The Pandemic Depression
The Global Economy Will Never Be the Same
(Kevin Lamarque / Courtesy Reuters)
As November's U.S. presidential election approaches, foreign policy and national security issues are rising in importance. President Barack Obama is running on a platform of ending the wars in Iraq and Afghanistan while demonstrating toughness against al Qaeda. His Republican opponents charge him with presiding over the United States' decline and demonstrating fecklessness on Iran. The true story is somewhat more complicated than either side admits.
When Obama was sworn into office in January 2009, he had already developed an activist vision of his foreign policy destiny. He would refurbish the United States' image abroad, especially in the Muslim world; end the wars in Iraq and Afghanistan; offer an outstretched hand to Iran; "reset" relations with Russia as a step toward ridding the world of nuclear weapons; elicit Chinese cooperation on regional and global issues; and make peace in the Middle East. By his own account, Obama sought nothing less than to bend history's arc in the direction of justice and a more peaceful, stable world.
There was inevitable tension between Obama's soaring rhetoric and desire for fundamental change, on the one hand, and his instinct for governing pragmatically, on the other. The history of the Obama administration's foreign policy has thus been one of attempts to reconcile the president's lofty vision with his innate realism and political caution. In office, Obama has been a progressive where possible but a pragmatist when necessary. And given the domestic and global situations he has faced, pragmatism has dominated.
This balancing act has pleased few and provided fodder for Obama's critics. His compromises have been interpreted as signs of weakness, and his inability to produce clean outcomes in short order taken as an indication of incompetence. His efforts to engage competing powers have seemed at times to come at the cost of ignoring traditional allies. Above all, his approach has caused some to question whether he has a strategy at all or merely responds to events.
Such a portrayal, however, misses the point. Obama is neither an out-of-his-depth naif nor a reactive realist. He has been trying to shape a new liberal global order with the United States still in the lead but sharing more responsibilities and burdens with others where possible or necessary. Surrounding himself with experienced cabinet members who are not personally close to him, along with junior advisers who are close but not experienced, Obama has kept the conceptualization, articulation, and sometimes even implementation of his foreign policy in his own hands. Intelligent, self-confident, ambitious, and aloof, he is more directly responsible for his record than most of his predecessors have been.
He has racked up some notable successes, including significantly weakening al Qaeda, effectively managing relations with China, rebuilding the United States' international reputation, resetting the relationship with Russia and ratifying the New Strategic Arms Reduction Treaty (New START), achieving a UN Security Council resolution imposing harsh sanctions on Iran, completing overdue but welcome free-trade accords, and withdrawing U.S. troops from Iraq.
There have also been some notable setbacks, including no progress on resolving the Israeli-Palestinian conflict, very little to show on combating climate change, the United States' continued low standing in the Muslim world, deepening frictions in U.S.-Pakistani relations, a Mexico awash in drugs and violence, an Iran still bent on acquiring the means to produce and deliver nuclear weapons, and a North Korea still developing its nuclear arsenal.
The Obama approach has been relatively nonideological in practice but informed by a realistic overarching sense of the United States' role in the world in the twenty-first century. The tone has been neither that of American triumphalism and exceptionalism nor one of American decline. On balance, this approach has been effective, conveying a degree of openness to the views of other leaders and the interests of other nations while still projecting confidence and leadership.
Judged by the standard of protecting American interests, Obama's foreign policy so far has worked out quite well; judged by the standard of fulfilling his vision of a new global order, it remains very much a work in progress.
Obama came to power envisioning a foreign policy based on three pillars: a changed relationship with the rising powers in Asia, particularly China; a transformed relationship between the United States and the Muslim world in which cooperation replaced conflict; and reinvigorated progress toward nonproliferation and nuclear disarmament. Even as his election was making history, however, the financial collapse made economic crisis management the new president's top priority in domestic and foreign policy -- and limited his options in both.
Arguably the most difficult steps to avert a catastrophe (such as the passage of the Troubled Asset Relief Program and actions to make possible the rescue of key financial institutions) were taken at the end of George W. Bush's term. But Obama still had to determine which institutions to save and take other steps to arrest the economy's free fall and stimulate growth. This had profound implications for Obama's foreign policy, making quick collective action with other powerful economies essential. The administration worked with countries both in and beyond the traditional G-8 club of major powers, turning to the larger but still fledgling G-20, in which all the emerging economic powers are represented.
