhat less vitally concerned over
this whole business) are represented. What
emerges is, I think, a very good and balanced
approach to the question. As in so many of
these questions, general principles tend to be
broken down, in practice, into detailed applica-
tion and in those Committees which operate on
this matter the strategic, as compared with the
trade considerations are carefully balanced and
are brought down to specific, concrete and
detailed questions of what precisely is a "stra-
tegic good." What power of plant, what size of
vessel, is to be considered strategic, and what not?
What diameter of optical instrument is likely to
be strategic and what is not, etc.? So, by tech-
nicians, in technical discussions, by detailed
practical case history, these two complimentary,
rather than opposing, points of view are worked
out in detail. At present I would say that the
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balance tends to favor the strategic rather than
the trading interest.
Supplement to above question -
AuMIRAL 1'LLIx B. STUMP.
I. think the distinguished gentleman from the
British Embassy made a very concise and excel-
lent statement of what I would like to see to be
the unanimous American opinion regarding trad-
iny with Red China, but I am afraid it is not so,
because there are many people in the United
Slates who think we should trade with Red
China. I think too, that he expressed it very
well when. he said that there is one point of view,
and I certainly agree with that point of view,
that in the totalitarian country anything that
they are willing to take is something they need
in order to produce their end result which, from
the time of Lenin through Stalin and Khrushchev,
l:as been the objective of the Soviets. So, any
trade with the Communist Bloc of any kind,
whether it is China or Russia, is to the advantage
of the Communists and brings nearer and nearer
the time when they will begin to give us a great
deal more competition than they do now.
I would like to give just one instance of a
ion-strategic material and what happened: A
great quantity of small copper wire, which
was considered entirely non-strategic, was shipped
into Red China. Within a period of about three
months, the radio aircraft control net from
Shanghai to Canton went off the air. In other
words, they were using this copper wire to take
off the air information which we could intercept
concerning their military dispositions as far as
the Communist Chinese Air Force was concerned.
The British Empire and the United Kingdom
in particular certainly vitally depend on trade
but trade that increases the power of Red China
and lets her spread her influence and control over
Southeast Asia will cut off trade routes upon
which the British Empire is entirely depending.
Their trade routes from Europe and the Middle
it ast, through Australia, New Zealand and. up to
Japan will be closed if they lose Southeast Asia,
and this portion of trade is enormous. So, I
think that a trade policy with Red China goes
back: to something from the Bible, regarding,
1. believe, the Babylonians whose motto just
before the fall of that Empire was, "eat, drink
and be merry, for tomorrow we die."
h'RANK T. O'BRIEN, Development Loan Fund.
flow big is United States private foreign invest-
ment, and how does it compare in size with govern-
ment foreign aid expenditures today?
I have seen those figures, but t do not have
them here. I can tell the group, however, that
the Development Loan Fund, in the course of
the last year, has loaned its entire capital of 700
million. dollars in support of economic develop-
ment projects in underdeveloped countries of
the world. I know that the great bulk of U. S.
private investment abroad is in the petroleum
industry.
Supplement to above question
Mn. A. M. STRONG, International Financial Con-
sultant, Chairman, International Trade Com-
mittee, Illinois Manufacturers' association.
Last year, private investments abroad ex-
ceeded two billion 300 million dollars. They
were below the 1957 figure which was about three
billion 200 million dollars. I do not know the
total of private investments, but I do know that
about 7,500 branches and subsidiaries of American
companies are now operating abroad.
JACK L. CAMP.
If American private foreign investment is so
important a part of our foreign policy, why is there
no tax relief given to American foreign corporations
to help compensate for some of the risks, and to
make foreign investment more attractive?
No one that I know of in private business who
is interested or is engaged in investing money
abroad, believes that by proper stimulation from
tax helps in the United States, that investment
would not be a great deal more than it is today.
Efforts have been made from time to time by
trade organizations in the United States, and
even some of our government agencies interested
in stimulating American private investment
abroad, to obtain some tax abatement or tax
benefits for Americans that take their money
abroad and take the risks that are connected
with such investments, particularly in certain
countries, but so far the Congress of the United
States has not seen fit, and the Treasury has not
seen fit to ask the Congress, to pass such legis-
lation. The Boggs Bill, which is now before
Congress, I am sure all the people that are
interested in stimulating private investment
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abroad, will support. The Boggs Bill is the most
important measure before the Congress today,
and those of us who are interested in the subject
will certainly endorse that Bill.
Supplement to above question ---
DEAN C. KEN WEIDNErt:
I would just like to read a brief excerpt taken
from the Stock Exchange Gazette, published in
London, February 27, 1959. It is headed, "U. S.
stake in the common market." The high cost
of American labor has made it more and more
difficult for U. S. manufacturers to maintain their
position in overseas markets, especially since
productive capacity has been rebuilt in Europe
and Japan. This trend was reflected very dra-
matically in last year's 3,500 million drop in the
total U. S. exports. The accompanying table,
however, shows quite clearly the wide disparage-
ment between the wage rates in the United States
and those in the United Kingdom and other
European countries. Higher productivity alone
stemming from heavy capital investment for
employee is not sufficient to bridge the gap
between such earnings. The average, hourly
earnings in manufacturing in the United States
is $1.70 - United Kingdom, 74 cents - Belgium,
54 cents - France, 42 cents - West Germany,
57 cents - Italy, 33 cents - The Netherlands,
46 cents.
JACK L. CAMP.
What is to prevent an American company with
a branch plant operation in Canada, for example,
exporting to China, because Canada also trades
with China?
I welcome the opportunity of giving a couple
of comments on this subject. In the first place,
I would say this - that my company, Inter-
national Harvester Company - with factories
not only in Canada but in various places in
Europe and in England, has not exported any-
thing to Red China nor endeavored to export
anything to Red China either from American
factories or from our factories abroad. But, I
would like to say this in defense of the American
business in this coun try and American companies
operating abroad, who have brought up from time
to time this matter of selling to Red China -
I think there are two philosophies -- One of them
is "I will not sell my enemy" The other. is
"I will not sell my enemy unless it suits me to do
so and I can make more out of it than lie does."
We Americans have. always followed this policy
of saying "I will not sell my enemy." Our allies
not only now, in the case of Red China, but
historically, have taken the philosophy "I will
not sell my enemy unless I can get more out of
it or I think I can get more out of it than he does."
. It has never been properly explained to Ameri-
can manufacturers in this country, who are not
making strategic goods, why allies can sell these
non-strategic goods to Red China and Americans
cannot. I do not think our government has ever
satisfactorily explained that, and therefore, I
think that this is an opportunity on behalf of
the American exporting community -- the Ameri-
can manufacturers engaged in export - to ask
that somebody in government tell us why we can-
not sell Red China non-strategic goods; what we
gain by not selling them non-strategic goods when
our allies are selling them non-strategic goods.
It is very well to say that England depends
on exports and must export or die, but some
little fellow out here in Iowa or some place, who
has a little factory, might have to export or die
as well. So, it is just as important to him as it
is to England that he get some export business,
and maybe Red China offers him an opportunity.
I am not advocating selling to Red China. I am
just advocating a policy that somebody can ex-
plain and make some sense out of the explanation.
An American company operating abroad, with
factories abroad, is not permitted by our govern-
ment to sell to Red China even though it resides
in a country which permits its citizens to ship
to Red China. So, if an American company con-
trolled by Americans in Canada wanted to ship
something to Red China, they could not do it. A
Canadian company, right across the street, with
non-strategic goods, can ship all they want to.
It does not quite make sense. Maybe somebody
in the government some day can explain it, but
I have talked to a lot of high people in govern-
merit and I have yet to get a satisfactory ex-
planation.
D. GEJuIAlrr NIEMEYErt, University of Notre
Dame.
Should we boycott all the Communist countries
and trade only with the free world?
The cold war is being fought by economic
means in three planes trade is only one of
these. Another is Soviet aid, and the third is
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the direct competition in productive capabilities.
,is expressed in such spectacular advances as
Sputnik or steel plans which are shown to foreign
vi3itirrg firemen, or some such other spectacular
achievement on which the Soviets concentrate
their entire energy, simply to show that their
system of production is superior to ours in the
short run as well as in the long run.
As far as the menace of trade is concerned,
even taking into account the increase in the
Soviet classification in world trade that has
taken place in the last few years, I do not know
that it has ever been too serious a threat. Trade
can cause considerable disruption, and it can
create a certain amount of dependence - not
only the Soviets but the Nazis have shown that.
The Soviets have shown it recently in such
countries as Iceland and Finland; the Nazis have
shown it in such countries as Rumania, Bul-
garia, etc. - but the Nazis did not take over
these countries by force of trade. They took
them over by military invasion, and the same
ping is true of the Soviet threat - it will not
In made good except in political and military
terms, although it can create disturbance and
disruption by means of trade. But that is a
passing annoyance.
Boycott of the Communist countries should be
seen as a defensive measure vis-a-vis Soviet
aggression. The crucial question here is: What
is our capacity for increasing the internal eco-
nomic difficulties of the Soviet Bloc in itself?
The Soviets approach all economic problems as
apolitical problems. They tend to achieve political
aims with economic policies in the long run and
in the short run. To the extent to which we think
ill terms of normal world trade or the beneficial
effect of world trade or the desirability of not
disrupting world trade, we think on a different
plane and tend to be vulnerable to Soviet propa-
ganda. Boycott of Communist countries should
root be ;judged from the point of view of a normal
system of world trade but rather from the point
of view of defensive struggle against a power
that uses peaceful activities as a means of ag-
gression and conquest.
Therefore, I would say to the extent to which
we refuse to trade with them, we increase their
political difficulties, not just the economic dif-
ficulties. To the extent to which we can do this,
we certainly ought to do it.
BRIGADIER GENERAL KENNETH F. ZITZMAN,
Deputy Commandant, Industrial College of
the Armed Forces.
What future role do you see for the European
common market plans and means of strengthen-
ing Western Europe's economy, thereby combating
Soviet economic gains?
I think the European Common Market will
strengthen the Western European economy con-
siderably and be a large factor in combating
Soviet economic aims. Some of the stresses and
strains that are being felt now in the Common
Market area are caused by the very adjustments
which will make those countries stronger and less
dependent on goods emanating from the Soviet
bloc. I am referring specifically to the situation
in Belgium now, where it is not economical for
them to continue working some low productivity
coal mines.
Temporarily, an appreciable number of coal
miners are becoming idle as activities in those
particular mines are being cut down. The basic
agreement of the European Common Market
contains provisions for relocating idle workers
and so adjust to improved conditions. Those
unemployed. miners will not be moved out of
Belgium unless they want to be, but opportunities
for new employment and the necessary training
will be given them.
However, when this rather tenuous period of
development is completed and the six countries
are welded into a closely knit economic unit,
their combined efficiency and productivity will
be greater than the sum of their individual ones
had been before. As such, it cannot fail to
stabilize and strengthen the Western European
economy of which it forms a considerable portion.
CHARLES S. DENNISON, Vice President-Over-
seas Operation, International Minerals and
Chemical Corp.
What is the best way for the United States to
combat Russian dumping, and what part should
private business and government play in combating
it?
We have had some slight experience with
dumping. We have it in Japan where Russia
has moved ill at tines and offered minerals at
depressed prices. Of course, the most dranuai.ic
case was aluminum which cost the American and
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Canadian aluminum companies about 116 million
dollars in earnings as a result of depressed dump-
ing by the Russians.
Point number one: The Russians are not
operating under a free enterprise system. They
do not have labor unions. They do not have a
standard of living to maintain. They do not
.have stockholders. We do. The aluminum com-
panies cannot consistently stand a loss of 116
million dollars. The Russians have achieved their
purpose because they have seriously hurt an
important facet of our economy. They have
forced labor. They do not have to maintain a
standard of living, as I previously stated.
We must have recourse to the Government.
I do not think this has to be a steady policy.
.1 think that what you have to be prepared to do
its to meet this dumping when it occurs ... meet
it promptly by support from the Government.
Do not change your channels of distribution.
Maintain them, because the tentacles that we
have developed through the private enterprise
system are most important to our world strength.
But when the burden becomes unsupportable,
at that point, the Government should have an
agency which could step in promptly, remove the
burden from private enterprise, and keep the
Russians out.
Supplement to above question -
Ma. A. M. STRONG, International Financial Con-
sultant; Chairman, International Trade Com-
mittee, Illinois Manufacturer's Association.
