The Failing System

References 1 through 4 cover the annual Joint Economic Committee (JEC) appearances by DCI Admiral Stansfield Turner:

Reference 1-23 June 1977: JEC testimony, Stansfield Turner: 15

We think the Soviet Union is entering into a period of reduced growth potential. . . . The basic problem is [that] the formula for maintaining their level of growth over the past 25 years, which has been to increase the inputs of labor and capital to make up for the inefficiency in the way they utilize them, does not appear to us to have long term prospects. They are not going to be able to continue this during the next ten years or so. (p. 2)

Reference 2-26 June 1978: JEC testimony, Stansfield Turner: 16 

You can see from this chart the sharp downturn in growth [of heavy industry] in the Soviet Union in the 1976-77 period. Shortfalls in key industrial commodities, especially steel,. . .construction materials,. . .and machinery have been a major factor in this slowdown. . . . Shortages in steel production have impacted on the machine building industry. . . which accounts for about one-third of industrial output in the Soviet Union . . . . Moreover, the Soviet record in bringing new industrial capacity on stream during the last two years has been dismal. (p. 2)

 

We think it likely that the Soviets will muddle through, at least to the early 1980s. (p. 38)

Reference 3-26 June 1979: JEC testimony, Stansfield Turner: 17

Our analysis of Soviet economic developments (since last year) has reinforced our conclusion that we see every reason to believe that a continued decline in the rate of growth of the Soviet Union is inevitable through most of the 1980s. (p. 2) The low growth rates we envision for the mid-1980s could squeeze their resources to the point where something has to give.

Reducing growth in consumption would not be popular, and would have a negative impact on worker moral and productivity when a boost in those is needed. . . .

 

Reducing defense spending, of course, in a period of very probable leadership change could be equally difficult since those vying for power will be reluctant to take actions which might alienate the military. . . .

 

There is no way the Soviets can do more to help Eastern Europe without hurting their own economy. To do less for Eastern Europe, however, might well endanger political stability in those countries. (p. 11-12)

 

At the recent July session of the Supreme Soviet, Premier Kosygin announced that the Council of Ministers has formed a high level commission to `solve current questions of economic growth.' This action appears to be another indicator of the government's concern over increasingly serious economic problems. (p. 160-161)

Reference 4-25 September 1980: JEC testimony, Stansfield Turner: 18

Our testimony on the Soviet Union has charted an economy losing its momentum while military programs continue to be pursued with vigor and determination. . . .I would like to review. . .why the economic outlook is so bleak. But I will mainly discuss why. . . the combination of slowing economic growth and rising military outlays pose such difficult choices for the Soviet leadership over the next several years.''(p. 105); ``the rate of economic growth has declined steadily since the 1960s,. . .the outlook is for a continued decline in the rest of the 1980s'' (p. 106); ``the Soviets lag far behind the Western countries and Japan [and] the differences have increased considerably since the 1960s. The Politburo's short run response is likely to stress discipline and measures to restrain consumer demand.'' (p. 116) ``But we do not think any of the economic reforms adopted thus far will have an appreciable effect on economic performance. A decisive shift in economic policy cannot be expected until a new Soviet leadership arrives on the scene. Even a succession leadership would be likely to `muddle down' for a time rather than confront head on the problems raised by slowing economic growth. . . .We do not think muddling down is tenable in the long run, however. . . .the economic picture might look so dismal by the mid-1980s that the leadership might coalesce behind a more liberal set of policies. These policies could include major shifts in resource allocation, structural reforms, or both. (p. 117)

Each of these four hearings included CIA statements that the problems had indeed registered on the Soviet leadership. See reference 1, p. 54-55; reference 2, p. 38; reference 3, p. 19-20; reference 4, pp. 116-117.

References 5 and 6, disseminated in unclassified form during the Turner tenure, are CIA economic assessments showing a bleak outlook for the 1980s and the potential impact on defense.

Reference 5-July 1977: Soviet Economic Problems and Prospects: 19

. . . it will not be easy to find solutions that will do more than alleviate the component problems. Powerful remedies are either not readily available or not politically feasible. . . .The slowdown in economic growth could trigger intense debate in Moscow over the future levels and pattern of military expenditures . (Emphasis added.) . . .These serious problems ahead seem most likely to prompt Soviet leaders to consider policies rejected in the past as too contentious or lacking in urgency. . . . Soviet responses to these problems could be further complicated by the fact that leadership changes will almost certainly take place during the coming period. Even a confident new leadership would have difficulties in coming to grips with the problems ahead. (pp. ii-v)

Reference 6-June 1980: The Soviet Economy in 1978-79 and Prospects for 1980: 20

 

The Soviet economy slowed to a crawl in 1978-79. . . .The severity and the wide-ranging nature of the slowdown, however, reflect more fundamental problems. After 25 years of sustained high rates of growth-fed by ever larger amounts of capital and labor-the Soviet economy has entered a period of increasing strain. . . overall resource productivity (output per unit of combined inputs of labor, capital and land) is declining and prospects for a turnaround are bleak. How to raise productivity is now the key question facing Soviet leaders as they enter the 1980s. (p. iii)

Reference 7, also disseminated during the Turner tenure, pointed to the growing malaise among the populace resulting from the system's failure to deliver on its promises and the potential for political repercussions over the longer term:

Reference 7- August 1979: Consumer Frustrations and the Soviet Regime: 21 

Soviet consumer discontent is growing and will cause the regime of the 1980's serious economic and political problems. . .national minorities, particularly in the Western borderlands, tend to see their economic woes caused by Russian exploitation. On several occasions in recent years, economic and national grievances have combined to produce large-scale demonstrations in the Baltic Republics and in the Ukraine. The approach of `hard times' will aggravate ethnic conflict. . . .(p. iii)

 

After years of neglecting consumer welfare, the Soviet leaders have shown growing concern in recent years, especially since the harvest failure of 1975. . . .It is unlikely that the current aged and conservative leadership, on the eve of a succession, will initiate any fundamental reordering of priorities to benefit the consumer, or any major reform of the economic system to raise productivity. . . . Politically, the short run consequences of continuing present policies will probably not pose a genuine threat to the stability of the state. (p. v)

 

In the longer run. . .consumer dissatisfaction could have severe political consequences. The Soviet leaders can ill afford to ignore the material demands of their increasingly acquisitive society. If, as projected, economic growth declines to the point where the regime is unable to improve or even maintain the current standard of living by the mid-1980s, the incidence of active unrest will certainly grow, forcing the leadership to consider a reordering of its priorities. (p. vi)

In the early 1980s, CIA disseminated a number of assessments of the combined effect of the failing economy and social stresses in the USSR and the implications for Soviet politics and defense spending toward the end of the decade:

Reference 8-August 1981: Consumption in the USSR: An International Comparison, JEC Submission, Schroeder and Edwards, 22 submitted to the JEC by the CIA's Office of Economic Research, contains a particularly bleak assessment of the larger implication of the Soviet failure:
 

The Soviet pattern in many respects conforms to that in less developed countries, and remarkable little progress toward a more modern pattern has been made in recent decades. In this and other respects, the USSR is indeed the world's most `underdeveloped developed country' . . . .In the USSR, long-continued investment priorities favoring heavy industry and defense, coupled with a rigid and cumbersome system of economic organization, have combined to produce a consumer sector that not only lags behind both the West and Eastern Europe, but also is in many respects primitive, grossly unbalanced and in massive disequilibrium. These negative aspects cannot be captured in quantitative comparisons, which as a consequence overstate the level of well being in the Soviet Union relative to other countries. . . . progress in raising living standards is likely to slow to a crawl and the consumer sector will remain fourth-class when compared with Western economies. (p. vi-viii)

Reference 9-October 1981: JEC testimonies of Harry Rowen and Douglas Diamond: 23

Two months after the paper in reference 8 was submitted to the JEC, the new Chairman of the National Intelligence Council, Harry Rowen, appeared before the Committee, testifying that, ``The overall state of the [Soviet] economy can be summarized very briefly. It is an economy in a great deal of difficulty. It is turning very sour indeed.'' (p. 202). . . . ``there is a very serious problem that the Soviet leadership faces'' (p. 203). And in response to a question from Senator William Proxmire, an officer from CIA's Office of Economic Research (Douglas Diamond) commented that:

Some observers argue that this declining growth in productivity is a key indicator of the deep-seated cynicism on the part of a society . . .that no longer believes the good life is coming. . .(p. 278)

 

We believe there is a feeling, widespread in Soviet society, covering all social groups, that lack of progress in the standard of living in real terms has affected them. This is a broad phenomenon. They feel the standard of living is leveling off, and their chances of having, for example, car ownership or an individual apartment with relevant accouterments, is nil, as opposed to 15 or 20 years ago, when their expectations were very high that they and their children would have, by this time or in the 1980s, much more than in the 1960s or 1970s. (p. 279)

References 10, 11, and 12 address the major societal problems that continued to worsen in the 1980s and describe the extent to which these are now becoming a potentially major factor in future political development in the USSR.

