It took me a couple of hours of reading, cogitation, and regurgitation to critique Mitt Romney's foreign policy positions. Clearly, I didn't think it was perfect, or even all that good in many places. But, I had to assess it, mull over the content... you know, think.
Now, I desperately want to be an equal opportunity blogger, and at this point Herman Cain appears to be the co-frontrunner for the GOP presidential nomination. Sure, I've had my fun with him in the past, and he has no shortage of foreign policy gaffes, but I figured that impromptu utterances during debates are only one part of a candidate's overall policy vision. The thoughts that are written down, they imply some forethought. So I thought I'd go over to Cain's campaign website and spend an equal amount of time to analyze his foreign policy thinking.
I found.... a total of five paragraphs on "national security." That's it. No white papers, fact sheets, bullet points, or list of advisors. So you gotta think that these are going to be the most awesome and mind-blowing foreign policy paragraphs ever!!!
Let's jump right in:
The primary duty of the President of the United States is to protect our people. In fact, it is the principal duty of a limited federal government. They must ensure that our military and all of our security agencies are strong and capable.
I'm with you so far, Mr. Cain -- my only objection is your odd pronoun choice of "they."
Unfortunately, national security has become far too politicized with our elected officials using the issue as a means to polarize our country as the “war hawks” and the “peace doves.” In response, the safety and morale of our brave men and women in uniform are often at risk for political gain. The judgment of our military experts on the ground is often underutilized in exchange for political purposes. National security isn’t about politics. It’s about defending America.
Let me just stop you right here and ask a few questions. First, which elected officials are politicizing national security -- could you be a bit more specific? Second, just out of curiosity, is President Obama a "war hawk" or a peace dove"? I mean, he's pretty hard to categorize at this point, right -- maybe a "peace hawk" or a "war dove"? So if the commander-in-chief doesn't fit your typology, is it at all useful? Also, when you accuse others of politicizing national security issues, aren't you, well, playing politics with national security?
While diplomacy is a critical tool in solving the complex security issues we face, it must never compromise military might. Because we are such a free and prosperous people, we are the envy of the world. Many regimes seek to destroy us because they are threatened by our ideals, and they resent our prosperity. We must acknowledge the real and present danger that terrorist nations and organizations pose to our country’s future.
On this "many regimes seek to destroy us" business -- can you give me more than one example? I'm not talking about a lot of countries, all you need to provide is a few.
Further, we must stand by our friends and we must not be fooled by our enemies. We should never be deceived by terrorists. They only have one objective, namely, to kill all of us. We must always remain vigilant in dealing with adversaries.
Now my head is starting to spin. What if an enemy pretends to be a friend just to fool us -- you know, like Lindsey Lohan in Mean Girls? What do we do then? How do we know you won't be fooled? Also, if you think terrorists only have one goal, how could they ever deceive us?
We must support our military with the best training, equipment, technology and infrastructure necessary to keep them in a position to win. We must also provide our men and women in uniform, our veterans and their families with the benefits they deserve for their tremendous sacrifice. These heroes have served us. We must never forget to serve them.
This "pro-winning" national security policy is quite daring and provocative.
So, that's it. Nothing on great power politics, nothing on foreign economic policy, nothing on our alliances, nothing on any particular region of the globe. Nothing but a faint whiff of Carl Schmitt's logic of friends and enemies. This is actually worse than Rick Perry's efforts, in that I don't think it passes the Turing Test.
Cain is busy promoting his new book, This Is Herman Cain!, so I checked it out to see if there was anything more illuminating on foreign policy. And, indeed, there were two revealing facts. On page 131, he states:
I can tell you what the Cain Doctrine would be: if you mess with Israel, you're messing with the United States of America. Is that clear?
Actually, that is clear. Unfortunately, we get to the problem on p. 133:
It's difficult to say how the Cain Doctrine would apply to the Middle East's other countries, especially those affected by the "Arab Spring," and to nations elsewhere in the world.
OK, that's totally unclear. Could you provide any more guidance to your thinking?
I'm not trying to escape the broader issues, but I think a President should first be briefed on classified intelligence about America's relationships before offering opinions.
The public doesn't know the answers to those [foreign policy] questions, and neither do I.
Three thoughts. First, you're totally trying to escape the broader issues. Second, if one accepted this logic at face value, then a president could never articulate anything useful on foreign policy in public, since the rest of us ain't going to be briefed on these matters anytime soon.
Third, I am 100% in agreement with Mr. Cain: he hasn't the faintest clue what to do when it comes to American foreign policy.
Am I missing anything? Seriously, is there anything Cain has written that displays anything resembling an understanding of how foreign policy works?
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.
Mary Carmichael has a fascinating story in the Boston Globe on how many American universities, which were so keen to create ocerseas satellite campuses, are now retrenching. The disturbing part of the story is the "monkey see, monkey do" nature of the international expansions of the past decade:
Over the last decade, universities spurred by dreams of global cachet - and, sometimes, by foreign governments eager to underwrite them - built or rented whole campuses and offered Western-style education abroad. But now some schools are running out of cash as they struggle to attract enough students and develop a viable business model....
From 2006 to 2009, the roster of international branch campuses grew by 43 percent, according to the Observatory on Borderless Higher Education, a British research firm. Qatar drew an all-star list, including Cornell, Georgetown, Northwestern, and Carnegie Mellon. By 2009, the United Arab Emirates had 40 international branches.
Middle-ranking colleges felt pressure to compete, even though some could not get foreign governments to pay their bills. The University of Nevada, Las Vegas, went to Singapore. City University of Seattle went to Switzerland. Troy, a public university in Alabama, founded 14 global branches.
“Some American campuses went into it wanting to make money,’’ said Phillip Altbach, director of the Boston College Center for International Higher Education. “But many of them got into it for prestige, planting the flag overseas, a presidential feeling that they needed to be doing adventurous things.’’
Not everyone shared that vision. Harvard, for instance, has not founded any international branch campuses recently. Neither did MIT nor Tufts University.
“Every time I looked at one of these deals I said, ‘No, I don’t think so,’ ’’ said Lawrence Bacow, who has been a high-ranking administrator at all three schools. “Philosophically, I think there’s an important role for higher ed to play in the developing world, but it’s not to create knockoffs of what we do here.’’
1) Go, Jumbos!! In your face, rest of higher education outside of the Boston area!!!
2) The logic of expanding overseas because of "prestige, planting the flag overseas, a presidential feeling that they needed to be doing adventurous things" is a depressing data point about the ways in which the academy can be slaves to
intellectual and business trends.
3) To be fair, I'm not sure this story tells the whole, er, story. There's no mention of the how the 2008 financial crisis and Great Recession might have affected the viability of these expansion plans. There's also nothing on the spread of distance learning. Fletcher's Global Masters of Arts Program, for example, combines a few intensive weeks of on-location education with a lot of online interaction. So although the tenor of this story is about the retrenchment of American universities, there are compensating trends that are still pushing American universities into the global marketplace.
4) Carmichael notes that one reason for retrenchment has been the difficulty of maintaining the quality of academic standards abroad. This is encouraging yet still modestly surprising. Why hasn't an American university gone the "f**k it, let's become a diploma mill" route as a way of making money? Why hasn't any university done this?
I suspect this might be one powerful virtue of the university degree functioning as a credential, but I'm curious to hear thoughts about this in the comments.
5) I'm thinking that Suffolk University's PR people can't be pleased with this kicker to the story:
At the end of last semester, Suffolk finally abandoned Dakar. It did not, however, abandon its students. Almost all have transferred to Boston under a special deal that charges them $10,000 in tuition, the same they paid when attending the Dakar branch and about one-third what their classmates pay. Suffolk foots the rest.
The students are adapting, though it is not easy. They dread winter and think the city’s buildings all look the same: impersonal. Some of their classmates have asked well-meaning but ignorant questions. Did they grow up living in trees? Isn’t Africa a great country? (emphasis added)
As I noted previously, compared to his GOP rivals, Mitt Romney has some actual foreign policy thinking going on. On the other hand, as Dan Trombly points out, doing better than Herman Cain or Rick Perry is a really low bar. So, looked at objectively, what's my assessment of Romney's foreign policy white paper?
I could go through it line by line, but James Joyner already did that for The Atlantic. As it turns out, I'm reaching a course called The Art and Science of Statecraft that will require students to write a grand strategy document. Sooo.... if Mitt Romney was one of my students, how would I grade him? See below:
You and your study team have clearly put a lot of work into "An American Century." It's cogently written and organized. Your basic statement of purpose -- "advance an international system that is congenial to the institutions of open markets, representative government, and respect for human rights (p. 7)" -- fits perfectly within the mainstream of American foreign policy thinking. You've done an excellent job of demonstrating an awareness of the complexity of threats that face the United States in the 21st century. I liked it on p. 6 when you noted that:
In the highly dynamic realm of national security and foreign policy there are seldom easy answers. Discrete circumstances in disparate regions of the world demand different kinds of approaches. There is no silver bullet for the problem of securing the United States and protecting our interests around the world.
You've also demonstrated an appropriate awareness that American power rests on more than a strong military. When you note that a Romney administration would "apply the full spectrum of hard and soft power to influence events before they erupt into conflict (p. 8)," I caught myself nodding along.
Some of the details are intriguing as well. I need to look more into these "Reagan economic zones" that you mention a lot, but applying them to Latin America and the Pacific Rim make a great deal of strategic and economic sense. I'm not fully persuaded that your notion of creating regional envoys to organize all "soft power resources" is all that different from the foreign policy czars or special envoys of administrations past, but this kind of argument fits well with your management background.
That said, there are some logical flaws and major gaps in this draft that will have to be corrected if you want to earn a better grade. The first problem is the style. I recognize that you've written this as a campaign document, so you're never going to completely eliminate the
unadulterated horsheshit allegations about the current president going on an apology tour. Maybe you could do it a bit more subtly in the future, however?
Secondly, there's a lack of historical awareness in some parts of the document. For example, on page 7 the paper says:
[A] Romney foreign policy will proceed with clarity and resolve. The United States will clearly enunciate its interests and values. Our friends and allies will not have doubts about where we stand and what we will do to safeguard our interests and theirs; neither will our rivals, competitors, and adversaries.
Now, reading this, I kept thinking back to the Bush administration and its repeated assetions that that there would be no hypocrisy in foreign affairs. Much like Bush, reality turned out to be trickier. I suspect you know this, from the other excerpts noted earlier. So get rid of this fluff: I'm sure statements like this play well in a management consulting boardroom, but it's not going to cut it in the real world.
Similarly, for someone who says that, the Obama administration is "undermining one’s allies (p. 3)" in contrast to you, who will "reassure our allies (p. 13)", you don't actually talk about America's treaty allies much at all. True, you do talk about expanding America's alliance system to include India and Indonesia. Mexico gets some face time. Israel gets a lot of face time. On the other hand, NATO is not mentioned once in this entire document. Neither is the European Union. Japan and South Korea get perfunctory treamtment at best. Turkey is a major treaty ally but you treat it like a pariah state. For someone who's claiming that the U.S. will reassure its major allies, you didn't seem to give them much attention at all. This is a really important problem, because Japan and Europe have been crucial allies in a lot of major American initiatives -- and they're getting weaker. Even in discussing new possible allies, I'm kind of gobsmacked that Brazil is never mentioned.
