must also be concerned about what happens to the culture as a whole, because there are transmitted the skills-simple arithmetic, manual skills, habits of cooperation, habits of invention-on which an economy depends.

Why are we so worried about education today? It is our culture that is going bad. Our culture is not doing its job. It is failing both the economy and the political system. As one can see from this encyclical, the great economic debate, and the great political debate of the bloody 20th Century have been resolved, at least in the Pope's mind. Democracy, for all its faults, protects human rights better than any other form of government. That argument is over. It was not so clear before World War I and World War II. But democracy has triumphed.

Second, it was not so clear whether socialism or the traditional economy were preferable to a new capitalism. However, the new capitalism proved to be the superior economic system for meeting human needs and achieving the common good. That is now clear. But what is not at all clear is how we will live in a free society. Granted political liberty, granted economic liberty, what will we do with what we have?

Here, I think Bishop Malone is quite right. We have a lot to examine in ourselves about how we are doing it, and this is what the Pope is calling us to.

I have always thought the seal of the United States represented us very well. The framers went through seven drafts of this seal so we know they thought about it a great deal. You can find it on the back of the dollar bill. Under it, if we may introduce Latin again, they put a little motto-they had a different motto for the first six drafts and in the last draft they inserted the present motto: "Novus. ordo seclorum," the new order of the ages. They knew they were developing something new, and unlike Great Britain, or France, or anyplace else, they wanted that originality noted. Federalist 37, affirms "The novelty of the undertaking immediately strikes us.

Above the motto they drew a picture of what that ordo is, and I would interpret it in this way. It is in the form of a pyramid. They wanted some identification with the ancient people of Israel who went out from Egypt seeking the Promised Land and wandered in the desert. So, they imagined most Americans coming to this virtually empty continent seeking a new city on the hill, a promised land.

But the pyramid also gave him a way of suggesting the novus ordo itself, the structure of the order. At the bottom, imagine limited government. The framework is crucial. Unless you have the juridical framework, the rest will not work.

Even in Eastern Europe today, they are discovering that until they get laws of private property, laws of contract, and other sorts of laws, they cannot have a free market. It will not work. Nothing can be done.

Chairman LAFALCE. How about in Mexico?

Mr. NOVAK. Mexico is the same. In Mexico, it is exceedingly difficult to get secure claim of private property. People have confiscated on others' land immemorially. It is not secure. You could go through the laws of Mexico, which do not work, and you can see why there is this great problem, but until you get the law straight,

it is very hard for people to have understandable expectations and make long-range investments.

But then you have to leave the economy free. You cannot manage it. It has got to be bound to the law. There, as it were, is the base of the pyramid. Political economy.

But above it all, they deliberately left the pyramid uncompleted to show that the final values are transcendent values, and they put the eye of God there, or the eye of conscience, if you are not a believer. Liberty and justice will never be achieved. We will always be under their judgment, no matter how rich or how powerful we

are.

Chairman LAFALCE. I find this fascinating. If you have any text which explains this, I would love to read it.

Mr. NOVAK. Well, I have written on this subject a number of times. The State Department has an official history of the seal, and much of the immediate symbology is interpreted in it. The more or less philosophical interpretation of the three systems, however, you will not find spelled out there. You will find it implicit in legislation for example, when it says "Congress shall make no law regarding religion or the press," Congress is one part of the system, but Congress is not above the cultural moral part.

To conclude my remarks, I should like to summarize a few things that the Pope has done.

First, the emphasis on the human mind is the chief form of capital. Second, the emphasis on the right to personal economic initiative is a right also guaranteed in the United States, a deeply cherished right. People have the right to economic initiative without Government permission, as is always necessary in Britain, in Latin America, or elsewhere.

Third, the Pope develops the virtues that are part of enterprise. Usually, in land-based economies, enterprise and commerce were looked upon as something vulgar, petty, mean, filthy. To see small business treated with respect is an aspect of Christian virtue, as an expression of the very creativity of God, is a very important preaching. I dare say not many people have heard sermons encouraging them in their economic activities in quite this way.

