Not Just Another Recession
Why the Global Economy May Never Be the Same
This year the Federal Republic of Germany is 30 years old; so are its close friendship and multiple ties with the United States. Those ties started with the Marshall Plan and the Berlin airlift and they have hardened through the many storms the two countries have weathered together over Berlin. Never before has Germany been tied for so long, so closely, and in so many ways to another nation.
No wonder that occasional irritations should occur in such a relationship. For a long time the Germans were the ones who had continual doubts about the steadfastness of their American friends, and got on their nerves by repeatedly asking, "Will you really stand by us?" Today the situation is rather the other way around, with quite a few Americans worried that the Germans might make secret deals with the Russians.
Part of the mutual uneasiness that occasionally crops up stems from the fact that each country's idea of the other no longer corresponds to reality. There is a certain time lag on both sides. Americans feel-often probably quite unconsciously-that we Germans should still act like well-behaved pupils with only one aim in mind: to be in tune with Washington. As long as we were focusing exclusively on the West, this was indeed the most important priority of Bonn's foreign policy. Since, in the early 1970s, in the course of our Ostpolitik we signed the agreements with Poland and the Soviet Union and thereby once again assumed our traditional place in the center of Europe, Bonn must to a certain extent also take the reactions of the East into account.
Our own ideas of the United States do not correspond to reality either. They go back to a time when, to Europeans, the United States was a powerful, self-assured nation that enjoyed boundless confidence. We know, of course, that the shocks of Vietnam and Watergate have weakened U.S. leadership and have caused uncertainty in the minds of the people. We know that self-assurance has given way to self-doubt, but nobody is quite willing to believe that this has become a permanent condition. Thus, neither side has fully realized yet that the Americans are no longer as strong as they were in the first decades after the war nor are we Germans as weak, which is why each is occasionally disappointed in the other.
This time lag with respect to reality accounts for certain political tensions that have arisen more frequently of late. They are related to our above-mentioned Ostpolitik. Precisely because Bonn can no longer afford to focus exclusively on the West and simply ignore its neighbors in the East and their reactions, the Federal Republic attaches much greater importance to détente than do other members of the Atlantic Alliance. As far as Bonn is concerned, a special kind of détente exists.
Inasmuch as the American détente toward the East has deteriorated-largely because of the disproportionate Soviet military buildup and Soviet expansion in Africa that have gravely affected American public opinion-the Soviet Union must try to keep détente alive elsewhere. Besides, the Soviet leaders feel that they have not gained all that much from détente with the United States: neither their hopes for technology nor their illusions about credits have been fulfilled. Both ended with the Jackson-Vanik Amendment linking most-favored-nation trade status for the Soviet Union to emigration.
Therefore, Moscow now looks to Europe and particularly to the Federal Republic of Germany, which has the highest stake in the question: "Détente-yes or no?" America is 4,000 miles away from the European periphery of the Soviet empire; Germany is split right down the middle by the line that divides West from East. Moreover, even after the Four-Power Agreement of 1972, Berlin remains a lever in the hands of the Soviets, which to some extent they are still able to pull.
Anyone traveling from the Federal Republic to Berlin must pass through the German Democratic Republic (GDR), i.e., through territory of the Soviet Union's most important protégé. For years, politicians and members of parliament traveling to Berlin had to go by air because travel by train or car posed too great a risk of their being stopped or even arrested. Today the approaches to Berlin are completely safe. This also means that the support and maintenance of the former Reich capital are guaranteed.
The Federal Republic has gained still other advantages in the course of détente, which was, after all, only made possible by the agreements with Poland and the Soviet Union. In 1978, for example, eight million West Germans and West Berliners were able to travel to East Berlin and to the GDR, and almost two million senior and other citizens traveled from the East into the Federal Republic. Families who for years had been unable to get together can now meet and telephone each other without difficulty. Furthermore, over the past six years, 50,000 Germans have been allowed to leave the GDR and join their relatives in the Federal Republic. Finally, 1978 was the first year since it was built in 1961 that nobody was killed at the Berlin Wall.
