No More Rich Bully

Don't send troops. Don't send aid. There's a better way to meet the Soviet threat in the Third World.

Melvyn Krauss | From the November 1986 issue

In recent years, the Soviets have made enormous gains in extending their influence in the poorer countries of the world. "As a result of the Kremlin's efforts over the past decade," writes Charles Wolf, Jr., of the Rand Corporation, "the Soviet imperium now includes Angola, Ethiopia, South Yemen, Vietnam, Laos, Cambodia, Benin, Madagascar, Congo-Brazzaville, Afghanistan, Nicaragua, Syria, and Libya, in addition to its previous satellites, allies and associates in Eastern Europe, Cuba, and North Korea.…While there have been some Soviet losses and setbacks (e.g., Somalia and Egypt) during this period, there is no question that the gains and extensions of the Soviet empire have vastly exceeded the losses and retrenchments."

One reason the Soviets have attained critical influence over the foreign and domestic policies of these countries has been their ability to split the opposition to their Third World imperialism. Japan, for example, is the very model of a rich, democratic nation dedicated to the proposition that it should not do anything to defend freedom beyond its borders. As far as Western Europe is concerned, the threat of a Soviet military invasion has effectively neutralized European opposition to Soviet expansion in the Third World. The fact that the United States stands virtually alone among the Western powers concerned with growing Soviet influence in the Third World, and willing to do something about it, makes urgent the adoption of a unilateralist foreign policy by this country.

The success of the Soviets in extending their influence in the Third World is due not only to their ability to neutralize the opposition, but to superior tactics as well. Unlike the United States, which has allowed American combat forces to be used directly in the attempt to contain communism in the Third World on several occasions—Vietnam, Korea, and Lebanon, to name but three—the Soviets rarely allow their troops to be used directly in combat. "Soviet troops are generally only a final, and usually disfavored, resource," writes Wolf, "whose use is confined to such exceptional circumstances as Afghanistan." The Soviets do not have a knee-jerk, "send-in-the-marines" mentality. When "marines" are required, the Kremlin is smart enough to send the other guys' marines, not their own.

According to Wolf, "the Soviet Union has developed an artful and complex network of cooperating 'fraternal' communist states (e.g., Cuba, Vietnam, East Germany, North Korea, and Nicaragua), as well as supportive non-communist states and entities (e.g., Libya and the Palestine Liberation Organization). These participants perform military as well as non-military roles and provide contributions in forms that vary in different contexts and 'projects.' Although precise operational details are—unsurprisingly—shrouded in secrecy, orchestration is provided by the Soviet Union, which also pays most of the bills."

The Soviet "takeover network" can be thought of as a set of triangular relationships, with the Soviets occupying one corner of the triangle, the Soviet proxy nation at the second corner, and the local communists in the country of conflict at the third corner. An example could be the Soviet Union, Cuba, and Angola. The Soviets provide Cuba with infrastructure, weapons for the military operations, and economic aid. Cuba, in turn, sends combat forces and military weapons to local communists in the country of conflict.

Should the local communists prevail, the Soviet Union receives a variety of benefits from the new member of its empire, including access to its troops for use as proxy troops in other countries targeted by the Soviets as takeover candidates. Should the communists lose, on the other hand, the Soviet leaders do not have to face the kind of trouble at home and embarrassment abroad that U.S. leaders faced after defeat in Vietnam or, more recently, the fiasco in Lebanon when 250 U.S. Marines were killed.

Copycatting the Soviets

The Soviet use of substitute forces to extend their influence in the Third World has been so successful that some leading anticommunist strategists in the United States are openly advocating that the United States copycat the Soviets by developing an American network of "cooperative forces" to assist "genuine and legitimate movements within the Third World seeking to achieve liberation from communist imperialism and totalitarianism." According to Rand Corporation analyst Wolf, who favors the use of American substitute forces abroad, "the purpose of these forces would be to contain or reverse communist imperialism in the Third World, and to further the mutual interests of the U.S. and its cooperators in the development of more pluralistic and more open political systems in the Third World."

The problems Reagan recently faced with Congress over aid to the Nicaraguan rebels, however, illustrate why any attempt on the part of the United States to copycat Soviet use of substitute forces is likely to prove ineffective. Just because a given strategy works for one person, or nation, does not mean that it will work for another. Different nations have different traditions, institutions, and cultures that make them more or less suited to different types of activities. In economics, this is called "the principle of comparative advantage." There is reason to believe that while the Soviets have a "comparative advantage" in using substitute forces to further their imperialistic ambitions, America's comparative advantage in countering them lies elsewhere.

