The Price of Nostalgia
America’s Self-Defeating Economic Retreat
The 1980s have been a good decade for the West. For the United States and for Europe alike they have been years of growing prosperity, reassurance and stability. The 1960s were a decade of illusion and baseless fantasies of utopia; the 1970s were a decade of disillusion, shattered hopes and rising fears. The 1980s have been a decade of realism, in which the affairs of the world, and of the West in particular, have been placed on a firmer, more concrete foundation.
These years have been marked, above all, by a return of confidence in the disciplines and rewards of the market system and a corresponding collapse of faith in collectivist solutions and the capacity of command economies to deliver. Capitalism seems to have recovered its entrepreneurial vigor. Marxist socialism appears to be dying, except perhaps in that home of lost causes, the university campus.
In all these developments Ronald Reagan has played a significant role: sometimes mostly as a symbol or figurehead, sometimes as active agent. It is impossible to imagine the 1980s without him. Future historians may call it the Thatcher Decade; they may even be tempted to call it the Gorbachev Decade. But it is far more likely, in my view, that they will settle for the Reagan Years. For it is the genial character of this unusual man, reflecting his attractive blend of naivety and wisdom, which has given an unmistakable coloring to a decade in which the peoples of the West felt better off and more secure.
This is more than a subjective impression; it is based on solid reasons. We have learned one lesson in the last half-century: the well-being of the world depends, above all, on the sensible pursuit of common aims by the United States and the free European peoples. That the Japanese are rapidly transforming this relationship into a triangular one goes without saying. But the U.S.-European axis remains the fulcrum of stability, and the Europeans know it: it is the one fixed point in their geopolitics. For this reason they are remarkably dependent on the workings of the American system, and the character of the man it places in the White House.
The Europeans favor a strong president: that is, a man strong enough in himself, and in his relations with Congress, to accept and discharge the international responsibilities which America's enormous power has thrust upon it. Most Europeans agree that the central tragedy of their history in the early and mid-twentieth century was the reluctance of the United States to participate in Europe's affairs. What they fear most is a return to American isolationism. So they want a president who accepts global duties and takes firm decisions, even though they may not always agree with them.
They have much more confidence in the White House than they have in Congress. They watched with dismay the decline of presidential power from the last years of Lyndon Johnson's Administration onward. As the Europeans see it, Johnson, initially a strong and outward-looking president, was broken on the fiery wheel of Vietnam. Richard Nixon, another strong president with broad global views, was sunk by Watergate, an episode the Europeans were never able to take seriously. Gerald Ford was an appointee without an elective mandate. For Europeans, Jimmy Carter was an unfortunate aberration of the electoral system, a product of a bad time, mired by the overwhelming nature of the problems he lacked the strength to tackle. By the beginning of the 1980s America had experienced four disabled presidents in succession.
In European eyes, indeed, 1980 was the nadir of the postwar American presidency. Carter was not dismissed as contemptible; he was given credit for his one undoubted personal success, the Camp David agreements. But he was seen as inconsistent and wavering.
The image of Carter was fixed by his handling of the Tehran embassy hostage crisis: his weakness, which allowed the situation to develop in the first place, was followed by an indecisive and vacillating response, and then by a sudden gamble on a rescue mission that ended in ignominy. This humiliating episode cast doubt, not least, on American technical competence, which had once seemed so unchallenged, and was greeted in Europe not with derision but with genuine anxiety. The Carter presidency was seen as the culminating point in a process of White House decline that had begun in 1968, and he himself as a man who did not know how to handle the Soviet Union.
During the 1970s Soviet moves in Africa and Asia had become bolder and more heedless of American reactions, and Europeans were worried that Carter, driven beyond endurance by Soviet presumption-as in the invasion of Afghanistan-might abruptly and without consulting them unleash a disproportionate response. European confidence in the good sense of American leadership was low, and in the wake of Afghanistan, 1980 was the first year since the Cuban missile crisis when war seemed possible.
I have dwelt in detail on European anxieties about the Carter Administration because it helps to explain the feelings of relief which quickly asserted themselves once Ronald Reagan took over the White House. He appeared a man of few but strong and simple ideas, firmly held and confidently executed. Unlike Carter, Reagan had both a political philosophy and a world outlook, both of them quite clear, in relation to which Europeans could orient themselves. He did not hesitate, he acted. He was consistent. He was usually predictable. The lines of his policies rapidly became distinct.
He thought Russia was winning the arms race. So he rearmed with all deliberate speed and on a considerable scale. He thought Russia and its surrogates had made unacceptable territorial gains during the 1970s. So he set about reversing these gains where possible and made it plain beyond any possibility of misunderstanding that any further attempts to advance would be resisted from the start. He thought the nuclear balance in Europe had been upset by recent Soviet deployments. So he set about restoring it with the deployment of American cruise and Pershing missiles in Europe.
