Seize the Moment (30 page)

For most of the underdeveloped world, learning the lessons of the successful developing countries represents only half of the battle. Before these maxims can begin to generate economic growth, many less developed countries must overcome the hurdles of political instability and economic mismanagement that have blocked them since they won their independence from the European powers. Without sound and stable government, neither foreign firms nor domestic entrepreneurs will risk their capital through investments. Without responsible fiscal and monetary policies, incentives to produce will evaporate. While we should seek to help those in poorer nations, we should not deceive ourselves into believing that any aid will make a difference until a solid foundation of political stability and economic common sense has been laid.

There are many different reasons for the poverty and turmoil in the underdeveloped world. In Latin America, fledgling democracies wage an uphill battle against massive governmental corruption, narrow-minded economic thinking, powerful drug cartels, and brutal Communist insurgencies. In Pakistan and India, human and economic resources are not applied to development projects but are instead squandered on the military. In Africa, incompetent and corrupt leadership has severely handicapped a continent that has
yet to struggle to its feet, much less enter the global economic race. Most African nations have rejected communism, but too many have adopted socialism. In the Middle East, the Arab-Israeli dispute has been matched by the growing intensity of inter-Arab strife.

Internal political instability remains the most debilitating feature of the underdeveloped world. Since my 1957 trip to Ghana, the first sub-Saharan nation to be granted independence from a colonial power, forty-seven other nations in Africa have become independent. There have been more than sixty coups and thirty-five assassinations of high government leaders. More than 10 million people have been killed in civil wars, and more than 15 million have died of starvation. No end to this pattern is in sight. Only three of the continent's fifty countries have had stable governments over the last twenty years. In Liberia, a brutal dictatorship was replaced in a bloody civil war in which three tribally based guerrilla bands sacked the country and killed more than ten thousand people. In Ethiopia, two ethnically based “liberation fronts” toppled the barbaric Communist regime of President Mengistu Haile Mariam. In South Africa, progress toward ending apartheid has not produced progress toward peaceful change, with black-on-black violence killing thousands of people.

In Latin America, there are still fifteen different groups of Communist insurgents and three major drug cartels holed up in jungle hideouts. In Colombia, successive governments have fended off repeated assaults by drug barons and Communist guerrillas, with violence directly related to drugs and terrorist groups claiming the lives of tens of thousands of Colombians over the past decade. More than 300 judges and court personnel were murdered between 1985 and 1991, and a total of 18,000 assassinations occurred in 1989 alone. In
Chile, Communist terrorists have unleashed a campaign to overthrow the government of President Patricio Aylwin, striking 279 times in 1990. In Peru, the Shining Path—numbering an estimated 5,000 hard-core Communist guerrillas—has murdered more than 11,000 people since its founding in the late 1970s. Political violence in Peru, predominantly committed by the Shining Path, has caused $10 billion in damage over the past decade.

In Asia, democratic governments have landed on hard times in recent years. In India, where political parties have long been the source of corruption in domestic politics, they are now becoming the instigators of ethnic and religious strife. In the state of Uttar Pradesh, Hindu extremists have battled Muslims for control of the Babri Mosque, leading directly and indirectly to more than two thousand deaths. At the same time, open armed conflict has raged in three areas. In the last eight years, India has had five different prime ministers, two of whom have been assassinated by radical factions. In Myanmar, formerly Burma, a military government seized power in a bloody coup in 1989, with the junta now permitting drug traffickers to ply their trade and launder their money from bases on its territory. In the Philippines, Communist rebels continue to undermine President Corazon Aquino's fragile base of power, while the competence of her own leadership has been called into doubt. There have been six coup attempts since she came to power in 1986, and many of her original ministers have resigned out of frustration with her directionless policies.

Many believe that democracy is the answer to the underdeveloped world's problems. According to this logic, because democratic government has proved to be the best form of government in the developed world, the West should export it to the rest of the world. In this view, the United States
should use its influence and leverage to force the dictators in the developing world to hold elections so that these countries can enjoy the fruits of political stability and escape poverty.

But democracy is not an Alice in Wonderland solution to these problems. Much of the underdeveloped world lacks the political traditions necessary to make democracy function properly. In some countries, ethnic hatreds, class divisions, and even tribal rivalries would frustrate the most well-intentioned advocates of democracy. A spirit of compromise and a willingness to accept defeat in elections are not universal human traits. Many political figures still adhere to Mao's dictum that political power comes from the barrel of a gun. For democracy to work, these nations must first transform their political cultures.

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.

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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.