America in Distress: The Challenges of Disadvantageous Change
Remarks to the Watson Institute for International and Public Affairs
Ambassador Chas W. Freeman, Jr. (USFS, Ret.)
Senior Fellow, Watson Institute, Brown University
20 February 2020, Providence, Rhode Island
The 21st century arrived belatedly – but with a bang – on September 11, 2001, when aircraft repurposed as improvised cruise missiles blew up the World Trade Towers and part of the Pentagon. In the two short decades since the shock and awe of that attack, most of the previous century’s American efforts to bolster peace and prosperity have been undone. Gone are the constraints on the strong bullying the weak provided by international law, multilateral institutions, and plurilateral and bilateral commitments to mutual aid and cooperation. The norms that long moderated international and domestic behavior have been largely erased. Incivility is now ubiquitous.
Political systems everywhere have been overtaken by socioeconomic and technological change. There is no sign they are catching up. In the United States and other democracies, political and economic systems still work in theory, but not in practice. In some ways, the scene in Washington now resembles that in Saint Petersburg in the last days of the Tsar, with sycophants and charlatans running amok and government capacity in rapid decline. And like Tsarist Russia, America is losing its aura of imperial purpose and invincibility.
American media and public discourse are dominated by bogus narratives and frenzied bigotry. Nothing seems true, but everything seems plausible. Almost everyone acknowledges that there are serious unattended problems, but no one seems able to do anything about them.
All this has spawned an age of soul-sickening worry. Both abroad and at home, the signposts of the past provide no reassurance. We have become pathfinders in the gloom, fumbling our way toward a better future that may or may not exist.
Many analysts attribute the current global and American despondency to President Trump, a self-centered sociopath whose incorrigible ignorance, relentless pettiness, and winner-take-all approach to international negotiations have catalyzed the deconstruction of the global political economy and established legal order. But the trends that underly the shocks we are experiencing began long before anyone other than Deutsche Bank, Russian oligarchs, or Gary Trudeau had even heard of Mr. Trump.
Here are some notable trends that have culminated under the current administration.
- Washington has given up on diplomacy and turned to aggressive reliance on exclusively coercive means to exercise influence abroad, turning instead to taunts, threats, unilateral sanctions, ultimatums, cyberwarfare, drone and missile attacks, assassinations, proxy warfare, and military invasions and pacification campaigns. Might once again makes right. The United States now has over thirty active financial and trade sanctions programs, which it can and does impose on friends and foes alike. The Trump administration is averaging 1,000 new sanctions on countries, companies, and individuals per year. The United States currently allocates almost 5 percent of GDP to military and related budgets for past, present, and future wars, a total of $1 trillion. (This is about one third more than the usually cited U.S. “defense budget,” which fails to include many categories of spending accounted for in other countries’ defense budgets.) Money spent on warfare amounts to about two-thirds of all “discretionary” spending in the federal budget. This doesn’t leave much for investment in anything else.
- The ill-conceived “Global War on Terrorism” has continued to snowball. In 2001, anti-American terrorists with global reach were found in only one or two countries. Today, according to the Watson Institute’s Cost of War project, the United States is engaged in combat with terrorists in 80 nations. We respect no sovereignty other than our own and are currently bombing at least seven nations without their permission. The military operations kicked off by the “Global War on Terrorism” have so far cost $5.4 trillion, plus another $1 trillion in veterans’ care. No end is in sight. The relatives and friends of the more than half-a-million Muslims killed since the U.S. anti-terrorist campaign began in 2001 continue to queue up for revenge.
- Despite the immensity and prowess of the American war machine, the United States has lost or is clearly losing every conflict it has fought in this century. With no fixed objectives or termination strategies for any of these wars, they go on forever. And history strongly suggests that once American troops establish a presence in a country, they do not withdraw. Seventy-five years after defeating Germany and Japan, the U.S. still garrisons them, as it does Korea, Afghanistan, and Iraq. Washington has sneered at recent Iraqi demands that it remove American troops from Iraq; it has instead promised to punish Iraq if it persists in pressing for U.S. withdrawal. This is the behavior of an imperial occupying force, not the deference to local pride and sovereignty characteristic of an ally. Such arrogance makes the humiliating expulsion of U.S. forces or terrorism by local nationalists inevitable.
