More Stars in Our Flag: A Modest Proposal for U.S. Policy after the Cold War

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MORE STARS IN OUR FLAG: A MODEST PROPOSAL FOR U.S. POLICY AFTER THE COLD WAR ITTJlter Russell Mead World Policy Journal, Vol. 9, No. 4 (Fall - Winter, 1992), pp. 581-598

Americans are sick and tired of hearing that there arc no easy answers to our problems. Experts are quick to come up with so-called cures for our problems that are usually worse than the disease. Do we lack a com­ prehensive energy policy? Experts point to Europe as an example where energy policies are leading to conservation and greater efficiencies and suggest that we follow their lead-by taxing, say, gasoline, to price levels closer to the European norm of $5 per gallon. Only an expert could call this a solution. The average citizen thinks that $5-a-gallon gasoline is the catastrophe that an energy policy should try to avert rather than the goal it should seek. The average citizen is, of course, right. Or take the budget deficit. Experts have two classes of solutions for this problem: tax increases and service cutbacks. Double your income tax, or take your mother off Medicare. Though voters don't like the budget deficit, they instinctively sense that it hurts less than either kind of "solution." After all, one doesn't feel the budget deficit except while listening to experts armed with charts and graphs and densely worded policy studies. The pain of a tax increase is harder to escape, and nobody wants to pay Mother's medical bills. The experts arc in love with their painful solutions-the pain in any case won't hurt them. The experts will all have fat consulting contracts and lush jobs imposing these solutions on the rest of us and thinking up brilliant new solutions for similar problems. Gas will cost $5 a gallon, income taxes will balloon, Mother will go to the poor house, but the experts will be so busy appearing on "MacNeil Lehrer" and signing new book contracts that they won't even notice.

Walter Russell Mead is senior counselor of the World Policy Institute at the New School for Social Research. He is working on a book about for­ eign policy in the post-Cold War world for the Twentieth Century Fund.

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Since all the solutions are so painful, nothing ever gets done. Experts say the problem lies with cowardly politicians and pain.averse voters, but that only shows how useless our experts are. Our real problem is the sloth of the experts. Anybody can think up complicated and expensive solu· tions to pressing social problems. People who spend their lives in think tanks or tenured in the groves of academe should be held to a higher stan· dard: a real expert is someone who can look at a messy complicated problem and see solutions that are simple, painless, and practical. In fact, most of America's problems-and a good many of the world's­ do have an easy answer. Our complicated and interrelated economic prob· lems form a kind of Gordian knot-and it is perfectly possible to cut it. The budget deficit, the trade deficit, falling demand and wages for blue­ collar workers, lack of economic opportunity for young high school and college graduates, the stagnant economy, international competition, our dependence on Middle Eastern oil: all these can be solved and the solu· tion won't hurt. It will feel good, which is what a solution is, after all, supposed to do. The same thing is true for many of the world's most intractable prob· !ems. The political and economic instability of Eastern Europe, the problem of establishing prosperous democracies in the former Soviet empire, the slow rate of world growth, the growing economic friction among the great economic powers, the potential for trouble in East Asia as China evolves and the North Korean regime ages, the competition over markets and the trend toward protectionism: these can all be solved with one fell swoop. And they should be. The answer is really very simple. It is something the United States has done before, and it has always worked in the past. We have precedents going back to the administration of Thomas Jefferson, and as a society we are uniquely well qualified to take on a task of this kind. Simply put, the United States should buy Siberia from Russia at a fair price1 - perhaps in the range of two to three trillion dollars. The small nationalities of the region would receive settlements based on the recent settlements of indigenous land claims in Alaska; all the inhabitants of Siberia would become American citizens with all the rights and privileges the rest of us enjoy plus the right to use their native languages in official business in the new territories. These new American citizens would, like all U.S. citizens, have the right to settle where they pleased throughout the United States. Those who choose to live under Russian rule would be free to leave with guaranteed fair compensation for any property left behind.

