Soviet Progress vs. American Enterprise:
Report of a Confidential Briefing Session
held at the Fifteenth Anniversary Meeting of the Committee for Economic Development,
on November 21, 1957, in Washington, D.C.
(Garden City NY:Doubleday & Co., 1958)
Two chapters are here excerpted from the full text =
J. Sterling Livingston on military production and
procurement [with brief bio of author]
William C. Foster's assesses the status of USA in the
world with recommendations [with brief bio of author]
[SAC editor has added boldface and hypertext links to SAC and other www material
to emphasize and explicate passages of particular significance to our course]
Some useful background reading =
Opaque hints follow in the chapters excerpted below, suggesting some sort
of high-level antagonism, state vs.scientists or military vs.businessmen. For
clarification =
*--An article by Donald
Welzenbach on James Killian, Jr. (President of MIT,
mentioned by Livingston below), Edwin Land
(Polaroid Corporation President), and the US Central Intelligence Agency
*--The two chapters here excerpted should be read with what became known as "The
Gaither Report" [W
TXT], written by Paul Nitze and issued in the same month
*--Here is a thought-provoking
review dealing with the Gaither Report and what was happening in and around
these critical days in November
*--Go right to page 2 of
this review on the same topic and read to the end. Supposedly secret, the
Report was leaked to the press, as this reviewer tells us
=
The report became public a little more than a month later. The headline of Chalmers Robert’s front-page story
in the Washington Post on December 20, 1958 read, SECRET REPORT SEES U.S. IN GRAVE PERIL. (p.139).
...It was Roberts who received during the Dienbienphu crisis of
1954 [ID] the "leak" that credited
the Democrats for "The Day We Didn’t go to War." Still, it takes little effort to
connect the Gaither Report to allegations of a Missile Gap during the 1960 campaign
[ID] [and] to the victorious Democrats’ military programs
which provided substance to Kennedy’s promise to "bear any burden."
---
Are Military Production and Procurement Now a Matter
of Soviet Enterprise vs. American Bureaucracy?
by
J. STERLING LIVINGSTON
Professor of Business Administration Harvard University
(Julius Sterling Livingston was the author of a case-book for business education and a text book}
I was fascinated this morning, as I am sure you gentlemen were, by the remarks of Mr.
Dulles, Mr. Randall, and Vice-President Nixon. I think they made it perfectly
obvious to all that we are in two races, one an arms race and the other an
ideological race. The evidence seems to indicate that we are lagging behind the
Soviets in the arms race because of "calculated decisions made by the military
people" which resulted in our not undertaking the development of the ICBM at the
time the Soviets undertook its development.
It appears to me that a critical question to be asked
in connection with the arms race is why we did not decide to go forward with the
intercontinental missile in 1945 when the Soviets did, particularly when our
Intelligence
43
told us the Soviets were going ahead with that
missile. Related to that is the question whether we can expect similar
"calculated decisions" in the future to result in further lag in our armament
effort.
It seems to me that the answer to the second question
is "yes," and I hope today to explore with you the decision-making process of
the military establishment, which is critical to our ability to keep pace with
the Soviets in the development of missiles and other weapons.
The second race we are engaged in is in an
ideological race. We have been told that the ideological race is largely
economic, and I am sure we all agree. It is also a race for the minds of men,
particularly the minds of the uncommitted men of the world. The contest for the
conquest of space is very closely related to the contest for the minds of men.
This is so because outer space in many ways is a proving ground on which the
superiority of the Communist system or the free-enterprise system can be
demonstrated. Outer space is a gigantic showcase, and the minds of men may be
more influenced by the products we put in this showcase than by the economic or
other aid we offer them.
Another critical question, therefore, is whether our
economic system can compete with the Soviets in the conquest of space, which is
in part a military conquest and in part an ideological conquest.
To me, the tragic part of this race is that the
outcome depends not on the strength of free enterprise but rather on the
decision-making process of the military establishment. In fact, we are using the
free-enterprise system to
44
a lesser extent in the development of our weapons now
than we have in the past. Our military procurement process is not taking full
advantage of the creative capability of the free-enterprise process, and we
should give some attention to that problem today.
Let us look at the military decision-making process.
You probably will be astonished, if you do not already know this, when I tell
you that from the time a new weapon idea is conceived until a decision is made
to proceed with its design—not its production, only its design—a period of five
years, on the average, elapses. Former Secretary of Defense Wilson appointed an
Ad Hoc Study Group on Manned Aircraft Weapons Systems last year to investigate
the reasons why the Soviets were able to produce weapons, in some instances, in
half the time required by the United States.
The B-52, for example, required approximately eight
years from its conception to its production. The comparable Soviet bomber, the
Bison, was reported to have been developed in from four to five years. Their
supersonic fighter aircraft, the Farmer, was reported to have taken four years
to conceive and produce, compared with seven years for our F-102. The Ad Hoc
Study Group reported to the Secretary of Defense that, on the average, it has
taken us ten years to conceive and produce new air-weapons systems, and
approximately half that time, or five years, has been required simply to decide
whether we were going to go ahead or not go ahead with a specific weapon.
The reason for this, of course, is complex. The
reason
45
in part is that the military services have a very
complicated and involved process for planning weapons requirements. The
excessive time required for decision-making is due in large measure to the fact
that authority and responsibility are widely divided among a large number of
organizations in the headquarters of each military organization, and also in the
subordinate commands.
Within the Air Force, for example, the planning cycle
starts with the preparation of a document known as the Development Planning
Objective. This document is forwarded by Headquarters, USAF, through
Headquarters, Air Research and Development Command (ARDC), to one of its eleven
research centers for determination of feasibility. Feasibility determination is
usually made after a study contract has been completed by a weapons
manufacturer. The results of the study are returned to Headquarters, USAF, via
Headquarters, ARDC, for the drafting of the requirement for a new weapon system.
