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GDP Now Matters More Than Force

A U.S. Foreign Policy for the Age of Economic Power

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Most nations today beat their foreign policy drums largely to economic rhythms, but less so the United States. Most nations define their interests largely in economic terms and deal mostly in economic power, but less so the United States. Most nations have adjusted their national security strategies to focus on economic security, but less so the United States. Washington still principally thinks of its security in traditional military terms and responds to threats with military means. The main challenge for Washington, then, is to recompose its foreign policy with an economic theme, while countering threats in new and creative ways. The goal is to redefine "security" to harmonize with twenty-first-century realities.

The model already exists for such an economic-centric world and for a policy to match: the approach of U.S. Presidents Harry Truman and Dwight Eisenhower. They understood that a strong economy is the basis of both a vibrant democracy at home and U.S. military might abroad. They also knew that no matter how strong the U.S. economy and military, Washington would need a lot of help in checking communism. Accordingly, they bolstered U.S. power by resurrecting the economies of Western Europe and Japan, and they added legitimacy to that power by establishing international institutions such as the World Bank and NATO. To respond to threats from the Soviet Union and communism, Truman and Eisenhower fashioned the policies of containment and deterrence, backed up by military and economic aid. The idea was to check Soviet military power without bankrupting the United States. Today, of course, any U.S. approach must account for the complexity of the global economy as well as new threats from terrorists and weapons of mass destruction. All this can be done -- but not without causing some intellectual and political mayhem.

The most ferocious fight will be over how to rejuvenate the U.S. economy. Everyone agrees that it must be fixed, lest the nation face further decline and more dangers. But few agree on how. The basic must-do list is lengthy, unforgiving, and depressingly obvious: improve public schools to sustain democracy and restore global competitiveness; upgrade the physical infrastructure critical to economic efficiency and homeland security; reduce public debt, the interest on which is devouring revenue; stimulate the economy to create jobs; and promote new sources of energy and freer trade to increase jobs, lower foreign debt, and reduce dependence on Middle Eastern oil.

Even as politicians and experts do their war dances on these do-or-die domestic issues, they will grapple over foreign policy, as they should. The United States is less and less able to translate its economic strength into influence abroad, even though it will remain for some time the world's largest economy. Why this gap between U.S. power and results? In part, it is because many problems internal to states today are beyond all external ministrations. It is also because U.S. power has been squandered and employed inefficiently. Having overlooked profound changes in the world, U.S. leaders have done little to modernize their national security strategy. Present U.S. strategy offers too little bang for its buck because there is not enough buck in the strategy. A new way of thinking about U.S. interests and power must aim for a foreign policy fitted to a world in which economic concerns typically -- but not always -- outweigh traditional military imperatives.

A UNIQUE ERA IN WORLD AFFAIRS

The modern world has experienced two periods of globalization, both of which brought about new highs in trade and investment. Both sparked hopes that the common pursuit of riches would overshadow traditional military rivalries and sustain peace. The dreams of the first era, which lasted from 1880 to 1914, drowned in the blood of World War I, then World War II, and finally the Cold War -- close to a century of war. Many expect that the current era of globalization, which began as the Cold War faded, will also end unhappily. Yet the current era differs from the past in three crucial ways: unlike the German empire of yesteryear, today's surging power, China, is unlikely to act as a spoiler; major powers and emerging powers today are less likely than ever to fight one another; and, consequently, nations can pursue their economic interests without the traditional overriding military worries.

In the pre-World War I era, Germany had the world's most dynamic economy, and the ambitions of German leaders greatly exceeded creating domestic wealth. They aimed to dominate the European landmass and beyond. The same was largely true of the Japanese empire before World War II, as it sought to rule Asia and much of the Pacific. Whereas most nations preferred to increase their wealth, Germany and Japan fixated on world domination and did not flinch from using force to achieve it. They were the world's most dynamic economies and also its spoilers.

Skeptics today argue that China could be the second coming of those old and strategically greedy empires, but that argument is a stretch. The argument goes that contemporary China, like the Germany and Japan of old, will seek to dominate by money and trade if possible, and by force if not. To begin with, China today is far behind the former Germany and Japan in possessing the military wherewithal necessary to conquer, occupy, and command the resources of other states. Germany and Japan were able to fight most of the rest of the world for years. China is still decades away from having the capacity to project force -- and sustain it -- beyond its borders. In any event, worried nations, such as India, Japan, and the United States would have plenty of time to react to and counter an aggressive China.

