Tag Archives: fareed zakaria

The Obama Doctrine and Smart Power, Pt. 2

This is part two of a two-part post about the Obama administration’s approach to foreign policy and military intervention in Africa and the Middle East.

The other day I discussed the first four points of Obama’s approach to military intervention – be effective, follow international law, put no American troops on the ground, and multilateralism.  Today I will talk about the last one: having a clearly-defined goal.

This is the most important tenet of all.  In Iraq, the U.S. overthrew Saddam and remarkably never planned for phase two.   In Libya, all possible post-Gaddafi scenarios were taken into account to understand exactly what we were getting ourselves into.  Not too far from where I live in Kenya, Obama just deployed 100 special forces “advisers” to hunt for Joseph Kony, the terrible leader of the Lord’s Resistance Army, a Ugandan paramilitary organization that has killed 30,000 people throughout Central Africa over the last two years.  The objective is simple: find and kill Joseph Kony and eliminate the LRA forever.  Unlike Islamic extremists, they have little support from the local population, and most of the world agrees that the world will be a much better place with Joseph Kony no longer among the living.

Some argue that deploying more troops in yet another war with little strategic interest to the United States is a bad idea.  In one sense, these people are right – Joseph Kony and the LRA pose no direct threat to the United States.  They may have a nightmarish record of human rights violations, but their wrath is confined to the unfortunate villages that happen to reside between point A and point B on the LRA’s marching path.  But these detractors don’t really see the big picture.

Ugandan peacekeepers in Somalia

Al Shabab, unlike the LRA, and Somalia in general are potentially very big problems for the United States.  It is the most failed state in the world and is a stone’s throw from Yemen and the Arabian Peninsula – a hotbed of terrorist activity.  The only thing preventing Somalia from completely collapsing (as opposed to almost completely collapsing, which is where it is now) and falling entirely into the hands of Al Shabab is the Ugandan peacekeeping force fighting in Mogadishu (with significant help from the U.S. and Europe).  Ingratiating ourselves to the Ugandan people by helping to eradicate the group that has caused so much suffering, and eliminating a destructive force – the LRA – will help stabilize the region, helping to prevent the turmoil in Somalia from spilling into other nations.  So, at the end of the day, destroying the LRA is probably as much about fighting terrorism as it is a humanitarian mission.

This is smart power.  In the chess match of foreign policy, Obama thinks several steps ahead of his opponents, recognizing the link between Joseph Kony terrorizing Uganda and Somalia becoming the new Waziristan.  He assesses the potential sacrifices, in blood and treasure, and carefully considers the outcomes.  In an op-ed titled “Stop Searching for an Obama Doctrine,” Fareed Zakaria explains why pragmatism trumps blind ideology in the way Obama views the world:

God bless the President

So what is the Obama Doctrine?

In fact, the search itself is misguided. The doctrinal approach to foreign policy doesn’t make much sense anymore. Every American foreign policy “doctrine” but one was formulated during the Cold War, for a bipolar world, when American policy toward one country — the Soviet Union — dominated all U.S. strategy and was the defining aspect of global affairs. (The Monroe Doctrine is the exception.) In today’s multipolar, multilayered world, there is no central hinge upon which all American foreign policy rests. Policymaking looks more varied, and inconsistent, as regions require approaches that don’t necessarily apply elsewhere.

Obama does, however, have a worldview, a well-considered approach to international affairs. His views have been straightforward and consistent. From the earliest days of his presidential campaign he said that he sees the basic argument in American foreign policy as “between ideology and realism” and placed himself squarely on one side.

What marks administration policy is a careful calculation of costs and benefits. The great temptation of modern American foreign policy, from Versailles to Vietnam to Iraq, has been to make grand declarations — enunciate doctrines — that then produce huge commitments and costs. We are coming off a decade of such rhetoric and interventions and are still paying the price: more than $2?trillion, not to mention the massive cost in human lives. In that context, a foreign policy that emphasizes strategic restraint is appropriate and wise.

