WSJ: US global influence is waning
By Frederick Kempe (The Wall Street Journal)
Updated: 2005-10-17 13:34
NEW YORK ĘC My new office window looks down on Ground Zero, a useful
perspective on America as it grapples with the globe.
The place where America once reached highest is now its most controversial
construction site. Design disputes, security concerns and political squabbles
have delayed building and watered down the boldest blueprints. It's a metaphor
for a larger problem: America is more capable than ever before of grand
achievements, yet it's finding them harder to execute for reasons that are as
often as not self-inflicted.
My new office view is a daily reminder -- upon returning home after a 15-year
assignment abroad -- that America 2005 is a dramatically different place than
the country I left. Like the World Trade Center, America 1990 spoke of limitless
possibilities. The Berlin Wall had fallen and the Soviet bloc was imploding,
leaving just one superpower standing. America now is no less powerful, and by
many measures it is mightier. Yet at the peak of its power, it has become a more
vulnerable, apprehensive and polarized place. What's changed most is the U.S.
ability to translate muscle into clout, strength into influence.
The evidence is ample:
U.S. military superiority doesn't produce proportional results.
America's annual military spending is greater than that of the 25 countries of
the European Union, China and Russia put together. Yet the U.S. is woefully
ill-equipped to take on its greatest new threat, non-state actors (diplo-speak
for "terrorists"). Some Pentagon planners doubt they have the resources for a
new major military engagement simultaneous with Iraq. They privately concede the
political costs may be too high and their weaponry and intelligence insufficient
to block Iran's nuclear ambitions.
New rivals are eroding American
economic influence. The U.S. importance to the global economy in some
respects is greater than ever before. It still accounts for 21% of world output,
and though Americans make up just 5% of the world population they buy 18% of its
exports. Yet America's ability to exert influence has been reduced by the rise
of an increasingly aggressive China, whose companies are growing more
acquisitive and whose officials are striking trade deals abroad with U.S.
friends and foes. Meanwhile, an expanded European Union has become a trade and
The U.S. has "globalized" faster than policy
makers have been able to adjust. The U.S. economy has never been so
dependent on foreign money and companies. Foreign direct investment has flooded
the country since 1990. Foreign buyers -- Japan and China leading the pack --
are the primary holders of expanding American debt. American companies have come
to rely more on profits earned abroad. For all that change, however, U.S.
politicians think less globally than business people, although everything from
mortgage rates to gasoline prices is in foreign hands. U.S. diplomats are too
frequently outmaneuvered on multilateral issues of central importance, ranging
from global warming to Internet governance.
Foreign influence on U.S.
economic health has grown dramatically while the American policy response hasn't
kept pace. The U.S. economy has never been so dependent on foreign capital
and companies. Foreign direct investment has flooded the country since 1990 --
more than $1.6 trillion in fifteen years, and foreign-owned assets have
quintupled in that time to $12.5 trillion. Foreign buyers -- Japan and China
leading the pack -- have become primary holders of expanding American debt.
American companies have come to rely far more on profits earned abroad. For all
that change, U.S. officials often introduce domestic policies -- such as
Sarbanes-Oxley rules on corporate accounting -- without sufficiently considering
their negative impact on foreign investment. U.S. diplomats are too often
outmaneuvered on multilateral issues from global warming to, most recently,
Internet governance. Caught off-guard, the U.S. and its global
technology-industry allies are now waging a fight to block a European
Union-inspired effort to shift Internet governance from a California nonprofit
known as Icann to a multilateral institution -- an effort to make oversight more
governmental and less American.
America's technological gap is
shrinking. American retains its innovative lead, and no country comes near
America's quota of miracle startups and world-beating entrepreneurs. Yet China
and India are churning out an army of well-educated scientists and engineers,
and both countries are showing remarkable technological and entrepreneurial
creativity. International testing confirms U.S. declines in math and science. A
new OECD report shows the U.S. as eighth and ninth respectively in the share of
its people between ages 25 and 34 who have college and high school diplomas. It
was first and second by those measures 20 years ago.
polarization hurts U.S. leadership. The ability to exert influence is also
a matter of political will. One of the great changes in today's America is
political rancor, which accelerated during the Clinton years and has grown
since, reducing friendships and collaboration across the ideological divide. A
new Council on Foreign Relations report warns that partisan politics is
endangering U.S. primacy. At a time when the world must draw the contours of a
new era, Americans are fighting over the pen. "The tough questions are not being
probed," the report says.
You don't need a dictionary to know that global
clout is the mixture of power and the ability to exert it. To understand the
current situation, says James Hoge, editor of Foreign Affairs magazine, imagine
the U.S. as the still-mightiest truck on a superhighway clogged with so many new
obstacles and increased traffic that it has grown harder to deliver the goods.
"We have this overwhelming economic and military power, but it's a power
that's not as easily useable," says Brent Scowcroft, who was George H.W. Bush's
national security adviser back in 1990. He concedes his job would be a much more
complex and difficult one today. Back then the greatest threat was that of
nuclear war between the Soviet Union and the U.S. "But beneath the apocalyptic
threat of nuclear conflagration it was a pretty tidy world." Fewer people lose
sleep today over mutually assured destruction, but that's been replaced by a
range of lesser-order nightmares.
Iran is as good a place as any to watch the new world's forces at work.
America's dominant military produces miracle weapons like bunker-busting
bombs that theoretically could stop Iranian nuclear ambitions in a flash. Yet
one former U.S. administration official concedes Washington faces barriers to
its efforts to block an Iranian bomb. They grow out of insufficient ability to
find and hit Iran's buried and dispersed nuclear sites and, barring the military
option, a growing difficulty to apply other pressures to Iran when Tehran's
political and economic clout is growing.
Soaring oil prices have helped Iran fund insurgents and terrorists in Iraq.
At the same time, Iran has negotiated new economic and trade deals with
energy-hungry China and India. These expanding relationships make the prospect
of U.S.-driven economic sanctions against Iran via the United Nations Security
Council all the more unlikely. "The principal beneficiary of the overthrow of
Saddam has been Iran," says the Niall Ferguson, author of "Colossus, the Price
of America's Empire."
However, Mr. Ferguson, a financial historian, doesn't agree with those who
argue that America's clout has been significantly hurt yet by its mounting
external debt, of which some 45% is held by foreigners compared with some 18% in
1990. "If you are the world's greatest power and borrowing in your own currency,
you are in a different position than Argentina," he says. Indeed, China by
acquiring so much American debt has become a stakeholder in America's continued
economic success. The point isn't so much the debt but the cost of servicing it,
which has been low thus far. Thus, American consumption and borrowing perhaps
have been the most important drivers of global growth.
More troubling and lasting in its impact is the growing "skills deficit,"
says Goldman Sachs International Vice Chairman Robert Hormats. Though U.S. elite
universities remain the world's best, primary education results are falling. If
America doesn't address this problem in a global-knowledge society, it may well
lose its innovation lead over time. "We have the greatest entrepreneurs in the
world, but without a well-educated society they would be like jockeys without a
Indeed, perhaps the most dramatic difference between America 2005 and 1990 is
that the U.S. must move faster and smarter to avoid falling further behind.
"America is the Red Queen," says Mr. Hormats.
For the uninitiated, the "Red Queen principle" applies to an evolutionary
system where continuing development is needed just in order to maintain fitness
relative to others. It arises from what the Red Queen told Alice in Wonderland
in Lewis Carroll's "Through the Looking Glass": "In this place it takes all the
running you can do to keep in the same place."
Write to Frederick Kempe at Fred.email@example.com