After this draft is reviewed by some twenty to thirty interested USAF offices,
it becomes known as a General Operational Requirement. Up to this point an
average of three years has elapsed in the cycle. An additional two years is
required on the average to prepare, co-ordinate, and obtain approval of
development plans for the weapon system. Approval of a Development Plan results
in issuance of a Development Directive, which is the definite decision to start
the actual design and development phase of a new weapon. It has taken an average
of five years to get this directive for air weapons during the last decade.
The problem can't be solved solely by finding a way
to
46
make decisions faster. As Mr. Dulles pointed out this
morning, the problem is also one of emphasis. What weapons are we going to
emphasize? It is equally important that we select the right weapons for
development.
Unfortunately, the military services historically
have neglected the development of radically new weapons because of pressures on
them to be ready for any eventuality. In order to ensure maximum readiness they
have tended to concentrate on those weapons which would be operationally ready
in the shortest period of time, to the detriment of long-range and radical
weapons development.
Let me give you a specific example. The Air Force in
1946 placed a contract with Convair (which was then Consolidated Vultee), for a
study of the feasibility of the long-range ballistic missile. That study
contract was canceled in 1947 and the decision was made to concentrate on the
air-breathing Snark and Navaho missile because these missiles appeared to be
capable of becoming operationally ready in a shorter period of time. The Convair
missile study was not reinstituted until 1951, and the Air Force did not give
ballistic missiles a high priority until 1954, when the Strategic Missile
Evaluation Committee, a civilian scientific advisory group headed by the late
Dr. von Neumann of Princeton University
[ID], advised this action.
There is no doubt that we would be further behind
today if Convair had not continued research on the intercontinental ballistic
missile with its own funds when military support of the project was dropped.
47
Now the immediate problem that is before us is one of
speeding the development and production of ballistic missiles. You have heard, I
am sure, a great deal of evidence which indicates that we don't have too much to
worry about in our missile program because a great deal of emphasis and
attention are being given to it. But, gentlemen, if we concentrate on the
short-term objective of developing ballistic missiles which are now in the
development stage and we neglect the equally fundamental problem, long-term
research and development, we will certainly be outclassed by the Soviets in the
future. This danger is emphasized by the statement made last week by
Dr. von
Braun [ID], who heads the scientific work on the Army's ballistic-missile program.
Some of you may have read the statement. He said:
"We do not have a really powerful rocket engine today
simply because none of our crash missile programs needs it, but in order to beat
the Russians in the race for outer space we absolutely need it and the
development of such an engine needs several years."
The United States can achieve scientific and
technological leadership only by vigorous and farsighted programs of research
and development. Available evidence clearly demonstrates, gentlemen, that the
military services cannot be counted on to carry out such programs. Although the
services are doing a great deal to overcome the weaknesses in their
decision-making process, in my opinion, there is very little likelihood that
they will be able to correct the deficiencies in sufficient time to keep pace
with the Soviets. The military services are too
48
complex and too large to reorganize quickly. As one
military historian has put it, "Reorganizing the military services is like
kicking a two-hundred-foot sponge around."
Moreover, the traditional mission, the traditional
responsibility of the services to be ready for any eventuality is very likely to
result in concentration on weapons or missiles which can be produced in a short
period of time, to the neglect and sacrifice of the more radical long-range
weapons development. For that reason I believe that the weapons-planning process
in the military services has to be by-passed, and that responsibility for the
development of radically new weapons—I am not talking about improvements of
existing weapons, I am talking about radically new weapons—should be transferred
from the Department of Defense to a civilian scientific agency similar to the
Office of Scientific Research and Development
[ID] which we had in World War II.
I know someone will ask this question, so let me
address myself to it; I believe President Eisenhower's appointment of
Dr.
Killian as Special Assistant to the President for Science and Technology will
not get to the heart of the problem unless Dr. Killian or some civilian agency
is given full and exclusive responsibility for long-range weapons development
and the research budget to carry through production to the prototype and testing
stage. This is what the Office of Scientific Research and Development had in
World War II, in contrast with all the boards and agencies which have been
singularly unsuccessful since then. It is important that we not forget that the technological
49
leadership in weapons which we held at the end of
World War II and the decade that followed was achieved primarily because of the
developments initiated by the Office of Scientific Research and Development
during the war, or by the efforts of independent scientists. Let us not fail to
note also that the Soviet Academy of Sciences, which is responsible for the
earth satellite and the missile program, is independent of the Soviet Ministry
of Defense.
[Comment by SAC editor = A remarkable assertion, and
not just in the use of the adjective "independent" but in the larger implication
that USA might benefit from imitating an important aspect of the Soviet system.]
Dr. Bruckner, who is head of Associated Universities,
an organization through which universities carry on much of their atomic-energy
research, presented the case for transfer of responsibility from the military
services to an independent agency when he stated before the Subcommittee on
Military Operations of the House: "The development of radically new weapons
never has been done successfully under the control of the Armed Forces and no
single example to the contrary can be cited."
Let us assume that in one way or another we take
steps which will enable us to decide quickly and wisely what new weapons should
be developed. Then our ability to win the arms race will largely depend upon how
efficiently the free-enterprise system is able to develop and produce weapons.
May I point out, however, that if we and the Soviets
decide at the same time to develop a radically new weapon, something like an
ionic missile, the Soviets probably will build it first, for two reasons: First,
because we require a very considerable period of time to select contractors and
to negotiate contractual terms, a process
50
which is absent in the Soviet system. And secondly,
because our weapons contractors lose a considerable amount of time securing
approval from the military services for engineering and technical decisions
which are involved in the design and production of the weapons. We cannot
eliminate the time required to select contractors and negotiate contractual
terms unless we eliminate the competitive system in weapons production. We can,
however, do something about the loss of time in securing approval for
contractors' technical decisions.
