Thank you for coming. It's a treat to  be with you and sharing all this stuff. 

Since we seem to be in a second Cold  War, maybe it's a good time to revisit  

the last one to see why it turned out the way  it did and why the participants in it thought  

it turned out the way it did. I'm going to pose the question:  

why did Russia lose the Cold War? People have loads of different  

answers to that question. This is going to be a tour  

of the counter-arguments. I'm going to start with  

an answer that many Americans have. It’s a very simple one that's like, "Ronald  

Reagan single-handedly defeated the Soviet Union."  That's one possible answer. But then I'm going to  

give you all kinds of counter-arguments to that. Some of them are going to be other external  

explanations of what others  did to the Soviet Union. 

Others are internal ones of  what the Soviet Union did, the  

cards that it didn't play particularly well. And then I've got some umbrella explanations. 

So that's my plan for this evening. The story that Ronald Reagan did it… Well,  

here's a picture at the Reagan  Ranch after the Cold War is over. 

You see the Gorbachevs and you see the Reagans  and they seem to be having a grand old time,  

which suggests there's something  maybe off with that explanation. 

But anyway, the way the "Ronald Reagan  did it" school goes is that Ronald Reagan  

did a massive military buildup and some  would argue it bankrupted the Soviet Union. 

He was a man of words and deeds. He made really good speeches that were memorable. 

Here's one before Parliament where he says,  "The regimes planted by totalitarianism have  

had more than 30 years to establish  their legitimacy, but none—not one  

regime—has yet been able to risk free elections. Regimes planted by bayonets do not take root." 

And then here he is before  the Brandenburg Gate, this  

is in Berlin, long a symbol of German greatness. But then it was a locked gate on the Berlin Wall. 

Here's Ronald Reagan: "General  Secretary Gorbachev, if you seek peace,  

if you seek prosperity for the Soviet Union  and Eastern Europe, if you seek liberalization,  

come to this gate. Mr. Gorbachev, open this  gate. Tear down this wall!" And who can forget  

the "Evil Empire" speech, which he gave to the  National Association of Evangelicals in Orlando,  

Florida, and they skipped Disneyland to hear it. Reagan did a very significant military buildup  

that actually had started under Carter  when the Soviets invaded Afghanistan,  

big mistake as we discovered. He also invested in and deployed  

missiles in Europe. He was busy funding  

anti-communist insurgencies and also others who  didn't like the Soviet Union all over the world. 

He started doing more  aggressive military patrolling. 

By the time he's out of office, he was like  half a dozen ships short of this 600-ship  

navy or whatever it is he was planning to make. He was also trying to build a missile shield,  

his Strategic Defense Initiative. The problem is the Soviets  

tried to match him on this. If you add up the GNPs of the  

United States, NATO allies, and Japan, well, that  would be seven times larger than the Soviet GNP. 

You've got to be aware of asymmetric strategy. The CIA thought during the Cold War that  

perhaps Russia was spending up  to 20% of its GNP on defense. 

After the Cold War ended, when you  were getting more accurate statistics,  

it turns out it was at least 40 or 50%. Some people say it was up to a truly  

economy-busting 70%, if you take into account  all the infrastructure investments that were  

associated with military things. If you look during the Cold War,  

the United States was spending less than 8%,  Germany less than 6%, Japan less than 2%,  

and Nazi Germany, which is no piker, 55%. So you look at all this and it was difficult. 

So I am going to be quoting lots of Russians  today because they have thought deeply about  

the fate of their country, how life as  they knew it disappeared, the Soviet  

Union gone, the empire gone. They thought a lot about it. 

Here is a former Soviet ambassador  to West Germany, Valentin Falin. 

Here's his take: "Following the American strategy  of our exhaustion in the arms race, our crisis in  

public health and all the things that have to do  with standard of living reached a new dimension." 

Then if you add to the arms race of the United  States the arms race that was going on with  

China on that border, the arms race plunged  the Soviet economy into a permanent crisis. 

Here you have Georgy Arbatov, who was the  late Soviet Union's finest expert on the  

United States, or at least the most famous one. He's looking at the Soviet war in Afghanistan. 

He said, "It is quite clear that the Afghan war  was most advantageous for the United States. And  

we got our Vietnam." Because the United States  is busy funding the other side, and it's costly. 

Gorbachev is looking at this, as he's telling  the Politburo a year after he came into power. 

He said, "Look, the Americans are betting  precisely on the fact that the Soviet Union  

is scared of this SDI, the Strategic  Defense Initiative, a missile defense. 

That's why they're putting pressure  on us, to exhaust us." Correct.  

So some would argue that the US victory in the  arms race guaranteed victory in the Cold War. Go  

Ronnie. That's one explanation. But I'm going to  give you a tour of the counter-arguments and some  

other explanations, starting with Presidents  Ford, Carter, and the Helsinki Declaration. 

After World War II, the Soviets had wanted  to convene a conference of European states  

to confirm its expanded World War II borders. And for a long time, nobody was interested. 

The Western Europeans are sick of all the drama. The United States still doesn't want to show,  

but we go along with our allies, and our allies  insist on including human rights provisions. 

We think this is crazy because we know the  Soviets are never going to enforce those things. 

But you get the Helsinki Accords that  have all sorts of human rights provisions. 

Well, lo and behold, unbeknownst to anybody,  dissidents across the Eastern Bloc and human  

rights activists across the West start holding  the communists to account for the agreements that  

they have signed and start contrasting  the liberation that communism promises  

versus the dictatorship actually delivered. This human rights movement within the Soviet  

bloc and abroad, took on a life of its own. Here you have the former director of the CIA  

and former head of the Department of Defense,  Robert Gates, saying, "The Soviets desperately  

wanted this big conference and it laid the  foundations for the end of their empire. 

We resisted it for years only to discover years  later that this conference had yielded benefits  

beyond our wildest imagination." Go figure. Here  is Jimmy Carter with his human rights initiative. 

It was Gorbachev's English language  translator who said that Carter's  

emphasis on precisely the human rights that  were denied to Soviets really resonated and  

it made people think that they wanted a  more democratic, open, liberal society. 

Here's Carter giving a  graduation address at Notre Dame. 

He said, "We have reaffirmed America's  commitment to human rights as a fundamental  

tenet of our foreign policy. What draws us Americans together  

is a belief in human freedom. We want the world to know that  

our nation stands for more than just financial  prosperity. We're bigger than that." And here  

is Eduard Shevardnadze, Gorbachev's foreign  minister, echoing some of these sentiments. 

He said, "Look, the belief that we are a  great country is deeply ingrained in me,  

but great in what? Territory? Population,  quantity of arms, people's troubles,  

the individual's lack of rights? And what do we, who have virtually the highest  

infant mortality rate in the world, take pride in? It's not easy answering the questions. Who are  

you? Who do you wish to be? A country which is feared  

or a country which is respected? A country of power or a country of kindness." 

Others agreed that communism was essential  to the survival of the Soviet Union,  

but it's an undemocratic ideology. Fundamentally, it's a foundation  

that can't endure forever. That's the take of Vitaly  

Ignatenko, who's a Russian journalist. Oleg Grinevsky, who's a Soviet career diplomat,  

is saying, "Look, communist ideology is  associated above all with the Soviet Union. 

Its rejection created a vacuum and  it determined its ultimate fate." 

Boris Yeltsin, who is Gorbachev's successor,  said, "Look, no one wants a new Soviet Union." 

So some would argue, this counter-argument, that  human rights clauses of the Helsinki Accords and  

Carter's subsequent human rights campaign  destroyed communist belief in communism.  

Okay. Another president, another  counter-argument. Those who are fans  

of Richard Nixon would say, "No, no, no, no, no. It was Richard Nixon who played the China card  

so the United States and China could gang up on  the Soviet Union and overextend it financially  

to wreck it militarily." I think the Chinese would  

beg to differ and say, "No, no, no, no. It was Mao who played the America card." 

Because what's going on in 1969? There's a border war between  

China and the Soviet Union. China's gotten its nuclear bomb in '64. 

It no longer has to defer to the Soviet  Union and starts playing more tough  

on their border disagreements. So the Soviets are really upset. 

They come to the United States and ask us whether  it would be okay to nuke these people, because  

they think Americans don't like the Chinese . Well we didn't, but we said, "No, it's not  

okay to nuke those people." So the Chinese figure it out. 

The one that wants to nuke you  is your primary adversary, right? 

Up until then… Think about it,  China and Russia, for them the  

United States was the primary adversary. Now they're primary adversaries with each other,  

freeing up the United States to decide  which one it's going to cozy up to. 

And the United States decides it's  going to cozy up to China. Why?  

Well, Chinese belligerency forces the Soviets. Not only have they already got a big militarized  

border with Europe, now they're going to do the  same thing on a very long border with China. 

These are nuclear-armed  mechanized forces, very expensive. 

Imagine if this country had to have  such borders with Canada and Mexico. 

It would be bankrupting, and we are far  richer than the Soviet Union was then,  

whenever. It was bankrupting. So some  would argue that US cooperation with China  

fatally overextended the Soviet Union. One could take all of these arguments,  

starting with President Nixon all the way through  Reagan, to make an overarching argument that says,  

"Look, each president opened up opportunities  for the others who then leveraged them." 

So Nixon plays the China card, which  others play with increasing dexterity. 

Ford comes in and begins dabbling in human rights. Carter then comes in and really goes for human  

rights and starts doing a military buildup,  which then Ronald Reagan really does. 

So that by the time you get to Reagan, he is  dealing in a position of both ideological and  

military strength vis-à-vis the Soviet Union. For those who think that US foreign policy was  

not consistent during the Cold War, you're  not looking at it at the strategic level. 

There were certain different strategies  going on and how best to achieve it,  

but both parties agreed the goals were free  trade, democracy, containment of communism. 

Those were staples of US foreign policy,  for both parties, for its duration. 

So some would argue that Presidents Nixon  through Reagan produced the cumulative  

presidential effects to defeat the Soviet Union. Okay, others would say to forget this great man  

theory of history business, that's really passé. What really accounted for the outcome of the Cold  

War was this military platform, that's  Pentagonese for large military systems. 

But anyway, it's a nuclear-powered,  nuclear-armed submarine. 

They say that this is the item. The way deterrence theory worked  

during the Cold War, and I believe now as well,  is that in order to deter the other side, you have  

to have a reliable second-strike capability. So if they thought of lobbing a nuke at you,  

they would be guaranteed that you would  have the second strike to lob a nuke back. 

