This paper discusses three issues: the level of Soviet military expenditure and the size of the resulting burden on the economy; current Soviet resource allocation policy dilemmas and the role of the military-economic system in their generation and possible future resolution; and the implications of the interconnections between defense spending and overall resource allocation for future growth of the military budget. The paper concludes that on political as well as economic grounds the best bet on future development is that the Kremlin will continue to be reluctant to embark on an intensive arms race, requiring major acceleration of defense spending. However, economic difficulties would not prevent a vigorous Kremlin response to perceived intensification of the external threat to Soviet security.
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