Soviet Actions Allow World’s Economic Hopes to Flourish

The exhilarating news from the Soviet Union means that this is the time to think confidently about investments for the next five years, the next decade.

The triumph of democracy over a threatened return to miserable dictatorship is profoundly bullish for the world economy.

It means that people everywhere can work productively for a better life without the fear that military conflict or a nuclear holocaust will turn all their dreams to nightmares.

Not surprisingly, stock markets around the world responded to the good news. U.S. stocks moved up sharply all day long as traders heaved a collective sigh of relief that the Cold War was not returning.

Now, there will be opportunity for U.S. companies to help the Soviet Union produce oil and gas and build cars and air traffic systems, computer networks and telecommunications lines across its vast territory.

To be sure, we have not reached the millennium; the lion is not yet lying down with the lamb. The Soviet Union must still go through many trials in sorting out how the vast country of 280 million people and 15 republics will govern itself and how it will reform its moribund economy.

Russian Federation President Boris N. Yeltsin is a hero today, but rivalries and differences will re-emerge shortly. However, those differences will now be settled by peaceful politics, not by military force. The brave Soviet people have rendered military solutions unacceptable.

For Americans, too, elation over good news from Moscow does not banish problems of unemployment, homelessness and illiteracy. The United States needs to get its economy moving to create jobs and opportunity for all its citizens in a livable environment.

And financial markets see that cash is short. Stocks rose Wednesday, but bonds only held steady, indicating that bond markets were keeping an eye on budget deficits and worldwide demands for capital, including capital for the Soviet Union.

But Americans can get a capital boost from peace in the Soviet Union. Each American spends $1,200 a year for defense, much of it devoted to protecting Europe from the threat of Soviet attack. By contrast, France and Germany spend about $300 per person for defense. So, the potential of a peace dividend is real.

Defense stocks rose in the crisis and fell with its resolution, a recognition that the defense industry faces the challenge of change. But change can also bring opportunity, as the technical know-how and unique talents of U.S. defense companies turn to other purposes. As the late Edgar Kaiser used to say, “Problems are only opportunities in overalls.”

However, the industries to watch in the coming time are those that were so evident in the defeat of the Soviet coup: telecommunications and television. Just reflect on one moment in the crisis when Boris Yeltsin, from his stronghold in the Russian Parliament building that was shown every day on Cable News Network, sent out a fax to the Ukrainian Republic.

That fax, a declaration of democratic principles, was pasted up in the main square of Kiev and helped rally Ukrainians to oppose the coup leaders who were trying to ban fax machines and close television stations.

Travel the world today, and you can see the faxes and videos, phone lines and computers multiplying everywhere. In the 19th Century, one might have seen builders of steel mills and railroads. But, today one sees the representatives of global telecommunications--American Telephone & Telegraph, Northern Telecom, NEC and Motorola. One sees computer companies--IBM, Fujitsu, Digital and Apple, not to mention Compaq and Dell, Intel and Microsoft.

And, one sees McDonald’s hamburgers and Turner Broadcasting’s CNN, not to mention Coke, Pepsi and Marlboro cigarettes.

Companies that will find favor are those that can help with economic development in the Soviet Union and elsewhere--Chevron with its oil project in Kazakhstan, Monsanto with a Soviet joint venture in biotechnology research, Archer Daniels Midland with numerous ventures in agriculture. General Motors building cars, General Electric and others creating a vast air traffic control system--the list goes on.

The best way to think about events in the Soviet Union is to see them as good for business everywhere. The defeat of the coup that overthrew Mikhail S. Gorbachev is the third in a series of profoundly bullish events for the world economy.

First came the fall of the Berlin Wall two years ago, signaling that the world was indeed turning from nuclear confrontation to peaceful development and setting up reductions of forces and military expenditure.

Then came the U.S.-led world reaction to Iraq’s invasion of Kuwait, culminating in the Gulf War. That declared that the United Nations, backed by the U.S. military, could prevent renegades and dictators from disrupting world commerce. And now the coup’s failure declares that people’s desire for freedom truly is a powerful force.

As President Bush said Wednesday morning, “Democracy has taken a gigantic leap forward.” It’s a great time to think confidently about investing.