Divisiveness is Upsetting More Than Home Front
Today, U.S. foreign policy is more prone to challenge as allies and foes alike doubt American resolve. Examples are China’s intrusions in the South China Sea, state-sponsored hacks of American systems, and recently, the Russian-Turkish-Iranian decision to go it alone in Syria. Furthermore, America can’t seem to exert its power on the sources of terrorism which are spreading and becoming increasingly more effective.
America is seen as far less relevant and its exceptionalism, far less exceptional. Not since America’s ascent on the global stage following World War II, has its geopolitical power been so fractured. And although fiercely argued in the presidential election and continuing on in the mainstream media, a clear consensus on its causes or its remedies is not likely anytime soon.
Many point to U.S. action in the Middle East over the last two decades. Some say it was unavoidable with the rise of emerging nations. But the debate is mistaken and is merely focused on politically-charged symptoms. The issue of America’s geopolitical decline is core to its greater underlying political divisiveness – the levels of which have not been seen since the Civil War. Further, the U.S. will be unable to right its superpower status until the home front is finally stabilized.
Understanding the turn of causative events will show that much the decline was driven by misplaced economic incentives. And typical with most stories on rise and fall, the breakdown will be found mostly of America’s own doing.
By most, American decline is measured against its Cold War standing when American foreign policy was cohesively purposed. Pax Americana was intended to stop communism and impede another global war. All means – military, trade, diplomatic, production, investment – were consistent and steadfast to those ends. As a result, U.S. wealth and power grew far beyond what the world had seen before and the broad-based increase spilled over to its western allies.
Even with occasional missteps at home and abroad, U.S.-led globalization achieved its goal – ridding the world of its dangerous bipolar power structure. Domestic support and non-conflicting self-interest reigned; for if it hadn’t, Pax Americana would have otherwise failed.
As the Cold War thawed, a new playbook was eagerly adopted. The world rejected communism and optimistically moved headlong into capitalism. Technological change and perception of the now unwarranted U.S. military dominance allowed for idealistic directions in foreign relations and economic globalization. The U.S. watched as capability and capacity significantly expanded in places that had previously been left behind. The downside was that far too many factories were built relative to the world’s wherewithal to consume, and thus, supply precariously outpaced demand.
Consistent with a massive increase in supply, the first signs of deflation appeared. Foretelling was the “Asian Flu” economic crisis of 1997. The American and Japanese economies sputtered as competition from emerging economies began to take hold. Germany, with a reunited east and its new undervalued currency (euro), would again rise to the detriment of its European neighbors, and increased oil production from Russia and others would weaken the Middle East’s energy empire. Unfettered globalization would cause the greatest shift of wealth in nearly a century and turn the world’s status quo on its head.
To combat the onslaught of global deflation – expected to be most severe in the debtor societies of the West – American policy mandated global monetary expansion (debt) to keep order, stimulate demand and sop up excess capacity. In that way, its standard of living would not be inconvenienced. Easy money did increase consumption, although mostly in the West. But monetary policy failed to encourage enough sustainable investment in productivity and its policy-makers failed to anticipate the sheer size of their ultimate undertakings, along with the byproducts of financial crises and the extreme economic inequality that were encouraged.
At home and abroad, the U.S. and its allies had naively established conflicting self-interests and dubious new dependencies. Regulation (and costs) increased in sectors that could be outsourced abroad making much of America’s industry noncompetitive. Meanwhile, deregulation was targeted for those sectors identified as being consistent with America’s new globalized role (financial services and technology), thus setting the stage for the dot.com bust, the housing and banking crises, and more. Consequently, more than just inconvenience became certain when the unanticipated and now interconnected failures would ultimately take place. Human nature and negative outcomes had been profoundly underestimated.
Additionally, the Cold War could not be so easily unwound, especially in the Middle East, where Soviet-American proxy contests had reignited long standing rivalries. Many of the seeds sown by the West during the first and second world wars and then nurtured during the Cold War would be cause for the chaos witnessed in the Middle East over the last quarter-century. And much of it had to do with oil – the world’s most globalized product.
