How The Financial Crisis Undermined US Power

By Peter Beinart
Monday, Jun. 21, 2010
Courtesy Of "Time Magazine"

When the White House announced its National Security Strategy last month, it titled it A Blueprint for Pursuing the World That We Seek. A better title might have been The Fun Is Definitely Over. The document used the phrase "hard choices" three times, called for "a disciplined approach to setting priorities" and predicted "trade-offs among competing programs and activities." The nature of those trade-offs was never spelled out, but the implication was clear: America doesn't have as much money and power as we once thought. We can no longer conduct foreign policy on a blank check.

Call it Obama foreign policy 2.0. When the President and his national-security team came into office, broccoli was not on the menu. Instead, the talk was about boosting the nonmilitary aspects of American might. In her confirmation testimony, Hillary Clinton talked endlessly about "smart power," meaning power that does not come only from the barrel of a gun. She dispatched über-envoys like Richard Holbrooke, George Mitchell and Dennis Ross to supercharge American diplomacy in the greater Middle East. A little more than a year ago, Obama went to Cairo University and projected himself as a 21st century global peacemaker, promising to close Guantánamo Bay and repeatedly quoting the Koran. (See pictures of Obama's trips overseas.)

At the time, all this made sense. Coming into office, Obama inherited a foreign policy in the red. The Bush Administration had staked out a series of commitments — vanquishing the Taliban, preventing a nuclear Iran, spreading democracy far and wide — that it lacked the power to fulfill. So like a debtor who decides that it's easier to ask for a raise than chop up his credit cards, Team Obama decided to focus on boosting American power, not reducing American obligations. The Bush Administration, they reasoned, had leveraged only military power. Obama would deploy "soft power" too, the power to attract rather than coerce.

The Obama Administration's charm offensive hasn't been a complete failure. Personally, Obama is far more popular overseas than was George W. Bush, and that popularity has brought the nastiness of adversaries like Mahmoud Ahmadinejad into sharper relief. But the very nastiness of those adversaries means that they don't get rattled by low favorability ratings. What's more, Obama's efforts to change America's image have been constrained by his inability to change certain U.S. policies at home. The best way for America to promote its values is "by living them," declares the National Security Strategy, but when it comes to closing Guantánamo Bay or dramatically reducing U.S. carbon emissions, Congress has shown little interest in making Washington a shining city on a hill.

These problems, however, pale before the overarching one: despite Obama's personal popularity, American soft power isn't going up; it's going down. The reason is the financial crisis. America's international allure has always been based less on the appeal of the man in the Oval Office than on the appeal of the American political and economic model. Regardless of what foreigners thought of Bill Clinton, in the 1990s America's brand of deregulated democracy seemed the only true path to prosperity. American economists, investment bankers and political consultants fanned out across the globe to preach the gospel of free elections and free markets. America represented, in Francis Fukuyama's famous words, "The End of History." (See pictures of Obama in Russia.)

Now it is much less clear that history is marching our way. The financial crisis has undermined the prestige of America's economic model at the very moment that China's authoritarian capitalism is rising. A decade ago, poor governments hungry for trade and aid had no choice but to show up in Washington, where they received lectures about how to make their economies resemble America's. Now they can get twice the money and half the moralizing in Beijing. From Iran to Burma to Sudan, the Obama Administration's charm offensive has been undermined by China's cash offensive.

The result is that 18 months after it took over a foreign policy in the red, there are growing signs that Team Obama understands that no raise is on its way. The White House is starting to confront the "hard choices" that come from trying to pare down America's commitments overseas.

The crucial moment came during last year's deliberations over Afghanistan, a nation that was supposed to be a test case for the virtues of smart power. Not only would Obama send more troops, but he would send agricultural experts to give Afghan farmers an alternative to opium. Generals David Petraeus and Stanley McChrystal, both fervent devotees of a counterinsurgency doctrine that emphasized winning hearts and minds, were all in. All they requested was a willingness to sustain these efforts for as long as it took.

The answer they got was no. Under pressure to go all in on making smart power work in Afghanistan, the White House — according to Jonathan Alter's new book, The Promise — responded with a fierce counterattack. Obama brought Office of Management and Budget chief Peter Orszag into Afghanistan-strategy meetings to explain how much escalation might cost. Obama reportedly insisted on a date certain for beginning to withdraw U.S. troops and told his generals not to settle in for a long war. He also ratcheted down what victory in Afghanistan meant. Whereas the U.S. had once aimed to destroy the Taliban, its new goal, according to the National Security Strategy, is merely to "deny the Taliban the ability to overthrow the government and strengthen the capacity of Afghanistan's security forces." In foreign policy terms, that's like deciding that because you can't afford a Hummer, you'll drive a Hyundai instead.

In some ways, Afghanistan was unique. Karzai's decision to steal an election certainly helped convince Obama that it wasn't the place to double down. But the spirit underlying Obama's decision is manifesting itself in other ways as well. On Iran, the diplomatic offensive of Obama's first months in office has been replaced by a bid for new sanctions. But quietly, the Administration seems to be realizing that a nonnuclear Iran may be another Bush-era goal that the U.S. cannot achieve. In April, the New York Times got hold of a memo from Defense Secretary Robert Gates suggesting that it was time for the White House to begin serious preparations for how to contain Iran if it builds a bomb. Obviously, the Obama Administration still hopes that economic and diplomatic pressure will persuade Tehran to switch course. But it seems clear that Team Obama would rather dial back the Bush Administration's commitment to prevent Iran from going nuclear than enmesh itself in a war that could force American foreign policy deeper into the red. (See pictures of people around the world protesting Iran's election.)

A few weeks before the Administration released its National Security Strategy, Gates went to the Eisenhower Library in Abilene, Kans., to offer the bluntest statement yet of Obama foreign policy 2.0. The choice of venue was not accidental. Ike took office at another moment when the U.S. had assumed vast new obligations around the world. Containment, which in the late 1940s had been a modest doctrine aimed at helping Western Europe rebuild economically after World War II, had become by the early 1950s a global commitment to fight communism anywhere on earth. Behind that commitment lay a belief — propagated by Keynesian economists like Leon Keyserling, the head of Truman's Council of Economic Advisers — that the U.S. could assume an almost unlimited set of overseas military burdens because in an economy as dynamic as America's, debt was nothing to worry about. Eisenhower disagreed with every fiber of his penny-pinching Midwestern being. As Gates noted, Ike steered clear of lengthy, direct military interventions in Vietnam and the Middle East because he didn't want to spend money America didn't have. For Ike, debt was almost as frightening as communism because, as Gates explained, the U.S. "could only be as militarily strong as it was economically dynamic and fiscally sound."

The terrorist attacks on Sept. 11, 2001, Gates told the Abilene crowd, "opened a gusher of defense spending ... The gusher has been turned off and will stay off for a good period of time." He might have noted that 9/11 also opened a gusher of new U.S. overseas military commitments: ground forces in Iraq and Afghanistan, new military bases across Central Asia. The Obama Administration, it is now clear, is trying to cap that gusher as well and is struggling against a uniformed military leadership that doesn't want to back down from a fight and a sea of right-leaning pundits who are itching to accuse Obama of appeasement. Capping gushers, as Obama has learned, is difficult work. But somewhere, Eisenhower is watching, rooting him on.

Beinart is an associate professor of journalism and political science at the City University of New York and a senior fellow at the New America Foundation. This piece is adapted from his new book, The Icarus Syndrome: A History of American Hubris