Reference 10-December 1982: Soviet Society in the 1980s: Problems and Prospects: 24

. . Soviet officials recognize that the Soviet Union now faces a wide array of social, economic and political ills, including general social malaise, ethnic tensions, consumer frustrations, and political dissent. Precisely how these internal problems will ultimately challenge and affect the regime, however, is open to debate and considerable uncertainty. Some observers believe the regime will have little trouble coping. . . .Others believe that economic mismanagement will aggravate internal problems and ultimately erode the regime's credibility, increasing the long-term prospects for fundamental change.

 

. . . popular discontent over a perceived decline in the quality of life represents, in our judgment, the most serious and immediate challenge for the Politburo . . . . Popular dissatisfaction and dynamism seem to be growing. This popular mood has a negative impact on economic productivity and could gradually undermine the regime's credibility.

 

Ethnic discontent-rooted in cultural, demographic, and economic problems as well as political suppression-remains primarily a latent but potentially serious vulnerability.

 

The range of political, religious, and cultural discontent that is expressed in the Soviet dissident movement does not, at present, seriously challenge the regime's control, but the regime deals with it as though it does . . . . The movement, however, is not likely to die and in the long run could grow if it can capitalize on increasing discontent, cynicism, and alienation among the populace.

 

The sharp downturn in economic growth since the mid-1970's is the underlying problem that ties all these issues together and makes them potentially more troublesome for the regime.

 

The pervasive police powers at the Politburo's disposal, when coupled with the Soviet populace's traditional passivity toward deprivation and respect for authority, should provide the regime with the necessary strength to contain and suppress open dissent. (Key Judgments, pp iii-iv)

 

No solution it is likely to attempt, however, offers any certain cure for its growth problem and the malaise related to it. This situation will likely require the leadership to fall back even more on traditional orthodox methods to control dissent and suppress challenges to its authority. (p. v)

 

From a perspective of the Soviet leadership, economic difficulties impact on the entire range of social problems it must manage. Unless it can find a successful economic strategy, there is every likelihood that growth will stagnate, consumer frustrations will grow, ethnic tensions will intensify, and discontent become more threatening. (p. 34)

Reference 11-December 1982: Soviet Elite Concerns About Popular Discontent and Official Corruption: 25

Brezhnev's death comes at a time of heightened concern among Soviet elites about public morale and official abuse of power. The dominant attitude appears to be one of pessimism about the popular mood and apprehension about the implications of corruption for the future of the Soviet system. (Key Judgments) . . . Soviet elites have become more concerned about the potential consequences of popular discontent and official abuse of power than they have been for the past quarter of a century. . . .Soviet elites are aware that, in recent years, conditions giving rise to popular discontent have worsened, while the regime's resources for maintaining social stability and motivating the work force have diminished. Officials are probably most concerned about the adverse effect of popular dissatisfaction on labor productivity. But they are also worried about the possibility of social disturbances serious enough to produce challenges to political control. (p. 1)

 

Soviet elite concerns about popular morale may be tempered by cognizance that the regime possesses still powerful instruments of repression . . . (p. 7)

 

Nonetheless, since the mid-1970s, the mood of Soviet society seems to have shifted. Although habits of submission to authority remain stronger in the Soviet Union than among most peoples of Eastern Europe, the Soviet population has apparently become more demanding, more skeptical, and less pliable . . . .There is apprehension among elites that corruption is sapping the party's moral authority and its ability to provide effective leadership. These trends in elite attitudes may have major implications in the post-Brezhnev period. (p. 8)

Reference 12-April 1983: Dimensions of Civil Unrest in the Soviet Union: 26 

Civil unrest in the Soviet Union takes many forms. Since 1970, intelligence sources report over 280 cases of industrial strikes and work stoppages, public demonstrations, and occasional violence, including sabotage, rioting, and even political assassination attempts . . . .The scope and character of popular grievances that are suggested in recent civil unrest probably present a greater long-range challenge to the regime than the narrower intellectual dissident movement . . . .For the Soviets, this may be a vicious circle of greater potential domestic significance for the 1980s than the regime has had to cope with anytime in the past three decades. (Key Judgments pp. v-vi)

Reference 13-13 June 1983: The dismal economic inheritance of the 1980s was described in a CIA paper entitled The Slowdown in Soviet Industry,1976 -82: 27 

Industrial growth, which had been decelerating since WW-II, slowed unusually sharply during 1976-1982 . . . .Even more dramatic was the slump in productivity . . . .Prospects for turning the situation around in the rest of the 1980s are not good . . . The surprising and dramatic turndown . . . was precipitated by a . . . decision . . . to try a new strategy for economic growth. Output gains were to depend mainly on improved efficiency . . . in the past, most of the growth in output had been achieved simply by massive increases in new plant and equipment and mobilizing more workers. (Key Judgments p. iii)

 

Most of the unfavorable developments that converged to slow industrial growth and productivity during 1976-82 will continue to do so for the rest of the 1980s, and may intensify . . . .Major systemic reforms, which might provide a solution in the long run, are not on the leaderships agenda as yet. Even if launched, they would be unlikely to boost industrial growth and productivity for many years . . . By CIA measures industrial growth has failed to meet planned targets every year since 1973-and by growing margins. (Key Judgments p. vi)

 

The adverse features that caused factor productivity to slump badly in 1976-82 are deeply imbedded and are likely to continue. (p. 30)

 

The slow pace of industrial growth that we project for the 1980s (about 2 percent per year) will seriously limit growth in other sectors and in the economy as a whole, since industry accounts for nearly half of Soviet GNP . . . .It will limit the USSR's ability to boost living standards substantially and to accelerate military production . . . the present Soviet leadership [Andropov, soon to be followed by Chernyenko] . . . will most likely try to adjust to slower economic growth and will return to traditional methods . . . this means tinkering with planning, organization, and incentives . . . `muddling through' . . . . (p. 31)

Enter Gorbachev

Two products disseminated within the first several months of Gorbachev's tenure identified him as a force for change, but also outlined the enormous hurdles he faced:

Reference 14-August 1985: Gorbachev's Approach to Societal Malaise: A Managed Revitalization: 28

Gorbachev's attempt to bolster popular support for the regime carries political risk. His direct appeal to the public could generate concern within key bureaucracies that they are being circumvented, and generate popular expectations that he may not be able to satisfy. A key issue in coming months will be the question of political will and political power- whether Gorbachev places enough priority on the alleviation of social problems to devote energy and resources in this area at the expense of other important projects, and whether he is able to marshal sufficient political support to do so. (p. iii)

 

. . . developments over the past decade have weakened several props [coercive instruments, social contract, historical patterns] and given rise to greater public discontent about internal conditions . . . .Soviet society has become more demanding, less believing and less pliable, as manifested in a variety of related phenomena: low morale, increased materialism and withdrawal in private affairs such as black market activity beyond the regime purview, rising crime and alcohol abuse, youth involvement of various types of delinquency, increased pacifism, and attempts of minorities to emigrate.

 

. . A tone of urgency pervades [Gorbachev's] public discussion of key societal problems . . . in his June speech . . . he referred to the `anxiety' of the Soviet people that the country's `social and economic development' be accelerated, stated that `none of the problems we must solve today can be put off until tomorrow,' and insisted that there must be `no delay, no waiting because there is no time left for warming up-it was exhausted by the past.' Gorbachev's remarks suggest that he is strongly committed to following through with a program of action. (p. 1)

 

Unlike Brezhnev, Gorbachev appears to view attempts to maintain the status quo as more destabilizing than attempts to change the situation . . . .This approach is consistent with Gorbachev's insistence that problems be vetted and discussed somewhat more openly . . . .Gorbachev has warned that public confidence in the regime is eroded when serious problems are glossed over. (p. 2)

 

As he fleshes out his programs, Gorbachev will have to reckon not only with vested bureaucratic interests opposing change and competing for resources, but also with ingrained habits and attitudes in the society at large that will be difficult to alter . . . In sum, Gorbachev has yet to reveal any integrated program for dealing with the web of interrelated societal problems . . . .A key issue in coming months will be the question of political will and political power-whether Gorbachev places a high enough priority on the alleviation of social problems to devote energy and resources in this area, and whether he is able to marshal sufficient political support to do so. (p. 9)

Reference 15-September 1985: Gorbachev's Economic Agenda: Promises, Potentials, Pitfalls: 29 

Since coming to power Michail Gorbachev has set in motion the most aggressive economic agenda since the Khrushchev era . . . .[but] All of Gorbachev's initiatives are aimed at raising productivity and efficiency throughout the economy by matching more and better equipment with a motivated work force and an enlightened management cadre. He has put his finger on the very tasks the economy has never done well and has become progressively less able to do as it has grown in size and complexity. Although economic performance has improved in recent years from the low levels of 1979-1982, Gorbachev still faces an economy that cannot simultaneously maintain growth in defense spending, satisfy demand for greater quantity and variety of consumer goods and services, invest amounts required for economic modernization and expansion, and continue to support client-state economies. (p. iii)

This paper described the failings of the system as:

A technologically antiquated industrial base and a burdensome defense sector that has systematically siphoned off high-quality resources needed for economic revitalization.

