President Gorbachev's bold approach during the London Economic Summit - to offer the conversion of the Soviet defense industry, conversiya, to the production of civilian goods - represents perhaps one of the most important steps for peace in the nuclear era. Envisioning new global and strategic changes across Eastern Europe and deeper progress in Soviet-American relations, Gorbachev began this program by announcing at the United Nations on December 7, 1988, plans for the unilateral reduction of Soviet defense spending. However, the West has only had the past several years to judge whether the effort is serious or not.

In 1990, President Gorbachev, while struggling to maintain control over the collapsing economy of the Soviet Union, declared plans to convert 550 out of 3000 armament factories to civilian production over a five-year period. He was able to do this because he was granted extraordinary powers by the Soviet Supreme to transform the national economy to a market system. His chief aim has always been to reduce the burden of national defense on the Soviet economy: switching defense factories towards the production of civilian goods which the Soviet people need badly, is the best hope that Gorbachev has to make perestroika survive. As Washington Post writers Gary Lee and Rick Atkinson described in their provocative article on Soviet defense conversion, " The Battle to Beat Swords into Shoes." that this step is a very large and ambitious plan to demilitarize one of the world's most militarized societies, from an economy of armament to an economy of disarmament. It offers to change America's relationship with its foremost adversary in the world to that of a political and economic partnership, thus reducing the Soviet threat significantly.' The United States must remember, as President Bush cautioned dining the London Economic Summit, that " I think as long as we have missiles deployed against each other we've got to be realistic. Allies are not in this posture, but we're moving to change this" .

By making conversion of the Soviet military defense industry to civilian output the cornerstone of his economic reform program, Gorbachev also plans to begin radically reducing and restructuring Soviet armed forces to a more defensive posture. This represents an opportunity for the United States to continue to diminish its armed forces significantly, which could help solve the enormous problem of reducing the federal deficit. America is planning to reduce overall defense spending by 25 percent over the next five years and reduce the size of its armed forces by 16 percent. In order to make such momentous changes, the United States must examine whether the fruits of progress in Soviet-American relations, which has brought a greater reduction of the nuclear and conventional threat, can be preserved in the post-Cold War era. We must determine in the interest of national and international security whether Soviet efforts in defense conversion are genuine and whether they represent a dramatic breakthrough for international peace.

Mikhail Gorbachev has already set the stage for this program by signing an Intermediate-Range Nuclear Forces Treaty, withdrawing Soviet conventional forces from Eastern Europe, and finally agreeing to a radical 20-35 percent reduction of existing nuclear arsenals, including the most destabilizing of weapons, the Soviet SS-18 heavy intercontinental ballistic missile. The radical reduction of conventional and nuclear forces is moving forward. However, the task of converting the Soviet military industrial complex, voenno-promyshlennyi kompleks, toward the production of civilian goods is tremendous. Although it is not a well known fact in the West, the Soviet defense sector has been traditionally responsible for producing a wide variety of civilian goods. As in the United States, certain conglomerates produce both defense and consumer products, the defense sector in the Soviet Union produces televisions, sewing machines, and video cassettes.2 In November 19W, Gorbachev met with his Presidential Council to complete plans to start a new Five Year Plan designed to convert the advanced defense sector into the production of electronic, medical, and food processing equipment, as well as other goods badly needed within the Soviet Union.

The State Program for Conversion of Defense Industry 1990-1995 went through several revisions before its completion. Earlier drafts of more radical plans for decentralization and privatization of the defense sector became watered down by former Prime Minister Ryzhkov. Although details of the actual program remain secret. Soviet spokesmen have declared that nearly 60 percent of the defense industrial sector will be converted by 1995. When Gorbachev launched this ambitious program he planned to save 250 billion rubles or $42 billion dollars. The savings from defense are planned to directly benefit the agricultural sector and consumer markets.

The Soviet government has declared that it has reduced defense spending by 10 percent this year. However, Gorbachev has claimed in his most recent letter to President Bush that it has been reduced by 29 percent. In fact, a closer examination of the Soviet figures indicate that in 1990, 71 billion rubies were spent on defense, yet the projected figure for this year is 99 billion rubles. Soviet officials have claimed that this increase resulted from the new price increases expected to result from price reform which would drive the value of the ruble downwards and hence cost more rubles for the same level of defense spending.

Gorbachev proposed during the London Economic Summit to pursue a radical conversion of the defense industry which would open up the most technologically advanced sector of the Soviet economy for foreign investors. During the Moscow Summit, he made a pitch for this idea during an interview with Peter Jennings on the Kremlin grounds. He stated, " The defense sector has the best use of science and technology, the best workers and engineers. We have a wide possibility for cooperation with the West in that sector. It is better to open this sector for cooperation" The defense sector is one of a handful of Soviet industries which has competed on the international market in arms sales.

