George Shultz
About
Statesman who brought Friedman to the Hoover Institution
Claims by George Shultz (17)
U.S. economic statistics like the GNP accounts are vastly obsolete because their categories were designed in the 1920s for an economy that no longer resembles today's; new activities get forced into old categories, and anything that doesn't fit gets labeled a 'service,' producing the misleading notion of a 'service economy.'
Trade sanctions have limited utility and usually only short-term effect unless very broad and adhered to; financial restrictions tend to be more effective than trade sanctions, as illustrated by South African businessmen who suddenly couldn't get loans in London and faced a deteriorating currency.
Overusing trade sanctions backfires economically because if you get 'too fast and loose' with embargoes, trading partners lose confidence and decide the U.S. is not a reliable supplier; trade cut off does not simply switch back on, so policymakers must be careful — what Shultz called 'light switch diplomacy.'
China's rapid economic growth required relative openness, and an open economy gives the population a wholly different knowledge base; thus the question is not whether China will change but how, and China has already changed in gigantic social and political ways, not just economically.
Economic foreign aid is hard and often done wrong; aid only helps if governance is right, and giving free food can be harmful by pricing local farmers out of the market and causing long-run damage, whereas funds supporting reform, education, or infrastructure at critical moments can be useful.
The world economy at the time was experiencing nearly universal expansion — the IMF World Economic Outlook table had no minus signs — making it a 'golden moment,' arguably the most promising in world history, which makes it important not to throw it away by succumbing to protectionism.
The first U.S.-Soviet deal under Reagan was a quiet human rights deal: people who had taken refuge in the U.S. embassy during the Carter era were allowed to emigrate, on condition the U.S. wouldn't publicize it; Reagan's willingness to keep silent convinced the Soviets his word could be 'taken to the bank.'
Reagan and Shultz rejected detente's premise of permanent peaceful coexistence in favor of the original 'containment' concept, which held that contained long enough the Soviets would look inward, dislike what they saw, and change — implying the pattern of governance, including how people are treated, could change.
Human rights pressure on the Soviets worked in combination with other agenda items (arms control, bilateral issues, regional issues), and the leverage came from the Helsinki Accords: because the Soviets had signed undertakings, the U.S. could insist on a right to know whether they were honoring them.
Shultz argued to the Soviets that in the emerging Information Age, running a closed, compartmentalized society would severely handicap them, because people must communicate to reap the age's benefits — so it was to their own advantage to let people move and communicate freely; this argument 'made a dent.'
At Reykjavik, the Soviets offered dramatic concessions but conditioned them on abandoning missile defense ('Star Wars'); Reagan and Shultz rejected those conditions because the cost was too high, and although the immediate media fallout was intense, the major items put on the table were essentially agreed and over time all came into being — making it a seminal meeting.
To protect the current 'golden moment' of prosperity, the U.S. needs an aggressive diplomatic full-court press addressing energy supplies, protectionism, the threat of radical Islam acquiring nuclear weapons, and climate change — which requires a larger, better-staffed State Department.
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