Encouraging Russia to implement economic reforms is one thing. Insisting on immediate adherence to the strict Western model is another matter altogether. Russia may have to pursue less ambitious but more realistic reforms to develop its economy over the long run. We should not ask the Russians to destroy their economy in order to save it. Throughout history they have shown an extraordinary capacity for suffering. But even Russians cannot bear their hardships much longer, as the ultranationalists’ and communists’ strong showing in the recent elections warns us.
The administration is undoubtedly concerned that slowing down Russian reforms will only prolong Russia’s agony. But ultimately the Russians themselves will determine the success or failure of their economic changes. The West may have better economists, but the Russians are better experts on the political situation in their own country and the best judges of how far and how fast reform can proceed without triggering a social explosion. The administration and the West in general would be wise to resist the temptation to try to save the Russians in spite of themselves.
We should also judge Russian reforms by their substantive content rather than according to the political interests of the Western favorites within the Russian government. The new corps of young, Westernized economists, with their good English and well-tailored suits, are easier for U.S. officials and international bankers to relate to than the more traditional industrial managers from the Russian provinces. But our experience in both postwar Germany and Japan indicates that the members of the old structures at least know how to make the trains run on time. Left to their own devices, they would take the train of reform in the wrong direction. Yet without them the train can easily be derailed and in the process discredit both the reforms and their Western supporters.
Russia’s economy is straining under the burden of loans recklessly made to Gorbachev’s communist regime by Western banks, governments, and international organizations. The entire $84 billion debt should be rescheduled over a period of at least fifteen years, as Yeltsin has requested. Most important, Russia must not be forced to use aid to repay loans. Western banks that made the mistake of loaning billions to communist governments of the former Soviet Union should not be bailed out with Western aid to the democratic government of Russia. Without total debt rescheduling, no amount of aid will get Russia’s economic development off the starting line.
Our allies in Europe and Japan should increase market access for Russian exports, as well as economic aid to Russia. This is particularly true for those allies who benefited from our aid after World War II. They can repay that debt by helping the Russians recover from the Cold War the same way that we helped them recover from World War II.
We should also put much more emphasis on developing broader cultural and educational exchange programs with Russia, as James Billington has strongly urged. Universities and colleges in the United States should expand exchange programs with sister institutions in Russia to facilitate the exchange of students, teachers, and ideas. More American and Russian businessmen, farmers, and members of other professions should visit each other’s country so that Russian reformers can see firsthand how a free-market economy works. As President Clinton told me before I left for Moscow in March 1994, there should also be more exchanges and communication between Congress and the Russian Parliament.
Far more important than all the government foreign aid is the need to increase investments in Russia from the private sector in the West. China has the fastest-growing economy in the world today. Over half of its GNP is produced by the private sector. This has been accomplished primarily with private investment rather than government foreign aid. It would be the highest irony if, as a result of China’s success and Russia’s failure, a communist government could provide better investment opportunities for private enterprise than a democratic government.
Our primary goal should be to increase the American private sector’s role in Russia’s emerging private sector. All of the Western economies, including Japan’s, are either in recession, going into recession, or, like the United States, just beginning to come out of recession. As a result, government aid programs are severely limited by budgetary constraints. Private-sector investments are limited only by opportunity. Archer Daniels Midland’s Chairman Dwayne Andreas has estimated that if the Yeltsin government adopted all necessary market reforms, Western companies within five years would invest over $700 billion in Russia’s private sector. This is in striking contrast to the $60 billion that is the highest estimate of aid that is likely to be provided by Western governments to Russia.
Another major advantage of private investment over government aid is that private enterprise brings the management expertise, training, and new technology needed for the transition from a communist to a free-market economy. More than anything else, Russia needs contact with the West’s private sector. Communist bureaucrats cannot run a free-market economy. Nor can government bureaucrats from the West tell them how to run their economy. Bureaucrats have done enough damage to Western economies; in Russia, their advice could be fatal. American foreign service officers are among the best in the world on political issues. Like some politicians, however, many of them know very little about economics, and much of what they think they know is wrong.
If private investments are to be made in Russia, the Russian government must establish a legal framework to support a free-market economy. If a communist government in China can do this, a democratic government in Russia can do so too. It must guarantee the rights of ownership for private property, control the money supply to attract foreign investors, encourage privatization and private entrepreneurs, and decollectivize agriculture. The Russian government should curb subsidies to inefficient state enterprises, free prices on goods and services, build a stable market to eliminate black-market bartering, and develop reasonable tax policies to raise revenues while encouraging the private sector.
