Ronald Reagan
Legacy for Europe

July 1, 2003

Transcript prepared from a tape recording

8:40 a.m.	Registration
9:00	Welcome:	Radek Sikorski, executive director, NAI; resident fellow, AEI
		Andrzej Kondratowicz, board member, Adam Smith Research Centre in Warsaw
9:10	Introductory remarks:	Leszek Balcerowicz, governor, Central Bank of Poland
9:30	Victory over the Evil Empire
	Speakers:	Christopher R. Hill, U.S. ambassador to Poland
		Mart Laar, MP, Estonian Parliament; former prime minister
		John Lenczowski, director, Institute of World Politics
		Peter J. Wallison, resident fellow, AEI
		Piotr Wierzbicki, editor in chief, Gazeta Polska
	Moderator:	Radek Sikorski, NAI
10:50	Coffee break
11:00	The Twenty Years’ Boom—What Are the Lessons for Europe?
	Speakers:	James K. Glassman, resident fellow, AEI; columnist, Washington Post
		Robert Gwiazdowski, chairman of the Tax Commission, Adam Smith Research Centre
	Moderator:	Jacek Rostowski, professor, Central European University
12:15 p.m.	Introduction of Newt Gingrich:	Piotr Gabryel, deputy editor in chief, Wprost
12:20	Keynote speech:	Newt Gingrich, senior fellow, AEI; former Speaker of the U.S. House of Representatives
1:00	Wprost luncheon
2:30	Media and the Politics of Success
	Speakers:	Mark Burson, executive director, Ronald Reagan Presidential Library
		Jaroslaw Sellin, member of Poland’s National Council for Radio and Television
		Steven F. Hayward, F.K., Weyerhaeuser Fellow, AEI
		John Fund, columnist, Wall Street Journal
	Moderator:	Jerzy Marek Nowakowski, columnist for Wprost; former under secretary of state in Poland’s Chancellery of the Prime Minister
4:00	Rzeczpospolita Essay Competition Awards
4:30	Conference adjourns
8:00	Dinner
8:30	Introduction of Lech Kaczyński:	Radek Sikorski, NAI
8:40	Dinner speech:	Lech Kaczyński, mayor of Warsaw; former minister of justice of Poland

Proceedings:

MR. SIKORSKI [Interpreted]: Good morning to you, ladies and gentlemen. My name is Radek Sikorski. I'm Executive Director of the New Atlantic Initiative at the American Enterprise Institute in Washington, D.C.

The New Atlantic Initiative was established in 1996 at a Congress in Prague, Czech Republic. The first primary objective was to expand the North Atlantic Treaty and introduce Russia and new emerging democracies into the alliance. Owing to our efforts, the process has been successful with Poland in the NATO in a while and the European Union.

Today, however, we are faced with a much more serious problem. It is the disconcert in the North Atlantic alliance, but we are of the opinion that what binds us together is more important than what divides us.

We have gathered today to honor, to pay respect to a great man, to Ronald Reagan, and to think about the way he achieved freedom for the world, and especially for Poland. Amongst various anecdotes about Ronald Reagan, I had one that is my personal favorite as a memory, back in 1983, where Vladimir Bukovsky, at that time still a prisoner of a gulag. Somehow the prisoners in the camp heard about the notion of evil empire, and it turned out that once the evil was named, it turned out for the benefit of the camp prisoners, who at that moment started to be treated well.

Let me welcome Newt Gingrich, the former Chairman of the House of Representatives and the author of "The Revolution of the 1990s." Let me also welcome the Chairman of the Polish National Bank, Leszek Balcerowicz. Let me welcome Prime Minister Laar. Let me also welcome the representatives of the Ronald Reagan Library who came to us from California.

I'm very pleased that it is Warsaw which hosts now the first Reagan conference in Europe.

Let me turn the rostrum over to the representative of our collaborative institution, the Adam Smith Institute of Poland, and I officially declare the conference open.

Thank you very much.

[Applause.]

MR. KONDRATOWICZ: Let me just add a few words to what Radek Sikorski just said, but a few words about the Adam Smith as co-organizer. We are an independent, nonpartisan, nongovernment think tank promoting the ideas of a free society and of a capitalist economy.

We do research. We educate. We educate the society and sometimes politicians as well, and we try to lobby for good legislative products. And we always try stirring important discussions, especially when the moment is right. And I think that the moment is right now in Poland. Poland needs new directions. Also, our overregulated Europe I think needs new directions. But to take new directions, a discussion of options, of new ideas and facts, is needed. But these ideas sometimes are not as new as we think. That's why we should look back to what Ronald Reagan was doing during his Presidency. Here and now, for Poland, and perhaps for Europe, this is extremely important.

Poland sometimes has been even accused in Europe of being a Trojan horse of American political interests. Wrong. It is not our intention, of course, to be one. But we cannot exclude that we would like to promote some economic ideas preached more often in the United States than in Europe, including those favored by Ronald Reagan.

Actually, the conference, as you see, has several dimensions: political, economic, and concerning the media, as reflected in our three consecutive sessions as shown in the agenda.

By profession, I am an economist, but I will not, of course, talk about things economic too long, especially that we are a little bit late, but just a little personal story.

In 1991, just weeks before the night martial law fell in Poland, I was sent for a one-year scholarship in the United States. I went to the States as an inexperienced person. I went to SUNY Stonybrook. This is State University of New York on Long Island.

Let's be frank. Stonybrook wasn't a place where conservative ideas or Ronald Reagan ideas would particularly thrive, or at least I hadn't noticed that. From that perspective, today's Europe sometimes is a little bit like Stonybrook 20 or 25 years ago.

There were things which actually stunned me there. For example, I have noticed that university, there was demand for courses in Marxist political economy. Apart from that, as we know, economic situation in the United States at that moment, before Ronald Reagan took office, was not actually very good.

But Ronald Reagan wasn't a popular fellow on the campus. When I bought myself as a student my first TV set in the United States, it turned out that Ronald Reagan wasn't a pet for most TV promoters as well and anchormen. They thought that his--they portrayed at least his ideas as very simple. They dubbed it, as you'll recall "Reaganomics."

Students, academics, intellectuals, the media were treating him like he was not one of their kind, actually with some sort of suspicion. So this was an environment I was immersed in.

I was looking at Ronald Reagan, his Reaganomics, and his laissez-faire ideas then, 25 years ago, with some suspicions and without understanding. It took me some time and some venturing into independent thinking to change my attitude and views. And I think this is the way many of us went from not understanding ideas of Ronald Reagan to fully appreciating, instead of just looking at certain labels which are attached to him, to judging him by his deeds and their effects, and this is what we now think of Ronald Reagan, I think.

And let me close by telling you a little story as well, namely that I remember in 1982 or '83 a well-known TV anchorman said about Ronald Reagan: "He's a man that in the morning he signs a bill that will cut down social benefits of several million U.S. citizens, and in the evening, with the same pen, he signs a $100,000 personal check and donates it to a charity, and he sees no contradiction between those two acts."

But stop to think for a while. There is no contradiction between those two facts. Now I know it. Now everybody knows. And I think this is how capitalism works, and I think that he was the best example of somebody who really felt how capitalism worked and showed us practical ways of preaching those ideas, which we will discuss, I hope, today with great success in the remaining time of our conference.

Thank you very much for your attention.

[Applause.]

MR. SIKORSKI [Interpreted]: Mr. Balcerowicz, over to you, sir.

MR. BALCEROWICZ: Ladies and gentlemen. President Reagan has changed the geopolitical shape of the world. Reagan’s policies undermined the foundations of communism and in this way they contributed to the liberation of the nations of Central and Eastern Europe and of the former Soviet Union.

Today, however, I would like to concentrate on President Reagan's and also Mrs. Thatcher’s vision of economic policy.

In order to appreciate their contributions to the development of economic policy, I shall commence by examining mainstream economics as it was until recently. I think there are two major characteristics worth mentioning.

First, institutions were disregarded. In other words, the supply side of the economy was ignored, and such issues as private property rights, limitations of the state activity were neglected.

Second, the emphasis was put on the discovery of new market failures. The usual assumption concerning this topic was that the state had an infinite capacity to correct such failures at no or very little cost. The issue of the public failure was ignored. This economic paradigm, which dominated mainstream economics until recently, provided a sort of theoretical justification for the policies of creeping statism.

However, I should mention that there were some exceptions to the above approach to the role of the state in some Western economies, but they were relegated to the margins. Ludwig von Mises, a great Austrian economist, who questioned the economic efficiency of socialist policies, Friedrich August von Hayek, and some other economists like Lord Peter T. Bauer in Great Britain as well as James Buchanan are among the economists who were opposed to the increased role of the state. But in the past and until very recently, they were not regarded as mainstream economists.

At that time the economic policies in most Western countries were those of creeping statism. First of all, increasing public spending was regarded as an important policy tool. It is worth recalling that at the turn of the 19th and 20th century, the public spending-to-GDP ratio in the Western economies stood at around 10 percent. It is estimated that an amount of 8 to 11 percent of GDP for the United States would suffice to finance the core functions of the state. Nowadays, in most Western countries, the United States included, public spending exceeds 30 percent of GDP.

In order to finance such overextended state activities, it has been necessary to raise the tax-to-GDP ratio. Therefore, many countries imposed very high marginal personal income taxes, up to 90 percent until recently, and very complicated tax regulations of various types. Additionally, some countries (mainly Western European countries) justified nationalization by the doctrine of commanding heights. What is meant here is that, according to this doctrine, sectors of the economy regarded as strategic had to be state-owned.