U.S. political institutions have been built on the principle of decentralized power. The Founding Fathers were sufficiently concerned that no man—or groups of men—gain excessive influence over public affairs that they put into the Constitution the principle of separation of powers: that there be three branches of government—executive, legislative, and judicial—and that each branch should be dependent upon, and thus checked by, the others. This is an optimal system of government for an isolationist society concerned with maximizing the individual freedom of its citizens. For a society concerned with developing a network of cooperative forces to thwart an enemy abroad, however, it is inferior to the centralized and secretive Soviet system.

Once the Soviet decisionmakers make up their minds to act, for instance, there is no analogous institution to the U.S. Congress in the Soviet Union to frustrate their plans. The trade-off problems Reagan faces with the Congress to get his program through have no counterpart in the Soviet system. Perhaps even more important for the Soviet success with substitute forces is the fact that the Kremlin is able to work in secret. The doctrine of public accountability does not exist in the Soviet Union, and Moscow is not confronted by a free press determined to expose, and undermine, each and every covert activity taken by the Kremlin. This gives Moscow an enormous advantage over Washington so far as freedom of action in foreign policy is concerned.

In summation, the fact that the Soviets have had considerable success in extending their influence in the Third World through the use of substitute or cooperative forces does not mean that the United States will have equal success in countering this influence by copying them. Soviet institutions are structured to give their leaders maximum flexibility and resources to pursue subversion abroad; American institutions are structured to restrain our leaders from unduly restricting the rights and freedoms of individual citizens. Playing the Soviet game with American institutions and attitudes makes about as much sense as would playing the American game with Soviet institutions. If the United States is to effectively counter the Soviets in the Third World, the game it plays must be its own.

Is Economic Aid the American Game?

If the Soviet Union has a comparative advantage in the use of substitute forces to further its imperialistic ambitions, does the United States have an analogous comparative advantage in the use of economic aid to counter the Soviets? At first glance, the answer to this question appears to be in the affirmative. The United States clearly is a wealthier country than the Soviet Union. If it has a comparative advantage in anything, it would appear to be in economics. Certainly the United States can afford to give more economic aid to poor countries than can the U.S.S.R.

Another reason, some argue, that the United States should use economic aid to combat Soviet expansionism in the Third World is the apparent success of the Marshall Plan. What appears to have worked in Western Europe also should work in the Third World. The idea that a Marshall Plan for the Third World is—or perhaps should be—the American answer to the Soviet challenge in the Third World certainly is a widely held one. But like many widely held ideas, it happens to be incorrect.

This is truly a pity, because the vast wealth of the United States would make it relatively easy for this country to defeat communism if the solution to Soviet expansion in the Third World was that simple. However, two leading international economists, Gottfried Haberler of Harvard University and P.T. Bauer of the London School of Economics, argue that the success of the Marshall Plan was a unique occurrence not likely to be duplicated in today's poor nations.

"It is one thing to assist a war-ravished industrial country to put its economy back on its feet," writes Haberler, "and it is an entirely different thing to help a less-developed, backward country change its way of life and modernize its economy." Bauer notes that "the success of the Marshall Plan in the early post-war years is frequently invoked in support of wealth transfer to the Third World." But, he argues, "this analogy is altogether misleading. The damaged economies of Western Europe had to be revived, not developed. As was evident from prewar experience, the personal, social, and political factors congenial to economic achievement were present."

Few economists, even those who favor economic aid, argue that aid can substitute for what Bauer calls the "personal, social, and political factors" necessary for economic development. What they do argue, however, is that aid is better than nothing—that it can provide relief for people who suffer from extreme poverty and that this, too, is important in the fight against the spread of communism.

This argument is misleading for two reasons. First, economic aid seldom reaches the poor people for whom it is intended. Because economic aid is given for the benefit of poor people does not mean that the poor actually receive it. The reason is that the aid must be intermediated, and what happens in more cases than not is that the intermediary—the government—confiscates all or part of the aid for itself.

The tragedy in Ethiopia is a case in a point. One has to be hard-hearted indeed not to be deeply moved by the situation in that poverty-striken north African country. What did it matter if Ethiopians were communists, capitalists, or whatever? These people were dying a most horrible death before our very eyes—indeed, even as we sat in the comfort and security of our living rooms viewing them on television. Who was not moved to give, and give generously, in the face of such calamity?