I agree with Fareed on all of his points except one (which makes me nervous, since I agree with 100% of what he usually says, which means that, if history is a guide, I am wrong).  I think that the five points above collectively comprise the Obama doctrine, or at least something close to it.  Just because the Bush Doctrine was particularly jingoistic doesn’t mean a doctrine based on “strategic restraint” – one marked by define goals, multilateralism, limited U.S. involvement, etc. – isn’t a doctrine.   In fact, Obama received a lot of criticism for “leading from behind.”  But not only is a strategy – contrary to what some believe – it is an effective one.  Back to theRolling Stone article:

“It isn’t leading from behind,” says Anne-Marie Slaughter, the former head of policy planning at the State Department, rejecting a quote in The New Yorker by an unnamed Obama adviser that came to dominate the debate over Libya. “We created the conditions for others to step up. That exemplifies Obama’s leadership at its best. The world is not going to get there without us – and we did it in a way where we’re not stuck, or bearing all the costs.”

If Obama gets another four years – Insha’allah – I would expect that all future military interventions stand up to the test of these five points – a retroactive rubric, of sorts.   And that, I think, is what a doctrine is all about.


A Toaster in Every Kitchen: Growing Demand in Developing Nations

The chart above is a bit complicated, but remarkably interesting.  For a good explanation, read Felix Salmon.  For a below-average explanation of questionable veracity, keep reading.  This chart displays the ratio of two ratios.  The numerator is the P/E (price to earnings) ratio of all the companies on a major U.S. technology stock index, and the denominator is the p/e ratio of all the companies on a major U.S. industrial stock index.  Simply defined, a P/E ratio is the market value of a share over the earnings per share.   When a company has a high P/E, it means that the market views the company as having greater potential than what is reflected by its current profits, and investors are willing to pay more for less income, ostensibly because they believe that the company will make more money in the future.  During the tech bubble in 2000, P/E ratios shot through the roof as companies that were not yet profitable (like Pets.com) had high valuations.  So, when ratio of technology P/E to industrial P/E is less than one, it means that the market values industrial companies (manufacturers of cars, appliances, electronics, etc.) more than technology companies.

For the first time since 1996, as the chart shows, that ratio is less than one.  In fact, the ratio is now at its lowest point in history.  What is going on?  After all, if you turn to the Marketplace section of the Wall Street Journal (if you have access, that is), you are more likely to read about Facebook’s $100 billion valuation (!) or Groupon’s pending IPO than you are about sales of GE washing machines.  But if this chart is an accurate reflection of the truth, then the communal conscience of the market believes that the invisible hand is going to push sales of Cuisinarts and Hoover vacuums to levels beyond the sales of whatever snake oil the latest tech stocks are peddling.  This all begs the question: in the wake of a financial meltdown and the worst recession of the last eight decades, where is all that demand coming from?

Matt Yglesias thinks he has an answer to that question, which I will quote in full:

What this says is that markets are more pessimistic about the growth prospects for high-tech firms than for industrial ones. That actually seems quite reasonable to me. The thing about high-tech firms is that the stuff they make tends to be relatively cheap. A MacBook Air is a steal compared to a new car, and a used computer can be found for almost nothing. Google is free. If you imagine a world in which the bulk of growth is going to occur in large developing nations. So imagine hundreds of millions of Chinese, Indians, Brazilians, etc. achieving something resembling the lifestyle of lower-income people in today’s rich countries. You’re imagining a household acquiring a quantity of cars, washing machines, refrigerators, toasters, vacuum cleaners, etc. whose dollar value vastly exceeds the price of its total quantity of computers, smartphones, and software.

In America, for a long time now we’ve been in a kind of major appliance funk. People don’t get richer and say, “Now I’m going to own seven toasters.” People buy these kind of low-tech goods, but it’s driven by population growth and depreciation. So the high-tech sector — new inventions — has been the high-growth sector. But in a world of catch-up growth you don’t need to be “high-tech” to find new customers. There are lots of people around the world who don’t own a blender.

Through its focused efforts to turn China into the world’s manufacturer, the Chinese government has pulled hundreds of millions of its people out of poverty.  Companies like Tata Motors in India and BYD Auto in China are growing gangbusters on the backs of a burgeoning global middle class, a product of what Fareed Zakaria calls “the rise of the rest.”  Say what you will about inequalities of economic liberalization and free trade, but the miracle of globalization, as someone described it to me in a conversation last night, has lifted millions of people out of poverty across the world and, moving a step higher on the ladder, created a middle class with the same appetite for convenience as your average Jack and Diane in Illinois.  Higher disposable income in the hands of a newly-empowered consumer class means toaster ovens, more stoves, more irons, mores refrigerators (I am scanning my apartment in Nairobi for inspiration, but you get the point).  Demand for cars in Asia, Africa, and Latin America has grown tremendously, to the benefit of the aforementioned manufacturers.  And that is just on the direct consumer level.  One could extrapolate further and say that the growing demand for meat and dairy products means more freezers and industrial chilling plants, for example.  Manufacturers in the United States and, increasingly, in the developing world will need to scale up production to meet the tidal wave of emerging market demand.  And, as Yglesias points out, smart investors are beginning to recognize that potential.