From a historical perspective, after the Second World War the negative impact of creeping statism was mitigated by a few positive forces for some time. These forces included primarily the post-war boom. There was also a favourable demographic structure of societies, which has since changed. Successive rounds of trade liberalization contributed to economic prosperity, as well. And finally the world enjoyed a stable international monetary system – the Bretton-Woods system, which later collapsed. So with the passage of time, the negative impact of creeping statism started to dominate the above positive forces, some of which were transient in nature.

Let me point out that the damage was done not only to Western economies. Even greater damage was done to the economies of the poor countries, because the dominating paradigm in development economics models until recently was that state intervention was successful, while markets were bad for the economic growth. This was the Marxist legacy. And only recently has this line of thought changed.

So we have to assess President Reagan's and Mrs. Thatcher’s economic policies against this background that I have just outlined. Basically, I reckon their policies marked a reverse towards the classical truths, those of Adam Smith. In no way does this diminish their personal contribution, because they fought the forces of conventional wisdom. In the case of President Reagan, this meant, inter alia, comprehensive tax reform. And it is my understanding that there were not a lot of people in the United States before he had launched those reforms, who believed that the reforms would be a success. This is a proof that one has to target major and challenging goals, and if one moves with the required conviction and determination, then one can succeed.

Thus, as I have just mentioned, the Reagan administration managed to streamline the tax system. I recall that there were 14 personal income tax rates ranging from 11 to 50 percent. They were reduced to just two rates of 15 and 28 percent in 1986.

There was also a reduction in spending. And in 1984, the Deficit Reduction Act was passed. Let me state here, that in my opinion fiscal constraints upon the state are crucial to long-term economic growth. This is even more true in the case of immature democracies. One can very easily find many examples of countries which suffered, because of a lack of fiscal discipline, while I can find no single country which has suffered in the long run from excessive fiscal discipline. So the conclusion is governments must be constrained. In this way, we defend individual freedoms.

Moreover, the economic policies of President Reagan and Prime Minister Thatcher involved a wave of deregulation. Prime Minister Thatcher implemented an efficient privatisation. This implied a change of the paradigm concerning the state’s involvement in the economy. For the purpose of comparison I would like to remind you that in the very same period of the early 1980s France still pursued the policy of nationalization. So Mrs. Thatcher paved the way for a wave of privatisation in the developed Western economies. And since her times it has become an established rule that one should not nationalize, but privatise in order to improve the economy’s efficiency. What I have just described took place only some 20 years ago, which is not such a long time back. These policies involved curbing inflation, lowering taxation, streamlining social expenditures, and reducing the destructive power of the trade unions. Margaret Thatcher’s economic policies constituted a very important contribution to the development of the British economy.

While examining the outcomes of the policies described, it is obviously very difficult to discern between the impact of policies proper and the concurrent effects of other forces. However, I think that there is little doubt that these policies are the main factor behind the  success of the U.S. and British economies. One can note this while comparing the economic performance of these countries in the 1980s and 1990s to the previous periods and the relative performance of the U.K. and United States against the background of other developed countries. It was not a long time ago that United Kingdom was regarded as the laggard of Europe, and now it expands and boasts one of the lowest rates of unemployment in Europe. And this has been achieved mostly thanks to supply side reforms.

President Reagan and Prime Minister Thatcher have changed the paradigm in economic policy in the Western world, and they contributed to the new way of thinking in the transition economies. They reintroduced and empowered the classical and very important notion that a strictly limited state, which enables the free market to thrive, is the best framework for sustained economic prosperity, high work ethic, and democracy.

Nevertheless, I would venture to say that the forces of statism are never going to disappear for the simple reasons that there are always some people who see economic benefits in limiting other people's freedoms, especially their economic freedoms. They try to reduce competition by increasing regulation. They like taking other people's money, so they increase public spending. And there are some inborn intellectual advocates of statism, who distrust market forces and don’t recognize the potential of voluntary  cooperation.  These people see the state as the main force of the betterment. This is why the struggle for a limited state will never end. And this is why conferences like this one are very important.

Thank you very much.

[Applause.]

MR. SIKORSKI: Thank you very much.

[Interpreted] And these are really important words spoken by a man who introduced Reagan's and Mrs. Thatcher's ideas into Poland.

[In English] -- panelists, John Lenczowski, Ambassador Hill, Mart Laar, Piotr Wierzbicki, and Peter Wallison.

[Interpreted] There are earphones for those of you, ladies and gentlemen, who want to use simultaneous interpretation. But if you don't, I'm glad that we are bilingual in this room. It is an honor for me to run an easy topic today: Victory over the Evil Empire, by Ronald Reagan. I think here in this city, where 20 years ago no such conference could happen, there are not many people that must be persuaded about the role of this man with a view to the fact that we can meet today and discuss his legacy.

I would like to welcome our panelists, and their CVs are contained in the conference proceedings, and we will start from the right-hand end of the head table. May I just add that Mr. John Lenczowski, who had an important post in the Department of State and the National Security Council, is the son of Polish diplomats. So, John, the floor is yours.

MR. LENCZOWSKI: Thank you, Radek. I'd like to thank you and the organizers of this conference for choosing a most worthy subject. I'm honored to be here. It is really the first substantive visit that I and my family have been able to make to Poland. I've been here once before, but never really a good chance to get to know the country, and it's been a very exciting visit for me.

I would like to speak to you about what my understanding, having been President Reagan's adviser on Soviet affairs in the White House for four years, my understanding of his ideas and his strategy concerning the Soviet empire.

There are many theories about why the Soviet Union collapsed. Most of them are based on material categories. People say that it was the Reagan military build-up. They say that it was economic pressures, such as the lowering of oil prices. Some people say that it was the Strategic Defense Initiative which trumped the Soviet ICBM threat. Some others say that the Soviet system had its own internal weaknesses and was bound to collapse, anyway.

Well, all of these theories are partially correct. They all have their element of truth. But I do not believe any of them, any of the material theories, satisfactorily answer two questions. One is: How did any of these factors bring millions of people to demonstrate in the streets and to go on strike against the regime? And how did any of these factors, these material factors, cause the Communist Party ultimately to give up its hold on power?

As a participant in the policies of President Reagan, I'd like to present my own theory that reflects, I believe, a great deal of the President's own thinking.

First of all, there are, I believe, two proximate causes for the Soviet collapse. One is that the regime faced massive internal popular resistance, including street demonstrations, strikes, independence movements within each of the Soviet republics and national minority groups. And, secondly, the Communist Party lost its internal discipline and the ability or the will to use sufficient force to suppress the resistance and the independence movements.

Ultimately, these two proximate causes were precipitated by President Reagan's integrated strategy based on a sound understanding of the Cold War, the nature of the Soviet system, and particularly his appreciation of the importance of first principles.

How did all this happen? One of the main causes, of course, was the undermining of the internal security system of the Soviet state. This system included the total control of communications and information, the domestic propaganda instruments, the educational system, the jamming of foreign broadcasts, the hermetic sealing of the borders, control of the entire economy, including production, distribution, and job placement, the parasitism laws, the internal passport system, the KGB, its network of informants, and so on.

This system was designed to address the main threat to the regime, which was not from the United States; it was from the peoples within the Soviet empire themselves. This was the central fact of political life in the USSR, the regime's fear of its own people, and the fear of democracy itself. No one elected the Communist Party. It seized power over a fragile democratic provisional government. It lost the first elections to the constituent assembly. It shot the non-communist electoral victors. And by democratic standards, it was an illegitimate government, and it knew it.

So it had to prove its legitimacy some other way in order to maintain a psychological climate that was conducive to internal security. It had to show some rational, practical, or moral reason why it deserved to rule, and then maybe its subject people could accept its rule without protest. The Marxist-Leninist ideology, of course, was the main legitimizing vehicle. But after seven decades, Marxist reasoning failed to be persuasive because the system itself was failing.

So the system had a crisis of legitimacy that intensified as the system repeatedly failed to live up to its promises. Another function, of course, of the ideology was to provide the party with its aura of inevitability and invincibility that derived from the inexorable laws of history. Soviet foreign policy was designed to bolster this. As long as Moscow could secure more expansionist victories and communist takeovers and so long as none of these communist regimes ever fell from power, then maybe the worldwide victory of communism was inevitable after all. Our friend Vladimir Bukovsky once said that the main purpose of Soviet foreign policy was to send a message to the peoples of the Soviet empire: Attention, Soviet peoples, we, the CPSU, the Communist Party, can shoot down Korean airliners, invade Afghanistan, and send arms to the Nicaraguan communists right under the nose of Uncle Sam, and not even the greatest imperialist power in the world can resist us. So how can you people behind the Berlin Wall even contemplate resisting us?

The message of the party was the same as that of the invading aliens: Resistance is futile.

The ideology had another internal security function. It set the standard against which deviationism was measured. It was like the drum beating for soldiers marching, and anyone failing to march in step could easily be identified by the sergeant and disciplined appropriately.

The ideology set the standard of conformity in thought and speech, and everybody in the court had to say that the naked emperor was wearing beautiful clothes, and they all did so. They all repeated the official lies, all out of fear. They all had to say the emperor was legitimate, and so did foreign leaders.

It was Ronald Reagan who upset the apple cart. He was the little boy in the court who told the truth. He had the courage to do so in the face of massive criticism that his truth telling was recklessly provocative. He told the truth about Soviet behavior, that they would lie, that they would cheat, they would commit any crime to further the goals of communism. He said that they had a different morality than our own. He told the truth about Soviet actions in Poland, Afghanistan, Central America, and Africa, human rights violations, the military build-up, and the illegitimacy of the regime.