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Once the initial transfer was complete, Siberia would be divided into territories. As soon as possible these territories would receive the same rights that territorial legislatures enjoyed on the old American frontier; after a suitable transition period these territories would be admitted to the Union as states with rights equal in every way to those enjoyed by the present 50. Treaties with Russia and other neighboring states would define the border and move toward demilitarization and open trade along the frontier. The United States would begin a massive program of infrastructure devel­ opment and environmental cleanup in the region. Large areas would be set aside as parks and nature reserves; existing facilities would be upgraded to meet stricter environmental standards. Tuition-free instruction in English and U.S. government and business practices would be provided for the inhabitants. The price is difficult to estimate, but two to three trillion dollars is not an unreasonable estimate.2 Roughly 10 percent of this amount would go into a fund to settle indigenous and other claims arising from the transac­ tion;3 another 10 percent would be paid at the transfer of sovereignty; the remainder would be paid, at market rates of interest, in installments over a mutually agreeable period of time. Even simple solutions have complicated details; the structure and timing of the payments would be very complex. The United States would not want to see a mad rush of fraudulent privatizations of valuable resources to politically favored individuals on the eve of the transfer. Russia might well prefer guaranteed deliveries of goods to cash for part of the payment: guaranteed deliveries of Siberian oil and other raw materials, for example over a period of 20, 30, or even 50 years. Some of the payment could take the form of direct cash payments to individual Russian citizens, either as annuities or in a series of lump-sum payments over the life of the transaction. Over 20 years, annual payments would be something on the order of $200 billion per year. Half of this would be paid either in cash, U.S. secu­ rities, or through deliveries of Siberian raw materials; the remainder would be available as import credits with which Russian agents could purchase goods and services from the United States. So, this is the answer. How does it work? How can an expensive land purchase of this kind help solve America's economic problems? Admittedly, this is a lot of money. Even if the entire payment will not be in cash, $200 billion per year to Russia plus tens of billions more each year to build Siberia's infrastructure and integrate it with the rest of the

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United Scates-let alone to provide for its defense-amounts to an unprecedented financial commitment for the United States. With a budget deficit perilously close to $400 billion and a national debt at $4 trillion and rising, how can the United States possibly take on obligations of this magnitude? This is a serious question, but not a difficult one to answer. Despite the high cost, Siberia would be a good investment for the United States government. Going into debt to buy Siberia is not stealing from future generations: it is investing for them. Because it is a good investment it is much more likely over the long run to reduce the deficit-painlessly! than to increase it. How so? First of all, much of the cost of the purchase will be recovered by privatizing Siberia's vast storehouse of natural resources. This area con­ tains some of the world's most valuable deposits of oil, gas, diamonds, and gold. There are vast stands of timber; huge mineral deposits. All of these resources are worth more as part of the United States than as part of Russia. Investors are reluctant to invest vast sums of money in Siberia while it is part of Russia. The investments will be expensive, the payoff is far in the future, and foreign investors are uncertain about the future intentions of the Russian government. Russia has not settled down after the overthrow of communism; a nationalistic government hostile to for­ eign investors could take power and forcibly expropriate foreign property. The Russian government will be too poor for many years, and too preoc­ cupied with the problems of European Russia where the vast majority of its citizens live, to provide Siberia with the infrastructure it needs. These problems vanish if the territory becomes part of the United States. The U.S. government could sell off mineral and timber leases at prices that could recoup much of the purchase money. The raw materials of Siberia will be critical to the Japanese economy in the future, and there would be a gold rush, literally, of Japanese and other countries to exploit these opportunities if the political situation were stabilized. Royalties from these concessions would continue to flow in during all the years in which the United States was paying for the purchase. And the United States would get more than the lease price, purchase money, and royalties-we would tax the profits on the operations of these companies and the incomes of their employees. Furthermore, Vladivostock, the warm water port in southern Siberia, is one of the finest harbors in Asia, and it enjoys a unique position at the crossroads, potentially, of the Japanese, Chinese, and Korean econo­ mies. This will be one of the most dynamic cities on the Pacific Rim in

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the 21st century, and the U.S. government will benefit enormously from selling land to the private sector and levying taxes on a rapidly growing economy. The payment structure and the government investment in the Siberian infrastructure will also have beneficial effects on the deficit. These expenditures-well over $100 billion per year-will act like an old-fashioned Keynesian economic stimulus. Russian purchases in the United States will create approximately 1.5 million export-related jobs each year. There would be millions more new jobs in Siberia itself-on federal infrastructure pro­ grams and as a result of both U.S. and foreign investment in the region. A highway could be built from Vladivostock to Berlin: the first modern land route across Eurasia-a project that will keep engineers, construc­ tion unions, and highway contractors happy for many years. Banks will lend money to these contractors and their employers; stores will sell them goods; shippers will deliver the goods to the new malls rising across Asia. Pipelines will snake down from the new oil fields; highways and airports will connect the mines and cities of the North to the ports. This new eco­ nomic activity will reduce government expenditures on welfare and unem­ ployment compensation and increase government tax receipts. Economic stimulus on this scale has a "ripple" or "multiplier" effect; the results can be dramatic and could set off a long-term boom for the U.S. economy. This would reduce, perhaps eliminate, the structural deficit without raising taxes or cutting spending. Other economies will benefit too. Russian purchasing power will stimulate the European economy, and Europeans are good customers for American products. Our trade deficit with Japan will shrink; our trade with the rest of Asia will explode. We will have a strategic position in the heart of the Asian side of the Pacific Rim; American investors and traders will be uniquely placed to participate in the most dynamic economy in the world. This is good for us and good for Asia, and suggests many years of rising tax revenue for the United States. Our dependence on foreign oil will decline as advanced technology exploits existing Siberian oil fields more effectively and brings new ones into production. American companies will be able to produce, and the American government will be able to tax, more oil at home; our trade deficit will go down and our tax receipts will go up without raising existing taxes in any way. Although the United States will have to borrow the money for this pur­ chase, the structure of the transaction will make this less disruptive of capital and currency markets than borrowing to support current consumption.