Another big problem is that your approach to China is so shot full of contradictions that I don't know where to begin. Do you seriously believe what you wrote on p. 3:
The easiest way... to become embroiled in a clash with China over Taiwan, or because of China’s ambitions in the South or East China Seas, will be to leave Beijing in doubt about the depth of our commitment to longstanding allies in the region.
Really? See, I'd say the easiest way to get embroiled in a clash with China is to write Taiwan a blank check on their defense needs. The second easiest would be to publicly bluster on about Taiwan to a Chinese leadership that feels increasingly insecure and will be tempted to stoke the fires of Chinese nationalism by creating another Quemoy and Matsu crisis.
Furthermore, you talk explicitly about supplying Taiwan with "adequate aircraft and other military platforms (p. 18)" in supposed contrast to the Obama administration. You also talk about strengthening relationships with other countries that neighbor China in an effort to preserve American dominance. Now, this might be a bit provocative, but I get the rationale. Here's the thing, though -- you can't simultaneously do this and assert that you will "work to persuade China to commit to North Korea’s disarmament (p. 29)." Really? How exactly are you gonna persuade them on this point? Do you really think that arming Taiwan to the teeth and blasting its human rights record will do the trick?
If the section on China is contradictory, then your discussion of Pakistan is worse. You state on p. 31-32:
It is in the interests of all three nations to see that Afghanistan and the Afghanistan/ Pakistan border region are rid of the Taliban and other insurgent groups.... Pakistan should understand that any connection between insurgent forces and Pakistan’s security and intelligence forces must be severed. The United States enjoys significant leverage over both of these nations. We should not be shy about using it.
There are at least two assertions in the quoted section that are highly dubious -- I'll let you find them on your own.
One final point, should you choose to revise this draft strategy -- you need to prioritize the threats you discuss in the paper. You list a whole bunch of them -- rising authoritarian states, transnational violence, failing states, and rogue states. If you have to prioritize, which threats merit greater attention? This should actually be pretty easy, since you absurdly overhype the threats posed by some of these countries (Venezuela, Cuba and Russia in particular).
I look forward to reviewing your later work.
Mitt Romney has spent the last day rolling out his approach to international relations. First his list of foreign policy advisors, then his backgrounders to important foreign policy reporters, then his speech at The Citadel, and finally his team's 43-page white paper.
There are two ways to think about Mitt Romney's foreign policy pronouncements. The first way is to understand the following joke:
Two campers are in the woods. In the morning, as they exit their tent, they see a bear rumbling into their campsite. One of the campers immediately starts putting on his shoes. The other camper turns to him and says, "Are you crazy? Even with your shoes, there's no way you can outrun that bear."
The first camper stands up with his shoes now on and says, "I don't have to outrun the bear. I just have to outrun you."
Compared to the other viable GOP candidates to date, Romney is the guy with his shoes on. Sure, he runs awkwardly, and I have little doubt that America's foreign policy challenges will quickly overwhelm him. Compared to Herman Cain or Rick Perry, however, he's a friggin' Olympic sprinter. Romney has had to think about foreign affairs for a while now, and while I might disagree with some of his musings, they're at least.... actual musings.
As for the other way... well... I'll get to hat one after I've
atoned for my sins digested Romney's white paper sometime this weekend.
I thought I'd said my
peace piece about Occupy Wall Street earlier this week -- interesting, but in all likelihood not going to amount to much unless it resonated culturally with broad swaths of American society.
I think it's safe to say that these protests don't resonate with OTB's Doug Mataconis. So this would seem to be a data point to support my argument. In his rant against the We Are the 99% crowd, however, Mataconis says something that triggered my history alarm:
The first thought I had when I looked through the Tumblr account is that these people can’t be doing all that bad if they’ve got access to the internet and a computer with a webcam necessary to create the posting that they put up at Tumblr. In any event, though, what strikes me more than anything else is that alot of these people are frustrated 20-somethings who have gotten out of college and found that the road to the good life isn’t quite as smooth as they thought it would be. Of course, things are more difficult today than they were ten years ago but that doesn’t mean they were easy back then. Establishing yourself in life is always a challenge, especially if you run up tens of thousands of dollars in student loan debt without really thinking about how you’re going to pay it off.
What comes across to me the most, though, is a sense of entitlement from some people and they idea that the situation they’re in clearly can’t be their fault so it must be the blame of someone else. There’s an attitude about the protests that there is something morally wrong about the fact that not everyone is suffering equally in the current economy as well. So when they look up and see that some people have managed to succeed during these rough economic times, that sense of entitlement becomes intermingled with a sense of envy and the belief that the only way these other people could have succeeded is by cheating....
There’s something pretty immature about blaming other people for your situation in life.
Now this strikes me as a bit harsh in judgment, but that's neither here nor there. What I can't help wondering, however, is whether Mataconis has also described the necessary conditions for a movement like Occupy Wall Street to sustain itself. Young people with a lot of time on their hands and prior entitlements possess both the will and the assets necessary to sit in for a looooooooooooong time.
There's something else: Mataconis' description of entitled young people used to peace and prosperity and demanding more of it sounds like... like... the people that decided to protest the Vietnam War after they began to realize that they might get drafted once they graduated college.
If the job prospects for twentysomethings are that bleak, then it really doesn't matter whether the protestors are responsible for their student loans or not. If they feel like the system has screwed them over, then they'll take to the streets and stay there. And in a society where the overwhelming majority of people haven't seen their wages or net wealth trending in the positive direction, I can't say they they'll necessarily trigger that much resentment.
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?
I was fortunate enough to give a talk at my alma mater over the weekend and chat informally with some of the political science undergraduates
over some food from an Indian restaurant that didn't exist when I was in school and I can't believe how much greater their range of ethnic food choices are than when I was in school and their life is great and college life was much tougher back in my day while we broke bread. Inevitably, the question of Occupy Wall Street came up and whether it would go anywhere.
Now, in many ways, this phenomenon has many of the features of networked movements that have been at the center of The Slaughter-Drezner Debates (although in this case Slaughter seems a bit more disdainful of the movement's potential). If you read here or here or here, you'll see all the advantages of a networked structure outlined in painstaking detail. This ragtag group of rebels has managed to get coverage on The Daily Show, generate associated online movements like the "We Are the 99%" Tumblr, generate headlines through mass arrests over the weekend, and inspire similar movements in other cities.
So … what did I say to these impressionable young adults?
I said two things. First, I said the moment was ripe for this kind of movement. You have an ample supply of network technologies to start a movement, and rising economic inequality to create the necessary social purpose for such a movement. Indeed, the surprising thing about Occupy Wall Street isn't that it's happening -- it's that it took three years for it to happen.
The other thing I said was that for this group to generate more than a thousand people or so out in the streets, however, their message has to resonate culturally with people who would otherwise not want to go out onto the streets. And here's where I start to be a bit more skeptical. I'm not sure the latest manifesto is really cogent enough -- beyond a rejection of corporations as we know them -- to generate much sympathy with broad swaths of the American people. And, as I've said before, unless you attract people who vote, this kind of thing will generate news coverage and not much else.
Could they attract a larger crowd? After reading Time's Nate Rawlings, I'm skeptical:
While "Occupy Wall Street" has become more organized, its demands haven't coalesced into a coherent message. The only thing its various constituent groups appear to have in common is a deep-seated anger at inequality in this country. For them Wall Street symbolizes that unfairness, but the groups have other concerns as well. Many want to redistribute wealth; others want to enlarge government social programs. Some are protesting against the wars in Iraq and Afghanistan. Daniel Levine, a journalism student from upstate New York, said he was taking a stand against the controversial method of natural gas extraction known as hydrofracking in his hometown – but also noted that the practice can bring jobs to economically disadvantaged regions.
Just as it lacks a single message, the "Occupy Wall Street" movement has been defined by the absence of a clear leader. Participants say that is by design, and point to the committees that have sprung up to tend to the daily needs of those camped in Zuccotti Park. It isn't clear that they want a single leader, and many think the movement is better of[f] without one. “It's kind of cool how it's growing organically,” one said. “People just need to give it time and it'll come together.”
Maybe, over time, that will happen. There's a political paradox, however, that Occupy Wall Street faces. Without clear and coherent demands, there will be little to inspire ordinary citizens to take to the streets. Articulating clear and coherent demands, however, will destroy the very gestalt that the people currently on the streets seem to like some much.
Still, unions have started to come out in support of this movement. The U.S. economy is in a bad way, and the festering eurocrisis could make it really bad. So maybe external conditions will eliminate this paradox for the protesters.
So that's what I think. What do you think?
Bruce Gilley argues in The National Interest that the next leader of China is going to be trouble for the United States:
It may be time to concede that China’s leader-in-waiting, Xi Jinping, is not the moderate that many have assumed. Indeed, evidence from his past suggests that Xi is going to steer China in a more aggressive direction, both domestically and internationally....
Foreign policy is where new Chinese leaders tend to make their mark quickly, given the small number of people involved compared to domestic policy. Thus it’s also the area where the question of who’s in charge in Beijing really matters, and the fine art of Pekingology remains important. Vice president Joe Biden came away from an August visit praising Xi as “strong” and “pragmatic.” Biden is probably right. But Xi’s strength and pragmatism do not necessarily augur well for those fearful of a rising China.
The first time that Xi’s “strong” dark side emerged publicly was in 2009 when on a visit to Mexico, he told local Chinese, “Well-fed foreigners have nothing better to do but point fingers at China. But China does not export revolution, we do not export poverty and hunger, and we do not interfere in the affairs of others. So what is there to complain about?”
Xi’s “three did nots,” as they have become known, have won plaudits from the country’s nationalists, including the authors of the vitriolic 1996 book The China That Can Say No. These nationalists express hope that Xi will be the first leader since Mao who is willing to stand up to the West. In early September, Xi told students at the Central Party School, the party’s elite training academy in Beijing, that “two overriding objectives—the struggle for both national independence and popular liberation, which is to say the realization of both state power and popular wealth—have always been closely related. The former has always been the basis of the latter.”
Gilley's hypothesis is certainly plausible, but can I suggest an alternative? China is in the middle of a leadership transition -- and when politicians are trying to move on up but ain't there yet, they often have the freedom to make all kinds of crazy, out-there, irresponsible foreign policy statements secure in the knowledge that foreign policy statements are not all that binding once politicians assume power .
Indeed, one could go even further. The phrase "only Nixon could go to China" refers to the idea that only someone who sounded as rabidly anti-communist as Richard Nixon in the past would be able to have the dometic political clout to meet with Mao Zedong and cut a deal with the People's Republic of China. Could it be that Xi is simply buttering up his base before taking power in order to make it easier to do business with the United States?
I don't know the answer, but I suspect even hardcore China-watchers don't know either. China is already experiencing some serious foreign policy blowback that has nothing to do with the United States, however. I'm not sure that Xi will really need the headache of ratcheting up tensions with Washingtgon, unless the global economic downturn is sooooooo bad that scapegoating foreigners is the best option for political survival.
