[Congressional Record Volume 140, Number 132 (Tuesday, September 20, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: September 20, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
         FREEDOM AND LIBERTY FOLLOW FREE MARKETS AND CAPITALISM

                                 ______


                         HON. DANA ROHRABACHER

                             of california

                    in the house of representatives

                      Tuesday, September 20, 1994

  Mr. ROHRABACHER. Mr. Speaker, many people talk about the virtues of 
freedom, but few have the deep personal commitment to help bring it to 
others. One who does have that commitment is Robert Krieble, founder 
and chairman of The Krieble Institute of the Free Congress Foundation.
  The Krieble Institute began its work behind the Iron Curtain in 1988 
and has worked tirelessly since that time to teach democratic 
principles and practices to literally thousands of national 
legislators, local government officials, political activists, and 
business leaders in well over a dozen former Communist countries.
  In January 1992 the institute expanded its programs to include 
training sessions in free market capitalism and entrepreneurism. These 
seminars are taught by American businessmen through case histories of 
their own companies, ranging from Fortune 500 companies to those that 
have fewer than 10 employees. But who better to teach the virtues of 
the free market than Bob Krieble himself, a successful former CEO and 
chairman of Loctite Corp., who has devoted so much of his life to 
public service.
  Among Bob's current affiliations is the National Endowment for 
Democracy, on whose board he sits. A friend from NED has shared with me 
Bob's wrap-up talk for the business program held this summer in the 
former Soviet Union. In it, he offers observations on which countries 
have achieved prosperity in the past 50 years, and the policies that 
have helped bring that about. I commend to my colleagues this profound 
message of the impact of free markets on economic growth.
  Mr. Speaker, I commend to the attention of our colleagues the speech 
Bob Krieble gave to a group of aspiring businessmen in the former 
Soviet Union this past summer. We in the United States can learn from 
this exposition of free market ideals.