Therefore, they're never  going to lob the first nuke. 

When Jimmy Carter became president, he was a  graduate of Annapolis and also a submariner. 

The United States began a much more  aggressive deployment of its fleet  

and that's continued even more so under Reagan. 

We're taking our submarines and we're targeting  Soviet submarines in their home water bastions. 

So the Soviets are thinking that  we're going to be able to destroy  

their second-strike capability on our first  strike and they're having a heart attack. 

So here you have Valery Boldin, a longtime  aide to Gorbachev, saying, "Look, the most  

powerful strength of the United States is the  naval fleet and we aren't going to get one,  

or our geography isn't set up to use  one the way the United States can." 

And then you have Marshal Yazov  saying, "For the Americans, the main  

means of atomic attack is the fleet." So then you get Marshal Akhromeyev,  

who's visiting the United States in 1987. At the end of the Cold War he will kill himself,  

but he's still around in '87. He's telling his American hosts,  

"You know where our submarines are, but we don't  know where yours are. It's destabilizing. You,  

you the United States Navy, are the problem."  Go Navy. And here's his host, Admiral Trost,  

who's going, "Yeah, the inability of the Soviet  Union to maintain a strong defensive capability  

led to the demise of the Soviet Union and to the  removal of the Soviets as a major threat to us." 

So you can make a perfectly good argument  to say the Soviet Union could not counter  

technologically or financially the US submarine  threat to its retaliatory nuclear forces,  

so war termination was the only thing it could do. All of these preceding explanations are navel  

explanations, spelled with an  ‘e’, as in staring at one's own. 

They're all about what the  United States did or didn't do. 

So let's get beyond the  half-court tennis of Team America. 

You need to look at the other side of the net. This is where the Western guru for things  

military, Carl von Clausewitz,  emphasizes reciprocity in war  

and the interaction of both sides. You're not going to do well unless  

you consider what the other side is doing. So I have given you some external explanations  

and I'm going to do the internal ones. Here is Arnold Toynbee, he's one of  

the finest historians of the 20th century. He wrote a big multi-volume history of the West,  

in which he argues that civilizations  die from suicide, not by murder. 

So I discussed the murder, what the United  States tried to do to the Soviet Union. 

Now I'm going to talk about the suicide,  what the Soviets did to themselves. 

And here is counter-argument number one. The Soviet Union was an empire, and when that  

collapsed, that meant they lost the Cold War. During the Cold War, the Korean War and the  

Vietnam War, there was much fear  in the West of this domino theory. 

The idea is one country falls to communism,  then the next and next and next and next  

would fall to communism. Turns out the domino theory  

did not apply to capitalism. It applied to communism because  

once the democratic contagion hit one  Warsaw Pact country in Eastern Europe,  

it spread to the others until it was a  seething mess and they fell like dominoes. 

So in 1988-89, there were all kinds  of demonstrations in the Eastern Bloc,  

the Soviet Union. In the Soviet Union,  

they're for political freedoms. In the Eastern Bloc,  

they're for freedom from the Soviet Union. Gorbachev may not have gotten that detail. 

They're all about not only  wanting political freedoms,  

but also they're about crumbling economies and  how to fix their miserable standards of living. 

Very uncharacteristically, the  Russians didn't send tanks. 

In fact, Gorbachev welcomed and encouraged reforms  in the Eastern Bloc, both political and economic,  

just as he was doing in the Soviet Union. So his ideas of glasnost, openness,  

and perestroika, rebuilding, resonated at home  and abroad. These reforms began in Poland. Poland  

had been a scene of much worker unrest many  times, in 1956, 1970, 1976, and 1980 and 1981. 

In 1981, this is when Solidarity, the  workers movement, gets going and it  

gets a national and an international reputation. The next set of strikes are happening in 1988,  

because in the preceding several years, the  Polish standard of living had shrunk by over 3%. 

The government was out of cash and wanted to raise  basic food prices, and Poles hit the streets. 

The government was in a panic, because it was  worried the economy would go into free fall. 

So the government cut a deal with Solidarity. They said, "You call off the strikes and then  

we'll let you into political  talks," and Solidarity agreed. 

There was a complicating factor on all of this. It's called the Roman Catholic Church,  

which is an institution of enormous credibility  and legitimacy in Poland, which had a partiality  

for Solidarity and it had a Polish pope. So the roundtable discussions  

were these political talks. They occurred a year later in  

February 1989, and the Soviets encouraged them. In fact, here's one Soviet person there advising  

the Poles: "Look, you've got to find some quick  solutions out of your economic and political mess. 

You're an itty-bitty country, so when you  make mistakes, they'll be itty-bitty mistakes. 

But if we make them, they'll be big." They  got that one right. The Polish Communist Party  

thought they had this one covered by the way  they jiggered the election rules. Not quite.  

The day they held elections is exactly  the same day that Deng Xiaoping turned  

the tanks on demonstrators in Beijing and you  have the Tiananmen Massacre. Two solutions for  

the problem. So the way the elections worked out  in Poland is that Solidarity won every single seat  

for which it could compete but one. And then only three people in the  

communist-designated seats actually won. So who won all the rest of them? 

The box on the ballot called "none of the above." Yes, the Roman Catholic Church had helped  

instruct people that that's the box you want. With that, the legitimacy of the Communist  

Party to rule had just been wrecked  and we're on to democracy in Poland. 

This democratic contagion then spread  into East Germany four months later. 

This is about the 40th anniversary  of the founding of East Germany.  

70,000 people demonstrated in Leipzig. Within the week around like 1.4 million Germans  

are demonstrating in over 200 demonstrations. Typically, the East Germans would have sent tanks. 

That was what they would have done in the past. But would-be tank man Erich  

Honecker was already out of a job. His ruinous policies of living off debt since  

he came to power in 1971 had just about wrecked  East Germany. So he was out. Then less than two  

weeks later, the Council of Ministers resigns. Then on November 8th, the Politburo resigns. 

Then on the 9th, whatever is left of that  government is issuing new travel regulations. 

You might wonder what travel has got  to do with it. I'll get there. So  

in response to a question at a news conference,  this guy, Günter Schabowski, who was one of the  

remaining communists helping run the show, gets  asked a question and he doesn't know the answer.  

So he wings it. The question is, "When do these  travel regulations go into effect?" And he goes,  

"Immediately." Well, crowds immediately started  gathering at the six gates to the Berlin Wall. 

At one of them, the border guards decided  that discretion was the better part of valor,  

and they opened the gate and East  Germans poured into West Berlin. 

Within the first week alone, over half of  East Germany's population visited the West. 

Within the month, 1% of the  population emigrated to the West. 

Like the Polish elections, this opening  of the gate was a pivotal decision. 

A pivotal decision, whatever it is, means  there's no going back to the way it was. 

Here's good old Günter going, "Gosh, we  hadn't a clue that opening the wall was  

the beginning of the end of East Germany."  Okay, better luck next time. And the Russians  

were shocked by how unpopular they were. They were thinking they were going to get credit,  

Gorbachev, for Eastern Europe's liberation rather  than blame for Eastern Europe's enserfment. 

Here you have Yuri Ryzhov, a scientist  and parliamentarian going, "All of our  

former satellites by compulsion cast off  from us as fast and as far as possible." 

And Anatoly Kovalev, who is a deputy foreign  minister, said, "Look, we had no confidence  

whatsoever concerning whom the East German army  is going to shoot, the demonstrators or us. 

And the same thing for the Polish and  Hungarian armies." Great. With allies  

like this, who needs enemies? The allies kind of cover it. 

So this argument says unrest in the empire forced  the Soviet Union to forfeit the Cold War. Okay,  

I got another counterargument.  It says, "Nonsense, the real  

problem was that the satellites were unhealthy. That's why the whole thing fell apart. So this map  

is 1960. You see all those tempting green places. They're about to become independent, and they are  

really sick of their Western European colonizers. Enter the Soviet Union with a program to put the  

West out of business. There were  many takers. Fast forward to late  

1980s. The Soviet Union is on a roll. Small hitch, in the late 1970s there  

was a big recession that continued into  the 80s and tanked commodity prices. 

For some of the newfound pals like Angola,  South Yemen, Ethiopia, Nicaragua, it wrecked  

their export earnings because they're exporting  commodities and these commodity prices are down. 

In many cases, it halved them. The Soviet Union was really  

dependent on oil exports, still is. Oil prices tanked and oil accounted  

for up to 55% of the Soviet budget. So here Brezhnev has got a deep bench  

of non-performing piles at a time when he  doesn't have the money to support all of them. 

Worse yet from the Soviet point of view,  it's dumped all this money in these Third  

World friends but meanwhile, it's got its  own nationalities who are deeply unhappy  

and they want out of the empire. Most problematically, they all  

revolt at exactly the same time. One of the rules for continental  

empire is "no two-front wars". Russia has so many fronts at  

this point, it can't even keep count. The unrest in the internal empire of  

nationalities started as soon as Gorbachev got in. There were student movements in Kazakhstan and  

Yakutia, opposite ends of things. By the time you get to 1990,  

there are like 76 seething ethnic  rebellions in different parts of this. 

There was too much going on for  the Soviet government to handle. 

So you could argue that the Soviet Union  bankrupted itself with the Third World while  

ignoring its own internal Third World  of nationalities, whose simultaneous  

revolts brought down the Soviet Union. I got a completely different argument for you. 

If you don't like all of those, I got  another one for you. It's the economy,  

stupid, right? That line. One could argue  that communism failed as an economic system. 

If you look at growth statistics for  the Soviet Union, they're pretty good  

post-World War II when they're rebuilding, but  they really stagnate from the mid-70s onward. 

For the decade preceding Gorbachev’s coming  to power, Soviet growth stats were one to  

two percent lower than those of the United States,  and the compounding effects of that were enormous.  

What's going on? Everyone's lying to each other.  The data that Soviets are using is garbage. 

If you're working for a subunit of an enterprise,  you have to lie about the inventories you have,  

saying you have less than you do, and  then you have to lie about what you need,  

saying you need more than you do because  you're worried about getting enough things. 

It's not a market system  where the price dictates it. 

This is all about the plan. You've got to enter the right numbers  

and then you get whatever inputs you get from the  centralized plan. So everyone's lying. They're  

aggregating all the lies. The higher up the food  chain you aggregate these things, the worse the  

data is, so that the Soviet government has no idea  what the actual value of capital or labor are. 

