The Atlantic Report on the World Today: Washington

IT IS clear that Moscow’s new tactics include a world-wide economic challenge to the United States, a threat to send into the underdeveloped nations of the Middle East, Asia, and Latin America goods made in Russia or elsewhere in the Soviet orbit and technicians who are also political agents.

But the Administration, in trying to “wake up America,” is in a difficult position. For it was the Republican campaign orators who went after Democratic waste overseas. It was Dulles who said in his “massive retaliation" speech two years ago that “broadly speaking, economic aid in the form of grants is on its way out as a major element in our foreign policy” in favor of a “more manageable” American budget and more trade and private investments. And it was the President who accepted a mere shadow of Harold Stassen’s “bold new program” of economic aid for the “arc of free Asia” a year ago.

Burma and surplus rice

Furthermore, the Administration has been retreating step by step before the farm bloc and the party politicians who have insisted that our surpluses be shipped abroad regardless of the effect on foreign relations. The flow of surplus items abroad has upset a number of trade patterns and brought us new political enmities among both friends and might-be friends.

The extreme example of the surplus problem is the case of Burma. Last summer, it has now come to light‚ Premier U Nu, who had cut off American aid in 1952 over the issue of our support of Chinese Nationalists in North Burma, offered to take our technical aid once again. This time, however, U Nu said he would take no help without paying; but his only means of paying was rice. If we would buy 10,000 tons of rice at the market price, he would let us store it in Burma as a Far East emergency famine or disaster supply, and guarantee to use the million and a quarter dollars or so paid for it to pay some forty or fifty American technicians.

After two weeks of soul-searching, the State Department told U Nu it would be politically impossible for the United States, which has its own rice surplus, to buy somebody else’s — even 10,000 tons. Our own surplus is now over 700,000 tons, and we recently have been negotiating to ship 30,000 tons of it to the Philippines and another 100,000 tons to Indonesia.

The outcome of the Burma story, however, was not merely that U Nu did not get forty or fifty badly needed American technicians and that the United States lost an opportunity to renew an excellent method of creating pro-American opinion in Burma. The unhappy fact is that U Nu, five months later, made the same offer to Khrushchev and Bulganin when they visited Burma, and they snapped it up.

Administration officials, talking privately, concede that there has in fact been no adequate American thinking on this problem of how to meet the new Soviet economic challenge. Economic problems in international relations have fallen between two chairs—the State Department’s preoccupation with political matters and the Pentagon’s with military problems. Dulles’s own well-known distaste for economics has meant leaving it largely to Hoover, who is willing to make a gesture but hardly more. The President’s illness has meant that Hoover, with the backing of Humphrey and Hughes and with Stassen out of the foreign aid field, has had his way.

The Soviet’s new five-year plan includes absolute figures instead of mere percentages— an almost certain measure of Soviet self-confidence. This applies just to the industrial side of the economy, however, for agricultural figures are again only in percentages. Khrushchev’s recent admissions that not all is going well in the new lands program is reason enough to be vague on the figures for farm output. But Soviet farm deficiencies do at least allow Russia to import unrestricted quantities of agricultural products from the underdeveloped countries in exchange for industrial goods — something the United States cannot do.

Moscow’s bargaining position

The new five-year plan reveals that the steel goal set by Stalin in 1946 of 60 million tons by 1960 will be surpassed by 8.3 million tons, the coal goal of 500 million tons by 93 million, and the oil goal of 60 million tons by 75 million. The use which is likely to be made of some of this oil, much in demand in underdeveloped nations, can be gleaned from the fact that the new plan also calls for almost half a million more tons of Soviet tanker capacity, including tankers of 20,000and 25,000-ton capacity.

The West, of course, has plenty of oil to sell and plenty of tankers to move it. But, as Washington unhappily knows, Moscow can undersell any Western oil company anytime it wishes to do so for political reasons. A Western private company that sold for less than cost would go bankrupt. The same “loss-leader" principle can be applied by Russia to any industrial goods. The meaning of the new five-year plan figures is simply that the Kremlin is certain to have an increasing margin of material things for use abroad. More steel means steel to sell to India, where a deal already has been worked out.

A new factor introduced for the first time is a drive to replace obsolete machinery. Not only will this mean more efficient industrial production but it will release for export old machinery, which is easier to operate because it is less complicated.

The new five-year plan, as American experts see it, emphasizes a rapid forced industrialization once again at the cost of the consuming public. One estimate is that Russia’s gross national product in 1955 was one third of ours; in 1960 it would be, if all goes well, about two fifths of ours, if our rate of increase goes as estimated here. In absolute terms, the Soviet Union is still far behind the United States. In 1955 we produced 1420 pounds of steel per capita to Russia’s 450 pounds. But such comparisons often serve to create complacency and hence are dangerous for Americans, who should remember that 450 pounds per person is an astronomical figure when read in most of the world.