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In the crudest sense, foreign investors will see that the United States govern­ ment has acquired an asset equivalent in value to its new debt. This makes them willing to lend, and at reasonable rates. The acquisition of Siberian raw materials and the dose economic rela­ tions between the United States and Russia would safeguard the dollar's role as the principal currency for world trade well into the 21st century. This will make the dollar a healthier currency and decrease the perceived currency risk that causes foreign investors to demand higher interest rates. Furthermore, the politics of the transaction are such that Japanese cap­ ital will be especially supportive. Presumably the United States would return the four disputed islands toJapan without charge; presumably Japan, which stands to reap substantial economic and security benefits from the transaction, will make an appropriately supportive response. Finally, wise Russian policy-perhaps encouraged by various incentives that can be built into the payment system-would lead them to invest much of the purchase instead of spending it on consumables. Some of this can and should be incorporated into the deal. Part of the purchase money would be in the form of warrants allowing Russia to build substan­ tial equity participation in leading U.S. firms. The Russians, for example, might use some of the money to set up joint ventures with U.S. phar­ maceutical companies to manufacture drugs under license for the domestic market. Another sensible use of the money: setting up a trust fund to support Russian social programs during the transition to capitalism. This would be especially important for the pension system as Russian prices rise toward world levels. These investments and licensing arrangements would increase the capital available for U.S. private investment, helping to offset any crowding out caused by the costs of financing the deal. Capital markets for public and private credit are more likely to improve as a result of this purchase than to deteriorate. The prospects of large profits to be made in Siberia plus the economic stimulus resulting from the trans­ action is likely to send stock prices higher, increasing the supply of private capital and enabling companies to raise both debt and equity more easily. Equity infusions from Russia, plus the vast opportunities for profitable business lending to companies building Siberian infrastructure, helping new municipalities and states fl.oat bonds, and the other associated aspects of the transaction will give U.S. banks a generation of solid loans and healthy balance sheets. The advantages of buying Siberia go far beyond reducing the budget deficit. This purchase will revitalize American society, opening a new eco-

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nomic and technological frontier that will create opportunities for new generations of Americans. Many of these jobs-building highways and oil pipelines, for example­ will be the kind of high-paid, blue-collar jobs that have been vanishing from the U.S. economy. Young Americans without college degrees have been the hardest hit by the decline of manufacturing; these blue-collar workers will be the ones that benefit most from the explosion of invest­ ment and development that will take place in American Siberia. Further­ more, Russia's $100 billion of export credits each year will give American factories and American workers a major advantage in international trade. The increased demand for American workers will raise wages; the desire of companies to keep their costs low to maximize profits will ensure major investments in technology that will enhance productivity. The U.S. economy will return to the high-wage, high-growth, high-productivity path that marked the 30 years after World War II. With a Siberian Purchase, the United States will once again become a frontier society, with all the attendant opportunities and freedoms. Better still, this new frontier will, for the first time, be one where minorities will have equal opportunity to participate in the risks and the rewards of fron­ tier life. The western frontier democratized American life and allowed poor, young, white men to grow rich; a new frontier would give those opportu­ nities to people of both genders and all races. But minorities would not have to go to Siberia to benefit. The expan­ sion in manufacturing stimulated by the purchase will create at least one million new jobs in the United States. Since many young people will go to Siberia to work in the new territories, wages and opportunities will expand for those who remain behind as well. Enlightened social policy can direct a substantial amount of the new manufacturing capability into inner cities to ensure that minorities benefit from new opportunities in the old states as well as those in the new ones. The purchase will also help the United States develop and apply new technologies. The harsh Siberian environment provides many challenges­ and colossal rewards for those who learn to meet them. Coping with extreme conditions will provide the same kinds of stimulus to the development of new materials and technologies that the space program did. The engineering difficulties involved in such tasks as building on permafrost or finding materials that can withstand severe Siberian temperatures will call forth new creative solutions that, if past experience is any guide, will transform our approach to more conventional problems. The requirement that purchase money be used on domestically pro-

