The communications revolution has assured that just about every human being in every still-poor country knows that people in many other countries are starting to enjoy the kind of lifestyle they want for themselves. Because television and video now reach into every village in the world, people in countries that still haven't gotten into shape literally can see that others are moving forward faster. Increasingly, they are starting to wonder why success has eluded them. And, not being intellectuals, they are having little difficulty putting two and two together and coming up with four.
And as this modern standard of living becomes visible to so many people in the world, they are putting more and more pressure on their governments to shape up and deliver the goods to them. Consider the Mideast. Just 35 years ago per capita income in the seven leading Arab countries averaged $1,512, versus an average per capita income of $1,456 in the seven Asian "tigers." In 1991, per capita income in these same Arab countries had risen to an average of just $3,342, versus $8,000 in the seven Asian countries. Would you like to stand up in a Cairo cafe and argue that Asians are smarter than Arabs? That would be neither a clever thing to do nor, more importantly, would it be accurate.
Today more and more Arabs are coming to understand that they have wasted the last several decades by playing politics instead of economics. Indeed, it is this recognition that offers the best hope for peace in the Mideast. The process is in its early stages now, but what seems clear is that the Arabs are starting to turn their attention from the destruction of Israel to the development of their own economies. For example, Israel and Jordan signed a trade accord in October. Creation of a Mideast development bank is moving forward, with a range of initial projects penciled in including construction of airports and integrated electric grids for the region. Tunisia has already signed a free trade agreement with the European Union, and separate negotiations are under way now between the EU and Jordan, Morocco and Egypt. In a very real sense, the battle in the Mideast is shifting from Arab against Jew, to middle-class Arab against Arab extremist. No doubt there will be some setbacks along the way, and some very nasty bumps. The old order will not give way gracefully to the new; it never does.
But in the end, the middle class will win. For in the Mideast, and elsewhere, the political elites are discovering that responding to middle class aspirations -- as opposed to extremist demands -- is becoming the prudent, even the fashionable thing to do. The Cold War is over. Playing East against West (or Arab against Jew), or playing both sides against the middle, just doesn't work any more. All that ideological posturing and preening is passe, as are those politicians who built their careers on it. Ideology has given way to technical expertise -- technical expertise in the political sense of knowing how to start up the growth process and keep it on track politically as well as economically. In more and more countries, those politicians who can deliver the goods are more likely to triumph.
Moreover, the romantic and sympathetic image so many Westerners used to have of the Third World has mostly eroded. The colonial era is long over. But so too is the post-colonial period, and just as middle-aged people who blame their parents for their psychological problems are boring, so too are countries that have been free and independent for 40 years boring when they blame everyone else for their economic failures. These days, "Third World" is just a fancy phrase for "losers." Hanging around with losers isn't much fun, and increasingly the leaders of countries that can't seem to move forward are finding chilly receptions in Washington, London, Paris, Bonn and other western capitals. (Indeed, the receptions accorded "Third World" leaders these days in places like Singapore, Hong Kong and Seoul are also fairly frosty.)
In effect, today more countries are being shamed into getting fit. After all, when you see neighbors you have been disparaging for centuries shaping up, it gets harder and harder to blame everyone and everything except yourself for your own continuing failure. Either you get with it, or you get left out. Remember the New World Order that President Bush talked about? He was unable to define what he meant, and so the term itself became something of a joke. But his instincts were right; a new world order was emerging after the end of the Cold War, and its chief characteristic is this scramble to join in the process of economic growth.
Now that we know what it takes to make growth happen, it is obvious that there is little the West can do, in any direct sense, to push the process along. What is called for is a macroeconomic version of the approach that Senator Daniel P. Moynihan, then a counsellor to President Richard Nixon, outlined 25 years ago in a memo to the President about domestic poverty. Moynihan said the best approach was one of "benign neglect" -- of just turning to other matters and letting people work it out for themselves. Moynihan was pilloried at the time for what the liberals viewed as a callous, even cruel attitude toward the less fortunate among us. But in a macroeconomic sense, Moynihan was exactly right. (Indeed, one might well argue that he was right in the microeconomic sense he was writing about; surely the parallel between physical fitness and economic growth is just as valid when applied to individuals as to countries.)