It has no idea what actual productivity is, and  no one has any idea what consumer preferences are. 

You're not using markets and prices. The misallocation of capital and  

labor goes unnoticed until it  metastasizes into a catastrophe. 

To give you a sense of these misallocations, the  Soviet Union was rotting 20 to 40% of its crops. 

It's using scarce hard currency for agricultural  imports to make up for those crops, a total mess. 

You can look at what happens to  the economy with oil prices down. 

We're into a spiraling mess, so that from  when Gorbachev comes in in '85 to when it  

hits a trough in Russia in 1998, you see this  crashing share of world GDP by the Eastern bloc. 

If you look at Soviet statistics on deficits,  trade balances, debt, they're just soaring,  

and then GNP growth goes double-digit negative.  That's called shrinkage. It's not the normal  

thing. Marshall Yazov, here's his take: "We simply  lack the power of all these wealthy NATO nations. 

We had to find an alternative to the arms race." And here's a foreign service officer,  

Anatoly Adamishin. He said, "Look, our problems began  

with the departure from isolation. The main reasons for collapse  

were internal, not external reasons. The Soviet economy was literally exhausted from  

this monstrous arms race, militarism, enemies with  half the world." That's his take. Gorbachev told  

the Central Committee, "Look, we're encircled not  by invincible armies, but by superior economies." 

He often told people, "Living this  way any longer is impossible." 

So you can make a powerful argument that it's  the Soviet economy that lost the Cold War. 

This gentleman, Alexis de Tocqueville, is  very famous for writing a book about the  

last days of the French monarchy before  the French Revolution overturned it. 

He also wrote something about Democracy  in America, both excellent books. 

But this one's from the one about France, where  Tocqueville observes, "The most dangerous moment  

for a bad government is when it begins to reform." Russians of all political persuasions  

agree on at least one thing. That is that Gorbachev's role in  

how the Cold War turned out was pivotal,  that he played a very essential part. 

Gorbachev made his decision based  on certain false assumptions. 

One of them was the irreversible  direction of history. 

Gorbachev thought of history going always forward  towards communism, never backwards to capitalism. 

Of course, Eastern Europe took a U-turn,  went straight back to capitalism. 

Here is Leonid Shebarshin, who is a senior  person in the KGB, their intelligence office. 

He said, "The thought never occurred  to the government that it's possible  

to withdraw from socialism." If you think about both communist  

theory and how imperialism works in practice,  usually the mother country is more developed  

than whatever all the colonies are, right? Well, the Soviet Union was an inverted empire. 

People in Eastern Europe as a group were more  well-educated and they were richer than Russians. 

It was like a donut empire. So when the empire went to Eastern Europe,  

Russians could no longer siphon off the wealth  of these enserfed populations in Eastern Europe,  

which explains why they wanted to leave. It also suggests why Putin wants them back. 

Another false assumption has to do  with the sentiments of the neighbors. 

Gorbachev was convinced he was going to  get credit for liberating Eastern Europe,  

rather than blame as a Russian for  having enserfed them in the first place. 

For Gorbachev, the clock began on his watch. For other people, no, Stalin's when it began,  

when he started shooting a lot of people. Here you have Anatoly Chernyaev,  

foreign policy adviser to Gorbachev, saying  that Gorbachev thought that bringing freedom  

to our Eastern European satellites would  have them adopt socialism with a human face.  

"He made an enormous mistake because these  countries brutally turned their back on us." 

Really, if that's brutal, then  what pray tell was Stalin? 

And then it gets better: "The politics in  connection with our former friends were  

totally unexpected to us." Really?  You occupy people, you never leave,  

you shoot a lot of people in their  government, you put in a new government,  

you siphon off a lot of their wealth, and  you impose a non-performing economic system,  

and you wonder why they don't like you. Think  about the United States. It intervenes all  

around the world in other people's troubles. It dumps billions in economic aid and even  

leaves and people don't like us. I don't know why the Russians  

think they're so special. Another false assumption:  

Gorbachev believed that if the Warsaw Pact,  the military alliance of the Eastern Bloc,  

disappeared, then NATO would disappear. He also believed that if the Comecon,  

which is their trading organization, went away,  then the European Community in those days—it  

becomes the European Union later—would disappear.  Not quite. It turns out that organizations that  

are coercive versus those that are voluntary,  they dissolve for different reasons. 

And then Gorbachev also assumed that the United  States would share a continental outlook of not  

wanting strong powers and that the United  States therefore would not want a unified  

Germany, let alone a strong unified Germany. So when all the unrest is happening in Germany,  

Gorbachev is off taking a vacation. Poor life choice, because at that moment,  

President George Bush Sr. and Chancellor Kohl  of Germany are working on fast-tracking German  

unification of a fully sovereign,  unified Germany—both halves in NATO. 

So many of Gorbachev's closest supporters  at the end of it all blamed him. 

They said, "Look, his foreign policy mistakes were  a function of his domestic policy mistakes and it  

destroyed the Soviet Union." Back to this America expert,  

Vladimir Lukin: "Gorbachev was no Deng Xiaoping." And Arbatov, who's their premier America expert:  

"The stupidity of our leaders caused  the disintegration of the Soviet Union." 

So the big bozo was playing with plastic  bags, stuck one on his head, committed  

suicide. It was by mistake. Lukin continued:  "In the West, they love Gorbachev because  

everything took place so easily and cheaply,  basically like that, but only for you. For us,  

it was expensive." But you could argue the time to  reassess all the Stalinist stuff was long overdue. 

Here's a completely different  way of looking at it. 

I've been giving you sins of commission, and now  I'm going to do sins of omission. It's a good  

framework. It's useful for other things. The sins  of commission are all the things Gorbachev did. 

Now what I'm going to do  is what the army didn't do. 

Some would argue that the Red Army  should have done exactly what Deng  

Xiaoping ordered his army to do. You just send the tanks against  

civilian demonstrators and they  truly crush them and it'll be over. 

Communist Party is still in  power in China 30 years later. 

So there are some people who believe  that this was a terrible mistake. 

So this argument would be that  timely tank deployments—TTD,  

my contribution to military acronyms—would  have changed the outcome of the Cold War. 

Others would be back to the great men  of history and sins of commission,  

and they wouldn't be picking on Gorbachev  but his successor Boris Yeltsin. 

There are two big pieces of evidence when we look. He removed Article 6 from the Soviet Constitution,  

which guaranteed that the Communist  Party would always monopolize power. 

And then in addition in the following  year, Yeltsin's the head of Russia,  

he gets together with the heads of Ukraine and  Belarus, and they signed the Belavezha Accords,  

which then formally dissolved the Soviet Union. So according to this way of thinking,  

it's his fault. It's suicide on purpose. And  what it does is it opens the door for multiple  

parties and for the nationalities within  the Soviet Empire to become independent. 

So I've given you internal explanations.  I've given you external explanations. Now I'm  

going to give you some umbrella explanations. They're based on all the preceding evidence,  

and they come to opposite conclusions. The first one was, well,  

any of the above, it's inevitable. The opposite conclusion from the same evidence is  

that no, it took all of the above. The West barely  won. I'm going to start with "any of the above". 

You could argue with this many serious  problems, it was a matter of time  

before the Soviet Union collapsed. It was an objectionable system for  

precisely the reasons the West didn't like it. It had a brutally inefficient economic system. 

Russians who invented the thing, at the  end of the day, didn't want it either. 

By this way of looking at it, you have people like  Yuri Ryzhov, a genuine rocket scientist, who says,  

"Look, the main reason for the collapse of the  Soviet Union is the rottenness of its system." 

Then here's a journalist, Teimuraz Stepanov, who  said, "Look, I think from the beginning the genes  

of disintegration were contained in the genetics  of this governmental political formation." 

Don't you love the products of  the Soviet educational system? 

Don't ever use wording like that. So you could argue that the Soviet Union  

was destined to fail with this many problems. Others would come to the opposite conclusion. 

They would say, "No, it took every single one of  them for the Cold War to end on Western terms." 

Back to Anatoly Kovalev, the deputy  foreign minister, he said, "Look,  

all these factors merge—internal, ideological,  economic, military—it's all of them. 

You remove any one of them and  you get a different outcome. 

Maybe the Cold War ends, but it  might end completely differently." 

So by this line of reasoning, the West barely  won and should feel very fortunate that it did. 

One can take this last argument  and say it was more than that. 

It also took the confluence in  office of two very talented leaders:  

Helmut Kohl of Germany and George Bush Sr. of  the United States, not the son who got into  

those forever wars, but the dad who didn't. George Bush Sr. had one of the most amazing  

resumes of any person ever to become president  of the United States. Just look at him. When he's  

really young, he's a war hero in World War II. He's a Navy pilot, a dangerous thing to do.  

He did it. Then he comes back and he gets  his BA at Yale and graduates with honors. 

Then he becomes a representative for this district  in Texas after he's already made himself a  

millionaire in the oil business that he started. Then he became ambassador to the UN,  

followed by US representative to the PRC,  before we had formal diplomatic relations. 

So he's the guy who's setting that up. He becomes director of the CIA, and then  

he is Ronald Reagan's understudy  for eight years as vice president. 

He is incredibly fit for the job. Helmut Kohl is equally fit for the job. 

He is the longest-serving chancellor  in German history since his illustrious  

predecessor, Otto von Bismarck. He starts out getting a PhD in  

history and political science. He also starts out in business,  

but then he works for state government, initially  as a representative, then as a governor. 

He becomes chairman of his political  party, the Christian Democratic Union,  

for a quarter of a century. Once he gets in, he decides  

he's going to buy up East Germany one  tourist at a time. How does that work? East  

Germans, it turns out, really like to travel. West Germans had always been able to travel to  

East Germany, or they long had been able to travel  to East Germany, but East Germans definitely could  

not easily travel to West Germany. Why?  Because they have a habit of staying. 

But all of a sudden, East Germany  eases up on the travel regulations. 

You might ask why, and the answer would be money. Just like the Poles, the East Germans were deep in  

an economic mess of their own making. Would-be tank man Erich Honecker,  

who got the boot at the very end, well, his  staying-in-power paradigm that he implements  

in 1971 is that he's going to live off debt. He needs to make certain social benefits  

available and consumer benefits available for  labor stability, to not have labor unrest. 

The way he's going to do that is he's not going  to do many domestic investments and he's going to  

do a lot of borrowing, particularly from  West Germany. Well, that's unsustainable  

long-term. By the time you get to the end of  the Cold War, if he's going to fix that and  

even out the accounts, it would be a 30%  decline in the East German standard of living. 

