EconTalk George Shultz on Economics, Human Rights and the Fall of the Soviet Union
Sep 3, 2007
George Shultz, former U.S. Secretary of State and Hoover Institution fellow, reflects on economics shaping his public service career. He discusses the interplay of morality and pragmatism in foreign policy. He recounts US-Soviet diplomacy in the 1980s, Reykjavík breakthroughs, and why openness and information flow undermined closed regimes.
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Economics Trains Long Term Strategic Thinking
- Economics trains you to think in lags and strategic cause-effect, which helps in policymaking beyond pure economic issues.
- George Shultz credits his economics background and the idea that "an economist's lag is a politician's nightmare" for patience in long-term diplomatic initiatives.
Favor Financial Pressure Over Trade Embargoes
- Use economic and financial tools selectively; trade sanctions have limited, often short-lived effects while financial restrictions can hit elites harder.
- Shultz notes South African businessmen were pressured when London loans dried up and social ostracism and currency decline followed.
Aid Fails Without Governance And Can Harm Local Markets
- Foreign economic aid can help but often fails when governance is poor or it simply hands out money that crowds out local producers.
- Shultz highlights food aid pricing local farmers out and stresses governance and targeted reform assistance instead.
