Scopus

Conditioning the market: Politics and US preferences

Imtiaz A. Hussain | Published: November 05, 2018 21:34:35


Donald Trump in Nevada on October 20, 2018 speaks about withdrawal from START. He said: 'We're going to terminate the agreement and we're going to pull out.' —Photo: Reuters

Given the political economy equation, why is the political component (at its extreme, the military), growing at this 21st century juncture? This was observed in the last Scopus piece (on the China-Japan, October 2018 thaw), but beginning with this piece, the length, breadth, and depth of such developments must be more accurately mapped. A good place to start is the world's largest economy, the United States. As the springboard of both neo-liberalism and the world's largest military-industrial network, it can no longer compete in both as it could in the 1990s. Does blowing the military horn suggest an economic deficit?

Donald J. Trump's presidency is not the first doing so, but his is making far more noise and getting much more mileage than previously. With the 2008-10 Great Recession as the turning point between the net economic competitiveness of the United States and its evaporation, the process can be traced back to the early 1970s, with 9/11 adding a substantial spark.

Before 9/11, the United States was on a FTA (free-trade-area) splurge, with the Western Hemisphere brought within that network and the Asian, or trans-Pacific, the journey targeted in full earnestness. Today, neither the original North American Free Trade Agreement (NAFTA) nor its wider companion, the Free Trade of the Americas (FTAA) remain in the original form, the latter actually pronounced dead, the former under greater asymmetrical US supervision. Though the Trans-Pacific Partnership (TPP) began petering out before Trump's tenure began, he buried it with one of his first executive brushstrokes. Since a similar fate befell the Transatlantic Trade and Investment Partnership (TTIP) on President Barack Obama's watch, structural weaknesses more than presidential preferences take the blame. Not only low-wage production, but also too many low-cost producing arenas have been the creeping US cry. How this neo-liberal by-product is returning to haunt neo-liberalism is a gripping story, but recounting parallel defensive policy ramifications may shed more light on the subject.

Defensive actions were not new in the liberal era: agriculture was protected until at least the 1990's breakthrough in the Uruguay Round that produced the 1994 Marrakesh Agreement (culminating in the World Trade Organization from January 1995). Manufactured goods were the first to be liberalised under US world leadership since it alone could supply these goods for at least two decades after World War II. Yet, with Richard Nixon's 1971 New Economic Policy, these would slowly retreat from the free-market, as tariffs, almost banished by the 1964-7 Kennedy Round of the General Tariffs and Trade (GATT), returned. Even more, a new trade beast surfaced from the early 1970s: non-tariff barriers. Other macroeconomic policy actions also jolted the market. In the 1980s, a very strong US dollar doubled down on US exports, strengthening outcries against lower-priced Japanese exports, especially automobiles. Only when the Cold War ended, by 1989, could liberalism return. Dubbed this time neo-liberalism (based on the 1989 Washington Consensus and institutionalization), it flowered too quickly, stayed too briefly, but confirmed the 1990s as the only truly post-World War II neo-liberal moment.

As many Scopus pieces show, the slow US shift from neo-liberalism is not a new observation, nor should its settings and surroundings escape analysis. First, liberalism was tainted from the very start in the 1940s by the very country championing it: farm protection tainted the picture. It was reciprocated, replicated and bred retaliation. Second, Cold War restriction and recriminations further damaged post-World War II liberalism. Third, the post-World War II FTA surge, which coincided with the neo-liberal high-noon, undermined its cardinal multilateral commitments: permitting multilaterally as a convergence procedure, it became a bloc rivalry instrument. Finally, the low-wage global networks flowing from a neo-liberal premise fed the very protectionist mindset liberalism and neo-liberalism were expected to dilute.

With 9/11, military measures took pride of place, as during the Cold War. First was unleashing the still unfinished anti-terror war. It diverted resources from more efficient market usages, spawned apprehensions and negative mindsets, encouraged countries to sharpen their knives, and littered negotiations tables with suspicion and single-shot tactics.

Then followed a spate of not just sanctions, but applied in the wrong places at the wrong time. Those pitted against Iran, which, as a matter of fact, just began, depicts the depravity entering the soul of free-market thinking. Iran will be pushed to its knees, but the European Union and India, among others, have thus far vowed to not follow through, prompting the United States to adopt exceptions for eight countries, led by China, India, and Turkey. Here is another case of political considerations buttressing a political decision over economic issues.

Exploitation opportunities open up for other countries, widening global political differences: China's Belt-Road-Initiative carries offsetting provisions; Russia's spoiler role, as in Syria; and Saudi Arabia can divert attention from its Istanbul consulate fiasco and, given its historical enmity with Iran/Persia and undercover alliance with Israel, cow Iran down.

If Trump's United States is placing his China containment policy-approach into higher gear, it cannot but make concessions in the only area where its comparative advantage remains: selling or sharing military hardware/knowledge, with Saudi Arabia from last year, and India from this. As Winston Churchill's eye-raising collaboration with a murderous Joseph Stalin during World War II comes to mind: he was willing to 'hold hands with the devil' to 'cross the bridge' in a way too many questionable hands beg to be held over real and imaginary bridges today.

Finally, terminating any military negotiations presages tough times ahead. One reason why the post-World War II 'Cold War' remained 'cold' was because of the silent yet continued negotiations between the Soviet Union and the United States. Only last month, Trump terminated talks just when START (Strategic Arms Reduction Talks) renewal arrived. Unbound, the two key countries can now go for the jugular as they wish; and once they do, we can be sure satellite countries will swoon in for the spoils.

That means market tumult. Evident, principally, in the world's more prominent markets, it is likely to shift from 'hard' punches (tariffs) to multiple 'soft' blows (lots of non-tariff barriers). 'Who's who', rather than 'what's what' might determine the length, breadth and depth of the foreseeable future. As the very country introducing the liberal then neo-liberal order, the United States exposes how business cycle dynamics can impact world leadership: it is what greeted Great Britain at the start of the last century, until World War II put the United States at the top; it threatened to happen to the United States in the 1970s, until the Soviet Union broke down before the United States could suffocate economically (it was too far from that choke-point); and could be happening even now. Will the United States thwart this thrust, as in the 1970s-80s, or will China seize the pedestal?

Political pedaling is but a sign that some change is afoot: how long it will take, what form it might assume, and why it is important may hold lots of clues, but what is for sure is the world getting too crowded in a time-span too short to bring the stability that shadowed past leaders.

Dr. Imtiaz A. Hussain is Professor & Head of the Department of Global Studies & Governance at Independent University, Bangladesh.

imtiaz.hussain@iub.edu.bd

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