180 Essays 92310-545-450-3

ESSAYS
An excessive focus on terrorism

disfigures American politics, distorts
U.S. policies, and in the long run
will undermine national security.
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—Robert Malley and Jon Finer
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The Long Shadow of 9/11 Go Your Own Way

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Robert Malley and Jon Finer 58 Tanisha M. Fazal 113
NATO’s Enemies Within The Myth of the Liberal Order

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Celeste A. Wallander 70 Graham Allison 124
Russia as It Is Why Carbon Pricing Isn’t Working

KAI PFAF F EN BACH / REUT E RS
Michael McFaul 82 Jeffrey Ball 134
The Human Capital Gap How the Safety Net Can Survive Trump
Jim Yong Kim 92 Lane Kenworthy 147
Reclaiming Global Leadership
John Kasich 102
Return to Table of Contents
The Long Shadow of 9/11

How Counterterrorism Warps
U.S. Foreign Policy
Robert Malley and Jon Finer
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W
hen it comes to political orientation, worldview, life expe-
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rience, and temperament, the past three presidents of the
United States could hardly be more different. Yet each ended
up devoting much of his tenure to the same goal: countering terrorism.
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Upon entering office, President George W. Bush initially down-
played the terrorist threat, casting aside warnings from the outgoing
administration about al Qaeda plots. But in the wake of the 9/11
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attacks, his presidency came to be defined by what his administration
termed “the global war on terrorism,” an undertaking that involved
the torture of detainees, the incarceration of suspects in “black sites”
and at a prison camp in Guantánamo Bay, the warrantless surveil-
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lance of U.S. citizens, and prolonged and costly military campaigns

in Afghanistan and Iraq.
Barack Obama’s political rise was fueled by his early opposition to
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Bush’s excesses. He was clear-eyed about the nature of the terrorist

threat and aware of the risks of overstating its costs. Once in office, he
established clearer guidelines for the use of force and increased trans-
parency about civilian casualties. But he also expanded the fight
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against terrorists to new theaters, dramatically increased the use of

drone strikes, and devoted the later years of his presidency to the
struggle against the Islamic State (also known as ISIS).
As for Donald Trump, he helped incite a wave of fear about terrorism
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and then rode it to an unlikely electoral victory, vowing to ban Muslims

ROBERT MALLEY is President and CEO of the International Crisis Group. During the
Obama administration, he served as Special Assistant to the President, White House
Middle East Coordinator, and Senior Adviser on countering the Islamic State.
JON FINER served as Chief of Staff and Director of Policy Planning at the U.S. Department
of State during the Obama administration.
58 F O R E I G N A F FA I R S
from entering the United States and to ruthlessly target terrorists

wherever they were found. In office, Trump has escalated counter-
terrorism operations around the world, significantly loosened the
rules of engagement, and continued to play up the terrorist threat
with alarmist rhetoric.
In short, in an era of persistent political polarization, countering
terrorism has become the area of greatest bipartisan consensus. Not
since Democrats and Republicans rallied around containing the
Soviet Union during the Cold War has there been such broad
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agreement on a foreign policy priority. Counterterrorism was a para-
mount concern for a president avenging the deaths of almost 3,000
Americans, and for his successor, who aspired to change the world’s
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(and especially the Muslim world’s) perception of the United States—
and now it is also for his successor’s successor, who is guided not by
conviction or ideology but by impulse and instinct.
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Many compelling reasons explain why U.S. policymakers have made
the fight against terrorism a priority and why that fight often has
taken on the character of a military campaign. But there are costs to
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this singular preoccupation and approach that are seldom acknowl-
edged. An excessive focus on this issue disfigures American politics,
distorts U.S. policies, and in the long run will undermine national
security. The question is not whether fighting terrorists ought to be a
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key U.S. foreign policy objective—of course it should. But the pendulum
has swung too far at the expense of other interests and of a more
rational conversation about terrorism and how to fight it.
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THE MORE THINGS CHANGE . . .

The first and most obvious reason why several consecutive admin-
istrations have devoted so much attention to fighting terrorism is
so
that guarding the safety of citizens should be any government’s

primary duty. Those privy to the constant stream of threat
information generated by U.S. intelligence services—as we were
during the Obama administration—can attest to the relentlessness and
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inventiveness with which terrorist organizations target Americans

at home and abroad. They likewise can attest to the determination
and resourcefulness required of public servants to thwart them.
Second, unlike most other foreign policy issues, terrorism matters
to Americans. They may have an exaggerated sense of the threat or mis-
understand it, and their political leaders might manipulate or exploit
July/August 2018 59
their concerns. But politicians need to be responsive to the demands

of their constituents, who consistently rank terrorism among the
greatest threats the country faces.
A third reason is that, by the most easily comprehensible metrics,
most U.S. counterterrorism efforts appear to have immediately and
palpably succeeded. No group or individual has been able to repeat
anything close to the devastating scale of the 9/11 attacks in the United
States or against U.S. citizens abroad, owing to the remarkable efforts
of U.S. authorities, who have disrupted myriad active plots and de-
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molished many terrorist cells and organizations. What is more, when
compared with other, longer-term, more abstract, and often quixotic
policy priorities—such as spreading democracy, resurrecting failed
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states, or making peace among foreign belligerents—counterterrorism
has a narrower objective over which the U.S. government has greater
control, and its results can be more easily measured. In the Middle
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East, in particular, Washington’s loftier pursuits have tended to back-
fire or collapse. Focusing on counterterrorism can discipline U.S. for-
eign policy and force policymakers to concentrate on a few tasks that
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are well defined and realistic.
Finally, in an age of covert special operations and unmanned drones,
the targeted killing of suspected terrorists appears relatively precise,
clean, and low risk. For a commander in chief such as Obama, who
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worried about straining the U.S. military and causing counterproductive

civilian casualties, the illusory notion that one could wage war with
clean hands proved tantalizing.
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The combination of these factors helps explain why such dissimilar

presidents have been so similar in this one respect. It also explains
why, since the 9/11 attacks, the United States has been engaged in a
seemingly endless confrontation with a metastasizing set of militant
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groups. And it explains why, by tacit consensus, American society has

adopted a zero-tolerance policy toward terrorism, such that any
administration on whose watch an attack were to occur would immedi-
ately face relentless political recrimination. The United States has
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become captive to a national security paradigm that ends up magnifying

the very fears from which it was born.
DON’T BELIEVE THE HYPE

For evidence of how this toxic cycle distorts American politics, one
need look no further than Trump’s rise, which cannot be dissociated
from the emotional and at times irrational fears of terrorism that he

simultaneously took advantage of and fueled. Trump, more blatantly
than most, married those sentiments to nativistic, bigoted feelings
about immigrants and Muslims. In December 2015, he proposed a
simple but drastic step to eliminate the
danger: “a total and complete shutdown
of Muslims entering the United States.”
A counterterrorism-
As a policy, this was absurd, but as industrial complex fuels the
demagoguery, it proved highly effective: cycle of fear and
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several months prior to the 2016 presi- overreaction.
dential election, some polls showed that
a majority of Americans approved of
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the idea, despite the fact that they were less likely to fall victim to a
terrorist attack by a refugee than be hit by lightning, eaten by a shark,
or struck by an asteroid.ha
But Trump is hardly the only one who has hyped the threat of
terrorism for political gain; indeed, doing so has become a national—and
bipartisan—tradition. It has become exceedingly rare for an elected
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official or candidate to offer a sober, dispassionate assessment of the
threat posed by foreign terrorists. Obama tried to do so, but critics
charged that at times of near panic, such rational pronouncements
came across as cold and aloof. After the 2015 terrorist shooting in San
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Bernardino, California, took the lives of 14 people, he became all the

more aware of the pernicious impact another attack could have—
prompting baseless anti-immigrant and anti-refugee sentiment, propos-
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als for the curtailment of civil liberties, and calls for foreign military
adventures. So Obama intensified his own and his administration’s
counterterrorism rhetoric and actions. It’s hard to ignore the irony of
overreacting to terrorism in order to avoid an even greater overreaction
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to terrorism.
This dilemma reflects the peculiar nature of terrorism. For an
American, the risk of being injured or killed in a terrorist attack is
close to zero. But unlike truly random events, terrorism is perpetrated
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by people intentionally seeking bloodshed and working hard to achieve

it. The combination of seeming randomness of the target and the
deliberateness of the offender helps explains why terrorism inspires a
level of dread unjustified by the actual risk. At any given time and
place, a terrorist attack is extremely unlikely to occur—and yet, when
one does happen, it’s because someone wanted it to.
July/August 2018 61
But that only goes so far in explaining why Americans remain so con-
cerned about terrorism even though other sources of danger pose much
higher risks. The fact is that many U.S. political leaders, members of the
media, consultants, and academics play a role in hyping the threat. To-
gether, they form what might be described as a counterterrorism-
industrial complex—one that, deliberately or not, and for a variety of
reasons, fuels the cycle of fear and overreaction.
TERROR TALK
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But it’s not just American politics that suffers from an overemphasis
on counterterrorism; the country’s policies do, too. An administra-
tion can do more than one thing at once, but it can’t prioritize
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everything at the same time. The time spent by senior officials and
the resources invested by the government in finding, chasing, and
killing terrorists invariably come at the expense of other tasks: for
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example, addressing the challenges of a rising China, a nuclear North
Korea, and a resurgent Russia.
The United States’ counterterrorism posture also affects how
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Washington deals with other governments—and how other governments
deal with it. When Washington works directly with other governments
in fighting terrorists or seeks their approval for launching drone
strikes, it inevitably has to adjust aspects of its policies. Washington’s
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willingness and ability to criticize or pressure the governments of

Egypt, Pakistan, Saudi Arabia, and Turkey, among others, is hindered
by the fact that the United States depends on them to take action
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against terrorist groups or to allow U.S. forces to use their territory to

do so. More broadly, leaders in such countries have learned that in
order to extract concessions from American policymakers, it helps to
raise the prospect of opening up (or shutting down) U.S. military
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bases or granting (or withdrawing) the right to use their airspace. And
they have learned that in order to nudge the United States to get in-
volved in their own battles with local insurgents, it helps to cater to
Washington’s concerns by painting such groups (rightly or wrongly)
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as internationally minded jihadists.

The United States also risks guilt by association when its counter-
terrorism partners ignore the laws of armed conflict or lack the ca-
pacity for precision targeting. And other governments have become
quick to cite Washington’s fight against its enemies to justify their
own more brutal tactics and more blatant violations of international
law. It is seldom easy for U.S. officials to press other governments to

moderate their policies, restrain their militaries, or consider the unin-
tended consequences of repression. But it is infinitely harder when
those other states can justify their actions by pointing to Washington’s
own practices—even when the comparison is inaccurate or unfair.
These policy distortions are reinforced and exacerbated by a
lopsided interagency policymaking process that emerged after the
9/11 attacks. In most areas, the process of making national security
policy tends to be highly regimented. It involves the president’s Na-
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tional Security Council staff; deputy
Paradoxically, fixating on cabinet secretaries; and, for the most
contentious, sensitive, or consequen-
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counterterrorism can make tial decisions, the cabinet itself, chaired
it harder to actually fight by either the national security adviser
terrorism. ha or the president. But since the Bush
administration, counterterrorism has
been run through a largely separate
process, led by the president’s homeland security adviser (who is
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technically a deputy to the national security adviser) and involving a
disparate group of officials and agencies. The result in many cases is
two parallel processes—one for terrorism, another for everything
else—which can result in different, even conflicting, recommenda-
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tions before an ultimate decision is made.

In one example from our time in government, in 2016, officials
taking part in the more specialized counterterrorism side of the
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process debated whether to kill or capture a particular militant leader

even as those involved in the parallel interagency process considered
whether to initiate political discussions with him. That same year,
those involved in the counterterrorism process recommended launching
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a major strike against ISIS leaders in Libya even as other officials

working on that country worried that overt U.S. military action would
undermine Libya’s fledgling government.
It’s true that once the most difficult decisions reach the president
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and his cabinet, the two processes converge, and a single set of players
makes the final call. But the bifurcated bureaucratic structure and the
focus on terrorism at the lower levels mean that by the time senior
officials consider the issue, momentum typically will have grown in
favor of direct action targeting a terrorist suspect, with less consider-
ation given to other matters. Even when there is greater coordination
of the two processes, as there was for the counter-ISIS campaign, the
special attention given to terrorist threats shapes policy decisions,
making it more difficult to raise potentially countervailing interests,
such as resolving broader political conflicts or helping stabilize the
fragile states that can give rise to those threats in the first place.
That policy distortion has produced an unhealthy tendency among
policymakers to formulate their arguments in counterterrorism terms,
thereby downplaying or suppressing other serious issues. Officials
quickly learn that they stand a better chance of being heard and car-
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rying the day if they can argue that their ideas offer the most effective
way to defeat terrorists. The Obama administration produced several
examples of that dynamic. Officials held different views about how
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closely to work with Egyptian President Abdel Fattah el-Sisi, who
took power in a coup in 2013, and whether to condition U.S. assis-
tance to Egypt on political reforms. In essence, the debate pitted
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those who believed that the United States could not endorse, let alone
bankroll, the Sisi regime’s authoritarian practices against those who
argued that relations with Egypt mattered too much to risk alienating
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its leader. This debate raised difficult questions about the utility of
U.S. military aid and the effectiveness of making it conditional, about
the importance of Egypt and the Middle East to Washington’s security
posture, and about the priority that U.S. policymakers ought to place
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on American values when formulating foreign policy. Yet policymakers

often chose to frame the debate in different terms: those in the first
camp insisted that Sisi’s disregard for human rights would produce
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more terrorists than he could kill, whereas those in the second camp
highlighted the need to work with Sisi against already existing
terrorists in the Sinai Peninsula.
In 2014, a similar pattern emerged when it came to policy discussions
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about the civil war in Syria. Once again, senior officials faced a
situation that tested their core assumptions and values: on the one
hand, the conviction that the United States had a moral responsibility
to intervene to halt mass atrocities, and on the other, a fear that U.S.
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forces would get bogged down in yet another military adventure in

the Middle East. But in front of the president, officials regularly spoke
a different language. Those who felt that Washington should try to
topple Syrian President Bashar al-Assad asserted that he was a “magnet”
for terrorist groups that could be eliminated only through Assad’s
removal. Meanwhile, officials who opposed intervention argued that
July/August 2018 65
the conflict itself was generating the vacuum that resulted in ISIS’ rise
and that the goal therefore ought to be to de-escalate it; they also
pointed out that many of the opposition groups asking for U.S. support
had ties to al Qaeda.
But those examples and the often highly defensible decisions they
produced are less important than the larger pattern they reflect. When
officials package every argument as a variation on a single theme—
how to more effectively combat terrorists—they are likely to down-
play broader questions that they ought to squarely confront regarding
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the United States’ role in the world, the country’s responsibility to
intervene (or not) on humanitarian grounds, and the relative impor-
tance of defending human rights or democracy.
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TOO MUCH OF A GOOD THING
Paradoxically, fixating on counterterrorism can make it harder to actually
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fight terrorism. The intense pressure to immediately address terrorist
threats leads to a focus on symptoms over causes and to an at times
counterproductive reliance on the use of force. Washington has become
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addicted to quick military fixes for what are too often portrayed as
imminent life-and-death threats, or officials focus too much on tangible
but frequently misleading metrics of success, such as the decimation
of leadership structures, body counts, or the number of arrests or
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sorties. Of course, when it comes to an organization such as ISIS, it is

hard to imagine any solution other than defeating the group militarily.
But when dealing with the Afghan Taliban, for example, or violent
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groups elsewhere that have local roots and whose fighters are motivated
by local grievances, it is hard to imagine any military solution at all.
Sometimes what’s needed is a far broader approach that would entail,
where possible, engaging such groups in dialogue and addressing factors
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such as a lack of education or employment opportunities, ethnic or

religious discrimination, the absence of state services, and local government
repression. These problems are hard to assess and require political, as
opposed to military, solutions—diplomacy rather than warfare. That
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approach takes longer, and it’s harder to know whether the effort is paying
off. For a policymaker, and particularly for political appointees serving
fixed terms, it’s almost always preferable to choose immediate and
predictable gratification over delayed and uncertain satisfaction.
But as the war on terrorism nears its third decade, and despite the
elimination of countless terrorist leaders and foot soldiers, there are
now almost certainly more terrorist groups around the world and far
more terrorists seeking to target the United States and its interests
than there were in 2001. The United States is engaged in more
military operations, in more places, against more such groups than
ever before: in Afghanistan, Iraq, Libya, Niger, Somalia, Syria, Yemen,
and the Sahel region, to name a few. The spread of such groups is
hardly the result of U.S. policy failings alone. Still, it ought to
encourage humility and prompt Washington to consider doing things
differently. Instead, it has been used to justify doing more of the same.
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One possible explanation for the resilience of the terrorist threat is
that an overly militarized approach aggravates the very conditions on
which terrorist recruitment thrives. The destruction of entire cities
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and the unintentional killing of civilians, in addition to being tragic,
serve as powerful propaganda tools for jihadists. Such incidents feed
resentment, grievances, and anti-Americanism. Not everyone who is
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resentful, grieving, or anti-American will turn to violence. The vast
majority will not. But invariably, some will.
The Obama administration sought to improve the protection of
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civilians by establishing detailed constraints on counterterrorism
strikes and unprecedented standards for transparency about civilian
casualties. That approach proved easier to establish than to imple-
ment. Outside analysts argued that the administration did not go far
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enough, and journalists revealed troubling disparities in the way casualties

were counted. But things have gotten far worse under Trump. In the
name of unshackling the military and halting what Trump adminis-
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tration officials have disparaged as Obama-era “micromanagement” of

the military’s operations, Trump has loosened the rules governing the
targeting of presumed terrorists, diminished the vetting of strikes,
and delegated increased authority to the Pentagon. Not surprisingly,
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the number of drone strikes has significantly grown as a result; in the

case of Yemen, the Trump administration carried out more airstrikes
during its first 100 days than the Obama administration did in all of
2015 and 2016.
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Today, the public knows little about what standards the military
must follow before launching a strike, but there is little doubt that
they have been relaxed. Nor is there much doubt that the rate of civilian
casualties has increased. But it’s hard to know for sure because the
White House has weakened the transparency rules that Obama
imposed at the end of his term. In a sense, such changes represent a
July/August 2018 67
natural progression. They are an outgrowth of a discourse that pre-

sents terrorism as an existential threat, its elimination as a goal wor-
thy of virtually any means, and secrecy as an essential tool.
Trump represents the culmination of that discourse. During the
campaign, he blithely asserted that his approach to ISIS would be to
“bomb the shit out of” the group’s members and suggested that the
United States should also “take out their families.” The Washington
Post recently reported that after he became president, Trump watched
a recording of a U.S. strike during which a drone operator waited to
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fire until the target was away from his family. When the video was
over, Trump asked, “Why did you wait?”
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AVOIDING THE TERRORISM TRAP
There must be a better way to allocate U.S. resources, define national
security priorities, and talk to the American public about terrorism.
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But it’s hardly a mystery why a better path has been so difficult to
find: few politicians are willing to challenge the dominant perspective,
hint that the danger has been exaggerated, or advocate a less militarized
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approach. Fuzzy thinking mars even well-intentioned efforts at change.
Senator Bob Corker, a Republican from Tennessee, and Senator Tim
Kaine, a Democrat from Virginia, have proposed an update to the
legislation that has governed most counterterrorism policy since 2001.
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Their bill seeks to rein in operations, put them on a sounder legal foot-
ing, and reassert Congress’ long-neglected role. But if passed, the bill
would end up codifying the notion that the United States is engaged
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in an open-ended war against an ever-growing number of groups.

Still, a window of opportunity might be opening. Despite its missteps
on counterterrorism, Trump’s national security team has declared that
the biggest threats facing the United States result from great-power
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politics and aggressive “revisionist” states, such as China and Russia.

Whatever one thinks of that assessment, it could at least help put terrorism
in proper perspective. Moreover, the fight against ISIS appears to be
winding down, at least for now, in Iraq and Syria. According to some
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polls, the U.S. public presently ranks international terrorism as only

the third most critical threat to U.S. vital interests, behind North
Korea’s nuclear program and cyberwarfare. There is also growing aware-
ness of the considerable portion of the U.S. budget currently devoted
to counterterrorism. And Senator Bernie Sanders, an independent
from Vermont—and a once and possibly future presidential contender—
recently broke with orthodoxy by condemning the war on terrorism as

a disaster for American leadership and the American people.
All of this amounts to just a small crack, but a crack nonetheless. It
will take more to overcome the political trap that discourages officials
from risking their futures by speaking more candidly. For example,
Congress could create a bipartisan panel to dispassionately assess the
terrorist threat and how best to meet it. Members of the policy com-
munity and the media could acknowledge the problem and initiate a
more open conversation about the danger terrorism poses, whether
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U.S. military operations have successfully tackled it, and how much
the global fight against terrorism has cost.
Future officeholders could rethink Washington’s bureaucratic organi-
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zation and the preeminent place granted to counterterrorism officials
and agencies, insist on greater transparency regarding civilian casualties
caused by U.S. military action, tighten the constraints loosened by the
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Trump administration, and press harder on allies and partners to act
in accordance with international law. Finally, since sloppy language
and bad policy are often mutually reinforcing, news organizations could
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impose on themselves greater discipline when covering terrorism.
This would entail eschewing highly emotional wall-to-wall coverage
of every attack (or even potential attack).
Washington’s militarized counterterrorism culture, born in the
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aftermath of the 9/11 attacks, has tended to conflate the government’s

primary responsibility to protect citizens with a global fight against
an ill-defined and ever-growing list of violent groups. This distortion
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has taken years to develop and will take years to undo. But that process
will have to start somewhere, and it ought to start now.∂
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July/August 2018 69
NATO’s Enemies Within

How Democratic Decline Could Destroy
the Alliance
Celeste A. Wallander
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ATO today faces multiple challenges. Terrorists have attacked
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European capitals, migration is putting pressure on border
and homeland security systems, Russia is both able and will-
ing to use military force and other instruments of influence in Eu-
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rope, and U.S. President Donald Trump has threatened to scrap the
alliance altogether. But the most serious problem is not one of these
obvious threats; rather, it is the breakdown of liberal democracy within
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the alliance itself.
The North Atlantic Treaty Organization has never been a typi-
cal alliance. From its inception in 1949, NATO has not only deterred
and defended against external threats; it has also advanced the
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principles of liberal democratic governance. Although its cohesion

initially rested on the common threat of the Soviet Union, NATO
was more unified than most multilateral organizations thanks to the
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common character of its members. Nearly all were democratically

elected governments that were accountable to their citizens, bound by
the rule of law, and dedicated to upholding political and civil rights.
Article 2 of NATO’s founding treaty committed members to “strength-
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ening their free institutions.”

Countries facing a common threat have often banded together for
defense and survival, but most alliances don’t last long once that threat
is eliminated. That is why so many observers feared that NATO would
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disappear with the end of the Soviet Union. But thanks to the internal
cohesion created by its democratic values, and the incentives its stan-
dards created for aspiring new members, the alliance defied predic-
CELESTE A. WALLANDER is President and CEO of the U.S. Russia Foundation and Senior
Adviser at WestExec Advisors. From 2013 to 2017, she served as Special Assistant to the Presi-
dent and Senior Director for Russian and Eurasian Affairs at the National Security Council.
tions. Instead of disintegrating, NATO adapted to new challenges and

became a cornerstone of transatlantic security after the Cold War.
Today, the Kremlin once again poses a serious threat in Europe and
beyond. But unlike the last time the alliance faced down Russia, now
NATO is in peril. Multiple members are dismantling the institutions
and practices of liberal democracy that emerged triumphant in the
Cold War, and things may get worse if autocratic demagogues exploit
populist fears to gain political clout in other member states. Just when
the alliance is needed as much as ever to meet challenges from with-
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out, the foundations of its power are at risk of crumbling because of
challenges from within.
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THE PRICE OF ADMISSION
After the fall of the Soviet Union, the liberal democratic credentials
of NATO’s members became even more important to the alliance. Al-
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though many experts and policymakers hoped that Europe would
emerge from the Cold War whole, free, and at peace, others warned
that without a shared enemy, the region might return to past cycles
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of instability and conflict fueled by revanchist, chauvinistic, and il-
liberal European regimes. Far from being irrelevant, these observers
argued, NATO would play a key role in bolstering liberal democracies
and creating trust among countries that had spent centuries fighting
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one another.
As if on cue, border disputes and simmering ethnic conflicts in
eastern Europe began to threaten the peace almost immediately
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after the fall of the Soviet Union. And with the disintegration of
Yugoslavia in the early 1990s, they ultimately broke it. In the face
of these challenges, NATO sought to leverage the desire for member-
ship to encourage political reforms by requiring that new members
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meet its standards for good governance. This decision was based on
the belief that liberal institutions, practices, and values would pre-
vent a return to the nationalist, nativist, extremist, and intolerant
dynamics that had driven destructive conflicts in Europe for centu-
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ries. To foster security within Europe, NATO required that new

members leave autocratic practices behind.
Fulfilling these requirements was often politically contentious, and
aspiring members did not always succeed. Countries that had spent
decades under authoritarian communist rule had to root out the linger-
ing influence of intelligence agencies, overturn politicized control of
July/August 2018 71
the military in favor of apolitical professional defense forces, establish

legislative oversight for military procurement, and implement person-
nel policies that would combat corruption. All of that has taken time:
Montenegro set the goal of achieving
NATO’s ability to conduct membership in 2007 but had to wait
ten more years to earn admission.
security operations depends And mere aspiration is not enough:
on its political cohesion as Bosnia, for example, has yet to fulfill
much as its members’ the criteria that the alliance set in 2010
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for the country to be granted the Mem-
military capabilities. bership Action Plan, a procedural pre-
cursor to joining. These requirements
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may have slowed the process of NATO’s expansion, but liberal institu-
tions and practices are central to creating security and trust among
Europe’s diverse societies. Anything less would have weakened the
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alliance instead of strengthening it.
Beyond its stabilizing effect on the broader continent, there is an-
other reason NATO’s liberal democratic character came to matter: in
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the absence of a shared external threat, the binding force of liberal
democratic values and institutions has become essential to the alli-
ance’s effectiveness. NATO’s ability to conduct security operations de-
pends on its political cohesion as much as its members’ military
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capabilities. Few question NATO’s cohesion when Article 5 of its found-

ing treaty is invoked—that is, when an ally is directly attacked. Com-
mon external threats generate unified responses. After 9/11, for example,
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NATO members quickly joined the U.S. campaign against Taliban-

ruled Afghanistan.
However, when the alliance faces a security issue that does not in-
voke Article 5, alliance cohesion is less certain because members have
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different priorities that guide their cost-benefit calculations. In such

cases, liberal commitment to the rule of law has played an important
role. The alliance has proved cohesive when acting outside Europe
and when the stakes are well grounded in international law, as was the
Ma
case during its 2011 intervention in Libya, which was backed by a UN

Security Council resolution.
In other instances, when the alliance has faced more diffuse and
contested security challenges, a common commitment to liberal demo-
cratic values has proved even more essential to maintaining cohesion.
Consider the Balkans: in 1995, NATO conducted Operation Deliberate
m
hi
ha
With allies like these: at a NATO summit in Brussels, Belgium, May 2017
iT
Force to protect UN safe areas in Bosnia that had come under attack from
ethnic Serbian armed groups. And in 1999, it conducted another air
operation against the armed forces of what remained of Yugoslavia to
Al
prevent military attacks on ethnic Albanians in Kosovo. In both

campaigns, Article 5 did not apply because no NATO member had
been directly attacked. Nor was the alliance acting under a UN Secu-
od
rity Council resolution. These interventions tested the alliance’s po-

litical capacity, but ultimately, members coalesced around their
common commitment to human rights, a principle that would be-
come enshrined in international law in 2005 as “the responsibility to
so
protect” (or R2P). The alliance’s ability to prevent mass atrocities in

non-NATO states was thus as much a product of its members’ values as
it was a product of their military assets.
By contrast, when democratic values and institutions have cut in
Ma
the opposite direction, the alliance has been divided. Compare NATO’s
interventions in the Balkan wars to its disunity over the 2003 U.S.
invasion of Iraq. Although the Bush administration contended that
POOL / REUTERS
Iraq threatened global security by pursuing weapons of mass destruc-

tion (an area of international law far better established than R2P),
NATO was far from unified on the matter. In fact, France and Germany
July/August 2018 73
were among the most vocal critics of the invasion. Although NATO’s
interventions in the Balkans had been legally problematic, the allies
were still united in pursuing them because of their shared commit-
ment to human rights. But when it came to Iraq, without a justifica-
tion rooted in liberalism, not all of them were willing to support an
intervention beyond the purview of Article 5.
BACKSLIDING AWAY
In the early years of this century, some observers, including me,
m
worried that the credibility of NATO’s admission criteria was being
undermined by new members that managed to meet NATO’s standards
only to backslide after joining the alliance. When international organ-
hi
izations increase their membership, they often become more un-
wieldy and slow to act. Greater numbers mean greater diversity in
interests and priorities. NATO argued that a shared commitment to
ha
liberal democracy would mitigate this challenge, but that would be
true only if new members sustained those values after accession. At
the time, I feared that long-standing NATO members were being ex-
iT
ploited by states such as Hungary that had made promises of political
reform they did not intend to keep. Giving backsliders a free pass
would harm NATO’s credibility and detract from its ability to cultivate
liberal values. And if NATO became unwilling to enforce its member-
Al
ship requirements, the United States’ most important multilateral alli-

ance would become rife with weak links.
Such fears have since been borne out. It has become clear that there
od
is no price for violating NATO’s liberal democratic standards, and some

weak links are indeed backsliding. Consider Hungary. In 1999, the
country was welcomed into NATO. In 2002 and then again in 2006,
it held competitive elections that resulted in the airing of past cor-
so
ruption and collusion with the Soviet-era Communist Party by of-

ficials in both main parties, many of whom were held accountable.
In 2004, Hungary pursued EU membership with strong support
across the political spectrum. It also made progress on civil liberties
Ma
and political rights, achieving top scores in all categories from 2005
to 2010 in rankings produced by the nongovernmental organization
Freedom House.
But in 2010, in elections that were widely recognized as free and
fair, Viktor Orban’s right-wing party Fidesz won 53 percent of the vote
and 68 percent of the seats in the parliament. Armed with a super-
majority, Fidesz changed the constitution and weakened institutional

checks on government power, especially the judiciary. It increased the
number of seats on Hungary’s Constitutional Court, which it then
packed with its own people, and narrowed the court’s mandate. By
early 2018, Hungary had slipped to the bottom of the “free” end of
Freedom House’s scales on political rights and civil liberties. And as the
rule of law and government accountability have declined in Hungary,
corruption has gone up. In April 2018, Fidesz won 49 percent of the
vote but again secured a supermajority in the parliament. Today, the
m
party seems poised to drive the country further away from the values
and institutions of European liberal democracy.
Hungary showed early signs of its potential to slide into illiberalism,
hi
but few imagined that Poland would join it. Devastated by centuries
of war and great-power competition, Poland and its citizens represented
the hope that liberal democracy could be an answer to Europe’s past
ha
follies of ethnic grievance, demagoguery, and the assault on liberal
political institutions. But after taking power in 2015, Poland’s Law
and Justice party began to do away with many of the same core checks
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and balances and rule-of-law protections that Fidesz had dismantled
in Hungary, eliminating the power of the Constitutional Tribunal to
review laws and executive actions and increasing the power of politi-
cal leaders to pack the judiciary with sycophants. In Freedom House’s
Al
ratings, Poland dropped from 93 out of 100 in 2015 to 85 in 2018. This

January, the government passed a law making it a crime to claim that
Poland was complicit in the Holocaust. Setting aside the question of
od
complicity by some Poles—and there is considerable historical evidence

for it—this effort threatens the core liberal democratic principle of
freedom of speech, without which governments cannot be held ac-
countable to their citizens.
so
THE NEW THREAT

In 2002, I wrote in this magazine about the risk that backsliding among
new NATO members could undermine the coherence of the alliance. It
Ma
is now clear that I was guilty of a failure to imagine even worse. Today,
liberal democracy is at risk not just among new members but also
among the original or early members of the alliance—a development
that poses an even greater threat to NATO’s unity and effectiveness.
The most egregious case may come as little surprise. Turkey, which
joined NATO in 1952, and whose history is checkered with military
coups, has long been a problem for the alliance’s commitment to lib-
eral democratic institutions and principles. But after the Cold War,
Turkey made progress in expanding legal and civil rights and allowing
for political competition. When the Justice and Development Party
took power in 2002 under the leader-
ship of Recep Tayyip Erdogan, it at first
appeared that progress would continue.
Today, liberal democracy is
Soon, however, the party began back- at risk not just among new
sliding. In 2016, under the cover of in- members but also among
m
vestigating an alleged coup attempt, the original or early
Erdogan’s government put political
opponents on trial, persecuted journal- members of the alliance.
hi
ists, and went after businesses that had
not supported his party. Through pressure on business interests, the
Turkish state acquired control of central media outlets and made them
ha
instruments of the ruling party. Erdogan also went after the indepen-
dent judiciary, pushing through a constitutional amendment that en-
abled his party to stack the judiciary with compliant political appointees.
iT
In 2018, Freedom House officially classified Turkey as “not free,” put-
ting it in the same category as China, Iran, Russia, and Syria.
Meanwhile, in other core NATO members, there are worrying signs,
such as the rise of the National Front in France (after the party’s con-
Al
fessed acceptance of Russian money) and the unimaginable emergence

of a far-right nationalist party in Germany: the Alternative for Ger-
many. And in 2017, the Netherlands had a sort of near-death experience
od
with the nail-biting defeat of Geert Wilders, the leader of the radical
right Party for Freedom.
Then there is the United States. Assuming that there proves to be
no evidence to the contrary, the 2016 U.S. presidential election was an
so
example of a free and fair election that brought to power an admin-

istration intent on disrupting the institutions and practices of liberal
democracy. U.S. President Donald Trump regularly advances false-
hoods, and he has assaulted the role of the independent press, sug-
Ma
gesting that journalists should be imprisoned or forced to reveal their

sources. He and other members of his administration have expressed
support for violent racist provocateurs, publicly denigrated religious
minorities, and defended acts of sexism and misogyny perpetrated by
both elected officials and those seeking elected office. Trump has also
repeatedly criticized an independent Justice Department investiga-
July/August 2018 77
tion into his presidential campaign and possible foreign interference

in the 2016 election. In light of all of this, in 2018, Freedom House
downgraded the United States’ freedom score to 86 out of 100, a rat-
ing that is barely ahead of Poland’s (at 85).
Of course, some NATO members also experienced authoritarianism
or military rule during the Cold War. Greece was ruled by a military
junta from 1967 to 1974, and the Portuguese government was an au-
thoritarian regime until 1974. It would not be unreasonable to criticize
as a convenient fairy tale the narrative of NATO as an alliance of liberal
m
democracies. During the Cold War, exceptions were tolerated in the
interests of enhancing NATO’s military capabilities and its ability to
prevent communist infiltration in Western Europe. But the deviations
hi
prove the point: under authoritarian rule, Greece and Turkey fought
a narrow, revanchist, destructive conflict over Cyprus that weakened
the alliance. Still, the divisive effects were sufficiently mitigated by
ha
the strong cohesive force of the Soviet threat. The authoritarian fail-
ings of certain NATO allies put them at odds with core members of the
alliance, but they did not create a fissure that would weaken NATO’s
iT
deterrent posture toward its main external security threat.
The situation today is different. With Russia mounting a renewed
threat in Europe and beyond, there is an additional reason the institu-
tions of liberal democracy are important to transatlantic security: il-
Al
liberal and nondemocratic countries are more vulnerable to subversion.

Authoritarianism enables corruption, and in Europe, corruption en-
ables Russian access and influence. After Russia’s 2014 intervention in
od
Ukraine, the NATO members that were most affected by corruption,

demagogic populism, and Russian media influence complicated the
alliance’s efforts to forge a unified response. Every time European
sanctions against Russia have come up for renewal, the United States
so
and other core allies have had to scramble to prevent these countries
from breaking with NATO and succumbing to pressure or temptation
from the Kremlin.
The Soviet threat was primarily military, and political infiltration
Ma
abroad was advanced through communist ideology and leftist political

parties. Russian influence today, on the other hand, operates through
shadowy financial flows, corrupt relationships, bribes, kickbacks, and
blackmail. To the extent that Russia promotes an ideology, it is the same
combination of intolerant nationalism, xenophobia, and illiberalism
that is on the rise in Hungary, Poland, Turkey, and elsewhere in Eu-
rope. Even as Orban and Erdogan have been berated by their allies,
they have found Russian President Vladimir Putin to be a source of
understanding and support. Unlike during the Cold War, NATO’s il-
liberal weak links now align with the Kremlin’s tactics. They are the
alliance’s Achilles’ heel. One hopes that these countries can still with-
stand any pressures to break consensus in the event of a Russian strike
on a NATO member. But confidence that these allies have not been
compromised would be a lot better than anxious hope.
Much has been written about how NATO needs to enhance its mili-
m
tary capabilities to counter Russia. That is true, but even more impor-
tant, the alliance needs to restore its liberal democratic foundations to
reduce its vulnerability to Moscow’s subversion through corruption,
hi
information warfare, and blackmail.
DEFENDING THE ALLIANCE ha

In 2002, I suggested mechanisms for putting backsliders on notice,
suspending their rights, and potentially expelling them from the alli-
ance. My proposal centered on modifying NATO’s consensus rule,
iT
which holds that the alliance’s major decisions require the consent of
all members. I believed that a “consensus minus one” mechanism—
which would allow other allies to discipline an errant member—would
enable NATO to protect itself from weak links and erect a higher barrier
Al
against backsliding. I also proposed providing a process for an offend-

ing state to reverse course and regain its full stature.
But these ideas were predicated on the assumption that the alliance
od
would be dealing with only the occasional outlier. With multiple alli-
ance members, new and old, already backsliding or at risk of doing so,
that window of opportunity has passed. If the cohort of backsliders
grows, NATO may find itself with a bloc within the alliance bent on
so
protecting illiberal democracy.

Given the proliferation of problem members, NATO should con-
sider adopting a form of the EU’s “qualified majority” rule for internal
governance. Instead of requiring consensus or consensus minus one
Ma
(which coalitions of backsliders are likely to subvert), NATO should

make it possible for a defined supermajority of members to suspend
the voting or decision rights of backsliders. Under the 2007 Lisbon
Treaty, most EU decisions require the support of a double majority—55
percent of the member states representing 65 percent of the popula-
tion of the union. Under this procedure, the EU can initiate a process
July/August 2018 79
that revokes the voting rights and organizational privileges of mem-

bers found to be advancing systematic threats to the rule of law. In-
deed, the EU is looking at precisely these procedures to restrict funding
and other benefits to Hungary and Poland.
NATO should also make one of its senior officials responsible for
monitoring and reporting on the liberal democratic credentials of
not only new or aspiring members but also all allies. The assistant
secretary-general for political affairs and security policy might be able
to take on this role. (To date, this position has primarily focused on
m
external relations and traditional security issues, such as arms con-
trol.) Given the centrality of the alliance’s commitment to the liberal
democratic institutions and practices of its members, NATO’s institu-
hi
tional leadership should be more involved in holding members ac-
countable to the alliance’s standards.
Finally, NATO should work more closely with the EU. The two organ-
ha
izations share a common focus on good governance, the rule of law,
and the rights of citizens and could reinforce each other’s internal
strengths. Deepening this relationship by creating official channels of
iT
exchange would bolster NATO’s capacity to monitor whether allies
were meeting its standards for good governance (the EU already has
metrics for evaluating this). And an explicit and systematic process
for sharing information would make it harder for members to use
Al
their status in one organization to avoid being held to account in the

other for any misbehavior or backsliding. For example, Poland often
cites its good standing in NATO, where it is a strong military ally that
od
assumes a tough stance on Russia, to excuse its growing illiberalism.

But procedural fixes to inoculate the alliance against weak links are
not enough. NATO might be able to deal with, say, a repressive Turkey
by pushing it to the sidelines of core missions and decisions. NATO
so
rules do not formally provide for such an approach, but the organiza-
tion is good at finding procedural workarounds, and it is at least pos-
sible that the Turkish leadership would not object. It would be quite
another matter if a core NATO member departed from the alliance’s
Ma
liberal democratic foundations. How could NATO sideline or work

around France, or Germany, or the United States?
The best defense lies within the member states themselves. NATO
can structure disincentives and punishments for backsliders, but only
citizens can hold elected leaders accountable. Most important, the
United States must rise to meet the challenge. The decline of liberal-
ism among core NATO allies is concerning: Germany represents the

transatlantic phoenix rising from fascism’s ashes; France is the symbol
of resistance through occupation; the United Kingdom was where
Europe kept hope alive in World War II. But it was the United States
that saved the twentieth century from dictatorship and helped Eu-
rope achieve prosperity, security, and stability. NATO might survive
European publics toying with fascism (although it should limit the
experiments). It cannot survive if U.S. liberal democracy fails.
Americans must face the fact that the biggest threat to NATO today
m
may be the United States itself. Regardless of political party and pol-
icy preferences, all Americans have a patriotic interest in protecting
the laws, practices, and institutions of U.S. liberal democracy. This is
hi
not merely a matter of domestic politics; it is also a matter of national
security. Threats to democracy at home have already undermined
Washington’s ability to work with allies in a dangerous, uncertain, and
ha
threatening world. As the most powerful member of NATO, the United
States must take the lead through a bipartisan defense of liberal insti-
tutions and values.
iT
Today, fundamental threats to NATO come from its own members.
These challenges cannot be resolved in NATO’s shiny new headquar-
ters in Brussels through procedural modifications or by pointing fin-
gers at the worst offenders. They must be defeated at home.∂
Al
od
so
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July/August 2018 81
Russia as It Is
A Grand Strategy for Confronting Putin
Michael McFaul
m
R
elations between Russia and the United States have deteriorated
to their most dangerous point in decades. The current situation
hi
is not, as many have dubbed it, a new Cold War. But no one
should draw much comfort from the ways in which today’s standoff
differs from the earlier one. The quantitative nuclear arms race is over,
ha
but Russia and the United States have begun a new qualitative arms race
in nuclear delivery vehicles, missile defenses, and digital weapons. The
two countries are no longer engulfed in proxy wars, but over the last
iT
decade, Russia has demonstrated less and less restraint in its use of
military power. The worldwide ideological struggle between capital-
ism and communism is history, but Russian President Vladimir Putin
has anointed himself the leader of a renewed nationalist, conservative
Al
movement fighting a decadent West. To spread these ideas, the Rus-

sian government has made huge investments in television and radio
stations, social media networks, and Internet “troll farms,” and it has
od
spent lavishly in support of like-minded politicians abroad. The best

description of the current hostilities is not cold war but hot peace.
Washington must accept that Putin is here to stay and won’t end
his assault on Western democracy and multilateral institutions any-
so
time soon. To deal with the threat, the United States desperately
needs a new bipartisan grand strategy. It must find ways to contain
the Kremlin’s economic, military, and political influence and to
strengthen democratic allies, and it must work with the Kremlin when
Ma
doing so is truly necessary and freeze it out when it is not. But above
all, Washington must be patient. As long as Putin remains in power,
changing Russia will be close to impossible. The best Washington
MICHAEL M C FAUL is Director of the Freeman Spogli Institute for International Studies at
Stanford University and the author of From Cold War to Hot Peace: An American Ambassa-
dor in Putin’s Russia. From 2012 to 2014, he served as U.S. Ambassador to Russia.
Russia as It Is
m
hi
ha
Red dawn: Russian and Syrian soldiers outside eastern Ghouta, Syria, February 2018
iT
can hope for in most cases is to successfully restrain Moscow’s actions
abroad while waiting for Russia to change from within.
Al
UPS AND DOWNS

At the end of the Cold War, both U.S. and Russian leaders embraced
the promise of closer relations. So what went wrong? Russia’s renewed
od
international power provides part of the explanation. If Russia were too

weak to annex Crimea, intervene in Syria, or interfere in U.S. elections,
Moscow and Washington would not be clashing today. But not all rising
powers have threatened the United States. Germany and Japan are
so
much stronger than they were 50 years ago, yet no one is concerned
about a return to World War II rivalries. What is more, Russia’s relations
with the United States were much more cooperative just a few years
back, well after Russia had returned to the world stage as a great power.
Ma
OMAR SANADIKI / REUTE RS
In Russian eyes, much of the blame falls on U.S. foreign policy.

According to this argument, the United States took advantage of Russia
when it was weak by expanding NATO and bombing Serbia in 1999,
invading Iraq in 2003, and allegedly helping overthrow pro-Russian
governments in Georgia in 2003 and Ukraine in 2004. Once Russia was
off its knees, it had to push back against U.S. hegemony. At the 2007
July/August 2018 83
Michael McFaul
Munich Security Conference, Putin championed this line of analysis:

“We are seeing a greater and greater disdain for the basic principles of
international law. . . . One state, and, of course, first and foremost the
United States, has overstepped its national borders in every way.”
There is some truth to this story. The expansion of NATO did
exacerbate tensions with Moscow, as did Western military interventions
in Serbia and Iraq. Democratic upheavals in Georgia and Ukraine
threatened Putin’s ability to preserve autocracy at home, even if Putin
grossly exaggerated the U.S. role in those so-called color revolutions.
m
Yet this account omits a lot of history. After the end of the Cold
War, U.S. presidents were truly committed to, in Bill Clinton’s words,
“a strategic alliance with Russian reform” and Russia’s integration into
hi
the international system. Just as the United States and its allies helped
rebuild, democratize, and integrate Germany and Japan after World
War II, the thinking went, so it would rebuild Russia after the Cold
ha
War. It is true that the United States and Europe did not devote enough
resources or attention to this task, leaving many Russians feeling
betrayed. But it is revisionism to argue that they did not embrace
iT
Moscow’s new leaders, support democratic and market reforms, and
offer Russia a prominent place in Western clubs such as the G-8.
The most powerful counterargument to the idea that U.S. foreign
policy poisoned the well with Russia is that the two countries managed
Al
to work together for many years. The cooperative dynamic of U.S.-

Russian relations established after the fall of the Soviet Union survived
not only U.S. provocations but also two Russian military operations in
od
Chechnya and the 1998 Russian financial crisis, after which foreign
governments accused the Kremlin of wasting Western aid. And even
the U.S. withdrawal from the Anti-Ballistic Missile Treaty, in 2002,
and another, larger round of NATO expansion, in 2004, did not end the
so
cooperative dynamic that U.S. President George W. Bush and Putin

had forged after the 9/11 attacks. Russia’s invasion of Georgia in 2008
pushed U.S.-Russian relations to a low point in the post–Cold War
era. But even this tragedy did not permanently derail cooperation.
Ma
HOW IT ALL WENT WRONG

Even after all these ups and downs, U.S.-Russian relations experienced
one last spike in cooperation, which lasted from 2009 to 2011. In 2009,
when U.S. President Barack Obama met for the first time with Russian
President Dmitry Medvedev and Putin, who was then serving as Russia’s
Russia as It Is
prime minister, the U.S. president tried to convince the two Russians
that he was a new kind of American leader. He had opposed the Iraq
war long before it was popular to do so, he explained, and had always
rejected the idea of regime change. At least at first, Medvedev seemed
convinced. Even Putin showed signs of softening. Over the next
few years, Russia and the United States signed the New Strategic
Arms Reduction Treaty (or New START), worked through the UN to
impose tough new sanctions on Iran,
managed Russia’s entry into the World
Putin’s anti-American
m
Trade Organization, coordinated to de-
fuse violence in Kyrgyzstan after the campaign was not just
collapse of the government there, and political theater intended
hi
arranged a vast expansion of the net- for a domestic audience.
work used to transport U.S. soldiers
and supplies to Afghanistan through
ha
Russia. In 2011, in perhaps the most impressive display of renewed
cooperation, Russia acquiesced in the Western intervention in Libya.
At the height of the so-called reset, in 2010, polls showed that around
iT
50 percent of Americans saw Russia as a friendly country and that
some 60 percent of Russians viewed the United States the same way.
This period of relative harmony began to break down in 2011,
owing primarily to the way that Putin reacted to popular democratic
Al
mobilizations against autocracies in Egypt, Libya, Syria—and Russia

itself. The Libyan uprising in 2011 marked the beginning of the end
of the reset; the 2014 revolution in Ukraine marked the start of the
od
hot peace.
Popular mobilization inside Russia was especially unnerving to
Putin. He had enjoyed solid public support during most of his first
eight years as president, thanks primarily to Russia’s economic
so
performance. By 2011, however, when he launched a campaign for a

third term as president (after having spent three years as prime
minister), his popularity had fallen significantly. The implicit bargain
that Putin had struck with Russian society during his first two terms—
Ma
high economic growth in return for political passivity—was unraveling.

Massive demonstrations flooded the streets of Moscow, St. Petersburg,
and other large cities after the parliamentary election in December
2011. At first, the protesters focused on electoral irregularities, but
then they pivoted to a grander indictment of the Russian political
system and Putin personally.
July/August 2018 85
Michael McFaul
In response, Putin revived a Soviet-era source of legitimacy:

defense of the motherland against the evil West. Putin accused the
leaders of the demonstrations of being American agents. Obama tried
to explain that the United States had not prompted the Russian
demonstrations. Putin was unconvinced. After his reelection in the
spring of 2012, Putin stepped up his attacks on protesters, opposition
parties, the media, and civil society and placed under house arrest the
opposition leader he feared the most, the anticorruption blogger
Alexei Navalny. The Kremlin further restricted the activity of non-
m
governmental organizations and independent media outlets and im-
posed significant fines on those who participated in protests that the
authorities deemed illegal. Putin and his surrogates continued to label
hi
Russian opposition leaders as traitors supported by the United States.
Putin’s anti-American campaign was not just political theater in-
tended for a domestic audience: Putin genuinely believed that the
ha
United States represented a threat to his regime. Some pockets of
U.S.-Russian cooperation persisted, including a joint venture between
the Russian state-owned oil giant Rosneft and ExxonMobil, an agree-
iT
ment brokered by Obama and Putin in which Syria pledged to elimi-
nate its chemical weapons, and Russian support for the international
negotiations that produced the Iran nuclear deal. But most of these
ended in 2014, after the fall of the pro-Russian Ukrainian government
Al
and the subsequent Russian invasion of Ukraine. Once again, Putin

blamed the Obama administration, this time for supporting the revo-
lutionaries who toppled Ukrainian President Viktor Yanukovych.
od
Putin was never inclined to believe in Washington’s good faith. His

training as a KGB agent had led him to distrust the United States along
with all democratic movements. But in the early years of his presi-
dency, he had held open the possibility of close cooperation with the
so
West. In 2000, he even suggested that Russia might someday join

NATO. After the 9/11 attacks, Putin firmly believed that Russia could
work with the United States in a global war on terrorism. In 2008,
after he stepped aside as president, he allowed Medvedev to pursue
Ma
closer ties with Washington. But the Western intervention in Libya

confirmed Putin’s old suspicions about U.S. intentions. Putin believed
that the United States and its allies had exploited a UN resolution that
authorized only limited military action in order to overthrow the Libyan
dictator Muammar al-Qaddafi. In Putin’s view, Obama had turned out
to be a regime changer, no different from Bush.
Russia as It Is
CONFRONTING THE KREMLIN

Four years after Russia annexed Crimea, the United States has still
not articulated a bipartisan grand strategy for dealing with Russia.
Such a strategy is necessary because Washington’s conflict with the
Kremlin doesn’t revolve around mere policy disagreements: rather, it
is a contest between Putinism and democracy. No tweaking of U.S.
policy on Syria or NATO will influence Putin’s thinking. He has been
in power for too long—and he is not likely to leave in the foreseeable
future. U.S. policymakers must dispense with the fantasy that Putin’s
m
regime will collapse and democracy will emerge in Russia in the near
term. The United States and its allies must continue to support human
rights and democracy and embrace people inside Russia fighting for
hi
those values. But real political change will likely begin only after Putin
steps down.
The United States also has to give up on the idea that Russia can
ha
or should be integrated into multilateral institutions. The theory that
integration would moderate Russian behavior has not been borne out
by events. The United States must dig in for a long and difficult
iT
confrontation with Putin and his regime. On most issues, the aim
should be to produce a stalemate, as preserving the status quo will
often be the best the United States can hope for.
Containment must start at home. Limiting Putin’s ability to
Al
influence U.S. elections should be priority number one. The Trump

administration should mandate enhanced cybersecurity resilience.
If the federal government can require all cars to have seat belts,
od
then federal authorities can require elementary cybersecurity

protections such as dual authentication for all processes related to
voting during a presidential election. Those who operate the
systems that maintain voter registries must be required to receive
so
training about how to spot common hacking techniques, and an even

more rigorous set of standards must be adopted for the vote count.
In a dozen states, including large battlegrounds such as Florida and
Pennsylvania, at least some precincts lack paper trails for each ballot
Ma
cast. These sloppy practices have to end. Every precinct must be

able to produce a paper record for every vote.
Congress should also pass laws to provide greater transparency
about Russian media activities inside the United States, including a
requirement for social media companies to expose fake accounts and
disinformation. Foreign governments should not be allowed to buy
July/August 2018 87
Michael McFaul
ads anywhere to influence voter preferences. Beyond elections, the

federal government must devote more time and money to blocking
Russian threats to all national electronic infrastructure.
To further counter Putin’s ideological campaign, the United States
should organize democracies around the world to develop a common
set of laws and protocols regulating government-controlled media.
Through regulation, Washington should
The United States must dig encourage social media platforms to
grant less exposure to Kremlin-created
m
in for a long and difficult content. Algorithms organizing search
confrontation with Putin results on Google or YouTube should
and his regime. not overrepresent information distributed
hi
by the Russian government. When such
material does appear in searches, social
media companies should make its origins clear. Readers must know who
ha
created and paid for the articles they read and the videos they watch.
On their own, without government intervention, social media
platforms should provide sources from more reliable news organi-
iT
zations; every time an article or video from the Kremlin-backed news
channel RT appears, a BBC piece should pop up next to it. Social media
companies have long resisted editorial responsibilities; that era must end.
In Europe, Putin’s success in courting Hungarian President Viktor
Al
Orban and nurturing several like-minded political parties and move-

ments within NATO countries underscores the need for a deeper
commitment to ideological containment on the part of Washington’s
od
European allies. Those allies must pay greater attention to combating

Russian disinformation and devote more time and resources to
promoting their own values. NATO members must also meet their
defense spending pledges, deploy more soldiers to the alliance’s front-
so
line states, and reaffirm their commitment to collective security.

No theater in the fight to contain Russia is more important than
Ukraine. Building a secure, wealthy, democratic Ukraine, even if parts
of the country remain under Russian occupation for a long time, is the
Ma
best way to restrain Russian ideological and military aggression in

Europe. A failed state in Ukraine will confirm Putin’s flawed hypothesis
about the shortcomings of U.S.-sponsored democratic revolutions. A
successful democracy in Ukraine is also the best means for inspiring
democratic reformers inside Russia and other former Soviet republics.
The United States must increase its military, political, and economic
Russia as It Is
support for Ukraine. Washington should also impose new sanctions

on Russians involved in violating Ukraine’s sovereignty and ratchet
them up until Putin begins to withdraw.
In the Middle East, the United States needs a more aggressive
strategy to contain Russia’s most important regional ally, Iran. It
should continue to arm and support Syrian militias fighting Iranian
soldiers and their allies in Syria and should promote anti-theocratic
and pro-democratic ideas in the region, including inside Iran. Aban-
doning the fight in Syria would deliver a tremendous victory to Mos-
m
cow and Tehran. The goals of U.S. policy toward Iran must remain
denying Tehran a nuclear weapon, containing its destabilizing actions
abroad, and encouraging democratic forces inside the country, but not
hi
coercive regime change from the outside.
The United States must contain the Kremlin’s ambitions in Asia, as
well. Strengthening existing alliances is the obvious first step. Putin
ha
has sought to weaken U.S. ties with Japan and South Korea. To push
back, the United States should make its commitment to defend its al-
lies more credible, starting by abandoning threats to withdraw its sol-
iT
diers from South Korea. It should also begin negotiations to rejoin the
Trans-Pacific Partnership. A harder but still important task will be to
divide China from Russia. In 2014, Putin suffered a major setback
when China did not support his annexation of Crimea at the UN. But
Al
today, putting daylight between the two countries will not be easy, as
Putin and Chinese President Xi Jinping have forged a united front on
many issues. When opportunities do arise, such as working with Bei-
od
jing toward North Korean denuclearization, Washington must act.

Western countries must also develop a coherent strategy to contain
the Russian government’s economic activities. Europe must reduce its
dependence on Russian energy exports. Projects such as the planned
so
Nord Stream 2 natural gas pipeline from Russia to Germany are no

longer appropriate and should be discontinued. Putin uses government-
owned and supposedly private companies to advance his foreign policy
interests; the United States and Europe must impose greater financial
Ma
sanctions on the activities those firms undertake in the service of

Kremlin interests abroad if Russia continues to occupy Ukraine or
assault the integrity of democratic elections. At a minimum, the West
must adopt new laws and regulations to require greater transparency
around Russian investments in the United States, Europe, and, as far
as possible, the rest of the world. Russian officials and businesspeople
July/August 2018 89
Michael McFaul
tied to the Kremlin cannot be allowed to hide their wealth in the West.
Genuine private-sector companies inside Russia should be encouraged
to engage with Western markets, but authorities must expose the ill-
gotten financial assets that Putin and his cronies have parked abroad.
The goal should be to underscore the economic benefits of free markets
and access to the West while highlighting the economic costs of state
ownership and mercantilist behavior.
On the other side of the equation, Western foundations and philan-
thropists must provide more support for independent journalism,
m
including Russian-language services both inside and outside Russia.
They should fund news organizations that need to locate their servers
outside Russia to avoid censorship and help journalists and their sources
hi
protect their identities.
More generally, the United States and its democratic allies must
understand the scope of their ideological clash with the Kremlin.
ha
Putin believes he is fighting an ideological war with the West, and he
has devoted tremendous resources to expanding the reach of his
propaganda platforms in order to win. The West must catch up.
iT
HOW DO YOU SOLVE A PROBLEM LIKE PUTIN’S RUSSIA?
Containing Russia does not mean rejecting cooperation in every area.
The United States selectively cooperated with the Soviet Union during
Al
the Cold War; it should do so with Russia now. First on the list must be
striking new arms control deals or at least extending existing ones, most
urgently New START, which is set to expire in 2021 and contains crucial
od
verification measures. Combating terrorism is another area for potential

partnership, as many terrorist organizations consider both Russia and
the United States to be their enemies. But such cooperation will have to
remain limited since the two countries have different ideas about what
so
groups and individuals qualify as terrorists, and some of Russia’s allies

in the fight against terrorism, such as Iran, Syria, and Hezbollah, are at
odds with the United States. U.S. and Russian officials might also seek
to negotiate an agreement limiting mutual cyberattacks. Yet Washington
Ma
should not pursue engagement as an end in itself. Good relations with

Russia or a friendly summit with Putin should be not the goal of U.S.
diplomacy but the means to achieve concrete national security ends.
Some might argue that the United States cannot pursue containment
and selective cooperation at the same time. The history of the Cold War
suggests otherwise. President Ronald Reagan, for example, pursued a
Russia as It Is
policy of regime change against Soviet-backed communist dictator-

ships in Afghanistan, Angola, Cambodia, and Nicaragua while nego-
tiating arms control deals with Soviet leaders.
On global issues in which Russia does not need to be involved, the
United States should isolate it. Since the end of the Cold War, U.S.
presidents have been eager to give their counterparts in the Kremlin
symbolic leadership roles as a way to signal respect. Those days are over.
Conversations about Russia rejoining the G-8 must end. Western gov-
ernments should boycott sporting events held in Russia. Let the athletes
m
play, but without government officials in the stands. Given Moscow’s
politicization of Interpol arrest requests, Interpol must suspend Russian
participation. Even Russia’s presence at NATO headquarters must be
hi
rethought. The more the United States can do without Russia, the better.
Even as the United States isolates the Russian government, it must
continue to develop ties with Russian society. By canceling exchange
ha
programs, banning U.S. civil society organizations, and limiting
Western media access to Russian audiences, Putin has tried to cut the
Russian people off from the West. The United States and Europe
iT
need to find creative ways to reverse this disturbing trend. Happily,
far more opportunities exist to do so today than did during the Cold
War. Washington should promote student and cultural exchanges,
dialogues between U.S. and Russian nongovernmental organizations,
Al
trade, foreign investment, and tourism.
STRATEGIC PATIENCE
od
But no matter how effective a containment strategy U.S. policymakers

put in place, they must be patient. They will have to endure stalemate
for a long time, at least as long as Putin is in power, maybe even longer,
depending on who succeeds him. In diplomacy, Americans often act like
so
engineers; when they see a problem, they want to fix it. That mentality
has not worked with Putin’s Russia, and if tried again, it will fail again.
At the same time, American leaders must say clearly that they do
not want endless conflict with Russia. When the current confrontation
Ma
winds down, most likely because of political change inside Russia,

future U.S. presidents must stand ready to seize the moment. They
will have to do better at encouraging democracy within Russia and
integrating Russia into the West than their predecessors have done.
Past politicians and the decisions they made created today’s conflict.
New politicians who make different decisions can end it.∂
July/August 2018 91
The Human Capital Gap

Getting Governments to Invest in People
Jim Yong Kim
m
G
overnments in pursuit of economic growth love to invest in
physical capital—new roads, beautiful bridges, gleaming
hi
airports, and other infrastructure. But they are typically far less
interested in investing in human capital, which is the sum total of a
population’s health, skills, knowledge, experience, and habits. That’s a
ha
mistake, because neglecting investments in human capital can dramatically
weaken a country’s competitiveness in a rapidly changing world, one in
which economies need ever-increasing amounts of talent to sustain growth.
iT
Throughout the World Bank Group’s history, our development experts
have studied every aspect of what makes economies grow, what helps
people lift themselves out of poverty, and how developing countries can
invest in prosperity. In 2003, the bank published the first annual Doing
Al
Business report, which ranked countries on everything from taxation

levels to contract enforcement. The findings proved hard to ignore: heads
of state and finance ministers faced the possibility that foreign direct
od
investment could go down as companies chose to invest in countries with

a better business climate. In the 15 years since, Doing Business has inspired
more than 3,180 regulatory reforms.
Now we are taking a similar approach to marshaling investments in
so
people. The staff of the World Bank Group is developing a new index
to measure how human capital contributes to the productivity of the
next generation of workers. Set to launch at the World Bank Group’s
annual meetings in Bali this October, the index will measure the health,
Ma
as well as the quantity and quality of education, that a child born today
can expect to achieve by the age of 18.
Scholars know a great deal about the many benefits of improving
human capital. But their knowledge has not turned into a convincing call
JIM YONG KIM is President of the World Bank Group.
for action among developing countries. One constraining factor is the

shortage of credible data that make clear the benefits of investing in
human capital, not just for ministers of health and education but also
for heads of state, ministers of finance, and other people of influence
around the world. That’s why an index of human capital across countries
can galvanize more—and more effective—investments in people.
Over the past three decades, life expectancy in rich and poor countries
has started to converge. Schooling has expanded tremendously. But
the agenda is unfinished: almost a quarter of children under five are
m
malnourished, more than 260 million children and youth are not in
school, and 60 percent of primary school children in developing countries
are still failing to achieve minimum proficiency in learning. In too
hi
many places, governments are failing to invest in their populations.
PEOPLE POWER ha
The value of human capital can be calculated in several different ways.
Traditionally, economists have done so by measuring how much more
people earn after staying in school longer. Studies have found that each
iT
additional year of education increases a person’s income by about ten
percent on average. The quality of the education matters, too. In the
United States, for example, replacing a low-quality teacher in an elementary
school classroom with an average-quality one raises the combined lifetime
Al
income of that classroom’s students by $250,000.

But cognitive abilities are not the only dimensions of human capital
that count. Socioemotional skills, such as grit and conscientiousness,
od
often have equally large economic returns. Health also matters: healthier
people tend to be more productive. Consider what happens when children
no longer suffer from parasitic worms. A 2015 study conducted in Kenya
found that giving deworming drugs in childhood reduced school absences
so
and raised wages in adulthood by as much as 20 percent—lifelong benefits

from a pill that costs about 30 cents to produce and deliver.
The different dimensions of human capital complement one another
starting at an early age. Proper nutrition and stimulation in utero and
Ma
during early childhood improve physical and mental well-being later in

life. Although some gaps in cognitive and socioemotional skills that
manifest themselves at an early age can be closed later, doing so becomes
more expensive as children reach their teens. It is no surprise, then, that
focusing on human capital during the first 1,000 days of a child’s life is
one of the most cost-effective investments governments can make.
July/August 2018 93
Jim Yong Kim
How does all of this relate to economic growth? For one thing,
when the benefits of individual investments in human capital are
added up, the overall impact is greater than the sum of the parts.
Going back to those schoolchildren in Kenya: deworming one child
also decreases the chances of other children becoming infected with
parasites, which in turn sets those children up for better learning
and higher wages. Some of the benefits from improved human
capital also accrue beyond the generation in which the investments
are made. Educating mothers about prenatal care, for instance, improves
m
the health of their children in infancy.
Individual investments in human capital add up: development
economists have estimated that human capital alone explains between
hi
ten and 30 percent of differences in per capita income across countries.
These positive effects also persist over time. In the mid-nineteenth
century, the state of São Paulo, in Brazil, encouraged the immigration
ha
of educated Europeans to specific settlements. More than 100 years
later, those very settlements boast higher levels of educational attainment,
a greater share of workers in manufacturing as opposed to agriculture,
iT
and higher per capita income.
Education yields particularly large returns, so it plays an important
role in decreasing poverty. Ghana’s success story is a testament to this
relationship: throughout the 1990s and early years of this century, the
Al
country doubled its education spending and drastically improved its

primary enrollment rates. As a result, the literacy rate went up by an
astonishing 64 percentage points from the early 1990s to 2012, and the
od
poverty rate fell from 61 percent to 13 percent.

Investments in education can also reduce inequality. In most
countries, children born to more affluent parents start having access
to better opportunities early in life, and these lead to lifelong
so
advantages, whereas children born to poorer parents miss out on

these opportunities. When governments take steps to correct that
problem, economic inequality tends to fall. One study released this
year drew on a trial conducted in North Carolina to estimate that if
Ma
the United States made effective early childhood development

programs universal, U.S. income inequality would fall by seven
percent—about enough for the country to achieve Canadian levels
of equality.
The societal benefits of investing in human capital extend even further.
Staying in school longer reduces a person’s probability of committing
m
hi
ha
iT
Teach your children well: a teacher in northeastern Nigeria, June 2017
a crime. So do programs that improve noncognitive skills. In a 2017
study in Liberia, drug dealers, thieves, and other criminally inclined
Al
men were enrolled in cognitive behavioral therapy in order to build

skills such as recognizing emotions, improving self-control, and navi-
gating difficult situations. The program, when combined with a small
od
cash transfer, significantly reduced the odds that these men would
fall back into a life of crime.
Human capital is also associated with social participation. In the
mid-1970s, Nigeria introduced universal primary education, sending a
so
large cohort of children through primary school who otherwise wouldn’t

have gone. Years later, those same people were more likely to pay close
attention to the news, speak to their peers about politics, attend
AKINTUN D E AKINLEYE / REUTE RS
community meetings, and vote.

Ma
Investments in human capital increase trust, too. More educated

people are more trusting of others, and more trusting societies tend to
have higher economic growth. They are also more tolerant: research
suggests that the large wave of compulsory school reforms that took
place across Europe in the mid-twentieth century made people more
welcoming of immigrants than they were before.
July/August 2018 95
Jim Yong Kim
THE VISIBLE HAND

Human capital doesn’t materialize on its own; it must be nurtured by
the state. In part, that’s because individuals often fail to consider the
benefits that investments in people can have on others. In deciding
whether to deworm their children, for instance, parents take into
account potential improvements to their own children’s health, but
they rarely consider how the treatment will reduce the risk of
infection for other children. Or in deciding whether to pay to enroll
their children in preschool, parents might not consider the wider
m
societal benefits of doing so, such as lower crime and incarceration
rates. These knock-on effects are significant: a 2010 study of one
preschool program developed in Michigan in the 1960s estimated
hi
that for each $1 spent, society received $7 to $12 in return.
Sometimes, social norms hold parents back from investing in their
children. Although the preference among parents for sons over
ha
daughters has been well documented, the extent of the discrimination
can be astounding. The government of India has estimated that the
country has as many as 21 million “unwanted girls,” daughters whose
iT
parents wished for sons instead. These girls receive much less parental
investment, in terms of both health and education. Other times, families
want to invest in the human capital of their children but simply cannot
afford to do so. Poor parents of talented kids cannot take out a loan on
Al
their children’s future earnings to pay for school today. And even when
education is free, parents still have to pay for transportation and school
supplies, not to mention the opportunity cost that arises because a child
od
in the classroom cannot work to earn extra income for the family.
Despite how crucial it is for governments to invest in human capital,
politics often gets in the way. Politicians may lack the incentive to support
policies that can take decades to pay off. For example, in the absence of
so
a pandemic, they can usually get away with neglecting public health. It
is rarely popular to fund public health programs by raising taxes or
diverting money from more visible expenditures, such as infrastructure
or public subsidies. The government of Nigeria ran into major resis-
Ma
tance in 2012 when it removed the country’s fuel subsidy to spend

more on maternal and child health services. Media coverage focused
on the unpopular repeal of the subsidy and paid scant attention to the
much-needed expansion of primary health care. After widespread
public protests, the subsidy was reinstated. In some countries, such
resistance is partly explained by a weak social contract: citizens do not
trust their government, so they are hesitant to pay tax money that they
worry will be misspent.
The problem of implementation is equally daunting. Across the world,
too many children cannot read because their teachers are not adequately
trained. The Service Delivery Indicators, an initiative launched by the
World Bank Group in partnership with the African Economic Research
Consortium to collect data on sub-
Saharan African countries, has revealed
the depth of the problem. In seven coun-
Human capital doesn’t
m
tries surveyed—Kenya, Mozambique, materialize on its own;
Nigeria, Senegal, Tanzania, Togo, and it must be nurtured by
Uganda—only 66 percent of fourth- the state.
hi
grade teachers had mastered the lan-
guage curriculum they were supposed to
be teaching, and only 68 percent had the minimum knowledge needed
ha
to teach math. In health care, medical professionals in these countries
could correctly diagnose common conditions such as malaria, diarrhea,
pneumonia, tuberculosis, and diabetes just 53 percent of the time.
iT
Implementation is also challenging in places where the people pro-
viding a given service lack the motivation to do their jobs well. In those
same seven countries, on average, teachers taught for only half the time
they were supposed to. In many cases, the problem is that civil servants
Al
work in politicized bureaucracies, where promotions are based on con-

nections, not performance.
But there are success stories. When the incentives of central govern-
od
ments, local governments, and service providers are aligned, countries

can make great strides in improving human capital. That has been the
case with Argentina’s Plan Nacer, a program launched in 2004 and
supported by the World Bank Group that provides health insurance to
so
uninsured families. Plan Nacer allocated funding to provinces based

on indicators measuring the scope and quality of their maternal and
child health-care services, an approach that incentivized provinces to
invest in better care. Among its beneficiaries, Plan Nacer reduced the
Ma
probability of a low birth weight by 19 percent.

More and more, populations in developing countries are demanding
better health care and education. In Peru, for example, a remarkable
campaign led by civil society groups placed stunted growth among
children firmly on the political agenda in 2006, an election year.
Politicians responded by setting a clear target of reducing stunting by
July/August 2018 97
Jim Yong Kim
five percentage points in five years. The country managed to outperform

even that ambitious goal: from 2008 to 2016, the rate of stunting
among children under five fell by about 15 percentage points. It was
proof that change is possible.
THE POWER OF MEASUREMENT

When politicians and bureaucrats fail to deliver, poor people suffer the
most. But there is a way to empower the people to demand the services
they deserve: transparency. Better access to information allows citizens
m
to know what their leaders and civil servants are and aren’t doing. In
Uganda in 2005, for example, researchers working with community
organizations released report cards grading local health facilities, which
hi
galvanized communities to demand better services. This simple policy
led to sustained improvements in health outcomes, including a reduction
in mortality for children under five. Similarly, in 2001, after Germany’s
ha
disappointing scores in the inaugural Program for International Student
Assessment were released to an embarrassed public—an event known
as “the PISA shock”—the government undertook major educational
iT
reforms that improved learning.
Learning assessments proved similarly pivotal in Tanzania. In 2011,
the nongovernmental organization Twaweza, supported by the World
Bank Group, published the results of a survey assessing children’s basic
Al
literacy and numeracy. The news was dismal: only three out of ten
third-grade students had mastered second-grade numeracy, and even
fewer could read a second-grade story in English. Around the same
od
time, the results of the Service Delivery Indicators surveys came out
and shined a spotlight on teacher incompetence and absenteeism. The
ensuing public outcry led to the introduction of Tanzania’s “Big Results
Now” initiative, a government effort to address low levels of learning.
so
As these examples show, when credible analysis on the state of human

capital development is made public, it can catalyze action. That is the
logic behind the metrics the World Bank Group is developing to
capture key elements of human capital. In countries where investments
Ma
in human capital are ineffective, these measurements can serve as a call

to action. We are focusing our efforts on health and education by look-
ing at the basics. Will children born today live long enough to start
school? If they do survive, will they enroll in school? For how many
years, and how much will they learn? Will they leave secondary school
in good health, ready for future learning and work?
In many developing countries, there is a great deal of work to be

done for the health of young people. In Benin, Burkina Faso, and Côte
d’Ivoire, ten percent of children born today will never see their fifth
birthday. In South Asia, as a result of chronic malnutrition, more than
one-third of children under the age of five have a low height for their
age, which harms their brain development and severely limits their
ability to learn.
The state of education is equally concerning. To better understand
whether schooling translates into learning, the World Bank Group, in
m
partnership with the UNESCO Institute for Statistics, has developed a
comprehensive new database of student achievement test scores.
We harmonized results from several ma-
hi
jor testing programs covering more than
150 countries, so that they are com-
Ministries of finance
parable to PISA scores. The database typically spend more time
ha
reveals huge gaps in learning: less than worrying about their
half of students in developing coun- country’s stock of debt than
tries meet what PISA calls “minimum
proficiency”—a score of roughly 400— its stock of human capital.
iT
compared with 86 percent in advanced
economies. In Singapore, 98 percent of students reached the interna-
tional benchmark for basic proficiency in secondary school; in South
Al
Africa, 26 percent of students did. In other words, nearly all of Singa-

pore’s secondary school students have sufficient skills for the world of
work, while almost three-quarters of South Africa’s youth are function-
od
ally illiterate. That is a staggering waste of human potential.

When children leave school, they face very different futures in terms
of health, depending on which country they live in. One stark indicator
is adult survival rates: in the richest countries, less than five percent of
so
15-year-olds will not live to see their 60th birthday. But in the poorest
countries, 40 percent of 15-year-olds will die before they turn 60.
These individual data points provide snapshots of the vast differences
in health and education across countries. To bring these different
Ma
dimensions of human capital together into a salient whole, we at the

World Bank Group are combining them into a single index that
measures the consequences of the failure to invest in human capital in
terms of lost productivity of the next generation of workers. In
countries with the lowest human capital investments today, our analysis
suggests that the work force of the future will be only between one-
July/August 2018 99
Jim Yong Kim
third and one-half as productive as it could be if people enjoyed full

health and received a complete high-quality education.
Measuring the economic benefits of investments in human capital in
this way does not diminish the social and intrinsic value of better health
and education. Rather, it calls attention to the economic costs of failing
to provide them. Ministries of finance typically spend more time worry-
ing about their country’s stock of debt than its stock of human capital.
By demonstrating the beneficial effects that investing in human capital
has on worker productivity, the World Bank Group can get policymak-
m
ers to worry as much about what is happening in their schools and
hospitals as what is happening in their current account.
Moreover, the index will be accompanied by a ranking, which should
hi
serve as a call to action in countries where investments are falling short.
We learned with the Doing Business report that even with the most
comprehensive measurements, reforms do not necessarily follow. A
ha
ranking puts the issue squarely in front of heads of state and finance
ministers, and it makes the evidence hard to ignore.
Benchmarking countries against one another is only the first step. If
iT
governments are to identify which investments in human capital will
yield results, they need to be able to measure the various factors that
contribute to human capital. Better measurement is a public good, and
like most public goods, it is chronically underfunded. The World Bank
Al
Group can add real value here: it can help harmonize the various
measurement efforts across development partners, collect more and
better information, advise policymakers how to use it, provide technical
od
support, and help design effective interventions.
HUMAN CAPITAL IN THE TWENTY-FIRST CENTURY

Human capital matters—for people, economies, societies, and global
so
stability. And it matters over generations. When countries fail to

invest productively in human capital, the costs are enormous, especially
for the poorest. These costs put new generations at a severe disadvantage.
With technological progress placing a premium on higher-order skills,
Ma
the failure of countries to lay the groundwork for their citizens to lead
productive lives will not only carry high costs; it will also likely gener-
ate more inequality. It will put security at risk, too, as unmet aspira-
tions can lead to unrest.
Better information is part of the answer, but only part. For one thing,
it is hard for a government to deliver quality services if there is not
enough money. So countries that chronically underinvest in human

capital will have to close tax loopholes and exceptions, improve revenue
collection, and reorient spending away from poorly targeted subsidies.
Egypt and Indonesia, for example, have both drastically reduced their
energy subsidies in recent years and reallocated these resources toward
social safety nets and health care. Greater revenue can go hand in hand
with better health outcomes. Between 2012 and 2016, tobacco tax
revenues allowed the Philippines to triple the budget for the Department
of Health and triple the share of its population with health insurance.
m
In the United States, cities such as Philadelphia aim to use resources
from soda taxes to fund early childhood education.
Increased funding is not enough, however. Some countries will have
hi
to work to improve the efficiency of their social services while still
maintaining their quality. In Brazil, for example, a recent World Bank
Group study found that efficiency improvements in the health sector
ha
at the local level could generate savings equivalent to approximately
0.3 percent of GDP. In other countries, reconciling the competing
interests of stakeholders will be critical. Chile’s decades-long experience
iT
with educational reform showed the importance of building political
coalitions to focus on one key goal: learning for all. In 2004, the country
was able to introduce performance-related pay for teachers by balancing
that reform with concessions to teachers’ unions.
Al
But no matter the starting point, better measurement is crucial. After

all, you can only improve what you measure. More and more accurate
measurement should lead to shared expectations about what reforms are
od
needed. It should also bring clarity to questions about priorities, generate

useful debate about various policies, and foster transparency.
In 1949, the World Bank’s president, John McCloy, wrote in these
pages, “Development is not something which can be sketched on a
so
drawing-board and then be brought to life through the magic wand of

dollar aid.” There was often a gap, McCloy argued, between concepts
for development and their implementation in practice. That is pre-
cisely the gap that the World Bank Group’s human capital index is
Ma
designed to close. The new measurements will encourage countries to

invest in human capital with a fierce sense of urgency. That will help
prepare everyone to compete and thrive in the economy of the future—
whatever that may turn out to be. And it will help make the global
system work for everyone. Failing to make those investments would
simply be too costly to human progress and human solidarity.∂
July/August 2018 101

Reclaiming Global
Leadership
The Right Way to Put America First
m
John Kasich
T
hi
he international system that the United States and its allies
created after World War II has benefited the entire world, but
global political and economic engagement have left too many
ha
Americans behind. Over the last 70 years, free-market democracies
have come to dominate the global economy, U.S.-led efforts have dra-
matically reduced poverty and disease, and the world has been spared
iT
great-power conflict. Yet many Americans—myself included—are in-
creasingly coming to believe that our country suffers from a leader-
ship vacuum. People are losing faith that their leaders will work to
make all Americans better off and that they will rally us to join with
Al
our allies in order to craft cooperative solutions to the global problems

that buffet us. Economic growth is delivering benefits for the few
but not for the many. Political discourse has become poisoned by par-
od
tisanship and egotism.

In the face of these challenges, we have a choice between two op-
tions: shut the blinds and withdraw from the world or engage with
allies old and new to jump-start a new era of opportunity and security.
so
Although American leaders should always put American interests

first, that does not mean that we have to build walls, close off markets,
or isolate the United States by acting in ways that alienate our allies.
Continuing to do that will not insulate us from external challenges;
Ma
it will simply turn us into bystanders with less and less influence.
I choose cooperation and engagement. Only those who have forgotten
the lessons of history can credibly contend that peace and prosperity
await us inside “Fortress America.” Yet as evergreen as this debate is—
JOHN KASICH is Governor of Ohio.
m
hi
ha
Kasich in Wauwatosa, Wisconsin, March 2016
iT
retreat or engage—reaching for set-piece answers to the problems fac-
ing the country will not work. New times require new answers, even
to old questions. The way forward is not to retreat but to renew our
Al
commitment to supporting those who share our values, to reboot our

capacity to collaborate, and to forge a new consensus on how to adapt
our policies and institutions to the new era.
od
Having served on the Armed Services Committee and chaired the

Budget Committee of the U.S. House of Representatives when the
U.S. government enjoyed the only balanced budget in living memory,
I am no stranger to the pessimism of those who say, “It can’t be done.” But
so
I am also no stranger to the hope that comes from remembering past

accomplishments. Leaders must now draw on that hope to rediscover
open-mindedness, civility, mutual respect, and compromise.
On challenge after challenge, we are better off working together than
Ma
DAR R E N HAUC K / R E U T E R S
going it alone. To secure our economic future, we must prepare our

workers for the future rather than retreat into protectionism. To deal
with global threats—from Russian aggression to nuclear proliferation
to cyberattacks—we need to harden our defenses and reinvigorate our
alliances. To fight terrorism, we must be more discerning about when
to commit American power and insist that our allies bear more of the

John Kasich
burden. To deal with the rise of China, we must strike the right bal-
ance between cooperation and confrontation. In other words, the
world needs more American engagement, not less.
TRANSFORMING DISRUPTION INTO OPPORTUNITY

As governor of Ohio, a state with an economy larger than those of 160
countries, I am reminded daily that we live in a connected world. Over
a quarter of a million jobs in my state depend on trade, and those jobs
generate close to $50 billion in export earnings every year. In the United
m
States as a whole, one in five jobs—40 million of them—depend on
trade, and these jobs tend to be higher paying. There’s no denying that
as goods and services have flowed more freely across borders, our coun-
hi
try as a whole has become better off. But there are also some people
who have suffered as a result. Jobs have been lost, and the cold steel
furnaces in my hometown of McKees Rocks, Pennsylvania, stand as a
ha
testament. These steel mills were once the engines of middle-class
prosperity. Today, the well-paying jobs they provided are gone.
It is up to Americans to constantly innovate in order to remain
iT
competitive. Our international trading partners have to realize, how-
ever, that if they do not do more to eliminate government subsidies,
dumping, and other anticompetitive behavior, support for free and
fair trade will collapse even further in the United States. The result
Al
will be that everyone will suffer. That said, we should not have to resort
to heavy-handed tariffs and quotas in order to get our partners to start
taking our concerns seriously. To reduce jobs losses from trade, we need
od
an expedited process, free of bureaucratic delays, to review trade viola-

tions and stop them when they occur. But we must also undertake new
efforts that help people obtain the skills they need for the jobs of the fu-
ture. Trade was not responsible for the majority of American job losses in
so
the last generation; technology was. That trend will only accelerate.
Traditional manufacturing will suffer the most from the techno-
logical tsunami. It would be foolish to try to spare ourselves the force
of this wave by retreating. Instead, we must ride the wave. That means
Ma
better preparing the U.S. work force—in particular, aligning our educa-
tion and training efforts with the needs of emerging industries and
improving the flexibility of labor markets. Educators must partner
with the private sector to advocate the right curricula, develop the
right skill sets, and make businesses a greater part of the educational
system by offering mentoring, workplace opportunities, and on-the-
job training. Real leadership is showing the courage to help people

embrace change, find new frontiers, and adjust in a fast-paced world—
not making false promises about returning to the past. The right lead-
ership can draw out from Americans the characteristics that we need
to flourish, ones I know we already possess: resiliency, flexibility, and
agility, and a dedication to lifelong learning.
Without greater confidence about their future place in the global
economy, Americans will have little reason to support international
cooperation and engagement. If the United States continues to go it
m
alone, however, that will only open up further opportunities for nations
that do not have our best interests at heart, such as China and Russia,
to shape our future for us. That’s why it was such a mistake for the Trump
hi
administration to turn its back on the Trans-Pacific Partnership, which
would have eliminated 18,000 foreign tariffs currently imposed on prod-
ucts that Americans make and seek to sell overseas. Those tariffs hold
ha
back job creation, and eliminating them could unleash new growth across
the United States. We shouldn’t have threatened to jettison the North
American Free Trade Agreement or the U.S.-Korea Free Trade Agree-
iT
ment either. Instead, we should work with our neighbors and partners
to modernize these agreements, which are essential to our economic
security and global influence. On trade, as on many other issues, the
goal should be to find win-win solutions, not to make threats and try to
Al
divide and conquer.
COUNTERING THREATS
od
During my 18 years on the House Armed Services Committee, I

learned that our alliances are vital to national security. But the world
has changed markedly since these partnerships were first formed.
We now must contend with not just the familiar conventional and
so
nuclear threats from Russia but also those posed by China, Iran, and
North Korea; threats in space and cyberspace; and threats from non-
state actors. The new environment demands leaner, more agile coali-
tions to solve such problems swiftly.
Ma
President Donald Trump was right to suggest that our allies are no
longer the poverty-stricken nations they were after World War II.
They can and must provide for a greater share of their own defense
and security, particularly in their own regions. These allies, along with
the United States, need to take care to avoid overemphasizing any
individual threat, such as terrorism, at the expense of longer-term

John Kasich
challenges, such as Russian intimidation, Chinese expansionism, or

North Korean nuclear proliferation. All of us must adapt our budgets
accordingly, investing in efforts to deal with new cyberthreats and
preserving our ability to project power
Real leadership is showing and secure the open global trading sys-
tem. And Washington must insist that
the courage to help people its allies in Europe and the Pacific con-
embrace change, find new tribute more to joint efforts.
frontiers, and adjust in a Our common purpose with our al-
m
lies is to preserve and advance free-
fast-paced world—not dom, democracy, human rights, and
making false promises about the rule of law. These values are what
hi
returning to the past. distinguish us from our rivals, and they
are what make our alliances so strong
ha and attractive to others. As we press
our allies to do more, we must not lose sight of the fact that we should
also be working with them—both to reshape our alliances into nimble
coalitions and to recruit other like-minded countries, such as Indone-
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sia, Malaysia, and Vietnam, to join in.
As a child of the Cold War, I remember well the schoolroom “duck
and cover” exercises, an ever-present reminder of the risk of nuclear
war. No threat holds greater consequences for all of humanity than
Al
that of the accidental or deliberate use of nuclear weapons. Containing

that risk has to remain our top priority.
U.S.-Russian agreements such as the 1987 Intermediate-Range
od
Nuclear Forces (INF) Treaty and the 2010 New Strategic Arms Reduc-
tion Treaty (New START) were designed to achieve greater stability
and security when it comes to nuclear weapons, and that goal should
not be abandoned lightly. With New START expiring in 2021 and the
so
INF Treaty on the verge of being fatally undermined by Russia’s non-

compliance, we need to think long and hard about walking away from
them. Unless we are convinced that they are unsalvageable, agree-
ments that by and large have worked for the two states holding more
Ma
than 90 percent of the world’s nuclear weapons should not be allowed

to fall apart.
A number of issues have soured U.S. relations with Russia, including
the Kremlin’s violent intervention in Ukraine, its support for Syria’s
brutal dictator, its disinformation and destabilization campaign in the
Baltic states, its penchant for assassinating political enemies at home
and abroad, and, of course, its interference in the 2016 U.S. presiden-
tial election. Nonetheless, we will have to work with Russia on arms
control, because with around 7,000 warheads, the country remains the
world’s largest nuclear power. Where we have common interests, we
should cooperate, while never closing our eyes to the nature of Russia’s
leaders, their intentions, and their disregard for our values. Where we
cannot cooperate, we must hold Moscow at arm’s length until there is
either a change in behavior or a change in leadership.
North Korea’s acquisition of nuclear weapons remains another major
m
concern. Until we have a definitive, verifiable treaty that formally ends
the Korean War and denuclearizes the Korean Peninsula, we will need
to keep up the pressure on Pyongyang to relinquish its nuclear weap-
hi
ons. Additional sanctions can and should be put in place. That includes
sanctions on large Chinese companies that enable North Korea’s nu-
clear weapons program. North Koreans who are working overseas to
ha
earn the regime the hard currency that funds that program should be
sent home on an expedited basis. The United States and its allies should
also put in place a much tighter counterproliferation regime on ship-
iT
ments going into or out of North Korea. Ultimately, however, it will
take peaceful regime change in Pyongyang to resolve the nuclear threat
North Korea poses in Northeast Asia. The country best positioned to
facilitate such a change is China, provided it can be sure that the United
Al
States, South Korea, and Japan will not exploit the situation.
Iran also presents a major proliferation threat. Given that the nuclear
deal with Iran was one of the few things constraining the country from
od
producing nuclear weapons, it was a mistake for President Trump to

walk away from it. The president’s move created disunity and separated
us from our allies at a time when we need to be rallying together to
confront a myriad of other challenges.
so
I am sympathetic to the efforts of former Secretary of State Henry

Kissinger, former Democratic Senator Sam Nunn of Georgia, former
Secretary of Defense William Perry, and former Secretary of State
George Shultz to rid the world of nuclear weapons. In my discussions
Ma
with them, however, it has been made clear that this is a goal that can
be achieved only in small steps. And with nuclear proliferation on
the upswing, it appears as though that dream is now further away
than ever. For that reason, deterrence will have to remain an essential
part of our national defense strategy for the foreseeable future.
Accordingly, we will have to continue to modernize our nuclear

John Kasich
weapons and harden against cyberattacks the electronic systems that

control them.
Almost all U.S. computer systems and communication networks
are at risk from such attacks. To stop the systematic looting of American
technology and ideas, we will need to reorganize our cyber-operations.
Those parts of the U.S. military, the Department of Homeland
Security, and the FBI that deal with cyberattacks should be united under
a single agency headed by a cabinet-level official. That agency must be
responsible for both cyberoffense and cyberdefense, and the latter task
m
must encompass both government and commercial systems.
Beyond this, the government can mandate that sensitive data be
encrypted, and individual agencies can hold cyberdefense drills and
hi
employ “red teams” to independently test the ability of their systems
to withstand attacks. But we cannot rely on defenses alone. Washington
must use its improving ability to attribute the origins of cyberattacks
ha
and then retaliate loudly or softly, depending on the circumstances.
And given that cyberwarfare has geopolitical implications, diplomacy
will be key to organizing a collective defense among our allies—a
iT
cyber-NATO, effectively.
The private sector has a vital role to play in cyberdefense, too.
American technology giants have all too often failed to prevent their
platforms from being used for malign purposes, such as interfering in
Al
elections and spreading terrorist propaganda. The general public and

the rest of the private sector should place economic pressure on these
companies—for example, withholding advertising and avoiding doing
od
business with them—until they fulfill their responsibilities.
REBALANCING THE WAR ON TERRORISM

After 17 years, the war on terrorism has become a series of open-
so
ended commitments. Some of those commitments clearly need to be

revisited. In Afghanistan, President Barack Obama micromanaged
the war and put in place a series of half measures, and President
Trump sent additional troops into a conflict that cannot be resolved
Ma
militarily. Both presidents’ decisions were mistakes. We must now

look instead to diplomacy to negotiate a sustainable U.S. exit with
all of Afghanistan’s stakeholders.
We should continue to train and assist Afghan government forces
so that they can hold key population centers, but we should limit our-
selves to securing two core U.S. interests: preventing Afghanistan
from once again becoming a terrorist safe haven and ensuring that
Pakistan’s nuclear weapons remain secure. Neither goal requires all
that many U.S. boots on the ground. U.S. forces in the Gulf and
along Afghanistan’s northern borders can achieve the first goal. A
political settlement in Afghanistan that reduces the risk of chaos spill-
ing across the border, together with long-term assistance in Pakistan
supporting the institutions of civilian nuclear control, can help achieve
the second. We should have no illusions about the difficulty of achiev-
ing such a settlement. But it is probably the only way to exit an oth-
m
erwise endless conflict without risking a bloodbath in Afghanistan or
instability in Pakistan.
President Trump deserves credit for improving on President
hi
Obama’s strategy against the Islamic State, also known as ISIS, in Syria
and Iraq. Now that the terrorists’ strongholds have been all but elimi-
nated, the only remaining core U.S. interest at stake is preventing ISIS
ha
from using those countries to mount future attacks against us. That
mission does not require a major commitment of U.S. combat troops.
With our help, allies whose interests are more directly affected than
iT
our own—such as Egypt, Israel, Saudi Arabia, Turkey, and European
countries—should take the lead in mitigating the continuing but re-
duced threat from ISIS and in repatriating Syrian refugees.
Going forward, we need to be much more careful and focused about
Al
how we fight terrorism. We have to develop better criteria for when

to intervene abroad. And when we do intervene, we need clearer
guidelines about what kinds of resources to commit—for example,
od
combat troops versus military trainers. We also need clearer bench-

marks for when we should escalate our commitments and when it
makes more sense to cut our losses and leave. In particular, we should
restrict our major counterterrorism efforts to instances in which our
so
homeland is directly at risk. When it is not, we should avoid getting

embroiled in civil wars and instead use diplomacy to rally interna-
tional partners to assume the lead. Doing that would allow us to hus-
band our resources for the challenges that pose a far greater long-term
Ma
threat to U.S. national security.
ADAPTING TO THE RISE OF CHINA

Chief among those challenges is an increasingly assertive China. Bei-
jing is already seeking to convert its economic power into regional
influence through such projects as the Belt and Road Initiative, a mas-

John Kasich
sive infrastructure venture, and the Asian Infrastructure Investment

Bank, a rival to Western-led development banks. Looking to fill the
political void created by the current vacuum in U.S. international
leadership, Chinese leaders are making ridiculous assertions that their
country will define the meaning of freedom and liberty.
The principal strategic challenge for the United States is to in-
tegrate China into the international system in a manner that al-
lows us to protect our interests in
Asia and safeguard international
To achieve any of our
m
institutions against China’s assaults
foreign policy goals, we will on democratic values. China’s ultimate
have to rededicate ourselves goal is to end what it considers to be
hi
to civility and compromise American dominance and to replace
it with a new order in which Beijing
at home. ha gets an equal voice in setting the rules.
It wants to push the United States
out of the western Pacific, undermine our alliances in the region,
and re-create a Sinocentric sphere of influence in Asia free from
iT
challenges to its authoritarian rule.
Confounding our hopes and expectations, China’s regime has man-
aged to deliver economic growth without being forced to democratize.
But China is not 12 feet tall: its economy has serious structural flaws,
Al
including exceedingly high levels of debt, a cohort of retirees whose

living expenses will be difficult to fund, and wages that are increas-
ingly uncompetitive with those paid by China’s neighbors. Nor is
od
China a monolith: like the United States, the country is riven by rival
factions, leading to infighting that diverts productive resources. China
does not need to be contained as the Soviet Union once did, since its
provocative behavior is already driving some of its neighbors into our
so
arms. Indeed, through its actions, Beijing can largely be counted on to

contain itself.
Another difference between the rivalry with China today and that
with the Soviet Union during the Cold War is that China and the
Ma
United States are so economically intertwined. This means not only

that the two countries will remain co-dependent for the foreseeable
future but also that relations between them need not be a zero-sum
game. There are ample opportunities to pursue strategies with China
that can adapt the world system to reflect Beijing’s growing international
role while benefiting both sides. Those opportunities include reining
in North Korea, addressing climate change, and promoting interna-

tional investment and economic growth.
There are limits to how much can be achieved through cooperation,
however. We should acknowledge our rivalry with China more frankly
and prepare our country to compete more vigorously. This does not
necessarily mean embarking on a path of outright confrontation. Rather,
it means putting hopes of a peaceful political evolution in China on
the back burner and incentivizing Beijing to play a constructive role
in the international system. It also means being prepared to decisively
m
counter Chinese moves that threaten the United States and its allies.
Achieving these ends will be impossible if we continue to hollow out
the State Department. Instead, we must empower it and permit our
hi
seasoned senior diplomats to guide the way, harnessing all the instruments
of American power to exploit China’s weaknesses. U.S. officials should
much more forthrightly advocate the values that we hold dear and
ha
vocally criticize China’s shortcomings. They should also better protect
our economic interests by combating Chinese dumping and currency
manipulation, streamlining the World Trade Organization’s dispute-
iT
resolution process, and insisting on full reciprocity in market access.
Deterring China also has a military dimension. The U.S. military
should forward-deploy greater numbers of forces in the western Pa-
cific and continue to challenge China’s illegal attempts to expand its
Al
territorial control there. Washington should make it clear that there

will be a significant price to pay for any attack on U.S. assets in space
and expand our regional allies’ missile and air defense capabilities. In
od
the long run, however, the best chance for peace lies in a China that
itself chooses reform. To kick-start that process, we will have to sup-
port efforts to give mass audiences in China better access to the un-
varnished truth about what is going on in the world.
so
TOGETHER WE ARE STRONGER

The United States needs a national security doctrine around which a
consensus can be built—both between the Democratic and the Re-
Ma
publican Parties and with those who share our interests and values
overseas. As we continue the search for that, we should work together
to secure our economic future, reimagine and strengthen our de-
fenses and alliances, and focus on the prime challenges to our na-
tional interests. Rather than pulling back and going it alone, America
must cooperate and lead.

John Kasich
That is true whether the country in question is China, Iran, or Rus-

sia and whether the issue at stake is nuclear proliferation, cybersecu-
rity, or counterterrorism. But to achieve any of our foreign policy
goals, we will have to rededicate ourselves to civility and compromise
at home. Without doing so, we cannot hope to lead by example. Nor
will we be able to pass the fiscal, educational, work-force, and other
reforms needed to restore Americans’ confidence in international en-
gagement.
I have faith that our deeply held values will guide us down the
m
right path. As we look back at history, Americans can take pride in
the fact that we have made the world a better place time and time
again. We can draw strength for the future from our past achieve-
hi
ments. Working together in the spirit of bipartisan compromise, ide-
alists and realists can help the United States rediscover optimism to
shape our destiny and guarantee our security. America will be stronger
ha
and more prosperous for it.∂
iT
Al
od
so
Ma
Go Your Own Way

Why Rising Separatism Might Lead to
More Conflict
Tanisha M. Fazal
m
F
rom the Mediterranean coast of northern Spain to the island
hi
states of the South Pacific, secessionism is on the rise. In 1915,
there were eight movements seeking their own independent
state. In 2015, there were 59. One explanation for the increase is that
ha
there are now more countries from which to secede. But even taking
that into account, the rate of secessionism has more than doubled
over the last century.
iT
Yet even though more groups are trying to break away, fewer are
resorting to violence. Because secessionists wish to join the exclusive
club of states, they pay close attention to signals sent by major coun-
tries and organizations that indicate how they should behave. So far,
Al
those signals have discouraged them from resorting to violence (and

made them more careful to avoid civilian casualties if they do) or
unilaterally declaring independence. Kurdish forces in Iraq and Syria,
od
for example, have largely avoided killing civilians and have offered
assistance to Western powers fighting the Islamic State (or ISIS).
Somaliland, which broke away from Somalia in the early 1990s, has
worked quietly but effectively with countries trying to curb piracy in
so
the Gulf of Aden. And in Catalonia and Scotland, independence

movements have long opted for referendums and negotiations rather
than unilateral declarations.
This good behavior has gone largely unrewarded. Amid the war
Ma
against ISIS, Turkey and the United States have moved swiftly to
tamp down talk of an independent Kurdistan. No country has
recognized Somaliland’s statehood. And the Spanish government
TANISHA M. FAZAL is Associate Professor of Political Science at the University of
Minnesota and the author of Wars of Law: Unintended Consequences in the Regulation of
Armed Conflict.

Tanisha M. Fazal
declared Catalonia’s independence referendum illegal and ignored the

result. Meanwhile, the newest member of the club of states, South
Sudan, won international recognition despite flagrantly violating inter-
national law and human rights during its struggle for independence.
This contradiction presents secessionists with a dilemma: Should
they believe what they are told is the best path to statehood or what
they can see actually works? In recent decades, they seem to have
closed their eyes to the gap between rhetoric and reality. But the abil-
ity of major countries and international organizations to maintain
m
the fiction that good behavior leads to success may be eroding.
If secessionists conclude that abiding by the rules generates few
rewards, the consequences could be ugly. Some will continue to play
hi
nice for their movement’s own internal reasons. But those who see
the rules as an external constraint will swiftly abandon them. That
could send the recent trend of nonviolent secessionism into reverse
ha
and increase the human costs of war in places where secessionists
have already resorted to rebellion.
iT
HOW TO CREATE YOUR OWN STATE
It is common for analysts of international affairs to note that since
World War II, civil wars have become more frequent than wars be-
tween states. Less well known is the growing trend toward seces-
Al
sionism among rebel groups that fight in civil wars. Data I collected
with my fellow political scientist Page Fortna show that the propor-
tion of civil wars in which at least one rebel group aimed to secede
od
rose from zero in 1899 to 50 percent in 1999.

There are several reasons for this increase. First, the creation of the
United Nations, in 1945, codified a norm against territorial conquest
that is meant to protect all member states. Today, states worry less
so
about being swallowed up by their neighbors than they used to. Second,
other international organizations have created a set of economic
benefits to statehood. Members of the International Monetary Fund
(IMF) and the World Bank are eligible for loans and aid. Members of
Ma
the World Trade Organization are afforded the benefits of lower

trade barriers. And third, the principle of self-determination, which
is crucial to the secessionist enterprise, enjoys more international
support today than in previous eras.
But secessionists face an uphill battle. Existing states, international
law, and international organizations have laid out several conditions
Go Your Own Way
for the recognition of new states. The 1934 Montevideo Convention,

which set a standard for statehood on which countries continue to
rely, lists four criteria: a permanent population, a defined territory, a
government, and the capacity to enter into relations with other states.
Those requirements might not seem to present many problems; several
currently active secessionist groups could meet them. But the bar has
risen significantly since 1934, especially after the main wave of decolo-
nization ended in the late 1960s.
Consider the United Kingdom’s policy on recognizing new states,
m
which is typical of the policies of many Western democracies. If the
leadership of an existing internationally recognized state is over-
thrown, British policy automatically grants the new government
hi
the same recognition as the old one. But gaining recognition as a
new state—the project of secessionism—is a steeper climb. The
British government requires that in addition to meeting the Monte-
ha
video criteria, would-be states must respect the UN Charter and the
basic principles of international law, guarantee the rights of mi-
norities, accept certain commitments regarding disarmament and re-
iT
gional stability, sign up to a raft of other human rights obligations,
and not violate any UN resolutions.
The United States takes a similar approach, at least on paper. U.S.
policy adheres to the criteria laid out in the Montevideo Convention
Al
but admits the possibility of exceptions, such as to the requirement

that a new state have clear territorial boundaries, if political expedi-
ency dictates. In practice, political factors often take precedence over
od
principles. U.S. policymakers have on occasion expressed support for

new states that have achieved quite limited progress toward effective
governance and democracy.
Gaining UN membership is an even more explicitly political affair.
so
The UN prefers that aspiring members first join their main regional
organization, such as the African Union or the Organization of American
States. Then a state must apply to the UN secretary-general’s office. The
most viable applications will eventually be discussed, and perhaps voted
Ma
on, by the UN Security Council, which must approve new members.

Because any of the five permanent members of the council can veto an
application, many applicants, including Kosovo, Palestine, and Taiwan,
have been unable to achieve membership.
Groups whose UN membership bids fail may nonetheless succeed in
joining other international organizations or gaining recognition from other

Tanisha M. Fazal
countries. Both Kosovo and Taiwan are members of FIFA, the interna-
tional football organization, as well as their regional economic develop-
ment banks. Palestine is recognized by 70 percent of the UN’s members
and in 2012 was upgraded from a “non-member non-state” to a “non-
member observer state” at the UN by a vote in the General Assembly.
PLAYING NICE
Unlike groups that seek to overthrow the central gov-
ernment or plunder resources, secessionists require for-
m
eign recognition to achieve their goals. For that reason,
what international organizations and major countries
say about secessionism matters. The UN has expressed
hi
a clear preference against the use of violence by inde-
pendence movements, and the evidence suggests that
secessionists have listened. Even though secession-
ha
ist movements account for an increasing propor-
tion of rebel groups in civil wars, the percentage
of all secessionists engaged in war has fallen. An
iT
increasing number of secessionist movements
begin entirely peacefully, and other formerly
violent secessionists have turned to nonviolence.
Since 1949, secessionist movements have been
Al
half as likely to fight large-scale wars (those result-

ing in at least 1,000 fatalities) as they were in the
previous century.
od
Meanwhile, secessionist groups that have resorted to

violence have moderated their conduct in war. Seces-
sionists are over 40 percent less likely than nonseces-
sionist armed groups to target civilians in civil war. That is in part
so
because secessionists understand the political downsides of violating

international humanitarian law. Many secessionists make a special
effort to broadcast their compliance with the laws of war. For exam-
ple, several groups, including the Polisario Front (which seeks to end
Ma
Moroccan control of Western Sahara), the Moro Islamic Liberation

Front (an armed group in the Philippines), and the Kurdistan Workers’
Party in Turkey, have highlighted their commitment to avoiding the
use of antipersonnel land mines. Secessionists have also contrasted
their own behavior with that of their government opponents, who
often resort to harsher tactics.
Go Your Own Way
m
hi
ha
iT
Al
od
Consider the little-known case of the South Moluccan secessionists,

who waged a guerilla campaign against the Indonesian government
so
from 1950 to 1963. The South Moluccans refrained from targeting

civilians. They publicized incidents in which Indonesian troops
bombed South Moluccan villages, erected starvation blockades, or
used South Moluccan civilians as human shields. And they pleaded
Ma
for help from the UN in the pages of The New York Times, but to no
avail. Since losing the civil war, the South Moluccan secessionist move-
ment has been represented by a government in exile in the Netherlands.
Decades later, in the late 1980s, another group of Indonesian sepa-
ratists, the East Timorese, adopted a policy of nonviolence after it
became clear that they could not win their armed struggle against

Tanisha M. Fazal
the Indonesian government. And both before and after they did so,
the separatists worked to bring international attention to attacks by
Indonesian security forces on peaceful protesters. (In 2002, after a
UN-brokered transition, East Timor
Secessionists understand became an independent country.) More
recently, in 2014, Kurdish forces in Iraq
the political downsides and Syria were extensively photo-
of violating international graphed assisting Yazidis who had
humanitarian law. been persecuted by ISIS. Yet it bought
m
the Kurds little international support.
The United States, for example, “strongly
opposed” Iraqi Kurdistan’s 2017 independence referendum and
hi
threatened to end its dialogue with Iraqi Kurds should they pro-
ceed with their vote.
The preferences of major states and international organizations have
ha
influenced secessionists’ nonviolent actions, as well. Since the founding
of the UN, the international community has generally frowned on
unilateral declarations of independence. In the 1990s, during the
iT
Balkan wars that preceded the breakup of Yugoslavia, the British, French,
and U.S. governments stated their opposition to such declarations.
And in 1992, the UN Security Council issued a resolution on Bosnia
and Herzegovina affirming that “any entities unilaterally declared . . .
Al
will not be accepted.” Secessionists have taken note: even though

secessionism in civil war has increased since the turn of the twentieth
century, the proportion of secessionists issuing formal declarations
od
of independence has declined since 1945.

Secessionists have usually gained little by defying this norm.
During the breakup of Yugoslavia, Croatia and Slovenia issued
unilateral declarations of independence. But the 1991 peace agreements
so
that the European Community brokered to conclude their wars of inde-

pendence required both countries to rescind those declarations. Both
obliged, and within a year, both had become members of the UN.
South Sudan’s declaration of independence, in 2011, provides an
Ma
example of how to get secessionist diplomacy right. The South

Sudanese worked with a New York–based nongovernmental organi-
zation (NGO), Independent Diplomat, to navigate a path to international
recognition. Together, they met with representatives from inter-
national organizations, including the UN, to establish a set of guidelines
for independence. As a result, when South Sudan declared indepen-
Go Your Own Way
dence, it did not do so unilaterally. It adhered closely to the provi-

sions laid out in the 2005 Comprehensive Peace Agreement between
the Sudan People’s Liberation Movement and the government of
Sudan, which it correctly viewed as its best path to independence.
The declaration was issued after the country was recognized by Su-
dan; the next week, South Sudan was voted in as a member of the
UN, after its government followed a careful script that included Pres-
ident Salva Kiir handing the country’s declaration of independence
to UN Secretary-General Ban Ki-moon.
m
Although states have been resistant to unilateral declarations of
independence, a recent ruling of the International Court of Justice
challenged that long-standing position. In 2010, the court issued an
hi
advisory opinion on the legality of Kosovo’s declaration of indepen-
dence. It found that declarations of independence in general, and
Kosovo’s in particular, are not illegal under international law. Many
ha
international lawyers (and the Kosovars themselves) argue that the ICJ’s
opinion did not set a binding precedent. But several other would-be
states, including Nagorno-Karabakh (which declared independence
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from Azerbaijan in 1991), Palestine, the Republika Srpska (a semiau-
tonomous region within Bosnia and Herzegovina), and Transnistria
(a breakaway region of Moldova), have indicated that they do see a
precedent in the opinion, thus creating an opening for future unilateral
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declarations of independence.
Last year, two secessionist groups tested these waters. Until recently,
Iraqi Kurdistan stepped extremely carefully around the question of
od
declaring independence. But in September, the Kurdish government

held a referendum against the advice of foreign allies, including the
United States, in which 93 percent of Kurds voted for independence
(although many of those in opposition to independence boycotted
so
the referendum). The regional response was swift: Iraq cut off air
access to Erbil, the capital of Iraqi Kurdistan, and Iran and Turkey
(both of which have fought separatist Kurdish groups) moved troops
to the region’s borders.
Ma
Catalan separatists also recently abandoned their historical re-

luctance to issue a formal declaration of independence, which
stemmed from a fear that doing so would be received poorly abroad.
That reticence made it surprising when the Catalan leader Carles
Puigdemont decided to declare independence after the Catalans voted
to leave Spain in a referendum in October 2017. Less surprising was

Tanisha M. Fazal
Puigdemont’s instantaneous reversal. In the same speech in which he

declared independence, he also suspended the declaration in order to
allow for negotiations with the Spanish government and foreign
countries and organizations. Despite this about-face, European offi-
cials criticized the declaration, and the Spanish government, which
deemed the referendum and the declaration illegal, sought to arrest
Puigdemont (who is currently in exile in Germany) on the charge of
rebellion. Despite the ICJ’s opinion, international aversion to unilateral
declarations of independence seems to be as strong as ever.
m
THE SECESSIONISTS’ DILEMMA
Unfortunately for independence movements that have followed the
hi
rules, playing nice has rarely worked. The political scientist Bridget
Coggins has shown that when it comes to gaining international
recognition, having a great-power patron matters more than being on
ha
one’s best behavior. Take Iraqi Kurdistan and Somaliland. Both areas
are well governed, especially compared with many of their neighbors.
Their governments collect taxes, provide health care, and even conduct
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international relations to the extent that they can. Their militaries have
mostly avoided targeting civilians, unlike nearby groups such as ISIS
and al Shabab. Yet both governments have received little international
recognition, which prevents them from providing many of the services
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one would expect of a modern state. They cannot issue travel visas, for
example, or offer their residents an internationally recognized postal
identity that would allow them to send and receive foreign mail.
od
Bad behavior seems more likely to win international recognition.

During South Sudan’s war for independence, opposing factions within
the Sudan People’s Liberation Army, the military wing of the southern
independence movement, attacked civilians who belonged to ethnic
so
groups they saw as aligned with the other side. The brutality of their
tactics, which included murder, rape, and torture, rivaled that of Sudan’s
repressive central government. The South Sudanese authorities have
also failed when it comes to the basics of governance: they have never
Ma
been able to feed South Sudan’s population or deliver health care

without international assistance. Yet none of these failures prevented
South Sudan’s international supporters, including the United States,
from championing the country’s independence.
South Sudan’s experience is important in part because secessionists
are becoming better observers of international politics and someday
Go Your Own Way
may decide that playing nice is not worth their while. Secessionists
are increasingly connecting with one another, often with the help of
NGOs. The Unrepresented Nations and Peoples Organization provides
a forum for groups, including many secessionists, that lack official
representation in major international organizations. It holds meetings
at which its members can share information and strategies. Geneva
Call, a humanitarian organization based in Switzerland, regularly reaches
out to armed nonstate groups to train them in international human-
itarian law and connects such groups with one another in order to
m
increase compliance with the laws of war. Although both NGOs
encourage separatists to abide by democratic and humanitarian norms,
the more frequent contact that these organizations facilitate also allows
hi
secessionists to discuss which strategies have worked and which have
not. They may very well conclude that good behavior has not been
rewarded and note that separatists who have behaved badly have
ha
avoided punishment.
Cheap travel has also helped create a global separatist community.
For example, in 2014, during the run-up to the Scottish indepen-
iT
dence referendum, Catalans traveled to Glasgow to wave their flag in
solidarity with the pro-independence parties. There is now even an
official soccer league for stateless nations (many of which include
secessionists), the Confederation of Independent Football Associations.
Al
(Abkhazia, a breakaway region of Georgia, won the 2016 CONIFA World

Football Cup.)
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GIVE THE PEOPLE (SOME OF) WHAT THEY WANT

There are no easy answers to the secessionists’ dilemma. That is in
part because secessionists have a complicated relationship with the
principle of sovereignty, which underlies modern international relations.
so
In one sense, they buy into the idea, as they would like to join the
club of states themselves. But in order to do so, secessionists must violate
the sovereignty of the country from which they secede. Existing
states frown at the practice and tend to support one another in rejecting
Ma
it; there is no right to secession in international law.

Yet if established states and international organizations continue to
deny international recognition to secessionist movements that appear
viable as states, separatists might abandon restraint and opt for violence.
At the same time, any steps to give would-be governments more recog-
nition would necessarily weaken the foundations of state sovereignty.

Tanisha M. Fazal
There are ways to strike a balance between these competing inter-

ests. Concerned states and international organizations could offer
some secessionists rewards that would enhance their autonomy but
fall short of membership in blue-chip
Secessionists are becoming organizations such the UN. These could
include invitations to join less well-
better observers of known organizations whose work is
international politics. nonetheless crucial for day-to-day in-
ternational politics. Membership in
m
the International Telecommunication
Union, for example, would give secessionist groups more control
over local communications infrastructure. Joining the IMF would open
hi
up access to loans. Having an internationally recognized central bank
would allow self-governing secessionists to develop their financial
markets. And membership in the World Bank’s Multilateral Invest-
ha
ment Guarantee Agency would offer protection to foreign investors.
Rewards along these lines would not be unprecedented. Kosovo is
a member of the IMF, the World Bank, and the International Olympic
iT
Committee. Taiwan lost its membership in the UN to mainland China
in 1971 but remains a member of the World Trade Organization, the
Asia-Pacific Economic Cooperation forum, and the Asian Development
Bank. And the Order of Malta, a religious military organization that
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is the world’s only sovereign entity without territory, maintains dele-

gations at the African Union and the International Committee of the
Red Cross and has a permanent observer mission at the UN.
od
Another option would be to further decentralize the process of recog-

nition. Several states already recognize Kosovo and Palestine. Erbil
hosts a number of consulates and offices representing international
organizations and NGOs—thus receiving a tacit form of recognition.
so
In each case, major powers will have to weigh the benefits of soft
recognition against political concerns. No matter how well Kurdistan
is governed, for example, independence will always be a long shot
given the fractured distribution of the Kurdish population among
Ma
four neighboring and often antagonistic countries. And the fact that
China and Russia, both permanent members of the UN Security
Council, face their own internal secessionist movements means that
they are unlikely to yield on the fundamental principles of state
sovereignty and territorial integrity. But offering some carrots could
help local populations and also create a boon for regional allies. Ethio-
Go Your Own Way
pia and the United Arab Emirates, for example, are investing over
$400 million in a port and military base in Somaliland, despite push-
back from the internationally recognized government of Somalia. If
Somaliland were a member of the World Bank’s Multilateral Invest-
ment Guarantee Agency, it would be able to attract even more foreign
funding, as investors would receive some external protection.
The strongest secessionist groups, such as the government of
Somaliland, the Iraqi Kurds, and the Catalans, appear to be the most
receptive to international pressure because they believe they are the
m
likeliest candidates for international recognition. Catalan secession-
ists, for example, refrained from violence even in the face of Madrid’s
crackdown after last year’s independence referendum. If, however,
hi
secessionists come to believe that good behavior will not be rewarded,
at least some of these groups will resort to violence, perhaps including
terrorism. ha
Continuing to frustrate secessionist groups will not keep them
from pursuing their ends. Members of a secessionist movement often
face a hard choice: remain among family and friends in an area that
iT
is relatively well governed but targeted by government forces or
move across the putative secessionist border and face possible discrim-
ination and isolation. Many who feel they are part of a movement will
decide to stay, even in the face of international disapproval. Isolating
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would-be governments and giving their citizens reasons to feel

aggrieved with the international system is a recipe for misery
everywhere. Finding better ways of dealing with secessionism is therefore
od
as much an issue for major countries and international organizations

as it is for secessionists themselves.∂
so
Ma

The Myth of the

Liberal Order
From Historical Accident to
Conventional Wisdom
m
Graham Allison
A hi
mong the debates that have swept the U.S. foreign policy
ha
community since the beginning of the Trump administration,
alarm about the fate of the liberal international rules-based
order has emerged as one of the few fixed points. From the inter-
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national relations scholar G. John Ikenberry’s claim that “for seven
decades the world has been dominated by a western liberal order” to
U.S. Vice President Joe Biden’s call in the final days of the Obama
administration to “act urgently to defend the liberal international
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order,” this banner waves atop most discussions of the United States’
role in the world.
About this order, the reigning consensus makes three core claims.
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First, that the liberal order has been the principal cause of the
so-called long peace among great powers for the past seven decades.
Second, that constructing this order has been the main driver of U.S.
engagement in the world over that period. And third, that U.S. Pres-
so
ident Donald Trump is the primary threat to the liberal order—and

thus to world peace. The political scientist Joseph Nye, for example,
has written, “The demonstrable success of the order in helping secure
and stabilize the world over the past seven decades has led to a strong
Ma
consensus that defending, deepening, and extending this system has

been and continues to be the central task of U.S. foreign policy.” Nye
has gone so far as to assert: “I am not worried by the rise of China. I
am more worried by the rise of Trump.”
GRAHAM ALLISON is Douglas Dillon Professor of Government at the Harvard
Kennedy School.
The Myth of the Liberal Order
Although all these propositions contain some truth, each is more

wrong than right. The “long peace” was the not the result of a liberal
order but the byproduct of the dangerous balance of power between
the Soviet Union and the United States during the four and a half
decades of the Cold War and then of a brief period of U.S. dominance.
U.S. engagement in the world has been driven not by the desire to
advance liberalism abroad or to build an international order but by
the need to do what was necessary to preserve liberal democracy at
home. And although Trump is undermining key elements of the cur-
m
rent order, he is far from the biggest threat to global stability.
These misconceptions about the liberal order’s causes and conse-
quences lead its advocates to call for the United States to strengthen
hi
the order by clinging to pillars from the past and rolling back
authoritarianism around the globe. Yet rather than seek to return to
an imagined past in which the United States molded the world in
ha
its image, Washington should limit its efforts to ensuring sufficient
order abroad to allow it to concentrate on reconstructing a viable liberal
democracy at home.
iT
CONCEPTUAL JELL-O
The ambiguity of each of the terms in the phrase “liberal international
rules-based order” creates a slipperiness that allows the concept to be
Al
applied to almost any situation. When, in 2017, members of the

World Economic Forum in Davos crowned Chinese President Xi
Jinping the leader of the liberal economic order—even though he
od
heads the most protectionist, mercantilist, and predatory major economy

in the world—they revealed that, at least in this context, the word
“liberal” has come unhinged.
What is more, “rules-based order” is redundant. Order is a condi-
so
tion created by rules and regularity. What proponents of the liberal

international rules-based order really mean is an order that embodies
good rules, ones that are equal or fair. The United States is said to
have designed an order that others willingly embrace and sustain.
Ma
Many forget, however, that even the UN Charter, which prohibits

nations from using military force against other nations or intervening
in their internal affairs, privileges the strong over the weak. Enforce-
ment of the charter’s prohibitions is the preserve of the UN Security
Council, on which each of the five great powers has a permanent
seat—and a veto. As the Indian strategist C. Raja Mohan has observed,

Graham Allison
superpowers are “exceptional”; that is, when they decide it suits their
purpose, they make exceptions for themselves. The fact that in the
first 17 years of this century, the self-proclaimed leader of the liberal
order invaded two countries, conducted air strikes and Special Forces
raids to kill hundreds of people it unilaterally deemed to be terrorists,
and subjected scores of others to “extraordinary rendition,” often
without any international legal authority (and sometimes without
even national legal authority), speaks for itself.
m
COLD WAR ORDER
The claim that the liberal order produced the last seven decades of
peace overlooks a major fact: the first four of those decades were
hi
defined not by a liberal order but by a cold war between two polar
opposites. As the historian who named this “long peace” has ex-
plained, the international system that prevented great-power war during
ha
that time was the unintended consequence of the struggle between
the Soviet Union and the United States. In John Lewis Gaddis’ words,
“Without anyone’s having designed it, and without any attempt what-
iT
ever to consider the requirements of justice, the nations of the postwar
era lucked into a system of international relations that, because it has
been based upon realities of power, has served the cause of order—if
not justice—better than one might have expected.”
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During the Cold War, both superpowers enlisted allies and clients
around the globe, creating what came to be known as a bipolar world.
Within each alliance or bloc, order was enforced by the superpower
od
(as Hungarians and Czechs discovered when they tried to defect in

1956 and 1968, respectively, and as the British and French learned
when they defied U.S. wishes in 1956, during the Suez crisis). Order
emerged from a balance of power, which allowed the two super-
so
powers to develop the constraints that preserved what U.S. President

John F. Kennedy called, in the aftermath of the Cuban missile crisis
of 1962, the “precarious status quo.”
What moved a country that had for almost two centuries assiduously
Ma
avoided entangling military alliances, refused to maintain a large

standing military during peacetime, left international economics to
others, and rejected the League of Nations to use its soldiers, diplo-
mats, and money to reshape half the world? In a word, fear. The
strategists revered by modern U.S. scholars as “the wise men” believed
that the Soviet Union posed a greater threat to the United States
m
hi
ha
Illiberal disorder: a U.S. military police officer in Karbala, Iraq, July 2003
iT
than Nazism had. As the diplomat George Kennan wrote in his leg-
endary “Long Telegram,” the Soviet Union was “a political force
committed fanatically to the belief that with US there can be no
Al
permanent modus vivendi.” Soviet Communists, Kennan wrote, believed

it was necessary that “our society be disrupted, our traditional way of
life be destroyed, the international authority of our state be broken,
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if Soviet power [was] to be secure.”

Before the nuclear age, such a threat would have required a hot
war as intense as the one the United States and its allies had just
fought against Nazi Germany. But after the Soviet Union tested its
so
first atomic bomb, in 1949, American statesmen began wrestling with

the thought that total war as they had known it was becoming obsolete.
In the greatest leap of strategic imagination in the history of U.S.
foreign policy, they developed a strategy for a form of combat never
Ma
FALEH KH EI BE R / REUT E RS
previously seen, the conduct of war by every means short of physical

conflict between the principal combatants.
To prevent a cold conflict from turning hot, they accepted—for
the time being—many otherwise unacceptable facts, such as the
Soviet domination of Eastern Europe. They modulated their compe-
tition with mutual constraints that included three noes: no use of

Graham Allison
nuclear weapons, no overt killing of each other’s soldiers, and no

military intervention in the other’s recognized sphere of influence.
American strategists incorporated Western Europe and Japan into
this war effort because they saw them as centers of economic and
strategic gravity. To this end, the United
Had there been no Soviet States launched the Marshall Plan to
rebuild Western Europe, founded the
threat, there would have International Monetary Fund and the
been no Marshall Plan World Bank, and negotiated the General
m
and no NATO. Agreement on Tariffs and Trade to pro-
mote global prosperity. And to ensure
that Western Europe and Japan remained
hi
in active cooperation with the United States, it established NATO and
the U.S.-Japanese alliance.
Each initiative served as a building block in an order designed first
ha
and foremost to defeat the Soviet adversary. Had there been no Soviet
threat, there would have been no Marshall Plan and no NATO. The
United States has never promoted liberalism abroad when it believed
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that doing so would pose a significant threat to its vital interests at
home. Nor has it ever refrained from using military force to protect
its interests when the use of force violated international rules.
Nonetheless, when the United States has had the opportunity to
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advance freedom for others—again, with the important caveat

that doing so would involve little risk to itself—it has acted. From
the founding of the republic, the nation has embraced radical,
od
universalistic ideals. In proclaiming that “all” people “are created

equal,” the Declaration of Independence did not mean just those
living in the 13 colonies.
It was no accident that in reconstructing its defeated adversaries
so
Germany and Japan and shoring up its allies in Western Europe, the
United States sought to build liberal democracies that would embrace
shared values as well as shared interests. The ideological campaign
against the Soviet Union hammered home fundamental, if exaggerated,
Ma
differences between “the free world” and “the evil empire.” Moreover,
American policymakers knew that in mobilizing and sustaining support
in Congress and among the public, appeals to values are as persuasive
as arguments about interests.
In his memoir, Present at the Creation, former U.S. Secretary of
State Dean Acheson, an architect of the postwar effort, explained the
thinking that motivated U.S. foreign policy. The prospect of Europe

falling under Soviet control through a series of “‘settlements by de-
fault’ to Soviet pressure” required the “creation of strength through-
out the free world” that would “show the Soviet leaders by successful
containment that they could not hope to expand their influence
throughout the world.” Persuading Congress and the American pub-
lic to support this undertaking, Acheson acknowledged, sometimes
required making the case “clearer than truth.”
m
UNIPOLAR ORDER
In the aftermath of the disintegration of the Soviet Union and Russian
President Boris Yeltsin’s campaign to “bury communism,” Americans
hi
were understandably caught up in a surge of triumphalism. The
adversary on which they had focused for over 40 years stood by as
the Berlin Wall came tumbling down and Germany reunified. It then
ha
joined with the United States in a unanimous UN Security Council
resolution authorizing the use of force to throw the Iraqi military out
of Kuwait. As the iron fist of Soviet oppression withdrew, free people
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in Eastern Europe embraced market economies and democracy. U.S.
President George H. W. Bush declared a “new world order.” Here-
after, under a banner of “engage and enlarge,” the United States
would welcome a world clamoring to join a growing liberal order.
Al
Writing about the power of ideas, the economist John Maynard

Keynes noted, “Madmen in authority, who hear voices in the air, are
distilling their frenzy from some academic scribbler of a few years
od
back.” In this case, American politicians were following a script offered

by the political scientist Francis Fukuyama in his best-selling 1992
book, The End of History and the Last Man. Fukuyama argued that
millennia of conflict among ideologies were over. From this point on,
so
all nations would embrace free-market economics to make their

citizens rich and democratic governments to make them free. “What
we may be witnessing,” he wrote, “is not just the end of the Cold
War, or the passing of a particular period of postwar history, but the
Ma
end of history as such: that is, the end point of mankind’s ideological
evolution and the universalization of Western liberal democracy as
the final form of human government.” In 1996, the New York Times
columnist Thomas Friedman went even further by proclaiming the
“Golden Arches Theory of Conflict Prevention”: “When a country
reaches a certain level of economic development, when it has a middle

Graham Allison
class big enough to support a McDonald’s, it becomes a McDonald’s

country, and people in McDonald’s countries don’t like to fight wars;
they like to wait in line for burgers.”
This vision led to an odd coupling of neoconservative crusaders on
the right and liberal interventionists on the left. Together, they
persuaded a succession of U.S. presidents to try to advance the spread
of capitalism and liberal democracy through the barrel of a gun. In
1999, Bill Clinton bombed Belgrade to force it to free Kosovo. In
2003, George W. Bush invaded Iraq to
m
topple its president, Saddam Hussein.
The end of the Cold War When his stated rationale for the inva-
produced a unipolar sion collapsed after U.S. forces were
hi
moment, not a unipolar era. unable to find weapons of mass destruc-
tion, Bush declared a new mission: “to
ha build a lasting democracy that is
peaceful and prosperous.” In the words of Condoleezza Rice, his
national security adviser at the time, “Iraq and Afghanistan are
vanguards of this effort to spread democracy and tolerance and
iT
freedom throughout the Greater Middle East.” And in 2011, Barack
Obama embraced the Arab Spring’s promise to bring democracy to
the nations of the Middle East and sought to advance it by bombing
Libya and deposing its brutal leader, Muammar al-Qaddafi. Few in
Al
Washington paused to note that in each case, the unipolar power was
using military force to impose liberalism on countries whose gov-
ernments could not strike back. Since the world had entered a new
od
chapter of history, lessons from the past about the likely consequences
of such behavior were ignored.
As is now clear, the end of the Cold War produced a unipolar
moment, not a unipolar era. Today, foreign policy elites have woken
so
up to the meteoric rise of an authoritarian China, which now rivals

or even surpasses the United States in many domains, and the
resurgence of an assertive, illiberal Russian nuclear superpower,
which is willing to use its military to change both borders in Europe
Ma
and the balance of power in the Middle East. More slowly and more
painfully, they are discovering that the United States’ share of global
power has shrunk. When measured by the yardstick of purchasing
power parity, the U.S. economy, which accounted for half of the
world’s GDP after World War II, had fallen to less than a quarter of
global GDP by the end of the Cold War and stands at just one-seventh
today. For a nation whose core strategy has been to overwhelm

challenges with resources, this decline calls into question the terms
of U.S. leadership.
This rude awakening to the return of history jumps out in the
Trump administration’s National Security Strategy and National
Defense Strategy, released at the end of last year and the beginning
of this year, respectively. The NDS notes that in the unipolar decades,
“the United States has enjoyed uncontested or dominant superiority
in every operating domain.” As a consequence, “we could generally
m
deploy our forces when we wanted, assemble them where we wanted,
and operate how we wanted.” But today, as the NSS observes, China
and Russia “are fielding military capabilities designed to deny Amer-
hi
ica access in times of crisis and to contest our ability to operate
freely.” Revisionist powers, it concludes, are “trying to change the
international order in their favor.”
ha
THE AMERICAN EXPERIMENT
During most of the nation’s 242 years, Americans have recognized
iT
the necessity to give priority to ensuring freedom at home over
advancing aspirations abroad. The Founding Fathers were acutely
aware that constructing a government in which free citizens would
govern themselves was an uncertain, hazardous undertaking. Among
Al
the hardest questions they confronted was how to create a government

powerful enough to ensure Americans’ rights at home and protect
them from enemies abroad without making it so powerful that it
od
would abuse its strength.

Their solution, as the presidential scholar Richard Neustadt wrote,
was not just a “separation of powers” among the executive, legisla-
tive, and judicial branches but “separated institutions sharing power.”
so
The Constitution was an “invitation to struggle.” And presidents,

members of Congress, judges, and even journalists have been strug-
gling ever since. The process was not meant to be pretty. As Supreme
Court Justice Louis Brandeis explained to those frustrated by the
Ma
delays, gridlock, and even idiocy these checks and balances some-
times produce, the founders’ purpose was “not to promote efficiency
but to preclude the exercise of arbitrary power.”
From this beginning, the American experiment in self-government
has always been a work in progress. It has lurched toward failure on
more than one occasion. When Abraham Lincoln asked “whether

Graham Allison
that nation, or any nation so conceived, . . . can long endure,” it was

not a rhetorical question. But repeatedly and almost miraculously, it
has demonstrated a capacity for renewal and reinvention. Throughout
this ordeal, the recurring imperative for American leaders has been
to show that liberalism can survive in at least one country.
For nearly two centuries, that meant warding off foreign interven-
tion and leaving others to their fates. Individual Americans may have
sympathized with French revolutionary cries of “Liberty, equality,
fraternity!”; American traders may have spanned the globe; and
m
American missionaries may have sought to win converts on all continents.
But in choosing when and where to spend its blood and treasure, the
U.S. government focused on the United States.
hi
Only in the aftermath of the Great Depression and World War II
did American strategists conclude that the United States’ survival
required greater entanglement abroad. Only when they perceived a
ha
Soviet attempt to create an empire that would pose an unacceptable
threat did they develop and sustain the alliances and institutions
that fought the Cold War. Throughout that effort, as NSC-68, a
iT
Truman administration national security policy paper that summar-
ized U.S. Cold War strategy, stated, the mission was “to preserve
the United States as a free nation with our fundamental institutions
and values intact.”
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SUFFICIENT UNTO THE DAY

Among the current, potentially mortal threats to the global order,
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Trump is one, but not the most important. His withdrawal from ini-
tiatives championed by earlier administrations aimed at constraining
greenhouse gas emissions and promoting trade has been unsettling,
and his misunderstanding of the strength that comes from unity with
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allies is troubling. Yet the rise of China, the resurgence of Russia, and
the decline of the United States’ share of global power each present
much larger challenges than Trump. Moreover, it is impossible to
duck the question: Is Trump more a symptom or a cause?
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While I was on a recent trip to Beijing, a high-level Chinese official

posed an uncomfortable question to me. Imagine, he said, that as
much of the American elite believes, Trump’s character and experience
make him unfit to serve as the leader of a great nation. Who would
be to blame for his being president? Trump, for his opportunism in
seizing victory, or the political system that allowed him to do so?
Why Carbon Pricing

Isn’t Working
Good Idea in Theory, Failing in Practice
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Jeffrey Ball
F
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or decades, as the reality of climate change has set in, policy-
makers have pushed for an elegant solution: carbon pricing, a
system that forces polluters to pay when they emit carbon
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dioxide and other greenhouse gases. Among the places that have
imposed or scheduled it are Canada, China, South Korea, the EU, and
about a dozen U.S. states. Much as a town charges people for every
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pound of trash tossed into its dump, these jurisdictions are charging
polluters for every ton of carbon coughed into the global atmosphere,
thus encouraging the dirty to go clean.
In theory, a price on carbon makes sense. It incentivizes a shift to
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low-carbon technologies and lets the market decide which ones will
generate the biggest environmental bang for the buck. Because the
system harnesses the market to help the planet, it has garnered
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endorsements across the political spectrum. Its adherents include

Greenpeace and ExxonMobil, leftist Democrats and conservative
Republicans, rich nations and poor nations, Silicon Valley and the
Rust Belt. Essentially every major multilateral institution endorses
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carbon pricing: the International Monetary Fund, the UN, and the
World Bank, to name a few. Christine Lagarde, the managing director
of the IMF, spoke for many in 2017 when she recommended a simple
approach to dealing with carbon dioxide: “Price it right, tax it smart,
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do it now.”
In practice, however, there’s a problem with the idea of slashing
carbon emissions by putting a price on them: it isn’t doing much about
climate change. More governments than ever are imposing prices on
JEFFREY BALL is Scholar in Residence at Stanford University’s Steyer-Taylor Center for
Energy Policy and Finance and a Lecturer at Stanford Law School.
Why Carbon Pricing Isn’t Working
carbon, even as U.S. President Donald Trump backpedals on efforts

to combat global warming, yet more carbon than ever is wafting
up into the air. Last year, the world’s energy-related greenhouse gas
output, which had been flat for three years, rose to an all-time high.
Absent effective new policies, the International Energy Agency has
projected, energy-related greenhouse gas emissions will continue rising
through at least 2040.
If governments proved willing to impose carbon prices that were
sufficiently high and affected a broad enough swath of the economy,
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those prices could make a real environmental difference. But political
concerns have kept governments from doing so, resulting in carbon
prices that are too low and too narrowly applied to meaningfully curb
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emissions. The existing carbon-pricing schemes tend to squeeze only
certain sectors of the economy, leaving others essentially free to
pollute. And even in those sectors in which carbon pricing might
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have a significant effect, policymakers have lacked the spine to impose
a high enough price. The result is that a policy prescription widely
billed as a panacea is acting as a narcotic. It’s giving politicians and
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the public the warm feeling that they’re fighting climate change even
as the problem continues to grow.
Sometime this century, global temperatures are all but certain to
cross what scientists warn is a perilous threshold: two degrees
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Celsius above their preindustrial levels. The two-degree line, a notion

introduced in 1975 by the economist William Nordhaus, is less an
environmental cliff than a political rallying cry. But beyond it, a range
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of problems will grow worse, including extreme weather events, coastal

flooding, and, in tropical and temperate regions, a reduction in the
yields of crucial crops such as wheat and rice. So the world needs
solutions that do more than merely chip away at the problem. What’s
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required are more targeted moves—ones that are politically difficult

but possible and environmentally effective. These include phasing
out coal as a fuel for electricity, except where coal is paired with
technology to capture its carbon emissions; keeping nuclear power
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plants up and running; slashing fossil fuel subsidies; raising gasoline

taxes; reducing the cost of renewable power; and toughening energy-
efficiency requirements.
Carbon pricing need not be abandoned. It can, at least at the margins
and in concert with these more direct carbon-cutting policies, help
channel money into cleaner energy options. But there is little evidence

Jeffrey Ball
for what has become an article of faith in the climate fight: that carbon
pricing should be society’s main tool to keep the planet cool.
PERMISSION TO POLLUTE
The roots of the notion of curbing pollution by pricing it go back
nearly a century. In 1920, the British economist Arthur Pigou
developed the concept of an economic “externality”: a benefit or cost
that is not priced into a given activity but can be, through what would
come to be called a Pigouvian tax. Nearly 50 years later, in the late
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1960s, two economists working separately—Thomas Crocker and
John Dales—proposed a different sort of pricing mechanism to limit
emissions: a combination of government-mandated caps and tradable
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emission allowances, a one-two punch that would come to be known
as “cap and trade.”
Under a cap-and-trade system, a government imposes a limit on
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the amount of carbon that the economy, or specified sectors of it,
may emit. It apportions responsibility for curbing emissions in line
with that cap to individual players, such as companies. At the same
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time, it creates a tradable currency called a carbon permit; each
permit allows its bearer to emit one metric ton of carbon dioxide. In
some cap-and-trade systems, the original permits are given away for
free, whereas in others, they are sold—creating revenue for governments.
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If a polluter’s expected emissions exceed the cap, it must either curb its
emissions—say, by installing more efficient manufacturing equipment
or shifting to cleaner energy sources—or buy more permits on the
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market. A polluter whose emissions are trending below its cap can
sell its excess permits on the market. In some systems, the market
alone sets the price; in others, the government imposes a floor and a
ceiling on the permit price.
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The basic idea behind a cap-and-trade system is twofold. First,

by forcing polluters to pay for the carbon they emit, the system incen-
tivizes them to invest in lower-carbon solutions, thus directing more
private capital—and, in turn, more research and innovation—toward
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clean technology. Second, by spreading the burden for cutting carbon

across an entire sector—or, ideally, across an entire economy—the
system helps each regulated player find the lowest-cost way to reduce
its carbon output.
The first major use of emission trading was in the United States,
to fight local air pollution. The federal government used it to phase
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hi
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Bad atmospherics: smokestacks in Jilin, China, February 2013
out leaded gasoline starting in the 1980s and to combat acid rain, an
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effect of power plant emissions, starting in the early 1990s. Both
campaigns succeeded, but limiting pollution from tailpipes and
smokestacks in a single city or region is infinitely easier than slashing
emissions of invisible carbon dioxide around the planet.
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Carbon pricing started in the 1990s in Scandinavia and expanded

in the following decade throughout Europe. More recently, it has taken
hold in California, the Northeast of the United States, much of Canada,
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and many other places. Today, according to the World Bank, 42 coun-
tries and 25 subnational jurisdictions—together representing about
half of global GDP and a quarter of global greenhouse gas emissions—
have imposed or are pursuing a price on carbon, through either a
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cap-and-trade system or a carbon tax.

But because many jurisdictions have imposed carbon prices just in
certain sectors of their economies, carbon pricing covers only about
15 percent of global emissions, the World Bank has calculated. That
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portion should grow to between 20 and 25 percent once China, the

STRINGER / REUTERS
world’s largest carbon emitter, implements a nationwide carbon-pricing

program, as it has promised to do. Yet even that share would fall far short
of the 50 percent of global emissions that a World Bank panel has said
needs to be covered by carbon pricing within a decade in order to meet
the global carbon-reduction goals set forth in the Paris climate accord.

Jeffrey Ball
Why does carbon pricing squeeze certain sectors more than others?
The answer is that it works well for industries that use a lot of fossil
energy, that have technologies available to them to reduce that energy
use, and that can’t easily relocate to places where energy is cheaper.
In other words, it works well in the power and heating sector, which
produces about 25 percent of global emissions. That industry is
dominated by localized utilities that
Carbon pricing covers only can curb their carbon emissions in a
number of ways: by switching to more
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about 15 percent of global efficient equipment for burning fossil
emissions. fuels, by shifting from higher-carbon
fossil fuels such as coal to lower-carbon
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ones such as natural gas, by increasing their use of renewable energy,
by capturing the carbon dioxide they produce and sequestering it, or
by incentivizing their customers to waste less electricity.
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Carbon pricing tends not to work well for curbing emissions from
buildings, which generate about six percent of global emissions.
Builders rarely occupy the buildings they build, which means they
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don’t pay the energy bills and thus have little incentive to foot the
capital cost of more efficient buildings. Nor does carbon pricing work
well to curb emissions from transportation, which account for about
14 percent of the global total. Studies show that drivers are usually
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unresponsive to modest increases in gasoline and diesel taxes. And

although they do respond to big hikes, taxes that high tend to be
political nonstarters. No wonder, then, that carbon-pricing regimes
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tend not to tamp down emissions from buildings and vehicles.

Just as the breadth of a carbon-pricing system matters, so does
the price it puts on each metric ton of carbon dioxide. In 2017, a
group of leading economists known as the High-Level Commission
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on Carbon Prices concluded that carbon prices would have to be

between $40 and $80 per metric ton by 2020, and between $50 and
$100 by 2030, to achieve the emission cuts called for in the Paris
climate accord. (Even in the unlikely event that the 195 nations
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that have agreed under the accord to voluntarily constrain their

carbon outputs met their promises, that wouldn’t stop global
temperatures from surpassing the two-degree threshold.) But of
the global emissions now subject to a carbon price, just one percent
are priced at or above the commission’s $40 floor of ecological
relevance. Three-quarters are priced below $10. The upshot: more
than two years after the ostensible watershed moment of Paris, a

mere 0.15 percent of global greenhouse gas emissions are subject to
a carbon price that economists deem high enough to make much of
an environmental difference.
Four countries have priced carbon at or above that $40 floor,
according to the World Bank: Finland, Liechtenstein, Sweden, and
Switzerland. These are rich nations with a deep-seated culture of
environmental protection. They also have, by global standards,
comparatively low-carbon electricity systems, thanks in large part to
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plentiful hydropower and, in the cases of Finland, Sweden, and
Switzerland, a great deal of nuclear power, too. All told, they couldn’t
be more different from the sorts of places—China, India, Africa, and
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the rest of the developing world—that most matter in the fight
against climate change.
The same is true of most of the U.S. states, including California,
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Maine, New York, and Vermont, that have chosen to price at least
some of their carbon either on their own or through a regional cap-
and-trade program for power plant emissions. Compared with other
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U.S. states, these tend to have ample solar power, wind power, or
hydropower, and they are less reliant on high-carbon coal.
It’s not just governments that are joining the carbon-pricing
stampede. More than 1,400 companies globally, including some of
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the world’s largest multinationals, are voluntarily integrating carbon

prices into their investment decisions, according to CDP, a nonprofit
that gathers environmental data from companies and governments.
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When, say, an oil company decides whether to drill in a certain field

or a bank decides whether to loan to a certain project, it first tries to
calculate what would happen to its profits if the government imposed
a particular carbon price. In theory, doing this should lead companies
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to favor less carbon-intensive investments.

Here, too, however, the reality is underwhelming. To decarbonize
the energy system enough to meet even the limited goals set in Paris,
annual global investment in low-carbon technologies would have to
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rise by about $700 billion by 2030, according to the World Bank. The
bank also estimates that an international carbon market could incen-
tivize about one-third of that—about $220 billion annually. That fig-
ure in itself is telling: even under the rosiest of circumstances, carbon
pricing will produce only a fraction of the emission cuts needed to
put the world onto a sufficiently low-carbon path.

Jeffrey Ball
THE PRICE IS WRONG

How a strategy so widely seen as so promising has failed to live up to
its ideal is a tale of good intentions thwarted by economic and
political realities. Europe’s experience is instructive. Launched in
2005, the EU’s emission-trading system was designed to cover elec-
tricity generators and energy-intensive industries such as cement
and steel manufacturing. But from the beginning, the companies the
system covered got plentiful free permits. That was a compromise EU
officials made to mollify opposition from industry. It meant that only
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those companies that experienced unexpected rises in emissions had
to pay much for the right to pollute.
When the 2008 global financial crisis struck, European economic
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activity declined, and so did emissions. Companies found themselves
with more free permits than they needed, and European carbon prices
tanked, from more than 25 euros per metric ton in 2008 to less than
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five euros in 2013. In recent years, the EU has toughened the system
somewhat; among other things, it has required more companies to
buy more of their permits, and it has broadened the system to cover
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airline flights within the EU. But the permits remain so cheap that the
program is not prodding emission reductions in line with the long-
term carbon-reduction goals that it has set. Between 2015 and 2016,
EU emissions fell by 0.7 percent across the bloc—enough to keep the
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EU on track to meet its goal of cutting emissions to 20 percent below

1990 levels by 2020, but not enough, officials have admitted, to meet
the EU’s more ambitious commitment of reducing them to 80 percent
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below 1990 levels by 2050. And in 2017, emissions covered by the EU’s
carbon-pricing system actually rose, for the first time in seven years,
the result of stronger than expected industrial output.
Last year, recognizing significant flaws in its carbon-pricing
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system, the EU agreed to redesign it. The new version, set to take effect
in 2021, seeks to tighten emission limits, reduce handouts of free
permits, and pull excess permits off the market if their price falls
below a certain level. But the reforms are probably too little, too late.
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The price of permits has risen markedly this year, from about eight
euros in January to about 14 euros in mid-May. Nevertheless, some
analysts have predicted that their price will average only about 18 euros
per metric ton in 2020, about half the price that the World Bank says
will be necessary to make a real dent in carbon emissions. In a
November 2017 report, the Mercator Research Institute on Global
Commons and Climate Change, a Berlin-based organization, cited

persistently low permit prices when it warned that the EU’s carbon-
pricing system is “in a crisis.”
California, the world’s sixth-largest economy, has had similar prob-
lems. Although it produces only about one percent of global green-
house gas emissions, it has long been a bellwether for environmental
policy, imposing regulations that are later adopted across the country
and around the world. The state launched its cap-and-trade system for
carbon in 2012, part of a broader plan to cut its emissions to 1990 levels
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by 2020—a goal less ambitious than the EU’s but more ambitious than
the U.S. federal government’s. California is all but sure to meet that
target. But even though emissions from power generation covered by
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its cap-and-trade system fell in 2016, those related to transportation—
the state’s biggest source of carbon emissions—rose that year. What’s
more, as an analysis released last year by Near Zero, a nonprofit research
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group in California, concluded, the decline in power plant emissions
owes little to carbon pricing. Instead, it is largely the product of an
increased use of hydropower (a result of higher rainfall) and a greater
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production of wind and solar power (a result of state renewable energy
mandates). As of mid-May, California’s carbon price was around $15
per metric ton. It was that low because factors other than the carbon
market led power producers to curb their emissions, leaving companies
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with extra permits that they had gotten from the state for free.
Like Europe, California is moving to add more bite to its carbon-
pricing system. It wants to force far deeper emission cuts, in line with
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the EU’s ambitions: to 40 percent below 1990 levels by 2030 and 80

percent below 1990 levels by 2050. A plan now under consideration
could increase the carbon price to between $81 and $150 per metric ton
in 2030. If such a higher price materializes, it should spur big cuts in
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emissions. But the state has yet to decide on the proposed plan, and the
fight is intense. In public hearings and through private lobbying, oil
producers and power companies are sparring with environmental groups.
In March, an official from Pacific Gas and Electric, California’s largest
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utility, told state officials that a 2030 carbon price of $150, a level that
some environmentalists call sensible, would be “very high” and would
not “strike that appropriate balance” between planet and pocketbook.
California’s revised system would reflect a new carbon-pricing
approach that is drawing bipartisan support and interest from policy-
makers. Called a “revenue-neutral” carbon price or a “carbon dividend,”

Jeffrey Ball
this scheme returns to consumers some or all of the money raised by

the selling of permits rather than putting that revenue into govern-
ment coffers. The allure of this approach is that although it still forces
big emitters to pay, goading them to pollute less, it returns revenue
to consumers (for instance, as tax rebates), compensating them for
the higher prices they have to pay for energy and other goods as a
result of the price on carbon.
In theory, returning to consumers money raised from a carbon
price should be popular, giving policymakers political cover to impose
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a carbon price high enough to make a difference on climate change.
But in reality, even this idea faces opposition from interests that would
be hit hardest by the carbon price. British Columbia implemented a
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revenue-neutral carbon price in 2008 and initially saw its emissions
drop. But in 2012, amid political blowback, the province froze its
carbon price, at 30 Canadian dollars per metric ton. Unsurprisingly,
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emissions started rising again. This spring, British Columbia raised
the carbon price to 35 Canadian dollars per metric ton—lower than a
government advisory panel suggested was necessary.
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THE CHINESE DREAM
China, the world’s factory floor and most populous country, is the
most important piece in the climate change puzzle. Unless it slashes
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its carbon emissions, little that the rest of the world does in the cli-
mate fight will matter much. It is the world’s largest producer of both
coal-fired power and renewable energy. And with its powerful central
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government, it would seem uniquely able to execute a carbon-pricing

revolution. In 2013 and 2014, after studying the European and Cali-
fornian examples, China launched carbon-pricing tests in five cities
and two provinces. And in 2015, Chinese President Xi Jinping
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announced with great fanfare that China would soon take carbon
pricing nationwide. Trading is expected to start in 2019 or 2020.
As has been the case elsewhere, however, carbon pricing is unlikely
to reduce carbon emissions dramatically in China. Those emissions
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are expected to peak between 2025 and 2030. That might seem like
good news, but it’s not good enough. The start of a decline in carbon
output from the world’s biggest emitter won’t fix climate change;
what’s necessary is for total global emissions to plummet. Moreover,
assuming that China’s emissions do in fact peak, which seems likely,
they will do so in response to broad changes in the economy that
have next to nothing to do with a price on carbon. Those changes—in

particular, improvements in the energy efficiency of manufacturing
and reductions in emissions from coal-fired power plants—will be
driven primarily by economic and public health priorities. Indeed, in
the pilot programs that China has rolled out in various localities, carbon
in mid-May was trading at between about $2 and $9 per metric ton, too
low to meaningfully change the behavior of companies or citizens.
None of this is terribly surprising, given that the plans for China’s
nationwide carbon-pricing system have been steadily watered down.
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The scheme was originally designed to cover between 6,000 and
7,000 companies across multiple industries. Instead, it will, at least
initially, cover 1,700 power producers. China may soften its carbon-
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pricing system even further. The government has yet to decide how
many permits it will provide to companies, and it could choose to
hand them out for free. Already, companies that successfully lobbied
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to receive free additional emission permits under the pilot programs
are pushing for the right to use those permits under the nationwide
system. This has the potential to create an oversupply of permits in
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China similar to the ones that have contributed to the low prices in
the EU and California. As one carbon-pricing expert involved in the
design of China’s system told me, “We are repeating the same mis-
takes that the EU market and California have done.”
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BLUNT TOOLS
For all its shortcomings, carbon pricing has done two important
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things. It has accustomed powerful economic players—governments,

companies, and, to a lesser extent, consumers—to the notion that
they will have to integrate decarbonization into their spending deci-
sions. In the process, it has prodded those actors to put more effort
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into discovering both the technologies and the business models that
would most cost-effectively cut carbon emissions to an environmentally
meaningful extent. But carbon pricing is failing to produce emission
cuts that are significant—and the time for tinkering is running out.
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Because carbon pricing is giving humanity the illusion that it is deal-

ing responsibly with climate change, it is reducing the pressure to
adopt other carbon-cutting measures, ones that would hit certain sec-
tors harder and that would produce faster reductions.
Seriously addressing climate change in the immediate future demands
not a theoretically effective strategy but an actually effective one.

Jeffrey Ball
That’s because with each passing year, more carbon accumulates in the
atmosphere, and more global warming becomes inevitable. Slashing
emissions in the near term is crucial. But in 2017, global energy-
related carbon emissions rose for the first time in four years. The 1.4
percent rise was due to an increase in coal use, particularly in Asia,
and to a slowdown in worldwide energy-efficiency improvements,
the result of cheap fossil fuel.
Since carbon pricing on its own is not reversing that trend, what
else is needed? Policymakers should start with electricity, arguably
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the easiest sector to clean up, owing to the ready availability of natural
gas and increasingly cost-effective renewable energy sources. Where
feasible, coal, the most carbon-intensive
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fossil fuel, should be phased out by
Maybe one day carbon fiat unless technology to mitigate its
pricing will be the best tool emissions—technology known as
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for fighting climate change. “carbon capture and storage,” or CCS—
But the planet doesn’t have can be scaled up. But make no mistake:
coal is all but certain to remain a major
time to wait.
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electricity source for decades, partic-
ularly in the developing world. China
and India sit on massive supplies of it, and even as both countries
rapidly scale up renewable power from a tiny base, they will be hard-
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pressed to get rid of coal anytime soon. In the meantime, then, the
imperative is to resolve the technological, legal, and political imped-
iments to CCS.
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Finding an economically and politically viable way to capture and

store carbon from fossil fuel consumption is crucial not just for
electricity production but also for industrial processes such as cement
and steel production. These activities emit huge quantities of carbon
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dioxide, and for now, there is no viable way to power them other than
by burning fossil fuels. But efforts to develop CCS technology have
stalled as carbon pricing has floundered, because absent a strong
government push to reduce carbon emissions, companies have no
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reason to spend money on it. Experts estimate that a carbon price

well above $100 per metric ton, and perhaps much higher, would be
needed to create enough of an incentive for firms to invest in large-
scale CCS. Given that a carbon price that high anytime soon seems to
be a pipe dream, governments will have to provide more direct
financial support for the technology.
Meanwhile, humanity cannot afford to reject nuclear power, a reliable,

carbon-free energy source. The safety and proliferation concerns about
nuclear power are real, but they can be mitigated through a combination
of newer nuclear technologies and smarter regulations. Given public
opposition to nuclear power, and given the declining cost of renewable
energy, nuclear power’s share of global electricity generation is expected
to remain relatively flat. Even so, shutting down nuclear plants that have
years of life left in them, as Germany, Japan, California, and other U.S.
states are doing, represents a step backward for the climate.
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Policymakers will also have to figure out how to unlock the potential
of renewable energy. The cost of wind and solar power is plummeting,
but it is still too high, and these sources remain a small slice of the
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total energy supply. To slash costs further, policymakers should, for
example, resist the temptation to impose protectionist policies, such
as tariffs on imported renewable energy equipment, which only make
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renewable energy more expensive.
Compared with the electricity sector, transportation is harder to
decarbonize. True, electric cars will likely proliferate as their cost
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continues to fall, and if powered by clean electricity, they could become
a major climate-fighting tool. But batteries remain too expensive, and it
will likely take decades to replace the fleet of vehicles already on the
road. So oil will, according to most projections, continue to power
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most transportation until the middle of the century and perhaps well
beyond it. For the foreseeable future, then, the key is to minimize the
wasteful consumption of oil.
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One important way to do that is to raise the price of gasoline and

diesel fuel. In developed countries, particularly in the United States,
that means raising the price at the pump through taxes. In develop-
ing countries, that means rolling back motor fuel subsidies. That is
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politically difficult. But governments from Mexico to Saudi Arabia

are showing it’s possible.
Then there are improvements in energy efficiency that can be
made to buildings, appliances, vehicles, and aircraft. The payoff of
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such improvements remains an open question; there is evidence that

as a given thing’s energy efficiency improves, people tend to use that
thing more, negating any reduction in carbon emitted. That said,
efficiency improvements are an important factor in decreasing carbon
emissions. Rules forcing greater energy efficiency—particularly in
buildings and cars—work.

Jeffrey Ball
MOVING ON
Humanity has solved a host of important environmental problems—
once it decided those problems were crises. Crushing smog in postwar
Los Angeles helped spur the 1970 Clean Air Act. When the Cuyahoga
River in Cleveland, then strewn with industrial waste, burst into
flames in 1969, another in a line of river fires, that hastened the Clean
Water Act of 1972. Public worry in the 1980s about the growing ozone
hole led to the 1987 Montreal Protocol, which started the phaseout
of ozone-depleting chemicals. But climate change, this century’s grand
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challenge, is different from these past problems. It is not just more
serious; it is also massively harder to solve. Physics, politics, and
economics all conspire to make climate change what social scientists
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call a “wicked problem”—one in which every supposed solution
creates another complication.
That does not, however, necessarily mean that climate change cannot
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be tamed. Although the planet is all but certain to cross the two-
degree threshold, minimizing greater warming is both possible and
pressing. Phasing out high-carbon coal, speeding the development of
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CCS, maintaining nuclear energy, slashing renewable energy costs,
and raising fuel prices would make a difference. So would ratcheting
up efforts unrelated to energy, such as combating deforestation. To
be sure, such a grab bag of policies lacks the intellectual tidiness of a
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carbon price. Some of the policies will be hard to achieve; others will
fail. And all would be helped by an effective carbon price. But pursuing
these measures directly offers a politically realistic path to significant
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environmental benefit.
Maybe one day carbon pricing will be the best tool for fighting
climate change. But the planet doesn’t have time to wait. To the extent
that the carbon-pricing experiment lets policymakers and the public
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delude themselves that they are meaningfully addressing global warm-

ing, it’s not just ineffectual; it’s counterproductive. The time has come
to acknowledge that this elegant solution isn’t solving the problem
it was designed to solve. In the toughest environmental fight the world
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has ever faced, a good idea that isn’t working isn’t good enough.∂
How the Safety Net Can

Survive Trump
Social Democracy’s Staying Power
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Lane Kenworthy
D
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uring his campaign for the U.S. presidency, Donald Trump
promised to protect the foundations of the United States’
public insurance system. “I was the first & only potential GOP
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candidate to state there will be no cuts to Social Security, Medicare &
Medicaid,” he tweeted in May 2015. “The Republicans who want to
cut SS & Medicaid are wrong,” he added two months later.
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Trump’s commitments to the safety net set him apart from his
Republican competitors during the campaign. But since taking office,
the president has fallen in line with Republican leaders in Congress
who seek to roll back the social programs he pledged to preserve. Last
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year, with Trump’s support, Republican lawmakers tried and narrowly

failed to slash Medicaid, which helps pay for health services for
low-income Americans, as well as government subsidies for private
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purchases of health insurance. Speaker of the House Paul Ryan of

Wisconsin and Senator Orrin Hatch of Utah, the chair of the Senate
Finance Committee, have said they will seek to scale back Medicare
this year. The partial privatization of Social Security could be on the
so
table, and food stamps, disability benefits, and housing assistance

are also likely targets.
Such proposals seem to threaten the progress the United States has
made toward social democratic capitalism—a system that features
Ma
modestly regulated markets, a big welfare state, and public services

meant to boost employment, such as childcare and job-placement
assistance. The evidence suggests that social democratic policies improve
LANE KENWORTHY is Professor of Sociology and Yankelovich Chair in Social Thought at
the University of California, San Diego, and the author of the forthcoming book Social
Democratic Capitalism.

Lane Kenworthy
economic security and well-being without sacrificing liberty, economic

growth, health, or happiness. Contrary to conventional wisdom, the
country has gradually come to embrace this model over the last
century. The federal government has built public insurance programs
that help Americans manage old age, unemployment, illnesses, and
more. Since 2000, California, Massachusetts, New York, Oregon, and
Washington State, which are home to around one-quarter of all Amer-
icans, have gone further, introducing such policies as paid parental
and sick leave and a $15 minimum wage. Although the United States
m
has not reached the level of social democratic protections that exists in
countries such as Denmark and Sweden, it has been moving steadily,
if slowly, in that direction.
hi
Republican control of the presidency and Congress has put that
march on hold. But the United States’ social democratic future is not
over. The structure of the U.S. government and popular support for
ha
public services will be formidable obstacles to the small-government
vision of the current Republican majority, as well as to the vision of
future ones. The United States has weathered a number of challenges
iT
in its progress toward social democracy, and the trials of the present
era will likely prove a brief detour rather than a dead end.
THE LAISSEZ-FAIRE FANTASY

Al
Those who support shrinking the safety net tend to believe that cut-
ting taxes and government spending would produce faster economic
growth. Even if much of that growth accrued to the rich, over the long
od
run it would also boost the living standards of the poor. As the state
stepped back, private firms would provide services such as health care
and education via markets, with competition driving quality up
and prices down. People in need could turn to their families and
so
communities, and government transfers to the desperate would fill

the remaining gaps.
That may sound plausible in theory, but it has proved less attractive
in practice. At a certain point, high taxes and public spending can
Ma
indeed do economic harm by weakening incentives for investment

and work. But the United States is still far from that point: the record
of the affluent democracies suggests that such governments can tax
and spend up to 55 percent of their GDPs before holding back economic
growth. That is around 20 percentage points higher than the share of
GDP the United States spends today. And even if the United States
How the Safety Net Can Survive Trump
were to achieve faster economic growth, that might not do much to

boost the incomes of ordinary Americans, whose real wages have not
risen much since the late 1970s.
Another problem with the laissez-faire fantasy concerns the abilities
of families and communities to care for children, tend to the elderly,
and protect the disadvantaged—roles now played partly by the state.
Civic groups such as churches and charities help those they can, but
some people inevitably fall through the
cracks. And not all parents are blessed
The United States’
m
with an abundance of money, time, and
skills. To make matters worse, family and social democratic
civic ties have frayed in recent decades. future is not dead.
hi
Nearly nine in ten Americans born be-
tween 1925 and 1934 were married by
the time they were between the ages of 35 and 44, but only about six
ha
in ten born between 1965 and 1974 were. Since the 1960s, the political
scientist Robert Putnam has found, Americans’ participation in vol-
untary associations has fallen, too. Lest one contend that the rise of
iT
the nanny state is to blame, remember that family ties and civic organ-
izations were strongest in the 1940s, 1950s, and 1960s, when the U.S.
government was expanding the fastest.
In the conservative vision of limited government, the final backstops
Al
to poverty are targeted public insurance programs. In principle, these

can help the neediest at little cost to taxpayers. Compared with those
of its rich peers, the United States’ welfare programs are already small
od
and targeted. Yet under the current system, the poorest 20 percent of
Americans have lower incomes and living standards than their counter-
parts in many other affluent democracies, from Denmark and Sweden
to Canada and France. Meanwhile, tens of millions of low-income
so
Americans are not poor enough to qualify for Medicaid or old enough
to access Medicare, yet they cannot afford to buy private health
insurance, even with government subsidies.
For some, the individual liberty that limited government provides
Ma
makes the accompanying shortcomings irrelevant. But there is evidence

that social democratic states are at least as good as countries with
smaller governments at safeguarding their citizens’ freedoms. On an
index of personal freedom compiled by the Cato Institute each year
since 2008, Denmark, Finland, Norway, and Sweden have scored
higher than the United States. And according to annual surveys

Lane Kenworthy
conducted by the Gallup World Poll since 2005, citizens in the Nordic
countries are more likely than Americans to say that they are satisfied
with their freedom to do what they want with their lives. That is
partly because these countries’ more robust safety nets broaden
individual choice by ensuring that if people start new businesses,
move in search of better jobs, or take time off for training, they won’t
become destitute if things don’t pan out. And when it comes to
ensuring affordable education, access to health care, decent living
standards in old age, and much more, public services tend to be more
m
reliable than the private alternatives available to many people—
especially the least advantaged.
When polled, more than half of Americans nevertheless tend to
hi
say they prefer “a smaller government providing fewer services”
over “a bigger government providing more services,” according to
the Pew Research Center. This dislike of the idea of big government
ha
is another common rationale for shrinking the state. But Americans
favor a lot of the things that the government does in practice,
including most of its public insurance programs. Big majorities
iT
consistently say that the government spends either the right amount
or too little on Social Security, assistance to the poor, education,
and health care. The health-care reform proposed by Republicans in
2017, which would have caused around 25 million Americans to lose
Al
health insurance, was the least popular major legislative proposal

since 1990, according to analyses of public opinion data by the
political scientist Christopher Warshaw. And a poll conducted by
od
The Washington Post and the Kaiser Family Foundation earlier this
year found that more than half of Americans support “having a
national health plan—or a single-payer plan—in which all Americans
would get their insurance from a single government plan.” Among
so
the country’s existing social programs, there is only one—welfare—

that Americans seldom support.
As for the axiom that Americans hate taxes—which are essential
for a sustainable safety net—there was some truth to it in the late
Ma
1970s and early 1980s, when revolts against local property taxes were
spreading across the country and Ronald Reagan was elected president
on a tax-cutting agenda. Yet that moment has long since passed.
Public opinion surveys now tend to find widespread support for
higher taxes, particularly on rich Americans. The 2017 Republican tax
cut was the second least popular major legislative proposal since 1990,
m
hi
ha
Time for a raise: rallying in support of a $15 minimum wage, Chicago, April 2016
iT
according to Warshaw. And state and local referendums proposing
tax hikes have grown steadily more popular since the 1980s. They now
are as likely to pass as those proposing cuts, the political scientist
Al
Vanessa Williamson has found.

Nor does Republican control of the presidency and Congress
suggest that Americans want a smaller state. For one thing, the size of
od
the government is just one of many issues that shape voters’ choices.
For another, the tax cuts and spending increases of Presidents Reagan,
George W. Bush, and Trump have laid waste to the Republicans’
reputation for fiscal prudence, so voting for the Republican Party
so
doesn’t necessarily indicate a preference for smaller government. More

important, U.S. electoral rules do a poor job of translating votes into
representation. California’s two senators, for instance, represent the
same number of Americans as the 44 senators of the country’s 22
Ma
least populous states. Since 2010, the gerrymandering of congressional

JIM YOUNG / REUTERS
districts has meant that Republicans have needed to win just 48 percent
of the vote in order to hold a majority of the seats in the House of
Representatives, according to calculations by the political scientist
Alan Abramowitz. And although Republicans have done well in local
and state elections in recent years, that should be no surprise: as the

Lane Kenworthy
political scientist James Stimson has found, voters tend to shift rightward
during Democratic presidencies, such as Barack Obama’s, and leftward
during Republican ones.
REPUBLICANS AND THE WELFARE STATE

If American conservatives were to drop their obsession with small
government, they could do a number of things to improve social policy
that would be consistent with their other beliefs and commitments.
Republicans could reduce regulatory obstacles to employment, such
m
as some occupational licensing requirements; increase choice and
competition in the delivery of services such as education and health
care; and make the government more effective by pushing lawmakers
hi
to consistently use evidence to design policy. But for at least the
coming year, Republican officials seem determined to continue to try
to shrink the welfare state.
ha
They face three main obstacles in getting there. The first is time.
The Republican Party could lose its majority in the House or the
Senate in November’s midterm elections, closing the door on
iT
attempts to shrink the safety net through new legislation. (Republicans
might pass a major reform before then, but that would be unusual in
an election year.) The second obstacle involves the veto points in the
U.S. political system. Republicans hold 51 of the Senate’s 100 seats,
Al
but under that body’s filibuster rules, many proposed changes,

including most reforms of Social Security, require 60 votes to pass.
The third roadblock is public opinion. During Reagan’s presidency,
od
the political scientist Paul Pierson has found, the popularity of

welfare state programs discouraged lawmakers from pursuing the
extensive cuts that some conservatives advocated. Something similar
happened when the George W. Bush administration proposed a
so
partial privatization of Social Security in 2005 and during congressional

Republicans’ attempt at health-care cuts in 2017. When social programs
have been around for a while and seem to be improving people’s lives,
they tend to become popular, making it harder to weaken them.
Ma
The Trump administration has instituted some cutbacks on its own,

without congressional action, and it may put in place more. It has
weakened and delayed regulations protecting workers’ safety, ensuring
access to fair pay, and securing the right to organize, and it has issued
executive orders allowing states to require able-bodied low-income
recipients of Medicaid, food stamps, and housing assistance to have a
paying job in order to qualify for benefits. Although these changes

have real effects on people’s lives, they don’t amount to a frontal
assault on the U.S. welfare state, and they can be quickly reversed by
a future president.
In the longer term, public support for government services will
probably deepen. Many of the groups that back such programs—
including professionals, minorities, immigrants, millennials, and
single, secular, and highly educated people—are growing as a share of
the U.S. population. The opposite is
m
true of groups that are more skeptical
of the safety net, such as rural residents,
The real threat to the
working-class whites, the religious, United States’ social
hi
and the rich but not highly educated. democratic future is a
And not everyone in the latter set sustained economic
opposes a bigger role for the state:
ha
Trump’s pitch for a government that slowdown.
would secure jobs and maintain public
insurance programs helped him win over many working-class whites
iT
in 2016. (That plenty of those voters still support Trump despite his
abandonment of his earlier commitments to the welfare state may be
explained by the president’s positions on cultural issues and his
rhetorical commitment to job creation.)
Al
To be sure, the 2017 tax cuts will reduce annual federal revenues by
around one percent of GDP, and that could pressure lawmakers to
shrink government programs and limit new spending. But recent
od
history suggests that tax cuts tend to be followed by tax increases.

Tax rates fell under Reagan, rose under George H. W. Bush and Bill
Clinton, fell under George W. Bush, and rose again under Obama.
By 2016, tax revenues equaled 26 percent of the country’s GDP, just as
so
they did the year before Reagan took office.

If Trump ends his presidency as unpopular as he is today,
reversing his administration’s tax reductions may prove relatively
easy. Lawmakers could raise the corporate tax rate from 21 percent
Ma
to 25 percent—the rate that the Republican presidential candidate

Mitt Romney proposed in 2012—and undo Trump’s tax breaks for
rich individuals and business owners. Even without increasing rates,
lawmakers could collect more unpaid taxes, crack down on tax havens,
and raise the cap on income subject to the Social Security tax, among
other measures. As for state governments, they will likely adjust to

Lane Kenworthy
the blow of last year’s reform, which damaged their ability to collect
revenue by limiting the amount of state and local taxes their residents
can deduct for federal income tax purposes, by, for instance, shifting
from income to payroll taxes.
A SOCIAL DEMOCRATIC FUTURE?

The real threat to the United States’ social democratic future is a sustained
economic slowdown. Over the last century, the country’s GDP per
capita has grown at an average rate of 1.9 percent per year. But between
m
2000 and 2007, the rate dipped to 1.5 percent, and from 2007 through
2017, it fell further, to an average of just 0.6 percent. The Great
Recession is the chief culprit: its arrival in 2008 cut short an economic
hi
expansion, and its depth dug a big hole from which the U.S. economy
has yet to emerge. Yet some analysts believe that the United States
has entered not a moment but an era of slow growth. One version of
ha
this story points to weak demand, perhaps due to the rising share
of income that goes to the rich, who tend to spend a smaller fraction
of their earnings than do middle- and lower-income households.
iT
Others contend that the problem is a decline in competition in
important sectors, such as the technology industry, or a slowdown in
the formation of new businesses. The most pessimistic assessment
comes from economists such as Tyler Cowen and Robert Gordon, who
Al
argue that inventions such as electricity, railroads, and the assembly

line boosted productivity and growth in earlier eras to a degree that
more recent innovations cannot match.
od
The slowdown is worrisome because economic growth facilitates

the expansion of public social programs. For one thing, it makes
them more affordable; as the economy grows, so do tax revenues.
Economic growth also increases public support for the welfare
so
state. Most people are risk averse and altruistic, so as they get
richer, they tend to want more protections for themselves and more
fairness in their society. If the United States suffers years of slow
growth, Americans’ embrace of generous public insurance programs
Ma
may wane. One worrisome sign: the slow recovery from the 2008–9
economic crisis has fueled support for right-wing populists across
the rich democracies. Although many populists support the safety
net itself, nativism could undermine the public’s commitment to
the kind of fairness and inclusivity on which social democratic
policies depend.
The economic policies of the Trump administration and congressional

Republicans are as likely to hurt growth as to help it. The 2017 tax
cuts and the additional government spending authorized by the 2018
budget agreement may boost economic growth by about one percentage
point this year, because the economy is still operating at less than full
capacity. But they won’t spur growth in the longer term, if the historical
record is any guide. Most economists believe that Trump’s efforts to
reduce imports and immigration will reduce growth. And there is a
risk that Washington will overshoot in scaling back financial regulations,
m
setting the stage for a replay of the 2008 financial crisis.
Still, growth could return to a higher rate in the coming decades.
There have been previous periods, such as the 1930s, when the economy
hi
slowed down before returning to the long-term trend. And the
productivity benefits of new technologies such as the Internet may
take years to appear; after all, the period of strongest productivity
ha
growth stemming from electricity and other nineteenth-century
innovations occurred decades later, between the mid-1940s and the
mid-1970s. Moreover, economists have an array of proposals for
iT
remedying the slowdown, from improving the educational system to
toughening antitrust efforts to reducing income inequality.
Even if the slowdown in the rate of economic growth persists, the
United States could still become far richer in the coming decades.
Al
Over the last 70 years, per capita GDP in the United States, adjusted
for inflation, has increased by about $40,000. The country is now
wealthy enough that securing the same increase over the next 70 years
od
would require a yearly growth rate of only 0.8 percent.

Then again, it may be people’s perceptions of their living standards,
not GDP growth rates, that shape their feelings about public insurance
programs. Since the late 1970s, the real incomes of American households
so
in the middle and below have grown slowly. There have been many
causes—technological advances, globalization, firms’ privileging share-
holders over employees, the decline of unions, and more—and that
will make it difficult to reverse the trend. Increasing the federal
Ma
minimum wage would help, as would pressuring employers to pay

workers more by keeping the unemployment rate low. Another
important step is to boost the supply of affordable housing in big
cities, which are the most productive, environmentally friendly, and
in many respects attractive places for ordinary Americans to live. It
will also help if Americans continue to enjoy advances in health care,

Lane Kenworthy
consumer products, entertainment, and access to information, which

cost-of-living measures don’t fully capture. Taken together, such
improvements could preserve Americans’ support for the safety net.
At some point, perhaps as soon as 2021, there will again be an
opportunity to move federal policy in a social democratic direction.
When that happens, policymakers should push for public invest-
ments in early education, universal health insurance coverage, paid
sick and parental leave, upgraded unemployment insurance, and
more. There is evidence that such programs improve lives. Less
m
clear is which measures to prioritize—and how to implement them.
Should the United States move to universal health insurance
coverage by expanding Medicare, Medicaid, or both? Should public
hi
preschool begin at age four or earlier? Should paid parental leave
last six months or 12 months? Questions such as these, rather than
whether or not to shrink the government, should be at the center
ha
of policymakers’ debates.∂
iT
Al
od
so
Ma
ESSAYS
Xi has matched the dramatic
growth of his personal power
with an equally dramatic
intensification of the Chinese
Communist Party’s power in
m
society and the economy.
—Elizabeth Economy
hi
ha
iT
Al
od
so
China’s New Revolution Opioids of the Masses

Elizabeth C. Economy 60 Keith Humphreys, Jonathan P. Caulkins,
Ma
and Vanda Felbab-Brown 118

Fresh Prince
F. Gregory Gause III 75 Globalization Is Not in Retreat
Susan Lund and Laura Tyson 130
DAMI R SAGO LJ / REUT E RS
The Right Way to Coerce North Korea

Victor Cha and Katrin Fraser Katz 87 Where Myanmar Went Wrong
Zoltan Barany 141
Perception and Misperception on
the Korean Peninsula
Robert Jervis and Mira Rapp-Hooper 103
China’s New Revolution

The Reign of Xi Jinping
Elizabeth C. Economy
m
S
tanding onstage in the auditorium of Beijing’s Great Hall of the
People, against a backdrop of a stylized hammer and sickle,
hi
Xi Jinping sounded a triumphant note. It was October 2017, and
the Chinese leader was addressing the 19th Party Congress, the latest
of the gatherings of Chinese Communist Party elites held every five
ha
years. In his three-and-a-half-hour speech, Xi, who was appointed the
CCP’s general secretary in 2012, declared his first term a “truly remarkable
five years in the course of the development of the party and the country,”
iT
a time in which China had “stood up, grown rich, and become strong.”
He acknowledged that the party and the country still confronted chal-
lenges, such as official corruption, inequality in living standards, and
what he called “erroneous viewpoints.” But overall, he insisted, China
Al
was headed in the right direction—so much so, in fact, that he recom-
mended that other countries draw on “Chinese wisdom” and follow “a
Chinese approach to solving the problems facing mankind.” Not since
od
Mao Zedong had a Chinese leader so directly suggested that others

should emulate his country’s model.
Xi’s confidence is not without grounds. In the past five years, the
Chinese leadership has made notable progress on a number of its pri-
so
orities. Its much-heralded anticorruption campaign has accelerated, with

the number of officials disciplined for graft increasing from some 150,000
in 2012 to more than 400,000 in 2016. Air quality in many of China’s
famously smoggy cities has improved measurably. In the South China
Ma
Sea, Beijing has successfully advanced its sovereignty claims by milita-

rizing existing islands and creating new ones outright, and it has steadily
eroded the autonomy of Hong Kong through a series of political and legal
ELIZABETH C. ECONOMY is C. V. Starr Senior Fellow and Director for Asia Studies at the
Council on Foreign Relations and the author of The Third Revolution: Xi Jinping and the New
Chinese State (Oxford University Press, 2018), from which this essay is adapted.
m
hi
ha
Party of one: Xi at the 19th Party Congress, Beijing, October 2017
maneuvers. Across Asia, it has enhanced its influence through the Belt
iT
and Road Initiative, a massive regional infrastructure plan. All the while,
the Chinese economy has continued to expand, and in 2017, GDP grew by
6.9 percent, the first time the growth rate had gone up in seven years.
But Xi’s ambitions extend beyond these areas to something more
Al
fundamental. In the 1940s, Mao led the communist revolution that

created the contemporary Chinese party-state. Beginning in the late
1970s, his successor, Deng Xiaoping, oversaw a self-proclaimed “second
od
revolution,” in which he ushered in economic reforms and the low-

profile foreign policy that produced China’s economic miracle. Now,
Xi has launched a third revolution. Not only has he slowed, and, in
many cases, reversed, the process of “reform and opening up” set in
so
motion by Deng, but he has also sought to advance the principles of

this new China on the global stage. Moreover, in a striking move made
in March, the government eliminated the constitutional provision
limiting the president to two terms, allowing Xi to serve as president
Ma
THOMAS PETE R / REUTE RS
for life. For the first time, China is an illiberal state seeking leadership
in a liberal world order.
THE REVOLUTION BEGINS

Xi began his revolution as soon as he took power. For more than three
decades, the Chinese political system had been run by a process of
May/June 2018 61
collective leadership, whereby decision-making authority was shared

among officials in the Politburo Standing Committee, China’s top ruling
body. But Xi quickly moved to centralize political authority in his own
hands. Within the first few years of his tenure, he assumed leadership
of all the most important committees overseeing policy, such as those
concerning cyber issues, economic reform, and national security. He
secured public pronouncements of loy-
alty from top officials, such as People’s
For the first time, China Liberation Army generals and provincial
m
is an illiberal state seeking party secretaries, as well as from the
leadership in a liberal media. And he has used an anticorrup-
world order. tion campaign to root out not just self-
hi
serving officials but also his political
enemies. In July 2017, for example, Sun
Zhengcai, a rising star within the CCP who served as party secretary
ha
of the municipality of Chongqing, was charged with corruption and
removed from office; months later, a senior official announced that
Sun had plotted with others to overthrow Xi.
iT
At the 19th Party Congress, Xi further cemented his hold on CCP
institutions and consolidated his personal power. His name and his
ideology—“Xi Jinping Thought on Socialism With Chinese Character-
istics for a New Era”—were enshrined in the party’s constitution, an
Al
honor previously granted only to Mao. More allies of his were added
to the CCP’s 25-member Politburo and its seven-member Standing
Committee, such that more than half of each group is now composed
od
of Xi loyalists. Then came the change that left open the possibility
that Xi could serve as president indefinitely.
Xi has matched the dramatic growth of his personal power with an
equally dramatic intensification of the CCP’s power in society and the
so
economy. The China scholar David Shambaugh once noted, “If one
of the hallmarks of the Maoist state was the penetration of society,
then the Dengist state was noticeable for its withdrawal.” Now, under
Xi, the pendulum has swung back toward a greater role for the party.
Ma
No element of political and economic life has remained untouched.