 

An energy sector beset by stagnation and decline in production of its major fuel-oil-and a 30-year pattern of energy use that inhibits the rapid transition from oil to other fuels.

 

A level of technology that generally lags that of the West. . .even in military applications.

 

An inefficient farm sector . . .

 

A hidebound bureaucracy whose rigidities contribute to irrational investment decisions. (p. 2)

The critical fallacies in Gorbachev's initial aims-to fix the existing system rather than to undertake fundamental change-were described in the Key Judgments of this paper as follows:

Improving worker morale and management effectiveness [which] will require an effective incentive system and a greater availability of high-quality consumer goods at a time when the investment sector will be oriented toward producer goods and new defense programs will be coming on line.

 

The regime's plan to hold energy's share of investment constant comes at a time when demand for energy will grow and the cost of offsetting declining oil production will be rapidly rising. (p. iv)

 

The increased managerial independence necessary to spur effective technological development and utilization is inconsistent with a centrally planned pricing and allocation system, leading to the likelihood of management disillusionment and subsequent reversion to the very methods that have led to waste, fraud, and mismanagement for years. (p. v) . . . continued reliance on marginal tinkering despite clear indications that the plan for economic revitalization is faltering would mean that Gorbachev, like Brezhnev before him, has succumbed to a politically expedient but economically ineffective approach. (p. vi)

Reference 16-November 1985: National Intelligence Estimate 11-18-85 entitled Domestic Stress in the Soviet Union 30 also made many of the points presented in the two CIA products above:
 

There is growing tension between popular aspirations and the system's ability to satisfy them; and also tensions between growth and modernization goals on the one hand, and centralized political control. We do not exclude the possibility that at some unforeseeable future time, such tensions could pose a serious threat to the stability of the regime. (p. 5 of Key Judgments)

The question of the potential impact that Gorbachev's efforts to deal with his internal economic and societal problems might have on Soviet defense-and thus on US defense budget planning-quickly became one of the most neuralgic of the issues surrounding assessments of the new leader. As noted in the Harvard case study, the Directors of DIA and Air Force Intelligence dissented on CIA's judgment in the NIE of November 1985 that Gorbachev's efforts to deal with these internal problems were likely to effect his foreign and defense policies. As was also described in the Harvard case study, however, and as is indicated below, by the spring of 1986 there was no disagreement between CIA and DIA on ``whether,'' only some differences on ``how and how much.''

Reference 17-19 March 1986: JEC testimony by Douglas MacEachin, the Director of CIA's Office of Soviet Analysis (D/SOVA) 31 was part of a joint CIA-DIA presentation at which the two agencies declared they had no significant differences:

Gorbachev's plan for refurbishing the economy's industrial base . . . will certainly involve increased competition with the defense sector . . . .(p. 6)

 

`` . . . the production capacity required to support the Soviet force modernization over the next 5 or 6 years is in place.'' (p. 7)

 

``. . . in the immediate future, whatever controversy exists between or within the civilian and military leadership over [Gorbachev's] modernization program does not appear sufficient to challenge him politically or derail his modernization program. . . . .Political risks for him are likely to mount, however, when the Soviets begin tooling up for the next generation of military weapons. Unless his efforts to modernize industry pay off between now and then in greater numbers of more advanced high quality equipment and substantially increased productivity, the conflict between civilian and defense interests will become more severe. (p. 8)

 

Down the line he faces considerable risk in implementing his modernization program. (p. 9)

 

[He may be hoping for a boost in agriculture in the next few years, but] in the absence of such an upturn, however, the hopes for eliciting a great work effort will probably plummet as general disillusionment sets in, with the population seeing Gorbachev as no more effective than Brezhnev or Chernyenko . . . Gorbachev might . . . permit selective utilization of private sector activity, particularly consumer services. This would require a greater departure from economic orthodoxy than he has indicated so far he is willing to do . . . .Gorbachev's approach has reflected adherence to the Soviet model. He does not seem to want to change the model. He seems to think he can make it work better.

 

In sum, we continue to believe that major adjustments probably will have to be made in Soviet economic policies, if Gorbachev hopes to come close to his economic objectives. At this stage, it is too early to say just what moves, if any, he would make. The one thing that appears certain is that the new General Secretary remains committed to his industrial modernization program. (p. 10)

Reference 18-March 1986: Gorbachev's Modernization Program: Implications for Defense 32, was a CIA paper disseminated at the end of Gorbachev's first year in office:

Gorbachev can coast a few years on the basis of the USSR's past investment in its military industrial complex. . . .In the immediate future, any controversy that exists within the civilian and military leadership regarding the industrial modernization plan does not appear sufficient to challenge Gorbachev politically or to derail his plans. . . .The political risks are likely to mount, however, as the demand for defense plant and production equipment rises in the late 1980s and early 1990s, when the Soviets will have to begin tooling up for the next generation of weapons. Unless Gorbachev's efforts to modernize the economy pay off in greater numbers of more advanced, high-quality equipment and in substantially increased productivity, the battle between civilian and defense interests will become more severe. . . . the objectives of industrial modernization could increase pressures to postpone certain major defense initiatives-an option almost certain to be unpalatable to a significant portion of the military and political leadership. (pp. 9, 10)

Reference 19-22 April 1986: A memo from D/SOVA to the DDI. 33 In this memo, the CIA sought to record a dissent to the aggregate projections for new Soviet strategic weapon systems projected in an NIE about to be disseminated. The CIA argued as follows regarding the economic implications:
 

(1) Our analysis shows that the ``low forces'' projected in the NIE would require Soviet procurement spending on the strategic mission to increase. . .an average annual growth of 11 percent. To support the ``high'' forces projected in the estimate, procurement spending would have to increase at an average annual rate of 13 percent.

 

(2) Procurement spending growth at even the low rate has only occurred once before over such an extended period. During 1966-70, procurement spending on strategic forces increased at an average annual rate of 10 percent as the Soviets embarked on a rapid expansion of their intercontinental attack forces with the deployment of the 3rd generation ICBMs and the Yankee-class SSBNs. But that growth occurred from a much lower base and the Soviet economy then was in much better shape, with GNP increasing at an average annual rate of around 5 percent, more than twice the rate antitipated during the 1986-90 period.

 

(3) More important, such high growth in procurement for the strategic mission would-unless accompanied by significant cuts in conventional military forces-not only rule out any prospect of success of the industrial modernization program, but in fact would imply that Moscow has no intention of attempting to carry out this program which the new Soviet leadership has publicly made the centerpiece of its agenda. Major cuts in spending on conventional forces, moreover, would run directly counter to what appears to be the current trend in Soviet strategy and doctrine. (pp. 2-3)

The CIA dissent was not included in the NIE. Indeed, some in the intelligence and policy communities believed that Gorbachev's plan was not real, but rather a gambit to buy ``breathing space.'' As indicated in the source materials below, CIA was coming to the conclusion that ``breathing space'' was not an achievable end, and that reaching Gorbachev's objectives would instead require the kind of systemic reforms that could change the threatening nature of the USSR.

