Excerpts from Remarks Prepared For Delivery By The Honorable Caspar W. Weinberger To Town Hall Of California On Thursday, 13 July 1989

We are at the crossroads in deciding how to assist in the fundamental transformation of totalitarian systems to free enterprise and democracy. Today, the so-called "conventional wisdom" seems to be that major infusions of Western capital, technology, equipment, and management will advance this process in a positive, irreversible direction. But there are a number of developments, which I believe, contradict this, and, at minimum, require a far more disciplined and sober approach by the West.

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In fact, many in the West are far more optimistic about the prospects of genuine reform in the Soviet Union than many prominent Soviet economists and statesmen.

Dr. Andrei Sakharov stated recently, at a speech at the Royal Institute for International Affairs in London, that it was not at all clear whether Mr. Gorbachev would prevail over the "right wing". He went on to say that, "This is a situation, it seems to me, where it is very dangerous to give financial credits. The West cannot be certain to whom or for what it would be giving these credits. They might support the reactionary tendency. These are times when one must be a bit cautious and wait."

Sakharov also said, "Any infusion of capital would just run into the sand. Now is not the time to artificially press ahead with economic, cultural or political relations."

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Some take statements such as these and say we must "help" Gorbachev in any way possible–that Gorbachev is the most "enlightened" leader we can ever expect to have on the scene.

However, these observers miss a fundamental point. The transformation of Soviet society that would truly serve Western interests would be achieved by inducing Moscow to transfer the country’s priority resources, from the bloated military sector to the starving civilian economy. As we all recognize, the USSR has a first-rate military and a third-world economy. Western assistance — in lieu of a fundamental change in the nature of the Soviet government — is more often than not used by the Soviets as a substitute for the required shift in Soviet resource allocation from military to civilian, not a stimulus.

For example, part of the attraction to the West of Gorbachev’s "perestroika" is the commonly held assumption that it will lead to a shift from spending on "guns" to spending on consumer items, the so-called "butter." But, if the West preemptively provides the Soviets, and East bloc countries, with large-scale loans at very low interest and credit lines with no strings attached, or questions asked about where the money is going, and how it is being used, where is the guarantee that the loans will not be used simply to add to the Soviets’ military power?

If we do not even try to restrict the use of these loans, is it not at least possible, and in fact likely, that the Soviets will use a significant portion of these funds to finance their ever growing military budget, or to support their other activities around the globe that are inimical to our interests?

I am not against peaceful, non-strategic trade, but I am against a Western investment and lending effort designed to bail out failed socialist economies, irrespective of the costs to Western security. Such behavior by Western governments, banks and firms is best embodied by the term "economic Genscherism", after the West German Foreign Minister who is strongly in favor of helping the Soviets at all costs.

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The West cannot base its security on a "riverboat gamble" as to the outcome of perestroika–hence the danger of our giving it unqualified support.

To my mind, the only factor that seems certain now is that political control will not be surrendered by totalitarian leaders anytime soon to systemic "reform".

Witness the recent events in China. In Tiananmen Square the massacre of civilians by the Army was viewed as the necessary price to pay for "stability," by the "reform-oriented" Chinese leadership.

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In Eastern Europe, it is important for us to encourage political and economic reform — so long as all disbursements of Western funds are fully coordinated and made contingent on achievement by these countries of publicly identified goals and specific milestones to attain those goals.

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Nevertheless, I am concerned that Solidarity and the Communist authorities do not yet have a comprehensive economic plan. And the Allies have not yet formulated goals and milestones against which Warsaw’s receipt of Western assistance will be based.

The chance of good money following bad is a serious possibility. Already in Poland a debt of over $2 billion to the United States government and taxpayers is languishing unpaid and probably will be forgiven.

In our effort to help others, we must protect the American taxpayer as well! And we must differentiate between Eastern European countries because they are not all alike, and where necessary, use the stick as well as just carrots.

While Poland and Hungary are making efforts to reform, East Germany, Czechoslovakia, Romania, and Bulgaria are not. East Germany still remains one of the very few cash producers for Moscow, and too often funds and helps carry out Soviet "dirty work" throughout the third world. There is every reason to be especially concerned about the diversion by East Germany of borrowed Western funds for purposes harmful to vital Western interests.

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Why should these countries enjoy any of the benefits of the West’s largess, particularly untied loans, with no questions asked as to how the money is being used?

I think we should proceed expeditiously–beginning tomorrow at the Paris economic summit–to identify, on an alliance-wide basis, appropriate linkages between Moscow’s need for economic and financial assistance, and concrete actions by the Soviets to reduce the global threat to freedom, including:

• a multi-year, proven record of sharply reduced defense spending;

 

• a verifiable shift in the deployment of Warsaw Pact forces, from an offensive to defensive posture;

 

• a curtailment of regional aggression in places such as Nicaragua;

 

• the removal of the Berlin Wall;

 

• irreversible market-oriented economic reform, including price reform;

 

• and broader compliance with the Helsinki human rights accords.

In addition, we need to achieve a comprehensive agreement on Western lending to Warsaw Pact countries and Soviet client states which phases out government guaranteed credits, untied loans (including Soviet bonds) and greatly enhances reporting requirements.

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Under no circumstances should the West return to undisciplined, financial transfers, which permit Moscow to divert the proceeds of such Western loans to fund their dangerous military and other activities on a global scale. Other large-scale infusions of Western capital equipment, technology, management, and marketing skills should await our having this "report card" in hand.

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I think it would be the height of folly to base the national security policies of our nation and those of other freedom-loving countries on the fate of, and unquestioning belief in, one individual–Mikhail Gorbachev. While many believe he is different, I suggest that thus far he is only clearly different in one real respect: he seeks favorable public opinion.

It is not unreasonable to assume that fundamental Soviet goals remain unchanged, and that Gorbachev is using new and more clever tactics to secure these goals, including gaining "breathing space"–peredishka, and perhaps even including world domination–an unchanging Soviet goal from the beginning of the Soviet regime.

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There is no real reason to believe that the current situation in the USSR justifies letting our guard down! But there is every reason to conclude that democracy is on the march, and if we do what is necessary to protect our own freedoms, while encouraging fundamental reform, the communist system is indeed finished. But we must never forget how strong is the Soviet Union’s military and how quickly, under their system, military strength can be added — and how long it takes for democracies to regain their military strength once lost.