Obama's Dilemma

Enraged opponents or disappointed followers?

Barack Obama
Obama's Dilemma : Enraged opponents or disappointed followers? - David P. Calleo


Contrary to what was widely expected when the Soviet Union imploded, the collapse of the old bipolar system has led not to a closely integrated “unipolar” global system but to a more plural world of distinctive and independent-minded states and regions. The old assumptions that lay behind America’s unipolar role and identity – that it possesses infinitely attractive soft power, incomparably superior hard power, limitless economic means, and intrinsic legitimacy – no longer hold true. Instead, the coming world of regional blocs raises questions as to how the West can accommodate the new Asia and avoid a dismal degradation of the Earth’s environment.

So far the twenty-first century has been a time of exceptional economic and political fluidity. Contrary to what was widely expected when the Soviet Union imploded, the collapse of the old bipolar system has led not to a more closely integrated and “unipolar” global system but to a more plural world of distinctive and independent-minded states and regions. This pluralist transformation challenges powers around the world to reinvent themselves – to reconsider their place among nations and how they should present themselves to others. This is a troubling task for Western nations – for the prosperous but vulnerable European states, and above all for the United States. For decades, America has been accustomed to seeing itself as the leading power within an increasingly united cosmopolitan “global” system. In the administration of George W. Bush this “unipolar vision” is widely believed to have inspired a disastrous series of dysfunctional policies. In 2008, Americans elected Barack Obama, a leader of impressive intelligence, eloquence and grace. Many supporters hoped Obama’s own multicultural life experience would prove well designed to reorient his countrymen away from unipolar views toward a more pluralistic vision of world order. But what seemed Obama’s advantage may also prove his undoing. His exceptional experience separates him from many of his fellow citizens. Fearing their alienation, Obama grows too cautious and thereby risks alienating his own most ardent supporters. This appears to be the pattern exemplified by his recent Nobel Prize speech, particularly when followed by his escalation of the war in Afghanistan.

Accepting the Nobel Peace Prize might seem an event ideally designed for exposing fresh thinking about the new world order and America’s place within it. Instead, the speech was a vigorous affirmation of traditional American aspirations for global leadership. To be sure, the speech was delivered with the President’s habitual grace and intelligence. And it neatly sidestepped the objection that many people felt toward the award: Why to Obama now, at the start of his Presidency? Obama’s solution was to say the award was not to him, but to America – for helping to underwrite global security over many decades, “with the blood of our citizens and the strength of our arms.”[1]

But while Obama’s solution was a tactical success, it may also have been a strategic misstep. What the President said was certainly true. Americans have good reason to be proud of their country’s postwar role. But Obama’s speech was one that could have been expected from any American president since Franklin Delano Roosevelt. Most notably, it was a speech that could have been given by Mr. Obama’s predecessor, George W. Bush. It seemed designed to show Obama’s own continuity with the past, rather than to lead Americans into a more plural future. It did not reflect why many Americans had voted for Obama. While Obama’s compromise did little to satisfy increasingly violent critics of his “weakness,” it disappointed many of his own ardent supporters. In the long run, of course, the real challenge for Obama is not merely to present an identity that suits the current psychological preferences of Americans, but rather to bring those preferences into accord with the realities of a rapidly changing world. Obama’s critics on the right seem to think calls for American retrenchment are merely signs of a weak-willed leadership. Arguably, however, the change is required, above all because the old assumptions that lay behind America’s unipolar role and identity no longer hold true.

The assumptions themselves may be summarized into four propositions:

  • America’s soft power is infinitely attractive.
  • America’s hard power is incomparably superior.
  • America’s economic power renders it invulnerable to the overstretch that has regularly defeated the hegemonic ambitions of others.
  • America’s power is widely seen by others as intrinsically legitimate.

Why are these assumptions no longer valid? In each case there are general and particular reasons.

For several generations America’s soft power has consisted mainly of its image as the world’s land of capitalist opportunity. With the present financial crisis, the prestige of American capitalism seems at a new low point throughout the world. Numerous studies now argue that there is less circulation in American society than in most of Europe.[2] In any event, America’s domestic accomplishments are not easily exported to other countries and neighborhoods. This is not a new lesson, but one we have been re-visiting at great cost in places like Iraq and Afghanistan.