Fourth, in section 48 the Pope discusses the way in which we ought to be treating the poor in advanced society. It gives credit for the fact that after World War II, particularly, the new governments did turn to the poor, not just for those who were able and were willing to work in markets, but also for the poor. But the Pope is concerned about the system we have set up here and in Europe. The welfare systems that we have set up are damaging the poor as much as helping. The welfare systems are making the poor dependent. He does not mention this in the text, but I think it lies behind the text because the problem is rife in Europe, too. There is an extraordinary outbreak of illegitimacy. In the United States, the figures just released for 1988 show over a million children born out of wedlock according to the last reporting. That never happened before, even when people were much poorer than they are today. It is happening in even greater numbers, in greater proportion, in Sweden and elsewhere. So, something is going away in the socialist state system that needs attention. The Pope attributed it to setting up big bureaucracies so expensive that they leave out the ordinary

human character, the ordinary human creative subjectivity of the people involved.

He asked us to consider methods which would help the poor in a better way than we are now doing it.

I think there is a terrific agenda behind this letter. The Pope says the church is not in the business of setting up a Government program or a party platform. Instead, it proposes practical ideals and criticizes existing ideals that are not going quite right or should go somewhat better.

I agree with Bishop Malone that this letter gets beyond the older categories of right and left. Some basic arguments being settled, it really invites all of us to start over again.

Chairman LAFALCE. There are reaffirmations to both, and there are challenges to both clearly.

Mr. NOVAK. That is exactly right. So, that is it.

Chairman LAFALCE. Thank you very much. I, as always, found your remarks stimulating, Mr. Novak.

[Mr. Novak's statement, with attachments, may be found in the appendix.]

Chairman LAFALCE. Our next witness is going to be Mr. John Steinbruner. Mr. Steinbruner is a scholar working out of the Brookings Institution. In fact, he is a specialist in foreign policy, correct?

Mr. STEINBRUNER. That's correct.

TESTIMONY OF JOHN D. STEINBRUNER, DIRECTOR, FOREIGN POLICY STUDIES, THE BROOKINGS INSTITUTION

Mr. STEINBRUNER. I have also prepared a statement which I will submit for the record. As is customary, this is an individual statement, not part of any institution.

Chairman LAFALCE. Without objection, we will put the entirety of your remarks in the record.

Mr. STEINBRUNER. I will summarize it very briefly.

As you noted, Mr. Chairman, and as the other speakers have noted as well, this encyclical is a very rich document with many judiciously balanced themes. I want to extract from it the main messages that I derived from it. I do not imagine that this is the only way in which it will be interpreted, but I think it a particularly important way. I do not think I will be alone in my reaction. At a very general level, I see two very strong propositions emerging from it. One is the assertion that the failure of authoritarian socialism as a viable social philosophy, although it has liberated the world from a threat of war and repression-and that is to be greeted with a great deal of joy, as the Pope does-has also left a conceptual vacuum as to how common purposes are to be organized and pursued. I see the Pope seriously worried about the vacuum created.

He does endorse the principles of market economy and the particular assertion, philosophy of individual rights that accompanies it. It is very important that he does so. But I believe he is saying that this is not a complete social philosophy. In particular, it tends to undervalue the collective interest, and that is a problem that we

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need to worry about. I read this encyclical, therefore, as a call to address ourselves to the issue of common purpose.

I do not imagine that I could add anything to the moral force of the Pope's statements, so I want to talk about some practical trends in the world that give powerful reinforcement to the comments that he is making and the guidelines he is setting forth.

First, I note that we are in the midst of a profound, largely spontaneous, technical revolution which is likely to change the nature of the way economies work in the course of the next century and probably much more rapidly than that. It is being driven primarily by the dramatic technical progress in the processing and transmitting of information. The transmitting of information over the last two decades has improved by two or three orders of magnitude, and it continues to improve at the rate of about 70 percent per year. I do not think we have fully comprehended yet what this will mean in the way in which international economic activity is conducted. I think the Pope is anticipating this development, and pointing out that it is knowledge emerging from the processing and transmission of information that is the key to meaningful economic participation and to the overall performance of modern economies. Out of this transformation that we face, I think he is warning, and appropriately so, that there is a great deal of common interest to be defined and pursued. We will have to find mechanisms for doing

So.

