TIME: Almanac 1993/TIME Almanac 1993.iso/time/093091/0930510.000

Text File | 1992-08-28 | 10.2 KB | 252 lines

                                                                                INTERVIEW, Page 11

How a Superpower Can Avoid Muscle Loss


If the U.S. is to avoid becoming an economic stepchild to Japan
and Europe, argues French writer JACQUES ATTALI, American society
must declare war on its own shortsighted thinking

BY CHRISTOPHER J. REDMAN and Jacques Attali


    Q. After victory in the gulf and the cold war, the U.S. is
standing tall. Yet you warn in your latest book, Millennium,
that America is in decline and could end up as the granary of
a Japan-dominated Pacific region. How come?

    A. This is not wishful thinking, but I fear a relative
decline brought about by a diminishing share of the global
market and faster growth elsewhere. Industry is the only lasting
foundation of a country's power, and America is lagging behind
in manufacturing, which is at the core of a nation's wealth.
With the notable exception of the microprocessor, not one new
product that has appeared in the past few years was made in
America. For high-technology products, the U.S. has a positive
trade balance only in those sectors in which it has had a
semimonopoly for some time: aerospace and computers.


    Q. How else is the U.S. handicapped?

    A. By short-term thinking. American managers seek
short-term gains and not, as in Japan, long-term rewards.
Bonuses are linked to the immediate payoff. Can such a culture
think about the consumer goods that will be needed in the next
20 years?


    Q. Doesn't U.S. military muscle count for anything?

    A. Yes. But in the coming struggle for world supremacy,
economic prowess will be critical. Military power cannot last
if it is not based upon a strong economic foundation. In the
past, powers whose foundations have crumbled have ended up as
mercenaries for others.


    Q. But the world will need peacekeepers. Can the U.S. play
that role?

    A. The dismantling of the Soviet threat does not mean the
world has become a safer place with no conflicts. We will need
a global peace force. The U.S., acting through the United
Nations on behalf of the rest of the world, is perhaps an embryo
of a peace force at the world level.


    Q. Can the U.S. prevent its own decline?

    A. Yes. When confronted by a challenge, Americans have
demonstrated that they can react and compete. The strong U.S.
space industry is the result of the shock of Sputnik. Maybe what
America needs is to feel threatened.


    Q. But the kinds of threats we are seeing now are more
gradual. What could be the economic equivalent of Sputnik?

    A. Japan's increased share of the U.S. market for cars and
consumer goods. Also the fact that it may be progressively more
difficult to finance what is needed for health and education and
the urban environment.


    Q. You posit a struggle for supremacy in which Japan and
Europe emerge as the main combatants. What has Europe got going
for it that the U.S. hasn't?

    A. Europe has weaknesses too. But with the elimination of
the East-West divide, Europe is a continent that has suddenly
doubled its size -- from 300 million to 700 million people. It
has a high level of culture and enormous capacity for growth,
particularly in those East European countries that must now be
reorganized from scratch. In what was East Germany, we are
already seeing levels of growth of 10% a year. And an enormous
boost will come from linking the developing and developed
countries of Europe -- the kind of boost that may happen between
America, Canada and Mexico. But it's happening in Europe on a
larger scale. Moreover, Europe, unlike the U.S., has retained
a capacity to produce exportable consumer goods and continues
to give priority to industry.


    Q. Is the U.S. doing enough to support what's happening in
Eastern Europe and the Soviet Union?

    A. I have no criticism of what has been said and done by
the U.S. Administration. As a superpower, America has a
responsibility to weigh events in the Soviet Union before
embarking on any assistance to a country that remains the
largest potential enemy of the Western world. In terms of aid,
whatever amount of money is made available will never be enough
for the enormous problems these countries face.


    Q. Are you concerned that the U.S. may become isolationist
in the post-cold war era?

    A. This is an enormous danger. I don't see that threat
with this Administration. But if American society does not
solve its problems and restore its fortunes, it will be tempting
for some to say, `Well, let's return to our own backyard,
withdraw our forces from Europe and elsewhere, and take care of
ourselves.' That would be a nightmare for Europe. It's why we
have to link the U.S. to Europe.


    Q. You now head the European Bank for Reconstruction and
Development, created last year with a mandate to help rebuild
what was communist Europe by promoting the private sector. But
there is already plenty of private Western capital chasing
limited investment opportunities. What can you bring to the
party?