So he really needs the pocket  change from the tourists. 

So what Kohl does is a brisk  business of tourists and things. 

What he does in return for the  easing of travel restrictions,  

he pays East Germany several hundred million  

Deutschmarks extra to allow that to happen. And then he gets the Hungarians to go along. 

He gets the Hungarians to open up their Austrian  border to let East Germans out that way,  

and he gives them a half a billion  Deutschmarks for that little favor. 

When Kohl introduces his 10-point unification  program—because now he's thinking he's going  

to get both Germanys together—this is when he  starts doling out big bucks to the Soviet Union,  

whose economy is unraveling. Gorbachev is going to be  

desperate for this cash as that's happening. So West Germany provides 100 million in food,  

especially in meat, for the Soviet  Union that doesn't have these things. 

Nevertheless, the unrest just keeps on going. The Berlin Wall, as I've told you, is breached,  

and then you wind up with a West German  caretaker government, and the financial  

situation in Russia itself is unraveling. By the time you get to January 1990, Bush and Kohl  

get together and they decide they want to really  fast-track German reunification. Why? Because  

they've got to get it done before this unraveling  crisis causes Gorbachev to fall from power. 

So they have got a game going, the  two of them. It's complicated. Here's  

why. Gorbachev was dead-set against  Germany, a united Germany, in NATO. 

He's not really keen about a united  Germany, let alone one in NATO. 

The US State Department experts, the guys  who know everything, are saying, "No,  

you want to go slow on this unification business." Kohl is also running a coalition government. 

There are people in that government he cannot fire  because they're from different political parties. 

One of them is his foreign minister,  this guy Genscher, who is very skeptical  

about Germany being part of NATO. Then it turns out, although Britain  

had talked a good piece during the Cold War,  it didn't actually want a unified Germany,  

nor did France. Why? Because that unified  Germany would eclipse them economically. 

They didn't want that to happen. So Kohl and Bush divide up the tasks. 

Kohl is going to reassure the Soviet  Union that Germany is not going to  

be belligerent or do horrible things. And Kohl is going to work on financial  

unification because the Soviets are  thinking in terms of military unification. 

You know, where you deploy your troops.  That determines things. Wrong instrument  

of national power, precisely because  the Soviets didn't understand finance. 

That's why they're in such a mess. Whereas the  Germans do. What they're going to do is get East  

Germany on the West German Deutschmark,  and at that point they will control all  

the money and they will control decisions. But the Russians aren't going to see that coming. 

Meanwhile, Bush is supposed to work the alliances  particularly with Britain and France in the West. 

There are all sorts of  meetings that are coming up. 

Bush's job is to delay those meetings for  as long as possible so German unification  

can proceed as far as possible. The two of them are doing a tag-team  

diplomacy with Gorbachev that he just can't  keep up with, given that his own home economy  

has got these double-digit shrinkage rates.  Here's how they go. As the trades get bigger,  

the amount of money you pay Gorbachev gets bigger. First of all, it's just to get a unified Germany. 

Then it's to get a unified Germany  with West Germany still in NATO. 

Then it's to get a unified Germany  with all of Germany in NATO. 

So here's how the money goes. Gorbachev agrees  to German unification. We are no longer paying  

hundreds of millions of Deutschmarks. We're paying billions of Deutschmarks,  

five billion Deutschmarks for that one. Then Gorbachev agrees that states can choose their  

own alliances, i.e. whether or not to join NATO. The US offers nine assurances, but it's also a  

trade agreement that Gorbachev really wants. Then the economic union goes into effect. 

So we've now done the financial  reunification of Germany. 

This is when there's a London Declaration  that's inviting Eastern European countries  

to coordinate more closely with NATO. In return, Gorbachev gets a promise  

of a G7 summit meeting that's going to  fast-track aid to him, which it will do. 

And then Gorbachev agrees  to German NATO membership. 

At this point, even bigger things are happening. Germany's going to agree to its border with  

Poland. I'll get there and explain. Germany  provides 15 billion in Deutschmarks,  

including building all kinds of new apartment  buildings for repatriated Soviet soldiers who are  

going home. Why are you doing that? Because you  want those soldiers focused on buying furniture,  

not running a military coup. That's what they're  doing. So the unification happens in mid-September  

1990. Here's the Polish borders. At the end of  World War II, Stalin moved Poland 200 kilometers  

to the west, and it winds up taking a third of  German territory by the time that's all over. 

So the Germans don't really  want to sign all that away. 

In addition, as part of that, there were 12  million German refugees who were thrown out  

of wherever they were living to send them  back to Germany, of whom 2 million died. 

So this is a big deal and it's in living memory. Germany agrees to this, that the borders are  

done. German-Polish borders are set. Complicating  factor: a month and a half before this unification  

treaty is signed, Saddam Hussein decides he's  going to invade Kuwait because he's broke. 

He's had a long war with Iran, huge debts, many  owed to Kuwait, which he doesn't want to pay back. 

So if you invade them, that solves that problem. Also, he would take over Kuwait's very rich  

oil fields, and together that would make  Iraq probably the swing producer of oil. 

So he thinks that's a great idea. Except the Cold War's over actually. 

The Russians are more than willing  to cooperate with the United States. 

Gorbachev really needs more money, and he  is willing to go along with getting Iraq out  

of Kuwait, but not with regime change in Iraq. Because think about it, Iraq is a very important  

debtor state to the Soviet Union. It owed them between $10–13 billion. 

That's a lot of money for a broke creditor. But Gorbachev is being extraordinarily  

cooperative with Bush Sr. He sends Yevgeny Primakov on  

multiple missions to Baghdad. The first one, Primakov  

gets all Russian hostages out of Iraq. Then on the second trip, he gets all Westerners  

out, Americans included. Third trip, not so  lucky. He's there for the coalition force bombing. 

I don't think he liked that very much. But imagine that bombing going on if  

there were Western human shields  going down with every target. 

Russia took that card right off the table. Here's  some of the reasoning. Sergei Tarasenko was an  

aide to Foreign Minister Shevardnadze, and they  understood that the United States was going to  

do something about this invasion of Kuwait. So the Russians thought, "It'll be better  

if we force all of this to go through  the UN, where Russia has a veto power." 

He said, "Look, there was a division of roles." It extends to China, the help that Russia  

provided. "When the Americans  asked us to work with the Chinese,  

we told the Chinese, 'Think about it. You're one of the big five with veto power. 

Doesn't it suit your interest to funnel everything  through the UN where you can put your foot down?'  

And the Chinese came around to that idea." However, the Russians had red lines. 

Here's Anatoly Kovalev again,  the deputy foreign minister. 

The red line is, American troops stay out of Iraq.  No regime change in Iraq. You do that and you will  

tank the termination of the Cold War. And that would be the goal. 

Here's Kovalev saying, "I advanced the  basic principle that we must support the  

territorial integrity of Iraq. This was our sacred  position. We must not permit a division of Iraq." 

So if you wonder why the ground war  ended after 100 hours, this is it. 

The big thing out there is war termination of the  Cold War. That's the big thing. Saddam Hussein is  

a minor event over there. Sorry, but he was.  If it had tanked Cold War termination or upset  

the reunification of Germany, France  and Britain might have been very happy,  

because François Mitterrand, who is the president  of France, and Margaret Thatcher, prime minister  

of Britain, were against German unification. They knew it would marginalize their own country. 

Germany's going to be a  bigger economy, which it is. 

François Mitterrand eventually found solace  in expanding the European Community to the  

European Union when you're incorporating  all these Eastern Bloc countries into it. 

He plays a really important role in concluding the  Maastricht Treaty that forms the European Union. 

But Margaret Thatcher just plain lost. She was just upset about the whole thing. 

She said, "Germany will be the Japan  of Europe and worse than Japan." 

I guess she hadn't been to Japan lately. She said, "The Germans will get in peace  

what Hitler couldn't get in war." She wanted to leave Red Army troops  

in Germany for the duration. Imagine if that had been the  

case and now dealing with Putin… If he had  troops in Germany, we would be in trouble. 

But Bush and Kohl worked around all of them. Bush said to Kohl at the end of it, "Look,  

I'm not going to beat my chest  and dance on the Berlin Wall." 

Both of them were very careful never to humiliate  Gorbachev about the Soviet loss of the Cold War.  

Why? Because they knew that if they did that, he  might fall from power sooner rather than later. 

Also, they were afraid that if they did that, the  hardliners would come to power much more rapidly  

than they actually did. It was 20 years before  

Putin started consolidating his power. The newly independent countries of Eastern  

Europe needed those 20 years to integrate  militarily, politically, economically with the  

West so that the cement could set before you  got the Russians trying to destabilize them. 

So they bought them 20 years to do this. But there's a cost to all this. 

Bush never got credit for his essential role  in ending the Cold War on Western terms. 

So he was not reelected for a second term. Anyway, when it came time for Nobel Prizes  

and why the Cold War ended, Anatoly Adamishin,  this Soviet Foreign Service officer, said,  

"Look, it's difficult to deny the Soviet  Union was the one that ended the Cold War." 

And Edwin Meese, who was a counselor to Reagan  and also his attorney general, said, "Look,  

the Cold War began because of Soviet policies  and it ended in a sense because of Soviet  

policies." The Nobel Prize Committee agreed.  They awarded the prize to Gorbachev, not to Bush,  

for his role in liberating Eastern Europe. So when you're thinking about this question  

of why Russia lost the Cold War, I  hope you will come up with a more  

complicated answer than, "Well, Ronnie did it." There are probably other causes at work as well. 

Anyway, thank you for your attention. That's what I have for you this evening. 

Sarah, thank you so much for doing these. Thank you for having me. That would  

be the more important thing. There's an interesting question  

of why the Soviet Union collapsed when it did. I think the even more interesting question is  

why a system that was so centrally  planned, monstrously inefficient,  

brutal, a colonial land empire, how such a country  could survive for so long into the 20th century. 

I feel like that's the thing  that actually needs explanation. 

How did this regime last for 74 years? There are loads of dysfunctional places all over  

the planet that have been dysfunctional forever. You look at well, why are they dysfunctional? 

To me, the answer to that one in a  way is the example of North Korea. 

Of all countries that should fall, a place  that has ongoing famines in the 21st century,  

and it used to be the richest  part of the Korean Peninsula. 