- Once famous for steadfastness and the value of our word, the United States has definitively repudiated the long-established principle of PACTA SUNT SERVANDA (“agreements must be kept”) and replaced it with capricious abrogation of treaties, arbitrary withdrawal from accords, wanton sabotage of multilateral compacts, and money-grubbing hedging of security commitments. Examples include arms control treaties, the UN Security Council-approved nuclear deal with Iran, the Paris climate accords, the Trans-Pacific Partnership (TPP), the Arms Trade Treaty, and previously unquestioned commitments to defend allies in Europe and Northeast Asia.
- The United States has not just forsaken, but in some instances sought to hamstring the multilateral institutions engaged in global governance and cooperative rule-setting it once sponsored, setting their mechanisms for dispute resolution aside in favor of bilateral confrontations and tests of strength. Examples include the United Nations, the World Trade Organization (WTO), UNESCO, and the UN Human Rights Commission.
- Washington has replaced market-driven trade based on comparative advantage with the tariffs, quotas, and government-managed exchanges characteristic of mercantilism. Trade policy is now a national security function embodying economic nationalism and the vested interests of the corporate and military-industrial elites. As China has continued to cut tariffs and eliminate quotas for other trading partners, U.S. tariffs on imports from China have risen from an average of 3.1 percent to 19.3 percent, a level last seen in the Smoot-Hawley tariffs that helped bring on the Great Depression. America’s other major trading partners are on notice to expect protectionist pressures like those imposed on China.
- Rapacious rent-seeking is replacing the national interest as the justification for U.S. overseas military commitments. The Trump administration has begun to demand that U.S. military installations and troop deployments be paid for by the nations they help defend. This is a significant contributor to the growing dissensus in U.S. alliances. It treats the U.S. armed forces as mercenaries rather than the defenders of U.S. national security. As U.S. defense commitments originally formulated to assure strategic denial of defeated adversaries to the Soviet empire erode, these former adversaries – nations like Germany and Japan – have been left with no choice but to rebuild their capacities to act independently of the United States.
- Finally, U.S. unilateralism threatens to bring about de-dollarization of the global economy. The dollar is used everywhere as a unit of account, store of value, and medium of exchange. Roughly 90 percent of global foreign exchange transactions currently involve a dollar leg. About 40 percent of global trade outside the United States is still invoiced and settled in dollars. Almost 60 percent of U.S. dollar banknotes circulate internationally, generating seignorage revenues that the Federal Reserve transmits to the Treasury. (Seignorage is the difference between the face value of dollar bills and the negligible cost of printing them.)
Dollar dominance has enabled the United States to wield enormous extraterritorial influence in support of its geopolitical objectives. But there is growing international resistance to Washington’s now routine abuse of dollar sovereignty to turn foreign banks into instruments of punitive U.S. policies opposed by their own governments. America’s friends and foes alike are considering how best to end the dollar’s central role in global trade settlement. No one can now take the primacy of the dollar in international trade and investment and the American geopolitical hegemony it has underwritten for granted.
These changes in U.S. policies and practices and their impact on the evolving international system are inevitably eliciting foreign reactions and counteractions, many of them detrimental to American interests. Each implies a very different set of world orders than the one we have known. And each entails a diminished role for the United States in decisions that affect global stability and prosperity.
Sadly, there is now no policy process in Washington capable of considering how to shape the American and global futures. Congress has unconstitutionally delegated most of its authorities relating to peace, war, and foreign affairs to the executive branch. But the great departments and agencies of that branch are no longer effective participants in national decision-making. They have become little more than stages on which political performers sing the president’s praises and strut their stuff in hopes of celebrity, future riches, higher office, or all three.
The U.S. ability to adapt to change is severely constrained by fiscal incapacity. Tax revenues are chronically short of expenditures. The last time Washington balanced a budget was in 2001. The federal revenue shortfall (i.e. the budget deficit) is now about $1 trillion annually – about the same size as overall military spending – and it’s destined to grow. Roughly 40 percent of any U.S. deficit is currently borrowed abroad. There is no money for the maintenance of human and physical infrastructure, let alone new initiatives to enhance economic competitiveness or project American power abroad. Sixty percent of the world’s reserves are held in dollars. But some day a few astute foreigners will notice that the United States has no plan to finance its mounting debt with anything but further credit rollovers and borrowing. Those foreigners will then switch to currencies more likely to hold value than the dollar.
