By Thomas L. Friedman
March 28, 1999
As I watched the Rwandan ground crew curiously watching the picture-taking, I couldn't help wondering what they were making of this scene, which represented America at its best: the spirit of community, the melting pot, the willingness to help faraway strangers in need and, most important, a concept of citizenship based on allegiance to an idea rather than to a tribe. As a picture, it represented everything that Rwanda was not.
And as I stood there, I started to get mad -- not just about the tragedy in Africa but also about a budget debate that was then going on in Congress. We have something tremendously special in America, I thought, but if we want to preserve it, we have to pay for it and nurture it. Yet, when I listened to the infamous 1994 class of freshman Republicans -- and when I hear echoes today, with the likes of the House majority leader, Dick Armey, boasting that he has traveled abroad only once -- I heard mean-spirited voices, voices for whom the American Government was some kind of evil enemy. I heard men and women who insisted that the market alone should rule. And I heard lawmakers who seemed to believe that America had no special responsibility for maintaining global institutions and stabilizing an international system that benefits us more than any other country. And as I thought about all this on the tarmac of Kigali airport, I said to myself: "Well, my freshman Republican friends, come to Africa. It's a freshman Republican's paradise." Yes sir, nobody in Liberia pays taxes. There's no gun control in Angola. There's no welfare as we know it in Burundi and no big government to interfere with the market in Rwanda.
But a lot of their people sure wish there were. Like the desk clerk in Luanda, Angola, who looked at me as if I were nuts when I asked her if it was safe to take a walk three blocks from the hotel, down the main street of the capital in the middle of the day. "No, no, no," she shook her head -- not safe." I'll bet she wouldn't mind paying some taxes for 100,000 more police officers.
And then there was the Liberian radio reporter who demanded to know why the Marines came to Liberia after the civil war broke out in 1989, evacuated only the United States citizens and then left. "We all thought, 'The Marines are coming, we will be saved, '" he said. "How could they leave?" Poor guy, his country has no marines to rescue him. I'll bet he wouldn't mind paying some taxes for a few good men.
Many in Congress are reluctant to go on trips abroad. They think it looks bad to their constituents. Too bad. They want all the respect and benefits that come with being an American in today's world, but without any of the sacrifices and obligations that go with it. They should come to war-torn Africa and get a real taste of what happens to countries where there is no sense of community, no sense that people owe their government anything, no sense that anyone is responsible for anyone else, and where the rich have to live behind high walls and tinted windows, while the poor are left to the tender mercies of the marketplace.
Employers don't have to fret about those pesky worker-safety rules in Angola, let alone services for the handicapped. The 70,000 Angolans who have had limbs blown off by land mines get by just fine on their own. You can see them limping around the streets of Luanda in Fellini-esque contortions, hustling for food and using tree limbs as a substitute for the human variety. And in Rwanda and Burundi, no one is asked to pay for Head Start, Medicaid, national service or student-loan programs. Instead they just have a Darwinian competition for scarce land, energy and water, with Tutsi and Hutu tribesmen taking turns downsizing one another to grab more resources for themselves.
I don't want to live in such a country, or such a world. It is not only wrong, it will become increasingly dangerous. Designing ways to avoid that should be at the heart of American domestic and foreign policy. Unfortunately, neither the Democrats nor the Republicans are thinking in those terms. They behave as if the world is now safe for us to be both insular and mindlessly partisan. To the extent that there is serious discussion about a shared national interest, it is about whether we can define a new common threat -- Iraq, China, Russia -- and not a new common mission. The "big enemy" is still the organizing principle of American internationalism, not the "big opportunity" -- let alone "the big responsibility."
America does have a bipartisan national interest to pursue, and it has an enormous role to play. But we won't begin to fully grasp that until we understand that we are in a new international system. For the last 10 years we've been talking about "the post-cold-war world." We've described the world by what it isn't -- it's not the cold war -- because we don't know what it is. Well, what it is is a new international system called globalization. Globalization is not just a trend, not just a phenomenon, not just an economic fad. It is the international system that has replaced the cold-war system. And like the cold-war system, globalization has its own rules, logic, structures and characteristics.
Unlike the cold-war system, which was largely static, globalization involves the integration of free markets, nation-states and information technologies to a degree never before witnessed, in a way that is enabling individuals, corporations and countries to reach around the world farther, faster, deeper and cheaper than ever. It is also producing a powerful backlash from those brutalized or left behind.