What do you think?
Over at The Atlantic, Max Fisher argues that the age of American client states is coming to an end:
The fall of easily controlled dictators across the region (the U.S. has already given up on its man in Yemen) comes at the same time as U.S.-allied democracies and autocracies alike seem increasingly willing to buck Washington's wishes. Last week alone, the U.S. clashed with some of its most important client states. Maybe that's because of America's habit of picking the most troubled states in the most troubled regions as clients (where they're perceived as the most needed), maybe it's because democratic movements are pressuring client states to follow popular domestic will rather than foreign guidance, and maybe it's because the idea of clientalism was doomed from the start....
Whatever the reasons, U.S. client states have been causing Washington more headaches than normal this year, and particularly over the past week. Here are ten of the most closely held U.S. clients, measured in part by foreign assistance (scheduled for fiscal year 2012) and by number of U.S. troops stationed there (according to Department of Defense statistics). Each is labeled with the reason for their strategic importance and with a rough gauge of how much trouble it's been causing the U.S., rated on a scale from "Zero Problems" to "Migraines in Washington." The most extreme cases are labeled "Client Relationship at Risk." Looking over the list of troubled client relationships, it's easy to wonder if the entire Cold War-inspired enterprise could be nearing its end. Maybe Egypt, just as it helped end the centuries of European imperialism in 1956, could make 2011 the year that began the end of clientalism.
Fisher makes an interesting point, but if you look at his list, there's a pretty obvious pattern: the client states causing actual headaches in Washington are in the Greater Middle East. Fisher's examples from Latin America and the Pacific Rim -- Colombia, South Korea and Taiwan -- are relationships that are actually deepening rather than fraying. These also happen to be the most democratic countries on Fisher's list.
The deeper question is whether the trouble with clients is a uniquely American problem, a uniquely Middle East problem, or a more general phenomenon of client-patron relationships. This is really the bailiwick of Dan Nexon, and I expect he'll weigh in on this question soon. Based on China's difficulties with North Korea and the Middle East, I'm inclined to think it's a general phenomenon, however.
I was pretty dismissive of Standard & Poor's debt downgrade last month. Re-reading that post, I stand by my political analysis of events going forward. Furthermore, the recovery of U.S. equity markets, the sharp reduction of yields on U.S. debt, and the failure of the other ratings agencies to follow suit are further data points suggesting that the S&P decision was flawed.
There's reality and perceptions of reality, however. On that latter front, after a recent expedition to Washington, I've concluded that regardless of whether S&P was right, they've won the argument in terms of perception. The summer debt debacle is, in many ways, the political equivalent of Hurricane Katrina. Perceptions of the Bush administration never recovered from that event, even though one could plausibly argue that the policy outputs of Bush's second term were better than the first term. Neverthelesss, Katrina was an inflection point that has caused a number of actors to reassess their perceptions about the political and policy competency of the White House and Congress.
Something similar seems to have happened with the debt deal. Politico's Ben White relays the dramatic effect on consumer confidence:
The Conference Board this week reported the biggest monthly decline in consumer confidence since the height of the financial crisis in 2008, its consumer confidence index falling from a reading of 59.2 to 44.5, the lowest in two years....
“The debt ceiling negotiation is an extremely significant event that is profoundly and sharply reshaping views of the economy and the federal government,” Republican pollster Bill McInturff wrote in a presentation of survey work he has done recently that suggests the debt ceiling debate has led to a significant shift in public opinion.
The partisan struggle over raising the debt went on for weeks before Obama finally announced on the night of Aug. 1 that a deal had been reached that resolves the issue for now. But while Washington has moved on to its next drama — the deliberations of the so-called supercommittee agreed to in the deal — its psychological impact has resonated widely.
McInturff said the result has been “a scary erosion in confidence” in both the economy and the government “at a time when this steep drop in confidence can be least afforded. … The perception of how Washington handled the debt ceiling negotiation led to an immediate collapse of confidence in government and all the major players, including President Obama and Republicans in Congress.”
A recent Washington Post poll found that 33 percent of Americans have confidence in Obama to make good decisions on the economy and just 18 percent have confidence in Congressional Republicans to do so.
These are especially dangerous readings when Federal Reserve Chairman Ben Bernanke has essentially said it is up to politicians to help boost the economy now that the Fed has fired nearly all its monetary policy bullets.
Speaking of Bernanke, he had this to say at Jackson Hole last week:
[P]erhaps most challenging, the country would be well served by a better process for making fiscal decisions. The negotiations that took place over the summer disrupted financial markets and probably the economy as well, and similar events in the future could, over time, seriously jeopardize the willingness of investors around the world to hold U.S. financial assets or to make direct investments in job-creating U.S. businesses. Although details would have to be negotiated, fiscal policymakers could consider developing a more effective process that sets clear and transparent budget goals, together with budget mechanisms to establish the credibility of those goals.
Ten days before Bernanke's speech, FP's Josh Rogin reported that Secretary of State Hillary Clinton had acknowledged the global ramifications of the debt fracas, telling a forum at National Defense University:
I happened to be in Hong Kong a few weeks ago, and I said confidently that we were going to resolve this; we were not going to default; we would make some kind of political compromise.
But I have to tell you, it does cast a pall over our ability to project the kind of security interests that are in America’s interest. This is not about the Defense Department or the State Department or USAID. This is about the United States of America. And we need to have a responsible conversation about how we are going to prepare ourselves for the future
Clinton's statements were confirmed by officials I talked to while down in DC.
So, can this perception be changed? Here, I'm bearish in the short-term. These kind of perceptions can be self-fulfilling. Economic growth is a remarkable political palliative, but growth looks anemic for a good long while. The Obama administration can try to change the narrative, but that's almost as difficult as Inception -- for the same reasons:
As Reinhart and Rogoff have observed, the economic aftereffects of debt crises are long-lasting. From here on out, the political effects of such crises will be on full display.
As someone who studies global political economy, this is fascinating. As a U.S. citizen, this is utterly depressing.
Fareed Zakaria thinks that the Libya intervention signals "a new era in U.S. foreign policy":
The United States decided that it was only going to intervene in Libya if it could establish several conditions:
1) A local group that was willing to fight and die for change; in other words, "indigenous capacity".
2) Locally recognized legitimacy in the form of the Arab League's request for intervention.
3) International legitimacy in the form of United Nations Security Council Resolution 1973.
4) Genuine burden sharing with the British and French spelling out precisely how many sorties they would be willing to man and precisely what level of commitment they would be willing to provide.…
The new model does two things:
First, it ensures that there's genuinely a local alliance committed to the same goals as the external coalition. This way, there is more legitimacy on the ground. And if there is anything Afghanistan and Iraq have taught us, it is that local legitimacy is key.
Second, this model ensures that there is genuine burden sharing so that the United States is not left owning the country as has happened so often in the past.…
In the future, we will again have to follow this limited model of intervention.
This sounds great, except that the set of criteria that Zakaria lists is so stringent that I seriously doubt that they will be satisfied again in my lifetime. Russia and China regretted the U.N. support the minute after it passed, and the president of the Arab League had buyer's remorse almost immediately after NATO started bombing. Even if the Libya operation looks like a success from here on out, there's no way that list of criteria will be satisfied. Ever.
Now, for those readers worried about the creeping militarization of American foreign policy, this might sound like a great idea, as it creates a ridiculously high barrier for military intervention. And, indeed, so long as these criteria are only used to satisfy humanitarian military interventions, it sounds good. Except that most military interventions aren't strictly humanitarian. The moment core national interests kick in, these criteria get downgraded from prerequisites to luxuries.
So Zakaria is wildly inflating the importance of the sui generis nature of the Libya intervention. But that's OK; he's a pundit, not an actual policymaker. There's no way anyone working in the White House, say, would make such a simplistic, facile -- hey, what's in this Josh Rogin FP interview with Ben Rhodes?
This week's toppling of the Qaddafi regime in Libya shows that the Obama administration's multilateral and light-footprint approach to regime change is more effective than the troop-heavy occupation-style approach used by the George W. Bush administration in Iraq and Afghanistan, a top White House official told today in a wide-ranging interview.
"The fact that it is Libyans marching into Tripoli not only provides a basis of legitimacy for this but also will provide contrast to situations when the foreign government is the occupier," said Ben Rhodes, deputy national security advisor for communications, in an exclusive interview on Wednesday with . "While there will be huge challenges ahead, one of the positive aspects here is that the Libyans are the ones who are undertaking the regime change and the ones leading the transition."…
"There are two principles that the president stressed at the outset [of the Libya intervention] that have borne out in our approach. The first is that we believe that it's far more legitimate and effective for regime change to be pursued by an indigenous political movement than by the United States or foreign powers," said Rhodes. "Secondly, we put an emphasis on burden sharing, so that the U.S. wasn't bearing the brunt of the burden and so that you had not just international support for the effort, but also meaningful international contributions."
Rhodes said that the United States is not going to be able to replicate the exact same approach to intervention in other countries, but identified the two core principles of relying on indigenous forces and burden sharing as "characteristics of how the president approaches foreign policy and military intervention."
Excuse me for a second; I have to go do this.
Look, ceteris paribus, burden-sharing and local support are obviously nifty things to have. I guarantee you, however, that the time will come when an urgent foreign-policy priority will require some kind of military statecraft, and these criteria will not be met. The Obama administration should know this, since its greatest success in military statecraft to date did not satisfy either of these criteria.
There is always a danger, after a perceived policy success, to declare it as a template for all future policies in that arena. Pundits make this mistake all the time. Policymakers should know better.
Remember that global political economy funk I was feeling about ten days ago? I think Felix Salmon caught it, and caught it bad. Riffing off of a George Magnus research note for UBS, Salmon thinks that we're currently experiecing, "the most uncertain outlook, in terms of the global political economy, since World War II ended and the era of the welfare state began."
If you think that's dramatic, consider this paragraph:
Most fundamentally, what I’m seeing as I look around the world is a massive decrease of trust in the institutions of government. Where those institutions are oppressive and totalitarian, the ability of popular uprisings to bring them down is a joyous and welcome sight. But on the other side of the coin, when I look at rioters in England, I see a huge middle finger being waved at basic norms of lawfulness and civilized society, and an enthusiastic embrace of “going on the rob” as some kind of hugely enjoyable participation sport. The glue holding society together is dissolving, whether it’s made of fear or whether it’s made of enlightened self-interest.
Magnus says something similar in his note, lamenting the "malaise in politics and policymaking," albeit conceding that, "While there is plenty of talk about endgames of war and conflict, muddling through and the rediscovery of good politics are just as, if not more likely." Walter Russell Mead nods along sagely, while John Sides is more skeptical.
In part for reasons proffered here, I'm more sympathetic to Sides than Salmon. Another reason is that Salmon's gloominess seems to be swamping the data. Edelman's 2011 Trust Barometer, for example, suggests that Salmon is exaggerating the "massive decrease of trust" across-the-world claim juuust a wee bit. That survey is not perfect (it's targeted at the top 25% of income-earners). It's also not all good news -- the advanced industrialized democracies are not strong reservoirs of trust right now. That said, the increase in trust -- not to mention the continued decrease in crime in kep places -- is broad-based enough to suggest that perception is overwhelming reality.
