Part 2 of NSC-68, truncated due to length.
B. ECONOMIC

1. Capabilities. In contrast to the war economy of the Soviet world (cf. Ch. V-B), the American economy (and the economy of the free world as a whole) is at present directed to the provision of rising standards of living. The military budget of the United States represents 6 to 7 percent of its gross national product (as against 13.8 percent for the Soviet Union). Our North Atlantic Treaty NATO allies devoted 4.8 percent of their national product to military purposes in 1949.

This difference in emphasis between the two economies means that the readiness of the free world to support a war effort is tending to decline relative to that of the Soviet Union. There is little direct investment in production facilities for military end-products and in dispersal. There are relatively few men receiving military training and a relatively low rate of production of weapons. However, given time to convert to a war effort, the capabilities of the United States economy and also of the Western European economy would be tremendous. In the light of Soviet military capabilities, a question which may be of decisive importance in the event of war is the question whether there will be time to mobilize our superior human and material resources for a war effort (cf. Chs. VIII and IX).

The capability of the American economy to support a build-up of economic and military strength at home and to assist a build-up abroad is limited not, as in the case of the Soviet Union, so much by the ability to produce as by the decision on the proper allocation of resources to this and other purposes. Even Western Europe could afford to assign a substantially larger proportion of its resources to defense, if the necessary foundation in public understanding and will could be laid, and if the assistance needed to meet its dollar deficit were provided.

The Soviet Union is now allocating nearly 40 percent of its gross available resources to military purposes and investment, much of which is in war-supporting industries. It is estimated that even in an emergency the Soviet Union could not increase this proportion to much more than 50 percent, or by one-fourth. The United States, on the other hand, is allocating only about 20 percent of its resources to defense and investment (or 22 percent including foreign assistance), and little of its investment outlays are directed to war-supporting industries. In an emergency the United States could allocate more than 50 percent of its resources to military purposes and foreign assistance, or five to six times as much as at present.

The same point can be brought out by statistics on the use of important products. The Soviet Union is using 14 percent of its ingot steel, 47 percent of its primary aluminum, and 18.5 percent of its crude oil for military purposes, while the corresponding percentages for the United States are 1.7, 8.6, and 5.6. Despite the tremendously larger production of these goods in the United States than the Soviet Union, the latter is actually using, for military purposes, nearly twice as much steel as the United States and 8 to 26 percent more aluminum.
Perhaps the most impressive indication of the economic superiority of the free world over the Soviet world which can be made on the basis of available data is provided in comparisons (based mainly on the Economic Survey of Europe, 1948).

It should be noted that these comparisons understate the relative position of the NAT countries for several reasons: (1) Canada is excluded because comparable data were not available; (2) the data for the USSR are the 1950 targets (as stated in the fourth five-year plan) rather than actual rates of production and are believed to exceed in many cases the production actually achieved; (3) the data for the European NAT countries are actual data for 1948, and production has generally increased since that time.

Furthermore, the United States could achieve a substantial absolute increase in output and could thereby increase the allocation of resources to a build-up of the economic and military strength of itself and its allies without suffering a decline in its real standard of living. Industrial production declined by 10 percent between the first quarter of 1948 and the last quarter of 1949, and by approximately one-fourth between 1944 and 1949. In March 1950 there were approximately 4,750,000 unemployed, as compared to 1,070,000 in 1943 and 670,000 in 1944. The gross national product declined slowly in 1949 from the peak reached in 1948 ($262 billion in 1948 to an annual rate of $256 billion in the last six months of 1949), and in terms of constant prices declined by about 20 percent between 1944 and 1948.

With a high level of economic activity, the United States could soon attain a gross national product of $300 billion per year, as was pointed out in the President's Economic Report (January 1950). Progress in this direction would permit, and might itself be aided by, a buildup of the economic and military strength of the United States and the free world; furthermore, if a dynamic expansion of the economy were achieved, the necessary build-up could be accomplished without a decrease in the national standard of living because the required resources could be obtained by siphoning off a part of the annual increment in the gross national product. These are facts of fundamental importance in considering the courses of action open to the United States (cf. Ch. IX).

2. Intentions. Foreign economic policyis a major instrument in the conduct of United States foreign relations. It is an instrument which can powerfully influence the world environment in ways favorable to the security and welfare of this country. It is also an instrument which, if unwisely formulated and employed, can do actual harm to our national interests. It is an instrument uniquely suited to our capabilities, provided we have the tenacity of purpose and the understanding requisite to a realization of its potentials. Finally, it is an instrument peculiarly appropriate to the cold war.

The preceding analysis has indicated that an essential element in a program to frustrate the Kremlin design is the development of a successfully functioning system among the free nations. It is clear that economic conditions are among the fundamental determinants of the will and the strength to resist subversion and aggression.

United States foreign economic policy has been designed to assist in the building of such a system and such conditions in the free world. The principal features of this policy can be summarized as follows:

- assistance to Western Europe in recovery and the creation of a viable economy (the European Recovery Program);
- assistance to other countries because of their special needs arising out of the war or the cold war and our special interests in or responsibility for meeting them (grant assistance to Japan, the Philippines, and Korea, loans and credits by the Export-Import Bank, the International Monetary Fund, and the International Bank to Indonesia, Yugoslavia, Iran, etc.);
- assistance in the development of underdeveloped areas (the Point IV program and loans and credits to various countries, overlapping to some extent with those mentioned under 2);
- military assistance to the North Atlantic Treaty countries, Greece, Turkey, etc.;
- restriction of East-West trade in items of military importance to the East;
- purchase and stockpiling of strategic materials; and
- efforts to reestablish an international economy based on multilateral trade, declining trade barriers, and convertible currencies (the GATT-ITO program, the Reciprocal Trade Agreements program, the IMF-IBRD program, and the program now being developed to solve the problem of the United States balance of payments).
In both their short and long term aspects, these policies and programs are directed to the strengthening of the free world and therefore to the frustration of the Kremlin design. Despite certain inadequacies and inconsistencies, which are now being studied in connection with the problem of the United States balance of payments, the United States has generally pursued a foreign economic policy which has powerfully supported its overall objectives. The question must nevertheless be asked whether current and currently projected programs will adequately support this policy in the future, in terms both of need and urgency.

