One of the lasting effects of the 2008 financial crisis was the belief that the distribution of economic power had radically shifted. China rising, West fading, yadda, yadda, yadda. A minor key in this argument has been the notion that a new and important measure of economic power is the size of a country's official reserves. This has led to the occasional panicked article that "China is buying gold!!" or "Russia is hoarding gold!!" or "Germany is moving gold!!" as a first step towards pushing the dollar out as the world's reserve currency.
Which is just so much horses**t.
Here are three facts to remember whenever you read any story about a BRIC economy hoarding gold:
1) Buying gold would have been extremely savvy in 2008. Now it's just silly. The price of gold peaked at over $1900 in September 2011 -- and despite massive amounts of quantitative easing and numerous reports about central bank hoarding, it's fallen by $300 since and trending downward.
2) The BRIC economies did not have a lot of gold to begin with. As Bloomberg notes, "Russia’s total cache of about 958 tons is only the eighth largest [in the world]."
1. The United States (8,134 tons)
2. Germany (3,391 tons)
3. The International Monetary Fund (2,814 tons)
4. Italy (2,451 tons)
5. France (2,435 tons)
So, to sum up: To believe that gold holdings really matter in the global political economy, you have to be willing to assert that Italy is a great power in global finance. I, for one, am not going there.
A little more than two years ago I wrote a blog post entitled "The End of Power?" After riffing on the subject for a spell, I closed with:
So... we live in a world in which more actors have vetoes over systemic change but no actor has the ability to truly compel change. This leads to lots of talk about "G-zero worlds" and so forth.
Just to be provocative, however, I wonder if what's truly changed is the extinction of compellence power as we know it. The primary, ne plus ultra tools of compellence require a willingness to kill, jail, or starve a lot of people. Recent flare-ups like Iran in 2009 and Egypt right now suggest that such actions are possible at the domestic level but pretty damn costly; even authoritarian countries flinch at using brute force on a domestic population. Cross-border efforts are even more expensive in terms of both material and reputational costs.
This isn't the end of power, but it might be the end of one particular dimension of power. I'm not entirely convinced that this supposition is true and am willing/eager to hear counterarguments. That said, I still hereby claim The End of Power as my title, so everyone else just back off, OK?
Well, so much for my claim. Former FP head honcho Moisés Naim has a new book out called... The End of Power: From Boardrooms to Battlefields and Churches to States, Why Being In Charge Isn't What It Used to Be. His argument:
Power is shifting -- from large, stable armies to loose bands of insurgents, from corporate leviathans to nimble start-ups, and from presidential palaces to public squares. But power is also changing, becoming harder to use and easier to lose. As a result, argues award-winning columnist and former Foreign Policy editor Moisés Naím, all leaders have less power than their predecessors, and the potential for upheaval is unprecedented. In The End of Power, Naím illuminates the struggle between once-dominant megaplayers and the new micropowers challenging them in every field of human endeavor. The antiestablishment drive of micropowers can topple tyrants, dislodge monopolies, and open remarkable new opportunities, but it can also lead to chaos and paralysis. Drawing on provocative, original research and a lifetime of experience in global affairs, Naím explains how the end of power is reconfiguring our world.
The originality of the argument -- along with the subtitle -- saves Moisés from some serious legal retribution!! Well, that and he asked me to moderate a panel on the topic with him and Fareed Zakaria at the Council on Foreign Relations. Here's the video. Enjoy!
A few months ago, the Tobin Project sponsored a YouGov poll to be put in the field on American attitudes towards foreign policy and national security. Dartmoth political science Benjamin Valentino conducted the poll, being so good as to solicit, collate and structure questions solicited from other political scientists, myself included.
You can look at all of the topline results here, with party-line breakdowns to the responses. The question I offered was Q53: "In thinking about a country's influence in the world, which single factor do you think matters most?" The response:
25.9% "The country's military strength"
45.0% "The size of the country's economy"
8.2% "The attractiveness of the country's culture"
21.0% "Don't know"
As for party line splits, Republicans stressed military strength almost as much as GDP (39.8% to 42.5%), which made them a bit of an outlier compared with Democrats or independents.
Related to this is Q57, which asked respondents whether they preferred a high growth world in which "the average American's income doubles, but China grows faster than the United
States and China's economy becomes much larger than America's" or a low growth world, in which "the average American's income increases by only 10 percent, but the U.S. economy remains much larger than China's." A majority (50.7%) preferred the low growth world, thus supporting my long-standing argument that Americans are stone-cold mercantilists.
I also submitted a variant of Q21: "In your opinion, what country is America's most important foreign ally?" to see whether Israel made it into the "super-special" ally status desired by a few neoconservatives and political leaders. Again, the results and party splits are interesting. Among the entire sample, Israel placed second, behind only Great Britain. It was a much stronger second among the GOP respondents, however -- among Democrats, Israel actually came in third, below -- gasp! -- Canada.
Readers are strongly encouraged to scan the the entire poll -- there's a lot of great stuff. The responses to Q25 ("How strongly do you agree or disagree with the following statement? 'The United States faces greater threats to its security today than it did during the Cold War.'") will make Micah Zenko and Michael Cohen want to bang their heads against a wall. And the GOP responses to Q64 ("Which of the following statements best describes your views on whether Barack Obama was born in the United States or another country?") are, shall we say, disturbing.
It's hard to believe, but ten years ago Robert Kagan published "Power and Weakness" in the pages of Policy Review. Coming on the heels of the invasion of Afghanistan and the start of the Iraq debate, Kagan's essay seemed to crystallize the state of the transatlantic relationship back in the day.
