It is clear, that the relative balance between surviving population and surviving productive capacity has a very important bearing on the problem of economic recuperation. If, for example, the enemy concentrates his fire primarily on military targets and we have neglected to provide fallout protection for our citizens, a situation could easily arise where the surviving wealth per capita was greater than it is now, although there would remain, of course, the problem of organizing the surviving wealth and human resources into a viable economy. If, on the other hand, we have an extensive system of blast and fallout shelters, and the enemy attacks our cities, much of our population may survive the immediate effects of the war, but the destruction of productive capacity may make it difficult to support the survivors in the long run. Thus the relative importance of the problems of recovery may be inversely related to the level of direct population casualties in the war.

EXTENT OF ORGANIZATIONAL BREAKDOWN

The great and possibly overriding importance of point F-organizational breakdown-is, I believe, increasingly recognized by almost everyone who has looked into the economic aspects of the recovery problem in any detail. Many of the important unsettled questions relate not to the physical and technological feasibility of taking constructive actions which will lead to full recovery, but whether there is sufficient reason to believe that capabilities will exist for recognizing the possibilities and taking the actions.

If one speculates on how a complete failure in the recovery effort might occur, the picture one develops is of a situation where the effectiveness of the Federal Government and many State governments is greatly diminished, the banking system disrupted, most surviving firms are bankrupt, electric power and water supply systems are severely damaged, and the transportation network broken in many places, and where few survivors have the responsibility, authority and plans to do anything about it.

Such a situation could arise even if the physical feasibility of recovery were beyond question. The efforts that are being made to assure continuity of Government and of management of firms, to preserve the banking system, to assure solvency, and so on, are clearly a very important part of our preparations. I should mention that Secretary Dillon has recently urged steps to assure the continued functioning of the banking system after an attack.

POSTWAR DEFENSE BURDENS

The expected character of the international enrivonment after the war is also extremely important and constitutes a major source of uncertainty in evaluations of the recovery problem. Most such evaluations, including my own, assume that attempts to support military forces will not be pushed to the point where serious obstacles are placed in the way of reorganization and reasonably rapid recuperation.

It is reasonably clear that the forces do not have to be very large, by present standards, before their support becomes a serious obstacle to recovery. Thus the assumption that the Nation will recover rather than rearm appears to involve a more fundamental assumption that

for one reason or another, a war would produce a substantial and fairly permanent reduction in the external threat. I do not find this assumption implausible, but its existence should be noted. Some form of international control of strategic weapons would be one mechanism by which this might occur.

POSTWAR FOREIGN ECONOMIC RELATIONS

The question of our economic relations with other nations after the war will also be important. If, for one reason or another, nations untouched by the war are unwilling or unable to trade with us, very heavy damage to particular industries may make rapid recovery impossible even if many other industries go relatively untouched.

But if we can trade with nations that escape involvement in the war, the problem of imbalance, that is, of "bottlenecks," in our surviving economy will be greatly alleviated. Very severe damage to any particular industry will then be of relatively little significance as compared with the total level of destruction of our economic resources. The prospects for recovery would be further improved if, in addition to trading goods of which we have a relative surplus for those that are scarce, we could finance additional imports by drawing on our gold stock and liquidating our investments abroad. We might have up to about $25 billion to draw on from those two sources, although the feasibility of actually making use of a large fraction of that amount is questionable. It is conceivable that we might obtain assistance from other nations in our reconstruction effort.

But the availability and significance of help from all these sources are obviously dependent, first, on the pattern and level of destruction in the rest of the world, and, secondly, on the postwar international political situation.

The latter presumably depends to a considerable degree on our success in limiting damage to the United States, and securing a relatively favorable military outcome is likely to be conducive to success in the recovery effort.

THE RECOVERY PROBLEM

With the questions that need to be answered and the wide range of possible situations in mind, let us now turn to the problem of recovery itself. It is quite useful to divide the recovery period into three time phases, each of which has its distinctive problems:

A. Survival-Minimize population losses.

B. Reorganization-Achieve economic viability.

C. Recuperation-Restore economy and basic institutions.

SURVIVAL PHASE

I have indicated for each time phase the principal domestic problem facing the Nation. In the survival period. which begins with the first attack and extends to a few months after the end of the war, the principal problem is that of minimizing the short-run population losses imposed by the war and the resulting destruction and disorganization.

Not only are there likely to be millions of nonfatal casualties from the blast, thermal and radiation effects of nuclear weapons who will

die if medical care is not provided, but additional millions will be threatened (with varying degrees of immediacy) with death from exposure, disease, thirst, and starvation.

The resources and organization to meet these threats to the population will necessarily be drawn almost entirely from areas that have escaped damage, or have been damaged only slightly. And the adequacy of those resources and organizational arrangements will depend almost entirely on what preattack preparations have been made to meet these tremendous problems.

Dispersed and protected stockpiles of medical supplies, food, and other survival items, plus realistic organizational arrangements and large numbers of well-trained civil defense workers, will make effective action possible. Without these preparations, millions will die unnecessarily.

REORGANIZATION PHASE

During the reorganization period, the major problem is that of achieving a viable economic system. I will speak on this in detail in a moment. Once viability is achieved, the emergency will be over and the task facing the Nation will be that of restoring a high standard of living in a free society in which our basic values are preserved. Many difficult problems which can be postponed during the emergency must then be faced.

