Global Economic Strategy

How Will Russia's Economy Emerge from the Crisis?

Stephanie Gunter — Mon, 22 Jun 2009 06:00:00 -0400

A New America Event
06/22/2009 - 1:00pm

On June 22, 2009 Yermolai Solzhenitsyn, Lenny Mendonca, Toby Gati, and Douglas Rediker gathered with Steve Clemons at the New America Foundation to discuss Russia’s economy and the newly released McKinsey Global Institute paper, Lean Russia: Sustaining Economic Growth Through Improved Productivity. This report asserts that future growth within Russia is contingent on new and increased investment and productivity.

Jobs Solutions for Our Jobless Recovery

Economic Growth — Tue, 19 May 2009 10:40:00 -0400

This speech was delivered at The New School on May 19, 2009.

Views on the U.S. economy

Changes in Global Finance Forces Tectonic Policy Shifts

Economic Growth — Mon, 11 May 2009 06:20:00 -0400

The following speech was given by Douglas Rediker for the Truman National Security Project in Washington, DC on May 1, 2009.

Green-shoots and optimism aside, let's agree that no one really knows how the economic crisis will play out or when it will end. There are those who believe that we have reached the bottom and others who believe that we have only reached a "temporary bottom."

Ten National Security Myths

Cecille Isidro — Mon, 06 Oct 2008 06:56:00 -0400

The Iraq War is a testament to the great damage a foreign policy based on myths, lies and distortions can do to our nation’s security and well-being. As the election draws near, a new set of myths and fallacies as misleading as those that led the Senate to support George W. Bush’s invasion of Iraq have become embedded in our foreign policy discourse. Many of them are being perpetuated by the very same political forces that peddled the myth of mushroom clouds coming from Saddam Hussein’s Iraq. Others are the product of muddled thinking on the part of both Republicans and Democrats.

If left unchallenged, these myths and fallacies could influence the outcome of the election and shape policy in the next administration. Here are the “top ten” myths followed by what we believe is a more accurate depiction of what is at stake for the United States and the world.

Myth 1. It’s a dangerous world. We face an array of serious national security threats that require an experienced Commander-in-Chief.

John McCain’s supporters have repeated this refrain over and over, replete with 3 am imagery, to call attention to his presumed national security credentials and to cast doubt on Barack Obama’s readiness to be Commander-in-Chief. Obama has on occasion challenged the politics of fear, but many of his supporters have too readily conceded that it is a dangerous world.

The world is more dangerous than it would have been had the Bush administration not invaded Iraq, spurned Iran’s diplomatic overtures in 2003 and unnecessarily antagonized Russia by expanding NATO and withdrawing from the Anti-Ballistic Missile Treaty. But the world is far less dangerous than it has been in previous election years -- certainly less dangerous than in 1960, when John F. Kennedy was elected, or in 1980, when Ronald Reagan was voted into office. Seven years after the 9/11 attacks, it is evident that al-Qaeda lacks the capacity to pose a systemic threat to America. Since 9/11 there have been no major terrorist attacks against US targets outside the war zones of Iraq and Afghanistan.

As for “great power” conflict, China, India, Brazil and Russia are all stakeholders in the current international system and would prefer to work with the United States rather than challenge it militarily. Iran is too weak economically and militarily to pose a threat to the United States or to US allies in the Middle East and is years away from obtaining nuclear weapons. The stability of nuclear Pakistan and oil-rich Saudi Arabia re--mains a concern, but both countries have proved to be more resilient -- and, in the case of Saudi Arabia, more capable of reform -- than their critics have allowed.

This is not to say that the United States does not face major international challenges. These challenges relate to the economic rise of China and India, the transfer of huge amounts of our wealth to petrodollar states, the vulnerabilities that come with the complex interdependence of industrial production and financial systems created by globalization, and the incipient struggle over resources, particularly oil and water. But the skills and resources needed to meet these challenges are not the warrior instincts highlighted in McCain’s Commander in Chief ads.

