nau. obama's foreign policy

8/6/2019 Nau. Obama's Foreign Policy

1/22


2/22

Henry R. auRoosevelt and Harry Truman ended pendulum swings between ambitiousinternationalism under Woodrow Wilson and isolationist nationalism underHarding and Coolidge. Roosevelt blended internationalist and nationalistconcepts tocommit the United States tomultilateral participation in theUnited Nations while reserving sovereign veto rights for the United Statesand other great powers onthe UN Security Council. When the UN systemfailed, Truman adapted Roosevelt's formula to regional security and createdthe Western institutions of NATO, the U.S.-Japan Security Treaty, theEuropean Community, and Bretton Woods that defended and rebuilt post-war Europe and Japan.

Ronald Reagan stopped Cold War pendulum swings between contain-ment and detente. He rejected both the balance ofRonald Reasan power antics of Richard Nixon and human rights

initiatives of Jimmy Carter. Like Roosevelt andrejected OOtlO Truman he combined realism and idealism tocon-the balance of front and reassure theSoviet Union at the samer time. Reagan's military and economic buildupslyoijer antics OT ^ ^ ^^ ' upped the ante in a competition the Soviets couldRichard Nixon not win while his diplomacy ofexpanding freedomatid humnfi "* reducing reliance on offensive nuclear weapons

offered a cooperative alternative the Soviet Unionrights and its satellites could not resist. The effect ofinitiatives of Reagan's strategy was tonarrow Soviet economic

and military options and encourage Soviet domesticJimmy Carter. reforms. Inthat sense Reagan helped bring reform-

ers like Mikhail Gorbachev topower inMoscow.He and Gorbachev then ended not only the Cold War but also the SovietUnion. As John Lewis Gaddis points out in Strategies ofContainment, "noadministration prior to Reagan had deliberately sought to exploit those ten-sions [in the Soviet Union] with aview todestabilizing the Kremlin leader-ship and accelerating the decline of the regime it ran."

Since Reagan, American presidents have been less successful at stoppingthe pendulum. George H.W Bush in the first Persian Gulf War, and BillClinton inSomalia, swung American policy decisively toward the UN andassertive multilateralism. Then, after the UN flopped in Bosnia and Kosovo,


3/22

Obama's Foreign Policylectual and management style. As a self-proclaimed pragmatist, Obamatakes on problems as he inherits them. He reacts to what history serves upand sees the world as acomplex system in which everything is interconnect-ed. Problems have to be addressed comprehensively, or, like squeezing abal-loon, progress in one area will only distort progress in others. He thinks andacts systematically, puzzling about how things fit together; he does not thinkand act strategically, identifying key problems that cause orunlock otherproblems. His style isoriented toward "fixing" the world, rather than"shaping" it.

In his first year Obama addressed every conceivable foreign policy crisison the globe. He reset relations with Russia; visited Ghina; agonized overAfghanistan, Iraq, North Korea, and Iran; reachedout to the Muslim world; attempted to regain After more thanEurope's trust; tried tojumpstart the Middle East ^ Presidentpeace process; and promoted economic recovery, cli- "mate change, and energy independence. He rarely Barack Obamaindicated which problem was more important than continues toanother and bounced from topic to topic and regionto region.1 In this sense, Obama is clearly pragmatic. blame BushHe is, as he told a Republican congressional audi- shamelessly forence in January, no ideologue. But his pragmatism is , .ideological. He has acoherent worldview that high- ^^^^ problemlights "shared" interests defined by interconnected he faces.material problems such as climate, energy, and non-proliferation and deemphasizes "sovereign" interests that separate countriesalong political and moral lines. He tacks away from topics that he believesdivide nations democracy, defense, markets, and unilateral leadership and toward topics that he believes integrate them stability, disarmament,regulations, and diplomacy. He has been called a president for the post-American world, but he may actually be apresident for the post-sovereignworld. He is apolicy pragmatist in response to aworldview of shared com-munity interests that transcend sovereign national interests.

Given hisworldview, Obama is unlikely to stop the pendulum.Successful presidents stopped the pendulum because they understood thatthere are no trade-offs between shared and sovereign interests. Gommon


4/22

Henry R. NauLet's look more closely at the four areas in which American foreign policy

swings, and at where Obam a seems to be heading.