And by doing this, he revived diplomatic relations with the peoples of the Soviet empire, not the government. He reconnected with the people. He gave them hope. He showed them that resistance was possible and that real strength was not material but moral. This was the revival of public diplomacy, a jargon term that refers to having relations with and influencing foreign publics. And this is something which is a function that is of tertiary status in the U.S. foreign policy establishment, but not in Ronald Reagan's mind.

It was his revival of public diplomacy that I believe was the main instrument that helped spark the collapse of the U.S.S.R. by helping to embolden domestic resistance to the regime. The very act of telling the truth was a sign that an American President for once was capable of renouncing self-censorship, that he was capable of moral resistance, and that it means that the Soviet peoples and the people of the satellite countries could do the same themselves. The same was true, of course, with Pope John Paul II, who came here to Poland, and before crowds of millions repeated the words of Jesus, "Be not afraid." These words, amongst his others, inspired the people of this country to remember their heroic national legacy and its relationship to their religious faith. They were words that galvanized the Solidarity movement and helped it become the mass movement of workers against the worker state. It was the movement that became a model for popular resistance movements elsewhere in the Soviet empire.

One of the most important elements of the Reagan strategy was the bolstering of our international broadcasts--the Voice of America, Radio Free Europe, Radio Liberty. These provided the only unfiltered information that we could send to audiences in the Soviet empire. They provided alternative ideas. They provided the true history of these captive nations. They even provided religious programming. They combatted the regime's attempts to atomize society, to isolate each individual from others by creating a climate where no one could trust one another. Secret listeners could now establish relations of trust with other fellow listeners.

The radios, in our opinion, were one of the greatest threats to Soviet rule, which is why the regime jammed them so intensively and attempted constantly to infiltrate them with KGB provocateurs. The radios were an expression of American solidarity with the people, and they were decisive, I believe, in emboldening resistance.

President Reagan showed that resistance was possible in other ways. In the face of massive Soviet-led disarmament propaganda in the West, he made the case for the military build-up. This, of course, was made possible by his adoption of the Copernican revolution in economic affairs, paying attention to the supply side of the economy and the incentives to work, to save, to invest, to take entrepreneurial risks. And it was this economic revival that enabled us to move the guns versus--away from the guns-versus-butter debate where everybody is fighting over how to slice up a stagnant or shrinking economic pie to creating a growing economic pie where we would be a rich enough of a country to afford all of our needs.

The President also sent aid to the Solidarity movement. He sent aid to the Nicaraguan resistance, the Afghan mujahedin, and other resistance movements in Southern Africa. This was the so-called Reagan doctrine. His rescue mission in Grenada toppled the first communist regime to be toppled in history. And then, of course, he launched what we called in our cable traffic "the Western political offensive," which became the Democracy Initiative. He launched the National Endowment for Democracy after his speech in the British Parliament, giving America the first overt capability to support democratic forces around the world, a capability which previously had been covert and which risked getting politically stained by being associated with secret intelligence activities.

All of these policies were completely in conformity with the spirit of the resistance movements within the Soviet empire. While some of our elites tried to prohibit aid to the anti-communist forces in Central America, the Solidarity movement was stealing Soviet arms from Soviet munitions depots in Poland, putting them on ships to the ports, in the port of Gdynia, shipping them to the freedom fighters of the Nicaraguan resistance. The Poles knew that if resistance could succeed in Central America, the people in the inner empire could regain their courage.

Altogether, President Reagan fought communism not just with anti-communism but with a positive message of hope, of liberty, of democracy, of moral resistance to the official lie, as well as the tangible material help. Only with this moral political dimension could the various strategies of economic pressure ultimately be effective, and we should mention them. They included the lowering of world oil prices by increasing Saudi oil production. They included the denial of vital technologies to the Soviet military-industrial complex. They included the sabotage of technologies that the Soviets were acquiring, that we'd permitted them to acquire, even through some of their own secret intelligence channels.

This aggravated the economic crisis in the Soviet system, which we should not misunderstand to be a crisis of consumer economy. It was a crisis of the military-industrial economy. But, of course, there was the continuing crisis of the consumer economy that derived from the very nature of the Soviet system, a system contrary to human nature, and as we all know, the workers used to say here, "They pretend to pay us and we pretend to work."

And so this is how the system worked here, as we understood it. The party would try to cram civil society into a mold into which it did not fit. There were periods of collectivism and enforced conformity. Human nature would rebel. Workers would cease working. The productive capacity of the economy would collapse, and then the party would have to loosen up. There would be a new economic policy in the 1920s, other periods of thaw, but when the parasite has sucked so much blood that its host may die, the alert parasite lets up and permits the host to resuscitate himself.

But there were limits to these periods of thaw, to these let-ups, such as the market reforms of the 1920s. Civil society threatens to become too powerful. Too much decentralization of economic decisionmaking threatened to bring about a decentralization of political decisionmaking. And so the threat to the party's power from civil society during these periods of thaw was so great that the party always had to crack down again. But by the 1980s, neither freeze nor thaw would work. The party was squeezed on both sides. And although the consumer economy was always a failure, the real problem was the lack of competitiveness of the military economy, and in order to rescue it, Gorbachev tried Stalin-style labor discipline. He tried the anti-alcohol campaign, exhortations for more production, ideological purification of the party. He tried the anti-corruption campaign where he arrested and prosecuted over 200,000 members of his own party and managerial elite. And none of it worked.

Meanwhile, he was losing all the popular support he might have had. The people hated him. And the intelligentsia concluded that socialism was a failure and ultimately illegitimate. To attempt to gain the intelligentsia's support and as part of his effort to purge the party of its corrupt elements, he launched the glasnost campaign, which, in fact, started out as a vehicle to encourage people tattling on corrupt middle managers. But that got out of control.

The public and the intelligentsia seized the opportunity for greater free speech, but Gorbachev, whose goons repeatedly harassed, beat, and arrested the burgeoning crop of dissident writers, could not do what he wanted to do, which was to throw these people into the gulag. He couldn't because he knew that the only salvation of his military economy lay in two things: the psychological disarmament of the West and the economic bailout it needed from the West. And so a crackdown on his people would undermine everything that he was trying to do to romance the West.

In any event, the people put their foot in the door. He couldn't slam it shut. It wasn't as if he tried. He invaded Lithuania and Baku and so on, but it was too little and too late, and ultimately we saw the final collapse.

Ronald Reagan never lost sight of the fundamental principles that were involved in this, which were fundamentally a philosophical and ideological struggle, and he articulated these principles at Moscow State University, the principles of freedom, that the self-evident truths of the Declaration of Independence and our freedoms are ultimately not the gift of the state but the gift of God. He understood the Cold War to be a war between those who believed in an objective, transcendent, universal moral order and those who believed in might makes right. And ultimately it was his courage to tell the truth that caused the biggest sea change in the modern history of the world.

Thank you very much for listening.

[Applause.]

MR. SIKORSKI: Ambassador Hill?

AMBASSADOR HILL: Thank you very much, Radek. It's a great pleasure to be here, especially to see the New Atlantic Initiative at work. I think like many of you, I'm a recipient of the many e-mails from the--I think I'm on your blast e-mail list, and so I feel virtually very much a part of the process, but now to see it in action it's a great pleasure.

Let me just say that I agree with just about everything John just had to say, but let me approach the problem a little differently. I think very much for me the legacy of Ronald Reagan in Europe today is for me very much rooted in the period in the early 1980s in this part of the world. Indeed, I arrived in Poland in 1983, and when I arrived here, there was really no sense that the world was about to change. Indeed, the only sense of change was that it had somehow gone from bad to worse.

The Solidarity era, which had been such a momentous era for this part of the world, indeed for the entire world, had given way to martial law. And even the adrenaline of resisting martial law had somewhat faded as we considered this new period of normalization. In short, it seemed a regime that had no sense of its own legitimacy and no sense that it was ever going to give up.

I must say as a foreigner, we felt the sadness of this era very much, as our Polish friends did. It was not easy, actually, living here as a foreigner because, in addition to the sense of despair that one felt at the system here, I think one also felt a certain sense of embarrassment that somehow how could we have allowed this all to happen in this country. There were no restaurants really to go out to. Indeed, my first encounter in a Polish restaurant, I went to the place, and they had a very thick menu. And I went through it and I said, "What do you have?" And he said, "We've got some beef and we've got some chicken." And I said, "Fine. I'll have the beef." And he said, "We're out of the beef."

[Laughter.]

AMBASSADOR HILL: I said, "Okay. We'll go with the chicken."

Indeed, it was really very depressing. I recall very much the lines in front of the stores. You know, the word for "display" in Polish is "wystawa" (?). In those days they used (?) meaning what's sort of been thrown out in the window. A very sort of brutal concept. But even for diplomats, where we had access to the dollar stores, once you sort of ran the gauntlet of people on the sidewalk trying to buy your dollars from you before you got into the store, we also had a particularly awful place with the very prosaic name of the Diplomatic Meat Store. And you would go into the Diplomatic Meat Store, and there would be a guy there with a cleaver, and you could tell he really would prefer to have used it on you. And he would say, "How much do you want to sell--I mean buy?" Because he felt that most diplomats were, in his opinion, engaged in black marketing. So you would explain, "Well, I'd like a half kilo." Then, thwonk, it would kind of come down perilously close to you, and you'd kind of back off.

And then he would take this hideous-looking meat, and he'd take a copy of (?) , and, whomp, right in the (?) , and here it was.