To celebrate it's 10th anniversary, Policy Review has come out with a special issue devoted to the essay, asking a variety of smart people to weigh in. Oh, and me. As I put it in my essay, "I come to praise Kagan's insights -- and then to bury them." You'll have to read the whole thing to see what I mean.
Check out the rest of the essays as well. With the passing of a decade, it's pretty easy to point out the ways in which Kagan's analysis breaks down (and, to be fair, the ways in which it doesn't). To his credit, Kagan himself is painfully aware of how his essay has aged:
Ten years ago, when I wrote the original essay, it would not have occurred to me that anyone would be commenting on it a year later, let alone a decade later. As Tod knows, I only wrote the essay because he had invited me to speak at a conference, and I had to deliver something. No doubt the other contributors will recognize the experience. Therefore from the beginning I have been acutely aware of the essay’s limitations — and have had the good fortune to have all those limitations pointed out to me frequently, in many languages, with greater or lesser kindness over the years, and now again at the scene of the crime a decade later.
I remember talking with Kagan when the original essay came out and blew up, and I can aver that he was just as surprised as anyone else about its impact. Let this be a lesson for policy wonks everywhere. Sure, most of the time when you write something it disappears into the ether, to be forgotten almost immediately. But on occasion, serendiptity or fortuna strikes, and you've suddenly got a major essay on your hands. Always write with that in mind -- because if your essay does blow up, you better be ready, willing and able to defend every paragraph of it.
I was never formally introduced to either Vaclav Havel or Christopher Hitchens, but I encountered both of them exactly once. I was lucky enough to hear Havel deliver a speech at Stanford University in the fall of 1994. I don't remember much about the speech itself beyond a vaguely metaphysical theme. What I do remember is a specific physical gesture. At one point during the proceedings, at Havel's request, Joan Baez came on stage, played her guitar, and sang a song. After Havel spoke, everyone exited the stage, Havel last. He noticed Baez's guitar, and picked it up. As he left the stage, he looked over his shoulder and raised the guitar over his head. The expression on his face screamed, "can you believe I'm holding Joan Baez's friggin' guitar??!!!"
My encounter with Hitchens was a little more mundane -- we were both participating at an AEI panel in early 2001 on international law. I was on a morning panel, and afterwards, Hitchens gave the lunch keynote. I can recall the standard Hitchens attributes: him reeking of cigarettes and alcohol, but nevertheless giving a very good speech. What I also remember is talking with one of the AEI assistants who was tasked with "handling" Hitchens for the day. We started chatting, and at one point she said plainly, "the minute he leaves here will not be soon enough for me."
I'd love to be able to divine some deeper meaning from their deaths, but I'm not quite as inspired a writer as either of them. It's funny to think that Hitchens started out politically to the left of Havel, swerving a bit to his right about a decade ago, but that's not a theme. Rather, this being a blog, I have two unrelated thoughts.
First, as someone who has written a thing or two about public intellectuals, Havel really was extraordinary as someone who could be trusted with power. As Mark Lilla noted in his excellent The Reckless Mind, intellectuals don't really have a distinguished track record when they actually acquire power. Havel was a notable exception -- perhaps because he never really thought he should have it. In David Remnick's New Yorker write-up of the end of Havel's (politically successful) presidency, the politics of doubt that I like so much shines through quite clearly:
At times, Havel felt thoroughly insufficient, a fraud. A familiar Prague voice, the voice of Kafka, told him what anyone who has grown up in a police state knows instinctually—that it could all end as easily as it started.
"I am the kind of person who would not be in the least surprised if, in the very middle of my Presidency, I were to be summoned and led off to stand trial before some shadowy tribunal, or taken straight to a quarry to break rocks," he told a startled audience at Hebrew University, in Jerusalem, less than six months after taking office. "Nor would I be surprised if I were to suddenly hear the reveille and wake up in my prison cell, and then, with great bemusement, proceed to tell my fellow-prisoners everything that had happened to me in the past six months. The lower I am, the more proper my place seems; and the higher I am the stronger my suspicion is that there has been some mistake."
In Havel's thirteen years as President—first of Czechoslovakia and then, after the Slovaks and the Czechs divided into two states, in 1993, of the Czech Republic—many of his advisers repeatedly begged him to delete, or at least soften, these public moments of self-doubt. What effect would they have on an exhausted people waiting for the radical transformation of their country? (Imagine Chirac or Blair, Bush or Schröder beginning a national address with an ode to his midnight dread!) Havel, however, would not be edited. The Presidential speech was the only literary genre left to him now, his most direct means of expressing not only his personal feelings but also the spirit of the distinctively human politics he wanted to encourage after so many decades of inhuman ideology. "Some aides tried to stop him, but these speeches had a therapeutic value for him," Havel's closest aide, Vladimír Hanzel, told me.
As Ta-Nehisi Coates observed recently, most people are mediocre and, if they were given power, would likely not exercise it all that benevolently. Havel was about as far away from mediocre as one could be.
Hitchens was not mediocre, but neither was he gentle, and so his passing generated a more variegated response. There was the eruption of fond memories from fellow writers at his ability to consume and produce prodigious amounts of prose and other substances -- this one is my favorite. It's also led Glenn Greenwald to grouse about the hagiography that the death of public figures ostensibly produces:
We are all taught that it is impolite to speak ill of the dead, particularly in the immediate aftermath of someone’s death. For a private person, in a private setting, that makes perfect sense. Most human beings are complex and shaped by conflicting drives, defined by both good and bad acts. That’s more or less what it means to be human. And — when it comes to private individuals — it’s entirely appropriate to emphasize the positives of someone’s life and avoid criticisms upon their death: it comforts their grieving loved ones and honors their memory. In that context, there’s just no reason, no benefit, to highlight their flaws.
