By Patrick Doherty and Ben Katcher
While the media are drawn to the story of the day, which today means the killing of Baitullah Mehsud in Pakistan and the longevity of the "cash for clunkers" program here at home, it is essential for the Obama administration to keep its eye on the strategic ball. In short, while the administration was absolutely right to triage the domestic economy and global crises like Iraq and Afghanistan during its first six months, the President and his most senior advisors must now turn to the great questions of statecraft: great power relations and America's role in the world.
The reality is that the post-war global order, in which the United States asserted a de facto strategy of hegemony, is now irretrievably dysfunctional and, when it comes down to it, triggered the domestic and foreign crisis that consumed the president's agenda until now. That old strategy, as our colleague Michael Lind has written, was founded on a simple bargain: Washington would let the rest of the world export to the American consumer, hollowing out our own manufacturing base but subsidizing our consumer lifestyle. In return, we would assert a kind of global hegemony, using the tools of foreign policy to dissuade the rise of peer competitors (our military budget and capabilities), to reassure the world's powers that we would take care of common threats (Iraq, Afghanistan, Serbia), and in those cases of resistance to our hegemony, to coercively disarm them (Iran, North Korea).
It was always a time-limited gambit and time finally ran out a year ago when the economic foundation of the strategy collapsed spectacularly in the U.S. housing crisis. Addicted to the false security of bundled American home mortgages, Wall Street built a house of un-priceable derivatives on the sand of irresponsible sub-prime mortgages -- fueled by easy access to credit provided by exporting nations like China, Japan, Germany and the Gulf States. Borrowing against rising home prices to keep consumption high, American households lost trillions in home value and cut back dramatically on consumption--such that Chinese exports fell 30 percent.
At the same time, our over-stretched military was finding it harder and harder to find the budget and the manpower to match the operations tempo that hegemony required. And despite today's confirmation of Baitullah Mehsud's death, it looks increasingly like that operations tempo will only remain high, if not get higher.
Furthermore, the basic strategic facts on the ground have changed dramatically since the early 1990s when hegemony was proffered during the George H. W. Bush administration. China is now a massive economy whose GDP is more about building China then exporting cheap goods to the West. Russia is no longer the post-Soviet basketcase it was under Boris Yeltsin, for Vladimir Putin has marshalled its energy resources and nuclear arsenal to make it a real force in the many strategic issues along and beyond its incredibly long frontier. Europe, meanwhile, used the last two decades to absorb Eastern Europe and along the way avoided getting into a balance of trade trap with Asia. Japan remains a major creditor of the United States and is increasingly concerned that American security guarantees in East Asia are not what they once were. Indeed, the combined economies of Russia, China, India and Brazil are likely to outstrip those of the G-7 in twenty years time, according to Goldman Sachs Chief Economist Jim O’Neil.
Luckily, this new reality points directly to the major issues that require a new great power agreement: global macroeconomic rebalancing, the need to adapt and manage global energy markets, and establishing global and regional collective security architectures.
The most immediate challenge is to begin rebalancing the global economy in a way that promotes sustainable global growth. The American consumption-led model of global growth is not coming back. The great powers must work together to create and balance new sources of domestic demand within their own territories. The United States and China in particular must conceive a new economic relationship that reduces the massive trade and capital flow imbalances at the root of the present economic recession. This will require a combination of policies that reorient China’s economy toward domestic demand and develop a new economic engine to power the United States for the coming decades.
Of equal importance is energy. The United States’ Energy Information Agency 2009 Energy Outlook predicts that global energy consumption will increase 44% from 2006-2030. Anticipating this increase in demand and the corresponding increase in prices, the great powers have so far conceived of energy security as a largely zero-sum game, and competed with one another for access to hydrocarbon resources from Africa to Central Asia to the Arctic Pole.
Russia, China and the United States all rely on a highly volatile and fragile global energy system. Such volatility, however, has had negative impacts in each of the great powers in recent years. The rise in oil prices accellerated the financial crisis in the United States, in China, high energy prices forced government energy subsidies that, for a while, took the profit out of their export sector. While in Russia, falling prices undercut government subsidies to its uncompetitive industries and massive pensioner class.
With Russia and Europe competeing over access to Caspian and Central Asian energy, with Russia, China, and the United States competing over Iranian energy resources and the U.S. and China signing a memorandum of understanding committing both to work towards a "low carbon economy," the geopolitics of energy will continue to shape the strategic outlook of great powers unless something changes. A new energy order that allows economies to develop, transform and function while facilitating global stability and prosperity is in all the powers' interest but as of yet is hard to discern.
Finally, the security arrangements and institutions that guided the United States through the Cold War must be updated to reflect current power realities. This requires a serious effort at global institutional reform as well as the creation of capable regional security structures that allow for rules-based regional resolution of threats to international security. At the global level, the UN Security Council and the International Financial Institutions need to reflect the realities of today, not 1945. Looking to models like NATO and the EU, regional organizations like ASEAN, the African Union, and the Rio Group need to increase their capability to promote regional stability and sustainable economic integration. Governor George W. Bush was right: the United States should not be the world's policeman.
As President Obama emerges from his first six months of domestic and global triage, conventional wisdom believes that his next priorities should be the usual laundry list: health care, climate change, Iran, Afghanistan, and North Korea. But a deeper look at these issues, we believe, reveals that most of them can be made much more tractable if the President first strikes a durable great power bargain with Russia and China.
The reasons for focusing on Russia and China should be clear. Russia because of the leverage provide by its energy resources and infrastructure and its nuclear arsenal, and China because of its rising economy and massive population. Europe, Japan, India and Brazil are, of course, real or rising world powers and must be accommodated in any new global concert, but their interests, capabilities, outlook and strategies are simply do not cross the great power threshold.
Of the three great powers, the United States is in the strongest position to lead such an agenda. Our post Cold War grand strategy has met its natural death and the Obama administration came into office with a mandate to not only deliver change we can believe in, but specifically to "change the mindset" that led the United States to war in Iraq. Meanwhile, China and Russia are in the opposite position: their ability to adapt their grand strategies to a new American agenda is extremely limited, giving the United States a significant silver lining.
But there is not much time. Grand strategy must be conceived of and executed well in advance of political judgment days. There are less than three years before the Obama administration must report on its progress to the American electorate and Russia and China's current strategies are every day reducing American maneuverability and options. It's time to focus.