These authoritarian regimes are really good  at maintaining coercive powers. Think about  

it. In order to educate someone, it takes  years as a parent to bring up a little  

person and then you get them educated  and maybe they're an A-list politician. 

It takes seconds to assassinate them. It's the asymmetry between construction  

and destruction. Destruction is so easy.  Dictatorships are all over the world. 

It's a sad part of the human condition. They clearly know what they're up to. 

In the case of the Soviet Union, there  were multiple intelligence organizations. 

That's what Stalin was using  to keep track of everyone. 

So you want to monopolize information so that  you know more information than other people. 

And then they have a whole bunch of people who are  the winners of the nomenklatura, the elites there. 

You make sure you pay all of them off.  I mean think about it. Human societies,  

slaves, serfs… We humans have been doing  these things to each other for a long time. 

So dictatorships can certainly  sustain themselves for a long time. 

But the Soviet Union was special in that by  the 60s and 70s, they had a GNP that's 60%  

of America's, this incredibly dynamic economy. In the 40s and 50s, they had much higher growth  

rates, so much so that prominent economists like  Paul Samuelson are saying that by the 90s, based  

on what they're seeing at the time, the Soviet  Union will have a bigger economy than America. 

This is just quite surprising that  they would have such high growth rates. 

If you just think about how central planning  works, people are going to tell you how much  

steel you can make and which company gets  to use the cotton fabric and cement, etc. 

You have hundreds of millions of  people living under this system. 

It's actually quite shocking that  they actually had notable growth rates  

after World War II for decades on end. Well, first of all, it's a war economy,  

essentially. You're putting  

all your money into having a big military. Russians define greatness—this is part of  

it—as being a big power, and its  a military power with territory. 

Most countries in wartime  mobilize for the military. 

This country did it in World War II. All kinds of rationing,  

we're not using market prices. You're setting different prices,  

giving people ration cards and things. The thing about the Soviets is  

they kept it forever. They never got rid of  

it. So that's one piece. Another problem  with the Soviet Union is all of the data. 

So I don't know what data you've  seen, and I know the data I've seen. 

It's hard to know because the Ruble is  a non-convertible currency and a lot of  

things they measured in weight and other things. Like they're the greatest TV producer in the  

world, they said. Why? Because they  made the heaviest TVs in the world. 

I'm serious, when I was there this was it. They would spontaneously combust,  

which is not the normal thing a TV should do  for you, burn down the apartment building. 

So they're going to measure their heavy TVs as  a positive, and the Ruble is non-convertible. 

So there was a guy named Murray Feshbach, and I  can't remember which part of the US government he  

was in, but he was really good at looking at their  statistics and then adjusting them. But people  

didn't know. I gave you the CIA ones. The CIA, they're not stupid people. 

They've got the best data they could find and  they're coming up with 20% of the Soviet budget  

is probably devoted to the military. After the Cold War is over,  

they're going, "Whoops, we missed." It's at least double that and maybe triple. 

So it's really hard to know even  with the statistics you're getting. 

Certainly what Paul Samuelson had  wouldn't be accurate. It's just a guess. 

My favorite example of this is that  there were top-down commands that you  

had to produce a certain amount of steel. A steel factory would then be incentivized  

to make thicker bars of steel rather than  thinner bars because that would count as  

greater production, except a lot of inputs  actually do require the thinner sheets. 

So then the other factories have to thin down  the steel, but that also counts towards GDP. 

So producing the inefficient steel and  then cutting it down to size is both  

being double-counted towards GDP. Oh, and just the whole waste of it. 

Like the heavy TVs, they probably have four  times the inputs that they need to make them  

that would be good for other things. It's this notion that you can actually  

plan an economy. Prices are a miracle.  Good old Adam Smith, the invisible hand. 

Prices are the way to go and  markets, it's more efficient. 

I wonder if one thing that's going on is  that in the early and mid-20th century,  

you have economies which are much  simpler, at least compared to today. 

So even then, obviously, command and  control is less workable than capitalism. 

But if you just have heavy industry,  you need a certain amount of cement,  

steel, concrete, fabrics, coal. That's much more workable than,  

"We've got to centrally command what SaaS  tools your enterprise is allowed to use." 

Oh, yeah. It's interesting  on the development thing. 

The communists have insisted on heavy industry. That's the thing that they want. Forget about  

the consumer goods. If you look at the  countries that really have made it,  

like Japan and the Meiji Restoration, they're  doing a lot of light industry and consumer goods. 

Then they move into heavy, but they've  already got people on bicycles and they've  

got textiles and other things up and running. That would also apply to Taiwan and Korea. 

They do, by all means, get heavy industry. But that's not the starter program. 

The starter program is basic standard of living. Again I'm not an economist, but it turns out  

if you just look at who's rich and who's  not, that seems to me a more workable thing. 

There's also the fact that the centralized regime  is building things according to the 30s plan. 

And even after post-war reconstruction, they're  still calling back on these plans from the 30s  

that call for heavy industry for a bygone era. In the 70s, 80s, we had our rust  

belt collapse of manufacturing. People complain about this as, "Look,  

the US has this hollowed-out manufacturing base." But it's much better to have industries which  

are left behind so that the whole economy as a  whole can be more dynamic and move on than the  

Soviet Union where the entire thing became  a rust belt because they couldn't move on. 

It's more exciting than that. Again,  I'm not an economist, but apparently  

they missed the plastics revolution. I mean think about our own lives. 

Now we're finding we have too many  plastics, but plastics are an incredible  

material and they're just missing that. I remember in Russia trying to figure out  

where to get sour cream and was being laughed at  by Russians because I was so stupid in the store  

that I couldn't find it. Well, we have little  

plastic tubs with the sour cream. Back in the late 80s, when I was there,  

you had to bring your glass jar with you so  you could hand it over the counter so someone  

could take a filthy ladle and fill up your jar. I mean, this is part of not having plastics. 

And then they totally missed  the computer revolution. 

This plays into Ronald Reagan  winning the military race. 

We're putting these chips and things  into our ballistic missiles and they  

can't do that. And that's a problem. Speaking of plastics, I didn't realize  

before preparing for this lecture the overwhelming  role that oil played in first explaining why the  

Soviet Union was able to sustain itself  for so long and then why it collapsed. 

By the late 50s, Soviet growth rates were already  starting to go down, especially compared to the  

postwar boom that America is experiencing. In '59, they discovered these massive  

oil fields in Siberia. And then from 1973 to 1985,  

I think, 80% of the Soviet Union's hard  currency earnings were just from oil. 

They use this because central planning can't  produce even grain, let alone advanced technology. 

They use this to import a bunch of stuff  to sustain the Red Army, to sustain the  

population, to subsidize Eastern Europe. And then of course, prices collapsed in 1985. 

Do you think that if the Siberian reserves weren't  found in the late 50s, that it's possible that the  

Soviet Union would have collapsed 30 years prior? I don't know, but they wouldn't have been able to  

do all the Africa program and things. It just would be too expensive. 

So certainly it would have been a reduced thing. It's also the gas reserves they got up in  

like the north central Soviet Union. I can't remember the places,  

but this is the gas that gets pumped to  Europe because that's the better place. 

They make those big investments and  it takes a while for them to pay off. 

That was a big deal because they needed help from  Western oil companies or whoever does the gas  

pipelines, compressors, whatever it is you need. There was a big to-do about that, about whether  

we should sell the stuff or whether we  shouldn't sell the stuff. The Europeans  

wanted to sell. We were trying not to.  This was going on under Reagan as well. 

But anyway, they had built a lot of it and  it was essential to their pocket change. 

But then when they got all the  pocket change, they never saved. 

Whatever the oil wealth was, they spent up to the  max. Doesn't it sound familiar? Governments, you  

have money, you spend it. Forget about rainy days. So after the Soviet Union collapses,  

there was a period when Putin was  still winning somewhat free elections. 

So if you look at why Russia's economy recovers  and why Putin was so popular in the 2000s,  

from 2000 to 2008, oil goes from  $10 a barrel to $140 a barrel. 

This goes to your point about how we give  credit or blame to political leaders for  

often what are just long-run macro trends. Well, what I didn't cover is that when the Soviet  

Union collapses, Soviet living standards, Russian  living standards, they implode and it's a mess for  

20 years. It is just unbelievably difficult.  Oh, and another piece of the brilliant Soviet  

management: in order to maintain control over  the empire, instead of building things all in one  

place, you build some plane parts here, some plane  parts there, some plane parts all over the empire. 

So when the empire goes, great, I've  got a quarter of a plane, and then  

where do I get the other parts? So all of that fell apart. 

When Putin suddenly has a lot of  money he starts spending it on people,  

because initially there's plenty of money. Russian standards of living do go up. 

So of course they like him, and they  give him credit for all of that. 

But then that runs its course, right? And then it's less good and then he's more  

excited about… Well, it's his mindset anyway. When you get more money,  

you want to get the empire back. And then Russians also like that, right? 

Speaking of the empire, Russia's  economy just had this terrible period  

after the collapse of the Soviet Union. A lot of the Eastern European satellites  

seem to recover in this gangbusters  way. Obviously, East Germany. But  

even Poland today is such a big success story. What's going wrong with the mainland itself that  

these other countries are able to  recover from communism much better? 

Well, they had always been much  more connected to Western Europe. 

Czechoslovakia before the war was a full-up highly  developed country absolutely tied to the West. 

Poland, I believe, Copernicus is  from a place like Poland, right? 

It's a center of the Enlightenment. But when I was using the George Bush Sr. archives,  

it's fascinating. So it's '88,  

'89 when the Soviet Union's imploding. There's a lot of correspondence between  

Eastern European, particularly Polish, leaders  coming to the Bush administration saying, "Hey,  

our banking system, we know it's a mess.  Our financial system's a mess. We know we  

need expertise to help us figure out what  our legal system is going to look like." 

And Bush is all over that. I'm sure he farmed them out  

to the private sector who would also be all  over that, like giving them free consulting. 

So as a result, you do have them really  taking advantage of this 20 years. 

At the same time when Bush would have loved  to have given some of the same advice… There  

were people like Jeffrey Sachs and  others who went to the Soviet Union,  

but it was not remotely the same thing. This is people throughout Polish society  

requesting this advice, not like  one guy with an office in Moscow. 

Basically, the Russians thought they knew  it all and they thought they understood. 

This is all the unknown unknowns, the things  you don't understand, your blind spots. 

Truly, economics is a blind spot for the Soviets. Because think about it, when the tsars ran the  

show, it's like a riff off the Mongol Empire. You take cuts from people's businesses,  

from trade that comes through. Then it's also about selling basic commodities. 