Reference 20-April 1986: The 27th CPSU Congress: Gorbachev's Unfinished Business 34, another of the CIA assessments at the end of Gorbachev's first year, dealt with his political progress:

 

Gorbachev's initial Party Congress effectively drew a curtain on the Brezhnev era . . . but was not the decisive break some Soviets and Western experts had predicted. . . ''(p. iii) ``For every issue moved forward, an equally important question was sidestepped . . . .Gorbachev's avoidance of potentially divisive issues at the Congress was politically prudent, but continued caution could slow the momentum he has built over the first year . . . . (p. v)

 

The 27th Party Congress strengthened Gorbachev's hand for pressing along the lines he had already laid out in his first year. The trend lines all point in the direction of Gorbachev's consolidation of power and the advance of his policy agenda . . . [but] by failing to flesh out his calls for reform, to move boldly on sensitive issues like party privilege and tenure, or to attack the Brezhnev legacy directly, Gorbachev has left in doubt his ability to translate political success into more than a personal triumph. (p. 21)

 

Signs of tension within the Gorbachev camp over how hard or fast to press change could be of even greater long term significance and will be a key indicator of Gorbachev's political health. (p. 23)

Reference 21-April 1986: Domestic Stresses in the USSR 35, while also disseminated at the end of Gorbachev's first year, was actually the compilation of an exhaustive research and analytic effort that had been under way before Gorbachev took office. It was extended to take into account the initial revelations of the new leader's agenda. It provides a critical and comprehensive assessment of the new leader's problems and prospects in confronting the societal problems that-at least as much as the economic failings-provided impetus to the calls for change from within the Soviet Union itself. The volume of the excerpted material below is offered both for its substantive content and as an illustration of the amount of information and significant judgments provided in that benchmark paper, which was the basis and backup for the NIE cited in reference 16.

The Key Judgments of the SOVA paper included the following:

As consumption growth tapered off in the 1970s and the population became less isolated from the outside world, popular discontent grew, especially among youth, religious believers, and national minorities. Leadership ineptitude and bureaucratic corruption exacerbated these problems and eroded the system's legitimacy in the public mind. . . .These problems are not likely to produce a fundamental challenge to regime control during the remainder of the 1980s, . . . .[but]Domestic pressures . . . will probably exert a more significant influence on regime policy than at any time since the period after Stalin's death. . . .More recently, there has been increased recognition that at some point domestic problems could combine to produce political instability. (p. iii)

 

[Gorbachev] moved vigorously to address the societal and economic ailments confronting the regime. . . . Likely steps, many of which are extensions of current initiatives . . . if enacted and pursued as vigorously as those now under way-will increase turbulence within society and the elite. Within officialdom, powerful vested interests will attempt to slow the pace and limit the scope of change. (p. iv)

 

Soviet leaders will face continuing problems throughout the 1980's and beyond. Soviet societal problems result from fundamental contemporary conditions that the regime is unable or unwilling to alter. The growing sophistication of consumer demand is a natural consequence of the very process of economic modernization that the regime wants to further. The growing size of the critically thinking public is the result of expanded education, which is essential to the country's progress. The exposure of the population to external influences is partly due to technological advances beyond the regime's control. (p. v)

The following excerpts are mainly the topic sentences of the paragraphs from pages 71-72 of the paper's text, although in two instances the entire paragraph is quoted:

Soviet press articles have suggested that Gorbachev's economic reforms are meeting resistance from ideologues in the party and the government. . . .

 

Unfulfilled expectations will probably become a growing concern for Gorbachev. . . .

 

Opposition to Gorbachev within the leadership and the broader elite for now appears disorganized. But the success Gorbachev has achieved in expanding his power will not guarantee success for his policies. Should his program fail to spur economic growth or lead to significant popular protest, latent opposition within segments of the elite could coalesce, disagreements might surface among his own allies within the leadership, and Gorbachev might fall.

 

Overall, however, we believe Gorbachev's political position will remain strong and the USSR under his dynamic leadership is likely to see some improvement in system performance over the next few years. . . .

 

It seems unlikely, however, that Gorbachev will be able to introduce reforms significant enough to arrest long-range negative trends in Soviet society. . . .

 

Soviet internal problems are to a considerable degree endemic, given the basic structure of the system. . . .

 

Soviet societal problems are not merely vestiges of the past that have endured, but the results of contemporary conditions that the regime is unable or unwilling to alter. Some societal problems are consequences of Brezhnev policies that can be modified, but others are byproducts of policies that the regime is loath to abandon. . . .

 

Thus, although the regime will be able to contain societal tensions for the foreseeable future, long-range trends are producing a fundamental and growing disparity between popular aspirations and the regime's capacity to satisfy them. Over time, these trends may produce consequences that are incalculable at present. The evolution of the Soviet system and the society will continue to be shaped by conflicting forces that will make a balance between controls and dynamism hard to strike. Over a decade ago, the late dissident Andrey Amalrik summed up the essential dilemma: In order to remain in power, the regime must change and evolve, but in order to preserve itself, everything must remain unchanged.

 

As Gorbachev approached the end of his second year in office, the problems foreseen for him became increasingly evident, and this was reflected in increasingly critical and pessimistic CIA assessments.

Reference 22-February 1987: Gorbachev's Domestic Challenge: The Looming Problems: 36

Gorbachev's greatest challenge lies ahead. The cautious changes he has mentioned so far are, in our view, insufficient to achieve (his) goals. Over the next few years, he is likely to face tough choices between accepting results that fall well short of his goals-and a resultant erosion of his power-or pushing the Soviet leadership toward far more difficult-and politically controversial-policy measures. (p. iii)

 

To achieve his goals he will have to consider more politically risky and economically disruptive reforms . . . . Gorbachev already is facing strong opposition from those who see their jobs, status, and sinecures threatened by his efforts to turn the Soviet economy and society around. (p. iii)

 

To implement successfully even the changes he has announced so far, Gorbachev will have to transform a bureaucracy renowned for its ability to resist leadership direction into a more responsive and efficient instrument of change . . . .His unrelenting pressure to get his agenda implemented is already creating a large pool of disgruntled apparatchiki intent on blocking his program and he may well have to consider even more forceful measures. (p. iii-iv)

 

Unless there is a sharp upturn in economic performance-which we think is unlikely-or a major reduction in defense spending-which would be controversial-by the end of the decade demands for investment in the civilian sector will come increasingly into conflict with demands for more investment in the defense industries. The prospect for such a choice has already led Gorbachev to pursue a bold strategy for managing the relationship within the Soviet elite and could, in conjunction with economic considerations, eventually lead him to confront fundamental obstacles inhibiting economic progress. (p. iv)

 

. . . As these problems converge over the next five years we believe he will face an increasingly clear choice between settling for half measures that fall well short of his demands and perhaps his needs, or forcing the Politburo to make some difficult and divisive decisions. Failure to take on this challenge probably would not cost him his job but would open his administration to charges of Brezhnev-style embolism that he seems determined to prevent. The leadership style Gorbachev has demonstrated so far-as well as his rhetoric-suggests he will turn to more radical policy alternatives rather than accept that fate. He will find some advisors eager to push for a broader neo-Stalinist path, as well as those arguing for a more radical policy on economic reform. We do not know what mix of these options he might choose or even how hard he will push. But the complexities of these issues and absence of easy alternatives guarantee that the struggle will be protracted and the outcome uncertain, both for him and the Soviet Union. (p. v)

Reference 23-19 March 1987: JEC testimony by Douglas MacEachin, D/SOVA: 37

There had developed, it is now clear, even before Gorbachev assumed the position of General Secretary, a consensus among a sizable portion of the Soviet political elite that the need to revitalize their economy was reaching a critical stage . . . .The plan that was submitted under the Gorbachev leadership essentially did not change or envisage any change in the fundamentals of the Soviet system . . . .(p. 3)

 

We foresaw major problems for him. First, it was our view that the system that he thought he could exercise to this end would, in effect, stymie him, block him . . . he still had not dealt with . . . the incentives to overcome the cynicism of a population that believed it had seen this before and of a managerial system which had strong disincentives for creativity, enterprise, and initiative . . . he had to contend with a large number of sinecures which had grownup over the last 18 years of the Brezhnev leadership . . . . (p. 3-4)

 

A second major area of problems we saw for him was that he was going to face competing demands for a limited pie of investment. (p. 4)

 

(Regarding defense) there will come a time in the next year or two, we think, when the question of cutting tools for the next generation of weapons systems will be a serious issue, and when the debates begin on the next Five Year Plan. It is clear that the military is going to have to be dealt with insofar as its share of investments is concerned. (p. 4)

 

And finally, the consumer is going to have to see some results . . . if he is going to have the kind of positive incentives needed. (p. 4)

 

Gorbachev appears now to have recognized that he is, indeed, running into the kinds of systemic problems we anticipated . . . facing resistance and blockage . . . he has taken the first steps toward challenging some fundamental aspects of the system . . . .This has created a great deal of political tension in the Soviet Union. It is going to be a very tumultuous year ahead, politically, in the Soviet Union. (p. 5)

 

. . . if he makes the present system become more effective and is able to limit his changes to the system to the minimum necessary, we would be facing an opponent whose opposition to our security interests remain but who is more effective . . . . On the other hand, if there is, accompanying this program, changes in the basic social instruments in the Soviet Union, an opening up to a greater exchange of ideas, greater democratization, it certainly will not look like anything we could describe as liberal democracy in the West, but it could move the system. So in that regard, we can say that the glass could be half empty or half full depending on the extent to which he undertakes those kinds of changes. (p. 5)

Gorbachev's policies had opened up enough public debate to allow the smoldering nationalities issue to heat up significantly. This ultimately became a critical precipitating factor in the coup attempt that ignited the political breakup of the USSR. The CIA published several papers on the boiling nationalities problems, most of which have not yet been declassified. One available example is excerpted below.

