Seize the Moment

by Richard Nixon

  Democracy is not a potted plant that can be transplanted into any soil. Instead, it must take root naturally, growing stronger with work and time. As the countries of Eastern Europe are realizing, the seeds of democracy have difficulty growing in the barren soil left behind by communism. It took the Western world hundreds of years to develop working democratic systems. We should not deceive ourselves into believing that the nations of the underdeveloped world can do so in one year. Democracy is government by people. Since people are not perfect, we must not expect democracy to be perfect. While democracy is the best form of government, it does not guarantee good government.

  Some democratic leaders have instituted economic policies as bad—if not worse—than those of the worst dictators of nondemocratic nations, while some authoritarian regimes have pursued enlightened economic strategies. We welcome the fact that twelve nations in Latin America moved from dictatorship to democracy in the 1980s, but political progress has not been matched by economic progress. To the contrary, the per capita income of the more than 400 million people in Latin America declined in that same period. More often than not, a majority of people in a developing country will not support the temporary cuts in wages and welfare that might be necessary to build a sound foundation for economic progress.

  Many democratically elected leaders in the underdeveloped world have irresponsibly played politics with the national economy, flooding their countries with cheap money to buy votes before an election and reaping the whirlwind of hyperinflation after they have been safely returned to office. While this strategy wins votes, the ensuing inflation erases any short-term economic benefit that the people may have gained. Brazil, Peru, Argentina, Bolivia, and Colombia—where leaders repeatedly exploited this tactic—all experienced four-digit inflation in the 1980s.

  Chile is a classic example of a country in which the seeds of economic reform grew in authoritarian soil. In the 1980s, Chile under President Augusto Pinochet scaled the economic ladder, while the rest of Latin America fell down the ladder. From 1986 to 1989, the average annual growth rate of the Chilean economy was 7 percent. Foreign investment grew 11 percent in 1990, totaling $1.1 billion in a $26-billion economy. While we rightly condemned Pinochet’s political repression, the fact that an authoritarian government triggered this growth did not lessen the economic benefits to the average worker.

  Nor are democratic governments immune from political corruption. In the Philippines, democracy has gone astray. Since her election in 1986, President Aquino’s government has been ravaged by corruption and intracabinet strife. Instead of working to improve conditions for the Filipino people, many ministers have worked to improve the balances in their own checkbooks. Unfortunately, the Aquino regime has fallen victim to the “Philippine disease,” the mixture of nepotism and corruption that has infected Filipino politics for much of the past century.

  This does not mean that we should not support the aspirations for democracy of the peoples of the underdeveloped world. We should encourage the rise of democratic governments when the conditions exist for their success, while not falling prey to the idea that it represents a universal quick fix. In recent years, democracy has made some meaningful inroads. In Latin America, Cuba remains the last bastion of totalitarian government, and some of the new democracies in the rest of the region, such as in Brazil, Argentina, and Mexico, have begun to improve their economic performance. In East Asia, South Korea held free elections in 1988, while Taiwan, Hong Kong, and Singapore have significantly opened up their political systems. Africa’s track record has also improved. In Mali, President Moussa Traore’s military government was driven from power in March 1991 by a group of army officers who committed themselves to democratic elections. In Zambia, President Kenneth Kaunda agreed last year to end two decades of one-party rule with elections in October 1991. In Benin, dictator Mathieu Kerekou was ousted in March 1991 in the country’s first free elections in history. In the Cape Verde Islands, the electoral victory of Movement for Democracy ushered out sixteen years of one-party rule. In Ethiopia, seventeen years of Communist repression ended with the victory of the Eritrean Liberation Front and the Tigre People’s Liberation Front, both of which have pledged to implement free-market reforms and institute democratic pluralism.

