I recently spoke at the Mauldin Economics Strategic Investment Conference about how the world is going to hell. I’m an investment community outsider. And I was struck that almost every investor and economist that spoke at the event was singing the same apocalyptic tune.
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Now, let’s get right into today’s letter…
Candidates Clear on Their Foreign Policy “Wants”
Forget for a moment that Hillary Clinton is a criminal, Donald Trump is crazy, and both are liars. This is an election year, and demons stalk the world. It is now clear that one of them will be president of the United States.
Behind the heated rhetoric lie two very diverse visions for American foreign policy. But what presidents want and what they get are usually very different things. Nevertheless, the chief task is to decode the “wants” from the campaign noise.
What they disagree on is vital and easily expressed. Clinton wants to keep the international system as it has been since 1945. Trump rejects the basic ideas that have guided foreign policy since that time.
A Series of Aftermaths: War Ends, Soviets Fold, Towers Fall
The US emerged from World War II having learned two lessons. The first was Pearl Harbor. It taught that an enemy can strike at any time without warning.
The second was the price of delay. Had the US entered the war earlier and opposed Hitler before the Munich Agreement, much suffering could have been avoided.
Global involvement would be the first line of defense. Cheyenne Mountain, home of the North American Defense Command, would be the ever watchful second line. It made sense yet was exhausting.
During the Cold War, this approach seemed right because the Soviet Union had to be blocked on the ground. It had to be deterred from nuclear war as well. The Soviet Union fell, but the military and economic structures the US had created remained.
The United States intervened in Somalia, Haiti, Kuwait, and Bosnia in the 1990s. The Soviets were gone, but the US still saw itself as the global guarantor of security.
Then 9/11 happened, and the classic American fear was made real. It was an attack out of nowhere. As the US awaited more attacks, it went on the offensive in the Islamic world. It built a coalition that has fought wars for 15 years.
US Still Deeply Embedded in the World
Vigilance and constant involvement were the principles. The US operated through a complex system of alliances, trade agreements, monetary arrangements, and troop deployments.
Alliances like NATO and the IMF are multilateral. Some are bilateral, like with Japan or Australia. Others, like the agreement with Israel, are informal but every bit as real. Still others, like NAFTA, are purely economic.
Through this web of cooperation, the United States remains deeply embedded in the world. It must not only stand guard against global missile threats, but also act as the world’s sentry for political, military, and economic instability.
The post-1945 concepts that emerged are woven into the complex global system that has brought the US into a series of wars and constant negotiations.
Smart Crisis Avoidance or Obsolete Assumptions
The US also sees maintaining the stability of the international economic system as its duty. The Vietnam War, the Third World debt crisis, and concerns about Brexit became the United States’ responsibility.
Clinton argues that this system avoided catastrophe. From her point of view, the most important thing is what didn’t happen.
Because of NATO, the Soviets didn’t invade Western Europe. Nuclear war didn’t happen.
Because of NAFTA, the instability that is sweeping the rest of the world didn’t reach the US.
Because of the IMF and World Bank, there has been intense and significant global economic development. The world didn’t stand still.
Trump counters that the assumptions behind our fundamental stance have become obsolete. Vigilance remains a basic issue, but from Trump’s point of view, it has not evolved to handle the threat that struck on 9/11.
The nature of the threat has changed. During the Cold War, the US watched the skies. Now, Trump argues, the US must exclude Muslims and watch its borders.
For Clinton, international involvement means relatively easy entry into the United States. This benefits the country in many ways. For Trump, this is thinking shaped by the Cold War period. For him, 9/11 made immigration a national security issue.
Trump also argues that NATO is outdated. Today, the EU has 200 million more people and a larger GDP than the US. There is no reason Europe’s military capability can’t match or exceed that of the US.
Stump Speeches Will Not Define a National Strategy
The Europeans have created a situation where the United States must, by treaty, defend Europe, while shifting the costs to the United States.
NATO may have been a reasonable pact while Europe was recovering from war, but WWII ended over 70 years ago. The world is very different today.
In the same way, free trade was essential for restarting the global economy in the post-war world. Now, the US must evaluate whether all free trade is in its best interest.
There are pressing issues that can’t be settled until a national strategy is defined. What should our relations with Russia and Central Europe look like? To what extent does Chinese power in the South China Sea matter to the United States? Is free trade always good? To what extent should the US be involved in the Middle East?
Mexico is now the 11th-largest economy in the world. How do we deal with its rising power?
The issues are endless, and many are potentially deadly. The dispute between Clinton and Trump is fundamental, regardless of how the debate is framed.
Trump’s argument is that constant involvement may have prevented Munich, but it is now exhausting America. Constant vigilance is unsustainable and might benefit the world, but not the US. Clinton argues that continued involvement costs less than the instability that even a partial withdrawal would mean.
The campaign “wants” are clear. What we will actually get is far less so.
Before I sign off…
Here’s a recent sample of the crucial topics our readers were briefed on in Geopolitical Futures: the deepening exporters' crisis—France’s flawed economic model—the curious case of Turkish President Erdoğan—Saudi Arabia's financial woes—nationalism’s rise in Europe—Germany's hidden troubles—Russia's political posturing—and President Obama's legacy.
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