Germany and Japan placed their industrialized economies at the disposal of their military ambitions. For them, the military domination of others was a cost-effective way to control resources, and it did not strain their internal control. China could not afford such an aggressive military strategy, as Beijing has to subordinate almost everything to upgrading its economy. Because half of China's population is still poverty-stricken -- a reality with explosive, revolutionary possibilities -- the Communist Party feels that it must produce economic growth to stay in power.

Also reducing the likelihood of conflict today is that there is no arena in which the vital interests of great powers seriously clash. Indeed, the most worrisome security threats today -- rogue states with nuclear weapons and terrorists with weapons of mass destruction -- actually tend to unite the great powers more than divide them. In the past, and specifically during the first era of globalization, major powers would war over practically nothing. Back then, they fought over the Balkans, a region devoid of resources and geographic importance, a strategic zero. Today, they are unlikely to shoulder their arms over almost anything, even the highly strategic Middle East. All have much more to lose than to gain from turmoil in that region. To be sure, great powers such as China and Russia will tussle with one another for advantages, but they will stop well short of direct confrontation.

To an unprecedented degree, the major powers now need one another to grow their economies, and they are loath to jeopardize this interdependence by allowing traditional military and strategic competitions to escalate into wars. In the past, U.S. enemies -- such as the Soviet Union -- would have rejoiced at the United States' losing a war in Afghanistan. Today, the United States and its enemies share an interest in blocking the spread of both Taliban extremism and the Afghan-based drug trade. China also looks to U.S. arms to protect its investments in Afghanistan, such as large natural-resource mines. More broadly, no great nation is challenging the balance of power in either Europe or Asia. Although nations may not help one another, they rarely oppose one another in explosive situations.

Given the receding threat of great-power war, leaders around the world can afford to elevate economic priorities as never before. To be sure, leaders throughout history have pursued economic strength as the foundation of state power, but power itself was equated with military might. Today, the prevailing idea is that economic strength should be applied primarily toward achieving economic -- not military -- ends. Money is what counts most, so most nations limit their spending on standing armies and avoid military interventions. What preoccupies most leaders is trade, investment, access to markets, exchange rates, additional riches for the rich, and a better life for the rest.

This trend is plain among the rising regional powers known as the BRIC countries (Brazil, Russia, India, and China) and among such others as Indonesia, Mexico, South Africa, and Turkey. Although these countries' leaders have major security concerns -- such as India with regard to Pakistan -- their paramount objective has become economic strength. For most, economic growth is their prime means of fending off internal political opposition.

China makes perhaps the best case for the primacy of economics. Although it might emerge as a spoiler decades hence, Beijing currently promotes the existing economic order and does not threaten war. Because Beijing has been playing the new economic game at a maestro level -- staying out of wars and political confrontations and zeroing in on business -- its global influence far exceeds its existing economic strength. China gains extra power from others' expectations of its future growth. The country has become a global economic giant without becoming a global military power. Nations do not fear China's military might; they fear its ability to give or withhold trade and investments.

And yet, for all the novel characteristics of the present era, there is one stunning constant: the national security strategy of the United States. Whereas other countries have adjusted to the new economics-based order, Washington has been tardy. This should not be surprising. For over half a century, U.S. foreign policy had to give priority to stemming real and serious threats. No other nation could or would shoulder the responsibilities. Even now, no other nation or group of nations can lead coalitions against terrorists and nuclear proliferation threats. The United States cannot ignore these burdens, but it must adjust its approach to recognize that economics is now at the center of geopolitics. Washington's failure to do so has already cost it in blood, treasure, and influence. Now, in the second decade of the twenty-first century, leaders in Washington proclaim their awareness of the new economic order but lack any semblance of a new national security strategy to embrace it.

UPDATING TRUMAN AND EISENHOWER

The best U.S. strategy for this new era is to update the approach taken by Truman and Eisenhower during the early Cold War. Its underlying principles were to make the American economy the top priority, even if it meant tamping down military spending and military interventions; to strengthen the economies of key allies, especially in Western Europe and Japan, to lessen their vulnerability to Soviet pressure and increase their value as allies; and to fend off threats by means of containment, deterrence, and a policy of providing military and economic assistance to partners worldwide.

