As you know, [I recently] announced renewal with conditions of MFN for China. I have deep concerns about China’s record on human rights, proliferation and trade. At the same time, I am well aware of the importance of the China market to U.S. businesses. Indeed, U.S. companies are a powerful force for change in China.
The following year’s letter, of August 26, 1994, testified to the positive momentum of this policy. President Clinton wrote of his recent grant of MFN status to China, saying the “world’s fastest growing economy … will lead to more trade, more international cooperation, and a more productive dialogue on human rights issues.”
Clinton was right—and so were Presidents Carter, Bush, and Nixon, as well as Greenberg. As told in The AIG Story, published in 2013:
China and the U.S. should open negotiations for a free trade agreement between them. Negotiations will be protracted and punctuated by impasses, but instead of trading accusations and meeting dead-ends, by discussing concerns in the context of a formal negotiation driving toward an agreement, the chances of success are substantially improved. While agreement on some issues may prove impossible, progress on others are all but certain and will create a productive trade climate. Greenberg believes that China is prepared for such an agreement and that it is in U.S. national interest. A free trade agreement is far superior to a trade war.
Those words still resonate. Russia was a different story.
NIXON’S JANUARY 1989 Foreign Affairs opus dissected the challenges in Russia with scrupulous, if unorthodox, care. Nixon sent Greenberg a copy, with a note saying he’d “find that it differs from some of the conventional wisdom embodied in the fashionable Beltway line.” The principal themes drove a middle course between the day’s hawks and doves, offering a pragmatic realist assessment of Russia under Gorbachev. Some highlights:
Those who urge the West to “help Gorbachev” with low interest loans and subsidized credits fail to realize that such actions are not in our interest until he makes an irrevocable break with the Kremlin’s past policies.
Gorbachev has launched his reforms and pursued a more conciliatory approach to the West because the communist economic system failed at home and the Soviet Union’s foreign policy became counterproductive.
Unlike his predecessors, Gorbachev sees the world without ideological blinders. He has realistically assessed the Soviet Union’s enormous economic, political, imperial and geopolitical problems.
Gorbachev’s goal is to reinvigorate his country’s communist system. He does not want to overturn the Soviet system; he wants to strengthen it. To paraphrase Churchill from another context, Gorbachev did not become general secretary to preside over the demise of the Communist Party.
Greenberg replied on February 7, saying of Nixon’s framework: “The new foreign policy team in Washington would do well to follow this road map.” Greenberg added:
I couldn’t agree more that Gorbachev is a super public relations campaigner and is in desperate need to enlist all the help he can from the West to try and rescue his economy. The likelihood is that no amount of capital, credits, even managerial assistance, will make much difference in the end. He can issue all the statements he would like to separating the political apparatus from economic/managerial decision making, but “memorandum” won’t accomplish the end result.
The culture is embedded and will take decades to unwind and not without great sacrifice. Change, if there is to be change, will come from public dissatisfaction with the system, but how will this occur in the Soviet Union given the strong security apparatus that exists?
By year-end 1989, Nixon and Greenberg continued to be skeptical of Gorbachev, even as many worldwide celebrated him. Nixon published a one-page essay in Time magazine and sent a copy to Greenberg.
The picture Nixon painted, in broad strokes, began by noting that, in one sense, the Cold War was over. The West had won. Democracy and capitalism had defeated communism and planned economies. On the other hand, the Soviet Union was still standing and, Nixon wrote, “a Communist named Gorbachev is the most popular man in Europe.” While citizens of newly-liberated eastern European countries rejoiced in their rediscovered freedom, Gorbachev remained a “proud Russian nationalist” dedicated to Marxism.
Before the Soviet Union’s collapse, Gorbachev ran a military superpower using Third World economic power. Facing enormous economic demands to pay subsidies to its far-flung client states—Cuba, Vietnam, Ethiopia, Angola, and Nicaragua—and an expensive war in Afghanistan, some kind of change was imperative. After sobriety and anti-corruption reforms failed, boldness was in order, Nixon said, noting that his “purpose was not to abandon Communism but to save it.”
