Global Security

A Review Of Strategic And Economic Issues

Barry M Blechman

• Publisher: Routledge
• Year: 2021
• Topic: Politics & International Relations
• eBook ISBN:
  9780429709760
• Subtopic: Politics
• Index: Politics & International Relations

This overview of world affairs provides a comprehensive assessment of the important trends and events during 1986 and the first half of 1987 that will have a decisive impact on U.S. security. Combining the expertise of an eminent group of regional specialists, economists, and military analysts, Global Security: A Review of Strategic and Economic

1
The Year in Review

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Barry M. Blechman and Edward N. Luttwak

DOI: 10.4324/9780429036675-1

During 1986, global perceptions of the U.S. and Soviet governments were drastically overturned. Just when the world had become used to the first successful two-term presidency in Washington since Eisenhower's days—seemingly competent in all major policy areas and capable of maintaining productive relations with Congress—the confused and ill-managed Reykjavik summit, the Republicans' loss of the Senate in spite of exceptional presidential efforts in the congressional elections, and the Iran arms sale revelations shattered the aura of competence and success, undermined the international prestige of the Reagan administration, and presaged a serious reduction in its power to control events.

In Moscow, by contrast, Gorbachev's rule—consolidated within a purged Politburo—decisively broke the pattern of uncommunicative, inflexible, and almost inert leadership that had become the Kremlin norm since the later Brezhnev years. Gorbachev inaugurated a broad array of domestic and international initiatives and introduced two new terms to the Soviet political vocabulary that evoked the prospect of sweeping reforms: glasnost (openness) and perestroika (restructuring). That change in perceptions was duly reflected in the media. But in the substance of government and politics, there was much more continuity than change during 1986, in both the Soviet Union and the United States.

By the most tangible of criteria—the disposition of the federal budget—the Reagan administration's influence had sharply declined long before the summit, the election, and the Iran-Contra affair. As soon as the administration's budget request for fiscal year 1987 was presented to Congress at the beginning of the year, it became virtually certain that the key demands, for deficit reduction coupled to a substantial increase in defense authorizations, would be substantially rejected.

It was not until much later that the exact numbers were decided, but from the start of the budget season in February it was generally agreed that there was no prospect of congressional acceptance of the $320.3 billion defense request; rather, an unprecedented reduction of some $30 billion was likely. In the end, $291.8 billion was authorized, an 8.9 percent reduction, as compared to 6.1 percent for fiscal year 1986, 5.2 percent for fiscal 1985, and 4.2 percent for 1984. These numbers clearly indicate a trend—a progressive loss of presidential control over the budget process, which is the crucial priority-setting mechanism of public policy in the United States. Symptomatically, the largest reduction of all, amounting to more than 33 percent, was imposed on the request for the Strategic Defense Initiative (SDI) programs, reduced from $5.3 billion to $3.5 billion.

Another resounding defeat for the administration, also entirely predictable before the year-end troubles, was the Goldwater-Nichols Defense Reorganization Act, a package of sweeping reforms vehemently resisted by Secretary of Defense Caspar W. Weinberger; under the circumstances, this was the equivalent of a vote of no-confidence in the administration's management of the Defense Department.

Even those defeats, however, understate the gap between perceptions and substance that the year-end troubles merely reduced. For if one examines the deeper level of governance rather than the surface phenomena of Washington politics, it becomes evident that the strongly positive image of the Reagan administration that persisted through the 1984 reelection obscured very negative realities. By far the most important of these was the position of the United States in the international economy, which cannot but affect its role in international security as well (see Chapter 3 by Gary C. Hufbauer and Kimberly Ann Elliott, on the national security implications of global economic trends).

