Focus on U.S. Economy; Leave the EU, Russia and China Alone

Dr Ivanovitch - MSI Global
Dr. Michael Ivanovitch

Bill Clinton got us into African, Balkan and East European quagmires, and Bush (W) finished it off with unwinnable Iraq and Afghanistan military adventures.

Obama continued to struggle with that difficult legacy -- adding a Libya civil war of his own -- before experiencing an epiphany and telling the nation about it on June 22, 2011: ”America, it is time to focus on nation building here at home.”

A few years later, that call was taken up by Trump, who was crucified, by friend and foe, at home and abroad, for trying to cut off allied free riders and allegedly withdrawing from the world to look after an impoverishing and shriveling America.

And here is what we got now.

From a budget deficit of 2.8% of GDP and a public debt of 64% of GDP in the early 1990s, we now have a budget deficit of 16% of GDP and a public debt of 126% of GDP – and counting.

In the early 1990s, the U.S. had to import only about $100 billion of foreign capital to close its savings-investment gap. Now, however, with an estimated current account deficit of $850 billion this year, America will need close to $1 trillion of new foreign debt to make ends meet.

A domestic systemic crisis

Systematic trade deficits have raised America’s net foreign liabilities to $15.4 trillion at the end of last June, an increase of $3.3 trillion since the beginning of 2020. Foreigners currently hold $7.6 trillion of U.S. public debt -- of which China owns $1.1 trillion (14.5% of the total).

But the most pathetic and heart breaking is the U.S. labor market situation.

At the end of last month, 100.4 million Americans were not in the labor force. That’s about 40% of the civilian population – a wasted pool of unemployable manpower for lack of skills and professional qualifications. And that sad number increased 19.1 million over the last ten years.

The 20 million Americans currently out of work put the actual unemployment rate at a shocking 12.4% -- nearly three times the officially reported 4.8%.

As a result of America’s deteriorating socioeconomic conditions, the number of people living in poverty increased by 3.3 million since 2019 to stand at 37.2 million at the end of last year. There are now 43.2 million Americans surviving on food stamps (a benefit to help low-income people buy food), and some 30 million live dangerously without any health insurance.

Those are the screaming reminders of Obama’s emphatic call for “nation building” at home.

Sadly, however, the screams are falling on deaf ears. America’s increasingly binding economic and social policy constraints have yet to lead to a radical reordering of national priorities.

“Forever wars” are continuing by other means. Huge resources are wasted on bellicose actions to uphold “liberal democracies” through “strategic competition.”

Such actions -- conducted in the form of pervasive sanctions, regime changes via disruptive political and social upheavals, (dis)information warfare, etc. – may be financially cheaper for the U.S., but insurrections, civil wars, and social disorders they cause are devastating in terms of human lives, material damage and American leadership.

Build a shining city on the hill

It is not clear what U.S. national interests are served by such actions, or, put more intuitively, whether those actions would pass Jim Baker’s (America’s former state secretary and a consummate deal-maker) folksy test: ”Do we have a dog in this fight?”

Take Hong Kong as an example. The U.S. lost the fight with China for Hong Kong’s democracy. In the process, lives were lost, and the local economy was gravely damaged. Was it such an intellectual strain to see that China would easily reassert control over its own territory?

A commonsense diplomacy with Beijing would have helped Hong Kong to thrive in its “one country, two systems” transition arrangement. As it is, the U.S. Chamber of Commerce in Hong Kong complained last week that its efforts to obtain a more liberal market access are being ignored, and President Joe Biden warned American companies against operating in the flourishing Cantonese “Fragrant Harbour.”

A more dangerous situation is now unfolding in the case of Taiwan. Beijing is warning about the island’s independence temptations, while the U.S. keeps fanning the fires of Taiwan’s politicians by equivocating about the “One-China” policy, and principle, Nixon and Kissinger approved, and signed, in the Shanghai Communiqué of February 1972.

Again, diplomacy instead of confrontation and convoluted “whatever-it-takes” threats.

The whole issue of China’s contested “nine-dash line” territorial claims in the South China Sea is a similar problem. China’s neighbors don’t take that as a casus belli. Most of them did not even exist as sovereign states when China ruled those sea lanes. And, most importantly, the U.S. will not go to a nuclear war with China to protect the air and naval traffic nobody is threatening.

The only real U.S. issue with China is trade. And that means $220 billion of lost sales to China in the first eight months of this year, and $340 billion the U.S. lost last year. That’s on top of decades of trillions of dollars of U.S. wealth and technology transferred to China.

Get after China to square the bilateral trade accounts by buying more U.S. goods and services.

Closer to home, the EU is America’s unnecessary distraction. Leave the Europeans alone to their centuries’ old squabbles and deadly clashes. The U.S. is doing enough for Europeans by tolerating their free riding on American economy with annual exports of $700 billion.

Washington should also forget about weaponizing East Europeans against Russia. That’s just another of America’s old blind alleys. Moscow is a smart and militarily formidable opponent. Led by Germany, the six core EU countries (aka the “old Europeans”) know that, and the debilitating energy crisis has reminded them how much Russia means for their economies.

It’s time for the U.S. to turn to its huge economic and social problems. The best strategic competition is to build the Reagan’s “shining city on the hill” -- a beacon to the world, because “A city that is set on the hill cannot be hid” (Matthew 5:14).

And with an arsenal of 3,750 nukes, the U.S. does not have to worry about external threats to its national security. If anybody misbehaves, the Pentagon knows all the return addresses.