It will take time to achieve these goals. Seventy years of communist brainwashing in Russia cannot be eradicated in one year, or five, or even ten. But Yeltsin and his new Parliament must commit themselves irrevocably to those goals if they are to succeed in attracting the private investment from abroad they so desperately need.
President Clinton has some able political experts advising him on Russia. But as Hank Greenberg, chairman of the American International Group, has pointed out, what the President now needs is a topflight businessman reporting directly to him, with responsibility for coordinating private investment from the United States and government aid programs. He should enlist the brightest and the best from the American business community and induce them to go to Russia and the other former Soviet states to give advice and guidance to private businesses. The Peace Corps and the foreign service can play important roles. But Russia’s greatest need is advice—not on politics or on government policy but on how to manage a private enterprise.
We should abandon the well-intentioned efforts to enlist economists and political scientists from the United States to instruct the Russians as to how to run a democracy and a free-market economy. We have enough trouble running our own economy to be qualified to tell others how to run theirs. Only experienced business leaders can fill the managerial void in the Russian private sector.
It was hard enough for a Republican administration in this era of giant government to stress private-sector solutions to an economy’s problems. It will be even more difficult for a Democratic administration, many of whose members were reared on 1960s liberalism. The President’s “New Democrats” have learned to talk a good line on free enterprise and public-private partnerships. It remains to be seen whether this is a matter of conviction or just of rhetoric. The fact remains that Western business can do vastly more than government to make Russia and the other post-Soviet republics prosperous and stable. In the era beyond peace, the smart politicians will let Western capital help build a new Russia and will put their speechwriters and pollsters to work figuring out how to make sure the politicians get the credit.
Because Russia has taken the lead in reform among the newly independent states, we must make Russia the focal point of Western aid in the short term. With the exception of the Baltics, none of the other former Soviet states has matched its commitment to tough economic reforms, and none can match its influence in the entire region. Until they adopt the reforms needed to transform their countries, aid to Russia should be the centerpiece of our policy.
In the long run, however, Russia’s chances for success will increase as other former Soviet republics succeed. In light of their historic ties and economic interdependence, neither Russia nor the other former Soviet states can succeed on their own. Only by adopting a “one for all, all for one” approach to reform can these countries overcome the massive obstacles before them. Russia and the other newly independent states have a choice between a future of conflict or a future of progress. The United States and the West should help them make the right choice.
We should make clear to Russia and the other post-Soviet states that Western assistance will be fruitless if they engage in counterproductive economic warfare among themselves. Any amount of aid we could provide would be insignificant compared with the costs they will inflict on one another if they sever all their economic ties and try to go it alone.
• • •
In our relations with Russia, Ukraine, and the other newly independent states, we must keep one point foremost in mind. There is no time to lose. General MacArthur once said that the history of failure in war could be summarized in two words: “Too late.” The same two words summarize the history of failure to win the peace after victory in war. In the wake of the collapse of communism, the United States and the West have failed to seize the moment.
As I write these words on March 30, 1994, the overwhelming conventional wisdom in the U.S. foreign policy establishment is that the prospects for the survival and success of economic reforms in Russia are bleak. The reformers are assumed by all the so-called experts to be in retreat after their election losses. Anti-reformers—most of them ex-communist bureaucrats—are ominously gaining strength. It is tempting, in view of the political and economic disarray, to throw in the towel. But this is the time for the West to become a more active participant in Russia’s success, not a passive observer of its failure.
We should not be surprised by the difficulty Yeltsin and his colleagues are experiencing. This is an unprecedented transition—the transformation of the world’s strongest dictatorship into a democracy and the world’s largest command economy into a free market. All of the Western nations, including the United States, know that the development and management of a free-market economy take time and ingenuity; building one from scratch is an almost insurmountable task. It cannot be done overnight or without help. I am convinced that the Russian people will not turn back to communism. But if they have no choice, they will turn to some kind of political dictatorship, which will at least promise the safety-net guarantees that were supposed to have been delivered by the communist regime.
Before writing off the Russians, we should recognize that they are a great people. It was the Russians who defeated Napoleon, and as President Eisenhower once told me, it was the Russians who, after incredible suffering and sacrifice, played the indispensable and primary role in defeating Hitler. Their powers of resilience are legendary, and are usually underestimated by those in the West who have not experienced such ordeals. We should also recognize that in addition to Yeltsin there are a number of other extremely capable pro-reform leaders. They have lost an election, but they can come back, and they deserve our support as they try to do so.