The sad fact is, however, that the major part of the aid sent to Ethiopia did not provide the relief for which it was intended. Before it could save lives and relieve hunger, the aid was confiscated by Ethiopia's government and used for political purposes—specifically, to feed Ethiopian soldiers who were fighting anticommunist rebels protesting the extreme poverty and political repression imposed on their country by the communists.

And as P.T. Bauer and B.S. Yamey write in Commentary magazine: "The Marxist-Leninist government there has regularly received much Western aid, mostly from multilateral sources, with an appreciable U.S. and British content. This totaled about $1 billion over the five years 1978–1983. Throughout this period, the government pursued…damaging and destructive policies…, including persecution of productive groups, coercive collectivization of agriculture, large-scale confiscation of property, and underpayment of farmers by state buying agencies. Western aid continued nevertheless.

"What has happened to all this money? Obviously very little of it has gone to the poorest. Some of it has presumably helped the government to fight its several civil wars and to finance the extravagant Organization of African Unity with headquarters in Addis Ababa."

The Ethiopian case is not the exception to the rule—it is the rule. Economic aid seldom reaches those for whom it is intended. But even in cases where some of the aid does get through, the temporary relief it provides is somewhat of an illusion. By increasing the amount of food available for domestic consumption, food aid depresses the price of agricultural products in the recipient countries. Such price reductions in turn depress domestic agricultural output, so that what the recipient country gains in food aid it loses to some extent in domestic output.

This is why Third World countries desirous of developing a viable food industry for domestic consumption should steer clear of food aid. The influx of free foreign food into the domestic market damages local producers and can even ruin them.

The analysis of how food aid creates weakness and dependency in recipient countries can be extended to the case of more general foreign economic assistance. Consider a candidate for foreign aid that is experiencing economic difficulties because of faulty domestic economic policies. If the aid is not given, the difficulties may eventually lead to a policy reversal. The problem can, and often does, correct itself. But rendering economic assistance to the troubled country removes the incentives for domestic policy reform and perpetuates the status quo. In effect, the continuation of the bad economic policies becomes dependent upon the foreign aid: so long as foreign aid is maintained, bad economic policies persist.

Pacific Basin Cases

Taiwan and South Korea are two cases where foreign aid has accommodated poor economic policies. Economic interventionists long have argued that U.S. economic aid was an important springboard for the rapid economic growth these two Pacific Basin countries have achieved during the past two decades. This argument not only is incorrect but is the reverse of what actually happened.

There were several motives for U.S. aid to Taiwan from 1950 to 1965, of which the least controversial was sustaining a strong Nationalist military posture vis-á-vis Communist China. By 1956, however, U.S. aid objectives gradually shifted from military strength to economic growth. Reflecting the conventional wisdom of the time, Taiwan's development strategy was to use government aid funds to build infrastructure (power, transport, communications), foster agriculture, and develop human resources. Industrial development was to be left in the hands of private enterprise.

Though designed to benefit private enterprise, the effect of U.S.-financed investment in "social-overhead capital" was to damage private enterprise by diverting scarce resources away from it. Statistics show that private-sector gross investment in fixed capital formation in Taiwan fell from 56 percent in 1954 to 41 percent in 1958. From 1951 to 1963, the public sector accounted for 48 percent of total Taiwanese net domestic investment—and U.S. capital assistance accounted for 80 percent of that figure.

Rather than create a model for capitalistic development, as intended, it became obvious by the late 1950s that government-to-government aid was creating a strong socialist state in Taiwan that was suffocating the private sector. This was one of the main reasons Washington wisely chose to discontinue its aid to Taiwan.

An equally important purpose of U.S. aid to Taiwan and Korea during the 1950s was general economic assistance. But this assistance became an important factor in sustaining the protectionist policies of the Nationalists in Taiwan during the 1950s.

The Nationalists had rejected an export-oriented, free capital-import program because they saw it surrendering Taiwan's future development to private firms and foreign interests. Autarkic economic policies, however, did not bring independence. They brought the opposite. By running the economy into the ground, protectionism forced Taiwan to depend increasingly on the United States for general economic assistance. The Nationalists' fear of dependence on private foreign firms thus led to the reality of "aid dependency" on the United States. In the final analysis, the Nationalist government realized that only the prosperous are truly independent.

