Seize the Moment

by Richard Nixon

  The junkyard relics of Moscow’s former empire in the underdeveloped world pose different problems. Some pundits argue that now is the time to normalize relations with Cuba and Vietnam, that the reasons for our mutual enmity have faded with the cold war, and that the West should extend trade and foreign aid as a peace offering. This view is wrong. The United States must insist that each meet specific political and human rights conditions before establishing diplomatic or trade relations.

  We must not allow the brilliant performance of Cuban athletes in the Pan American games to blind us to the fact that Cuba is an economic disaster area. Castro’s government, not the Cuban people, is to blame. Cuban Americans in southern Florida enjoy extraordinary prosperity, while Cubans ninety miles away who stayed behind suffer in abject poverty. After relying for decades on Soviet aid and subsidized trade, Cuba has been squeezed by the twin problems of incompetent government planning and cutbacks in Moscow’s largess. Castro has tried pathetically to rally the Cuban people by calling for a “special time of peace”—a euphemism for wartime austerity. More than 240 items, including fish, fruit, milk, rice, and other basic foodstuffs, are now rationed. Fuel shortages forced state farms to draft over 600,000 bulls and oxen to replace their tractors. Instead of moving Cuba forward, communism has pushed it backward.

  Vietnam faces similar problems. While the Soviets pumped in over $33 billion in economic and military aid since 1979, the Vietnamese have sunk into a self-inflicted economic malaise. Poor harvests in the late 1980s pushed 7 million people to the verge of starvation. Today, Vietnam has a 20 percent unemployment rate and cannot absorb the 1 million new workers who enter the labor force every year. Trade with the former Soviet Union and Eastern Europe, which accounts for 60 percent of its total trade, has plummeted. Hanoi is scrambling to service its $18-billion debt to Moscow. Vietnam now sells old U.S. military equipment, such as tanks and armored personnel carriers, as scrap metal to earn hard currency on the international market. With a per capita income of $130, it is one of the five poorest nations in the world.

  Because Cuba and Vietnam continue to challenge our interests, the United States must link diplomatic and trade ties to changes in their foreign policies. Castro continues to funnel millions of dollars of arms and ammunition to the Communist guerrillas in El Salvador and to encourage their obstructionism in the ongoing peace talks. During the past twelve years, the Salvadoran civil war has caused over $2 billion in economic losses and seventy thousand deaths. The United States must not expand political or economic contacts that would increase Cuba’s ability to undermine democratic governments in Central America.

  Vietnam’s leadership has continued its quest for regional domination. It is sadly ironic that those who fought to expel French colonial rule from Indochina now view that region as their natural imperial domain. Despite the withdrawal of Vietnamese forces from Cambodia in 1989, Hanoi provides the essential economic and military support needed to keep its client, Hun Sen, in power in Phnom Penh. In addition, the Vietnamese dominate Laos, where they have brutally used chemical weapons against the Hmong people in the southern part of the country.

  Even if Vietnam were to facilitate a peace settlement in Cambodia and allow genuine self-determination for Laos, we should insist on two other conditions for normalization of relations. First, Hanoi’s rulers must provide a full accounting of the 2,273 Americans still missing in action from the Vietnam War. Second, they must liberalize their totalitarian political system, particularly in the south. Since the borders of the unified Vietnam were established by conquest, not concord, we owe it to the Vietnamese people—millions of whom fought with us as allies—to demand improvements in the regime’s human rights record before we restore economic and political ties.

  Angola is a classic example of a country where Soviet-style communism has lost the battle, but freedom has not yet won the war. In June 1991, the Moscow-backed government in Luanda and the freedom fighters of the pro-Western Unita movement signed a political settlement that ended sixteen years of war and provided for multiparty elections. With the final pullout of Cuban troops from Angola in the summer of 1991, the conditions exist for ending the strife and poverty imposed on the Angolan people by communism. While we must exercise vigilance to ensure the fairness of the elections, the United States should also stand ready to assist Angola—rich in natural resources and human talent—to rebuild its economy once a freely elected government comes to power. We should help a free Angola, not only for its own sake, but also to create an example of what could await other former Soviet-client states if they choose to join the free world.

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  For decades the underdeveloped world has been bleeding from self-inflicted wounds. While the world moved toward free trade, many underdeveloped countries isolated themselves in economic autarchy. Yet today there are many encouraging signs that these developing countries might finally integrate themselves into the world economy.

  In his much-heralded work, The Other Path, Peruvian economist Hernando De Soto analyzes the lessons of Peru’s massive underground economy and advocates a complete break from economic authoritarianism, with its stifling bureaucracy, government intervention, and state subsidies. While De Soto reminds his readers that economic and political freedom are the twin pillars of stability in the underdeveloped world, his main message is that developing countries must solve their own problems, not look for help from abroad. His book won plaudits throughout Latin America, indicating that many developing countries may be ready to take critically important steps on the road toward market-based prosperity.

