Transcript: George Shultz

George Shultz has been an important figure on the national and international stage for over fifty years. A graduate of Princeton University, Mr. Shultz served in the Marines for three years before continuing his education at MIT.

Mr. Shultz has taught at Stanford, the University of Chicago Graduate School of Business, and Massachusetts Institute of Technology. He became involved in politics in 1955 during the Eisenhower administration, when he served as senior staff economist on the President’s Council of Economic Advisors. Following this, he has held a range of positions, including Director of the Office of Management and Budget, Secretary of Labor, Secretary of the Treasury. In 1982, he became the sixtieth US Secretary of State under President Regan, a position he held until 1989.

Mr. Shultz holds a number of honorary degrees, from universities such as Columbia, Carnegie-Mellon, and Keio University in Tokyo. He has authored many books, including Turmoil and Triumph: My Years as Secretary of State, a memoir of his time in office.

He is currently a Distinguished Fellow of the Hoover Institution at Stanford University.

Economist/Former Secretary of State

Student: We’re interested to know why you choose a life of public service.

Shultz: I was interested in issues of public policy. In my college days I majored in economics, and I was involved with something called the School of Public and International Affairs, it’s now called the Rigor Wilson School at Princeton. I was interested in that kind of thing, and I wrote my thesis as an undergraduate on the agricultural program of the Tennessee Valley Authority, which was a big thing back then. So I studied this big public policy initiative; I was interested in those things, and in studying economics.

After I got my Ph.D. in economics, I as invited to become a member of the senior economist on the staff of President Eisenhower’s Economic Advisors. So I was around and about and I got an idea of how Washington worked, and I also got to know some people. And as fate would have it, when Nixon got elected, he invited me to be Secretary of Labor.  So that led me from one thing to another. So it’s partly my interest in public policy issues, and then that caused certain things to happen. You meet people, and then all of a sudden you get asked to do something you say “Sure.”

Student: Did you ever imagine you would reach this level of success?

Shultz: Well, my wife and I didn’t plan on having five children. But we love them all; they’re wonderful kids, they’re all married. I have twelve grandchildren. I never imagined I’d have that warmth. My wife died after fifty years of marriage, and it was very hard, but I was lucky a couple of years later to meet another wonderful woman, so life has been good to me.

You probably mean being Secretary of State. But you know, you ask yourself, “what is success?” There are all kinds of ways of defining it, but I think that people who have warm families are very lucky and successful in the sense that famiily is a supporting element in one’s life.  There is really no good substitute for it..

I had no particular plan in my life. I didn’t plan to be Secretary of State. I was interested in economics, so I studied it. I got a job teaching at MIT, where I did my Ph.D.  In the course of time, people offered me jobs of one kind or another, and usually I could tell in practically one minute whether I thought it was an interesting job.  Most of the things that were offered to me I turned down. Every once in a while, something comes along, and you say, “this I gotta do.” When I was asked to go to Washington, and serve on President Eisenhower’s economic advisory staff, I said, “this is a good opportunity.” It was just a one year leave of absence from MIT. Then when I was invited to be a professor at the University of Chicago, I knew instantly that was a good thing for me to do, and so on. So one things leads to another, and you kind of evaluate them as you go. There’s lots of things you turn down, and there’s lots of experiences that probably would have been good for me. I’ve never been unemployed; I’ve never had to look for a job. I was always choosing among jobs that were in front of me, and it might have been a good thing to have to struggle a bit more.

Student: What is the right way for our increasingly interlinked economies to be properly involved with each other, especially since there is so much political pressure to use any means to maintain economic growth?

Shultz: Well, countries want to grow, you want your country to grow. It provides a much better environment for you to get the kind of job you want, or if you don’t like it leave it, and you can get another job. So growth is good for people, by and large, everywhere. You have to think about the environment that you may be creating. There are some ways of growing that need to be curtailed, but by and large, economic growth is good for people, so countries want to have it.

In trade, you have an event where everybody gains. If you don’t gain something, you won’t trade. You only trade when you gain something. In some cases, somebody may make a really good bargain and gain more than you do. But you won’t trade unless you gain. So having an arrangement that makes trade easy tends to enhance the general good. As in any other kind of economic activity, as things change some people are put out of a job by change. With trade, all kinds of changes take place. You live in a time, in a society, where you have to expect that you’re going to be confronted with rearrangements.  So you need to be ready to be flexible. I think that, as a world, we can maintain openness to trade, and openness to investment, we’ll all be better off. I would say reasonable openness to immigration is a good thing as well, particularly for the United States.

