Thread 5: Desperately Seeking Instability
The first four threads of US foreign policy are less notable for what they are than for what they are not. Getting past a strategic hangover or disengaging from an outdated commitment is a process, not a policy. Dollar diplomacy can exist only because there is a hole where policy normally would be.
The hole isn’t limited to American foreign policy. Since 1946 American foreign policy has determined the shape of the world. When the Americans stop holding up the roof, they will note that the resulting power vacuum is bad, exceedingly bad, for most of the world. But they will also notice that in many cases the chaos works for America.
It’s a shift in mind-set that ongoing structural evolutions will support.
America’s recent wars have shaped what Americans consider to be “normal” military activity. Of late very little of America’s war fighting has involved, well, fighting a war. Instead of clashes with other organized militaries, American forces have alternatively been doing a lot of patrolling and sweeping and hunting and drone warfare. When the goal is to pacify and stabilize large swathes of territory, large numbers of troops are required, and they are subject to high levels of irregular attacks. This is noisy and bloody; the American public notices it, and they don’t like it very much.
As the Iraq and Afghan wars ground on, however, it became obvious to the W and Obama administrations that these places could never be “fixed” as Americans defined the term. Goals narrowed from reconstructing Iraq and Afghanistan in America’s image to setting up local forces that could carry on the fight to setting up a government structure that could survive with minimal American support to simply ensuring that, when the bulk of American forces left the countries, some bases would remain in American hands to insert Special Operations forces and drones as needed.
It’s an issue of numbers and information. At their heights, the Iraq War had 148,000 American troops in theater and the Afghan War had 99,000 (not including contractors or allied forces), out of a total personnel roster (including reservists) of 2.3 million. Patrolling central Iraq requires a dozen major bases in central Iraq and tens of thousands of troops.
In contrast, drone and Special Operations require only a single small footprint that doesn’t even need to be in-country. America’s entire Special Operations forces—even with their tenfold increase in budget during the Global War on Terror—number fewer than seventy thousand. Add that Special Operations by their very nature are less public than conventional military operations, and that drones don’t have families back home, and most Americans are quite comfortable in (or at least resigned to) their ignorance about the way the US now fights.
What America finds ideal, however, the rest of the world finds problematic. The United States has become comfortable with a war-fighting method that exposes few Americans—civilian or military—to risk, but enables US power to reach anywhere in the world on short notice in an often deniable manner. Marry the new techniques to a broadscale and deepening American indifference to global stability, and the results are disruptive, bordering on explosive.
It does not take much of a leap in logic to see the next step here. The United States will begin to view disruption in and of itself as a tool, perhaps even a goal. It sounds dangerous (and there certainly is a risk), and it sounds irresponsible (and by some measures, it is) but that doesn’t mean it’s a bad strategy. Consider the following:
- The United States is not a trading nation, but all its current perceived and likely future competitors are. Fully 100 percent of trade in Northeast Asia uses oceanic shipping, as does over 95 percent of Europe–Asia trade and 70 percent of global oil trade. In contrast, less than half of American trade (comprising less than 8 percent of total American economic activity) uses the ocean, and much of that is within the Western Hemisphere and so is immune to chaos beyond it. Targeted disruptions, even broad disruptions, do not only make a great deal of mercantile sense, but they also make would-be trading nations strategically dependent upon American goodwill even if they are not US allies.
- As of early 2020, the United States has just become a net crude-oil and products exporter, and it had already been a net exporter of every other finished energy and petrochemical product since early 2018.* Disruption in energy or chemical flows would be economically crippling to competitors, whether importers or exporters, while a policy tweak at the presidential level would shield US consumers from global price rises. For decades, Moscow has had a delightful time throwing wrenches into the Middle East to complicate global energy flows and thereby American strategic policy. Now it’s America’s turn. Considering American naval power, achieving something an order of magnitude worse than the 1970s and 1980s oil shocks would be child’s play.
- Modern manufacturing rests upon the idea that any particular location can thrive by mastering individual steps of the manufacturing supply-chain process. Global safety enables global supply-chain integration. That requires absolute freedom of the seas as well as access to a near-bottomless supply of capital to fund constant industrial plant overhauls as technologies evolve. The United States is not only the provider of the security and commander of the financial access, but the NAFTA network is the only manufacturing system on the planet that does not require global maritime access. A small degradation in maritime safety not only destroys most manufacturing supply chains, but also forces many of them to relocate to the only place where inputs and production and consumption are co-located: North America. Almost anything that reduces supply-chain security globally increases the case for positioning industrial plant within the NAFTA system.