  This new sense of hope is evident throughout the underdeveloped world. In the early 1950s, many governments adopted the socialist model as a shortcut to industrialization. Today, many of these same countries have cast aside socialism and embraced capitalism. The success of the four Asian tigers has spread to Thailand, Indonesia, and Malaysia. In Latin America, the Chilean example of economic growth has attracted widespread interest. In South Asia, India and Pakistan are turning toward the market. In Africa, several heads of state have adopted the rhetoric of radical economic change, even though their actions still fall far short in practice.

  Our policies must build on this hope. Our strategy should therefore advance along four fronts:

  Assist population control programs. We must help break the link between spiraling population growth and poverty. At current rates, the underdeveloped world’s population will increase 23 percent by the year 2000 and 77 percent by the year 2025. Countries such as Mozambique, Ethiopia, Tanzania, and Somalia will need to maintain real economic growth rates greater than 3 percent just to keep their per capita incomes from dropping. Unchecked population growth will put them on an ever-accelerating treadmill that will outpace any potential economic performance.

  Where they have been tried, family planning programs have largely worked. Thailand reduced its population growth rate from 3.1 percent in the 1960s to 1.9 percent in the 1980s, which in turn helped sustain an average annual growth rate over 7 percent during the decade. But today only half the women in the underdeveloped world have access to standard birth control methods. More than 125 million additional couples would use birth control methods if they were available. Unless family planning programs are expanded, the economies of the underdeveloped world will forever languish behind the curve of population growth.

  Many pro-life advocates argue that the United States should stand by the so-called Mexico City policy, which denies funding to any family planning organization that employs abortion in any of its activities. They contend that to condone abortion even implicitly is morally unconscionable. Their view is morally shortsighted. If we ban all funds to such organizations, we might prevent hundreds or thousands of abortions. But if we provide funds for birth control methods other than abortion—even if the same organizations we aid engage in abortion with money acquired from other sources—we will prevent the conception of millions of babies who would be doomed to the devastation of pover
ty in the underdeveloped world.

  Abortion is a deeply divisive issue in the United States. We can honestly disagree on that issue insofar as it affects policy in this country. We should not, however, try to export our views on abortion to overpopulated countries in the underdeveloped world, whose values and circumstances differ so profoundly from our own. Unless the population growth rates are slowed, many developing countries will forfeit their only chance to provide a better standard of living for their peoples.

  Reduce trade barriers to exports from the underdeveloped world. To promote economic growth, foreign trade, not foreign aid, should be our principal instrument. Over the past forty years, the United States has poured more than $400 billion in foreign aid into the underdeveloped world. The results have been meager. Foreign aid alone often only serves to prop up inefficient industries, increase industrial subsidies, and raise trade barriers. The developing countries cannot immerse themselves in the healing waters of free trade unless the industrialized world keeps its markets open to their goods.

  By removing trade barriers, these countries have the chance to specialize in industries in which they enjoy a competitive advantage over the rest of the world. In the Uruguay Round of the GATT talks, we should push for the elimination of costly agricultural subsidies in the United States and the European Community that prevent the less developed countries from gaining access to our markets.

  If we are to preach the gospel of free trade, we must practice it by eliminating our own self-serving agricultural subsidies. Sugar quotas, for example, deprive impoverished sugar-producing countries, such as Guatemala, Jamaica, the Dominican Republic, Colombia, and the Philippines, of vitally important export earnings. These import restrictions also force Americans to pay twice the world price for sugar, which costs them $3 billion a year. In addition, the U.S. government coddles the nation’s thirty thousand peanut farmers. It restricts foreign peanut imports to 1.7 million pounds per year, which is only two-tenths of one percent of total domestic consumption. This absurd quota leaves poor peanut-exporting countries out in the cold, while forcing U.S. consumers in effect to subsidize each American peanut grower an average of $16,000 annually.

  By promoting the mutual economic interests of the United States and Mexico through the negotiation of a free-trade agreement, President Bush has taken a vitally important step in the right direction. The best way to promote the development of Mexico’s economy is to grant free access to the U.S. market. This agreement would not be a one-way street. Free trade will increase our exports to Mexico, as well as reduce the flow of illegal workers into the United States.

  Many liberals—who claim to be advocates of the underdeveloped world—raise the banner of protectionism in their campaign against the free-trade agreement. Though their hidden agenda seeks to shelter special interests, they have launched a two-pronged attack against the free-trade accord. They argue that U.S. firms will flock to Mexico because of its low wages and that Mexico’s weaker environmental and worker safety laws will give Mexican firms an unfair competitive advantage. Both of these objections are unfounded. If U.S. corporations located their facilities simply on the basis of lower wages, they would all have moved to Mexico already. In addition to wage levels, other variables such as output per worker, transportation capabilities, and the quality of human resources are all part of the economic equation. Moreover, Mexico has committed itself to enhancing protection of the environment and its workers. Free trade will help to provide Mexico with the resources needed to strengthen enforcement of its laws in these two areas.

  The strongest argument in favor of the free-trade agreement, however, is not economic but political. Those who contend that we should keep Mexico at arm’s length economically because its government is not fully democratic would compromise a vital U.S. interest. A free-trade agreement could be the key catalyst in moving Mexico toward greater political democracy. If we fail to work with President Salinas to develop Mexico’s economy, we would not only throw U.S.-Mexican relations into a tailspin. We would also send Salinas to an early political grave and give his leftist rivals the hammer to nail his coffin shut.