I believe that dumping is a problem not only
in the United States but throughout'the world,
and this a part of the overall problem. I think
that our allies should coordinate and cooperate
with us in our policies on Russia. In other words,
if we do not sell to Russia and to Red China,
they should not sell - there should be an under-
standing. And, if government is to do something
about it, it should not be the United States
government alone - it should be all the govern-
ments who are with us in this program.
Supplement to above question -
Mn. WILLIAM BLACI{IE :
I cannot favor a state trading corporation.
I think it would be setting up one of the worst
possible socialistic devices and f cannot, see the
aluminum companies - Alcoa, Kaiser, Reynolds,
and others - being bailed out like subsidized
farmers. We do quite a bit of dumping ourselves
one way or another, so maybe it isn't such an
illegitimate way of doing things - at least when
it is done our way. I think, furthermore, that
when the Soviets go as far as they did in alumi-
num, there is no effective resort, and that a race
to out-dump each other could only lead to com-
plete chaos. So what might the alternative be?
I do not think that the entry of a state agency
into this situation would provide a permanent
solution; and if it is not permanent it is not a
solution.. Furthermore, there is no such thing
as a temporary state agency -- ready and willing
to step in or out as circumstance might demand.
And private business cannot live with losses
unless they be only a temporary interlude to
protect long-term profit earning. So there may
be no good alternative but to quit - to retreat
from unacceptable conditions beyond our control
or remedy.
Naturally, I would not like to quit - but there
are worse things than judicious withdrawal from
an untenable situation. And if Soviet prices are
based on less than costs then it might be just
as well to let them have the losses. We in private
business would not be prepared to accept such
losses and we have no right to believe that they
should be borne by the U. S. tax-payer.
So, in looking at this problem, let us not be
so overanxious to meet Soviet competition that
we fall into the trap of either sovietizing ourselves
or weakening our economic strength by dis-
sipating our resources for less than a net addition
to our national wealth.
Further supplement to above question -
DR. HOWARD A. MEYERHOFF:
If we go back to the two most recent examples
of dumping in the minerals field, we find that
80 or 85% of all the aluminum dumped by the
Russians was bought by British concerns. We
find that 95c/'O of all the tin that was dumped
was bought by the Dutch or by the British.
Now, both of those countries have a deep interest
in the success of Aluminium, Ltd., and of the
tin group, the International Tin Commission
and the production in Indonesia and Malaya.
It seems to me that a little cooperation on
the part of those governments, possibly within.
the limits of the common market, would take
care of the problem - simply put up govern-
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r rental barriers against dumping of this kind,
recognizing it as such, and recognizing the com-
riorr interest of the other nations within unified
Europe. It seems to me that this calls for coopera-
tion upon the part of several governments, and
particularly those who are the principal offenders.
TViore supplement to above question -
JACK L. CAMP:
I think that it is pretty important in analyzing
this as to whether we are really at war or whether
we are not at war. Khrushchev said, "I declare
'var on. you in the peaceful economic field" or
more or less words to that effect. We have never
;aid that we will accept that challenge, that I
know of. We have aided underdeveloped coun-
,rics to help the poor, underprivileged people of
he world, and we give arms to our allies, and we
have malty other programs, but I have not heard
he words "economic warfare" mentioned since
1e made that statement. .I think it is very
rnportant, when we talk about creating a state
trading entity here, whether we are talking about
fighting the war or whether we are talking about
:treating something which is going to destroy free
enterprise - which is the very thing that we are
fighting for -- so, I think you have got to clarify
what we are talking about.
't'here is one other thing along this line that
I would like to bring up and that is, that so far
in the economic war, if there is such, we have been
on the defensive, the same as we have been in the
cold war in. most places that I know of. So, I
think instead of studying what we are going to
do when the, Russians dump aluminum, or when
they go in and break the tin market, let us get
on the offensive if we are fighting an economic
war and it really is an economic war ; and there are
many things that we can do to accomplish that.
N. JORDAN-Moss, British Embassy.
I understand, in this aluminum dumping opera-
tion, that the British were the ones who bought most
of it and thereby maybe hurt themselves--and,
inasmuch as it was said that about one-half of the
trade of the world occurred in the sterling area, do
they have any plans for combating this and on what
basis?
Let. me say this that I had expected in the
United States to find something of a prejudice
against state trading! Now, we are not a govern-
ment which generally indulges in state trading
Therefore, our traders are generally free to buy,
without governmental interference. When they
find a profitable buy, they buy, and that is
probably how a good deal of this metal got to
be bought. I would like to endorse, however,
the idea that in all these matters, consultation
between allies is obviously important and good.
The more it takes place, the more we consult
the facts of situations like this and determine
on policies to combat them, the better.
I would like to put in a comment about dump-
ing which I do not think has been referred to so
far, and that concerns the origin of many of these
supplies which are dumped.. It is a frequent
Russian practice to go into underdeveloped coun-
tries, and provide them ---- as on the whole
neither you. or we do -- with purchasing contracts
for raw materials, spreading over many years in
many cases; buying the products from them
under long-term contracts. Very often, these
products have relatively little interest to Russia,
but they are of tremendous interest to the
countries concerned, particularly at a time like
the present when the terms of trade are so heavily
against these underdeveloped countries, and when
they so badly need foreign exchange to complete
their development program.
Now, the Russians go in and they buy large
quantities of these primary products produced
by these countries, and then sell them again on
the world market at dumping prices. This means
that they can accomplish two objectives at the
same blow -- they can make themselves popular
with the underdeveloped countries and they can,
at the same time, embarrass us by depressing in
the long term the markets for those products
which the countries are most interested in.
Now, I would suggest that in these circum-
stances, the Western free countries should con-
sider among themselves how they can mitigate
this process by commodity agreements concerned,
not with bucking a long term trend in prices of
any particular raw material -- this would be
unrealistic -- but with a more limited objective.
It seems to me that it is possible, in certain limited
fields, to discuss ways and means of avoiding
sudden sharp fluctuations in the trend of com-
modity prices, and it is those fluctuations that
particularly disturb underdeveloped countries,
and give them too little time to adjust themselves
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to movements in world prices. I think in that
limited field it is possible to do a great deal in
respect of individual commodities, and while we
should not try to fix up arrangements which will
provide an artificial floor to a long-term trend
in production or off-take, we could, nevertheless,
perhaps find means of avoiding these sudden
sharp and difficult fluctuations.
If I may revert to the common market, speak-
ing about it as a European, I know that the
United States has always had a very great
political interest in the development of this
great experiment. It has often been said that
the United Kingdom has a hostile attitude
towards it. This is not true. We believe as you
do that this experiment is an important step
toward the central political and economic uni-
fication of Europe. However, unless the countries
of the common market can reach a really satis-
factory form of modus vivendi with the other
countries of Europe that surround them, this
community of nations -- this tight-knit economic
unit -- can divide Europe politically and eco-
nomically rather than help unite it, and I would
like to suggest that one of the most important
things that the United States can do in this next
year or so is to bring to bear the great power of
its influence in Europe towards helping to build
from this bridgehead of the common market, to
expand it into a unified Europe, to help find
ways of associating with it other countries which
for various reasons, economic, political, etc. are
unable to join the common market on its full
terms; to help to find a form of association be-
tween the common market and the rest of Europe,
which will make that first step a real first step
toward unification rather than the beginning of
political and economic disunity.
FRANK T. O'BRIEN, Development Loan Fund.
We talk about not wanting state trading. In a
sense, don't we have state banking with the World
Bank, the Development Loan Fund and the Inter-
national Finance Corporation -- and, if so, does
this state banking activity really hurt private bank-
ing or has it been devised so that it actually helps
private banking and private enterprise overseas?
We welcome the opportunity to assist by
making loans in underdeveloped countries to
privately operated industries which develop the
economic resources of those countries. I might
point out a number of loans which have been
made directly in that line. There have been 70
loans made in the last year which is the first
full year of the operation of funds. We have
been limited in capital to 700 million dollars and
all of that has now been committed.
Among the loans which have been made was
one in Central America to a country which, in
the past, has depended entirely upon coffee for
its economic existence. This loan is a loan through
the private banks of this particular country which,
at the moment, is to the extent of five million
dollars, to permit smaller loans to be made to
operators in the rubber industry which will
thus permit the change of the economy and the
diversification of the economy of that country.
Another example is a loan in Paraguay to an
American firm, International Products Corpora-
tion. That firm is a strong American firm but
it needled additional loan capital to provide itself
with certain equipment and material for develop-
ment of its operation. It is the largest, single
dollar-earner in the country of Paraguay and that
country, of course, needs dollar foreign exchange.
If the Development Loan Fund had sub-
stantial capital, it could make many greater
contributions in this particular area. It is an
area in which the government is deeply interested
in assisting private enterprise abroad in the
underdeveloped areas of the world.
J. MISIIELL GEORGE, Economic Defense Adviser.
Should the objective of any economic competition
in Soviet Russia be limited in scope to pure contain-
ment or is successful economic warfare the avenue
to victory in the struggle for world domination?
It seems to me this is more a basic political
question than. a commercial question.
We have been involved for some years in a
trade control program, both internationally and
in the United States, addressed to denying the
Soviet Bloc access to the better industrial mater-
ials, equipment, and technology. We have at-
tempted in this program to be selective in our
effort and to concentrate on those commodities,
equipment and technology which are of strategic
significance to the Soviet Bloc. From the begin-
ning of our program, there has been a vast -
and I use this word advisably - a vast area of
material and equipment which could be exported
to the Soviet Bloc. For the most part, however,
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the Soviet Bloc has not been interested in these
goods or equipment which are the types which
are normally used in a civilian economy in raising
the general standard of living of a people. The
Soviet Bloc has been interested - and this in-
terest has recently been sharply renewed - in
obtaining our advanced technology, our advanced
equipment. It has recognized that the receipt
of such equipment and technology would mean
an advance of some years in its own efforts in
some areas where the Soviet Bloc has been par-
ticularly lacking, and one of these is the general
chemical industry. Such imports would con-
stitute a tremendous advance for it. In a very
short period, the Soviet Bloc could acquire the
technology to permit it to move ahead very
rapidly and, indeed, to move ahead to the point
where we would open up another broad industrial
area from which goods, technology or equipment
could be dumped in Free World areas to the
embarrassment not only of some of our friends
abroad but also to some of our own exporters.
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Part Seven
Summary of the Conference
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 CHAPTER TWENTY-ONE
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SOME OBSERVATIONS AND CONCLUSIONS ABOUT THE ECONOMIC, PSYCHOLOGICAL
AND PROPAGANDA ASPECTS OF SOVIET EXPANSIONISM
By THOMAS H. COULTER, Chief Executive Officer, Chicago Association of Commerce and Industry.
The newness of the Soviet economic challenge
and the lack of understanding of its psychological
and propaganda aspects on the part of the
.American public and business has made this
Conference an intriguing experience as experts
in the fields of foreign trade, education, research,
science, business, government and the military
services have revealed their observations, analyses
and opinions of how the latest Communist threats
in the cold war can be successfully challenged and
defeated.
The Conference is indebted to those principal
speakers whose profound views provoked such
interest from the record audience and contributed
so much to the substantive questions presented
to the panel sessions of the Conference and the
keen observations of the respondents.
The principal objectives of the panel on the
"Economic, Psychological and Propaganda As-
pects of Soviet Expansionism" were as follows:
1. Define the nature and threat of the Soviet
economic challenge.
2. Evaluate the scope of the new Communist
offensive.
3. Describe its operation in actual practice.
4. Suggest how it can be successfully com-
batted.
5. Recommend policies for private business
and government to meet its threat im-
mediately and decisively.
The Soviet economic threat has taken form in
the past two years as America's firm stand against
Russian armed threats and aggression has created
a nuclear stalemate for the time being. The new
Communist propaganda line had its beginnings
in November 1956 when Mr. Khrushchev boasted
"Whether you like it or not, history is on our
side. We will bury you." Later he announced
"We declare war on you in the peaceful field of
trade. We declare a war we will win over the
United States. The threat to the United States
is not the I.C.B.M. but in the field of peaceful
production. We are relentless in this and it will
prove the superiority of our system." In 1957
he declared "We think capitalism should be
destroyed not by means of war and military
conflict but through an ideological and economic
struggle." In January of this year at the 21st
Communist Party Congress he boasted about
Soviet economic achievements and promised that
in fifteen years the USSR would take first place
in the world, not only in total output but also
in per capita production.
