Circling the Wagons

People don’t circle the wagons when they are feeling safe, good about themselves and optimistic about the future. With the exception of the economic impact expected from possible European national defaults and harsh competitive realities with China, and direct safety concerns from Taliban and Taliban-like extremists (even al Qaeda still) against the United States measured against the cost of the war in Afghanistan, Americans seem to have placed foreign policy issues far down the list of priorities. When the Arab-Israeli debacle in Palestine raises its ugly head, the issue may grab headlines for a day or two, but we are back to domestic issues almost instantly.

The underlying momentum is to cut expenditures, and foreign aid – the bribes that have fomented U.S. foreign policy for most of the 20^th century – is considered among the most expendable of our budgetary categories… even humanitarian aid. We have moved from an open and optimistic society to one that is suspicious of foreigners, inhospitable to immigrants and where it’s everyone for themselves. Anything that costs money, even if it may benefit the society at large, is suspect – from Medicare and national healthcare to public education at every level.

Everyone looks at Canada’s national healthcare system and assumes that “liberal Canadians” had an easy time passing the system. In fact, that nation struggled with conservative groups that threw down the gauntlet to reformers who pressed the issue: “In 1935, the United Farmers of Alberta passed a bill creating a provincial insurance program, but they lost office later that year and the Social Credit Party scrapped the plan due to the financial situation in the province. The next year a health insurance bill passed in British Columbia, but its implementation was halted over objections from doctors. William Lyon Mackenzie King promised to introduce such a scheme, but while he created the Department of Health he failed to introduce a national program.” Wikipedia. The Province of Saskatchewan started the ball rolling in 1946, but it was not until 1961 that the national nature of Canadian healthcare was finally approved by all the provinces. Today, there are very, very few Canadians, liberals or conservatives, who would eliminate this government program and no measurable number of Canadians who believe the US. private healthcare system is superior to theirs.

But despite the fact that healthcare costs rose 9% from last year, the fact that massive unemployment also means massive numbers of new uninsured, and the fact that “Obamacare” is still implemented through private plans, reversing any movement towards national healthcare is a prime target of a vast pool of Americans who simply want the government out of their lives. Whatever the issue, America is turning inwards with its back to the rest of the world and creating an internal free-for-all within its own borders. In economically impaired times, this kind of a national reaction seems to be textbook history.

Europe has also circled the wagons, blaming the rogue Wall Street trading and debt practices (adopted by many European financial institutions) for their own demise. Their own practices are focused very heavily on their own goals, and U.S. priorities are seldom given a second glance these days. But the notion of increased desires to return to the past, to eschew any recent shifts to modernity, has also infected nations with spectacular growth and unlimited potential as well. China has been reversing many of its open and liberal policies of late, rapidly returning to a severe centralist government that maintains careful controls – if not direct ownership – of every significant aspect of her citizens’ political and economic institutions.

Forbes (October 9^th) summarizes: “First, [PRC Chairman] Hu [Jintao] has been blocking high-profile foreign acquisitions, especially beginning in 2007 with Microsoft’s attempt to take a stake in Sichuan Changhong Electric and Goldman Sachs’s moves on Midea Electric and Fuyao Group. Carlyle was frustrated in its multi-year pursuit of Xugong Group Construction Machinery late last decade, and the central government used its new anti-monopoly law against Coca-Cola when the American icon tried to buy Huiyuan Juice Group in 2009.

“Second, Hu’s government has been renationalizing the economy for about a half decade. During his tenure, China Investment Corp., the sovereign wealth fund, and the National Social Security Fund went into the Chinese stock markets to buy up shares that were in private hands… But at the end of 2008 the government’s renationalization program really got rolling. Then, Beijing, to avoid a slowing of growth, ramped up investment, now the most important of the three legs of the Chinese economy, with perhaps the largest program of stimulus spending in history. Beijing’s stimulative plan is resulting in a bigger state economy and a smaller private one: about 87% of recent growth is attributable to investment, almost all of it from the state. And state investment is going into the state sector, of course. The state’s stimulus plan is favoring large state enterprises over small and medium-sized private firms and state financial institutions are diverting credit to state-sponsored infrastructure. As they say, ‘the Communist Party is now the economy.’

“Third, Hu Jintao has been busy shutting out foreign competitors as he has embraced a new economic paradigm of closing the country down. The Chinese government has actively tried to cripple foreign competitors, for instance… Beijing officials, we now know, targeted Google, stole its source code, and then undermined its ability to compete in order to help local search engine Baidu. The Communist Party is attempting to build ‘national champions’ and wants 50 of the world’s 500 largest companies to be Chinese by the middle of this decade. And it is willing to use harsh tactics to achieve this goal, like the indigenous innovation product accreditation rules that force foreign companies to surrender technology.” If you think this is a short term policy, think again. Xi Jinping, thought to be Hu’s heir apparent when the latter steps down at the end of 2012, appears to be firmly committed to this new, inwardly focused China.

With trans-border financial regulations and environmental issues that cannot be resolved at a local level, as the interdependence of nations caught up in a global economy is beyond obvious, the willingness of countries to open up and cooperate with each other appears to be at its lowest point in many decades. Such dangerous trends often result in armed conflict or sustained periods of economic turmoil, even beyond those recessionary elements we currently face. The complete de-prioritization of foreign policy may seem justified to those believing that we have to solve our own problems and the rest of the world be damned. But they need to take a drive in their Canadian-built “American car” powered by imported oil to their local Wal*Mart and walk the aisles looking for American-made products. The link between our economy and foreign policy is too obvious to miss.

I’m Peter Dekom, and impaired economic times requires better cooperative thinking and not knee-jerk reactions that only make the problems worse.