But that is completely inapplicable to the death of a public person, especially one who is political. When someone dies who is a public figure by virtue of their political acts — like Ronald Reagan — discussions of them upon death will be inherently politicized. How they are remembered is not strictly a matter of the sensitivities of their loved ones, but has substantial impact on the culture which discusses their lives. To allow significant political figures to be heralded with purely one-sided requiems — enforced by misguided (even if well-intentioned) notions of private etiquette that bar discussions of their bad acts — is not a matter of politeness; it’s deceitful and propagandistic. To exploit the sentiments of sympathy produced by death to enshrine a political figure as Great and Noble is to sanction, or at best minimize, their sins. Misapplying private death etiquette to public figures creates false history and glorifies the ignoble.
Meh. I read a lot of the Hitchens write-ups, and a fair number of them were pretty blunt about his personal and political dark sides. Even critics like Corey Robin acknowledge the "consistent line" of “Yes, he was wrong on Iraq, but…” in the public responses to his death. This suggests that Hitchens has not, in fact, been a subject of one-sided requiems. even by those who liked him.
I suspect two things are going on in the public reaction to Hitchens' death, one unique to him and one that's more general. What was unique about Hitchens was that he was an archetype brought to life. Here was a real, honest-to-goodness heavy drinking, heavy smoking, occasionally rude Brit who could nevertheless dash off excellent writing on a daily basis. Where do you actually see that outside of the movies nowadays?
The more general trend is that in an age of self-publishing, perhaps the personal and the public are more fused than Greenwald realizes or comprehends. Hitchens hung around with a lot of writers, and as friends it's not shocking that their initial responses will be to talk about the private individual behind the public persona. As time passess, more strangers will push back, there will be more sober reassessments, and eventually some kind of perspective is achieved. The thing about the internet is that it amplifies these cycles of reactions and counterreactions for all to see.
At 8:30 this morning U.S. Secretary of State Hillary Clinton will give "a major address on the role of economics in our foreign policy." This speech is the culmination of a series of Clinton speeches and papers over the past few months, including her July remarks in Hong Kong, her essay on America's Pacific Century in the pages of FP, and her remarks on global leadership earlier this week.
A key precept in Clinton's effort is addressing a kind of cultural lag in the sprawling Washington bureaucracy. Lead policy makers may recognize the pivotal role that economics plays in global diplomacy--but in many ways, the diplomatic bureaucracy needs to catch up. Clinton's planned speech will be in large part a call to her own agency's ambassadors, diplomatic staff and analysts to shift their thinking.
And as Clinton lays out that vision in more detail, she will stress two main bulwarks. First, she will highlight the need to advance relations with the wider world as part of the effort to revive the American domestic economic order. And second, she will stress that State Department diplomats and foreign policy thinkers need to work harder to understand how market forces are driving first-order national security challenges in hot spots such as Afghanistan, Iraq and Iran.
Now, as I noted last week, my full disclosure here is that I've seen multiple draft versions of this speech and might have made a modest suggestion or two (because you, dear readers, know how gentle I am with the red pen). Last week, I was pretty pessimistic about the effect of this kind of initiative:
I fear that the State Department is fighting through hurricane-level winds on this front to make a difference. First, the trade deals just sent to Congress are the last ones we're going to see for a while. Doha is dead, the Trans-Pacific Partnership still hasn't materialized, and all of the momentum on trade policy is to move towards
futile gesturesclosure. The dynamic, growing economy is not looking so dynamic, and those deep capital markets are getting extremely jittery.
And this week? Oddly, I find myself more on the "glass half full" side, for a few reasons. First, Congress finally cleared the decks on the three outstanding trade deals, so that looks a bit less embarrassing. Second, there does appear to be genuine enthusiasm inside the administration for the Trans-Pacific Partnership, and a recognition that this would be a neat-o deliverable for the upcoming APEC summit in Honolulu. Third, my own conversation with State Department officials suggest that they've got a decent read on which geographic regions should be the focus of which initiatives. Fourth , dwindling resources doesn't mean no resources -- the U.S. still has some formidable foreign economic policy arrows in its quiver.
The most important reason I'm more optimistic, however, is that the Secretary will be doing two things with this speech that speeches can actually accomplish. A speech can act as a form of reassurance to other countries that the United States gets it -- economics is a vital component of foreign policy, and Washington is ready to play.
A speech can also signal to the foreign policy bureaucracy that there's a shift in priorities, and they had better get on the train if they want to
get promoted make a difference. If foreign service officers see that a familiarity with economics is a key for advancement, then the United States will develop a diplomatic corps that doesn't run away screaming in terror seem distracted if the words "exchange rates" or "geographic indicators" are uttered.
Watch the speech yourself -- it will be webcast at 8:30 AM -- and let me know what you think in the comments.
Yesterday FP alum Laura Rozen detailed the State Department's push to have economic statecraft to the front and center of U.S. diplomacy:
[I]n many ways, Hillary Clinton's diplomatic portfolio is increasingly indistinguishable from many of the leading challenges in global economic policy. Trade issues obviously have a direct impact on America's efforts to emerge from the present economic downturn--from the battles over the national debt to the the need to stimulate job growth. But economic issues also shape other less-noted features of the American foreign-policy agenda, be it the effort to contain fallout from Europe's debt crisis, to the rise of major economic powers such as China, Brazil, Turkey and India—all of whom come bearing their own foreign policy ambitions....