In the end, the danger of each country's acting to protect its own economy at the expense of others was largely avoided, demonstrating a surprising degree of collaborative common sense about shared interests. But the United States' role in precipitating the crisis through the popularization of dubious financial instruments severely tarnished the Washington-consensus model of deregulated markets, reduced deficits, and liberalized trade. A president less open to soothing the international community might have become a lightning rod for global frustrations, and Obama deserves more credit than he commonly receives for avoiding this outcome and helping keep a catastrophe at bay. This same crisis had the result of accelerating perceptions of Beijing's economic rise and Washington's relative decline, something that would complicate U.S.-Chinese relations during Obama's second year in office and pose a broader management challenge for his foreign policy.
From the beginning, the new administration sought more active engagement with Asia, trying to improve U.S. ties with friends and allies and cooperating with China on bilateral, regional, and global issues. The Obama team accepted that China's relative importance in the world was growing and that the United States could no longer exercise the degree of leverage that it had previously.
Despite concentrated attention, however, the administration's efforts to work more closely with China have not gone smoothly. A major deterioration in relations has been avoided, reflecting the underlying maturity of U.S.-Chinese relations and the long-standing desire of both countries' leaders to keep disagreements within bounds. Regular high-level meetings have created strong incentives for stabilizing relations and articulating areas of cooperation, but subsequent implementation of the intentions expressed at these meetings has often fallen short.
One of the administration's major goals has been to have China become a responsible player in the current liberal international order, one that accepts the system's basic goals and rules and contributes to their overall success. However, the administration has found that China's rapid rise in global standing has created enhanced expectations too quickly for Beijing to absorb. Although China is now a major factor in global issues, it still views itself as a developing country whose obligation is first of all to grow its economy, not to take on global responsibilities.
Perhaps the greatest policy failure for both countries has been the inability to mitigate distrust over each other's long-term intentions. Almost every American policy is seen by most in Beijing as part of a sophisticated conspiracy to frustrate China's rise. Washington, meanwhile, has increasingly been disconcerted by these Chinese views and concerned that Beijing seeks to use its economic and growing military power in Asia to achieve both diplomatic and security advantages at the United States' expense. Washington is also well aware that almost every other country in Asia wants the United States to help counterbalance the growing Chinese pressures, but not at the cost of making them choose between the two giants.
Obama's resulting "strategic pivot" to Asia, announced last November, was an attempt to generate confidence in the United States' future leadership role in the region, something many there had begun to doubt. This is a sophisticated, regionally integrated economic, diplomatic, and security strategy, but its full implementation will require disciplined administration management and convincing evidence of the United States' economic resurgence. The strategy of rebalancing toward Asia thus makes sense but risks creating expectations that Washington will not be able to meet while feeding Chinese suspicions, which could lead to a far more irascible U.S.-Chinese relationship. U.S. officials must act adroitly both at home and in Asia in order to realize the strategic benefits they have set in motion instead of generating greater distrust and tension.
MIDDLE EASTERN MORASS
The administration's relations with the Muslim world have provided the most surprise and drama. Obama always intended to continue combating terrorism, but he did not embrace Bush's concept of a "global war on terror." Instead, he sought to wind down the ongoing wars in Iraq and Afghanistan while focusing narrowly on attacking al Qaeda operatives in Afghanistan, Pakistan, and elsewhere, removing the organization as a threat to the United States and the world at large. The administration's success in this area has been among its signature achievements, and Obama can rightly claim that he has ended the Iraq war, persevered in Afghanistan and Pakistan, and essentially decapitated al Qaeda.
In the process, Obama has been tough. He has displayed no naive expectations about the power of his personal charm or vision to resolve matters of war and peace. In Iraq, Afghanistan, and Pakistan, however, stability hangs by a slender thread, and it is not yet clear if the president will be able to achieve both his goals simultaneously, exiting the wars without leaving dangerous messes behind.