Meanwhile, years of diplomacy-free foreign policy and rampant militarism have gutted American diplomatic capacity. This has left the U.S. military to manage America’s international relations. But the generals and admirals have no answers to the dilemmas their own regime-change interventions and forever wars have created, let alone the pressing economic, technological, global governance, and financial challenges now facing the country. The deficit-induced inability of the United States to invest in human and physical infrastructure, science or medical services at home or anything other than military activities abroad continues to erode American competitiveness. China and other rising or resurgent powers are building rival competencies as American non-military capabilities erode. So, China and other nations are likely to play a larger role than the United States in determining what is to come. You get what you can pay for, not what you believe past leadership entitles you to.
After 9/11, Americans began a program of hit-and-run attempts to democratize other countries. As America’s founders had warned, such military and ideological adventurism is lethal to democratic constitutionalism. U.S. regime-change policies have stimulated smaller powers to develop their own means of striking back at the United States from afar, including with nuclear weapons. North Korea is the prime example of this. But, given recent events, it is hard to imagine that Iran and others will be far behind.
America’s amazing global success derived less from our military might than from our embrace of equality of opportunity and shaping of the world’s multilateral institutions, our openness, and our ability to constantly redefine ourselves as we assimilated and were changed by successive waves of immigrants. These were qualities that others everywhere admired and aspired to emulate. Border walls, Muslim bans, and the mean-spirited refoulement (or turning back) of refugees tell the world that the United States has set aside the values that long made it internationally inspiring to others.
And if democracy means citizen participation in setting policies, budgets, and national priorities, it is hard for foreigners to find much evidence of it in the contemporary United States – a nation now led by plutocrats and manipulated by deceptive media. Instead, they see American politics as both cynically venal and indecisive. The United States is now a nation in which intransigent partisanship appears to have succeeded the separation of powers as the basis of decision-making about public policy and personnel. To many abroad, America has lost its mojo.
It is against this unpromising background that the United States has decided that the only way to influence foreign nations is to use economic sanctions and military power to bring them to their knees. The Trump administration has leavened this approach to problematic opponents by coupling what it calls “maximum pressure” on them and their national interests as they see them with transparently insincere flattery of their leaders and appeals to their greed.
So far, however, the application of this bizarre approach to U.S. relations with nations like China, Iran, north Korea, Pakistan, and Turkey, as well as to Europe, has yielded nothing but pushback. Maximum pressure without the flattery has done nothing to advance U.S. interests in Cuba or Venezuela, while flattery without pressure has gained America nothing with Israel, Russia, or Saudi Arabia. Clearly, the United States needs to revamp its diplomatic doctrine.
In the meantime, Americans must expect increased hedging on the part of their traditional security partners. Even Britain now seeks to reduce dependence on the United States and its military technology. Germany and Japan are cautiously rebuilding the capacity to act on their own interests internationally without regard to the United States. As they do so, they are rearranging their strategic environments. It is unlikely that any foreign nation will attack the United States, since the consequences for an attacker would be too severe. But in time, many of America’s erstwhile military allies and protected states will reemerge as at least limited rivals of U.S. power in third countries and regions. Their previously confident dependence on the defense capabilities of the United States had successfully precluded this. But as they look only to their own interests, they will be ever less likely to make common cause with the U.S. on matters that concern them less than Americans.
That is unfortunate. For decades to come, both the security of Americans abroad and their safety at home are almost certain to be imperiled by delayed reactions from the relatives, friends, and coreligionists of the many dead in our so-called Global War on Terrorism. International cooperation is essential to manage and mitigate these threats, which are largely of our own making. Given U.S. self-centeredness and unilateralism, cooperation by other countries will be significantly less forthcoming than it might have been. Meanwhile, the foreign adversaries of the United States will begin to subject Americans to the deadly techniques Washington has devised to kill presumed terrorists since 9/11 – assassinations, cyberwar, drone attacks, and the like.
