the present context as it is in the reorganization context. High destruction levels threaten the viability of the system, but if it is viable it is unlikely that much of the surviving wealth will be unutilized for long.

The following calculations are all in constant 1954 dollars, which correspond to about $1.15 in current dollars. A reasonable estimate of gross national product at full capacity today, undoubtedly quite conservation for my purposes, would be about 470 billion 1954 dollars. Assume half that capacity is destroyed, in such a way as to leave no severe bottlenecks in the portion that survives. Then a GNP of $235 billion could be produced. The 1929 level of per capita consumption would be about $1,000 in these terms; for a population of 180 million that means consumption expenditures of $180 billion. I then allow a scant $15 billion for Government expenditures. A further allowance must be made for replacement of capital used up in meeting these requirements; I estimate this as about $17 billion. This uses up $212 of the $235 billion. The remaining $23 billion can be allocated to creating new capacity, and, of course, to maintaining itself. If consumption and Government expenditures are held constant, the new capacity constructed and the uncommitted old capacity can then be used to produce still more capacity, and so on in a cumulative way. The question then comes down to what the growth rate of this uncommitted capacity is likely to be. I think most economists would agree that, given the assumptions of no bottlenecks and the conditions of labor surplus, a growth rate of 25 percent per year of this uncommitted capacity would not be unreasonable. In technical jargon, after an adjustment for depreciation, the 25-percent growth rate would imply a capital-output ratio of about 3. If this assumption is valid, it turns out that capacity is back to the $470 billion level in just over a decade. This once again, simply illustrates how very far we are from having a bare subsistence economy. If the calculations are repeated for the case where consumption standards are held at the level of the turn of the century, roughly $700 per capita at 1954 prices, an allowance can be made for $40 billion of Government expenditures and capacity will be fully restored in 7

years.

IMPORTANT ASSUMPTIONS IN CALCULATIONS

The assumption that a fixed standard of per capita consumption is maintained until full recovery is achieved makes these calculations quite sensitive to the level of destruction assumed. For example, with 1929 consumption standards and $15 billion of Government spending, recuperation would not occur at all if only 45 percent of capacity survived. A more realistic picture of recovery under such circumstances would allow for consumption below the 1929 standard for the first year or two, then rising as recuperation proceeded. But the calculations above are only illustrative, not a prediction or a proof of the feasibility of economic recuperation in about a decade. They are much too rough and aggregative for that, and many of the most important effects of a thermonuclear war are left out of account-for example, the changes in agricultural practices required by contamination of farmland, the probability of severe bottlenecks in at least some industries, possible physiological and psychological effects on the

efficiency of the work force, and so on. The very important assumption that reorganization is successfully accomplished has been made. Finally, there is the fact that the economic policies assumed are recuperation-oriented in the extreme. It is not at all clear that such a high valuation would be placed on rapid recuperation as compared with increasing consumption. But the calculations do show that recuperation in a period on the order of a decade is probably not physically infeasible by a large factor. Important as all the qualifications to these simple calculations are, they are not nearly so important as the difference between the American economy and that of an underdeveloped country when it comes to estimating the implications of substantial losses of productive capacity.