To strengthen the economy, Truman and Eisenhower leveraged foreign threats to initiate economic projects at home. Eisenhower used the Soviets' launching of Sputnik to advocate crash programs in math and science, for example, and he convinced Congress to build the national highway system in order to strengthen the country against the Soviet military threat. Similarly, leaders today could press for more math and science education to restore U.S. trade competitiveness and could leverage the threat of terrorism to provide more money for building physical infrastructure, which would increase U.S. resiliency against terrorist attacks and enhance the country's overall economic efficiency.

Truman and Eisenhower carried out their reforms while holding military spending in check -- Pentagon budgets came last, not first. Both presidents allocated defense outlays using the "remainder method," whereby they subtracted necessary domestic spending from tax revenues and gave the leftovers (the "residual," as Eisenhower called it) to defense. Presidents could not repeat that math given today's politics, but they could approach Pentagon requests more skeptically and lower them accordingly. Eisenhower and Truman were particularly conscious of the ill effects of being a debtor nation. As such, they both essentially balanced the federal budget. This course still represents the right direction, especially at a time when 40 cents of every federal dollar spent is borrowed from abroad.

Today, the Truman and Eisenhower approach would almost certainly revolutionize basic priorities -- for example, by elevating Mexico far above Afghanistan as a national priority. The fact is that Mexico could damage or help the United States profoundly and inescapably -- just consider illegal immigration, drugs, crime, as well as the trade and investment potential. By contrast, the war in Afghanistan will have little lasting effect on the United States, whatever the outcome, except for the incredible cost in lives and dollars. Terrorists will still find homes in Pakistan and many other locales. In the face of all this, Washington nonetheless showers its attentions on Afghanistan and virtually ignores Mexico.

By following a second basic principle -- to not just strengthen the United States but also bulk up its key allies -- Truman and Eisenhower constructed an impregnable wall against communist encroachment while nurturing mutual trade and investment. The main beneficiaries were Western Europe (through the brilliance of the Marshall Plan) and Japan. By the late 1950s, this triangle of allies -- the United States, Western Europe, and Japan -- constituted the bulk of the world's economic, military, and diplomatic punch. Together, they could not be defeated, whatever the setbacks. Even today, this triangle represents the world's greatest commonality of interests and values and, as such, is the best place to start constructing twenty-first-century coalitions. Such coalitions would, however, have to include a number of other nations, as situations required.

Of course, the present-day U.S. economy barely resembles that of the Truman and Eisenhower days. Today, trade accounts for about one-quarter of U.S. GDP, more than double its share during the early Cold War years. Trillions of dollars cross national boundaries daily, mostly unconstrained by governments. The World Bank and the International Monetary Fund, which Truman essentially created, now occupy a much smaller place in the global economy. The United States is still the beacon for world trade, but its power has declined from the days when Truman created the General Agreement on Tariffs and Trade, which was the precursor to the World Trade Organization. The reason for the United States' decline in trade power is that the U.S. economy is relatively weaker than before. The country's past trade power rested largely on the size and vitality of its economy. Thus, in trade talks, the United States could give more access to markets than it got, confident that it would recoup more than its fair share in the long run.

No matter how compelling the case for an economic focus to U.S. strategy, the effort will falter unless Washington makes clear that first, focusing on economics will not weaken national security and, second, it is constantly developing new ways to confront today's threats. The starting point is to reassure the public about China and, to a far lesser extent, Russia. Neither country can seriously challenge U.S. military power beyond its borders. Moscow's conventional military forces are weak and in decline, and its army counts only near home. China's military is indeed increasing in strength, but it will take decades before it approaches parity with the United States', if then.

Moreover, both Russia and China are unlikely to launch an unprovoked attack and risk the unpleasant consequences. To be sure, Beijing could bring military tensions to a boil over Taiwan or the resource-abundant South China Sea. Washington has to maintain naval and air capability in those regions to make such ventures too risky for China. As with the Berlin airlift in Truman's day, the White House has to place the burden of risk and escalation on potential aggressors, such as Beijing. In a larger sense, China is contained and deterred by its vast trade with and huge investments in the United States. Although hawks in the United States may denigrate the power of money, the Chinese do not.