Going back further to the eve of the October
revolution in 1917, Lenin stated "War is in-
exorable. It poses the question with ruthless
sharpness: To perish or catch up with the leading
countries and outstrip them economically." From
"Stalin on Revolution" in 1948: "The goal is
to consolidate the dictatorship of the proletariat
in one country using it as a base for the over-
throw of imperialism in all countries."
This relentless enmity on the part of Soviet
Russia for the Western democracies has remained
steadfast for 42 years.
It is clear now that the Russians feel strong
enough to engage in open economic conflict, and
secure enough from military attack, that they
are now in a position to outstrip, overthrow and
eventually control the world.
The stark fact is that we are engaged in an
all out economic war and the Sino-Soviet bloc
has given itself fifteen years to make good its
boast in this death struggle for world supremacy.
While the Russians hope to gain their ends by
methods short of military war, they have re-
peatedly shown their willingness to use military
threats and adventures to achieve these ends.
Witness Berlin, Poland, Formosa Straits, Korea,
Greece, Hungary, Indochina and Tibet. Even
though they may honestly hope to avoid war,
their economic policies nurture the seeds of war
because Mr. Khrushchev has stated "We value
trade least for economic reasons and most for
political purposes."
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The first manifestations of the Soviet economic
war are now a matter of record as well as the
political and propaganda aspects of the new
offensive.
During the Thirteenth United Nations General
Assembly sessions, Bolivia, Indonesia, Malaya
and Thailand complained against the Soviet
Union (which incidentally is a tin purchaser and
not a tin producer) dumping tin in the world
market. The Bolivian delegate said that the
USSR was guilty of "economic aggression de-
signed to bring about the collapse of the inter-
national tin market." Bolivia was hardest hit
when world tin prices dropped 12%. At the
same time that Moscow was striking at the
Bolivian. economy and inflicting misery on its
working people, the Soviet fifth column in
Bolivia, the Communists, were violently de-
noancing the United States and the Bolivian
Government for the unemployment caused by
their masters in Moscow. This is a typical
example of the tactics of international Com-
munist gangsters working both sides of the street.
Soviet dumping, whether it be tin, aluminum,
rice or cotton, is not due to surpluses at home.
If she Soviet people were not being deprived of
cor-sumer goods, Russia today would be short of
tin, aluminum, and cotton, all of which have
been dumped recently. In fact, the Soviet
Government often resells at lower prices in the
very country where it has previously purchased
commodities . . . lfgyptian cotton is a case
in point.
soviet trade missions are busy in the under-
developed nations of Asia, Africa, Latin America
anc h;urope. They are meeting with success.
l+'ree world trade with the Soviet bloc increased
from $3.5 billion in 1.951 to $6 billion in 1957.
.Czechoslovakia is building a sugar refinery in
Ceylon and a tire factory in Indonesia. Rumania
is selling oil drilling equipment in India and
supplying the inevitable teams of "technical
obs3rvers." Even Red China with massive ceo-
noniic problems at home is extending aid and
establishing textile mills in Burma. Russia is
building a large steel mill in India where its
trade has grown from $22 million in 1953 .to
:122 million in 1956.
Moscow has made much noise about attaching
no strings to any credits or economic aid it may
give. The experience of Yugoslavia exposes the
fraud of this Kremlin claim. It was not eco-
nomic competition, but political differences be-
tween two Communist regimes which led Khrush-
chev to withhold credits from Tito.
In reality the Soviet Union attaches not
strings but ropes to the "aid" it is prepared
to give other countries. Nasser can say much
to enlighten the world on this score as can
the Burmese Government about the operations
of the Bank of China in Burma financing the
Communist conspiracy and its military operations
against a courageous Asian people.
It is not concern for the needs of the people
but only interest in advancing Communist im-
perialism which explains Peking's recent gift of
six factories to Yemen, although this extremely
underdeveloped country has no labor force to
operate the plants.
The most serious impact of the Soviet indus-
trial power is on the newly independent countries
of Africa and Asia. These countries are in a
great hurry to industrialize. Because of the vast
industrial advances made by the USSR in forty
years, some leaders in these new nations look on
Communist Russia as a model for a short cut to
rapid industrialization and prosperity. These
leaders fail to see that the Communist short cut
can only short-circuit their newly won inde-
pendence and destroy the democratic liberties
they won after many years of bitter struggle.
The Soviet bloc has been skillful in its dema-
gogy, timing and tactics, all calculated to give
the impression of Communist interest in the
well being of the people. Soviet economic pene-
tration of these young nations will bring rewards
to the USSR far exceeding in value the volume
of Soviet credit, loans, trade and aid. Should
Russia ever equal or exceed United States indus-
trial capacity, this phase of the Soviet threat
will become even more serious.
Since 1939 Russia has brought fifteen once-
independent nations into a state of abject
servitude. It has a hard core of agents in prac-
tically every country of the world. The current
economic offensive of tke Sino-Soviet Bloc in the
remaining underdeveloped countries of the free
world began in 1954 and the first sizeable credit
agreements were concluded in 1955. By the end
of 1.958 the bloc had signed agreements with
eighteen less developed countries to provide
$2.4 billion in credit and grants for economic and
military aid.
The USSR has been in the forefront of the
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offensive with $1.6 billion, the European satel-
lites next with $650 million, and Communist
China, about $120 million. At the end of 1958
a little over $900 million had actually been
delivered, much of it in the military field.
The increasing tempo of the bloc offensive is
indicated by the fact that aid agreements covering
approximately $1 billion were concluded in 1958
as compared to $300 million the previous year.
Some of the larger bloc commitments in 1958
include :
Egypt: $175 million for various development
projects and $100 million for the Aswan
Dam, as well as large additional arms credit.
Argentina: $100 million for the petroleum
industry.
Indonesia: $225 million for military and eco-
nomic aid.
Iraq: $120 million for arms.
Ceylon: $30 million for development projects
and $10 million for machinery.
India: $21 million for a foundry and $11
million for a refinery.
Yemen: $41 million largely for transportation
projects.
Yugoslavia : $300 million of bloc credits were
cancelled.
In addition to aid to free world countries,
intra-bloc aid in the form of credits, grants and
property transfers were on the order of $6 to
$7 billion.
In the ten-year period 1948-58, the United
States through five main sources, namely, Inter-
national Cooperation Administration, Depart-
ment of Defense (Mutual Security Program),
Development Loan Fund, Public Law 480, and
the Export-Import Bank (long term loans) pro-
vided about $25 billion in military and economic
assistance to some 55 less developed countries
of the free world. Of the total, about $16 billion
was economic assistance.
Since mid-1955 when the Soviet Bloc became
active in economic aid programs, the United
States has extended $4.4 billion in both military
and economic aid to the 18 free world loss-de-
veloped countries which have accepted bloc
assistance as compared with $2.4 billion for the
bloc during roughly the same period. Of these
amounts, economic aid from the U. S. A. was
$3.3 billion compared to $1.6 billion for the
Communist bloc.
The terms under which the bloc and U. S.
aid are provided differ markedly. Practically all
bloc aid has been in the form of credit, while
U. S. aid has been largely grants and loans.
Soviet credits carry interest of 2.0 to 2.5%.
Satellite countries, 3.0 to 4.07; and the U. S.
3.5 to 6.00/0. The U. S. allows longer time for
repayment, up to 40 years compared to 12 years
or less for the Soviets.
Most bloc agreements provide for at least
partial repayment in commodities, while a sub-
stantial portion of U. S. loans have required
payment in dollars, although currently an in-
creasing number are repaying in local currencies.
Bloc assistance is virtually tied to the use of
bloc goods and services, while much U. S. assist-
ance is used by the recipient for procurement in
third countries.
The following tables give rough comparisons
of the value of U. S. and Sino-Soviet Bloc credits
and grants to those countries which have accepted
bloc assistance.
During the first half of 1958 Soviet exports
to the less developed countries continued to rise
at a significant rate ... about 15770.
During the latter half of 1958 about 2,800
non-military technicians from the Sino-Soviet
Bloc spent a month or more in the 19 free world
countries the Soviets are aiding. Corresponding
military personnel numbered about 1,200. A
minimum of 1,000 students have accepted scholar-
ship offers in the Soviet Bloc. As compared with
50 bi-lateral trade agreements, at the end of 1953
bloc countries had 177 agreements in force with
32 countries at the end of 1958.
It is easy to exaggerate the importance of
certain Sino-Soviet activities because one would
expect the second largest nation in the world to
engage in international trade on a considerable
scale, and Russian trade with the rest of the
world has lagged far behind that of a normal
nation. As long as trade with Russia does not
constitute a sufficiently large component of the
trade of another country to give the Soviets
actual or potential control or undue pressure
over the country, as is true of Finland, its results
are not all bad and can in some cases be beneficial
to the country concerned and the free world.
Insofar as Soviet development projects assist
the country concerned without creating possibil-
ities for control, undue pressure or propaganda
effects, the result may be to reduce the need of
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TABLE I
SING-SOVIET Bloc CREDITS AND GRANTS EXTENDED TO FREE WORLD Liss DEVELOPED COUNTRIES
1 January 1954 - 31 December 1958
(Commitments in millions of U. S. Dollars)
Recipient Countries
Total
Grand Total
2,384 *
Middle East and Africa
Egypt
626
Ethiopia
2
Iran
3
Iraq
120
Syria
323
'T'urkey
13
Yemen
59
South and Southeast Asia
Afghanistan
159
Burma
34
Cambodia
34
Ceylon
58
India
304
Indonesia
364
Nepal
13
/Europe
Iceland
5
Yugoslavia
163
Latin America
Argentina
1.02
Brazil
2
34
34
58
304
194
13
5
163
102
2
Total aid by years is as follows: 1954 - $11 million; 1955 -- $339 million; 1.956 -- $718 million;
1957 - $287 million; 1958 - $1,029 million.
t Includes $27 million in an unutilized Soviet credit which is ostensibly outstanding but on which further
drawings are unlikely.
TABLE II
COMPARISON Or CREDITS AND GRANTS EXTENDED TO 18 LESS DEVELOPED COUNTRIES OF TIIE FREE: WORLD
BY SING-SOVIET BLOC AND By UN[TED STATES
(Bloc commitments and U. S. obligations and authorizations in millions of U. S. Dollars)
Sino-Soviet Bloc *
Mid-1955
United States t
Mid-1955 1948
Thru Dec. 1958
Thru Dec. 1958
Thru Dec. 1958
'13)TAL ECONOMIC & MILITARY
2,373
4,442
8,628
TOTAL ECONOMIC ONLY
1,591
3,304 t
6,005 t
Afghanistan
116
62
101
Argentina
102
285
449
Brazil
2
551
1,108
Burma
34
58
79
Cambodia
34
125
164
Ceylon
58
32
38
1!%gypt
311.
22
123
Ethiopia
2
45
54
Iceland
5
17
55
India
304
954
1,312
Indonesia
194
143
258
I ran
3
153
397
Iraq
-
10
18
Nepal
13
14
19
Syria
195
-
1
Turkey
13
431.
909
Yemen
42
--
-
Yugoslavia
163 $
402
920
* The Bloc aid figures include about $120 million of credits extended in the first half of 1955. They
exclude about $1 I million in credit extended to Afghanistan in 1954.
t Includes grants and credits from: (1) ICA obligations; (2) 1)LF loan agreement signed; (3) Exlm
Bank loans :IUthorized; and (4) P.L. 480 funds earmarked under Title I, authorization Under Title II,
and shipments authorized under Title II.
t See footnote t of preceding table.
Economic Military
1,602 782
311 315
2
3
- 120
195 128
13
42 17
127 32
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the country for development assistance from us
and other countries.
Taken as a whole, however, and particularly
in conjunction with the prospect of an increase
in the Russian gross national product over the
next few years of about 6% per annum as con-
trasted with a U. S. rate of 4%, the Sino-Soviet
economic threat places the United States in a
position of great peril.
Right now the whole grant and loan develop-
ment assistance program to the less developed
countries is being questioned in light of the
almost insurmountable task of having economic
development keep up with population gains. It
has been noted that a 2%a annual increase in per
capita gross national product, which is considered
a good. performance in a less developed country,
would in the case of a $60 a year per capita in-
come in India provide each person with only a
little over a dollar addition to his yearly income.
Reference is frequently made to the fact that
America just does not have the resources to
assist in increasing substantially the living stand-
ards of the millions in the less developed countries
of the world. We give economic developmental
aid as an incentive for countries to seek the
realization of their national aspirations within
the economic and political framework of the
free world. The masses of the people of these
countries are dedicated to a betterment of their
way of life. They do not expect miracles but
must see activity and at least hope of progress.