So you'd sort of walk out with this thing dripping red and out onto the sidewalk where everyone would say, "Can I buy that from you?" And you just wanted to give it away and get out of there, I tell you.

It was really a very sad time, but you could tell there was some--there was really a spark among Poles. I always remember driving -- [tape ends].

T1B -- going there to visit my wife and daughter, and I was in a hurry. And a policeman stopped me near Poznan, and he said, "Well, why are you going so fast?" And I said, "Because I'm going west." And he said, "Please continue."

[Laughter.]

AMBASSADOR HILL: So it was a time, I remember, when in the 1984 elections--and I do believe that Poles at the time, and maybe even today, felt they had as much right to participate in American elections as Americans do. So there was a great deal of interest in the 1984 elections, so much so that the day after or two days after the elections, there was a piece in the Polish News Agency, PAP, shocked, utterly shocked, that there were Masses of thanksgiving going on in Poland for the winner of the election, that is, Ronald Reagan. They were so shocked that they provided the times and places of those Masses of thanksgiving that people had.

Indeed, I remember one day going to--we had a small garden in the back of my house on Filtrowa Street, and we thought we might plant some flowers there. And, of course, there weren't any flowers in the stores. So we went out of town and found a Polish farmer--and, by the way, Polish farmers did not wait for the Balcerowicz plan in order to start making money. They figured it out a little before. And so after going through a very difficult negotiation, because this farmer was driving a very hard price, a hard bargain with me, he finally agreed to sell me 12 roses in their little pots of rose bushes. And he said to me finally, "You Americans, you don't understand the Russians. That is your big problem. You simply don't understand the Russians. There's only been one American--one American--who's ever understood the Russians, and that's your President, Ronald Reagan. He is God's gift to your country."

So I always thought of that, and I thought of what that sentiment really meant for today. And I think one can still see the sense in Poland of what the United States, represented so well by our President at the time, Ronald Reagan, what we meant to people like that farmer, what we meant to people standing in those terrible lines, what we meant to people who were actually interned at the time. There was still the Solidarity Six. And yet I think really it was really in many respects one of the foundations of this very special relationship that Poles and Americans have.

To this day, I think people throughout Europe are sort of wondering, you know, Poland, why is there this sort of feeling about the United States. And I think a great part of the answer has to go back to that time when we had a President who, in the opinion of the Poles, understood what the threat was and what he needed to do about it.

So as I look today at what is going on in Poland, and I think going on in many parts of Europe, where it's clear that there is this very exciting process of European integration, European countries are coming together in a way that is truly exciting and truly inspiring, I think, for everybody because Europe has gone through a very tough few centuries. And yet this is such an inspiring moment, and yet sometimes you see that people want to make this unity or forge this unity on the basis of somehow not being American. And in Poland, I think the Polish people made very clear European unity will not be purchased at the expense of the relationship with the United States.

And so I think we see in Poland today the legacy of Ronald Reagan, that is, a consensus, a consensus that is shared not only by the party in power today but also by the opposition. And I would say this is one of the things that makes Poland a little different from some of the other countries. All the political forces in Poland agree that their foreign policy should be based, one, on being a good and strong European state and, two, on being a good and strong European state that is allied to the United States. And I think we all, those of us who were here in the 1980s, those of us who were not here in the 1980s, owe a great deal of gratitude to Ronald Reagan.

Thank you very much.

[Applause.]

MR. SIKORSKI: Prime Minister Laar, please. The man who introduced the first flat tax, not just in Eastern Europe but in all of Europe. Welcome.

MR. LAAR: Just to start my presentation, I hope next time if I come into Poland, I can welcome the new country with the flat tax, personal income tax.

Ladies and gentlemen, of course, first of all, I must say that I am enormously honored to have the opportunity to speak in such a conference about the role of Ronald Reagan in the history of the world, and especially to do this in Poland, in the country which has played so big role getting the Soviet empire down. If we are looking back to those times somewhere in the 1980s, actually it's even hard to remember what the people really thought then. But if you start to read the newspapers or the political magazines I once did, I was really horrified because this socialist way of thinking that was there, it's really necessary to read to understand what was this revolution that Ronald Reagan and Margaret Thatcher and other people really actually had accomplished. Because this was the world where most decisionmakers were fashioning their policies on the assumption that the socialist way of thinking and the Soviet Union are permanent figures on the planet.

Ronald Reagan thought otherwise. He refused to be blinded by the (?) , and so he broke the back of the Soviet empire in the Cold War, pressed the Soviet Union into the corner, and gave to captive nations the possibility to destroy the Soviet empire from inside.

The progress made by all of us, those achievements, membership in NATO, coming membership in European Union, are all actually a result of those decisions, and they are serving as testimony to the wisdom of those who fought the long Cold War against the evil empire that was the Soviet Union. And one thing in the world, in the modern world, which really surprised me is that it looks that most of the West have not yet understood that the West won the Cold War.

If you are looking even at the end of the Cold War to the Western (?) example, in January 1990 Time Magazine made Gorbachev Man of the Decade, and showing that the real hero of the Cold War was not Ronald Reagan, but actually it was Mikhail Gorbachev. And there were people who declared that the West had not really won the Cold War, but the Soviet Union had lost it, and actually four decades of effort had, therefore, been unnecessary because things would have worked out equally well.

I think we nations of Central Europe, the former captive nations, have a very different view on this. The Cold War was won, and the people of Central Europe were a part of it. Victory of the Cold War was achievement of the long, long policy line coming from the different leaders and the long fight of the captive nations for their freedom. This war had a lot of heroes. There were heroes, often nameless heroes of the (?) Baltic (?) brothers, freedom fighters from Berlin, Budapest, Prague and (?) , but there were really heroes like Ronald Reagan.

To understand the role, again, of Ronald Reagan, we must sometimes think back on the history of the Cold War, starting from the point how it started, how it actually was, has there been possibilities to win the Cold War earlier, why it started at all, where were the mistakes which were done to let communism flow, to give to the communists through the Yalta and (?) all of Central Europe to rule, how the situation was created, what were the mistakes. And I think especially looking back on the events in 1956, where the West missed the opportunity to win the Cold War then, because the situation in the Soviet Union in the 1950s was very similar to the situation in the 1980s. The (?) and order context were the same. The situation in Central and Eastern Europe, in Poland, in Hungary, that was all the same. There was only one thing missing. There was the Western policy, what was missing.

I think if we are starting now the history by example of the Hungarian uprising and looking on the Western leaders, including the United States Presidents, who are sending the messages to Khrushchev, who is very afraid and who is not planning (?) Hungary, sending the messages that actually we are doing nothing, please do whatever you want, and then actually giving to this the possibility for the Soviet system to survive for more than 30 years.

I'm unfortunately quite sure if we had not been lucky and if we had not such leaders as Ronald Reagan in the 1980s, we are maybe still sitting in the same system, maybe with a little bit different form. Maybe there has been some (?) and so on. Maybe we have reading secret memoirs of the Mikhail Gorbachev life or secret memoirs of Nikita Khrushchev or whatsoever, but there has not been the real change. And this was mainly the policy of Ronald Reagan and other Western leaders who did this change because they had a vision that the communist country destroyed and really followed how it was soon explained the policy which pressed the Soviet Union to the corner and gave for us the chance.

As I lived in the Soviet system, I remember for myself very well the first moment where I understood that the end of the Soviet system is not very far away, and that was somewhere in 1981 as I was trained as a Soviet military officer in the university, we had big German maps, German cities where we had to attack if the war starts. So we were trained. It was, of course, easy, first nuke them and then go in. And it was simple training. But then once we got one instructor from Moscow, one very high-rank Soviet officer, which by some mistake was sent into Estonia to have their (?) about the situation in the world. And we were very positively surprised seeing the first Soviet military who was totally afraid because, as he said, "You see, comrades, we are having a problem. In the United States they elected some crazy cowboy to be President, and this man, I must say, is really crazy. He can really push the button. He really hates communists, and now he's having all those Star War programs and weapons in space. And, of course, we are financing now the peace movement, so we probably are stopping them to deploy those missiles at Europe, and so on."

But looking on this man, how afraid he was, we understood that the end is not very far away, because what is important with the Soviets and communists is to make them afraid. Ronald Reagan was the first President of the United States from those times who wasn't afraid of the communists but made communists afraid of him. And this was the significant change. And through this way, the captive nations got this courage. We got the first help. We got the President who called the communists what it was: the empire of evil. And all this helped to create this situation where we all together (?) finished the communists. And this created the possibility for our nations to live in a free world, and even if we are doing sometimes mistakes there and we couldn't do everything what we want, those are our mistakes now, and we are really responsible for our future, and we can (?) together.

Thank you.

[Applause.]

MR. SIKORSKI [Interpreted]: Editor in Chief Mr. Piotr Wierzbicki and Solidarity activist. He was one of the people with whom Ronald Reagan expressed his solidarity with when he lit his candle in January 1982.

x MR. WIERZBICKI: Ladies and gentlemen, I was asked to say here how President Reagan has been perceived by a Warsaw-based intelligentsia member who, back in the 1980s, became one of the dissidents. I was never a Solidarity activist, by the way. I was interned by--I was detained because of what I wrote. So I was a writing dissident. But I have to go back in time.

I was one of the people who in their adult life were really awed by America. We looked at America as our second motherland, and for me, such developments as the killing of President Kennedy or President Nixon's stepping down was so special as if it happened in Poland, as if it related to Polish Presidents and supreme commanders. For me, the landing of Apollo 11 on the moon was one of the most important days in life.