Whether or not the rising magnitude of the accumulated federal deficit, in excess of a trillion dollars, was and remains harmful in itself is still debatable. What is quite certain is that the deficit's conjunction with a very low domestic savings rate, and the consequent financing of much of it from foreign sources, has resulted in the accumulation of the world's largest external public debt. That debt must now be serviced by interest charges paid for either by otherwise unrequited exports or by the sale of capital assets (which will generate further external payments in the future)—unless additional borrowing takes place, delaying but aggravating the eventual standard-of-living burden of making the necessary transfers abroad. The devaluation of the dollar reduces pro rata the accumulated debt in foreign-currency terms but by the same token it depreciates capital assets in the United States that foreigners can buy, and reduces the import-buying capacity of U.S. exports. In other words, devaluation confiscates part of the foreign lending received in the past but aggravates the consequences of borrowing from abroad for current spending, rather than for productive investment.

If public borrowing of the magnitude recently experienced had taken place at a time when the U.S. economy was fundamentally sound, the consequences could only be trivial, just as the "supply-side" publicists have argued, because in the United States the public sector as a whole amounts to less than one-quarter of the total economy; its deficit, in turn, accounts for only a few percentage points of the gross national product.

Unfortunately, the economy is not sound. It is afflicted by a structural malady whose most visible symptom is a long-term decline in international competitiveness, lately dramatized by disappointing post-devaluation export figures.

The onset of this condition antedated by many years the Reagan administration, but its positive encouragement of complacency has certainly done nothing to improve the situation. A sinister parallel with Great Britain's economic decline is not improper: It too was masked by possession of an international currency that allowed liberties to be taken with the foreign-trade balance as other countries shipped goods in exchange for sterling-designated paper; it too was characterized by the downfall of classic manufactures and heavy industry, fecklessly slighted as "old-fashioned"; and it too proceeded amidst baseless self-satisfaction (recall Harold Macmillan's slogan of 1959: "you never had it so good"), which anaesthetized British society at a time when there should have been instead a great sense of urgency and alarm.

One need not evoke analogies to register what hard numbers prove—the sharply diminished relative productivity of the U.S. economy, which is slowly but cumulatively impoverishing the United States and its people in real terms, as deflated family income figures clearly show. Masked by inflation during the 1970s and by external borrowing more recently, this process cannot continue for long without leading to a degradation of the standards and institutions of U.S. society in noneconomic ways as well, as the British example again suggests.

Long before any acute societal symptoms are likely to be manifest, the entire position of the United States as a world power will have been eroded. The key to the system of U.S. alliances in place since the aftermath of World War II was the primacy of the United States as both a surplus producer of security and as a net exporter of capital, goods, and services. This dual role enabled the United States to provide concurrently both defensive garrisons in place as well as centralized deterrence from U.S.-based forces without demanding payment pro rata. It was this departure from the historically normal collection of overt or disguised tribute by the provider of security that made possible the historically unprecedented duration of the North Atlantic, U.S.-Japanese, and other defensive alliances.

If the U.S. economy fails to recover sufficiently to become internationally competitive once again and reverts to an external surplus position, it is most unlikely that the United States will continue to borrow overseas and also continue to provide forces in place to protect its creditors—unless directly compensated for its military costs and not just for local currency expenditures (as is now sometimes the case, at least in part). Whether it is the necessary resources or the domestic political consent that would be the first to be exhausted, one cannot say; but certainly without one solution or the other, the upkeep of overseas defensive garrisons in Western Europe, Japan, and Korea, the airlift and sealift forces that they require for crisis augmentation and wartime resupply, as well as associated protective forces, simply cannot continue undiminished.

At this time, far from implementing fundamental remedies for an economic decline that clearly has causes of a fundamental nature, no investigation has been made to uncover what those underlying causes might be. Distortions in the capital markets that allocate funds preferentially for manipulative rather than productive purposes, educational shortcomings at many levels, the overstimulation of consumption rather than of saving and production, and even the hidden long-term effects of commercial television are only some of the institutional, societal, and cultural causes that have been mentioned as factors in the present crisis. None are likely to be remedied either by laissez-faire policies or by mere legislative tinkering, but as yet no serious reforms have been proposed, let alone attempted.