If all the threats and opportunities of the cold-war system grew out of "division," all the threats and opportunities of the globalization system grow out of "integration." The symbol of the cold-war system was a wall, which divided everyone. The symbol of the globalization system is the World Wide Web, which unites everyone. In the cold war we reached for the hot line between the White House and the Kremlin -- a symbol that we were all divided but at least someone, the two superpowers, were in charge. In the era of globalization we reach for the Internet -- a symbol that we are all connected but nobody is in charge.
If the cold war had been a sport, it would have been sumo wrestling, says Michael Mandelbaum, a foreign affairs expert at Johns Hopkins University. "It would be two big fat guys in a ring, with all sorts of posturing and rituals and stomping of feet, but actually very little contact until the end of the match, when there is a brief moment of shoving and the loser gets pushed out of the ring, but nobody gets killed."
If globalization were a sport, it would be the 100-yard dash, over and over and over. And no matter how many times you win, you have to race again the next day. And if you lose by just a hundredth of a second it can be as if you lost by an hour.
The driving idea behind globalization is free-market capitalism. The more you let market forces rule and the more you open your economy to free trade and competition, the more efficient and flourishing your economy will be. Globalization means the spread of free-market capitalism to virtually every country in the world.
The defining document of the cold-war system was the Treaty. The defining document of the globalization system is the Deal. While the defining measurement of the cold war was weight, the defining measurement of the globalization system is speed -- in commerce, travel, communication and innovation. The cold war was about Einstein's mass-energy equation, E=mc2. Globalization is about Moore's Law, which states that the computing power of silicon chips will double every 18 months.
The cold-war system was built around nation-states, and it was balanced by two superpowers: the United States and the Soviet Union. The globalization system is built around three balances that overlap and affect one another. One is the traditional balance between states and states. The next is the balance between states and "supermarkets" -- the huge global stock and bond markets. (The United States can destroy you by dropping bombs, and the supermarkets can destroy you by downgrading your bonds.)
The last is the balance between states and "super-empowered individuals." Because globalization has brought down the walls that limited the movement and reach of people, and because it has simultaneously wired the world into networks, it gives more power to individuals than ever before to directly influence markets and nation-states. For instance, Osama bin Laden, the Saudi millionaire with his own global network (Jihad Online), declared war on America, and the Air Force had to launch cruise missiles at him. We launched cruise missiles at an individual -- as though he were another nation-state.
As the country that benefits most from global economic integration, we have the responsibility of making sure that this new system is sustainable. This is particularly important at a time when the world has been -- and will continue to be -- rocked by economic crises that can spread rapidly from one continent to another. America has had 200 years to invent, regenerate and calibrate the balances that keep markets free without their becoming monsters. We have the tools to make a difference. We have an interest in making a difference. And we have the responsibility to make a difference.
Sustaining globalization is our overarching national interest. The political party that understands that first, the one that comes up with the most coherent, credible and imaginative platform for pursuing it, is the party that will own the real bridge to the future.
Designing a strategy to promote sustainable globalization at home and abroad is no easy task. And it is made even more complicated by the effects of globalization, which have intensified the world's long-running love-hate relationship with America. For the moment, America has many of the most sought-after goods, services and innovations in the global market. What people thought was American decline in the 1980's was actually America adjusting to the new system before anyone else. We're already around the second turn before some others have laced up their shoes. Globalization-is-U.S.
Because we are the biggest beneficiaries and drivers of globalization, we are unwittingly putting enormous pressure on the rest of the world. Americans may think their self-portrait is Grant Wood's "American Gothic," the strait-laced couple, pitchfork in hand, standing stoically outside the barn. But to the rest of the world, Americans actually look like some wild, multicolored Andy Warhol print.
To the rest of the world, American Gothic is actually two 20-something software engineers who come into your country wearing beads and sandals, with rings in their noses and paint on their toes. They kick down your front door, overturn everything in the house, stick a Big Mac in your mouth, fill your kids with ideas you never had or can't understand, slam a cable box onto your television, lock in the channel to MTV, plug an Internet connection into your computer and tell you, "Download or die."