The best approach now is simply to ignore the Third World. There is nothing we can do to help those countries whose leaders persist in pursuing discredited ideologies and economic policies. This is neither callous nor cruel; it is merely practical. However, when a Third World country does make the decision to shape up -- in other words, when a Third World country decides to leave the Third World behind and join the rest of us -- we ought to be receptive and welcoming. Happily, the international infrastructure to support economic growth is in place. Today there is a wide range of agencies and organizations that, together, teach the skills and provide the initial wherewithal to get the growth process started. These include publicly-funded entities such as the World Bank, the IMF, and the regional development banks -- which are beginning to reshape themselves to support real entrepreneurial growth rather than merely make loans to governments. And there is now a slew of privately-funded entities that do much the same thing. The US should encourage the private entities, and use its financial muscle to make sure that the public entities move in parallel.
In addition, there is one thing that only the US can do to keep the curve of wealth rising. We can use our overwhelming power -- military as well as economic -- to assure that no one country screws things up for everyone else. Likely troublemakers include China, Iran, Iraq, North Korea, possibly a surly and resurgent Russia. Just as safe streets encourage business activity in urban neighborhoods, safe regions and continents encourage economic growth. There is no public opinion poll to prove this, but common sense suggests that just about every ordinary person in the world would be delighted if the US would keep the troublemakers at bay (assuming the US has the sense to distinguish between world- class troublemakers who would upset the global order and local thugs, such as the Burmese military, who are merely screwing things up within their own borders.) We can do it, and we should. And if this means boosting the defense budget, it will be worth the price a thousand times over if the result is that the curve of wealth continues to rise.
For while the most profound benefits of global economic development obviously will accrue to those countries that move upward from poverty, we in the West also will benefit enormously. It is our goods and services that people around the world want; everything from our computers to our restaurant chains to our clothing, our movies, our management technologies and our distribution prowess. While it is true that some western jobs will be lost as manufacturing plants move to the less developed countries where wage rates are lower, it is also true that in today's economy the percentage of total cost of production attributable to labor is declining. It may make sense to move, say, a furniture factory from North Carolina to Ecuador if labor accounts for 80 percent of the cost of manufacturing a dining room set. It makes no sense to move, say, a printing plant to a low wage rate country if, with today's robot-controlled presses, labor accounts for just 10 percent of the cost of manufacturing 10,000 copies of a book. Better to keep that plant in Michigan and ship the books to India or Brazil.
Moreover, in today's global marketplace the very concept of manufacturing in just one place is becoming outmoded. Increasingly, a product is designed in one country, then the manufacturing of its components is farmed out to suppliers in other countries, then all the components are shipped to yet another country for assembly. The new laptop computer on which I am writing this article is comprised of hundreds of components -- disk drive, chips, keyboard, screen, modem, case -- which together probably earned more frequent-flier miles this year than I have. The phrase "Made in X" is increasingly an anomaly, although it will take some time before our unions and workers fully grasp what this means; namely, that companies compete not so much for contracts to manufacture products as to make components of products or for service-oriented pieces of the action such as design, advertising and distribution.
Since the most valuable components of any product are those requiring the most skill and knowledge to produce, our own economic well-being requires that we provide a steady stream of skilled men and women into what is now a global workplace; young people who are sufficiently competent at math, science, writing and communications technologies to hold and even increase our share of the expanding global pie. More precisely, we want to assure that we remain the world's leading supplier of the most valuable parts of any product or service -- those with the highest knowledge component.
Whether we will do this in years to come is the subject for another article, but the evidence so far is that we are succeeding. US exports are rising steadily, and US direct investment abroad is running at a record level -- $33 billion during just the first six months of 1995, up 47 percent from 1994 and up 27 percent from the record year of 1993. Indeed, across the entire range of our business community -- from the largest multinationals to the mid-size, $5 million to $50 million companies that have carved out tiny niches for themselves in which they do whatever it is they do better and more efficiently than anyone else -- we are competing and winning in the global marketplace to a degree the standard economic indicators, such as housing starts and interest rates, reflect feebly, if at all. This may account for why, despite massive industrial layoffs during the last several years, the unemployment rate is so low, and why the stock market is so high.
Indeed, if the curve of wealth keeps rising and if we have the discipline to stay in shape ourselves, it is hard to see how -- for those already on top of the curve, as well as for those just starting their upward climbs -- the coming decades could be anything less than an economic blowout.
Herbert E. Meyer served during the Reagan Administration as Special Assistant to the Director of Central Intelligence and Vice Chairman of the CIA's National Intelligence Council. His most recent book is Hard Thinking: The Fusion of Politics and Science.
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