Student: One of the things I have been recently thinking about a lot is the relationship between the individual and society, and what responsibility the individual has when participating in society. It seems that some systems we have set up, particularly the capitalist system, have been exploited by people who have used it to promote their self interest and greed. It creates class levels, where the wealthy seem to benefit from the work of a lower class. What is our responsibility, as individuals in the capitalist system, towards the welfare of society?

Shultz: Did you read The Wealth of Nations in your study of economics? Have you studied economics?

Student: I haven’t studied economics.

Shultz: A well known economist named Adam Smith wrote a book in 1776 called The Wealth of Nations. The book describes how the wealth of nations would come about. Smith has a very famous phrase in there that goes something like this: “In a competitive environment, each individual acts in his or her own interests.  As if by an invisible hand, this will lead to the greater general good.” So the market system, the capitalist system, is posited on the idea that you are going to seek the best you can for yourself. If we keep you in a competitive environment, without some monopolistic advantage, other people will challenge you. You’ll thrive; other people will challenge you, you’ll have to face competition. You won’t be able to act in excess due to competition. And the process of you and others doing well leads to the general good. That’s the underlying notion, and it has basically worked well. There are abuses, as in any systems, but if you compare a market based system with the command and control system, as epitomized by the Soviet Union, you see on the one hand they didn’t produce very well, and on the other hand it terribly inhuman in the way it treated people. So, markets tend to centralize power and taken together with the governmental process we have in the US, where the key is checks and balances, no one can run away with things. The framers of our Constitution tried to design it so that we have three branches of government, and they check and balance each other. So, on the whole it seems to me a good system, even though it’s certainly possible, as in any big system, to point to things that didn’t go right. But on the whole, we’ve managed to correct them when we can.

But, you ask, as an individual, are there things you should do?  Yes, I think yes there are. You want to do your best; you shouldn’t cheat, you try to behave in an honorable way. I think there are others in society who aren’t able to participate fully the way you’d like them to. So I think that the tradition we have in this country of volunteerism, of going and trying to help, is a good thing.  You find lots of people in business who do it. I think, in a sense, morality can be exercised by the individual.  But at the same time, there’s nothing wrong with sticking to your own interests in the market environment, because that’s what produces the overall good result.

Student: Mr. Shultz, usually we think of our ethical and moral systems as informing other arenas of society, such as economic policy. From reading your writings, however, I’m beginning to think that you envision a different relationship between economics and other informing principles. For example you said in one essay that, “Market and enterprise based policies lead not just to economic development but to a rise in levels of education so necessary for an individual’s and society’s continued advancement.” From this I am inferring that sound economic policies may be a way to create the ground upon which cultural morality can flourish. Would you explain how you see the relationship between cultural values and economic policy?

Shultz: I think it’s a very interactive process.  In the history of our country we’ve had a strong moral, religious, ethical underpinning, a kind of civilized way of thinking that has been a base. Maybe we have come to take it for granted too much in recent times, but it’s been there, and you build everything on top of it. A good economy doesn’t flourish without some kind of a stable base.

For example, as an investor you look at country X, asking “should I put my money there?” The thing you want to know is, is there stability there? Is there predictability there, so that I know it’s going to be the same five years from now, more or less. You have the best chance of stability over time if the regime is decent. Probably that means democratic, but even if it isn’t democratic, in the purest sense of the word, if it’s civilized and predictable, and it understands the importance of having the rule of law, then you’re going to be better off. Having said that, I think that if an economy is opened up, it flourishes on enterprise and market bases, then it gives more dignity to individuals. It gives them the chance for self-expression; it gives them the chance to do things for themselves, instead of having the state do it for them. That’s fulfilling to the individual and to the communities that they’re a part of.

You also get other things. I’ve been studying comparative demography lately. And I’m absolutely stunned by what I see around the world, the variations and shape of the world to come is practically inevitable because of the demography.  One of the things you will see is, and this goes contrary to everybody who’s worried about the population explosion, that the world’s going to be inundated by people. It’s not going to happen. The reason is that the minute you come by an educated woman with the prospect of an improved standard of living, the fertility rates drop like a stone. It happens across cultural lines, ethnic lines, religious lines, geographic lines. There aren’t any lines that divide this principle. A lot of poor, very populous countries have been condemned to poverty by virtue of the way their economies have been managed. They have been managed according to a central planning, socialist communist motif, that just hasn’t worked. I don’t think there’s much to be said for it from an ethical point of view, but leaving that aside, this is an observation: it just doesn’t work. And the economies that have organized by market and enterprise principles, by and large have worked. They’ve seen expansion.