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duced goods will create a market for U.S. manufactured goods, while the new employment opportunities will lead to upward pressure on the wage level. This combination will provide a stimulus for improvements in produc­ tion technique and investments in technology. Companies that learn to make goods efficiently using high-wage U.S. labor will reap economic benefits from the Russian contracts. Obviously, these production techniques will improve the competitiveness of U.S. firms in markets other than the Russian one, and make a permanent contribution toward the ability of the U.S. economy to sustain high-wage employment for the middle class. A new frontier will also help the United States rediscover a sense of national unity and purpose. Welcoming the new citizens into American society and helping them get started; coping with the challenges of the Siberian climate; working to exploit Siberia's resources while supporting and in some cases restoring its fragile ecosystems; establishing American cities and towns on the Asian side of the Pacific Rim: these are the kinds of challenges that brought Americans together in the past and can do so again. Given all these advantages, it may be clear that the United States should buy. But is it as clear that the Russians should sell? If Siberia is so valuable, why shouldn't they hold onto it and, in any case, won't nationalist pride prevent the Russians from ceding so much of their history and territory? The president ofRussia is a Siberian; why would he sell it to the Americans? These are good questions and, of course, if the Russians won't sell there is nothing more to be said. Russia, even in these difficult times, remains a great power and no one on earth can force it to give up an inch of its land against its will. But given all this, the fact remains: selling Siberia co the United States­ for the right price-is the best thing for Russia and the Russians. Russia too has its Gordian knot of problems; decades of work won't untie these knots, but the right deal in Siberia would cut them overnight. Russia faces an avalanche of problems. Economically, Russia is in the midst of a depression that is deeper, and looks to be longer lasting, than anything the West suffered in the 1930s. There is no end in sight to this horrifying economic collapse. The Russian people have already lost their life savings to a savage inflation even as their wages drop toward the pov­ erty level; more unemployment and more inflation loom on the horizon. Beyond the short- to middle-term problems caused by the unraveling of the old state economy lie profound problems that threaten to reduce most Russians permanently to the living standards of the developing world. While Russia possesses world-class technology in many fields, it lacks the infrastructure-in transportation, power, and communications-that would

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enable it to compete successfully in world markets. Its factories are out­ dated, often by decades. Its agricultural sector is far too large and unproduc­ tive to perform on world markets. Worse still, Russia lacks the human skills needed for success in a capi­ talist world. Russia also lacks the institutional infrastructure of banks, invest­ ment houses, and experienced, successful corporations. It lacks managers who understand the economic system under which it is beginning to operate. Its people have for too long been cut off from the outside world. They are less fluent in foreign languages, less traveled, less familiar with the cultural and social trends in the rest of the world than their counter­ parts in Europe. Its academics and its managers are equally confused by the way the rest of the world does business; its young people, who are eager to learn new ways, do not have access to the educational, cultural, and travel experiences that could prepare them to compete on equal terms with their peers in other countries. Russia's economic problems are only the tip of the iceberg. Socially, Russia is in the midst of a profound crisis. The economic collapse of the old system has reduced its old people to poverty-in some cases, to the brink of starvation. Its overburdened, underfunded medical system is incapable of delivering world-class care-or even adequate care-to the overwhelming majority of its citizens. Russia cannot afford an adequate social safety net for the tens of millions of its citizens who will be vulner­ able during its transition; the consequences for a social fabric already weakened by the crimes and dishonesty endemic under the old communist system-and resulting also from the devastation and atrocities of the world wars-are alarming to contemplate. Given its social and economic problems, it is not surprising that Rus­ sian democracy is under attack. If democracy cannot guarantee a decent standard of living for the people and cannot show that Russia is respected abroad, it has little future in that proud and angry land. Any Russian government, whether democratic or not, faces tremendous difficulties. It must maintain basic services, manage an unprecedented social transfor­ mation under conditions ofeconomic collapse, preserve a relationship with an often unsympathetic and uncomprehending outside world, and renegotiate its relationships with surrounding republics that, sometimes for many centuries, have formed an integral part of the Russian state. Eco­ nomic relationships created over many generations-and often deliber­ ately strengthened by the integrationist planning of the Soviet state-are being irrationally and expensively ripped apart. The Russian government must ask its people for an unending series