                                Freedom

       The fundamental desire of most people is to be free. The 
     Founding Fathers of the United States recognized very clearly 
     that the enemy of freedom is the state. Their basic purpose 
     in writing the Constitution was to limit the powers of 
     government. Thomas Jefferson summed up the legitimate power 
     of government: ``Defend our shores, provide a sound currency, 
     maintain law and order.'' This is the sum of good government. 
     All other activities by government, in his view, were an 
     invasion of the freedom of the citizens. As he saw it, the 
     only limit to freedom should be laws that prevent any citizen 
     from infringing on the freedom of others.
       Even this carefully drawn Constitution did not satisfy the 
     legislatures of all the States. As colonies, they had been 
     forced to obey oppressive dictates of an all-powerful British 
     Government, and they were resolved never again to be 
     dominated by Government, even their own. They insisted that a 
     bill of rights be incorporated in the Constitution before 
     they were willing to ratify it. The Bill of Rights protected, 
     among others, the freedom of speech, religion and assembly. 
     It established the rights to due process, trial by jury, pre-
     trial release, and prohibited unreasonable searches and 
     seizures, and the taking of private property without just 
     compensation. [As an aside, I should note that in his 
     praiseworthy drive against organized crime, President Yeltsin 
     repealed these rights of due process in his eagerness to 
     destroy the Mafia--a laudable goal pursued by dangerous--and 
     regrettable--methods.]
       However, they did recognize that freedom for all required 
     that the acts of individuals be sufficiently restricted to 
     prevent all from interfering with the freedom of one's fellow 
     citizens. Their religion, being based on the bible, provided 
     powerful guidelines in the ten commandments.
       They were only willing to empower the new government to 
     enforce such a code of behavior as necessary to maintain 
     civil harmony.
       A result of this structure of government was that the 
     economy was managed not by government, but by the free 
     market. The market is a wondrous way of organizing an economy 
     without the need for government to exercise any authority. 
     Adam Smith's invisible hand provided all needed guidance. 
     People trading freely with each other determined what 
     producers would supply by their choice of what they were 
     willing to buy. Competition among producers determined 
     prices. People naturally chose to buy the products that they 
     considered to represent the best value. Producers were 
     thereby motivated to improve their products and to find more 
     efficient ways of making them in order to take business from 
     their competitors. The market thus provided a constantly 
     widening range of products, in ever increasing abundance, at 
     ever falling prices.
       This has been the experience of all countries that enjoy a 
     high degree of freedom, practically without exception. 
     Perhaps the best measure of market success is growth in GNP 
     per capita, expressed in figures that have been corrected to 
     eliminate the effect of inflation.
       The U.K. is perhaps the world's oldest democracy and has a 
     particularly interesting industrial history. In the 19th 
     century at the peak of England's power, a large part of the 
     globe was printed in red, indicating British territory. 
     England's manufactured goods could be found everywhere in the 
     world, and England's prosperity at home was unparalleled. The 
     British Navy and the British merchant fleet covered the 
     world.
       They used their colonies primarily as sources of raw 
     materials, which they then took home to England and converted 
     to manufactured goods, which they resold to the colonies at 
     great profit.
       It was during this period of rugged capitalism, with very 
     little interference from the government, that British 
     industrial power became preeminent. During the 19th century, 
     the British Government did everything in its power to 
     maintain the leading position of British industry in the 
     world markets. British steel, British machinery, British 
     textiles were held in highest esteem and moved the markets 
     all over the world.
       At the turn of the century, however, socialism had begun to 
     capture the British mind. Governments became involved in 
     issues of equitable distribution of wealth, of workers' 
     rights, of helping the unions to build their power. Work 
     rules, such as mandatory tea breaks, shorter working hours 
     and longer vacations, took their toll. Their control of their 
     colonies weakened and the colonies broke away.
       By World War II, Britain, in spite of its indomitable 
     spirit was no match for the German military industrial 
     complex, and Britain was pushed into the sea, to be restored 
     only when America's industrial might was engaged in 
     partnership. Today, Britain is one of the poorer countries in 
     Europe, and it has shown zero growth in real GNP/Capita over 
     the last 5 years.
       The Federal Republic of Germany is a much more recently 
     founded democracy, dating back to the 1860's under Bismarck. 
     Its government has always been more authoritarian even than 
     that of the U.K. By 1914, however it was able to mount a war 
     against allied armies drawn from most of the countries of 
     Western Europe and, toward the close, from the U.S. as well. 
     This war was truly a test of industrial might, quite as much 
     as military prowess. Germany held its own against the rest of 
     Europe, until the U.S. entered the war in 1918, which tipped 
     the balance. After 20 years of recovery, Germany started 
     round two of the war. Having driven British troops off the 
     mainland, Germany raced through Western Europe and penetrated 
     deeply into Russia. It was America's industrial might, 
     particularly in building airplanes, that eventually defeated 
     and reduced cities and economic power to rubble.
       The economic miracle that recreated Germany as a prosperous 
     world power began under the leadership of Adenauer and 
     Erhardt, who essentially freed German industry from 
     regulation and restored the free market. In a surprisingly 
     short time of 25 or 30 years, Germany was able to reestablish 
     itself as a world industrial power. Today its real GNP/capita 
     is one third higher than that of the U.S. and is second only 
     to Japan among the major nations.
       Japan is an even more striking example. It, too, was 
     devastated in World War II. It has no natural resources, but 
     the virtues of its population--disciplined, hard working 