In doing so, he fooled the West, becoming “the darling of Western intellectuals and pundits.” Gorbachev’s political reforms, called Glasnost, were “breathtaking” compared to the erstwhile Soviet oppression. To Nixon, however, they remained “totally inadequate compared with a free society.” Worse, his economic reforms, called Perestroika, had been “an abject failure,” as Russian per capita income had fallen. To Nixon, while Gorbachev had only marginally changed Russia, he had transfixed and transformed the world by making the West believe his reforms were real when they were not.
Russian military power and related spending was sustained. To quote Nixon again: “Even if he has been sounding to some hopeful ears like a dove, his bristling talons still make him look like a hawk.” As for freedom spreading across Eastern Europe, to Nixon these were the result of forces Gorbachev knew he simply could not control. The new Russia had not suddenly come to embrace Western values such as political pluralism, individual rights, or a free-market economy, Nixon said. Without radical shifts from central planning to decentralized spontaneous economic coordination, Western dollars would encrust communism and Gorbachev’s grip on power, rather than facilitate the “advent of democracy,” to use a phrase Nixon borrowed from Andrei Sakharov.
Greenberg concurred. He did not find the Washington consensus, focused on Marshall Plan type foreign aid, to be the right approach. He sought a private-sector solution, one that would target development of an economy in Russia that would push back against political oppression. Gorbachev had been succeeded, in 1991, by Boris Yeltsin, taking the title of president of Russia and seeming more open to genuine economic reform ideas.
IN A letter dated September 3, 1991, to David Abshire of the Center for Strategic and International Studies (CSIS), Greenberg’s ideas were clearly the perspective of a business executive: a private sector initiative, enlisting the best global companies, incentivized with profits, and creating targeted economic opportunities. Each leading multinational in every major industry would adopt a Russian counterpart by making a substantial equity investment, providing strategic and managerial direction, to build the country’s infrastructure across all sectors, from agriculture to transportation. Financing would be supported by soft loans from global export-import banks.
Nixon agreed with Greenberg, noting that prevailing talk of an effort equivalent to the Marshall Plan was flawed. In a March 9, 1992, letter to Greenberg, the former President wrote:
The Marshall Plan analogy does not work for the Soviet Union. While five years of devastating war did not destroy the management class in Western Europe and Japan, seventy years of Communism did exactly that in the Soviet Union. A new class cannot be built through government action, but only by enlisting private enterprise on a massive basis.
On the same day Nixon wrote his letter, Greenberg had sent one to President Bush. It referenced the recent remarks of Ambassador Vladimir Lukin expressing enthusiasm for some form of partnership between Russia and the United States to solve Russia’s enormous economic problems.” Greenberg said he was “writing to outline one way I believe this partnership might work very effectively.” Reflecting both Greenberg’s political astuteness and his farsightedness, he prefaced the proposal as follows:
The future of Russia may seem a second or third level issue for many Americans in this political year with its focus on domestic economic issues. But if we relegate the issue to that status, we may lose not only Russia, but the peace dividend as well as an historic opportunity. It is not pleasant to contemplate the world in ten years if Yeltsin fails in his efforts to transform the Russian economy and power reverts to a right-wing group reasserting Russian nationalism.
Those words, alas, would prove prophetic. The premise to the proposal was designed to counter the direction policy seemed to be taking: “Money alone will not be enough, no matter how much the G-7 nations might pledge. The lack of a financial infrastructure, a managerial class, and a culture of entrepreneurship are serious impediments.” A slightly more formal and delineated version of the proposal he had sent to Abshire followed. Greenberg spelled out the proposal in just a few paragraphs:
The United States and the other G-7 countries develop a program of soft loans to a select group of companies, who would in turn “adopt” Russian companies, providing managerial, technical and financial assistance, and obtaining equity in the Russian enterprises in return. This is surely better than outright grants to Russia, as the funds would be used more productively and combine with the skills the Russians really need.