The last year has been indecisive in the economic field. The Soviet Union has made considerable progress in integrating the satellite economies of Eastern Europe into the Soviet economy, but still faces very large problems, especially with China. The free nations have important accomplishments to record, but also have tremendous problems still ahead. On balance, neither side can claim any great advantage in this field over its relative position a year ago. The important question therefore becomes: what are the trends?

Several conclusions seem to emerge. First, the Soviet Union is widening the gap between its preparedness for war and the unpreparedness of the free world for war. It is devoting a far greater proportion of its resources to military purposes than are the free nations and, in significant components of military power, a greater absolute quantity of resources. Second, the Communist success in China, taken with the politico-economic situation in the rest of South and South-East Asia, provides a springboard for a further incursion in this troubled area. Although Communist China faces serious economic problems which may impose some strains on the Soviet economy, it is probable that the social and economic problems faced by the free nations in this area present more than offsetting opportunities for Communist expansion. Third, the Soviet Union holds positions in Europe which, if it maneuvers skillfully, could be used to do great damage to the Western European economy and to the maintenance of the Western orientation of certain countries, particularly Germany and Austria. Fourth, despite (and in part because of) the Titoist' defection, the Soviet Union has accelerated its efforts to integrate satellite economy with its own and to increase the degree of autarchy within the areas under its control.

Fifth, meanwhile, Western Europe, with American (and Canadian) assistance, has achieved a record level of production. However, it faces the prospect of a rapid tapering off of American assistance without the possibility of achieving, by its own efforts, a satisfactory equilibrium with the dollar area. It has also made very little progress toward "economic integration," which would in the long run tend to improve its productivity and to provide an economic environment conducive to political stability. In particular, the movement toward economic integration does not appear to be rapid enough to provide Western Germany with adequate economic opportunities in the West. The United Kingdom still faces economic problems which may require a moderate but politically difficult decline in the British standard of living or more American assistance than is contemplated. At the same time, a strengthening of the British position is needed if the stability of the Commonwealth is not to be impaired and if it is to be a focus of resistance to Communist expansion in South and South East Asia. Improvement of the British position is also vital in building up the defensive capabilities of Western Europe.

Sixth, throughout Asia the stability of the present moderate governments, which are more in sympathy with our purposes than any probable successor regimes would be, is doubtful. The problem is only in part an economic one. Assistance in economic development is important as a means of holding out to the peoples of Asia some prospect of improvement in standards of living under their present governments. But probably more important are a strengthening of central institutions, an improvement in administration, and generally a development of an economic and social structure within which the peoples of Asia can make more effective use of their great human and material resources.

Seventh, and perhaps most important, there are indications of a let-down of United States efforts under the pressure of the domestic budgetary situation, disillusion resulting from excessively optimistic expectations about the duration and results of our assistance programs, and doubts about the wisdom of continuing to strengthen the free nations as against preparedness measures in light of the intensity of the cold war.

Eighth, there are grounds for predicting that the United States and other free nations will within a period of a few years at most experience a decline in economic activity of serious proportions unless more positive governmental programs are developed than are now available.

In short, as we look into the future, the programs now planned will not meet the requirements of the free nations. The difficulty does not lie so much in the inadequacy or misdirection of policy as in the inadequacy of planned programs, in terms of timing or impact, to achieve our objectives. The risks inherent in this situation are set forth in the following chapter and a course of action designed to reinvigorate our efforts in order to reverse the present trends and to achieve our fundamental purpose is outlined in Chapter IX.

C. MILITARY

The United States now possesses the greatest military potential of any single nation in the world. The military weaknesses of the United States vis-à-vis the Soviet Union, however, include its numerical inferiority in forces in being and in total manpower. Coupled with the inferiority of forces in being, the United States also lacks tenable positions from which to employ its forces in event of war and munitions power in being and readily available.

It is true that the United States armed forces are now stronger than ever before in other times of apparent peace; it is also true that there exists a sharp disparity between our actual military strength and our commitments. The relationship of our strength to our present commitments, however, is not alone the governing factor. The world situation, as well as commitments, should govern; hence, our military strength more properly should be related to the world situation confronting us. When our military strength is related to the world situation and balanced against the likely exigencies of such a situation, it is clear that our military strength is becoming dangerously inadequate.

If war should begin in 1950, the United States and its allies will have the military capability of conducting defensive operations to provide a reasonable measure of protection to the Western Hemisphere, bases in the Western Pacific, and essential military lines of communication; and an inadequate measure of protection to vital military bases in the United Kingdom and in the Near and Middle East. We will have the capability of conducting powerful offensive air operations against vital elements of the Soviet war-making capacity.

The scale of the operations listed in the preceding paragraph is limited by the effective forces and material in being of the United States and its allies vis-à-vis the Soviet Union. Consistent with the aggressive threat facing us and in consonance with overall strategic plans, the United States must provide to its allies on a continuing basis as large amounts of military assistance as possible without serious detriment to the United States operational requirements.