Security not democracyw. BUSH Staked his presidency after 9/11 on ending tyran-

ny and promoting democracy, especially inthe Middle Eas t andSouthwest Asia. In his second inaugural address, he declared, "it is

the policy of the United States to seek and support the growth of democraticmovements and institutions in every nation and culture, with the ultimate, . goal of ending tyranny in our world . " Now, ObamaObama has ^jg^^iy p^j^j^g ^^^ ^^^^^is f reedom agenda.downsized The objective isno longer tot ransform domesticA . , 1 society and establish democratic states inunstable

America s goals. . , ] r^ J U countries but to prevent al Qaeda or other extremistIn every instance, elements from regrouping in these countries to plotsecurity interests ^"'^ ^ '' ".' Vyo\tnct against the United States.Obama put it bluntly inMarch 2009 when hetrump human announced his first new strategy for Afghanistanrightsand ^^'^ Pakis tan: Amer ica has "aclear and focusedJ goal: todisrupt, dismantle, and defeat al Qaeda indemocracy Pakistan and Afghanistan, and toprevent theirpromotion. return to either coun try in the future." He narrowed

this goal even further when he announced his sec-ond new strategy for Afghanistan and Pakistan in December 2009 : "Wemust deny al Qaeda a safe haven. We must reverse the Taliban's momentumand deny it the ability to overthrow the government." The goal is no longerdefeating al Qaeda but denying it a safe haven and denying the Taliban theability to overthrow the Afghan government.

O b a m a has downsized Amer ica ' s goa ls e lsewhere aswel l . In everyinstance, security interests trump human rights and democracy promotion.In major foreign policy speeches in 2 0 0 9 , he mentioned democracy eitherbelatedly or abstractly. In Prague he declared that "freedom is a right for allpeople, no matter what side of a wall they live on, and no matter what they


5/22

Obama's Foreign Policynation." Indeed, earlier in France, he disowned the idea that America hadany u nique role whatsoeve r: "I believe in American excep tionalism, just as Isuspect that the Brits believe in British exceptionalism and the Greeks believein Greek exceptionalism."

At the Nobel Prize ceremonies in Oslo, Obama made his most elegantdefense of human rights: "So even as we respect the unique culture and tra-ditions of different countries, America will always be a voice for those aspi-rations that are universal." The pragmatic president acknowledged for thefirst t ime that there may be philosophical and moral divisions in worldaffairs. "Make no mistake," he declared, "evil does exist in the world."Obama even backtracked on some of his views about American exception-alism: "Whatever mistakes we have made, the plain fact is this: The UnitedStates of America has helped underwrite global security for more than sixdecades with the blood of our citizens and the strength of our arms." Thesewere unadorned Reagan-and-Bush-like words spoken to an audience thatwas not inclined to appreciate them. But which message is the true Obama?He did not pledge specific help for dissidents in Burma, Zimbabwe, Iran,and elsewhere. And in none of these speeches did he mention, let alone con-front, the oppressive policies of a new wave of authoritarian powers stalk-ing the world Russia in Europe, China in Asia, Iran in the Middle East,and Venezuela in Latin America. Instead he turned to many of these newautocrats as principal partners to pursue shared global interests of disarma-ment, economic recovery, climate change, and nonproliferation. Considerthe following:

In M osco w he seeks Russia 's cooperation to reduce nuclear weap ons ,pressure Iran and North Korea to give up their nuclear plans, and gainR u s s i a n s u p p l y r o u t e s f o r s e c u r i t y o p e r a t i o n s i n A f g h a n i s t a n .Apologizing for American democracy, he says not a word about thefar more egregious f laws of Russian democracy: imprisonment ofpolitical opponents, replacement of elected provincial governors byprotgs of Vladimir Putin, closing of major opposition media, andrepeated assassination of human rights activists and journalists criticalof Moscow's autocrats. Nor does he mention Russian military inter-vention in Georgia or Russian meddling in the domestic politics of


6/22

Henry R. NauState Department denies funds appropriated by Congress to circumventthe Chinese firewall. Secretary of State Hillary Clinton set the policy onher first trip to China: "We already know what they are going to say[about human rights] because I've had those kinds of conversations formore than a decade with Chinese leaders. We have to continue to pressthem. But our pressing on those issues can't interfere with the globaleconomic crisis, the global climate change crisis, and the security cri-sis." Shared interests take precedence over sovereign ones.

Nor th Korea takes a turn for the worse fires off long-range test mis-siles at the very moment Obama calls for nuclear disarmament inPrague, tests another nuclear device six weeks later, launches sevenmedium-range missiles as Obama presses for nuclear disarmament inMoscow, and for good measure fires off five short-range missiles short-ly after Obama's U N address in September. U .S. journalists are cap-tured, tried, and sentenced to the gulag in North Korea. Obama dis-patches former President Clinton to Pyongyang to free hostageAmerican journalists. As Henry Kissinger asked in the New YorkTimes, "Is the lesson of this episode that any ruthless group or govern-ment can demand a symbolic meeting with a prominent American byseizing hostages or threatening inhuman treatment for prisoners intheir hands?" Iran may have been hstening, because only days afterClinton's Pyongyang visit, Tehran arrested three American studentswho wandered across the border from Iraq and now threatens to trythem or exchange them for Iranians held in American prisons.