In other words, the danger of conflict has been reduced, and the GDR's greater willingness to cooperate in the past 12 months may well be attributed to Moscow's influence. Small wonder that Bonn is anxious not to jeopardize this state of affairs. Those human relations would be the first victim of a deterioration of the political climate.
The Germans have certainly profited from détente more than other nations. By the same token, they have also become more sensitive to pressure. Does this mean that the Federal Republic may have become open to blackmail? Could Bonn, in order not to lose all of those privileges again, bow to Soviet wishes and even be misused as a representative of Soviet interests within the alliance? To pose such questions presumes a naïveté which simply cannot be attributed to a government that has had more experience with the communists than any of its allies in the West. No one has a clearer knowledge of communism than a people one part of whom has had to live under Marxist rule for over 30 years. Moreover, one thing is certain beyond any doubt: the close relationship with the United States and the unconditional membership in the Atlantic Alliance will continue to have top priority in Bonn's foreign policy, regardless of which party is in office. For the public as well, the need for security is the primary concern.
Under such circumstances, it is simply absurd that terms like "self-Finlandization" or "Rapallo" should suddenly crop up in connection with the German Federal Republic. The agreement that the Germans and the Soviets signed at Rapallo in 1922 came into being at a period which does not bear the remotest resemblance to the present situation. At the time of Rapallo, both countries were the pariahs of Europe: impoverished, discredited, impotent. They therefore decided to resume the diplomatic relations that had been severed by World War I and to cancel their mutual claims for war damages and reparations. Today both countries are strong, though in totally different ways: the Soviet Union is militarily strong and a global superpower, the Federal Republic is strong economically but otherwise merely a regional power. In their views and habits, their moral principles and their cultural traditions, the citizens of the Federal Republic are so naturally and completely integrated into the West that any suspicion that they might disengage themselves and turn to the East is simply inconceivable.
Those who nevertheless do not trust the judgment and reliability of the leadership in Bonn should take comfort from the knowledge that Moscow is in no position to make sweeping new offers, because it must take the East Europeans into consideration. For instance, the offer to reunite Germany in exchange for neutralization, which some critics may have in mind, is quite unthinkable with respect to the German Democratic Republic. The GDR, after all, is Moscow's most important economic COMECON partner and must not be endangered under any condition. Any basic change in its political status may shake the government in East Berlin. And this, again, would doubtless cause a chain reaction of disturbances among the East European nations.
Any fear that Moscow might, as some people believe, "play the German card" is simply absurd. First of all, Moscow is unable to play it, and in any case, it would not score with the Federal Republic. What is true, as far as Bonn is concerned, is that its relations with the Soviet Union clearly rank before those with China. Chancellor Schmidt has made this quite plain in a statement prompted by the violent attacks against the Soviet Union that the Chinese Deputy Prime Minister Deng Xiaoping launched in the United States. Playing other people's cards is, in any case, a rather dubious undertaking. The German General Staff found that out in World War I, when Ludendorff had the bright idea of "playing the Russian card" and smuggling Lenin into Russia.
The widely circulating rumors and conjectures about a flirtation between Bonn and the East have been fabricated largely inside the Federal Republic itself. During the first five months of this year, three regional elections, the election of the President of the Federal Republic, and the elections to the European Parliament have given the opposition ample opportunity for all kinds of insinuations. With the help of such sounding boards, every event has been blown out of proportion-the speeches of German Social Democratic Party (SPD) Chairman Herbert Wehner saying that the U.S.S.R.'s military aims are wholly defensive and warning of a Washington-Bonn axis, the trips to Moscow of SPD Secretary Egon Bahr, the talks of SPD security adviser Alfons Pawelczyk with Valentin Falin, the former Soviet Ambassador to Bonn. Since no further elections are in the offing, it may be assumed that these rumors will cease.
What will not cease is the somewhat critical amazement with which the United States and the Federal Republic of Germany are eyeing one another. Each is fully aware of its criticism toward the other. Therefore, only certain irritations felt on this side of the Atlantic are worth mentioning here.
