Thus, far from ignoring the Soviet economic malaise, by the middle of
the Reagan administration the intelligence community understood as a
matter of course that the Soviet economy had been consistently
slowing down, slipping to mediocre--and, in some years,
negligible--growth rates. The intelligence community also believed
that Gorbachev knew that the Soviet economy was faltering. Its main
question was whether Gorbachev was serious about economic reform, and
whether he could implement reform without losing control and
releasing forces that would bring down the Soviet system.

The intelligence community generally agreed that Gorbachev was
determined, mainly out of necessity, to reform the Soviet system. It
also generally agreed at the time that these reforms would not
resuscitate the Soviet economy, but that the Soviet Union had not yet
reached a crisis stage. For example, the 1985 NIE stated:

"The USSR is afflicted with a complex of domestic maladies
that seriously worsened in the late 1970s and early 1980s. Their
alleviation is one of the most significant and difficult challenges
facing the Gorbachev regime. . . .
Over the next five years, and for the foreseeable future, the
troubles of the society will not present a challenge to the system of
political control that guarantees Kremlin rule, nor will they
threaten the economy with collapse. But, during the rest of the 1980s
and well beyond, the domestic affairs of the USSR will be dominated
by the efforts of the regime to grapple with these manifold problems.
The underlying cause of most of these problems is the
repressive nature of a political system that discourages initiative
throughout the society on which economic and social progress depend,
and that limits the private freedom Soviet citizens desire. . .
Gorbachev has achieved an upswing in the mood of the Soviet
elite and populace. But the prospects for his strategy over the next
five years are mixed at best..."

In other words, the documentary record portrays an intelligence
community that fully understood that the Soviet Union was in trouble;
that the cause of these problems was the Soviet system itself, and
its reliance on a command economy and political repression; and that
Gorbachev faced a tremendous challenge in trying to reform the system
without bringing it down around him.

It is notable that the five-year prediction of stability presented in
the 1985 NIE stopped just short of the actual date of the Soviet
collapse (1991), especially so in light of the assessment that the
CIA's Directorate of Intelligence issued in July 1987, as Gorbachev
began to establish a track record. This assessment was even more
pessimistic and, as it turned out, on the mark in its anticipation of
developments to come:

"Judgments regarding Gorbachev's situation will appear
somewhat less sanguine than those found in earlier CIA papers, for
two principal reasons. First, the papers reporting on Gorbachev's
progress through the winter of 1986/87 focused primarily on his
success in consolidating his power rather than the concrete and
difficult choices he would face in exercising power. Second, since
the plenum of the Central Committee in January 1987, an accumulation
of evidence from Soviet sources suggests that indifference and
opposition on the part of party and government leaders and the
average worker are more deeply rooted than was thought six months
ago. . . .
Gorbachev's position could be undermined by the loosening of
censorship over the written and spoken word and the promotion of
limited democracy. If it suspects that this process is getting out of
control, the party could well execute an abrupt about-face,
discarding Gorbachev along the way. . . .
Growth of Soviet GNP dropped from an average of 4.0 percent
per year in the period 1966-75 to 2.3 percent in 1976-80, and to 2.2
percent per year in 1981-84."

To be fair, the intelligence community can blame itself for at least
some of the current controversy. In retrospect, it is clear that in
trying to determine if the rate of growth was 2.0 percent or 2.5
percent, the CIA was pursuing false precision. In reality it is
difficult to estimate--or, for that matter, even express--the actual
size of a non-market economy in which there are no prices or true
national accounts.

Henry Rowen, chairman of the National Intelligence Council from
1981-1983, recalls pressing analysts to focus even more on the
non-quantitative signs that the Soviet economy was faltering, such as
shortages of goods. Rowen devoted greater effort to highlighting how
many Soviet economic activities that inflated GNP estimates actually
yielded few productive benefits (e.g., high production of shoddy
goods that went unsold). Rowen also began to emphasize the hidden
costs that the Soviet military imposed on the Soviet economy
(diversion of talent, unnecessary redundancy in production capacity).