But coming back to your question, I think it’s interactive. What happens as a result of the way economic policy is set up, has tremendous effects on the opportunities that people have. I think open economic and political systems give more opportunities for people to express themselves, and to have a sense of individual accomplishment and fulfillment.

Student: Michael Sandel wrote in his book Democracy’s Discontent, “The effort to banish moral and religious argument from the public realm for the sake of political agreement may end by impoverishing political discourse and eroding the moral and civic resources necessary to self-government.” When our country was founded there was a strong Republican notion, espoused by Jefferson and others, that the government had a vital role in developing the civic virtue of its citizens. Do you think the government has any place in the formation of the moral character of its citizens? If so, how? If not, who does have that responsibility?

Shultz: I think the responsibility is widely distributed. It works best if people in all walks of life feel a responsibility. What can government do to shape an environment that’s conducive? Well, I think that education is a big factor. That’s not something traditionally we’ve done on a central level, and I’m very glad it’s that way.  We need to work in our various communities to improve the quality of education. There’s big debate going on right now, about the degree to which it would be better if we provided people with a choice about education. Wealthy people have a choice; poor people don’t.  A lot of us are advocating a system in which the money we spend on education, instead of giving it to the bureaucrats to spend, goes directly to parents who don’t have a choice of where their children go.  We think that will improve the quality of education. There are things like that you can debate. It seems to me that having a system where tolerance is possible is also good. This country was founded by people who wanted to get away from intolerant religious biases. We have lots of different religions, and we need to conduct ourselves so that we don’t try to force one on somebody. Let me point out something about a tolerant society: tolerance doesn’t mean anything unless there is a standard. If there’s no standard, there’s nothing to be tolerant of, it’s just chaos. So I think that somehow in our lives, and in the way the country develops, having standards is a good thing. And maybe you tolerate some deviants from that standard, but you need to have a standard to which people are held accountable.

Student: What do you think is the single biggest threat in a coherent world economy?

Shultz: We’re about to have a conference about this today here at the Hoover Institution. For two and a half days, we will be discussing the threat of chemical and biological warfare. I think that’s about the biggest threat to our lives, including our economic lives, as anything that’s around these days. In other words, the threats to economic development aren’t just things that go wrong in the international economy, but things that go wrong in the security system. When we have a security system, and people feel safe, that tends to cause investment and economic development to move forward. When they’re uncertain, they “un-invest.” So if you were to ask me what’s the biggest threat, I would say that’s it.

Student: Mr. Shultz, as someone who has made a career of settling disputes all over the world, what would you say are the most important principles of conflict resolution?

Shultz: Well, be modest about what you can do. And be patient, and be determined, and steadfast–a kind of “patient impatience” is the way you have to approach these things. Part of negotiation and conflict resolution is analyzing what the forces are, and what’s the real reason for this conflict, and we’ll operate from there. And I think also you have to be willing to take action. The most effective action is early action, but that’s the most difficult, because you’re not sure what’s going to happen. So you intervene early, before things get out of hand. People say “no, wait till you’re sure.” By the time you’re sure, the situation has unraveled to the point that you have a hard time putting it back together again. There are legions of examples of this.

Right now, we are in a terrible pickle, in my opinion, with Bosnia. If we had intervened early on, during the Bush administration, or the early part of the Clinton administration, we could have prevented the worst of the ethnic cleansing, the dividing of the country, and the bitterness that emerged from the killing and the brutality. But we didn’t. We finally intervened, and we managed to stop the fighting, and we constructed an agreement, called the Dayton agreement. We negotiated. There are two parts to it. The military forces move in and separate people. Then there’s a political part that says “we want to put Bosnia back together again.” In other words, refugees go back to their homes, and we reconstruct a multi-ethnic society. One part separates, the other part says put it back together. And if you are asked to be the mediator who does that, my advice is, decline. We are in a terrible problem in there, because we know if we withdraw our forces, it’s just going to erupt.  We’ll be right back where we stared from; we didn’t do any good. But we don’t want to have a lot of people there indefinitely, so how do you construct a situation where you can remove them without renewed fighting?  Well, you construct a working, happy, multi-ethnic society. And how do you do that? It’s practically impossible. So people say, “well, if that’s impossible, we better set up for the kind of divisions that are over there.” We don’t want to do that, so it’s a dilemma. The worst part of it is, it hasn’t been turned to people. There hasn’t been any discussion in this country; we just kind of know vaguely that our forces are over there, and so far haven’t been blown up. But as soon as they try to do something to implement the political side of the Dayton Accords, they will they’ll get right into the fray, and people will start getting killed. Then we’ll probably withdraw them, and that won’t be a pretty picture.