There are two interesting points to be made here.  The first is that the developing world is developing fast, and the bulk of demand in the coming decades is clearly going to come from emerging economies that are savvy enough to reap the benefits of globalization.  The second point stems from a conversation I had with some friends last night at a swanky outdoor lounge bar in Nairobi surrounded by the TGIF Kenyan after-work crowd, all dressed to the nines and enjoying a mixed drink and calamari appetizer before dinner.  It is this: the United States and Europe do not really appreciate  just how fast the rest of the world is growing.  The chart on the right shows year-over-year growth in retail sales.  The developing world has averaged 10% a year, with hardly a blip from the financial crisis.  It is starting from a smaller base, but such tremendous growth rates cannot be dismissed as poor countries simply transitioning to lower-middle income status.  As a result of globalization, the tortoise isn’t just catching up – it is becoming the hare.

The United States still has the edge in many areas.  Our post-secondary education system is the best in the world, and we have a culture of innovation, entrepreneurship, and risk-taking that is still producing the largest companies on earth (Google, Facebook, Apple, etc.).  Yet our policies suggest that, as a nation, we have a mixture of either ignorance, willful blindness, or arrogance that leads us to collectively believe that we are invincible.  But, as the European Union (actually, just Germany and France) struggles to pull itself together as one country after another risks default (the P.I.G.S – Portugal, Italy, Greece, Spain), and the dysfunctional government of the United States threatens to actively cause the country to default on its debt, the rest of the world continues to grow.  And in countries like China, India, and Brazil, where the people have less to lose and more to gain from economic development, the hunger that drives the economic engine mirrors that of the United States at the turn of the 20th century, and in Europe before that.

But this is the nature of things, as loyal followers of Develop Economies have heard me say in the past.  Countries don’t develop through aid.  Fewer people die from starvation and water-borne diseases because of aid, but economies do not grow on the backs of donor dollars.  They grow because of investment in human capital and in manufacturing.  China became the world’s manufacturer, India its hub for business process outsourcing (BPO), and Brazil its provider of natural resources.  And now these three countries are reaping the benefits of hard work and discipline, while the West remains mired in unnecessary wars and struggles to uphold a standard of living it can no longer afford.

Forbes Magazine describes the magnitude of retail sales growth and the mushrooming of consumer demand in developing countries:

Retail is exploding in developing markets and those markets have become the driving forces fueling global growth in retail sales and space. Over the 10-year history of A. T. Kearney’s Global Retail Development Index (GRDI), an annual research project designed to help global retailers prioritize which countries to enter, the population of developing markets increased 11%, while retail sales per capita has almost doubled, retail space has more than tripled and Internet access grew by nearly 500%.

Ten days ago, Pew Global Research released a report which shows that the world now sees China overtaking the United States as a global superpower.  Meanwhile, back in the New World, we are exactly one week away from the biggest man-made economic calamity in the nation’s history (the secondary market prediction at Intrade shows a 29.9% chance of the U.S. increasing the debt ceiling by July 31st).  The rest of world is looking at the United States with a mixture of disbelief and smug satisfaction as the world’s most hubristic and sanctimonious nation undergoes a very public, very childish debate about whether not to jump off a cliff.  China, which owns a not-insignificant percentage of our national debt, is telling us to shape up and deal with our problems.  It used to be the other way around.

So, while the Western world struggles with its problem of unemployment, stagnant growth, and a long period of detox from debt and irrational exuberance, the developing world continues to lift its people out of poverty and expand its middle class.  Industrial demand will continue to increase as the appetite for material goods grows among the newly-enfranchised.  For an American insulated the rest of the world, charts like the one above defy logic and reason.  For a citizen of the world, attuned to the tremendous growth and potential of emerging economies, this chart makes a whole lot of sense.