We Americans are the apostles of the Fast World, the prophets of the free market and the high priests of high tech. We want "enlargement" of both our values and our Pizza Huts. We want the world to follow our lead and become democratic and capitalistic, with a Web site in every pot, a Pepsi on every lip, Microsoft Windows in every computer and with everyone, everywhere, pumping their own gas.
No wonder, therefore, that resentment of America is on the rise globally. In 1996 I visited Teheran and stayed in the Homa Hotel. The first thing I noticed was that above the front door in the lobby were the words "Down With U.S.A." It wasn't a banner. It wasn't graffiti. It was tiled into the wall. A short time later, I noticed that Iran's mullahs had begun calling America something other than the "Great Satan." They had begun calling it "the capital of global arrogance."
The Iranian leadership had grasped the important distinction between "global arrogance" and old-fashioned notions of imperialism, when one country physically occupies another. Global arrogance is when your culture and economic clout are so powerful and widely diffused that you don't need to occupy other people to influence their lives. Well, guess what? The Iranians aren't the only ones talking about America as "the capital of global arrogance." The French, Germans, Japanese, Indonesians, Indians and Russians also call us that now.
In most countries, people can no longer distinguish between American power, American exports, American cultural assaults, American cultural exports and plain old globalization.
Martin Indyk likes to tell the story of when, as Ambassador to Israel, he was called upon to open the first McDonald's in Jerusalem. McDonald's gave him a colorful baseball hat to wear, with the golden arches on it, so he would be properly attired as he ate the ceremonial first Big Mac in Jerusalem -- with Israel Television filming every bite for the evening news. At that moment, an Israeli teen-ager walked up to him, carrying his own McDonald's hat, which he handed to Ambassador Indyk with a pen and asked: "Are you the Ambassador? Can I have your autograph?" Somewhat sheepishly, Ambassador Indyk replied: "Sure. I've never been asked for my autograph before."
As the Ambassador prepared to sign his name, the Israeli teen-ager said to him, "Wow, what's it like to be the ambassador from McDonald's, going around the world opening McDonald's restaurants everywhere?"
Ambassador Indyk looked at the Israeli youth and said, "No, no. I'm the American Ambassador -- not the ambassador from McDonald's!" Ambassador Indyk described what happened next: "I said to him, 'Does this mean you don't want my autograph?' And the kid said, 'No, I don't want your autograph,' and he took his hat back and walked away."
Oh, well. The trick for America is to lead without being too overbearing, to be generous without overextending ourselves and to be tough without engendering too much resentment. But how?
First, forget about the political labels from the cold-war system. Democrats and Republicans, liberals and conservatives; these terms are meaningless today. Instead, to locate yourself and your opponents in the new era, consider the accompanying chart of globalization identities.
The line across the middle from left to right describes how you feel about globalization. At the far right end of this line are the "Integrationists." These are the people who really welcome globalization because they think it is either good or inevitable and want to see it promoted through more free trade, more Internet commerce, more networking of schools, communities and businesses, so that we can have global integration across 24 time zones and into cyberspace.
At the far left end of the globalization line are the "Separatists." These are people who believe that free trade and technological integration are neither good nor inevitable, because they widen income gaps, lead to jobs being sent abroad, homogenize cultures into global mush and lead to life being controlled by distant, faceless market forces. They want to cut off and kill globalization now.
So the first thing you have to do is locate yourself somewhere on this line. Are you a Separatist? An Integrationist? Or something in between?
Now look at the line running from top to bottom of the matrix. This is the distribution axis. It represents what sort of policies you believe governments should adopt to go along with globalization. At the lower end of this line are the "Social-Safety-Netters." These are people who believe that globalization will be sustainable only if it is democratized, in both the economic and the political sense.
Obviously, not everyone agrees with this approach. That's why at the other extreme from the Social-Safety-Netters are the "Let-Them-Eat-Cakers." These are people who believe that globalization is essentially winner-take-all, loser-take-care-of-yourself. They want to shrink government, taxes and safety nets, and let people reap the fruits of their own labor or pay the price of their own ineptitude.
So next you have to locate yourself on this distribution axis. Are you a Social Safety-Netter? Are you a Let-Them-Eat-Caker? Or something in between?