    A. We can take a long-term approach and handle long-term
risk. Secondly, small amounts of our capital can generate huge
leverage through co-financing with other investors. Not being
profit oriented, we can afford to invest not just with an
economic payoff in mind but in order to foster democracy. We can
help ensure that the transition to a market economy is not only
fast but fair.


    Q. You gave up a position of considerable influence at the
right hand of France's President to head what could be a risky
venture. Why?

    A. I'm interested in avoiding nightmares. Twice in this
century, Europe has had the nightmare of divisions that have led
to world war. We now have the chance to end Europe's East-West
division and irreversibly reduce the chances of war. That is the
great challenge, and the European Bank can play a role.


    Q. Some Americans fear they will be excluded from the new
Europe.

    A. Europe is not anti-U.S. On the contrary. You could say
that America is the largest European country and the only real
one, because it is home to Poles, Russians, Ukrainians,
Italians -- all of Europe. It is in Europe's interest to see
America not going too far in its ties with the Pacific Rim but
linked to Europe. The fact that the U.S., as a member of the
European Bank for Reconstruction and Development, is a full
member of a European institution, and not an outsider, is an
excellent omen.


    Q. So this new Europe could, in fact, stretch east from
Seattle to Vladivostok?

    A. It's up to the U.S. to decide. But I think this is in
the European interest.


    Q. In Millennium you wrote that the coming struggle for
supremacy between the two emerging spheres -- Europe and Pacific
-- will pale against the struggle between the world's rich
regions and an exploited periphery. What will be the
consequences?

    A. Simply that the Iron Curtain that once separated East
and West will be erected between North and South. The only way
to get out of that danger will be to have a global trade
agreement that will allow a flow of capital, ideas and goods
from North to South, making the world more interdependent and
enabling the South to catch up.


    Q. As a banker, do you think there is enough capital
around to rebuild Eastern Europe and the Soviet Union, finance
U.S. deficits and help the South?

    A. No and yes. No, because we do not have enough savings
-- again the tendency toward the short term. Yes, because
economics is not a zero-sum game. Growth can create new
resources. We have seen in the past, in Europe and in the U.S.,
that if you invest you can create more wealth than you started
with. I am sure that in Europe at least, growth, far from
depriving the Third World, will create more opportunity for
growth elsewhere.


    Q. So it's not too late to head off a confrontation
between the haves and have-nots?

    A. No. Not if the North is bold enough to see its
long-term interest, which is to create the conditions for growth
in the countries of the South: be generous with their debts,
help them build market economies and democratic institutions.
And after that, prime the pump of growth and create a virtuous
circle whereby investment brings trade and further investment.


    Q. You argue in your book that "the making of images and
the means of their transmission is imposing its character more
and more on objects and goods and products of all kinds," and
that if America is unable to compete in this arena, its decline
will speed up. Doesn't the U.S., through Hollywood, dominate
the making of images -- the software?

    A. The U.S. has controlled the software since the dawn of
the movie industry. But it has no grip on products like VCRs.
In 1492 the equivalent of Hollywood was Venice, where more than
one-third of the world's books were produced. But even then
Venice was in decline, ceding power to the maritime economies
like Holland trading textiles and other goods.


    Q. Is there a danger of the Soviet Union, like Weimar
Germany, falling into the grip of a demagogue?

    A. It is not impossible. And it will certainly be more
possible if, as in the Versailles Treaty, we are vindictive and
not generous.


    Q. Are you optimistic about the outcome of the second
Russian revolution?

    A. We face a situation in which the country is dividing
up. There may be in the future no common currency, and many
central banks, no culture of freedom or entrepreneurship,
nothing. I do believe that it's very important to strengthen the
development of a market economy and joint ventures; it's why I'm
eager to be allowed to do more private-sector investment there.
But even if the European Bank is allowed to do that, no one can
say that problems will be resolved overnight. It will be a very
long process, and the coming years are going to be very
difficult. When Spain shook itself free after Franco's death,
it had much more going for it than the Soviet Union, including
a successful entrepreneurial tradition. And yet readjustment
there produced unemployment as high as 24%. If the Soviet Union
is lucky enough to follow Spain's example, we will soon see 40
million people out of work there.