In the political sphere, the CCP has taken advantage of new technology
and put greater pressure on the private sector to restrict access to for-
bidden content online, sharply diminishing the vibrancy of China’s
virtual public square. Even privately shared humor can trigger police
action. In September 2017, authorities detained a man for five days
after he sent a joke about a rumored love triangle involving a govern-

ment official to a group over the messaging app WeChat. The govern-
ment is also developing a massive biometric database that, thanks to
state-of-the-art voice- and facial-recognition technologies, could be
married to its vast telephone and video surveillance network and used
to identify and retaliate against party critics. By 2020, Beijing plans to
have rolled out a national system of “social credit,” integrating infor-
mation from online payment and social media apps into a database
that would allow it to punish or reward citizens based on their supposed
m
trustworthiness. Those whose behavior falls short—defaulting on a
loan, participating in a protest, even wasting too much time playing
video games—will face a range of consequences. The government
hi
might slow their Internet connections or restrict their access to every-
thing from restaurants to travel to jobs, while giving preferred access
to those who abide by the CCP’s rules.
ha
On the economic front, Xi has defied expectations that he would
accelerate market-based reforms. He has strengthened the position of
state-owned enterprises, assigning them a leading role in economic
iT
development campaigns, and he has empowered the party committees
that sit inside every Chinese firm. In recent years, those committees had
only ill-defined roles, but thanks to a new requirement under Xi, man-
agement must seek their advice—and, in some cases, their approval—for
Al
all major decisions. The CCP has called for similar rules to apply in joint
ventures with multinational corporations. Even private companies are
no longer outside the party’s purview. In 2017, Beijing announced
od
plans to expand an experiment in which the party takes small stakes in

media and technology companies, including such giants as Alibaba
and Tencent, and receives a degree of decision-making power.
so
AMBITIONS ABROAD
While Xi has limited political and economic openness at home, on
the international stage, he has sought to position himself as globalizer
in chief. At a meeting of the Asia-Pacific Economic Cooperation in
Ma
November 2017, for example, he proclaimed, “Opening up will bring

progress, and those who close down will inevitably lag behind.” Such
rhetoric is misleading. In fact, one of the most distinctive elements of
Xi’s rule has been his creation of a wall of regulations designed to
control the flow of ideas, culture, and even capital between China and
the rest of the world.
Although restrictions on foreign influence are nothing new in China,

they have proliferated under Xi. In January 2017, Beijing enacted a
stringent new law requiring nongovernmental organizations in China
to register with the Ministry of Public Security, obtain permission for
every activity they engage in, and refrain from fundraising within
China. By March 2018, only 330-odd groups had registered, about
four percent of the total that had been operating in China before the
law. Meanwhile, Beijing has begun the process of formally blocking
foreign-owned virtual private networks that allow users to circumvent
m
China’s so-called Great Firewall.
A similar pattern has emerged in the economic realm. In 2015, in
order to prevent China’s currency from depreciating and its foreign
hi
reserves from plummeting, Beijing placed strict controls on Chinese
citizens’ and corporations’ ability to move foreign currency out of the
country. That same year, the government launched its “Made in China
ha
2025” program, a self-sufficiency drive that sets out ten key industries,
from materials to artificial intelligence, in which Chinese firms are
expected to control as much as 80 percent of the domestic market by
iT
2025. To ensure that Chinese companies dominate, the government
not only provides large subsidies but also puts in place a variety of
barriers to foreign competition. In the electric car industry, for example,
it has required Chinese automakers to use batteries made in Chinese
Al
factories that have been operating for more than a year, effectively
eliminating the major Japanese and South Korean competitors.
Meanwhile, Xi has moved China further away from its traditional
od
commitment to a low-profile foreign policy, accelerating a shift begun

by his predecessor, Hu Jintao. Under Xi, China now actively seeks to
shape international norms and institutions and forcefully asserts its
presence on the global stage. As Xi colorfully put it in a 2014 speech,
so
China should be capable of “constructing international playgrounds”—

and “creating the rules” of the games played on them.
Xi’s most notable gambit on this front is his Belt and Road Initiative,
a modern incarnation of the ancient Silk Road and maritime spice
Ma
routes. Launched in 2013, the undertaking now encompasses as many

as 900 projects, more than 80 percent of which are contracted to Chinese
firms. But the effort goes far beyond mere infrastructure. In Pakistan,
for example, the plan includes not only railroads, highways, and dams but
also a proposal to develop a system of video and Internet surveillance
similar to that in Beijing and a partnership with a Pakistani television
May/June 2018 65
channel to disseminate Chinese media content. The Belt and Road

Initiative has also given China an opportunity to advance its military
objectives. Chinese state-owned enterprises now run at least 76 ports
and terminals out of 34 countries, and in Greece, Pakistan, and Sri
Lanka, Chinese investment in ports has been followed by high-profile
visits from Chinese naval vessels. Beijing has also announced that it
will be establishing special arbitration courts for Belt and Road Initiative
projects, thereby using the plan to promote an alternative legal system
underpinned by Chinese rules.
m
Indeed, China is increasingly seeking to export its political values
across the globe. In Ethiopia and Sudan, for example, the CCP is
training officials on how to manage public opinion and the media,
hi
offering advice on what legislation to pass and which monitoring and
surveillance technologies to use. Perhaps the most noteworthy effort
is China’s campaign to promote its vision of a closed Internet. Under
ha
the banner of “cyber-sovereignty,” Beijing has promulgated the idea
that countries should be allowed to, as one official document explained,
“choose their own path of cyber development, model of cyber regulation
iT
and Internet public policies.” It has pushed for negotiations about
Internet governance that would privilege states and exclude represen-
tatives from civil society and the private sector, and it hosts an annual
conference to convince foreign officials and businesspeople of its view
Al
of the Internet.
China also dangles access to its massive domestic market to coerce
corporations to play by its rules. In 2017, for example, Apple was
od
convinced to open a data center in China in order to comply with

new rules requiring foreign firms to store certain data inside the
country (where it will presumably be easier to monitor). That same
year, the company removed from its app store hundreds of programs
so
that helped people get around the Great Firewall.

Ironically, for all the talk of sovereignty, part of Xi’s more assertive
foreign policy involves unquestionable violations of it. The govern-
ment’s Confucius Institutes and Confucius Classrooms, which purvey
Ma
Chinese language and culture abroad, have come under increasing

scrutiny in the United States and elsewhere for spreading CCP propa-
ganda, although they probably pose a lesser threat to U.S. interests
than is commonly thought. More challenging is China’s effort to mobilize
its overseas communities, particularly students, to protest visits by
the Dalai Lama, inform on Chinese studying abroad who do not
follow the CCP line, and vociferously represent the government’s

position on sensitive issues such as Hong Kong and Taiwan. This
effort contributes to a climate of intimidation and fear within the
Chinese overseas student community (not to mention the broader
university community), and it threatens to tar all Chinese students
as representatives of the Chinese government. Of even greater con-
cern, Chinese security officials have on several occasions abducted
former Chinese nationals who are now citizens of other countries.
After a Chinese Swedish bookseller was snatched from a train in
m
China and detained earlier this year, the state-supported Global
Times editorialized, “European countries and the U.S. should educate
their newly naturalized citizens that the new passport cannot be
hi
their amulet in China.”
RETHINKING XI ha
Many observers view Xi as an economic reformer who has been
thwarted by powerful opposition, as the best hope for positive
global leadership, as overwhelmingly popular among the Chinese
iT
people, and as committed to stability abroad in order to focus on
affairs at home. In fact, such assessments miss four fundamental
truths about him.
First, Xi is playing a long game. His preference for control
Al
over competition often leads to policies that appear suboptimal in

the short run. For example, his centralization of power and anti-
corruption campaign have slowed decision-making at the top of
od
the Chinese political system, which in turn has led to paralysis at

local levels of governance and lower rates of economic growth. Yet
such policies have a long-term payoff. Chinese leaders tolerate
the inefficiencies that come with nonmarket policies—say, slow
so
Internet connections or money-losing state-owned enterprises—

not only because the policies enhance their own political power
but also because they afford them the luxury of making longer-
term strategic investments. Thus, for example, the government
Ma
encourages state-owned enterprises to invest in high-risk economies

in support of the Belt and Road Initiative, in order to gain con-
trolling stakes in strategic ports or set technical standards, such as
railway track gauges or types of satellite navigation systems, for
the next wave of global economic development. Decisions that
may appear immediately irrational in the context of a liberal political
system and a market economy often have a longer-term strategic

logic within China.
Second, although he harbors ambitions on the global stage, Xi has
only rarely demonstrated true global leadership, in the sense of showing
a willingness to align his country’s interests with—or even subordinate
them to—those of the broader international community. With a few
exceptions, such as when it comes to UN peacekeeping contributions,
China steps up to provide global public
goods only when doing so serves its own
There may be more
m
short-term interests or when it has been
pressured to do so. Moreover, it is in- pushback against Xi than
creasingly seeking to ignore established is commonly thought.
hi
norms and set its own rules of the road.
In 2016, when the International Court of Arbitration rejected Chinese
claims to wide swaths of the South China Sea, Beijing simply dismissed
ha
the ruling and carried on with its land-reclamation and militarization
efforts there.
Third, Xi’s centralization of power and growing control over infor-
iT
mation make it hard to assess how much consensus there really is in
China about the direction in which he and the rest of the Chinese leader-
ship are taking the country. There may be more pushback against Xi
than is commonly thought. In academic and official circles, a wide-
Al
ranging debate over the merits of many of the regime’s policies rages,
even if it is less robust than during previous times. Many of China’s
wealthiest and most talented citizens, concerned about the state’s
od
heavier hand, have moved their money and families abroad. Chinese
lawyers and others have condemned many of Xi’s initiatives, including
the recent move to eliminate term limits. Even his signature Belt and
Road Initiative has generated criticism from scholars and business
so
leaders, who argue that many of the proposed investments have no

economic rationale.
Finally, Xi has eliminated the dividing line between domestic and
foreign policy. There may have been a time when the political and
Ma
economic implications of China’s authoritarian system were confined

largely to its own society. But now that the country is exporting its
political values—in some cases, to buttress other authoritarian-leaning
leaders, and in others, to undermine international law and threaten
other states’ sovereignty—China’s governance model is front and center
in its foreign policy.
May/June 2018 69
CHALLENGE AND RESPONSE

At the heart of Xi’s revolution is a values-based challenge to the inter-
national norms promoted by the United States. The Trump adminis-
tration must now advance an equivalent challenge to China—one
that begins with a forceful assertion of enduring American princi-
ples. This means not only maintaining a strong military presence in
the Asia-Pacific but also demonstrating a continued commitment to
free trade and democracy. At the same time, the United States must
mount a vigorous defense at home. Because it can no longer count on
m
China to continue the process of reform and opening up, it should
stop sacrificing its own economic and political security. In the past,
Washington tolerated a degree of intellectual property theft and
hi
unequal market access because it believed that China was making
some progress toward market principles and the rule of law. With
that logic off the table, there is no reason the United States shouldn’t
ha
adopt more restrictive policies toward China.
Keeping up with Xi’s many new initiatives is not easy, and it is
tempting to respond to each one as it arrives. In March, for example,
iT
reports that Djibouti—home of the U.S. military’s only permanent base
in Africa—was planning to give China control over a port prompted
senior U.S. officials to sound alarm bells and press Djibouti to reverse
course. Yet the United States offered no constructive alternative,
Al
such as an economic development package. More important, nor did

it put forth a broader U.S. strategy to address China’s ambitions in
Africa and other places covered by its Belt and Road Initiative. (As
od
events played out, Djibouti awarded management of the port to a

Singaporean company.) Such a reactive and piecemeal approach will
do little to respond to the longer-term challenge posed by Xi’s revo-
lution. At the other extreme, although it may be tempting to react
so
to Xi’s changes by demanding that Washington come up with an

entirely new China strategy, what is actually required is not an out-
right rejection of the past four decades of U.S. policy but a careful
rethinking of that policy so as to incorporate what works and reevaluate
Ma
what does not.

An effective China policy must rest on a robust demonstration of
the United States’ commitment to its own principles. Despite U.S.
President Donald Trump’s protectionist impulses and praise for au-
tocrats, recent moves suggest that the White House has not entirely
forsaken its commitment to liberal values in Asia. On his trip to the
region in November 2017, the president articulated his support for a

“free and open Indo-Pacific” and revived the quadrilateral partnership
with Australia, India, and Japan, a dormant grouping of like-minded
Pacific democracies that could start pushing back against Chinese
aggression in the region. Indeed, the administration’s National Defense
Strategy calls for placing a renewed emphasis on alliances to counter
“revisionist powers.”
As a useful first step toward making good on its word, the adminis-
tration should elaborate on the substance of the renewed quadrilateral
m
partnership and establish how it will work in conjunction with other
U.S. partners in Asia and elsewhere. One potential area of collabora-
tion centers on high-stakes security issues. That could mean under-
hi
taking joint freedom-of-navigation operations in the South China
Sea, providing alternative sources of investment for countries with
strategically important ports, or supporting Taiwan in the face of
ha
Beijing’s increasingly coercive strategy.
Trump should also reopen discussions about the Trans-Pacific
Partnership. Although he withdrew the United States from the deal
iT
days after his inauguration, more recently, he has expressed a will-
ingness to consider a modified version of it. A revived agreement
would not only promote market-based reforms in countries with
largely state-dominated economies, such as Vietnam, but also pro-
Al
vide a beachhead from which the United States could advance its
own economic interests over the long term.
To compete with the Belt and Road Initiative, the United States
od
should draw on its strengths in urban planning and technology. In the

field of “smart cities,” many of the world’s top corporations and most
innovative start-ups are American. Washington should partner with
developing countries on urban planning for smart cities and help fi-
so
nance the deployment of U.S. firms’ technology, just as it did in 2014,

when it worked with India on an ambitious program to upgrade that
country’s urban infrastructure. Part of this endeavor should include
support for companies from the United States—or from U.S. allies—
Ma
to help build up developing countries’ fiber-optic cables, GPS, and

e-commerce systems. Doing that would undercut China’s attempt to
control much of the world’s digital infrastructure, which would give
the country a global platform for censorship and economic espionage.
China’s push to shape other countries’ political systems underscores
the need for the Trump administration to support U.S. institutions that
May/June 2018 71
promote political liberalization abroad, such as the National Endowment

for Democracy, the International Republican Institute, the National
Democratic Institute, and the Asia Foundation. These institutions
can partner with Australia, Japan, and South Korea, along with Euro-
pean allies, to help build the rule of law in quasi-authoritarian states
and buttress nascent democracies. Legal, educational, and structural
reform programs can provide a critical bulwark against Chinese efforts
to project authoritarian values abroad.
Of course, strength abroad begins with strength at home. China’s
m
willingness to subordinate its short-term economic interests for longer-
term strategic gains means that Washington must redouble its invest-
ment in science and technology, support the universities and national
hi
labs that serve as a wellspring of American innovation, and fund the
development and deployment of new technologies by U.S. firms.
Without such support, U.S. companies will be no match for better-
ha
funded Chinese ones, backed by Beijing’s long-term vision.
China is eager to restrict opportunities for outsiders to pursue their
political and economic interests within its borders, even as it advances
iT
its own such interests outside China. Accordingly, it’s time for the
Trump administration to take a fresh look at the notion of reciprocity—
and do unto China as China does unto the United States. U.S. policy-
makers have long considered reciprocity a lose-lose proposition that
Al
harms relations with China without changing its behavior. Instead,

they have acted under the assumption that if the United States remains
true to its democratic values and demonstrates what responsible
od
behavior looks like, China will eventually follow its lead. Xi has
upended this understanding because he has stalled, and in some
respects reversed, the political and economic reforms begun under Deng
and has transformed the United States’ openness into a vulnerability.
so
Reciprocity could take a number of forms. In some cases, the pun-

ishment should be relatively light. For example, the Trump adminis-
tration could bar China from establishing additional Confucius
Institutes and Confucius Classrooms in the United States unless China
Ma
permits more American Centers for Cultural Exchange, organizations

funded by the U.S. government on Chinese university campuses.
Currently, there are fewer than 30 such centers in China and more
than a hundred Confucius Institutes and over 500 Confucius Class-
rooms in the United States. U.S. universities, for their part, could refuse
to host Confucius Institutes or forge other partnerships with Chinese
institutions if any member of their faculty is banned from travel to

China—a punishment Beijing has often meted out to critical scholars.
Washington should also consider constraining Chinese investment
in the United States in areas that are out of bounds for U.S. businesses
in China, such as telecommunications, transportation, construction,
and media. That might take the form of limiting Chinese stakes in
U.S. companies to the same level that Beijing permits foreign firms
to have in Chinese companies. More provocatively, the United States
could tacitly or explicitly support other Asian countries’ efforts to mil-
m
itarize islands in the South China Sea in an effort to raise the costs
for China of doing the same. Reciprocity need not be an end in itself.
Ideally, in fact, a reciprocal action (or even just the threat of one)
hi
would bring China to the negotiating table, where a better outcome
could be reached.
While Xi poses new challenges for the United States, he also offers
ha
a distinct new opportunity: the chance for Washington to hold him
publicly accountable for his claim that China is prepared to assume
greater global leadership. In 2014, the Obama administration achieved
iT
some success in leveraging Xi’s ambitions when it pressured China to
adopt limits on its carbon emissions and to increase substantially the
amount of assistance it provided African countries struck by the
Ebola crisis. Similarly, the Trump administration successfully pushed
Al
China to adopt tougher sanctions to try to rein in North Korea’s

nuclear program. More such moves should follow. The administration
should call on China to play a bigger role in addressing the global
od
refugee crisis, particularly the part of it taking place in the country’s

own backyard. In bordering Myanmar, more than 650,000 refugees
from the Rohingya ethnic minority have fled to Bangladesh, over-
whelming that impoverished country. China has offered to serve as a
so
mediator between the two countries. But it also blocked a UN Security

Council resolution to appoint a special envoy to Myanmar and has
downplayed concerns about the plight of the Rohingya, focusing more
on protecting Belt and Road Initiative projects from the violence in
Ma
Myanmar. The United States and others should say it loud and clear:
with global leadership comes greater global responsibility.
WILL XI SUCCEED?
Does China’s third revolution have staying power? History is certainly
not on Xi’s side. Despite a weakening of democratic institutions in some
May/June 2018 73
parts of the world, all the major economies—save China—are

democracies. And it is possible to map out, as many scholars have,
potential paths to a Chinese democratic transition. One route is
through an economic crisis, which could produce a demand for change.
China’s economy is showing signs of strain, with Chinese household,
corporate, and government debt as a proportion of GDP all having sky-
rocketed since the 2008 global financial crisis. Some Chinese economists
argue that the country faces a sizable challenge from its rapidly aging
population and massively underfunded pension system, coupled with
m
its persistently low birthrate, even after the end of the one-child policy.
It’s also conceivable that Xi could overreach. At home, discontent
with his repressive policies has spread within large parts of China’s
hi
business and intellectual communities. The number of labor protests
has more than doubled during his tenure. Moreover, although often
forgotten in China’s current political environment, the country is not
ha
without its champions of democracy. Prominent scholars, activists,
journalists, retired officials, and wealthy entrepreneurs have all spoken
out in favor of democratic reform in the recent past. At the same time,
iT
Xi’s move to eliminate term limits stirred a great deal of controversy
within top political circles. As Chinese officials have admitted to the
press, there have even been coup and assassination attempts against Xi.
Abroad, Beijing’s aggressive efforts to expand its influence have
Al
been met with frequent backlashes. In just the past year, widespread
protests against Chinese investments have erupted in Bangladesh,
Kazakhstan, Kenya, and Sri Lanka. As China presses forward with its
od
more ambitious foreign policy, more such instances will undoubtedly

crop up, raising the prospect that Xi will been seen as failing abroad,
thus undermining his authority at home.
Nonetheless, there is little compelling evidence that Xi’s revolution
so
is in danger of being reversed. Many of his accomplishments have

earned him widespread popular support. He has survived past crises,
such as a major stock market crash in 2015, and at the 19th Party
Congress, his consolidation of institutional power and mandate for
Ma
change were only strengthened. For the foreseeable future, then, the
United States will have to deal with China as it is: an illiberal state
seeking to reshape the international system in its own image. The
good news is that Xi has made his revolutionary intentions clear.
There is no excuse now for the United States not to respond in equally
unambiguous terms.∂
Fresh Prince
The Schemes and Dreams of Saudi Arabia’s
Next King
F. Gregory Gause III
m
I
t is not often that a Ritz-Carlton becomes a detention facility. But
hi
last November, when a large slice of the Saudi elite was arrested
on accusations of corruption, the luxury hotel in Riyadh became
a gilded prison for hundreds of princes, billionaires, and high-ranking
ha
government officials. Behind this crackdown was the young crown
prince, Mohammed bin Salman, also known as MBS, who is attempt-
ing to remake the kingdom’s economy and social life, and even the
iT
House of Saud itself.
At only 32, MBS is already the most powerful figure in contempo-
rary Saudi history, having sidelined other members of the ruling family
with the full support of his father, King Salman. His concentrated
Al
authority and evident will to shake up the system make it possible for
him to do great things. But he has also removed the restraints that
have made Saudi foreign and domestic policy cautious, conservative,
od
and ultimately successful amid the crises of the modern Middle East.
Whether the crown prince can pull off his high-stakes gamble, which
the Middle East expert Bernard Haykel terms a “revolution from
above,” without destabilizing his country and adding to the region’s
so
chaos remains an open question.

Conventional wisdom has it that the Saudi regime rests on a social
compact among the ruling family, the religious establishment, and the
economic elite. The system is lubricated by enough oil wealth to also
Ma
fund a substantial welfare state. But that view is only half right. Over
the decades, oil wealth has lifted the ruling family above its partners
and the governing princes above the other members of the extended
House of Saud. Religious elites are now state bureaucrats, not equal
F. GREGORY GAUSE III is Head of the International Affairs Department at the Bush
School of Government and Public Service at Texas A&M University.
May/June 2018 75
partners in governing. The business community is also a junior partner,

more of a lobby than an independent actor. The crown prince’s cam-
paign is further redefining the role of the regime’s traditional pillars of
support while also appealing, in a most unmonarchical way, to an incho-
ate Saudi public opinion. So far, MBS appears to be popular among
many Saudis (although accurate measures of public opinion are notori-
ously hard to come by in authoritarian regimes). The problem is that
public opinion is fickle. The institutional interests of elites, as conser-
vative and self-interested as they may be, are a much
m
more reliable basis for monarchical rule.
The crown prince’s most ambitious goal, which he
outlined in his Vision 2030 plan, is to diversify the
hi
Saudi economy and reduce its dependence on oil.
The collapse of oil prices in 2014 convinced him that
the kingdom could no longer support the welfare
ha
state that has been in place since the 1970s. He has
already reduced subsidies on utilities such as
water and electricity, which were practically
iT
free in the past, and has imposed a five percent
value-added tax (VAT) on many commercial
transactions. The private sector is key to the
plan’s success. Right now, the vast majority of
Al
Saudi workers are employed by the state. Vision

2030 calls for the private sector to invest more
in the economy and become a greater source of
od
employment. The privatization of five percent

of the state oil company Saudi Aramco—the
most publicized element of Vision 2030—
aims to generate revenue for the govern-
so
ment’s Public Investment Fund, which

will invest both at home, in the local pri-
vate sector, and abroad, as a sovereign
wealth fund.
Ma
All of this made the Ritz-Carlton

roundup even more puzzling. Why did
the crown prince arrest the pillars of
the private sector—the very people he
needs to make Vision 2030 work? Saudi
officials contend that a dramatic, public strike
Fresh Prince
against high-level corruption will help level the playing field and encour-
age greater investment going forward. But the crackdown’s opaque
and arbitrary methods—detentions without public charge, financial
settlements negotiated for unspecified crimes, and the alleged use of
brutal coercive tactics—could lead the country in the opposite direction.
The long-term effect of the crown prince’s gambit will hinge on
what kind of leader the crown prince really is. If he is like Chinese
President Xi Jinping, he will use the anticorruption campaign not
m
hi
ha
iT
Al
od
so
Ma
May/June 2018 77
only to settle political scores but also to actually reform the economy.
In that case, a reconstituted and chastened private sector might, with
the right incentives and sound government policy, become an engine of
growth. On the other hand, if MBS is more like Russian President
Vladimir Putin, he will simply replace the old oligarchs with new ones
of his own choosing. That path is certainly open: the Saudi government
has obtained a substantial interest in at least one major company, the
construction giant the Saudi Binladin Group, in exchange for releas-
ing its chief executive, and it might be doing the same with the Middle
m
East Broadcasting Center. This approach would solidify the crown
prince’s power but undermine the potential for meaningful reform.
Equally troubling, he might be more like King Henry VIII. Faced with
hi
mounting expenses from fighting wars overseas and consolidating his rule
at home, the king of England took over monasteries and other religious
endowments when he declared himself head of the Church of England.
ha
But rather than maintaining these institutions as a steady source of
income, he sold most of them for a one-time infusion of funds. There is
some indication that MBS is feeling similar fiscal pressures. The Wall
iT
Street Journal reported that King Salman had unsuccessfully implored
leading businesspeople to contribute to the government’s coffers before
the November roundup. The wolf is hardly at the door: the government
has around $500 billion in reserves. But some of the crown prince’s more
Al
ambitious plans, such as building a futuristic city dubbed “Neom,” have

not excited much enthusiasm from the Saudi business elite. Shaking down
business leaders would yield money for pet projects, but this tactic can be
od
used only once. If foreign investors and domestic business elites think that
they are perpetually at risk of being arrested or having their assets seized,
they will be much less likely to invest in the country.
At a minimum, the crown prince has redefined what corruption
so
means in the kingdom. The problem is that observers, both domestic

and foreign, are not yet clear on what the new definition is. The path
that MBS chooses in the aftermath of the Ritz-Carlton crackdown
will determine his country’s future.
Ma
CHANGE AT LAST
On the social front, the crown prince has already made bold decisions.
In September, he tackled the most fraught Saudi social issue by
declaring that, as of June 2018, Saudi women will have the right to
drive. This decision has elicited barely a peep of domestic opposition.
Fresh Prince
As education levels rose and more Saudis experienced life abroad, the
argument that the kingdom was “not ready” or “too conservative” for
this change rang increasingly hollow. And the objections of some cler-
ics that driving would endanger Saudi women’s moral standing were
risible, given that the alternative was for Saudi women to be driven
by male drivers (either in taxis or in their families’ cars) who were
not members of their families. Saudi society had been ready for this
change for some time; the country’s leaders had simply lacked the
political will to pull the trigger. The crown prince has that political
m
will, in spades.
Having women behind the wheel will bring enormous changes
to the country. More women will be able to join the work force. Hun-
hi
dreds of thousands of foreign workers employed as drivers will no
longer be needed. Men will not lose productive hours transporting
their wives, mothers, and sisters to doctor’s appointments and other
ha
meetings. It is hard to underestimate the impact of this decision.
The crown prince has publicly talked about “going back to how we
were, to the tolerant, moderate Islam that is open to the world.” Although
iT
this interpretation of Saudi history is questionable, his commitment
to change is real. In addition to deciding to allow women to drive, he has
limited the powers of the religious police
and opened up Saudi social life. Musical
The path that MBS chooses
Al
concerts, movie theaters, female atten-

dance at soccer matches, and a greater in the aftermath of the
number of public social events will help crackdown will determine
od
make the country more “normal,” at least his country’s future.

for those Saudis who have lived or vis-
ited abroad. Undoubtedly, some in more
conservative religious circles will object to all of this, and there might be
so
isolated instances of a violent backlash, as there were when the country

introduced television and education for girls in the 1960s. But history has
shown that these changes will soon become normalized. The wives of
clerics will be among the first behind the wheel.
Ma
All this social change gives a more accurate picture of the rela-
tionship between the religious establishment and the ruling family.
Ultimately, the religious elites are state employees who take orders
from above, not equal players with a veto over government policy.
During every major crisis in modern Saudi history, the religious
establishment has supported the government’s decisions, including the
May/June 2018 79
implementation of social changes in the 1960s, the retaking of the

Grand Mosque in Mecca from millenarian zealots in 1979, the invitation
of foreign troops into the kingdom during the Gulf War of 1990–91,
and the crushing of local al Qaeda elements in the early years of this
century. Religious elites may not like
the crown prince’s policies, but they are
For now, the crown not leading a charge against them. Reli-
prince’s path to ultimate gious opposition to the regime comes
power seems secure. from outside official circles, from radical
m
groups such as al Qaeda and the Islamic
State (or ISIS) and from Islamist populists who call for both greater
adherence to Islamic law and more political freedom. The state has
hi
been able to suppress these movements for the last century. There is no
reason to think that has changed.
UNCHALLENGED AUTHORITY
ha
Equally audacious but less noticed abroad has been the crown prince’s
consolidation of power within the ruling family. Since the 1960s, the
iT
kingdom has been ruled by a de facto committee of senior princes—
all sons of King Ibn Saud, the founder of modern Saudi Arabia—with
the king as first among equals. Some kings were stronger than others,
but all of them sought consensus on important decisions among their
Al
family members who held the key ministries and governorships across
the country. This style of government had all the vices of rule by com-
mittee: it was ponderous, conservative, and not readily able to seize
od
opportunities. But it also had its virtues: its decisions were well con-
sidered, there were checks on bad ideas, and everyone important was
on board once a decision was made. As the sons of the founding king
grew old, some observers questioned how the system would be sustained.
so
Most Saudi watchers, myself included, assumed that the sons of that
generation would take the places of their fathers and reconstitute
committee governance. We were wrong.
When King Salman assumed the throne in 2015, he originally
Ma
appointed his half brother Prince Muqrin bin Abdulaziz to be crown

prince, keeping the succession in his own generation. But the king
jettisoned Prince Muqrin a few months later in favor of one of his neph-
ews, Mohammed bin Nayef. MBN, as he is known, is part of the Saudi
royal family’s third generation, the son of the former interior minister,
who had inherited the leadership of that ministry from his father. MBN
also became the main point of contact for U.S. officials in the burgeon-
ing intelligence and counterterrorism partnership that had developed
between the two countries after the 9/11 attacks. MBN was a safe choice
to become the first king of his generation—experienced in government,
successful in maintaining internal security against threats from al Qaeda
and ISIS, and well known and respected in Washington.
But in June 2017, King Salman removed MBN from his position as
crown prince and from his ministerial post and elevated his favorite
son to become the heir apparent. The new crown prince’s ascent was
m
remarkably fast—MBS had become a minister only two years before,
when he succeeded his father as minister of defense. At that time, the
king had also appointed him to head a cabinet committee overseeing
hi
economic and social policy (MBN was in charge of a similar committee
on security issues). With the cashiering of MBN, the new crown prince
became the focal point for all major decisions in the government. Al-
ha
though some saw the Ritz-Carlton roundup as a consolidation of power,
MBS had already secured his position by then. To be sure, a number of
princes were involuntary guests at the Ritz. The most important of
iT
these was Miteb bin Abdullah, a son of the former king, who served as
the commander of the National Guard. After his November arrest, he
was stripped of that position and removed from the cabinet. But no
one questioned that MBS was in charge, even before November 2017.
Al
Today, the Saudi cabinet contains fewer members of the ruling fam-
ily than at any time since the 1950s. The king is still the prime minister,
and the crown prince is both the defense minister and the deputy prime
od
minister, but the only other ministerial position filled by a family mem-
ber is minister of the interior, which is held by a young nephew of the
former crown prince MBN and thus a member of the family’s fourth
generation. (There are also two royal ministers of state, one of whom
so
is another son of King Salman, but both lack a portfolio.)

In effect, the crown prince has cut out a large number of his older
cousins, many of whom had previously held high positions in govern-
ment and were looking to inherit their fathers’ seats at the decision-
Ma
making table. This has occasioned more than a little grumbling in family
circles, some of which has seeped out into the Western press. But there
are no indications, at least not publicly, of a serious mobilization inside
the House of Saud to block MBS from eventually succeeding his father.
Dangerous splits in the family have happened before, most recently
in the late 1950s and early 1960s, when King Saud and Crown Prince
Fresh Prince
Faisal contended for power. But the signs of that split were clear and
public. People were fired from jobs and then returned when their man
was on top, the protagonists took extended leaves outside the country
after they lost a skirmish, and family councils were called to adjudicate
the conflict. In the end, the family deposed King Saud in 1964. Nothing
approaching that kind of open contest for power is occurring now.
It is possible that MBS will face familial opposition when his father
dies. The House of Saud famously tries to keep family business out of
the public eye, so there could be things going on that outsiders do not
m
know about. Perhaps in anticipation of a move against him, the crown
prince has been appealing to younger family members, particularly in
the fourth generation, who are below him in the hierarchy but close to
hi
him in age, by appointing many of them to subcabinet positions in
Riyadh and positions of authority in the regional governorates. They
could become his supporters if trouble arises. For now, his path to
ha
ultimate power seems secure.
AN UNPREDICTABLE PRINCE
iT
The crown prince now stands at the top of the Saudi decision-making
process. He answers only to the king, who has granted him wide-ranging
powers, allowing him to make difficult decisions that were previously
kicked down the road, such as pursuing economic reform and allowing
Al
women to drive. But it also means that there are few checks on an
ambitious and aggressive leader who may not fully calculate the second-
and third-order consequences of some of his actions.
od
Some recent Saudi foreign policy decisions suggest a certain amount

of recklessness. In November 2017, for example, as the Ritz-Carlton
roundup was under way, the Lebanese prime minister, Saad Hariri,
made an unscheduled visit to Riyadh. A few days later, he announced his
so
resignation from the Saudi capital, under obvious pressure from MBS.
This was clearly a Saudi power play meant to put pressure on the Leba-
nese political system in hopes of dealing a blow to Hezbollah, Iran’s ally
in Lebanon. Instead, the move backfired, as the United States and Saudi
Ma
allies in Europe told the kingdom to back down. A few weeks later,
Hariri returned to Lebanon and rescinded his resignation. Likewise, in
the summer of 2017, Saudi Arabia and the United Arab Emirates led a
number of other Arab countries in a boycott of Qatar, accusing the
Qataris of supporting Islamist groups, backing terrorists, and meddling
in the domestic politics of their neighbors. But far from knuckling
May/June 2018 83
under, Qatar has withstood the pressure and drawn support from Iran
and Turkey. In both cases, Saudi Arabia did not achieve its objectives.
Many would classify the Emirati-Saudi military offensive in Yemen
as another example of an aggressive and unsuccessful MBS policy.
Undoubtedly, the Saudis and their partners assumed that the operation,
which began in 2015, would swiftly drive back the rebel Houthi militants
and restore the Saudi ally Abd-Rabbu Mansour Hadi to the presidential
palace in Sanaa. It did not turn out that way, and international pressure
on Riyadh is mounting as the human toll of the campaign has reached
m
alarming levels. But unlike the Lebanese and Qatari gambits, the
Yemeni campaign touches more directly on what most Saudis see as
their national security. One can argue about the extent to which the
hi
Houthis are tied to Iran, but Saudi Arabia considers Houthi control of
Yemen as tantamount to allowing Iran a base of influence on the Arabian
Peninsula. No Saudi government would have stood by and allowed that
ha
to happen. The war in Yemen is a drain on Saudi resources and a blot on
the country’s international reputation, but it still enjoys broad support
among Saudi elites. The question now is how to bring it to an end.
iT
Unlike past Saudi leaders, MBS can make dramatic and unilateral
decisions. But this freedom of action also means that he can engage in
foreign policy adventures that would not have moved forward under
previous rulers. He may be learning from his mistakes, but given his
Al
ambition and impulsiveness, the world should expect more surprises.
THE PRINCE AND THE PEOPLE

od
The crown prince has few checks on his decision-making power from
within the Saudi political system, but he still has to respond to public
demands. More than any other recent Saudi leader, MBS has cultivated
public support, especially among younger Saudis.
so
In January, responding to public grumbling about the increased

prices of water, electricity, and gasoline and the imposition of the five
percent VAT that took effect in mid-2017 and early 2018, MBS re-
stored an annual pay raise for government employees that had been
Ma
suspended as part of earlier austerity moves, and he granted govern-

ment employees a bonus of about $250 per month for “cost of living.”
The crown prince also established a “citizen’s account,” which directly
transfers cash to Saudis in the middle and lower economic strata.
Saudi officials are now saying that the money recovered from those
held in the Ritz-Carlton will be used to support this fund.
Fresh Prince
These new benefits could be read as a move away from the goals of
balancing the state budget and making public-sector jobs less attractive,
but it is better seen as a necessary reaction to placate public opinion.
Two years of rising oil prices have made it difficult to impose austerity.
Sacrifices that might have been acceptable to Saudis when oil was $30 per
barrel seem less so with oil above $60 per barrel. Although the crown
prince may be headstrong and aggressive, he still realizes that he needs
the people behind him. But to transform the Saudi system, he will
also have to inculcate a new understanding of what the state is going
m
to provide its citizens. Reducing the welfare state without turning the
public against him will be his most daunting challenge.
hi
LESSONS FOR THE UNITED STATES
Perhaps nowhere have the crown prince’s moves produced more curiosity,
hope, and fear than in Washington. In U.S. President Donald Trump,
ha
MBS has an enthusiastic backer—at times too enthusiastic. The fact
that MBS became crown prince just a few weeks after Trump’s visit to
Saudi Arabia in May 2017 left the impression that Washington had
iT
something to do with the change, and the White House was far too
quick to imply that MBS had explicit U.S. backing. The president’s
excessive friendliness has already had consequences. In June, Trump
tweeted his support for the Emirati-Saudi boycott of Qatar, stating
Al
that isolating the country might be “the beginning of the end to the
horror of terrorism.” This created tension with the Gulf state, which
is a crucial base for the U.S. military’s air operations in the Middle
od
East, and undercut moves by Secretary of State Rex Tillerson and

Secretary of Defense James Mattis to bring about a quick end to the
imbroglio. The sense that the Saudis (and the Emiratis) can appeal
directly to the White House through the president’s son-in-law, Jared
so
Kushner, has also made it more difficult for the regular organs of U.S.
foreign policy to bring the Gulf standoff to a diplomatic conclusion.
Although Trump’s close public embrace of the crown prince might
not serve either’s interest in the long term, it has undoubtedly given
Ma
Washington considerable leverage with Riyadh in the short term. The

administration should think carefully about how to use this influence.
Bringing the Saudis on board for a new effort to settle the Israeli-
Palestinian conflict would make sense, but only if the Trump plan has
a real chance of success. The administration should not play the Saudi
card on the peace process if it is not going anywhere—and there is
May/June 2018 85
little reason for optimism. When it comes to Syria, Trump has shown
little interest in a new peace initiative, so there is no reason to engage
the Saudis there. Riyadh is already in agreement with a more confron-
tational policy toward Iran. And the administration has successfully
pushed the Saudis to reengage with the government of Iraqi Prime
Minister Haider al-Abadi, which is a positive step in the long-term
effort to stabilize Iraq and reduce Iranian influence there.
The place where Trump could most productively use his close
relationship with the crown prince is Yemen. The administration
m
should continue its efforts to push the Saudis to address the human
catastrophe through more effective aid and more discriminate military
action. The Houthis also have much to answer for regarding the suf-
hi
fering of Yemeni civilians, and international pressure should focus as
much on them as on the Saudis. Any diplomatic initiative to end the
fighting will require that the United States decide whether it wants
ha
to see the redivision of the country into two states, as was the case
before 1990. It will also involve sophisticated outreach to Iran, the
only regional power with any influence over the Houthis. This can be
iT
accomplished even as the Trump administration works to contain
and roll back Iranian influence in the Arab world. Oman has acted as
a conduit to Iran before, and European countries can also deal directly
with the Iranians. If Tehran is at all chastened by the antiregime pro-
Al
tests that broke out across Iran in January, it might be open to reducing
its involvement in the regional conflict that least affects its interests.
Stabilizing Yemen will not be easy, but such an effort would give Saudi
od
Arabia a desperately needed exit ramp from a costly campaign and

alleviate one of the world’s most searing human tragedies.
Meanwhile, Washington should pay close attention to how the
crown prince handles the aftermath of his anticorruption campaign.
so
If MBS becomes his country’s Xi, then the United States should
maintain its pragmatic alliance, which is based on mutual benefit
rather than shared values. But if MBS turns out to be more like Putin
or Henry VIII, privileging political cronies and treating the private
Ma
sector as his personal ATM, then the longer-term prospects of the

kingdom in a world where oil prices are unlikely to return to the his-
toric highs of the early years of this century will be much less certain.
In that case, the United States will need to look elsewhere for a partner
in stabilizing the region.∂
The Right Way to Coerce

North Korea
Ending the Threat Without Going to War
m
Victor Cha and Katrin Fraser Katz
W
hen it comes to North Korea, U.S. President Donald Trump’s
hi
policies have been whiplash inducing. On February 23, he
appeared to be gearing up for a conflict when he said that if
sanctions against Pyongyang didn’t work, Washington would have to move
ha
to “phase two,” which could be “very, very unfortunate for the world.” But
just two weeks later, Trump abruptly changed course and accepted an in-
vitation to meet with North Korean leader Kim Jong Un—a decision that
iT
caught even his own White House and State Department by surprise.
Trump’s newfound enthusiasm for diplomacy has temporarily low-
ered the temperature on the Korean Peninsula, but it also underlines
a bigger question: Does the United States have a strategy for North
Al
Korea, or are these twists and turns merely the whims of a tempera-
mental president? In the past, rash and uninformed decisions by U.S.
officials on the peninsula—such as acquiescing to Japan’s occupation
od
of Korea in 1905 and excluding Korea from the U.S. Cold War defense
perimeter in 1950—have had grave consequences. The United States
cannot afford a similar outcome today.
Trump’s unpredictability has had some upsides. His self-proclaimed
so
“madman” behavior may have played a role in bringing the North Koreans
to the table, and the Trump administration’s policy of applying, in the
White House’s words, “maximum pressure” has yielded some impres-
sive results. An unprecedented summit between the U.S. and North
Ma
Korean leaders could indeed bring lasting peace to Asia. But it

could also go wrong: if negotiations fail, the administration might
VICTOR CHA is Professor of Government in the Walsh School of Foreign Service at George-
town University and a Senior Adviser at the Center for Strategic and International Studies.
KATRIN FRASER KATZ is a Fellow at the Center for Strategic and International Studies.
She served on the staff of the U.S. National Security Council from 2007 to 2008.
May/June 2018 87
conclude that a military strike is the only way forward, greatly increas-
ing the chance of war.
The Trump administration must ground its summit diplomacy and
overall approach to North Korea in a strategy of comprehensive coercion
that clearly defines U.S. objectives, leverages Washington’s most effective
diplomatic and military tools, and aligns its Korea policy with the broader
U.S. strategy in Asia. Failure to do this would only benefit Kim and
increase the likelihood that the United States will get “played,” as Trump
has characterized past negotiations. After a year of saber rattling, and
m
with North Korea likely to be just months away from possessing the
capability to launch a nuclear attack on the continental United States, the
stakes could hardly be higher. In the not unlikely event that talks break
hi
down, the United States will need a strategy that prevents the parties
from sliding into a disastrous war.
WHIPLASH
ha
During Trump’s first year in office, North Korea conducted more than
twice as many ballistic missile tests (20) as it did during the first year of
iT
Barack Obama’s presidency (8). The result was a constant exchange of
recriminations between the United States and North Korea. After North
Korea tested its first intercontinental ballistic missile (ICBM), in July,
Trump promised to rain “fire and fury” on Pyongyang. After North Korea
Al
threatened a nuclear attack on “the heart of the U.S.,” Trump’s national

security adviser hinted that a preventive attack was becoming increasingly
likely. Meanwhile, rumors swirled that the Joint Chiefs of Staff and U.S.
od
Pacific Command were drawing up plans for a limited military strike to

give Kim a “bloody nose.” Combined, we have decades of experience
working on this problem, and one of us, Victor Cha, was once under
consideration for U.S. ambassador to South Korea, before the Trump
so
administration withdrew his candidacy. Never before have we witnessed

more discussion about possible military escalation than in the past year.
But 2018 has brought a dramatic shift. The government of South
Korean President Moon Jae-in, who is much more open to engagement
Ma
with North Korea than his predecessor, decided to capitalize on what it

perceived as toned-down language in Kim’s New Year’s address. In Janu-
ary, it achieved a reopening of the long-suspended inter-Korean dialogue
channels and facilitated an all-expenses-paid invitation for the North
Korean team to attend the Winter Olympics in Pyeongchang. While
briefing Trump on the phone about these developments, Moon recalled
m
hi
ha
From Pyongyang with love: a North Korean ICBM test, July 2017
iT
Trump’s campaign pledge to have a hamburger with Kim. Ultimately,
Moon managed to elicit a promise from Trump to consider meeting
the North Korean leader—a message that Seoul dutifully conveyed to
Pyongyang. At the Olympics, despite exchanging little more than icy
Al
stares with U.S. Vice President Mike Pence, Kim’s younger sister
presented a letter to Moon that suggested her brother’s interest in
improving relations with the United States.
od
In early March, shortly after the Olympics concluded, Kim warmly

welcomed a group of South Korean envoys to Pyongyang, led by the
South Korean national security adviser, Chung Eui-yong. After two days
of meetings, Kim agreed to cross into the South for an inter-Korean sum-
so
mit by the end of April. He also promised a moratorium on missile and

nuclear testing contingent on dialogue with the United States. According
to the South Koreans, Kim said that the “denuclearization of the Korean
Peninsula” was possible if the U.S. threat to his country were removed.
Ma
Not to be outdone, on March 8, Trump scrapped his daily White

House schedule to host the South Korean national security adviser in the
Oval Office soon after his delegation landed at Dulles Airport (Chung
KCNA / REUT E RS
was supposed to brief the president on his recent North Korean trip the
next day). Trump called for an immediate summit with Kim (which he
was eventually persuaded to push to May) and, in a dramatic moment
May/June 2018 89
recalling his television show The Apprentice, made an impromptu visit to

the White House briefing room to tease an imminent “major announce-
ment” on North Korea, which he later let the South Koreans deliver in
front of the West Wing. Shortly afterward, he conveyed his enthusiasm
for diplomacy in a flurry of optimistic tweets.
WINGING IT?
The South Korean government deserves credit for turning an impend-
ing crisis into an opportunity. It is possible that a face-to-face meeting
m
between Kim and Trump, who are both fond of making surprise decisions,
could bring progress on one of the world’s most dangerous problems.
But it is easier to understand Seoul’s and Pyongyang’s motives for
hi
engaging in diplomacy than Washington’s.
For South Korea, the imminent threat of North Korean aggression
during the Winter Olympics, as well as long-term concerns about a
ha
renewed campaign of North Korean missile and nuclear tests after the
conclusion of the Paralympics in late March, made engineering some
form of détente a strategic imperative. Meanwhile, North Korea’s apparent
iT
change of heart likely stems from the economic bite of Trump’s maximum-
pressure campaign, which has cut oil imports and coal exports, dried
up hard-currency inflows, and made commodity prices spike in the
country. According to Trump administration officials, the sanctions have
Al
caused North Korean gas prices to triple and have reduced the country’s
exports by more than $2.7 billion. Today, paper is so scarce in the North
that the state-run newspaper has been forced to cut its circulation. There
od
have even been reports in South Korean media that North Korea used
telephones, rather than global VSAT communications, to speak with South
Korean air traffic controllers when coordinating the arrival of high-level
North Korean delegations for the Olympics, since the state had lost access
so
to satellite networks after defaulting on payments. The news that the

Trump administration was seriously considering a military strike may
also have contributed to this turnaround.
But Kim also has other motivations for reengaging. A pause in weapons
Ma
testing at this point would do little to set back Pyongyang’s nuclear pro-
gram. Moreover, a meeting with Trump would give the rogue leader the
all-important recognition that he craves and, depending on what Trump
relinquished in exchange for a freeze in North Korea’s weapons testing
and development, could advance the North’s long-standing goal of getting
the United States to accept the country as a nuclear power.
What about the United States? Although there is an internal logic to

North and South Korean actions, inconsistencies abound in the U.S. ap-
proach. After spending most of 2017 discussing military options, the
administration backpedaled in January and denied that such plans even
existed. Officials have said that the sanctions campaign is designed to
compel the North Korean regime to return to the negotiating table, but
the amount of attention Trump’s National Security Council and State
Department have paid to preparing for negotiations pales in comparison
to the considerable effort devoted to developing sanctions and military
m
strike options. The administration’s diplomatic strategy to date has
amounted to little more than a list of don’ts: don’t reward talks, don’t let
up on sanctions, don’t make the mistakes of past administrations.
hi
Furthermore, because Trump has jettisoned the interagency process,
which brings in experts and policymakers from across the U.S. gov-
ernment to advise the president, negotiations will occur amid ominous
ha
conditions. Trump will be flying blind into meetings with Kim, acting on
little more than his gut instincts, without the advice of experienced for-
eign policy and Asian affairs experts, who would undoubtedly counsel
iT
him to avoid verbose but meaningless summit statements and to press
Kim on making tangible steps toward denuclearization. Meanwhile, the
North Koreans are probably only a few tests away from gaining the
capacity to reach the continental United States with nuclear-tipped
Al
ICBMs. The moratorium on testing that Pyongyang offered the South

Korean envoys will merely maintain the status quo. Since the pause is
contingent on talks, Pyongyang will be able to resume testing the day
od
the talks end, and it will likely continue covertly working on its pro-
grams all the while. Finally, there is no reason to believe that North
Korea has changed its long-standing aims of achieving recognition as a
nuclear power, ejecting U.S. forces from South Korea, and undermining
so
the U.S. defense commitment to South Korea.

To counter these negotiating traps, Trump might offer incremental
energy and economic assistance and sanctions alleviation in exchange for
a freeze in and the eventual dismantlement of North Korea’s nuclear
Ma
weapons and long-range ICBM programs. North Korea’s missile program,

in particular, has not been the topic of negotiations in almost two dec-
ades, and Trump could score a victory on this count. Or he might choose
a bolder path that would put much bigger carrots on the table, including
the normalization of relations or even a peace treaty formally ending the
Korean War. It would be ironic if Trump, an avowed hawk on North
May/June 2018 91
Korea, adopted an approach to diplomacy that doves have advocated for

years, but it is not out of the question.
WHAT TRUMP SHOULD DO

Regardless of how talks do or do not play out, the United States must base
its policy going forward on a set of sound principles. North Korea’s effort
to develop nuclear missiles capable of reaching the United States demands
an urgent response. Past behavior suggests that Kim will try to share these
weapons with other states and nonstate actors. Down the road, he might
m
use them in an attempt to intimidate the United States into offering con-
cessions or even withdrawing its troops from South Korea, which would
leave the country vulnerable to an invasion. More broadly, North Korea’s
hi
acquisition of these weapons, if left unchecked, could undermine the
global nonproliferation regime. The United States must keep North
Korean denuclearization at the top of its strategic priorities. Accepting
ha
North Korea as a nuclear power and building a new relationship from that
basis would legitimize its pursuit of nuclear weapons and send a dangerous
signal to other countries that are considering starting their own programs.
iT
Trump’s pursuit of a diplomatic solution has the best chance of suc-
cess if it is bolstered by a strategy that ramps up the regional and inter-
national pressure on North Korea. The Trump administration’s approach
to North Korea thus far has involved swings between confrontation and
Al
engagement without a clear link to broader U.S. strategic objectives in

the region. A comprehensive coercive strategy for denuclearization di-
plomacy would build on the strengths of the maximum-pressure cam-
od
paign while more fully leveraging the support and resources of regional
allies and partners in pursuing shared long-term goals. This strategy
would involve five key components.
First, Washington must continue to strengthen the global coalition that
so
it has mustered in its highly successful sanctions program. Unlike the

so-called smart sanctions campaign 13 years ago, Trump’s effort has the
backing of ten UN Security Council resolutions, which grant the United
States virtually unlimited authority to punish violators. Moreover, compli-
Ma
ance with the sanctions has increased because the Trump administration is
more willing than past administrations to share intelligence information
with third parties to help them stop sanctioned activities in their countries.
Second, the United States should buttress this sanctions campaign
with a statement on nonproliferation. This message should signal unam-
biguously to North Korea and any recipients or facilitators of its nuclear
weapons that the United States will hold accountable any state, group, or
individual found to be complicit in a transfer of nuclear material—if
necessary, through the use of force.
Third, the United States must upgrade its alliances with Japan and
South Korea. Militarily, that means improving capabilities regarding in-
tegrated missile defense, intelligence sharing, antisubmarine warfare, and
conventional strike missiles to deter North Korean threats. The political
scientists Michael Green and Mat-
thew Kroenig have outlined a useful
The United States must
m
wish list: adding more missile defense
systems in the region, deploying B-1 keep denuclearization at
and B-2 bombers to new locations, un- the top of its strategic
hi
dertaking cyber-operations to impede priorities.
North Korea’s missile program devel-
opment, and encouraging South Korea
ha
to purchase shorter-range missile defense systems (similar to Israel’s Iron
Dome) to defend against North Korean artillery. The United States
should also remain open to additional conventional strike capabilities for
iT
Japan and South Korea, the use of which would require U.S. sign-off.
At the political level, the United States should push for a joint state-
ment with Japan and South Korea that pledges that an attack on one will
be treated as an attack on all. Affirming collective defense is important
Al
because North Korea’s long-term strategy is to decouple South Korea’s

security from Japan’s and the United States’. Indeed, one of the purposes
of North Korea’s long-range missile tests last year was to reduce South
od
Korea’s confidence in the U.S. commitment to deterring an attack against

South Korea and raise doubts in Japan and the United States about their
willingness to trade Tokyo or Los Angeles for Seoul in the event of
war. In order to convey a clear deterrent message to Pyongyang, the
so
collective-defense statement should commit all three allies to the use

of force in response to a North Korean attack.
These military and political measures should be complemented by dip-
lomatic and economic strategies that treat U.S. alliances more holistically.
Ma
For example, the United States should approach updates and adjustments
to the existing free-trade agreement with South Korea or U.S.–South
Korean defense cost-sharing negotiations with an awareness that tension
in one area of these relationships can make progress elsewhere more dif-
ficult, if not impossible, particularly if the Japanese public or the South
Korean public is paying attention and anti-U.S. sentiment has been rallied.
May/June 2018 93
Although the North Korea problem is immediate, the longer-term

strategic competitor in Asia is China, whose challenge to U.S. preemi-
nence has been augmented by Russia’s spoiler role across the globe.
Bolstering U.S. alliances would strengthen Washington’s hand against
these threats, as well, by significantly improving military defense capa-
bilities, counterproliferation efforts, and diplomatic coordination among
U.S. allies and partners in East Asia. Reinforcing the U.S. military
posture in the region would also increase the costs to China and Russia
of subsidizing the Kim regime, not complying with sanctions, or under-
m
taking other problematic behavior.
Fourth, although Washington may seek an assurance from Pyongyang
that it will not proliferate, the Trump administration must also push for
hi
the establishment of a counterproliferation coalition that shares intelli-
gence about maritime nuclear smuggling and cooperates on law enforce-
ment. Japan’s and South Korea’s port authorities, coast guards, and navies,
ha
along with the United States’ considerable assets, should work together
to prevent nuclear material from leaving the country. Most of this
enforcement activity would likely take place in ports, but the allies should
iT
be prepared to carry out interceptions at sea as needed. The United
States should also approach China and Russia about the possibility of
building a five-party counterproliferation regime in Northeast Asia.
Beijing and Moscow should see benefits to stopping any North Korean
Al
loose nukes, but if they are not willing to participate, then they should be
prepared to face the diplomatic and economic consequences of allowing
North Korean proliferation across their borders.
od
Finally, the United States must continue preparing both diplomatic

and military plans for North Korea. This is critical to, on the one hand,
upholding deterrence against Pyongyang and, on the other, creating a
credible off-ramp for the regime. Washington should maintain its exist-
so
ing high-tempo military exercises in the region, preposition ammunition

stocks for a possible conflict, and rotate strategic assets such as B-52
bombers, stealth warplanes, nuclear submarines, and aircraft carriers
regularly to the peninsula. All these steps should prevent North Korea
Ma
from spreading its nuclear weapons, threatening the United States, or

taking offensive actions in the region.
Given the limited amount of time to prepare for a Kim-Trump
summit, the meeting is unlikely to bear immediate fruit beyond some
grandiose statements about a normalization of relations, a peaceful
end to the Korean War armistice, and denuclearization, statements that
the leaders would then authorize their governments to begin nego-

tiations over. This outcome would itself be significant, but it should not
lead to a lifting of sanctions unless North Korea backs up its promises
with actions.
Whether the summit succeeds or not, the United States must move
beyond broad statements and invite Pyongyang to reiterate the denucle-
arization pledges it made during the six-party talks in 2005 and 2007.
The documents outlining these pledges are the only place where North
Korea has ever been forced to dump its noncommittal and vague formu-
m
lations about a “nuclear-free peninsula” in favor of specific and written
commitments to “abandoning all nuclear weapons and existing nuclear
programs.” These agreements are also of value to North Korea (and
hi
China) because they state that the United States will not attack North
Korea with conventional or nuclear weapons, the only written security
assurance that addresses North Korean concerns about “hostile” U.S.
ha
policy. Washington should also compel the regime to improve its human
rights record as a good-faith demonstration of the authenticity of its
diplomatic intentions. North Korea will undoubtedly have its own long
iT
list of wants, but for the United States, the summit must establish zero
tolerance for any plutonium- or uranium-based nuclear weapons stock-
piles or the deployment of long- or intermediate-range ballistic missiles
and call for substantial reductions in the stocks of short-range ones. Absent
Al
the preservation of these core security interests, neither summit diplo-

macy nor working-level agreements will be worth much.
Following this overall strategy would enhance the credibility of Wash-
od
ington’s negotiating position, while also securing U.S. interests in the

event of failure. Broadly speaking, comprehensive coercion would get
the United States out of crisis management mode and demonstrate U.S.
resolve without unnecessarily risking war. It would also strengthen U.S.
so
alliances in Asia for the long term, directly address the proliferation
threat, increase the costs to those who subsidize Pyongyang, and comple-
ment the United States’ regional commitments.
Ma
WHAT NOT TO DO
When it comes to North Korea, the only American voice that really mat-
ters is Trump’s. By agreeing to meet with Kim, Trump has improved his
media ratings, but he has also inadvertently increased the chances of war.
If his latest diplomatic gamble doesn’t pay off, the administration may
come away from negotiations more determined to use the military option.
Indeed, even amid talk of negotiations, some senior officials in the

Trump administration have continued to contemplate using a limited
military strike to prevent North Korea’s development of a long-range
nuclear missile. The rationale is that a strike on North Korea’s nuclear
and missile facilities, perhaps after its next test, would give Kim a “bloody
nose” painful enough to compel him to begin the process of denuclear-
ization, but not so damaging as to start a wider war on the peninsula.
The logic behind a limited military strike is that North Korea will be
undeterrable once it acquires the ability to hit the continental United
m
States with a nuclear weapon—because
the regime is unpredictable, economically
desperate, and has used chemical weap-
Trump cannot solve the
hi
ons against a civilian target as recently as problem of a nuclear
last year. If Kim can strike the continental North Korea with a
United States, the argument goes, then preventive military strike.
ha
Washington will not be able to prevent
nuclear proliferation or nuclear black-
mail. A strike would constitute an immediate, decisive action to prevent
iT
that outcome. It would also demonstrate the capability and willingness
of the United States to employ all options to stop North Korea’s nuclear
program, a message that would no doubt resonate beyond the region.
Yet this logic is flawed. If Kim would be undeterrable if he had nuclear
Al
weapons able to reach the continental United States, then why would a
limited military strike deter him from responding in kind? And if Kim
did respond militarily, then how could the United States prevent the
od
crisis from escalating given that Kim would have just proved himself not
to have a clear and rational understanding of signals and deterrence?
Some Americans argue that the risks are worth taking because it’s
better that people die “over there” than at home. That, too, is a mis-
so
guided sentiment. On any given day, there are 230,000 Americans

living in South Korea and another 90,000 or so in Japan. Evacuating
them would be almost impossible. The largest American evacuation
in history was about 60,000 from Saigon in 1975. An evacuation from
Ma
South Korea would be infinitely more difficult. Even if the State

Department tripled the number of consular officers in South Korea,
the process would likely take months. Moreover, the normal evacua-
tion points south and east of the peninsula would not be feasible to
use in a war scenario because of the North Korean missile threat,
which would mean that the only way out would be through China.
May/June 2018 97
But in a crisis, the waterways around the peninsula would be clogged

with a million Chinese seeking to leave, as well.
Under a rain of North Korean artillery, American citizens in the
region would most likely have to hunker down until the war ended.
Although those in Japan might be protected by U.S. missile defense
systems, the U.S. population in South Korea would not be as lucky.
To be clear: by launching a preventive strike, the president would be
putting at risk an American population the size of that of Cincinnati or
Pittsburgh, not to mention millions of South Koreans and Japanese,
m
all based on the unproven assumption that an undeterrable and unpre-
dictable dictator would be cowed into submission by a demonstration
of U.S. power.
hi
Some may argue that U.S. casualties and even a wider war on the
peninsula are worth risking if a preventive strike would preserve the
post–World War II regional and international order in the long term.
ha
But this proposition is highly problematic. A military strike would only
delay, not stop, Kim’s missile and nuclear programs. Washington does
not know where all of North Korea’s nuclear installations are, and even if
iT
it did, many are hidden deep underground and in the side of mountains,
beyond the reach of even large “bunker buster” weapons. Furthermore,
a limited strike would not stem the threat of proliferation. In fact,
it would only exacerbate it, turning what might be a moneymaking
Al
endeavor for the Kim regime into a vengeful effort to equip actors
arrayed against the United States.
This strategy also risks fracturing the impressive coalition that the
od
Trump administration has brought together for its maximum-pressure

campaign. A unilateral military attack would undercut what has so far
been a successful bid to deplete the currency reserves North Korea has
been using to build its programs. Finally, a strike could harm key U.S.
so
alliances. Japan and South Korea insist that they must be consulted
before the United States considers a strike. Going it alone is always an
option, but doing so could fracture, if not end, the very alliances that
the Trump administration has declared it seeks to strengthen in the face
Ma
of a rising China.
Ultimately, Trump cannot solve the problem of a nuclear North Korea
with a preventive military strike. This assessment is widely shared by
former members of the intelligence community, the National Security
Council, the State Department, and the Defense Department who
served in both Democratic and Republican administrations. As Steve
Bannon, Trump’s former chief strategist, put it in an interview: “Until

somebody solves the part of the equation that shows me that ten million
people in Seoul don’t die in the first 30 minutes . . . there’s no military
solution here, they got us.”
THE BEST OF LOUSY CHOICES

Going forward, Washington should build on the maximum-pressure
campaign, embed negotiations in a broader regional strategy, and forgo
a military strike in favor of new efforts to strengthen regional deterrence
m
and counterproliferation through close cooperation with U.S. allies.
Such a strategy could deliver the same potential benefits as a limited
strike without the costs. And if the Kim-Trump summit fails, it could
hi
also keep the two countries from immediately going to war.
China and Russia would not like this approach, but from their per-
spective, it is preferable to a military strike, which could lead to a U.S.–
ha
North Korean nuclear exchange in their neighborhood. Moreover, few
states, including China, are comfortable with the proliferation risk
posed by a nuclear North Korea. In fact, under this strategy, China and
iT
Russia may decide to participate in counterproliferation efforts or even
in an enduring multilateral security institution.
Some in the global community fear that China and North Korea could
frame certain actions, such as an embargo to prevent proliferation, as an
Al
act of war. To counter this, the United States and its allies should, to the
extent possible, seek legal authorization for their actions through UN
Security Council resolutions keyed to the next set of North Korean
od
provocations or to proliferation.
Doves may argue that this strategy would generate insecurity in
Pyongyang that would further justify the regime’s pursuit of weapons.
They may think that a better alternative would be to throw a diplomatic
so
Hail Mary—as Trump may well do—such as declaring peace on the

peninsula and pulling U.S. troops out of South Korea. Over the long
term, a peace treaty might be possible, but first, the facts on the ground
must change. The regime’s intention to pursue nuclear-tipped ICBMs
Ma
presents grave new threats to the U.S. homeland and allies in the region
that must be addressed. The pressure of sanctions must be maintained,
but that doesn’t mean there is no room for subtlety in efforts to shape
North Korean behavior. The sanctions campaign, if handled carefully,
might be designed to target the regime while leaving space for market
development, information dissemination, and humanitarian assistance
May/June 2018 99
among ordinary people. Still, a Hail Mary without tangible North Ko-
rean actions toward denuclearization might be great for TV ratings, but it
would also give Kim what he wants (nuclear recognition) while offering
the United States nothing but empty promises.
Finally, critics might argue that a strategy of comprehensive coercion
would simply take too much time, and time only plays into North
Korea’s hands as the country continues its nuclear sprint. This critique is
not unwarranted; in recent decades, sensitive historical and domestic is-
sues have hampered Japanese–South Korean military cooperation, which
m
could impede defense planning among U.S. allies. In the past, however,
crises involving North Korea have led to security cooperation between
Japan and South Korea in a timely and prompt fashion. In addition,
hi
although the push for a Kim-Trump summit is dramatic, it may have
shifted the play to a longer game, as bold statements by leaders who love
flair and drama will have to be translated into action by policy minions
ha
in painstaking detail over weeks and months, if not years. The United
States should use this time to invest in its alliances and strengthen its
position in the region.
iT
Coordinating and developing the capabilities needed for security
cooperation with Japan and South Korea will take time, but it will
put the United States in a better position in the long run. It’s impor-
tant to distinguish between strategy and tactics. Tactical responses
Al
are always possible in the near term, but tactics without a strategy
can lead one down undesirable paths. As former U.S. Deputy Secre-
tary of Defense John Hamre has argued, recent U.S. claims that
od
“time has run out,” which were designed to pressure the North Koreans,
have only pushed Washington further into a corner, under pressure
to carry out a threatened military attack, and they have done nothing
to advance a strategy outlining what the United States should be doing
so
before, during, and after any negotiations.

In the land of lousy options, no plan is perfect. But some are demon-
strably better than others. A comprehensive coercion strategy for denu-
clearization diplomacy would significantly increase the pressure on North
Ma
Korea. It would strengthen U.S. alliances in Asia against threats not just
from North Korea but also from China and increase the costs to Beijing
of subsidizing the Kim regime. It would not risk hundreds of thousands of
American lives with a preventive military attack. And it would strengthen
the United States’ hand at the negotiating table in a way that primed
Washington for success, but also prepared it for failure.∂
Perception and
Misperception on the
Korean Peninsula
m
How Unwanted Wars Begin
Robert Jervis and Mira Rapp-Hooper
N hi
orth Korea has all but completed its quest for nuclear weapons.
ha
It has demonstrated its ability to produce boosted-fission
bombs and may be able to make fusion ones, as well. It can
likely miniaturize them to fit atop a missile. And it will soon be able
iT
to deliver this payload to the continental United States. North Korea’s
leader, Kim Jong Un, has declared his country’s nuclear deterrent
complete and, despite his willingness to meet with U.S. President
Donald Trump, is unlikely to give it up. Yet Washington continues to
Al
demand that Pyongyang relinquish the nuclear weapons it already

has, and the Trump administration has pledged that the North Korean
regime will never acquire a nuclear missile that can hit the United States.
od
The result is a new, more dangerous phase in the U.S.–North Korean

relationship: a high-stakes nuclear standoff.
In March, U.S. and South Korean officials announced the possibility
of a Kim-Trump meeting. But regardless of whether diplomacy
so
proceeds or the United States turns its focus to other tools—sanctions,

deterrence, even military force—the same underlying challenge will
remain: the outcome of this standoff will be determined by whether
and how each country can influence the other. That, in turn, will
Ma
depend on the beliefs and perceptions each holds about the other. The
problems of perception and misperception afflict all policymakers that
ROBERT JERVIS is Adlai E. Stevenson Professor of International Affairs at Columbia
University.
MIRA RAPP-HOOPER is a Senior Fellow at the Paul Tsai China Center and a Senior
Research Scholar at Yale Law School.
May/June 2018 103

deal with foreign adversaries. But when it comes to relations between

Washington and Pyongyang, those problems are especially profound,
and the consequences of a miscalculation are uniquely grave.
Any U.S. strategy toward North Korea involves using a combination
of threats and promises to persuade Pyongyang to bend to Washington’s
will. But whether the United States can actually persuade Pyongyang
depends not just on which tools it chooses to use but also, more
fundamentally, on how it is viewed by North Korea. How do North
Korean leaders interpret the signals Washington sends? Do they see
m
Washington’s threats and promises as credible? And how do U.S.
policymakers perceive their counterparts in Pyongyang? How do they
differentiate plausible threats from mere bluster? The American
hi
debate about whether Kim is “rational”—that is, capable of making
means-ends calculations and providing for his own survival—barely
scratches the surface of necessary considerations.
ha
Ultimately, the effectiveness of any threat or promise is in the eye of
the target; the adversary has the final say in whether a particular approach
succeeds. Analysts often compare international politics to chess, a bilat-
iT
eral contest in which players view the entire board and know all the
possible moves. In this case especially, a more apt analogy is Rashomon—
the Japanese film that depicts the same story from several vantage
points, each character viewing what happened differently.
Al
If any U.S. strategy toward North Korea is to have a chance of suc-

ceeding (or even of just averting catastrophe), it must be guided by an
accurate sense of how Kim’s regime thinks, what it values, and how it
od
judges its options. Washington must understand not just North Korean
objectives but also how North Korean officials understand U.S. objec-
tives and whether they consider U.S. statements credible. If it fails to
do so, perceptual pitfalls could all too easily provoke a downward spiral
so
in relations and lead to the worst conflict since World War II.
YOU CAN’T ALWAYS GET WHAT YOU WANT

It has long been clear what the United States wants from North Korea.
Ma
For years, Washington has sought to denuclearize the country—that

is, to achieve the complete, verifiable, and irreversible disassembly of
its nuclear arsenal—and to deter major military action on its part.
More recently, Trump has added that North Korea cannot be allowed to
develop an intercontinental ballistic missile, or ICBM, capable of reaching
the continental United States. Washington has also long called for,
Perception and Misperception on the Korean Peninsula
m
hi
ha
Seeing like a state: Kim watching a military drill, Pyongyang, November 2014
iT
but never actively pursued, the reunification of the Korean Peninsula
under the democratic control of the South. Yet as North Korea has
moved toward a complete nuclear and ICBM capability, such goals have
become harder to achieve. They no longer require simply preventing
Al
North Korea from taking certain steps. Now, they require persuading
it to reverse course and give up capabilities it has already developed,
even in the face of significant opposition, a much bigger concession.
od
Accordingly, the more urgent question today is less what the

United States wants than what it can reasonably live with—that is,
what it needs. As North Korea nears the end of its nuclear quest,
concessions that would have once looked attractive, such as a freeze
so
in further development, no longer look as desirable. What, then,

would it take for the United States to live with a nuclear North Korea?
If Washington can strengthen its alliances and military presence to
effectively deter Pyongyang and prevent it from resorting to nuclear
Ma
blackmail, would minimum American needs be met?

What North Korea wants from its nuclear and missile programs has
also become fairly clear. Above all, the regime wants to ensure its sur-
KCNA / REUT E RS
vival and deter a U.S. attack. Beyond that, it also appears to consider
nuclear weapons to be a source of prestige and thus wants acceptance
as a de facto nuclear state, much as Pakistan has. Nuclear weapons also
May/June 2018 105

help advance other long-standing North Korean desires, such as reunifi-

cation of the peninsula under Pyongyang’s control and the undermining
of U.S. security guarantees for South Korea and Japan.
The harder question to answer is whether the Kim regime now
sees a nuclear capability as inextricable from its own survival—that is,
whether it thinks it needs to keep nuclear
Both the United States and weapons under any circumstances. If it
does, then there is no security assur-
North Korea have bluffed ance that Washington can offer Pyong-
m
in the past. yang that will convince it to give them
up. The only steps that would work are
ones that U.S. diplomats would almost certainly never take—say,
hi
renouncing the U.S. treaty with South Korea and withdrawing all
U.S. troops from the peninsula.
The needs and wants of other actors are also relevant. South Korea’s
ha
objectives largely align with those of the United States. But because a
conflict would inevitably spill onto its own soil, South Korea is more
likely to privilege political solutions over military ones. Some differ-
iT
ences in U.S. and South Korean positions can be managed, but if they
diverge too much, North Korea may have reason to doubt Washing-
ton’s security guarantee to Seoul. China, meanwhile, has traditionally
preferred to have a stable, if irksome, North Korean buffer state along
Al
its border rather than to push for denuclearization at the risk of regime
collapse. But Chinese–North Korean relations have been deteriorating
for years, and it is now an open question how much Beijing values
od
its client.
CREDIBILITY IS IN THE EYE OF THE BEHOLDER

No matter what strategy it is using at any given moment, the United
so
States relies on a combination of threats and promises to change

North Korean behavior. Those threats and promises must go together:
a threat only works if it is coupled with a promise not to carry out the
threatened action if North Korea complies with a demand. And both
Ma
the threat and the promise must be credible. Washington has to signal
to Pyongyang what actions it can take to avoid punishment, as well as
what actions it can take to produce better outcomes.
In discussions of international politics, credibility is often treated
as a characteristic inherent to a given state and its signals. In fact,
credibility is in the eye of the beholder: a threat or a promise is credible
only if the target sees it as such. The target makes that determination
by assessing its opponent’s interests, its previous behavior, the nature
of its regime, and whether its leaders have lived up to prior commitments.
Accordingly, any U.S. attempt to exert influence over North Korea
necessarily leaves the decision to comply in the hands of North Korean
leaders. They, not officials in Washington, make the cost-benefit calcu-
lation of the value of compliance and noncompliance.
The question of how to establish credibility is especially fraught in
this case. The United States and North Korea face major hurdles to
m
persuading each other that their intentions are genuine. Because they
do not have formal diplomatic relations, they are basing their views
on an impoverished set of interactions and data points. In the last two
hi
decades, state-level exchanges have taken the form of nuclear negotia-
tions. With the exception of those leading to the 1994 Agreed
Framework, which stayed in place for six years, all these negotiations
ha
resulted in failure. As a result, each side distrusts the other.
Moreover, the two sides interpret history differently. Kim looks at
past agreements with the United States that his father and grand-
iT
father struck and likely infers that Washington seeks to make Pyong-
yang less secure and will renege on its commitments. He looks at the
U.S. invasions of Iraq and Libya and likely concludes that nuclear
weapons are a far stronger guarantor of survival than any U.S. promise.
Al
He sees Trump’s threats to pull out of the Iran nuclear deal and likely
worries that U.S. arms control agreements cannot be trusted. And
when evaluating the prospect of U.S. military action, he may consider
od
prior instances in which U.S. leaders have contemplated bombing

nuclear sites in North Korea or elsewhere—and conclude that since
the United States has always refrained from doing so in the past, it
will again.
so
Making credibility even harder to establish, both states have bluffed

in the past. Perhaps more than any other state, North Korea has a
tendency to use incendiary rhetoric that does not result in action. It
threatened to turn Seoul into a “sea of fire” in 1994, and it calls nearly
Ma
every new round of international sanctions “a declaration of war.”

After the UN Security Council approved sanctions in 2013, a North
Korean spokesperson said, “We will be exercising our right to preemp-
tive nuclear attack against the headquarters of the aggressor.”
Although Washington’s bluffing has typically been less brazen,
the effect is similar. Washington has called North Korea’s nuclear
development “unacceptable” but then gone on to accept it. It promised

to hold Pyongyang accountable for proliferation but took no action
when it sold a nuclear reactor to Syria in 2007. In August 2017,
Trump threatened to unleash “fire and fury like the world has never
seen” against North Korea if it made more threats, only to do noth-
ing when the country conducted more missile tests. He even prides
himself on his ability to backtrack. When The Wall Street Journal
asked him about his combative tweets against Kim, he replied, “You
see that a lot with me and then all of a sudden somebody’s my best
m
friend. I could give you 20 examples.” Although no single bluff com-
pletely erodes a state’s credibility, habitual empty threats degrade it
over time.
hi
North Korea may be more likely to treat a U.S. threat or promise
as credible under certain conditions: when the United States has
previously demonstrated the capability to act as it says it will, when
ha
the costs to the United States of action are low, when it has a signifi-
cant incentive to act, and when there are not less costly ways of carry-
ing out a threat. To increase the credibility of a threat, Washington can
iT
make it more specific, detailing which precise conditions would trigger
which precise responses. Doing so might mean issuing an ultimatum,
one of the strongest types of threats in international politics. In the
case of military threats, Washington could send costly signals of immi-
Al
nent action, such as evacuating American personnel from Seoul or

sharing prospective military plans with allies in the hope that they
will leak them. Such moves, in addition to causing public alarm and
od
giving up the advantage of a surprise attack, would make it harder for

the United States to step back from the brink.
THE DIFFICULTIES OF DIPLOMACY

so
Pyongyang’s perception of U.S. credibility will determine the success

or failure of any U.S. strategy. Whether the Trump administration is
relying on diplomacy, pressure, deterrence, or force, it and North
Korean leaders will interpret the same actions differently, and neither
Ma
will fully understand the other’s view. Misperception afflicts all policy
options, with different risks in each case.
Diplomacy—whether a Kim-Trump summit or lower-level exchanges—
presents its own difficulties and dangers. Each side views the other’s
behavior in a different light. The United States sees North Korea as
an insincere actor that has reneged on countless commitments in the
May/June 2018 109

past, whereas North Korea sees the United States as intent on threat-
ening its existence. For both parties to come to the negotiating table,
they must believe that the potential upsides of diplomacy outweigh
the costs, including the likelihood that the other side will agree to and
then scuttle a deal.
The United States faces what might be called a “time-technology
dilemma” in diplomacy. North Korea is close to reaching its technical
goals, making it all the more important for Washington to secure signifi-
cant enough concessions quickly enough to make the gambit worthwhile.
m
The more time that passes, the less the United States will be able to
gain from negotiations, and the more North Korea will be able to secure
for itself. Pyongyang may, for example, get away with making minor
hi
concessions in exchange for significant sanctions relief or security
assurances, strengthening its hand without meaningfully improving
the security situation for the United States and its allies.
ha
Given these perceptual dynamics and the likelihood that they will
cause diplomatic failure, why would the United States pursue diplomacy
at all? After all, many argue that it can deter, contain, and manage the
iT
North Korean threat without talks. Any progress on constraining
Pyongyang’s nuclear and missile programs, no matter how modest or
unlikely, will require concessions that can be made only at a negotiating
table. Just as important, engagement can reduce the risks of misper-
Al
ception and miscalculation in the bilateral relationship, which is especially

important given how few other ties exist between Washington and
Pyongyang. That said, ill-conceived diplomacy may lead each side to its
od
worst-case assessment of the other. If it does, tensions will only spiral.
YOUR ECONOMY OR YOUR NUKES

Similar perceptual problems affect other U.S. policy options—
so
including the tool of choice in recent years, financial sanctions.

Whatever the economic impact of sanctions, their effectiveness in
achieving a broader political objective still depends on North Korean
perceptions of U.S. intentions. Sanctions are meant to decrease
Ma
North Korea’s ability to pursue its weapons programs and to inflict

pain on the regime without raising the risk of direct military conflict.
Because they are usually applied reactively and episodically, however,
their influence is only incremental.
The United States and the UN tend to apply new sanctions after
North Korea has taken a prohibited action. Because this has been the
pattern for years, North Korea can anticipate new sanctions before it
makes a given move and decide whether the benefits will outweigh
the costs. Moreover, because sanctions are applied only after the fact,
the regime has time to adjust to the new economic circumstances it
will face after it takes the action. Indeed, because it chooses when next
to conduct a nuclear test, it actually has some control over whether
and when it will get hit with another round of economic measures,
even if the exact contents of the sanctions package are a surprise. In
other words, what international actors view as resolute and punishing
m
steps may not actually do much to affect Pyongyang’s preferences.
The United States hopes that its sanctions will send a message that
forces North Korea to choose between its economy and its nuclear
hi
weapons. But the incremental nature of the financial punishment may
instead signal that it will continue but the pain will be tolerable,
encouraging North Korea to hurry up and complete its nuclear pro-
ha
gram so that it can start negotiating the sanctions away. This repre-
sents another instance of the time-technology dilemma: North Korea
has few technical hurdles left to cross, yet new sanctions take time to
iT
bite. Still, international financial pressure has inherent credibility,
because multilateral sanctions include the participation of countries
on which North Korea depends, such as China and Russia. Moreover,
it is difficult to draw conclusions about how multilateral sanctions
Al
against Pyongyang are affecting its political behavior. Did Kim seek
a summit with Trump because he is desperate for sanctions relief
and willing to make concessions or because he seeks the prestige of
od
a presidential summit and de facto recognition of North Korea as a

nuclear power? American observers may assume the former, whereas
Kim may believe the latter, leading to a yawning gap in diplomatic
expectations.
so
MAKING DETERRENCE WORK

One of the foremost questions that has occupied U.S. policymakers is
whether North Korea can be deterred. But the better question is what
Ma
North Korea can be deterred from doing and what it can be compelled
to do differently. It is one thing for the United States to deter the use
of nuclear weapons or a major attack—since the end of the Korean
War, North Korea has not tried to invade the South because the U.S.
threat to destroy the North Korean regime in such a circumstance is
credible, thanks to U.S. conventional and nuclear military superiority.
But it is another thing entirely to deter lower-level provocations. When

North Korea makes such moves, as it did when it sank a South Korean
warship in 2010, it presumably estimates how the United States will
respond and then selects actions and targets that limit U.S. options.
The United States and South Korea may be able to deter some North
Korean provocations through their conventional force posture and
military doctrine, but they are unlikely to be able to prevent them all.
Further complicating matters, U.S. goals have gone beyond deter-
rence to compellence—that is, seeking to change what the North is
m
already doing. Coming only when deterrence has failed, compellence—
in this case, getting North Korea to abandon a mature nuclear arsenal—
is even harder to achieve. As behavioral economists have demonstrated,
hi
decision-makers are more willing to pay costs and run risks to avoid
losing something they already possess than they are to get something
they don’t yet have. Even growing U.S. pressure is unlikely to alter this;
ha
it may just reinforce Kim’s belief that he needs nuclear weapons to deter
Washington. Similarly, it is possible that U.S. threats only heighten
Kim’s perceived need for a better deterrent—meaning that Washington’s
iT
messaging around deterrence undermines its own objectives.
After all, deterrence goes both ways, and so U.S. policymakers must
also consider what their messages tell Kim about his ability to deter an
American attack. When Washington declares that a North Korean ICBM
Al
capability would pose an unacceptable threat to the United States, it is

in effect admitting to Kim that the United States is easily deterred by
such a capability. Similarly, drawing a sharp distinction between threats
od
to the American homeland and threats to U.S. allies is deeply problem-

atic, because extended deterrence requires demonstrating that allies are
as valuable, or nearly as valuable, as the homeland itself. Both South
Korea and Japan should be concerned that Washington appears preoc-
so
cupied with weapons aimed at it and relatively unconcerned about the

weapons aimed at them. Understandably, they might worry that Trump’s
“America first” stance means a weaker nuclear umbrella.
Ma
THE FOG OF WAR

Of all the ways in which perceptual pitfalls could come into play on the
Korean Peninsula, the most consequential would involve the use of mil-
itary force. The United States is unlikely to wage a campaign of total
destruction against North Korea now that Pyongyang’s nuclear arsenal
is advanced enough to stave off utter defeat. If war did break out, the
May/June 2018 113

United States would be more likely to use military force as a form of

coercion. But even that would be unlikely to achieve denuclearization.
The mere fact that the United States possesses superior military capa-
bilities would not guarantee that it would prevail, since each country’s
resolve would help determine the outcome. That is why U.S. officials
must consider North Korea’s willingness to run risks and pay high costs.
After an attack, North Korea’s perception of the initial military
campaign would determine whether Pyongyang complied with U.S.
wishes. For the United States to get its way, it would have to send
m
signals that it would continue to use force if North Korea refused to
comply, but also that it would cease to use violence if North Korea
cooperated. In particular, the United
hi
States would have to indicate that the
The prospect of a meeting leadership in Pyongyang had a clear
between Kim and Trump pathway to survival. If Kim believed
ha
has raised hopes that, if that the United States was bent on his
dashed, could make war destruction no matter what, he would
have no choice but to mount an all-out
more likely.
iT
counterattack. The United States would
find this balance difficult to achieve. If
Kim anticipated some form of U.S. military action but the strike was
less destructive than feared, he might actually be bolstered in his refusal
Al
to comply with U.S. wishes. In either case—a devastating attack or an

underwhelming one—the United States should expect to face signifi-
cant retaliation, at least until Kim figured out whether compliance or
od
resistance made more sense in the long term.

How third parties and domestic actors reacted to a strike could
influence any additional U.S. efforts to use violence coercively. If the
domestic audience vehemently supported a strike, the United States
so
could more credibly claim that it would attack again if Pyongyang

failed to cooperate. If international parties expressed outrage and
condemned the strike, as seems plausible, the U.S. threat to launch a
devastating follow-on strike would become less potent, and Pyongyang
Ma
would have far less motivation to comply. U.S. leaders would also
have to contemplate the signals they sent beyond the military strike
itself. What message would Trump deliver to accompany the use of
force? Would he demand full denuclearization? Throughout the his-
tory of warfare, once one side has resorted to violence, emotions play
a larger role in leaders’ calculations and states become prone to gamble,
willing to accept greater risks and take bigger chances to prevent major
losses. North Korea is unlikely to be an exception.
A PERFECT STORM OF MISPERCEPTION

The greatest risk is that the perceptual challenges that afflict all these
approaches could build into a perfect storm of misperception. It is all
too easy to imagine how such a crisis might develop—no less amid a
flurry of diplomacy than amid a volley of threats.
In fact, the prospect of an unprecedented meeting between Kim
m
and Trump has raised hopes that, if dashed, could make war more
likely. There is a real danger of a Rashomon situation: Washington
might believe that sanctions and military threats made Kim realize
hi
that his nuclear program could lead to his demise, whereas Pyongyang
might believe that Trump’s willingness to meet without demanding
substantive concessions indicates that the United States is finally
ha
ready to accept North Korea as a nuclear state. Even the same words
may mean different things to the two sides. For the United States,
“denuclearization” is the North giving up nuclear weapons; for North
iT
Korea, it may mean an arms control agreement in which the two sides
bargain over each other’s force levels. Well-intentioned mediation by
South Korea could postpone the day of reckoning but make it worse
when it comes, by encouraging both Washington and Pyongyang to
Al
believe that the other is ready to make major concessions. If face-to-

face talks reveal that neither is in fact willing to do so, the hostility
will be magnified.
od
It is not difficult to imagine how this scenario could come to pass.

Following North Korea’s reasonably good behavior during the Winter
Olympics, the United States’ postponement of military exercises, and
South Korean President Moon Jae-in’s efforts at diplomacy with the
so
North, a diplomatic window has opened. Imagine that Kim and Trump
arrive at the summit only to discover that they hold radically different
views of the commitment to “denuclearize”: Trump believes that Kim
is willing to negotiate away his arsenal for sanctions relief, whereas
Ma
Kim believes that full denuclearization also requires the removal of

U.S. troops from the Korean Peninsula and an end to the U.S.–South
Korean alliance (a possibility that was reinforced by comments Trump
made in March that appeared to threaten to withdraw U.S. troops from
South Korea unless the U.S.–South Korean trade deal was renegotiated).
After it becomes clear that Trump will not move forward on Kim’s
May/June 2018 115

terms, Kim is outraged and renews his August 2017 pledge to test mis-
siles over Guam.
Both Washington and Pyongyang now think the other is responsible
for derailing diplomacy. Out of a desire to induce the United States
to drop its denuclearization demands, Kim decides to show that his
willingness to negotiate does not mean his will has been broken, and
he proceeds with his missile launch. Much as the Japanese did before
they attacked Pearl Harbor, he hopes that a missile test over Guam—a
U.S. territory but not a state—will unnerve the United States enough
m
to persuade it to accept his nuclear program, but not so much as to
bring a full-scale war.
But then, one of his missiles expels debris over Guam. Fragments
hi
from the reentry vehicle strike the island itself, killing a few residents—
who are, after all, U.S. citizens. Trump declares this “an act of war”
and gives Kim 48 hours to issue a formal apology and a pledge to
ha
denuclearize. Kim does not comply, and the United States dusts off
one of its plans for a limited military strike. It attacks a known missile
storage facility, believing the limited nature of the target will induce
iT
Kim’s cooperation and minimize the risk of retaliation. Instead, Kim
views the strike as the beginning of a larger effort to disarm him and
as a prelude to regime change. Following his conventional bombard-
ment of Seoul, the United States begins to attack other known weapons
Al
sites and command-and-control facilities to neutralize the threat. Kim

launches nuclear weapons the following day.
The purpose of this vignette is not to suggest that war on the
od
Korean Peninsula is inevitable, likely, or totally beyond the control of

the parties involved. Rather, it is to illustrate how the forms of misper-
ception now ingrained in the U.S.–North Korean relationship may
interact with a situation that is already unfolding to invite a catastrophe
so
that neither side wants.
KNOW THYSELF
There is no set of policies that can eliminate these risks. But there are
Ma
steps U.S. policymakers can take to sharpen their own perceptions of

North Korea; better understand how U.S. actions and signals affect
the perceptions of their North Korean counterparts; and, perhaps
most important, recognize the assumptions behind American beliefs.
The Trump administration should start by deepening its assessment
of Pyongyang’s aims and bottom line. There are a handful of former
U.S. officials who have experience negotiating with the North Koreans
and who could help current policymakers more accurately read North
Korean signals. Even if it has arrived at a diplomatic opening by
accident, the administration must now work with these experts to
devise a strategy for diplomacy, including coming up with objectives
that are more limited than full denuclearization. U.S. policymakers
should also press the intelligence agencies not only to offer their best
assessments of North Korean intentions but also to be explicit about
the gaps and shortcomings in them.
m
Policymakers should also work with the intelligence community to
examine how existing U.S. policies may look from Pyongyang. They
should consider how those perceptions (or misperceptions) serve to
hi
reinforce or undermine U.S. objectives and how future changes in
policy may be viewed. There is an all-too-human tendency to assume
that an action will be seen as it is intended to be seen; intelligence
ha
analysts should help policymakers actively counter this tendency,
especially when it comes to potential military strikes.
In addition to trying to understand the assumptions of North Korean
iT
policymakers, U.S. policymakers must work to understand their own.
They should go back and examine them, carefully mapping the causal
logic of any move they might make. By recognizing the flaws or weak-
nesses in their own assumptions, they will be better prepared to react
Al
nimbly to unexpected North Korean concessions or to manage the

situation if engagement abruptly fails. Diplomatic encounters are not
likely to unfold according to script, and if the United States and North
od
Korea are not willing to be surprised and learn, they can neither take
advantage of opportunities nor avoid making worst-case inferences
that would rule out further discussions.
The prospect of grave misperceptions should instill a degree of
so
caution in U.S. officials and prompt them to insert the equivalent of

speed bumps into the policy process, above all in a moment of crisis.
If the U.S.–North Korean relationship begins to deteriorate further
and escalate toward conflict, they should pause to consider the prob-
Ma
lems of perception. Why did North Korea enter into direct talks if it
didn’t intend to denuclearize? What assumptions were made about
the North that must now be interrogated? Such questions may seem
basic, but they too often go unasked. Simply by considering them,
U.S. policymakers can reduce the risk that flimsy credibility and haz-
ardous misperceptions will bring about an unnecessary war.∂
May/June 2018 117

Opioids of the Masses

Stopping an American Epidemic From
Going Global
Keith Humphreys, Jonathan P. Caulkins, and
m
Vanda Felbab-Brown
I hi
n 2016, nearly 50,000 people died of opioid overdoses in the United
States, and, per capita, almost as many died in Canada. From 2000 to
ha
2016, more Americans died of overdoses than died in World War I
and World War II combined. Yet even these grim numbers understate
the impact of opioid abuse, because for every person who dies, many more
iT
live with addiction. The White House Council of Economic Advisers
has estimated that the epidemic cost the U.S. economy $504 billion in
2015, or 2.8 percent of GDP.
This public health story is now common knowledge. Less well known
Al
is the growing risk that the epidemic will spread across the globe. Facing
a backlash in the United States and Canada, drug companies are turning
their attention to Asia and Europe and repeating the tactics that created
od
the crisis in the first place. At the same time, the rise of fentanyl, a
highly potent synthetic opioid, has made the outbreak even deadlier
and begun to reshape the global drug market, a development with
significant foreign policy implications. As a result, the world is on
so
the cusp of a global opioid epidemic, driven by the overuse of legal pain-
killers and worsened by the spread of fentanyl, that could mark a public
health disaster of historic proportions.
Yet in the face of this terrifying possibility, the world has remained
Ma
largely complacent. Governments and international organizations

KEITH HUMPHREYS is Esther Ting Memorial Professor and Professor of Psychiatry at
Stanford University.
JONATHAN P. CAULKINS is H. Guyford Stever University Professor of Operations
Research and Public Policy at Heinz College at Carnegie Mellon University.
VANDA FELBAB-BROWN is a Senior Fellow at the Brookings Institution.
urgently need to learn the lessons of the North American crisis. The
first and most important of those is that the more opioids flood the
market, the bigger the problem will be—and so governments must
couple efforts to treat addicted individuals with efforts to curb supply.
That will require them to crack down on pharmaceutical companies
that abuse their positions and to take aggressive steps to regulate the
sale and marketing of opioids. And the rise of synthetic opioids means
that governments must rethink the role that fighting drug trafficking
plays in their foreign policies.
m
THE PRESCRIPTION AND THE DAMAGE DONE
Opioids derived from the opium poppy have long been used success-
hi
fully to relieve short-term pain from surgery and to comfort patients
with terminal conditions, including cancer. Problems can arise,
however, when they are prescribed for prolonged periods to treat
ha
nonterminal chronic pain. Extended use raises the risk of addiction
and increases tolerance, meaning that patients need more and more
of the drug to achieve the same effect. Opioids are so dangerous
iT
because the difference between a lethal dose and a normal one is
only a modest multiple. Worse still, a dose that works today can kill
tomorrow, especially if the patient has taken other drugs, such as
alcohol or benzodiazepines (a class of drugs that includes Valium
Al
and Xanax). And because an overdose kills by depriving the body

of oxygen, even those who survive risk serious organ damage.
Opioids are widely misused for three reasons. First, clinicians
od
can’t objectively measure pain in the way they can body temperature
or blood pressure, so they rely on patients’ accuracy and honesty in
judging pain severity. Second, opioids are highly prized, even by
healthy people, because of the euphoria they create. And third, anyone
so
without scruples can sell prescription opioids on the black market.

After several epidemics involving legal medications in the nine-
teenth century, in 1914, the U.S. government banned most distribution
of opioids. For nearly 50 years after that, North America saw few
Ma
opioid-related problems besides heroin use in a few U.S. and Canadian

cities. In the late 1960s and 1970s, heroin spread to more cities, but then
stalled. From the 1970s to the mid-1990s, the number of dependent
users was fairly stable.
All of that changed in the mid-1990s. Several pharmaceutical compa-
nies began aggressively marketing opioids to treat chronic, not just acute,
May/June 2018 119

pain, claiming they carried little risk of addiction. The most infamous
was Purdue Pharma, the maker of OxyContin, but other companies
rolled out similar products. As the New York Times journalist Barry
Meier and the psychiatrist Anna Lembke have documented, their tactics
were nearly as ruthless as those of any drug dealer. During the period
of mostly uncritical enthusiasm for prescription opioids, the largess of
m
manufacturers flowed to virtually every organization that should have
been protecting the public, including health-care regulators, profes-
sional medical societies, medical school education programs, elected
hi
officials, patient advocacy groups, medical opinion leaders, and state
medical boards.
A study by the Center for Public Integrity and the Associated Press
ha
found that from 2006 to 2015, the pharmaceutical industry spent
$880 million on campaign contributions and lobbying state legislatures,
220 times as much as the amount spent by groups trying to limit opioid
iT
use. In 2013, the marketing expenditure of each of the ten largest phar-
maceutical companies exceeded the entire budget of the U.S. Food
and Drug Administration.
The resulting lax regulatory environment, coupled with a sincere
Al
concern that many patients were living with unacceptable levels of

pain, released a tsunami of opioid prescriptions. Consumption in the
United States quadrupled from 1999 to 2014, peaking at 250 million
od
so
Ma
prescriptions per year. By 2010, the U.S. health-care system was dis-
pensing enough opioids each year for everyone in the country to be
medicated round the clock for a month.
In 2007, federal prosecutors secured a guilty plea from Purdue
Pharma for knowingly deceiving doctors and patients. The courts
fined the company $600 million and required it to more accurately
m
describe the risks and benefits of OxyContin. Still, that fine is dwarfed
by the estimated $35 billion of revenue that Purdue has earned from the
drug, and the three executives who pled guilty avoided jail sentences.
hi
By contrast, someone convicted of selling 100 grams of heroin—worth
between $2,500 and $15,000—faces a federal mandatory minimum
sentence of five years. Other fines paid by opioid manufacturers and
ha
distributors in the United States and Canada have mostly been under
$25 million—small enough that companies could treat them as just a
cost of doing business.
iT
A recent scandal reveals the extent to which the industry has captured
regulators. In 2016, Eric Eyre, a determined West Virginia journalist,
discovered that drug companies had shipped nearly nine million opioid
pills to a pharmacy in Kermit, West Virginia, a town with fewer than
Al
400 residents. The Drug Enforcement Administration was already

investigating why the companies that distributed these opioids did
not report or stop the suspicious shipments. But the opioid distributors
od
responded by hiring away DEA officials, many of them from the division
responsible for regulating the industry, and by lobbying friendly poli-
ticians. In 2016, Congress passed legislation curtailing the DEA’s ability
to pursue any such cases.
so
One of the leaders in that effort, Tom Marino, a Republican congress-

man from Pennsylvania and a recipient of extensive campaign donations
from the industry, was even nominated by President Donald Trump
to serve as the director of the Office of National Drug Control Policy.
Ma
Marino withdrew when The Washington Post and 60 Minutes broke the
story of his involvement with the bill, but his nomination showed that
the administration was willing to put its drug policy in the hands of a
creature of the industry. And despite Marino’s withdrawal, the pro-
industry policy created by Congress remains firmly in place.
May/June 2018 121

Keith Humphreys, Jonathan P. Caulkins, and Vanda Felbab-Brown
SELLING NIRVANA
The liberalization of painkiller prescriptions has fueled a black market
thanks to a straightforward economic calculus. The black market pays
about $1 per milligram for oxycodone pills. A typical daily dose for a
long-term opioid patient is 100 milligrams, or $36,500 worth of pills
a year. Thus, a patient with a $30 copay for a 30-day prescription pays
$1 a day for medicines that can then be sold for $100. Those skilled at
working the system can obtain prescriptions for hundreds of milligrams
a day, either from one doctor or by doctor shopping.
m
Although most patients are not criminals, many criminals pretend to
be patients. Furthermore, even otherwise honest people can be tempted
into crime when the payoff is that great. Just by lying about a medical
hi
condition that doctors cannot verify with any objective test, a patient
can obtain prescriptions worth tens of thousands of dollars.
Even for those who truly need the drugs, the black market offers
ha
attractive opportunities. A single milligram of pure heroin usually
sells for under $1, slightly less than the price that a milligram of oxy-
codone commands, even though heroin is roughly three times as potent.
iT
Selling prescription pills and buying heroin thus lets the user more
than triple his or her opioid consumption or, alternatively, keep the same
rate of consumption and buy groceries or pay the rent.
This creates a vicious cycle: addicted people obtain prescriptions,
Al
which they sell to others, who become addicted and seek their own
prescriptions, which they then sell in turn, addicting still others. This
process has driven a boom in demand. Heroin use, which had stayed
od
stable for many years, surged as people who had become addicted to
prescription opioids shifted to black-market alternatives.
Beginning around 2014, black-market fentanyl compounded matters.
Fentanyl did not create the crisis: prescribed opioids were already killing
so
tens of thousands of people. But it threw gasoline on the fire. Dealers

began cutting heroin with cheap diluents and then adding fentanyl—
which is less expensive and more potent than other opioids—to raise the
strength of the mixture before selling it as heroin. Deaths in the United
Ma
States from synthetic opioids other than methadone (the category that
includes fentanyl) jumped from 3,105 in 2013 to 20,145 in 2016.
A WORLD OF PAIN
So far, this dynamic has been most pronounced in the United States
and Canada. The United States has an unusually corporate-friendly
policy environment, but Canada has a stronger tradition of state regu-

lation. So other countries would be foolish to assume that something
similar could not happen to them.
U.S. pharmaceutical companies are already working to expand
foreign sales. The Sackler family, which owns Purdue Pharma, also
owns Mundipharma, a worldwide network of pharmaceutical com-
panies that is not constrained by the U.S. federal court decision
against Purdue. As detailed by the Los Angeles Times, Mundipharma
is active in Australia, Brazil, China, Colombia, Egypt, Mexico, the
m
Philippines, Singapore, South Korea, and Spain and is using the same
aggressive sales tactics that Purdue Pharma employed in the United
States. It runs training seminars in which representatives encourage
hi
doctors to overcome their “opiophobia.” It sponsors ad campaigns
that promote pharmaceutical treatment for pain. It has hired con-
sultants, local opinion leaders, and an army of sales representatives
ha
to promote its products.
The Los Angeles Times reported that Mundipharma consultants have
claimed that OxyContin presents only a small risk of addiction, the
iT
assertion for which Purdue Pharma was fined in the United States.
As David Kessler, a former U.S. Food and Drug Administration com-
missioner, told the Los Angeles Times, Mundipharma’s strategy is “right
out of the playbook of Big Tobacco. As the United States takes steps
Al
to limit sales here, the company goes abroad.”

In May 2017, a bipartisan group of 12 members of the U.S. Congress
wrote to the director general of the World Health Organization (WHO)
od
to warn against the predations of Mundipharma. But it is not clear

that the world heard the message. Already, several countries appear to
be falling into the trap of opioid use. In Germany, prescription rates
have risen to nearly the Canadian level. In Australia, OxyContin pre-
so
scriptions have increased sharply, and Mundipharma has contributed

funding to the development of national pain-management strategies.
In much of the developing world, where states are weaker and drug
manufacturers have a freer hand, the outlook is even worse.
Ma
A NEW PRESCRIPTION
To prevent the North American crisis from growing into a global one,
several steps must be taken now, before it is too late. First, jurisdictions
that decide to liberalize their prescription opioid policies must plan to
spend more on drug treatment and other services for those struggling
May/June 2018 123

with opioid addiction, rather than playing catch-up after the problem
has grown. But just treating addicted people will not solve the problem.
Governments must also address the incentives pharmaceutical compa-
nies have for profiting from oversupplying and overpromoting opioids.
A simple, although radical, policy would be to ban for-profit com-
panies from selling prescription opioids for extended home use, allowing
only the government or nonprofit organizations to do so. A less extreme
idea would involve a ban on branding. Regulators could require phar-
macies to sell only generic products or,
m
Legal drugs can bring at the least, prevent manufacturers and
retailers from advertising their drugs.
death on a scale vastly Although such bans are largely uncon-
hi
surpassing the effects stitutional in the United States, many
of illegal ones. countries do have the power to restrict
ha advertising. (The restrictions on pro-
motion that have worked in the United
States have come primarily from legal settlements such as those imposed
on the tobacco industry, not legislation.)
iT
A more complex alternative would be to develop a distinct and
more stringent set of regulations for opioids that would recognize the
unique challenges they pose. Whereas for most drugs it makes sense
for regulators to consider only whether the drugs are safe and effective
Al
for patients when used as directed, that standard is woefully inadequate

for drugs that are as easily and widely abused as opioids. Regulators
should take all foreseeable consequences into account, not just those
od
likely to follow from the proper use of prescribed opioids.

Tighter regulation could also include new ways of calculating fines
for drug companies that break the law. There is little evidence that
one-off penalties change corporate behavior. But agreements that made
so
fines contingent on outcomes might. If opioid manufacturers faced,

say, a $1 million fine for every overdose involving one of their products,
they would have an enduring incentive to regulate themselves.
The WHO and the United Nations could help in two ways. Many
Ma
low- and middle-income countries face the opposite problem of rich

ones: they do not use enough opioids, a shortfall that leads to unneeded
suffering, particularly for the terminally ill. Rather than let profit-
seeking corporations exploit that opportunity and push the needle too
far in the other direction, the WHO or another UN agency should provide
generic morphine to patients in those countries as a humanitarian
priority. The WHO and the UN should also warn their members against
pharmaceutical companies with expansionist visions and questionable
ethics. Just as pharmaceutical companies send their sales representa-
tives to promote their drugs, the WHO and other public interest groups
could send representatives to explain how and why the current opioid
epidemic started and escalated.
TURNING OFF THE TAP

Drug policy experts often dismiss attempts to cut down on supply,
m
arguing that governments cannot arrest their way out of drug prob-
lems. That is largely correct when it comes to street dealers. Locking
up people who are easily replaced does little to stem the flow or use of
hi
most drugs. Furthermore, prisoners who depend on opioids lose their
tolerance while in prison, and some then die of overdoses when they
are released. ha
Luckily, there is a wide space between the two extremes of waging
war on drug dealers and users and turning over the keys of public health
and safety to rapacious companies that profit by pushing addictive
iT
drugs. Authorities can stop a doctor who prescribes illegally or irre-
sponsibly just by revoking his or her license, no expensive prison cell
needed. The tactic works because the black market cannot replace those
doctors. This practice is already used, but such investigations should be
Al
given greater resources. Targeting corporations is even cheaper, since

the resulting fines are often larger than the costs of investigation and
prosecution. To make these investigations easier, Congress should re-
od
peal the law it passed in 2016 that restricted the DEA’s power. Other
countries should make sure that their law enforcement agencies are
empowered to investigate and prosecute gross corporate malfeasance.
A key lesson of the current epidemic repeats one from the history
so
of tobacco: legal drugs pushed by corporations can bring death on a

scale vastly surpassing the effects of illegal ones. Calls to legalize rec-
reational opioids that fail to grapple with this reality do not deserve
to be taken seriously.
Ma
Governments will also need to recognize a central lesson of public

health research: epidemics cannot be ended simply by managing indi-
vidual cases of the disease. Take Vancouver, British Columbia, which
has thoroughly embraced the idea that providing health and social
services can solve drug problems. Residents have access to universal
health care, drug treatment programs, syringe exchanges, supervised
May/June 2018 125

rooms in which they can use drugs, the overdose rescue drug naloxone,
and opioid substitution treatments, including government-provided
heroin. The city and the province have positioned themselves as world
leaders in this harm-reduction approach. Yet the overdose death rate
in the Vancouver health service delivery area rose by 36 percent in
2016, reaching 53.8 deaths per 100,000 residents last year. That is
similar to the rate in West Virginia, which has few services and is
the U.S. state that has been the hardest hit, where 52 people died of
overdoses for every 100,000 residents in 2016. Services for people
m
addicted to opioids are essential. But the lesson of Vancouver is that
expanding health and social services without addressing opioid sup-
ply is akin to emptying an overflowing bathtub with a thimble without
hi
turning down the tap.
FUEL ON THE FIRE ha

The rise of fentanyl is both making the North American crisis worse
and complicating efforts to forestall the emerging global one. For drug
traffickers and dealers, fentanyl offers many advantages and could
iT
reshape the global opioid market in ways that would have important
consequences for foreign policy and international relations, not just
public health. Traditional illicit drugs, such as heroin and cocaine,
flow through long distribution chains that include as many as ten
Al
transactions between the farmer and the user. Parts of those chains,
especially the links crossing international borders, often favor large
criminal organizations that can intimidate or co-opt authorities.
od
Fentanyl, by contrast, can be produced secretly anywhere there is a

chemical industry, not just where poppies grow.
Fentanyl is also far less labor-intensive to make than heroin, so
its sponsors gain significantly less political capital by providing
so
jobs than do the sponsors of illegal poppy cultivation. Disrupting

fentanyl production is therefore less politically costly and has fewer
negative side effects for counterinsurgency and counterterrorism
efforts than eradicating drug crops. And fentanyl is so concentrated
Ma
that it can be mailed a kilogram at a time. That radically reduces

transportation costs and the role and power of organizations whose
comparative advantage lies in smuggling large shipments across
international borders.
These factors will drive down prices, raising consumption. But the
consumption of opioids tends to rise in smaller proportion to the fall
in prices. (A ten percent decrease in the price, for example, leads to

an increase in use of less than ten percent.) Hence, fentanyl will tend
to depress producers’ revenues and power. In countries that allow
drug companies to market opioids aggressively, however, that effect
will likely be more than offset by an intensifying demand for black-
market opioids.
Fentanyl also has the potential to alter the balance of power among
drug-trafficking organizations. Mexico’s Sinaloa cartel, for example,
which has long dominated the distri-
m
bution of heroin and cocaine in the
United States, could well lose market
The largess of manufacturers
share to its rival Jalisco New Generation, flowed to virtually
hi
which embraced fentanyl early, back in every organization that
2014. That is not necessarily good news, should have been
because the Sinaloa cartel has tradition-
ha
ally been less violent than Jalisco New protecting the public.
Generation. If that group challenges
Sinaloa’s dominance north of the Mexican border, drug-related violence
iT
within the United States could well increase, both among dealers and
against law enforcement and public officials.
Sinaloa has begun to adapt by moving aggressively into the dis-
tribution of fentanyl, at least on the eastern coast of the United
Al
States. It is a major supplier of the drug to New York City, for ex-
ample, where drug overdose deaths last year were four times as many
as homicide deaths. That’s a worrying trend, but at least Sinaloa
od
continues to shun violence in the United States. For example, it

sometimes employs nonviolent, middle-aged couples without prior
criminal records to distribute fentanyl, sending them on one-time
drug runs by train or car. That makes stopping them harder, but it
so
keeps violence down.

Fentanyl’s rise could also split the global drug market. In affluent
places where heroin is expensive, including Canada, the United States,
and Europe, users might switch to cheaper synthetics. That would
Ma
leave countries that grow poppies, such as Afghanistan and Myanmar,

primarily supplying neighboring countries with high addiction rates,
such as China, Iran, Pakistan, and Russia. Synthetics are less likely
to make inroads in those countries because they are close to heroin
production areas and have lax law enforcement and porous borders,
so heroin is far cheaper.
May/June 2018 127

All of this could reshape international relationships. If U.S. con-

sumption shifts from plant-based to synthetic drugs, Washington’s
interest in eradicating drug crops could wane, removing a decades-old
source of tension between the United States and Latin American
countries. From 2001 to 2009, U.S. programs to eradicate poppy fields
in Afghanistan, where a large proportion of the economy depends on
drugs, drove farmers to embrace militant and terrorist groups. Aban-
doning that approach, a major policy breakthrough of the Obama
administration, has helped with counterinsurgency and nation building.
m
The Trump administration should not resurrect it. If synthetic opioids
replaced cocaine consumption or a synthetic cocaine analogue were
developed, the coca-producing countries of Bolivia, Colombia, and
hi
Peru could see similar effects.
It will be much harder to persuade larger and more powerful
synthetic-drug-producing countries, such as China and India, to crack
ha
down on manufacturers. And because U.S. and Canadian relations
with China and India cover far more issues than those with South
American countries, drug control efforts would have to compete against
iT
other interests.
A bifurcation in international drug markets would exacerbate splits
over global drug policy, heightening differences between the interests
of hawkish countries in Asia and the Middle East and those of more
Al
liberal ones in Europe and Latin America. International drug control

would likely climb up the agendas of countries whose populations still
relied on plant-based drugs, especially China and Russia. Russia, which
od
is suffering from an opioid epidemic revolving around Afghan heroin,

might well continue pressuring the United States to eradicate poppy
fields in Afghanistan and even take it upon itself to do so. Moscow
would likely view controlling drug supplies as more important than
so
limiting the political capital the Taliban can gain from fighting to pro-
tect poppy fields. Already, Russia is courting the Taliban, perceiving
the group as a lesser danger in Afghanistan than the Islamic State
(also known as ISIS). Washington would be wise to engage Beijing and
Ma
Moscow to educate them on the mistakes the United States has made
in its fight against drugs that they should avoid and the successes they
should replicate.
Drug control is becoming an increasingly important aspect of the
U.S.-Chinese relationship. In March 2017, China banned the production
of four variants of fentanyl, largely in response to engagement from
the Obama administration. But the Trump administration has failed

to expand that dialogue. It needs to work with China to curb the illegal
shipment of fentanyl to the United States and the common practice
of producing new, slightly altered drugs to avoid legal restrictions.
Drug control discussions with India—an equally large producer of
precursors of illegal drugs and, increasingly, of synthetic ones—are
far less advanced. That’s because India remains in profound denial
about its part in the global drug trade. It refuses even to acknowledge
its role in the supply of illegal precursors, let alone of synthetics, and
m
has failed to adequately crack down on the factories that illegally
produce and distribute them. In any event, the production of syn-
thetic drugs won’t remain confined to the developing world. Already,
hi
many are made in rich countries, especially in western Europe. If
this trend continues, drug-consuming countries, which tend to be
wealthy and powerful, may no longer need to pressure producing
ha
countries, which tend to be neither, because the problem will have
moved closer to home.
From a foreign policy perspective, although the rise of synthetic
iT
opioids presents new dangers, it will give countries opportunities to
improve important international relationships. But when it comes
to public health, the picture is consistently grim: a burgeoning opioid
supply—either of prescription pain medications or of black-market
Al
opioids—could create a global pandemic, subjecting millions of people

to disabling and potentially lethal addiction. That outcome is still
avoidable, but only if the world’s governments stop sleepwalking
od
toward disaster.∂
so
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May/June 2018 129

Globalization Is Not
in Retreat
Digital Technology and the Future of Trade
m
Susan Lund and Laura Tyson
B
hi
y many standard measures, globalization is in retreat. The
2008 financial crisis and the ensuing recession brought an end
to three decades of rapid growth in the trade of goods and
ha
services. Cross-border financial flows have fallen by two-thirds. In many
countries that have traditionally championed globalization, including
the United States and the United Kingdom, the political conversation
iT
about trade has shifted from a focus on economic benefits to concerns
about job loss, dislocation, deindustrialization, and inequality. A once
solid consensus that trade is a win-win proposition has given way to
zero-sum thinking and calls for higher barriers. Since November 2008,
Al
according to the research group Global Trade Alert, the G-20 countries
have implemented more than 6,600 protectionist measures.
But that’s only part of the story. Even as its detractors erect new
od
impediments and walk away from free-trade agreements, globalization

is in fact continuing its forward march—but along new paths. In its
previous incarnation, it was trade-based and Western-led. Today,
globalization is being driven by digital technology and is increasingly
so
led by China and other emerging economies. While trade predicated

on global supply chains that take advantage of cheap labor is slowing,
new digital technologies mean that more actors can participate in
cross-border transactions than ever before, from small businesses to
Ma
multinational corporations. And economic leadership is shifting east
SUSAN LUND is a Partner at McKinsey & Company and a leader of the McKinsey Global
Institute.
LAURA TYSON is Distinguished Professor of the Graduate School at the Haas School of
Business at the University of California, Berkeley. She served as Chair of the White House
Council of Economic Advisers during the Clinton administration.
Globalization Is Not in Retreat
m
hi
ha
Printed-out kicks: a sneaker produced by a 3-D printer, Germany, March 2018
iT
and south, as the United States turns inward and the EU and the United
Kingdom negotiate a divorce.
In other words, globalization has not given way to deglobalization;
it has simply entered a different phase. This new era will bring economic
Al
and societal benefits, boosting innovation and productivity, offering

people unprecedented (and often free) access to information, and
linking consumers and suppliers across the world. But it will also be
od
disruptive. After certain sectors fade away, certain jobs will disap-
pear, and new winners will emerge. The benefits will be tangible and
significant, but the challenges will be considerable. Companies and
governments must prepare for the coming disruption.
so
THE NEW ERA

The threads that used to weave the global economy together are fraying.
Beginning in the 1980s, the falling costs of transportation and commu-
Ma
MICHAEL DALD E R / REUT E RS
nication, along with a raft of new multilateral free-trade agreements,

caused international commerce to swell. Between 1986 and 2008,
global trade in goods and services grew at more than twice the pace of
global GDP. For the last five years, however, growth in trade has barely
outpaced global GDP growth. A weak and uneven recovery from the
Great Recession explains part of the trade slowdown, but structural
May/June 2018 131

factors are also to blame. Global value chains, which gave rise to a
growing trade in manufactured parts, have reached maturity; most of
the efficiency gains have already been realized. Although the location
of production will continue to shift among countries in response to
differences in wages and the prices of other factors of production—
from China to Vietnam and Bangladesh, for example—these shifts
will merely change the patterns of trade. They will not increase its
overall volume.
Cross-border financial flows—which include purchases of foreign
m
bonds and equities, international lending, and foreign direct investment—
grew from four percent of global GDP in
1990 to 23 percent on the eve of the fi-
The movement of data is
hi
nancial crisis, but they have since fallen
already surpassing to just six percent. Trade in services,
traditional physical trade ha meanwhile, has increased, but it is grow-
as the connective tissue ing slowly and is unlikely to assume
the role that trade in goods has played
in the global economy. in driving globalization. That’s because
iT
most services simply cannot be bought
and sold across national borders: they are local (dining and construction),
highly regulated (law and accounting), or both (health care).
This is where digital flows come in, from e-mailing and video
Al
streaming to file sharing and the Internet of Things. The movement of

data is already surpassing traditional physical trade as the connective
tissue in the global economy: according to Cisco Systems, the amount
od
of cross-border bandwidth used grew 90-fold from 2005 to 2016, and

it will grow an additional 13-fold by 2023. The number of minutes
of all Skype calls made now equals approximately 40 percent of all
traditional international phone call minutes. Although digital flows
so
today mostly link developed countries, emerging economies are catch-

ing up quickly.
This surge in the movement of data not only constitutes a huge
flow in and of itself; it is also turbocharging other types of flows.
Ma
Half of all trade in global services now depends on digital technology

one way or another. Companies can cut losses on goods in transit by
installing tracking sensors on shipments—by 30 percent or more, in
McKinsey’s experience. They can also reach consumers around the world
without going through retail shops. AliResearch (the research arm of
the Chinese online shopping company Alibaba) and the consulting
firm Accenture project that by 2020, cross-border e-commerce will

reach one billion consumers and total $1 trillion in annual sales.
The countries that led the world during the last era of globalization
may not necessarily be the same ones that thrive in the new one.
Consider Estonia, which has a population of just 1.3 million but has
emerged as a giant in the digital era. Its pioneering e-government
initiative allows Estonians to go online to vote, pay taxes, and appear
in court, all with a digital identity card. Once an economy based
heavily on logging, Estonia is now home to the founders of Skype
m
and other technology start-ups, and it has historically been one of the
fastest-growing economies in the EU.
Digital flows are also upending the corporate world. Giant multi-
hi
national firms have long dominated the trade in goods and services,
but digital platforms have made it easier for smaller firms to muscle
their way in. So-called micro-multinationals can use online market-
ha
places to reach far more customers than ever before; Amazon hosts
two million third-party sellers, and Alibaba hosts more than ten
million. Some 50 million small and medium-sized enterprises use
iT
Facebook for marketing, and nearly 40 percent of their fans are foreign.
Digital platforms and marketplaces such as these are creating vast
new opportunities for small businesses, which form the bedrock of
employment in most countries.
Al
THE RISE OF THE REST

As globalization has gone digital, its center of gravity has shifted.
od
As recently as 2000, just five percent of the companies on the For-

tune Global 500 list, the world’s largest international companies,
were headquartered in the developing world. By 2025, by the
McKinsey Global Institute’s estimate, that figure will reach 45 per-
so
cent, and China will boast more companies with $1 billion or more
in annual revenues than either the United States or Europe. The
United States continues to produce the majority of digital content
consumed in most parts of the world, but that, too, will likely soon
Ma
change, as Chinese Internet giants such as Alibaba, Baidu, and

Tencent rival Amazon, Facebook, and Google. China now accounts
for 42 percent of global e-commerce transactions by value. The
country’s investments in artificial intelligence, while still lagging
behind those of the United States, are more than double Europe’s.
In 2017, China announced an ambitious investment plan designed
May/June 2018 133

to turn the country into the world’s leading center for artificial intel-
ligence research by 2030.
The geography of globalization is even changing within the devel-
oping world. The McKinsey Global Institute predicts that roughly
half of global GDP growth over the next ten years will come from
some 440 rapidly expanding cities and regions in the developing
world, some of which Western executives may not be able to find on
a map, such as the city of Hsinchu in Taiwan or the state of Santa
Catarina in Brazil. Moreover, as many as one billion people in these
m
places will see their incomes rise above $10 a day, high enough to
make them significant consumers of goods and services—at the same
time that tens of millions of Americans, Europeans, and Japanese will
hi
enter retirement and reduce their spending.
The world economy is already adapting to this new reality. Today,
more than half of all international trade in goods involves at least
ha
one developing country, and trade in goods between developing
countries—so-called South–South trade—grew from seven percent
of the global total in 2000 to 18 percent in 2016. So open is Asia
iT
that the region more than doubled its share of world trade (from 15
percent to 35 percent) between 1990 and 2016. Remarkably, more
than half of that trade stays within the region, a similar proportion
to that found in Europe, a much richer region with its own free-
Al
trade zone.
As Washington pulls back from global trade agreements, the rest
of the world is moving forward without it. After the United States
od
withdrew from the Trans-Pacific Partnership, the remaining 11 coun-

tries negotiated their own pact, the Comprehensive and Progressive
Agreement for Trans-Pacific Partnership, which was signed in March.
This version left out 20 provisions that were important to the United
so
States, including ones concerning copyright, intellectual property,

and the environment. Separately, a number of Asian countries are
negotiating the Regional Comprehensive Economic Partnership, a
trade deal that includes all the members of the Association of South-
Ma
east Asian Nations plus Australia, China, India, Japan, New Zealand,
and South Korea—but not the United States. If ratified, this agree-
ment would cover about 40 percent of global trade and nearly half of
the world’s population. Meanwhile, the EU has struck new bilateral
trade arrangements with countries including Canada and Japan, and
it is negotiating one with China. So busy is the EU making such deals,
in fact, that its agricultural, environmental, and labor standards may

soon become the new benchmarks in global trade.
One notable aspect of this realignment is that China has gained
a greater voice as a champion of globalization. To provide a counter-
weight to Washington-based economic institutions, Beijing has
launched numerous initiatives of its own, including the Asian Infra-
structure Investment Bank, which has attracted 57 member nations,
many of them U.S. allies that joined over the objection of the
United States. Together with Brazil, India, and Russia, China was
m
a driving force behind the creation of the New Development Bank,
an alternative to the World Bank. The China-Africa Investment
Forum, an annual meeting begun in 2016, is gaining momentum as
hi
a platform for deals in Africa. Then there is the Belt and Road
Initiative, China’s $1 trillion plan to add maritime and land links
in Eurasia. Although still at an early stage, it could prompt a major
ha
shift in the pattern of global investment, spurring faster economic
growth across Asia and connecting many countries that the last era
of globalization left behind.
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THE COMING DISRUPTION
Although it will lead to countless new opportunities, the new era of
globalization will also present considerable challenges to individuals,
Al
companies, and countries. For one thing, because openness will be

so rewarded, developing countries now at the periphery of global
connections risk falling further behind, especially if they lack the
od
infrastructure and skills to benefit from digital trade. With global

trade tensions mounting, it is essential to recognize that countries
will reap economic gains not from export surpluses but from both
inflows and outflows. In fact, as in the past, it is precisely the countries
so
that open themselves up to foreign competition, foreign investment,

and foreign talent that stand to benefit the most in the new era.
One consequence of openness has been immigration. In the past
40 years, the number of migrants worldwide has tripled. Today,
Ma
almost 250 million people live and work outside their country of birth,
and 90 percent of them do so voluntarily to improve their economic
prospects, with the remaining ten percent being refugees and asylum
seekers. Economic migrants have become a major source of growth.
According to the McKinsey Global Institute, they contribute approx-
imately $6.7 trillion to the world economy every year, or nine percent
May/June 2018 135

of global GDP—some $3 trillion more than they would have produced

had they stayed in their home countries.
But for some workers, the rapid expansion of trade has led to
stagnant wages or lost jobs. As the economists David Autor, David
Dorn, and Gordon Hanson have found, of the roughly five million
U.S. manufacturing jobs lost between 1990 and 2007, a quarter dis-
appeared because of trade with China. And as the economist Elhanan
Helpman has concluded, although globalization explains just a small
part of the rise in inequality over the last few decades, it has still
m
contributed to it, by making the skills of experts and professionals
more valuable while lowering the wages of workers with less education
and more generic skills. Globalization has its winners and losers, and
hi
in theory, the gains should be big enough to compensate the losers.
But in practice, the benefits have rarely been redistributed, and the
communities and workers harmed by globalization have turned to
ha
populism and protectionism.
The new era of globalization will also prove disruptive, in that it
will intensify competition; indeed, it already has. New ideas now
iT
flow around the world at an astonishing speed, allowing companies
to react to demand faster than ever before. Fashion retailers such as
H&M and Zara can take a trendy idea and turn it into clothing on
the rack in just weeks, rather than the months it used to take. The flip
Al
side is that the period during which a company can profit from an
innovation before competitors copy it has shrunk dramatically. As a
result, product life cycles have become shorter—by 30 percent over
od
the past 20 years in some industries. Meanwhile, the variety of products

is exploding, and many industries are adopting “mass customization,”
using technology to produce built-to-order goods without sacrificing
economies of scale.
so
The growing economic clout of developing countries is also changing

the rules of competition. Companies from emerging economies are
taking a growing share of global revenue, and their governance struc-
tures differ from those of companies in the United States and other
Ma
developed countries. In emerging markets, firms are more often state-

or family-owned and less often publicly traded. They therefore face
less pressure to hit quarterly profit targets and can make longer-term
investments that take time to pay off. Developing-world companies
also tend to enjoy lower costs of capital, lower taxes, and lower dividend
payouts, enabling them to sell goods and services at smaller profit
margins compared with U.S. and European companies. The balance

sheets reveal the difference: for companies in advanced economies,
improvements in overall profits stem largely from growing mar-
gins, whereas for companies in emerging markets, they come from
growing revenues.
Because the rise of digital flows is increasing competition in
knowledge-intensive sectors, the importance of intellectual property
is growing, generating new forms of competition around patents.
One example is the development of
m
“patent thickets,” clusters of overlap-
ping patents that companies acquire
In the new era, digital
to cover a wide area of economic capabilities will serve as
hi
activity and impede competitors. rocket fuel for a country’s
Another is the practice of “patent economy.
fencing,” whereby firms apply for
ha
multiple patents in related areas with
the intention of cordoning off future research in them. The smart-
phone industry and the pharmaceutical industry have been particularly
iT
hard hit by these tactics.
As digital flows grow, some governments have turned to digital pro-
tectionism. Invoking concerns about cybersecurity, China enacted a
new law in 2016 that requires companies to store all their data within
Al
Chinese borders, pass security reviews, and standardize the collection

of personal information, effectively giving the government access to
vast amounts of private data. A similar law went into effect in Russia
od
in 2015. Rules requiring companies to build data servers in each

country where they operate threaten their economies of scale and
increase their costs. Not surprisingly, these and other forms of digital
protectionism inhibit economic growth—reducing growth rates by
so
as much as 1.7 percentage points, according to the Information Tech-

nology and Innovation Foundation.
Digital technologies are also affecting companies’ decisions about
where to locate their factories. For most manufactured products, digi-
Ma
tally driven automation is making labor costs less relevant, reducing

the appeal of global supply chains premised on low-cost foreign workers.
Today, when multinational companies choose where to build plants,
they more heavily weigh factors other than labor costs, such as the
quality of the infrastructure, the distance to consumers, the costs of
energy and transportation, the skill level of the labor force, and the
May/June 2018 137

regulatory and legal environment. As a result, some types of production

are shifting from emerging markets back to advanced economies,
where labor costs are considerably higher. (In 2015, for instance, Ford
moved its production of pick-up trucks from Mexico to Ohio.) Three-
dimensional printing could have a similar effect. Already, companies
are using 3-D printers to produce parts for tankers and gas turbines in
the locations where they are needed. These trends are good news for
the United States and other developed countries, but they are bad
news for low-wage countries. It’s now far less clear that other developing
m
countries in Africa and Asia will be able to follow the path that China
and South Korea did to move tens of millions of workers out of low-
productivity agriculture and into higher-productivity manufacturing.
hi
BE PREPARED
In the new era, digital capabilities will serve as rocket fuel for a country’s
ha
economy. Near the top of the policy agenda, then, should be the
construction of robust high-speed broadband networks. But govern-
ments should also create incentives for companies to invest in new
iT
digital technologies and in the human capital they require, especially
given how low productivity growth has stayed. Since digital literacy
will be even more essential than it already is, schools will have to
rethink their curricula to emphasize digital skills—for example, intro-
Al
ducing computer coding in elementary school and requiring basic

engineering and statistics in secondary school.
When negotiating trade agreements, policymakers will need to
od
make sure that issues such as data privacy and cybersecurity figure
prominently. Currently, rules vary widely from place to place—the
EU’s new data regulations that are scheduled to come into effect this
year, for example, are far more restrictive than those in the United
so
States—and so governments should seek to harmonize them when

possible. The trick will be to strike the right balance between protect-
ing individual rights and remaining open to digital flows. Negotiators
should also seek to remove tariffs and other barriers that have hampered
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trade in computer hardware, software, and other knowledge-intensive

products. Laws requiring data to be stored locally are particularly
burdensome in the era of cloud storage. And to make it easier for
smaller companies to ship smaller quantities of goods globally, customs
regulations will need to be revamped to do away with much of the
red tape that exists. The World Trade Organization’s Trade Facilitation
Agreement, which came into effect in 2017, has helped simplify the
import-export process, but there is room to broaden it.
In order to maintain political and societal support for digital global-
ization, governments will have to make sure that its benefits are dis-
tributed widely and that those who have been harmed are compensated.
(Indeed, it was partly the failure to do this during the last era of
globalization that led to the populist backlash rocking the United
States and other countries today.) To help those displaced by global-
ization both old and new, governments should offer temporary income
m
assistance and other social services to workers as they train for new
jobs. Benefits should be made portable, ending the practice of tying
health-care, retirement, and child-care benefits to a single employer
hi
and making it easier to change jobs. Finally, governments should
expand and improve their worker-training programs to teach the
skills needed to succeed in the digital era, a move that would reverse
ha
the decline in spending on worker training that has taken place over
the past decade in nearly all advanced countries.
Work-force training alone will not solve the problems faced by
iT
smaller communities built on declining industries; what’s also needed
are initiatives to revitalize local economies and nurture new industries.
At the same time, governments should recognize that the geography of
employment is changing. In the United States, for example, the jobs
Al
are moving from smaller Midwestern cities to faster-growing urban

areas in the South and the Southwest. So the goal should be to make it
easier for people to move to where the jobs are—for example, by offer-
od
ing one-time relocation payments to help defray the costs of moving.

The era of digital trade will also pose considerable challenges for
the private sector. Setting aside the serious problem of cyberattacks,
companies will need to invest more in digital technologies, including
so
automation, artificial intelligence, and advanced analytics, in order to

remain competitive. That will mean developing their own digital
capabilities and partnering with, or acquiring, digital players. Success-
ful global companies, whether large or small, will also need to compete
Ma
strenuously in the global battle for talent, especially for top managers
who have both an understanding of technology and an international
perspective. Firms can gain an edge in this battle by spreading their
research and development and other core functions across the world,
a shift that would tap talent from different places, thus ensuring
diversity of thinking.
May/June 2018 139

Corporate strategy will also need to be reset: no longer will compa-

nies be able to rely on highly centralized approaches to producing and
selling their goods now that consumers around the world expect custom-
ized products to meet their tastes. Increasingly, companies will need a
strong local presence and a differentiated strategy in the markets where
they compete. That will require strong relationships with governments
and a commitment to corporate social responsibility.
Globalization is not in retreat. A revamped version of it, with digi-
tal underpinnings and shifting geopolitics, is already taking shape. In
m
its last incarnation, globalization became a battleground for opposing
forces: on one side stood the political and business elites who bene-
fited the most, and on the other stood the workers and communities
hi
that suffered the most. But while debates raged between these two
groups about the effects of globalization, globalization itself proceeded
apace. Today, the same debates about globalization’s effects on employ-
ha
ment and inequality continue, even as its new, digital form is gaining
momentum. Rather than relitigating old debates, it is time to accept
the reality of the new era of globalization and work to maximize its
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benefits, minimize its costs, and distribute the gains inclusively. Only
then can its true promise be realized.∂
Al
od
so
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Where Myanmar
Went Wrong
From Democratic Awakening to
Ethnic Cleansing
m
Zoltan Barany
L hi
ate last year, when news broke that Myanmar’s military had
ha
been systematically killing members of the country’s Muslim
Rohingya minority, much of the world was shocked. In recent
years, Myanmar (also known as Burma) had been mostly a good news
iT
story. After decades of brutal dominance by the military, the country had
seen the main opposition party, the National League for Democracy,
score an all-too-rare democratic triumph, winning the 2015 national
elections in a landslide. The NLD’s leader, Aung San Suu Kyi, an inter-
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nationally celebrated dissident who had received the 1991 Nobel Peace
Prize for her efforts to democratize Myanmar, became Myanmar’s
de facto head of state. Many analysts and officials concluded that the
od
county was finally on the path to democratic rule. Support poured

in from Western democracies, including the United States. Myanmar
had long been isolated, relying almost exclusively on China, which
was content to turn a blind eye to human rights abuses. Now, many
so
hoped, Suu Kyi would lead the country into the Western-backed
international order.
But such hopes overlooked a fundamental reality, one that was brought
into stark relief by the slaughter of the Rohingya: Myanmar’s generals
Ma
continue to control much of the country’s political and economic life.

Suu Kyi must strike a delicate balance, advancing democratic rule with-
out stepping on the generals’ toes. Her government has no power over
ZOLTAN BARANY is Frank C. Erwin, Jr., Centennial Professor of Government at the

University of Texas and the author of How Armies Respond to Revolutions and Why.
May/June 2018 141

Zoltan Barany
the army and can do little to end the military’s brutal campaign against
the Rohingya—which, in any event, enjoys massive popular support.
Yet Suu Kyi has taken the bad hand she was dealt and made it worse.
She has adopted an autocratic style. She has failed to make progress in
the areas where she does have influence. And she has alienated erst-
while allies in the West.
CITIZENS OF NOWHERE
Myanmar, which has a population of 54 million, officially recognizes
m
135 ethnic groups—but not the Rohingya. In fact, Myanmar authorities,
including Suu Kyi, refuse to even use the term “Rohingya.” But the
Rohingya are indisputably a distinct group with a long history in
hi
Myanmar. They are the descendants of people whom British colonial
authorities, searching for cheap labor, encouraged to emigrate from
eastern Bengal (contemporary Bangladesh) to the sparsely populated
ha
western regions of Burma in the nineteenth and early twentieth cen-
turies. Today, there are around 2.5 million Rohingya, who constitute
the world’s largest stateless population. But fewer than half a million
iT
currently reside in Myanmar; the rest have fled decades of official
repression and exclusion, often crossing the border into Bangladesh,
where they inhabit sprawling, squalid refugee camps. Those who have
remained in Myanmar are a subset of the country’s Muslim community.
Al
The majority of Myanmar’s Muslims live in urban areas, speak Burmese,

have Burmese names, and are Myanmar citizens. The Rohingya are
different: most speak a dialect of Bengali, have traditionally Muslim
od
names, and have never received citizenship. The Rohingya in both

Bangladesh and Myanmar have led unusually difficult lives even by the
region’s humble standards, marked by poverty, the absence of legal
status, and multifaceted discrimination. Owing to their lack of resources
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and extreme vulnerability, the Rohingya have largely failed in their

attempts at political mobilization, which have generated further resent-
ment against them. For instance, the 1950–54 Rohingya resistance
movement, which demanded citizenship and an end to discriminatory
Ma
policies, was eventually crushed by the army.

Perhaps not surprisingly, a militant Rohingya faction also emerged:
the Arakan Rohingya Salvation Army, which formed in 2013. Most of
the ARSA’s leaders are from Bangladesh or Pakistan, and some of them
have received training from jihadist veterans of the wars in Afghanistan.
(The group’s chief leader was born in Pakistan and later became an
Where Myanmar Went Wrong
m
hi
ha
Scorched earth: houses burning after sectarian clashes in Sittwe, Myanmar, June 2012
iT
imam in Saudi Arabia.) ARSA likely has fewer than 600 active members.
But Myanmar officials consider it a dangerous organization. In the
early morning hours of August 25, 2017, for example, about 150 ARSA
militants staged coordinated attacks on police posts and an army base
Al
in Rakhine State. The confrontation ended with the deaths of 77 ARSA

fighters and 12 police officers and touched off a crackdown by Myanmar’s
army, which burned down scores of Rohingya villages, murdered
od
dozens of civilians, and launched a campaign of rape against Rohingya

women and girls, according to Human Rights Watch. The UN labeled
the operation ethnic cleansing, and others, including French President
Emmanuel Macron and eight Nobel Peace Prize laureates, have
so
described it as an act of genocide.

By the end of 2017, 650,000 Rohingya had fled to neighboring
Bangladesh, joining approximately 200,000 more who had escaped
earlier waves of discrimination and violence in recent years. The
Ma
large-scale forced migration seemed to have stopped by the end of last

year. And last November, bowing to international pressure, Myanmar
STAF F / R E U T E R S
signed a Chinese-brokered agreement with Bangladesh for the tentative

repatriation of the refugees to newly constructed villages. The fulfill-
ment of this plan is at best questionable, however: it calls for Myanmar
authorities to verify that each refugee did, in fact, reside in Myanmar
May/June 2018 143

Zoltan Barany
before he or she can return. But most Rohingya have no documents to

prove their prior residency. More important, few of them wish to return
to a country that has persecuted them for generations.
DAUGHTER OF THE REVOLUTION

Myanmar’s government, and especially its army, known as the Tatmadaw,
has earned worldwide condemnation for the campaign against the
Rohingya. Last September, the UN’s top human rights official, Zeid
Ra’ad al-Hussein, denounced the army’s “brutal security operation” as
m
a “textbook case of ethnic cleansing.” Critics singled out Suu Kyi for
at best inaction and at worst providing political cover for the army’s
atrocities. Regardless of how one interpreted her motives, it was hard
hi
to square her actions with her status as a human rights icon. Suu Kyi
is the daughter of Aung San, the revered Burmese revolutionary who
shepherded his country to independence from the United Kingdom
ha
in the 1940s. In the 1990s, “the Lady,” as she is referred to in Myanmar,
led the NLD to victory in national elections. But the military nullified
the results and placed her under house arrest for 15 of the next 21 years,
iT
before releasing her in 2010 as a gesture meant to highlight the govern-
ment’s nascent liberalization program. The disappointment in her
lack of action to stop the bloodshed—or, worse, her complicity in
it—has been profound. Archbishop Desmond Tutu of South Africa,
Al
one of numerous Nobel Peace Prize laureates who have expressed

their disillusionment, lamented the silence of his “dearly beloved
sister” and said that it was “incongruous for a symbol of righteousness
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to lead such a country.”

But Suu Kyi’s response should not have come as a great surprise.
She has a long record of downplaying the Rohingya’s plight. In March
2017, Suu Kyi’s office dismissed detailed descriptions of Rohingya
so
women suffering sexual violence at the hands of Myanmar’s armed

forces as “fake rape.” Once a defender of press freedom, Suu Kyi has
remained mum about the case of two Reuters journalists who were
arrested by the military last December after investigating the military’s
Ma
involvement in the killing of ten Rohingya civilians. Suu Kyi’s govern-

ment did create a commission, headed by former UN Secretary-General
Kofi Annan, to study the Rohingya issue, and has promised to implement
its recommendations. But last January, Bill Richardson, a former U.S.
ambassador to the UN and a longtime Suu Kyi supporter, quit a separate
ten-member international advisory board on the Rohingya crisis that
the Myanmar government had set up, calling it “a whitewash” and “a

cheerleading squad for the government.” As for Suu Kyi, Richardson
said, “I like her enormously and respect her. But she has not shown
moral leadership on the [Rohingya] issue.”
Suu Kyi deserves a great deal of criticism. But in faulting her for
not publicly confronting the military, let alone restraining the generals,
some critics have ignored two fundamen-
tal realities of contemporary Myanmar.
First is the intensity of anti-Rohingya
Aung San Suu Kyi deserves
m
sentiment in the country. Hatred of a great deal of criticism.
the Rohingya is widespread and deep- But some of her critics
seated, stirred up by influential extremist ignore the fundamental
hi
Buddhist monks who are the military’s
political allies and who have incited realities of contemporary
violence against Rohingya. The ugly Myanmar.
ha
truth is that the vast majority of Burmese,
including most of the NLD’s supporters,
approve of the anti-Rohingya campaign. Making pro-Rohingya state-
iT
ments and gestures would be tantamount to political suicide for
Suu Kyi and her government and would only strengthen the army’s
public support.
Second, the civilian-led government has no control over the armed
Al
forces nor any means of reining them in. Even if Suu Kyi wanted
to limit the military’s campaign against the Rohingya, it would be
almost impossible to do so. Myanmar’s constitution, crafted by the
od
military in 2008, ensures that the military remains far and away the
country’s strongest political institution. Amending the constitution
requires more than 75 percent of the votes in the legislature—and
25 percent of parliamentary seats are set aside for armed forces per-
so
sonnel, which ensures that no changes can be made without the mili-
tary’s cooperation. In addition, the constitution reserves three key
ministries for the armed forces: Defense, Border Affairs, and Home
Affairs. The last of these oversees the General Administration Depart-
Ma
ment, the administrative heart of the state, which is responsible for

the day-to-day running of every regional and state-level government
and the management of thousands of districts and townships. The
constitution further safeguards the army’s interests by allowing its
commander in chief to name six of the 11 members of the National
Defense and Security Council, a top executive body.
May/June 2018 145

Zoltan Barany
The army also sets its own budget and spends it without any civilian
oversight: in 2017, the budget amounted to $2.14 billion, representing
13.9 percent of government expenditures—around three percent of
the national GDP and more than the combined total allotted to long-
neglected health care and education. Perhaps just as consequential as
the military’s political dominance is its economic clout. By some
estimates, active and retired military officers and their associates
control over 80 percent of the economy.
Drafting the constitution and then holding a referendum to gain
m
the public’s endorsement represented two important steps in the
military’s long-term plan to manage and control a cautious move
toward a “disciplined democracy,” in its words, and to transfer respon-
hi
sibilities over day-to-day politics to a civilian government. Having
shed the burden of governance, military elites focused on their own
interests: modernizing the army and tending to their business empires.
ha
They gave up little that was dear to them, and the changes they
have permitted remain easily reversible. No further democratiza-
tion will occur unless the generals relinquish their constitutionally
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granted privileges.
IRON LADY
Suu Kyi has been unable to alter this basic dynamic. Following the
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2015 elections, she failed to persuade the military brass to amend the
constitution by removing its prohibition against anyone who has fam-
ily members who hold foreign passports from serving as president.
od
This clause directly targets Suu Kyi, whose late husband, Michael Aris,
was British and whose two children are British citizens. In March 2016,
the NLD-controlled legislature elected a confidant of Suu Kyi’s, Htin
Kyaw, as president; he has served a mostly ceremonial role. Suu Kyi
so
created and took the position of “state counselor,” giving herself a role
akin to that of a prime minister—a fully defensible workaround to the
military’s move to block her from becoming president.
Less justifiable are the autocratic inclinations Suu Kyi has demon-
Ma
strated since taking office and the extraordinary degree to which she
has centralized power in her own hands. In addition to serving as state
counselor, she also heads the Ministry of Foreign Affairs and retains
the presidency of the NLD. As party chief, she has personally chosen
every member of the party’s Central Executive Committee—a violation
of party rules. She is a micromanager who finds it difficult to delegate;
most consequential decisions require her approval, which has led to

bottlenecks. She sits on at least 16 governmental committees, all of
which seldom produce concrete decisions. In November 2017, the govern-
ment established a new ministry, dubbed the Office of the Union
Government, just to help Suu Kyi cope with her workload.
Suu Kyi has also decided to act as her own spokesperson, but she
has done a poor job of communicating her administration’s policies.
She prefers limited transparency: according to several NLD members
of parliament with whom I have spoken, she has instructed them to
m
not ask tough questions during parliamentary sessions and to avoid
speaking to journalists. Her preference for personal loyalty over
competence was illustrated by her appointment of several cabinet
hi
members with scant qualifications.
Suu Kyi is in her early 70s yet has no apparent successor, and her party
is dominated by other septuagenarians who enjoy her trust but lack the
ha
energy, imagination, and skills necessary to carry out the comprehensive
renewal the country needs. Although Suu Kyi has been exceedingly crit-
ical of the constitution, she has used its antidemocratic provisions when
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they have suited her purposes. For instance, she appointed two NLD
members as chief ministers in Rakhine and Shan States, both of which
are home to large minority ethnic communities—even though in both
places, a candidate from a local party that represents those groups had
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won the popular vote.

The complex political situation in which Suu Kyi operates requires
a leader with a firm hand and a clear sense of purpose. She remains
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very popular among ordinary Burmese, who admire her tenacity,

respect her authority, and consider her the one indispensable leader.
Her autocratic style and silence on the Rohingya crisis might be less
troubling if her government had made significant progress on economic
so
reform or on reconciliation with other ethnic minority groups. But it

has not.
WORDS AND DEEDS

Ma
Although the NLD has been Myanmar’s main opposition group since
1988, it has never formulated a policy program beyond vague promises
of democracy, the rule of law, and economic reform. One might argue
that it did not need detailed proposals to succeed as an opposition party:
it had an iconic leader, and it stood against the army. But even after two
years in power, major questions remain about the government’s economic
May/June 2018 147

Zoltan Barany
policies, positions on ethnic and religious issues, and plans for per-
suading the military to leave politics. Notwithstanding its limited room
to maneuver, the government should have accomplished much more
since taking office.
Decades of military control of the economy have turned Myanmar
into a desperately poor country. In 2017, its per capita GDP of $1,300
was the lowest in Southeast Asia, about half of that of Laos and one-
fifth of Thailand’s. GDP grew by more than six percent in 2016 and
2017, but that was a slower rate of growth than the country enjoyed in
m
the early years of the decade. Inflation has been nearing double digits,
commodity prices have increased, and the job market’s expansion has
been anemic. Millions of Burmese have been forced to find employ-
hi
ment abroad, mostly in so-called 3D jobs: tasks that are dirty, dangerous,
and demeaning.
Reforming the economy should be the NLD government’s most
ha
critical task, but it waited until July 2016 to present its first major
statement on the issue. The document turned out to be little more
than a wish list, a general outline that identified neither policy instru-
iT
ments nor specific objectives to achieve within a given time frame. So
far, the government’s main economic achievement has been the partial
modernization of the legal framework governing investment. In January
2016, the legislature passed an arbitration law intended to boost inves-
Al
tor confidence. Last year, it passed new rules on investment that are
designed to simplify and harmonize existing regulations and that
specify the privileges that will be granted to domestic and foreign
od
investors. But the NLD has offered scant details on how the new rules
will be implemented. The arrival of the NLD government had fueled
hopes of increased foreign direct investment, but partly as a result of
its lack of action, such investment has actually tapered off since 2015.
so
Suu Kyi’s record on other pressing economic issues has been even
less impressive. Agriculture represents 37 percent of Myanmar’s GDP
and employs, directly or indirectly, about 70 percent of the country’s
labor force. But farmers tend to be extremely poor, and farming prof-
Ma
its are among the lowest in Asia. The government must find a way to
provide farmers with what they most need to increase their earnings:
high-quality seeds and fertilizers, improved water control and irrigation
facilities, and access to affordable credit.
Farmers also suffer from a lack of land rights. For several decades,
the military expropriated hundreds of thousands of acres from helpless
peasants, offering little or no compensation. In 2016, groups of farmers

sent letters to the army’s commander in chief, Senior General Min
Aung Hlaing, requesting the return of their land. The military’s response
was to threaten the farmers and their lawyers with defamation lawsuits.
Suu Kyi’s government has said that dealing with the landownership
issue is a priority, but she has done little.
The military regime also grossly neglected the country’s infrastruc-
ture. Roads, railways, and public transportation systems all lie in a
pitiful state of disrepair. Even more serious is the shortage of electricity:
m
only one-third of the population has access to it, and blackouts are
frequent, even in Yangon’s luxury hotels. Economic growth will put
even more pressure on the electricity supply, and shortages will likely
hi
get worse. These weaknesses affect every economic sector and scare
off potential investors. But Suu Kyi’s government seems to have real-
ized the importance of infrastructure only recently. A number of plans
ha
have been drawn up, and the government has held some summits on
the issue. But on this, too, there has been little action to match the
government’s rhetoric.
iT
A DOUBLE BIND
Despite the lack of progress, relations between the civilian govern-
ment and the military have settled into what Suu Kyi has described as
Al
a “normal” routine. The most charitable interpretation of Suu Kyi’s

accommodation of the military is that she hopes that, over time, the
generals will conclude that their interests would be best served by
od
leaving politics. The army appears to be taking its time: Min Aung
Hlaing has said that the Tatmadaw intends to reduce its presence in
parliament, but he has refused to set a timetable.
Part of the problem is that the military has two conflicting goals.
so
The generals want to transform the army—which is plagued by obsolete

equipment, archaic training methods, and poor morale—into a pro-
fessional force comparable to its counterparts in other countries in
the region. In order to do that, the military needs help from more
Ma
developed, powerful countries—help that, in the case of Western gov-

ernments, is conditioned on the military leaving politics. But Western
governments also insist that the government must do more to resolve
its many conflicts with ethnic minority groups. In September 2017,
the United Kingdom’s Ministry of Defence announced that it would
suspend educational courses it provided for the Tatmadaw, citing
May/June 2018 149

Zoltan Barany
ongoing violence and human rights abuses. Similarly, the following

month, the Trump administration announced the withdrawal of
U.S. military assistance from officers and units participating in
the operations in Rakhine State and
rescinded invitations to senior members
Compared with Beijing, of Myanmar’s security forces to U.S.-
Washington today has little sponsored events. Then, in November,
sway over Myanmar. a bipartisan group of U.S. representa-
tives introduced the Burma Act of 2017,
m
which, among other things, would reinstate sanctions against the
Tatmadaw that were lifted the year before to reward the country for its
putative progress and to incentivize more steps in the direction of
hi
democracy. That legislation has yet to be put to a vote. In December,
however, the U.S. House of Representatives passed a resolution con-
demning “the ethnic cleansing of the Rohingya,” and the Trump admin-
ha
istration imposed new sanctions on Major General Maung Maung Soe,
who has overseen the brutal campaign against the Rohingya.
But the military’s troubling treatment of minorities extends far
iT
beyond the Rohingya. Several ethnic communities have been at war
with the government for long periods—in some cases, ever since Burma
proclaimed its independence in 1948. Together, these conflicts form
something like a low-level, multifaceted civil war. Some ethnic groups
Al
bear long-held grudges against others, sometimes related to overlapping

land claims. Individual ethnic communities themselves are often divided
by sectarian differences. Aside from causing thousands of deaths and
od
displacing millions, ethnic violence has prevented the consolidation

of central authority over the country, as well as the formation of a shared
national identity.
For decades, the military has prolonged ethnic conflicts in a bid to
so
justify its continued rule. The fighting has also given cover to generals
who profit from the drug trade (Myanmar is a major source of opium)
and from the illegal export of gems, gold, and timber. But in recent years,
the Tatmadaw has appeared more determined to end the civil war. In
Ma
October 2015, prior to Suu Kyi’s electoral victory, eight ethnic armed
organizations and the government signed the National Ceasefire
Agreement, brokered by the military, although some of the largest
and most influential ethnic groups stayed away.
During her campaign, Suu Kyi repeatedly identified achieving ethnic
peace as her number one priority. After the realization of that objective,
she was to pursue the creation of a federal system of the sort first
promised by her father in the 1940s. There is no agreement on what
precise shape that system would take, except that it would grant more
autonomy to ethnic groups but stop short of giving them the right to
secede. Suu Kyi’s promise to pursue ethnic peace was a tactical mistake,
however, since she has little influence over how the military wages its
wars against ethnic armed organizations, and the idea of a federal system
is anathema to the generals. Nevertheless, her administration organized
conferences in August 2016 and May 2017 with the aim of persuading
m
more ethnic armed organizations to sign the National Ceasefire
Agreement; the talks brought together armed groups, the military, and
the government. Predictably, the meetings achieved little besides pro-
hi
viding a forum for grand speeches and gestures, and in the aftermath
of the conferences, the fighting actually intensified in several regions.
In February 2018, two additional rebel groups signed on to the cease-
ha
fire amid much fanfare. But the groups that represent four-fifths of all
the ethnic armed personnel in the country remain as opposed to signing
as ever. Meanwhile, the generals adamantly refuse to create a federal
iT
army that would represent the country’s ethnic groups and regions,
which is one of the ethnic armed organizations’ key demands; the
military falsely contends that the armed forces are already inclusive
and fair. At the same time, the armed groups have refused to disavow
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secession—a position that the military insists they must take as part
of any final agreement.
Optimists believe that the ethnic armed organizations’ chief objective
od
is to maximize their gains on the ground in preparation for eventual

peace negotiations. In reality, their ultimate goal is the establishment of
a federal system. Such a system represents a redline for the Tatmadaw:
although military elites have adopted an increasingly pragmatic
so
approach toward negotiation with the ethnic armed organizations,

they continue to see federalism as the first step toward the country’s
disintegration. The word “federalism” is no longer taboo in public
discourse, as it had been for decades, but the top brass are unlikely to
Ma
relax their long-standing opposition to a federal system anytime soon.
BEIJING BECKONS
In the face of Western opprobrium over Myanmar’s treatment of the
Rohingya, there are signs that the military might abandon its relatively
recent quest to placate Western governments and instead return to a
May/June 2018 151

Zoltan Barany
strategy of reliance on its traditional patron, China. China has always

been Myanmar’s top trading partner and biggest investor, and for
decades, Beijing was the main sponsor of Myanmar’s military junta.
Suu Kyi’s first major trip abroad as state
counselor, in August 2016, took her to
Obama wanted to Beijing. Her discussions there centered
reward Myanmar’s progress; on business and trade issues, especially
in hindsight, that was likely a few large infrastructure projects, such
a mistake. as a $7.2 billion deep-sea port in Rakhine
m
State that China plans to build to give
Chinese ships access to the Indian Ocean.
Since then, the relationship between Myanmar and China has improved;
hi
in November 2017, Chinese President Xi Jinping described this moment
in Chinese-Myanmar military relations as being the “best ever.” It helps
that Chinese officials, unlike Western ones, do not admonish Suu Kyi
ha
and her government for their human rights violations.
But the Chinese are pressing for progress on the civil war. Chinese
leaders have endorsed negotiations between the Myanmar gov-
iT
ernment and the country’s ethnic armed organizations, and Beijing
facilitated the participation of some recalcitrant groups in the May
2017 conference. China has played a complex role in the civil war for
decades, backing the government but also providing shelter, weap-
Al
ons, and training to some of the belligerent groups; such contacts

have allowed China to extract natural resources (mostly illegally),
such as jade, gold, and timber, from regions where militants operate.
od
But it now seems that the Chinese want the violence to end because
the rebels’ objectives have shifted from merely resisting government
forces to improving their status within Myanmar, an aim that is more
conducive to internal stability, and because the fighting has impeded
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economic development and trade. What’s more, the Chinese want to

be seen as peacemakers in a region where they have long been regarded
as a destabilizing presence.
Compared with Beijing, Washington today has little sway over
Ma
Myanmar. That is a recent development: the Obama administration,

in one of its undisputed foreign policy successes, managed to convince
the country to take steps toward democracy. The United States was a
steadfast supporter of Suu Kyi for years before she took office, and
both President Barack Obama and Secretary of State Hillary Clinton
made historic visits to Yangon. When Suu Kyi visited Washington in
September 2016, she asked Obama to lift most of the remaining U.S.
sanctions on Myanmar in order to help her government grow the
country’s economy. Obama obliged her; in hindsight, that was likely a
mistake. Obama wanted to reward progress. But lifting the sanctions
robbed Washington of precisely the kind of leverage it now needs.
Indeed, democratic activists in Myanmar and elsewhere had hoped
that the sanctions would stay in place until the antidemocratic features
of the 2008 constitution were abolished.
Since the Rohingya crisis erupted last year, there have been few
m
official interactions between the United States and Myanmar. Under
the Trump administration, Myanmar has lost the special place it enjoyed
on Washington’s foreign policy agenda during the Obama years. Then
hi
U.S. Secretary of State Rex Tillerson made a five-hour visit to Myanmar
in November 2017. In meetings with Suu Kyi and the army chief, Min
Aung Hlaing, he raised concerns about ethnic violence. At a news
ha
conference, Tillerson said that there had been “crimes against human-
ity,” but he did not back the idea of new economic sanctions against
Myanmar. Pope Francis visited the country a few days later and called
iT
for peace and mutual respect. But neither Tillerson nor the usually
outspoken pope used the term “Rohingya” during his discussions with
Myanmar officials or in his public statements, likely out of a fear that
doing so would aggravate an already highly charged situation and, in
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the case of the pope, out of a fear that it could endanger Myanmar’s
small and vulnerable Catholic community.
Admittedly, the United States has few appealing policy options for
od
stopping the ethnic cleansing. Restoring the sanctions or placing more

new ones on the generals would likely just drive the military further
into the welcoming arms of the Chinese, who are keen to fill the
vacuum left by Washington’s flagging interest. Denunciations from
so
Washington and other foreign capitals have failed to affect the govern-
ment’s position on the Rohingya and have actually increased domestic
support for the Tatmadaw, as evidenced by a number of major pro-
military rallies held throughout Myanmar last fall.
Ma
Still, there are ways for the United States to push for progress.
For starters, it should suspend all military-to-military engagement
with Myanmar and expand assistance to a number of sophisticated
but underfunded nongovernmental organizations, such as Mosaic
Myanmar, a civil society group that promotes tolerance between the
majority Buddhist community and Christian and Muslim minorities.
May/June 2018 153

Zoltan Barany
Furthermore, the United States should establish or sponsor programs

in Myanmar focused on health care, educational opportunities, and
cultural exchanges. In a country that tends to be at best cautious of
foreigners’ intentions, the United States is generally held in high
regard, according to Asian Barometer surveys of public opinion—a
sharp contrast to the suspicious attitudes toward China and India
that prevail throughout Myanmar. There are few societies where
prudent U.S. democracy promotion could find more fertile ground or
where it would be more gratefully accepted. Finally, in lieu of public
m
expressions of indignation, Washington should communicate its dis-
pleasure privately—especially through politicians with long histories of
supporting Suu Kyi and Myanmar’s democratization, such as Clinton
hi
and Republican Senator Mitch McConnell of Kentucky.
As for Suu Kyi, her reduced stature abroad might further reduce
her already limited leverage with the generals. She is boxed in to a
ha
degree that many critics fail to appreciate. But she has made her own
situation worse through poor management and a lack of focus on issues
that are under her administration’s control: improving the economy,
iT
shoring up infrastructure, and revamping the health-care and educa-
tional systems. The government should adopt a personnel policy that
emphasizes merit and accomplishment instead of personal loyalty to
Suu Kyi. Instead of alienating ethnic minorities and their political
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parties and ignoring civil society organizations, Suu Kyi ought to open
a meaningful dialogue with them with a view to forming a big-tent
political and social coalition that might, in time, challenge the military’s
od
political supremacy. Suu Kyi and her administration should reverse

their attacks on media freedoms. And even though the government
cannot control the military, it must stop denying and defending the
Tatmadaw’s atrocities and start actively protecting those who have
so
suffered so terribly from the army’s repression.

Most important, Suu Kyi must shift gears quickly. International
patience with her is almost extinguished. If she does not change course
soon, she will lose what little goodwill remains.∂
Ma
ESSAYS
If American citizens are good

democrats, they will always be
suspicious of government officials.
But they ought to be suspicious
m
of whistleblowers, too.
—Michael Walzer
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ha
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Al
od
so
Just and Unjust Leaks Iran Among the Ruins

Michael Walzer 48 Vali Nasr 108
The China Reckoning The President and the Bomb

Ma
Kurt M. Campbell and Ely Ratner 60 Richard K. Betts and Matthew C.

Waxman 119
RAFAEL MARCHANT E / REUT E RS
Life in China’s Asia

Jennifer Lind 71 Mugabe’s Misrule
Martin Meredith 129
Green Giant
Amy Myers Jaffe 83 The Clash of Exceptionalisms
Charles A. Kupchan 139
How to Crack Down on Tax Havens
Nicholas Shaxson 94
Just and Unjust Leaks

When to Spill Secrets
Michael Walzer
m
A
ll governments, all political parties, and all politicians keep
secrets and tell lies. Some lie more than others, and those
hi
differences are important, but the practice is general. And
some lies and secrets may be justified, whereas others may not. Citizens,
therefore, need to know the difference between just and unjust secrets
ha
and between just and unjust deception before they can decide when it
may be justifiable for someone to reveal the secrets or expose the
lies—when leaking confidential information, releasing classified doc-
iT
uments, or blowing the whistle on misconduct may be in the public
interest or, better, in the interest of democratic government.
Revealing official secrets and lies involves a form of moral risk-
taking: whistleblowers may act out of a sense of duty or conscience,
Al
but the morality of their actions can be judged only by their fellow
citizens, and only after the fact. This is often a difficult judgment to
make—and has probably become more difficult in the Trump era.
od
LIES AND DAMNED LIES

A quick word about language: “leaker” and “whistleblower” are over-
lapping terms, but they aren’t synonyms. A leaker, in this context,
so
anonymously reveals information that might embarrass officials or open

up the government’s internal workings to unwanted public scrutiny. In
Washington, good reporters cultivate sources inside every presidential
administration and every Congress and hope for leaks. A whistleblower
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reveals what she believes to be immoral or illegal official conduct to her

bureaucratic superiors or to the public. Certain sorts of whistle-blowing,
relating chiefly to mismanagement and corruption, are protected by law;
leakers are not protected, nor are whistleblowers who reveal state secrets.
MICHAEL WALZER is Professor Emeritus at the Institute for Advanced Study.
Before considering the sorts of official deception where the stakes

are high and the whistleblower’s decisions and the public’s judgment
of them are especially difficult, it’s important to look at the way secrets
and lies affect everyday politics, where the dilemmas are simple—and,
most of the time, not much is at stake. Consider the many politically
engaged men and women who insist that they are not running for of-
fice even while they are secretly raising money and recruiting help for
a campaign. They don’t want assaults on their records to begin before
they have developed the resources they will need to counterattack.
m
Citizens expect deception of this sort and commonly see through it:
the practice is tolerable even if it is not fully justifiable.
But what about a candidate who tries to conceal political positions
hi
she has held in the past or who lies about her policy commitments for
the future? Someone inside the candidate’s campaign who exposes such
lies is disloyal, but the disclosure is certainly not unjust. The leaker is
ha
a good citizen even though she may not be a desirable colleague in a
conventional political enterprise.
Now imagine a politician who is particularly ruthless: she wins the
iT
election and then uses the power of the government to destroy records
of her previous actions, removing documents from archives and
threatening people who know too much. Anyone breaking the silence or
leaking the documents would be a public hero—and a welcome colleague
Al
to the vast majority of citizens who are sure that they would never
destroy records or threaten anyone. Self-aggrandizing deception and
ruthless attempts to cover it up invite moral exposure.
od
But now consider a politician who shouts lies at election rallies and
solicits money from unsavory characters in order to defeat a particularly
awful opponent—a neo-Nazi, for example, who threatens to dismantle
the institutions of democratic government. Here is a politician with
so
dirty hands. She has gotten her hands dirty for a good cause—but the
good cause doesn’t wash them clean. She is a lying and possibly corrupt
politician. Still, I wouldn’t defend someone inside her campaign who
exposed the lies or revealed the source of the campaign funds and
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claimed something like a Kantian categorical imperative. “I had to do

it,” the leaker might say. “No, you didn’t,” I would respond. Lying to
one’s fellow citizens and seeking funds that the candidate doesn’t dare
talk about are certainly practices that should not be generalized. If all
candidates acted in that way (and far too many do), democracy itself
would be at risk. But if democratic institutions were already at risk,
March/April 2018 49
Michael Walzer
most citizens would want to make an exception for a politician they

were sure would defend those institutions—even if she did not adhere
to democratic norms while seeking office.
THE SECRET SHARER

Government secrets and deceptions are equally common but often
harder to judge than the secrets and deceptions of individual candidates
or elected officials. A relatively easy case can help establish some of
the contours. It was militarily necessary and therefore justified for
m
the U.S. government to keep the date of the 1944 D-Day invasion
secret from the Germans and, in order to ensure secrecy, to withhold
the information from almost everyone else, too. Governments justi-
hi
fiably conceal such information from anyone who does not need to
know it. Similarly, Washington’s and London’s efforts to deceive the
Germans about the location of the invasion were also justified, as
ha
were all the lies that officials told as part of those efforts. Providing
that information to the press would not have been a good thing to
do; in fact, someone who revealed it would probably have been
iT
charged with treason.
But contemporary U.S. military operations often do invite whistle-
blowing—as in cases in which the people being kept in the dark are
not U.S. enemies, who know a good deal about what’s going on
Al
since their operatives or soldiers are already engaged with American

ones. Rather, it’s the American people who don’t know. Think of
drone attacks or special operations that the public has never been told
od
about, in places that most Americans have never heard of; recent
U.S. military activities in Niger offer a good example. Soldiers die,
and officials struggle to explain the mission—and, with even greater
difficulty, the reasons for concealing it in the first place. In the
so
wake of such incidents, it’s plausible to argue that the truth should
have been revealed earlier on by someone with inside knowledge.
The whistleblower in this case would be a good citizen, one might
argue, because the use of force abroad should always be the subject
Ma
of democratic debate. Still, such a disclosure might not be justified

if the operation was defensible—necessary for national security, for
example, or intended to help people in desperate trouble—and if
blowing the whistle would shut down any prospect of success. A
disclosure might also be unjustified if it put the lives of U.S. operatives
or armed forces at risk. Government officials usually claim that both
the operation and U.S. personnel have been endangered. The case
at hand, they regularly insist, is just like D-Day.
But U.S. leaders often choose secrecy for a very different reason:
they fear that an operation would not survive public scrutiny or a
democratic decision-making process. Or an operation has been debated
and democratically approved but has taken on a different character in
the field. Mission creep is common and
often results in an entirely new mission,
different from the one that citizens
U.S. leaders often choose
m
debated and Congress voted on. The secrecy out of fear that an
new mission may be strategically and operation would not
morally justifiable, but the democratic survive a democratic
hi
process has been cut short or avoided
altogether. If the operation is kept secret, decision-making process.
however, Americans don’t know that it
ha
hasn’t been democratically authorized; they don’t know that it is going
on at all. And obviously, they can’t weigh official justifications, since
they have never heard a government official justify the operation.
iT
By contrast, a potential whistleblower knows that the operation is
going on and that it hasn’t been democratically authorized. But who is
she to judge its strategic or moral value? In recent years, many govern-
ment whistleblowers have been very young people—members, perhaps,
Al
of a generation of “digital natives,” who believe that everything should

be revealed. But government employees and contractors take oaths or
sign agreements that commit them to obey secrecy rules; their superiors
od
and fellow workers trust them to protect the confidentiality of their

common enterprise, whatever it is.
If the enterprise is clearly illegal or monstrously immoral, a govern-
ment employee or contractor should certainly break that promise,
so
violate the trust of her coworkers, and blow the whistle. Officials or
operatives engaged in illegal or immoral activities don’t deserve her
protection. This argument is similar to one often made in the case of
humanitarian intervention: if a massacre is going on, anyone who can
Ma
stop it should stop it, regardless of the costs imposed on the killers. If
the U.S. government is engaged in an illegal and immoral operation,
anyone who can stop it should.
Consider a rough analogy. U.S. soldiers are required by international
law and by the Uniform Code of Military Justice to refuse to obey
illegal commands—and they should assume that monstrously immoral
March/April 2018 51
Michael Walzer
commands are always illegal. Discipline and obedience are more crucial
to a military than they are to a civilian bureaucracy, and yet soldiers
are commanded to disobey illegal orders even on the battlefield. Citizens
might excuse a soldier who obeyed an illegal order under coercion or
who evaded rather than defied the order—as did the U.S. soldiers at
the 1968 My Lai massacre in Vietnam who shot into the air, deliberately
missing the civilians they had been ordered to kill. There are civilian
equivalents of this kind of evasion, such as slowing down the work
required to prepare for an operation or doing the work so badly that
m
the operation has to be postponed or canceled. Whistle-blowing, by
contrast, is closer to deliberate disobedience on the battlefield.
There is a difference between the two contexts, however: a soldier
hi
often has to decide whether to obey in an instant; a whistleblower has
more time. Bureaucracies move slowly, so a whistleblower, thinking
about a clearly illegal or immoral operation, can appeal to her superiors
ha
to stop the operation. She can deliberate at length about the costs of
what she is preparing to do. She can talk to coworkers whom she
trusts (although there probably won’t be any). Publicly blowing the
iT
whistle may mean losing her job and perhaps going to prison. Yet
assuming she has exhausted the options for internal dissent, this is her
obligation. And if she blows the whistle, her fellow citizens should
recognize the value of what she has done, after the fact.
Al
But what if the operation isn’t clearly illegal or morally mon-

strous? What if there are arguments to support it, and the would-be
whistleblower has heard them, even though her fellow citizens
od
haven’t? How can she claim the right to judge the official account of
what’s going on and the justifications of her coworkers and superiors,
many of whom have more experience than she has? Such a situation
is very different from the case of a soldier on the battlefield, who
so
can see pretty clearly the meaning of what she is being ordered to
do—who might even look into the eyes of the innocent civilians she
has been told to kill.
Whistle-blowing generally involves decision-making under condi-
Ma
tions of uncertainty. Americans elect officials and ask them (and their
appointees) to make decisions under those conditions. These officials
may not be any more qualified than ordinary citizens, but they have
been given and they have accepted a charge and the responsibilities
that go with it—which include, crucially, the obligation to worry
about the consequences of their decisions. Officials have at their
m
hi
ha
iT
Al
od
disposal a multitude of researchers, analysts, and advisers, who pre-

so
sumably reduce the uncertainty and help with the worrying. By con-
trast, a whistleblower is usually alone; her uncertainties are private,
and the public cannot know how much she worries. Indeed, one of
the things the public should be concerned about is how well a whistle-
Ma
blower understands the uncertainties. Is she a good worrier? It can

be dangerous when whistleblowers make their decisions on the basis
of some ideological fixation or long-standing prejudice. That’s a
danger for officials, too—but they are being watched by coworkers
(and, to an extent, by Congress and the media), whereas whistle-
blowers act in the shadows.
March/April 2018 53
Michael Walzer
A WHISTLE IN THE DARK

Does it make a difference if whistleblowers are (or claim to be) con-
scientious? “Conscience” originally meant what the word suggests:
“co-knowledge,” shared, as the early Protestants said, between a man
and “his God.” But in the case of a whistleblower, the knowledge is
uncertain and limited to the individual: good enough, perhaps, to
justify someone’s refusal to serve in the military, but not good enough
to justify decisions that affect large numbers of other people. I am
sure that many whistleblowers have consciences, but they have to
m
defend their actions in other terms.
If American citizens are good democrats, they will always be suspi-
cious of government officials, and that will make them receptive to
hi
the information that whistleblowers provide. But they ought to be
suspicious of whistleblowers, too. Citizens may not need to know
the information that a whistleblower provides—indeed, the whistle-
ha
blower might be acting for profit or publicity and not out of a desire
for more democratic decision-making or a concern for law and morality.
Sometimes, however, whistle-blowing opens a debate that should
iT
have started long before and exposes government activities that many
citizens strongly oppose.
Imagine a military or intelligence operation that originally made
a lot of sense and that the government has successfully defended to
Al
the public but that has expanded in ways that U.S. citizens didn’t
anticipate and haven’t been told about. The operation now requires
a degree of force far greater than officials had originally planned for,
od
and its geographic range has expanded. The potential whistleblower

knows what is going on, and she knows that there hasn’t been any-
thing resembling a democratic decision. Is that enough knowledge
to justify revealing details about the operation to the media? Probably
so
not: she has to make some judgment about the character of the
expanded operation, and she has to consider the possible consequences
of her revelations—and she is, remember, no better a judge than
anyone else.
Ma
Arguably, the goal of empowering citizens by supplying them with

crucial but secret information justifies whistle-blowing—as long as
there are good reasons to believe that secrecy isn’t a legitimate
requirement of the mission and as long as the revelation results in no
negative consequences for U.S. personnel in the field. Those two
qualifications, however, will probably mean that whistle-blowing can-
not be justified in many cases. But now imagine that the expanded
operation involves terrible brutality or potential danger to civilians
abroad or in the United States. And the whistleblower believes that
ordinary Americans would recognize the brutality or the danger, and
so she isn’t merely acting on her own judgment: she is assuming that
most of her fellow citizens would judge the situation in the same
way—and giving them the chance to do so.
This is the best way to think about whistle-blowing: it involves a
kind of moral risk-taking, and it can be justified only after the fact, if
m
other citizens recognize its morality. Of course, its morality will always
be contested, with government officials arguing that an important mis-
sion has been undercut and that agents
hi
in the field have been endangered. This
might be true, or it might be a lie, which
Soldiers are obligated to
would justify further whistle-blowing. disobey illegal orders; civil
ha
The whistleblower herself is counting servants are not obligated
on her fellow citizens to defend her to blow the whistle when
judgment—to affirm it, in fact, and say,
“Yes, this is an operation that we should they see wrongdoing.
iT
have been told about, and it is one that
we would have rejected.” If most of her fellow citizens agree—or, rather,
most of those who are paying attention, since majority rule would not
Al
work here—then exposing the operation was likely justified.

The case is the same if U.S. citizens are both the objects of the
operation and the ones from whom it is being concealed. The best-
od
known contemporary American whistleblower, the former National

Security Agency contractor Edward Snowden, revealed the large-
scale surveillance of Americans by their own government. He bet that
most of his fellow citizens would not think that the danger they faced
so
was great enough to warrant such a massive invasion of their privacy.

With some difficulty, I can imagine circumstances in which large-
scale secret surveillance by an otherwise democratic state might be
justifiable or at least defensible. But what Snowden revealed was an
Ma
operation that could not be justified by any actually existing danger;

this was something that American citizens needed to know about.
Unfortunately, however, Snowden revealed much more than what
Americans needed to know—and not only to his fellow citizens: in
addition to sharing secrets about the surveillance of American citi-
zens with journalists from The Washington Post and The Guardian, he
March/April 2018 55
Michael Walzer
provided the South China Morning Post with information about U.S.
intelligence operations against non-American targets in mainland
China. That disclosure put Americans at risk, and Snowden had no
reason to believe that what the United States was doing in China was
either illegal or immoral—or anything other than routine.
Judgments in cases like this one will obviously be shaped by political
views, but not, one hopes, by partisan loyalties. Many liberals and
Democrats, along with some conservatives and a few Republicans,
condemned the domestic surveillance that Snowden revealed and
m
defended his decision to do so. The first year of the Trump adminis-
tration, however, has seen many leaks that have derived from and
invited partisanship. Consider the leaked details of the president’s
hi
May 2017 conversation with Russian officials in the Oval Office, after
he had fired FBI Director James Comey, who had been investigating
whether Donald Trump’s election campaign had coordinated with the
ha
Kremlin. “I just fired the head of the FBI. He was crazy, a real nut job,”
Trump said, according to a source quoted by The New York Times. “I
faced great pressure because of Russia. That’s taken off.” The Washington
iT
Post reported that during the same meeting, Trump shared highly
classified information with the Russians that “jeopardized a critical
source of intelligence on the Islamic State.” The leakers to the Times
and the Post certainly meant to raise questions about the president’s
Al
competence on foreign policy. Americans who already doubted Trump’s

abilities welcomed the leak. The president’s supporters obviously
did not.
od
There is no way to make an objective judgment here—not, at least,

about the leakers. But the journalists who reported this and many
other leaks, and who worked hard to make sure of their accuracy, were
doing their job and ought to be commended. They did not confront a
so
moral dilemma. Leaks of this sort are grist for the mill of a free press.
BUREAUCRATIC OUTLAWS
As for whistle-blowing, as opposed to leaking, a truly detached and
Ma
fully informed observer would probably be able to make an objective

judgment about any particular revelation. But that sort of judgment
isn’t likely in the fraught world of politics and government—although
a consensus might take shape, slowly, over time, as in the case of the
Pentagon Papers: it seems likely that most Americans have come to
believe that the military analyst Daniel Ellsberg did the right thing
in sharing the documents with the press. Whistleblowers such as

Ellsberg appeal to their fellow citizens, and there really isn’t any further
appeal to make. If the citizens don’t agree among themselves about
the justifiability of the disclosure, there can be no definitive verdict.
But suppose that most Americans recognize the brutality or the
danger that has driven the whistleblower to act. Her action was justified,
but she has violated the commitments she made when she took her
job, and she may have broken the law.
When soldiers disobey an illegal order, Democracies live
m
they are in fact obeying the official
army code. But there is no official code uneasily with secrecy,
that orders civil servants to refuse to and governments
hi
keep secrets about an illegal or immoral keep too many secrets.
operation. Soldiers are obligated to dis-
obey; civil servants are not obligated to
ha
blow the whistle. They are, however, protected from official retaliation
and punishment by the Whistleblower Protection Act of 1989 if they
reveal a range of illegal government actions: gross mismanagement,
iT
the waste of public funds, or policies that pose a substantial and
specific danger to public health and safety.
If whistleblowers are fired or demoted for revelations such as those,
they can file an appeal to the U.S. Merit Systems Protection Board.
Al
These appeals are most often denied—but not always. In 2003, Robert
MacLean, an employee of the Transportation Security Administration,
told an MSNBC reporter that in an effort to reduce spending on hotels,
od
the TSA would be removing air marshals from many long-distance

flights. He was subsequently fired. After appealing the decision—first
to the MSPB, then to a federal appeals court—he was finally reinstated
in 2013. The Supreme Court upheld that decision in 2015. It was a
so
rare judicial victory for whistle-blowing.

But blowing the whistle on government action abroad or on security-
related surveillance at home isn’t protected by the Whistleblower
Protection Act. And revealing classified information is not legal even
Ma
if public health and safety are at issue. If a whistleblower reveals secrets

that the government doesn’t believe should be revealed, she has broken
the law, regardless of her intentions or public sentiment about her
actions. She is a disobedient civil servant, a bureaucratic outlaw.
Citizens might well consider her action a form of civil disobedience.
But an act must meet certain conditions for that term to apply. First,
March/April 2018 57
Michael Walzer
the whistleblower must have tried to convince a superior that the

government’s operation was illegal or immoral. Before going outside
the government, she must have done the best she could inside, among
her coworkers. Second, she must act in person and in public, without
any attempt to hide who she is—even though this means that she
won’t see any more secrets. Many leaks can come from a single concealed
leaker, but whistle-blowing is almost certainly a one-time act. If
internal dissent doesn’t work, then going public is a kind of principled
resignation. Third, the whistleblower must take responsibility for the
m
revelation she has made; she must not hand secret documents to agents
about whose subsequent behavior she can’t be reasonably confident.
She has a purpose for blowing the whistle, and she has to do her best
hi
to make sure that her purpose, and no other, is served. Snowden ini-
tially chose The Guardian, The Washington Post, and The New York
Times (among other media outlets) as venues for his leaked secrets,
ha
and this seems the right kind of choice since these are newspapers
whose publishers have had, along with a desire to sell papers, a long-
standing commitment to democratic government. But Snowden
iT
showed less careful judgment in choosing to share information with
the South China Morning Post, an organization that he had no reason
to believe was committed to democratic decision-making in the
United States.
Al
A similarly flawed judgment also affected the case of another well-

known American whistleblower, Chelsea Manning, who in 2010
provided a massive trove of classified diplomatic cables to WikiLeaks.
od
In contrast to newspapers with long records of public service, Wiki-

Leaks is the wrong kind of intermediary between a whistleblower and
the American people. Its directors may or may not have democratic
commitments, but they also have narrowly partisan and personal aims,
so
about which the public has learned a great deal in recent years.
TOUGH CALLS
A civil whistleblower is making the same appeal to her fellow citizens
Ma
that civil rights activists in the 1960s made—in similar defiance of the
law and with a similar willingness to accept legal punishment. Whistle-
blowers can and probably should be punished for revealing state
secrets, even if the secrecy is unjust. Judges and juries should try to
make the whistleblower’s punishment fit her crime, and her crime
must be weighed against the government’s subversion of the democratic
process and the illegality and immorality of the revealed operation:

the more significant the subversion and the greater the brutality or
danger, the milder the sentence should be.
There must be some punishment for people who break secrecy
laws, to serve justice when someone blows the whistle recklessly and
to deter others from doing so. The fear of punishment focuses the
mind and forces a potential whistleblower to think hard about what
she is doing. Citizens should respect a whistleblower’s willingness to
pay the price of her disobedience, and at the same time, they should
m
make their own judgments about whether what she did was right or
wrong. Her action may require a complicated verdict: for example,
perhaps she was right to open the democratic debate but wrong in her
hi
assumption of what the outcome of the debate should be. In any case,
the public owes her a reflective response—not knee-jerk hostility or
knee-jerk support. ha
Democracies live uneasily with secrecy, and governments keep too
many secrets. Greater transparency in government decision-making
would certainly be a good thing, but it has to be fought for democrati-
iT
cally, through the conventional politics of parties and movements.
Whistle-blowing probably does not lead to greater transparency; in
the long run, it may only ensure that governments bury their secrets
more deeply and watch their employees more closely. Still, so long as
Al
there are secrets, whistle-blowing will remain a necessary activity.

Whistleblowers have a role to play in a democratic political universe.
But it is an unofficial role, and one must recognize both its possible
od
value and its possible dangers.∂

so
Ma
March/April 2018 59
The China Reckoning

How Beijing Defied American Expectations
Kurt M. Campbell and Ely Ratner
m
T
he United States has always had an outsize sense of its ability
to determine China’s course. Again and again, its ambitions
hi
have come up short. After World War II, George Marshall,
the U.S. special envoy to China, hoped to broker a peace between the
Nationalists and Communists in the Chinese Civil War. During the
ha
Korean War, the Truman administration thought it could dissuade
Mao Zedong’s troops from crossing the Yalu River. The Johnson admin-
istration believed Beijing would ultimately circumscribe its involve-
iT
ment in Vietnam. In each instance, Chinese realities upset American
expectations.
With U.S. President Richard Nixon’s opening to China, Washington
made its biggest and most optimistic bet yet. Both Nixon and Henry
Al
Kissinger, his national security adviser, assumed that rapprochement

would drive a wedge between Beijing and Moscow and, in time, alter
China’s conception of its own interests as it drew closer to the United
od
States. In the fall of 1967, Nixon wrote in this magazine, “The world
cannot be safe until China changes. Thus our aim, to the extent that
we can influence events, should be to induce change.” Ever since, the
assumption that deepening commercial, diplomatic, and cultural ties
so
would transform China’s internal development and external behavior

has been a bedrock of U.S. strategy. Even those in U.S. policy circles
who were skeptical of China’s intentions still shared the underlying
belief that U.S. power and hegemony could readily mold China to the
Ma
United States’ liking.
KURT M. CAMPBELL is Chairman of the Asia Group and was U.S. Assistant Secretary of
State for East Asian and Pacific Affairs from 2009 to 2013.
ELY RATNER is Maurice R. Greenberg Senior Fellow for China Studies at the Council on
Foreign Relations and was Deputy National Security Adviser to U.S. Vice President Joe
Biden from 2015 to 2017.
The China Reckoning
m
hi
ha
The era of good feelings: Xi and Obama in California, June 2013
iT
Nearly half a century since Nixon’s first steps toward rapproche-
ment, the record is increasingly clear that Washington once again put
too much faith in its power to shape China’s trajectory. All sides of the
policy debate erred: free traders and financiers who foresaw inevitable
Al
and increasing openness in China, integrationists who argued that

Beijing’s ambitions would be tamed by greater interaction with the
international community, and hawks who believed that China’s power
od
would be abated by perpetual American primacy.