Bill Clinton is an Integrationist Social-Safety-Netter. Newt Gingrich, the former Speaker of the House, was an Integrationist Let-Them-Eat-Caker. That's why Clinton and Gingrich were always allies on free trade but opponents on Social Security-welfare spending. The House minority leader, Dick Gephardt, is a Separatist Social-Safety-Netter, while Ross Perot is a Separatist Let-Them-Eat-Caker. That's why Gephardt and Perot were allies in their opposition to Nafta but enemies on Social Security and welfare.
Al Gore and George W. Bush are interesting hybrids. Gore is an Integrationist Social-Safety-Netter, but not on the extreme end of either. He has certain Gephardtist leanings when it comes to free-trade issues that might alienate his labor-union base. Bush is an Integrationist Let-Them-Eat-Caker, but also not on the extreme end of either. He has certain Clintonite leanings on education, training and social spending that should appeal to centrist voters.
I'm an extreme Integrationist Social-Safety-Netter. I believe you dare not be a globalizer without being a safety-netter and social democrat, because if you don't equip the have-nots, know-nots and turtles to survive in the new system, they will eventually produce a backlash that will choke off your country from the world. And I believe you dare not be a safety-netter or social democrat without being a globalizer, because without ever-increasing integration, you will never generate the incomes and absorb the technologies needed to keep standards of living rising.
But what does it mean to be an Integrationist Social-Safety-Netter? I think it means articulating a politics, geo-economics and geopolitics of sustainable globalization.
Politics
The first thing a politics of sustainable globalization must include is a picture of the world, because no policy is sustainable without a public that understands why it's necessary. This is particularly true with globalization, because the people who are hurt by it know exactly who they are, but the people who benefit from it tend not to understand that at all. After World War II, successive Presidents instructed Americans about the One Big Thing in the world that would be at the center of American politics -- containing Communism. Today, globalization and rapid technological change are that Big Thing. And that means virtually every aspect of national policy -- health care, welfare, education, job training, the environment, market regulation, Social Security, free-trade expansion and military strategy needs to be adjusted so that we get the most out of the globalization system and cushion its worst aspects.
For instance, a politics of sustainable globalization would have to include a strategy for giving as many people as possible a financial stake in the Fast World. Whenever I think about this, I always recall a story that a Russian journalist, Aleksei Pushkov, told me back in April 1995 about one of his neighbors in Moscow. "He was this poor driver who lived in the apartment off the entryway. Every Friday night he would get drunk and sing along -- over and over in a very loud voice -- with two English songs: 'Happy Nation' and 'All She Wants Is Another Baby.' He had no idea what the words meant. When he got really drunk, he'd start beating his wife and she would start screaming. He was driving us crazy. I wanted to throw a grenade at him.
"Anyway," Pushkov continued, "about eight months ago, I don't know how, he got a share in a small car-repair shop. Since then, no more 'Happy Nation,' no more singing all night, no more beating his wife. He leaves every morning at 8:30 for work and he is satisfied. He knows he has some prospects in life now. My wife said to me the other day, 'Hey, look at Happy Nation' -- that's what we call him -- 'he's an owner now.'"
Integrationist Social-Safety-Netters feel that there are a lot of things we can do to democratize globalization economically, promote social stability and prevent our own society from drifting even further into high walls and tinted windows. These measures need not be all that expensive, nor do they have to involve radical income redistribution -- or lavish welfare programs that violate the basic, neoliberal free-market rules of the system.
To that end, I believe that each Administration should offer an annual piece of legislation that I would call the Rapid Change Opportunity Act. It would accompany whatever integrationist policy the White House is pursuing that year -- whether it be Nafta expansion or most-favored-nation status for China. The act would vary each year, but its goal would be to create both the reality and perception that the Government understands that globalization spreads its blessings unevenly, and therefore the Government is constantly going to be adjusting its safety nets and trampolines to get as many people as possible up to speed for the Fast World.
Last year, my Rapid Change Opportunity Act would have included: pilot projects for public employment of temporarily displaced workers; tax breaks for severance pay for displaced workers; free government-provided resume consultation for anyone who loses a job, a further extension of the Kassebaum-Kennedy act, so that laid-off workers could keep their health insurance polices longer, and a national advertising campaign for one of the best, but most under-reported, bipartisan achievements of the Clinton era: the Workforce Investment Act.
Signed in August 1998, the act brought together and energized all the Government's job-training programs, including individual training accounts that workers can use for any training they believe will most advance their job opportunities, one-stop career centers for every job-training program and an increase in youth training programs by $1.2 billion over five years.