  While we cannot, and should not, transplant our system into the underdeveloped world or micromanage every developing country, we can make meaningful contributions. We should invest resources in helping these nations develop the social and political institutions needed for democracy to work. In 1982, President Reagan established the National Endowment for Democracy (NED) to encourage the growth of democratic government around the world, not only by sending teams to observe the fairness of elections, but also by funding a wide range of organizations, including prodemocratic think tanks, newspapers, civic groups, and labor unions. It has also done important work, particularly in Eastern Europe, in training democratic political parties in the basics of grass-roots organization. It represents a practical and realistic approach to promoting Western ideals in what is still a largely undemocratic world. Despite its successes, however, it must fight tooth and nail in Congress for its pitifully inadequate $25-million budget. If we are truly committed to seeing freedom and democracy flourish in the underdeveloped world, we should start by substantially increasing the funds for the NED.

  • • •

  The theology of state economic interventionism—epitomized by nationalized industry, state subsidies, and price controls—still attracts a large following in the underdeveloped world, producing scores of economic horror stories.

  In the 1980s, Latin America—despite its abundant natural resources and talented peoples—went into reverse gear economically. While the world enjoyed a major boom, Latin America’s economy went bust. In nineteen out of its twenty-one countries, living standards have declined. Per capita income fell by more than 10 percent for the entire region. In Peru, Argentina, and Nicaragua, it fell by 25 percent. The average annual rate of inflation among Latin American countries exceeded 1,000 percent in 1990, over ten times higher than in 1982. The region’s total foreign debt rose from $116 billion in 1980 to $421 billion in 1990. Mexico—whose stability is a vital interest of the United States—saw the peso’s dollar exchange rate escalate from 23 to 1 to 2,813 to 1 in less than ten years.

  In sub-Saharan Africa, living standards went from bad to worse. Sixteen of the world’s twenty poorest nations are located on the continent. In 1990, nineteen of sub-Saharan Africa’s fifty countries had a per capita income of $300 or less. Six—including Ethiopia, Chad, Somalia, and Tanzania—had per capita incomes of less than $200. Torn by civil war and sapped by socialist policies, Mozambique, whose real GNP declined by 1.4 percent annually for a decade, managed to generate a per capita income of only $80. Between 1981 and 1987, per capita GNP for sub-Saharan Africa’s six most populous countries fell at an annual rate of 4 percent. Over the past decade, the area has experienced a negative growth rate of 2.2 percent. Over the past two decades, African exports as a proportion of total world exports fell by 50 percent, while foreign investment in Africa dropped from $2.3 billion in 1982 to $500 million in 1986. Today, one-fourth of Africa’s population faces a chronic shortage of food.

  While it is generally assumed that Israel’s economic problems are caused by its high defense budget, Israel is actually a textbook case of an economy hobbled by a tradition of socialist economic policies. The Israeli government owns and operates 190 companies, which account for one-fifth of Israel’s industrial output and are worth more than $15 billion. In addition, the government owns 93 percent of all land. One-quarter of all Israeli goods and services are under price controls. Taxes consume 50 percent of Israel’s GNP. Worse, Israel’s protectionist policies—in the form of customs and nontariff barriers—force Israelis to pay twice the world price for many consumer goods.

  Some of the world’s most highly capable and talented people live in Israel. Its population not only has the highest literacy rates
and the best math skills in the world, but also has more scientists per capita than any other country. Israel publishes more technical and scientific papers per capita than any other nation—ten times more than the runner-up, the United States. If Israel abandons its destructive economic policies and embraces the free market, it could enjoy enormous prosperity.

  Not even generous U.S. economic assistance has been able to counteract the effects of these socialist policies. Over the past ten years, Israel has received $15 billion in U.S. economic assistance, an amount per capita fifteen times greater than that given to the next largest aid recipient, Egypt. Yet Israel’s real growth in 1989 was only 1.1 percent, while inflation ran at 21 percent and unemployment hit 9 percent. Israel’s foreign debt totaled $16.4 billion, one of the highest per capita totals in the world. Instead of serving as a helping hand, U.S. aid to Israel has become an economic crutch.