Obama embraces Hugo Chavez at a G-20 meeting, while Chavez dri-ves political opponents into exile, seizes foreign companies withoutcompensation, pushes through referenda that make him electable forlife, and exports his brand of despotism to Ecuador, Bolivia,Nicaragua, and Honduras. Obama sides with Chavez in the disputeover the ouster of Honduran President Manuel Zelaya, who was exiledfrom the country by the Honduran military after he violated thenation's constitution. Embarrassed, the U nited States then backed elec-tions which Zelaya boycotted, even though all other major powers inthe region opposed the U .S. position. Arguably, in the space of a few


7/22

Obama's Foreign PolicyThe pattern is too persistent to be an accident. Ever the pragmatist,

Obama deliberatively mutes the rhetoric of democracy and human rights infavor of fixing global problems.

George W. Bush clearly went overboard with his pledge to seek democrat-ic institutions "in every nation and culture." What's wrong with the pendu-lum swinging back? Only that security and democracy are not opposite endsof a pendulum; they depend upon one another. Dialing down the decibels ondemocracy has costs. It undercuts democracy advocates around the world,creates a vacuum that autocratsflU,discourages democratic allies, and ulti-mately alienates the American people.

Autocrats inMoscow and the Middle East use the opportunity tocrackdown ondissidents. InMarch 2009, the chair ofthe Moscow Helsinki Group petitioned the Obamaadministration topay more attention to freedom: security ana"Democracy in former Soviet areas needs a friend." democracy areAnd inOctober, Ayman Nour, aprominent opposi- .tion leader in Cairo, warned: "His [Obama's] Oppositereduced talk of democracy is giving these non-demo- ends of acratic regimes the security that they won't face prs- pendulum; theysure. And that's having anegative impact on democ- 'racy in the Arab world." The Mubarak government depend Uponimprisons Muslim opposition leaders, and protestors o g another.in the streets of Iran cry out: "Obama, Obama,either you're with them or with us?"

Autocrats step into the vacuum. In July 2009, the G8 met tocondemnIran's elections. Russia's foreign minister, Sergei Lavrov, seized the micro-phone: "No one is willing to condemn the election process [in Iran], becauseit's anexercise in democracy." Grotesquely, Russia tells the world whatdemocracy is. As Obama insists, American democracy has faults. But com-pared towhat? Malpractices at Abu Ghraib pale incomparison to starva-tion, mutilation, and murder that take place daily in the gulags of Russia,Iran, North Korea, and China. By undressing in front of foreign despots,Obama weakens his moral authority and promotes a perverse equivalencebetween democracy and despotism. Obama got his only applause inOslowhen he mentioned closing Guantanamo.


8/22

Henry R. au"w itho ut the high mo ral grou nd [of democracy building] , the [German]Bundeswehr mission in Afghanistan would never have started."

Finally, there are political costs at home. How long will the Americanpeople, especially Obama's own party, accept the stepped-up fighting inAfg hanistan if the goal is m ere stability?

Perhaps Obama plans to ta lk less about promoting democracy but domore. Maybe, but his talk is revealing. He does not see the battle betweendemocracy and despotism as the great struggle of our times. He sees theworld in comprehensive, mechanistic terms, not in competitive, politicalterms. At the U N General Assembly in September, he discussed "four pillars"of future engagement: nonproliferation and disarmament; the promotion ofpeace and security; the preservation of our planet; and a global economythat advances opportunity for all people. Democracy is missing. The reasonapparently is that , in Obama's mind, the spread of democracy is not ashared global interest or task. It is rather a task and struggle for each coun-try. "The essential truth of democracy," Obama said, "is that each nationdetermines its own destiny." America will assist, but history will decide.And, as he repeated in Ghana, Oslo, and at the U N , "history is on our side."Ap parently, the spread of democracy is only a matter of time.

Is this the Obama doctrine? The goals of foreign policy are mutual andmaterial, not competitive and moral. Shared interests trump sovereign ones.Gountr ies of any poli t ical persuasion can and must cooperate with oneanother to deal with problems of common interest. Those common interestsinclude getting rid of arms, restoring economic growth, and saving the plan-et. While all nations tend to these tasks, individual nations cultivate theirown political ideology. History takes over from there. In the Obama doc-trine there is no global struggle for freedom that parallels and limits theprospects for cooperation. Gooperation emerges from shared interests notfrom shared values.