When the phone rings at 3 am, it will more likely be a call warning that an international deal to rescue an American bank that is “too big to fail” has collapsed, and that the Treasury and Fed will have to step in, than a call about a terrorist attack on American soil or missiles being fired on an American ship. The nerves and judgment of a good crisis-management team may indeed be in high demand in the next administration, but not those that the catchphrase “It’s a dangerous world” brings to mind.

Myth 2. The surge has worked. To withdraw from Iraq now would snatch defeat from the jaws of victory and embolden Islamic extremists.

This is McCain’s main talking point on Iraq, and his supporters have used the “success” of the surge to cast doubt on Obama’s judgment. Civilian and military casualties in Iraq have indeed declined since the deployment of additional US forces. But to say the surge worked is misleading in three ways. First, it confuses the temporary surge of US forces in 2007–08 with a number of other factors that reduced violence. As US officials in Iraq have admitted, the decision by Sunni groups to rein in Al-Qaeda–oriented extremists, along with the US military’s decision to pay former Sunni insurgents who joined the Awakening Councils -- both of which began well before the surge -- deserves much of the credit for the decline in violence. So does the decision by Shiite leader Muqtada al-Sadr to order his militia to stand down during this period.

Second, the surge has had an ugly flip side. To reduce the violence, the US military built concrete walls to separate Sunnis and Shiites, which facilitated ethnic cleansing by both sides but especially by Shiite militias against Sunni residents of Baghdad. The drop-off in violence reflects the fact that ethnic cleansing led to the internal partition of Iraqi cities and regions, reducing the opportunity for sectarian killing.

Third, the surge has not created the conditions for political reconciliation or a stable Iraq, which, after all, was its main purpose. The “success” of the surge was based on Sunni repression of jihadi extremists, ethnic cleansing and separation walls, not compromise. The Shiite-led government seems no more willing to compromise on key issues than it was before the surge. Indeed, the Maliki administration is now targeting Sunni leaders of the Awakening movement, threatening to undo the fragile progress that has been made. Thus the surge has emboldened the government to consolidate its sectarian gains and buck the wishes of its American supporters, even to the point of demanding a timetable for the end of the occupation.

Myth 3. We cannot allow Afghanistan to become a safe haven for terrorists. We therefore must redouble our military efforts there or face another terrorist attack.

Since Barack Obama and John McCain both support sending more troops to Afghanistan, the election may create a bipartisan consensus for increasing the US military commitment to “winning” the “right” war. But such a consensus would be based on several mistaken notions.

First, the United States and its NATO allies are losing the war in Afghanistan not because we have had too few military forces but because our military presence, along with the corruption of the Hamid Karzai government, has gradually turned the Afghan population against us, swelling the ranks of Taliban recruits. American airstrikes have repeatedly killed innocent civilians. Sending thousands of additional troops will not secure a democratic and stable Afghanistan, because the country is not only deeply divided but also fiercely resistant to outside forces. Indeed, more troops may only engender more anti-American resistance and cause groups in neighboring Pakistan to step up their support for the Taliban in order to stop what they see as a US effort to advance US and Indian interests in the region. As the British and the Soviets discovered before us, Afghanistan can easily become a trap for any great power seeking to establish control of the country.

Second, securing Afghanistan is not necessary to US security and may actually undermine our goal of defeating Al-Qaeda. It makes no sense to commit more troops and money to a war in Afghanistan that cannot be won when Al-Qaeda can operate relatively freely in parts of Pakistan.

The key to the defeat of Al-Qaeda and its protectors lies with the Pakistani government and its ability to establish control over its remote territory. Major groups within Pakistan’s military and intelligence services are reluctant to take action against the extremists for fear it would help the United States and India consolidate control over Afghanistan. Expanding the war in Afghanistan may only further destabilize Pakistan by deepening divisions within that country, especially if Washington persists with its new policy of extending American military operations into Pakistan. The best way to get Pakistan to take action against al-Qaeda is for the United States to withdraw its forces from Afghanistan, encourage the Karzai government to negotiate with the Taliban to end the civil war and redirect US military efforts toward economic assistance, which would strengthen the popular appeal of the Pakistani and Afghan governments.