On both Iraq and Afghanistan, the administration has displayed an admirable degree of flexibility and adaptation. In Iraq, for example, the president reconciled his earlier campaign positions with the realities he found on the ground. He slowed down the withdrawal of U.S. troops substantially, finally bringing them home in late 2011, in line with the schedule first designed and agreed on by Bush and Iraqi Prime Minister Nouri al-Maliki back in 2008. It is hard to see how an American president could have -- or should have -- retained U.S. forces abroad in a country that was not willing to have them remain there under a normal legal framework.
Nevertheless, Obama's crowing about the finality of the troop withdrawal was inappropriate given that his administration was on record as having tried to reach an accord with the Iraqis to keep the troops deployed there longer. At the same time, it is better for the future of U.S. military intervention abroad that the United States reestablished its reputation for leaving when asked instead of remaining where it was not wanted.
Obama decided to devote far more resources than his predecessor to both Afghanistan and Pakistan. But the intractable nature of the problems there and the deep divisions within the administration over how to handle them have kept success at bay. Practically every senior national security official has had his or her own priorities when it comes to AfPak, and so it is hardly surprising that locals there could never quite figure out if the United States was staying or going or if Washington saw them as friends or foes. This naturally led to hedging behavior from key local figures and a failure to achieve objectives as effectively as possible. Having invested so much in a robust Afghanistan strategy that sought to weaken the insurgency and build up the Afghan state's institutions, Obama will, in a possible second term, need to engineer a carefully designed troop drawdown through 2013 and 2014, when Afghan forces are set to assume primary responsibility for security throughout the country.
Middle East diplomacy, meanwhile, has been the source of the greatest gap between promise and delivery in the Obama record and the greatest frustration for the president. This is ironic given that Obama vowed to make Middle East peacemaking a priority from day one of his presidency. Critics have been unanimous in seeing the president's biggest mistake as focusing on an unrealistic demand for a full freeze on Israeli settlement activity in the occupied territories. By insisting on such a freeze, they argue, Obama drove Palestinian President Mahmoud Abbas away from the negotiating table (since he could not be seen as accepting something less than the U.S. president himself had demanded of the Israelis), and then by achieving less than his stated objectives, Obama damaged U.S. credibility as a mediator in the conflict.
Obama's demand was logical: restricting settlement activity should have improved the environment for negotiations and reduced Palestinian mistrust of Israeli intentions. The Palestinian Authority had made progress on Bush's watch in fighting terrorism, and it was reasonable for Obama to expect that Israel would in turn fulfill its reciprocal obligations by restricting settlement activity. Memories of how then Israeli Prime Minister Benjamin Netanyahu had driven a truck through a loophole allowing "natural growth" in the settlements during the Clinton administration, moreover, increased the determination of some of Obama's senior advisers who had been around then to support his desire for a full freeze.
But when Obama, following his pragmatic instinct, gave George Mitchell, his special envoy to the Middle East, a green light to negotiate something less than a complete settlement freeze with a newly elected Netanyahu, the president failed to adjust his declared objective. This opened up a gap between what the administration was publicly demanding and the reality of what it eventually achieved (a problem that also emerged with the president's speech envisaging a Palestinian state welcomed into the 2011 session of the UN General Assembly, something that the administration would ultimately have to reject). The effort generated bad blood in U.S.-Israeli relations and a settlement moratorium that disappointed the Arabs.
In fact, in general, Obama's relations with the Israelis have been curiously tone-deaf. His blockbuster Cairo speech in 2009 was clearly directed at the Arabs, but there were no corresponding visits to Israel or speeches directed at the Israelis, with the result that he lost Israeli public opinion early on. This, in turn, helped frustrate the president's peace diplomacy by diminishing his potential leverage over Netanyahu, who follows the polls obsessively and realized that he had more to gain than to lose at home from defying a president perceived as hostile. From Vice President Joseph Biden and former White House Chief of Staff Rahm Emanuel to Secretary of State Hillary Clinton and Clinton's adviser Dennis Ross, Obama had an array of advisers who recommended greater efforts to try to change Israeli minds, but the president himself thought he could win Israel over with stepped-up security backing, not understanding that what the Israeli public really craved was his attention and affection.