That America has overweening hard power seems obvious. The U.S. spends as much on its military as does all the rest of the world combined. While we have not fought a first-class army in some time, we could presumably defeat any other “advanced modern” military force – one, at least, that chose to fight our kind of war. From time to time we have felt emboldened to use our hard power to destroy enemy states and their armies, thereby hoping to create an environment where our soft power can penetrate and prevail. It turns out, however, that this is not something we can reliably accomplish.

Our armed forces are designed according to a different model and for a different purpose. Ours is meant to be a post-Vietnam military – relatively small, highly professional, trained for “net-centric” warfare, with electronic battlefields and weapons of great accuracy causing overwhelming destruction in limited spaces. It is a military that hopes to wage its wars with relatively few but well-trained professional soldiers, with low casualties among them. But our opponents, we discover, don’t fight our kind of warfare. Confronted with our overwhelming force, they turn to guerrilla tactics and terrorism – warfare of the weak. Our military find it difficult to eliminate opposition of this kind. Our hard power allows us to defeat and destroy a state and its traditional army with ease, but we lack the means to follow through to a real victory. Applying our hard power merely turns rogue states into failed states, over which we have few means of control. Ours seems the wrong kind of army for a unipolar role. A Roman vocation for world management calls for different forces – an army of occupation, skilled in languages, police work, economic reconstruction, and “re-education.” It requires an abundance of troops and a tolerance for high casualties. Grafting this kind of army on to what we already have would be preposterously expensive. We lack the means for so extravagant a transformation.

Considering the military costs brings up another critical assumption behind the unipolar role: unlimited economic means. American political elites find it difficult to accept any limits on their financial power. The American economy has been in deficit to the world economy throughout most of the postwar era.[3] The deficits reflect the cost of our military operations abroad, our heavy consumption at home, as well as the huge foreign investments of our corporations. Since the dollar was the world’s reserve currency, we paid our deficits abroad by issuing more dollars. In other words the US leveraged the “exorbitant privilege” of the dollar as the world’s reserve currency in order to create virtually unlimited credit for itself. Throughout the Cold War, America’s ability to create credit for itself in this fashion depended on two conditions: First, there was no real substitute for the dollar as a reserve currency. And second, the principal accumulators of exported dollars were Germany and Japan, US military protectorates who absorbed their dollars as a kind of imperial tax. All things considered, the costs of accumulating the exported dollars was a cheap price for America’s protection, and awkward to refuse. The US was spending more on Europe’s defense than the Europeans themselves. With the end of the Cold War both conditions ceased. Within a decade, the Europeans had created the Euro and the US was no longer so urgently indispensable for protecting Germany and Japan. Indeed, for Germany, America’s belligerent attitude toward Russia soon began to seem a security problem rather than a solution.

By now, holding up the dollar’s exchange rate depends heavily on China, which is, after all, a country with a low standard of living and enormous infrastructure needs. Like many other countries, China has used export-led growth to begin its ascent to modern prosperity. To retain the high competitiveness of its exports it ties its currency to the dollar, despite an already huge trade surplus with the US. Since Chinese investments abroad are often deeply suspected and resisted, the natural result has been an ever-growing Chinese accumulation of inert dollar reserves. Such flagrantly mercantilist trade and currency policies invite retaliation and grow increasingly unsatisfactory for China’s own purposes. A massive accumulation of dollars does not serve China’s urgent need for domestic development and, on the face of it, is not a particularly attractive way to store the nation’s savings.[4] Compared to the Euro, the dollar has lost nearly half its value in this decade.[5] Of course, European central bankers have little desire to see the Euro replace the dollar. But Europe’s export industries grow increasingly uncomfortable as the relatively scarce Euro keeps appreciating against the all-too-abundant dollar. In this respect, as in numerous others, America’s perennially weak and volatile currency has begun to undermine the stability of world capitalism.

For several years the global “financial” economy has been absorbing an ever-increasing flood of dollars. Markets in futures contracts for currency or raw materials have, for example, grown several times larger than the actual markets themselves. This surplus money normally remains confined to the financial economy, but increasingly also enters the “real” economy, where it can cause severe problems: periodic currency crises, bouts of asset inflation, a banking system loaded with unsound assets, threatening a 1930s style breakdown.[6] The present banking crisis combines a collapse of credit with an explosion of liquidity. The general climate of uncertainty saps business confidence and feeds already record unemployment. This combination of monetary instability and high unemployment is almost certain to have major political consequences. Logic and historical experience together suggest four likely reactions.