These actions won broad support in Europe, not least because of the self-confidence with which they were taken. It is remarkable, looking back on it, how quickly Reagan contrived to reestablish the concept of American leadership of the West as inevitable and right, part of the natural order of things. He was helped by the friendship, based on a general identity of views, that he rapidly established with Margaret Thatcher, already emerging in 1981 as the most influential of the European leaders.
But Reagan's personal appeal was very wide, affecting European politicians who in no sense shared his basic ideological assumptions. One senior European Socialist leader, after his first meeting with the president, observed wryly: "It is very hard indeed to dislike that man." Reagan also appealed to the general European public. He was soon seen as a man of goodwill, who meant well and had a proper appreciation of Europe's dignity. He was regarded as trustworthy, if not always well advised.
His appeal in Europe never approached the intensity of the glamour radiated by John F. Kennedy. But it touched a much wider audience. Kennedy mesmerized the elites (or some of them) and especially the intellectuals, who were the group least pervious to Reagan's charm. But Reagan was liked by ordinary people, especially those anxious to get on and better themselves. He was, and is, identified in Europe with the pristine American spirit of self-reliance, endeavor and determination to make the most of God's bounty. For Europeans he stands not indeed for the New Frontier, now the vaguest of fading memories, but for the Old Frontier, a perennial and attractively concrete image.
In many ways Reagan recalled Dwight Eisenhower in the friendly feelings he evoked in a wide variety of ordinary Europeans: as with "Ike," many jokes were made at his expense, but they were tolerant, unmalicious jokes. But Reagan has been more popular than Eisenhower, who aroused, at least for a time, bitter feelings in both Britain and France for the deliberate steps he took to frustrate the Anglo-French Suez expedition in 1956. By contrast Reagan was seen as a president who was willing to put the interests of his European political partners, when need be, above global considerations. This was illustrated by the discreet but generous assistance he afforded to the British Falkland Islands expedition in 1982, something the British will not soon forget and which all Europe noted with approval. The fact that Reagan was under pressure from Latin America and some of his own close advisers to remain strictly neutral greatly enhanced his action in European eyes. The Germans and the French were led to believe that, ceteris paribus, he would do the same for them.
An equally important factor in the European acceptance of Reagan's leadership was his success in restoring dynamism to the American economy. A brashly self-confident America may sometimes seem tiresome to Europeans. But they rightly much prefer it to the America they experienced in the 1970s-visibly declining in relation to the rest of the world, losing its self-respect, edgy and so unpredictable. Superpowers in decay are dangerous animals, and Europeans therefore welcomed the return of American prosperity, exuberance and optimism. They were particularly impressed by Reagan's reversal of the 1970s' relative decline in productivity, and still more by his success in creating millions of new jobs-all the more remarkable in a period when Europe was suffering from heavy and prolonged unemployment.
It is true that European governments (as opposed to the European peoples, who were not much interested) were privately, sometimes publicly, critical of Reagan's failure to take effective steps to tackle the two U.S. deficits. Prime Minister Thatcher, in particular, repeatedly voiced her view that the U.S. budget deficit ought to be sharply reduced by forceful measures, such as a substantial tax on gasoline; she made this point with the added fervor of one whose government was running a large and growing budgetary surplus.
But the American deficit in external trade aroused more mixed feelings. For one thing, the Europeans benefited from it, both by selling goods in the U.S. market and by finding it relatively easy to buy into American business. British investment in the United States during the Reagan years was enormous, and other Europeans are now following in the wake of British investors. For Americans who feel uneasy about this development, it is worth pointing out that it is a return to a nineteenth-century pattern, when a rapidly growing America, without a big capital market of its own, had to turn to London and Paris for investment, and remained a large net borrower for many decades. Moreover, the flow of capital is by no means one-sided, since U.S. corporations, such as Ford, continue to make huge investments in Europe. The way in which Europeans (as well as Japanese) have taken up U.S. deficits reflects the growing interdependence of the world's financial, business and investment communities and is seen in Europe as a further guarantee against American isolationism.
Even those inclined to criticize Reagan for complacency about the trade deficit recognize that it is far preferable to the obvious alternative, protectionism. Throughout his tenure, Reagan was admired in Europe for the tenacity with which he stood by the principles of free trade, especially at a time when it would have been easy and politically profitable to bow to protectionist pressure. His commitment to the development of a world market was seen as an important aspect of his internationalism and his acceptance of global responsibilities. His support of free trade was particularly important to those, like Chancellor Helmut Kohl of West Germany and Prime Minister Thatcher, who are determined to ensure that the single European market, when it comes into existence in 1992, will itself be outward-looking rather than exclusive. Some members of the European Community are still high-tariff-minded. But Reagan's refusal to contemplate the notion of a Fortress America in trade, or in anything else, makes it far less likely that a mercantile Fortress Europe will develop in the 1990s.