SUMMARY OF ECONOMIC RECOVERY PROBLEM IN EARLY 1960's

Let me summarize my statement briefly. The problems of economic recovery are complex and numerous, and many are inadequately understood. There is a great need for further research in order to reduce or eliminate the uncertainties that now exist. There is a particular need for more supporting research on the social and psychological aspects of recovery, and on the effects of the changed physical environment on agriculture, since firm conclusions on the economic questions cannot possibly be reached as long as these other questions are not settled. Of course, many of these other questions also turn on how the economics come out, so there is a need for a complete and integrated study of the whole problem. However, our current knowledge of the economic aspects suggests quite strongly that the difficulties of economic survival, reorganization, and recuperation need not be significant compared with the immense direct consequences of the war. I say "need not" rather than "are not" because I feel that many relatively cheap measures of preparation would have to be taken before the feasibility of reorganization could be asserted with much confidence. These measures, though cheap, might make a very large difference in the outcome. Finally, I should state that these conclusions cannot be drawn with confidence with respect to the threat levels of the late 1960's, nor can they be applied to possible future situations when extensive systems of blast shelters might be available. Very large attacks, or much greater survival of population relative to resources, would increase substantially the relative significance of the economic recovery problem. Feasible preparations for economic recovery could reduce the relative significance of the problem to its present level. But very large programs of stockpiling, and of industrial dispersal and protection would probably be required to accomplish this.

Thank you.

Mr. HOLIFIELD. Thank you, Mr. Winter, very much for a very cogent and forceful presentation.

Mrs. Griffiths, do you have any questions?

PRESERVATION OF BANK RECORDS

Mrs. GRIFFITHS. Do you have a system, you say, for maintaining the banking system?

Mr. WINTER. Do I have a proposal?

Mrs. GRIFFITHS. Does Mr. Dillon? In your presentation did you say that he has a system for maintaining a banking system?

Mr. WINTER. Secretary Dillon recently communicated to the Federal Reserve Board the suggestion that they make great efforts to insure that banks had the capability of preserving their records so that the situation could be reconstructed following an attack.

The preservation of records is an excellent illustration of one of the relatively cheap measures that might be taken in order to simplify these problems.

It is difficult to imagine the complexity of the situation that would be created if banks and business firms were destroyed, and there were no possibility of determining who had valid claims on the destroyed institutions.

Mrs. GRIFFITHS. For instance, if all of Detroit were destroyed and it was the only city destroyed, and I had $10,000 in the national bank in that city on that day and on that day the national bank had $10 million on deposit with the Chase National, I might never be able to prove that I had a valid claim against Chase National unless I had some record somewhere else.

Is that right?

Mr. WINTER. That is exactly right.

Mr. HOLIFIELD. A number of the financial institutions are microfilming their vital records, as we know, and are preparing, but this is not, by any means, universal.

Mr. WINTER. That is right. It is not universal and, furthermore, some of the institutions that have made preparations, I believe, have made preparations which would permit them to microfilm the records and have them in a safe place if they had a day or two of warning. I would be the last one to say that that situation could not arise or is very improbable. It would still be desirable to be able to do it on shorter notice.

Mr. HOLIFIELD. Mr. Riehlman?
Mr. RIEHLMAN. No questions.

Mr. HOLIFIELD. Mr. Morse?

AVAILABILITY OF TRANSPORTATION

Mr. MORSE. One question, Mr. Chairman.

In your calculations, Mr. Winter, as to the percentage of the productive capacity necessary to support the population, is one of your premises an uninterrupted national transportation system?

Mr. WINTER. Yes. The transportation system-such things as transportation, electric utilities, and water supply, which may be called network industries-pose a particular problem, a special problem, which I am sure is behind your question.

It is quite true that one cannot necessarily say that the capacity of the railroad system is exactly half of what it used to be if half of all of the railroad tracks are destroyed.

Therefore, these are areas where special preparations would have to be made and these are areas where these calculations should not be regarded as reassuring, in any sense.

Mr. MORSE. Did you assume in your calculations no disturbance of the national transportation system?

Mr. WINTER, As I said, these calculations for capacity comparison are made for the manufacturing industries.

Now, it is true that there is a transportation input into these other industries, and it is true that this has been assumed to be available, That is correct.

Mr. MORSE. Could you, by application of operations, research, feed in other variables such as the disturbance of the transportation network and come up with some sound figures?

Mr. WINTER. I spoke of the need for further research earlier, and this is certainly one of the areas where I think this should be done. It is a complicated problem to consider the geographical distribution of economic activity, and the transportation net connecting the economic activity in this country.

