Not Just Another Recession
Why the Global Economy May Never Be the Same
Today’s world presents a seemingly endless array of challenges: a more powerful and assertive China, novel threats from cyberspace, a rising tide of refugees, resurgent xenophobia, persistent strands of violent extremism, climate change, and many more. But the more complex the global environment, the more Washington needs clear thinking about its vital interests and foreign policy priorities. Above all, a successful U.S. grand strategy must identify where the United States should be prepared to wage war, and for what purposes.
For all the talk of how U.S. foreign policy and the country’s place in the world will never be the same after the presidency of Donald Trump, the best strategic road map for the United States is a familiar one. Realism—the hard-nosed approach to foreign policy that guided the country throughout most of the twentieth century and drove its rise to great power—remains the best option. A quarter century ago, after the Cold War ended, foreign policy elites abandoned realism in favor of an unrealistic grand strategy—liberal hegemony—that has weakened the country and caused considerable harm at home and abroad. To get back on track, Washington should return to the realism and restraint that served it so well in the past.
If Washington rediscovered realism, the United States would seek to preserve the security and prosperity of the American people and to protect the core value of liberty in the United States. Policymakers would recognize the importance of military strength but also take into account the country’s favorable geographic position, and they would counsel restraint in the use of force. The United States would embrace a strategy of “offshore balancing” and abstain from crusades to remake the world in its image, concentrating instead on maintaining the balance of power in a few key regions. Where possible, Washington would encourage foreign powers to take on the primary burden for their own defense, and it would commit to defend only those areas where the United States has vital interests and where its power is still essential. Diplomacy would return to its rightful place, and Americans would promote their values abroad primarily by demonstrating democracy’s virtues at home.
In the eighteenth and nineteenth centuries, when the United States was weak, leaders from George Washington to William McKinley mostly avoided foreign entanglements and concentrated on building power domestically, expanding the country’s reach across North America and eventually expelling the European great powers from the Western Hemisphere. In the first half of the twentieth century, U.S. presidents such as Woodrow Wilson and Franklin Roosevelt used the country’s newfound strength to restore the balance of power in strategically critical regions outside the Western Hemisphere. But they let other great powers do most of the heavy lifting, and thus the United States emerged relatively unscathed—and stronger than ever—from the world wars that devastated Asia and Europe.
Letting other states shoulder the burden was not possible during the Cold War, so the United States stepped up and led the alliances that contained the Soviet Union. American leaders paid lip service to democracy promotion, human rights, and other idealistic concerns, but U.S. policy was realist at its core. Through the Bretton Woods system and its successors, the United States also helped foster a more open world economy, balancing economic growth against the need for financial stability, national autonomy, and domestic legitimacy. Put simply, for most of U.S. history, American leaders were acutely sensitive to the balance of power, passed the buck when they could, and took on difficult missions when necessary.
But when the Soviet Union collapsed and the United States found itself, as the former national security adviser Brent Scowcroft put it in 1998, “standing alone at the height of power . . . with the rarest opportunity to shape the world,” U.S. leaders rejected the realism that had worked well for decades and tried to remake global politics in accordance with American values. A new strategy—liberal hegemony—sought to spread democracy and open markets across the globe. That goal is the common thread linking President Bill Clinton’s policy of “engagement and enlargement,” President George W. Bush’s “freedom agenda,” and President Barack Obama’s embrace of the Arab revolts of 2010–11 and his declaration that “there is no right more fundamental than the ability to choose your leaders and determine your destiny.” Such thinking won broad support from both political parties, the federal bureaucracies that deal with international affairs, and most of the think tanks, lobbies, and media figures that constitute the foreign policy establishment.
At bottom, liberal hegemony is a highly revisionist strategy. Instead of working to maintain favorable balances of power in a few areas of vital interest, the United States sought to transform regimes all over the world and recruit new members into the economic and security institutions it dominated. The results were dismal: failed wars, financial crises, staggering inequality, frayed alliances, and emboldened adversaries.
When Clinton took office in 1993, the United States was on favorable terms with the world’s other major powers, including China and Russia. Democracy was spreading, Iraq was being disarmed, and Iran had no nuclear enrichment capacity. The Oslo Accords seemed to herald an end to the Israeli-Palestinian conflict, and Washington seemed well positioned to guide that process. The European Union was adding new members and moving toward a common currency, and the U.S. economy was performing well. Americans saw terrorism as a minor problem, and the U.S. military seemed unstoppable. The wind was at the country’s back. Life was good.
