Something has gone terribly wrong. When the Cold War ended, the era of struggle was supposed to end with it, and the period of peace and prosperity was to begin. For a time, optimism did prevail. The Warsaw Pact suddenly disbanded, the Soviet Union itself disintegrated, and Wilson won his nearly century-long ideological struggle with Lenin. Virtually everywhere, collectivism and centralization gave way to democracy and decentralization. Peace began to break out in the most unlikely places -- bloody Central America, stalemated Southern Africa, traumatized Southeast Asia, and even the embittered Middle East. The world economy delivered a cornucopia of goods to the planet's peoples. No other country could now present a military challenge to the United States, which also seemed, in effect, the institutionalized stabilizer of the globalized world economy. Culturally, too, the world apparently was coming together. Other countries wanted to embrace American ways. They did not have to be forced to adopt them. The attractiveness of American society to others -- a form of what the political scientist Joseph S. Nye, Jr. calls "soft power" -- was also a force for peace.

The essay that best captured the mood of the day -- an intense collective American desire for dominance without conflict -- was Francis Fukuyama's controversial "The End of History?" He argued that with the end of the tense Cold War ideological battle, liberal democracy combined with open market economics became the only model a state could follow and would prevail everywhere. America could entrench its preeminence with scant effort. We would move into a boring age of economic calculation after a conquest both painless and profitable.

America's foreign policy over the last six years has been fundamentally Fukuyaman. Both government officials and most of the chattering class alike have believed that any government that failed to follow the lone path to the future would be left on the ash heap of history. With the end of communism, there was no conceptual alternative. Moreover, the global economy's forces were irresistible. Economic reform would bring political reform. Free trade, markets, and capital flows would democratize virtually every country in the world.

The policies of the Bush administration in its final years and those of the Clinton administration, for example, turned out to be remarkably similar. Both concentrated on domestic reform at the expense of international affairs. When the dramatic transformations in the Soviet Union and Eastern Europe took place, both Bush and Clinton decided that America's contribution would be largely advice, not aid. Both made reducing the federal deficit their highest priority. Except for efforts to contain Iraq, both were reluctant to get involved in foreign adventures.

In the past few months, Fukuyaman foreign policy has collapsed. As 1998 drew to a close, the international economic system was facing severe strains and even America, which experts had earlier pronounced secure, seemed threatened. The allies, who contributed so much to the Gulf War that the United States made a profit, were now more reluctant to grant U.S. actions automatic legitimacy and generous funding. They began to resist U.S. preferences in handling Iraq and felt America should foot the bill for NATO expansion.

Earlier confidence that strife was over also began to wane. Ethnic conflict disturbed the peace in one trouble spot after another. The comfortable belief that the nuclear powers could restrict the size of their club also suffered a rude shock when India and Pakistan inscribed their names on the membership roll.

The promise of international organizations in this new era was also fading. The International Monetary Fund (IMF) and World Bank stood accused of failing to prevent the economic collapse of Indonesia, Russia, South Korea, and Thailand. The United Nations was near bankruptcy because the United States refused to pay its arrears and others were unwilling to devote even a little of much-reduced defense expenditures to defending peace and security in other ways.

The reason for these setbacks, many totally unanticipated, is that since 1991 the United States has based its foreign policy on three key assumptions: that the invisible hand requires no guidance to bring the world stability as well as growth; that the major cause of ethnic conflict is evil leaders; and that the main military mission remains deterrence. Others in the West have followed the American lead. All three are false.


During the Cold War several major governments bet on closed economies, while others opted for open economies. India, though a democracy, chose the former path. Indonesia, South Korea, and Taiwan, though dictatorships, chose the second. By the late 1980s the evidence was in. Open economies, even under dictatorial governments, perform better than closed economies, even under democratic governments.

Unfortunately, with the end of the ideological challenge from Moscow, this fundamental truth was transformed during the 1990s into an increasingly rigid ideology that blinded otherwise intelligent people to some of the inherent shortcomings of a free market. Economies all over the world were opened to the full blast of international competition, often before they were ready. The new orthodoxy's command of economics was better than its command of politics; it overestimated the power of logic in economics while underestimating the power of psychology; it was vulnerable to unanticipated shocks; and by neglecting the need to erect buffers, it discovered that failure's impact was not merely national or even regional but global.

A glance at the economies that have stumbled badly in recent years reveals the unstable political premises of the new orthodoxy. Most of the problem countries got into severe economic trouble precisely as they were facing a fundamental political challenge. Under political pressure, they postponed key decisions that might have lifted the economy out of its difficulties.

To begin with, the Mexican currency crisis of Clinton's first term erupted as Mexico was attempting a critical political transformation. The Institutional Revolutionary Party, which had totally dominated Mexican politics for decades, was attempting to steal its last election, this time with enough of a democratic facade to make an opposition victory possible. Pressures from abroad and at home were forcing a political opening. Unsurprisingly, the Mexican government failed to make tough decisions before the election that might have avoided the peso's devaluation.