In the short term, anticipation of what is to come has included old suggestions from novel and unexpected quarters (e.g., Henry Kissinger) for reductions in the U.S. forces stationed in West Germany and Japan and of course the reduction in defense authorizations already mentioned. Most harmful of all, so far, has been the continuing decline in funds for economic security assistance and in loan guarantees for foreign military sales extended to poorer allies in difficulties. Nor has the United States, in its reduced economic state, been capable of confronting the Latin American debt crisis, whose direct consequence has been to block the recovery in U.S. exports in the largest potential market, and whose indirect political consequences could be catastrophic for the stability of the region. Overall, crisis-prevention efforts by way of economic assistance continue to be slighted as compared to crisis-management capabilities by military means, even though the cost ratios are similar to those between preventive and therapeutic medicine.

Whereas newly negative perceptions of the Reagan administration have merely corrected exaggerated images of success, newly positive perceptions of Gorbachev's leadership of the Soviet Union have overstated its meager results so far. That Gorbachev has been party general secretary for only two years at this writing is not as significant an excuse as it might have been in other circumstances: By the time Gorbachev secured his control of the Politburo, the critique of the status quo established under his predecessors was already fully developed, a reform agenda for the economy had been broadly ventilated, and suggestions for change in other areas of Kremlin policy (including the conduct of public relations overseas) had been accumulating for almost a full decade. Hence Mikhail Gorbachev has not been in the usual position of a reforming successor who must first expend much time and energy in breaching the barrier of complacency. Brezhnev in his dotage, Andropov in his illness, and Chernenko in his debility obviously did not launch a reform program; but among Soviet economists and diplomats (e.g., Abel Aganbegyan), technically minded military leaders (e.g., Marshal Nikolay V, Ogarkov), and military-minded technical managers (e.g., those in aerospace), there was no complacency to breach. Rather, much anxiety—and an increasing tendency to propose fairly radical reforms even by way of public media accessible to Western observers—had been expressed. It is against that background that Mikhail Gorbachev's record must be assessed. (On the Soviet economy in detail, see Chapter 4, by Herbert S. Levine).

At the 27th Party Congress in February 1986, Gorbachev received much praise for the improved performance of the economy since his advent to power. Industrial statistics were cited to show that in the last quarter of 1985, output had increased at an annualized rate of 3.5 percent. Scrutiny of the possible causes reveals that the weather (the coldest winter in two decades) had depressed the basis of comparison (namely, the last-quarter 1984 figures); that two days of holiday were suppressed ("postponed") during the second half of 1985; and that investment had been increased by 2.7 percent during 1985 (in a pre-Gorbachev decision), as compared to a growth rate of 1.9 percent in 1984. What Gorbachev can claim full credit for are his anti-alcohol and work discipline campaigns, as well as his replacement of twenty-five presumptively "stagnant" (if not corrupt) ministers and state committee chiefs with economic portfolios, and of five Central Committee departmental chiefs with supervision over economic sectors, including machine-building and construction.

Such administrative measures can have, and apparently did have, a one-time positive effect; in February 1987, figures were published according to which the temperance campaign had not only increased productivity but also reduced mortality rates. Still, a "work harder/ drink less" campaign of exhortation is a weak substitute for structural measures, that can have a continuing effect by providing incentives for an improvement in worker productivity that does not fall off—as mere exhortation must. Instead of structural change, however, one more wave of bureaucratic reorganization has occurred, with a recasting of the agro-industrial supervisory system, the formation of new industrial bureaus, and more of the same. But the Soviet economy has been on a treadmill of reorganization for many years—under Brezhnev as well—without any perceptible beneficial effects in the long term.

For a regime that speaks so much of perestroika (restructuring), the absence of genuine structural reform has been quite remarkable. Gorbachev has been cited as having vehemently criticized Gosplan, the central-planning bureaucracy, which is the administrative instrument of state control over the economy; but he has not abolished Gosplan, as indeed he cannot until the only alternative, a market economy, is first put in its place. Hence Soviet factory administrators (they are not managers in any real sense) continue to receive minutely detailed Gosplan orders that specify what is to be produced at what numerical rate; they are not allowed to decide for themselves—and indeed they could not, given the absence of a responsive market whose prices would be the, only valid indicators of what should be produced—of what quality, and in what volume.

