Obama Needs a Reset Button on His Own Foreign-Policy Machine

For the past 18 months, foreign policy has been a distinctly secondary concern for U.S. President Barack Obama, in spite of still-hot wars in Afghanistan and Iraq, nuclear diplomacy with Russia, and simmering crises in Iran and North Korea. With the U.S. economy stuck in neutral and no immediate external crisis demanding action, the sidelining of foreign policy isn’t surprising. In some ways, this period resembles the mid-1990s, when domestic matters dominated the national discussion. But unlike then, the relative position of the United States is not on an upswing; instead, the United States is experiencing relative decline, which may or may not presage absolute decline in a world defined by rising affluence of emerging economies in general and China above all.

Today’s challenges are also formidable and varied. Unlike during the Cold War, there is no organizing principle and no one overarching issue for U.S. foreign policy. The challenges of Afghanistan are markedly different than those of Iraq, which in turn do little to inform policy toward Iran and even less to shape approaches toward North Korea. And none of those in turn has much bearing on America’s all-important economic relationship with China. The world is a series of decentralized issues, and that is not likely to change soon.

But if you just looked at the foreign-policy establishment in Washington, you wouldn’t know that much has changed, either from the 1990s or even the 1950s. Yes, there are new bureaucracies and departments established in the wake of the September 11, 2001, attacks to coordinate, centralize, and enhance intelligence collection, but those are simply additions to a Cold War set of institutions created after World War II. The truth is that Obama’s foreign-policy machinery doesn’t look too different from Ronald Reagan’s.

And it’s not just the structure of foreign policy; it’s the mindset as well. For the entire latter half of the 20th century, America could approach foreign policy with an unusual set of tools and a remarkable amount of leverage. Throughout the Cold War, the United States had at least four ways to pursue its foreign-policy interests: aid, trade, ideas, and guns. Each could be used as a carrot or a stick: You could use guns to invade or threaten, but you could also use arms sales to cement relationships. You could use the promise of trade and economic ties as an incentive for a recalcitrant dictator or a wavering democracy, and you could wield the potential of cutting off access to lucrative American markets and vital American capital as an effective threat. And you could use ideas — the lure and promise of American democracy and freedom — as a compelling alternative to communism or totalitarianism.

The shape of the American government evolved in the context of those strengths. A large Defense Department was predicated on a country that could spend a large amount of money not on one but on three separate branches and advanced weapons systems. Multiple intelligence agencies reflected the particular needs of various players in foreign policy, from the military to the State Department to the Drug Enforcement Administration to the Treasury Department. Billions of dollars in aid were granted by Congress directly and then many billions more indirectly through various programs ranging from the Peace Corps to the U.S. Agency for International Development to agricultural programs such as those that bolstered Saddam Hussein’s government in the 1980s during Iraq’s long war with Iran.

The Cold War was a struggle that called upon all of those resources, and at times, it was the least costly of those — ideas — that were the most effective. Defecting Soviet spies were often drawn not by money but by the genuine belief that American freedoms — however flawed — were a far cry better than Soviet constraints. As much as countries distrusted American power and questioned American intentions, they were more drawn to the promise of American life and to the appeal of American capitalism than they were to communist economics. You didn’t have to like America or its government to like what it represented, and far more societies strove for what America had than aspired to be like Russia.

In the 1990s, the collapse of the Soviet Union and the confident prosperity of the United States were taken not just by Washington but by much of the world that the American way offered the best path to affluence and stability. Even the Chinese Communist Party began to woo American capital and companies to remake a moribund Chinese economy. Meanwhile, though there was a "peace dividend" in the United States and military spending was pared back, it remained massive by global standards as others pared back even more. By the end of the 1990s, with the United States flush and confident, the traditional four tools seemed more potent than ever.

The September 11 attacks saw a resurgence of foreign policy as the dominant focus of Washington, with both terrorism and two wars occupying public attention. The invasion of Afghanistan, the reorientation of the national security establishment toward nonstate actors and terrorism, and the invasion and occupation of Iraq all dominated the public agenda in Washington well through 2006. The Patriot Act, the creation of the Department of Homeland Security, and the reorganization of the intelligence community were significant and time-consuming. The 2004 presidential election was the first since the 1980s to feature foreign policy as a major component. But even as the attention of the U.S. government was more occupied with such challenges, other parts of the world began to reap the benefits of their decision to revamp their economies. Having cast their lot with market capitalism, Brazil, China, and India surged ahead, along with a host of smaller countries such as Chile and Vietnam. In Washington, however, that change barely registered.