I extract from his comments, and from the practical situation, an imperative to develop what I would call policies of inclusiveness. By this I mean recognition that we are in the midst of a process in which an international economy is being created. We cannot, and should not, resist that. We do need to shape it, State its rules, and develop its necessary elements of regulation. But its underlying principle is that all countries and all people are to participate on equitable terms, and our policies must be so aligned to try to produce such a result. The burden of proof falls very heavily on anyone who would make an exception to this.

That implies to me that we need to be very, very careful about excluding or isolating any country on political grounds, as careful as we are about imposing criminal sanctions on individuals within our own constitutional system. We also have to be very careful and very concerned about the exclusion of people in terms of natural social dynamics. People who live in places that are not integrated into the developing global economy and who are subjected to such terrible conditions of disadvantage that it is a question as to whether you can say they are meaningfully participating in economic progress.

I recognize that these are abstractions, actually rather familiar abstractions. These thoughts have been talked about for quite some time. It is quite important to bring them to connect with real policy in order to get some practical sense of what they mean. As an illustration, I, in my statement, mention the current issue of Export Control, which in many ways is a vital matter, an essential matter, in the development of an international economy based upon the processing and transmitting of information. Access to those technologies is truly a matter of vital interest, both for countries and for individuals.

At the moment, we are systematically attempting to exclude certain countries from access to highest levels of this technology on security grounds, and we have been doing this for a long period of time, The supposition is that they are potential enemies and should be denied access to this technology for that reason. That seemed to be such a compelling matter that it was an overwhelming matter of consensus up through the last couple of years. It is now clearly an open issue of debate as the former enemies are changing their declared policy, and, indeed, to some extent the nature of their societies, in attempting to join the world on standard terms.

We are moving in the direction of removing these restrictions, and we have cut back on them, but we have not really changed our fundamental policy. We are still discriminating against the Soviet Union and most of the countries of Eastern Europe on the grounds that they are potential enemies and should be denied access to this vital technology. I think that that is both unwise and unsustainable, and it is in evidence of a revision of policy that we have not fully undergone.

Chairman LAFALCE. Well, Mr. Steinbruner, I think that when it comes to the gleaning of general principles we may be in accord, but when it comes to the practical application of those principles, people of similar perspective, with respect to the general principles, could differ markedly on the application of those principles.

I, for one, think we should be much more flexible in the positioning of our export controls than we have been. But by the same token, I do not think you would want to share all our technology with Iraq.

Mr. STEINBRUNER. NO.

Chairman LAFALCE. No; how about Syria? Sometimes with us, sometimes against us, and we do not know where they are going to be tomorrow.

Mr. STEINBRUNER. I mention this case because I think it is a very difficult case. My general point is that we should do more than just discuss the general principles. We should struggle with the question as to how they connect to very practical policies of this sort. Chairman LAFALCE. Yes. What I think is important is that we always have the principles before us, and 9 times out of 10 we do not have the principles before us, unfortunately. When it comes to the application of those principles, then I think that we liberals and conservatives, we Democrats and Republicans, can have our own puzzle, and as long as the principles are before us, we are making judgments, the backdrop motivation of those principles. Mr. STEINBRUNER. I do not disagree.

Chairman LAFALCE. When you get to discrete cases, whether it is the Soviet Union or some other country, the Peoples Republic of China, et cetera, then you have some hard calls to make.

Mr. STEINBRUNER. Indeed. That is part of the point I want to make. That both on practice-

Chairman LAFALCE. Unlike John McLaughlin, I would not be one to say right or wrong.

Mr. STEINBRUNER. No, you cannot declare moral right or wrong down at that level of specificity. However, I do believe that, again, for both moral and practical reasons, we have to take these principles seriously enough to struggle with what they mean in these