All this might have been forgotten or forgiven if Obama had succeeded in bringing the Arab world around to a more encouraging diplomatic stance. But when he proved unable to fulfill his promises to resolve the Palestinian problem and to close Guantánamo, the Arab street became disillusioned with Obama as well, eventually turning its back on him when he pivoted toward Israeli positions as his reelection approached. The president ended up with the worst of both worlds, losing the support of the Israelis and the Arabs and achieving nothing.
To be sure, Obama did not have willing partners in Netanyahu and Abbas. But his missteps ended up letting them both off the hook. If he decides to try again in a second term, he will need Israeli and Palestinian partners willing to take risks for peace and defend the necessary and painful compromises. But he will also need to work much more with, rather than against, them.
The Arab awakening is the biggest curveball thrown at Obama to date. The president has managed the turmoil and tensions relatively well, recognizing that these revolutionary stirrings are not about the United States and that he therefore has limited ability to affect their outcomes. Unlike during the protests in the wake of the June 2009 Iranian elections, when Obama muted his criticism while the Iranian regime suppressed the pro-democracy movement, the president has put the United States' voice behind popular demands for freedom and democracy across the Arab world and assisted in toppling unpopular dictators in Egypt, Libya, and Yemen, while doing his best to protect U.S. interests in stability in the Gulf. There have been tactical missteps: the humiliation of Egyptian President Hosni Mubarak, the failure to push effectively for meaningful reforms in Bahrain, and the subsequent slowness to push for Syrian President Bashar al-Assad's ouster. But in general, Obama's instinctive idealism has put the United States on the right side of history, and his innate pragmatism has served him well in striking a new balance between American values and the United States' strategic interests in a volatile region.
In Egypt, Obama's support for the preservation of the military's role was important in achieving a quick start to the transition process, but betting on the Egyptian military as the midwife of Egyptian democracy has not quite worked out as hoped. Although the Supreme Council of the Armed Forces (SCAF), Egypt's temporary ruling body, has reiterated its intention to honor all of the country's international obligations, including the peace treaty with Israel, it has proved feckless in handling popular demands and protecting minority rights. Worse than that, instead of ensuring the orderly transition that Obama sought from the early days of the revolution, the military has tried to protect its special interests and place itself above the constitution.
In demanding that the SCAF abide by Egypt's recent election results and allow the Islamists to take power, Obama is betting that rather than attempting to impose sharia on a quarter of the Arab world's population, the Muslim Brotherhood, out of a need to generate tangible results for those who voted for it, will prefer the stability that comes from cooperating with the United States and preserving the peace treaty with Israel. Obama has made a judgment that it will be less damaging to U.S. interests to try to shape this dramatic development than to encourage its suppression. But it is a gamble; standing on the right side of history now means accepting that one of the United States' most important Arab partners will be led by Islamist religious parties and betting that their pragmatism will outweigh their ideological opposition to liberalism, secularism, and U.S. regional objectives.
The shakiness of the United States' strategic relationship with Egypt, however, is offset by the strategic windfall coming from the troubles of Syria, Iran's one Arab ally. Cutting off the Syrian conduit for Iran's meddling in the affairs of the Arab-Israeli heartland would represent a major strategic setback for Iran. Already, Assad's international isolation and preoccupation with his country's severe internal challenges have significantly reduced his ability to support Iran's proxy Hezbollah in maintaining its grip on Lebanon. Meanwhile, Hamas is busy moving out of the Iranian orbit and into the Egyptian camp as the influence of its Muslim Brotherhood patron in Egypt rises, manifested in the withdrawal of Hamas' external headquarters from Damascus and the cutoff of Iranian aid to the group.
Libya was always a strategic sideshow. Obama helped achieve the relatively low-cost overthrow of a brutal dictator there, supporting the military intervention of NATO's European allies, which had a greater stake in the outcome. But there were indirect costs. By repeatedly calling for Muammar al-Qaddafi's over-throw when the UN Security Council resolution that justified NATO's military intervention provided for no such thing, Obama confirmed Chinese and Russian charges that the West would distort the intentions of UN resolutions on the matter for its own purposes. The unintended consequence was that China and Russia, as well as the emerging powers on the Security Council (Brazil, India, and South Africa), are no longer willing to countenance UN Security Council resolutions that could lead to military interventions to overthrow regimes elsewhere in the Arab world. This has made it more difficult for Obama to isolate the Assad regime.