Of particular importance in my memory, something that sticks in my memory until this day, is a band of experience that accompanied the observation of United States failures sustained in the 1960s and 1970s when it confronted itself with communism, when it clashed with communism. The first sad years of the conquest of space where the United States entered into that race unprepared and rockets fell onto the landing gear, onto the pads, and the Vietnam War, who was not permitted to win by politicians--soldiers were not allowed to win and President Carter's Presidency, the humiliation of that period, more and more African nations falling into the hands of communism, of Afghanistan.

Ladies and gentlemen, Tehran refugees--or Tehran captives, I thought America was going backward to the point where Russia would have no other option but to run on Europe. If one party keeps leaving ground, the other party has to go forward. I remember a discussion back in 1980 with Kisielewski. We talked. We said that this was leading to a catastrophe. Fortunately, it didn't happen. And I remember another conversation with Stefan Kisielewski. The U.S. Embassy had invited him to a Mass, to a service, to pray for the freeing of American captives in Tehran. Stefan Kisielewski had refused. He said, "Don't confuse people's things with God's things. This is not down to God to do that. It's down to the people." Reagan was the first American President who got it, who understood that this was to be done by people, not by God.

For me, Reagan was the one who finished the series of U.S. failures, compromised failures, voluntary failures, failure of withdrawal, of no action, of no fight. The small island of Grenada was totally unimportant. This invasion Grenada was, however, a visible sign. If something changes in the power balance, this is going to be to our advantage, not to your advantage.

The Star Wars meant for me the following: Reagan decided to push the Soviet Union to a second-rate emperor's position, which was never bound to catch up with America, the area of defense. This was the first time ever in the U.S. history. All the preceding Presidents took care of the equilibrium. They had it in mind any supremacy would be dangerous because Russia would fight back, fight back on a preventive note. Reagan was the first one who was not afraid of a preventive attack of Russia, and he cornered them, didn't he?

Well, I didn't know then what I know now, that that cornering of the Soviet Union by Reagan meant also cornering them to the brink, pushing them to the brink of bankruptcy. I didn't know that the days of the Soviet Union were numbered, not defense-wise only, but also economically. The economy had no reserves at all, and they had to step down. I was one of the pessimists. Now there are so many wise men, in Warsaw, especially, who are claiming that they knew that it would be days before communism was about to collapse. But I couldn't see those wise men then. They are now springing up everywhere.

Yes, people are claiming that, well, the roundtable is about to happen and everything will smooth. No, it wasn't smooth. People were fatigued. People did not want to protest. I thought it might last another 30 years. I just didn't know that apart from Star Wars there is this ingenious plan of crude oil, which actually killed the Russians.

And, thirdly, Reagan was the American President for me who displayed, demonstrated his heart to Poland. We had a radio set in our detention center. We had a fine group of intellectuals. We were allowed in the detention center to do things which others couldn't, perhaps. So we knew. We had the radio, and we knew what happened in the White House, and we knew that Poland was a centerpiece of American policy. We knew that America was not about to intervene. We were not stupid enough to expect that. But we knew that Reagan had been emotionally involved.

Nixon was a very good President when he was President, but he had no emotional involvement in Poland. For him, it had been totally indifferent, totally neutral.

Ladies and gentlemen, the second wing of that Reagan legacy, the first wing being the pugnacious anti-communism and the recklessness and the bravery and the courage and the going full throttle and wisdom, knowing that they would not stand the pressure, knowing that it was worth trying our hand. The second wing is the economic liberty, economic freedom and the invisible hand of the market.

Those of you who lived through the Solidarity era know--and I was in that small little group of outcasts, dissidents who were sort of cast outside the mainstream because Solidarity was a trade union and a state intervention type of movement, because people thought that workers could control managers and corruption and cronyism would go away and we will thrive. Capitalism was not a good word. I was a friend of Miroslaw Dzielski and Stefan Kisielewski. They were the advocates of the idea of free entrepreneurship. We were a distant island on the ocean of distance, and I saw it with my bare eyes. A group of my readers invited me over to the United States, and that was the second term of President Reagan, and these people told me--and I couldn't test that, could I? They told me that American bakeries had numerous, an incalculable number of bread types. Normally the United States bakeries had one type of bread. When Reagan came to office, bakeries started selling various types of bread. And I sort of believed it wasn't a fable, that it was true.

Ladies and gentlemen, you read the press, you listen to the radio, and you watch television, so you probably were exposed to this statement that the collapse of communism, the Berlin Wall going down, and Solidarity was the deed of (?) , Jaruzelski, and Gorbachev, and the communist architect of the roundtable.

Now, Ronald Reagan was the inhibitor because when Gorbachev organized perestroika and glasnost, Reagan continued his Cold War policies. Now, there is a horrendous idea. The Iron Curtain was not built by the United States or Churchill. It was created by Stalin to murder his opponents and to occupy captive nations. Reagan was the one who dismantled the Iron Curtain.

I think he got it right. He understood one thing. He understood what language should be spoken with the Russians. Russians understand only one language, and Russians had always been good diplomats. When they did understand, they did understand. Well, they were professional politicians. They understood the language of force. Reagan spoke a language they understood, and they did understand. And so they packed their little things and went away. Therefore, we can talk about today the great legacy of Ronald Reagan today in this part of the world.

Thank you.

[Applause.]

MR. SIKORSKI: Peter Wallison, biographer of Ronald Reagan, American Enterprise Institute. Peter?

x MR. WALLISON: Thank you. It's really a great honor to be here with this distinguished group and on this extraordinary subject.

Going last in any of these kinds of groups is very difficult because so many people have said before what you had intended to say. But I think in this case, it's particularly apt because Ronald Reagan, I think, touched something very deeply, and we all understood it. So I'm not surprised at all that people from Lithuania or Poland would understand exactly what Ronald Reagan stood for.

I will try in my remarks to relate Ronald Reagan's personality and his nature somewhat more clearly to the policies that he adopted in the hope that that would give some of the people in the audience here a better understanding of why this man, this governor of a state in the United States, a former actor, would become such an important figure on the world stage and really affect world history in such a profound way.

The key to understanding Ronald Reagan, it has always seemed to me, is the power of his convictions. When Ronald Reagan came to believe in something, he was unshakable. And when he believed--and he knew this--that the Soviet Union was not destined to be a permanent figure in the flow of time, he was able to structure his policies in such a way as to take account of that belief.

It was this belief that led him to reject the policy of detente and to adopt a policy of confrontation and military build-up that ultimately, I think, resulted in the destruction, along with the delegitimizing elements of Reagan's policies, resulted in the destruction of the Soviet Union.

At the intellectual root of detente was an assumption that, while the Soviet Union had its problems and its empire was in some difficulties, it, nevertheless, represented a long-term challenge to the United States and to the West in general.

During the Ford administration, I was counsel to Vice President Rockefeller at that point, and I happened to attend a Cabinet meeting in which relations with the Soviet Union were discussed. And Henry Kissinger remarked that the problem for the United States in the future was going to be the problem of living with a sick bear. In other words, it was understood that the Soviet economy was weak, and in other respects faced profound difficulties. But even a Kissinger, who was one of the architects of detente was unable to make the conceptual leap to the notion that the collapse of the Soviet Union could be precipitated by policies of the U.S. Government. Ronald Reagan, however, was able to make that leap.

Ronald Reagan's profound effect on this aspect of world history sprang, then, from two distinct elements of his personality and nature: his unshakable beliefs, in this case in the evanescence of the experiment with communism, and his intellectual ability--and I was to stress that, his intellectual ability to devise strategies that exploit those beliefs. I'll try to just discuss each of them very briefly.

Reagan's remarkable confidence in his own conclusions about the world, what I would call his power of convictions, was displayed again and again during his Presidency. One of my favorite examples--it actually has a little bit of relevance to Poland today--has to do with tax policy. After Reagan's initial tax cut program was put in place, the United States entered a rather severe recession in 1981 and 1982. And many people in the U.S. political system were suggesting to Reagan, arguing to Reagan, pleading with Reagan that he raise taxes because the assumption was under the prevailing economic theory that the deficits that were projected because of Reagan's tax cuts were causing interest rates to stay high, and with high interest rates the economy would never recover.

Reagan, however, didn't believe in the prevailing economic theory, which was, of course, Keynesianism, and he argued that if tax rates were cut, the economy would grow, deficits would eventually go away, but, in any event, there was no connection between deficits and high interest rates. And, of course, Reagan was proved right.

But in the course of that, he had to overcome the opposition not only of the Democrats, not only of the Republicans, who still believed in some of the old theories, but his own White House staff. And yet Reagan, because he believed in things and he believed in them firmly, strongly, and unshakably, persevered. He stayed the course in that respect, and that showed his extraordinary ability to stick with the things he actually believed in.

There are similar examples in foreign policy. One that I have noted in the book I wrote about Reagan was Reykjavik in 1986, where he was offered an extraordinary, a world-shaking kind of deal by Gorbachev if he would only give up the Strategic Defense Initiative. And, of course, as we all know, Reagan refused. He refused a proposal that would have allowed both the United States and the Soviet Union to eliminate most of their strategic arms. Well, why would he do something like this?

First of all, we see it today. We see that there are rogue nations around the world which could threaten the United States. And Reagan was sure that at some time in the future the United States would need the protection of the Strategic Defense Initiative for more than just protection against the Soviet Union. So, again, his strong beliefs, his enormous prescience enabled Reagan to take a position that at the time was opposed by a good many people, was incomprehensible to a good many people, but today has been borne out as an excellent decision for his country.