     people with an incredible will to succeed, largely by their 
     own efforts, and aided by a highly unusual willingness to 
     save and invest in the future--regained their pre-war 
     position in the rank of industrial nations by the mid-70's. 
     Then, by a focus on quality and rapid turnover of capital, 
     they became a leading exporter to the upscale markets of the 
     world. ``Made in Japan'' became a symbol of higher quality. 
     Today, Japan is the richest major country in terms of real 
     GNP/capita, if you exclude the oil exporting countries of the 
     Arabian Peninsula.
       Only a few of these countries have experienced democracy 
     for several generations and, therefore, consider democracy to 
     be the normal form of Government. Germany and Japan, of 
     course, had democracy and a free market imposed on them by 
     the allied powers after their defeat in World War II.
       The older democracies have lost their dynamism. The growth 
     rates over the last 5 years are near zero for UK and a bare 
     1% for U.S. The newcomers have done much better, namely for 
     Chile (6%), Singapore (7%), and PRC (7%).
       Chile and Korea and Singapore established the free market 
     under farsighted dictators who related their tight control of 
     government in order to pursue prosperity and the resulting 
     improvements in education and perspective favored a higher 
     degree of self-government.
       Chile has been ruled for some time by a highly dictatorial 
     military man, General Pinochet. He recognized that the 
     continuity of his leadership in that previously unstable 
     country depended on achieving enough economic growth to give 
     the people a sense of every increasing prosperity. He adopted 
     a free market economic system. Chile's economy took off! It 
     is now rich even by Western European standards, and the 
     growth continues. In the last five years, its growth in real 
     GNP/capita has been 6%--six times that of the United States--
     and is exceeded only by South Korea, Thailand, Taiwan, and 
     China. The success of the free market brought democracy in 
     its wake. In the last elections, Pinochet was defeated by 
     a younger man, and the general quietly accepted the voice 
     of the people and retired from public life.
       Most of you probably know the success stories of the young 
     tigers of Southeast Asia. Hong Kong and Singapore are now 
     approaching the United States in real GNP/capita. Taiwan and 
     South Korea are not far behind. In all these cases, economic 
     success fostered democratic government.
       China is particularly interesting. When the Soviet Union 
     collapsed, the Communist government of China was, naturally, 
     worried. Deng told the leaders not to panic, but to take two 
     years to study what caused the collapse. This conclusion was 
     that the CPSU had failed to provide for the material welfare 
     of the people and, thereby, lost their support. The command 
     economy had failed, Deng was resolved to avoid a similar 
     outcome in China. Therefore, he authorized the construction 
     of a market economy, and the bureaucracy started to dismantle 
     government control with surprising enthusiasm. China's real 
     GNP/capita grew 7.7% in 1991, 12.8% in 1992 and an estimated 
     13% in 1993. While China's nominal GNP/capita in 1992 was 
     only $2,000, the buying power of that sum in China was about 
     twice that amount--or $4,000--which ranks China in the middle 
     income group of countries. If they can maintain that growth 
     rate, China will be the largest economy in the world early in 
     the 21st century.
       With this rising prosperity you can already see the 
     authority of the central government weakening, particularly 
     in the coastal areas where the growth has been concentrated. 
     The free market is the greatest liberator known to man!
       So China is becoming rich. Well, you may ask, why not the 
     CIS? My personal observation, from coming here every few 
     months for the last six years, is that you are doing better 
     than you admit. Where there were few cars, you now have 
     traffic jams. Where before your stores were empty, now they 
     are full of all the essential goods though you find the 
     prices high in terms of your salaries. Where six years ago 
     living space was crowded and of poor quality, now we see the 
     development of individual private houses in the suburbs of 
     the major cities. There is, indeed, substantial economic 
     progress. This progress is much slower than in China, but you 
     have been under communism for twice as long. Your older 
     people have lost their motivation. People in China have 
     retained theirs. Of course, they had the advantage of a very 
     large and very rich expatriate population who became leaders 
     of the surrounding countries while maintaining their family 
     ties to China. The rich and powerful expatriates served as an 
     inspiring example to those they left behind in China, and 
     when the economy was freed, they rushed to take advantage of 
     this opportunity. As your young people, who have not been so 
     subdued, take over control of their lives, your pace will 
     quicken. Rising hopes emboldened by highlighted success will, 
     in time, produce, the exuberance which is the fuel that 
     drives modern China.
       But to return to the question, ``Why aren't Russia and the 
     rest of the NIS keeping pace with China?'' Well, for one 
     thing, your leaders are preoccupied with the reform of 
     government rather than the improvement of the economy and the 
     task of raising the standards of living. They still miss the 
     point that the very essence of prosperity is minimum 
     government and reliance on the free market to provide 
     direction to the economy.
       The countries that I've cited as examples of successful 
     governments generally spend less than 25% of the GNP on 
     government, leaving the rest to the private sector from 
     whence comes the well-being of its citizens. The major drag 
     on the economies of the NIS is the excessive fraction of the 
     GNP used by government. In many countries in this group, the 
     government takes more than half of the GNP. This is more 
     government that you can afford! It must be cut in half if the 
     people of the NIS are to approach the well-being of the 
     people in China. The governments of these countries have 
     great difficulty in relinquishing the power of central 
     control and giving free reign to the benign power of an 
     impersonal market. Perhaps the process needs an employment 
     agency for surplus government officials to find them 
     appropriate posts in the private sector business.
       I think you have reason to be optimistic. What's happening 
     in China will happen here too! It just takes time.