(What’s Left of) Our Economy: A Laughable Indictment of Trump’s World Bank Choice

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David Malpass, economic development, Financial Times, globalism, multilateralism, third world, Trump, World Bank, {What's Left of) Our Economy

I was going to post this morning on more implications of yesterday’s new monthly U.S. trade figures, but as so often happens, the Mainstream Media has just come out with an article whose mind-boggling cluelessness reveals such deep-seated biases that I had to switch gears. Special bonus – it didn’t even come from a mainstay of the establishmentarian U.S. foreign policy and globalization Blob. Instead, we have the Financial Times editorial board to thank.

What other conclusion can be reasonably drawn from the FT editorial slamming President Trump’s appointment of David Malpass to head the World Bank?

Not that Malpass has been God’s Gift to Economics or to the cause of third world economic development. But according to the FT, a big problem with Malpass is that he lacks the leadership experience as well as intellectual and often political heft of previous U.S. choices like – wait for it – Robert S. McNamara.

That’s right – the same Robert McNamara who deserves such blame for the American disaster in Vietnam. What’s next for the FT? Criticizing Mr. Trump for appointing a senior military adviser lacking the battlefield genius of George Armstrong Custer?

Almost as bad: What’s given the FT editorialists the idea that McNamara, or any of his pre-Malpass successors, was such a whiz at the Bank? Here’s an appraisal of McNamara’s tenure arguing that he unintentionally created “incentives for Bank staff and management to push money out the door, sometimes with relatively little regard for how it would be used—a practice that still bedevils the Bank’s work today.” And this was from an admirer.

A second major FT argument against Malpass looks more reasonable at first glance:

“His judgment even on economics, his supposed speciality, is wanting. Notoriously, as then chief economist at Bear Stearns, Mr Malpass was blithely confident about the strength of the US economy in 2007 — a year before the global financial crisis hit and his own employer went under.”

What the FT conveniently forgets, though, is that using this standard would rule out virtually every economist in the world as World Bank president.  

Considerably stronger is the FT‘s observation that “As early as 2011 [Malpass] suggested tightening monetary policy and driving up the dollar, a hard-money philosophy entirely at odds with the reality that the Fed had averted economic disaster.”

The problem with this school of thought is that, although the Federal Reserve’s flooding of the American economy with easy money may have been necessary to keep the nation (and world) afloat, it’s also arguably created a global addiction to super-cheap credit that’s kneecapped chances of restoring genuine long-run economic health.

As contended by no less an economic authority than Lawrence Summers (a former World Bank research chief), the result has been “secular stagnation” – the inability of the United States or other major countries to grow acceptably without inflating lending and spending bubbles that are doomed to burst disastrously.

As the editorial makes clear, the FT mainly objects to Malpass because he’s “deeply sceptical of multilateral institutions.” Which would be funny even if the FT itself didn’t describe the Bank as already “dysfunctional” – despite being led by McNamara and all his supposedly genius successors.

More fundamentally, all else equal, why should anyone lack skepticism about any means to an end? Worshiping multilateralism is like worshiping a hammer. Sometimes is the best tool to use; sometimes it’s not.

The FT reasonably argues that “With an increasing number of rival sources of development finance — not to mention private capital — the bank needs to think hard about where it can best add value.” The paper just as reasonably concludes that effecting change requires its president “to be a critical friend of multilateralism who recognises that its institutions need to be adapted to a changing world, not an instinctive ideological enemy.”

But given that these – and other – problems with the Bank have persisted for so long, it’s hard to imagine that a leader accepted by multilateral fetishists like the FT would generate the necessary push.

As a result, the Malpass nomination can just as reasonably be viewed as a Trump administration attempt to change the kind of losing game coddled for so long by diehard multilateralists like the FT editorial board. Such critics should exhibit a little more humility before writing him off as a sure failure. Not to mention minimal historical memory. 

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Our So-Called Foreign Policy: U.S. Cyber Strategy Still Seems Full of Holes

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arms control, asymmetrical war, China, cyber-war, deterrence, Iran, James Clapper, Joseph S. Nye, multilateralism, North Korea, nuclear weapons, Obama, Our So-Called Foreign Policy, Politico, Project Syndicate, Russia, treaties

Terrorism has understandably grabbed all the recent national security headlines lately, but two big articles this week have also valuably reminded us that major cyber threats still loom. Unfortunately, these pieces also (unwittingly) remind of all the reasons to worry that Washington still doesn’t have its arms around two of the biggest challenges facing the nation on the cyber front. The first is the asymmetry issue, which is a fancy way of saying that many of America’s current and likely cyber adversaries have much less to lose than the United States in a computer-war exchange. The second is the unlikelihood that the kinds of legalistic foreign policy approaches favored by much of the American establishment can meet this challenge.