I would also include, in the Rapid Change Opportunity Act, increased lending to Asian, African and Latin American development banks to promote training of women, micro-lending to women and environmental cleanup. I'd also like to see an increase in financing for the International Labor Organization's new initiative for creating alternatives to child labor in countries where children are most abused. It's true: a hand-up really is better than a handout.
Even if we waste some money on these hand-up programs, the Rapid Change Opportunity Act would be a tiny price to pay for maintaining the social cohesion and political consensus for integration and free trade. Our motto should be: "Protection, Not Protectionism. Cushions, Not Walls. Floors, Not Ceilings."
Geo-Economics
I once wrote a fantasy about global investing that went something like this: I brushed up on my German and bought some German corporate bonds. I studied a little Japanese and picked up a few stocks on the Nikkei. I got a tip from a waiter at my local "House of Hunan" and bought a few shares on the Shanghai Stock Exchange. My broker tried to sell me some Lebanese bonds, but I told him that I already had wallpaper. I even did my thing for Russian reform by brushing up on the Cyrillic alphabet and buying a few Russian T-bills.
But after all this, I discovered that I had forgotten two little English words, "Alan Greenspan." Because when the Fed Chairman suddenly raised United States interest rates in the mid-1990's -- making the extra interest investors were getting on foreign bonds less attractive -- everyone started dumping securities in these foreign markets and bringing their money home. I got creamed. I was a bad lender, chasing higher rates of return without regard to risk.
Over the years I got a little smarter and became a better lender. I started doing my global investing through a mutual fund. A short time after Russia's economy went into a tailspin, in August 1998, I got a letter from that fund -- Tweedy, Browne Global Value -- reporting that its profits were down a bit because of the turmoil in international markets triggered by Russia's default. However, the fund was not down as much as many others because it had stayed away from Russia. The letter said of Russia that Tweedy "cannot understand investing in countries with little political stability, no laws protecting investors and a currency that may be put to better use as Kleenex." Yes, the Tweedy letter added, in the prior two or three years the Russian market increased fivefold, and then overnight lost 80 percent of its value -- a complete round trip." Russia, it turns out, was a bad borrower.
I tell these two stories because they capture in microcosm the two biggest threats to today's global financial system -- crises triggered by "bad lenders" and crises triggered by "bad borrowers." Just as there are drug users and drug pushers, in global economics there are bad borrowers, like Russia, and bad lenders, like myself. We need to address both.
Let's start with bad borrowers. I believe globalization did us all a favor by melting down the economies of Thailand, Korea, Malaysia, Indonesia, Mexico, Russia and Brazil in the 1990's, because it laid bare a lot of rotten practices in countries that had prematurely globalized. People keep referring to what happened in countries like Indonesia as an economic "crisis." Well, excuse me, but I don't consider the downfall of the most corrupt, venal, greedy, ruling family in the world -- the Suhartos -- a crisis. People talk about Indonesia or Russia or Thailand as if they had these charming, efficient and equitable financial systems before big bad globalization came along. Hogwash! Globalization simply exposed a bunch of flimflam regimes and crony-capitalist systems that were not up to the demands of the global system. The real crisis in these countries is not economic, it's political.
The tragedy is that globalization flattened not only the crony capitalists but also a lot of little folks who were just working hard and playing by the local rules (however flawed). In the new geo-economics, we now have an opportunity to assist the innocent victims by helping their countries get up to speed. The only lasting way to do it, though, is to encourage them to become not just emerging markets but also "emerging societies" (like Poland, Hungary and Taiwan), with real regulatory and democratic institutions. That way, as they plug into the global system they can handle its inevitable surges and excesses. The real crisis will come if we don't take advantage of this moment.
All sorts of would-be geo-architects want to set up some new global institutions to slow down capital flows. This is both wrong and futile. We want to keep global capital flows as free as possible -- and even if we didn't, there's no way to restrict them anymore. The answer for countries is local, not global.
I like to compare countries to computers. Today, for the first time in history, we all have the same basic piece of hardware -- free markets. The question is, which countries will get the economic operating systems (neoliberal macroeconomics) and software (regulatory institutions and laws) to get the most out of those free markets and cushion them from the worst surges coming from the "electronic herd" of global investors.