For example, a permanent unraveling of the spectacular tangle of property rights created by the war will have to be accomplished somehow, hopefully in a way which spreads the economic costs of the war over the surviving population in a relatively equitable fashion. Adequate preparation will, of course, make this much easier.

In attempting to reach some fairly definite conclusions as to the ability of our Nation to cope with the problems posed by all three of these phases of recovery, we have to examine a very broad range of considerations. We have to look at the physical and technological side of the problem-the question of what level and pattern of destruction of wealth occurs, what the technological possibilities are for exploiting the surviving wealth, how much of our farmland is contaminated with strontium 90, whether the ecological effects of the war are likely to have major effects on agriculture, how the general health of the population is likely to be affected by the levels of radiation in the environment and by the austerity in such things as diet and medical care that is likely to be necessary, and so on.

ORGANIZATION FOR RECOVERY

Then we have to consider the organizational side-what private and public agencies will undertake the tasks of firefighting, rescue, maintenance of law and order, medical care for the injured, and control, protection, and distribution of inventories of food and other necessities? How will the economy be run during the reorganization and recuperation periods; what sorts of controls will be necessary and desirable; what measures can be taken to prevent the enormous confusion of property rights and debtor-creditor relations from interfering with

the restoration of essential production? And so on through a much longer list of questions. These are the types of questions that are treated, in general terms, in the national plan for civil defense and defense mobilization. But, as this committee has pointed out, that document does not relate the delegations of responsibilities it makes and the general objectives and policies that it sets forth to any assessment of the capabilities of the designated agencies to achieve the objectives and carry out the policies.

IMPACT OF WAR ON PEOPLE

Finally, we have to consider the broad problem of the social, political, and psychological impact of the war. Will the shock of the war so derange people that they will be incapable of constructive action on behalf of themselves and others?

To what extent will an extensive delegation of responsibilities in the civil defense area to State and local governments lead to actions consistent with the national interest when these may be in sharp conflict with the interests of the smaller political units?

Will survivors be so overcome with grief and apathy, even when the immediate threat to their survival has passed, that they will be unwilling to make the effort to restore the economy? Will those survivors in relatively untouched areas willingly bear the burdens of supporting those who are less fortunate?

Will the psychological scars produced by events in which millions are killed, additional millions injured and by living in an environment which has become distinctly more hostile to human life, preclude any meaningful recovery in terms of human welfare? As an economist, I can hardly presume to provide definitive answers to this last series of questions. I want to stress their importance, however, and to emphasize the fact that the relevance of all analysis of the economic problem hinges on the answers being relatively optimistic.

SUMMARY OF THE PROBLEM

This concludes my survey of the problem of recovery. I will summarize it by saying that, for the full range of possible wars we need answers to all of the important physical, technological, organizational, social, political, and psychological questions that arise in connection with each of the three major phases of the recovery process.

And the answers should then be pulled together and integrated into the best comprehensive picture of what the various possible nuclear wars might mean to our Ñation that we can construct.

PRESENT STATE OF RESEARCH

Now as I mentioned earlier, it is clear that no amount of research will actually provide us with a picture that is very reliable. But I cannot refrain from commenting that, in my opinion, our knowledge is much less complete than it needs to be and could be.

A good deal of competent and important work has been done, but it does not really scratch the surface of this vast problem, and there is, in particular, a definite need for a systematic and comprehensive reexamination of the whole problem.

This committee, I know, is familiar with the 1958 RAND Corp. report, "A Study of Non-Military Defense." This study was reasonably systematic and comprehensive, but its treatment of many details and a few major problems was inadequate.

On the other hand, the large number of other studies that have been done are relatively strong on details, but the integration provided by a comprehensive study is lacking. In general, there are too many unexamined mechanisms and interactions which might produce considerably greater problems of recovery than the work done so far suggests.

These issues should be examined and the questions settled as conclusively as possible. A needlessly limited undertaking of what the risks are, only increases the hazards we face by increasing the chances of seriously mistaken estimates of the losses a war would involveand either underestimates or overestimates can increase the chance of a catastrophe.

Some of the work now underway will produce results in the near future which should result in a considerable increase in our knowledge. In particular, some powerful tools for analysis of reorganization and recuperation are being developed under the auspices of the National Resource Evaluation Center in the OCDM.

Some results will be forthcoming from that source within the next 6 months to a year. I also understand that OCDM, in cooperation with the National Academy of Sciences, is fostering, in the universities and elsewhere, a larger research effort on the social and psychological effects of nuclear war, and on attitudes toward preparedness. Plans also exist for expanding the OCDM-supported effort at the Stanford Research Institute. Perhaps the rate at which our understanding improves will soon get substantially above the rate at which the problems get more serious and more complicated.

ATTITUDE OF CAUTIOUS OPTIMISM

In the remainder of my testimony, I want to focus primarily on the problems of economic reorganization and recuperation and to suggest in general terms the reasons why an attitude of cautious optimism seems to be justified with respect to the ability of the Nation to cope with these problems over a broad range of possible wars.

I will not discuss the economic problems of the survival period, which are mainly a matter of making effective use of inventories of food, medical supplies, and other necessities in order to meet the immediate threats to the surviving population.

PRODUCING BEFORE EXHAUSTING STOCKPILES

Assuming that this can be accomplished, the next question is whether production of the necessities of life can be restored before the inventories are depleted. Until this taks of restoring production is ac