If the potential military capabilities of the United States and its allies were rapidly and effectively developed, sufficient forces could be produced probably to deter war, or if the Soviet Union chooses war, to withstand the initial Soviet attacks, to stabilize supporting attacks, and to retaliate in turn with even greater impact on the Soviet capabilities. From the military point of view alone, however, this would require not only the generation of the necessary military forces but also the development and stockpiling of improved weapons of all types.

Under existing peacetime conditions, a period of from two to three years is required to produce a material increase in military power. Such increased power could be provided in a somewhat shorter period in a declared period of emergency or in wartime through a full-out national effort. Any increase in military power in peacetime, however, should be related both to its probable military role in war, to the implementation of immediate and long-term United States foreign policy vis-à-vis the Soviet Union, and to the realities of the existing situation. If such a course of increasing our military power is adopted now, the United States would have the capability of eliminating the disparity between its military strength and the exigencies of the situation we face; eventually of gaining the initiative in the "cold" war and of materially delaying if not stopping the Soviet offensives in war itself.

VII. Present Risks

A. GENERAL

It is apparent from the preceding sections that the integrity and vitality of our system is in greater jeopardy than ever before in our history. Even if there were no Soviet Union we would face the great problem of the free society, accentuated many fold in this industrial age, of reconciling order, security, the need for participation, with the requirement of freedom. We would face the fact that in a shrinking world the absence of order among nations is becoming less and less tolerable. The Kremlin design seeks to impose order among nations by means which would destroy our free and democratic system. The Kremlin's possession of atomic weapons puts new power behind its design, and increases the jeopardy to our system. It adds new strains to the uneasy equilibrium-without-order which exists in the world and raises new doubts in men's minds whether the world will long tolerate this tension without moving toward some kind of order, on somebody's terms.

The risks we face are of a new order of magnitude, commensurate with the total struggle in which we are engaged. For a free society there is never total victory, since freedom and democracy are never wholly attained, are always in the process of being attained. But defeat at the hands of the totalitarian is total defeat. These risks crowd in on us, in a shrinking world of polarized power, so as to give us no choice, ultimately, between meeting them effectively or being overcome by them.

B. SPECIFIC

It is quite clear from Soviet theory and practice that the Kremlin seeks to bring the free world under its dominion by the methods of the cold war. The preferred technique is to subvert by infiltration and intimidation. Every institution of our society is an instrument which it is sought to stultify and turn against our purposes. Those that touch most closely our material and moral strength are obviously the prime targets, labor unions, civic enterprises, schools, churches, and all media for influencing opinion. The effort is not so much to make them serve obvious Soviet ends as to prevent them from serving our ends, and thus to make them sources of confusion in our economy, our culture, and our body politic. The doubts and diversities that in terms of our values are part of the merit of a free system, the weaknesses and the problems that are peculiar to it, the rights and privileges that free men enjoy, and the disorganization and destruction left in the wake of the last attack on our freedoms, all are but opportunities for the Kremlin to do its evil work. Every advantage is taken of the fact that our means of prevention and retaliation are limited by those principles and scruples which are precisely the ones that give our freedom and democracy its meaning for us. None of our scruples deter those whose only code is "morality is that which serves the revolution."

Since everything that gives us or others respect for our institutions is a suitable object for attack, it also fits the Kremlin's design that where, with impunity, we can be insulted and made to suffer indignity the opportunity shall not be missed, particularly in any context which can be used to cast dishonor on our country, our system, our motives, or our methods. Thus the means by which we sought to restore our own economic health in the '30's, and now seek to restore that of the free world, come equally under attack. The military aid by which we sought to help the free world was frantically denounced by the Communists in the early days of the last war, and of course our present efforts to develop adequate military strength for ourselves and our allies are equally denounced.

At the same time the Soviet Union is seeking to create overwhelming military force, in order to back up infiltration with intimidation. In the only terms in which it understands strength, it is seeking to demonstrate to the free world that force and the will to use it are on the side of the Kremlin, that those who lack it are decadent and doomed. In local incidents it threatens and encroaches both for the sake of local gains and to increase anxiety and defeatism in all the free world.

The possession of atomic weapons at each of the opposite poles of power, and the inability (for different reasons) of either side to place any trust in the other, puts a premium on a surprise attack against us. It equally puts a premium on a more violent and ruthless prosecution of its design by cold war, especially if the Kremlin is sufficiently objective to realize the improbability of our prosecuting a preventive war. It also puts a premium on piecemeal aggression against others, counting on our unwillingness to engage in atomic war unless we are directly attacked. We run all these risks and the added risk of being confused and immobilized by our inability to weigh and choose, and pursue a firm course based on a rational assessment of each.

The risk that we may thereby be prevented or too long delayed in taking all needful measures to maintain the integrity and vitality of our system is great. The risk that our allies will lose their determination is greater. And the risk that in this manner a descending spiral of too little and too late, of doubt and recrimination, may present us with ever narrower and more desperate alternatives, is the greatest risk of all. For example, it is clear that our present weakness would prevent us from offering effective resistance at any of several vital pressure points. The only deterrent we can present to the Kremlin is the evidence we give that we may make any of the critical points which we cannot hold the occasion for a global war of annihilation.

The risk of having no better choice than to capitulate or precipitate a global war at any of a number of pressure points is bad enough in itself, but it is multiplied by the weakness it imparts to our position in the cold war. Instead of appearing strong and resolute we are continually at the verge of appearing and being alternately irresolute and desperate; yet it is the cold war which we must win, because both the Kremlin design, and our fundamental purpose give it the first priority.

The frustration of the Kremlin design, however, cannot be accomplished by us alone, as will appear from the analysis in Chapter IX, B. Strength at the center, in the United States, is only the first of two essential elements. The second is that our allies and potential allies do not as a result of a sense of frustration or of Soviet intimidation drift into a course of neutrality eventually leading to Soviet domination. If this were to happen in Germany the effect upon Western Europe and eventually upon us might be catastrophic.