Abandoning detente and challenging the Soviets was of a piece with the confident attitude of mind that Reagan possessed. All through the 1970s, before he became President, Reagan opposed the policy of detente. As he wrote in his autobiography, which is called "Ronald Reagan: An American Life"--well titled, I think--"Our relationship with the Soviet Union was based on detente, a French word the Russians had interpreted as a freedom to pursue whatever policies of subversion, aggression, and expansionism they wanted anywhere in the world. In my speeches and press conferences, I deliberately set out to say some frank things about the Russians to let them know that there were some new fellas here in Washington who had a realistic view of what they were up to and weren't going to let them keep it up."

He understood the Russians, in other words, as some of our speakers have already said, and that was a key element of Ronald Reagan. And when he understood something and he believed in it, he stuck with it.

This confrontational approach was based on a realistic assessment of Soviet intentions that was unique to Reagan. It took two forms: economic sanctions and the military build-up, on the one hand, which was intended, deliberately intended to weaken the Soviet economy; and, second, delegitimizing language to weaken Soviet prestige and their claims to the initiative in world affairs.

On economic sanctions, Reagan was forced to act without the support of others. It is perhaps not recollected by many of the people here, but Germany, France, Canada, Norway, Greece, Italy, and even Margaret Thatcher's Great Britain denounced martial law in Poland, but refused to adhere to the U.S. embargo. And George Kennon (ph), who was the architect of the U.S. post-war policies of containment of the Soviet Union, criticized the sanctions as undermining detente, which, of course, is exactly what Reagan wanted to do.

But the U.S. sanctions did impose a significant cost on the Soviet Union and ultimately resulted, among other things, in the lifting of martial law and negotiations resuming between Solidarity and the Polish Government.

Reagan's military build-up was also opposed in the United States and in unexpected quarters. President Ford, President Nixon, the Business Council--all opposed the strong build-up that Ronald Reagan had adopted as U.S. policy. And he again had to argue against his own White House staff. This, you understand, was a person who was thought to have been a tool of his advisers and his White House staff. But, again, in the most important areas, where Reagan had strong beliefs, he was unshakable, and his White House staff was unable to change his mind, although they let the press know, this White House staff, that they disagreed with Reagan's policies.

His efforts to delegitimize the Soviets were extensive and also opposed. Probably the most controversial of his statements in this respect was his referring to the Soviet Union as "an evil empire." This brought widespread condemnation, and when it was ultimately included in one of Reagan's speeches, it was only over the protests of many of his speech writers and people in his staff. They kept taking the phrase out, and Reagan kept putting it back in. When it was finally spoken, however, it clarified things enormously. It brought people to their senses, both inside and outside the Soviet bloc, and as has been noted, it was like the young boy saying that the emperor had no clothes. It eliminated the sense that there was some kind of moral equivalency between the United States and the Soviet Union. And once that issue of moral equivalency was eliminated, it was possible for the Soviets to be delegitimized.

Reagan would naturally believe that the peoples of Eastern Europe could be won over through the efforts that he was making through radio broadcasts that have been mentioned before and others. He was a tremendous believer in ideas and the sense that people could be--people's views could be changed by presenting them with ideas.

So over opposition at home and abroad, he continued to press the Soviets everywhere--in the economic sphere, militarily, and on the plane of ideas and morality. Eventually, as we now know, his policies brought about the collapse of the Soviet Union.

In my book, I argue that Reagan had a strategy for conducting his Presidency. It involved a deliberate effort to keep out of the details of policy but to focus on the key points. He approached these major issues in the same way through his speeches, which were ultimately aimed at winning over the American people. And so in the same sense, he attempted to win over the peoples of Eastern Europe.

So he selected an appropriate means to achieve a desirable end, and we can see in the connection that Reagan made between the weakness of the Soviet Union and the strategy that he adopted for bringing about its collapse the extraordinary ability of this man to take a set of important facts that he believed in strongly and translate them through a strategy into a winning set of actions.

Detente was exactly the wrong policy, as Reagan foresaw, to adopt if you thought your opponent was weak. It was a policy of cooperation and non-confrontation and would inevitably extend the life of the Soviet Union. And it was this perception that underlay Reagan's position.

So how, then, did Reagan contribute to the freedom of Eastern Europe? By recognizing, as had no other previous President, the true significance of Soviet economic weakness and by developing and implementing a strategy to exploit it. And this, as in so many other facets of his remarkable Presidency, Ronald Reagan relied on nothing but his own firmly held convictions and his talent for strategy.

Thank you.

MR. SIKORSKI: Thank you, Peter.

[Interpreted] A lot of information. Our panelists are available to address your questions during the coffee break, and we are meeting in a quarter of an hour. Thank you.

[Recess.]

T2A MR. SIKORSKI: I turn over the floor to Professor Jacek Rostowski, the moderator of our session about the 20 years' boom that was set in motion by President Ronald Reagan. Jacek, the floor is yours.

MR. ROSTOWSKI: Thank you very much, Radek.

Well, could I encourage people to come in from the corridor? With their coffee cups if they can't be separated from their coffee cups.

[Interpreted] Good morning, ladies and gentlemen. Let us start the second session, which is devoted to economic issues. Clearly, Ronald Reagan's strategy was a two-tier strategy. On the one hand, it was to confront the Soviet Union and communism; and, secondly, it was geared towards the strengthening of the American economy and the American state by introducing pro-market reforms.

Our session is entitled "The Twenty Years' Boom--What Are the Lessons for Europe?" However, may I start with a handful of my personal reflections. Looking around at the pictures of Ronald Reagan and Margaret Thatcher and listening to the interesting memories of the members of the previous panel when they recollected the fight against the evil empire, one can have an unpleasant thought that this is all ancient history. Why should we bother?

But then I thought--and it was an even more unpleasant thought. I thought of the memories of the applause awarded to General Jaruzelski at the SLD Congress. Now, for many people in Poland, this is not ancient history. Leszek Balcerowicz said this morning that the statists will always be amongst ourselves, and what we saw yesterday in the Congress is going to be with us and will be applauded.

But moving to the economic issues--and I will switch into English to strike a balance.

[In English] -- in order to be fair to our guests, provide equilibrium, equality between the two languages.

The title of our panel is "The Twenty Years' Boom-Lessons for Europe." And, of course, one's instinctive reaction is to say, well, lessons for Europe, what about emigrate? We do have very serious problems here in Europe. Leszek Balcerowicz mentioned creeping statism. Statism has taken on a different form, regulation, creeping regulation of the economic system. And, indeed, that creeping regulation is particularly strongly embedded or focused around the institutions of the European Union.

I am personally very much in favor of the enlargement of the European Union and Polish membership. But I have to say that there are worrying tendencies, and one of the worrying tendencies is the way in which many statists and regulatory principles get written into the various treaties that form the basis of the Union and now into the constitutional treaty. One of the problems is that because the European Union is a gradualist, evolving project, this gives the statists in Europe many bites at the cherry in terms of undermining the principles of a market economy. One of the things I'd ask the panelists maybe to consider in their talks, since we are talking about lessons, is how one might try to deal with that.

A second great problem for Europe is, of course, the question of the great demographic problem, what's usually presented as a pensions problem. And here it is fascinating to see that the United States population is growing, of course, very much faster than the population of Europe. And this is not only because of rapid immigration but also because of faster natural growth also among non-immigrant populations in the United States and, indeed, also among richer people in the United States.

And one of the questions, therefore, is: What can Europe do to deal with this? I'm not imposing it as a subject or as a topic on our panelists, but if they could maybe refer to this--I see these as the two main issues, and if they could maybe refer to this, I'd be grateful.

Now, our first speaker is James Glassman of the American Enterprise Institute and columnist for the Washington Post. And I'll ask him to speak first.

Mr. Glassman?

x MR. GLASSMAN: Thank you, Mr. Chairman. Thank you, Radek, for bringing us all together here, and thanks to the Adam Smith Research Centre. This is a very, very impressive crowd today.

As President Bush said when he was here, the United States has no greater friend than Poland. Thank you for your moral and your military support in recent months.

You know, Ronald Reagan said a great many things. He was able to cut to the chase and tell the truth. And one thing he said about economists was that economists are people who see something work in practice and wonder if it would work in theory.

I'd like to talk about three things: first, briefly describe the prosperity of the last 20 years in the United States and why we owe it to changes wrought by Ronald Reagan; second, what those changes were and how Reagan achieved them; and, third, what the lessons are for Europe and Poland. And I will end with a distinction between what I call a complacent and aspiring Europe.

The results are clear. The 20 years from the end of the 1981-82 recession to the present were not merely the best in United States history, but probably the greatest 20 years of prosperity enjoyed by any nation in history, not just the 3-percent-plus GDP growth in the United States, not just low inflation, low unemployment, an investment boom, but incredible economic stability, which is something that people in Europe don't quite understand yet, or many people in Europe.

It is from the competition and turmoil of free market capitalism that comes, paradoxically enough, stability, much more stability than centrally planned economies can bring.

Between World War II and 1982, there were eight recessions in the United States, one every four years, on average; roughly one-third of the time, the United States economy was either in recession or in stagnation. That was normal. But from 1982 to the present, there have been only two recessions, both of them very mild, and only one year of declining growth, and that was less than 1 percent.

Prosperity has also spread widely in the States in the last 20 years. The poverty rate has declined. Senior citizens have become far richer. The tax cuts that Ronald Reagan initiated did not reduce tax revenues. In fact, they raised tax revenues from $288 billion in real terms in 1982 to $354 billion in real terms, a 25-percent increase in real taxes after significant rate reductions.