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of sacrifices-something that few democratic regimes in Western coun­ tries are able to accomplish in peacetime. But as the coup of August 1991 showed, it is far from clear that authoritarian measures can succeed where democracy fails. With morale low in the army and the security forces, with deep political divisions among conservatives as weH as reformers, it is quite possible that, in the present circumstances, nobody can yet govern Russia. Few observers rule out the possibility that this political impasse will ulti­ mately be resolved by the rise to power of a fascist movement of some kind. This would be an immeasurable disaster both for the Russians and for the rest of the world, and even the distant prospect of such develop­ ments causes many foreign investors to shy away. Additionally, the Russian state faces serious security problems. Millions of Russians live outside Russia's new and unrealistic frontiers. They live under nationalist regimes that in many cases discriminate openly and severely against ethnic Russians. The situation is volatile throughout the former Soviet Union, and any Russian government faces the possibility of intervention to save the lives or protect the interests of its fellow citizens throughout the former state territory. That is only the beginning. The breakup of the Soviet armed forces leaves Moscow facing potentially hostile armies to the south, east, and west. Some of the breakaway republics have nuclear weapons. From Mol­ dova to Central Asia, there are civil wars that Russia cannot ignore, and in which it may have to fight. It must resist efforts to spread Islamic fun­ damentalism in neighboring republics. It faces unprecedented losses of territory and bases in the West, where a territorial settlement far more disastrous than Brest Litovsk has been imposed. China and Japan make claims in the East; Ukraine wants, essentially, to strangle Russia's presence on the Black Sea; the Baltic States intend to strip Russia of its ability to protect St. Petersburg-Russia's only warm water port on the Baltic. These problems, only touched on here, give Russia the most difficult problems of any major power today. It faces these problems essentially unaided. A vengeful West is eager to see Russia confined within the irra­ tional boundaries of the communist era-boundaries that would never have been drawn had their authors thought for one minute that the Soviet Union would ever break up. Aid is a trickle-pathetically inadequate to the size of even Russia's humanitarian needs. On a per capita basis, the Russians are receiving perhaps one percent of the aid that East Germans are getting, and even that is paid slowly and grudgingly. There is simply no prospect that aid from the West will suffice for Russia's needs. Selling Siberia won't make all these problems go away, but it will get

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rid of many of them, and it will make the rest of them solvable. W ith one simple step, Russia can begin to advance into the First World, rather than sliding into the third. It can revive its economy, build its material and human infrastructures, provide a safety net for its troubled society, and put its diplomatic, political, and economic relations with its breakaway neighbors on a more satisfactory basis. Selling Siberia makes Russia a stronger country and not just a richer one. It will catapult Russia once again into a leading place as a world power and give Russia a real chance to reach the 21st century as one of the world's most advanced and progressive economies. A transaction of this kind is the only way that Russia can obtain transfers of capital sufficient to finance its modernization. Payments in the range of $200 billion per year for 20 years will provide much of the hard cur­ rency necessary to stabilize the ruble, modernize the Russian industrial plant, acquire foreign technologies, and develop the human and physical infrastructure necessary to secure the nation's future. Moreover, the trans­ formation of Russia's economic-and therefore, to a large degree, of its political outlook as well-will make the country a substantially more atuac­ tive site for foreign investment. With the immense purchasing power Russia acquires it can require would-be foreign suppliers to make investments, participate in co-production arrangements, and so on to earn Russian orders. These investments will in turn increase the attractiveness of Russia to for­ eign companies, further improving the economic and political picture, and therefore further accelerating Russia's economic transformation. This process, wisely managed, offers substantially more hope for Russia than any proposal now on the table. Renewed economic strength will greatly simplify another of Russia's essen­ tial tasks: working out relations and methods of cooperation with other former republics of the Soviet Union. Cooperation with Russia under the new circumstances would mean participating in the benefits of the renewal of the Russian economy. The Russian government might wish to assign some of its income to a Commonwealth fund to revitalize the Common­ wealth and provide incentives for republics to join. The ruble will no longer be something to escape; it will be something to covet, and the Russian Central Bank will have the opportunity to develop a new and stronger ruble zone in areas where the economic links to Russia will be strong. All of this will reduce the economic and political uncertainty in the former Soviet territories-creating new markets for Russian goods and providing additional stimulus for the Russian economy. Russia will be in a far better position to defend its economic interests in the region; it will