Thailand also had the misfortune to face an economic crisis amid vital political change. Its parliamentary system came under increasing pressure from undemocratic forces. The trade surplus disappeared. With elections looming, the government hesitated to take decisive action. Rather, seeking political advantage, it increased government spending. The speculators sensed weakness and swamped the system.

South Korea's economy went into meltdown precisely as the country was facing the most profound political change in its postwar history, with the left poised to gain power for the first time. A conservative government fighting for its life could hardly be expected to take the tough economic decisions necessary to ward off the crisis.

The economic tidal wave next struck Indonesia, where the Suharto government clung to power by its fingernails. It knew that the reforms the IMF was urging would doom the regime. Small wonder Suharto resisted.

The crisis next hit Russia, where the Yeltsin era was coming to an end. Here again, political weakness enhanced the speculative challenge. The measures that the financial doctors were insisting were necessary for economic survival seemed politically toxic to Moscow. It resisted, and the pressure grew.

Brazil was next in line. Here again, the new orthodoxy proved prone to breakdown as much for political reasons as for economic shortcomings. As the Financial Times reported last September, though some might take comfort from the fact that Brazil was "too big" for the international financial system to let fail, the rescue effort was complicated by upcoming elections. The Brazilian government was reportedly determined not to ask the IMF for assistance until after the November balloting.

The pattern described above is no accident. The new orthodoxy's Achilles' heel is its faulty political foundation. Speculative pressures seem to converge on economies facing dramatic political change. Previously, such a pattern would have been of only academic interest, but in a globalized world one failure in one economy -- even one as relatively small as Russia's -- can send major shock waves throughout the now unprotected system, one in which all the firebreaks have been dismantled.

Some may object that, while the globalized system may suffer from this political flaw, the IMF or the major financial powers have no choice but to press for politically different measures. The choice depends on the country, but in general, we should all recognize the unexpected political vulnerability of the new system and adjust accordingly.

Transition economies like Russia's cannot be treated like traditional free market economies. Last summer, the world offered Russia more loans to cope with its economic problems when the country's immediate need was for debt relief. Russia today is in the same position as Germany in the late 1920s. Then the world loaned Germany large sums of money that the country was unable to repay once economic conditions worsened. Disastrously, the world waited too long before finally coming up with the Young Plan to help lift that debt from Germany's shoulders. Russia, with the end of the Cold War, agreed to accept the burden of the Soviet debt, now more than half Russia's total debt. It also agreed to additional loans to support its reform program but now cannot repay either them or the old Soviet debts because commodity markets have collapsed after the Asian shock. At a minimum, Western countries should have recognized last summer the statesmanlike Russian decision to shoulder the Soviet debt and offered to renegotiate, delay, or cancel that debt out of awareness of the new adverse conditions created by slumping world commodity prices.

For years George Soros, the most successful of the new international financial titans, has been warning fellow investors and government officials that financial markets are -- contrary to the confident assertions of the deans of the new orthodoxy -- inherently irrational because they depend enormously on psychology and group behavior. In effect, in terms of their economic policy, governments must have perfect pitch. Few do. When errors are made -- often because governments facing elections put down the tuning fork -- investors notice and, as a group, begin revising their calculations.

The new orthodoxy is therefore unworkable. It requires that no one fail, but someone always will. When that happens, the globalized economy offers too few buffers, and the shock effect crosses continents. More buffers are urgently needed if we are to capture the benefits of an open economy without suffering devastating future traumas. We must create these buffers collectively, or states will create them individually.


The second failing of the post-Cold War era has been Western misunderstanding of the nature of ethnic conflict, which emerged as the new age's principal challenge. Every newspaper carried reports on struggles between minorities that even long-time students of international affairs never knew existed -- the Abkhazians, the Ossetians, the Bosnians, the Gagauz, the different groups of Kurds.

Many American analysts responded by assuming that people wanted to live together but were thwarted by bad leaders or meddling foreign governments. Commentators suggested that the conflicts were fueled mainly by old communists anxious to stay in power. Obviously, there are plenty of evil leaders and meddling governments around the world, not all of whom were communist. Nevertheless, the problem of post-Cold War ethnic conflict is less one of bad leadership than of inadequate structures.

As the Berlin Wall was being pulled down, a Turkish diplomat remarked, "Now you Americans are going to understand the value of empires. So long as minorities have someone to whom they can appeal when they are in dispute, they can live peacefully together. When that arbiter is gone, they will be at one another's throats."

