TIME: Almanac 1993/TIME Almanac 1993.iso/time/013089/01308900.000

Text File | 1992-09-23 | 6.1 KB | 122 lines

                                                                                ESSAY, Page 82

The Secret of Our Success


By Charles Krauthammer

    It is fitting that during Inauguration week, the stock
market should have recovered nearly to its level of Black
Monday, the day of the 1987 crash. Fitting, because an
Inauguration is more than just a transfer of power. It is a
ritual re-enactment of the resilience, the suppleness of
American life.

    Every four years Americans remind themselves that, as
Reagan loved to say (Tom Paine too), "We have it in our power
to start the world over again." Reagan was exaggerating, as
usual. But, as usual, he was on to something: capitalism's
genius for what Joseph Schumpeter called "creative destruction,"
the often painful process by which old structures and techniques
are destroyed and then renewed by the dynamism of capitalism.
The resulting suppleness and adaptability is capitalism's
greatest source of strength.

     Even Marxists have now come to that realization. Marx's
confident prediction of the collapse of capitalism presupposed
its rigidity. He assumed that trends of the early 19th century
would continue and lead to the immiserization of the working
class, which would then lead to revolution. None of this has
happened in advanced industrial societies.

    As Andrei Kozyrev, a deputy chief in the Soviet Foreign
Ministry, recently admitted, capitalism has evolved a "mutually
accepted legal framework," such that "class conflicts largely
take place through the achievement of compromise." By adapting,
capitalism disarmed the dialectic. The Soviets are now obsessed
with adaptation. They recognize that the West's capacity for
adaptation is the key to its success -- and the Soviets'
incapacity for it is the cause of their decline.

    Harvard's Samuel Huntington confirms this Soviet intuition
in the current Foreign Affairs. The real cause of the decline of
nations, he argues, is not the now fashionable notion of
"imperial overstretch" but the phenomenon of creeping
inflexibility, what might be called industrial sclerosis --
precisely the loss of that ability to change and adapt.

    Another decline theorist, Macur Olson, laid out the case in
his 1982 classic The Rise and Decline of Nations. Olson showed
that  mature societies start to decline when layers of powerful
special-interest groups -- inefficient producers, inflexible
unions, governmental bureaucracies -- succeed in impeding the
normal "creative destruction" of capitalism. In order to hold on
to what they have, they stave off change. But in the end, the
whole society pays for the accumulated obsolescences and
inefficiencies. The result is decline.

    One example is Britain, with its rigid class structure, its
powerful unions, its state-owned industrial dinosaurs, its
enormous governmental bureaucracy. Its precipitous postwar
decline took place precisely as it was shedding its empire.
Thatcher engineered Britain's dramatic renewal in the 1980s,
when it had one of the fastest growth rates in Europe, by going
after not defense spending but the sclerosis that had set into
the system: authoritarian unions, failing state-owned
industries, a paternalistic bureaucracy and, by example and
rhetoric, the British class system itself. Of course the true
basket case is the Soviet Union. (Its decline does not settle
the argument between the overstretch and the sclerosis schools,
since the Soviets are experts at both.) Gorbachev faces a
society whose entire political and economic structure is
ossified.

    But that may not prove Gorbachev's greatest problem. His
ultimate obstacle may be the inculcated habits of mind -- the
loss of initiative, the abhorrence of risk, the envy of success
-- that underlie and justify these frozen structures. (Which is
why Gorbachev so insists on glasnost; without it, perestroika is
impossible.) After 70 years of submission, the Soviet people
have lost the habit of innovation and renewal.

    Take recent Soviet gropings toward democracy. Two weeks ago,
Boris Yeltsin, the maverick former Moscow party chief, was
nominated for the new Soviet parliament by a raucous public
meeting. But when competing candidates got up to speak, they
were shouted off the stage. And when the vote was taken and
three hands went up for Yeltsin's opponent, the crowd shouted,
"Publish their names." These people have something to learn
about democracy. And that something, for a people schooled in
Stalinism, may be unlearnable. When the collective mind has
lost all suppleness, even structural reform will fail.

    In the U.S., on the other hand, the continuing fluidity of
society is its greatest asset and its primary defense against
the doleful prophecies of American declinists.

    True, in the 1980s the U.S. has allowed the world's
financial center of gravity to shift from New York City to
Tokyo. But this is largely the cause not of sclerotic thinking
or sclerotic structures but of screwy policy. And policy, like
cutting taxes without reducing spending, can be reversed.

    It might be argued, however, that underlying that policy is a
structural defect, that the American political system is growing
rigid. It gives great power to special-interest,
hold-what-we-have PACs. It almost guarantees re-election for
obedient incumbents. It has so fractured political power that
nothing ever gets done. (Or as George Shultz once said in
exasperation, "Nothing ever gets settled in this town.") As a
result, it is becoming increasingly difficult for the necessary
dynamic and painful hard choices -- balancing the budget, for
example -- ever to be made.

    Has the U.S. too grown sclerotic? Perhaps, but don't count
on it. Not this week anyway. The genius of democracy is that
about twice a decade it produces a new President. Political
equations can be rewritten. Policies can be reversed. Structures
can be remade. Will that happen this time? We don't know yet.
But the American blessing is to have invented a system that
reopens that question -- and allows us to reimagine the world
-- every four years.