Third, even if remnants of al-Qaeda’s leadership are still there, the value of Afghanistan and Pakistan as an al-Qaeda safe haven is greatly exaggerated. Pakistan’s tribal areas are of limited use in training extremists to blend into US society or learn how to fly airplanes or make explosives (most of the planning for the 9/11 attacks took place in Hamburg and Florida, not Afghanistan). Nor is this remote and isolated area the best location from which to direct an effective terror campaign or recruit new members. That is why al-Qaeda is a decentralized network whose leaders in Pakistan can offer at most moral support and encouragement. American safety thus depends not on eliminating faraway safe havens for al-Qaeda but on common-sense counterterrorist and national security measures -- extensive intelligence cooperation, expert police work, effective border control and the occasional surgical use of special forces.

Myth 4. Iran is responsible for much of the violence against US forces in Iraq; by using its proxies in Lebanon and Gaza, it threatens to dominate the Middle East.

Iran has been able to increase its influence in the region not because of its strengths but because of Washington’s blunders -- most notably its illegal invasion of Iraq, which brought to power a pro-Iranian Shiite government, and its policy of isolating Hizbullah and Hamas, which has opened the door for Tehran to forge a closer alliance with both groups. Although strong enough to make any military action against its territory costly, Iran has a very modest ability to project military power and therefore poses little threat to its neighbors.

Its economy is overly dependent on high oil prices and is so badly managed that it depends on imported gas and other distillates. And its Islamic system of government has very limited ideological appeal in the predominantly Sunni Middle East, as evidenced by the failure of its earlier effort to export revolution. In recent years it has made progress in its uranium-enrichment program, but experts agree that it is years away from being able to produce a nuclear weapon.

Iran has tried to make the occupation of Iraq as difficult as possible for US forces, but it has not been the major cause of violence against US troops. Most of these attacks have come from Sunni insurgents, who are deeply hostile to Iran. Even though Tehran has helped supply some Shiite militias hostile to the US occupation, Iran does not want to do anything that would destabilize the current Shiite-led government, with which it has very close relations. Like it or not, both Tehran and Washington back the current Shiite-dominated government in Iraq.

Commentators have focused too much attention on the statements of Iranian President Mahmoud Ahmadinejad, who has little influence over foreign affairs. Iran is not ideologically wedded to an anti-American position. It supported the Bush administration’s 2001 overthrow of the Taliban in Afghanistan, and in 2003, it made a diplomatic overture to Washington, which put on the table such sensitive issues as Iran’s support for anti-Israeli militant groups and a de facto acceptance of Israel’s right to exist, in return for the normalization of US-Iranian relations. By virtue of its size and power, Iran wants to play a larger role in regional relations, and it sees Washington’s policy of isolating and punishing it as an obstacle to this goal. Change American policy to engage Iran, and the rationale for some of its anti-American policies would disappear while pressure within Iran for a different regional approach would increase.

Myth 5. To talk to the leaders of “rogue” states like Iran and Cuba without conditions legitimizes their position and weakens American leverage.

McCain has attacked Obama for saying that he would be willing to meet with the leaders of Iran, Syria, Venezuela, Cuba and North Korea without conditions. Although Obama later qualified his position, his willingness to engage US adversaries and use bilateral and multilateral diplomacy offers a clear alternative to McCain’s almost unconditional hostility to any kind of diplomacy.

McCain’s position of refusing to meet with such leaders without conditions ignores a long, albeit uneven, bipartisan tradition of direct negotiations with our enemies, a tradition that runs from Kennedy to Nixon to Reagan. It also ignores the abysmal record of trying to isolate “rogue” states with the goal of regime change. The Castro brothers in Cuba have outlasted nine, soon to be ten, US presidents. And more than seven years of refusing to talk with Tehran has only left Iran stronger and closer to a nuclear bomb. By contrast, the Bush administration’s decision to participate directly in the six-power talks and to drop earlier conditions led to the successful agreement with North Korea to dismantle its nuclear program.