But what if ideological differences impede global cooperation? What ifregime types democracies vs. despots matter more than shared inter-ests? Then the cause of democracy is as much a global task as arms controlor climate change. Bill Clinton believed that "democratic enlargement" wasthe best national security policy for America because democracies do not


9/22

Obama's Foreign Policydtente and shared interests shaped some grand compromise. It ended whenfreedom prevailed and the Soviet Union disappeared. Obama goes too fardownplaying the universal struggle for freedom. Not only may dissidentslanguishing in jail wonder how long it will take for history to prevail, buthistory shows no significant gains for security unti l democracy gains.Security and democracy are hooked at the hip.

Paradoxically, Obama's Afghanistan policy proves the point. He touts hisstrategy as more practical and less costly than democracy promotion. But hecan't really establish a more practical order in Afghanistan without con-fronting the moral issues of democracy. The flawed elections in August2009 proved that the ideological legitimacy of the Afghan government mat-ters. While that government does not have to be a Jeffersonian democracy, ithas to be sufficiently representative and open that the America governmentcan trust it and the U.S. public support it. As Zalmay Khalilzad, former U.S.ambassador in Afghanistan, pointed out in February in the InternationalHerald Tribune, four conditions on the ground have to be met: security, amore effective government in Kabul, a regional solution that includesPakistan, and the perception that the United States is in the region for thelong run. The Obama administration, he concluded, "appears to have a planfor the first of these points . . . b u t . . . n o t . . . for the other three ."

Thus , seeking security in Afghanistan and Pakistan does not do awaywith the need for democratic reforms; it reinforces that need. Any stabilitythat America can trust in southwest Asia necessarily involves more not lessdemocratic governance. Will Obama stop the pendulum? If he sticks withna rro w security goals, the voices calling for with dra w al from Afghanistanwill escalate. Some leaders, including Vice President Joe Biden, already adv o-cate a strategy to punish rather than prevent terrorist attacks. They call foran offshore strategy of counterterrorism to retaliate after an attack ratherthan an in-country strategy of counterinsurgency to prevent such attacks.The logic is as follows: Since going in at any level implies some need fordemocracy pro m otion and n ation-building, just don 't go in at all.

The tocsins of retreat are growing louder. Obama will be driven one wayor the other to more emphasis on democracy promotion or out ofAfghanistan altogether. Even if he withdraws from Afghanistan, the issueswon't go away. They will simply shift to Pakistan.


10/22

Henry R. auaround toacknowledge the need touse force (inClinton's case, inBosniaand Kosovo; in Carter's case, in amilitary rescue operation in Iran). Gettingthe right balance between force anddiplomacy eludes many if not mostAmerican presidents.

Will it elude Obama? George W. Bush clearly emphasized "militarysurges," responding to9/11 with a "war against terror" that led to twoongoing U.S. military engagements in Iraq and Afghanistan. Obama, on theother hand, emphasizes "diplomatic surges," seeking to exit militarily fromIraq, shift the focus from war to counterinsurgency in Afghanistan and per-haps counterterrorism in future interventions, and find regional diplomaticsolutions for Pakistan, Iran, North Korea, and other trouble spots. In hisfirst year, he dispatched an army of diplomaticIn Ubamas envoys throughout the world to the Middle Eastworld of shared (George Mitchell), Iran (Dennis Ross), North Korea

(Steve Bosworth), Sudan/Darfur (Scott Gration), andinterests, threats Afghanistan-Pakistan (Richard Holbrooke).come from, arms Obama talks more about the limits of power than

I .1 the uses ofpower the need toreduce arms, espe-and other . . . , , , r cially nuclear arms, and the importance ofnonvio-material sources, lent action tooppose oppression. Inhis world ofnot from shared interests, threats come from arms and other

material sources, notfrom ideological adversariesIdeological ^\^^^ ^ j . ^ ^Q pursue conflicting objectives. In fact, asadversaries. ^^^^^^ ^ Prague, "when nations and peoples allow

themselves to bedefined by their differences, thegulf between them widens." Obama subscribes towhat political scientistscall a constructivist view of threats. Threats do not stem from real differ-ences which provoke armaments for self-defense but rather from construc-tions of our minds which we are free to shape in significant measure deciding whether to see others as enemies or friends and having it be so. Heshies away from differences and confrontation, and the armaments they pro-voke, because, in his woridview, these things create or exacerbate but do notresolve conflicts.