Neither carrots nor sticks have swayed China as predicted. Diplomatic
and commercial engagement have not brought political and economic
openness. Neither U.S. military power nor regional balancing has
so
stopped Beijing from seeking to displace core components of the

U.S.-led system. And the liberal international order has failed to
lure or bind China as powerfully as expected. China has instead pur-
sued its own course, belying a range of American expectations in
Ma
KEVIN LAMARQU E / REUT E RS
the process.
That reality warrants a clear-eyed rethinking of the United States’
approach to China. There are plenty of risks that come with such a
reassessment; defenders of the current framework will warn against
destabilizing the bilateral relationship or inviting a new Cold War.
But building a stronger and more sustainable approach to, and rela-
March/April 2018 61
tionship with, Beijing requires honesty about how many fundamental

assumptions have turned out wrong. Across the ideological spectrum,
we in the U.S. foreign policy community have remained deeply in-
vested in expectations about China—about its approach to economics,
domestic politics, security, and global order—even as evidence against
them has accumulated. The policies built on such expectations have
failed to change China in the ways we intended or hoped.
THE POWER OF THE MARKET
m
Greater commercial interaction with China was supposed to bring
gradual but steady liberalization of the Chinese economy. U.S. President
George H. W. Bush’s 1990 National Security Strategy described
hi
enhanced ties with the world as “crucial to China’s prospects for
regaining the path of economic reform.” This argument predominated
for decades. It drove U.S. decisions to grant China most-favored-
ha
nation trading status in the 1990s, to support its accession to the
World Trade Organization in 2001, to establish a high-level economic
dialogue in 2006, and to negotiate a bilateral investment treaty under
iT
U.S. President Barack Obama.
Trade in goods between the United States and China exploded from
less than $8 billion in 1986 to over $578 billion in 2016: more than
a 30-fold increase, adjusting for inflation. Since the early years of
Al
this century, however, China’s economic liberalization has stalled.

Contrary to Western expectations, Beijing has doubled down on its
state capitalist model even as it has gotten richer. Rather than becoming
od
a force for greater openness, consistent growth has served to legitimize

the Chinese Communist Party and its state-led economic model.
U.S. officials believed that debt, inefficiency, and the demands of
a more advanced economy would necessitate further reforms. And
so
Chinese officials recognized the problems with their approach; in 2007,

Premier Wen Jiabao called the Chinese economy “unstable, unbalanced,
uncoordinated, and unsustainable.” But rather than opening the country
up to greater competition, the Chinese Communist Party, intent on main-
Ma
taining control of the economy, is instead consolidating state-owned

enterprises and pursuing industrial policies (notably its “Made in
China 2025” plan) that aim to promote national technology champi-
ons in critical sectors, including aerospace, biomedicine, and robotics.
And despite repeated promises, Beijing has resisted pressure from
Washington and elsewhere to level the playing field for foreign
The China Reckoning
companies. It has restricted market access and forced non-Chinese

firms to sign on to joint ventures and share technology, while funneling
investment and subsidies to state-backed domestic players.
Until recently, U.S. policymakers and executives mostly acquiesced
to such discrimination; the potential commercial benefits were so
large that they considered it unwise to upend the relationship with
protectionism or sanctions. Instead, they fought tooth and nail for
small, incremental concessions. But now, what were once seen as
merely the short-term frustrations of doing business with China
m
have come to seem more harmful and permanent. The American
Chamber of Commerce reported last year that eight in ten U.S.
companies felt less welcome in China than in years prior, and more
hi
than 60 percent had little or no confidence that China would open its
markets further over the next three years. Cooperative and voluntary
mechanisms to pry open China’s economy have by and large failed,
ha
including the Trump administration’s newly launched Comprehensive
Economic Dialogue.
iT
THE IMPERATIVE OF LIBERALIZATION
Growth was supposed to bring not just further economic opening
but also political liberalization. Development would spark a virtuous
cycle, the thinking went, with a burgeoning Chinese middle class
Al
demanding new rights and pragmatic officials embracing legal reforms

that would be necessary for further progress. This evolution seemed
especially certain after the collapse of the Soviet Union and demo-
od
cratic transitions in South Korea and Taiwan. “No nation on Earth

has discovered a way to import the world’s goods and services while
stopping foreign ideas at the border,” George H. W. Bush proclaimed.
U.S. policy aimed to facilitate this process by sharing technol-
so
ogy, furthering trade and investment, promoting people-to-people

exchanges, and admitting hundreds of thousands of Chinese students
to American universities.
The crackdown on pro-democracy protesters in Tiananmen Square
Ma
in 1989 dimmed hopes for the emergence of electoral democracy in

China. Yet many experts and policymakers in the United States still
expected the Chinese government to permit greater press freedoms
and allow for a stronger civil society, while gradually embracing more
political competition both within the Communist Party and at local
levels. They believed that the information technology revolution of
March/April 2018 63
the 1990s would encourage such trends by further exposing Chinese

citizens to the world and enhancing the economic incentives for open-
ness. As U.S. President Bill Clinton put it, “Without the full freedom
to think, question, to create, China will be at a distinct disadvantage,
competing with fully open societies in the information age where
the greatest source of national wealth is what resides in the human
mind.” Leaders in Beijing would come to realize that only by granting
individual freedoms could China thrive in a high-tech future.
But the fear that greater openness would threaten both domestic
m
stability and the regime’s survival drove China’s leaders to look for an
alternative approach. They took both
the shock of Tiananmen Square and
Events of the last decade
hi
the dissolution of the Soviet Union
have dashed even modest as evidence of the dangers of democ-
hopes for China’s political ratization and political competition.
ha
liberalization. So rather than embracing positive
cycles of openness, Beijing responded
to the forces of globalization by put-
iT
ting up walls and tightening state control, constricting, rather than
reinforcing, the free flow of people, ideas, and commerce. Additional
stresses on the regime in this century—including an economic slow-
down, endemic corruption in the government and the military, and
Al
ominous examples of popular uprisings elsewhere in the world—have

spurred more authoritarianism, not less.
Indeed, events of the last decade have dashed even modest hopes
od
for political liberalization. In 2013, an internal Communist Party

memo known as Document No. 9 explicitly warned against “Western
constitutional democracy” and other “universal values” as stalking-
horses meant to weaken, destabilize, and even break up China. This
so
guidance demonstrated the widening gap between U.S. and Chinese

expectations for the country’s political future. As Orville Schell, a
leading American expert on China, put it: “China is sliding ineluctably
backward into a political climate more reminiscent of Mao Zedong in
Ma
the 1970s than Deng Xiaoping in the 1980s.” Today, an ongoing crack-
down on journalists, religious leaders, academics, social activists, and
human rights lawyers shows no sign of abating—more than 300 law-
yers, legal assistants, and activists were detained in 2015 alone.
Rather than devolving power to the Chinese people, as many in the
West predicted, communications technologies have strengthened the
The China Reckoning
hand of the state, helping China’s authorities control information

flows and monitor citizens’ behavior. Censorship, detentions, and a
new cybersecurity law that grants broad government control over the
Internet in China have stymied political activity inside China’s “Great
Firewall.” China’s twenty-first-century authoritarianism now includes
plans to launch a “social credit system,” fusing big data and artificial
intelligence to reward and punish Chinese citizens on the basis of
their political, commercial, social, and online activity. Facial recogni-
tion software, combined with the ubiquity of surveillance cameras
m
across China, has even made it possible for the state to physically
locate people within minutes.
hi
THE DETERRENT OF PRIMACY
A combination of U.S. diplomacy and U.S. military power—carrots
and sticks—was supposed to persuade Beijing that it was neither
ha
possible nor necessary to challenge the U.S.-led security order in Asia.
Washington “strongly promot[ed] China’s participation in regional
security mechanisms to reassure its neighbors and assuage its own
iT
security concerns,” as the Clinton administration’s 1995 National
Security Strategy put it, buttressed by military-to-military relations
and other confidence-building measures. These modes of engagement
were coupled with a “hedge”—enhanced U.S. military power in the
Al
region, supported by capable allies and partners. The effect, the think-
ing went, would be to allay military competition in Asia and further
limit China’s desire to alter the regional order. Beijing would settle for
od
military sufficiency, building armed forces for narrow regional contin-

gencies while devoting most of its resources to domestic needs.
The logic was not simply that China would be focused on its self-
described “strategic window of opportunity” for development at home,
so
with plenty of economic and social challenges occupying the attention

of China’s senior leaders. American policymakers and academics also
assumed that China had learned a valuable lesson from the Soviet
Union about the crippling costs of getting into an arms race with the
Ma
United States. Washington could thus not only deter Chinese aggres-
sion but also—to use the Pentagon’s term of art—“dissuade” China from
even trying to compete. Zalmay Khalilzad, an official in the Reagan
and both Bush administrations, argued that a dominant United States
could “convince the Chinese leadership that a challenge would be
difficult to prepare and extremely risky to pursue.” Moreover, it was
March/April 2018 65
unclear whether China could challenge U.S. primacy even if it wanted

to. Into the late 1990s, the People’s Liberation Army (PLA) was
considered decades behind the United States’ military and those of
its allies.
Against this backdrop, U.S. officials took considerable care not to
stumble into a confrontation with China. The political scientist Joseph
Nye explained the thinking when he led the Pentagon’s Asia office
during the Clinton administration: “If we
China has set out to build treated China as an enemy, we were
m
guaranteeing an enemy in the future. If
its own set of regional and we treated China as a friend, we could
international institutions. not guarantee friendship, but we could
hi
at least keep open the possibility of more
benign outcomes.” Soon-to-be Secretary
of State Colin Powell told Congress at his confirmation hearing in
ha
January 2001, “China is not an enemy, and our challenge is to keep it
that way.”
Even as it began investing more of its newfound wealth in military
iT
power, the Chinese government sought to put Washington at ease,
signaling continued adherence to the cautious, moderate foreign
policy path set out by Deng. In 2005, the senior Communist Party
official Zheng Bijian wrote in this magazine that China would never
Al
seek regional hegemony and remained committed to “a peaceful rise.”

In 2011, after a lively debate among China’s leaders about whether it
was time to shift gears, State Councilor Dai Bingguo assured the world
od
that “peaceful development is a strategic choice China has made.”

Starting in 2002, the U.S. Defense Department had been producing
a congressionally mandated annual report on China’s military, but
the consensus among senior U.S. officials was that China remained a
so
distant and manageable challenge.

That view, however, underestimated just how simultaneously insecure
and ambitious China’s leadership really was. For Beijing, the United
States’ alliances and military presence in Asia posed unacceptable
Ma
threats to China’s interests in Taiwan, on the Korean Peninsula, and

in the East China and South China Seas. In the words of the Peking
University professor Wang Jisi, “It is strongly believed in China
that . . . Washington will attempt to prevent the emerging powers,
in particular China, from achieving their goals and enhancing their
stature.” So China started to chip away at the U.S.-led security order
The China Reckoning
in Asia, developing the capabilities to deny the U.S. military access

to the region and driving wedges between Washington and its allies.
Ultimately, neither U.S. military power nor American diplomatic
engagement has dissuaded China from trying to build a world-class
military of its own. High-tech displays of American power in Iraq
and elsewhere only accelerated efforts to modernize the PLA. Chinese
President Xi Jinping has launched military reforms that will make
Chinese forces more lethal and more capable of projecting military
power well beyond China’s shores. With its third aircraft carrier report-
m
edly under construction, advanced new military installations in the
South China Sea, and its first overseas military base in Djibouti,
China is on the path to becoming a military peer the likes of which the
hi
United States has not seen since the Soviet Union. China’s leaders no
longer repeat Deng’s dictum that, to thrive, China will “hide [its]
capabilities and bide [its] time.” Xi declared in October 2017 that
ha
“the Chinese nation has gone from standing up, to becoming rich, to
becoming strong.”
iT
THE CONSTRAINTS OF ORDER
At the end of World War II, the United States built institutions and
rules that helped structure global politics and the regional dynamics
in Asia. Widely accepted norms, such as the freedom of commerce
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and navigation, the peaceful resolution of disputes, and international

cooperation on global challenges, superseded nineteenth-century
spheres of influence. As a leading beneficiary of this liberal interna-
od
tional order, the thinking went, Beijing would have a considerable

stake in the order’s preservation and come to see its continuation as
essential to China’s own progress. U.S. policy aimed to encourage
Beijing’s involvement by welcoming China into leading institutions
so
and working with it on global governance and regional security.

As China joined multilateral institutions, U.S. policymakers hoped
that it would learn to play by the rules and soon begin to contribute
to their upkeep. In the George W. Bush administration, Deputy
Ma
Secretary of State Robert Zoellick memorably called on Beijing to

become “a responsible stakeholder” in the international system. From
Washington’s perspective, with greater power came greater obligation,
especially since China had profited so handsomely from the system.
As Obama emphasized, “We expect China to help uphold the very
rules that have made them successful.”
March/April 2018 67
In certain venues, China appeared to be steadily, if unevenly, taking

on this responsibility. It joined the Asia-Pacific Economic Cooperation
organization in 1991, acceded to the Nuclear Nonproliferation Treaty
in 1992, joined the World Trade Organization in 2001, and took part
in major diplomatic efforts, including the six-party talks and the
P5+1 negotiations to deal with nuclear weapons programs in North
Korea and Iran, respectively. It also became a major contributor to
UN counterpiracy and peacekeeping operations.
Yet Beijing remained threatened by other central elements of the
m
U.S.-led order—and has increasingly sought to displace them. That
has been especially true of what it sees as uninvited violations of
national sovereignty by the United States and its partners, whether
hi
in the form of economic sanctions or military action. Liberal norms
regarding the international community’s right or responsibility to
intervene to protect people from human rights violations, for example,
ha
have run headlong into China’s paramount priority of defending its
authoritarian system from foreign interference. With a few notable
exceptions, China has been busy watering down multilateral sanctions,
iT
shielding regimes from Western opprobrium, and making common
cause with Russia to block the UN Security Council from authorizing
interventionist actions. A number of nondemocratic governments—
in Sudan, Syria, Venezuela, Zimbabwe, and elsewhere—have benefited
Al
from such obstruction.

China has also set out to build its own set of regional and interna-
tional institutions—with the United States on the outside looking
od
in—rather than deepening its commitment to the existing ones. It has

launched the Asian Infrastructure Investment Bank, the New Devel-
opment Bank (along with Brazil, Russia, India, and South Africa), and,
most notably, the Belt and Road Initiative, Xi’s grandiose vision for
so
building land and maritime routes to connect China to much of the

world. These institutions and programs have given China agenda-
setting and convening power of its own, while often departing from
the standards and values upheld by existing international institutions.
Ma
Beijing explicitly differentiates its approach to development by noting

that, unlike the United States and European powers, it does not
demand that countries accept governance reforms as a condition of
receiving aid.
In its own region, meanwhile, Beijing has set out to change the
security balance, incrementally altering the status quo with steps just
The China Reckoning
small enough to avoid provoking a military response from the United

States. In the South China Sea, one of the world’s most important
waterways, China has deftly used coast guard vessels, legal warfare,
and economic coercion to advance its sovereignty claims. In some
cases, it has simply seized contested territory or militarized artificial
islands. While Beijing has occasionally shown restraint and tactical
caution, the overall approach indicates its desire to create a modern
maritime sphere of influence.
In the summer of 2016, China ignored a landmark ruling by a tribu-
m
nal under the UN Convention on the Law of the Sea, which held that
China’s expansive claims in the South China Sea were illegal under
international law. U.S. officials wrongly assumed that some combination
hi
of pressure, shame, and its own desire for a rules-based maritime order
would cause Beijing, over time, to accept the judgment. Instead,
China has rejected it outright. Speaking to a security forum in Aspen,
ha
Colorado, a year after the ruling, in July 2017, a senior analyst from the
CIA concluded that the experience had taught China’s leaders “that
they can defy international law and get away with it.” Countries in the
iT
region, swayed by both their economic dependence on China and
growing concerns about the United States’ commitment to Asia, have
failed to push back against Chinese assertiveness as much as U.S.
policymakers expected they would.
Al
TAKING STOCK
As the assumptions driving U.S. China policy have started to look
od
increasingly tenuous, and the gap between American expectations

and Chinese realities has grown, Washington has been largely focused
elsewhere. Since 2001, the fight against jihadist terrorism has con-
sumed the U.S. national security apparatus, diverting attention
so
from the changes in Asia at exactly the time China was making
enormous military, diplomatic, and commercial strides. U.S. Presi-
dent George W. Bush initially referred to China as a “strategic
competitor”; in the wake of the September 11 attacks, however, his
Ma
2002 National Security Strategy declared, “The world’s great powers

find ourselves on the same side—united by common dangers of ter-
rorist violence and chaos.” During the Obama administration, there
was an effort to “pivot,” or “rebalance,” strategic attention to Asia. But
at the end of Obama’s time in office, budgets and personnel remained
focused on other regions—there were, for example, three times as
March/April 2018 69
many National Security Council staffers working on the Middle

East as on all of East and Southeast Asia.
This strategic distraction has given China the opportunity to press
its advantages, further motivated by the increasingly prominent view
in China that the United States (along with the West more broadly)
is in inexorable and rapid decline. Chinese officials see a United States
that has been hobbled for years by the global financial crisis, its
costly war efforts in Afghanistan and Iraq, and deepening dysfunction
in Washington. Xi has called on China to become “a global leader
m
in terms of comprehensive national strength and international influ-
ence” by midcentury. He touts China’s development model as a “new
option for other countries.”
hi
Washington now faces its most dynamic and formidable competi-
tor in modern history. Getting this challenge right will require doing
away with the hopeful thinking that has long characterized the
ha
United States’ approach to China. The Trump administration’s first
National Security Strategy took a step in the right direction by inter-
rogating past assumptions in U.S. strategy. But many of Donald
iT
Trump’s policies—a narrow focus on bilateral trade deficits, the
abandonment of multilateral trade deals, the questioning of the value
of alliances, and the downgrading of human rights and diplomacy—
have put Washington at risk of adopting an approach that is confron-
Al
tational without being competitive; Beijing, meanwhile, has managed

to be increasingly competitive without being confrontational.
The starting point for a better approach is a new degree of humility
od
about the United States’ ability to change China. Neither seeking

to isolate and weaken it nor trying to transform it for the better
should be the lodestar of U.S. strategy in Asia. Washington should
instead focus more on its own power and behavior, and the power and
so
behavior of its allies and partners. Basing policy on a more realistic

set of assumptions about China would better advance U.S. interests
and put the bilateral relationship on a more sustainable footing.
Getting there will take work, but the first step is relatively straight-
Ma
forward: acknowledging just how much our policy has fallen short
of our aspirations.∂

What Regional Hegemony Would Look Like
Jennifer Lind
m
F
or now, the United States remains the dominant power in East
Asia, but China is quickly closing the gap. Although an economic
hi
crisis or domestic political turmoil could derail China’s rise, if
current trends continue, China will before long supplant the United
States as the region’s economic, military, and political hegemon.
ha
As that day approaches, U.S. allies and partners in the region, such
as Australia, Japan, the Philippines, and South Korea, will start to face
some difficult questions. Namely, should they step up their individual
iT
defense efforts and increase their cooperation with other countries in
the region, or can they safely decide to accept Chinese dominance,
looking to Beijing as they have looked to Washington for the past
half century?
Al
It may be tempting to believe that China will be a relatively benign

regional hegemon. Economic interdependence, one argument goes,
should restrain Chinese aggression: because the legitimacy of the
od
Chinese Communist Party (CCP) rests on economic growth, which

depends on trade, Beijing would maintain peaceful relations with
its neighbors. Moreover, China claims to be a different sort of great
power. Chinese officials and scholars regularly decry interventionism
so
and reject the notion of “spheres of influence” as a Cold War relic.

Chinese President Xi Jinping has said that his country has “never
engaged in colonialism or aggression” thanks to its “peace-loving
cultural tradition.” In this view, life in China’s Asia would not be so
Ma
different from what it is today.

But this is not how regional hegemons behave. Great powers
typically dominate their regions in their quest for security. They
develop and wield tremendous economic power. They build massive
JENNIFER LIND is Associate Professor of Government at Dartmouth College. Follow her
on Twitter @profLind.
March/April 2018 71
Jennifer Lind
militaries, expel external rivals, and use regional institutions and cul-
tural programs to entrench their influence. Because hegemons fear
that neighboring countries will allow external rivals to establish a mil-
itary foothold, they develop a profound interest in the domestic
politics of their neighborhood, and even seek to spread their culture
to draw other countries closer.
China is already following the strategies of previous regional hege-
mons. It is using economic coercion to bend other countries to its will.
It is building up its military to ward off challengers. It is intervening
m
in other countries’ domestic politics to get friendlier policies. And it
is investing massively in educational and cultural programs to enhance
its soft power. As Chinese power and ambition grow, such efforts will
hi
only increase. China’s neighbors must start debating how comfortable
they are with this future, and what costs they are willing to pay to
shape or forestall it. ha
ECONOMIC CENTRALITY
Over the past few decades, China has become the number one trading
iT
partner and principal export destination for most countries in East
Asia. Beijing has struck a number of regional economic deals, including
free-trade agreements with Australia, Singapore, South Korea, the
Association of Southeast Asian Nations, and others. Through such
Al
arrangements, which exclude the United States, Beijing seeks to

create a Chinese-dominated East Asian community. Beijing is also
building an institutional infrastructure to increase its influence at the
od
expense of U.S.-led institutions, such as the International Monetary

Fund (IMF) and the World Bank, and Japanese-led ones, such as the
Asian Development Bank. In 2014, China, along with Brazil, Russia,
and India, set up the $100 billion New Development Bank, which is
so
headquartered in Shanghai. In 2015, China founded the $100 billion

Asian Infrastructure Investment Bank, which 80 countries have now
joined. Furthermore, Xi’s much-heralded Belt and Road initiative will
promote Chinese trade and financial cooperation throughout the
Ma
region and provide massive Chinese investment in regional infrastruc-

ture and natural resources. The China Development Bank has already
committed $250 billion in loans to the project.
Such policies mimic the economic strategies of previous regional
hegemons. China was the predominant economic and military power
in East Asia until the nineteenth century. It granted or withheld trade
m
hi
ha
Changing of the guard: Chinese naval officers in Shanghai, December 2013
iT
privileges according to an elaborate system of tribute, in which other
countries had to send diplomatic missions, bestow gifts, and kowtow
to the Chinese emperor. The Chinese then determined the prices and
quantities of all goods traded. Imperial China consolidated its economic
Al
power by investing in agriculture and railroads, extracting minerals, and

encouraging close commercial integration throughout the region.
In Latin America, the United States followed the same playbook to
od
establish itself as the region’s central economic player. In the nineteenth

century, American firms flocked to the region in search of fruit, minerals,
sugar, and tobacco. The U.S. company United Fruit managed to gain
control of the entire fruit export trade in Central America. Finance was
so
another powerful tool; as the Uruguayan journalist Eduardo Galeano

has argued, a U.S. “banking invasion” diverted local capital to U.S.
firms. Washington encouraged American banks to assume the debts of
European creditors to minimize the influence of European rivals. For
Ma
CAR L O S BAR R IA / R E U T E R S
almost 100 years, Washington used diplomacy to advance its economic

interests through initiatives promoting U.S. regional trade and invest-
ment, such as the Big Brother policy in the 1880s, “dollar diplomacy”
in the early 1900s, and the Alliance for Progress in the 1960s.
The United States also built a regional institutional architecture to
advance its agenda. In 1948, it created the Organization of American
March/April 2018 73
Jennifer Lind
States (headquartered in Washington, D.C.) to promote regional security

and cooperation. American influence ensured that the OAS remained
silent on, or even legitimized, various U.S. military and political inter-
ventions in Latin America. Other development institutions, including
the IMF, the World Bank, the Inter-American Development Bank, the
U.S. Agency for International Development, and the Export-Import
Bank of the United States, also advanced U.S. interests. Through “tied
aid,” such organizations required sponsored projects to hire U.S. vendors.
The IMF, as Galeano has argued, was “born in the United States, head-
m
quartered in the United States, and at the service of the United States.”
Another regional hegemon, Japan, pursued similar strategies in its
empire that dominated the region in the early twentieth century. Vowing
hi
to eject the Western colonial powers, Tokyo declared itself the head
of a “Greater East Asia Co-Prosperity Sphere.” To feed its industrial
economy and military, Tokyo extracted raw materials from countries
ha
it conquered. To promote Japan’s centrality, and to prevent economic
activities by rival countries, it reformed
Economic dominance lets and managed local economies in a
iT
regional network, standardizing the
regional hegemons use region’s currency in a “yen bloc” and
economic coercion to dispatching Japanese banks through-
advance their agendas. out the area so that they controlled
Al
the majority of the region’s bank

deposits. Tokyo also created the
Southern Development Bank, which provided financial services
od
and printed currency in occupied territories.

Similarly, in Eastern Europe after World War II, the Soviet Union
relied on economic and financial statecraft to dominate the region.
Moscow blocked all trade with Western Europe and forbade Eastern
so
European states from accepting aid under the 1948 Marshall Plan.
Instead, it created the Council for Mutual Economic Assistance to
manage and integrate the regional economy. Soviet investment, trade
agreements, and trade credits made Eastern European countries
Ma
economically dependent on Moscow, both as their primary export

market and as their supplier of raw materials and energy. And by sell-
ing raw materials at below-market prices, Moscow encouraged local
political leaders to become dependent on its subsidies.
Economic dominance lets regional hegemons use economic coercion
to advance their agendas. In Latin America, the United States has
long sought to coerce countries through sanctions. In addition to the

long-standing (and failed) U.S. embargo of Cuba, Washington used
financial pressure to weaken President Salvador Allende in Chile in
the 1970s and embargoed Nicaragua to undermine the Sandinista
government in 1985. Similarly, in Eastern Europe, Moscow sought
to control independent-minded leaders, imposing sanctions against
Yugoslavia in 1948, Albania in 1961, and Romania in 1964.
Beijing has already begun to employ such economic coercion. In
2017, China punished South Korea and the Japanese–South Korean
m
business conglomerate Lotte for cooperating with the U.S.-built
THAAD missile defense program. (Lotte had sold the land on which
THAAD was deployed to the South Korean government.) Beijing banned
hi
Chinese tour groups from visiting South Korea, Chinese regulators
closed 80 percent of Lotte supermarkets and other Korean-owned
businesses (ostensibly for fire-code violations), and state-run media
ha
urged boycotts of Korean products. Beijing has also used economic
coercion against Japan (banning the export of Chinese rare-earth
metals to the country after a 2009 ship collision) and Norway
iT
(embargoing Norwegian fish exports after the Chinese dissident Liu
Xiaobo won the Nobel Peace Prize in 2010). And in 2016, when Mongo-
lia hosted the Dalai Lama, Beijing imposed extra fees on commodities
moving through the country and froze all diplomatic activity—including
Al
negotiations about a $4 billion Chinese loan. “We hope that Mongolia

has taken this lesson to heart,” the Chinese foreign ministry said in
a statement. Apparently it has: the Mongolian government has an-
od
nounced that the spiritual leader will not be invited back.

Such coercion will be less necessary in the future as leaders pre-
emptively adjust their policies with Beijing in mind. Consider the
Philippines: in the past, the country has stood up to China—for
so
example, filing a complaint about Chinese territorial assertiveness

with an international tribunal at The Hague in 2013. But more recently,
Philippine President Rodrigo Duterte, who has received $24 billion
in investment pledges from Beijing, has warmed relations with China
Ma
and distanced his country from the United States.
THE PURSUIT OF MILITARY HEGEMONY

Following the example of previous hegemons, China is also expanding
its regional military reach. Since the 1990s, Chinese military spending
has soared, and the CCP is modernizing weaponry and reforming its
March/April 2018 75
Jennifer Lind
military organizations and doctrine. The People’s Liberation Army

(PLA) has adopted the doctrine of “anti-access, area denial” to push the
U.S. military away from its shores and airspace. China has also built
the region’s largest coast guard and controls a vast militia of civilian
fishing vessels. In 2017, the PLA opened its first overseas military base
in Djibouti; it will likely build more bases along the African east coast
and the Indian Ocean in coming years. Meanwhile, in the South
China Sea, China has built six large islands that house air force bases,
missile shelters, and radar and communications facilities. Already,
m
the U.S. military finds itself constrained by the expanding bubble of
Chinese air defenses, by China’s growing ability to find and strike
U.S. naval vessels, and by an increased missile threat to U.S. air bases
hi
and ports.
Beijing is using these capabilities to more forcefully assert its
territorial claims. By transiting disputed waters and massing ships
ha
there, Beijing is pressuring Japan militarily over a cluster of small
islands called the Diaoyu by China and the Senkaku by Japan. Else-
where, to deny access to disputed areas, the PLA swarms fishing and
iT
coast guard vessels, and fires water cannons at other countries’ ships.
Last summer, after asserting ownership of an oil-rich area in Vietnam’s
exclusive economic zone, Beijing threatened to use military force if
Vietnam did not stop drilling. Vietnam stopped drilling.
Al
Contemporary China’s quest for regional military dominance

follows the behavior of previous regional hegemons, including China
itself. As the historian Peter Perdue has argued, modern China is a
od
product of invasions that subdued all of modern Xinjiang and Mon-

golia, and reached Tibet, as well. Chinese dynasties, he has written,
“never shrank from the use of force,” including the “righteous ex-
termination” of rival states and rebels. Throughout Asia, Chinese
so
military garrisons subdued invaders and pirates.

Subsequent hegemons dominated their regions through military
force, too. Starting in the late nineteenth century, the United States
began to build what would become the Western Hemisphere’s preemi-
Ma
nent military. In that period, the United States acquired territory

through numerous wars against Mexico and Spain. Over the next few
decades (often to advance the United States’ commercial interests),
U.S. forces invaded Latin American countries more than 20 times,
most often the Dominican Republic, Haiti, Mexico, and Nicaragua.
During the Cold War, the United States repeatedly used military
force to counter leftist movements in Latin America: it blockaded

Cuba in 1962, sent troops to the Dominican Republic in 1965, mined
Nicaraguan harbors in the 1980s, and invaded Grenada in 1983 and
Panama in 1989.
Japan also built and maintained its empire through military force. Its
nineteenth-century military modernization yielded stunning victories
over China and Russia. Through these and other military campaigns,
Japan seized territories such as Korea and Taiwan and wrested colonial
possessions from France, Germany, the United Kingdom, and the United
m
States. The Japanese military then administered the empire, fighting
counterinsurgencies and suppressing independence movements.
In Europe after World War II, the Soviet Union dominated its
hi
sphere of influence with the region’s most powerful army. It stationed
troops in Czechoslovakia, East Germany, Hungary, and Poland. To
shape the region to its liking, the Kremlin was willing to use force. It
ha
dispatched Soviet troops to quell uprisings in Hungary in 1956 and
Czechoslovakia in 1968.
These hegemons did not tolerate the presence of rival great powers
iT
in their regions. Likewise, China today is chafing against the U.S.
presence in Asia and actively working to undermine it. Chinese officials
and defense white papers criticize U.S. alliances as outdated and desta-
bilizing. Xi himself, calling for a new “Asian security architecture,”
Al
has argued that these relationships fail to address the region’s complex
security needs. Meanwhile, by cultivating close ties with Seoul and
encouraging the Philippines’ tilt toward China, Beijing has sought to
od
draw U.S allies away.
NOSY NEIGHBOR
Beijing is also interfering in the domestic politics of other countries.
so
Citing China specifically, Canadian intelligence officials have warned

of foreign agents who might be serving as provincial cabinet ministers
and government employees. And in 2016, a scandal erupted in Australia
after it was revealed that Sam Dastyari, a senator who had defended
Ma
Chinese territorial claims in the South China Sea, had financial ties to a
Chinese firm, prompting new laws banning foreign political donations.
Historically, regional hegemons have intervened extensively in
domestic politics to support friendly governments and undermine
parties and leaders perceived as hostile. Within China’s tribute system,
the emperor delegated the administration of subservient states to
March/April 2018 77
Jennifer Lind
local leaders, an approach known as “using barbarians to govern bar-

barians.” But local independence went only so far. As the sixteenth-
century statesman Chang Chu-cheng said of such vassals, “Just like
dogs, if they wag their tails, bones will be thrown to them; if they
bark wildly, they will be beaten with sticks; after the beating, if they
submit again, bones will be thrown to them again; after the bones,
if they bark again, then more beating.”
Japan similarly intervened in domestic politics during its imperial
heyday. In the Philippines, for example, it abolished all political
m
parties except for the pro-Japanese one. Elsewhere, it delegated con-
trol to friendly local leaders and police, and trained such leaders at
institutes in Japan. If officials in China, Korea, and Manchuria did not
hi
cooperate, Tokyo relied on a Japanese paramilitary organization that
intimidated, blackmailed, and assassinated local leaders.
For its part, the United States meddled in Latin American politics
ha
countless times. Through the Roosevelt Corollary to the Monroe
Doctrine, Washington claimed the right to intervene in its neighbors’
affairs. It relied on covert and overt, violent and nonviolent methods
iT
to support anticommunist leaders and to undermine or depose leftist
ones. The U.S. diplomat Robert Olds explained the approach in blunt
terms in 1927: “Central America has always understood that govern-
ments which we recognize and support stay in power, while those
Al
which we do not recognize and support fall.” During the Cold War,
the U.S. military and the CIA funded, armed, and trained anticom-
munist forces throughout Latin America at institutions such as the
od
U.S. Army School of the Americas in Panama. U.S.-trained forces

sought to depose leftist governments in Cuba, Ecuador, El Salvador,
and Nicaragua. Washington also supported coups in Guatemala in
1954 and Chile in 1973.
so
Moscow was similarly busy in Eastern Europe. After World War

II, the Soviet Union installed communist parties in its neighbors’
governments, in which advancement depended on loyalty to Moscow.
Under Stalin, Soviet secret police harassed, tortured, and murdered
Ma
opposition leaders. After Stalin, the Soviets relied on subtler tac-

tics, such as bringing foreign elites to train in communist party
schools and to build networks with Soviet and regional politicians.
Through the Brezhnev Doctrine, Moscow claimed the authority to
intervene in its neighbors’ politics in order to defend socialism from
hostile forces.
PLAYING HARDBALL FOR SOFT POWER

China today is seeking to increase its influence in East Asia and
beyond through extensive educational and cultural activities. The
media is central to this effort. The state-run media organizations
Xinhua and the China Global Television Network have bureaus all
over the world. Hollywood studios regularly seek Chinese funding
for their projects, as well as distribution rights in China’s vast mar-
ket. Wary of offending the CCP, studios have started preemptively
censoring their content. Censorship has also begun to infect the
m
publishing industry. To gain access to China’s vast market, publishers
are increasingly required to censor books and articles containing
specific words or phrases (for example, “Taiwan,” “Tibet,” and “Cultural
hi
Revolution”). Prominent publishing houses, including Springer
Nature—the world’s largest academic book publisher—have succumbed
to Beijing’s demands and are increasingly self-censoring.
ha
Beijing also promotes Chinese influence in education. China has
become the world’s third most popular destination for foreign
study, welcoming more than 440,000 students from over 200 coun-
iT
tries in 2016. Many students receive support from the Chinese gov-
ernment. Overseas, in 142 countries, Beijing has created more than
500 Confucius Institutes to promote Chinese language and culture.
A study by the U.S.-based National Association of Scholars argues
Al
that Confucius Institutes are decidedly nontransparent about their

connections to the CCP. Their teachers must observe CCP restrictions
on free speech and are pressured to “avoid sensitive topics,” such as
od
human rights, Tibet, and Taiwan.

The CCP also infiltrates college campuses abroad. Beijing enlists
members of the 60-million-strong Chinese diaspora: at universities
around the world, Chinese Students and Scholars Associations dem-
so
onstrate in support of visiting Chinese leaders and protest the Dalai

Lama and other speakers the CCP deems hostile. Beijing also monitors
and silences Chinese critics abroad by mobilizing harassment on so-
cial media and by threatening their families back home. In Australia,
Ma
concerns about Chinese interference and espionage at universities led

intelligence officials to issue warnings about an “insidious threat”
from foreign governments seeking to shape local public opinion.
Past regional hegemons similarly promoted their influence through
culture and education, and by co-opting leaders of civil society. As the
China expert Suisheng Zhao writes, “Chinese culture was seen as a
March/April 2018 79
Jennifer Lind
great lasting power to bridge periods of disunity and to infuse new

governments . . . with values supportive of the traditional Chinese
order.” China spread its language, literature, Confucian philosophy,
and bureaucratic traditions to Japan, Korea, Vietnam, and other coun-
tries. Chinese emperors also followed the advice of one minister in
the Han dynasty who proposed subduing barbarians with “five baits”:
silk clothing and carriages, sumptuous food, entertainments and female
attendants, mansions with slaves, and imperial favors such as banquets
and awards.
m
U.S. hegemony in Latin America also relied heavily on soft power. In
1953, the U.S. government created the U.S. Information Agency, which,
according to President Dwight Eisenhower, would show countries that
hi
U.S. objectives “are in harmony with and will advance their legitimate
aspirations for freedom, progress, and
ha peace.” U.S. TV stations started Latin
Past regional hegemons American channels that broadcast
promoted their influence American films and programs. The
through culture and U.S. government built news agencies
iT
education. and radio stations and infiltrated or
intimidated opposition media outlets.
In Chile and the Dominican Repub-
lic, for example, the CIA and the USIA engaged in an intense propaganda
Al
effort against undesirable political candidates, spreading misinfor-

mation and silencing opposition media.
Likewise, imperial Japan created the East Asia Development
od
League to shape regional perceptions and guide the activities of

Japanese people living in the empire. Tokyo controlled civil society
by creating and infiltrating organizations such as youth groups,
martial arts clubs, student unions, secret societies, and religious
so
organizations. Its Greater East Asia Cultural Policy sought to erad-

icate Western culture. For example, Tokyo banned Coca-Cola on
the grounds that it had been invented “to bring the people under
the soul- and mind-shattering influence of the insidious drug, and
Ma
so to make them more apt for Anglo-American exploitation.” Tokyo

prohibited the use of European languages and established Japanese
as the area’s official language, dispatching hundreds of teachers
throughout Asia. Japan transmitted its culture through radio programs,
newspapers, and comic books, as did cultural institutes that spon-
sored exhibitions, lectures, and films.
The Soviet Union secured its influence in Eastern Europe through

extensive cultural activities. As the writer Anne Applebaum details in
her book Iron Curtain, Soviet-backed communist parties took over
radio stations and newspapers and intimidated or shut down indepen-
dent media. The Soviets created influential youth organizations
and co-opted writers, artists, and other intellectual leaders by offer-
ing well-paid jobs, lavish houses with servants, and free education
for their children.
Moscow also created a vast organization known as VOKS (a Russian
m
acronym for All-Union Society for Cultural Relations With Foreign
Countries) to disseminate Soviet ideas and culture and bring Western
intellectuals under communist influence. VOKS brought thousands of
hi
visitors to the Soviet Union and sponsored scientific research, film-
making, athletics, ballet, music, and publishing. It also spent lavishly
at international fairs and expositions—such as the Brussels World’s
ha
Fair of 1958—to showcase Soviet technology and culture.
CONTEMPLATING LIFE IN CHINA’S ASIA

iT
When examining China’s current behavior in the context of previous
regional hegemonies, some common themes stand out. First, economic
interdependence has a dark side. Although interdependence raises the
cost of conflict, it also creates leverage. China’s centrality in regional
Al
trade and finance increases its coercive power, which Beijing has
already begun to exercise. Second, history shows that regional hege-
mons meddle extensively in their neighbors’ domestic politics. Indeed,
od
Beijing has already begun to reverse its much-touted policy of non-

intervention. As China grows stronger, its neighbors can expect Beijing
to increasingly interfere in their domestic politics.
East Asian countries need to decide whether this is something they
so
are willing to accept. In particular, Japan, the only country with the
potential power to balance China, faces an important choice. Since
World War II, Japan has adhered to a highly restrained national secu-
rity policy, spending just one percent of its GDP on defense. For obvious
Ma
historical reasons, the Japanese people are suspicious of military state-

craft, and they worry about a lagging economy and the expense of
caring for an aging population. They may decide to continue devoting
their wealth to butter rather than guns.
This would be a perfectly valid choice, but before making it, the
Japanese people should contemplate their life in China’s Asia. Beijing
March/April 2018 81
Jennifer Lind
and Tokyo are already embroiled in a bitter territorial dispute over

the Diaoyu/Senkaku Islands. To gain control of the islands, weaken
the U.S.-Japanese relationship, and advance other interests, Beijing
can be expected to use greater military and economic coercion and
to meddle in Japanese politics. Beyond a hegemon’s normal reasons
to intervene, China harbors deep historical resentment toward Japan.
Imagine if the United States had actually hated Cuba.
If Japan decided that Chinese hegemony would be unacceptable, its
national security policy would need to change. The United States’
m
global interests and commitments allow Washington to devote only
some of its resources to Asia. It would not have the capability, let
alone the will, to balance Beijing alone. Japan would need to become
hi
more like West Germany: a U.S. ally that, although outgunned and
directly threatened by a hostile great power, mobilized substantial
military might and was a true partner with the United States in securing
ha
its national defense.
Tokyo and Washington could use diplomacy to offer countries an
alternative to Chinese regional dominance. To do so, they should
iT
look to a core group of maritime countries with similar values and
overlapping interests—namely, Australia, India, New Zealand, and
the Philippines. Other potentially interested actors, such as Indonesia,
Malaysia, Singapore, and Thailand, should be welcomed, too. But
Al
the first step on this path is a Japanese—and broader East Asian—

debate about the prospect of living in China’s Asia.∂
od
so
Ma
Green Giant
Renewable Energy and Chinese Power
Amy Myers Jaffe
m
I
n 1997, in need of increasing oil and gas imports to fuel its accel-
hi
erating economy, China launched a new energy policy. Intent
on replicating Washington’s close relationships with large oil-
producing countries, its diplomats toured oil-state capitals, offering
ha
investment and arms in exchange for guaranteed supplies. Of partic-
ular interest were governments that had been ostracized by Western
powers—an opening, Beijing believed, that would allow it to level the
iT
energy playing field with the United States and have the added benefit
of fueling conflicts that would distract the U.S. military just as it was
trying to refocus on Asia.
Yet many of China’s forays turned out badly. New partners defaulted
Al
on loans and failed to deliver the promised oil. The practice of

investing in dangerous places where others would not put the lives
of Chinese workers at risk. At home, several leaders of large energy
od
corporations have been purged in so-called anticorruption drives.

Meanwhile, the United States has enjoyed a domestic energy boom
that is rapidly turning it into a major exporter of oil and natural
gas and cushioning its economy against oil-price shocks. Beijing has
so
begun to worry that, given the United States’ decreasing reliance on

supplies from the Persian Gulf, Washington might intervene more
slowly to quell disturbances in the Middle East that threaten to disrupt
the flow of oil.
Ma
Accordingly, since assuming office in 2012, Chinese President

Xi Jinping has turned to a new strategy: a pivot to renewable energy.
China already dominates the global solar-panel market, but now it is
AMY MYERS JAFFE is David M. Rubenstein Senior Fellow for Energy and the Environ-
ment and Director of the Energy Security and Climate Change Program at the Council on
Foreign Relations.
March/April 2018 83
Amy Myers Jaffe
expanding its support for oil-saving technologies, funding the devel-

opment and production of everything from batteries to electric cars.
The goal is not just to reduce China’s dependence on foreign oil and
gas but also to avoid putting the country at an economic disadvantage
relative to the United States, which will see its own growth boosted
by its exports of oil and gas to China. China’s aims are also strategic.
By taking the lead in green energy, Beijing hopes to make itself an
energy exporter to rival the United States, offering other countries
the opportunity to reduce their purchases of foreign oil and gas—and
m
cut their carbon emissions in the process.
If Beijing’s new energy strategy succeeds, it will help both the global
fight against climate change and China’s ambition to replace the United
hi
States as the most important player in many regional alliances and
trading relationships. That ambition has been bolstered by the Trump
administration’s backward-looking approach to energy policy: its focus
ha
on coal, oil, and natural gas; its abandonment of the international
organizations that shape global energy markets; and its rejection of
the Paris climate accord. Such moves are helping pave the way for
iT
China to become the renewable energy superpower of the future.
Washington needs to respond before it is too late.
OIL SHOCK
Al
Beginning in the first decade of this century, breakneck economic

growth in China created a need for foreign oil and gas, driving China’s
transformation from a regional power to a global one. Hampered by
od
competition for resources from large Western oil companies, Beijing

focused on so-called rogue states, where, because of Western sanctions,
those rival companies could not invest. It first targeted Iran, Iraq, and
Sudan, then Russia and Venezuela.
so
The results have been less than stellar. In Iran, Western and
then UN sanctions hindered Chinese efforts for several years by
limiting the amount of money Chinese firms could spend in Iran.
And even since the Iran nuclear deal relaxed sanctions, other
Ma
problems have cropped up. In early 2016, for example, two Chinese
national oil companies, Sinopec and the China National Petroleum
Corporation, finally managed to get production moving at two
fields in Iran’s Khuzestan Province, but they now have to worry
about Saudi-backed Arab separatists, who have recently bombed
oil facilities there.
Green Giant
China has encountered similar problems in Iraq, where a lack of

security has plagued oil projects. And in the more secure Kurdish
region, estimates of oil reserves have been reduced by half since initial
surveys. Together with low oil prices, that means that Sinopec is unlikely
to make a profit on its investments there. Chinese exploration for
natural gas in Saudi Arabia has also come up dry.
In Africa, Chinese projects have fared little better. Prolonged civil
wars in Sudan and South Sudan have severely restricted the amount
of oil that Chinese firms operating there
m
can extract. Beijing has faced interna-
tional condemnation for its support of
China’s increasing
the Sudanese government, which has dependence on foreign oil
hi
been sanctioned by the United States has made its leaders uneasy.
for war crimes. And attacks on Chinese
oil workers in Ethiopia, Libya, Nigeria, Sudan, and South Sudan have
ha
forced the Chinese government to evacuate its personnel and have led
to political criticism at home.
China has struggled even in relatively stable places. Last Sep-
iT
tember, a Chinese conglomerate invested $9 billion in the Russian
state-controlled oil giant Rosneft in return for a 14 percent owner-
ship stake. But Rosneft is saddled with nearly $50 billion in debt
and has undertaken a program of ambitious international spending
Al
driven less by a coherent profit strategy than by Russia’s strategic

interests. This decision, on top of the uncertainty caused by U.S.
sanctions on Russia, led Rosneft’s share price to decline by 23 percent
od
during 2017, which translates into a multibillion-dollar loss for the

Chinese conglomerate.
The story is similar in Venezuela. From 2007 to 2014, Chinese
firms provided around $60 billion in oil-backed loans to Caracas. But
so
Venezuelan crude oil exports to China reached just 450,000 barrels

a day in 2017, only half the volume the Chinese had anticipated.
One of the largest lenders, the China Development Bank, currently
receives barely enough oil and refined oil products from Venezuela
Ma
to cover the interest payments on its loans.

All told, China’s $160 billion in spending on oil and gas assets has
bought it less energy that it might have expected. Its foreign oil re-
sources are projected to produce roughly two million barrels a day by
2028. By comparison, just over a decade ago, Saudi Arabia spent $14
billion to add two million barrels a day of new production. China’s
March/April 2018 85
Amy Myers Jaffe
oil imports pale in comparison with the United States’ domestic oil
production, which stood at 9.8 million barrels a day at the end of 2017
and could reach over 20 million barrels a day in the next decade. More-
over, China’s own oil production, currently 3.9 million barrels a day, is
falling fast due to mismanagement, depleted fields, and low prices.
China currently imports around 70 percent of the oil it uses. By 2030,
that figure is expected to reach 80 percent.
Meanwhile, the United States will likely become a net exporter of
oil and natural gas by the 2030s, if not sooner. When it does, other
m
energy producers will lose their long-standing leverage over U.S.
policy. (In 1973, for example, OPEC placed an embargo on oil exports
to countries, including the United States, that had supported Israel
hi
during the Yom Kippur War.) And the U.S. economy, which boasts
hundreds of thousands of new oil and gas jobs, will be better shielded
than China’s economy from a sudden drop in the global oil supply.
ha
China’s increasing dependence on foreign oil has made its leaders
uneasy. Its 12th five-year energy plan, which ended in 2015, noted “a
profound adjustment in energy supply patterns” resulting from the de-
iT
velopment of new oil and gas sources in Canada and the United States.
It characterized China’s energy security situation as “grim,” in contrast
to that of the United States. Such trends have also changed Beijing’s
calculus in the Middle East. Although Washington is still saddled with
Al
the responsibility of protecting the region’s oil flows, an oil cutoff caused
by conflict there would now do more damage to China’s economy than
to that of the United States. Beijing has to take account of the growing
od
risk that Washington will abdicate its protector role in the region or, at
the least, force China and other countries to foot more of the bill.
THE BIG GREEN BANG

so
This new reality has prompted China to ramp up its investment in

renewable energy and low-carbon technologies. It is not only looking
for domestic energy security but also banking on green energy
products as major industrial exports that will compete with Russian
Ma
and U.S. oil and gas. China aims to make itself the center of the clean
energy universe, selling its goods and services to help other countries
avoid the environmental mistakes it now admits were part of its recent
economic growth.
There is a precedent for this approach. Beginning around ten years
ago, a booming solar power industry in Germany helped China’s nascent
Green Giant
solar-panel manufacturing sector get off the ground. The Chinese

government plans to repeat that success on a grander scale. It hopes
that demand for clean energy technology from countries looking to
reduce their carbon emissions will create jobs for Chinese workers
and strong relationships between foreign capitals and Beijing, much
as oil sales linked the Soviet Union and
the Middle East after World War II.
That means that, in the future, when the
China’s bet on
United States tries to sell its liquefied renewable energy is
m
natural gas to countries in Asia and designed to improve
Europe, it may find itself competing its national security.
not so much with Russian gas as with
hi
Chinese solar panels and batteries.
According to the International Energy Agency, the Chinese public
and private sectors will invest more than $6 trillion in low-carbon
ha
power generation and other clean energy technologies by 2040. The
Chinese renewable energy sector already boasts 125 gigawatts of
installed solar power, over twice the figures for the United States
iT
(47 gigawatts) and Germany (40 gigawatts). Chinese firms now have
the capacity to manufacture 51 gigawatts’ worth of photovoltaic solar
panels every year, more than double total global production in 2010.
The U.S. Department of Energy estimates that the Chinese govern-
Al
ment has provided as much as $47 billion in direct funding, loans, tax
credits, and other incentives to solar-panel manufacturers since 2008.
Over the last decade, Chinese exports have contributed to an 80 per-
od
cent drop in global solar-panel prices. Future Chinese investment in

battery technology is likely to have a similar effect on battery prices.
Overall, China currently generates 24 percent of its power from
renewable sources; the United States generates 15 percent.
so
China is also betting big on electric vehicles, heavily subsidizing

their development and production. In 2015, Chinese public subsidies
for electric vehicles totaled more than ten times the amount provided
by the U.S. government. Over 100 Chinese companies currently make
Ma
electric cars and buses. The Chinese car manufacturer BYD is now the
largest producer of electric vehicles in the world, with another six
Chinese firms also ranking in the top 20. In 2015, China surpassed the
United States in annual and cumulative electric car sales. There are
over one million electric cars on Chinese roads today, almost double
the number in the United States. By 2020, China aims to have five
March/April 2018 87
Amy Myers Jaffe
million in operation. China could eventually boast as many as 100 mil-

lion electric vehicles. In September, Chinese officials confirmed that
the government is developing a timetable to end the use of gas-powered
cars in China, in line with other countries, such as France and the
United Kingdom, that are aiming to eliminate them by 2040.
Beijing is also working to dominate the financing of green energy.
In late December, it announced that it intends to create the world’s
largest carbon market, in which firms trade credits for the right to emit
greenhouse gases. China already buys more “green bonds”—which fund
m
projects designed to prevent climate change or mitigate its effects—than
any other country and is actively promoting so-called green finance
within its financial sector by encouraging its major banks, including
hi
the People’s Bank of China, to accelerate the issuance of green bonds
and other kinds of credits for clean energy. The Chinese government
has started to promote cooperation on green finance between Chinese
ha
and foreign businesses through bilateral efforts, such as the UK-China
Economic and Financial Dialogue. It is also playing up its environ-
mental standards to attract multinational lenders to pay for its ambitious
iT
$1.4 trillion Belt and Road Initiative, an infrastructure program designed
to expand Beijing’s influence in Asia.
China’s bet on renewable energy and electric transport is also
designed to improve its national security. Chinese analysts have long
Al
decried the risks of shipping oil through sea-lanes that are dominated
by the U.S. military and increasingly threatened by the growing
navies of regional powers such as India and Japan. Replacing foreign
od
oil with domestic sources of renewable energy would remove this

problem. Meanwhile, flexible energy microgrids (which generate and
distribute power in self-contained grids that can detach from centralized
systems during a crisis) and multifuel transportation systems (which
so
move away from sole reliance on oil-based gasoline and diesel) will
help China withstand cyberattacks and limit the effects of natural
disasters and wars. Advanced clean energy technologies will also likely
fuel autonomous weapons, such as drones, artificial intelligence, and
Ma
satellite-based equipment that can disable U.S. satellites and global

positioning systems, all of which China is trying to master.
FALLOUT
China’s energy pivot promises to reshape the international order. Its
most direct impact will be on the global response to climate change.
Green Giant
m
hi
ha
Here comes the sun: solar panels in Zhejiang Province, China, December 2014
iT
Just as China’s big move into solar-panel manufacturing brought down
the costs of that technology, so the prices of batteries, electric cars, and
carbon capture and storage will likely collapse as China invests.
The energy pivot is also already changing how China deals with the
Al
rest of the world. It is courting countries in Europe, Central Asia, and

Southeast Asia with the promise of cheap loans, upgraded energy and
transport infrastructure, and freedom from energy shortages and energy-
od
related pollution. Russia’s history of heavy-handed threats to cut off

supplies of oil and gas to its neighbors has made Beijing’s job all the
easier. Helping countries generate clean, abundant energy will allow
China to compete more aggressively with the United States by under-
so
cutting Washington’s ability to use its new oil and gas exports to forge
CHINA STRING E R N ETWO RK / REUTE RS
closer relations with other countries. Chinese officials have even argued
that by assisting countries in developing green business models and
providing access to reliable energy and modern infrastructure to poorer
Ma
countries, China can help redress inequality among nations and create
more consistent global economic growth, lowering the risks of terrorism
and conflict.
Not all the effects of China’s move into clean energy are likely to
prove so benign. If China comes to depend largely on domestic energy,
it will become less willing to offer preferential loans to failing oil states.
March/April 2018 89
Amy Myers Jaffe
That could prove disastrous for some countries, especially if China’s

renewable energy technology exports also eliminate a significant pro-
portion of the world’s demand for oil and gas. This story has already
played out in Venezuela. In 2016, China refused to extend new loans
to Caracas, cutting off Venezuela’s most important remaining finan-
cial lifeline and pushing the country deeper into debt, poverty, and
political breakdown. As China sells more and more renewable energy
technology and electric vehicles at home and abroad, other oil states,
such as Angola, Nigeria, and Russia, could experience similar fates.
m
Even countries in the Persian Gulf could suffer if they do not reform
their economies. The result could well be more dangerous failed
states with disenfranchised populations.
hi
AMERICA’S ENERGY CHALLENGE
China’s new energy strategy raises serious questions for U.S. energy
ha
and climate policy. The Trump administration argues that the United
States can maintain U.S. energy dominance by selling its vast sup-
plies of oil and natural gas to the rest of the world, as long as domestic
iT
producers are unfettered by excessive government regulation. But the
success of that vision will rely on international energy and carbon
rules. If the United States abdicates its global role, those might be set
by other countries.
Al
Although President Donald Trump has announced that the United

States will withdraw from the Paris climate agreement, the country
cannot formally do so until 2020. That means that the United States
od
still holds leadership positions in the bodies that will play a large part
in determining global energy-market regulations, energy- and carbon-
pricing policies, and possibly even which fuels—coal, oil, gas, nuclear,
or renewables—will be favored globally. But if the United States
so
leaves those groups, they may well design a global energy architec-
ture that favors China’s interests. That could allow China to sell its
energy technology products abroad free of tariffs, while fees on carbon
emissions would hamper U.S. oil and gas exports. It could also make
Ma
Chinese, rather than U.S., requirements for energy-product labeling

and efficiency and for zero-emission vehicles the global standards.
And if Chinese financial institutions help set the rules and standards
for green financing, they could stack the deck in their own favor,
hurting U.S. banks in what is set to become a multitrillion-dollar
industry in the coming decades.
Green Giant
To keep the United States’ options open, the Trump administration

needs to find a creative way to meet the country’s original pledge in the
Paris agreement to reduce its emissions by roughly 27 percent from
2005 levels by 2025. There is still time to do so. A majority of U.S.
states and major cities will continue to implement the initiatives they
set out in alignment with the Clean Power Plan, an Obama-era policy
designed to get states to cut their carbon emissions, which the Trump
administration rescinded in October. U.S. car and truck manufacturers
and ride-sharing companies are engaging China to sell their products
m
and services to Chinese consumers. By recommitting to the Paris
agreement, even with a less ambitious strategy, the Trump administra-
tion would avoid needlessly antagonizing countries that care about the
hi
accord and maintain U.S. influence in global rule-making on energy.
The United States should also work both inside and outside the
framework of the Paris agreement to create trade rules and carbon-
ha
market systems that would favor U.S. oil and natural gas exports in
the immediate term and lay the groundwork to promote U.S. clean
technology companies in the long run. A good model exists in the
iT
agreement finalized in November among Alaska, Sinopec, the Bank
of China, and China’s sovereign wealth fund, which will result in a
Chinese investment of up to $43 billion to develop natural gas re-
serves in northern Alaska. Natural gas could replace coal in countries
Al
such as China and India, reducing carbon dioxide emissions. And

tying China to U.S. resource extraction would help cement U.S.-
Chinese energy cooperation and ensure that the United States’ en-
od
ergy exports will remain competitive with those of other countries

trying to sell oil and gas to China.
So far, the Trump administration has shown little sign that it has
a real vision for sustaining U.S. energy dominance. It seems inclined
so
to expand rules set by the Committee on Foreign Investment in the

United States in order to safeguard U.S. advantages in artificial in-
telligence and other digital technologies important to protecting
U.S. energy infrastructure. That could be worthwhile, but the ad-
Ma
ministration will need a much broader vision, one that goes beyond
a proposed small tariff on imported solar panels and looks at the rest
of the U.S. clean technology complex, which includes new batteries,
energy-saving digital products, and alternative-fuel vehicles.
The administration has begun the process of rewriting the Clean
Power Plan. It has suggested improving the efficiency of power plants by
March/April 2018 91
Amy Myers Jaffe
reducing leaks and using new digital technologies to improve control

systems. But that will not be enough. It also needs to devise policies to
help innovation and promote the adoption of technologies that can rival
Chinese products, such as smart meters and solar panels or wind turbines
with connected batteries to store the energy generated. New regulations
on the power generation industry should reward states, counties, and
cities that want to shift to clean energy and issue green bonds.
Rick Perry, the secretary of energy, has argued that natural gas and
renewable sources of energy are less reliable than fossil fuels or nuclear
m
power and so the administration should subsidize coal and nuclear
power in key markets to prevent interruptions in supply. But this argu-
ment fails to realize that new technologies can create a flexible, responsive
hi
grid capable of bouncing back quickly in the aftermath of sudden surges
in demand, natural disasters, or cyberattacks.
The administration should also think creatively about how to best
ha
tap the United States’ increasing surplus of cheap natural gas to lower
the country’s emissions and meet its pledge under the Paris agreement.
Washington should consider supporting new uses for natural gas, such
iT
as to power long-distance trucks or to make hydrogen fuel for other
vehicles. Doing so while minimizing emissions will require enforcing
rules governing the leakage of methane from oil and gas production,
transport, and disposal. Those rules have bipartisan support in Congress
Al
as well as support from many industry players. But the Department of

the Interior has delayed their implementation and even suggested that
it is considering scrapping them altogether.
od
There is some good news. The Republican tax reform bill signed by
Trump in December left federal support for renewable energy and cred-
its for electric cars intact (an earlier version of the bill had eliminated
them). But these programs don’t do enough to meet the challenge of
so
China’s massive public investments.

Washington should embrace additional policies to promote private-
sector investment in clean technology, such as allowing renewable
energy investors to form master limited partnerships (MLPs), a type
Ma
of publicly traded entity that avoids double taxation for its shareholders.
Currently, MLPs are restricted to companies that extract or process
natural resources or lease real estate. The tax bill slashed the tax rate
for MLPs, making them even more attractive, but failed to extend the
structure to renewable energy production, even though a bipartisan
congressional group proposed doing just that last October.
Green Giant
The United States’ withdrawal from the Paris accord will likely be
accompanied by lackluster U.S. participation in Mission Innovation,
a global initiative involving the European Union and 22 major
countries, including China and the United States, to accelerate the
transition to clean energy by doubling the public R & D budgets of
the participating countries. Failing to take part would be a mistake.
China is building an energy system that will help its economy and
allow its military to better withstand cyberattacks and natural disas-
ters. The United States should do the same. That means developing
m
and installing new technologies, such as smart grids, solar panels,
and wind turbines, at U.S. military bases to reduce the damage from
potential interruptions in power supplies or attacks on power sources.
hi
During the Cold War, the United States realized the likely eco-
nomic and military consequences of losing the space race, and it
rose to the task. Meeting the challenge of China’s pivot to renewable
ha
energy will be no different. The United States risks frittering away
its dominance of the global energy market. But with strong leader-
ship and a long-term commitment, it can secure its energy future
iT
for decades to come.∂
Al
od
so
Ma
March/April 2018 93
How to Crack Down on

Tax Havens
Start With the Banks
m
Nicholas Shaxson
O
hi
n October 17, 2008, during the throes of the global financial
crisis, officials from the U.S. Department of Justice summoned
Swiss banking regulators and executives from UBS, Switzerland’s
ha
largest bank, to a closed-door meeting in New York to discuss the
bank’s role in helping American clients evade taxes. It was a sensitive
moment: the Swiss government had bailed out UBS the previous day.
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The bank’s game plan was simple, a company insider later told Reuters:
“Admit guilt, settle the case quickly, and move on.”
But the Swiss were in for a nasty surprise. Four months earlier, U.S.
authorities had imprisoned Bradley Birkenfeld, a former UBS wealth
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manager who had begun to spill the institution’s secrets. Cooperating

with U.S. investigators, Birkenfeld described a culture of deception at
the bank, which circumvented many countries’ laws and the bank’s own
od
regulations, making use of encrypted computers and offshore shell

companies and trusts. (Birkenfeld also claimed to have relied on less
sophisticated methods, such as hiding diamonds in a toothpaste tube to
smuggle them across borders.) Birkenfeld claimed that UBS, seeking to
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make inroads with “high net worth individuals”—Silicon Valley entrepre-

neurs, Russian oligarchs, Saudi princes, Chinese industrial magnates—
sponsored events popular with global economic elites, such as the
America’s Cup yacht race and the Art Basel festival in Miami. In his
Ma
confessional book, Lucifer’s Banker, he describes organizing what he touts

as the largest-ever exhibit of Rodin sculptures. “I can’t even remember
how many of those art lovers ended up in our vaults,” Birkenfeld writes.
NICHOLAS SHAXSON is a writer on the staff of the Tax Justice Network and the author of
Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens. Follow him
on Twitter @nickshaxson.
According to Birkenfeld, other UBS bankers also used such events

to introduce themselves to ultrarich attendees and pitch their bank as
a safe harbor where vast quantities of wealth could reside, out of the
reach of pesky tax collectors. The Department of Justice estimated
that in 2004 alone, Swiss bankers visited the United States 3,800 times
to find and retain clients. The investigation found that UBS had helped
U.S. clients hide up to $20 billion.
But U.S. clients accounted for less than two percent of the assets of
the bank’s wealth-management division, which was handling around
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$1.3 trillion globally by the time the financial crisis hit in 2007. Secrecy
was a global game for Swiss banks, and the playing field extended far
beyond Switzerland and the United States. One former Swiss banker
hi
told me that she would regularly travel to Latin America for work and
would always arrive with butterflies in her stomach, uncomfortable
with the deceptions she had to carry out. On the immigration form,
ha
she would write that she was traveling for pleasure, “though my suitcase
would be full of business suits and portfolio evaluations.” She would
remove client names and numbers from documents so that if the
iT
authorities found them, they wouldn’t be able to connect the dots
between assets and depositors. She attended polo matches, operas,
and champagne dinners, earning the trust of potential customers.
“That is where it happens,” she said—meaning the establishment of a
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mutually beneficial relationship in which her bank would help wealthy

elites hide their often ill-gotten gains in exchange for hefty wealth-
management fees. “I felt like I was prostituting myself,” she said.
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UBS was a major player, but just one part of a vast system of off-
shore tax havens that still thrives. Havens facilitate tax evasion,
undermine the rule of law, and abet organized crime. They contribute
to the economic inequality that has sapped people’s faith in democracy
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and fueled populist backlashes. They corrupt market economies by

favoring large multinationals over smaller local companies for reasons
that have nothing to do with productivity, entrepreneurship, or gen-
uine wealth creation. They have supercharged the profits of sys-
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temically important global banks, helping make such institutions

“too big to fail” and “too big to jail.” They help wealthy elites in
poor countries loot their treasuries and stash the spoils elsewhere,
generating illicit cross-border financial flows of around $1 trillion
each year, according to the Washington, D.C.–based research firm
Global Financial Integrity.
March/April 2018 95
Nicholas Shaxson
Before the global financial crisis, few officials in the developed world
made much noise about tax havens. But their existence was hardly a
secret, and many major financial firms involved in the offshore system
employed former officials as executives or lobbyists. At the time that
UBS was under investigation, its vice chair of investment banking was
Phil Gramm, a former Republican senator from Texas who had served
as the chair of the Senate Banking Committee. (I sent Gramm an e-mail
asking him what he knew about UBS’ activities in this area at that time;
a representative said he was not available to comment.)
m
Whatever political cover the bank may have believed it enjoyed, the
Department of Justice officials told the Swiss that if they wanted to
avoid criminal charges of defrauding the United States, they would
hi
need to supply the names of U.S. tax evaders who held assets at UBS.
For the Swiss, this represented an excru-
Havens undermine the rule ciating
ha choice between violating the
official policy of banking secrecy that
of law, abet organized their country had upheld for more than
crime, corrupt market seven decades and risking a criminal in-
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economies, and sap people’s dictment that could conceivably destroy
UBS. Ultimately, in February 2009, the
faith in democracy. Swiss government gave its blessing to
a settlement in which UBS admitted
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defrauding the United States and paid a fine of $780 million. Crucially,
Switzerland also agreed to implement emergency laws to bypass Swiss
courts and allow UBS to deliver the names of 280 high-level U.S.
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tax evaders.
But the Department of Justice wasn’t done: it immediately hit UBS
with a new fraud charge. The bank eventually coughed up 4,450 names.
The Department of Justice widened the net to include other Swiss
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banks, and to date, more than 55,000 U.S. taxpayers have voluntarily
come forward with information about their Swiss deposits. By January
2016, U.S. authorities had recovered some $8 billion from these banks’
clients in back taxes, interest, and penalties, plus $1.4 billion in penalties
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paid by the banks themselves. More is likely to have been recovered

since then.
The episode marked a powerful victory in the fight against tax havens
and provided crucial lessons in how to crack down on them, a task that
has taken on renewed urgency in recent years. Last November, the
International Consortium of Investigative Journalists, in partnership
with 95 news organizations all over the world, published the “Paradise
Papers” reports, the result of a giant data leak from the Bermuda-
based offices of an offshore law firm, Appleby, which shed light on
how the ultrarich avoid taxes and escape other laws and rules. This
was a sequel to the ICIJ’s 2016 “Panama Papers” reports, which revealed
the secrets of another company that specialized in hiding assets, the
Panamanian law firm Mossack Fonseca, and exposed a sordid world of
criminality and creative tax shenanigans—alongside plenty of perfectly
legal behavior. And in 2014, the ICIJ published the “LuxLeaks” papers,
m
another huge data leak, which revealed how the accounting firm PwC
helped its clients lawfully avoid paying taxes by using Luxembourg as
a platform for exploiting loopholes in other countries’ tax codes.
hi
These revelations have turned a harsh spotlight on the questionable
financial practices of prominent multinationals such as Disney; the
commodity trading giant Glencore and its rival, Koch Industries;
ha
celebrities such as Harvey Weinstein and Shakira; criminals connected
to the notorious Mexican drug lord Joaquín “El Chapo” Guzmán; and
political figures as varied as U.S. Commerce Secretary Wilbur Ross,
iT
Russian President Vladimir Putin, and Queen Elizabeth II. What
these investigations have shown is that tax havens aren’t an exotic side-
show to the world economy: they lie close to its heart.
Outrage over tax havens has never been more widespread and
Al
deep-seated than it is today. But addressing the harm they cause will
not be easy; tax havens enjoy the protection of powerful forces, and
the reforms that would be required to rein them in are fairly radical.
od
Successfully tackling the problem will require mobilizing public anger

against rigged systems that disadvantage ordinary people.
TAKE THE MONEY AND RUN

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There is no generally agreed-on definition of “tax haven,” but its

meaning can be boiled down to two ideas: elsewhere and escape. Very
wealthy people put their money or assets elsewhere—in places usually
referred to as “offshore”—to escape the rules at home that they don’t like.
Ma
Those rules may be tax laws, disclosure requirements, criminal statutes,

or financial regulations. In exchange, the private-sector enablers of
the system earn hefty fees from their clients, and haven governments
profit from taxes, which they typically levy not on the capital nominally
flowing through these places but on the incomes or consumption of
the local resident professionals who handle that capital.
March/April 2018 97
Nicholas Shaxson
A commonly cited estimate of the total amount of wealth held off-

shore, calculated by the economist Gabriel Zucman, is $8.7 trillion—a
figure equal to around ten percent of global GDP. Zucman arrived at
that figure using a novel method: tracking mismatches between cross-
border assets and liabilities in countries’ balance-of-payments records.
He has said that the $8.7 trillion figure probably does not fully reflect
the volume of hidden assets, because it
excludes nonfinancial assets owned off-
Havens exist in almost shore, such as art, or racehorses, or real
m
every region of the world, estate. But in e-mail exchanges with me,
with each providing a he agreed there were further assets his
different mix of offshore data miss. His method doesn’t account
hi
for some fairly common tax-evasion tools,
services. such as certain insurance products de-
ha signed to hide assets, or for situations
in which recorded assets and liabilities technically reside in the same
jurisdiction but are nevertheless “offshore” because the owner is else-
where. (One example: U.S. securities held by a custodian bank in the
iT
United States but owned by a Brazilian.) Also, although banks don’t
mind revealing aggregate figures of their assets and liabilities, which
form the basis of Zucman’s numbers, tax or criminal authorities seek
client-level data, which banks are far more reluctant to hand over. It’s
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safe to assume that if authorities could see that information, they

would discover many more hidden assets.
Using a model that is more inclusive than Zucman’s, the economist
od
James Henry has estimated that tax havens hold between $24 tril-
lion and $36 trillion. Even that estimate represents only the stock
of individual wealth held offshore and does not fully take into
account the assets that corporations park outside their home coun-
so
tries. (Corporate and individual wealth overlap, of course, since

individuals hold corporate assets, but the two forms of wealth are
taxed differently.) U.S. Fortune 500 corporations alone hold around
$2.6 trillion offshore. The UN Conference on Trade and Development
Ma
has estimated that developing countries lose out on somewhere

between $70 billion and $120 billion in annual tax revenue due to
multinationals artificially shifting profits to tax havens. And rich
countries are hardly immune: according to a 2014 U.S. Senate report,
the United States loses around $150 billion in tax revenue each year
owing to offshore tax schemes.
The global offshore system is constantly evolving. Havens exist in

almost every region of the world, with each providing a different mix
of offshore services. In Asia, Hong Kong serves as China’s offshore
gateway to the world—a low-tax platform for capital to flow in and
out of China, often with minimal scrutiny. Singapore, meanwhile,
acts as a haven of choice for wealthy elites from Australia, Indonesia,
and Malaysia. In Europe, Switzerland is not the only player. A U.S.
Senate investigation published in 2013, for example, showed how
Apple had routed some $74 billion through Ireland in the preceding
m
four years, escaping almost all taxes on its profits earned outside the
United States. Meanwhile, Luxembourg provides exotic tax-avoidance
products, such as shell companies, alongside more mainstream tax-
hi
escape facilities. And the Netherlands acts as an offshore stepping-
stone for investment funds shifting capital between different countries
stripping out taxes along the way.
ha
Then there is the massive British network, which resembles a spider
web, with the City of London in the middle, surrounded by an array
of British territories and dependencies: the British Virgin Islands, Ber-
iT
muda, Gibraltar, the Cayman Islands, Jersey, Guernsey, and the Isle of
Man. The British Virgin Islands specialize in secretive shell companies
and trusts. Bermuda is a big player in offshore “captive insurance,”
wherein a multinational owns a company ostensibly for insurance pur-
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poses but typically with the real goal of cutting its tax bill. Gibraltar is
a favored destination for dodgy money from the former Soviet Union,
and the Cayman Islands and Jersey cater to the tax-avoidance needs of
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investors in hedge funds and private equity firms, among others. Such
places enjoy some level of autonomy from the United Kingdom, but
London ultimately calls the shots and guarantees their legal systems.
Another crucial tax haven is the United States. Delaware, Nevada,
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Wyoming, and other states encourage people to set up shell companies,

which allow their owners to hide behind walls of secrecy so thick that
foreign crime fighters cannot penetrate them—and neither, usually, can
the Internal Revenue Service or the Department of Justice. Much of
Ma
U.S. President Donald Trump’s wealth is reportedly held by Delaware

companies, which would make it easier for him to hide conflicts of inter-
est. The amount of assets held in shell companies based in the United
States can only be guessed at; it is likely in the trillions.
The U.S. federal government, for its part, turns a blind eye to this
state-level phenomenon and even provides another layer of financial
March/April 2018 99
Nicholas Shaxson
secrecy for foreigners. Federal enforcement efforts focus on finding

U.S. tax cheats in overseas havens. Under the Foreign Account Tax
Compliance Act (FATCA), Washington requires foreign financial insti-
tutions to disclose their American clients’ financial information to the
U.S. Treasury and imposes a 30 percent withholding tax on certain
payments to foreign financial institutions that don’t comply. But
Washington is stingy when it comes to sharing information in the other
direction, often refusing to reveal data on the assets that foreigners
hold in the United States to law enforcement authorities elsewhere.
m
As a result, the United States hosts large amounts of criminal and
foreign “dark money,” some of which finds its way into the political
system via campaign spending. In 2011, the Florida Bankers Association
hi
estimated that hundreds of billions of dollars had come to the United
States in pursuit of this secrecy. The sums are larger now.
Notice that nearly all the places mentioned above are either rich
ha
countries or satellites of rich countries. Tax havens need to persuade
asset holders that they are safe, reliable, and trustworthy. Nobody wants
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Al
od
so
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to hide assets in a banana republic.
There are havens in less wealthy coun-
tries and places without rich-country
protectors—the Bahamas, Belize,
Mauritius, and the Seychelles, for
example—but they cannot offer
mainstream ultrarich depositors
the same level of protection as
the big players, and so those
m
places tend to go down mar-
ket, attracting more illicit money.
All tax havens share an impor-
hi
tant feature: they are “captured
states,” in which powerful global
forces prevent local democratic institu-
ha
tions from interfering in the elaborate game of offshore finance. This
is especially true of smaller tax havens, such as Jersey or Vanuatu,
where local legislators are often ordinary folks—former
iT
fishermen or hoteliers, for example—who lack the skills,
knowledge, or confidence they would need to push back
against the flood of money, influence, and financial
expertise that suffuses the offshore system and that has
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drowned entire societies. Locals often fear that chal-

lenging offshore players will lead the rich to take their
money elsewhere. Haven residents who dare criticize
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the offshore sector are routinely ostracized as traitors and

even frozen out of employment. And if offshore players
don’t get the laws they want, they have been known to
turn to bribery, which can be especially effective in small
so
jurisdictions. As a result of all of this, local authorities

often serve as rubber stamps for laws and regulations
proposed by offshore private-sector actors.
Most tax havens attract little genuine foreign invest-
Ma
ment as a result of their offshore strategies. What they

generally get instead is “hot money”—rootless capital that
flits from place to place in search of the most welcoming
home. The constant fear in havens that such assets will
flee creates a race to the bottom, as authorities strain to
make themselves ever more accommodating. In March
March/April 2018 101

Nicholas Shaxson
2009, in the depths of a global financial crisis that was brought on

in large part by lax regulation, Robert Kirkby, then the technical
director of Jersey Finance, the official lobbying body for Jersey’s
financial sector, proudly described this dynamic. Explaining how
Jersey dealt with private-sector demands to loosen regulations related
to the risky securitization of various kinds of assets, he told me, “You
can lobby onshore, but there are lots of stakeholders, you have to get
past them all, and it takes a long time.” In Jersey, he boasted, “we can
change our company laws and our regulations so much faster.” That may
m
sound like a form of free-market efficiency—but those stakeholders
and onshore rules that such places bypass represent the lifeblood of
the rule of law and accountability.
hi
“A LOT OF THIS STUFF IS LEGAL”
It’s fair to ask why tax havens persist and why they have so many defend-
ha
ers if they are so clearly deleterious. Offshore advocates make a number
of arguments. But none survives scrutiny.
Officials in tax havens point out that those places are sovereign nations
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(or autonomous territories) with every right to set their own tax laws.
That’s true. But by the same logic, countries harmed by havens have
every right to take strong countermeasures against them. Officials in
havens also note that people have a right to privacy and need relief
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from unjust laws. But the people who use tax havens are overwhelmingly
rich and powerful. Providing them with special forms of protection
and immunity from fiscal and legal obligations while leaving everyone
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else to shoulder the responsibilities and burdens of society creates one

rule for the 0.1 percent and another rule for everyone else.
Defenders of offshoring also correctly argue that the practice is not
always illegal and arguably benefits ordinary investors alongside the
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ultrarich. Most large private pension and equity funds touch the offshore
system in some way. So do “tax efficient” corporate cash management
operations, which circulate capital around a multinational’s many global
subsidiaries, and “tax neutral” investing platforms, which host pools
Ma
of capital from various different places and then spread it out around
the world, seeking out the highest after-tax returns. If such assets
were taxed in havens, too, it would be unfair “double taxation.” In this
sense, defenders argue, havens serve as frictionless, efficient financial
conduits, removing obstacles from the path of capital as it flows in
pursuit of investment opportunities around the globe.
Yet this isn’t the full story. For one thing, the facilities that prevent
“double taxation” are the same ones that allow accounting tricks to
produce “double nontaxation,” in which no taxes are paid anywhere.
What is more, a lot of common tax avoidance that gets labeled “legal”
actually is not: often, it’s not clear whether a particular offshore strategy
or structure is lawful until it has been tested in court. Law firms that set
up shell companies for their clients may not be breaking any laws them-
selves, but many of their clients are. More broadly, what is legal isn’t
necessarily legitimate. As U.S. President Barack Obama said in 2016,
m
in reaction to the Panama Papers revelations: “The problem is that a
lot of this stuff is legal, not illegal.”
Tax havens are a pure distillation of all that is wrong with financial
hi
globalization: they encourage capital to move across borders, but in
the wrong directions. Many developing countries have found that
when they open up to global finance, investment doesn’t flow in to
ha
their capital-starved economies—instead, after being looted by elites,
money flows out, into tax havens. Indeed, this represents one of the
main reasons why financial globalization has failed to improve the lot
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of many poor countries.
TO CATCH A TAX CHEAT

No magic bullet can solve this vast political and economic conundrum.
Al
Any serious effort to do so would run headlong into some of the

world’s most powerful interests. So fairly radical solutions are required—
as is constant vigilance, since the officials, bankers, accountants, and
od
lawyers who prop up the offshore system will always seek new ways to
subvert the rules.
One tactic that some economists (and many lobbyists) advocate
would be sure to fail: trying to reduce the incentive for major companies
so
and rich people to park their money offshore by lowering corporate and
income tax rates. For one thing, as rich countries have steadily lowered
their corporate tax rates since the 1970s, corporate investment has stag-
nated and tax avoidance has skyrocketed. Major firms now sit on huge
Ma
piles of uninvested cash—Apple alone had nearly $300 billion at last

count. Cutting corporate taxes would simply add to such piles. The
same applies to lowering taxes for superwealthy individuals. There is
little point in trying to “compete” with tax havens. After all, why would
corporations or rich people pay a bit less when they can pay a whole lot
less, or even nothing, by going offshore?

Nicholas Shaxson
What lower taxes might attract, however, is more hot money,

which brings few benefits to economies but is associated with a raft
of costs: financial instability; asset bubbles; increased economic,
political, and geographic inequality (which saps long-term growth);
and the potential, especially in smaller open economies, for “Dutch
disease,” in which financial inflows push up real exchange rates and
damage productive parts of an economy.
If governments want to cut havens out of the game, they will have to
take far more drastic steps. By late 2017, U.S. taxes on the estimated
m
$2.6 trillion in profits held overseas by Fortune 500 companies were
supposedly being “deferred” until such time as the companies decided
to “repatriate” them. As Kimberly Clausing, Reuven Avi-Yonah, and
hi
other tax experts have recommended, the United States should simply
eliminate such deferrals and tax accumulated offshore earnings directly,
with exemptions for taxes already paid in other countries. According to
ha
the Institute on Taxation and Economic Policy, such an approach to
taxing multinationals could raise up to $750 billion for the U.S. Treasury.
But the tax bill Trump signed into law last year went in precisely the
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opposite direction, levying a one-time tax on accumulated offshore
earnings at a hugely reduced rate of between eight and 15.5 percent
and exempting future foreign profits from tax—thus increasing the
incentive for multinationals to keep relying on tax havens.
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Advocates for the tax bill cheered in January when Apple announced
that it would make a $38 billion tax payment on the cash that it held
overseas and would spend $30 billion in capital expenditures over the
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next five years. Other technology companies will likely follow suit.
But Apple’s announcement did not say that the investments had any-
thing to do with the tax reforms. Moreover, the reforms will yield less
than half of the revenue the United States could have raised by simply
so
taxing Apple’s roughly $246 billion in offshore profits at the full cor-
porate rate and then continuing to tax them every year. Instead, Wash-
ington will get a relatively modest short-term payment and next to
nothing in the future.
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An even more far-reaching solution is called “formulary apportion-

ment” and would divide a multinational’s total global income between
individual countries according to a formula based on the company’s sales,
assets, and payroll in each country where it operates. After the income
was so divided, each country could tax its share at whatever rate it
liked. Countries could adopt this measure unilaterally, calculating
and then taxing their share of a multinational’s income, but inter-

national coordination would help iron out complexities. Many U.S.
states and Canadian provinces already use a version of this model.
It’s not without its drawbacks, but it could make a huge difference
if properly implemented.
Other solutions are already being tested. In 2014, the Organization
for Economic Cooperation and Development set up a useful (although
imperfect) global information-sharing scheme called the Common
Reporting Standard, in which participating countries automatically
m
share financial information about one another’s taxpayers. The CRS is
technically similar to the FATCA in the United States but with a big
difference: unlike FATCA, the CRS doesn’t impose a hefty 30 percent tax
hi
on payments to financial institutions that don’t comply with it. Most
large countries and even most large tax havens have agreed to partici-
pate in the CRS, with one glaring exception: the United States. Wash-
ha
ington claims that it does participate, in effect, since the CRS is similar
to FATCA—but this ignores the fact that although FATCA involves vague
promises to share information with other countries, it actually offers
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other countries very little. To give the CRS teeth, the EU—the largest
non-U.S. entity represented by the OECD—should impose its own
30 percent tax on payments to financial institutions that don’t comply
with the CRS. This would target U.S. banks, which would likely pres-
Al
sure Washington to provide the necessary information.

On the level of U.S. states, the activist Ralph Nader and others
have long argued that letting individual states incorporate companies
od
has resulted in a race to lower standards, as states turn themselves into

permissive corporate havens in order to attract businesses and maxi-
mize incorporation fees. Nader has argued for a federal law that would
create “a modern federal chartering agency with comprehensive author-
so
ity.” Limiting corporate chartering to the federal level, Nader contends,

would “put an end to the wheeling and dealing that corporations use
against state governments.”
Another tactic would be to require all countries and territories to
Ma
establish standardized central registers that would record who owns

the various assets they hold—and, ideally, publish that information.
The United Kingdom has the power to impose such a rule on every
node in its spider web of tax havens, and the EU could force all its
member states to do the same thing. Large, powerful countries could also
blacklist tax havens that refused to take this step by imposing sanctions

Nicholas Shaxson
ranging from blocking foreign aid to cutting off recalcitrant govern-

ments or financial institutions from international payment systems.
(The trouble with blacklists, however, is that the big players usually have
the political muscle to lobby their way off the lists, leaving behind only
the minnows.)
Alongside these measures, the UBS case illustrates an immensely
powerful principle for those seeking to tackle tax havens. For decades,
countries had tried and failed to crack open Switzerland’s famed
banking secrecy. The fight launched by U.S. law enforcement against
m
the bank didn’t exactly pit the United States against Switzerland: rather,
it was chiefly a contest between the rule of law, on the one hand, and
wealthy tax evaders and other criminals, on the other. Switzerland
hi
was merely the main battlefield. U.S. authorities did not threaten the
country’s government, at least not directly.
If authorities in one country go after another country, then elected
ha
officials and the public in the target country might rally against foreign
“bullies.” That is what happened in 2008, when Peer Steinbrück, then
the German finance minister, publicly threatened to “take a whip” to
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Switzerland, albeit without providing detailed proposals. In the wake
of a furious response from the Swiss public, the Germans backed off.
In tackling tax havens, private companies often make much better
targets than governments. Banks can be regulated and penalized. So
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can the so-called Big Four accounting firms: Deloitte, EY, KPMG, and
PwC, which are as responsible as any other group for putting together
the nuts and bolts of the offshore system. Little focuses the minds of
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bankers and accountants like the threat of jail or the loss of a license
to operate in a big economy.
TRUMP TIME?
so
Fatalists argue that crackdowns on tax havens are pointless, like squeezing
a balloon: its shape changes, they argue, but its volume stays the same.
That is false. Crackdowns are more like squeezing a sponge: yes, there
is some displacement, but also a reduction in volume.
Ma
The real problem with crackdowns is usually that governments lack

the political will to carry them out. In the United States, it seems
unlikely that this will change much in the Trump era. But Trump
could, in theory, revive his now tattered populist image and drive up
his flagging approval ratings by announcing a crackdown on tax
havens. He has, in fact, already expressed interest in doing so. When
I interviewed him by telephone in 2016 for an article I was writing for

Vanity Fair, he told me that, if elected, he would “fix” tax havens and
address the issue of banking secrecy. “I fully understand the tax-haven
situation, and much of it will be ended,” he said. “It is very easy to end
it.” But when I asked him how, he cut short the interview.
Whether or not Trump acts, it seems likely that the offshore system
will come under ever-stronger attack, as public fury rises about in-
equality and as large multinationals and private elites remain untaxed,
unaccountable, and out of touch. Until recently, few people paid
m
attention to tax havens, and those who did considered them to be
colorful sideshows to the global economy: the province of a few Mafiosi,
drug runners, tax-cheating celebrities, and European aristocrats. But
hi
the Panama and Paradise Papers helped expose the truth: the offshore
system is a cancer on the global economy. Tax havens are formidable
bastions of wealth and power, but because they hurt nearly everyone,
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the campaign against them could conceivably draw together a vast
array of allies. Mafia bosses and drug runners use tax havens, so law
enforcement and tough-on-crime politicians should want to shut them
iT
down. Every major private-sector financial institution uses tax havens
and is significantly implicated in the offshore system, so campaigners
against the outsize influence of Wall Street should be laser-focused on
the problem. U.S. banks go offshore to escape rules they don’t like,
Al
accelerating their path toward too-big-to-fail, too-big-to-jail status. So

policymakers worried about financial stability should pay more atten-
tion to the role of tax havens. Politicians use tax havens to hide bribes and
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bypass disclosure laws, which means that anticorruption campaigners

ought to join the fray. Dictators and their cronies in poor countries
use havens to stash their looted treasure, so international development
organizations should contribute more to fighting the offshore system.
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The list of potential partners in the fight against the offshore system
is long, and could grow longer. It is a cause that could attract voters on
the right worried about crime and the corruption of markets and voters
on the left worried about inequality and growing corporate power.
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Politicians of all stripes would be wise to get ahead of the story.∂

Iran Among the Ruins

Tehran’s Advantage in a Turbulent
Middle East
Vali Nasr
m
O
ver the last seven years, social upheavals and civil wars have
hi
torn apart the political order that had defined the Middle
East ever since World War I. Once solid autocracies have
fallen by the wayside, their state institutions battered and broken, and
ha
their national borders compromised. Syria and Yemen have descended
into bloody civil wars worsened by foreign military interventions. A
terrorist group, the Islamic State (also known as ISIS), seized vast areas
iT
of Iraq and Syria before being pushed back by an international coalition
led by the United States.
In the eyes of the Trump administration, and those of a range of
other observers and officials in Washington and the region, there is
Al
one overriding culprit behind the chaos: Iran. They point out that the
country has funded terrorist groups, propped up Syrian dictator
Bashar al-Assad, and aided the anti-Saudi Houthi rebels in Yemen.
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U.S. President Donald Trump has branded Iran “the world’s leading
state sponsor of terrorism,” with a “sinister vision of the future,” and
dismissed the nuclear agreement reached by it, the United States,
and five other world powers in 2015 as “the worst deal ever” (and refused
so
to certify that Iran is complying with its terms). U.S. Secretary of

Defense James Mattis has described Iran as “the single most enduring
threat to stability and peace in the Middle East.” And Saudi Foreign
Minister Adel al-Jubeir has charged that “Iran is on a rampage.”
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Washington seems to believe that rolling back Iranian influence

would restore order to the Middle East. But that expectation rests on
a faulty understanding of what caused it to break down in the first
place. Iran did not cause the collapse, and containing Iran will not
VALI NASR is Dean of the Paul H. Nitze School of Advanced International Studies at Johns
Hopkins University.
bring back stability. There is no question that many aspects of Iran’s

behavior pose serious challenges to the United States. Nor is there
any doubt that Iran has benefited from the collapse of the old order in
the Arab world, which used to contain it. Yet its foreign policy is far
more pragmatic than many in the West comprehend. As Iran’s will-
ingness to engage with the United States over its nuclear program
showed, it is driven by hardheaded calculations of national interest,
not a desire to spread its Islamic Revolution abroad. The Middle East
will regain stability only if the United States does more to manage con-
m
flict and restore balance there. That will require a nuanced approach,
including working with Iran, not reflexively confronting it.
hi
MORE NORMAL THAN YOU THINK
Too often, politicians and analysts in the West reduce Tehran’s interests
and ambitions to revolutionary fervor. Iran, the charge goes, is more
ha
interested in being a cause than a country. In fact, although Tehran
certainly has its dyed-in-the-wool hard-liners, it also has many prag-
matic, even moderate, politicians who are keen to engage with the
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West. In domestic politics, the two camps are locked in a long-running
tug of war. But when it comes to foreign policy, there is a growing
consensus around the imperatives of nationalism and national security.
It was this consensus that led Iran to sign and then implement the
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nuclear deal.
Some observers see Iran today, with its use of militias and insurgents
abroad, as the United States saw the Soviet Union or China at the
od
height of its revolutionary fervor—as a power intent on using asym-

metric means to upset the existing order and sow chaos. Iran’s goal is
to “expand its malign influence,” Mattis said at his confirmation hear-
ing, “to remake the region in its image.” But Iran is closer to modern
so
Russia and China than to their revolutionary predecessors. Like them,

it is a revisionist power, not a revolutionary one. It opposes a regional
order designed to exclude it. Iran’s methods often defy international
norms, but the national interests they serve, even when at odds with
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those of the United States, are not uncommon. Iran’s view of the
world is shaped less by the likes of Lenin and Mao than by those of
Vladimir Putin and Xi Jinping. And it is driven less by revolutionary
zeal than by nationalism.
What characterizes Iran’s current outlook harks back not just to the
Iranian Revolution in 1979 but also to the Pahlavi dynasty, which ruled

Vali Nasr
the country for the five decades leading up to the revolution. Mohammad
Reza Pahlavi, the last shah, envisioned Iran dominating the Middle
East, with the help of a nuclear capability, a superior military, and
exclusive control over the Persian Gulf. For a time, the Islamic Repub-
lic eschewed such nationalism in favor
of more ideologically driven aspirations.
Iran worries that it is But nationalism has, over the last de-
outgunned by its cade and a half, been on the rise. Today,
traditional rivals. Iran’s leaders interlace their expressions
m
of fidelity to Islamic ideals with long-
standing nationalist myths. Like Rus-
sia and China, Iran has vivid memories of its imperial past and the
hi
aspirations of great-power status that come with them. And like those
two countries, Iran sees a U.S.-led regional order as a roadblock in
the way of its ambitions. ha
Such nationalist ambitions come alongside more acute national
security concerns. The Israeli and U.S. militaries pose clear and pres-
ent dangers to Iran. The U.S. invasions of Afghanistan and Iraq put
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hundreds of thousands of U.S. troops on Iran’s borders and convinced
Tehran that it would be foolish for it to think that Iranian forces could
thwart the U.S. military on the battlefield. But the U.S. occupation of
Iraq showed that, once the initial invasion was over, Shiite militias
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and Sunni insurgents would do just that, persuading the United States
to withdraw. The use of those militants, who relied on training and
weapons provided by Iran to kill and injure thousands of U.S. soldiers
od
during the Iraq war, also helps explain the Trump administration’s
antipathy toward Iran.
Iran sees threats from the Arab world, as well. From 1958, when
a revolution overthrew the Iraqi monarchy, to 2003, Iraq posed an
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ongoing threat to Iran. The memory of the eight-year Iran-Iraq

War in the 1980s shapes Iran’s outlook on the Arab world. Many
senior Iranian leaders are veterans of that war, during which Iraq
annexed Iranian territory, used chemical weapons against Iranian
Ma
troops, and terrorized Iranian cities with missile attacks. And since
2003, brewing Kurdish separatism in Iraq and Syria and growing
Shiite-Sunni tensions across the region have reinforced the percep-
tion that the Arab world endangers Iran’s security.
Iran also worries that it is outgunned by its traditional rivals. In 2016,
according to the Stockholm International Peace Research Institute, Iran
m
hi
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Hired guns: a Hezbollah fighter on the Lebanese-Syrian border, July 2017
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spent three percent of its GDP on its military, less than the propor-
tions spent by Saudi Arabia (ten percent), Israel (six percent), Iraq
(five percent), and Jordan (four percent), putting Iran in eighth
place in the Middle East in terms of defense spending as a percent-
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age of GDP. Iran’s spending lags in absolute terms, as well. In 2016,

for example, Saudi Arabia spent $63.7 billion on defense, five times
Iran’s $12.7 billion.
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To compensate for this handicap, Iran has adopted a strategy of

“forward defense.” This involves supporting friendly militias and
insurgent groups across the Middle East, including Hamas and
Hezbollah, both of which threaten Israel’s borders. Iran’s most vaunted
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military unit is the Quds Force, the part of the Islamic Revolutionary
Guard Corps (IRGC) charged with training and equipping such
proxies. Hezbollah has proved a particularly effective ally, as it has
achieved the only instances of Arab military success against Israel. In
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ALI HASHISHO / REUTE RS
2000, it forced Israeli troops to withdraw from southern Lebanon,

and in 2006, it blunted Israel’s offensive there.
A similar logic underlies Iran’s long-range missile program (and,
before the 2015 agreement, its nuclear efforts). Tehran has intended
for these programs to serve as a protective umbrella over its other forces,
a strategy successfully employed by Pakistan against India. Iran has

Vali Nasr
agreed to freeze its nuclear program; the idea now is that, with a fully
developed missile program, even a significantly more powerful country
could not attack Iran or its proxies without facing devastating retaliation.
SURROUNDED BY CHAOS
If Iran’s behavior appears more threatening today than it once did,
that is not because Iran is more intent on confronting its rivals and
sowing disorder than before but because of the drastic changes the
Middle East has experienced over the last decade and a half. Gone is
m
the Arab order on which Washington relied for decades to manage
regional affairs and limit Iran’s room for maneuver. A chain of events,
starting with the U.S. invasion of Iraq in 2003, culminated in the
hi
implosion of the Arab world, as social unrest toppled rulers, broke
down state institutions, and triggered ethnic and sectarian strife that
in some cases escalated into full-fledged civil war.
ha
In many ways, the instability has enhanced Iran’s relative power and
influence throughout the region; with so many other power centers
weakened, Tehran looms larger than before. In Iraq, working through
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an array of Kurdish and Shiite political forces, Iran shapes alliances,
forges governments, settles disputes, and decides policies. As a result,
Iraq is influenced more deeply by Iran than by any other country,
including the United States. In Syria, Iran has combined Hezbollah
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fighters with Shiite volunteers from across the Middle East to make an
effective military force, which it has used to wage war on the opposition.
As Assad has gained the upper hand in the civil war, Iran’s influence
od
in Damascus has surged. And in Yemen, with very little investment,

Iran has managed to bog Saudi Arabia and its allies down in a costly
war, diverting Saudi resources away from Iraq and Syria.
But the instability has also produced new threats. Arab public opin-
so
ion is highly critical of Iran’s support for the Assad regime in Syria.
According to a Zogby poll published in 2012, soon after Iran entered
the Syrian conflict, the country’s favorable rating in the Arab world
plummeted to 25 percent, down from a high of 75 percent in 2006. And
Ma
the meteoric rise of ISIS, which is virulently anti-Shiite and anti-

Iranian, brought into sharp relief Sunni resistance to Iranian influence.
Yet ISIS’ fate has also confirmed the effectiveness of forward defense
in Tehran’s eyes. Without Iran’s military reach and the strength of its
network of allies and clients in Iraq and Syria, ISIS would have quickly
swept through Damascus, Baghdad, and Erbil (the capital of Iraqi
Kurdistan), before reaching Iran’s own borders. Although Iran’s rivals

see the strategy of supporting nonstate military groups as an effort to
export the revolution, the calculation behind it is utterly conventional:
the more menacing the Arab world looks, the more determined Iran
is to stay involved there.
The new regional context has also heightened the risk of direct
conflict between Iran and the United States or its Arab allies. But
here, too, Iran’s leaders sense that they have the advantage. Iran has
come out of the fight against ISIS stronger than before. The IRGC
m
has trained and organized Iraqi Shiites
who confronted ISIS in Iraq, Shiite vol-
unteers who traveled from as far away
With so many other power
hi
as Afghanistan to fight in Syria, and centers weakened, Tehran
Houthi forces battling the pro-Saudi looms larger than before.
government in Yemen. Together with
ha
Hezbollah, these Shiite groups form a
force to be reckoned with. After the fighting ends, they will continue
to shape their home countries as they enter local politics, entrenching
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Iran’s influence in the Arab world. As a result, Sunni Arab states will
no longer be able to manage the region on their own.
Over the past year, escalating tensions with Saudi Arabia, the
Trump administration’s saber rattling against Iran, and the admin-
Al
istration’s ban on travel from several Muslim-majority countries,

including Iran, have touched off a nationalist reaction. The defiance
toward the United States is matched by worry about the growing threat
od
from the reinvigorated U.S.-Saudi relationship. Tensions between Iran

and Saudi Arabia have been on the rise since the signing of the
nuclear deal, but since the Trump administration took office, they have
taken an ominous turn. In May 2017, Crown Prince Mohammed bin
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Salman, Saudi Arabia’s first deputy prime minister and minister of

defense, warned that the battle for influence over the Middle East
ought to take place “inside Iran.”
Iran is also no longer immune to the kinds of terrorist attacks that
Ma
have hit Arab and Western capitals. Last June, ISIS gunmen and suicide
bombers attacked the Iranian parliament building and the mausoleum
of Iran’s first supreme leader, Ruhollah Khomeini, killing 18 people.
The sense of danger from the threats swirling around the country has
led many Iranians to accept the logic of forward defense. During the
early years of the Syrian civil war, Iran’s rulers went to great lengths

Vali Nasr
to downplay Iranian involvement and hid Iranian casualties. Now,

they publicly celebrate them as martyrs.
During antigovernment protests in late December and early January,
some marchers shouted slogans questioning Iran’s involvement in
Lebanon, Syria, and the Palestinian territories. Forward defense, the
demonstrators claimed, channeled scarce resources to distant con-
flicts, away from pressing needs at home. The protests suggested that
nationalism is tempered by its economic cost. But despite the public
criticism, Iran is not about to collapse under the pressure of imperial
m
overreach. Iranians are skeptical of their government’s regional ambi-
tions, but they do not doubt the imperative of defense. They worry
about the threat posed by Sunni extremists to sacred Shiite cities in
hi
Iraq and Syria, and even more so to Iran itself. In any case, Iran’s rulers
are not moved by the criticism. Many of them saw foreign hands behind
the protests. They are convinced that rather than retreat, Iran must
ha
show strength by protecting its turf in the Middle East.
FROM NEGOTIATION TO CONFRONTATION

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The Obama administration responded to the disintegrating order in
the Middle East by distancing the United States from the region’s
unending instability. In a clear break with past U.S. policy, it refused
to intervene in Syria’s civil war and moved beyond the old strategy of
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containment to forge a nuclear deal with Iran. That deal angered the
Arab world and aggravated regional tensions, but it also reduced
the threat that would have continued to tether the United States to
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the Middle East just when it was trying to break free.

The success of the nuclear deal suggested that the United States
might reimagine its relationship with Iran. Arab allies concluded
that Washington would no longer be committed to containing the
so
country and worried that it would turn away from them. Tehran
agreed. With the Arab world in free fall, it reasoned, a containment
strategy against Iran was unsustainable, and the nuclear deal would
make it unnecessary.
Ma
But despite these expectations, the United States did not fundamen-
tally change its approach to the region. The Obama administration
sought to assuage Arab angst by signing large arms deals with Bahrain,
Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.
Those in Tehran who had supported the nuclear deal were disappointed:
Iran had given up an important asset only to see the conventional
military gap with its regional rivals widen. In 2015, Saudi Arabia and
its allies for the first time proved willing to use that military superiority,
with devastating effect, in Yemen—a signal that was not lost on Iran.
Tehran responded by doubling down on its missile program.
The Trump administration has reversed course on the nuclear deal
and is pivoting back to the old U.S.-Arab alliance system, with Saudi
Arabia as its anchor. The deal may limp along, but the opening that it
presented Iran and the United States has closed. A return to contain-
ment will be difficult, however. Two important building blocks are
m
missing: Iraq and Syria are weak and broken, unable to control their
own territories and ruled by governments that are closer to Iran than
to the United States’ Arab allies. The two countries cover most of the
hi
Levant and for several decades had imposed order on its competing
sects, ethnicities, and tribes. Since World War I, along with Egypt
and Saudi Arabia, they had served as pillars of the Arab order. After
ha
1958, Iraq, in particular, acted as both a shield against Iranian influence
and a spear in Iran’s side.
Ultimately, the United States’ position in the Middle East reflects
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its broader retreat from global leadership. The United States lacks
the capacity to roll back Iranian gains and fill the vacuum that doing
so would leave behind. The shortcomings of U.S. policy were on full
display during last year’s referendum on independence held by Iraqi
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Kurdistan. Although Washington called on the Kurds not to hold the

vote, it could not stop them, and after they voted for independence,
it played little role in managing the ensuing crisis. Instead, Iran defused
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the standoff, which threatened to escalate into open conflict between

Baghdad and Erbil. Tehran compelled Kurdish leaders to back away
from independence, surrender control over the contested city of
Kirkuk, and even submit to a change in leadership in the Kurdistan
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Regional Government.
Nor can the United States’ principal Arab ally, Saudi Arabia, pick
up the slack. It has successfully rallied Sunni Arab public opinion in
opposition to Iran’s meddling in Syria and the rest of the Arab world.
Ma
And between 2013 and 2016, it, along with Qatar and Turkey, put Iran
and its clients on their heels in Syria by supporting various anti-Assad
opposition groups. But then the Saudi effort fell short. Saudi Arabia
quarreled with Qatar and Turkey, and the Assad regime survived the
Sunni-led opposition. And in Yemen, the Houthis have stood their
ground in the face of the vast military muscle of the Saudi-led coalition.

Vali Nasr
Iran still worries about Saudi Arabia’s newfound assertiveness.

Prince Mohammed is waging war in Yemen and isolating Qatar, and
he even attempted to strong-arm Lebanon’s prime minister, Saad
Hariri, into resigning in November. Breaking with his predecessors,
he has also shown a willingness to play
a role in Iraq, where he is wooing Iraqi
A consensus has emerged Shiite politicians, including the maver-
in Tehran around closer ties ick militia leader Muqtada al-Sadr.
with Russia. Yet Saudi Arabia will have a hard time
m
continuing this aggressive strategy. The
crown prince has to manage a tricky
succession from his father, King Salman, and pull off an ambitious
hi
program of social and economic reforms, all while confronting Iran.
Nor does Iran feel as isolated as Washington and its allies would
like. Last June, Saudi Arabia led a coalition of Arab states to impose a
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diplomatic and economic boycott on Qatar, punishing it for cozying
up to Iran and for supporting terrorist groups and the Sunni Islamist
organization the Muslim Brotherhood. But the effort to isolate Qatar
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has only pushed it closer to Iran, providing Tehran with a beachhead
on the southern shores of the Persian Gulf.
Saudi Arabia’s move also damaged relations with Turkey. Ankara’s
ruling Justice and Development Party has ties to the Muslim Brother-
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hood, and the country has its own aspiration to lead the Sunni world.
The U.S.-Saudi vision of regional order does not reflect Turkey’s
interests and ambitions. All of this has accelerated Turkey’s pivot
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toward Iran and Russia. Turkish President Recep Tayyip Erdogan has
found ways around his disagreements with Tehran and Moscow to
forge a partnership with the two in order to shape events in Syria. This
new axis was on full display last November, when Erdogan joined
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Russian President Vladimir Putin and Iranian President Hassan

Rouhani in Sochi to decide Syria’s fate. The rise in tensions between
Iran and the United States is happening in the context of Russia’s entry
into the Middle East, which began in earnest in 2015, when Russia
Ma
intervened in the Syrian civil war on behalf of the Assad regime. U.S.
officials have steadfastly downplayed Moscow’s interest in Syria and
dismissed the idea that Russia will gain influence by extending its
reach into the region. But Russia has emerged as the main arbiter of
Syria’s fate, and as its role has grown beyond Syria, it has become the
only power broker in the Middle East that everyone talks to.
Russia could not have made these gains without Iran. Iranian ground
presence gave Russia its victory in Syria. And in Afghanistan, Central
Asia, and the Caucasus, Iran and Russia have worked together closely to
counter U.S. influence. The two countries see themselves as great powers
at odds with U.S. alliances built to contain them. Russia understands
Iran’s value to its broader ambitions. Iran sits at an important geographic
location and is an energy-rich country of 80 million people, with a net-
work of allies and clients that spans the Middle East—all outside the
United States’ sphere of influence. That makes Iran a prize for Putin,
m
who is eager to push back against the United States wherever he can.
By working together in the Syrian civil war, the Iranian and Russian
militaries and intelligence communities have built deep ties with one
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another, which will help Iran withstand future U.S. coercion. Over
the past year, as the United States has backed away from the nuclear
deal and put increased pressure on Iran, a consensus has emerged in
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Tehran around closer ties with Russia. Iran is looking to increase
trade with Russia and buy sophisticated weaponry from it to counter
rising military spending within the Saudi-led bloc. It may even sign
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a defense pact with Russia, which would include close military and
intelligence cooperation and Russian access to Iranian military bases,
something Iran has resisted in the past. In the end, U.S. policy may
end up empowering Russia without diminishing Iran’s influence.
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TIME TO TALK
Based as it is on a warped understanding of the causes of the disorder
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in the Middle East, the Trump administration’s Iran policy is caught

in a self-defeating spiral. The assumption that the United States and
its Arab partners will be able to contain Iran quickly and painlessly,
and that doing so will bring stability to the region, is dangerously
so
wrong. Right now, the United States does not have enough troops in
the Middle East to affect developments in Iraq or Syria, let alone
suppress Iran. Committing the necessary military resources would force
Trump to go back on his disavowal of costly military adventures. And
Ma
those resources would have to come at the expense of other pressing

issues, such as managing North Korea and deterring China and
Russia. Nor should Washington put its hopes in its regional allies.
They are not able to expel Iran from the Arab world, nor would they
be able to replace its influence if they did. Any regional conflagration
would inevitably compel the United States to intervene.

Vali Nasr
Even if the United States did muster the necessary resources to

contain Iran, doing so would not bring stability. Iran is an indispens-
able component of any sustainable order in the Middle East. Military
confrontation would only encourage Tehran to invest even more in
forward defense, leading to more Iranian meddling and more insta-
bility. Stable states, such as Bahrain, Jordan, Qatar, and the United
Arab Emirates, could stumble, and weak ones, such Iraq and Lebanon,
could descend into the kind of lawlessness and violence that have
characterized Libya and Yemen in recent years. On top of that, the
m
United States would have to contend with humanitarian crises and
terrorist groups that would pick up where ISIS left off.
Rather than conceive of a regional order designed to contain Iran,
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the United States should promote a vision for the Middle East that
includes Iran. It should convince Tehran that it would be better off
working with Washington and its allies than investing its hopes in a
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Russian-backed regional order.
To achieve that, the United States would have to rely more on
diplomacy and less on force. Washington should find ways to reduce
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tensions by engaging Iran directly, picking up where the nuclear deal
left off. It should also encourage Iran and Saudi Arabia to cooperate
to resolve regional crises, starting with those in Syria and Yemen.
Given the trust Saudi Arabia now places in the Trump adminis-
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tration, the United States should do what the Obama administration

failed to: lead an international diplomatic effort to broker a regional
deal that would end conflicts and create a framework for peace and
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stability. This task should not be left to Russia. Such an effort would
be difficult, especially since Washington has thrown away any dip-
lomatic capital generated by the nuclear deal. But the alternative—
escalating confrontation—would only drive the Middle East deeper
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into disarray.∂
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The President and

the Bomb
Reforming the Nuclear Launch Process
m
Richard K. Betts and Matthew C. Waxman
I
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n November 2017, for the first time in 41 years, the U.S. Congress
held a hearing to consider changes to the president’s authority to
launch nuclear weapons. Although Senator Bob Corker of Tennessee,
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the Republican chair of the Senate Foreign Relations Committee, insisted
that the hearing was “not specific to anybody,” Democrats used the
opportunity to air concerns that President Donald Trump might
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stumble into nuclear war. After all, he had threatened to unleash “fire
and fury” on North Korea, and he subsequently boasted in a tweet
about the size of the figurative “nuclear button” on his desk in the
Oval Office. General C. Robert Kehler—a former head of U.S. Strategic
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Command, the main organization responsible for fighting a nuclear

war—tried to calm senators’ fears about an irresponsible president
starting such a war on a whim. He described how the existing process
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for authorizing the launch of nuclear weapons would “enable the pres-
ident to consult with his senior advisers” and reminded the senators
that officers in the chain of command are duty-bound to refuse an
illegal order.
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What Kehler could not assure the senators, however, was that the
process that enabled the president to seek the concurrence of the
secretary of defense or senior officers actually required him to do
so, or even required that he consult with advisers. Nor could he assure
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them that officers receiving a launch order would dare to assert

their own judgment over his about its legality, or that the president
RICHARD K. BETTS is Director of the Saltzman Institute of War and Peace Studies at
Columbia University and an Adjunct Senior Fellow at the Council on Foreign Relations.
MATTHEW C. WAXMAN is Liviu Librescu Professor of Law at Columbia Law School and
an Adjunct Senior Fellow at the Council on Foreign Relations.

would listen to them if they did. When asked by Senator Ben Cardin,
a Democrat from Maryland, whether the president could ignore a
military lawyer’s advice that an order to launch a nuclear attack was
illegal, Kehler said that would present “a very interesting constitutional
situation.” He continued: “I would say, ‘I have a question about this,
and I’m not ready to proceed.’” Pressed by Cardin about what would
happen next, Kehler responded, “Well, I don’t know.” The implication
was worrisome: although common sense and careful official planning
dictate a process to prevent an imprudent and impulsive president
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from starting a nuclear war, there is nothing stopping a determined
president from overriding it.
Details of the current nuclear launch process are classified, but in
hi
general, they are designed to ensure that the president can quickly
order a launch. That’s why wherever the president goes, he is accom-
panied by a military officer carrying the “football,” a briefcase contain-
ha
ing strike options and codes used for communicating with the chain of
command and confirming that an order is authentic. Once an order is
issued, it reaches officers manning the missile silos, bombers, and sub-
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marines responsible for carrying out an attack. Before issuing the order,
however, the president is expected to confer in person or over a secure
line with senior military and civilian advisers. But that is merely assumed.
The secretary of defense has no formal role in the authorization, and
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the president can bypass him if he wishes.

That needs to change: any presidential order to launch nuclear
weapons that is not in response to an enemy nuclear attack should
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require the concurrence of the secretary of defense and the attorney

general. This reform is not aimed at a particular president; it addresses
a problem that could arise in any administration. Moreover, adding
these checks would not only limit the commander in chief’s power
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but also buttress it, protecting the launch process from interference
by unauthorized parties.
CONSTRAINING AND CONFIRMING

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There are two sets of scenarios in which a U.S. president might order
a nuclear strike. The first is relatively straightforward and uncontro-
versial: launching a retaliatory attack after or during an enemy nuclear
attack. In that case, given the need to respond quickly, the commander
in chief’s power should remain unhampered. The concern arises when
considering the other set of scenarios: the first use of nuclear weapons,
The President and the Bomb
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Hail Mary: carrying the “nuclear football” in Washington, D.C., February 2017
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either as an initial knockout blow or during the course of a conventional
war. What if the commander in chief ordered such an attack without
sufficient cause, consultation, or legal justification?
Starting a nuclear war is the most momentous national security
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decision imaginable. Some observers have called for a ban on nuclear

first use altogether, and the Obama administration considered declaring
a no-first-use policy near the end of its second term. But for better or
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worse, U.S. and NATO strategic doctrine has always rested on this option
(originally, to counter the Soviets’ perceived superiority in conventional
forces), and there is no consensus for taking it off the table.
In the event that the president wanted to be the first in a conflict to
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use nuclear weapons, two procedural problems could arise: insufficient

deliberation and insubordination. On the one hand, the president
might order a launch without adequate consideration or without con-
sulting responsible advisers, and the military chain of command might
Ma
simply comply. On the other hand, he might order a launch and officers
might refuse to comply, either doubting the order’s authenticity or
resisting it on moral or other grounds. Either possibility is dangerous.
The first risks unnecessary and catastrophic escalation. The second
may seem less dangerous—to some it may even seem desirable—but
a refusal by uniformed officers to comply would deeply damage the

hallowed norms of civilian control of the military. Currently, if the

president orders a launch, there are technical means to ensure the
authenticity of the order, but the system is not designed to deal with
an order that appears to be irrational. Relying on ad hoc disobedience
of orders of questionable legality is not the right solution to this prob-
lem, since it is both unreliable and fraught with bad constitutional
and policy implications.
A third and very different problem—the possibility of unauthorized
parties tampering with the system to inject a false launch order or
m
block a legitimate one—has received less attention. Such a problem
is unlikely. The U.S. nuclear command-and-control system has been
carefully designed with redundant bul-
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warks against imaginable accidents—
It is time to add new but so have nuclear power plants, and
checks to the process for ha still there were unanticipated disasters
nuclear first use. at Three Mile Island, Chernobyl, and
Fukushima, all of which would pale in
comparison to a single mistaken use of nuclear weapons. When it comes
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to nuclear weapons, even extremely low odds of a mistake should be
reduced in any reasonable way possible. Whether an unauthorized
launch stemmed from an unhinged military aide in charge of the
football, unforeseen technical glitches that accidentally mimicked a
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presidential order, malicious hackers who managed to penetrate the

command-and-control system, or malfunctioning sensors that generated
false warnings of an attack, a requirement that officials in addition to
od
the president sign off on a nuclear launch would serve as a valuable

safeguard. It would make it harder for a wayward president, a provoca-
teur, or a malfunction to start a nuclear conflagration, while preserving
the president’s option to fire nuclear weapons first when sensible officials
so
consider it necessary.
Given the deficiencies in the existing process, it is time to add new
checks for nuclear first use: certification from the secretary of defense
that a given order is valid (meaning definitely from the commander in
Ma
chief) and from the attorney general that it is legal (that is, within the
president’s authority and proper legal bounds). Requiring written confir-
mation from the secretary of defense that the president has, in fact,
commanded a launch would supplement the existing technical means
for ensuring an order’s authenticity. More important, it would guarantee
the secretary’s involvement in the decision-making. Requiring written
confirmation from the attorney general that an order is legal—or,

alternatively, that there has been a meaningful review of the order’s
legality—would further widen the circle of cabinet-level discussion.
For both officials, provisions would need to be made for alternates to
perform their roles when needed.
These proposed requirements could be implemented either by the
executive branch, through an executive order, or by the legislative
branch, through a new law. The executive-branch route would be
more politically and legally palatable to those who oppose legislative
m
restrictions on presidential decision-making or fear that it would lead
to further congressional meddling. True, executive orders can be waived
by the president, but once it was institutionalized in two cabinet
hi
departments, it would be difficult to undo this requirement quickly
and without raising major alarms internally.
Codifying these requirements instead through legislation would
ha
have virtues and risks. For one thing, statutory requirements would
give commanders below an irrational president greater confidence to
resist an unjustified launch order. There is, however, a danger that
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even if such a statute were not watered down during the legislative
process, the executive branch might label it unconstitutional and
announce that it would refuse to be bound by it, at least in certain
circumstances. The legal issues raised by such a law are unlikely to
Al
ever be resolved by the courts, which have tended to punt on tough

questions about war powers and leave them to the other branches.
That said, the executive branch often adopts practices mandated by
od
Congress even without conceding its legal position. (For example,

presidents regularly submit notifications to Congress about the use of
U.S. forces, as required by the 1973 War Powers Resolution, even
when questioning the constitutionality or applicability of the law.) If
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Congress did pass reforms to the nuclear launch process, it should

be prepared to exercise firm oversight and, if necessary, use its other
powers, such as threatening to withhold certain funding, to ensure that
the executive branch followed through.
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Adding new certifications to the launch process should appeal to a

broad range of opinions—both of those who want to move toward a
ban on first use and of those who are worried about the credibility of
U.S. nuclear deterrence, including whether the command-and-control
system will function as intended in crises. The fact that the safeguards
would both constrain and empower the president as commander in

chief should increase the odds of a viable political coalition for reform.
Still, the proposal would no doubt be controversial. But the most likely
criticisms do not hold up.
IS THIS REALLY A PROBLEM?

The first criticism of additional checks is that they represent a solution
to a problem that does not exist. Granted, the image of a president
simply pushing a button to launch hundreds of missiles at a moment’s
notice, unchallenged, is naive. And although the details of command
m
and control are classified, some of the most informed critics of reform
insist that consultation and concurrence are solidly built into the stan-
dard operating procedure. As a practical matter, however, senior officials
hi
might not be immediately available when called on to confer with the
president, a problem that has come up in past exercises and false-
warning incidents. More to the point, the president can change or
ha
revoke the procedural plans that his subordinates have designed,
reject the counsel of top advisers, or issue orders directly to officers in
the chain of command—who in some circumstances could be no more
iT
senior than a colonel.
Officers are bound to disobey orders that are obviously illegal, but
when the legality of a command seems uncertain, they are not expected
to resist. Officers might be especially inclined to defer to the commander
Al
in chief in a crisis or even merely in a situation of increased tension,

when an order for action, however unwise it may sound, would not
seem to be a completely nonsensical bolt from the blue. (The current
od
strain with North Korea represents just such a situation.) If the presi-
dent said that the United States needed to launch an anticipatory first
strike to prevent an enemy attack that could kill many Americans,
there is no guarantee that officers of any rank would assert that their
so
interpretation of the law should take precedence over his. Besides,

those who count on officers in the chain of command to resist illegal
nuclear orders rarely consider what that would mean the day after, for
presidential authority over the military or for the credibility of the
Ma
nuclear deterrent.
If a four-star general who headed U.S. Strategic Command does
not know what would happen if the president insisted on a suspect
order, as Kehler admitted, then there certainly is a problem. And some
of the most knowledgeable civilian experts on command-and-control
procedures—such as Bruce Blair, a scholar at Princeton (and former
missile launch control officer in the U.S. Air Force), and Scott Sagan,
a political scientist at Stanford—are firmly convinced that the current
system is inadequate. The current reliance on the president’s optional
consultation with top advisers is only a speed bump in slowing a pre-
cipitous launch authorization. What’s needed is a circuit breaker.
Lengthening the time in which an irrational launch order could be
held up, as required certification by the secretary of defense and the
attorney general would do, would buy time for the most extreme
solution, if it appeared necessary: the as-yet-untested process, author-
m
ized by the 25th Amendment, by which cabinet officers can legally
remove a president who has gone off the deep end.
What about the opposite problem—that unauthorized parties
hi
could manage to block the legitimate use of nuclear forces? It’s hard
to know how significant that risk is. But even if the current system
is immune to such interference—and to the similar danger of an
ha
unforeseen malfunction—there is no guarantee that it will remain so,
especially in the age of rapidly evolving technology and burgeoning
failures in cybersecurity. The record in military history of disastrous
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surprises that had been considered impossible before the fact does
not inspire confidence.
TYING THE PRESIDENT’S HANDS?

Al
A second line of criticism contends that these reforms would danger-

ously tie the president’s hands. Skeptics fear that even a short lag
in the process could give an enemy an advantage, whether during a
od
tense standoff or in the course of a conventional conflict. It’s impor-

tant to remember, however, that the measures would apply only to first
use, meaning that there is no risk that a president would be unable
to retaliate quickly against an enemy nuclear attack in progress.
so
That said, the one situation in which additional steps in the process
could present a problem would be if a president felt it necessary to
launch a preemptive nuclear strike—that is, one intended to interdict
an imminent attack by an enemy making immediate preparations
Ma
for nuclear war. It’s important to distinguish this from a preventive

war, one waged in anticipation of a possible enemy attack sometime
in the future. Preventive wars are almost never a good idea, given
the uncertainty about whether the threat will ever come to pass, and
because they are usually seen by the rest of the world as aggression,
not defense. A nuclear one started by the United States, inflicting

epochal devastation without immediate provocation, would brand the

country as an international outlaw.
A preemptive attack, in contrast, could be more legitimate, since if
an enemy attack really was about to begin, a U.S. first strike might
block the damage it could inflict. Preemption is still very risky, how-
ever, since it may be impossible in the heat of a crisis to determine
whether the enemy’s war preparations are intended for offense or
defense. Figuring out which mistake is the greater risk—launching
an unnecessary attack or falling victim to aggression—has long been
m
a central strategic dilemma for decision-makers.
During the Cold War, the United States handled the dilemma by
constructing a nuclear force capable of surviving a first strike and firing
hi
back effectively, creating a sense of certain retaliation, which would make
Moscow refrain from initiating a nuclear attack under any circumstances,
since it knew that doing so would be suicidal. Thus, there would be no
ha
need for preemption, even in a crisis. No strategy is foolproof,
but such deterrence should still work today, even against a reckless
adversary such as the North Korean leader Kim Jong Un, who, for
iT
all his bluster, still wants to stay in power (and alive).
If U.S. intelligence did report a major increase in the readiness of
North Korean forces, the argument for a preemptive strike would grow
stronger, but should not override the reasons for nuclear restraint.
Al
Rather, policymakers should make an effort to maximize the capabili-

ties for preemption with conventional forces. Doing so may require
technical and operational innovations, along with the deployment
od
of additional forces near the scene in peacetime, and it would raise

the risk of failing to destroy 100 percent of the enemy’s arsenal. But
the alternative risk—starting an unnecessary nuclear war—is worse.
so
UNCONSTITUTIONAL?
The third likely criticism would come from those who believe that
limiting the president’s nuclear authority—if done through legislation—
would violate the Constitution. Imposing conditions on his authority
Ma
to direct military officials and exercise tactical and operational control

over U.S. forces, the argument runs, would encroach on his executive
powers, including as commander in chief.
But the proposed requirements are justifiably within Congress’
authority. The Constitution gives Congress the power to declare war
and regulate the military, provisions that arguably include the power
to place limits on when the president may resort to nuclear first use.
New requirements would also raise separate concerns about encum-
bering the president’s direct command of military forces or intruding
on his power to determine how to conduct military operations, but
Congress may arguably legislate measures such as these to ensure
that the president’s commands are lawfully and properly carried out,
without taking military options completely off the table. In the past,
the enormous stakes of nuclear decision-making were used to justify
expanded presidential powers, but today, the better argument is that
m
the special challenges of nuclear decisions justify giving Congress
some authority to regulate them.
To be clear, this proposal leaves open many constitutional and
hi
legal questions. Under what circumstances may a president resort to
a nuclear first strike without explicit authorization from Congress?
What international law applies to a proposed strike, and how should
ha
it be interpreted in the context at hand? But the aim right now
should not be to answer such questions definitively; rather, it should
be to ensure that before a nuclear attack is launched, the answers
iT
are carefully considered, formalized, and communicated reliably
down the chain of command. Instead of settling the thorny ques-
tions in advance, they would be left for the attorney general to answer
when certifying the legality or legal review of a given proposed attack.
Al
Moreover, merely institutionalizing this process of requiring the

attorney general’s official opinion would allow time for reconsidera-
tion. And in the event that the attorney general refused to certify that
od
a strike was legal, the process would give the chain of command the
confidence needed to resist an irrational president who wished to start
a nuclear war without reasonable grounds. In other words, it would put
insubordination on firmer legal footing, should it come to that.
so
THE BALANCE OF RISKS

Requiring additional checks for the first use of nuclear weapons would
serve as a hedge against a low-probability, high-consequence event: an
Ma
impetuous commander in chief lurching into catastrophe. At the same

time, it would help guard against interference by hostile parties seeking
to sabotage the chain of command, and it would improve decision-
making and implementation in the very unlikely event that a nuclear
first strike were truly necessary. Political and legal opposition to this
proposal will inevitably be strong. Much of that will concern the

question of the extent of the president’s war powers, but merely

adding a delay to the process for first use does not require resolving
this long-standing constitutional debate. If only by ensuring and
formalizing deliberation, these reforms would buy time for respon-
sible officials to take action. And although critics will inevitably
point to the political, strategic, and legal risks of this proposal, the
problem of an inadvertent nuclear war has no risk-free solution.
Adding new steps to the authorization process would balance these
risks better than the current system does.
m
Questions about how and when to use nuclear weapons may seem
like an academic relic of the Cold War era, a time when they consumed
defense planners. Indeed, after the Soviet Union collapsed, such ques-
hi
tions faded away as smaller security problems took center stage.
But now, as tensions grow with the established nuclear powers of
China and Russia and with the new nuclear power of North Korea
ha
and the potential one of Iran, such debates have returned to the fore.
As the United States adapts its nuclear strategy to the twenty-first
century, it should adapt its nuclear decision-making procedures, too.
iT
The founders put a high premium on checks and balances out of a
healthy appreciation for the limits of any individual’s virtue or wisdom.
There is every reason to apply this logic to the process of starting a
nuclear war—the ultimate presidential power.∂
Al
od
so
Ma
Mugabe’s Misrule
And How It Will Hold Zimbabwe Back
Martin Meredith
m
I
n a radio broadcast that Robert Mugabe made from exile in 1976,
during the guerrilla war he was leading to overthrow white-
hi
minority rule in Rhodesia, he set out his views about the kind of
electoral democracy he intended to establish once he had gained
control of Zimbabwe, as the new state was to be named. “Our votes
ha
must go together with our guns,” he said. “After all, any vote we shall
have shall have been the product of the gun. The gun which produces
the vote should remain its security officer—its guarantor. The people’s
iT
votes and the people’s guns are always inseparable twins.”
As Zimbabwe’s leader for 37 years, Mugabe never deviated from
this attachment to brute force. Whatever challenge his regime faced, he
was always prepared to overcome it by resorting to the gun. So proud
Al
was he of his record that he once boasted that in addition to his seven
university degrees, he had acquired “many degrees in violence.”
What propelled Mugabe to use violence so readily was his obsession
od
with power. Power for Mugabe was not a means to an end but the end
itself. His overriding ambition was to gain total control, and he pursued
that objective with relentless single-mindedness, crushing opponents
and critics who stood in his way, sanctioning murder, torture, and
so
lawlessness of every kind. “I will never, never, never, never surrender,”

he said after unleashing a campaign of terror to win an election held
in 2008. “Zimbabwe is mine.”
To sustain himself in power, Mugabe came to rely on a cabal of army
Ma
generals, police chiefs, senior civil servants, and political cronies will-
ing to do his bidding. In return, he gave them license to amass huge
personal wealth, derived mainly from bribes and the looting of state
assets. As the bedrock of the Mugabe state, they became accustomed
MARTIN MEREDITH is a journalist, historian, and biographer. He is the author of The Fate
of Africa: A History of the Continent Since Independence.

Martin Meredith
to using methods of violence and intimidation as a matter of routine,

able to act with impunity.
Ensconced in the presidential residence in Harare, the capital, Mugabe
intended to rule for life. At the age of 93, although prone to falling
asleep in meetings and afflicted by memory lapses, he still clung to
power with the same determination and ruthlessness that had marked
his political career from the start.
In his dotage, however, he succumbed to the blandishments of
his 52-year-old wife, Grace, an avaricious and menacing figure with
m
ambitions to establish herself at the head of a Mugabe dynasty. During
a vicious struggle over the succession, Mugabe was persuaded in
November 2017 to dismiss Grace’s main rival, Vice President Emmerson
hi
Mnangagwa, his chief enforcer and a key player in the security estab-
lishment. Fearing that their own positions were under threat, the
generals who had underwritten Mugabe’s rule for so long decided
ha
to stage a palace coup, placing him under house arrest. For six days,
Mugabe tried to hold on to the trappings of office, but after losing the
support of his party, he accepted a lavish retirement package and
iT
agreed to resign, paving the way for Mnangagwa to take control.
Mugabe may have gone, but the Mugabe state lives on. The apparatus
of vote rigging and repression is still in place. The plight of Zimbabwe,
moreover, remains pitiful, a once prosperous country not only reduced
Al
to economic ruin but also trapped in a culture of corruption and violence

that Mugabe fostered since gaining power in 1980 and that is now
deeply embedded among the ruling elite. There is little hope of much
od
change for the better.
FROM TEACHER TO REVOLUTIONARY

Before he entered politics, Mugabe seemed set on an illustrious career
so
as a teacher. Like many other independence leaders in Africa, he was a

product of the mission-school system. As a pupil at Kutama Mission
School in rural Rhodesia, then a British colony, he devoted much of his
time to studying, encouraged by Jesuit teachers who recognized his in-
Ma
tellectual ability and his aptitude for self-discipline. His Jesuit upbring-
ing instilled in him a self-confidence that he never lost. Yet he was also
secretive and solitary, preferring books to sports or other school activi-
ties. “His books were his only friends,” his brother Donato once recalled.
Mugabe left Kutama in 1945 with a teaching diploma and took up
a series of teaching posts. After winning a scholarship to study in
Mugabe’s Misrule
m
hi
ha
iT
No country for old man: Mugabe and his wife, November 2017
South Africa, he returned to Rhodesia in 1952 more politically aware
of the injustices of white rule, but he still preferred to continue his
Al
studies rather than engage in political activity. To his political friends

in the 1950s, he remained an aloof and austere figure, a supporter
of the African nationalist cause but one who kept his distance. In
od
1958, with three academic degrees to his credit, he took up a post

at a teacher-training institute in newly independent Ghana. As the
first black African colony to gain independence, Ghana was brimming
with optimism and ambition at the time. Its leader, Kwame Nkrumah,
so
harbored grand plans for a new socialist order and was keen to support
the liberation of the rest of Africa from European rule. Mugabe reveled
in this environment but nevertheless remained committed to his work
P H I L I M O N B U L AWAY O / R E U T E R S
as a teacher.
Ma
The pivotal moment came in 1960, when he returned to Rhodesia

for a brief visit, fully expecting to go back to Ghana, but found himself
caught up in nationalist agitation against white rule. Galvanized into
action by street protests, he abruptly resigned from his teaching post
and threw himself into the nationalist fray with the same dedication
he had hitherto devoted to education.

Martin Meredith
Mugabe was among the first nationalists to advocate armed struggle,

convinced that nothing else would overcome white intransigence. But
he was simultaneously helping organize attacks against black political
opponents. When the nationalist movement split in 1963, setting off
internecine warfare between two rival factions, ZANU (the Zimbabwe
African National Union) and ZAPU (the Zimbabwe African People’s
Union), Mugabe played a prominent role in orchestrating violence
carried out by ZANU’s youth group against ZAPU. ZAPU was politically
aligned with the Soviet Union and tended to focus on the urban
m
proletariat, whereas ZANU supported Mao Zedong’s China and was
agrarian in outlook.
Gang violence between the two factions eventually gave Rhodesia’s
hi
white rulers sufficient pretext to arrest nationalist leaders and crush
the nationalist movement in 1964 in the name of law and order. When
a guerrilla war against white rule broke out in 1972, ZANU and ZAPU
ha
fought separately in different parts of Rhodesia. Meanwhile, many of
the personal hatreds and antagonisms engendered in the nationalist
movement in the 1960s continued to fester and came to the fore after
iT
independence in 1980, with disastrous consequences.
Like Nelson Mandela in South Africa, Mugabe endured long years
of imprisonment. And like him, he suffered the anguish of losing a son
and was refused permission to attend the funeral. But whereas Mandela
Al
used his prison term to open a dialogue with South Africa’s white rulers
in order to defeat apartheid, Mugabe emerged from 11 years in prison
bent on revolution. In 1975, he escaped into exile in neighboring Mo-
od
zambique, intent on taking control of ZANU’s war effort, determined to

overthrow white society by force and replace it with a one-party Marxist
regime. In 1979, after seven years of civil war in which at least 30,000
people had died, a negotiated settlement under British auspices was within
so
reach, but Mugabe still hankered for military victory—“the ultimate

joy,” as he described it at the time. Only an ultimatum from African
presidents who had until now backed him forced him to compromise,
accepting a cease-fire and a British-run transition to independence. “As
Ma
I signed the document, I was not a happy man at all,” he recalled.
THE DICTATOR
After winning a majority in Zimbabwe’s inaugural elections in February
1980, Mugabe became prime minister of a coalition government amid
a rising sense of optimism. He made strenuous efforts to achieve a good
Mugabe’s Misrule
working relationship with his former white adversaries, pledging to

strive for reconciliation and racial harmony. Instead of the angry
Marxist ogre that the white minority had been led to expect, he
impressed them as a model of moderation. Even the recalcitrant white
leader Ian Smith, who had previously denounced Mugabe as “the
apostle of Satan,” found him “sober and responsible.”
On the international stage, Zimbabwe was accorded star status. In
the first year of independence, Zimbabwe was awarded more than
$1 billion in aid, enabling Mugabe to em-
m
bark on ambitious health and education
programs. The white population, too,
Within weeks of taking
benefited from the growing prosperity. office, Mugabe decided to
hi
Mugabe paid particular attention to settle some old scores, not
the concerns of white farmers—the against former white
backbone of the agricultural economy—
ha
reassuring them with large increases in adversaries but against
commodity prices. “Good old Bob!” they black opponents.
cheered. “We are the darling of the
iT
world,” Mugabe told a meeting of white farmers, “and since we are on
honeymoon and honeymoons don’t always last long, we ought to take
advantage of it!”
Zimbabwe’s honeymoon was indeed brief. Within weeks of taking
Al
office, Mugabe decided to settle some old scores, not against former
white adversaries but against black opponents. Although Mugabe’s
party, ZANU-PF (the additional two letters stand for “Patriotic
od
Front”), had won the February 1980 elections with a substantial ma-
jority, the outcome left his ZAPU rivals with a stronghold in Matabele-
land, a region that makes up the western half of the country. Mugabe
made clear his intention of provoking a showdown, licensing his
so
closest colleagues to speak out about the need to “crush” ZAPU. In

October 1980, he secretly arranged for North Koreans to train a special
military brigade as a strike force. It was given the name Gukurahundi,
after a Shona word meaning “the rain that blows away the chaff before
Ma
the spring rains.”

In 1983, using “dissident” activity in Matabeleland as a pretext, Mugabe
unleashed the Gukurahundi on a campaign of mass murder, torture,
arson, rape, and beatings directed mainly against the civilian population
there. One of the key figures in the campaign was Mnangagwa, then the
minister of state security, who described the “dissidents” as “cockroaches”

Martin Meredith
that needed to be eliminated. Over a four-year period, an estimated

20,000 civilians were killed. ZAPU eventually capitulated and agreed
to disband.
Having demolished his ZAPU rivals and established a de facto one-
party state, Mugabe went on to accumulate huge personal power, giving
himself the right to hold office as president for an unlimited number of
terms. He based his regime on a vast system of patronage, controlling
appointments to all senior posts in the civil service, the defense forces,
the police, and parastatal organizations. One by one, all these institu-
m
tions—and, eventually, the judiciary—were subordinated to his will.
His secret police harassed, intimidated, and murdered his opponents.
As a reward for their loyalty, Mugabe allowed the new elite to engage
hi
in a scramble for property, farms, businesses, and contracts. “I am rich
because I belong to ZANU-PF,” boasted one of his cronies, the multimil-
lionaire businessman Philip Chiyangwa, in the press. “If you want to be
ha
rich, you must join ZANU-PF.” The scramble became ever more frenetic,
spawning corruption on a massive scale. One after another, state corpo-
rations—the national oil company, the national electric company, the
iT
national telecommunications company—were plundered. Fraud, theft,
and embezzlement in government departments became endemic. In the
most notorious case, a state fund set up to provide compensation for
those who had suffered during the liberation war was looted so thor-
Al
oughly by Mugabe’s colleagues that nothing was left for genuine vic-
tims. A land redistribution program financed by the British government
was halted when it was discovered that Mugabe had been handing out
od
farms intended for peasant resettlement to ministers and officials.

By the mid-1990s, Mugabe had become an irascible dictator, brooking
no opposition, contemptuous of the law and human rights, and indif-
ferent to the incompetence and corruption around him. Whatever good
so
intentions he had started out with had long since evaporated. Surrounded
by sycophants, he had become increasingly detached from reality, living
in heavily fortified residences and venturing out only with retinues of
armed bodyguards and in large motorcades. He spent much of his time
Ma
abroad, enjoying the role of revolutionary hero.
CHALLENGE AND RESPONSE

Ordinary people suffered the brunt of government mismanagement.
By 2000, Zimbabweans were generally poorer than they had been at
independence; average wages were lower; unemployment had tripled;
Mugabe’s Misrule
and life expectancy was falling. More than two-thirds of the population
lived in abject poverty. Veterans of the liberation war held particular
grievances over government neglect and Mugabe’s failure to deliver
on promises of land reform.
Popular opposition to Mugabe’s regime spread to many parts of the
country. Aiming to challenge ZANU-PF in parliamentary elections in
2000, a coalition of labor unions, lawyers, journalists, and church
groups launched a new party, the Movement for Democratic Change
(MDC), and mobilized support to oppose Mugabe’s plans to extend his
m
powers even further in a referendum over a proposed new constitution.
White activists played a significant role in the “no” campaign. White
farmers, in particular, were alarmed by Mugabe’s proposal to allow the
hi
government to seize land without compensation.
The result was a stunning defeat for Mugabe: 55 percent voted against
the proposed constitution. Shaken to the core, the ruling elite suddenly
ha
saw their grip on power slipping and, with it, all the wealth, salaries,
perks, contracts, commissions, and scams they had enjoyed for 20 years.
Mugabe attributed his defeat principally to the whites.
iT
In a carefully coordinated operation, starting ten days after the refer-
endum result was announced, Mugabe launched a campaign of terror
against white farmers and hundreds of thousands of black farm workers
whom he accused of supporting the opposition. Gangs armed with
Al
axes and machetes invaded white-owned farms across the country.

Government and army trucks were used to transport them to the farms
and keep them supplied with rations. They were called “war veterans,”
od
but the majority were too young to have participated in the war 20 years
earlier. Large numbers were unemployed youths paid a daily allowance.
They assaulted farmers and their families, threatened to kill them, and
forced many to flee their homes. They stole tractors, slaughtered cattle,
so
destroyed crops, and polluted water supplies. The police refused to

take action. Black farm workers and their families were subjected
to mass beatings and taken away en masse to “reeducation centers.”
Mugabe fanned the flames, describing white farmers as “enemies,” and
Ma
as the election approached, his target became the MDC and opposition
of any kind. “The MDC will never form the government of this country,
never ever, not in my lifetime or even after I die,” he declared. Violence
and intimidation erupted across the country. One MDC candidate, Bless-
ing Chebundo, who was running for Mnangagwa’s seat in Parliament,
endured several murder attempts. On his way to work, Chebundo was

Martin Meredith
surrounded by a gang of ZANU-PF thugs who poured gasoline on him

and tried to set him on fire, but failed because in the scuffle, their
matches had been doused in gasoline. Even though he was forced to
remain in hiding throughout the campaign, he nevertheless managed
to inflict on Mnangagwa a humiliating defeat.
After months of systematic intimidation, ZANU-PF scraped through
with a narrow victory. But there was to be no respite from Mugabe’s
tyranny. He pursued his vendetta against
At one point, Zimbabwe’s white farmers relentlessly, seizing cattle
m
ranches, dairy farms, tobacco estates,
inflation rate reached and safari properties. When the Supreme
500 billion percent. Court declared his actions illegal, Mugabe
hi
swiftly removed independent judges and
replaced them with loyalists. A chaotic land grab ensued as Mugabe’s
cronies, party officials, and army and police commanders scrambled to
ha
snap up choice properties. Among the beneficiaries were his wife,
Grace, and his brother-in-law.
The farm seizures spelled the end of commercial agriculture as a
iT
major industry. The impact on food supplies was calamitous. To survive,
Zimbabwe became increasingly dependent on food imports and foreign
food aid. Over a five-year period from 1999 to 2004, the economy
shrank by one-third, precipitating a mass exodus. It was not only
Al
whites who fled abroad but also a large part of the black middle class—
doctors, nurses, teachers, and other professionals who saw no future
for themselves in Mugabe’s Zimbabwe.
od
The same pattern of violence, intimidation, and vote rigging prevailed

from one election to the next. In 2005, Mugabe targeted the mass of dis-
affected Zimbabweans living in slums and shantytowns on the fringes of
urban centers, strongholds of the MDC. In a campaign called Operation
so
Murambatsvina, using a Shona word meaning “drive out the rubbish,”

police squads bulldozed and sledgehammered one community after an-
other. According to a UN investigation, some 700,000 people lost their
homes, their source of livelihood, or both. Mugabe claimed that the aim
Ma
of the campaign was merely slum clearance. But his real purpose was to
make clear the fate of anyone who voted against him.
In the run-up to presidential and parliamentary elections in 2008, the
MDC’s leader, Morgan Tsvangirai, became a direct victim of Mugabe’s
tactics. When Tsvangirai arrived at a police station to investigate reports
that supporters held there had been beaten, he, too, was seized, held
Mugabe’s Misrule
down, and beaten so badly that doctors thought his skull had been
fractured. “I told the police, ‘Beat him a lot,’” Mugabe subsequently
said at a gathering of African presidents. “He asked for it.”
Despite the fearful consequences, MDC supporters continued to defy
Mugabe’s regime. The 2008 parliamentary elections gave opposition
parties, led by the MDC, a clear majority. The simultaneous presidential
election also gave Tsvangirai a narrow lead over Mugabe, but election
officials, after weeks of prevarication, manipulated the figures to ensure
that a second round of voting was needed.
m
The campaign of terror that Mugabe unleashed to win the second
round was more intense than any previous election episode. In a
military-style operation, youth militias, police agents, army personnel,
hi
and party thugs moved into opposition areas, setting up torture camps
and indoctrination centers. The campaign was officially called
Operation Mavhoterapapi?—“Operation Whom Did You Vote For?”
ha
Among the people, it was known simply as chidudu—“the fear.”
Villagers were beaten en masse and told to vote for Mugabe next time
or they would be killed. Scores of MDC organizers were abducted and
iT
murdered; hundreds were tortured. Some 200,000 people were forced
to flee their homes. Mugabe vowed that he would “go to war” to prevent
an MDC victory. “We are not going to give up our country because of
a mere x,” he said. “How can a ballpoint pen fight with a gun?” Five
Al
days before the voting was due to start, Tsvangirai withdrew.

A fractious coalition government was eventually formed, but Mugabe
refused to implement any major reform that would restore a semblance
od
of democracy, leaving Tsvangirai and the MDC humiliated and discredited

by the time of the next election, in 2013. The economy, meanwhile,
continued its downward slide. At one point, inflation reached 500 billion
percent, according to calculations by the International Monetary
so
Fund, rendering the currency worthless.
MUGABEISM AFTER MUGABE

The damage inflicted on Zimbabwe by Mugabe’s 37-year rule is immense.
Ma
Mugabe vitiated the courts, trampled on property rights, rigged elec-

tions, hamstrung the independent press, and left Zimbabwe bankrupt
and impoverished. One-quarter of Zimbabweans live abroad in order
to survive; four million depend on food aid; vast numbers of children
are stunted by malnutrition; life expectancy, at 60 years, ranks among
the lowest in the world.

Martin Meredith
No wonder the downfall of Mugabe brought crowds onto the streets

in celebration. But the sense of euphoria has been replaced by appre-
hension. As a member of Mugabe’s inner circle since independence,
Mnangagwa, now 75 years old, is well known for his ruthlessness. His
involvement in the Gukurahundi atrocities and in ZANU-PF’s habitual
election violence has made him the most feared politician in Zimbabwe.
At his inauguration as president in December 2017, he praised Mugabe
as “a father, a mentor, a comrade-in-arms, and my leader.” He also
approved a lavish retirement package for Mugabe and his wife that in-
m
cludes bodyguards, housekeepers, gardeners, waiters, cooks, chauffeurs,
diplomatic passports, first-class air flights, and private health insurance.
In recent years, as Mugabe’s deputy, Mnangagwa sought ways
hi
out of Zimbabwe’s economic morass, courting multilateral financial
institutions such as the International Monetary Fund and the World
Bank and proposing reforms to encourage foreign investors to return.
ha
As president, he has promised to compensate white farmers, even
though the treasury is empty. But although he offers a more pragmatic
approach than Mugabe, Mnangagwa has also made clear his deter-
iT
mination that ZANU-PF, and its wealthy elite, will remain in control.
“The dogs may keep on barking, but ZANU-PF will keep on ruling,”
he said after Mugabe’s resignation. To this end, he has appointed to
his cabinet several former generals notorious for their brutality,
Al
including Perence Shiri, former commander of the Gukurahundi,

and Constantino Chiwenga, a former defense forces chief; both
have been heavily involved in orchestrating election violence and
od
farm seizures.
The key test of Mnangagwa’s intentions will come in the run-up to
the next elections, which are due later this year. He has promised that
the elections will be “free and fair.” Yet ZANU-PF’s government has a
so
long record of rigging elections. It is practiced not only in controlling

the work of election officials and law enforcement agencies but also in
manipulating a defective electoral roll system that contains millions
of ghost voters. Much will depend on the willingness of Western
Ma
governments to insist on credible elections that are strictly monitored

as a condition for helping Zimbabwe emerge from decades of misrule.
Meanwhile, the state Mugabe created lives on. With Mnangagwa and
the generals at the helm, ZANU-PF continues to control every lever of
government. Just as Mugabe envisioned more than four decades ago,
the vote still goes with the gun.∂
The Clash of
Exceptionalisms
A New Fight Over an Old Idea
m
Charles A. Kupchan
M
hi
any Americans have recoiled at President Donald Trump’s
“America first” foreign policy. Critics charge that his pop-
ulist brand of statecraft undermines the United States’ role
ha
as an exceptional nation destined to bring political and economic
liberty to a waiting world. Trump exhibits isolationist, unilateralist, and
protectionist instincts; indifference to the promotion of democracy; and
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animosity toward immigrants. How could Americans elect a president
so at odds with what their country stands for?
Yet “America first” is less out of step with U.S. history than meets
the eye. Trump is not so much abandoning American exceptionalism
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as he is tapping into an earlier incarnation of it. Since World War II,

the country’s exceptional mission has centered on the idea of a Pax
Americana upheld through the vigorous export of U.S. power and
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values. But before that, American exceptionalism meant insulating

the American experiment from foreign threats, shunning international
entanglements, spreading democracy through example rather than
intrusion, embracing protectionism and fair (not free) trade, and pre-
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serving a relatively homogeneous citizenry through racist and anti-

immigrant policies. In short, it was about America first.
That original version of American exceptionalism—call it American
Exceptionalism 1.0—vanished from mainstream politics after the
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Japanese attack on Pearl Harbor. But it retained allure in the heartland

and is today making a comeback across the political spectrum as
Americans have tired of their nation’s role as the global policeman and
grown skeptical of the benefits of globalization and immigration. To
CHARLES A. KUPCHAN is Professor of International Affairs at Georgetown University
and a Senior Fellow at the Council on Foreign Relations.

Charles A. Kupchan
be sure, as a grand strategy, “America first” is headed for failure. The

United States and the rest of the world have become too interdependent;
solving most international challenges requires collective, not unilateral,
action; and immigration has already ensured that a homogeneous
United States is gone for good.
A brand of exceptionalism dating to the eighteenth century is ill
suited to the twenty-first. Still, the contemporary appeal of “America
first” and the inward turn it marks reveal that the version of excep-
tionalism that has guided U.S. grand strategy since the 1940s is also
m
past its prime. Trump’s presidency has exposed the need for a new
narrative to steer U.S. foreign policy. The nation’s exceptional mission
is far from complete; a world tilting toward illiberalism sorely needs
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a counterweight of republican ideals. How the United States redefines
its exceptional calling will determine whether it is up to the task.
ha
AMERICAN EXCEPTIONALISM 1.0
From its earliest days, the exceptionalist narrative has set the boundaries
of public discourse and provided a political and ideological foundation
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for U.S. grand strategy. The original conception of American excep-
tionalism was based on five national attributes.
The first was geography: protective oceans kept predatory powers
at bay, and ample and fertile land sustained a growing population and
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generated wealth, helping the United States become the dominant

power in the Western Hemisphere. But the nation’s geopolitical
ambition would stretch no farther. Exceptional geographic bounty
od
enabled, even mandated, a grand strategy of isolation from other

quarters. As President George Washington affirmed in his Farewell
Address, the country enjoyed a “detached and distant situation. . . .
Why forgo the advantages of so peculiar a situation? Why quit our
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own to stand upon foreign ground?” The United States did experiment
with a broader imperialism in 1898, colonizing the Philippines and
taking hold of Hawaii and a number of other Pacific islands, and
it intervened in Europe during World War I. But these episodes
Ma
provoked a sharp backlash and consolidated the stubborn isolationism

of the interwar decades.
Second, in part because of its geographic isolation, the United States
enjoyed unparalleled autonomy, both at home and abroad. Although
the founders were keen to expand overseas commerce through trade
deals, they were deeply averse to binding strategic commitments. As
The Clash of Exceptionalisms
Washington said in his Farewell Address, “The great rule of conduct

for us in regard to foreign nations is in extending our commercial
relations, to have with them as little political connection as possible.”
After reneging in 1793 on the revolution-era alliance with France that
had helped the United States gain independence, the country would
not enter into another alliance until World War II.
Third, Americans embraced a messianic mission: they believed
that their unique experiment in political and economic liberty would
redeem the world. As the pamphleteer
m
Thomas Paine wrote in Common Sense,
“A situation, similar to the present,
A brand of exceptionalism
hath not happened since the days of dating to the eighteenth
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Noah until now. The birthday of a century is ill suited to the
new world is at hand.” But the United twenty-first.
States was not to fulfill this mission
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through intervention. When liberal
revolutions unfolded in Europe and Latin America in the early 1800s,
Secretary of State John Quincy Adams asserted that the United States
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“goes not abroad, in search of monsters to destroy.” The country
should be “the well-wisher to the freedom and independence of all,”
he insisted, but only through “the countenance of her voice, and the
benignant sympathy of her example.”
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Fourth, the United States enjoyed unprecedented social equality

and economic mobility. Americans had replaced monarchy and aristoc-
racy with equality of opportunity. Yeoman farmers and small-town
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shopkeepers were the foot soldiers of manifest destiny—the notion

that democracy and prosperity would stretch from coast to coast. As
the United States became a leading commercial power, it defended its
emerging industrial base through tariffs and insisted on fair and recip-
so
rocal trade, not free trade. And when necessary, it was prepared to use
deadly force to defend the commercial rights of its citizens, as made
clear in the Barbary Wars of the early 1800s and in the War of 1812.
Finally, Americans believed their nation had been endowed with
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not just exceptional land but also exceptional people: Anglo-Saxons.

Reflecting a view commonplace in the early United States, the
Congregational minister Horace Bushnell declared, “Out of all the
inhabitants of the world, . . . a select stock, . . . the noblest of the
stock, was chosen to people our country.” The racial dimension of
American exceptionalism manifested itself in the campaigns against

Charles A. Kupchan
Native Americans, the enslavement and segregation of African

Americans, and frequent bouts of anti-immigrant sentiment. Through
the Alien and Sedition Acts of 1798, Congress extended the timeline
for immigrants to become U.S. citizens and granted the federal
government the power to imprison or deport those it deemed disloyal.
Restrictions on immigration kicked in during the second half of the
1800s and intensified during the interwar period. And the fear of
diluting the population with “inferior peoples” curbed the country’s
desire to acquire significant territory in the Caribbean and Central
m
America after the Civil War.
hi
Then came the attack on Pearl Harbor, which, as Arthur Vandenberg, a
Repubican senator and one-time isolationist, wrote in his diary, “ended
isolationism for any realist.” So began the era of American Exception-
ha
alism 2.0. If the United States could no longer shield itself from the
world and share the American experiment by example, it would have
to run the world by more actively projecting its power and values. Ever
iT
since the 1940s, internationalists have enjoyed political dominance,
while isolationists have become political pariahs—“wacko birds,” as
Senator John McCain of Arizona once labeled his fellow Republican
Senator Rand Paul of Kentucky and others who take that stance.
Al
Under American Exceptionalism 2.0, an aversion to foreign entan-

glement gave way to a strategy of global engagement. The Cold War
set the stage for the country’s core alliances in Europe and Asia, as well
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as a global network of diplomatic and military outposts. Unilateralism

yielded to multilateralism. In 1919 and 1920, the Senate rejected U.S.
participation in the League of Nations three times; in 1945, it ratified
the UN Charter by a vote of 89 to 2. The United States also assumed
so
a leading role in the panoply of institutions that have undergirded

the postwar rules-based international order. And it continued to
pursue its messianic mission, but through more intrusive means, from
the successful occupations and transformations of Germany and
Ma
Japan after World War II to the ongoing and less successful forays
into Afghanistan and Iraq.
The American dream remained central to this updated version of
exceptionalism, but it was to be fulfilled by the factory worker instead
of the yeoman farmer. The postwar industrial boom generated bipartisan
support for open trade. And especially after the civil rights movement of
m
hi
ha
True believers: watching a Veterans Day parade in New Hampshire, November 2015
the 1950s and 1960s, postwar American exceptionalism lost its racial
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tinge, replaced by a conviction that the melting pot would successfully
integrate a diverse population into one civic nation. Preaching plural-
ism and tolerance became part of spreading the American way.
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THE RETURN OF AMERICA FIRST

Postwar presidents through Barack Obama have been staunch
defenders of American Exceptionalism 2.0. “The United States has
od
been, and will always be, the one indispensable nation in world affairs,”
Obama affirmed in a 2012 commencement speech at the U.S. Air
Force Academy. But just minutes after taking office, Trump promised
something different. “From this moment on,” he proclaimed in his
so
inaugural address, “it’s going to be America first.”

Because of the America First Committee, which was founded in
1940 to oppose U.S. intervention in World War II, this phrase evokes
anti-Semitism and isolationism. But there is more to Trump’s
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BRIAN SNYD E R / REUTE RS
“America first” than its ugly pedigree. Trump’s political success stems
in no small part from his ability to exploit a version of American
exceptionalism that resonates with the nation’s history. As the writer
Walter Russell Mead has argued, populist foreign policy—what
Mead calls a “Jacksonian” approach—has always maintained its
appeal in the heartland, Trump’s electoral base. Whether Trump

Charles A. Kupchan
himself actually believes in the exceptional nature of the American

experiment is unclear (his illiberal instincts and behavior suggest he
may not). Nonetheless, he has proved quite successful at reanimating
core elements of American Exceptionalism 1.0.
Trump has cloaked himself in isolationist garb, repeatedly ques-
tioning the value of core U.S. alliances in Europe and Asia and
promising in a campaign speech outlining his “America first” foreign
policy that the United States will be “getting out of the nation-building
business.” So far, his bark has been worse than his bite, as these pledges
m
have proved easier said than done. The United States remains the
strategic stabilizer of Europe and Northeast Asia and continues to be
mired in the broader Middle East. And when it comes to Iran and
hi
North Korea, Trump, if anything, errs on the hawkish side.
Still, Trump’s vision is nonetheless isolationist. In his “America
first” campaign speech, he promised to let allies that did not increase
ha
their own military spending “defend themselves.” And he pledged to
bring to an end the era in which “our politicians seem more interested
in defending the borders of foreign countries than their own.”
iT
Trump wants to roll back multilateralism. As a candidate, he vowed
that “we will never enter America into any agreement that reduces
our ability to control our own affairs.” Once in office, he pulled the
United States out of the Trans-Pacific Partnership, the Paris climate
Al
agreement, and UNESCO. He refused to certify the nuclear deal with

Iran and continues to take aim at the North American Free Trade
Agreement and the World Trade Organization.
od
As for the United States’ messianic mission, Trump is disdainful of

the activist brand of democracy promotion embraced under American
Exceptionalism 2.0. As he explained in that same campaign speech, he
sees today’s instability in the Middle East as a direct result of the
so
“dangerous idea that we could make Western democracies out of countries

that had no experience or interests in becoming a Western democracy.”
But Trump does not stop there; indeed, he forsakes even American
Exceptionalism 1.0, by showing little patience for republican ideals.
Ma
He traffics in untruths, denigrates the media, and expresses admiration

for Russian President Vladimir Putin and other autocrats.
According to Trump, the American dream has given way to what he
called “American carnage” in his inaugural address. He claimed that
the wealth of the country’s middle class “has been ripped from their
homes and then redistributed across the entire world.” Taking a page
from American Exceptionalism 1.0, he has promised protectionist

policies to “bring back our jobs . . . bring back our borders . . . bring back
our dreams.”
Trump also wants to return to the more homogeneous America of the
past. Restricting immigration; ending Deferred Action for Childhood
Arrivals, or DACA (the Obama administration’s program that shielded
undocumented immigrants who were brought to the country as children);
insulting Hispanic Americans; sending back Haitians, Salvadorans, and
others displaced by natural disasters; and equivocating on neo-Nazis in
m
Charlottesville—all these moves are not-so-subtle paeans to the days
when Christians of European extraction dominated the United States.
For Trump, making America great again means making it white again.
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AMERICAN EXCEPTIONALISM IN CRISIS
“America first” helped Trump win the presidency, but as a guiding
ha
principle for U.S. foreign policy, it is leading the nation astray. As
Trump has already found out, a daunting array of threats makes it
impossible for the United States to return to the era of “entangling
iT
alliances with none,” as Thomas Jefferson put it. The rules-based inter-
national order that the United States erected may limit the country’s
room for maneuver, but dismantling it is a recipe for anarchy. In
today’s globalized economy, protectionism would worsen, not improve,
Al
the plight of the U.S. middle class. And with non-Hispanic whites
projected to fall below 50 percent of the population by the middle of
this century, there is no going back to Anglo-Saxon America.
od
But the political appeal of “America first” also reveals serious cracks in
American Exceptionalism 2.0, which still dominates the U.S. foreign
policy establishment. Trump’s success stems not just from his skill at
activating traditional elements of American identity but also from his
so
promises to redress legitimate and widespread discontent. The United

States has overreached abroad; after all, it was Obama, not Trump, who
insisted that “it is time to focus on nation building here at home.” The
middle class is hurting badly: stagnant wages, inequality, and socio-
Ma
economic segregation have put the American dream out of reach for
many. And the nation has yet to arrive at an effective and humane
policy for controlling immigration, raising important questions about
whether the melting-pot approach remains viable.
American Exceptionalism 2.0 is also failing to deliver overseas.
With help from the United States, large swaths of Europe, Asia, and

Charles A. Kupchan
the Americas have become democratic, but illiberal alternatives to the

American way are more than holding their own. The collective wealth
of the West has fallen below 50 percent of global GDP, and an ascen-
dant China is challenging the postwar architecture, meaning that
Washington can no longer call the shots in multilateral institutions. It
was easy for the United States to advocate a rules-based international
order when it was the one writing the rules, but that era has come to
an end. Today, U.S. ideals are no longer backed up by U.S. prepon-
derance, making it harder to spread American values.
m
With American Exceptionalism 2.0 stumbling and Trump’s effort to
hi
revert to the original version not viable, the United States can either
abandon its exceptionalist narrative or craft a new one. The former
option may seem tempting amid the nation’s political and economic
ha
trials, but the costs would be too high. American exceptionalism has
helped the country sustain a domestic consensus behind a grand
strategy aimed at spreading democracy and the rule of law. With
iT
illiberalism on the rise, the globe desperately needs an anchor of
republican ideals—a role that only the United States has the power
and credentials to fill. Failing to uphold rules-based governance would
risk the return of a Hobbesian world, violating not just the United
Al
States’ principles but also its interests. Indeed, it is precisely because

the world is potentially at a historical inflection point that the United
States must reclaim its exceptionalist mantle.
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Doing so will require adjustments to all five dimensions of the

exceptionalist narrative. For starters, the United States should find the
prudent middle ground between the isolationism of American
Exceptionalism 1.0 and the overreach that has accompanied Pax
so
Americana. Some scholars have suggested that the United States

embrace “offshore balancing,” letting other countries take the lead in
keeping the peace in Europe, Northeast Asia, and the Persian Gulf,
with Washington intervening only in a strategic emergency. But this
Ma
approach goes too far. The United States’ main problem of late has
been shot selection, embroiling itself in unnecessary wars of choice in
the strategic periphery—namely, the Middle East—where offshore
balancing is indeed the right approach. But in the core strategic theaters
of Europe and Asia, a U.S. retreat would only unsettle allies and
embolden adversaries, inviting arms races and intensifying rivalries.
The United States needs to end its days as the global policeman, but it
should remain the arbiter of great-power peace, while emphasizing
diplomatic, rather than military, engagement outside core areas.
The United States must also rebalance its alliances and partnerships.
Trump is not alone in his antipathy to pacts that, as he said, “tie us up.”
Congress has lost its appetite for the treaty-based obligations that laid
the foundation for the postwar order. But the United States cannot
afford to drift back to unilateralism; only collective action can address
many of today’s international challenges, including terrorism, nuclear
m
proliferation, and climate change. The United States should therefore
view itself as the leader of an international posse, defending rules-based
institutions when possible and put-
hi
ting together “coalitions of the
willing” when only informal coop-
The United States can
eration is available. ha either abandon its
Although Trump’s diplomacy lacks exceptionalist narrative or
tact, he is right to insist that U.S. craft a new one.
allies shoulder their fair share. The
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United States should continue cata-
lyzing international teamwork, but Washington must make clear that
it will ante up only when its partners do. And in areas where the
United States transitions to an offshore-balancing role, it should help
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organizations such as the Gulf Cooperation Council, the Association

of Southeast Asian Nations, and the African Union become more
capable stewards of their respective regions. Washington should also
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encourage emerging powers such as Brazil, China, India, and South

Africa to provide the much-needed public goods of humanitarian as-
sistance, peacekeepers, and development aid.
Although the United States’ messianic mission should remain at the
so
core of its exceptionalist narrative, the country must transition from

crusader back to exemplar. Recent efforts at regime change in the Middle
East, far from clearing the way for democracy, have unleashed violence
and regional instability. Leading by example hardly means giving up on
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democracy promotion, but it does entail engaging in a world of political

diversity and respectfully working with regimes of all types. Still,
Americans must always defend universal political and human rights; to
do otherwise would be to abandon the ideals that inform the nation’s
identity. Trump’s failure on this count is not serving to reclaim an earlier
version of American exceptionalism but denigrating it.

Charles A. Kupchan
Domestic renewal is also essential to restoring faith in the American

way both at home and abroad. The United States cannot serve as a
global beacon if its electorate is deeply divided and it cannot provide
opportunity for many of its citizens. Still, if the United States could
recover from the internal discord of the Civil War and the hardship of
the Great Depression, it can surely bounce back from today’s malaise.
Renewing the American dream—a key step toward overcoming political
polarization—requires a realistic plan for restoring upward mobility, not
a false promise to bring back an industrial heyday that is gone for good.
m
Manufacturing employment has suffered mainly because of automation,
not open trade or immigration. Adjusting the terms of trade can help.
But rebuilding the middle class and restoring economic optimism in
hi
areas hurt by deindustrialization will also require ambitious plans to
better educate and retrain workers, expand broadband Internet access,
and promote growth sectors, including renewable energy, health care,
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and data processing.
Finally, a new version of American exceptionalism must embrace the
idea that the United States’ increasingly diverse population will integrate
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into an evolving national community imbued with the country’s long-
standing civic values. As sectarian passions cleave the Middle East,
Hindu nationalism unsettles India, and discord over the future of
immigration and multiculturalism test European solidarity, the United
Al
States must demonstrate unity amid diversity. The melting-pot approach

of American Exceptionalism 2.0 is the right one, but sustaining it will
require deliberate measures. Reversing socioeconomic segregation and
od
immobility will take heavy investment in public schools and community

colleges. Effective border control, a rational approach to legal immi-
gration, and a fair but firm way to deal with undocumented immigrants
would assure Americans that diversity is the product of design, not
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disorder. Fluency in English is critical to helping newcomers enter the

mainstream. And national service and other programs that mix young
Americans could encourage social and cultural integration and produce
a stronger sense of community.
Ma
If nothing else, the rise of Trump has demonstrated that American

Exceptionalism 2.0 has run its course. But try as he might, Trump will
fail in his bid to respond to today’s challenges by going back to the
past. Looking beyond Trump, the United States will need a new
exceptionalism to guide its grand strategy and renew its unique role
as the world’s anchor of liberal ideals.∂
ESSAYS
If the Trump administration
cannot or will not stand up
to Russia, other democratic
institutions, including Congress
and civil society organizations,
m
must mobilize.
—Joseph Biden and
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Michael Carpenter
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Al
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so
How to Stand Up to the Kremlin Macron’s World

Joseph R. Biden, Jr., and Ronald Tiersky 87
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Michael Carpenter 44
Congo’s Slide Into Chaos
S E RG EI KARPUKHIN / REUTE RS
Why China Won’t Rescue North Korea Stuart A. Reid 97

Oriana Skylar Mastro 58
Let Women Work
After Credibility Rachel Vogelstein 118
Keren Yarhi-Milo 68
The Truth About the Minimum Wage
How to Waste a Congressional Majority Alan Manning 126
Sarah Binder 78
How to Stand Up to
the Kremlin
Defending Democracy Against Its Enemies
m
Joseph R. Biden, Jr., and Michael Carpenter
D
hi
uring the Cold War, the United States and the Soviet Union
faced off in an existential struggle between two antithetical
systems. Either the Soviet bloc would “bury” the West, as
ha
Soviet Premier Nikita Khrushchev threatened in 1956, or Western
principles of democratic accountability, individual rights, and the
rule of law would triumph over Soviet totalitarianism. The eventual
iT
outcome—the demise of the Soviet system and the expansion of the
U.S.-led international order—showed that military power is essential
to American national security but also that the United States must
advance its goals through the quiet resilience of democratic institutions
Al
and the attractive pull of alliances.

After the Cold War, Western democracy became the model of
choice for postcommunist countries in central and eastern Europe.
od
Guided by the enlightened hands of NATO and the EU, many of

those countries boldly embarked on the transition from dictatorship
to democracy. Remarkably, most succeeded. Post-Soviet Russia also
had an opportunity to reinvent itself. Many in Europe and the
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United States hoped that by integrating Russia into international

organizations (such as the Council of Europe, the World Bank, and
the International Monetary Fund), they could help Russia become
a responsible member of the rules-based international order and
Ma
develop a domestic constituency for democratic reforms. Many

Russians also dreamed of creating a democratic, stable, and prosperous
JOSEPH R. BIDEN, JR., leads the Penn Biden Center for Diplomacy and Global Engage-
ment and served as Vice President of the United States from 2009 to 2017.
MICHAEL CARPENTER is Senior Director of the Penn Biden Center and served as U.S.
Deputy Assistant Secretary of Defense from 2015 to 2017.
How to Stand Up to the Kremlin
Russia. But that dream is now more distant than at any time since the
Cold War’s end.
Today, the Russian government is brazenly assaulting the foundations
of Western democracy around the world. Under President Vladimir
Putin, the Kremlin has launched a coordinated attack across many
domains—military, political, economic, informational—using a variety
of overt and covert means. At the extreme, in the cases of Georgia
and Ukraine, Russia has invaded neighboring countries to block their
integration into NATO or the EU and to send a message to other gov-
m
ernments in the region that pursuing Western-backed democratic
reform will bring dire consequences. More frequently and more
insidiously, it has sought to weaken and subvert Western democra-
hi
cies from the inside by weaponizing information, cyberspace, energy,
and corruption.
At its core, this assault is motivated by the Kremlin’s desire to
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protect its wealth and power. The Russian regime that emerged from
the ashes of the Soviet collapse consolidated immense authority and
privilege in the hands of a small cabal of former intelligence officials
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and oligarchs. They appear strong from the outside, but their power
remains brittle at the core—a fact that Putin and the top members
of his regime understand better than anyone. Without a chokehold
on civil society, the adoring applause and sky-high approval ratings
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they generally enjoy could quickly descend into a storm of boos

and whistles, as Putin has discovered on more than one occasion.
The regime projects an aura of invincibility that masks the shallow
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roots of its public support, particularly among younger, urban, and

educated Russians.
To safeguard its kleptocratic system, the Kremlin has decided to
take the fight beyond Russia’s borders to attack what it perceives as
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the greatest external threat to its survival: Western democracy. By

attacking the West, the Kremlin shifts attention away from corrup-
tion and economic malaise at home, activates nationalist passions
to stifle internal dissent, and keeps Western democracies on the
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defensive and preoccupied with internal divisions. This allows Moscow

to consolidate its power at home and exert untrammeled influence
over its “near abroad.”
To fight back, the United States must lead its democratic allies
and partners in increasing their resilience, expanding their capabilities
to defend against Russian subversion, and rooting out the Kremlin’s
Januar y/Februar y 2018 45

networks of malign influence. The United States has the capacity to

counter this assault and emerge stronger, provided that Washington
demonstrates the political will to confront the threat. However, since
the Trump administration has shown that it does not take the Russian
threat seriously, the responsibility for protecting Western democracy
will rest more than ever on Congress, the private sector, civil society,
and ordinary Americans.
TYRANNY BEGINS AT HOME
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The first victim of the Kremlin’s assault on democratic institutions
was Russia itself. Opposition politicians have been harassed, poisoned,
and even murdered. Basic freedoms of expression and assembly have
hi
been restricted, and Russian elections have become choreographed
performances that are neither free nor fair. In recent years, Russian
human rights groups have even claimed that the horrific Soviet-era
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practice of using psychiatric institutions to imprison dissidents has been
quietly revived.
In contrast to the Soviet Union, however, contemporary Russia offers
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no clear ideological alternative to Western democracy. Russia’s leaders
invoke nationalist, populist, and statist slogans or themes, but the
Kremlin’s propaganda machine shies away from directly challenging the
core precepts of Western democracy: competitive elections, account-
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ability for those in power, constitutionally guaranteed rights, and the

rule of law. Instead, the Kremlin carefully cultivates a democratic
façade, paying lip service to those principles even as it subverts them.
od
Thus, it grants nominal opposition parties representation in the Rus-

sian parliament but thoroughly co-opts and controls them. It allows
independent media to operate (although not in broadcast television),
but journalists are regularly threatened and sometimes beaten or
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killed if they report on taboo subjects. It permits civil society groups

to exist but brands them as “foreign agents” and crushes them if they
demonstrate political independence. It oversees a vast repressive
apparatus—recently augmented by the creation of a new National
Ma
Guard force of around 350,000 members—to deter and respond to

dissent. In short, Russia’s leaders have built a Potemkin democracy in
which democratic form masks authoritarian content.
This cynical and heavy-handed approach is driven by intense anx-
iety. Having watched with a mix of shock, horror, and sorrow as the
Soviet Union disintegrated, today’s Russian leaders worry that their
m
hi
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This is what autocracy looks like: detaining a protester in St. Petersburg, February 2014
iT
own system could meet a similar fate. The Russian economy is utterly
dependent on hydrocarbon exports, so its health is tied to the price of
oil and gas; as those prices have plummeted in recent years, the state-
owned gas giant Gazprom’s market capitalization has shrunk, from
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about $368 billion in 2008 to around $52 billion today. Meanwhile,

long-term demographic decline is sapping Russian society; the Russian
Presidential Academy of National Economy and Public Administration
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has projected a 20 percent decrease in the population by 2050. Accord-

ing to the CIA’s World Factbook, life expectancy in Russia ranks 153rd
in the world, far below the world’s developed democracies and lower
even than developing countries such as Nicaragua and Uzbekistan.
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Finally, endemic corruption has stunted Russia’s potential for economic

growth based on innovation and integration into global value chains,
portending a period of prolonged stagnation.
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MA XIM ZM EYEV / REUT E RS
WEAKNESS DRESSED UP AS STRENGTH

In the face of these negative trends and the possibility that they could
contribute to organized resistance, the Kremlin appears to have con-
cluded that its best defense is a strong offense. But not content to merely
crush dissent at home, it is now taking the fight to Western democracies,
and especially the United States, on their turf.

From the Kremlin’s perspective, the United States and its democratic
allies pose three distinct threats. First, Russia harbors an erroneous
but stubborn—perhaps even obsessive—belief that Washington is
actively pursuing regime change in Russia. There is no truth to
that idea; the United States has never
Russia’s leaders have built sought to remove Putin. But Putin
and his associates have long peddled a
a Potemkin democracy in conspiracy theory that accuses the
which democratic form United States of engineering popular
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masks authoritarian content. uprisings in Serbia in 2000, Georgia
in 2003, Ukraine in 2004 and 2014,
Kyrgyzstan in 2005, and throughout
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the Arab world in 2010–11. And they have apparently come to
believe their own propaganda, perceiving Washington’s hand behind
the mass protests that erupted in Moscow and other Russian cities
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in 2011–12. Tens of thousands of Russians took to the streets before
and after elections that returned Putin to the presidency after four
years in which he had ruled from the sidelines as prime minster.
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Putin was apparently unable to comprehend that his attempt to
remain in power indefinitely might alienate some constituents or
that widely shared smartphone videos of ballot stuffing during
the parliamentary election held in December 2011 would offend
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Russian citizens.
Second, the regime fears that Western support for democratic reforms
among Russia’s neighbors, particularly measures to boost transparency
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and fight corruption, will undermine the patronage networks that allow
Kremlin cronies to extract enormous rents in the “near abroad.”
Third, democratic transformation in Russia’s neighborhood would
serve as a powerful counterexample to Moscow’s kleptocratic and
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authoritarian rule and would delegitimize its authority over the long
run. So Russia waged wars against Georgia in 2008 and against Ukraine
in 2014 in order to undermine governments determined to pursue
further integration with NATO and the EU. Meanwhile, a third country
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in the region, Moldova, has been partially occupied by Russian forces

since the early 1990s as leverage against any sudden movement toward
the West (despite a provision of constitutional neutrality that precludes
Moldova from joining foreign military alliances).
The Kremlin has justified its violations of these countries’ sovereignty
on the grounds that they form part of Russia’s “sphere of privileged
interests,” as Dmitry Medvedev, Russia’s then president and Putin’s

junior partner, explained shortly after Russia’s invasion of Georgia.
That term is telling. Kremlin insiders have long benefited from
privileged status in these three countries. For example, murky gas-
trading ventures with Kremlin-linked oligarchs in Ukraine have netted
billions of dollars in profits for Putin’s cronies at the expense of the
Russian state.
The small Balkan nation of Montenegro lies almost a thousand miles
from the nearest Russian border and was never part of the Russian or
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the Soviet empire. But it, too, finds itself tangled in Putin’s web.
Montenegro became enveloped in Russia’s “sphere of privileged inter-
ests” not owing to proximity but because Kremlin-linked oligarchs
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and criminal groups invested their wealth and expanded their influ-
ence there following the dissolution of Yugoslavia. After Montenegro
became independent from Serbia in 2006, these Russian interests came
ha
under threat as the Montenegrin government began to lobby for NATO
and EU membership. As a precondition for membership, Montenegro
was pressed by both organizations to establish a firmer rule of law.
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Western officials pushed the country to appoint an independent
special prosecutor to combat organized crime and corruption and
demanded that it clean house in the defense and intelligence sectors.
Correctly perceiving these reforms as a direct threat to its interests,
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the Kremlin responded almost immediately, coordinating a campaign

funded by Russian oligarchs to oppose Montenegro’s NATO member-
ship and subsidizing a small anti-NATO and pro-Russian political party
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in the country.
When that failed to slow Montenegro’s march toward integration
with NATO, the Kremlin resorted to more coercive tactics. In the weeks
prior to Montenegro’s parliamentary elections in October 2016, a
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small group of Russian military intelligence agents hatched a plot to

carry out an armed coup d’état using mercenaries recruited from
extremist nationalist groups in the region. The scheme unraveled
when one of the plotters tipped off the authorities, forcing the Kremlin
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to dispatch an envoy to Serbia to bring home the stranded conspirators.
PUTIN’S SOFT SUBVERSION

The Kremlin has relied on subtler tools to subvert democracies in
western Europe and the United States. Although Russian operatives
have carried out at least one politically motivated assassination in the

West (and possibly more), Moscow’s intelligence services are gener-

ally more cautious when operating on NATO territory, relying instead
on information operations and cyberattacks. Whereas Soviet intelli-
gence operatives occasionally tried to plant false stories in Western
media outlets, today the Kremlin subcontracts the task to proxies,
who spread customized disinformation
U.S. elections in 2018 and using fake accounts on social media.
These proxies need not even reside in
2020 will present fresh Russia since they can be contacted and
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opportunities for Russian compensated via the so-called Dark Web
meddling. (a parallel, closed-off internet) wher-
ever they live. Different messages can
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be tailored to specific demographic
groups, depending on the Kremlin’s goals, which have ranged from
discouraging voter turnout to boosting attendance at political rallies
ha
held by Russia’s preferred candidates. To maintain a modicum of plau-
sible deniability, Russia’s “patriotic hackers” and trolls are typically
employed by entities loosely connected to the Kremlin rather than
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directly by the government. For example, the Internet Research Agency,
a notorious “troll farm” based in St. Petersburg that reportedly pur-
chased thousands of ads on Facebook during the 2016 U.S. presidential
race, relies on the financial support of a close Putin associate.
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During the 2016 U.S. campaign and the 2017 presidential contest
in France, Russia’s intelligence services cultivated similar online
intermediaries to hack private e-mails and distribute the stolen infor-
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mation to organizations such as WikiLeaks, which in turn disseminated

it more widely. Although Western cybersecurity experts and intel-
ligence agencies were able to identify the Russian military intelligence
agency as the main culprit behind both attacks, the disinformation
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had already penetrated the mainstream media by the time it was

attributed to Russia.
In France, the widespread knowledge of Russia’s prior involvement
in the U.S. campaign somewhat lessened the Kremlin’s first-mover
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advantage. But Russia has hardly given up, and it has taken similar steps
to sway political campaigns in a wide range of European countries,
including for referendums in the Netherlands (on Ukraine’s integration
with Europe), Italy (on governance reforms), and Spain (on Catalonia’s
secession). Russian support for Alternative for Germany, a far-right party,
aimed to increase the group’s vote totals in last fall’s parliamentary
elections by amplifying its messaging on social media. A similar

Russian effort is now under way to support the nationalist Northern
League and the populist Five Star Movement in Italy’s upcoming
parliamentary elections. Further down the road, the U.S. midterm
elections in 2018 and the presidential election in 2020 will present
fresh opportunities for Russian meddling.
The manipulation of energy markets is another important tool that
Russia uses for coercion and influence peddling. Russia has repeatedly
threatened to cut off gas to Ukraine, and in 2006 and 2009, Moscow
m
actually stopped the flow in the middle of winter. The clear message
was that leaders who crossed the Kremlin could literally see their
populations freeze to death. Russia again made threats to cut off gas
hi
deliveries following its invasion of Ukraine in 2014, but thanks to
intense diplomacy by the United States and the EU, Kiev’s neighbors
helped avert a crisis by ensuring an adequate supply.
ha
Since then, new liquefied natural gas terminals in Lithuania and
Poland have helped diversify Europe’s natural gas supplies, but this
has not stopped the Kremlin from continuing to use energy to pressure
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European governments, particularly in the Baltic states, the Balkans,
and central Europe. Currently, for example, Russia is building a nu-
clear power plant in close proximity to the Lithuanian capital of
Vilnius, giving Moscow a powerful psychological weapon should it
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choose to foment rumors of an accident.