To be sure, decrees have been published that widen the sphere of collective and even private enterprise. At first glance, they suggest that sweeping changes should result, but a more detailed scrutiny reveals that as much is being taken away as is being given.

In regard to private enterprise, for example, practices already very widespread have been legalized: State employees who used to perform auto repairs, construction work, tailoring, and other services illegally ("on the left" as the Russians say), and in their spare time, may now do so officially, so long as their state work is not slighted and they declare their private income and pay rather high taxes. Full-time private practice is still not allowed, however; nor is the employment of others. And in a fatal omission, no provision has been made for the legal purchase of the necessary tools and supplies by the newly legalized artisans. In the past, tools and supplies were obtained "on the left" also, directly or indirectly through the theft of state property, which was seemingly tolerated up to a point as a sort of fringe benefit. In the present much more regulated climate, illegal appropriations have been greatly restricted by all accounts; at the same time, there are still no Western-style hardware or "do-it-yourself" stores to provide what is needed legally. Similarly, in the latest decrees, Soviet collectives (i.e., cooperative enterprises) have even been authorized to transact business directly with foreign entities without having to go through the Ministry of Foreign Trade and the intermediate state-trading offices established in each sector. But the ruble remains nonconvertible, and no market has been established to apportion scarce hard currency by competitive ruble bidding. Hence, in practice, this aspect of the reform must remain a dead letter, except insofar as collectives choose to export directly, earning foreign currency that would presumably have to be remitted to the state bank for exchange at the inflated official rate, which should in turn make most exports unprofitable.

To be sure, external trade is only a minor factor for the Soviet economy in general and thus for most enterprises; thus the persistence of central planning is by far more important in nullifying the administrative reforms enacted so far. But the disjunction between the liberalization of external dealings and the failure to create a foreign-currency market that would make them profitable are characteristic of Gorbachev's innovations as a whole in addressing externalities rather than the substantive core of each question.

The explanation commonly offered is that substantive reform is blocked by an uncooperative bureaucracy, and there is undoubtedly some truth in that: Certainly a great many in the middle and higher layers of the state bureaucracy must resent the upheavals and mass firings of the new regime, which has explicitly repudiated "the stability of cadres" that Brezhnev has ensured and, of course, there are the usual factors of inertia and fear of the unknown at work. But there also exists a much greater obstacle to substantive economic reform that many commentators appear to overlook: The present system, though increasingly unsuccessful in ensuring meaningful growth in conditions of rapid technological change, has been successful indeed in guaranteeing Moscow's highly centralized political control over a vast land of very diverse population.

Whatever its defects as an economic instrument, the Gosplan has been effective as a political instrument in subjecting economic activity in every part of the Soviet Union to Moscow's detailed control: It largely preempts the nominal autonomy of the republics, and above all it enables the Communist party itself to function in its postrevolutionary managerial role. It is only because the party's cadres have detailed output targets to administer, rather than entrepreneurial tasks ill-suited to political operatives, that these cadres have been able to function in significant and materially rewarding roles as the managers of collective and state farms, industry large and small, wholesale and retail distribution entities, and infrastructural services. Insofar as illegal activities proliferated under the old regime, in reaction to the rigidities and errors of central planning, they did not e...

Table of contents

• Cover
• Half Title
• About the Book and Editors
• Title Page
• Copyright Page
• Contents
• List of Tables and Figures
• Foreword
• 1 The Year in Review
• 2 The East-West Military Balance
• 3 The International Economy with a National Security Perspective
• 4 The Soviet Economy: In Search of Reform
• 5 Southern Africa: Descent into Chaos?
• 6 NATO's Southern Flank: A Troubled Region
• 7 Latin America: Political Progress, Economic Stagnation
• 8 South Asia in 1986
• List of Acronyms
• About the Contributors
• Other Titles Published in Cooperation with the Center for Strategic and International Studies
• Index