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American Economic Policy and National Security.

The Council on Foreign Relations is a long way from its heyday 50 years ago, when Washington enlisted its help in planning a post-World War II global political and economic order. Still, the New York-based issues forum and research institute remains a bell-wether of mainstream foreign policy thinking. These two short studies are only the latest indications that conventional wisdom is changing in those critical areas where domestic economic policy, international economic policy, and national security intersect.

Since well before Pearl Harbor, three mutually reinforcing factors have shaped mainstream American foreign policy: the assumption of U.S. global military and economic predominance and the ideologies of internationalism and laissez-faire economics. So long have these factors been part of the policy landscape, so well have they conformed with America's self-image as history's darling, that few see them as even noteworthy, much less controversial. Consequently, the strategies that they have produced tend to be seen as inevitabilities.

For roughly two decades after V-J Day, the reality of U.S. global predominance enabled Washington and the policy establishment epitomized by the council to pursue these strategies. And it allowed those in the free-world camp to assume away traditional, defining features of world politics such as conflicting national security interests and the quest for relative economic gain.

When this predominance began to pass, in the 1970s and 1980s, America's policy elites clung fervently to their beliefs. Their indifference to the nation's relative decline stemmed largely from their socioeconomic position. Their jobs were not threatened by foreign competition. Their children or spouses were not drafted. Indeed, as Labor Secretary Robert Reich and many others have observed, the policy elite and the rest of the upper-income bracket profited most from laissez-faire internationalist economic policies.

In the early 1990s, what remained of the popular consensus behind internationalism was further undermined by the confluence of several trends: The Soviet military threat ended, real incomes of many continued to decline, more high-wage jobs vanished, and economic growth rates slowed ever more dramatically. Consequently, government at all levels became hard pressed to provide necessary services. When George Bush and the rest of the internationalist establishment could respond with only more of the same plus a narrowly, almost casually, conceived free trade agreement with Mexico and Canada, the American people finally reacted. Bill Clinton's election and the 19 percent showing by H. Ross Perot signaled the triumph of economic nationalism.

Although its advocates often disagree on specifics and sometimes promote them halfheartedly, the essence of economic nationalism is clear: The best guarantor of U.S. security and prosperity in an imperfect world is not to perfect this world, but to consolidate America's own strength. Thus, emphasis is placed on maintaining U.S. defenses, reviving the economy, and restoring the country's economic and social health. Yet, however commonsensical these positions seem, they clash fundamentally with the internationalist/laissez-faire approach to U.S. policy.

Squaring the circle

The eclipse of political and economic internationalism has left establishment groups such as the council in quite a bind. They can resist the political tide and thus risk increasing irrelevance, they can cave in, or they can try to square the circle somehow. Defining National Security and especially American Economic Policy and National Security suggest the latter approach. But they also illustrate to internationalists and laissez-faire devotees the perils of being just a little bit nationalist.

Of the two authors, Joseph J. Romm has the less conventional pedigree for the council but has written the more conventional essay. A research scholar at the Rocky Mountain Institute in Colorado, Romm has produced some provocative work on U.S. energy and environmental policies and how they bear on national security, including a stunning late 1992 article in the council's journal Foreign Affairs that depicted a switch from fossil fuels as the key to strengthening U.S. economic competitiveness. In the process, he and his coauthor, Amory Lovins, endorsed most of the principal industrial policy proposals that have been made in recent years. Yet, Defining National Security is not only disappointingly descriptive but also curiously dated.

Although Romm presents numerous striking and important facts about problems ranging from declining real wages to U.S. dependence on foreign military technology (culled largely from already published sources), his message seems limited to noting the existence of nonmilitary threats to national security and urging that we think about them more seriously. Hardly cutting-edge stuff. In fact, several officials in the new administration got their jobs by making these points in print. One thing to be grateful for: Romm never lapses into what might be called interdependence thinking--the facile notion that the very existence of shared transnational problems will lead nations to stop quarreling and seek cooperative solutions.

Moran, who teaches international business at Georgetown University, grapples with the economic dimension of national security more energetically and creatively. But he ultimately raises more questions than he answers about the viability of internationalism and laissez-faire as guideposts for policymakers.

Perhaps the most encouraging aspect of American Economic Policy and National Security is its frank admission that America's relative economic performance has slipped badly in the past two decades, and that this deterioration matters. It's a refreshing change from the hollow triumphalist crowing that has emanated from so many establishmentarians since the Cold War and the Gulf War ended. But having agreed that Americans cannot simply rationalize our failings as the gratifying success of our friends and that we cannot compensate for a shortage of material wherewithal by spreading our pop culture around the world, Moran advances a two-stage solution--putting our fiscal house in order (with an emphasis on saving more while consuming less), and then pursuing a strategy of transnational integration. Unfortunately, the first is too preciously apolitical to be plausible, and the second flatly illogical if the world is indeed polarized enough to make national economic failure dangerous.