Today, with the old world of America, Europe, and Japan economically challenged, with the general contours of market capitalism nearly universally embraced, and with foreign aid a shell of what is was, U.S. foreign policy has essentially been reduced to one tool: guns. In short, the United States is conducting its affairs abroad with a 20th-century tool kit, an antiquated mindset, and poorly allocated resources.

Take aid and trade. The U.S. economy is big, but the financial crisis revealed a scantily clad emperor. The United States is no longer a primary source of capital and instead needs loans to keep going. U.S. companies are still hugely profitable and highly competent, but their growth is largely outside the United States. They are strong in spite of domestic America, not because of it. Throughout the 20th century, the promise of access to U.S. markets or the threat of denying access to American capital was a powerful tool of coercion and suasion. Today, the U.S. government has little to offer that can’t be obtained elsewhere, and no tariff on foreign goods or currency can be enacted without doing substantial harm to domestic American consumers.

Even the military is something of a paper tiger. It is vast, immensely effective, and commands a larger budget than much of the rest of the world combined. It can wage conventional war better than any force on the planet and has unparalleled technology and intelligence resources at its disposal. But as a tool that can secure America’s economy or create jobs or manage the competition embedded in China’s economic emergence or India’s and Brazil’s after that, it is a nonfactor. America cannot — and nor does it have any intention to — invade or threaten military action against China over its dispute with Google or its currency policy. Yet those economic issues will affect domestic security and prosperity in the United States intimately in the years to come.

Foreign policy is supposed to be a vehicle for securing American interests in the world and preserving and guaranteeing security. The threat of terrorism is real and will remain for decades, whether at the hands of those claiming to act in the name of Islam or wielded by others for reasons of personal revenge or group grievance. But even the 9/11 attacks were an economic blip; terrorism is not likely to undermine the ability of the United States to generate growth and stability. Instead, the most pressing issue for America’s long-term security is the health and dynamism of its economy. And the way U.S. diplomats conduct foreign policy is almost devoid of tools to enhance that.

You can’t invade a country to bolster American employment, output, or innovation. Talk to a group of foreign-policy experts and officials, and Iran and nuclear weapons, China and Taiwan, Afghanistan and terrorism will all be on the table. But economics and trade? Those issues will be on the table of Treasury Department officials or counselors to the president charged with economic affairs, but they will not be front and center when this thing called "foreign policy" is the focus. And that is a problem of immense proportions.

The United States needs to recalibrate its approach to foreign policy as fundamentally as it did after World War II and with the same fervor as in the days following 9/11. It might even be easier to make dramatic changes now, given the overwhelming focus on domestic issues. But we’re not talking about moving around boxes on an org chart: Although Congress would be needed for any major bureaucratic reform, it might be better to avoid a repeat of experiences like the creation of the Department of Homeland Security, which merely added new bureaucratic layers without much increase in clarity. The president himself has ample room to realign how policy is made, with economic issues taking as much pride of place as traditional foreign-policy constituencies like military, state, and nuclear.

The first step is to make economic security an organizing principle because without that, there is no foundation for the rest or for power in the world or at home. How that leads to a shift in the relative position of bureaucracies like the Treasury and Commerce departments versus Foggy Bottom and the Pentagon, or between the National Intelligence Council versus the National Economic Council, is less important than establishing new first principles. Yes, there is an under secretary for economic affairs at the State Department, and yes, there are more staff on the National Security Council who now focus on cross-issue areas like trafficking, terrorism, and capital flows. But all of those are augmentations within established bureaucracies and will by necessity reflect the organizations of which they’re a part. What’s needed, frankly, is to alter the system to align with the preeminent importance of economic security. That’s a bold, radical demand, but so what? That doesn’t mean it can’t be done.

The United States has been adept at pursuing its interests abroad to secure prosperity and security at home by evolving dramatically as external conditions changed. That nimble creativity served the United States brilliantly in the 20th century, but it is no less required today. For one thing is certain: The rest of the world is not static and will not wait as the United States takes its time to sort out its bureaucracy and rethink — slowly and messily — its modus operandi. There is a window open, but not for long.