Improving U.S. foreign economic policy after four years of neglect will require addressing a series of problems that, if left to fester, will have grave consequences for U.S. domestic interests and U.S. foreign policy as a whole. Above all, the second Bush administration must recognize that geopolitics and geoeconomics are deeply intertwined and must be managed accordingly.
Lester C. Thurow's gloomy new book trumpets the knowledge revolution's virtues but warns that neither Europe, nor Japan, nor even America is ready for them.
The global financial crisis has eroded developing nations' faith in modern capitalism itself, and the meltdown of Brazil's currency was grim evidence that the chaos is far from over. But few lessons have been absorbed. That had better change. Key Wall Street and Washington players do agree that crisis management was muffed, the nature of contagion misunderstood, and the importance of local politics underestimated. But they argue over the pace of fiscal liberalization, the efficacy of the IMF rescues, and the importance of "moral hazard." Herewith, a politically realistic plan to bridge the gaps and gird for the next, inevitable disaster.
The connection between American business and foreign policy is poorly thought out and mismanaged, on both sides. It is, however, vital to the national interest. For most of the country's history, foreign policy has reflected an obsession with open markets for American firms. At one time, protecting the interests of a company like United Fruit was synonymous with policy toward Latin America. While those days may be gone, commercial interests must still play a central role. Herewith, a framework for the second Clinton administration to guide cooperation between the government and the business community for the benefit of both.
Japan, Europe, and others worry that the United States is backing away from its historical commitment to international rules and reverting to arm-twisting and private deals on trade. So long as governments intervene unfairly, Washington cannot demobilize. But as the world's most open market and a burgeoning exporter, America has the most to gain from multilateral decisions to lower trade barriers and increase exchange. During the past half-century it has shown the way, and it will continue to lead in shaping a multilateralism for the millennium.
The new president cannot wait until his January 20 inauguration to signal boldly how he will deal with urgent economic problems at home and abroad. He should confront Congress as a tough fiscal conservative on domestic spending and open discussions with German and Japanese leaders on trade, growth, and currency issues.
For over half a century Japan and Germany have been at the heart of America's international preoccupations. After a long and destructive war against both countries, the United States worked exhaustively to help its two erstwhile enemies recover and build democratic societies secure under the American defense umbrella. From the late 1960s to the mid-1980s, victor and vanquished moved to a more balanced relationship, especially in trade and finance. Today, in one of history's great role reversals, Tokyo and Bonn have become Washington's fierce trading rivals and also its primary bankers.
Over the last four years America's foreign economic policy jumped its traditional track. The first few postwar administrations practiced a single-handed kind of world leadership, because there was no one else to help. As Europe and Japan gained more economic strength, recent presidents focused on ways to share the management of the world economy. But President Reagan and his team seemed far less interested in international economic policy. Above all, they were preoccupied with events at home.