Actually, the asymmetry issue has several cyber-related dimensions. One, widely noted (and especially by Chinese strategists), is that today’s civilian computer networks, whose development has long emphasized openness and information sharing, are vulnerable to attacks even from relatively low-tech countries. So for that reason alone, cyber-war can be a great geopolitical equalizer.

The second, however, is less widely noted. As I’ve written, the decision to launch a cyber attack against an adversary with significant cyber-war capabilities of its own rests on much more than a calculation of whether any assets the attacker values (its own cyber forces, its other military forces, its economy or broader society) can survive a retaliatory strike in meaningful form. This decision also hinges on more than how “meaningful” is defined for one or both parties to the conflict. It depends as well on a more fundamental, more political assessment regarding how much pain the two countries and societies can withstand.

Paradoxically, and especially relevant to Americans, the more advanced a country is, the less able it arguably is to deal satisfactorily with the disruptions stemming from a major cyber strike. And because the converse makes sense, too, it may not be decisive that the United States could inflict more damage in absolute terms in a cyber exchange on foes such as North Korea or Iran or Russia or even China than vice versa. The kinds of hardships stemming from the disabling of modern infrastructure could be much more tolerable for the peoples of these less developed, less prosperous countries than for Americans because much greater percentages of them rely so much less on these systems. Moreover, life without them is a much more recent memory – as are knowledge of and experience with coping.

That’s where, for all the information it contains (and keeping in mind that national cyber capabilities are closely guarded secrets), this detailed new Politico article on U.S. forces in this realm falls short. Even if America’s technological edge is as strong as portrayed, some of its adversaries might not be impressed enough to be deterred. One big possible policy implication: Asymmetry means that shoring up the nation’s cyber defenses, difficult as that is, is at least as important for ensuring cyber-security as creating matchless offenses. And as RealityChek readers know, U.S. intelligence chief James Clapper and other senior officials have said – for attribution – that these offenses actually aren’t so matchless. Another big implication – at least against China, trade and broader economic sanctions may be the most effective cyber counter-moves, since China’s dictators will struggle so to remain in power without the growing prosperity created largely by exporting to the United States.

One conclusion that shouldn’t be drawn from this cyber predicament is that a realistic way out is an international treaty or code of conduct banning or limiting cyber war. In this respect, it’s encouraging that Joseph S. Nye’s new essay for Project Syndicate is hardly a ringing endorsement of such legalisms and their effectiveness. But he does suggest that these measures can strengthen deterrence, and notes approvingly that

“major states have agreed that cyber war will be limited by the law of armed conflict, which requires discrimination between military and civilian targets and proportionality in terms of consequences. Last July, the United Nations Group of Government Experts recommended excluding civilian targets from cyberattacks, and that norm was endorsed at last month’s G-20 summit.”

Nye isn’t an Obama administration official, but he has been at the center of Democratic Party foreign policy circles for decades, and his pioneering emphasis on “soft power,” multilateralism, and other supposed substitutes for military might fits right in with Mr. Obama’s belief that world affairs is coming to be dominated by a fundamentally new, more cooperative set of dynamics and relationships. 

So it’s important to note that these ideas are simply efforts to define America’s biggest international problems – and international tensions in general – out of existence. Think about it: If the United States faced cyber-armed adversaries who were willing to abide fully by the conflict-limiting agreements they signed, these agreements wouldn’t be needed in the first place. For those countries would never take such commitments seriously unless they decided that their stake in maintaining whatever degree of (shaky) global peace and order prevails significantly outweighs whatever goals they could hope to achieve through major use of cyber-weapons – or any other weapons.

That is, if the world’s Chinas, Russias, and Irans were truly devoted to competing for influence peacefully and according to a set of rules, the rules would simply codify that reality. Their existence on a piece of paper cannot create it. And the asymmetry problem makes assuming their reasonableness (at least as Americans judge it) or perceived support for the global status quo even less reasonable.

Moreover, anyone believing that the history of nuclear arms control debunks that pessimism doesn’t understand that the various Cold War agreements signed by the United States and Soviet Union had nothing important to due with preventing armageddon. Instead, in this case, the conditions for a successful “balance of terror” – of mutual deterrence – were obviously in place. Fears of final physical destruction trumped all other considerations and produced restraint.