  India’s economic and political policies represent another case of flawed priorities. Its leaders deserve great credit for integrating an extraordinarily diverse population into a relatively stable democracy. It has 702 million Hindus, 97 million Muslims, 20 million Christians, 17 million Sikhs, 4 million Buddhists, 3 million Jains, and 7 million members of other religions. Its people speak 23 main languages and more than 200 dialects and are divided into more than 2,400 castes. India’s leaders committed a colossal error, however, when they bought into Western academic development theories emphasizing government intervention and import substitution. With the natural industriousness of the Indian people—the average Indian immigrant to the United States enjoys a higher income than the average American—India’s economy should have experienced booming growth in the 1970s and 1980s. Instead, real per capita growth bumped along at a 1.8 percent annual rate over the past twenty-five years, with its economic progress barely keeping pace with its massive population growth.

  These mistakes were compounded by the misguided geopolitical ambitions of India’s leaders. Instead of focusing on the dire needs of its people, whose per capita income reached only $340 in 1990, India’s political leadership squandered vast resources trying to elevate their country to the status of a regional superpower. From 1970 to 1990, the Indian government spent ten times more on the military than on education and eleven times more than on health care. Even the rivalry with Pakistan—over which India easily prevailed in battle in 1948, 1965, and 1971—does not represent an external threat sufficient to justify astronomic military spending levels. With a population of 850 million and a GNP of $333 billion, India dwarfs Pakistan’s 107 million people and $43 billion economy. Moreover, New Delhi’s military—the fourth largest in the world—fields twice as many combat aircraft and tanks and seven times more artillery than Islamabad’s.

  It is obscene that together India and Pakistan—two of the world’s poorest countries—spend over $11 billion annually on defense and even worse, have active nuclear weapons programs. While the United States has been rightly concerned with nuclear proliferation in South Asia, the exclusive focus on Pakistan’s program has been unbalanced. India, after detonating a nuclear device in 1974, has reportedly developed a small but significant nuclear stockpile. Since India’s leadership has yet to fully accept the legitimacy of Pakistan’s existence—and since New Delhi dismembered East and West Pakistan in the 1971 war—Islamabad concluded that it had no choice but to try to acquire its nuclear deterrent. Though we should seek to curb proliferation, particularly in volatile regions such as South Asia, we will not succeed if we ignore the security concerns that originally prompted countries to seek to develop nuclear weapons. We must therefore seek a region-wide solution, based on Pakistan’s proposals for a South Asian nuclear-free zone, that will not only advance our nonproliferation objectives but also enhance security and stability.

  India and Pakistan are symptomatic of a wider problem. Military spending in the underdeveloped world is spiraling upward by 7.5 percent a year, with the growth of its spending on military hardware outpacing that of the West by a three-to-one margin. A freeze on military budgets would free up $15 billion for economic development and for the dire humanitarian needs of the 180 million malnourished children in the underdeveloped world, 3 million of whom perish each year from preventable diseases because of inadequate medical care.

  Many Western analysts argue that because of their problems, the countries of the underdeveloped world deserve massive foreign aid. Their view of the world comes from a Charles Dickens novel. A cause-and-effect relationship, they contend, links the wealth of the industrialized world and the poverty of developing countries. Exploitation by multinational corporations and unbalanced terms of trade keep making the rich countries richer, while the poor nations grow poorer. Only vast transfers of resources from north to south through credits, low-interest loans, and development grants can balance the moral equation. They call in effect for an international entitlement program that would make the West the world’s welfare agency.

  Generous humanitarian assistance should be provided for those in desperate straits in the poorer countries of Africa. The infant mortality rate of Africa stands at 11 percent, reaching 18 percent in the Western Sahara. Half of the continent’s 480 million people are infected with malaria. But filling Africa’s tin cup with Western money is a stopgap measure. It will not solve Africa’s chronic economic and social problems.

