- If only Hillary Clinton had become president, some believe, the United States would have guided the world toward a better future.
- There is no question that Trump places little value in democracy. However, it is a mistake to see him as the sole cause of the world’s problems.
- Our present troubles were caused by the decisions made by the administrations of former Presidents Bill Clinton, George W. Bush, and Barack Obama.
A recurring theme of foreign-policy commentary since 2016 has been the prior status and uncertain future of the so-called liberal order. Some writers question whether a liberal order ever existed or challenge its alleged virtues, while others are quick to defend its past achievements and bemoan its potential demise.
If there is a consensus among these various commentators, however, it is that US President Donald Trump poses a particular threat to the US-led, rules-based order that has supposedly been in place since 1945.
If only Hillary Clinton had become president, some believe, the United States would have remained the “indispensable nation” guiding the world toward a more benign future, and the familiar elements of a rules-based order would be thriving (or at least intact).
There is no question that Trump places little value in democracy, human rights, the rule of law, or other classic liberal values, and he seems to have a particular disregard for America’s democratic partners and a soft spot for autocrats. But it is a mistake to see him as the sole — or even the most important — cause of the travails now convulsing the US-led order.
Indeed, the seeds of our present troubles were sown long before Trump entered the political arena, and are in good part due to foreign-policy decisions made by the administrations of former Presidents Bill Clinton, George W. Bush, and Barack Obama.
Think back a quarter century, to the beginning of the “unipolar moment.”
Having triumphed over the Soviet Union, the United States could have given itself a high-five, taken a victory lap, and adopted a grand strategy better suited to a world without a superpower rival.
Rejecting isolationism, Washington could nonetheless have gradually disengaged from those areas that no longer needed significant American protection and reduced its global military footprint, while remaining ready to act in a few key areas should it become absolutely necessary.
These moves would have forced our wealthiest allies to take on greater responsibility for local problems while the United States addressed pressing domestic needs. Making the “American dream” more real here at home would also have shown other nations why the values of liberty, democracy, open markets, and the rule of law were worth emulating.
This sensible alternative was barely discussed in official circles, however.
Instead, both Democrats and Republicans quickly united behind an ambitious strategy of “liberal hegemony,” which sought to spread liberal values far and wide.
Convinced that the winds of progress were at their back and enamored of an image of America as the world’s “indispensable nation,” they set about using American power to topple dictators, spread democracy, sanction so-called rogue states, and bring as many countries as possible into security institutions led by the United States.
By 2016, in fact, America was formally committed to defending more foreign countries than at any time in the nation’s history.
America’s leaders may have had the best of intentions, but the strategy they pursued was mostly a failure. Relations with Russia and China today are worse than at any time since the Cold War, and the two Asian giants are once again colluding against us.
Hopes for a two-state solution between Israel and the Palestinians have been dashed, and the rest of the Middle East is as divided as it has ever been. North Korea, India, and Pakistan have all tested nuclear weapons and expanded their nuclear stockpiles, while Iran has gone from zero enrichment capacity in 1993 to being nearly a nuclear weapons state today.
Democracy is in retreat worldwide, violent extremists are active in more places, the European Union is wobbling, and the uneven benefits of globalization have produced a powerful backlash against the liberal economic order that the United States had actively promoted.
All of these trends were well underway long before Trump became president. But many of them would have been less likely or less pronounced had the United States chosen a different path.
In Europe, the United States could have resisted the siren song of NATO expansion and stuck with the original “Partnership for Peace,” a set of security arrangements that included Russia.
Over time, it could have gradually drawn down its military presence and turned European security back over to the Europeans. Russia’s leaders would not have felt as threatened, would not have fought Georgia or seized Crimea, and would have had little or no reason to interfere in the US election in 2016.
As the European Union took on a greater security role, states like Poland and Hungary might have been less inclined to flirt with authoritarianism under the safety blanket of US security guarantees.
A wiser United States would have let Iraq and Iran check each other instead of attempting “dual containment” in the Persian Gulf, eliminating the need to keep thousands of US troops in Saudi Arabia after the first Gulf War.