In addition to using energy to coerce its neighbors, the Kremlin is
adept at using energy deals to curry influence with European political
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and business leaders. The fruits of these influence operations can be

seen in Putin’s close personal relationships with a host of current and
former European officials, many of which were facilitated by Western
political advisers with ties to the Russian energy sector.
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WEAPONIZING CORRUPTION
Russia’s disinformation operations, cyberattacks, and energy politics
have received a good deal of attention. Less well covered are the ways
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in which Russia has managed to effectively export the corruption that

has warped its own politics and economy—weaponizing it, in a sense,
and aiming it at vulnerable societies elsewhere.
In Russia’s crony capitalist system, success and survival in business
depend on the protection of powerful patrons who can shelter a business-
person or a company from raids by bigger competitors or overzealous

tax officials. Kremlin authorities and Russian intelligence officials

sit at the top of this pyramid, receiving bribes and payoffs in exchange
for such protection. But the state itself also benefits from this arrange-
ment, which gives the Kremlin enormous leverage over wealthy
Russians who do business in the West and over Western companies
that do business in Russia. Moscow can ask (or pressure) such busi-
nesspeople and companies to help finance its subversion of political
processes elsewhere—by making contributions to an anti-NATO
organization in Sweden, for example, or establishing anti-fracking
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groups in Bulgaria and Romania to fight developments that might
threaten Russia’s dominance of the eastern European gas market.
What makes corruption such an effective weapon is the difficulty of
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proving that it even exists, or that its purpose is political. Occasionally,
however, cases appear that illuminate how Russia weaponizes corrupt
relationships to achieve its political goals. Consider, for example, the
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fact that the far-right candidate in last year’s French presidential race,
Marine Le Pen, secured (albeit legally) a multimillion-dollar loan for
her campaign from a Russian bank with alleged links to the Kremlin
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while advocating a policy of lifting sanctions on Russia. (Le Pen, of
course, has denied that the funding influenced her positions.)
Money laundering is another example of how the Kremlin seeks to
infect Western democracies with the corruption virus. Western financial
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institutions launder staggering amounts of illicit Russian money.

In January 2017, New York State banking regulators revealed that
Germany-based Deutsche Bank had helped Russian clients launder
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$10 billion; the state hit the bank with a $425 million fine. Two months
later, the Organized Crime and Corruption Reporting Project, an
international network of investigative reporters, uncovered a complex
scheme that moved more than $20 billion of illicit Russian money
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through numerous Western financial institutions. After being “cleaned,”

some of the money went to groups that advocated closer relations
between EU countries and Russia, including a Polish nongovernmen-
tal organization run by the political activist Mateusz Piskorski, who
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also heads a pro-Kremlin political party—and who was arrested by

Polish authorities in 2016 on charges of spying for Russia. (He remains
detained and has yet to be tried.)
The scope of Russian corrupt influence is exceptionally wide, par-
ticularly since Russian oligarchs who made vast sums of money over
the last several decades have parked much of this wealth in the West,
including in luxury real estate markets in London, Miami, and New

York. These billions of dollars of investments have been used in many
cases to secure access to Western political and business elites. They
also serve as a ready source of financing for the Kremlin’s influence
operations abroad. A good deal of this money has gone to support
antiestablishment candidates or movements in Europe—on both the
far right and the far left—that support closer partnership with Russia
or that publicly question the value of membership in NATO or the
EU. For the Kremlin, it hardly matters what specific ideology these
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candidates or movements espouse; the more important goal is to
weaken and divide Western democracies internally.
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HOW TO FIGHT BACK
Russia’s assault on democracy and subversion of democratic political
systems calls for a strong response. The United States and its allies
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must improve their ability to deter Russian military aggression and
work together more closely to strengthen their energy security and
prevent Russia’s nonmilitary forms of coercion. They must also reduce
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the vulnerability of their political systems, media environments, finan-
cial sectors, and cyber-infrastructure. Every country in the Kremlin’s
cross hairs must also better coordinate its intelligence and law enforce-
ment activities to root out Russian disinformation and subversion
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and find ways for authorities to cooperate with the private sector to
counteract such meddling.
But Washington and its partners cannot only play defense. They
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also must agree to impose meaningful costs on Russia when they

discover evidence of its misdeeds. At the same time, to prevent
miscalculations, Washington needs to keep talking to Moscow.
The Kremlin would like nothing more than for Western leaders to
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declare NATO obsolete and cut investments in collective defense. Given

Russia’s aggression in Georgia and Ukraine, NATO must continue to
forward-deploy troops and military capabilities to eastern Europe
to deter and, if necessary, defeat a Russian attack against one of the
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alliance’s member states. But the threat of unconventional and non-

military coercion now looms larger than ever. More than a decade has
passed since Estonia became the first NATO country to see its govern-
ment institutions and media organizations attacked by hackers based in
Russia. In the intervening period, the risk of a far more debilitating at-
tack has increased, but planning for how to defend against it has lagged.

One step NATO members can take would be to broaden the responsibility
for such planning beyond their militaries and defense ministries. The
EU and the private sector need to be part of such efforts, so that Russian
strikes on infrastructure can be isolated and backup systems can be put
in place. Although much of the responsibility for cyberdefense cur-
rently rests with individual countries, the interconnectedness of allied
infrastructure makes greater coordination imperative.
Western democracies must also address glaring vulnerabilities in
their electoral systems, financial sectors, cyber-infrastructure, and media
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ecosystems. The U.S. campaign finance system, for example, needs to
be reformed to deny foreign actors—from Russia and elsewhere—the
ability to interfere in American elections. Authorities can no longer turn
hi
a blind eye to the secretive bundling of donations that allows foreign
money to flow to U.S. organizations (such as “ghost corporations”)
that in turn contribute to super PACs and other putatively independent
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political organizations, such as trade associations and so-called 501(c)
(4) groups. Congress must get serious about campaign finance reform
now; doing so should be a matter of bipartisan consensus since this
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vulnerability affects Democrats and Republicans in equal measure.
The United States also needs more transparency in its financial and
real estate markets, which have become havens for corrupt foreign
capital, some of which undoubtedly seeps into politics. To expose and
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prevent the money laundering behind that trend, Congress should pass
new legislation to require greater transparency in high-end real estate
investments and tighten loopholes that allow money to be laundered
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through opaque law-firm bank accounts or shell companies. Authorities

in Washington and other Western capitals must also integrate law
enforcement and intelligence tools to neutralize corrupt networks
linked to Russia. The Kremlin has successfully fused organized criminal
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groups, intelligence agencies, and corrupt businesses, as revealed in

great detail by a recent investigation carried out by Spanish authorities.
Nothing illustrates the tangled web linking organized crime, Russian
government officials, and the Kremlin’s foreign influence operations
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more clearly than the ongoing lobbying efforts in the United States on
behalf of the criminal syndicate responsible for the death of Sergei
Magnitsky, the Russian lawyer who was killed in a Moscow prison after
he uncovered a corrupt scheme to steal $230 million from the Russian
Treasury. In the United States, a dedicated interagency body should be
charged with coordinating efforts to neutralize such malign networks.
The United States’ cyber-infrastructure, most of which is owned and

managed by the private sector, remains vulnerable to foreign hacking—
or, worse, a crippling systemwide attack. To protect the networks that
operate power plants, for example, or those that manage train and airline
traffic, government regulatory bodies and private operators must raise
their standards and apply them consistently. This means, among other
measures, ensuring that there are no back doors into networks that re-
main isolated from the public Internet, mandating that software patches
and updates be installed as soon as they become available, and conducting
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regular network diagnostics. Similarly, state and local governments that
maintain electronic voting machines must address lapses in network se-
curity that have left open too many back doors to intrusion and potential
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manipulation. Some immediate steps that authorities should take include
mandating an auditable paper trail of every ballot cast and protecting
voter registration rolls with the same vigor as vote tabulation systems.
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Meanwhile, journalists and activists in the United States and Europe
must do more to expose and root out disinformation, especially on social
media. Civil society initiatives have taken the lead on this: the Univer-
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sity of Pennsylvania’s FactCheck.org, Ukraine’s StopFake.org, and the
German Marshall Fund’s Hamilton 68 have all exposed propaganda by
debunking falsehoods and shedding light on the sources propagating
them. Social media companies such as Twitter, Facebook, and Google
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must provide greater transparency about who funds the political adver-
tisements on their platforms, work harder to eliminate automated and
bot-generated content, and invest in the technological and human
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resources to root out fake foreign accounts that spread disinformation.

In countries with extensive experience of Russian information warfare,
such as Estonia and Finland, officials and media professionals alike have
learned that the more light they shine on the methods foreign actors use
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to sow disinformation, the less successful the propaganda becomes.
HANG TOUGH, BUT KEEP TALKING

In the short term, Putin and his allies are likely to continue their assault
Ma
on Western democracy. So Washington and its allies must stand firm and
impose costs on Russia for its violations of international law and other
countries’ sovereignty—those it has already committed and those it is
likely planning. Maintaining the sanctions that the United States and the
EU levied on Russia in response to its invasion of Ukraine has been im-
portant not only in pressuring Moscow to resolve the conflict in the near

term but also as a signal to the Kremlin that the costs of such behavior
will eventually outweigh any perceived benefits. Having suffered few
lasting consequences for its 2007 cyberattack on Estonia and only a short
financial decline following its 2008 invasion of Georgia, the Kremlin er-
roneously concluded that it could act with relative impunity. It did so in
spite of the clear marker that the Obama administration laid down from
the very start. As one of us, Joe Biden, noted in a speech at the Munich
Security Conference in 2009, “We will not recognize any nation having
a sphere of influence. It will remain our view that sovereign states have
m
the right to make their own decisions and choose their own alliances.” So
when Russia invaded Ukraine, the United States led the way by imposing
tough sanctions. Fortunately, the Countering America’s Adversaries
hi
Through Sanctions Act, a bill that Congress passed last August, codified
the sanctions on Russia that were put in place by the Obama administra-
tion and gave the current administration enhanced authorities to impose
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lasting consequences on Russia for its interference in the 2016 election.
Even while defending U.S. interests and safeguarding liberal democ-
racy elsewhere, Washington must keep the channels of communication
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open with Moscow. At the height of the Cold War, American and Soviet
leaders recognized that, whatever their differences, they could not afford
a miscalculation that might lead to war. They had to keep talking. The
same is true today: as two nuclear superpowers with military assets de-
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ployed in close proximity in many different parts of the globe, the United
States and Russia have a mutual obligation to maintain strategic stability.
That means not only regulating the development and deployment of
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strategic weapons but also communicating clearly to avoid misunder-

standings about what each side perceives as a strategic threat. For its part,
Washington needs to spell out clear consequences for interfering in the
U.S. democratic process or tampering with critical U.S. infrastructure.
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MOBILIZING WHEN TRUMP WON’T

As two former government officials, we are, of course, no longer in a posi-
tion to implement such policies, which raises the question: What if these
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recommendations are ignored? The White House seems unlikely to act.

Too many times, President Donald Trump has equivocated on whether
Russia interfered in the 2016 election, even after he received briefings
from top intelligence officials on precisely how Moscow did it. After
meeting privately with Putin at the Asia-Pacific Economic Cooperation
summit in Vietnam last November, Trump told reporters that Putin “said
he absolutely did not meddle in our election. He did not do what they
are saying he did.” Pressed about whether he accepted Putin’s denials,
Trump replied: “Every time he sees me, he says, ‘I didn’t do that,’ and I
really believe that when he tells me that, he means it.” Trump has made a
habit of lavishing praise on Putin and even reportedly sought to lift sanc-
tions against Russia shortly after his inauguration. We are not question-
ing Trump’s motives, but his behavior forces us to question his judgment.
If this administration cannot or will not stand up to Russia, other
democratic institutions, including Congress and civil society organi-
m
zations, must mobilize. A starting point would be the creation of an
independent, nonpartisan commission to examine Russia’s assault on
American democracy, establish a common understanding of the scope
hi
and complexity of the Russian threat, and identify the tools required
to combat it. The 9/11 Commission allowed the United States to come
to terms with and address the vulnerabilities that made al Qaeda’s
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attacks possible. Today, Americans need a thorough, detailed inquest
into how Russia’s strike on their democratic institutions was carried
out and how another one might be prevented.
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In the absence of an independent commission with a broad man-
date, the United States will be left with only the relatively narrow
investigations led by the special counsel Robert Mueller, the congres-
sional intelligence committees, and the Senate Judiciary Committee.
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The good news is that Congress has already demonstrated its clear
understanding of the Russian threat: in an overwhelmingly bipartisan
manner, it passed the Countering America’s Adversaries Through
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Sanctions Act by a margin of 419 to 3 in the House of Representatives

and by 98 to 2 in the Senate. Congress should continue to rigorously
exercise its oversight responsibilities to ensure that the administration
applies the letter and spirit of the legislation—and, if it does not, to
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make sure the American people find out.

And finally, as more news breaks each day about the extent of Russia’s
disinformation campaign and the tactics that Moscow used to manipulate
public opinion and exploit the fault lines within U.S. society, it falls on all
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Americans to be aware and informed citizens. We must collectively reject

foreign influence over our democratic institutions and do more to address
the challenges within our own communities, rather than allowing dema-
gogues at home and tyrants abroad to drive us apart. Putin and his cronies
do not understand that the greatest strength of American democracy is an
engaged citizenry. Even if the president refuses to act, we can.∂

Why China Won’t Rescue

North Korea
What to Expect If Things Fall Apart
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Oriana Skylar Mastro
U
hi
.S. officials have long agreed with Mao Zedong’s famous for-
mulation about relations between China and North Korea:
the two countries are like “lips and teeth.” Pyongyang depends
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heavily on Beijing for energy, food, and most of its meager trade with
the outside world, and so successive U.S. administrations have tried
to enlist the Chinese in their attempts to denuclearize North Korea.
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U.S. President Donald Trump has bought into this logic, alternately
pleading for Chinese help and threatening action if China does not do
more. In the same vein, policymakers have assumed that if North
Korea collapsed or became embroiled in a war with the United States,
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China would try to support its cherished client from afar, and potentially
even deploy troops along the border to prevent a refugee crisis from
spilling over into China.
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But this thinking is dangerously out of date. Over the last two decades,
Chinese relations with North Korea have deteriorated drastically
behind the scenes, as China has tired of North Korea’s insolent behav-
ior and reassessed its own interests on the peninsula. Today, China
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is no longer wedded to North Korea’s survival. In the event of a

conflict or the regime’s collapse, Chinese forces would intervene to
a degree not previously expected—not to protect Beijing’s supposed
ally but to secure its own interests.
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In the current cycle of provocation and escalation, understanding

where China really stands on North Korea is not some academic
exercise. Last July, North Korea successfully tested an intercontinental
ballistic missile capable of reaching the United States’ West Coast. And
ORIANA SKYLAR MASTRO is Assistant Professor of Security Studies at the Edmund A.
Walsh School of Foreign Service at Georgetown University.
Why China Won’t Rescue North Korea
m
hi
ha
All alone: a North Korean soldier near the Chinese border, June 2013
iT
in September, it exploded a hydrogen bomb that was 17 times as
powerful as the one dropped on Hiroshima. U.S. rhetoric, meanwhile,
has inflamed the situation. Trump has mocked the North Korean
Al
leader Kim Jong Un as “Little Rocket Man,” threatened that North

Korea “won’t be around much longer,” and announced that “mili-
tary solutions are now fully in place, locked and loaded.” To back up
od
these threats, the United States has brought its long-range bombers
and naval vessels conspicuously close to North Korea.
The real possibility of chaos on the peninsula means that the United
States needs to update its thinking about Beijing’s motivations. In the
so
event of an escalation, China will likely attempt to seize control of key

terrain, including North Korea’s nuclear sites. The large-scale presence
of both American and Chinese troops on the Korean Peninsula would
raise the risk of a full-blown war between China and the United States,
Ma
something neither side wants. But given how weak Beijing’s ties to
JACKY CH EN / REUTE RS
Pyongyang are, and given China’s own concerns about North Korea’s
nuclear program, the two great powers may find surprising common
ground. With some forward thinking, the United States could lessen
the risk of an accidental conflict and leverage Chinese involvement to
reduce the costs and duration of a second Korean war.

UPDATING THE RECORD

As the conventional wisdom has it, China is unwilling to push North
Korea to denuclearize on account of its own insecurities. This thinking
is based on three assumptions: that China and North Korea are allies,
that China fears instability on the peninsula and the refugee problem
that may result, and that Beijing needs North Korea to survive as a
buffer state between China and South Korea, a key U.S. ally. These
assumptions were true 20 years ago, but Beijing’s views have evolved
significantly since then.
m
China and North Korea long enjoyed a closeness born of mutual
dependency. Just one year after the birth of the People’s Republic of
China, Beijing came to the assistance of its fledgling communist
hi
neighbor during the Korean War. To prevent future “aggression”
against Pyongyang, the two signed a mutual defense pact in 1961. And
when the end of the Cold War robbed North Korea of its Soviet bene-
ha
factor, Beijing stepped in to provide economic and military assistance.
But today, China and North Korea can hardly be characterized as
friends, let alone allies. Chinese President Xi Jinping has never even
iT
met Kim, and according to Chinese scholars with government access or
ties to the Chinese Communist Party, he despises the North Korean
regime. The rumor in Chinese foreign policy circles is that even the
Chinese ambassador in Pyongyang has not met Kim.
Al
Xi has publicly stated that the 1961 treaty will not apply if North
Korea provokes a conflict—a standard easily met. In my travels to
China over the past decade to discuss the North Korean issue with
od
academics, policymakers, and military officials, no one has ever brought

up the treaty or a Chinese obligation to defend North Korea. Instead,
my Chinese colleagues tell me about the relationship’s deterioration
and Beijing’s efforts to distance itself from Pyongyang, a change that
so
a Global Times public opinion poll suggests enjoys wide support. As

the Chinese scholar Zhu Feng has argued in Foreign Affairs, giving up
North Korea would be domestically popular and strategically sound.
In fact, the bilateral relationship has gotten so bad that officers in
Ma
the People’s Liberation Army (PLA) have suggested to me in private

meetings that Beijing and Pyongyang may not take the same side in
the event of a new Korean war. The Chinese military assumes that it
would be opposing, not supporting, North Korean troops. China
would get involved not to defend Kim’s regime but to shape a post-
Kim peninsula to its liking.
These policies have shifted alongside China’s increasing confidence

about its capabilities and regional influence. Chinese thinking is no
longer dominated by fears of Korean instability and a resulting refugee
crisis. The PLA’s contingency planning previously focused on sealing
the border or establishing a buffer zone
to deal with refugees. Indeed, for dec-
ades, that was probably all Chinese
China is no longer wedded
forces could hope to achieve. But over to North Korea’s survival.
the past 20 years, the Chinese military
m
has evolved into a far more sophisti-
cated force by modernizing its equipment and reforming its organiza-
tional structure. As a result, China now has the ability to simultaneously
hi
manage instability at its borders and conduct major military operations
on the peninsula.
If Kim’s regime collapsed, the People’s Armed Police, which has
ha
approximately 50,000 personnel in China’s northeastern provinces,
would likely be in charge of securing the border and handling the
expected influx of North Korean refugees, freeing up the PLA for com-
iT
bat operations further south. China currently has three “group armies”
in the Northern Theater Command, one of the PLA’s five theater com-
mands, which borders North Korea. Each of these armies consists of
45,000 to 60,000 troops, plus army aviation and special forces brigades.
Al
And if it needed to, China could also pull forces from its Central The-
ater Command and mobilize the air force more extensively. When
China reorganized its military regions into “war zones” in February
od
2016, it incorporated Shandong Province into its Northern Theater

Command, even though it is not contiguous with the rest of the com-
mand, most likely because military leaders would require access to the
shoreline to deploy forces to North Korea by sea. The last two decades
so
of military modernization and reform, along with China’s geographic

advantages, have ensured that the Chinese military would be capable of
quickly occupying much of North Korea, before U.S. reinforcements
could even deploy to South Korea to prepare for an attack.
Ma
In the past, part of what explained China’s attachment to North

Korea was the notion that the latter served as a buffer between China
and a once hostile capitalist, and later democratic, South Korea. But
China’s increased power and clout have all but eliminated that rationale,
too. Beijing may have previously been wary of a reunified Korea led
by Seoul, but no longer. Some prominent Chinese scholars have begun

to advocate abandoning Pyongyang in favor of a better relationship

with Seoul. Even Xi has been surprisingly vocal about his support for
Korean reunification in the long term, albeit through an incremental
peace process. In a July 2014 speech at Seoul National University, Xi
stated that “China hopes that both sides of the peninsula will improve
their relations and support the eventual realization of an independent
and peaceful reunification of the peninsula.”
Still, the Chinese calculus on South Korea has not completely
changed. Enthusiasm for reunification peaked between 2013 and 2015,
m
when South Korean President Park Geun-hye prioritized bilateral re-
lations with Beijing. But after a nuclear test in early 2016 by North
Korea, Seoul reinforced its alliance with Washington and agreed to
hi
deploy THAAD, a ballistic missile defense system, causing conster-
nation among Chinese officials that their charm offensive was not
gaining enough traction. China’s chief concern remains the prospect
ha
of U.S. forces in a reunified Korea. Although China still supports
Korean reunification, it also wants to shape the terms. And its approach
will likely depend on the status of its bilateral relationship with
iT
South Korea.
WHAT CHINA REALLY WANTS

Given the costs of a war on the Korean Peninsula, U.S. planners have
Al
long thought that China would do everything it could to avoid

becoming entangled in a major conflagration involving South Korean
and U.S. forces. If China did intervene, policymakers assumed that
od
Beijing would limit its role to managing refugees close to the border
or supporting the Kim regime from a distance through political,
economic, and military aid. Either way, Washington believed that
China’s role would not significantly impact U.S. operations.
so
This is no longer a safe assumption. Instead, Washington must recog-

nize that China will intervene extensively and militarily on the peninsula
if the United States seems poised to move its forces north. This is not to
say that China will take preemptive action. Beijing will still attempt to
Ma
keep both sides from leading everyone down the path to war. Moreover,
if an ensuing conflict were limited to an exchange of missile and air
strikes, China would most likely stay out. But if its attempts to deter the
United States from escalating the crisis to a major war failed, Beijing
would not hesitate to send considerable Chinese forces into North Korea
to ensure its interests were taken into account during and after the war.
China’s likely strategic assertiveness in a Korean war would be driven

largely by its concerns about the Kim regime’s nuclear arsenal, an
interest that would compel Chinese
forces to intervene early to gain con- Understanding where
trol over North Korea’s nuclear facili-
ties. In the words of Shen Zhihua, a China stands on North
Chinese expert on North Korea, “If Korea is not some
a Korean nuclear bomb explodes, academic exercise.
who’ll be the victim of the nuclear
m
leakage and fallout? That would be
China and South Korea. Japan is separated by a sea, and the United
States is separated by the Pacific Ocean.”
hi
China is well positioned to deal with the threat. Based on informa-
tion from the Nuclear Threat Initiative, a U.S. nonprofit, if Chinese
forces moved 100 kilometers (about 60 miles) across the border
ha
into North Korea, they would control territory containing all of the
country’s highest-priority nuclear sites and two-thirds of its highest-
priority missile sites. For Chinese leaders, the goal would be to
iT
avoid the spread of nuclear contamination, and they would hope that
the presence of Chinese troops at these facilities would forestall a
number of frightening scenarios: China could prevent accidents at the
facilities; deter the United States, South Korea, or Japan from strik-
Al
ing them; and block the North Koreans from using or sabotaging
their weapons.
Beijing is also concerned that a reunified Korea might inherit the
od
North’s nuclear capabilities. My Chinese interlocutors seemed

convinced that South Korea wants nuclear weapons and that the
United States supports those ambitions. They fear that if the Kim
regime falls, the South Korean military will seize the North’s nuclear
so
sites and material, with or without Washington’s blessing. Although

this concern may seem far-fetched, the idea of going nuclear has
gained popularity in Seoul. And the main opposition party has
called for the United States to redeploy tactical nuclear weapons to
Ma
the peninsula—an option that the Trump administration has been

reluctant to rule out.
Beyond nuclear concerns, China’s stance on North Korea has shifted
as part of its more general geopolitical assertiveness under Xi. Unlike
his predecessors, Xi is not shy about China’s great-power ambitions.
In a three-and-a-half-hour speech he gave in October, he described

China as “a strong country” or “a great country” 26 times. That is a far

cry from the dictum that one of his predecessors, Deng Xiaoping,
preferred: “Hide your strength, bide your time.” Under Xi, China is
increasingly playing the role of a major power, and he has pushed for
military reforms to ensure that the PLA can fight and win future wars.
Most important, a war on the Korean Peninsula would represent a
litmus test of China’s regional competition with the United States.
Indeed, Chinese concerns about Washington’s future influence best
explain why China is unwilling to push North Korea to the degree
m
that the Trump administration wants. China will not risk instability
or war if the outcome could be a larger U.S. role in the region. Given
this, China no longer feels comfortable sitting on the sidelines. As
hi
one PLA officer asked me, “Why should the United States be there
but not us?” For this reason alone, Chinese scholars and military
leaders argue, China will need to be involved in any contingency on
ha
the peninsula.
WORKING TOGETHER
iT
The bottom line, then, is that Washington should assume that any
Korean conflict involving large-scale U.S. military operations will
trigger a significant Chinese military intervention. That does not mean
that the United States should try to deter China: such a response would
Al
almost certainly fail, and it would increase the chances of a direct

military confrontation between Chinese and U.S. forces. Moves that
could damage the relationship between Beijing and Washington
od
would also impede contingency planning or coordination before and

during a crisis, raising the risks of miscalculation.
Instead, Washington must recognize that some forms of Chinese
intervention would actually be beneficial to its interests, especially with
so
regard to nonproliferation. First and foremost, U.S. officials should

note that Chinese forces are likely to make it to North Korea’s nuclear
sites long before U.S. forces, thanks to advantages in geography, force
posture, manpower, and access to early warning indicators. That is a
Ma
good thing, since it would reduce the likelihood that the collapsing
regime in Pyongyang would use nuclear weapons against the United
States or its allies. China could also prove helpful by identifying
nuclear sites (with the assistance of U.S. intelligence), then securing
and accounting for the nuclear material at those sites, and finally
inviting international experts in to dismantle the weapons. The United
States, meanwhile, could lead multilateral efforts to intercept North

Korean nuclear materials at sea, in the air, or traveling overland and to
guarantee their accounting, safe storage, and disposal.
More than anything, U.S. policymakers must shift their mindset to
view China’s involvement as an opportunity instead of as a constraint
on U.S. operations. For example, the U.S. Army and the Marines
must accept that although securing nuclear facilities is currently a key
mission in North Korea in the event of a conflict, they will have to
change their plans if the Chinese get there first.
m
At the political level, Washington must be willing to take greater
risks to improve coordination with China in peacetime. This may
mean bilateral consultation with Beijing, even though that would
hi
conflict with Seoul’s preference to keep China at arm’s length. Granted,
sharing intelligence with China and jointly planning and training for
contingencies would seem unnatural, since the United States is simul-
ha
taneously engaged in a long-term strategic competition with China.
The U.S. Defense Department considers China to be one of its top
five global threats, along with Iran, North Korea, Russia, and extremist
iT
organizations. But strategic challenges and severe threats often bring
together potential adversaries, and rightfully so. With North Korea
out of the way, the United States would have more resources at its
disposal to address other threats.
Al
Of course, such an effort to cooperate would require a massive

degree of coordination. China has long opposed engaging in discus-
sions with the United States on how it would behave in the event of a
od
conflict on the Korean Peninsula or the North Korean regime’s collapse

because of its distrust of U.S. intentions and fears that Washington
would use those conversations to sabotage Beijing’s attempts to
resolve the nuclear crisis peacefully. But China appears to be softening
so
its position. In a September op-ed in the East Asia Forum, Jia Qingguo,
a professor at Peking University, argued that China should cooperate
with the United States and South Korea, especially on the question
of North Korea’s nuclear weapons arsenal. In Jia’s words, “The omens
Ma
of war on the Korean peninsula loom larger by the day. When war
becomes a real possibility, China must be prepared. And, with this in
mind, China must be more willing to consider talks with concerned
countries on contingency plans.”
If Beijing continues to resist proposals to work together, Washington
should consider unilaterally communicating aspects of U.S. contingency

plans to reduce the risk of accidental clashes. It could even provide the
Chinese side with intelligence to help the PLA secure the most impor-
tant nuclear facilities. Alternatively, the two countries could use
established mechanisms for nuclear security cooperation in the civil-
ian sector, such as the jointly established Center of Excellence on
Nuclear Security, or organizations such as the International Atomic
Energy Agency to conduct technical training. No country has more
experience dismantling and securing nuclear weapons than the United
States. Although China has the manpower to seize control of the sites,
m
it is unclear whether it has the expertise necessary to render safe,
transport, or destroy nuclear weapons and material. Sharing best
practices would help ensure that China can safely handle what it will
hi
find at these sites.
Every strategy has its tradeoffs. Coordinating with or conceding to
Chinese involvement in a Korean contingency does have a number of
ha
downsides, as critics are bound to point out. For starters, the South
Koreans completely oppose the idea of any Chinese involvement on
the peninsula, let alone Chinese boots on the ground. U.S. moves to
iT
coordinate efforts with China would harm U.S. relations with Seoul,
although the benefit of managing the demise of North Korea at a
lower cost would be worth it.
Potentially more worrisome is the fact that Chinese intervention in
Al
North Korea would entail the loss of some U.S. influence on the
peninsula. At a fundamental level, China would be acting not to assist
the United States but to ensure that a reunified Korea would not
od
include U.S. troops. But that may not be so bad, after all. In frank
discussions, Chinese interlocutors have insinuated that Beijing may
yet accede to a U.S. alliance with a reunified Korea. In that case, the
end of a permanent U.S. military presence on the peninsula would be
so
a reasonable price to pay to ensure that a second Korean war had the
best possible outcome.∂
Ma
After Credibility
American Foreign Policy in the Trump Era
Keren Yarhi-Milo
m
“ elieve me.” U.S. President Donald Trump has used that phrase
countless times, whether he is talking about counterterrorism
(“I know more about ISIS than the generals do. Believe me”),
hi
building a wall along the U.S.-Mexican border (“Believe me, one way
or the other, we’re going to get that wall”), or the Iran nuclear deal
(“Believe me. Oh, believe me. . . . It’s a bad deal”).
ha
Trump wants to be taken at his word. But public opinion polls
consistently indicate that between two-thirds and three-quarters of
Americans do not find him trustworthy. The global picture is no bet-
iT
ter. Most citizens of traditional U.S. allies, such as Australia, France,
Germany, Japan, Jordan, Mexico, South Korea, and the United King-
dom, say that they have no confidence in the U.S. president.
In other words, Trump suffers from a credibility gap. This is,
Al
perhaps, unsurprising. According to The New York Times, Trump

said something untrue every day for the first 40 days of his presi-
dency. His actions speak even louder. Trump has sown doubt about
od
some of the United States’ oldest and most important commit-

ments, such as its support for NATO—an alliance Trump described
as “obsolete” in January, before declaring it “no longer obsolete” in
April. He has flip-flopped on policy positions, publicly undermined
so
the efforts of members of his own administration, and backpedaled

on diplomatic agreements, including the Paris climate accord and
the Iran nuclear deal.
The United States does not derive its credibility from the words of
Ma
the executive alone, but Trump’s behavior carries consequences. As

the president undermines the nation’s credibility at home and abroad,
allies will hesitate to trust American promises, and U.S. threats will
KEREN YARHI-MILO is Assistant Professor of Politics and International Affairs at
Princeton University and the author of the forthcoming book Who Fights for Reputation?
The Psychology of Leaders in International Conflict.
After Credibility
lose some of their force. The

risks of deadly miscalculation will
increase. And to demonstrate
its resolve, the United
States may need to take
more costly and extreme
actions. Other sources of
credibility, such as American
military prowess and a general
m
faith in U.S. institutions, may
mitigate some of the damage
wreaked by Trump. But there
hi
is no substitute for a president
whose words still matter.
YOUR REPUTATION
PRECEDES YOU
ha
The Nobel laureate and nuclear
iT
strategist Thomas Schelling
once wrote that “face is one of
the few things worth fighting over.”
For much of the twentieth century,
Al
policymakers believed that their own

credibility was essential to making
threats believable and to reassuring al-
od
lies and adversaries alike that they could

trust U.S. commitments. In the 1950s,
for example, the United States entered
the Korean War in part to demonstrate
so
its resolve to actively counter the

Soviet Union. A similar concern
about reputation kept U.S. troops
in Vietnam long after policy-
Ma
makers had concluded that the

United States was losing the war.
In the post–Cold War era, most American leaders have considered
credibility essential to the task of maintaining the U.S. alliance
system and the postwar liberal order. Such thinking played a role in
U.S. interventions in Haiti, Kosovo, and Iraq. The rationale for these

Keren Yarhi-Milo
interventions varied, as did their outcomes, but in each case, leaders

backed their words with action.
In international politics, an actor’s credibility is tied to its reputa-
tion, a characteristic that political scientists generally split into two
varieties. What Robert Jervis calls “signaling reputation” refers to an
actor’s record of carrying out threats or fulfilling promises. “General
reputation,” on the other hand, refers
In international politics, an to a broader range of attributes, such as
whether an actor is cooperative or sin-
m
actor’s credibility is tied to cere. These two forms of reputation
its reputation. can affect each other: for example, sus-
tained damage to a state’s signaling
hi
reputation may erode its general reputation for trustworthiness.
However, a country’s general reputation can also be distinct. Before
the Korean War, for example, the United States had made no specific
ha
commitment to South Korea. Choosing to intervene, therefore, did
not affect the United States’ signaling reputation but may have con-
tributed to a general reputation for resolve.
iT
Context can also affect credibility. For example, a president may
not be perceived as trustworthy when he makes assurances to allies
but may still be considered credible when he threatens military
action. Or he may be seen as trustworthy on social or economic issues
Al
but not on foreign policy. Sometimes, a president’s credibility at home

can affect his credibility abroad. In 1981, U.S. President Ronald
Reagan followed through on his threat to fire more than 11,000 air
od
traffic controllers after they had violated federal law by going on

strike. A number of policymakers and observers—including George
Shultz, who became U.S. secretary of state the following year, and Tip
O’Neill, then Speaker of the House—reported that this move had
so
significant, if unintentional, consequences for U.S. foreign policy: the

Soviets learned that Reagan didn’t bluff.
Some scholars are skeptical that reputations matter. The political
scientist Daryl Press argues that credibility has nothing to do with a
Ma
leader’s record of following through on threats. Instead, adversaries

evaluate the balance of military capabilities and the interests at stake.
Press argues that during the Cuban missile crisis, for example, mem-
bers of the Kennedy administration viewed Soviet Premier Nikita
Khrushchev’s threats as highly credible, even though Khrushchev had
repeatedly backed down on his ultimatum that Western forces
After Credibility
withdraw from West Berlin. In Press’ view, Khrushchev’s credibility

stemmed not from his signaling reputation but from Washington’s
view of the nuclear balance of power and Soviet interests. Similarly,
the political scientist Jonathan Mercer argues that, historically, back-
ing down from a threat has not led countries to develop a reputation
for weakness among adversaries, and standing firm has not led to a
reputation for resolve among allies.
The empirical evidence these scholars have gathered is important.
But their view by no means represents the scholarly consensus.
m
According to the political scientists Frank Harvey and John Mitton, for
example, a reputation for following through on threats significantly
increases a state’s coercive power. Focusing on U.S. interventions in
hi
Bosnia, Kosovo, and Iraq, they show that adversaries studied what the
United States had said and how it had behaved in comparable situa-
tions to infer its resolve and to predict its likely actions. My work with
ha
the political scientist Alex Weisiger has shown that countries that
have backpedaled in past crises are much more likely to be challenged
again, whereas countries with good reputations for resolve are much
iT
less likely to face military confrontations. Other studies have documented
how states that break their alliance commitments develop a reputa-
tion for being unreliable and are less likely to earn trust in the future.
A good reputation, this body of work demonstrates, remains crucial
Al
for successful diplomacy.
BAD REPUTATION
od
Unfortunately, the reputation of the U.S. presidency has eroded in recent

years. Trump deserves much of the blame—but not all of it. The United
States’ signaling reputation began to decline in the summer of 2013, after
Syrian President Bashar al-Assad breached U.S. President Barack
so
Obama’s “redline” on chemical weapons. In August 2012, Obama had

stated that the mobilization or use of these weapons would “change [his]
calculus” on Syria, a remark that many interpreted as a threat of military
action. In August 2013, Assad launched a series of sarin gas attacks against
Ma
rebel strongholds, killing 1,400 Syrians. Yet instead of responding with

military strikes, Obama agreed to a Russian-brokered deal in which Assad
pledged to dismantle his arsenal of chemical weapons.
In an interview with The Atlantic’s Jeffrey Goldberg, Obama defended
his decision by saying that “dropping bombs on someone to prove that
you’re willing to drop bombs on someone is just about the worst reason

Keren Yarhi-Milo
to use force.” But this was a straw man. Few analysts were suggesting
that Obama should pursue a bad policy solely on reputational grounds;
however, there are political and strategic costs when the president
makes a promise and then fails to act. If Obama had not intended to
follow through on his threat, he should not have issued it in the first
place. And ultimately, the diplomatic solution did not work: Assad
has continued to use chemical weapons.
Regardless of whether they supported or opposed Obama’s decision
not to intervene more forcefully in Syria, Republicans and many
m
Democrats believed that the redline episode had damaged the country’s
credibility. Hawks argued that to restore the United States’ reputation
for resolve, Washington should be more willing to use military force.
hi
But this was a misleading, and potentially dangerous, assessment of
what needed fixing in U.S. foreign policy after Obama’s departure.
Credibility requires consistency, not belligerency. The next president
ha
could have repaired the damage by demonstrating the integrity of
American assurances and threats.
Instead, Trump has complicated the situation by showcasing
iT
both toughness, which may have some strategic advantages, and
impulsivity, which undermines his credibility. By bombing Syria,
reengaging in Afghanistan, and applying more pressure on North
Korea, Trump may have gained a general reputation for resolve and
Al
conveyed that he is more comfortable using military force than his

predecessor. Yet the president’s track record of flip-flopping on key
campaign pledges, his bizarre and inaccurate outbursts on Twitter,
od
his exaggerated threats, and his off-the-cuff assurances have all led
observers to seriously doubt his words.
The list of Trump’s inconsistencies is long. After winning the 2016
race but before taking office, Trump spoke by phone with Tsai Ing-wen,
so
the president of Taiwan. This represented a major breach of protocol;

in order to avoid angering China, no U.S. president or president-elect
had spoken to the leader of Taiwan since 1979, when the United States
broke off diplomatic relations with the island. After the call, Trump
Ma
declared that he was considering abandoning the “one China” policy,

the foundation of the U.S.-Chinese relationship for the past four dec-
ades. But in February 2017, he reconsidered and decided to uphold
the policy after all. During the campaign, Trump threatened to launch
a trade war with China and pledged to label Beijing a currency
manipulator. He also implied that the United States should abandon
After Credibility
its commitment to nuclear nonproliferation, suggesting that Japan

and South Korea should develop their own nuclear weapons. He has
subsequently backtracked on all these positions.
The ongoing crisis with North Korea is the latest manifestation of
the same pattern. At the beginning of his presidency, Trump described
the North Korean leader Kim Jong Un as a “smart cookie” and said
that he would be “honored to meet him.” He has subsequently taken
to referring to Kim as “Little Rocket Man,” and in September, he
threatened to “totally destroy” North Korea.
m
In other instances, Trump may have upheld his own signaling reputa-
tion at the country’s expense. For example, Trump followed through
on a campaign promise when he decided not to certify the Iran
hi
nuclear deal in October. Because he demonstrated consistency, this
decision may have bolstered his personal signaling reputation. But by
reneging on a formal U.S. commitment without presenting evidence
ha
that Iran was not abiding by the treaty, Trump also imperiled the
general reputation of the United States. Such a move could under-
mine Washington’s diplomatic clout in future negotiations. If other
iT
countries believe that American political commitments cannot survive
a transition of power, they will be less likely to make significant or
painful concessions. Trump’s earlier decision to withdraw from the
Paris climate agreement presented a similar problem. Of course, any
Al
American president who wishes to change the status quo must wrestle
with the dilemma of how to keep his own promises without jeopardiz-
ing the credibility of his country. But it is unclear that Trump has any
od
concern for the larger reputational consequences of his decisions.
RATIONAL IRRATIONALITY?
Some in Trump’s circle claim that there is a brilliant strategy under-
so
pinning his erratic behavior and that the president understands the
ramifications of his unsteady public posture. According to this view,
Trump’s seemingly irrational statements are part of a calculated strat-
egy to make adversaries think that he is crazy. In September, for ex-
Ma
ample, Trump told his trade representative to intimidate South Korean

negotiators. “You tell them if they don’t give the concessions now, this
crazy guy will pull out of the deal,” Trump said, according to Axios,
referring to the U.S.–South Korean free-trade agreement. When it
comes to North Korea, the logic is simple: if Trump can convince Kim
that he is irrational, and therefore willing to accept the steep costs of a mil-

Keren Yarhi-Milo
itary confrontation, then he might scare the North Korean leader

into capitulation.
Trump would not be the first U.S. president to attempt this
strategy, which scholars call “the madman theory,” or “the rationality
of irrationality.” During the Vietnam War, President Richard Nixon
reportedly asked his national security adviser, Henry Kissinger, to
tell the Russians and the North Vietnamese that he was unpredictable
and might even use nuclear weapons in Vietnam. But they saw through
Nixon’s bluff, and the gambit failed. The first rule of playing the
m
madman game is to never publicly state that you are playing the mad-
man game. Trump has done just that. Pursuing this approach will
only make him appear unsophisticated and immature.
hi
Another explanation that Trump’s defenders have offered is that the
president purposefully creates ambiguity in order to keep adversaries
off balance. During the campaign, Trump said that he would not
ha
“broadcast to the enemy exactly what my plan is.” It’s certainly true
that when carefully crafted and consistently implemented, ambiguous
statements can offer strategic benefits, such as allowing leaders to
iT
speak to multiple audiences, who may have opposing interests, without
alienating any of them. But Trump’s statements are not strategically
ambiguous; in fact, they are generally quite clear. The problem is that
they are inconsistent. The impulsive tone and the fact that some of
Al
his statements are communicated via Twitter in the middle of the

night further reduce their credibility.
When asked to account for Trump’s behavior, some of his support-
od
ers have even suggested that the president’s words should not be taken
literally. The Trump adviser Kellyanne Conway told CNN’s Chris
Cuomo that the president should be judged based on “what’s in his
heart” rather than “what’s come out of his mouth.” U.S. allies, faced
so
with the daunting task of discerning what lies in Trump’s heart, are
unlikely to find this advice reassuring.
CREDIBILITY COUNTS
Ma
It is possible that the American public and the rest of the world
have already gotten used to Trump’s unpredictable statements and
contradictory tweets. In some cases, his reputation for not living
up to his word may even be reassuring: the world knows that he is
unlikely to follow through on some of his more disturbing pro-
nouncements, such as his threat to “totally destroy” North Korea.
After Credibility
But this is small comfort. What happens when his word really needs
to count? How can the United States deter adversaries and reassure
allies in the next crisis when the president cannot be trusted to
credibly communicate U.S. intentions?
Optimists argue that Trump will eventually learn the importance of
keeping his word. In this view, Trump’s inconsistency results from his
lack of experience, especially when it
comes to foreign policy. On occasion,
Trump himself has admitted this.
Trump has undermined his
m
Trump criticized China for failing to advisers’ efforts to salvage
restrain North Korea but then reversed Washington’s reputation by
himself after speaking about it with publicly undercutting them.
hi
Chinese President Xi Jinping. “After
listening for 10 minutes, I realized it’s
not so easy,” Trump told The Wall Street Journal. Similarly, the president
ha
changed his stated positions on the U.S. war in Afghanistan, Russia’s
meddling in the 2016 election, and U.S. policy in Syria after he was
elected, presumably because he had learned more about those issues.
iT
It is not unusual for a president’s views on foreign policy to evolve
in office. But what is disturbing about Trump’s process of learning is
that his new views remain as fluid as his old ones, and they do not ap-
pear to emerge from thoughtful reevaluation and reflection. Instead,
Al
they appear to be determined by his mood, or by the views of the last

person he has spoken to or watched on cable news networks.
Other possible sources of comfort are Trump’s advisers, whom
od
many observers have taken to referring to as “the grownups” in the

administration. White House Chief of Staff John Kelly, Secretary of
Defense James Mattis, National Security Adviser H. R. McMaster,
Vice President Mike Pence, and Secretary of State Rex Tillerson
so
have all sought to add coherence and stability to U.S. policy by clarify-
ing the president’s statements—or by seeming to ignore them altogether.
These people are now the face of American public diplomacy: observ-
ers turn to them to understand U.S. policy. This would be reassuring
Ma
if the president were playing along. But Trump has undermined his
advisers’ efforts to salvage Washington’s reputation by publicly under-
cutting them. Just one day after Tillerson confirmed that the United
States was speaking directly with the North Koreans, Trump tweeted
that his secretary of state was “wasting his time.” “Save your energy
Rex,” he wrote. Such statements—even if they are intended to push

Keren Yarhi-Milo
Kim to make concessions—are likely to sow confusion in Pyongyang.

Trump’s rhetoric on North Korea has undermined the United States’
signaling reputation and could potentially lead to a disastrous and
avoidable war.
If there is any ground for cautious optimism, it is that the presi-
dent’s reputation is not the only factor adversaries and allies consider
in order to discern U.S. intent. As skeptics of the importance of
reputation might point out, U.S. military power, widespread knowledge
of the United States’ vital interests, and a long record of taking military
m
action to defend the status quo in various parts of the world continue
to allow the United States to dissuade adversaries from crossing
well-established redlines. The credibility of a country does not depend
hi
solely on the credibility of its president. Foreign observers may not
trust Trump, but they may still retain some degree of confidence in
American political institutions and public opinion as constraints on
ha
the president’s actions.
At the same time, however, the president’s compromised signaling
reputation increases the likelihood that adversaries will misperceive
iT
American redlines and misjudge U.S. reactions, especially in contentious
regions such as eastern Europe and the Middle East. World leaders
may also feel that it is now acceptable to dismiss or ignore the president
of the United States when it is convenient for them to do so; they could
Al
be forgiven for coming to this conclusion when they read that Tillerson
referred to Trump as a “moron.” (Tillerson’s spokesperson has denied
this—but Tillerson himself has not.)
od
A damaged reputation may also make it harder for the United

States to achieve its objectives through coercive diplomacy—the
threats and promises that have traditionally worked because they were
understood to put U.S. credibility at stake. Under Trump, the United
so
States may have to resort to more risky tactics to demonstrate resolve,

such as military brinkmanship or even military force. Such tactics
carry serious risks of unnecessary escalation.
With the president’s signaling reputation diminished, the United
Ma
States will also have to work harder to convince its allies that it will
stand by its commitments. Washington’s partners are likely to demand
more concrete demonstrations that U.S. security guarantees remain
intact. Reduced trust in American protection may lead U.S. allies to
become more self-reliant (as Trump wants them to be), but it could
also embolden U.S. adversaries to more aggressively test boundaries.
After Credibility
It would not be surprising, for example, if Russian President Vladimir

Putin decided to probe the extent of U.S. support for Ukraine.
MAKING WORDS MATTER AGAIN

The long-term ramifications of Trump’s credibility crisis remain unclear.
The United States cannot control the conclusions that others draw
from the president’s behavior. But international observers will look at
how the U.S. political system responds to Trump’s statements, and
when and how it counteracts them. Even if American foreign policy
m
during the Trump administration remains consistent and coherent in
action, if not in rhetoric, the United States has already paid a signifi-
cant price for Trump’s behavior: the president is no longer considered
hi
the ultimate voice on foreign policy. Foreign leaders are turning else-
where to gauge American intentions. With the U.S. domestic system
so polarized and its governing party so fragmented, communicating
ha
intent has become more difficult than ever. The more bipartisan and
univocal U.S. signaling is, the less likely it is that Trump’s damage to
American credibility will outlast his tenure.
iT
For now, however, with Trump’s reputation compromised, the price
tag on U.S. deterrence, coercion, and reassurance has risen, along with
the probability of miscalculation and inadvertent escalation. Trump
may think that a predictable and credible foreign policy is a sign of
Al
weakness. He is wrong. For a small revisionist power such as North

Korea, appearing unpredictable may allow a leader to temporarily
punch above his weight. But whether Trump likes it or not, the United
od
States is a global superpower for whom predictability and credibility

are assets, not liabilities.∂
so
Ma

How to Waste a
Congressional Majority
Trump and the Republican Congress
m
Sarah Binder
G
hi
overning is always hard in polarized times, but it has been
especially hard during U.S. President Donald Trump’s first
year in office. Undisciplined and unpopular, Trump has been
ha
largely unable to advance his agenda on Capitol Hill despite Repub-
lican control of both houses of Congress. With his political capital
shrinking as his public approval falls, Trump will no doubt struggle to
iT
deliver on his campaign promises to repeal the Affordable Care Act,
reform the tax code, build a wall along the southern border, and repair
the nation’s crumbling infrastructure.
It is tempting to blame Trump’s legislative failures on his lack of
Al
government experience, his indifference to the details of policy, and

his tempestuous personality. But focusing only on personal character-
istics misses the political and institutional dynamics at play. The two
od
parties are deeply polarized, Republicans hold only a slim Senate

majority, and Republican conferences in both chambers cannot agree
on key issues. A more disciplined and popular president might have
managed to bring Republicans together. But huge obstacles would
so
still have remained. As it stands, Trump is heading into his second

year in office with little to show in terms of legislative victories—and
few reasons to believe his agenda will fare any better in the future.
Ma
STUCK IN NEUTRAL
Judging legislative accomplishments so early in a president’s term is
risky. Congressional Republicans won’t face voters until November
SARAH BINDER is Professor of Political Science at George Washington University and a
Senior Fellow at the Brookings Institution. She is a co-author, with Mark Spindel, of The
Myth of Independence: How Congress Governs the Federal Reserve.
How to Waste a Congressional Majority
m
hi
ha
We need to talk: Trump and House Speaker Paul Ryan, November 2016
iT
2018, and Trump won’t for two more years after that. But so far, Trump’s
record pales beside those of other modern presidents. Ever since
Franklin Roosevelt’s extraordinary first 100 days, during which he
persuaded Congress to pass a raft of major laws to combat the Great
Al
Depression, that mark has become a checkpoint in assessing presidential

performance. In their first 100 days, most presidents exploit their elec-
toral victory to push through major proposals. Even with Bill Clinton’s
od
rocky start in 1993, Democrats swiftly enacted the nation’s first family-
leave law, which had been vetoed by George H. W. Bush. In 2001,
George W. Bush made quick progress on a multitrillion-dollar tax cut, as
well as on landmark education reform. Within a month of taking office
so
in 2009, Barack Obama and a Democratic Congress had delivered the

largest fiscal stimulus since World War II, along with pay-equity and
children’s health-care reforms that Bush had vetoed.
Trump came into office with a litany of promises: he vowed to
Ma
J O S H UA RO B E RT S / R E U T E R S
reform immigration and the tax code, fix the nation’s infrastructure,
renegotiate trade deals, build a southern border wall, overhaul health
care, deregulate Wall Street, and revive the coal industry. So far,
Congress has delivered little from that wish list. Trump’s first 100 days
were, in the words of the Republican operative Karl Rove, a “honey-
moon from hell.”

Sarah Binder
Republicans’ failure to repeal and replace the Affordable Care Act,

or Obamacare, has defined Trump’s early legislative record. In May,
after the House barely passed a widely unpopular repeal-and-replace
bill, Trump bused GOP lawmakers to the White House to celebrate
their achievement in the Rose Garden
Trump’s first 100 days were, (a venue typically reserved for signing
bills into law). But subsequent efforts
in the words of the GOP by Senate Republicans to pass their own
operative Karl Rove, a version of the bill failed, despite their
m
“honeymoon from hell.” use of a legislative process that elimi-
nated the need to secure the votes of
any Democratic senators. In October,
hi
facing a deadlocked Congress, Trump moved to destabilize Obamacare’s
health-care markets on his own, ending subsidies to insurers that were
designed to reduce costs for low-income Americans. Coupled with
ha
drastic cuts in Obamacare advertising and personnel, the president’s
moves increased confusion over the availability and cost of health in-
surance and threatened to reverse the recent rise in the number of
iT
insured Americans.
Republicans have achieved some victories. They have turned to
the Congressional Review Act, a rarely used 1996 law that allows
Congress to overturn recently written federal regulations without
Al
having to worry about a filibuster, in order to loosen restrictions on

the oil, gas, coal, and telecommunications industries implemented
at the end of the Obama administration. In April, the Senate con-
od
firmed Trump’s nominee to the Supreme Court, Neil Gorsuch. As

of this writing, however, the Senate has confirmed only 12 lifetime
judges to the federal bench since then, leaving nearly 150 judge-
ships vacant, even though Democratic votes are not required to fill
so
them. That said, Trump’s pace is roughly on par with George W.

Bush’s and Obama’s during each of their first years in office. This
year, a slow-moving White House, a distracted Senate GOP majority,
and Democratic foot-dragging have hindered what could have been
Ma
quick progress on filling the bench.

Republicans have managed to score some bipartisan wins. In June,
with broad support from both parties, Congress passed legislation
making it easier to fire employees at the Department of Veterans
Affairs, a reaction to revelations in 2014 that VA hospitals had missed
targets for waiting times and falsified records. Congress’ other major
bipartisan legislative accomplishment, a measure that forced the

president to impose new sanctions on Russia and limited his ability
to lift existing ones, met fierce opposition from Trump. But with a
special counsel investigating possible collusion between the Trump
campaign and the Russian government in the 2016 election and
Trump facing near-unanimous, veto-proof majorities on the Hill, the
president had little choice but to acquiesce to legislators’ demands.
Away from Congress, Trump has had mixed success when he has
tried to pursue his agenda through the executive branch. He has
m
fulfilled some major promises. He abandoned the 12-nation Trans-
Pacific Partnership trade deal, announced his intention to withdraw
the United States from the Paris climate accord, and reopened talks
hi
on the North American Free Trade Agreement. And Scott Pruitt, the
head of the Environmental Protection Agency, has pushed hard to
unravel many Obama-era environmental protections.
ha
But much remains undone. Most significant, several of Trump’s
major executive orders, including the travel ban on visitors from sev-
eral countries, restrictions on federal funding for so-called sanctuary
iT
cities, and an order preventing transgender people from serving in
the military, have been blocked in whole or in part by the courts.
Some of Trump’s difficulties in advancing his agenda through executive
action have been self-inflicted. Two cabinet seats—secretary of health
Al
and human services and secretary of homeland security—are vacant.

Roughly two-thirds of the most important government posts still
lack a nominee, reflecting a pace of hiring that lags far behind those
od
of past administrations. Trump has stated that he does not even

intend to fill all the vacancies. Without important personnel in the
State Department and other agencies, Trump’s agenda lacks people
to implement it.
so
WHO’S TO BLAME?
At first glance, conditions in 2017 appeared ripe for major legislative
change. The 2016 election turned on the need for change and pro-
Ma
duced the first unified GOP government in a decade. Granted, Trump

could hardly claim a mandate for his agenda, given that Hillary Clin-
ton had won the popular vote. But presidents rarely come in with an
overwhelming mandate. As the political scientist Andrew Rudalevige
has put it, “Presidents claim to speak for the nation. But in practice
they are more often minority leaders.” Even presidents who win both

Sarah Binder
the popular and the Electoral College votes tend to enter office with
small majorities. When Ronald Reagan defeated Jimmy Carter in the
1980 presidential election—often recalled as a landslide because Rea-
gan won 489 Electoral College votes—he won just 50.7 percent of the
national popular vote. As the parties are roughly evenly matched in
popular support, close national elections have become the norm.
In the past, successful presidents have reached beyond their narrow
bases to build broader legislative coalitions. But structural factors often
limit the parties’ appetite for compromise. Continuing a decades-long
m
trend, Democrats and Republicans are
deeply polarized along party lines. This
Republican lawmakers reflects both deep ideological differ-
hi
cannot trust the president ences between the parties over the role
to stick to his policy of government and intensely partisan
pronouncements. ha team play. If one party is for something,
the other must be against it. Partisan
and ideological disagreements emerge
on nearly every major issue of the day: whether to retain or repeal
iT
Obamacare, whether to cut taxes for the wealthy or only for the middle
class, whether to keep financial regulation tight or free the industry
from Obama-era restrictions, whether to grant citizenship to those
protected by the Deferred Action for Childhood Arrivals program (an
Al
Obama-era policy, known as DACA, that allowed some undocumented

immigrants who entered the country as minors to avoid deportation)
or end the program altogether. By one common metric, centrists made
od
up about a third of each party in the 1960s; today, less than a fifth of
lawmakers vote like moderates.
As the parties have polarized, the incentives for presidents to make
overtures to the other side and to build broad coalitions of the sort
so
normally needed to pass major legislation have waned. Moves to the

center put the support of one’s own party at risk to a much greater
extent than they did a few decades ago. Indeed, Trump has been far
more likely to follow through on pledges he has made that are close to
Ma
the views of his far-right base than he has on some of his more moder-
ate promises. He has, for example, decertified the Iran nuclear deal
and halted DACA, whereas he has failed to push Congress to follow
through on his promise to boost infrastructure spending.
Polarization matters because for almost every legislative motion,
Senate rules require a supermajority of 60 out of 100 votes to block a
filibuster. Since they have just 52 seats, Republicans must convince

eight Democrats to vote with them each time. If the parties were
more ideologically diverse, that might be possible. But senators from
competitive, polarized parties find little to agree on—and no political
advantage in crossing the aisle.
Recognizing their inability to attract Democratic votes, Republicans
abandoned bipartisanship in both chambers from the get-go. Not only
did they employ the filibuster-proof Congressional Review Act to
reverse Obama-era regulations; they also ignored Senate precedent
m
and went ahead and banned filibusters of Supreme Court nominees,
allowing them to confirm Gorsuch to the bench, and sought to repeal
and replace Obamacare through “reconciliation,” a budgetary process
hi
that can’t be filibustered. In October, they began the process to use
this same method to pass a tax plan.
Yet even when Republicans have avoided Democratic filibusters, they
ha
have struggled to pass major legislation—because in addition to the
polarization of the two parties, congressional Republicans have them-
selves splintered into factions. The current Republican conferences in
iT
Congress are more divided than both their Democratic counterparts
and their Republican predecessors. A key split is ideological: hard-core
conservatives, often representing southern states, hold decidedly more
far-right views and are less willing to compromise than their more cen-
Al
trist, pragmatic colleagues. By trying to legislate without Democratic

votes, Republicans have highlighted divisions in their own ranks: they
can no longer blame the minority for the legislative gridlock.
od
Consider the fiasco over Obamacare this past spring and summer. In
the House, the far-right Freedom Caucus would vote only for an Obama-
care repeal bill that their moderate colleagues refused to support. (After
several failures, the moderates ended up caving, and the House eventu-
so
ally passed a bill.) And in the Senate, where only 50 votes were required
to repeal Obamacare (counting on the vice president to break a 50–50
tie), Republicans repeatedly came up short. Senators disagreed over
how much of Obamacare to repeal and how it might be replaced—
Ma
decisions made more difficult by cumbersome legislative rules.
TWEETER IN CHIEF
In theory, Trump could help his party bridge these divides. As the
political scientist Richard Neustadt famously argued, a president’s
power stems from his ability to persuade. That, in turn, depends on

Sarah Binder
his professional reputation in Washington and his public prestige

more broadly. Early wins bolster his reputation with others at the
bargaining table and thus beget future success. Early losses, in contrast,
communicate weakness. A president’s standing among voters also affects
his ability to bend others to his will: the higher the public’s regard for
a president, the riskier it becomes for lawmakers and bureaucrats to
cross him.
Viewed from this perspective, it is small wonder that Trump has
struggled to advance his agenda in Congress. Republican lawmakers
m
have come to realize that they cannot trust the president to stick to his
policy pronouncements. Trump’s declaration in June that the House’s
Obamacare repeal bill was “mean”—after celebrating its passage at the
hi
White House—illustrates the GOP’s dilemma. The president’s com-
ment further exposed both centrists who voted for the bill reluctantly
and conservatives who backed it enthusiastically to the threat of
ha
possible future campaign ads that attack them for supporting such an
unpopular law. As lawmakers have gradually learned, the president
has few, if any, consistent beliefs about policy; he seems only to want
iT
to score a deal. Despite Trump’s claims on the campaign trail to be a
superior dealmaker, any talent he may have had in the business world
has not translated into legislative success.
Trump’s standing with the general public is little better than his
Al
reputation in Washington. He is the least popular president at this

stage in a presidential term since World War II, and his approval
rating—around 38 percent, as of November—has dropped in every
od
single state since he took office. This weakness creates leeway for
both Democratic and Republican lawmakers to resist his policies.
Red-state Democrats felt little pressure to cross the aisle to vote to
repeal Obamacare. And the three GOP senators who voted against
so
the bill to repeal Obamacare withstood considerable pressure from

Trump to fold.
Beyond his weak personal standing, Trump’s lack of discipline is per-
haps his greatest liability. Members of Congress cannot set a national
Ma
agenda and can only rarely command national press attention. They
rely on the president to use his bully pulpit—or Twitter account—to
craft and stick to a message, pave the way forward on contested policy,
and thereby give rank-and-file members political cover for any tough
votes or policy outcomes. But Trump seems singularly incapable of
focusing. Instead of pressing relentlessly for tax reform, he engages
in Twitter fights with Republican senators, undercuts his cabinet

secretaries, and goes to battle against NFL players. The president
doesn’t need to be a policy expert. But he does need to adopt a con-
sistent message if he expects to unite a divided party and advance an
agenda in Congress.
Faced with a party that struggles to legislate and his own inability
to mold consensus among his fellow Republicans, Trump has com-
pounded his party’s problems. He has repeatedly created additional
crises for Congress to deal with, perhaps with the intention of
m
blaming congressional leaders if they fail to resolve each issue. In
September, he began a six-month countdown clock to end DACA
and threw the task to Capitol Hill, highlighting divisions among
hi
Republicans over immigration. In October, he refused to recertify
the Iran nuclear deal, tossing the problem to Congress to resolve.
His move later that month to cancel Obamacare subsidies intended
ha
to help low-income Americans added another contentious item to
Congress’ already busy calendar.
To be sure, congressional dysfunction is nothing new. In recent
iT
years, Congress has tended to delegate power to the executive—some-
times on purpose, other times as a consequence of deadlock. But
now the buck no longer seems to stop with the president. Returning
responsibility to Capitol Hill will not make finding solutions any eas-
Al
ier if Republicans in Congress are unable to resolve policy impasses

on their own.
od
TURBULENCE AHEAD
Trump’s prospects for legislative success in his second year look
equally dim as those in his first. Throughout the fall, Republicans
worried that Trump’s promise to deliver huge corporate and indi-
so
vidual tax cuts would meet the same fate as the effort to repeal
Obamacare, even though they again planned to use budget rules
that would foreclose a Democratic filibuster. Periodic spending
bills to keep the government open require 60 votes, handing leverage
Ma
to Senate Democrats, who could insist that Congress fund the health
insurance subsidies Trump abandoned, block spending on a border
wall, move to permanently protect DACA recipients from deportation,
or demand more funding for their other domestic priorities. What-
ever price they extract, it will involve advancing their own agenda,
not Trump’s.

Sarah Binder
Big deals are possible in polarized times if the costs of refusing to

negotiate climb too high for both parties to bear. Whether the pres-
ident will play any part in such negotiations remains to be seen. In
theory, Republicans on Capitol Hill, sensing a weakened president,
could cut deals with the Democrats as both parties look ahead to the
midterm elections in 2018. But so long as Trump remains popular
with the GOP’s base, Republicans’ appetite for joining Democrats at
the bargaining table will be limited. And time is running short: GOP
incumbents could face primary threats with Trump supporters angry
m
at their inability to deliver on Trump’s promises.
Unified party control rarely lasts long in American politics. Repub-
licans have a narrow window to deliver on the promises they made to
hi
both traditional GOP voters and die-hard Trump supporters. But to keep
hold of Congress, they must also show a broader electorate that they
can be trusted to govern. Slim, divided majorities notwithstanding,
ha
Republicans control all of government. If things go wrong, voters will
know who to blame.∂
iT
Al
od
so
Ma
Macron’s World
How the New President Is Remaking France
Ronald Tiersky
m
I
n 2015, before resigning his position as economy minister in President
François Hollande’s government, Emmanuel Macron explained
hi
his idea of French democracy to the newspaper Le 1. “Democracy,”
he said, “always implies some kind of incompleteness. . . . In French
politics, this absence is the figure of the king, whose death I fundamen-
ha
tally believe the French people did not want.”
What he meant was that the French people instinctively demand
a strong state with centralized leadership, that France does best
iT
when its executive actually governs rather than merely serves as a
vehicle for ideological and personal rivalries. That sentiment has run
through French politics for over two centuries, since the French
Revolution, through two empires, the Vichy regime, and five parliamen-
Al
tary republics. In modern times, it has become especially prominent.

In 1958, the Fourth Republic’s last president, René Coty, persuaded
Charles de Gaulle to return to power to deal with a military crisis
od
shaking the French government of Algeria, then still part of France.

The Algerian crisis was so destabilizing that it threatened to bring
violence to mainland France. The Fourth Republic, its Parliament
torn between ideologically incompatible parties and with only a
so
weak presidency, was on the verge of collapse. Once in power, de

Gaulle used the crisis as an opportunity to write a new constitution
that gave the president enough power to dominate the fractured party
system. He then shaped that presidency into a kind of elected kingship,
Ma
turning France into a “republican monarchy,” as French commentators

have called it ever since.
Yet despite the immense power of the office, only two presidents,
de Gaulle himself and the Socialist François Mitterrand, have deployed
RONALD TIERSKY is Joseph B. Eastman ’04 Professor of Political Science, Emeritus, at
Amherst College.

Ronald Tiersky
its potential to the full. Every other president either lost the initiative
or never had it to begin with.
Now, in Macron, France may have found its third transformative
president. Like de Gaulle and Mitterrand, Macron has the ambition
to be more than simply president. He wants to accomplish great
things. Of course, Macron is not de Gaulle, and France’s predicament
is far less serious than it was during World War II or the Algerian
War. But Macron has a sense of personal destiny similar to de Gaulle’s,
one that is bound up with his idea of what a twenty-first-century France
m
must be.
Macron’s vision of France has at its heart a deeply integrated
Europe, with France as the continent’s leader alongside Germany.
hi
Macron wants the European Union to become an economic power-
house that will play a crucial role in a multipolar world order.
To achieve this, he believes that he needs to rejuvenate more than
ha
France’s economy. He aims to turn French complacency into ambi-
tion, transforming a country that has lost its energy into a dynamic,
entrepreneurial nation with a renewed sense of national purpose.
iT
Macron describes his strategy as “radical centrism,” meaning a centrism
that is bold and original, tackling the problems of the twenty-first
century—terrorism, cybersecurity, climate change—and not just
triangulating positions between the old right and the old left.
Al
As Macron told Der Spiegel in October, “Post-modernism was the

worst thing that could have happened to our democracy,” because it
destroyed the idea of a convincing national myth, and with it the
od
possibility of a feeling of national unity and purpose. “Modern political

life must rediscover a sense for symbolism,” he said. “We need to
develop a kind of political heroism. . . . We need to be amenable
once again to creating grand narratives.”
so
OUT WITH THE OLD

When Macron launched his presidential bid in the summer of 2016,
few paid much attention. He had never run for office. His experience
Ma
in government was limited to two years as a junior inspector of finances

in the Economy Ministry and two years as the minister of economy,
industry, and digital affairs. For months after his entry into the race,
polling organizations did not even include him in their surveys.
Yet as the campaign unfolded, Macron left far more experienced
politicians in the dust. He led the field in the first round and won
Macron’s World
m
hi
ha
iT
Monsieur Fix It: Macron visiting a factory in Amiens, October 2017
66 percent of the vote in the May runoff against Marine Le Pen, the
leader of the right-wing populist National Front. His new party, La
Al
République en Marche! (The Republic on the Move!), or LRM, won

308 of the 577 seats in Parliament. With LRM’s ally, the Democratic
Movement, an older party with its roots on the center-right, the coali-
od
tion has 350 seats, giving Macron the ability to pass his legislative
agenda without major compromise.
Macron’s victory blew apart the old party system. The ruling
Socialist Party collapsed. Its candidate won only six percent of the
so
presidential vote, and the party lost almost 90 percent of its seats in
Parliament. The conservative Republican candidate also failed to
make the presidential runoff, and the Republicans lost 40 percent of
PHILI PPE WOJAZE R / REUTE RS
their seats. The National Front, shocked by Le Pen’s lopsided defeat,

Ma
has descended into a leadership struggle, one that Le Pen herself

might not survive. Jean-Luc Mélenchon, a far-left anticapitalist dem-
agogue, has taken up the banner of populist revolt, but his party,
France Unbowed, has few seats in Parliament and much-reduced in-
fluence in the street. A kind of one-man show, Mélenchon has had a
negligible effect.

Ronald Tiersky
In the midst of a surge of nativist populism across Europe and the

United States, Macron’s victory made France into the defender of
the values of liberal democracy and internationalism. This was sur-
prising. For years, economic stagnation
and political failures have left much of
France is the only large the French population pessimistic about
European economy not to the future, more interested in being
have conquered mass protected from the world than engaging
unemployment. with it. In a poll conducted by YouGov
m
in 2016, 81 percent of respondents in
France said they believed the world was
getting worse, and just three percent said they believed it was getting
hi
better, the gloomiest result among the 17 countries surveyed.
France’s stagnant economy is the cause of much of this pessimism.
To be sure, many people are doing well, and the high French quality
ha
of life still exists, at least for them. But the larger picture shows a
society in which too many are struggling for a decent living. French
GDP growth has consistently trailed the average of the Organization
iT
for Economic Cooperation and Development (OECD). As Macron often
emphasizes, France is the only large European economy not to have
conquered mass unemployment. For three decades, French unem-
ployment has hovered around ten percent. In 2016, almost 25 percent
Al
of those aged 16 to 24 and actively seeking work could not find a job,
and many others were working part time or in jobs below their skill
level. The gap between rich and poor has widened, and poverty rates
od
have risen. Poverty in France is now as much a phenomenon of the

young and jobless as of the old and retired. About 13 percent of French
children grow up in deprived households.
The basic economic problem is that in an open international trading
so
system, French products and services must compete globally or they

will lose market share, even at home. Domestically, two main forces
hold back private-sector dynamism: sky-high public spending along
with the taxes that pay for it and an overly protected labor market.
Ma
France’s public sector accounts for 56 percent of GDP, the largest

share in the OECD. French payroll taxes are among the highest in the
world. As individuals, French workers are highly productive, but they
work fewer hours each week, and have more vacation time and more
national holidays, than do workers in any other developed country.
The mandatory 35-hour workweek increases overtime costs and hasn’t
Macron’s World
kept unemployment down. Letting employees go in hard times can be

prohibitively expensive for employers due to strict rules regarding
layoffs, and wrongful-dismissal cases can drag on for years. Businesses
often solve this problem by hiring inefficient temporary workers
instead. This creates a two-tiered labor market, split between people
with protected permanent positions and those living precarious lives
on temporary job contracts.
WORK BEGINS
m
Macron has nevertheless had a lucky start, taking office during
improving economic conditions. French GDP growth is rising and
has reached nearly two percent, close to Germany’s and the euro-
hi
zone’s as a whole. By the fall of 2017, unemployment had dropped
to 9.7 percent. Consumer confidence is at its highest level in over a
decade. The country’s 2017 budget deficit was 2.9 percent of GDP,
ha
already below the three percent limit mandated by the EU, a threshold
France had missed for several years. In 2018, the deficit is slated to
be 2.6 percent, which means planned government spending cuts
iT
that will reduce welfare programs and a cut to the military budget
that will be restored the following year. (Macron intends French
military funding to meet NATO’s goal of two percent of GDP by
2025.) Macron aims to shrink public spending to 51 percent of GDP
Al
within five years. That would be a major accomplishment, as it

would allow for significant tax reductions.
To boost growth, Paris needs to encourage foreign and domestic
od
businesses to invest in France and create new permanent jobs.

French governments have too often resorted to employing more civil
servants—including teachers and staff in the public school system—
to reduce unemployment. But private-sector jobs create far more
so
value for the economy. In a broader sense, Macron must reduce the
widespread French antipathy to capitalism, profits, and risk taking.
Macron’s first major step was to rewrite France’s lengthy labor-
market rules. The major unions were expected to put up fierce
Ma
resistance to any changes. Yet the government spent much of the

summer consulting them, and they proved willing to cut deals.
Even the General Confederation of Labor (CGT), an erstwhile ally
of the Communist Party, chose to negotiate. The CGT leadership
was responding to a changing mood among union members and
supporters. Fewer people—tens of thousands rather than hundreds

Ronald Tiersky
of thousands—now show up to street demonstrations, and because

of legal restrictions, public-sector strikes by railway workers, utility
employees, truckers, and airline staff can no longer shut down the
country, as they did in famous past crises in 1968 and 1995.
Among the labor-code revisions are new restrictions on how long
employee litigation is allowed to take, limits on the compensation that
labor courts may award in wrongful-dismissal cases, reductions in the
number of workers’ councils permitted inside individual companies,
and rules that allow firms to negotiate working conditions within
m
themselves rather than through industry-wide talks involving dozens
of firms, a practice that magnified union influence.
In October, talks began on reining in France’s generous unemploy-
hi
ment insurance benefits, to be followed by discussions on reducing
the variety and costs of retirement schemes. Once again, the goal
is to reduce the cost of doing business in France, thus encouraging
ha
firms to invest and hire. The government also plans to increase
programs of professional retraining, vocational schooling, and appren-
ticeships, following the “flexicurity” models of Germany and the
iT
Scandinavian countries.
It’s an open question whether these sorts of policies can boost
the economy quickly enough to win over public opinion to more
optimistic ideas about France’s economic prospects. Macron hopes
Al
for significant results within a year or two. The expansionary phase

already under way will help.
od
CONTINENTAL AMBITIONS
Macron’s success or failure will reverberate throughout the European
Union. For decades, the partnership between France and Germany
set the EU’s agenda, determining the content and pace of integration.
so
But when France’s economy fell behind and its political leadership
declined in quality, the EU lost its focus, its incubator of new ideas,
and its propulsive force. German Chancellor Angela Merkel has waited
for years for a heavyweight French leader with whom she could work.
Ma
For Macron, reforming France and reforming the EU represent

two sides of the same coin. In a speech he gave two days after the
German elections in September, Macron laid out a vast program
for EU development. The idea at the core of Macron’s plan is that
in return for French fiscal responsibility and economic reform,
Germany would support closer integration of the eurozone, including
Macron’s World
a joint budget to fund common investment and help countries

through national recessions. There would be a eurozone finance
minister and a eurozone parliament separate from the European
Parliament. Macron also called for the
harmonization of national corporate
tax rates and an EU carbon tax.
When France’s economy
Macron believes that deeper Euro- fell behind and its political
pean integration serves France’s national leadership declined in
interests, because national sovereignty quality, the EU lost its focus.
m
and EU sovereignty are ever more in-
extricable. French sovereignty today,
he told the journalist Éric Fottorino in 2017, exists “sometimes at
hi
the national level, but also at the European level,” when it comes to
energy, migration, technology, and some military affairs. “France
cannot win against Google and Facebook, but Europe can . . . at least
ha
regulate them.” Mitterrand would have agreed.
Macron’s plan would create a much clearer two-speed EU than
currently exists, with the 19 eurozone countries on one track and the
iT
other EU member states on a second. He intends the deepened euro-
zone to become “an economic power that can compete with China and
the United States.” Macron wants the eurozone budget to amount to
several percentage points of eurozone GDP, far higher than the 1.2 per-
Al
cent that the EU currently allocates to its common finances.

The EU’s border, Macron believes, must be made comparable to
a national one, so that travel and immigration are brought under
od
central control. This is important, above all, to prevent the move-

ment of Islamist terrorists. He wants to establish a European asylum
office to speed up the process of accepting or rejecting refugees. In
2015, Merkel was right to welcome hundreds of thousands of Syrian
so
refugees to Germany, but, Macron argues, that was a humanitarian

emergency for which the EU was totally unprepared. In future crises,
his strategy would attempt to keep refugees and asylum seekers
close to home so they can return once the crisis from which they
Ma
fled is over.
The extent to which Macron will be able to implement his Euro-
pean agenda will depend first of all on Merkel. It will help her a lot
if Macron manages to enforce fiscal responsibility in France. German
politicians have grown used to France’s failure to control its budget
deficit. If Macron’s vision of a renewed EU is to have a chance, he

Ronald Tiersky
will have to convince them that he is serious about controlling

spending, including how much he will ask Germany to contribute
to a eurozone budget.
Even then, winning their support will not be easy. Many of the
things Macron has called for represent radical departures from cur-
rent EU policy, whereas Merkel’s career has been defined by caution.
Especially after an election that saw her party victorious but with a
smaller vote share and fewer seats in parliament, she may well refuse
to take big risks, especially if her new coalition partners, the Free
m
Democrats and the Greens, oppose her.
Yet Merkel is not likely to simply run out the clock on her remain-
ing time in office. Her decision to admit the Syrian refugees into
hi
Germany showed rare political courage. “Wir schaffen das,” she said.
“We’ll make it work.” That courage has been rewarded. Turmoil among
EU governments about accepting refugees threatened to break apart
ha
the union, yet they have integrated surprisingly well in Germany.
Now, blessed with a dynamic French partner, Merkel might step out
front with Macron, not least to demonstrate anew that Germany still
iT
supports an ambitious version of European integration. That would
be a remarkable conclusion to a remarkable career.
MACRON ABROAD
Al
As with his domestic reforms, Macron’s foreign policy will defy old
categories. As an Atlanticist, he is fully committed to NATO and knows
that the United States is France’s and Europe’s natural ally. Yet with
od
the Cold War long over, U.S. supremacy within NATO is no longer
automatic, especially now that U.S. President Donald Trump has
adopted a policy of reducing U.S. exposure to the world’s conflicts. As
a result, Macron is intent on keeping Washington at a distance, with
so
France mediating between the United States and other countries.

And his strategy for EU development shows the importance he ac-
cords to a secure, independent Europe.
Macron is, at heart, a pragmatist. He knows that Ukraine’s in-
Ma
ternational orientation—toward Europe or toward Moscow—is

Russia’s most important problem. He has proved willing to stand
up to Russian President Vladimir Putin’s plans to expand Russia’s
influence and territory. But he also recognizes that fighting Islamist
terrorism, organizing cybersecurity, and dealing with climate
change all require democratic and authoritarian countries to work
Macron’s World
together. Today, Atlanticism, Europeanism, and globalism are no

longer mutually exclusive.
In Europe’s dealings with the United States, Macron will play the
leading role. He speaks fluent English and has cosmopolitan instincts
and a background in investment banking. He also has experience in
the French technology and media industries. So far, he has both
charmed and challenged Trump. At the July 14 Bastille Day festivities,
Macron honored and flattered his American guest. On the other hand,
Macron’s speech at the UN General Assembly in September flatly
m
refuted Trump’s “America first” nationalism.
Where France and the United States come closest together on
foreign policy is over Iran. France, along with the United States and
hi
five other world powers, negotiated the nuclear agreement with Iran
that was signed in 2015. During the talks, the French negotiators
took the hardest line, demanding that Iran’s ballistic missile program
ha
and Tehran’s spreading influence in the Middle East be addressed in
the deal. But in the end, the French government agreed to focus on
the nuclear issue alone, as the Obama administration wanted.
iT
Since the agreement was reached, France has again been the
most demanding, this time in terms of verifying Iranian compliance.
Although Macron was critical of Trump’s decision to decertify the
agreement in October, he understands that Trump’s decertification
Al
may well have been a negotiating tactic. Because Trump did not
denounce the agreement completely, the United States can stay in
it if Congress votes in favor of doing so. Whether the United
od
States stays in or leaves the deal, France, along with the other sig-
natories, will maintain it. In any case, Macron and Trump both
want new agreements to limit Iran’s ballistic missile program and
its support for Hamas and Hezbollah, and they want a more gen-
so
eral understanding about Iran’s aggressive policies throughout the

Middle East.
Macron’s solidarity with Israel is similarly clear. He endorses
the long-standing French support for a two-state solution and the
Ma
Palestinians’ right to a homeland. But more clearly than any previ-

ous French president, Macron has put Israel’s legitimacy as a state
beyond question. In a speech marking France’s Holocaust Remem-
brance Day, in July, he denounced “anti-Zionism” as “a reworked
form of the old anti-Semitism.” He warned about prejudice against
Jews in France today. And he emphasized French complicity in the

Ronald Tiersky
Holocaust. Speaking of the infamous Vel d’Hiv Roundup of July 1942,

in which over 13,000 Jews were arrested in Paris, he was unambiguous:
“It was France that organized the roundup of Jews. . . . Not a single
German was involved.”
Much now rests on Macron’s shoulders. There are many rea-
sons why he might fail. Changing minds and creating new energy
are hard tasks in any country at any time. Macron is asking the
French people to care once again about the country’s sense of
purpose, “le roman français,” or “the French narrative,” as he puts
m
it. In particular, he’s asking young people to feel ambitious rather
than complacent.
In graduate school, Macron’s master’s thesis discussed Machiavelli,
hi
whose description of political leadership remains true today: the
successful prince needs great skill and great luck. So far, Macron
has had both. Whether he will continue to do so will count for
ha
much in France, Europe, and the wider world.∂
iT
Al
od
so
Ma

How a State Fails
Stuart A. Reid
m
O
n January 16, 2001, the Democratic Republic of the Congo
tumbled into uncertainty. The country’s president, Laurent
hi
Kabila, had been sitting in his office at his marble palace in
Kinshasa, the capital, when one of his teenage bodyguards entered,
drew his pistol, aimed it at Kabila, and fired several times.
ha
Kabila had installed himself as president in 1997, after overthrowing
Mobutu Sese Seko, the cancer-stricken dictator of what was then known
as Zaire. He had begun fighting Mobutu back in the 1960s, leading a
iT
Marxist rebellion in the eastern half of the country before, in the
1980s, fleeing to nearby Uganda and Tanzania, where he raised his
children under false names. After years of dodging Mobutu’s intelli-
gence agents, Kabila finally got the chance to remove his nemesis,
Al
riding in on an invasion backed by eight nations to take the presi-

dency, if not control, of the country he rechristened the Democratic
Republic of the Congo. Kabila’s Rwandan backers quickly tired of him,
od
however. They launched a rebellion in the east that kicked off the
Great War of Africa, a five-year conflict so deadly and confused that
estimates of its death toll range from two million to five million.
Now, less than four years into a presidency he had spent his life pursuing,
so
Kabila was slumped over, bleeding into his chair.

Kabila’s advisers scrambled to react. Keeping news of the attack from
the public, they arranged for his dead body to be flown to Zimbabwe,
ostensibly for treatment. Congo’s borders were sealed, its airports shut
Ma
down, and a curfew announced. Late at night, Kabila’s inner circle

gathered to decide on a successor, as Mwenze Kongolo, the justice min-
ister at the time, recently recounted to me. “It was at that moment,” he
said, “when we decided we had to put in Joseph.”
STUART A. REID is an editor at Foreign Affairs. Follow him on Twitter @stuartareid.

Stuart A. Reid
Joseph, Laurent Kabila’s son, was just 29 years old, a commander

in the new Congolese military. Having grown up in Uganda and Tan-
zania, he spoke Swahili and English, but little French, Congo’s official
language, and no Lingala, its most prominent African one. Shy and
inscrutable, he was not a man made for politics. His only civilian
work experience lay in doing odd jobs for his father and driving a taxi.
Joseph was a mystery, unknown to foreign diplomats and the Congo-
lese public alike; even his age was an open question at the time. Yet
having marched across the country as part of the invasion, he enjoyed
m
legitimacy among the military and the confidence of his father. “He
was not a stranger,” Kongolo said. “And with his father having died, it
had to be someone close.”
hi
Convincing the country’s security forces and government ministers
of this succession plan turned out to be easy; convincing Joseph him-
self, less so. Around four in the morning, a plane sent to retrieve him
ha
from a military base landed back in Kinshasa. As a diplomatic cable
from the U.S. embassy reported, when his father’s advisers asked him
to become president, “Joseph was initially ‘very resistant’ to the idea,”
iT
most likely because he feared for his life. Yet he assented, and was
sworn in as president three days after his father’s funeral. Photos at
the time show a man who looks stunned by his sudden ascension.
The moment marked yet another bloody transfer of power in Congo’s
Al
troubled history. The Congolese were ruled for 75 years by the Belgians—
particularly nasty, as colonizers went—until 1960, when the country
became independent. Its new, democratically elected prime minister,
od
Patrice Lumumba, held office for just two and a half months before he
was ousted in a coup by Mobutu, who then orchestrated Lumumba’s
murder with the blessing of the CIA. After decades of Western sup-
port during the Cold War, Mobutu, in turn, would be chased from
so
power by Kabila.
Today, Congo faces another transition crisis that threatens to
throw the country into chaos. This time, however, the cause is not a
transfer of power but the lack of one. During his 17 years in office,
Ma
Joseph Kabila has presided over a profoundly decrepit state. Every

institution to speak of has been perverted to serve itself rather than
the people, 77 percent of whom live on less than $1.90 per day,
which the World Bank classifies as “extreme poverty.” Vast parts of
the country go ungoverned, with armed militias vying for territory
and resources in at least a third of its provinces. In the past two
m
hi
ha
Blood in the streets: at a protest against Kabila in Kinshasa, September 2016
iT
years, the number of displaced people in the country has doubled, to
nearly four million.
Pointing to the very disorder he has let fester, the once reluctant
Al
president has repeatedly delayed elections originally scheduled for

2016 through a series of administrative maneuvers that the Congolese
have termed glissement (slippage). With the economy weakening and
od
armed violence on the rise, the pressure on Kabila to step down has
never been greater, yet he shows no interest in doing so. The new
reality recalls Voltaire’s quip about the Holy Roman Empire: in this
case, the Democratic Republic of the Congo is neither democratic,
so
nor a republic, nor in control of the Congo.

For decades, the West has been obsessed with finding a cure for failed
states, believing that the best way to prevent international problems is to
solve domestic ones. Since the 1960s, Western governments have plowed
Ma
K E N N Y K AT O M B E / R E U T E R S
nearly $1 trillion in aid into Africa alone, partly to ease immediate pain
and partly to promote long-term stability. The UN has set up an elaborate
system of peacekeeping operations, health initiatives, refugee camps,
and food-distribution networks aimed at doing the same. And yet today,
a country the size of western Europe and home to 80 million already
suffering people is collapsing in slow motion in the middle of Africa.

Stuart A. Reid
ON THE MAKE
Things weren’t supposed to turn out this way. As part of the peace
process that ended the war in 2003, Congo created a new political
system. Rebel leaders rebranded their militias as political parties
and exchanged their fatigues for suits. A new constitution was
drafted. Kabila legitimized his rule by winning a 2006 presidential
election organized by the UN and generally regarded as free and fair.
After a nearly 50-year absence, democracy appeared to have returned
to Congo.
m
But Kabila quickly set about co-opting the newly created institutions.
He replaced judges with unqualified loyalists. His allies in Parliament
weakened electoral laws and granted him the power to dismiss provin-
hi
cial governors. In 2011, Kabila won another five-year term, but this
time, the vote, organized without the UN’s help, was marred by fraud.
Monitors from the Carter Center reported that some districts had
ha
“impossibly high” turnout rates of more than 99 percent and that
hundreds of thousands of ballots had disappeared. Content to limit their
ambitions for Congo to the absence of major war, the Western gov-
iT
ernments supplying much of the country’s budget turned a blind eye.
The military, meanwhile, remained the predatory force it had been
under Mobutu, only with the added complication of having to incor-
porate disparate rebel groups. Soldiers are poorly paid—as of 2015,
Al
colonels were earning less than $100 a month—and often go months

without any wages at all. To make up for the shortfall, they extort
civilians. (As Mobutu once told the army, “You have guns; you don’t
od
need a salary.”) Higher up the chain of command, generals use their

power to control local trade, whether it be in timber, ivory, minerals,
or their own weapons.
Government ministries function as ATMs for the politically deserv-
so
ing. Ministers enjoy access not only to official budgets but also to off-
the-books revenue streams generated through semiofficial fees and
outright bribes. In 2012, the chief of staff to the minister of hydro-
carbons even published, on ministry letterhead, a list of prices to
Ma
secure meetings with various officials. Oil companies had to pay

$5,000 to meet with lower-level advisers and $6,000 to meet with the
chief of staff himself at the ministry (and an extra $3,000 to see him
off-site). At the University of Kinshasa, one professor said that of his
roughly 1,000 colleagues, only around 200 actually work; the rest,
many of whom hold political office, collect their university salaries
without setting foot on campus. At kindergarten, children bring their

teachers beignets in return for good treatment.
Every day, the orange-vested police who monitor Kinshasa’s traffic
circles practice an intricately choreographed form of corruption. An
unpublished study conducted by researchers from Harvard University,
the University of California, Berkeley, and the University of Antwerp
broke down this dance, invisible to the casual passenger, in detail. Each
morning, the officers who man the intersections receive a quota
from their commanders indicating how many cars they must flag for
m
violations—say, a broken door handle—and redirect to the police station.
There, drivers can go through the cumbersome process of receiving a
ticket, having their car impounded, and paying the official fine to free
hi
it—but nearly all choose to simply pay a bribe and go on their way.
Back at the intersections, once the traffic police have met their daily
quota of cars for their bosses, they go to work for themselves, extracting
ha
three types of payments. The first is the harassment bribe, one I
witnessed when an officer claiming some violation forced himself
into the passenger seat of my taxi to shake the driver down for $8 (a
iT
sum that would have been much higher had I not been a potentially
well-connected foreigner). The second is a quick handoff of around 50
cents, a preemptive bribe given out of necessity and with a closed
hand. The third is a tip, given openly and varying in amount. The
Al
study found that these police officers received approximately 92 per-

cent of their incomes through illicit payments. Their bosses made
some 99 percent of their incomes that way.
od
GRAND THEFT
In many poor places, corruption would end with the petty variety.
But underneath Congo’s soil lies trillions of dollars’ worth of copper,
so
cobalt (used in batteries), coltan (used in electronics), tin, diamonds,

and gold. Above, some of the planet’s poorest people scrape by. The
World Bank puts Congo’s per capita GDP at $445 per year, the third-
lowest in the world when adjusted for purchasing power. Nearly half
Ma
of children younger than five are stunted due to malnutrition. In the

slums that crowd Kinshasa, the poor live cheek by jowl in cardboard
huts near streams clogged with garbage that cut through mountains
made of the stuff. It is a far cry from the tony neighborhood of Gombe,
a downtown district popular among the political elite where pool
nets poke out over walls topped with razor wire.

Stuart A. Reid
For about a decade under Kabila, Congo rode the commodities

boom. Its minerals—particularly copper and cobalt, which account
for 79 percent of the country’s exports—fed fast-rising demand in
China and other emerging markets. But the price of cobalt crashed in
2008, and between 2011 and 2016, the price of copper fell by 50 per-
cent. Now, inflation has hit 50 percent. Restaurants print special price
sheets for patrons to consult separately from the menu. The Central
Bank has said that it has only enough foreign exchange reserves to
cover three weeks of imports.
m
The most egregious forms of corruption involve the president
and his family. The Kabilas did not grow up rich. During a trip to
the Soviet Union in the late 1980s, Laurent Kabila was stranded in
hi
Moscow, unable to afford the airfare home. His wife, Joseph’s
mother, sold vegetables in Tanzania. But two decades in power have
made the family fabulously wealthy.
ha
This past July, the Congo Research Group at New York University
published a report in collaboration with Bloomberg News that exposed
the elaborate web of businesses that
iT
The experience of Kabila’s the president and his relatives have con-
structed in Congo. The Kabilas have
predecessors suggests that their fingers in everything from farming
staying in office is the surest and mining to aviation and construction.
Al
way to stay alive. Kabila’s twin sister, Jaynet, holds an

indirect stake in Vodacom Congo, the
country’s biggest cell phone service pro-
od
vider; another sister, Gloria, owns 40 percent of a large bank; his

brother Zoé’s possessions include a boxing gym in Kinshasa and a
luxury hotel on Congo’s Atlantic coast. Many Kabila-linked businesses
receive special treatment—as with the mines that are protected by
so
presidential guards or the company that gets $60 of the $185 fee for
each new Congolese passport.
Such legitimate businesses probably account for a minority of the
Kabilas’ income. The rest comes from murkier enterprises. In these,
Ma
blame extends beyond Congolese elites to include the international

mining companies and financiers who have acted as accessories to
national theft. As the anticorruption group Global Witness has docu-
mented, in deals that took place between 2010 and 2012, the Congolese
government sold mining rights at rock-bottom prices to anonymous
offshore companies, some of them linked to Kabila’s longtime friend
Dan Gertler, an Israeli billionaire. The Congolese state missed out on

$1.36 billion in revenues as a result. Around the same time, the Ameri-
can hedge fund Och-Ziff Capital Management was funneling tens of
millions of dollars to a businessman who then bribed two Congolese
officials to secure favorable mining deals, a scheme the company ad-
mitted to in a 2016 deal with U.S. prosecutors. That agreement did not
include names, but the descriptions made clear that the officials were
Kabila and his top adviser at the time and that the businessman was
Gertler. (Gertler has denied wrongdoing.) Global Witness also counted
m
$750 million that went into state mining companies and tax agencies
from 2013 to 2015 but never made it into the treasury.
Many are quick to call the Congolese state dysfunctional. But it is
hi
dysfunctional only if one considers its purpose to be serving the Con-
golese people. As a mechanism for distributing resources to loyalists
in the political elite, it functions beautifully.
ha
DEMOCRACY DEFERRED
What is notable about the Kabila family’s many income streams is
iT
that to maintain them requires being in Congo—and, ideally, being
in power. If Kabila gets chased into exile, he and his relatives stand
to lose hundreds of millions of dollars.
Thus, one motive behind Kabila’s electoral delay may be financial.
Al
Kabila himself does not appear to be an extravagant man. Whereas

Mobutu had a taste for pink champagne, Chanel cologne, and Euro-
pean villas, Kabila rarely drinks alcohol and shuns chauffeurs. Aside
od
from watches and suits, his chief luxury is a collection of motorcycles,

whose engines residents of Gombe can hear him revving late into the
night. But given the involvement of his family, the decision to step
down is not his alone to make.
so
Fear may be another motive. The experience of Kabila’s predecessors

suggests that staying in office is the surest way to stay alive. And if
Kabila did survive a transfer of power, he could easily end up in
prison. A future regime could find more than enough evidence to
Ma
prosecute him for corruption. It might even investigate his conduct

in 1997, when, as a commander during his father’s invasion of Zaire,
he allegedly participated in the slaughter of tens of thousands of
Hutu refugees near a town called Tingi Tingi.
Russ Feingold interacted with Kabila dozens of times as U.S. special
envoy to the Great Lakes region of Africa during the Obama adminis-

Stuart A. Reid
tration. Feingold held five or six direct meetings with the president
and pressed him on his succession plans. “I think it’s not as simple as a
raw desire to keep power,” Feingold said, pointing to the psychological
factors weighing on a man who missed his youth to serve in a job he
never asked for. Now, at 46 years old, Kabila is struggling to come up
with a second act. Feingold put the dilemma this way: “What else am
I going to do with my life, after I’ve been president of the Congo?”
And so Kabila plays for time. According to the constitution, a
presidential election was supposed to have been held in November
m
2016, and Kabila, limited to two terms, would not have been allowed
to compete. Three years before the scheduled vote, he pushed for
an amendment to the constitution that would do away with the
hi
two-term limit, taking a cue from neighboring heads of state. But
the effort failed, and it triggered defections from Kabila’s ruling
coalition. Then, his allies proposed a time-consuming national cen-
ha
sus that would push back the date of the vote, but that failed as well,
and Kabila turned to more creative means. In 2015, for example, the
government announced that Congo’s 11 provinces would be split into
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26, which had the effect of weakening rival politicians and diverting
resources from elections.
Kabila’s principal obstacle is his own unpopularity. Mobutu enjoyed
a cult of personality and knew how to whip up a crowd. Holding a
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cane and wearing a leopard-skin hat, he presented himself as a village

chief on a national level (never mind that the hat was made by a
Parisian couturier). He was said to possess magical powers, such as
od
the ability to hear one’s thoughts. Kabila, by contrast, gives off an air
of detachment, reinforced by his foreign upbringing, his lack of fluency
in Lingala, and persistent rumors of Rwandan ancestry. He rarely
speaks in public, and when he does, he sounds like a schoolboy read-
so
ing a prepared text. At soccer games, tens of thousands of fans have

debuted a chant that causes state television to cut the live feed: “Kabila,
watch out, your mandate is over.”
In September 2016, as the end of Kabila’s term approached, protest-
Ma
ers swelled the streets. Clashes with security forces left more than
50 dead, and the U.S. Treasury responded by imposing financial
sanctions on two top security officials. Kabila’s government entered
into a dialogue with the opposition hosted by the Catholic Church, one
of the few credible institutions left in Congo. The result was a deal,
announced on New Year’s Eve, in which a member of the opposition
would be appointed prime minister, elections would be held by the

end of 2017, and Kabila would at last step down. But that has all but
fallen apart. The electoral commission, whose head is effectively
appointed by Kabila, has invoked the technical difficulties of organ-
izing a vote, marrying legitimate complaints to absurd timelines
for resolving them.
Rather than merely updating the voter rolls from the last election,
the electoral commission decided to create new ones from scratch. The
resulting registration process, which
m
involves collecting biometric data from
every voter, has been held up in certain
Mobutu enjoyed a cult of
provinces experiencing armed conflict. personality and knew how
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Once registration is complete, the rolls to whip up a crowd.
will still have to be “cleaned,” a months- Kabila, by contrast, gives
long process that involves analyzing
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ten fingerprints each for an estimated off an air of detachment.
45 million voters. But first, the computer
system that does this must be ordered. After the nomination and vetting
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of candidates would come the gargantuan undertaking of printing
the newspaper-like ballots required for an election day that could see
voters choose among some 60,000 candidates from 600-plus political
parties at more than 100,000 polling stations. Therefore, the com-
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mission has argued, it might make more sense to use electronic voting
machines—a recipe for failure in a country with such irregular electric-
ity supply and limited technical capacity. By pretending to fetishize
od
democracy, the commission has deferred it.

It has also handed the government a convenient line for deflecting
blame. I visited Lambert Mende, Congo’s jowly minister of commu-
nication and media, at the ministry’s dusty headquarters in Kinshasa.
so
Mende kept me waiting for four full hours in a sweaty room full of
chairs with torn upholstery. When word came that he was ready to see
me, a handler led me upstairs to a glass partition, roused the soldier
napping behind it, and brought me into the minister’s office. Dressed
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in a sharp suit and an orange tie, Mende sat leisurely behind his desk,
slowly flipping through a stack of newspapers. He shoved them to
the side, grunted, and gestured for me to take a seat.
Mende is Congo’s Kellyanne Conway, a spokesperson whose fervent
displays of loyalty make one wonder if even his bosses think he is over-
doing it. With me, he ridiculed the opposition (“lobbyists for foreign

Stuart A. Reid
interests”), decried U.S. sanctions (“totally unfounded, irrelevant”), and

dismissed criticism of Kabila as a Belgo-American conspiracy (“they
are calling him a human rights abuser, as they were calling Lumumba
a communist”). He smiled impishly throughout the interview, as if to
acknowledge that this was all just a performance, and quite an enter-
taining one at that.
“We have no responsibility, constitutionally, to organize elections,”
Mende answered when I asked when a vote would be held. That, he
insisted, was the job of the electoral commission, on whose behalf
m
he could not speak. “We cannot set up an independent body and act
as if this body was not independent,” he said. In Mende’s telling, the
government was merely waiting on guidance from the commission,
hi
while doing its best to ready a vote. “Not because Brussels or Wash-
ington is pushing us to do so,” he was quick to add.
And when would elections take place? “The time is coming,” he
ha
said. “Very soon.”
A more precise answer would arrive the very next day, when the
electoral commission announced that it would take 504 days once reg-
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istration was finalized to hold a vote. This scientific-sounding estimate
meant that elections could be held no earlier than April 2019.
DIVIDE AND CONQUER

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Opposition politicians balked. But in Congo today, the opposition has

its own credibility problem. Kabila has skillfully co-opted many of its
leaders—appointing one as prime minister and others to ministerial
od
posts—giving them an opportunity to trade resistance for the privileges

of power. Twice in Kinshasa, I saw the prime minister striding proudly
through the lobby of the fanciest hotel, entourage in tow. “Kabila knows
that the Congolese political class is corruptible, and he gives them
so
money to divide them,” the journalist Patient Ligodi said. “He knows
that the opposition is an opposition of the belly: that his opponents
need money.”
The most threatening opposition figures have been sidelined.
Ma
Jean-Pierre Bemba, who challenged Kabila in the 2006 election, now

sits in a prison cell in The Hague, having been handed over to the
International Criminal Court, which convicted him of war crimes.
Étienne Tshisekedi, a longtime rival of Mobutu and both Kabilas,
died last February at the age of 84. (For months, his corpse languished
in a Belgian morgue as the Congolese government sought to delay his
funeral and the protests that it feared would accompany it.) And Moïse
Katumbi, a former provincial governor, has been forced into exile.
Katumbi was once a Kabila ally, handpicked to govern Katanga, a
mineral-rich province the size of Spain, in 2007. He had earned an
estimated fortune of $100 million from
food processing, trucking, and min-
ing, and in office, he styled himself a
“Kabila knows that the
tropical Michael Bloomberg, raising tax Congolese political class is
revenues nearly 40-fold, overseeing an corruptible,” the journalist
m
infrastructure spending spree, and crack- Patient Ligodi said.
ing down on corruption (at least when
it didn’t involve himself). But as it be-
hi
came clear that Kabila might seek to overstay his mandate, Katumbi
resigned from the ruling party and announced his intention to replace
him as president. ha
Then, Katumbi told me, the harassment began. His private jet was
grounded. His car was rammed by a minibus. Security forces tried to
kidnap his son. In May 2016, he was charged with hiring former U.S.
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soldiers as “mercenaries”; Katumbi characterized them as merely
unarmed security advisers contracted through General Jim Jones, the
former U.S. national security adviser. Katumbi fled the country dur-
ing the trial and was later sentenced in absentia to three years in
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prison for real estate fraud. The judge who oversaw that case has also
left Congo, claiming she was pressured by the intelligence services
to convict him.
od
A May 2017 poll found that Katumbi would easily win a presiden-
tial election, with 38 percent of respondents naming him as their first
choice. Only ten percent said they would vote for Kabila. Even with
Katumbi in exile, authorities have worked hard to seal his fate: they
so
evidently fear that he may try to return. After the real estate case
against Katumbi was appealed, one of the judges set to rule on it received
an anonymous phone call instructing him to confirm the sentence,
according to Hubert Tshiswaka, a lawyer I met in Lubumbashi who has
Ma
tracked local judicial decay closely. Having responded to the call by

saying he would follow the law, the judge was visited by eight armed
men one night this past July. Tshiswaka told me that the men tied up
the judge’s security guard, raped his wife and teenage daughter, and
shot him in the stomach—he survived only because the men fled when
a car approached.

Stuart A. Reid
THE YOUNG AND THE RESTLESS

A different type of threat to Kabila has emerged in Goma. Hemmed
in by volcanic mountains, Lake Kivu, and the Rwandan border, the
city is the home base of an activist group that is sending the govern-
ment into conniptions. Called Lutte pour le Changement (Struggle
for Change), or LUCHA, the group was founded in 2012 by students
frustrated with their country’s persistent violence, human rights vio-
lations, and poor social conditions. But over time, it has become more
overtly anti-Kabila.
m
I met one of LUCHA’s members, Rebecca Kabugho, who is 23, in
the city one evening. She wore a pink leather jacket and sported
short dreadlocks. “Most of the population had decided to cross its
hi
arms, say nothing, and accept the situation in which we live—and yet
it’s not normal,” she said. “That’s why I stopped being silent and
started saying what I thought out loud.”
ha
As we sat on the otherwise empty lawn of a hotel near Lake Kivu,
out of earshot of staff, Kabugho recalled the night of February 15,
2016. She and fellow LUCHA members were working late at an office
iT
making banners for a march the next day. Congo’s national soccer
team had just defeated Mali’s to win the African Nations Champion-
ship, and so they painted two lines on a cloth: “2016: We won the
cup” followed by “2016: We will win elections.” Around four in the
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morning, Kabugho heard some noise outside. It was the police, who
barged into the building and arrested her and five others. They were
all charged with attempting to incite revolt and served five and a half
od
months in prison. Crowded into cells with no privacy, they ate meager
rations, got sick, and spent time cleaning the septic system.
LUCHA remains small, with 1,500 members nationwide, and has
yet to prove that it can turn out the broader population en masse. Even
so
so, the government has rushed to brand it a criminal enterprise. In part,

Kinshasa may fear that such groups represent early signs of youth
discontent in a country with a median age of just 18. But it may also
simply be groping in the dark. Kabila’s regime has never met a threat
Ma
it couldn’t co-opt or kill. LUCHA and other similar groups are stubbornly
immune to the first strategy, having chosen to remain outside the
political system. (LUCHA makes a point of taking no external money
whatsoever, and none of its members has run for political office.)
And adopting the second strategy would only provoke more furor, because
of these groups’ strict refusal to take up arms. At LUCHA’s initiation
ceremonies, new members stand before existing ones, Congolese flag in

hand, and swear an oath committing themselves to nonviolence.
Not all of Kabila’s opponents are so inclined. As peaceful methods
of forcing a transition have failed to produce results, the violent
variety has flared. The country has suffered a rash of recent jail-
breaks. One of them, which took place at Kinshasa’s central prison in
May, was orchestrated by a separatist cult and resulted in the escape
of some 4,000 prisoners, including the group’s leader. In the south-
eastern province of Tanganyika, violence between the Bantu and Twa
m
ethnic groups has grown, leaving hundreds of villages destroyed, women
raped, and civilians killed.
The most disturbing conflict is the one that engulfed the Kasai, a
hi
region in the middle of Congo that had last seen full-scale war in 1961.
After Congo’s Ministry of the Interior and Security started trying to
replace the region’s village leaders, largely
ha
unmolested since independence, with
Kabila loyalists, security forces searched
“It’s not like anything I’ve
the home of a chief who resisted. He ever seen in 20 years in
iT
and his followers retaliated by attacking Africa,” a Western diplomat
a nearby city in August 2016, burning in Kinshasa told me.
police stations and the local office of the
electoral commission and assassinating
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various officials. In a sign of the hybrid nature of Congo’s state, they

enjoyed the encouragement of Kabila’s minister of development at
the time, according to an excerpt of a call that took place during the
od
attack published by The New York Times. (“The colonel is in his house,
and we’re burning down the house so he burns to death,” a subordinate
informed the minister. “Did you kill the colonel’s bodyguards?” the
minister replied.)
so
The military, in turn, killed the chief, and a loose alliance of cultish
militias formed to carry on his resistance. It enlisted children, who
brandished toy wooden guns they were told magic could make real. It
may also have been behind the murder of two UN experts—an American
Ma
and a Swede—sent to investigate human rights abuses, although some

observers suspect government involvement.
Desperate to reassert authority in the Kasai region, the Congolese
military sent in some of its most thuggish commanders. Soldiers went
door to door, killing suspected militia members and sympathizers
and looting their homes. Over time, the rebellion took on an ethnic

Stuart A. Reid
dimension and spawned yet another militia, this one armed by local
authorities. The conflict spread to include five provinces, kill more
than 3,000 people, and displace an additional 1.4 million. “It’s not like
anything I’ve ever seen in 20 years in Africa,” one Western diplomat
in Kinshasa told me.
The dead were buried in mass graves—87 of them, by the UN’s
count—many guarded by soldiers, suggesting that the government
had something to hide. In June, Zeid Ra’ad al-Hussein, the UN high
commissioner for human rights, summarized the findings of UN inves-
m
tigators who had interviewed refugees who had fled the violence: “My
team saw children as young as two whose limbs had been chopped off;
many babies had machete wounds and severe burns. . . . At least two
hi
pregnant women were sliced open and their foetuses mutilated.”
By the fall of 2017, the conflict had died down, and Kabila flew in
for a peace conference to publicly mark its end. The humanitarian
ha
crisis continued. Refugees returned to find destroyed homes and
schools and, with two planting seasons missed, a looming famine. The
Ministry of Communication and Media denied my request to visit the
iT
Kasai, but Claudel Lubaya, an opposition politician from the region,
described it for me. “You’ve seen Mosul and Aleppo?” he said. “That’s
sort of what the Kasai looks like.”
Al
EASTERN PROMISES
Congo’s east, especially the provinces of North and South Kivu, has
long resisted pacification, the result of ethnic tensions, competition
od
over land and resources, foreign meddling, and loose ends from the 1994
Rwandan genocide and the ensuing regional war. But even against this
backdrop, the conflict there is going from bad to worse.
In Goma, the capital of North Kivu, a local researcher named
so
Jean-Claude Buuma explained to me that there were 18 militias alone

vying for control of Masisi, one territory in the province. In rural areas,
the state is largely absent. Congolese forces’ power is confined to
major highways, he said: “One meter off, they have no control.”
Ma
Often, that is by design. For example, in another territory in North

Kivu, Walikale, a powerful rebel group has built a symbiotic relation-
ship with the military it is ostensibly battling. The Nduma Defense
of Congo-Rénové, or NDC-R, earned its legitimacy by beating back
the Democratic Forces for the Liberation of Rwanda, a group of Hutus
from Rwanda whom locals viewed as foreign occupiers. But the NDC-R’s
m
hi
ha
iT
Watch the throne: Kabila at UN headquarters in New York, September 2017

activities go beyond the realm of security. Its leader, a man known as
Al
Guidon, is the area’s gold monopsonist, the only buyer artisanal miners
can turn to, and also holds a monopoly on the alcohol and cigarettes
sold to them near the mines. A Human Rights Watch report estimated
od
his monthly income at more than $20,000—some of which, according

to Buuma, ends up in the pockets of Congolese military commanders,
who in turn sell Guidon weapons. It’s the traffic bribe, on a grander
scale: a wrongdoer paying off the government to avoid punishment.
so
Kabila’s attempts to stay in power have started to upset such

arrangements. Capitalizing on growing frustration with the stalled
presidential transition, militias are promising not only to secure the
population but also to rid it of Kabila. In September 2017, for exam-
Ma
E D UAR D O M U N O Z / R E U T E R S
ple, a warlord named William Yakutumba, who had previously confined

himself to low-level racketeering, launched a dramatic attack against
the military in Uvira, a city of several hundred thousand on Lake
Tanganyika, near the Burundian border. Invoking the constitution,
Yakutumba announced that he had “chosen the military option as the
way to chase the dictator Joseph Kabila from power.”

Stuart A. Reid
UN peacekeepers were brought in to Congo to enforce a cease-

fire during the war in 1999, and they were supposed to disarm the
militias and secure a lasting peace. They are still there. Now known
as MONUSCO, the peacekeeping mis-
sion is the world’s largest, with 18,000
More frightening than a uniformed personnel and a $1.14 billion
never-ending peacekeeping annual budget, a quarter of it paid by
mission is one that ended the United States.
too early. Three weeks after the Uvira attack,
m
I climbed into the back seat of a white
pickup truck filled with five Uruguayan
soldiers to accompany them on a UN patrol. Our two-car convoy drove
hi
due north from Goma, until the houses thinned out to make way for
the lush countryside. Every five kilometers, the trucks stopped and
the peacekeepers got out, gripped their guns, and scanned the horizon
ha
without saying a word. Mount Nyiragongo, a large volcano, puffed in
the distance.
When I asked what the mission was that day, I got a quizzical look,
iT
as if I should have known. “To drive you 20 kilometers north and
20 kilometers back,” I was told. Only when I pressed did someone
mutter something about making a show of force and collecting intel-
ligence. The unwieldy blue helmet and heavy armored vest I had been
Al
issued began to feel not just silly but unnecessary, too.

MONUSCO’s reputation among the population is mixed. On the
one hand, it has succeeded in protecting countless civilians, and
od
some grateful locals have staged pro-MONUSCO demonstrations. On

the other hand, many view it as too passive or, because it is an occasional
partner with the unpopular Congolese military, as a party to the
conflict. (It does pick and choose which commanders to work with,
so
consulting a database of soldiers’ behavior that goes back over a

decade.) MONUSCO troops, moreover, have sometimes raped civil-
ians, and a 2016 poll found that 57 percent of people in North Kivu
thought they should simply leave. When we stopped in one village,
Ma
I asked a 28-year-old cauliflower vendor named Janvier what he

thought of the peacekeepers. “They’re trouble,” he said. “When
they pass through, they ask questions about security, but they don’t
buy anything.”
After 18 years in Congo, MONUSCO has grown into an entrenched
institution, replete with its own visitor lanyards, regular video press
conferences, and glossy newsletter. At its headquarters in Goma, I

lunched on a sumptuous buffet—$6 for a vegetarian version, $10 if you
wanted meat. A poster advertised weekly tai chi classes.
A common knock against the mission is that with large parts of
the population still living in a state of constant warfare and regular
massacres, it has little to show for the $18 billion it has consumed
since its inception—and displays no signs of working itself out of a
job anytime soon. The organization also has little leverage over the
Congolese government, at whose pleasure it serves. “MONUSCO behaves
m
according to four verbs here,” Lubaya, the politician from the Kasai,
said. “MONUSCO condemns; MONUSCO regrets; MONUSCO disapproves;
MONUSCO calls.”
hi
All of that may be true, but more frightening than a never-ending
peacekeeping mission is one that ended too early. Indeed, it was
MONUSCO forces who saved the day in Uvira, doing the job that
ha
should have been done by government soldiers, who, long unpaid,
melted away. For all its flaws, MONUSCO is helping provide Congo’s
most badly needed service: security.
iT
Before the surge in violence, 94 percent of the peacekeepers had been
concentrated in the east, but with the recent flare-ups—protests and
prison breaks in Kinshasa and other big cities, rebellions in the Kasai
and elsewhere—they have had to spread themselves more thinly. At the
Al
same time, MONUSCO has lost eight percent of its budget, after the
Trump administration put pressure on the UN to cut peacekeeping costs.
So beginning in September, MONUSCO withdrew 1,700 troops from
od
Congo. “Not only do we have a larger area to cover; we also have fewer
troops to do so,” complained David Gressly, an American who serves as
the UN secretary-general’s deputy special representative for Congo.
Having to do more with less, MONUSCO has switched strategies,
so
replacing fixed positions with more mobile patrols—or, in its terms,

moving from an approach of “protection through presence” to one of
“protection through projection.” It has closed five bases in North
Kivu alone. In the run-up to possible elections, Gressly said, his job
Ma
“is only going to get more difficult.”
NOW WHAT?
The paradox of Congo’s current regime is that it looks utterly unsus-
tainable, and yet somehow, it is sustained. Congo is a place where
one can spend hours wandering from office to office trying to get the

Stuart A. Reid
right piece of paper, or slice easily through red tape with a well-placed
phone call. Nothing works, and everything works. Competing power
centers vie for access and dominance. Publicly stated motivations
mask a darker private reality. Alliances flip overnight. But at some
fundamental political level, nothing ever changes. Armed rebellions
that look certain to gain momentum unexpectedly fizzle out. Promised
protests fail to materialize.
Perhaps that is why so many obituaries of Kabila’s regime have been
published prematurely: because events in Congo proceed according to
m
the competing logics of stasis and change. The most likely outcome is
that Kabila will remain in office tomorrow, just as he did yesterday.
That pattern could easily go on for years. But it is safe to say that ever
hi
since Kabila consolidated his power in the years immediately after his
father’s death, never before has he seemed so likely to go.
If Kabila does leave soon, he will exit in one of three ways. The first
ha
is the smoothest: he voluntarily steps down. It’s possible he could do
this in the context of somehow running for a third term and losing.
Or he could bow to pressure and allow an ally to succeed him. Kabila’s
iT
political coalition is not monolithic, and aspirants may seek to clear their
own path to the presidency, promising to protect him and his family.
Kabila’s opponents have little faith that he will experience a spon-
taneous change of heart, and so they have sought to apply pressure.
Al
Some of that has come from Angola, Congo’s oil-rich southwestern

neighbor, which has grown frustrated with the refugees streaming in.
Once a crucial ally, it has withdrawn its military advisers from Congo.
od
And Sindika Dokolo, a Congolese businessman who is a son-in-law of

Angola’s still powerful former president, has started a pro-democracy
citizens’ movement targeted against Kabila.
Most international pressure, however, has taken the form of sanctions.
so
In May, the EU imposed an asset freeze and a travel ban on nine

Congolese officials, including Mende, the minister of communica-
tion and media. Shortly thereafter, the U.S. Treasury Department
imposed financial sanctions on Kabila’s top military adviser and on a
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beach resort he owns, adding him to the list of five other officials it
had sanctioned in 2016. Activists have welcomed these measures, and
called for more. “The sanctions so far have just scratched the surface,”
said Sasha Lezhnev of the Enough Project, an Africa-focused advocacy
group based in Washington, D.C. “What’s needed is measures against
some of the banks that Kabila and his business partners use to move
the proceeds of corruption, as well as sanctions against the senior finan-

cial advisers, the family members, and the companies they control.”
Katumbi, the exiled presidential aspirant, has pushed for sanctions,
too, and hired a D.C. law firm, Akin Gump, to lead the lobbying effort.
An American friend of his, a former mining company executive
and one-time partner at the firm, has started a curious nonprofit
named United for Africa’s Democratic Future: it ostensibly promotes
democracy across the continent but appears designed principally to
place pro-Katumbi op-eds and anti-Kabila think-tank reports.
m
In an apparent countermove, Bill Meierling, the chief marketing
officer of the American Legislative Exchange Council, a nonprofit
that has been described as “a stealth business lobbyist,” published
hi
a piece of sponsored content in The
Washington Times. In it, he accused
Katumbi—who is the son of a Sephardic
Kabila seems to be
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Jewish father who fled to Belgian preoccupied with the idea
Congo from Rhodes just before World that he could meet a
War II—of being in the pockets of violent end.
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“wealthy foreign financiers,” a “tightly-
knit and highly interconnected group
headed by George Soros.” (A representative from The Washington
Times said that whoever paid the newspaper to publish Meierling’s
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article preferred to remain anonymous.)

Nikki Haley, the U.S. ambassador to the UN, has emerged as the
Trump administration’s point person on Africa, and she has continued
od
the Obama administration’s policy of urging Kabila to hold elections

and step down. She even stated flatly, “The government is corrupt
and preys on its citizens.” In October, Haley visited Congo, where
she was moved to tears at a refugee camp in North Kivu and, in an
so
hour-plus-long meeting with Kabila at the presidential palace, warned

him not to postpone the elections to 2019.
“President Kabila made a commitment to his country’s constitution,”
Haley told me over e-mail. “He knows we expect him to honor that
Ma
commitment to his constitution, as it is written—meaning he cannot

be on the 2018 ballot. He also understands, the United States will
not accept elections any later than 2018.” A week after her visit, the
electoral commission released a long-awaited calendar, with election
day scheduled for December 23, 2018—not as early as the opposition
wanted, but an improvement over the 504-day timeline.

Stuart A. Reid
The asset freezes and travel bans are rankling the officials affected,
especially those who live part time in Europe. Inflicting pain is not
the same thing as changing behavior, however, and there is no evidence
so far that the government is mending its ways in response to the
sanctions. The logic of regime survival will always supersede the
logic of sanctions avoidance. If a crowd needs to be dispersed violently
today, it will be dispersed violently today, whatever consequences the
U.S. Treasury Department might impose tomorrow. In lobbying for
sanctions, then, the opposition may only be enhancing its reputation
m
for spending too much time in Brussels and Washington and not
enough back home organizing. Congo’s political elite suffers from
a misguided sense that power must come from elsewhere—no doubt
hi
a holdover from a time when it really did.
All of this pressure is aimed at getting Kabila to “leave through the
front door,” as Congolese are fond of saying. But Kabila could resist,
ha
leading to the second type of exit: a popular revolt that forced him to
flee through the back door. The model is Burkina Faso, where in 2014 an
uprising forced an abrupt end to Blaise Compaoré’s 27-year presidency.
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With economic conditions worsening and Kabila’s popularity so
low, it’s conceivable that fed-up Congolese will take to the streets en
masse and march toward the presidential palace. In that environment,
opposition leaders could seize the moment. Katumbi, for example,
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might return home on his private jet, surround himself with supporters,
and declare himself transitional president. Kabila appears to be pre-
paring for the possibility of mass riots. In the last two years, he has
od
transferred some of his most trusted (and brutal) generals to Kinshasa,

and his forces have stocked up on tear gas and water cannons.
One big obstacle to a mass uprising is Kabila’s talent for repression.
Nothing scatters a crowd like live fire. What’s more, as bad as the
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economy is today, it was worse during the early 1990s, when the Mobutu
regime began its death spiral. Back then, a running gag had it that
Congo’s constitution included a mythical Article 15: Débrouillez-vous
(Deal with it). People may invoke it again.
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Equally destabilizing as a popular revolt would be the third method

through which Kabila could leave power: a coup or an assassination.
Kabila once publicly complained that he didn’t even have 15 people
he could count on. He is thought to enjoy the loyalty of his presidential
guards, who, like him, are well-compensated Swahili speakers. But
regular soldiers are poorly paid, and they have guns, too. Manya Riche,
an analyst and former adviser to Kabila on peace building, told me

that people vastly underestimate the internal threats to the regime.
She had been predicting a possible coup back in 2015, and she believes
one is even more likely now. “It’s a house of cards,” she said. “Which
card is the one that will cause everything to fall down?”
Kabila himself seems to be preoccupied with the idea that he could
meet a violent end. Like his father, his grandfather, a former colonial
administrator, was assassinated; Joseph has openly worried that he
will meet the same fate. “Any time the assassination of his father
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would come up, his face would noticeably change,” said one U.S.
diplomat who has met with Kabila many times.
In a country with so much dry tinder—poorly fortified borders with
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nine different countries, scores of militias, and more than 250 ethnic
groups—it is all too easy to imagine the chaos that might result from
any variety of the last two scenarios. The Great African War, the
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world’s deadliest conflict since World War II, ended only in 2003.
And many of that war’s underlying causes—above all, a weak state—
persist. “Evacuation is on everyone’s mind,” one member of Kinshasa’s
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Western diplomatic corps told me. Most Congolese, of course, have
no such choice.∂
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Let Women Work

The Economic Case for Feminism
Rachel Vogelstein
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n June, Saudi Arabia will make it legal for women to drive,
marking the end of one of the world’s most conspicuous examples
hi
of gender discrimination. The ban’s removal has been rightly
hailed as a victory in a country that systematically limits women’s
freedoms. But for Saudi officials, this policy reversal has more to
ha
do with economics than concern for women’s rights. In recent years,
even culturally conservative countries such as the Gulf kingdom have
begun to recognize that they cannot get ahead if they leave half of
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their human capital behind.
Women’s advocates have long championed gender parity as a moral
issue. But in the modern global economy, eliminating obstacles to
women’s economic participation is also a strategic imperative. A grow-
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ing body of evidence confirms the positive relationship between

women’s participation in the labor force and overall growth. In 2013,
the Organization for Economic Cooperation and Development con-
od
cluded that a more gender-balanced economy could boost GDP by an

estimated 12 percent in OECD countries. The International Monetary
Fund (IMF) has made similar predictions for non-OECD countries,
projecting that greater female economic participation would bring GDP
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gains of about 12 percent in the United Arab Emirates and 34 per-

cent in Egypt. All told, according to a 2015 report by the McKinsey
Global Institute, closing gender gaps in the workplace could add an
estimated $12 trillion to global GDP by 2025.
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Yet legal barriers to female economic enfranchisement persist in

every region of the world, in both developed and developing econo-
mies. According to the World Bank, women face gender-based job
RACHEL VOGELSTEIN is Douglas Dillon Senior Fellow and Director of the Women and
Foreign Policy Program at the Council on Foreign Relations and a Visiting Fellow at the
Center for Global Legal Challenges at Yale Law School.
Let Women Work
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A woman’s place: at a car show room in Riyadh, October 2017
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restrictions in 155 countries, including limitations on property owner-
ship, spousal consent requirements for employment, and laws that
prevent them from signing contracts or accessing credit. In many
nations, women are still barred from traditionally male jobs or face
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limits on the number of hours they can work. In Russia, women can-
not seek employment in 456 specific occupations, from woodworking
to driving a subway. Argentina prohibits women from entering “dan-
od
gerous” careers, such as in mining, manufacturing flammable materi-

als, and distilling alcohol. French law prevents women from holding
jobs that require carrying 25 kilograms (about 55 pounds). In Paki-
stan, women cannot clean or adjust machinery.
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Many economists and analysts are understandably skeptical about

the potential for change. After all, deeply embedded cultural norms
underpin these discriminatory legal systems. But there is reason to be
hopeful. Recognizing the economic imperative, leaders across the globe
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FAISAL NASS E R / REUT E RS
are pushing for reform. In the last two years alone, 65 countries enacted
almost 100 legal changes to increase women’s economic opportunities.
“Fully unleashing the power of women in our economy will create
tremendous value but also bring much-needed peace, stability, and
prosperity to many regions,” Ivanka Trump, an adviser to her father,
U.S. President Donald Trump, said at a women’s entrepreneurship

Rachel Vogelstein
forum in October. Progress, however, will require more than lofty

rhetoric. To make real strides in unshackling women’s economic
potential, the United States will have to use its international clout
and foreign aid budget to drive legal reform, not just at home but
also in countries across the globe where women cannot fully engage
in the economy.
MOMENTUM FOR REFORM

The economic case for eliminating restrictions on women’s economic
m
participation is clear. In Saudi Arabia, for example, women earn more
than half of all college and graduate degrees but compose only about
20 percent of the labor force. This means that the economic potential
hi
of nearly a third of the population remains untapped. As the Saudi
economy struggles to cope with low oil prices, increasing female work-
force participation has become part of Crown Prince Mohammed bin
ha
Salman’s ambitious economic modernization effort, known as Saudi
Vision 2030. Lifting the driving ban shows that the country is serious
about changing the status quo, although many other laws continue to
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circumscribe the rights of women in the Gulf kingdom.
Even in countries that have far fewer stark gender disparities than
Saudi Arabia, leaders have sought to spur economic growth by making
it easier for women to participate. In the 1990s, Canadian lawmakers
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eliminated the so-called marriage penalty, the product of a tax code

that had depressed the incomes of secondary earners by requiring
couples to pay higher rates in comparison to single taxpayers. In
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Japan, Prime Minister Shinzo Abe’s “womenomics” agenda has put

female workers at the center of the country’s growth strategy by
increasing child-care benefits and incentivizing family-friendly work-
place reforms. And in Bangladesh, cabinet ministers are seeking to
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advance economic development by increasing the share of women in

the workplace through infrastructure initiatives, such as bringing
electricity to rural areas. These projects reduce the burden of unpaid
labor by making household work less time consuming, thereby freeing
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up time for paid work outside the home.

Countries that have pursued such reforms are already seeing results.
In India, after two states changed their succession laws in 1994 to
grant women the same right to inherit family property as men, women
became more likely to open bank accounts, and their families started
to enjoy more financial stability, according to a study conducted by
Let Women Work
the World Bank in 2010. Similarly, in Ethiopia, since the government

eliminated the requirement for a woman to get her husband’s consent
in order to work outside the home, in 2000, considerably more women
have entered the work force and obtained full-time, higher-skilled—
and therefore better-paying—jobs. Five years later, women in the three
regions where the policy was first implemented were 28 percent more
likely to work outside their homes and 33 percent more likely to hold
paying jobs than women elsewhere in the country, according to a
World Bank analysis. These reforms not only increase women’s income
m
but also create a multiplier effect, as women are more likely to invest
their earnings in the health, nutrition, and education of their children.
But despite these clear benefits, the pace of change remains far
hi
too slow. Saudi women fought for three decades before achieving a
repeal of the driving ban. And even after this hard-won victory, the
highly restrictive Saudi guardianship system will continue to prevent
ha
women from opening a bank account, starting certain businesses, obtain-
ing a passport, or traveling abroad without the permission of a male
relative—restrictions that are arguably more significant in limiting
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their full economic participation than the driving ban.
According to the World Bank, 90 percent of the world’s economies
still have at least one law on the books that impedes women’s economic
opportunities. And despite rapid improvements in women’s status
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in other areas—rates of maternal mortality have significantly declined

over the last two decades, and the gender gap in primary school
education virtually closed over the same time period—women’s labor-
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force participation has actually declined, from 52 percent to 50 percent

globally between 1990 and 2016, in part because of the endurance
of such legal restrictions.
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HELPING WOMEN SUCCEED

Boosting the pace of change should be a priority for U.S. foreign
policy—and in recent years, it has been. In 2009, the Obama admin-
istration appointed the first-ever U.S. ambassador for global women’s
Ma
issues to lead U.S. efforts on this front. In 2011, the United States
hosted the first-ever Asia-Pacific Economic Cooperation ministerial
meeting on women in the economy, which led to historic commit-
ments to promote women’s inclusion in the workplace, including
through legal reform. And in 2014, the United States worked with
G-20 leaders to set an ambitious target to increase female labor-force

Rachel Vogelstein
participation by 25 percent over the next decade, a goal that would

add an estimated 100 million women to the global work force.
The Trump administration should sustain these initiatives and develop
new policies that will economically enfranchise women throughout
the world. Although the administration has been justifiably criticized
for undermining women’s rights in health, education, and other areas,
it has acknowledged the importance of women’s economic participa-
tion. In July, Washington put diplomatic and financial resources into
the development of the Women Entrepreneurs Finance Initiative
m
(We-Fi), a partnership with the World Bank and other countries that
will leverage $1 billion in financing to improve women’s access to
capital. (This program, which the White House has characterized as
hi
the brainchild of Ivanka Trump, in fact expands on a model spearheaded
during the Obama administration called the Women Entrepreneurs
Opportunity Facility, which continues today and similarly aims to
ha
help close the gender gap in access to credit.)
But to truly generate returns on its investment in women’s entrepre-
neurship, the current administration must adopt a more comprehensive
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approach. Greater access to capital will go only so far if women
remain legally prohibited from entering into business relationships
or holding positions that are available to men. Indeed, some have
criticized We-Fi for failing to take on the systemic legal barriers that
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impede women’s economic participation. Others have questioned the

commitment of some of the partner states—including Russia, Saudi
Arabia, and the United Arab Emirates—given the gender inequalities
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enshrined in their laws. Trump’s retreat from U.S. leadership on

equality and human rights overseas has compounded these doubts.
During his May 2017 trip to Saudi Arabia, Trump stated, “We are not
here to tell other people how to live, what to do, who to be,” at a time
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when the driving ban, along with various other restrictions on women,
remained in full effect. If the administration is serious about advanc-
ing women’s economic participation globally, it must tackle laws and
policies that rig the game against women—and accept the mantle of
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global leadership, which Trump has spurned.

The United States should start by tying development assistance to
progress on women’s economic participation, a strategy that would also
uphold the administration’s commitment to efficient public spending.
Some organizations already do this. For example, the Millennium
Challenge Corporation, an aid agency funded by the U.S. government,
Let Women Work
evaluates the legal position of women in a given country when making

decisions about whether to provide assistance, assessing factors including
women’s ability to sign a contract, register a business, choose where
to live, travel freely, serve as the head of a household, and obtain
employment without permission. This policy has created “the MCC
effect”: countries enacting legal reforms
in order to attract U.S. aid. In 2006,
during negotiations with the MCC, the
Women face gender-
Parliament of Lesotho ended the prac- based job restrictions in
m
tice of giving women the legal status of 155 countries.
minors. And in 2007, to secure MCC
investment, the Mongolian government enacted property rights
hi
reforms that increased the percentage of female landowners and
allowed for the collection sex-disaggregated data on land registration
to establish a base line for monitoring future progress. The MCC
ha
model should be expanded to all U.S. foreign assistance programs to
guarantee maximum returns on American investments in women’s
economic development.
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The United States should also encourage similar reforms within
multilateral economic institutions. For example, Washington can use its
leverage at the IMF to make equal treatment for women in an economy
a precondition for obtaining investment and a positive assessment
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from the fund. The IMF is already running a pilot program that includes
appraisals of legal equality in the process of reviewing conditions in
20 countries that receive IMF loans. It should extend that policy to all
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recipient countries, and this approach should become standard practice

at other multilateral financial institutions as well, starting with regional
and subregional development banks.
Finally, Washington should draw attention to the persistent legal
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barriers that continue to impede women’s economic opportunity and

broader economic growth. The U.S. Treasury and State Departments
could start by releasing an annual ranking of countries, modeled on
the State Department’s Trafficking in Persons Report. This exercise
Ma
would raise awareness and create competition, incentivizing country-

level reforms.
To be sure, legal reforms are just one step on the road to gender parity
in the global economy. After all, the reforms must be implemented in
the cultural context that gave rise to pervasive discrimination in the
first place. And promoting equality on paper will not necessarily improve

Rachel Vogelstein
the situation of women in practice. Genuine progress requires enforce-

ment, which presents its own challenges.
Still, eliminating legal barriers to women’s economic participa-
tion is essential. Without these reforms, women cannot establish
their right to compete in the marketplace. And research shows that
legal reforms can precipitate broader societal changes, particularly
when combined with community education initiatives. In Senegal,
for example, a ban on female genital mutilation, coupled with an
information campaign, caused the practice’s incidence to drop far
m
more quickly than in comparable nations where it remained legal.
By encouraging legal reforms and supporting grass-roots efforts to
shift norms, the United States can meaningfully improve women’s
hi
economic participation.
In advancing this agenda, Washington should not heed the nay-
sayers who claim that promoting gender equality constitutes cultural
ha
imperialism. Such assertions ignore the proliferation of domestic
groups fighting for women’s inclusion around the world, including
in Saudi Arabia, where women have been campaigning for the right
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to drive since 40 courageous women first staged a demonstration in
the early 1990s. These critics also overlook the persuasive economic
case for female inclusion, which is already galvanizing change across
the globe.
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At the end of the day, women’s economic participation improves

societies and drives growth. Leveling the legal playing field is not just
a matter of fairness; it is an economic imperative that countries around
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the world ignore at their own peril. The time has come for Washington
to act—and to use its influence to push others to act, as well.∂
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The Truth About the

Minimum Wage
Neither Job Killer Nor Cure-All
m
Alan Manning
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t has been more than eight years since many of the United States’
cashiers, dishwashers, janitors, lifeguards, baggage handlers,
baristas, manicurists, retail employees, housekeepers, construc-
ha
tion laborers, home health aides, security guards, and other minimum-
wage workers last got a raise. The federal minimum wage now
stands at just $7.25. In real terms, these workers’ earnings have
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declined by nearly 13 percent since the last hike, in 2009—and have
fallen by over one-third since 1968, when the real federal minimum
wage was at its peak of $11.38 in today’s money (although only $1.60
then). Although most Americans think the minimum wage should
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go up—one 2017 poll found that 75 percent supported raising it to

$9.00 per hour—today’s Republican-controlled Congress is unlikely
to act.
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But the lack of progress on Capitol Hill should not give one the
impression that little is happening with regard to the minimum wage.
In fact, never has there been so much action—it’s just that it is hap-
pening at the state and, increasingly, city levels. The “Fight for 15”
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has become a rallying call on the left and has resulted in some notable
successes. Twenty-nine U.S. states plus the District of Columbia
now have minimum wages that exceed the federal minimum, as do
about 40 municipalities.
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Proponents of the minimum wage claim that a high minimum

wage is the best way to ensure an acceptable standard of living for
all Americans, whereas opponents counter that it is likely to destroy
jobs. In the debate between these two camps, feelings often run high.
ALAN MANNING is Professor of Economics at the London School of Economics.
m
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Super-size it: fast-food workers on strike in Los Angeles, August 2013

But behind the emotion, economics, both theoretical and empirical,
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can help one make sense of the issues at stake. The bottom line is that
there is not much evidence that the minimum wage is currently a
job killer in the United States, and so there is room for it to go up.
Raising the minimum wage, however, is not a particularly effective
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tool to combat poverty and share the benefits of growth.
IN THEORY . . .
The recent experiments with minimum-wage increases in the United
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LUCY NICHOLSON / REUTERS
States have not gone uncontested. In 2013, voters in SeaTac, Wash-

ington, made their city the first in the country to raise its minimum
wage to $15 per hour. During the campaign, groups supporting and
opposing the measure spent a combined $264 per vote, one of the
highest figures on record. And 27 states have passed laws requiring
cities to abide by the state minimum. Those behind such pushback

Alan Manning
make an appealing argument: that employers forced to pay above-

market wages will choose to cut their payroll.
Opponents of the minimum wage have long invoked economic
theory to claim that the measure destroys jobs. “Just as no physicist
would claim that ‘water runs uphill,’ no self-respecting economist
would claim that increases in the minimum wage increase employ-
ment,” the Nobel Prize–winning economist James Buchanan wrote in
The Wall Street Journal in 1996. “Such a claim, if seriously advanced,
becomes equivalent to a denial that there is even minimal scientific
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content in economics, and that, in consequence, economists can do
nothing but write as advocates for ideological interests.”
Strong stuff, but wrong stuff. That view is rooted in either igno-
hi
rance or dishonesty. What Buchanan really meant is that the textbook
model of perfect competition taught as a benchmark in many intro-
ductory economics courses predicts that raising wages above the level
ha
that the market would dictate will move the economy from a point
where the demand and supply of labor are in balance to one where
demand has fallen below supply—in other words, a place in which
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there are fewer jobs. Some claim that the law of demand tells us that
the minimum wage must destroy jobs just as surely as the law of
gravity tells us that an apple will fall to the ground.
But it is important not to mistake the labor market on planet
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Econ 101 for the labor market on planet Earth. The predictions of
this model are not akin to the laws of physics, and alarm bells should
go off anytime an economist, even a Nobel laureate, claims that
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they are.
The predictions of any economic model are only as good as the
assumptions behind it. And the assumption of perfect competition is
a bad approximation for real-world labor markets. Perfect competi-
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tion assumes that labor markets are frictionless, meaning that hiring
workers costs employers nothing in time or money (so there are no
vacancies) and that workers can always find an alternative to their
current job (so there is no unemployment). In that world, finding or
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losing a job is no big deal, and if an employer tried to cut wages by

just one cent, all its workers would leave right away.
In the real world, of course, workers celebrate getting jobs and
grow depressed when they lose them, since it takes time to find a
new one. Employers, for their part, know that it takes time and
money to hire workers. And they know that if they lower wages, they
may find it harder to recruit and retain workers, but not all of the
existing ones will quit immediately. There are economic models that
capture these features, perhaps taught more often in Econ 301 than
in Econ 101. And these models imply that the relationship between
minimum wages and employment is more complicated than the
model of perfect competition predicts.
In a perfectly competitive market, a minimum wage above the
natural level moves the labor market to a place where employment
is determined by the demand for labor alone. Some people are unem-
m
ployed, but no company has any difficulty in filling vacancies for
minimum-wage workers. In a more accurate model, by contrast,
employment is influenced by both demand and supply factors. Vacan-
hi
cies and unemployment coexist, because one cannot instantaneously
fill open positions with the unemployed who want jobs. An increase
in the minimum wage may depress the demand for labor, but by
ha
making work more attractive, it also raises the supply of labor. The
overall employment level, therefore, may go up or may go down.
Economic theory does not imply that a minimum wage always
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destroys jobs, nor does it imply that it will never do so. All it tells us
is that the impact of minimum wages on jobs is not an issue that can
be settled with pen and paper; it is an empirical question.
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. . . AND IN PRACTICE
Until 25 years ago, the conventional wisdom among economists was
that the empirical evidence proved that the minimum wage destroys
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jobs and that the only interesting question was, How many? But be-
ginning in the 1990s, new research cast doubt on that conclusion. The
key work was the 1995 book by David Card and Alan Krueger, Myth
and Measurement: The New Economics of the Minimum Wage, which
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concluded that much of the existing literature was flawed. Krueger’s

position as chief economist at the U.S. Department of Labor at a time
when the Clinton administration was advocating a raise in the mini-
mum wage only increased the controversy surrounding the book.
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The debate on the impact of the minimum wage has raged back and
forth ever since. Each new study claiming that the minimum wage
costs jobs is met by another study critiquing it, and vice versa. A lot
of this debate concerns issues of little strategic importance, generat-
ing more heat than light. Much of the research, for example, focuses
on teenagers, the group most affected by the minimum wage, with

Alan Manning
25 percent of them reporting hourly wages at or below the minimum.

But teens account for a small and shrinking share of total employment,
now representing less than two percent of all hours worked in the
United States. And less than ten percent
There is good evidence that of all minimum-wage hours are worked
by teens, down from 25 percent in 1979.
the minimum wage boosts So findings about teenagers’ incomes
the incomes of the workers have little to say about the overall impact
earning it. of the minimum wage. Nonetheless, a
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Congressional Budget Office report in
2014 used evidence (and selective evi-
dence at that) from the teen labor market to estimate the impact of
hi
proposed increases in the federal minimum wage on total employment.
Setting these problems aside, it is important to note that although
some studies claim to have found that minimum wages in the
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United States reduce employment, none of those is very robust,
statistically speaking. If a different (but equally reasonable) model
of the relationship between minimum wages and employment is
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used, the job-killing results often disappear. This conclusion is
borne out by a number of meta-studies that have combined the
estimates from many different studies to get some idea of the average
estimate. There is no reason to think that, up to the levels of a
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minimum wage observed in these data, an increase will cause workers

to lose their jobs.
Although the evidence for the minimum wage as a job killer is
od
thin, there is some evidence that it has other negative effects. It does
appear to push up prices to some degree, although the effect is small,
because minimum-wage labor often accounts for a small share of the
cost of a good or service. A study of a 25 percent increase in the
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minimum wage in San Jose, California, in 2013 found that restaurant

prices rose by just 1.45 percent.
There is good evidence, however, that the minimum wage boosts
the incomes of the workers earning it. Whereas the studies of the
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impact of minimum wages on employment are conflicting, the studies

of the impact on earnings point in one direction: not only do workers
paid the minimum wage see their incomes go up accordingly, but so
do those paid slightly above the old minimum.
Studies of other countries support the conclusion that the minimum
wage can increase pay without reducing employment. In 1999, for
example, the United Kingdom introduced a national minimum wage;

an independent commission that has researched the impact exten-
sively has yet to find any strong evidence of job losses. That has
remained the case after 2016, when the government introduced a
much higher minimum wage for workers over the age of 25, which
now stands at about $9.80 per hour. In 2015, Germany introduced a
national minimum wage (currently about $10.30 per hour), and early
studies of its impact also suggest little effect on jobs. Opponents of
the minimum wage often look to France for evidence for their side,
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since the country has both a high minimum wage (about $11.30 per
hour) and high unemployment (nearly ten percent). But the main
brake on employment there is probably not the minimum wage; it is
hi
restrictive labor laws.
Policymakers around the world have begun to take notice of all this
accumulating evidence. The International Monetary Fund and the
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Organization for Economic Cooperation and Development—institu-
tions that once criticized minimum wages—now recommend that when
set at a reasonable level, a minimum wage should be part of a well-de-
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signed labor policy.
But what is a reasonable level? The experiences of the United
Kingdom and Germany may be the most relevant for the U.S. debate,
because the minimum wage is higher in those countries, both in absolute
Al
terms and as a share of the median worker’s earnings. (There are some
U.S. states, such as Arkansas and West Virginia, where the minimum
wage represents a similar fraction of the median worker’s earnings,
od
but not many.) Thus, the United States appears to have considerable
room for an increase. Moving it to around $10.50 would be very
unlikely to raise unemployment. Indeed, a minimum wage at that
level would end up constituting a similar proportion of the average
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worker’s earnings as do the minimum wages on the books in the

United Kingdom and Germany. And it would still be less, in real
terms, than the one that was in place in 1968.
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HOW HIGH IS TOO HIGH?

At some point, a high enough minimum wage would start to destroy
jobs. The problem is that no one can say where exactly that point lies.
I know of only one study for any country that seems to demonstrate a
clear negative impact of a national minimum wage, a study of Denmark’s
experience by Claus Thustrup Kreiner, Daniel Reck, and Peer Ebbesen

Alan Manning
Skov. When Danes turn 18, the minimum wage rises by 40 percent, to
something close to $15 per hour, and the study found that their employ-
ment rate dropped by a third. Employers
switch to employing 17-year-olds, who
The minimum wage is are similarly skilled but can be paid much
a particularly blunt less. That study, however, does not nec-
instrument for reducing essarily tell us about the impact of a
poverty. minimum-wage rise that affects all work-
ers, as most employers cannot switch to
m
similar but cheaper labor. And studies
of similar age-related rises in the United Kingdom have found no effect
on employment.
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But the United States may soon find out what happens when the
minimum wage rises dramatically. If implemented, the proposed
measures in many U.S. cities would increase the minimum wage to
ha
new highs and affect a larger-than-ever share of workers. After Seattle
increased its hourly minimum wage to $13, part of a projected plan to
increase it to $15, the city commissioned a study by economists at the
iT
University of Washington to look into the effects. The study, released
in June 2017, concluded that the measure had harmed the low-wage
workers it was intended to help, since it caused employers to reduce
hours and delay new hiring. But those findings have been contested
Al
and are unlikely to be the final word; there will be many other studies
to come, of Seattle and elsewhere.
What is likely, however, is that some credible study finding that the
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minimum wage has cost jobs will eventually turn up. This is almost
inevitable, because those campaigning for a higher minimum wage are
not motivated by a finely calibrated assessment of the costs and benefits
to low-wage workers. Rather, they have rallied around the cause of a
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“living wage,” meaning an income that would allow workers to have

what could be regarded as a decent standard of living—something
that is very different from economists’ idea of the highest wage that a
labor market can bear. Market economies do not on their own guarantee
Ma
that all people will be able to find an employer prepared to pay them
a wage that gives them the opportunity to earn a decent standard of
living for them and their family. If activists determine that a single
mother of two must make, say, $20 an hour to get by, and they succeed
in convincing the legislature to raise the minimum wage to that level,
then it is entirely plausible that unemployment will rise.
When a study showing such an effect does arrive, it will be impor-

tant to draw the right inference. Some will incorrectly conclude that
the minimum wage costs jobs—full stop. Rather, one should conclude
that such a study tells us something about the appropriate level for a
minimum wage, not whether a minimum wage should be used at all.
Economists would do well to shift their research focus, then. The question
should be not, What is the effect of the minimum wage on employment?
but, What is the appropriate level for the minimum wage?
m
WAGES AND WANT
Even though most sweeping arguments against minimum-wage
increases have proved misguided, it is important to be realistic about
hi
what the policy can achieve. Supporters often argue that the mini-
mum wage reduces poverty. That is true, but it is a particularly blunt
instrument for doing so. As an hourly rate, the minimum wage on its
ha
own reveals little about the household income of those who earn it.
That depends on how many hours are worked, how many other adults
there are in the household and how much they earn, and how many
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dependents there are. A minimum wage of $7.25 means something
very different for a teenager working a summer job as a lifeguard
than it does for a woman who has to support her family of four
through shifts at McDonald’s. A federal minimum wage of $15 would
Al
mean that the vast majority of households would have earnings above
the poverty line if they had at least one full-time worker. But there
would still be some households with only part-time workers. More-
od
over, given how high $15 is compared to the historical high-water

mark and compared to the minimum wage in similar countries, such
a level would most likely be reached not on a nationwide basis but
only in certain cities. In other words, the minimum wage is unlikely
so
to eliminate poverty on its own.

Policies such as the earned-income tax credit, a federal benefit
linked to a taxpayer’s income and number of dependents, are also
needed. But the earned-income tax credit shouldn’t be used alone,
Ma
either. The risk with a tax credit is that employers will use the federal
subsidy as a reason to cut wages, effectively pocketing some of the
income that was intended for low-income workers. The minimum
wage stops employers from doing this.
There is another important limit to the minimum wage. The United
States doesn’t just have a problem with low wages at the bottom of the

Alan Manning
income distribution; it also has a problem generating growing real

wages for the average worker. The gains from what economic growth
there has been have flowed disproportionately to those at the top
of the income distribution, who already have the most. The United
States is not the only Western economy grappling with stagnant or
declining living standards for the average citizen, and in recent
years, populists on both the left and the right have fed off the result-
ing widespread dissatisfaction with self-serving political elites. On
the left, one symptom of this discontent has been the push for much
m
higher minimum wages.
But the minimum wage is very unlikely to ever affect the earnings
of the average worker, and so it will do little to reverse the economic
hi
forces that have upended politics around the globe. There is evidence
that minimum wages can boost earnings for people making more
than the minimum, but these spillover effects peter out before one
ha
gets anywhere close to the average worker. If the United States is to
share the benefits of growth across the population, it will take much
more than a higher minimum wage to do so.∂
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Al
od
so
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REVIEWS & RESPONSES
m
hi
ha
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Although Varoufakis
entered office armed
with largely correct
od
convictions about
what ailed Greece’s
economy, he held a
so
weak hand from the

beginning.
Ma
—Martin Sandbu
AL K I S KO N STA N T I N I D I S / R E U T E R S
Beware Greeks Bearing Rifts Recent Books 150

Martin Sandbu 136
Reform or Revolution?
Haleh Esfandiari 143
ESSAYS
The vast shadow of
Stalin the despot
often hides Stalin the
human being.
m
—Stephen Kotkin
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ha
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Al
od
so
Ma
When Stalin Faced Hitler Yemen’s Humanitarian Nightmare

Stephen Kotkin 48 Asher Orkaby 93
The Korean Missile Crisis Even Smarter Sanctions

Scott D. Sagan 72 Edward Fishman 102
G ET TY IMAG ES
Will India Start Acting Like a Why Military Assistance Programs

Global Power? Disappoint
Alyssa Ayres 83 Mara Karlin 111
When Stalin Faced Hitler

Who Fooled Whom?
Stephen Kotkin
m
T
hrough the first four decades of his life, Joseph Stalin achieved
little. He was born in 1878 to a poor family in Gori, Georgia,
hi
then part of the Russian empire. His father was a cobbler; his
mother, a cleaning lady and seamstress. Stalin’s childhood, illnesses and
mishaps included, was largely normal for the time. He received good
ha
marks in school and, as a teenager, got his poems published in well-
regarded Georgian periodicals. (“To this day his beautiful, sonorous
lyrics echo in my ears,” one reader would later recall.) But he did not sit
iT
for his final-year exams at the Tiflis Seminary and failed to graduate.
Instead of becoming a priest, he became an underground revolutionary
fighting tsarist oppression, spending the next 20 years hiding, organiz-
ing, and serving time in prison and internal exile in Siberia.
Al
Stalin’s life was altered forever by the outbreak of total war in 1914,
which helped precipitate the Russian tsar’s abdication in February 1917
and, later that year, a putsch by radical leftists led by Vladimir Lenin.
od
Suddenly, the 39-year-old Stalin was a leading member of the new

Bolshevik regime.
He played a central role in the Russian Civil War and the creation
of the Soviet Union. In 1922, Lenin appointed him head of the
so
Communist Party. A month later, Lenin was incapacitated by a stroke,

and Stalin seized his chance to create his own personal dictatorship
inside the larger Bolshevik one. Beginning in the late 1920s, he forced
through the building of a socialist state, herding 120 million peasants
Ma
onto collective farms or into the gulag and arresting and murdering
immense numbers of loyal people in the officer corps, the secret police,
STEPHEN KOTKIN is John P. Birkelund ‘52 Professor in History and International Affairs at
Princeton University and a Senior Fellow at the Hoover Institution. This essay is adapted
from his most recent book, Stalin: Waiting for Hitler, 1929–1941 (Penguin Press, 2017), the
second in a three-volume biography of the Soviet leader.
embassies, spy networks, scientific and artistic circles,
and party organizations.
The vast shadow of Stalin the despot often
hides Stalin the human being. He collected
watches. He played skittles and billiards. He
loved gardening and Russian steam baths. He liked
colored pencils—blue, red, and green. He drank
mineral water and wines from his native Geor-
gia. He smoked a pipe, using tobacco from ciga-
m
rettes, which he would unroll and slide into the
pipe—usually two cigarettes’ worth—and then
light with matches. He kept his desk in order.
hi
Stalin had a passion for books, which he
marked up and filled with placeholders to find
particular passages. His personal library would
ha
ultimately grow to more than 20,000 volumes.
He annotated works by Karl Marx and Lenin, of
course, but also Russian translations of Plato and
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Clausewitz, as well as the writings of Alexander
Svechin, a former tsarist officer whom Stalin
never trusted but who demonstrated that
the only constant in war was an absence
Al
of constants. Among Russian authors,

Stalin’s favorite was probably Anton
Chekhov, who portrayed villains, and
od
not just heroes, with complexity. Still,

judging by the references scattered
among his writings and speeches, he spent
more time reading Soviet-era literature.
so
His jottings in whatever he read were

often irreverent: “Rubbish,” “fool,” “scum-
bag,” “piss off,” “ha-ha!”
Stalin’s manners were coarse, and his
Ma
sense of humor perverse. But he culti-

vated a statesmanlike appearance, editing out his jokes and foul
language from the transcripts of official gatherings. He appears
to have had few mistresses, and definitely no harem. His family
life was neither particularly happy nor unhappy. Personal life was
subsumed in politics.
November/December 2017 49
Stephen Kotkin
Stalin spoke softly, sometimes inaudibly, because of a defect in his

vocal cords. He relished being called Koba, after the Georgian folk-hero
avenger (and a real-life benefactor who had underwritten Stalin’s
education). But one childhood chum had called him Geza, a Gori-dialect
term for the unusual gait Stalin had developed after an accident. He
had to swing his hip all the way around to walk. A childhood bout with
smallpox had left lifelong scars on his nose, lower lip, chin, and cheeks.
It is tempting to find in such deformities the wellsprings of bloody
tyranny: torment, self-loathing, inner rage, bluster, a mania for adulation.
m
His pockmarks were airbrushed out of public photographs, and his
awkward stride was hidden from public view. (Film of him walking was
prohibited.) But people who met him saw the facial disfigurement and
hi
odd movement; they also discovered that he had a limp handshake and
was not as tall as he appeared in photographs. He stood five feet seven
inches, roughly the same as Napoleon and one inch shorter than Adolf
ha
Hitler. And yet, despite their initial shock on seeing him for the first
time—could this be Stalin?—most people found that they could not
take their gaze off him, especially his expressive eyes.
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THE DREAM PALACE
Stalin saw himself and his country as menaced from every direction.
After seizing power in 1917, Lenin and his followers had obsessed over
Al
the “capitalist encirclement” their coup had brought about: now, this
structural paranoia fed, and was fed by, Stalin’s personal paranoia. Such
were the paradoxes of power: the closer the country got to achieving
od
socialism, Stalin argued, the sharper the class struggle became; the more
power Stalin personally wielded, the more he still needed. Triumph
shadowed by treachery became the dynamic of both the revolution and
his life. Beginning in 1929, as the might of the Soviet state and Stalin’s
so
personal dictatorship grew and grew, so, too, did the stakes. His drive to
build socialism would prove both successful and shattering, and deeply
reinforcing of his hypersuspicious, vindictive disposition.
Communism was an idea, a dream palace whose attraction derived
Ma
from its seeming fusion of science and utopia, and Stalin was an
ideologue. In the Marxist conception, capitalism had created great
wealth by replacing feudalism, but then promoted only the interests of
the exploiter class, at the expense of the rest of humanity. Once capitalism
was overcome, the thinking went, the forces of production would be
unleashed as never before. Exploitation, colonization, and imperialist
war would give way to solidarity, emancipation, and peace. To be sure,

socialism in practice had been difficult to imagine. But whatever it was, it
could not be capitalism. Logically, socialism would be built by eradicat-
ing private property, the market, and
“bourgeois” parliaments and putting in
their place collective property, socialist
Under Stalin, the most
planning, and people’s power. Of course, terrible crimes became
as Stalin and many other Marxists morally imperative acts in
avowed, the capitalists would never al- the name of creating
m
low themselves to be buried. Rather,
they would fight to the death against so- paradise on earth.
cialism, using every means—lies, espi-
hi
onage, murder—because this was a war in which only one class could
emerge victorious. Socialism, therefore, would also have to use mass
violence and deceit. The most terrible crimes became morally imperative
ha
acts in the name of creating paradise on earth.
The purported science of Marxism-Leninism ostensibly explained why
the world had so many problems (class) and how it could be made better
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(class warfare), with a role for all. People’s otherwise insignificant lives
became linked to building an entirely new world. To collect grain or operate
a lathe was to strike a hammer blow at world imperialism. It did not hurt
that those who took part stood to gain personally: idealism and opportunism
Al
are always reinforcing. Accumulated resentments, too, fueled the aspiration

to become significant. People under the age of 29 made up nearly half of
the Soviet population, giving the country one of the youngest demographic
od
profiles in the world, and the youth proved especially attracted to a vision
that put them at the center of a struggle to build tomorrow today.
Stalin personified communism’s lofty vision. A cult would be built
around him, singling him out as vozhd, an ancient Slavic word that
so
came to mean something like “supreme leader”—the Russian equiv-

alent of “duce” or “führer.” Stalin resisted the cult, calling himself
“shit compared with Lenin.” According to his close associate Anastas
Mikoyan, Stalin once rebuked another Soviet official, saying, “Why
Ma
do you praise me alone, as if one man decides everything?” Whether

Stalin’s objections reflected false modesty or genuine embarrassment
remains hard to say, but he indulged the prolonged ovations he
received in public. “At first,” recalled Vyacheslav Molotov, who served
as Stalin’s principal lieutenant for decades, “he resisted the cult of
personality, but then he came to like it a bit.”
Stephen Kotkin
Stalin was a ruler of seemingly irreconcilable contradictions. He

could flash burning anger; he could glow with a soft, capacious smile.
He could be solicitous and charming; he latched on to perceived slights
and compulsively sought revenge. He prided himself on his voracious
reading and his ability to quote the wisdom of Marx or Lenin; he
resented fancy-pants intellectuals who he thought put on airs. He
possessed a phenomenal memory and a mind of scope; his intellectual
horizons were severely circumscribed by primitive theories of class
struggle and imperialism. He developed a feel for the aspirations of the
m
masses and incipient elites; he almost never visited factories or farms,
or even state agencies, instead reading about the country he ruled in secret
reports and newspapers. He was a cynic about everyone’s supposed
hi
base motives; he lived and breathed his own ideals.
Stalin did what winning leaders do: he articulated and drove toward a
consistent goal, in his case a powerful state backed by a unified society that
ha
had eradicated capitalism and built industrial socialism. “Murderous” and
“mendacious” do not begin to describe him. At the same time, Stalin
galvanized millions. His colossal authority was rooted in a dedicated party,
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a formidable governing apparatus, and Marxist-Leninist ideology. But his
power was magnified many times over by ordinary people, who projected
onto him their ambitions for social justice, peace, abundance, and national
greatness. Dictators who amass great power often retreat into pet pursuits,
Al
expounding interminably on their obsessions and paralyzing the state. But

Stalin’s obsession was a socialist great power, and he labored day and night
to build one. Stalin was a myth, but he proved equal to the myth.
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“A TREMENDOUS CHAP”
Hitler was 11 years Stalin’s junior, born in 1889 in a frontier region of
Austria-Hungary. He lost his father at age 13 and his mother at 18. (The
so
Jewish physician who tended to his mother would recall that in 40 years
of practicing medicine, he had never seen anyone as broken with grief
over a mother’s death as Hitler.) At age 20, Hitler found himself on a
bread line in Vienna, his inheritance and savings nearly spent. He had
Ma
twice been rejected from Vienna’s Academy of Fine Arts (“sample

drawing unsatisfactory”) and was staying in a homeless shelter behind a
railway station. A vagrant on the next bed recalled that Hitler’s “clothes
were being cleaned of lice, since for days he had been wandering about
without a roof and in a terribly neglected condition.” Soon, with a small
loan from an aunt, Hitler got himself into a group home for men. He
managed to find odd jobs, such as painting picture postcards and drafting
advertisements. He also frequented the city’s public libraries, where he
read political tracts, newspapers, the philosopher Arthur Schopenhauer,
and the fiction of Karl May, set in the cowboys-and-Indians days of the
American West or in the exotic Near East.
Hitler dodged the Austrian draft. When the authorities finally
caught up with him, they judged the undernourished and gloomy
youth unfit for service. He fled across the border to Munich, and in
August 1914, he joined the German army as a private. He ended World
m
War I still a private, but the war’s aftermath transformed his life. He
would be among the many who migrated from the political left to the
right in the chaotic wake of imperial Germany’s defeat.
hi
Film footage from 1918 shows Hitler marching in the funeral procession
of provincial Bavaria’s murdered leader, a Jewish Social Democrat; he is
wearing two armbands, one black (for mourning) and the other red. In
ha
April 1919, after Social Democrats and anarchists formed the Bavarian
Soviet Republic, the Communists quickly seized power; Hitler, who
contemplated joining the Social Democrats, served as a delegate from his
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battalion’s soviet (council). He had no profession to speak of but appears
to have taken part in leftist indoctrination of the troops. Ten days before
Hitler’s 30th birthday, the Bavarian Soviet Republic was quickly crushed
by the so-called Freikorps, made up largely of war veterans. Hitler
Al
remained in the military because a superior, the chief of the German

army’s “information” department, had the idea of sending him to an
antileftist instructional course and then using him to infiltrate leftist
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groups. The officer recalled that Hitler “was like a tired stray dog looking
for a master” and “ready to throw in his lot with anyone who would show
him kindness.” The assignment as an informant led to Hitler’s involvement
in a minuscule right-wing group, the German Workers’ Party, which had
so
been established to draw workers away from communism and which

Hitler, with the assistance of rabidly anti-Semitic émigrés from the former
imperial Russia, would remake into the National Socialist German
Workers’ Party, or Nazi Party.
Ma
Although he had begun to earn a reputation as a transfixing far-right

agitator, Hitler remained a marginal figure. When Stalin was the new
general secretary of the Communist Party of the largest state in the
world, Hitler was in prison for a failed 1923 attempt to seize power in
Munich, which would be derided as “the Beer Hall Putsch.” He was
convicted and sentenced to five years. Still, he managed to turn his trial
Stephen Kotkin
into a triumph. One of the judges remarked, “What a tremendous

chap, this Hitler!” Indeed, even though Hitler was an Austrian citizen,
the presiding judge allowed him to stay in Germany, reasoning that the
law requiring deportation “cannot apply to a man who thinks and feels
as German as Hitler, who voluntarily served for four and a half years
in the German army at war, who attained high military honors through
outstanding bravery in the face of the enemy, was wounded.”
During his first two weeks in prison, Hitler refused to eat, believing
he deserved to die, but letters arrived congratulating him as a national
m
hero. Richard Wagner’s daughter-in-law, Winifred, sent paper and pen-
cil, encouraging him to write a book.
Hitler had an attendant in confinement,
Hitler was a master
hi
Rudolf Hess, who typed his dictation,
improviser who grasped creating an autobiography dedicated
opportunities that came ha to the 16 Nazis killed in the failed
his way. putsch. In Mein Kampf, Hitler por-
trayed himself as a man of destiny and
pledged to revive Germany as a great
iT
power and rid it of Jews, anointing himself “the destroyer of Marxism.”
In December 1924, after serving only 13 months, he was released. But
his book sales disappointed, a second book failed to find a publisher, and
his Nazi Party struggled at the ballot box. Lord D’Abernon, the Brit-
Al
ish ambassador to Berlin at the time, summarized Hitler’s political life

after his early release from prison as “fading into oblivion.”
History is full of surprises. That this Austrian member of a fringe po-
od
litical movement would become the dictator of Germany, and Stalin’s

principal nemesis, was scarcely imaginable in 1924. But Hitler turned out
to be a master improviser: often uncertain, but a man possessed of radical
ideas who sensed where he was ultimately going and grasped opportuni-
so
ties that came his way. Stalin, too, was a strategist in that sense: a man of
radical ideas able to perceive and seize opportunities that he did not always
create but turned to his advantage. The richest opportunities perceived by
Stalin and Hitler were often supposedly urgent “threats” that they inflated
Ma
or invented. History is driven by the interaction of geopolitics, institu-

tions, and ideas—but it takes historical agents to set it all in motion.
Stalin’s direct experience of Germany consisted of just a few months in
1907 in Berlin, where he stopped on the way back to Russia from a Bol-
shevik meeting in London. He studied but never mastered the German
language. But like several tsarist predecessors, Stalin was a Germanophile,
admiring that country’s industry and science—in a word, its modernity.

But for the longest time, Stalin had no idea of Hitler’s existence.
Then, in 1933, Hitler was handed the wheel of the great state Stalin
admired. The lives of the two dictators had run in parallel, as the
historian Alan Bullock wrote. But it was the intersection that would
matter: two very different men from the peripheries of their societies
who were bloodily reviving and remaking their countries, all while
unknowingly (and then knowingly) drawing ever closer. It was not
only the German people who turned out to be waiting for Hitler.
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FACE-OFF
On Saturday, June 21, 1941, Stalin paced and paced in his Kremlin office,
hi
with his usual short steps, gripping a pipe. Inside the triangular Kremlin,
the Imperial Senate formed its own triangular stronghold, and Stalin’s
wing was a fortress within the fortress. Even the regime personnel with
ha
regular Kremlin passes needed a special pass to enter Stalin’s wing. It
came to be known to regime insiders as the Little Corner. The walls
in the offices were lined with shoulder-height wood paneling, under
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the theory that wood vapors enhanced air quality, and the elevators were
paneled with mahogany. Behind Stalin’s working desk hung a portrait
of Lenin. In a corner, on a small table, stood a display case with Lenin’s
death mask. Another small table held several telephones. (“Stalin,” he
Al
would answer.) Next to the desk was a stand with a vase holding fresh
fruit. In the rear was a door that led to a room for relaxation (although
rarely used for that purpose), with oversize hanging maps and a giant
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globe. In the main office, between two of the three large windows
that let in afternoon sun, sat a black leather couch where, in his better
moods, Stalin sipped tea with lemon.
Over the years, people who were granted an audience with him surmised
so
that he paced to control his explosive emotions or, alternatively, to unnerve

those in his company. Invariably, he would be the only one in the room
standing, trundling back and forth, sidling up to people while they were
speaking. Only a few intimates knew that Stalin suffered nearly constant
Ma
pain in the joints of his legs, which may have been a genetic condition
and which movement partly alleviated. He also strolled the Kremlin
grounds, usually alone, touching the leaves on the trees and shooing away
black ravens. (Afterward, guards would come and massacre the birds.)
Stalin had eliminated private property and made himself responsible
for the Soviet equivalents of Washington, Wall Street, and Hollywood
Stephen Kotkin
all rolled into one, and all rolled into one person. He complained of
fatigue, especially toward the end of his long workdays, and suffered
from insomnia, a condition never acknowledged publicly. A tiny group
of insiders knew of his infections and multiday fevers. Rumors of
various health problems had circulated abroad, and the use of foreign
doctors had long ago been discontinued. But a narrow circle of Russian
physicians had acquired detailed knowledge of his illnesses and of his
bodily deformities, including his barely usable left arm, the thick,
discolored toenails on his right foot, and the two webbed toes on his
m
left foot (an omen, in traditional Russian folklore, of Satanic influence).
For long periods, Stalin resisted being seen by any doctor, and he had
ceased using medicines from the Kremlin pharmacy that were issued
hi
in his name. The household staff had stopped bringing his meals from
the Kremlin canteen, cooking them in his apartment instead and, in his
presence, tasting from the plates. All the same, Stalin’s stomach was a
ha
wreck. He suffered from regular bouts of diarrhea.
The Imperial Senate had been built by the Teutonic empress of Russia,
Catherine the Great, for “the glorification of Russian statehood.” A few
iT
decades after its opening, in the early fall of 1812, Napoleon had arrived
with his invading forces. Members of the French Grande Armée—which
included many Protestants and Catholics from Germany, Italy, and
Poland—had defecated in the Kremlin’s Orthodox churches and taken
Al
potshots at the holy icons. After cunning Russian resistance starved the
occupiers, a retreating Napoleon had ordered the Kremlin blown to pieces.
Heavy rains limited the damage, but the explosives destroyed parts of
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the walls and several towers. The Imperial Senate suffered a fire.
The long, red-carpeted corridors around the Little Corner were
attended by an army of sentries. “See how many of them there are?”
Stalin once remarked to a military commander. “Each time I take this
so
corridor, I think, which one? If this one, he will shoot me in the back,
and if it is the one around the corner, he will shoot me in the front.”
The commander was dumbfounded by such paranoia: after all, there
had never been a single genuine assassination attempt against Stalin.
Ma
But the “Man of Steel”—“deeper than the ocean, higher than the
Himalayas, brighter than the sun, teacher of the universe,” in the words
of the Kazakh national poet—was being stalked from afar.
In the summer of 1941, it seemed clear that Hitler had won World
War II. He had annexed his native Austria, the Czech lands, much of
Poland, and a strip of Lithuania, creating the Greater Germany that in
1871 Otto von Bismarck had deliberately avoided forging during the
wars of German unification (deeming Austria-Hungary’s existence
vital for the balance of power). Hitler’s troops had occupied the Balkans,
Denmark, the Low Countries, Norway, and northern France. Leaders
loyal to the führer ruled Bulgaria, Croatia, Finland, Hungary, Italy,
Romania, and Spain. Hitler essentially controlled all of Europe from
the English Channel to the Soviet border; only Sweden and Switzerland
remained neutral, and both were cooperating with Nazi Germany
economically. True, the defiant British still refused to come to terms,
m
but London could never overturn Berlin’s continental dominance.
Stalin was strictly observing the nonaggression pact that Germany
and the Soviet Union had signed in August 1939. At that time, Hitler,
hi
who had decided to swallow Poland by force, needed to keep the
Soviet Union out of a possible anti-German coalition with France and
the United Kingdom. Stalin extracted a highly favorable bargain. As
ha
Hitler rampaged across the rest of Europe, Stalin avoided having to
face Germany’s military might and, taking advantage of the situation,
occupied and soon annexed the Baltic states, eastern Poland, and the
iT
eastern European regions of Bukovina and Bessarabia. Moreover, in
exchange for Soviet grain and oil, Stalin received advanced machine
tools and state-of-the-art weaponry from Germany.
Stalin’s apprenticeship in high-stakes diplomacy had shown him to
Al
be cunning but also opportunistic, avaricious, obdurate. His approach

had remained the same: prepare for war with a massive armaments
buildup, yet do everything to avoid fighting while allowing the British
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and the Germans to go at each other. This had worked, until Germany—
aided by the cornucopia of Soviet raw materials—conquered France in
the summer of 1940, and Germany was freed up to turn its troops toward
the Soviet Union. The two geopolitical and ideological rivals, as a result
so
of their shared aggrandizement, had acquired a common border.

Now, after half a year of contradictory secret reports about a possible
German invasion of the Soviet Union, intelligence warnings of an
imminent titanic war were coming from everywhere. In Moscow, German
Ma
embassy personnel were evacuating, taking with them oil paintings,

antique rugs, and silver. The Soviet secret police reported that the Italian
embassy, too, had received instructions to evacuate. Earlier in the day, a
Soviet agent in Bulgaria had reported that a German emissary had said
that “a military confrontation is expected on June 21 or 22.” The Chinese
Communist leader Zhou Enlai reported to officials at the Comintern, the
Stephen Kotkin
international communist organization, that his nationalist rival, Chiang

Kai-shek, “is declaring insistently that Germany will attack the USSR,
and is even giving a date: June 21, 1941!” This prompted the head of the
Comintern to call Molotov. “The situation is unclear,” Molotov told
him. “There is a major game under way. Not everything depends on us.”
FAKE NEWS
It was a hot, stifling day, and Stalin’s top aide, Alexander Poskryobyshev,
was sweating profusely, his window open but the leaves on the trees
m
outside utterly still. The son of a cobbler, like the despot he served,
Poskryobyshev occupied the immediate outer office through which
all visitors had to pass, and invariably they would spray him with
hi
questions—“Why did the Master have me summoned?” “What’s his
mood?”—to which he would laconically answer, “You’ll find out.” He
was indispensable, handling all the phone calls and document piles in
ha
just the way the despot preferred. But Stalin had allowed Lavrenti
Beria, the feared head of the secret police, to imprison Poskryobyshev’s
beloved wife as a “Trotskyite” in 1939. (Beria had sent a large basket of
iT
fruit to their two girls; he then executed their mother.)
Poskryobyshev sat at his desk trying to cool down with a bottle of
mineral water. On Stalin’s instructions, at around 2:00 PM, he phoned
General Ivan Tyulenev, head of the Moscow Military District. Soon
Al
the general heard Stalin’s muffled voice asking, “Comrade Tyulenev,

what is the situation concerning Moscow’s antiaircraft defenses?” After
a brief report, Stalin said, “Listen, the situation is unsettled and
od
therefore you should bring the antiaircraft defenses of Moscow up to

75 percent of their readiness state.”
Poskryobyshev placed the latest intelligence, delivered by a field
courier, on Stalin’s desk. Almost all of it was hearsay, rather than pur-
so
loined documents. The reports were contradictory, contaminated with

obviously false information, and often delivered with skepticism. In
London, the Soviet ambassador to the United Kingdom wrote in his
report that he considered a German attack “unlikely” despite having
Ma
received information to the contrary from British intercepts of secret

German military communications. In Berlin, however, the Soviet
ambassador to Germany, after months of equivocation, finally averred
that Germany’s actions signaled an imminent invasion. But Stalin
evidently concluded that his envoy in Berlin had been fed disinformation
and remarked that he was “not such a smart fellow.”
For Stalin, the question was not whether war with the Nazi regime
was inescapable but whether it was inescapable this year. Scores
and scores of invasion warnings had accumulated on his desk, but
14 specific dates that intelligence reports had identified as the day
when Germany would attack had come and gone. The only remaining
possibilities were “June 22–25” and “June 21 or 22.” The invasion
window would soon shut, because of the short time remaining until
the onset of winter. Stalin was virtually home free for another year.
Of course, warnings of impending war were even splashed across
m
the front pages of newspapers all over the world. But knowing how
he himself made use of the press, Stalin took the screaming head-
lines to be planted provocations. He reasoned that the Americans
hi
and the British wanted nothing more
than for the Germans and the Soviets to
become embroiled in war. He was right,
Stalin labeled as
ha
of course. But as a result, he dismissed “disinformation” whatever
all warnings of a German attack. He he chose not to believe.
knew that Germany was experiencing se-
iT
vere shortages and reasoned that it needed even more supplies from
him, thus a German invasion would be self-defeating because it
would put those supplies at risk. He knew further that Germany had
lost World War I because it had fought on two fronts, and so he rea-
Al
soned that the Germans understood that it would be suicidal for

them to attack the Soviet Union in the east before defeating the
United Kingdom in the west.
od
This kind of reasoning had become a trap for Stalin, allowing him
to conclude that the colossal buildup of German forces on his door-
step was not a sign of imminent attack but rather Hitler attempting
to blackmail him into giving up territory and making other conces-
so
sions without a fight. Indeed, a brilliant Nazi disinformation campaign

fed the Soviet global spy network with incessant reports about
German demands that would follow the vast eastern military buildup.
Thus, even Stalin’s best intelligence said both that war was coming
Ma
and that there would be blackmail. And if the latter were true, the
former need not be.
When Stalin damned his intelligence as contaminated by disinfor-
mation, therefore, he was right. But the despot had no idea which
parts were disinformation and which might be accurate intelligence.
He labeled as “disinformation” whatever he chose not to believe.
Stephen Kotkin
READY OR NOT, HERE I COME

Colonel Georgy Zakharov, a decorated fighter pilot, had been ordered
to conduct a full daylight reconnaissance of the border region on the
German side, and he reported that the Wehrmacht was poised to
invade. The NKGB, the Soviet secret police agency, had discovered that
German saboteurs brazenly crossing the border had been instructed
that “in the event German troops cross the frontier before they return
to Germany, they must report to any German troop unit located on
Soviet territory.” Soviet counterintelligence noted vigorous German
m
recruitment of disaffected people in the Baltic region, Belarus, and
Ukraine, who were forming underground groups and engaging in
terrorism long after Stalin’s supposed annihilation of the perceived fifth
hi
column during the Great Terror. Overburdened Soviet rail lines that
were needed to transport troops westward were swamped with tens of
thousands of “anti-Soviet elements” being deported. German tanks,
ha
warplanes, and pontoons had been advanced into an inner zone protected
by barbed wire; now the wire was being removed. The click and whir of
German motors resounded across to the Soviet side of the frontier.
iT
At the centerpiece of the Little Corner, a felt-covered conference
table, Stalin had held countless sessions devoted to war preparations.
He had forced into being upward of 9,000 new industrial enterprises
during three Five-Year Plans, and Soviet military production grew
Al
even faster than GDP for a decade. He had overseen the formation
of 125 new divisions just since 1939, and the Red Army now stood at
5.37 million troops, the largest military force in the world. It had
od
25,000 tanks and 18,000 fighter planes, three to four times the size of
Germany’s stocks. Stalin knew that Germany was underestimating
this massive force out of prejudice as well as ignorance, so he had arranged
German visits to Soviet aviation and tank factories, and even allowed
so
German planes nearly unimpeded reconnaissance of Soviet troop

concentrations, airfields, naval bases, and fuel and ammunition depots.
Stalin also had his spies spread rumors that, if attacked, Soviet aircraft
would assault Berlin with chemical and biological agents. In Hitler’s
Ma
shoes, Stalin would have been deterred.

Of course, if his own country really was so well armed, why not let
an enemy foolishly underestimate it? Because the so-called Winter
War between the Soviet Union and Finland, waged in 1939–40, had
exposed Soviet military weaknesses not just to Hitler but also to Stalin.
(The Soviets had won a crushing victory in the end, but only after
being stymied for months by stout Finnish resistance.) The Red Army
was still in the middle of a protracted post-Finland technological
upgrade and reorganization. The Soviets possessed only around 1,800
advanced heavy tanks; the rest of their tanks were too light relative to
their German counterparts. Similarly, the most advanced Soviet warplanes
made up just one-quarter of the air force. Stalin’s war preparations
also bore the mark of his executions of thousands of loyal officers, espe-
cially top commanders such as Vasily Blyukher, whose eye had been
deposited in his hand before he died under torture in 1938, and the
m
gifted Mikhail Tukhachevsky, whose blood had been splattered all
over his “confession” to being a German agent—not long before Stalin
concluded the German-Soviet Nonaggression Pact.
hi
Now, 85 percent of the officer corps was 35 or younger; those older
than 45 constituted around one percent. Fully 1,013 Soviet generals
were under age 55, and only 63 were older than that. Many had been
ha
majors just a short time earlier. Out of 659,000 Soviet officers, only
around half had completed military school, while one in four had the
bare minimum (a few courses), and one in eight had no military edu-
iT
cation whatsoever.
TONIGHT’S THE NIGHT

Stalin was keenly aware of these realities, and lately, the despot’s
Al
morose side had gotten the upper hand. “Stalin was unnerved and
irritated by persistent reports (oral and written) about the deterioration
of relations with Germany,” recalled Admiral Nikolai Kuznetsov, the
od
commissar of the Soviet navy, of this period. “He felt that danger was
imminent,” recalled Nikita Khrushchev, who was at the time the party
boss of Ukraine and had spent much of June in Moscow. “Would our
country be able to deal with it? Would our army deal with it?”
so
June 21 happened to be the summer solstice, the longest day of the

year—and it must have seemed interminable. At 5:00 PM, Stalin
ordered that party secretaries of all Moscow wards were to stay at
their posts. At 6:27 PM, Molotov entered the Little Corner—the first
Ma
visitor, as usual. At 7:05, in walked Beria, Kuznetsov, Georgy Malenkov

(a senior Communist Party secretary responsible for cadres), Grigory
Safonov (a young deputy procurator general responsible for military
courts), Semyon Timoshenko (a senior military commander), Kliment
Voroshilov (a deputy head of the government), and Nikolai Voznesensky
(the head of state planning). The discussion apparently revolved
Stephen Kotkin
around recent developments pointing toward war and Stalin’s dread

of provocations that might incite it.
Stalin’s military intelligence estimated that only 120 to 122 of Germany’s
285 total divisions were arrayed against the Soviet Union, versus some-
where between 122 and 126 against the United Kingdom (the other 37 to
43 were said to be in reserve). In fact, there were around 200 divisions
arrayed against the Soviets—a total of at least three million Wehrmacht
soldiers and half a million troops from Germany’s Axis partners, as well
as 3,600 tanks, 2,700 aircraft, 700,000 field guns and other artillery,
m
600,000 motor vehicles, and 650,000 horses. The Soviets had massed
around 170 divisions (perhaps 2.7 million men) in the west, along with
10,400 tanks and 9,500 aircraft. The two largest armies in world history
hi
stood cheek by jowl on a border some 2,000 miles long.
Most conspicuously, German forces had occupied their firing positions;
the Soviets had not. To be sure, Stalin had allowed covert strategic rede-
ha
ployments to the western border from the interior. But he would not
permit the assumption of combat positions, which he feared would only
play into the hands of hawks in the German military who craved war and
iT
were scheming to force Hitler’s hand. Soviet planes were forbidden from
flying within six miles of the border. Timoshenko and Georgy Zhukov,
another senior military commander, made sure that frontline commanders
did not cause or yield to provocation. Beria also tasked a master assassin
Al
with organizing “an experienced strike force to counter any frontier incident
that might be used as an excuse to start a war.” Soviet commanders could
be liquidated by their own side if their forces returned any German fire.
od
Soviet intelligence was now reporting that not just Germany but also
its eastern allies—Finland, Hungary, Romania, and Slovakia—were at
full war readiness. But Stalin, having long ago ceded the initiative,
was effectively paralyzed. Just about anything he did could be used by
so
Hitler to justify an invasion.