But there are risks in making ourselves strong. A large measure of sacrifice and discipline will be demanded of the American people. They will be asked to give up some of the benefits which they have come to associate with their freedoms. Nothing could be more important than that they fully understand the reasons for this. The risks of a superficial understanding or of an inadequate appreciation of the issues are obvious and might lead to the adoption of measures which in themselves would jeopardize the integrity of our system. At any point in the process of demonstrating our will to make good our fundamental purpose, the Kremlin may decide to precipitate a general war, or in testing us, may go too far. These are risks we will invite by making ourselves strong, but they are lesser risks than those we seek to avoid. Our fundamental purpose is more likely to be defeated from lack of the will to maintain it, than from any mistakes we may make or assault we may undergo because of asserting that will. No people in history have preserved their freedom who thought that by not being strong enough to protect themselves they might prove inoffensive to their enemies.

VIII. Atomic Armaments

A. MILITARY EVALUATION OF U.S. AND USSR ATOMIC CAPABILITIES

1. The United States now has an atomic capability, including both numbers and deliverability, estimated to be adequate, if effectively utilized, to deliver a serious blow against the war-making capacity of the USSR. It is doubted whether such a blow, even if it resulted in the complete destruction of the contemplated target systems, would cause the USSR to sue for terms or prevent Soviet forces from occupying Western Europe against such ground resistance as could presently be mobilized. A very serious initial blow could, however, so reduce the capabilities of the USSR to supply and equip its military organization and its civilian population as to give the United States the prospect of developing a general military superiority in a war of long duration.

2. As the atomic capability of the USSR increases, it will have an increased ability to hit at our atomic bases and installations and thus seriously hamper the ability of the United States to carry out an attack such as that outlined above. It is quite possible that in the near future the USSR will have a sufficient number of atomic bombs and a sufficient deliverability to raise a question whether Britain with its present inadequate air defense could be relied upon as an advance base from which a major portion of the U.S. attack could be launched.

It is estimated that, within the next four years, the USSR will attain the capability of seriously damaging vital centers of the United States, provided it strikes a surprise blow and provided further that the blow is opposed by no more effective opposition than we now have programmed. Such a blow could so seriously damage the United States as to greatly reduce its superiority in economic potential.

Effective opposition to this Soviet capability will require among other measures greatly increased air warning systems, air defenses, and vigorous development and implementation of a civilian defense program which has been thoroughly integrated with the military defense systems.

In time the atomic capability of the USSR can be expected to grow to a point where, given surprise and no more effective opposition than we now have programmed, the possibility of a decisive initial attack cannot be excluded.

3. In the initial phases of an atomic war, the advantages of initiative and surprise would be very great. A police state living behind an iron curtain has an enormous advantage in maintaining the necessary security and centralization of decision required to capitalize on this advantage.

4. For the moment our atomic retaliatory capability is probably adequate to deter the Kremlin from a deliberate direct military attack against ourselves or other free peoples. However, when it calculates that it has a sufficient atomic capability to make a surprise attack on us, nullifying our atomic superiority and creating a military situation decisively in its favor, the Kremlin might be tempted to strike swiftly and with stealth. The existence of two large atomic capabilities in such a relationship might well act, therefore, not as a deterrent, but as an incitement to war.

5. A further increase in the number and power of our atomic weapons is necessary in order to assure the effectiveness of any U.S. retaliatory blow, but would not of itself seem to change the basic logic of the above points. Greatly increased general air, ground, and sea strength, and increased air defense and civilian defense programs would also be necessary to provide reasonable assurance that the free world could survive an initial surprise atomic attack of the weight which it is estimated the USSR will be capable of delivering by 1954 and still permit the free world to go on to the eventual attainment of its objectives. Furthermore, such a build-up of strength could safeguard and increase our retaliatory power, and thus might put off for some time the date when the Soviet Union could calculate that a surprise blow would be advantageous. This would provide additional time for the effects of our policies to produce a modification of the Soviet system.

6. If the USSR develops a thermonuclear weapon ahead of the U.S., the risks of greatly increased Soviet pressure against all the free world, or an attack against the U.S., will be greatly increased.

7. If the U.S. develops a thermonuclear weapon ahead of the USSR, the U.S. should for the time being be able to bring increased pressure on the USSR.

B. STOCKPILING AND USE OF ATOMIC WEAPONS

1. From the foregoing analysis it appears that it would be to the long-term advantage of the United States if atomic weapons were to be effectively eliminated from national peacetime armaments; the additional objectives which must be secured if there is to be a reasonable prospect of such effective elimination of atomic weapons are discussed in Chapter IX. In the absence of such elimination and the securing of these objectives, it would appear that we have no alternative but to increase our atomic capability as rapidly as other considerations make appropriate. In either case, it appears to be imperative to increase as rapidly as possible our general air, ground, and sea strength and that of our allies to a point where we are militarily not so heavily dependent on atomic weapons.

2. As is indicated in Chapter IV, it is important that the United States employ military force only if the necessity for its use is clear and compelling and commends itself to the overwhelming majority of our people. The United States cannot therefore engage in war except as a reaction to aggression of so clear and compelling a nature as to bring the overwhelming majority of our people to accept the use of military force. In the event war comes, our use of force must be to compel the acceptance of our objectives and must be congruent to the range of tasks which we may encounter.