The wars in Bosnia and the Caucasus (and the Middle East for that matter) are terrifyingly intense because they are not struggles for gain or glory but for identity and survival. The combatants are trying to answer the existential question, Whose country is this? If it is mine, you cannot stay, and if it is yours, I cannot stay -- or if I am allowed to stay, I must agree to accept a second-class status. Whether Catholics in Northern Ireland, Palestinians in Israel, Israelis in a future Palestine, Serbs in Croatia, or Croatians in Serbia, the lot of the loser in these wars of national identity -- barring outside intervention -- has been second-class status or exile. The same kind of struggle for identity and survival fuels the tension in the Caucasus between Armenians and Azerbaijanis and in Cyprus between Turks and Greeks.

Americans are closer to such wars for identity and survival than they realize. The struggle between white settlers and Native Americans had the same pitiless ferocity to it. In effect, when the settlers arrived, the Native Americans knew that the U.S. Army would not be far behind and that they would be cleansed from their own land. They would not have a country for much longer. Hence the savage nature of the struggle between the settlers and the Native Americans.

Can it be an accident that the most intractable ethnic struggles take place in parts of the globe where a few particularly aggrieved minorities have suffered unusually tragic historical traumas? The Armenians, Israelis, Palestinians, and Irish Catholics have all been the victims of historic mass catastrophes. Their determination to forge their identity is deeper than almost any other people's. The wars in the former Yugoslavia need to be understood in this context. The Serbs, as many have pointed out, seem to have embedded victimization in their very national identity. There is a reality behind the psychology. As the Encyclopedia Britannica entry on Yugoslavia notes, the massacre of the Serbs in World War II "was surpassed for savagery only by the mass extermination of Polish Jews." The struggle of the Basques also fits this pattern. Guernica, immortalized by Picasso after the German Luftwaffe first tested its terror techniques on a civilian population, is located in the land of the Basques. Upon victory, Franco's forces put more than 20 percent of the Basque population into concentration camps. His repression was ruthless.

These distressed peoples' harsh history does not excuse the brutal methods they have sometimes adopted to fight for their identity and survival. All the groups mentioned have resorted to terrorism, ethnic separation, and acts of aggression. But understanding their history can help outsiders appreciate that unless the quest for identity and group security is satisfied and the tragic history of these peoples taken into account, the struggle is likely to be very hard to contain.

Does the cruel nature of these conflicts mean that outside powers should avoid involvement? Not at all. If possible, we must try to break the cycle of victimization before the next generation embraces it. But the nature of these struggles does mean that outside involvement must provide reassurance for all sides, include psychology as well as diplomacy, and take historical grievances into account rather than simply declaring them irrelevant. In these cases, the pain remains too immediate for anesthesia to prevail.

The original American answer to the new outburst of ethnic conflict was to call for American-style democracy. Elections would replace bad leaders with good. But Anglo-Saxon democracy, with its winner-take-all character, is not an answer but a provocation. Our own history demonstrates this. After the Civil War, once federal troops were withdrawn, American-style democracy in the South meant a political system that suppressed blacks. For many years, the British only compounded the problem of ethnic relations in Northern Ireland through winner-take-all elections.

The ethnic groups struggling for identity today will not allow their struggles to be resolved by elections alone unless they are persuaded that they enjoy a majority of the electorate that votes or they have assurances regarding their future, which probably can only be guaranteed by some outside force. Finding a peaceful path for settling conflicts of identity that does not require outside intervention would be worthy of a Nobel Prize. Regrettably, no one has discovered that path. Sometimes, though, after many years of struggle, the contesting parties do tire and do seek compromise. That seems to explain what happened in South Africa and may be happening in Northern Ireland.

For ethnic conflicts between contestants who have not tired, however, the international community's most effective answer is imposing a foreign protectorate on the warring populations for their own good -- as in Bosnia today and perhaps Kosovo tomorrow. In Bosnia, a ranking American civilian, Jacques Klein, publicly states that the NATO troops now providing a de facto protectorate will be there forever. The highest-ranking civilian, Carlos Westendorp, the Spanish diplomat dubbed "Bosnia's viceroy" by The Economist, announces the more modest goal of 15 years.

If the United States and its allies wish to deal with particularly intense ethnic conflicts, they must understand their traumatic underlying causes. They must then ask the following questions: How many protectorates will the international community support financially and militarily? Where will it support them? The former Soviet Union is full of ethnic groups that have suffered extraordinary trauma.


Finally, the West continues to rely on military deterrence. At the end of the Cold War, the United States had the world's most powerful military, one that paradoxically grew stronger daily by simply standing in place and watching the Soviet military machine melt away. Its armed forces towering over all others like a colossus, the United States nevertheless keeps its military roughly at Cold War levels and has even begun to extend its reach through NATO expansion and U.S. leadership in NATO's Balkan operations. U.S. nuclear submarines never slowed their vigilant patrols off Russian shores. Thousands of NATO missiles remain targeted on the collapsing institutions and impoverished people of Russia. It is as if the Berlin Wall still stood.