Under our present procurement
and production system, the military services place responsibility on contractors
for weapons design and development, but they often specify how the work shall be
carried out and they retain final authority to approve or disapprove designs,
engineering and configuration changes, and deviations from specifications. As a
result of this division of authority and responsibility, the attention of the
contractor's scientific and technical personnel is diverted from the creative
aspects of research and development by the necessity to justify and obtain
approval for their technical decisions. A great deal of time is thus lost by the
technical decision process, and both the contractors and the services perform a
considerable amount of unproductive work. The contractors must divert
engineering talent to the preparation of data and drawings which will support
their technical decisions, and the services must, in turn, maintain a technical
staff to review, evaluate, and approve these drawings and data. The unsound
duplication of effort that is caused by
51
the division of technical authority and
responsibility between the services and their private industrial contractors can
be demonstrated in the case of our intercontinental-ballistic-missile program.
Many of you gentlemen know, I am sure, that the Air Force found that the Air
Research and Development Command did not possess the technical talent required
to approve designs and review technical decisions of the contractors building
the ballistic missiles, so the Air Force hired a systems engineering contractor
to advise the Air Research and Development Command on technical aspects of
missile development. That firm gives technical advice to the Air Research and
Development Command so it in turn can give sound advice to the ballistic-missile
contractors. So you have the Air Force hiring a contractor to advise it on
whether to approve or not to approve technical decisions made by other
contractors.
The solution to divided authority and responsibility
and indecision is not to assign authority to a new organization and further
divide authority and responsibility.
The inefficiency in the present system, it seems to
me, could be eliminated by holding contractors only to performance
specifications until the prototype is produced, tested, and modified for
production. At that point the design could be frozen and specifications prepared
for production. It would, thus, be possible to get better performance by giving
a greater degree of authority to contractors and by eliminating much of the
present division of authority which is responsible for a great deal of
inefficiency.
52
The private-enterprise system cannot compete with the
Soviet system if we shackle the initiative of our private managers, because this
is where the strength of the private-enterprise system lies.
I am sure that I do not need to tell you gentlemen
that the productivity of the private-enterprise system is influenced heavily by
the profits a corporate manager can make. This fact has been largely ignored in
the development of our military procurement policy. Profit is an important
factor, not only in the selection of the work the contractor will undertake, but
also in the efficiency with which he performs the work.
There is considerable evidence at the present time
that military profit policies are not only inadequate to encourage contractors
to engage in weapons development but also unsound because they result in waste
of scientific, technical, and production man power. Let me illustrate this.
The
profits that can be made on military research and development contracts provide
little incentive to undertake that work. Congress originally authorized the
services to pay contractors their costs plus a fee of up to 15 per cent of their
cost, as profit. The Department of Defense, through the Armed Services
Procurement Regulations, has reduced the maximum fee to 10 per cent, except with
the approval of the Secretary of the service awarding the contract, an approval
which very rarely is given. Military contracting officers, in turn, seldom agree
even to the 10-per-cent fee. Typically they negotiate a fee of 6 to 7 per cent,
but the fee of 6 to 7 per cent is not a real fee because, through the Armed
Services Procurement
53
Regulations, many costs which contractors must
incur are disallowed in research and development cost-type contracts. As a
result most contractors are fortunate to make 3 to 4 per cent on government
research and development contracts.
You will agree, I am sure, that this profit is
insufficient to provide an incentive to use highly skilled engineers and
scientists to develop missiles and weapons which are required for the nation's
defense. In case you have any question about this, let me report that Dr. Dean
Wooldridge, of the Ramo-Wooldridge Corporation, the systems engineering
contractor for the Air Force's ballistic-missile program, stated at the June
1957 meeting of the Institute of Aeronautical Sciences that in his opinion
civilian contractors would seldom, if ever again, furnish a technical staff to
the military services solely for weapons-development work because of the low
financial return from this work.
If our objective is to enlist the free-enterprise
system in weapons development, our profit incentives certainly do not help us.
The solution, gentlemen, is not one simply of
increasing profits. The solution is not one solely of increasing the fee on
research and development contracts from, say, 10 to 15 per cent. Rather an
entirely new profit concept is required, in my opinion, because, under our
present profit policy, the higher the cost estimates a contractor can justify to
military contracting officers, the higher will be his profit. Accordingly,
contractors are encouraged to use as much man power as they can convince
military contracting officers they need.
54
The mass engineering techniques which defense
contractors are accused of using are an example of this waste. Mr. James Bridges
of the Office of the Secretary of Defense, who has made a study of
mass-engineering techniques, has this to say: "[There] is a growing tendency in
industry to approach military research and development jobs on the basis of mass
engineering, an expression used to describe the situation where several
engineers are assigned to a job which could be adequately accomplished in the
same length of time by one competent engineer properly supported by technicians
. . . There is little doubt that cost-plus-fixed-fee method of contracting . . .
is responsible to a considerable degree for the growth of the mass-engineering
philosophy . . ."
The policy of negotiating profit on a percentage of
estimated or actual cost also discourages the use of labor-saving equipment and
machinery and encourages the waste of man power. Under this policy contractors
have a strong incentive not to introduce automatic equipment which will
reduce the need for labor and cut costs.