So Hillary Clinton has been working hard to beef up the economic bench strength of the State Department, while also mounting a bid for State officials to play a more decisive role in determining U.S. global economics policy. Aides expect her to lay out what they are calling the "Clinton doctrine on economic statecraft" early this month, likely in a speech in New York. Timing and venue for the address are still being worked out, her aides say.
"This is coming from a sense that we are seeing the lines between national security and economic security blur as emerging powers are doing more to advance their economic power, and fitting their national security strategy is more about economic interest," the State Department adviser told the Envoy Friday....
"As we pursue recovery and growth, we are making economics a priority of our foreign policy," Clinton said at the International Institute for Strategic Studies-Shangri La conference in Hong Kong in July. "Because increasingly, economic progress depends on strong diplomatic ties and diplomatic progress depends on strong economic ties. And so the United States is working to harness all aspects of our relationships with other countries to support our mutual growth."
Full disclosure: State Department officials have reached out to your humble blogger
in a sign of true desperation to talk about ways in which economics should be integrated into American foreign policy. Don't panic -- I know that they're talking to smarter people than I as well.
Economic statecraft is only as useful as the economic power that fuels such statecraft -- namely, the attraction of possessing a large, dynamic, growing economy for imports, deep capital markets, provisions for foreign assistance, and a model of economic development that looks attractive to others. Now, getting Congress to vote on negotiated-long-ago trade deals is certainly a step in the right direction. Talking about Russian entry into the WTO is also constructive.
On the other hand.... I fear that the State Department is fighting through hurricane-level winds on this front to make a difference. First, the trade deals just sent to Congress are the last ones we're going to see for a while. Doha is dead, the Trans-Pacific Partnership still hasn't materialized, and all of the momentum on trade policy is to move towards
futile gestures closure. The dynamic, growing economy is not looking so dynamic, and those deep capital markets are getting extremely jittery.
Finally, there's foreign aid -- which brings us to this New York Times front-pager by Steven Lee Myers:
America’s budget crisis at home is forcing the first significant cuts in overseas aid in nearly two decades, a retrenchment that officials and advocates say reflects the country’s diminishing ability to influence the world....
The financial crunch threatens to undermine a foreign policy described as “smart power” by President Obama and Secretary of State Hillary Rodham Clinton, one that emphasizes diplomacy and development as a complement to American military power. It also would begin to reverse the increase in foreign aid that President George W. Bush supported after the attacks of Sept. 11, 2001, as part of an effort to combat the roots of extremism and anti-American sentiment, especially in the most troubled countries.
Given the relatively small foreign aid budget — it accounts for 1 percent of federal spending over all — the effect of the cuts could be disproportional. (emphasis added)
It's striking to see Myers be that blunt in his assessment of the effects of these budget cuts. Look, foreign aid is far from a panacea, but one has to think of these forms of economic statecraft as spending on preventing rather than curing ailments in American foreign policy. As a general rule, the former is far cheaper than the latter. The latter also tends to involve a much greater allocation of blood and treasure. I know why foreign aid is the first item on the chopping block -- unlike military spending, it doesn't go to Congressional districts -- but let me go on record as saying this is a stupid own-goal by both Democrats and Republicans in Congress. Even if one buys the need for fiscal austerity, there's a lot more waste in the Pentagon than the State Department.
So American economic power looks set to wane, and the Amerian model of political economy seems broken. On the one hand, this is not a strong foundation upon which to build a more effective economic statecraft. On the other hand, this is precisely the moment during which policymakers need to think about how to be more efficient with America's still-impressive reservoirs of economic strength.
Consider the comments below as a suggestion box -- what would you recommend the State Department do to improve upon American economic diplomacy?
While the debtopocalypse might have been cancelled, I see that the wake for American hegemony is chugging right along.
The interwebs is drowning from variations of the argument that the process by which the debt ceiling deal was reached has dented American power. To sum them up: Sure, the United States government staved off collapse, but the galactically stupid brinkmanship over it has permanently damaged America's brand. Furthermore, the new politics of brinkmanship means that we could potentially see this kind of own-goal as a new permanent fixture of American political economy. Continued political uncertainty over something as obviously necessary as raising the debt ceiling means that actual policy problems like, say, crumbling infrastructure, education, or reassessing grand strategy is a true fool's errand. So, in other words, the USA is screwed.
To which I say: mmmmmmmaybe.
I don't doubt that the U.S. brand of constitutional democracy has taken a pretty severe hit from this episode. Then again, the parliamentary system of democratic governance has long been more popular, so that's not really a new thing.
There are three factors, however, that make me wary of this kind of eulogy. First, I've come to look at concepts like "soft power" and "standing" with a bit of a jaundiced eye. Even if the U.S. takes a hit in that category, I'm not sure that loss translates anything more tangible than … a bunch of foreign-policy pundits bemoaning its loss.
Seriously, compare the last few years of the Bush administration with the first few years of the Obama administration. Any measurable metric of standing or soft power with the presidential transition. The effect on U.S. foreign policy, however, has been negligible.
Second, power is always a relative term, so the question has to be asked -- who's gaining on the United States? Joshua Keating's survey of global schadenfreude doesn't change the fact that the eurozone remains a basket case, Japan and Russia remain demographic disasters, and China has domestic political problems that make partisanship in the United States look like child's play. Even a cursory glance at military spending reveals no peer competitor to the United States. So yes, the United States will endure a rain of rhetorical horses**t for a while … right up until the next crisis in which the world demands America "do something" because it's still the only superpower still standing.
Or, to put this in bond rating language -- even if US power is downgraded from AAA, who else is even above BBB+?