For decades we Europeans have been extremely spoiled because there were so many European experts on the other side of the Atlantic who had a decisive influence in U.S. policymaking, such as John J. McCloy, Dean Acheson, Henry Kissinger, George F. Kennan, and J. William Fulbright. None of these men is active in policy today. Their experience and their intimate knowledge of the old continent are missing. Hence, it is inevitable that the Europeans who have a better knowledge of the mentality and complexity of the East European countries than most Americans are horror-struck on occasion: for example, when Treasury Secretary W. Michael Blumenthal last December was charged by President Carter with expressing official respect to President Ceausescu in Bucharest for his courageous defiance of Moscow.
American actions in the Middle East also raise serious questions in the minds of many informed West Germans. After the fall of the Shah of Iran, Defense Secretary Harold Brown traveled to Saudi Arabia to offer the government in Riyadh American military assistance-precisely at a moment when the Saudis were trying to play down their close relationship with Washington and when out of fear they tried to woo the radical Arab leaders. This came out very clearly at the Baghdad conference in March of this year when the Saudis decided, along with the other Arab states, to sever their diplomatic ties with Cairo as a way of protesting the peace treaty with Israel. President Sadat has gone so far as to accuse the Saudis of having "paid off" some of the other governments to break off relations with Egypt.
Most people in Germany, however, praise President Carter for his courage, and claim that no other statesman would have dared to put his political reputation on the line in order to bring Israel and Egypt together. This kind of spontaneity on his part may be the other side of the coin for which he is often criticized in this country, namely that he lacks a consistent concept of foreign policy. Those who now argue that the situation in the Middle East has become more complicated since the peace treaty-and much more dangerous-did not have this insight when the treaty was concluded. On the whole, however, it must be said that in the Federal Republic public interest in and general knowledge of the Middle East is rather superficial.
This is much less the case so far as Africa is concerned because South Africa is such a controversial topic and apartheid lends itself to polarized discussion-all the more so since German industry has heavily invested in that country. So far as Rhodesia and Namibia (where 30,000 Germans still live) are concerned, there is a growing opposition to Bonn's policy, which tends to fall in line with Washington's.
The argument of that opposition is that the official policy misconstrues basic currents in black Africa; that it has been misguided because of statements of the radical leaders at conferences of the Organization of African Unity; that moderate leaders, like Kenneth Kaunda of Zambia, are far more concerned about Soviet intervention than they are about the West. Even a figure like Angolan President Agostinho Neto is struggling to make ties with the West that will provide a counterweight to the Soviets and Cubans.
If such is indeed the case-and several trips during the past few years have convinced me that it is-then it must be said that a policy solely directed at obliging the radical leaders cannot be one designed to produce optimal results. For example, it remains inconceivable what anyone could have expected from the demands that have been made over the past two years for an arrangement in Rhodesia which all concerned vehemently opposed and which no one is prepared to accept, i.e., an all-party government, incorporating every political tendency from Ian Smith and the white minority on the Right, to the Popular Front on the Left. That arrangement would institutionalize the very civil war between black rivals which it is ostensibly designed to avoid. That the internal solution was never given serious thought only proves that, for the policymakers, the question is more one of ideological agreement than of pragmatic transition to a multiracial society. This is, however, a source of internal disagreement in both countries, not a problem burdening the Bonn-Washington relationship per se.
Very often irritations simply grow out of differences in style. For Europeans, the sometimes rapid change of emphatic official statements is hard to understand. When President Carter spent New Year's Eve 1977 with the Shah and Shahbanou, he said in his toast at the state dinner that he considered it a good omen to start 1978 with those in whom he put such great trust and with whom he shared the responsibility for the present and the future:
Iran, because of the great leadership of the Shah, is an island of stability in one of the more troubled areas of the world. This is a great tribute to you, Your Majesty, and to your leadership, and to the respect and the admiration and love which your people give to you. . . . We have no other nation on earth who is closer to us in planning for our mutual military security. We have no other nation, with whom we have closer consultation on regional problems that concern us both. And there is no leader with whom I have a deeper sense of personal gratitude and personal friendship.
Yet in December 1978, shortly before the fall of the Shah, who was already in dire straits, President Carter referred to "the difference in human rights values . . . . There have been abuses. . . . under the Shah's government that would not be acceptable in our own country." One naturally wonders if the President had not in fact known this a few months earlier.