The trouble begins with the author's analysis of our economic ills. The fault, he argues, lies primarily in ourselves--a position that's fine as far as it goes but that begs all the important questions. Why, for example, does Moran think that the United States has become a consumption- rather than a savings- and investment-oriented society? Why does he think that our budgets are bloated with middle class welfare programs and wildly out of balance? Why--to take matters further than Moran--does he think that U.S. leaders consistently have made the wrong monetary policy choices, resorting so readily to inflation and currency depreciation to artificially buoy incomes and trade balances?

Moran's answer echoes establishment analyses of recent decades, notably Harvard University political scientist Samuel P. Huntington's musings about "the democratic distemper." In other words, it's largely the American people's fault and the fault of a user-friendly political system that panders to their selfishness and shortsightedness. But if Americans and their leaders really are greedier and less intelligent than their counterparts in Europe and Japan, then the situation really is hopeless--unless we think a man on a white horse will come along and ennoble us. A more quantifiable comparison of post-World War II America, Western Europe, and Japan yields a more convincing answer than Moran's. Until health care costs in the United States began to explode, the biggest budget-related difference among them--that is, the most important measurable distinction in their national priorities--was the long-time U.S. defense burden. But slashing the military budget would have ruled out internationalism's ambitious foreign policy agenda.

Just as important as the author's neglect of the politics of defense spending is the disconnect between his analysis of U.S. decline and the second part of his proposed solution--transnational integration. Although low-key in tone, American Economic Policy and National Security is filled with warnings about economic failure that make sense only in the context of a world characterized by cutthroat economic competition that can endanger not only a country's living standards and growth potential but its independence and ultimately its security. Why else would any country worry about losing critical industries to foreign competitors, especially when those competitors are democratic, peace-loving, and capitalistic just like us?

In addition, if we lived in a positive-sum world full of benign, friendly competitors, why would we worry that other countries are growing faster than we are and increasing their share of the world's wealth and wealth-creating capacity--as long as the whole global pie keeps growing? Why even measure our performance against that of others to begin with, as long as the United States keeps growing in absolute terms?

Conventional response

Moran acknowledges that a strategy of economic nationalism--he calls it "sophisticated neo-mercantilism"--would be a rational response to America's ills, although he tends to define this strategy in unnecessarily extreme terms. But his preferred response to lagging relative U.S. economic performance is to push transnational economic and technological integration even harder and further. The main pillars of this strategy are depressingly familiar: "progressive liberalization (of trade) with common rules for fairness"; general "indifference to foreign acquisitions" of key U.S. assets; and "hands off (or even encouragement) of transborder alliances" among "prime" corporate actors.

All rest on the assumption that humans already are or will readily become economic angels. But if such global consensus on economically appropriate behavior were possible, we would not need to codify it. And our species would not still be furiously trying to organize itself in national states or some semblance thereof. What is going to change the fundamental dynamic of world politics and economics from struggle to cooperation? More important, Moran's main justification for transnational integration boils down to internationalism's most shopworn cliche--the lessons of the 1930s. That is to say, if we don't make economic love, we'll surely make war. And not surprisingly, the key to peace is an America that continues to bear outsized burdens and take the long-term view until the rest of humanity comes to its senses.

In fact, Moran's recommendations bow so often to the realities of the international struggle for power and wealth and carve out so many exceptions to integration that the end result is a confusing mix of laissez-faire and intervention. He also supports an idea capable of securing the benefits of open markets as well as hardheaded nationalism. He would welcome foreign investors into the American economy but use strict performance standards (for example, requiring that certain levels of research, development, and manufacturing take place within the United States) to ensnare them in the U.S. industrial base. But carrying out this strategy effectively would require thinking about the structure of the U.S. economy and about the linkages between industries in ways that would be not only unprecedented, but incompatible with laissez-faire both domestically and internationally.

For reasons such as this, one finishes Moran's study wondering about the establishment's bottom line. Is it rationalizing its attachment to world political leadership, the dream of a cooperative world, and to the doctrinaire laissez-faire approach to domestic and international economics that dovetails with them so well? Or is it advancing American interests in the imperfect world we will surely live in for the foreseeable future? Despite his talk of recognizing the new importance of national security's economic dimension and bargaining harder for U.S. businesses and workers, it's an open question about President Clinton as well.
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Author:Tonelson, Alan
Publication:Issues in Science and Technology
Article Type:Book Review
Date:Jun 22, 1993
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