At 7:00 PM, Gerhard Kegel, a Soviet spy in the German embassy in
Moscow, had risked his life, slipping out to tell his Soviet handler that
German personnel living outside the facility had been ordered to come
Ma
inside immediately and that “all think that this very night there will be
war.” At 8:00 PM, a courier arrived to give Stalin, Molotov, and
Timoshenko this new piece of intelligence in sealed envelopes. In the
Little Corner, Kuznetsov, Safonov, Timoshenko, Voroshilov, and
Voznesensky were dismissed at 8:15. Malenkov was dismissed five
minutes later. Nothing significant was decided.
Zhukov phoned in to report that yet another German soldier had

defected across the frontier and was warning of an invasion within a few
hours. This was precisely the kind of “provocation” Stalin feared. He
ordered Zhukov to the Kremlin, along with the just-departed Timosh-
enko. They entered Stalin’s office at 8:50. Whereas Molotov and Beria
parroted Stalin’s denials that Hitler was
going to attack, the two peasant-born Stalin clung to his
commanders could see that Germany
was coiled to invade. Still, when Stalin belief that Germany
m
insisted otherwise, they presumed that could not attack Russia
he possessed superior information and before defeating the
insight. In any case, they knew the costs
hi
of losing his trust. “Everyone had in their United Kingdom.
memory the events of recent years,”
Zhukov would later recall. “And to say out loud that Stalin was wrong,
ha
that he is mistaken, to say it plainly, could have meant that without leav-
ing the building, you would be taken to have coffee with Beria.”
Nonetheless, the pair evidently used the defector’s warnings to urge
iT
a general mobilization—tantamount, in Stalin’s mind, to war. “Didn’t
German generals send that defector across the border in order to
provoke a conflict?” Stalin asked. “No,” answered Timoshenko. “We
think the defector is telling the truth.” Stalin: “What do we do now?”
Al
Timoshenko allowed the silence to persist. Finally, he suggested, “Put

the troops on the western border on high alert.” He and Zhukov had
come prepared with a draft directive.
od
Stalin had himself tried to engage Hitler even as he waited for the
blackmail demands he expected Hitler to issue. “Molotov has asked for
permission to visit Berlin, but has been fobbed off,” Joseph Goebbels,
the Nazi propaganda chief, had written in his diary on June 18. “A
so
naive request.”
Stalin, instead of continuing to wait for an ultimatum from Hitler,
could have preempted it. This was the last option he had left, and a
potentially powerful one. Hitler feared that the wily Soviet despot would
Ma
somehow seize the initiative and unilaterally, publicly declare dramatic,

far-reaching concessions to Germany. Stalin appears to have discussed
possible concessions with Molotov, but if he did, no record survives.
Evidently, Stalin expected Germany to demand Ukraine, the Caucasian
oil fields, and unimpeded transit for the Wehrmacht through Soviet
territory to engage the British in the Near East and India. A cunning
Stephen Kotkin
despot could have publicly declared his willing-

ness to join the hostilities against the United
Kingdom, exacting revenge against the great
power he most reviled and, crucially, rob-
bing Hitler of his argument that the Brit-
ish were holding out against Germany in
anticipation of eventual Soviet assistance. In-
stead, or in parallel to that, Stalin could have
demonstrably begun the withdrawal of Soviet
m
forces back from the entire frontier, which would
have struck at the heart of the Nazi leader’s
public war rationale: a supposed “preventive
hi
attack” against the “Soviet buildup.”
Instead of acting cunningly, Stalin clung
to his belief that Germany could not attack Rus-
ha
sia before defeating the United Kingdom, even
though the British did not have an army on the
continent and were neither defending terri-
iT
tory there nor in a position to invade from
there. He assumed that when Hitler finally
issued his ultimatum, he would be able to buy
time by negotiating: possibly giving in, if
Al
the demands were tolerable, and thereby avert-

ing war, or, more likely, dragging out any talks
beyond the date when Hitler could have launched
od
an invasion, gaining one more critical year, dur-

ing which the Red Army’s technological re-
vamp would advance. Failing that, Stalin
further assumed that even if hostilities
so
broke out, the Germans would need at

least two more weeks to fully mobilize their
main invasion force, allowing him time to mobilize, too.
When his spies out of Berlin and elsewhere reported that the Weh-
Ma
rmacht had “completed all war preparations,” he did not grasp that this
meant that day one would bring full, main-force engagement.
BARBAROSSA BEGINS
In the Little Corner, while the relatively heated discussion with
Timoshenko and Zhukov continued, Molotov stepped out. Stalin had
him summon the German ambassador, Friedrich

Werner von der Schulenburg, to the Imperial Senate
for a meeting at 9:30 PM. Schulenburg arrived
promptly, direct from overseeing the burning
of secret documents at the embassy. The envoy
had been deeply disappointed that the Hitler-
Stalin Pact, in which he had played an impor-
tant role, had turned out to be an instrument
not for a territorial deal over Poland to avoid war
m
but for the onset of another world war. Now he
feared the much-rumored German-Soviet
clash, and recently he had gone to Berlin to see
hi
Hitler himself and persuade him of Stalin’s
peaceful intentions but had come back
empty-handed. In desperation, Schulenburg
ha
had sent his embassy counselor to Berlin to
try one last time, but this had failed as well.
Molotov demanded to know why Germany
iT
was evacuating personnel, thereby fanning rumors
of war. He handed Schulenburg a letter of protest
detailing systematic German violations of Soviet
airspace and plaintively told him that “the Soviet
Al
government is unable to understand the cause of

Germany’s dissatisfaction in relation to the [Soviet
Union], if such dissatisfaction exists.” He com-
od
plained that “there was no reason for the German

government to be dissatisfied with Russia.”
Schulenburg responded that “posing those
issues [is] justified,” but he shrugged, saying
so
that he was “not able to answer them, because

Berlin utterly refrains from informing [me].”
During a state visit to Germany in November 1940, Molotov had gone
toe to toe with Hitler in the gargantuan new Reich Chancellery, arguing
Ma
over clashing spheres of influence in eastern Europe. “No foreign visitor

had ever spoken to [Hitler] in this way in my presence,” the führer’s trans-
lator later wrote. But now Molotov could merely express, several times,
his regret that Schulenburg was “unable to answer the questions raised.”
Molotov shuffled back to Stalin’s Little Corner. Suddenly, around
10:00 PM, amid the still suffocating heat, the winds gushed, billowing
Stephen Kotkin
the curtains at open windows. Then came the thunderclaps. Moscow

was struck by a torrential downpour.
Finally, Stalin yielded to his insistent soldiers and accepted their
draft directive. Timoshenko and Zhukov rushed out of the Little Cor-
ner at 10:20, armed, at long last, with an order for full-scale war mobi-
lization, Directive Number 1. “A surprise attack by the Germans is
possible during 22–23 June 1941,” it stated. “The task of our forces is
to refrain from any kind of provocative
action that might result in serious com-
“The beginning of every
m
plications.” It ordered that “during the
war is like opening the door night of June 22, 1941, the firing posi-
into a dark room,” Hitler tions of the fortified regions on the
hi
once said. state border are to be secretly occu-
pied,” that “before dawn on June 22,
ha 1941, all aircraft stationed in the field
airdromes are to be dispersed and carefully camouflaged,” that “all
units are to be put in a state of military preparedness,” and that “no
further measures are to be carried out without specific instructions.”
iT
It carried the signatures of Timoshenko and Zhukov. The military
men had managed to delete an insertion by the despot that if the Ger-
mans attacked, Soviet commanders were to attempt to meet them, to
settle any conflict. Still, the document made clear that the military
Al
was to prepare for war while doing everything possible to avoid it.
Soviet commanders up and down the frontier were hosting perfor-
mances, as they generally did on Saturday nights. In Minsk, 150 miles
od
east of the border, the officers’ club put on The Wedding at Malinovka, a
Soviet comic operetta about a village in the Ukrainian steppes during the
civil war. The venue was packed. Attendees included the commander of
the critical Western Military District, Dmitry Pavlov; his chief of staff;
so
and his deputies. Six German aircraft had crossed the frontier in Pavlov’s
region on a recent night. “Never mind. More self-control. I know, it has
already been reported! More self-control!” Pavlov was overheard saying
on the phone about reports of German actions. As soon as Pavlov put the
Ma
receiver down and prepared to greet a visitor, the phone rang again. “I
know; it has been reported,” Pavlov was heard to say. “I know. Those at
the top know better than us. That’s all.” He slammed down the phone.
During the operetta, Pavlov was interrupted in his box by a new report
of unusual activity: the Germans had removed the barbed wire from
their side of the border, and the sound of motors had grown louder,
even at a distance. An uninterrupted flow of German mechanized col-

umns was moving forward. Pavlov remained at the show.
Around midnight, the commander of the Kiev Military District
called the defense commissariat to report that another German had
crossed the border, claiming that Wehrmacht soldiers had taken up
their firing positions, with tanks at their start lines. Some 12 hours
earlier, at 1:00 PM, Germany’s high command had transmitted the
password for war, “Dortmund.” That afternoon, Hitler had composed
letters explaining his decision to attack the Soviet Union to the lead-
m
ers of Nazi-allied states. Hitler’s adjutant Nicolaus von Below noticed
that the führer was “increasingly nervous and restless. Hitler talked a
lot, walked up and down; he seemed impatient, waiting for some-
hi
thing.” In his residence in the old Reich Chancellery, Hitler did not
sleep for a second straight night. He took a meal in the dining room.
He listened to Les Préludes, the symphonic poem by Franz Liszt. He
ha
summoned Goebbels, who had just finished watching Gone With the
Wind. The two walked up and down Hitler’s drawing room for quite
a while, finalizing the timing and content of Hitler’s war proclamation
iT
for the next day, which would focus on “the salvation of Europe” and
the intolerable danger of waiting any longer. Goebbels left at 2:30 AM,
returning to the Propaganda Ministry, where staff had been told to
await him. “Everyone was absolutely astonished,” he wrote in his
Al
diary, “even though most had guessed half of what was going on, and
some all of it.” The Germans had given the invasion the code name
Operation Barbarossa. Now, it had begun.
od
Most of the intended recipients in Soviet frontline positions failed

to receive Directive Number 1. Wehrmacht advance units, many
disguised in Red Army uniforms, had already crossed the border and
sabotaged Soviet communications. “The beginning of every war is
so
like opening the door into a dark room,” Hitler had told one of his
private secretaries. “One never knows what is hidden in the darkness.”
BLINDED BY THE MIGHT

Ma
Stalin’s regime had reproduced a deep-set pattern in Russian history:

Russian rulers launching forced modernizations to overcome or at
least manage the asymmetry of a country that considered itself a prov-
idential power with a special mission in the world but that substantially
lagged behind the other great powers. The urgent quest for a strong
state had culminated, once more, in personal rule. Stalin’s regime
Stephen Kotkin
defined the terms of public thought and individual identity, and Stalin
himself personified the passions and dreams of a socialist modernity
and Soviet might. With single-sentence telegrams or brief phone calls,
he could spur the clunky Soviet party-state machinery into action,
invoking discipline and intimidation, to be sure, but also galvanizing
young functionaries who felt close emotional ties to him and millions
more who would never come close to meeting him in person.
Stalin’s regime promised not merely statist modernization but also
the transcendence of private property and markets, of class antago-
m
nisms and existential alienation—a renewal of the social whole rent by
the bourgeoisie, a quest for social justice on a global scale. In world-
view and practice, it was a conspiracy
hi
that perceived conspiracy everywhere
Hitler turned out to be and in everything, constantly gaslighting
someone neither Marx ha itself. In administration, it constituted
nor Lenin had prepared a crusade for planning and control that
Stalin for. ended up generating a proliferation of
improvised illegalities, a perverse drive
iT
for order, and a system in which propa-
ganda and myths about “the system” were the most systematized part.
Amid the cultivated opacity and patent falsehoods, even most high
officials were reduced to Kremlinology. The fanatical hypercentrali-
Al
zation was often self-defeating, but the cult of the party’s and especially
Stalin’s infallibility proved to be the most dangerous flaw of Stalin’s
fallible rule.
od
By inclination, Stalin was a Russian nationalist in the imperial sense,

and anti-Westernism was the core impulse of this long-standing Russian-
Eurasian political culture. Initially, the ambitious Soviet quest to match
the West had actually increased the country’s dependency on Western
so
technology and know-how. But after importing technology from every

advanced Western economy, Stalin’s regime went on to develop its own
sophisticated military and related industries to a degree unprecedented
for even a military-first country. Geopolitically, however, whereas tsarist
Ma
Russia had concluded foreign alliances for its security, the Soviet Union
mostly sought, or could manage, only nonaggression pacts. Its sole formal
alliance, formed with France, lacked any military dimension. The coun-
try’s self-isolation became ever more extreme.
Stalin insisted on calling fascism “reactionary,” a supposed way for
the bourgeoisie to preserve the old world. But Hitler turned out to be
someone neither Marx nor Lenin had prepared Stalin for. A lifelong
Germanophile, Stalin appears to have been mesmerized by the might
and daring of Germany’s parallel totalitarian regime. For a time, he
recovered his personal and political equilibrium in his miraculous pact
with Hitler, which deflected the German war machine, delivered a
bounty of German industrial tools, enabled the conquest and Soviet-
ization of tsarist borderlands, and reinserted the Soviet Union into
the role of arbitrating world affairs. Hitler had whetted and, reluc-
tantly, abetted Stalin’s own appetite. But far earlier than the despot
m
imagined, his ability to extract profit from the immense danger Hitler
posed to Europe and the world had run its course. This generated
unbearable tension in Stalin’s life and rule, yet he stubbornly refused
hi
to come to grips with the new realities, and not solely out of greed for
German technology. Despite his insight into the human psyche,
demonic shrewdness, and sharp mind, Stalin was blinkered by ideology
ha
and fixed ideas. British Prime Minister Winston Churchill controlled
not a single division on the Soviet frontier, yet Stalin remained abso-
lutely obsessed with British imperialism, railing against the Treaty of
iT
Versailles long after Hitler had shredded it and continuing to imagine
that Hitler was negotiating with the British behind his back.
HITLER’S CHOICE
Al
For Hitler, the 1939 pact had been a distasteful necessity that, with
luck, would not endure very long. His racial, social Darwinist, zero-
sum understanding of geopolitics meant that both the Soviet Union
od
and the United Kingdom would have to be annihilated in order for

Germany to realize its master-race destiny. To be sure, in the immediate
term, he thought in terms of domination of the European continent
(Grossmacht), which required Lebensraum—living space—in the east.
so
But in the longer term, he foresaw domination of the world (Weltmacht),

which would require a blue-water fleet, bases rimming the Atlantic,
and a colonial empire in the tropics for raw materials. That was
incompatible with the continued existence of the British Empire, at
Ma
least in the form it took at that time. Hitler thus put himself in front
of a stark choice of either agreeing to deepen the pact with Stalin and
taking on the entire British Empire, which would mean conceding at
least a partial Soviet sphere in the Balkans and on the Black Sea—on
top of the Soviet sphere in the Baltics—or, alternatively, freeing
himself from the infuriating dependency on Moscow and taking on
Stephen Kotkin
the British later. In the end, military circumstances helped determine

the sequencing: Hitler did not possess the air or naval capabilities or
the depth of resources to prevail militarily over the United Kingdom;
he did have the land forces to attempt to smash the Soviet Union.
A commitment to a prolonged contest for supremacy with the British,
whom Hitler expected to be aided more and more by the vast resources
of the United States, made quick annihilation of the Soviet Union an
absolutely necessary prelude. Moreover, even though Hitler and the
German high command knew that the Soviet Union was not poised to
m
attack, the invasion amounted to a preventive war all the same in his
logic, for the Soviet Union was only getting stronger and might itself
attack at a time it deemed more advantageous. And so in 1940, while
hi
pushing Japan to attack British positions in East Asia, Hitler had
offered the British government a version of the pact he had concluded
with Stalin and seemed dumbfounded when the British government
ha
did not accept it. The Nazi leader had grasped the British imperial
mindset, and he was sincere when promising that, in exchange for a
free hand on the continent, he would keep the British Empire intact
iT
for now. He continued to hold out hope that the United Kingdom,
patently weak militarily on land and therefore unable to defeat him,
would come to terms with him. But Hitler had failed to understand
the long-standing British preference for a balance of power on the
Al
continent (on which the security of the empire, too, partly depended).
And he perceived far more common interests between London and
Moscow than either of them saw themselves.
od
During the preparations for the blitzkrieg against the Soviets, Hitler
continued to devote resources to preparing for a long naval and air
war against the British and the United States. May and June of 1941
was the blackest period yet for the United Kingdom: Germany was
so
sinking its ships and bombing its cities, and it had lost its position in
the Balkans. After German paratroopers had captured Crete, in late
May 1941, the British position seemed grievously imperiled. Eleven
days before the scheduled launch of his Soviet invasion, Hitler had
Ma
dictated a draft of Directive Number 32, “Preparations for the Time

after Barbarossa.” It envisioned the subdivision and exploitation of
Soviet territories, as well as a pincer movement against the Suez Canal
and British positions in the Middle East; the conquest of Gibraltar,
northwestern Africa, and the Spanish and Portuguese Atlantic islands,
to eliminate the British in the Mediterranean; and the building of
coastal bases in West and possibly East Africa. Eventually, there would
need to be a German base in Afghanistan for seizing British India.
Had Hitler thrown all his might into this “peripheral strategy”
rather than invading the Soviet Union, the United Kingdom might
not have survived. The war with the Soviets would have gone ahead at
some point, but with the British knocked out of the picture. There
would have been no British beachhead to assist an eventual U.S.-led
Allied landing in western Europe.
m
THE WISDOM OF BISMARCK
Hitler cannot be explained in terms of his social origins or his early
life and influences, a point that is no less applicable to Stalin. The
hi
greatest shaper of Stalin’s identity was the building and running of a
dictatorship, whereby he assumed responsibility for the Soviet Union’s
power in the world. In the name of socialism, Stalin, pacing in his
ha
Kremlin office, had grown accustomed to moving millions of peasants,
workers—whole nations—across a sixth of the earth, on his own initi-
ative, often consulting no one. But his world had become intensely
iT
constricted. Hitler had trapped the Soviet despot in his Little Corner.
Stalin’s dealings with Hitler differed from British appeasement in
that Stalin tried deterrence as well as accommodation. But Stalin’s
policy resembled British appeasement in that he was driven by a
Al
blinding desire to avoid war at all costs. He displayed strength of

capabilities but not of will. Neither his fearsome resolve nor his
supreme cunning—which had enabled him to vanquish his rivals and
od
spiritually crush his inner circle—was in evidence in 1941. He shrank

from trying to preempt Hitler militarily and failed to preempt him
diplomatically.
In the end, however, the question of who most miscalculated is not
so
a simple one. “Of all the men who can lay claim to having paved the
way” for the Third Reich, Hitler liked to say, “one figure stands in
awe-inspiring solitude: Bismarck.” But Bismarck had built his chan-
cellorship on avoiding conflict with Russia. When a bust of Bismarck
Ma
was transferred from the old Reich Chancellery to Hitler’s new Reich
Chancellery, it had broken off at the neck. A replica was hastily made
and artificially aged by soaking it in cold tea. No one shared this omen
with Hitler.∂
The Korean Missile Crisis

Why Deterrence Is Still the Best Option
Scott D. Sagan
m
I
t is time for the U.S. government to admit that it has failed to
prevent North Korea from acquiring nuclear weapons and inter-
hi
continental ballistic missiles that can reach the United States.
North Korea no longer poses a nonproliferation problem; it poses a
nuclear deterrence problem. The gravest danger now is that North
ha
Korea, South Korea, and the United States will stumble into a
catastrophic war that none of them wants.
The world has traveled down this perilous path before. In 1950, the
iT
Truman administration contemplated a preventive strike to keep
the Soviet Union from acquiring nuclear weapons but decided that the
resulting conflict would resemble World War II in scope and that
containment and deterrence were better options. In the 1960s, the
Al
Kennedy administration feared that Chinese leader Mao Zedong was

mentally unstable and proposed a joint strike against the nascent
Chinese nuclear program to the Soviets. (Moscow rejected the idea.)
od
Ultimately, the United States learned to live with a nuclear Russia and
a nuclear China. It can now learn to live with a nuclear North Korea.
Doing so will not be risk free, however. Accidents, misperceptions,
and volatile leaders could all too easily cause disaster. The Cold War
so
offers important lessons in how to reduce these risks by practicing

containment and deterrence wisely. But officials in the Pentagon and
the White House face a new and unprecedented challenge: they must
deter North Korean leader Kim Jong Un while also preventing U.S.
Ma
President Donald Trump from bumbling into war. U.S. military leaders
should make plain to their political superiors and the American public
that any U.S. first strike on North Korea would result in a devastating
loss of American and South Korean lives. And civilian leaders must
SCOTT D. SAGAN is Caroline S. G. Munro Professor of Political Science and a Senior
Fellow at the Center for International Security and Cooperation at Stanford University.
convince Kim that the United States will not attempt to overthrow his
regime unless he begins a war. If the U.S. civilian and military leaderships
perform these tasks well, the same approach that prevented nuclear
catastrophe during the Cold War can deter Pyongyang until the day
that communist North Korea, like the Soviet Union before it, collapses
under its own weight.
DANGER OF DEATH
The international relations scholar Robert Litwak has described the
m
current standoff with North Korea as “the Cuban missile crisis in slow
motion,” and several pundits, politicians, and academics have repeated
that analogy. But the current Korean missile crisis is even more dan-
hi
gerous than the Cuban one. For one thing, the Cuban missile crisis did
not involve a new country becoming a nuclear power. In 1962, the
Soviet Union was covertly stationing missiles and nuclear warheads
ha
in Cuba when U.S. intelligence discovered the operation. During
the resulting crisis, Cuban Prime Minister Fidel Castro feared an im-
minent U.S. air strike and invasion and wrote to Soviet Premier Ni-
iT
kita Khrushchev advocating a nuclear strike on the United States “to
eliminate such danger forever through an act of clear legitimate de-
fense, however harsh and terrible the solution would be.” When
Khrushchev received the message, he told a meeting of his senior leader-
Al
ship, “This is insane; Fidel wants to drag us into the grave with him!”
Luckily, the Soviet Union maintained control of its nuclear weapons,
and Castro did not possess any of his own; his itchy fingers were not
od
on the nuclear trigger.

Kim, in contrast, already presides over an arsenal that U.S. intelligence
agencies believe contains as many as 60 nuclear warheads. Some
uncertainty still exists about whether North Korea can successfully
so
mount those weapons on a missile capable of hitting the continental

United States, but history cautions against wishful thinking. The
window of opportunity for a successful U.S. attack to stop the North
Korean nuclear program has closed.
Ma
At the time of the Cuban missile crisis, both the American and the
Soviet nuclear war plans were heavily geared toward preemption. Each
country’s system featured a built-in option to launch nuclear weapons
if officials believed that an enemy attack was imminent and unavoidable.
This produced a danger that the strategist Thomas Schelling called
“the reciprocal fear of surprise attack.” That fear was why Khrushchev
Scott D. Sagan
was so alarmed when a U.S. U-2 spy plane accidentally flew into Soviet
airspace during the crisis. As he wrote to U.S. President John F.
Kennedy on the final day of the crisis: “Is it not a fact that an intruding
American plane could be easily taken for a nuclear bomber, which
might push us to a fateful step?” Today, the world faces an even more
complex and dangerous problem: a three-way fear of surprise attack.
North Korea, South Korea, and the United States are all poised to
launch preemptive strikes. In such an unstable situation, the risk that
an accident, a false warning, or a misperceived military exercise could
m
lead to a war is alarmingly high.
Another factor that makes today’s situation more dangerous than
the Cuban missile crisis is the leaders involved. In 1962, the standoff
hi
included one volatile leader, Castro, who held radical misperceptions
of the consequences of a nuclear war and surrounded himself with yes
men. Today, there are two such unpredictable and ill-informed leaders:
ha
Kim and Trump. Both men are rational and ruthless. Yet both are also
prone to lash out impulsively at perceived enemies, a tendency that
can lead to reckless rhetoric and behavior.
iT
This danger is compounded because their senior advisers are in a
poor position to speak truth to power. Kim clearly tolerates no dissent;
he has reportedly executed family members and rivals for offering
insufficiently enthusiastic praise. For his part, Trump often ignores,
Al
ridicules, or fires those who disagree with him. In May, The New York
Times reported that Trump had described his national security adviser,
Lieutenant General H. R. McMaster, as “a pain” for subtly correcting
od
him when he made inaccurate points in meetings. And in June, the

spectacle of U.S. department secretaries falling over themselves to
declare their deep devotion to Trump and flatter him on live television
during the administration’s first full cabinet meeting brought to mind
so
the dysfunctional decision-making in dictatorships. Any leader who

disdains expertise and demands submission and total loyalty from his
advisers, whether in a democracy or in a dictatorship, will not receive
candid assessments of alternative courses of action during a crisis.
Ma
TONE-DEFCON
Trump’s poor decision-making process highlights another disturbing
contrast with the Cuban missile crisis. In 1962, strong civilian leaders
countered the U.S. military’s dangerously hawkish instincts. When the
Joint Chiefs of Staff recommended an immediate air strike and an
m
hi
ha
Rocket man: Kim Jong Un in Pyongyang, October 2015
invasion of Cuba, Kennedy insisted on the more prudent option of a
naval blockade. Together with his subsequent refusal to retaliate with an
iT
air strike after an American U-2 spy plane was shot down over Cuba,
Kennedy’s approach reflected the best kind of cautious crisis management.
Now, however, it is the senior political leadership in the United
States that has made reckless threats, and it has fallen to Secretary of
Al
Defense James Mattis (a former general) and senior military officers to

serve as the voices of prudence. In early August, Trump warned: “North
Korea best not make any more threats to the United States. They will
od
be met with fire and fury like the world has never seen.” By appearing
to commit to using nuclear force in response to North Korean threats,
he broke sharply with U.S. deterrence policy, which had previously
warned of military responses only to acts of aggression. Vice President
so
Mike Pence, Secretary of State Rex Tillerson, and UN Ambassador

Nikki Haley have not echoed Trump’s “fire and fury” rhetoric, but they
have repeated the worrying mantra that “all options are on the table.”
That phrase may sound less threatening than Trump’s comments,
Ma
but it still leaves itself open to misinterpretation. To some listeners, it

just suggests that Washington is considering limited military
options. But from a North Korean perspective, the statement implies
KCNA / REUT E RS
that the United States is contemplating launching a nuclear first strike.

This would not be an altogether unreasonable conclusion for Pyong-
yang to draw. In 2008, U.S. President George W. Bush stated that all
Scott D. Sagan
options were on the table when it came to U.S. tensions with Iran, and
when a reporter explicitly asked Bush whether that included “nuclear
options,” Bush simply repeated himself: “All options are on the table.”
The Obama administration made a commitment, in its 2009 Nuclear
Posture Review, not to use nuclear
weapons against any non-nuclear-
The United States should weapons state that was in compliance
take some military options with its nonproliferation commitments.
off the table, starting with But then Secretary of Defense Robert
m
a preventive nuclear war. Gates quickly added that “because North
Korea and Iran are not in compliance
with the Nuclear Nonproliferation
hi
Treaty, for them, all bets are off. All options are on the table.”
Such rhetoric is dangerous. The U.S. government must convince Kim
that an attack on the United States or its allies would spell the end of his
ha
regime. But it is equally important that U.S. leaders acknowledge loudly
and often that it would be a disaster for the United States to start a war.
If those in the White House do not do so, the civilian and military leader-
iT
ship in the Pentagon should more forcefully and publicly make this point.
To back this rhetoric up, the United States should take some military
options off the table, starting with a preventive nuclear war. A preemptive
strike, the use of force when a country considers an adversary’s first
Al
strike imminent and unavoidable, can sometimes be justified

strategically and legally as “anticipatory self-defense.” But preventive
war—starting a war to prevent another country from taking future
od
action or acquiring a dangerous capability—is rarely justified and

arguably contrary to the UN Charter.
U.S. military officers are trained to follow orders from political
authorities, unless they are clearly unconstitutional. The Constitution,
so
however, says nothing about what to do if a president’s orders are legal

but also crazy. This leads to bizarre situations, such as the response
that Admiral Scott Swift, the commander of the U.S. Pacific Fleet,
gave when he was asked at a seminar at the Australian National
Ma
University in July if he would launch a nuclear strike against China

“next week” if Trump ordered him to do so. The admiral should have
said that the hypothetical scenario was ridiculous and left it at that.
Instead, he answered, “Yes.”
Trump’s volatility has produced a hidden crisis in U.S. civil-military
relations. In 1974, during the final days of Richard Nixon’s presidency,
when Nixon had become morose and possibly unstable, Secretary of

Defense James Schlesinger told the chairman of the Joint Chiefs of
Staff, General George Brown, that if Nixon gave military orders, Brown
should contact Schlesinger before carrying them out. Schlesinger’s
action was extraconstitutional but nonetheless wise, given the extra-
ordinary circumstances. The U.S. government faces similar dangers
every day under Trump. Mattis and senior military leaders should
be prepared to ignore belligerent tweets, push back against imprudent
policies, and resist any orders that they believe reflect impetuous
m
or irrational decision-making by the president. Their oath, after all,
is not to an individual president; it is to “support and defend the
Constitution of the United States.” The Constitution’s 25th Amend-
hi
ment lays out procedures on how to relieve an impaired president of
his responsibilities. If senior military leaders believe at any time that
Trump is impaired, they have a duty to contact Mattis, who should
ha
then call for an emergency cabinet meeting to determine whether
Trump is “unable to discharge the powers and duties of his office”
and thus whether to invoke the 25th Amendment.
iT
WHAT YOU DON’T KNOW CAN HURT YOU
One similarity with the Cuban missile crisis is that those Americans
who think the United States should attack North Korea exaggerate the
Al
prospects that U.S. military action would succeed and underestimate

the costs of a war. In 1962, the CIA and the military assumed that there
were no nuclear weapons in Cuba and, on that basis, recommended air
od
strikes and an invasion. But the intelligence assessment was wrong.

Well over 60 nuclear warheads, gravity bombs, and tactical nuclear
weapons had already arrived in Cuba, and one missile regiment was
already operational by the time the Joint Chiefs were advising military
so
action. Any attack on Cuba would almost certainly have led to nuclear
strikes on the United States and against invading U.S. forces.
Today, U.S. intelligence finds itself once again in the dark. It does not
know the status of North Korea’s warheads or the locations of its missiles.
Ma
For example, when the North Koreans successfully tested an intercontinen-

tal ballistic missile in late July, it came as a complete surprise to the United
States and demonstrated that North Korea can now build such missiles,
store them, take them out of storage, and launch them, all before the United
States could react. Yet U.S. military leaders have failed to pour cold water
on the idea of a U.S. first strike. Instead, they have added fuel to the fire.
Scott D. Sagan
Consider the complaint expressed by General Joseph Dunford, the

chairman of the Joint Chiefs of Staff, at the Aspen Security Forum in
July that “many people have talked about the military options with words
such as ‘unimaginable.’” Dunford insisted that, to the contrary, “it is
not unimaginable to have military options to respond to North Ko-
rean nuclear capability. What’s unimaginable to me is allowing a capa-
bility that would allow a nuclear weapon to land in Denver, Colorado.
. . . And so my job will be to develop military options to make sure
that doesn’t happen.” Dunford should have reinforced deterrence. In-
m
stead, he created a redline that Kim may have already crossed.
The military’s job is to come up with options. That involves think-
ing the unthinkable. But it is also military leaders’ responsibility to
hi
offer brutal honesty to political leaders and the public. When it
comes to the current conflict with North Korea, that means admit-
ting that there are no military options that do not risk starting the
ha
most destructive war since 1945.
WHY THERE’S NO MILITARY SOLUTION

iT
Some Trump supporters, including former UN Ambassador John Bolton
and Trump’s evangelical adviser Robert Jeffress, have argued that a U.S.
strike to assassinate Kim is the best solution. Any attempt to “decapi-
tate” the regime, however, would be a gamble of epic proportions. The
Al
history of unsuccessful U.S. decapitation attempts, including those

launched against the Libyan leader Muammar al-Qaddafi in 1986 and
the Iraqi leader Saddam Hussein in 1991 and again in 2003, warns
od
against such thinking. Moreover, Kim may well have ordered his gen-
erals to launch all available weapons of mass destruction at the enemy
if he is killed in a first strike—as did Saddam before the 1990–91 Gulf
War. There is no reason to think that the North Korean military would
so
fail to carry out such an order.

U.S. leaders should also resist the temptation to hope that limited, or
“surgical,” conventional attacks on North Korean missile test sites or
storage facilities would end the nuclear threat. Proponents of this course
Ma
believe that the threat of further escalation by the United States would
deter North Korea from responding militarily to a limited first strike.
But as the political scientist Barry Posen has explained, this argument is
logically inconsistent: Kim cannot be both so irrational that he cannot
be deterred in general and so rational that he could be deterred after
having been attacked by the United States. Moreover, even a limited
attack by the United States would appear to North Korea as the

beginning of an invasion. And because no first strike could destroy
every North Korean missile and nuclear weapon, the United States
and its allies would always face the prospect of nuclear retaliation.
Nor can missile defense systems solve the problem. The United States
should continue to develop and deploy missile defenses because they
complicate North Korean military planning, and any missiles that
Pyongyang aims at U.S. or allied military targets are missiles not
aimed at American, Japanese, or South Korean cities. But military
m
leaders should be candid about the limits of U.S. ballistic missile
defenses. Most such systems have failed numerous tests, and even
the most effective ones, such as the Terminal High Altitude Area
hi
Defense, or THAAD, system, could be overwhelmed if North Korea
fired multiple missiles—even dummy missiles—in a salvo at one target.
That is why North Korea has been practicing launching several missiles
ha
simultaneously. Any prudent U.S. planner should therefore assume
that in the event of an attack, some North Korean nuclear-armed missiles
would reach their targets. Even in the best-case scenario, in which only
iT
a few North Korean nuclear weapons penetrated U.S. defenses, the
consequences would prove catastrophic.
Estimating the potential fatalities in a limited nuclear strike is
difficult, but the nuclear weapons scholar Alex Wellerstein has designed
Al
a useful modeling tool called NUKEMAP, which uses data from the
Hiroshima and Nagasaki bombings to provide rough estimates of how
many people would die in a nuclear strike. After North Korea conducted
od
its sixth nuclear test, in early September, Japanese, South Korean, and
U.S. intelligence agencies reportedly provided a range of estimates of
the weapon’s explosive yield, with an average estimate of around 100
kilotons. According to NUKEMAP, a single 100-kiloton nuclear
so
weapon detonated above the port city of Busan, in South Korea (which
was shown as a target in a recent North Korean press release), would
kill 440,000 people in seconds. A weapon of that size detonated over
Seoul would kill 362,000; over San Francisco, the number would be
Ma
323,000. These estimates, moreover, include only immediate blast

fatalities, not the deaths from fires after a nuclear detonation or the
longer-term deaths that would result from radioactive fallout. Those
secondary effects could easily cause the number of dead to double.
Even if a war were limited to the Korean Peninsula, the costs would
still be unacceptable. According to a detailed study published in 2012
Scott D. Sagan
by the Nautilus Institute, a think tank based in California, North Korea

has thousands of conventional artillery pieces along the demilitarized
zone that by themselves could inflict some 64,000 fatalities in Seoul
on the first day of a war. A major attack on South Korea could also
kill many of the roughly 154,000 American civilians and 28,000 U.S.
service members living there. If the North Korean regime used its
large arsenal of chemical and biological weapons, the fatalities would
be even higher. Finally, there are a number of nuclear power plants
near Busan that could be damaged, spreading radioactive materials, in
m
an attack. All told, one million people could die on the first day of a
second Korean war.
hi
ACCIDENTAL WAR
Even if the United States forswore preventive conventional or nuclear
strikes, the danger of an accidental war caused by the mutual fear of a
ha
surprise attack would remain. South Korea increasingly (and quite
openly) relies on a strategy of preemption and decapitation. In 2013,
General Jeong Seung-jo, the chairman of the South Korean Joint
iT
Chiefs of Staff, announced that “if there is a clear intent that North
Korea is about to use a nuclear weapon, we will eliminate it first even
at the risk of a war,” adding that “a preemptive attack against the
North trying to use nuclear weapons does not require consultation
Al
with the United States and it is the right of self-defense.” A white

paper published by the South Korean Ministry of National Defense in
2016 featured an illustration of several missiles being fired at and a
od
group of South Korean commandos attacking the “war command”

building in Pyongyang. (Unsurprisingly, the North Koreans have similar
ideas about preemption: in April 2016, in response to U.S. and South
Korean military exercises, North Korean state media reported that “the
so
revolutionary armed forces of [North Korea] decided to take preemptive

attack as the mode of its military counteraction. . . . The right to nuclear
preemptive attack is by no means the U.S. monopoly.”)
In such a tense environment, one government’s preemptive-war
Ma
plan can look a lot like a first-strike plan to its enemies. Would Seoul
see the movement of Pyongyang’s nuclear missiles out of the caves in
which they are stored as a drill, a defensive precaution, or the start of
an attack? Would Pyongyang mistake a joint U.S.–South Korean
exercise simulating a decapitation attack for the real thing? Could an
ill-timed inflammatory tweet by Trump provoke a military response
from Kim? What if a radar technician accidentally put a training tape

of a missile launch into a radar warning system—which actually hap-
pened, creating a brief moment of panic, during the Cuban missile
crisis? Add in the possibility of an American or a South Korean military
aircraft accidentally entering North Korean airspace, or a North
Korean nuclear weapon accidentally detonating during transport, and
the situation resembles less a Cuban missile crisis in slow motion than
an August 1914 crisis at the speed of Twitter.
The fear of a U.S. attack explains why Kim believes he needs a nuclear
m
arsenal. Pyongyang’s nuclear weapons development undoubtedly appeals
to Kim’s domestic audience’s desire for self-sufficiency. But that is not
its primary purpose. Kim’s spokespeople have stressed that he will not
hi
suffer the fate of Saddam or Qaddafi, both of whom gave up their
nuclear programs only to be attacked later by the United States. The
North Korean nuclear arsenal is not a bargaining chip. It is a potent
ha
deterrent designed to prevent a U.S. attack or disrupt one that does
occur by destroying U.S. air bases and ports through preemption, if
possible, but in retaliation if necessary. And if all else fails, it is a
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means for exacting revenge by destroying Kim’s enemies’ cities. That
may sound implausible, but keep in mind that Castro recommended
just such an attack in 1962.
Al
KEEP CALM AND DETER ON

Living with a nuclear North Korea does not, in Dr. Strangelove’s terms,
mean learning “to stop worrying and love the bomb.” On the contrary,
od
it means constantly worrying and addressing every risk. U.S. policy

should aim to convince Kim that starting a war would lead to an
unmitigated disaster for North Korea, especially as his own ministers
and military advisers may be too frightened of his wrath to make that
so
argument themselves. The United States should state clearly and

calmly that any attack by North Korea would lead to the swift and
violent end of the Kim regime.
Kim may be under the illusion that if North Korea were to destroy
Ma
U.S. air bases and kill hundreds of thousands of Americans, Japanese,

and South Koreans, the American public would seek peace. In fact, it
would likely demand vengeance and an end to Kim’s regime, regardless
of the costs. Such a war would be bloody, but there is no doubt which
side would prevail. There are few, if any, military targets in North Korea
that the United States could not destroy with advanced conventional
Scott D. Sagan
weapons in a long war. And the Kim regime cannot ignore the possibil-
ity of U.S. nuclear retaliation.
The more difficult challenge will be convincing Kim that the
United States will not attack him first. Reducing the risk of war will
therefore require an end to U.S. threats of first-strike regime change.
In August, Tillerson told reporters that the United States did not
seek to overthrow Kim unless he were to begin a war. Other American
leaders should consistently echo Tillerson’s comments. Unfortunately,
the Trump administration’s rhetoric has been anything but consistent.
m
Should the United States succeed in bringing North Korea back to
the negotiating table, it should be prepared to offer changes to U.S.
and South Korean military exercises in exchange for limits on—and
hi
notifications of—North Korean missile tests and the restoration of
the hotline between North and South Korea. The United States
should also continue to extend its nuclear umbrella to South Korea to
ha
reduce the incentive for Seoul to acquire its own nuclear arsenal.
Some have argued for a return of U.S. tactical nuclear weapons to air
bases in South Korea, but such weapons would be vulnerable to a
iT
North Korean first strike. A better option would be to keep nuclear-
capable bombers at Guam on ground alert. Or the United States could
borrow a tactic it used in the wake of the Cuban missile crisis. To
assuage Moscow, Washington promised to remove its Jupiter ballistic
Al
missiles from Turkey after the crisis. But to reassure Ankara, it also
assigned some submarine-based missiles to cover the same retaliatory
targets in the Soviet Union that the Jupiter missiles had and arranged
od
for a U.S. submarine to visit a Turkish port. Today, occasional U.S.

submarine calls at South Korean harbors could enhance deterrence
without provoking North Korea.
In 1947, the American diplomat George Kennan outlined a strategy
so
for the “patient but firm and vigilant containment” of the Soviet Union.
Writing in this magazine, he predicted that such a policy would eventu-
ally lead to “either the breakup or the gradual mellowing of Soviet
power.” He was right. In the same way, the United States has deterred
Ma
North Korea from invading South Korea or attacking Japan for over 60
years. Despite all the bluster and tension today, there is no reason why
Kennan’s strategy of containment and deterrence cannot continue to
work on North Korea, as it did on the Soviet Union. The United States
must wait with patience and vigilance until the Kim regime collapses
under the weight of its own economic and political weakness.∂
Will India Start Acting

Like a Global Power?
New Delhi’s New Role
m
Alyssa Ayres
T
hi
he country with the world’s third-largest military by personnel
strength, fifth-largest defense budget, and seventh-largest
economy isn’t a member of the UN Security Council. It isn’t
ha
even a member of the G-7, the exclusive club of major industrialized
economies. It is India, a country long regarded as an emerging power
rather than a major global player.
iT
In fairness, for years, this assessment was not off the mark, and
India’s reality did not match up to its vaunted potential. And indeed,
India still faces daunting developmental challenges. It is home to around
270 million people living in extreme poverty. Its infrastructure is in
Al
need of major investment—to the tune of $1.5 trillion over a decade,

according to India’s finance minister. Discrimination among India’s
famously diverse population persists, whether on the basis of gender,
od
caste, religion, or region.

Because of these challenges, and because the country has been kept
on the margins of the global institutions central to U.S. diplomacy,
India’s impressive economic power and defense capabilities have often
so
gone unnoticed. But that is changing. A more confident India has already
begun to shape the global agenda on climate change, clean energy, and
worker mobility. And spurred by China’s increasingly assertive regional
posture, India has ramped up its own military capacity.
Ma
India has long chafed at the fact that despite its size and its democracy,
the world does not see it as a major power. Unlike China, it does not
ALYSSA AYRES is Senior Fellow for India, Pakistan, and South Asia at the Council on Foreign
Relations and the author of the forthcoming book Our Time Has Come: How India Is Making
Its Place in the World (Oxford University Press, 2018), from which this essay is adapted.
Copyright © 2018 Oxford University Press. All rights reserved.
Alyssa Ayres
have a coveted permanent seat on the UN Security Council. Considering

India’s growing economy and enhanced military capabilities, Indian
leaders are pushing for their country’s “due place in global councils,” as
former Prime Minister Manmohan Singh put it. Under the current
prime minister, Narendra Modi, India has begun to see itself as a “leading
power,” laying overt claim to a new, more central place in the world.
As India leaves behind some of its old defensiveness on the world
stage, a vestige of its nonaligned worldview, it is time for U.S. policy
to evolve, as well. Relations between the United States and India have
m
come a long way from the days in which the diplomat and historian
Dennis Kux could write of the two as “estranged democracies,” and
both countries now talk of being “strategic partners”—a relationship of
hi
cooperation, but not a formal alliance. U.S. President Donald Trump
has not yet fully articulated his plans for relations with India, although
he did remark in June that they have “never looked brighter,” and in a
ha
departure from the Washington playbook, he has explicitly asked India
to do more on economic development in Afghanistan.
As the president and his team grapple with India’s rise, they should
iT
reconceptualize the U.S.-Indian relationship to better manage dif-
ferences with a power that prizes policy independence above all. And
they must address the inequity of India’s exclusion from major
institutions of global governance by championing Indian member-
Al
ship and giving New Delhi a long-overdue place at the table.

Working with a rising India will not always be easy. The country
remains fiercely protective of its policy independence, shuns formal
od
alliances, and remains ever willing to break global consensus, as it has

done most famously on trade negotiations. It can be a close defense
partner, but not in the familiar template of most U.S. alliances. India
wants an improved trade and economic relationship, but it will not be
so
easily persuaded by U.S. entreaties for increased market access. Still,

Democratic and Republican administrations alike have prioritized
forging closer ties with New Delhi, rightly regarding a tighter relation-
ship as a vote for the importance of democracy and a bet on shared
Ma
prosperity and stability in Asia.
PROSPERITY AND POWER

As with China, the economy has been at the center of India’s global
transformation. While many outside India are aware of the country’s
great potential, few realize that the Indian economy, with a GDP of
Will India Start Acting Like a Global Power?
over $2 trillion at current exchange rates, has now surpassed the

economies of Canada and Italy (both members of the G-7). U.S.
government projections anticipate that India will be the world’s
third-largest economy by 2029, lagging behind only China and the
United States. A slowdown in China
and contractions in Brazil and Russia
have increased India’s share of global
India has begun to see itself
GDP as measured by purchasing power as a “leading power,”
parity, which the International Monetary laying overt claim to a
m
Fund (IMF) projects will exceed eight new, more central place
percent by 2020—above that of Japan
in 1995 and that of China in 2000. If in the world.
hi
the world at large doesn’t yet see India as
akin to those economic powerhouses,
CEOs around the world do: a 2016 survey conducted by the firm KPMG
ha
found that India had moved up four notches to become their top pick
for growth opportunities in the next three years.
India’s sheer size and its youthful demographics offer the prospect
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of enormous economic growth. According to UN estimates, India will
overtake China as the world’s most populous country sometime
around 2024, and it will do so with a significantly younger population.
India’s large working-age population will continue to grow until 2050,
Al
while Japan, China, and western Europe age. By then, Japan’s median
age is expected to stand at 53 years, China’s at nearly 50, and western
Europe’s at 47. The median-age Indian will be just 37 years old.
od
Although India remains home to the world’s largest number of

poor, its middle class is growing and now consists of anywhere from
30 million (as the Pew Research Center estimates) to 270 million people
(as the National Council of Applied Economic Research estimates),
so
depending on how “middle class” is measured. A 2007 McKinsey

report estimated that the Indian middle class, if defined as those with
an annual disposable household income of $4,000 to $22,000, could
balloon to nearly 600 million people by 2025. A growing middle class
Ma
wields market power, which explains why giant multinational

companies, from Apple and Xiaomi to Bosch and Whirlpool, have
India in their sights: all those four are now manufacturing goods in
India for the growing Indian market. India surpassed China as the
world’s largest market for motorcycles and scooters in 2016, but it has
also become a global hub for automobile manufacturing, producing
Alyssa Ayres
nearly one in three small cars sold worldwide. India does not yet come
to mind as an automotive powerhouse, but Ford, Hyundai, Maruti
Suzuki, and Tata are all making cars there. Collectively, the Indian auto-
motive industry built only slightly fewer automobiles in 2016 than
South Korea and more than Mexico, both major car-producing nations.
Although India needs to do much more to develop its manufacturing
base, its advances in the auto industry represent an about-face from
just 15 years ago.
Increasingly, India is translating its economic might into military
m
power. It already counts itself as part of a select club of countries with
advanced defense technology, including a nuclear weapons program.
India is also a space power: it sent a probe to the moon in 2008 and
hi
has another in the works, and in 2014, it placed a vehicle in orbit
around Mars (at a fraction of the cost of NASA’s latest Mars orbiter).
With its sights set on primacy in the Indian Ocean, New Delhi is
ha
strengthening its defense ties with countries across the region and
building a blue-water navy. According to the International Institute
for Strategic Studies, India now has a force strength of nearly 1.4 million
iT
troops on active duty and nearly 1.2 million reservists. The Stockholm
International Peace Research Institute estimates that India became
the world’s fifth-largest military spender in 2016, ahead of France and
the United Kingdom. Now the world’s top importer of military
Al
equipment for the last five years, India has accelerated its procurements
from U.S. companies from essentially zero to more than $15 billion
worth over the past decade. But even as defense ties with the United
od
States grow, India is not going to end its long-standing relationship

with Russia, and recognizing that is part of working with New Delhi.
Indeed, Russia remains a major defense supplier for India, as are
France and Israel; India is simply diversifying its strategic bets by
so
doing business with multiple partners.

India is also increasingly producing its own advanced defense tech-
nologies, instead of importing them. Although it recently replaced its
aging aircraft carrier in a much-delayed deal with Russia in 2013, it
Ma
now has a second carrier under construction, developed and built at

home, although it may not be ready for as long as a decade. India has
a third carrier scheduled for construction, also to be made domestically,
and it has plans to add at least three nuclear-powered submarines to
its fleet. In fact, in a major departure from the past, the country has
begun to export military equipment to other countries in the region.
India began transferring a series of naval patrol vessels to Mauritius in

2015, and it has been in discussions with Vietnam to sell it cruise missiles.
A NEW SWAGGER
A more confident India, eager to shape, rather than simply react to,
global events, has already made its presence felt diplomatically. Take
climate change. In the long-running multilateral climate negotiations,
India moved, in less than a decade, from playing defense to taking the
lead in setting the global climate agenda. For years, India had refused
m
to acquiesce to proposals to cap carbon emissions. Indians considered
it deeply unfair that the developed West was looking for cuts from
developing India, a country with a historically small contribution to
hi
climate change, low per capita emissions, and large future development
needs. But at the 2015 Paris climate conference, a new Indian stance
emerged. Along with François Hollande, then France’s president, Modi
ha
announced a new international solar power alliance to be headquartered
in India, with a focus on promoting the rapid deployment of solar
energy and cutting the costs of financing and development. Given
iT
India’s ambitious and expensive goal of ramping up domestic solar
energy production to 100 gigawatts by 2022, the alliance has allowed
India to take on an international leadership role that complements its
preexisting domestic energy plans. The Paris agreement showcased a
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different style of Indian diplomacy—this was not the India that helped
scuttle the World Trade Organization’s Doha negotiations in 2008 but
a new, problem-solving India.
od
On defense and security, India has strengthened its capacity over

the past decade to such an extent that U.S. secretaries of defense now
routinely refer to India as a net provider of regional security. India’s
maritime ambitions, especially its goal of primacy in the Indian
so
Ocean, are a response to China’s more assertive presence across South

Asia. Beijing’s intensified infrastructure development assistance to
Bangladesh, the Maldives, Sri Lanka, and, especially, Pakistan—as
well as a new military base in Djibouti—have expanded China’s Indian
Ma
Ocean reach. A 2012 decision upped India’s naval ship requirement

to 198 from its earlier level of 138. In 2015, New Delhi quietly reached
an agreement with the Seychelles to host its first overseas military
base. That same year, India took the lead in rescuing nearly 1,000 foreign
citizens from 41 countries stranded in Yemen, including Americans.
And when Japan joined India and the United States that year as a
permanent participant in the annual Malabar naval
exercises, India was able to showcase its warships,
planes, and submarines beside the two most pow-
erful democracies in the Asia-Pacific region.
While deepening its ties with the West, New
Delhi has also shown a determination to invest in alter-
native international organizations over the course of
the past decade. India does not seek to overturn the
global order; rather, it merely wants such institu-
m
tions as the UN Security
Council, the Asia-
Pacific Economic
hi
Cooperation (APEC),
the World Bank, the
ha IMF, the Nuclear
Suppliers Group, and
others to expand to
accommodate it. But as
iT
reform of these organ-
izations drags on, New
Delhi has put some of
its eggs in other baskets.
Al
Take the BRICS, comprising Brazil, Russia, India, China, and South
Africa. In less than a decade, the group has become an important
diplomatic forum and has accomplished more than most observers
od
expected. At their 2012 summit, the BRICS began discussions on the

New Development Bank—which announced its first loans in 2016—
an institution in which these five countries could have an equal voice,
unlike their disproportionately low representation in the World Bank
so
and the IMF. And in 2014, they agreed to form the BRICS Contingent
Reserve Arrangement, an alternative to IMF support in times of eco-
nomic crisis. India also supported the Chinese-led creation of the
Asian Infrastructure Investment Bank, and it is now the bank’s second-
Ma
biggest contributor of capital.

In 2017, India also joined the Shanghai Cooperation Organization,
and it maintains an active presence in other institutions far outside
the United States’ orbit, such as the Conference on Interaction and
Confidence Building Measures in Asia. Although New Delhi’s top
priority remains a seat commensurate with its size and heft within the
traditional global organizations still dominated by the West, India has

shown that it is also willing to help build other arenas in order to have
a greater voice. India will likely continue to maintain this diverse array
of relationships even as it strengthens its ties with the United States;
regardless, granting New Delhi the place it deserves in major Western
international forums would help, rather than hinder, U.S. interests.
At a time when international coordination has become far more
complex, the increase in new organizations creates “forum-shopping”
opportunities, as the political scientist Daniel Drezner and others have
m
argued. More forums and more options make it harder to get things
done internationally—and also decrease Washington’s influence.
hi
A SEAT AT THE TABLE
Successive U.S. administrations have viewed the relationship with India
as one of the United States’ great strategic opportunities, offering a
ha
chance to overcome historical differences and strengthen ties with a
fast-growing market, a stable pillar in a region of turmoil, and a large
country that can provide a balance of power across Asia and a bulwark
iT
against Chinese dominance. The George W. Bush administration sought
to reframe the U.S.-Indian relationship by striking a 2005 deal con-
cerning civilian nuclear cooperation, bridging what had been a 30-year
divide on nonproliferation. The Obama administration continued the
Al
momentum, with various efforts to expand defense, economic, and

diplomatic cooperation.
But shared goals do not always translate into shared approaches.
od
Such was the case with Russia’s annexation of Crimea: Indian officials
walked a tightrope, saying little publicly about it beyond an anodyne
tweet from a Ministry of External Affairs spokesperson (“We are closely
watching fast evolving situation and hope for a peaceful resolution”) rather
so
than clearly condemning Russia’s violation of Ukrainian sovereignty.

On questions of grand strategy, India’s desire to be recognized as a
major global power includes an indelible commitment to its own ideas
of autonomy. Although New Delhi has shifted over the years from
Ma
reflexive nonalignment to a recent philosophy of “strategic autonomy”

to the present Indian government’s vision of “the world is one family”
(from the Sanskrit phrase vasudhaiva kutumbakam), the connecting
thread remains policy independence. But that sense of independence
can sometimes clash with the United States’ tendency to believe that
its partners and allies should support it across the board.
Alyssa Ayres
Part of the problem is that Washington has no template for a close

defense relationship outside of the obligations inherent in a formal
alliance. The U.S. government’s designation of India last year as a
“major defense partner”—a status created and accorded only to India,
as a means to facilitate advanced defense cooperation—illustrates the
unique situation and marks the begin-
ning of a new way to think through this
Given the size of India’s relationship. Even though New Delhi
economy, it is past time for seeks deeper ties, including obtaining
m
the country to be brought U.S. technology, Indians do not want
into agenda-setting to sign themselves up for every U.S.-
led initiative around the world. There
hi
institutions. is a difference between being “natural
allies,” in the words of former Indian
Prime Minister Atal Bihari Vajpayee, and the extensive commitments
ha
of a formal alliance. New Delhi seeks the rhetorical flourish of the
former without the restrictive expectations of the latter.
Given that U.S. and Indian interests are converging across Asia,
iT
military ties between the two countries will no doubt deepen. But as
they do, U.S. policymakers will have to manage their expectations and
not be disappointed when India, say, improves ties with Iran. In order
to ward off frustrations with India’s inevitable departures from U.S.
Al
preferences, the United States should frame its relationship with

India differently, conceiving of it more as a joint venture in business
than a traditional alliance. That would mean insulating shared ini-
od
tiatives from areas of disagreement, such as policy toward Iran or ties

with Russia.
On economics, too, Washington at times differs sharply with New
Delhi, despite a commitment on both sides to expanding bilateral
so
trade. Indeed, India has never hesitated to break global consensus to

protect its perceived economic interests. A decade ago, New Delhi
and Beijing made common cause to protect their agricultural sectors,
leading to the July 2008 stalemate that ended the Doha round of
Ma
international trade negotiations. Then, in 2014, India backed out of

the Trade Facilitation Agreement, which sought to cut red tape,
despite having previously agreed to it. It took extensive talks to revive
the deal. More recently, India’s powerful information technology
sector has raised trade in services to the very top of India’s economic
negotiating agenda, since one way to provide information technology
services is to perform work on location—including in another country.

New Delhi is pushing other countries to accept greater numbers of
Indian temporary workers while remaining resistant to opening its
own market further to goods and services. In 2016, India filed a formal
dispute against the United States in the World Trade Organization
over increases in visa fees that India claimed would hit its information
technology workers especially hard; the outcome will set a precedent
for managing worker mobility across the globe.
Despite these disagreements, there is ample room for progress on
m
the economic relationship. India’s global ambitions rest on sustained
economic growth, and for that, India needs to maintain ongoing
reforms. While only India’s own political process will determine the
hi
trajectory of those efforts, the United States can and should do a better
job of including India in the international networks conducive to eco-
nomic growth and job creation. Historically, decades of self-sufficiency
ha
and a relatively small economy locked India out of productive econo-
mic institutions such as APEC, the Organization for Economic Cooper-
ation and Development (OECD), and the International Energy Agency
iT
(IEA)—all bodies that set standards and provide a meaningful place
for cooperation on trade, development, and economic policy.
Given the size of India’s economy, it is past time for the country to be
brought into such agenda-setting institutions. An APEC missing Asia’s
Al
third-largest economy lacks legitimacy and makes little economic sense.

Washington should support Indian membership, something it has so far
refrained from doing. The same argument holds for the OECD, especially
od
because India has emerged as a major donor of development aid across

South Asia and Africa. In recent years, the OECD has created a category
of states called “key partners”—a group that includes India, along with
Brazil, China, and Indonesia—which it consults but does not count as
so
members. Locking India out of the OECD also keeps it out of the IEA, for
arcane historical reasons, thus excluding one of the world’s largest en-
ergy consumers. If the G-7 is to remain a central economic-agenda-
setting institution for the world’s leading democracies, at some point, it,
Ma
too, will have a hard time rationalizing its exclusion of India given the
rapidly growing size of the Indian economy. Concerns that bringing
India into the fold will disrupt consensus in these economic institutions
are overblown, since these are not binding negotiating forums. If any-
thing, giving India a place at the table will help pull it into a cohort of
countries already committed to economic openness and transparency.
Alyssa Ayres
Finally, on the security front, India is right to see its continued

exclusion from permanent UN Security Council membership as unfair,
given its population and contributions to UN peacekeeping (India is
among the top troop contributors annually). Washington should seek
to make good on its promise of working toward permanent member-
ship for India “in a reformed and expanded” Security Council, as
President Barack Obama pledged before the Indian Parliament in
2010. Promoting India’s membership could present challenges to
many U.S. positions, but the perspective Indian diplomats bring on
m
some of the world’s most intractable problems deserves to be heard in
the same room as the perspectives from China, France, Russia, and
the United Kingdom. Unfortunately, the UN Security Council has not
hi
budged on the issue of expansion since Obama first voiced support
for Indian inclusion. Reform has been held hostage to competing
demands from other deserving countries—such as Brazil, Germany,
ha
and Japan—not to mention a lack of consensus on the size of expansion
and whether new permanent members should have veto powers.
Even if the UN remains plagued by inertia, there are many other
iT
forums where India could make a contribution, with a little help from
Washington. The United States must do a better job of normalizing the
reality of India’s rise and overtly emphasizing the country’s importance
to U.S. national interests and to the world, just as Washington assumes
Al
the importance of so many of its close European partners. Despite

their political differences, both Modi and his predecessor, Singh,
shared a conviction: that for India on the world stage, “our time has
od
come.” Washington should embrace—rather than merely await—

its arrival.∂
so
Ma
Yemen’s
Humanitarian Nightmare
The Real Roots of the Conflict
m
Asher Orkaby
O
hi
n February 20, 2015, as the residents of Sanaa prepared for
evening prayers, Yemeni President Abd-Rabbu Mansour
Hadi put on a woman’s niqab and slipped out the back door
ha
of his official residence, where a car was waiting for him. For a month,
Houthi rebels, who had taken Sanaa in late 2014, had been holding
him under house arrest. By the time the guards noticed that he was
iT
gone, Hadi had reached the relative safety of the southern port of
Aden. A month later, as Houthi forces advanced south, he fled again,
this time to Riyadh, where he called on Saudi Arabia to intervene in
Yemen’s civil war.
Al
Within days, a Saudi-led coalition of Arab states began a campaign

of air strikes against Houthi targets that rapidly became a siege of the
entire country. Cut off from imports, and under a ceaseless Saudi
od
bombardment, Yemen has turned into one of the worst humanitarian

crises of modern times. Seven million Yemenis live in areas that are close
to famine, nearly two million children are suffering from acute malnutri-
tion, and an outbreak of cholera has infected over 600,000 people.
so
The conflict in Yemen is often described as an outgrowth of the

Shiite-Sunni rivalry between Iran and Saudi Arabia, as Iran has
supplied weapons and military advisers to the Houthis. But this
misunderstands both the origins of the war and the reason why Saudi
Ma
Arabia intervened. The war is not about regional interests; it is a contin-

uation of a long-standing conflict between the Yemeni government
and marginalized northern tribes, which escalated thanks to a gradual
decline in the legitimacy and competence of the central government
ASHER ORKABY is a Research Fellow at Harvard University and the author of Beyond the
Arab Cold War: The International History of the Yemen Civil War, 1962–68.
Asher Orkaby
in Sanaa. And Saudi Arabia intervened not to counter Iranian expan-

sionism but to secure its southern border against the Houthi threat.
As a result, only an internal Yemeni political settlement can end the
war, although Saudi Arabia, the United States, and international
humanitarian organizations can do much to improve the situation in
the meantime.
THE SHADOW OF THE PAST

The modern state of Yemen was born in 1962, when revolutionaries,
m
many of whom had absorbed contemporary ideas of nationalism at
foreign universities, deposed Imam Muhammad al-Badr and created
the Yemen Arab Republic, or North Yemen. For the next 40 years,
hi
the foreign-educated elite who had sparked the revolution occupied
some of the most important positions in the new republic, serving
as presidents, prime ministers, cabinet ministers, and chief executives.
ha
They based their legitimacy on the roles they had played during the
revolution and its aftermath, achieving an almost mythic status in
the national imagination. The revolution also transformed the rest
iT
of Yemeni society. It empowered Yemen’s growing urban population
and ended the dominance of those families—known as “sayyids”—
who could trace their lineage back to the Prophet Muhammad. And
it sent Yemen’s northern tribes, which had supported the deposed
Al
Badr, into the political wilderness. Shut off from government funding,
their region stagnated and their problems festered.
After North and South Yemen unified, in 1990, discrimination
od
against the northern tribes gave rise to a protest movement in the

north, led in part by the Houthi family, one of the most prominent
sayyid dynasties in northern Yemen. Then, in 2004, during early
clashes between northern tribes and the government, the Yemeni
so
military killed Hussein Badreddin al-Houthi, one of the leaders of the

movement. His death marked the beginning of the northern tribes’
armed insurgency and gave the rebels their name. For the next seven
years, sporadic fighting continued, with neither side gaining a mean-
Ma
ingful advantage.
At the same time as the government was fighting the Houthis in the
north, its authority in the rest of the country was fading. The greatest
challenge for a revolutionary state is maintaining its legitimacy after the
founders have died, and half a century after the revolution, few of Yemen’s
original leaders remained. In June 2011, Abdul Aziz Abdul Ghani, one
Yemen’s Humanitarian Nightmare
m
hi
ha
Critical condition: at a hospital in Al Hudaydah, Yemen, June 2017
iT
of the last of the revolutionary generation, was mortally wounded in an
assassination attempt on the country’s president, Ali Abdullah Saleh,
during popular protests that had paralyzed Sanaa. Both sides of the
Al
political divide paused the hostilities to mourn. But from that point on,
the Yemeni state created by the revolution effectively disappeared.
The passing of Yemen’s revolutionary generation created not only
od
a crisis of national identity but also one of governance. Once, Yemeni

students who had obtained degrees abroad took pride in returning
home as future leaders. But over the last ten years, much of the educated
elite has left the country, citing worsening government corruption and
so
ineptitude and a lack of domestic employment opportunities. Political

appointments are now granted on the basis of tribal membership rather
than training or experience, and technocrats have gradually given way
A B D U L J A B B A R Z E YA D / R E U T E R S
to the beneficiaries of nepotism.

Ma
As the central government’s legitimacy declined over the last decade,

a political void opened. Beginning in 2009, extremist groups, including
al Qaeda in the Arabian Peninsula, emerged to fill the gap. But it was
the northern Houthi movement, already organized and opposed to the
central government, that was positioned to take the fullest advantage
of the derelict republic.
Asher Orkaby
REVOLUTIONS
The Houthis’ chance came in early 2011, when revolts in places such
as Egypt and Tunisia inspired months of mass protests against the
corrupt, autocratic government in Sanaa. That February, Abdul-Malik
al-Houthi, a northern rebel leader, declared his support for the anti-
government demonstrations and sent thousands of his followers to
join the rallies in the capital. Some of the most powerful images of the
uprising were those of tribesmen in traditional robes demonstrating
alongside members of the urban youth movement. Fifty years earlier,
m
these two groups had fought each other for control of Yemen; in 2011,
they marched together against a common enemy, Saleh.
By the end of the year, the uprising had achieved its main goal:
hi
Saleh agreed to step down and be replaced by his vice president, Hadi.
In early 2013, the government and opposition groups began a national
dialogue conference that culminated in 2014 with a plan, backed by
ha
Hadi, to write a new constitution and divide Yemen into six provinces.
At the time, Jamal Benomar, then the UN’s special envoy for Yemen,
predicted that the agreement would lead to “democratic governance
iT
founded on the rule of law, human rights and equal citizenship.”
Yet the Houthi opposition rejected the deal, as it would have fur-
ther weakened the power of the northern tribes. Throughout 2014,
antigovernment protests, many of them led by Houthis, continued to
Al
rage. In September, Houthi forces captured Sanaa, and then in early

2015, they dissolved parliament, forced Hadi to resign, and installed a
revolutionary committee to replace the Yemeni government.
od
The Houthi advance unnerved Riyadh. Ever since Saudi Arabia

was founded, in 1932, its leaders have worried about the security of
the country’s southern border with Yemen. In 1934, Saudi Arabia fought
its first war against the Kingdom of Yemen to secure that border.
so
Under the treaty that ended the war, Saudi Arabia annexed three
Yemeni border provinces that it had occupied during the fighting.
Since then, Saudi foreign policy toward Yemen has been driven by the
need to maintain a weak central government in Sanaa that does not
Ma
threaten Saudi security. Each time a popular movement or a strong

central authority has looked as though it were appearing in Yemen,
the Saudi government has responded with military action and financial
support for pro-Saudi groups.
The Houthis’ rise was the realization of Saudi leaders’ worst fears. In
2009 and 2010, cross-border skirmishes between Houthi fighters and
Saudi forces caused the first Saudi casualties along the Saudi-Yemeni
border since the 1960s. After taking Sanaa in 2014, the Houthi leadership
openly called for war with Saudi Arabia, using demands for the return
of the three border provinces as a rallying cry for the movement.
SAUDI ARABIA STEPS IN

As a result, when Hadi requested Saudi help, Riyadh was only too
happy to oblige. In March 2015, Saudi Arabia and a coalition of Arab
nations from the Gulf Cooperation Council launched a military cam-
m
paign to push back the Houthis and restore the government. Saudi
Arabia presented the intervention as a response to the threat of
Iranian expansionism, arguing that the Houthis were effectively an
hi
Iranian proxy. This won it the support of other Arab countries and the
United States. Yet Saudi rhetoric has grossly misrepresented Iran’s
role in the conflict. Although some small arms and money have flowed
ha
from Iran to the Houthis, the amounts are not large, and there is no
real Houthi-Iranian alliance. The northern tribes do not share Iran’s
desire to challenge Israel and the United States, and they began posi-
iT
tioning themselves as an alternative to Yemen’s central government
long before receiving any Iranian help. The true target of the Saudi
campaign was not Iran but the Houthis themselves.
The intervention, which began as a series of air strikes against Houthi
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military targets, has morphed into an attempt to destroy Yemen’s

economic infrastructure in order to turn public opinion away from the
Houthi movement and its anti-Saudi stance. Hospitals, factories,
od
water mains, sewage facilities, bridges, and roads have all been demol-
ished in bombing raids. The Saudi coalition, with help from the
United States, has blockaded Yemen’s ports and rendered it dangerous
for civilian aircraft to fly over the country, making it difficult for aid
so
agencies or businesses to bring goods into Sanaa’s airport and for

wounded Yemenis to go abroad for treatment.
Yemen’s economy, already weak, has collapsed under the pressure.
For many Yemenis, buying food or medicine is now difficult or
Ma
impossible. According to the UN, two-thirds of Yemen’s 28 million

people face food shortages and do not have access to clean water.
Seven million of them live in areas on the brink of famine, and
nearly two million Yemeni children are acutely malnourished.
Without working public services, rubbish and sewage have piled up
on the streets and leached into drinking wells. Since April, cholera,
Asher Orkaby
which spreads in contaminated water, has infected over 600,000

people, killing more than 2,000.
The UN Human Rights Council, Amnesty International, and
other humanitarian organizations have condemned Saudi Arabia’s
human rights violations in Yemen.
The Houthis’ rise was the Adama Dieng, the UN’s special adviser
on the prevention of genocide, has
realization of Saudi called on the Security Council to inves-
leaders’ worst fears. tigate possible Saudi crimes against
m
humanity. Yet by portraying its inter-
vention as a conflict with Iran, Saudi
Arabia seems to have convinced much of the world, especially the
hi
United States, to ignore the deliberate targeting of Yemeni civilians.
The practical response to the crisis from international aid organiza-
tions has been ineffective. In July, the World Health Organization
ha
announced that it was suspending its cholera vaccine program in
Yemen indefinitely. It cited difficulties delivering the drugs and the
fact that the vaccination campaign would have had limited effect as
iT
the disease had already infected over 300,000 people. The WHO may
well have been right, but it and other international organizations have
missed opportunities to help resolve the wider conflict.
Because the international community has officially recognized
Al
only the Yemeni government in exile and given the Houthi govern-
ment scant diplomatic attention, neutral humanitarian organizations
are among the few groups that can mediate the conflict without
od
political restraints. This is a role they have played in Yemen before.

In the 1960s, the government of the new Yemen Arab Republic fought
a six-year civil war with northern tribes loyal to the deposed leader
Badr. Back then, as today, the northern tribes were not officially
so
recognized by foreign governments, so the International Committee

of the Red Cross and the UN were the only groups that had access
to them. The UN opened a direct line of communication with their
leaders, legitimizing their position in the conflict and encouraging them
Ma
to participate in a national peace conference. And the Red Cross

facilitated several prisoner exchanges, introducing aspects of the
Geneva Convention to an area of the world where belligerents had
traditionally beheaded captives rather than swapped them.
During the current war, the Red Cross and the UN can repeat that
strategy. They should both address the humanitarian crisis and provide
the Houthi tribes with an international platform from which to negotiate

with the government in exile.
The UN could also send peacekeepers to secure Saudi Arabia’s
southern border, alleviating one of the main drivers of the conflict.
That tactic worked from 1963 to 1964, when UN personnel patrolled a
demilitarized zone between Saudi Arabia and Yemen and mediated
cross-border disputes. A similar peacekeeping presence today would
give Riyadh enough confidence in the security of the border to cease
its aerial campaign and lift its naval blockade, ending the immediate
m
humanitarian crisis.
WASHINGTON’S ROLE
hi
Although the United States is not involved in the fighting in Yemen,
it has supported the Saudi-led coalition in several ways. The U.S.
military trains Saudi forces and offers its bases to Saudi warplanes
ha
for refueling. And the United States has sold Saudi Arabia billions of
dollars’ worth of weapons, many of which have been used in Yemen.
That means that the United States is well positioned to improve the
iT
situation on the ground. Washington should threaten to withdraw its
military support in order to pressure Saudi Arabia to end hostilities
and accept an international peacekeeping force along the Saudi-
Yemeni border. With a buffer against immediate territorial incursions,
Al
Saudi Arabia might be more willing to allow Yemenis to adopt their

own political solution, even if the Houthi leadership played a signifi-
cant role in the ensuing government.
od
Any negotiations between the U.S. government and the Houthis

would meet serious opposition in the United States. At every Houthi
rally, the protesters chant, “God is great! Death to America! Death to
Israel! Curse on the Jews! Victory to Islam!” U.S. officials have pointed
so
to this slogan as proof of the movement’s anti-American stance and,

since the expression is based on an Iranian revolutionary catch phrase,
as evidence of Houthi-Iranian cooperation. Hadi has even formally
petitioned the UN to brand the Houthis a terrorist organization.
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Yet the slogan is misleading. The Houthis are one of the few groups
in the Middle East that has little intention or ability to confront the
United States or Israel. And far from being aligned with extremists,
the Houthi movement has repeatedly clashed with the Islamic State
(also known as ISIS) and al Qaeda in the Arabian Peninsula. It is Saudi
Arabia that has long supported Sunni Islamist groups in Yemen. More-
Asher Orkaby
over, Yemen’s northern tribes are willing to accept foreign assistance no

matter who gives it. During the 1960s, they even received secret military
aid from Israel in their civil war against the new republic.
Abdul-Malik al-Houthi and the rest of the movement’s leadership,
however, need a crash course in modern diplomacy. Members of the
Houthi family have dismissed the group’s anti-American slogan as mere
words, arguing that it does not reflect actual policy. Yet words can be
dangerous. The Houthi leadership needs to distance the Yemeni
conflict from the divisions that characterize the rest of the region. It
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should start by adopting a new slogan.
A PATH TO PEACE
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The United States and international organizations should realize that
focusing on tensions between Iran and Saudi Arabia only distracts
from finding a local political settlement to end the fighting. Both of
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the main causes of the civil war are internal to Yemen: an illegitimate
republican government and a Houthi movement that has no intention
of retreating to the political obscurity of its northern stronghold. So
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far, peace talks led by Ismail Ould Cheikh Ahmed, the UN’s special
envoy for Yemen, have missed both of these points and attempted to
solve the crisis by demanding Houthi withdrawal and the reinstate-
ment of the deposed republican government.
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That must change. Before 1990, Yemen had never existed as a

single country. A peaceful solution needs to acknowledge Yemen’s
internal divisions. The country is made up of three regions. The
od
north, the home of the Houthi movement, contains the great majority
of the Shiite population and is dominated by powerful tribal alliances.
The south of the country, a British colony from 1839 to 1967 and
thereafter an Arab communist state until Yemeni unification, is
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primarily Sunni, with a weak tribal structure that has been eroded by
over a century of imperial dominion and then decades of secular com-
munist ideology. Finally, Yemen’s eastern region, known as Hadramawt,
is inhabited by a sparse Hadrami population that has traditionally
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enjoyed significant independence.

None of these regions can or should exercise complete control
over the other two. Yet nor would breaking Yemen up into three
separate nations solve the problem. A better solution would involve a
federal system that maintained a degree of autonomy for each region
and established a weak central government to mediate disputes over
territory or resources and to guide foreign policy. As well as keeping

the peace within Yemen, the absence of a strong central state would
allay Saudi concerns over regional stability.
The greatest threat to Yemen’s future, however, is not Saudi Arabia,
Iran, or even a renewed civil war, but rather a growing water shortage
that threatens the country’s major cities. According to projections
from the UN, Yemen’s major urban areas could run out of water as
soon as 2018, a consequence of inefficient irrigation and a growing
population. Saudi Arabia has long promised funds to repair Yemen’s
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damaged infrastructure after the war. That money should be used to
move major urban populations to areas with more water and invest in
massive desalination projects. This need not be a one-sided deal: a
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stable Yemen could let Saudi Arabia pipe oil from its wells to the
refineries and shipping facilities in Aden, giving the Saudi government
a new export route that would bypass the Strait of Hormuz, avoiding
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the perennial danger of an Iranian blockade. If foreign governments
and the UN act soon to reduce Yemen’s suffering and accept that the
civil war needs a local solution, then Yemen can still recover and even
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add a measure of stability to a volatile region.∂
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Even Smarter Sanctions

How to Fight in the Era of Economic Warfare
Edward Fishman
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E
conomic sanctions have been a fixture of U.S. foreign policy
for decades, but never have they enjoyed so much popularity
hi
as they do today. On virtually every major foreign problem—
North Korea’s belligerence, Iran’s nuclear aspirations, Russia’s aggres-
sion, the Islamic State’s (or ISIS’) brutality—the U.S. government has
ha
turned to some form of sanctions as an answer. Their value is one of
the few things that former President Barack Obama and President
Donald Trump agree on: Obama used them more than any other presi-
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dent in recent history, and Trump, in his first eight months in office,
oversaw significant expansions of U.S. sanctions against North Korea,
Venezuela, and, despite his misgivings, Russia.
Some U.S. sanctions aim to stigmatize foreign leaders and human
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rights abusers, such as those against North Korea’s Kim Jong Un,
Zimbabwe’s Robert Mugabe, and the Russian officials responsible
for killing the lawyer Sergei Magnitsky. Others are designed to deny
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terrorists, drug traffickers, nuclear proliferators, and other bad actors

the money and tools they need to wreak havoc. It is a third category,
however, that U.S. officials have come to rely on so heavily in recent
years: coercive economic sanctions. Their purpose is to apply economic
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pressure to force a foreign government to do something it doesn’t

want to do (or to refrain from doing something it does want to do).
The prime example is the sanctions that pressured Iran to sign the
2015 Joint Comprehensive Plan of Action, under which it agreed to
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stringent limitations on its nuclear program.

For all the popularity of sanctions, however, the system for apply-
ing them remains underdeveloped. U.S. officials almost never design
EDWARD FISHMAN is a Fellow at the Atlantic Council. From 2015 to 2017, he served as an
adviser on Europe and Eurasia and the lead sanctions expert on the Policy Planning Staff at
the U.S. Department of State. Follow him on Twitter @edwardfishman.
sanctions, much less negotiate them with allies, until crises are already
under way, and so the measures tend to be either rushed and ill conceived
or too slow to deter adversaries. These shortcomings make sanctions less
effective in the present, and they will do even more harm in the future.
As governments around the world race to hone their own economic
warfare capabilities while finding clever ways to insulate themselves
from the effects of U.S. sanctions, Washington risks falling behind in
an area in which it has long enjoyed primacy. So it’s well past time for
the U.S. government to modernize its favorite foreign policy tool.
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SMARTER AND SMARTER
Sanctions have been Washington’s foreign policy tool of choice through-
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out the post–Cold War period. As the specter of great-power war
receded, policymakers came to see sanctions as an efficient means of
advancing U.S. interests without resorting to military force. But the
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explosion of sanctions programs during the Clinton administration
led to a backlash among experts. In the late 1990s and early years of
this century, their reputation hit rock bottom.
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In particular, the UN Security Council’s strict embargo against
commerce with Saddam Hussein’s regime in Iraq was seen as depriving
ordinary civilians while doing little to pressure those in power.
Waning international support for these sanctions inspired U.S.
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Secretary of State Colin Powell to propose a new approach. Dubbed

“smart sanctions,” it aimed to move beyond embargoes by targeting
leaders and influencers directly.
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But beginning around 2006, as Washington shifted its focus to

sanctions against Iran, it became clear that this approach was not up to
the task of curbing the country’s nuclear program. It would take pressure
on the Iranian economy, chiefly the financial and energy sectors, to do
so
that. So sanctions experts in the State Department and the Treasury

Department aimed higher, crafting measures that would damage Iran’s
economy without placing undue burdens on its civilians or destabilizing
global markets. The resulting sanctions severed Iran’s largest banks from
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the global financial system, denied its maritime shipping fleet access to
insurance and repairs, and gradually reduced the regime’s oil revenues.
The strategy worked: from 2012 to 2013, Iran’s GDP shrank by roughly
nine percent and its oil sales fell from 2.5 million barrels per day to 1.1 mil-
lion barrels per day. Meanwhile, broad exceptions to sanctions granted
ordinary Iranians access to food, medicine, and cell phones from abroad.

Edward Fishman
Even though sanctions have gotten smarter, their precise impact re-
mains extraordinarily difficult to forecast. That’s because it is banks and
companies that perform the first line of sanctions implementation, and it
is impossible to know exactly how they will manage this task. In some
cases, they simply decide to cease doing business with entire countries
for fear of violating sanctions, making
U.S. officials almost never the effect of the measures more draconian
than intended. That is what has happened
design sanctions until crises with Somalia, where remittances have
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are already under way. been impeded after U.S. banks decided
to end their relationships with companies
transmitting money to the country. In other cases, sanctions end up being
hi
weaker than intended, as the private sector grows accustomed to comply-
ing right up to the boundary of legality and illicit actors find workarounds.
The United States possesses two principal assets to handle this inevi-
ha
table uncertainty. The first is the sheer size and reach of its economy
(and the global dominance of the U.S. dollar), which gives it a fairly wide
margin for error. The second is the flexibility of U.S. legal authorities,
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which permit the Treasury Department to issue licenses, update sanc-
tions lists, and pursue other course corrections with relative ease.
Both factors help explain the success of U.S. sanctions against
Russia, the largest economic power the United States has ever sanc-
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tioned. But perhaps the most unique element of this particular sanc-
tions program is that, from the start, it has been a collaborative project
between the United States and Europe. (The sanctions program against
od
Iran became a genuine multilateral endeavor only after years of pressure

from Washington.) Given the many links between the Russian and
European economies, getting the EU’s buy-in was essential. After all,
if Russia could replace all its lost business with the United States by
so
turning to Europe, the sanctions would be toothless, leaving U.S.

companies as the only losers.
The sanctions on Russia are also distinct in their precision. Unlike
ordinary sanctions, which shut their targets out of the U.S. economy
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altogether, these focus primarily on blocking Russia’s state-owned

enterprises from raising capital in Western financial markets and on
hindering its energy companies’ efforts to develop Arctic, deep-water,
and shale oil projects. The United States and the EU designed the
sanctions this way to put pressure on Russia while limiting the risk to
markets posed by going after a major player in the global economy.
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hi
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All in favor: at a UN Security Council meeting on North Korea, September 2017
On paper, the sanctions against Russia are a fraction as harsh as
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those placed on Iran before the 2015 nuclear deal. But owing to the
outsize roles played by Western banks and oil companies in global
finance and energy, the sanctions have managed to squeeze Russia’s
economy while causing little financial blowback in the United States
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or Europe. In the six months after the first round of sanctions on key
sectors of Russia’s economy were enacted, in July 2014, the ruble lost
more than half its value. The International Monetary Fund estimates
od
that sanctions initially reduced Russian GDP by 1.0 to 1.5 percent and
will cost the country up to nine percent of GDP over approximately
five years. The drop in world oil prices that began in 2014 no doubt
remains a crucial factor behind Russia’s economic fall, but sanctions
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have held back the country’s recovery, curbing investment, hampering

access to credit, and stalling the development of energy projects.
Sanctions have not forced Russia to pull out of Ukraine. But they have
helped deter it from taking more drastic measures, such as conquering
STE PHANI E KEITH / REUTE RS
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a wider swath of eastern Ukraine, using its military forces to secure a

land bridge to Crimea, or overthrowing the democratically elected
government in Kiev. It is impossible to prove a counterfactual, but it
strains credulity that Moscow would have abstained from all these actions
had it believed it could get away with them scot-free. The timeline of
events also provides evidence of deterrence. Russia put the brakes on

Edward Fishman
its two large-scale military offensives, in September 2014 and February

2015, as Washington and Brussels were preparing harsher sanctions.
And in the spring of 2015, after several rounds of sanctions and clear
signals from the West that tougher ones were in the offing, Moscow
abandoned the so-called Novorossiya (New Russia) project, which
envisioned Russia swallowing up nearly half of Ukraine’s territory. The
Russia experience thus suggests an important lesson: the best use of
sanctions may be not to counterpunch but to deter.
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WHEN TO SANCTION
Despite these recent successes, sanctions are no panacea. In some
cases, they are best suited to a supporting role—a means of constrain-
hi
ing an adversary’s capacity for mischief, for instance, as opposed to a
solution to an intractable problem. In others, they are the wrong tool
altogether. The United States should be wary of using them capri-
ha
ciously, as doing so would allow adversaries to adapt to its tactics,
decrease allies’ appetite for cooperation, and encourage foreign corpo-
rations to reduce their exposure to the U.S. economy. Before turning
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to sanctions to address a problem, policymakers should ask themselves
four questions.
First, is there money at stake? Sanctions will sway a country’s political
leaders only if their economy relies substantially on foreign trade or access
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to international financial markets. This is why sanctions programs that

remain stagnant for years tend to be the least effective: their targets have
long since limited their exposure to the U.S. economy. Such is the case
od
with sanctions against Cuba, which have been in place since 1960 to little
effect. The same dynamic was also at work with the embargo against Iran
initially imposed by the Reagan administration in 1987. With minimal
commerce between the United States and Iran, sanctions were largely
so
ineffective until 2010, when the Obama administration began a policy of

threatening sanctions against firms in Asia, Europe, the Middle East,
and elsewhere that conducted business with Iran—putting more stress
on the Iranian economy than decades of an embargo ever did.
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The second question concerns the need for a persuasive theory of

success: Will economic pressure actually change the target country’s
policies? All governments, even autocracies, care to some degree about
their people’s livelihoods, as plunging living standards can spark political
unrest. But in general, the more politically active a target’s population
is, the more likely sanctions are to work.
Take Iran. Although hardly a democracy, the country does elect its
president (from a slate of approved candidates, to be sure). After the
government’s election rigging in 2009 led to mass protests—and after
escalating Western sanctions caused a sharp economic decline—Aya-
tollah Ali Khamenei, Iran’s supreme leader, assented to the election of
Hassan Rouhani in 2013. Rouhani had campaigned on the promise of
freeing Iran from sanctions, and without his election, the nuclear deal
almost certainly would not have happened.
Sanctions can work in a similar way with Russia, another autocracy
m
that holds stage-managed elections. For over a decade and a half,
President Vladimir Putin has promised the Russian people political
stability and rising living standards in
hi
exchange for acquiescence to his personal
rule. But Western sanctions, mixed with
Sanctions should be the
the Kremlin’s own economic misman- United States’ most potent
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agement, have made this social contract deterrent in the gray zone
untenable, forcing Putin to seek a new between war and peace.
one based on his supposed role as Russia’s
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protector from a predatory West. Putin’s
popularity spiked after the 2014 annexation of Crimea, but as a full
economic recovery remains far from sight, discontent is brewing and
seems likely to grow.
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The third question officials should ask themselves involves the dis-
position of the coalition imposing sanctions: Do the United States
and its allies have the determination to maintain these measures over
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the long haul? If not, then a target country will likely try to wait them
out, hoping that interest groups and opposition parties in the West
will seize on the domestic costs of sanctions and force Washington or
Brussels to throw in the towel.
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The experience with Russia shows how sanctions can turn into a race
against time. For the last several years, Russia has sought to free itself
from sanctions not by giving the West what it wants—the restoration
of Ukraine’s international borders—but by trying to break the West’s
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resolve. By setting up a process in which member states must unani-

mously agree to extend sanctions against Russia every six months, the
EU has made itself a frequent target, with Moscow currying favor with
incumbent leaders, such as Hungary’s Viktor Orban, and boosting as-
piring ones, such as France’s Marine Le Pen. The spectacular failure of
Russia’s intervention in the recent French presidential election and the

Edward Fishman
U.S. Congress’ overwhelming approval of a law that restricts Trump’s

ability to lift sanctions against Russia have done much to clarify that the
West is not prepared to fold. But still, EU sanctions would be far more
effective if they didn’t require a semiannual vote of confidence.
The fourth question zeroes in on the political objective of sanctions:
Does the target have a feasible off-ramp? Even the harshest sanctions
are unlikely to result in total capitulation, and it is foolhardy to expect
any leader to commit political suicide in order to get sanctions lifted.
Hence the failure of sanctions against North Korea: Kim has made his
m
nuclear program a centerpiece of his domestic legitimacy, and so the
political costs of agreeing to denuclearize have outweighed the eco-
nomic benefits of doing so. For sanctions to change a country’s behav-
hi
ior, they must allow leaders on the receiving end to save face while
acceding to U.S. demands.
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IF YOU WANT PEACE, PREPARE FOR ECONOMIC WAR
In March 2016, the U.S. secretary of the treasury, Jacob Lew, struck a
memorable note of caution in a speech on sanctions. “We must be
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conscious of the risk that overuse of sanctions could undermine our
leadership position within the global economy and the effectiveness
of our sanctions themselves,” he said. The more the United States
relies on sanctions, Lew argued, the more other countries will wean
Al
themselves off dependency on the U.S. financial system—and reduce

their vulnerability to U.S. sanctions.
However compelling its logic, Lew’s argument overlooked a key
od
point: we are already living in an era of intensifying economic war-

fare. In just the last two years, China has threatened sanctions against
U.S. companies involved in arms sales to Taiwan, Russia has responded
to Turkey’s shooting down of a Russian attack aircraft with restric-
so
tions on tourism and food imports, and Saudi Arabia and other Arab
states have imposed a slew of economic penalties on Qatar. At a time
when states are trying to challenge the liberal world order without
triggering great-power war, rising economic combat has become in-
Ma
evitable. And that’s to say nothing of the political impetus for more and
more sanctions in Washington: supporting them is one of the easiest
ways for politicians to burnish their national security credentials. Cur-
tailing the use of sanctions would be akin to the error of those who
protested the Industrial Revolution by smashing textile machines: the
individual may opt out, but the tool will continue to spread.
Instead, the United States must prepare itself for the coming eco-
nomic battles by overhauling its sanctions apparatus. Although sanc-
tions have some record of success in persuading adversaries to reverse
troublesome steps they’ve already taken—such as in the Iran nuclear
negotiations—it remains far easier to prevent future actions. So the
goal should be to establish sanctions as the United States’ most potent
deterrent in the gray zone between war and peace, where so much of
today’s international jostling takes place.
The first step is to build a permanent sanctions contingency-planning
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process within the U.S. government. Just as the U.S. military draws up
detailed plans for wars it might someday have to fight, U.S. officials in
the State Department, the Treasury, and other agencies should create
hi
and constantly update off-the-shelf plans to impose sanctions rapidly if
needed. To practice these plans and signal the government’s readiness to
use them, they should routinely perform military-style exercises that
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simulate crises in which sanctions play a central role in the response.
The U.S. government should also bolster its defenses against other
countries’ sanctions. That means prioritizing the collection of intelli-
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gence on adversaries’ blueprints for economic warfare in addition to
their military plans. It also means identifying vulnerabilities in the
U.S. economy and quietly working with private companies to rectify
them. Some vital American-made products, including aircraft and
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pharmaceuticals, depend on components from countries that may one

day sanction the United States, and so the federal government should
team up with their manufacturers to identify potential alternative
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suppliers in advance.
Indeed, effective offensive and defensive planning will require more
regular consultation between sanctions policymakers and private-sector
leaders. The United States has traditionally shunned the types of close
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ties between business and government that are so prevalent elsewhere,

but it is worth making an exception for national security. In a similar
vein, when building the teams that fashion sanctions, the State
Department and the Treasury Department should draw on not just the
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usual diplomats and lawyers but also experienced professionals from

the financial, energy, and technology sectors. Industry expertise is
critical for the U.S. government to construct sanctions programs that
are forceful yet don’t backfire on the United States or its allies. And it is
especially important when deploying sanctions against larger economies,
because the risk of financial contagion is higher in such cases.

Edward Fishman
The final ingredient to sanctions-based deterrence is making eco-

nomic warfare a regular subject of consultations between the United
States and its allies. Despite the tantalizing prospect of widespread
international support, the UN Security Council is not the right forum
for these discussions, since the differences among its five permanent
members tend to result in watered-down sanctions. In fact, a cardinal
weakness of the U.S. campaign to pressure North Korea has been its
reliance on the UN Security Council, a legacy of a program that has
historically been geared more toward frustrating the country’s efforts
m
to obtain nuclear missile components than economic coercion. By
giving China and Russia a veto over sanctions decisions, and by en-
trusting them to police violations within their borders, the United
hi
States has left itself with fewer options on North Korea than it has
had in the case of Iran or Russia. It has also exposed itself to the vex-
ing possibility that Beijing and Moscow will claim the moral high
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ground for agreeing to Security Council resolutions while surrep-
titiously continuing to aid Pyongyang.
In most cases, U.S. interests are best served by negotiating coercive
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economic sanctions with like-minded allies in the EU and the G-7,
while focusing efforts in the UN on less divisive sanctions, such as
those that stigmatize bad actors and stem weapons proliferation and
illicit finance. The U.S. government should also invite allies to par-
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ticipate in sanctions contingency planning and exercises, and it should

work with them to use sanctions for collective defense. A reasonable
strategy for deterring future Russian interference in foreign elections,
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for example, would entail a joint EU-NATO declaration affirming that

such meddling will be treated as an attack against all and result in
strong multilateral sanctions.
Economic warfare is a reality of the international environment, and
so
perfecting the art of it will be essential for the United States to deter
the incremental interventions favored by its adversaries. That doesn’t
mean crises will go away; the United States will always find it difficult
to check aggression and defend its interests in such hot spots as the
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South China Sea, the Persian Gulf, and Russia’s periphery. But if
Washington strengthens its sanctions policy so that its capabilities are
unquestioned and its intentions unmistakable, it will provide a critical
service to the sustenance of great-power peace: averting crises before
they spiral out of control.∂
Why Military Assistance

Programs Disappoint
Minor Tools Can’t Solve Major Problems
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Mara Karlin
S
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ince the end of World War II, U.S. administrations of both parties
have relied on a time-honored foreign policy tool: training and
equipping foreign militaries. Seeking to stabilize fragile states,
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the United States has adopted this approach in nearly every region of
the world over the last 70 years. Today, Washington is working with
the militaries of more than 100 countries and running large programs to
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train and equip armed forces in such hot spots as Afghanistan, Iraq,
Jordan, and Pakistan.
The logic behind this approach is simple. Fragile states jeopardize
U.S. interests, but large-scale interventions are costly and unpopular.
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By outsourcing regional security in places where U.S. interests are not

immediately threatened, Washington can promote stability without
shouldering most of the burden itself. And heading off threats before
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they metastasize means that the United States can keep its eye on more
sophisticated rivals such as China and Russia.
Among U.S. policymakers, this approach enjoys widespread popularity.
Writing in this magazine in 2010, for example, Secretary of Defense
so
Robert Gates called weak states “the main security challenge of our time”
and made the case for dealing with them by “helping other countries
defend themselves or, if necessary, fight alongside U.S. forces by provid-
ing them with equipment, training, or other forms of security assistance.”
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And at a moment when public support for military intervention is fall-

ing and once coherent countries are dissolving, the prospect of stabiliz-
MARA KARLIN is an Associate Professor at Johns Hopkins University’s School of Advanced

International Studies and a Nonresident Senior Fellow at the Brookings Institution. She is
the author of Building Militaries in Fragile States: Challenges for the United States (University
of Pennsylvania Press, 2017), from which this essay is adapted.

Mara Karlin
ing weak states cheaply and quickly is more alluring than ever. Indeed,
these days, the commonly accepted narrative in Washington for se-
curity assistance in fragile states can be summed up in one word:
“more”—more training, more equipment, more money, more quickly.
But history shows that building militaries in weak states is not
the panacea the U.S. national security community imagines it to be. As
examples that span the globe have demonstrated, in practice, American
efforts to build up local security forces are an oversold halfway measure
that is rarely cheap and often falls short of the desired outcome.
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For decades, the United States has poured countless billions into
foreign security forces—to the tune of nearly $20 billion per year
these days. But the returns have been paltry. Sometimes, the problem
hi
is one of execution, and the United States can improve the way it
conceives of and carries out military assistance. Often, however, the
problems run deeper, and the United States must recognize that the
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game is simply not worth the candle.
NOT ENOUGH STRINGS ATTACHED

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The biggest problem with Washington’s efforts to build foreign militaries
is its reluctance to weigh in on higher-order questions of mission,
organizational structure, and personnel—issues that profoundly affect
a military’s capacity but are often considered too sensitive to touch.
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Instead, both parties tend to focus exclusively on training and equipment,

thus undercutting the effectiveness of U.S. assistance.
Such narrow-mindedness hampered U.S. support for South Vietnam,
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which began in earnest after the French withdrawal from Vietnam in

1954. Ngo Dinh Diem, South Vietnam’s president from 1955 to 1963,
sought to orient his military toward external threats, even though
internal defense against communists should have been the primary
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concern, as many U.S. officials knew. Yet even after receiving nearly
half a billion dollars in U.S. military aid between 1956 and 1960,
Diem reorganized the South Vietnamese military according to his
preferences, preparing it for a conventional external conflict with
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North Vietnam and leaving it ill equipped for the growing communist
insurgency at home. To make matters worse, the military’s leadership
remained weak, its chain of command confusing, and its method of
promotion based on loyalty rather than merit. When the security
situation deteriorated throughout 1960 and Vietnam’s military was
incapable of dealing with the growing insurgency, it became evident
Why Military Assistance Programs Disappoint
that the country had a poorly led military that was oriented toward
the wrong kind of threat.
Something similar happened in El Salvador, where the Carter and
Reagan administrations supported the country’s military in its fight
against left-wing guerrillas. Despite U.S. officials’ preference for a
more humane approach to the rebels, the El Salvadorian military
spearheaded an extremely violent counterinsurgency campaign charac-
terized by death squads and civilian massacres. Things got slightly
better once the United States de-
m
cided to intervene in the military’s
internal affairs: after it temporarily
Building militaries in weak
conditioned arms transfers on respect states is no panacea.
hi
for human rights in 1983, the military
purged some right-wing officers, which resulted in a reduction in vio-
lence. But it was too little, too late. Although the military did pre-
ha
vent the guerrillas from taking over the state, more than 75,000
civilians died in the protracted conflict, mostly at the hands of gov-
ernment forces. And El Salvador today remains a fragile state with
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one of the world’s highest homicide rates.
In Yemen, from 2007 to 2011, the U.S. government disbursed more
than $500 million to assist the country’s military in its fight against a
mix of domestic insurgents and al Qaeda affiliates. In its narrow
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focus on counterterrorism, however, the United States failed to fully

appreciate that Yemen’s security challenges were only one of many
problems facing the country. Its president, Ali Abdullah Saleh, had
od
filled the military with friends and family members who grew rich
while nearly everyone else in the country suffered from poverty,
hunger, and unemployment. Moreover, Saleh used the U.S. funds and
equipment intended for counterterrorism to enrich his family and
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bolster his personal security detail. In 2015, when Yemen descended

into outright civil war, Pentagon officials admitted that they had lost
track of millions of dollars’ worth of military equipment and could
not guarantee that U.S. weapons would not fall into the wrong hands.
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U.S. efforts to build Mali’s military have fizzled out for similar reasons.
As General Carter Ham, the commander of U.S. Africa Command
from 2011 to 2013 explained, military assistance to Mali “focus[ed]
almost exclusively on tactical or technical matters.” The U.S. approach
consisted of ad hoc assistance programs, which failed to comprehen-
sively strengthen Mali’s military or address issues such as organization,

Mara Karlin
discipline, and mission. As a result, most of the force collapsed in 2012,

after a U.S.-trained officer staged a military coup and leaders of elite
units defected, taking valuable U.S. materiel with them.
Although the situation is different in Afghanistan and Iraq—
namely, the United States has put American boots on the ground—
similar problems have emerged. In both countries, the United States
has spent billions of dollars to build militaries composed of hundreds
of thousands of troops. But it has largely sidestepped bigger-picture
questions about these forces’ mission, structure, and leadership in favor
m
of a focus on training and equipment. Small wonder, then, that both
militaries remain plagued by problems with recruitment, discipline,
leadership, motivation, and corruption.
hi
Despite receiving some $60 billion in aid since 2001, Afghanistan’s
military has suffered from chronic problems with morale and desertion,
especially in regions of intense conflict, such as Helmand Province.
ha
And in Iraq, during the battle for Mosul against the Islamic State (or
ISIS) that began in 2014, whole swaths of the Iraqi military deserted
en masse, leaving behind U.S.-supplied equipment for ISIS to capture.
iT
The current fight against ISIS has been more successful, with the U.S.-
trained Iraqi Counter Terrorism Service playing a key role in the
liberation of Mosul in July 2017. But credit for success in the broader
fight against the terrorist group also goes to the numerous Iranian-
Al
backed Shiite militias that have fought alongside—and often in place

of—the Iraqi military.
od
TRYING TO KEEP THE CUSTOMER SATISFIED

One might expect that Washington’s tendency to avoid raising hot-
button issues with its partners would placate them, but that is rarely
the case. Almost always, partner states are disappointed by the quan-
so
tity, quality, and timing of the assistance they receive. Because these
countries are living with the threat every day, they usually want help
as quickly as possible. But the U.S. system is not designed to work so
fast, even in high-priority cases.
Ma
That was true of the $1 billion-plus U.S. program to build Lebanon’s

military after 2005, when Syrian forces withdrew from the country.
Despite a consensus in Washington that Lebanon needed urgent help
to exert control over its territory after almost 30 years of occupation,
it took over a year for any military assistance to materialize. It took
yet another year to set up a comprehensive military training program
m
hi
ha
This is how we do it: U.S. Special Forces training Iraqi fighters, December 2016
iT
and upward of 18 months for vital equipment—including vehicles,
light arms, sniper rifles, and night-vision devices—to arrive. Frustrated
by these delays, the Lebanese did not shy away from criticizing U.S.
assistance and even sought additional help from Russia.
Al
But even under the best of circumstances, U.S. partners are rarely
satisfied. In 2007, when the Lebanese military faced down Fatah al-
Islam, an al Qaeda–affiliated group that had taken over a Palestinian
od
refugee camp, the United States dispatched planeloads of materiel to

the frontlines in just a few weeks. Lebanese officials nonetheless
griped. “We didn’t get anything but promises and best wishes and
some ammunition,” Michel Suleiman, the commander of the Lebanese
so
armed forces, said. “It’s as though [the Americans] are telling us,
‘Die first and assistance will follow.’” This disappointment resulted in
uncertainty about U.S. seriousness and staying power and made the
MOHAMM E D SALEM / REUTE RS
Lebanese less amenable to U.S. guidance.

Ma
A HOUSE DIVIDED
Another problem with U.S. military assistance concerns divisions on
the American side. Washington does not always come to a consensus
on the parameters and purpose of its help. This confusion undermines
a program’s efficacy and can result in unmitigated disaster.

Mara Karlin
Again, consider Vietnam. The man the Pentagon put in charge of

assisting the South Vietnamese military from 1955 to 1960 was Lieuten-
ant General Samuel Williams, a commander who had received a battle-
field demotion during World War II due to incompetence. Williams
repeatedly clashed with U.S. embassy officials in Saigon, kowtowed to
Diem, and remained committed to building a conventional South Viet-
namese military, contrary to the wishes of the White House and the CIA.
At a time when there were more than enough problems among its Viet-
namese allies, Washington was needlessly undermining its own efforts.
m
It repeated that mistake in Lebanon in the 1980s. In the wake of
Israel’s 1982 invasion of the country, the Reagan administration dispatched
U.S. troops to serve in a multinational peacekeeping force and to
hi
professionalize Lebanon’s military. But Washington failed to establish
a consensus on the purpose of its involvement. What began as a 30-day
mission to oversee the withdrawal of the Palestine Liberation Organi-
ha
zation from Beirut turned into a vague and open-ended commitment
to support Lebanese stability and security. Senior U.S. policymakers
disagreed sharply over the scope of the U.S. role in Lebanon—in
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particular, the extent to which the United States should directly support
Lebanon’s military in combat operations. Not surprisingly, then, officials
sent mixed messages. Although officially speaking, the U.S. govern-
ment was invested in the stability and security of the Lebanese state,
Al
one senior U.S. policymaker broke ranks and encouraged the commander
of the armed forces to lead a military coup.
This disunity laid the groundwork not only for a convoluted
od
program but also for the deaths of hundreds of U.S. military and
diplomatic personnel. Two spectacular attacks in 1983 on the U.S.
embassy and marine barracks in Beirut illustrated that at least some
actors saw the United States as a combatant in the conflict, despite
so
efforts to characterize itself as playing a supporting role. By early 1984,

portions of the Lebanese military had melted away amid increased
violence, and the United States withdrew from Lebanon, having
failed to make the state more stable or secure.
Ma
THREE’S COMPANY
A final problem with assistance programs concerns the impact of antago-
nistic external actors. When Washington partners with foreign militaries,
it too often fails to grapple with the third parties intent on exploiting a
country’s weakness. These actors have a vested interest in opposing
policies designed to strengthen the state, but U.S. policymakers,

often viewing the situation through a bilateral lens, tend to pay too little
attention to their meddling.
In Lebanon, for example, U.S. efforts to build up the military in the
1980s were thwarted by all manner of foreign proxies and governments.
Iran flooded the country with hundreds of Islamic Revolutionary
Guard Corps personnel to establish Hezbollah, a group whose original
purpose was to fight the Israeli occupation. Israel intimidated senior
Lebanese political figures by parking tanks outside their homes. Syria
m
had perhaps the greatest influence of all. As Donald Rumsfeld,
Reagan’s envoy to the Middle East at the time, quipped, “If [Amine]
Gemayel [the president of Lebanon] fears Israel could eat him ‘like a
hi
mouthful of bread,’ the Syrians could do so like a potato chip.” By
refusing to work with Lebanon’s fledgling government and empowering
its opponents, Israel, Syria, and Iran undercut U.S. efforts to help
ha
Lebanon’s military strengthen the state.
External meddling also poses a threat to U.S. objectives in Iraq,
where Iranian-backed militias and politicians feed sectarian tensions.
iT
Countering Tehran in Baghdad is admittedly complicated, given Iran’s
help in the fight against ISIS, but if left unchecked, continued Iranian
interference will undermine Iraqi sovereignty, posing further problems
as Iraq’s government struggles to achieve political reconciliation among
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the country’s Shiites, Sunnis, and Kurds. With ISIS routed from Mosul,
the United States should help Iraq meaningfully incorporate the Iranian-
backed militias into the Iraqi military. In Afghanistan, likewise, Pakistan’s
od
support for the Afghan Taliban has weakened the government in Kabul
and inhibited national reconciliation. U.S. efforts to pressure Pakistan—
including through drone strikes within the country’s borders—should
be redoubled to stop the country from serving as a safe haven.
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BETTER BUILDING
History is not replete only with tales of failure, however. Under certain
circumstances, the United States has succeeded in reforming foreign
Ma
militaries. Perhaps the best example is the first: the U.S. program
to build Greece’s military after World War II. In 1946, communist
insurgents began waging war against the Greek government. In the
words of Dean Acheson, then the U.S. secretary of state, “Greece was
in the position of a semiconscious patient on the critical list whose
relatives and physicians had been discussing whether his life could be

Mara Karlin
saved.” Concerned about growing Soviet influence around the world,

the administration of President Harry Truman quickly undertook a
$300 million effort to strengthen the Greek economy and military.
Crucially, the United States deeply involved itself in all aspects of
Greek military affairs. State Department officials even drafted the
Greek government’s initial request for
As the provider of military aid. U.S. officials worked closely with
Greece to reorganize the Hellenic Army’s
assistance, Washington structure to align with the mission of
m
has more influence than it defending the government against
may realize. communist guerillas rather than foreign
armies. And they made sure that capa-
hi
ble military leaders were appointed to
the right positions. The architect of the U.S. effort, General James
Van Fleet, was himself a capable and charismatic leader committed to
ha
keeping Athens and Washington on the same page.
Under Van Fleet’s leadership, U.S. advisers trained and equipped
the Greek forces, provided tactical and strategic advice, planned oper-
iT
ations to rout guerilla fighters, and made organizational and personnel
changes. Van Fleet and his team oversaw a complete overhaul of mil-
itary personnel, appointing a new chief of staff and compelling all of
the Hellenic Army’s lieutenant generals except one to resign. They
Al
then facilitated the promotion and placement of eight major generals

and encouraged the removal of division and corps commanders who
were reluctant or incapable of supporting the broader strategy.
od
In Washington, senior national security officials regularly assessed

the program to ensure its purpose was clear, making necessary
adjustments as the situation evolved. They held serious debates about
the appropriate role for the U.S. military, including when and if the
so
United States should consider becoming a co-combatant in Greece’s

civil war. And Truman responded promptly and decisively to signs of
division among those administering the program. When a clash between
Lincoln MacVeagh, the U.S. ambassador to Greece, and Dwight
Ma
Griswold, who was in charge of the U.S. aid program in the country,
proved insurmountable, the president removed MacVeagh.
There were challenges, to be sure. The most intense disagreements
with the Greeks centered on the size of the Hellenic Army, which
Athens wanted to increase beyond what the United States thought
necessary for internal defense. After more than a year of debate, during
which the Greeks kept expanding the military despite American dis-
pleasure, U.S. officials finally threatened to withdraw U.S. support.
The threat had its intended effect: the Greeks dropped the issue, and
the military stayed within its authorized limits.
All told, the program was a success. When Yugoslavia diminished
its support for the communist insurgents as part of an effort to reposition
itself away from the Soviet Union, the Greek military, thanks to the
reforms instituted at the behest of Washington, was able to extend its
control over the country. By 1949, thanks to U.S. support and training,
m
government forces had defeated the guerillas, and the Greek state
prevailed in one of the first proxy conflicts of the Cold War.
hi
TO BUILD OR NOT TO BUILD
Past experience offers two key lessons for U.S. officials as they seek to
strengthen the security sectors of weak states. First, like all state-
ha
building endeavors, these are political, not technical, exercises. Instead
of focusing narrowly on training and equipment, U.S. policymakers
responsible for implementing such programs must address the purpose
iT
and scope of the U.S. role and the mission, leadership, and organi-
zational structure of the partner’s military. In Saudi Arabia, for example,
the U.S. military is running a handful of programs to train and equip
the country’s armed forces, but it stays far away from sensitive issues, in
Al
line with Saudi preferences. The United States should align these dis-
jointed programs, assess the broader purpose of U.S. support, and use
the findings to meaningfully engage on crucial but sensitive matters.
od
To be sure, increasing U.S. involvement in the details of a foreign

country’s military is rife with colonial undertones and therefore might
be difficult to digest. To minimize pushback, U.S. officials should watch
how they communicate and avoid creating the perception that they are
so
bullying those they seek to assist. That said, it would be foolish not to
acknowledge the reality of the relationship between the United States
and its partners: as the provider of often irreplaceable military assis-
tance, Washington has more influence than it may realize. Recent efforts
Ma
to condition military aid to Pakistan on the country’s cracking down

on the militants within its borders, for example, are a good first step.
The second lesson for policymakers is that they cannot afford to
ignore the destabilizing potential of third parties that pose a serious
challenge to a newly equipped military. When and where possible, the
United States should marshal its tools to limit external meddling.

Mara Karlin
This might involve enhancing border security, going to the UN to leverage

international pressure, or even, in extreme cases, attacking the third
parties themselves.
At times, however, these recommendations may prove infeasible. A
partner state may refuse to discuss those crucial, higher-order questions,
motivated by some combination of distrust, a desire to pursue a
different agenda, uncertainty about the American commitment, and
the belief that it will receive U.S. aid no matter what. For example,
officials in Egypt, one of the top recipients of U.S. military aid, appear
m
to believe that Washington will continue to provide assistance in order
to maintain the country’s peace treaty with Israel regardless, which
explains their reluctance to reform their corrupt military. Nigerian
hi
officials, likewise, seem to have calculated that the United States
will help with their fight against Boko Haram despite the military’s
egregious human rights violations, and so they have refused to discuss
ha
changes to the Nigerian military’s outdated defense strategy and ineffi-
cient organizational structure.
In other cases, improving an assistance program may be unwork-
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able because the United States is unwilling to crack down on external
actors, whose support it needs for higher-priority issues. In Syria, for
example, where the United States supports a range of Syrian opposition
forces, it may make sense for the United States to give up on trying to
Al
get Russia to lessen its meddling in the civil war and instead prioritize
making progress on broader European security affairs.
In such scenarios, policymakers need to make a clear-eyed assessment
od
about the goals and likely outcomes of U.S. military assistance. That
will lead them to one of two conclusions. Sometimes, they may decide
to move forward, recognizing that the effort to train and equip the
foreign military will be just that: light security-sector reform. Limited
so
train-and-equip programs can serve useful purposes, such as providing

intelligence, professionalizing the military to make the force more
respected, enabling some tactical and operational cooperation on
mutually agreed threats, and giving U.S. personnel valuable experience
Ma
working with foreign forces. But limited U.S. involvement will have
a limited impact. Alternatively, policymakers may conclude that the
costs outweigh the benefits. In those cases, better to submit to reality
and deal with the problem some other way than throw good money
after bad.∂
РЕЛИЗ ПОДГОТОВИЛА ГРУППА "What's News" VK.COM/WSNWS
ESSAYS
The Trump administration’s
bureaucratic problems come
not from an insidious,
m
undemocratic “deep state”
but simply from the state.
hi
—Jon Michaels
ha
iT
Al
od
so
Trump and the “Deep State” The Congressional Apprentice

Jon D. Michaels 52 Jeff Bergner 99
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Saving “America First” Pay Up, Europe

Andrew J. Bacevich 57 Michael Mandelbaum 108
The False Prophecy of Hyperconnection What America Owes Its Veterans

Niall Ferguson 68 Phillip Carter 115
Y U R I G R I PAS / R E U T E R S
China vs. America A Conversation With

Graham Allison 80 Tedros Adhanom Ghebreyesus 128
Making Government Smarter

Bjorn Lomborg 90
Trump and the “Deep State”

The Government Strikes Back
m
Jon D. Michaels
hi
O
ne of the strangest aspects of the current era is that the president
of the United States seems to have little interest in running
ha
the country’s government. A political novice with no fixed
ideology or policy agenda, Donald Trump took office as if orchestrating
a hostile corporate takeover. In his first six-plus months as president,
he has followed his own counsel, displaying open contempt for much
iT
of the federal work force he now leads, slashing budgets, rescinding
regulatory rules, and refusing to follow standard operating procedures.
This has cost him allies in the executive branch, helped spur creative
(and increasingly effective) bureaucratic opposition, and, thanks to
Al
that opposition, triggered multiple investigations that threaten to sap

party and congressional support.
Furious at what they consider treachery by internal saboteurs, the
od
president and his surrogates have responded by borrowing a bit of

political science jargon, claiming to be victims of the “deep state,” a
conspiracy of powerful, unelected bureaucrats secretly pursuing their
own agenda. The concept of a deep state is valuable in its original
so
context, the study of developing countries such as Egypt, Pakistan,

and Turkey, where shadowy elites in the military and government
ministries have been known to countermand or simply defy democratic
Ma
directives. Yet it has little relevance to the United States, where gov-
ernmental power structures are almost entirely transparent, egalitarian,
and rule-bound.
The White House is correct to perceive widespread resistance
inside the government to many of its endeavors. But the same way
the administration’s media problems come not from “fake news” but
simply from news, so its bureaucratic problems come not from an
JON D. MICHAELS is Professor of Law at the University of California, Los Angeles, School
of Law.
52 f o r e i g n a f fa i r s
insidious, undemocratic “deep state” but simply from the state—the

large, complex hive of people and procedures that constitute the U.S.
federal government.
L’ÉTAT, C’EST TOI

Broadly speaking, the American state comprises the vast expanse of
federal administrative agencies—the organizations and people responsible
m
for making and enforcing regulations, designing and running social
programs, combating crime and corruption, providing for the national
defense, and more. These agencies function somewhat autonomously
hi
from their political masters, drawing on their own sources of legal
authority, expertise, and professionalism. They oversee the disburse-
ha
ment of vast amounts of money to vast numbers of people for various
things, and most of their day-to-day operations are largely unaffected
by broad-stroke policy statements issued from the White House or
even their department’s leaders.
iT
Officials inside these agencies can defend environmental and
workplace safety standards, international alliances, and the rule of
law. They can investigate, document, and publicize instances of
high-level government malfeasance. And they can do so, in no small
Al
part, because a good number of them are insulated by law from

political pressure, enjoy de facto tenure, and have strong guild codes
of professional behavior. In some ways, the Trump administration—
od
in truth, any administration—is right to see them, collectively, as a

potentially dangerous adversary.
But unlike the deep states in authoritarian countries, the American
state should be embraced rather than feared. It is not secretive,
so
exclusive, and monolithic, but open, diverse, and fragmented. Its

purpose is not to pursue a private agenda contrary to the public will
but to execute that will—to deliver to the people the goods and
Ma
services that their elected representatives have decreed, and to do

so fairly and effectively.
In Europe, the upper reaches of the state are often dominated by a
tight-knit group of graduates from the country’s most exclusive schools,
such as Cambridge, Oxford, and the École Nationale d’Administration.
Across Asia and the Middle East, ministries and state-owned enter-
prises are often controlled by clans and cliques and run for their private
benefit. In the United States, however, the state is an amalgam of
middle-class technocrats without any strong collective identity or
September/October 2017 53
Jon D. Michaels
financial incentives to profit personally from their jobs. In fact, one

could make a good case that the bureaucrats (more numerous outside
the Beltway than they are in Washington proper) are closer to and
more in tune with median voters than the mostly rich, elite politicians
who control them.
Throughout the developing world, and even in some developed
countries, power is not only concentrated in the hands of a cohesive
m
elite but also exercised largely in secret. In the United States, by
contrast, government agencies are overwhelmingly transparent and
accessible. (Within the United States,
hi
it is generally easier to get accurate and
The American state comprehensive information about the
should be embraced rather inner workings of federal agencies than
ha
than feared. about the White House or Congress.)
And when officials take the extraordi-
nary step of opposing the choices of
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their political bosses, they often do so in a reasoned, public manner—
as with the State Department’s exemplary Dissent Channel. Even their
crimes are transparent: What is the offense Trump supporters are most
outraged by? The unauthorized disclosure of accurate information.
Al
What’s more, unlike in many nations where democracy presented

itself as a late-arriving imposition on an already entrenched bureauc-
racy, in the United States, it is the administrative state that is seen as
od
the intrusion. The American state therefore operates from a position

of weakness and deference. It is disaggregated and siloed. True deep
states involve powerful, elite factions that control multiple inter-
locking ministries and funding sources. By contrast, in the United
so
States, the only actor with even a plausible ability to control many
separate parts of the American state is the president, whose own powers
and resources are limited by law and custom.
Ma
U.S. administrative fragmentation makes it hard for things to

get done—but it also makes the notion of a coordinated, secret
conspiracy by multiple state actors laughable. Tree huggers in the
Environmental Protection Agency live to enforce the Clean Air
Act, and latter-day Eliot Nesses in the Treasury Department obsess
about combating corruption and fraud. Neither group is profes-
sionally interested in or involved with the other’s agenda, or, for
that matter, interested in or involved with health care, immigration,
or foreign policy.
DIVIDE AND AVOID BEING CONQUERED

The American constitutional order is based on many different separa-
tions of powers, not just the division of the legislative, executive, and
judiciary branches. There are splits between the two halves of the
legislature; the federal, state, and local levels of government; the
public and private sectors; and more.
Over the first half of the twentieth century, as Americans realized
m
that they wanted government to play a larger role in economic and
social affairs, Congress delegated large swaths of its own lawmaking
power to federal agencies operating under the president’s control.
hi
This transfer of authority greatly destabilized the original, Madisonian
separation of powers. But to prevent true presidential imperialism,
ha
the architects of the modern welfare and national security states
generated new checks and balances, including the legal and cultural
empowerment of an autonomous bureaucracy. And today, the en-
abling of that autonomy has positioned agency officials to challenge
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and resist efforts by the Trump administration that lack legal or
scientific foundations.
Of course, the value (and advisability) of such a potent check
depends on the quality of the state actors involved, and in the United
Al
States, agency officials are highly trained, relatively diverse, and

demonstrably devoted to the public weal. They understand that they
would forfeit their authority and legitimacy if they were captured by
od
special interests working for private rather than public goods or if

they conspired to undermine the will of the people’s representatives.
Here again, however, whatever problems the bureaucracy poses are
dwarfed by the much greater danger of special interests capturing
so
those representatives. After all, the civil service constitutes a rela-

tively meritocratic technocracy operating under strict transparency
rules and within careful guardrails that prevent tampering—compared
Ma
with presidents and legislators who spend half their time setting
policy and the other half desperately soliciting money from anybody
willing to contribute.
RESTORING THE STATE

Why is the American state so susceptible to vilification? The current
efforts to delegitimize the state are not without precedent. For
decades, certain groups in society have chipped away at the American
state’s status, resources, and independence. Outsourcing, privatization,
Jon D. Michaels
the conversion of civil servants into at-will employees—these and

other attempts to sideline or defang the independent bureaucracy
have taken their toll. Now more than ever, the state and its officials
need to be supported and nurtured rather than demonized and starved.
Two obvious efforts worth pursuing would be insourcing some previ-
ously outsourced responsibilities and safeguarding the civil service.
Recent administrations, Democratic and Republican alike, have
m
increasingly turned to private-sector contractors for the provision of
core government services relating to defense and intelligence, policing
and incarceration, social welfare provision, and so on. Proponents of
hi
such shifts argue that contractors are cheaper and more efficient than
federal employees. In practice, however, outsourcing and privatiz-
ha
ing key government services have rarely produced the promised
economic windfall.
But even if there are efficiency gains, they have come at the expense
of democratic and legal accountability, as contractors operate more
iT
opaquely and without much oversight. And whereas tenured civil
servants are legally and culturally positioned to subject administration
proposals and policies to independent expert scrutiny, contractors
rarely challenge the presidentially appointed agency leaders who
Al
write their checks. Outsourcing thus undercuts that new, and critical,
internal check on modern administrative power.
In addition to circumventing a contentious civil service through
od
outsourcing, recent administrations have tried to strip government

personnel of their legal protections. This campaign, principally pitched
in neutral, technocratic terms as bringing private-sector methods into
public-sector workplaces, has already succeeded in reclassifying thou-
so
sands of agency personnel as at-will employees. They are now subject

to summary termination for any reason, including political disagree-
ment or perceived disloyalty, clearly introducing a chilling effect and
Ma
checking the autonomy that employees allow themselves to display.

Confident and capable presidents tend to recognize that a healthy,
high-quality bureaucracy is a national treasure, a force multiplier that
can use its skills, judgment, and hard-earned credibility to help an
administration achieve responsible goals as effectively as possible. It is
the insecure presidents, unable to hear honest technocratic feedback,
who go to war with the state they nominally lead.∂
Saving “America First”

What Responsible Nationalism Looks Like
m
Andrew J. Bacevich
hi
O
ne of the privileges of power that Americans routinely abuse is
to remember selectively. It was not surprising, then, that this
ha
year’s centennial of the United States’ entry into World War I
attracted barely any official attention. A House resolution commending
“the brave members of the United States Armed Forces for their efforts
in ‘making the world safe for democracy’” never made it out of commit-
iT
tee. And although the Senate did endorse a fatuous decree “expressing
gratitude and appreciation” for the declaration of war passed back in April
1917, the White House ignored the anniversary altogether. As far as
Washington is concerned, that conflict retains little or no political salience.
Al
It was not always so, of course. For those who lived through it, the
“war to end all wars” was a searing experience. In its wake came acute
disillusionment, compounded by a sense of having been deceived about
od
its origins and purposes. The horrific conflict seemed only to create
new problems; President Woodrow Wilson’s insistence in a 1919 speech
that the 116,000 American soldiers lost in that war had “saved the liberty
of the world” rang hollow.
so
So 20 years later, when another European conflict presented Americans

with a fresh opportunity to rescue liberty, many balked. A second war
against Germany on behalf of France and the United Kingdom, they
Ma
believed, was unlikely to produce more satisfactory results than the

first. Those intent on keeping the United States out of that war organ-
ized a nationwide, grass-roots campaign led by the America First
Committee. During its brief existence, the movement enlisted more
supporters than the Tea Party, was better organized than Occupy Wall
Street or Black Lives Matter, and wielded more political clout than
the “resistance” to President Donald Trump.
ANDREW J. BACEVICH is Professor Emeritus of International Relations and History at Boston
University and the author of America’s War for the Greater Middle East: A Military History.
Andrew J. Bacevich
Yet despite drawing support from across the political spectrum, the
movement failed. Well before the Pearl Harbor attack in December
1941, President Franklin Roosevelt had embarked on a program of
incremental intervention aimed at bringing the United States into the
war as a full-fledged belligerent. When it came to Nazi Germany,
Roosevelt believed that the putative lessons of World War I—above
all, that France and the United Kingdom had played the United States
m
for a sucker—did not apply. He castigated those who disagreed as
“enemies of democracy” aligned with fascists, communists, and “every
group devoted to bigotry and racial and religious intolerance.” In effect,
hi
Roosevelt painted anti-interventionism as anti-American, and the
smear stuck. The phrase “America first” became a term of derision. To
ha
the extent that anti-interventionist sentiment survived, it did so as a
fringe phenomenon, associated with the extreme right and the far left.
For decades, World War II remained at the forefront of the American
historical consciousness, easily overshadowing World War I. Politicians
iT
and pundits regularly paid homage to World War II’s canonical
lessons, warning against the dangers of appeasement and emphasizing
the need to confront evil. As for “America first,” the slogan that had
resonated with those reeling from World War I, it appeared irredeem-
Al
able, retaining about as much political salience as the Free Silver and
Prohibition movements. Then came Trump, and the irredeemable
enjoyed sudden redemption.
od
THE MYOPIA OF UTOPIANISM

As long as the Cold War persisted and, with it, the perceived imperative
of confronting international communism, America First remained an
so
emblem of American irresponsibility, a reminder of a narrowly averted

catastrophe. When the fall of the Soviet Union triggered a brief flurry
of speculation that the United States might claim a “peace dividend”
Ma
and tend to its own garden, elite opinion wasted no time in denouncing
that prospect. With history’s future trajectory now readily apparent—
the collapse of communism having cleared up any remaining confusion
in that regard—it was incumbent on the United States to implement
that future. U.S. leadership was therefore more important than ever,
a line of thought giving rise to what the writer R. R. Reno has aptly
termed “utopian globalism.”
Three large expectations informed this post–Cold war paradigm.
According to the first, corporate capitalism of the type pioneered in the
m
hi
ha
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Isolated: Lindbergh arriving at the White House to meet Roosevelt, 1939
United States, exploiting advanced technology and implemented glob-
ally, held the potential of creating wealth on a once unimaginable
scale. According to the second, the possession of vast military might—
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displayed for all to see in the 1990–91 Gulf War—endowed the United
States with an unprecedented ability to establish (and enforce) the
terms of world order. And according to the third, the White House, no
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longer merely the official residence of the country’s chief executive,

was now to serve as a de facto global command post, the commander
in chief’s mandate extending to the far corners of the earth.
In policy circles, it was taken as a given that American power—
so
wielded by the president and informed by the collective wisdom of the

political, military, and corporate elite—was sufficient for the task ahead.
Although a few outsiders questioned that assumption, such concerns never
H A R R I S & EW I N G / L I B R A RY O F C O N G R E S S
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gained traction. The careful weighing of means and ends suggested

timidity. It also risked indulging popular inclinations toward isolation-
ism, kept under tight rein ever since the America First campaign met
its demise at the hands of the imperial Japanese navy and Adolf Hitler.
Again and again during the 1990s, U.S. officials warned against
the dangers of backsliding. The United States was “the indispensable
nation,” they declared, a quasi-theological claim pressed into service
as a basis for statecraft. After 9/11, policymakers saw the attacks not as
a warning about the consequences of overreach but as a rationale for
Andrew J. Bacevich
redoubling U.S. efforts to fulfill the imperatives of utopian globalism.

Thus, in 2005, in the midst of stalemated wars in Afghanistan and
Iraq, President George W. Bush summoned the spirit of Wilson and
assured his fellow citizens that “the expansion of freedom in all the
world” had become “the calling of our time.”
A decade later, with both of those wars still simmering and other
emergencies erupting regularly, despite vast expenditures of blood and
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treasure, Trump denounced the entire
post–Cold War project as a fraud. Dur-
The challenge is to save ing his presidential campaign, he vowed
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“America first” from Trump. to “make America great again” and
recover the jobs lost to globalization.
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He pledged to avoid needless armed conflicts and to win promptly
any that could not be avoided.
Yet although he rejected the first two components of utopian
globalism, he affirmed the third. As president, he and he alone would
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set things right. Once in office, he pledged to use his authority to the full-
est, protecting ordinary Americans from further assault by the forces
of globalization and ending the misuse of military power. Instead of
embracing globalism, Trump promised to put “America first.”
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Trump’s appropriation of that loaded phrase, which formed a central

theme of his campaign and his inaugural address, was an affront to
political correctness. Yet it was much more. At least implicitly, Trump
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was suggesting that the anti-interventionists who opposed Roosevelt

had been right after all. By extension, he was declaring obsolete the
lessons of World War II and the tradition of American statecraft
derived from them.
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The policy implications seemed clear. In a single stroke, the columnist

Charles Krauthammer wrote, Trump’s inaugural “radically redefined
the American national interest as understood since World War II.”
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Instead of exercising global leadership, the United States was now opting
for “insularity and smallness.” Another columnist, William Kristol,
lamented that hearing “an American president proclaim ‘America
First’” was “profoundly depressing and vulgar.”
That Trump himself is not only vulgar but also narcissistic and
dishonest is no doubt the case. Yet fears that his embrace of “America
first” will lead the United States to turn its back on the world have
already proved groundless. Ordering punitive air strikes against a
regime that murders its own citizens while posing no threat to the
United States, as Trump did in Syria, is not isolationism. Nor is sending

more U.S. troops to fight the campaign in Afghanistan, the very epitome
of the endless wars that Trump once disparaged. And whatever one
makes of Trump’s backing of the Sunnis in their regional struggle with
the Shiites, his vow to broker an Israeli-Palestinian peace deal, his
threats against North Korea, and his evolving views on trade and the
viability of nato, they do not suggest disengagement.
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What they do suggest is something much worse: an ill-informed,
impulsive, and capricious approach to foreign policy. In fact, if “policy”
implies a predictable pattern of behavior, U.S. foreign policy ceased
hi
to exist when Trump took office. The United States now acts or refrains
from action according to presidential whim. Trump’s critics have misread
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their man. Those who worry about the ghost of Charles Lindbergh,
the aviator and America First backer, taking up residence in the Oval
Office can rest easy. The real problem is that Trump is making his
own decisions, and he thinks he has things under control.
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Yet more important, unlike Trump himself, Trump’s critics have
misread the moment. However oblivious he was to the finer points of
diplomacy, candidate Trump correctly intuited that establishment
views about the United States’ proper role in the world had not worked.
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In the eyes of ordinary citizens, policies conceived under the direction

of George H. W. Bush or George W. Bush, Bill Clinton or Hillary
Clinton, Condoleezza Rice or Susan Rice no longer command auto-
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matic assent. America über alles has proved to be a bust—hence, the

appeal of “America first” as an alternative. That the phrase itself causes
conniptions among elites in both political parties only adds to its allure
in the eyes of the Trump supporters whom the Democratic candidate
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Hillary Clinton dismissed during the campaign as “deplorable.”

Whatever the consequences of Trump’s own fumbling, that allure is
likely to persist. So, too, will the opportunity awaiting any would-be
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political leader with the gumption to articulate a foreign policy that

promises to achieve the aim of the original America First movement:
to ensure the safety and well-being of the United States without
engaging in needless wars. The challenge is to do what Trump him-
self is almost certainly incapable of doing, converting “America first”
from a slogan burdened with an ugly history—including the taint of
anti-Semitism—into a concrete program of enlightened action. To put
it another way, the challenge is to save “America first” from Trump.
Andrew J. Bacevich
THINKING ABOUT TOMORROW

The problem with utopian globalism, according to Reno, is that it
“disenfranchises the vast majority and empowers a technocratic elite.”
This is good news for the elite, but not for the disenfranchised. True,
since the end of the Cold War, globalization has created enormous
wealth. But it has also exacerbated inequality. Much the same can be
said of U.S. military policy: those presiding over and equipping
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American wars have made out quite handsomely; those actually sent
to fight have fared less well. The 2016 presidential election made
plain to all the depth of the resulting divisions.
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Reno’s proposed solution to those divisions is to promote “patriotic
solidarity, or a renewed national covenant.” He’s right. Yet the term
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“covenant,” given its religious connotation, won’t fly in secular quarters.
What’s needed is a statement of purpose capable of binding Americans
together as Americans (as opposed to citizens of the world), while also
providing a basis for engaging with the world as it is, not as it might
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once have been.
To fill this tall order, Americans should go back to their beginnings
and consult the Constitution. Its concise, 52-word preamble, summa-
rizing the purpose of the union, concludes with a pledge to “secure
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the Blessings of Liberty to ourselves and our Posterity.” Put the

emphasis on “ourselves,” and this passage suggests a narrow, even selfish
orientation. Put the emphasis on “our Posterity,” however, and it
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invites a more generous response. Here is the basis for a capacious

and forward-looking alternative to utopian globalism.
Taking seriously an obligation to convey the blessings of liberty to
Americans’ posterity brings to the fore a different set of foreign pol-
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icy questions. First, what do Americans owe future generations if they

are to enjoy the freedoms to which they are entitled? At a minimum,
posterity deserves a livable planet, reasonable assurances of security,
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and a national household in decent working order, the three together

permitting the individual and the collective pursuit of happiness.
Second, what are the threats to these prerequisites of liberty? Several
loom large: the possibility of large-scale environmental collapse, the
danger of global conflict brought about by the rapidly changing roster
of great powers, and the prospect of a citizenry so divided and demor-
alized that it can neither identify nor effectively pursue the common
good. Taken separately, each of these threats poses a serious danger to
the American way of life. Should more than one materialize, that way
of life will likely become unsustainable. The simultaneous realization

of all three would jeopardize the very existence of the United States
as an independent republic. Therefore, the overarching purpose of
U.S. policy should be to forestall these eventualities.
How best to respond to these threats? Proponents of utopian global-
ism will argue for the United States to keep doing what it has been
doing, even though since the end of the Cold War, their approach has
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exacerbated, rather than alleviated, problems. A broad conception of
“America first” offers an alternative more likely to produce positive
results and command popular support.
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An “America first” response to environmental deterioration should
seek to retard global warming while emphasizing the preservation of
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the United States’ own resources—its air, water, and soil; its flora and
fauna; and its coastlines and inland waterways. The pursuit of mere
economic growth should take a back seat to repairing the damage
caused by reckless exploitation and industrial abuse. To effect those
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repairs, Congress should provide the requisite resources with the kind
of openhandedness currently reserved for the Pentagon. On all matters
related to safeguarding the planet, the United States would serve as
an exemplar, benefiting future generations everywhere.
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An “America first” response to ongoing changes in the international

order should begin with a recognition that the unipolar moment has
passed. Ours is a multipolar era. Some countries, such as China and
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India, are just now moving into the first rank. Others long accustomed
to playing a leading role, such as France, Russia, and the United King-
dom, are in decline while still retaining residual importance. Occupying
a third category are countries whose place in the emerging order
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remains to be determined, a group that includes Germany, Indonesia,

Iran, Japan, and Turkey.
As for the United States, although it is likely to remain preeminent
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for the foreseeable future, preeminence does not imply hegemony.

Washington’s calling should be not to impose a Pax Americana but to
promote mutual coexistence. Compared with perpetual peace and
universal brotherhood, stability and the avoidance of cataclysmic
war may seem like modest goals, but achieve that much, and future
generations will be grateful.
Similar reasoning applies to the question of nuclear weapons.
Whatever advantage a ready-to-launch strike force once conferred on
the United States will almost surely disappear in the coming years. As
Andrew J. Bacevich
the Pentagon continues to develop ever more discriminate and exotic

ways of killing people and disabling adversaries, strategic deterrence
will no longer depend on maintaining a capability to retaliate with
nuclear weapons. Even as the actual use
of U.S. nuclear weapons becomes in-
Let marines be marines, creasingly unimaginable, however, the
and help do-gooders do good. United States’ own vulnerability to these
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weapons will persist. As a first step to-
ward eliminating the scourge of nuclear weapons altogether, Wash-
ington should pay more than lip service to its obligations under the
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Nuclear Nonproliferation Treaty, which requires signatories “to pur-
sue negotiations in good faith on effective measures” leading to the
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abolition of nuclear arms. Taking that obligation seriously would exem-
plify enlightened self-interest: the very essence of what it means to
put America first.
As for the societal fissures that gave rise to Trump, Americans are
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likely to find that restoring a common understanding of the common
good will be a long time coming. The era of utopian globalism coin-
cided with a period of upheaval in which traditional norms related
to gender, sexuality, family, and identity fell from favor among many.
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The resulting rifts run deep. In one camp are those waging a fierce
rear-guard action in favor of a social order now in tatters; in the other
are those intent on mandating compliance with precepts such as diver-
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sity and multiculturalism. Both sides manifest intolerance. Neither

gives much evidence of empathy or willingness to compromise.
A reimagined “America first” approach to statecraft would seek to
insulate U.S. foreign policy from this ongoing domestic Kulturkampf
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as much as possible. It would remain agnostic as to which blessings of

liberty the United States views as ready for export until Americans
themselves reach a consensus on what liberty should actually entail.
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This need not imply turning a blind eye to human rights abuses.
Yet an “America first” foreign policy would acknowledge that on an
array of hot-button issues, as varied as gun ownership and the status
of transgender people, the definition of rights is in a state of flux.
In that regard, the warning against “passionate attachments” that
President George Washington issued in his Farewell Address should
apply not only to countries but also to causes. In either case, those
responsible for the formulation of foreign policy should avoid taking
positions that threaten to undermine the nation’s fragile domestic
cohesion. It may be naive to expect politics to stop at the water’s edge.

That said, diplomacy is not an appropriate venue for scoring points
on matters on which Americans themselves remain deeply at odds.
That’s what elections are for. What the present generation of Amer-
icans owes to posterity is the opportunity to sort these things out
for themselves.
Something similar applies to U.S. military policy. Future generations
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deserve their own chance to choose. Unfortunately, military actions
undertaken under the auspices of utopian globalism have narrowed
the range of available choices and squandered vast resources. The du-
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ration of the post-9/11 wars tells the tale: Afghanistan is the longest in
U.S. history, and Iraq is the second longest. The countless sums of
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money wasted—few in Washington evince interest in tallying up how
much—have contributed to the exploding size of the U.S. national
debt. It stood at approximately $4 trillion when the Cold War ended,
has risen to $20 trillion today, and is projected to exceed $25 trillion
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by the end of this decade. The United States has become a country
that does not finish what it starts and then borrows exorbitantly to
conceal its failures.
From an “America first” perspective, the antidote is twofold:
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first, curb Washington’s appetite for armed intervention except when

genuinely vital U.S. interests are immediately at risk, and second,
pay for wars as they occur, rather than saddling future generations
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with their cost. Posterity deserves books that balance.

Critics will contend that a nation that fights only when vital in-
terests are at stake will become oblivious to the suffering of those
unfortunate people living in such hellholes as Syria. Yet fighting is
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neither the sole nor necessarily the best way to respond to suffer-
ing. Indeed, Washington’s scorecard when it comes to sending U.S.
troops to liberate or protect is mixed at best. Consider the present-
Ma
day conditions in Somalia, Iraq, and Libya, each the subject of U.S.
military action justified entirely or in large part by humanitarian
concerns. In all three countries, armed intervention only made life
worse for ordinary people.
Does this mean that Americans should simply avert their eyes from
horrors abroad? Not at all. But when it comes to aiding the distressed,
they should not look to U.S. bombs or troops to fix things. The armed
forces of the United States may occasionally engage in charitable works,
but that should not be their purpose. Far better to incentivize concerned
Andrew J. Bacevich
citizens to open their own wallets, thereby expanding the capacity of

relief organizations to help. In comparison to bureaucratically engineered
programs, voluntary efforts are likely to be more effective, both in
making a difference on the ground and in winning hearts and minds.
In short, let marines be marines, and help do-gooders do good.
POTUS ON NOTICE
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All these suggestions amount to little more than common sense. Yet
given the state of U.S. politics, defined above all by the outsize role
of the president, none of it is likely to happen. In that regard, the
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most immediate goal of an “America first” policy must be to restore
some semblance of constitutional balance. That means curtailing
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presidential power, an aim that is all the more urgent with Trump in
the White House.
In utopian globalist circles, however, the thought of constraining
executive authority is anathema. The entire national security apparatus
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is invested in the proposition that the president should function as a
sort of quasi deity, wielding life-and-death authority. Disagree, and
you’ve rendered yourself ineligible for employment on the seventh
floor of the State Department, in the E Ring of the Pentagon, at cia
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headquarters, or anywhere within a half mile of the Oval Office.

This line of thinking dates back to the debate over whether to enter
World War II. Roosevelt won that fight and, as a result, endowed his
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successors with extraordinary latitude on issues of national security.

Ever since, in moments of uncertainty or perceived peril, Americans
have deferred to presidents making the case, as Roosevelt did, that
military action is necessary to keep them safe.
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Yet Trump, to put it mildly, is no Roosevelt. More to the point,

both the world and the United States have changed in innumerable
ways. Although the lessons of World War II may still retain some
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legitimacy, in today’s radically different circumstances, they do not

suffice. So although the risks of ill-considered appeasement persist,
other dangers are at least as worrisome—among them, recklessness,
hubris, and self-deception. In 1940, the original America First move-
ment warned against such tendencies, which had in recent memory
produced the catastrophe of World War I and which would lay the
basis for even worse things to come. Today, those warnings deserve
attention, especially given the recklessness, hubris, and self-deception
that Trump displays daily.
The point is not to relitigate the arguments over whether the

United States should have entered World War II: in that instance,
Roosevelt got it right and those who thought Nazi Germany posed
no threat to the United States got it wrong. Yet the latter were not
wrong to insist that the previous war against Germany and all that it
had wreaked remained relevant. Nor were they wrong to decry the
chicanery and demagoguery that Roosevelt was employing to maneuver
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the United States toward war.
Americans today need to do a better job of remembering. To remem-
ber with an open mind is to consider the possibility that those on the
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losing end of old arguments might be worth listening to. The impera-
tive now, amid the wreckage created by utopian globalism and the
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follies of Trump, is to think creatively about the predicaments that
the United States faces. Stripped of their unfortunate historical asso-
ciations and understood properly, many of the concerns and convictions
that animated the original America First movement provide a sound
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point of departure for doing just that.∂
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The False Prophecy of

Hyperconnection
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How to Survive the Networked Age
Niall Ferguson
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I
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t is a truth universally acknowledged that the world is connected
as never before. Once upon a time, it was believed that there
were six degrees of separation between each individual and any
other person on the planet (including Kevin Bacon). For Facebook
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users today, the average degree of separation is 3.57. But perhaps that
is not entirely a good thing. As Evan Williams, one of the founders
of Twitter, told The New York Times in May 2017, “I thought once
everybody could speak freely and exchange information and ideas,
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the world is automatically going to be a better place. I was wrong

about that.”
Speaking at Harvard’s commencement that same month, Facebook’s
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chair and ceo, Mark Zuckerberg, looked back on his undergraduate

ambition to “connect the whole world.” “This idea was so clear to us,”
he recalled, “that all people want to connect. . . . My hope was never
to build a company, but to make an impact.” Zuckerberg has certainly
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done that, but it is doubtful that it was the impact he dreamed of in

his dorm room. In his address, Zuckerberg identified a series of
challenges facing his generation, among them: “tens of millions of
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jobs [being] replaced by automation,” inequality (“there is something

wrong with our system when I can leave here and make billions of
dollars in ten years while millions of students can’t afford to pay off their
loans”), and “the forces of authoritarianism, isolationism, and national-
ism,” which oppose “the flow of knowledge, trade, and immigration.”
What he omitted to mention was the substantial contributions that
NIALL FERGUSON is a Senior Fellow at the Hoover Institution and the author of the forth-
coming book The Square and the Tower: Networks and Power, From the Freemasons to Facebook
(Penguin Press, 2018), from which this essay is adapted. Follow him on Twitter @nfergus.
The False Prophecy of Hyperconnection
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Add friend: Mark Zuckerberg at a conference in San Francisco, April 2016
his company and its peers in Silicon Valley have made to all three of
these problems.
No businesses in the world are working harder to eliminate jobs
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such as driving a truck than the technology giants of California. No

individuals exemplify the spectacular growth of the wealth of the top
0.01 percent of earners better than the masters of Silicon Valley. And
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no company did more—albeit unintentionally—to help the populists

win their political victories in the United Kingdom and the United
States in 2016 than Facebook. For without Facebook’s treasure house
of data about its users, it would surely have been impossible for the
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relatively low-budget Brexit and Trump campaigns to have succeeded.

The company unwittingly played a key role in last year’s epidemic of
fake news stories.
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Zuckerberg is by no means the only believer in one networked world:

a “global community,” in his phrase. Ever since 1996, when the Grateful
Dead lyricist turned cyber-activist John Perry Barlow released his
“Declaration of the Independence of Cyberspace,” in which he asked
STE PH EN LAM / REUTE RS
the “Governments of the Industrial World, you weary giants of flesh

and steel,” to “leave us alone,” there has been a veritable parade of
cheerleaders for universal connectivity. “Current network technology
. . . truly favors the citizens,” wrote Google’s Eric Schmidt and Jared
Cohen in 2013. “Never before have so many people been connected
Niall Ferguson
through an instantly responsive network.” This, they argued, would

have truly “game-changing” implications for politics everywhere.
The early phase of the Arab Spring seemed to vindicate their opti-
mistic analysis; the subsequent descent of Syria and Libya into civil
war, not so much.
Like John Lennon’s “Imagine,” utopian visions of a networked world
are intuitively appealing. In his Harvard speech, for example, Zuckerberg
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contended that “the great arc of human history bends towards people
coming together in ever-greater numbers—from tribes to cities to
nations—to achieve things we couldn’t on our own.” Yet this vision, of
hi
a single global community as the pot of gold at the end of the arc of
history, is at odds with everything we know about how social networks
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work. Far from being new, networks have always been ubiquitous in
the natural world and in the social life of humans. The only thing new
about today’s social networks is that they are the biggest and fastest
ever, connecting billions of people in seconds. Long before the found-
iT
ing of Facebook, however, scholars had already conducted a great deal
of research into how smaller and slower social networks operate. What
they found gives little ground for optimism about how a fully networked
world would function.
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NOT MANY MEN ARE ISLANDS

Six fundamental insights can help those without expertise in network
od
theory to think more clearly about the likely political and geopolitical
impacts of giant, high-speed social networks. The first concerns the
pattern of connections within networks. Since the work of the eighteenth-
century Swiss scholar Leonhard Euler, mathematicians have conceived
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of networks as graphs of nodes connected together by links or, in the

parlance of network theory, “edges.” Individuals in a social network
are simply nodes connected by the edges we call “relationships.” Not
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all nodes or edges in a social network are equal, however, because few
social networks resemble a simple lattice, in which each node has the
same number of edges as all the rest. Typically, certain nodes and
edges are more important than others. For example, some nodes
have a higher “degree,” meaning that they have more edges, and
some have higher “betweenness centrality,” meaning that they act as
the busy junctions through which a lot of network traffic has to pass.
Put differently, a few crucial edges can act as bridges, connecting
together different clusters of nodes that would otherwise not be able to
communicate. Even so, there will nearly always be “network isolates”—

individual nodes that are not connected to the main components of
the network.
At the same time, birds of a feather flock together. Because of the
phenomenon known as “homophily,” or attraction to similarity, social
networks tend to form clusters of nodes with similar properties or
attitudes. The result, as researchers found when they studied American
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high schools, can be self-segregation along racial lines or other forms
of polarization. The recent division of
the American public sphere into two
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echo chambers, each deaf to the other’s
Utopian visions of a
arguments, is a perfect illustration. networked world are at
A common error of much popular odds with everything we
ha
writing about social networks is to draw know about how social
a distinction between networks and
hierarchies. This is a false dichotomy. networks work.
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A hierarchy is simply a special kind of
network with restricted numbers of horizontal edges, enabling a single
ruling node to maintain an exceptionally high degree and exceptionally
high betweenness centrality. The essence of any autocracy is that nodes
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further down the organizational chart cannot communicate with

one another, much less organize, without going through the central
node. The correct distinction is between hierarchical networks and
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distributed ones.
For most of history, hierarchical networks dominated distributed
networks. In relatively small communities with relatively frequent
conflicts, centralized leadership enjoyed a big advantage, because
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warfare is generally easier with centralized command and control.

Moreover, in most agricultural societies, literacy was the prerogative
of a small elite, so that only a few nodes were connected by the written
Ma
word. But then, more than 500 years ago, came the printing press. It
empowered Martin Luther’s heresy and gave birth to a new network.
Luther thought the result of his movement to reform the Roman
Catholic Church would be what came to be called “the priesthood of
all believers,” the sixteenth-century equivalent of Zuckerberg’s “global
community.” In practice, the Protestant Reformation produced more
than a century of bloody religious conflict. This was because new
doctrines such as Luther’s, and later John Calvin’s, did not spread
evenly through European populations. Although Protestantism swiftly
Niall Ferguson
acquired the structure of a network, homophily led to polarization, with

those parts of Europe that most closely resembled urban Germany in
terms of population density and literacy embracing the new religion
and the more rural regions reacting against it, embracing the papal
Counter-Reformation. Yet it proved impossible for Catholic rulers to
destroy Protestant networks, even with mass executions, just as it
proved impossible to wholly stamp out Catholicism in states that
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adopted the Reformation.
THE STRENGTH OF WEAK TIES
hi
The second insight is that weak ties are strong. As the Stanford soci-
ologist Mark Granovetter demonstrated in a seminal 1973 article,
ha
acquaintances are the bridges between clusters of friends, and it is those
weak ties that make the world seem small. In the famous experiment
with chain letters that the psychologist Stanley Milgram published in
1967, there turned out to be just seven degrees of separation between
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a widowed clerk in Omaha, Nebraska, and a Boston stockbroker she
did not know.
Like the Reformation, the scientific revolution and the Enlightenment
were network-driven phenomena, yet they spread faster and farther. This
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reflected the importance of acquaintances in correspondence networks

such as Voltaire’s and Benjamin Franklin’s, communities that might
otherwise have remained subdivided into national clusters. It also re-
od
flected the way that new social organizations—notably, Freemasonry—

increased the connectedness of like-minded men, despite established
divisions of social status. It is no accident that so many key figures in
the American Revolution, from George Washington to Paul Revere,
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were also Freemasons.
GOING VIRAL
Ma
Third, the structure of a network determines its virality. As recent

work by the social scientists Nicholas Christakis and James Fowler has
shown, the contagiousness of a disease or an idea depends as much on
a social network’s structure as on the inherent properties of the virus
or meme. The history of the late eighteenth century illustrates that
point well. The ideas that inspired both the American Revolution and
the French Revolution were essentially the same, and both were trans-
mitted through the networks of correspondence, publication, and
sociability. But the network structures of Colonial America and ancien
régime France were profoundly different (for example, the former

lacked a large, illiterate peasantry). Whereas one revolution produced
a relatively peaceful, decentralized democracy, albeit one committed
to a transitional period of slavery, the other established a violent and
at times anarchic republic that soon followed the ancient Roman path
to tyranny and empire.
Hierarchical order was not easily restored after the fall of Napoleonic
m
France in 1814. It took the great powers that dominated the Congress
of Vienna, which concluded the next year, to reestablish monarchical
governance in Europe and then export it to most of the world in the form
hi
of colonial empires. What made the spread of imperialism possible was
the fact that the technologies of the industrial age—railways, steam-
ha
ships, and telegraphs—favored the emergence of “superhubs,” with
London as the most important node. In other words, the structure of
networks had changed, because the new technologies lent themselves
to central control in ways that had not been true of the printing press
iT
or the postal service. The first age of globalization, between 1815 and
1914, was a time of train controllers and timetables.
NETWORKS NEVER SLEEP

Al
Fourth, many networks are complex adaptive systems that are constantly
shifting shape. Such was the case even for the most hierarchical states
of all time, the totalitarian empires presided over by Adolf Hitler,
od
Joseph Stalin, and Mao Zedong. With his iron grip on the party
bureaucracy and his ability to tap the Soviet telephone system, Stalin
was perhaps the supreme autocrat, a man so powerful that he could
effectively outlaw all unofficial social networks, even persecuting the
so
poet Anna Akhmatova for one illicit night of conversation with the
philosopher Isaiah Berlin. In the 1950s, Christian democratic Europe and
corporate America were hierarchical, too—just look at the midcentury
Ma
organizational charts for General Motors—but not to anything like

the same extent. A network-based reform campaign such as the civil
rights movement was unthinkable in the Soviet Union. Those who
campaigned against racial segregation in the American South were
harassed, but efforts to suppress them ultimately failed.
The middle of the twentieth century was a time that lent itself to
hierarchical governance. Beginning in the 1970s, however, that began
to change. It is tempting to assume that credit goes to technology. On
closer inspection, however, Silicon Valley was a consequence, rather
Niall Ferguson
than a cause, of weakening central control. The Internet was invented

in the United States and not in the Soviet Union precisely because the
U.S. Defense Department, preoccupied with a disastrous war in Vietnam,
essentially let the computer scientists in California build whatever
system for computer-to-computer communication they liked. That did
not happen in the Soviet case, where an analogous project, directed by
the Institute of Cybernetics, in Kiev, was simply shut down by the
m
Ministry of Finance.
The 1970s and 1980s saw two great phase transitions within the
superpowers that waged the Cold War, marking the dawn of the second
hi
networked age. In the United States, the resignation of President
Richard Nixon seemed to represent a major victory for the free press
ha
and representative government over the would-be imperial presidency.
Yet the Watergate scandal, the defeat in Vietnam, and the social and
economic crises of the mid-1970s did not escalate into a full breakdown
of the system. Indeed, the presidency of Ronald Reagan restored the
iT
prestige of the executive branch with remarkable ease. By contrast, the
collapse of the Soviet empire in Eastern Europe was brought about
by networks of anticommunist dissent that had almost no techno-
logically advanced means of communication. Indeed, even printing was
Al
denied to them, hence the underground literature known as “samizdat.”

The Polish case illustrates the role of networks well: the trade union
Solidarity succeeded only because it was itself embedded in a het-
od
erogeneous web of opposition groups.
NETWORKS NETWORK
The fifth insight is that networks interact with one another, and it
so
takes a network to defeat a network. When networks link up with

other networks, innovation often results. But networks can also attack
one another. A good example is the way the Cambridge University
Ma
intellectual society known as the Apostles came under attack by the

kgb in the 1930s. In one of the most successful intelligence operations
of the twentieth century, the Soviets managed to recruit several spies
from the Apostles’ ranks, yielding immense numbers of high-level
British and Allied documents during and after World War II.
The case illustrates one of the core weakness of distributed net-
works. It was not only the Cambridge intelligentsia that the Soviets
penetrated; they also hacked into the entire old-boy network that ran
the British government in the twentieth century. They were able to do
so precisely because the unspoken assumptions and unwritten rules of

the British establishment caused telltale evidence of treachery to
be overlooked or explained away. Unlike hierarchies, which tend to be
paranoid about security, distributed networks are generally bad at
self-defense.
Likewise, the 9/11 attacks were carried out by one network on
another network: al Qaeda against the U.S. financial and political
m
system. Yet it was not the immediate damage of the terrorist attacks that
inflicted the real cost on the United States so much as the unintended
consequences of the national security state’s response. Writing in the
hi
Los Angeles Times in August 2002, before it was even clear that Iraq
was to be invaded, the political scientist John Arquilla presciently
ha
pointed out the flaws in such an approach. “In a netwar, like the one
we find ourselves in now, strategic bombing means little, and most
networks don’t rely on one—or even several—great leaders to sustain
and guide them,” he wrote. Faulting the George W. Bush administration
iT
for creating the Department of Homeland Security, he argued, “A
hierarchy is a clumsy tool to use against a nimble network: It takes
networks to fight networks, much as in previous wars it has taken tanks
to fight tanks.”
Al
It took four painful years after the invasion of Iraq to learn this
lesson. Looking back at the decisive phase of the U.S. troop surge in
2007, U.S. General Stanley McChrystal summed up what had been
od
learned. In order to take down the terrorist network of Abu Musab al-
Zarqawi, McChrystal wrote, his task force “had to replicate its disper-
sion, flexibility, and speed.” He continued: “Over time, ‘It takes a
network to defeat a network’ became a mantra across the command
so
and an eight-word summary of our core operational concept.”
THE INEQUALITY OF NETWORKS

Ma
The sixth insight is that networks are profoundly inegalitarian. One

enduring puzzle is why the 2008 financial crisis inflicted larger economic
losses on the United States and its allies than did the terrorist attacks of
2001, even though no one plotted the financial crisis with malice
aforethought. (Plausible estimates for the losses that the financial
crisis inflicted on the United States alone range from $5.7 trillion to
$13 trillion, whereas the largest estimate for the cost of the war on terror-
ism stands at $4 trillion.) The explanation lies in the dramatic altera-
tions in the world’s financial structure that followed the introduction of
Niall Ferguson
information technology to banking. The financial system had grown so

complex that it tended to amplify cyclical fluctuations. It was not just that
financial centers had become more interconnected, and with higher-speed
connections; it was that many institutions were poorly diversified and
inadequately insured. What the U.S.
The unregulated oligopoly Treasury, the Federal Reserve, and other
regulatory authorities failed to grasp
m
that runs Silicon Valley has when they declined to bail out Lehman
done very well from Brothers in 2008 was that although its
chief executive, Richard Fuld, was some-
hi
networking the world.
thing of a network isolate on Wall
Street—unloved by his peers (including
ha
the U.S. treasury secretary, Henry Paulson, formerly the head of Gold-
man Sachs)—the bank itself was a crucial node in a dangerously fragile
international financial network. Economists untrained in network theory
woefully underestimated the impact of letting Lehman Brothers fail.
iT
In the period after the financial crisis, everyone else caught up with
the financial world: the rest of society got networked in the ways that,
ten years ago, only bankers had been. This change was supposed to
usher in a brave new world of global community, with every citizen
Al
also a netizen, equipped by technology to speak truth to power and

hold it to account. Yet once again, the lessons of network theory had
been overlooked, for giant social networks are not in the least bit
od
egalitarian. To be precise, they have many more nodes with a very

large number of edges and many more with very few edges than would
be the case in a randomly generated network. This is because, as social
networks expand, the nodes gain new edges in proportion to the num-
so
ber that they already have.

The phenomenon is a version of what the sociologist Robert Merton
called “the Matthew effect,” after the Gospel of Matthew 25:29: “For
Ma
unto every one that hath shall be given, and he shall have abundance:
but from him that hath not shall be taken away even that which he
hath.” In science, for example, success breeds success: to the scientist
who already has citations and prizes, more shall be given. But the
trend is perhaps most visible in Silicon Valley. In 2001, the software
developer Eric Raymond confidently predicted that the open-source
movement would win out within three to five years. He was to be
disappointed. The open-source dream died with the rise of monopolies
and duopolies that successfully fended off government regulation that
might have inhibited their growth. Apple and Microsoft established

something close to a software duopoly. Beginning as a bookseller,
Amazon came to dominate online retail. Google even more swiftly
established a near monopoly on search. And of course, Facebook won
the race to dominate social media.
At the time of this writing, Facebook has 1.17 billion active daily
users. Yet the company’s ownership is highly concentrated. Zuckerberg
m
himself owns just over 28 percent of the company, making him one
of the ten richest people in the world. That group also includes Bill
Gates, Jeff Bezos, Carlos Slim, Larry Ellison, and Michael Bloomberg,
hi
whose fortunes all derive in some way or another from information
technology. Thanks to the rich-get-richer effect, the returns to their
ha
businesses do not diminish. Vast cash reserves allow them to acquire
any potential competitor.
At Harvard, Zuckerberg envisioned “a world where everyone has
a sense of purpose: by taking on big meaningful projects together, by
iT
redefining equality so everyone has the freedom to pursue purpose,
and by building community across the world.” Yet Zuckerberg per-
sonifies what economists call “the economics of superstars,” whereby
the top talents in a field earn much, much more than the runners-up.
Al
And paradoxically, most of the remedies for inequality that Zuckerberg

mentioned in his address—a universal basic income, affordable child-
care, better health care, and continuous education—are viable only as
od
national policies delivered by the twentieth-century welfare state.
THAT WAS THEN, THIS IS NOW

The global impact of the Internet has few analogues in history better
so
than the impact of printing on sixteenth-century Europe. The personal

computer and the smartphone have empowered the individual as much
as the pamphlet and the book did in Luther’s time. Indeed, the trajec-
Ma
tories for the production and price of personal computers in the

United States between 1977 and 2004 look remarkably similar to the
trajectories for the production and price of printed books in England
from 1490 to 1630.
But there are some major differences between the current networked
age and the era that followed the advent of European printing. First,
and most obvious, today’s networking revolution is much faster and
more geographically extensive than the wave of revolutions unleashed
by the German printing press.
Niall Ferguson
Second, the distributional consequences of the current revolution

are quite different. Early modern Europe was not an ideal place to
enforce intellectual property rights, which in those days existed only
when technologies could be secretively monopolized by a guild. The
printing press created no billionaires: Johannes Gutenberg was no
Gates (by 1456, in fact, he was effectively bankrupt). Moreover, only a
subset of the media made possible by the printing press—newspapers
m
and magazines—sought to make money from advertising, whereas all
the most important network platforms made possible by the Internet
do. That is where the billions of dollars come from. More than in the
hi
past, there are now two distinct kinds of people in the world: those
who own and run the networks and those who merely use them.
ha
Third, the printing press had the effect of disrupting religious life in
Western Christendom before it disrupted anything else. By contrast, the
Internet began by disrupting commerce; only very recently did it begin
to disrupt politics, and it has truly disrupted just one religion, Islam,
iT
by empowering the most extreme version of Sunni fundamentalism.
Nevertheless, there are some clear similarities between our time
and the revolutionary period that followed the advent of printing. For
one thing, just as the printing press did, modern information technology
Al
is transforming not only the market—for example, facilitating short-term

rentals of apartments—but also the public sphere. Never before have
so many people been connected together in an instantly responsive
od
network through which memes can spread faster than natural viruses.
But the notion that taking the whole world online would create a utopia
of netizens, all equal in cyberspace, was always a fantasy—as much a
delusion as Luther’s vision of a “priesthood of all believers.” The reality
so
is that the global network has become a transmission mechanism for

all kinds of manias and panics, just as the combination of printing
and literacy temporarily increased the prevalence of millenarian sects
Ma
and witch crazes. The cruelties of the Islamic State, or isis, seem less
idiosyncratic when compared with those of some governments and
sects in the sixteenth and seventeenth centuries. The contamination
of the public sphere with fake news today is less surprising when one
remembers that the printing press disseminated books about magic
as well as books about science.
Moreover, as in the period during and after the Reformation, the
current era is witnessing the erosion of territorial sovereignty. In the
sixteenth and seventeenth centuries, Europe was plunged into a series
of religious wars because the principle formulated at the 1555 Peace of

Augsburg—cuius regio, eius religio (to each realm, its ruler’s religion)—
was being honored mainly in the breach. In the twenty-first century,
there is a similar phenomenon of escalating intervention in the do-
mestic affairs of sovereign states. Consider the Russian attempt to
influence the 2016 U.S. presidential election. Moscow’s hackers and
trolls pose a threat to American democracy not unlike the one that
m
Jesuit priests once posed to the English Reformation.
For the scholar Anne-Marie Slaughter, the “hyper-networked
world” is, on balance, a benign place. The United States “will gradually
hi
find the golden mean of network power,” she wrote in these pages last
year, if its leaders figure out how to operate not just on the traditional
ha
“chessboard” of interstate diplomacy but also in the new “web” of
networks, exploiting the advantages of the latter (such as transpar-
ency, adaptability, and scalability). Others are less confident. In The
Seventh Sense, Joshua Cooper Ramo argues for the erection of real and
iT
virtual “gates” to shut out the Russians, the online criminals, the teenage
Internet vandals, and other malefactors. Yet Ramo himself quotes the
three rules of computer security devised by the National Security
Agency cryptographer Robert Morris: “rule one: Do not own a
Al
computer. rule two: Do not power it on. rule three: Do not use
it.” If everyone continues to ignore those imperatives—and especially
political leaders, most of whom have not even enabled two-factor
od
authentication for their e-mail accounts—even the most sophisticated

gates will be useless.
Those who wish to understand the political and geopolitical impli-
cations of today’s interconnectedness need to pay more heed to the
so
major insights of network theory than they have hitherto. If they did,
they would understand that networks are not as benign as advertised.
The techno-utopians who conjure up dreams of a global community
Ma
have every reason to dispense their Kool-Aid to the users whose data
they so expertly mine. The unregulated oligopoly that runs Silicon
Valley has done very well indeed from networking the world. The rest
of us—the mere users of the networks they own—should treat their
messianic visions with the skepticism they deserve.∂
China vs. America

Managing the Next Clash of Civilizations
m
Graham Allison
hi
A
s Americans awaken to a rising China that now rivals the United
States in every arena, many seek comfort in the conviction
ha
that as China grows richer and stronger, it will follow in the
footsteps of Germany, Japan, and other countries that have undergone
profound transformations and emerged as advanced liberal democracies.
In this view, the magic cocktail of globalization, market-based consum-
iT
erism, and integration into the rule-based international order will
eventually lead China to become democratic at home and to develop
into what former U.S. Deputy Secretary of State Robert Zoellick once
described as “a responsible stakeholder” abroad.
Al
Samuel Huntington disagreed. In his essay “The Clash of Civili-

zations?,” published in this magazine in 1993, the political scientist
argued that, far from dissolving in a global liberal world order, cultural
od
fault lines would become a defining feature of the post–Cold War

world. Huntington’s argument is remembered today primarily for its
prescience in spotlighting the divide between “Western and Islamic
civilizations”—a rift that was revealed most vividly by the 9/11 attacks
so
and their aftermath. But Huntington saw the gulf between the U.S.-led
West and Chinese civilization as just as deep, enduring, and consequen-
tial. As he put it, “The very notion that there could be a ‘universal
Ma
civilization’ is a Western idea, directly at odds with the particularism

of most Asian societies and their emphasis on what distinguishes one
people from another.”
The years since have bolstered Huntington’s case. The coming decades
will only strengthen it further. The United States embodies what Hun-
tington considered Western civilization. And tensions between American
GRAHAM ALLISON is Douglas Dillon Professor of Government at the Harvard Kennedy
School of Government. This essay is adapted from his book Destined for War: Can America
and China Escape Thucydides’s Trap? (Houghton Mifflin Harcourt, 2017).
China vs. America
and Chinese values, traditions, and philosophies will aggravate the

fundamental structural stresses that occur whenever a rising power,
such as China, threatens to displace an established power, such as the
United States.
The reason such shifts so often lead to conflict is Thucydides’ trap,
named after the ancient Greek historian who observed a dangerous
dynamic between a rising Athens and ruling Sparta. According to
m
Thucydides, “It was the rise of Athens, and the fear that this instilled
in Sparta, that made war inevitable.” Rising powers understandably
feel a growing sense of entitlement and demand greater influence and
hi
respect. Established powers, faced with challengers, tend to become
fearful, insecure, and defensive. In such an environment, misunder-
ha
standings are magnified, empathy remains elusive, and events and
third-party actions that would otherwise be inconsequential or man-
ageable can trigger wars that the primary players never wanted to fight.
In the case of the United States and China, Thucydidean risks are
iT
compounded by civilizational incompatibility between the two countries,
which exacerbates their competition and makes it more difficult to
achieve rapprochement. This mismatch is most easily observed in the
profound differences between American and Chinese conceptions of
Al
the state, economics, the role of individuals, relations among nations,

and the nature of time.
Americans see government as a necessary evil and believe that the
od
state’s tendency toward tyranny and abuse of power must be feared

and constrained. For Chinese, government is a necessary good, the
fundamental pillar ensuring order and preventing chaos. In American-
style free-market capitalism, government establishes and enforces the
so
rules; state ownership and government intervention in the economy

sometimes occur but are undesirable exceptions. In China’s state-led
market economy, the government establishes targets for growth, picks
Ma
and subsidizes industries to develop, promotes national champions,

and undertakes significant, long-term economic projects to advance
the interests of the nation.
Chinese culture does not celebrate American-style individualism,
which measures society by how well it protects the rights and fosters the
freedom of individuals. Indeed, the Chinese term for “individualism”—
gerenzhuyi—suggests a selfish preoccupation with oneself over one’s
community. China’s equivalent of “give me liberty or give me death”
would be “give me a harmonious community or give me death.” For
Graham Allison
China, order is the highest value, and harmony results from a hierarchy
in which participants obey Confucius’ first imperative: Know thy place.
This view applies not only to domestic society but also to global
affairs, where the Chinese view holds that China’s rightful place is atop
the pyramid; other states should be arranged as subordinate tributaries.
The American view is somewhat different. Since at least the end of World
War II, Washington has sought to prevent the emergence of a “peer com-
m
petitor” that could challenge U.S. military dominance. But postwar
American conceptions of international order have also emphasized the
need for a rule-based global system that restrains even the United States.
hi
Finally, the Americans and the Chinese think about time and experi-
ence its passage differently. Americans tend to focus on the present and
ha
often count in hours or days. Chinese, on the other hand, are more
historical-minded and often think in terms of decades and even centuries.
Of course, these are sweeping generalizations that are by necessity
reductive and not fully reflective of the complexities of American and
iT
Chinese society. But they also provide important reminders that policy-
makers in the United States and China should keep in mind in seeking
to manage this competition without war.
Al
WE’RE NUMBER ONE

The cultural differences between the United States and China are
aggravated by a remarkable trait shared by both countries: an extreme
od
superiority complex. Each sees itself as exceptional—indeed, without

peer. But there can be only one number one. Lee Kuan Yew, the
former prime minister of Singapore, had doubts about the United
States’ ability to adapt to a rising China. “For America to be displaced,
so
not in the world, but only in the western Pacific, by an Asian people
long despised and dismissed with contempt as decadent, feeble, corrupt,
and inept is emotionally very difficult to accept,” he said in a 1999
Ma
interview. “The sense of cultural supremacy of the Americans will

make this adjustment most difficult.”
In some ways, Chinese exceptionalism is more sweeping than its
American counterpart. “The [Chinese] empire saw itself as the center of
the civilized universe,” the historian Harry Gelber wrote in his 2001 book,
Nations Out of Empires. During the imperial era, “the Chinese scholar-
bureaucrat did not think of a ‘China’ or a ‘Chinese civilization’ in the
modern sense at all. For him, there were the Han people and, beyond that,
only barbarism. Whatever was not civilized was, by definition, barbaric.”
China vs. America
To this day, the Chinese take great pride in their civilizational

achievements. “Our nation is a great nation,” Chinese President Xi
Jinping declared in a 2012 speech. “During the civilization and devel-
opment process of more than 5,000 years, the Chinese nation has
made an indelible contribution to the civilization and advancement of
mankind.” Indeed, Xi claimed in his 2014 book, The Governance of
China, that “China’s continuous civilization is not equal to anything
m
on earth, but a unique achievement in world history.”
Americans, too, see themselves as the vanguard of civilization,
especially when it comes to political development. A passion for free-
hi
dom is enshrined in the core document of the American political
creed, the Declaration of Independence, which proclaims that “all
ha
men are created equal” and that they are “endowed by their Creator
with certain unalienable Rights.” The declaration specifies that these
rights include “Life, Liberty and the pursuit of Happiness” and
asserts that these are not matters for debate but rather “self-evident”
iT
truths. As the American historian Richard Hofstadter wrote, “It has
been our fate as a nation not to have ideologies, but to be one.” In
contrast, order is the central political value for Chinese—and order
results from hierarchy. Individual liberty, as Americans understand it,
Al
disrupts hierarchy; in the Chinese view, it invites chaos.
DO AS I SAY . . . AND AS I DO?

od
These philosophical differences find expression in each country’s

concept of government. Although animated by a deep distrust of
authority, the founders of the United States recognized that society
required government. Otherwise, who would protect citizens from
so
foreign threats or violations of their rights by criminals at home? They

wrestled, however, with a dilemma: a government powerful enough to
perform its essential functions would tend toward tyranny. To manage
Ma
this challenge, they designed a government of “separated institutions

sharing power,” as the historian Richard Neustadt described it. This
deliberately produced constant struggle among the executive, legislative,
and judicial branches, which led to delay, gridlock, and even dysfunction.
But it also provided checks and balances against abuse.
The Chinese conception of government and its role in society could
hardly be more different. As Lee observed, “The country’s history
and cultural records show that when there is a strong center (Beijing
or Nanjing), the country is peaceful and prosperous. When the center
Graham Allison
is weak, then the provinces and their counties are run by little warlords.”
Accordingly, the sort of strong central government that Americans
resist represents to the Chinese the principal agent advancing order
and the public good at home and abroad.
For Americans, democracy is the only just form of government:
authorities derive their legitimacy from the consent of the governed.
That is not the prevailing view in China, where it is common to believe
m
that the government earns or losses political legitimacy based on its
performance. In a provocative ted Talk delivered in 2013, the Shanghai-
based venture capitalist Eric Li challenged democracy’s presumed
hi
superiority. “I was asked once, ‘The
party wasn’t voted in by election.
In some ways, Chinese
ha
Where is the source of legitimacy?’” he
exceptionalism is more recounted. “I said, ‘How about compe-
sweeping than its tency?’” He went on to remind his au-
American counterpart. dience that in 1949, when the Chinese
iT
Community Party took power, “China
was mired in civil war, dismembered by
foreign aggression, [and] average life expectancy at that time [was] 41
years. Today [China] is the second-largest economy in the world, an
Al
industrial powerhouse, and its people live in increasing prosperity.”

Washington and Beijing also have distinctively different approaches
when it comes to promoting their fundamental political values interna-
od
tionally. Americans believe that human rights and democracy are univer-
sal aspirations, requiring only the example of the United States (and
sometimes a neoimperialist nudge) to be realized everywhere. The
United States is, as Huntington wrote in his follow-on book, The Clash of
so
Civilizations, “a missionary nation,” driven by the belief “that the non-

Western peoples should commit themselves to the Western values . . .
and should embody these values in their institutions.” Most Americans
Ma
believe that democratic rights will benefit anyone, anywhere in the world.
Over the decades, Washington has pursued a foreign policy that seeks
to advance the cause of democracy—even, on occasion, attempting to
impose it on those who have failed to embrace it themselves. In contrast,
although the Chinese believe that others can look up to them, admire their
virtues, and even attempt to mimic their behavior, China’s leaders have
not proselytized on behalf of their approach. As the American diplomat
Henry Kissinger has noted, imperial China “did not export its ideas but
let others come to seek them.” And unsurprisingly, Chinese leaders have
China vs. America
been deeply suspicious of U.S. efforts to convert them to the American

creed. In the late 1980s, Deng Xiaoping, who led China from 1978 until
1989 and began the country’s process of economic liberalization, com-
plained to a visiting dignitary that Western talk of “human rights, free-
dom, and democracy is designed only to safeguard the interests of the
strong, rich countries, which take advantage of their strength to bully
weak countries, and which pursue hegemony and practice power politics.”
m
THINKING FAST AND SLOW
The American and Chinese senses of the past, present, and future are
hi
fundamentally distinct. Americans proudly celebrated their country turn-
ing 241 in July; the Chinese are fond of noting that their history spans five
ha
millennia. U.S. leaders often refer to “the American experiment,” and
their sometimes haphazard policies reflect that attitude. China, by con-
trast, sees itself as a fixture of the universe: it always was; it always will be.
Because of their expansive sense of time, Chinese leaders are care-
iT
ful to distinguish the acute from the chronic and the urgent from the
merely important. It is difficult to imagine a U.S. political leader sug-
gesting that a major foreign policy problem should be put on the
proverbial shelf for a generation. That, however, is precisely what Deng
Al
did in 1979, when he led the Chinese side in negotiations with Japan
over the disputed Diaoyu/Senkaku Islands and accepted an eventual,
rather than an immediate, solution to the dispute.
od
Ever more sensitive to the demands of the news cycle and popular
opinion, U.S. politicians take to Twitter or announce alliterative, bullet-
point policy plans that promise quick solutions. In contrast, Chinese
leaders are strategically patient: as long as trends are moving in their fa-
so
vor, they are comfortable waiting out a problem. Americans think of

themselves as problem solvers. Reflecting their short-termism, they see
problems as discrete issues to be addressed now so that they can move on
Ma
to the next ones. The American novelist and historian Gore Vidal once
called his country “the United States of Amnesia”—a place where every
idea is an innovation and every crisis is unprecedented. This contrasts
sharply with the deep historical and institutional memory of the Chi-
nese, who assume that there is nothing new under the sun.
Indeed, Chinese leaders tend to believe that many problems cannot
be solved and must instead be managed. They see challenges as long
term and iterative; issues they face today resulted from processes
that have evolved over the past year, decade, or century. Policy actions
Graham Allison
they take today will simply contribute to that evolution. For instance,
since 1949, Taiwan has been ruled by what Beijing considers rogue
Chinese nationalists. Although Chinese leaders insist that Taiwan
remains an integral part of China, they have pursued a long-term
strategy involving tightening economic and social entanglements to
slowly suck the island back into the fold.
m
WHO’S THE BOSS?
The civilizational clash that will make it hardest for Washington and
Beijing to escape Thucydides’ trap emerges from their competing
hi
conceptions of world order. China’s treatment of its own citizens pro-
vides the script for its relations with weaker neighbors abroad. The
ha
Chinese Communist Party maintains order by enforcing an authoritar-
ian hierarchy that demands the deference and compliance of citizens.
China’s international behavior reflects similar expectations of order: in
an unscripted moment during a 2010 meeting of the Association of
iT
Southeast Asian Nations, then Chinese Foreign Minister Yang Jiechi
responded to complaints about Chinese assertiveness in the South
China Sea by telling his regional counterparts and U.S. Secretary of
State Hillary Clinton that “China is a big country and other countries
Al
are small countries, and that’s just a fact.”

By contrast, American leaders aspire to an international rule of law
that is essentially U.S. domestic rule of law writ large. At the same
od
time, they also recognize the realities of power in the Hobbesian

global jungle, where it is better to be the lion than the lamb. Washing-
ton often tries to reconcile this tension by depicting a world in which
the United States is a benevolent hegemon, acting as the world’s law-
so
maker, policeman, judge, and jury.

Washington urges other powers to accept the rule-based interna-
tional order over which it presides. But through Chinese eyes, it
Ma
looks like the Americans make the rules and others obey Washing-
ton’s commands. General Martin Dempsey, former chairman of the
Joint Chiefs of Staff, became familiar with the predictable resent-
ment this elicited from China. “One of the things that fascinated me
about the Chinese is whenever I would have a conversation with
them about international standards or international rules of behav-
ior, they would inevitably point out that those rules were made when
they were absent from the world stage,” Dempsey remarked in an
interview with this magazine last year.
China vs. America
YOU CAN GO YOUR OWN WAY

The United States has spent nearly three decades as the world’s most
powerful country. During that time, Washington’s massive influence
on world affairs has made it crucial for elites and leaders in other
nations to understand American culture and the U.S. approach to
strategy. Americans, on the other hand, have often felt that they have
the luxury of not needing to think too hard about the worldviews of
m
people elsewhere—a lack of interest encouraged by the belief, held by
many American elites, that the rest of the world has been slowly but
surely becoming more like the United States anyway.
hi
In recent years, however, the rise of China has challenged that indif-
ference. Policymakers in the United States are beginning to recognize
ha
that they must improve their understanding of China—especially
Chinese strategic thinking. In particular, U.S. policymakers have begun
to see distinctive traits in the way their Chinese counterparts think
about the use of military force. In deciding whether, when, and how to
iT
attack adversaries, Chinese leaders have for the most part been rational
and pragmatic. Beyond that, however, American policymakers and
analysts have identified five presumptions and predilections that offer
further clues to China’s likely strategic behavior in confrontations.
Al
First, in both war and peace, Chinese strategy is unabashedly driven

by realpolitik and unencumbered by any serious need to justify Chinese
behavior in terms of international law or ethical norms. This allows the
od
Chinese government to be ruthlessly flexible, since it feels few constraints

from prior rationales and is largely immune to criticisms of inconsistency.
So, for example, when Kissinger arrived in China in 1971 to begin secret
talks about a U.S.-Chinese rapprochement, he found his interlocutors
so
unblinkered by ideology and brutally candid about China’s national inter-

ests. Whereas Kissinger and U.S. President Richard Nixon felt it neces-
sary to justify the compromise they ultimately reached to end the Vietnam
Ma
War as “peace with honor,” the Chinese leader Mao Zedong felt no need
to pretend that in establishing relations with the capitalist United States
to strengthen communist China’s position vis-à-vis the Soviet Union, he
was somehow bolstering a larger socialist international movement.
Just as China’s practical approach to international politics arguably
gives China an edge over the United States, so, too, does China’s obses-
sively holistic strategic worldview. Chinese planners see everything as
connected to everything else. The evolving context in which a strategic
situation occurs determines what the Chinese call shi. This term has no
Graham Allison
direct English translation but can be rendered as the “potential energy”

or “momentum” inherent in any circumstance at a given moment. It
comprises geography and terrain, weather, the balance of forces,
surprise, morale, and many other elements. “Each factor influences
the others,” as Kissinger wrote in his 2011 book, On China, “giving rise to
subtle shifts in momentum and relative advantage.” Thus, a skilled
Chinese strategist spends most of his time patiently “observing and
m
cultivating changes in the strategic landscape” and moves only when
everything is in optimal alignment. Then he strikes swiftly. To an
observer, the result appears inevitable.
hi
War for Chinese strategists is primarily psychological and political.
In Chinese thinking, an opponent’s perception of facts on the ground
ha
may be just as important as the facts themselves. For imperial China,
creating and sustaining the image of a civilization so superior that it
represented “the center of the universe” served to deter enemies from
challenging Chinese dominance. Today, a narrative of China’s inevitable
iT
rise and the United States’ irreversible decline plays a similar role.
Traditionally, the Chinese have sought victory not in a decisive battle
but through incremental moves designed to gradually improve their
position. David Lai, an expert on Asian military affairs, has illustrated
Al
this approach by comparing the Western game of chess with its Chinese
equivalent, weiqi (often referred to as go). In chess, players seek to
dominate the center of the board and conquer the opponent. In weiqi,
od
players seek to surround the opponent. If the chess master sees five or six
moves ahead, the weiqi master sees 20 or 30. Attending to every dimension
in the broader relationship with an adversary, the Chinese strategist resists
rushing prematurely toward victory, instead aiming to build incremental
so
advantage. “In the Western tradition, there is a heavy emphasis on the

use of force; the art of war is largely limited to the battlefields; and the
way to fight is force on force,” Lai wrote in a 2004 analysis for the U.S.
Ma
Army War College’s Strategic Studies Institute. By contrast, “the phi-

losophy behind go . . . is to compete for relative gain rather than seeking
complete annihilation of the opponent forces.” In a wise reminder, Lai
warns that “it is dangerous to play go with the chess mindset.”
LET’S MAKE A DEAL

Washington would do well to heed that warning. In the coming years,
any number of flash points could produce a crisis in U.S.-Chinese rela-
tions, including further territorial disputes over the South China Sea
China vs. America
and tensions over North Korea’s burgeoning nuclear weapons program.

