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Issues On My Mind
Strategies for the Future
By George P. Shultz
Hoover Institution PressCopyright © 2013 Board of Trustees of the Leland Stanford Junior University
All rights reserved.
My days of public service, after two and a half years as a US Marine in the Pacific during World War II, span three administrations — those of Eisenhower, Nixon, and Reagan — and include four cabinet positions: secretary of labor, director of the Office of Management and Budget, secretary of the treasury, and secretary of state. Throughout my years in government, and continuing through my careers in business and academia, a number of vital issues have been persistently on my mind.
This book contains my thoughts about six of these central issues, including comments I have made about them in speeches and publications over the past half century.
The result is basically a how-to book. It offers thoughts on how to: do a better job of governance; get our economy back on track; take full advantage of current prospects for twin revolutions in the field of energy; take on the debilitating problems associated with addictive drugs; conduct an energetic, professional, and tough-minded diplomacy; and confront the security issues posed by nuclear weapons.
We now face these difficult issues at a particularly challenging time. We have moved from a period when we in the United States took the lead role in the construction of a global economic and security commons to a world that is awash in change. We must identify constructive ways to influence the changing world for the well-being of the United States as well as for the benefit of all.
An Economic and Security Commons
As World War II was drawing to a close, a group of gifted and creative people from the United States, Great Britain, and other Allied countries gathered to plan for the future. They reflected on the events of the first part of the twentieth century: two world wars, the first ended with a vindictive treaty and both with immense casualties (around 70 million people, civilian and military, in World War II alone), the Holocaust, and the Great Depression with the accompanying explosion of protectionism and competitive currency devaluations. Seeing this, and recognizing that the Soviet Union was an aggressive and dangerous adversary, this group realized the urgent need to construct a different kind of world.
It was in this environment that there emerged the concept of containment, the establishment of NATO, and the creation of the General Agreement on Tariffs and Trade (GATT) with its rounds of agreements lowering barriers to trade. In addition, the International Monetary Fund (IMF) was established to deal with currency issues and the International Bank for Reconstruction and Development (now the World Bank) was founded to deal with the development needs of devastated countries and, subsequently, the needs of countries with low per-capita incomes. This era also led to the formation of the United Nations to help preserve the peace and support the emergence of the European Community.
These developments resulted in what could be called a global economic and security commons in which the United States took the lead and its allies — and, eventually, its reconstructed adversaries — played strong roles. The creative contributions to these efforts by the Truman and Eisenhower administrations extended, with a few dips and valleys, through the end of the Cold War in the 1990s, at which time Russia began to take part in the global economy. China and Russia have now become members of the World Trade Organization. I was proud to play a part in this process as a cabinet member in the Nixon and Reagan administrations.
The establishment and strengthening of the global economic and security commons has been beneficial for the United States. These decades have also seen unprecedented improvement in the human condition on a global scale. Poverty has been reduced and many people enjoy better health and longer lives, due in some considerable part to breathtaking biological research and the development of pharmaceutical products and innovative medical procedures, many of them emanating from the United States.
But now we are once again living in an age of remarkable changes of enormous proportions that affect every part of the globe. This age calls for a renewed effort to understand these developments and to recreate a global economic and security commons that will benefit us as well as the rest of the world. The changes we face are real and the risks of a chaotic world are high. Serious progress must be made in addressing each of the issues discussed in the chapters that follow. The United States must once again demonstrate its capability and willingness to take the lead.
A World Awash in Change
Primary among these dramatic changes is demography, which has recently undergone stunning shifts. In almost every developed country, fertility is far below the replacement level, longevity is rising, and the labor force is shrinking in proportion to the total population. These developments inevitably affect outlook and capability. In many countries, such as Germany and Japan, populations are declining. Russia has a demographic catastrophe on its hands, with low fertility, longevity for men at around sixty years, and a declining population. South Korea, Japan, and other relatively developed countries in Asia exhibit demographics similar to those of many European nations. Of these countries, Japan now has the most rapidly aging population.
In some ways, China has the most interesting demography. With its one-child policy, fertility began falling rapidly about thirty years ago, so for a quarter century China had a growing labor pool and a decreasing number of people that labor pool had to support — call it a demographic dividend. But soon that picture will shift abruptly, almost like flipping a switch. The labor pool will start to decline and the number of older people whom the labor force must support will start rising rapidly.
The situation is quite different in other parts of the world such as the Middle East and North Africa, where fertility has declined moderately but is still relatively high, so the growing populations are primarily young. In all too many cases, however, these societies are organized in such a way that many of their youth have little or nothing to do.