Let me illustrate why. If a defense contractor buys
automatic labor-saving equipment, if he automates the plant and reduces the cost
of making a product from, let's say, $1,000 to $100, his profits subsequently
will be reduced from, say, $100 to $10, if he has a cost-type or redeterminable-type
contract or obtains a follow-on fixed-price contract. Now, in addition, if he
borrows money to buy this equipment, the interest on that money will be
disallowed on all cost-type contracts and probably will be disallowed on most
redeterminable contracts; hence his
55
profit will be cut further. Why, then, would a
contractor undertake to install labor-saving equipment to reduce his costs when
the primary effect would be to reduce his profit? I don't believe he is going to
do it, and I don't believe you would expect him to do it.
I believe there is really a great danger that as a
result of our profit policy our weapons industry will become inefficient.
We
cannot beat the Chinese and Russians by using more man power in the production
of weapons than they use. We can only do it through the use of labor-saving
equipment, and this labor-saving equipment will not be purchased and installed
in defense plants unless there is a positive profit incentive to do it. In order
to give military contractors a positive incentive to install labor-saving
equipment, which will reduce costs, a major factor in the profits on military
contracts should be return on total assets employed rather than a percentage of
estimated or actual costs.
I am well aware of the fact that no single yardstick
is an ideal measure of reasonable and fair profit, but incentives which are
related to capital employed are essential in a capitalist economy to attract the
investment required for the purchase of research and production facilities.
Weapons contractors can be induced to invest in the facilities and equipment
needed to keep pace with the Soviets only if they are assured of an adequate
return on the funds invested. They cannot be induced to make these investments
if they know the return will be inadequate.
I have only one further point, but it is an important
point because it has to do with the fundamental question
56
of whether we want a competitive free-enterprise
system in weapons design and production, or whether we want to establish a
semi-monopoly. As you know, at the present time a large percentage of the
facilities used by weapons contractors are furnished by the government. What we
have failed to recognize is that you can't have competition —true, real
competition—if a large share of the production facilities are owned by the
government.
While a form of competition still remains in weapons
contracting, the Ad Hoc Study Group on Manned Aircraft Weapons Systems, which I
referred to earlier, reported to the Secretary of Defense this year that in the
past ten years only 30 per cent of air weapons contracts placed by the Air Force
were based on formal, open-design competition. In most instances the awards were
based on such factors as, ". . . the need for maintaining the industrial base by
spreading the work," or "limited competition among selected eligible
manufacturers."
Indeed, it is now common Air Force practice to survey
and evaluate eligible contractors in terms of past performance and current
resources and to select contractors without formal design competition. Contract
awards for air-weapons systems are made increasingly to those contractors who
have available facilities and tools, including those furnished by the
government.
Since government tools and facilities are typically
not transferable from one contractor to another, except at very considerable
cost to the government, the military services naturally are reluctant to incur
the cost involved in duplicating facilities solely to stimulate competition.
57
The Assistant Secretary of the Air Force for Research
and Development, Mr. Richard Horner, has explained the present philosophy of the
Air Force in placing research and development contracts as follows:
"We are ... understandably reluctant to create new
facilities and new organizations. . . . Thus, it can be seen that a
contradictory situation might be created where one company might propose a
superior technical solution whereas preponderance of necessary facilities and
technical manpower might be located with another company. There is no completely
satisfactory solution to such a dilemma. The loser of a technical evaluation is
rarely convinced that his proposal was not, in reality, the best solution, and
it is very difficult for the winner to understand why he is not given full
opportunity to exploit the fruits of his ingenuity, regardless of over-all cost
of the program to the government. . . ."
Now, may I repeat that last statement, ". . . it is
very difficult for the winner to understand why he is not given full opportunity
to exploit the fruits of his ingenuity, regardless of the over-all cost to the
government. . . ."
"It appears," Secretary Horner continued, "that one
of the most satisfactory compromises may be an increasing use of multiple-source
contracts for development; where two or more companies are invited to jointly
contribute to the accomplishment of a project, each providing the services for
which it is best fitted. The solution in itself can be very difficult to
administer and we recognize our deficiencies in officiating in such a marriage."
The Air Force is thus faced with the dilemma of
58
either accepting inferior designs in order to avoid
the expense of duplicating production facilities, or of encouraging the
aeronautical industry to pool its resources and to rationalize its production.
But by indirectly forcing multiple-source contracts, the military services are
clearly stimulating the establishment of a weapons cartel in which effective
competition eventually will be eliminated.
I believe serious doubt may be raised whether this
policy is wise for the aeronautical industry or compatible with the
free-enterprise system. But let me say, if pooling of facilities and resources
is essential, then it seems to me the ritual and the pretext of competition
should be abandoned and weapons producers should be dealt with as semi-publicly
owned monopolies. Such an arrangement would at least have the advantage of
saving time and effort in weapons procurement and production and would permit
the establishment of much simpler contractual relationships with contractors. As
it is, we go through the process of selecting contractors and negotiating
contractual terms three times during the development of a weapon. First
we go out for feasibility studies, then we go out for design studies, and
finally for development and production of the weapon.
The solicitation of design proposals and the
selection of design contractors alone has consumed as much as a year in the
weapons-development cycle. If weapons manufacturers are encouraged to pool their
resources and contracts are awarded to "spread the work" or to "avoid creating
new facilities and new organizations," then there is little justification for
the very considerable delay and effort
59
which we go through as part of the ritual of
competition.
The threat of Russian technological progress and
weapons development makes it imperative, I believe, that the nation decide what
kind of a weapons procurement and production system it wants. The present hybrid
system does not permit us to gain the full benefits of competitive private
enterprise, yet it shackles us with the delays and the effort inherent in
contractual methods which can be justified only because we believe we have a
competitive system.
In order to restore effective competition the
military services must stop furnishing facilities to weapons contractors, so
that the services may be free to place contracts with those manufacturers who
submit the best technical proposals or the best weapons designs. In turn,
contractors must take the risks and be willing to invest in the facilities which
are required for weapons production under the competitive private-enterprise
system.