First, enthusiasm for the “global” free market will give way to demands for the reassertion of political power over national economies. Politics will be invoked to protect employment and to reestablish order and predictability to markets – especially currency markets. Few nations, however, will be able to progress far toward these goals without the cooperation of their neighbors.

Second, like-minded countries will intensify their regional blocs to stabilize their currencies and trade. This has been happening for some time in Asia and Latin America. The hope is to preserve the advantages of wider trade specialization without the incipient chaos of full “globalization.” For such blocs, the European Union is an obvious model. As a model, the EU has great advantages: It accepts that all members have an equal right to prosper. It commits its political machinery to mutual appeasement and the search for collective interests. Its method is to search for harmony through political negotiation rather than through the market alone. Nevertheless, the EU also has strong liberal elements, with a reasonably open-minded attitude toward the rest of the world and a tolerant view of foreign investment.

Third, within a world of budding blocs, conflict between China and the West remains a strong possibility. Given the huge size of the Chinese workforce, and its radically lower living standard, Western labor cannot be expected to compete against Chinese labor without strong political adjustment. Growing consciousness of environmental limits will greatly impede closing the gap in living standards through rapid growth. Much of China’s growth is thus likely to come at someone else’s expense. Mastering the situation peacefully calls for restraint and reciprocal sympathy on all sides. The West must accept China’s right to return to its normal place among the world’s rich nations. But China will need to recognize that its own prosperity is unlikely to be achieved peacefully if it is accompanied by a precipitous decline in Western living standards. To limit conflict with the West, and with its own Asian neighbors, China will have to turn inward – to cultivating its own self-development as a nation and society.

Finally, there is also great potential for conflict within the West itself, in particular if the US tries to close its very large current account deficit by depreciating the dollar against the Euro. Without serious mutual regulation to curb fiscal deficits and credit creation in both Europe and the United States, a severe breakdown in transatlantic relations will be difficult to avoid.

This last observation should remind us that a world of blocs will not be easy to govern. How does a plural world give itself some form of stable management? It may prove instructive to consider the prospects in the light of three fundamental theories of interstate relations:

• Hobbesian – where order is sustained by a benign and all-powerful hegemon.
• Liberal – where order and efficiency follow from freedom, with empires dissolved, and creative human energy liberated within free markets.
• Constitutional – where order is sustained by a collaborative balance of political and economic power, in a system whose partners are committed to negotiating common interests.

The first and second models appear to offer little hope in present circumstances. A Hobbesian hegemon cannot provide stable order because no hegemon is available. American unipolar dominance is an illusion and no one else is in position to bid for the global crown. With an appropriately disciplined policy, the US may continue to be the world’s most powerful state well into the future, but for all the reasons just outlined, America cannot sustain the power for an essentially unilateral policy. Nor can it expect others to grant its leadership exceptional legitimacy. Instead, as our present decade indicates, the US pursuing a hegemonic role points toward a progressive disintegration of world order.

Nor does the liberal model provide a credible global order – as we are discovering once more. Not only is there the ever-present danger of chaos in an over-globalized system, but the inherent conflicts between a rising and populous Asia and a stagnant West are, in themselves, too great to be reconciled by the market alone – above all in a world where urgent environmental concerns curb rapid growth.

There remains the “constitutionalist” model – with regional blocs achieving a collaborative balance of power within themselves, and multilateral institutional connections among the separate blocs to help them generate and identify common interests. Here Europe – for all its troubles – remains the most promising political experiment of our time. Member states retain their primary role as the creators and harvesters of political and economic consensus, but are linked in networks that favor compromise and the search for common interests. As an external actor, the EU is prominent and generous in the global system, and can marshal vast resources. Nevertheless, the EU’s confederal internal structure limits its imperial ambitions. In other words, Europe’s constitutionalist model favors balance and cooperation not only in Europe’s national and regional levels but also in its global behavior. By contrast, the U.S. is constitutionalist at home but Hobbesian abroad. As a model, the EU seems better adapted to a plural world. Of course, it is the Europeans primarily who have created their Europe. But Americans have helped. American protection, encouragement, and opposition have all played a major role in giving European states the incentive and courage to cooperate. At the same time, America’s hyperactive world role has helped to preempt Europe’s own ambitions for global domination. Thus, the bipolar Atlantic relationship between the EU states and the US has become a vital piece of the world’s constitutional architecture. It seems fitting to close with some reflections on the global significance of the Atlantic relationship.

