If a people’s only interest is stability, it should not choose a free-market economy. Free markets are by nature unstable. One nineteenth-century philosopher likened capitalism to a gale of creative destruction. A command economy can produce stability, but at the cost of suppressing creativity. A free-market system encourages creativity at the cost of instability. The choice therefore is between economic progress at the cost of some instability or stability at the cost of no progress.
Supply-siders, Keynsians, monetarists, and proponents of other economic disciplines will continue to debate the merits of their various policies. The key is free debate about what does and does not work and the willingness to discard failed policies and to expand successful ones. As we advise leaders of the developing nations, we must disabuse ourselves of the notion that we have all the answers, for the simple reason that the essence of the free market is that there are no sure-fire answers. If there were, we would all be billionaires.
One of the most inspiring stories of the last fifty years has been that of countries who were mired in absolute poverty after World War II but adopted the right economic policies and triggered astonishing social and economic progress. China, Taiwan, South Korea, Singapore, Malaysia, Thailand, Chile, and others have succeeded because they stressed basic economic principles such as lower taxes, fewer government regulations, open markets, and competitive industries, and placed a high premium on education. These principles have opened up their economies and integrated them with those of the developed world. Such progress is within the reach of every nation. Within two or three decades, any country can extricate itself from poverty and join the ranks of the newly industrializing nations. By helping developing countries adopt growth-based policies, developed countries can make an enormous positive contribution to the welfare of their own people and the prosperity of all peoples.
The next generation’s success stories will be written by the three towering giants of the developing world, India, Brazil, and Indonesia, all of which have turned the corner toward potential economic prosperity.
With a population of over 875 million, India is slowly shedding its reputation as a socialist economy. It has increased trade with Western Europe and the United States, reduced subsidies to state-run industries, and strengthened the rupee in the international financial markets. The literacy rate has improved by 120 percent since 1960. Per capita GNP has risen from $110 to $310 over the last twenty years. Despite the fact that India suffers from religious conflicts and civil strife, it will become a great power by the next century if it continues down the road toward free-market economics.
Brazil, with over one half the people of South America, has made a remarkable economic turnaround in the 1990s. Racked by runaway inflation, a burgeoning foreign debt, a crumbling public infrastructure, and widespread political corruption, the government of President Itamar Franco opened the door to economic reform. Brazil’s GDP grew 4 percent in 1993, and industrial production rose almost 10 percent. Exports to the United States have increased 80 percent over the last 10 years. Import tariffs on products such as automobiles have dropped from 80 percent to 25 percent. Brazil still has formidable problems, but with this improved economic outlook, it has the potential to become an economic showcase for the rest of Latin America.
Indonesia is a striking example of how a developing nation can move from poverty to progress through the adoption of free-market policies. Too often overlooked by foreign policy experts, Indonesia is the fourth-most-populous nation in the world, after China, India, and the United States. It is the largest Muslim nation, with more people than all the Arab nations combined. During the past twenty-five years, the proportion of Indonesians living in absolute poverty has declined from 60 percent to 15 percent. Annual per capita income has increased from $50 to $650. Family-planning policies have reduced the annual population growth from 2.4 percent to 1.8 percent. Indonesia suffers from corruption, nepotism, and an authoritarian government. But progress toward political freedom is beginning and will continue as economic freedom is expanded.
Vietnam could become an economic success story if it breaks with the failed political and economic policies of its past. Because its leaders are ruthless players of power politics, they will soon understand that geopolitically they cannot afford to retard their economic growth with communist policies at a time when their mortal rival, China, has achieved high growth by capitalist means. Vietnam has begun to open its economy to foreign investors, particularly from Western Europe and Japan. But most of its economic reforms are nothing more than window dressing.
Egypt has remarkable potential, particularly as many of the statist practices that impeded economic growth in the 1970s and 1980s have been repealed. Under the courageous leadership of President Hosni Mubarak, it has opened the door to free trade with Western Europe and serves as an economic conduit between Europe and the rest of the Arab world. It has doubled its exports to the United States over the last ten years. With the ominous threat of radical Muslim fundamentalists, overpopulation, and inflation, Egypt faces grave problems. But as by far the most populous and influential Muslim regime in the Mideast, it deserves maximum attention and support from the West.
Turkey has transformed itself from an economic basket case into an economic breadbasket. Beginning in the 1980s, the late Turkish Prime Minister Turgut Ozal aggressively lifted trade restrictions, liberalized policies, and integrated Turkey economically with Western Europe. These policies boosted Turkey’s per capita GNP from $1,400 in 1980 to $2,000 in 1993. The new government of Tansu Ciller has pledged to keep Turkey on this same track of economic reform.
Mexico has been the economic wunderkind of the 1990s. Under the leadership of President Salinas, Mexico has increased trade with the United States, liberalized state-run industries, restored world confidence in the peso, and eliminated costly government subsidies. Since Mexico began to reduce its trade barriers in 1986, U.S. exports have climbed from $12.4 billion to $40 billion in 1992. As a result, Mexico has become Latin America’s most progressive economy and has set an example for other nations.