The most useful force isnonviolent protest. InMoscow, he said that the


11/22

Obama's Foreign Policyin Obama's understanding of history? In Prague referring to the onset of theCold War, he said, "after comm unism took over Czechoslovakia . . . wecame together to forge the strongest alliance that the world has ever known.And we stood shoulder to shoulder year after year, decade after decade until an Iron Curtain was lifted, and freedom spread like flowing water." Butwhere is the mention of Berlin, Korea, Cuba, Vietnam, and nuclear weaponscompetition right up to the very end of the Cold War? A military coup inMoscow in August 1991 almost perpetuated the oppressive regime.

In Obama's account, a few peaceful protestors stood up and the wallscame tumbling down. In his version of history, outcomes are meant to be.There are no struggles, no close calls, no Cuban Missile Crisis, no show-downs. If all nations disarm and every nation minds its own "democratic"gard en, history w ill bring peace to all.

Shared interests not only reign; sovereign interests end. In MoscowO ba m a declared that great pow er interests are no longer zero-sum:

There is the 20 th century view that the United States and Russia are des-tined to be antagonists, and tha t a strong Russia or a strong America canonly assert themselves in opposition to one another. And there is a 19 thcentury view that we are destined to vie for spheres of influence, andthat great powers must forge competing blocs to balance one another . . .Both assumptions are wrong . . . The pursuit of power is no longer azero-sum game progress must be shared.

The pursuit of power may not be a zero sum game (and probably hasn'tbeen since the beginning of the industrial revolution), but it is still a relative-sum game. The United States and Russia may both gain but one may gainmore than the other. Russia understands this arithmetic in the region of the14 former republics of the Soviet Union, which it refers to as the "near-abroad." In this region, Russia claims a "sphere of privileged interests" yes, a 19th-century sphere of influence and seeks to claw back influencefrom the United States. It attacks Georgia, fuels separatists in Moldova,launches cyber attacks against Estonia, and intervenes in Ukrainian elec-tions. Sovereign not shared interests matter most to Moscow, and Russiapushes even shared interests such as arms agreements with the United Statesto achieve sovereign gain, namely parity with the United States in Europe


12/22

Henry R. auacquiring nuclear weapons rose. Perhaps the incentives work the other way.As nuclear powers disarm, the benefits fornonnuclear states toacquirenuclear arms increase. Now, at increasingly low levels of nuclear arms, someexperts worry as Keir A. Lieber and Daryl G. Press did in the November-December 2009 issue of Foreign Affairs that cutting further is too risky,especially before we think through the macabre yet necessary scenarios andcapabilities that might be needed todeter future powers that insist onspheres of influence.

It is probably too early to label Obama a dove like Jimmy Carter. His firstfull defense budget raises expenditures by 4 percent for fiscal year 2010-11and then holds them flat over the next ten years adjusted for inflation. Whileit cuts a number of significant weapons systems,WrJtle tne including missile defenses, it increases outlays forsuperpowers counter-insurgency operations.^ And Obama has

J J , committed significant additional forces toreduced nuclear Afghanistan twice 17,000 after the first reviewstockpiles in and another 30,000 after the second. What's inyprP'nt AprnAp


13/22

Obama's Foreign PolicyUnion to an arms race, deploying I N F missiles and freedom fighters to raisethe costs of Soviet military actions on the ground, and dangling his StrategicDefense Initiative at the negotiating table all for the purpose, as Martinand Annelise Anderson show in their breathtaking book, Reagan's SecretWar, of negotiating a peaceful en d to the Gold War an d a shift from offen-sive to defensive weapons for deterrence.

Here's how one Soviet official, Alexei Arbatov, assessed the impact ofReagan's first-term defense policies on perceptions in Moscow: "Reagan'scourse in the early 1980s sent a clear signal to Gorbachev and his associatesof the dangerous and counterproductive nature of the Soviet Union's furtherexpansion, which was overstretching its resources, aggravating tensions, andprovoking hostile reactions across the globe." Gorbachev made the samepoin t himself. Speaking to the Pol i tburo in October 1985, a mere s ixmonths after taking office, he said:

Our goal is to prevent the next round of the arms race. If we do notaccomplish it, the threa t to us will only grow. "We will be pulled intoanother round of the arms race that is beyond our capabilities, and wewill lose, because we are already at the limits of our capabilities.

Obama wields none of these advantages. He sees force as a last resortafter diplomacy fails, not as a pervasive and parallel resort throughout thediplomatic process. H e withdra ws U.S. forces unco ndit ionally from Iraqwhen keeping them there might narrow Iranian options on the ground asnegotiat ions proceed to stop Iran 's nuclear program. At West Point , heannounces the dispatch of additional forces to Afghanistan and in the nextsentence gives a date to begin their w ithd raw al, w hen allies in Pakistan ques-tion precisely America's commitment to stay in the fight. As of this writinghe is w orkin g o n a fourth set of UN sanctions for I ran. In all likelihood, he isheading toward accepting and then hoping to contain the acquisition ofnuclear weapons by Iran. But containment too cannot work without a credi-ble threat to use force.