Out of the now five-year plan figures also comes I his important fact; the rate of Soviet growth is slowing down—not greatly, but somewhat. This slowing down is thought to reflect several factors: decline in manpower due to the low wartime birth rate; a rise in the school attendance period from seven to ten years; increased technical education and a return to the farm of some city workers; the natural rate decline as the base is enlarged; decline in investment productivity as more investment goes into agriculture; the new emphasis on replacement of obsolete equipment, which slows production temporarily though there will be a long-term gain.

Where the pinch comes

In sum, however, Moscow’s industrial growth is immense. But the picture in the consumer field — food, clothing, and housing — is appalling. Because some 95 per cent of Russian clothing is cotton, clothing has suffered from lagging agriculture. Shoes, also dependent on agriculture, last year averaged one and one-third pairs per person, with just under two pairs the 1960 goal (our 1955 figure was three and one-half pairs). Housing, even if the somewhat doubtful Soviet figures of 46 square feet per person in 1955 and a 1960 goal of 56 square feet are accepted, is incredibly bad. Our Federal Bureau of Prisons standard is 60 square feet per prisoner.

The only logical way to look at the Soviet economy, if one wants to estimate its impact on and relation to Soviet foreign policy capabilities, is this; any share of total output which is allotted to the consumer is in effect a production cost, in that it is subtracted from the total output available for additional investment and for arms. Hence, to continue to build Russia industrially, it is necessary to hold down public consumption, which means holding down the standard of living.

Industrial goods for use abroad politically are likewise a production cost. The Kremlin’s problem is to give the consumers enough to keep them working hard enough, and to ship enough abroad to make political gains. The economy, as the figures cited here amply demonstrate, gives the Kremlin considerable leeway. Washington realizes that in the broadest sense the problem is simply this: How can a free enterprise system compete with the Soviet system’s lossleader tactics?

The top of the heap

What is ahead for the Soviet elite, the couple of million bureaucrats, technicians, and managers, whose real compensation lies in the good things of life as well as in the possession of power?

Radio-television production is due to jump, 1960 over 1955, by some 225 per cent, but only to 10 million sets from 4 million. Today there is one Soviet set per 55 persons to one per 7 in America. Refrigerators will jump from 151 million to 635 million, and washing machines “from 86,000 to 528,000. These goal figures are laughable to us for a nation which already has 220 million people compared with our 165 million. But the important thing is that those on the top of the Soviet heap will get some of these luxuries — or at least can look forward to getting them — as compensation for hard work and political loyalty. And, if necessary, a few thousand Soviet citizens can wait a while longer so that a few thousand Liberians or Sudanese or Burmese or Indonesians can have steel and machinery instead.

Mood of the Capital

Washington, as spring approaches, is in a cat-and-mouse mood. Each political party is watching the other — waiting for an opening to strike, yet making sure it has a route of retreat if necessary. The first weeks of the congressional session were about as unreal as any in a presidential election year could be because of the uncertainty over President Eisenhower’s course. The will to get down to work, to pass much of the mass ol legislation that both parties know must be put through somehow before they quit for the August nominating conventions, has been badly lacking.

It has been a formative period — a period of testing out possible issues, of looking for advantage, of efforts to determine whether there is political mileage in the foreign field or whether the issues which may sway the voters are essentially domestic. The hot controversy over the Dulles “brink of war” statements certainly made much more difficult the bipartisanship necessary in the foreign aid field.

Anglo-American solidarity is the essential rock of the Atlantic alliance and indeed of the free world. The White House talks with Sir Anthony Eden came at a point between the Summit glow and the Communist Party’s Twentieth Party Congress in Moscow and were an effort to gauge the effects of both and to determine Western strategy. But the immediate issues of ArabIsrael conflict and Anglo-American differences over China policy tended to blot out the more fundamental agreements between Washington and London, if not to take too much time from the kind of long-range thinking so necessary in the face of world-wide Communist strategy.

Both the Arab-Israel and the China issues are highly charged politically. It should be said in Dulles’s defense that, although he is certainly as politically-minded a Secretary of State as any in modern times, he has stoutly resisted Israeli pressure in the knowledge that to give in at such a time as this might set off the Middle East “dry tinder,” to use Eden’s phrase. On the other hand, the Eden-Dulles relationship, already touchy, was hardly improved by the Dulles “ brink of war” interview reviving their disagreements over Indochina.

The issues of the Eden visit may be summed up this way: the British are overextended both militarily and economically and the burden of the free world’s defense must pass even more to America. But Washington, in a presidential election year, is in no mood to take on more commitments. As a result, democracy once again faces the test of whether it can afford the luxury of a sabbatical year amid the conflicts of the nuclear age.