James Mann - The Rebellion of Ronald Reagan

Shultz pushed the State Department to explore these ideas. In 1986, Richard D. Kauzlarich, a foreign-service officer and intelligence analyst who specialized in international economics, was assigned to gather materials on the implications of the information revolution for American foreign policy. Kauzlarich prepared charts on the increasing speed and declining costs of personal computers, on the replacement of old-style commodities such as copper by fiber optics. He found examples of how manufacturing was being moved from one country to another. One favorite was a shipping label for an American company that made integrated circuits. The label said: “Made in one or more of the following countries: Korea, Hong Kong, Malasia [ sic ], Singapore, Taiwan, Mauritius, Thailand, Indonesia, Mexico, Philippines. The exact country of origin is unknown.” The memos that accompanied this research drew stark conclusions: “Increasingly,” Kauzlarich wrote, “countries which cannot or will not compete in the global market place and interact with ideas from other societies will find themselves falling behind the advanced innovators and producers.” 3

Shultz introduced these themes into his meetings with several foreign ministers. He had a small audience for which this material was especially targeted: the top leaders of the Soviet Union, above all Gorbachev and his foreign minister, Eduard Shevardnadze. On a visit to Moscow in April 1987, after clearing with Reagan the details of what he would say, Shultz departed from the usual idiom of Soviet-American diplomacy. During a break in a long afternoon meeting about arms control, Shultz set up some of the graphs and charts that Kauzlarich and other aides had prepared. He told Gorbachev that the world’s economy was changing rapidly, that financial markets and manufacturing were becoming international in scope, and that governments would have to learn to adapt to a new world where information was more important than minerals or heavy industry.

Shultz’s implicit message was that if the Soviets didn’t jump into the global marketplace fairly quickly, they would never catch up. Richard Solomon, then a senior State Department official, said in an interview two decades later that Shultz was engaged in “a kind of psychological warfare,” aimed at telling Gorbachev that the Soviet system was failing. “Reagan and Shultz were trying to spook the Soviet leadership,” recalled Solomon. 4

Soviet leaders, particularly Gorbachev, did not need to be reminded of the country’s economic difficulties. In the spring of 1987, Gorbachev had been in power for two years. He had been appointed general secretary in no small part because of the perception within the Soviet hierarchy that, since he was younger and more energetic than his predecessors, he might somehow find a way to reinvigorate the economy.

The Soviet economy had been slowly stagnating since the 1960s. The spike in oil prices produced by the OPEC cartel in the 1970s helped to divert attention away from these chronic problems; the Soviet Union was taking in huge new sums by exporting oil and was earning more by selling arms to Middle East countries awash in oil revenues. The Soviet Union used this revenue on a military buildup and on foreign adventures such as the invasion of Afghanistan. But by the mid-1980s the price of oil was declining, and so was Soviet oil production. 5

The oil boom was over. The Soviets were left with an economy in which consumer goods were in desperately short supply, military spending was enormous, and technology remained at levels well behind the West’s. Among those who worried about the country’s inertia were leaders of the Soviet military, who feared that the backwardness of the Soviet economy undermined the capabilities of the armed forces. They watched with growing dismay in the late 1970s and early 1980s as the Pentagon developed new precision-guided weapons more advanced than anything the Soviet Union could produce. In June 1984, a senior Soviet military leader showed the staff of the Communist Party’s Central Committee a documentary about the new American weaponry. Having watched it, one Soviet official wrote:

It was amazing: missiles homing in on their targets from hundreds and thousands of kilometers away; aircraft carriers, submarines that could do anything, winged missiles that, like in a cartoon, could be guided through a canyon and hit a target 10 meters in diameter from 2,500 kilometers away. An incredible breakthrough of modern technology. And, of course, unthinkably expensive. 6

When Gorbachev came to power in 1985, he focused on restoring discipline to the economy with campaigns against absenteeism and alcohol. Those efforts proved largely unsuccessful, and economic problems deepened in his first two years. The anti-alcohol campaign caused state revenues to plummet; the nuclear disaster at Chernobyl of April 26, 1986, sucked up billions in clean-up costs. 7Soviet officials who traveled overseas were increasingly demoralized by the disparity between Communist and capitalist countries. “I compared the bustling capital of Thailand, with its vibrant economy and its people, who looked busy and dynamic, with the economic decline and people’s apathy that was so obvious… , particularly in Vietnam,” recalled Pavel Palazchenko, the Soviet official who became Gorbachev’s interpreter, after a 1987 visit to Southeast Asia. “The contrast was dramatic. It could no longer be explained by the ravages of war.” 8

Increasingly, Gorbachev turned his attention to helping the economy through changes in Soviet foreign policy—by ending the Soviet war in Afghanistan and above all, by limiting the ever more expensive arms competition with the United States. In 1986, shortly before the meeting at Reykjavik with Reagan, Gorbachev told his aide Anatoly Chernyaev that his highest priority was to prevent being drawn further into the arms race. “We will lose, because right now we are already at the end of our tether,” said Gorbachev. 9

Throughout his career, Reagan had been in many respects the archetypical hawk. He had been in the vanguard in opposing Communist ideology and in supporting increases in American defense spending to combat the Soviet military threat. Yet for a conservative Republican, Reagan’s views were also in a few ways unusual. Far from portraying the Soviet Union as all-powerful, he had from time to time expressed a cheery optimism that the Soviet system was fragile. During the mid-1970s, he asserted at one point that the Communist system was merely “a temporary aberration which will one day disappear from the earth because it is contrary to human nature.” Ordinary citizens inside the Soviet Union wanted the same ordinary consumer goods and benefits as those in the West, and might eventually voice their discontent, Reagan argued. “Maybe we should drop a few million typical mail order catalogues on Minsk & Pinsk & Moscow to whet their appetites,” Reagan said in one of his late-1970s radio addresses. After the Geneva summit, he wrote a friend that Gorbachev seemed to realize the Soviet economy was in shambles. 10

It was one thing for Reagan and Shultz to be aware of Gorbachev’s economic plight, however, and another to decide what they should tell him about it. Gorbachev would hardly be receptive to arguments that the Soviet system was fundamentally flawed. The Soviets were not prepared to abandon all at once the ideas and institutions they had developed over the previous seven decades. Nor were they going to listen to a lecture about the superiority of capitalism from representatives of the United States, their geopolitical adversary for forty years. Shultz’s presentation to Gorbachev was aimed at circumventing these difficulties.

During one of Shultz’s first meetings with Shevardnadze, he had spoken about the importance of human rights. The Soviet foreign minister cut him short. We may do some of the things you want, but we won’t do them simply to please you, Shevardnadze said. We’ll do them only if they serve our own interests. Shultz began looking for arguments for why it was to the Soviet Union’s own advantage to change its policies.