What Western military leaders have still not grasped is that the uses of force have changed in much of the world, including the areas where they are most immediately involved. Throughout the Cold War, force was needed to deter the other side from doing bad things outside its borders. Today force is needed to compel the other side to do good things inside its borders. The difference is fundamental. Deterrence is mounted along borders; compellence is undertaken within borders. Deterrence is a military task; compellence is a police function. Deterrence creates alliances; compellence breeds protectorates.

Moral considerations obviously play a growing role in international affairs. They should. Americans must not, however, lose sight of the underlying national security issues involved in many ethnic struggles. Take Kosovo, where NATO is poised to intervene because of widespread outrage over the Serbian army's brutality in its attempt to crush the province's Albanian rebels -- a potential bombing in the name of humanitarianism. The critical national security issue, however, is whether Europe can or should accept a larger Albania, and if it cannot, how to prevent this. On the eve of World War II, Serbs made up nearly 40 percent of Kosovo's population. Large wartime deportations of Serbs, Tito's decision not to allow them to return in a vain effort to lure Albania into a Balkan communist federation, and a much higher Albanian birthrate have set in motion a process that can only lead to an independent Kosovo. If the process is to be stopped, who will provide the force to do so? Belgrade or Brussels? Serbia's army or NATO? If we conclude that a Europe at peace can stand neither, in effect, a greater Albania nor a brutal Serb repression, we must recognize the need for a protectorate over Kosovo, as much for reasons of national security as of human rights.

The core nature of ethnic conflict has profound implications for the perennial debate about the size of the U.S. defense budget. Some armchair strategists, seeing America without a serious challenge, now call for massive increases in the Pentagon's budget to lock in America's current international preeminence and convert it into hegemony. They do not propose to reform the U.S. military; they simply want more of it. Answering their call would be wasteful and would provoke a popular backlash. If the purpose of force is now more to control than to deter, are the American people prepared to see their young men and women make the supreme sacrifice in the name of controlling others rather than defending ourselves? British and French families in the last century were willing to make such sacrifices because they had imperial ambitions. Are we? If not, we probably need to create special military units that will volunteer for such duty.

The current configuration of U.S. forces is of dubious use against today's new security threats. How does maintaining thousands of nuclear weapons and the nuclear triad help fight ethnic conflict or terrorism? Does airpower really work in these cases? Many believe, for example, that NATO bombing helped bring the Bosnian Serbs to the table at Dayton. This is a myth. As Carl Bildt, the former Swedish prime minister and the person in charge of the civilian side of the Dayton Accord, has pointed out, the Bosnian Serbs agreed to negotiate once the United States accepted the creation of a separate Serb entity within Bosnia called Republika Srpska -- a concession made before the bombing ever started. The likely audience for the bombings, it appears, was not the Bosnian Serb negotiators but Bosnian Muslim public opinion. After the horrors the Muslim population had suffered, seeing the Bosnian Serbs punished may have helped persuade the authorities in Sarajevo to come to Dayton. But simply because NATO airpower was politically useful does not make it effective in security terms against the type of ethnic fury that sundered Yugoslavia.


The depressing results of following these three false assumptions are an urgent goad to recast Western post-Cold War foreign policy. The West must show greater imagination and historical understanding in almost every field.

First, the West must finally recognize the need for reform of the world's economic institutions. Simply expanding the free market is not enough. Second, the West must rethink the reform of world political institutions. It can no longer simply work to consolidate Western privilege. Finally, the West must address the age's new military needs. In its antiquated security doctrines, the West is rather like a homeowner who was robbed and then buys a couple of beautifully trained watchdogs, even though his house's new problem is termites.

The West still faces an extraordinary opportunity. Rarely in history do most major powers proclaim allegiance to one political and economic model, which happens to be our own -- one which, if properly regulated, can bring enormous benefits to humanity. It is equally rare that all the great powers essentially endorse the status quo, which happens to favor us. Indeed, for the first time ever, all major powers prefer internal development to foreign expansion. It is also the first time that communications make possible citizen-to-citizen contact on a truly global basis -- and those citizens not only speak to one another largely in English, but they use reassuringly familiar Western concepts.

The United States and its allies could still seize this opportunity. To do so, however, will require a larger vision of the future than Western leaders have displayed in the 1990s. In the time remaining before the millennium ends, the West will not continue to have the luxury of standing pat.

You are reading a free article.

Subscribe to Foreign Affairs to get unlimited access.

  • Paywall-free reading of new articles and a century of archives
  • Unlock access to iOS/Android apps to save editions for offline reading
  • Six issues a year in print, online, and audio editions
Subscribe Now