Added to this demographic picture is the deep and still underappreciated impact of the information and communications revolution that allows people in nearly every corner of the world to be informed, to communicate, and to organize. This development profoundly changes the manner of governance because it sharply reduces the distance between those in power and those being governed. This shift may cause countries with representative-style governments to struggle, but these leaders are accustomed to listening to their citizens. Autocratic governments that have been in place for decades, however, will become increasingly vulnerable.
In much of the Middle East and North Africa, there is now a toxic mix: many young people are without work and, because of the information and communications revolution, they are becoming ever more aware of their plight in comparison to the lives of their counterparts in other areas of the world. Remember that the movement we might call the Arab Awakening was sparked by one entrepreneur in Tunisia who simply wanted to create a business selling fruits and vegetables. As the regime's corrupt police officers to whom he refused to pay bribes squashed him, he asked, "How do you expect me to make a living?"1 A fundamental lesson from this incident is that the future stability of these societies will depend more on economies that can put people to work than on the barrel of a gun, because work links people to reality and can provide them with positive incentives, confidence in the future, and the dignity that comes from knowing they have earned what they have been paid.
Our world today is also plagued by the unpredictable violence that we call terrorism, much of it emanating from some strain of radical Islam. The United States and many other countries are paying a heavy price in their efforts to counter this phenomenon. They must identify less costly and more effective methods of addressing this serious threat.
Changes in the nature of the state system present another challenge. Ideally, we think of the world as being composed of states, each able to exert sovereign power within its domain and interact constructively on the world stage. These days, however, there are large areas of the world where lines have been drawn on a map and a name placed inside the lines, but where no real sovereign authority exists.
Sovereign capacity is severely limited in many other countries. Then there are the individual nation-states of Europe, which are also part of a community with headquarters in Brussels. Most are also members of the eurozone with headquarters in Frankfurt. This dispersion of authority diminishes each state's sovereign power and sense of responsibility, and is one of the reasons that nations of the eurozone, in particular, are struggling with severe financial crises.
Added to these sources of change are the economic and financial problems so evident in Europe and the United States. The impact of these problems goes beyond their economic effects and leads to doubts about competence and the applicability of the Western model of free markets and open politics. The United States must get its house in order. Then it can reestablish leadership as it helps to reinvigorate the global economic and security commons that has effectively served the United States and countries throughout the world over the past half century.
How can this be done? Leadership is the first requirement. The United States has historically played this role. Its leadership involves working constructively with other nations, and such work can best be done when the United States is strong, prosperous, and confident. On such a foundation, we will be able to confront problems and conduct an effective, strategically based diplomacy. Today, important opportunities are ripe for development in the field of energy. The United States can also do much better in handling the devastating issues involving addictive drugs: fighting their use more proficiently, relieving burdens on our criminal justice system, and improving the lives of citizens in our hemisphere.
Creative diplomacy will be an essential ingredient in making our way to a safer world. And priority must be given to addressing the global threat posed by nuclear weapons. Progress has been made but much needs to be done.
The chapters and the appended speeches and publications that follow highlight six pressing issues with a how-to objective in mind. If we successfully address each of these issues, we will be able to ensure that future generations of Americans — and future generations around the globe — will have a more secure and prosperous world in which to live.
The final reflections in this book contain observations on opportunities and problems ahead, while the epilogue emphasizes the importance of freedom.
The points that I make in the following chapters are based largely on my personal experiences, many of which are put in story form. For example, one of the most compelling and instructive experiences in negotiations2 came in the form of a domestic issue, a battle to bring greater fairness to education. Its critical lesson, which is widely applicable in any setting, is that successful diplomacy requires strong, credible, legitimate representation on all sides to work effectively on sensitive problems. With strong representation, arguments are brought forward in a clear and straightforward way so that solutions will be accepted with the belief that the interests involved were fairly defended and will thereby receive the support needed for implementation.
President Nixon gave me the assignment, beginning in March 1970, of chairing the process of desegregating the schools in seven Southern states. There we were, a decade and a half after the Brown v. Board of Education decision, with these schools still segregated by race. With strong support from Presidential Counselor Pat Moynihan, Special Counsel Len Garment, and Ed Morgan, a savvy former advance man for the president, I formed biracial committees in each of the seven states. We determined, with the president's agreement, that politics should have nothing to do with the selection of the people for these committees. We wanted equal numbers of blacks and whites who were truly representative of their constituencies. And so, with great care, we chose strong, respected leaders from each of these states.