So, conflict resolution is important. When you know you’re going to have to intervene, intervene early, and nip things in the bud. Of course it’s hard to do that, because people say, “well how are you so smart to know to take this sort of reaction?” So in the tough situations it’s difficult.

Student: You spoke earlier of China’s rich cultural heritage. I was wondering did you find in dealing with other countries on delicate issues that mistakes were made based on cultural misunderstandings, or was there an unique cultural international diplomacy that allows for relatively easy cross-cultural understanding?

Shultz: You have to be sensitive to cultural differences. If you conduct yourself in a way that shows that you respect what has been put there by the past, it helps you. But in the end, I think the important thing is to be candid and clear. There are people who say yes and mean no, but you just have to interpret how they say yes. It’s not so easy. There can be problems, but I think if you can be alert to them, and it’s not that difficult to read up on them, to be cognizant at least of the main things, and to avoid aggravating things.

We need to respect other people, but we also need to respect ourselves. People say that in the Arab world, where women are in the background, we shouldn’t have women representing US interests, that if we try to have a woman deal with the head of government, it’s going to fail. To that, I say, “In our society we have a different attitude than they do. So why should we let them dictate how we represent ourselves our way?” And it turns out that if we have strong, effective women, we’ll be fine.

Student: Mr. Shultz, today it seems fashionable to say that Americans are cynical and they have a very base sense of morality. As someone who has lived through an incredible sequence of historic events, from the Great Depression to the post-Cold War victory of free market economics, do you think that these have created a significant erosion of values of Americans?

Shultz: Yes, I do. I think there’s a different pattern in our public life than there used to be. There’s less confidence and trust in people. There’s almost a presumption that if you go into public life there must be some nefarious reason, and we must investigate and find out why. So all of that I think is taking a toll. At the same time I think people at large, there’s a little different process going on, and I think all the discussion we’re having about values and families and communities, is positive. It’s causing us to reexamine our behavior.  Maybe right now we are saying to ourselves, “our values system has eroded, and it doesn’t feel good.” So maybe we ought to try and put back some of the things that have gotten away from us: a little more willingness to think about other people, to sacrifice a little bit, and to be more tolerant.  So I think things have deteriorated, and I think there is a reaction to it. At least I hope so. I think the most objectionable thing is the tendency of people to be intolerant. Having said that, I listen to people criticizing the deterioration of our values, and I think they’re right. As a matter of fact, more and more people are saying that.

Student: Mr. Shultz, looking on your life experience, is their any advice you could give to our generation?

Shultz: I think you should try to be yourself, do the things that you want to do, that are satisfying. People ask me often if I aspired to be Secretary of State. And I say, “No, I didn’t. I didn’t ask for it. I just tried to do interesting things, and to do the best I could, and the future would take care of itself.” I have five children. They’re all nice people; they’re pretty happy. I think the happiest one is the eldest child, who teaches science in high school. It’s so fulfilling for him. The people who are the happiest and the most fulfilled are the ones who are doing things that they decided they wanted to do, and spend their life doing it.

I don’t think that there’s any mystery on how to conduct yourself. You have talents that the good Lord gave you, so use them. Use them to help yourself along, and make yourself a constructive part of your community. It seems to me that if you do that, the rest kind of takes care of itself. I don’t mean go rise up and be President or something, but you tend to have a satisfying life. It’s fulfilling. And that is, in the end, what you’re trying to have, not a happy life but a fulfilling life, where you feel as though you’ve made a difference in some way, you’ve made the world a little better.

Well, you’re a very impressive bunch, and you’ve read all kind of things I didn’t think anybody knew to read. I have to be careful what I write. Well, good luck to you all.

Students: Thank you.