Third, the thing about democracy is that it has multiple ways to constrain political stupidity and ideological overreach. The first line of defense is that politicians will have an electoral incentive to act in non-crazy ways in order to get re-elected. The second line of defense is that politicians or parties who violate the non-crazy rule fail to get re-elected. So, in some ways, the true test of the American system's ability to stave off failure will be the 2012 election. Politicians from both parties have vastly overinterpreted recent electoral victories as sweeping mandates. I suspect, in 2012, many of them will be penalized for such hubris. If they aren't, well, then the conventional wisdom might have a point.
Smart investors made a ton of money this past month by betting on the full faith and credit of the United States despite the D.C. blood sport. If one could make a similar wager on American power, I'd be inclined to bet against the current market sentiment.
Am I missing anything?
JIM WATSON/AFP/Getty Images
Last week Reuters' Emily Flitter filed quite the story, entitled "China flexed its muscles using U.S. Treasuries ," about China's financial power over the United States. Here's the opening:
Confidential diplomatic cables from the U.S. embassies in Beijing and Hong Kong lay bare China's growing influence as America's largest creditor.
As the U.S. Federal Reserve grappled with the aftershocks of financial crisis, the Chinese, like many others, suffered huge losses from their investments in American financial firms -- from Lehman Brothers to the Primary Reserve Fund, the money market fund that broke the buck.
The cables, obtained by WikiLeaks, show that escalating Chinese pressure prompted a procession of soothing visits from the U.S.Treasury Department. In one striking instance, a top Chinese money manager directly asked U.S. Treasury Secretary Timothy Geithner for a favor.
This story generated a lot of interest across the mediasphere. FT Alphaville called it "Diplomacy by US Treasuries." AFP reports that the "sensitive cables show just how much influence Beijing has and how keen Washington is to address its rival's concerns."
As someone who's published on this question, you'd think I'd be very happy at the attention this issue is receiving. And Flitter deserves kudos for going through the cables to find clear efforts by Chinese officials to use its financial muscle to get what it wanted from the United States.
The thing is, the reportage is framed to suggest that China not only asked for concessions, but the United States granted them. And Flitter's own story suggests that very little in the way of concessions actually happened.
Here are the portions of Flitter's story that discusses U.S. responses to Chinese pressure:
On Chinese requests to halt/restrict arms sales to Taiwan: Flitter records no response. These concerns were voiced in late 2008 and the arms sales went ahead in early 2010, so there doesn't appear to be much influence here. AFP suggests that this pressure led the U.S. to not sell F-16's to Taiwan, but I don't think that option was ever in the cards.
On Chinese demands that they be provided guarantees for Chinese re-entry into the U.S. repo market:
The U.S. government does not appear to have offered the Chinese a special setup guaranteeing U.S. banks. Instead, the cables show, American diplomats reassured the Chinese by pointing out that Washington had infused banks' balance sheets with $700 billion in fresh capital, effectively propping up the banking system.
On Chinese demands for providing explicit U.S. government guarantees of Fannie Mae and Freddie Mac debt:
To defuse the situation, the Treasury Department sent Undersecretary for International Affairs David McCormick to Beijing for two days in October 2008. The gesture went over well.
"All of Undersecretary McCormick's counterparts appeared to appreciate his willingness to come to Beijing in the midst of a financial crisis," Piccuta wrote in a cable dated October 29, 2008. "Interlocutors stressed that unless leaders' concerns about the viability of banks and U.S. government-sponsored enterprises (GSEs) are assuaged, lower-level officials will be constrained from taking on greater counter-party risks."
The cables show McCormick trying to reassure the Chinese. "In each meeting, Undersecretary McCormick emphasized that even though the U.S. government did not explicitly guarantee GSE debt, it effectively did so by committing to inject up to $100 billion of equity in each institution to avoid insolvency and that this contractual commitment would remain for the life of these institutions," [Deputy Chief of Mission at the U.S. Embassy in Beijing Dan] Piccuta wrote.
On Chinese protests regarding Federal Reserve purchases of Treasuries and agencies in March 2009: Flitter has no response, though the fact that the Fed went ahead with QE2 suggersts that Chinese pressure didn't deter the Federal Reserve.
On responses to Chinese requests that CIC be allowed to participate in bidding on Morgan Stanley's new equity issuance:
There's no record in the cable of how Geithner responded, but it was only a day later, on June 3, that CIC announced plans to purchase $1.2 billion in Morgan Stanley shares.
A spokesperson for the Fed said in the instance of the June 3 CIC investment, no application for an exemption was made to the Federal Reserve Board.
On the general dynamic of Chinese financial pressure:
The cables also indicate a high level of confidence among the Americans that China can't entirely stop buying U.S. debt, a sentiment shared by most economists who describe the dynamic as a form of mutually assured financial destruction.
So, to sum up, the Chinese maybe got a small break on being able to particupate in the Morgan Stanley auction. Beyond that, all of these efforts led to the dilomatiic equivalent of hand-holding and not much else. And, hey, what do you know, that's pretty much consistent with what I wrote about this back in late 2009. So, contrary to some deep-seated fears of mine, the Wikiliaks cables appears to buttress rather than contradict prior scholarship.
Flitter deserves credit for making explicit what had only been inferred, but I'm worried that commentators are drawing the wrong lessons from her article. The big reveal here is not that China tried to exercise its financial muscle. The big reveal is that these efforts generated next to nothing in the way of U.S. concessions. China's financial might does give it the ability to deter U.S. pressure -- but to China's growing frustration, it doesn't yield much else.
