Reconnecting to the World

Reconnecting to the World

The US must make full employment and ample demand the guiding principles of its international economic policy.


For the sake of party unity, many Democrats last year put aside their differences with John Kerry’s foreign policy positions, in particular his tortured support for the war in Iraq. Situating the party as close to the Bush agenda as possible without actually embracing it, it was argued, was a reasonable price to pay for taking back the White House. The gambit–of being long on national security and the “war on terror” and short on the economy and jobs–failed, however, to persuade working-class and suburban voters in places like Ohio and Missouri, reinforcing the public view that the Democrats have no mind of their own on issues of great national and international importance.

Unchastened, the neoliberal wing of the party wants the Democrats to repeat this gambit by toughening their rhetoric and committing yet more resources to the fight against what they describe as Islamic jihadism. In a New Republic essay late last year, Peter Beinart called on Democrats to rediscover their “fighting faith” and to commit themselves to a new generational struggle against “Islamic fascism.” More recently, Blueprint magazine, the house organ of the Democratic Leadership Council, published a statement on national security, signed by leading Democrats, urging the party to “make winning the war against Islamic jihadism the party’s first priority.” The group’s agenda–prosecuting the global “war on terror,” democratizing the Middle East and increasing the military’s ground forces–is echoed by likely Democratic presidential candidates, including Senators Joe Biden and Hillary Clinton.

These exhortations are particularly troubling because they come at a time when the Administration itself is being forced to rethink significant parts of its post-9/11 foreign policy and just when much of the nation has reopened its mind to a larger set of international concerns. Rather than seizing the moment to point us in a more constructive direction, much of the Democratic leadership is reinforcing a foreign policy agenda that has divided us from the world, inserted us more deeply into an Islamic civil war and drained us politically and economically, all the while distracting us from many of the real challenges to our security and well-being. The party–indeed, the nation–deserves a better alternative.

The Neoliberal Narrative

If the muscular neoliberal narrative sounds familiar, it is because it is modeled on an earlier triumphant struggle–the one waged against the Soviet Union. As seen in these terms, the world is now threatened by Islamic jihadism, whose determined proponents threaten to overrun the entire Muslim region and sow terror in the United States. Islamic jihadism, we are told, is first and foremost a product of the lack of freedom in much of the Islamic world. Thus the United States must commit itself not just to a global “war on terror” but to a new mission to democratize and liberalize the greater Middle East. This mission, we are informed, must take priority over other urgent public challenges. Sound market economics will take care of much of the rest.

After reading the statement published in Blueprint, one might reasonably conclude that car bombs are going off daily in Washington, New York and Los Angeles and that governments across the Middle East are in danger of falling to jihadist insurgents. But John Kerry, for all his other failings as a presidential candidate, was correct when he intimated to a New York Times reporter that while it may not be possible to eliminate terrorism entirely, it could be reduced to a nuisance. Indeed, the experience of other countries, many of them more vulnerable to terrorist attack, would support that view.

At worst, Islamic jihadism is a regional problem–in Europe, the Middle East and parts of Africa and Southeast Asia. But as Gilles Kepel and other experts on Islamism have argued, even in the case of the Middle East, bin Laden-inspired groups have been remarkably unsuccessful in shaking any government (except for Afghanistan in the 1990s) or in galvanizing the Muslim masses into action. And they would have been even less successful had it not been for counterproductive American actions, especially the war in Iraq. It is not a coincidence that the governments that feel most vulnerable to Islamic jihadism are those that have had a close association with the United States, or on whose soil the United States has left the heaviest footprint.

Even in the region, Islamic jihadism may not be the most serious problem today. That worry goes to the growing sectarian conflict between the Sunni and Shiite communities that the Iraq War has helped provoke. The Sunni-Shiite divide runs directly through the region’s oil-producing belt, and a Sunni-Shiite-Kurdish war in Iraq could draw in all the area’s major powers, including Egypt, Jordan and Saudi Arabia. This, more than religious extremists, occupies the minds of many people in these three countries as well as in Turkey, Syria and Iran.

But even assuming that Islamic jihadism is a regional threat, this does not mean that a muscular American response would be the most appropriate one. Rather, if Washington were serious about damping down Islamic jihadism it would reduce America’s heavy footprint in the region, not increase it; make a more serious attempt to address the legitimate grievances that arouse the passions of many in the Muslim world, especially Israel’s occupation of the West Bank, not try to fudge them over; and internationalize American policy, not make it more difficult for other leading nations to be engaged. It would also help create the conditions for economic growth and development, not put new obstacles in the way by arousing more religious tensions and divisions.