In any case, the U.S. deficits, though worrying, were seen in Europe as flaws in an otherwise remarkable American economic recovery. This recovery had geopolitical consequences. It was the most important single factor in the restoration of faith in the market system. Glib phrases like "post-capitalism" and "post-industrialism," so common in the 1970s, passed out of fashionable and academic usage. Moreover, the U.S. economic performance was equally effective in precipitating the crisis of socialism that in some ways was the most significant event of the decade.
The Soviet bloc had been spurred on in the 1970s by the widespread belief that the U.S. economy, the keystone of Western capitalism, was in rapid relative decline. The Reagan prosperity upset all these predictions. In January 1988, Discriminate Deterrence, the report of the President's Commission on Integrated Long-Term Strategy, was able to report economic projections for the year 2010 (the limit of reasonable prediction), showing the United States with a GNP close to $8 trillion, followed a long way behind by China and Japan, each with GNPs of less than $4 trillion, and the Soviet Union bringing up the rear with a GNP of under $3 trillion.
These projections emphasized, contrary to the belief induced by such alarmist studies as Paul Kennedy's The Rise and Fall of the Great Powers, that the kind of rearmament program carried out by the Reagan Administration was sustainable-indefinitely, if necessary. In fact by 1988 it had become clear that the image of a great power in decline fitted the Soviet Union rather than the United States. In European eyes the readiness of Reagan's America to rearm had a decisive effect on Russia at two levels, each of them important. First, the evident unwillingness of America to allow Russia to develop a significant lead in strategic weapons, signified by the deployment with European agreement of the cruise and Pershing systems, was the critical factor in forcing the Russians to negotiate seriously. There are certain European reservations about American views of negotiated weapons reductions, which briefly surfaced immediately after the 1986 Reykjavik summit. But in general the Europeans and the Reagan Administration were at one in believing that an effective disarmament process could only begin from a position of strength, and Reagan's policy demonstrated the truth of this beyond contention.
It was for this reason, springing as much from a psychological point as from military argument, that the Europeans were prepared to accept the Intermediate-range Nuclear Forces (INF) Treaty. In general, Europeans are averse to agreements limiting or reducing nuclear weapons that are not accompanied by corresponding measures to cut the overwhelming preponderance of Soviet conventional forces in Europe. The actual terms of the INF treaty, as well as the principle underlying it, aroused serious private doubts among various European political and military leaders. But all were prepared publicly to accept it because they had confidence, in general, in the kind of leadership Reagan had reestablished in Washington and were reassured by the overall level of U.S. armament.
European reservations about the wisdom of cutting intermediate-range nuclear forces on the Continent were further reduced by the Soviet decision, announced by Mikhail Gorbachev at the United Nations last December, to make a unilateral cutback over two years in Soviet conventional troops and weapons facing NATO. This was greeted with general satisfaction and was seen as more than just a propaganda ploy. The precise way in which the West should respond was left to detailed analysis of what the cuts involved, their timetable and arrangements (if any) for verification and, more particularly, what exactly Gorbachev meant by his promise that Soviet forces in Europe would be redeployed to assume a posture of "defensive defense"-seen as by far the most significant item in his package. But right from the start there was general agreement that Gorbachev's move was dictated by weakness, rather than strength, and was another consequence of Reaganite resolution.
At a deeper level, however, Reagan's rearmament program, accompanied as it was by a resurgence in the U.S. economy, had a demoralizing effect on the Soviet elite. It seems to have persuaded a significant number of leading Soviet figures that the attempt to out-arm and out-perform the West, at any rate within the limitations of the production system they had inherited, was hopeless. A new way had to be found, and its direction lay in internal reform of a fundamental nature.
Thus the concept of perestroika was born, not merely of internal shame and exasperation at empty shops and shabby conditions, but of an external recognition that their chief ideological competitor, under Reagan's leadership, was far more formidable and durable than they had supposed. Without American dynamism in the 1980s it is highly unlikely that the Soviet leadership would have set out on the unknown, risky and potentially disastrous road of reform. As it was, they felt they had no alternative. This American challenge, and Soviet response, may well turn out to be the leading development of the last decades of our century. If so it will indicate once again the importance of will in politics. For the Reagan Administration's decision to rearm was essentially an act of will-the will of one simple, single-minded man.
In the last two years, indeed, a strong feeling has developed in Europe that the Soviet Union, after engaging in an acquisitive offensive throughout the 1970s, has been slowly but surely turned toward the defensive during the Reagan years, and in part at least as a result of U.S. policies. The problems for Europe which will arise when and if the Soviet empire breaks up or even frays at the edges are daunting, of course, but that is another story. What is clear is that Reagan brought about for the West a major strategic success.