I'm not without concerns -- the disconnect at the global economic governance level is pretty disconcerting, and even G-20 optimists are starting to sound like me. Furthermore, the longer that sluggish growth and anemic job creation persists in the advanced industrialized democracies, the gloomier things get. If Reinhart and Rogoff are correct, Salmon is just demonstrating rational expectations.
Still, given the general suckiness of the global political economy over the past few years, what's striking is not the signs that the world is falling apart, but rather the dogs that haven't barked.
What do you think?
As I type this, most of Tripoli is now in the hands of Transitional National Council forces and supporters, two of Muammar Khaddafi's sons are in custody, and the backbone of Khaddafi's military has been broken. TNC forces do not control all of Libya, but they control an ever-increasing amount of it, including all of its oil infrastructuire. The whereabouts of Gaddafi, Khaddafy, and Qaddafi are still unknown, however.
So, six months after a spontaneous protest movement morphed into armed resistance and NATO got involved.... what does this all mean? With events on the ground still evolving, let me suggest the following list of tentative winners and losers from this operation:
1) The people of Libya. I think it's safe to say that an overwhelming majority of Libyans are pretty pleased that they're no longer living under the thumb of the Qaddafi family. Juan Cole has a pretty triumphalist post up about how this is playing out. He's a bit overoptimistic in places, but this point rings true -- appearances to the contrary, this was not a civil war:
It was not, if by that is meant a fight between two big groups within the body politic. There was nothing like the vicious sectarian civilian-on-civilian fighting in Baghdad in 2006. The revolution began as peaceful public protests, and only when the urban crowds were subjected to artillery, tank, mortar and cluster bomb barrages did the revolutionaries begin arming themselves. When fighting began, it was volunteer combatants representing their city quarters taking on trained regular army troops and mercenaries. That is a revolution, not a civil war. Only in a few small pockets of territory, such as Sirte and its environs, did pro-Qaddafi civilians oppose the revolutionaries, but it would be wrong to magnify a handful of skirmishes of that sort into a civil war. Qaddafi’s support was too limited, too thin, and too centered in the professional military, to allow us to speak of a civil war.
Brian Whitaker makes similar points in The Guardian. This fact does not necessarily mean that an armed insurgency won't persist, but even if it does, it would lack domestic political legitimacy.
2) NATO. Quick, was the 1999 Kosovo operation a NATO success or a failure? During the operation, it seemed like a failure, as a) everyone thought it was taking too long; and b) the operation expost the operational gaps between the U.S. and European forces. After Kosovo ended, however, it seemed like a victory... because it was.
This operation parallels the rhythms of the Kosovo intervention, but in many ways represents a bigger victory. The UK and France shouldered a greater share of the burden, there were no casualties in the alliance, and this operation directly led to regime change (whereas Kosovo had only an indirect effect on Serbia). As Blake Hounshell has observed, at the cost of $1 billion, Western involvement was totally worth it.
3) Air power advocates. Eric Schmitt and Steven Lee Myers' New York Times account of the march into Tripoli suggests the ways in which NATO air power played a critical role in aiding TNC forces on the ground. Stepping back, one has to conclude that NATO's air power was a necessary (though not sufficient) condition for Libya to play out the way it did. Despite some neoconservative calls for even heavier intervention, however, Western boots on the ground were not necessary.
4) Tunisia and Egypt. If TNC forces are able to consolidate their hold on Libya and restore some semblance of law and order, that means the return of more than 680,000 Libyan refugees. This would be good not just for Libya proper, but for the countries housing most of these refugees -- namely, Egypt and Tunisia. These countries are attempt their own transition into more representative regimes. Eliminating the socioeconomic pressure of displaced Libyans is an unalloyed good thing for the political development of Libya's neighbors.
5) President Obama. To quote Eli Lake: "President Birth Certificate has done what Reagan and W could not: end Gadhafi's reign and kill bin Laden." It's worth noting that oth operations took more than six months to play out. While he won't necessarily be this blunt about it, Obama can now credibly argue that patience + determinaion = badass military statecraft.
1) Other authoritarian despots, particularly in Africa. I don't want to overstate this -- I'm skeptical that the scenes from Tripoli will lead to spontaneous uprisings in Damascus and elsewhere. Still, this is the kind of event that will always make other despots nervous.
In the case of African authoritarians or quasi-authoritarians, the fall of Khaddafi also leads to the permanent end of a pipeline of cash from Libya to his friends in Africa.
2) U.S. cable news networks. Useless. Totally f$%*ing useless. Seriously, until FOX news started airing live footage from its SkyNews partner, I got vastly more information from my Twitter feed than any of the cable news nets. That's when they were even covering events in Tripoli -- I think it took MSNBC something like five hours to realize there was something worth covering. Yesterday's performance was just embarrassing.
3) Realists. The United States should never have intervened!! It's a civil war!!! Libya is an example of the militarization of American foreign policy!! The U.S. will be drawn into an expensive quagmire that is not a core national interest!! Air power alone will never work!! Many, many other realist cliches!!
Readers are warmly welomed to provide realist rationalizations for why they are still right/will be proven right in the future in the comments.
4) KT McFarland. There has been a lot of stupid American punditry on Libya, but I think McFarland's FoxNews.com essay from last Friday takes the cake as the Dumbest Thing I've Read on Libya in the past month. Thankfully, it's also completely obsolete.
5) President Obama. [Wait, how is he a winner and a loser?!--ed.] On the one hand, Obama certainly wins by insulating himself against foreign policy criticism. On the other hand, foreign policy victories in the bank are quickly forgotten -- just look at the way in which bin Laden's death translated into a transitory blip for Obama's popularity.
In 2012, the only issue any voter cares about is the economy. A successful operation in Libya will mean less news coverage about Libya and even more coverage of the economy … which is not exactly Obama's strong suit at the moment.
So the big Middle East news this AM is that the Obama administration has explicitly called for Syrian leader Bashir Assad to leave power. The White House blog has the full text of Obama's statement. On Assad:
The future of Syria must be determined by its people, but President Bashar al-Assad is standing in their way. His calls for dialogue and reform have rung hollow while he is imprisoning, torturing, and slaughtering his own people. We have consistently said that President Assad must lead a democratic transition or get out of the way. He has not led. For the sake of the Syrian people, the time has come for President Assad to step aside.
The United States cannot and will not impose this transition upon Syria. It is up to the Syrian people to choose their own leaders, and we have heard their strong desire that there not be foreign intervention in their movement. What the United States will support is an effort to bring about a Syria that is democratic, just, and inclusive for all Syrians. We will support this outcome by pressuring President Assad to get out of the way of this transition, and standing up for the universal rights of the Syrian people along with others in the international community.
As to what the administraion is going to do to, well, you can check out the executive order, or you can believe me when I say that it amounts to a tightening of economic sanctions.
Now, conservatives have been calling for this move for quite some time, while Middle East analysts like FP's Marc Lynch, have been far more pessimistic. Two months ago, Lynch argued:
[T]here's "Expellus Assadum": the magic words by which Obama might declare that Asad must go and somehow make it so. While there's every reason for the U.S. to ratchet up its rhetorical criticism of an increasingly violent and brutal regime, tougher rhetoric isn't going to change the game. The entire course of the Arab upheavals this year demonstrates the limits of American influence and control over events or other regional actors. It most certainly proves that firm Presidential rhetoric is not enough to tip either the internal or the international diplomatic balance.
Libya should be enough to demonstrate this hard reality. I'm actually optimistic about Libya -- the diplomatic and military trends all clearly favor the rebels, the NTC has come together into an impressive government-in-waiting, and international consensus has remained reasonably strong. But even if Libya ends well, the reality is that it has taken months under nearly the best possible conditions. It isn't just that the President used his magic words. The Libya operation had widespread regional and international support, UN authorization, direct military involvement in a favorable environment for airpower, and an organized and effective opposition on the ground with a viable political leadership. And it has ground on for months.
The idea that invoking "Expellus Assadum" would quickly lead to an endgame in Syria just doesn't make sense. Demanding that Obama say "Assad must go" seems less about Assad and more about either moral posturing or about creating a rhetorical lever for pressuring Washington -- not Damascus -- to do more to deliver on that new commitment. By putting the President's -- and America's -- credibility on the line, however, it might force unwanted escalation into more concrete actions in order to deliver on the demand. So tougher and sharper rhetoric, with constant condemnations of violence, is not just appropriate but essential... but escalating to "Assad must go" at this point is not.
I've already revealed my sober assessment of this kind of policy step on Twitter. That said, I'm a bit more sanguine about this kind of call than Lynch. This strikes me as your classic gut-level foreign policy pronouncement, which, as I argued last month, accomplishes nothing of substance but, "just the acknowledgment of frustration can be politically useful, a venting of pressure that might otherwise lead to hopelessly misguided or absurdly risky policy options."
I suspect Marc is still haunted by the ways in which this sort of rhetoric about Saddam Hussein in the 1990s laid the political groundwork for Operation Iraqi Freedom. But it's not the 1990's anymore. The United States has three active military operations in the Middle East. There is no public clamor or enthusiasm for yet another military engagement, nor do I see any genuine policy appetite for such a move. Sanctions are already in place. Covert action might be taking place, but that policy option can never be publicly acknowledged. As the New York Times story notes, in calling for Assad to leave the United States is now moving towards the consensus in the region.
When the rest of the policy quiver has been exhausted, sure, why not call for Assad to leave? As a general rule, all else equal, I see no reason why the U.S. government should not express its actual preferences rather than hide behind diplomatese. Or, as Douglas Adams would put it, this rhetorical move counts as "harmless."
What do you think?
[WARNING: THE FOLLOWING IS AN OPTIMISTIC GLOBAL POLITICAL ECONOMY POST]
Note: in my last blog post, I might have sounded juuuuust a wee bit pessimistic about the state of the global political economy. That was my intent, but it wasn't necessarily how I actually felt. My aim was to assemble as negative a brief as possible about the state of the global political economy. The aim of this post is to argue that, despite all the recent bad news, the fundamentals of the global political economy are surprisingly sound. I'm not actually as optimistic as the rest of this post suggests, either -- but I do lean more in this direction. The fact that I'm blogging this from a zombie-proof vacation redoubt should in no way affect your evaluation of the following few paragraphs.
So, when we last left off this debate, things were looking grim. My concern in the last post was that the persistence of hard times would cause governments to take actions that would lead to a collapse of the open global economy, a spike in general riots and disturbances, and eerie echoes of the Great Depression. Let's assume that the global economy persists in sputtering for a while, because that's what happens after major financial shocks. Why won't these other bad things happen? Why isn't it 1931?
Let's start with the obvious -- it's not gonna be 1931 because there's some passing familiarity with how 1931 played out. The Chairman of the Federal Reserve has devoted much of his academic career to studying the Great Depression. I'm gonna go out on a limb therefore and assert that if the world plunges into a another severe downturn, it's not gonna be because central bank heads replay the same set of mistakes.