The region, of course, does need democratic and economic reform, and Arabs are frustrated by Washington’s support for authoritarian governments. But this does not mean that the lack of democracy is the principal cause–or that an American push for democratization is the principal cure–of terrorism and Islamic jihadism. In an exhaustive study, political scientist Robert Pape has concluded–correctly, in my view–that occupation is the single biggest cause of suicidal terrorism worldwide. And as Afshin Molavi of the New America Foundation has documented, what the people of the region want most is jobs and economic opportunity–understandably so, since unemployment runs as high as 25 percent in many Arab countries and even higher among the two-thirds of the population under 35.

Absent further heavy-handed American intervention, there is good reason to believe that bin Ladenism will eventually burn itself out, just as Western radical movements did in the 1970s and as the Iranian revolution did in the 1980s. Given the hunger for jobs and economic opportunity, bin Ladenism will eventually be seen for what it is–a futile attempt to deal with the modern world. Fascism and Communism were so dangerous because they could actually deliver the goods of modernization and jobs–at least for a period of time. This suggests the need for a prudent counterterrorist strategy combined with patient multilateral encouragement of political and economic reform aimed at building liberal state institutions, protecting human rights and creating jobs. Encouraging elections is desirable too, but only if we are willing to live with the results–which many neoliberals may not be prepared to do, given their intense dislike for Hezbollah and Hamas, two groups that are most likely to benefit from elections in Lebanon and Palestine, respectively.

The biggest problem with the neoliberal agenda is not just that it may be wrong but that it may be dangerously so. Breaking apart old orders always unleashes forces that we do not understand and cannot control. The notion that we can dial up just the right amount and just the right brand of democracy is naïve at best. It is the same mentality that has helped unleash the current forces of chaos in Iraq. And if Iraq is any guide, the neoliberal project would put the United States in the middle of the chaos and conflict that is likely to result, without a strategy for knowing how to control what it has set in motion. It is understandable that the major European governments want little or nothing to do with this venture, and that the rising powers of East Asia want to keep Washington’s “war on terror” as far away from them as possible while they concentrate on growing rich and strong.

Without any real allies or any reasonable chance of success, the United States would dramatically increase its military costs with an extended US crusade. But there is no reason to believe that additional ground forces, as some leading Democrats propose, would be any more effective than the ones already in Iraq, or for that matter any less destabilizing than the ones we had to pull out of Saudi Arabia just a few years ago or out of Lebanon in 1984.

In the 1920s Britain too got caught up–and bogged down–in imperial adventures in the Middle East, weakening itself and ignoring rumblings in Europe and Asia and worrying problems in a globalized economy. Similarly, the neoliberal agenda today would distract us from much more fundamental concerns, whether they be our own economic weaknesses or the challenges posed by the further integration of China and India into the world economy. It naïvely assumes that the American people will be content to finance an even larger Iraq War while they lose jobs to China and India. And it assumes that foreigners will continue to lend us enormous sums even if we remain mired in a Middle East war running up billions of dollars in debts.

Crowding Out Liberalism at Home

Eight months after American forces entered Iraq, New York Times columnist Thomas Friedman urged liberals to get on board what he called “the most important liberal, revolutionary U.S. democracy-building project since the Marshall plan.” In exhorting liberals to support occupation and nation-building in Iraq, Friedman perhaps unwittingly revealed the emptiness of the neoliberal hawk worldview: Liberalism from this point forward would be defined not by new programs to strengthen America at home but by noble activism abroad. The neoliberal agenda, in fact, has stood the traditional relationship between foreign policy and domestic society on its head. Traditionally, the overarching purpose of American foreign policy has been to shape a world order favorable to the American democratic way of life. But now our foreign policy ambitions are to define our domestic society, not vice versa.

Thus in the view of many neoliberals, it is perfectly reasonable to spend more than $200 billion and to send young men and women to die in Iraq but unthinkable for budgetary reasons to commit even a smaller sum to rural or urban redevelopment at home. In foreign policy, neoliberals are guided by a triumphalist can-do spirit; on domestic policy they display an uncharacteristic modesty: In their view, it is possible for the United States to re-engineer centuries of political culture in the Middle East and navigate the difficult shoals of Shiite, Sunni and Kurdish political currents in Iraq but not at all feasible to change the gang culture in East LA or to end poverty in America.

