Bush and Gorbachev
Jude Wanniski
May 3, 1989

Understandably, there is quite a division of opinion in the Bush Administration on whether or not it is in U.S. interests for Mikhail Gorbachev to succeed in his economic reforms. Defense Secretary Dick Cheney caused some fluster at the White House with his observations on Friday's Evans & Novak TV show, doubting Gorbachev would succeed. The President came back with some ardor in his hope for success in both the USSR and China on the grounds that "economic reform with its emphasis on incentive and market economics leads to more freedom." Cheney reflects the more cautious view that even successful economic reforms may not produce sufficient political freedom in Moscow to reduce the security threat to our economic and political allies. It's quite proper for him to hold to that view as Pentagon chief, equally desirable that the President do everything he can to coax Gorbachev down the road to democratic capitalism. It is also in Gorbachev's interests, if he really aims to eventually integrate the Eastern bloc into the fabric of the Western industrial powers, to have Cheney maintaining a healthy skepticism. Hitler and Mussolini used heavy doses of incentive and market economics to propel their fascist economies. It was anti-democratic political corruption that propelled them toward world war.

Cheney is right, so far. Gorbachev's economic initiatives to date have not been especially encouraging. The object of perestroika is to create a wealth of goods, but again and again we see Old Guard resentment of individual prosperity producing taxes and regulations to prevent its creation. This is why I've advised the Bush Administration that the new Soviet income-tax law is a threat to Gorbachev's success, signaling the Soviet people that once a citizen earns 1,500 rubles a month (perhaps $300 a month at a realistic exchange rate) the government wants him to sharply reduce his efforts at wealth creation, via a 50% tax rate. I wrote of these concerns to the Soviet Embassy, which advises me they have been conveyed to Moscow. There is hope among the reformers, I'm told, that when the Supreme Soviet meets May 25, some of the fresh political breezes generated by Easter Sunday's elections will modify this tax law.

This is Gorbachev's best hope, to engage the masses on the side of reforms by creating a political mechanism through which they can be heard. Prior to the Easter elections, the Western press was almost wholly taken in by official opinion that the great majority of Russians remained egalitarian in outlook. This can't be true or it would defy human nature. The masses are egalitarian only when faced by economic contraction. When given the opportunity to create economic expansion, the electorate will invariably choose avenues for individual initiative and reward.

The absence of democracy in the socialist bloc is the chief burden to it. This is quite the contrary to the Kissinger view in the Nixon years that Moscow and Beijing were advantaged in being able to act swiftly, not having to aceomodate the political forces that slow policy change in a democracy. My recent advice to the Soviets is to think of the electorate as a giant computer, able to process information, confront problems and generate solutions on a far more efficient scale than any unfettered oligarchy. I made the point some years ago in a conversation with William F. Buckley, asking him to consider that each of his individual brain cells was "dumb," but when the cells were assembled into an integrated circuit, the brain was brilliant. Similarly, I suggested to Buckley that if he stood on a street corner in Manhattan with a clipboard, interviewing 100,000 passers-by over a period of months, chances are that he would not find one of them smarter than he. But if he assembled them in a stadium and found a way to have them answer questions pitted against him, they would invariably defeat him. I reminded him that he once said he would rather be ruled by the first fifty people in the Boston telephone directory than the entire faculty at Harvard! It is the same principle; on Wall Street we would think of program trading and portfolio diversification.

In order to keep pace with the West, the Soviet Union has no choice but to democratize, to organize itself politically in ways that optimize the inherent, collective wisdom of the Soviet electorate as if tapping into a computer. Otherwise, the USSR will struggle along at the level of a PC Jr. (put the czarist mechanism at the level of an abacus) while the United States, Europe and the Asian democracies are streamlined Cray supercomputers. Gorbachev seems to somehow know that in this sense political reform, glasnost, is more important than economic reform. The Chinese are now discovering the limits of economic reform in a system that is using a political PC Jr., pressing for change while Deng Xiaoping is still alive, at a point where they have maximum influence on the succession. When I was in Beijing in 1983, I observed the fervor of newfound freedoms in the economic area, but noted the political limitations. I quoted a student at the University of Beijing who observed that "Deng Xiaoping is a great man, but he is still a dictator." In 1986, when I returned to China, I was excited to learn the reformers were writing openly about the need for democratic reforms in order to benefit from the "feedback effects" of elections. The current student demonstrations in China are an extension of these impulses, an attempt to catch up with Gorbachev on his Easter political adventure at a time when democracy is in the air everywhere. (I recommend Gregory Fossedal's new book, The Democratic Imperative, Basic Books.)

My belief is that both Gorbachev and the Chinese leaders can succeed in adapting to a democratic framework as long as they have the understanding of the Western leaders and in turn understand the political bearings that distinguish between President Bush and Dick Cheney. There are no hardliners I'm aware of who truly do not wish Gorbachev to succeed in the way President Bush has in mind (although plenty believe it won't happen). I'm thoroughly convinced Gorbachev at least knows the ultimate outcome of his reforms must involve integration with the world economy, which means the USSR will have to become part of the global division of labor in an Adam Smithian sense. For that to happen, democratic institutions (the electoral computer) have to dominate policy in the Soviet Union, and at that level, the USSR ceases to be a physical threat to the planet.

How long will it take to get there? Not as long as we might think. Glasnost has already set up centrifugal forces in the ethnic regions that can only be balanced by the centripetal forces of democratic communication, "feedback." It would be to the advantage of Lithuania, for example, if Moscow democratized sufficiently to satisfy the particular national tastes of the Lithuanians. There would be no need to spin off if the Empire became responsive and benign. The Soviets have as their model the United States, which embraces far more diversity of race, religion and ethnicity a point my Soviet acquaintances enjoy thinking about as they observe the strains in the system. With Europe integrating, the USSR can too, but constant progress toward political reform is required to keep the natives from becoming restless as China now demonstrates.

Hardliners here are already critical of Gorbachev for not axing those Communist Party leaders who were defeated in the Easter balloting. But that would be a foolish thing for Gorbachev to do in the foothills of democracy. The defeated now have an opportunity to try again, the next time without taking the voters for granted. If so, we should see more of the spirit of enterprise. Change requires change. This is also why I agree with Irving Kristol that it is in the natural order of things that West Germany would now be straining away from NATO, given the new dynamic underway in Europe. I also tend to agree with Paul Nitze that President Bush should be making allowances in that direction in arms negotiations. It's perfectly proper for us to both anguish publicly about Bonn's dalliance with Moscow and privately cheer as it tests the intentions of the suitor from the East. This is how we should understand the seeming differences between President Bush and his Defense Secretary. There are really no differences at all.