Had Washington also made its support for Israel and the Palestinian Authority conditional on both sides making steady progress toward “two states for two peoples,” the two principal sources of Osama bin Laden’s murderous antipathy toward America would have been removed, making the 9/11 attacks much less likely. And with no 9/11, we almost surely would not have had invaded and occupied Iraq or Afghanistan, thereby saving several trillion dollars and thousands of US and foreign lives.
Mazhar Ali Khan/AP
The Islamic State would never have emerged, and the refugee crisis and terrorist attacks that have fueled right-wing xenophobia in Europe would have been far less significant.
A United States less distracted by wars in the Middle East could have moved more swiftly to counter China’s growing ambitions, and it would have had more resources available to accomplish this essential task.
Instead of naively assuming that a rising China would eventually become democratic and willingly abide by existing international norms, the United States could also have made Beijing’s entry into the World Trade Organization contingent on it first abandoning its predatory trade practices and establishing more effective legal institutions at home, including protections for intellectual property.
Moreover, greater attention to how the benefits of globalization were distributed would also have reduced inequality in the United States and tempered the polarization that is ripping the country apart today. And as Rosella Zielinski argues in a recent article in Foreign Affairs, financing foreign wars by borrowing money (instead of by raising taxes) lets the wealthiest Americans off easy and even allows them to earn interest lending to the federal government, exacerbating existing economic disparities.
In this way, an overly ambitious grand strategy helped make economic inequality worse.
Finally, a more restrained grand strategy would not have tempted US leaders to use torture, extraordinary rendition, targeted killings, unwarranted electronic surveillance, and other betrayals of core US values.
It would also have freed up trillions of dollars that could have been spent strengthening our armed forces, providing better health care for US citizens, rebuilding America’s crumbling infrastructure, investing in early childhood education, or reducing persistent deficits.
To be clear: to say that our strategy has been mostly a failure is not to say that the United States failed at everything, or to suggest that the world would be perfect today had US leaders chosen differently. But when one looks back on what the pursuit of “liberal hegemony” has wrought, there can be little doubt that a different approach would have left the United States (and many other countries) in much better shape today. And the liberal order that many are now desperate to save would be in much better shape.
Nor is it implausible to imagine one additional benefit: Trump would not be president.
Back in 2016, when he called US foreign policy a “complete and total disaster,” a lot of Americans nodded in agreement and cast their votes for him. Unfortunately, his erratic, incompetent, and needlessly combative handling of foreign affairs has succeeded only in making America less popular and influential, without reducing any of its global burdens.
The United States is still “nation building,” still waging wars in far-flung locales, still spending more on defense than the eight next largest militaries combined, and still subsidizing numerous wealthy allies.
Defenders of our past follies now bemoan Americans’ reluctance to support the same overweening global strategy that produced so many disappointments. But the public has every reason to reject an approach to the world that has repeatedly failed, and to demand a better alternative.
Some voters mistakenly believed they would get it from Trump, but he hasn’t delivered and almost certainly won’t. The question remains: what — and whom — will it take before the American people get the more restrained foreign policy they want and deserve?
Stephen M. Walt is the Robert and Renée Belfer professor of international relations at Harvard University.
Former Federal Reserve Chairman Alan Greenspan told FOX Business on Thursday that the U.S. economyis poised to slow down very soon.
“Just wait until the fourth quarter number comes out, it’s going to be down around 2.5 percent,” Greenspan said during an exclusive interview with Maria Bartiromo. “We have monthly data which suggests that we are slowing down, we are not going negative, but we are definitely slowing down – the rate of growth as we go into 2019 probably at a 2 to 2.5 percent pace maximum.”
Gross domestic product (GDP) increased 3.5 percent in the third quarter, according to a revised estimate from the Bureau of Economic Analysis, but Greenspan said gross domestic savings, which consists of savings of the household, private corporate and public sectors, is a critical factor in determining his outlook.
“Gross domestic savings is the key funding to capital investment in the Unites States, and as a result we are seeing capital investments slowing down,” he said.
Earlier this week, White House Council of Economic Advisers Chairman Kevin Hassett told FOX Business a capital spending boom is giving the U.S. economy momentum.