The good news is that the “attack surface” – the bases and deployments accessible to enemy attack – that the United States presents to foreign foes will shrink as American forces are brought home either at U.S. initiative or at that of the countries they have garrisoned. Circumstances have changed. In the Cold War, a U.S. military presence was valued by other countries as both a deterrent and a tripwire against foreign attack. Now a continuing U.S. presence is likely to be seen as both an attractive nuisance and an impediment to the negotiated resolution of the issues dividing nations by the peoples of those nations themselves. Examples include Afghanistan, Iraq, China, and Korea. The tension between the U.S. focus on deterring changes in the status quo and host-country citizens’ eagerness for the restoration of national unity makes longstanding military deployments increasingly precarious. Some U.S. overseas presences seem certain to generate unwelcome surprises.
- Afghanistan. The ill-considered U.S. pacification campaign in that fractious country has failed. There has been neither clarity nor fixity about our objectives there. The main American goal now seems to be to withdraw without having to admit defeat. For now, however, U.S. and NATO forces remain a feature of the politico-military landscape to be exploited by all sides in their ongoing ethnic and religious conflicts and struggles to siphon off foreign aid and control the drug trade. As long as foreign troops remain in their country, Afghan factions will avoid the compromises with each other that the foreign presence enables them to sidestep or delay. The withdrawal of U.S. and other Western forces would remove a key impediment to peace. The United States should let Afghans work out Afghanistan’s problems even as we retain the ability to return to Afghanistan if it once again becomes a haven for terrorists with global reach.
- Iraq. The Shi`ite Arab majority in the Baghdad parliament has now formally demanded the departure of U.S. and other foreign forces. But the Kurds and many Sunni Arabs in Iraq view a continuing U.S. military presence as essential to preserve their ability to defy the authorities in Baghdad. The United States has inadvertently become the essential bulwark of the ethno-religious divisions that its invasion and occupation of Iraq energized. S. withdrawal would force Kurds, Sunnis, and Shi`i to attempt to hammer out a modus vivendi of some sort within a more unified Iraq. If successful, this would dilute Iraq’s sectarianism, deprive the so-called Islamic State of space to maneuver in a divided Iraq, revive Iraqi nationalism as the antidote to Iranian domination of Iraqi politics, and reopen the possibility that Iraq might once again balance Iran.
- Taiwan. The separation of the island from the rest of China resulted from a civil war among Chinese that was suspended but not ended by U.S. naval intervention in June 1950. Taiwan has since emerged as a far more attractive society than that on the mainland. But the military balance in the Taiwan Strait has shifted overwhelmingly against it. In this context, the Taiwan Relations Act’s vague unilateral U.S. undertaking to help defend the Chinese on Taiwan from those across the Strait provides Taiwanese with a persuasive rationale to avoid pursuing an agreed relationship with Chinese on the mainland. As frustration with the direction of Taiwan’s politics and American policy mounts in Beijing, a resumption of the Chinese civil war is becoming more rather than less likely.
- Korea. S. intervention in 1950 successfully prevented Korea’s unification under Pyongyang. The Korean War resulted in an armistice but no peace. In the 1950s, ‘60s, and ‘70s, a large U.S. troop presence was almost certainly the principal deterrent to renewed attack on the South by the North. But, the balance of power on the peninsula has long since shifted decisively in favor of the South, which has become one of the most successful societies on the planet. Today, South Korea’s economy is fifty times bigger than that in the North. Its armed forces are also vastly better equipped. In this century, an increasingly self-confident Seoul has begun to explore the possibility of peace with Koreans north of the 38th parallel. But the United States has remained focused solely on the north Korean military threat. Seoul and Washington are no longer in sync, still less in lockstep. “Kachi kapsida” – “we go together,” the US-ROK alliance slogan – rings increasingly hollow.
Some South Koreans favor a continuing U.S. military presence in their country but ever more seem to view it as humiliating. Despite President Trump’s three meetings with Kim Jong-un, the United States continues to reject addressing North Korea’s security concerns as a prerequisite to facilitating arms control, including denuclearization, and intra-Korean détente.
The American warfare state is adamantly opposed to any troop drawdown in Korea. But the possibility that South Koreans will insist on such withdrawals is increasing. This is in part because they do not want to be caught up in escalating Sino-American tensions and in part because they want a free hand to craft a relationship with their fellow Koreans to the North. The consequences for the U.S. position in Northeast Asia of a falling out over troop withdrawals could be as strategically damaging as north Korea’s unbroken drive to acquire a nuclear deterrent capable of striking the continental United States.