The legacy of the Great Depression has also affected public attitudes and institutions that provide much stronger cement for the current system. In terms of publuc attitudes, compare the results of this mid-2007 poll with this mid-2010 poll about which economic system is best. I'll just reproduce the key charts below:
The headline of the 2010 results is that there's eroding U.S. support for the global economy, but a few other things stand out. U.S. support has declined, but it's declined from a very high level. In contrast, support for free markets has increased in other major powers, such as Germany and China. On the whole, despite the worst global economic crisis since the Great Depression, public attitudes have not changed all that much. While there might be populist demands to "do something," that something is not a return to autarky or anything so drastc.
Another big difference is that multilateral economic institutions are much more robust now than they were in 1931. On trade matters, even if the Doha round is dead, the rest of the World Trade Organization's corpus of trade-liberalizing measures are still working quite well. Even beyond the WTO, the complaint about trade is not the deficit of free-trade agreements but the surfeit of them. The IMF's resources have been strengthened as a result of the 2008 financial crisis. The Basle Committee on Banking Supervision has already promulgated a plan to strengthen capital requirements for banks. True, it's a slow, weak-assed plan, but it would be an improvement over the status quo.
As for the G-20, I've been pretty skeptical about that group's abilities to collectively address serious macroeconomic problems. That is setting the bar rather high, however. One could argue that the G-20's most useful function is reassurance. Even if there are disagreements, communication can prevent them from growing into anything worse.
Finally, a note about the possibility of riots and other general social unrest. The working paper cited in my previous post noted the links between austerity measures and increases in disturbances. However, that paper contains the following important paragraph on page 19:
[I]n countries with better institutions, the responsiveness of unrest to budget cuts is generally lower. Where constraints on the executive are minimal, the coefficient on expenditure changes is strongly negative -- more spending buys a lot of social peace. In countries with Polity-2 scores above zero, the coefficient is about half in size, and less significant. As we limit the sample to ever more democratic countries, the size of the coefficient declines. For full democracies with a complete range of civil rights, the coefficient is still negative, but no longer significant.
This is good news!! The world has a hell of a lot more democratic governments now than it did in 1931. What happened in London, in other words, might prove to be the exception more than the rule.
So yes, the recent economic news might seem grim. Unless political institutions and public attitudes buckle, however, we're unlikely to repeat the mistakes of the 1930's. And, based on the data we've got, that's not going to happen.
[WARNING: THE FOLLOWING IS A VERY PESSIMISTIC GLOBAL POLITICAL ECONOMY POST]
So, just to sum up the past week or so of global political economy events:
1) U.S. government debt got downgraded by Standard & Poor;
2) Global equity markets are freaking out;
London Britain is burning;
This all sounds very 2008, except that it's actually worse for several reasons. First, the governments that bailed out the financial sector are now themselves the object of financial panic and political resentment. Second, the tools used to try and rescue the global economy in 2008 are partially to blame for what's happening right now. Despite all the gnashing of teeth about the Fed twiddling its thumbs, it's far from clear that a QE3 would actually stimulate anything besides a rise in commodity prices.
With both Europe and the United States unable to stimulate their economies, and China seemingly paralyzed into indecision, it's worth asking if we are about to experience a Creditanstalt moment.
The start of the Great Depression is commonly assumed to be the October 1929 stock market crash in the United States. It didn't really become the Great Depression, however, unti 1931, when Austria's Creditanstalt bank desperately needed injections of capital. Essentially, neither France nor England were willing to help unless Germany honored its reparations payments, and the United States refused to help unless France and the UK repaid its World War I debts. Neither of these demands was terribly reasonable, and the result was a wave of bank failures that spread across Europe and the United States.
The particulars of the current sovereign debt crisis are somewhat different from Creditanstalt, and yet it's fascinating how smart people keep referring back to that ignoble moment. The big commonality is that while governments might recognize the virtues of a coordinated response to big crises, they are sufficiently constrained by domestic discontent to not do all that much.
So... is this 1931 all over again?
There are three aspects of the current situation that make me fret about this. The first is the sense that developed country governments have already tapped out all of their politically feasible methods of stimulating their economies. This is the time when both politicians and voters start to ask themselves, "Why not pursue the crazy idea?"
The second is whether the Chinese government will do something to satiate their nationalist constituency. Neither Joe Nye nor James Joyner thinks this is likely, and I tend to agree that any effort at economic coercion will hurt China as much as the United States. When autocrats are up against the wall, however, then they might take risks they otherwise would never consider.
The third is this working paper on what causes societal unrest in developed economies (h/t Henry Farrell). The abstract suggests more trouble on the way:
From the end of the Weimar Republic in Germany in the 1930s to anti-government demonstrations in Greece in 2010-11, austerity has tended to go hand in hand with politically motivated violence and social instability. In this paper, we assemble crosscountry evidence for the period 1919 to the present, and examine the extent to which societies become unstable after budget cuts. The results show a clear positive correlation between fiscal retrenchment and instability. We test if the relationship simply reflects economic downturns, and conclude that this is not the key factor.
So... there are, unfortunately, numerous reasons to think that we're headed down a bad road... which is the pretty much point of this post.
Readers are encouraged in the comments to offer counterarguments for why things aren't as bad as 1931. I'll be offering some thoughts about why 1931 won't happen again later in the week.
American politicians are super-mad at Standard & Poor's for downgrading U.S. debt even after the debtopocalypse was averted earlier this week. These same politicians seem torn between pointing out that S&P sucks at math and blaming the other political party for the S&P screw-up.
I really don't care about that as much as the debate over whether S&P got its political analysis right. Here's the key paragraphs of the actual Standard & Poor statement:
[T]he downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011....
Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act.
Felix Salmon, thinks that this analysis is spot on:
[T]he US does not deserve a triple-A rating, and the reason has nothing whatsoever to do with its debt ratios. America’s ability to pay is neither here nor there: the problem is its willingness to pay. And there’s a serious constituency of powerful people in Congress who are perfectly willing and even eager to drive the US into default. The Tea Party is fully cognizant that it has been given a bazooka, and it’s just itching to pull the trigger. There’s no good reason to believe that won’t happen at some point.
David Weigel concludes that the S&P political analysis is fair:
This is not crazy.This what Republicans imply about the supercommittee -- they will not accept plans that increase taxes, and despite the fact that they've agreed to let the Bush tax cuts lapse on January 1, 2013, they are making noises about not accepting a return of the rates. The best possible scenario, if we assume that stance, is what I wrote about today -- tax reform plans that start in the supercommittee and win over a committed Congress.
Kevin Drum, however, thinks that S&P's political analysis is way off:
S&P shouldn't be in the business of commenting on a country's political spats unless they've been going on so long that they're likely to have a real, concrete impact on the safety of a country's bonds. And that hasn't happened yet. There's no serious macroeconomic reason to think Americacan't service its debt and there's no serious political reason to think the Tea Party has anything close to the power to provoke a political meltdown in which wewon'tpay our debt....
[S&P]should care only about the safety of U.S. bonds, and for the moment anyway, there's no legitimate reason to think either that we can't pay or that we won't pay. The bond market, which has all the same information as S&P, continues to believe that U.S. debt is the safest in the world, and in this case the market is right. S&P should stop playing dumb political games and stick to its core business.
I side, mostly, with Drum. It's totally fair for S&P to factor politics into their assessment of sovereign debt. Indeed, a key trend in sovereign debt analysis over the past five years has been the recognition that political fundamentals can matter as much as economics. That said, if ratings agencies are going to do this, then their political expectations can't just be retrospective -- they need to do some actual forecasting. Instead, they looked at recent weeks and extrapolated into the future.
There are three factors that should give S&P pause before assuming that political dysfunction could lead to no increae in tax revenue. First, as Drum points out, despite all the displays of ideological inflexibility, in the end the debt ceiling vote secured a strong majority of the GOP House caucus. Some Tea Party members were willing to risk a crisis, but not actually go and perpetuate one. It was not a Great Moment in Democracy, but in the end a deal was done. You can't dock for intransigence without noting the outcome.
Second, unlike the debt ceiling, deadlock in late 2012 means that the Bush tax cuts expire. Either a lame-duck Obama or a newly-re-elected Obama will be able to make that fiscal decision (no way any faction in Congress musters the 2/3 vote necessary to override). As Jonathan Chait has repeatedly observed, that dynamic is the opposite of the debt ceiling episode, in which case paralysis led to bad fiscal outcomes. If S&P thinks partisan gridlock will persist on Capitol Hill, then the conclusion to draw is that taxes will go up.
Third -- and this is pretty important -- S&P has failed to observe the political aftereffects of the debt deal. As I argued previously:
[T]he 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.
The first line line of defense has been breached, but the second line of defense looks increasingly robust. Public opinion poll after public opinion poll in the wake of the debt deal show the same thing -- everyone in Washington is unpopular, but Congress is really unpopular and GOP members of Congress are ridiculously unpopular. At a minimum, S&P needs to calculate how the current members of Congress will react to rising anti-incumbent sentiment. If they did that analysis and concluded that nothing would be done, I'd understand their thinking more. I didn't see anything like that kind of political analysis in their statement, however.
In the end, I suspect Moody's and Fitch won't follow S&P's move, so this could be a giant nothingburger. Still, if these guys are going to be doing political risk analysis, it might help to actually have some political scientists on the payroll. Based on their statement, S&P is simply extrapolating from the op-ed page, and that's a lousy way to make a political forecast.
Am I missing anything?
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
whored mingled enough with the magazine world to understand that publishing "best/worst" lists are fun and engaging. Some choices will be universally acknowledged, others will provoke controversy and debate, and so forth. Lists are always going to engage the readers. It's almost impossible to get them wrong.
I bring this up because The Atlantic's list of the best and worst foreign policy presidents of the past century is really, really wrong.
Democracy Arsenal's Michael Cohen cobbled together the list. Here are his criteria:
After reaching out to host of historians, foreign policy experts, academics and various think tankers here's one stab at answering a question which, in many respects, has no right answer. How you choose the best and worst foreign policy President depends in large measure on what values inform your vision of what a good foreign policy looks like. If you're a foreign policy idealist, Wilson would seem pretty good; a foreign policy realist; you might cast a vote for George H.W Bush or even Richard Nixon. If you prefer your presidents to talk tough, Harry Truman might be your man; if you prefer a more modest and less partisan figure, Dwight Eisenhower might float your boat.
As my list suggests, I tend to lean toward the more restrained, pragmatic realists who are suspicious about the use of force. Conversely, I'm more wary of not only the idealistic and ideologically driven presidents, but also those who use foreign policy, most destructively, as a tool of domestic politics.
OK, fair enough. Here's his list:
The Five Best Presidents: 1) FDR; 2) Dwight Eisenhower; 3) George H.W. Bush; 4) Ronald Reagan; 5) John F. Kennedy
The Five Worst Presidents: 1) LBJ; 2) Jimmy Carter; 3) Woodrow Wilson; 4) Harry Truman; 5) Richard Nixon.