“A capital spending boom like the one that we’re in usually takes three to five years,” he told Bartiromo. “We’ve had about a 10 percent increase in capital [spending] since this time last year and that should continue if it’s a normal spending boom for the next three to five years.”
However in Greenspan’s opinion, although a recession is unlikely, the U.S. has entered a period of stagflation driven by runaway spending and entitlement programs.
“We are not funding our entitlements and as a result we have this huge deficit – [a] trillion dollar budget deficit,” he said. “You can’t exist with that sort of phenomenon without inflation re-emerging itself.”
The annual inflation rate in the U.S. fell to 2.2 percent in November from 2.5 percent in October, according to the Labor Department.
Julia Limitone is a Senior Web Producer for FOXBusiness.com.
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■ December 13, 2018, 12:01 AM EST
On the Eve of Brexit, U.S. Banks Are Set to Conquer Europe
● Exit Britain. Enter Wall Street.
By Edward Robinson, Lananh Nguyen and Yalman Onaran
With Donald Trump rattling the international order Washington built after World War II, engagement is out and isolationism is in. Yet Wall Street, an expression of American influence every bit as defining as Hollywood or Silicon Valley, apparently didn’t get the memo.
European finance—whipsawed by debt crises and political upheaval since the financial crash of 2008 and now on the verge of the Brexit trauma—is seeing just how internationalist American banks are. U.S. financial powerhouses such as JPMorgan Chase & Co. and Goldman Sachs Group Inc. have been running up the score on their European rivals, dominating investment banking overseas as never before.
The U.K.’s separation from the European Union will cleave Europe’s financial industry in half. London’s diminished role as the financial gateway to the Continent may prevent Europe from matching the U.S. with its own deep, seamless flow of capital. Brian Moynihan, the chairman and chief executive officer of Bank of America Corp., calls this effect “disaggregating liquidity.”
“That’s not going to be good for the economy,” Moynihan said at an industry conference in Boston in November. “It puts them back about 10 to 15 years in the possible development of capital markets, which is critical to a country’s success. At the end of the day, what makes the U.S. powerful is our capital markets and all the capital we can bring to the situation. That just allows us to develop wealth faster for people, and companies can access the capital a lot faster.”
The result: Wall Street’s deepening penetration into the EU. Bank of America is turning a post office in the center of Paris into a trading floor for hundreds. Goldman Sachs, Morgan Stanley, and JPMorgan are shifting capital and staff to Frankfurt, Paris, and possibly other locales. JPMorgan Chase Chairman Jamie Dimon and his peers are increasingly signing up clients for work at the expense of homegrown rivals such as Deutsche Bank AG and BNP Paribas SA. In January, for instance, JPMorgan, Morgan Stanley, and Lazard advised Belgian drugmaker Ablynx and Paris-based Sanofi on a $4 billion takeover that featured no involvement by a European investment bank. This year, five of the six top institutions handling European transactions worth $500 million to $6 billion were American, according to data compiled by Bloomberg.
It’s possible the contest between U.S. and European investment banking will shift again. In the precrisis decade, European institutions were making inroads into the new world. UBS Group AG built an airplane hangar-size trading floor in Stamford, Conn., and Barclays, Deutsche Bank, and Credit Suisse elbowed into the upper ranks for securities underwriting and mergers advice in the U.S. In 2010, top European banks raked in 51 percent of global revenue from trading equities, compared with 44 percent for American lenders.
The UBS trading floor is no more, and Deutsche Bank is the latest European bank retreating from the U.S. In equities trading this year, Wall Street commands 60 percent of global revenue, compared with Europe’s 34 percent, according to data compiled by Bloomberg. The top five U.S. investment banks earned $75 billion in the first nine months of 2018, a quarter more than the same period last year. In contrast, Deutsche Bank, which has been hobbled by CEO turnover and a round of money laundering cases, saw its shares fall to record lows in December. BNP Paribas, France’s No. 1 bank, jolted investors in the third quarter when it reported a 15 percent drop in revenue in fixed income, long considered one of its strongest businesses.
