# NSC-68/VI. U.S. Intentions and Capabilities--Actual and Potential

VI. U.S. Intentions and Capabilities--Actual and Potential
A. POLITICAL AND PSYCHOLOGICAL
Our overall policy at the present time may be described as one designed to foster a world environment in which the American system can survive and flourish. It therefore rejects the concept of isolation and affirms the necessity of our positive participation in the world community.
This broad intention embraces two subsidiary policies. One is a policy which we would probably pursue even if there were no Soviet threat. It is a policy of attempting to develop a healthy international community. The other is the policy of "containing" the Soviet system. These two policies are closely interrelated and interact on one another. Nevertheless, the distinction between them is basically valid and contributes to a clearer understanding of what we are trying to do.
The policy of striving to develop a healthy international community is the long-term constructive effort which we are engaged in. It was this policy which gave rise to our vigorous sponsorship of the United Nations. It is of course the principal reason for our long continuing endeavors to create and now develop the Inter-American system. It, as much as containment, underlay our efforts to rehabilitate Western Europe. Most of our international economic activities can likewise be explained in terms of this policy.
In a world of polarized power, the policies designed to develop a healthy international community are more than ever necessary to our own strength.
As for the policy of "containment," it is one which seeks by all means short of war to (1) block further expansion of Soviet power, (2) expose the falsities of Soviet pretensions, (3) induce a retraction of the Kremlin's control and influence, and (4) in general, so foster the seeds of destruction within the Soviet system that the Kremlin is brought at least to the point of modifying its behavior to conform to generally accepted international standards.
It was and continues to be cardinal in this policy that we possess superior overall power in ourselves or in dependable combination with other likeminded nations. One of the most important ingredients of power is military strength. In the concept of "containment," the maintenance of a strong military posture is deemed to be essential for two reasons: (1) as an ultimate guarantee of our national security and (2) as an indispensable backdrop to the conduct of the policy of "containment." Without superior aggregate military strength, in being and readily mobilizable, a policy of "containment"--which is in effect a policy of calculated and gradual coercion--is no more than a policy of bluff.
At the same time, it is essential to the successful conduct of a policy of "containment" that we always leave open the possibility of negotiation with the USSR. A diplomatic freeze--and we are in one now--tends to defeat the very purposes of "containment" because it raises tensions at the same time that it makes Soviet retractions and adjustments in the direction of moderated behavior more difficult. It also tends to inhibit our initiative and deprives us of opportunities for maintaining a moral ascendancy in our struggle with the Soviet system.
In "containment" it is desirable to exert pressure in a fashion which will avoid so far as possible directly challenging Soviet prestige, to keep open the possibility for the USSR to retreat before pressure with a minimum loss of face and to secure political advantage from the failure of the Kremlin to yield or take advantage of the openings we leave it.
We have failed to implement adequately these two fundamental aspects of "containment." In the face of obviously mounting Soviet military strength ours has declined relatively. Partly as a byproduct of this, but also for other reasons, we now find ourselves at a diplomatic impasse with the Soviet Union, with the Kremlin growing bolder, with both of us holding on grimly to what we have, and with ourselves facing difficult decisions.
In examining our capabilities it is relevant to ask at the outset--capabilities for what? The answer cannot be stated solely in the negative terms of resisting the Kremlin design. It includes also our capabilities to attain the fundamental purpose of the United States, and to foster a world environment in which our free society can survive and flourish.
Potentially we have these capabilities. We know we have them in the economic and military fields. Potentially we also have them in the political and psychological fields. The vast majority of Americans are confident that the system of values which animates our society--the principles of freedom, tolerance, the importance of the individual, and the supremacy of reason over will--are valid and more vital than the ideology which is the fuel of Soviet dynamism. Translated into terms relevant to the lives of other peoples--our system of values can become perhaps a powerful appeal to millions who now seek or find in authoritarianism a refuge from anxieties, bafflement, and insecurity.
Essentially, our democracy also possesses a unique degree of unity. Our society is fundamentally more cohesive than the Soviet system, the solidarity of which is artificially created through force, fear, and favor. This means that expressions of national consensus in our society are soundly and solidly based. It means that the possibility of revolution in this country is fundamentally less than that in the Soviet system.
These capabilities within us constitute a great potential force in our international relations. The potential within us of bearing witness to the values by which we live holds promise for a dynamic manifestation to the rest of the world of the vitality of our system. The essential tolerance of our world outlook, our generous and constructive impulses, and the absence of covetousness in our international relations are assets of potentially enormous influence.
These then are our potential capabilities. Between them and our capabilities currently being utilized is a wide gap of unactualized power. In sharp contrast is the situation of the Soviet world. Its capabilities are inferior to those of our allies and to our own. But they are mobilized close to the maximum possible extent.
The full power which resides within the American people will be evoked only through the traditional democratic process: This process requires, firstly, that sufficient information regarding the basic political, economic, and military elements of the present situation be made publicly available so that an intelligent popular opinion may be formed. Having achieved a comprehension of the issues now confronting this Republic, it will then be possible for the American people and the American Government to arrive at a consensus. Out of this common view will develop a determination of the national will and a solid resolute expression of that will. The initiative in this process lies with the Government.