  But if Africa’s leaders want to know who is responsible for its economic disasters, they should just look at themselves. To blame the West—or the legacy of European colonialism—ignores the socialist policies that have transformed once-prosperous agricultural areas from breadbaskets into basket cases. All the aid in the world will achieve nothing unless combined with sound market-oriented policies. Over the past decade, the United States and other Western industrialized countries have injected over $100 billion in aid and credits into sub-Saharan Africa. Most was wasted because inefficient and corrupt governments refused to put into place policies to provide average farmers and workers with incentives to produce. If we attempt to carry these countries on our back, the moment they are on their own they will fall flat on their faces.

  The argument that developing countries need the international dole to progress at a reasonable rate, if at all, is wrong. Those who contend, as one Western academic has, that “foreign aid is the central component of world development” are naive. Neither the Western world nor the Asian tigers needed infusions of external aid to industrialize their economies. We should reject the patronizing notion that underdeveloped nations need handouts to achieve what so many others did on their own. While that should not lessen our desire to help the less fortunate, we must remember that foreign aid goes not to people but to governments. Only if those governments, in turn, institute the right economic policies will we help the peoples of the underdeveloped world, not just its government bureaucrats.

  • • •

  Western policies toward the world’s pariah states—South Africa and the Communist regimes in Cuba and Vietnam—must address circumstances complicated by human rights and geopolitical considerations. In these cases, establishing normal relations—particularly in the economic sphere—must also serve our interests and values.

  The United States, as well as the rest of the world, has rightly condemned South Africa’s apartheid system since its inception in 1948. Worse than the notion of “separate but equal,” apartheid was based on the principle that races should be separate because they were unequal. It violated the fundamental precept of Western morality that every individual deserves to be treated with basic human dignity and granted equal rights. Although blacks in South Africa had a higher per capita income than in any other sub-Saharan African nation, and although far more brutal regimes existed elsewhere on the continent, apartheid’s formal legal inequalities made it different in kind, not just degree. South Africa’s system was not only morally repugnant but also economically stupid. No country can afford to squander the talents and productivity of 86 percent of its people, as Pretoria did by disc
riminating against all nonwhites. By denying them equal economic opportunities, the South African regime undercut its own potential prosperity.

  The economic sanctions imposed by most countries of the West, however, were the wrong response. Though satisfying the self-righteousness of antiapartheid activists, the policy hurt the people we most wanted to help. The economic boycott against South Africa was color-blind, affecting both the white and black communities. But unlike the blacks, the whites were in a better position economically to withstand its effects. The 215 American corporations that divested from South Africa were no longer able to enforce their fair employment practices and spend millions of dollars on social programs that improved the working and living conditions of their black employees. Many American companies, such as Ford Motor Company, had financed black housing, schooling, recreation, and health facilities. If sanctions had remained in place until the year 2000, they would have cost South Africa’s blacks an estimated 2 million jobs. Some key black leaders, who backed sanctions at the time they were imposed, have recently conceded the damage they did to South Africa’s blacks.

  Despite the criticism from Western foes of the South African government, President Bush acted correctly in repealing the sanctions in July 1991. President Frederik W. de Klerk had not only met all the conditions stipulated in the sanctions legislation—such as the repeal of the Population Registration and Group Areas Act and the release of all political prisoners—but had also signaled a clear intention to move toward a multiracial society. In addition to the negotiation of a new constitution, further progress toward a just and stable South Africa requires work on two fronts. First, the leaders of black organizations such as the African National Congress and the Inkatha Movement must curb black-on-black violence. A democracy cannot be built while blood flows in the streets. Second, the white government must prepare to redress the economic consequences of apartheid and block efforts by white extremists who do not want South African blacks to play an equal role in society. This means not only equality of opportunity in education and employment but also reparations to blacks whose land and property were seized under apartheid. Only after these steps are taken can South Africa be fully welcomed into the community of nations.