It 's still early, but Obama needs to stop the pendulum swing from forceto diplomacy and recognize that diplomatic outcomes reflect the balanceof forces in negotiations as well as the goodwill and mutual understandingof negotiating partners. Force and violence play a continuing role in world


14/22

Henry R. Nauvince al Qaeda 's leaders to lay down thei r arms." But , again , whichObama is the t rue Obama?

Obama's diplomacy is flaccid. He packs few arrows in his quiver. He iscontent to downplay force, even as Iran, North Korea, and other extremistsuse force and show no sign of being "shamed" into honoring internationalnorms and principles to stop proliferation or the use of violence. And whenhe supports the use of force, it seems to be only when force is "absolutelyn e c e s s a r y " m e a n i n g a p p a r e n t l y a f te r A m e r i c a h a s b e e n a t t a c k e d(Afghanistan) but not before (Iraq). He assumes that if America does not useforce, others will not either. But there's the problem. If the United States doesnot push back to stop nuclear proliferation in the Middle East and Asia, oth-ers may. Israel is close to that point already, and, if North Korea acquiresnuclear weapons, Japan may demand more extensive U.S. nuclear protectionor decide to acquire nuclear weapons on its own. The use of force onlywhen it is absolutely necessary does not minimize risks; it leads to much big-ger risks later on.

Markets and regulationC g HERE IS NO doubt that we are witnessing a major swing in U.S.

g foreign policy away from markets toward global regulation. Thev _ ^ question, again, is will the pen dulu m swing too far. W ill it stop

before the rush to regulation strangles a world economy that in the past 3 oyears has produced unprecedented global growth? On economic policy,Ceorge W. Bush pushed tax cuts, deregulation, and free trade agreements.Now Obama pursues higher taxes and more stringent regulations, and heshows little enthusiasm for existing or new free trade agreements.

First, one needs to be clear about the past from which Obama now wantsto swing the pendulum. The era of the so-called Washington consensus,which enshrined market policies from the Reagan years (see my account inThe Myth of America's Decline), has been extraordinarily successful. Hereare some of the main accom plishm ents:


15/22

Obama's Foreign Policy Du ring the past 3 o years, a major world trade round was completed,

the Uruguay Round, and numerous bilateral and regional free tradeagreements negotiated and ratified, such as N A F T A .

A new t r ade ove r s igh t body came in to be ing , t he W or ld Trad eOrganization (wTo), and opened i ts doors for the first t ime to theworld's poorest countries, most notably China and India.

M ore than 4 0 0 million poo r people in China and India, not to mentionMexico, Brazil , and other developing countries, benefi ted from theworld trading system and rose out of poverty to join the world's middleclass. Th e share of people living on one dollar a day plum meted from 4 0perce nt in 19 8 1 t o 18 percent in 2 0 0 4 . Inclusion of the so-calledemerging countries in the G20, which has supplemented the G 8 on theglobal economic stage, is testimony to the egalitarian consequences ofgrowth during the era of the Washington consensus. In the case of thewo rld economy, "trickle do w n" actually happen ed t o a surprising extent.

Trickle do w n also hap pen ed in the United States. Ov er the pas t 3 0years, the United States, which took the lead in opening markets to theworld's poor, prospered. Taking into account two mild recessions, theUnited States grew by 3 percent per year over this period and createdover 5 o million new jobs, accommodating growing numbers of womenand immigrants in the work force. Per capita income increased by 65percent, and household income corrected for the number of people in ahousehold (down from 3.14 to 2.57 persons) went up substantially.According to Stephen Rose in the Washington Post, fewer people livetoday in middle class households with incomes between $30,000 and$ 1 0 0 ,0 0 0 , bu t more live in households making more than $ 1 0 0 ,0 0 0 ,which has gone up from 12 percent to 24 percent, while the percent-age of people living in households making less than $30,000 stayedthe same. Contrary to convent ional wisdom, people in the Uni tedStates moved up out of the middle class, not down from it.