As Washington replaces staunch commitments to other countries with noncommittal stands and U.S. alliances decay, the risks of American self-isolation from multilateral bodies are also becoming ever more apparent. American repudiation of multilateral agreements like TPP and the Paris climate accords did not kill these institutions or cause others to discard their objectives. Japan took the lead in refashioning TPP into an eleven-member grouping that others now seek to join. It is now forging a loose Japanese-led order in East Asia to balance China. When Syria belatedly signed on to the Paris accords, the United States became the only nonmember on the planet. As these groups agree on programs and rules, Americans have no say in them. Indeed, there is a real danger that compensatory tariffs will eventually be applied to imports from countries that are not in compliance with multilaterally agreed rules about carbon emissions. The main, if not the only target of such tariffs would be the United States.
Washington’s efforts to incapacitate the WTO are now spurring the creation of more efficient tribunals for trade and investment dispute resolution. At the end of January, the EU, China, Brazil, South Korea, and twelve others agreed on a system to stand in for the WTO appellate process, which the United States had hamstrung. Another example is the Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU. CETA eliminates tariffs on 98 percent of EU-Canada trade, harmonizes standards for regulated professions, facilitates staff transfers between companies operating in multiple jurisdictions, and stiffens the enforcement of intellectual property rights. It contemplates the establishment of a permanent multilateral investment court with improved rules for its members. By contrast, the so-called “phase one” trade deal with China entrenches U.S. protectionism and leaves future disputes to be resolved through bilateral tests of strength that amount to renewed trade wars.
The EU has adopted CETA as a model for future free trade agreements (FTAs). China’s Belt and Road Initiative similarly eliminates barriers to trade as well as transit and creates special courts to resolve trade and investment disputes among its participants. The new African Continental Free Trade Area does the same. The biggest things these initiatives have in common are their affirmation of multilateralism and their exclusion of the United States. The world is inventing post-WTO arrangements to expand trade and investment. It is doing so both despite America and without it.
Meanwhile, the United States has stepped up its use of the dollar as an instrument of economic warfare. America’s unilateral application and enforcement of dollar-based sanctions – including secondary sanctions that penalize third countries and their banks and companies for dealing with any country backlisted by Washington – reflects open U.S. contempt for the United Nations, international law, and other countries’ sovereignty. It is deeply resented internationally. This has driven the world’s major trading nations into a serious search for ways to end dollar supremacy. Their efforts have included the creation of alternatives to SWIFT (the Society for Worldwide Interbank Financial Telecommunications) to handle money transfer instructions.
The Russian “System for Transfer of Financial Messages” (STFS) has already de-dollarized 70 percent of trade within the Eurasian Economic Union. China’s UnionPay still uses dollars when converting currencies but, later this year, Beijing is expected to expand its Cross-Border International Payments System (CIPS) to connect some twenty banks in a worldwide payments superhighway for clearing and settling transactions in yuan. It will link up with the Russian STFS and an Indian system now being designed. Earlier, the EU established a “special vehicle” to conduct trade with Iran outside SWIFT. The BRICS group of countries (Brazil, Russia, India, China, and South Africa) is joining forces to create a single payment system – BRICS Pay.
The People’s Bank of China recently announced plans to issue a digital (blockchain-based) version of the Chinese yuan, allowing the world’s largest non-dollar economy to extend its almost cash-free domestic systems for settling transactions to the world. The link-up between a digitized yuan and emerging alternatives to SWIFT represents a major threat to the dollar’s continued near-monopoly of international trade settlement. It also threatens traditional banking because it promises a faster, much cheaper way to handle international transactions. Still the main driver of this and other new clearance mechanisms is the desire to evade the extraterritorial enforcement of U.S. policies that most of the world considers both illegal and obnoxious.
An erosion of dollar primacy would have profound effects on American hegemony. The U.S. ability to print money and exchange it for foreign goods and services would be reduced, if not ended. Dollar notes held overseas represent interest-free loans to the U.S. Federal Reserve Bank. Lessened demand for dollars overseas would lower the dollar’s value in relation to other currencies, reduce its credibility as a vehicle for storing value, and negate the rationale for its continued dominant role in foreign exchange reserves. The emergence of digital alternatives to the dollar in the global economy would lead to less liquid capital markets in the United States and increased costs to participants in them.