Clearly the arms race is a test of two productive
systems, the Communist system on the one hand and a distorted version of the
free-enterprise system on the other. The problem confronting the United States
is that of aligning its weapons production and procurement system so that it can
take advantage of the strengths inherent in the free-enterprise system.
The executive vice-president of the General Electric
Company, Mr. C. W. La Pierre, summarized this problem when he said:
"For our defense and atomic energy work we depart
widely from the normal American private enterprise
60
systern. Our defense work is being carried out with a
minimum of incentive and highly centralized government control of detailed plans
and operations. . . . Unquestioned superiority of American weapons could be
obtained by finding a way to fully use the American system to evolve and produce
them."
It seems to me that the way to use the American
system of free enterprise in the development and production of weapons is not
difficult to find.
First, steps must be taken to promote private
ownership of weapons-production facilities and to encourage the use of
labor-saving equipment by basing profit in military contracts largely as return
on assets rather than on a percentage of estimated or actual costs.
Second, competition must be restored among
manufacturers, and the pressure to establish a munitions cartel must be
abandoned.
Third, the division of technical authority and
responsibility must be eliminated by holding weapons contractors responsible, in
so far as possible, only for weapons performance, and by giving them greater
freedom to decide how the required performance can best be achieved.
And, finally, a new weapons-planning system must be
evolved to assure that a scientifically directed long-range research and
development program will permit the prompt and wise selection of the weapons to
be developed.
61
---
Address Delivered at the Ninth Annual Conference on U.S. Affairs
by
WILLIAM C. FOSTER
Vice-President of the Olin Mathieson Chemical Corporation, and a Trustee of the CED
The following talk by
William C. Foster, given at the U. S. Military Academy, West Point, New York,
on November 4, is appended because the CED believes that it bears directly on
the issues raised in the preceding papers. Mr. Foster was formerly Deputy
Secretary of Defense, and acting co-chairman of the special
presidential study group known as the Gaither Committee [TXT
of that Committee report, generated well before Sputnik, but given a
favorable emotional atmosphere by the coincidence of Sputnik.
More bibliography]
Our foreign policy is basic to our national
security policy and was aptly characterized in part of the quote from John
Foster Dulles in your problem paper for the conference. That, you will recall,
reads: "Our foreign policy accepts change as the law of life. We seek to assure
that change will be benign and not destructive, so that it will promote not
merely survival, but freedom and well-being." But there are some parts of the
basic material making up national security policy which do not change. They are
constant. Some help and some hinder us in attaining our objectives.
For our part, one firm position has never wavered
since our nation was founded. We have always been ready, by force, if necessary,
to protect our way of life and what it
109
stands for—freedom, democracy, and individual human
dignity.
To continue this position means we must not only be
strong and ready to defend ourselves, but we must also wage the peace by
supporting peaceful evolutionary change and by spreading the ideal of freedom
through political, economic, and educational means. However, on the part of the
nation which currently threatens our objectives for the world and ourselves,
there continues a traditional expansionism initiated by the province of Muscovy
in the fifteenth century [ID]. The Russian expansionism of today is cloaked in new
garments—the ideology of world communism. There has just been issued another of
their manifestoes, in which sixty-four Communist nations joined. This echoed
much of the basic threat to our principle of the importance of the individual.
Thus, the Soviet Union has now support in its expansionism from many other
nations, most important of which is Communist China, also committed to the
destruction of our way of life.
These two opposed major elements—our firm desire for
a free and good world versus the Soviet's will to expand— ebb and flow as
changes in economics, politics, and technology occur. So how do things stand?
How do we ride out peacefully the tremendous technological revolution in
weapons? How do we help meet the rising expectations of uncommitted, less
developed nations, for instance those in Asia and the Middle East, while we
still maintain our security position? How good is our security position as of
today?
110
The last few weeks have seen a sharp change in the
state of mind both of the country at large, and in the government executive and
legislative branches. Any complacency seems to have been dispelled.
The National Security Council is continually
examining our relative position with respect to potential enemies and our
co-operative position with allies. Many special studies are made as occasion
requires. Sputnik I and Sputnik II were effective searchlights into certain dark
corners of intelligence. Out of all these exercises have come some clear signals
as to the direction our security activities and policies should take.
Perhaps, before attempting to define what some of
those directions might be, it would be useful to put in focus the nature of the
threat posed by the Soviet Union and its satellites, and then, similarly, the
great resources which we and the free world can draw upon to counteract that
threat. Millions of words have been published on these subjects in the last few
weeks and I shall try not to be repetitious. My purpose is to try to look at a
balanced picture from the vantage point (without breaking security, I
trust) of a recent look at all of our major weapons systems, intelligence data,
and leadership resources in the field, both civilian and military.
As to the threat, all of us have been aware that the
U.S.S.R. has been getting stronger in many ways. It has also been clear that she
has devoted a disproportionate share of her economic strength to military ends
and heavy industry, with a much lesser growth in agriculture and consumer goods.
She has impressed us, particularly
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lately, with the speed of her technological and
scientific progress, bringing her capabilities close to our own in some fields
at least, such as metallurgy, electronics, and propulsion. Should the relative
rates of progress continue, she could, not long hence, surpass us. Out of this
background appears a fivefold threat. First, military: The U.S.S.R. has a
four-million-man military establishment, well trained and well equipped in the
weapons of both nuclear and conventional warfare, together with a strong
industrial structure geared to the production of weapons of nuclear
construction, which pose a constant threat of military aggression. Their backup
includes a strong steel industry, machine-tool industry, aircraft and missile
industry and nuclear industry. The armies of the satellites of the Soviet Union
add to the military man power approximately four million more fighting men, even
though there is question as to their training and dependability.