We need these nations in the free world, both
from the standpoint of their trade, raw materials,
political support in and out of the United Nations
and their moral and psychological support in the
cold war. In the present uneasy balance between
the Sino-Soviet dominated and free world group-
ings the loss of any nation becomes a major
disaster. The whole world watches in fascinated
horror today as Iraq appears to be slipping into
the quicksand of Soviet domination. What is
happening in Iraq can happen elsewhere.
The Draper Committee in its recent Interim
Report posed the problem of foreign aid as being
in its broadest aspect a basic issue of foreign
policy and our most potent weapon in meeting
the Soviet economic challenge.
With our government leadership committed
to a long-range continuing economic aid program,
the where, when and how much to use it represent
the most important decisions in the strategy of
the cold war. It has been suggested that its
present amount of about 1% of our gross national
product could be continued indefinitely without
serious consequences to the American economy.
As we view the threat of the new Soviet
offensive in the so-called field of peaceful trade,
and plan our strategy to combat it immediately
and decisively, it is enlightening to evaluate our
relative strength in the vital areas of industrial
capacity, research, manpower and productivity.
In all basic resources, such as the steel industry,
power production and transportation, the U. S.
holds an impressive advantage of at least two
to one, but the Soviets are making impressive
gains and are closing the gap. With the addi-
tional capacity of the committed nations of the
free world, our advantage over the Sino-Soviet
Bloc is even more impressive. For example, the
West produces three times as much crude steel,
four times the petroleum, and almost twice the
coal. Comparing the United States and Russia
directly, we exceed Russia by a substantial mar-
gin in the production of almost every item ne3es-
sary to make capital goods- or consumer goods.
With only 6% of the world's population, the
USA is consuming almost 60% of the world's
production, of which about one-half is produced
within the United States.
For decades the United States has been the
shining model of economic growth in the eyes
of the world. Our way of life and especially our
prosperity and security have . been the most
eloquent argument ever advanced in favor of
democracy as a political form and of free enter-
prise as an economic system.
Now Russia wants to be that model so that
the peoples and nations of the world will in the
same way be attracted to Communism. They
are convinced that if they can overtake us, then
all the great uncommitted areas of the world,
in Asia, Africa and parts of Europe and Latin
America, will swing to their side.
The propaganda aspects of Soviet research in
the missile and nuclear fields have been impres-
sive because in rocketry they are ahead . . .
probably five years ahead in certain aspects.
The Russians are training more engineers and
scientists than we are, and have an impressive
lead right now in numbers but not yet in quality.
They have noticeable major weaknesses in the
chemical industry, hence their latest efforts to
buy chemical plants in the United States on a
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turnkey basis to telescope the years of research
and development American companies have in-
vested in this industry.
The Soviets will have to spend tens of thousands
A man-years of scientific and technical effort to
perfect our developments if we do not sell them
our know-how.
In five specific types of technology it took
American industry about 10,000 man-years to
bring the developments through the laboratory
and into production. To reach Russian goals in
these products within their new Seven Year Plan
would require the full time of more than 1,400
of their best chemists and chemical engineers,
and since Khrushchev has told his people, research
and training in these areas has been sadly neg-
lected probably not even this many could reach
their goals without Western aid.
As research and development expenditures in
America continue to skyrocket to almost $60
billion in this decade, and with the prediction
of twice that amount being invested in the 1960's,
it would seem that our future vitality and lead
over the Soviets is assured ... with one exception.
That exception is the continuing spiral of inflation
in the LISA which threatens profits, curtails ex-
pansion, reduces productivity, creates unemploy-
ment, and is currently pricing many American-
made products out of the market both at home
and abroad. Unless inflation is curbed and pro-
ductivity greatly increased, the American dream
o' continued economic growth, prosperity and
security may be forfeited to the Soviets. This
is currently our greatest threat and challenge
here at home.
There are three main reasons for the current
inflation:
1. Governmental deficit spending.
2. Government subsidies and artificial price
supports in agriculture.
3. Continuing wage demands and pay increase
in excess of productivity gains.
You will notice that the classical reason for
inflation. is not included in the list, namely,
demand for goods and services in excess of supply.
Because of the current interest in the outcome
of the steel industry wage negotiations this
summer, it is worthy to note what has been
happening to labor costs and productivity in this
basic industry in recent years. During the past
decade, steel employment costs have risen 8%
166
per annum while steel productivity has risen only
2%aj'o per annum.
Overall, since 1948, direct wages have gone up
more than 50%. During the same period pro-
ductivity has increased only 30%. This is the
inflationary gap that contributed to our wage-
price spiral. and causes prices to rise even in
periods of recession.
Manufacturers trying to hold prices down are
caught in a profit squeeze. In 1947 corporate
profits after taxes were 9.2%. In 1957 they were
down to 6%.
Another alarming trend is now evident. Small
businesses are becoming less profitable than big
ones. In recent years small and middle-sized
companies have suffered decreases in profits rang-
ing from 15% to 38%, while big companies had
only an 11% drop in profits. This premium on
size of business is a major retardant to the de-
velopment and growth of new small businesses so
essential to a dynamic American economy.
High taxes, low depreciation rates and ac-
celerating obsolescence compound the problems
of American industry in meeting the Soviet
economic challenge.
Between 1947 and 1957 the value of plant,
property and equipment per worker increased
from $2,530 to $6,675, almost a threefold increase
in 1.1 years.
In Chicago today the investment per worker
in, new industrial plants averages about $13,000.
Since tax laws require depreciation on the basis
of original cost, not replacement value, adequate
reserves cannot be accumulated to take care of
normal depreciation, much less obsolescence.
Soviet industry has no such problems.
.Unless productivity catches up with and goes
ahead of wage increases, the American dream of a
progressive standard of living will become a
nightmare of inflation and insolvency and in-
evitable controls on prices, rent and wages.
Such controls in peacetime will mean the death of
unions, the end of free enterprise, and encroach-
ment on our personal liberties. This is not only
a challenge to industry but a threat to the se-
curity of every American citizen. The voice of
business must compete more effectively with the
voice of labor at the grass roots of public opinion
and political action if we are to meet the Soviet
economic threat, survive as a free nation, and
continue to provide leadership for a free world.
Before planning any grand strategy to meet the
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Soviet threat around the world, it seems worthy
to note the internal threats to our security here
at home. Maybe our foreign friends and com-
petitors, like Germany, Britain and Japan, who
have experienced inflation, lost their freedoms,
and are now austerely coming back, can teach
us some lessons if we will only listen.
Before summarizing the strategems presented
at this Conference which can help us develop an
American strategy to defeat the Soviet economic
offensive, these facts should be kept constantly
in mind--
First: Communist bloc trade or aid does not
involve the "profit motive" or "good business" in
the American sense. When it can, the bloc
strikes hard bargains but the Politburo is willing
where necessary to view financial loss for political
gain. American private business cannot meet
such a challenge indefinitely by applying normal
business profit judgment. All Soviet trading
is conducted through government trading agencies
and not by individuals or companies.
Second: The Soviet Politburo aims every action
on the economic front at political objectives.
With these facts in mind, it is obvious that
American businessmen and our friends and
allies in the free world are at a distinct if not
impossible disadvantage in conducting foreign
trade along normal, traditional lines.
Several suggestions were made to combat
Soviet (lumping and below-market pricing prac-
tices:
1. Create an American government corpora-
tion to compete with the Soviet govern-
ment trading agencies on equal terms.
2.Establish a program of government sub-
sidies for American companies operating
abroad to meet Soviet price competition,
similar to agricultural subsidies.
3. Encourage American investment in foreign
operations to obtain the advantages of a
local industry.
4. Reduce corporation taxes, particularly on
American businesses with foreign opera-
tions to make them more competitive in
world markets.
5. Make greater use of foreign currencies
received by our government agencies from
the sale of surplus commodities; for ex-
ample, wheat sold under Public Law 480,
by U. S. investors requiring such cur-
rencies for the support of their foreign
operations. The U. S. could only gain
from such a policy and no foreign country
should ever be harmed by it.
6. Encourage restraint on the part of business
and labor against ever increasing wages
and prices and insist that wage increases
be more than offset by productivity in-
creases.
7. Stimulate more receptive import policies
for three reasons:
(a) We cannot expect foreign countries to
resist Sino-Soviet overtures while we
deny them access to our markets.
(b) We cannot continue indefinitely to sell
more to foreign countries than we buy
from them.
(c) Competition from foreign imports here
at home will stimulate competition and
help keep prices and living costs lower.
This in turn may soften labor union
demands and curtail automatic wage
increases based on a cost of living
index.
8. National goals like the Soviet Seven Year
Plan should be encouraged for private
industry to assure a continued high rate
of industrial growth.
9. Establish a firm coordinated foreign eco-
nomic policy aimed at the expansion of our
trade and investments abroad.
10. Provide tax incentives for private enter-
prise to assume the special risks involved
in foreign business operations.
11. Fully explore Russian overtures to trade
with us in non-strategic products with the
hope of relieving East-West tensions.
12. Continue the United States economic aid
program while encouraging private busi-
ness to supplant it with private investment
wherever possible.
13. Establish a national policy concerning
trade with Russia to encourage the
following:
(a) Within the limits of security and the
demands of the economy of ourselves
and our allies, continue trade with the
Russians in finished goods.
(b) Deal with Russia on terms of cash on
the barrelhead.
(c) Recognize that the cold war of the
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past 15 years will continue for a long
time.
(d) Realize that our most precious pos-
sessions are our technical advantages
which must not be traded away.
(c) Our allies should be urged to adopt
similar policies.
(f) Build up the true economic inde-
pendence of underdeveloped areas so
they need never become dependent
upon Russia.
(g) Remember that the ultimate objective
of our people and the people of the
Western world is to provide the fullest
possible dignity and freedom of the
individual living in a peaceful world.
This includes Russians, Chinese, Afri-
cans and all the people of the world.
(h) Seek the ultimate objective of freedom
for the Russian people and the en-
slaved people in the Communist bloc,
and hope for their peace and pros-
perity.
Be realistic and recognize there is no
real chance for this friendly relationship
in our lifetime.
As we adjourn this Conference and go our
respective ways to contemplate these suggestions
to meet the challenge and frustrations of dealing
with the Russians, let us be reminded of the
concluding remark of Woodrow Wilson in his
vi Aorv address at the end of World War I. Ile
said, "The most effective organization arises from
the spontaneous cooperation of a free people."
Following is the announcement made by Mr.
Coulter regarding the Institute for American
Strategy on the last day of the Military-Indus-
trial Conference in Chicago on April 8, 1959:
The overall conclusion is clear: the Soviet threat
on all fronts cannot be overstated.
The irnniediate task is to get that specific
message to the American people.
flow is the job to be done and who will do it?' As
of midnight last night, we have started.
TWO of Chicago's leading citizens have pledged
to implement the program. Mr. Edwin A. Locke,
President of Union Tank Car Company, has
accepted the Chairmanship of the Executive
Committee of the Institute for.American Strategy.
Brig. General Lawrence II. Whiting (USA-Rtd.),
President of the American Furniture Mart, has
accepted the Associate Chairmanship.
And scores of prominent participants in the
h'ifth Annual Military-Industrial Conference have
already volunteered to serve under their leader-
ship. This is a national conference; and the Insti-
tute for American Stretegy is a national organiza-
tion. Rest assured, however, that with help from
the rest of the nation Chicago will shoulder its
headquarters responsibility.
Chicago, with its great new window on the,
world, has a vital role to play in strengthening
both national and free world security.
Within ninety days, the Executive. Committee
of the Institute for American Strategy will be in
touch with all participants as to specific programs.
:Meanwhile, each participant, as his first task on
his return home, is earnestly requested to write
Mr. Dan Sullivan, our Executive Director, giving
him ideas and suggestions. Specifically, the
Institute wants names of people and organiza-
tions who want to give high priority to the study
of strategy.
A major project is already underway. A private
foundation has just pledged $50,000 to help its
spread the study of strategy all over the country!
In other words, the first project of the Institute
has been approved, staffed and financed. A
unique two-week training course covering all
aspects of strategy in the nuclear age will be given
200 reserve officers at the National War College
in W ashi ngton July 12-25. These men -in turn -
will lecture on strategy to their own civic clubs
and business groups -to high schools, colleges and
professional societies.