Since it will take at least another decade or more for China’s military
capabilities to fully match those of the United States, the Chinese will
be cautious and prudent about any lethal use of force against the Amer-
icans. Beijing will treat military force as a subordinate instrument in its
foreign policy, which seeks not victory in battle but the achievement of
national objectives. It will bolster its diplomatic and economic connec-
m
tions with its neighbors, deepening their dependency on China, and
use economic leverage to encourage (or coerce) cooperation on other
issues. Although China has traditionally viewed war as a last resort,
hi
should it conclude that long-term trend lines are no longer moving in
its favor and that it is losing bargaining power, it could initiate a limited
ha
military conflict to attempt to reverse the trends.
The last time the United States faced extremely high Thucydidean
risks was during the Cold War—especially during the Cuban missile
crisis. Reflecting on the crisis a few months after its resolution, U.S.
iT
President John F. Kennedy identified one enduring lesson: “Above all,
while defending our own vital interests, nuclear powers must avert
those confrontations which bring an adversary to a choice of either a
humiliating retreat or nuclear war.” In spite of Moscow’s hard-line
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rhetoric, Soviet Premier Nikita Khrushchev ultimately concluded that

he could compromise on nuclear arms in Cuba. Likewise, Kissinger
and Nixon later discovered that the Chinese ideologue Mao was quite
od
adept at giving ground when it served China’s interests.

Xi and U.S. President Donald Trump have both made maximalist
claims, especially when it comes to the South China Sea. But both are
also dealmakers. The better the Trump administration understands how
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Beijing sees China’s role in the world and the country’s core interests,
the better prepared it will be to negotiate. The problem remains psycho-
logical projection: even seasoned State Department officials too often
Ma
mistakenly assume that China’s vital interests mirror those of the United
States. The officials now crafting the Trump administration’s approach
to China would be wise to read the ancient Chinese philosopher Sun-
tzu: “If you know the enemy and know yourself, you need not fear the
result of a hundred battles. If you know yourself but not the enemy, for
every victory gained you will also suffer a defeat. If you know neither
the enemy nor yourself, you will succumb in every battle.”∂
Making Government
Smarter
m
How to Set National Priorities
Bjorn Lomborg
hi
T
ha
hese days, people for the most part believe that governments
should try to promote the general welfare of the populations
they serve. The disagreements come over how to do that—what
goals to focus on, what policies to adopt, and so on. These questions
iT
are usually approached through broad intellectual frameworks, such
as political ideology or religion, and much time is spent debating the
finer points of various doctrines. Often overlooked, however, is a simple
and easy way to make lives better: use routine cost-benefit analysis to
Al
compare the expected returns from alternative policies and then choose
the more effective ones.
Effectiveness sounds dull. But what if an extra dollar or rupee in a
od
budget could feed ten people instead of one? Or if $100,000 of inter-

national aid spending could be tweaked so it would save ten times as
many lives? When the stakes are this high, efficiency in spending be-
comes a moral imperative. Moreover, unlike debates over ideology or
so
religion, debates over efficiency can actually get somewhere, because

there is a straightforward mechanism for resolving them: compare the
predictable costs and benefits of different courses of action and see
Ma
which yields more bang for the buck.

Surely, this is just common sense, one might say, and governments
must do it all time. Maybe they should, but in the real world, they rarely
do—partly because this analysis involves a lot of work, but mostly
because the results can be inconvenient, showing that a preferred policy
is inefficient or even that elements of existing government bureaucracy
may be unnecessary. Unsurprisingly, nobody wants to be the superfluous
BJORN LOMBORG is President of the Copenhagen Consensus Center and Visiting
Professor at the Copenhagen Business School.
official—whether in a government, an international organization, a

nongovernmental organization, or even a private philanthropy.
This means that decisions are affected by other factors. One town
in rural Virginia, for example, holds an annual fair to support local
charities. Each year, an animal-rescue organization brings a bald eagle
to its booth as a prop, and each year, it receives more donations than
other groups—which have a harder time using stagecraft to promote
m
the virtues of, say, being a foster parent or working with at-risk youth.
This sort of thing happens everywhere, and everybody knows it.
Marketing and politics shape policy selection at least as much as tech-
hi
nical merit, and the public suffers as a result.
The difference can be considerable: the philosopher Toby Ord
ha
analyzed 108 health interventions from the Disease Control Priorities
Project, identifying the number of additional years of healthy life
gained from spending the same amount on each. The most effective
interventions were at least hundreds of times as powerful as the least.
iT
Moving $50 million from the bottom to the top of the list could save
1,000 lives instead of one. Likewise, extensive research on the United
Nation’s Sustainable Development Goals reveals a similar pattern:
the most efficient interventions aren’t just good; they’re remarkably
Al
better than the middle-of-the-road ones—and it’s likely that such a

pattern holds true for spending by governments and development
agencies in any country.
od
But just because inefficiency is common doesn’t mean it’s inevitable.

Governments and other service providers can do better, even within
their existing budgets, simply by disciplining themselves to embrace
best practices across all their operations and by shifting time, effort,
so
and resources from inefficient programs to efficient ones. Recently,

my think tank, the Copenhagen Consensus Center, worked with the
government of Bangladesh, as well as an extensive list of public-
Ma
and private-sector organizations and Bangladeshi media, to find out

how to improve the efficiency of development efforts in the country,
and the lessons we learned in the process are applicable to other
nations trying to improve their performance.
THE BANGLADESHI EXPERIMENT

The Bangladesh Priorities project has been funded by the C&A Foun-
dation, an affiliate of the Dutch fashion company C&A, with help
from the Swedish International Development Cooperaton Agency and
Bjorn Lomborg
the Danish embassy in Dhaka. We worked with all the major players in
Bangladesh to assess what kinds of spending (both for the government’s
$30 billion annual budget and for the $3 billion in development aid
given by outside organizations) would do the most good for the country.
The results were startling: they showed that major gains in national
well-being could be achieved simply by rearranging budgets to favor
policies with high returns on investment.
m
We began with the country’s latest five-year plan, which shapes
most conversations about national development. Partnering with brac,
the world’s largest nongovernmental development organization, we
hi
took each of the plan’s 20 topic areas, from gender equality to urban-
ization, and noted all the associated policies. Then we invited several
ha
hundred thought leaders from government, the academy, nongovern-
mental organizations, donors, and the private sector to add their own
recommendations. This ultimately yielded 1,000 proposals, about half
overlapping with those in the plan, on topics as varied as infrastruc-
iT
ture, tax reform, public health, and more.
In 20 roundtables, we asked Bangladeshi experts to look at all the
proposals and rank them—specifically identifying which ideas had the
most potential or were likely to be politically popular, and also which
Al
had enough empirical data available to make a thorough examination

possible. That whittled the list down to 76 proposals. Then, 30 teams
of local and foreign economists estimated the costs and benefits of all
od
76 proposals. Most of the costs were monetary, but the benefits included
several noneconomic ones as well.
Take a proposal to promote wetland conservation in the Sundarbans,
a vast mangrove forest on the coast of the Bay of Bengal. It would
so
help address climate change, enhance biodiversity, and create oppor-

tunities for fishing and tourism. The projected benefits added up to
almost $4 billion, for a cost of $1.4 billion, generating a predicted
Ma
nearly $3 of benefits for every $1 spent.

Or take an early childhood education program that would help kids
overcome setbacks from stunting. Stunting is caused by poor nutrition
or repeated early infections, and its effects can last for many decades,
with afflicted children earning less than their peers ever after. The
program would bring specialists to work with stunted children and
their parents to improve the children’s development skills, and the
evidence shows that such efforts can boost the children’s lifetime
earnings by 25 percent, completely eliminating the stunting effect.
In Bangladesh, such a program would cost about $160 per child and
increase each child’s future earnings by $2,884. So every $1 invested
would bring an $18 return.
The Bangladesh Priorities project has generated more than 1,150
pages of peer-reviewed studies, available for free online and to be
published in a two-volume book. Changes in spending require public
support, so we published more than 40 articles on the research results
m
in the largest Bengali and English newspapers, with a combined reader-
ship of more than ten million people. To help spread the message
even more, we combined all the results in one chart, showing the bang
hi
for the buck of all 76 policies evaluated: the longer the line, the greater
the multiplier effect.
ha
TB OR NOT TB
To compare the policies fairly against one another, we had to translate
all their impacts into a single ultimate scale of value, using common
iT
assumptions and calculations. For example, across all the studies, we used
a standard figure for the economic value of a year of life and standard
discount rates to calculate the value of future costs and benefits. Even
so, the figures can obviously be only rough estimates, because of the
Al
inherent uncertainties involved in many of the projections.

Moreover, efficiency is not the only important value; governments
need to consider other factors as well, such as justice, equality, and
od
political sustainability. So we built in additional rounds of discus-

sion in which the calculations and rankings could be challenged,
including having a special panel of top economists scrutinize all the
findings, make sure all variables were considered, and adjust the
so
rankings as appropriate.
For example, microfinance programs have a relatively low economic
return, but they promote equality and often benefit the poorest of
Ma
the poor and so have more going for them than one might assume
at first glance. A similar effect is true for family subsidies designed
to prevent child marriage. The educational benefits of a delay in
marriage are well established, but the broader social and health
benefits are challenging to study. A simple economic cost-benefit
analysis underestimates these and overlooks the moral benefits of
deterring child marriage.
In the end, the project’s most important finding related to the treat-
ment of tuberculosis. It turns out that one in every 11 deaths in Bang-
Bjorn Lomborg
ladesh is caused by tuberculosis and that virtually all of those deaths

are preventable. Today, proven treatments can cure tb patients for
about $100 each. And yet nine Bangladeshis die from the disease every
hour nevertheless. Why? Because only half of those who need treat-
ment get it, thanks to the limited reach of Bangladesh’s health-care
system, popular ignorance about how the disease is transmitted, and
the shame and stigma associated with diagnosis.
m
Treating all tb patients in Bangladesh appropriately would not be
easy or free. Identifying and treating people with the disease would
require extensive outreach initiatives, costing $402 per death avoided.
hi
The value of the average life gained from those efforts, however,
would be $8,503. So every $1 spent on treating tb—one of the country’s
ha
crucial problems—would produce an impressive $21 of benefits.
But wait, there’s more! Most of the benefits would go to the poorest
of the poor, and curtailing tb would prevent all the disruption and
tragedies stemming from the death of adults in their prime. Putting every-
iT
thing together, therefore, the expert panel decided that increasing ex-
penditures on tb treatment was the single most effective way to
improve life in Bangladesh. “For many years, [it has] been difficult to get
enough attention and funding for tb,” according to brac’s Md. Akramul
Al
Islam. He has found that the results of our study are increasing the
visibility of and funding for this neglected disease.
Perhaps more surprising, the second-biggest finding concerned
od
expanding e-procurement. Reforming government purchasing proce-

dures is about as unsexy a topic as one could imagine, but it turns out
that it is extremely important in practice, particularly for a developing
country such as Bangladesh. The government there spends more than
so
$9 billion on procurement annually, on everything from roads to office

buildings to pencils. There are opportunities for corruption at every
step along the way: contractors have to hand in their proposals in
Ma
person, and companies with political connections have been known to

hire goons to physically block competitors from submitting bids. This
leads to higher prices and sometimes subpar output.
Our research showed that switching to a digital procurement sys-
tem would increase competition, reduce corruption (by an estimated
12 percent), and save money (up to $700 million annually). The practical
requirements would involve little more than buying computers and
educating staff—and for each $1 spent on such efforts, the return
would be a whopping $663.
Benefit-to-Cost Ratios in Bangladesh

0 5 10 15 20 25 30 35
Expand government e-procurement 663
Offer more services at rural digital centers DIGITAL INNOVATION
Expand broadband access
Digitize land records 619
Invest in Golden Rice R & D ≤ 329
Deliver nutrients to 6-month- to 5-year-olds NUTRITION
Deliver hypertension medication
Discourage smokeless tobacco use
Raise the tobacco tax to 50% by 2021 NONCOMMUNICABLE DISEASES
Expand diabetes treatment
Treat and immunize for cervical cancer
m
Offer newborn in-home care by health workers
Provide iron and folic acid in pregnancy
Train more traditional birth attendants
Increase access to TB treatment
HEALTH-CARE SYSTEM & ACCESS
Immunize children in urban slums
hi
Expand birth facilities with skilled attendants
Immunize children in remote areas
Treat drug-resistant TB intensively
Replace kerosene with shared diesel
Use imported and domestic coal for power
ENERGY
ha
Import coal for more power
Replace kerosene with household solar
Enforce garment factory compliance
Liberalize trade
INDUSTRIAL POLICY & TRADE
Create special zones for garment factories
Invest in trade facilitation
Offer migration services at rural digital centers
Offer seasonal migration stipends
iT MIGRATION
Offer skills training for migrants
Stimulate stunted children
Group and teach students according to ability
Offer on-the-job management training
Improve teacher accountability
EDUCATION
Improve school management
Al
Provide vocational training
Expand computer-assisted learning
Buy more standard inputs, e.g., textbooks
Expand village courts GOVERNANCE & INSTITUTIONS
Treat arsenic in water for 20% worst affected
Treat arsenic for all affected households
WATER & SANITATION
od
Improve sanitation
Promote hand washing
Retrofit kilns
Buy biomass cooking stoves
Buy new hybrid kilns ENVIRONMENT & BIODIVERSITY
Restore Buriganga River system
Buy LPG cooking stoves
so
Invest in solid waste management in Dhaka

URBANIZATION
Improve storm water drainage in Dhaka
Reform VAT and automate collection REVENUE COLLECTION
Increase secondary education for girls
Deter child marriage with subsidies
GENDER EQUALITY
Improve access to contraception
Enact dowry and child marriage laws
Ma
Greatly expand bus network

Invest in transport infrastructure for Dhaka
Improve roads to northeastern India TRANSPORTATION
Build the Padma Bridge
Improve roads to Bhutan and Nepal
Boost agricultural productivity
Protect mangroves in the Sundarbans
Promote resettlement to manufacturing cities
CLIMATE CHANGE
Build early warning systems and shelters
Build polders where flood level is below 3 m
Build polders where flood level exceeds 3 m
Develop bond market CAPITAL & FINANCIAL MARKETS
Expand flexible microfinance
Expand poverty graduation program
Expand traditional microfinance ANTIPOVERTY
Expand livelihood programs
Disburse unconditional cash transfers
source: Copenhagen Consensus Center.
Bjorn Lomborg
DIESEL WIN
Doing this sort of exercise properly enables policymakers to see whether
familiar nostrums live up to their billing. Bangladesh, and especially its
garment industry, has benefited from trade liberalization, for example. But
by how much? Now we can say that each $1 spent on further trade liberal-
ization would bring the country $10 in benefits. Bangladesh has battled
naturally occurring arsenic in its groundwater for decades, to cite another
m
example. Now we can say that every extra $1 invested in fixing the prob-
lem for the worst-affected households would return $17 worth of benefits.
Even more important, this sort of process enables previously obscure
hi
ideas to get the audition and acceptance they deserve. Take a policy to
counter malnutrition by providing small children with micronutrient
ha
supplements, including iodized salt, vitamin A, and zinc. Delivering
the supplements would cost roughly $125 per child in need—in return
for which the child would be healthier, do better in school, and have
higher lifetime earnings. The result? For every $1 spent, the supple-
iT
ments program would generate $19 in benefits.
Or take retrofitting kilns. More than a thousand kilns across Dhaka
manufacture four billion bricks each year, emitting so much pollution
along the way that the city’s air quality is often 16 times as bad as
Al
international standards. This air pollution kills 2,000 people each

year. Upgrading the kilns with improved technology would make
them burn more cleanly and efficiently and decrease fuel consumption
od
by a fifth. And every $1 spent would yield $8 in value.

This kind of exercise also enables policymakers to tell which celebrated
programs aren’t particularly effective, especially on a comparative basis.
Household solar projects, for example, are darlings of the development
so
community, but analysis by the economist A.K. Enamul Haque—

who also co-wrote the recent World Bank report on solar energy in
Bangladesh—showed that the panels produce only $1.80 in benefits
Ma
for every $1 spent on them. Why such a poor showing? Because solar
panels are relatively expensive and deliver fairly little energy, avail-
able for only a few hours at night.
Haque noted that most rich Bangladeshis use diesel generators
rather than solar panels to provide alternative electricity sources during
power cuts. So he decided to test whether it made sense for poorer
Bangladeshis to emulate their richer neighbors. And sure enough, if
five households chipped in to split the cost of a diesel generator, each
$1 spent would yield $25 of benefits—even after accounting for the
harm of higher carbon dioxide emissions. People who care about

eliminating energy poverty should follow the numbers.
Similarly, Bangladesh is famous for its experiments in microfinance.
But extensive research in many countries over long periods has shown
that microfinance is not a particularly powerful intervention, as these
things go. It carries a significant initial cost and produces modest benefits
that taper off after a few years; all told, it yields $2 in benefits for
m
every $1 spent. That’s better than nothing, but much less efficient
than many other ways of using the same aid dollars.
Surprisingly, one program very popular in some development cir-
hi
cles—unconditional cash transfers—turned out to be one of the least
effective, according to the economists. These programs give a one-
ha
time cash amount to ultra-poor recipients, often microentrepreneurs,
without conditions on how the money can be used. Multiple ran-
domized controlled trials—the gold standard in estimates of effect—
showed little direct impact: just 80 cents for each $1 invested, while
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the long-term impacts are not well studied.
Nor was cash what the ultra-poor themselves wanted most. In addition
to asking experts for their recommendations, we also engaged many
poor Bangladeshis in remote areas directly. Many of their priorities
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were similar to those identified by the experts, but there were some
crucial differences, depending on their circumstances. What the ultra-
poor wanted most was increased agricultural productivity. Research
od
has shown that efforts in this area can be extremely valuable, and our
calculations predicted that investing $9,000 per agricultural worker
would increase Bangladeshi farming productivity by ten percent over
two decades—yielding a $4 return on each $1 spent.
so
MOVING FROM INTERPRETATION TO CHANGE

As one might imagine, the results of our study were not always popular,
Ma
particularly among advocates of programs that ranked poorly. Sketch-

ing what could be done was easy; translating the findings into practice
will be hard. But already, the discourse in Dhaka has changed for the
better. As an editorial in Prothom Alo, one of the country’s leading
newspapers, recently observed, “It is clear that the research is having
a real impact on guiding decisions on Bangladeshi priorities and prom-
ises to help even more into the future.”
The prime minister’s office is now incorporating cost-benefit analysis
across all government ministries. The finance minister has promised to
Bjorn Lomborg
complete e-procurement in two years, and his new budget sets aside
$12 million for the effort. And the recommendations on nutrition
have already been incorporated into the National Plan of Action for
Nutrition, helping the country spend $1.5 billion over ten years even
better. “Policymakers prioritize between competing options many times
every single day,” Tofail Ahmed, Bangladesh’s minister of commerce,
observed. “This project will help us to take a step back and ask, where
m
are the areas where we should focus more attention and resources?”
At this point, the Copenhagen Consensus Center is continuing to
work with brac in Bangladesh, helping move the reforms from con-
hi
cept to implementation. And what of our own project’s cost-benefit
ratio? One immediate result has been the government’s decision to
ha
rapidly scale up its e-procurement. This will cost some $60 million
in total, but the benefits will run to about $700 million every year.
The move would likely have happened eventually anyway, but even
if we can claim responsibility for only half the benefits for just the
iT
first year, that still means that the $2.5 million project has generated
$350 million in benefits for Bangladesh, or $140 back on the dollar.
If we were to include the impact of the other 75 proposals, the benefits
would be even higher.
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There is nothing special about Bangladesh when it comes to the

potential gains to be realized. Any country could do a project like this,
and we’re currently working on similar efforts for Haiti and India. This
od
type of project is not a panacea for all of the world’s problems, and it
would be naive to expect most of the gains to be realized. Nevertheless,
the scale of the possible upside is so vast as to be sobering. For example,
we estimate that shifting a mere one percent of Bangladeshi govern-
so
ment spending from mediocre programs to great ones could end up

producing more than $35 billion worth of social benefits every five
years—a whole additional government budget’s worth.
Ma
Too often, politicians, voters, and donors fall for the bald eagle at
the charity fair, letting catchy marketing and heart-rending anecdotes
capture their imaginations and their wallets. But cost-benefit analysis
provides a powerful tool to see the true track records and potential
benefits of the policy alternatives before us, helping more people live
longer, healthier, better lives. The moral is simple: If you really want
to make the world dance, don’t forget about the price tag. Check it
very carefully.∂
The Congressional
Apprentice
m
How Trump Is Approaching Capitol Hill
Jeff Bergner
hi
W
ha
ithin 100 days of his inauguration as U.S. president, Donald
Trump had concluded that the U.S. legislative process is
“a very tough system.” He is hardly the first occupant of
the Oval Office to arrive at that judgment. Every new president finds
iT
interaction with Congress more difficult than expected. But what is
challenging for any president was bound to be even more so for Trump—
especially given the political climate in the United States today.
Trump ascended to the highest office in the land with no previous
Al
political experience, few settled policy views, and a combative style that
had created enemies in quarters not usual for political leaders. With
transactional instincts honed by decades in the business world, Trump has
od
an approach that is characterized by speed and finality—hardly the hall-

marks of the U.S. Congress. Instead of one place or person for a presi-
dent to work with, there are two houses and two political parties, several
dozen committees, various informal voting blocs, and a range of quasi-
so
congressional bodies such as the Congressional Budget Office. A deal

struck with one group must wend its way through the rest of the legis-
lative process. It might change significantly in the process, as in the case
Ma
of current Republican health-care legislation, which took several forms in

the House of Representatives, a brand new form in the Senate, and a
yet-to-be-determined form if there is ever a House-Senate conference.
Or it might die altogether, as in the case of the 2013 immigration-reform
legislation, which passed in the Senate but died in the House.
JEFF BERGNER is an Adjunct Professor at the Frank Batten School of Leadership and
Public Policy at the University of Virginia. He served as Staff Director of the U.S. Senate
Committee on Foreign Relations from 1985 to 1986 and as U.S. Assistant Secretary of State
for Legislative Affairs from 2005 to 2008.
Jeff Bergner
“I’m disappointed that it doesn’t go quicker,” an exasperated

Trump said of his early experience working with Capitol Hill. Still,
he has proved a fast learner. He has an uncanny ability to pivot
quickly, as demonstrated by his business career, his personal life,
and every step of the primary and general election campaigns. He
has learned to trim his sails when necessary, as he has done with
each successive iteration of the health-care bill. He has accepted
m
that Congress can typically deal with only a handful of big issues at
a time, making him recalibrate his expectation of what constitutes
“quick” legislative action. What was once promised immediately,
hi
and then in the first 100 days of the administration, is now prom-
ised for the end of the 115th Congress’ first session. And he has
ha
come to see that achieving just a handful of legislative victories will
count as success.
But even if he continues to adjust to the rhythms of Congress, Trump
will face greater challenges than many of his predecessors. The country’s
iT
current political divisions compound the normal complexities of executive-
legislative relations. Congress reflects and magnifies today’s political
polarization, making it harder than ever to pass significant legislation.
That would be true even if the 2016 Democratic nominee, Hillary
Al
Clinton (whose campaign offered small-bore proposals and a commit-

ment to expand the scope of the Obama administration’s executive
orders), or a more mainstream Republican, such as Senator Marco Rubio
od
of Florida, had been elected.

Moreover, although Congress is deeply divided, it has also become
newly assertive. After years of relative passivity, legislators—including
those in Trump’s own party—have taken on a more active role in shaping
so
key policies. Should an executive-branch misstep cause the political

parties in Congress to come together, the challenges for Trump could
escalate quickly.
Ma
MODERATION IN ALL THINGS

In the transition from candidate to public official, some moderation is
inevitable. It is always easier to promise big results than to achieve them.
Trump has already tempered his positions in several areas, and Congress
has played a significant, and surprising, role in this process. In Trump’s
case, it is not the opposition party that has forced him to the center (as,
for example, a Republican Congress did to President Bill Clinton after
the 1994 midterms). It is his own party.
The Congressional Apprentice
m
hi
ha
iT
The House always wins? Trump addressing a joint session of Congress, February 2017
Congressional Democrats today are wallowing in the irrelevancy of
total “resistance.” What Democrats once denounced as nearly criminal
Republican obstruction during the Obama administration is now billed
Al
as essential for the preservation of the republic. For Trump and congres-
sional Republican leaders alike, that makes attempting to negotiate with
the Democrats a near-certain waste of time. Even though a handful of
od
congressional Democrats have spoken about working with Republicans

on health-care reform, their conditions for beginning negotiations
include retaining every major provision of Obamacare. But the Demo-
crats’ irrelevance also means that, with Republicans controlling both the
so
House and the Senate, failure to advance significant legislation cannot

be blamed on the opposition.
Many congressional Republicans, including the House and Senate
Ma
leaderships, are uncomfortable with a number of Trump’s stated

positions. They resist the sudden or radical departures from the
status quo that Trump has called for: massively increasing funding
for a border wall, upsetting relationships with Washington’s nato
JIM BOU RG / REUTE RS
allies, making radical reductions in the State Department’s budget,

and scrapping the North American Free Trade Agreement (Senator
John McCain of Arizona, with broad Republican backing, has slowed
this initiative in the Senate). In the continuing budget resolution
passed in May to fund the government for five months, Trump’s own

Jeff Bergner
budget plans, such as providing more funding for a border wall and
defunding Planned Parenthood, were largely replaced by congressional
preferences. House and Senate Republicans are committed to working
with Trump, but they will continue to moderate his positions in many
areas as they do. But it is interesting that it may be Trump who ends
up moderating congressional Republicans on health-care reform.
The Trump administration’s slowness in naming political appointees
m
has helped congressional Republicans expand their role. Typically,
senior political appointees bring a settled,
Congressional Republicans, institutional quality to an administration’s
hi
policies and work closely with members
not the president, will set of Congress to advance an administra-
the bounds of what is
ha
tion’s priorities. Trump has moved more
possible. slowly than his predecessors to fill politi-
cal slots (for the understandable reasons
of not wanting to nominate individuals
iT
who opposed his election and not wanting his presidency to settle into
business as usual). The resulting vacuum has given Congress wide latitude
to shape Republican policies.
For the administration, the process will only grow more challenging
Al
from here. What Trump gets from Congress now is as good as he will
get. Six months after inauguration day, a newly elected president can
usually still expect something of a honeymoon with members of his own
od
party. Trump has not enjoyed much of one, and congressional indepen-
dence will grow as the 2018 midterm elections near.
Trump has a strong stake in maintaining Republican control of the
House and the Senate. If the Democrats recapture the House in the
so
2018 midterm elections, he will face far deeper difficulties not only on
legislative policy issues but also with the investigative mechanisms of the
House. Democratic control would likely mean nonstop committee
Ma
investigations, subpoenas, and threats of impeachment. That would

cripple Trump’s ability to win any serious legislative victories.
Yet congressional Republicans have even more at stake than Trump
does. Their entire political world is on the line: leadership positions,
committee chairmanships, staffs, and fundraising capabilities. Accord-
ingly, as the elections approach, they will increasingly look out for
themselves. And what now looks like presidential policy deference to
Congress is likely by mid-2018 to look more like “leading from behind.”
FRIENDS LIKE THESE

The White House has focused much of its early policy effort on issuing
deregulatory executive orders, which require little input from the
Hill—but even there, congressional Republicans have helped; by
using their authority under the Congressional Review Act, they
have been able to roll regulations back quickly. President Barack
Obama pushed the envelope on executive orders about as far as a
m
president can. With the exception of his executive order on the so-called
Dreamers (undocumented immigrants who came to the United
States as children), most of these orders will be overturned by either
hi
Trump or the courts. The latest example is the Paris climate accord.
Because Obama took the easy way out by not sending the agree-
ha
ment to the Senate as a treaty, Trump was able to justify the United
States’ withdrawal with a simple executive order.
But on most important domestic issues, Trump will find that he
needs Congress to create meaningful, enduring reform. Accordingly,
iT
congressional Republicans, not the president, will set the bounds
of what is possible. They will dictate the final outcomes and, in the
process, do even more than they have done so far to moderate
Trump’s policies.
Al
The efforts to repeal the Affordable Care Act give some indica-
tion of how the process will play out. Republicans in the House and
the Senate, as well as Trump, are far too exposed on this issue to
od
fail to produce any changes at all. Moreover, unless the administra-

tion massively subsidizes health insurance companies, competition
in many states’ insurance exchanges will wither away. But radical
changes such as total repeal—which might have been possible be-
so
fore Obamacare became entrenched—are no longer plausible. The

most likely result—and for Republicans, the best possible result—is
a limited set of changes, many of which will empower the secretary
Ma
of health and human services, that will be advertised by the gop as

a wholesale reform. Trump seems not to worry excessively about
the details of health-care reform and would certainly sign a bill that
left many of the Affordable Care Act’s provisions in place. So long as
Congress passes a replacement bill of some sort, both congressional
Republicans and Trump will declare victory.
There will also be a concerted effort by congressional Republicans
to pass a tax bill. The outline of the tax plan presented by the
Trump administration will serve as a point of departure, but any

Jeff Bergner
bill that can pass both houses of Congress will look very different.
Trump’s plan calls for comprehensive reform and deep cuts in tax
rates, and it makes no effort to achieve
There is no stronger force in revenue neutrality. A congressional bill
is likely to push for a reduction in the
American politics than a number of personal income tax brack-
unified Congress. ets and a limited net tax cut, along
m
with corporate tax reform, which has
been politically viable since the Obama
administration. Tax reform has a natural advantage over other kinds
hi
of policy legislation: despite Democrats’ rhetorical opposition to
any Republican tax bill, it will be difficult for Democrats in contested
ha
states or districts to vote against tax cuts. If the scope of the presi-
dent’s tax-reform plan is reduced, it will not be at all surprising to
see a number of Democrats in the House and the Senate join with
Republicans to support the resulting bill.
iT
Congress will also significantly diverge from Trump in crafting a
fiscal year 2018 spending bill. The administration has presented a
2018 budget that proposes substantial changes, including many re-
ductions, across the board. Some of these, such as cuts to Planned
Al
Parenthood (if not achieved in a health-care reform bill), reflect long-

standing Republican objectives. But many other proposed reductions
are opposed not only by Democrats but also by Republican leaders
od
and appropriators. Mick Mulvaney, Trump’s budget director, has

signaled that the administration’s proposal is an opening offer—the
art of the deal at work—and that he expects changes as the process
unfolds. Both Trump and the Republican congressional leadership
so
would be well advised to agree in advance on a limited number of

priorities for the bill—increased defense spending, funding for the
border wall, cuts to the Environmental Protection Agency, or what-
Ma
ever they may be—and then declare victory if and when they
achieve those goals.
In all these areas, the dynamic between the legislative and executive
branches will look quite different than it did during much of the
Obama presidency. For decades, Congress has largely relinquished
key parts of its constitutional role. It has ceded authority on issues
such as finance, immigration, and environmental protection to reg-
ulatory bodies. It has handed over the authority to go to war to the
White House. During much of the Obama administration, Congress
was uniquely supine. Democratic leaders cheered on the White House’s

executive orders on immigration and the Clean Air Act, which created
lawlike policies entirely within areas of Congress’ constitutional
authority (offering a reminder of why the framers of the Constitution
were wary of political parties). The relationship between Trump
and Republicans on the Hill already marks a change. Congressional
Republicans will work with Trump whenever they can, especially
m
when his proposals conform to their own long-standing policy pref-
erences. But there will be no rubber stamp.
Consider the various committees looking into the relationship
hi
between the Trump campaign and Russia. Congressional committees
frequently investigate presidents: Ronald Reagan over Iran-contra,
ha
Clinton over Monica Lewinsky, Obama over Benghazi. But it is
unusual for a president to be under investigation by four separate
committees, led by members of his own party, in the first year of
his term. Although congressional Republicans regularly say that
iT
they can “walk and chew gum at the same time,” there is no doubt
that the Russia investigations have slowed legislative progress on
other issues. The appointment of Robert Mueller as special counsel,
which most Republicans understandably opposed at first, may give
Al
them the space to focus on policy priorities. As Republican Senator

Lindsey Graham of South Carolina put it, “We can get back to the
normal business of legislating.”
od
THE WATER’S EDGE

Although Congress has undertaken several minor initiatives on foreign
policy—an effort to stop Saudi arms sales; legislation to impose
so
new sanctions on Russia, which the Senate passed in June; and an

endorsement of nato’s Article 5—newly recovered congressional
assertiveness has largely centered on domestic issues. Trump is
Ma
quickly discovering what every other post–World War II president

has recognized: he has much wider latitude on foreign and defense
policy than on domestic policy. He has already been encouraged by
the favorable reception he received in the Middle East during his
first foreign trip, in May.
The president requires no proactive congressional input to conduct
foreign and defense policies, which create significant, lasting changes
to the world order. This is true of initiatives such as forging a new,
informal alliance among Egypt, Israel, Jordan, Saudi Arabia, and the

Jeff Bergner
United Arab Emirates to counter Iran’s role in the Middle East. It is

true of arming Kurdish forces to attack the Islamic State (also known
as isis). It is true of whatever deal the president might choose to
strike, or not strike, with Russia over the future of Syria. It is true of
efforts to secure additional defense spending by nato allies and to
shape the tenor of the transatlantic alliance. And it will be true of
however the president might choose to address North Korea’s nuclear
m
weapons program or the growing Chinese military presence in the
South China Sea.
In recent years, presidents have also enjoyed an almost totally free
hi
hand in decisions to use military force abroad, despite the consider-
able power the Constitution invests in the legislative branch. In this
ha
regard, Congress has utterly failed to defend its constitutional pre-
rogatives. Not since 2002, when Congress authorized the Iraq war,
has it exercised its self-created responsibilities under the War Powers
Act. In 2011, Congress sat idly by as the Obama administration con-
iT
ducted an eight-month-long bombing campaign in Libya with the
ridiculous legal rationale that the attacks should not count as hostilities.
And Congress has continued to sit idly by as Trump, like Obama
did before him, expands the 2001 Authorization for Use of Military
Al
Force beyond all recognition as he wages military campaigns in six

different countries.
There have been recent signs in Congress of attempts to amend or
od
revoke that 2001 authorization. But none of these efforts is likely to

make it to the president’s desk (at least not without the provision of
a lengthy period grandfathering the 2001 authorization), and if one
did, it is highly unlikely that Trump would sign it. Unlike in domestic-
so
policy making, there is no reason to expect deeper congressional

involvement in presidential decisions to use military force in the
future. As the face of war is shaped more and more by standoff
Ma
weapons, drones, and cyberwarfare, it seems less and less likely that
Congress will assert its role in authorizing military actions.
CONGRESS AWAKENED
In Washington today, the conventional wisdom holds that Trump
is unlikely to finish 2017 with a strong record of policy accomplishments.
Yet should he continue to learn how to work with a newly assertive
Congress, he may defy that conventional wisdom. If he emerges from
the first session of the current Congress with a health-care bill, a tax
bill, several new budgetary priorities, the elimination of numerous

regulations, a new Supreme Court justice, a growing economy, and
no new conflicts around the world, who could fairly judge this as
anything but success?
But Trump would be wise to keep in mind that there is no stronger
force in American politics than a unified Congress, by the design of
the Constitution’s framers. In light of recent decades of congressional
m
passivity, that may be difficult to remember. But if the administration
heads down a path that majorities in both political parties oppose,
Trump could confront a unified Congress, a body that possesses far
hi
more constitutional power than the presidency.
When Congress rises to its full height and decides to act, it is
ha
fitted with the most expansive powers of any institution in the U.S.
government. President Richard Nixon learned that fact the hard
way. Those powers are latent, but they are always available. And
they are a reminder to any president, including Trump, that although
iT
executive power can be stretched and expanded, sometimes very
widely, there are limits beyond which it is not wise to proceed.∂
Al
od
so
Ma

Pay Up, Europe

What Trump Gets Right About NATO
m
Michael Mandelbaum
hi
D
onald Trump, the 45th president of the United States, has
a point about Europe and nato. In May, in a speech at the
ha
alliance’s headquarters, in Brussels, he told his fellow leaders
that “nato members must finally contribute their fair share.” In July,
he repeated the warning in Warsaw. “Europe must do more,” he said.
European leaders may find these demands grating, especially given
iT
Trump’s unpopularity among their constituents, but they should heed
them. In recent years, Europe has become a dangerous place. In search
of domestic support, Russian President Vladimir Putin has turned to
aggression abroad, invading Ukraine and intervening in Syria. Since
Al
any one military adventure can provide only a temporary popularity

boost, Putin will always need new victims. That makes him an ongoing
threat. Just when nato has once again become necessary for Europe’s
od
security, however, Trump’s election has thrown the future of the U.S.
role in the alliance into doubt.
For these reasons, Trump is right: to strengthen nato and encourage
the United States to continue its commitment to European security, the
so
alliance’s European members should contribute more. Just as important

for European and Western security, however, is for the United States to
lead other multilateral initiatives to defend the interests and values that
Ma
North America and Europe have in common. Without that leadership,

Europe—and the rest of the world—will be a harsher place.
OLD MISTAKES
For the two and a half decades after the collapse of the Soviet Union,
the word that candidate Trump used to describe nato—“obsolete”—
MICHAEL MANDELBAUM is Christian A. Herter Professor Emeritus of American Foreign
Policy at Johns Hopkins University’s School of Advanced International Studies and the
author of Mission Failure: America and the World in the Post–Cold War Era.
Pay Up, Europe
m
hi
ha
iT
Commitment issues: NATO headquarters, Brussels, May 2017
was largely accurate. It no longer is. In 2014, Russia put an end to the
post–Cold War European peace. It invaded Ukraine, backed pro-
Russian politicians in eastern European countries, and has since
Al
meddled in elections in the United States and France. This renewed

aggression stems from Putin’s need for public support to sustain the
kleptocracy over which he presides. During his first two terms as pres-
od
ident, from 2000 to 2008, the skyrocketing price of oil, Russia’s largest
export, allowed Putin to buy popularity. But in 2014, two years after he
returned to the presidency, the price of oil collapsed. He was forced to
turn to the only other reliable source of support at his disposal: aggres-
so
sive nationalism. That year, in response to a popular uprising in

Ukraine, known as the Euromaidan revolution, that deposed the cor-
rupt, pro-Russian president, Viktor Yanukovych, Putin launched an
Ma
invasion, initially disguised as a spontaneous reaction by local forces.

Russian troops seized the Crimean Peninsula and began a campaign to
C H R I ST IA N HART MA N N / R EU T E R S
support pro-Russian separatists in Ukraine’s eastern provinces.

Putin claimed that Russia’s actions were necessary because the
Euromaidan revolution stemmed from a Western plot to isolate, humili-
ate, and ultimately destroy Russia. The Russian public largely believed
him. His approval ratings rose sharply, and then got a further boost
from his intervention in the Syrian civil war on the side of the brutal
dictator Bashar al-Assad.

Michael Mandelbaum
Although Putin and his regime bear the primary responsibility for
the return of war to Europe, the West, particularly the United States,
has unintentionally helped bring about this dangerous state of affairs.
In the 1990s, nato expanded eastward, against the wishes of Russians
across the political spectrum, even those favorably disposed to the West,
and in spite of earlier assurances by Western leaders to their Soviet and,
later, Russian counterparts that no such expansion would occur.
m
The West also pursued other policies to which Russia objected in
vain, including the U.S.-led wars in Bosnia, Kosovo, and Iraq and the
unilateral U.S. withdrawal in 2002 from the 1972 Anti-Ballistic Mis-
hi
sile Treaty, an agreement that had restricted the number of missile
defense systems the Soviet Union and the United States could build.
ha
Together, these initiatives created a constituency for Putin’s claim,
used to justify his aggressive foreign policies, that the West was pur-
suing an anti-Russian campaign that he was acting to thwart.
Whereas nato expansion mobilized Russia, it tranquilized the
iT
West. To gain domestic acceptance of the policy, Western govern-
ments portrayed it as a harmless gesture of goodwill made by an organ-
ization that was transforming itself from a defensive multinational
army into a benign club of democracies. Expansion, its sponsors
Al
claimed, would require no exertion or expense on the part of current

nato members. Nor would Russia object to it, they added, in spite of
considerable evidence to the contrary. These false claims have left the
od
ultimate arbiters of nato’s fate—the voters of the alliance’s member

countries—unprepared for the renewed threat in Europe and the need
for increased efforts to meet it.
It is worth recalling the blunder of nato expansion and the effects that
so
the subsequent Western policies have had on Russia in case the country
ever has, as it did at the end of the Cold War, a government willing to
participate in a security order based on cooperation and transparency.
Ma
Today, however, it is both too late and too early for such an arrangement.
BACK TO THE PAST

The basic condition that gave rise to nato during the Cold War, a
threat from the east, has returned. But not every feature of the U.S.-
Soviet conflict has reappeared. Russia has three-quarters of the terri-
tory and half the population of the Soviet Union. It poses a conventional
military threat only to Europe, not, as in Soviet times, to countries
elsewhere. Today’s Russia also lacks the kind of messianic ideology
Pay Up, Europe
that drove Soviet foreign policy. Still, it does challenge Europe in two
familiar ways.
First, it possesses nuclear weapons, which other European countries
must balance with their own or those of the United States. The United
Kingdom and France have maintained
nuclear arsenals since the 1950s and
1960s, respectively. During the Cold
The West has unintentionally
m
War, the other European members of helped bring about this
nato, particularly West Germany, con- dangerous state of affairs.
cluded that these could not deter the
hi
Soviet Union by themselves. Effective deterrence required the United
States’ far larger arsenal. German nuclear weapons could have sub-
ha
stituted for U.S. ones, but no one, least of all the Germans themselves,
wanted Germany to acquire them.
The same principle applies today. In May, German Chancellor
Angela Merkel hinted at reducing Europe’s dependence on the United
iT
States by telling a crowd at a political rally in Munich that “the times
in which we could totally rely on others are to some extent over.” But
without the familiar U.S. role in nato, its European members would
face an unwelcome choice between Russian dominance and German
Al
nuclear weapons.
The second problem that Putin has resurrected involves the three
Baltic countries, all of which belong to nato. According to a 2016
od
Rand Corporation study by the defense analysts David Shlapak and

Michael Johnson, because Estonia, Latvia, and Lithuania are so small
and share borders with Russia, “as currently postured, nato cannot
successfully defend” them against a Russian invasion. In the same way,
so
during the Cold War, the alliance could not hope to defend West Berlin
successfully, a small Western island surrounded by communist East
Germany. Preventing a direct Soviet attack required energetic efforts
Ma
by successive U.S. administrations to convince the Soviet Union that

the United States was committed to keeping the city free of communist
control. To protect the Baltic countries from Moscow today, Washington
will have to make a similarly credible commitment.
In September 2014, in a speech in the Estonian capital of Tallinn,
U.S. President Barack Obama declared, “We will defend the territorial
integrity of every single ally . . . because the defense of Tallinn and Riga
and Vilnius is just as important as the defense of Berlin and Paris
and London.” By contrast, during his trip to Europe last May, Trump

Michael Mandelbaum
conspicuously failed to endorse Article 5 of nato’s founding treaty, which

pledges every member of the alliance to the defense of the others. Only
in June, at a press conference with Romanian President Klaus Iohannis,
did Trump commit the United States to that provision of the treaty.
This indifference to the established U.S. role in Europe is not simply
a personal eccentricity that will vanish after Trump leaves office.
American voters, after all, knew his views and elected him as commander
m
in chief. For many of them, talk of Russian threats and U.S. deterrence
in Europe seems long out of date. Even Americans sympathetic to the
need for a continued U.S. military presence on the continent know
hi
that the wealthy European countries are capable of contributing more
to their own security. U.S. Defense Secretary James Mattis spoke for
ha
many when he told nato members at a meeting in Brussels in February
that they would have to increase their military spending since “Ameri-
cans cannot care more for your children’s future than you do.”
In 2014, the European members of nato did agree to devote two
iT
percent of their gdp to defense by 2024, but only five of the 29 nato
members are currently doing so. That target is an arbitrary one, and
achieving it would not by itself maximize the alliance’s military power.
Still, reaching it would send a signal to the American public that Europe
Al
was taking its own defense seriously and thus deserved U.S. support.
ECONOMIC COMPETITION
od
Important as increased defense spending is, nato cannot effectively

meet the threat that Putin’s Russia poses through military means
alone. After all, the military confrontation between the two Cold War
blocs ended in a stalemate. It was in the economic sphere that the West
so
triumphed: its free-market economies decisively outperformed the

centrally planned systems of the communist world. The prosperity of
West Germany juxtaposed with the relative economic backwardness of
Ma
East Germany offered the most telling contrast.

Today, the rivalry between Ukraine and Russia comes closest to
replicating the competition between the two Germanys. A stable,
prosperous, and democratic Ukraine would provide an example to the
people of Russia that would do more than anything else to discredit
and subvert the kleptocratic Russian political system.
The twin shocks of the Euromaidan revolution and the Russian
invasion have produced a Ukrainian government committed, at least
rhetorically, to liberal democracy and a market-based economy.
Pay Up, Europe
Although it has made some progress, the country remains far from
achieving either. Success will depend principally on the efforts of the
Ukrainians themselves. Still, other countries can provide economic
support for the reformist government in Kiev, as some European coun-
tries, through the eu, have already done. In this way, European countries
are making an important contribution to European security.
In addition to supporting Ukraine, the West has sought to punish
m
Russia. In response to Russia’s invasion, the United States and the eu
imposed sanctions on several Russian individuals and businesses. To-
gether with the low price of oil, these have hurt the country’s economy,
hi
damaging Putin’s standing with the Russian public. They have also
signaled that further assaults will trigger even stiffer economic penalties.
ha
Because they have taken an economic toll not just on Russia but also
on the countries imposing them, the sanctions have become contro-
versial in Europe. Indeed, Putin may well have reckoned that public
opposition would, before long, force European leaders to lift them. If
iT
so, he was wrong. They have remained in place, largely thanks to the
efforts of Merkel, who understands, as many of her compatriots do
not, the threat that Putin poses. The United States and the eu should
be prepared to impose additional, stiffer economic penalties if Russian
Al
policy warrants them.
GLOBAL THREATS
od
Europe is not the only place where an aggressive power is threatening

the security of its neighbors. In the Middle East, Iran has pursued
nuclear weapons and fought proxy wars in Syria and Yemen. In response
to its aggression, European countries joined the international sanctions
so
regime against Iran that preceded the 2015 nuclear agreement, which
slowed Iran’s nuclear weapons program. Given the weakness of the
restraints in that deal and the vigor with which Iran is working to dom-
Ma
inate the region, the United States and European countries may soon
need to reimpose economic constraints on the country.
European countries also have a role to play in protecting Western
interests and values in Asia. There, China has claimed sovereignty and
built military bases in disputed areas of the South China Sea. At the
same time, it has wielded its growing economic power to try to extort
political concessions from other Asian countries. In 2010, for instance,
the Chinese government blocked some exports of rare-earth minerals
to Japan until the Japanese government released a Chinese fisherman

Michael Mandelbaum
it had arrested near the disputed Diaoyu/Senkaku Islands, an archipelago

in the East China Sea. Earlier this year, in response to an agreement
between Seoul and Washington to deploy a U.S.-made system of
ballistic missile defenses in South Korea, China began an unofficial
economic campaign against the country, banning certain imports and
pressuring Chinese travel agencies to halt sales of trips to South Korea.
The United States and Europe have already taken significant eco-
m
nomic steps to support their fellow democracies in Asia. In the future,
European countries should participate in multinational efforts to resist
Chinese economic pressure, through compensation to targeted coun-
hi
tries, counterboycotts, or sanctions. To be sure, to expect European
voters to make economic sacrifices for the sake of faraway countries is
ha
asking a great deal of them. But such global economic and political soli-
darity may prove necessary to cope with China’s expansive ambitions.
For Western responses to expansive Chinese and Russian conduct
to succeed, the United States must lead the way. Only it has the power
iT
and the standing to launch global initiatives of this kind, as it did,
for example, in 1990, when President George H. W. Bush assembled
the worldwide coalition that evicted Iraqi forces from Kuwait. Unfor-
tunately, Trump has shown neither the inclination nor the ability to
Al
exercise such leadership.

Forming a global coalition to resist Chinese economic bullying and
Russian aggression will also require a broad sense of community among
od
democracies, based not only on shared interests but also on common

values. At the core of European leaders’ unconcealed distaste for Trump
seems to be their dismay that, unlike his predecessors since at least
Franklin Roosevelt, and despite giving a rousing defense of Western
so
values in Warsaw in July, he does not subscribe to the idea of a global

democratic community.
Europe must take more responsibility for defending Western inter-
Ma
ests and values, but it cannot replace the leadership of the United
States. Without that leadership, the world that the democracies made
with their victories in the three great global conflicts of the twentieth
century—the two world wars and the Cold War—a world freer, more
peaceful, and more prosperous than at any other time in history, will
not endure.∂
What America Owes Its

Veterans
m
A Better System of Care and Support
Phillip Carter
hi
E
ha
ach year, the U.S. military recruits some 175,000 young Ameri-
cans. At the heart of its pitch is a sacred promise to take care
of those who serve—what President Abraham Lincoln described
in his second inaugural address as the national duty “to care for him
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who shall have borne the battle and for his widow and his orphan.”
Today, this promise is enshrined in the ethics of each service: members
of the U.S. Army, Navy, Air Force, Marines, and Coast Guard pledge
to never leave a fallen comrade behind. After their service, the Depart-
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ment of Veterans Affairs (va) works to fulfill this same promise on behalf
of a grateful nation, enabled by a budget larger than those of the State
Department, the Department of Homeland Security, and the entire
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U.S. intelligence community combined.

Most national security discussions focus on strategy or policy. To
the extent that ways and means get considered at all, the talk tends to
center on weapons systems, budgets, bases, and buildings. These matter,
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but people matter, too. Service members are an irreplaceable compo-

nent of U.S. national security. And because the United States relies
on an all-volunteer force, how the country treats its troops during and
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after their service matters when it comes to sustaining this critical

component of national strength.
The wars in Afghanistan and Iraq saw incredible advances in body
armor, battlefield medicine, and medical evacuation, all of which
dramatically improved the likelihood that soldiers would survive injuries.
PHILLIP CARTER is a Senior Fellow and Director of the Military, Veterans, and Society
Program at the Center for a New American Security. A former U.S. Army officer and
veteran of the Iraq war, he served as U.S. Deputy Assistant Secretary of Defense in 2009.
Follow him on Twitter @Carter_PE.

Phillip Carter
Deaths from nonbattlefield injuries and illnesses, historically far more

deadly than combat, have also fallen greatly, thanks to aggressive public
health efforts and fitness requirements for troops. In this respect, the
United States is keeping its most sacred pledge to those it sends into
harm’s way: to bring them home.
But despite some recent improvements, the va and other federal
agencies struggle to keep other promises to active service members
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and veterans after they come home. Aging bureaucracies struggle to
meet the needs of a diverse and dispersed population. Educational
and economic support programs fail to keep pace with the changing
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needs of veterans and their families. To fix these problems, the United
States must rewrite the contract it strikes with its service members,
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building a support system that not only ameliorates their battle wounds
and financial losses but also helps them thrive after their service in a
twenty-first-century economy.
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AT YOUR SERVICE
The social contract with veterans has changed considerably since the
founding of the United States. For economic and political reasons,
the framers of the Constitution envisioned a small standing military,
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supported in peacetime by a citizen militia. When wars did break out,

white male citizens were expected to volunteer. Aside from small
pensions for war widows or severely disabled veterans, the government
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offered little in return.

This model persisted through most of the eighteenth and nineteenth
centuries. Then came the Civil War. Following the lead of the French
during the Napoleonic Wars, both the North and the South eventually
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resorted to conscription for the first time in U.S. history. By the time
the war was over, in 1865, some 3.3 million Americans had served, out
of a total population of 35.2 million. Of these, nearly 500,000 were
Ma
killed, with tens of thousands more wounded. During the war, each
side set up battlefield hospitals; afterward, they established convalescent
homes to rehabilitate the injured and veterans’ cemeteries to inter and
memorialize the dead.
Civil War veterans dominated U.S. political life for the next half
century. Veterans’ organizations, such as the Grand Army of the Repub-
lic and the United Confederate Veterans, became powerful domestic
lobbies. They successfully campaigned for expanded government
benefits, such as bigger pensions for disabled veterans and widows
What America Owes Its Veterans
m
hi
ha
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Al
od
so
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and more hospitals, veterans’ homes, and cemeteries. But Washington

didn’t think to combine these services into a single federal agency,
since the U.S. government wasn’t in the habit of providing social ser-
vices at the time. Apart from these new benefits, support for veterans
remained largely the province of charities and local governments.
This arrangement changed with the advent of industrialization, the
experience of two world wars, and the implementation of the New

Phillip Carter
Deal. During World War I, the United States mustered 4.7 million
troops to fight, including 2.8 million conscripts. Over 115,000 died
and 200,000 were wounded. Just as had happened after the Civil War,
veterans’ organizations that formed in
the wake of this war accrued tremen-
The U.S. military has dous political influence. This time, how-
grown increasingly distinct ever, they used that power to secure
m
from the population as a more expansive health care, life insur-
whole: a part of society, but ance, vocational rehabilitation, and other
programs. In 1930, President Herbert
hi
also apart from it. Hoover worked with Congress to create
the Veterans Administration, the fore-
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runner to today’s va, consolidating health care, benefits programs,
and cemetery administration into a single agency for the first time.
After the Great Depression struck, President Franklin Roosevelt
responded by fundamentally changing the role of the federal gov-
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ernment in society, vastly expanding social welfare programs—
eventually including those for veterans.
The government’s role in veterans’ affairs increased again during
World War II, in which 16 million men and women served, 400,000 of
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whom died and 670,000 of whom were wounded. To prepare for the
return of so many troops, in 1944, Congress unanimously passed the
Servicemen’s Readjustment Act, better known as the gi Bill. It contained
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three main provisions: 52 weeks of unemployment compensation, a

veterans’ home loan program offering zero-down-payment mortgages,
and subsidies for higher education. It also appropriated $500 million
for new va hospitals, authorized the va to take over existing military
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hospitals, created a veterans’ employment program, and established a

small-business loan program. Together with Roosevelt’s earlier reforms,
these benefits added up to a new social contract with service members.
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The government would not simply treat the wounds of war and com-
pensate the disabled and the widowed for their suffering; it would
recognize and reward military service, too.
The gi Bill helped the massive cohort of World War II veterans
make the transition back to civilian life. One congressional study from
1988 estimated that for every $1 the government spent on educational
benefits, veterans returned nearly $7 to public coffers in increased tax
revenue or added economic output. In the ten years after the war, the
government issued 4.3 million home loans to veterans, contributing
to a housing boom that stimulated the economy and changed the postwar
American landscape.
Even during these halcyon days, however, the va labored to fulfill
its expanded role. To address its various problems, in 1954, President
Dwight Eisenhower appointed his former colleague, General Omar
Bradley, to lead a study of the future of the va. The Bradley Commis-
sion took a conservative view of what veterans were owed, concluding,
m
“Military service in time of war or peace is an obligation of citizenship
and should not be considered inherently a basis for future Government
benefits.” Helpful as the gi Bill had proved to millions of veterans,
hi
Bradley saw it as unnecessary and unsustainable, particularly since
new programs such as Social Security were intended to provide eco-
ha
nomic security for all Americans.
But Bradley ultimately lost the debate. Veterans fought back hard
against the attempt to cut their cherished programs, and they found
allies in broader society, which had benefited from the tidal wave of
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former soldiers buying homes, going to college, and starting businesses.
As the Cold War took off, the Defense Department continued to
recruit or conscript hundreds of thousands of young men, establishing
the first large peacetime military in U.S. history (and contributing
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to a veteran population that would peak at over 28 million in 1980).

That military would go to war in Vietnam. As the conflict began
to wind down in 1973, President Richard Nixon ended the use of
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conscription, eliminating one of the great contributors to the anti-

war movement. So began the era of the all-volunteer force, which
remains in place today.
In the wake of Nixon’s decision, the demographics of the U.S. military
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began to shift dramatically. Although the military had been formally

desegregated for decades, the military (and veteran) population be-
came more racially and ethnically diverse as the self-selection dynamics
Ma
of the all-volunteer force took root and as minorities increasingly saw

service as a form of economic mobility. The military also began to
include more women, who gained access to new roles across the force
and now make up the fastest-growing demographic within the veteran
population. Yet without conscription, which drew young Americans from
all classes and regions, the military began to recruit disproportionately
from certain parts of the country and society: the South, the Midwest,
the middle and working classes, and military families. Among those,
the military also recruited a relatively elite group, since not everyone

Phillip Carter
could pass its rigorous entry requirements regarding education, health,

and criminal history. The effect of these changes was to produce a mili-
tary that has grown increasingly distinct from the population as a whole:
a part of society, but also apart from it.
During this period, the social contract behind military service also
shifted. Today’s promise to veterans still includes the core components
provided to previous generations: health care and compensation for
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wounds and other injuries sustained in the line of duty, help with re-
adjusting to civilian life, and support for indigent veterans and survivors
of those killed in the line of duty. But now it also includes programs—
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from the Post-9/11 gi Bill’s educational assistance initiatives to the
Small Business Administration’s programs for veteran entrepreneurs—
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that reward and encourage service by enabling veterans to outperform
those who have not served.
Yet the shift to giving veterans a leg up in the workplace is not com-
plete. The va’s largest program, disability compensation, effectively
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encourages disability by paying veterans according to the degree to
which they are disabled, offering no incentive for them to improve
their conditions or leave the disability roster. A related va program,
aimed at vocational rehabilitation and education, aims to get disabled
Al
veterans back to work, but it serves a relatively small population and

should be broadened to help all disabled veterans. The dissonance be-
tween these programs—with one compensating veterans for losses
od
incurred during service and the other seeking to improve their perfor-
mance after service—creates mixed incentives for veterans.
GET WELL SOON

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Of the three categories of veterans’ benefits—health care, economic

aid, and crisis support—health care is the largest and most used. By
law, nearly all of the country’s 21 million former service members are
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eligible for va health care; of these, nine million have enrolled, and
almost seven million used the system in 2016, at a cost of $63 billion.
This system provides comprehensive coverage, not only for injuries
and illnesses sustained in the line of duty but also for any other medical
needs that may arise at any point. To do this, the va runs 144 hospitals,
800 clinics, and 300 mental health Vet Centers and employs more than
300,000 people. In addition to treating veterans, the va trains nearly
half of U.S. doctors and two-thirds of U.S. nurses at some point in
their careers and conducts more than $2 billion in research each year.
Generally speaking, the va provides outstanding medical care. The

problem, however, is that many veterans struggle to access it. The va’s
complex bureaucracy is hard to navigate, so many eligible veterans
don’t receive care in a timely, convenient manner. The va system erupted
in scandal in 2014, when cnn discovered that employees at a va hospital
in Phoenix were manipulating recorded wait times to make it seem as
though veterans were receiving timely care. The incident prompted
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Eric Shinseki, the secretary of veterans affairs, and Robert Petzel, the
va’s top doctor, to resign.
The va also has difficulty maintaining quality and patient satisfaction.
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It relies on an antiquated health records system that once led the country
in terms of innovation but now lags far behind those in the commercial
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sector. (In June, the va announced that it plans to replace this system
with commercial software, but doing so will likely take years.) Because
of its size and geographic dispersion, the va struggles to be good at all
things in all places. Hardly a month passes without a scathing report
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from the va’s inspector general about flaws in care or squalid conditions
at some va facility. In May 2017, for example, a report on the va hospital
in Hines, Illinois, described cockroaches on patient food trays and
transportation carts.
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Until the Phoenix scandal, proposals for reforming va health care gen-
erally involved pouring more resources into the existing system. After-
ward, however, conservatives, such as Arizona Senator John McCain,
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won a major debate over whether to rely more on the private sector to
improve care. For years, McCain and others had called on the va to priva-
tize in a variety of ways, in part by relying more on contractors. In 2014,
the va contracted out ten percent of its appointments to private-sector
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providers; that figure rose to 32 percent by late 2016 and, if the Trump
administration gets its way, will increase further. In the years to come, the
va will likely reshape its health-care system into a hybrid public-private
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model that current va leaders hope will better and more cheaply serve
the shrinking, dispersed veteran population. But this evolution is fraught
with peril. It remains unclear whether the va can maintain its high qual-
ity of care or large research and educational missions when a significant
number of veterans receive services outside the system.
THE BENEFITS OF SERVICE

The federal government runs a dizzying array of economic support
programs for veterans. Some, such as disability compensation, trace

Phillip Carter
their roots back to the Revolutionary War and the core idea of caring
for those wounded in war. Others, such as offering veterans small-
business loans or giving them preference in receiving government
contracts, reflect the more modern aim to reward veterans and attract
new recruits.
Of these various efforts, disability compensation and pensions are
the most expensive: in 2016, the va spent $77 billion on payments
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to roughly five million people eligible for such benefits. It devoted
another $14 billion to educational and training programs, including
the Post-9/11 gi Bill; these helped just over one million veterans attend
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college or receive vocational training. Alongside these forms of assis-
tance, the va also administers life insurance programs and home loans.
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Meanwhile, the Department of Labor runs a veterans’ employment
service, the Small Business Administration offers support for entre-
preneurial veterans, and every federal agency provides contracting
and hiring preferences for veterans.
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Like Social Security, most va benefits programs run on autopilot.
Unlike the va’s health-care system, which is classified as discretionary
spending, its benefits system is considered by Congress to be mandatory
spending. Once a veteran earns a benefit, it is paid until it is exhausted,
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as with the Post-9/11 gi Bill (which runs for 36 months) and disability
compensation (which generally lasts for a veteran’s lifetime). Controversy
arises only when the system runs aground, as it did in 2011, when the
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disability claims backlog reached nearly one million, as veterans of all

ages simultaneously pursued claims for disability from an overworked
system. It also encounters problems if it makes systemic errors, such
as denying claims for Agent Orange–related illnesses or posttraumatic
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stress disorder because the evidence of a causal link between military

service and these ailments is tenuous (although, of course, battlefield
conditions are not the best laboratories for randomized controlled trials).
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But veterans have come to accept a certain level of friction in the sys-
tem, not unlike what they experienced in the military itself.
Yet many of these benefits fail to fully support modern soldiers’
transitions to civilian life. The va’s disability compensation scheme, for
example, matches neither the realities of contemporary service nor the
American workplace. With longer terms of enlistment and more
frequent deployments, service members often end their tours with at
least some physical effects, from hearing loss to orthopedic injuries or
worse. The current disability system treats every one of these injuries,
no matter how minor or treatable, as a potentially lifelong disability,

rather than as the normal wear and tear of service. Veterans have
increasingly claimed these injuries as disabilities, taxing the va’s
resources. The system also primarily addresses physical injuries rather
than cognitive or mental impairments, an outmoded approach.
In addition, over the past eight years, the unemployment rate
for recent veterans rose above the overall national rate. By 2011, the
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unemployment rate for post-9/11 veterans was 12 percent, compared
with just nine percent for the overall population. (The total veteran
unemployment rate was lower than the national rate, owing to older
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veterans, who tend to do better than average in the work force.) Starting
that year, the Defense Department, the va, the Department of Labor,
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and other agencies worked to address this crisis by revamping the civil-
ian transition training given to service members before discharge and
working with companies to establish private-sector hiring goals.
Those efforts, plus an improving economy, brought unemployment
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among recent veterans down to parity with the national unemployment
rate by 2016.
But the unemployment spike highlighted a problem. Although the
government provides substantial benefits in education and health, it
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can do much more to facilitate veterans’ transitions into the work

force. For example, it should offer programs that subsidize vocational
training, such as coding boot camps, and provide seed capital for start-
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ups, which could help veterans who want to start a business instead of
going to college. The Trump administration has pledged to facilitate
public-private partnerships to serve veterans and hold the va account-
able. Although such efforts will help, the continued gulf between the
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culture of the military and that of the civilian work force makes for a
difficult shift no matter what services the government provides.
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REMEMBER THE NEEDIEST

Although crisis support—programs for homelessness, addiction, and
legal problems—represents a small share of veterans’ benefits, it responds
to an acute problem. The va and other federal agencies provide billions
of dollars to veterans living on the margins of society, offering a lifelong
social safety net that far exceeds what is available to nonveterans.
For years, veterans have been chronically overrepresented in the
nation’s homeless population. In 2009, Shinseki announced an auda-
cious goal of reducing the number of homeless veterans to zero. From

Phillip Carter
fiscal year 2009 to fiscal year 2017, the va poured $65 billion into
housing, mental health treatment, and other services for veterans
in need. The effort made a huge dent, reducing the number of home-
less veterans from 73,367 in 2007 to 39,471 in 2016. Shortly after
Trump took office, David Shulkin, his secretary of veterans affairs,
announced that the effort would continue, but that instead of simply
counting the absolute number of veterans on the streets, it would
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instead aim for the more realistic target of “functional zero,” a goal
that measures the number of homeless veterans against the housing
capacity of a given community.
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Veterans are also disproportionately afflicted by alcohol and substance
abuse. Self-medication of posttraumatic stress appears to be one driver;
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another may be the tendency of va and military hospitals to overpre-
scribe medication for everything from sports injuries to combat stress
and sleep disorders. The va has set up clinics to treat addicted veterans,
but these lack the resources to meet demand, and other veterans fail
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to seek any care at all.
Veterans have also historically been overrepresented in the nation’s
courts, jails, and prisons, although less so in the era of the all-volunteer
force. Across the country, local courts and law enforcement agencies
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have joined with social service agencies to form veterans’ courts,

which resemble diversionary programs for other populations, such as
juveniles. For nonviolent, nonserious crimes, these courts can match
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veterans with supportive services, such as substance-abuse counseling

and job placement, in exchange for dismissing or expunging their
charges when they complete these programs. The number of veterans
entering these courts remains small, but they have no doubt helped
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many avoid a lifetime of dependency and incarceration.

Another previously marginalized group of veterans has risen to
prominence over the past few years: those discharged with “bad paper,”
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frequently the result of minor misconduct while in service, for which

the root cause is often posttraumatic stress. By statute, these former
service members aren’t classified as veterans and are thus denied
access to veterans’ health care and other benefits. But they are far
more likely to struggle with unemployment, homelessness, substance
abuse, and suicide than other veterans. Since they are ineligible for va
support, the burden of supporting these veterans falls on state and
local governments and charities, often costing tens of thousands of
dollars per veteran. In recent years, veterans’ groups, social service
organizations, and public interest lawyers have argued that these veter-
ans should at least have access to life-saving health care, if not the full
benefits. Shulkin recently embraced this cause, too, although it will
likely take action from Congress to make real headway.
TIME TO RETHINK
In all these areas, change will undoubtedly prove slow and chal-
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lenging. Each va program has a constituency that depends on it and
might oppose reform. Long-overdue adjustments to the system for
disability compensation, for example, could include updates to the
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antiquated schedule used to rate disability percentages or changes
to the process for evaluating disabilities. Because these changes
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would reduce benefits for some, however, for political reasons, current
veterans would have to be grandfathered in. On the health-care side,
increasing the va’s use of private-sector doctors could shorten wait
times, but it could also weaken the agency’s teaching and research
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capacity and thus lower the quality of care for those patients who
continue to receive treatment from va doctors. Those veterans who
are generally satisfied with the status quo will look at any major
changes with skepticism.
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Cost must factor into the equation, too. The federal government
already spends more on veterans now, in both absolute and per-
veteran terms, than at any point in history—but some reforms will
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cost even more. Trump requested a va budget for 2017 totaling

$186 billion, covering health care, benefits, cemeteries, and the admin-
istration of the va. This represents a four percent increase from the
previous year but may still fail to meet veterans’ needs through the
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existing agency structure. Over the past 15 years, even as the overall
veteran population has shrunk, the va budget has grown enormously,
since veterans of all generations are increasingly using the system.
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And over the next 15 years, demand will no doubt rise, as the va
serves both the Vietnam-era cohort and the post-9/11 cohort. The
Defense Department has reported that as of May 2017, 2,874,820
service members had deployed to Afghanistan, Iraq, or other theaters
of war since 9/11. The Harvard scholar Linda Bilmes has estimated
that the total cost of veterans’ support for the post-9/11 generation
will likely exceed $4 trillion. The majority of this bill will come
due sometime around 2050, because expenditures typically peak
when a cohort reaches its 70s.

Phillip Carter
With the veteran population evolving and existing programs straining

to meet its needs, it is time for the U.S. government to fundamentally
rethink the social contract underlying service. If the goal of veterans’
programs is merely to compensate individuals for injuries, hardships,
and the costs of service, then they are doing a decent job. But if the
goal is to help veterans thrive, then the programs are faring poorly.
And leaving veterans better off than their peers is crucial, since it will
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make service appear more attractive to future generations weighing
the military as an option.
With that goal in mind, Washington should redesign the system for
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supporting veterans. Without scaling back programs such as disability
compensation and health care, which primarily ameliorate the harms
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of service, the government should expand benefits such as the Post-
9/11 gi Bill and small-business financing,
which can create enormous economic
The federal government opportunities for those who serve. It
already spends more
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should also find ways to leverage the
on veterans now than at enormous social capital that veterans
any point in history. develop during their service for eco-
nomic and societal gain. In Israel, for
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example, veterans of elite intelligence

and special operations units move seamlessly into the technology and
start-up world, drawing on their connections in much the same way
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that Stanford graduates do in Silicon Valley. Although Israel is much

smaller and maintains conscription, both of which help build a tight-
knit entrepreneurial military community, the United States could
replicate elements of that ecosystem within parts of its military,
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especially the intelligence and special operations fields, both of which

rely on advanced technology. The Defense Department should also
explore ways to more closely link active and reserve units with busi-
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nesses, particularly those that provide critical infrastructure, such as

telecommunications and energy firms. These service members could
draw on their hard-earned experience to help defend the private sector
against cyberattacks and economic espionage, while fostering a virtu-
ous cycle of innovation between the military and the private sector.
Washington should also be mindful of the ways in which the in-
creasing civil-military divide exacerbates the struggles of veterans—
for example, fueling veteran unemployment because of the cultural
gap between civilian employers and their veteran employees. This divide
may also hinder veterans’ reintegration into communities and their will-
ingness to seek mental health care, because of a fear of social stigma.
Absent a foreign invasion or a crisis on the scale of World War II, the
country is unlikely to return to conscription or increase the size of the
military to the point where it would fundamentally change its relation-
ship to the rest of society.
To repair the split, then, the military should seek greater geo-
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graphic and socioeconomic diversity among its recruits. It should
establish public-private partnerships to support veterans in the work
force. And it should rely on reserve units so as to broaden the mil-
hi
itary’s geographic footprint to include communities away from major
base towns such as Killeen, Texas, and Norfolk, Virginia. Veterans
ha
have a role to play, too. A recent study by the advocacy group Got
Your 6 found that veterans are not always likely to self-identify as
veterans after service, and civilians often think veterans are worse
off than they are. Veterans, particularly those who succeed after
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service, must represent the military and explain their service to the
wider population.
For the foreseeable future, the United States will rely on a rela-
tively small, volunteer military. Its success depends on its ability to
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draw in high-quality recruits. And that, in turn, depends on the

perception that service will benefit soldiers, their families, and
their country.∂
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so
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Global Health Gets a

Checkup
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A Conversation With Tedros Adhanom
Ghebreyesus
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he World Health Organization considering the serious gaps we have. I
was established in 1948 as a think the world should unite and focus
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specialized agency of the United on strong health systems to prepare the
Nations charged with improving global whole world to prevent epidemics—or
public health, coordinating the interna- if there is an outbreak, to manage it
tional response to epidemics, and the quickly—because viruses don’t respect
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like. In the ensuing decades, its dedicated borders, and they don’t need visas.
staff has served on the frontlines of
public health battles, from the eradica- What do you see as the WHO’s core
tion of smallpox to the fight against aids mission?
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to the challenges of noncommunicable The who has a responsibility to prevent,
diseases. In May, the who’s member early-detect, and manage outbreaks, and
countries elected Tedros Adhanom it can do this by strengthening countries’
Ghebreyesus as its new director general. capacity. But we have to do more. Ebola
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A malaria researcher, Tedros, as he is has already shown the weaknesses that

known, served as the health minister of we have. So the who should start by
Ethiopia from 2005 to 2012 and as strengthening epidemiological surveil-
foreign minister from 2012 to 2016. He lance and investing in countries’ health
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spoke with Foreign Affairs’ deputy systems.

managing editor Stuart Reid in New
York in July. You’ve identified health coverage as one
of your top priorities. What does that
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What keeps you up at night? mean in practice?

Epidemics or pandemics. Immediately About a third of countries are covered, a
after the First World War, in 1918, the third are progressing towards universal
DENIS BALI BOUSE / REUTERS
world encountered the Spanish flu. It was health coverage, and the last third
airborne and killed more than 50 million haven’t started. We will focus on speed-
people. Ebola is lousy compared to that. ing up the progress of those who are
That sometimes keeps me awake at night, making progress and influencing those
because we have to do a lot, especially who haven’t started. The aim of the sdgs
[the un’s Sustainable Development
This interview has been edited and condensed. Goals] is to leave no one behind by 2030.
Global Health Gets a Checkup
Political commitment is very impor- does now that it should not be in the
tant here. Expanding health coverage is business of doing?
not a technical issue but a political one; Of course, the who should prioritize.
it should be seen as a right and a means I’ve said we need to focus on universal
to development. health coverage, emergency response,
women and children in adolescence, and
What role does the WHO have when it climate change and health. So anything
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comes to noncommunicable diseases? outside this will be less of a priority and
First of all, it’s important to recognize get fewer resources.
that noncommunicable diseases are on
the increase globally, both in develop- You’ve also said that you want to profes-
hi
ing countries and in the developed sionalize the WHO’s fundraising opera-
world, due to urbanization and chang- tions. But how can the WHO get more
ing lifestyles. We know many noncom- funding from countries when officials in
ha
municable diseases are related to risk those countries often can’t get the
factors such as smoking, alcohol con- resources they need to run their own
sumption, inactivity, and diet. We can health ministries properly?
address them by building or strength- I think the who in this case is shy. The
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ening health systems focused on pre- who only contacts ministries of health,
vention and health promotion. Primary but it should also work with other
health care is especially important. ministries, like the ministry of finance,
Using the media is important. And in the ministry of foreign affairs—even
Al
the education sector, it’s important to, heads of state and government. The who
as part of the curriculum, educate should play its technical leadership role
children on risk factors and help them but at the same time its political leader-
choose a healthy lifestyle. ship role. If you say, “health for all,” it’s
od
political. And unless you take it to the

Another threat to public health is irrational highest level possible, it cannot happen.
beliefs. In some of the richest communi-
ties, parents don’t vaccinate their chil- What do you plan to do to increase the
so
dren because they falsely believe vaccines funds available to the WHO from
cause autism. What can be done about governments and private groups that
the spread of misinformation? are not earmarked for specific projects?
Governments have to communicate well Take those earmarked for polio. Seventy-
Ma
with the community, and the who can four percent of your employees in
help. In addition to that, we have to use Africa get their salaries from polio
the media. The media is very important funds. We’re now on the verge of
on this. And we can use faith-based eradicating polio, but after the eradica-
organizations and civil society to teach tion of smallpox—arguably the WHO’s
the society to accept vaccination as an greatest success—the infrastructure
important part of child development. and funding sources used in that effort
fell apart. How do you make sure that
Resources—both attention and money— doesn’t happen again?
are finite. Is there anything the WHO We should be creating value for money—
using all the available money wisely. We

should expand the donor base. We need
to look for new donors apart from the
traditional donors, not only govern-
ments but foundations and the private
sector, as well. We should ask for
flexible funding rather than earmarked
m
funding. We also need to strengthen
our resource-mobilization capacity. If
we can address these key areas, then we
can reduce our dependency on ear-
hi
marked funding. For polio, we have
already developed an exit strategy.
ha
But donors might walk away after
victory is declared. What rationale
would you give to, say, the Rotary Club,
to keep giving money to the WHO? Or to International
Security
iT
the Bill and Melinda Gates Foundation?
Polio is being finished, but there are
other areas that need a joint effort. The Stay on top of the latest in
same children saved from polio will need contemporary security issues.
Al
support for other health problems—could
be measles, malaria, or other problems. Recent issues have
explored a range of
fascinating topics,
Another relevant nonstate actor is the
od
including the future of

pharmaceutical industry. Some have U.S.-China relations,
criticized its priorities—for instance, the causes of nuclear
producing drugs for restless leg syndrome proliferation, cyberwarfare
while tuberculosis still kills more than a and cybersecurity, and
terrorism.
so
million people every year. Should more

pressure be placed on the industry? As a subscriber, you’ll receive a year’s worth
of articles from the foremost scholars in
The private sector will always go for international relations and security studies,
profits. If you put pressure on [companies plus access to the journal’s online archive.
Ma
not to do this], I don’t think they will

succumb. It doesn’t work that way.
They should see in their business Yours for 25% off.
plan whether or not they can get Subscribe now.
funding, so one area to consider is what
Gavi [the Vaccine Alliance] does, with bit.ly/ISEC17
an advance market commitment that
helps pharmaceutical companies invest Image © Yuri Samoilov, bit.ly/2mzUfNK
in vaccines that are only important for
the developing world. The other option
131
Global Health Gets a Checkup
is for governments to invest, because it’s on the economy if it reports a certain

a public good. disease. And if the other countries,
instead of banning travel or other
Many feel that the WHO responded too measures, could be supportive and imple-
slowly to the 2014–15 Ebola outbreak. ment the ihr, then the country could be
How can it respond faster in the next encouraged to report immediately.
emergency?
m
My predecessor, Dr. Margaret Chan, What were your biggest accomplish-
worked on reforming emergency ments and challenges during your time
response, and a new program for it is as Ethiopia’s health minister and foreign
now in place. One good experience with minister?
hi
using the new system is the recent Our biggest achievement was health-
report of Ebola from the drc [Demo- sector reform. The success was in
cratic Republic of the Congo]. It was making sure that primary health care
ha
detected early and reported immedi- was the center of gravity in our health
ately, and the country mobilized partners system. People prefer to focus on build-
and addressed it. We need to make the ing hospitals and so on, so it was
program even stronger, and we should difficult to convince many to accept
iT
build it up with a sense of urgency. We primary health care as a priority.
have learned a lot from Ebola. We have Ethiopia achieved most of the mdgs
to implement those lessons aggressively. [the un’s Millennium Development
Goals] because it focused on health
Al
Some also feel that the WHO has been promotion and prevention.
too accommodating of governments. Is
that accurate? You said earlier that the media is crucial
I don’t agree that the who only follows to the spread of public health informa-
od
what the members states say. It goes tion. According to the Committee to
both ways. Member states should listen Protect Journalists, in 2016, Ethiopia
to what the who says, and at the same imprisoned 16 journalists, making it one
time, the who should listen to them. of the five worst countries in the world
so
in terms of jailing reporters.

But sometimes a government may not This interview is of me representing the
want to raise the alarm about an out- who. So do you think it’s a good idea to
break because it fears a drop in tourism. talk about [something] country specific?
Ma
What can be done in cases like that? It’s unrelated to the job I’m doing now.
On that one, it’s not an issue between
the who and the member state in What is your response to people who
question; it’s about the overall imple- say that in your current role, your
mentation of the International Health association with the Ethiopian govern-
Regulations [the rules that govern how ment could undermine your work?
states respond to outbreaks]. That It’s not related, but I can answer. First
involves not only the country in ques- of all, when I was there, as far as I
tion but other countries, as well. For know, journalists were not jailed because
instance, a country may fear the impact they spoke their mind. It was because
A Conversation With Tedros Adhanom Ghebreyesus
they trespassed. We have rules and laws, world who can run organizations. By
like any country. Journalists may or may the way, the un has been run by Afri-
not like a particular law, including in the cans before: Kofi Annan and Boutros
U.S., but even if you don’t like a law, you Boutros-Ghali.
don’t break it. That was the problem.
Otherwise, the media is actually The World Bank has been getting
important. It’s the eyes and ears of the increasingly involved in public health,
m
society. And the government uses this not just in funding but also in directing
as feedback to intervene where there are policy—developing its own guidelines
problems, and that’s how we used to see for universal health coverage, for
it when I was part of the government. instance. Shouldn’t that fall under the
hi
But be it a journalist or a politician or a WHO’s mandate?
businessman, no one can be above the The global challenges we are facing are
law, because if you do that, it’s very getting more complex, so having more
ha
difficult to govern a country. players is not a problem. I don’t think
the who should compete with the
Critics have also accused you of covering World Bank, and the World Bank doesn’t
up cholera epidemics in Ethiopia. need to compete with the who. We can
iT
Neighboring countries have tens of work together. On many of the things
thousands of cases, and experts say that that the who does, if the World Bank
Ethiopia is currently suffering from an has a competitive advantage, the who
outbreak. Why not just admit it? should let the World Bank do it. If the
Al
I think you have read in The New York Global Fund [to Fight aids, Tuberculosis
Times what Tom Frieden [the former and Malaria] has a better comparative
director of the Centers for Disease advantage, the Global Fund can do it,
Control and Prevention] said [in a or Gavi can do it. At the end of the day,
od
letter to the editor responding to an the important thing is building effective

article about the allegations]. It doesn’t partnerships to achieve our global
even make any difference whether you health objectives.
call it “cholera,” because the management
so
is the same. The most important thing U.S. President Donald Trump’s proposed
is to respond immediately. budget cuts include a 17 percent de-
crease for the Centers for Disease
You’re the first African head of the WHO. Control and Prevention and an 18 per-
Ma
Should developing countries get a cent cut for the National Institutes of
greater voice in global institutions more Health. What would that mean for global
generally? public health?
I think any position in any international That’s not yet finalized. The United
organization should be merit-based. States normally takes a bipartisan
When I competed, that was my platform. position on these issues. I expect that
It’s not about developing or developed the U.S. will contribute its share.∂
world; it’s about selecting the right
people for the position, and there are
many able people from the developing

ESSAYS
The country, and the

world, needs a new,
twenty-first-century
version of the
m
Truman Doctrine.
—Tim Kaine
hi
ha
iT
Al
od
A New Truman Doctrine Don’t Follow the Money

Tim Kaine 36 Peter R. Neumann 93
so
Why Globalization Stalled Keine Atombombe, Bitte

Fred Hu and Michael Spence 54 Ulrich Kühn and Tristan Volpe 103
Ma
Course Correction Start-Up Palestine

H A R RY S . T R U M A N L I B R A RY
Ely Ratner 64 Yadin Kaufmann 113
Trump and the Environment The Next Energy Revolution

Fred Krupp 73 David G. Victor and Kassia Yanosek 124
Paris Isn’t Burning

Brian Deese 83
A New Truman Doctrine

Grand Strategy in a Hyperconnected World
Tim Kaine
m
D
onald Trump’s victory in the 2016 U.S. presidential election
has prompted a major reassessment of the United States’ global
hi
role—the most fundamental rethinking since the immediate
aftermath of World War II.
I am not a neutral or independent observer. I was Hillary Clinton’s
ha
running mate last fall. We won the popular vote handily but lost where
it counts: in the Electoral College. Following the election, I returned
to the U.S. Senate, which is now engaged in a task that would have
iT
seemed surreal a few years ago: the review of successful efforts by the
Russian government to interfere in an American presidential election.
Many questions remain to be answered—and answered they will be.
But the election is over, and Trump is in place. Much effort is now
Al
being expended to figure out his administration’s priorities, yet it is

already clear that Trump’s election will continue at least one trend
that has been under way since the collapse of the Soviet Union. For
od
some 40 years following World War II, the United States had a fairly
coherent foreign policy, which both parties supported. That policy—the
Truman Doctrine—saw the world as a bipolar competition between
the Soviet bloc and the U.S. led bloc. When the Soviet Union collapsed
so
-
in 1991, however, the Truman Doctrine lost its viability. Although
fragments of the strategy still shape U.S. thinking, no administration
has come up with a comprehensive plan to replace it.
Trump’s views on trade and the importance of international insti
Ma
tutions are very different from those of Presidents Barack Obama,

George W. Bush, and Bill Clinton. Trump will prioritize immediate
economic gains over security and human rights. But like his immediate
predecessors, Trump will probably also make foreign policy in an
TIM KAINE is the junior U.S. Senator from Virginia.

executive driven, reactive way, without a clear or lasting strategic
-
vision that he shares with Congress or the American people. Such
an approach has some advantages: in theory, it’s a good way to
avoid blunders and unnecessary adventures. But its risks are even
greater. The country, and the world, needs a new, twenty first
-
-
century version of the Truman Doctrine: a sustained U.S. national
security strategy that is proactive rather than reactive and sets a
course for this administration and those that follow it. At a time

when countries such as Russia are attempting to subvert other
m
nations’ democratic institutions, the world needs a reinvigorated
campaign to peacefully and forcefully promote the virtues of
democracy over authoritarianism or extremism. The United States
hi
is best suited to lead that campaign, and failure to do so will hurt
both the United States and people around the world.
OPLANS BUT NO STRATEGY

ha
As a member of the Senate Armed Services Committee, I benefit
from constant dialogue with U.S. military leaders. Early in 2016, I
iT
was struck by something one of our most senior uniformed officers
told me. “We have oplans [operational plans] but no strategy,” he
said. He was right, and his complaint laid bare a key problem the
United States faces today. While operational plans are important—
Al
and the U.S. military creates them for virtually every contingency—
the country lacks an overall framework for looking at and leading in
today’s complicated world.
od
This thought occurred to me often during my 100 plus days on the

-
campaign trail last year. There was so much discussion of national
security topics, including the Islamic State (also known as isis), the
Zika virus, terrorism, China, Russia, North Korea, the Middle East,
so
and cyberthreats. Debates over the value of immigration, trade,

diplomacy—including our advances with Cuba and Iran—and insti
tutions such as nato and the United Nations dominated much of the
election. Yet each issue was treated as a one off, briefly discussed without
Ma
-
much context or connection. Beyond platitudes such as “America
first,” little attention was paid to overall strategy.
Although that problem is common during campaigns, it’s not the
way the United States and its allies have always done things. Seventy
years ago, in three famous speeches, leaders of the free world laid out
a markedly different approach.
July/August 2017 37

Tim Kaine
The first of these speeches was delivered by Winston Churchill in

March 1946. At U.S. President Harry Truman’s request, the former
(and future) British prime minister delivered a talk at Westminster
College in Fulton, Missouri. Churchill used his address to flatter
the United States as standing “at the pinnacle of world power” but
urged the country to match its primacy with “an awe inspiring
-
accountability to the future.” Warning Americans about the rise of a
militant Soviet bloc—lying behind the “Iron Curtain” he was the
first to describe—Churchill called for the creation of an “overall
m
strategic concept” to shape the U.S. and allied response. The core of
this mission, Churchill argued, should be an effort to shield the
world from war and tyranny.
hi
One year later, Truman sought to put these principles into practice.
With the governments of Greece and Turkey facing threats from
Soviet backed extremists, Truman went to Congress in March 1947.
ha
-
The United States was war weary and,
-
in the 1946 midterm elections, had
The United States should repudiated Truman and his party by
strive to reestablish its
iT
handing Republicans control of both
position as the world’s houses of Congress. But Truman didn’t
exemplary democracy. shrink from the task. In his speech, he
highlighted the dangers facing Athens
Al
and Ankara and pointed out that no

other country had the means to help them. And the cause was urgent.
As Truman declared, “It must be the policy of the United States to
od
support free peoples who are resisting attempted subjugation by

armed minorities or outside pressures. I believe that we must assist
free peoples to work out their own destinies in their own way.”
A few months later, in June 1947, U.S. Secretary of State George
so
Marshall gave the third key speech, in which he sought to give shape
to the emerging policy. In a commencement address at Harvard
University, Marshall, who had led U.S. forces during World War II,
proposed that the United States assist in the rebuilding of war torn
Ma
-
Europe. The plan—which Truman shrewdly recognized would be
more likely to win Congress’ favor if it was named after a war hero—
was designed to use economic aid to promote stability and reduce
Soviet influence in Europe and, later, Japan. Congress agreed, and the
United States soon began providing aid to Greece and Turkey, and
then to many of their neighbors, too.

m
hi
ha
Kaine at a rally in Sterling, Virginia, November 2012
iT
And so a grand strategy was born. For the next four decades, the
United States would be openly interventionist. It would strive to
reduce the threat of war, check Soviet communism, and promote
freedom—as defined by Western ideals of democracy. Washington
Al
would use international institutions as a first resort. But as the world’s

democratic superpower, the United States would act unilaterally
when necessary.
od
The fact that the Truman Doctrine lasted as long as it did does
not mean that it was perfect. Without it, the United States might
have avoided taking over France’s colonial fight in Southeast Asia—a
fight that became the Vietnam War. It might not have intervened
so
to help topple the democratically elected governments of Iran,

Guatemala, Congo, and Chile. It might not have attempted to
invade Cuba during the first months of the Kennedy administration.
Too often, in attempting to thwart real or perceived Soviet
Ma
influence, the United States threw its weight behind authoritarian

regimes—thus turning a doctrine meant to promote its best values
into one focused on checking its adversary. And as President
Dwight Eisenhower famously observed, the doctrine also led to an
overemphasis on militaristic solutions, thereby robbing the Treasury
of dollars that might have been better spent on domestic priorities.
July/August 2017 39
Tim Kaine
Yet for all of the doctrine’s flaws, at least the United States had a
strategy during these years—one that shaped its military posture,
its budget, its diplomacy, its humanitarian aid, its engagement with
international institutions, and even many of its great domestic social
programs. And by its own terms, that doctrine succeeded: the United
States dominated the second half of the twentieth century, and the
Soviet Union, unable to compete, eventually collapsed. When it did,
however, Washington suddenly found itself without an organizing
principle to animate its foreign policy—and so it reverted to the
m
pragmatic, case-by-case approach the country had pursued prior to
World War II.
Now, there is something to be said for careful pragmatism in
hi
international relations. The George H. W. Bush administration,

for example, demonstrated the virtues of this approach in 1990–91,
when it pushed Iraq out of Kuwait but then refrained from toppling
ha
Saddam Hussein. Nondoctrinal pragmatism also suits the American
psyche. Americans are a practical and concrete people: we tend to
be suspicious of theory and favor commonsense approaches to
iT
problem solving.
But there are also downsides to a case-by-case approach. It is too
often reactive. It doesn’t give allies, adversaries, or the U.S. public
any way to predict what the U.S. government will do. And it can lead
Al
to incoherence. During the 1990s, for example, the United States

intervened to stop genocide in the Balkans but refused to do the
same in Rwanda. Today many people assume that that difference was
od
based on a judgment that African lives mattered less than European

ones. That is a haunting thought.
After al Qaeda attacked the United States on September 11, 2001,
the George W. Bush administration tried to define a new American
so
mission: “the global war on terror.” In the years since, that mission has
led the country into a number of military conflicts: in Afghanistan,
Iraq, the tribal areas of Pakistan, Syria, North Africa, the Horn of
Africa, and the Arabian Peninsula.
Ma
Although terrorism remains a central—perhaps the central—

security challenge of our era, the idea that this problem could define
U.S. foreign policy had collapsed by the end of Bush’s second term.
Collective embarrassment over an Iraq war sold on the basis of a
nonexistent nuclear threat was part of the problem. But on a deeper
level, the military struggle against shadowy nonstate actors was

simply inadequate to fully describe or determine the many ways in

which the United States interacted with the world.
By the beginning of the Obama administration, the United States had
once again entered a murky and nondoctrinal phase in its international

relations. Since 2008, the country has
struggled to answer its hardest foreign
policy questions—Should it stay in Iraq
It seems unlikely that the
or Afghanistan? Intervene in Libya or Trump administration will
Syria? Pivot to Asia? Respond to Russia’s articulate a clear strategy
m
invasion of Ukraine? Negotiate new of its own.
treaties and trade deals?—without a
clearly articulated doctrine to help it.
hi
As the United States continues to wrestle with these and deeper
questions, other nations have had a hard time anticipating what it will
do and how it will deal with new crises. The recent presidential election
ha
only heightened those concerns.
I strongly supported Obama and generally agreed with his foreign
actions. By reviving the hunt for Osama bin Laden, he managed to
iT
eliminate the architect of the 9/11 attacks. He also reinvigorated
U.S. diplomacy by normalizing relations with Cuba, pursuing a
high stakes international nuclear deal with Iran, leading the Paris
-
negotiations on curbing greenhouse gas emissions, and helping end
Al
the civil war in Colombia. Obama’s general inclination to defend the

United States unilaterally even while participating in the rules based
-
order and seeking to promote democratic values through multilateral
od
coalitions was sound.

But Obama’s suspicion of grand strategy proved problematic. He
once said that his national security strategy was “don’t do stupid stuff ”
(although he used stronger language), and that quip revealed a lot
so
about his pragmatic and nonideological inclination. His desire to

avoid doing stupid stuff may have helped the country avoid some bad
decisions. But sometimes not doing stupid stuff became an excuse for
not doing stuff it was stupid not to do. I believe that the Obama
Ma
administration’s unwillingness to forcefully intervene early in the

Syrian civil war will come to haunt the United States in the future,
much as the Clinton administration’s failure to help avert the horror
in Rwanda haunts the United States today. And the lack of a clear
strategy led to a lackadaisical response to Russia’s cyberattacks and its
unprecedented interference in the 2016 election.
July/August 2017 41

Tim Kaine
At this point, it seems unlikely that the Trump administration will

articulate a clear strategy of its own. Trump touts the virtues of
unpredictability. His promises to put “America first” recall the country’s
isolationist bent in the years preceding World War II. And the deep
ideological divisions among his military, national security, and
diplomatic advisers make it likely that his administration will continue
to deal with challenges on a case by case basis.
-
-
This approach—oplans but no strategy—may help the country
avoid doing stupid stuff. But should Washington pursue it, it will miss
m
clear leadership opportunities and produce a lot of confusion abroad
at a time when the world still looks to the United States for leadership.
hi
THE TRIPOLAR WORLD
So how should the United States do things? Simply calling for the
creation of a new grand strategy is easy. The problem is that the
ha
modern world is significantly different from the world Churchill,
Truman, and Marshall confronted. Given how hyperdiffuse and
hyperconnected power has become, it’s worth asking whether it’s
iT
even possible to conceive of a comprehensive national security
strategy today.
I think it is. Before getting into the details, however, I must make one
other basic point. The Truman Doctrine was created by a Democratic
Al
president who was able to convince a Republican Congress to embrace

it. For a new national security strategy to succeed, it, too, will need
bipartisan support—since Congress, among its other prerogatives,
od
retains the exclusive power to declare war. That said, the strategy
itself must once again come from the president, to whom the Constitu
tion gives significant power to formulate and execute foreign policy.
Individual senators and representatives can help inform the process,
so
as can think tanks, academics, military leaders, diplomats, foreign

allies, journalists, and citizens. But today’s Congress—which has
been reluctant to vote on the war against isis, to ratify important
treaties, and to confirm ambassadors and other key diplomats (at least
Ma
under Obama), and which views trade deals and globally focused
institutions such as the Export Import Bank with suspicion—is
-
generally uninterested in acting to support U.S. global leadership.
Most other nations, furthermore, are used to strong executives and
expect the same from the U.S. president. So no lasting strategy will
ever catch hold absent a clear articulation by the commander in chief.

In trying to define a new grand strategy, a president should start

with the same question that Churchill, Truman, and Marshall asked
themselves in the late 1940s: What is the current arrangement of
power around the globe? Things are much more complicated today
than they were during the Cold War, when the world was dominated
by the competition between a U.S. led democratic capitalist bloc and
-
the Soviet dominated socialist bloc. Wealth has become far more
-
diffuse, and there is more parity among nations. At the close of World
War II, the United States enjoyed both economic and military
m
dominance. These days, although the United States stills boasts overall
primacy, it faces far more constraints, such as high debt levels, which
have created a powerful push to reduce spending on international aid,
hi
diplomacy, and the military. Such constraints narrow the United
States’ qualitative edge and limit its choices—if not always the rhetoric
coming out of Washington.ha
A second change from Truman’s day is the increase in inter
connectedness. Today, travel, communication, information sharing,
technology, immigration, and commerce draw nations together far
iT
more closely than ever before. And the post–World War II system of
international norms, rules, and institutions—a system the United
States played a major role in building—draws countries closer together
still. This interconnectedness is generally a positive thing, but not
Al
entirely so. The tighter ties linking markets means that national
financial problems, such as the Greek debt crisis, can have a much
bigger impact on other countries—including the United States—
od
than they would have had a few decades ago. Immigration brings
valuable flows of talent to the United States but also raises concerns
about security. More trade means more export related jobs, but it
-
also means fewer jobs in sectors where other nations’ lower costs give
so
them an advantage.
A third key difference between Truman’s era and our own is the
tremendous increase in the power of nonstate actors—from terrorist
groups to criminal syndicates to international nongovernmental
Ma
organizations to transnational businesses. Many of these forces are

benign, even beneficial. But the ability of nonstate actors to use
violence and evade laws and accountability is both pernicious and
destabilizing. The rise of these nonstate actors is undercutting the
Westphalian consensus, which dates back to the mid 1600s and was
-
based on the assumption that power, especially military power, was to
July/August 2017 43

Tim Kaine
be exercised by nation states—and only nation states—and within
-
-
generally accepted boundaries. Today’s world is not bipolar, as it was
during Truman’s day. It’s tripolar: power is now exercised by democratic
states, authoritarian states, and nonstate actors. A contemporary U.S.
security doctrine must operate in that framework and offer a guide for
action that treats each group distinctly.
Let’s start with democracies, which now come in many different
shapes and styles and exist all over the planet. U.S. policymakers
tend to spend most of their time focusing on trouble spots, and not
m
worrying much about democracies,
which they assume can take care of
Democracies everywhere themselves. But such complacency is
hi
are grappling with problematic. Democracies throughout
fundamental questions the West are currently struggling with
regarding immigration and anti Semitism and other forms of ugly
ha -
sectarianism. Europe’s democracies
national identity. have suffered an energy sapping fiscal
-
crisis, which the United Kingdom’s
iT
exit from the eu will make even more complicated. Countries
aspiring to greater democracy, such as Ukraine, are now threatened
by authoritarian neighbors, and others, such as Tunisia, are under
assault by terrorist groups. Finally, democracies everywhere are
Al
grappling with fundamental questions regarding immigration and

national identity, which often involve tough decisions about how to
balance security with individual liberty. All these tensions risk
od
making democracies more authoritarian, as their anxious leaders

curtail individual freedoms in their desperate attempts to hold
things together.
Any new U.S. national security strategy should therefore start by
so
looking for cooperative, not coercive, ways to shore up the world’s

existing democracies. The United States can do this best by making
the best use of its own example and showing how its democratic
institutions promote prosperity, peace, and happiness. The better the
Ma
United States does, the more its example will inspire other democracies
to keep improving.
Authoritarian states represent today’s second major global power
base. Like modern democracies, contemporary authoritarian states
differ substantially from one another. And just as some democracies
are starting to betray authoritarian tendencies, so some authoritarian

nations have begun to democratize in certain spheres—by increasing

participation in local governments, for example, as Vietnam has done.
The United States should skillfully challenge such states in the
hopes that they will increase their commitment to democratic values,
as well as their commitment to peaceful relations with other nations
and their integration into global institutions. Challenging authoritarian
nations requires different tactics depending on the issue. Some
times the United States should cooperate, sometimes compete, and
sometimes confront. The United States’ current relationships with
m
China and Russia show how complex these interactions must be.
Washington cooperates with Beijing and Moscow in many areas, from
trade to climate change. That’s as it should be. Engagement deepens
hi
U.S. understanding of these regimes. It doesn’t guarantee success, but
refusing to engage usually guarantees failure.
Of course, sometimes cooperation with nations such as China and
ha
Russia isn’t the right approach. So the United States also competes
with them—by forming military and trade alliances with their nervous
neighbors, for example. And at other times, Washington must confront
iT
Beijing and Moscow: over human rights, for example, or China’s
construction of islands in the South China Sea, or Russia’s aggressive
behavior in eastern Ukraine and elsewhere.
The final type of power the United States faces today is the non
Al
state actor. Many such entities—companies and nongovernmental

organizations, for example—help build bridges between nations
and individuals. Such organizations should be supported. Those
od
that use violence to achieve their ends, however, must be fought

and defeated. This fight is the key area in which the United States
has cooperated, and should continue to cooperate, with authoritarian
states. All countries that agree that military force should be
so
exercised only by nation states—or international coalitions of na

-
tion states—and not by nonstate organizations must work together
-
to defeat violent extremists. Trump is therefore right when he ar
gues that the United States should work with Russia to defeat
Ma
groups such as isis. While there are many reasons to be skeptical

about Russian intentions in other areas, fighting terrorist organiza
tions has long been a key Russian priority, and there is no reason
not to work together toward that end.
Terrorists aren’t the only nonstate actors who use their peculiar
status to avoid accountability and legal restrictions. Speaking about
July/August 2017 45

Tim Kaine
ExxonMobil, Lee Raymond, then the company’s ceo, once famously

said, “I’m not a U.S. company, and I don’t make decisions based on
what’s good for the U.S.” On one level, corporations seeking to avoid
paying taxes seem quite different from transnational drug cartels. But
both types of groups now take advantage of the mobility of capital
and people in a roughly similar way. The United States must therefore
work with other nations to close the loopholes that allow organizations
to amass economic power while evading accountability to any national
legal system.
m
FROM INDISPENSABLE TO EXEMPLARY
As the United States builds a strategy for navigating today’s tripolar
hi
world, the first step should involve setting aside the idea that it is “the
indispensable nation.” This concept was largely a statement of fact
when Churchill and Truman promoted it in the 1940s. And it was
ha
arguably still a statement of fact when then U.S. Secretary of State
Madeleine Albright made it the 1990s. But it doesn’t accurately
describe the United States’ place in the world today. Other nations
iT
are growing in power. Growth is a positive development, and the
United States should find ways to accommodate it in a framework
designed to help both American citizens and people around the world.
Too often in the past, the idea of American exceptionalism has slid
Al
from justified pride in U.S. accomplishments into a belief that the

United States is exempt from the rules that everyone else must follow.
When the Soviet Union worked with Cuba to provide military support
od
to rebel groups in the Western Hemisphere from the 1950s through

the 1980s, Washington correctly perceived such behavior as a threat—
and responded accordingly. Why, then, did Washington fail to antic
ipate how Russia would see nato’s expansion into former Soviet
so
territory under Clinton and Bush? And why was Washington surprised
when China viewed Obama’s “pivot” to Asia as a threat and strength
ened its own military posture in response?
Washington’s fondness for opining about who should or should not
Ma
lead other nations also often proves counterproductive. In recent

years, at various times, the U.S. government publicly stated that
Saddam Hussein, Hosni Mubarak, Muammar al Qaddafi, and Bashar al
-
-
Assad had to go, and it went to war twice—once in Iraq, once in
Libya—to effect regime change. Trump’s missile strike against the
Syrian government may or may not be a precursor to another such

war. These statements and conflicts make it easy for authoritarian

nations to dismiss Washington’s just criticism of their policies by
arguing that the United States is only interested in overthrowing their
governments. The United States should condemn atrocities whenever
and wherever they are committed, and use appropriate tools—such
as sanctions, un Security Council resolutions, prosecution by the
International Criminal Court, or multilateral military action—to
punish breaches of global norms. But a United States justifiably
outraged at the efforts of Russian President Vladimir Putin to affect
m
the outcome of the 2016 U.S. presidential election has no right to
decide who should lead other countries.
Instead of proclaiming its own indispensability, the United States
hi
should strive to reestablish its position as the world’s exemplary
democracy. Doing so would be the best way to advance the needs of
American citizens and make the most persuasive case for the virtues
ha
of democracy over authoritarianism or extremism.
Those virtues are not as immediately obvious today as they were in
Truman’s era. Authoritarian governments such as Russia’s are using
iT
propaganda and active subversion to make it seem as though democ
racies cannot govern effectively. And too often, democratic govern
ments provide evidence to support this claim, by failing to stand up
for themselves or deal effectively with issues such as immigration and
Al
the promotion of human rights.

The good news is that if the United States decides to reinvest in
the power of its example, it will have an exemplary foundation to
od
work with. Ever since Thomas Jefferson put equality first on his list
of “self evident” truths in the Declaration of Independence, the
-
country has progressively expanded civic participation. The country
witnessed a number of remarkable firsts in just the last decade,
so
including its first minority president, its first Supreme Court justice
of Hispanic descent, and its first female presidential candidate
nominated by a major party. It extended the right to serve in all
positions in the U.S. military to anyone who meets the qualifications,
Ma
regardless of gender or sexual orientation. It expanded access to health

care to tens of millions of people of modest means, and it granted
marriage equality to lgbt citizens. Although the harsh rhetoric during
the recent election and the election result have threatened to undo
some of this progress, history has shown that such pushbacks never
erase all the gains made—and often provide new motivation for
July/August 2017 47

Tim Kaine
champions of equality to move society forward. Indeed, the recent

uptick in civic activism and peaceful protest shows that this dynamic
is already working.
There are so many other areas in which the U.S. example is strong.
Chief among them is the American culture of innovation and entre
preneurship, fostered by the rule of law, the protection of intellectual
property, strong institutions of higher education, a big supply of
immigrant talent, and a willingness to accept failure and allow second
chances. As China and India continue to grow, the United States may
m
not remain the world’s largest economy forever. But there is no reason
why it should stop being the world’s most innovative economy.
Of course, being the exemplary democracy also requires a will
hi
ingness to criticize oneself. The recent election should shake Americans
out of their complacency, awakening them to the country’s persistent
regional and racial gaps in economic success, abysmal record electing
ha
women to federal office, and shockingly low voter turnout rates (even
-
in high stakes presidential elections)—these all show how much work
-
remains to be done.
iT
Another key way to restore the United States’ status as the world’s
exemplary democracy is by supporting democracies around the
globe. Together with its allies, Washington should establish a new
global pro democracy initiative—one that is separate from military
Al
-
alliances such as nato—that will highlight and advance the virtues
and viability of democracy worldwide. Such an effort would look
like an expanded Organization for Economic Cooperation and
od
Development or Community of Democracies. It would have a global

reach—emphasizing the success of democracies on all continents
and not just in North America and Europe. It would focus on sharing
best practices for improving the effectiveness of democratic insti
so
tutions. Democracy today needs a champion. If the United States

refuses to play that role, the strength of the democratic model will
likely diminish.
Ma
LEVERS OF INFLUENCE
The primary goal of the U.S. military is to protect the country.
Succeeding in that mission requires both capacity and determination.
The U.S. military’s capacity—the skill of its troops and the sophis
tication of its weaponry—remains superb. But the dysfunction in
Congress imperils that advantage, not just by making it harder to

continue to invest in troops and weapons but also by making the

government’s investments less predictable. Legislative gimmicks,
such as budget sequestration, continuing resolutions, and overseas con
tingency operations, are all part of the problem, and Congress should
abandon them.
Equally problematic is the government’s lack of determination.
Russia’s interference in the 2016 presidential election succeeded only
because Moscow was not afraid to try. Washington’s failure to articulate
a clear deterrence strategy in the realm of cyberspace and its dithering
m
over what to do once it learned that the United States was under
attack will go down as low points in the country’s national security
history. To protect itself in the future, the United States must always
hi
send a clear message to those who mean Americans harm: don’t mess
with us. And Washington must back that message up by always
defending the country, the American people, and U.S. institutions
ha
with swift, visible, and overwhelming force. Failure to do so emboldens
U.S. enemies and undermines American allies’ confidence that
Washington will come to their aid when needed.
iT
A second major role for the U.S. military—and one that is growing
in importance today—is to serve as the security partner of choice for
other countries trying to protect themselves. U.S. efforts to help train
foreign militaries, through programs both abroad and in the United
Al
States, consume a small fraction of the country’s overall defense

budget. But using U.S. resources to build the defense capacity of
other nations, while reinforcing respect for norms such as civilian
od
control of the military and the unacceptability of torture, is one of the

best investments the United States can make. The United States may
no longer have the resources or the will to be the world’s protector,
but it is still the best builder of smart military capacity, and it should
so
hold on to that position and focus its efforts on democracies.

Another way the United States has historically amplified its
influence is by acting as a rule builder, not an empire builder. The
Trump administration now seems intent on abandoning that tradition,
Ma
even though Americans and everyone else have benefited greatly from
the hard work Washington has done to help craft international
standards over the last seven decades. While the president has raised
some important questions about the United Nations, nato, and various
trade deals, and while such institutions must be reexamined and
reinvigorated over time, it would be foolish to abandon them or cede
July/August 2017 49

Tim Kaine
the United States’ leadership role. The battle against international

threats such as isis requires coordination among states. Undermining
the international forums designed to promote such coordination
would make the United States weaker, not stronger.
As for trade, rapid advances in transportation and communication
technologies guarantee that it will accelerate in the years ahead. Most
new demand for goods and services
There is no reason why the will come from outside the United
States. The United States wants access
m
United States should stop to those markets. Why, then, should it
being the world’s most not continue to help draft the kind of
innovative economy. rules that would guarantee that access?
hi
Trump is right that a bad trade deal is
worse than no deal. Washington’s fail
ure to robustly enforce the rules of existing deals and its inadequate
ha
commitment to helping American workers whose lives have been dis
rupted by globalization and automation have soured the public on
international agreements. But the answer to this problem is to craft
iT
new and better rules—not abandon trade deals altogether, or let oth
ers rewrite them.
Another key role the United States must preserve is that of humani
tarian leader. When crises occur around the world—whether a tsunami
Al
in the Pacific or an Ebola outbreak in Africa—people turn to the

United States for help. That impulse can seem like a burden, but it
should also be a tremendous source of pride: it shows that people
od
around the world know that not only does the United States have the
capacity to help; it also has the instinct.
This work goes way beyond what the State Department, the
Pentagon, the U.S. Agency for International Development, and other
so
government agencies provide. Americans have also helped drive the

growth of nongovernmental organizations around the world. And
increasing numbers of American corporations have begun to provide
humanitarian assistance in order to make a good impression in new
Ma
markets. Yet Washington’s role remains essential. The U.S. government

currently spends less than one percent of its annual budget on foreign
aid, yet the return on this investment—in terms of security and
goodwill—is enormous. Carrying out the administration’s intention
to slash funding for diplomacy and foreign aid, announced in its 2018
budget blueprint, would therefore be a huge mistake.

Finally, as the United States seeks to define a new grand strategy

for the twenty first century, it needs to correct one long term trend.
-
-
Since the country’s earliest days, its policymakers have tended to
think in East West terms. We have focused most of our attention on
-
Europe, Japan, the Soviet Union, the Middle East, China, Southeast
Asia, and Russia, while neglecting the global South. We have seldom
paid enough attention to the Americas, in particular, and when
we have—whether through the Monroe Doctrine or by battling
communist movements during the Cold War—we have focused more
m
on blocking outsiders from building influence in the Western
Hemisphere than we have on the nations already there.
That must change. The United States needs an “all Americas”
hi
national security policy that places primacy on North, Central, and
South America. It should not be an “Americas only” policy, one
that limits the United States’ involvement with democracies
ha
elsewhere. But the United States should shift its focus. The 35 nations
that make up the Americas share significant cultural similarities
and boast a combined population of more than one billion. Thanks
iT
to the cease fire that Washington helped broker in Colombia, for
-
the first time in recorded history, there are now no wars being
fought in the hemisphere. The region is also home to two of the
United States’ top three trading partners, Canada and Mexico, and
Al
the United States’ commercial ties to these and other countries in

the Americas will continue to be critical to the U.S. economy.
Meanwhile, the move toward the normalization of U.S. relations
od
with Cuba has removed a perennial obstacle to improved relations

with other parts of Latin America.
Despite the progress, Americans must remember that the problems
still faced by various countries in the region—from poverty to
so
violence to drugs to political instability—can and do directly affect

the United States. Historically, the U.S. government has looked
south only during crises and then, once the problems have been
addressed, quickly shifted its attention back to Europe or Asia. The
Ma
United States’ top diplomats spend little time in the hemisphere,

and Washington devotes few resources to the U.S. military’s
Southern Command. Other countries have noticed this lack of
focus and taken advantage of it. As one South American president
told me recently, “We prefer dealing with America and American
companies because of our close ties—language, culture, history,
July/August 2017 51

Tim Kaine
immigration. But you are largely absent from the region, while
China is very present. And so we work more with them.”
Increasing U.S. engagement with the Americas would have major
upsides. It would help the United States compete with the huge
Chinese and Indian economies. Building new bridges through coop
eration on commerce, education, defense, and intelligence would
increase U.S. security. And such efforts would carry little risk if
undertaken respectfully. Many of the problems the United States is
currently experiencing in its relations with China and Russia come
m
from their concern over U.S. activities in their backyards. Increasing
the United States’ focus on the Americas would not raise similar
suspicions. Given the budget constraints that have made it difficult
hi
to project power globally, moreover, Washington should consider
how much more it could do by increasing investment closer to home.
ha
GREATNESS THROUGH GOODNESS
The seeds of the United States’ remarkable dominance in the twentieth
century were first planted in the late 1860s, when the elimination of
iT
slavery and the reunification of the nation after the Civil War allowed
the country to start looking outward. By 1890, the U.S. economy had
become the world’s largest. Under President Theodore Roosevelt, the
U.S. military became much more powerful, and under President
Al
Woodrow Wilson, the country intervened to end a pointless and

destructive world war and thus established itself as the most promising
broker of international peace and stability. Barely two decades later,
od
the United States played the decisive role in the defeat of German
and Japanese fascism. It then helped construct a postwar architecture
of rules, norms, and institutions that has benefited people all over the
world. And it led a coalition of nations in successfully resisting the
so
Soviet bloc.
This history helps explain why, despite all the mistakes made and
the envy American dominance inspires, so many nations still want the
United States to exert global leadership. I hear this regularly when I
Ma
travel around the world and interact with foreign leaders. They know
that, although the United States must always put its own interests
first, the country’s unique combination of resources and principles
makes it the best source of humane solutions to humankind’s most
pressing problems. This desire for U.S. engagement remains the most
important measure of American power.

On August 10, 2010, the USS John S. McCain, a guided missile
-
destroyer, docked in Da Nang harbor, in Vietnam, to commemorate
the 15th anniversary of the normalization of relations between
Washington and Hanoi. It was a momentous and emotional moment,
in which the Vietnamese military command welcomed an American
warship named after the father and grandfather of my fellow senator
John McCain—a former naval aviator who had been held prisoner in
the country for more than five years. The Vietnam War killed some
60,000 Americans and between 1.5 million and three million
m
Vietnamese. Yet now Hanoi wanted an even deeper military and
economic partnership with its former adversary, because it knew
that this was the best way to improve its citizens’ security and quality
hi
of life.
Today—in the aftermath of one of the most bitter elections in
recent U.S. history—is a good time for Americans to remember that
ha
story and remind themselves just how much influence the United
States still possesses around the world. The key question the country
now faces is what to do with it. It can continue along a reactive path
iT
and even reduce its commitments to its allies and the international
institutions it helped create. Or it can start articulating a broad new
strategy for reengaging with the world as its leading democracy.
Americans should recognize their country’s unique strengths without
Al
indulging in either paranoia or unnecessary self congratulation. That

-
is what Truman and the U.S. Congress did 70 years ago, at a moment
when bipartisan cooperation seemed unlikely. There is no excuse for
od
failing to live up to the challenge today.∂

so
Ma
July/August 2017 53

Why Globalization Stalled

And How to Restart It
Fred Hu and Michael Spence
m
F
or many decades after World War II, a broad range of countries
shared a fundamental economic vision. They endorsed an
hi
increasingly open system for trade in goods and services, sup
ported by international institutions; allowed capital, corporations, and,
to a lesser extent, people to flow freely across borders; and encouraged
ha

the rapid spread of data and technology. As trade expanded, global
living standards improved dramatically, and hundreds of millions of
people escaped from poverty.
iT
Today, every aspect of this globalized economy is under assault. A
popular backlash against free trade and unrestricted cross border
-
movements of capital has picked up momentum. The ideal of freely
flowing information has clashed with growing calls for privacy rights,
Al
the protection of intellectual property, and increased cybersecurity.

Across the developed world, sentiments have turned strongly against
immigration, especially as waves of Middle Eastern refugees have
od
flooded Europe. And after several successful rounds of multilateral

trade negotiations in the postwar years, new agreements have become
much rarer: the World Trade Organization (wto) has not completed
a single full round of successful negotiations since its creation in 1995.
so
Last June, the United Kingdom voted to leave the eu, sparking the
worst political crisis in the union’s history. Meanwhile, in the United
States, President Donald Trump has vowed to put “America first.”
In his first week in office, Trump withdrew from the Trans Pacific
Ma
-
Partnership (tpp), the 12 nation free trade deal orchestrated by Trump’s
-
-
predecessor, and he has pledged to renegotiate the North American
FRED HU is Founder and Chair of Primavera Capital Group.
MICHAEL SPENCE is William R. Berkley Professor in Economics and Business at New
York University’s Leonard N. Stern School of Business. He received the Nobel Prize in
Economics in 2001.

Free Trade Agreement, which he has called “the worst trade deal
maybe ever signed anywhere, but certainly ever signed in this country.”
The Transatlantic Trade and Investment Partnership, a deal currently
being negotiated by the United States and the eu, also faces an
uncertain future, bogged down in strong opposition on both sides of
the Atlantic.
As the United States loses interest in nurturing the international
order that it played the lead role in building, the future of globalization
will depend in large part on China. So far, Beijing appears committed
m
to preserving an open global system. But for now, China will struggle
to replace the United States as the sponsor of an open, multilateral
order. In an era of rapid and disruptive technological change, politicians
hi
and policymakers all over the world will need to push for reforms that
can preserve the achievements of globalization—and fix its flaws—
before it’s too late. ha
PITCHFORK POLITICS
Over the past seven decades, and especially since the end of the Cold
iT
War, globalization has accelerated steadily. For much of this period,
most countries accepted the open global trading system. But govern
ments often erected barriers to manage the pace of change. Developing
countries, for instance, frequently delayed opening certain sectors of
Al
their economies to foreign trade to protect so called infant industries,

-
and they imposed capital controls to avoid destabilizing their financial
systems. Although developed countries generally accepted the costs
od
of the open economic system, they, too, sometimes intervened to reduce

the disruption caused by trade. In a largely unsuccessful attempt to
help the domestic auto industry, for instance, the Reagan administration
imposed restrictions on car imports and pushed Japanese automakers
so
to build plants in the United States.

In the past two decades, however, developed countries have
failed to mitigate the negative side effects of international trade
and rapid technological change. Western publics have blamed free
Ma
trade for the decline in manufacturing jobs and for widening income
inequality, and anti trade sentiments in middle America helped
-
catapult Trump into the White House. Among the traditional cham
pions of globalization—the United States, the United Kingdom,
and continental Europe—support for economic openness has declined
precipitously. In November 2016, a YouGov/Economist poll found
July/August 2017 55

that less than half of Americans, Britons, and French believed that
globalization was a “force for good.”
Such attitudes are hardly limited to the grass roots; antiglobalists
have come to power or have grown closer to achieving it. And they are
finding common cause: on the day after the United Kingdom voted
for Brexit, Steve Bannon, now Trump’s chief strategist, invited Nigel
Farage, then the leader of the uk Independence Party, onto his radio
show. “The European Union project has failed,” Farage announced.
“It is doomed, I’m pleased to say.” “It’s a great accomplishment,”
m
Bannon said. “Congratulations.” Ahead of France’s recent presidential
election, Trump expressed support for the National Front leader
Marine Le Pen and her protectionist agenda.
hi
Although Trump’s unorthodox tenure in Washington has dominated
headlines, in Europe, too, the globalized economy is facing intense
challenges. The United Kingdom, home to Europe’s most important
ha capital market, is about to exit the eu;
Brexit represents a victory the terms remain unclear, but there is
no question that Brexit represents a
for antiglobalization,
iT
victory for antiglobalization, nativism,
nativism, and nationalism. and nationalism. Meanwhile, much of
the rest of Europe is plagued by low
growth and high unemployment, factors that, alongside the refugee
Al
crisis, have fueled support for populist parties across the continent.
Europe is trapped in a failing economic system that has too few
adjustment mechanisms. Growth and inflation remain too low to
od
reduce high unemployment and debt levels, and debt restructuring

would be almost impossible without breaking up the eurozone. The
euro’s exchange rates with other major currencies are too low for
Germany and some other countries in the north, driving up their
so
trade surpluses, but too high for those in the south, which remain far
less competitive.
In the current political environment, as nationalism rises across the
continent, sensible economic reforms, such as increased fiscal inte
Ma
gration, are unlikely to gain traction. But the British vote to leave the
eu and Trump’s election might serve as a wake up call for European
-
elites, triggering real reform. Nonetheless, with a new and inexperi
enced president in France and with elections looming in Denmark,
Germany, and Italy, Europe will remain preoccupied with its internal
political and economic challenges for the foreseeable future.

m
hi
ha
Protectionist in chief: Trump at a factory in Indianapolis, Indiana, December 2016
iT
Multilateral institutions that have played a key role in the post–
World War II order will also struggle to provide global leadership.
Institutions such as the International Monetary Fund and the World
Al
Bank have had trouble adapting to the rise of the emerging economies:
the United States and Europe still dominate them, eroding their
credibility and influence among developing countries, especially in
od
Asia. Yet neither the United States under Trump nor the eu, which
has been embroiled in a conflict with the imf over Greece’s debt, is
likely to invest many resources in these organizations in the coming
years. As the multilateral institutions are marginalized, the global
so
economic system will become more vulnerable to local and systemic

financial crises.
Meanwhile, the early optimism about the Internet and the free flow
of information, another central element of globalization, has faded.
Ma
The disclosures by the National Security Agency leaker Edward

MIKE SEGAR / REUTERS
Snowden regarding U.S. surveillance programs, Russia’s alleged cyber

attacks during the U.S. presidential election, the rise of “fake news,”
and terrorist organizations’ use of digital communications to recruit
followers and plan attacks have made clear that information technology
can subvert the globalized liberal economic order as well as support it.
July/August 2017 57
The Internet faces a much more complicated, regulated, and frag

mented future than the one imagined by many in the 1990s. In China,
stringent regulations have built a sort of digital Great Wall that par
tially seals off Chinese Internet users from the rest of the world, and
the eu has taken strong positions on privacy, attempting to constrain
the practices of some Web based platforms created by Facebook and
-
Google through legal action. In the next few years, other governments
are also likely to restrict the free flow of information, data, and knowl
edge in the name of security.
m
WHERE IT ALL WENT WRONG
Many of the global economy’s current challenges have their roots in
hi
the years around the turn of the millennium. In 1999, the euro was
launched, setting the stage for Europe’s recent economic woes. Nearly
three years later, in December 2001, China joined the wto, opening
ha
its domestic markets to imports and gaining full access to the global
economy. Meanwhile, the economic impact of automation and digital
technology began to accelerate.
iT
In the United States, manufacturing jobs had been declining for
two decades, but they dropped sharply in the early years of this
century: between 2000 and the present, the number of U.S. manu
facturing jobs fell by between six million and seven million. As the
Al
number of jobs in the so called tradable sector, which produces

-
goods and services that can be consumed anywhere, barely grew,
the nontradable sector absorbed around 25 million new entrants to
od
the job market, in addition to the displaced manufacturing workers.

It was a buyer’s market for medium and low skilled labor, and as a
-
-
result, wages stagnated.
For many years, automation has been eliminating blue collar jobs
so
-
and some lower paying white collar jobs. But recent breakthroughs
-
-
in sensors, machine learning, and artificial intelligence have left
even more jobs vulnerable. In almost every developed economy,
middle income jobs are decreasing while lower and higher paying
Ma
-
-
-
jobs are increasing.
Countries have responded in different ways. Some have acted to
reduce inequality by redistributing wealth through the tax system,
expanding social security programs and other safety nets, and increasing
support for education and job training. These efforts have proved
successful in countries such as Denmark, Germany, and Sweden, where

organized labor wields strong bargaining power, businesses and

unions trust each other, individual and corporate wealth have limited
influence on politics, and egalitarian cultural norms prevail. In all
three of these countries, inequality remains below the average for
the Organization for Economic Cooperation and Development, a
group of mostly rich countries.
But in countries where these factors are absent—especially the
United Kingdom and the United States—disparities of income,
wealth, and opportunity have widened dramatically. The absence of
m
a meaningful policy response, and the apparent lack of concern
among these countries’ elites, has aroused deep anger among those
who have lost out in the changes wreaked by globalization and
hi
technological progress.
The rejection of the old order was not immediate. For a while,
people believed that their economic woes were a temporary result of
ha
the global financial crisis of 2008. But over time, they began to suspect
that disappearing jobs and stagnant wages had become lasting features
of the economic landscape. They turned against the elites they held
iT
responsible, including business leaders, academics, and the political
establishment. And as they watched powerful economic and tech
nological forces buffet their countries—forces over which policymakers
at the national level appeared to exert little control—they sought to
Al
regain ownership of their destiny and reassert national sovereignty.

This has played out most dramatically in Europe, where real and per
ceived erosions of sovereignty, above all concerning immigration,
od
played a major role in the British vote to leave the eu. Even privileged
citizens who had thrived in an open global system voted for Brexit,
believing that doing so would allow them to take greater control over
their lives.
so
GLOBALIZATION WITH CHINESE CHARACTERISTICS

As the United States and Europe turn inward, much of the respon
sibility for maintaining a globalized liberal economic order will fall
Ma
to China. In his address at the World Economic Forum, in Davos,

in January, President Xi Jinping reaffirmed China’s commitment to
globalization. By sponsoring numerous economic initiatives, includ
ing the Asian Infrastructure Investment Bank (aiib), the Belt and
Road Initiative, and the New Development Bank (formerly known as
the brics Development Bank), and by making substantial overseas
July/August 2017 59

investments, Beijing has signaled that it intends to support an inclu-

sive, multilateral form of globalization.
As the world’s second-largest economy, China will undoubtedly
help shape the future of the global economy. But for now, it remains
unclear whether China can replace the United States as the primary
champion of globalization. China is in the middle of a challenging
domestic structural shift, as it transi

The early optimism about tions from an economy led by exports
and investment to one based more on
m
the Internet and the consumption and services, and its econ

free flow of information omy faces strong headwinds, including
has faded. excess capacity and high corporate
hi
debt. Should the United States with

draw from its leadership role, China
would not be able to supply the world economy with a large and ac-
ha
cessible market for other countries’ exports, deep capital markets, or
the kind of strong institutions, such as the Federal Reserve and the
imf, that have allowed Washington to stabilize the global financial
iT
system for decades. And China has recently tightened its capital con-
trols in an effort to stem capital flight—backtracking, at least for
now, from its attempts to internationalize the renminbi.
Still, Beijing’s support for multilateral structures represents an im
Al

portant step forward. A world based on bilateral relationships might
work for the most powerful countries, but multilateralism has built a
big tent in which the smaller, poorer countries can participate and
od
prosper. They will suffer if they have to fend for themselves. China’s
embrace of multilateralism has already enhanced its stature among
countries with smaller economies. Despite strong opposition from
Washington, 57 countries joined the Chinese-led aiib, many of them
so
long-standing U.S. allies, such as Australia, France, Germany, Israel,

Saudi Arabia, South Korea, and the United Kingdom. In the first
quarter of 2017, another 13 countries agreed to join, including
Afghanistan, Belgium, Canada, Hungary, Ireland, and Peru.
Ma
But if Washington retreats into bilateralism and Beijing wants to

fill the void, the Chinese economy must keep growing and other
emerging economies must increase their access to the Chinese market.
Among the members of the aborted tpp, the vast majority, including
Australia, Japan, and South Korea, already depend on exports to
China, by far their largest trading partner, as do emerging economies

all over the world. But if the United States turns toward protectionism,
the $12 trillion Chinese economy is still not large enough to support
global growth alone.
The new U.S. administration has blamed trade deals for manu
facturing job losses and trade deficits and has threatened to impose
sanctions on some of the United States’ top trading partners, such
as China, Germany, Japan, and Mexico. In the short run, the U.S.
government may introduce targeted hikes in tariffs on, for instance,
steel imports, as well as aggressive antidumping penalties and
m
broader trade restrictions justified by the alleged currency manipu
lations of China, Germany, and Japan. The Trump administration
may also try to browbeat companies, urging them to set up factories
hi
in the United States. So far, aside from tearing up the hard won
-
tpp agreement and sharply criticizing trade deals and trading partners
alike, Trump has refrained from launching more aggressive actions.
ha
But if his domestic agenda runs aground, a frustrated Trump admin
istration could turn toward more strongly protectionist policies
and, in the worst case outcome, ignite full scale trade wars with
-
-
iT
other countries.
But there is a more optimistic scenario. Tax reform, public invest
ment in infrastructure, and deregulation—all goals of the new
administration—could stimulate private investment and boost U.S.
Al
growth and, with it, global growth. But to achieve this outcome,
Trump must avoid becoming bogged down in unnecessary and
divisive fights with the media and the courts and must firm up
od
congressional support in his own party. In the meantime, policy

makers and businesses in other countries should hope for the best
but prepare for the worst.
so
THE AGE OF AUTOMATION

For all the focus on globalization, in the long run, the most im
portant force shaping the labor market and income inequality will
be not trade or politics but technological change. Automation has
Ma
already transformed the economies of the developed world and the

nature of employment there, and almost all experts believe that
the scope for expanding automation is enormous. As costs fall and
the pace of innovation accelerates, the impact of automation will
spread to middle income countries and, eventually, to lower income
-
-
ones, as well.
July/August 2017 61

As capital intensive technology replaces labor intensive manufac
-
-
turing, early stage developing countries across Africa and Southeast
Asia will cease to enjoy the comparative advantage offered by lower
wages and production costs. Overall trade in goods will probably
decline as the price of labor no longer determines where goods are
produced, allowing production to move closer to consumers and
cutting the costs of transportation and logistics.
Of course, no one knows with certainty how quickly such changes
will occur, and every country should invest in education, technology,
m
and infrastructure so that it can anticipate them better. For now, trade
will continue to play a crucial role in allowing developing economies
to grow rapidly. Although trade in physical goods may decline,
hi
trade in services will probably rise, as more and more services can
be carried out remotely. As a result, developing countries should
seek to grow their service sectors, especially in the tradable sector.
ha
They should also invest in innovation hubs, which can help replace
lost manufacturing jobs.
As developing countries advance into middle income status,
-
iT
they can no longer offer cheap labor. Such places should follow
China’s lead by investing heavily in the high tech sector. Doing so
-
has helped China transition away from traditional manufacturing
and leapfrog over some of its competitors in a number of promising
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new industries, such as robotics, renewable energy, mobile messaging,

and e commerce.
-
As the history of technological change has demonstrated, technology
od
displaces only specific kinds of jobs; it does not displace labor, at least
not in the longer term. But in the short term, automation renders
certain kinds of human capital redundant. This can cause difficult
and sometimes lengthy transitions, both for individuals and for
so
whole economies. In the end, however, machines raise human pro

ductivity and increase incomes and prosperity. As the economists
Erik Brynjolfsson and Andrew McAfee have explained, economies
shift from creating jobs for which machines are substitutes to creating
Ma
those for which they are complements.

Smart investment in job training can accelerate and ease these
transitions. Policymakers should learn from the Nordic countries,
where governments have combined training programs with various
forms of income support and redistribution. Governments should not
offer training only to the unemployed. Displaced middle income
-

workers, who often end up in lower paying service jobs, can benefit
-
from retraining that will help them compete for higher wage work.
-
SAVING GLOBALIZATION
Predictions that the era of globalization will soon end are too pessi
mistic. To be sure, the rapid expansion of trade, rising cross border
-
capital flows, and, above all, the spread of new technologies have
transformed the global economy. They have created difficult chal
lenges, and countries will continue to struggle to increase growth
m
and productivity, while reducing inequality and creating good jobs.
But there are also enormous opportunities. Turning back the clock
to restore the old frameworks is impossible. The challenge is to
hi
build new ones that work.
Waving the banner of protectionism and nationalism may attract
popular support, at least temporarily. But history has shown that,
ha
ultimately, it may well threaten global peace and prosperity. The
United States, China, and the world at large would be far better off
if they could find a path to a more sustainable globalization, reforming
iT
the existing global order rather than tearing it down completely.∂
Al
od
so
Ma
July/August 2017 63

Course Correction
How to Stop China’s Maritime Advance
Ely Ratner
m
he South China Sea is fast becoming the world’s most impor
tant waterway. As the main corridor between the Indian and
Pacific Oceans, the sea carries one third of global maritime
hi -
trade, worth over $5 trillion, each year, $1.2 trillion of it going to or
from the United States. The sea’s large oil and gas reserves and its vast
fishing grounds, which produce 12 percent of the world’s annual catch,
ha
provide energy and food for Southeast Asia’s 620 million people.
But all is not well in the area. Six governments—in Brunei, China,
Malaysia, the Philippines, Taiwan, and Vietnam—have overlapping
iT
claims to hundreds of rocks and reefs that scatter the sea. Sovereignty
over these territories not only serves as a source of national pride; it
also confers hugely valuable rights to drill for oil, catch fish, and sail
warships in the surrounding waters. For decades, therefore, these
Al
countries have contested one another’s claims, occasionally even resort

ing to violence. No single government has managed to dominate the
area, and the United States has opted to remain neutral on the sover
od
eignty disputes. In recent years, however, China has begun to assert

its claims more vigorously and is now poised to seize control of the
sea. Should it succeed, it would deal a devastating blow to the United
States’ influence in the region, tilting the balance of power across Asia
so
in China’s favor.
Time is running out to stop China’s advance. With current U.S.
policy faltering, the Trump administration needs to take a firmer line.
It should supplement diplomacy with deterrence by warning China
Ma
that if the aggression continues, the United States will abandon its
neutrality and help countries in the region defend their claims. Wash
ington should make clear that it can live with an uneasy stalemate in
Asia—but not with Chinese hegemony.
ELY RATNER is Maurice R. Greenberg Senior Fellow in China Studies at the Council on
Foreign Relations. Follow him on Twitter @elyratner.

Course Correction
ON THE MARCH
China has asserted “indisputable sovereignty” over all the land features
in the South China Sea and claimed maritime rights over the waters
within its “nine dash line,” which snakes along the shores of the other
-
claimants and engulfs almost the entire sea. Although China has long
lacked the military power to enforce these claims, that is rapidly
changing. After the 2008 financial crisis, moreover, the West’s eco
nomic woes convinced Beijing that the time was ripe for China to flex
its muscles.
m
Since then, China has taken a series of actions to exert control over
the South China Sea. In 2009, Chinese ships harassed the U.S. ocean
surveillance ship Impeccable while it was conducting routine opera
hi
tions in the area. In 2011, Chinese patrol vessels cut the cables of a
Vietnamese ship exploring for oil and gas. In 2012, the Chinese navy
and coast guard seized and blockaded Scarborough Shoal, a contested
ha
reef in the Philippines’ exclusive economic zone. In 2013, China sent
an armed coast guard ship into Indonesian waters to demand the
return of a Chinese crew detained by the Indonesian authorities for
iT
illegally fishing around Indonesia’s Natuna Islands.
Then, in early 2014, China’s efforts to assert authority over the
South China Sea went from a trot to a gallop. Chinese ships began
massive dredging projects to reclaim land around seven reefs that
Al
China already controlled in the Spratly Islands, an archipelago in the

sea’s southern half. In an 18 month period, China reclaimed nearly
-
3,000 acres of land. (By contrast, over the preceding several decades,
od
Malaysia, the Philippines, Taiwan, and Vietnam had reclaimed a

combined total of less than 150 acres.) Despite assurances by Chinese
President Xi Jinping in September 2015 that China had “no intention
to militarize” the South China Sea, it has been rapidly transforming
so
its artificial islands into advanced military bases, replete with

airfields, runways, ports, and antiaircraft and antimissile systems. In
short order, China has laid the foundation for control of the South
China Sea.
Ma
Should China succeed in this endeavor, it will be poised to establish

a vast zone of influence off its southern coast, leaving other countries
in the region with little choice but to bend to its will. This would
hobble U.S. alliances and partnerships, threaten U.S. access to the
region’s markets and resources, and limit the United States’ ability to
project military power and political influence in Asia.
July/August 2017 65

Ely Ratner
MISSING: AMERICA
Despite the enormous stakes, the United States has failed to stop
China’s assertiveness in the South China Sea. For the most part,
Washington has believed that as China grew more powerful and en
gaged more with the world, it would naturally come to accept interna
tional rules and norms. For over a decade, the lodestar of U.S. policy
has been to mold China into what U.S. Deputy Secretary of State
Robert Zoellick described in 2005 as “a responsible stakeholder”—
which would uphold the international system or, at the least, cooper
m
ate with established powers to revise the global order. U.S.
policymakers argued that they could better address most global chal
lenges with Beijing on board.
hi
The United States complemented its plan to integrate China into
the prevailing system with efforts to reduce the odds of confrontation.
U.S. Secretary of State Hillary Clinton spoke of the need to “write a
ha
new answer to the question of what happens when an established
power and a rising power meet.” She was referring to the danger of
falling into “the Thucydides trap,” conflict between an existing power
iT
and an emerging one. As the Athenian historian wrote, “It was the
rise of Athens, and the fear that this inspired in Sparta, that made war
inevitable.” Wary of a similar outcome, U.S. policymakers looked for
ways to reduce tensions and avoid conflict whenever possible.
Al
This approach has had its successes. The Paris climate accord and
the Iran nuclear deal were both the direct result of bilateral efforts to
solve global problems together. Meanwhile, U.S. and Chinese officials
od
interacted frequently, reducing misperceptions and perhaps even

warding off major crises that could have led to outright conflict.
Applying this playbook to the South China Sea, the Obama admin
istration put diplomatic pressure on all the claimants to resolve
so
their disputes peacefully in accordance with international law. To

deter China from using force, the United States augmented its
military presence in the region while deepening its alliances and
partnerships as part of a larger “rebalance” to Asia. And although
Ma
Beijing rarely saw it this way, the United States took care not to
pick sides in the sovereignty disputes, for example, sending its ships
to conduct freedom of navigation operations in waters claimed by
-
-
multiple countries, not just by China.
Although this strategy helped the United States avoid major crises,
it did not arrest China’s march in the South China Sea. In 2015,

Course Correction
m
hi
ha
Troublemaker: a Chinese ship harassing a U.S. one in the South China Sea, March 2009
repeating a view that U.S. officials have conveyed for well over a
iT
decade, U.S. President Barack Obama said in a joint press conference
with Xi, “The United States welcomes the rise of a China that is
peaceful, stable, prosperous, and a responsible player in global affairs.”
Yet Washington never made clear what it would do if Beijing failed to
Al
live up to that standard—as it often has in recent years. The United

States’ desire to avoid conflict meant that nearly every time China
acted assertively or defied international law in the South China Sea,
od
Washington instinctively took steps to reduce tensions, thereby allowing

China to make incremental gains.
This would be a sound strategy if avoiding war were the only
challenge posed by China’s rise. But it is not. U.S. military power
so
and alliances continue to deter China from initiating a major military

confrontation with the United States, but they have not constrained
China’s creeping sphere of influence. Instead, U.S. risk aversion has
allowed China to reach the brink of total control over the South
Ma
China Sea.
U.S. policymakers should recognize that China’s behavior in the
sea is based on its perception of how the United States will respond.
The lack of U.S. resistance has led Beijing to conclude that the United
U . S . N AV Y
States will not compromise its relationship with China over the South
China Sea. As a result, the biggest threat to the United States today
July/August 2017 67
Ely Ratner
in Asia is Chinese hegemony, not great power war. U.S. regional leader
-
ship is much more likely to go out with a whimper than with a bang.
THE FINAL SPRINT

The good news is that although China has made huge strides toward
full control of the South China Sea, it is not there yet. To complete its
takeover, it will need to reclaim more land, particularly at Scarbor
ough Shoal, in the eastern part of the sea, where it currently lacks a
base of operations. Then, it will need to develop the ability to deny
m
foreign militaries access to the sea and the airspace above it, by
deploying a range of advanced military equipment to its bases—fighter
aircraft, antiship cruise missiles, long range air defenses, and more.
hi
-
The United States has previously sought to prevent China from
taking such steps. In recent years, Washington has encouraged
Beijing and the other claimants to adopt a policy of “three halts”: no
ha
further land reclamation, no new infrastructure, and no militarization
of existing facilities. But it never explained the consequences of
defying these requests. On several occasions, the United States,
iT
along with the Association of Southeast Asian Nations (asean), the
G 7, and the eu, criticized China’s moves. But each time, Beijing
-
largely ignored the condemnation, and other countries did not press
the issue for long.
Al
Consider Beijing’s reaction to the landmark decision handed down

in July 2016 by an international tribunal constituted under the un
Convention on the Law of the Sea, which ruled that most of China’s
od
claims in the South China Sea were illegal under international law.
The United States and other countries called on China to abide by the
decision but took no steps to enforce it. So China simply shrugged it
off and continued to militarize the islands and police the waters
so
around them. Although the United States has continued to make sig
nificant shows of force in the region through military exercises and
patrols, it has never made clear to China what these are meant to
signal. U.S. officials have often considered them “demonstrations of
Ma
resolve.” But they never explained what, exactly, the United States
was resolved to do. With that question unanswered, the Chinese leader
ship has had little reason to reverse course.
For the same reason, U.S. President Donald Trump’s idea of reviving
President Ronald Reagan’s strategy of “peace through strength” by
beefing up the U.S. military will not hold China back on its own. The

Course Correction
problem has never been that China does not respect U.S. military
might. On the contrary, it fears that it would suffer badly in a war
with the United States. But China also believes that the United States
will impose only small costs for misdeeds that stop short of outright
aggression. No matter how many more warships, fighter jets, and
nuclear weapons the United States builds, that calculus will not change.
DARE TO ACT
In order to alter China’s incentives, the United States should issue a
m
clear warning: that if China continues to construct artificial islands or
stations powerful military assets, such as long range missiles or combat
-
aircraft, on those it has already built, the United States will funda
hi
mentally change its policy toward the South China Sea. Shedding its
position of neutrality, Washington would stop calling for restraint and
instead increase its efforts to help the region’s countries defend
ha
themselves against Chinese coercion.
In this scenario, the United States would work with the other coun
tries with claims in the sea to reclaim land around their occupied territo
iT
ries and to fortify their bases. It would also conduct joint exercises with
their militaries and sell them the type of weapons that are known to
military specialists as “counterintervention” capabilities, to give them
affordable tools to deter Chinese military coercion in and around the
Al
area. These weapons should include surveillance drones, sea mines, land -
based antiship missiles, fast attack missile boats, and mobile air defenses.
-
A program like this would make China’s efforts to dominate the sea
od
and the airspace above it considerably riskier for Beijing. The United
States would not aim to amass enough collective firepower to defeat
the People’s Liberation Army, or even to control large swaths of the
sea; instead, the goal would be for partners in the region to have the
so
ability to deny China access to important waterways, nearby coast

lines, and maritime chokepoints.
The United States should turn to allies and partners that already
have close security ties in Southeast Asia for help. Japan could
Ma
prove especially valuable, since it already sees China as a threat,

works closely with several countries around the South China Sea, and
is currently developing its own defenses against Chinese encroach
ment on its outer islands in the East China Sea. Australia, meanwhile,
enjoys closer relations with Indonesia and Malaysia than does the
United States, as does India with Vietnam—ties that would allow
July/August 2017 69

Ely Ratner
Australia and India to give these countries significantly more military

heft than Washington could provide on its own.
Should Beijing refuse to change course, Washington should also
negotiate new agreements with countries in the region to allow U.S.
and other friendly forces to visit or, in some cases, be permanently
stationed on their bases in the South China Sea. It should consider
seeking access to Itu Aba Island (occupied by Taiwan), Thitu Island
(occupied by the Philippines), and Spratly Island (occupied by
Vietnam)—members of the Spratly Islands archipelago and the first ,
m
-
second , and fourth largest naturally occurring islands in the sea,
-
-
respectively. In addition to making it easier for the United States and
its partners to train together, having forces on these islands would
hi
create new tripwires for China, increasing the risks associated with
military coercion.
This new deterrent would present Beijing with a stark choice: on
ha
the one hand, it can further militarize the South China Sea and face
off against countries with increasingly advanced bases and militaries,
backed by U.S. power, or, on the other hand, it can stop militarizing the
iT
islands, abandon plans for further land reclamation, and start working
seriously to find a diplomatic solution.
KEEPING THE PEACE

Al
For this strategy to succeed, countries in the region will need to invest
in stronger militaries and work more closely with the United States.
Fortunately, this is already happening. Vietnam has purchased an
od
expensive submarine fleet from Russia to deter China; Taiwan recently

announced plans to build its own. Indonesia has stepped up military
exercises near its resource rich Natuna Islands. And despite President
-
Rodrigo Duterte’s hostile rhetoric, the Philippines has not canceled
so
plans to eventually allow the United States to station more warships

and planes at Philippine ports and airfields along the eastern edge of
the South China Sea.
But significant barriers remain. Many countries in the region fear
Ma
that China will retaliate with economic penalties if they partner with
the United States. In the wake of Trump’s withdrawal from the Trans
-
Pacific Partnership trade agreement, Southeast Asian countries are
increasingly convinced that it is inevitable that China will dominate
the economic order in the region, even as many are concerned by that
prospect. This growing perception will make countries in the region

Course Correction
reluctant to enter into new military activities with the United

States for fear of Chinese retribution. The only way for Washington
to prevent this dangerous trend is to offer a viable alternative to
economic dependence on China. That could mean reviving a version
of the tpp or proposing a new and equally ambitious initiative on
regional trade and investment. The United States cannot beat
something with nothing.
Washington should also do more to shape the domestic politics of
countries with claims in the South China Sea by publicly disseminating
m
more information about China’s activities in the sea. Journalists and
defense specialists currently have to
rely on sporadic and incomplete com
Beijing will not compromise
hi
mercial satellite images to understand
China’s actions. The U.S. government as long as it finds itself
should supplement these with regular pushing on an open door.
ha
reports and images of China’s weapons
deployments, as well as of Chinese navy and coast guard ships and
Chinese state backed fishing vessels illegally operating in other coun
-
iT
tries’ exclusive economic zones and territorial waters.
Countries in the region will also be more likely to cooperate with
Washington if they can count on the United States to uphold inter
national law. To that end, the U.S. Navy should conduct freedom of
Al
-
-
navigation patrols in the South China Sea regularly, not just when
Washington wants to make a diplomatic point.
Critics of a more muscular deterrent argue that it would only
od
encourage China to double down on militarization. But over the last

few years, the United States has proved that by communicating
credible consequences, it can change China’s behavior. In 2015, when
the Obama administration threatened to impose sanctions in response
so
to Chinese state sponsored theft of U.S. commercial secrets, the

-
Chinese government quickly curbed its illicit cyber activities. And in
-
the waning months of the Obama administration, Beijing finally
began to crack down on Chinese firms illegally doing business with
Ma
North Korea after Washington said that it would otherwise impose

financial penalties on Chinese companies that were evading the
sanctions against North Korea.
Moreover, greater pushback by the United States will not, as some
have asserted, embolden the hawks in the Chinese leadership. In fact,
those in Beijing advocating more militarization of the South China
July/August 2017 71

Ely Ratner
Sea have done so on the grounds that the United States is irresolute,
not that it is belligerent. The only real chance for a peaceful solution
to the disputes lies in stopping China’s momentum. Beijing will not
compromise as long as it finds itself pushing on an open door.
And in the event that China failed to back down from its revisionist
path, the United States could live with a more militarized South
China Sea, as long as the balance of power did not tilt excessively in
China’s favor. This is why China would find a U.S. threat to ratchet
up military support for other countries with claims in the sea credible.
m
Ensuring that countries in the region can contribute to deterring
Chinese aggression would provide more stability than relying solely
on Chinese goodwill or the U.S. military to keep the peace. Admittedly,
hi
with so many armed forces operating in such a tense environment, the
countries would need to develop new mechanisms to manage crises
and avoid unintended escalation. But in recent years, asean has made
ha
significant progress on this front by devising new measures to build
confidence among the region’s militaries, efforts that the United States
should support.
iT
Finally, some critics of a more robust U.S. strategy claim that
the South China Sea simply isn’t worth the trouble, since a Chinese
sphere of influence would likely prove benign. But given Beijing’s
increasing willingness to use economic and military pressure for
Al
political ends, this bet is growing riskier by the day. And even if
Chinese control began peacefully, there would be no guarantee that
it would stay peaceful. The best way to keep the sea conflict free is
od
for the United States to do what has served it so well for over a
century: prevent any other power from commanding it.∂
so
Ma

Trump and the

Environment
What His Plans Would Do
m
Fred Krupp
W
hi
hen U.S. President Donald Trump and Chinese President
Xi Jinping met in April at Trump’s Mar a Lago resort,
-
-
one topic was not on the agenda: the environment. Perhaps
ha
they couldn’t find enough common ground. Xi, a chemical engineer
by training, has often spoken publicly about his concerns over the
effects of climate change on China, where almost 20 percent of the
iT
land is desert, an area expanding at a rate of more than 1,300 square
miles per year. Analysts believe Xi is also determined to help China
dominate the clean energy industry. In 2015, China installed more than
one wind turbine every hour, on average, and enough solar panels to
Al
cover over two dozen soccer fields every day, according to Greenpeace.
As part of its drive to clean up dangerous air pollution in Chinese
cities, Beijing has canceled the construction of more than 100 coal fired
-
od
power plants this year alone. Such measures, coupled with Xi’s commit
ment to the 2015 Paris agreement on climate change, have turned Xi
into a global leader on energy and the environment, filling a void created
by the man who sat across the table from him at Mar a Lago.
so
-
-
Trump’s position on environmental protection has been consistent:
he wants far less of it. Unlike Xi, Trump and many of his cabinet
secretaries question the scientific consensus that human activities are
the main driver of climate change. In the name of regulatory reform
Ma
and job creation, they want to increase domestic fossil fuel production
and roll back limits on both greenhouse gas emissions and the release
of conventional pollutants. During his campaign, Trump promised to
“get rid of” the Environmental Protection Agency (epa). “We’re going
FRED KRUPP is President of the Environmental Defense Fund. Follow him on Twitter
@FredKrupp.
July/August 2017 73

Fred Krupp
to have little tidbits left, but we’re going to take a tremendous amount
out,” he said in March 2016. And his administration is considering
withdrawing from the Paris agreement, a move that would undermine
the United States’ standing in the world, cede clean energy jobs and
investment to China and Europe, and expose U.S. companies to retali
atory trade measures.
If enacted, Trump’s agenda would erode the environmental and
public health safeguards that Republicans and Democrats alike have
put in place over the past 50 years. As a result, it would lead to more
m
disease and more premature deaths, weaken the U.S. economy, and
yield environmental leadership to China. But it is not too late for the
administration to change course.
hi
THE WAR ON ENVIRONMENTAL PROTECTIONS
In late March, when Trump appeared at the headquarters of the epa
ha
to sign an executive order unraveling President Barack Obama’s
efforts to combat climate change, he declared that his goal was no less
than “ending the theft of American prosperity.” “Come on, fellas,” he
iT
said, turning to a group of coal miners who were flanking him at the
event. “You’re going back to work.”
Reducing red tape and making federal rules more effective are worthy
goals. But they require a careful balancing of risks and benefits and a
Al
consideration of the views of many stakeholders. The Trump admin

istration has sought the views of just one: the industry affected. All of
Trump’s cabinet secretaries who oversee energy and the environment
od
have ties to the fossil fuel industry, and none has a history of advocacy
for cleaner air, cleaner water, or public health. The president’s choice
to lead the epa, the Oklahoma attorney general Scott Pruitt, rose to
prominence by teaming up with fossil fuel producers to sue the agency
so
14 times. As attorney general, he allowed industry lobbyists to draft

some of his letters to the epa; now he runs the organization. It is the
governmental equivalent of a hostile takeover.
The epa’s annual budget currently stands at about $8.06 billion,
Ma
close to its lowest level in 40 years. This sum represents just two
-
tenths of one percent of total federal government spending. Yet Trump
and Pruitt want to reduce the agency’s budget by almost one third,
-
cutting it more than any other agency’s budget. This would severely
weaken the epa’s ability to monitor pollution levels and enforce public
health safeguards. It would cripple the Superfund and Brownfields

Trump and the Environment
m
hi
ha
Green day: the People’s Climate March in Washington, D.C., April 2017
iT
programs, which clean up contaminated sites, and eliminate more than
50 programs, including ones involving research into climate change
and the restoration of the Great Lakes and Chesapeake Bay.
Al
Trump’s political team has imposed new restrictions on public

communications by epa staff and, in late April, ordered the agency’s
climate science webpage to be taken down; it now redirects to a page
od
that says updates are pending “to reflect epa’s priorities under the
leadership of President Trump and Administrator Pruitt.” The presi
dent’s proposed budget for fiscal year 2018 calls for thousands of
layoffs in the agency, and morale is understandably low. A budget
so
proposal is a trial balloon, designed to set the terms of debate. In the

funding bill for the remainder of the current fiscal year, Congress
imposed only modest cuts on the epa, but the big fight, over next
year’s budget, is just beginning. If Congress passes anything close to
Ma
MIKE THEILER / REUTERS
these proposed cuts, it will destroy the epa as it currently exists.

Yet the coal workers Trump used as props at his epa photo op are
in for a cruel surprise: undermining the epa and revoking environ
mental regulations will not bring back many mining jobs. Demand for
coal has declined not primarily because of the epa or the spread of
renewable sources of energy but because of huge increases in the
July/August 2017 75
Fred Krupp
supply of cheap natural gas. According to the U.S. Energy Information

Administration, as demand for coal for electric generation fell by
22 percent from 2011 to 2015, power sector demand for natural gas
-
rose by 32 percent—dwarfing the increase in power generation from
renewable sources, which rose by six percent over the same time
period. What’s more, mining has become so mechanized that even
increased demand for coal won’t create many more jobs.
Every job matters, but the debate about coal misses a much
bigger point. Blaming environmental protection for job losses ignores
m
one of the greatest success stories in recent U.S. history. From
1970, the year President Richard Nixon established the epa, through

2015, U.S. gdp increased by 246 percent, whereas national emissions
hi
of six common air pollutants, including sulfur dioxide, a leading
cause of acid rain, dropped by an average of 71 percent. The number
of U.S. jobs, meanwhile, increased by more than 90 percent.
ha

To be sure, the United States has witnessed a hollowing out of the
middle class, and that problem demands a concerted response. But
trying to return to the fuel sources of
iT
Undermining the EPA and the last century is no solution. Instead,
the United States should embrace the
revoking environmental clean energy sources of this century,
regulations will not bring such as wind and solar power. Improve
Al
back many mining jobs. ments in battery storage and other inno
vations have already begun to generate
millions of high paying jobs. More than
-
od
two million Americans now work in jobs related to energy efficiency,

such as retrofitting homes or manufacturing efficient appliances, and
the wind and solar power industries employ half a million more. In
total, twice as many Americans work in renewable energy fields as do
so
in jobs that involve extracting and generating electricity from fossil

fuels. Clean technology has begun to transform labor markets in states
that rely on manufacturing. Illinois and Ohio each have more than
100,000 clean energy jobs, according to a study by bw Research
Ma
Partnership. Minnesota and Missouri each have more than 50,000.

And the numbers are rising rapidly in half a dozen other Midwestern
states. No wonder a Gallup poll conducted in March found that 72 per
cent of Americans favor more government support for wind and solar
power. And in February, a bipartisan group of governors sent Trump
a letter pointing out that the nation’s wind and solar resources are

transforming low income rural areas “in ways not seen since the
-
passage of the Homestead Act over 150 years ago.” One reason: U.S.
wind facilities pay rural landowners $245 million in lease fees each
year, a figure projected to climb to $900 million a year by 2030.
As renewables become fully competitive with fossil fuels and as
states such as California and New York continue to drive policies
that support them, they are sure to play a growing role in the power
mix no matter what the president does. Red states such as Iowa,
Oklahoma, and Texas are installing thousands of wind turbines. Red
m
congressional districts boast more large scale wind and solar energy
-
production than do blue ones. According to the asset management
-
firm Lazard, between 2009 and 2016, the price of electricity generated
hi
by land based wind turbines, without any subsidies, plummeted
-
from 14 cents to 4.7 cents per kilowatt hour—making it cheaper
-
than the energy produced by most new natural gas or coal fired
ha
-
power plants. Nationwide, the price of electricity generated by
utility scale solar power has dropped by roughly 90 percent over
-
the last decade. Even the Kentucky Coal Mining Museum, in
iT
Benham, in Harlan County—the heart of the U.S. coal industry—
is switching to solar power. A spokesperson said that the decision
would save the museum money.
Al
DON’T WAIT FOR WASHINGTON

The challenge, of course, is that renewable sources of electricity
don’t produce power around the clock. Until grids become smarter
od
and storage technology cheaper, the United States will need to rely
on natural gas power plants, which can be fired up when the sun
isn’t shining or the wind doesn’t blow. Fortunately, the price of
energy storage is falling dramatically. The question is whether
so
government policies will speed or stymie this trend. So it was

discouraging when, in April, Energy Secretary Rick Perry, who as
governor of Texas saw his state become the top producer of wind
power in the country, asked his department to prepare a study on
Ma
whether policies that encourage the use of clean energy, such as

production tax credits for wind and solar power and mandates that
set goals for utilities to increase the proportion of green energy they
provide (known as “renewable portfolio standards”), imperil the
security of the grid by forcing coal fired and nuclear power plants to
-
retire prematurely.
July/August 2017 77

Fred Krupp
Clean energy advocates fear that the move is part of a broader

attempt by the administration to slow the growth of renewables and
create new subsidies for coal and nuclear power. But it is troubling
that Perry has said that the administration reserves the right to
preempt state clean energy policies. Moreover, Perry’s study will
focus on clean energy subsidies while ignoring the billions of dollars
the United States spends each year on fossil fuel subsidies in the
form of tax breaks. Trump, meanwhile, has resumed the sale of coal
mined on federal land, reversed an Obama era restriction on
m -
dumping mining waste into waterways, and ended Obama’s mandate
that federal agencies must consider climate change in a broad range
of decisions.
hi
Although federal action may be in short supply for some time to
come, state and local governments and leading corporations are accom
plishing a great deal. Walmart, the world’s largest retailer, recently
ha
announced Project Gigaton, which aims to remove a gigaton of green
house gas emissions—more than the annual emissions of Germany—
from the company’s global supply chain by 2030. Last December, in
iT
Illinois, Republican Governor Bruce
Rauner signed the Future Energy Jobs
Rolling back regulations Act, which will temporarily subsidize
will take its toll on existing nuclear plants in the state,
Al
public health. create clean energy jobs, and accelerate

the shift from coal to renewable energy
sources—delivering a remarkable 56 per
od
cent reduction in carbon dioxide emissions from the state’s power

sector by 2030. (By contrast, Obama’s Clean Power Plan would have
reduced emissions in Illinois by 34 percent.) The Future Energy
Jobs Act is proof that state action can deliver major breakthroughs.
so
It’s the kind of progress that will be necessary at a time when

Washington has abdicated leadership.
Trump has also signaled his intention to lower vehicle fuel economy
-
standards. In March, Trump ordered the epa to reopen its recent
Ma
favorable midterm review of rules that require auto manufacturers

to meet fleetwide averages of 54.5 miles per gallon by 2025. Some
industry leaders have complained that reaching this goal will be too
costly. But in the long run, relaxing these standards will only hurt the
U.S. auto industry. The rest of the world’s automakers are electrifying
their fleets and boosting gas mileage. China is subsidizing its electric

vehicles and creating a massive internal market for them. Loosening

fuel economy standards would encourage Detroit to build more gas
-
-
guzzling suvs and fewer electric vehicles just when global consumer
demand is shifting toward cleaner cars. It’s not only environmentalists
who recognize this trend: Total, one of the world’s largest oil producers,
projects that electric vehicles could account for almost a third of new
automobile sales by the end of the next decade.
UNHEALTHY OBSESSION
m
In addition to setting back the fight against climate change, the admin
istration’s attitude toward environmental regulation will make it
harder for the epa to fulfill its vital role as the country’s public health
hi
watchdog. Although the epa has made progress in fighting dangerous
pollution over the past few decades, its work is not complete. A new
report by the American Lung Association, for example, found that
ha
almost four in ten Americans—about 125 million people—live in
counties with unhealthy levels of air pollution.
Rolling back regulations will take its toll on public health. For
iT
example, revoking the Clean Power Plan and thus allowing companies
to emit more dangerous air pollutants would cause up to 3,600 more
premature deaths, 1,700 more heart attacks, 90,000 more asthma
attacks, and 300,000 more missed work and school days each year,
Al
according to the epa’s own analysis. In another worrying sign,

lawyers representing the Trump administration recently asked the
U.S. Court of Appeals for the D.C. Circuit to delay hearing a case
od
on an epa standard that, in 2011, set the first national limits on the
amount of mercury, acid gases, and other toxic pollutants that
power plants could emit. Such pollutants are hazardous to human
health even in small doses: mercury causes brain damage in children;
so
acid gases cause serious lung diseases; and metal toxics, such as
chromium and nickel, cause cancer. Legal analysts have interpreted
the request to delay as a sign that the administration intends to
revisit and weaken these safeguards.
Ma
Pruitt is also trying to overturn rules that require oil and gas
companies to monitor and reduce emissions of methane, a greenhouse
gas that is 84 times as potent as carbon dioxide for the first 20 years it
exists in the atmosphere. U.S. oil and gas companies emit eight mil
lion to ten million metric tons of methane annually—enough natural
gas to supply the heating and cooking needs of every home in Ohio
July/August 2017 79

Fred Krupp
for a year. Methane emissions contribute to smog, which triggers

asthma attacks and causes other respiratory illnesses. At times, the air
quality in some rural areas where oil and gas are produced, such as
Pinedale, Wyoming, and Vernal, Utah, has been worse than it is in big
cities. Reducing emissions wouldn’t cost much—according to a study
by the consultancy icf International, a 40 percent cut would cost just
one cent per thousand cubic feet of gas produced—and rolling back
these rules would help only laggards in the industry that haven’t kept
up with best practices. And it would also shortchange U.S. taxpayers,
m
since companies pay no royalties on the $330 million worth of natural
gas that they leak or vent on public or tribal lands every year. In May,
the Senate rejected an attempt to revoke rules controlling methane
hi
emissions on federal land; every Democratic and three Republican
senators voted to protect these standards. It was the first big win this
year for the environmental community, and proof that its voice still
ha
counts—but the administration has said that it will look for other
ways to undo the safeguards.
Before the epa proposed rules to control methane, in August 2015,
iT
state governments had led the way—and now that the Trump admin-
istration is trying to reverse course, the states will have to step up
once again. In early 2014, Colorado became the first state to limit
methane emissions from oil and gas operations. It introduced rules
Al
that reduced approximately 65,000 tons of methane and some 90,000

tons of smog-forming compounds each year, equal to the amount pro-
duced by all the cars and trucks in Colorado.
od
Not every state has the political will to follow Colorado’s lead.
That’s why action is needed at the federal level. But the Trump
administration has shown no interest in sensible oversight, and Pruitt
has ignored the views of his own experts. Over the objections of epa
so
scientists, for example, he recently decided to allow the continued use

of the pesticide chlorpyrifos, which is applied to much of the fresh
food that Americans consume. Epa scientists had recommended
banning it because it may cause neurological damage in children.
Ma
Pruitt overruled them. He also plans to cut funding for research into
potentially harmful chemicals—some linked to breast cancer and birth
defects—found in products most Americans have in their homes, such
as flame retardants. And he is seeking to decrease grants to monitor
the safety of tap water, paving the way for more disasters like that
which occurred in the city of Flint, Michigan, where up to 9,000 chil-

dren under the age of six were exposed to lead in their tap water. An
estimated six million to ten million U.S. homes still receive their
drinking water through lead pipes.
STAND UP FOR SCIENCE

If the administration is serious about responsible regulatory reform, it
should study the Frank R. Lautenberg Chemical Safety for the 21st
Century Act, which passed in the House last year in a bipartisan land
slide of 403 to 12 and passed in the Senate by a voice vote. For decades,
m
various legislators had tried in vain to fix its deeply flawed predeces
sor, the Toxic Substances Control Act of 1976, which gave the epa the
authority to regulate chemicals but was so broken that the agency
hi
couldn’t even ban cancer causing asbestos.
-
The Lautenberg Act succeeded because industry leaders, public
health groups, and environmental organizations came together to work
ha
out a practical path forward. Supported by Democrats such as Senator
Tom Udall of New Mexico and Republicans such as Senator Jim Inhofe
of Oklahoma, the law sets clear and enforceable deadlines for the epa to
iT
evaluate existing chemicals, imposes new safety standards, and improves
transparency. The administration should recognize that chemical safety
-
reform was driven by a bipartisan recognition that both industry and
the public need strong, credible, and well funded federal oversight.
Al
-
The passage of the Lautenberg Act was a triumph of bipartisan
regulatory reform—yet now it is at risk of being undone by congres
sional efforts to paralyze the epa’s ability to implement the law. Inspired
od
by calls by Steve Bannon, the White House adviser, for “the decon
struction of the administrative state,” at least six antiregulatory bills
have passed the House so far in this Congress. They would hamstring
the process for issuing or implementing safeguards, making it nearly
so
impossible in some cases and undoing the hard won improvements to

-
chemical policy introduced by the Lautenberg Act.
Yet there are some grounds for optimism. The environmental pro
tections now in place were introduced with ample time for comment
Ma
and judicial review, and they cannot be undone with the stroke of a
pen. More than 60 percent of Americans would like to see the epa’s
powers preserved or strengthened, according to a poll that Reuters/
Ipsos conducted in January. And in April, a poll by cnbc found that
fewer Americans supported—and more opposed—Trump’s plan to
roll back climate protections than supported any other part of his policy
July/August 2017 81

Fred Krupp
agenda. Americans everywhere care deeply about the health of their

children, about clean air and water, and about safe communities and
safe food—and the process of regulatory unraveling will give them
plenty of opportunities to prove it.
In April, hundreds of thousands of Americans protested in marches
held around the country in support of action on climate change and
serious, unbiased science. By rejecting the administration’s assump
tion that it can eliminate hard won environmental safeguards without
-
consequence, they can help turn back the worst of the administration’s
m
environmental agenda. Their voices were critical, for example, in per
suading the Senate to reject the administration’s attempt to revoke
commonsense rules to control methane emissions on federal land.
hi
That was one vote; there will be many more, and common sense will
surely not prevail every time. But if enough people stand up and make
their voices heard, the president himself may even decide to steer a
ha
new course.∂
iT
Al
od
so
Ma


Why the Climate Agreement Will Survive
Trump
Brian Deese
m
F
or decades, the world has understood the threat of climate
hi
change. But until recently, the economic and political obstacles
to tackling the problem stymied global action. Today, that calculus
has changed. Technological progress has made clean energy a profitable
ha
investment, and growing popular pressure has forced politicians to
respond to the threat of ecological disaster. These trends have enabled
major diplomatic breakthroughs, most notably the 2015 Paris agree
iT
ment. In that pact, 195 countries pledged to make significant reductions
in their greenhouse gas emissions. “We’ve shown what’s possible when
the world stands as one,” proclaimed U.S. President Barack Obama
after the talks concluded.
Al
Now, however, that agreement is under threat. When it comes to

climate change, U.S. President Donald Trump has replaced urgency
with skepticism and threatened to pull the United States out of the
od
Paris agreement. He has spent the early months of his presidency

attempting to roll back the Obama administration’s environmental
regulations and promising the return of the U.S. coal industry.
The Trump administration has not yet decided whether to formally
so
leave the Paris agreement. Whatever it decides, the agreement itself

will survive. Negotiators designed it to withstand political shocks.
And the economic, technological, and political forces that gave rise to
it are only getting stronger. U.S. policy cannot stop these trends. But
Ma
inaction from Washington on climate change will cause the United

States serious economic and diplomatic pain and waste precious time
in the race to save the planet. Sticking with the deal would mitigate
BRIAN DEESE is a Senior Fellow at the Mossavar-Rahmani Center for Business and
Government at the Harvard Kennedy School of Government. From 2015 to 2017, he was a
Senior Adviser to U.S. President Barack Obama.
July/August 2017 83

Brian Deese
the damage and is clearly in the U.S. national interest, but Washing
ton’s failure to otherwise lead on climate change would still hurt the
United States and the world. So U.S. businesses, scientists, engineers,
governors, mayors, and citizens must step forward to demonstrate
that the country can still make progress and that, in the end, it will
return to climate leadership.
MORE FOR LESS

A decade ago, the Paris agreement could never have been negotiated
m
successfully. Effective collective action on climate change was simply
too difficult to achieve because of the vast costs involved. But since
then, rapid reductions in the price of renewable energy and increases
hi
in the efficiency of energy consumption have made fighting climate
change easier, and often even profitable. By the time of the Paris
negotiations, the world had reached a milestone that energy analysts
ha
had previously thought was decades away: in many places, generating
energy from solar or wind sources was cheaper than generating it
from coal. According to research from Bloomberg New Energy Finance,
iT
in 2015, clean energy attracted twice as much investment globally as
fossil fuels.
As a result, the world has adopted clean energy far faster than
experts expected. Consider the projections of the International Energy
Al
Agency, the world’s most respected forecaster of energy market trends.

-
In 2002, the agency predicted that it would take 28 years for the world
to generate more than 500 terawatt hours of wind energy; instead, it
-
od
took eight. And in 2010, the agency projected that it would take until
2024 to install 180 gigawatts of solar capacity; that level was reached
in 2015, almost a decade ahead of schedule.
This improbable progress has upended the once dominant assumption
so
that economic growth and rising greenhouse gas emissions must go

hand in hand. Between 2008 and 2016, the U.S. economy grew by
12 percent while carbon emissions from energy generation fell by
about 11 percent—the first time the link between the two had been
Ma
broken for more than a year at a time. This decoupling of emissions

and economic growth has begun to occur in at least 35 countries,
including China, where many believe that emissions will peak and
begin to decline in the next few years, more than a decade earlier than
the 2030 target China has set for itself. In fact, 2016 was the third year
in a row when global emissions did not rise even as the global economy

m
hi
ha
Captain Planet: Obama at a UN climate summit in New York City, September 2014
grew. Before this streak, only recessions had ever brought emissions
iT
down. This quiet shift represents a seismic change in the political economy
of clean energy. Once, countries had to trade faster economic growth
for reducing emissions. Now, they are racing against one another to
claim the economic benefits of clean energy.
Al
The pace of change will likely continue to outstrip projections.

Technological breakthroughs in energy storage will make renewable
power cheap enough to use in more places and accelerate the move to
od
electric cars and other electric transportation systems. China plans

to invest $340 billion in renewable energy sources by 2020; Saudi
Arabia is investing $50 billion. In the last year alone, India doubled its
solar capacity. It is installing solar panels so fast that Prime Minister
so
Narendra Modi’s audacious goal of reaching 100 gigawatts of solar

capacity by 2022 no longer seems like a pipe dream.
WE’RE ALL ENVIRONMENTALISTS NOW

Ma
As new technologies upend the economics of climate change, the politics

MIKE SEGAR / REUTERS
surrounding the environment are changing, too. In 2008, the U.S.

embassy in Beijing made a routine decision to place an air-quality
monitor on its roof and tweet out the readings. It began as a way to
provide information to Americans and other expats living in Beijing
about how safe it was to go outside at any particular moment; most
July/August 2017 85
Brian Deese
Chinese were unable to see the tweets, since China’s “Great Firewall”
generally blocks Twitter. But as more Chinese citizens acquired smart
phones, app developers created ways for them to bypass the filter and
access the air quality updates. Beijing’s middle class residents reacted
-
-
with outrage at the prospect of exposing their children to dangerous
air pollution. Schools built giant domes for pupils to play in, safe
from the polluted air. Many children
The incentives for started wearing heavy duty masks on
-
their way to school. The furor forced the
m
politicians to address Chinese government into action. By
climate change 2013, it had installed hundreds of air
-
will only strengthen. quality monitors in over 70 of China’s
hi
largest cities. That same year, the govern
ment promised to spend billions of dol
lars to clean up the air, and it pledged to set initial targets for reducing
ha
the emissions of air pollutants in major cities.
Meanwhile, environmental activism across the world was moving
from the fringe to the mainstream. Parents in India worried that pol
iT
lution from vehicles was damaging their children’s health. Inhabitants
of remote islands such as Kiribati anxiously watched the sea rising
around them. Ranchers in the western United States saw their land
ravaged by droughts and wildfires unlike any they had experienced
Al
before. Along with other alarmed citizens all over the world, they
began calling on politicians to act, with louder and more unified voices
than ever before.
od
When world leaders gathered in Paris in December 2015, they

were responding to this wave of climate activism. At the conference,
a group of over 100 countries that had traditionally been at odds on
climate change formed the “high ambition coalition.” Propelled by
so
-
grass roots activism, they successfully demanded that the agree
-
ment adopt the ambitious goal of limiting the warming of the
earth’s atmosphere to 1.5 degrees Celsius. “Anything over two
degrees is a death warrant for us,” said Tony de Brum, then the
Ma
foreign minister of the Marshall Islands, an informal leader of the

coalition. The incentives for politicians to address climate change
will only strengthen as more people, particularly in developing

countries, leave poverty for the ranks of the middle class and gain
access to information about how climate change is directly affecting
their lives and livelihoods.

This shift is already well under way. In January, in a speech that

stood in stark contrast to China’s previous unwillingness to accept
responsibility for tackling climate change, Chinese President Xi
Jinping told the World Economic Forum, in Davos, that “all signa
tories should stick to [the Paris agreement] instead of walking away
from it, as this is a responsibility we must assume for future gen
erations.” And the day after Trump signed an executive order to
begin undoing the rule known as the Clean Power Plan, which Obama
had implemented to reduce emissions from power plants, the eu’s
m
climate action and energy commissioner, Miguel Arias Cañete,
tweeted a picture of himself hugging China’s chief climate negotiator.
“A new climate era has begun, and the eu and China are ready to
hi
lead the way,” the caption read.
THE ART OF THE DEAL ha

These economic and political forces made the Paris agreement
possible, but to get the entire world to sign on, negotiators still needed
to clear a major diplomatic hurdle: deciding who should do what and
iT
who should pay for it. For about two decades after the 1992 Rio Earth
Summit, climate negotiations were predicated on the idea that since
developed countries had been responsible for the lion’s share of past
greenhouse gas emissions, they should shoulder the burden of ad
Al
dressing global warming.

By the end of the last decade, that concept had clearly outlived
its usefulness. As the world saw the economies of China and India
od
grow rapidly, the United States and other developed countries could
no longer justify to their citizens accepting limits on emissions
when major emerging market countries were doing nothing. And
-
when China overtook the United States as the world’s largest
so
emitter of carbon dioxide in 2007, it became clear that developed

countries could not solve the problem alone. Indeed, by 2040, close
to 70 percent of global emissions will come from countries outside
the Organization for Economic Cooperation and Development, a
Ma
group of mostly developed countries.

Yet for years, governments could not agree on an alternative approach.
The size of the problem meant that all would have to participate. But
no country was prepared to accept a supranational body that would
dictate and enforce targets and actions. The failure of the 2009
Copenhagen climate conference showed that insisting on a rigid goal
July/August 2017 87

Brian Deese
would create a zero sum game in which every country tried to do less
-
and make others do more. The Paris agreement solved this problem
by combining the ambitious goal of a universal compact with the
conservative method of allowing each country to decide for itself
how it could contribute to hitting the overall target.
Obama hoped that if China and the United States—the two largest
emitters—bought into this approach, others would follow. To that
end, he sought an agreement between
The agreement has proved the two countries well in advance of the
m
Paris negotiations. In November 2014,
surprisingly durable. in a joint announcement, the United
States promised to reduce its emissions
hi
by 26–28 percent below their 2005 levels by 2025, and China pledged
to cap its emissions by 2030. The deal demonstrated that countries
could move beyond the old approach and created the possibility of a
ha
universal effort to reduce emissions and claim the economic spoils of
a clean energy boom.
With striking speed, countries at every stage of economic develop
iT
ment joined the race. Before the negotiations had even begun in Paris,
enough countries to account for over 90 percent of global emissions had
established their own targets. This meant that, unlike in Copenhagen,
countries came to Paris agreeing that they would all have to reduce
Al
emissions in order to meet the challenge of climate change.