We brought each of these committees to the White House for intense discussions designed to engage them constructively in this sensitive and potentially explosive issue. At the end of a day of substantive exchanges of ideas on implementation, I brought them to the Oval Office for a meeting with President Nixon. The president spoke to them with great conviction and considerable emotion. Looking around the room, he said, in essence: Here we are in the Oval Office of the White House. Think of the decisions that have been made here that have affected the health and the security of our country. But remember, too, that we live in a great democracy where authority and responsibility are shared. Just as decisions are made here in this office, decisions are made throughout the states and communities of our country. You are leaders in those communities, and this is a time when we all have to step up to our responsibilities. I will make my decisions, and I count on you to make yours. We must make this work. By the time the president finished and committee members were ready to leave, they were charged up to put their energy into making sure the school openings and subsequent operations of the schools proceeded as smoothly and constructively as possible.
The school openings in September 1970 were peaceful, much to the amazement of almost everyone. The community leaders had done a fine job by fulfilling their responsibilities. Strong people were the key to success in negotiating this difficult and sensitive situation.
Each of the following chapters highlights an issue of critical importance that has been on my mind for many years. I hope that my observations on how to approach these concerns — based on the insights I have gained though personal experiences — may be useful.CHAPTER 2
If you are able to confront problems effectively and take advantage of opportunities fairly, you will be able to govern. So the issue of governance is an appropriate starting point for this exploration of how to achieve a better future.
Let's begin by recognizing that good governance requires top-notch, highly accomplished people — the A team. These talented individuals then need to become part of a process and organizational structure in which they can work together constructively.
The second important element of governance is the ability to identify and understand the issues inherent in leadership. These issues are often daunting. These days, especially, vast technological changes providing wide availability of information and rapid communication have to be taken into account. Leaders must realize the difficulties posed as well as the opportunities available to convey important points to their constituents.
Of course, the most important ingredient for success in governance is leadership itself — the ability to create an environment conducive to learning and to involve people as active participants in the process. An atmosphere of trust is essential, as are standards of performance and accountability.
When these three interrelated elements of governance, each of key importance, interact, high performance will be the result.
How to Attract Top Talent to Government Service
Remember the historic touchstones: duty, privilege, and the opportunity to serve the common good, keeping in mind the constitutional process for governance that has stood us in good stead for more than two centuries. These days, however, this process is widely ignored, making it difficult to recruit the A team for many key positions where policy is developed and high-quality execution is needed.
The constitutional process starts with the election of a president, vice president, and members of Congress. Then the government functions through a variety of cabinet departments and agencies in the executive branch, authorized and funded through budgets appropriated by the Congress. So, in the executive branch, the president presumably governs through a fairly large number of his appointees who serve only after the Senate has given its advice and consent and who can be called to testify.
Excerpted from Issues On My Mind by George P. Shultz. Copyright © 2013 Board of Trustees of the Leland Stanford Junior University. Excerpted by permission of Hoover Institution Press.
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Table of Contents
Foreword Henry A. Kissinger xi
1 Our Challenges
The world is awash in change 1
2 Better Governance
What's wrong with governance today and how can we fix this essential process? 9
3 Return to a Vibrant Economy
Our economy has lost its drive. The reasons-and the solutions-are clear. Here's how we can have a vibrant economy once again. 27
4 A Better Energy Future
How can we take advantage of new opportunities? 45
5 Drugs: The War with No Winner
Forty years of the failed war on drugs should be enough to stimulate debate on alternative approaches to this serious problem. 53
6 Effective Diplomacy Applied to Issues of Foreign Policy
Proven ideas for effective diplomacy should be applied with a strategic overview that gives direction to the tactics of the day. 63