The democratic way is harder than the authoritarian way because, in seeking to protect and fulfill the individual, it demands of him understanding, judgment, and positive participation in the increasingly complex and exacting problems of the modern world. It demands that he exercise discrimination: that while pursuing through free inquiry the search for truth he knows when he should commit an act of faith; that he distinguish between the necessity for tolerance and the necessity for just suppression. A free society is vulnerable in that it is easy for people to lapse into excesses--the excesses of a permanently open mind wishfully waiting for evidence that evil design may become noble purpose, the excess of faith becoming prejudice, the excess of tolerance degenerating into indulgence of conspiracy and the excess of resorting to suppression when more moderate measures are not only more appropriate but more effective.
In coping with dictatorial governments acting in secrecy and with speed, we are also vulnerable in that the democratic process necessarily operates in the open and at a deliberate tempo. Weaknesses in our situation are readily apparent and subject to immediate exploitation. This Government therefore cannot afford in the face of the totalitarian challenge to operate on a narrow margin of strength. A democracy can compensate for its natural vulnerability only if it maintains clearly superior overall power in its most inclusive sense.
The very virtues of our system likewise handicap us in certain respects in our relations with our allies. While it is a general source of strength to us that our relations with our allies are conducted on a basis of persuasion and consent rather than compulsion and capitulation, it is also evident that dissent among us can become a vulnerability. Sometimes the dissent has its principal roots abroad in situations about which we can do nothing. Sometimes it arises largely out of certain weaknesses within ourselves, about which we can do something--our native impetuosity and a tendency to expect too much from people widely divergent from us.
The full capabilities of the rest of the free world are a potential increment to our own capabilities. It may even be said that the capabilities of the Soviet world, specifically the capabilities of the masses who have nothing to lose but their Soviet chains, are a potential which can be enlisted on our side.
Like our own capabilities, those of the rest of the free world exceed the capabilities of the Soviet system. Like our own they are far from being effectively mobilized and employed in the struggle against the Kremlin design. This is so because the rest of the free world lacks a sense of unity, confidence, and common purpose. This is true in even the most homogeneous and advanced segment of the free world--Western Europe.
As we ourselves demonstrate power, confidence, and a sense of moral and political direction, so those same qualities will be evoked in Western Europe. In such a situation, we may also anticipate a general improvement in the political tone in Latin America, Asia, and Africa and the real beginnings of awakening among the Soviet totalitariat.
In the absence of affirmative decision on our part, the rest of the free world is almost certain to become demoralized. Our friends will become more than a liability to us; they can eventually become a positive increment to Soviet power.
In sum, the capabilities of our allies are, in an important sense, a function of our own. An affirmative decision to summon up the potential within ourselves would evoke the potential strength within others and add it to our own.
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 [NAT] 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.
A few statistics will help to clarify this point [Table 1].
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.
Table 1. Percentage of Gross Available Resources Allocated to Investment, National Defense, and Consumption in East and West, 1949 (in percent of total)
| COUNTRY | GROSS INVESTMENT | DEFENSE | CONSUMPTION |
| USSR | 25.4 | 13.8 | 60.8 |
| Soviet Orbit | 22.0 (a) | 4.0 (b) | 74.0 (a) |
| U.S. | 13.6 | 6.5 | 79.9 |
| European NAT countries | 20.4 | 4.8 | 74.8 |
   (a) crude estimate. [Footnote in the source text.]
   (b) Includes Soviet Zone of Germany; otherwise 5 percent. [Footnote in the source text.]
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) [Table 2].
Table 2. Comparative Statistics on Economic Capabilities of East and West
| | U.S. 1948-49 | EUROPEAN NAT COUNTRIES | TOTAL | USSR (1950 PLAN) | SATELLITES 1948-49 | TOTAL |
| Population (millions) | 149 | 173 | 322 | 198 (a) | 75 | 273 |
| Employment in non-agricultural establishments (millions) | 45 | - | - | 31 (a) | - | - |
| Gross National Production (billion dollars) | 250 | 84 | 334 | 65 (a) | 21 | 86 |
| National income per capita (curent dollars) | 1700 | 480 | 1040 | 330 | 280 | 315 |
| Production data (b): | | | | | | |
| Coal (million tons) | 582 | 306 | 888 | 250 | 88 | 338 |
| Electric power (billion kwh) | 356 | 124 | 480 | 82 | 15 | 97 |
| Crude petroleum (million tons) | 277 | 1 | 278 | 35 | 5 | 40 |
| Pig iron (million tons) | 55 | 24 | 79 | 19.5 | 3.2 | 22.7 |
| Steel (million tons) | 80 | 32 | 112 | 25 | 6 | 31 |
| Cement (million tons) | 35 | 21 | 56 | 10.5 | 2.1 | 12.6 |
| Motor vehicles (thousands) | 5273 | 580 | 5853 | 500 | 25 | 525 |
   (a)1949 data. [Footnote in the source text.]
   (b) for the European NAT countries and for the satellites, the data include output by major producers. [Footnote in the source text.]
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 policy is 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.