Sadly, there’s no evidence that any of the presidential candidates this year have better ideas. But as I wrote above, what the public doesn’t know about America’s cyber-war programs and strategies greatly (and properly) exceeds what it knows. So perhaps there’s some hope that truly realistic approaches are being developed, and that the next president will start learning about them once he or she is elected.

Our So-Called Foreign Policy: A Big Overlooked Lesson of the Iran Deal

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AIIB, allies, Asian Infrastructure Investment Bank, burden sharing, China, Cold War, IMF, Iran, Iran deal, John Kerry, multilateralism, Obama, Our So-Called Foreign Policy, sanctions, Security Council, United Nations, World Bank

Whatever you think of President Obama’s deal aimed at preventing Iran’s acquisition of a nuclear weapon, it’s vital to recognize that it greatly compounds the evidence that a key pillar of recent U.S. foreign policy is crumbling – the belief that many crucial American international objectives can successfully be pursued multilaterally. The terms of the deal powerfully indict extensive reliance on formal U.S. alliances and less formal groupings of allegedly like-minded countries. They also indict extensive reliance on international institutions like the United Nations. And they make more urgent than ever the development of alternatives.

Even President Obama has described the terms of the Iran deal as sub-optimal. But he and his aides have insisted that it is better than any feasible alternative non-military approaches to Iran’s nuclear program. The president appears to be correct on this score, and consequently, a compelling case can be made for the deal’s approval by Congress. Nonetheless, it’s imperative to understand why an agreement with genuinely disturbing weaknesses has in fact been the best peaceful option available.

The principal reason, as made clear by Mr. Obama and Secretary of State John Kerry, is that even the western powers involved in the Iran negotiations have decided that the economic sanctions to which they have agreed have exacted a high enough price, and that the further costs they might have to pay due to efforts to strengthen the deal are unacceptable. In other words, for Britain, France, and Germany, the desire to resume potentially lucrative commercial ties with Iran outweighs the benefits of increasing pressure on Iran’s economy in order to, say achieve the right of no-notice, “anytime, anywhere” inspections of suspect Iranian sites. Similarly, the allies judge new business opportunities to be more important than requiring Iranian compliance with the agreement’s terms for longer time spans before restoring its ability to buy arms – including ballistic missiles – on the international market.

Kerry has noted that the United Nations has been even less interested in keeping The Bomb out of Iran’s hands. He has pointed out that the Security Council had not decided to condition early ends to the weapons- and missile-buying embargoes on signing a nuclear deal with Iran. The Council conditioned these actions on nothing more than Iran’s agreement to participate in nuclear negotiations. That’s why, Kerry argues, he needed to agree to these relatively early sunsets to begin with, and why he insists that the United States will be isolated in the world community if Congress does not agree.

In other words, a goal described by the president as vital – keeping Iran nuclear weapons free – has been significantly compromised because the allies do not fully share U.S. concerns. Nor does most of the rest of the world. As a result of this fundamental disagreement, it’s difficult to understand, as I’ve written, why anyone supposes the allies or the UN membership would agree to reimposing (“snapping back”) sanctions while the agreement is in place, much less holding Iran’s feet to the fire once the deal’s various provisions lapse.

Economics just delivered a similar message to Washington. The United States had initially decided to oppose China’s decision to set up an international development bank to serve as an alternative to the existing World Bank. Chinese leaders argued that the Western-dominated Bank was too slow to finance the massive infrastructure needs of developing countries in Asia and elsewhere, but U.S. leaders suspected that China was really seeking to gain international influence at America’s expense. Washington also worried that a Chinese dominated aid bank would be managed irresponsibly from a financial and governance standpoint, and that its projects would run roughshod over the environment. Anyone who knows anything about Chinese financial, governance, and environmental practices would need to regard these fears as legitimate.

As I’ve written, however, despite this U.S. opposition, even most of its closest allies decided to join the Chinese-led Asian Infrastructure Investment Bank (AIIB) anyway. They have cited two main reasons that even many prominent Americans agree with, but that turn out to be bogus on closer inspection – and that underscore the weaknesses of multilateralism. First, many of the allies themselves maintained that their participation would promote best business and environmental practices at the new institution. Second, they – and many influential Americans – describe the aid bank as an understandable Chinese reaction to the U.S. Congress’ refusal to approve increasing China’s voting power in the International Monetary Fund (IMF).