I'll let Tom Ricks rebut the JFK assessment on his own blog. I'll let my readers make other objections -- and there are many ones to make -- with most of he list. My problem is with the assessment of Harry Truman as, somehow, one of the five worst foreign policy presidents of the last century.
Here's Cohen's explanation -- let's do this by paragraph, shall we?
Harry Truman has in the nearly 50 years since he left the White House grown significantly in the estimation of both the public and many historians. To be sure, he deserves enormous credit for protecting and stabilizing Western Europe with the Marshall Plan and the creation of NATO. These are signal achievements but as historians from Robert Dallek and Walter Lafeber to Fredrik Logevall have suggested there is a pretty significant downside to Truman's presidency as well.
One must stop here or a second and admire Cohen's ability to glom most of Truman's foreign policy accomplishments into a single sentence. That takes some doing. One could have at least noted that in the span of five years Truman and his foreign policy advisors created pragmatic institutions that not only withstood the Cold War but prospered even after it ended. Nope, nothing on that point. That takes some serious doing.
OK, let's move onto Truman's alleged defects:
First there was Korea. An impulsive response to a cross-border attack that re-shaped American foreign policy. It was the final nail in the coffin of the more modest containment strategy proposed by George Kennan and by default enshrined the notion that the US had a responsibility to contain Communism wherever it showed its fangs. But while the decision to go to war can be considered a debatable one; the failure in rein in Douglas MacArthur's push to the Yalu River, which triggered a Chinese intervention is a disaster that can't be washed away (even by Truman's later decision to fire the general). Considering that more than 20 million North Koreans continue to live in terrible hardship today because of that decision only compounds the mistake (emphasis added).
Why yes, that's so true. Had Truman not decided to respond in force in Korea, there wouldn't be 20 million North Koreans living in terrible hardship -- there would be at least 60 million Koreans living in terrible hardship.
Seriously, this line of reasoning makes no sense to me. I understand but strongly disagree with the logic that intervening in Korea was a mistake. I understand and kinda agree with the contention that crossing the 38th parallel was exceedingly costly in terms of blood and treasure. I simply can't understand, however, the argument that had the U.S. not made that push, North Korea would have evolved differently. Would Kim-Il Sung have abandoned juche if MacArthur hadn't tried for the Yalu?
Speaking of MacArthur, you can't acknowledge Truman's failure to rein him in without also acknowledging that by firing MacArthur, Truman cemented civilian control over the military just as the size of the U.S. military was reaching a new high.
Beyond Korea, the Truman Doctrine and its declaration that it was the "policy of the United States to support free people who are resisting attempted subjugation by armed minorities or by outside pressures" laid the groundwork for the limitless definition of US national interests that unfolded over the next 60 years. As Kennan would later note, it was one thing to contain Communism in Europe (a goal on which Truman succeeded). It was quite another to broaden that goal to the rest of the world. There is, as a result, a straight line between Truman's foreign policy choices and the war in Vietnam.
Right, this is why Eisenhower felt compelled to intervene in Vietnam during Dien Bien Phu -- oh, wait, as Cohen points out in his Eisenhower write-up, he did the exact opposite of that. I don't buy straight-line arguments that take two decades to play out.
Then there was Truman's use of anti-Communist rhetoric for political advantage that turned what might have been a balance of power, geo-political clash into an ideological one. This, of course, also helped to politicize the Cold War in the United States and heightened the issue of anti-Communism. Indeed, few Presidents more flagrantly used foreign policy as a political punching bag as frequently as Truman.
I'd be more charitable towards this point if Cohen hadn't also said that Eisenhower "used Cold War fears to push for national highway system and more money for higher education, two smart national security investments." When is using foreign policy fears at home good and when is it bad, exactly? Based on Cohen's list, I can't tell.
Finally, ask yourself a counter-factual: how would the Cold War have unfolded if FDR had lived out his fourth term, rather than having the inexperienced Truman become the leader of the Free World? It's not hard to imagine that the tensions between the United States and the Soviet Union, so deftly handled by FDR during WWII, would have been minimized and a less militarist and dangerous conflict might have emerged. At the very least, as Robert Dallek points out even if superpower, ideological conflict between the US and Soviet Union was inevitable, Truman never really sought to find an alternative (emphasis added).
Again, I'm not sure what to make of this. First, Cohen acknowledged that FDR "sold out the Eastern Europe countries at Yalta." Does he believe that FDR would have somehow been able to repulse Stalin in Iran, Greece, Turkey and elsewhere without a Cold War -- or do those countries not matter?
Second, if the bipolar distribution of power made superpower conflict inevitable, why exactly should Truman be blamed for not dickering around with alternatives that would have crashed and burned? According to this logic, Truman is one of the five worst foreign policy presidents of the last century because he failed to pursue unfeasible options. I'm sorry, but clearly I don't get it.
In his blog post explaining the list, Cohen acknowledges that:
I'm probably far too generous to John F. Kennedy, who makes the best list, and far too harsh to Richard Nixon, who makes the worst list. This is a pretty fair critique and if I had my druthers I'd put both men somewhere in the middle, but the need for editorial symmetry was too strong!
Fair enough -- but I'm sorry, listing Harry Truman as one of the five-worst foreign policy presidents is absurd.
Am, I missing anything?
As the markets begin their full-on freak out over the failure of Washington to raise the debt ceiling, I must confess to having a semi-out-of-body experience about the whole thing. The American in me is simply appalled by the stupid, self-destructive behavior that led to this thoroughly avoidable apocalypse. The political scientist in me, however, is utterly fascinated by the whole shebang. I understand that wartime photographers have the same kind of problem -- I wish they had a word for it.
So, taking my American hat off and putting my poli sci hat on, I find it fascinating that House Speaker John Boehner is having so much difficulty whipping a debt ceiling bill that is already a dead letter in the Senate. Conventionally, whipping is done through a mixture of cajoling, coercing and cash -- with an emphasis on the latter. A pet project here, a pet project there, and presto, you have a majority.
The problem is that the nature of the GOP House caucus, combined with the party's anti-government ideology, has stripped Boehner of everything but the cajoling. First, here's the Politico story on last night's whip effort:
Boehner and his top lieutenants worked deep into Thursday night trying to find a just-right solution that would attract 216 votes for the package of $900 billion in new borrowing authority, $917 billion in spending cuts over the next decade, and a process for entitlement and tax reform legislation that could lead to $1.6 trillion or so in deficit reduction and a second increase in the debt limit.
They don’t have available to them the same tools as past Republican leadership teams: There are no earmarks to hand out, nor any to take away, for example.
Rep. Jeff Flake (R-Ariz.), one of the last holdouts and a candidate for the Senate in Arizona, spoke of how “refreshing” it was to see a lobbying effort bereft of the legislative grease that used to secure last-minute votes in the House. He said the vote-building would have “cost $20 billion” in the past.
Yes, it's totally refreshing. It's also totally f**king useless, because Boehner isn't trying to cajole moderates, he's trying to cajole ideological hardliners. David Weigel explains in his wrap-up:
The Republican dilemma quickly revealed itself. In other situations where a majority party needed to grind out a few final votes, it called on members who agreed with the concept of legislation but quibbled with the text....
John Boehner and Eric Cantor couldn't sell their Republicans in the same way. Their diehards never wanted to raise the debt limit. They had supported a strict, doomed version of a debt ceiling deal, Cut, Cap, and Balance, which did that, but even then, they weren't really comfortable with the concept of what they were doing. They did not want to raise the debt limit. Their constituents were uncomfortable with the idea, at first. And now they were being asked to raise the limit, without the conditions they liked, because... why? Because they were told that failing to do so would give Barack Obama all the leverage in the debt fight. That was too clever by half for some Republicans. More than 24 Republicans, it seemed.
Tonight, reporters stalked outside the offices of Boehner and Cantor as members walked in and out for meetings. This wasn't like health care, or even the continuing resolution. We were watching diehard conservatives, who had never wanted to raise the debt limit, and who had never done so in their careers, being begged for votes. As the night dragged on, the visitors did not look like the sort who could cave on big, existential votes. Louie Gohmert, one of the diehards who believes that Tim Geithner is lying about the threat of default, was dragged in. Tim Scott, the co-president of the freshman class, was dragged in; he walked out nonplussed, walked past reporters, and took out his iPod earbuds to confirm he was a "no." Roscoe Bartlett, an octogeniaran, who's not usually counted on for tough votes, entered the hot room telling reporters he didn't want to choose between "bad and really bad." The farce peaked when Gohmert joined freshman Rep. Jeff Duncan, R-S.C., for a prayer session in the House's chapel. It can't be good when members of Congress are literally asking for salvation.
If you are looking only to God for a clue about how you should vote, neither material incentives nor political rhetoric is gonna sway you. And now you know why I think there's a 50/50 chance that no deal occurs by August 2.
UPDATE: Megan McArdle has some similar reactions to the same Politico story as I did.
Win McNamee/Getty Images
After last night's stunningly useless set of speeches, I'd put the odds of the U.S. not raising the debt ceiling by August 2nd at 1 in 2. Like many other observers, I'm finding it increasingly difficult to envision a deal that would get through the Senate while attracting a majority of House Republicans [You meant a majority of the House of Representatives, right?--ed. No, I meant a majority of House Republicans. I'm pretty sure that Boehner and the rest of the House GOP leadership will refuse to pass any debt ceiling plan that relies too much on House Democrats.]
So, it's gonna be a fun few weeks for those of us who study the global political economy. Let's start by thinking the unthinkable -- what will happen if there is a default?
I've expressed my feelings on the matter already, and I'm hardly the only one. That said, I've also
hedged my bets been flummoxed by the lack of market reaction to the DC stalemate. The lack of market reaction to date has emboldened House GOP members to stand fast. Could they be right?
Tom Oatley, who pooh-poohed my fears of the debtpocalypse last week, makes an interesting point about the composition of U.S. debt-holders:
By these figures, about 63% of US government debt is owned by central banks (foreign and domestic) and/sovereign wealth funds. Most of these entities are American friends and allies. Another 4% is owned by US state and local governments. That leaves 33%--about $4.8 trillion--in private hands. Of this, the financial institutions with the most restrictive regulations regarding asset ownership (depository institutions) own only 2% of the total ($290 billion). Mutual Funds, who may or may not have to dump downgraded debt, hold another 9% ($1.35 trillion).
What's the point? The discussion about the impact of US default revolves around the market response to default. Useful to recognize that most of the US government debt is held by public-sector agents who are much less sensitive to balance sheet pressures and regulatory constraints. These public sector agents are also substantially more sensitive to "moral suasion" and direct appeal than private financial institutions. The structure of ownership of US debt might dampen the negative impact of any default that does occur.
This is pretty interesting. Oatley focuses on "moral suasion," but there's also a national-interest motive for many U.S. debtholders. Most of the official holders of U.S. debt have a strong incentive for a) the value of their holdings not to plummet; and b) the United States economy to continue to snap up other their exports. If China, for example, is buying up U.S. debt to sustain its own growth, then neither a technical default nor a ratings downgrade should deter China or other export engines from continuing to buy U.S. debt even if there's a spot of trouble.