This same set of misplaced priorities is also evident in the area of international economic policy. In the 1990s the Clinton Administration embarked on a revolutionary agenda to liberalize the world’s financial and trading system, an effort that continued until the world financial crisis of 1997-98. As seen by the Clintonites, it was thinkable to change decades of economic practice in East Asia in a few short years, but not at all thinkable to design economic policies that would insure rising wages and economic security in both developed and emerging economies. Globalization, we were told, was a natural and immutable force, and domestic society must bend to the demands of globalization, not vice versa.

Put together, this mix of neoliberal activism abroad and inaction at home has created a very unhealthy Democratic Party agenda, offering rank-and-file Democrats fantasies about American greatness and nobility while forcing them to accept ever more economic insecurity and lower wages. But what if middle-class prosperity–jobs, rising wages, economic security–is intimately connected to global stability, as Franklin Roosevelt and John Maynard Keynes believed? Then what happens to the great liberal project globally? It gets overrun by rising disaffection at home and greater extremism abroad–which is exactly what is beginning to occur today.

The Twenty-Year Crisis

In his New Republic essay, Peter Beinart argues that the Democratic Party faces a choice similar to the one it made in 1947-48, when Harry Truman and other party leaders took a tough and uncompromising posture toward Soviet Communism. But we can learn more from the twenty-year crisis from 1919 to 1939, whose conditions bear an eerie resemblance to the challenges today. Then as now, the world’s dominant power had been weakened by war and imperial adventures in Iraq and by the erosion of the competitive base of its economy, and as a result was becoming too weak to stabilize the system. Then as now, there were rising powers that could not be easily accommodated in the world economy and the international order. Then as now, several decades of globalization had created a world economy of finance and trade that had outstripped the ability of national economies to effectively manage it, while the rapid expansion of new producers had created excess capacity and inadequate consumption, which put downward pressure on profit margins and led to frequent financial manias and crises. Then as now, widespread unemployment, together with feelings of humiliation at the hands of one’s perceived enemies, created a fertile ground for radical utopian ideologies–in that period in Germany, today in much of the Arab world. Then as now, a high-sounded idealism became the substitute for wise statecraft and cooperation.

Today we have the benefit of the lessons that Roosevelt, Keynes and others drew from this experience. We also have the legacy of many of the policies and institutions they eventually created to manage a world of multiple great powers and a globalizing world economy (even if those institutions and policies are badly in need of reform and updating). For ideological reasons, the Republicans under George W. Bush have turned their back on these lessons and institutions. But so has the neoliberal wing of the Democratic Party. Yet these lessons have far more relevance to the problems of today than does a new crusade, and far more to offer as a guide to a progressive and internationalist foreign policy. What are those lessons?

First, an international system with multiple powers cannot rest on the power of one dominant power alone. The world is too big, too complex, too diverse and too disorderly. Roosevelt therefore favored a community of power–a handful of great powers that would together assume the burdens of order-keeping and managing the world economy.

Second, such a community must include as many powers as possible without paralyzing the system, even if they do not fully share America’s liberal democratic credentials. The last time the world deprived two major industrial countries, Germany and Japan, of what they considered their rightful place in the sun, the result was World War II. Today, the United States has to help find a place not only for China and India but also for other emerging powers, including regional powers like Iran.

Third, a multipolar system cannot depend on the good intentions of the great powers alone. It must rest on a broader legitimacy than power. Roosevelt and his advisers therefore sought to create international institutions, like the United Nations and the World Bank, that would help insure cooperation and bestow legitimacy on the leading powers. Multipolarity needed to be accompanied by multilateralism or a form of international governance based on the rule of law.

Fourth, peace and international stability depend as much on economic prosperity as on collective security. Collective security without collective economic cooperation is virtually impossible to maintain. Moreover, economic development has to go hand in hand with democratization. In postwar Europe, for example, US officials developed an approach that included economic reconstruction (the Marshall Plan), collective security (NATO) and the institutionalization of democratic politics.

Finally, the world economy has to be managed and it has to be based on principles of ample demand, full employment and a stable international financial system. The great conclusion of the postwar world was that international peace and prosperity depended upon making the world economy safe for the social welfare state and full employment, whether it was American-style Keynesianism or European-style social democracy.

The lessons that Roosevelt and other progressives drew from the twenty-year crisis suggests a role for the United States much different from the one being pursued by the Bush Administration and proposed by the neoliberals: less one of warrior and preacher/proselytizer and more one of architect and builder, less one of imperial cop and more one of community leader or board chairperson.