Such a contradictory approach to human rights stood right at the top of the list of irritations between the Federal Republic and the new Administration in Washington in its early months. There is no denying that a foreign policy which is not firmly based on a system of moral values of necessity deteriorates into opportunism. As such, the decision to put greater emphasis on human rights so as to make plain what America stands for surely would have met with general approval. But criticism arose as to the method by which the policy was implemented.
Since neither Chile nor Brazil, nor Idi Amin nor the Shah, was condemned during the first months for violations of human rights, and criticism was directed exclusively against the Soviet Union, the crusade for human rights degenerated into a weapon in the fight against communism and thereby lost its credibility. More than that, the employment of this weapon was extremely vexing because it could only achieve negative results.
It was a development that anybody who knows the East would have anticipated: a government as suspicious as the Russian was bound to look upon the interplay between Washington and the dissidents-which had become particularly conspicuous through the correspondence between President Carter and Andrei Sakharov-as a conspiracy between the enemy without and the opposition within. Furthermore, the Kremlin was furious that the President's suggestions and reproaches were no longer directed to Moscow through customary channels via Ambassador Dobrynin, but were suddenly announced at a press conference. The Russians, after all, have always had a horror of open diplomacy. Hence, Moscow could only draw one conclusion and take immediate harsh action against the dissidents. During the first two months of the Carter Administration, the leaders of the human rights committees that had formed in Moscow, Leningrad and Odessa after the Helsinki Conference were arrested. Of these, only Aleksandr Ginzburg has been released, in May of this year, and only after Washington returned to secret negotiations.
Europeans who have become skeptical are of the opinion that it is pointless to mix foreign policy with moral objectives. Woodrow Wilson and John Foster Dulles did not make the world any more moral, but led it into all kinds of conflicts and deadends. The militant anti-communism that is bred at home by such statements brings the wrong spokesmen to the fore, and unleashes emotions which under certain circumstances may no longer permit a rational policy.
We remember with some apprehension the days of John Foster Dulles, for whom morality was the most important issue: help the good, punish the evil. He once refused to shake hands with Chou En-lai because he was a communist-hence, a villain. We recall his successor, Dean Rusk, who insisted that, true to Nationalist Chinese tradition, Peking should be named Peiping. To him, China was Taiwan, the island of 15 million inhabitants, while mainland China with its 800 million Chinese was nonexistent.
Henry Kissinger was much better understood, since he started from the premise that peace is not a natural order and therefore must be carefully constructed. He urged people not to stress differences of opinion but to focus on mutual interests and refrain from setting standards by punishment and beneficial acts, so there would be an end at last to the eternal hot and cold treatment of illusion and disappointment.
To critics who blamed him for having done too little in seeing to it that human rights in the Soviet Union were observed, he replied: "Painful experience should have taught us that we must not overestimate our capacity for working social and political changes in other countries." Such insight runs parallel to the experience of Europeans, whereas organizations like the Committee on the Present Danger, which has since come into existence and which stirs up public anxiety about Soviet rearmament, conjure up memories of the cold war.
Other differences between Bonn and Washington have centered on specific issues of economic and monetary policy, approaches to nuclear energy, and NATO weapons systems. The first of these came to be symbolized, during 1978, by the new European Monetary System (EMS), in which Helmut Schmidt is a great believer. It made the Americans worry that the Federal Republic, and the Europeans in general, might become too independent altogether. The old Europe syndrome of the Gaullist era-"Europe as a third force between the superpowers"-is raising its head once again. This suspicion had its origins not only in the new European currency system, but also in certain discussions over new weapons systems.
As far as the currency system is concerned, people in Bonn, in the fall of 1977 and throughout 1978, were under the impression that U.S. Treasury Secretary Blumenthal was trying on purpose to talk down the dollar. He said, for example, that a "de facto devaluation is necessary to redress trade imbalances and fuel the global recovery." People in Bonn became suspicious and interpreted this as: "unless the Germans do what they are supposed to do, namely turn themselves into the engine that pulls the world economy out of the recession by inflating a bit, we'll just do it another way."
It was Blumenthal's theory at the time that if the value of the dollar declined, American exports would rise and the balance of payments would even itself out automatically. But this cannot be achieved through monetary measures alone. Blumenthal has since recognized his mistake, but the Europeans have been left with the uneasy feeling that a few speeches by the Secretary of the Treasury might jeopardize the soundness of the world economy, which depends on the dollar.