In these circumstances, America could no longer run persistent balance of trade and payments deficits. The overvaluation of the dollar that its primacy has sustained would end. The American standard of living would plunge. Degradation of the dollar’s status would greatly erode U.S. global influence. In short, the confluence of foreign resistance to U.S. bullying and the emergence of new fintech has created the possibility of a devastating monetary earthquake.
The causes and catalysts of the many nasty possibilities before us are, for the most part, decisions made in Washington, not abroad. The rise of China and India and the resurgence of Russia are not irrelevant but hardly central to what is happening. When one creates a strategic vacuum, it’s easier to blame the powers that are sucked into it than oneself.
But it is not China that has substituted the use of force and the pursuit of regime change for diplomacy. Other countries are not engaged in global drone warfare or “forever wars.” They do not occupy or maintain multiple bases in lands far from their borders or bill other countries for contributions to the common defense. They have not felt free to repudiate treaties and agreements to which they are party. Neither China nor other countries are trying to destroy the institutions of global governance or replace free-market transactions with government-managed trade. With the notable exception of Israel, other countries are not asserting a right to assassinate foreign officials. And they are not imposing unilateral sanctions or waging financial warfare on others. All these things are examples of American self-sabotage, not predatory foreign behavior. Curing these deviations from past practice and their pernicious consequences requires introspection and reform in Washington more than anywhere else.
If no such introspection and reform are forthcoming, the United States will have to compete with others under the law of the jungle that it has reintroduced. It will face mounting opposition from a loose coalition of resistance to its faltering hegemony. At the moment, America is trying to best China by pushing it into economic stagnation rather than acting to enhance U.S. economic dynamism. This is not working, and there is no reason to believe it ever will. In the end, America can be competitive only if it does what is necessary to rectify home-grown deficiencies and strengthen domestic capabilities and competencies.
This means addressing obvious areas of weakness and the trends that cause them, including:
- A continuing refusal to raise taxes to fund the government. This guarantees competitive incapacity. Budget deficits preclude maintenance of existing infrastructure, let alone new initiatives to improve competitiveness at home and abroad.
- An undemanding educational system that is content with mediocrity in both world knowledge and vocational training. (Siemens reports that to make American workers competitive with German workers, it must give them six months of remedial training in math and other basic skills.)
- Domestic opposition to science and rejection of its findings, coupled with declining funding for basic scientific research and bans on the publication of politically unwelcome scientific data.
- Disinvestment in what have long been the world’s best universities and their increasing subjection to national security-derived restrictions on international collaboration.
- Visa bans and disapprovals that discourage foreign students, visitors, and investors.
- Inadequate and often irrelevant retraining of workers displaced by automation, foreign competition, or changes in industrial structure.
- Complacent but mistaken assumptions of superiority to other societies, which remain uncorrected out of disinterest in examining and adopting foreign best practices. (Recall the sneer with which Hillary Clinton dismissed Bernie Sanders’ 2016 suggestion that America might have a thing or two to learn from Denmark.)
- A tax structure that directs wealth to the plutocracy at the expense of both the middle class and an increasingly disaffected working class, and that hinders rather than supports socioeconomic mobility. (Among European countries, only Slovenia, Italy, and the U.K. now have less movement between classes than the contemporary United States.)
- Racial prejudice and growing barriers to the admission and absorption of foreigners and their ideas.
- An economy dominated by uncompetitive oligopolies, in which laws and regulations protect vested interests at the expense of new market entrants, and in which – contrary to the conventional wisdom – innovation is in secular decline.
- Disdain for expertise and a marked decline in the competence of government officials.
Many Americans know what we need to do to up our game. Still, there is next to no public discussion of our competitive weaknesses, their causes, or their remedies. We are in an election year. But few candidates have offered anything other than vague, cost-free prescriptions for restoring American competitiveness.
On one issue – the costs of war – the Watson Institute has stepped up to collect the data and raise the issues the Congress should have but hasn’t. There is a role for our great universities in stimulating the debate about the state of the nation and its future that the vested interests that dominate Washington have stifled. And there is a long list of neglected issues for the academy to choose from. Is it too much to hope that American civil society will intervene where an increasingly ineffectual government has failed to?
Source: Chas W. Freeman, Jr.