- Agricultural supply chains are not as fixed and vulnerable as those in the manufacturing sector, but the impact of their disruption is far more terrifying. Oil is processed into fertilizer that helps grow foodstuffs, which are transported by ocean the world over. Any interruption along that chain of events means food does not make it to mouths. Few countries have their entire supply system internally; fully 75 percent of global oil is wrapped up in transnational trade, and the United States’ internal supply-chain system for all the various inputs is by far the world’s largest. American farmers will cringe at the carnage of continent-spanning famine . . . and then giggle all the way to the bank.
- The single largest source of stable, productive financial resources comes from a population cohort that is nearing retirement. Workers in their thirties save a small sliver of a small income for the future. Workers in their fifties save a larger wedge of a larger income. Workers just shy of retirement save as much as humanly possible. With global aging, there are a lot of these near-retirement populations, so global capital is plentiful and therefore cheap. But very few countries don’t face demographic hollowing-out, and on average the global Baby Boomer population flips into mass retirement in 2022. Upon reaching retirement, one lacks income and so has nothing new to save. The result? Very few countries will have a stable, indigenous capital supply in the future. The American Boomers, however, had kids, so America’s demographic decline will be far slower and far less painful. This not only grants the Americans cheaper capital than everyone else, but also makes the United States the primary global destination for capital flight. Chaos, war, and depression—disruption—encourage capital flows to the American system. From 2015 through 2019—a time of strong global growth and relative stability—that capital flight probably topped $8 trillion. Imagine what’s coming. Imagine what’s coming if the United States puts its thumb on the scale.
- Most raw materials worldwide—I’m referring here to non-energy, non-food products such as iron ore or copper—are processed in regions the Americans consider to be economic competitors: Germany and China consistently rank high. Yet in most cases the raw materials themselves don’t originate in Germany and China, but in the Southern Hemisphere. Disruption either in or near Germany or China or in the waters between them and the source material forces metals processing and refining to shift to other locations—locations that are more stable with cheaper and more reliable electricity. Places like the United States.
- Today most global trade is denominated in US dollars, and any significant global degradation will reduce the stability of nearly every currency to the point that nearly all future trade will be USD-denominated. The Americans will be able to selectively grant or withdraw access to global finance on a whim, so even countries with only limited security exposure must consider the consequences of impinging upon American interests or souring the mood of the American president and Congress. Failure to do so could easily reduce them to barter.
- By doing some minor tinkering in the financial markets, it would be easy for the United States to crush systems that are financially overexposed. The obvious candidate here is China, where any financial interruption quickly generates political chaos—which would be great for US manufacturers. There’s also Brazil, where a timely interruption in agricultural finance first generates local economic breakdown and, a season later, seizures in global food supply—which would be great for US farmers. Don’t forget Turkey, where the political alliance that supports the current government is built upon tens of billions of dollars of cheap construction loans—the disruption of which would be great for US energy interests. Moreover, the entire eurozone faces risk, and not only basket cases, like Greece, or those with rotted banking systems, like Italy. Germany’s economic model is based on deep, reliable financing to keep the industrial base updated with the latest technology, while state intervention in the economy is a hallmark of French policy. In an era of more mercantilist and populist policies, American nonintervention in the world of finance does not come for free.
- One side effect of trading systems that are less global and more regional is that instability in this or that region has less of an impact upon others. The primary reason the global recessions of 2007–9 were not worse was that the US Federal Reserve stepped in to provide unlimited volumes of dollar-denominated bridge loans to any peer institution that needed the liquidity. At a minimum, that prevented a much deeper financial crisis in (from mildest to greatest danger) Australia, Canada, Brazil, New Zealand, Norway, Denmark, the United Kingdom, Japan, Mexico, Sweden, South Korea, Singapore, Switzerland, and the eurozone. If the Fed no longer fears contagion, similar assistance in the future might not be forthcoming—or at least not without a significant price tag. And even that assumes the United States wouldn’t deliberately nudge financial systems that were unstable or overexposed. It wouldn’t take much prodding to upend Argentina, Brazil, Venezuela, Peru, Saudi Arabia, Egypt, Turkey, Russia, Ukraine, Kazakhstan, Japan, South Korea, China, Taiwan, Thailand, Pakistan, South Africa, Canada, or the eurozone (and within it, Italy, Greece, Cyprus, Belgium, Portugal, Ireland, Spain, the Netherlands, and Germany are particularly vulnerable). It isn’t that the United States expressly views any of these countries in particular as targets, but rather that in a changed world the US dollar’s status as the only truly viable currency gives Washington incredible reach into and influence over foreign economic systems.
Marry an American strategic, willing disregard for global security to a public that has become more comfortable with low-level, disavowable military activity to a military with global reach to a more mercantile approach to the world, and it is Anakin-falling-to-the-Dark-Side eeeeasy to envision a United States that seeks disruption rather than stability as both a tool and a desired end of foreign policy.