The Economic Crisis and National Strategy

Summary
The current global economic crisis has multiple ramifications on U.S. foreign policy. Not only does this crisis reveal fissures in U.S. diplomatic strength; but also, it highlights the strengths of Neo-Communism. Geopolitical Thoughts believes U.S. foreign policy principals need to be paying attention to the subtle monetary and economic moves from these Neo-Communistic nations throughout the duration of this unprecedented global economic crisis. Such moves can reveal as much about these new governmental abilities and intentions as do overt military moves. Moreover, U.S. leaders should treat this crisis as an opportunity to identify its own weaknesses.

Analysis
During his presidency, Dwight Eisenhower was quoted as saying the strength of the United States wasn’t its military, but its economy. Eisenhower’s remark still rings true in relation to the economy being more important for the U.S. than any other nation. However, what was once the U.S.’s strength is now an Achilles’ heel as it pertains to diplomatic leverage.

Much has changed since Ike’s presidency. Most notable for purposes of this discussion is the rapid economic development throughout the world. No longer does the health of the U.S. economy dictate the direction of all other’s. Furthermore, no longer is democracy’s chief protagonist a Marxist structure that is fundamentally flawed. The point is in the new world order total dependence on a globalized economy can work against capitalistic democracies. The U.S. as compared to China and Russia is a perfect example of this argument.

The ability for the United States to influence international issues is dependant upon the strength of the U.S. economy. As the U.S. economy goes, so goes its international influence. While part of this is the basic reality of being a capitalistic country, this paradigm should not be as correlative as it currently is. Part of the reason is the U.S. shift to a NeoCon-driven foreign policy dampening the U.S.’s ability to leverage its ideals and goodwill. Regrettably, an unpredictable side-effect is how this devalued goodwill has allowed the potential for longer-term security threats to develop.

Geopolitical Thoughts has argued for some time that the Neo-Communistic political structures that continue to evolve in Eurasia has a real potential to threaten U.S. interests long-term. In a Neo-Communistic structure, the consolidated political power allows for opportunistic moves internationally and flexibility to mandate domestic issues economically swiftly. This structure gives these national structures the necessary domestic support because of the government’s willingness to allow a quasi-capitalistic economy that ensures the support of its oligarchs. The strength of this quid-pro-quo structure is harder to see when the global economy is thriving. During good economic times, nations from the outside can point to the economic wealth that is created with the false belief that capitalism is dictating government decisions. However, this current economic environment reveals just how much control these nation’s leaders have.

Russia
Most news sources point to the suffering Russian market and ruble to argue that Russia is at risk of slipping back to the economic and social unrest of the early 1990’s. That would be an over-simplification of the global situation. Worse, this ignores Russia’s ability to capitalize on the situation for long-term benefits. This global economic crisis has created opportunities for Russia to take advantage of the situation by providing diplomatic, economic, and military assistance. Russian President Dmitri Medevev and Prime Minister Putin have been quick to react to fluidity of the situation.

Russia is leveraging the situation diplomatically to get back into good graces with the EU. They have given the German military approval to transport weapons and military equipment through Russia to German units in Afghanistan. Additionally, President Medvedev signed a decree giving Spain permission to send troops and supplies through Russian territory to support the Spanish presence in Afghanistan. These acts of generosity are providing the leverage to prevent Ukraine, and other former-Soviet satellites, inclusion into NATO.

Russia is making overt military moves with the knowledge that it is hard for the U.S. to focus on issues outside of the U.S. economy. They are seeking a strategic airbase in Tajikistan. Putin is aggressively attacking the issue of U.S. missile defense systems in Poland. Somalia is reaching out to Russia for assistance in addressing piracy with military force despite the fact that the U.S. Navy already patrols the region.

Russia’s relative strength is revealed in other ways. Russia is using economic leverage where possible. Unlike the U.S. and virtually all EU nations, Russia is not facing the economic crisis with an over-levered balance sheet. Russia remains very well capitalized. Its reserves are still over $450 billion even after a 25%+ slide since August. Russia was Iceland’s first call for financial assistance when that nation started to collapse. Russia stated its willingness to curtail crude production if need be, a signal that it is not as dependant upon the commodity as many think. Russian companies, many flush with cash, are capitalizing on other country’s weakness. Russia’s largest gold mining company is taking a controlling interest in Kazakhstan’s largest gold company. Without a Neo-Communistic governmental structure, Russia would not be able to capitalize so rapidly on the U.S.’s weakness due to the economic crisis.