Now, frankly, I don't think that's necessarily a good thing. I'd like to see revenues go down. But revenues increased with the tax cuts.

Now, what were the policies that precipitated this long boom? Well, first, I want to look briefly at the economy that Ronald Reagan inherited, the one that he confronted. In a February 5, 1981, speech, shortly after taking office, he said, "We are in the worst economic mess since the Great Depression." And he was right. Growth had slowed dramatically. The annual rate of growth per capita in the United States based on GNP during the 1970s was essentially zero compared to 2 percent in the previous decade and 3 percent for Japan, Germany, and France.

Inflation had soared from 2 or 3 percent a year in the 1950s and 1960s to 12 to 13 percent in 1979 and 1980. Taxes were up. Marginal rates on labor income had gone from 23 percent in 1965 to 36 percent in 1980, and rates on capital income had gone all the way up to 70 percent.

Government spending had soared. In 1960, the government spent $1,300 per capita in 1980 dollars. By the time Reagan took office, that figure had gone to $3,900. It had tripled in just 20 years, from 21 percent of GNP to 33 percent of GNP. And, quite naturally, as a result of these policies, net investment had plummeted.

So what to do? Well, Ronald Reagan came to office with a broad consensus that something had to be done, something dramatic had to be done. And it wasn't just Republicans who believed this, but Democrats did as well. This is a wonderful position for any policymaker to be in, a time of severe economic crisis.

Reagan initiated four policies:

First, he shifted federal spending toward defense and held down the growth of new programs while maintaining a safety net for the poor.

Second, he cut taxes dramatically, from a high of 70 percent on unearned income, as it was called then--you could see the disdain which some people held for the idea of investment. It was called "unearned income," 70 percent, down to 28 percent. Two rates, 28 percent and 15 percent for labor wages. Capital gains were cut also to 28--or capital gains were maintained at the same rate of 28 percent.

Third, tough monetary policy, which actually had begun during the Carter administration under a new chief of the Federal Reserve, Paul Volcker.

And, four, deregulation.

But behind these policies were a set of very clear principles: sound money, a strong defense, which was good for the economy and for spreading freedom around the world, individual choice and freedom, the idea of a safety net, and the notion that it was not the job of government to fine-tune the economy. Those were the principles.

And here's my point: Ronald Reagan succeeded because, A, the economy was so bad that everyone knew that strong action needed to be taken; second, he had established a strong, principled foundation and could articulate it, and articulated it in plain language. Reagan said such things as no government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we'll ever see on Earth. And government is like a baby, an alimentary canal with a big appetite at one end and no sense of responsibility at the other. And, more seriously, man is not free unless government is limited. As government expands, liberty contracts.

Third, Reagan was also an avuncular figure. He did not seem to be experimental or revolutionary. As Governor Balcerowicz said, he spoke with conviction and determination, which was also Peter Wallison's point, the power of his convictions, a seemingly mild-mannered, avuncular person speaking with powerful conviction. That seems to be a winning combination.

Reagan created a supply side revolution. As Michael Boskin wrote, "His emphasis changed"--"Our emphasis changed to relative prices, from aggregate demand or spending management to concern about the economy's potential to produce more."

Now, supply side economics was nothing new. Alfred Marshall talked about it in the 19th century. And economists have always known that both supply and demand affect prices and output. But during most of the 20th century, the ideas of Keynes dominated, and supply side economics was de-emphasized, demand side was stressed.

Demand side economics suffered a terrible crisis in the 1970s, and supply side economics has essentially taken its place, the notion of policies that permit supply to grow: free trade, low taxes, limited regulation, and unbridled technological innovation.

Finally, the lessons for Poland and Europe. The Polish economy has come a long way, and I congratulate you on moving toward a flat tax and lower taxes. Ronald Reagan is smiling on you in that regard, and there he is smiling in the picture.

It is also good that you are joining the EU because I think that Poland could become a force like Ireland. Look to Ireland, 9 to 10 percent growth, a tremendous reversal from an outflow to an inflow of population, but only--only--if you refuse to adopt the outlook of the EU's largest states.

Donald Rumsfeld, the Secretary of Defense in the United States, made the distinction between old Europe and new Europe. I don't think this--I think this distinction is a good one, but it doesn't go far enough, and it's not completely accurate. Obviously, Poland is a very old nation, older as a nation than Germany. Germany is considered old Europe. Poland I think is new Europe.

I would make a different distinction between complacent Europe and aspiring Europe. Complacent Europe is Germany, France, Luxembourg, Belgium. Aspiring Europe is Ireland, Portugal, Spain, the Netherlands, Poland, the Czech Republic.

In complacent Europe, complacent Europe is dominated by statism, high taxes, but more than that, by a culture of contentment and satisfaction, even smugness, while aspiring Europe wants to achieve more.

If you see accession as a chance to get more welfare from the EU, to be tamed, you will no longer be aspirational. Remember what Jacques Chirac said not too long ago to Poland: "You missed the opportunity to stay quiet." Poland, do not stay quiet.

Complacent Europe is considered, by France, by Germany, by its members, to be a kind of paradise, a post-historical paradise. But, in fact, it's really a fool's paradise. And as the Chairman suggested that I address the issue of demographics, quite clearly the demographics of complacent Europe are changing, and they will not support the kind of welfare state that exists today in Germany and France. And you can see Germany trying to change, but I think Poland can show the way.

So, in the end, three lessons: focus on the supply side, remember, like Ronald Reagan, the big things, and also remember that policymakers should not pander or provoke, but inspire us in simple language. And let me quote Ronald Reagan: "We who live in free market societies believe that growth, prosperity, and ultimately human fulfillment are created from the bottom up, not the government down. Only when the human spirit is allowed to invent and create, only when individuals are given a personal stake in deciding economic policies and benefiting from their success, only then can societies remain economically alive, dynamic, progressive, and free. Trust the people," said Ronald Reagan.

And also remember that it's not over, that eternal vigilance is the price of freedom always. Again, Ronald Reagan: "Trust the people." This is the one irrefutable lesson of the entire post-war period, contradicting the notion that rigid government controls are essential to economic development.

Thank you.

[Applause.]

MR. ROSTOWSKI: Thank you very much.

I now call on Robert Gwiazdowski to speak. Robert Gwiazdowski is someone who I see on television very often, arguing for lower taxes, arguing against the incredible mess that we have in our tax system, so I'm sure he's going to have a lot of really important things to say to us. Please.

x MR. GWIAZDOWSKI: Thank you very much. To keep equilibrium, I will slip into the Polish language.

[Interpreted] First of all, I owe the organizers a word of gratitude and explanation of the reason why I am especially happy to be here today, because it's all thanks to the Reagan administration back in 1984, during the rule of communism in our country and at the time when General Jaruzelski, mentioned here today, fought against Pershing in Europe, not against monuments of General Pershing, for that matter, but Pershing missiles.

When the time for the U.S. elections was approaching, I manually did a button which I put on my suit, and it said, "My Friend Reagan." I wore that button, not because of the tax reductions in the United States but because of the Pershing missiles.

I was detained, apprehended for several hours, and that was the key reason why two years later the communist government did not give me any passport. I could not leave the country. I could not travel. And here, thanks to Reagan, I am standing in front of you, and I am speaking not about Pershing missiles but about tax cuts, speaking about an American experience from which Poland and other European states should and ought to benefit.

Certainly not all elements of Reagan's economic policy can be transferred to European countries, especially Poland. But some of them are not only possible but, indeed, are necessary.

I am under the impression and I assume it's an a priori presumption, but a very strong one, that if we use some of the Reagan policies in Poland, we would see an even faster growth, economic growth, than happened in the United States because the starting situation is different. The starting situation in Poland is much worse than in the United States at that time.

The economic policy of President Reagan rested on three pillars: monetarism, the supply economics, and the free market, traditional free market philosophy. The economic details were translated into the following three groups or blocks: first, bold deregulation of the economy; secondly, containment of inflation, curbing inflation; and, thirdly, reducing taxes.

As far as inflation is concerned, we are in a better situation than Americans were in the 1980s because our inflation is lower. But, unfortunately, there's much more pressure in Poland from academics and politicians to increase inflation, in fact, to make monetary policies more lax, to trigger more demand. All those who make such claims should listen to my real-life example. When in 1985 I didn't get the passport from the government, I wanted to buy a fridge. I was, I remember, queuing up in a shop. I queued for 14 days and nights, so I did create a hell of a demand. I do apologize for the word. But there was no supply.

[Applause.] MR. GWIAZDOWSKI: I dare say that if we relaxed monetary policies today, we will not see, we will not see more demand at the level of where we would expect it to be. If we used Reagan's policies in Poland, we would. But two challenges that we are facing in Poland, A, deregulation; Bank, taxes.

With regard to regulation, the number of regulations and pieces of legislation that limit liberties in Poland is not comparable, the number is not comparable to the amount of legislation in the United States back in the '80s. Now, we have to reduce it dramatically in Poland.

As far as tax are concerned, thanks to President Reagan and his aids, we can observe, we can always think of two levels of taxation which yield the same government revenue; A, low output, and the other at high output, and this is depicted by Laffer's Curve. Laffer made an assumption, a very simple one, that when the tax rate is zero, then government revenue is zero, too, but if the tax rate is 100, the government's revenue is not 100, but is zero, as well.

Somewhere in the middle there is an optimum point. Laffer is not going far enough to define it by any number. He is ascribing a letter, ".E," famous ".E." And .E is where the tax equilibrium exists if we increase tax rates, tax revenues do not grow. They start declining.

