Will Obama steer the international system toward the abyss?

There is a generally held view that when you get a group of Washington insiders together that what you’ll get is conventional wisdom. But, when I ended yesterday’s meeting of The Carnegie Economic Strategy Roundtable — a group I chair comprised of a bipartisan folks of top policy-thinkers — despite that fact that the shared outlook was rather dour (well, veering between dour and how-many-of-these-pills-do-I-have-to-take-before-I-lose-consciousness), there was much said that was actually far from the conventional wisdom you’ll get in the paper.

At the core of the discussion was the general belief that in addition to an economic crisis and a series of brewing political crises, the world faces a profound crisis of confidence in many of its most important institutions. One participant quoted a friend who said, “I have seen two things in life I thought I would never see…the fall of two walls…the Berlin Wall and of Wall Street.” (While the details of these discussions are off the record until our conclusions are made public later in the year, I can reveal a couple of general themes to yesterday’s conversation, which I found quite disturbing.)   

Not only have people lost faith in the institutions of Wall Street and the financial community, but they’re now wary of international financial institutions like the IMF and the World Bank, and the once seemingly indestructible pillars of the business community like the auto industry, and in governments around the world that have failed to cope with the crisis. (How do you think they feel about their governments right now in Iceland, Latvia, Hungary…or Britain, Pakistan, or Mexico right now?) Indeed, while the U.S. government is enjoying a brief resurgence from very low approval ratings, there was a strong sense that was a fragile rebound and one that would soon be reversed if the stimulus and the financial rescues don’t soon produce results. As a consequence, the group felt that there was a not inconsiderable likelihood that the resurgence of “big government” or neo-socialism that is a central theme of the chattering classes may actually be short-lived, a temporary reversal of historical trends that contains the seeds of its own undoing. (Personally, I believe the role of government was due for a recalibration, but also believe that governments like markets overshoot and that we shall over-inflate the government’s role in some areas before getting it right…or closer to right.)

For the past four or five years this group at the Carnegie Endowment for International Peace has been meeting to discuss issues at the intersection of America’s top economic and national security interests. This year, all the sessions are around the theme “Present at the Creation 2.0: How Remaking the International System Can Become One of the Top Legacies of the Obama Administration.” Yesterday, we had roughly equal numbers of folks who had served in Democratic or Republican administrations, roughly an equal balance between economic, political and security thinkers, even some balance provided with leading thinkers from outside the United States. Virtually all the participants in the group have served in cabinet-level or senior sub-cabinet level jobs in their respective governments. 

Among the themes of our discussion I found most disturbing was generally a very downcast view of both the geoeconomic and geopolitical outlooks. Early on in our meeting the point was made that this period doesn’t look or feel like the post-World War II environment in which much of the current international system was made. Back then we were dominant, the only surviving megapower, and there was a common threat around which to unite. Neither condition exists today. (It was also pointed out that even with those conditions, it took us almost four full years from the end of World War II until Marshall Plan money really started making its way into Europe. In other words, it took a depression, the Second World War and starting to lose the peace after that war to motivate real rather than symbolic actions concerning the creation of a functioning international community…at least the western branch of such a community.) Subsequently, the discussion then would periodically turn to trying to determine whether we were really in a time more analogous to 1929 or 1932 or 1933 and so on. But that was just a contextual subtext. And as one participant thoughtfully pointed out, these historical analogies are weak and can serve as a needless distraction from the business of understanding what is really going on right now.

The original rationale for convening the group was the recognition that in the year or years immediately ahead, like it or not, the Obama administration will be confronted with the need to reevaluate, renovate, or re-invent virtually every major existing international institution we have and, at the same time, will have to participate in the creation of a few others. This will include continuing with the transformation of the “steering committee” of the international system from a G8-like group to more of a G20-like group. It will include the top items on the agenda of the G20 when it meets early in April in London: restructuring and recapitalizing the IMF and the World Bank (and possibly regional multilateral financial institutions) and rethinking the global regulatory and market-oversight structures we’ve got. It’ll include rethinking organizations that are widely considered to be flawed or faltering or due for a tune-up: the WTO, the UN Security Council, the non-proliferation regime and the UN system itself. It will also certainly include the need to create some kind of Global Environmental Organization (GEO) to administer and enforce any conclusions that may come out of the Copenhagen global climate talks or its successors. It’s a sweeping landscape and the choice before the US government is whether to take these issues serially and approach them without core principles and a clear vision as to what kind of international system we want in the future or to take them serially, reactively and to focus on patching immediate issues and putting off the heavy lifting until tomorrow. 

My sense is that the group largely (though not universally) shares my view that the former approach clearly makes more sense and represents a big foreign policy opportunity for Obama & Co. But perhaps the most disturbing perception that spread through yesterday’s conversation was the recognition that while this could be a moment for reinventing the international system, it might also be a moment that presents great peril for that system and could see the undoing of several major components of the system as a direct result of nation’s turning inward to address the most immediate and politically pressing consequences of the global crisis.

Evidence that this was the case came from this week’s headlines. The Economist talked about how urgent domestic concerns, financial weakness everywhere, and the deep problems in Eastern Europe could lead to the undoing of the EU. Hillary Clinton arrived in Europe for a NATO meeting at which it seemed unlikely she would get much support from our allies for their assuming great burdens and risks in Afghanistan thus calling into question NATO’s relevance going forward. Gordon Brown sleep-walked into Washington to make a pitch for sweeping international financial reforms that met with a chilly reception from the Obama team. The IMF and the World Bank need major infusions of cash to play any kind of meaningful role in ameliorating the current international situation…certainly hundreds of billions of dollars, possibly as much as a trillion or more. Not only does it seem unlikely countries will pony up the dough, there is reluctance among Europeans to give up the voting shares and traditional role they have had in these institutions which will be essential if the Fund and the Bank are to draw in capital from emerging powers and truly reflect the new global reality. And there is a gradual undercutting of the world trading system that goes beyond the dead man walking progress of the Doha Round. Just take a look at the subsidies issues all these national stimulus packages are raising or at the provision in the Senate appropriations bill (cited on FP Passport yesterday) that kills the core NAFTA idea of Mexican trucks being allowed easier transit into the U.S. market. Some organizations, like the OAS or the UN General Assembly itself, are already little more than bureaucracies in search of a quiet place to sleep.

It is not hard to see all this and contemplate what a deepening of the economic crisis might do to attitudes everywhere toward assisting people in distant countries and conclude that we framed our discussion incorrectly. We don’t just face a choice between the ad hoc reinvention of the international system or a strategic approach to remaking the global institutional architecture. We are at a fork in the road where one direction takes us to a period in which the international system suffers serious setbacks and is substantially weakened and the other leads to the strengthening that the massive roster of global challenges we face demands.

The group of leading experts with whom I met yesterday were uncertain which direction we were more likely to take.

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