This statement before a Congressional subcommittee is addressed to the Soviet economic capability to accomplish its military objectives. The peacetime growth rate of aggregate output has been notably rapid, but it seems unlikely that it can be raised much above the level achieved in recent years. Nor should the possibility of a decline be ruled out, if attempts at patchwork repairs to the economic mechanism prove unsuccessful. But the USSR is rich in physical and human resources, and muddling through may still carry it a long way. The ceiling has apparently been reached on the rate of investment attainable under the present arrangement, and relative stability also characterizes the shares of the major sectors of consumption and defense. This does not mean that the Soviet Union will not be able to maintain its strong and growing military machine. Given growth increments at least as large as those obtained in recent years, it should be able to continue building up the forces to help meet national objectives. 10 pp.