When Gorbachev finally gained reasonably accurate figures, he was aghast to learn that military expenditures were not 16 percent of the budget, as he feared, but 40 percent, which he said was tantamount to 20 percent of GDP.69 His foreign minister, Eduard Shevardnadze, believed the figure was 50 percent of GDP, which meant half of the country’s wealth went to defense.70 “For decades ours was probably the most militarized country,” said Shevardnadze. “Gigantic proportions.”71 Genrikh Trofimenko estimated that Moscow spent 35 to 40 percent of its GDP on the military.72 Today, the most authoritative estimates peg the figure at 32 percent of GDP.73 Compare these figures to what the United States was spending during this peak period, which was usually less than 6 percent of GDP.74
How much did this equate to in rubles? Trofimenko says that Soviet GDP at the start of the decade was 619 billion rubles, or $103 billion—pathetically low for a supposed superpower.75 The traditional official military budget figure for the USSR was 17 billion rubles per year, or about $3 billion, which was probably ten times less than what was actually spent.76 A reliable projection is that the USSR spent roughly $30 billion annually on the military. By comparison, Reagan military spending hit $250 billion per year, eight times higher than Soviet levels.77 Amazingly, the United States may have spent over twice on the military what the USSR possessed in total GDP. There was literally not enough GDP in the entire USSR to match Reagan defense levels—not even close.78 Reagan no doubt had the numbers on his side.
While the percentage of Soviet military spending was staggering, there were other factors that contributed to the high domestic cost of the arms race for the USSR. Equally numbing were the resources of the country—industrial, technological, and human—that were going into military preparations.79 The USSR was truly giving all it could but could not afford to step up competition even a notch, let alone to Reagan levels.
With these factors, Communism once again was proving to be its own worst enemy. From Moscow to Pyongyang to Havana, even if Marxists wanted to expand by force, their literally bankrupt ideology undercut revenues for the arsenals. In a supreme irony, the best way for them to generate revenue would have been to embrace the market systems of their adversaries.80
But while Soviet spending was bankrupting the economy of the USSR, Reagan’s spending was providing him with his own set of domestic problems—by 1985, his military allocations had contributed to a 40 percent jump in the U.S. budget deficit.81 Yet, he told Cap Weinberger repeatedly that he was willing to accept deficits as a necessary expense to aid his offensive against the USSR, which later prompted Lou Cannon to refer to these Reagan deficits as “wartime deficits.”82 Despite these deficits, Reagan was certain that the United States was more capable of sustaining high levels of military spending than the USSR. He knew that the American economy would be able to bounce back from deficits whereas Communism could not.
THE REACTION OF MIKHAIL GORBACHEV TO REAGAN’S ARMS RACE
The one Russian most fearful of his nation being bankrupted by the Reagan arms challenge was Mikhail Gorbachev. While Gorbachev had made it clear since his election that slowing the arms race was vital to him, the general secretary made the matter painfully evident to Reagan in his opening remarks at the Geneva summit in November 1985, in which he embarrassingly begged for Western aid. There, he made reference to the commercial and technological “weight” of America and the prosperity of Japan and West Germany, the two of which he said had the advantage of spending “so little on armaments.” (He did not reconcile how the United States could spend so much on armaments and flourish economically.) He said that arms control was essential to enabling the USSR to reallocate funds from militaristic to peaceful purposes. “Mr. President,” he pleaded, “the arms race is wiping us out. I’m starting my talk with this because it’s crushing us and we can’t afford it. Let’s end it before there’s nothing left of the USSR.”83
Central to that arms race was Reagan’s SDI challenge. In fact, SDI doubters in the United States were about to face a dilemma: If SDI was unworkable, as they insisted, why then did it scare the Soviets, especially Mikhail Gorbachev, so much? According to Foreign Minister Alexander Bessmyrtnykh, the Soviets were “enormously frightened” by SDI.84 The initiative was “something very dangerous” that “made us realize we were in a very dangerous spot.” He called SDI Gorbachev’s “number-one preoccupation”: “When we were talking about SDI, just the feeling that if we get involved in this SDI arms race, trying to do something like the U.S. was going to do with space-based programs, looked like a horror to Gorbachev.”85
Within the USSR, there were mixed views concerning SDI’s feasibility as a functional missile-defense system. Some articles in the Soviet press reacted as if the system were a certainty, whereas others were doubtful.86 Gorbachev’s regime seemed to believe that a so-called “impenetrable shield” was not in the cards.87 The prevailing view within the USSR’s inner sanctum (based on counsel from Soviet scientists) was that within fifteen to twenty years the United States might be able to produce a system that could take down a limited number of ICBMS, and thereby negate a Soviet return-strike capability after an initial U.S. nuclear strike—or, as Gorbachev put it: “the creation of a shield which would allow a first strike without fear of retaliation.”88 Gorbachev was sure of this, as had been General Secretary Chernenko and the Soviet press that parroted the line.89 In Gorbachev’s presentation at the second plenary meeting between him and Reagan at Geneva on November 19, 1985, he told the president that SDI “only makes sense if it is to defend against a retaliatory strike.”90
FEARS OF THE “SDI ARMS RACE”
Despite the internal Soviet debate over SDI’s practicality, Gorbachev concluded that SDI was yet another contributing factor to the downward spiral of the arms race. The Kremlin worried that responding to SDI in this form would further bankrupt the USSR. Ambassador Oleg Grinevsky recalls the dread of being “sucked into” a competition over dueling SDIs.91 As MajorGeneral Vladimir Slipchenko confirmed, “SDI did harm us. Our military industrial complex was able to obtain some money and we created our own SDI [research program] for Moscow, which nobody needed.”92 In addition, Gorbachev and his comrades feared SDI could be transformed into an offensive system equipped with sophisticated space-based lasers, with SDI research generating spin-off benefits for the U.S. military—that is, an entire line of new, cutting-edge technologies.
In the end, the Soviets made counter investments in response to SDI. Roald Sagdayev, head of the Soviet Space Research Institute, said Moscow spent “tens of billions of dollars” reacting to SDI. He confirms that Soviet generals insisted on measures to counter the missile-defense project, including an all-out effort to upgrade the USSR’s land-based ICBMs. “This program became priority No. 1 after Mr. Reagan’s announcement of the ‘Star Wars’ in 1983,” said Sagdayev. Sagdayev said that this spending weakened the USSR and may have contributed to its demise.93