State Department to hire new ‘chief economist’

The State Department is looking for a top economics official to lead an office tasked with bringing economics to the fore of U.S. foreign policy and coordinating State’s handling of the current world economic crisis.

"The secretary’s view was that we needed a full time, official, chief economist," said Undersecretary of State for Economic, Energy, and Agricultural Affairs Robert Hormats in a Friday interview with The Cable.

In a speech Friday morning, Secretary of State Hillary Clinton laid out State’s strategy for developing tools of "economic statecraft," which is designed both to expand its involvement in the economic arena and increase Foggy Bottom’s role in the administration’s overall jobs agenda.

The new chief economist will have an office inside Hormats’ "E" family, but will also report up directly to Secretary of State Hillary Clinton. Hormats had borrowed an economist from the Federal Reserve, Jane Holestead, but that arrangement was only for one year.

"Having a chief economist who can quantify some of the benefits of foreign direct investment would really help us explain to other countries the opportunities of investing in the United States," Hormats said. "We also want them to be able to follow what’s going on in Europe from an economic perspective."

The new office is one piece of State’s drive to increase its focus on the interrelationship between economic policy and national security policy, Hormats said. He is also overseeing a host of new economic engagement programs, including the expansion of cooperation with chambers of commerce abroad, which is intended to boost both exports and foreign direct investment in the United States.

Another new initiative, which focuses on sub-national dialogue, will set up meetings between U.S. governors and provincial governors around the world. The first country this program is being applied to is China. Next week, Hormats will lead a delegation of six U.S. governors to meet with six Chinese provincial chairmen in Beijing.

"Our goal is to have more and more interchange between American governors and Chinese provincial leaders," Hormats said. "And then we’re going to do the same thing with India, and we are thinking about doing something similar with Russia."

Brazil and Turkey are the other main targets of State’s new economic outreach. "We’re going to have to deal more and more with where the opportunities are for us in the economic area, and the opportunities are to deal with these fast rising, emerging economies," he said.

Tomorrow, Clinton will issue instructions to all diplomatic posts on how to implement economic statecraft, with the dual mission of utilizing American economic influence to advance foreign policy goals and maximizing the use of diplomacy to help fix the domestic economy.

"Our foreign and economic relations remain indivisible," Clinton told an audience at the Economics Club of New York. "Only now our great challenge is not deterring any single military foe, but advancing our global leadership at a time when power is more often measured and exercised in economic terms."

"We have to position ourselves to lead in a world where security is shaped in boardrooms and on trading floors as well as on battlefields," she said. "Simply put, America’s economic strength and our global leadership are a package deal."

Hormats and Clinton also see the State Department’s foray into the economic arena as a necessary step in contributing to a positive outcome in domestic uprisings sweeping the Middle East.

"In light of the Arab Spring, this is a great way of connecting younger generations in other countries to younger generations of Americans. We’re not just competing with other countries, we’re competing with other economic models," Hormats said. "If we can demonstrate our economic model is the model that has proved itself decade after decades as a way of creating upward mobility, it helps us a lot with our foreign policy — but it also ties younger generations of Americans with younger generations in the Arab world and elsewhere."

Clinton made the same point in her speech, arguing that "to succeed, the Arab political awakening must also be an economic awakening."