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have the budget to modernize its defense forces; it will naturally and inevitably return to a position of leadership in this part of the world, which is good both for Russia and its neighbors. Part of the treaty relationship could include a commitment by the United States to use its good offices in neighboring republics to assist in the devel­ opment of new forms of association and cooperation among the former Soviet republics. Stability and economic growth in these regions would be in the interest of the United States as well as Russia; American officials could help Russia and its neighbors develop institutional mechanisms to handle the common interests that they share-including provisions for the equitable treatment of national minorities in Commonwealth republics and for the arbitration of boundary questions. The sale of Siberia, then, would provide a basis for Russia to solve its most urgent foreign policy questions in a satisfactory manner. It is an agree­ ment by which Russia makes unprecedented sacrifices, but reaps unprecedented rewards. Russian nationalists should support it, however painful, because it is the best thing for Russia. The American proposal should be structured to attract both the Rus­ sian elite and popular opinion. Ideally the treaty will be one that most responsible Russian leaders and opinion-makers can conscientiously endorse; it will also be based in such a way as to command a majority in the event of a referendum. The method of payment and related questions in the proposed treaty will be more than a statement of terms and conditions of payment; they will in fact amount to an ambitious and much more favorable program for Russia's transition to the capitalism of the First World-for the transformation of a society of workers, peasants, and bureaucrats into one of capitalists, consumers, and entrepreneurs. For the Russian elites, the advantages of such a treaty should be obvious. These people will be best placed to exploit the enormous economic possi­ bilities that the transaction opens up in Russia. Many of them will make great fortunes under the new dispensation-and why not? Capitalism doesn't work very well without capitalists, and the first thing capitalists need is capital. Clearly, transfers of resources on this basis will enable many people in Russia to achieve economic success on a scale now undreamed of-and to create the foundation for a native capitalist class with the resources and, increasingly, the experience to take its place in the inter­ national system. This process, one should note, is the opposite from old-fashioned imperi­ alism. The goal is not to bring Russia into the American orbit as an eco­ nomic dependent, but to enable it to avoid such a fate by establishing

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the conditions for independent capitalist development. The recognition of equality between Russia and the United States should be reflected throughout the treaty, and, if the Russians want them, the transfer of ter­ ritory should be accompanied by treaties establishing free trade between the two countries, transit rights for Russian and Russia-bound goods to and from the Far East, mutual defense, technology transfer, and other measures as appropriate. It will be a vital interest of the United States to enjoy relations with Russia that are friendly, and not merely correct, and the United States should recognize from the beginning that the transfer of territory involves a commitment to a new kind of relationship with Russia. Special sectors of the Russian elite would respond to specific elements of the treaty. Support for military pensions and the provision of assistance for officers to begin civilian careers might well be written into the treaty. Provisions for a mutual defensive military alliance, limited armaments in the new border zone, and officer training would further deepen the relationship between the countries and offer the Russian military more benefits from the treaty. All this can help stabilize civilian rule in Russia, reconcile elements of the military to the cession of territory, and help stimu­ late the development of a skilled group of entrepreneurs. Other provisions of the new relationship could include technical assistance and training on a vast scale as Russians learn to cope with their changing economic environment. Russian managers could receive training at U.S. business schools or at first-rate programs to be established at Russian univer­ sities, staffed initially by a mixture of Americans and Russians and ulti­ mately dedicated to providing Russia with world-class managers and busi­ ness instructors. Given the mechanics of the transfer of funds, the Federal Reserve would in any case need to establish a new and close relationship with the Russian Central Bank; this relationship can be expanded in a number of ways-perhaps including joint action to maintain ruble-dollar exchange rate stability. Such agreements would enable Russians to begin to play a major role in the world economy and to rapidly acquire both the experience and the connections they need. For the nation's military, intellectual, scientific, and managerial elites, this program represents their best chance to build a First World future for themselves and their children. The U.S. proposal should be de­ signed to widen these opportunities to the greatest possible extent. Not only does a magnanimous and thoughtful proposal increase the chances that Russia will agree to the offer, but the generosity of the offer will increase the chances that the Russian economy will benefit fully from its new oppor-

