October 31, 1985

The United States said today that the Philippines was headed toward ''civil war on a massive scale'' within a few years unless the Government made drastic internal changes. Officials of the State Department and the Defense Department, testifying before the Senate Foreign Relations Committee, said that while a Communist insurgency was not close to toppling the Government of President Ferdinand E. Marcos, trends pointed to a military stalemate in as few as three years. In the long run, the officials said, the unwillingness of President Marcos to clean up the political system, professionalize the military and break up business monopolies could lead to a collapse in the Philippines and deal a blow to Western interests. Most Dire Predictions by U.S. The assessments were made by Paul D. Wolfowitz, an Assistant Secretary of State, and Richard L. Armitage, an Assistant Secretary of Defense, both of whom have been involved in Philippine affairs. They gave the most dire estimates of the situation yet by the United States Government.

An article in Business Day on Tuesday about a drop in earnings at Merrill Lynch & Company for the third quarter omitted necessary information about the corresponding quarter last year. The company had a large one-time gain then; if that gain were set aside, earnings in the 1985 period would show an increase of 54 percent, to $38.4 million.

An article on Tuesday about the innovative curriculum of the Red Bank, N.J., elementary schools misstated the source of their workbooks and other educational materials. The materials are prepared by staff members, who draw on a variety of commercial sources. None of the material used is from Mastery Education Corporation.

Fluttering green pennants over the graves of men and the bones of camels and horses glistening in moonlight mark one of the most dangerous parts of an Afghan rebel trail used to bring military supplies to the country's northern provinces. The trail is the most important supply route for the insurgents fighting Soviet and Soviet-backed Afghan Army troops, according to rebel commanders, foreign medical workers and others who have traveled in Afghanistan. The Soviet and Afghan Government forces, these sources say, are well aware of the route's importance. For that reason, those who use it are subjected to almost daily air attacks and ambushes. Soviet Troops Put at 115,000 According to foreign military analysts in Pakistan, the supply route passes through areas with the largest concentration of Soviet troops, whose total number in Afghanistan is estimated at 115,000. The journey along the route seemed to indicate that the Russians were unable to stop the flow of rebel arms and ammunition, despite their control of the air and superiority in firepower.

Sweden, as a small nation, hardly ranks as a world leader in politics, armaments or commerce. But in finance, especially when it comes to raising money in the international capital markets, the Kingdom of Sweden has set a standard for ingenuity and innovation that few other borrowers can rival. Two weeks ago, for instance, Sweden retired $1 billion in floating-rate notes for new issues at better terms, even though the old issues would have been readjusted within the next few months. In a commentary on the subject last week, The Financial Times observed, ''Once gain Sweden has shown the way to other borrowers.''