  A new generation of enlightened leaders in Mexico—led by Salinas—has emerged to defend the principles of free-market economics. Their commitment to those principles has been met with tough resistance from Mexico’s entrenched bureaucracy, including rural chieftains, anti-U.S. populists, and corrupt politicians. By signing a free-trade accord with Mexico, the United States will help slay the bureaucratic dragon that has wreaked havoc on Mexico’s economic and political system for the past century. A failure to complete a free-trade agreement with Mexico would not only deal a serious blow to free-market reformers, but it would also send a message throughout all of Latin America that the United States is not serious about helping developing countries achieve economic prosperity.

  A U.S.-Mexican free-trade agreement could be the first step toward a western hemisphere free-trade zone. We would derive huge economic benefits from such a trading agreement. In 1989, 13 percent of our exports went to Latin America and the Caribbean, more than our total exports to Japan. If we doubled our exports to this region, we would create 1.2 million jobs for American workers. The purpose of a hemispheric free-trade agreement would not be to form a potential trading bloc against Japan and the European Community, but to increase trade throughout the hemisphere. Free-trade agreements, both regional and multilateral, always serve our interests because they open up possibilities for greater economic growth.

  Improve the effectiveness of economic assistance. We must face up to the fact that in the past our foreign aid has done as much harm as it has done good. Too often it has perpetuated bad habits rather than encouraged necessary change. Since foreign aid budgets will almost certainly shrink in the future, we need to overhaul these programs if we expect them to help the people of the underdeveloped world.

  First, we need to give our aid on the basis of strict conditionality. We should not extend aid without attaching strings with clearly defined and measurable goals. While we cannot micromanage every dollar of aid distributed, we should monitor our funds to ensure they are not spent irresponsibly on wasteful infrastructure projects or siphoned off into government graft.

  Second, we should extend more of our aid on a bilateral, not multilateral, basis. Multilateral organizations such as the World Bank have their own agenda, which does not always coincide with ours. Even though we provide 20 percent of the capital for these organizations, they have in the past made loans that sharply conflicted with our interests. They have, for example, provided discounted loans to Soviet-backed, anti-Western governments, such as Ethiopia, Somalia, and Vietnam. In addition, most multilateral organizations have omnivorous bureaucracies whose regal offices and padded payrolls rival those of the corrupt regimes to which they lend. Before we pour any more resources into these organizations, a major review of their overhead expenses and lending practices must be undertaken. It is wrong to spend millions of dollars on first-class travel accommodations for World Bank staff when the citizens of the underdeveloped world live a third-class existence.

  Third, we should establish “enterprise funds” for those countries in the underdeveloped world that have adopted market-oriented reforms. These funds, which should be patterned on those in Eastern Europe, would fund viable business ventures, not frivolous government-to-government aid projects. They would lend money to individual entrepreneurs to start their own businesses, stimulating grass-roots economic activity rather than greasing the wheels of government bureaucracy.

  Because of our budget constraints, we spent almost $15 billion on foreign aid in 1991, less than three-tenths of one percent of our GNP. While the needs of the underdeveloped world continue to grow, our aid budget cannot. We must therefore ensure that our aid is spent on projects that stimulate growth from the bottom up, not the top down. If we encourage aid recipients to undertake free-market reforms, open up entrepreneurial opportunities, and generate investment possibilities
, our aid will be well spent. If not, we are throwing away not only our money but also any chance to better the lives of the people in the underdeveloped world.

  After World War II, the United States extended a helping hand not only to its war-ravaged allies but also to its former enemies in Germany and Japan. Over the past forty-five years, Berlin and Tokyo have surged ahead, while most of the underdeveloped world has fallen behind. Until recently, the United States has shouldered most of the burden of foreign aid. Germany and Japan must now adopt a sense of global responsibility on a par with their burgeoning economic power. While Japan has taken encouraging steps by increasing its foreign aid budget to over $15 billion in 1991, both countries must do far more to give the underdeveloped world the same chance to grow and prosper that we gave them nearly half a century ago.

  Facilitate debt relief. The ultimate answer to the debt crisis lies with the underdeveloped world. These countries must restore both domestic and foreign confidence in their economies before any long-term solution is possible. At the same time, Western governments must insist that the banks that recklessly lent billions to uncreditworthy states bear their share of the burden. Western leaders should do their part by not imposing draconian payback schemes that would crush the underdeveloped world’s ability to finance its debt. Too much international pressure could create political instability, which would drive out responsible democratic leaders and drive in radicals who would rather cancel than carry their debt.

  The underdeveloped world’s $1.3 trillion debt not only restricts the potential growth of these countries but also serves as a deadly drag on the world economy. Some analysts have proposed elaborate debt-for-equity swaps, in which debtor states would trade ownership of enterprises and resources for cancellation of debt. While these proposals recognize the fact that the debt crisis must be solved by both the creditors and the debtors, they will not by themselves solve the critical economic problems that have forced many developing states to contract excessive debt in the first place.