But those circumstances fueled a dangerous overconfidence among American elites. Convinced that the United States was “the indispensable nation,” as Secretary of State Madeleine Albright famously put it in 1998, they believed they had the right, the responsibility, and the wisdom to shape political arrangements in every corner of the world.
That vision turned out to be a hubristic fantasy. Repeated attempts to broker peace between the Israelis and the Palestinians all failed, and the two-state solution sought by three U.S. presidents is no longer a viable option. Al Qaeda attacked the U.S. homeland on September 11, 2001, and Washington responded by launching a global war on terrorism, including invasions of Afghanistan and Iraq. Those campaigns were costly failures and shattered the U.S. military’s aura of invincibility. Much of the Middle East is now embroiled in conflict, and violent extremists operate from Africa to Central Asia and beyond. Meanwhile, India, Pakistan, and North Korea tested and deployed nuclear weapons, and Iran become a latent nuclear weapons state. The collapse of the U.S. housing market in 2008 exposed widespread corruption in the country’s financial institutions and triggered the worst economic crisis since the Great Depression—a calamity from which the global economy has yet to fully recover.
In 2014, Russia seized Crimea, and it has interfered in a number of other countries since then—and its relations with the West are now worse than at any time since the Cold War. China’s power and ambitions have expanded, and cooperation between Beijing and Moscow has deepened. The eurozone crisis, the United Kingdom’s decision to withdraw from the EU, and energetic populist movements have raised doubts about the EU’s future. Democracy is in retreat worldwide; according to Freedom House, 2018 was the 13th consecutive year in which global freedom declined. Illiberal leaders govern in Hungary and Poland, and the Economist Intelligence Unit’s annual Democracy Index has downgraded the United States from a “full” to a “flawed” democracy.
The United States was not solely responsible for all these adverse developments, but it played a major role in most of them. And the taproot of many of these failures was Washington’s embrace of liberal hegemony. For starters, that strategy expanded U.S. security obligations without providing new resources with which to meet them. The policy of “dual containment,” aimed at Iran and Iraq, forced the United States to keep thousands of troops on the Arabian Peninsula, an additional burden that also helped convince Osama bin Laden to strike at the U.S. homeland. NATO expansion committed Washington to defend weak and vulnerable new members, even as France, Germany, and the United Kingdom let their military forces atrophy. Equally important, U.S. efforts to promote democracy, the open-ended expansion of NATO, and the extension of the alliance’s mission far beyond its original parameters poisoned relations with Russia. And fear of U.S.-led regime change encouraged several states to pursue a nuclear deterrent—in the case of North Korea, successfully. When the United States did manage to topple a foreign foe, as it did in Afghanistan, Iraq, and Libya, the results were not thriving new democracies but costly occupations, failed states, and hundreds of thousands of dead civilians. It was delusional for U.S. leaders to expect otherwise: creating a functional democracy is a difficult process under the best of circumstances, but trying to do it in fractured societies one barely understands is a fool’s errand.
Finally, globalization did not deliver as promised. Opening up markets to trade and investment brought great benefits to lower and middle classes in China, India, and other parts of the developing world. It also further magnified the already staggering wealth of the world’s richest one percent. But lower- and middle-class incomes in the United States and Europe remained flat, jobs in some sectors there fled abroad, and the global financial system became much more fragile.
This sorry record is why, in 2016, when Trump called U.S. foreign policy “a complete and total disaster” and blamed out-of-touch and unaccountable elites, many Americans nodded in agreement. They were not isolationists; they simply wanted their government to stop trying to run the world and pay more attention to problems at home. Trump’s predecessors seemed to have heard that message, at least when they were running for office. In 1992, Clinton’s mantra was “It’s the economy, stupid.” In 2000, Bush derided Clinton’s efforts at “nation building” and called for a foreign policy that was “strong but humble.” Obama pledged to end foreign wars and focus on “nation building at home.” These expressions of restraint were understandable, as surveys had repeatedly shown that a majority of Americans believed the country was playing the role of global policeman more than it should and doing more than its share to help others. According to the Pew Research Center, in 2013, 80 percent of Americans agreed that “we should not think so much in international terms but concentrate more on our own national problems and building up our strength and prosperity here at home,” and 83 percent wanted presidents to focus more on domestic issues than on foreign policy. Clinton, Bush, and Obama all understood what the American people wanted. But they failed to deliver it.