While I was obsessing about Egypt last week, I see that John Quiggin, William Winecoff and others have been having a rollicking debate about the status of American hegemony, the fungibility of military power, and Boeing/Airbus subsidies. OK, that last one is less interesting, but I strongly encourage readers to go through the comment thread to that blog post.
Essentially, Quiggin contends that:
[T]he decline of the US from its 1945 position of global pre-eminence has already happened. The US is now a fairly typical advanced/developed country, distinguished primarily by its large population.
Ergo, other large market jurisdictions, like the European Union, are equal to the U.S. in terms of relative power.
This cheesed off Winecoff and others into pointing out the myriad ways in which the U.S. power profile is a) still outsized; and b) largely shaped the current global order we live in; and c) allowed entities like the EU to focus on welfare maximization rather than security.
Dan Nexon, in a comment to Quiggin's last rejoinder, gets at one nub of the debate:
John’s pointing out, quite rightly, that military power isn’t necessarily fungible. He’s doing so in the context of economic and regulatory power, which is the most “multipolar” dimension of global power right now. His IR critics are pointing out that the US still has outsized influence across a number of domains, and that some of those domains involve international (economic) institutions. They’re both onto something.
I pretty much agree with Dan here. In the military sphere, the U.S. remains a hegemonic power. In the economic and regulatory realms, well, I wrote a whole book arguing that until recently we lived in a bipolar world, so I'll side with Quiggin on that score.
There's something missing from this debate that is worth raising, however -- a proper definition of power. For example, in his first post, Quiggin noted that "[advanced industrialized countries] might be said to have declined in relative terms. But this doesn’t seem to me to constitute 'decline' in any important sense." This is heresy to an international relations scholar, in that power is viewed as a zero-sum commodity.
Beyond that, however, it is useful to think about the power to deter change from the status quo vs, the power to compel change in the status quo. In a deterrence scenario, countries use their capabilities to ward off pressure from other actors, or from structural pressures. In a compellence scenario, a powerful government threatens to use statecraft to extract concessions from other actors, or use power to alter the rules of the global game.
Deterring pressure by others is different than applying such pressure to others. With military or economic statecraft, it is generally easier to defend than attack. Many IR scholars argue that the ability to deter is a necessary condition of the power to compel. Only after an actor has the ability to resist pressure from others will they contemplate whether they can be the actor to generate pressure. Countries possessing sufficient reservoirs of power should therefore have both greater autonomy of action and be better placed to apply pressure on other actors.
What the past few years have demonstrated is the relative decline of U.S. compellence power and the rise of other countries deterrence power. Certainly the recent uses of U.S. military force haven't yielded the expected results. In the economic realm, countries like India and Brazil can veto WTO negotiation rounds in a way that simply wasn't possible 15 years ago. Similarly, China can resist U.S. jawboning on its exchange rate policy far more than in the past.
On the other hand, neither U.S. deterrent power nor other countries' compellence power has changed all that much, even in the economic realm. The rest of the G-20 can scream as loud as they want, but quantitative easing is going to continue. China has tried to find ways to use its newly found financial muscle to force changes in the international system, to little avail. To be sure, Russia, China and others can compel countries on their immediate periphery, but even a glance at the 2008 Russian-Georgian war suggests that even modest efforts like these are expensive and messy.
So... we live in a world in which more actors have vetoes over systemic change but no actor has the ability to truly compel change. This leads to lots of talk about "G-zero worlds" and so forth.
Just to be provocative, however, I wonder if what's truly changed is the extinction of compellence power as we know it. The primary, ne plus ultra tools of compellence require a willingness to kill, jail or starve a lot of people. Recent flare-ups like Iran in 2009 and Egypt right now suggests that such actions are possible at the domestic level, but pretty damn costly; even authoritarian countries flinch at using brute force on a domestic population. Cross-border efforts are even more expensive in terms of both material and reputational costs.
This isn't the end of power, but it might be the end of one particular dimension of power. I'm not entirely convinced that this supposition is true, and am willing/eager to hear counterarguments. That said, I still hereby claim The End of Power as my title, so everyone else just back off, OK?
More seriously, am I missing anything?
Foreign Policy asked many smart people, and then me, for some nuggets of unconventional wisdom heading into 2011. My contribution is on how China isn't all that and a bag of chips.
My closing paragraph:
Exaggerating Chinese power has consequences. Inside the Beltway, attitudes about American hegemony have shifted from complacency to panic. Fearful politicians representing scared voters have an incentive to scapegoat or lash out against a rising power -- to the detriment of all. Hysteria about Chinese power also provokes confusion and anger in China as Beijing is being asked to accept a burden it is not yet prepared to shoulder. China, after all, ranks 89th in the 2010 U.N. Human Development Index, just behind Turkmenistan and the Dominican Republic (the United States is fourth). Treating Beijing as more powerful than it is feeds Chinese bravado and insecurity at the same time. That is almost as dangerous a political cocktail as fear and panic.
Be sure to read the rest of them -- really, the other contributors are all smarter than me.
As someone who wrote about celebrity activism a few years ago, I'm always intrigued to see new takes on the issue. In the Washington Post, a curmudgeonly William Easterly argues that today's celebrity activists -- like Bono -- ain't like the celebrity dissidents of a prior generation -- like John Lennon:
Is there a celebrity activist today who matches Lennon's impact and appeal? The closest counterpart to Lennon now is U2's Bono, another transcendent musical talent championing another cause: the battle against global poverty. But there is a fundamental difference between Lennon's activism and Bono's, and it underscores the sad evolution of celebrity activism in recent years.
Lennon was a rebel. Bono is not.