The goals of the Soviet industrial conversion program are listed as follows:

1. To turn capacity formerly used for military goods to meet production of the most needed civilian goods, including aircraft, ships, computers, and communications;
2. To maintain the level of expenditures on military production and research and design at an absolute minimum;
3. To transfer the benefits of scientific research and inventions from the defense to the civilian sectors;
4. To increase the development and production of technology of use in both the military and civilian sectors;
5. To conduct a thorough review of how defense expenditure and military procurement are to be reduced.3

    

John Tedstrom, a military analyst for Radio Liberty, has focused much deserved attention on Soviet defense conversion and traced the institutional shake-up of the Soviet military-industrial complex which resulted from the implementation of this plan. While Gorbachev has as General Secretary of the Communist Party and chairman of the Soviet Supreme and the USSR Defense Council led the initiative for reform and reconversion of the defense sector, other Soviet officials have been placed in charge of insuring the success of this program. As head of the Central Committee's Defense Department, Oboronny otdel, Oleg Belyakov is given the responsibility of insuring the coordination of this effort with the nine defense-industrial ministries and the Military-Industrial Commission of the USSR Council of Members. Gorbachev's top advisers, Vadim Zagladin, Anatoli Dobrynin, and Marshal Serge i Akromeev have also played an instrumental role in determining the path of defense conversion.

During a USCSAR interview with the author of this article, at the CPSU Central Committee's Headquarters, Vadim Zagladin explained that the Soviet Union's " era in new poltical thinking" meant that as far as the top political leadership is concerned, " We believe quite clearly that real security could be reached by political means and not by military means. What does it mean by political means? This would be achieved through the balance of interests and not by the balance of power, to join in efforts with the other side, not against them" 4 Soviet foreign policy, by and large, has adopted this goal in the Persian Gulf, in Europe, and now in the Middle East. However, with respect to the restructuring or perestroika of the effort of the defense industry, several ministries have been transferred and others given priority to produce specific kinds of consumer goods. John Tedstrom has concluded that despite the changes in the institutional structure of the defense industry and personnel controlling it, " there is no one among them who is known to be a free-market-oriented or 'radical' reformer and no institution that is likely to advocate the scaling back of centralized, command-administered methods of management.5 In fact, he goes on to conclude that the Soviet government is implementing this vast program of reconversion of the defense sector into making civilian products, yet they are using the defense industry as a model to follow because it has been the one sector of the Soviet economy which has displayed some semblance of efficiency, solely because it needed to keep pace with U.S. security interests and advances in weapons technology.

There are other problems which the reconversion plan faces as well. Several of the most serious problems confronting the program result from the government's implementation of it. They have left the concrete actions of reconversion to be handled by the individual defense firms. As a result, many of the firms have lost their state subsidies and have been left financially in the dark. Other firms have started to produce consumer goods which do not even correspond with the industrial plant that is located in the factories. One example which Gary Lee and Rick Atkinson highlighted was of a former manager of the Klimov engine plant who was asked to start designing machines that make shoes. The Votkinsk Machine Works, which once built nuclear missiles, is now supposed to make dishwashers, underwater drilling rigs, and milk-pasteurizing equipment. In their article, they also noted that 10 percent of the manager's best skilled workers have left the shoe business to work in the newly flourishing private repair business of Leningrad shipyards where they make more money.6

As Lev Zeidin, translator for USCSAR, and former engineer in a Leningrad factory which supplied electronic parts for MIG-21s, explained, " Civil production makes more money now; the trend maybe a brain drain of highly qualified people from the defense sector. If people who have a good education and spend a lot of time designing electronical equipment and high technology can use their knowledge for civil production it would be great. Yet, if they begin to start producing simple things like toys, furniture, o or shoes, it would be a waste of talent and resources." He went onto explain a Soviet anecdote about a woman from a factory who bought a kettle and tried to make it into a samovar at home. Every time she tried to change it, it turned into a gun.

The level of chaos and inefficiency in the Soviet conversion program will no doubt increase. However, there are some worthwhile plans and processes that are being implemented in this effort. One major factor is that before Gorbachev's plan was implemented, the defense industrial sector was producing 40 percent of the consumer goods. Now, under the new plan, they are diverting their resources from making tanks and artillery to making more refrigerators and baby carriages by phenomenal increases in production of up to 250 percent in each category. Seymour Melman analyzed the problems of defense spending in the United States and recognized that it produces products which do not yield ordinary economic value in the consumer sector or to further production, " in fact billions of dollars have been spent on the military since World WJ! II and produced no economically useful products which do not yield ordinary economic value for the United States" By relying on what he terms a " permanent war economy" , Melman feels governments and societies become more militarized and seem more likely to resort to military solutions as an option in crisis.7 Observing the Soviet defense industry shift production in reverse can be perhaps the most dramatic development of the post-Cold War era as well.