So has Trump. Although his Twitter feed and public statements often question familiar orthodoxies, the United States is still defending wealthy NATO allies, still fighting in Afghanistan, still chasing terrorists across Africa, still giving unconditional support to the same problematic Middle Eastern clients, and still hoping to topple a number of foreign regimes. Trump’s style as president is radically different from those of his predecessors, but the substance of his policies is surprisingly similar. The result is the worst of both worlds: Washington is still pursuing a misguided grand strategy, but now with an incompetent vulgarian in the White House.
Four presidents have now pursued a grand strategy built around the goal of American hegemony, and all four have fared poorly. As the political scientist John Mearsheimer and I have argued previously in these pages, it is time for the United States to return to its traditional approach of offshore balancing. This strategy begins by recognizing that the United States remains the most secure power in modern history. It has thousands of nuclear weapons and powerful conventional forces, and it faces no serious rivals in the Western Hemisphere. The Atlantic and Pacific Oceans still insulate the country from many threats, giving U.S. leaders enormous latitude in choosing where and when to fight.
In addition to working to maintain U.S. hegemony in the Western Hemisphere, American policymakers have long sought to prevent other great powers from imitating the United States by dominating their own regions. A peer competitor with no serious rivals nearby would be free to project power around the world—as Washington has for decades. From an American perspective, it is better if the major powers in Eurasia have to keep a wary eye on one another, making it harder for them to interfere near American shores. The United States intervened in the world wars to prevent Wilhelmine Germany, Nazi Germany, and imperial Japan from dominating Europe and Asia. This same principle inspired the Cold War strategy of containment, although in that case, the United States could not pass the buck and had to bear most of the costs itself.
Today, there is no potential regional hegemon in Europe, whose states should gradually take full responsibility for their own defense. The countries of the European Union are home to more than 500 million people and boast a combined annual GDP exceeding $17 trillion, whereas Russia—the main external threat to EU states—has a population of just 144 million and an annual GDP of only $1.6 trillion.
Moreover, NATO’s European members together annually spend more than three times what Russia does on defense. The idea that the EU (whose roster includes two nuclear-armed powers) lacks the wherewithal to defend itself against a neighbor whose economy is smaller than Italy’s is risible. NATO still has ardent defenders on both sides of the Atlantic, but they are living in the past. The alliance played an invaluable role in containing the Soviet Union and preventing the return of an aggressive, expansionist Germany. But the Soviet Union is long gone, and Germany is now a liberal democracy firmly committed to the status quo. NATO’s leaders have worked overtime to devise new missions since the Berlin Wall came down, but the alliance’s attempts at nation building in the Balkans, Afghanistan, and Libya have not gone well. Unless NATO’s European members decide to back a U.S.-led effort to balance against China (and it is not clear that they will or should), it is time for the United States to gradually disengage from NATO and turn European security over to the Europeans by beginning a coordinated withdrawal of U.S. military forces from Europe, allowing a European officer to serve as NATO’s supreme allied commander, and making it clear that the United States will no longer be Europe’s first line of defense. Washington should take these steps not with rancor or resentment but with a sense of accomplishment and a commitment to cooperate on issues on which American and European interests align, such as climate change, counterterrorism, and the management of the world economy.
Washington should also return to its traditional approach to the Middle East. To ensure access to the energy supplies on which the world economy depends, the United States has long sought to prevent any country from dominating the oil-rich Persian Gulf. But until the late 1960s, it did so by relying on the United Kingdom. After the British withdrew, Washington relied on regional clients, such as Iran, Israel, and Saudi Arabia. U.S. forces stayed offshore until January 1991, a few months after Saddam Hussein, the leader of Iraq, seized Kuwait. In response, the George H. W. Bush administration assembled a coalition of states that liberated Kuwait, decimated Iraq’s military, and restored balance to the region.