As de Gaulle told a skeptical Roosevelt toward the end of World War II, it is America’s great interest that there be a strong and vigorous Europe – even if Americans don’t always realize it. De Gaulle was pleading not only for a postwar partnership to manage the new global system, but also for restoring a healthy balance of power across the Atlantic. Across the decades, de Gaulle’s advice now speaks to Obama’s task. A world order of cooperating blocs will probably have to start with deep and enduring success within the West itself. But the prospect for serious transatlantic conflict is today probably greater than we realize, even if the need for genuine collaboration is greater than ever. In the years following Roosevelt’s death, the United States did respond handsomely to Europe’s political and economic needs. And Europe’s states did regain their vigor and began building their Union. By now, perhaps another moment for mutual aid has come. This time, however, it is Europe’s turn to rescue America. The requirements for transatlantic balance and collaboration are complex. To finish with a few reflections from my own recent study, Follies of Power:

“Like all great powers, the U.S. needs to be checked and balanced. With so much power concentrated in Washington, to preserve America’s own domestic balance, something beyond a purely national constitutional framework is required. Keeping power in check at home requires balancing it abroad. Balance among states requires balance within them. Two world wars exacted a terrible price before Europe’s states learned this lesson. Their expensive education led to the EU. Their subsequent progress suggests a more general historical lesson: Among states, as among individuals, balancing is often better done among friends than between enemies; in other words, in a cooperative rather than a zero-sum relationship. To be Europe’s stabilizing friend was America’s vital postwar role. Europe must now assume that role for the overstretched and disoriented constitution of post-Soviet America. The Iraq misadventure has shown how urgently America needs to be contained by its friends – by those who share the values of liberty at home and respect for the rights of other peoples. Restoring balance to America requires more political and military weight for Europe. To succeed, each will need the other.”

“If America’s political imagination regains its balance, and Europe rises to the occasion, there may be hope that the West can accommodate the new Asia and perhaps even avoid a dismal degradation of the Earth’s environment. The twenty-first century may then come to reflect Europe’s new model for peace rather than its old model for war.”

Notes & References

  1. Barack Obama, “A Just and Lasting Peace,” Nobel lecture delivered in Oslo, Norway, December 10, 2009, http://nobelprize.org/nobel_prizes/peace/laureates/2009/obama-lecture_en.html.
  2. See “Meritocracy in America: Ever Higher Society, Ever Harder to Ascend,” The Economist, December 29,
    2004, pp. 22-24; Aaron Bernstein, “Waking up from the American Dream,” Business Week, 3860, pp. 54-58; Jo
    Blanden, Paul Gregg, and Stephen Machin, “Intergenerational Mobility in Europe and North America,” Centre
    for Economic Performance, April 2005, http://cep.lse.ac.uk/about/news/IntergenerationalMobility.pdf. 
  3. US Department of Commerce, “U.S. International Transactions,” March 2010, http://www.bea.gov/
    international/index htm#bop. 
  4. See Morris Goldstein, “Adjusting China’s Exchange Rate Policies,” Peterson Institute for International Economics, 2004, Available at: http://www.ciaonet.org/wps/gom07/gom07.pdf]; Goldstein and Nicholas R. Lardy, “Chinese Exchange Rate Policy: An Overview of Some Key Issues,” in Goldstein and Lardy, ed., Debating China’s Exchange Rate Policy, 2008 (Washington: Peterson Institute for International Economics), pp. 1-60.
  5. Decline of 42.5% from January 1, 2000 to January 1, 2010.
  6. For a good explanation, see Charles P. Kindleberger, Manias, Panics, and Crashes: A History of Financial Crises, 1996, (New York: Wiley).
David P. Calleo is University Professor at Johns Hopkins University and Dean Acheson Professor and Director of European Studies at the Nitze School of Advanced International Studies. The article is developed from the author’s Follies of Power: America’s Unipolar Fantasy (Cambridge 2008), and was first published in Politique Américaine, no. 16 (2010).