Yet the U.S. allies that have jumped on the AIIB bandwagon are acting so eager to win new infrastructure contracts that it’s hard to believe they’ll pressure Beijing to adopt high standards. Moreover, increasing China’s IMF vote amounts to increasing the global clout of a government and economic system that’s by far the worst kleptocracy of all major countries. That’s a terrible idea, which in particular overlooks the multi-decade failure of western policies to moderate China’s behavior by integrating it into the world economy. The results to date have been a country that’s immensely stronger militarily, far more aggressive towards its neighbors, increasingly protectionist on the trade and investment fronts, and increasingly repressive towards domestic dissent.

The United States has never been especially successful at alliance management. In particular, it was never able to convince either its European or Asian allies to contribute proportionately to the common defense and security burden. And the Europeans frequently broke with Washington even on the military conflicts of the day – to the point of continuing to trade with North Vietnam during the Indochina conflict. But failures during the Cold War took place in a period when America possessed much greater relative military and economic power than today. So it needed allied cooperation much less to achieve goals it considered important. The Iran deal and AIIB failures show that a lack of allied cooperation is now enough to prevent America from achieving such goals.

Which means that, as during the Cold War, the main point is not the United States has been necessarily right and other countries necessarily wrong in these disputes. The main point is that America today finds itself in a position in which the rest of the world (including its closest allies) can – and have – fatally undermined measures needed to achieve objectives that Washington regards as deserving the utmost importance. As a result, whether its leaders know it or not, the nation faces a basic choice. It can either accept the global consensus, and decide to live in a world that its own leaders have stated will pose unacceptable risks. Or it can start figuring out ways to attain an acceptable level of security through its own devices.

The possibilities are wide-ranging, depending on how the American political system defines the nation’s overseas priorities, how much it decides to spend on achieving them, and how much wealth the economy can generate – thereby determining how intense the inevitable resource competition between “guns and butter” will be. My own hope is that U.S. leaders recognize two truths that seem to be recognized by the public already. First, foreign policy is about achieving important goals that cannot be attained through domestic policy. Second, although the United States lacks the power to become acceptably safe and secure by stabilizing, pacifying, enriching, or democratizing the rest of the world, it has ample power to survive and prosper even in the deeply flawed and indeed dangerous world it faces today.  

Worrisomely, though, President Obama doesn’t even yet seem to recognize the problem. Speaking at the West Point commencement last year, he made a point that’s become presidential boilerplate by now: “America should never ask permission to protect our people, our homeland, or our way of life.” Yet as demonstrated by his Iran diplomacy and, secondarily, by the AIIB fiasco, that’s exactly what the nation is doing.  And the rest of the world is anything but reluctant to say “No.”

 

Our So-Called Foreign Policy: Desperately Seeking Real Retrenchment

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Afghanistan, American exceptionalism, Asia-Pacific, Baltic states, Bashir Al-Assad, boots on the ground, Charles Lanes, chemical weapons, defense budget, defense spending, Earl Ravenal, George W. Bush, international law, Iraq, ISIS, isolationism, Middle East, multilateralism, national interests, NATO, Nixon Doctrine, Obama, Our So-Called Foreign Policy, pivot, Poland, Richard Nixon, Russia, sequestration, Soviet Union, Stephen Sestanovich, Syria, Ukraine, Vietnam War, vital interests, Vladimir Putin, Washington Post

Washington Post columnist Charles Lane has just done an excellent job of demonstrating how powerfully universalist America’s bipartisan foreign policy establishment remains – even as powerful reasons keep multiplying for climbing down from this wildly ambitious approach.

According to Lane, a new book by former American diplomat and Columbia University political scientist Stephen Sestanovich bears out President Obama’s claim to be a kindred spirit with Richard M. Nixon as a “retrenchment” president – one of the chief executives who has sought to “correct the perceived overreaching of their predecessors and free up U.S. resources for domestic concerns.” In fact, says Lane, Sestanovich has written that post-World War II U.S. foreign policy has been marked by a “constant pendulum-swing between administrations that aggressively pursued U.S. goals abroad” (who the author calls “maximalists”) and those Nixon- and Obama-style retrenchers.

I hate to comment on books I haven’t yet read. But Lane’s description of Mr. Nixon and Mr. Obama both qualify as retrenchers reveals a mindset so enthusiastic about massive and potentially open-ended U.S. involvement in literally every corner of the world if necessary that it sees even talk about a more discriminating approach as a major departure.

Judging by the record, it hasn’t been. In fact, both the Nixon talk and the Obama talk about retrenchment have been overwhelmingly that – talk. Just as important, and closely related, what have arguably looked at least superficially like exercises in retrenchment have in fact been exercises in wishful thinking. Both presidents have actually agreed that the security, stability, and even prosperity of the entire world are U.S. vital interests. They’ve simply differed with the maximalists in insisting that these interests can be defended through means that are less dangerous and violent, and more globally popular, than the unilateral U.S. use of military force.