This feeling certainly did not provide the motive for the two European leaders, Helmut Schmidt and French President Valéry Giscard d'Estaing, to work out a European currency system, but the experience probably lodged somewhere in the back of their minds. They were actually motivated by a desire to minimize the influence of currency fluctuations on the rate of growth in the European economies.
In the beginning, the Carter Administration was afraid that the European Currency Unit, or ECU (which actually only shows up in interbank transactions), might turn into a new European substitute currency that would push the dollar aside. Actually, it has had a positive effect on the dollar, whose value now is no longer affected by speculations or by the fact that European issuing banks find themselves forced into dollar purchases and sales which now are controlled by America's own currency measures. Washington probably has realized that the ECU is not a magic wand that can change Europe into an integrated powerful rival overnight. Europe lacks the political will to do this, and integration can never be achieved by technical measures alone.
Finally, everybody was surprised, the Europeans included, at how little the new currency system changed existing currency relationships. There was practically no noticeable movement; at most it became evident that the deutschmark was not quite as hard as had always been assumed.
Another serious controversy, which erupted in 1977, concerned nuclear energy, and specifically dealt with the conflict between President Carter's nonproliferation policy and a proposed sale of a reprocessing plant by the Federal Republic to Brazil. A calm has settled on this matter, not because the conflict has been resolved, but rather because the International Nuclear Fuel Cycle Evaluation (INFCE), the research group instituted on President Carter's initiative to determine the feasibility of international reprocessing centers, has not yet finished its work. It is hardly to be expected, though, that the basic positions will change significantly, for this is not a technical controversy, but a matter of differences over a philosophical approach to nuclear energy.
However, the situation in the Federal Republic has taken a fundamental turn, and this could modify the need to resolve the conflict immediately. Antinuclear feeling has become so vehement that Bonn will probably have to give up its plans to construct a massive reprocessing and waste disposal facility. The government parties themselves are split on this matter, and their local organizations across the country are succumbing so strongly to the pressure of citizen's initiatives that the desire for total renunciation of nuclear energy is heard with increasing frequency. Finally, the provincial or Länder governments, within whose competency the authorization for new reactors lies, have been made so insecure that they are tending to take no position at all.
Chancellor Schmidt, who has stated several times that no industrial country will be able to manage without nuclear energy during the next decades, either in respect to technological development, jobs or the Third World, faces an unusually difficult test of his strength. The trade unions have supported his position up to now, but the question stands whether they will really fight for the issue following the incident at Three Mile Island.
The situation relating to the controversy between Bonn and Washington could lead to two very different sets of consequences: it is conceivable that the whole reactor industry, in which enormous sums have been invested and which has reached a high degree of development, will have to be closed down because no new reactor construction is approved; or, it is also conceivable that, if it does turn out that no more production for the home market takes place, the export of reactors will be pushed with all possible speed in order to keep the industry running, to hold onto the jobs involved, and, in the event that the public mood calms again, to revive activity in the Federal Republic.
Obviously relations between the United States and the Federal Republic have been strained more acutely and more lastingly over the problems of new weapons systems, although a real controversy between the United States and the Federal Republic has erupted only over the neutron bomb. As far as medium-range missiles are concerned, the debate at present is still taking place within the governments of the two nations, rather than between them.
The discussion of neutron weapons did indeed cause certain friction, leaving wounds that have not yet quite healed. As far as the Federal Republic was concerned, the issue presented itself as follows. For quite some time NATO had wanted a new nuclear weapon which, unlike the old tactical weapons, would not totally destroy the area to be defended, that is, a device causing less fallout, more concentrated radiation, and reduced blast effect. This weapon-the neutron bomb-was developed during the 1960s in the United States but never went into production and thus was forgotten by the public. But in 1977 The Washington Post discovered that expenses for such a weapon had been hidden away in the energy budget, and soon the news made waves on this side of the Atlantic. In the German Democratic Republic and in the Soviet Union, propaganda at once ran full blast about this "super-destructive capitalist instrument which kills people and spares objects-meaning property."