Meanwhile, Obama's balancing of American values and interests is likely to be put to the test in the Persian Gulf sooner rather than later. Saudi Arabia seems determined to hold back on political reform at home, prevent it altogether in neighboring Bahrain, and carve out an exemption on political liberalization for all the kings and sheiks in its wider neighborhood. This cannot work as a long-term solution, even though the monarchies enjoy greater legitimacy among their people than the pharaohs and generals who have ruled in other parts of the Arab world.
Indeed, it seems likely that no Arab authoritarian regime will remain immune for long from popular demands for political freedom and accountable government. Obama's inclination to let these transitions play out on their own is understandable, but it might well seem shortsighted down the road unless he can find a way to negotiate a new compact with Saudi King Abdullah. Obama needs to convince the king that drawing up a road map that leads eventually to constitutional monarchies in the neighborhood, first in Bahrain, but over time in Jordan and other Gulf Cooperation Council states, too, is the better way to secure these kingdoms and the interests of their subjects.
On balance, it is not clear that a more consistent U.S. policy in the Middle East would have produced better results since the upheavals began. The United States' influence has been inherently limited in most cases. But the net effect of the tumultuous developments in the Arab world, when combined with Obama's failure to achieve an Israeli-Palestinian peace deal and Turkey's determination to play a leadership role in the Arab world at the expense of its relationship with Israel, has left the United States without a consistent strategy beyond reacting to the crosscutting currents of unpredictable events.
NUKES OF HAZARD
Obama took office determined "to seek the peace and security of a world without nuclear weapons," as he put it in Prague in April 2009. Russia was critical to this effort, which is why the president sought the reset in relations, designed to remove the frictions generated by expanding NATO's writ to Russia's borders and by Bush's determination to deploy a missile defense system in the Czech Republic and Poland. The New START treaty, signed with Russian President Dmitry Medvedev in March 2010, with its reductions in U.S. and Russian nuclear arsenals, was a manifestation of this new partnership, designed to set an example for the rest of the world.
Iran and North Korea have been at the core of the nuclear proliferation issue. Obama tried at first to engage Iran, but when those efforts bore little fruit, he moved to pressure Tehran instead. As part of his nonproliferation agenda, Obama wanted to ensure that those who broke the rules in this area would face, in his words, "growing consequences," that is, sanctions that "exact a real price." And his efforts first to engage Iran and North Korea gave him greater credibility when he sought broad support for sanctions: hence, the passage of a UN Security Council resolution in June 2010, with China and Russia voting in favor, mandating tougher sanctions against Iran for its violations of the Nuclear Nonproliferation Treaty.
The administration's attempts to change North Korea's behavior have been unproductive, but at least the effort has been handled in a way that has generated other important diplomatic benefits for the United States. Through its clear articulation of the consequences of ongoing nuclear and missile development for the U.S. deployment of military assets in Northeast Asia, the administration has increased China's incentives to try to constrain North Korea. The White House has also adeptly worked with Seoul to come to an understanding on how to handle Pyongyang, and as a consequence, the U.S.-South Korean alliance is probably as strong as it has ever been. Extensive consultations with Japan have helped improve American relations with the government there, as well, and reduced the risks to the U.S.-Japanese alliance from the Democratic Party of Japan's victory after over five decades of virtually unbroken rule by the Liberal Democratic Party.
Similarly, notwithstanding the tensions with Israel over the Palestinian issue and with Saudi Arabia over the Arab awakenings, close coordination against Iran with these two critical Middle Eastern allies has increased the effectiveness of U.S. strategy.
As of the time of this writing, Iran and North Korea retain their nuclear and ballistic missile programs; Iran, especially, is thumbing its nose at the international community; and both countries are making their neighbors nervous. But both are also facing the "growing consequences" that Obama warned them about in his Prague speech. And through painstaking diplomatic efforts, Obama has succeeded in convincing China and Russia to cooperate with his broader arms control agenda and with UN Security Council efforts to inflict increased costs for Iran's and North Korea's recalcitrance. That, together with other measures, has forced Iran's leaders to contemplate the dire consequences of their country's nuclear advance and has possibly persuaded North Korea to reconsider the steps necessary to reactivate the six-party talks. In addition, Obama's actions have alerted others that "going rogue" is costly.