A comparison of the rate of industrial growth of the
Soviet Union over the last twenty-five years shows it to have been about twice
our own rate over the same period. The U.S.S.R. is devoting about 25 per cent of
its production to things military, while the United States has been setting
aside about 8.7 per cent of its Gross National Product to these military ends.
Some indication of the damage that the U.S.S.R. can probably inflict on the
United States can be seen in the figures recently quoted by Dr. Henry Kissinger,
whom you will hear later tonight. In Chapter 3 of his recent work
Nuclear
Weapons and Foreign Policy, he speaks of tens of millions of possible
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deaths in case of nuclear attack with megaton bombs
(which it is believed the Russians now possess). This would, of course, present
a problem of defense and restoration of normal functions after attack unlike any
experience mankind has ever faced.
Second, economic: With the continued increase in the
production of hard goods by the Soviet Union, a serious threat of another type
is posed. Prior to '54 the U.S.S.R. had utilized the flow of commodities to
exert political attraction mainly within the Communist orbit. Now, however, she
appears ready to export hard goods, in an attempt to secure political advantage
within certain strategic areas of the free world and in particular in the Middle
East and South Asia. She is now moving to the status of an industrial state and
is, more than ever, in need of raw materials produced extensively by the
underdeveloped nations. Thus, she is in a strong position to woo these countries
through trade, because she is not only giving them loans at low interest rates,
accepting payment in local currency, but she is also willing to arrange
bilateral deals to buy specific hard-to-sell raw materials from such countries
in exchange for industrial goods on a barter basis. The political attraction
that can attach to such a flow of commodities, military weapons in particular,
is great. Certainly a country such as Egypt or Syria that receives military
supplies from the U.S.S.R. becomes more dependent on it. Another element in this
economic challenge is that the Soviet Union and Red China go to great lengths to
prove that they have an economic-development
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model with real appeal for many of the underdeveloped
nations.
Third, the technological threat: Increasing resources
of scientifically trained personnel in the Soviet Union pose another type of
threat. This has been highlighted by Sputniks I and II. The March '53 report of
the Subcommittee on Research and Development of the Congressional Joint Atomic
Energy Committee warned us that the total number of scientists and engineers in
the U.S.S.R. exceeded that of the United States and was more than three fourths
of the total of 1,150,000 in our country and the fifteen Western European
nations combined. This report maintains that the latter gap will be narrowed
rapidly while the Soviet universities and technical institutions continue to
graduate engineers at about twice the rate of the United States. Some observers
have maintained that the Soviet ideology prohibits the freedom of inquiry
requisite to basic scientific progress. However, the thesis of the recent report
of the National Science Foundation to President Eisenhower is that although the
U.S.S.R. is still technologically underdeveloped in comparison with the United
States, there exists a more favorable balance between basic research and applied
research and development in Russia, with one fifth to one third more scientific
personnel devoting full time to basic research than in the more technologically
oriented program of the United States. This report finds the Soviet Government
providing able, high-ranking administrative leadership in science and technology
and an effective atmosphere for the education and use of capable and devoted
scientists
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with a lesser emphasis on the immediate applications
of science. This is not, of course, to deny the proved ability of the Soviet
Union to engineer complex weapons with relatively short lead times when its
rulers are willing to concentrate sufficient resources in the particular
project. Fourth, the ideological challenge: Use of an ideology of world-wide
appeal to extend the power of the U.S.S.R. and its satellites has been a
continual threat since the Bolshevik Revolution. In the light of
de-Stalinization [ID] and suppression of the Hungarian revolt
[ID], this may have waned
somewhat, but Khrushchev has been recently making strong efforts to take the
lead again. This leadership is potent, particularly in the newly emerging
nations with strong feelings about their colonial pasts
[EG].
Fifth, the threat of political subversion: This will
remain as long as Communist parties exist within nations of the free world. The
Communist Party has particularly made excellent use of the passionate and
deep-seated sense of anti-colonialism and nationalism present in Africa and
Asia. For example, when one considers that the main elements of nationalism
existing in the Arab world are hatred of Israel and opposition to Western
influences, one can see the opportunities presented to the U.S.S.R. Chinese
minorities in South and Southeast Asia also afford fertile ground for subversion
in that area by Red China [EG].
This is a grim and foreboding picture, but
fortunately we, too, have great resources to meet these threats:
First, resources in the United States.
1. Military: We maintain a military establishment of
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two and a half million men, well trained and equipped
in case of a general nuclear war. We do, however, need to be ever alert to
protect the ability of these forces to respond in time in case of surprise
attack. We also need new emphasis to be sure our offensive striking power will
be developed in the missile field soon enough to match or be superior to the
Soviet's, in order to preserve the deterrent effect of our retaliatory strength.
Currently we are concerned whether we are well prepared to counteract local,
limited aggressions of the Sino-Soviet Bloc. This sort of aggression, so-called
nibbling attacks, might well be their chosen method to cut away our ties with
the rest of the free world.
2. Economic Assets: The great inherent advantage we
still hold is the presence of a massive industrial structure, which can, if we
choose, be geared to support a larger and more versatile military establishment
than can all the industrial facilities of the U.S.S.R. We presently are roughly
matching the economic resources that the Soviet is devoting to the military. We
are doing so with less than 10 per cent of our Gross National Product, whereas
the Soviet is using 25 per cent. If we devoted, for instance, another 10 per
cent of our resources, still leaving 80 per cent for such things as consumer
goods, services, and all our present high standards of living, the Russians, in
order to match us, would have to take away from their people one third of all
the already sparse good things of life they have. This is because their Gross
National Product is now only about 33.3 per cent of ours, and even after ten
years of
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their estimated faster rate of growth than ours, it
would still be only one half of ours.