Reference 24-June 1987: The Kazakh Riots: Lessons for the Soviet Leadership: 38

The consequences of the riots that took place in the Soviet Kazakh Republic in December extend well beyond the borders of Central Asia. The widespread corruption within Kazakh officialdom confirmed central leadership claims that Moscow's ability to force its will on the non-Russian periphery had seriously eroded during the Brezhnev years, necessitating remedial measures. Yet, the riots and elite complicity in them also demonstrated the risks of moving vigorously to restore central authority. The unrest in Kazakhstan has brought home to the Gorbachev regime that its initial approach to ruling the non-Russian areas of the USSR was flawed, prompting it to reassess its overall nationality and cadre policies. (p. iii)

Reference 25-July 1987: Gorbachev: Steering the USSR Into the 1990s 39 addressed the implications of Gorbachev's mounting internal problems for international security issues and for potential political upheaval in the USSR:

Developments during the past year have increased the chances he will act boldly to sustain the momentum of his program . . . .Because he seems determined to protect a modernization program that is already under-funded and because the milestones for fashioning the 1991-95 economic plan are fast approaching, Gorbachev is likely to seek arms control agreements in the final years of the Reagan administration rather than wait for the next election. Moreover, the weakness of the reform measures undertaken thus far are likely to become clearer over the next few years. We think Gorbachev is likely to move forward rather than retreat and push through more radical reforms so that they will be in place for the 1991-95 plan period.

 

. . . Gorbachev has already asked the military and the population to curb their appetites in return for more later. If his programs do not work out, other leaders could appeal to these constituencies. The risks in a more radical reform and a rewrite of the social contract are that confusion, economic disruption, and worker discontent will give potential opponents a platform on which to stand. Gorbachev's position could also be undermined by the loosening of censorship over the written and spoken work and the promotion of limited democracy.

Reference 26-13 April 1988: JEC testimony by Douglas MacEachin, D/SOVA, at the end of Gorbachev's third year: 40

We foresaw troubles for Gorbachev . . . too few investment resources chasing too many needs. The growth targets themselves, we thought, were unrealistic . . . .There was an acknowledged squeeze on the consumer. Military expenditures remained at the generally low rate of growth but they remained at an extremely high absolute level. There was also a systemic problem . . . a party and state bureaucracy which was being pressed for change without any incentive for change. (p. 72)

 

We continue to think the outlook for Gorbachev's program is bleak unless and until the Soviets deal with the fundamental problems we identified at the outset. The management reforms that Gorbachev has started are pointed in the right direction, but they clearly don't go far enough. At the heart of the issue, we think, is price reform . . . .organizational changes and price reforms without an accompanying incentive system to drive the implementation are a formula for evasion and circumvention at the working level. (p. 73)

Reference 27-July 1988: Gorbachev's Economic Program: Problems Emerge, a joint CIA-DIA product submitted to JEC: 41

. . . [in 1987] Soviet GNP grew at less than 1.5 percent-a rate reminiscent of the late Brezhnev period. The new quality-control program (gospriyemka). . . proved to be particularly disruptive . . . industry grew by only 1.5 percent and the critical machine-building sector did not expand at all. . . .The real loser appeared to be the consumer, who-now three years into Gorbachev's economic program-has seen almost no increase in the standard of living. . . .The leadership had hoped that a strong economic performance last year would provide a firm foundation for the future development of Gorbachev's economic program, but this did not occur. . . . we believe that if, as seems likely, the leadership continues to pursue its high-investment strategy and provides some increase in consumer goods to motivate workers, it will have to tap resources from one or all three of the following areas:

Whatever direction Gorbachev follows, we believe that if the economy continues to perform poorly in the next few years, tension within society and the leadership will increase. Bureaucrats will become increasingly frustrated by loss of privileges and status and by demands that they show greater initiative. Military leaders are likely to become more and more uneasy if benefits of the industrial modernization fail to materialize. Soviet citizens will need to see some improvement in living standards if the regime is to achieve necessary gains in worker productivity and avoid widespread discontent. Although Gorbachev appears to be working against no set timetable, failure to head off these tensions would, at a minimum, make it more difficult for him to pursue his economic program vigorously and could, ultimately, call into question his strong political position at home. (p. iii, iv)

Reference 28-June 1988: Soviet National Security Policy: Responses to the Changing Military and Economic Environment 42 addressed internal Soviet debates on ``how much is enough'' for defense. It offered what was at the time a judgment not widely accepted-that there was a good chance for a sizable unilateral cut in Soviet defense forces and spending:

The reality of the nuclear standoff and an era of tightening economic constraints have stimulated an expanding debate in the USSR on the precepts that guide decisions on the size and composition of Soviet military forces. Much of the public treatment is designed to influence Western opinion by portraying Soviet military aims as nonagressive, seeking only what is necessary to ensure the security of the USSR. Nonetheless, there is, we believe, persuasive evidence from both classified and open sources that the discourse goes beyond mere propaganda and involves fundamental issues that have important ramifications for Soviet secuirty policy and military forces over the longer term. . . .(Key Judgments, p. v)

 

The political leadership. . .has been grappling since the late 1970s with the need to revitalize a flagging economy and modernize an antiquated industrial base. And in 1985 Gorbachev's program for industrial modernization through large increases in production of civilian machinery clearly signaled a more intense resource competition for a military that was already restive after a decade of relatively slow growth in defense spending. (p. vi)

 

. . .there seems to be a consensus, whether based on conviction or acceptance of political and economic priorities, that the nuclear standoff can be maintained at lower force levels. This has enabled the military, while guarding its equities (particularly on strategic defense) to support Gorbachev's strategic arms control policies. (p. vi)

 

Civilian specialists from the major Soviet foreign policy research institutes, however,. . .argu(e) that securing the USSR from military attack on any level-conventional as well as nuclear-does not require matching or exceeding the quantity and quality of all aspects of the military forces of potential adversaries. They assert that past adherence to this practice has resulted in undue economic strain, that political factors play an increasingly important role in security calculations, and that secruity can therefore be maintained with a reduced volume of material and human resources for military forces. . . . (p. vi-vii)

 

Soviet military officers. . .appear to have accepted that the political and economic realities leave little room for. . .increased defense spending. . . .But they have taken particular exception to the implicit rationale for unilateral cutbacks contained in the argrments of the civilian specialists. They have defined sufficiency in terms of parity. . .and assert that `it is NATO and the West' that set the limits of sufficiency. . . .(p. vii)

 

In any event, the debate. . .is really over ``how much is enough''; it will not be resolved through theoretical doctrinal tenets but on the basis of the policy agenda and political power of the party leadership. (p. vii)

 

Some reports claim that Gorbachev has reached an accommodation with the Soviet defense constituency to hold down growth in defense outlays in order to gain the breathing space necessary for progress in his industrial modernization goals-the success of which is seen by the military to be in its own best interests. Even if growth is constrained, the present high level of military spending ensures a continuing large input of new weapons that should keep the defense constituency modified, as long as the military does not sense a serious deterioration of the Soviet side of the military balance. Because so much of the USSR's superpower status rests on military power, however, resistance to any efforts to slacken appreciably the defense effort will not be confined to the military. Indeed, what Soviet military writers tout as the Western thrust into high-technology hardware will continue to be a basis for arguing to increase defense resources. All this suggests that we will see a prolongation of the trend of the past decade-continued high but flat or slowly growing defense spending. (p. vii-viii)

 

Nonetheless, the meager progress so far in the industrial modernization program, particularly in machinery output, which is the linchpin of the plan, creates powerful incentives for at least a short-term reduction in military procurement and construction, and perhaps even in the size of the active-duty forces. A leadership seeking ways to conserve resources going to the military would not be hard pressed to find elements of the massive Soviet military establishment that seem excessive in relation to ``reasonable'' security requirements, especially if more weight is given to political dimensions of security. Indeed, a case could be made-and is, in fact, implied in the arguments of some writers-that defense spending could be cut at the same time the effectiveness of the Soviet military is improved. All this leads us to conclude that-barring a major change in the party leadership or in the external situation-there is a good chance that Gorbachev will, by the end of the decade, turn to unilateral defense cuts.