To cite the leading historical example, the ballyhooed Nixon Doctrine of 1970 was never a decision to cross Vietnam or any part of Asia off the list of vital U.S. interests – those whose defense was thought essential for maintaining America’s own security and prosperity. As explained initially by Earl C. Ravenal shortly after the Doctrine’s declaration, Mr. Nixon had decided, in the absence of any evidence, that this vital set of objectives could be defended without an early resort to U.S. military involvement – chiefly, by the militaries of America’s regional allies.

Therefore, Ravenal wrote:

“the Administration’s new policies and decision processes do not bring about the proposed balance [between the country’s foreign policy ends and the means to be used to attain them]; in fact, they create a more serious imbalance. Essentially we are to support the same level of potential involvement with smaller conventional forces. The specter of intervention will remain, but the risk of defeat or stalemate will be greater; or the nuclear threshold will be lower.”

President Obama has given us a different version of such dangerous wishful thinking. More accurately, he’s given us several different versions. His original 2008 candidacy for the White House was largely motivated by a conviction that the overly unilateralist and militaristic tendencies of George W. Bush had produced disaster in Iraq, and were actually undermining U.S. security by damaging America’s international image.

That’s why Mr. Obama focused so much attention on repairing that image. He never indicated that he would scale back that list of U.S. vital interests. He simply suggested that they could be better defended if need be by acting multilaterally, with international approval, rather than by going it alone. And he conveyed the clear impression that challenges could be prevented in the first place if only America became more popular in regions like the Middle East.

Once in office, Mr. Obama did try to establish a hierarchy of U.S. worldwide interests that would have operational impact. He decided that the nation had been so preoccupied with Middle East wars that it had been neglected the Asia-Pacific region, which he considered at least as important. So he launched a “pivot” that would transfer some American forces from the former to the latter.

But the president never apparently judged the Middle East to be less important to America’s fate. He simply concluded that, with the Afghanistan and Iraq wars supposedly winding down, it had become less dangerous. Having been proven wrong by the rise of ISIS. in Afghanistan, he’s (gradually) boosting the American military presence in region again. The president is claiming, moreover – based on as little evidence as Mr. Nixon required – that any remaining capabilities gap can be filled by the armed forces of regional countries. Worse, many of his Republican critics, who are just as reluctant to deploy many more U.S. “boots on the ground,” agree with Mr. Obama’s fundamental assessment.

Further, the president has actually expanded the list of circumstances in the Middle East (and presumably elsewhere) that should justify American military responses – the kinds of chemical weapons attacks launched by Bashir Al-Assad against Syrians revolting against his dictatorship, along with similar major violations of international law.  (This effort, so far, has not yet won over the public.)

Nor does that exhaust Mr. Obama’s efforts to lengthen the list of U.S. vital interests. He has understandably responded to Russia’s recent provocations against allies in the North Atlantic Treaty Organization (NATO) by strengthening U.S. forces and deploying them more conspicuously in new NATO members like Poland and the Baltic states, former Soviet satellites clearly in Moscow’s line of fire. Less understandable have been the Obama administration’s numerous suggestions that the security of Ukraine, too, is a matter of urgent American concern – even though this country was actually part of the old Soviet Union for decades with no apparent effects on U.S. safety or well-being.

Yet like the debate over countering ISIS, that over dealing with Vladimir Putin spotlights one major difference between President Obama and his (mainly) Republican foreign policy critics: Many of them have strongly backed big boosts in the U.S. military budget (if not always using these forces), including aggressive moves to circumvent spending caps established by the sequestration process. Mr. Obama has not sought comparable increases.

The president unquestionably has often spoken in terms that seem to support a smaller U.S. role in the world – e.g., his remarks suggesting that America’s exceptionalism isn’t all that exceptional, and reminding that much of the world has legitimate historical grievances against the West, and in some cases against the United States specifically. But his strategic walk has never matched this talk, and the continuing flood of contentions to the contrary in the punditocracy and even academe (if Lane’s Post column is accurate) plainly are serving their (partly) intended purpose of preventing searching debate on foreign policy fundamentals.

Given the nation’s resulting over-extension militarily, therefore, when the chattering class powers-that-be start labeling presidents or most other politicians as retrenchers or minimalists (an improvement to be sure over the hackneyed charge of “isolatonism”), the only legitimate reaction is a thoroughly exasperated, “If only.”