It is very complicated, but I think it is feasible and I believe this should be done.

Mr. MORSE. Thank you, Mr. Winter.
Thank you, Mr. Chairman.

COORDINATION OF RESEARCH

Mr. HOLIFIELD. I would just like to say that your presentation indicates a tremendous area for research and development, and I would assume that under the division of responsibilities which is contemplated by the President in his new plan for the Office of Emergency Planning, that this would naturally fall within their category of functions.

I would assume that studies of this kind will fall within the Office of Emergency Planning functions.

Mr. WINTER. It would appear so to me. That seems to be the role for that office that is envisaged.

Mr. HOLIFIELD. Mr. Roback has a question or two.

Mr. ROBACK. Are these studies conducted by yourself and others at Rand public service studies, or are they conducted specifically for Government agencies?

Mr. WINTER. The earlier RAND Corp. study was, as you probably know, a public service study.

However, some of the work that I am reporting here has been supported in connection with studies of active and passive defense for the Air Force. I emphasize again, however, that these are my personal views.

Mr. ROBACK. Are you acquainted with a study that appears to be part of a contract performance for the Air Research and Development Command, under contract No. AF-49638-549, entitled "Outline of an Analytic Approach to Predicting Societal System Recovery From an

Are you familiar with that study?

Mr. WINTER. Yes, I am.

Mr. ROBACK. Did you get anything from that study?

Mr. WINTER. I think that the goal of this study, of supplying a comprehensive and systematic approach to the problems of recovery, is very commendable.

As I have said, I think that such an approach is required. However, my reaction to that particular attempt is that I would say that the realities of data availability have been largely ignored.

The question of feasible simplifications of the problem has not been faced. The study is laid out in outline in the report you mentioned and it is clearly infeasible because the required data are not available. Also, I believe that the people who put this particular report together might have been benefited from greater attention to some of the earlier work in this area.

Mr. ROBACK. So the question is whether the Federal Government, through its contract or other resources, is utilizing or employing these efforts in useful ways or not.

Of course, we could study all facets of these problems, but the question is: Is there any direction, any integration, of this effort so that the studies are made toward some systematic purpose?

Mr. WINTER. There are some very serious problems in trying to stimulate research on the questions that need to be answered and in providing integration.

Every time I contemplate this problem and try to reconcile the needs of decisionmakers for answers with the necessity of allowing sufficient freedom to the research worker, to permit him to exercise his imagination, I am simply staggered by the complexity of the issues that are raised.

And I am afraid that I have no solution.

Mr. ROBACK. Mr. Winter, will you comment, in relation to recovery as against survival requirements, on the proposed redistribution of wheat surpluses?

Mr. HOLIFIELD. At this time the chairman is going to stop the questioning and ask you to appear before the committee at 2 o'clock for such answers to this question and other additional questions as may be required.

The bells have been heard and it is necessary now for the members to go to the floor.

Mr. Gouré, are you still in the room?

Mr. GOURÉ. Yes, sir.

Mr. HOLIFIELD. I will ask you, sir, to confer with the staff, in view of the time limitation, and the staff will make a report on such matters that they may want to discuss with you of a classified nature. Mr. GOURÉ. Very well.

Mr. HOLIFIELD. We will adjourn until 2 o'clock.

(Whereupon, at 12:15 o'clock p.m., the subcommittee was recessed, to revconvene at 2 p.m. the same day.)

AFTERNOON SESSION

Mr. HOLIFIELD. The subcommittee will be in order.
Mr. Roback has a question.

REDISTRIBUTION OF SURPLUS WHEAT

Mr. ROBACK. At the end of the morning session, Mr. Winter, I inquired about the food distribution from the standpoint both of survival and of recovery requirements. Do you have any comment on the proposed plan to redistribute wheat surpluses.

Mr. WINTER. I believe that the idea of distributing the food around the country, so as to locate it more in proportion to population, is an excellent idea.