By about this time, CIA analysis had concluded that things had reached a critical fork in the road for Gorbachev-he had to either strike out boldly or retrench. CIA believed-incorrectly as it turned out-that the decisive point would be a major party conference scheduled for mid-1988 and disseminated a paper listing what appeared to be Gorbachev's political agenda for the conference.

Reference 29-June 1988: The 19th All-Union Party Conference: Restructuring the Soviet Political System:43

[The conference] could mark a watershed in the history of the Soviet system. . . . Gorbachev is counting on the party conference to approve sweeping changes in the Soviet political system in order to breathe new life into his efforts to restructure the economy and build a stronger foundation for regime legitimacy. . . . Changes under consideration, if successfully adopted and implemented, would radically alter the Soviet political landscape by `democratizing' the party and society, limiting the role of the party in day-to-day economic and social life, and opening the way for decentralized decision making. (Summary, p. i)

This assessment turned out to be a bit premature; at this conference Gorbachev temporized in the face of stiff resistance. Many of the reforms the CIA had expected were passed, but the major shakeup of the party did not occur.

CIA analysts, nonetheless, believed the major confrontation had merely been pushed down the road, and CIA's Office of Soviet Analysis laid out this assessment in a memo to the DDI.

Reference 30-27 September 1988: Memo from D/SOVA to DDI Richard Kerr and attached analytic paper by Kay Oliver, Prospects for a Leadership Crisis44, 27 September 1988:

[Gorbachev] has had some success in moving his reform agenda forward, but his very successes are alienating many elites at all levels of the system. There is a good chance that Gorbachev will accommodate his Politburo critics by backing off from some of his radical proposals for change. Given the depth of divisions in the Politburo, however, there are increasing prospects that conflict will come to a head. Neither the timing nor the outcome of such a confrontation are possible to predict with any precision. The leadership appears to be pulling together to bring the crisis situation in the Caucasus under control, but the conflagration there could lead to further polarization within the leadership that will later result in a denouement.

 

A sizable portion of the Soviet Politburo-including Ligachev, Chebrikov, Solomentsev, Gromyko, and Shcherbitskiy-have good reason for wanting to be rid of Gorbachev. There appear to be differences among these leaders on some policy issues and they do not necessarily constitute a cohesive coalition at present. But all of them must feel personally threatened by Gorbachev's plans and they now seem to share a belief that the Gorbachev ``cure'' for the USSR is worse than the ``disease''; they fear his program will erode the old foundations of party rule before solid new foundations are built.

 

The burgeoning nationality unrest has been a key factor leading some of Gorbachev's Politburo peers to conclude that his overall strategy in domestic policy is fundamentally flawed . . . it is abundantly clear that glasnost is responsible for unleashing nationality grievances. (p. 1)

 

Gorbachev so far has not achieved any significant improvement in the overall economic situation, and there is a widespread perception that living conditions are deteriorating. (p. 3)

 

On balance . . . we believe there is a greater chance that events will move toward a dramatic resolution. . . . there is a good chance that [Politburo members] will move against Gorbachev or that Gorbachev himself will risk a preemptive move to consolidate his power. (p. 4)

Just a few days after this memo was sent forward by SOVA, Gorbachev made the preemptive strike that pushed the USSR into a new chapter.

The Showdown

 Reference 31-December 1988: Gorbachev's September Housecleaning: An Early Evaluation 45 tried to gauge the longer term impact of Gorbachev's watershed move to circumscribe the power of the CPSU. It described `` . . . the areas most likely to be affected'' as follows:

. . . Gorbachev now directly supervises the process of strengthening legislative instructions and transferring some executive powers from conservative and resistant party bodies back to the presidency. . . .(p. iii)

 

The leadership shakeup has apparently helped Gorbachev's effort to give greater priority to consumer goods and services and may lead to increased diversion of resources from military to domestic economic needs. (p. iii)

 

The new leadership team appears to be more tolerant of national assertiveness. . . .

 

Gorbachev's political shakeup tilts the balance even further in favor of a more pragmatic, nonideological approach to foreign affairs. . . .

 

The prospects for advancing `new thinking' on national security issues have increased. . . . (p. iv)

This paper goes on to say in its main body:

On 30 September, the CPSU Central Committee kicked off a personnel and organizational shakeup of a magnitude not seen since Khrushchev's time. At the surprise plenum, the Central Committee retired several Politburo members of the Brezhnev era, promoted several reform supporters, drastically reorganized the party apparatus, and weakened the position of Yegor Ligachev, who had emerged as spokesman for the conservative wing of the party. The following day, at a hastily convened USSR Supreme Soviet session, Gorbachev further enhanced his power, succeeding Andrey Gromyko as Chairman of the Presidium . . . . (p. 1)

 

The leadership shakeup laid the groundwork for Gorbachev to transfer powers from the party to the state and thereby build a political base for himself outside the Politburo and Central Committee. In particular, Gorbachev hopes to streamline the size and redefine the functions of the party apparatus, while simultaneously shifting some decision making powers to the state presidency and to popularly elected legislatures (soviets) at all levels of the system. (p. 1)

 

Gorbachev's shakeup of the leadership included a significant reorganization of the party Secretariat and a seeming emasculation of its powers. . . . . In fact, some Soviet officials have said that the Secretariat has been bypassed so effectively that it is no longer a major power entity. (p. 2)

 

At the very least, the leadership shakeup appears to have tilted the balance in favor of greater tolerance for national assertiveness. Strains in the leadership over national policy have been evident for some time . . . . The leadership cannot afford to let national independence movements get out of hand. (pp. 6-7)

 

. . . pressure is already evident in the Baltic republics, where Gorbachev's proposed constitutional amendments received a hostile reception on the grounds that they fail to guarantee regional autonomy. . . . (p. 10)

 

Reference 32-March 1989: The Soviet Economy in a Global Perspective 46 stated in its Scope Note that it was an effort to put Gorbachev's concerns underlying his effort to revitalize the economy of the USSR into context by comparing the USSR's economic performance with that of other countries. Both the Scope Note and the first section of paper-Methods and Sources-describe the fact that the comparisons given in the paper were constructed using the UN ``purchasing power parity'' standard, and point out that the comparisons ``should not be regarded as precise measures. They provide at best an approximation of the relative levels of economic development and performance among countries of the world with very diverse systems.'' It is noted that the comparisons are for 1985, the last year for which the data are available for all the countries, but that CIA believed they reflected reasonably well the conditions in the USSR at the time (1989).

The Key Judgments of this paper highlight the stark contrast between, on the one hand, the potential represented by the enormous size and resources of the Soviet Union and the promises that had been made to the populace throughout the Leninist system's lifetime, versus the stark reality of dismal performance and promises not met. These Key Judgments follow in their entirety:

When Mikhail Gorbachev became General Secretary of the Communist Party of the Soviet Union in 1985, he assumed command of an economy that was impressive in terms of size and historical performance:
• The estimated value of the USSR's gross domestic product (GDP) was second only to that of the United States.
• The Soviet Union ranked first in the world in the annual production of oil, iron ore, and steel and was the second largest producer of machinery.
• Between 1950 and 1975 Soviet economic growth outstripped that of the United States, and the Soviet economy had increased from about one-third to almost 60 percent of the size of the US economy.

 

Since the mid-1970s, however, the economy has been faltering. Soviet growth had decreased sharply and by the late 1970s the ratio of Soviet to US GDP has slipped. The USSR now lags the West even further in many important respects:
• Soviet labor productivity measured by GDP per worker is less than half that of the United States, below that of most developed countries, and even below that of some East European countries.
• The West's technological lead over the USSR is large and increasing in fields such as computer-operated machine tools and computer software, in which the West is as much as 12 years ahead.
• Valuable energy resources are being used far less efficiently that in most other developed countries.

 

Indeed, although a military superpower, the Soviet Union has an economy that in many ways is like that of a developing country. The level of per capita consumer consumption in the USSR, for instance, is far below that of the developed Western countries and Japan. It is about one-third that of the United States and is more comparable to that of countries such as Mexico and Brazil. Moreover, that Soviet pattern of consumption and output more closely resembles that of less developed nations than that of the West:
• The per capita consumption of consumer durables is below that of many Latin American countries, and stocks of high-quality consumer durables such as passenger cars and modern appliances are extremely low.
• Per capita expenditures on consumer services are markedly lower than in the developed West and only slightly higher than in such countries as Uruguay and Portugal.
• Compared to other nations at a similar level of development, the Soviet Union has a much larger agricultural sector. Indeed, the share of agricultural output in GDP is similar to the share in Turkey and the Philippines.