As our experience with North Korea makes clear, however, to talk or not to talk misses the main point. The key question is not whether the president will meet with other leaders, “rogue” or not, but whether the United States will use diplomacy effectively to achieve US objectives. In many cases that diplomacy will not be head-to-head meetings with other leaders but good-faith participation in multilateral forums such as the six-power talks. In most cases, the United States will have far more to gain by participating without conditions than by creating conditions to avoid negotiations.

Myth 6. Vladimir Putin’s Russia is an authoritarian state pursuing an anti-American agenda aimed at reconstituting the Soviet Union in the form of a new Russian empire.

McCain has seized on the crisis in Georgia to advance this alarmist view and to push his policy of ejecting Russia from the G-8 and expanding NATO to include Georgia and Ukraine. Obama initially took a more nuanced position toward the crisis but has recently joined McCain in promising NATO membership to Georgia. McCain’s characterization of Russia is wrong for two reasons.

First, Russia’s foreign policy has not been anti-American. Moscow has cooperated with Washington on a number of important international issues, from assisting NATO against the Taliban in Afghanistan and supporting Washington’s counterterrorism efforts, to joining the coalition to curb Iran’s nuclear enrichment program.

Second, what McCain sees as a pattern of intimidation to re-establish the Russian empire more objective analysts see as a great power protecting its legitimate interests in the face of US provocations. These provocations started during the Clinton administration and have increased under Bush, with the expansion of NATO to Russia’s border and abrogation of the Anti-Ballistic Missile Treaty. They have continued with the promise of NATO membership to Georgia and Ukraine and the decision to deploy a missile defense system in Central Europe. Yet Moscow has responded for the most part in a measured and defensive way, its most forceful move being the recent military actions in Georgia to protect South Ossetia. When the Georgian president, Mikheil Saakashvili, sent forces into South Ossetia in violation of an earlier agreement, Russia responded much as the United States did when it intervened in 1999 against Serbia over Kosovo. Russian military actions in Georgia may have been disproportionate, but not as disproportionate as Washington’s extensive bombing of Serbia proper.

Despite the souring of the earlier cooperative relationship with the Bush administration, Russia has made it clear that it would still prefer a strategic partnership that would reduce nuclear weapons, contain Islamist extremism, and expand the world’s oil and gas supplies. But it has also made it clear that this partnership must be based on mutual interests and compromise, not simply on Russian acquiescence in American dictates.

Myth 7. Because the American military is stretched thin by the wars in Iraq and Afghanistan, we must increase the size of our conventional armed forces.

Both presidential candidates have come out with proposals to increase conventional forces. But these proposals are based on mistaken notions of the utility of military power and which military missions we must pursue to protect national security and contribute to world order.

The long wars in Iraq and Afghanistan have indeed ground down the military and limited our ability to respond to other potential threats. But the problem is not that we spend too little or have too few forces. After all, the military budget, now almost $600 billion, is almost as large as the combined military budgets of the rest of the world. We outspend China by a factor of ten to one, Russia by sixteen to one, and Iran by almost ninety times. Rather, the problem lies with the Bush administration’s military missions and its forward-based strategy. In addition to the traditional missions of deterrence and defense of sea lanes, national security strategy now calls for the use of force to effect regime change and to fight counterinsurgency wars. It also envisions expansion of American military bases throughout much of the greater Middle East.

The lesson we should draw from our experience in Iraq and Afghanistan is not that we need more conventional forces but that the missions of regime change and counterinsurgency are -- in addition to being illegal, in the case of the former, and unethical -- not essential to US interests and cannot be achieved at acceptable cost.

Furthermore, we should have learned from the stationing of forces in Saudi Arabia in the 1990s that positioning US troops in or near Muslim countries can fuel radical movements that create new threats to US security. The better course of action would be to wind down the counterinsurgency wars in Iraq and Afghanistan and reduce America’s heavy footprint in the Islamic world, thereby freeing resources for more urgent domestic and international needs.

Myth 8. A League of Democracies would create a global coalition for peace and freedom and would enable the United States and its democratic allies to intervene to solve humanitarian and other crises when the UN Security Council is paralyzed.