China
The situation between the U.S. and China is much less nuanced. China is in a much greater position of strength than Russia and knows it can flex its muscle at will. Domestic U.S. auto manufacturers are pleading for government funds arguing that the U.S. economy depends upon their health to prevent a depression. However, the U.S. auto industry impact pales in comparison to China’s influence on global and U.S. economic growth. For example, the $150 billion infrastructure plan being proposed by President-elect Obama might be an incremental positive to the U.S. economy, eventually. Unfortunately, this stimulus is a moot point compared to China’s infrastructure ambitions that are four times the size of the U.S.’s. ($585 billion, to be exact.) The rapidity with which China can kick-start needed U.S. metallurgic coal, steel, or heavy equipment exports dwarfs anything that the U.S. government can do to stimulate the economy.

Because China, like Russia, has evolved into a new form of government structure, it too has an ability to allow for economic growth without relinquishing governmental control. This Neo-Communistic structure gives such a nation multiple levers to pull when need be. Domestically, China is managing economic growth efficiently and effectively. They are curtailing steel production by shutting down inefficient, overly-polluting mini-mills through manipulation of Nationally-controlled bank financing as well as access to electricity. Democratic free-market nations like the U.S. cannot do this. This structure also allows more control over the pace of growth and all of the international ramifications that come with it. Case in point, by merely resuming its domestic steel production, China would instantly resurrect the 90% decline in Baltic Drybulk Rates to normalized levels, effectively saving entire economic sectors from pending financial collapse. The Chinese government knows this. The U.S. leadership knows this too. The problem is many in the U.S. want to believe it is free-market capitalism at work and not market manipulation. By doing so is to ignore what the situation really is: a growing dependency on a country that is not democratic and is not afraid to challenge the U.S.

Summary
Until the credit crisis is over and signs of an economic recovery are seen, the United States’ position of strength on the international stage will slowly erode, even if it seems imperceptible to the naked eye. In the meantime, it is important to realize this new form of government, Neo-Communism, is starting to flex its muscles. This new coupling of totalitarianism governmental leadership with quasi-capitalism poses long-term threats to U.S. interests. This should be a warning signal for the importance of reclaiming the intrinsic value of promoting freedom through nuanced foreign policy and not forced-democracy. Hopefully, such a realization of this fact will be one of the silver linings that comes out of this recession’s aftermath.

Need to Shift Middle East Foreign Policy

Discussing the Middle East as a tempest pot is nothing new. However, public attention to the issue tends to shift focus from the biggest perceived threat to the next. This encourages the interest in confronting a singular person than truly discussing the political instability as a whole. Some who are politically motivated want to exploit this by encouraging Americans to believe that removing Ahmadinejad from Iran will miraculously improve conditions in the Middle East just like it was argued the same would happen with the removal of Hussein in Iraq. However, as an Air Force colonel on the condition of anonymity pointed out, “Most of the Middle East Problems are economic.” This individual, who deals directly with the State Department in the region, stated that the supposed cultural differences go away with an economic structure that trickles throughout the population.

This idea of an economically-focus foreign policy effort instead of a military-focused effort pinpointed on terrorism is gaining attention, albeit not enough. Just this week, lost in the shuffle of the U.S. election, Jordan’s Queen Rania highlighted the issue of unemployment in the Arab world. She stated that the number of unemployed adults under 30 in the region is likely to grow from 15 million (a startling figure in and of itself) to a staggering 100 million by 2020. The Middle East already has the highest rate of unemployment among young adults in the World.

The decreased level of violence in Iraq has sent mixed signals to the U.S. public that the Middle East is slowly settling down. True, the U.S. might be succeeding in its efforts against terrorist cells. That is a matter of subjectivity. However, the bigger picture of the Middle East shows an increasingly fluid situation with more countries seeking regional supremacy.

The point of this line of discussion is that U.S. foreign policy in the Middle East needs to focus on economic development, the true lynch pin to stability in the region. If the U.S. doesn’t, someone else might provide the needed long-term economic stimulus and gain influence over key Middle East players. Additionally, this economic unrest in the Middle East will continue to feed terrorist activities and aggressive sovereign nation actions.