• • •
There have been three great wars in this century—World War I, World War II, and the Cold War. Before each there was widespread conflict. After each there was unbridled euphoria.
After World War I, many Americans hoped that the League of Nations could achieve our goal of making the world safe for democracy. But Woodrow Wilson’s courageous and eloquent appeal to idealism fell victim to the tragedy of his physical breakdown and the opposition of isolationist forces in the United States. Wilson believed that under the League of Nations, countries would work together to resolve their conflicts peacefully. Twenty years later, the Axis dictatorships launched World War II.
After the defeat of Germany and Japan in World War II, America’s Secretary of State, Cordell Hull, said in testimony to Congress: “There will no longer be a need for spheres of influence, for alliances, for balances of power, or any other of the separate alliances through which in the unhappy past the nations strove to safeguard their security or promote their interest.” The United Nations was heralded as the body that would make all of this possible. In 1946, less than a year after the end of World War II and the founding of the United Nations, the Soviet Union launched the Cold War.
After the collapse of Soviet communism in the Cold War and the defeat of aggression in the Persian Gulf War, the conventional wisdom for a time was that we were witnessing the beginning of a new world order. Many believed that man’s ability to reason would replace his instinct for aggression. The death and destruction in Bosnia is only one example of the tragic fact that the end of the Cold War between the superpowers has not meant the end of conflict between smaller powers. Immanuel Kant’s dream of a “perpetual peace” has collapsed into a nightmare. In addition, with the unity of the West fractured by the end of the security threat, economics threatens to become, to paraphrase Clausewitz, a continuation of war by other means.
Great leader
ship will be needed to meet the challenges we face in the world in the era beyond peace. It is significant that none of the other current leaders of the Western world, although they are able men and women, have public approval ratings equal even to Boris Yeltsin’s. Churchill once observed that one of Britain’s nineteenth-century Prime Ministers, Lord Rosebery, “had the misfortune to live in a time of great men and small events.” Historically, leaders have not been recognized as great unless they have led during times of war. We must change our thinking. Keeping peace should be recognized as an event as great as waging war. Those who meet the exciting new challenges of this historic era beyond peace will earn the mantle of greatness, because they will have had the good fortune to live in a time of great events of their own making.
What role will the United States play in this era beyond peace? In the beginning of the twentieth century we were not a military or economic superpower. While we played a significant role on the world stage, American world leadership was not an indispensable factor for maintaining peace. Today the United States is the strongest and richest nation in the world.
It is clear that there is no substitute for American leadership. What is not clear is how the United States should lead. History shows that the lessons of the past can be used to resolve the problems of the future. We face lesser dangers than we did during World War I, World War II, and the Cold War. In those three wars, the danger was tangible—we could see it, feel it, touch it. Even during the Cold War, we faced a clear and present danger. By mobilizing our economic, political, and military resources, the United States and its allies could meet and defeat those threats.
With the end of the Cold War, the threat is less but the challenge is greater. We undoubtedly have the means to maintain the military power necessary to secure the peace for which we have sacrificed so much. The cost will be far lower because the danger has diminished as a result of the end of the Cold War. But we do not have a foreign enemy to unite us or a cause to inspire us. The profound question is whether America will unite behind a policy of enlightened world leadership—one of the greatest causes any nation could have.
We should welcome the opportunity to meet this challenge—not just for those whose freedom is threatened, but for ourselves. Only when we are engaged in an enterprise greater than ourselves can we be true to ourselves.
Are we worthy to lead? We cannot unless we project values that go beyond peace, beyond our security, beyond our wealth. Two hundred years ago we caught the imagination of the world because of the ideals of freedom for which we stood. Today the United States must once again demonstrate not just that we are the strongest and the richest nation in the world, but also that we are a good and principled country, an example for others to follow. That is our challenge beyond peace. How we meet that challenge will determine not only our future but also the future of peace, prosperity, and freedom for the rest of the world.
III
America Beyond
Peace
The ultimate test of a nation’s character is not how it responds to adversity in war but how it meets the challenge of peace. The end of the Cold War offers us a providential opportunity to address long-neglected domestic problems, to return to our founding principles, and to achieve a true American renewal. Our future and the future of the world depend upon whether we meet this challenge. A strong, unified, growing America can help make the next century a century of peace and freedom. A weak, fractured, stagnant America could be the catalyst for another grim century of tyranny and war.
America is the greatest, most successful social experiment ever conducted in the history of man. Nothing is more essential to the world’s peace and security in the twenty-first century than the renewal and strengthening of America itself and the preservation of what it means to mankind everywhere. Unless we successfully address our serious domestic problems, they will insidiously erode our prosperity, corrode the soul of the nation, and extinguish what Lincoln called “the last best hope of man on earth.”