The most serious threats to U.S. security come from rogue states with or in the process of acquiring nuclear capabilities, failed and failing states that could breed or house terrorists, and international terrorists themselves. The strategic question here is whether to combat these dangers with substantial military interventions or to rely on deterrence, containment, and aid. Land wars should be undertaken if and only if the following criteria are met: the threat is unique to the country posing it and clearly a danger to U.S. security; only land forces can neutralize that threat, and they can do so within a few years and at a reasonable cost; and the local population will fight for itself, fully supporting the effort and understanding from the outset that it will be its own prime defender. Short of that, the United States should stick to aid and diplomacy to combat threats. The wars in Afghanistan and Iraq have a combined tab of almost $3 trillion and counting. Although the overall utility of these wars will be debated forever, the costs to the U.S. economy have been clear and horrendous.

Regarding rogue states such as Iran and North Korea, conservatives generally contend that deterrence and containment cannot work. Rogue leaders are crazy, they argue, and cannot be deterred by expectations of retaliatory death and destruction. That was the contention during the Cold War, as conservatives maintained that Soviet and Chinese leaders were ready to sacrifice half their people in order to "win" a nuclear war. In time, however, Moscow and Beijing lost the Cold War without resorting to nuclear weapons. Similarly, although the rhetoric of leaders in Tehran and Pyongyang is often psychedelic, their actions are largely careful and fall short of provoking a military response. Their apocalyptic rhetoric mostly targets their domestic constituents (a tactic not unfamiliar to Washington politicians). Iran and North Korea are troublemakers that are dangerous but deterrable. They know that they would risk putting U.S. nuclear missiles on hair-trigger alert if they fully activated a nuclear capability. The regimes in Tehran and Pyongyang are governments that run countries, and they have everything to lose if they attack the United States and its allies and invite devastating retaliation. As for the serious problem of Iran's supplying arms to terrorists in Lebanon and elsewhere, even hawkish U.S. experts do not advocate obliterating Tehran to stop such activity.

Terrorists willing to commit suicide are another proposition entirely. They are not at all likely to be deterred. They can destroy ports and trade towers with conventional means and could inflict untold damage if they acquired nuclear material for a so-called dirty bomb. And they can do so irrespective of the outcomes of the U.S. land wars in Afghanistan and Iraq. In the absence of a magic policy bullet to vanquish terrorists, the most prudent and effective antiterrorist strategy is a varied formula: improving police and intelligence operations at home and abroad, hunting terrorists in rogue states with air and missile strikes and commando raids, helping friendly states battle terrorists, and greatly upgrading homeland security. Future attacks on the United States are almost certain, and immediate preparations are essential to bolster the United States' ability to respond and recover.

Truman and Eisenhower did not have to contend with these threats in their modern forms. In their time, rogues and terrorists could largely be controlled by Moscow and Beijing. But it is fair to say that Truman and Eisenhower would have sidestepped major land wars and opted instead for containment, deterrence, and aid. Truman did not intervene with U.S. troops in Greece and Turkey to implement his new containment doctrine; he gave them military and economic aid and strong, but never open-ended, rhetorical promises.

Truman accepted the Korean War for unique and justifiable reasons. North Korea blatantly attacked South Korea across a generally accepted international border, and Truman reckoned that a failure to respond with force would invite Soviet and Chinese attacks elsewhere. But he kept the war limited to the peninsula, and once in power, Eisenhower stopped it almost immediately.

Truman and Eisenhower most likely would have responded to 9/11 by allying with Afghan neighbors to contain the Taliban, deterring the Taliban by threatening to punish them if they provided safe haven for al Qaeda, dividing the Taliban with diplomatic offers, encouraging the formation of a new government in Kabul, and bolstering this new government and tribal leaders with military and economic aid, backed by training for friendly forces.

Today, the United States continues to be the world's power balancer of choice. It is the only regional balancer against China in Asia, Russia in eastern Europe, and Iran in the Middle East. Although Americans rarely think about this role and foreign leaders often deny it for internal political reasons, the fact is that Americans and non-Americans alike require these services. Even Russian leaders today look to Washington to check China. And Chinese leaders surely realize that they need the U.S. Navy and Air Force to guard the world's sea and trading lanes. Washington should not be embarrassed to remind others of the costs and risks of the United States' security role when it comes to economic transactions. That applies, for example, to Afghan and Iraqi decisions about contracts for their natural resources, and to Beijing on many counts. U.S. forces maintain a stable world order that decidedly benefits China's economic growth, and to date, Beijing has been getting a free ride.