A Neo-Progressive Strategy

In the early days of the post-cold war world, advisers to President Clinton spoke of being present at the creation, much as Acheson, Marshall and the other architects of the post-World War II order had been. But unlike Acheson and Marshall, they proved better at breaking down barriers than at creating new forms of governance; at unleashing the forces of global capitalism than at creating new social contracts needed to tame it; at asserting American power in old alliances than at building a more sustainable community of power; and at talking about democratization than at helping countries achieve it. The result was not a new American century but a weakened international system.

The Bush Administration that followed has destroyed much of what remained of that system while alienating a considerable part of the world in the process. As a result, the greatest threat to the security and well-being of the American people today stems from the further breakdown of that system and the absence of anything to take its place. The rise of religious extremism and terrorist networks in the Middle East is just one product of this breakdown. The economic insecurity of working people in much of the Western world is another. So too is the disorder and failed governance that afflict parts of the developing world and that threaten to spill over into the daily lives of Americans through the spread of pandemics and criminal networks and an increase in illegal immigration. The prospect of new nuclear-weapons states and the economic rise of China and India pose yet other challenges to the international order.

The overarching goal of a progressive foreign policy therefore must be to reconnect the United States to the world by working with others to build a more durable international system. The first element of such a policy must be to recognize that the world has outgrown American power, and that the maintenance of international peace and stability must be a shared goal and burden, not an American “right” or prerogative. If anything, the cost of the Iraq War and America’s mounting international debt should put an end, once and for all, to the illusion that American power can sustain a unipolar world and that we can afford both our unipolar aspirations and a decent liberal society at home. We must therefore bring America’s international pretensions back into line with our domestic needs and priorities. That means we should welcome and indeed encourage a multipolar world as the best way to share the burden of international order-keeping.

The principal cold war-era institutions of collective security–NATO, the Organization for Security and Cooperation in Europe, the US-Japan Security Treaty–have limited utility in dealing with the international security problems of the early twenty-first century. And the UN Security Council, although necessary for the authorization of military force and for giving legitimacy to nation-building efforts, is often too unwieldy to deal with the security problems associated with the management of regional threats. Our goal, therefore, should be to develop regional concerts of power for preventing regional arms races and for managing potentially dangerous conflicts. The European Union, Japan, Russia, China and India must by necessity be our main partners in this effort, but we must harness the efforts of smaller nations as well.

The most pressing challenges in this regard relate to the Middle East and to the suspected nuclear ambitions of Iran and North Korea, and thus the need for new security arrangements in the Persian Gulf and East Asia. Ironically, in the cases of Iran and North Korea, the Bush Administration has pointed the way by blessing the EU’s efforts to negotiate with Iran and by relying on the six-power framework to deal with North Korea. What has been missing in each case has been active American engagement and the kind of security guarantees needed to make Iran and North Korea feel more secure and to give them a greater stake in a larger regional community.

Understandably, there are reservations about a policy of engagement with Iran and North Korea in that it would require us to overlook some unpleasant features of both regimes. The way out of this dilemma is to think of engagement as part of a larger multilateral process of establishing a new security order involving great-power cooperation in each region. In East Asia the eventual reunification of Korea must be at the core of a regional security order that further cements cooperation and forecloses new geopolitical rivalries among China, South Korea, Japan and Russia. And in the Persian Gulf the peaceful evolution of Iran is central to a new security order for containing the conflict in Iraq and for developing the oil and gas resources of the region.

With regard to the Middle East in general, we must extract ourselves from what could escalate into what many Arabs see as a civilizational war with the Islamic world. This, however, does not mean disengaging, but rather repositioning the United States to be less of an overbearing dominant power. Our strategy toward Islamic jihadism ought to consist of lowering America’s profile in the region and patiently containing bin Ladenism as it slowly loses its allure by being denied the foreign imperial enemy it needs in order to succeed. And the best way to lower our profile, without sacrificing any legitimate American interests, is to internationalize as much as possible US policy toward the Middle East–to reduce America’s dominant, in-your-face presence in the region by withdrawing forces from Iraq and by sharing responsibility with the three other members of the “Quartet,” the EU, Russia and the UN.

We should encourage the EU to take more responsibility for promoting democratization and economic development in the region around the European Rim, from the Maghreb to the Levant. We should also recommit ourselves to the Quartet and through it support an international conference for a comprehensive settlement of the Israeli-Arab conflict and the establishment of a Palestinian state. By delaying discussion of the final status of such a state, we are only encouraging the most radical elements in the West Bank, Gaza and the region.

The establishment of regional security concerts must be accompanied by other great-power efforts to manage conflicts and reduce security risks. Chief among these must be a stronger effort to put all fissionable materials under international control, strengthen international safeguards against biological warfare and create a greater UN capacity for state-building. Together with America’s traditional role as the guarantor of the world’s sea lanes, these would constitute the principal security pillar of American foreign policy.