Under the circumstances, it was understandable that President Carter did not want to decide to go into production without a clear statement of purpose from the Europeans. The Europeans, however, wanted the bomb, but did not want to say so publicly. Both sides, therefore, finally agreed on the following three-stage plan:
First stage: the President announces that development of the bomb has been completed, but that he would like to talk to the Soviet Union before going into production.
Second stage: in the event that the Soviets are unwilling to come up with a counterproposal in return for an offer to drop production of the bomb, he tells the NATO allies that the negotiations have failed.
Third stage: the President announces that he has decided to go into production and that the neutron bomb will be stationed in Germany and at least one additional European country. The Europeans take note of this decision.
This was the agreement. But in the end the President did not stick to it, announcing instead that the bomb would not be produced, whereupon West German Foreign Minister Genscher flew to Washington. Result: the President announced that production was not stopped, but simply postponed.
On reflection, the course of events leads one to admit that here the strain in U.S.-European relations was caused less by President Carter than by the Europeans, and particularly by Bonn. Bonn obviously set great store by the bomb, or Genscher would not have flown to Washington. But the Federal Republic wanted to be pushed into accepting it rather than openly come out in its favor.
At present, a wide-ranging discussion about medium-range missiles is underway. It has been caused by the fact that the Russians had 750 medium-range rockets of the SS-4 and SS-5 types stationed in Europe, one-third of which were transferred to the Far East over the past few years. These outdated models are now being replaced by modern SS-20s, which are far more precise and effective, in addition to being mobile. Each launching system consists of three rockets with three warheads each. This raises the question as to whether or not the United States, too, should station medium-range missiles in Europe. Chancellor Schmidt's answer was that, first, this required an allied agreement, and second, that the Federal Republic was not willing to be the only country to have medium-range missiles stationed on its territory.
Two points of view have emerged during the Federal Republic's public debate. Almost unanimously in favor are the NATO officers who argue that the jump from tactical atomic weapons to intercontinental missiles is so enormous that it will cause a gap in the ladder of deterrence. Certain politicians are also in favor, but at the same time see the weakness of the argument, which lies in the fact that stationing medium-range missiles would provide the Soviets with valuable targets for their nuclear weapons; these politicians base their standpoint on political implications. They say we must make the Soviets realize that we simply cannot accept an obvious nuclear buildup-the SS-20 can easily be converted into an intercontinental missile-since this would cause an imbalance of power that might tempt people to apply political pressure. These advocates place great importance on demonstrating willingness to defend the continent, which could be done with a few medium-range missiles. Hence, they are not in favor of seeking numerical parity in weapons systems.
Opposed are those in the Federal Republic who believe that stationing the missiles would create more political disadvantages than military gains. They feel that a new kind of threat arises for the Soviet Union if it can be fired upon from the European continent. For them, negotiations in Moscow have absolute priority; only if these should fail to have any tangible results would they be willing to reconsider the issue. Other opponents believe that there should be a parallel effort of production and negotiation. But for the moment this obviously remains an internal discussion within the Federal Republic, in which both sides allow their respective partners in the United States to supply them with ammunition for their arguments.
Both 1977 and 1978 were sometimes quite stormy. There were many reproaches-spoken and unspoken-on both sides. But the certainty of each country depending on the other and of standing for the same goals and convictions was always stronger than the irritations.
If 1979 has up to now gone by with substantially more harmony than either of the two preceding years, we should not let ourselves be deceived. The coming 16 months, which include elections in both countries, will prove extraordinarily difficult. The foundations for strife have already been laid: the Federal Republic must and will further cultivate its ties with the East-very carefully, but with great determination-and will do everything to maintain relaxed tensions with Moscow. However, the close fight in America over the ratification of the SALT agreement will inevitably give German opponents of Ostpolitik both the scope and a major opportunity steadily to incite mistrust of the Soviet Union and to cast suspicion on all who want to live in peace with it.
As a citizen of the Federal Republic, one can only hope that Washington will find understanding for the Federal Republic's situation, and that Americans will not mistake the balancing act we have to perform for opportunism but rather for what it is-the policy of a land that happens to be located in the center of a divided Europe.