It is sometimes argued that U.S. aid was vital in stabilizing Taiwan and South Korea because it signaled American willingness to stand firm against communist aggression. This supposedly gave the Taiwanese and South Korean economies their attractiveness to private investment. In fact, however, foreign and domestic private investment did not take off until the governments of these countries changed their policy orientation from government-led growth and reliance on foreign aid to more emphasis on private-sector growth. Korean per capita GNP, for example, grew at an annual average rate of 1.9 percent during this period, compared with figures three times that magnitude after both aid and government size in Korea were scaled down in the 1970s.

In short, so long as generous U.S. aid was forthcoming, Taiwan and South Korea could forgo private-capital import and export promotion for foreign-exchange purposes. But when the United States discontinued its aid, the generation of foreign exchange by the private sector became critical. It was not mere coincidence that both countries radically altered their domestic economic policies from import substitution to export-led growth in the face of the U.S. aid cutoff. It was a case of cause and effect.

Does Wealth Make a Difference

It is sometimes argued that America's strong suit may lie in economic aid because this country is richer than the Soviet Union. That the United States is a much richer country than Russia is, of course, beyond dispute. What can be disputed, however, is the value of the greater wealth of the United States in attempting to combat Soviet influence in the Third World.

There would appear to be a natural affinity between aspiring and actual Third World totalitarians and Moscow. The former want power, not wealth, and Moscow can help supply the means to acquire and keep power—at a price. The greater wealth of the United States has proved itself of limited utility in trying to pry Third World totalitarians away from the Kremlin. Economic aid simply does not have the allure many think it does.

Moreover, just because the United States is richer than the Soviet Union does not mean that U.S. leaders have fewer economic resource constraints on their giving of economic aid. The fact that the United States is a real democracy puts it at a substantial disadvantage to the Soviets in the use of economic aid for strategic purposes. In both the United States and the Soviet Union, there is a trade-off between the amount of resources that can be put into economic aid and that available for other uses—for example, the satisfaction of consumer needs and social services. This is the basic law of economic scarcity which no country—communist or capitalist—can repeal.

In a totalitarian system, the allocation of resources is made by a small group of men, operating in secret. If a consensus exists among these men to put resources into imperialistic adventures, nothing and no one can stop them. The amount of resources the U.S. government can divert to combat Soviet imperialism, however, is limited by public tolerance of the anti-imperialistic measures. Historically, public tolerance for economic aid in this country has been rather low. Thus, even though the U.S. economy is more productive than that of the Soviets, U.S. leaders work under more severe economic resource constraints than do Soviet leaders.

American democratic traditions put the United States at a comparative disadvantage to the Soviets in the use of economic aid for strategic reasons in another important respect. When economic aid is given for strategic reasons, its purpose is to create a dependency relationship between the donor and aid recipient such that the aid recipient is made amenable to manipulation by the donor country. Potential for manipulation of aid recipients by the United States, however, is limited by the influence that friends of the aid recipient can have on Congress and in the White House through the democratic process.

The relation between Israel and the United States is a case in point. The United States gives more economic aid to Israel than to any other country. There is also a large, politically active, well-organized Jewish community in the United States that has made economic aid to Israel something of a "sacred cow" in Washington—the politician that dares oppose it faces certain and substantial retribution.

This has not been good for the United States and it has not been good for Israel. From the point of view of the United States, its foreign aid to Israel has not given it the leverage over Israel's foreign policies it would like to have, and should get, given the amount of money the United States has put into Israel. From Israel's point of view, the economic aid has allowed successive Israeli governments to follow ruinous economic policies, which have devastated the country's economic base at a time when a strong economy is badly needed. A country that spends almost 50 percent of its public budget on defense cannot afford the elaborate welfare state Israel has been able to finance because of the economic aid it receives from the United States. Instead of making Israel strong, U.S. open-ended economic aid has made Israel into the "Sweden of the Mediterranean."

Does the Cuban lobby in Moscow (they must have one) possess the same political clout as that of the Israeli lobby in Washington? It is highly unlikely that the Cuban tail wags the Soviet dog, for several reasons. As noted above, in a decentralized political system such as that of the United States, a client state can exert an influence over the most important decisionmakers by appeals to public opinion and direct contacts with lawmakers and other influential persons. In a totalitarian system, these avenues of influence do not exist.

Second, Castro's ideological base is so intrinsically anti-American that his bargaining power with the Kremlin is virtually nil. Can anyone seriously imagine Castro trying to hold up the Soviets for more economic aid by threatening to adopt pro-American policies? Yet America's clientele in the Third World consistently threaten the United States that if it does not give—and give generously—they will turn to the other superpower for assistance.