In addition, the USSR-a large net importer of manufactured goods and an exporter primarily of raw materials and fuels-has a trade pattern more like that of Egypt and Mexico than of the major industrial states.

The Soviets have set economic targets that, it realized, would narrow the gap between themselves and the West. We believe, however, that these targets are out of reach. We expect that the Soviet Union will have difficulty maintaining its [present] position relative to the West, much less closing the gaps in technological development, productivity, or living standards.

Reference 33-April 1989: Rising Political Instability Under Gorbachev: Understanding the Problems and Prospects for Resolution 47:

The Soviet Union is less stable today than at any time since Stalin's great purge in the 1930's . . . .Even Gorbachev realizes . . . that it is far from certain that he will be able to control the process he has set in motion . . . the political stability of the Soviet system could be fundamentally threatened . . . . The political reforms being introduced could further erode central authority and could give disaffected groups new platforms to challenge the regime . . . .Under the banner of Glasnost, Soviet citizens are organizing groups that could form the basis of political opposition and are advancing a wide range of demands that challenge central authority. The most dangerous of these are the nationalist movements that have blossomed in many republics, unleashing centrifugal forces that, if unchecked, could threaten to tear the system apart. (p. iii)

 

Although the influence of Gorbachev's opponents on the Politburo has been weakened, they have a strong base of support among members of the elite who feel threatened by his reforms, including sizable elements in the Central Committee, the party and state apparatus, the military, and the KGB . . . .There also have been growing signs of frustration among Soviet citizens . . . as the March election demonstrated, . . . reforms have released pressures for further changes that could undermine the party's monopoly on political power. (p. iv)

 

Nevertheless, the Soviet leadership has undertaken the hazardous path of radical reform because it believes that the old system was failing and that, in the long run, it would have been more dangerous to do nothing. Particularly while Gorbachev remains at the helm, the leadership will not be easily swayed from this path. It specifically recognizes that the highly centralized Stalinist economic model was increasingly ill suited to reversing the economic slide that began under Brezhnev and narrowing the technological gap with the West. At the same time, Soviet political institutions were failing to provide social liberties and legitimate channels for airing concerns to a population that is increasingly well educated and informed. Corruption, abuses of privilege, and unfulfilled promises under Brezhnev compounded these problems by increasing popular cynicism and alienation and helping to erode the legitimacy of the regime. (p. iv)

 

The next several years promise to be some of the most turbulent in Soviet history. Indeed, while the kind of turmoil now being created in the USSR has been effectively managed in many countries, in other countries it has contributed to the destabilization of the political system. There are too many unknowns to determine whether Gorbachev will be able to control the process he has started, or if it will increasingly come to control him, making a wide range of outcomes possible over the next five years:


• If Gorbachev's reforms begin to produce tangible results and if he is lucky, he should remain in power and prevent any of the potential problems he faces from getting out of control, while continuing to move his reforms ahead.

 

• A growing perception within the leadership that reforms are threatening the stability of the regime could lead to a conservative reaction. This would probably, but not necessarily, involve a transfer of power-with a majority of the Politburo voting Gorbachev out, as happened with Khrushchev in 1964-and a repudiation of many aspects of reform.

 

• Those pressing for a maximalist agenda could gain control of the political system as a result of democratization and glasnost-as happened in Czechoslovakia in 1968-and force Gorbachev out. (p. v)

Reference 34-September 1989: Gorbachev's Domestic Gambles and Instability in the USSR 48, while looking at a number of alternative futures, included a judgment on one aspect that was likely to hold almost regardless of which of the postulated futures materialized:

whether or not Gorbachev retains office, the United States for the foreseeable future will confront a Soviet leadership that faces endemic popular unrest and that, on a regional basis at least, will have to employ emergency measures and increased use of force to retain domestic control. This instability is likely to preoccupy Moscow for some time to come and-regardless of other factors-prevent a return to the arsenal state economy that generated the fundamental military threat to the West in the period since World War II. Moscow's focus on internal order in the USSR is likely to accelerate the decay of Communist systems and growth of regional instability in Eastern Europe, . . . .Instability in the USSR will increase uncertainty in the West about proper policies to pursue toward Moscow, reflecting nervousness about Soviet developments but non-nonchalant about defense, and will strain domestic and Alliance policymaking. (p. vi)

 

By putting economic reform on hold and pursuing an inadequate financial stabilization program, Gorbachev has brought Soviet internal policy to a fateful crossroads, seriously reducing the chances that his rule-if it survives-will take the path toward long-term stability. (p. vii)

 

Gorbachev has no easy option, and other gambles would have produced other problems. Wherever those problems might have led, the set of problems Gorbachev has in fact fostered is likely to lead in the future to major instability in the USSR . . . . with escalation of ethnic assertiveness generally since 1988, the radicalization of Baltic demands, and the growth of Russian nationalist sentiment, the stage is being set for major Russian/non-Russian conflict. (p. 9)

 

Gorbachev's gamble on protracted transition to marketization, unless modified, is likely to delay serious economic revitalization indefinitely and create conditions of chronic instability irrespective of the destabilizing impact of ethnic conflict . . . . Within the party, divisions now visible pitting natives against Russians within the republics, republic party organizations against other republic party organizations and against the center, RSFSR oblast party organizations against the Central Committee apparatus, and liberal against traditionalist factions, will continue. And Gorbachev's personal authority within the party and among the population will probably continue to decline. (p. 10)

 

The chances that Gorbachev will successfully overcome the dilemmas (many of his own making) that confront him are-over the longer term-doubtful at best. (p. 13)

Over the ensuing year, all of the nationality problems that CIA described became worse, the economy-caught between Gorbachev's rending of the old system and tentativeness in moving toward some form of real market reform-plummeted, and the political fallout for Gorbachev was intensified by the dramatic collapse of the Communist governments in Eastern Europe. By the spring of 1991, CIA analysis treated the prospects for some kind of denouement as highly probable, with the main uncertainties being timing and form rather than ``whether.''

Reference 35-25 April 1991:This was laid out starkly in ``The Soviet Cauldron,'' 49 a memo from George Kolt, then D/SOVA, which was requested by the National Security Council and disseminated to key policy officials:

 

Economic crisis, independence aspirations, and anti-Communist forces are breaking down the Soviet empire and system of governance.

 

The centrally planned economy has broken down irretrievably and is being replaced by a mixture of republic and local barter arrangements, some of whose aspects resemble a market, but which do not constitute a coherent system. (p. 1)

 

In the midst of this chaos, Gorbachev has gone from ardent reformer to consolidator . . . . Gorbachev has truly been faced with terrible choices in his effort to move the USSR away from the failed, rigid old system. His expedients have so far kept him in office and changed that system irretrievably, but have also prolonged and complicated the agony of transition to a new system and produced a political stalemate in the overall power equation. (p. 2)

 

Of all . . . possible explosions, a premeditated organized attempt to restore a full-fledged dictatorship would be the most fateful in that it would try to roll back newly acquired freedoms and be inherently destabilizing in the long term. Unfortunately, preparations for dictatorial rule have begun in two ways:
• Gorbachev . . . is increasing the chances of it through his personnel appointments.
• More ominously, military, MVD, and KGB leaders are making preparations for a broad use of force in the political process. (p. 3-4)

The long-term prospects of such an enterprise are poor, and even the short-term success is far from assured. (p. 5)

Even a putsch is not likely to prevent the pluralistic forces from emerging in a dominant position before the end of this decade. (p. 6)

Reference 36-May 1991: Gorbachev's Future 50:

Whether or not [Gorbachev] is still in office a year from now, a major shift of power to the republics will have occurred unless it has been blocked by a traditionalist coup. (p. 1)

 

The essence of the current crisis is that neither the existing political system Gorbachev is attempting to preserve nor the partially emerging new system is able to cope effectively with newly mobilized popular demands and the deepening economic crisis. In short, the Soviet Union is now in a revolutionary situation, in the sense that it is in a transition from the old order to an as yet undefined new order. As happened in Eastern Europe over the past two years, the ingredients are now present in the USSR-hatred of the old order, divisions in the political elite and its lack of firm resolve, uncertainty over the reliability of the security services, and increasingly mobilized and organized political opposition-that could quickly sweep away the current system and leadership. The reformers' and traditionalists' basic goals for the future are diametrically opposed, so there is little prospect that Gorbachev's so-called centrist course can diffuse the crisis. (p.4)

One of the prospects this paper examined was:

A Hard-line Coup: To take the steps they believe are necessary to forestall a reformist victory, at any point hard-liners may try to remove Gorbachev and install their own regime. The danger would be great if they believe Gorbachev is selling out their interests to the republics. (p. 11)

And the paper concluded:

No matter what happens, the current political system in the Soviet Union is doomed . . . .Time is working against the traditionalists, however. The longer force is not used, the weaker their position will become. . .

