Don't Knock NATO

READ any of the latest scholarly journals and you'll notice a growing consensus among observers of the international scene that it's time for the U.S. to reduce its commitment to NATO. More than echoes of the traditional cries for greater "burden sharing" among our allies, an increasing array of academics are calling for a long-term "devolution" and pullout from our commitment to defend Western Europe and Japan, while arguing that a failure to do so will lead to long-term American decline!

Such theories gained widespread credibility early last year with the publication of Yale historian Paul Kennedy's Rise and Fall of the Great Powers, which skyrocketed to No.2 on the New York Times best-seller list with its predictions of America's relative decline from its position of world hegemony.

Kennedy proposed a theory of "imperial overstretch," that a nation gains "Great Power" status by using its economic strength to finance a military buildup and undertake a wide array of international obligations. As time goes on, however, such overseas commitments ultimately become a financial drain, eroding the Power's economic base by diverting resources badly needed for domestic investment.

As other nations experience more rapid economic growth and threaten its market shares, the Great Power feels its security threatened and instinctively spends more on defense, compounding the problem of its long-term economic decline. The Power becomes "overstretched," as it no longer has the capacity to defend all its international commitments.

SUCH is the situation today, Kennedy and many other prominent academics would have us believe, for the U.S. and NATO. They argue, correctly, that the U.S. must reduce its budget deficit if it wants to maintain its high standard of living but conclude that the proper place for the U.S. to cut back is in the 58 percent of the defense budget that is devoted to NATO.

"If the United States is to avoid becoming a hegemon in decay, set toward an ignominious end, we must shape a new policy--above all towards NATO," writes David Calleo in a recent issue of New Perspectives Quarterly.

Yet to blame America's recordbreaking budget deficits on our allies' failure to shoulder more of the NATO burden is misleading. Defense expenditures as a percentage of GNP, even after the Reagan defense buildup, are much lower than they were throughout the 1950s and 1960s, when the economy boomed.

The unchecked growth of the deficit has occurred because the Reagan Administration has refused to raise taxes or keep the lid on spending for non-means-tested entitlements, such as Social Security, which are geared towards immediate consumption rather than use in savings and investment. As a result, interest payments on the national debt have become the fastest growing line item in the federal budget, not defense spending.

Granted, the United States's share of the world manufacturing output has fallen from over 40 percent after World War II to around 16 percent today. But the reduction of America's overwhelming predominance in the world economy was a result that America deliberately sought, on the grounds that an economically secure Western Europe and Japan were crucial to containing communism and providing for a stable post-war world, thereby enhancing America's international position in the long run. To cite the economic rehabilitation of Western Europe and Japan through the Marshall Plan and demilitarization as causes of the United States's decline, two of the major successes of post-war American foreign policy, seems highly disingenuous.

CLEARLY America's industrial base has eroded in recent years as the record Reagan budget deficits have drained private savings from badly-needed investment. Federal investment in civilian research and development has fallen 27 percent in real terms since 1981; America's failure to adapt and develop new technology has led to rapid declines in productivity. The United States has been borrowing abroad in record levels for the purpose of consumption, rather than investment.

America may be in the midst of a long-term decline, not because of the Europeans' failure to pay for "their share" of NATO's defense or because of protective measures by the Japanese government, but because it refuses to promote national savings and encourage investment. Instead of blaming Japan for our inability to compete abroad or accusing our European allies of being responsible for our deficits, the United States should realize that it cannot continue to pursue such reckless, consumption-oriented fiscal policies in the years to come and that it must reinvest in job training, education, and research to restore America's competitive edge.