So it appears that complex interdependence will force America's rivals to continue to hold U.S. debt even after the debtpocalypse!! The United States in the clear, right?
Not so fast. Here are five "known unknowns" I can think of that might complicate Oatley's analysis:
1) What if the creditors form a cartel? In my 2009 paper, this was the one scenario that gave me the heebie-jeebies, because it's the one scenario under which creditors can wring geopolitical gains from debtor states. Any kind of default can act as a focal point moment in which U.S. creditors decide it's time to apply a haircut to American power and influence.
I don't think this is going to happen, because the national interests of American debtholders remain divergent. That said, if U.S. allies interpret default as a signal of U.S. unreliability in times of crisis, then all bets are off.
2) What about the economic nationalism of China? China is the largest foreign debtholder, which gives it a certain agenda-setting power in moments of crisis. There are a lot of compelling reasons why China would decide to try to minimize the economic disruptions . On the other hand, there's a lot of resentment on Chinese Internet boards already about the Chinese purchases of U.S. debt. During a period in which the CCP is already concerned about domestic instability, one could envision a scenario whereby they try to mollify nationalists at home by acting out against the United States.
3) What would be the effect of a mild market reaction on the House of Representatives? The less the markets react, the less that the House GOP will feel a need to do anything. There will come a point, therefore, when official debtholders might need to signal to the House that, in IPE lingo, "s**t needs to get done." That signal would in and of itself roil markets, not to mention the effects the current uncertainty is already having on the real economy.
4) What is the fiscal shock from a default? There are two causal mechanisms through which a default could affect the global economy. The first is through panic and uncertainty roiling financial markets. The second, however, is from a dramatic fiscal contraction due to limited government spending. Given the lackluster state of the current recovery, it wouldn't take much to tip the United States back into recession.
5) What if there's another AAA bubble? FT Alphaville's Tracy Alloway provided another interesting chart earlier this month on the distribution of AAA securities:
As Alloway warns:
[W]atch what starts happening from 2008 and 2009.
The AAA bubble re-inflates and suddenly sovereign debt becomes the major force driving the world’s triple-A supply. The turmoil of 2008 shunted some investors from ABS into safer sovereign debt, it’s true. But you also had a plethora of incoming bank regulation to purposefully herd investors towards holding more government bonds, plus a glut of central bank liquidity facilities accepting government IOUs as collateral. Where ABS dissipated, sovereign debt stood in to fill the gap. And more.
It’s one reason why the sovereign crisis is well and truly painful.
It’s a global repricing of risk, again, but one that has the potential for a much largerpop, so to speak.
We know that a downgrade of U.S. Treasuries would likely lead to a downgrade of state and municipal bond ratings as well. We also know that the ripple effects from the collapse of asset-backed securities were much larger than anticipated before the 2008 crisis. This is why the possible knock-on effects of downgrade so many AAA asserts makes me itchy. Even if banks and other financial institutions have minimal exposure to U.S. Treasuries, I don't think it's possible for them to have minimal exposure to all U.S.-based AAA sovereign debt.
These are just the five known unknowns that I could think of in the past hour -- there are probably many, many more. Readers are strongly encouraged to add them in the comments.
Here's an open secret -- most American foreign policy observers loathe domestic politics. To those who seek to define and distill the national interest, the notion that factions or parties can get in the way of the common good is very, very frustrating. This is why, whenever gridlock breaks out in Washington, there is a spasm of caterwauling from prominent foreign policy thinkers that Something. Must. Be Done.
This leads to some silly memes, like claims that a third party will break the logjam. It won't -- a glance at Duverger's Law and you know that the first-past-the-post electoral system in this country means that a two-party system is the only stable long-term equilibrium. A third party in the United States could only achieve electoral viability in one of two ways: either supplanting one of the existing parties, or focusing on success in a particular region. Since neither of these outcomes has occurred since the Civil War, I'm not holding my breath.
Gridlock frustration also leads to proposals of Grand Diagnoses and Remedies for Fixing the System. Fareed Zakaria goes down this road, offering a diagnosis of why partisanship has been rising in the United States and then links to Mickey Edwards' essay in The Atlantic of how to fix things. Zakaria, riffing off of Edwards, lists four reasons why partisanship is so high:
1) Redistricting has created safe seats so that for most House members, their only concern is a challenge from the right for Republicans and the left for Democrats....
2) Party primaries have been taken over by small groups of activists who push even popular senators to extreme positions.
3) Changes in Congressional rules have also made it far more difficult to enact large, compromise legislation.
4) Political polarization has also been fueled by a new media, which is also narrowcast.
These sound compelling, except that A) none of them really explain increased polarization in the Senate; and B) only the fourth trend is in any way recent (the rest of these phenomenas can be traced back to the 1970's).
The real problem with Congress is that any proposed institutional reform to correct the problems would require either a dilution of legislative power or a dilution of the minority's power to obstruct. Neither minority nor majority parties in Congress will be interested in moves like that unless and until we're in a crisis that made 2008 look like a ripple in the pond.
If you are looking to this humble blogger for ways out of this current problem... um... look elsewhere. My training is in international relations, and I've found that people with that kind of training tend to prefer policy reforms that provide political leeway and insulation to the executive branch. These measures are appealing because they tend to minimize the number of stupid interactions with galactically stupid members of Congress. Over the long-term, however, even a stupid Congress still serves as a valuable check on executive branch authority.
I'm as frustrated as the next foreign policy observer when it comes to the current policy paralysis. I know my own kind, however, and we suffer from the flawed belief that there was a halcyon era of bipartisanship in the foreign policy days of yore. Be very, very wary when a foreign policy pundit gives advice about how to reform the American system of government. Most of the time they are relying on decades-old Introduction to American Government arguments that are either obsolecent or incentive incompatible.
Chip Somodevilla/Getty Images
Despite Fareed Zakaria's best efforts, it seems that foreign policy commentators can't stop offering advice on American grand strategy.
Richard Haass provides the latest salvo in Time. After arguing that no other great power can offer a serious revisionist challenge to the current system, concluding, "Today's great powers are not all that great." With that set-up, he proposes a grand strategy of "Restoration":
The U.S. would continue to carry out an active foreign policy—to create international arrangements to manage the challenges inherent in globalization, to invigorate alliances and partnerships, to deal with the threats posed by an aggressive North Korea, a nuclear-armed Iran and a failing Pakistan.
But under a doctrine of restoration, there would be fewer wars of choice—armed interventions when either the interests at stake are less than vital or when there are alternative policies that appear viable. Recent wars of choice include Vietnam, the second Iraq war and the current Libyan intervention. There would, however, continue to be wars of necessity, which involve vital interests when no alternatives to using military force exist. Modern wars of necessity include the first Iraq war and Afghanistan after 9/11....
Restoration is not just about acting more discriminating abroad; it is even more about doing the right things at home. The principal focus would be on restoring the fiscal foundations of American power. The current situation is unsustainable, leaving the U.S. vulnerable either to market forces that could impose higher interest rates and draconian spending cuts or to the pressures of one or more central banks motivated by economic or conceivably political concerns.
Reducing discretionary domestic spending would constitute one piece of any fiscal plan. But cuts need to be smart: domestic spending is desirable when it is an investment in the U.S.'s human and physical future and competitiveness. This includes targeted spending on public education, including at the community-college and university levels; modernizing transportation and energy infrastructures; and increasing energy efficiency while decreasing dependence on Middle East oil. Spending cuts should focus on entitlements and defense. Further deficit reductions can be achieved by reducing so-called tax expenditures such as health care plans and mortgage deductions. The goal should be to reduce the deficit by some $300 billion per year until the budget is balanced but for interest payments on the debt.
Adopting a doctrine of restoration for several years would help the U.S. shore up the economic foundations of its power.
[Hasss' argument is] derivative of what journalist Peter Beinart called a “solvency doctrine” back in 2009. He wrote, “No matter what grand visions Obama may harbor to remake the world, the central mission of his foreign policy--at least at first--will be to get it out of the red.” None of these plans or explanations is perfect, of course, but taken together, they seem to me good starting points for what a grand strategy for the U.S. should look like, namely a focus on tending to the sources of American power rather than on making more commitments that draw on it.
Color me skeptical. It's not that I don't like the ideas behind Haass' argument -- they're sympatico with a welter of realpolitik-friendly strategies that have been promulgated at regular intervals.
There are two currently insurmountable political problems with Haass' strategy, however. The first is that it is ridiculously hard for the U.S. government to draw down military commitments -- particularly if the U.S. military doesn't want to do it. It's worth remembering that Barack Obama entered office with a worldview that closely matched Haass' restoration idea -- and yet, in the end, he expanded U.S. operations in Afghanistan and attacked Libya to boot. The U.S. military strongly supported the former, while Obama's foreign policy advisors jump-started the latter. [So, you're saying that if a powerful executive-branch foreign-policy actor favors the use of military statecraft, it's gonna happen?--ed. Um... yeah, I guess I am.]
The second is that a restoration strategy is really a focus on domestic policy. And, as I noted in the pages of Foreign Affairs:
The most significant challenge to Obama's grand strategy is likely to emerge at home rather than abroad. Viable grand strategies need to rest on a wellspring of domestic support. The biggest problem with Obama's new grand strategy is its troublesome domestic politics....
By focusing on renewing the United States' domestic strength, the Obama administration has introduced more partisan politics into the equation. There is still some truth to the aphorism that politics stops at the water's edge. But if the administration argues that the key to U.S. foreign policy is the domestic economy, then it increases the likelihood of domestic discord. Based on the tenor of the debates about the rising levels of U.S. debt, the possibility that the president can hammer out a grand bargain over fiscal and tax policies is looking increasingly remote.
I wrote that a few months ago, and of course as the debtopocalypse approaches, I'm sure things will improve in our domestic political discour--- HA HA HA HA HA HA HA... I'm sorry, I couldn't finish that sentence, I was
crying bitter tears laughing too hard.
Restoration won't be happening anytime during this session of Congress... or perhaps ever. The real problem in today's political climate is devising a grand strategy that is sustainable both domestically and internationally. I'm reluctantly coming around to Peter Trubowitz and Charles Kupchan's conclusion that the bipartisan political foundations for a viable grand strategy are badly eroded.
Chinese overlords alien visitors robot masters zombie hegemons post-apocalyptic historians:
Greetings. My goal in this message is to explain to you why the most powerful country in the world committed financial seppuku in the summer of 2011 AD*.
To set the stage: by now you know that the U.S. Congress was obligated to increase the debt ceiling in order for the United States government to continue to function normally. President Obama, Democrats in Congress, and most of the Republican leadership recognized the gravity of the situation. The GOP leadership, however, wanted to use the debt cekiling vote as leverage to get President Obama to commit to significant deficit reduction. After much haggling over "grand bargains," there was a recognition that no such deal could be passed. As a backup, leaders from both parties reluctantly advocated a bill that hiked the ceiling and put off questions about long-term deficit reduction to the future.