In the event of a general war with the USSR, it must be anticipated that atomic weapons will be used by each side in the manner it deems best suited to accomplish its objectives. In view of our vulnerability to Soviet atomic attack, it has been argued that we might wish to hold our atomic weapons only for retaliation against prior use by the USSR. To be able to do so and still have hope of achieving our objectives, the non-atomic military capabilities of ourselves and our allies would have to be fully developed and the political weaknesses of the Soviet Union fully exploited. In the event of war, however, we could not be sure that we could move toward the attainment of these objectives without the USSR's resorting sooner or later to the use of its atomic weapons. Only if we had overwhelming atomic superiority and obtained command of the air might the USSR be deterred from employing its atomic weapons as we progressed toward the attainment of our objectives.

In the event the USSR develops by 1954 the atomic capability which we now anticipate, it is hardly conceivable that, if war comes, the Soviet leaders would refrain from the use of atomic weapons unless they felt fully confident of attaining their objectives by other means.

In the event we use atomic weapons either in retaliation for their prior use by the USSR or because there is no alternative method by which we can attain our objectives, it is imperative that the strategic and tactical targets against which they are used be appropriate and the manner in which they are used be consistent with those objectives.

It appears to follow from the above that we should produce and stockpile thermonuclear weapons in the event they prove feasible and would add significantly to our net capability. Not enough is yet known of their potentialities to warrant a judgment at this time regarding their use in war to attain our objectives.

3. It has been suggested that we announce that we will not use atomic weapons except in retaliation against the prior use of such weapons by an aggressor. It has been argued that such a declaration would decrease the danger of an atomic attack against the United States and its allies.

In our present situation of relative unpreparedness in conventional weapons, such a declaration would be interpreted by the USSR as an admission of great weakness and by our allies as a clear indication that we intended to abandon them. Furthermore, it is doubtful whether such a declaration would be taken sufficiently seriously by the Kremlin to constitute an important factor in determining whether or not to attack the United States. It is to be anticipated that the Kremlin would weigh the facts of our capability far more heavily than a declaration of what we proposed to do with that capability.

Unless we are prepared to abandon our objectives, we cannot make such a declaration in good faith until we are confident that we will be in a position to attain our objectives without war, or, in the event of war, without recourse to the use of atomic weapons for strategic or tactical purposes.

C. INTERNATIONAL CONTROL OF ATOMIC ENERGY

1. A discussion of certain of the basic considerations involved in securing effective international control is necessary to make clear why the additional objectives discussed in Chapter IX must be secured.

2. No system of international control could prevent the production and use of atomic weapons in the event of a prolonged war. Even the most effective system of international control could, of itself, only provide (a) assurance that atomic weapons had been eliminated from national peacetime armaments and (b) immediate notice of a violation. In essence, an effective international control system would be expected to assure a certain amount of time after notice of violation before atomic weapons could be used in war.

3. The time period between notice of violation and possible use of atomic weapons in war which a control system could be expected to assure depends upon a number of factors.

The dismantling of existing stockpiles of bombs and the destruction of casings and firing mechanisms could by themselves give little assurance of securing time. Casings and firing mechanisms are presumably easy to produce, even surreptitiously, and the assembly of weapons does not take much time.

If existing stocks of fissionable materials were in some way eliminated and the future production of fissionable materials effectively controlled, war could not start with a surprise atomic attack.

In order to assure an appreciable time lag between notice of violation and the time when atomic weapons might be available in quantity, it would be necessary to destroy all plants capable of making large amounts of fissionable material. Such action would, however, require a moratorium on those possible peacetime uses which call for large quantities of fissionable materials.

Effective control over the production and stockpiling of raw materials might further extend the time period which effective international control would assure. Now that the Russians have learned the technique of producing atomic weapons, the time between violation of an international control agreement and production of atomic weapons will be shorter than was estimated in 1946, except possibly in the field of thermonuclear or other new types of weapons.

4. The certainty of notice of violation also depends upon a number of factors. In the absence of good faith, it is to be doubted whether any system can be designed which will give certainty of notice of violation. International ownership of raw materials and fissionable materials and international ownership and operation of dangerous facilities, coupled with inspection based on continuous unlimited freedom of access to all parts of the Soviet Union (as well as to all parts of the territory of other signatories to the control agreement) appear to be necessary to give the requisite degree of assurance against secret violations. As the Soviet stockpile of fissionable materials grows, the amount which the USSR might secretly withhold and not declare to the inspection agency grows. In this sense, the earlier an agreement is consummated the greater the security it would offer. The possibility of successful secret production operations also increases with developments which may reduce the size and power consumption of individual reactors. The development of a thermonuclear bomb would increase many fold the damage a given amount of fissionable material could do and would, therefore, vastly increase the danger that a decisive advantage could be gained through secret operations.

5. The relative sacrifices which would be involved in international control need also to be considered. If it were possible to negotiate an effective system of international control the United States would presumably sacrifice a much larger stockpile of atomic weapons and a much larger production capacity than would the USSR. The opening up of national territory to international inspection involved in an adequate control and inspection system would have a far greater impact on the USSR than on the United States. If the control system involves the destruction of all large reactors and thus a moratorium on certain possible peacetime uses, the USSR can be expected to argue that it, because of greater need for new sources of energy, would be making a greater sacrifice in this regard than the United States.

6. The United States and the peoples of the world as a whole desire a respite from the dangers of atomic warfare. The chief difficulty lies in the danger that the respite would be short and that we might not have adequate notice of its pending termination. For such an arrangement to be in the interest of the United States, it is essential that the agreement be entered into in good faith by both sides and the probability against its violation high.

7. The most substantial contribution to security of an effective international control system would, of course, be the opening up of the Soviet Union, as required under the UN plan. Such opening up is not, however, compatible with the maintenance of the Soviet system in its present rigor. This is a major reason for the Soviet refusal to accept the UN plan.