Russia is the egregious example of a country that plugged into the herd with no operating system and no software, with predictably horrendous results. Thailand, South Korea and Indonesia plugged into the herd, but with a slow operating system: what I call "DOScapital 2.0" (crony capitalism). It was great for getting these countries from an average income of $500 per capita to $5,000. But when they wanted to move from $5,000 to $15,000, and the speed of the electronic herd moved from a 286 chip to a Pentium III, and they were still using DOScapital 2.0, a message came up on their screens: "You Have Performed a Series of Irrational Investments. Cannot Save Items. Delete Memory of All Inefficient Banks and Firms, and Download New Software and Operating System."
As President Ernesto Zedillo of Mexico once remarked to me, at the end of the day every global dollar invested in Mexico ends up in a "local" Mexican bank, a "local" Mexican insurance company, a "local" Mexican factory. If Mexico does not have the operating system and rule-of-law software to manage and regulate that dollar, he said, no global institution can save it.
Bad lenders can be just as dangerous as bad borrowers, and some of the worst lenders in recent years have been big banks. A friend of mine in Hong Kong said that during the Asian economic boom, Germany's Dresdner Bank told its managers in Asia, "Lend, lend, lend, otherwise we will lose market share." Banks make money by lending and each one assumed that Asia was a no-brainer. So they shoved money out the door, just like drug dealers expanding their client base. Their message to the developing world was: "C'mon kid. Just try a little of this cash. The first loan's free."
Another form of bad lending is when banks recklessly lend millions of dollars to hedge funds so that they can "leverage" their bets. The hedge funds raise $1 from investors, borrow $9 more from banks and then use that leverage to magnify each of their bets in stocks, bonds, derivatives and currencies around the world. Generally speaking, there is nothing wrong with leverage. Your home mortgage is leverage. You want people to take risks, even crazy risks. This is how fledgling enterprises get financed and either go bankrupt or turn into Microsoft. The danger with leverage derives from the fact that the amounts of money that can be lent to hedge funds or emerging markets today are so enormous, and the system is now so greased and integrated, that when big risk-takers like Long-Term Capital Management make big mistakes they can destabilize everyone.
How to reduce that threat? To begin with, we need to proceed slowly and humbly. By this I mean that we have to understand that the global economic system is still so new and so fast that even the best minds don't fully understand how it works. Right now, our understanding of the globalization system is about as sophisticated as our understanding of the cold-war system was in 1946. Alan Greenspan is a lifelong scholar of international finance. But when I asked him in December about the logic of today's integrated global market, he gave me a rare on-the-record quote that should humble us all. "I have learned more about how this new international financial system works in the last 12 months," he said, "than in the previous 20 years."
Some have proposed that we put a little sand in the gears of the global economy to slow it down a bit. My response would be that I don't think it is ever very wise to put sand in the gears of a machine when you don't fully understand how it works. It might not just slow down. It could come to a screeching, metal-bending halt. Also, where do you put the sand when you are dealing with a fund manager sitting in Connecticut using the Internet to invest in Brazil via a bank domiciled offshore in Panama? Ever try to put sand in cyberspace? Well, then, how about setting up a global central bank? That may be a good idea, but it's not something that is going to happen anytime soon -- not as long as we all still live in 200-odd different countries.
So does that mean that there is nothing we can do? No. The good news is that in the wake of the crisis of 1998-99 the market on its own is brutally disciplining itself. You see signs of this everywhere. The chief executives of some of the biggest banks in the world -- Barclays P.L.C., BankAmerica, United Bank of Switzerland -- were all ousted in 1998, after huge losses in high-risk emerging markets.
In the wake of these beheadings, those major banks have restricted leverage, cutting off reckless fund managers, demanding more documentation from those to whom they are still lending and scrutinizing more seriously not just the balance-of-payments figures of emerging markets but also their operating systems, legal systems and overall software.
Banks and investors have started asking fund managers tough questions about their exposure to risks and what defensive measures they have taken. And the International Monetary Fund, the Treasury and fund managers have belatedly started asking emerging-market countries what they are doing to improve their financial and regulatory systems.
The only realistic solution for now is to take this ad hoc approach, intensify it and extend it into the future. If everyone from the I.M.F. to Merrill Lynch to my Aunt Bev would just ask these questions more often, and keep asking them, we'd have a chance of preventing two out of the next five crises and limiting the impact of one of the next five. That's the most we can hope for.