Against this background, therefore, the foreign policy decisions of the Reagan Administration that were most controversial in the United States seemed comparatively trivial to Europeans. The U.S. invasion of Grenada in October 1983 aroused, at the time, great indignation in some British quarters, notably in the affronted breast of Mrs. Thatcher. It was the one time in eight years when she was actually angry with, as opposed to critical of, Ronald Reagan. But other European powers did not care much, and Mrs. Thatcher herself soon calmed down, when the evidence for the necessity for American action emerged, and its popularity among West Indians became manifest. In time she came to see that Reagan had been right, though she never admitted it to him.
The bombing of Libya in April 1986 was a different matter. Initially at least, Britain was the only European power that officially and publicly supported it, though others (especially the Germans and Italians) were privately grateful. But attempts to moralize about American behavior soon collapsed, especially when it was seen that the strike against Colonel Muammar al-Qaddafi had had a perceptible, though limited and perhaps transitory, effect on his terrorist activities.
The difficulty for the Europeans was to trace any underlying consistency in America's attitude toward terrorism. At the June 1984 Washington Conference on International Terrorism, sponsored by the Jonathan Institute, Secretary of State George Shultz gave a positive and unqualified assurance that the United States would never negotiate with terrorists. He was obviously sincere, but at the very time, unknown to him, other officials in the administration were engaged in the activities which produced the Iran arms affair.
In European eyes, the clandestine efforts to get money to finance the contras were in no way scandalous; indeed they were legitimate in view of the failure of Congress to supply the means whereby a president, elected to defend American interests, could discharge his duty to the nation. What saddened the Europeans, especially the president's warmest admirers, was the evidence that the White House, whether with Reagan's knowledge and blessing or not, had done an ignoble deal with terrorists or their sponsors. That was hard to forgive, and has not been forgiven, though it is sensibly placed against the perspective of his general prudence and success.
Indeed it is an illuminating fact that Reagan's more questionable actions, including his obvious mistakes, aroused remarkably little resentment in Europe. The period was notable for a sharp and sustained decline in anti-Americanism. It seems to have largely disappeared except on the university campus where, like Marxism, it lingers on, a curious survival from the past. Elsewhere it has proved remarkably difficult for the far left to assemble a rent-a-mob and march on an American embassy. The reasons for this change of mood are not entirely clear. Europe is doing well and there is less reason to feel jealousy and resentment at American prosperity. But equally important, I suspect, has been the actual handling of American foreign policy in recent years.
Reagan has given the impression of genuine firmness in meeting any serious threat to what he conceives to be America's, or the West's, interests. But he has been extremely adept in finding alternatives to committing American forces, except on a temporary basis. He has spoken, on the whole, quietly; he has, to be sure, carried a bigger stick; but he has shown himself reluctant and judicious in using it. These points have not been lost on Europeans.
Nor, finally, can we ignore the effect of personality. Reagan, over eight years, has been seen a good deal on European television. The impression he contrived to give can be summed up in one word: reassuring. He was, Europeans surmised, not a man to plunge the world into nuclear war, or to do anything precipitate, aggressive or reckless. They saw him as an old man with much sense and some wisdom. And they warmed to him. They, too, found him hard to dislike.
This important personal contribution which Reagan made to his role as leader of the West will not make George Bush's task any easier. So far as Europe is concerned, Reagan's act will be hard to follow-though there is certainly no lack of goodwill toward Bush himself, who is known and liked among the elites.
His presidency begins, however, with one salient advantage-itself part of the legacy Reagan has bequeathed-which has a direct and special bearing on the situation in Europe. In 1981 when Reagan entered the White House, the Soviet Union, its empire and satellites, formed a monolithic bloc, solid and stable, not to say immobile, locked into a seemingly immutable system of ideological discipline and internal order. From this secure base the Soviet leaders could take initiatives and, to a great extent, set the agenda for action all over the world. The United States, by contrast, was a responsive power.
Today this situation has changed fundamentally. It is the Soviet Union that is now a country in internal ferment, the troubled center of a system whose ideology is under growing challenge and whose order suddenly looks vulnerable everywhere. Abroad, its leaders have lost the initiative. At home, their agenda is increasingly determined not by their will but by the multiplicity of long-suppressed problems which now demand solutions. With little warning, the whole of Eastern Europe is entering an era of unpredictable change.
The situation has its dangers, for the immediate origins of two world wars lay in the ethnic disputes of Eastern Europe, now rising to the surface again. But it also has its advantages, for George Bush in particular. He can set about building on Reagan's legacy with the reasonable certitude that the Soviet leadership, for the time being at least, has neither the time nor the energy-nor even, one suspects, the inclination-for acquisitive geopolitics. No American president in modern times has begun with such an advantage, and Europeans will judge Bush on the finesse with which he makes use of it.