The creation of a League of Democracies is one of the central pillars of McCain’s foreign policy. Several leading Obama advisers, including former Clinton National Security Adviser Anthony Lake and Ivo Daalder of the Brookings Institution, also support the idea. Despite its bipartisan appeal, the notion has several insuperable problems.

First, many leading democracies would be reluctant to join such a league because it would exclude China and Russia -- and undermine the United Nations. And after their difficult experience with the Bush administration over Iraq, many of these same countries would not welcome another high-profile US initiative that seeks to tie democracy promotion to Washington’s national security agenda.

Second, a League of Democracies would be no more effective than other organizations in solving humanitarian problems like those in Burma and Darfur or in preventing nuclear proliferation. Large, newly developed democracies like Brazil, India, Mexico, Indonesia and South Africa are as protective of national sovereignty as China and Russia, in some cases more so, and are unlikely to support US-led interventions. And a League of Democracies would weaken more inclusive organizations, like the UN Security Council, thereby making it more difficult to solve the many international conflicts that would require China’s and Russia’s cooperation.

Third, the promotion of a League of Democracies would be polarizing and would create a global divide between a group of self-selected democracies and more authoritarian governments. This would reverse a twenty-year process of integrating China and Russia into the international system and reducing great power conflicts. It would also likely provoke efforts by China and Russia to strengthen organizations like the Shanghai Cooperation Organization as geopolitical alliances to counterbalance the West.

The best way to advance peace and security is to breathe new life into the UN by reforming the Security Council to better reflect today’s realities. In particular, that means enlarging the council to include emerging powers like India and Brazil. We need a more inclusive global forum that enables major -- and minor -- powers to deal with common problems, not a less inclusive new organization that through exclusion would make common action more difficult.

Myth 9. Globalization has strengthened the economy, and we cannot avoid it by hiding behind protectionist walls.

Free-trade Republicans associated with McCain and neoliberal Democrats seeking to influence Obama’s economic policies regularly trot out this notion to tar, as “protectionists” and “defeatists,” progressives who question current trade and investment policies. They go on to argue that American prosperity depends on embracing free trade and globalization.

But the global integration of the past decade has not benefited the US economy. This is most evident in the erosion of America’s tradable goods sector, as reflected by the large trade deficit and by the loss of millions of middle-class manufacturing jobs. It is also evident in the decline in family incomes over the past seven years despite rising worker productivity and by the increase in income and wealth inequality to levels not seen since the 1920s.

The problem is not with the idea of global economic integration per se but with the policies that have been pursued in its name. These policies have shortchanged investment at home by catering to the interests of Wall Street at the expense of Main Street and have indulged in the unfair trade practices of neo-mercantilist economies, which suppress workers’ wages and thus the basic needs of their populations.

The pattern of economic growth these policies produced is undesirable as well as unsustainable. It is not sustainable because it was too dependent on debt-financed consumption and a series of asset bubbles in the United States, which in part were caused by the oversaving and underconsumption of production-oriented economies like China’s and Japan’s. With the bursting of the housing and credit bubbles, US consumers are no longer in a position to be the main driver of world economic growth. Other large economies will have to do more to provide their own demand.

Thus the nature of global economic integration will change, and with it the structure and rules of the global economy. The goal must not be to preserve free trade as it was practiced over the past decade or so but to create a global system of trade and finance built on rising wages and growing middle classes in developed and developing economies. Above all, American prosperity depends not on preserving globalization and free trade but on improving the quality of our infrastructure, enhancing the skills of our workers, strengthening our institutions of science and research, and reforming our financial system to serve the real economy.

Myth 10. The world needs American leadership.

The call for the United States to lead the world is a staple of both political campaigns. Yet understandably, much of the rest of the world is more skeptical, if not outright resistant, to Washington’s global leadership than at any time since the end of World War II. What has passed as leadership in recent years too often has been swollen rhetoric about American greatness and pious dictates about how other countries should organize their economic and political systems, not leadership to solve common problems.