Even before Brexit, Europe struggled to overcome obstacles that would make its lenders more competitive. Brussels’ bid to unify its member states’ banking industries, for example, has foundered. “The fact that European politicians failed to produce banking union is a travesty,” says Barrington Pitt Miller, a portfolio manager with Janus Henderson Group Plc, which holds big stakes in European lenders. “If you’re a U.S. capital markets bank, you are looking at a free runway to step in and take market share.”
As if that weren’t enough, Dimon and Moynihan and their fellow Americans are riding a tailwind courtesy of the U.S. Federal Reserve—a surge in lending revenue. Over the last eight quarters, the Fed has lifted its benchmark interest rate to a range from 2 percent to 2.25 percent, which means banks can charge more for loans. The European Central Bank, nursing a fragile regional economy, has stood fast with a subzero rate. “There’s strong lending growth coming from companies in the U.S.,” says Jan Schildbach, head of research on banking, financial markets, and regulation at Deutsche Bank. “In Europe there’s only modest lending volume growth after years of contraction.”
Wall Street is doing well in Asia, too. U.S. banks take the five top spots in Asian equities underwriting, according to Bloomberg data. In the global business of trading securities, only one Asian lender, Japan’s Nomura Bank Holdings Inc., makes the top 16, with just a 1.7 percent share. In mergers and acquisitions, Asian institutions tend to show up in deals on their own turf. The Bank of China Ltd., for example, leads yuan bond underwriting.
It’s tempting for European banks to conflate the financial industry with the other sources of U.S. economic influence. The dollar continues to be the world’s reserve currency, and the U.S. Department of the Treasury has stepped up its role as a global financial cop—whether on trade with pariah states, policing money laundering, or enforcing tax laws. Foreign bankers and lawmakers bristle at what they call the “weaponization” of the dollar—how its dominance makes it harder for other countries to borrow and trade—and fear that Washington is indirectly giving Wall Street a boost by fining overseas banks billions of dollars.
The EU is starting to push back. Brussels was dismayed by the Trump administration’s withdrawal from the 2015 international agreement to curb Iran’s nuclear program and pursuit of penalties for companies that have renewed doing business with the oil-rich country. So Brussels is trying to cook up a way to get around the dollar-denominated economy to preserve commercial links with Iran.
Indeed, Trump’s willingness to undo long-standing accords on trade, security, and climate change has emboldened rival powers to challenge Washington’s reach. On Dec. 5 the EU unveiled an initiative to strengthen the euro as an alternative to the dollar by calling for companies in the financial and energy industries to denominate more trading contracts in the single currency. China is in its fifth year of rolling out its Belt and Road Initiative, a program worth hundreds of billions of dollars designed to project Beijing’s influence through myriad infrastructure and commercial ventures in dozens of nations in Africa, Asia, and Europe. Russian President Vladimir Putin, for his part, has called on nations to use their own currencies for international trade to blunt U.S. economic power.
Yet when it comes to Wall Street, the great game of geopolitics may ultimately amount to little more than noise. The industry, of course, has only one lodestar: money. And if a tectonic shift such as Brexit creates new opportunities, you can bet America’s big banks will grab a bigger share of business. Still, some fret about what will happen when the cycle turns. “The banks are never going to be terribly good at identifying what would cause them to fail,” says Paul Tucker, chairman of the Systemic Risk Council and former deputy governor of the Bank of England. “There will be a recession at some point, and people will lose money. The economy relies on these banks, and so they need to be able to withstand a lot of stress.”
Theoretical fears of some future downturn aren’t likely to put off Wall Street from making money today. And in the pursuit of profit, America’s global financial profile will grow only more prominent. “That old adage that the business of America is business is still true,” says Curtis Chin, the former U.S. ambassador to the Asian Development Bank and now an Asian Fellow at the Milken Institute. “Soft power comes in many forms.” —With Chitra Somayaji
To contact the editor responsible for this story:
Howard Chua-Eoan at email@example.com
BOTTOM LINE – American banks are establishing global hegemony as European institutions retrench even before London loses its place as the world’s financial capital.