7 Toward a World Without Nuclear Weapons
We must get better control of nuclear weapons and identify the steps needed to achieve the goal of their eventual elimination. 87
8 Final Reflections 101
Comments by Helmut Schmidt 2012 Henry A. Kissinger Award Ceremony, Berlin, Germany, May 24, 2012 108
Comments by Henry A. Kissinger 2012 Henry A. Kissinger Award Ceremony, Berlin, Germany May 24, 2012 112
Remarks by President Reagan George P. Shultz, Mike Mansfield Medal of Freedom Award Ceremony, Washington, DC, January 19, 1989 117
Tribute to Ronald Reagan George P. Shultz, June 9, 2004 123
1 Our Challenges
"Representation: A Lesson from My Days with Nixon" George P. Shultz, Turmoil and Triumph: My Years as Secretary of State, New York: Charles Scribner's Sons, 1993 129
2 Better Governance
"The Constitution Doesn't Mention Czars" George P. Shultz, The Wall Street Journal, April 11, 2011 139
"The Shape, Scope, and Consequences of the Age of Information" George P. Shultz, Address before Stanford University Alumni Association's International Conference, Paris, France, March 21, 1986 143
3 Return to a Vibrant Economy
"Prescription for Economic Policy: 'Steady as You Go'" George P. Shultz, Address before the Economic Club of Chicago, Chicago, IL, April 22, 1971 157
"Economic Strategy for the Reagan Administration" A Report to President-elect Ronald Reagan from His Coordinating Committee on Economic Policy, November 16, 1980 166
'"Think Long' to Solve the Crisis" George P. Shultz, The Wall Street Journal, January 30, 2009 176
"Principles for Economic Revival" George P. Shultz Michael J. Boskin John F. Cogan Allan H. Meltzer John B. Taylor, The Wall Street Journal, September 16, 2010 179
"Time for a Budget Game-Changer" Gary S. Becker George P. Shultz John B. Taylor, The Wall Street Journal, April 4, 2011 186
"Education Is the Key to a Healthy Economy" George P. Shultz Eric A. Hanushek, The Wall Street Journal, April 30, 2012 190
"The Magnitude of the Mess We're In" George P. Shultz Michael J. Boskin John F. Cogan Allan H. Meltzer John B. Taylor, The Wall Street Journal, September 16, 2012 193
4 A Better Energy Future
"How to Gain a Climate Consensus" George P. Shultz, The Washington Post, September 5, 2007 201
"Why We Support a Revenue-Neutral Carbon Tax" George P. Shultz Gary S. Becker, The Wall Street Journal, April 7, 2013 204
5 Drugs: The War with No Winner
"A Real Debate About Drug Policy" George P. Shultz Paul Volcker, The Wall Street Journal, June 11, 2011 209
6 Effective Diplomacy Applied to Issues of Foreign Policy
"US Foreign Policy: Realism and Progress" George P. Shultz, Address before the 37th UN General Assembly, New York, NY, September 30, 1982 213
"America and the Struggle for Freedom" George P. Shultz, Address before the Commonwealth Club of California, San Francisco, CA, February 22, 1985 226
"The Future of American Foreign Policy: New Realities and New Ways of Thinking" George P. Shultz, Statement before the Senate Foreign Relations Committee, Washington, DC, January 31, 1985 241
"Terrorism and the Modern Wotid" George P. Shultz, Address before the Park Avenue Synagogue, New York, NY, October 25, 1984 263
"US-Soviet Relations in the Context of US Foreign Policy" George P. Shultz, Statement before the Senate Foreign Relations Committee, Washington, DC, June 15, 1983 278
"'Tear Down This Wall,' Twenty Years Later" George P. Shultz, Address before the American Academy in Berlin, Berlin, Germany, June 5, 2007 299
7 Toward a World Without Nuclear Weapons
"Preventing the Proliferation of Nuclear Weapons" George P. Shultz, Address before the United Nations Association of the USA, New York, NY, November 1, 1984 309
"Nuclear Weapons, Arms Control, and the Future of Deterrence" George P. Shultz, Address before the International House of Chicago and the Chicago Sun-Times Forum at the University of Chicago, Chicago, IL, November 17, 1986 321
"A World Free of Nuclear Weapons" George P. Shultz William J. Perry Henry A. Kissinger Sam Nunn, The Wall Street Journal, January 4, 2007 336
"Toward a Nuclear-Free World" George P. Shultz William J. Perry Henry A. Kissinger Sam Nunn, The Wall Street Journal, January 15, 2008 341
"Deterrence in the Age of Nuclear Proliferation" George P. Shultz William J. Perry Henry A. Kissinger Sam Nunn, The Wall Street Journal, March 7, 2011 347
"A World Free of Nuclear Weapons, An Idea Whose Time Has Come; Where We Are and Where We Need to Go" George P. Shultz, Address before the Global Zero World Summit, Paris, France, February 2, 2010 352
"Issues and Opportunities in the Nuclear Enterprise" Sidney D. Drell George P. Shultz Steven P. Andreasen, The Nuclear Enterprise: High Consequence Accidents-How to Enhance Safety and Minimize Risks in Nuclear Weapons and Reactors, Hoover Institution Press, 2012 360
"Next Steps in Reducing Nuclear Risks" George P. Shultz William J. Perry Henry A. Kissinger Sam Nunn, The Wall Street Journal, March 5, 2013 370
About the Author 375
Photo Section after page 126