A NEW APPROACH

In this environment, the first-tier foreign policy goals of the United States should be a strong economy and the ability to deploy effective counters to threats at the lowest possible cost. Second-tier goals, which are always more controversial, include retaining the military power to remain the world's power balancer, promoting freer trade, maintaining technological advantages (including cyberwarfare capabilities), reducing risks from various environmental and health challenges, developing alternative energy supplies, and advancing U.S. values such as democracy and human rights. Wherever possible, second-tier goals should reinforce first-tier ones: for example, it makes sense to err on the side of freer trade to help boost the economy and to invest in greater energy independence to reduce dependence on the tumultuous Middle East. But no overall approach should dictate how to pursue these goals in each and every situation. Specific applications depend on, among other things, the culture and politics of the target countries. An overarching vision helps leaders consider how to use their power to achieve their goals. This is what gives policy direction, purpose, and thrust -- and this is what is often missing from U.S. policy.

The organizing principle of U.S. foreign policy should be to use power to solve common problems. The good old days of being able to command others by making military or economic threats are largely gone. Even the weakest nations can resist the strongest ones or drive up the costs for submission. Now, U.S. power derives mainly from others' knowing that they cannot solve their problems without the United States and that they will have to heed U.S. interests to achieve common goals. Power by services rendered has largely replaced power by command.

No matter the decline in U.S. power, most nations do not doubt that the United States is the indispensable leader in solving major international problems. This problem-solving capacity creates opportunities for U.S. leadership in everything from trade talks to military-conflict resolution to international agreements on global warming. Only Washington can help the nations bordering the South China Sea forge a formula for sharing the region's resources. Only Washington has a chance of pushing the Israelis and the Palestinians toward peace. Only Washington can bargain to increase the low value of a Chinese currency exchange rate that disadvantages almost every nation's trade with China. But it is clear to Americans and non-Americans alike that Washington lacks the power to solve or manage difficult problems alone; the indispensable leader must work with indispensable partners.

To attract the necessary partners, Washington must do the very thing that habitually afflicts U.S. leaders with political hives: compromise. This does not mean multilateralism for its own sake, nor does it mean abandoning vital national interests. The Obama administration has been criticized for softening UN economic sanctions against Iran in order to please China and Russia. Had the United States not compromised, however, it would have faced vetoes and enacted no new sanctions at all. U.S. presidents are often in a strong position to bargain while preserving essential U.S. interests, but they have to do a better job of selling such unavoidable compromises to the U.S. public.

U.S. policymakers must also be patient. The weakest of nations today can resist and delay. Pressing prematurely for decisions -- an unfortunate hallmark of U.S. style -- results in failure, the prime enemy of power. Success breeds power, and failure breeds weakness. Even when various domestic constituencies shout for quick action, Washington's leaders must learn to buy time in order to allow for U.S. power -- and the power of U.S.-led coalitions -- to take effect abroad. Patience is especially valuable in the economic arena, where there are far more players than in the military and diplomatic realms. To corral all these players takes time. Military power can work quickly, like a storm; economic power grabs slowly, like the tide. It needs time to erode the shoreline, but it surely does nibble away.

To be sure, U.S. presidents need to preserve the United States' core role as the world's military and diplomatic balancer -- for its own sake and because it strengthens U.S. interests in economic transactions. But economics has to be the main driver for current policy, as nations calculate power more in terms of GDP than military might. U.S. GDP will be the lure and the whip in the international affairs of the twenty-first century. U.S. interests abroad cannot be adequately protected or advanced without an economic reawakening at home.

U.S. leaders forever swear their allegiance to making the tough choices to restore the U.S. economy. But they never deliver. Equally often, they appear to grasp the need for a new foreign policy for the age of economic power. But that, too, they fail to deliver. President Barack Obama, in particular, has often struck just the right themes, only to let them fizzle in the din. In the meantime, Americans of nearly every political stripe are waiting and wondering whether their leaders are prepared to let the nation that saved the world in the twentieth century sink into history in the twenty-first.

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