You're not thinking, under the tsars,  of Russia doing high-end manufacturing. 

I mean, I guess Fabergé and some jewelry if you  want to do that. But really that's not it. It  

doesn't have this commercial tradition, being tied  into this commercial tradition of Western Europe  

and all the sea routes for trade. Then when you get the communists,  

they aren't about that at all. So there's really a dearth of knowledge. 

Think about this country with all the  little kids selling lemonade, right? 

You see them on the streets. They're already  learning. The kids who are doing newspaper routes,  

they're already learning about buying  things, selling things at a very young age. 

We just take this knowledge for granted. It was just absent in the Soviet Union and  

not as much absent in Eastern Europe  that had been more connected in. 

Before we get to the period of Russian collapse,  let's go back to the end of the Soviet period. 

Gorbachev starts instituting these economic  reforms along with glasnost and perestroika. 

But what I find mysterious is that those economic  reforms not only fail to prevent the stagnation  

that the Soviet Union is experiencing,  but they in fact make things worse. 

You would think that reform, even if it's handled  badly, would have some sort of positive impact. 

If you do it badly, then it'll  have a smaller positive impact. 

But here it just causes this huge  hyperinflation, causes all these big problems. 

So why did reform have this backwards impact? There's so much that needs reforming there. 

But part of it, I think, is because he wanted to  do political reforms. That's what he understands.  

As a human being, that would be the thing that  he's very familiar with. Think about it. He's an  

A-list member of the Communist Party to be the guy  when they do generational change, he's the one. 

So he's obviously very astute at that  level, but the problem is economics. 

He's giving away political power before  he's fixed the economic problems. 

China's conclusion is there is no way  you're going to touch political power. 

They're going to hang onto that and then deal  with as much of the economics as they're going  

to deal with. That’s part of it. But part of it  is there's no tradition for all of these things. 

Then you go, "Well, how did Russia  get this way?" It's a very difficult  

address. Prior to the Industrial Revolution,  it's flat, neighbors all invade, and so you  

needed a big army in order to defeat them. A big army is going to want a war economy. 

Historically, you're going to  want to support a big land force. 

I mean this is my take. Others who are actually  

experts on these various periods of Russian  history can come up with something else. 

But I think you're funneling, you're  channeling your economics into that. 

Whereas you're looking at Europe,  particularly Britain, and it’s merchants. 

They have a big aristocracy who are not going to  dirty themselves with buying and selling stuff,  

but there are a tremendous number of very  rich merchants in Britain that are going  

to influence government laws and things,  which is not going to take place in Russia. 

Then what's nice about the Navy  for Britain is you send them away. 

They're not going to run a coup in the capital  because they're off on the ship somewhere. 

And there aren't that many of  them compared to a standing army. 

So I suspect, I can't prove this, that this leads  to different outcomes or contributes to them. 

One theory I heard that is complementary to your  theory is that Gorbachev is instituting reforms  

because he thinks there should be decentralization  and democratization, but he doesn't  

fundamentally believe in the market system. So he's delegating power to these quasi-firms. 

At the same time, he thinks the price system  is immoral, private property is immoral. 

So they can't intermediate between  themselves using real prices. 

So then how do these firms intermediate? Well,  

there's corruption. If you can't use actual  prices and property to figure out who gets what  

allocation of scarce resources, you just  backroom deal, which makes the problem worse. 

Well there's no legal system  and you need a legal system. 

Legal systems take a long time to develop. So you're telling the Soviet Union, "Okay,  

communism is down and now chop chop, we need  a new legal system." It's not going to happen. 

You were mentioning the problem that  Eastern European countries especially had,  

which is that they're going more and more  into debt because they're not able to  

produce globally competitive exports. They have this last-ditch effort that  

"We're going to solve our problems  with some technological miracle. 

We need to get even more over-leveraged. We'll get some Western machinery or technology,  

and then we'll be able to finally  produce something that the world wants." 

I'm curious up to what point  this was a plausible hope. 

Through the 80s and even till the  end of the 80s, they still believed  

that Czechoslovakia or East Germany or  something could catch up with West Europe? 

They're desperate. Think about  it. If you're a communist leader,  

how many other cards are there to play? You're looking, "Okay, this is the  

only card I got." And they're doing  

other things because of the social unrest. They want to import food and consumer products  

because they've been so neglected. Then there's another piece,  

which is VCRs, the videos. All of a sudden, those things came around. 

I remember being in the Soviet  Union, the academic year of 1988-89. 

One of my classmates had been an English  language tutor of this person in Moscow and  

set me up because that was the only  way to get a good meal once a week. 

For a meal, I would talk English for an hour. What that family wanted more than  

anything else was a VCR player. You could have hard currency and  

buy it at the diplomatic store. So I basically got them a VCR by  

going to the diplomatic thing with  my very limited foreign currency. 

I bought an overpriced VCR for them and got  all kinds of meals for the rest of the year. 

But it meant that they could all  of a sudden get Western movies. 

There are things in movies where there'll  be a picture of a fugitive running by  

the fruit section of the Berkeley Bowl. The Russians would gasp like, "Oh." It's  

unbelievable. I think that Raisa Gorbachev,  Gorbachev's wife, when she came and visited,  

she must have realized that a welfare mother on  food stamps had better buying power than she did  

by just being able to have access to Walmart. I think the elites, as they're traveling… I  

have no statistical data on this,  but as you travel, it's like I'm  

comparing me getting sour cream in a jar. That was the other thing, counting up all  

the things in a Soviet supermarket. The total was something like 77  

items total in this supermarket. I don't think that compares favorably  

to a candy rack as you leave a 7-Eleven. And when you went by the meat section,  

the smell just about knocked you out, rotten  meat. It was really disgusting. I got really  

good at making borscht. Go to the peasant market,  

pay hard currency for bones, because I couldn't  afford any meat, but I could afford the bones. 

Then I would buy… The Russians produce  really good sugar beets so I got beets. 

Then you're starting to get rotten apples over  the winter, but they at least come from Hungary. 

Russians didn't even produce apples  in those days, but Hungarians did. 

The Romanians provided the canned tomatoes,  and I could do a credible borscht. 

But you're talking about Moscow,  the center of everything. 

I remember buying potatoes at the market  and the rotten spots felt gelatinous. 

So you'd have to cut those out. And then you're wondering how many  

nutrients are in the rest of that potato. It was a really gross year. 

I remember going to the candy store and I  would buy caramel from Poland or somewhere. 

It was like a food item  because it was actually edible. 

At this point, I bet you were wondering  why you didn't write a biography of  

Napoleon so you could just visit Paris instead. My brother's comment is, "You're studying Russia  

and China, two countries in the breakdown lane." By the way, the point about the grocery stores  

having 74 items is interesting in two ways. One, central control works much better if you have  

a much smaller amount of items to optimize over. So if things are standardized,  

it can work much better. And second, to your point about GDP being  

hard to compare between the Soviets and the United  States, how do you compare a rotten tomato or a  

rotten potato to the Idaho ones that you can get? They would have compared it by pound. 

Exactly. Yeah. 

You said you were there in '88 and '89. So this is before the Berlin Wall has fallen. 

I was watching the Tiananmen  demonstrations on Soviet TV. 

The only reason you got that TV coverage  is because Gorbachev was in Beijing. 

So all the press was there. That's why you have the coverage. 

And they stayed on because the students were  demonstrating and the Chinese closed society  

wasn’t aware of the power of television. Guys, they're going to film you doing all  

of this stuff and they will get the film out. In '88, was the mood… Obviously things are going  

terribly, but did people realize that they're  only two years away, or three years away from the  

complete dissolution of the Soviet Union? No. Maybe the end of the Soviet Union,  

but there was such optimism of thinking we're  finally going to be a full-up democratic country. 

It's going to be wonderful, with no sense of the  work schedules that go into a capitalist economy. 

To create the wealth in this country, a lot of  people are working far more than 40 hours a week,  

particularly as they're getting  started, working enormous hours. 

That was not something that  was in most people's minds. 

Sure, the kids who became the ballerinas in  the Bolshoi are working long hours to do that. 

But as an economy as a whole, they didn't  understand the source of wealth and had no  

inkling of all the things that are missing,  not least of which is that no one's got the  

right education. Great, you got Marx  memorized. That does you zero good. 

So around this time is when people are finally  learning about what actually happened during the  

Stalinist period. Oh, yeah. 

So people are optimistic that  we can have a changing of the  

guard and maybe things will improve. But at the same time, they're learning  

about how terrible their history actually was. Between these two things… Also at some point  

they must realize through the 90s that  things actually aren't improving. In fact,  

they're getting worse. So what is the  inflection point at which the mood is just... 

I don't know, because I wasn't living there. I was thinking that there would be impending  

problems as a Chicken Little American. The sky is falling, the sky is falling. 

Americans always think disaster is coming. I sort of fit in that crowd. 

But I think there was a lot of  optimism and exuberance thinking,  

"We have the freedom to really understand  our history and what's happening." 

This is for educated people, people with college  degrees in Moscow and St. Petersburg. Now what's  

going on in the rest of the country is  undoubtedly a different story because  

as bad as living in Moscow was, living in the  countryside was going back in time far further. 

So those people weren't living well at all. And it's going to get really bad for them. 

Okay, so people are learning about  these things for the first time. 

Is the sense that they kind of suspected? I  mean, people have family. They must have known,  

"My uncle was off in this little mining  town that he was forced to go to for a  

decade right after World War II." Were they totally shocked or was  

there some sense that things were pretty bad  and now we're just learning the extent of it? 

I think there was an understanding it was  terrible, but I think there's this exuberance  

of thinking it's going to get much better. Then the disappointment is equally extreme. 

And then there was this feeling that the West  owes us because you're all really rich and  

you now owe us to fix everything. The counterargument to that is,  

"No you are an enormous migraine. You set back all of these countries  

across the globe in time with this nonfunctioning  communist model that you peddled around there. 

And now you want extra aid." The problem was that we wanted to do some of the  

aid, but they're not going to be receptive to it. That was another conclusion with the Bush  

administration, that if we dumped a lot of money  in it, it would just go straight into corruption. 

You need a legal structure in order to place  money, and they just plain didn't have it. 

That was another thing that was  worrying the Bush administration. 

