The question of whether the United States should challenge the Soviet Union to an intensified "arms race" is now at the center of American political debate, and I would like to answer it from the standpoint of one who worked as an economist in the Soviet Union for many years before emigrating to this country in 1974.
My answer begins here: the American intelligence agencies have made major errors in their estimates of the Soviet economy. They say that Soviet GNP was about 60 percent of American GNP in 1978, that the Soviets spend 11 percent to 13 percent of this GNP on the military and that the Soviets will not reduce their military spending but likely will increase it -- because a reduction would not benefit them economically.
The 60 percent GNP estimate is critical. Note that the CIA estimate is even higher than the Soviets' own, which would mean that the Soviets underestimate their own achievement. This is impossible to believe, but rather than demonstrating so with numbers and economic jargon, let me make the case with a few observations.
That GNP estimate would mean that, accounting for population difference, the standard of living and labor productivity in the Soviet Union are roughly one-half that of this country. Let us look first at the Soviet standard of living.
Soviets eat much worse than we do. They consume very small quantities of fruits and vegetables and less meat. Only consumption of bread, potatoes and liquor is higher. At that, Americans spend 17 percent of their income on food, Soviets about half. In housing, many millions share apartments, and a family of three to fourt has at most two rooms. Two bathrooms are unheard of, and no house in the countryside has running water. Similarly with clothing: walk-in closets do not exist because people don't need them. Color TV sets are rare, household appliances few or nonexistent, air conditioning hardly known. There are less than 10 million private cars.
In services, only education is even comparable. Medical care is "free" but poor in quality. Telephone services, air travel, recreation facilities and hotels represent tiny fractions. Retail trade is atrocious. Many services simply do not exist. There are at most 3,000 swimming pools.
In short, my estimate is that the Soviet standard of living is only a fourth or even a fifth the American level.
As for labor productivity, even by Soviet statistics, which cannot be trusted here, it is about half that of the United States in industry and one-fifth in agriculture. An American worker uses several times more electricity and much better instruments and tools, so he produces much more. Why else are the Soviets so eager to buy Western technologies?
Various practical and theoretical considerations might be cited to explain the inaccuracy of CIA estimates, but let me simply say that, in my opinion and expertise, the Soviet economy produces at most one-third of American GNP per capita and more likely one-fourth. This, of course, changes the whole picture fundamentally.
Let us move to the CIA estimate that 11 percent to 13 percent of Soviet national product goes to the military. I think the military share is higher -- not less than 15 percent, and very likely about 20 percent. This follows from the consideration that Soviet GNP is not so large as the agencies think. It follows from my certain knowledge that Soviet military industries get the best brains, skills, facilities and other advantages. It follows from certain faults in the methodology of Western analysts.
Finally, there is the CIA statement that the Soviets will not cut military spending because there is no particular economic purpose in doing so, and the Soviets can even increase the military share of GNP.
This claim rests once again on a presumption that the Soviet economy performs much better than it actually does, and on a gross underestimation of the military burden. The elementary fact that all Soviet resources are in shortage necessarily means that any diversion of resources from the military will produce useful results. We witnessed something of the sort in the early 1970s, when events in Poland and the onset of detente produced a decision in favor of more consumer goods. These were produced precisely by military enterprises, some of whose resources of labor, materials and energy can be easily and efficiently shifted for civilian production.
I am not predicting here that Soviet military outlays will be reduced. I am simply saying that the Soviet rulers again face a most difficult choice of allocating scarce resources. There are many reasons the Soviet economy is now in a shambles -- systemic inefficiency, demographic problems, oil shortages, the permanent failure of agriculture, inefficient investment and the like -- but a fundamental one is backbreaking military expenditures. Contrary to what the intelligence agencies claim, a radical reduction in military outlays could be a real remedy. That is why, when we economists discussed the situation in Moscow, we agreed that detente was badly needed to save the economy from collapse.
That leads me to a final enigma: why in the 1970s, in spite of the troubles of the economy and in spite of the possibilities of detente, did the Soviets put so much into a military buildup?
Obviously they made various miscalculations, but the main factor, I believe, arose from the United States' post-Vietnam deceleration of its military effort. When an arms race was under way on both sides, the Soviets could not hope for military parity, let alone advantage; but then the rulers saw an opportunity to overtake the United States, and they could not resist it.
The standard of living has remained shamefully low, there is an acute financial crisis, the tempo of economic growth is at historic lows, scanty investment has created problems in oil and other raw materials, etc. But they did reach military parity, with superiority perhaps on the horizon.
We cannot allow the Soviet leaders to hope to gain military superiority. Since their economy is much weaker and smaller and their military burden extremely heavy, our best hope is to demonstrate by our own military spending that the Soviet Union cannot catch up to us. If we do not spend more on our military, the Soviets may well validate the CIA estimate and increase the military share of GNP. But if we increase our share and reestablish superiority, they will on second thought divert at least some resources for the good of their people. Then, and only then, will the arms race in both countries slow down.