The two-week seminar will be co-sponsored by
the Institute for American Strategy and the
Reserve Officers Association.
The Department of Defense has approved this
training course for members of the reserve com-
poneni:s (reserve forces and national guard) ---
specially selected from all segments of commerce,
industry and opinion-forming groups---as a means
of increasing public understanding of the nature
and scope of the threat to national security. The
curriculum, designed to cover all aspects of
strategy in the nuclear age, will encompass many
of the topics discussed over the past live years at
the National Military-Industrial Conference.
The Seminar will be conducted chiefly by
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civilian schol~x , many of whom have lectured to
the Chicago Military-Industrial Conference.
Military leaders, diplomats and key members
of Congress will also participate. The civilian
professors preparing the course have the assistance
of a consulting and advisory committee of general
and flag officers, representing all the Services, in
cooperation with the Commandant of the Na-
tional WVar College.
Dr. Robert Strausz-IIupc of the University of
Pennsylvania will be Dean of the Faculty at the
Summer Session. Ile is the Director of the
Foreign Policy Research Institute and a member
of the Educational Projects Committee of the
Institute for American Strategy. The Reserve
Officers Association will also co-sponsor the
Seminars.
Course material will also include: the impact of
missiles on geopolitics; an analysis of Communist
conflict-management; the role of economic aid,
technical assistance and propaganda in the
present international situation; case studies in
the Kremlin's non-military techniques; an over-
a, .11 assessment of Sino-Soviet military, industrial
CIA-RDP88-01315R000300160040-1
and scientific capabilities; and the study of
comparative ideologies.
This experiment explores a new dimension in
"partnership for defense" between government,
the military services, reserve officers and civilian
educators. It illustrates the growing awareness
that strategy is everybody's business, a constant
theme of the National Military-Industrial Con-
ference. The Chicago Institute for American
Strategy will help prepare lecture kits which
will be distributed to all officers taking the Na-
tional War College Course as an aid to them in
preparing their own lectures to local groups. This
will include papers on such matters as psycho-
logical warfare, the problem of "lead time" in
basic research, war-gaming, the role of commerce
and industry in foreign aid, and Citizenship
Awareness as a factor in national will. The whole
project was made possible by the. informal and
voluntary cooperation of private citizens, military
personnel and educators who met each other for
the first time through the activities of the Na-
tional Military-Industrial Conference in Chicago.
We're on our way!
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Part Eight
Biographies:
CONFERENCE SPEAKERS AND PANEL MEMBERS
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 CHAPTER TWENTY-TWO
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MR. FRANK R. BARNETT, Director of Research, The Richardson Founda-
lion, Inc.
Mr. Barnett is one of the nation's leading experts on Russian affairs and
psychological warfare. A former Rhodes Scholar, college professor and
military government official in Berlin, he is a Cold War strategist and propo-
nent of a plan to recruit Iron Curtain exiles into a Legion of Freedom. In ad-
dition to his duties with the Richardson Foundation, he is a director of the
American Friends of Russian Freedom. Mr. Barnett served in World War II as
it Russian interpreter with the first American division to meet the Red Army
at the Elbe River. Ile has received the Freedoms Foundation award. Recently
he has lectured to the Army War College and to national conventions of the
N.A.M., the Reserve Officers Association and many other groups on tech-
niques of Soviet conflict management.
REAR ADMIRAL RAWSON BENNETT, II, U. S. Navy, Chief of Naval
Research.
Rawson Bennett, II, a graduate of the U. S. Naval Academy, returned for
post-graduate instruction in radio (electronic) engineering, after tours of duty
overseas and in the U. S. He received his M.S. degree in Electronic Engineer-
ing at the University of California. In 1939 he set up the technical program
of the first Fleet Sound School of San Diego. During his next tour of duty,
he was awarded the Legion of Merit for designing sonic and supersonic under-
water sound apparatus which greatly aided in the destruction of Axis sub-
marines and Japanese shipping. In 1950 .lie established and became the first
Director of the Electronics Production Resources Agency of the Departments
of the Army, Navy and Air Force. Ile later served as Head of the Mine
Warfare Branch, Naval Inspector of Machinery, Naval Inspector of Ordnance
at the General Electric Co., and Assistant Chief of the Bureau for Electronics.
Ile assumed his present position in 1956. Rear Admiral Bennett's awards
include both the American and National Defense Service Medals.
WILLIAM BLACKIE, Executive Vice-President and Director, Caterpillar
Tractor Company.
Mr. Blackie joined Caterpillar in 1939 and served as controller and vice-
president before being elected to the presidency in 1954. Born in Scotland,
lie attended the University of Glasgow and was a chartered Accountant of
Scotland for five years before coming to the U. S. in 1930. Mr. Blackie helped
organize the Caterpillar Foreign Trade Group and served as president of the
group until 1958. A director of the U. S. Chamber of Commerce from 1955
to 1958, lie has served on the Chamber's Foreign Commerce Committee since
L955. Ile was chairman of this committee during the years 1956-58. From
1952 to 1958, lie was a trustee of the Council for Technological Advancement
of the Machinery & Allied Products Institute.
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JOSEPH L. BLOCK, Chairman of the Board, Inland Steel Company.
Mr. Block is one of Chicago's most distinguished civic leaders. Among his
many activities, he is vice president and director of the Community Fund
and a trustee of Illinois Institute of Technology. During World War II, Mr.
Block served on the steel division of the War Production Board. A former
president of Inland Steel, Mr. Block was appointed Chairman of the Board
in January of this year. He is also a director of the Commonwealth Edison
Company and The First National Bank of Chicago.
ANTHONY T. BOUSCAREN, Associate Professor of Political Science,
Marquette University.
Mr. Bouscaren completed his formal education in 1951 with an A.B. from
Yale University and an M.A. and Ph.D. from the University of California,
and served as professor at the Universities of San Francisco and Loyola
before accepting his present position at Marquette University in 1958. In
1957 he was a Consultant, House Un-American Activities Committee. He
has been awarded a total of $14,500 in research grants for various studies,
including a study of the Communist movements in the Free World. The
author of various books, articles and reviews, he has also lectured to numer-
ous groups, including The National War College, the Mid West Conference
of Political Scientists and Valley Forge Military Academy.
HARRY A. BULLIS, Chairman, International Development Advisory Board,
Former Chairman of the Board, General Mills, Inc.
Mr. Bullis, for years a leader in the milling industry, began his career in 1919
as a mill hand. Eleven years later, in 1930, he was a director of General
Mills, and. since has served as the company's secretary, comptroller, vice
president, vice president in charge of operations, executive vice president,
and president. He served as Chairman of the Board for eleven years-since
January 1, 1948--and. retired January 1, 1959. Long active in business affairs,
Mr. Bullis currently is a director-at-large of the Chamber of Commerce of
the United States. Ile is also a post director and officer of the N.A.M. In
1953 he headed a governmental team which evaluated mutual security opera-
tions on Formosa, and in 1954 and 1955, served on the Hoover Commission.
He is presently Chairman of the International Development Advisory Board.
JACK L. CAMP, Director, Foreign Operations, International Harvester Com-
pany.
Mr. Camp has been employed by the International Harvester Company since
1932, and has travelled extensively in Latin America, where he served as
assistant general manager of Harvester's export business in Argentina,
Uraguay, Paraguay and Chile. During World War II, Mr. Camp was special
assistant to the United States Ambassador in Buenos Aires. He later served
the U. S. Government as special representative of the Foreign Economic
Administration. Returning to Harvester in 1944, he was appointed Assistant
Director of Foreign Operations and Director General of the Pacific Operations.
In 1957 he was named Director and head of Foreign Operations. In 1956
and 1957 he was World Trade Vice President of the Chicago Association of
Commerce and Industry and Chairman of the Chicago World Trade Confe-
rence. He is currently a Director of the Chicago Association of Commerce
and Industry and of the National Foreign Trade Council. Mr. Camp is also
Director of the Chicago Council on Foreign Relations.
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LEO CHERNE, Executive Director, The Research Institute of America, Inc.
Leo Cherne was a practicing attorney in 1936 when he joined the Research
Institute to develop a research organization that would be equal to the
challenges presented to business by an economic revolution. In his job of
directing the staff that analyzes economic and political trends and provides
executive guidance in the fields of taxation, industrial and human relations,
business management, sales and marketing, he is responsible for the advice
and guidance extended by the Institute to its members-more than 30,000
business concerns. Since 1946, Mr. Cherne has occupied a unique position
as spokesman of the American people in their support of those who cherish
freedom. As Chairman of the Board, International Rescue Committee, he
has visited many parts of the world to perform the service of aiding victims
of totalitarian governments. A graduate of Now York University and New
York Law School, he was awarded an honorary degree of Doctor of Law from
Parsons College in 1951. The author of several books on America's adjust-
ment to World War II, he is also a sculptor and lecturer.
THOMAS H. COULTER., Chief Executive Officer, Chicago Association of
Commerce and Industry.
Mr. Coulter received his bachelor's degree from the Carnegie Institute of
Technology in 1933, and his Master's from the University of Chicago in 1935.
Active in business and professional organizations, he is on the board of di-
rectors of the Economic Club of Chicago, a past president of both the Execu-
tive Club and Sales Executive Club of Chicago, and a member of the Western
Society of Engineers, the American Management Assn., and the National
Sales Executives. He is also affiliated with numerous civic and philanthropic
activities, including the Chicago Crime Commission, the American Red Cross,
and the citizens hoard of the University of Chicago.
CIIARLES STUART DENNISON, Special Assistant to the President for
Foreign Operations, International Minerals & Chemical Corporation.
Charles S. Dennison was educated in New York City, Montevideo, Uruguay,
Buenos Aires, Argentina, Columbia University and New York University.
Ile has served with General Motors Overseas Operations, U. S. Steel Export
Company, and, during World War II, with the 101st Airborne Division, U. S.
Army European Theater of Operations. Before accepting his present position,
Mr. Dennison also served with Willys Overland Motors, Inc.; as Managing
Director for Olin Mathieson Limited and E. R. Squibb in London; and as
Vice President of the Chrysler Export Company in Detroit, Michigan.
HONORABLE NADIM DIMECIIKIE, Ambassador of Lebanon to the
United States.
Mr. Nadim Dimechkie, after a brief professional career which included the
position of Lebanese Director of Affaires Economicques, entered the diplo-
matic field in 1944 by joining the Ministry of Foreign Affairs of Lebanon. Some
of the highlights of his 15 years as a diplomat include his service as Counselor
of the Lebanese Legation in London, 1946-49; Consul General, Consulate
General of Lebanon in Ottawa, Canada, 1949-51; Lebanese Delegate of the
Arab League, 1953-55; Minister of Lebanon to Switzerland, 1955-57; and
his present position as Ambassador of Lebanon to the United States. Mr.
Dimechkie has had an equally long and varied international career which
began in 1945. In 1946, he was the Delegate to the Palestine Conference in
London, and the Delegate to the United Nations General Assembly in 1950.
Mr. Dimechkie received his B.A. and M.A. at the American University of
Beirut in Lebanon.
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MAJOR GENERAL HAROLI) C. DONNELLY, USAF, Assistant Deputy
Chief of Staff, Plans & Programs, Department of the Air Force.
After graduation from the U. S. Military Academy in 1933, Harold C. Don-
nelly was commissioned a Second Lieutenant and served in various capacities
overseas and in the U. S. In 1943 Gen. Donnelly attended the Army-Navy
Staff College, and was assigned to Planning Staff Headquarters in the China-
Ilurma-India Theater. In 1940 Gen. Donnelly was designated Chief of Staff,
India-Burma Theater, in which capacity he supervised the inactivation and
closeout of the Theater. He returned to the United States and served on the
War Department General Staff before transferring to the Air Force in 1.947.
Alter serving as the Executive to the Deputy Chief of Staff, Operations,
Gen. Donnelly entered the Air War College in Washington. After serving in
several capacities in the Air Force Headquarters, he was assigned overseas
as Special Assistant to the Air Deputy and later Chief, Plans and Policy
Branch, Plans and Policy Division, Supreme Allied Headquarters in Paris.
In 1957 Gen. Donnelly was assigned to Air Force Headquarters in Washington
to assume duty as Assistant Deputy Chief of Staff, Plans and Programs.
REAll. ADMIRAL EMMET P. FORRIiSTEL, USN, Comrrraarcdant, Ninth
Naval District.
