INTERNATIONAL PRIVATE ENTERPRISE: WHEN WILL THE REAGAN REVOLUTION BEGIN?

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87T00759R000100100019-6
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 2
• Document Creation Date: December 22, 2016
• Document Release Date: May 5, 2010
• Sequence Number: 19
• Publication Date: July 11, 1985
• Content Type: MISC

Approved For Release 2010/05/05: CIA-RDP87T00759R000100100019-6
11 July 1985
INTERNATIONAL PRIVATE ENTERPRISE:
WHEN WILL THE REAGAN REVOLUTION BEGIN?
The Challenge
Economic policies in the Third World (and industrial nations) are shifting
toward market-oriented approaches. Many of these countries are just beginning
to initiate practical policies which will gain momentum over the next 10
years. The President's goals as spelled out at Cancun and Williamsburg thus
were timely and have the potential of delivering international economic growth
through the stimulation of private enterprise. The strategy and mechanisms
for carrying out the goals are, however, flawed. Thus, the challenge of
implementing the President's program remains unfullfilled.
The Opportunities
This changing climate presents significant economic opportunities for the
United States:
-- To increase the promotion of small-scale enterprises within LDCs and
the acceptance of new technologies.
-- To enlarge the flow of foreign direct investment, and to help state
enterprises to become more efficient and find ways to relinquish some
functions to the private sector.
-- To strengthen its trade, finance, and investment links with LDCs based
upon a growing mutuality of economic interest.
Developing countries have finally perceived that the Soviet Union and its
client states represent dismal examples of economic and industrial
productivity. In addition, Soviet domestic economic and foreign financial
constraints over the next 10 years will make Moscow even less able to compete
in non-military sectors. Thus:
-- the changing climate should strengthen the West's position relative to
that of the Soviet Union if we take advantage of it, and
-- in specific countries US security interests will often coincide with
opportunities for economic support and can be mutually reinforcing.
The Obstacles
The growing American economy is an irresistible example impelling change
in the economies of both the industrial and Third World countries. Although
the richer LDCs have been able to advance economically by exporting, the
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poorer LDCs will have to depend on the emergence of small-scale,
domestically-oriented enterprises as their main engine of growth.
-- These poorer countries are groping with new approaches because they
have seen their socialist-centralized economic policies fail and
realize they cannot afford the burden of inefficient government
bureaucracies and ponderous state enterprises.
-- They have also seen how price incentives in China and elsewhere
have boosted agricultural production and general economic growth.
But many Third World leaders are moving slowly because they feel
threatened by a loss of political control caused by the diffusion of
economic power.
-- How does the US encourage a tilt toward free-market policies while
helping reduce the fears as to political instability?
AID is not the solution. In fact, it is part of the problem. Western
countries have built ponderous bureaucracies of their own which for the
most part administer security assistance and welfare without contributing
to economic growth.
-- Bureaucratically, AID opposes new initiatives to address this issue
which are beyond its control, as a matter of turf.
AID has an important role as part of the process. It can use its
programs to create leverage for policy change and the dismantling of state
enterprises. However, it has neither the philosophy nor the capability to
promote private enterprise.
Thus, we are at a stalemate. The mechanism does not exist to pull
together security, welfare, trade liberalization, and economic interests
for the constructive promotion of private economic development in a country
or region abroad.
The Crucial Questions
-- is the Administration willing to commit the political capital
necessary to address this issue through legislative change?
-- Is the President aware that, despite the positive climate for
change, his program to encourage economic growth and more open
societies through the stimulation of private enterprise remains
unfilfilled?
-- Is the Administration satisfied with the current means of
coordination of US policy for foreign assistance, trade and
security assistance to key countries and regions?
-- Are we going to depend upon AID and its staff to promote
international private enterprise, or is there a better way?
Approved For Release 2010/05/05: CIA-RDP87T00759R000100100019-6