Chapter 8 – Setting the New Cold War Strategy: The First Term - Statements and Decisions

In the longer term, if Soviet behavior should worsen, e.g., an invasion of Poland, we would need to consider extreme measures. Should Soviet behavior improve, carefully calibrated positive economic signals, including a broadening of government-to-government economic contacts, could be considered as a means of demonstrating to the Soviets the benefits that real restraint in their conduct might bring. Such steps could not, however, alter the basic direction of U.S. policy.16
Tech Transfer NSDDs. NSSD 1—83 U.S. Technology Transfer Policy, issued on February 25, 1983, tasks the interagency development of a comprehensive policy to review related earlier technology transfer directives and assessments, including some from the Carter presidency; submit a report to the National Security Advisor by April 30, 1983 for Presidential review; and include intelligence, economic, organizational, and public aspects. Other NSDDs on Export Controls and Restrictions on U.S. Soviet trade include NSDD 89—The Export Administration Act, issued on April 11, 1983; NSDD 118—Preparations for the 1984 Economic Summit, issued on December 5, 1983; NIE 11—1/7—84—Potential for the Transfer of U.S. Space Technology to Soviet Union, issued in November 1984; and NSDD 152—Preparations for the 1985 Economic Summit. More perspective and documentary notes are provided in the next chapter on Reagan’s second term. All of these documents are provided in this book’s Internet Document Library.
An NIE Look at Soviet Economic Vulnerabilities and Distortions—1988. A Reagan Administration National Intelligence Estimate NIE 11–23–88—Gorbachev’s Economic Programs: The Challenges Ahead, issued in December 1988 reminds readers of the Soviet Union’s disastrous economic inheritance from Marxist-Leninist central planning blueprints as further aggravated by Reagan’s economic pressures and Mikhail Gorbachev’s risky and ultimately futile efforts at perestroika. Thus:
[The Soviet Military Industrial Complex Askew] [In the 1960s] labor supply growth slowed, even larger expenditures were required to exploit natural resources, and the inefficiencies inherent in central planning became more acute as the economy grew. Military spending also has increasingly hindered economic performance. To support the military effort, Moscow created an institutional mechanism reaching from the highest state bodies down through layers of administrative control to individual enterprises, thus ensuring priority to defense programs. As a result of this priority, the defense sector’s share of national output grew and by the mid-1980s consumed 15 to 17 percent of GNP. The incentive structure—wages, bonuses, perquisites—was designed to favor those who worked in or supported the defense industry. The defense sector was given priority access to raw materials, machinery and equipment, subcomponents, scientists, engineers, and skill workers, preempting consumption and investment in the civilian sector . . . [and] has allowed no room for major increases in the quantity and quality of consumer goods and services.
[Central Planning, Reform, and Legitimacy Problems] Brezhnev’s successors, then, were saddled with:
  • An antiquated industrial base and a defense sector that was siphoning off high-quality resources needed for economic improvement.
  • An energy sector beset by rapidly rising production costs of oil, its major fuel.
  • Levels of technology that, for most areas, substantially lagged those of the West.
  • Inefficiencies inherent in the conflict between ever more central planning and control and an increasingly large and complex economy.
  • An inefficient farm sector that, despite large investments, still employed 20 percent of the Soviet labor force compared with only 5 percent in the U.S.
  • A hidebound corrupt bureaucracy and inflexible planning system that failed to provide the proper signals for production and investment, retarded scientific-technical innovation, and encouraged high costs and massive waste of resources . . .
[Gorbachev] grouped his efforts to revive the economy under the broad rubric of perestroyka, a term that includes three major economic elements—tighter economic discipline, industrial modernization, and economic reform . . . [thereby] enabling Moscow to maintain its military competitiveness . . . [and] achieving major improvements in consumer welfare to gain the cooperation and support of the masses for perestroyka and to maintain regime legitimacy. (headings added)17
[Book pg. 184]