There's nowhere to put the money. Speaking of these different countries that  

the Soviets and the United States were competing  for during the Cold War, you had this presentation  

where you say Reagan alone didn't do this. But I wonder if the broader lesson is that  

nothing any US president did in terms of  foreign policy… That was all a sideshow,  

this tête-à-tête competition for different Third  World countries: "We're going to get Brazil, we're  

going to get Vietnam, we're going to get Algeria." That just seems much less significant than the  

fact that liberal capitalism was more  appealing and out-produced communism. 

So even if some country, even if Brazil  goes communist, this is not going to change  

the fundamental playing board here. If you do not protect the liberal economies  

of Europe, you're not going to have anywhere to  play the liberal economic game, and also Japan. 

One of the reasons you feel that liberal  economies work is you've got economic  

miracles going on in Japan, Korea, Taiwan,  Singapore, and Hong Kong back in the day. 

So if you abandon those places... Also in the Cold War, there was a  

tremendous amount of economic growth across  the world, particularly in the Third World.  

Why? Because in the past, if there's a civil  war, whoever's losing either comes to us or  

comes to the Russians and says, "Help us." So whoever it is helps, and then the other  

side feels obliged to help, and then you're  just destroying wealth ever more rapidly. 

The Cold War was anything  but cold in the Third World. 

Tens of millions of people  died in these conflicts. 

So when you end that, all of a sudden  they can start compounding growth. 

So there is a problem with not  countering someone who's going  

to impose communist systems all over the place. 

Communist systems are really  good at putting dictators into  

power in a civil war situation. It's very  effective. That's how Mao gets into power. 

The problem is, then they win  the civil war, they're in power,  

they annihilate the opposition, but then  it produces compounding poverty thereafter. 

So there is this conundrum, and I  genuinely don't know the answer to this. 

In order to beat off these communist factions  and guerrillas, we often through the Cold War  

had to support other dictators. Probably in many cases they were  

better than the communist alternative. It's just very hard to beat Pol Pot  

and Mao in terms of how terrible you can be. But obviously this was in its own way problematic. 

Even if we didn't have to support  dictators, we had to alienate countries. 

You had this previous lecture that you gave  on the Indo-Pakistani chapter in history where  

we had to alienate India in order to fend off  against the Soviet Union in this little episode. 

I don't know what the solution to this is. If you think that this theater mattered less, then  

you could say we should have just kept our hands  clean of these different Third World countries. 

But to your point, if you want to be able to  show that these countries are going to experience  

growth under capitalism, then you want them  to not be under the subjugation of communists. 

But then you have to support  sometimes objectionable regimes. 

I think you had a more optimistic  generation, ironically, optimistic. 

The people who had survived World  War II, there was a real generosity. 

American servicemen and women were welcomed  all over Europe and they were adored in Europe. 

They came back and they were a very  generous group of people. Others felt  

generous to them. That's when the GI Bill  just passed saying, "You've saved everyone. 

Therefore we're going to give you college  educations, extend home loans to you." 

Not to African Americans, they were  excluded from this, which is a problem. But  

white Americans weren’t. It led to massive  economic growth where people who'd never had  

a college education in their family, they did. All of a sudden, instead of having really  

hard manual labor, this real optimism. And then it extended to foreign countries. 

This is when this country was tremendously  generous to others, and it worked very well for  

us. Think about the Marshall Plan. It looks really  generous putting all this money into Europe. 

We made a fortune off of it, as did Europe. If you're smart, you're looking for win-wins  

of things where you both benefit because  that'll incentivize the other side to join  

in. This is basic strategy. This is one  of the reasons I've got problems with the  

United States' turn to zero-sum approaches where  "I'm going to get everything, you get nothing. 

Then I look so smart when we do the clickbait on  this moment where I get everything and you get  

nothing." It's much smarter. The other piece is  that a lot of things don't pay off immediately. 

George Bush is not reelected president. He  absolutely deserved to be. Because what he did,  

the payoff was huge, ending  the Cold War on Western terms. 

But it doesn't pay off in  time for the next election. 

I think this is where Americans miss it. You're looking at what someone does on  

a given day when the real implications  are what's going to happen in a decade. 

Like on tax policy, if we keep racking up our  debt, it may get us out of the corner today,  

but is it going to back us into a corner later on? This is where Americans need to think a little  

harder about long-term implications of things. I thought when you pointed out that it would  

cost 60 billion Deutschmarks for West Germany  to pay Gorbachev to let East Germany join West  

Germany. That's a lot of money. But if you  think about decades and decades of future  

growth, it's a huge bargain. It's a mistake to think about  

how expensive things seem at the moment. It's another huge country that you've turned. 

There's a statement that politicians  think of the next election,  

statesmen think of the next generation. George Bush and Helmut Kohl are statesmen. 

They're thinking of the next generation. The group that fought World War II, many of  

US and allied leaders, were statespeople. They're thinking of the next generation. 

Or if you're thinking of where I've  got Mitterrand, who's negotiating the  

Maastricht Treaty about the European Union,  that is statesperson's work of what's the  

next generation. It's important. We need more  statesmen, statespeople, political leaders. 

To try out a different thesis on you, through this  period the Soviet Union is also trying to buy off  

other countries, especially when  it thinks its economy can grow. 

Especially when oil, after the 1973  oil crisis, oil prices just skyrocket. 

This is why some Soviet citizens  remember the Brezhnev era favorably. 

Oil made it possible for the Soviets to not  only import stuff, but through the Brezhnev  

period there's actually a net export of  resources to Eastern European satellites  

rather than the other way around. That's probably their data. I get it,  

their oil is really subsidized, but  everything in the Soviet Union that was  

worth having came from somewhere else. The problem is how do you measure it? 

They're just going to measure  by weight or something else. 

It doesn't really capture what they're getting. The larger question being that, it's not like  

the Soviet Union didn't think of  doing things like the Marshall Plan. 

Obviously nothing to that extent, but this idea  that you can win people's favors by providing  

them military aid, providing them foreign aid. They just didn't have the resources to do it to  

the extent that the US could. That's true,  

but there's a real coercive piece too. If you mess with them, it'll be really ugly. 

Here's what I don't understand about  the arms buildup during the Cold War. 

The Soviet Union is spending 2% of their GDP  just on nuclear weapons alone at its peak. 

Arms control advocates will make this quip,  which is that we've already got enough weapons to  

destroy the world many times over. Why do we need  more? But that is sort of an interesting question. 

What was the point of spending so much  of GDP on the marginal nuclear weapon  

or marginal weapon system? I don't know the answer,  

but you read the plans about these things  and you wonder what people are thinking. 

We were trying to develop tactical nukes. There was only a little trick with that. 

Whoever deployed it would be within  the blast range of the tactical nuke. 

You're going, "Who develops a weapon like that?"  Apparently we did. Luckily we didn't deploy it.  

I don't know the answer of why we  had such massive redundancy in these  

nuclear weapons, why the arsenals were so massive. I don't know the story on how you maintain these  

things and how long they last. It doesn't make much more  

sense to me than it does to you. Another question. Sino-Soviet split,  

this huge diplomatic coup. The Soviets had to put a million  

soldiers on the Siberian front against China. They had to spend 2% of GDP just stationing and  

garrisoning this area, which is obviously a lot. That's often what many countries spend on defense  

as a whole, let alone just along one front. At the same time, 2% GDP, well if they just  

had one or two more years of extra  economic growth or faster growth,  

that could make up for this huge diplomatic coup. Again this goes back to the point of, if some  

domestic policy just caused slightly higher  economic growth rates, that would make up for the  

biggest diplomatic coup of the entire Cold War. It goes back to economy first, diplomacy second. 

Firstly, I have real problems with the statistics. I got a sample size of one, moi. I remember living  

in Moscow. It was so backwards.  It's just breathtakingly backwards  

in just about every way imaginable. They got a big fancy subway system that looks  

remarkably retro, and at least it works. But the consumer goods were so awful,  

the quality was so bad. You look at the buildings themselves. 

I get it, they make nuclear weapons. Do they  make anything else? Their cars were a joke,  

their Ladas or whatever they were. It's just  thing after thing. So you're looking at all  

their stats because that's what they  are telling you, that we're so great. 

It really is an Emperor Wears No Clothes  moment that finally the little kid goes,  

"Oh, you're actually naked." I can give you an example. 

These acquaintances in Moscow were  talking about hospitals outside of Moscow  

that some of them didn't have running water. How do you have a hospital without running water? 

I don't even know how that's even conceivable. Or when their kid had put her hand through a  

glass door or something. They wanted to get her  

stitched up because she's bleeding. She’s not going to die, but she's  

probably bleeding all over the place. They bring her to one place and, oh,  

they got no thread to do the stitches. So then they have to go to another place. 

Who runs a country like this? Alright, you convinced me. BART  

is acceptable. I'll stick here. Subway's not  a big deal. I don't want to move to Moscow. 

Okay, while the Eastern European satellites  are trying to leave the Soviet Union, this has  

happened many times through the 20th century. Hungary in 1956, Czechoslovakia in '68,  

Poland through Solidarity. Every previous time there's a  

many-million-person-strong Red Army stationed  in Eastern Europe left over from World War II,  

which rolls in the tanks and prevents  these revolutions from taking place. 

So what happens in the late 80s and early 90s? The Red Army is still there. 

There's still millions of Red Army  soldiers. They just don't shoot. 

Generational change. The leaders  don't have the stomach for it anymore. 

I don't know how you'd feel about  sending tanks and going, "Oh,  

we're going to splatter all these people." I think for many Americans, that would not  

be the choice that they would make. So this ruthless generation is gone. 

Another piece is that Gorbachev had traveled  and I think he had some Czech friends. 

I can't remember all of his lists of friends. But they'd been horrified by Czechoslovakia in  

1968 as young people watching, as Russian  young people watching it and thinking,  

"It's just wrong. We shouldn't be doing this.  If communism is what it should be, this is not  

what should be happening." This is of their youth.  Gorbachev and his generation. It's not just him,  

he reflects a whole generation of communists. They're thinking, "There's got to be another  

way. This is just not right." So  he thinks he's got his other way. 

It's this exuberance of the reforms and  things that are happening in Russia. 

There's a tremendous feeling of energy. He's telling the Poles, "You get at it too. 

We're all going to do this thing." But it's all the expertise and things  

that he's missing, that he's unaware that  he's missing, as are all these other people,  

because how could they have it? They've been living in a command economy. 

