THE WISDOM FUND: News & Views
November 4, 2008
The Wisdom Fund

Obama's Foreign Policy and Economic Challenges

by Mohsin Ali

President Bush in his September farewell address to the UN General Assembly in New York said the United Nations and other multilateral organizations were needed more urgently than ever. He challenged the world body to stop terrorism and punish Iran and communist North Korea for their nuclear programs.

Mr. Ban Ki Moon, UN Secretary General, said the world faced a "challenge of global leadership." He urged the UN to become stronger and swifter in its response to humanitarian problems such as a world food crisis that has more than doubled the price of rice.

Since then the global economic system has been sliding into a recession and is on the verge of a possible deep and long depression unless the international community takes urgent countermeasures.

So at the urgent behest of Britain and France, President Bush has agreed to convene a summit in Washington, DC in mid-November of the leaders of 20 developing countries and industrial powers as well as international organizations to consider measures to prevent a repeat of the current global financial crisis.

As Britain's ambassador to the United Nations, Sir John Sawers, said last month the winner of the U.S. presidential election will face the immediate challenge of "restoring America's standing in the world." He said: "We have all seen that America's standing has slipped as it has confronted the challenges of recent years."

The Ambassador declared that whether Democrat Barack Obama or Republican John McCain wins the election, the new president will have to move quickly to enlist global support in rebuilding confidence in the international economic system as well as in American leadership in the world. He compared the challenges facing the next president to those of 1945, when the world's leaders emerged from World War II to create global institutions including the UN, the International Monetary Fund and the World Bank.

British Prime Minister Gordon Brown had warned in a speech in April that the IMF needed to be overhauled to create a global early warning system for financial risks. The Bank of England recently said the world's financial firms had lost £1.8 trillion ($2.8 trillion) as a result of the continuing credit crisis.

The Washington - based IMF has about $250 billion for all lending which is not enough in a world of massive cross-border flows. It needs a lot more money. Some 20 countries may eventually require Fund help, economic experts say.

The United Nations next scheduled global summit in 2010 offers a target date for reaching agreement on institutional changes. Mr. Brown, who was Chancellor of the Exchequer before becoming Prime Minster, believes that the summit's goal should be to achieve "globally accepted standards of supervision that apply equally in all countries," as well as better cross-border supervision of global companies and more concerted action at moments of crisis.

Mr. Brown has said: "Hard-pressed families and businesses in our communities depend on us working together. "This is a global problem that requires a global solution. No country - no matter how big - can solve these problems on their own."

Meantime, French President Nicolas Sarkozy has persuaded the reluctant Germans to sign his coordinated bailout plan of the Euro-zone. Actually Britain's Gordon Brown was the first to come up with the idea of injecting capital to prop up the banks. This pan-European scheme was endorsed in Brussels under President Sarkozy's current chairmanship of the EU.

The French leader then went on the warpath, attacking the greed of a banking and business world that had brought the global economy to its knees. He next flew to America as Mr. Europe and made the case for a new global economic order conference that would do no less than reform capitalism.

The November 15 Washington economic summit meeting would include oil rich Saudi Arabia and Gulf states and China and Japan that have massive ‘sovereign funds' or foreign currency reserves. Mr. Brown has just got a pledge from King Abdullah of Saudi Arabia, who is to attend the Washington summit, to contribute to the IMF's special rescue fund. China, which has foreign currency reserves of some $1.6 trillion dollars is also expected to help.

I think you will agree that the U.S. dominance of the post 'Cold War' system is slipping as Moscow and Beijing show a combination of authoritarianism and modernization that offers a new and clear challenge to "liberal democracy." Are we entering a "post American super power world?"

There is some reason to think that we are seeing the demise of the so called unipolar world -- the existence of a sole superpower -- which arose after the collapse of the Soviet Union and the end of the Cold War. A few years ago, the United States was the most powerful political, economic, and military nation ever seen on the planet. Today, after two notably highly controversial presidential terms, the army is creaking under the weight of unpopular wars, the U.S. economy seems to be headed for recession, and the "coalition of the willing" is mainly of NATO members and a few other friendly states, including Israel.

Early on, the neo-conservatives of the Bush Administration blithely spoke of an "American Century." The truth may be the opposite. China and Russia are moving towards a partnership through the Shanghai Cooperation Organization (SCO) which, along with the rise of India as a big economic power and Japan's industrial and high tech' eminence, could shift the axis of world power east. Regional alliances and trade groupings like the European Union are increasingly making their weight felt. There are greater or lesser challenges to U.S. power occurring most of the time -- just consider the situation in nuclear armed Pakistan.

Mr. Robert Gates, U.S. Defense Secretary, has warned that extremist safe havens in northwest Pakistan were threatening the existence of Islamabad's civilian government. "The war on terror started in this region. It must end there," he said.