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tunities. Besides the economic benefits to us from a prosperous Russia next door, there are political considerations also: we do not want them, ever, to regret making this transaction. The U.S. proposal should also address the interests and the ambitions of the mass of the Russian population. A prudent Russian government might well wish to submit a proposed treaty to a popular referendum; in any case, the proposal ought to be one that the Russian people would gladly ratify in a popular vote. The price must be perceived to be just, and the transaction must contain visible, important, immediate, and real benefits for the citizens of Russia. There are many ways to ensure that this happens. One would be that part of the payment would be made directly to Russian citizens-perhaps $1,000 per person at the time of transfer of sovereignty. This represents much more hard currency than most Russians can now expect to see in their entire lives, and it comes at a time when ruble inflation has wiped out their savings. W hile many Russians no doubt will use this money to buy long-coveted consumer goods-a shot in the arm in itself for retail trade -others will use it as a savings account or to begin small businesses. In any case, it will be the first good economic news that many families have received since perestroika began under Gorbachev and it will be wel­ come in a country where annual incomes of industrial workers are cur­ rently less than $100 per year. Another portion of the payment could be reserved to allow Russian students to study at American universities. Any Russian student could compete for one of thousands of full scholarships for study in the United States every year. This would be good for students in both countries and good for American colleges. There are other ways of improving the treaty from the standpoint of the average Russian citizen. One would be the offer of immigration rights. All Russian citizens in Siberia would of course become U.S. citizens, and their relatives would have priority in joining them. A special immigration quota for families of Siberian residents would be established as part of the treaty. These new citizens would not, of course, be forced to live in Siberia. Like all U.S. citizens, they would have a legal right to live where they wished. The United States could offer to raise its immigration quota substantially for other Russians- perhaps to 150,000 per year or even higher. A lottery or some other system could be employed to ensure that the average citizen has equal access to the opportunity to emigrate. Given the millions of jobs to be created in the United States as a result of the transaction, the economy can absorb immigration on this scale, and if necessary the United States ought to be ready to cut its

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general immigration quota to make room for the Russians. While immigra­ tion on this scale always creates social problems, the United States has absorbed millions of Russian immigrants in the past with good results and presumably could do so again. Other provisions could also win support for the treaty. Specific provi­ sions for licensing technology would allow Russian companies-perhaps in joint ventures-to manufacture drugs domestically for local consump­ tion. Some of the payment could be used for modern medical equipment as well as to replenish depleted medical supplies in Russia. Russian health care is facing a major crisis; this ueaty could be a way for Russians to improve their access to high-quality health care in a way that nothing else could. The import credit provisions of the treaty will guarantee Russia's food supply; there would be no danger that Russia would have to depend on charity for emergency imports of food for the foreseeable future. Tech­ nical assistance, which could also be written into the treaty, will ensure that Russian agriculture will benefit from U.S. know-how, while import credits and joint venture funds can expedite the creation of an advanced agricultural industry in Russia using the best-known methods and crop strains. The treaty would also make possible the overhaul of the distribu­ tion and transport system so that the emerging Russian retail sector could depend on a steady and adequate supply of consumer goods of all kinds. This treaty, then, would improve the economic and social conditions of the average Russian more than any single development in living memory. While it is a painful thing for a proud country to give up territory, a Siberian treaty would be an act of statesmanship on Russia's part that would benefit every Russian citizen as nothing else could. This is not to say that there will not be disadvantages and problems for the United States in a Siberian Purchase. Annexation plus immigra­ tion will create a new non-English speaking minority of 20 million people in 10 years. Coping with this demographic and cultural transition will become a major domestic concern. Although the United States is better able to cope than any other country on earth, this will represent a sub­ stantial and in some ways unique challenge. Siberia itself is no easy frontier. It is potentially one of the richest places in the world, but it will not give up its riches easily. It is a fragile, easily damaged land, one that has suffered from decades of misdevelopment by Soviet planners. Much of it is pristine wilderness; much of it has been polluted almost beyond repair. In accepting responsibility for the devel­ opment of this region, the United States will face great economic, tech­ nological, and environmental problems. This kind of challenge histori-

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cally brings out the best in Americans, but we should not delude ourselves that the development of Siberia will be cheap and straightforward. The transaction depends on a simple economic assumption: that Siberian raw materials can be produced and transported at prices that justify their extraction. One should note that this has not been quite possible under the Soviet system. While Siberia produces roughly half of the hard cur­ rency exports of the old U.S.S.R.,4 economic statistics, environmental data, anecdotal reports, and census figures show that the Soviet system has never been able to produce goods here on a strictly economic basis. The notorious role of slave labor in the development of 20th century Siberia can never be forgotten, nor can the system of forced exile that helped to populate much of the territory. For decades the Soviets relied increasingly on mate­ rial incentives, with Siberian workers earning two or more times the sala­ ries offered in European Russia, but primitive living conditions and crit­ ical shortages of goods combined to create net population losses in Siberia in many recent years. 5 Economic and climatic difficulties were such that Siberian development appeared to be stalling even before the present eco­ nomic crisis. It is certainly clear that under current conditions the Russian state could not continue the former Soviet plans for rapid development in the region. It may be that without the Soviet drive for self-sufficiency in raw materials much of Siberia would have not yet been developed. One should also note that the price of most raw materials has been in decline for some time. Only in exceptional cases will Siberian producers be the lowest-cost producers of a given commodiry, and significant addi­ tional production in Siberia would tend to depress world commodity prices further. This suggests that the United States would have to provide finan­ cial incentives as well as expensive investments in infrastructure to ensure accelerated development of the region - but it is also one more reason to suppose that the inflationary consequences of the transaction will be limited. The logic of the purchase assumes that the United States could exploit Siberia more efficiently than the Soviet Union or Russia. A more advanced industrial technology and a better ability to use economic incentives to attract investment and labor are part of this presumed advantage. So also is the abiliry of the United States to orient the eastern Siberian economy around the Pacific, rather than European Russia. Nevertheless, the eco­ nomic benefits of this purchase will not become available without sub­ stantial effort and government intervention. We will not be able to buy it and then leave it on its own to develop. More fundamentally, an annexation will transform the strategic posi-