This is what I wanted to ask you about. You had the de Tocqueville quote about  

how revolutions happen when governments start  to institute some kind of reform. Gorbachev  

is doing perestroika, glasnost. There's  the conservative reactionary parts of  

the Communist Party, which by the way is  a phrase I wouldn't expect to have said. 

But they're trying to resist this. So Gorbachev goes about dismantling the  

party secretariat and instead devolving power  down to the individual republics. We know what  

happens later. These republics are saying, "Look,  we want our own country now." But this raises a  

question. If you do inherit a brutal regime,  and now you say, "I want to do reforms." 

You know this dynamic that de Tocqueville pointed  out, which is that as soon as you start reforms,  

actually what tends to happen is that you lose  power, not that people consolidate it under you.  

What actually should you do? Because you're  like, "I want to improve people's lives." 

But as soon as you try to do that,  the whole thing's going to fall apart. 

This is so far above my  pay grade. I'm a professor.  

I have trouble justifying a B+ on a paper. I'm a believer in gradual reforms. Do it  

incrementally. For the Soviet Union, it  would be gradual legal reforms, work it  

through their Duma slowly, and do it that way. But seek out help from the European Union that  

has many, many experts that would  be overjoyed if Putin and friends  

would cease doing their number on Ukraine. Now the problem is you're going to get into  

reparations for the horrors they've inflicted. So that ship has sadly sailed for this generation. 

There's no nice ending for Russians.  It's too late. But you can look at  

Europe itself improving its institutions  and Ukraine improving its institutions. 

If you think about what forces you to  change, the existential threat on Ukraine,  

if they survive all this, this is forcing  them really to clean up their institutions. 

So it's happening rapidly there, but we don't  know the end of that story, how it ends. 

I do think these are interesting lessons here of  whenever we look at a country from the outside,  

we have this thing of, "Well, just reform  everything and just fix your economy." 

Whenever we understand the  system better… For example,  

in the United States, healthcare is 20% of GDP. This idea that Trump or Obama or Biden, whoever,  

could just come in and be like,  "Well, I'll just fix healthcare." 

We recognize that this is a wildly  implausible thing to happen. 

But then we have this expectation that in Russia,  Gorbachev or Yeltsin could have just been like,  

"100% of my economy is messed up,  and I'm just going to fix it." 

American hubris in action. Think about our  country. We have one of the most crazy tax codes  

on the planet, and neither party can touch it. Because you touch any part of it,  

someone negotiated that wording exactly. Yet think of how much of our economy is  

taken up by the overhead of all the  tax accountants, all the misdirected  

cash in order to take advantage of something  that's simply an invention of the tax system. 

There was years ago when there was talk of doing a  flat tax, "Wouldn't that be much more efficient?" 

You can imagine what accountants thought  about that one. That idea has totally died.  

Talk about inefficiency. Then we realize  we have budgetary problems in this country. 

This would seem to be something that ought to  be on people's radar, clean up the tax code. 

But isn't it precisely that many people  don't want the radar on the tax code? 

That's why we're wondering who can get in and out  of girls' or boys' bathrooms, instead of looking  

at the tax code, which should be the real thing. I think there should be big  

deductions for podcasts. It should count for research and development. 

Well, Dwarkesh, you're almost at that stage. You need to add a lobbyist in DC. 

We'll work on it. There's a very interesting  book about North Korea, I forget the title,  

where the author is pointing out that  North Korea could not even start doing  

reforms today because as soon as there was some  sort of information from the outside world that  

North Koreans could see—which would be part of  any reform—they would immediately realize that  

everything the government has told them is false. South Korea is enormously wealthier and they  

have this terrible standard of living. Obviously, this is the same experience  

that Eastern Europeans had. Literally in many cases, you had a  

country that was bisected in half and  the other half is living so much richer. 

In those situations, I guess this goes back to  the question of, "Well, today in North Korea,  

how would it even kick off if Kim  Jong-un just had a change of heart  

or if somebody else came into power?" They're probably just trapped in this to  

the extent that they want to keep power. Oh, he's trapped because he's a dead boy  

if he tries to take a go at retirement. In Asia—I don't know exactly all of the  

parts of Asia where this applies to,  it's some parts—there's a thought that  

things last for three generations and then  it's over. So he's the third generation.  

Whether this is true or not doesn't matter. If you believe it's true, it will become a  

self-fulfilling prophecy. So I'll be interested.  I probably won't live to see it, you in the  

room will, what happens to the Kim family,  whether it makes it to generation four or not. 

But by their own belief system, in  theory, they shouldn't. So who knows? 

One more question about oil. Based on my big expertise on oil, zero. Okay. 

During this period between '73 and '85,  when they had these huge oil revenues,  

presumably there was some amount of exuberance. But did the government recognize and realize that  

they're super fragile to the price of oil  and if that collapses, they need some sort  

of contingency plan, some rainy day fund? You must notice that, "Oh, this is half my  

budget, and all of my foreign currency  is coming from oil, and this is a very  

volatile commodity." Nobody noticed that? Yeah, well, it's interesting. I was reading  

this long chronology that was put  together sort of like early Putin. 

So before they really shut  down all the information. 

It was just a chronology of  the Cold War, big fat book. 

Just like someone like me  to read a book like that. 

So I'm going date after  date after date after date. 

It's written by people who are really  angry about how the Cold War turned out. 

One of the takeaways from the compilers  of this thing is they kept criticizing. 

They showed how much for every year  Russia was making in oil revenues.  

It was huge. But in their analysis it  was, "And they saved none of it", right? 

There was no sense of investing in something.  There's something called consumption. There's  

another thing called investment. Going around and  buying a bunch of Western grain is consumption. 

There's none of this being put in  anything that's going to yield anything. 

So that was a big criticism  from the authors of this book. 

To the question you're asking, "No, they  just milked it while they were there." 

Final question, this is not so  much a question as an observation. 

I don't know if you have a reaction to this. 

Just look at Russia's history through  the 20th century: tsarism, communism,  

collectivization, to more than 10% of  your population dying from World War II,  

then back to Stalin, and then more communism, and  then the economy collapses again, and then Putin. 

Especially if you look at the satellite states,  they had all of this happen to them and worse  

because now they're getting invaded. Whereas you  have other countries. Japan and Germany also had  

tragic histories, but then they recovered. Maybe it’s just the tragedy of Russia. 

Yeah, you're lucky you're not Russian. Yeah, exactly. 

No, it is tragic. It is tragic. It started out as  a difficult address, pre-Industrial Revolution,  

that required certain things to survive. They were more ruthless than their neighbors.  

They did survive. I mean, in a previous  lecture, I discussed how they wiped out  

entire princely states and Khanates  and things, they just wiped them out. 

Then you're using their elites  because it's a rough neighborhood. 

The problem is if you aren't on the winning side,  you're going to be on the losing side, right? 

But since the Industrial Revolution, where you  can do compounded economic growth that comes  

from commerce and trade and industry and things,  that's the real way to get powerful because power  

becomes a function of your wealth. That involves having legal systems,  

institutions, and stability. Russia has found it very difficult  

getting with that program. It has to do with, I think,  

this very difficult historical legacy of who  rises to power, and also all the missing things. 

They didn't have the Renaissance, they didn't have  the Reformation, these fundamental movements that  

were very influential in the West. So there's a lot of negative space  

of things that didn't happen. There's all the awful stuff that  

you saw that did happen, but then they're  missing things. So it's very difficult.  

Then people like Putin can set the clock way  back because he's killed so many Ukrainians. 

What he's done will take a generation  at minimum to get to anywhere where  

people are going to be thinking about…  People will be talking about reparations  

from Russia for quite a while and they're  poor, they're not going to want to do that. 

I should have thought to end on  a more optimistic note, but... 

Well, history's ended, okay? Well, you've outlined the ways in which  

countries can chart a better course for themselves  and that's where the optimism can come from. 

Actually, I've told a story about the last Cold  War that stayed cold in the industrialized world,  

which was a good thing, because  it could have been nuclear. 

It was tragic in many other parts  of the world, but at least it stayed  

cold in the industrialized part. There was a strategy that a very  

thoughtful generation of people, not just  in the United States but all over the West,  

put together to allow for a non-nuclear landing  for the Soviet Union when it fell apart. 

From this, you can derive some of the  strategies that worked for ending it that way. 

These are the kind of strategies  that we're going to have to use  

in order to navigate the second Cold War. The other piece about the Cold War is the Soviet  

Union living miserable lives of their own making. But Americans were actually having a good time. 

They paid taxes, they had to  pay for all the nuclear weapons. 

But as I recall, people are running  around in Disneyland, they're doing  

their European trips, they're buying houses. So actually Americans, people in Western Europe,  

were living fulfilling lives while they're  waiting out for others to get with the program. 

If we're going to make it through this second  one, we need to start cooperating with our allies,  

building institutions, and improving laws. Don't just burn down the house. 

We will get through this one too, and we will  live fulfilling lives while we're waiting for  

Putin to come up with something different or  Xi Jinping to come up with something different. 

But if we blow through our good hand of cards... You interview all kinds of people  

at the cutting edge of technology. If we get rid of all of our university funding,  

we aren't going to have the intellectual  capital on which those businesses are based. 

If we're going to dump all our allies for  unknown reasons and just alienate them so  

they organize without us… If we're going to just  throw away entire institutions without thinking  

very carefully about what we're doing… We become  a cooperative adversary and we will be the bozo  

putting a plastic bag on our own head. I look at the rhymes here. 

The Soviets had this ancient leadership who just  couldn't get their act together and they're living  

off of debt instead of thinking creatively. The rhymes are awful, but we don't  

have to do it that way. So it is more optimistic,  

but we need to get our house in order. That's why I'm doing these lectures. 

They're lectures in strategy to give  you tools on how to come to your own  

decisions. That's your business, not mine. That is an excellent note to close on. 

Sarah, I want to thank you so much  for doing this lecture series with us. 

It has been a true education across these six  lectures, everything from individual wars to the  

strategic and tactical decisions which explain  them, to the broader lessons for today's world. 

I do interview lots of different  kinds of people, but from a sort  

of view-per-minute average-adjusted  basis, I host a Sarah Paine podcast. 

If you just sort by popular,  Sarah Paine comes up a lot. 

But you've got it backwards. I was  an unknown academic and then you  

cold-called me about doing an interview. I said,  

"Sure." Dwarkesh, as a result of all this,  I'm getting emails from all over the place. 

So let's talk about who's grateful to whom. Anyway, I'm devoted to your generation.  

Thank you for having me. Thank you for coming and  being such a warm audience. Really appreciate it.