The problem was, a political faction emerged that some called "debt kamikazes." These were politicians and interest group leaders -- all Republicans -- who genuinely believed that nothing of consequence would happen if the debt ceiling wasn't raised. There were a few others who did believe it and were nevertheless copacetic with that outcome -- I'll get to that group later.
Sounds absurd to your futuristic ears, you say? Consider my evidence. The Daily Beast's John Avlon detailed the position of the 2012 GOP presidential candidates:
There were also interest group coalitions called "Tea Party" organizations that pressured their members of Congress not to raise the debt ceiling. As CNN's Shannon Travis chonicled, these organizations believed that the effects of more government spending were far more disastrous than defaulting on the debt:
Similarly, Red State blogger Erick Erickson wrote an open letter to the House GOP that boiled down to "do not believe the doom and gloom."
Now, future historians, you might argue that neither Tea Party activists nor presidential candidates (Bachmann excepted) were in Congress and therefore did not matter. However, what's important to understand is that these views were prevalent inside the House GOP caucus as well. The Washington Post's David A. Fahrenthold provided a detailed description of the members of the House of Representatives who thought a default wouldn't be such a big deal. Rep. Mo Brooks (R-AL) offered the most extreme example of House GOP thinking:
Lest you think the view that a default was not such a big deal was limited to backbenchers, Outside the Beltway's Steven Taylor found House Budget Chairman Paul Ryan telling CNBC that a "technical default" of a few days wouldn't be a big deal:
Now, at this point, I'm sure you, future post-apocalyptic historians, must be scratching your
third eye heads, thinking the following:
Why, why did these human beings maintain these beliefs in the face of massive evidence to the contrary? Why did these people continue to insist that default wasn't that big a deal when Federal Reserve Chairman Benjamin Bernanke (a Republican first appointed by Republican president George W. Bush) insisted that there would be a "huge financial calamity" if the debt ceiling wasn't raised? Why did their belief persist when Moody's, Standard & Poor's, and Fitch Ratings all explicitly and repeatedly warned of serious and expensive debt downgrades if the ceiling wasn't raised? Why did they stick to their guns despite news reports detailing the link between the rating of federal government debt and the debt of states and municipalities? Why did they stand firm despite the consensus of the Republican Governors Association and the Democrat Governors Association that a failure to raise the debnt cailing would be "catastrophic"? Why did they refuse to yield despite bipartisan analysis explaining the very, very bad consequences of no agreement, and nonpartisan analysis explaining the horrific foreign policy consequences of American default? Why did they not understand that even a technical default would cost hundreds of billions of dollars**, thereby making their stated goal of debt reduction even harder?
Most mysteriously, why did these people throw their steering wheel out the window despite witnessing the effect of the 2008 Lehman Brothers collapse, which revealed the complex interconectedness of financial markets? Treasuries were far more integral to global capital markets than Lehman, but the debt kamikazes refused to recognize the possibility that a technical debt default would have unanticipated, complex, and disastrous consequences. Why?
I would like to be able to offer you a definitive answer, I really would, but I can't. The implications listed in the previous paraqgraph seemed pretty friggin' obvious to a lot contemporaneous observers at the time. As near as I can determine, there are four partial explanations for why the debt kamikazes persisted in their belief that nothing serious would happen: One explanation, which I've detailed here, is that the debt kamikazes refused to budge because refusing to budge had yielded great political rewards in the past.
Another explanation is that the debt kamikazes convinced themselves that no possible alternative was worse than the federal government accumulating more debt. They looked at countries like Greece and Portugal and decided that the U.S. was only one more Obama administration away from such strictures.
A third explanation was the general erosion of trust in economic experts during this period. To be fair to the debt kamikazes, many of the prominent policymakers who warned about calamities if the debt ceiling wasn't raised had pooh-poohed the effects of the housing bubble in 2005, or the collapse of that bubble in 2007.
The final explanation goes back to those people who acknowledged that a default might be a big deal, but were nevertheless OK with the outcome. These debt kamikazes had undergone a fundamental identity change. That is to say, despite all their protestations to the contrary, they were no longer loyal Americans. They were loyal to Republicans first and Republicans only. Erick Erickson made this logic pretty clear in his open letter to Congress:
As Outside the Beltway's Doug Mataconis explained in response:
That's the best set of answers I can give you. I'm sure, future post-aopocalytpic historians, that you have devised new and sophisticated methodologies to unearth the mysteries of the past. I hope you can solve this historical puzzle -- because me and my contemporaries are thoroughly flummoxed.
I wish you the best of luck, and once again, apologies for the whole collapse-of-Western-civilization-thing that happened in 2011. Our bad.
*To translate into your time scale, 15 B.B. (Before Lord Beiber, Praised Be His Hairness)
** 100 billion U.S. dollars = 15 BieberBucks
Your humble blogger has been relatively
lazy circumspect in blogging about the Dominique Strauss-Kahn affair. The latest turn of events, however, has rousted me from my vacation torpor to ask just one simple question: are you friggin' kidding me??!!!
Both the New York Times and New York Post carry stories containing more prosecutor leaks than the Titanic suggesting that the woman DSK allegedly attacked was "a con artist." according to one blind quote. From the Times account:
Well, this is pretty simple -- if the prosecutors are leaking this stuff, then the charges are going to be dropped. Dominique Strauss-Kahn will be a free man, thereby re-convulsing the French political scene. I'm also expecting a super-fun flurry of discussion about the dangers of immigration from tis latest turn of events.
The story can't end here, however. Readers are therefore warmly encouraged to suggest how Act III of l'affaire-DSK will play itself out in the comments section.
Here's my suggestion: DSK and his wife Anne Sinclair will proft handsomely from a wrongful prosecution settlement with the city of New York. After that, they decamp to the island of Tahiti. At which point, Neve Campbell turns out not to be dead and, in league with Sinclair, eliminates DSK so they can enjoy their riches with the help of Bill Murray.
[Implausible, I say!!--ed. I say, not implausible enough!!!]
As FP's indefatigable Josh Rogin reported yesterday, GOP presidential candidate Tim Pawlenty will " deliver a major address on foreign policy on Tuesday in what his top aides are billing as a rebuttal to what they see as President Barack Obama's flawed May 19 speech.
Your humble blogger will be listening in -- live!!-- and will provide real-time updates on the blog and on Twitter.
I'll be looking for two things from this speech. First, how does Pawlenty straddle between his more neocon-friendly foreign policy approach with the stronger streak of retrenchment rhetoric that permeates the current GOP primary voter? Will he at least sound isolationism-curious, or will he conclude that the Tea Party's influence is waning? As I said before, my money is that he'll cozy up to this wing by sounding protectionist trade themes. The foreign policy pickings of Pawlenty's website are pretty slim.
Second, will Pawlenty score any Trumpie nominations? He came veeeeery close during the New Hampshire debate with his casual assertion that the United States could grow at 5% a year for a decade because China and Brazil had done it -- ignoring the vast differences in economic development between the United States and those two BRIC economies.
The speech will begin at 9:30 AM, so tune in
so my life has meaning so you can learn what a GOP candidate thinks about the world!
[UPDATE] Live-tweets below, summary analysis at the bottom:
9:33 AM: Pawlenty starts by praising CFR #itsbeensoooooolongsinceIheardarepublicandothat
9:34 AM: T-Paw on U.S. in Middle East: "now is not the time to retreat from freedom's rise."
9:36 AM: T-Paw ain't coddling Tea Partiers -- bashes members of GOP for "out-isolating" Democrats.
9:37 AM: T-Paw: "History teaches us there is no such thing as stable oppression."#haveyouheardofthedarkages
9:38 AM: T-Paw blasts Obama for being silent during Iran's 2009 Green Movement, cutting democracy aid to Egypt during same year.
9:42 AM: T-Paw has four categories of ME countries. Category 1: emerging democracies in Egypt, Tunisia, Libya and Iraq. US must support democracy.
9:43 AM: T-Paw makes shrewd point that revolution in Egypt has caused a populist rejection of economic reforms that Mubarak instituted in past decade
9:44 AM: On Libya, T-Paw rejects "leading from behind" (GASP!!) recognizing TNC, and using full weight of U.S. force to ensure regime change.
9:45 AM: T-Paw's second category -- the monarchies. Claims Jordan, Morocco are engaging in "real reforms" Paging @blakehounshell
9:46 AM: T-Paw observes that U.S.-Saudi relaions are a a new low, but NOT because of Arab Spring. Apparently due to Obama cozying up to Iran. Hmm...
9:48 AM: T-Paw's Category 3: anti-US states of Iran, Syria. Blasts Obama for staying too close to Bashir Assad for too long. #fairpoint
9:49 AM: T-Paw's Category 3: anti-US states of Iran, Syria. Blasts Obama for staying too close to Bashir Assad for too long. #fairpoint
9:50 AM: T-Paw argues for "more forceful sanctions" to push business elites in Syria away from Assad regime #yeahthatwilldoit
9:52 AM: On Iran, T-Paw also calls for new, tougher sanctions as a policy solution. #sanctionsarenomagicbullet
9:52 AM: T-Paw's Category 4 is.... Israel!!! "Nowhere is Obama's lack of judgment clearer"
9:53 AM: T-Paw: Obama's Israel-Palestinan obsession is absurd - Arab Spring shows that conflict is NOT at the heart of the Middle East
9:54 AM: T-Paw: Peace will only come to Israel/Palestine when everyone in the region recognizes the US totally has Israel's back
9:57 AM: T-Paw: "America is exceptional, and we have the moral clarity to lead the world."
9:58 AM: T-Paw says that everyone should listen to David Petraeus the most on Afghanistan
9:59 AM: T-Paw goes off on Republican isolationists, arguing that one party focusing on decline & retrenchment is enough.
10:00 AM: Jon Meacham is moderating the Q&A. His first response to T-Paw: "Withdrawal? Decline? Retrenchment? Really?"
10:05 AM: Pawlenty acknowledges that autocracies can't be converted into democracies overnight, "takes generations."
10:08 AM: T-Paw: War on Terror will require a long, "episodic" commitment
10:10 AM: Asked about worse possibilities after Assad, T-Paw responds, "No one ever asked who would follow Hitler."
10:11 AM: BREAKING: Pawlenty pledges US will not invade every Middle Eastern country. #phew
10:15 AM: BREAKING: Pawlenty really does not like "cookie-cutter, one-size-fits-all" foreign policy strategies #anticookieist
10:19 AM: Pawlenty: U.S. should "not necessarily" use military force in Syria.
10:21 AM: Pawlenty thinks Obama "dithered for a month" at the moment when U.S. force could have pushed Khaddafy out.
10:27 AM: James Traub from @FP_Magazine asks what to do about elections leading to anti-Israeli leaders in ME. T-Paw: start early, think long-term
My final assessment: Pawlenty successfully skirted a Trumpie nomination -- he exaggerated Obama's cozying up to Iran, but that's pretty much GOP boilerplate at this point. Pawlenty was also quite outspoken in attacking "isolationists' within the GOP as well.
The occasionally overheated piece of rhetoric aside, this was a reasonably coherent speech that placed way too much faith in the ability of more sanctions to force out regimes in Iran and Syria.
What do you think?
Daniel W. Drezner is professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University.