The gamble for political and economic freedom in Russia is being played for enormously high stakes and against great odds. The reformers may fail, but let it not be said that they failed because we did not provide for them, our allies in defeating communism in the Cold War, as generously as we did to help our enemies, Germany and Japan, recover from World War II. The situation is desperately precarious. The reformers can still prevail, but we must do more to help them pull off the greatest transition from tyranny to freedom in history. We must help them beat the odds.
For seventy-five years, the Soviet Union tried to export the ideas of communism to the rest of the world, using propaganda, subversion, and naked aggression. Now democratic Russia can offer the rest of the world an example of a great people enjoying economic and political freedom. The profound unanswered question will be whether democratic capitalism in Russia can compete with communist capitalism in China. If it fails to do so, and if Russia turns to reactionary leaders, the hard-line leaders in China and other dictators in the world will be heartened. If it succeeds, political and economic freedom will be the wave of the future in the twenty-first century.
America and Europe: New Missions for Old Friends
For half a century, Europe dominated United States foreign policy. During World War II, we helped save it from Nazi Germany. During the Cold War, defending it against Soviet aggression was the primary mission of our armed forces. Yet today it has receded to the back pages of American newspapers, is seldom the lead story on television news programs, and receives little attention from the foreign policy establishment. Even the agony in the former Yugoslavia is covered as though it were an obscure disaster in a faraway place where we have only a humanitarian interest.
Yet Europe is just as important to the United States as ever. We cannot afford to neglect a region with 345 million people and a GNP of $7 trillion, compared with the United States’ $6.2 trillion. Its political stability, its economic health, our access to its markets, and the character of its relations with the rest of the world are all vital American interests. Cooperation between Europe and America is indispensable if we are to preserve peace and promote economic progress for ourselves and the rest of the world. Disunity would cause us to risk squandering all the gains we fought for together in war and peace.
America’s new isolationists—the “bring the boys home” crowd—take the view that the only thing that held the West together was fear of the Soviet Union. With the overwhelming Soviet threat gone, they argue, the very idea of “the West” has no meaning as a unifying factor; instead we are now told that the overwhelming danger we face is that the French will flood our markets with subsidized Bordeaux and drive producers of California Chardonnay into bankruptcy.
The isolationist view ignores the huge economic stake we have in a stable, secure Europe. It ignores the implicit commitment we have made to participate indefinitely in Europe’s security arrangements, for the sake not only of deterring aggression but also of preserving our common heritage. And it ignores the progress we have made, since the heyday of the isolationists between the world wars, in stitching the United States into the fabric of transatlantic political and economic life. The major argument of the isolationists between World War I and World War II was that the United States should not risk being drawn into Europe’s wars. Our active membership in NATO today is the best way we can reduce the danger of war in Europe and also play a powerful role in preserving peace in other parts of the world.
The new spirit of political correctness notwithstanding, Europe and the United States belong to the same civilization. Our traditions and values are uniquely close. This does not make European countries better than others or more deserving of American support when our views collide. But it does mean that when great issues are at stake, even the most adamantly independent European leaders will back the United States, as Charles de Gaulle did during the Cuban missile crisis. This almost hereditary sense of unity is a valuable resource that no American President should neglect.
It is particularly important that the unique relationship between the United States and Great Britain be sustained. The ties of common heritage and language are the most obvious, but ultimately they may not be the most enduring. Nor are the ties based on the memory of Americans fighting and dying in both world wars to protect British soil, or American and British soldiers fighting side by side in the P
ersian Gulf. In the era beyond peace, the more significant link may well be the two societies’ virtually simultaneous experiments with bloated government. In the first generation after World War II, both nations built massive welfare states. During the late 1970s and 1980s, both turned to more conservative, pro–free enterprise policies and experienced astonishing economic growth as a result. During the 1990s, the political fortunes of conservative leaders have faded as a result of the worldwide economic downturn. If England and the United States make the right choices in the months and years ahead and pick leaders who stress individual and private enterprise rather than government interference, it will be because they learned not only from their own experiences but from each other’s.
America’s new isolationists draw much of their strength from a proposition that is especially attractive during economic hard times: that we could use what we are spending to keep our forces in Europe to solve our urgent domestic problems. The Europeans have reason to worry that Americans are becoming too inward-looking. But at the same time, the Europeans themselves have become more inward-looking since the end of the Cold War. Their problems at home are as pervasive and distracting as ours.
Beyond Peace Page 10