Even with these commitments in hand, the process of getting
nearly 200 countries to let go of the old model was painful. Perhaps
od
inevitably, allowing each country to determine its own way forward

meant that the initial pledges were insufficient. According to a study
by a group of climate scientists published in the journal Science in
2015, even if all countries meet their targets and global investment in
so
clean energy technology accelerates, the world will still have only a
50 percent chance of limiting warming to two degrees Celsius, and
the 1.5 degree target will remain out of reach. Nevertheless, the move
from a head to head climate battle to a global clean energy race created
Ma
-
-
the potential for collective action to accelerate progress.
More than a year later, the agreement has proved surprisingly
durable. Throughout 2016 and early 2017, countries moved aggressively
to reach their targets, even as world events, such as the Brexit vote and
Trump’s election, signaled a global shift away from multilateralism.
India recently set a goal of putting six million hybrid and electric cars

on its roads by 2020 and ending the sale of internal combustion

vehicles in the country by 2030. Last December, Canada created a
national carbon-pricing regime. In April, the United Kingdom went a
full day without burning coal to generate electricity, the first time it
had done so since 1882. And although most expected that it would
take years for enough countries to ratify the Paris agreement for it to
formally take effect, the world accomplished that goal just 11 months
after the talks ended. Even opec has embraced the accord.
This progress suggests that the agreement’s main assumption—
m
that countries would grow more ambitious over time—was a reasonable
bet. The agreement encourages governments to raise their climate
targets every five years, but it imposes no binding requirements. A
hi
more stringent accord would have looked better on paper, but it might
well have scared many countries away or led them to set their initial
targets artificially low. Because the economic forces that gave rise to
ha
the agreement have continued to accelerate, more and more countries
now see the benefits of leading in the fast-growing clean energy
industries. So they will likely raise their targets to reap the rewards of
iT
staying ahead of the pack.
SELF-HARM
Although the Trump administration cannot halt global progress on
Al
climate change, it can still hurt the U.S. economy and the United
States’ diplomatic standing by abandoning the Paris agreement. On
everything from counterterrorism and trade to nuclear nonprolifera-
od
tion and monetary policy, the Trump administration will need to work
with other countries to accomplish its agenda. If it pulls the United
States out of the Paris agreement, it will have a harder time winning
cooperation on those issues because other countries increasingly see
so
leadership on climate change in the same way they see security pledges,
foreign assistance, or aid to refugees, as a test of a country’s commit-
ment to its promises and of its standing in the global order. When, in
2001, the Bush administration stepped away from the Kyoto Protocol,
Ma
it was surprised by how harshly China, India, the eu, and many others
criticized the move. Since then, the world has made dramatic progress
on cooperation over climate change. So abandoning the Paris agree-
ment would do far worse diplomatic damage.
Leaving the Paris agreement would also cause the United States to
lose out to other countries, especially China, on the benefits of a clean
July/August 2017 89

Brian Deese
energy boom. More than three million Americans work in the renew
able energy industry or in the design, manufacture, or maintenance of
energy efficient products or clean energy vehicles, such as electric
-
cars. Employment in the solar and wind energy industries has grown
by about 20 percent each year in recent years, roughly 12 times as fast
as employment in the economy as a whole. Maintaining this pace will
require sustained investment and the ability for U.S. industries to
capture larger shares of the growing clean energy markets abroad.
On this front, China is already starting to overtake the United
m
States. According to data from Bloomberg New Energy Finance and
the un Environment Program, in 2015, China invested $103 billion in
renewable energy; the United States invested $44 billion. China is
hi
home to five of the world’s six largest solar module manufacturers and
-
to the world’s largest manufacturers of wind turbines and lithium ion,
which is used to make the batteries needed to store renewable energy.
ha
It is likely inevitable that much of the manufacture of lower value
-
-
added clean energy products will move away from the United States.
But it is troubling that the country risks ceding ground on clean
iT
energy innovation, as well. According
A lack of U.S. to a study by the public policy experts
Devashree Saha and Mark Muro, the
leadership will cost the number of clean energy technology
Al
world valuable time. patents granted in the United States

each year more than doubled between
2001 and 2014, but it declined by nine
od
percent from 2014 to 2016. Other countries are filling the void.
“In 2001, both U.S. and foreign owned companies generated about
-
47 percent of [clean energy technology] patents each,” Saha and Muro
write. But “by 2016, 51 percent of all cleantech patents were owned by
so
large foreign multinationals, while only 39 percent were generated by

U.S. companies.”
Should the Trump administration abandon the Paris agreement,
these trends will likely get worse. If Washington is not part of crucial
Ma
discussions as details of the agreement are finalized over the coming

years, other governments could shape the rules around intellectual
property, trade, and transparency in ways that would disadvantage the
U.S. economy. Some countries have also suggested that if the United
States leaves the Paris agreement, they would consider imposing
retaliatory measures, such as import taxes. Even if they do not, with

the United States outside the Paris agreement, foreign governments,

international agencies, and private investors might direct funds for clean
energy research, development, and deployment to U.S. competitors.
China has already pledged more money than the United States has to
help poorer countries develop their markets in clean energy. If the
United States leaves the discussion, it will lose its influence over
where and how those funds get spent. And if Washington skips future
rounds of negotiations within the un framework, an emboldened
China might look for ways to water down the Paris agreement’s rules
m
on important issues, such as requiring all countries to submit their
emissions plans to independent reviews.
hi
EMISSION CRITICAL
For all these reasons, the Trump administration should keep the
United States in the Paris agreement. Yet that by itself will not be
ha
enough. Even inside the agreement, if Washington otherwise fails to
lead on climate change, the United States will still suffer, as will the
rest of the world. Without robust government investment in clean
iT
energy, and government policies that help set a stable price for green-
house gas emissions, the U.S. economy will not see the full dividends
of the transition to clean energy.
A lack of U.S. leadership will not just hurt the United States; it will
Al
cost the world valuable time. Rising temperatures are outpacing ef-
forts to cut emissions. Last year was the hottest on record, the third
year in a row to earn that distinction. Sea ice in the Arctic and around
od
Antarctica has reached record lows. And the pace of extreme weather
events is accelerating across the United States and the rest of the world.
To reverse these trends, countries need to move to decarbonize
their economies even faster. Although other countries will move
so
forward with the Paris agreement even without the United States,
getting them to dramatically raise their targets without U.S. lead-
ership will be difficult. China and the eu will continue to compete
in the clean energy race, but only the United States has the politi-
Ma
cal clout and resources to spur other countries to action, the way it
did before the Paris negotiations. A U.S. president using every
possible diplomatic tool at his or her disposal—as Obama did—can

bring remarkable results.
Because the Paris agreement calls on most countries to set their next
round of national targets after 2020, much will hinge on the next U.S.
July/August 2017 91

Brian Deese
presidential election. If the next U.S. administration restores U.S.

leadership on climate change, it might be able to make up for lost time.
Meanwhile, not all progress in the United States will stall. Several
states, including California, Nevada, New York, and Virginia, are cut-
ting their greenhouse gas emissions and seeing the economic benefits
firsthand. They should raise their sights even further and remind the
world of the collective impact of their efforts. Major U.S. cities are
finding novel ways to go green. They should explore new partnerships
with foreign counterparts. American companies will need to speak
m
loudly and clearly about the economic benefits of a credible plan to
reduce emissions and the costs of ceding leadership on clean energy
to China and other countries. American scientists and engineers are
hi
poised to transform several technologies crucial to tackling climate
change, such as batteries and those used for carbon capture and storage.
Engineers could exploit recent breakthroughs in satellite technology,
ha
for example, to create a real-time global emissions monitoring system
that could settle disputes between countries over the extent of their
past progress and allow diplomats to focus on the future. And concerned
iT
citizens must continue to organize, march, and convey to politicians that
ensuring clean air and water in their communities is a requirement for
their votes.
The Paris agreement represents real progress, but it alone will not
Al
solve the climate crisis. Its significance lies primarily in the economic,
technological, and political shifts that drove it and the foundation for
future action it laid. Its negotiators made it flexible enough to with-
od
stand political changes and policy differences while betting that the
global movement toward cleaner energy would continue to accelerate.
The road may not always be smooth, but in the end, that bet looks
likely to pay off.∂
so
Ma

Don’t Follow the Money

The Problem With the War on Terrorist
Financing
Peter R. Neumann
m
I
n the first days of the “war on terror,” before the United States
hi
had launched air strikes against the Taliban or Special Forces
raids on Osama bin Laden’s compounds, President George W.
Bush signed Executive Order 13224. The presidential decree, which
ha
dates from September 23, 2001, targeted al Qaeda’s money by
“prohibiting transactions” with suspected terrorists. “Money is the
lifeblood of terrorist operations,” Bush said at the time. “We’re
iT
asking the world to stop payment.” Five days later, the un Security
Council followed suit, calling on states to “prevent and suppress
the financing” of terrorism in its first substantive resolution since
the 9/11 attacks.
Al
More than 15 years later, the war on terrorist financing has failed.
Today, there are more terrorist organizations, with more money, than
ever before. In 2015, for example, the self proclaimed Islamic State
-
od
(also known as isis) had a budget of up to $1.7 billion, according to

a study by King’s College London and the accounting company
Ernst & Young, making it the world’s richest terrorist group. That
same year, the total amount of all frozen terrorist assets amounted
so
to less than $60 million. Only three countries—Israel, Saudi Arabia,

and the United States—had seized more than $1 million.
Driven by the assumption that terrorism costs money, governments
have for years sought to cut off terrorists’ access to the global financial
Ma
system. They have introduced blacklists, frozen assets, and imposed

countless regulations designed to prevent terrorist financing, costing
the public and private sectors billions of dollars.
PETER R. NEUMANN is Professor of Security Studies and Director of the International
Centre for the Study of Radicalisation and Political Violence (ICSR) at King’s College
London. Follow him on Twitter @PeterRNeumann.
July/August 2017 93

Peter R. Neumann
This approach has probably deterred terrorists from using the

international financial system. But there is no evidence that it has
ever thwarted a terrorist campaign. Most attacks require very little
money, and terrorists tend to use a wide range of money transfer and
-
fundraising methods, many of which avoid the international financial
system. Instead of continuing to look for needles in a haystack, govern
ments should overhaul their approach to countering terrorist funding,
shifting their focus away from the financial sector and embracing a
broader strategy that includes diplomatic, military, and law enforce
m
ment options. Otherwise, they will waste time and money on a strategy
that cannot deliver security for many more years to come.
hi
MONEY FOR NOTHING
One month after terrorists killed 130 people in Paris on November 13,
2015, the un Security Council hosted a special session on combating the
ha

financing of terrorism. “In the face of such indiscriminate barbarism,”
the French finance minister, Michel Sapin, declared, “we all have a duty
to act.” He described isis’ main sources of funding: “trading in oil,
iT
antiquities and works of art, kidnappings and ransoms, extortion, [and]
human trafficking.” Yet instead of explaining how the international
community could stop oil smuggling or prevent kidnappings, he called

for the freezing of financial assets, more screening by banks, better
Al
financial intelligence, and tougher regulation of digital currencies.

Sapin’s speech was far from unusual. Even if governments under
stand the many and varied sources of terrorist funding, they almost
od
always turn to the financial system to crack down on it. The obvious
explanation is that in most countries, the responsibility for choking
off terrorists’ funds lies with finance ministries, which are disconnected
from broader counterterrorism strategies. As a result, governments
so
typically respond to attacks by tightening due diligence procedures,

demanding that banks freeze more assets, and further empowering the
Financial Action Task Force (fatf), an intergovernmental body that
monitors international standards on money laundering and terrorist
Ma
financing. In a telling statement, then U.S. Treasury Secretary Jacob

Lew, speaking at the same Security Council session, said that the
aim was not to deprive terrorists of their money but “to protect the
international financial system.”
This approach has failed for two reasons. First, terrorists’ money is
hard to find. Al Qaeda’s leader, Ayman al Zawahiri, and isis’ self
-
-

declared caliph, Abu Bakr al Baghdadi, surely do not have bank accounts
-
in their own names, and lower ranking members and middlemen tend
-
not to be officially designated as terrorists by governments or
international institutions such as the un. Without the names or
identities of terrorists or their financers, banks struggle to single out
suspicious transactions. If banks were to investigate every movement
of money for which they could not immediately see a legitimate
economic rationale, they would have to scrutinize tens of millions of
transactions every day. Given that
m
terrorist operations are cheap—none of
the recent attacks in Europe cost more
Large amounts of terrorist
than $30,000—they would have to funds never enter the global
hi
carry out in depth investigations of the financial system.
-
circumstances behind millions of trans
actions of less than $1,000. As long as
ha
governments are unwilling to share more intelligence about suspects
and suspicious entities with banks, calls for the financial sector to
crack down on terrorist financing serve as little more than politi
iT
cal rhetoric.
Second, large amounts of terrorist funds never enter the global
financial system. In such countries as Afghanistan, Iraq, Somalia,
Syria, and Yemen, where al Qaeda and isis have their strongholds,
Al
only a tiny percentage of the population holds bank accounts. Even

large and legitimate transactions are carried out in cash, which means
that most people never interact with the international financial system
od
at all. As a result, few of the financial transactions of terrorist groups

appear on bank statements.
In fact, not only has the focus on the financial sector proved
ineffective; it has also harmed innocent people and businesses. To
so
address policymakers’ demands, financial institutions have “de risked”

-
their portfolios, shedding investments and clients that might be linked
to terrorist financing. Without intelligence on specific individuals and
entities, banks have relied on open source databases for their due
Ma
-
diligence. But these databases contain inaccurate and outdated entries.
De risking, moreover, has resulted in the de facto exclusion of entire
-
countries, mostly poor ones such as Afghanistan and Somalia, from
the global financial system. The bank accounts of refugees, charities
that operate in regions torn apart by civil war, and even Western
citizens with family links to so called risk countries have been closed.
-
July/August 2017 95

Peter R. Neumann
m
hi
ha
iT
Al
Practically no Western bank now offers cash transfers to Somalia, for

example, although 40 percent of the population depends on remit-
od
tances from abroad. When the last U.S. bank to offer such payments
shut down its service in early 2015, Somali Americans started a Twitter
campaign using the hashtag #IFundFoodNotTerror.
In addition to disrupting countless lives and undermining the work
so
of legitimate charities, de-risking has fueled a boom in informal—and

unregulated—financial services. Rather than use Western banks, im-
migrants to the West increasingly rely on informal money-transfer
systems, known as hawala networks in the Muslim world, to send re-
Ma
mittances home. In contrast to banks, these networks depend on trust,

require little identification, maintain no systematic or centralized re-
cords, and lie outside the remit of government regulators. In other
words, driving terrorists away from the international financial system
has inadvertently made it easier for them to move money around the
world undetected.

MONEYMAKERS
But the problems with the
current strategy run deeper:
the very idea of terrorist
financing is misguided. It
implies that there is a set
of financial methods that
all terrorist groups employ.
Nothing could be further
m
from the truth. The concept
of terrorist financing is
defined by its purpose, and
hi
this makes it difficult to
generalize about its sources
ha and methods. Different
groups fund their operations
in different ways, and for
transnational networks such
iT
as al Qaeda, the methods
may even differ from place
to place. Consider the al

leged involvement of the
Al
East African jihadist group

al Shabab in the ivory trade.
When this first became pub

od
lic in 2013, journalists and experts were quick to add wildlife poaching
to their list of terrorist-financing methods, and politicians, such as
former U.S. Secretary of State Hillary Clinton, started calling for
action against the ivory trade as part of the global war on terrorism.
so
In reality, there was no risk that isis would start poaching elephants
in Iraq and Syria, and it should have been clear that combating the
ivory trade outside al Shabab’s areas of influence would do little to
combat terrorism.
Ma
Three factors determine how terrorist groups finance their opera-

tions. The first is the groups’ level of support. Although few disagree
that al Qaeda and isis are terrorist organizations, most other groups are
labeled as terrorists by some governments but not by others—as the
saying goes, one man’s terrorist is another man’s freedom fighter. Hamas
and Hezbollah, for example, are viewed as terrorist organizations by
July/August 2017 97

Peter R. Neumann
the West but operate more or less openly in many Arab countries.
And when groups are involved in civil wars in which all sides are
accused of committing atrocities, they can often count on voluntary
contributions from the people they claim to represent, financial support
from sympathetic charities and diasporas, and even state sponsorship.
Financial regulation can’t eliminate any of these funding sources—only
sustained political pressure, sanctions, or negotiated solutions can.
A second factor determining terrorist groups’ fundraising methods
is the extent to which they can tap into illicit economies. Terrorists
m
often profit from the smuggling of antiquities, oil, cigarettes, counter
feit goods, diamonds, or, indeed, ivory. They usually exploit existing
networks and often collaborate with criminals. Heroin production in
hi
Afghanistan dates back to the 1970s, long before the Taliban arrived
on the scene. Wildlife poaching in East Africa did not begin with the
birth of al Shabab, nor will it end with the group’s collapse. And the
ha
smuggling routes in Iraq and Syria, which have existed for decades,
are certain to outlive isis. As a result, the goods from which terrorist
groups have profited—oil in Iraq, cigarettes in the Sahel, or diamonds
iT
in West Africa—simply reflect one or another region’s illicit economy.
To counter terrorist financing, therefore, governments need to tackle
the underlying economic structures of these regions or, at the very
least, break those structures’ connections to terrorism. Promoting
Al
development, improving governance, and cracking down on corruption

will play a far more important role than preventing terrorists from
using the international financial system.
od
The third factor shaping the ways in which terrorists finance their
activities is their capacity to access legitimate sources of money. U.S.
authorities first knew bin Laden as a financer of terrorism, yet the
sources of his wealth—his family money and the construction and
so
farming businesses he owned—were entirely legal. Likewise, the Irish

Republican Army set up numerous businesses, including taxi services
and hotels, that were properly registered and paid their taxes, but the
group channeled the proceeds toward its armed struggle. Because
Ma
terrorists can draw on legitimate sources of income, cutting off the

spigot is harder than fighting money laundering or organized crime.
MO MONEY MO PROBLEMS
However significant terrorists’ fundraising methods may be, however,
only one thing can truly revolutionize a terrorist group’s finances: the

seizure of territory. Until 2013, isis made most of its money from
protection rackets, Iraq’s illicit economy, and, to a much lesser extent,
foreign donations. But in 2013 and 2014, the group captured vast
swaths of territory in eastern Syria and northern Iraq. By mid 2014,
-
when isis declared its caliphate, some six million to eight million
people lived under its rule.
The group’s finances skyrocketed. In 2014, its budget, according to
the study by King’s College London and Ernst & Young, soared to
$1.9 billion, up from less than $500 million the previous year, 90 per
m
cent of which stemmed from its newly acquired territory. As it seized
land, isis looted banks and shops and confiscated the property of minor
ities and the people who had fled. The capture of Mosul alone, the
hi
caliphate’s commercial capital, probably generated $500 million to
$1 billion—making looting the group’s most significant source of income.
Like the Iraqi and Syrian governments, isis collects taxes, charges
ha
fees, and levies tariffs on trade; the group’s 2014 revenues from such
measures exceeded $300 million. It also imposes fines, typically for
what it considers “un Islamic” behavior, and exploits natural resources,
-
iT
especially oil fields in the eastern Syrian province of Deir ez Zor and
-
in territories in northern Iraq that had been controlled by the Kurds.
Although isis uses most of the oil it acquires for domestic consumption,
it also smuggles some of it into neighboring territories for sale. At its
Al
peak in late 2014 and early 2015, the group earned between $1 million
and $3 million per day from oil revenues.
But isis’ territorial conquests have come at a price. The group has
od
transformed into a quasi state—with all the costs that entails. Now
that it holds so much territory and controls so many people, the group
has to maintain a bureaucracy. And it has to create the utopia it
has promised. No longer able to limit its expenses to funding fighters
so
and buying weapons, the group must pay for schools, hospitals, and
infrastructure and employ judges, teachers, and street cleaners. As isis
has become more like the state it claimed to be, its additional revenue
has been matched by new expenses.
Ma
For international regulators, the rise of isis has presented a challenge,

because none of the group’s major sources of income can easily be
intercepted with financial tools, such as blacklisting individuals or
seizing bank accounts. In a major policy document released in early
2016, the fatf recognized that isis’ “strategy has been to rely on funds
generated within the territory it controls.” Yet all of the document’s
July/August 2017 99

Peter R. Neumann
proposals focused on preventing the group “from exploiting the formal

financial sector.” Given that isis has had little need to use the inter
national financial system, these recommendations made no sense.
That isis’ finances have nonetheless declined—from an estimated
$1.9 billion in 2014 to less than $1 billion in 2016—is due more to military
action than to actions by the fatf. Since October 2015, the U.S. led
-
coalition has targeted the group’s oil infrastructure, transportation systems,
and cash depots. According to the coalition’s figures, by November 2016,
isis had lost 62 percent of its territory in Iraq and 30 percent of its territory
m
in Syria. At the same time as its tax base has shrunk, isis has lost control
over an estimated 90 percent of its oil wells. By thwarting the group’s
territorial expansion, the coalition has also eliminated isis’ ability to
hi
profit from looting. The resulting cash shortage has not only weakened
isis’ military power but also blunted its ideological appeal.
CHEAP THRILLS
ha
Yet these efforts have not impeded the ability of groups such as isis or
al Qaeda to launch or inspire terrorist attacks in the West. Terrorist
iT
operations are cheap, and according to a 2015 study by the Norwegian
Defense Research Establishment, over 90 percent of the jihadist cells
in Europe between 1994 and 2013 were “self funded,” typically through
-
savings, welfare payments, personal loans, or the proceeds of petty
Al
crime. For example, the terrorists who carried out the January 2015
attack on the French magazine Charlie Hebdo were low level criminals
-
who had met in prison and shared a dozen convictions between them.
od
One of them, Chérif Kouachi, had reportedly received $20,000 from

a radical preacher in Yemen seven years earlier, but Kouachi had
probably spent the money by the time he and his collaborators started
planning the operation. Instead, the men financed the attack by taking
so
out fraudulent loans, selling counterfeit sneakers, and dealing drugs.

These crimes generated far more money than they needed—the loans
alone were worth nearly $40,000.
The Norwegian study also found that more than 40 percent of the
Ma
jihadist terrorist plots in Europe between 1994 and 2013 were funded
at least partly through crime. This figure has likely risen, as more and
more criminals have joined groups such as isis. And according to the
German Federal Police, two thirds of the 669 German foreign fighters
-
for whom it possessed information in late 2015 had police records, and
one third had criminal convictions. Alain Grignard, a commissioner
-

in the Belgian Federal Police in Brussels, has described isis as “a sort

of super gang.”
Personal funds are another important source for foreign fighters
traveling to conflict zones such as Iraq and Syria. Reaching Syria via
Turkey, a popular holiday destination for many Europeans, is cheap—
in most cases, it costs less than $1,000 for a budget airline ticket and
the trip to the airport. To pay for their travel, many jihadists have
used their own savings and welfare payments or taken out small loans;
others have borrowed money from their friends or family. In one case,
m
a young man in the United Kingdom who hoped to make it to Syria
convinced his mother that he needed a new laptop; in another, in
Germany, the excuse was a school trip. Even the most sophisticated
hi
methods of following the money through the global financial system
would not catch these transactions.
What’s more, unlike al Qaeda, which tried to convince its supporters
ha
to build homemade bombs, isis, more than any other jihadist group,
appears to understand that sowing terror requires neither explosives
nor sophisticated skills nor money. “If
iT
you can kill a disbelieving American or
European,” the group’s spokesperson,
ISIS’ territorial conquests
Abu Muhammad al Adnani (who has have come at a price.
-
since been killed), declared in a 2014
Al
speech to Western supporters, “then rely upon Allah, and kill him in
any manner or way however it may be: smash his head with a rock, or
slaughter him with a knife, or run him over with your car, or throw
od
him down from a high place, or choke him, or poison him.”

These instructions have inspired many of the most devastating
attacks in recent years. In the summer of 2016, a 16 year old boy
-
-
attacked passengers on a commuter train in southern Germany with
so
an ax, and in France, two men who entered a Catholic church beheaded
an 85 year old priest with knives. Terrorists have also used vehicles,
-
-
attempting on two occasions in 2014 to drive cars into crowds at
French Christmas markets. In July 2016, a truck killed 86 people
Ma
during the Bastille Day celebrations in Nice, and later that same year,
a jihadist drove a truck into a Christmas market in Berlin, killing 12.
And in March 2017, near the Houses of Parliament in London, an
attacker drove his car into a crowd and then stabbed a policeman.
None of these attacks cost more than $300—the price of renting the
truck in Nice. The majority of them cost nothing at all.

Peter R. Neumann
DON’T TAKE IT TO THE BANK

More than a decade and a half into the war on terrorist funding, policy
makers must recognize the drawbacks of their current approach. Financial

tools cannot stop lone attackers from driving cars into crowds, nor can
they do much when groups such as isis hold territory and earn most
of their income from within it. Policymakers need to acknowledge that
the war on terrorist financing, as it has been conducted since 2001, has
often been costly and counterproductive, harming innocent people and
companies without significantly constraining terrorist groups’ ability
m
to operate. Unless governments find ways to revolutionize how they
share information with the financial sector, most of the current procedures
for identifying suspicious transactions will continue to be little more
hi
than costly box ticking exercises.
-
Instead, governments should integrate their efforts to restrict terrorist
financing into their wider counterterrorism strategies. Instead of delegat
ha
ing this mission to finance ministries, which perpetuate the excessive
focus on the banking sector, governments should include it in broader
political, diplomatic, and military decisions. At times, actions aimed
iT
at countering terrorist funding may involve the financial system, but
on other occasions, governments should use the military and law
enforcement instead. In January 2016, for example, the U.S. military
bombed isis’ cash depots, destroying tens of millions of dollars in a
Al
single day—more than the entire international financial system had

seized since the rise of the caliphate.
Finally, methods for countering terrorist financing should be tailored
od
to the group and the theater being targeted. Terrorist groups raise
money in myriad different ways, but governments tend to respond
with the same narrow set of counterterrorism tools. Choking off
terrorist financing in Brussels should look very different from doing
so
the same in Raqqa. In Brussels, it may involve cracking down on gangs

and petty crime; in Syria, it requires bombing oil facilities and cash
depots. Instead of lobbying for Security Council resolutions, govern
ments should pursue a more pragmatic and targeted approach to
Ma
deprive terrorists of their money. After spending over 15 years and

billions of dollars on a strategy that has had little discernible impact,
it’s past time for a new approach.∂

Keine Atombombe, Bitte

Why Germany Should Not Go Nuclear
Ulrich Kühn and Tristan Volpe
m
he election of U.S. President Donald Trump last November
confounded Berlin. What, German politicians, policymakers,
and journalists wondered, should they make of Trump’s vague
hi
or even hostile stances toward the eu and nato or his apparent
embrace of Russia? Some hoped that Trump meant to push nato
members to spend more on defense but would, in the end, leave the
ha
long standing U.S. guarantee of European security intact. Others,
-
less optimistic, argued that the days when Germany could rely on the
United States for its defense were over—and that the country must
iT
start looking out for itself.
Those fears have given new life to an old idea: a European nuclear
deterrent. Just days after Trump’s election, Roderich Kiesewetter, a
senior member of Chancellor Angela Merkel’s Christian Democratic
Al
Union, said that if the United States no longer wanted to provide a

nuclear shield, France and the United Kingdom should combine their
nuclear arsenals into an eu deterrent, financed through a joint eu
od
military budget. Then, in February, Jaroslaw Kaczynski, the leader of

Poland’s ruling Law and Justice party, spoke out in favor of the idea
of the eu as a “nuclear superpower,” as long as any eu deterrent
matched Russian capabilities.
so
Some German commentators even suggested that those proposing

a British French deterrent under the auspices of the eu didn’t go far
-
enough. Berthold Kohler, one of the publishers of the influential
conservative newspaper Frankfurter Allgemeine Zeitung, argued that
Ma
the British and French arsenals were too weak to take on Russia. He
suggested that Germany consider “an indigenous nuclear deterrent
which could ward off doubts about America’s guarantees.” Other
ULRICH KÜHN and TRISTAN VOLPE are Fellows in the Nuclear Policy Program at the
Carnegie Endowment for International Peace. Follow them on Twitter @UliTKuehn and
@TeeAndersVolpe.

German analysts, such as Thorsten Benner, head of the Global Public

Policy Institute, in Berlin, and Maximilian Terhalle, a scholar of
international relations, have come to the same conclusion. “Germany
needs nuclear weapons,” Terhalle wrote in Foreign Policy in April.
For now, those calling for a German bomb are a fringe minority.
For decades, Germany has stood as one of the world’s staunchest
supporters of nuclear nonproliferation and global disarmament. In
February, a spokesperson for Merkel told the press, “There are no plans
for nuclear armament in Europe involving the federal government.”
m
She and others evidently recognize that such plans are a bad idea: a
German arsenal would destabilize eu Russian relations and heighten
-
the risk that other countries would attempt to go nuclear.
hi
But even though Germany’s current nuclear flirtation may reflect
nothing more than a passing reaction to Trump’s presidency, it reveals
a deeper problem: insecurity in Berlin, caused by years of meandering
ha
U.S. policy toward Russia and Europe. To solve this problem, Germany
and the United States must work together. Merkel’s government should
encourage the eu to coordinate more effectively on defense. The
iT
Trump administration, meanwhile, should double down on the U.S.
commitment to the success of the eu and nato while also pushing for
broader negotiations with Russia over the future of European security.
Al
THE SHADOW OF THE PAST

Over the last decade, Europe has experienced a series of intensifying
crises, culminating in Russia’s annexation of Crimea in 2014. Each
od
time, Germany, as the eu’s largest country, has led the response. In
2015, for example, Germany led the negotiations between Russia and
Ukraine that resulted in a shaky cease fire. But every time Germany
-
takes the lead, its neighbors recall history and grow nervous about
so
German hegemony over Europe.

Such fears go back at least as far as the creation of the modern Ger
man state in 1871. From then until the country’s partition after World
War II, European leaders confronted “the German question,” a simple
Ma
but unsolvable dilemma. Germany’s size meant that no single Euro

pean country could ever balance its economic or military power. Yet
Germany was never powerful enough to rule over Europe alone. Part
of the problem stemmed from the country’s so called Mittellage, its
-
location at the center of Europe, surrounded by potentially hostile
coalitions. Germany responded to external threats by pursuing what

historians have called its Sonderweg, or “special path,” a term used to

describe the country’s affinity for authoritarian rule and attempts
to impose that rule throughout Europe. Whenever it did that, the
resulting wars devastated the continent.
Germany’s partition—after Hitler led the country’s last and most
disastrous attempt to rule over Europe—temporarily solved these
problems. West Germany could not dominate Europe during the
Cold War since the struggle between the East and the West subsumed
European rivalries. And after reunification, in 1990, the institutional
m
bonds of the eu and nato prevented
the German question from recurring.
Surrounded only by friends, Germany
The halcyon era for
hi
did not have to worry about its Mittellage. Germany ended abruptly
At the same time, the U.S. military in 2009.
retained a limited presence in Europe
ha
(including Germany), and the former western Allies successfully
transformed Germany into a peaceful and democratic nation, making
the pursuit of Sonderweg unthinkable. The U.S. security guarantee
iT
also allowed Germans to maintain their largely antimilitaristic stance,
reap the economic benefits of peace, and, at times, claim the moral
high ground over Washington for its overreliance on military power.
This halcyon era for Germany ended abruptly in 2009. The Great
Al
Recession and the subsequent eu debt crisis led many eu countries

to demand German leadership. But when Germany imposed its
solutions on the rest of the continent—for example, by insisting that
od
southern European countries follow austere economic policies—it

triggered accusations of rising German hegemony. In 2015, for
example, the ruling Greek Syriza party claimed that Germany had
threatened “immediate financial strangulation” and “annihilation” of
so
Greece if the Greek government rejected the harsh terms of the

proposed eu bailout.
The first major shock to European security came in 2014, when
Russia invaded Ukraine. Merkel’s once pragmatic relationship with
Ma
Russian President Vladimir Putin deteriorated rapidly. Sidelining

the United States, Germany joined France in brokering a shaky truce
in eastern Ukraine, led eu efforts to impose sanctions on Russia, and
sent German forces to reassure nervous Baltic nato allies. Years of
mercurial U.S. policy toward Moscow that veered back and forth
between efforts to repel Russian influence in eastern Europe and

attempts to “reset” the strained relationship left Germany with little

choice but to take the lead.
Against this backdrop, Trump’s election heightened the tensions
among competing factors: the need for German leadership, the limits
of German power, and Europe’s intolerance of German dominance.
During the campaign, Trump displayed indifference to the possible
breakup of the eu and praised nationalist political movements such
as the Brexit campaign, a stance that threatened Germany’s core
political identity as the heart of the eu and put pressure on Berlin to
m
defend the union. Worse still, by declaring nato “obsolete,” Trump
undermined the system that has kept Europe safe and Germany
restrained for over half a century.
hi
But worst of all, by appearing to cozy up to Putin, Trump put
Germany in a new Mittellage—this time between the White House
and the Kremlin. The effect was not confined to Germany; the
ha
prospect of a rapprochement between Putin and Trump has left the
entire eu in an uncomfortable position. In January, when Donald
Tusk, the president of the European Council, ranked the threats facing
iT
the eu, he highlighted not just the traditional menaces of jihadism
and Russian aggression but also “worrying declarations by the new
American administration.” Across the continent, leaders feared that
Trump would support populist forces seeking to break up the eu or
Al
trade away the U.S. nuclear guarantee of European security in a

grand bargain with Russia.
od
A DANGEROUS IDEA
Should Europe find itself caught between a hostile Russia and an
indifferent United States, Berlin would feel pressure to defend Europe
militarily rather than just politically. But then it would face the problem
so
of how to guarantee European security without reviving fears of

German hegemony. And if Germany boosted its military power without
integrating it into the European project, that might well lead to
German isolation and the breakup of the eu.
Ma
Nuclear weapons seem to offer Germany a way out of this impasse.

In the eyes of their proponents, they would deter existential threats
and reduce European dependence on the United States without raising
fears of German dominance. “Nuclear power projection on the part of
Berlin would be accepted as legitimate,” Terhalle wrote, because
“World War II has no real political weight in today’s relations.” Instead,

m
hi
ha
Bombs away: at an antinuclear demonstration in Biblis, Germany, April 2010
iT
it is the “perception of threat from Russia” that determines policy in
central and eastern European countries. This claim rests on a shaky
foundation. Russia’s actions in eastern Ukraine may be driving
Al
European nations together, but the fear of a German resurgence has

not gone away entirely. If Germany built nuclear weapons, the eu’s
current unity would quickly fracture.
od
Even if the rest of the eu accepted German nuclear weapons, that

would not end Europe’s security woes. Nuclear weapons cannot deter
the kind of limited wars Russia has waged so successfully in Crimea
and eastern Ukraine, whoever provides the deterrent. Even simply
so
replacing the U.S. nuclear deterrent for Europe with a German or

euled one would not be easy. The United States struggled for much
of the Cold War to convince the Soviet Union that it would defend
West Berlin with nuclear weapons, especially given the Soviets’
JOHANN ES EIS ELE / REUTE RS
Ma
conventional military superiority; Germany would face the same

problem as it tried to persuade Russia of its willingness to use nuclear
force to defend other eu countries, especially the Baltics, which are
under the greatest threat from Russia.
Both France and the United Kingdom already possess nuclear
weapons. Their experiences offer mixed lessons of the benefits of a

nuclear arsenal. Both gained some independence from the United

States after fielding their own nuclear forces, yet both still relied on
the United States to supply conventional military force in Europe,
and neither country’s nuclear arsenal
could match the Soviet Union’s. Nor
Nuclear weapons cannot did their nuclear forces do a great deal
deter the kind of limited to improve nato’s collective defense.
wars Russia has waged Only the United Kingdom pledged to
so successfully in Crimea use its deterrent to defend other nato
m
members, while France stayed outside
and eastern Ukraine. nato’s nuclear structure. And it took
the United Kingdom a great deal of time
hi
and effort to make its commitment credible. Germany should remem
ber that simply possessing nuclear weapons does not automatically
make allies more secure. ha
Regardless of the ultimate effect of a nuclear arsenal, Germany
would have to surmount major technical, political, and security
hurdles before acquiring one. It would need to either repurpose its
iT
nuclear energy infrastructure for weapons production or sprint to
the bomb from new military facilities. Either path would take substan
tial time and effort. Each would involve activities that, if detected,
would ring alarm bells. Germany would struggle to keep any effort
Al
to build nuclear weapons in military facilities secret given the vast

construction work this would involve. Nor could it simply rely on its
civil nuclear infrastructure. In the wake of the 2011 Fukushima
od
nuclear accident in Japan, Merkel’s government decided to phase out

all of Germany’s nuclear power plants by 2022. This decision makes
it difficult for Germany to take technical steps toward the bomb
under the guise of a peaceful program. Even seemingly innocuous
so
moves, such as keeping a few large reactors online past the deadline,
would raise suspicions.
In any case, the time would eventually come when Germany could
no longer hide its nuclear ambitions. At that point, the German govern
Ma
ment would face intense domestic political opposition and perhaps

even civil unrest from a population that determinedly opposes nuclear
weapons. A March 2016 poll found that 93 percent of Germans favor
an international ban on nuclear weapons and that 85 percent would
like to see the United States remove all its nuclear weapons from
Germany. The German population would not back a public nuclear

weapons program, and any leader who authorized a clandestine effort

would face political ruin.
Moreover, a German nuclear arsenal would risk bringing down the
international nonproliferation regime. Before acquiring the bomb,
Germany would have to leave the Nuclear Nonproliferation Treaty, a
move that would threaten the continued existence of the treaty itself.
Despite the npt’s successful record, the treaty’s future already looks
uncertain. Under the npt, states with nuclear weapons agreed to
pursue disarmament, but in recent years, progress toward this goal
m
has stalled, and nonnuclear states have increasingly voiced their frus
tration that the nuclear weapons states have not fulfilled their promise.
A foundational goal of the treaty, moreover, was to keep Germany
hi
from building nuclear weapons. If Berlin defected, the nonproliferation
regime might collapse entirely, because other countries would no
longer feel bound by the treaty’s collective bargain.
ha
Germany would also need to modify or withdraw from the so called
-
Two Plus Four Treaty, the agreement on reunification that East and
West Germany signed with France, the Soviet Union, the United
iT
Kingdom, and the United States in 1990. In that document, Germany
affirmed its “renunciation of the manufacture and possession of and
control over nuclear, biological, and chemical weapons.” The treaty
was meant not only to end the Cold War but also to prevent any
Al
future German Sonderweg; abrogating it would bring back the German

question and deliver an affront to the four countries that paid such
enormous costs to defeat Nazi Germany in World War II.
od
Worst of all, the pursuit of a German nuclear arsenal, rather than

deterring aggression, could increase the risk of conflict in Europe, since
Russia would likely work to prevent Germany from acquiring the bomb.
Moscow could assassinate German nuclear scientists, use cyberattacks
so
to sabotage German nuclear industrial infrastructure, and perhaps go

so far as to strike German nuclear facilities from the air. Even covert
operations could quickly spiral into outright confrontation.
Even if Germany managed to acquire nuclear weapons, it would
Ma
then face the daunting task of making sure they could survive a Russian
attack. In recent years, Russia has moved its missiles westward,
targeting Germany and other nato members. Now that Russia has
allegedly deployed multiple cruise missiles in violation of the 1987
Intermediate Range Nuclear Forces Treaty, under which the Soviet
-
Union and the United States agreed to abandon midrange missiles, its

ability to destroy a fledgling German nuclear stockpile is only growing.

Unless Germany managed to conceal and protect its nuclear weapons
almost immediately, German leaders could, during a crisis with Russia,
feel pressure to launch a preemptive nuclear attack against Russia in
order to avoid losing the arsenal to a Russian first strike.
These formidable barriers to a German nuclear program have led some
to return to the idea of a British French deterrent. But the United
-
Kingdom’s impending departure from the eu leaves Germany with
the sole option of reaching out to France. This would not be the first
m
time that France and Germany have considered a joint European
nuclear deterrent. In 1957, shortly after the Suez crisis, when tensions
between France and the United States were running high and the
hi
French government began to doubt the credibility of the U.S. nuclear
guarantee, France suggested to Italy and West Germany that the
three countries develop nuclear weapons together. The next year,
ha
French President Charles de Gaulle took office and quickly canceled
the secret negotiations and began an indigenous French nuclear
program, only to raise the prospect of nuclear cooperation again with
iT
German Chancellor Konrad Adenauer in 1962. And in the 1990s,
France offered to extend its nuclear umbrella to Germany after
reunification in an attempt to decrease U.S. influence in Europe. All
these efforts failed, in part because the French consistently refused
Al
to relinquish control over their arsenal, as to do so would have been

to give up French autonomy in foreign policy. This calculus has not
changed, a fact that should give German policymakers pause today.
od
Moreover, by reviving such talk, Berlin risks giving isolationist

elements in the Trump administration exactly what they want: an
excuse to disengage.
so
STRONGER TOGETHER
Nuclear weapons will not solve Europe’s current woes, but Washington
should not dismiss German nuclear yearnings, as they reflect a grow
ing sense of uncertainty in Berlin. This uncertainty stems from an
Ma
incoherent U.S. policy toward Russia, which began well before Trump
took office. Since 2000, Washington has faced competing policy options:
focus only on defending nato allies and containing Russia; offer
indefinite support to former Soviet states, such as Georgia and Ukraine,
that struggle under Russian dominance; or cooperate with Russia to
tackle global security challenges.

The United States has experimented with all three. It has welcomed
new countries into nato despite dire, if vague, warnings from Russia.
Washington continues to keep the door to the alliance open in the
hope that former Soviet states will eventually join, but it lacks the
resolve to force Moscow to respect the sovereignty of countries such
as Georgia and Ukraine. At the same time, successive U.S. adminis
trations have tried to cooperate with the Kremlin on various issues,
such as counterterrorism and stopping the Iranian nuclear program.
Three years after the annexation of Crimea and the start of the war
m
in Ukraine, Washington has yet to choose a clear policy. This incon
sistency, coupled with Russian aggression, has led Europe to the brink
of a new Cold War. Add to this Trump’s erratic stances toward Russia
hi
and nato, and it is not surprising that Europeans are asking what
Washington’s long term priorities really are and how the United States
-
intends to achieve them. ha
This crisis in transatlantic relations presents many perils, but it
also offers opportunities for leaders in Berlin and Washington. For
Germany, that means taking practical steps to increase Europe’s
iT
ability to provide for its own conventional security, not proposing
dangerous nuclear fantasies. Germany should not focus on nato’s
blunt spending goal of two percent of gdp but instead seek closer
cooperation among national eu militaries; contribute larger and better
Al
-
equipped forces to the eu Battlegroups; encourage eu countries to
avoid duplicating one another’s military R & D, production, and
procurement; overcome German national pride and work to develop
od
a common European defense industry; and increase the resilience of

eu states to Russian propaganda.
For its part, Washington must recognize the limits of U.S. power
and focus on strengthening its existing alliances in Europe. To that
so
end, it should send more high ranking officials to the Baltics and
-
deploy another light battalion to the region to reinforce U.S. security
commitments to nato’s most vulnerable eastern members. Washington
should also probe whether Moscow’s aims are limited to protecting its
Ma
core interests in the former Soviet states or whether the Kremlin has
broader ambitions. To this end, U.S. officials should put the option of
ending nato’s open door policy on the table during future negotiations
-
with Russia over the war in eastern Ukraine. Should this strategy fail
to stop the Kremlin from threatening nato members, the United
States could always return to its proven approach of containment.

For this policy to work, Germany must play its well established
-
role of interlocutor. Washington should take up a long standing
-
German suggestion to embark on a round of negotiations concerning
European security among Russia, the United States, and all European
countries. In 1975, a similar meeting in Helsinki improved communi
cation between the Soviet and U.S. militaries and produced a
tentative commitment to respect individual rights and freedoms. Eu
and U.S. officials should aim for an agreement that increases the
security of both nato members and Russia, ends the bloodshed in
m
Ukraine, and helps develop the economies of former Soviet states.
Past U.S. administrations have shown few signs that they believe in
such a vision. The Trump administration should take this opportunity
hi
to rethink U.S. policy.
As the sudden desire for nuclear weapons in Germany demonstrates,
even offhand remarks calling into question European security can have
ha
serious consequences. So the Trump administration should change
its tune and instead buttress the eu and nato whenever possible. It
should also offer a broader vision for Russian and European security.
iT
U.S. leadership would allow Germany to delicately balance the eu’s
need for direction against its fears of German hegemony. Together,
Germany and the United States can renew the transatlantic bonds on
which Europe is built.∂
Al
od
so
Ma

Start-Up Palestine
How to Spark a West Bank Tech Boom
Yadin Kaufmann
m
or decades, Israeli and Palestinian politicians have pursued a
political solution to the Arab Israeli conflict, only to see their hopes
-
dashed again and again. Today, the prospects for a comprehensive
hi
peace agreement remain dim. Policymakers must therefore start looking
for other ways to improve the situation on the ground and preserve the
possibility of a two state solution.
ha
-
Creating a viable Palestinian economy will be central to this effort.
Should the Palestinian economy collapse, that failure would hurt Pales
tinians and their neighbors just as much as a failed political state would.
iT
And it would jeopardize their future as well, since no peace deal will
succeed unless the Palestinian economy is able to stand on its own.
The idea of economic development as a precursor to peace is not new.
But so far, efforts to boost growth have largely failed. Per capita gdp in
Al
the Palestinian territories is currently just $2,000, and a quarter of the

labor force is unemployed. What growth the economy has achieved has
come primarily from foreign aid and cash remittances from Palestinian
od
workers abroad. And that aid—which in any case has done little to create
good, high paying jobs—has been declining since 2012.
-
As the economy has stagnated, a sense of despair has grown among
many Palestinians. Such hopelessness, combined with the already vola
so
tile mixture of religious extremism, a large population of young people,

and a stalled peace process, could prove extremely dangerous.
To break out of this trap, the Palestinians must look to private industry,
not external aid agencies or the territories’ bloated public sector, to
Ma
drive growth. More specifically, technology start ups offer the best
-
path forward. High tech start ups create well paying jobs and support
-
-
-
growth elsewhere in the economy while avoiding many of the roadblocks
that prevent other Palestinian businesses from succeeding.
YADIN KAUFMANN is a Founding Partner at Veritas Venture Partners and Co-Founder of
Sadara Ventures, the first venture capital fund to invest in Palestinian technology companies.

Yadin Kaufmann
That said, the Palestinians cannot create a thriving technology eco

system by themselves anytime soon. Israel and the United States will
have to help. If entrepreneurs, engineers, and venture capitalists from
all three places work together, they can generate prosperity and hope
for millions of Palestinians—and perhaps improve the dimming prospects
for peace.
INVESTMENT OPPORTUNITY
The West Bank has a small technology sector, but it is already changing
m
the economy. As recently as five years ago, the territory had no
venture backed start ups. Today, it boasts several local investment
-
-
funds and accelerators, and multiple international funds have made
hi
initial investments in the territories. At least 15 start ups have received

-
some funding and are developing products and services aimed at
foreign markets, primarily in the Gulf states. Thanks in part to these
ha
companies, the Palestinian technology sector now employs around
8,500 people, up from 5,000 in 2011. The sector now accounts for
over six percent of Palestinian gdp and is growing at around ten
iT
percent each year.
Most Palestinian technology companies are relatively young, having
been founded in the past five years. And that youth is an asset: although
most start ups fail, those that succeed go on to create more jobs than
Al
-
established firms and generate great wealth for their founders and key
employees. In the Palestinian territories, each new job in the technology
sector contributes $190,000 in economic output every year, compared
od
with an average of $16,000 for jobs in other sectors. And technology

jobs offer the highest wages: an average of $29,000 per year, compared
with less than $6,000 for jobs in other parts of the economy. Thanks to
those high wages, each technology employee helps create another three
so
jobs—by eating out at local restaurants, buying goods in local stores,

and purchasing new homes.
So far, however, the emerging Palestinian technology sector has
not been able to create enough opportunities to turn the local econ
Ma
omy around, or to stem the territories’ long running brain drain.

-
Every year, around 2,500 Palestinian students graduate with degrees
in fields related to information technology. But since local technology
jobs remain scarce, many of them must either leave their chosen
profession or leave the territories. Both types of exoduses damage
the economy.

Start-Up Palestine
This situation is all the more frustrating because a huge market

awaits would be Palestinian technology entrepreneurs. In recent years,
-
Arabs in the Middle East have adopted new technologies faster than
people anywhere else in the world. The number of Arabic speaking
-
Internet users has soared from an estimated five million in 2001 to
more than 170 million today. The proportion of the population using
smartphones in the countries of the Gulf Cooperation Council (gcc)—
Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab
Emirates—is among the highest in the world. E commerce is also
m
-
growing quickly throughout the region. Frost & Sullivan, a consulting
firm, has estimated that by 2018, it will reach $10 billion a year in the
United Arab Emirates alone.
hi
Yet Arabic language Internet content has not kept pace; start ups
-
-
have only recently begun to supply the sorts of sites and services in
Arabic that Western users have flocked
ha
to for years. Part of the problem is that
Western technology companies don’t
Israel has refashioned
have a firm grasp of Arab cultural and itself into a global
purchasing norms; for example, few peo technology leader.
iT
ple in the Arab world use credit cards
online. Western technology firms have generally avoided making
investments in the region, preferring to focus on larger and more
Al
familiar markets closer to home or in Asia. Technology sectors have

sprung up in recent years in several Arab countries, notably Dubai,
Egypt, and Jordan, but they are still small.
od
If Palestinian entrepreneurs can find a way to fill some of these gaps,

they will transform their society. To understand the potential impact,
look no further than next door Israel. In the mid 1980s, the Israeli
-
-
economy still reflected the country’s socialist origins. Per capita gdp
so
was around $6,000 in today’s dollars. Growth was sluggish, inflation

was rampant, and the country’s best known export was oranges. Today,
-
by contrast, Israel’s per capita gdp stands at $36,000. The country has
refashioned itself into a global technology leader with a concentration
Ma
of entrepreneurial activity and success second only to that of Silicon

Valley. Spurred by its excellent schools and universities, military
conscription, strong links to the United States, and several government
programs to encourage investment in high tech start ups, Israel has
-
-
truly become the “start up nation” about which Dan Senor and Saul
-
Singer first wrote in 2009.

Yadin Kaufmann
To be sure, the Palestinian economy is currently even weaker than

Israel’s was in the mid 1980s. The territories also lack several elements
-
that contributed to Israel’s growth: a powerful military that funds tech
nology research; an influx of engineers and scientists from the former
Soviet Union in the early 1990s; and, of course, sovereignty. The
occupation and the persistent threat of violence drive talented young
people away from the West Bank and Gaza, prevent many Palestinians
from adopting advanced technologies, make traveling to and within
the territories more difficult, and discourage foreign investment. What’s
m
more, the Palestinian educational and legal systems are in dire need of
reform; schools generally focus on rote learning rather than critical
thinking, and local laws do not allow Palestinian companies to use
hi
various legal and financial tools, such as issuing preferred shares for
investors or stock options for employees, that technology companies
elsewhere rely on. ha
Still, Palestinian society today shares many similarities with pre
-
boom Israel. Like Israel in the mid 1980s, the Palestinian territories
-
have a small domestic market and few natural resources, so growth must
iT
come from a well educated work force that can export to the wider
-
world. Like Israel, the West Bank and Gaza boast a young and educated
population, a sizable network of well placed expatriates working in
-
technology companies, and access to a vast potential foreign market.
Al
Israeli companies have traditionally targeted consumers in the United

States; Palestinian start ups could target the 390 million inhabitants
-

of the Arab world. The technology revolution in Israel has generated

od
vast export revenues, attracted billions of dollars in foreign invest

ment, invigorated the Israeli economy, and improved Israel’s global
standing. Repeating the formula has the potential to do the same for
the Palestinian territories.
so
Growth led by technology start ups would allow Palestinians to evade

-
many of the constraints currently holding their economy back. Selling
digital services to the Arab world would reduce the Palestinians’ extreme
dependence on trade with Israel, which today accounts for around 82
Ma
percent of exports from the territories. Digital exports would also largely
avoid Israeli security restrictions on shipments of physical goods. And
political tensions would not have a significant impact on technology
companies, since they generally don’t require large investments or
government involvement. A few talented people with an idea and some
seed capital can form a start up quickly, and largely on their own.
-

Start-Up Palestine
m
hi
ha
Looking for networks: a freelance Web programmer in Nablus, West Bank, April 2013
BUILD IT, AND THEY WILL COME
iT
The idea that the technology sector could lead Palestinian develop
ment is not as fantastic as it might sound: several Palestinian startups
have already developed products aimed at export markets and are growing
fast, offering living proof of what others can hope to achieve.
Al
So far, most Palestinian startups have taken models that have

worked elsewhere, such as online hotel booking, and customized them
to suit Middle Eastern markets. No Palestinian technology company
od
has yet achieved the ultimate goal of technology firms: selling them
selves to a larger corporation or going public by listing their shares on
a stock exchange. But several are making rapid progress, and such
“exits,” as they are known in the tech world, will come. When they do,
so
they will provide a major boost to the entire sector. A few successes will
encourage more talented young Palestinians to start businesses and
tempt others who left for greener pastures abroad to return, bringing
MOHAMAD TO ROKMAN / REUTE RS
valuable experience back with them. Once investors see an investment

Ma
in a Palestinian technology company turn a profit, more capital will

flow into the region. The founders and employees of the first wave of
startups will take the experience and networks they’ve built and start
new ventures. Multinational companies will take notice and establish
joint enterprises with Palestinian startups, invest in them, or even
acquire them as a way to increase their market share in the Middle

Yadin Kaufmann
East. This is the way of technology ecosystems everywhere; the same

virtuous cycle powered the development of Silicon Valley and the Israeli
high tech boom.
-
START-UP REGION
The Palestinian technology sector is unlikely to complete this cycle by
itself anytime soon, however, and the region can’t afford to wait. The
territories’ educational, legal, and regulatory systems need reform. Israeli
restrictions on movement into and within the territories hamper business
m
and restrict some foreigners, especially Israelis, from visiting. Worst of all,
Palestinian entrepreneurs currently work in near isolation. No multinational
technology company has an office in Ramallah, and foreign executives
hi
rarely visit. And to date, only a handful of experienced Palestinian
expatriates have returned home. The typical Palestinian entrepreneur has
never worked at a technology company and does not know many people
ha
who have. Finally, there are few experienced Palestinian technology inves
tors who can make introductions and advise novice founders.
This is where Israel can help. Israel’s technology sector has benefited
iT
hugely from cooperation with the established technology and financial
ecosystems in Silicon Valley, in the Route 128 area around Boston, and
on Wall Street. Countless Israeli engineers studied in the United States,
gained experience at leading U.S. companies, raised funding from U.S.
Al
sources, partnered with U.S. firms for development and marketing,

sold their businesses to U.S. based companies, or took them public on
-
the Nasdaq.
od
Israel can play the same role for aspiring Palestinian entrepreneurs
today. The country is home to outposts of 300 of the world’s leading
multinational corporations, including such giants as Amazon, Apple,
Facebook, Google, and Microsoft, most of which have already acquired
so
Israeli companies. The Israeli R & D operations of Cisco, Microsoft,

and others have begun to work with Palestinian developers; many others
will find natural partners across the Green Line.
Hundreds of Israeli entrepreneurs have already completed the jour
Ma
ney from idea to exit and thus can provide contacts and mentoring.
Some of them operate in the same sectors as Palestinian entrepreneurs,
such as e commerce, Internet services, and gaming, and so can help them
-
access and understand international markets. Israeli venture capitalists,
some of whom represent the leading Silicon Valley funds, can provide
funding and support.

Start-Up Palestine
Best of all, cooperating to build Palestinian start ups is in Israeli’s
-
self interest. Unlike the political negotiations between the Israeli and
-
Palestinian governments, business dealings are not zero sum. Israeli
-
technology companies are largely shut out of the huge Middle Eastern
market, as a result of cultural, legal, and political barriers. Partnering
with Palestinian companies—whose employees speak Arabic, under
stand Arab cultures, and in some cases have worked in Gulf countries—
could change all of that.
Experienced Israeli entrepreneurs could also employ Palestinians
m
directly. Israel’s booming technology sector has created an extremely
competitive market for talent, making educated West Bank developers
attractive to Israeli employers. These
hi
employers also understand the benefits
of creating jobs for those nearby rather
Entrepreneurs everywhere
than bringing in workers from, say, India tend to shun ideology in
ha
or eastern Europe at a similar cost. Again, favor of pragmatism.
a few bold firms have already shown the
way. In 2012, for example, Zvi Schreiber,
iT
a British Israeli serial entrepreneur, founded Freightos, an online
freight marketplace aimed at simplifying the logistics of the global
shipping market. The company has raised venture capital funding

from several international investors, including Sadara Ventures, a firm
Al
I co founded. Most recently, in early 2017, Freightos raised $25 million

-
from a group of funders led by ge Ventures. Schreiber decided to build
his R & D team in Ramallah and recruited a Palestinian engineer,
od
Fareed Qaddoura, who had spent years in senior positions at Amazon

in Seattle, to be the company’s chief technology officer. Today, Qaddoura
manages a team of several dozen engineers in Ramallah and Jerusalem
for the fast growing company.
-
so
Such companies reveal the potential for cross border cooperation.

-
Although Israeli and Palestinian entrepreneurs have vastly different life
experiences, they face many of the same challenges, and they know that
they have a stake in each other’s future. Entrepreneurs everywhere tend
Ma
to shun ideology in favor of pragmatism. And many Israeli entrepreneurs

understand that Palestinian economic development will reduce political
tension—and thus is in their country’s interest as well as their own.
Over the past three years, the Palestinian Internship Program, which
I started in 2014, has brought several dozen recent Palestinian university

Yadin Kaufmann
graduates in engineering and finance to Israel for three month intern
-
ships at multinational and Israeli companies. The program helps interns
gain valuable skills and contacts, while also benefiting their host
companies and changing Israeli attitudes. The signs of the shift aren’t hard
to find. A decade ago, when I first started working with Palestinians in
the technology sector, friends and colleagues typically thought I was
crazy. “What could you possibly be looking for in Ramallah?” they
asked. Today, many Israelis get it. Once they hear about the technology
story unfolding in the Palestinian territories, they see the hope such
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programs represent. People no longer ask what’s wrong with me. Instead,
they ask, “How can I help?”
hi
FOUNDATION FOR PEACE
Economic growth will not solve the Israeli Palestinian conflict on its
-
own; only a political solution can address Palestinians’ aspirations and
ha
Israelis’ concerns about security. But a solid economic footing and busi
ness partnerships across the border would help politicians reach a deal
and ensure that a future Palestinian state endures.
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Palestinian economic development, especially if it comes in part from
working with Israelis, would also isolate violent extremists and strengthen
those Palestinian factions that favor a two state solution. Indeed, it would
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create important lobbying groups for a political settlement on both sides
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of the Green Line. The experiences of Northern Ireland and South

Africa show that lobbying by businesspeople can help bring peace. The
same could work for the Israelis and the Palestinians.
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Bilateral business relationships can undo the damaging myth—

promoted by partisans on both sides—that there is “no partner for peace.”
Many Israelis currently blame the Palestinians for responding to the
2005 Israeli withdrawal from Gaza by attacking Israel with rockets rather
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than by building their own economy. Were the Palestinians to focus on

entrepreneurship today, that might begin to change Israelis’ minds.
Those Israelis who help Palestinian technology businesses will also help
change attitudes on the other side, among a people who have come to see
Ma
Israelis as only soldiers and settlers.

Of course, changing such attitudes will not be easy. Many Palestinians
believe that until the Israeli occupation of the West Bank ends and a
Palestinian state is established, Palestinians must refrain from doing
anything that treats the status quo as normal. This position has deterred
many Palestinian businesspeople from openly cooperating with Israelis.

Start-Up Palestine
But those who believe in a two-state solution should strongly

support cooperation. Palestinian-led boycotts of Israeli goods and
services have not had a significant economic impact on Israel—but they
have helped condemn the Palestinian economy to slow growth. Some
Palestinians still fear that those Israelis promoting economic cooperation
with Israel are hoping to buy them off by trading prosperity for their
acquiescence in the continued Israeli occupation of the West Bank.
Yet Palestinians need not waive their political demands in order to
work with Israeli technology companies and investors. On the con-
m
trary, increased business interaction will make Israelis more sympa-
thetic to Palestinian aspirations, since they will be hearing about
them directly from their business partners.
hi
Although many Palestinians might prefer to find other partners to
build their emerging technology sector, only the Israelis can provide
the necessary knowledge and assistance in the near term. Distance,
ha
fear, and ignorance combine to ensure that there is little appetite among
technology entrepreneurs outside the region for engaging deeply in the
Arab Middle East. Few people are even aware that a Palestinian
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technology ecosystem is beginning to emerge. Silicon Valley is far away,
and its investors and entrepreneurs are busy with what they see as larger
opportunities. Europe, although closer, has struggled to develop its own
start-up culture.
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Some Israeli businesspeople may worry that, whatever its potential,

cooperation with Palestinians remains too risky given the ever-present
threat of violence. In the technology sector, however, this concern is
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mitigated by the fact that colleagues can communicate remotely and

share their work without having to move physical products. Israelis
themselves have addressed similar concerns from international partners
in recent years by noting proudly that during periods of conflict, Israeli
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start-ups continued to deliver their products on schedule, even as

missiles rained down on Israel.
AMERICA’S ROLE
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Although most of the responsibility for developing the Palestinian econ

omy lies with those who live in the region, the United States can and
should play a crucial role, both by working directly with Palestinian
technology firms and by acting as a bridge to Israel. U.S. companies
should collaborate with local partners to develop, customize, and market
products and services in the Middle East. U.S.-based multinationals

Yadin Kaufmann
should consider opening R & D centers in Ramallah. American firms

should help Palestinian companies market their products abroad. And
American engineers, financiers, and executives should offer mentorship
to Palestinian entrepreneurs and their employees to fill the gaps in their
international networks and experience.
Washington should also do its part, by drawing on a successful program
it launched four decades ago: the Israel U.S. Binational Industrial
-
Research and Development Foundation, or bird, to which Israel and
the United States each contributed $55 million in 1977. Bird introduces
m
Israeli start ups aiming to develop a new product or service to large
-
U.S. companies and then provides grants equal to 50 percent of the
development costs, with the remainder coming from venture capital
hi
funds and other sources in the private sector. The program has been
a runaway success. It has poured millions of dollars into Israeli start ups,
-
enabled U.S. companies to provide valuable know how to fledgling
ha
-
Israeli ventures, and supported projects that have generated billions
of dollars in revenues.
The U.S. government should replicate bird’s success by establishing
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a similar foundation to provide matching funds for new business ven
tures that include a Palestinian company and an Israeli or U.S. company.
U.S. technology companies could participate through the R & D centers
that many of them have already established in Israel.
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This model would be both cheap and easy to implement. Given the
low cost of labor in the West Bank, $50 million would suffice to sustain
the program for several years. The United States could provide part of
od
this sum by redirecting some of the over $200 million in annual bilateral
assistance it currently provides to the West Bank and Gaza. Since this
would not involve increasing the foreign aid budget and the approach
has proved so effective in Israel, the Trump administration should consider
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it a cheap way to fulfill Trump’s promise, made at a press conference in

May with Mahmoud Abbas, President of the Palestinian Authority, to
work to “unlock the potential of the Palestinian people through new
economic opportunities.” The U.S. government could also ask gcc
Ma
countries to contribute, especially as many of the products built by the

resulting ventures will flow into Middle Eastern markets. Support from
the gcc would be crucial, as it would make participating in joint ventures
with Israeli companies more publicly acceptable for Palestinian firms.
Neither the Palestinian Authority (which lacks the resources) nor
the Israeli government (whose involvement would complicate matters

Start-Up Palestine
politically) is likely to provide financing. But getting the Palestinian

Authority to officially bless the program would increase the likelihood
that Palestinian entrepreneurs and other Arab entrepreneurs and govern
ments will accept the idea. To facilitate collaboration, the United
States should ask Israel to loosen restrictions on Israeli, Palestinian,
and foreign technology workers wishing to cross the border—and
remind Jerusalem of all the ways that doing so would be in its interests.
Over the past two decades, U.S. and Israeli politicians have come up
with various ideas designed to boost the Palestinian economy, from
m
building industrial parks to creating the $4 billion investment program
announced by U.S. Secretary of State John Kerry in 2013. Yet all these
plans have failed; they proved too complex or too expensive to work.
hi
Supporting technology start ups, by contrast, would cost little and
-
could start tomorrow. The risks would be low and the payoff enormous:
should the Palestinians, helped by Israel and the United States, succeed
ha
in building a technology ecosystem that powers Palestinian economic
growth, they will reduce their reliance on foreign aid, improve the lives
of millions of people, and help lay the groundwork for lasting peace.∂
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Al
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The Next Energy

Revolution
The Promise and Peril of High Tech
-
Innovation
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David G. Victor and Kassia Yanosek
T hi
he technology revolution has transformed one industry after
another, from retail to manufacturing to transportation. Its
ha
most far reaching effects, however, may be playing out in the
-
unlikeliest of places: the traditional industries of oil, gas, and electricity.
Over the past decade, innovation has upended the energy industry.
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First came the shale revolution. Starting around 2005, companies be
gan to unlock massive new supplies of natural gas, and then oil, from
shale basins, thanks to two new technologies: horizontal drilling and
hydraulic fracturing (or fracking). Engineers worked out how to drill
Al
shafts vertically and then turn their drills sideways to travel along a
shale seam; they then blasted the shale with high pressure water, sand,
-
and chemicals to pry open the rock and allow the hydrocarbons to
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flow. These technologies have helped drive oil prices down from an
all time high of $145 per barrel in July 2008 to less than a third of that
-
today, and supply has become much more responsive to market condi
tions, undercutting the ability of opec, a group of the world’s major
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oil exporting nations, to influence global oil prices.

-
That was just the beginning. Today, smarter management of complex
systems, data analytics, and automation are remaking the industry once
again, boosting the productivity and flexibility of energy companies. These
Ma
changes have begun to transform not only the industries that produce
commodities such as oil and gas but also the ways in which companies
DAVID G. VICTOR is Professor of International Relations at the School of Global Policy
and Strategy at the University of California, San Diego, and Co-Chair of the Initiative on
Energy and Climate at the Brookings Institution.
KASSIA YANOSEK is an Associate Partner in McKinsey & Company’s Global Energy and
Materials Practice.

The Next Energy Revolution
m
hi
ha
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Al
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generate and deliver electric power. A new electricity industry is emerg

ing—one that is more decentralized and consumer friendly, and able to
-
integrate many different sources of power into highly reliable power
grids. In the coming years, these trends are likely to keep energy
cheap and plentiful, responsive to market conditions, and more effi
cient than ever.
But this transition will not be straightforward. It could destabilize
countries whose economies depend on revenue from traditional en
ergy sources, such as Russia, the big producers of the Persian Gulf,
m
and Venezuela. It could hurt lower skilled workers, whose jobs are
-
vulnerable to automation. And cheap fossil fuels will make it harder
to achieve the deep cuts in emissions needed to halt global warming.
hi
GET SMART
There are three trends driving the new energy revolution: smarter
ha
management of complex systems, more sophisticated data analytics,
and automation. The first trend has allowed companies to become
much more efficient while drilling for oil and gas in ever more com
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plex geological environments. Beginning around 15 years ago, for ex
ample, advances in imaging technology made it easier for companies
to find oil deposits in deep waters, such as in the Gulf of Mexico and
off the coast of Brazil. But as oil and gas companies rushed to recover
Al
these resources, the technological demands of operating in deep wa

ters and through thick layers of sediment and bedrock drove up costs.
By 2014, new deep water projects were so costly that many broke even
-
od
only when the price of oil was at almost $100 per barrel. As the price of
oil tumbled from above $100 per barrel in early 2014 to below $50 per
barrel in January 2015, many of these projects stalled. By early 2016,
companies had put on hold an estimated four million barrels per day
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of new oil output, 40 percent of it from deep water sources.

-
As drilling stalled, oil and gas operators, desperate to cut costs,
began to rethink the complex systems they used. Some savings were
easy to find: reduced activity meant that critical equipment and services,
Ma
once scarce, now sat idle. The daily cost of renting an oil rig, for example,
fell by half. But the industry is also cutting costs and improving per
formance through fundamental productivity improvements. Simpler,
standardized designs make drilling and production platforms easier to
replicate, less expensive, and less likely to suffer costly delays and over
runs in construction. And companies are transferring the lessons they’ve

learned across the industry. Shell, for example, recently announced

that it is applying techniques from onshore shale operations, such as
drilling horizontal wells and injecting water into them, to increase
production in mature deep-water fields.
Today, thanks to these innovations, the average breakeven prices of
new deep-water projects have fallen, to just $40–$50 per barrel in the
Gulf of Mexico—an important global bellwether because it is one of
the most responsive regions in the world to changes in market conditions.
Even though oil prices remain low (and many in the industry expect
m
them to stay low), investment is once again growing. Ten deep-water
projects were approved for investment in 2016 and the first half of
2017 alone.
hi
Smarter management of complex systems is also reshaping the electric
power industry. For decades, centralized, base-load energy generators—
mainly coal, nuclear, and large hydro-
ha
electric plants—dominated the industry. The energy revolution
But in the last two decades, governments will profoundly change
have subsidized wind and solar energy
and pushed them into the electricity sys- politics, economics,
iT
tem, in the hopes of diversifying their and the environment.
countries’ energy sources, creating new
jobs, and reducing emissions. Until recently, these new sources were too
Al
small to have much of an effect on the overall system.

Today, however, as the cost of renewables is plummeting and their
share of the power supply is rising, they have begun to transform
od
electricity markets. In Germany, wind and solar power account for almost
30 percent of the power mix; in Hawaii, they account for about a quarter.
Traditional utilities have struggled to adapt. In March, grid operators in
California shut down 80 gigawatt-hours of the state’s renewable power
so
because the grid couldn’t handle the afternoon solar surge; without more
capacity to store power, even larger curtailments will occur. In Texas,
among many other places, prices occasionally turn negative when the
wind is blowing hard but people don’t need too much electricity—in
Ma
other words, companies are paying customers to use the electricity they
generate. Utilities that have failed to see these changes coming have
floundered. The market valuations of the top four German utilities are
about one-third the level they were a decade ago—in large part because
they were stuck with the costs of the old electric power system even as
the government provided lavish support for renewables.

Renewables are just one part of this transformation. In the coming

years, utility companies may face an existential challenge from smaller
and more decentralized energy systems known as “microgrids.” Microgrids
first emerged decades ago, driven by customers, such as the U.S. military,
that prized reliability above all else and that did not mind paying more
for it: military bases have to keep functioning even if the bulk power
grid fails. Early adopters also included remote communities, such as in
Alaska, that are far from the conventional grid. But now, microgrids
are spreading to other places, such as university campuses and hospitals,
m
where they generate reliable power and are often designed to save
money by using waste energy to heat and cool buildings.
New technologies, such as fuel cells and battery storage systems
hi
(to store extra power produced by renewables), along with more
sophisticated software, have led to even smaller systems called
“nanogrids,” which Walmart and other megastores have begun to
ha
adopt. And picogrids may be next. As more and more people rely less
on the traditional grid for power (while still interconnecting with it to
help ensure reliability), policymakers and companies will need to
iT
create new regulatory systems and business models. Some states, such
as New York, have embraced these changes, aggressively promoting
decentralization by rewarding companies that invest in decentralized
systems. But no one has yet worked out a detailed plan for how to
Al
integrate new grids with traditional power systems.
HI, ROBOT
od
The second major source of innovation is better data analytics. Oil

companies, for example, have begun to use complex algorithms to analyze
massive amounts of data, making it easier for them to find oil and gas and
to manage production. In April 2017, for example, bp announced that,
so
using these methods, it had identified another 200 million barrels of oil
in an existing field in the Gulf of Mexico. According to bp, data crunching
that used to take a year now takes just a few weeks. And cloud processing
makes it possible to generate millions of scenarios for developing an oil
Ma
field. When firms can evaluate more options, production from fields can
rise by five percent, with a 30 percent cut in the investment required to
drill holes and begin producing oil. The industry has also begun to use
data analytics for “predictive maintenance,” reducing unplanned downtime
by analyzing historical data to predict equipment failures before they
happen. This practice, pioneered by industries such as the aircraft engine

business, is helping cut costs on oil and gas rigs, where compressors and
other rotating equipment can cause costly interruptions when they fail.
The third and most important trend is automation. In remote offshore
oil fields, robots have already begun to perform dangerous tasks, such
as connecting pipes during drilling operations, a job traditionally
carried out by the versatile workers
known as “roustabouts.” Soon, intelli
gent automated systems will enable re
Changes in the industry
mote drilling, controlled almost entirely could destabilize countries
m
by a handful of high tech workers in on whose economies depend on
-
shore data rooms hundreds of miles revenue from traditional
away. And companies are developing
hi
robots that can live on the ocean floor energy sources.
and inspect offshore pipelines and un

derwater equipment. At the moment, offshore oil rigs typically em
ha

ploy 100–200 workers, a figure that could fall. Although people remain
indispensable for critical safety roles that require complex decision
-
making, automation will transform the industry’s work force. Accord

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ing to a McKinsey study, within ten years, oil and gas companies could
employ more data scientists with Ph.D.’s than geologists.
Automation has already changed the power industry, where smart
meters have all but eliminated manual meter readings. In the future,
Al
automation, along with better data analytics, will make it easier to

manage the variation in supplies that comes from using renewable
sources such as wind and solar energy and more complex, decentralized
od
grids. It can also make the grid more reliable. The inability of grid
operators to understand what is happening in real time plays an
important role in many power outages; automation and improved
human computer interaction could make blackouts much rarer.
so
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Yet innovation can create new problems. Automation in the energy
business, for example, could make it more difficult for governments to
perform some of their traditional functions, such as safety regulation.
When technological changes on rigs, production platforms, and grids
Ma
proceeded slowly, regulators could keep up, learning and applying

lessons from occasional failures. Today, the sheer complexity of highly
automated systems makes observing and predicting their behavior
much more difficult. So regulators will need to evolve as quickly as
the industry—and develop early warning systems to identify places
where oversight is required. They will need to learn more rapidly

from each other. Regulators in other countries could study the Nor
wegian offshore oil and gas regulatory body, for example, which is
becoming adept at managing the high levels of uncertainty inherent
in the offshore industry, or they could learn from the U.S. nuclear
industry, which has figured out how to use peer review inside the in
dustry to judge the management of plants.
WINNERS AND LOSERS

The coming transformation of the energy industry is, for the most
m
part, good news for the world. But as the revolution unfolds, it will
profoundly change politics, economics, and the environment. Policy
makers and business leaders will need to tread carefully.
hi
For starters, sustained lower energy prices could weaken the eco
nomic and geopolitical influence of many major oil suppliers, which
have relied for too long on their control of nearly all of the world’s
ha
cheap oil resources. In response, some of these countries have begun
to act. Last year, for example, Saudi Arabia launched Vision 2030, a
program to reduce the kingdom’s dependence on oil and diversify its
iT
economy. The government has announced plans to sell around five
percent of the state oil giant, Saudi Aramco—the kingdom’s crown
jewel—in an initial public offering next year, which may help the firm
become more efficient. These reforms are promising and long over
Al
due, but they face significant resistance, and whether they can be suc
cessfully implemented remains to be seen.
Russia, too, must continue to reform. A decade ago, the Russian
od
government could balance its budget only when the price of oil topped
$100 per barrel. Today, however, the country expects to balance its
budget by 2019 with oil at just $40 per barrel, even though 35 percent
of the government’s revenue still comes from hydrocarbons. But this
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situation remains unstable, and Moscow will have to continue cut

ting its expenditures. Other countries, such as Angola and Nigeria,
have failed to introduce sufficient reforms, and the fall in energy
prices has contributed to their instability. Fiscal prudence and a more
Ma
reliable environment for foreign investors would help local industries

get access to the latest technologies and compete in international
energy markets.
In the United States, the energy revolution will have profound
effects far beyond the jobs and economic growth that cheap energy
will catalyze. When it comes to electricity, the economics increasingly

favor natural gas and renewables—making it even harder for coal,

which accounted for almost half of U.S. electricity generation in 2007
but just 30 percent in 2016, to compete, no matter what politicians
may claim. Most coal jobs are not coming back.
The United States has not yet had a well informed public debate
-
about how the nature of work in the modern economy is changing. The
energy industry has witnessed this transformation firsthand and is well
positioned to show how the work force itself can adjust. Energy
companies, for example, have begun to figure out how to retrain workers
m
over the course of their careers as jobs in power plant control rooms and
on production platforms shift toward the overseeing of automated
systems. Education and training are changing, too. Texas A&M, for
hi
example, is launching a master’s degree in geospatial technologies
specifically targeted for the oil and gas work force.
Climate change remains perhaps the greatest challenge of all.
ha
According to the latest assessment from the Intergovernmental
Panel on Climate Change, the world will need to cut emissions by about
80 percent if it is to slow and, eventually, stop the rise in global
iT
temperatures. The last two decades of summits and negotiations
have shown that this will not be easy. And the revolution in fossil
fuel production may make it even more difficult, because the prices
of carbon based fuels are likely to remain highly competitive with
Al
-
those of their lower emission rivals. The solution lies in part in invest
-
ing more in innovation, and at the Paris climate change conference
in late 2015, the world’s biggest governments pledged to double their
od
spending on energy R & D. So far, however, they have not delivered.

Although there has been an uptick in private sector investment,
-
across the industrialized world, government spending on energy R & D
has remained roughly flat for almost four decades.
so
Already, huge benefits from the technology revolution in energy

are reaching consumers. The 92 million barrels of crude oil that the
world economy consumes every day cost about $2 trillion less annu
ally than that amount did a decade ago. In the United States, the en
Ma
ergy revolution has helped sustain economic growth: from 2008 to

2014, lower prices saved the average household over $700 a year. The
era in which energy policy focused on the security of raw resource
supplies—access to barrels of crude oil, tons of coal, and volumes of
natural gas—is over. Today, the task for policymakers is to manage the
implications of a new world of cheap, plentiful energy.∂

ESSAYS
We did not pay enough attention as
capitalism hijacked globalization.
—Jeff Colgan and Robert Keohane
m
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The Liberal Order Is Rigged Iran’s Next Supreme Leader

Jeff D. Colgan and Robert O. Keohane 36 Sanam Vakil and Hossein Rassam 76
The False Promise of Protectionism Brazil’s Never-Ending

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Douglas A. Irwin 45 Corruption Crisis

BRIAN SNYD E R / REUTE RS
Brian Winter 87
Intelligence and the Presidency
Jami Miscik 57 How to Maintain America’s Edge
L. Rafael Reif 95
Getting Tough on North Korea
Joshua Stanton, Sung-Yoon Lee, and The Boom Was a Blip
Bruce Klingner 65 Ruchir Sharma 104
The Liberal Order

Is Rigged
Fix It Now or Watch It Wither
m
Jeff D. Colgan and Robert O. Keohane
P
hi
rior to 2016, debates about the global order mostly revolved
around its structure and the question of whether the United
States should actively lead it or should retrench, pulling back
ha
from its alliances and other commitments. But during the past year
or two, it became clear that those debates had missed a key point:
today’s crucial foreign policy challenges arise less from problems be-
iT
tween countries than from domestic politics within them. That is
one lesson of the sudden and surprising return of populism to Western
countries, a trend that found its most powerful expression last year
in the United Kingdom’s decision to leave the eu, or Brexit, and the
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election of Donald Trump as U.S. president.

It can be hard to pin down the meaning of “populism,” but its cru-
cial identifying mark is the belief that each country has an authentic
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“people” who are held back by the collusion of foreign forces and
self-serving elites at home. A populist leader claims to represent the
people and seeks to weaken or destroy institutions such as legisla-
tures, judiciaries, and the press and to cast off external restraints in
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defense of national sovereignty. Populism comes in a range of ideo-

logical flavors. Left-wing populists want to “soak the rich” in the name
of equality; right-wing populists want to remove constraints on wealth
in the name of growth. Populism is therefore defined not by a particular
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view of economic distribution but by a faith in strong leaders and a

dislike of limits on sovereignty and of powerful institutions.
JEFF D. COLGAN is Richard Holbrooke Associate Professor of Political Science and

International Affairs at Brown University. Follow him on Twitter @JeffDColgan.
ROBERT O. KEOHANE is Professor of International Affairs at Princeton University.

The Liberal Order Is Rigged
Such institutions are, of course, key features of the liberal order:

think of the un, the eu, the World Trade Organization (wto), and
major alliances such as nato. Through them, the Washington-led
order encourages multilateral cooperation on issues ranging from se-
curity to trade to climate change. Since 1945, the order has helped
preserve peace among the great powers. In addition to the order’s
other accomplishments, the stability it provides has discouraged
countries such as Germany, Japan, Saudi Arabia, and South Korea
from acquiring nuclear weapons.
m
This peace-building aspect of the liberal order has been an ex-
traordinary success. So, too, is the way in which the order has al-
lowed the developing world to advance, with billions of people rising
hi
out of crippling poverty and new middle classes burgeoning all over the
world. But for all of the order’s success, its institutions have become
disconnected from publics in the very countries that created them.
ha
Since the early 1980s, the effects of a neoliberal economic agenda have
eroded the social contract that had previously ensured crucial political
support for the order. Many middle- and working-class voters in the
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United Kingdom, the United States, and elsewhere have come to be-
lieve—with a good deal of justification—that the system is rigged.
Those of us who have not only analyzed globalization and the liberal
order but also celebrated them share some responsibility for the rise
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of populism. We did not pay enough attention as capitalism hijacked

globalization. Economic elites designed international institutions to
serve their own interests and to create firmer links between themselves
od
and governments. Ordinary people were left out. The time has come
to acknowledge this reality and push for policies that can save the
liberal order before it is too late.
so
THE BOATS THAT DIDN’T RISE

In 2016, the two states that had done the most to construct the liberal
order—the United Kingdom and the United States—seemed to turn
their backs on it. In the former, the successful Brexit campaign focused
Ma
on restoring British sovereignty; in the latter, the Trump campaign

was explicitly nationalist in tone and content. Not surprisingly, this
has prompted strong reactions in places that continue to value the
liberal order, such as Germany: a poll published in February by the
German newspaper Die Welt found that only 22 percent of Germans
believe that the United States is a trustworthy ally, down from 59 percent
May/June 2017 37

just three months earlier, prior to Trump’s victory—a whopping

37-point decrease.
The Brexit and Trump phenomena reflect a breakdown in the social
contract at the core of liberal democracy: those who do well in a market-
based society promise to make sure that those disadvantaged by
market forces do not fall too far behind. But fall behind they have.
Between 1974 and 2015, the real median
household income for Americans with-
The Brexit and Trump out high school diplomas fell by almost
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phenomena reflect a 20 percent. And even those with high
breakdown in the social school diplomas, but without any college
contract at the core of education, saw their real median house-
hi
hold income plummet by 24 percent.
liberal democracy. On the other hand, those with college
ha degrees saw their incomes and wealth
expand. Among those Americans, the real median household income
rose by 17 percent; those with graduate degrees did even better.
As political scientists such as Robert Putnam and Margaret Weir
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have documented, such trends have led to different sets of Americans
living in separate worlds. The well-off do not live near the poor or
interact with them in public institutions as much as they used to.
This self-segregation has sapped a sense of solidarity from American
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civic life: even as communications technology has connected people

as never before, different social classes have drifted further apart,
becoming almost alien to one another. And since cosmopolitan
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elites were doing so well, many came to the conclusion—often without

realizing it—that solidarity just wasn’t that important for a well-
functioning democracy.
Elites have taken advantage of the global liberal order—sometimes
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inadvertently, sometimes intentionally—to capture most of the income

and wealth gains in recent decades, and they have not shared much with
the middle and lower classes. Wealthier, better-educated Americans
have pushed for or accepted regressive tax policies, trade and investment
Ma
agreements that encouraged corporate outsourcing, and the under-

funding of public and higher education. The result of such policies
has been to undermine what the political scientist John Ruggie once
called “embedded liberalism”: a global order made up of free-market
societies that nevertheless preserved welfare states and labor-market
policies that allowed for the retraining of people whose skills became

obsolete, compensation for those who lost out from trade liberalization,
and validation of the self-worth of all citizens, even if they were not
highly productive in economic terms. Elites pushed for and supported
the first part of this vision—free markets, open borders, and multi-
lateralism—but in the 1970s and even more so in the 1980s, they began
to neglect the other part of the bargain: a robust safety net for those
who struggled. That imbalance undermined domestic support for free
trade, military alliances, and much else.
The bill for that broken social contract came due in 2016 on both
m
sides of the Atlantic. And yet even now, many observers downplay
the threat this political shift poses to the liberal order. Some argue
that the economic benefits of global integration are so overwhelming
hi
that national governments will find their way back to liberalism, regard-
less of campaign rhetoric and populist posturing. But the fact is that
politicians respond to electoral incentives even when those incentives
ha
diverge considerably from their country’s long-term interests—and
in recent years, many voters have joined in the populist rejection of
globalization and the liberal order.
iT
Moreover, business leaders and stock markets, which might have
been expected to serve as a brake on populist fervor, have instead
mostly rewarded proposals for lower taxes with no accompanying
reduction in government spending. This is shortsighted. Grabbing
Al
even more of the benefits of globalization at the expense of the middle

and working classes might further undermine political support for the
integrated supply chains and immigration on which the U.S. economy
od
depends. This position is reminiscent of the way that eighteenth-

century French aristocrats refused to pay taxes while indulging in
expensive foreign military adventures. They got away with it for many
years—until the French Revolution suddenly laid waste to their privi-
so
lege. Today’s elites risk making a similar mistake.
CAREFUL WHAT YOU WISH FOR

Some portion of the blame for the liberal order’s woes lies with its
Ma
advocates. Policymakers pursued a path of action favored by many

academics, including us: building international institutions to promote
cooperation. But they did so in a biased way—and, for the most part,
we underestimated the risk that posed. Financial firms and major
corporations enjoyed privileged status within the order’s institutions,
which paid little attention to the interests of workers. Wto rules
May/June 2017 39

emphasized openness and failed to encourage measures that would

cushion globalization’s effects on those disadvantaged by it, especially
workers in the traditional manufacturing sectors in developed countries.
Meanwhile, investment treaties signed in the 1990s featured provisions
that corporate lawyers exploited to favor big business at the expense of
consumers. And when China manipulated trade and currency arrange-
ments to the disadvantage of working-class Americans, Washington
decided that other issues in U.S.-Chinese relations were more impor-
tant, and did not respond strongly.
m
Working-class Americans didn’t necessarily understand the details of
global trade deals, but they saw elite Americans and people in China
and other developing countries becoming rapidly wealthier while
hi
their own incomes stagnated or declined. It should not be surprising
that many of them agreed with Trump and with the Democratic pres-
idential primary contender Bernie Sanders that the game was rigged.
ha
Much ink has been spilled on the domestic causes of the populist
revolt: racism, growing frustration with experts, dysfunctional economic
policies. But less attention has been paid to two contributing factors
iT
that stemmed from the international order itself. The first was a
loss of national solidarity brought on by the end of the Cold War.
During that conflict, the perceived Soviet threat generated a strong
shared sense of attachment not only to Washington’s allies but also
Al
to multilateral institutions. Social psychologists have demonstrated

the crucial importance of “othering” in identity formation, for indi-
viduals and nations alike: a clear sense of who is not on your team
od
makes you feel closer to those who are. The fall of the Soviet Union
removed the main “other” from the American political imagination
and thereby reduced social cohesion in the United States. The end
of the Cold War generated particular political difficulties for the
so
Republican Party, which had long been a bastion of anticommunism.

With the Soviets gone, Washington elites gradually replaced Commu-
nists as the Republicans’ bogeymen. Trumpism is the logical extension
of that development.
Ma
In Europe, the end of the Cold War was consequential for a related
reason. During the Cold War, leaders in Western Europe constantly
sought to stave off the domestic appeal of communism and socialism.
After 1989, no longer facing that constraint, national governments
and officials in Brussels expanded the eu’s authority and scope, even
in the face of a series of national referendums that expressed opposi-

tion to that trend and should have served as warning signs of growing
working-class discontent. In eastern Europe, anti-Soviet othering was
strong during the 1980s and 1990s but appears to have faded as memo-
ries of the Cold War have become more distant. Without the specter
of communist-style authoritarianism haunting their societies, eastern
Europeans have become more susceptible to populism and other
forms of illiberalism. In Europe, as in the United States, the disap-
pearance of the Soviets undermined social cohesion and a common
sense of purpose.
m
The second force stirring discontent with the liberal order can be
called “multilateral overreach.” Interdependence requires countries
to curb their autonomy so that institutions such as the un and the
hi
World Bank can facilitate cooperation and solve mutual problems. But
the natural tendency of institutions, their leaders, and the bureaucra-
cies that carry out their work is to expand their authority. Every time
ha
they do so, they can point to some seemingly valid rationale. The
cumulative effect of such expansions of international authority, however,
is to excessively limit sovereignty and give people the sense that foreign
iT
forces are controlling their lives. Since these multilateral institutions
are distant and undemocratic—despite their inclusive rhetoric—the
result is public alienation, as the political scientist Kathleen McNamara
has documented. That effect is compounded whenever multilateral
Al
institutions reflect the interests of cosmopolitan elites at the expense

of others, as they often have.
od
SYSTEM UPDATE
Derigging the liberal order will require attention to substance but
also to perceptions. The United States has made only feeble attempts
to sustain something like Ruggie’s embedded liberalism, and even
so
those attempts have largely failed. Germany, Denmark, and Sweden

have done better, although their systems are also under pressure.
Washington has a poor track record when it comes to building gov-
ernment bureaucracies that reach deep into society, and the American
Ma
public is understandably suspicious of such efforts. So U.S. officials

will have to focus on reforms that do not require a lot of top-down
intervention.
To that end, Washington should be guided by three principles.
First, global integration must be accompanied by a set of domestic
policies that will allow all economic and social classes to share the

gains from globalization in a way that is highly visible to voters. Second,

international cooperation must be balanced with national interests to
prevent overreach, especially when it comes to the use of military
force. Third, Washington should nurture a uniquely American social
identity and a national narrative. That will require othering authoritar-
ian and illiberal countries. Fostering U.S. opposition to illiberalism
does not mean imposing democracy by force, but it does require more
than occasional diplomatic criticism of
countries such as China or Saudi Arabia.
Like it or not, “America
m
A willing president could, for instance,
make it clear that although the United first” is a powerful slogan.
States may have an interest in cooper-
hi
ating with nondemocratic countries, it identifies only with liberal
democracies and reserves its closest relationships for them. Done
properly, that sort of othering could help clarify the American national
ha
identity and build solidarity. It might at times constrain commercial
relationships. However, a society is more than just an economy, and
the benefits of social cohesion would justify a modest economic cost.
iT
Developing policies that satisfy those principles will require innova-
tion and creativity. Some promising ideas include tax credits to busi-
nesses that provide on-the-job training for dislocated workers and
earned-income tax credits for individuals. Progressives have pursued
Al
such policies in the past but in recent times have retreated or compro-
mised for the sake of passing trade deals; they should renew their
commitment to such ideas. Officials should also require that any new
od
trade deals be accompanied by progressive domestic measures to assist

those who won’t benefit from the deals. At a minimum, Congress should
avoid regressive tax cuts. If, for example, the Trump administration
and its gop allies in Congress decide to impose a border adjustment
so
tax on imports, the revenue raised ought to benefit the working class.
One way to make that happen would be to directly redistribute the
revenue raised by the tax on a per capita basis, in the form of checks
to all households; that would spread the wealth and build political
Ma
support for the combination of economic openness and redistribution.

Another way to benefit the working class would be to stimulate job
creation by lowering employers’ payroll tax burden. Such ideas will
face an uphill battle in the current U.S. political environment, but it is
essential to develop plans now so that, when political opportunities
emerge, defenders of the liberal order will be ready.
May/June 2017 43

The more difficult task will be developing a national narrative,

broadly backed by elites across the ideological spectrum, about “who
we are”—one built around opposition to authoritarianism and illiber-
alism. The main obstacle will likely be the politics of immigration,
where the tension between cosmopolitanism and national solidarity
surfaces most clearly. Cosmopolitans argue (correctly) that immi-
grants ultimately offer more benefits than costs and that nativist fears
about refugees are often based more on prejudice than fact. The
United States is a country of immigrants and continues to gain energy
m
and ideas from talented newcomers. Nonetheless, almost everyone
agrees that there is some limit to how rapidly a country can absorb
immigrants, and that implies a need for tough decisions about how
hi
fast people can come in and how many resources should be devoted
to their integration. It is not bigotry to calibrate immigration levels
to the ability of immigrants to assimilate and to society’s ability to
ha
adjust. Proponents of a global liberal order must find ways of seeking
greater national consensus on this issue. To be politically sustainable,
their ideas will have to respect the importance of national solidarity.
iT
Like it or not, global populism has a clear, marketable ideology,
defined by toughness, nationalism, and nativism: “America first” is a
powerful slogan. To respond, proponents of an open liberal order must
offer a similarly clear, coherent alternative, and it must address, rather
Al
than dismiss, the problems felt keenly by working classes. For Demo-
crats, “the party of jobs” would be a better brand than “the party of
increasing aggregate welfare while compensating the losers from trade.”
od
Without dramatic change to their messages and approach, estab-

lished political parties will fade away altogether. An outsider has already
captured the Republican Party; the Democrats are cornered on the
coasts. In Europe, the British Labour Party is imploding and the tra-
so
ditionally dominant French parties are falling apart. To adapt, estab-

lishment parties must begin to frame their ideas differently. As the
social psychologist Jonathan Haidt has argued, progressives must learn
to speak of honor, loyalty, and order in addition to equality and rights.
Ma
To derig the liberal order and stave off complete defeat at the
hands of populists, however, traditional parties must do more than
rebrand themselves and their ideas. They must develop substantive
policies that will make globalization serve the interests of middle-
and working-class citizens. Absent such changes, the global liberal
order will wither away.∂

The False Promise of

Protectionism
Why Trump’s Trade Policy Could Backfire
m
Douglas A. Irwin
I
hi
n his inaugural address, U.S. President Donald Trump pledged
that economic nationalism would be the hallmark of his trade
policy. “We must protect our borders from the ravages of other
ha
countries making our products, stealing our companies, and destroying
our jobs,” he said. Within days, he withdrew the United States from
the Trans-Pacific Partnership (tpp), announced that he would rene

iT
gotiate the North American Free Trade Agreement (nafta), and threat

ened to impose a special tax on U.S. companies that move their
factories abroad.
Although Trump’s professed goal is to “get a better deal” on trade, his
Al
brand of economic nationalism is just one step away from old-fashioned

protectionism. The president claimed that “protection will lead to
great prosperity and strength.” Yet the opposite is true. An “America
od
first” trade policy would do nothing to create new manufacturing jobs

or narrow the trade deficit, the gap between imports and exports.
Instead, it risks triggering a global trade war that would prove
damaging to all countries. A slide toward protectionism would also
so
undermine the institutions that the United States has long worked to
support, such as the World Trade Organization (wto), which have
made meaningful contributions to global peace and prosperity.
At the same time, not all tariffs are bad. Congress is considering corpo
Ma

rate tax reforms that would involve a “border adjustment tax”—a tax
that would apply to all imports to the United States but not to exports.
If implemented fairly, such a measure would not be protectionist.
DOUGLAS A. IRWIN is Professor of Economics at Dartmouth College and the author of
the forthcoming book Clashing Over Commerce: A History of U.S. Trade Policy. Follow him
on Twitter @D_A_Irwin.
May/June 2017 45

Douglas A. Irwin
Likewise, not all trade threats are bad. Although it is true that closing
the market to foreign competition is the wrong way to improve U.S.
economic performance, the threat of closing the market has some-
times helped ensure compliance with international trade rules. But
this is a high-risk strategy that must be used with care, since it could
spark damaging foreign reprisals.
It is all the riskier given the growing nationalist sentiment around
the world. According to the wto, the import restrictions imposed by
G-20 countries since 2008 now cover a disturbingly high 6.5 percent of
m
their merchandise imports. The rate at which new measures are being
imposed exceeds the rate at which old measures are being removed,
resulting in the steady accumulation of
hi
The Trump administration trade barriers. In January, citing “protec

tionist pressures,” the World Bank
must recognize that ha reduced its forecast for global economic
protectionism at home can growth in 2017.
lead to protectionism abroad. In this environment, a move toward
protectionism by Washington could
iT
unleash a similar response abroad. Such
a scenario has a historical precedent: when Congress passed the
Smoot-Hawley Tariff Act in 1930, it was taken as “the signal for an
outburst of tariff-making activity in other countries, partly at least by
Al
way of reprisals,” as a League of Nations report explained at the

time. Washington should not send that signal again.
As the Trump administration plots its next move, it should take
od
care to distinguish between what trade policy can achieve and what
it cannot, and between changes to current policy that would be
constructive and those that would prove counterproductive. It must

also recognize that protectionism at home can lead to protectionism
so

abroad. Indeed, perhaps the greatest danger of Trump’s trade policy
is that a misstep might do irreparable damage to the open world
trading system that the United States had, until now, so assidu-
ously promoted since World War II. That system constrains the
Ma
policies of the 163 other wto members, with which the United
States trades. If the United States backs away from current trade
rules, those countries will feel free to discriminate against the
United States, and the system will unravel—doing grave damage
not only to the global economy but also to the very Americans
Trump claims to represent.

The False Promise of Protectionism
THE PERILS OF PROTECTIONISM

Although free trade is always under fire, the barrage has been particu-
larly intense in recent years. U.S. politicians often blame trade for the
loss of manufacturing jobs and the destruction of the middle class, and
many voters seem to agree. It was Trump’s willingness to acknowledge
the “rusted-out factories scattered like tombstones across the landscape
of our nation” and to question establishment views on trade agreements
that won him support in the Rust Belt.
But the reality is that factors other than foreign trade are to blame
m
for the country’s current economic woes. The share of Americans who
work in manufacturing has fallen steadily since the early 1950s, mainly
due to automation and productivity growth. The labor-force partici-
hi
pation rate among working-age males has been declining since 1960.
The stagnation in real earnings of men also dates back to the early
1960s. These trends started well before the era of deregulation and
ha
free trade in the 1980s and 1990s, let alone the “China shock” of the
first decade of this century. Complaints about the plight of middle-
class workers resonate so much today, however, because the U.S. labor
iT
market has experienced more than a decade of lackluster performance,
owing to the slow recovery from the 2008 financial crisis. Since then,
trade has not significantly disrupted the U.S. labor market because
imports have not been surging into the country.
Al
The problem with wrongly blaming trade for these recent difficulties
is that it makes it all too easy to propose protectionism as the quick
fix. After all, if imports are seen as the problem, then reducing them—
od
by reversing existing trade policies, tearing up nafta, or slapping high

duties on Chinese goods—would seem to be the solution. Yet simply
rolling back trade will not repair the damage that has been done.
Those who want to curtail trade claim that such actions will revitalize
so
basic manufacturing industries, create new manufacturing jobs, and

reduce the trade deficit. In fact, higher trade barriers would fail to
achieve any of these objectives.
Why can’t trade protection be used to revitalize basic industries
Ma
that have suffered? After all, some claim, in the 1980s the Reagan
administration imposed many import barriers, which seemed to
help domestic industries cope with increased foreign competition.
Confronted with a large and growing trade deficit, the United
States pressured Japan to agree to reduce its automobile exports,
forced foreign suppliers to limit their steel exports, and negotiated
May/June 2017 47

Douglas A. Irwin
a new arrangement that restricted imports of textiles and apparel.

Because the economy recovered and employment grew, Robert
Lighthizer, a trade negotiator in the Reagan administration whom
Trump has tapped to be the U.S. trade representative, has asserted
that Reagan-era import restrictions “worked.”
But that judgment runs counter to the evidence. In a 1982 report,
the U.S. International Trade Commission found that most industries
receiving trade relief were undergoing long-term declines that import
restrictions could not reverse. Such measures did little to help companies,
m
it stated, “either because so much of the firm’s injury was caused by
non-import-related factors, or because the decline of imports following
relief was small.” Four years later, when the Congressional Budget
hi
Office studied the question, it concluded, “Trade restraints have failed
to achieve their primary objective of increasing the international
competitiveness of the relevant industries.”
ha
Just as it is today, trade then was wrongly blamed for the prob-
lems facing U.S. producers. What really afflicted them were fac-
tors beyond the reach of trade policy. The first was a cyclical
iT
problem: the severe recession in 1981–82 that resulted
from the tight monetary policy the U.S. Federal Reserve
had adopted to reduce inflation. That policy contributed
Al
od
so
Ma

to a 40 percent real appreciation of the dollar against other currencies

between 1981 and 1985, making U.S.-made goods far less competitive
at home and abroad. Then there were various structural problems:
Big Steel lost market share to low-cost domestic mini-mills that
could recycle scrap metal, and the Big Three automakers were
slow to improve quality and shift to the smaller, more fuel-efficient
cars that consumers were demanding. Eventually, U.S. producers
did regain their competitiveness, but they did not do so thanks to

protectionist policies. Credit goes instead to the economic recov-
m
ery that started in 1983 and the weakening of the dollar that
started in 1985.
One should look back at the Reagan-era protectionism not with
hi
nostalgia but with regret, because it proved to be a costly failure.
The restrictions on automobile imports raised the average price of
a Japanese car by 16 percent in the early 1980s, socking it to con-
ha
sumers and handing billions of dollars to Japanese exporters. The
limitations on steel imports punished steel-using industries, and
those on textile and apparel imports raised prices for low-income
iT
consumers. When it comes to using protection to help revitalize do-
mestic industries, the United States has been there, done that. It
didn’t work.
Al
od
so
Ma
May/June 2017 49

Douglas A. Irwin
BAD BARRIERS
Today, the prospect that import restrictions can help domestic produc

ers is even dimmer than it was in the 1980s. That’s because firms
engaged in international trade now form part of intricate global supply
chains. About half of all U.S. imports consist of intermediate goods,
such as factory equipment, parts and components, and raw materials.
Many U.S. companies depend on imported intermediate goods in
their production process or sell their outputs to other firms around
the world that use them as inputs. As a result, protectionist measures
m
today would prove much more disruptive than they did in the 1980s.
The implications for trade policy are enormous. Any import
restriction that helps some upstream producers by raising the prices
hi
of the goods they sell will hurt downstream industries that use those
goods in production. If a tariff raises the price of steel to help U.S.
Steel, it will hurt steel consumers such as John Deere and Caterpillar
ha
by raising their costs relative to those of foreign competitors. If a
quota keeps out imported sugar to boost domestic prices, it will raise
costs for the domestic confectionery industry. (Indeed, in 2002, Kraft
iT
moved the production of Life Savers candy to Canada in response to
the high cost of sugar in the United States.) Typically, there are far
more workers in the downstream industries whose jobs will be
jeopardized by trade restrictions than workers in the upstream indus
Al

tries whose jobs might be saved by them. In an effort to help the
147,000 Americans employed in the steel industry, for example,
Washington may harm the 6.5 million Americans employed in steel-
od
using industries.
Even if trade protection can succeed in helping some domestic
producers at the expense of others, it is an illusion to think that it
will create many new manufacturing jobs, particularly for low-
so
skilled workers. In the United States, manufacturing has become

technologically sophisticated and involves many more engineers
and technicians than blue-collar workers on the assembly lines. The
clock cannot be turned back. Consider the steel industry: in 1980,
Ma
it took ten man-hours to produce a ton of steel; today it takes just

two. So boosting steel output will not create nearly as many jobs as
it would have in the past.
Even if a particular trade measure succeeds in terms of protecting
jobs in a specific sector, it will cost consumers dearly. When the
Obama administration imposed special duties on tires imported from

China in 2009, the measure saved at most about 1,200 jobs—at a cost
to consumers, in the form of higher tire prices, of $900,000 per job.
And by pushing U.S. production toward the types of lower-quality
tires that the United States had been importing and away from the
high-quality tires that U.S. producers specialized in making, the tariff
froze American workers in low-end jobs at the expense of high-end
ones. No country can protect the jobs of the past without losing the
jobs of the future.
Another reason trade protection today makes even less sense than
m
it did three decades ago is that other countries are sure to retaliate in
a way that they did not before. Back
then, the United States demanded that
The mix of macroeconomic
hi
other countries restrict their exports
to the United States. Because foreign policies Trump has promised
suppliers reduced their exports them will likely enlarge, rather
ha

selves to avoid U.S. punishment, they than shrink, the trade deficit.
were able to charge much more for these
suddenly scarce goods and earn excep

iT
tionally high profits. Although countries such as Japan did not always
like restricting their exports, they did not strike back because the
United States was not imposing tariffs on them.
Today, such export restrictions would violate wto rules. If the
Al
United States nonetheless arbitrarily imposed steep tariffs or other

trade restrictions on imports, other countries would inevitably retaliate
against U.S. exports. That would directly threaten U.S. farm and
od
factory workers. In a report released last year, the Department of

Commerce estimated that 11.5 million U.S. jobs were supported by
exports. Those jobs—which tend to pay above-average wages for
manufacturing—would be jeopardized if the United States started
so
slapping taxes on imports. Protectionism is a game that more than

one country can play.
Foreign retaliation could even occur if the measures were permis

sible under wto rules. In the past, whenever the United States slapped
Ma
duties on Chinese imports under antidumping provisions allowed by

the wto, China’s regulators would suddenly find that U.S. poultry or
pork was contaminated and had to be banned, its airlines would start
buying from Airbus instead of Boeing, or its food companies would
purchase Argentine soybeans and Australian wheat rather than the
American equivalents.
May/June 2017 51

Douglas A. Irwin
Finally, protectionism damages the U.S. economy even when no one

retaliates. Trade restrictions increase the price of imported goods—
not just for businesses that employ workers but for households, too.
The higher prices that these consumers pay for goods affected by
import restrictions reduce the amount of money they can spend
on other goods. To make matters worse, tariffs on imports also act as
a kind of regressive tax. Because poorer households tend to spend
proportionately more of their income on tradable goods such as food,
clothing, and footwear, they bear a disproportionate burden of import
m
restrictions. You wouldn’t know it from listening to most politicians,
but low- and middle-income households benefit substantially more
from trade than do high-income households.
hi
THE TRADE DEFICIT FALLACY
Import barriers are often proposed as a way to shrink the trade deficit,
ha
a particular bugbear of Trump’s. Yet it is far from clear that reducing
the trade deficit should be a policy priority. Unlike in the 1980s, when
the current account deficit was growing rapidly, today, it has remained
iT
stable for nearly a decade, at about two to three percent of gdp. Im-
ports are not flooding into the United States; in fact, in 2016, the
value of U.S. imports from China fell by four percent from the previ-
ous year. Even if one believes that closing the trade gap would boost
Al
employment—and the consensus among economists is that it would

not—past experience suggests that restricting imports alone would
fail to narrow the deficit. The United States had a trade surplus when
od
it imposed the Smoot-Hawley Tariff, but exports fell in step with

imports and the trade balance did not budge. In the 1980s, the trade
deficit continued to grow in spite of the Reagan administration’s pro-
tectionist measures.
so
The trade deficit is impervious to import restrictions, particularly

in an era of floating exchange rates, because it is determined not by
trade policies but by net capital flows into the United States. As econ-
omists have long emphasized, unless domestic savings rise (a good
Ma
thing) or national investment falls (a bad thing), the United States

will be a recipient of capital from abroad. Because the dollar is the
world’s reserve currency, the closest thing to a safe asset in the global
financial system, foreign demand for dollar-denominated assets will
remain strong. The continued demand for safe assets means that other
countries will use some of their dollar earnings to buy U.S. assets

instead of U.S. goods. This, in turn, means that the United States will
continue to buy more from other countries than they do from it.
Ironically, even though Trump has said that he wants to reduce the
trade deficit, the mix of macroeconomic policies he has promised will
likely enlarge, rather than shrink, it. Just as the Reagan administration
discovered, the combination of an expansionary fiscal policy (Trump
has promised lower taxes and greater infrastructure spending) and a
tighter monetary policy (the Federal Reserve’s ongoing response to
falling unemployment) will cause the dollar to appreciate against other
m
currencies. In the 1980s, these policies dealt a painful blow to U.S.
companies that exported goods or competed against imports. The
result was a growing trade deficit and louder calls for protectionist
hi
measures. Over the past three years, the dollar has already risen by
more than 25 percent compared with other currencies. If the Federal
Reserve continues to tighten monetary policy and the fiscal deficit
ha
continues to grow, the trade deficit will likely grow, too, despite Trump’s
trade policies.
iT
LEVELING THE PLAYING FIELD
Even though the case against protectionism remains strong, that does
not mean that activist trade policies have no role to play. One thing
the Reagan administration did that the Trump administration could
Al
usefully emulate was to undertake strong trade-enforcement measures.

Ronald Reagan always insisted that free trade required enforcing the
rules. As he put it, “When governments assist their exporters in ways
od
that violate international laws, then the playing field is no longer level,
and there is no longer free trade.” That’s why his administration pursued
trade agreements: to establish rules to constrain unfair policies. And yet
to reach such agreements, it is sometimes necessary to threaten higher
so
trade barriers. Supporters of free trade often object to such tactics, but
even Adam Smith argued that it might be worthwhile for a country to
threaten to close its market if the move brought about a change in foreign
behavior. Although the Obama administration filed many new cases
Ma
involving specific products and specific countries with the wto, such a
piecemeal approach falls short of addressing a real and growing problem:
whether international competition between private domestic firms and
foreign state-owned or state-supported firms can ever truly be fair.
The problem is most acute when it comes to China. China’s state
banks routinely engage in generous and unprofitable lending that leads
May/June 2017 53

Douglas A. Irwin
to excess capacity in various industries, such as steel. China produces

half of the world’s steel, and as its economy has slowed, massive excess
capacity has built up in that sector. In a market system, unneeded
plants would shut down. But in China, the visible hand of the state is
at work, as government-owned banks prop up uneconomic production
capacity with cheap credit. China then dumps its surplus steel on
other countries, where calls for protectionism grow.
Free-trade supporters are of two minds about foreign subsidies. On
the one hand, these subsidies reduce the price paid by U.S. consum-
m
ers, who should send a thank-you note to foreign taxpayers for their
generosity. On the other hand, foreign subsidies distort markets in a
way that is costly not only to the subsidizing country but also to other
hi
countries. In the countries importing the subsidized goods, plants are
idled and workers are laid off—adjustment costs that the subsidizing
country avoids. A political backlash can result: when foreign subsidies
ha
harm an important domestic industry, free trade gets a bad name and
becomes a harder sell at home. As a result, the United States has
tended to err on the side of opposing foreign subsidies. It has, for
iT
example, attacked Europe’s agricultural subsidies as detrimental to
American farmers and its subsidies to Airbus as a threat to Boeing,
and it has sought agreements to rein in both.
So how should the United States respond to, for example, Chinese
Al
steel subsidies? Imposing antidumping duties is not the answer, since

they would fail to solve the underlying problem of excess capacity
and would punish steel-consuming industries in the United States.
od
Paradoxically, however, threatening reprisals of some sort may be the

answer; politely asking China to cut back its steel subsidies would
accomplish nothing. Confronting unfair trade practices with the
threat of retaliation is not protectionism in the usual sense. Instead, it
so
represents an attempt to free world markets from distortions. In order

to return trade to a market basis, Washington may have to threaten
trade sanctions, some of which might have to be carried out for the
threats to gain credibility. This process will no doubt be disruptive
Ma
and controversial, but if handled skillfully, the end result could make
it worthwhile.
Once again, the 1980s offers useful lessons. In 1985, Reagan used
the power granted to him under a provision of U.S. trade law known
as Section 301 to attack unfair foreign trade practices, such as the
barring of U.S. products from certain markets. Although the U.S.

action prompted bitter foreign protests, Arthur Dunkel, the Swiss

director general of the General Agreement on Tariffs and Trade (the
predecessor to the wto), later admitted that it was one of the best
things the United States had ever done for the multilateral trading
system: it helped unite the world behind an effort to strengthen the
rules-based system in the 1986–94 Uruguay Round of international
trade negotiations. The wto’s dispute-settlement system has proved
remarkably successful and should be supported, but it may not be
capable of handling every type of trade disagreement.
m
A border adjustment tax is another policy currently under consid

eration that is sometimes labeled as protectionist but need not be.
Republicans in the House of Representatives are pushing a major tax
hi
reform package that would change the way corporations are taxed.
Instead of being based on where goods are produced, the tax would be
applied on the basis of where goods end up. The tax would also involve
ha
a border adjustment, meaning that it would not be imposed on U.S.
exports (which are taxed in other countries) but it would apply to all
imports. In essence, the tax burden would shift from goods produced
iT
in the United States to goods consumed in the United States.
Such measures are standard practice for countries that have value-
added taxes and wish to equalize the tax treatment between domestic
and foreign goods, and they are consistent with wto rules. Whether
Al
the particular border adjustment tax that Congress is considering now

conforms to wto rules remains an open question. Still, the principle
remains: a border adjustment tax is not protectionist if it does not
od
discriminate in favor of U.S. producers and instead simply ensures

that the same tax is imposed on all sellers in the U.S. market, regard-
less of where their goods are produced.
so
THE FUTURE OF FREE TRADE

Trump’s “America first” trade rhetoric has sparked fears in foreign
capitals of a coming trade war. Economists of all political stripes
remain deeply skeptical that the protectionist measures the president
Ma
discussed during the campaign will spur a renaissance of manufacturing

production or do much to boost employment.
Yet Trump’s pronouncements on trade are not just economically
problematic; they also raise troubling questions about the United States’
place in the world. A turn inward would mean abandoning global
leadership, threatening the country’s economic and political interests.
May/June 2017 55

Douglas A. Irwin
Already, the abrupt termination of the tpp has stoked fears of a

U.S. retreat from Asia. Trump’s saber rattling with Mexico has led
to a growing anti-American backlash there. Just consider what happened
in Canada after the United States imposed the Smoot-Hawley Tariff.
The pro-American, pro-free-trade Liberal government lost power
to the protectionist Conservative Party, which promptly retaliated
against U.S. exports. In Mexico, the last thing the United States
needs is to inadvertently give rise to an anti-American president who
returns to economic nationalism and seeks common cause with leftist
m
governments in Cuba and Venezuela.
There is a charitable view of Trump’s threats to impose trade barriers,
however: that they represent a negotiating tactic to seek new agree
hi

ments that would scale back other countries’ distorting policies. In a
January interview with The New York Times, Trump called himself “a
free trader” but added, “It’s got to be reasonably fair.” Likewise, the
ha
administration has announced that it wants to replace the tpp with a
series of bilateral agreements, although it’s not clear why a dozen
bilateral agreements would prove superior to one regional agreement.
iT
Unfortunately, most of what Trump has said to date suggests that
he is interested in protectionism for protectionism’s sake. He seems to
view international trade as a zero-sum game, in which one country
wins and another loses, with the trade balance being the scorecard.
Al
“We will follow two simple rules: Buy American and hire American,”
he said in his inaugural address. But if every country adopted a similar
pledge, international trade would shrivel up.
od
Lessons from the past, such as the trade disaster of the 1930s, suggest
that protectionism begets protectionism. Indeed, a poll released in
February found that 58 percent of Canadians want their government
to fight a trade war if the United States imposes tariffs on Canadian
so
goods. History also reveals that trade barriers are easy to impose and
hard to remove. And it can take decades to repair the damage.∂
Ma

Intelligence and the

Presidency
How to Get It Right
m
Jami Miscik
U
hi
.S. presidents and other senior policymakers often come into
office knowing little about the 17 federal agencies and offices
that make up the U.S. intelligence community, but in short
ha
order, they come to rely heavily on its unique technologies, tradecraft,
and expert analysis. The intelligence community’s mission is to provide
national leaders with the best and most timely information available
iT
on global affairs and national security issues—information that, in turn,
can help those leaders achieve their foreign policy objectives.
The president is the country’s top intelligence consumer and the
only person who can authorize a covert action, and the services he
Al
receives from the intelligence community can be invaluable—providing

early warning of brewing trouble, identifying and disrupting threats
before they materialize, gaining insight into foreign leaders, and discreetly
od
affecting developments abroad. For the relationship between intelligence

producers and consumers to work effectively, however, each needs to
understand and trust the other.
so
INFORMATION, NOT POLICY

The most common misperception about the intelligence community is
that it makes policy. It doesn’t. As Allen Dulles, the director of central
intelligence from 1953 to 1961, once said, “Intelligence is the servant,
Ma
not the master, of foreign policy.” A new administration considers and

articulates what it stands for and what it hopes to achieve; it develops
policies and informational priorities, and then it deploys the resources
of the intelligence community based on those priorities.
JAMI MISCIK is CEO of Kissinger Associates and former Deputy Director for Intelligence
at the CIA. She is also Chair of Foreign Affairs’ Advisory Board.
May/June 2017 57

Jami Miscik
The intelligence community, in other words, cannot operate in a

vacuum. It must be told what to look for and what is most important.
The White House must be disciplined in its tasking; if everything is
a priority, then nothing is. Moreover, it needs to remain engaged and
update its thinking. Over time, some issues will rise in importance
and some will fall. Without regular dialogue and guidance, the intel

ligence community will do what it can to respond appropriately to
global changes and improvise ways to balance competing requests. But
the tradeoffs will often go unnoticed by senior policymakers until a
m
crisis exposes deficiencies in intelligence collection.
The intelligence community needs to have close and regular access
to all senior national security policymakers, including the president,
hi
the vice president, the secretary of state, the secretary of defense, the
secretary of homeland security, and the national security adviser. If
the producers of intelligence don’t know the status of ongoing opera-
ha

tions and negotiations, then their product will not be responsive to the
consumers’ needs and will be dismissed as irrelevant. And the window
of policy relevance is open only briefly. The reward for warning about
iT
something too early is to be ignored, and the reward for warning too
late is to risk becoming the latest example of intelligence failure.
In order to work well together during a crisis, when the stakes are
highest, intelligence producers and consumers need to have established
Al
a good working relationship long before the crisis hits. Personal

connections and regular briefings can help establish trust and mutual
understanding. Noncrisis periods are opportunities to work on the
od
relationship and prepare for the future, because when a crisis does hit,
there is no time for on-the-job training and coming up to speed on
how to best utilize intelligence assets.
The intelligence community’s relationship with senior policymakers
so
must be close and trusted, or else neither party will be able to do its job
well. At the same time, intelligence professionals have to be careful not
to get drawn into policy debates or partisan politics. Should a president
or a cabinet member ask intelligence officers for an opinion on policy, the
Ma
officers should refuse to give it, because that is not their remit; they do
not make policy. The training and culture of intelligence officers
underscore this ethos.
The American system of government requires a new president to
place his full trust in an intelligence community that loyally served
his predecessor right up until the inauguration. This is a lot to ask,

m
hi
ha
Truth tellers: at the headquarters of the CIA, in Virginia, August 2008
especially if senior administration figures have little experience with
iT
the intelligence community. The potential for distrust is high,
but intelligence officers are loyal, trustworthy, and committed to
serving the presidency. They serve without regard to political
affiliation and are trained to present their findings without personal
Al
or political agendas.
Reading a report from a cia officer in the field, a former White House
official once asked, “Is he a Republican or a Democrat?” Not only did
od
the briefer not know, but as would most of his colleagues, he found the
very premise of the question abhorrent. The new administration should
take care not to make assumptions about the political leanings of the
intelligence community or infer that it knows how intelligence officers
so
voted. Unlike in other U.S. government departments, where there are

many political appointees, in the intelligence community, most members
are careerists who have served under both Democratic and Republican
administrations. The whole point of the National Security Act of 1947,
Ma
L A R RY D O W N I N G / R E U T E R S
which codified modern governmental arrangements, was to foster a

professional national security community inoculated against partisan
politics. This is why public concerns were raised when a political adviser
was added to the National Security Council’s Principals Committee.
When intelligence officers brief senior policymakers, they are there
to do a job, not to be loved or to score political points. A former director
May/June 2017 59
Jami Miscik
of central intelligence likened it to being the skunk at the garden

party: frequently, the job is to tell policymakers what they do not
want to hear. Senior administration officials are invested in the
policies of their administration, but intelligence officers are not. It
is the essence of the intelligence community’s creed to speak truth
to power, and those who do so responsibly are considered heroes of
the profession.
GREAT EXPECTATIONS
m
At the start of a new administration, policymakers should have realistic
expectations of what intelligence can and cannot do. Many assume
that the intelligence community tries to predict the future. It does not.
hi
Intelligence officers present the intelligence that has been collected,
assess it, and evaluate possible actions and outcomes. They anticipate
possible contingencies and warn about possible dangers, but they do
ha
not try to predict results. The relationship between intelligence
officers and policymakers resembles that of scouts and coaches. A
scout is responsible for studying the strengths, weaknesses, and
iT
tendencies of the other team. The scout’s job is to provide data and
insights on the opposition. Armed with that information, the coach
can then decide how to deploy the team and what plays to execute.
The scout’s goal is to help the coach win, but nobody expects the scout
Al
to correctly predict the final score before the game is played.

Policymakers new to government must understand that intel

ligence operates in a world of uncertainties and changing realities.
od
As Clausewitz noted, “Many intelligence reports in war are con

tradictory; even more are false, and most are uncertain. . . . In
short, most intelligence is false.” All too often, this remains true
today. But false or incorrect is not fake, nor is it necessarily failure.
so
Intelligence officers are forced to deal with partial bits of

information, some sources who faithfully report inaccurate infor

mation that they mistakenly believe is correct, and other sources
who are deliberately trying to mislead and deceive. Intelligence is
Ma
cumulative, moreover, and earlier reports may prove less accurate

than later ones. As more intelligence is collected, analysts can
dismiss some reports that they had once credited. This natural and
correct dynamic should not be seen as waffling or simply changing
the story. It is actually how increasingly sophisticated answers to
intelligence puzzles emerge.

When the intelligence community gets it wrong, it must own its

mistakes. These professionals owe the country, the president, and
themselves an understanding of what went wrong, why, and what measures
have been taken to ensure the same mistakes are not repeated. That is
exactly what I believed the cia needed in the aftermath of the invasion
of Iraq in 2003, when no stockpiles of weapons of mass destruction
were found, completely contrary to our judgments. I put together a
special team to find out where we had gone wrong, and then, borrow-
ing a practice from the U.S. Navy, I
m
ordered a “safety stand-down” for all
the analysts at the cia to ensure that
It is the essence of the
the lessons learned were conveyed to intelligence community’s
hi
everybody, not just those who had creed to speak truth to
worked on Iraq. In a culture of secrets, power.
some may try to gloss over problems
ha
in hopes that the mistakes are never
discovered. It is incumbent on the leadership of the intelligence
community to hold their officers accountable and demand that mis-
iT
takes be acknowledged, analyzed, and rectified.
Policymakers should be able to aggressively question analytic
judgments and raw reporting without being accused of politicizing
intelligence. Politicization can occur only when intelligence professionals
Al
alter their findings to meet policymakers’ desires. Aggressive questioning

should be welcomed, in fact, because it forces analysts to defend their
reasoning and leads to deeper understanding of the raw reporting that
od
underlies their judgments. Policymakers need to understand not only

what the intelligence community knows but also what it doesn’t know.
Having learned from the mistakes made about Iraq, the intelligence
community now carefully conveys the level of confidence it places on
so
the judgments it makes. Policymakers should also ask what could

cause these judgments to change, what are the truly critical factors on
which each judgment rests—“linchpin analysis,” in intelligence speak.
Policymakers sometimes go too far and try to intimidate analysts
Ma
into changing or shading their judgments to fit a political objective.

When that doesn’t work, some have gone so far as to set up their own
intelligence shops, as Secretary of Defense Donald Rumsfeld and
Deputy Secretary of Defense Paul Wolfowitz did in establishing the
Office of Special Plans at the Pentagon in the run-up to the Iraq war
to find politically desired linkages between Saddam Hussein and
May/June 2017 61

Jami Miscik
al Qaeda. But policymakers cannot politicize intelligence professionals

who refuse to go along.
RISKY BUSINESS
To gain an edge over their targets, intelligence officers have to take
risks. They must face unimaginable dangers and overcome incredible
obstacles just to collect small but critical fragments of an unknown
story. The essential national service they provide should not be
dismissed, minimized, or overlooked by the president or senior policy
m

makers. Law enforcement officers, first responders, and members of the
military and intelligence services are the only Americans who vol

untarily agree to run mortal risks for their fellow citizens. The cia’s
hi
memorial wall honors 117 officers who died in the line of duty; many
of them still remain undercover. As George Tenet, the former director
of central intelligence, has said, their families and colleagues must
ha
have “the courage to bear great grief in silence.” Their service and that
of currently serving officers should be respected.
When using intelligence, policymakers need to be risk takers of a
iT
different kind. They might base a decision on intelligence that turns out
to be wrong. A presidentially approved covert operation may be blown,
leading to death, embarrassment, or retaliation. A foreign leader may
learn that U.S. intelligence has been monitoring his or her phone
Al
calls. Skiers, when renting equipment, sign a waiver that begins with
the phrase, “Skiing is an inherently dangerous sport.” National security
policymakers should mentally sign a similar waiver—and in practice ask
od
themselves, “How much risk are we willing to take?”

Faced with the complexities of international crises, presidents are
often drawn to the option of covert action. As Henry Kissinger once
described it, “We need an intelligence community that, in certain
so
complicated situations, can defend the American national interest in

the gray areas where military operations are not suitable and diplomacy
cannot operate.” Covert action can range from propaganda to coup
plotting to paramilitary operations. Used judiciously, it can be an
Ma
effective foreign policy tool, but it cannot substitute for not having a
policy in the first place.
Covert actions pose three risks for policymakers: exposure, failure,
and the blowback of unintended consequences. Traditionally, covert
action was the mandate solely of the cia, with operations requiring a
finding personally signed by the president and timely notification of

Congress. In recent years, under the guise of force protection or

battlefield preparation, the U.S. military has conducted intelligence
activities abroad that would have required a covert-action finding if
conducted by the cia. New policymakers with appropriate clearances
will need to fully understand the extent of this activity and the
potential risks engendered by it.
Both policymakers and the intelligence community are accountable
to the American people, yet ensuring such accountability can be
difficult. The public understands that the intelligence community must
m
keep secrets, but that very secrecy can fuel concerns about government
overreach. These days, it is not always clear where a foreign threat
ends and a domestic threat begins, and government agencies need to
hi
share intelligence in order to prevent disasters. However, given the
power and reach of U.S. capabilities for intercepting communications,
such sharing raises legitimate concerns about civil liberties and privacy.
ha
A healthy conversation and debate on these issues are both necessary
and wise. The intelligence community does not ignore such concerns, but
often, it wants to address the tension between collection and protection

iT
in classified venues such as the Foreign Intelligence Surveillance Court,
the National Security Council, or the congressional intelligence oversight
committees. But those concerned with civil liberties want them addressed
in the public domain. However the balance is achieved, the American
Al
people must be confident that the internal controls are appropriate and
that external oversight has sufficient visibility to be effective.
od
FORWARD GUIDANCE
To meet current and future challenges, the U.S. intelligence community
must constantly innovate and improve. A new administration can
bring a fresh perspective on how best to organize and modernize the
so
community, and positive change should be embraced and welcomed

by intelligence professionals. The new national security team, however,
needs to balance a desire for change against the potential disruption
drastic change may cause in the intelligence mission. Although disruption
Ma
can be a positive force in technology and business, in the intelligence

community, it could carry serious risks.
Future relations between intelligence producers and consumers in
Washington remain uncertain. The gravity of the presidency and the
weight of the decisions the president alone must make almost inevitably
change the person who sits behind the desk. As the complexities of the
May/June 2017 63

Jami Miscik
international challenges facing the United States become clear, the

value of intelligence in dealing with those challenges may lead senior
administration officials to rely more heavily on the intelligence com

munity. Mike Pompeo, the director of the cia; Gina Haspel, the
deputy director; and Dan Coats, the director of national intelligence,
are well positioned to lead the community into the future. But the
importance of the intelligence community’s relationship with the
president himself cannot be overstated. If human sources don’t believe
that their intelligence will make a difference, they may not take the
m
extra chance to meet with a case officer. If friendly foreign intelligence
services believe that their most sensitive information might be leaked
to the public as part of political score-settling, they will hold back
hi
and be disinclined to share. Leaders of the intelligence community
must be able to walk into the president’s office at any time and be
received openly and professionally.
ha
The members of the U.S. intelligence community serve their country
proudly and help it remain strong. Their professionalism is a bulwark
of American democracy, and they should be respected for the work
iT
they do. Unless quickly rectified, policymakers’ misconceptions about
intelligence professionals and their motivations could endanger
U.S. national security. The relationship needs to be recalibrated, with
policymakers gaining a deeper understanding of and appreciation
Al
for the work of intelligence professionals—a mission in which

“alternative facts” have no place.∂
od
so
Ma

Getting Tough on
North Korea
How to Hit Pyongyang Where It Hurts
m
Joshua Stanton, Sung-Yoon Lee, and
Bruce Klingner
F hi
or the past quarter century, the United States and South Korea
have tried to convince North Korea to abandon its nuclear
ha
aspirations. Beginning in the early 1990s, Washington attempted
to bargain with Pyongyang, while Seoul pursued a strategy of economic
engagement, effectively subsidizing Pyongyang with aid and in

iT
vestment even as it continued to develop nuclear weapons. Then,
after North Korea tested an atomic bomb in 2006, the United States
pressed the un Security Council to impose sanctions on North Korea.
Yet at the urging of South Korea and for fear of angering China, the
Al
United States failed to use its full diplomatic and financial power to
enforce those sanctions. All along, the goal has been to induce North
Korea to open up to the outside world and roll back its nuclear and
od
missile programs.
This combination of sanctions and subsidies has failed. North
Korea already possesses the ability to hit Japan and South Korea with
nuclear weapons and will soon have the ability to hit the continental
so
United States with one. Despite what some in Washington and Seoul
want to believe, the country’s leader, Kim Jong Un, is no reformer.
He has staked his legitimacy on perfecting the nuclear arsenal his
father and grandfather bought at the cost of billions of dollars and
Ma

JOSHUA STANTON is an attorney in Washington, D.C., and was the principal drafter of
the legislation that later became the North Korea Sanctions and Policy Enhancement Act of
2016. Follow him on Twitter @freekorea_us.
SUNG-YOON LEE is Kim Koo-Korea Foundation Professor in Korean Studies at Tufts
University’s Fletcher School of Law and Diplomacy.
BRUCE KLINGNER is Senior Research Fellow for Northeast Asia at the Heritage Founda-
tion. Follow him on Twitter @BruceKlingner.
May/June 2017 65

Joshua Stanton, Sung-Yoon Lee, and Bruce Klingner
millions of lives. If he will disarm at all, he will do so only under duress

so extreme that it threatens the survival of his regime.
To protect the United States and its allies from the North Korean
threat and prevent further nuclear proliferation, the Trump administra-
tion must end the incoherent policy of simultaneously sanctioning and
subsidizing Pyongyang. Instead, it should crack down on the foreign
financial dealings of North Korean officials and companies and the
foreign states that help them. The world is facing its greatest nuclear
emergency since the Cuban missile crisis. It’s past time for the United
m
States to act decisively.
ROGUE STATE
hi
For decades, North Korea has represented a second-tier crisis for the
United States—never topping Iran, for example, as a nonproliferation
priority, or Sudan as a humanitarian priority, or Iraq as a security
ha
priority. Every president since Bill Clinton has played for time, hoping
that the North Korean regime would collapse while doing nothing to
undermine it, and at times even propping it up with aid and by
iT
relaxing sanctions. The last three administrations cut a series of deals
that traded hard cash for false promises. Time and again, North Korea
agreed to dismantle its nuclear weapons program but did not.
In 1994, Clinton signed the first U.S. deal with Pyongyang: a pact,
Al
known as the Agreed Framework, that offered generous fuel aid and
help building two expensive nuclear power reactors in return for
promises from North Korea’s then leader, Kim Jong Il, to halt both his
od
uranium- and his plutonium-based nuclear programs. In 2002,

U.S. President George W. Bush, having learned that Pyongyang was
cheating by secretly enriching uranium, responded by stopping the
flow of aid. After that, Kim pulled out of the agreement, withdrew
so
from the Nuclear Nonproliferation Treaty, and restarted his plutonium

reactor. Despite this history, Bush signed his own agreement with
North Korea in 2007, under which he allowed North Korean entities
to use the dollar system, provided more aid, relaxed sanctions, and
Ma
removed the country from the list of state sponsors of terrorism.

Within a year, Pyongyang balked at signing a verification protocol,
and the deal collapsed as Bush left office.
U.S. President Barack Obama entered office promising to reach
out a hand if Kim would unclench his fist. Within months, Kim
answered by testing first a long-range missile and then a nuclear device.

m
hi
ha
Special delivery: unloading North Korean coal in Dandong, China, December 2010
Yet Obama persisted in his outreach to Pyongyang. Under the 2012
iT
Leap Day agreement, the United States promised North Korea aid in
exchange for a freeze of its nuclear and missile tests. Just six weeks
after agreeing to the deal, Pyongyang tested a long-range missile.
The lesson to be learned from all these experiences is clear: yet
Al
another piece of paper will not resolve the United States’ differences
with North Korea. After all, Pyongyang has already signed and then
unilaterally withdrawn from two International Atomic Energy
od
Agency safeguards agreements and the Nuclear Nonproliferation

Treaty and violated an inter-Korean denuclearization agreement,
the 1994 Agreed Framework, a 2005 joint statement, and both the
2007 and the 2012 agreements.
so
MONEY FOR NOTHING

While Washington negotiated deal after deal with Pyongyang, Seoul
pursued a program of economic aid and subsidized investment in
Ma
North Korea, hoping to draw it into the global economy, sow the
JACKY CH EN / REUTE RS
seeds of capitalism, and gradually liberalize its regime. Between 1991

and 2015, Seoul poured at least $7 billion into Pyongyang’s coffers.
The United States contributed an additional $1.3 billion in aid, and
private investment from China, South Korea, and Europe likely contrib-
uted billions more. The heyday of engagement, known in South Korea
May/June 2017 67
as “the sunshine policy,” lasted from 1998 to 2008, under the presi

dencies of Kim Dae-jung and Roh Moo-hyun. The cash that the sun-
shine policy provided Kim came just in time to rescue him from a
spiraling economic crisis that had already led to a major mutiny
within the North Korean army.
The failure of engagement was just as inevitable as the failure of
the Agreed Framework. Its premise—that capitalism would spur
liberalism in a despotic state—was flawed. After all, over the past
two decades, both China and Russia have cracked down on domes-
m
tic dissent and threatened the United States and its allies abroad,
even as they have cautiously welcomed in capitalism. In 2003, even
as it cashed Seoul’s checks, Pyongyang warned party officials in the
hi
state newspaper that “it is the imperialist’s old trick to carry out

ideological and cultural infiltration prior to their launching of an

aggression openly.” For the regime, engagement was a “silent, crafty
ha
and villainous method of aggression, intervention and domina-
tion.” Given this attitude, it’s no surprise that Kim Jong Il never
opened up North Korea. The political change that engagement ad-
iT
vocates promised was exactly what he feared the most.
North Korea did allow a few capitalist enclaves to be built. But
while Pyongyang collected the financial windfall, it carefully isolated
the enclaves from the rest of North Korean society. Starting in 2002,
Al
South Korean tourists booked overpriced and closely supervised hikes

along the scenic but secluded Kumgang Mountain trail in North
Korea’s southeastern corner. (The tours abruptly ended in 2008, when
od
a North Korean soldier shot and killed a South Korean woman as she
took an unauthorized morning walk.) And beginning in 2004, South
Korean companies employed thousands of North Korean workers at
the Kaesong Industrial Complex, an inter-Korean factory park a few
so
miles north of the demilitarized zone. By 2015, the companies in

Kaesong employed over 54,000 North Koreans. (The regime probably
stole most of the laborers’ low wages.)
In 2016, after North Korea’s fourth nuclear test and a missile launch,
Ma
Seoul finally conceded that Pyongyang was probably using revenues

from Kaesong to fund its nuclear program and withdrew from the
project. The leading candidate in South Korea’s presidential election
this year, Moon Jae-in, has called for the Kaesong complex to reopen
and expand, but a un Security Council resolution passed in 2016 bans
the kind of “public and private financial support” for trade with North

Korea that kept the industrial complex afloat, absent approval from a un
committee, approval that the United States could—and should—block.
Engagement has not changed Pyongyang, but it has often corrupted
the engagers. Take the case of the Associated Press. In 2012, when it
opened a bureau in Pyongyang, it promised to chart “a path to vastly
larger understanding,” while following “the same standards and practices
as ap bureaus worldwide,” to “reflect accurately” the lives of the North
Korean people. Yet it is the ap, not North Korea, that has been compro

mised, by submitting to censorship and broadcasting the regime’s pro-
m
paganda around the world, at the same time overlooking newsworthy
events—such as an apartment collapse and a hotel fire—that took place
just minutes from its bureau. Meanwhile, the foreign tour agencies that
hi
promote themselves as agents of glasnost have done little more than sup-
ply the North Korean government with hard currency—and, occasion-
ally, hostages—while shuttling tourists
ha
through a circuit of propaganda specta-
cles. The Pyongyang University of Sci-
U.S. relations with
ence and Technology was founded by Pyong yang will have
iT
Christian missionaries in 2010 to, in the to get worse before
founders’ words, help North Korea they can get better.
“contribute as a member within the
international community.” But defectors
Al

have alleged that the regime is using the university to train hackers.
And to avoid expulsion or imprisonment, aid workers in North Korea
must collaborate with the government’s discriminatory rationing system,
od
which favors those citizens it deems the most loyal to the state.
The promised results of engagement have never materialized. Since
the death of his father, Kim Jong Un has accelerated the pace of North
Korea’s nuclear and missile tests, stamped out foreign media, and tight-
so
ened the seals on the country’s already closed borders. He has ex-
panded prison camps and carried out bloody purges, and he even seems
to have sent a team of assassins to murder his half brother in a Malaysian
airport earlier this year. Pyongyang’s party elites are richer than they
Ma
were ten years ago, but they also live in greater fear of falling out of favor
with the regime and are defecting in greater numbers. Although there is
no wide-scale famine of the type that ravaged North Korea’s countryside
in the 1990s, most North Koreans barely scrape together enough to eat.
North Korean society has changed in the past two-plus decades.
Markets now provide people with most of their food, consumer goods,
May/June 2017 69

and information. Yet as the economists Marcus Noland and Stephan

Haggard have documented, those changes have occured despite, not
because of, official efforts. They have been driven by the country’s
poorest and most marginalized people, those who turned to smug-
gling to earn a living, often at the risk of death or life in a prison
camp. The United States and its allies should focus on these signs of
real change, not on brokering yet another deal with the regime that
would only perpetuate the status quo.
m
GOOD COP, GOOD COP
In 2006, after more than a decade of negotiations and aid shipments,
North Korea conducted its first nuclear test. In response, the un Se-
hi
curity Council approved a series of sanctions resolutions, and the
United States began a halfhearted campaign to use its own sanctions
to pressure North Korea into disarming. Bush and Obama talked
ha
tough after various nuclear tests, but both failed to back up their words
with action. Worse still, continued economic aid and investment can-
celed out much of the effect of the sanctions.
iT
The lax enforcement of sanctions allowed Pyongyang to launder the
money that paid for its nuclear arsenal and perpetuated its crimes against
humanity through banks in the United States. Pyongyang earned much
of that money from illicit activities and mingled dirty funds with
Al
legitimate profits to conceal the dirty money’s origin. As reports from the
un and documents from the U.S. Justice Department confirm, North
Korea continues to pay, receive, and store most of its funds in U.S. dollars.
od
The U.S. Treasury Department could end this practice, because nearly all
transactions denominated in dollars must pass through U.S. banks.
From late 2005 to early 2007, it did just that. Treasury Department
officials warned bankers around the world that North Korean funds were
so
derived in part from drug dealing, counterfeiting, and arms sales and
that by transacting in those funds, banks risked losing their access to the
dollar system. To show that they were serious, officials targeted Banco
Delta Asia, a small bank in Macao that was laundering illicit funds for
Ma
North Korea, and blocked its access to the dollar system. After that,
other banks around the world froze or closed North Korean accounts,
fearing similar sanctions or bad publicity. Even the state-owned Bank of
China refused to follow the Chinese government’s request to transfer
funds from the tainted Banco Delta Asia to other accounts controlled
by Pyongyang. As Juan Zarate, a former U.S. Treasury official, has

explained, the U.S. effort “isolat[ed] Pyongyang from the international

financial system to an unprecedented degree.” The episode also showed
that when the interests of Chinese banks diverge from those of the
Chinese government, the banks will protect their access to the dollar
system. As Zarate recounted, “Perhaps the most important lesson was
that the Chinese could in fact be moved to follow the U.S. Treasury’s
lead and act against their own stated foreign policy and political interests.”
Yet in early 2007, as part of Bush’s effort to denuclearize North Korea,
the Treasury Department returned to its policy of letting most of
m
Pyongyang’s dollars flow freely through
the U.S. banking system. By July 2014,
the Treasury Department had frozen the
China has made a show of
hi
assets of just 43 (mostly low-ranking) voting for each round of
people and entities in North Korea, sanctions, only to flagrantly
compared with about 50 in Belarus (in- violate each of them.
ha
cluding its president and his cabinet),
161 in Zimbabwe, 164 in Myanmar (in-
cluding its junta and its top banks), nearly 400 in Cuba, and more than
iT
800 in Iran. Foreign banks that processed transactions for Cuba, Iran, or
Myanmar risked getting hit with secondary sanctions and multimillion-
dollar fines. The result was that many banks avoided doing business
with those countries altogether. But doing business with North Korea
Al
posed no such risks and so continued freely, until last February, when
Congress passed the North Korea Sanctions and Policy Enhancement
Act. The law banned North Korean banks from processing payments
od
through the dollar system. But because the restriction did not take ef-
fect until last November, it is too early to gauge its effects. It took three
years for strong, well-enforced sanctions on Iran to begin to bite.
Un sanctions look strong on paper, but member states have often failed
so
to enforce them. China, in particular, has made a show of voting for each
round of sanctions, only to flagrantly violate each of them. China’s state-
owned companies have sold missile trucks to Pyongyang; its banks have
laundered the regime’s money; its government has allowed un-sanctioned
Ma
companies and the North Korean hackers who attacked Sony Pictures in
2014 to operate on its soil; and its ports have allowed the transshipment
of arms, materials for North Korea’s nuclear and missile programs, and
luxury goods headed to North Korea—all without fear of punishment.
Other countries deserve a share of the blame, as well. Until 2016,
South Korea let approximately $100 million a year flow into Pyong-
May/June 2017 71

yang through Kaesong without questioning how Pyongyang used the

money, despite un resolutions requiring Seoul to ensure that the
North Korean regime would not use South Korean funds for its
nuclear program. The fleet of ships that North Korea uses to smuggle
weapons has flown Cambodian and Mongolian flags; its nuclear and
missile scientists have visited Indian and Russian laboratories; its
slave laborers have toiled at Qatari construction sites, Malaysian
mines, and Polish shipyards; its military has trained Ugandan pilots
and built weapons for Iran and Namibia; its doctors have sold quack
m
medicines in Tanzania; and its generals have bought Swiss watches. In
testimony before a U.S. congressional committee in 2015, the scholar
Larry Niksch estimated that North Korea receives over $2 billion a
hi
year from “various forms of collaboration” with Iran alone. The cash
that Pyongyang has gained by disrupting sanctions enforcement may
be modest by global standards, but it has been enough to keep the
ha
regime in power and advance its nuclear program.
TURNING THE SCREWS

iT
North Korea’s fourth nuclear test, in January 2016, forced the United
States and South Korea to apply more coherent financial and diplo-
matic pressure. Seoul could hardly ask other governments to enforce
the sanctions when it was violating them itself in Kaesong. Closing
Al
the industrial complex there allowed it to use its substantial diplo-

matic influence to persuade allies to crack down on North Korea.
In Washington, the passage of the North Korea Sanctions and Pol-
od
icy Enhancement Act forced the Obama administration to designate

North Korea a money-laundering concern under the Patriot Act and
label several North Koreans, including Kim, human rights abusers.
Today, the U.S. Treasury Department has frozen the dollar assets of
so
about 200 North Korean entities. This number represents progress,

but it does not approach the level of pressure applied to Iran. Nor
does it represent a determined effort to find and freeze North Korea’s
money-laundering network. Another un Security Council resolution,
Ma
passed in November 2016, aimed to coax wavering states to enforce

un sanctions against North Korea, but absent a threat of secondary
sanctions, Fiji and Tanzania will continue to reflag North Korean
ships, Iran and Syria will continue to buy North Korean weapons,
Namibia will continue to host a North Korean arms factory, and Chi-
nese banks will continue to launder North Korean cash.

In September 2016, in the wake of North Korea’s fifth nuclear test,

the United States for the first time indicted a Chinese firm for break-
ing un and U.S. sanctions and seized its Chinese bank accounts.
According to the indictment, the Dandong Hongxiang Industrial
Development Company knowingly helped a sanctioned North Ko-
rean bank launder millions of dollars through U.S. banks. But the
Obama administration stopped short of going after the Chinese banks
that had facilitated the scheme, even though both un sanctions reso-
lutions and U.S. Treasury Department regulations obligated the banks
m
to investigate and report the company’s suspicious activities. That was
a mistake: sanctions will not work if Chinese banks continue to break
them, and Chinese banks will not enforce the sanctions until the
hi
United States begins penalizing violators. Indeed, it was secondary
sanctions that isolated North Korea from 2005 to 2007, helped force
Myanmar to accept political reforms in 2012, and got Iran to return to
ha
the negotiating table in 2014.
BEEN THERE, TRIED THAT

iT
Doves in the United States and South Korea still call for a return to
economic engagement and even a halt to joint U.S.–South Korean
military exercises, in the hope that North Korea will reciprocate by
freezing its nuclear program. Yet Obama repeatedly attempted to
Al
negotiate, all for naught. In 2009, then former President Clinton flew
to Pyongyang to meet with Kim Jong Il. He won the release of two
American journalists and invited the North to denuclearization talks,
od
but Pyongyang declined the invitation. Later that year, Stephen Bos-
worth, the U.S. special representative for North Korea policy, visited
Pyongyang to invite the government back to the negotiating table and
came back empty-handed. In 2013, Obama tried to send Robert King,
so
the U.S. special envoy for North Korean human rights issues, to Pyong-
yang, but North Korea canceled the visit at the last moment. Shortly
before the January 2016 nuclear test, U.S. and North Korean diplomats
discussed the possibility of starting negotiations for a peace treaty, but
Ma
Pyongyang insisted that its nuclear program would not be on the agenda.
Diplomacy has failed because Pyongyang remains determined to
build its nuclear arsenal. Resuming talks would achieve nothing, as
Pyongyang will not freeze its nuclear and missile programs when it is
so close to attaining an effective arsenal. Any U.S. concessions with-
out irreversible progress toward disarmament would do more harm
May/June 2017 73

than good. Suspending U.S.–South Korean military exercises would

degrade the readiness of U.S. and South Korean forces at a time when
North Korean missiles are still aimed at South Korean cities. And yet
Pyongyang will use any resumption of exercises as an excuse to restart
its nuclear reactors and missile tests. It will exploit any enforcement
of un sanctions, any interception of a North Korean arms shipment,
any acceptance of a North Korean defector, or any criticism of North
Korea’s crimes against humanity in the same way.
North Korea now says that it will denuclearize only after the United
m
States and South Korea negotiate a peace treaty with it to formally
end the Korean War. But Pyongyang does not want peace, or even a
peace treaty. It wants a peace-treaty negotiation—the more protracted
hi
and inconclusive, the better. By drawing the United States into a
peace process, the North hopes to blunt criticism of its crimes against
humanity, legitimize its regime, get South Korea to lower its defenses,
ha
induce the United States and the un to lift sanctions, and eventually
get U.S. forces to withdraw from South Korea. Yet Pyongyang would
ultimately rebuff U.S. requests for verification and would meet any
iT
new concessions with yet more demands and more provocations.
NO MORE MR. NICE GUY

The only remaining hope for denuclearizing North Korea peacefully lies
Al
in convincing it that it must disarm and reform or perish. Doing that will
require the United States to embark on an unrelenting campaign of
political subversion and financial isolation. The United States should
od
begin by fining and sanctioning the Chinese banks that illegally maintain
relationships with North Korean banks and fail to report suspicious
North Korean transactions to the U.S. Treasury Department. The
Treasury Department should also require banks to report North Korean
so
ownership of offshore assets. The United States and South Korea

should facilitate high-level defections by North Korean diplomats of
the kind that exposed large parts of Pyongyang’s money-laundering
network last year. As Fredrick Vincenzo, a commander in the U.S.
Ma
Navy, argued in a paper last October, the United States and South
Korea should try to convince elites in Pyongyang that they have a
future in a free, democratic, united Korea, and that in the event of
war, the United States will hold them accountable for any attacks on
civilian targets in South Korea. The United States and South Korea
should also threaten to prosecute those involved in Pyongyang’s ongoing

crimes against the North Korean people and promise clemency for
those who mitigate them.
Because Pyongyang has so consistently reneged on its agreements,
the United States must continue to pursue the regime’s assets until it has
permanently and verifiably disarmed. Until then, Washington should
work with un aid agencies to allow Pyongyang to buy and import only
the food, medicine, and other goods required to meet the humanitarian
needs of the North Korean people. Washington should release blocked
North Korean funds only in exchange for verified progress toward the
m
freeze, disablement, and dismantlement of Pyongyang’s nuclear and
missile programs; the withdrawal of the artillery that threatens Seoul;
and humanitarian reforms. As long as North Korea remains a closed
hi
society, outside inspectors will find it impossible to verify its disarmament.
Only financial coercion stands any reasonable chance of getting North
Korea to take the path that sanctions forced on Myanmar: incrementally
ha
opening up its society.
Effective sanctions require years of investigation and coalition
building; they cannot be turned on and off in an instant. So this strategy
iT
will take time, determination, and a willingness to accept that U.S.
relations with Pyongyang will have to get worse before they can get
better. The same is true of U.S. relations with Beijing. In response to
tough sanctions on North Korea, China will likely impose import tariffs
Al
on goods from South Korea, Japan, and the United States; increase its
domestic anti-American rhetoric; take aggressive military steps in the
Pacific; and attempt to circumvent the sanctions by sending food and
od
other goods to Pyongyang. Yet Beijing wants neither a major trade war
nor a military conflict. And Chinese banks and trading companies have
shown that they value their access to the U.S. economy more than their
business with North Korea.
so
China will be most likely to put diplomatic and financial pressure on

North Korea if it believes that failing to do so will lead the United
States to destabilize the regime on its northeastern border. Accord-
ingly, Washington must make clear to both Kim Jong Un and Chinese
Ma
President Xi Jinping that it would prefer the regime’s chaotic collapse

to a stable, nuclear-armed North Korea. The missing ingredient in U.S.
diplomacy with Pyongyang has been not trust but leverage—and the
willingness to use it. Washington must threaten the one thing that
Pyongyang values more than its nuclear weapons: its survival.∂
May/June 2017 75

Iran’s Next Supreme Leader

The Islamic Republic After Khamenei
Sanam Vakil and Hossein Rassam
m
O
n July 17, 2016, Ayatollah Ali Khamenei, Iran’s supreme leader,
turned 77. Rumors that he suffers from cancer have circu-
hi
lated for over a decade, and in 2014, the state-run news
agency published photos of him recovering from prostate surgery.
Although Khamenei’s prognosis remains closely guarded, the Iranian
ha
government is evidently treating his succession with urgency. In De-
cember 2015, Ali Akbar Hashemi Rafsanjani, a former president and
a kingmaker, broached the usually taboo subject when he publicly
iT
admitted that a council within the Assembly of Experts, the body
that selects the supreme leader, was already vetting potential succes-
sors. And last March, after new members of the assembly were elected
to an eight-year term, Khamenei himself called the probability that
Al
they would have to select his replacement “not low.”

The death of Khamenei will mark the biggest political change in
the Islamic Republic since the death of the last supreme leader—
od
Ayatollah Ruhollah Khomeini, the revolutionary founding father—in

1989. The supreme leader is the most powerful person in Iran, with
absolute authority over all parts of the state. A new person in that
position could dramatically alter the direction and tenor of Iran’s
so
foreign and domestic policies.

But those hoping for a kinder, gentler Iran are likely to be disap

pointed. Since he took power in 1989, Khamenei has steadily built an
intricate security, intelligence, and economic superstructure composed
Ma
of underlings who are fiercely loyal to him and his definition of

the Islamic Republic, a network that can be called Iran’s “deep
SANAM VAKIL is an Associate Fellow at Chatham House and a Professorial Lecturer at
Johns Hopkins University’s SAIS Europe.
HOSSEIN RASSAM is Director of Rastah Idealogistics and a former adviser on Iran to the
British Foreign and Commonwealth Office.

m
hi
ha
Superdelegates: the Assembly of Experts meeting in Tehran, March 2012
state.” When Khamenei dies, the deep state will ensure that whoever
iT
replaces him shares its hard-line views and is committed to protecting
its interests.
PAST IS PROLOGUE
Al
When Khomeini died, observers considered Khamenei just one of

a handful of possible replacements—and not even the likeliest. A
50-year-old midranking cleric at the time, Khamenei lacked Khomeini’s
od
towering stature. But at a meeting on June 4, 1989, the day after Kho-
meini’s death, Rafsanjani, a close confidant of Khomeini, told the
assembly that Khomeini had considered Khamenei qualified for the
job. The group elected Khamenei by a vote of 60 to 14.
so
Khamenei pledged to maintain stability as supreme leader, saying

in a speech the year he took over, “I assure you, Iran continues on
the path of the Islamic Revolution and has not diverged from its prin-
R A H E B H O M AVA N D I / R E U T E R S
ciples.” In fact, however, he immediately began ushering in dramatic

Ma
changes to Iran’s political system. Given Khamenei’s middling clerical

rank—he was only an ayatollah and not a grand ayatollah, or marja—
his election technically violated the Iranian constitution. So the po-
litical establishment quickly put to a referendum a series of
constitutional revisions that Khomeini had already approved in an
effort to reduce factional tensions after his death. Not only did these
May/June 2017 77
downgrade the required clerical qualifications for supreme leader; they

also increased the position’s authority.
The changes eliminated the possibility of a three- or five-person
leadership council should the Assembly of Experts fail to elect a
supreme leader. The word “absolute” was added before a description of
the supreme leader’s authority in the article specifying the separation of
powers, thereby maximizing his control over Iran’s executive, legislative,
and judicial branches. Another article was rewritten to give the supreme
leader extensive new powers, including the authority to resolve “issues
m
in the system that cannot be settled by ordinary means” through a new
constitutional body called the Expediency Council. These modifications
put an unprecedented amount of power in the hands of the new supreme
hi
leader. And in the ensuing years, Khamenei proved determined to use it.
THE RISE OF THE DEEP STATE

ha
Under Khomeini, the Islamic Republic had been divided. On the left
were those who sought to preserve state control over the economy and
impose moderate cultural policies. On the right were those who
iT
frowned at government intervention in the economy but favored a
sharia-inspired domestic policy. Khomeini had held the system to-
gether at the top with the backing of the clerical establishment—the
original power brokers behind the revolution—while giving each side
Al
influence. A shared sense of struggle during the Iran-Iraq War, along

with Khomeini’s enormous personal influence and charisma, kept
these tensions from breaking into the open during his reign. But be-
od
neath the surface, the divisions ran deep.

With the war over and Khomeini gone, factional infighting entered
a new stage, and Khamenei began to gradually consolidate his power.
During Rafsanjani’s first term as president, from 1989 to 1993, the
so
two men coexisted peacefully, with Khamenei cautiously supporting

Rafsanjani’s postwar plans for economic liberalization and regional
integration and tolerating his efforts to promote cultural liberaliza-
tion. But opposition to Rafsanjani’s liberal agenda began to mount
Ma
among his hard-line allies, who in 1992 won a majority in parliament.

Two years later, Khamenei openly sided against Rafsanjani over the
budget, criticizing him for the country’s growing economic malaise
and widespread corruption. Rafsanjani backtracked from his cultural
liberalization agenda and appeased conservatives by offering them

more seats in his cabinet and greater access to economic privileges.

Competition between Khamenei and Rafsanjani would continue up

until the latter’s death, earlier this year, with Khamenei repeatedly
emerging on top.
Khamenei’s next problem was gaining authority within the reli-
gious establishment. Khamenei had enjoyed its near-unanimous
backing when he became supreme leader, and in 1994, the Society
of Qom Seminary Teachers, an important clerical and political in-
stitution, proclaimed Khamenei a marja. Still, a number of clerics
strongly questioned Khamenei’s theological credentials. To counter
m
his perceived weakness, Khamenei embarked on a decadelong jour-

ney to build religious support. He imposed a state-controlled bu-
reaucracy on top of the clerical structure of Qom that stripped the
hi
ayatollahs of their once cherished financial independence and put
them under his implicit control. And he rewarded his supporters with
political positions and financial privileges that he denied to his critics.
ha
In the process, Khamenei managed to subjugate the Assembly of
Experts, the one and only body with the constitutional authority to
supervise him.
iT
Over the years, Khamenei has also steadily diminished the role
of Iran’s elected government, concentrating power in his own office
and in state entities that fall outside government oversight. In 2011,
he established a body charged with resolving conflicts among vari-
Al
ous branches of government and appointed its chair. He also created

the Strategic Council on Foreign Relations, his personal advisory
board on foreign policy, and set up a parallel intelligence apparatus
od
that has grown more powerful than the elected government’s.

Whereas Khomeini relied on a small coterie of officials to run his
office, Khamenei has placed thousands of his direct and indirect
representatives in government ministries, universities, the armed
so

forces, and religious institutions throughout the country, all of
whom report to him or his office.
STANDING GUARD
Ma
Most important, Khamenei has cultivated a strong relationship with

the Islamic Revolutionary Guard Corps, the parallel military force
beside the regular army, loyal to the supreme leader, that is charged
with protecting Iran’s security and Islamic character. His methods
have largely been financial. Over the past two decades, as Iran has
hesitantly embarked on the path of economic liberalization, Khamenei
May/June 2017 79

has helped businesses affiliated with the irgc purchase state-owned

companies at below-market rates and steered lucrative government
contracts their way.
As a result, the irgc has become a multibillion-dollar commercial
powerhouse that comprises hundreds of companies. These employ
hundreds of thousands of Iranians directly, and millions more depend
indirectly on them for their livelihoods. To name just one example,
the irgc controls the Khatam al-Anbiya Construction Headquarters,
which ranks as the biggest engineering firm in Iran and employs more
m
than 160,000 people.
As the irgc’s economic power has grown, so has its willingness to
assert itself politically. The key moment came in 1999, when thousands
hi
of students took to the streets to protest the closure of a reformist
newspaper. Twenty-four irgc com-
Over the years, Khamenei manders ha wrote an angry letter to then
President Mohammad Khatami, criti-
has steadily diminished the cizing him for not stopping the dem-
role of Iran’s elected onstrations and implicitly calling for
iT
government. his resignation. “Our patience is at an
end,” they wrote, “and we do not think
it is possible to tolerate any more if this
is not addressed.” It was the first time the irgc had intervened di-
Al
rectly in politics, and the move neutralized Khatami’s reform agenda.

Iran’s deep state had pulled off a soft coup against its government.
From that point on, reformists were on the back foot as the deep
od
state grew. The trend continued into the presidency of Mahmoud

Ahmadinejad, who took office in 2005. More government offices and
parliamentary seats came to be held by members of the irgc, and its
associated organizations took control of most newly privatized enti-
so
ties. Then came the contested presidential election of 2009. After the
Green Movement protests broke out, the irgc oversaw the crack-
down, which further solidified its authority.
What officials in the deep state care most about now is defending
Ma
their institutions against what they call a “soft war” ( jang-e narm)
led by the West. Caught unawares by the 2009 protests, they see
themselves as standing guard against efforts by the United States
and its Western allies to undermine Iran. As the deep state pre-
pares for Khamenei’s succession, it will look for a candidate who
can help it continue this struggle.

In the hours following Khamenei’s death, the Speaker of the As-

sembly of Experts will likely convene an emergency session to choose
a successor. Although the process is not written in stone (or in the
constitution), precedent suggests that the assembly will name one of
its 88 members.
Because the members are concerned most with protecting Iran’s
deep state, they will likely elect a relatively young insider who
seems capable of maintaining stability for a long time to come.
Such a candidate would, like Khamenei, have hard-line ideological
m
leanings (in terms of both domestic and foreign policy), adequate
but not overarching religious authority, and good executive expe

rience. Most important, he would respect the interests of the deep
hi
state and allow it to operate without interference. These criteria rule
out three oft-mentioned candidates: Hassan Khomeini (Khomeini’s
grandson), President Hassan Rouhani, and Mojtaba Khamenei
ha
(Khamenei’s son). The first two are distrusted by the deep state for
their reformist inclinations, and the third has no popular base of
support. Rather, the next supreme leader is likely to be one of three
iT
men: Sadeq Larijani, Mahmoud Hashemi Shahroudi, or Ebrahim
Raisi.
THE TARNISHED HARD-LINER

Al
The current head of Iran’s judiciary, Larijani, 56, was born in Najaf,
Iraq, to an influential family: his father, Mirza Hashem Amoli, was a
much-esteemed grand ayatollah, and his four brothers have all risen
od
to senior posts within the Iranian government. An elected member of

the Assembly of Experts since 1998, Larijani was appointed to the
Guardian Council (which approves candidates for parliament, the
Assembly of Experts, and the presidency) in 2001 and named to his
so
current position in the judiciary in 2009.

Larijani possesses impeccable clerical credentials. He studied under
his father and another grand ayatollah, Hossein Vahid Khorasani, and
began teaching the highest level of seminary education when he was
Ma
just 30 years old. He has written extensively on the philosophical

merits of Islamic government. Indeed, Larijani is best described as a
genuine hard-liner. A member the Society of Qom Seminary Teach-
ers’ extreme right wing, he opposes the relaxation of social and reli-
gious norms and the liberalization of Iran’s political system. He also
advocates a zero-tolerance policy toward dissent: at a convention of
May/June 2017 81

judiciary officials in 2015, he spoke of resolute action against domestic

opposition, adding, “We cannot exchange compliments with them.”
Like the supreme leader, Larijani has a decidedly anti-Western
outlook. After moderates supportive of Rafsanjani and Rouhani made
gains in the February 2016 Assembly of Experts elections, Larijani
issued a statement accusing the moderates of collaborating with Saudi
Arabia, the United Kingdom, and the United States. Larijani’s un-
compromising stances have put him in conflict with more than a few
members of the political establishment over the years, including
m
Ahmadinejad and Rafsanjani.
But Larijani has demonstrated an absolute devotion to the su-
preme leader. He has never claimed the status of grand ayatollah,
hi
thereby showing deference to Khamenei’s authority. And he supports
the notion that the Assembly of Experts should exercise minimal
supervision over the supreme leader, an extreme view within the
ha

seminary. Khamenei has described Larijani as a “learned, brave, cere-
bral, revolutionary mujtahid [an authoritative interpreter of Islamic
law] and devout scholar” and has rewarded him for his loyalty by
iT
promoting him to important positions.
As head of the judiciary, Larijani earned the ire of reformists and
the admiration of hard-liners for meting out severe punishments to
the Green Movement protesters (as well as a place on the eu’s list of
Al
designated human rights violators). Larijani established good rela-

tions with the irgc, whose intelligence arm has assisted the judiciary
in recent years by detaining and questioning activists. And he demon-
od
strated his conservative zeal, eagerly attacking Rouhani for supporting

the nuclear deal. Further adding to his influence, Larijani chairs the
board of trustees of Imam Sadiq University, which trains civil officers
for key political positions in the Islamic Republic. His involvement in
so
such pivotal institutions has given him a deep understanding of Iran’s

labyrinth of power.
Only one major obstacle stands in Larijani’s way: in recent years, his
family has come under attack for corruption. In 2013, Ahmadinejad
Ma
played a video in parliament that he claimed showed one of Larijani’s

brothers trading on his family connections, and members of parlia-
ment have accused Larijani of transferring public funds to his personal
bank accounts. Although the allegations were eventually debunked,
they could still block Larijani’s ascent to Iran’s top job if members of
the assembly conclude that his reputation is simply too tarnished.

THE CREDENTIALED CANDIDATE

Larijani’s predecessor as head of the judiciary, Shahroudi, is an equally
plausible candidate for supreme leader. Born to a family of clerics in
Karbala, Iraq, Shahroudi, 68, immigrated to Iran shortly after the 1979
revolution, where he acted as a go-between for the Islamic Republic
and the Iraqi Shiite opposition to Saddam Hussein. He rose to prom-
inence after Khomeini’s death, when Khamenei named him to the
Guardian Council. In 1999, Shahroudi was appointed head of the ju-
diciary, and he served in that position until the end of his term, in
m
2009. Shahroudi has had a long and close relationship with Khamenei.
He shares the supreme leader’s anti-American worldview and hard-
line foreign policy positions, but unlike Khamenei, he has shunned
hi
factional politics.
What distinguishes Shahroudi most are his Islamic credentials.
Shahroudi holds the honorific title “sayyid,” meaning that he is con-
ha
sidered a descendant of the Prophet Muhammad. When Khomeini
was an exiled lecturer in Najaf, Shahroudi studied under him and
other esteemed scholars. In 2010, Shahroudi declared himself a grand
iT
ayatollah and published a collection of fatwas. With strong links to
parts of the Shiite community in Iraq, Shahroudi enjoys a religious
authority that extends beyond Iran, giving him a leg up over his ri-
vals for supreme leader. But his relationship with the Society of Qom
Al
Seminary Teachers, of which he is a member, has been less success-

ful: in 2012, he tried to start a rival, more inclusive clerical group,
only to receive strong pushback from some fellow high-ranking aya-
od
tollahs who accused him of trying to sow discord.

As head of the judiciary, Shahroudi showed minimal opposition to
the harsh treatment of dissidents and activists. He made tepid attempts
at reform, which achieved little. His effort to fight corruption in the
so
judiciary failed to do much. (In fact, the press has speculated that
various associates of his are corrupt.) A 2004 parliamentary law he
championed that was intended to monitor the performance of the

courts and interrogators proved ineffective, as did his attempts to
Ma
end solitary confinement and torture. While these efforts appear to

have been genuine, as a regime insider, he never pushed for wide-
scale reform.
Shahroudi has a great deal of experience at the highest echelons of
power and influence. In addition to his time heading the judiciary
and sitting on the Guardian Council, he has served on the Supreme
May/June 2017 83

Council of the Cultural Revolution (which sets policy on Iran’s social

mores). And in March, his name was circulated as a possible candidate
to chair the Expediency Council (which arbitrates disputes between
parliament and the Guardian Council), a significant promotion. But
Shahroudi’s influence extends only so far: he does not appear to have
strong ties to military or security officials.
Known for his gentle personality, Shahroudi has largely steered
clear of factional politics. During the 2009 demonstrations, he said
little about the judicial sentences handed down to protesters. He
m
has maintained ties with both Ahmadinejad’s circle of hard-liners
and Rafsanjani’s more reform-minded crowd. Shahroudi’s fence
straddling may lead some within the deep state to consider him
hi
unreliable, and it may explain why his two bids to become Speaker
of the Assembly of Experts failed.
THE DEEP STATE’S PICK

ha
Since early last year, Raisi has emerged as the odds-on favorite to
become Iran’s next supreme leader. In March 2016, Raisi, 56, was ap-
iT
pointed head of Astan Quds Razavi. A massive charity that is con-
trolled by the supreme leader’s office, the organization manages a
shrine that attracts religious pilgrims from Iran and beyond. In this
post, Raisi oversees the organization’s sprawling business empire,
Al
which dispenses the charity’s financial largess to religious groups and

institutions. Although Raisi is not that well known among the Iranian
public, his new appointment will no doubt increase his profile.
od
Raisi made his career in the judiciary. In 1980, when he was just
20 years old, he was among the first group of young clerics to enter
the newly established Islamic court system, and he steadily worked his
way up. After heading the group that prosecutes corruption in state-
so
owned entities, he was named deputy chief justice in 2004. A year

later, according to press reports, Ahmadinejad asked him to lead the
Ministry of Intelligence and Security, but Raisi declined the offer,
preferring to retain the more powerful post in the judiciary. In 2014,
Ma
Larijani appointed Raisi attorney general, the country’s top prosecutor.

He distinguished himself most in that position by dragging his feet
on an investigation into a series of acid attacks in 2014 against women
in the city of Isfahan.
Raisi’s biggest liability is his mediocre religious resumé. He is not
a high-ranking cleric, has published little theological scholarship, and

has never taught in top seminaries. Unlike Larijani and Shahroudi, he

is not a member of the Society of Qom Seminary Teachers, nor has he
ever sat on the Guardian Council. Although he studied under Khamenei
in the early 1990s and forged close ties
to the supreme leader’s coterie, his
association with other seminarians is
The question of succession
limited. In an attempt to burnish his will force unity among
clerical credentials, he started teaching Iran’s political factions.
graduate courses in theology at Imam
m
Sadiq University and, in 2016, began using the title “ayatollah.” Raisi
also serves as the prosecutor on the Special Clerical Court, the body
that punishes wrongdoing among the clergy, and as a member of the
hi
council that oversees seminaries in Mashhad, Iran’s second-largest city.
Despite his clerical shortcomings, Raisi enjoys the high esteem
of his fellow members of the Assembly of Experts. He was elected to
ha
the assembly in 2006, and just two years later, his peers voted for him
to replace Rouhani on the body’s presiding board, which acts as a liai-
son with other state institutions. Raisi also serves as secretary of the
iT
committee within the assembly that oversees the supreme leader.
Raisi is nothing if not a hard-liner. He hails from the extremist faction
within the Combatant Clergy Association, a conservative political

group. In 1988, as a prosecutor, Raisi handled the mass executions of
Al
political prisoners, including members of the Mujahideen-e Khalq,

or mek, an exiled group that advocates the overthrow of the Is-
lamic Republic.
od
Perhaps most important, of all the candidates, Raisi has the strong

est ties to the deep state. Last year, the commander of the irgc paid
a visit to Raisi in Mashhad with other top brass to report on the
group’s classified regional activities. In photos of the meeting, Raisi
so
can be seen sitting in a chair while his guests sit on the floor—a re-
markable show of respect and confidence for a security establishment
that closely guards its secrets. For ten years, Raisi served on the board
of Setad, a holding company under Khamenei’s control that has inter-
Ma
ests in Iran’s pharmaceutical, real estate, telecommunications, and en-

ergy sectors and, according to Reuters, has assets of some $95 billion.
Throughout his career, Raisi has maintained the utmost loyalty to
Khomeini and Khamenei. That, along with his conservative bona fi-
des, experience in the judiciary, and political savvy, makes him the
leading candidate for supreme leader. He ticks all the right boxes.
May/June 2017 85

PREDICTING THE UNPREDICTABLE

It is tempting to hope that when Khamenei dies, Iran’s reformists
will resurface to challenge the hard-liners. But when Rafsanjani
died, so, too, did the possibility of any internal challenge. The ques-
tion of succession will force unity among Iran’s various political
factions, all of which remain devoted to safeguarding the state above
all else.
The Green Movement, meanwhile, has been neutralized through
violence and intimidation. Khatami has been marginalized since he
m
was placed under close state supervision in 2009 (and even as presi-
dent, he never truly attempted to challenge the deep state). Rouhani,
who counts as a moderate in today’s Iran, is also a creature of the
hi
political system, and when push comes to shove, he, too, will fall into
line, despite his deep disagreements with the hard-liners. Like the
rest of Iran’s establishment, he has no desire to relive the 2009 pro-
ha
tests or allow the Arab Spring to spread to his country.
As Iran gears up for a leadership transition, it is important to see
the Islamic Republic for what it is, and not what one may hope it can
iT
be. Given the enduring power of its deep state, Iran will likely keep
trying to expand its regional influence. When it comes to relations
with the West, it will probably continue its cautious and pragmatic
strategy, cooperating on some issues (for example, helping with the
Al
fight against the Islamic State, or isis) while refusing to do so on oth-

ers (for example, maintaining its hostility toward Israel). And as long
as the United States upholds its end of the nuclear deal, Iran will
od
continue to uphold its. But it is foolish to hope that pressure from the
Trump administration will bring about political change in Iran.
Khamenei wants a stable transition, and he is counting on the deep
state to ensure it. In a 1996 speech to a group of irgc commanders, he
so
divided Iranians into two groups, the avam, “masses,” and the khavas,
“insiders,” and emphasized the importance of the latter’s “level of
dedication to the ideals of the Islamic Republic.” He went on: “Some
fall for the glitter of the material world, and the faithful are only those
Ma
who remain committed and loyal.” As Khamenei sees it, Iran’s sur-
vival lies in the hands of his carefully built network of disciples. In all
likelihood, they will continue to safeguard the Islamic Republic long
after he is gone.∂

Brazil’s Never-Ending
Corruption Crisis
Why Radical Transparency Is the
Only Fix
m
Brian Winter
S hi
ix decades ago, long before the Brazilian Senate’s August 2016
ha
vote to impeach President Dilma Rousseff and remove her from
office, one of the most beloved leaders in the country’s history
was besieged by scandals of his own. President Getúlio Vargas, a stocky,
iT
gravelly voiced gaucho from Brazil’s deep south, had granted new
rights, including paid vacation, to a generation of workers in the 1930s
and 1940s. But after Vargas returned to power in 1951, one of his top
aides was charged with murder, and Vargas himself faced allegations
Al
that the state-run Bank of Brazil had granted sweetheart loans to a

pro-government journalist. “I feel I am standing in a sea of mud,”
Vargas lamented. After a late-night cabinet meeting on August 24, 1954,
od
failed to solve the crisis, and with numerous generals demanding his
resignation, Vargas withdrew to his bedroom, grabbed a Colt pistol,
and shot himself through the heart.
Ever since, corruption scandals have continued to routinely upend
so
Brazilian politics. In 1960, the mercurial Jânio Quadros won the presidency
by campaigning with a broom, vowing to sweep away the thieving “rats”
in Brasília—only to quit after eight tumultuous months in office. Following
a 1964 military coup, widespread disgust at the corruption of civilian
Ma
politicians helped Brazil’s generals hold on to power for two decades. In

1992, Fernando Collor de Mello—the first president to be elected fol-
lowing the restoration of democracy—was impeached over allegations
that he and members of his inner circle had embezzled millions.
BRIAN WINTER is Editor in Chief of Americas Quarterly. Follow him on Twitter @BrazilBrian.
May/June 2017 87

Brian Winter
Last August, Rousseff, the country’s first female president, became

the latest Brazilian politician to see her career wrecked in part by
revelations of graft. The technical grounds for her impeachment were
that she had manipulated the federal budget to conceal the scale of the
country’s mounting deficits. In reality, however, the impeachment was
driven by public anger at a president who had overseen the country’s
worst recession in more than a century and by the exposure of a
multibillion-dollar corruption scandal that made Vargas’ “sea of mud”
look like a tiny pond. Operation Car Wash, as the investigation has
m
come to be known, uncovered massive
Brazilian democracy is at graft involving government officials,
business leaders, and the state-controlled
hi
its most vulnerable point oil company, Petrobras—the board of
since the return of civilian which Rousseff herself had chaired
rule three decades ago. ha before becoming president in 2011.
Although Rousseff is not accused of
personally profiting from the corruption
scheme, prosecutors say that illegal proceeds were used to finance her
iT
electoral victories in 2010 and 2014 (Rousseff denies any wrongdoing).
Several operatives from her Workers’ Party, including its former
treasurer, Rousseff ’s media guru, and a former senator, have been
jailed on charges of money laundering and other crimes.
Al
Rousseff ’s successor, President Michel Temer, took office hoping to

turn the page—to no avail. Some within Temer’s centrist Brazilian
Democratic Movement Party (pmdb), including several members of
od
Temer’s cabinet, were also allegedly involved in the corruption at

Petrobras. Just weeks after Temer took office, his minister of trans-
parency, Fabiano Silveira, was forced to resign after a secret recording
was leaked in which he appeared to advise the president of the Senate,
so
another member of the pmdb, on how to avoid prosecution. In a Febru-

ary poll, 65 percent of Brazilians surveyed said they thought Temer’s
government was just as corrupt (or more so) than Rousseff ’s. Just ten
percent approved of his government’s performance, placing Temer’s
Ma
own political survival in jeopardy.

With public anger on the rise and the economy still stagnant,
Brazilian democracy is now at its most vulnerable point since the
return of civilian rule three decades ago, and it risks lapsing into long-
term dysfunction or the “soft authoritarianism” currently sweeping
the globe. The struggles of Rousseff and Temer, like those of their

Brazil’s Never-Ending Corruption Crisis
predecessors, illustrate why it’s time for Brazil to take a radically new

approach to preventing corruption. Only by renouncing their spe-
cial privileges and committing to genuine reform will Brazil’s poli-
ticians be able to ward off disaster and regain the public’s trust.
WASHED AWAY
The history of corruption in Latin America has generally been one of
dramatic headlines but few consequences for the guilty. While he was
in office, Carlos Menem, Argentina’s president during the 1990s,
m
proudly drove a bright red Ferrari that he had received as a gift from
a businessman. “It’s mine, mine, mine!” he crowed. Menem’s brazen
behavior reflected many politicians’ belief that they would be shielded
hi
from public anger, either by economic growth or by pliant institutions.
In Mexico, for example, the long-dominant Institutional Revolutionary
Party controlled the courts and the media, shielding the country’s
ha
presidents from career-ending scandals.
Only in Brazil has corruption toppled one government after another.
Some analysts blame Brazil’s continental size and its strong regional power
iT
centers, which have produced a large number of political parties—at one
point, Rousseff’s coalition in Congress included more than 20. The parties
themselves have weak ideological identities and little power to enforce
loyalty among their members, which often compels presidents to bargain
Al
with legislators individually to get laws passed. This, in turn, creates strong
incentives for politicians to resort to bribery to help forge alliances.
Other scholars argue that Brazil is no more crooked than its regional
od
peers, pointing to surveys such as Transparency International’s

Corruption Perceptions Index, which ranks Brazil as less corrupt than
Argentina and Mexico. Brazilian corruption is simply more likely to
be detected, they claim. Brazil has an especially vigorous free press, an
so
independent and well-resourced judicial branch, and a large and

historically marginalized working class that, amid levels of inequality
that are high even by Latin American standards, is almost always
ready to turn on its leaders at the drop of a hat.
Ma
Whatever the truth, in recent decades, Brazil’s systemic corruption

has become more unsustainable. The country’s 1988 constitution granted
extraordinary autonomy to Brazilian prosecutors, leaving them free to
investigate and imprison members of the business and political elite
with little fear of reversal or retribution. As in other parts of the
world, technological changes, including the rise of Facebook and Twitter,
May/June 2017 89

Brian Winter
have made it easier for watchdogs to collect evidence, publish allegations,

and mobilize anticorruption demonstrations. And the economic boom
Brazil enjoyed in the first decade of this century, fueled in part by
Chinese demand for its commodities, created a new, educated middle
class that demands better governance from its leaders. A decade ago,
unemployment and hunger ranked at the top of most voters’ concerns;
today, corruption does, especially among voters under 40.
These factors have come to a head in the Car Wash scandal. In
2013, Brazilian police discovered an illegal money-transfer business
m
hidden behind a gas station. In exchange for a plea bargain, one of the
money launderers they arrested, a man named Alberto Youssef, told
investigators about his role in a scheme that had funneled billions of
hi
dollars from Petrobras and other corporate giants to Brazilian politicians
and their associates. Since then, a team of prosecutors has built evi-
ha dence based on additional plea bar-
gains, as well as an extensive web of
Only in Brazil has domestic and international bank rec
corruption toppled one

ords. Many of Brazil’s most famous
iT
government after another. tycoons have been jailed, including the
oil magnate Eike Batista, the seventh-
richest person in the world in 2012, according to Forbes magazine.
The prosecutors, most of whom are in their 30s and 40s, come from
Al
Brazil’s first generation to know nothing but democracy in their

adult lives and value the rule of law over deference to authority.
Meanwhile, Brazil’s old political establishment has consistently
od
underestimated both the tenacity of the prosecutors and the support

they enjoy from the Brazilian public. On taking office, the 76-year-
old Temer could have appointed aides who were untainted by the Car
Wash scandal. Instead, he assembled an all-male, all-white cabinet
so
(despite the fact that more than 50 percent of Brazilians define

themselves as black or mixed race) that included numerous politicians
already under investigation for corruption. The idea, it seems, was
that by assembling an all-star team of experienced, if unpopular,
Ma
politicians, Temer would be able to pass legislation, including a

reform of Brazil’s overly generous pension system, that would restore
investors’ confidence. Once economic growth returned, Temer and
his aides believed, public anger over corruption would recede.
Perhaps predictably, this approach has backfired. Amid a relentless
torrent of new allegations stemming from the Petrobras case and other

m
hi
ha
You’re fired: Rousseff in Brasília after being stripped of the presidency, September 2016
investigations, five more ministers from Temer’s cabinet, in addition to
Silveira, have resigned or otherwise lost their jobs. In December, large
iT
street demonstrations broke out after Brazilian politicians gutted an
anticorruption bill. The political instability has hampered Temer’s
ability to execute his legislative agenda and has scared off many domestic
and foreign investors, and most economists now expect Brazil’s economy
Al
to barely grow in 2017. The only public figure in Brazil whose approval
rating consistently stands above 50 percent is Sérgio Moro, the 44-year-
old judge overseeing Operation Car Wash.
od
With Temer’s term set to end in December 2018, it is probably too

late for him to relaunch his government in a more transparent mold.
But his successor will have a golden opportunity to show that he or
she has learned the lessons of Operation Car Wash. Only by prioritizing
so
the fight against systemic corruption and making transparency a

guiding principle of government policy can Brazil’s politicians regain
the support of their constituents, inspire confidence among investors,
AD RIANO MACHADO / REUTE RS
and end the country’s crippling economic crisis. This strategy—call it

Ma
“radical transparency”—holds the country’s best hope for recovery.
THE BEST DISINFECTANT

Radical transparency must start at the very top, and it requires deep
reforms as well as symbolic measures aimed at regaining the public’s
trust. For starters, Brazil’s next president should name a cabinet that is
May/June 2017 91
Brian Winter
completely untouched by the scandals of recent years. To reinforce his

or her commitment to bringing new figures into national politics, the
president should reserve half of all cabinet positions for women and a
smaller quota for people under the age of 40, following the lead of
Colombia, which introduced this very policy in the early years of this
century. The government should also publish statements listing each
minister’s assets and recent income on the presidency’s official website.
But to significantly reduce corruption, Brazilian lawmakers must
make deeper political reforms. The most obvious is to abolish Brazil’s
m
so-called privileged standing, a law under which only the Supreme Court
can judge senior government officials, including the president, cabinet
ministers, and members of Congress, for alleged crimes. This provision,
hi
which has its origins in nineteenth-century Portuguese colonial rule, was
designed to shield high-level public servants from politicized verdicts by
ha lower courts. But given that the Su-
There is more support now preme Court deals with more than
100,000 cases a year, trials of politicians
for sweeping political usually drag on for several years—if they
iT
change than at any point in occur at all. The result is near impunity
a generation. for the estimated 22,000 people who
currently enjoy some version of this
privilege, which helps explain why far
Al
more executives than politicians have been imprisoned so far in the Car
Wash scandal. Withdrawing it, which would require Congress to amend
the constitution, would dramatically improve the odds of corrupt politi-
od
cians going to jail without inordinate delays.

