The onset of war produced a rare instance of agreement among the liberal and conservative press: U.S. unilateralism will impact the global economy.
Writing in the Wall Street Journal, Michael Sesit lamented that the U.S. decision to invade Iraq without the support of the United Nations has "unleashed forces that could impact the global economy and financial markets for years." From the left-wing pulpit of The Nation, William Greider said, "The boosters of corporate-led globalization should understand that their vision of a New World Order is fundamentally imcompatible [sic] with George W. Bush's." In Great Britain both the conservative Economist and progressive Guardian have voiced similar sentiments: By their unrelenting focus on unilateralism, the Bush Administration has undercut the partnerships necessary for the financial support of globalization and jeopardized the health of the economy.
Whether driven by politics or ideology, George Bush and Karl Rove have ignored the reality that the United States exists within a world community tied together by three policy systems: military, social and trade. Since 9/11, and more specifically since the publication of the Administration's National Security Strategy in September of 2002, the role of the military has been paramount; our strategy has been unabashedly unilateral. The Bush doctrine of "Imperial America" asserted that as we are the world's sole superpower, we would do whatever is necessary to ensure our military preeminence.
But since 1945, recognition of an array of common social concerns ranging from the environment to the disposition of refugees and the proliferation of weapons produced a substantial body of international treaty and law. By its failure to ratify the Kyoto Accords, support the International Criminal Court and similar international treaties, the Bush Administration indicated that here, too, it plans to act unilaterally.
Only in the matter of trade has the Bush Administration suggested support for multilateralism. The president signaled approval of the elements of the global financial architecture: the IMF, WTO, and World Bank, as well as trade agreements such as NAFTA (although in the interest of domestic politics he has willfully violated global-market agreements by actions such as approval of steel import tariffs and farm subsidies and, recently, built a "coalition of the procured" through bilateral trade agreements). The administration assumed that our global trading partners would be unaffected by our unilateralism in military and social matters.
Many commentators question this. They argue that by failing to get the backing of the United Nations before we invaded Iraq, the U.S. has incensed our trading partners and thereby severely damaged the global economy.
There is both a personal and an economic element in this argument. The personal is, in essence, that no one wants to play with a bully. Reporting from the World Economic Forum at Davos, Switzerland, Newsday writer Laurie Garrett spoke of a surge of anti-American feeling. Apparently this negativism was precipitated both by the perceived arrogance of Americans who flaunted our unilateralism and by the Christian Fundamentalist tone set by many American representatives (such as John Ashcroft and Ralph Reed). It is possible that foreigners will trade with us less, because of this hostility, or that they will be less likely to travel to America or to use our products.
The economic argument is that U.S. unilateralism will severely damage the U.S. economy and therefore, the global economy. The United States may be the world's dominant military power but we are a debtor nation, dependent upon outsiders to support our economy.
We run an enormous annual trade deficit -- in 2002 this was about $500 billion (more than we spend annually on defense). Thus we depend upon the willingness of other nations and foreign investors to continue to do business with us while we consume more than we produce. This is a singular situation; one that depends upon the attitudes of overseas investors and their level of confidence in the U.S. economy.
As the image of America tarnishes, our creditors will not be as willing to finance our debt by investing in our securities (they already own $2.3 trillion more of our assets than we do of theirs). Instead, foreign investors will begin to invest in non-U.S. securities such as Euro bonds.
This change will have three critical impacts: It will cause the Federal Reserve Board to raise interest rates in an effort to make our bonds more attractive, which will further depress the economy. The Treasury will have to increase the money supply, as well, minting more dollars to finance our trade deficit which will, in turn, cause inflation. The dollar will decline relative to the Euro and other currencies.
Both conservative and liberal commentators argue that the combined impact of these factors will be enough to throw the U.S. economy into a recession, which will become the main issue of the 2004 presidential election. This could be further hastened if the real costs of the war soar and dramatically increase our national debt and further erode the confidence of our creditors.
With the global economy then staggering and unable to depend upon the U.S. economy for support, there will be a loss of confidence in the basic mechanism of globalization, a challenge to the financial architecture of the global marketplace.
The dire effects of U.S. unilateralism on the global economy suggest three windows of opportunity: The first is for the anti-globalization forces to change the financial architecture directing globalization. The second is for an ideological challenge to the Bush doctrine of unilateralism, Imperial America. Finally, the onset of recession presents an opportunity for regime change at home.
Bob Burnett is a journalist living in Berkeley. He is the former publisher of In These Times.
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