Before his appointment to the U. S. Naval Academy, Adm. Forrestal attended
Cornell University. After graduating with distinction from Annapolis, he
served an extended period of sea duty and was ordered to the Postgraduate
School at Annapolis for instruction in electrical engineering. He received his
M.S. Degree from Columbia If., and in 1.929, was assigned to the Bureau of
Engineering, Navy Dept., and, as additional duty, served as Aide to the
White House. From 1935 to 1938 he served as Assistant Naval Attache at the
American Embassy, Rome. After several command positions, Adm. For-
restel was designated Aide to the Assistant Secretary of Navy until 1943,
when he joined the staff of Commander Central Pacific Force (Fifth Fleet).
During this period, Adm. Forrestal, as Operations Officer, participated in the
amphibious operations to capture and occupy enemy Japanese-held positions
in the Gilbert, Marshall and Marianas Islands; at Two Jima and Okinawa; in
the First Battle of the Philippine Sea; and in carrier raids on Truk, Palau,
Tokyo, Kyushu and the Inland Sea Area. He was subsequently awarded the
Legion of Merit and Combat "V". After numerous commands, including
Commander Naval Station, Norfolk and 1)eputy Commandant, National
War College, he was ordered to his present position as Commandant of the
Ninth Naval District.
OR. i' FAIDINAND A. HI~,R.Mh7NS, Professor, Political Science, University
of Notre Dame.
I)r. Hermens, a member of the University of Notre Dame faculty since 1938,
is a specialist in comparative government and the relations between politics
and ethics. Born in Nicheim, Germany, d)r. Hermens was educated in
Germany, France and England and holds it diploma and Doctorate in
Economics from the University of Bonn. During 1953-54, be served as it
visiting professor at the University of Munich and also as a visiting American
specialist in political science under the auspices of the State Department. He
is a member of the American Political Science Association, the American
Economics Association and the American Academy of Political and Social
Science. Dr. Hermens is the author of several books including The Representa-
tive Republic and Europe Between Democracy or Anarchy.
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GENERAL JOHN E. HULL, USA-RTI )., President, Manufacturing Chemists'
Association, Inc.
General John E. hull, former United States and United Nations commander-
in-chief in the 1''ar East, was appointed president of the Manufacturing
Chemists' Association, Inc., on August 1, 1955. Ile retired from the Army
in April, 1955, after 38 years' service. In. 1955 .he served as vice-chairman
of the Defense Department Committee which developed the new prisoner
of war code. After graduation from Miami University in 1917, he served as
it platoon and company commander with the 4th Infantry Division during
World War 1. L''rom 1919-1941 General hull served in various line and staff
positions. I )uring World War II and Korea, he held numerous staff positions,
including commanding general, U. S. Army, Middle Pacific (1946) and vice
chief of staff of the Army, a post he held until lie went to Tokyo as U. S.
and UN Far East commander. Ile, has also served as chairman of the ]'resi-
dent's Board of Consultants on Foreign Intelligence Activities. His decora-
tions include the Distinguished Service Medal with Three Oak Leaf Clusters,
the Silver Star and the Legion of Merit.
MAJOR GENERAL I';. C. ITSCILNI',R, USA., Chief of Engineers.
A graduate of the U. S. Military Academy, General Itschner became assistant
chief of engineers for civil works in 1953, and, in 1956, .was appointed Chief
of Engineers by President Eisenhower. During World War II, he was in
charge. of construction for the chief of engineers and later planned and initiated
the reconstruction of the port of Cherbourg, and supervised the rehabilitation
of railroads, utilities, ports, steel mills, coal mines, etc., in the American sector
of Northern France, Belgium, Luxemburg and Germany. He served as
engineer of the First Corps for fourteen months in Korea, supervising de-
molition work during the American withdrawal from the Yalu. As chief of
Engineers, General Itschner has both a combatant army and it technical
branch with the peacetime strength of 10,000 officers, 100,000 enlisted men
and some 50,000 civilians. Ile is responsible for the large scale, worldwide
military construction program for the Army and Air Force and a Civil Works
Program in the interest of water resources development throughout the U. S.
CLEVELAND LANE, Assistant to the ]'resident, Manufacturing Chemists'
Association, Inc.
Mr. Lane, a recognized leader in the field of public relations, began his career
as a newspaper reporter and later served as a political, industry and general
assignment writer. After serving as a captain with the 13th Armored Division
in the European 't'heater during World War II, Mr. Lane was separated
from the Army and joined a public relations agency as an account executive
for the Pennsylvania Salt Manufacturing Company. Following a position
as public relations director for the New York Cotton Exchange, he returned
to Pennsalt as Manager of public relations. As such, Mr. Lane became one
of the original members of the Public Relations Advisory Committee of the
Manufacturing Chemists' Association. In 1953 he was loaned to MCA to
organize its public relations department and in January, 1954, was appointed
Assistant to the President.
DR. IIALDON A. LEEDY, Vice ]'resident and Director, Armour Research
Foundation of Illinois Institute of Technology.
Dr. Lecdy is an outstanding leader and educator in the field of physics. Ile
joined Illinois Institute of Technology as a physicist in 1938, and served as
chairman of the physics research department before being appointed-in
1950-to his present post. Dr..Leedy received his bachelor's degree from
North Central College in 1933, his Master's from the University of Illinois
in 1935, and his Ph.D. from Illinois in 1938. The author of many scientific
and professional papers, Dr. Lecdy directs the research and development of
both industry and federal government projects for IIT.
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MAJOR. LENOX R. LOHR, President, Museum of Science and Industry;
General Chairman.
Major Lohr, engineer, scientist, author and educator, was President of the
Centennial of Engineering, 1952, and is President of the World-famous
Museum of Science and Industry, a three-dimensional encyclopedia of in-
formation, illustrating the working relationships between the scientist and
the engineer from the building of Roman roads to atomic energy. He is a
Past President of the National Broadcasting Company and an appointee of
the Governor of Illinois as Chairman of the Commission to serve higher
education in Illinois. His military career being prior to World War I, he
served with distinction in the Corps of Engineers. Major Lohr was first
Executive Secretary of the Society of American Military Engineers and an
honor graduate of Cornell University. Applying his military engineering
background to educational and industrial fields, he directed the Century of
Progress in Chicago in 1933 and 1934, and the Chicago Railroad Fair in 1948
and 1.949 with remarkable success.
GENERAL ANTHONY C. "NUTS" McAULIFFE, U. S. Army, Retired,
Vice President, American Cyanamid Company.
General McAuliffe retired as a four-star General in 1.956, and assumed his
present position the next year. A graduate of the United States Military
Academy, General McAuliffe received his first commission in the Army in
1918. From 1.920 to 1935 he served in the Field Artillery in the United States
and Hawaii, and graduated in 1937 from the Command and General Staff
School and later from the Army War College. In World War.II he joined
the 1011st Airborne Division and participated throughout the combat opera-
tions of the 101st. During the Battle of the Bulge he commanded the Division
in the defense of Bastogne. In 1945 he commanded the 103rd Infantry
Division when it broke through the Siegfried Line and later made the historic
link-up with the U. S. Fifth Army from Italy. After the war he served as
ground forces advisor at Bikini during Operations Crossroads and as Chief
of the Chemical Corps. He also served as Commander of the Seventh Army
in Germany and later Commander-in-Chief of the U. S. Army in Germany and
later Commander-in-Chief of the U. S. Army, Europe. He has been awarded
numerous decorations including the Distinguished Service Cross, Distinguished
Service Medal with Oak Leaf Cluster, Silver Star and the Legion of Merit.
DEMPSTER Mc[NTOSH, Managing Director, Development Loan Fund.
Mr. McIntosh served as Vice President and Director of American Steel
Export, Inc., and as President and Director of Philco International Corp.
In 1953 he was appointed U. S. Ambassador Extraordinary and Plenipotentiary
to Uruguay. He was subsequently appointed the President's Representative
with the rank of Special Ambassador to head the U. S. Delegation at the
ceremonies incident to the inauguration of the President of the Republic of
Paraguay. In 1955 Mr. McIntosh again headed the U. S. Delegation attend-
ing the inauguration of the President of the National Council of the Govern-
ment of the Republic of Uruguay. In 1957 the President appointed Mr. Me-
Intosh Special Ambassador to the Republic of Ecuador. From 1956 to 1958,
he served as U. S. Ambassador to Venezuela.
DR. HOWARD A. MEYERHOFF, Executive Director, Scientific Manpower
Commision.
Dr. Meyerhoff received his A.B. degree at the University of Illinois and
his Ph.D. in geology at Columbia University. During his 25 years as a teacher
he carried on research that earned him a reputation as a specialist in Carib-
bean geology and consultant for many parts of the Western Hemisphere.
As a mediator on the National War Labor Board during World War II, lie
dealt with many of the problems of production and industrial relations in
a War economy. As Executive Director of the Scientific Manpower Com-
mission, he continues his consulting practice, and is directing mineral research
and development in the Southwest and in several countries of Latin America.
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HONORABLE FREDERICK II. MUELLER, Under Secretary of Commerce.
The Honorable F. H. Mueller was appointed as Under Secretary of Commerce
by President Eisenhower on November 3, 1958. Prior to that, he served as the
Assistant Secretary of Commerce for Domestic Affairs-a position he had
held since 1955. He received his B,S. Degree from Michigan State University
in 1914. Mr. Mueller was a member of the State Board of Agriculture of the
State of Michigan for thirteen years, and, like so many other men serving in
the administration, has devoted himself to activities in the fields of education,
business and charitable organizations. During the World War II years,
he served as president of the Grand Rapids, Michigan, Industries--a group
who combined their facilities to produce troop-carrying gliders and other
aircraft components in support of the national defense effort. Before entering
government service, Mr. Mueller had a long and successful career as a general
partner of the Mueller Furniture Company of Grand Rapids.
DR. GERHART NIEMEYER, Professor, Political Science, University of
Notre Dame.
Dr. Niemeyer has been professor of political science at Notre Dame University
since 1955, and is presently on leave from that position to be on the faculty at
The National War College in Washington, D. C. Professor Niemeyer was a
member of the staff, U. S. Department of State, 1950-53, and of the Council on
Foreign Relations, 1953-55. Born in Germany, he studied at Cambridge
University, University of Munich and received his LL.B. and J.U.D. at
Kiel University. Dr. Niemeyer, the author of An Inquiry into Soviet Mentality
and co-editor, handbook on World Communism, has lectured and served as
professor at several universities in the United States and Europe.
GENERAL EDWIN W. RAWLINGS, USAF-Ret'd. Director and Financial
Vice President, General Mills, Inc.
While attending the University of Minnesota, General Rawlings served as a
part time correspondent for the Associated Press, the St. Paul Pioneer Press
and Dispatch and one of Minneapolis' leading department stores before
entering the Air.Corps as a flying cadet in 1929. Exactly 25 years later he
achieved the rank of a four star general. General Rawlings was commissioned
it second lieutenant in 1930 and served as a photographic officer in Hawaii.
Back in the U. S., General Rawlings spent three years at the Brooks Air Force
Base in Texas with the 12th Observation Group. In 1935 he was made as-
sistant chief of the administrative branch in the Materiel Division. Two years
later, the young captain was one of two air corps officers chosen to attend
Harvard University Graduate School of Business Administration. In 1939
he was graduated cum laude with a Master's degree in industrial management.
In October, 1943, as a Lieutenant Colonel, he was chosen to head the Aircraft
Scheduling Unit, responsible for scheduling the material and critical com-
ponents needed to maintain wartime production schedules for the entire
aircraft industry. He assumed command of Air Materiel Command in 1951.
At 49, already considered the outstanding business management expert in the
military, he became a four star general in February, 1954. General Rawlings
officially concluded 30 years of service to the Air Force in March, of this year,
and was awarded a first oak-leaf cluster to the Distinguished Service Modal.
Upon his retirement from the Air Force, he became the Director and Financial
Vice President of General Mills, Inc.
I)R. JOHN T. RETTALIATA. President, Illinois Institute of Technology.
Dr. Rettaliata, authority on steam and gas turbines and jet propulsion, is an
acknowledged leader in education and engineering. In 1943, at the request
of the Navy, he studied British developments in jet propulsion. In 1944 .he
served on a sub-committee on turbines established by the National Advisory
Committee for Aeronautics. And in 1945, he received a special certificate of
commendation from the Bureau of Ships for an investigation and report on
steam turbines developed by German hydrogen-peroxide submarine operations.
Dr. Rettaliata's pioneering work on gas turbine development also won him
a special award in 1951 from the American Society of Mechanical Engineers.