None of this extraordinary prosperity would have been possible withoutthe liberalization and growth of global flnancial markets. The freeing up ofcapital flows is the big untold success (yes, success) story of the past 3 o


16/22

Henry R. Nauthe Washington consensus and market policies. Obama pledges toend theboom and bust cycle of capitalism and compares the present crisis to theGreat Depression. In t ruth, the current slump com es nowhere n ear the levelsof the Great Depression (which led to real G DP losses of30 percent andunemployment ra tes of25 percent) and does not even equal the Reaganrecession of 1 9 8 1 - 8 2 in either maximum unemployment (10.2 comparedto 10.8) or inflation rates (2 percent compared to 13 percent). So far, byonly twomeasures, the decline of industrial output and number of jobs lost(not unemployment ra te) , has the current recession exceeded the Reagandownt urn . And, ironically, this result isa consequence of the fact that thecurrent recession started atmuch higher levels of production and employ-ment than in 1 9 8 1 - 8 2 , a testament to the success ofObama pledges economic policies over the past 3 o years.'^ Byhypmg the current crisis and pandering toto end the boom populism onsuch issues asbank bonuses, Obamaand bust cycle of ''^^^^ overreacting tothe current economic crisis,

encouraging the pendulum toswing completelyoutcapitalism and Qf control. Ofcourse, mistakes were made duringcompares the ^^^ W ashington consensus era by all administrat ions. . the Reagan years lef t behind massive budgetpresent crisis deficits, the Clinton years blessed the unregulatedto the Great growth ofglobal banking and derivat ive markets,p . and the Bush years compounded errors of excessive

' spending as well as unmonitored financial markets.Yet the benefits remain for all to see, and no w the

trick is to correct the errors without reducing the benefits. The real economyin the United States today the industrial and productivity base is solidand does not require a major overhaul. Notonly are anti-market regulationsunnecessary; they were amajor cause, along with private banking, of thecurrent crisis. Government housing agencies especially Fannie Mae andFreddie Ma c added $5 trillion to the national debt , and they too awarded"fat cat" bonuses and received bailout funds that exceeded $100 billion andare still climbing.

So governments fail, just as markets do. Obama needs to stop the pendu-lu m of anti-market sentiment before we overregulate and recreate the twin


17/22

Obama's Foreign Policycosts (new cap and trade legislation), more employer mandates (health care),escalating labor costs (card check), and expanding consumer regulations.Meanwhile, federal, state, and local governments spend more to sustain andexpand social services, build infrastructure, manage bankrupt industrialcompanies (G M and Chrysler), and create green jobs. At the margins, gov-ernment bureaucrats, not business leaders and entrepreneurs, make moreinvestment an d prod uction decisions.

The American economy is massive and resilient. Maybe the public sectorcan grow at the margins wi thout reducing growth. But , bear in mind,Obama's budgets call for government spending to expand from around 20percent of gross domestic product, where it has hovered for the past 3 oyears, to 2 6 percent by 2 0 2 0 . That 's a 30 percent jump at the margins. Andthe claim that government spending creates more and better jobs (e.g., greenjobs) and offers necessary competition where the private sector fails to do sohas to be treated with some skepticism, especially given the financial perfor-mance of the government's housing agencies and its two flagship entitlementpro gra m s. Social Security and M edicare.

Second, can Obama stem a disastrous protectionist trend which is rapidlyaccelerating and will become another major factor adding to the costs of pri-vate sector entrepreneurs? G lobal Trade Alert reported in Decem ber 2 0 0 9th at just since the financial crisis in fall 2 0 0 8 , G 20 c oun tries slapped on184 s ignif icant protect ionis t measures . "Buy American" provis ions inObama's st imulus package purge Canadian, Mexican, Chinese and otherproducts from U.S. public and private sector projects.^ Labor unions, whichwith government now control American automobi le companies , cal l forindustrial policies to shut out foreign imports. And politicians advocatepenalizing multinational companies that invest abroad.

Thus far, Obama has been silent on free trade. He quietly walked backcampaign pledges to renegotiate N A F T A and designate China as a currencymanipulator. But he did nothing to stop provisions in the stimulus packagethat banned Mexican trucks from U.S. highways, perpetuating a 14-yeardispute in which Mexico won a W TO ruling against the United States. Mostimportantly, he has coddled protectionist supporters on the Hill and stalledfree t rade agreements wi th Panama, Colombia, South Korea, and othercountries. And he has potentially doomed the Doha Round negotiations by


18/22

Henry R. augiven his party's preferences, would he belikely toget it if he did ask.Meanwhile, according toearly estimates, world trade dropped by io per-cent in 2009.

Third, can Obama lead a sensible effort toregulate risks innew globalfinancial markets without strangling competitive markets which mobilizedcapital for unprecedented expansion after 1980? Inshort, can he create aregulatory regime for global finance like the one the General Agreement onTariffs and Trade created forglobal trade inthe 1950s and 1960s? TheGATT regime greatly expanded, not restricted, international economicexchanges.