If we decrease the tax rate, revenues do not go down, but go up. We've had three occasions in Poland to witness that. In the 1990s, when, in '91 and '98, Customs duties were increased for tax and other goods. The increasing of these tax duties did not cause any increase of revenues by the government. On the contrary, the revenues from these transactions dwindled.

On the other side of the coin, we have the current situation, where they reduced tax rates for alcohol, and after that development the government's revenues for the sales of alcohol are not going down. Indeed, they are growing. So we have an empirical piece of evidence showing the premises on which Ronald Reagan's economic policy was relying work in practice. They really stand the real-life test.

A number of politicians today in Poland claim strongly that the flat tax is marginally unfair to people. Well, Ronald Reagan did not go as far as putting a flat tax in place. It was not radical enough because he was facing a presidential election, and then his vice president, George Bush, faced an opportunity to be re-elected.

The relation between understanding and nonunderstanding people is much better in the United States than Poland, but some people in America do not get the nature of a flat tax either, so Reagan was afraid. And on top of that, the American economy was not in such bad shape as the Polish economy. So the room for experimenting was larger. So marginal tax rates were reduced radically under Reagan, but no flat tax was introduced.

Unfortunately, in Poland, we do not have any room or space for experimenting. We have to take a step further than Reagan, and we do have to implement a flat tax, and not in the shape and flavor promoted by some Americans. We believe the personal income tax should be abolished altogether.

Moving with the spirit of Ronald Reagan, we should put in place institutional arrangements which will be better than those of the Reagan era. One should not stop on the way. Reagan is pointing a finger, is pointing a direction, is sharing his philosophy, but based on that philosophy, I can be in search of a better world, of a better arrangement, and that was to be proven as above.

Thank you very much.

[Applause.]

MR. ROSTOWSKI: Well, thank you for a truly radical proposal, the total abolition of income tax.

I think now we've got quite a bit of time for discussion, and I therefore ask the members of the audience to put up their hands if they'd like to either ask a question or make a comment, either are welcome. Of course, also, I think given the amount of time we have, we could indeed refer back if these are not questions, but rather comments, to the previous panel, which didn't really have an opportunity to open up to discussion.

Yes, in the front row. But very short.

QUESTION: Oh, yes.

[Laughter.]

QUESTION: As you know, I am always very short.

[Interpreted.] I'll speak Polish just to be able to save time. It was a tremendous presentation that we just listened to, but the speaker said that the optimum item on the Laffer's Curve is one where the income from taxes is the maximum. The question is whether the objective to maximize the income to the state.

I think, in my opinion, it is wrong. If we lower the current tax rate from 80 percent to 15 percent, we shouldn't stop reducing the taxes because the more money rests or remains with the people and not with the government, the better.

[Applause.]

MR. ROSTOWSKI: Everybody agrees, obviously. We have a preselected audience here.

[Laughter.]

MR. ROSTOWSKI: Yes, the gentleman in the third row.

QUESTION: [Interpreted.] I just wanted to follow up on the previous part of our panel. My comments addresses the complacent tone that prevailed after the first session. I think we should rectify this a little bit. I'm trying now to disconcert you, ladies and gentlemen.

Ronald Reagan was obviously a freedom fighter. This is, in my opinion, the best description of the president, and he was anti-Soviet because he was a freedom fighter and not the other way around. It is that Ronald Reagan fought for freedom not only against the Soviet Union, but as many panelists have stated, he also fought against any threats to the freedom that emerged on the very style of the United States.

Therefore, the satisfaction that comes out of the fight that we now restate the virtues or merits of Ronald Reagan for all of us are quite substantiated. However, I would like to put forward a question whether the theory of convergence was right and to what extent it was right. Because if the theory of convergence had been right, it would mean that both systems drew closer to each other.

Two months ago, I paid a visit to Paris, and I met them with a living, live and kicking Marxist full of optimism. It would mean that the Soviet Union somehow survived, but it got transferred to a different location. What locations these are and how big the threat to freedom is we can conclude based on where these locations are.

Thank you very much.

[Applause.]

MR. GLASSMAN: Thank you for your comment. I think the reason that I ended with a quote from, well, Abraham Lincoln, and many others claimed to have said the same thing that "eternal vigilance is the price of freedom," is that we can't afford to be complacent.

I think where Marxism continues to reign in the world is probably in academic life and also in a lot of the assumptions that we make about power relationships, about some of our cynicism about politics in general. And we see this in the United States, as well as in Europe.

So I completely agree with what you said. This is not a time to be complacent. There are important battles ahead, and I think in Europe as well, and that is why I'm so encouraged that Poland is joining the EU, and I think joining the EU as an engaged and aspiring member not as a complacent member or a member under the thumb of Germany or France.

Thanks.

MR. SIKORSKI: I'd like to ask the panelists to go back to the original idea of the panel; namely, what would Ronald Reagan do today in Europe. And I would like to share the worry because, for me, the essence of the Reagan method is not just the willingness and ability to carry out great projects, to carry out great reforms and great challenges in foreign policy, but also to succeed in getting re-elected.

My question is the following: In systems where socialism has spread deep and wide enough, where you have enough people dependent on the state for their sustenance in the various state bureaucracies, in the various state industries, in the various ways in which the state in Europe has become too big.

Might you not have a situation in which you have a politically stable stagnation, relatively rich societies--Germany comes into mind--where people live well may be going back economically, losing out to competition, but because they don't experience any sudden collapse of standard of living, there is no political stimulus, no political capital to be made out of proposing world change,

And therefore the kind of strategy that Reagan and Thatcher carried out in their countries may be good, and true, and advisable, but politically impossible to carry out?

MR. GLASSMAN: Well, I think Radek points to an important problem, and it's one that has concerned me a great deal, which is that there may be a level of well-being that societies can achieve that essentially makes them so satisfied and complacent that they don't move ahead.

In a way, it is their choice, except that I think it produces very unfavorable consequences for much of the rest of the world. So we see this in Europe just as one example that the Europeans have decided that for reasons of complacency and I think superstition, they won't allow biotech agriculture into the EU, even though there is no scientific basis for this prohibition. And this has been quite damaging to the people in Africa. In fact, I think it has killed people in Africa. So there are wide-ranging consequences.

But Japan, Germany, France, seemed to have achieved a level of well-being where they don't feel they necessarily need to grow and have chosen this kind of complacency or you might call it, in some cases, simply leisure. So what is the project that would inspire them to change?

First of all, I think they're going to have to change because of demographics within the next 10 or 15 years anyway. But I do think that the world needs to be, especially the rich and complacent, need to be inspired in other ways, and I do feel that the United States can show the way. I think we've done that not as well as we should have, but certainly we've done that in Iraq, and I think we can do that in other parts of the world.

But specifically I'm not really sure whether there is an answer to Radek's question. What I've urged is that the United States focus on what I call aspiring nations, trying to inspire the aspiring, and not to worry too much about countries that have decided to mire themselves in complacency.

So that's an inadequate answer, but I think Radek has helped to define a true problem that we have today.

MR. GWIAZDOWSKI: [Interpreted.] I see a connection between the two comments, between what I can see on the one hand, the Soviet Union, and on the other hand, we are dependent on the state.

Well, the Soviet Union exists in all of us. Particles of Soviet Union continue to live in every human being. This is why we are so easily made dependent on states. So what Reagan would do in Europe. Well, he would probably arrest all of those people who are organizing strikes in Berlin and Paris, all of those straight unionists.

Secondly, he would probably start convincing us that we should start fighting the Soviet Union that exists in us, not in us, perhaps, but judging by the applause, we have some mutants in the room, the perhaps 2 percent of the society who understand. But I'm talking about the rest who tend to believe that it is the state that should extend care and protection over them every time.

I believe taxes should be maximum from the point of view of foreign and defense policies. This is why one should maximize tax revenues anyway because what we need is a modern judiciary, modern police and modern army or defense systems. I'm not saying money should be spent on minors, coal minors, but monies should be injected into the areas which a constituent of the state, if the state is going to be strong, but maximum of the least, if I may put it that way.

QUESTION: [Interpreted.] [?], Civic Movement, Normal State.

You are saying, gentlemen, that Poland should benefit from Ronald Reagan's legacy. I do agree with it fully. However the United States are so much different from Poland. The United States is a country where the best are promoted and the best win, and it applies to people who create the legislation of the country.

The United States have one mandate constituencies. Don't you believe that changes in Poland should be started with the way elections are organized in Poland?

MR. GWIAZDOWSKI: [Interpreted.] Well, perhaps we shouldn't start with it, but certainly it should be one of the key components of the reform of the political system. When we address taxes, we should perhaps answer the following question: Why don't taxpayers pay their taxes? Well, there are three reasons for that.

First of all, they look at the profit, and they calculated the marginal tax rates are very high, and then profits from cheating, tax evasion is high. Then, they factor in the risk. The more complicated the tax risk, the tax system is, the more bureaucracy and effective, the less-effective control, then the risk of being caught is low. So they look at it.

If taxpayers feel cheated upon and stolen from, if they see that monies are being squandered or fraud, subjected to--

[Tape change: T-2A to T-2B.]

MR. GWIAZDOWSKI: [Interpreted.] [Continues.] --should be changed starting from the election system.

MR. ROSTOWSKI: Which has been relatively silent.

Yes, the gentleman in the back?

QUESTION: [Interpreted.] I have a question I think over to Mr. Gwiazdowski because Adam Smith Centre is one of the organizations which are promoting Reagan's ideas, and we know that Reagan had similar problems as you. For several years, he said things, and said more things, and nobody listened to him, and something must have happened to make people listen to him. So there must be a