Sure, this doesn't seem very sexy -- calling on everyone in the system to become a better regulator, a smarter investor and a more prudent lender. But it's time we stopped kidding ourselves. Today's markets are so big and, with the advent of the Internet, becoming so fast that they can never be immunized from crises.
Global financial crises will be the norm in the coming era. In fact, let me leave you, dear readers, with one piece of advice: Fasten your seat belts and put your seat backs and tray tables into a fixed and upright position. Because the booms and the busts and the recoveries will all be coming faster. So get used to it, and just try to make sure that the leverage in the system doesn't become so great in any one area that it can make the whole system go boom or bust. Anyone who tells you that they have a plan for eliminating these crises is just pulling your leg. In fact, as you are reading these words, the next global financial crisis is already germinating somewhere.
Geopolitics
It is not easy for this generation of Americans to grasp how important the United States is to the world in the era of globalization. America today is the Michael Jordan of geopolitics -- the overwhelmingly dominant system. Now Jordan was good, and his opponents both loved and hated playing against him. Everyone wanted to be like Mike. But as good as Jordan was, he was nothing without all the other teams in the N.B.A. to showcase his skills -- and we're nothing without the rest of the world, which is why managing globalization is a role from which America dare not shrink.
Historically, the United States has either been isolated from world affairs or deeply engaged as part of a moral crusade to fend off an aggressive, threatening power. Isolation is easy to explain and understand. Engagement in a bipolar world -- with a menacing, nuclear-armed Soviet bear growling on the other side -- was easy to explain and understand. But what is not easy to explain or understand is engagement in a world in which America is the biggest beneficiary and the sole superpower, with multiple secondary powers and no immediately visible threat, but with many little threats and an abstract globalization system to maintain. But this is the world we have. And in this world we can't afford either to retreat into isolation or to wait around for some smaller adversary to become a life-threatening foe.
As I have noted before, globalization and economic integration will act, to some degree, as a restraint on those states that are plugged into the system and dependent upon the electronic herd. It's true that no two countries that both have a McDonald's have ever fought a war since they each got their McDonald's. (I call this the Golden Arches Theory of Conflict Prevention.) But globalization does not end geopolitics -- the enduring quest for power, the fear of neighbors, the tug of history. What globalization does is simply put a different frame around geopolitics, a frame that raises the costs of war but cannot eliminate it.
That is why sustainable globalization still requires a stable, geopolitical power structure, which simply cannot be maintained without the active involvement of the United States. All the technologies that Silicon Valley is designing to carry digital voices, videos and data around the world, all the trade and financial integration it is promoting through its innovations and all the wealth this is generating, are happening in a world stabilized by a benign superpower, with its capital in Washington, D.C.
The hidden hand of the market will never work without a hidden fist -- McDonald's cannot flourish without McDonnell Douglas, the builder of the F-15. And the hidden fist that keeps the world safe for Silicon Valley's technologies is called the United States Army, Air Force, Navy and Marine Corps. "Good ideas and technologies need a strong power that promotes those ideas by example and protects those ideas by winning on the battlefield," says the foreign policy historian Robert Kagan. "If a lesser power were promoting our ideas and technologies, they would not have the global currency that they have. And when a strong power, the Soviet Union, promoted its bad ideas, they had a lot of currency for more than half a century."
This is too easily forgotten today. For too many executives in Silicon Valley, there is no geography or geopolitics anymore. There are only stock options and electrons. Their view that Washington is the enemy, and that any tax dollar paid there is a tax dollar wasted, is grotesque. There is a saying in Silicon Valley that "loyalty is just one mouse-click away." But you can take that too far. Execs there make boasts like: "We are not an American company. We are I.B.M. U.S., I.B.M. Canada, I.B.M. Australia, I.B.M. China." Oh, yeah? Then, the next time I.B.M. China gets in trouble in China, call Jiang Zemin for help. And the next time Congress closes another military base in Asia, call Microsoft's navy to secure the sea lanes of the Pacific. And the next time Congress wants to close more consulates and embassies, call Amazon.com to order a new passport.
This doesn't mean America needs to be involved everywhere all the time. There are big, important places and there are small, unimportant places. Diplomacy is about knowing the difference between the two, and knowing how to mobilize others to act where we cannot or should not act alone.