While financial regulation is complex, two choke points seem crucial. Thefirst is leverage ratios. Leverage ratios specify theT/i tt rl f amount of capital financial institutions are required

^ tohold tosupport lending. Domestic banks havehas coddled been regulated in this area since the 1930s, andProtectionist international banks came under similar regulation

after 1980 through the Basel Accords. But nonbanksupporters on institutions including investment houses, insurancethe Hill and companies, pension funds, hedge funds, and struc-

11 J r J tured investment vehicles (sivs) set up by banks offStalled free trade ^^^^^ j ^^ j^^^^^ ^^^^^^ ^^^^ ^^^^^ ^^^^ regulated, andagreements with they now account for a larger and larger share ofseveral countries. ^^""^^ ''f"" "' ^ ' "^ ' - Leverage ratios at some

nonbank institutions such as the AmericanInternational Group went ballistic in the recentfinancial crisis. Glearly, nonbank institutions have tobe brought into this

regulatory regime.A second choke point in the financial system is transparency.

Governments audit banks and in turn provide help in times of crisis, includ-ing orderly dissolution if banks fail. Banks can't fail on their own becausetheir collapse might trigger wider systemic failure. Should governments nowalso audit and, if they get in trouble, supervise the orderly dissolution ofnonbank institutions? In the zoo8 crisis, nonbank institutions like GoldmanSachs became bank holding companies to benefit from government support.


19/22


20/22

Henry R. auGeorgia and Ukraine and perhaps even to extend i t s inf luence in theBaltic NATO states?

Where will Obama stop the pendulum between assertive American lead-ership, which involves some degree of unilateralism, and accommodatingAmerican multilateralism, which risks action too late or no action at all? Onmany issues , as we see in h is del iberat ions on a second s t rategy forAfghanistan, he struggles to find a middle ground which satisfies everyone alittle bit and dissatisfies no one too much. He often defers to other partners,as he does to the UN on Iran or to Congress on the stimulus and health carelegislation. He likes to "wait to see how the dust settles." But deferring tointernational institutions is usually a prescription for delay if not default.Soon, the heat will be turned up on Obama and his numerous diplomaticinitiatives. Will he be willing to pull the trigger and act without consensus ifnecessary? Or will he instead define his objectives down, disarm his diplo-macy, default to nationalistic economic forces, and defer to multilateral solu-tions? We have little to guide our speculation. His Afghanistan policy offerssome evidence of resolve, but the test is yet to come, both from the left wingof h is own party and from entrenched extremis ts in the Afghanis tan-Pakistan region. His redlines for acting alone or with less than majority sup-port are well concealed. This is perhaps the biggest mystery about a manwho has always led by community more than by conviction.

Swinging which way?I /I K E CLOCKWORK, AMERICAN foreign policy cycles be tw eenf dem ocracy and security, force and diplomacy, m arke ts and regula-

c ^ i ^ ^ tion, and unilateralism and multilateralism. For m ost of his term,George W Bush trumpeted democracy, military force, markets, and assertiveU.S. leadership. Obama now reverses course in all four areas.

Obama argues that this was the hand he was dealt. But he's not the firstpresident to initiate or justify a pendulum swing. According to national pollsdating back to the 1950s, voters opposing the party that occupies the WhiteHouse become more dissatisfied with American foreign policy than the pres-ident's own party. Presidential candidates from opposing parties use this dis-


21/22

Obama's Foreign Policyby whether and where he stops it. Will he grasp, like successful presidentsbefore him, that the crucial aspects of foreign policy are not opposite ends ofa continuum but integral factors that depend on one another? At what pointwill he refresh America's commitment to freedom as the foundation of secu-rity, an effective diplomacy backed by military leverage, a world m arket thataccepts risks to achieve higher growth, and a style of leadership that is notsubordinate to the slowest camel in the caravan?

Leadership is much more than pragmatism to solve problems that some-body else has created. It has to define those problems in the first place. Inthis process, sovereign principles of free peoples matter much more thanshared interests with despots who espouse very different principles.Leadership is proactive not reactive, clarifying differences of principle, set-ting the agenda, pushing preferences, and preempting alternatives. Bush didthat part well. But leadership is also bringing along the majority of people,both at home and in the free world, or it can hardly be called democratic.Bush did not do that part very well. Obama has a proven ability to bringpeople along but an unproven record of where he wants to lead them. To besuccessful, he needs to stop the swing of the pendulum and chart a clearercourse that champions the ongoing struggle for freedom and markets in aworld in which despots still prefer to use force and regulations.


22/22

Copyright of Policy Review is the property of Hoover Institution and its content may not be copied or emailed

to multiple sites or posted to a listserv without the copyright holder's express written permission. However,

users may print, download, or email articles for individual use.

nau. obama's foreign policy

Documents