The danger facing the West need not be to defend the Free World from world socialism the rival alternative to capitalism, which reduced opportunities for U.S. business profits and future prosperity. Communism is dying as an economic force. The real danger lies in determining the real motivation behind the defense conversion effort. Is the Soviet military planning to cut its losses, to reconvert the defense industrial sector in order to obtain a high-tech civilian sector which it could revamp into making weapons at some later date? Or could they, in conjunction with the KGB, plan to take matters into their own hands and seize the levers of power by removing Gorbachev from office? A recent CIA report entitled, " Beyond Perestroika: The Soviet Economy in Crises" noted that overall Soviet defense spending has dropped 12 percent in the last two years. They also examined a decrease of a half a million troops in the Soviet armed forces as well as a decline in spending in operations, maintenance, and force requirements. The cuts have been drastic in both strategic and conventional forces as well. The Central Intelligence Agency has concluded, " that the driving forces behind these cuts have been the poor state of the economy and the leadership's desire to reduce the budget and shift resources to civilian production" *

As Col. General Vladimir Lobov, Deputy Chief of the Soviet General Staff, told me personally in the Headquarters of the Soviet High Command in Moscow:

" The people of both countries and the whole world will see that we were in an arms race and now we disarm. Now we are disarming and destroying weapons, not material things such as houses and villages, so it is really a victory of human thinking and should be aided in the future"

The danger depends on which way the Soviet Union develops politically as well. If it develops democratically, it will not be a danger to the Western world. However, the West must assist the reform effort in order not to let the Soviet Union revert to totalitarianism and dictatorship - our security and that of our allies would be threatened again. Perhaps the Soviet Union is really changing and making the concrete steps which are necessary for it to join the new world order envisioned by President Bush. It was this dream that President John F. Kennedy envisioned when he declared in his Inaugural Address:

Let both sides unite to heed in all comers of the world the command of Isaiah to " undue the heavy burden and let the oppressed go lice" And if a beachhead of cooperation may push back the jungle of suspicion, let both sides Join in creating a new endeavor, not a new balance of power, but a new world of law, where the strong are just and the weak secure and the peace preserved.

Thirty years later, the United States has the tremendous opportunity to fulfill that dream. No other president of the United States in the nuclear era has been given the possibility of radically lowering the threshold and threat of nuclear war as President Bush. Yet. more importantly he has been given the opportunity to radically restructure a new Soviet-American relationship built not on hatred and suspicion but on cooperation and friendship. President Bush can now commit the United States in helping to assist the reconversion effort of the Soviet defense industry with the right kind of technical assistance and economic aid. However, to let the program disintegrate and proceed in a haphazard way will not only doom perestroika and cause a tremendous hardship for the Soviet people, but its failure may induce general chaos and lead to the threat of civil war.

The West cannot afford to lose the opportunity for the Soviets to beat their swords into plowshares and Gorbachev must finally deliver on Lenin's promise of " Peace, Bread, and Land!" to the Soviet peoples. Seventy-five years later, Gorbachev and the Communist leadership have finally realized that these are the elements that are necessary for the survival of the Soviet Union.

NOTES

1. Gary Lee and Rick Atkinson, " The Battle to Beat Swords into Shoes .,'Washington Post, April 20, 1991, p.l.
2. John Tedstrom, " Industrial Conversion and Consumer Goods Production." Report on the USSR, May 19, 1991, p.l.
3. Tedstrom, op. cit., p.6.
4. John Tedstrom, " Managing the Conversion of the Defense Industries." Report on the USSR, February 10, 1990, ð. 17.
5. Lee and Atkinson, op. cit., p. 12.
6. Seymour Melman, The Permanent War Economy (New York: Sun on and Schuster, 1974), p. 11.
7. Central Intelligence Agency and Defense Intelligence Agency, " Beyond Perestroika: The Soviet Economy in Crisis." A Report to the Technology and National Security Subcommittee of the Joint Economic Committee, U.S. Congress, May 14, 1991, p.ll.
8. Gerard .J. Janco, " Top Soviet Officials' Views on Arms Control and I .S.-Soviet Relations," USCSAR Interview Series: Moscow, May 14, 1988, p.7.

Gerard J. Janco, executive director of the U.S. Center for Soviey-AmericanRelations, is an expert in arms control and international security issues.