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June 24, 2005



PAUL GIGOT: Welcome to THE JOURNAL EDITORIAL REPORT. Secretary of State Condoleezza Rice used some shocking language in the Middle East this week. Face to face with the leaders of Egypt and Saudi Arabia, she challenged them to embrace democracy. The United States, she said, was changing course.

CONDOLEEZZA RICE: For 60 years the United States pursued stability at the expense of democracy in this region here in the Middle East, and we achieved neither.

PAUL GIGOT: With me to offer our take on the Secretary of State and some of the other news of the week are: Dan Henninger, columnist and deputy editor of the Wall Street Journal editorial board; Jason Riley, a senior writer for the editorial page; And Steven Moore, a senior writer for the editorial board. Dan, those are some astonishing words by the Secretary of State, stability no longer promoting democracy. How big a change is this for U.S. foreign policy?

DAN HENNINGER: Well, I think it's a huge change, and I think it's a very important change. It's generally thought to be very idealistic. I think it's very pragmatic. It reflects the world we live in now. We live in a world in which Saudi Arabia can export terrorists into the world and AQ Khan of Pakistan can create a network that sells materials to create nuclear bombs and biological weapons around the world. And I think the question is whether authoritarian governments like Saudi Arabia and Egypt are more dangerous if they acquire this sort of material, or whether a democracy like, say, Brazil -- which has a nuclear processing program up and running -- is less dangerous. And I believe that Bush and Rice are arguing that it is in our national interest that we can minimize these dangers if more of these autocracies are turned into democracies. And I agree with that.

PAUL GIGOT: Well for years, we supported these dictatorships, Arab dictatorships, because we said the alternative was worse. The alternative was fundamentalists taking over. The Bin Ladens -- well, we supported the dictatorships. We got Bin Laden anyway -- he's a Saudi. Al Zawahri, his deputy, isn't Egyptian, and they ended up attacking us. So what they're saying -- that is, Rice and the President are saying -- is we've got to go after these places that have become the breeding ground of terrorists, and change them.

JASON RILEY: And she also in this speech acknowledged the fact that that could be a difficult process, moving towards democracy. I was struck by how she brought up the U.S. experience and our long and difficult road to democracy. She mentioned slavery. She mentioned how only in her lifetime everyone in America has the right to vote, in reference to the Voting Rights Act of 1965. So coming from her, from someone with that background, I think that might resonate.

PAUL GIGOT: Well, there is a precedent for this. And I would say East Asia during the 1980s, you know, those were also our allies -- South Korea, Taiwan, the Philippines -- and yet they were authoritarians. We supported them because they were our allies in the Cold War, but we realized that there was some instability there. We pushed them for democracy. It took awhile, but ultimately they transitioned to democracy, and I would argue that East Asia is more stable for it. It took awhile, but it worked. All right, thanks.

In other news, the Chinese are flexing their muscles, making an unsolicited 19 billion dollar bid to take over Unocal, which agreed two months ago to be sold to Chevron. Earlier this week, a Chinese company made a bid to buy the Maytag Corporation, and last month China's largest computer maker completed its deal for IBM's personal computer business. Jason, what's the significance of all this?

JASON RILEY: Well I think this is yet another example of China wanting to join the multi-national club, establish a global presence in the West. And in and of itself that's a very good thing. I mean, we don't want to close off our markets to Chinese capital. We certainly don't want to go into places like Iran or Sudan. We'd rather have them investing in the West. So this is a good thing. The important thing to watch out for here is whether Unocal shareholders will make the ultimate decision as to whether or not they go with Chevron or go with the Chinese company. And the backdrop, what's going on in that area, makes it uncertain. The U.S., the administration has been prepping China to revalue its currency. You have that backdrop. You have a lot of protectionists in Congress who might be pushing to block a Chinese deal. So let's make sure the shareholders make this decision. But in and of itself, China wanting to engage the West in this way is a good thing.


DAN HENNINGER: Absolutely. I mean, this deal will be harshly criticized in Congress. But on the one hand, you can't complain that the Chinese are not behaving like good partners in the global economy and then prevent them from participating in the mechanisms of the global economy where they can learn how to be good partners.

PAUL GIGOT: We've been lecturing the Chinese to open up their capital markets as part of their agreement to join the World Trade Organization. If we now say you can't spend your capital here, that would be a fairly contradictory message.

The debate over The debate over Social Security reform shifted this week, with a new congressional proposal on how to start private investment. Steve, is this going to shake up the debate?

STEVEN MOORE: Yeah, this debate has been resuscitated. All of a sudden private retirement accounts are back on the table. Republicans have come up with a very shrewd idea here, which is to say, okay Democrats, you don't want to have a big personal account system. Let's just take the surplus amount in the Social Security system -- which is about a hundred billion dollars a year ...

PAUL GIGOT: And that surplus is the amount that exceeds what goes out, the amount of taxes that exceed every year the amount that goes out to current retirees.

STEVEN MOORE: That's right. And what makes Americans of all ages and all political stripes seethingly angry is that this money is being spent on road projects and Lawrence Welk museums and all the other things government spends money on. So what the Republicans are saying is, okay, let's wall off that money in 140 million lock boxes, that Americans could actually take that money and put it in their personal accounts. And it guarantees that that money can no longer be spent on other government programs.

PAUL GIGOT: Do you think this is going to bring any Democrats into the debate? Because they've been so far saying we don't want any part of anything that's labeled a personal account.

STEVEN MOORE: It's very tough. You're exactly right. They're reflexively against personal accounts. But this is an excruciating -- if you're a Democrat, this is a really tough vote if it comes to the House or Senate floor, because you have to either vote against personal accounts or you have to vote for keeping this raid on Social Security going.

PAUL GIGOT: One Republican in the House told me that he thinks this means about 30 or 40 Democrats may end up voting for this, if it does go to the floor.

STEVEN MOORE: I hope you're right.

PAUL GIGOT: All right, thanks. Next subject.