We also have deeper reserves in most things, material
or human, if we are willing to use them for military purposes.
We have had enough basic wealth so that we have been
able to extend aid of more than fifty billion dollars throughout the free world
during the last decade. At the same time our own living standards have increased
sharply. Aid, military and economic, given through the Truman Doctrine, the
Marshall Plan, Point Four Program, Mutual Security Appropriations, and ICA has
been used to help build the free nations' strength and to stem the flow of world
communism in areas vital to U.S. security. We have the largest industrial plant
and the most productive labor force in the world.
3. Technological Assets: While the U.S.S.R. may train
more engineers and scientists each year, the quality of those turned out by our
school system is still unsurpassed. Another of our great assets is the extremely
high level of technological skills achieved by the skilled workers who
manipulate our massive industrial plant.
4. The vitality of our way of life offers widespread
appeal both to Americans and to those abroad who would emulate us in the major
elements of the American philosophy. That these ideals are meaningful, not only
to Americans but also to other peoples of the world, is shown by the objectives
and resolution of the Hungarian revolutionists of a year ago. We, not the new
classes of communism [ID], are the true revolutionaries and the protagonists
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of the new dignity of man. Assuming firm leadership
in the education of our people on the problems we face, our system of life has
and can continue to contribute greatly to the over-all strength of the free
world. The resources in spirit and things from millions of centers of initiative
of individuals in a free society can never be matched by the submissive efforts
of unhappy half slaves.
In addition to these resources of ours, we can count
on substantial additive facilities from the balance of the free world.
1. Military: The contribution of forces by our allies
to NATO, while not as great or as advanced as had been planned, are a
considerable addition to our shield for limited military operations in Western
Europe and the Mediterranean. Our allies also provide not only forward bases
for light manned bombers and other tactical aircraft now, but can do so for
IRBMs with nuclear warheads soon, if legislative and political acceptance is
developed. The geography provides as well a sound basis for early warning over a
broad range of attack channels against the continental United States.
2. Economic: With the exception of the Soviet Union,
the major nations in the remaining industrialized areas of the world—Western
Europe and Japan—are allied with the United States. The forces of our
industrialized allies turn the strategic balance in our favor, since the
combined industrial resources and the pool of skilled men and man power of NATO
alone exceed those of the Sino-Soviet Bloc by a considerable margin. Although
the vast potential of India is not now placed on the scales beside
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the U.S. and its allies, it is not, at least, on the
Soviet side [4-hop LOOP on India]. With wise action by us, we can hope that in the future India will
draw closer to the anti-Communist world.
3. Technological Potential: The high attainments in
science and technology of our major free-world allies add to our ability to
compete successfully in nuclear age technology with the Sino-Soviet Bloc.
British, German, French, Italian, Scandinavian, and other free scientists have
repeatedly shown their ability, especially in pure science and research. In
fact, we are indebted to Western European scientists [EG] for a great many of the
basic scientific ideas we have used. We have then developed them further in many
cases to help the current high level of our defense strength and our high
standard of living. Great Britain has detonated both atomic and hydrogen bombs,
while France appears to have the capability of doing so in the very near future.
[NB! enthusiasm for spread of nuclear weapons.]
4. Ideological Attributes: Our major allies are
dedicated to the preservation of freedom, an attitude which gives them an
elan vital which is not present among the captives of the Sino-Soviet Bloc.
Ours is a free association, not a satellite relation. ["Freedom", but no
mention of liberal democratic political system till
toward the end.]
With all of this, what should be done to mobilize our
strength?
5. As to leadership, major problems of maintaining a unity of design among those
allied with us include different views as to vital interests and dangers thereto
(witness the Suez war [ID]), nationalism (witness the Algerian dilemma
[ID]), and disagreement as to the types and sizes of forces
that are needed for the defense of the free world.
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There is fundamentally a problem of political
leadership —convincing the people of the dangers to be faced and methods
needed—within each Allied country. This is a problem of convincing people of the
need of sacrifice of some present comforts in order to assure survival. In all
our national experience, the people will respond if they are led boldly and know
the facts. You are all familiar with recent steps by the President and
Vice-President to this end.
2. Our decision and policy-making systems need
strengthening. Although we are dedicated to the ideal of democracy, we realize
that there are present in the democratic systems certain difficulties absent in
totalitarian systems. The U.S.S.R., without need to consider the wishes of its
people, can assign priorities to projects that best serve the Soviet leadership.
In a democratic nation the immediate wishes and well-being of its people usually
must be given first consideration. An excellent example of this can be observed
in this year's attempt by the administration and Congress largely to approach
the problem of military defense from the standpoint of the budget, holding down
military expenditures to an arbitrarily determined figure in order to try to
satisfy, too soon perhaps, a prosperous people's desire for tax cuts and less
government in daily life. I think it can be fairly said that events of recent
weeks [ID] have raised considerable doubt as to any possibility of tax reductions in
the near future, and, again in this sense, Sputnik and other influences have
initiated a major change in the political state of mind. This sort of basic
change, however, within a single nation is much simpler than in an alliance of
sovereign states.
3. Then, how make the best selection of weapons
systems? Of utmost importance is the determination of the types of war that we
must be prepared to fight. Should we concentrate almost completely on the worst
possible case—namely, total war, with the danger of either turning all
aggressions, however small, into a large-scale nuclear holocaust through massive
retaliation, or should we passively bow to events? Should we operate under the
premise that different threats will require different responses? If our policy
is one of graduated deterrents, how many weapons systems should we concentrate
upon at any one time? Other questions which must concern us are, "What should be
the optimum balance between nuclear and conventional forces?" "What weapons
systems will our budgetary restrictions allow us to develop fully?" And, again,
"How and to what extent should we share developments in this area with our
allies?"