Indeed, on issues where American leadership has been most needed, like resolving the Israeli-Palestinian conflict, reducing nuclear weapons or halting global climate change, Washington has been largely absent or downright obstructionist.

On these issues, American leadership will still be required in the period ahead. But to say that the world needs our leadership ignores the fact that much of the rest of the planet -- China, India, Russia, South Korea, the countries of Latin America, even our European allies -- has become accustomed to a world in which the United States has been preoccupied with Iraq and in which the rest has had more freedom to shape the politics and economies of their regions. And much of the world has done just fine without American leadership.

Neither campaign has grasped the central lesson of the Bush era: The world does not need strong US leadership so much as it needs constructive US participation as a great power.

On a whole range of global issues, from climate change to stopping North Korea’s nuclear program -- even on the question of a peace between Israel and Syria -- other powers and new coalitions of transnational NGOs and intergovernmental agencies have become leaders and have an ownership stake. They would welcome the United States to the fold, but they would not cede all leadership to Washington.

Indeed, they understand that there will be clear limits to American power and leadership in the years ahead, as the United States digests the cost of its wars in Iraq and Afghanistan. The challenge for the next administration, then, is not how to restore American leadership but how to share these responsibilities in an increasingly multipolar world, and thus free up the energy and resources needed to rebuild American society.

Douglas Rediker in The New York Times | 'A Fund to Rival Those of Other Governments'

Communications — Mon, 22 Sep 2008 15:53:00 -0400

The new fund, assuming it is approved by Congress, could pull the United States deeper into a form of capitalism in which the most powerful financial entities are not risk-happy investment banks, but more cautious state-sponsored entities. While not necessarily a third economic way, this general approach presumes that the government -- in addition to the private sector -- plays a crucial role in deciding how best to deploy a nation’s investment capital.

“This gets to the point of state capitalism and defining what the role of the government is in a free-market economy,” said Douglas Rediker, a former investment banker who studies sovereign funds at the New America Foundation in Washington. LINK

Redressing America's Public Infrastructure Deficit

Economic Growth — Thu, 19 Jun 2008 06:49:00 -0400

Chairman, Oberstar, Representative Mica, and Members of the Committee, thank you for inviting me to testify today on the question of "financing infrastructure investments."

Over the past several decades, we have accumulated a sizeable public infrastructure deficit. As a result, a variety of infrastructure bottlenecks-traffic congested roads, clogged ports, and an antiquated air traffic system, to mention just a few-have begun to undercut our economy's efficiency and undermine our quality of life.

Parag Khanna and Fareed Zakaria in Wired | 'The Post-National, Post-American World as a League of Regions'

Communications — Mon, 02 Jun 2008 14:51:00 -0400

...Two new books – The Post-American World by Fareed Zakaria and The Second World by Parag Khanna – argue that the new global economy power will be more dispersed and multipolar.

"Mr. Zakaria believes we are experiencing modern history's third great power shift, after the rise of the West from the 15th century on, and the rise of the U.S. in the 19th century. But he argues that this latest transition is not so much about the decline of America as it is about “the rise of the rest,” and by that he means much more than simply China or India. The end result will be a “landscape that is quite different from the one we have lived in until now – one defined and directed from many places and by many peoples.” Mr. Khanna similarly predicts that we are headed toward a “global, multi-civilizational, multipolar” world with three superpowers: the U.S., China and the European Union.

"Each of the Big Three powers will assert its influence differently, but the intense demand for energy and resources means that the underlying goal will be the same. And the main battlefield for this geopolitical competition, Mr. Khanna argues, is the “second world” – about… more

Global Economic Strategy

American Strategy — Tue, 25 Mar 2008 14:04:00 -0400

The debate between hard, soft and smart power is meaningless unless the United States employs a sophistcated, global economic strategy--rooted in prosperity at home. This has been a fundamental tenet of American strategy since 1933.

In a dangerous shift, the United States' macroeconomic strategy now focuses on preservation instead of innovation. As a nation, we have chosen to defend an economic engine that is starved of modern infrastructure, hamstrung by policies that… more