Today, Washington’s primary goal in the Middle East remains preventing any country from impeding the flow of oil to world markets. The region is now deeply divided along several dimensions, with no state in a position to dominate. Moreover, the oil-producing states depend on revenue from energy exports, which makes all of them eager to sell. Maintaining a regional balance of power should be relatively easy, therefore, especially once the United States ends its counterproductive efforts to remake local politics. U.S. forces in Iraq and Syria would be withdrawn, although the United States might still maintain intelligence-gathering facilities, prepositioned equipment, and basing arrangements in the region as a hedge against the need to return in the future. But as it did from 1945 to 1991, Washington would count on local powers to maintain a regional balance of power in accordance with their own interests.
As an offshore balancer, the United States would establish normal relations with all countries in the region, instead of having “special relationships” with a few states and profoundly hostile relations with others. No country in the Middle East is so virtuous or vital that it deserves unconditional U.S. support, and no country there is so heinous that it must be treated as a pariah. The United States should act as China, India, Japan, Russia, and the EU do, maintaining normal working relationships with all states in the region—including Iran. Among other things, this policy would encourage rival regional powers to compete for U.S. support, instead of taking it for granted. For the moment, Washington should also make it clear that it will reduce its support for local partners if they repeatedly act in ways that undermine U.S. interests or that run contrary to core U.S. values. Should any state threaten to dominate the region from within or without in the future, the United States would help the rest balance against it, calibrating its level of effort and local presence to the magnitude of the danger.
With its relationships with Europe and the Middle East right-sized and rationalized, an offshore-balancing United States could focus primarily on the country that is its only potential peer competitor and the world’s only other would-be regional hegemon: China. If China’s power continues to grow, it is likely to press its neighbors to distance themselves from Washington and accept China as the dominant power in the Asia-Pacific. Were China to become a regional hegemon in Asia, it would be better positioned to project power around the world and extend its influence into the Western Hemisphere. To counter this possibility, the United States should maintain and deepen its current security ties with Australia, Japan, the Philippines, and South Korea and continue to nurture its strategic partnerships with India, Singapore, and Vietnam. Once the United States is no longer subsidizing its wealthy European allies or squandering trillions of dollars on costly quagmires in the greater Middle East, it can more readily afford the military capabilities needed to balance China.
Maintaining an effective Asian coalition will not be easy, however. Washington’s Asian allies are separated from one another by water and vast distances, and they are reluctant to jeopardize their commercial ties with China. The relationship between Japan and South Korea has a troubled history that makes close cooperation difficult. Local powers will be tempted to let Washington do most of the work, and sophisticated U.S. leadership will be necessary to hold this coalition together and ensure that each member contributes its fair share. Trump’s missteps—abandoning the Trans-Pacific Partnership, starting trade disputes with Japan and South Korea, and indulging in an amateurish flirtation with North Korea—have not helped.
Defenders of the status quo will no doubt mischaracterize this course of action as a return to isolationism. That is nonsense. As an offshore balancer, the United States would be deeply engaged diplomatically, economically, and, in some areas, militarily. It would still possess the world’s mightiest armed forces, even if it spent somewhat less money on them. The United States would continue to work with other countries to address major global issues such as climate change, terrorism, and cyberthreats. But Washington would no longer assume primary responsibility for defending wealthy allies that can defend themselves, no longer subsidize client states whose actions undermine U.S. interests, and no longer try to spread democracy via regime change, covert action, or economic pressure.
Instead, Washington would use its strength primarily to uphold the balance of power in Asia—where a substantial U.S. presence is still needed—and would devote more time, attention, and resources to restoring the foundations of U.S. power at home. By setting an example that others would once again admire and seek to emulate, an offshore-balancing United States would also do a better job of promoting the political values that Americans espouse.
This approach would also involve less reliance on force and coercion and a renewed emphasis on diplomacy. Military power would remain central to U.S. national security, but its use would be as a last resort rather than a first impulse. It is worth remembering that some of Washington’s greatest foreign policy achievements—the Marshall Plan, the Bretton Woods system, the Egyptian-Israeli peace treaty, and the peaceful reunification of Germany—were diplomatic victories, not battlefield ones. In recent years, however, both Democratic and Republican administrations have tended to eschew genuine diplomacy and have relied instead on ultimatums and pressure. Convinced they hold all the high cards, too many U.S. officials have come to see even modest concessions to opponents as tantamount to surrender. So they have tried to dictate terms to others and have reached for sanctions or the sword when the target state has refused to comply. But even weak states are reluctant to submit to blackmail, and imposing one-sided agreements on others makes them more likely to cheat or renege as soon as they can. For diplomacy to work, both sides must get some of what they want.