The Manichaen certainties of the Bush foreign policy are seen to be increasingly irrelevant in a changing world. Whoever takes over the White House in 2009 will need, as a matter of urgency, to put into effect new policies to preserve what elements of the unipolar system are good and necessary and in the real interests of the United States. The shape of the policy remains unclear until the protagonists are known, but one thing appears certain -- there will be an urgent need for multilateralism. In this fragile nuclear age of economic globalization, consumerism and high technological communication, raw power alone will not suffice. Indeed it is becoming increasingly irrelevant.

Whoever enters the White House in January will be faced with unprecedented global issues. Principal among these are the economic and ultimately political challenges from China and India, the new economic superpowers of the East, closely followed by an assertive new post-communist Russia.

Parallel to this, the new chief executive will have the immediate and urgent task of following up the present Administration's attempts to stabilize the economy with a massive purchase of "toxic" assets. If this succeeds it will affect not only the American economy, but the world. Because it has often been said that when the U.S. sneezes, the world catches a cold.

The United States will be faced with stark choices in future foreign relations under the next Administration. It can continue down the path of unilateralism both politically and economically, denouncing strategic arms agreements with Moscow, provoking Russian sensitivities with new arms buildups, defying warnings of global warming, engaging in foreign interventions with damaging results such as that in Iraq, widely perceived to have caused lasting damage to Muslim relations with the United States and America's reputation elsewhere in the world. This was exacerbated lately by American cross-border air attacks from Afghanistan into Pakistan, killing innocent civilians, actions seen as reckless not only in Islamabad.

However, the new Administration in Washington could rededicate itself to multilateralism and engage in a new form of interdependence with the world.This could lead to strengthening cooperation within NATO. It could also mean returning to more creative and constructive involvement in the Pacific Rim, especially now that China has joined Japan as an economic giant on the other side of that ocean.

Foreign policy is frequently about perceptions. Whatever side one takes, whatever one's views, the international reputation of the United States is widely perceived to have suffered during the Bush Administration.

Perceptions of NATO are a case in point. The Russian-Georgian clash this summer was an instructive episode, highlighting the dangers of failure to perceive properly the larger geopolitical picture in the interests of international security and stability. The future of NATO should surely, emphatically, not be about starting a new Cold War, but resuming and enriching the detente achieved with the former USSR and enhancing cooperative relations with post-Soviet Russia.

Critics of the present Administration have deplored American behind-the-scenes involvement in arming the Georgians in Russia's strategic backyard. That and demands to admit Georgia and the Ukraine into NATO prompt critics to point out that Russia has a legitimate right to its own sphere of influence, the equivalent of the American Monroe Doctrine. Attempts to make Georgia a member of the Atlantic Alliance, however constitutional, can only strain east-west relations instead of improving these.

The new hawkish, anti-Russian tones with talk of a new cold war were not universal in western Europe. Among those to urge caution and warn against early admission of Georgia to the Atlantic Pact was Germany, perhaps America's most influential NATO ally. Berlin has its own agenda, which includes a particularly strong interest in stability in central and eastern Europe, on its eastern flank. The newcomer to the White House will have the opportunity to change perceptions, resume Theodore Roosevelt's wisdom of not only carrying a big stick but also speaking softly, and to restore the United States' post-World War Two reputation -- at least in Europe -- as a benign, benevolent benefactor, a custodian of democratic values, and an inspiration to all who seek political freedom, freedom of enterprise and the creative spirit.

Moscow and Beijing may show a combination of authoritarianism and modernization that offers a new and clear challenge to "liberal democracy." But recent history shows that liberal democracy has a remarkable habit of ending up the winning player.

The immediate task for the new Administration will be an economic one: to strengthen regulation of financial markets and achieve stability in a radically changed world economy of globalization, to ensure greater responsibility by the markets, and curb malpractice and irresponsible borrowing that have led to the collapse of hallowed American banking institutions and caused shock-waves overseas.

To overcome the fragility of capital markets, the Administration has introduced a 700 billion dollar rescue package, setting up a fund to buy back much of the bad debt held by banks and financial institutions around the world. This is the largest transfer of debts since the creation of money.

U.S. Government efforts to restore confidence and curb excessive risk-taking in order to protect the American taxpayer and home owner will have a big effect overseas. Under the American Administration's bail out plan, foreign financial institutions with significant operations in the United States are eligible to sell or auction their bad debts to a new U.S. Treasury fund. Thus, the worldwide disturbance that started with the sub-prime mortgage crisis in the United States paradoxically demonstrates not America's weakness, but its influence, its continuing importance to the world, its vital role in re-stabilising the world economy. This latest crisis was more than a sneeze and the shock-waves have been correspondingly mountainous.

Ultimately, this crisis has once again ironically shown the extent of American world power and potential. Thus, in international economics too, responsible U.S. world leadership is needed as never before. It is therefore premature to talk of a post-American superpower world.