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ADMIRAL JAMES S. RUSSELL, Vice Chief of Naval Operations, U. S.
Navy.
James Sargent Russell was born in Tacoma, Washington, and entered the
Naval Academy in 1922. After completing flight training he was designated
a Naval Aviator in 1929 and has been flying naval. aircraft regularly ever since.
While in post graduate training at the California Institute of Technology,
he received his Master of Science in Aeronautical Engineering. During
World War It, [,CDR Russell commanded a Patrol Squadron against Japanese
forces in the Aleutian Island Campaign and was awarded the Distinguished
Flying Cross and the Air Medal for heroism. Later, as Captain, he served in
the Pacific area as Chief of Staff to a Commander Carrier Division with the
famed Task Forces 38 and 58, and was awarded a Gold Star in lieu of a second
Legion of Merit. He also served with the U. S. Atomic Energy Commission
during the Sandstone atomic tests. Following duty as Commander of an
attack carrier which was part of the Sixth Fleet in the Mediterranean, Captain
Russell served in the Office of the Chief of Naval Operations and was pro-
moted to the rank of Rear Admiral in 1953. In 1955, lie assumed the duties
of Chief of the Bureau of Aeronautics. In 1956, lie was awarded the Collier
Trophy, sharing that award with Mr. C. J. McCarthy of Chance Vought
Aircraft? for the development of the supersonic Crusader Navy fighter. He
was appointed Vice Chief of Naval Operations in 1958 with the four star
rank of Admiral.
JOSEPH L. SINGLETON, Vice President, Industries Group, Allis-Chalmers
Mfg. Co.; Chairman of the Board, Canadian Allis-Chalmers Limited.
Joseph L. Singleton has been associated with Allis-Chalmers since 1926,
when he entered the firm's Graduate Training Course. Mr. Singleton became
Vice President in charge of the General Machinery Division in 1951 and was
elected to the board of directors in that same year. He is president of the
National Electrical Manufacturers Association and a member of several other
technical groups. A native of Tennessee, he received his mechanical engineer-
ing degree from Alabama Polytechnic Institute.
W. CLEON SKOUSEN, Author, Educator, Federal Agent.
Mr. Skousen was born in Alberta, Canada, and was educated in California,
Chihuahua, Mexico, and received his LLB Degree in Law from the George
Washington University in Washington, D. C. Mr. Skousen entered the
Federal Bureau of Investigation in 1935 and served in various parts of the
U. S. over it period of sixteen years. During World War II, lie served as an
Administrative Assistant to the Director of the Federal Bureau of Investiga-
tion. In 1951 lie accepted a position at the Brigham Young University as
Director of Public Services, and was appointed to the position of Chief of
Police, Salt hake City, Utah, in 1956. He is the author of a hard hitting book,
The Naked Communist.
MR. JOHN SLEZAK, Chairman of the Board, Kable Printing Co.
In April, 1953, Mr. Slezak was appointed by President Eisenhower as Assistant
Secretary of the Army for Materiel. Eight months later he was promoted to
Under Secretary of the Army and served in that capacity until January, 1955.
After coming to this country from his native Czechoslovakia, Mr. Slezak
graduated from the University of Wisconsin and went to work for the Western
l';lectric Company as a mechanical engineer and ultimately became Chief of
the Metal Machining Methods Development Division. He left Western
Electric Co. in 1930 to become associated with the Turner Brass Works and
was made president of that company in 1940. He served in the U. S. Army
in both World Wars. Aside from being chairman of the board of Kahle
Printing Co., Mr. Slezak holds directorships in eight other concerns and holds
executive posts in numerous professional societies and associations.
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DR. ROBERT STRAUSZ-IIUPE, Director Foreign Policy Research Institute,
University of Pennsylvania.
Dr. Robert Strausz-Hupe, one of the United States' foremost experts on
geopolitics, is a well known author and lecturer. Among his books are Geo-
politics, The Balance of Tomorrow, and International Relations. His most
recent book, A Study of Protracted Conflict, written with Kintner, Cottrell and
Dougherty, is to be published in May, 1959. Born in Vienna, Dr. Strausz-
Ilupc received his Ph.D. from the University of Pennsylvania. Ile has served
as visiting professor, College of Europe, in Bruges, and has lectured at the
University of Madrid. Ile has also lectured at the Air War College and the
National War College.
MR. A. M. STRONG, International Financial Consultant; Chairman, Inter-
national Trade Committee, Illinois Manufacturers Association.
Mr. Strong has had more than forty years experience in international banking
and trade. In 1916 he became vice president in charge of the foreign depart-
ment of the Bank of the United States, in New York-a post he held until
1930. .After that Mr. Strong was connected successively with the New York
State Banking Department, the Public National Bank and Trust Company
of New York, and the American National Bank and Trust Company of
Chicago. He was vice president in charge of the foreign department for
both the Public National and American National banks. Mr. Strong has
been chairman of the International Trade Committee of the IMA since 1952.
ADMIRAL FELIX B. STUMP, U. S. NAVY (Reid.), Vice Chairman &
Chief Executive officer, Freedoms Foundation at Valley Forge.
After graduation from the Naval Academy in 1917, Felix B. Stump served
in World War I and had flight training at the Naval Air Station immediately
after the War. After commanding an experimental aircraft squadron, he
received his degree of Master of Science at the Massachusetts Institute of
Technology. Later, he commanded aircraft squadrons in cruisers and an
aircraft carrier, and had two tours of duty in the Bureau of Aeronautics,
Navy Department. During World War II, lie served as Commander of the
combined operations intelligence center of the Allied American, British, Dutch,
Australia High Command, for which he was awarded the Army Distinguished
Service Medal. In 1948, lie was promoted to Vice Admiral, and became
Commander-in-Chief, Pacific and the U. S. Pacific Fleet, Pearl Harbor,
where he served until retirement last year. During his period of duty as
Commander-in-Chief Pacific, all U. S. Forces in the Pacific and Eastern
Asia were under his command. Ile was appointed to his present position in
January of this year. Admiral Stump is the holder of a Silver Star Medal,
the Navy Cross with Gold Star, the Legion of Merit with two Gold Stars, and
numerous Campaign Medals.
DR. WERNHER VON BRAUN, Director, Development Operations Division,
Army Ballistic Missile Agency.
Dr. von Braun, one of the nation's foremost leaders in rocket development
and space travel, attended both the Universities of Berlin and Zurich, receiv-
ing a B.S. in Mechanical Engineering at the age of 20 and a Ph.D. two years
later. From 1932-37, he was instrumental in developing the A-1, A-2, and
A-3 rockets, all forerunners of the famous German V-2 rocket. In 1937,
Dr. von Braun became technical director of the Pecnemuende Rocket Center,
where the V-2 was developed. He came to the U. S. under contract with
the U. S. Army Ordnance Corps in 1945 and worked at White Sands, N. Mex.
Proving Ground during high altitude firings of captured V-2 rockets. Working
with 120 of his Pecnomuende colleagues, he became project director of a
guided missile development unit at Fort Bliss, Tex. In 1950, the entire group
was transferred to Redstone Arsenal at Huntsville, Alabama, where he was
appointed to his present position. In 1956, the ballistic missile activity was
shifted from Redstone Arsenal to the Army Ballistic Missile Agency at the
same location. His awards include: Department of the Army Decoration
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for Exceptional Civilian Service presented by Secretary of the Army Wilbur
M. Brucker, 1957, and the U. S. Chamber of Commerce Award for "Great
Living Americans" for missile research and enabling this country to launch
its first earth satellite in 1958.
DEAN C. KEN WEIDNER, Dean, School of Engineering, American Uni-
versity of Beirut, Lebanon.
Dean Weidner, educator, author and engineer, was a former director of the
Society of American Military Engineers. In 1947, he was appointed chief
engineer for design and construction of the Argonne National Laboratory.
During World War II he was ordered to duty as a Lieutenant in the Navy's
Civil Engineer Corps, leaving active duty in 1946 as a Captain in the Naval
Reserve. He served in the Asiatic-Pacific Theater. Dean Weidner received
SAME's gold medal in 1946. Ile has held his present position since 1951.
GENERAL THOMAS D. WHITE, Chief of Staff, U. S. Air Force.
After graduation from the United States Military Academy in 1920, Gen.
White completed Flying School in 1925. After four years in China, he re-
turned for duty at Headquarters, Air Corps, Washington. He has served
as Military Attache for Air to Russia, Italy, Greece and Brazil. In 1942,
Gen. White was appointed Assistant Chief of Staff for Operations of the
Third Air Force at Tampa, Fla., and subsequently named Chief of Staff.
As Deputy Commander of the 13th Air Force in 1944, he took part in the
New Guinea, Southern Philippines and Borneo campaigns. The following
year Ile assumed command of the Seventh Air Force in the Marianas and
moved with it to Okinawa. After duty as Chief of Staff of the Pacific Air
Command in Tokyo and Commander of the Fifth Air Force in Japan, Gen.
White was promoted to his present four-star rank of full general in 1953 and
designated Vice Chief of Staff at that time, assuming his present position in
1957. His decorations include the Distinguished Service Medal, Legion
of Merit with Oak Leaf Cluster, and the Air Medal with One Oak Leaf Cluster.
EDMUND S. WHITM.A?AN, Director of Public Relations, United Fruit Com-
pany-Mr. Whitman has been with the United Fruit Company since 1921, having
joined the company in Honduras. Prior to his present position, he worked
in agriculture, sales, advertising and publicity for the company, which has
played an important role in our foreign relations in all the countries of Latin
America. The Vice President of the Pan American Society of the U. S. and
a member of the Executive Committee of the Business Council for Inter-
national Understanding, he has lectured extensively on the subject of Inter-
national Communist penetration into Latin America. Mr. Whitman is also
the author of several novels and travel books dealing with Latin American
subjects and has contributed to many national magazines.
DR. KENNETH R. WHITING, Documentary Research Division, Research
Studies Institute, Air University, Maxwell Air Force Base.
Dr. Whiting, professor, author, and Special Adviser on Soviet affairs at
Maxwell Air Force Base, was educated at Boston University, the University
of California, Harvard University, and the Institute of Russian Studies at
the University of Munich in Germany. He accepted the position of Assistant
Professor at the Air University, Maxwell Air Force Base, in 1951 and served
as Associate Professor there from 1953 to 1955, before he was named Pro-
fessor of History. During World War II, he served with the AAF and in
the Southwest Pacific Theater. Dr. Whiting's writings include Essays on
Soviet Problems of .Nationality and Industrial Management, Iron Ore Resources
of the USSR, Materials on the Soviet Petroleum Industry, all three of which
appeared in Eugene Emme's Impact of Air Power. Dr. Whiting has also
written articles in Asher Lee's Soviet Air Force, and two articles in the Air
University Quarterly Review on Soviet Military Theory. Dr. Whiting is the
Special Adviser at Maxwell Air Force Base on Soviet military theory, Soviet
iron and petroleum resources, Soviet politics, and the Russian language.
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ROBERT BRUCE WRIGIIT,* Chief, Economic. Defense Division, Department
of State.
Mr. Wright received his A.B. Degree from Allegheny College, and his M.A.
and M.A.L.D. in 1942 from the Fletcher School of Law and Diplomacy. He
served as Air-Intelligence Specialist for the War Department from 1.942 to
1945. He was then appointed Country Specialist, Department of State--
a position lie held until 1949. In 1950 he served as Acting Assistant Chief,
and later as Assistant Chief, of the Economic Resources and Security Staff.
The next year, lie was chief, Economic Defense Policy Branch, Economic
Defense Staff. Before his appointment to his present position in 1956, he
served as Assistant Chief, Economic Defense Staff.
GENERAL ROBERT E. WOOD, Retired Chairman of the Board, Sears,
Roebuck and Company.
General Wood has had a distinguished career in two separate fields-military
and business. A graduate of the United States Military Academy, General
Wood, during World War I, was acting quartermaster general and director
of purchase and storage for the entire Army. Later, as Vice President, Presi-
dent and Board Chairman for Sears, he guided the mail-order firm into the
retail business, opening more than 700 stores between 1925 and 1954. When
lie retired as Board Chairman in 1954, the company had annual not sales of
approximately $3 billion and had retail outlets established in six Latin-
American countries-Brazil, Columbia, Cuba, Mexico, Peru, and Venezuela.
Active in both national and local civic affairs, General Wood is greatly inter-
ested in the youth of America.