Lennon's protests against the war in Vietnam so threatened the U.S. government that he was hounded by the FBI, police and immigration authorities. He was a moral crusader who challenged leaders whom he thought were doing wrong. Bono, by contrast, has become a sort of celebrity policy expert, supporting specific technical solutions to global poverty. He does not challenge power but rather embraces it; he is more likely to appear in photo ops with international political leaders - or to travel through Africa with a Treasury secretary - than he is to call them out in a meaningful way.
There is something inherently noble about the celebrity dissident, but there is something slightly ridiculous about the celebrity wonk.
Where the essay gets a little strange is where Easterly defines what he means in his dissident vs. wonk divide:
Bono is not the only well-intentioned celebrity wonk of our age - the impulse is ubiquitous. Angelina Jolie, for instance, is a member of the Council on Foreign Relations (seriously) in addition to serving as a U.N. goodwill ambassador. Ben Affleck has become an expert on the war in Congo. George Clooney has Sudan covered, while Leonardo DiCaprio hobnobs with Russian President Vladimir Putin and other leaders at a summit to protect tigers; both actors have written opinion essays on those subjects in these pages, further solidifying their expert bona fides.
But why should we pay attention to Bono's or Jolie's expertise on Africa, any more than we would ask them for guidance on the proper monetary policy for the Federal Reserve?
True dissidents - celebrity or not - play a vital role in democracy. But the celebrity desire to gain political power and social approval breeds intellectual conformity, precisely the opposite of what we need to achieve real changes. Politicians, intellectuals and the public can fall prey to groupthink (We must invade Vietnam to keep the dominoes from falling!) and need dissidents to shake them out of it.
True dissidents claim no expertise; they offer no 10-point plans to fix a problem. They are most effective when they simply assert that the status quo is morally wrong. Of course, they need to be noticed to have an impact, hence the historical role of dissidents such as Lennon who can use their celebrity to be heard.
Now, on the one hand, I can kinda sorta see what Easterly is saying. Sometimes it takes the innocent to say that the emperor has no clothes, and goodness knows celebrities can play that role if they so choose.
That said, Easterly is also being a bit innocent himself. As I argued a few years ago, celebrities have strong personal incentives to embrace causes that are seen as having broad appeal. It's worth remembering that Lennon only starting acting dissident-y after he was more popular than Jesus. The celebrities that have made their anti-war views loudly known -- like, say, Sean Penn -- haven't exactly shifted the debate all that much.
This could be because today's celebrities simply can't project the same kind of star power that the Beatles could. Today's global popular culture is more fragmented, and so individual celebrities might have smaller
groupies fan bases than in the past.
More generally, however, Easterly seems to be arguing that the more celebrities know about the cause that they are embracing, the less effective they will be. Again, in today's information ecosystem, I'm not sure that's right. As I wrote before:
In the current media environment, a symbiotic relationship between celebrities and cause célèbres has developed. Celebrities have a comparative advantage over policy wonks because they have access to a wider array of media outlets, which translates into a wider audience of citizens. Superstars can go on The Today Show or The Late Show to plug their latest movie and their latest global cause. Because of their celebrity cachet, even hard-news programs will cover them-stories about celebrities can goose Nielsen ratings. With a few exceptions, like Barack Obama or John McCain, most politicians cannot make the reverse leap to soft-news outlets. Non-celebrity policy activists are virtually guaranteed to be shut out of these programs.
The growth of soft news gives celebrity activists enormous leverage. The famous and the fabulous are the bread and butter of entertainment programs. Covering celebrity do-gooders provides content that balances out, say, tabloid coverage of Nicole Richie's personal and legal troubles. ESPN can cover both Michael Vick's travails and Dikembe Mutombo's efforts to improve health care in sub-Saharan Africa. MTV will cover Amy Winehouse's on-stage meltdowns, but they will also follow Angelina Jolie in her trips to Africa. They covered Live Earth for both the music and the message....
Indeed, celebrities actually have an advantage over other policy activists and experts because hard-news outlets have an incentive to cover them too. Celebrities mean greater attention, and hard-news outlets are not above stunts designed to attract readers or ratings. Consider this question: If The Washington Post is deciding between running an op-ed by Angelina Jolie and an op-ed by a lesser-known expert on Sudan, which author do you think they are most likely to choose?
On the other hand, it is very easy, in today's world, to mock the uninformed dissident who simply says "war is bad." Indeed, given the causes that celebrities have latched onto -- like Darfur -- the dissident response might well be to call for greater American intervention as the means to end the status quo in the region. Ironically, only as celebrities have acquired more information about Sudan have they realized the huge risks of that policy.
Having read and reviewed Easterly, I suspect he's making these arguments because he knows a great deal about aid (which makes him a wonk in that area) and not so much about war (which makes him more of a dissident) and he'd like celebrities to be following his lead. More generally, and revealing my own biases, I'm skeptical that the dissident will be more effective than the insider. Or, to posit the counterfactual, even if Bono, Angelina Jolie, Brad Pitt and George Clooney had railed against the Iraq war from day one, I don't think it would have made a damn bit of difference.
Of course, if Salma Hayek had gotten involved, then all bets are off.
I'm willing for the commenters to persuade me otherwise. Particularly Salma Hayek.
Over the weekend I finally saw The Social Network and read Malcolm Gladwell's New Yorker essay about social networks. Both Gladwell and Aaron Sorkin, the screenwriter for The Social Network, have their issues with futurists who embrace these technologies as the beginning of a social revolution.
Now I'm pretty sympathetic to these arguments. In the past, I've expressed a fair amount of ambivalence about the power of Internet technologies to transform the world. After reading the essay and watching the movie, however, I can't say I'm all that convinced by their theses.