The studies which began with the Acheson-Lilienthal committee and culminated in the present UN plan made it clear that inspection of atomic facilities would not alone give the assurance of control; but that ownership and operation by an international authority of the world's atomic energy activities from the mine to the last use of fissionable materials was also essential. The delegation of sovereignty which this implies is necessary for effective control and, therefore, is as necessary for the United States and the rest of the free world as it is presently unacceptable to the Soviet Union.

It is also clear that a control authority not susceptible directly or indirectly to Soviet domination is equally essential. As the Soviet Union would regard any country not under its domination as under the potential if not the actual domination of the United States, it is clear that what the United States and the non-Soviet world must insist on, the Soviet Union at present rejects.

The principal immediate benefit of international control would be to make a surprise atomic attack impossible, assuming the elimination of large reactors and the effective disposal of stockpiles of fissionable materials. But it is almost certain that the Soviet Union would not agree to the elimination of large reactors, unless the impracticability of producing atomic power for peaceful purposes had been demonstrated beyond a doubt. By the same token, it would not now agree to elimination of its stockpile of fissionable materials.

Finally, the absence of good faith on the part of the USSR must be assumed until there is concrete evidence that there has been a decisive change in Soviet policies. It is to be doubted whether such a change can take place without a change in the nature of the Soviet system itself.

The above considerations make it clear that at least a major change in the relative power positions of the United States and the Soviet Union would have to take place before an effective system of international control could be negotiated. The Soviet Union would have had to have moved a substantial distance down the path of accommodation and compromise before such an arrangement would be conceivable. This conclusion is supported by the Third Report of the United Nations Atomic Energy Commission to the Security Council, May 17, 1948, in which it is stated that ". . . the majority of the Commission has been unable to secure . . . their acceptance of the nature and extent of participation in the world community required of all nations in this field.... As a result, the Commission has been forced to recognize that agreement on effective measures for the control of atomic energy is itself dependent on cooperation in broader fields of policy."

In short, it is impossible to hope than an effective plan for international control can be negotiated unless and until the Kremlin design has been frustrated to a point at which a genuine and drastic change in Soviet policies has taken place.

IX. Possible Courses of Action

Introduction. Four possible courses of action by the United States in the present situation can be distinguished. They are:

a. Continuation of current policies, with current and currently projected programs for carrying out these policies;
b. Isolation;
c. War; and
d. A more rapid building up of the political, economic, and military strength of the free world than provided under a, with the purpose of reaching, if possible, a tolerable state of order among nations without war and of preparing to defend ourselves in the event that the free world is attacked.

The role of negotiation. Negotiation must be considered in relation to these courses of action. A negotiator always attempts to achieve an agreement which is somewhat better than the realities of his fundamental position would justify and which is, in any case, not worse than his fundamental position requires. This is as true in relations among sovereign states as in relations between individuals. The Soviet Union possesses several advantages over the free world in negotiations on any issue:

a. It can and does enforce secrecy on all significant facts about conditions within the Soviet Union, so that it can be expected to know more about the realities of the free world's position than the free world knows about its position;
b. It does not have to be responsive in any important sense to public opinion;
c. It does not have to consult and agree with any other countries on the terms it will offer 'And accept; and
d. It can influence public opinion in other countries while insulating the peoples under its control.

These are important advantages. Together with the unfavorable trend of our power position, they militate, as is shown in Section A below, against successful negotiation of a general settlement at this time. For although the United States probably now possesses, principally in atomic weapons, a force adequate to deliver a powerful blow upon the Soviet Union and to open the road to victory in a long war, it is not sufficient by itself to advance the position of the United States in the cold war.

The problem is to create such political and economic conditions in the free world, backed by force sufficient to inhibit Soviet attack, that the Kremlin will accommodate itself to these conditions, gradually withdraw, and eventually change its policies drastically. It has been shown in Chapter VIII that truly effective control of atomic energy would require such an opening up of the Soviet Union and such evidence in other ways of its good faith and its intent to co-exist in peace as to reflect or at least initiate a change in the Soviet system.

Clearly under present circumstances we will not be able to negotiate a settlement which calls for a change in the Soviet system. What, then, is the role of negotiation?

In the first place, the public in the United States and in other free countries will require, as a condition to firm policies and adequate programs directed to the frustration of the Kremlin design, that the free world be continuously prepared to negotiate agreements with the Soviet Union on equitable terms. It is still argued by many people here and abroad that equitable agreements with the Soviet Union are possible, and this view will gain force if the Soviet Union begins to show signs of accommodation, even on unimportant issues.

The free countries must always, therefore, be prepared to negotiate and must be ready to take the initiative at times in seeking negotiation. They must develop a negotiating position which defines the issues and the terms on which they would be prepared--and at what stages--to accept agreements with the Soviet Union. The terms must be fair in the view of popular opinion in the free world. This means that they must be consistent with a positive program for peace--in harmony with the United Nations' Charter and providing, at a minimum, for the effective control of all armaments by the United Nations or a successor organization. The terms must not require more of the Soviet Union than such behavior and such participation in a world organization. The fact that such conduct by the Soviet Union is impossible without such a radical change in Soviet policies as to constitute a change in the Soviet system would then emerge as a result of the Kremlin's unwillingness to accept such terms or of its bad faith in observing them.

A sound negotiating position is, therefore, an essential element in the ideological conflict. For some time after a decision to build up strength, any offer of, or attempt at, negotiation of a general settlement along the lines of the Berkeley speech by the Secretary of State could be only a tactic.' Nevertheless, concurrently with a decision and a start on building up the strength of the free world, it may be desirable to pursue this tactic both to gain public support for the program and to minimize the immediate risks of war. It is urgently necessary for the United States to determine its negotiating position and to obtain agreement with its major allies on the purposes and terms of negotiation.