Middle Class and Populism
Undeniably, globalization lessened the value of the West’s middle class. Unable to compete with cheaper labor abroad and higher regulatory costs at home, the middle class lost opportunity and wealth. Its frustration would start an irreversible process to resist globalization while also setting the stage for further divisiveness and the upswing in populism.
Helping the cause for reform, the plight of the masses from the disparate economic recovery (reflected by inflated assets and unemployment statistics distorted by record low participation rates) went largely unrecognized by the West’s leadership and elite. And both were stunned when recent election results reflected a formidable undercurrent for change. Those left behind by globalization now seek to turn back the hands of time, a particularly difficult, if not impossible task without a significant overhaul of the global economic system.
America’s Extreme Divisiveness
Which leads to the current levels of divisiveness. Many are discounting America’s political divide and point to its recovery from troubles during the civil rights and anti-war movements of the 1960s. However, the current level of global divisiveness is only truly comparable to the upheavals associated with the closing stages of nationalism in the 1930s, and the post-Industrial Revolution turmoil of the 1850s. Both led to major restructurings of the global economic system.
Current ideological differences are strongly influencing where we live, how we spend our money and who we associate with. Few Americans can recollect a period of more widespread difference than now. Each side considers the other a threat to the nation’s well-being. The worry is that today’s divisiveness may serve as impetus for an overhaul similar to those witnessed in the past with all the attendant consequences.
Simple common sense makes it easy to conclude that crucial policy efforts, both foreign and domestic, will be ineffective without repair of America’s political divide.
Russia and China
Russia and China do have their own internal and not so insignificant problems, but domestic opposition is causing much less concern there. Russia’s Putin and China’s Xi Jinping have domestic approval ratings greater than 80% and are the envy of every western leader. Putin and Xi have managed a widespread belief in rising fortune, while many in the West believe that the American dream is dead.
With such high levels of domestic support, Russia and China have been able to successfully project their rising global power. So that global power has now returned to the Cold War’s zero-sum game of absolute winners and losers, and whereby, Russia and China’s gains have come at the West’s expense.
Divide and Conquer
So America is vulnerable. Suspicions of state actors meddling in the presidential campaign, whether true or not, point to an effective strategy to capitalize on American divisiveness. Not considering which candidate won, as long as the divide remains intact, America’s political impasse and its geopolitical slide will continue.
It’s like tipping a wall rested on a crumbling foundation and the highly-energized poles of western discord enable it. Therefore, the only way to lessen a geopolitical pivot away from America is through repair of its divide – a course that is likely only through rebirth of widespread prosperity and which is decidedly at odds with the interests of America’s opponents.
Without a dramatic silver bullet that increases broad-based wealth creation, the world will find itself once again at a dreadful crossroads. The path of continued globalization will further only those interests that have been on the receiving end of the great wealth transfer, and including those domestic factions that have facilitated or benefited from globalization. But the path of continued globalization (as we know it) is not sustainable, and therefore, cannot last. The West’s divisiveness, low productivity, and high debt load will ultimately force its conclusion. That said, the longer globalization does endure, the American decline will likely worsen, an outcome most definitely bad for the whole of American society.
Alternatively, if the path taken, obstructs globalization more quickly, it comes with the same result. It’s a matter only of timing with the ultimate reconciliation becoming more dreadful the longer it is delayed. There should be no illusion that the world’s current globalized structure can continue as it has. Also, there should be no illusion that the related divisiveness now present in the U.S. is causing nothing less than a critical junction in the Union’s story. America (both sides of the divide) should cease its recklessness, move toward the center of common good, and finally recognize the severity of the hazards that lie ahead.
Christopher Petitt – financial executive, board advisor, and business consultant – is the author of the book, The Crucible of Global War: And the Sequence that is Leading Back to It. It is available for sale at Amazon.com, Barnesandnoble.com and at bookstores everywhere.