HIS EXCELLENCY FATIN RUSTU ZORLU, Foreign Minister of Turkey;
Permanent Representative to the North Atlantic Council with the rank of Ambas-
sador.
A well known figure on the international scene, Fatin Rustu Zorlu has come
to be recognized as one of the free world's foremost exponents of collective
defense and economic cohesion. As Chief Delegate, Ambassador, Minister
of State, Deputy Premier, and since November, 1957, as Foreign Minister,
career diplomat Zorlu has been a familiar personality at almost every major
international conference of the past decade. He has played a leading role
in the settlement of the Cyprus problem, which threatened the NATO Alliance.
Ilis Excellency Zorlu has made an impressive contribution to NATO and
to the peace of the world.
BRI('xAI)IER GENERAL KENNETH F. ZITZMAN, USA, Deputy Com-
mandant, Industrial College of the Armed Forces.
Brig. Gen. Zitzman graduated from the United States Military Academy and
received his M.S. Degree from Ohio State University in 1939. He also at-
tended the Command and General Staff School and graduated from the
Industrial College of the Armed Forces. Ile served two tours at the U. S.
Military Academy and during the latter was Associate Professor of Elec-
tricity. After lie was commissioned in the regular Army in 1932, lie performed
normal signal corps duties in areas to include the Philippine Islands and
Europe. During the war he served at every echelon from Division to Army
Group and fought in all the Italian campaigns. After the war, Brig. Gen.
Zitzman served on the Department of the Army General Staff and as Army
Communication Staff Advisor to the Assistant Secretary of Defense (Supply-
Logistics). Ile was a member of the original group which established Supreme
Headquarters, Allied Powers in Europe under General Eisenhower in early
1951 and remained with the Headquarters for two and a half years. Ile was
appointed a Brig. Gen. in July, 1956, while Chief, Personnel and Training
Division, Office of the Chief Signal Officer and later served as Chief of the
Combat Developments and Operations Division until lie was designated
Deputy Commandant of the Industrial College on Oct3ber 11, 1957.
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COOPERATING AGENCIES:
Aerospace Industries Association of America, Inc.
American Security Council
American Society of Industrial Security
American University of Beirut, Lebanon
Armed Forces Chemical Association (Midwest Chapter)
Armed Forces Communications and
Electronics Association
Armour Research Foundation of
Illinois Institute of Technology
Associated General Contractors of America, Inc.
Association of the U. S. Army
Chicago Association of Commerce and Industry
Chicago Civil Defense Corps
Defense Orientation Conference Association
Engineers Joint Council
Executive Office of the President,
Office of Civil and Defense Mobilization
Foreign Policy Research Institute,
University of Pennsylvania
Freedoms Foundation at Valley Forge
Illinois Institute of Technology
Illinois Manufacturers' Association
Illinois State Chamber of Commerce
National Defense Transportation Association
National Industrial Advertisers' Association
National Safety Council
Ohio State University
Reserve Officers Association of the U. S.
Scientific Manpower Commission
Stanford University, The Hoover Institute
State of Illinois Civil Defense Agency
The American Legion
The Research Institute of America, Inc.
The Society of American Military Engineers
U. S. Department of Commerce
U. S. Department of Defense
Chemical Corps, U. S. Army
Corps of Engineers, U. S. Army
Industrial College of the Armed Forces
Offices of Assistant Secretary of Defense
(Manpower, Personnel and Reserve)
(Supply and Logistics)
Office of Naval Research, U. S. Navy
U. S. Air Force (Civil Engineering)
U. S. Department of Labor
U. S. Coast Guard
University of Notre Dame
Veterans of Foreign Wars of the U. S.
Western Society of Engineers
PLANNING AND IMPLEMENTA-
TION COMMITTEE
FRANK ROCKWELL BARNETT, Director of Research,
The Richardson Foundation
EDWARD J. CONDON, Former Vice President,
Sears, Roebuck and Company
FRED M. GILLIES, Chairman of the Board,
Acme Steel Company
ALLAN B. KLINE, Former Head,
American Farm Bureau
EDWIN A. LOCKE, JR., President,
Union Tank Car Company
JOHN SLEZAK, Chairman of the Board,
Kable Printing Company
EDUCATIONAL PROJECTS
COMMITTEE
DR. C. E. BARTIIEL, Assistant Director,
Armour Research Foundation
FREDERICK BELLINGER, Chief, Material Sciences Division,
Georgia Institute of Technology
DR. GEORGE C. S. BENSON, President
Claremont Men's College
PROF. ANTHONY T. BOUSCAREN,
Marquette University
DEAN FRANCIS X. BRADLEY, JR., Assistant Dean,
Graduate School for Research,
University of Notre Dame
DR. WILLIAM R. EMERSON,
Assistant Professor of Military History,
Yale University
SETA FOSTER
Poster Foods
DR. HAROLD F. IIARDING,
National Security Policy Seminar
The Ohio State University
DR. EYRON KIRKPATRICK, Executive Director
American Political Science Association
DR. Lours C. MCCABE, President,
Resources Research, Inc.
DR. GERHART NIEMEYER,
University of Notre Dame
DR. WARREN W. SHEARER, Professor of Economics,
Wabash College
DR. ANTHONY E. SOKOL,
Professor of International Security Affairs,
Stanford University
DR. ROBERT STRAUSZ-IIuPE, Director,
Foreign Policy Research Institute,
University of Pennsylvania
DR. DONALD TREADGOLD,
Far Eastern and Russian Institute,
University of Washington
DR. RICHARD L. WALKER,
Chairman, Department of International Studies,
University of South Carolina
WASHINGTON LIASON
COMMITTEE
Chairman: MAJ. GEN. CHARLES G. IIOLLE,
Office of the Chief of Engineers,
Department of the Army
Assoc. Chmn.: BRIG. GEN. DONALD ARMSTRONG,
U. S. Army (Ret.)
VIRGIL L. COUCH
Executive Once of the President,
Office of Defense Mobilization
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JIINTRY S. IIOLMES,
Assistant for Public Affairs,
International Finance Corporation
.REAR ADMIRAL H. ARNOLD FARO,
Director, Coast cC Geodetic Survey,
U.S. Department of Commerce
1)R. WALTER J. MURrHY, Editorial Director,
ACS Applied Publications
J. LEWIS POWELL,
Assistant for Planning, Office of Production. Policy,
Office of the Assistant Secretary of Defense
(Supply and Logistics.)
CONGER REYNOLDS,
Director, O ce of Private Cooperation,
U.S. Information Agency
JAMES P. RINGLEY, Chairman,
Selective Service Appeal Board
lrr. COMDR..JAMES C. WATKINS,
Chief, Organization Branch,
Office of the Assistant Secretary of Defense
JAMES H. WILSON, JR.,
Director, National Security Commission,
The American Legion
ADVISORY COMMITTEE ON
I,'OR.EI(;N AFFAIRS
WILLIAM BLACKIE, Executive Vice President,
Caterpillar Tractor Co.
I)R. MARTIN BLANK,
Representing German Industry
JACK L. CAMP,
Director of Foreign Operations,
International Harvester Co.
SIR RALPH COCHRANE,
Director, Research Division,
].Rolls-Royce, Ltd.
DAVID CoLLIn:R,
Publisher and Associate Editor,
Modern Age
MARK M. JONES,
Consulting Economist,
Princeton, New Jersey
Da. IRENE W. MEISTER,
Public Itstations Adviser, Overseas,
Socony Mobil Oil Co., Inc.
SIR JOHN SLESSOR, Director,
Blackburn & General Aircraft of Great Britain
DR. ROBERT STRAIrsz-HUPE,
Director, Foreign Policy Research Institute,
University of Pennsylvania
A. M. STRONG,
International Financial Consultant and Chairman,
International Trade Commission, Illinois Manufacturers
Association
BARON FREDERICII At7GUST VON DER IIEYDTE, Professor,
Wrlrzburg University
l)I:AN C. KEN WEIDNER, Faculty of Engineering,
American University of Beirut
THE BOARD OF DIRECTORS
LENOX R. LOHR, Chairman of the Board
President
Chicago Museum of Science and Industry
ROBERT C. BARKER:
Vice President and General Counsel,
The Northern Trust Company
REAR ADMIRAL RAWSON BENNETT, USN:
Chief of Naval Research
DR. HOWARD L. BEMs:
Chairman,
The President's Committee on Scientists and Engineers
WILLARD W. BROWN:
President,
The Cleveland Graphite Bronze Company
CHARLES W. BRYAN, JR.:
Vice President, Pullman, Inc., and
Pullman Finance and Properties Company
HARRY A. 13ULLIS:
Retired Chairman of the Board,
General Mills, Inc. and
Chairman, International Development Advisory Board
JonN L. COLLYER:
Chairman of the Board,
The B. F. Goodrich Company
EDWARD J. CONDON:
Former Vice President,
Sears, Roebuck and Company
THOYIAS H. COULTER:
Chief Executive Ofcer,
Chicago Association of Commerce and Industry
L. J. FLEi1TCIIER:
Former Vice President,
Caterpillar Tractor Company
FRED M. GILLIES:
Chairman of the Board, Acme Steel Company
LT. GEN. LESLIE R. GRovEs, USA-Rtd.:
Vice President,
Remington Rand Division of Sperry Rand Corp.
LT. GEN. E. C. ITSCHNER, USA:
Chief of Engineers,
Department of the Army
MAJ. GRE. MAX S. JOHNSON, USA-Rtd.:
Former Commandant,
U. S. Army War College
REAR ADMIRAL II. ARNOLD FARO:
Director, Coast and Geodetic Survey,
U. S. Department of Commerce
ALLAN B. ELINE:
Former Head,
American Farm Bureau
DR. lIA1.DON A. LEEDY:
Director,
Armour Research Foundation of Illinois Institute of
Technology
MORitis I. LEIBMAN:
Crowell & Leibman
EDWIN A. LOCKE, JR.,
President,
Union Tank Car Company
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MERRILL C. MEIGS:
Vice President,
The Hearst Corporation
LT. GEN. GEORGE W. MUNDY, USAF:
Commandant,
Industrial College of the Armed Forces
GENERAL EDWIN W. RAWLINGS, USAF-Rtd.:
Financial Vice President,
General Mills, Inc.
GORDON W. REED
Chairman of the Board,
Texas Gulf Producing Company
HENRY REGENERY:
President,
Henry Regnery Company
II. A. SHEPARD:
Vice President,
Thompson Products Divisions,
Thompson Ramo Wooldridge, Inc.
JOHN SLEZAK:
Former Under Secretary of the Army--
Chairman of the Board,
Kable Printing Company
MAJ. GEN. DELMAR T. SPIVEY, USAF-Rtd.:
Superintendent,
Culver Military Academy
DANIEL A. SULLIVAN:
Armour Research Foundation of Illinois Institute of
Technology and Executive Director, Institute for
American Strategy
GENERAL HERBERT 1). VOGEL:
Chairman of the Board,
Tennessee Valley Authority
MAJ. GEN. DOUGLAS L. WEART, USA-Rtd.:
Corps of Engineers
BRIG. GEN. LAWRENCE II. WHITING, USA-Rtd.:
President,
American Furniture Mart
GENERAL ROBERT E. WOOD:
Retired Chairman of the Board,
Sears, Roebuck and Company
OFFICERS
CHAIRMAN, 1960 CONFERENCE:
GEN. ROBERT E. WOOD
CO-CHAIRMAN, 1960 CONFERENCE:
BRIG. GEN. LAWRENCE H. WHITING, USA (Ret.)
Pres., Whiting & Co.
EXECUTIVE DIRECTOR:
DANIEL A. SULLIVAN
Armour Research Foundation, ITT
AUDITOR:
LEONARD SPACEK
Managing Partner
Arthur Anderson and Company
GENERAL COUNSELS:
Ashcraft, Olson & Edmonds
Crowell & Leibman
DIRECTOR OF PUBLICATIONS:
IVAN HILL,
Executive Vice President,
Cunningham & Walsh, Inc.
THE EXECUTIVE COMMITTEE
EDWIN A, LOCKS, JR., CHAIRMAN
President, Union Tank Car Co.
THOMAS H. COULTER,
Chief Executive Officer,
Chicago Association of Commerce and Industry
JOAN M. FISHER,
Chairman of the Board, National Security Council
LENOX R. LOIrE,
President, Museum of Science and Industry
GEN. EDWIN W. RAWLINGS, USAF (Ret.),
Financial Vice President,
General Mills, Inc.
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