For example, several noncommunist Latin American countries—Ecuador, Colombia, Uruguay, and Argentina—are reported to be warming up to Castro, who in March 1985 said that the Latin American foreign debt of $360 billion simply cannot be paid and must be canceled by U.S. banks. The message the debt-ridden Latin American governments are sending to Washington is obvious enough: Unless you bail us out with economic aid on favorable terms, we will tilt our foreign policies toward Havana and Moscow. Because the ideological orientation of these countries is not intrinsically anti-Soviet, their threat to change political coloration has a credibility in Washington that Castro lacks in Moscow.

Playing to Our Strength

Those who argue that America's comparative advantage in competing with the Soviets in the Third World lies in economic aid are correct in only one respect: that the strength of the United States lies in its economy, and that this country somehow must learn to turn its enormous economic strength to its strategic advantage if it is to impede the spread of communism among the poorer countries. The truth of the matter is that the United States probably has spent too much time and too many resources containing communism, and too little time and resources spreading capitalism. The marketplace is this country's strongest institution, and the United States must learn how to use it to help the poorer countries of the world develop a vested interest in the capitalistic system. Once capitalism spreads, communism will contain itself.

The best way the United States can spread capitalism is through deeds, not words. The poor countries of the world already have had too many lectures from the richer nations about the benefits of free trade, and too few examples of it. Access to the vast American market is what these countries need—and should get—to build their allegiance to a capitalistic system. American protectionism is as subversive to U.S. security interests as Soviet cooperative forces.

That access to the American market is preferred to American aid by at least one of our most important allies recently was made clear by Turkish prime minister Turgut Ozal. One look at the map reveals Turkey's strategic importance to the United States. Not only does it guard frontiers with the Soviet Union, Bulgaria, and the straits from the Black Sea into the Mediterranean, but it also shares borders with Iran, Iraq, and Syria.

On a recent visit to Washington, according to a dispatch in the New York Times, "Mr. Ozal said Turkey was 'not fairly treated' in comparison with the two top beneficiaries of American military aid, Israel and Egypt, the only countries that receive more aid than Turkey." The Turkish prime minister, however, is not seeking additional military aid. "He stressed an easing of 'American protectionism' rather than more military aid. He said protectionism limited the export of such Turkish products as textiles and steel goods."

The Turkish prime minister's comments make it clear that a link exists between increased American imports on the one hand, and the fight to contain communism on the other. Many U.S. allies would prefer trade to aid but settle for aid because that is what the U.S. government offers them. When U.S. Secretary of State George Shultz traveled to Turkey in March 1986 to renew American military-base rights there, he offered aid but was told by Sakip Sabanci, chairman of the Turkish Industrialists' and Businessman's Association, to "assist us not by aid, but by facilitating our export performance." Indeed, Turkey went further than mere rhetoric on this point: it explicitly linked the renewal of the American military-base rights to major trade concessions by the United States. Shultz, formerly of the free-market University of Chicago, left Turkey furious.

By increasing the economic resources available to foreign governments, economic aid increases the power that government—and politicians—have over the lives of ordinary citizens in recipient countries. By increasing the exports of the private sector, however, trade creates ties to, and vested interests in, the capitalistic system. The issue of "trade versus aid," in fact, boils down to whether there should be political or market solutions to economic problems. Unfortunately, the U.S. State Department traditionally has thought more in terms of buying the allegiance of public officials in Third World countries with economic aid than in terms of creating an allegiance on the part of the mass of peoples in these countries to an economic system that has the potential to make them "communist-proof."

The conflict between these two objectives has become a particular problem for the Reagan administration, whose capitalistic ideology has clashed on several occasions with the State Department's business-as-usual policies. The result has been an uncomfortable attempt to square the circle by making U.S. economic aid conditional on the aid recipients undertaking certain reforms designed to make their economies more compatible with capitalism.

This confused policy is not likely to work. So long as the Third World country knows the United States is using economic aid to compete with the Soviet Union, "conditionality" will not be effective. The Third World country simply will take the aid and promise to make the reforms at some future date; then it breaks its promise, claiming severe domestic opposition to the reforms. When the United States counters by threatening an aid cutoff, the aid recipient responds with a threat of its own: "If you cut the aid, we will go for help to the Soviets or to one of its proxy nations." Finally, we decide the aid must be continued for national security reasons. As noted above, several Latin American nations already are using a variant of this scenario to get Washington to bail them out of their enormous foreign debt.