These questions in turn lead to the subject of
management improvement. Whatever the answers to the questions raised above may
be, if we are to have the essential defense measures, improvement of our defense
organization along three lines seems to be required. First, to help the
Secretary of Defense in his job as deputy to the Commander in Chief he must be
given an improved organization to cope with his infinitely difficult job. The
existing complex system of assistant secretaries and joint committees tends to
delay decisions until inter-service agreement can be reached. It would seem
useful to develop a staff
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immediately responsible and loyal to the Secretary to
aid him in obtaining and weighing relative views of the services and commanders
and facilitate prompt decision. This type of staff might well help to reach the
hard decisions for taper-off or elimination of less fruitful weapons systems,
and thus provide the only real source of major opportunity for savings to offset
the increasing cost of new requirements.
Military missions that are, in fact, multi-service
jobs can no longer be achieved economically and well by three competing
services. Certain missions crossing service lines should be the responsibility
of operational commands reporting directly to the Secretary of Defense through
his personal staff. The three services could then usefully focus their energies
on the indispensable training and logistics activities necessary to make the
operational commands more effective. Fundamental to all of our actions would
appear to be the necessity of now moving promptly to build an organization to
meet modern needs. A good deal of this can be accomplished under existing
legislation. Some of these changes, however, would require that the Congress be
asked to modify restrictions in the National Security Act and in the Organic
Acts establishing the three services. These restrictions now perpetuate
organizations designed for another era and deny responsible executives the
opportunity to adapt our defense structure to current needs.
Moving to another field, that of non-military defense
against prospective nuclear attack, there must, here too, be substantial
improvement. Protection of the civil
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population would seem to be a national problem requiring
a national remedy. In view of that, the present division of responsibility among
federal, state, and local governments should be looked at again. As a start, it
seems desirable that the Office of Defense Management and the Federal Civil
Defense Administration be consolidated and there be a re-allocation of
responsibility for related services to the permanent federal departments. Even
granting the optimum development of our strength and resources, as outlined
above, the best that might be hoped for would be a nuclear standoff at an
increasing level of danger and potential destruction. There must be a better way
for human beings to live together than this, and deep thought and constant
effort should be directed toward achieving this better way. Involved here is the
problem of achieving some beginning on the reduction of military forces or, if
this is not possible, at least the maintenance of unity among our free-world
allies on the problem of arms limitation and control, despite appealing Soviet
propaganda on the subject. The arms-inspection schemes which are being suggested
to replace disarmament proposals must be examined, and creative new ideas
developed. Certainly we have not been successful in past attempts to meet with
the Soviets in this field, and it seems obvious that disarmament, as such, is
not a fruitful current area of discussion. However, Khrushchev and his
associates are constantly making statements about their willingness to control
or limit arms, and every effort should be made to determine whether we can make
this sort of limitation workable by means of adequate controls, none of which
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seems to have been
developed to date
[ID].
Certainly the enormous value of a
truly successful arrangement
in this field,
even though we have
grave doubt as to
the reliability
of the Russians in carrying
it out, should encourage
us to
continue our
efforts.
In conclusion, I
would like to set out several points which I
hope will be considered in your panel discussions. I believe them to be
fundamental to our ability to remain leaders of the
free
world and to
help preserve these opportunities and conditions which we hold dear. They seem
to me basic to national security policy and may indicate ways in which usefully
to develop peaceful change. I hope you younger people with your energy, your
vision, and your courage will be able to point the way to achieving them. We who
have labored in these vineyards up to now will, I assure you, support you in any
way we can. These are some points which seem to me important:
1. The necessity for renewing our faith in the ideals
of our heritage in freedom, in democracy, in human dignity. Our difficulties
always tend to be more apparent than our strength and, conversely, our
adversaries' strength—perhaps because this is not easily measured by us—tends to
be more apparent than their difficulties.
2. The need to renew our will to resist the inroads
of world communism. We must be prepared to make the sacrifices that such
resistance will entail—economic and military aid, technical assistance, a strong
economic and military structure at home. All of
these are costly
in terms of time, money, and effort, but are surely worth while.
3. The necessity for discarding the myth that
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inherently all things American are superior, and for
recognizing the value of humility. We must make a major effort to understand
other peoples and the revolution about us. Two thirds of the free and
uncommitted peoples of the world have a per-capita income of less than two
hundred dollars per year, but with the world growing smaller, they have rising
expectations which we must help them to meet in some degree, in our own interest
as well as theirs [EG].
4. Willingness as a people to analyze the problems
besetting us in a more sophisticated manner, to realize that they are more
complicated than at first meets the eye, to understand that our policy must
transcend immediate short-term interests in order to serve our national
interests in the long run.
5. The necessity of approaching our security problems
from a practical as well as a moral standpoint. We must attempt to get away from
the strange dichotomy with which we have traditionally viewed force, refusing to
consider it except as a last resort, then approaching it in a crusading manner
with a "punish-the-bandit" view which has been prevalent in our recent
conflicts.
6. To use our normal strength to help create the kind
of a world in which the basic human values can flourish. We cannot stand aloof
on the great issues that seize mankind. We must work tirelessly—bilaterally,
through regional organizations and through the U.S. [?UNO?] —to remove sources of
discord, to promote economic co-operation and growth, and to assure the world of
our dedication to the ideals we profess.
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We have the means to do these things, and, if we have
the wisdom to undertake them, I believe the spirit will support them, and we and
all men can have a decent, peaceful, hopeful world.
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