Constant renewal has always been part of the American experience. But “renewal” and “change” are not the same. Change is good only if it happens to be improvement. Change that destroys what is good is bad. One hundred years ago, Marx’s colleague, Friedrich Engels, inspired millions with the slogan “We must change the world.” The changes he advocated left a terrible legacy of death, destruction, and brutal repression in its wake. As Irving Babbitt warned, “Where there is no vision, the people perish. Where there is sham vision, they perish sooner.” The change we need today is the kind that restores the best we have lost, preserves the best we have, and leads us on to something better.
Restoring the best we have lost is the first essential. The domestic problems that plague the nation today result directly from the destructive changes in cultural values, social policies, and behavioral standards that have marked the course of the past three decades.
Many of our opinion leaders are satisfied to think of the United States as just “one nation” among a hundred and eighty moral, if not necessarily military or economic, equals. Most Americans disagree. We want, and the world needs, America to be something more.
From the beginning, America has been more than a place. It represents the values and ideals of a humane civilization. Our central mission is to preserve and advance those values both at home and abroad.
In my first Inaugural Address twenty-five years ago, I said, “To a crisis of the spirit we need an answer of the spirit.” That was true then. It is still true today. The violence, discord, viciousness, and slovenliness that so mar the quality of life in America are products of the spirit, and they require answers of the spirit. These are behaviors, not conditions. We will get America back on the path of civilization when Americans once more respect and demand civilized behavior.
From the 1960s on, our laws and our mores have been driven by the cultural conceits that took hold during the heyday of the counterculture, including a denial of personal responsibility and the fantasy that the coercive power of government can produce spiritual uplift, cure poverty, end bigotry, legislate growth, and stamp out any number of individual and social inadequacies.
Some have called the 1960s the second-most-disastrous decade in American history, second only to the 1860s, when the nation was drenched in the blood of civil war. As Rush Limbaugh put it, “In the eyes of the 1960s activist, America could do nothing right. The United States was no longer perceived as the greatest experiment in democracy and freedom in the history of the world, but as a center of militarism, imperialism, racism, and economic oppression.”
The 1960s saw an explosion of domestic violence without modern precedent. That was also the time when, in effect, the inmates took over the asylum: when the notion took hold that great universities should be run by their students, and pandering college faculties and administrations supinely acquiesced; when police departments were stripped of the right to police; when the fad for “deinstitutionalization” emptied mental hospitals of their patients, dumping them on the streets; when criminal behavior was celebrated as social protest; when welfare-rights activists succeeded in transforming the public dole into a permanent entitlement; and when the cultural avant-garde, egged on by the news and entertainment media, declared open war on the values of family, civility, and personal responsibility, and mocked the American dream.
Some are beginning to recognize this. One of America’s most penetrating social thinkers, Thomas Sowell, asked recently whether anyone has noticed “how many of the adverse trends plaguing us today began in the 1960s?” In a new book, The Dream and the Nightmare: The Sixties’ Legacy to the Underclass, Fortune magazine editor Myron Magnet brilliantly analyzes the multiple ills that are directly traceable to that cultural revolution. He argues that the remade system “fostered, in the underclass and the homeless, a new, intractable poverty that shocked and dismayed, that . . . went beyond the economic realm into the realm of pathology.” It stripped away respect for precisely those attitudes and behavio
rs that have always provided the exit from poverty: thrift, hard work, deferred gratification, “and so on through the whole catalogue of antique-sounding bourgeois virtues.”
The founders created a land of opportunity. For more than three centuries, opportunity was enough because the culture conditioned people to take advantage of it. But we have now created a culture in which appallingly large numbers ignore the opportunities offered by work, choosing instead those offered by the interwoven worlds of welfare and crime. Our task now is not to invent opportunity, but to enforce honest work as the route to it. We need to get America back on track before it sails off into the abyss.
To paraphrase Shakespeare, the answer is not in our laws but in ourselves. Get our culture and values back on track, and the laws will follow.
In assessing our domestic situation, we must keep a sense of proportion. Karen Elliot House, former foreign editor of The Wall Street Journal, has observed that we hear “ceaseless sermons of gloom and doom; decline and fall; America is overextended; America can’t compete”—ideas that have been “sold like snake oil, by politicians, economists, and academic evangelists.” We must not allow this dirge of pessimism to become the national anthem.
The United States is the wealthiest and most productive nation in the world. We are still the most religious nation in the advanced industrialized world. For millions of every race, creed, color, and religion, the United States represents the promised land. Immigrants from all over the world still endure great hardship and peril to become Americans. Despite our serious racial problems, the United States has made unprecedented progress toward building a society that judges individuals not by who they are but by what they do. Those who find nothing right with America should compare our record with those of other advanced industrial democracies where status is largely determined by birth or ethnicity. They should consider the plight of Turkish workers in Germany, Arabs in France, or Koreans in Japan. Most Americans are decent, generous, hardworking people, driven by the ethic of individual responsibility, accountability for their actions, and empathy for the misfortune of others.
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