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tion of the United States. It will give us a long land border-not always surveyed and not everywhere free from dispute-with China. It will give us a land frontier with a great European power, and bring us many thou­ sands of miles closer to the Muslim Middle East. North Korea will be on our doorstep. Isolationism will finally be dead; the United States can no longer tell itself that geography makes it indifferent co European and Asian politics. The Pentagon will have to rethink its entire war doctrine; the State Department will have to find a satisfactory relationship with China regard­ less of what kind of government is in power in Beijing. The balance of power in both Europe and Asia will change. Beyond these problems, American civil society will have to make a major commitment both to the development of the new territories and toward good relations with Russia. Politics in the new territories will be compli­ cated; the institutions of democratic life will have to put down roots in a harsh social and physical environment. Moreover, the treaty would be more than a simple transaction with Russia. The real thing we are selling to Russia is a First World future, and the American people will have to be prepared to live up to the commitment to deliver. This means more than the money; it means U.S. companies, social institutions like founda­ tions and churches, and private citizens involving themselves in Russia. If the transaction succeeds, it will be because it is fundamentally a treaty between peoples, not governments. The American people must recog­ nize, and support, a genuine national commitment to do whatever it takes to give Russia a real opportunity for a First World future. These adjustments-psychological as well as practical-will not always be easy. But they will be beneficial. A successful Siberian Purchase will go down in the history books as the most generous act of U.S. statesman­ ship since the Marshall Plan, and the most beneficial since the Louisiana Purchase. There may be other things that the United States could do that would be even more painless and solve even more of our problems; I for one would like to know what they are. There will be many people who argue that this modest proposal is imprac­ tical. Perhaps they are right. But the problems it addresses-social melt­ down in Russia, economic stagnation in the United States-are very real, and they are much too grave to ignore. If this article calls attention to the gravity of these problems, to the urgent need for solutions, and to the utter inadequacy of all the remedies so far proposed for Russia's prob­ lems, it will have justified the author's time in preparing it, and the reader's time in considering the idea. The future will not ask how much money

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we spent in ensuring a peaceful transition from communism in Russia; it will not even ask whether we financed our policy through taxation or deficit spending. If we succeed in helping the Russians establish democ­ racy and build prosperity, future historians will write admiring biogra­ phies of the wise men and women who brought this about. If we and the Russians fail, there may not be any future at all; if there is, it will not remember us fondly.

Notes ' Siberia is used loosely here to indicate a region comprising most, though not all, of Asiatic Russia. One can imagine three possible divisions of the territory: a boundary to run along the Lena River, the Yenisey, or west from the Yenisey to the Ob near Surgut and across the Urals to include the Komi Autonomous Region. The third and most ambi­ tious proposal would involve the transfer of about 15 million people and an area roughly seven times the size of Alaska. Any of these proposals would leave Russia with substantial energy reserves; the purchase price would of course vary with the amount of land to be transferred. 2 This price reflects the natural resources of Siberia plus the improvements made in recent decades. The United States would take possession of all property currently owned by the Russian state; individual property rights would not be affected. The purchase price would, however, be decreased to reflect privatization of state assets preceding the transfer. The per-acre price is considerably higher than we paid for Alaska, but real estate, oil, and gold are all up since 1867, and the dollar is down. � Such claims might include pensions and other compensation for Siberian residents; land settlements with indigenous peoples; border adjustments and compensation to China to extinguish residual claims and disputes. 4 Mike Edwards, "Siberia: In From the Cold," Nah°onal Geographic, March, 1990, p. 14. s See the essay by T I. Zaslavskaya, V.A. Kalmyk, and L.A. Khakhulina, "Social Develop­ ment of Siberia: Problems and Possible Solutions" in Alan Wood and R.A. French, eds., The Development o/Siberw (New York: St. Martins Press, 1989). Also, in the same work, seeJohn Sallnow's "Siberia's Demand for Labour: Incentive Policies and Migration, 1960-8 5 ."