Abstract
If you think the policy of preemption is a recipe for disaster, take a look at how the National Security Strategy plans to fix the world economy.
In 1847, in a famous moment of the Mexican-American War, Brig. Gen. David Twigg, commander of an attacking U.S. force, captured the Mexican garrison in the convent of Churubusco on the outskirts of Mexico City. His first question to the garrison's commander, Gen. Pedro Anaya, was, “Where's the ammunition?”
“If we had had any ammunition left, you wouldn't be here,” Anaya replied.
Every Mexican child hears this anecdote in school–and one wonders if perhaps Saddam Hussein himself made a similar reply when interrogated about Iraq's alleged weapons of mass destruction (WMD).
Admittedly, the U.S. troops who swept across Mexico 157 years ago were not really searching for ammunition or weapons of mass destruction. What were they actually looking for? Well, by war's end, Mexico had lost a full half of its territory.
Similarly, one must consider that Iraq sits on the second largest oil reserves in the world, and Mexicans, at least, may be inclined to wonder whether the big little war in Iraq had as much or more to do with economics than with WMD.
The invasion of Iraq may not be a straightforward repeat of nineteenth-century colonization and plunder (although the story about the destiny of Iraqi oil is still unfolding). It is more related to the need to demonstrate to the world that the United States remains the linchpin of the globalized economic system. This is why national security doctrine under the Bush administration rests on the idea that there is a single sustainable model for national success (at the heart of which lies not democracy, but this administration's particular brand of free enterprise), and the intention to impose this economic model on everyone else.
A great deal of attention has been paid to the amazing National Security Strategy (NSS) transmitted by George W. Bush to the U.S. Congress in September 2002, and it has been widely criticized for its unilateralism, first-strike policies, missile defense plans, and emphasis on maintaining unrivalled military supremacy. But critically important sections of the document, related to U.S.-led globalization, have been overlooked. And these sections say much more about international security than the thoughtless references to raw military power and covert action.
As David Sanger reported in the September 20, 2002 San Francisco Chronicle, Bush told his staff the NSS should be written in plain English so “the boys in Lubbock ought to be able to read it.” Yet the NSS is as surprising for what it ignores as what it says. The most glaring omission concerns today's U.S. economy. Lack of references to the deficit may be understandable, given that the current administration inherited a surplus of 2.5 percent of GDP. Of course, by 2003 it had transformed this surplus into a 4 percent deficit.
The size and durability of the deficit alarms even International Monetary Fund (IMF) analysts, and may bring about a financial crisis with grave repercussions for the global economy. The administration's rhetoric about reducing the deficit in the next few years is simply unbelievable to anyone with a pocket calculator (especially if he or she takes into account the looming Medicare/Social Security crisis).
Ignoring the current account deficit (the United States continues to import far more goods than it exports) is harder to understand. The United States has been running a large and increasing external deficit (reaching 5 percent of GDP in 2003). So far this foreign debt has been financed through gargantuan capital inflows driven by a so-far-inexhaustible craving for U.S. financial assets (whose prices exploded during the 1990s). But if the external deficit is not reduced in the near term, it may well lead to a speculative attack against the dollar, bringing about a serious crisis in the American–and world–economy. After a hard landing, the dollar would probably lose its central role in the world economy.
This scenario was not considered plausible until recently. But the coupling of the two deficits and the emergence of the euro as a credible alternative currency are rapidly changing this perception. Even pundits within the U.S. financial establishment (like Robert Rubin) do not rate the odds of a Third World-style economic crisis as insignificant. The president's analysts should have examined this set of issues if for no other reason than Cicero's old dictum linking wealth and security, “nervos belli, infinitam pecuniam”–“endless money forms the sinews of war”–or, less literally, successful war-waging capacity requires unlimited cash.
The premise of the NSS is that a new era of economic growth should enhance American security. However, economic growth per se does not lead to greater opportunity or less inequality. This is important because if those whom the NSS calls the “embittered few” remain forever excluded from the benefits of economic growth, their resentment will result in continuing insecurity.
Leaving aside, for the moment, how wealth is distributed, another key issue is how to achieve sustainable economic growth. The NSS asserts that worldwide economic growth is fueled by deregulation, a path that has led to financial disaster in many countries. Considering the gigantic financial scandals made possible by deregulation in the United States alone, such a claim for deregulation seems preposterous.
