Imagine an economy roughly two-thirds that of the United States and managed by a single board of directors. The board--in this case the ruling Soviet Politburo--can by a simple vote decide to concentrate all its vast resources on any given project.
Or, as is probably the case involving the Siberian gas pipeline, a project may be assigned very high priority. However inefficient the Soviet economy may be, whatever its structural and technological shortcomings, the concentration of resources and talent makes it virtually certain that a pipeline to export Siberian natural gas to Western Europe will be completed on schedule.
The Kremlin still hopes that President Reagan will ease his ban on sales of American pipeline technology. Yet it seems clear that Moscow's ability to concentrate its economic power is one of the major obstacles to Reagan's efforts to force the Soviets into a switch of resources away from their military buildup and to exert significant pressure on the whole Soviet system.
Another obstacle is the carefully cultivated autarky, or self-sufficiency, of the Soviet Union. Its economy remains largely isolated from the capitalist world. Although the $10 billion Siberian pipeline project is the largest East-West commercial deal in history, it accounts for only 12 percent of Moscow's planned pipeline construction through 1985. The scope of Western participation is less than 10 percent.
Apart from the limited leverage, two other factors are working against Reagan's strategy.
One is that the Soviet Union has the world's richest natural and mineral resources and that the export of these resources--including gas, oil, timber and almost the full spectrum of rare metals--is in such demand as to boost East-West trade despite Reagan's embargo. In the first three months of U.S. sanctions after December's military crackdown in Poland, Soviet exports to Western nations rose 35 percent over the comparable period the previous year.
In a $1.5 trillion command economy, the leadership does not have to reallocate resources or investments to come up with a domestic turbine for the project. Moscow appears to have decided simply to shift the entire output of two Leningrad factories to the turbine production, which in practice means that machine tools scheduled for manufacture there would be assigned to other plants.
The other factor is the resistance to Reagan's policy from the Western allies, which undercuts the effort to deny U.S. technology to the project. The growing divisions within the Western alliance also serve to advance Moscow's long-term political goal of separating Western Europe from the United States.
In a flurry of often self-serving arguments, American officials have accused Western Europeans of subsidizing Soviet economic development and thus undercutting Reagan's larger objective of curtailing the Kremlin's ability to project power globally.
In turn, the Europeans have accused Reagan of hypocrisy by launching an "economic war" that would damage their already sagging economies while refusing to use the single most effective tool to punish the Soviets--an American grain embargo--for domestic political reasons.
Underlying these arguments is a basic difference in approaches toward Moscow. The Europeans see the Soviet Union as a permanent fact of life and want to have normal political and commercial relations with it. The Kremlin encourages this by promising vast commercial opportunities. The Reagan administration has viewed Moscow in ideological terms, contending that the forces of communism have to be confronted and contained.
Both sides have buttressed their arguments with conflicting assessments of the Soviet economy. But as often is the case, the glass is either half full or half empty, depending on the point of view. The Soviet Union has not been able to escape the striking world phenomenon known as stagflation. After the heady growth figures of the postwar era, it has entered a period in which its economic growth rate is significantly slowing over the long term. Its economy is plagued by weak agriculture, low productivity, inflation and the absence of technological innovation.
The old self-proclaimed image of the "system that does not know crises, inflation and unemployment" no longer holds. The world oil crisis of 1973 is one reason for the change. The other is rooted in various structural weaknesses--primarily in the absence of incentives and the continued insistence on rigid centralized planning.
Moreover, the Kremlin has assumed greater commitments abroad, supporting client states ranging from Cuba, Vietnam and Afghanistan to Eastern Europe, Ethiopia and Angola. It is fully realized here that the Soviet Union has become the energy and raw-materials base for its empire.
It has also been clear for a long time that, short of drastic reforms, there was no way within the Soviet system to reverse the chronic shortcomings in the two most troublesome areas--agriculture and technology.
Being either unwilling or unable to effect major reforms, the Kremlin leaders have decided to compensate for the system's failure by buying food and technology abroad. The assumption was that this was a manageable problem given the fact that the government was backed up by the country's vast resources.
A decade ago, when detente was just blooming, the Russians tried to interest the West in helping them. They went after the Americans and West Germans in particular, in the belief that good relations with them would bring infusions of Western technology and know-how to oil the creaking Soviet economic machine. But the Americans proved too political and the Germans, at least initially, too cautious.
The dreams of a Soviet-American trade boom died after Congress in 1974 linked trade to the issue of emigration for Soviet Jews and other minorities. However, trade with West Germany and other Western countries, including Japan, has been increasing sharply ever since.
By opening up to the West, the Soviets intended to buy the time needed to make improvements in their cumbersome industrial and agricultural machine.
So far, the tinkering with the economy has failed to arrest a steady decline in economic growth--from 5.2 percent in 1976 to 3.2 percent in 1981--while agricultural performances over the past three years were disastrous. Agriculture is the only sector of the economy that has shrunk since 1979.
Perhaps the most illuminating indicator of an economic slowdown is a declining growth rate in investments--from 2 percent in 1976 to 1.4 percent in 1981. Western experts link this decline and the troubled rate of increases of productivity to approximately 4 percent growth in annual military expenditures to suggest that the consumer sector is bound to show serious deficiencies in the near future.
But the declining rate of investments also reflects the problems of a maturing economy. Latest economic indicators for the first five months of this year show the economy growing at about 3 percent per year.
Exports of mineral resources, timber and energy last year netted the Soviet Union about $28 billion (the figure includes about $5 billion from arms sales). About half the amount came from oil, gas, oil products and fuels. Gold and diamond sales totaled about $3 billion in a sagging market.
The total amount paid for food imports was less than $8 billion. This is the amount the Russians expect to get from exports of additional gas to Western Europe each year once the controversial pipeline comes on stream in January 1984.
Despite the serious problems of the Soviet economy, most analysts here believe there is no real possibility of its collapse. But given the fact that the basic approach to economic development is aimed at the "strengthening and advancement of the state" rather than meeting popular demands, the burden of any economic difficulties is bound to fall on the Soviet consumer.
In this context, various economic embargoes during the past few years have strengthened the Kremlin's instinct toward self-sufficiency. At the same time, the latest embargo has given the authorities an opening to appeal to the population's patriotic sentiments and to refocus their efforts to increase productivity.
Most analysts here believe that even an American grain embargo would not significantly alter Soviet behavior. There is no doubt that such a move would make the outlook for the Soviet people leaner. But despite its chronic failures, Soviet agriculture produces enough food to ward off possible famine. By now it is also clear that irrespective of any American action, meat shortages affecting Soviet citizens are going to continue for the foreseeable future.
There is a school of thought among Western diplomats here that the Soviet system is beset by social and political problems and that these should be the areas for sustained political struggle. Soviet citizens today live better than five years ago, but not as well as their government had promised. The wave of rising expectations stands in sharp contrast to the government's ability to deliver.
Even American officials privately say that short of a complete trade war with Moscow fully supported by all Western countries, an unlikely prospect, one cannot expect any single measure such as Reagan's sanctions to weaken the Soviet system significantly.
In assessing the Soviet economy, one should recall that Nikita Khrushchev predicted in 1959 that his country would overtake the United States economically by 1980.
His prediction has proved as incorrect as those of various Western Cassandras who have forecast the collapse of the Soviet system annually since its inception in 1917.