In the second place, assuming that the United States in cooperation with other free countries decides and acts to increase the strength of the free world and assuming that the Kremlin chooses the path of accommodation, it will from time to time be necessary and desirable to negotiate on various specific issues with the Kremlin as the area of possible agreement widens.

The Kremlin will have three major objectives in negotiations with the United States. The first is to eliminate the atomic capabilities of the United States; the second is to prevent the effective mobilization of the superior potential of the free world in human and material resources; and the third is to secure a withdrawal of United States forces from, and commitments to, Europe and Japan. Depending on its evaluation of its own strengths and weaknesses as against the West's (particularly the ability and will of the West to sustain its efforts), it will or will not be prepared to make important concessions to achieve these major objectives. It is unlikely that the Kremlin's evaluation is such that it would now be prepared to make significant concessions.

The objectives of the United States and other free countries in negotiations with the Soviet Union (apart from the ideological objectives discussed above) are to record, in a formal fashion which will facilitate the consolidation and further advance of our position, the process of Soviet accommodation to the new political, psychological, and economic conditions in the world which will result from adoption of the fourth course of action and which will be supported by the increasing military strength developed as an integral part of that course of action. In short, our objectives are to record, where desirable, the gradual withdrawal of the Soviet Union and to facilitate that process by making negotiation, if possible, always more expedient than resort to force.

It must be presumed that for some time the Kremlin will accept agreements only if it is convinced that by acting in bad faith whenever and wherever there is an opportunity to do so with impunity, it can derive greater advantage from the agreements than the free world. For this reason, we must take care that any agreements are enforceable or that they are not susceptible of violation without detection and the possibility of effective countermeasures.

This further suggests that we will have to consider carefully the order in which agreements can be concluded. Agreement on the control of atomic energy would result in a relatively greater disarmament of the United States than of the Soviet Union, even assuming considerable progress in building up the strength of the free world in conventional forces and weapons. It might be accepted by the Soviet Union as part of a deliberate design to move against Western Europe and other areas of strategic importance with conventional forces and weapons. In this event, the United States would find itself at war, having previously disarmed itself in its most important weapon, and would be engaged in a race to redevelop atomic weapons.

This seems to indicate that for the time being the United States and other free countries would have to insist on concurrent agreement on the control of nonatomic forces and weapons and perhaps on the other elements of a general settlement, notably peace treaties with Germany, Austria, and Japan and the withdrawal of Soviet influence from the satellites. If, contrary to our expectations, the Soviet Union should accept agreements promising effective control of atomic energy and conventional armaments, without any other changes in Soviet policies, we would have to consider very carefully whether we could accept such agreements. It is unlikely that this problem will arise.

To the extent that the United States and the rest of the free world succeed in so building up their strength in conventional forces and weapons that a Soviet attack with similar forces could be thwarted or held, we will gain increased flexibility and can seek agreements on the various issues in any order, as they become negotiable.

In the third place, negotiation will play a part in the building up of the strength of the free world, apart from the ideological strength discussed above. This is most evident in the problems of Germany, Austria, and Japan. In the process of building up strength, it may be desirable for the free nations, without the Soviet Union, to conclude separate arrangements with Japan, Western Germany, and Austria which would enlist the energies and resources of these countries in support of the free world. This will be difficult unless it has been demonstrated by attempted negotiation with the Soviet Union that the Soviet Union is not prepared to accept treaties of peace which would leave these countries free, under adequate safeguards, to participate in the United Nations and in regional or broader associations of states consistent with the United Nations' Charter and providing security and adequate opportunities for the peaceful development of their political and economic life.

This demonstrates the importance, from the point of view of negotiation as well as for its relationship to the building up of the strength of the free world (see Section D below), of the problem of closer association--on a regional or a broader basis--among the free countries.

In conclusion, negotiation is not a possible separate course of action but rather a means of gaining support for a program of building strength, of recording, where necessary and desirable, progress in the cold war, and of facilitating further progress while helping to minimize the risks of war. Ultimately, it is our objective to negotiate a settlement with the Soviet Union (or a successor state or states) on which the world can place reliance as an enforceable instrument of peace. But it is important to emphasize that such a settlement can only record the progress which the free world will have made in creating a political and economic system in the world so successful that the frustration of the Kremlin's design for world domination will be complete. The analysis in the following sections indicates that the building of such a system requires expanded and accelerated programs for the carrying out of current policies.

A. THE FIRST COURSE--CONTINUATION OF CURRENT POLICIES, WITH CURRENT AND CURRENTLY PROJECTED PROGRAMS FOR CARRYING OUT THESE POLICIES

1. Military aspects. On the basis of current programs, the United States has a large potential military capability but an actual capability which, though improving, is declining relative to the USSR, particularly in light of its probable fission bomb capability and possible thermonuclear bomb capability. The same holds true for the free world as a whole relative to the Soviet world as a whole. If war breaks out in 1950 or in the next few years, the United States and its allies, apart from a powerful atomic blow, will be compelled to conduct delaying actions, while building up their strength for a general offensive. A frank evaluation of the requirements, to defend the United States and its vital interests and to support a vigorous initiative in the cold war, on the one hand, and of present capabilities, on the other, indicates that there is a sharp and growing disparity between them.

A review of Soviet policy shows that the military capabilities, actual and potential, of the United States and the rest of the free world, together with the apparent determination of the free world to resist further Soviet expansion, have not induced the Kremlin to relax its pressures generally or to give up the initiative in the cold war. On the contrary, the Soviet Union has consistently pursued a bold foreign policy, modified only when its probing revealed a determination and an ability of the free world to resist encroachment upon it. The relative military capabilities of the free world are declining, with the result that its determination to resist may also decline and that the security of the United States and the free world as a whole will be jeopardized.