China, India and Russia all know what they owe to American creativity and originality of mind and enterprise, whether in technology, science or culture, and how greatly American know-how and inventive genius can continue to enrich their societies and the world.

America is not finished yet. It relishes challenges. Now its Himalayan task is to restore its good name in the world, engage better with the United Nations and use its great power and reach to make sure the world is a safer place.

The novelist John Le Carre, master of cold war espionage fiction and a former British diplomat, said on the BBC recently and I quote: "When the cold war ended I hoped something wonderful would happen. The opposite happened. We've screwed up."

Today, as the presidential election voting is taking place, most in the world, whether they love America or hate her, look to a new American Administration to unscrew the problems, and lead the way to a better world.



[Mohsin Ali, O.B.E., is a former diplomatic correspondent for Reuters.]

Robert Fisk, "New actor on the same old stage," Independent, August 2, 2008

William Greider, "Paulson Bailout Plan a Historic Swindle," Nation, September 19, 2008

[Obama's job is to present a benign, even progressive face that will revive America's democratic pretensions, while ensuring that nothing changes.--John Pilger, "Exercise your rights," New Statesman, October 23, 2008]

George Friedman, "Obama's Challenge," Stratfor, November 5, 2008

Andrew J.Bacevich, "Evangelical foreign policy is over," Boston Globe, November 6, 2008

Ted Galen Carpenter, "Worse Than Bush?," National Interest, November 7, 2008

[But will the election also mark a turning point in the actual substance of policy? Can Barack Obama really usher in a new era of progressive policies? Yes, he can. . . .

What F.D.R. said in his second inaugural address - "We have always known that heedless self-interest was bad morals; we know now that it is bad economics" - has never rung truer.--Paul Krugman, "The Obama Agenda," New York Times, November 7, 2008]

[Obama has got to close Guantanamo. He's got to find a way of apologising to the world for the crimes of his predecessor, not an easy task for a man who must show pride in his country; but saying sorry is what - internationally - he will have to do if the "change" he has been promoting at home is to have any meaning outside America's borders. He will have to re-think - and deconstruct - the whole "war on terror". He will have to get out of Iraq. He will have to call a halt to America's massive airbases in Iraq, its $600m embassy. He will have to end the blood-caked air strikes we are perpetrating in southern Afghanistan - why, oh, why do we keep slaughtering wedding parties? - and he will have to tell Israel a few home truths: that America can no longer remain uncritical in the face of Israeli army brutality and the colonisation for Jews and Jews only on Arab land. Obama will have to stand up at last to the Israeli lobby (it is, in fact, an Israeli Likud party lobby) and withdraw Bush's 2004 acceptance of Israel's claim to a significant portion of the West Bank. US officials will have to talk to Iranian officials - and Hamas officials, for that matter. Obama will have to end US strikes into Pakistan - and Syria.--Robert Fisk, "Obama has to pay for eight years of Bush's delusions," Independent, November 8, 2008]

Paul Harris, "Why America will not turn to the left," Guardian, November 9, 2008

Joseph Stiglitz, "More Pain to Come, Even if He's Perfect," Washington Post, November 9, 2008

"Job One," Washington Post, November 9, 2008

Michel Chossudovsky, "Will an Obama Administration Reverse the Tide?," globalresearch.ca, November 9, 2008

VIDEO: "The New World Order," wakinggiant.org, November 2008

[On October 12 the United States and India launched an eighteen-day military exercise codenamed Yudh Abhyas (war study) in the Indian state of Uttar Pradesh. Described as "one of their largest-ever ground combat joint exercises," . . .

Far from being an isolated case, the joint U.S-Indian operation is emblematic of unprecedented military cooperation between the two nuclear nations over the past few years, in fact a strategic military partnership whose major purposes are to supplant Russia as India's decades-long main defense ally and arms supplier and to consolidate a U.S.-led military bloc in the Asia Pacific region aimed at containing China and furthering the encirclement of both that nation and Russia.--Rick Rozoff, "Dangerous Crossroads: U.S. Expands Asian NATO Against China, Russia," globalresearch.ca, October 17, 2009]

[For the first time since World War II, it was not the United States that pulled the rest of the world out of negative growth, but China. The U.S. has emerged from the financial carnage as the most heavily indebted nation on Earth, and China as its leading creditor with an unprecedented $2.4 trillion in foreign reserves.

Its cash-rich corporations are now buying companies and future natural resources from Australia to Peru, Canada to Afghanistan where, last year, the Congjiang Copper Group, a Chinese corporation, offered $3.4 billion - $1 billion more than the highest bid by a Western metallurgy company - to secure the right to mine copper from one of the richest deposits on the planet.--Dilip Hiro, "The American Century Is So Over: Obama's Rudderless Foreign Policy Underscores America's Waning Power," antiwar.com, May 28, 2010]

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