Although there have been no breakthroughs when it comes to disarming the world yet, Obama has strengthened the international community's commitment to nonproliferation and nuclear disarmament. Consequently, Iran and North Korea face growing isolation from the emerging global order that Obama is shaping. The giant question mark hanging over these efforts, however, remains the prospect of Iran's potential acquisition of a nuclear weapons capability. That would deal a blow to the nonproliferation regime -- a pillar of the U.S.-led international order -- and raise questions about the efficacy of Obama's pressure tactics.
Obama's foreign policy has been sensible and serious but not pathbreaking. It has stewarded the nation's interests competently in most areas, with few signature accomplishments (apart from the killing of Osama bin Laden) that might create a distinctive historical legacy. Keeping the country safe and helping prevent an even worse economic meltdown were considerable feats. But they have been measured mostly against negative counterfactuals -- bad things that could have happened but were prevented, such as another big terrorist strike or another Great Depression. And the gap between the president's rhetoric and his deeds has generated disappointment at home and abroad among those who did not appreciate that Obama's way of achieving progress is incremental rather than transformational.
The record also leaves the president with no clear road map for the future should he win reelection. The remedy for this situation, ironically, is to refresh Obama's original view of what mattered most: a gradual readjustment of the United States' leadership role in an emerging global order. Over the last seven decades, the U.S.-led international system has encouraged the development and rise of other powers, from Europe to Japan to countries in the rest of Asia, Latin America, and elsewhere. Gradual, directed change that accords these rising powers greater roles in constructively managing the system could benefit most countries, including the United States.
Obama seems to understand this well, but he has not yet developed a clear strategy for achieving it or found a way to persuade the American public of the need for and benefits of such a course. One cornerstone to build on could be the rebalancing toward Asia that the administration rolled out last fall. Fleshed out and managed well, it could yield a reaffirmation of the United States' international leadership for years to come, serving as a framework for trade promotion and investment; a transformation to a leaner, more flexible military working closely with foreign partners; and the reshaping of global and regional organizations to preserve a leadership role for the United States while more accurately reflecting the emerging distribution of power in the international system.
Obama's ability to pursue such a strategy effectively, however, will depend on two other factors: some less-than-disastrous resolution of the Iranian nuclear issue and a revival of the United States' domestic political economy. Should Iran go nuclear, or should Israel or the United States attack it in an attempt to head off that outcome, security issues in the Middle East would once again rocket back to the top of the foreign policy agenda, probably throwing the region into turmoil and pushing other issues onto the back burner yet again. Like Michael Corleone, that is, just when Obama thought he was reducing his involvement in the region, he would be pulled back in, with a vengeance.
The second factor is whether the president will be able to overcome the United States' structural problems of low growth, high unemployment, and an unsustainable trajectory on debt. The global system is based on American political and economic, as well as military, strength. That strength is now being called into question, and the very public domestic political dysfunction in the United States is affecting expectations about the future around the world. There are many dimensions to this issue, but Washington's ability to gain control over its fiscal challenges while making investments that nurture the United States' capacity to adapt and compete in the future will obviously have to be a critical component of any serious program. And at the end of the day, national security budgets can and must be trimmed as well (albeit preferably without the severe reductions of "sequestration").
The United States still has many advantages: the strongest armed forces in the world; a powerful network of allies and partners; a continued lead in research and development; the world's best higher education system, innovation, and high-tech manufacturing; melting-pot demographics and moderate, balanced population growth; a transparent political system and reliable rule of law, which help attract foreign investment; and abundant natural resources, a vibrant civil society, and vast experience in global leadership.
Yet some key trends are heading in the wrong direction, and the country's economic future therefore remains at risk. Put simply, the continued weakening of the United States' economic foundations is incompatible with maintaining long-term national power and a successful foreign policy. The consequences of a failure to arrest American domestic decline for the United States and the world at large will thus reach far beyond any consequences stemming from the president's personal popularity or partisan standing.