By attempting to estimate specific growth rates, the intelligence
community diluted its main message, which was that the Soviet economy
was stagnating and--even more important--that there were no apparent
or available means for it to be reinvigorated. This basic message,
which was accepted throughout the intelligence community and was
repeated in official estimates over the course of several years, was
right on the mark.

The "Tactical" Problem: Will Gorbachev and the Soviet Union Survive?

As conditions in the Soviet Union continued to worsen, the main
questions for the U.S. intelligence community were whether Gorbachev
would be able to hold on to power, and whether the Soviet Union
itself would break up. The United States had a major stake in both
questions, and this is the real reason why the intelligence community
is faulted for its performance in the final days of the Soviet Union.

By the late 1980s, U.S.-Soviet relations had improved significantly
(as reflected by the signing of the INF treaty in December 1987) and
Gorbachev was seen as being largely responsible. The Bush
administration wanted to take these improvements in U.S.-Soviet
relations even further. Under its policy of "moving beyond
containment," the Soviet Union would be "integrated into the
community of nations." While the Bush administration stopped short of
referring to Gorbachev as an "ally," it did see him as a "strategic
partner" in promoting stability in the world. It was clear that U.S.
leaders wanted Gorbachev to remain in power.

Critics claim that the intelligence community should have warned U.S.
leaders that Gorbachev was in trouble. Such warnings, according to
these critics, might have enabled the United States to aid Gorbachev,
or hedge its bets by opening channels to other leaders. At a minimum,
the United States could have avoided the stigma of having backed a
loser and, as a result, undercut its credibility.

The record suggests, however, that the intelligence community, and
particularly the CIA's Office of Soviet Analysis, were keenly aware
that Gorbachev was playing with fire. The CIA grew even more
pessimistic about Gorbachev's chances of political success throughout
the first year of the Bush administration. In an April 1989
assessment, the CIA noted that:

"It will be very difficult for [Gorbachev] to achieve his goals. In
the extreme, his policies and political power could be undermined and
the political stability of the Soviet system could be fundamentally
threatened. . . . anxiety, fear, and anger [of the Soviet political
elite] could still crystallize in an attempted coup, legal removal of
Gorbachev, or even assassination."

In a September 1989 assessment, the CIA examined the gambles
Gorbachev was taking in the nationality, economic, and political
areas, characterizing his policies as being based on "questionable
premises and wishful thinking." It concluded that the "unrest that
has punctuated Gorbachev's rule is not a transient phenomenon.
Conditions are likely to lead in the foreseeable future to continuing
crises and instability on a larger scale. . . ."

Of all intelligence agencies, the CIA had the most pessimistic view
of Gorbachev's ability to fix the Soviet economy and retain power. In
the 1989 NIE, The Soviet System in Crisis: Prospects for the Next Two
Years, the consensus view was that the situation would remain bad,
but that the regime would be able to tough it out. The CIA disagreed,
however, arguing that the situation was not manageable. By the
following year, the intelligence community as a whole had come around
to the CIA's position; the NIE on Soviet political conditions issued
in November 1990, The Deepening Crisis in the USSR: Prospects for the
Next Two Years, stated flatly in its key judgments that "the Soviet
Union as we have known it is finished"--with the emergence of a loose
federation of republics a possibility.

This reporting by the CIA had a direct effect on U.S. policy.
Then-Deputy National Security Advisor Robert Gates recalls that in
September 1989--two years before Gorbachev's fall, and at least in
part as a result of the CIA's warnings--the Bush Administration
established a "contingency planning group" chaired by the director of
Soviet Affairs, Condoleezza Rice. The purpose of this group was to
analyze specific options as to how to react if the Gorbachev regime
fell. Knowledge of the existence of this group was strictly limited,
so as not to increase concerns about Gorbachev's hold on power, but
its creation represented a major move by an administration that was
publicly committed to Gorbachev.

Essay Types: Essay