In such a world, pure realism and pure idealism are rarely the answer. The realists would say, Stay away from Kosovo, even if the conflict could spill over to Greece and Turkey; the idealists argue that we should invade Serbia with NATO forces, break off Kosovo, make it an independent state and defend it forever. Both are wrong.
The lesson I learned from Bosnia is that Americans do not want to watch innocent civilians slaughtered in Europe, especially when we have the resources to make a difference at a reasonable cost. And they are right. But those who argued that no NATO peacekeeping operation would be workable in Bosnia until the parties were exhausted and there was a balance of power on the ground were also right. When you talk to American troops and officers who have served in Bosnia as peacekeepers, they don't tell you that they feel stuck in some morass. They are genuinely proud of what they are doing and vastly prefer that to parading around the flagpole at Fort Hood.
In Kosovo, the instinct of the Clinton Administration to nudge the parties toward a settlement before another massacre, and to leverage American power -- sending 4,000 peacekeepers to the Europeans' 25,000 -- basically makes sense. If the parties in Kosovo are ready to make peace, America, as a European power, should be prepared to play a part in patrolling the fence between them. If they are not, we should build a fence around them and use our leverage to foster a balance of power.
This same delicate balance applies to China. America's China policy oscillates between the Boeing School (just do business and everything will take care of itself) and the neoconservative school (China is a new version of the old Soviet Union and must be contained). Both are wrong. We do not want a cold war with China if we can avoid it.
China is not the Soviet Union, which made television sets that blew up and tractors that were more valuable as scrap metal. China is one-fifth of humanity and an economic powerhouse. It is also changing profoundly because of its openness to the world, and anyone who visits there regularly can see that it's Madison, not Mao, who's winning the day there. The right approach to China is to build bridges where possible -- to nurture that openness -- and draw redlines where necessary when Chinese actions become destabilizing. And some days you have to draw redlines in the morning and build bridges in the afternoon. We get in trouble when we do only one and not the other.
In order to sustain such policies, proponents of internationalism are going to have to build a new coalition to support it. The constituency that sustained internationalism for 50 years was the so-called Eastern Intellectual Establishment. That establishment, to the extent it even exists today, doesn't carry much weight with the I'm-an-idiot-and-proud-of-it Congressmen, who boast that they never travel abroad and, in some cases, don't even hold passports.
The next Administration, whether Democratic or Republican, will have to try to bring together the new globalizers -- from software writers to Web-page designers, from Iowa farmers to environmental activists, from human rights campaigners to high-tech assembly-line workers -- to form a new, 21st-century coalition that can sustain internationalism. This new coalition doesn't exist yet, so someone is going to have to put it together.
This won't be easy. Americans were ready to pay any price and bear any burden in the cold war because there was a compelling and immediate sense that their own homes and way of life were threatened. But a large majority don't feel that way about North Korea, Iraq or Kosovo, and while Russia may still have the capability to pose a lethal threat, it is not doing so at this time. That's why Americans are in the odd position now of being held responsible for everything, while being reluctant to die for anything. That's why in the globalization era, counterinsurgency is out; baby-sitting is in. House-to-house fighting is out; cruise missiles are in. Green Berets are out; U.N. blue helmets are in.
America truly is the ultimate benign superpower and reluctant enforcer. But history teaches us that if you take this reluctance too far, you can undermine the whole system. Paul Schroeder, emeritus professor of international history at the University of Illinois, is one of the great international historians of the 20th century. He once remarked to me: "If you look at history, the periods of relative peace are those in which there is a durable, stable and tolerable hegemon, who does the adjusting and preserves the minimal necessary norms and rules of the game. And that hegemon always pays a disproportionate share of the collective costs, even forgoes opportunities for conquest or restrains itself in other ways, so as not to build up resentments and to make sure the system stays tolerable for others.
"The difficulty," Schroeder continued, "comes when the benign hegemonic power, which is responsible for keeping the system stable, is unable or unwilling to pay the disproportionate costs to do so, or its hegemony becomes intolerable and predatory rather than benign, or when enough actors rebel against its rules and insist upon a different kind of system that may not benefit that hegemon."
That is what we must avoid. The global system cannot hold together
without an activist and generous American foreign and defense policy.
Without America on duty, there will be no America Online.
This article is adapted from his book, "The Lexus and the Olive
Tree: Understanding Globalization,"
to be published in April by Farrar,
Straus & Giroux.