As the progressives who lived through the 1919-39 crisis understood, collective security is difficult to maintain without collective economic cooperation aimed at expanding middle-class prosperity. And in many respects, the foundations of collective economic management are even weaker than those for collective security. So it is here that the United States must put its greatest emphasis in the decade ahead. The lack of middle-class jobs and economic dignity is what links the growing disquiet in Ohio to the backlash against Turkish immigrants in Europe to the rise of religious radicalism in the Middle East to the appeal of Hugo Chávez in Latin America–not to mention the threat of rising nationalism in China, should economic growth and job creation falter there. That is why we have to put jobs and prosperity at the center of American foreign policy.

The problem is that we are building a world economy that is too small, too risky and too dependent on American consumption to accommodate both the aspiring middle classes of the developing world and the existing middle classes of the developed world. We are doing so because we are relying on a nineteenth-century economic philosophy that ignores the lessons of the twenty-year crisis. As in the decades before the Great Depression, rising productivity gains made possible by the spread of industrialization and technology and the opening up of new production centers and labor markets have created a glut of capacity, savings and labor. The entry of China and India into the global economy has had the effect of more than doubling the world’s potential labor force. This has put downward pressure on wages in both the developed and developing worlds. This in turn has caused a fall in global aggregate demand in relation to global supply, creating a classic 1930s-style Keynesian problem relieved only by America’s debt-led consumption, which is unsustainable [see William Greider, “Debtor Nation,” May 10, 2004, and “Elite Protectionists,” April 11].

The good news is that these developments have set the stage for a new golden age of rising prosperity–but only if we shift our economic thinking from the neoliberal, export-oriented nostrums of the 1980s and ’90s to the Keynesian ideas of the 1940s and ’50s. Indeed, the solution to our economic problems as well as our foreign policy dilemma is to translate those productivity gains into rising wages and living standards in the newly industrialized and developing worlds–so that working men and women there can consume more of what they produce and so that the world economy can grow in a more balanced way.

For this reason, we must make full employment and ample demand the guiding principle of international economic policy, much as Roosevelt’s policies did in the 1940s. We must become the champion of an international labor organization and a world labor movement that supports the establishment of unions in low-wage economies and fights Victorian-era working conditions in the world’s factories. We must support public investment projects funded by international financial institutions to soak up excess labor and to give the unemployed in places like Egypt and Morocco a sense of economic opportunity. We need to put our weight behind the equivalent of New Deal programs like the TVA and the Civilian Conservation Corps and expand the efforts of specialized UN agencies like the World Health Organization to bring basic healthcare, education, housing and clean energy within the reach of billions of people and to relieve poverty in Africa and South Asia. We should also reorient the missions of the IMF and World Bank to support full employment and channel excess savings to public and social investment projects in the developing world. In short, we need to create institutions at the global level to do what the New Deal did for our national economy in the last century.

Our goal should be a New International Deal to build a global middle class and to eliminate global poverty. Rather than encourage emerging economies to develop through the export of manufactured goods and their component parts, we should champion what might be called middle-class-oriented development aimed at increasing domestic consumption–helping emerging economies to grow by expanding home ownership, investing in public infrastructure and creating more small and medium-size businesses, much as we did in the last century. This kind of middle-class development would have the beneficial effect of facilitating democratic reform in emerging economies while relieving the United States of the burden of serving as the locomotive of the world economy.

Competing Visions

Dedicating our foreign policy to a rapid rise of a global middle class and to a new international “community of power” would do far more for our security and future prosperity than a prolonged, openly declared war against Islamic jihadism. It would also help make us relevant again to the lives of millions of people–from Latin America to Africa to the Middle East to the Pacific–in a way that an agenda of fighting Islamic jihadism does not. That, together with a renewed respect for the international rule of law and a commitment to act as a good neighbor in fighting poverty and protecting the environment, would go a long way toward restoring America’s standing in the world–not as a unipolar power but as a constructive leader of a diverse but increasingly interconnected world.

In the end, it comes down to a question of vision as well as of national interest. Many neoliberal Democrats would like the United States to be the second coming of imperial Britain, doing what Britain could not do in the 1920s and ’30s. But as we are learning in Iraq, and as we did in Vietnam, the American people have no appetite for long, contested occupations of foreign lands. Nor do they have an appetite for a long, unending religious conflict in the Middle East. What they long for are not misguided heroic crusades but the respect of other nations and better lives for themselves and the many other people who share this planet.

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