But even if U.S. State Department officials can avoid being sandbagged by the "switching allegiance" threat, the policy of giving economic aid in the name of capitalism does not create an allegiance to capitalism in the Third World country—it creates the opposite. Assume, for example, that the Third World country maintains foreign-exchange controls, and aid is made contingent upon their removal. In and of itself, the removal of exchange controls makes the private economy more efficient—that is, after the reform, a given amount of economic resources in the private sector can be expected to produce more goods and services than before the reform.

The price of making the private sector more efficient in this instance, however, is to increase the economic resources available to government. Consequently, the new jobs created by the aid-cum-reform package will be public-sector jobs, not private-sector ones. Moreover, politicians will determine who gets how much of the aid. Thus, while the poor country can be presumed to be better off with the reform measure tied to the aid than with the aid alone, conditionality in no way alters the conclusion that economic aid, tied or untied, increases the power and influence of politicians and creates allegiances to government rather than to the private marketplace.

Trading Communism Away

Instead of playing a game in which the Soviets can compete, and compete effectively—buying foreign leaders with economic aid—we should select a game to play where the Soviet disadvantage is so great as to guarantee a U.S. victory. There is no way, for example, that the U.S.S.R. could possibly match the economic impact of the United States granting unlimited access to its vast market. The United States could use trade against the Soviets as they use aid against the Americans. Let the United States declare war on communism in Central America, for example, not by sending in American troops but by forming a common market with all countries in Central America who want to participate.

The United States should agree to eliminate all obstacles to imports from any Central American country that agrees to reciprocate by removing all obstacles to U.S. exports. A "common market" with the Caribbean Basin countries would help fight communism in four important ways: (1) It would increase the exports and economic well-being of the Central American countries. (2) It would create an allegiance to capitalism in a part of the world where the economic process has been dominated by the political process for too long a period. (3) It would improve the efficiency of the Caribbean Basin economies by imposing more-liberal trade policies upon them. And (4) it would place Uncle Sam in a new light.

Americans should not underestimate the resentment many Caribbean people feel toward the United States. A common market with the Caribbean Basin would help ameliorate that resentment by showing the people of that region that the United States practices the competitive ethic it preaches. Economic aid, on the other hand, reinforces Uncle Sam's image as a rich bully, all too willing to use its enormous wealth to manipulate others for its own selfish reasons.

When faced with the choice of linking up with the Soviets or plugging into the American economy, what sane Central American leader would choose the former? Even Nicaragua should be asked to join a U.S.-Caribbean Basin Common Market. Should it join, the pressures of free trade would dampen Sandinista control over the economy. The common market would have rules, and Nicaragua would have to conform. Moreover, anti-American paranoia would sell at a discount rather than a premium in Managua if both countries belonged to the same common market.

For these reasons, it is doubtful the Sandinistas would join a Caribbean Basin Common Market even if asked. But this, too, would be good; a refusal to join such an enterprise would help isolate the Sandinistas in their own region. A U.S.-Caribbean Basin Common Market is the type of initiative in which the Sandinistas lose no matter what they do.

Objections to the formation of a U.S.-Central American Common Market can be expected to come from protectionist interests in the United States that fear the increased competition from Central American exports. Countries such as El Salvador, Guatemala, Honduras, and others are rich in labor and thus could be expected to be efficient in the production of such labor-intensive products as textiles, apparel, toys, and plastics. American labor and management in these industries undoubtedly will use their considerable political clout in Washington to try to sabotage the initiative.

Under normal circumstances, the protectionists would have a good chance to succeed, since the opponents of protectionism usually are not well organized and are scattered throughout the population. But the linkage of the Common Market to combating the communists in Central America gives the plan a much broader base of political support than it otherwise would enjoy. The strategic importance of the proposed U.S.-Caribbean Basin Common Market might be able to defeat American protectionists, just as it might be able to defeat the Central American communists.

A Caribbean Basin Common Market is one example. The general point is that in countering Moscow's moves in the Third World, Washington must develop tactics and strategies appropriate to America's institutions, values, and strengths—not simply imitate the tactics of our rivals. America's strong suit is its economy, and this country must learn how to use its enormous economic power to improve the material standard not only of its own citizens but of foreigners as well. Other things being equal, the better off our neighbors, the more secure they—and we—will be.

Melvyn Krauss is a senior fellow at the Hoover Institution at Stanford University and a professor of economics at New York University.