The NSS also advocates financial and trade liberalization, privatization, and “sound fiscal and monetary policies.” This combination makes up the so-called Washington Consensus, a policy package endorsed by the IMF and the World Bank. In buying into this package, the president's advisers seem to disregard the historical record–that since 1973, when the world of fixed exchange rates was abandoned and deregulation began in earnest, growth rates have declined, unemployment has increased, and productivity has declined in most of the world. The NSS recipe has brought about unfavorable economic performance (and violent crises) in both rich and poor countries.
Yet the NSS proceeds fearlessly: “The lessons of history are clear: Market economies, not command and control economies with the heavy hand of government, are the best way to promote prosperity and reduce poverty.”
The shallowness of this view is breathtaking. It refers of course to the collapse of the Soviet Union, but it ignores the 250 years of experience with capitalist economies showing that unfettered markets have not led to prosperity.
There are no examples of industrialized countries attaining high levels of economic strength without decisive government intervention. Whether through protectionist schemes, heavy subsidies, or public investments in strategic industries, all the rich industrialized nations of the world have used a set of policy instruments that the NSS describes as obstacles to wealth.
The NSS also emphasizes the implementation of policies based on lower marginal tax rates, on the theory that they improve incentives for investment. This is, of course, simple supply-side economics, which translates into regressive tax policies and greater inequality. The idea that lowering marginal income tax rates causes entrepreneurs to invest more has a dubious record, even in the United States. In other countries that have embraced the policy, investment has dropped significantly.
In a critical passage, the NSS states that “improving stability in emerging markets is also key to global economic growth.” This could be true, but then the NSS argues that what is needed are greater capital flows. This completely ignores the massive supply of capital that is now used for daily speculation in currency and bond markets. Daily foreign exchange trading exceeds $1.3 trillion–a ratio to world trade of more than 75 to 1. These capital movements are in fact a source of instability. (And there is no reason to believe that even greater liquidity would lead to more long-term investment rather than more speculation.) The magnitude of capital in daily speculation dwarfs even the largest IMF operations and should be a warning about the economic forces at play in the global arena.
Undaunted, the NSS asserts the United States must encourage the IMF to streamline its lending policies, focusing on “sound fiscal and monetary policies.” This means the NSS endorses the practice of conditionality in IMF operations, something that has wrought havoc on the economies of many countries and brought about crises in Argentina and Indonesia, among others. Amazingly, the Bush administration believes national security depends on promoting the agenda of the Washington Consensus at a time when IMF staffers are questioning it. Official IMF documents now speak of placing controls on capital flows, but the president's advisers have apparently not noticed.
Returning to the question of inequality, the NSS mentions the embittered few–but “few” is an ill-chosen word. As the NSS itself points out, half the world's population lives on less than $2 a day. Even in the United States, poverty is a serious and persistent problem, with 34.6 million citizens (more than 12 percent) living beneath the poverty line. Inequality in the United States has increased dramatically over the past 20 years, regressing to the level of 1945. If the NSS's so-called few are a source of insecurity, then inequality is a bigger threat than Russia's new Topol-M missiles, or any remaining rogue state or terrorist network.
The sad truth is, the administration's top policy makers believe poverty is a natural phenomenon rather than an outcome of their disastrous theories. The policy package endorsed so enthusiastically by the NSS is not only incapable of reducing poverty, it might as well be designed to increase destitution and social marginalization.
It is ironic that in the 1990s, under then-Governor Bush, Lubbock County fell into Texas's low-wage county category; wage inequality increased by 33 percent. Instead of confidently looking ahead to a promising future, the children of Lubbock must now fight for job opportunities or a scholarship by “volunteering” to go to war in Iraq.
The United States may still be the strongest military power in the world. But it is not the greatest economy any more, and it has ceased to be an economic model for other countries to emulate. Failure to understand this is probably the single greatest flaw of U.S. national security doctrine today. Its economic weaknesses, together with the disarray of the arms control regime and emphasis on war as an instrument for international policy, do not bode well for the future. Arrogance, and the infantile belief that the United States has the right to remain the most wasteful nation in the world, spreads resentment and hatred. Instead of enjoying greater security, America's future generations may inherit a bitter legacy.