 

[but] Even if Gorbachev manages to remain, his domination of the Soviet political system has ended and will not be resurrected. (p. 16)

Footnotes

15 Joint Economic Committee, Allocation of Resources in the Soviet Union and China-1977: Hearings Before the Subcommittee on Priorities and Economy in Government of the Joint Economic Committee, Part 3, 95th Cong., 23 June 1977, p. 2. Unclassified in the original.

16 Joint Economic Committee, Allocation of Resources in the Soviet Union and China-1978: Hearings Before the Subcommittee on Priorities and Economy in Government of the Joint Economic Committee, Part 4-Soviet Union, 95th Cong., 2d sess., 26 June 1978, pp. 2, 38. Unclassified in the original.

17 Joint Economic Committee, Allocation of Resources in the Soviet Union and China-1979: Hearing Before the Subcommittee on Priorities and Economy in Government of the Joint Economic Committee, Part 5, 96th Cong., 1st sess., 26 June 1979, pp. 2, 11-12, 160-161. Unclassified in the original.

18 Joint Economic Committee, Allocation of Resources in the Soviet Union and China-1980: Hearings Before the Subcommittee on Priorities and Economy in Government of the Joint Economic Committee, Part 6, 96th Cong., 2d sess., 25 September 1980, pp. 105, 116, 117. Unclassified in the original.

19 National Foreign Assessments Center, Office of Economic Research, Soviet Economic Problems and Prospects, ER 77-10436U, July 1977, Records of the Directorate of Intelligence, pp. ii-v. Unclassified in the original.

20 National Foreign Assessment Center, Office of Economic Research, The Soviet Economy in 1978-79 and Prospects for 1980, ER 80-10328, June 1980, Records of the Directorate of Intelligence, p. iii. Unclassified in the original.

21 National Foreign Assessment Center,Office of Political Analysis, Consumer Frustrations and the Soviet Regime, PA 79-10389C, August 1979, Records of the Directorate of Intelligence, pp. iii, v, vi.

22 Gertrude E. Schroeder and Imogene Edwards, "Consumption in the USSR: An International Comparison," A Study Prepared for the Joint Economic Committee, 97th Cong., 1st sess., 17 August 1981, pp. vi-viii. Unclassified in the original.

23 Joint Economic Committee, Allocation of Resources in the Soviet Union and China-1981: Hearings before the subcommittee on Priorities and Economy in Government of the Joint Economic Committee, Part 7, 97th Cong., 2d sess., 15 October 1981, pp. 202, 203, 278, 279. Unclassified in the original.

24 Directorate of intelligence, Office of Soviet Analysis, Soviet Society in the 1980s: Problems and Prospects, SOV 82-12026X, December 1982, pp. iii-v, 34.

25 Directorate of Intelligence, Office of Soviet Analysis, Soviet Elite Concerns About Popular Discontent and Official Corruption, SOV 82-10192X, December 1982, pp. 1, 7, 8.

26 National Intelligence Council, Dimensions of Civil Unrest in the Soviet Union, NIC M 83-10006, April 1983, pp. v-vi.

27 Directorate of Intelligence, Office of Soviet Analysis, The Slowdown in Soviet Industry, 1976-82, SOV 83-10093, June 1983, pp. iii, vi, 30.

28 Directorate of Intelligence,Office of Soviet Analysis, Gorbachev's Approach to Societal Malaise: A Managed Revitalization, SOV 85-10141, August 1985, pp. iii, 1, 2, 9.

29 Directorate of Intelligence, Office of Soviet Analysis, Gorbachev's Economic Agenda: Promises, Potentials, and Pitfalls, SOV 85-10165, September 1985, pp. iii, v, vi, 1, 2.

30 National Intelligence Council, Domestic Stresses on the Soviet System, NIE 11-18-85, November 1985, p. 5.

31 Joint Economic Committee, Allocation of Resources in the Soviet Union and China-1985: Hearings Before the Subcommittee on Economic Resources, Competitiveness, and Security Economics of the Joint Economic Committee, Part 11, 99th Cong., 2d sess., 19 March 1986, pp. 6-10. Unclassified in the original.

32 Directorate of Intelligence, Office of Soviet Analysis, Gorbachev's Modernization Program: Implications for Defense, SOV 86-10015X, March 1986, pp. 9, 10.

33 Memorandum to Deputy Director for Intelligence [Richard J. Kerr] from Douglas J. MacEachin, Director, Office of Soviet Analysis, ``NIE 11-3/8: Force Projections,'' 22 April 1986, Records of the Directorate of Intelligence, Job 90-60l35R, Box 2, Folder 20.

34 Directorate of Intelligence, Office of Soviet Analysis, The 27th CPSU Congress: Gorbachev's Unfinished Business, SOV 86-10023, April 1986, pp. v, 21, 23.

35 Directorate of Intelligence, Office of Soviet Analysis, Domestic Stresses in the USSR, SOV 86-10017X, April 1986, pp. iii, iv, v, 71-2.

36 Directorate of Intelligence, Office of Soviet Analysis, Gorbachev's Domestic Challenge: The Looming Problems, SOV 87-10009, February 1987, pp. iii, iv, v.

37 Joint Economic Committee, Allocation of Resources in the Soviet Union and China-1986: Hearing before the Subcommittee on National Security Economics of the Joint Economic Committee, 100th Cong., 1st sess., 19 March 1987, pp. 3, 4, 5. Unclassified in the original.

38 Directorate of Intelligence, Office of Soviet Analysis, The Kazakh Riots: Lessons for the Soviet Leadership, SOV 87-010033KX, June 1987, p. iii.

39 Directorate of Intelligence, Office of Soviet Analysis, Gorbachev: Steering the USSR Into the 1990s, SOV 87-10036X, July 1987, p. ix.

40 Joint Economic Committee, Allocation of Resources in the Soviet Union and China-1987: Hearing before the Subcommittee on National Security Economics of the Joint Economic Committee, 100th Cong., 2d sess., 13 April 1988, pp. 72, 73.

41 Central Intelligence Agency and Defense Intelligence Agency, Gorbachev's Economic Program: Problems Emerge, A Paper Prepared for the Subcommittee on Economic Resources, Competitiveness, and Security Economics of the Joint Economic Committee, DDB-1900-187-88, 100th Cong., 2d sess., June 1988, pp. i-iv. Unclassified in the original.

42 Directorate of Intelligence, Office of Soviet Analysis, Soviet National Security Policy: Responses to the Changing Military and Economic Environment, SOV 88-10040CX, June 1988, pp.v-viii.

43 Directorate of Intelligence, Office of Soviet Analysis, The l9th All-Union Party Conference: Restructuring the Soviet Political System, SOV M88-20052X, 22 June 1988, p. i.

44 Memorandum to Richard Kerr, Deputy Director for Intelligence, from Douglas J. MacEachin, Director of Soviet Analysis, ``Leadership Situation in the USSR,- 27 September 1988, with attachment, ``Prospects for a Leadership Crisis,'' n.d., pp. 1, 3, 4.

45 Directorate of Intelligence, Office of Soviet Analysis, Gorbachev's September Housecleaning: An Early Evaluation, SOV 88-10079X, December 1988, pp. iii, iv, 1, 2, 6-7, 10.

46 Directorate of Intelligence, Office of Soviet Analysis, The Soviet Economy in a Global Perspective, SOV 89-10017, March 1989, pp. i-ii.

47 Directorate of Intelligence, Office of Soviet Analysis, Rising Political Instability Under Gorbachev: Understanding the Problem and Prospects for Resolution, SOV M89-10040X, April 1989, pp. iii, iv, v.

48 Directorate of Intelligence, Office of Soviet Analysis, Gorbachev's Domestic Gambles and Instability in the USSR, Sov 89-10077X, September 1989, pp. vi, vii, 9, 10, 13.

49 Directorate of Intelligence, Office of Soviet Analysis, The Soviet Cauldron, SOV 91-20177M, 25 April 1991, pp. 1-6.

50 Directorate of Intelligence, Office of Soviet Analysis, Gorbachev's Future, SOV M 91-20070X, 23 May 1991, pp. 1, 4, 11, 16.