From the military point of view, the actual and potential capabilities of the United States, given a continuation of current and projected programs, will become less and less effective as a war deterrent. Improvement of the state of readiness will become more and more important not only to inhibit the launching of war by the Soviet Union but also to support a national policy designed to reverse the present ominous trends in international relations. A building up of the military capabilities of the United States and the free world is a pre-condition to the achievement of the objectives outlined in this report and to the protection of the United States against disaster.

Fortunately, the United States military establishment has been developed into a unified and effective force as a result of the policies laid down by the Congress and the vigorous carrying out of these policies by the Administration in the fields of both organization and economy. It is, therefore, a base upon which increased strength can be rapidly built with maximum efficiency and economy.

2. Political aspects. The Soviet Union is pursuing the initiative in the conflict with the free world. Its atomic capabilities, together with its successes in the Far East, have led to an increasing confidence on its part and to an increasing nervousness in Western Europe and the rest of the free world. We cannot be sure, of course, how vigorously the Soviet Union will pursue its initiative, nor can we be sure of the strength or weakness of the other free countries in reacting to it. There are, however, ominous signs of further deterioration in the Far East. There are also some indications that a decline in morale and confidence in Western Europe may be expected. In particular, the situation in Germany is unsettled. Should the belief or suspicion spread that the free nations are not now able to prevent the Soviet Union from taking, if it chooses, the military actions outlined in Chapter V, the determination of the free countries to resist probably would lessen and there would be an increasing temptation for them to seek a position of neutrality.

Politically, recognition of the military implications of a continuation of present trends will mean that the United States and especially other free countries will tend to shift to the defensive, or to follow a dangerous policy of bluff, because the maintenance of a firm initiative in the cold war is closely related to aggregate strength in being and readily available.

This is largely a problem of the incongruity of the current actual capabilities of the free world and the threat to it, for the free world has an economic and military potential far superior to the potential of the Soviet Union and its satellites. The shadow of Soviet force falls darkly on Western Europe and Asia and supports a policy of encroachment. The free world lacks adequate means--in the form of forces in being--to thwart such expansion locally. The United States will therefore be confronted more frequently with the dilemma of reacting totally to a limited extension of Soviet control or of not reacting at all (except with ineffectual protests and half measures). Continuation of present trends is likely to lead, therefore, to a gradual withdrawal under the direct or indirect pressure of the Soviet Union, until we discover one day that we have sacrificed positions of vital interest. In other words, the United States would have chosen, by lack of the necessary decisions and actions, to fall back to isolation in the Western Hemisphere. This course would at best result in only a relatively brief truce and would be ended either by our capitulation or by a defensive war--on unfavorable terms from unfavorable positions--against a Soviet Empire compromising all or most of Eurasia. (See Section B.)

3. Economic and social aspects. As was pointed out in Chapter Vl, the present foreign economic policies and programs of the United States will not produce a solution to the problem of international economic equilibrium, notably the problem of the dollar gap, and will not create an economic base conducive to political stability in many important free countries.

The European Recovery Program has been successful in assisting the restoration and expansion of production in Western Europe and has been a major factor in checking the dry rot of Communism in Western Europe. However, little progress has been made toward the resumption by Western Europe of a position of influence in world affairs commensurate with its potential strength. Progress in this direction will require integrated political, economic, and military policies and programs, which are supported by the United States and the Western European countries and which will probably require a deeper participation by the United States than has been contemplated.

The Point IV Program and other assistance programs will not adequately supplement, as now projected, the efforts of other important countries to develop effective institutions, to improve the administration of their affairs, and to achieve a sufficient measure of economic development. The moderate regimes now in power in many countries, like India, Indonesia, Pakistan, and the Philippines, will probably be unable to restore or retain their popular support and authority unless they are assisted in bringing about a more rapid improvement of the economic and social structure than present programs will make possible.

The Executive Branch is now undertaking a study of the problem of the United States balance of payments and of the measures which might be taken by the United States to assist in establishing international economic equilibrium. This is a very important project and work on it should have a high priority. However, unless such an economic program is matched and supplemented by an equally far-sighted and vigorous political and military program, we will not be successful in checking and rolling back the Kremlin's drive.

4. Negotiation. In short, by continuing along its present course the free world will not succeed in making effective use of its vastly superior political, economic, and military potential to build a tolerable state of order among nations. On the contrary, the political, economic, and military situation of the free world is already unsatisfactory and will become less favorable unless we act to reverse present trends.

This situation is one which militates against successful negotiations with the Kremlin--for the terms of agreements on important pending issues would reflect present realities and would therefore be unacceptable, if not disastrous, to the United States and the rest of the free world. Unless a decision had been made and action undertaken to build up the strength, in the broadest sense, of the United States and the free world, an attempt to negotiate a general settlement on terms acceptable to us would be ineffective and probably long drawn out, and might thereby seriously delay the necessary measures to build up our strength.

This is true despite the fact that the United States now has the capability of delivering a powerful blow against the Soviet Union in the event of war, for one of the present realities is that the United States is not prepared to threaten the use of our present atomic superiority to coerce the Soviet Union into acceptable agreements. In light of present trends, the Soviet Union will not withdraw and the only conceivable basis for a general settlement would be spheres of influence and of no influenced "settlement" which the Kremlin could readily exploit to its great advantage. The idea that Germany or Japan or other important areas can exist as islands of neutrality in a divided world is unreal, given the Kremlin design for world domination.

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