Moreover, offshore balancing requires a sophisticated understanding of regional politics, which only knowledgeable diplomats and area specialists can provide. In particular, creating an effective coalition to check China’s ambitions in Asia will be as much a diplomatic task as a military mission, and success would depend on a deep bench of officials who are intimately familiar with the history, languages, cultures, and sensitivities of the region.
A return to offshore balancing should also be accompanied by a major effort to rebuild and professionalize the U.S. diplomatic corps. Ambassadorships should be reserved for qualified diplomats rather than VIPs or campaign donors, and the State Department must develop, refine, and update its diplomatic doctrine—the ways the United States can use noncoercive means of influence—much as the armed services continually refine the military doctrines that guide their conduct in war. The ranks of the Foreign Service should be significantly increased, and as their careers advance, career diplomats should receive the same opportunities for professional education that senior military officers currently enjoy.
Despite the disappointments of the past 25 years, the American foreign policy elite remains convinced that global leadership is their birthright and that Washington must continue trying to force other countries to conform to U.S. dictates. This perspective is an article of faith at almost every foreign policy think tank inside the Beltway and is repeatedly invoked in task-force reports, policy briefs, and op-eds. A similar groupthink pervades the U.S. media, where unrepentant neoconservatives and unchastened liberal internationalists monopolize the ranks of full-time pundits; proponents of realism, restraint, and nonintervention appear sporadically at best.
The result is that foreign policy debates are heavily skewed in favor of endless intervention. Moving back to a more realist grand strategy will require broadening the parameters of debate and challenging the entrenched interests that have promoted and defended a failed foreign policy.
The clubbiness of the foreign policy establishment has also produced a disturbing lack of accountability. Although the community contains many dedicated, imaginative, and honorable individuals, it is dominated by a highly networked caste of insiders who are reluctant to judge one another lest they be judged themselves. As a result, error-prone officials routinely fail upward and receive new opportunities to repeat past mistakes. Consider the officials responsible for (and the commentators who cheered on) the bungled Middle East peace process, the misguided expansion of NATO, the botched wars in Afghanistan and Iraq, the CIA’s torture of detainees in the war on terrorism, the National Security Agency’s warrantless surveillance of Americans, the disastrous NATO intervention in Libya, and the American machinations in Ukraine that gave Russia a pretext to seize Crimea. None of those officials or commentators has suffered significant professional penalties for his or her mistakes or malfeasance. Indeed, nearly all of them still enjoy prominent positions in government, think tanks, the media, or academia.
No one is infallible, of course, and a desire to hold people accountable could be taken too far. Policymakers often learn from past mistakes and become more effective over time. But when the same people keep making the same errors and neither recognize nor regret them, it is time to look for new people with better ideas.
Despite the stagnation within the foreign policy establishment, the prospects for a more realist, more restrained U.S. foreign policy are better today than they have been in many years. For all his flaws, Trump has made it easier to propose alternatives to liberal hegemony by expressing such disdain for the elite consensus. Younger Americans are more skeptical of their country’s imperial pretensions than are their elders, and some new members of Congress seem bent on clawing back some of the control over foreign policy that presidents have amassed over the past 70 years.
Furthermore, powerful structural forces are working against liberal hegemony and in favor of offshore balancing. China’s rise and the partial revival of Russian power are forcing the United States to pay closer attention to balance-of-power politics, especially in Asia. The intractable problems of the Middle East will make future presidents reluctant to squander more blood and treasure there—especially in chasing the siren song of democracy promotion. Pressure on the defense budget is unlikely to diminish, especially once the costs of climate change begin to bite, and because trillions of dollars’ worth of domestic needs cry out for attention.
For these reasons, the foreign policy elite will eventually rediscover the grand strategy that helped build and sustain American power over most of the nation’s history. The precise path remains uncertain, and it will probably take longer to get there than it should. But the destination is clear.