Let's start with Gladwell, because it's the lesser of the two arguments. Gladwell contrasts the relationships and connections forged on Twitter/Facebook with real-world movements. He argues that the latter work when based on a hierarchical structure with strong ties among the participants. The former is based on a networked structure with weak ties. Therefore:
This sounds good, except this doesn't describe networks all that well. Networks eliminate neither hierarchical power nor strong ties -- they're simply expressed in different ways. Actors in central nodes, with lots of dynamic density among other actors, can command both power and discipline. Not all networks will look like this, but the ones successful at fomenting change will likely resemble it. To put it more precisely: social networks lower the transactions costs for creating both weak ties and strong ties, loose collaborations and more tightly integrated social movements.
It's not either/or, a point Oliver Willis raises:
Things bubble over to real world via social networking when influencers push the influenced to do something. Social networks tend to magnify this, and the web does give some of us who would never be real-life leaders a way of having some sway. I find it odd that Gladwell misses this, because this is the whole point of his bestseller The Tipping Point.
I’ve no doubt that getting your followers to do something in the real world is more complicated than getting them to retweet or “Like” something, but I don’t think the barrier to doing that is social networking’s distributed nature but rather the intensity of the network following you. But this is the same as in the real world. Network leaders need to have leadership skills no matter the medium.
The movie The Social Network was far more interesting. There is some controversy over what's been fictionalized, what's been mysoginized, and what's been left out of the film, and I'm sympathetic to some of these arguments. Taking what was intended to be on the screen, however, The Social Network also suggests the ways in which offline and online structures intersect. There were many reasons for Facebook's rise, but I have to think that the site's initial exculsivity helped to give it something that MySpace and Friendster lacked.
The film has many great moments (if Aaron Sorkin was meant to translate any real-life figure onto film, it was Larry Summers). Both the ending and Sorkin's interviews about the film, however, suggests that there's an emptiness at the core of Facebook that hollows out 21st-century friendships.
I don't buy this. Social networking sites giveth as much as they taketh away. Speaking from my own experience, I've found myself becoming closer with some friends and less close with others based on Facebook.
More generally, there seems to be a generational effect whenever a new social technology emerges. Different generations react in radically different ways:
1) The Mature Generation tends to disdain the technology as yet another example of the world going to hell in a handbasket.
2) For the Maturing Generation, the new technology is both a blessing and a curse. The adroit learn how to use the new technology to vault to social, political or economic heights that they would not have otherwise achieved. At the same time, a new technology without new social norms inevitably creates confusion about what is acceptable and what is taboo. Some people lose status as a result.
3) For the Youngest Generation, the technology isn't new by the time they come to use it. They're savvy in the ways that the technology is both an opportunity and a risk, and can navigate those waters without thinking too hard. For this generatioon, the social technology is part of the new normal.
Sorkin has demonstrated his Oldest Generation credentials since the "Lemon-Lyman" episode of The West Wing. Which is fine. But there are other generations out there, and they're not relating to these technologies the way that Sorkin thinks.
Justin Sullivan/Getty Images
The whole beauty pageant brouhaha reminds me that I have an article in the U.K. Spectator about the rise of political paranoia and discontent in the West. The opening paragraph:
Polio vaccines in Nigeria are part of a Western plot to make African women infertile. Foreign zombies are replacing indigenous labourers in South Africa. Barack Obama was born in Kenya and is a secret Muslim who hates the United States and wants to institute ‘death panels’ to govern the healthcare system. The United States triggered the earthquake in Haiti to expand America’s imperial reach.
Go read the whole thing and see if I'm onto something.... or whether the powers that be have gotten to me already.
[I'm noticing a trend of zombie references pervading your work. What's up with that?--ed. Oh, you're just being paranoid.]
I have a confession to make -- last week this blog was not manufactured in the U.S. of A. No, your humble blogger outsourced his blogging to... well, himself, overseas.
In an example of real hardship duty, I was teaching U.S. Foreign Policy at the Barcelona Institute for International Studies to a truly international collection of students -- Spaniards, Germans, Brits, Americans, Chinese, Vietnamese, Thai, Ghanaian, Kenyan, Turkish, Belgian, Mexican, Nicaraguan... you get the idea.
One mildly surprising finding from surveying my stidents was the extent to which many of them believed that the United States government was consciously manipulating every single event in world politics. Ironically, at the moment when many Americans are questioning the future of U.S. hegemony, many non-Americans continue to believe that the U.S. government is diabolically manipulating events behind the scenes (For example, the Ghanaians in the crowd wanted to know why Obama visited their country last week. The standard "promotion of good democratic governance" answer did not satisfy them, They were convinced that there had to be some deeper, potentially sinister motive to the whole enterprise).
As a result, I spent much of the week trying to point out the possibility of fundamental attribution error and the like. But I don't think I did a terribly good job. Trying to prove people convinced that conspiracies exist -- with some justification, to be fair -- that sometimes what you see is what you get is not an easy enterprise.
Going forward, the persistence of anti-Americanism in the age of Obama might have nothing to do with the president, or his rhetoric, or even U.S. government actions. It might, instead, have to do with the congealed habits of thought that place the United States at the epicenter of all global movings and shakings. The tragedy is that such an exaggerated perception of American power and purpose is occurring at precisely the moment when the United States will need to scale back its global ambitions.
Question to readers: how can the United States defalate exaggerated perceptions of U.S. power?
P.S. Just to be clear, I'm not saying that this kind of conspiracy theorizing in world affairs is only the product of non-Americans. For a good example of ludicrous American conspiracy-mongering about other countries, click here.
Daniel W. Drezner is professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University.