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Map of Asia |
Foreign Affairs
July/August 1997
Comments
Post-communism has been bad for women in Eastern Europe--their representation, employment, and safety have suffered. America must support women leaders and entrepreneurs for the transition to democracy and capitalism to be complete.
Too often guerrillas pretend to be refugees and siphon off aid to continue their fight. The humanitarians whose help they count on should halt this abuse.
After 50 years of independence, India appears to the world neither rich nor powerful nor principled.
Essays
By 2030, Social Security payroll tax rates will rise to 19 percent--more than 45 percent including Medicare and Medicaid. In Europe, which faces similar challenges, the burden of entitlement expenses is already so great as to slow economic growth. The solution is to phase out Social Security and other pay-as-you-go programs and replace them with a mandate for all to put away savings in a mix of stocks and bonds. Under a privatized system, the same benefits would require contributions equal to just 2 percent of the U.S. payroll. Not only would the elderly be safe from poverty, but for the first time people of low and moderate means would accumulate significant personal savings.
Although privatization zealots backed by Wall Street have called for replacing Social Security with mandatory investment in stocks and bonds, their promised high rates of return do not accord with experience. Any form of private investment is much riskier than a government program--and in the end can be more expensive if the government must bail it out. For at least a generation, retirement taxes would rise, funneling money to private investors. With small adjustments, the current pay-as-you-go system can continue its historic success.
Secretary Cohen's defense review is out, but the flaws in the Pentagon's military planning are still glaring. Haiti, Bosnia, NATO expansion, stability in Korea, keeping Iraq in check--all these are primarily army and air force missions. Yet the army has been reduced by about 40 percent, while the navy has been cut back far less and the marines hardly at all. Advances in technology make the marines' expeditionary role and the navy's aircraft carriers obsolete. Defense doesn't need more money; it needs to reallocate resources. As it stands, the United States is paying more for a military that can do less.
The waves of the business cycle are becoming ripples. The recent American combination of minimal inflation and very low unemployment may not be an aberration, but the beginning of a new worldwide trend. Smarter government policy, globalization, changes in employment, advances in information technology, and emerging markets all cushion shocks and dampen the familiar boom and bust. The consequences for world politics and prosperity will be profound.
With the creation of a single European currency, the dollar will have its first real competitor since it surpassed the pound sterling as the globe's dominant currency. As much as $1 trillion of international investment may shift from dollars to euros. The political impact of the euro will be just as great. Europe could try to export its high unemployment by undervaluing the euro's initial exchange rate. Protectionist battles could break out. The euro's arrival need not cause instability in world markets, but it will probably cause volatility. A smooth transition to a stable dollar-and-euro system will require a quantum leap in transatlantic cooperation.
Decades ago, donors saw aid as a transfer of resources from rich to poor countries. Today they see it more as a means of improving recipient countries' use of domestic resources. And though aid has had its successes in humanitarian relief and family planning, its record is mixed when it comes to promoting economic growth. Many nations in sub-Saharan Africa are poorer than when they began receiving aid. The solution is not to end foreign aid, but for donors to know when to say when, cutting off countries that fail to adopt sound economic policies and rewarding those that do.
Things may look bad, but North Korea can stagger on for a long time before it collapses. The famine there, limited information seems to reveal, is due not to shortages of food but to political decisions in Pyongyang. But unification would be so costly for South Korea--about $1 trillion over 10-25 years--and a mass southward exodus so debilitating that the South will instead try to prop up the North. China will provide food, and the United States fuel, while the North muddles through with a form of apparatchik capitalism similar to Romania's, in which officials channel resources to favored groups.
Into his fourth decade in power, President Suharto has guided an impoverished, strife-ridden nation to rising prosperity and outward stability--at the cost of abridged political and civil liberties, gutted democratic institutions, and flourishing corruption. Now economic disparities, ethnic and religious differences, and the frustrated aspirations of a new generation are triggering outbreaks of violence across the islands, and what passes for politics in Indonesia is unable to cope. The unsettled succession to Suharto, 76, is, frankly, scary.
Book Reviews
David Hackett Fischer's theory, in The Great Wave, of inflation followed by a long equilibrium is a quick sell with businessmen who want to believe we have reached the Promised Land. But history shows that change is a constant.
With exclusive access to newly opened Soviet records, Aleksandr Fursenko and Timothy Naftali reveal that Kennedy blinked too soon and Khrushchev declared victory.
Recent Books
Richard Cooper on emerging markets; David Hendrickson on John Lewis Gaddis; Kenneth Maxwell on police brutality; William Quandt on Rubber Bullets; Donald Zagoria on Nathan and Ross; Gail Gerhart on African Women.
Letters To The Editor
Louis Kraar on Hong Kong, Pedro-Pablo Kuczynski on Latin America, James G. Speth on the Marshall Plan, and others.