Brazil’s next president could complement this change by steering
greater resources toward the Federal Police; the Ministry of Trans-
parency, Supervision, and Controls; the Superior Electoral Court;
so
and other bodies that investigate and prosecute graft and fraud. Brazil
already has some of the region’s most stringent anticorruption legisla-
tion, including a 2011 freedom-of-information law, a 2013 law governing
private-sector conduct, and a 2016 law mandating greater financial
Ma
transparency at state-run companies such as Petrobras. But as the wry

Brazilian expression goes, Algumas leis não pegam (Some laws don’t
quite catch on), usually because the government fails to provide the
resources to enforce them. According to their employees’ union, for
instance, the Federal Police are so strapped for cash that they have
only one agent for every 200 cases; the union has asked that the size

of the force be doubled to keep up with demand. Other countries

shaken by Operation Car Wash—the investigation has followed the
money beyond Brazil’s borders into Colombia and Peru—have already
taken similar steps: in February, Peru’s president announced that he
would triple funding for anticorruption prosecutors.
If the government wishes to crack down on the kind of corruption
uncovered at Petrobras, it should focus on places where the private
and public sectors intersect. That means publishing all the terms, bids,
and results for procurement and infrastructure projects and instituting
m
harsher fines for companies when the projects go overtime or over
budget. One proposal that Congress is considering would oblige gov-
ernment entities, including state-run companies, to dedicate at least
hi
ten percent of their advertising budgets to educating the public about
the dangers of corruption and publicizing outlets for whistleblowers.
This is a good idea, and the government should also work with
ha
Congress to draw up a new framework for campaign finance, following
the Supreme Court’s 2015 decision to abolish corporate donations
altogether until a more transparent system could be created.
iT
Finally, the next government should work with Congress to pass
legislation that would slash the number of political parties, and with it
the opportunities for corruption. As of December 2016, 28 parties
were represented in Brazil’s Congress, and applications were pending
Al
with electoral authorities to create an additional 52 parties. Introducing

a minimum threshold of votes to enter Congress could reduce the
number of major parties to, say, eight or ten, without unduly restricting
od
political diversity.
CLEANING UP
Many Brazilian politicians dismiss these proposals as unworkable in
so
the current political climate. They insist that the true source of public
discontent is not corruption but the economy, which has contracted by
almost ten percent on a per capita basis since 2014. The government
should therefore save its political capital, the argument goes, for pass-
Ma
ing legislation that will boost job creation, simplify its notoriously
Byzantine tax code, and better integrate Brazil—the most closed major
economy in Latin America—with the rest of the world.
It’s true that recapturing the dynamism that lifted millions of Brazilians
out of poverty is critical. But the government would be reckless to
dismiss the public’s outrage over corruption. In a 2016 survey, only
May/June 2017 93

Brian Winter
32 percent of Brazilians polled agreed that democracy is always the best

form of government—a 22-percentage-point plunge from the previous
year. If popular dissatisfaction with the political class remains so high,
Brazilian democracy will face an existential threat. The risk is not a
military coup; that era in Brazil ended with the Cold War. Instead,
the public could be seduced by an authoritarian civilian leader who
pushes Congress aside and restricts democratic freedoms. Alternatively,
the country could remain trapped in a cycle in which unpopular politi

cians persistently resist transparency, even as new scandals continue
m
to erupt—a recipe for long-term stagnation.
To be sure, an anticorruption drive would carry some risks. Presidents
who pledge to stamp out corruption often resort to demagoguery and
hi
try to drive investigations themselves instead of empowering indepen

dent judicial institutions. Authorities must ensure that law enforcement
agencies spend any additional funds effectively. After all, Brazil already
ha
spends more than its regional peers on the judicial sector, but too much
of the money goes toward lavish salaries and perks for judges, even as
police complain they can’t afford to fill their cars with gas. Finally, efforts
iT
to increase transparency often end in disappointment. Governments
should thus manage public expectations; the goal is to significantly
reduce corruption, not eliminate it altogether.
Nonetheless, Brazil’s leaders have an extraordinary opportunity.
Al
There is more support now for sweeping political change than at any
point in a generation. Polls show that Brazilians are convinced that
corruption caused the worst crisis of their lifetimes. In a nationwide
od
survey at the end of 2016, 96 percent of respondents said they wanted

Operation Car Wash to continue “no matter the cost”; 70 percent said
they felt confident that, thanks to the investigation, corruption would
decline in the future. Over the past 35 years, Brazil has defeated
so
authoritarianism, hyperinflation, and hunger. Adding systemic cor

ruption to that list would represent a historic accomplishment.
In the final months before Rousseff’s impeachment, as the Car Wash
scandal erupted and the economy collapsed, she commissioned secret
Ma
internal polls to gauge her political standing. Rousseff was surprised to

learn that the most popular figure in Brazil was not her or Luiz Inácio Lula
da Silva (known as Lula), her much-loved predecessor. It was Pope Francis,
whose example of austerity and integrity resonated at a time of enormous
moral crisis, and who, in 2015, had called on the Vatican to operate
with “absolute transparency.” Brazil’s next leader should take note.∂

How to Maintain
America’s Edge
Increase Funding for Basic Science
m
L. Rafael Reif
I
hi
n February 2016, scientists from the Massachusetts Institute of
Technology (mit) and the California Institute of Technology, or
Caltech, joined with the National Science Foundation (nsf) to
ha
share some remarkable news: two black holes 1.3 billion light-years
away had collided, and the resulting gravitational waves had been “heard”
by the twin detectors of the Laser Interferometer Gravitational-Wave
iT
Observatory (ligo). This was the first time such waves—ripples in
the space-time continuum caused by the violent acceleration of massive
objects—had ever been directly observed. Albert Einstein had predicted
such waves a century ago, but it was long doubted that instrumentation
Al
sensitive enough to confirm their existence could ever be created. It

took more than four decades of work by a vast team of scientists to
make the impossible possible.
od
Ligo has revealed thrilling new insights into the cosmos—but it

has given the world some gifts of immediate practical value as well,
which help illustrate the benefits of such investments in basic science.
Over the years, the ligo project has provided a crucial training
so
ground for thousands of top young scientists and engineers, developing

talent that has energized not only American universities but also
American businesses. Because ligo researchers had to measure displace-
ments of mirrors one-10,000th the size of a proton, they were required
Ma
to invent an array of breathtakingly precise new tools, including ultra-

stable high-powered lasers, ultrasmooth mirrors mounted on ultraquiet
vibration-isolation platforms, the world’s largest ultrahigh-vacuum
system, and software algorithms for extracting tiny signals from noisy
L. RAFAEL REIF is President of the Massachusetts Institute of Technology.
May/June 2017 95

L. Rafael Reif
data. Some of these technologies are already beginning to be used in

commercial manufacturing. And if history is any guide, ligo will lead
to important innovations far down the road—just as 1940s experiments
with nuclear magnetic resonance led to the mri scanner, a 1950s effort
to create clocks to measure how gravity warps time made possible
gps, and research in the 1960s and 1970s gave the world the Internet.
Ligo, in short, is extraordinary. But it is also typical, because it
highlights the system the United States relies on to achieve great
scientific discoveries: public support
m
for university-based research, with large
It often takes decades for investments of time, cash, and patience.
fundamental research to This support flows through federal
hi
yield practical applications. agencies such as the nsf, the National
Institutes of Health, and the Defense
and Energy Departments. In the case of ligo, its observatories were
ha
funded by the nsf and designed, constructed, and run by its university
partners, with more than $1.1 billion spent over 40 years.
Since World War II, the U.S. government has been the world’s
iT
biggest supporter of potentially transformative science—which is a
key reason why the country continues to have the highest share of
knowledge- and technology-intensive industries in the world,
amounting to nearly 40 percent of the economy. It often takes decades
Al
for fundamental research to yield practical applications, and those

applications can be unpredictable (such as the cyclotrons devised for
experiments in particle physics in the 1930s being put to use in cancer
od
treatments now). Yet it is out of such attempts to expand human

knowledge that powerful new businesses grow, with technology titans
such as Apple and Google building world-class companies on the
backs of technologies emerging from federal investments in research.
so
By now, one successful way to cultivate economic growth in the

United States is clear: Government provides the resources for basic
science, and universities supply the talent, the training, and the com-
mitment. The results inspire innovation, private investment, and
Ma
further research and development, generating new products, new indus-

tries, new jobs, and better lives on a large scale.
Indeed, a short walk from my office, I can see the physical embodi-
ment of this process in Cambridge’s Kendall Square, which has been
transformed in recent decades from an aging industrial landscape.
First, it became an informal gathering place for young scientists from

How to Maintain America’s Edge
m
hi
ha
The truth is out there: a simulation of black holes, released at a conference in February 2016
iT
mit, Harvard, and Boston’s great medical centers excited by molecular
medicine and gene engineering, then the site of academic research
centers focused on cancer, genomics, neuroscience, and biomedicine
and a hotbed for start-ups in the biosciences. Now it is a home for
Al
large companies as well, in biotechnology, pharmaceuticals, information

technology, and energy. Once dominated by shuttered candy factories
and empty pavement, Kendall Square has been reborn as the biotech
od
capital of the world, one of the most innovative square miles on the
planet. Much of the work on the government-funded Human Genome
Project took place in the area, and according to the Battelle Memorial
Institute, a nonprofit research-and-development organization, the
so
$14.5 billion spent on that effort between 1988 and 2012 has helped
generate an estimated $1 trillion in economic impact and more than
S I M U L AT I NG EX T R E M E S PAC E T I M ES
four million job-years of employment.

Yet despite the remarkable success of the U.S. innovation economy,
Ma
many players in both government and industry have been pulling

back from the types of bold long-term investments in fundamental
science that could seed the great companies of the future. The entire
innovation ecosystem is becoming more shortsighted and cautious.
And by failing to invest sufficiently in basic research today, Washington
risks creating an innovation deficit that may hobble the U.S. economy
May/June 2017 97
L. Rafael Reif
for decades to come. This concern has become acute since the White
House released its budget blueprint, which proposes crippling cuts
to science funding. Now more than ever, the fate of this crucial national
investment depends on Congress.
THAT USED TO BE US
While other nations are vigorously investing in scientific discovery,
in recent years, total research-and-development spending in the
United States, both private and public, has stagnated. Between 2008
m
and 2014, the entire U.S. research-and-development enterprise grew
by just over one percent annually in inflation-adjusted dollars.
Most concerning, however, is the decline in federally supported
hi
research. Between 2009 and 2015, federal spending on research and
development of all kinds decreased by nearly 20 percent in constant
dollars. Universities suffered the longest downturn in federal support
ha
since the nsf began keeping track in 1972, and that has caused a great
deal of promising work to stall—just when groundbreaking new tools,
such as the ligo detectors and CRISPR-Cas9 genome editing, have
iT
opened up enormous opportunities for new discoveries.
Such underinvestment in research and development is not merely
a temporary effect of the Great Recession. The federal government
now spends a significantly lower percentage of gdp on research than
Al
it did in the 1960s and 1970s and has particularly stinted research in
essential fields such as the physical sciences, mathematics and com-
puter science, and the environmental sciences. The result has been a shift
od
over time in the source of the majority of research-and-development

investment from the federal government to industry.
Industrial research and development is necessary and valuable, of
course. But with some exceptions, it tends to focus on relatively narrow
so
questions directed at specific commercial outcomes. Only about six

percent of industry funding goes to basic research—to projects
designed to expand humanity’s store of knowledge rather than pass
tests of immediate usefulness. This is understandable. Basic research
Ma
is curiosity-driven, and the short-term returns from it are often not

obvious. Yet we cannot do without it, because it is from such funda-
mental explorations that the world gets the startling breakthroughs
that create entirely new industries.
Unfortunately, the United States’ great corporate laboratories, such
as Bell Labs and DuPont Central Research and Development, once

hubs of both fundamental and applied science, are largely a thing of

the past. As global competition intensified and firms lost their market
dominance, funding such labs came to be seen as an extravagance.
Since 1971, moreover, U.S. corporations have been required to report
their earnings quarterly, a change that has made it more difficult for
managers to focus on long-term results.
There is, however, a true bright spot in the innovation economy. A
new generation of digital industry leaders is now funding applied
research into various blue-sky technologies, such as low-cost space
m
rockets, autonomous vehicles, holographic computing, Internet-
beaming drones, and flying cars. Some are even taking on long-term
biomedical challenges, such as devising interventions for aging. But
hi
however impressive such efforts are, one must not mistake the fruit
for the tree it grew from. Even Astro Teller, the head of so adventurous
a corporate laboratory as Alphabet’s X, home of the fabled “moon-
ha
shots,” notes that basic research is outside his purview. “The word
‘basic’ implies ‘unguided,’” Teller told The New York Times in 2014,
“and ‘unguided’ is probably best put in government-funded universities
iT
rather than industry.” Yet many of X’s futuristic projects, Teller
explained, “rely on the academic work of the last 30 or 40 years.”
Universities have struggled to do their part. Over the past 40 years,
they have doubled the share of academic research-and-development
Al
spending they provide themselves, to its highest level ever. They have
found the money to invest steadily in new facilities, they continue to
train the nation’s young technical talent, and they continue to drive
od
economic development, gaining ever more patents, licensing new

technologies, and incubating start-ups. But budgets are tight, and
university resources are too limited to sponsor basic research any-
where near the scale of ligo.
so
LESS MONEY, MORE PROBLEMS

Why is U.S. government funding for fundamental scientific research
drying up? In part because sluggish economic growth since the end
Ma
of the last economic downturn has made it difficult to justify funding

projects with no projected returns for decades to come. There is also
a sense that other countries will reap the profits of U.S. investment
in basic research without helping cover the costs. And there is a concern
that, in combination with globalization, innovation is contributing to
the erosion of jobs.
May/June 2017 99

L. Rafael Reif
But the process of scientific progress and technological change will

not stop because Washington refuses to participate. Moreover, the
growth of innovation clusters such as those around Silicon Valley and
Kendall Square suggests that there is indeed a home-court advantage
to those places where discoveries are made and that businesses like to
stay physically close to the source of important ideas. In such places,
start-ups linked to university-based research stay in the neighborhood
to absorb talent and knowledge and are often joined by larger, more
established firms.
m
And although an increasing percentage of Americans worry that
science is forcing too much change on them too quickly, the route to
rising incomes ultimately runs through
hi
new technologies. In 1987, the mit
All six of the 2016 professor Robert Solow was awarded
American Nobel laureates the Nobel Prize in Economics for an
ha
in science and economics economic growth model that proposed
were immigrants. that rising real incomes are largely
dependent on technological progress.
iT
Throttling back on investment in basic
research is a way to increase economic insecurity, not reduce it, and
threatens to shrink the country’s horizons in several ways.
To start with, the United States’ lead in technological innovation
Al
could fall to global competition, just as the country’s domestic manu-

facturing base did, with major geopolitical and economic conse-
quences. Cutting-edge science is equally vital to national security
od
and the economy. Tellingly, other nations are already starting to catch
up. As the United States’ research-and-development spending stag-
nated between 2008 and 2013, China’s grew by 17 percent annually,
and South Korea’s, by nine percent. Chinese nationals now publish
so
almost as many peer-reviewed scientific journal articles as Americans

do, and the quality of Chinese research is rising rapidly. (For as long
as the U.S. Patent and Trademark Office has been monitoring how
many patents have been granted to universities, mit has ranked as
Ma
the single institution with the greatest number, followed by other

distinguished U.S. universities, such as Stanford and Caltech. In
2013, Beijing’s Tsinghua University suddenly leapt ahead of Stanford.)
Further cuts in research budgets will discourage the cultivation of
desperately needed young scientific and engineering talent. This is not
merely an academic issue, because a high proportion of U.S. science and

engineering Ph.D.’s go into industry. As a result, universities have a sig-

nificant role in training the most sophisticated talent for U.S. businesses,
and a crucial feature of U.S. graduate education in science and engineer-
ing is the involvement of students in cutting-edge academic research.
Projects such as ligo show graduate students that they can pursue the
boldest of ideas, leading to further innovation down the road.
Continuing to starve basic research will also hamper the country’s
ability to attract top global talent, adding to the discouraging effect
of recent restrictions on immigration. U.S. universities have long
m
been a magnet for the world’s most brilliant people, as both students
and faculty. All six of the 2016 American Nobel laureates in science
and economics were immigrants, for example, as have been 40 percent
hi
of the American Nobel laureates in chemistry, medicine, and physics
in this century. At mit, more than 40 percent of both the graduate
students and the faculty were born outside the United States—
ha
including the Venezuelan-born author of this article. As research
funding dries up, so, too, will the influx of foreign talent.
Fewer federal dollars will also reduce the diversity of the entire
iT
U.S. research enterprise. While philanthropic support is important
and can focus resources and attention on particular areas of research
at particular institutions in ways that may yield rapid results, it cannot
substitute for the broad base of federal investment. The National
Al
Institutes of Health alone spends over $30 billion on medical research

every year; imagine how many relentlessly generous billionaires it
would take to match that. Furthermore, although some philanthropic
od
funding goes to university research, the majority of it is directed to

nonprofit research institutes, which, unlike universities, are not re-
freshed by a steady stream of new students and junior faculty. Because
universities are forever young, they are uniquely creative.
so
Declining public investment in science is linked to another emerging

threat: a less patient system of private investment to carry discoveries
through to commercialization. From the 1960s through the early 1990s,
federal investments in education and research produced well-trained
Ma
young scientists and engineers who generated brilliant ideas. Big

companies with big internal research-and-development operations
would then hire many of those people, develop their ideas, and deliver
them to the marketplace. When I joined mit’s electrical engineering
faculty in 1980, that model was working well, translating discoveries
from university labs across the country into market-ready innovations.
May/June 2017 101

L. Rafael Reif
By the 1990s, however, as American corporations curtailed their

own internal research operations, scientists and engineers were left
with only one avenue to bring their innovations to market: seek risk
capital and launch a start-up. Venture capital investment is typically
not patient, however, and it has gravitated disproportionately to dig-
ital and biotechnology start-ups that offer a quick path to profitability
or to the potentially outsize rewards of blockbuster therapeutics.
Venture capital investment has not worked as well for many tangible
products based on new science and technology, including sorely
m
needed new energy technologies, which may require capital-intensive
infrastructure and involve novel manufacturing processes that will
take time to develop.
hi
DANGER, WILL ROBINSON!
The future of U.S. scientific, technological, and economic innovation
ha
depends on increased federal funding for basic research and increased
effort by the private sector to move new technologies into the market-
place. In 1964, at the height of the Cold War and the space race, federal
iT
spending on research and development came to 1.9 percent of gdp.
Today it is less than half that—even in the face of threats such as ter-
rorism, cyberattacks, climate change, and potential pandemics. Given
these challenges and the ratcheting up of international competition, a
Al
recommitment to U.S. leadership in science and innovation is critical.

Something more has to be done, also, to ensure a steady progression
from ideas to investment to impact. Many universities have created
od
incubators and accelerators to support start-ups emerging from their

laboratories. At mit, we are particularly concerned about the fate of
“tough technologies” in fields such as clean energy, manufacturing,
robotics, biotechnology, and medical devices—promising ideas that
so
could potentially yield game-changing answers to enormous challenges

but whose commercialization is too time- and capital-intensive to
attract risk capital or strategic investment from a large corporation.
To help such technologies reach the marketplace, we recently
Ma
launched an enterprise we call The Engine. It will support up to 60

start-ups at a time by offering them affordable space near the mit
campus, access to specialized equipment and technical expertise, and
patient capital through a venture capital investment arm relying on
private funds. If this and similar projects elsewhere succeed, they
could unleash waves of innovation that could benefit everyone.

The benefits of public investment in science and technology, finally,

must be broadly shared by the citizens who shoulder the cost, and the
economic and social disruptions triggered by the resulting advances
must be addressed with systems that offer continuous training and
retraining to American workers throughout their professional lives.
Increasingly smart and nimble machines will eventually radically alter
the workplace. Stopping such technological progress is impossible—
so rather than wish the problem away, the public and private sectors
should focus on helping people adapt successfully.
m
As soon as the world heard the first chirp signaling a gravitational
wave emanating from black holes 1.3 billion light-years away, it was
clear that the ligo project was a triumph and would usher in a new
hi
kind of astronomy that would reveal new truths about the universe.
Ligo shows that the United States still knows how to do truly bold
science and do it well. But the breakthroughs today were built on the
ha
hard work and generous funding of past generations. If today’s
Americans want to leave similar legacies to their descendants, they need
to refill the research pipelines and invest more in the nation’s scientific
iT
infrastructure. If they don’t, Americans should not be surprised when
other countries take the lead.∂
Al
od
so
Ma
May/June 2017 103

The Boom Was a Blip

Getting Used to Slow Growth
Ruchir Sharma
m
T
he global recovery from the Great Recession of 2009 has just
entered its eighth year and shows few signs of fading. That
hi
should be cause for celebration. But this recovery has been an
underwhelming one. Throughout this period, the global economy has
grown at an average annual pace of just 2.5 percent—a record low
ha
when compared with economic rebounds that took place in the decades
after World War II. Rather than rejoicing, then, many experts are now
anxiously searching for a way to push the world economy out of its
iT
low-growth trap. Some economists and investors have placed their
hopes on populists such as U.S. President Donald Trump, figuring
that if they can make their countries’ economies grow quickly again,
the rest of the world might follow along.
Al
Given how long the global economy has been in the doldrums,
however, it’s worth asking whether the forces slowing growth are
merely temporary. Although economists and business leaders complain
od
that a 2.5 percent global growth rate is painfully slow, prior to the
1800s, the world’s economy never grew that fast for long; in fact, it
never topped one percent for a sustained period. Even after the
Industrial Revolution began in the late eighteenth century, the average
so
global growth rate rarely exceeded 2.5 percent. It was only with the
massive baby boom following World War II that the global economy
grew at an average pace close to four percent for several decades. That
period was an anomaly, however—and should be recognized as such.
Ma
The causes of the current slowdown can be summed up as the

Three Ds: depopulation, deleveraging, and deglobalization. Between the
end of World War II and the financial crisis of 2008, the global economy
RUCHIR SHARMA is Chief Global Strategist and Head of Emerging Markets at Morgan
Stanley Investment Management and the author of The Rise and Fall of Nations: Forces of
Change in the Post-Crisis World.

The Boom Was a Blip
was supercharged by explosive population growth, a debt boom that

fueled investment and boosted productivity, and an astonishing in-
crease in cross-border flows of goods, money, and people. Today, all
three trends have begun to sharply decelerate: families are having
fewer children than they did in the early postwar years, banks are
not expanding their lending as they did before the global financial
crisis, and countries are engaging in less cross-border trade.
In an ideal world, political leaders would recognize this new reality
and dial back their ambitions accordingly. Instead, many governments
m
are still trying to push their economies to reach unrealistic growth
targets. Their desperation is understandable, for few voters have accepted
the new reality either. Indeed, many recent elections have punished
hi
establishment politicians for failing to do more, and some have brought
to the fore populists who promise to bring back the good times.
This growing disconnect between the political mood and the eco
ha

nomic reality could prove dangerous. Anxious to please angry publics,
a number of governments have launched radical policy experiments
designed to revive economic growth and increase wages, or to at least
iT
spread the wealth more equitably—even though such plans are likely
to fail, since they often rely on heavy spending that is liable to drive
up deficits and spark inflation, leading to boom-and-bust swings.
Even worse, some leaders are trying to use nationalism—by scape
Al

goating foreigners or launching military adventures—to divert the
public’s attention from the economy altogether.
Depopulation, deleveraging, and deglobalization need not hurt every

od
one; in fact, they will benefit certain classes of countries, companies,

and people. To respond properly to these trends, governments need to
plan for them and to manage public expectations. So far, however, few
leaders have shown the ability—or even the inclination—to recognize
so
the new economic reality.
MORE OR LESS
The emergence of the Three Ds represents an epochal reversal in the
Ma
story of global development, which for decades prior to the Great

Recession was a tale of more: more people, more borrowing, and more
goods crossing borders. To understand why the plot took such an
unexpected turn, it’s helpful to consider the roots of each trend.
Depopulation was already under way prior to the economic melt

down. During the postwar baby boom, the annual rate of growth in
May/June 2017 105

Ruchir Sharma
the global population of working-age people nearly doubled, from one

percent in the mid-1950s to over two percent by 1980. This directly
boosted economic growth, which is a simple function of how many
people are joining the work force and how rapidly their productivity
is increasing. By the 1980s, however, signs that the boom would fade
had begun to appear, as women in many countries began to bear fewer
children, in part because of the spread of contraception. As a result,
the annual growth rate of the global working-age population started
to fall in stages, with a sharp drop after 2005. By 2016, it had dropped
m
all the way back to just one percent. In the United States, growth in
the working-age population declined from 1.2 percent in the early
years of this century to just 0.3 percent in 2016—the lowest rate since
hi
the un began recording this statistic in 1951.
The un now predicts that worldwide, population growth rates will
continue to decline through 2025 and beyond. Such long-term fore
ha

casts, which are based on a relatively simple combination of birth and
death rates, have an excellent track record. And the economic impli

cations of that trend are clear: every percentage point decline in working-
iT
age population growth shaves an equally large chunk off the gdp
growth rate.
In the 1950s and 1960s, the baby boom provided a massive boost
to the global economy, as did increases in productivity rooted in
Al
large measure in technological advances. As productivity growth

slowed in the subsequent decades, however, easy money started to
take its place as an economic spur. Beginning in the early 1980s,
od
central banks began to win the war on inflation, which allowed them
to lower interest rates dramatically. Until that point, borrowing
and economic growth had moved in tandem, as is the norm in a
capitalist system; for decades, global debt had grown in line with
so
global gdp. But as falling interest rates lowered the cost of borrow-
ing to near zero, debt surged from
100 percent of global gdp in the
late 1980s to 300 percent by
Ma
2008. Although some of

this borrowed money

was wasted on specula

tion, much of it went to
fuel business activity and
economic growth.

The Boom Was a Blip
Then came the global financial crisis. Regulations issued in its wake
limited the risks that U.S. and European banks could take both in
their domestic markets and overseas. In 2008, global capital flows—
which are dominated by bank loans—
stood at 16 percent of global gdp.
Today, those flows hover at around two
Few leaders have shown
percent of global gdp—back to where the ability—or even the
they were in the early 1980s. Meanwhile, inclination—to recognize
many private borrowers and lenders the new economic reality.
m
have been paralyzed by “debt phobia,”
which has prevented new lending despite
the fact that interest rates are at record lows. The only country where
hi
borrowing has continued to grow rapidly is China, which did not develop
a fear of debt because it remained insulated from the financial crisis in
2008. But globally, since interest rates can hardly drop any further, a
ha
new debt boom is extremely unlikely.
Globalization is not likely to revive quickly, either. The last time
that cross-border flows of money and people slowed down was in 1914,
iT
at the onset of World War I. It took three decades for that decline to
hit bottom, and then another three decades for flows to recover their
prewar peaks. Then, in the early 1980s, many countries began to open
their borders, and for the next three decades, the volume of cross-
Al
border trade doubled, from the equivalent of 30 percent of global gdp

in 1980 to 60 percent in 2008. For many countries, export industries
were by far the fastest-growing sector, lifting the overall growth rate
od
of the economy.
In the wake of the recession, however, consumers have cut back on
spending, and governments have started erecting barriers to goods and
services from overseas. Since 2008, according to the Centre for Economic
so
Policy Research’s Global Trade Alert, the world’s major economies have
imposed more than 6,000 barriers to protect themselves from foreign

competition, including “stealth” measures designed to dodge trade
agreements. Partly as a result of such policies, international trade has
Ma

fallen back to the equivalent of 55 percent of global gdp. This trend is
likely to continue as populists opposed to globalization move to further

restrict the movement of goods and people. Witness, for example, one
of Trump’s first moves in office: killing the Trans-Pacific Partnership
(tpp), a 12-nation deal that was designed by Trump’s predecessor to as-
sure that American-style free-market rules would govern trade in Asia.
May/June 2017 107

Ruchir Sharma
WELCOME TO THE DESERT OF THE REAL

Depopulation, deleveraging, and deglobalization have become potent
obstacles to growth and should prompt policymakers in countries at
all levels of development to redefine economic success, lowering the
threshold for what counts as strong annual gdp growth by a full per-
centage point or two. Poorer countries tend to grow faster, because
they start from a lower base. In countries with average annual incomes
of less than $5,000, such as Indonesia, a gdp growth rate of more than
seven percent has historically been considered strong, but that number
m
should come down to five percent. For countries with average annual
incomes of between $5,000 and $15,000, such as China, four percent
gdp growth should be considered relatively robust. For developed
hi
nations such as the United States, with average annual incomes above
$25,000, anything over 1.5 percent should be seen as healthy.
This is the new reality of economic success. Yet few, if any, leaders
ha
understand or accept it. Given the constraints imposed by the Three Ds,
the economies of China, India, Peru, the Philippines, Poland, and the
United States are all growing at what should be considered healthy rates.
iT
Yet few citizens or policymakers in those countries seem satisfied with
the status quo. In India, where the economy is now growing at a pace
between five and six percent, according to independent estimates, elites
still fantasize about hitting eight or nine percent and becoming the next
Al
China. The actual China, meanwhile, is still taking on ever more debt in
an effort to keep its growth rate above six percent. And in the United
States, Trump has talked of somehow getting the already fully developed
od
U.S. economy to grow at four, five, or even six percent a year.

Such rhetoric is creating an expectations gap. No region of the world
is growing as fast as it was before 2008, and none should expect to. In
2007, at the peak of the pre-crisis boom, the economies of 65 countries—
so
including a number of large ones, such as Argentina, China, India,

Nigeria, Russia, and Vietnam—grew at annual rates of seven percent
or more. Today, just six economies are growing at that rate, and most
of those are in small countries such as Côte d’Ivoire and Laos. Yet the
Ma
leaders of many emerging-market countries still see seven percent

annual gdp growth as the benchmark for success.
THE POPULIST MOMENT

“What’s wrong with ambition?” some might object. The answer is that
pushing an economy to sustain speeds beyond its potential is like

The Boom Was a Blip
persistently gunning a car’s engine: it may sound cool, but eventually

the motor will burn out. And if buyers are promised a muscle car but
find themselves stuck in a broken-down family sedan, they will turn
on the dealer.
In the last year, numerous leaders once considered rising stars, such
as Mexico’s Enrique Peña Nieto and Italy’s Matteo Renzi, have seen
their approval ratings tumble and, in
Renzi’s case, have been forced out of Pushing an economy too
office after their reform plans failed to
m
deliver as promised. Normally, incum hard is like persistently

bent politicians enjoy an advantage on gunning a car’s engine: it
election day, but not during antiestab sounds cool, but eventually
hi

lishment revolts, such as the one occur-
ring now. In 2009, in the 50 most the motor burns out.
populous democracies, the governing
ha
party won 90 percent of elections at the national level. Since then,
the success rate of ruling parties has fallen steadily, to just 40 percent
last year.
iT
The beneficiaries of this shift have often been populist and nation

alist leaders who have cast doubt on the central tenets of the liberal
postwar order. Figures such as Trump, Prime Minister Theresa May
in the United Kingdom, and the right-wing leader Marine Le Pen in
Al
France have encouraged people to question the so-called Washington

consensus—that is, the belief that there is an intrinsic link between
global free markets and rising prosperity—which was an article of
od
faith in the United States and other Western countries for decades.
Many of these same politicians promise more muscular leadership
in the name of promoting their countries’ interests, and publics have
shown themselves to be increasingly open to such appeals. The World
so
Values Survey polled citizens of 30 large countries in the late 1990s

and then again in the first five years of the current decade, asking,
among other things, whether “having a strong leader who does not
have to bother with parliament and elections” would be good for their
Ma
country. In 25 of the surveyed countries, the share of people who said

they would prefer authoritarian rule to democracy rose. The figure
increased by 11 percentage points in the United States, 24 percentage
points in Russia, and 26 points in India, where the number now stands
at a stunning 70 percent. Even more striking, the decline in support
for democracy was sharper among young people than among the old.
May/June 2017 109

Ruchir Sharma
Many leaders are responding to this shift by embracing protectionist

policies and by intervening more aggressively in markets. One of the
main reasons for British voters’ surprising 2016 decision to leave the
eu was a popular desire, whipped up
by populists, to “retake control” of
Diverting attention from national borders and trade policy. Now
economic troubles by the Washington consensus is under at-
blaming foreign cabals and tack even in Washington. In the name
enemies within is a trick as of his “America first” agenda, Trump
m
has begun publicly demanding that
old as politics. private companies build with U.S.-
sourced materials and threatening to
hi
change the tax code to explicitly favor exports over imports. This
willingness to scrap postwar economic orthodoxy has extended into
emerging markets as well. Although Indian Prime Minister Narendra
ha
Modi was once a darling of the free-market crowd, he has recently
begun to defy its preferences, most recently by deciding to withdraw
86 percent of the paper currency in circulation in India, virtually
iT
overnight, as a way to punish wealthy tax dodgers.
Such policies stand little chance of accomplishing the larger goal:
bringing back a period of broad prosperity. Indeed, populist exper

iments will likely do more harm than good, in part by threatening
Al
the victory in the war on inflation that governments won in the

1980s and have sustained ever since, as tighter central bank policies
have combined with intensifying international competition to put a lid

od
on prices. If countries pursue insular, protectionist policies, decreased

foreign competition will likely remove that lid. Populist proposals to
boost growth by increasing government spending could also push
prices up, especially if the economy is already running close to full
so
capacity, as it is in the United States right now. That is why expectations

for U.S. inflation have risen markedly since Trump took office.
Populist spending might indeed drive up growth for a year or so,
but it would come at the expense of higher deficits and rising inflation.
Ma
That would force central banks to raise interest rates faster than
expected, triggering a downturn. Trump’s call for significant new spend

ing on roads and bridges has proved broadly popular, but the timing
is all wrong.
The U.S. economy is already in the eighth year of a recovery, which
means the need for stimulus spending has passed. And the Trump

The Boom Was a Blip
plan would push the U.S. budget deficit, which is already at unprec

edented levels, even higher. At this stage, Washington should be building
a surplus—money it will need when the next recession inevitably
hits. But the idea of saving for a rainy day seems quaint at a time when
disgruntled voters are demanding an economic revival. The U.S.
economy is already growing in line with its potential rate of 1.5 to two
percent, yet most politicians seem to share the public’s disappointment
and eagerness for more.
m
WINNERS AND LOSERS
The slowdown in global flows of goods, money, and people has affected
more than just national politics and policymaking: it has also rearranged
hi

the international balance of economic power. Before 2008, emerging
economies sought to export their way to prosperity. But that model has
become less effective as the competitive edge once enjoyed by major
ha
exporters, such as South Korea and Taiwan, has begun to shift to
countries that can grow by selling to their own large domestic markets,
such as Indonesia or Poland.
iT
At the same time, countries that got ahead by specializing in out

sourced labor will probably see their advantage dwindle. India has
seen cities such as Bangalore emerge as incubators of the country’s
rising middle class, spurred by opportunities at global outsourcing
Al
firms. The same goes for the Philippines, where call centers did not
exist at the turn of the millennium but have exploded into a $22 billion
industry employing more than one million people. As globalization

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retreats, however, outsourcing is likely to decline, and Trump’s tax

plans, designed to bring companies and jobs back to the United States,
will accelerate this shift.
Economic advantages are also moving away from big multinationals
so
and toward smaller, domestically focused companies that rely less on

exporting goods and importing or outsourcing labor. As borders tighten
and it becomes harder to fill positions with foreign employees, workers
in developed economies such as the United States will gain more
Ma
bargaining power. For much of the postwar era, the share of U.S.
national income that went to workers declined, in large part because
many companies cut labor costs by shifting jobs abroad. Meanwhile,
the share of national income going to corporate profits rose steadily, to
a peak of ten percent in 2012. Since then, however, the corporate share
has started to drop and the workers’ share has begun inching up.
May/June 2017 111

Ruchir Sharma
Border restrictions and aggressive government intervention in

markets are nonetheless likely to slow the global economy. Reduced
competition tends to undermine productivity, one of the key drivers
of growth. As leaders attempt to grab a greater share of the global
pie for their countries, their combined efforts will wind up shrinking
the pie itself.
I’M A SURVIVOR
So what will happen when populists and nationalists fail to deliver
m
faster growth? One might expect everything to come crashing down
around them. In fact, history shows that canny populists can survive
such outcomes. But the tactics they tend to use often stoke international
hi
instability, as the cases of Russia and Turkey demonstrate.
When Russian President Vladimir Putin came to power in 2000,
his basic promise was that he would make Russia great again by
ha
reviving its economy. Thanks largely to rising prices for Russia’s top
exports, oil and gas, average annual income increased tenfold over the
next decade, to the equivalent of $15,000. Putin reaped the benefits,
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basking in unprecedented levels of public support. But in 2014, energy
prices collapsed, setting off a recession, and average annual income
fell to just $9,000. Putin suddenly seemed politically vulnerable.
To deflect attention from the downturn, Putin embarked on a
Al
series of foreign adventures: invading and annexing Crimea, fomenting

a pro-Russian insurrection in eastern Ukraine, and launching a mili

tary intervention to support the embattled Assad regime in Syria. By
od
playing the nationalism card and casting himself as the hero of a

campaign to restore Russian prestige and power, Putin has avoided
suffering the fate of so many other establishment politicians. Despite
Russia’s continued economic struggles, his approval rating remains
so
above 80 percent.
Like Putin, Turkish President Recep Tayyip Erdogan is also well
into his second decade in power despite the fact that he presides over
a sputtering economy. Erdogan’s ideas about economics are distinctly
Ma
unconventional: he has claimed, for example, that raising interest

rates—a standard antidote to inflation—is in fact a cause of inflation.
Turkey faces a crippling mix of rising deficits, accelerating inflation,
and slow growth. Yet the latest polls put Erdogan’s approval rating at
close to 70 percent, in part because Erdogan has managed to convince
many Turks that the United States and the eu are the masterminds of

The Boom Was a Blip
a conspiracy to weaken Turkey. When military officers launched a

coup attempt against him last year, Erdogan claimed that the plot was
“written abroad,” and members of his government accused the cia
and the fbi of involvement—an accusation that Washington denies
but that most Turks believe, according to polls.
This trick—diverting attention from economic troubles by launch-
ing foreign adventures or by scapegoating foreign cabals and enemies
within—is as old as politics. But Putin’s and Erdogan’s success with
such tactics will only make other leaders more willing to take similar
m
measures when they find themselves unable to deliver on promises of
renewed prosperity. The resulting wave of nationalist antagonism and
aggression will stoke geopolitical tensions, especially at a time when
hi
Washington’s commitment to upholding the liberal international order
seems to be wavering.
THE NEW NORMAL

ha
Not all the effects of the Three Ds will be negative; the trends will
produce some winners, such as countries whose economies are less
iT
reliant on international trade and firms that deal primarily with
domestic markets. A slower-growing, less globalized economy might
also raise middle-class wages in developed economies, which might in
turn halt or even reverse the increase in income inequality that many
Al
nations have experienced in recent decades. Such gains will prove

fleeting, however, if leaders and policymakers refuse to accept the
new normal.
od
There are some steps that governments can take to dampen the
impact of the Three Ds. Although attempts to reverse the long-term
decline in birthrates, such as offering women “baby bonuses,” have
proved largely futile, governments can offer more women and elderly
so
people incentives to enter or reenter the work force. They can also
open doors to immigrants. But doing so will be at best politically
impractical at a time of rising nativism. And working-age populations
are falling so sharply that women, senior citizens, and immigrants can
Ma
make up for only a small portion of the looming labor shortage.

The same basic math applies to deglobalization: at a time when
global trade talks have stalled and regional trade deals are dying on
the vine, countries can try to boost trade by cutting bilateral deals—
but this will only partly counteract the global anti-trade trend. And
the rise of populists will continue pushing mainstream politicians to
May/June 2017 113

Ruchir Sharma
be wary of any trade deals: before beginning her 2016 presidential

campaign, former U.S. Secretary of State Hillary Clinton had called
the tpp “the gold standard” for trade deals; once primary season started,
she withdrew her support for the agreement in response to anti-trade
populism in the Democratic Party’s base.
The obstacles to reviving the postwar debt boom are even more
daunting. The financial crisis of 2008 led to new regulations and new
restrictions on lending and made big banks an easy target for populists
of all stripes, limiting the room to maneuver for policymakers and
m
financial firms alike. And global debt, although stable, is already
quite high, at around 300 percent of gdp. That means that, even
if policymakers wanted to do so, it would be politically difficult
hi
and perhaps economically destabilizing to trigger a new period of
debt expansion.
If political leaders can’t summon the words or the courage to explain
ha
this slow-growth world to a demanding public, they can at least avoid
overpromising on growth and eschew unorthodox policy experiments
to achieve it. Some traditional economic policies, such as well-designed
iT
tax cuts and deregulation, could help increase productivity and lift
growth rates at the margin. But the gains from such policies are unlikely
to add up to much. No country will be able to avoid the constraints on
growth posed by the Three Ds; the time has come to prepare for life
Al
in a post-miracle world.∂
od
so
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ESSAYS
To reject the advice of
experts is to assert
autonomy, a way for
m
Americans to demonstrate
their independence from
hi
nefarious elites.
—Tom Nichols
ha
iT
Al
od
so
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How America Lost Faith in Expertise The Dignity Deficit

Tom Nichols 60 Arthur C. Brooks 106
Asia’s Other Revisionist Power The Prisoner Dilemma
74
NOAH BE RG E R / REUT E RS
Jennifer Lind Holly Harris 118

China’s Great Awakening High Stakes
Ian Johnson 83 Mark A. R. Kleiman 130
How to Hunt a Lone Wolf An Internet Whole and Free
Daniel Byman 96 Kal Raustiala 140
How America Lost Faith

in Expertise
m
And Why That’s a Giant Problem
Tom Nichols
hi
ha
I
n 2014, following the Russian invasion of Crimea, The Washington
Post published the results of a poll that asked Americans about
whether the United States should intervene militarily in Ukraine.
Only one in six could identify Ukraine on a map; the median response
iT
was off by about 1,800 miles. But this lack of knowledge did not stop
people from expressing pointed views. In fact, the respondents favored
intervention in direct proportion to their ignorance. Put another
way, the people who thought Ukraine was located in Latin America or
Al
Australia were the most enthusiastic about using military force there.
The following year, Public Policy Polling asked a broad sample of
Democratic and Republican primary voters whether they would support
od
bombing Agrabah. Nearly a third of Republican respondents said they

would, versus 13 percent who opposed the idea. Democratic preferences
were roughly reversed; 36 percent were opposed, and 19 percent were in
favor. Agrabah doesn’t exist. It’s the fictional country in the 1992 Disney
so
film Aladdin. Liberals crowed that the poll showed Republicans’ aggres-
sive tendencies. Conservatives countered that it showed Democrats’
reflexive pacifism. Experts in national security couldn’t fail to notice that
Ma
43 percent of Republicans and 55 percent of Democrats polled had an

actual, defined view on bombing a place in a cartoon.
Increasingly, incidents like this are the norm rather than the excep-
tion. It’s not just that people don’t know a lot about science or politics
or geography. They don’t, but that’s an old problem. The bigger concern
TOM NICHOLS is Professor of National Security Affairs at the U.S. Naval War College. He
is the author of The Death of Expertise: The Campaign Against Established Knowledge and
Why It Matters (Oxford University Press, 2017), from which this essay is adapted. Follow him
on Twitter @RadioFreeTom. The views expressed here are his own.
How America Lost Faith in Expertise
today is that Americans have reached a point where ignorance—at

least regarding what is generally considered established knowledge
in public policy—is seen as an actual virtue. To reject the advice of
experts is to assert autonomy, a way for Americans to demonstrate their
independence from nefarious elites—and insulate their increasingly
fragile egos from ever being told they’re wrong.
This isn’t the same thing as the traditional American distaste for
m
intellectuals and know-it-alls. I’m a professor, and I get it: most people
don’t like professors. And I’m used to people disagreeing with me on
lots of things. Principled, informed arguments are a sign of intellectual
hi
health and vitality in a democracy. I’m worried because we no longer
have those kinds of arguments, just angry shouting matches.
ha
When I started working in Washington in the 1980s, I quickly
learned that random people I met would instruct me in what the
government should do about any number of things, particularly my
own specialties of arms control and foreign policy. At first I was
iT
surprised, but I came to realize that this was understandable and even
to some extent desirable. We live in a democracy, and many people
have strong opinions about public life. Over time, I found that other
policy specialists had similar experiences, with laypeople subjecting
Al
them to lengthy disquisitions on taxes, budgets, immigration, the

environment, and many other subjects. If you work on public policy,
such interactions go with the job, and at their best, they help keep you
od
intellectually honest.
In later years, however, I started hearing the same stories from
doctors and lawyers and teachers and many other professionals.
These were stories not about patients or clients or students raising
so
informed questions but about them telling the professionals why

their professional advice was actually misguided or even wrong. The
idea that the expert was giving considered, experienced advice worth
Ma
taking seriously was simply dismissed.

I fear we are moving beyond a natural skepticism regarding expert
claims to the death of the ideal of expertise itself: a Google-fueled,
Wikipedia-based, blog-sodden collapse of any division between profes-
sionals and laypeople, teachers and students, knowers and wonderers—
in other words, between those with achievement in an area and those
with none. By the death of expertise, I do not mean the death of
actual expert abilities, the knowledge of specific things that sets some
people apart from others in various areas. There will always be doctors
March/April 2017 61
Tom Nichols
and lawyers and engineers and other specialists. And most sane people
go straight to them if they break a bone or get arrested or need to
build a bridge. But that represents a kind of reliance on experts as
technicians, the use of established knowledge as an off-the-shelf con-
venience as desired. “Stitch this cut in my leg, but don’t lecture me
about my diet.” (More than two-thirds of Americans are overweight.)
“Help me beat this tax problem, but don’t remind me that I should
m
have a will.” (Roughly half of Americans with children haven’t written
one.) “Keep my country safe, but don’t confuse me with details about
national security tradeoffs.” (Most U.S. citizens have no clue what the
hi
government spends on the military or what its policies are on most
security matters.)
ha
The larger discussions, from what constitutes a nutritious diet to
what actions will best further U.S. interests, require conversations
between ordinary citizens and experts. But increasingly, citizens don’t
want to have those conversations. Rather, they want to weigh in and
iT
have their opinions treated with deep respect and their preferences
honored not on the strength of their arguments or on the evidence
they present but based on their feelings, emotions, and whatever stray
information they may have picked up here or there along the way.
Al
This is a very bad thing. A modern society cannot function without

a social division of labor. No one is an expert on everything. We
prosper because we specialize, developing formal and informal
od
mechanisms and practices that allow us to trust one another in those

specializations and gain the collective benefit of our individual
expertise. If that trust dissipates, eventually both democracy and
expertise will be fatally corrupted, because neither democratic leaders
so
nor their expert advisers want to tangle with an ignorant electorate.

At that point, expertise will no longer serve the public interest; it
will serve the interest of whatever clique is paying its bills or taking
Ma
the popular temperature at any given moment. And such an out-

come is already perilously near.
A LITTLE LEARNING IS A DANGEROUS THING

Over a half century ago, the historian Richard Hofstadter wrote that
“the complexity of modern life has steadily whittled away the functions
the ordinary citizen can intelligently and comprehendingly perform
for himself.”
In the original American populistic dream, the omnicompetence of

the common man was fundamental and indispensable. It was believed
that he could, without much special preparation, pursue the profes-
sions and run the government. Today he knows that he cannot even
make his breakfast without using devices, more or less mysterious to
him, which expertise has put at his disposal; and when he sits down to
breakfast and looks at his morning newspaper, he reads about a whole
m
range of vital and intricate issues and acknowledges, if he is candid
with himself, that he has not acquired competence to judge most
of them.
hi
Hofstadter argued that this overwhelming complexity produced
feelings of helplessness and anger among a citizenry that knew itself
ha
to be increasingly at the mercy of more sophisticated elites. “What
used to be a jocular and usually benign ridicule of intellect and formal
training has turned into a malign resentment of the intellectual in his
capacity as expert,” he noted. “Once the intellectual was gently ridiculed
iT
because he was not needed; now he is fiercely resented because he is
needed too much.”
In 2015, the law professor Ilya Somin observed that the problem
had persisted and even metastasized over time. The “size and com-
Al
plexity of government,” he wrote, have made it “more difficult for

voters with limited knowledge to monitor and evaluate the govern-
ment’s many activities. The result is a polity in which the people
od
often cannot exercise their sovereignty responsibly and effectively.”

Despite decades of advances in education, technology, and life
opportunities, voters now are no better able to guide public policy
than they were in Hofstadter’s day, and in many respects, they are
so
even less capable of doing so.

The problem cannot be reduced to politics, class, or geography.
Today, campaigns against established knowledge are often led by
Ma
people who have all the tools they need to know better. For exam-
ple, the anti-vaccine movement—one of the classic contemporary
examples of this phenomenon—has gained its greatest reach among
people such as the educated suburbanites in Marin County, outside
San Francisco, where at the peak of the craze, in 2012, almost eight
percent of parents requested a personal belief exemption from the
obligation to vaccinate their children before enrolling them in school.
These parents were not medical professionals, but they had just
enough education to believe that they could challenge established
March/April 2017 63
Tom Nichols
medical science, and they felt empowered to do so—even at the

cost of the health of their own and everybody else’s children.
DON’T KNOW MUCH

Experts can be defined loosely as people who have mastered the
specialized skills and bodies of knowledge relevant to a particular
occupation and who routinely rely on them in their daily work. Put
m
another way, experts are the people who know considerably more
about a given subject than the rest of us, and to whom we usually turn
for education or advice on that topic. They don’t know everything,
hi
and they’re not always right, but they constitute an authoritative
minority whose views on a topic are more likely to be right than
ha
those of the public at large.
How do we identify who these experts are? In part, by formal train-
ing, education, and professional experience, applied over the course of
a career. Teachers, nurses, and plumbers all have to acquire certifica-
iT
tion of some kind to exercise their skills, as a signal to others that their
abilities have been reviewed by their peers and met a basic standard of
competence. Credentialism can run amok, and guilds can use it cynically
to generate revenue or protect their fiefdoms with unnecessary barriers
Al
to entry. But it can also reflect actual learning and professional compe-
tence, helping separate real experts from amateurs or charlatans.
Beyond credentials lies talent, an immutable but real quality that
od
creates differences in status even within expert communities. And

beyond both lies a mindset, an acceptance of membership in a broader
community of specialists devoted to ever-greater understanding of a
particular subject. Experts agree to evaluation and correction by other
so
experts. Every professional group and expert community has watch-

dogs, boards, accreditors, and certification authorities whose job is to
police its own members and ensure that they are competent and live
Ma
up to the standards of their own specialty.

Experts are often wrong, and the good ones among them are the
first to admit it—because their own professional disciplines are based
not on some ideal of perfect knowledge and competence but on a
constant process of identifying errors and correcting them, which
ultimately drives intellectual progress. Yet these days, members of
the public search for expert errors and revel in finding them—not
to improve understanding but rather to give themselves license to
disregard all expert advice they don’t like.
Part of the problem is that some people think they’re experts when
in fact they’re not. We’ve all been trapped at a party where one of the
least informed people in the room holds
court, confidently lecturing the other
guests with a cascade of banalities and
We are moving toward a
misinformation. This sort of experience Google-fueled, Wikipedia-
isn’t just in your imagination. It’s real, based collapse of any
m
and it’s called “the Dunning-Kruger division between
effect,” after the research psychologists
David Dunning and Justin Kruger. The professionals and laypeople.
hi
essence of the effect is that the less skilled
or competent you are, the more confident you are that you’re actually
ha
very good at what you do. The psychologists’ central finding: “Not
only do [such people] reach erroneous conclusions and make unfortunate
choices, but their incompetence robs them of the ability to realize it.”
To some extent, this is true of everybody, in the same way that few
iT
people are willing to accept that they have a lousy sense of humor or
a grating personality. As it turns out, most people rate themselves
higher than others would regarding a variety of skills. (Think of the
writer Garrison Keillor’s fictional town of Lake Wobegon, where “all
Al
the children are above average.”) But it turns out that less competent
people overestimate themselves more than others do. As Dunning
wrote in 2014,
od
A whole battery of studies . . . have confirmed that people who don’t

know much about a given set of cognitive, technical, or social skills
tend to grossly overestimate their prowess and performance, whether
it’s grammar, emotional intelligence, logical reasoning, firearm care
so
and safety, debating, or financial knowledge. College students who

hand in exams that will earn them Ds and Fs tend to think their efforts
will be worthy of far higher grades; low-performing chess players,
Ma
bridge players, and medical students, and elderly people applying for
a renewed driver’s license, similarly overestimate their competence by
a long shot.
The reason turns out to be the absence of a quality called “metacog-

nition,” the ability to step back and see your own cognitive processes
in perspective. Good singers know when they’ve hit a sour note, good
directors know when a scene in a play isn’t working, and intellectually
self-aware people know when they’re out of their depth. Their less
March/April 2017 65
Tom Nichols
successful counterparts can’t tell—which can lead to a lot of bad music,

boring drama, and maddening conversations. Worse, it’s very hard
to educate or inform people who, when in doubt, just make stuff
up. The least competent people turn out to be the ones least likely
to realize they are wrong and others are right, the most likely to
respond to their own ignorance by trying to fake it, and the least able
to learn anything.
m
SURREALITY-BASED COMMUNITY
The problems for democracy posed by the least competent are serious.
hi
But even competent and highly intelligent people encounter problems
in trying to comprehend complicated issues of public policy with
ha
which they are not professionally conversant. Most prominent of those
problems is confirmation bias, the tendency to look for information
that corroborates what we already believe. Scientists and researchers
grapple with this all the time as a professional hazard, which is why,
iT
before presenting or publishing their work, they try to make sure their
findings are robust and pass a reality check from qualified colleagues
without a personal investment in the outcome of the project. This
peer-review process is generally invisible to laypeople, however, be-
Al
cause the checking and adjustments take place before the final product
is released.
Outside the academy, in contrast, arguments and debates usually
od
have no external review or accountability at all. Facts come and go

as people find convenient at the moment, making arguments unfal-
sifiable and intellectual progress impossible. And unfortunately,
because common sense is not enough to understand or judge plausible
so
alternative policy options, the gap between informed specialists and

uninformed laypeople often gets filled with crude simplifications or
conspiracy theories.
Ma
Conspiracy theories are attractive to people who have a hard time

making sense of a complicated world and little patience for boring,
detailed explanations. They are also a way for people to give context
and meaning to events that frighten them. Without a coherent expla-
nation for why terrible things happen to innocent people, they would
have to accept such occurrences as nothing more than the random
cruelty of either an uncaring universe or an incomprehensible deity.
And just as individuals facing grief and confusion look for meaning
where none may exist, so, too, will entire societies gravitate toward
outlandish theories when collectively subjected to a terrible national

experience. Conspiracy theories and the awed reasoning behind them,
as the Canadian writer Jonathan Kay has noted, become especially
seductive “in any society that has suffered an epic, collectively felt
trauma.” This is why they spiked in popularity after World War I, the
Russian Revolution, the Kennedy assassination, the 9/11 attacks, and
other major disasters—and are growing now in response to destabiliz-
m
ing contemporary trends, such as the economic and social dislocations
of globalization and persistent terrorism.
At their worst, conspiracy theories can produce a moral panic in
hi
which innocent people get hurt. But even when they seem trivial, their
prevalence undermines the sort of reasoned interpersonal discourse
ha
on which liberal democracy depends. Why? Because by definition,
conspiracy theories are unfalsifiable: experts who contradict them
demonstrate that they, too, are part of the conspiracy.
The addition of politics, finally, makes things even more complicated.
iT
Political beliefs among both laypeople and experts are subject to the
same confirmation bias that plagues thinking about other issues. But
misguided beliefs about politics and other subjective matters are even
harder to shake, because political views are deeply rooted in a person’s
Al
self-image and most cherished beliefs. Put another way, what we

believe says something important about how we see ourselves, making
disconfirmation of such beliefs a wrenching process that our minds
od
stubbornly resist.
As a result, unable to see their own biases, most people simply
drive one another crazy arguing rather than accept answers that
contradict what they already think about the subject—and shoot the
so
messenger, to boot. A 2015 study by scholars at Ohio State University,

for example, tested the reactions of liberals and conservatives to
certain kinds of news stories and found that both groups tended to
Ma
discount scientific theories that contradicted their worldviews. Even

more disturbing, the study found that when exposed to scientific
research that challenged their views, both liberals and conservatives
reacted by doubting the science rather than themselves.
WELCOME TO THE IDIOCRACY

Ask an expert about the death of expertise, and you will probably get
a rant about the influence of the Internet. People who once had to
turn to specialists in any given field now plug search terms into a Web
March/April 2017 67
Tom Nichols
browser and get answers in seconds—so why should they rely on some
remote clerisy of snooty eggheads? Information technology, however,
is not the primary problem. The digital age has simply accelerated the
collapse of communication between experts and laypeople by offering
an apparent shortcut to erudition. It has allowed people to mimic
intellectual accomplishment by indulging in an illusion of expertise
provided by a limitless supply of facts.
m
But facts are not the same as knowledge or ability—and on the
Internet, they’re not even always facts. Of all the axiomatic “laws”
that describe Internet usage, the most
hi
important may be the predigital insight
The countless dumpsters of the science fiction writer Theodore
of nonsense parked on
ha
Sturgeon, whose eponymous rule states
the Internet are an expert’s that “90 percent of everything is crap.”
nightmare. More than a billion websites now exist.
The good news is that even if Sturgeon’s
iT
cynicism holds, that yields 100 million
pretty good sites—including those of all the reputable publications
of the world; the homepages of universities, think tanks, research
institutions, and nongovernmental organizations; and vast numbers
Al
of other edifying sources of good information.

The bad news, of course, is that to find any of this, you have to
navigate through a blizzard of useless or misleading garbage posted by
od
everyone from well-intentioned grandmothers to propagandists for

the Islamic State (or ISIS). Some of the smartest people on earth have
a significant presence on the Internet. Some of the stupidest people,
however, reside just one click away. The countless dumpsters of non-
so
sense parked on the Internet are an expert’s nightmare. Ordinary

people who already had to make hard choices about where to get their
information when there were a few dozen newspapers, magazines, and
Ma
television channels now face endless webpages produced by anyone

willing to pay for an online presence.
Of course, this is no more and no less than an updated version of the
basic paradox of the printing press. As the writer Nicholas Carr pointed
out, the arrival of Gutenberg’s invention in the fifteenth century set off
a “round of teeth gnashing” among early humanists, who worried that
“printed books and broadsheets would undermine religious authority,
demean the work of scholars and scribes, and spread sedition and de-
bauchery.” The Internet is the printing press at the speed of fiber optics.
The convenience of the Internet is a tremendous boon, but mostly

for people already trained in research and who have some idea what
they’re looking for. It does little good, unfortunately, for a student or
an untrained layperson who has never been taught how to judge the
provenance of information or the reputability of a writer.
Libraries, or at least their reference and academic sections, once
served as a kind of first cut through the noise of the marketplace. The
m
Internet, however, is less a library than a giant repository where anyone
can dump anything. In practice, this means that a search for information
will rely on algorithms usually developed by for-profit companies using
hi
opaque criteria. Actual research is hard and often boring. It requires the
ability to find authentic information, sort through it, analyze it, and
ha
apply it. But why bother with all that tedious hoop jumping when the
screen in front of us presents neat and pretty answers in seconds?
Technological optimists will argue that these objections are just so
much old-think, a relic of how things used to be done, and unnecessary
iT
now because people can tap directly into the so-called wisdom of
crowds. It is true that the aggregated judgments of large groups of or-
dinary people sometimes produce better results than the judgments of
any individual, even a specialist. This is because the aggregation process
Al
helps wash out a lot of random misperception, confirmation bias, and

the like. Yet not everything is amenable to the vote of a crowd. Under-
standing how a virus is transmitted from one human being to another
od
is not the same thing as guessing the number of jellybeans in a glass jar.
And as the comedian John Oliver has pointed out, you don’t need to
gather opinions on a fact: “You might as well have a poll asking, ‘Which
number is bigger, 15 or 5?’ or ‘Do owls exist?’ or ‘Are there hats?’”
so
Moreover, the whole point of the wisdom of crowds is that the

members of the crowd supposedly bring to bear various independent
opinions on any given topic. In fact, however, the Internet tends to
Ma
generate communities of the like-minded, groups dedicated to con-

firming their own preexisting beliefs rather than challenging them.
And social media only amplifies this echo chamber, miring millions of
Americans in their own political and intellectual biases.
EXPERTISE AND DEMOCRACY

Experts fail often, in various ways. The most innocent and most com-
mon are what we might think of as the ordinary failures of science.
Individuals, or even entire professions, observe a phenomenon or
March/April 2017 69
Tom Nichols
examine a problem, come up with theories about it or solutions for it,

and then test them. Sometimes they’re right, and sometimes they’re
wrong, but most errors are eventually corrected. Intellectual progress
includes a lot of blind alleys and wrong turns along the way.
Other forms of expert failure are more worrisome. Experts can
go wrong, for example, when they try to stretch their expertise from
one area to another. This is less a failure of expertise than a sort of
m
minor fraud—somebody claiming the
Like anti-vaccine parents, general mantle of authority even though
he or she is not a real expert in the
hi
ignorant voters end up specific area under discussion—and it
punishing society at large is frequent and pernicious and can un-
ha
for their own mistakes. dermine the credibility of an entire
field. (I recognize that I myself risk
that transgression. But my observations
and conclusions are informed not only by my experience of being an
iT
expert in my own area but also by the work of scholars who study the
role of expertise in society and by discussions I have had with many
other experts in a variety of fields.) And finally, there is the rarest
but most dangerous category: outright deception and malfeasance,
Al
in which experts intentionally falsify their results or rent out their

professional authority to the highest bidder.
When they do fail, experts must own their mistakes, air them publicly,
od
and show the steps they are taking to correct them. This happens less
than it should in the world of public policy, because the standards for
judging policy work tend to be more subjective and politicized than
the academic norm. Still, for their own credibility, policy professionals
so
should be more transparent, honest, and self-critical about their far-

from-perfect track records. Laypeople, for their part, must educate
themselves about the difference between errors and incompetence,
Ma
corruption, or outright fraud and cut the professionals some slack

regarding the former while insisting on punishment for the latter. As
the philosopher Bertrand Russell once wrote, the proper attitude of
a layperson toward experts should be a combination of skepticism
and humility:
The skepticism that I advocate amounts only to this: (1) that when the
experts are agreed, the opposite opinion cannot be held to be certain;
(2) that when they are not agreed, no opinion can be regarded as
certain by a non-expert; and (3) that when they all hold that no suf-
ficient grounds for a positive opinion exist, the ordinary man would
do well to suspend his judgment.
As Russell noted, “These propositions may seem mild, yet, if accepted,

they would absolutely revolutionize human life’’—because the results
would challenge so much of what so many people feel most strongly.
m
Government and expertise rely on each other, especially in a de-
mocracy. The technological and economic progress that ensures the
well-being of a population requires a division of labor, which in
hi
turn leads to the creation of professions. Professionalism encourages
experts to do their best to serve their clients, respect their own
ha
knowledge boundaries, and demand that their boundaries be re-
spected by others, as part of an overall service to the ultimate client:
society itself.
Dictatorships, too, demand this same service of experts, but
iT
they extract it by threat and direct its use by command. This is why
dictatorships are actually less efficient and less productive than de-
mocracies (despite some popular stereotypes to the contrary). In a
democracy, the expert’s service to the public is part of the social
Al
contract. Citizens delegate the power of decision on myriad issues

to elected representatives and their expert advisers, while experts,
for their part, ask that their efforts be received in good faith by a
od
public that has informed itself enough—a key requirement—to make

reasoned judgments.
This relationship between experts and citizens rests on a foundation
of mutual respect and trust. When that foundation erodes, experts
so
and laypeople become warring factions and democracy itself can

become a casualty, decaying into mob rule or elitist technocracy.
Living in a world awash in gadgets and once unimaginable conven-
Ma
iences and entertainments, Americans (and many other Westerners)

have become almost childlike in their refusal to learn enough to
govern themselves or to guide the policies that affect their lives.
This is a collapse of functional citizenship, and it enables a cascade
of other baleful consequences.
In the absence of informed citizens, for example, more knowledge-
able administrative and intellectual elites do in fact take over the daily
direction of the state and society. The Austrian economist F. A. Hayek
wrote in 1960, “The greatest danger to liberty today comes from the
March/April 2017 71
Tom Nichols
men who are most needed and most powerful in modern government,
namely, the efficient expert administrators exclusively concerned with
what they regard as the public good.”
There is a great deal of truth in this. Unelected bureaucrats and
policy specialists in many spheres exert tremendous influence on the
daily lives of Americans. Today, however, this situation exists by
default rather than design. And populism actually reinforces this
m
elitism, because the celebration of ignorance cannot launch commu-
nications satellites, negotiate the rights of U.S. citizens overseas, or
provide effective medications. Faced with a public that has no idea
hi
how most things work, experts disengage, choosing to speak mostly
to one another.
ha
Meanwhile, Americans have developed increasingly unrealistic
expectations of what their political and economic systems can provide,
and this sense of entitlement fuels continual disappointment and
anger. When people are told that ending poverty or preventing ter-
iT
rorism or stimulating economic growth is a lot harder than it looks,
they roll their eyes. Unable to comprehend all the complexity around
them, they choose instead to comprehend almost none of it and
then sullenly blame elites for seizing control of their lives.
Al
“A REPUBLIC, IF YOU CAN KEEP IT”

Experts can only propose; elected leaders dispose. And politicians are
od
very rarely experts on any of the innumerable subjects that come

before them for a decision. By definition, nobody can be an expert on
China policy and health care and climate change and immigration and
taxation, all at the same time—which is why during, say, congressional
so
hearings on a subject, actual experts are usually brought in to advise

the elected laypeople charged with making authoritative decisions.
In 1787, Benjamin Franklin was supposedly asked what would
Ma
emerge from the Constitutional Convention being held in Philadel-

phia. “A republic,” Franklin answered, “if you can keep it.” Americans
too easily forget that the form of government under which they
live was not designed for mass decisions about complicated issues.
Neither, of course, was it designed for rule by a tiny group of tech-
nocrats or experts. Rather, it was meant to be the vehicle by which
an informed electorate could choose other people to represent them,
come up to speed on important questions, and make decisions on
the public’s behalf.
The workings of such a representative democracy, however, are

exponentially more difficult when the electorate is not competent
to judge the matters at hand. Laypeople complain about the rule of
experts and demand greater involvement in complicated national
questions, but many of them express their anger and make these
demands only after abdicating their own important role in the process:
namely, to stay informed and politically literate enough to choose
m
representatives who can act wisely on their behalf. As Somin has
written, “When we elect government officials based on ignorance,
they rule over not only those who voted for them but all of society.
hi
When we exercise power over other people, we have a moral obligation
to do so in at least a reasonably informed way.” Like anti-vaccine
ha
parents, ignorant voters end up punishing society at large for their
own mistakes.
Too few citizens today understand democracy to mean a condition
of political equality in which all get the franchise and are equal in the
iT
eyes of the law. Rather, they think of it as a state of actual equality, in
which every opinion is as good as any other, regardless of the logic or
evidentiary base behind it. But that is not how a republic is meant to
work, and the sooner American society establishes new ground rules
Al
for productive engagement between educated elites and the society

around them, the better.
Experts need to remember, always, that they are the servants of a
od
democratic society and a republican government. Their citizen

masters, however, must equip themselves not just with education but
also with the kind of civic virtue that keeps them involved in the running
of their own country. Laypeople cannot do without experts, and they
so
must accept this reality without rancor. Experts, likewise, must accept
that they get a hearing, not a veto, and that their advice will not always
be taken. At this point, the bonds tying the system together are
Ma
dangerously frayed. Unless some sort of trust and mutual respect can
be restored, public discourse will be polluted by unearned respect for
unfounded opinions. And in such an environment, anything and every-
thing becomes possible, including the end of democracy and republican
government itself.∂
March/April 2017 73
Asia’s Other
Revisionist Power
m
Why U.S. Grand Strategy Unnerves China
Jennifer Lind
hi
ha
D
onald Trump’s election as U.S. president threatens to upend
the world’s most important bilateral relationship. On the
campaign trail, Trump promised to label China a currency
manipulator and to respond to its “theft of American trade secrets”
iT
and “unfair subsidy behavior” by levying a 45 percent tariff on Chinese
exports. As president-elect, he reversed four decades of U.S. policy
when he spoke by telephone with Taiwanese President Tsai Ing-wen
and declared that the United States was not bound by the “one
Al
China” policy, the diplomatic understanding that has underpinned

Washington’s approach to Beijing since 1979.
Trump’s actions, however, have only compounded deeper problems
od
in the Sino-American relationship. Recent Chinese policies have

fueled concerns that the country seeks to overturn the post–Cold
War geopolitical order. President Xi Jinping has begun to modernize
China’s military, gradually transforming the regional balance of
so
power. He has pursued assertive policies in the East China and South
China Seas, appearing to reject both the territorial status quo in East
Asia and the role of international law in adjudicating disputes. Many
Ma
observers now believe that efforts to integrate China into the inter-
national system have failed and that East Asia will have to contend
with a dangerous, revisionist power.
But China is not the only revisionist power in the U.S.-Chinese rela-
tionship. Since the end of World War II, the United States has pursued
a strategy aimed at overturning the status quo by spreading liberalism,
free markets, and U.S. influence around the world. Just as Chinese
JENNIFER LIND is Associate Professor of Government at Dartmouth College. Follow her
on Twitter @profLind.
Asia’s Other Revisionist Power
m
hi
ha
iT
You started it: Obama and Xi in Paris, November 2015
revisionism alarms Washington, the United States’ posture stokes fear in
Beijing and beyond. As Trump begins his presidency, he would do well
Al
to understand this fear. The risk of crises, and even war, will grow if
Trump introduces instability into areas of the relationship that posed few
problems under previous U.S. administrations. But Trump could ease
tensions if he pursues a less revisionist strategy than his predecessors.
od
SEA C ✣✂✄☎✆
Chinese policymakers deny that their country is a revisionist power. They
claim that China seeks merely to defend a regional status quo that the
so
United States is threatening. After all, they argue, China’s claims to many
of the region’s disputed islands date back centuries. For example, Yang
Yanyi, China’s ambassador to the European Union, wrote in a 2016 op-ed
Ma
that China has enjoyed “sovereignty over the South China Sea Island . . .
and the adjacent waters since ancient times.” Chinese policymakers point
out that the “nine-dash line,” a demarcation of Chinese claims that runs
along the edge of the South China Sea, has appeared on Chinese maps
since the 1940s. “China’s relevant claims have never exceeded the scope
of the current international order,” China’s ambassador to the United
Kingdom, Liu Xiaoming, argued in a 2016 speech criticizing the decision
by an international tribunal in The Hague to rule against China in the
South China Sea dispute. “China’s rejection of the arbitration is to up-
March/April 2017 75
Jennifer Lind
hold the postwar international order,” he said. According to Beijing, the

South China Sea has always been, and will always be, Chinese territory;
China, in other words, remains a status quo power, not a revisionist one.
But even if its territorial claims are not new, China rarely sought to
enforce them until recently. For the past few years, however, China has
grown increasingly assertive in its territorial disputes. In 2012, to the dis-
m
may of Tokyo and Washington, Beijing declared an “air defense identifi-
cation zone” over the Senkaku Islands
(known in China as the Diaoyu Islands),
China, unlike the Soviet
hi
which are currently controlled by Japan
Union, does not have a but which China also claims, requiring
revolutionary ideology. aircraft flying through the zone to iden-
ha
tify themselves to Chinese authorities.
That same year, China maneuvered the Philippines out of Scarbor-
ough Shoal—a reef just over 100 miles from the Philippines and more
than 500 miles from China. Today, its navy, coast guard, and “maritime
iT
militia” of fishing boats deny Philippine vessels access to the area.
Meanwhile, China has presided over an extraordinary construction
project in the South China Sea, building a string of artificial islands.
Al
As the Asia Maritime Transparency Initiative, a website that monitors
activity in the disputed territory, has noted, “The number, size, and
construction make it clear these are for military purposes—and they
are the smoking gun that shows China has every intention of militariz-
od
ing the Spratly Islands,” a contested archipelago. China has drilled for
oil in the waters of the contested Paracel Islands, ignoring Vietnamese
protests and keeping Vietnamese ships away from the area. Last year,
China sent a swarm of approximately 230 fishing boats, escorted by
so
coast guard ships, into the waters around the Diaoyu/Senkaku Islands,
and it has also escalated the situation by sending more powerful
military forces into the area, such as a frigate and an air force bomber.
Ma
What’s more, over the past few years, China has modernized its
military. According to Captain James Fanell, the former chief of
intelligence for the U.S. Pacific Fleet, China is building coast guard
vessels “at an astonishing rate,” some of which are among the largest
coast guard ships in the world. China is also improving its conven-
tional ballistic missiles, which threaten U.S. air bases and ports in the
region, including Andersen Air Force Base, on Guam, a crucial U.S.
military hub. These moves jeopardize the entire U.S. strategy for
projecting power in East Asia.
In the eyes of all but Beijing, this clearly counts as revisionist

behavior. And it has touched off a flurry of activity among coun-
tries that feel threatened. The Philippines, although possibly moving
closer to China under President Rodrigo Duterte, has challenged
China’s territorial claims in an international tribunal. Australia has
strengthened its military and deepened its alliance with the United
States. Singapore, not a U.S. treaty ally but a longtime U.S. partner,
m
has increased its defense spending and has begun to work more
closely with the U.S. Navy. Despite the legacy of the Vietnam
War, Hanoi and Washington have begun to move toward closer
hi
security cooperation.
Chinese behavior has also shocked Japan into action. Japanese
ha
leaders have rejected military statecraft for more than half a century.
But under Prime Minister Shinzo Abe, Japan has reinterpreted (and
may eventually revise) its constitution to permit more military activism
and is forging closer ties with other countries worried about Chinese
iT
revisionism, including Australia and India.
So far, Japan’s response to China has been restrained. Although
changes in the Japanese defense posture often generate alarmist
headlines, Japan’s actions to date have been modest, especially when
Al
compared with how great powers normally behave when confronted

by a rising power in their neighborhood. The Japanese public is pre-
occupied with a lagging economy and an aging society; it has no
od
interest in military statecraft and has disapproved of the security

reforms pushed by Abe and other conservatives. But as the world’s
third-largest economy, Japan has tremendous latent power; a sufficiently
alarmed Tokyo could decide to increase its military spending from
so
the current one percent of GDP to two or three percent—an undesirable

outcome for Beijing.
Chinese officials argue that U.S. interference has caused its
Ma
neighbors to respond with alarm, but China’s own revisionism is to

blame. Consider that for the past 60 years, even as Washington
constantly entreated Japan to play a more active military role in the
U.S.-Japanese alliance, Tokyo stepped up only when it felt threat-
ened, as it did in the late 1970s when the Soviet Union launched a
military buildup in Asia. Today, Japan is responding not to U.S.
pressure but to Chinese assertiveness. Beijing must understand
how threatening its actions appear if it wishes to successfully man-
age its relations with its neighbors and with Washington.
March/April 2017 77
Jennifer Lind
POT, MEET KETTLE

Like their Chinese counterparts, U.S. foreign policy officials argue that
the United States seeks merely to uphold the status quo in East Asia.
They want to maintain military predominance in the region through
the policy of a “rebalance” to Asia, prevent a return to an era when
countries settled disputes unilaterally and by force, and support free-
dom of navigation and the law of the sea.
m
In its desire to preserve the current global economic system and its
network of military alliances, the United States does favor the status
quo. But at its heart, U.S. grand strategy seeks to spread liberalism
hi
and U.S. influence. The goal, in other words, is not preservation but
transformation.
ha
After World War II, the United States formed a network of partners,
supported by military alliances and international institutions, and sought
to expand it. Prosperity and peace, created through trade and institutions,
would prevail among the members of the liberal zone. As democracy and
iT
economic interdependence deepened, and as the zone widened, war would
become less likely and respect for human rights would spread. Washington
sought to pull countries into its orbit, regardless of whether they accepted
its values. In time, perhaps engagement with the United States and with
Al
the liberal order would encourage the spread of liberalism to those coun-
tries, too. “The West was not just a geographical region with fixed bor-
ders,” the scholar G. John Ikenberry has written. “Rather, it was an
od
idea—a universal organizational form that could expand outward, driven

by the spread of liberal democratic government and principles of conduct.”
The strategy, to be sure, had elements of self-interest: Washington
sought to create a liberal order that it itself led. But it also had a more
so
revolutionary goal: the transformation of anarchy into order.

The United States has pursued this transformational grand strategy
all over the world. In Europe, after the collapse of the Soviet Union
Ma
in 1991, the United States and its allies did not preserve the status quo.
Instead, they pushed eastward, enlarging NATO to absorb all of the
Soviet Union’s former Warsaw Pact allies and some former Soviet
territories, such as the Baltic states. At the same time, the European
Union expanded into eastern Europe. In Ukraine, U.S. and European
policymakers encouraged the overthrow of a pro-Russian government
in 2014 and helped install a Western-leaning one.
In the Middle East, U.S. policymakers saw the 2003 invasion of Iraq
as an opportunity to advance democracy in the region. During the
Arab Spring, they viewed the uprising in Libya as another chance to

replace an anti-American dictator, and they encouraged the spread of
democracy elsewhere as well. Underlying the United States’ recent
engagement with Iran is a desire to promote liberalization there, too.
In East Asia, the United States has not only maintained and strength-
ened its longtime alliances with Australia, Japan, and the Philippines
but also courted new partners, such as Malaysia and Singapore. And
m
with its policy toward Vietnam, the United States may encourage a
dramatic change in the regional status quo. Historically, Vietnam,
which borders China, has fallen within its larger neighbor’s sphere of
hi
influence, and since the Vietnam War, its relations with the United
States have been bitter. In the past few years, however, Vietnam and
ha
the United States have deepened their economic ties, resolved previous
disputes, and even explored greater security cooperation. Vietnam is
also expanding its military ties with U.S. allies—namely, Australia,
Japan, and the Philippines.
iT
In each of these regions, U.S. diplomatic, economic, and military
policies are aimed not at preserving but at transforming the status quo.
“A country is one of three colors: blue, red, or gray,” the Japanese jour-
nalist Hiroyuki Akita said in 2014 at a talk at the Sasakawa Peace Foun-
Al
dation, in Tokyo. “China wants to turn the gray countries red. The
Americans and Japanese want to turn the gray countries blue.” No one,
in other words, is trying to preserve the status quo. U.S. foreign policy
od
elites might object to Akita’s blunt assessment and often dismiss the
notion of “spheres of influence” as outdated, Cold War–era thinking.
But the U.S. goal is to replace the old-fashioned competition for spheres
of influence with a single liberal sphere led by the United States.
so
IN OR OUT?
China, of course, does not stand entirely outside the liberal interna-
Ma
tional system. China has become the world’s second-largest economy

in large part by embracing some features of liberalism: it is now a top
trading partner of many countries, including, of course, the United
States. And China has gained greater influence in institutions such as
the International Monetary Fund and the World Bank. The country
both profits from and—increasingly, by virtue of its wealth, talent,
and expertise—contributes to the liberal order.
Yet in several key respects, China remains outside that order. Its
military modernization and regional assertiveness challenge U.S. pri-
March/April 2017 79
Jennifer Lind
macy in Asia and the principle that countries should resolve territorial
disputes through peaceful adjudication. Although China has introduced
significant economic reforms, many observers question its support for
liberal economic development. Beijing argues that the Asian Infrastruc-
ture Investment Bank, a Chinese-led international development bank,
will uphold good governance and environmental protection. Yet Beijing
m
could well renege on those promises.
China is clearly an outsider in the realm of human rights. The
Chinese Communist Party maintains its grip on power through the
hi
threat and use of force. It harasses, arrests, and tortures political
activists and suspected enemies, and it represses secessionist groups,
such as the Mongolians, the Tibetans, and the Uighurs. Under Xi,
ha
the government has cracked down even more harshly on domestic
dissent. As a 2015 Human Rights Watch report put it, the Chinese
leader has “unleashed an extraordinary assault on basic human rights
and their defenders with a ferocity unseen in recent years”; in 2016,
iT
the nongovernmental organization declared that “the trend for hu-
man rights . . . continued in a decidedly negative direction.”
China also obstructs its liberal partners’ efforts to promote human
Al
rights across the globe. In the 1990s, for example, China opposed UN
intervention in Bosnia and Kosovo, arguing that the West should respect
national sovereignty. And regarding Syria, China has vetoed multiple
UN Security Council resolutions calling for a political solution.
od
For illiberal countries, the inherently transformational nature of

U.S. grand strategy appears deeply threatening—something U.S.
foreign policy elites too often fail to recognize. NATO expansion, for
example, provoked deep consternation in Moscow. As the political
so
scientist Joshua Itzkowitz Shifrinson has noted, “Western scholars and

policymakers should not be surprised that contemporary Russian lead-
ers resent the United States’ post–Cold War efforts and are willing to
Ma
prevent further NATO expansion—by force, if necessary.” U.S. and

European efforts to encourage Ukraine to join NATO and the EU men-
aced Russia, and Russian President Vladimir Putin lashed out. This is
not to excuse Putin’s military aggression; he had other choices. But
NATO members’ inability to see how the expansion of their alliance
threatened Russia represented a serious failure of strategic empathy.
In East Asia, adding Vietnam to the list of U.S. regional partners—or
even allies—would seem to follow naturally from a strategy of spreading
democracy and free markets and might insulate a liberalizing Vietnam
from the coercive influence of its powerful neighbor. But a U.S. alliance
with Vietnam would represent a dramatic departure from the status
quo, and China would see it as such. U.S. foreign policy analysts some-
times invoke the benefits of closer U.S. relations with Hanoi without
mentioning how threatening this development would appear to Beijing,
which could react in a similar way toward Vietnam as Russia did toward
Ukraine. U.S. policymakers should not automatically defer to China
m
and Russia. But to understand the real tradeoffs of a given policy, they
need to take into account how these great powers will likely react.
hi
A BULL IN A CHINA SHOP?
One can argue that the United States’ transformational strategy has
ha
had, and will continue to have, a profoundly positive effect on the world.
Or one can argue that it is simply a manifestation of self-interested
U.S. expansionism. It’s hard to argue, however, that U.S. policy has
sought to support the status quo.
iT
Proponents of the post–World War II U.S. grand strategy might
argue that there is no reason to adjust it now. They might insist that
challenges from China and Russia demand, if anything, a stronger
U.S. commitment to spreading liberalism. According to this view, the
Al
United States should strengthen its security commitments in eastern

Europe and extend new ones there. In Asia, the United States should
strengthen its existing alliances, align itself more closely with Viet-
od
nam, and clarify its commitment to defend Taiwan.

By contrast, realist critics might caution that as the global balance
of power changes, so must U.S. grand strategy. A transformational
approach may have made sense in the 1990s: it allowed the United
so
States and its liberal partners to gain ground when China and Russia
posed little threat. Today, however, China’s rise and Russia’s resur-
gence make this strategy too provocative. In this view, Washington
Ma
must be wary of a growing risk of great-power conflict and, because

all three countries possess nuclear weapons, potentially catastrophic
escalation. These critics would have Washington prioritize great-
power stability over its transformational goals.
The best way forward is a compromise between the approach of the
liberal internationalists and that of the realists. Washington should con-
tinue to look for opportunities to promote liberalism, but it should do
so through less threatening policies and in regions where its actions are
less likely to have strategic repercussions for U.S. relationships with
March/April 2017 81
Jennifer Lind
some of the world’s most powerful countries. For example, the United
States can support the building of institutions and civil society in Af-
rica, Latin America, and parts of Asia and the Middle East without
threatening the core interests of other great powers. U.S. policymakers
should be wary of extending alliances to the borders of China or Russia
or attempting to advance democracy within those countries. The United
States can encourage liberalism while acknowledging that its grand
m
strategy appears deeply threatening to outsiders.
If Hillary Clinton, the Democratic nominee, had won the presiden-
tial election, the United States would probably have continued to pursue
hi
its transformational strategy. It is much less clear, however, how Trump’s
presidency will shape U.S. grand strategy and U.S.-Chinese relations.
ha
On the one hand, the Trump administration could prove deeply desta-
bilizing. Trump’s phone call with the Taiwanese president, for example,
has introduced real uncertainty about U.S. policy toward Taiwan,
potentially shattering a delicate compromise that has held for four
iT
decades. If the Trump administration pokes sticks into more areas where
previous U.S. and Chinese governments have forged compromises, it
will preside over a deterioration of an already troubled relationship.
But Trump could also reduce tensions if he proves less assertive
Al
about promoting liberalism than the liberal internationalists who have

presided over U.S. foreign policy since the end of the Cold War.
Although Trump has not outlined his views on grand strategy, he
od
seems less concerned with transforming the world’s political system

and more interested in making good bilateral deals for the United
States. So Trump, caring little about promoting further liberalization
in Asia, might dismiss an alliance with Vietnam, a weak nation embroiled
so
in a territorial dispute with a great power, as a bad deal. If Trump’s

pragmatism makes him more willing than liberal internationalists
to compromise, his leadership could prove stabilizing in this respect.
Ma
For years, foreign policy analysts in the United States, Japan, and
Europe took heart from at least one reassuring factor in U.S.-Chinese
relations: China, unlike the Soviet Union, does not have a revolutionary
ideology. Beijing has not tried to export an ideology around the world.
Washington has. In attempting to transform anarchy into liberal
order, the United States has pursued an idealistic, visionary, and in
many ways laudable goal. Yet its audacity terrifies those on the outside.
The United States and its partners need not necessarily defer to that
fear—but they must understand it.∂
China’s Great Awakening

How the People’s Republic Got Religion
m
Ian Johnson
hi
F
or decades, outsiders have thought of China as a country where
religion and faith play marginal roles. Images of Chinese people
ha
overwhelmingly involve economics or politics: massive cities
sprouting up, diligent workers laboring in vast factories, nouveaux
riches flaunting their wealth, farmers toiling in polluted fields, dis-
sidents languishing in prison. The stories about faith in China that
iT
do exist tend to involve victims, such as Chinese Christians forced to
worship underground or groups such as Falun Gong being repressed
by the government.
Such images fail to fully capture the reality of present-day China,
Al
where hundreds of millions of people are consumed with doubt about

their society and are turning to religion and faith for answers they
cannot find elsewhere in their radically secular society. They wonder
od
what makes a good life and if there is more to it than material gain. As
a 42-year-old pastor of a church in the western metropolis of Chengdu
told me recently, “We thought we were unhappy because we were poor.
But now a lot of us aren’t poor anymore, and yet we’re still unhappy.
so
We realize there’s something missing, and that’s a spiritual life.”

Across China, hundreds of temples, churches, and mosques open
every year, attracting millions of new worshippers. The precise figures
Ma
are often debated, but even a casual visitor to China cannot miss the
signs: new churches dotting the countryside, temples being rebuilt or
massively expanded, and even new government policies that encourage
traditional values. Faith and values are returning to the center of a
national discussion over how to organize Chinese life.
IAN JOHNSON has reported from and written about China for The New York Times, The
New Yorker, and The New York Review of Books, among other publications. This essay is
adapted from his forthcoming book, The Souls of China: The Return of Religion After Mao
(Pantheon, 2017). Copyright © Ian Johnson, 2017.
March/April 2017 83
Ian Johnson
China’s ethnic minorities—especially Tibetan Buddhists and Uighur

Muslims—have long valued religion, sometimes as a form of resistance
against an oppressive central state. But a similar or even stronger move
toward spiritualism is emerging among Han Chinese, the ethnic
group that makes up 91 percent of the country’s population. A search
for deeper meaning is no longer just a salve for China’s marginal people,
but a major preoccupation of the same Chinese who have benefited
m
the most from their country’s economic takeoff.
It is hardly an exaggeration to say that China is undergoing a spir-
itual revival similar to the Great Awakening that took place in the
hi
United States in the nineteenth century. Then, as now, a country on
the move has been unsettled by great social and economic change.
ha
People have been thrust into densely populated cities where they have
no friends and no support systems. Religion and faith offer them ways
of looking at age-old questions that people everywhere struggle to
answer: Why are we here? What really makes us happy? How do we
iT
achieve contentment as individuals, as a community, as a nation?
This burst of religious and spiritual activity poses risks for the
Chinese Communist Party. But China’s leaders have also benefited
from it, and have even encouraged and fostered it in some ways. So
Al
far, the party has managed a delicate balance, tolerating the spiritual
awakening without overreaching or provoking a dangerous backlash.
But as Beijing pursues a new, harder line on social, economic, and
od
political change, this equilibrium may become harder to maintain.
OLD-TIME RELIGION
Understanding the spiritual revival in contemporary China requires
so
a detour back in time to its cause: one of history’s greatest antireligious

movements. Contrary to what many people assume, this campaign did
not originate with the Communist takeover of China in 1949. Instead,
Ma
it began a century earlier, when China’s traditional civilization began

to collapse.
China’s decline in the nineteenth century triggered a crisis of con-
fidence. For most of its history, China had dominated its neighbors.
At times, some were militarily stronger, especially the nomadic peo-
ples to its north, such as the Mongols and the Manchus. But even when
those groups got the upper hand and conquered China, the Chinese
rarely doubted the superiority of their culture. They were often self-
critical, but they believed that their way of life would prevail.
China’s encounter with the West shook that self-assurance. China

suffered a string of military defeats that began with the First Opium
War of 1839–42, during which British
forces defeated the Qing dynasty. As
the century progressed, many Chinese
A burst of religious and
looked around the world and saw how spiritual activity poses risks
the West had carved up Africa and the for the Chinese Communist
m
Americas and had subjugated India. By Party.
the end of the nineteenth century, a
growing number of Chinese had come
hi
to believe that their country needed to change if it were to survive.
China lacked modern science, engineering, education, public health,
ha
and advanced agricultural methods. All these things were products of
the West’s dramatically different way of ordering society, which was
based primarily on science rather than religion and tradition.
As China’s crisis deepened, increasingly radical ideas took hold.
iT
China didn’t just need new policies, or even a new dynasty. Reformers
wanted to overthrow the entire imperial political establishment, and that
meant destroying the religious system that undergirded it. Under-
standing why requires one to envision how traditional Chinese society
Al
was organized. Religion was not an institution separate from secular

society, and religious practice was not something Chinese people
engaged in once or twice a week, at a certain place, under the guidance
od
of a particular holy book. Chinese religion involved little theology

and almost no clergy. But this didn’t mean Chinese religion was weak.
Instead, it was diffused over every aspect of life—a fine membrane
that held society together. The country had an estimated one million
so
temples around the turn of the century, with many villages home to
half a dozen places of worship.
The prominence of faith in China has also long been masked by the
Ma
complexity of religious identity among the Chinese. People today tend

to think in exclusive terms about religion: this person is Catholic, that
person is Jewish, that one is Muslim. “What faith do you believe in?”
seems like a simple question for people who define religion according
to monotheistic norms. But for most of Chinese history, this sort of
question would have sounded strange. In China, religion has histori-
cally been more about community than identity. Each village had at
least one temple where residents honored a certain god on certain
holy days. For most of its history, China had three main religious
March/April 2017 85
Ian Johnson
teachings, or jiao: Buddhism ( fojiao), Confucianism (rujiao), and Taoism

(daojiao)—but they largely did not function as separate institutions
with their own followers. Instead, people believed in an amalgam of
these faiths that is best described simply as “Chinese religion.”
What mattered more than religious labels or identities were rituals,
which helped organize Chinese society. In imperial China, the central
bureaucracy was relatively small, and most officials sent to the prov-
m
inces by Beijing made it only to the county seat, which meant that one
person oversaw hundreds of villages and tens of thousands of people.
Local life was run by committees headed by local grandees, and the
hi
most important committee was the one that ran the local temples.
These bodies often managed other projects as well, such as building
ha
irrigation systems or raising militias to fight off bandits. Temples also
provided a physical space for government rule: they were often the
places where local elders met, read proclamations, and carried out
punishments. In the words of the historian Prasenjit Duara, temples
iT
were Chinese society’s “nexus of power.”
But religion offered more than practical assistance in running
imperial China; it was the political system’s lifeblood. The emperor
was called “the Son of Heaven” and presided over elaborate rituals that
Al
underscored his semidivine nature. That is why when reformers and

revolutionaries set out to re-create China in the late nineteenth cen-
tury, they started with religion. To build a new political and cultural
od
system, they first had to demolish the old one.
BORN AGAIN
At around the same time that reformers were beginning their assault
so
on Chinese religion, a foreign faith—Christianity—was gaining trac-

tion and exerting a subtle but powerful influence. By the late sixteenth
century, Christianity had secured a foothold in China, but it remained
Ma
a minor phenomenon until missionaries began to arrive in the nine-

teenth century as a result of China’s defeat in the Opium Wars. Unlike
Islam, which had entered China a millennium earlier but was largely
confined to the country’s periphery, Christianity began to spread in
China’s economic heartland and among its most influential classes. This
caused a great deal of angst: one popular saying at the time was “One
more Christian, one less Chinese.”
But Christianity held a powerful appeal for modernizing reformers
who often looked to the West for inspiration and were impressed by
m
hi
ha
iT
Come to Jesus: at an underground Catholic church in Tianjin, November 2013
the religion’s apparent compatibility with modern states there. Some
reformers, including the Nationalist Party leader Chiang Kai-shek,
even converted to Christianity. But most important was the decision by
Al
almost all Chinese modernizers to adopt what they saw as a Protestant-

style distinction between religion and superstition. They concluded
that only religious practices that resembled Christianity were “real”
od
and should be allowed to survive; the rest were mere superstitions and
should be banished.
The religious cleansing that followed unfolded haphazardly, often
through individual actions. A telling example involves Sun Yat-sen,
so
who would eventually help overthrow the Qing dynasty and establish
the Republic of China in 1912. One of his first acts of rebellion involved
storming into the local temple in his hometown in Xiangshan County
Ma
and smashing its statues. When Sun’s Nationalist Party took power,
the pace of change picked up, and Chiang, who succeeded Sun in
1926, launched the New Life Movement to cleanse China of its old
KIM KYUNG-HOON / REUTERS
ways. Along with trying to eradicate opium abuse, gambling, prostitu-

tion, and illiteracy, the Nationalists launched a “campaign to destroy
superstition.” In the period between the end of imperial rule and the
Communists’ victory in the civil war in 1949, half of the one million
temples that had dotted China at the turn of the century were destroyed,
shuttered, or converted to other uses.
March/April 2017 87
Ian Johnson
FAITH NO MORE
Following their takeover, China’s Communists initially handled reli-
gion as they did other noncommunist elements of society, through
co-optation. The party set up associations for the five groups that
had emerged out of the wreckage of the old system: Buddhists, Taoists,
Muslims, Catholics, and Protestants. These five were allowed to run
m
their surviving temples, churches, and mosques. Everything was firmly
guided by the party, but religion wasn’t banned.
That system lasted only a few years. In the late 1950s, Mao Zedong
hi
began to suppress most religious activity, and by the time he launched
the Cultural Revolution in 1966, the Chinese Communist Party had
begun one of the most furious assaults on religion in world history.
ha
Virtually every place of worship was closed, and almost all clergy were
driven out. In the Catholic stronghold of Taiyuan, in Shanxi Province,
the central cathedral was turned into a “living exhibition” to demon-
strate the backwardness of religion: its priests and nuns were held in
iT
cages, and local residents were ordered to troop by and observe them.
Across the country, Buddhist, Taoist, and Catholic clerics who had
taken vows of chastity were forced to marry. Family shrines were
Al
dismantled. Temples were gutted, torn down, or occupied by factories
or government offices; zealous Maoist cadres pitched the temples’
sacred statues into bonfires or smuggled them to Hong Kong to be
sold off through antiques dealers. (This is one reason why so many
od
temples in China today lack the great works of art that characterize
ancient places of worship elsewhere around the world.)
In response to such repression, religion went underground. Church-
goers began meeting in secret, and Buddhists and Taoists tried to save
so
their scriptures and ritual manuals by burying them or committing

them to memory. Authorities forbade the open practice of physical
forms of spiritual cultivation, such as meditation and many martial
Ma
arts. In public, the only form of worship the party allowed to thrive
was the cult of Mao. People wore Mao badges, clutched his book of
sayings like a sacred text, and traveled to his hometown of Shaoshan
as if on a pilgrimage. Some people even prayed to Mao, asking for his
instructions in the morning and reporting back to him in the evening.
Much of this fervor was coerced; a failure to show sufficient revolu-
tionary fervor could result in prison or death. But especially among
young people, the phenomenon was real—an ecstatic outpouring of
emotion, an ersatz religion for a country that had destroyed its own.
THE GOD THAT FAILED

There was one problem with Mao as a living god: he died. When that
happened, in 1976, the country went into shock. Some people were
thrilled—finally, the tyrant was gone—but many were crushed. Tears
flowed, and the country ground to a halt. With traditional religion
decimated and Mao dead, people were unsure how to channel their
hopes and fears.
m
The party responded by trying to turn the clock back to the early
1950s. In 1982, as part of a more general accounting of the destruction
wrought by the Cultural Revolution, the Chinese Communist Party
hi
issued a 20-page paper titled “The Basic Viewpoint and Policy on the
Religious Question During Our Country’s Socialist Period.” Better
ha
known as Document 19, it featured an astoundingly candid analysis of
China’s religious crisis—and provided the legal basis for the religious
revival now under way. The document stated that for 19 of Mao’s
27 years in power, “leftist errors” took hold—a surprising admis-
iT
sion of how badly the party had fumbled religious policy during its
first three decades in power. It conceded that Maoist radicals had
“forbade normal religious activities,” “fabricated a host of wrongs
and injustices that they pinned upon these religious personages,” and
Al
“used violent measures against religion that forced religious move-

ments underground.” The document went on to describe religion in
sympathetic language, arguing forcefully that it would disappear—
od
but only very gradually. In the meantime, the party’s policy would
be “respect for and protection of the freedom of religious belief.”
Places of worship could reopen, and a new generation of clergy
could receive training.
so
The approach described in Document 19 has more or less guided the

party ever since. As a result, China is no longer the bastion of godless
communism that many foreigners still imagine. However, that hardly
Ma
means that religion is not a source of severe tension in Chinese society.

People of faith intensely resent the government’s control of major tem-
ples, churches, and mosques, and many have turned to underground
places of worship. In the public sphere, religion remains tightly cir-
cumscribed. It is all but banned from the media; religious leaders, for
example, almost never comment on the great issues of the day, or even
interact with one another. Interreligious dialogue is all but unknown.
The turmoil of the past century and a half has also made people
uncomfortable about expressing their religiosity. In fact, most peo-
March/April 2017 89
Ian Johnson
ple shun the word “religion” (zongjiao), which is still seen as a sensi-
tive term. This results in colossal misunderstandings when outsiders
try to gauge religious or spiritual life in China. In 2014, for exam-
ple, the Pew Research Center issued a major study on global views
about religion that reported that in China, only a startling 14 percent
of respondents believed that morality was linked to belief in religion.
m
In 2015, a WIN/Gallup International poll reported that 61 percent of
Chinese identified as atheists, far higher than the worldwide average
of just 11 percent.
hi
These studies were flawed, however, because they asked people
whether they believed in a zongjiao. (Other translation issues ulti-
mately led Pew to reissue its report with China removed altogether
ha
from the findings.) It is much more useful to ask Chinese people
about how they act or whether they be-
There was one problem lieve in specific ideas. In a 2007 survey
of 3,000 Chinese conducted by British
iT
with Mao as a living god: and Chinese researchers, 77 percent of
he died. respondents said they believed in moral
causality, or baoying, a key pillar of tra-
Al
ditional Chinese belief. This is the idea that you reap what you sow—
what you do in this life has repercussions in the next. Forty-four
percent agreed with the statement “Life and death depends on the
will of heaven,” and 25 percent said they had experienced the inter-
od
vention of a “Buddha” ( fo) in their lives during the past 12 months,

meaning that a god or spirit had influenced their lives.
Other surveys have also managed to capture the scope of the reli-
gious surge. A 2005 poll carried out by East China Normal Univer-
so
sity, in Shanghai, found that 31 percent of the country’s population, or

about 300 million people, were religious. Around 200 million Chinese
adhered to Buddhism, Taoism, or folk practices such as worshipping
Ma
one’s ancestors or deified historical figures, such as famous generals or

medical doctors. The poll also found that around 60 million or so
Chinese were Christians. The main reason for the poll’s high religious
response rate was that the researchers used the word xinyang, or “faith,”
instead of zongjiao. Another study, led by the scholar Fenggang Yang
of Purdue University in 2007, reached similar conclusions: it found
that 185 million Chinese considered themselves to be Buddhist and
another 17.3 million had formal ties to a temple (making them the
equivalent of lay Buddhists). As for Taoism, it found that 12 million
considered themselves to be Taoist and another 173 million engaged

in some Taoist practices.
The most obvious signs of China’s religious revival are the growing
number of places of worship and the expanding population of clergy.
A government survey from 2014 found half a million Buddhist monks
and nuns in some 33,000 Buddhist temples and another 48,000 Taoist
m
priests and nuns affiliated with 9,000 Taoist temples—twice the num-
ber of temples reported in the 1990s. That might seem like impossibly
fast growth, but it matches what I have personally observed in dozens
hi
of cities across China. Even in Beijing, the most politicized and atyp-
ically atheistic city in China, the number of Taoist temples has in-
creased from just two in 1995 to more than 20 today. That is still a
ha
fraction of the hundreds that existed in the past, but the growth indi-
cates the speed of change.
As for Christianity, the picture is bifurcated. For a host of reasons,
Catholicism remains the weakest and least influential of China’s five
iT
official religions. Even if one accepts upper-end estimates of 12 mil-
lion adherents, that is still less than one percent of the population.
Protestantism, by contrast, took off after 1949 and is often described
Al
as the fastest-growing religion in China. Official figures show that
20 million Protestants belong to government-run churches, a massive
increase from one million in 1949. Almost all independent estimates,
however, suggest that the true number of Protestants is far higher,
od
especially because of the popularity of underground, or “house,”

churches, which are not part of the government-run structure. In
2008, the Chinese sociologist Yu Jianrong estimated that Protestants
number between 45 million and 60 million; in 2011, the Pew Forum
so
on Religion and Public Life put the figure at 58 million. Whatever the
precise number, the fact is that Protestantism has become a dynamic
part of China’s religious landscape, especially in its biggest cities and
Ma
among its best-educated people.
THE LOST MIDDLE

The Chinese Communist Party has kept a close eye on this explosion
of religious sentiment and practice and has made sure that no one
mistakes its modest liberalization for complete freedom of religion.
Underground activities might be tolerated but are still illegal. So, too,
are ties with foreign religious organizations—a taboo that often leads
to persecution.
March/April 2017 91
Ian Johnson
The most significant instance of official repression took place in

1999, when the government banned the spiritual movement Falun
Gong, which authorities saw as a challenge to the government. When
Falun Gong refused to disband, a crackdown followed. Human rights
groups estimate that about 100 practitioners died in police custody,
and thousands were incarcerated without trial, many spending years
in labor camps.
m
However severe it was, the suppression of Falun Gong may
have created space for other religious organizations. Since the
crackdown, the government has loosened its policy toward the
hi
five established religions, perhaps feeling that it is better to allow
religiosity to be channeled into groups that it can control rather
ha
than see it erupt in independent movements. The government has
shown particular favor toward Taoism, folk practices, and most
forms of Buddhism.
Groups with foreign ties have fared less well, including Tibetan
iT
Buddhists who emphasize their ties to the exiled Dalai Lama,
Muslims inspired by global Islamic movements, or Christians who
look abroad for guidance and leadership—hence a recent cam-
paign that saw the removal of crosses from the spires of churches
Al
in one heavily Christian part of the country. But religious organi-

zations that are led and financed from within China have been
granted considerable leeway.
od
And yet authorities also fear faith as an uncontrollable force—an

alternative ideology to the government’s vision of how society
should be run. In the past, state and religion were united, forming
a spiritual center of gravity for China. That old system is now gone,
so
and nothing new has taken its place. The situation has been com-
plicated by a roiling debate within the ruling Communist Party
about how to best govern the country. With no clear course, China
Ma
percolates with ideas and saviors but has no system to hold it all
together. As the historian Vincent Goossaert and the sociologist
David Palmer describe it, today’s China is “a Middle Kingdom that
has lost its Middle.”
CHURCH AND STATE

China’s religious revival has become a bellwether for broader
changes in Chinese society. When Mao died and moderates took
over in the late 1970s, they tried to rebuild the regime’s credibility
among the population by loosening control. Their goal was to push

economic development and let people do much as they pleased as
long as they did not challenge party rule. During this reform pe-
riod, which lasted for about 30 years, until roughly 2010, observers
believed, or at least hoped, that this
relaxation would continue indefi-
nitely and result in a freer society.
The government has tried
m
This was an optimistic period around hard to co-opt religious
the world; when the Cold War ended, groups instead of crushing
it seemed that societies were moving them.
hi
inexorably toward freedom and de-
mocracy. During much of this period,
ha
Chinese society did become increasingly free. Part of this process
was led by the government; following the collapse of the Soviet
Union, the Chinese Communist Party concluded that reforms and
openness could actually strengthen their grip on power by creating
iT
more prosperity and thus dampening opposition.
But in recent years, the government has changed course. Perhaps
because leaders feel that further liberalization could threaten their
rule, they have begun to take a harder line. Critics, even moderate
Al
ones, have been locked up; the Internet has been brought to heel; and
social movements have been instructed to obey the government or
face suppression. A period of stasis has set in.
od
In the field of religion and faith, the government has tried hard to
co-opt groups instead of crushing them. It has cleverly tapped into
the phrases and some of the ideas of the traditional political-religious
state that ran China for more than two millennia. These trends toward
so
control are likely to continue: the state will never fully yield its grip
on the country’s moral life.
The winners will likely be China’s traditional religions: Buddhism,
Ma
Taoism, and folk religion. Seeing them as easier to manage, the

state will give them more space, even while making sure they follow
government policies. This does not mean that China will become
like Russia, with its nationalist Orthodox state church. Nor will the
Chinese Communist Party morph into something like India’s
Bharatiya Janata Party (Indian People’s Party), which advocates a
nationalist-religious agenda. The Chinese Communist Party en-
joys a higher degree of support, so it doesn’t need to resort to the
blatant instrumentalization of religion. Instead, like the imperial
March/April 2017 93
Ian Johnson
dynasties of the past, it will continue to push acceptable forms of

faith as a way to strengthen its position as the arbiter of the nation’s
moral and spiritual values.
FAR FROM HEAVEN

If one had to summarize the collective aspirations of the Chinese peo-
ple in one word, it would be “heaven” (tian), a concept that is central
m
to how the Chinese conceive of a well-ordered society. Tian implies a
form of justice and respect and suggests an authority higher than any
one government.
hi
But aspiring to tian does not always lead to political dissent.
Throughout the decades of communist rule, China has had dissidents,
ha
including inspiring figures such as the Nobel Peace Prize laureate
Liu Xiaobo. But by and large, these activists and their pursuit of
universal rights have left ordinary Chinese people cold. Most
Chinese see political activists as well meaning but unrealistic.
iT
When ordinary people have pursued political change, their goals
have been fairly narrow: farmers protesting unfair taxation or city
residents opposing the destruction of their homes. Their motivations
were personal and rarely part of an overarching ideology or a yearning
Al
to change the system.

The new desire for spiritual transformation is deeper and more
profound than such expressions of dissatisfaction. All religious
od
and spiritual movements have self-interested goals, but they also

offer systematic critiques of the status quo. It is true that faith can
be an escape from politics, a pietistic flight from a chaotic society:
“Most people aren’t trustworthy, but at least my church/my temple/
so
my pilgrimage society is filled with good people.” And yet faith

can also inspire social action. It is no coincidence that among
Chinese human rights lawyers—a group currently suffering from
Ma
intense state repression—one finds a disproportionate number of

Christians, or that other activists have found inspiration in Bud-
dhism and Taoism.
In the 1980s and 1990s, as the scholar Richard Madsen documents
in his book Democracy’s Dharma, faith-based Buddhist and Taoist
charities played a significant role in democratizing Taiwan. Some-
thing similar is unlikely to happen on the mainland in the near term.
The Communist Party has made clear that it will not permit non-
governmental organizations—religious or secular—to be set up and
organize. Religious groups have been limited to providing services—

disaster relief, for example—and have been hindered in pursuing
broader goals, such as trying to reform society. But seen from a
wider historical perspective, religious organizations are helping lay
the groundwork for a broader transformation.
Out of this ferment, China is becoming more than a hypermer-
cantilist, fragile superpower. It is a country engaging in a global
m
conversation about how to restore solidarity and values to societies
that have made economics the basis of most decisions. Perhaps because
Chinese religious traditions were so savagely attacked over the past
hi
decades and then replaced with such a naked form of capitalism,
China might actually be at the forefront of this worldwide search
ha
for values. These are universal aspirations, and like people else-
where in the world, many Chinese people believe that their hopes
are supported by something more than a particular government or
law. They believe they are supported by heaven.∂
iT
Al
od
so
Ma
March/April 2017 95
How to Hunt a Lone Wolf

Countering Terrorists Who Act on
Their Own
m
Daniel Byman
hi
I
n the last two years, “lone wolf” jihadists seemed to emerge as the
ha
new face of terrorism. In December 2015, husband and wife Syed
Rizwan Farook and Tashfeen Malik attacked a Christmas party
held by Farook’s employer, the San Bernardino County Department
of Public Health, killing 14. In June 2016, Omar Mateen killed 49 peo-
iT
ple at a gay nightclub in Orlando, Florida—the deadliest attack on
U.S. soil since 9/11. And in July, Mohamed Lahouaiej Bouhlel drove
a truck through a Bastille Day celebration in Nice, killing 86 people.
The attacks by the San Bernardino killers, Mateen, and Bouhlel followed
Al
an increasingly common pattern: the Islamic State (also known as ISIS)

claimed credit for them, but the perpetrators appear to have planned
and executed their operations alone.
od
Analysts traditionally define a lone wolf as a terrorist who is not

part of a group or directed by an outside organization. In reality, few
lone wolves truly act alone: Farook and Malik were a married couple,
and some security officials believe that Bouhlel had been in contact
so
with suspected extremists in his neighborhood. Nevertheless, the label

is important: terrorists who act without external guidance pose a differ-
ent threat, and call for a different policy response, than do those who
Ma
are directed by an extremist group.

Lone wolves are an old problem, but in recent decades, the number
of attacks by them has grown. And it won’t fall anytime soon: ISIS has
embraced the tactic, and recent successes may well inspire copycats.
And although lone wolves usually kill few people, they have an outsize
DANIEL BYMAN is a Professor and Senior Associate Dean at Georgetown University’s

School of Foreign Service and a Senior Fellow at the Brookings Institution. He is the author
of Al Qaeda, the Islamic State, and the Global Jihadist Movement: What Everyone Needs to
Know. Follow him on Twitter @dbyman.
m
hi
ha
iT
political impact. In both the United States and Europe, they are fuel-
Al
ing Islamophobia, isolating Muslim communities, and empowering

populist demagogues.
Although lone-wolf attacks are hard to prevent, governments in the
od
West can do several things to make them less likely and to prepare for
those that do occur. First, they should work to keep lone wolves isolated.
Terrorists are far more likely to succeed if they can coordinate with
others, especially if they have the help of an organized group, such as
so
ISIS. Second, governments should build strong relationships between

Muslim communities and law enforcement agencies. The friends,
family, and neighbors of would-be terrorists are more likely than the
Ma
security services to know if something is amiss, so governments must

gain their trust. This will mean giving security officials the flexibility
to intervene in ways that do not involve jail sentences, such as by
allowing them to supervise individuals without arresting them. Third,
governments should direct security services to monitor and infiltrate
jihadist social media accounts, and encourage private companies to
shut them down, to identify individual terrorists and disrupt their
communications. Finally, and most important, governments should
try to discredit the ideology embraced by lone wolves. Yet doing all
March/April 2017 97
Daniel Byman
these things would only reduce the lone-wolf threat, not end it. It is
impossible to stop every violent individual from picking up a gun
and shooting.
AN OLD PROBLEM
Today, the lone wolves who get the most attention are Islamist extrem-
m
ists, but since the threat began, such attackers have emerged from
fanatical movements of all stripes. In 1995, the white supremacist
Timothy McVeigh launched the deadliest terrorist attack on U.S. soil
hi
before 9/11 when he bombed the Alfred P. Murrah Federal Building
in Oklahoma City, killing 168 and wounding hundreds more. In 2010,
James Lee, who mixed environmental activism with anti-immigrant
ha
sentiment, took three people hostage in Maryland. Dylann Roof, a
white supremacist, murdered nine African American parishioners at a
historically black church in Charleston, South Carolina, in 2015.
Groups usually encourage lone wolves when they are too weak to
iT
carry out organized attacks themselves. In 1983, the American white
supremacist Louis Beam called for “leaderless resistance” to the federal
government. Traditional groups with tight command and control “are
Al
easy prey for government infiltration, entrapment, and destruction,”
Beam wrote, so small groups and individuals should work independently.
Over a decade ago, the jihadist fighter and theorist Abu Musab al-
Suri encouraged lone-wolf attacks for the same reason. He pointed
od
out that jihadists had lost hundreds of fighters when they confronted
U.S. forces in large groups during the post-9/11 wars in Afghanistan
and Iraq. The solution, Suri argued, was to rely on “single operations
. . . carried out by individuals or small groups.”
so
Beam and Suri’s logic is catching on. In 2012, the sociologist Ramon
Spaaij found that from 1970 to 2010, the number of lone-wolf attacks per
decade grew by 45 percent in the United States and by over 400 percent
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across 14 other developed countries, although the absolute numbers

remained low. And since ISIS gained strength in 2014, the West has
seen another increase. In July 2015, Mohammad Youssef Abdulazeez
killed five people at a military recruitment center and a U.S. Navy
Reserve base in Tennessee. In September 2016, lone wolves executed
two separate plots. Ahmad Khan Rahami allegedly planted two bombs
in New York City and one in New Jersey—one went off in Manhattan
but did not kill anyone. On the same day in Minnesota, Dahir Adan
stabbed and injured ten people at a mall. And in November, Abdul
Razak Ali Artan, a legal permanent resident of the United States who
was a refugee from Somalia, rammed his car into a group of his fel-
low students and faculty and staff members at Ohio State University
and stabbed several more before a security guard shot him dead.
Europe has seen even more attacks, with strikes in Tours, Lyon, and
Copenhagen. Both the United States and Europe saw roughly twice
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as many successful lone-wolf attacks in 2015 and 2016 as they did from
2011 to 2014.
Although the overall trend is clear, experts struggle to identify pre-
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cise numbers, as the boundary between lone wolves and coordinated
attackers is unclear. When it comes to affiliation with a group, terror-
ists exist on a spectrum. At one end lie established organizations. The
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2015 Paris attacks, for example, in which terrorists killed 130 people,
involved a relatively large network of individuals operating in Belgium
and France. ISIS fighters had trained many of them in Syria, and the
group’s leadership coordinated the operation. At the other end of the
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spectrum lies someone such as Ted Kaczynski, the so-called Unabomber,
who killed three people and injured more than 20 others during a
17-year campaign of mail bombings. Kaczynski lived alone, had no
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ties to any organized group, and formulated his own agenda.
Individuals such as the San Bernardino killers or Mateen lie closer
on the spectrum to the Unabomber than to the Paris attackers, but they
were not totally isolated. Although such attackers act alone, they all
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still feel some connection to a broader cause. The lectures of the U.S.-
born al Qaeda ideologue Anwar al-Awlaki inspired the San Bernardino
killers, for example, and although they had no direct contact with ISIS,
during the attack they pledged loyalty to the group’s leader (whose
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name they had looked up on the Internet only that day). Closer to the
organized end of the spectrum was Nidal Hasan, who in 2009 killed
13 people in a shooting rampage at Fort Hood, in Texas. Hasan drew
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inspiration from Awlaki’s teachings but also exchanged e-mails with

the preacher, in which the two discussed jihad (although they did not
plan any particular attack).
THE NEW NORMAL?

The increase in lone-wolf attacks has been driven in part by ISIS’ embrace
of the tactic. For most of its history, ISIS focused on Iraq and Syria. It
did call for attacks in the West in 2014, but most of its propaganda
urged supporters to immigrate to the areas under the group’s control,
March/April 2017 99
Daniel Byman
where they could defend and expand the state and live life as virtuous
Muslims under ISIS’ just rule. In early 2016, however, an ISIS spokes-
man declared that “the smallest action you do in the heart of [the West]
is dearer to us than the largest action by us and more effective and more
damaging.” ISIS made this shift because attacks by the U.S.-led coali-
tion have shrunk its territory in Iraq and Syria and eroded its ability to
carry out large-scale operations. The group is short of funds and having
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a tougher time recruiting foreigners. Like all terrorist groups, ISIS needs
victories to inspire new recruits and maintain morale among the existing
cadre. Lone-wolf attacks can provide at least a few victories.
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New technologies have also contributed to the lone-wolf phenom-
enon. Back when Beam and other white supremacists were urging
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individuals to carry out attacks, they were trying to promote their ideas
and give their effort overall coherence by disseminating a few printed
tracts. The Internet, particularly since the rise of social media, has put
that process on steroids. Now even small groups can spread their ideas
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far and wide. Young Muslims all over the West need only search Google
to read or listen to the words of ideologues such as Awlaki.
Perhaps most worrisome, lone-wolf attacks seem to be entering the
broader cultural imagination in the West, providing a template to
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violence-prone misfits who might otherwise not have acted on their

murderous impulses. Put another way: people who might not have the
means, opportunity, or even desire to actually join a terrorist organiza-
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tion might nevertheless come to see lone-wolf attacks as an appealing

way to express their rage. Consider that many recent lone-wolf attackers
were not longtime adherents to radical ideas. Rather, they seem to
have been people who were searching for meaning in their lives and
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who found it by committing spectacular violence in the name of a

movement—without having invested the time and energy it would
have taken to actually join the movement in a more committed way
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or having borne the associated risk.
PROS AND CONS

As Beam, Suri, and other proponents of lone-wolf attacks have argued,
governments find it fiendishly difficult to stop them. To break up
most terrorist plots, officials monitor communications to identify and
locate the associates of known suspects. Lone wolves, however, have
few previous connections to known terrorists and rarely communicate
with them.
Lone wolves are also cheap. They are usually untrained, and they
finance themselves, so a group can take the credit for free. The wider
a group spreads its ideology, the larger the supply of cheap attacks.
Lone wolves also allow a terrorist group to claim responsibility for
violence that the larger public would
otherwise have ignored. In Lyon in Groups encourage lone
2015, Yassin Salhi, a delivery driver,
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beheaded his boss before trying to blow wolves when they are too
up gas canisters at a processing plant. weak to carry out organized
Farook, one of the San Bernadino at- attacks themselves.
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tackers, worked at the county health
department whose Christmas party he
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and his wife targeted. In both cases, had the attackers not pledged loyalty
to ISIS, law enforcement and the media might have described the attacks
as workplace violence, not terrorism. Once officials attributed the acts
to ISIS-linked terrorists, media attention—and thus the psychological
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impact—went through the roof.
Finally, lone wolves frighten people because they can strike anywhere.
The 9/11 attacks targeted the symbols of U.S. financial, military, and
political power; for many, the attacks struck at their identity as Americans
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but did not affect their personal security. A massacre at a nightclub or an

office party, by contrast, hits much closer to home.
Despite these advantages, most terrorist organizations have shied
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away from lone wolves. Groups avoid them partly because they often
fail. The high death tolls of the attacks by Mateen and Bouhlel were
unusual. Most lone wolves kill only a few people, if any, before police
neutralize them. The Tsarnaev brothers, who in 2013 killed three
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people with primitive bombs at the Boston Marathon, were typical.

Lone-wolf attacks mostly flop because the perpetrators are untrained
in violence. The terrorism scholar Thomas Hegghammer has found
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that the involvement of someone with prior combat or terrorist expe-

rience both dramatically improves the odds of a plot’s succeeding and
makes the attack deadlier. By using untrained militants, groups risk
damaging their reputations with repeated failures.
Another problem is that group leaders do not control lone wolves,
who might adopt tactics that hurt the broader cause. Violence without
a strategy terrifies, but it can also backfire. McVeigh’s attack, for
example, discredited other far-right movements: McVeigh claimed
he was dealing a blow to a tyrannical government, but the death of

Daniel Byman
19 children and three pregnant women in the bombing made it hard

for other antigovernment zealots to defend him. The fact that many
lone wolves suffer from mental illness makes this lack of discipline
even more likely. Unfortunately, ISIS seems to be ignoring these
constraints. It has so far accepted, and actually encouraged, lone-wolf
violence committed in its name—a surprising turn even considering
the low standards of terrorist groups.
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THE ILLIBERAL INTERNATIONAL
Lone-wolf attacks are having a far more powerful impact than their
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relatively modest death tolls might suggest. In the United States and
Europe, they are encouraging Islamophobia, shattering good relations
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between Muslims and non-Muslims, and even threatening liberal
democracy itself.
A report published last year by the Bridge Initiative at Georgetown
University found that “Islamophobic political vitriol intensified” in
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the period following the San Bernardino attack. After the Orlando
shooting, a Gallup poll found that almost 40 percent of Americans
favored then Republican presidential candidate Donald Trump’s
proposal to ban Muslims from entering the United States. And the
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effects weren’t just rhetorical: according to the FBI, anti-Muslim hate

crimes in the United States rose by 67 percent from 2014 to 2015. In
Europe, refugees have faced a similar backlash. A recent Pew poll
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indicated that 59 percent of Europeans feared that the presence of

refugees would increase the likelihood of terrorist attacks in the EU.
In the first four months of 2016, arsonists carried out 45 attacks on
refugee camps in Germany. And in northern Italy, far-right protesters
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have repeatedly torched prayer rooms in refugee camps.

Such Islamophobia can begin a vicious cycle. When public opinion
turns on Muslim communities, they tend to withdraw into themselves,
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trust law enforcement—and the wider society—less, and risk turning

into breeding grounds for radicals. For instance, for four months
following the Paris attacks, a network of friends, family, and petty
criminals helped Salah Abdeslam, one of the perpetrators, evade a
massive international manhunt while hiding in his hometown of
Molenbeek, in Belgium. Groups such as ISIS often highlight discrim-
ination and hostile rhetoric and use decisions such as the French
government’s ban on wearing the Islamic veil in public places as
proof that the West is at war with Islam.
Meanwhile, demagogues have exploited the fear of Muslims in order

to undermine public confidence in government, call for draconian
security measures, reject refugees fleeing violence, and turn societies
against religious minorities, particularly Muslims. Far-right move-
ments are growing stronger in several European countries. Hungary’s
prime minister, Viktor Orban, has long played on public fear of
Muslim foreigners to win support for turning his country into what
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he has termed an “illiberal state,” arguing that the community, not the
individual, should lie at the center of politics. To that end, he has
centralized power, restricted media freedom, and undermined the
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independence of the judiciary. In December 2016, Austria came close
to electing Norbert Hofer of the far-right Freedom Party to the pres-
ha
idency, and anti-immigrant far-right parties have emerged from the
political fringes in France and the United Kingdom. In the latter,
anti-immigrant sentiment played a major role in the decision to leave
the European Union. In the United States, Islamophobia and fear of
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terrorism—despite few attacks or fatalities on U.S. soil since 9/11—
fueled the rise of Trump and other anti-immigrant politicians. Trump’s
calls for establishing a Muslim registry, renewing the use of torture,
and monitoring mosques as a matter of course all contradict the U.S.
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principles of freedom of religion and respect for human rights.
FIGHTING BACK
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Governments can reduce the number of lone-wolf attacks, even though

official efforts cannot stop them completely. One of the best ways to
do so is to keep lone wolves lonely: the less they interact with potential
coconspirators, and especially with groups that can give them direction
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and training, the less dangerous they will be. Officials must therefore
focus on gathering intelligence, arresting suspected cell leaders, and
destroying terrorist command centers with drone strikes. If leaders
Ma
cannot reach out to potential followers, they cannot train terrorists or

organize them into groups large enough to conduct major attacks.
Better lone wolves than wolf packs.
It is also important to try to make lone-wolf attacks less lethal. The
United States has programs that limit the possession of explosives to
only those with a legitimate need, making it far harder for terrorists
to build bombs. Taking a similar approach to semiautomatic weapons
would be sensible. Unfortunately, gun control—even in the context of
counterterrorism—seems to be a political nonstarter.

Daniel Byman
Intelligences services should also work to identify lone wolves ahead

of time. On this front, ISIS’ heavy reliance on social media makes the
group vulnerable. Monitoring social media can help officials spot
potential attackers without previous connections to other terrorists,
as online operatives may encourage them or they may post their inten-
tions online. One of the two Islamist terrorists who last July killed a
priest in a church in northern France, for example, reportedly announced
m
his intention to do so well in advance on social media.
To hinder ISIS’ recruitment, the U.S. government should continue
to press companies such as Facebook and Twitter to tighten restrictions
hi
on accounts linked to the group, monitoring users more regularly and
suspending their accounts when necessary. In 2015 and 2016, as ISIS’
ha
reliance on social media became a public concern, several companies,
including Twitter, suspended accounts linked to ISIS. Companies bristle
when they perceive government censorship, but in reality, the govern-
ment is simply asking them to abide by their own terms of service,
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which often place tight restrictions on potentially illegal activity.
ISIS will adapt to suspensions by creating new accounts and taking
to new forms of communication, but the new means of communication
will often fall short of the old ones. Although ISIS had tens of thou-
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sands of accounts on Twitter, for example, it used only a small fraction

of them to spread most of its propaganda. Suspending these accounts
can set back recruitment. A recent study by the terrorist social media
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analysts J. M. Berger and Heather Perez found that ISIS’ Twitter

presence declined from 2014 to 2016 in part because of Twitter’s efforts
to shut down its accounts.
Governments can also plant disinformation in ISIS’ network. The
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group is already highly suspicious of infiltrators—it has rejected or

even executed foreign fighters on suspicion of spying—so officials
should exploit this paranoia by playing up the presence of moles and
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the likelihood of defections. Law enforcement should also carry out

offensive cyberattacks on extremist sites. These attacks could alter the
sites so that they pass on false contact information, present distorted
propaganda, or otherwise sow confusion, or they could simply take
the sites down.
Countering ISIS’ broader message is also important, albeit exception-
ally difficult. In theory, doing so could hurt the group’s fundraising
and recruitment. In practice, however, government efforts are often
cumbersome, cautious, and ineffective. The best voices are those of
former recruits or others with firsthand experience with the group,

not those of officials. The former can talk credibly about the dismal
conditions in areas controlled by ISIS, the killing of jihadists, and other
problems that run counter to the group’s propaganda.
One imperative—and the one governments are least likely to heed in
the aftermath of an attack—is to build support within Muslim commu-
nities for official counterterrorism efforts. If a community has good
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relations with the police and the rest of society, it will have fewer
grievances for terrorists to exploit and its members will have stronger
incentives to point out malefactors in their midst. In the United States,
hi
law enforcement could achieve better results by increasing their engage-
ment with Muslim communities. In particular, officials should base
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their relationships with Muslim communities on more than just fighting
terrorism. They should address crime and anti-Muslim harassment
and help immigrants access social services. In addition, they should
work with community leaders in advance on plans to protect their
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communities from the Islamophobic violence that often follows jihadist
terrorist attacks. Situating terrorism in a broader context of public safety
is more effective than isolating it, as Muslim communities rightly fear
that law enforcement will focus only on terrorism while ignoring anti-
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Muslim crimes.
In addition, U.S. law enforcement must recognize the remarkable
diversity of American Muslims, among whom ethnicity, sect, and tra-
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dition all vary widely. Different communities may have different con-
cerns, different leaders, and different news sources. Local governments
should take care to hire diverse police forces and train their members
in cultural awareness.
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A culture of greater resilience would also help. Despite the rela-

tively low number of terrorism-related deaths on U.S. soil since 9/11,
public fear of terrorism remains high. During his presidency, Barack
Ma
Obama tried to highlight the United States’ many counterterrorist

successes. Trump and other politicians should do the same and make
Americans aware of the low risk, rather than attempting to exploit
people’s fears for political gain.
These measures, alone or in combination, would not stop all lone
wolves. But they would allow law enforcement to catch more of them
and reduce the lethality of those attacks that go undetected. Most of
all, they would diminish the political impact of lone-wolf attacks—
and thus make the phenomenon as a whole less dangerous.∂

The Dignity Deﬁcit

Reclaiming Americans’ Sense of Purpose
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Arthur C. Brooks
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H
“ e who establishes conventional wisdom owns history,” a histo-
rian once told me. So it’s no surprise that ever since last year’s
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extraordinary U.S. presidential election, all sides have been
bitterly fighting over what happened—and why. The explanations for
Donald Trump’s surprise victory have varied widely. But one factor
that clearly played an important role was the alienation and disaffection
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of less educated white voters in rural and exurban areas. Trump may
have proved to be a uniquely popular tribune for this constituency. But
the anger he tapped into has been building for half a century.
The roots of that anger lie all the way back in the 1960s, when
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President Lyndon Johnson launched his so-called War on Poverty. Only

by properly understanding the mistakes made in that war—mistakes that
have deprived generations of Americans of their fundamental sense of
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dignity—can the country’s current leaders and political parties hope

to start fixing them. And only once they properly understand the
problem will they be able to craft the kind of cultural and political
agenda that can heal the country’s wounds.
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ALL THE WAY WITH LBJ

On April 24, 1964, Johnson paid a highly publicized visit to Inez, the
Ma
biggest town in eastern Kentucky’s Martin County. Inez was the heart
of coal country, the most typical Appalachian town that Johnson’s
advisers could find. In the 1960s, “typical Appalachian” meant a place
suffering from crippling despair. The citizens of Inez were poor.
Many of them were unemployed, and their children were malnourished.
Johnson had chosen Inez to illustrate that dire poverty was not just a
Third World phenomenon: it existed right here at home, and not just in
ARTHUR C. BROOKS is President of the American Enterprise Institute. Follow him on
Twitter @arthurbrooks.
The Dignity Deficit
m
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ha
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I’m from the government, and I’m here to help: Johnson with Tom Fletcher, April 1964
cities but in rural America as well. But he also came to Inez to announce
that this tragedy could be remedied.
In one famous photo op, Johnson stopped by the home of a man named
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Tom Fletcher, an unemployed 38-year-old father of eight. The pres-

ident climbed up onto Fletcher’s porch, squatted down next to him,
and listened to the man’s story. According to a 2013 article in the
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Lexington Herald-Leader by John Cheves, “Fletcher never finished

elementary school and could not really read. The places where he had
labored—coal mines, sawmills—were closed. He struggled to support
his wife and eight children.” The president used Fletcher’s struggles as
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a springboard for his own announcement. “I have called for a national

war on poverty,” he declared. “Our objective: total victory.” Years later,
Cheves reports, Johnson still remembered the encounter. “My deter-
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mination,” he wrote in his memoirs, “was reinforced that day to use the
powers of the presidency to the fullest extent that I could, to persuade
America to help all its Tom Fletchers.” Over the next five decades, the
federal government would spend more than $20 trillion trying to
achieve Johnson’s dream with social welfare programs such as Medicaid,
BET TMANN / CO RBIS
food stamps, and Aid to Families with Dependent Children.

Tom Fletcher personally received some of this largess: he got welfare
benefits and found employment through government make-work
initiatives, laboring on crews that cleared brush and picked up trash

Arthur C. Brooks
from roadsides. But he never held down a steady job, Cheves recounts,
and although his standard of living rose along with the national average,
he never made it out of poverty. By 1969, he no longer worked at all
and relied instead on disability checks
Between 1966 and 2014, the and other public assistance. After his
first wife died, he married a woman
United States spent trillions four decades his junior, with whom he
m
of dollars but saw no had two more children. In a cruel final
reduction in the poverty rate. twist, Fletcher’s second wife murdered
one of those children (and tried to kill
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the other) as part of a scam to collect on
their burial insurance. In 2004, with his wife still in prison, Fletcher
ha
died, never having gotten much closer to the American dream than
he was when Johnson climbed onto his porch.
Visit the area today, and despite Johnson’s promises, you’ll see that
idleness and depression still hang heavy in the air. In Inez, as across
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the country, the welfare state and modern technology have made job-
lessness and poverty less materially painful. Homes have electricity
and running water. Refrigerators, personal computers, and cars are
ubiquitous. Economic growth and innovation have delivered material
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abundance, and some of the War on Poverty’s programs have proved

effective at bolstering struggling families.
But even though poverty has become less materially miserable, it is
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no less common. In Martin County, just 27 percent of adults are in the

labor force. Welfare is more common than work. Caloric deficits have
been replaced by rampant obesity. Meanwhile, things aren’t much
better on the national level. In 1966, when the War on Poverty pro-
so
grams were finally up and running, the national poverty rate stood at
14.7 percent. By 2014, it stood at 14.8 percent. In other words, the
United States had spent trillions of dollars but seen no reduction in
Ma
the poverty rate.

Of course, the poverty rate doesn’t take into account rising con-
sumption standards or a variety of government transfers, from food
stamps to public housing to cash assistance. But the calculations
that determine it do include most of the income that Americans
earn for themselves. So although the rate is a poor tool for gauging
material conditions, it does capture trends in Americans’ ability to
earn success. And what it shows is that progress on that front has
been scant.
The Dignity Deficit
The War on Poverty has offered plenty of economic analgesics but

few cures. This is a failure not just in the eyes of conservative critics
but also according to the standard set by the man who launched the
campaign. On signing the Appalachian Regional Development Act in
March 1965, Johnson argued that the United States should aspire to
more than simply sustaining people in poverty. “This nation,” he declared,
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“is committed not only to human freedom but also to human dignity
and decency.” R. Sargent Shriver, a key Johnson adviser on the War on
Poverty, put it even more explicitly: “We’re investing in human dignity,
hi
not doles.”
I NEED YOU TO NEED ME
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At its core, to be treated with dignity means being considered worthy
of respect. Certain situations bring out a clear, conscious sense of our
own dignity: when we receive praise or promotions at work, when we
see our children succeed, when we see a volunteer effort pay off and
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change our neighborhood for the better. We feel a sense of dignity when
our own lives produce value for ourselves and others. Put simply, to
feel dignified, one must be needed by others.
Al
The War on Poverty did not fail because it did not raise the daily
caloric consumption of Tom Fletcher (it did). It failed because it did
nothing significant to make him and Americans like him needed and
thus help them gain a sense of dignity. It also got the U.S. government
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into the business of treating people left behind by economic change as

liabilities to manage rather than as human assets to develop.
The dignity deficit that has resulted is particularly acute among
working-class men, most of whom are white and live in rural and
so
exurban parts of the United States. In his recent book Men Without
Work, the political economist (and American Enterprise Institute
scholar) Nicholas Eberstadt shows that the percentage of working-age
Ma
men outside the labor force—that is, neither working nor seeking
work—has more than tripled since 1965, rising from 3.3 percent to 11.6
percent. And men without a high school degree are more than twice as
likely to be part of this “un-working” class.
These men are withdrawing not only from the labor force but from
other social institutions as well. Two-thirds of them are unmarried. And
Eberstadt found that despite their lack of work obligations, these men are
no more likely to spend time volunteering, participating in religious activi-
ties, or caring for family members than men with full-time employment.

Arthur C. Brooks
That sort of isolation and idleness correlates with severe pathologies

in rural areas where drug abuse and suicide have become far more
common in recent years. In 2015, the Proceedings of the National Academy
of Sciences published an extraordinary paper by the economists Anne
Case and Angus Deaton. They found
Involuntary unemployment that, in contrast to the favorable long-
term trends in life expectancy across
m
saps one’s sense of dignity. the rest of the developed world, the
mortality rate among middle-aged white
Americans without any college education has actually risen since
hi
1999. The main reasons? Since that year, among that population, fatalities
due to chronic liver disease and cirrhosis have increased by 46 per-
ha
cent, fatalities from suicide have risen by 78 percent, and fatalities
due to drug and alcohol poisoning are up by a shocking 323 percent.
Unsurprisingly, those left behind hold a distinctly gloomy view of
the future. According to a survey conducted last year by the Kaiser
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Family Foundation and CNN, fewer than one-quarter of white Ameri-
cans without a college degree expect their children to enjoy a better
standard of living in the future than they themselves have today, and
half of them believe things will be even worse. (In contrast, according
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to the same survey, other historically marginalized communities have

retained a more old-school American sense of optimism: 36 percent
of working-class blacks and 48 percent of working-class Hispanics
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anticipate a better life for their children.)

To be sure, rural and exurban whites who possess few in-demand
skills and little education are hardly the only vulnerable group in the
United States today. But the evidence is undeniable that this commu-
so
nity is suffering an acute dignity crisis. Left behind every bit as much
as the urban poor, millions of working-class whites have languished
while elites have largely ignored them or treated them with contempt.
Ma
Americans from all walks of life voted for Trump. But exit polls
unambiguously showed that a crucial central pillar of his support
came from modern-day Tom Fletchers: Trump beat Hillary Clinton
among white men without a college degree by nearly 50 percentage
points. Tellingly, among counties where Trump outperformed the 2012
GOP candidate Mitt Romney, the margins were greatest in those places
with the highest rates of drug use, alcohol abuse, and suicide.
Many analysts and policy experts saw Trump’s campaign as a series
of sideshows and unserious proposals that, even if implemented,
The Dignity Deficit
would not actually improve things for his working-class supporters.

For example, academic research clearly shows that trade protectionism—
a major theme of Trump’s campaign—is more likely to destroy jobs
than create them. Yet Trump won regardless, because he was the first
major-party nominee in decades who even appeared to care about the
dignity of these working-class voters whose lives are falling apart.
m
WELF✛✝✗ TO WORK
If its goal is to instill dignity, the U.S. government does not need to
hi
find more innovative ways to “help” people; rather, it must find better
ways to make them more necessary. The question for leaders, no matter
where they sit on the political spectrum, must be, Does this policy
ha
make people more or less needed—in their families, their communities,
and the broader economy?
Some may ask whether making people necessary is an appropriate
role for government. The answer is yes: indeed, it represents a cata-
iT
strophic failure of government that millions of Americans depend on
the state instead of creating value for themselves and others. How-
ever, it’s not enough to merely make people feel that they are needed;
Al
they must become more authentically, objectively necessary.
The single most important part of a “neededness agenda” is putting
more people to work. The unemployment rate is relatively low today,
at around 4.7 percent, after peaking at around ten percent in 2010, in
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the wake of the financial crisis. But the unemployment rate can be a
misleading metric, since it does not take into account people who are
no longer even looking for work. A more accurate measure of how
many Americans are working is the labor-force participation rate: the
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percentage of all working-age adults who are currently employed.

That figure hit a peak of just over 67 percent in 2000 and has since
fallen to around 63 percent today. The decline has been particularly
Ma
pronounced among men. In 1954, 98 percent of prime-age American

men (those between the ages of 25 and 54) participated in the labor
force; today, that figure has fallen to 88 percent.
Involuntary unemployment saps one’s sense of dignity. According
to the American Enterprise Institute economist Kevin Hassett, recent
data suggest that a ten percent increase in the jobless rate may raise
the suicide rate among men by almost 1.5 percent. And a study pub-
lished by the sociologist Cristobal Young in 2012 found that receiving
unemployment insurance barely puts a dent in the unhappiness that

Arthur C. Brooks
follows the loss of a job. Feeling superfluous triggers a deep malaise

that welfare benefits do not even come close to mitigating.
Increasing the labor-force participation rate will require significant
tax and regulatory reforms to encourage more firms to locate and expand
their operations in the United States. A logical first step would be
to reform the draconian American approach to taxing corporations.
m
On average, between federal and state
policies, U.S. businesses pay a tax rate
Elites have an ethical of around 39 percent. That is far above
duty to reveal how they
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the worldwide average of 22.5 percent
have achieved and and even more out of alignment with the
sustained success. average rates paid by companies in Asia
ha
(20.1 percent) and Europe (18.9 percent).
One promising, revenue-neutral plan,
put forward by the economists Eric Toder and Alan Viard (the latter of
the American Enterprise Institute), would cut the U.S. rate to 15 percent
iT
(in conjunction with other important structural reforms).
Putting more people to work must also become an explicit aim of the
social safety net. Arguably, the greatest innovation in social policy in
Al
recent history was the Personal Responsibility and Work Opportunity
Reconciliation Act of 1996. The PRWORA, which became synonymous
with the phrase “welfare reform,” made several major changes to fed-
eral policy. It devolved greater flexibility to the states but established
od
new constraints, such as a limit on how long someone could receive

federal welfare benefits and a work requirement for most able-bodied
adults. The PRWORA was denounced at the time as a callous right-wing
scheme. Critics insisted that people were only jobless because there
so
were no opportunities to work and that the new requirements would

force single mothers and vulnerable children into poverty. The opposite
has happened. According to the poverty expert Scott Winship, child
Ma
poverty in single-parent homes has fallen by more than ten percent

since 1996. Overall child poverty now sits at an all-time low.
This demonstrates that commonsense limits on welfare can in-
crease people’s incentives to seek employment without crushing them
or their families. Congress should apply that lesson to other programs.
Housing vouchers and food stamps have weak work requirements that
are rarely enforced. Simply bringing those requirements closer to
the ones created by the PRWORA could help many Americans reenter
the labor force.
The Dignity Deficit
Federal disability insurance, or SSDI, is in even more urgent need of

reform. Many workers and employers have come to view SSDI as just
another form of unemployment insurance. Its enrollment numbers
have swelled by almost 40 percent since 2005, even as research offers
no evidence of an accompanying uptick in actually disabling conditions.
Economists have proposed several interesting ideas for curtailing
m
this surge, which would keep more people in the work force. One
plan would adjust employers’ payroll tax burdens depending on
how frequently their workers enroll in SSDI; another would require
hi
employers to obtain private disability insurance policies, which have
a better track record than SSDI when it comes to keeping employees
in jobs where they are needed.
ha
These policies represent fairly traditional conservative thinking,
and as most conservatives would likely point out, putting them in
place years ago might have mitigated much of the suffering that now
afflicts so many Americans. But conservatives have failed to get their
iT
proposals enacted, in no small part because they have made the wrong
arguments for them. Why reform taxes? “To boost earnings and GDP.”
Why require work for welfare? “To make those lazy welfare queens
Al
work!” Such rhetoric has made good policies sound out of touch and
inhumane. The most compelling reason for tax reform and further
welfare reform is to create more opportunities for people at the
periphery of society.
od
The truth is that not all good economic policy aligns perfectly with
conservative orthodoxy. Take, for example, the challenge of helping
low-wage workers earn enough to support their families. For years,
conservatives have railed against increases in the minimum wage,
so
citing evidence that such increases do not decrease poverty rates and
may well destroy jobs at the bottom of the pay scale. Although well
intentioned, minimum-wage policies are more likely to restrict poor
Ma
Americans’ opportunities to earn a stable living than to enhance

them. So governments at every level should forget about increasing
minimum wages—which is where the usual conservative argument
ends. But they should also experiment with reducing minimum
wages to help people trapped in long-term unemployment, making
these vulnerable people more attractive to hire. Governments would
then supply those workers with direct wage subsidies to increase
their take-home income. For example, Michael Strain of the Ameri-
can Enterprise Institute has proposed that the federal government

Arthur C. Brooks
let employers hire long-term unemployed people at $4 per hour and

then itself transfer an additional $4 per hour to each of these workers.
Another promising idea is the expansion of an existing subsidy, the
Earned Income Tax Credit, a refundable tax credit for low-income
people who work. The EITC prioritizes families but is less gener-
ous to individuals without children; Washington should consider
increasing the credit for the latter. Such pro-work policies would
m
help achieve the noble goal of ensuring that hard work results in
sufficient rewards, without the negative consequences that accompany
minimum-wage hikes.
hi
Creating more opportunities for Americans to work would also require
addressing the broken U.S. immigration system, which has a significant
ha
effect on the labor market. Economists disagree vigorously about the
precise nature of that effect, but it’s reasonable to conclude that illegal
immigration tends to moderately reduce wages in low-skill industries,
whereas the legal immigration of high-skilled individuals has a positive
iT
effect on the overall economy and job creation. Congress and the Trump
administration should therefore prioritize the enforcement of existing
immigration laws, not through mass deportations but by targeting
low-wage employers who hire and exploit illegal immigrants. But they
Al
should also significantly loosen the current quotas that limit the number
of high-skilled immigrants who can enter the United States.
od
SKILLS TO PAY THE BILLS

Making people more necessary will also require improving human
capital through better education. At present, U.S. public schools leave
millions of young people behind, especially the poor. This is not for
so
lack of funding. According to the National Center for Education

Statistics, U.S. government spending per pupil (adjusted for inflation)
has more than doubled since 1970. Yet math and reading scores for
Ma
17-year-olds haven’t budged in four decades, and the achievement gap

between poor and rich students has widened by about a third.
Policies designed to increase competitive pressures on public schools—
vouchers to allow low-income families to send their children to private
schools, the devolution of more latitude to state and local authorities,
and the expansion of charter schools—are the right place to begin.
But these ubiquitous proposals are only the start.
For several generations, American education has moved away from
teaching skills that help people specialize and gain greater job security.
The Dignity Deficit
According to one trade association estimate, nearly 3.5 million manu-

facturing positions will be created over the next decade, but as many
as two million may go unfilled. Another estimate suggests that the
U.S. welding industry alone may face an imminent shortage of nearly
300,000 skilled workers. Much of the blame for such gaps goes to a
widespread “college or bust” mentality that pervades American society
and has resulted in a disconnect between supply and demand in the
m
blue-collar labor market. Employers in several sectors are begging for
more workers, but many young adults don’t have the necessary skills
because they were never encouraged to learn them. There’s a fairly easy
hi
policy fix for this problem. Career- and technical-training programs
take, on average, only two years to complete, and students can attend
ha
them while still enrolled in high school. To get more students to pursue
such options, governments should reallocate financial assistance toward
trade schools and apprenticeship programs.
For that change to work, however, politicians and other influential
iT
figures will need to use moral suasion to attack the cultural fixation on
gaining a four-year degree at any cost. More than 90 percent of high
school seniors aspire to postsecondary education, and about 80 per-
cent try it out within two years of graduating from high school, but
Al
only about 40 percent successfully earn a degree. That leaves too

many young Americans with unfulfilled dreams, college debt, and no
credentials or marketable skills—an outcome that could be avoided if
od
they pursued a more practical direction.

Skills-based training isn’t only for the young. The crisis of dignity
is most acutely felt among middle-aged populations that have been
badly served by decades of lackluster federally funded job-training
so
programs. Instead of relying on top-down directives from Washing-

ton, training programs should be embedded in the private sector and
gently overseen by authorities at the state and local level, where officials
Ma
could entice companies through tax incentives to train and hire workers
who have been out of the labor force for long periods of time.
TWO AMERICAS
A public policy agenda focused on building dignity and neededness
would mark a departure from the status quo, but not an unthinkable
or radical one. But on their own, these policies would not produce the
dramatic change that is necessary. Only a profound cultural shift can
achieve that.

Arthur C. Brooks
Today, the top and the bottom of American society live in separate
worlds. They do not attend school together, socialize together, or
work together. They hardly know each other. As a result, few people
in either of these two Americas even recognize the social trends that
are widening the cultural gulf between them. Some differences are
trivial, such as regional accents or entertainment preferences. Other
differences, however, are more consequential: for example, the birth-
m
rate among unmarried mothers. Whereas less than ten percent of
births to college-educated women occur out of wedlock, the compa-
rable figure for women with only a high school degree or less is more
hi
than 50 percent. Children born out of wedlock are more likely to
grow up without a father, and those brought up in such circum-
ha
stances are less likely to graduate from high school, more likely to
suffer from mental health problems, and less likely to work later in
life. In other words, class-based cultural differences are more than a
matter of curiosity. They are a major factor in producing the misery
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that so many Americans experience.
Of course, the United States does not need a cabinet-level secretary
of middle-class morals. But legislators and officials should try to ensure
that any social policy passes a simple test: Does it weaken family
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integrity or social cohesion—for example, by encouraging single

parenthood, fragmenting communities, erecting barriers to religious
expression, or rewarding idleness?
od
Moral suasion can be even more powerful than policy. Before elites
on the left and the right do battle over policy fixes, they need to ask
themselves, “What am I personally doing to share the secrets of my
success with those outside my social class?” According to the best
so
social science available, those secrets are not refundable tax credits or
auto-shop classes, as important as those things might be. Rather, the
keys to fulfillment are building a stable family life, belonging to a
Ma
strong community, and working hard. Elites have an ethical duty to

reveal how they have achieved and sustained success. Readers can decide
for themselves whether this suggestion reflects hopeless paternalism,
Good Samaritanism, or perhaps both.
MAKE AMERICA DIGNIFIED AGAIN

A few months after the launch of the War on Poverty in 1964, voters
in Kentucky’s Martin County headed to the polls to choose the next
president of the United States. They rewarded the candidate who had
The Dignity Deficit
traveled there, listened to them, and pledged to fight for their dignity.
The deeply conservative community, where Richard Nixon had easily
won in the 1960 presidential contest, made a brief exception: Johnson,
a liberal Democrat, won Martin County with just over 51 percent of
the vote. The outcome of the 2016 election was similar in one impor-
tant respect: the man who swept Martin County with a staggering
89 percent of the vote was the candidate who had promised to return
m
dignity to its people.
But merely backing the winning candidate will not guarantee dignity
for today’s Tom Fletchers. The War on Poverty proved that beyond all
hi
doubt, having led to five decades of debt and welfare dependence, which,
when blended with the Great Recession, helped produce the anger and
ha
disillusionment that drove the current populist surge.
Many elites and officials have reacted to Trump’s victory with a
combination of shock, alarm, and depression. But they should see it as
an opportunity for learning and reform, and they should respond with
iT
a positive policy agenda that is radically pro-work and serious about
developing human capital. And they should learn to treat people at
the periphery of society—from Inez to Detroit to the Rio Grande
Valley—with enough respect to share with them the cultural and moral
Al
norms that can bring happiness and success in life. Doing so would be
politically prudent. But much more important, it would help fulfill
the moral obligation that leadership brings: to maximize the inherent
od
dignity that all Americans are born with, remembering that we all
possess a deep need to be needed.∂
so
Ma

The Prisoner Dilemma

Ending America’s Incarceration Epidemic
m
Holly Harris
hi
D
uring the past decade, a time of intense political polarization
in the United States, criminal justice reform has emerged as
ha
an unlikely unifier. Democrats and Republicans have reached
across the aisle, compelled by a shared recognition that flawed legal
codes and sentencing laws (among other features of the criminal justice
system) have destroyed lives, drained billions of taxpayer dollars, and
iT
failed to provide Americans with the public safety they deserve. This
broad agreement led to the introduction, in 2015 and 2016, of bipartisan
legislation in the U.S. Congress that would have produced comprehensive
reform at the federal level—including changes to mandatory minimum
Al
sentencing laws, which have contributed to the explosion in U.S. incar-

ceration rates by reducing judges’ discretion in sentencing. Supporters
of the legislation represented an extraordinarily wide ideological
od
spectrum: from Speaker of the House Paul Ryan of Wisconsin, former

Speaker Newt Gingrich of Georgia, and the billionaire donor Charles
Koch on the right to President Barack Obama, the American Civil
Liberties Union (ACLU), and the philanthropist George Soros’
so
Open Society Foundations on the left.

But last September, the bill, which had seemed certain to pass in
the Senate, died without ever reaching the floor after opposition
Ma
from a handful of high-profile GOP senators apparently convinced

Senate Majority Leader Mitch McConnell of Kentucky not to
bring it up for a vote. “I think that Senator McConnell understand-
ably did not want to tee up an issue that split our caucus right before
the 2016 election,” remarked Republican Senator John Cornyn of
Texas, one of the bill’s most vocal proponents, in an interview with
The New York Times.
HOLLY HARRIS is Executive Director of the U.S. Justice Action Network. Follow her on
Twitter @holly_harris.
Of course, 2016 was no ordinary election year. During the presidential

campaign, Donald Trump, the eventual GOP nominee, painted a grim
portrait of the United States. “Crime is out of control, and rapidly
getting worse,” he tweeted in July. “When I take the oath of office
next year, I will restore law and order to our country,” he pledged in
his acceptance speech at the Republic National Convention later that
month, to thunderous applause.
m
It is no wonder that Trump’s message on this issue resonated with
many voters: television news reports, newspaper headlines, and social
media feeds have left Americans with
hi
the distinct impression that crime is
on the rise. Media attention tends to
The idea of a new crime
focus on a small number of high-profile wave is a myth. What is
ha
incidents, leading many pundits and real, however, is an
politicians to declare that the country epidemic of incarceration.
is entering a new period of lawlessness
iT
that harks back to the years between
the mid-1980s and the early 1990s, the last time that violent crime rates
rose nationwide. Public opinion reflects the impact of such rhetoric:
a Gallup poll published last April found that 53 percent of Americans
Al
worried “a great deal” about crime—a 15-year high.

Such fears are misplaced. Last September, the FBI released its
annual crime statistics report. It showed that although violent crime
od
increased nationwide by 3.9 percent in 2015, the broader trend has

been in the opposite direction: the violent crime rate in 2014 was
0.7 percent lower than in 2011 and 16.5 percent lower than in 2006.
The long-term trend is even more striking. In 1991, authorities re-
so
ported 758 violent crimes per 100,000 Americans. By 2015, that number
had dropped to 373: a decrease of more than 50 percent. And although
data for 2016 will not be available for another year, it is likely that
Ma
crime rates will continue to hover at or near their current historically

low levels. Early signs already indicate that many cities in which crime
rose during 2015, including Baltimore and New York City, experienced
declines in 2016.
The idea of a new crime wave is a myth. What is real, however, is
an epidemic of incarceration. The numbers are staggering. According
to a report published last year by the Prison Policy Initiative, U.S.
penal authorities “hold more than 2.3 million people in 1,719 state
prisons, 102 federal prisons, 942 juvenile correctional facilities, 3,283

Holly Harris
local jails, and 79 Indian Country jails as well as in military prisons,

immigration detention facilities, civil commitment centers, and prisons
in the U.S. territories.” Over the course of a single year, more than
11 million people will be admitted to an American prison or jail.
It wasn’t always like this. In 1972, for every 100,000 U.S. residents,
161 were incarcerated. By 2015, that rate had more than quadrupled,
with nearly 670 out of every 100,000 Americans behind bars. That is
m
slightly lower than the peak rate, which was reached in 2007–8, but it
is still shockingly high. Among industrialized nations, the United
States has by far the highest rate of incarceration. The conviction and
hi
imprisonment of so many Americans has resulted primarily from
more than three decades of “tough on crime” policies that legislators
ha
began to favor in the early 1980s, persuaded by the deceptively simple
logic of reducing crime by locking up as many offenders as possible.
Defenders of this approach credit it with producing the marked decline
in crime rates that began in the early 1990s. But according to research
iT
published by the urban policy scholar William Spelman and the econo-
mist Steven Levitt, the rise in incarceration has been responsible for
only about 25 percent of the decrease in crime rates. The rest of the
decline, they argue, has stemmed from a complex combination of eco-
Al
nomic and social trends, innovative policing tactics, and other factors.
Meanwhile, the explosion in incarceration has had significantly
harmful effects on U.S. society: dangerously overcrowded prisons,
od
abysmal recidivism rates, and the creation of profound racial, eco-

nomic, and gender disparities in the criminal justice system. And the
price of industrial-scale incarceration in economic terms is massive.
The average annual cost to house, feed, and care for an American
so
inmate now exceeds $30,000. Between 1980 and 2013, federal spend-
ing on prisons rose more than sevenfold, from $970 million, adjusted
for inflation, to nearly $7 billion, adjusted for inflation. The National
Ma
Association of State Budget Officers reports that state general-fund

spending on corrections grew from an inflation-adjusted $10.6 bil-
lion in 1987 to $50.9 billion in 2015, a 380 percent increase. According
to the Hamilton Project at the Brookings Institution, combined state
and federal corrections expenditures more than quadrupled in the last
three decades, from approximately $17 billion (adjusted for inflation)
in 1980 to more than $80 billion in 2010.
Although comprehensive federal reform has proved elusive, law-
makers at the state level—in red, blue, and purple states—have
m
hi
ha
iT
Hard time: inmates in Chino, California, June 2011
managed to achieve significant change. Although their details vary,
a raft of state initiatives have demonstrated that smart reforms can
save money, lower crime rates, and give offenders the chance to rejoin
Al
society as productive, law-abiding citizens. This matters a great

deal, since in 2015, out of the roughly 1.5 million people incarcerated
in prisons in the United States, 1.35 million were housed in state
od
facilities. Nevertheless, federal reform is still imperative. A study

by the U.S. Sentencing Commission (a bipartisan, independent
federal agency) found that in 2005, nearly half of all the federal
offenders who were either released from federal prison after serving
so
a sentence or placed on a term of probation were rearrested within

eight years, either on new charges or for some other violation of
their probation or terms of release. Additionally, the composition
Ma
of the federal inmate population makes it fertile ground for the kinds
of effective treatment programs that reformers have championed as
a way to make prison more rehabilitative. More than half of federal
prisoners are incarcerated for drug offenses, compared with just

16 percent of state prisoners.
Now that the 2016 election is over, Democrats and Republicans
in Congress should once again take up the cause of commonsense
sentencing and recidivism-reduction reforms. If Trump wants to make
the country safer, the best way to do so would be to study successful

Holly Harris
reforms in states from Connecticut to Georgia and advocate trans-

formational changes to the broken federal system.
THE (VERY) BIG HOUSE

The U.S. incarceration system is literally bursting at the seams. One
recent analysis from the Government Accountability Office found
that the spike in prison populations has led to overcrowding in nearly
m
40 percent of federal facilities. States are also struggling. In 2015, the
Bureau of Justice Statistics found that 19 states’ systems had exceeded
their maximum capacities. Illinois’ correctional facilities, for example,
hi
were designed to hold just under 28,000 prisoners but were housing
more than 46,000.
ha
Looking at these numbers, one might conclude that U.S. cities and
towns were overrun by so many dangerous criminals that the country
had run out of places to put them all. But consider who actually fills
all those cells. In 2015, around 93 percent of federal prisoners were
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nonviolent offenders, most of whom were serving time for drug-
related offenses. The situation in many state prison systems is similar;
between 2009 and 2015, 59 percent of the offenders in the custody
of the Louisiana Department of Corrections had been convicted of
Al
nonviolent crimes.
Yet there is little evidence that doing time in U.S. prisons makes
inmates more responsible citizens. An influential 2011 study published
od
by the criminologists Francis Cullen, Cheryl Jonson, and Daniel Nagin

found that regardless of what kind of offense an inmate has committed,
prison does not reduce his or her recidivism any more than alterna-
tives such as drug treatment and mental health counseling. Indeed,
so
the researchers found that prison time might even increase recidivism,
particularly among low-risk offenders.
Spending time behind bars also makes it much harder for someone
Ma
convicted of a crime to live a productive life once released, because

most ex-convicts struggle to find work. According to a 2010 study
conducted by the Pew Charitable Trusts, on average, men who have
been incarcerated work nine fewer weeks per year and take home
40 percent less annual pay than other men. Such struggles contribute
to recidivism, as ex-convicts turn to crime to earn money. According
to the Administrative Office of the U.S. Courts, of the 262,000
people who were released from federal prison between 2002 and 2006,
half of those who could not secure any employment during the period
of their supervised release (usually a period of two to five years) commit-

ted a new crime or violated the terms of their release and were sent
back to prison. In contrast, only seven percent of those who did find
work wound up behind bars again.
The burgeoning U.S. prison population reflects a federal criminal
code that has spiraled out of control. No one—not even the government
itself—has ever been able to specify with any certainty the precise
m
number of federal crimes defined by the 54 sections contained in the
27,000 or so pages of the U.S. Code. In
the 1980s, lawyers at the Department of The long arm of the law
hi
Justice attempted to tabulate the figure reaches into nearly every
“for the express purpose of exposing
aspect of American life.
ha
the idiocy” of the criminal code, as one
of them later put it. The best they were
able to come up with was an educated guess of 3,000 crimes. Today, the
conservative Heritage Foundation estimates that federal laws currently
iT
enumerate nearly 5,000 crimes, a number that grows every year.
Overcriminalization extends beyond the law books, partly because
regulations are often backed by criminal penalties. That is the case
for rules that govern matters as trivial as the sale of grated cheese, the
Al
precise composition of chicken Kiev dishes, and the washing of cars

at the headquarters of the National Institutes of Health. State laws
add tens of thousands more such crimes. Taken together, they push the
od
total number of criminally punishable offenses in the United States

into the hundreds of thousands. The long arm of the law reaches
into nearly every aspect of American life. The legal scholar Harvey
Silverglate has concluded that the typical American commits at least
so
three federal felonies a day, simply by going through his or her normal
routine. If you package and ship certain food in plastic rather than
cardboard containers, you might be in violation of the Lacey Act. If
Ma
you call in sick to work in order to go to a ball game, you might be

breaking laws that prohibit schemes to defraud a company. And if you
get lost while riding a motorbike in the forest and accidentally wander
onto protected land, you might run afoul of the Wilderness Act.
Another problem is that in recent years, by writing laws that lack a
so-called mens rea requirement (named after the Latin term for “guilty
mind”), legislators have made it more likely that people will break
the law without intending to. A study conducted by the Heritage
Foundation and the National Association of Criminal Defense Lawyers

Holly Harris
found that 40 percent of the nonviolent federal crimes established

between 2005 and 2011 had “weak” intent requirements. This can lead
to some appalling injustices, such as the case of Lawrence Lewis. As
the chief engineer at a retirement home for U.S. military veterans in
Washington, D.C., Lewis dealt with a backed-up sewage system by
diverting its flow to a storm drain that he believed linked up to the
city’s sewage-treatment system. Instead, the sewage entered a creek
m
that ultimately joined with the Potomac River. Without intending to,
Lewis had violated the Clean Water Act. He pleaded guilty in 2007
and received probation, a $2,500 fine, and—perhaps worst of all—a
hi
criminal record.
To protect against such outcomes, states such as Michigan and
ha
Ohio have recently established default mens rea standards for all state
laws that do not already include an intent requirement. But reform
advocates and activists disagree about whether to pursue such a step
at the federal level. Proponents back the idea as a way to ward off
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injustices that inevitably occur owing to the expansiveness of the
criminal code. Opponents, on the other hand, fear that implementing
such a standard would make it more difficult to prosecute environ-
mental and financial crimes. The issue is a complicated one that even
Al
splits the Republican leadership in Congress. Bob Goodlatte of

Virginia, chair of the House Judiciary Committee, passed a default
mens rea bill through his committee and made it clear that any reform
od
package that goes to the floor must include it. But Chuck Grassley of
Ohio, chair of the Senate Judiciary Committee, opposes the policy and
omitted it from his own reform package. If any reform legislation is to
reach the president’s desk, it will likely require a compromise on mens
so
rea, such as an agreement to apply any new default standard only to

future legislation or to limit the offenses to which it would apply.
Finally, perhaps the most pernicious problem is the existence of so
Ma
many laws requiring mandatory minimum sentences. During the

1980s and 1990s, at the height of the “war on drugs,” federal and state
lawmakers created a host of new statutes that required that offenders
receive specific prison sentences based on the nature of their crimes.
Although these laws were generally intended to help reduce crime by
creating stronger deterrents, they have often ended up doing far more
harm than good. By restricting judges’ ability to consider all the facts
of a case, they force courts to ignore mitigating evidence and have
resulted in unduly harsh punishments that frequently do not fit the
crimes. By putting more people in prison for more time, they have
also contributed to the explosion in prison populations. As of 2010,
roughly 40 percent of federal inmates were subject to mandatory min-
imum sentences. There is no parole in the federal system, and inmates
are required to serve at least 85 percent of their sentences before they
become eligible for release. For those reasons and others, the federal
prison population has grown from 24,640 in 1980, before Congress
m
enacted the Anti-Drug Abuse Act of 1986, which established the basic
framework for mandatory minimum sentencing, to just under 220,000
in 2013, the year in which the federal prison population peaked.
hi
The case of Weldon Angelos illustrates some of the injustices inher-
ent in system. On two occasions in 2002, the 22-year-old father of
ha
three sold half a pound of marijuana worth about $350 to a confidential
informant in Utah. The informant alleged that Angelos was carrying
a firearm during the second transaction (although that testimony was
disputed). In Angelos’ home, police later found guns, drug parapher-
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nalia, and evidence suggesting that he was involved in drug trafficking
and money laundering. In 2004, Angelos was convicted of 16 charges,
several of which carried mandatory minimums. Even though he was
a first-time, arguably nonviolent offender, he received a staggering
Al
55-year sentence, with a projected release date of 2051. The shocking

unfairness of the sentence was obvious even to Judge Paul Cassell, the
federal judge who handed it down. Cassell, a George W. Bush appointee,
od
delivered a 67-page ruling in which he called the sentence “unjust,

cruel, and even irrational.” But due to federal mandatory minimum
sentencing laws, he had no choice but to apply it. Last May, after
Angelos had served 12 years in prison, a federal court granted him
so
an immediate sentence reduction and released him. In a show of

compassion, the effort to free him was led by none other than the
federal prosecutor who had helped put him away in the first place.
Ma
A MOVEMENT FOR CHANGE

Americans of all political and ideological backgrounds have recently
taken up the cause of criminal justice reform. Unlikely coalitions
have formed to push for change. Conservative and faith-focused
groups such as the Louisiana Family Forum are working alongside
the progressive ACLU. In Ohio, the conservative think tank the Buckeye
Institute is spearheading many reforms also supported by the National
Association for the Advancement of Colored People. Due in large

Holly Harris
part to this unprecedented cooperation, since 2007, at least 31 states

have enacted bipartisan legislation designed to safely reduce prison
populations. Between 2008 and 2013, dozens of states reduced both
their incarceration rates and their crime rates, proving that smart
reforms can make communities safer and also save taxpayers’ money.
In Texas, where in 2007 the legislature adopted alternatives to
incarceration for many low-level, nonviolent offenders, the prison
m
population decreased by 14 percent and crime dropped by 29 percent,
reaching the lowest rate the Lone Star State has enjoyed in 40 years.
Both red and blue states have also reduced their prison populations by
hi
decreasing or eliminating mandatory minimums for crimes stemming
from addiction. Oklahoma, a red state, has increased its focus on pro-
ha
grams that help people with criminal records get the kinds of treatment
and services that can make it easier for them to avoid drugs and crime.
In 2015, Connecticut, a blue state, passed legislation intended to
foster what its proponents called a “Second Chance Society,” allowing
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judges to divert nonviolent offenders into mandatory rehabilitation or
treatment programs. Crime in Connecticut has reached a 50-year low,
and the state’s prison population is the smallest it has been in two
decades. And in the red state of Georgia, the legislature recently
Al
passed its third round of reforms, making the Peach State perhaps the
most reform-minded in the country when it comes to incarceration.
In recent years, under the leadership of Republican Governor Nathan
od
Deal, Georgia has given judges more discretion in sentencing, insti-

tuted innovative programs to help ex-convicts reenter society, reduced
its prison population by more than ten percent, and saved taxpayers
roughly $264 million.
so
Such bold leadership has yet to be matched at the federal level, but
there have been some positive developments there, too. In 2008,
President George W. Bush signed the Second Chance Act, which
Ma
expanded job-training and job-placement services for ex-convicts.

In 2010, Obama signed the Fair Sentencing Act, which eliminated
disparities in sentencing between crimes involving crack and those
involving powder cocaine—differences that had led to some severe racial
inequalities, as black defendants (more often convicted of crack-
related offenses) received far harsher punishments than white defendants
(more often convicted of crimes relating to powder cocaine). And in
2013, in the absence of comprehensive sentencing reform legislation,
Attorney General Eric Holder issued a memo declaring a major change
in Justice Department policy, instructing federal prosecutors to con-

sider charging certain low-level, nonviolent offenders in drug cases
in ways that would avoid mandatory minimum sentences. (The memo,
however, did not carry the force of law or offer the permanence of
reform legislation.)
By 2015, the country seemed poised for a decisive turn, as federal
representatives and senators from both parties introduced a number
m
of bills that, among other things, would have limited or reversed the
growth of the criminal code, restored judges’ discretion in sentencing
for certain offenses, and increased the use of educational and vocational
hi
programs to reduce recidivism. Many of these bills built on policies
that states had successfully pursued over the past decade.
ha
The most comprehensive of these bills was the Sentencing Reform
and Corrections Act. Among its features were reductions in mandatory
minimum sentences for some drug and firearm-possession offenses
(along with the establishment of new mandatory minimums for
iT
providing aid to terrorists and for
some crimes of domestic violence), a Sentencing reform enjoys the
provision that would make the Fair backing of law enforcement
Sentencing Act retroactive, and new
Al
requirements for the Federal Bureau of

officers and agencies all
Prisons to offer more programs to help over the country.
inmates successfully reenter society.
od
The act was approved by the Senate Judiciary Committee in No-

vember 2015 and appeared destined for passage. A poll conducted
in January 2016 by my organization, the U.S. Justice Action Net-
work, found broad support for the bill’s measures among likely vot-
so
ers in battleground and bellwether states such as Florida, Kentucky,

Missouri, Nevada, North Carolina, and Wisconsin. Large majori-
ties of those we surveyed agreed that federal prisons house too many
Ma
nonviolent offenders, and nearly 70 percent agreed that the federal

government spends too much tax money keeping them behind bars.
Nearly 75 percent favored changing the way nonviolent offenders
are sentenced, allowing judges to use their discretion to impose a
range of sentences instead of relying on one-size-fits-all mandatory
minimums.
But over the course of 2016, vocal opposition to the measures
emerged from a handful of Republican senators in the midst of a GOP
primary season and presidential campaign that featured archaic “tough

Holly Harris
on crime” posturing and appeals to restore “law and order.” With

McConnell’s decision to delay bringing the legislation to the floor,
the momentum of recent years appeared to come to a halt.
BETTER LAWS, MORE ORDER

There are still reasons for optimism, however. The presidential cam-
paign is finally over, and the GOP now controls the White House and
m
Congress. Safe in their seats, some of the Republican lawmakers
who initially opposed or failed to take a position on the Sentencing
Reform and Corrections Act might now be willing to take a second
hi
look; the bill’s supporters may also manage to convince Trump to back
it or support similar efforts. One of the president’s greatest challenges
ha
will be to unify an American public suffering from the deep social
divisions that have surfaced or widened in recent years. In addition to
improving an often flawed and unjust system, criminal justice reform
would create a badly needed point of unity and help build trust between
iT
law enforcement agencies and the communities they serve.
Further, this legislation would help realize Trump’s desire to be a
“law and order” president. After all, sentencing and corrections
reforms enjoy the backing of law enforcement officers and agencies all
Al
over the country that would prefer for the justice system to focus on
the most serious threats to society, such as mass shootings and acts
of terrorism, rather than on low-level, nonviolent offenders. Law
od
enforcement support for the legislation has come from the Interna-
tional Association of Chiefs of Police, the Major County Sheriffs’
Association, the National District Attorneys Association, the Associa-
tion of Prosecuting Attorneys, and the Council of Prison Locals, which
so
represents more than 28,000 federal prison guards.

The Trump administration should support sentencing reforms for
low-level offenders that would free up prison beds and focus resources
Ma
on the most dangerous criminals. The cost savings from sentencing

reforms would allow for more vocational training, addiction counseling,
and mental health treatment to help ex-convicts returning to society
find jobs, support their families, and turn away from crime. The new
administration can also work to curb government overreach and put
more people to work by supporting legislation that would remove
statutory and regulatory obstacles to employing former prisoners and
that would seal the records of former prisoners who have stayed crime
free for a significant amount of time. Such steps have been backed by
business groups in some conservative-leaning states, such as Kentucky

and Louisiana, which struggle with a dearth of skilled labor.
Finally, the Trump administration can hold government account-
able by backing federal incentives for states that safely decrease
their prison populations and reconsider ineffective sentencing regimes.
Such an initiative would represent a stark reversal of legislation
signed into law by President Bill Clinton in 1994, which did just
m
the opposite, offering federal dollars to states that imposed harsher
criminal penalties and built more prisons, which contributed to the
explosion of incarceration rates during the past two decades.
hi
Many high-profile Republican leaders in Congress remain committed
to passing comprehensive criminal justice reform legislation, including
ha
senators such as Cornyn, Grassley, Thom Tillis of North Carolina,
and Mike Lee of Utah and representatives such as Ryan, Goodlatte,
Trey Gowdy of South Carolina, and Jason Chaffetz of Utah. If Trump
chooses to support reform or simply defer to congressional leadership
iT
on these issues, these Republicans could enjoy a wide-open field. And
with Obama out of the picture, the bill might become more palatable
to some Republicans who had found it politically difficult to support
reforms backed by a president they opposed on almost every other
Al
issue. On the other hand, Trump’s choice for attorney general, Senator
Jeff Sessions of Alabama, might pose an obstacle: in the past, Sessions
has resisted changes to mandatory minimum sentencing, although
od
during his confirmation hearing in January, he pledged to “follow

any law” that Congress passes. And perhaps the greatest challenge
for advocates will be to ensure that criminal justice reform remains a
top-tier issue during a time when fights over judicial nominations, the
so
Affordable Care Act, and immigration will likely take center stage on
Capitol Hill.
Meanwhile, large-scale reform packages are now moving forward
Ma
in states such as Illinois, Ohio, Pennsylvania, and even McConnell’s

home state of Kentucky. At some point, so many states will have enacted
policies that safely reduce prison populations, save money, and lower
crime and recidivism rates that Congress will have no choice but to
act. There’s no reason for Washington to wait.∂

High Stakes
The Future of U.S. Drug Policy
m
Mark A. R. Kleiman
hi
M
any people enjoy the psychological effects of various chemi-
cals. Any chemical can have unwanted side effects, especially
ha
when used often, in high doses, or in combination. There is
always the risk that a user will lose control over his or her consumption,
using too much or too often.
The likelihood of developing what is now called “substance use dis-
iT
order” varies by person and by drug; except in the case of nicotine, the
victims of this disorder are generally a small minority among users.
Most people unfortunate enough to develop a drug problem recover
Al
without formal intervention, although recovery typically comes after
some struggle and several failed attempts.
But an even smaller minority faces graver problems. Their attempts
to cut back fail because of withdrawal symptoms or persistent cravings;
od
they have become addicted. Addicts, although relatively few in number,

account for most of the damage done by drugs.
Some potentially habit-forming chemicals—including the two
biggest killers, alcohol and tobacco—are legal to use and sell. Others
so
are illegal or restricted to medical use by prescription. This tends to

reduce the number of people who develop drug problems, but it also
worsens the problems of those who do develop them. Making a drug
Ma
illegal creates illicit markets and the need for enforcement, and can
lead to violence.
The United States has a variety of legal and illegal drug markets,
and more than its share of the evils of addiction, illicit trafficking,
and drug-related incarceration. Two of those markets—those for
MARK A. R. KLEIMAN is Professor of Public Policy and Director of the Crime and Justice
Program at New York University’s Marron Institute of Urban Management. He is the author
(with Jonathan Caulkins and Beau Kilmer) of Marijuana Legalization: What Everyone Needs
to Know. He is also Chair of BOTEC Analysis, a consultancy with clients that include the
Washington State Liquor and Cannabis Board. Follow him on Twitter @MarkARKleiman.
High Stakes
m
hi
ha
iT
Must everybody get stoned? At the 420 Fest, Seattle, April 2013
cannabis and opioids—will force themselves on the attention of the
new administration of U.S. President Donald Trump, although for
very different reasons.
Al
Cannabis will be on the agenda because of the conflict between

state policies and increasingly unpopular federal law. Last October, a
Gallup poll found that public support for legalization had reached
od
60 percent, the highest level since Gallup began asking the question
in 1969. In November, four states, including California, voted to allow
cannabis sales without a medical recommendation. More than a fifth
of all Americans now live in the eight states that issue permits to grow
so
and sell cannabis—actions that federal law still defines as felonies.

This situation leads to absurd consequences. Some state-licensed
cannabis businesses pay their state taxes with sacks of cash because
Ma
money-laundering laws discourage banks from letting them have

checking accounts. Respectable law firms file state regulatory applica-
tions to enable their clients to commit federal felonies. Somehow,
federal law needs to adapt to the new realities.
NICK ADAMS / REUT E RS
Opioids—including both illicitly manufactured heroin and fentanyl

compounds and prescription drugs such as oxycodone—are on the
agenda for a much grimmer reason: the United States is facing a massive
epidemic, with the rapidly rising death toll now great enough to contrib-
ute to falling overall life expectancies.

Mark A. R. Kleiman
Current policies toward cannabis and opioids are equally unsus-

tainable; the opioid problem is both more serious and harder to fix.
Better cannabis policies would accommodate the movement toward
cannabis legalization without going all the way to alcohol-style commer-
cial availability; the goal would be to shrink the illicit market while
damping the growth of cannabis use disorder and avoiding an upsurge
in teenage use. Better opioid policies would curb the over-aggressive
m
marketing and prescribing of opioids that helped create the current
problem without going back to the days when patients suffered need-
lessly from untreated or undertreated pain; they would also improve
hi
addiction treatment and make it more widely available, and offer better
therapy to those who suffer from chronic pain.
ha
The new administration has great political flexibility; Trump has not
committed to any specific cannabis or opioid policies. On the cam-
paign trail, he promised to solve the opioid problem by stopping the
flow of smuggled drugs and expanding treatment for opioid addicts.
iT
But the new administration will struggle to reconcile the latter with its
commitment to repeal Obamacare, which greatly increased funding
for drug treatment.
Al
THE RISE OF BIG MARIJUANA?

In 1992, illegal cannabis sales in the United States totaled about
$10 billion; in recent years, that figure has topped $40 billion, making
od
the market for cannabis by far the largest illicit drug market. In 1992,
when polled, of those who said that they had used marijuana in the
past month, only about nine percent reported daily or near-daily use.
Today, that figure is 40 percent, or about eight million people; about
so
half of them report the symptoms of substance use disorder, including

failed attempts to cut back or quit.
Despite steady growth in public support for legalization, federal
Ma
cannabis law has not changed in decades. But there have been dra-
matic developments at the state level. In addition to the eight states
that now permit commercial sales, another 35 allow the sale or use
of cannabis on medical recommendation, which also remains illegal
under federal law.
The changes in state law have put the federal government in a bind.
The states can’t repeal federal laws, but the federal government can’t
enforce those laws without help from the states: 4,000 federal Drug
Enforcement Administration agents cannot replace 500,000 state
High Stakes
and local police. The Justice Department could shut down state-
licensed businesses by obtaining federal injunctions. But unless the
states were willing to arrest growers and retailers, the federal gov-
ernment would simply be replacing taxed and regulated sales with
untaxed and unregulated sales.
Even with the full cooperation of the states, mounting the enforce-
ment effort required to suppress a $40 billion illicit market is hard
m
to imagine, given the overstrained
criminal justice system and concerns
about excessive incarceration. Even the
Cannabis prohibition
hi
current level of half a million arrests has broken down,
for cannabis possession every year strains probably beyond repair.
ha
the relationships between the police and
the communities they serve, especially
in high-crime minority neighborhoods. But that level is too low to
seriously deter people from consuming cannabis: the risk of arrest
iT
per day of use is below one in 5,000.
Under President Barack Obama, federal agencies reluctantly
acquiesced to the state-level cannabis legalization, except when
state-licensed activity involved interstate sales, sales to minors, the
Al
use of weapons, or links to organized crime or terrorism. Senator Jeff

Sessions of Alabama, Trump’s nominee for attorney general, criti-
cized the Obama administration for not enforcing the law; he also
od
asserted that “good people don’t smoke marijuana.” But as attorney

general, Sessions will face the same arithmetic that confronted Eric
Holder, Obama’s attorney general: his department doesn’t have the
manpower to enforce federal laws without help from the states.
so
Cannabis prohibition has broken down, probably beyond repair. But

what has replaced it in the legalizing states is far from ideal. The slogan
behind the new system—“Regulate marijuana like alcohol”—sounds
Ma
sensible only to those who ignore how bad U.S. alcohol policy is. Thanks
in part to low taxes and aggressive marketing, 16 million Americans
suffer from alcohol use disorders, and about 90,000 people die from
alcohol-related causes every year. The alcohol industry depends for most
of its revenue on the minority of people who drink too much, and the
industry’s political clout ensures that public policy doesn’t interfere
much with the business of promoting and profiting from alcohol abuse.
Under the current version of legalization, the marijuana industry is
likely to follow the same playbook: for-profit businesses will strive to

Mark A. R. Kleiman
create more and more of the heavy daily cannabis use that accounts
for 80 percent or more of cannabis sales.
The right set of policies for marijuana would look less like the
current policies on alcohol and more like those on tobacco, where
taxes and regulations are designed to decrease smoking. High taxes,
restrictions on marketing, and relentless antismoking messages have
driven tobacco use down sharply—especially among minors—and it
m
will continue to fall. But current state-level cannabis legalization
features relatively low taxes, loose regulations, and minimal restrictions
on marketing (except to minors). As legal marijuana production
hi
replaces illegal growing, cannabis prices will continue their rapid
decline: adjusting for inflation and potency, today’s cannabis produces
ha
about four times as much intoxication per dollar as it did a quarter
century ago, and legal competition will drive prices lower still.
Lower prices make it easier for casual users to slip into heavy use:
good for the vendors, bad for the users.
iT
A good alternative to full national legalization would be to change
federal law to accommodate state-licensed cannabis sales, but only
if the taxes and regulations that replaced state prohibitions were
strict enough to prevent an acceleration in the rate of heavy use.
Al
The federal government could do this by using “policy waivers,”

like those it now uses to allow state-level experiments with other
policies. But legalizing cannabis without prompting a large increase
od
in heavy use would require very different polices from those adopted
so far in the legalizing states. At a minimum, it would require
replacing taxation based on price—which means that taxes fall with
market prices—with taxation based on potency. More radically, it
so
might entail replacing a for-profit industry with co-ops, nonprofits,

or state-operated retail stores.
For now, the current debate on legalization remains at the level of yes
Ma
or no, with no intermediate options on the table. Proponents of legaliza-

tion see no reason to compromise, while the remaining supporters of
prohibition are holding out to the bitter end, hoping that the steady
growth in support for legalization will somehow miraculously reverse.
It’s not that voters or officials have rejected the ideas about temperate
cannabis policy developed by the tiny group of academic drug policy
analysts; rather, those ideas have never been up for discussion.
If the federal government is ever going to move toward policies
that support moderation, the time is now. Once California and the
High Stakes
other states where marijuana was recently legalized have created multi-
billion-dollar commercial markets, potent political forces will resist
any radical change.
AN AMERICAN EPIDEMIC
The costs of inaction on opioid policy would be much higher. An
estimated two million Americans suffer from opioid abuse disorders,
m
and in 2015, 32,000 died of opioid overdoses—nearly as many as died
in car crashes and more than twice the number killed in homicides.
The abuse of prescription opioids, including hydrocodone (sold as
hi
Vicodin or Lortab) and oxycodone (or Percodan, Percocet, and
Oxycontin), began to grow rapidly in the early 1990s; the annual
ha
count of people reporting first-time nonmedical use of opioids rose
from around 200,000 in 1992 to more than 2.4 million a decade
later, exceeding the comparable figure for cannabis.
For the most part, those drugs were not smuggled into the coun-
iT
try; they were prescribed by physicians and purchased legally from
pharmacies. Encouraged by pharmaceutical manufacturers, physi-
cians began to consider pain “the fifth vital sign” that they should
monitor routinely, along with body temperature, blood pressure,
Al
pulse, and respiration rate, and to overrule concerns that the medical
use of opioids would lead to dependency.
Rising supplies of prescribed opioids helped create a black mar-
od
ket. Patients exchanged and sold unused pills; burglars stole them.
Drug dealers began to recruit people to pose as patients and secure
high-dosage prescriptions from as many physicians as possible.
Drug-seeking patients learned that they could usually get a prescrip-
so
tion just by rating their pain at seven or above on an arbitrary ten-

point scale.
Prescription opioids penetrated populations left largely untouched
Ma
by heroin. Finding heroin required finding a dealer, and dealers

clustered in places where heroin was already common; the prescrip-
tion drugs were available wherever there were physicians and drug-
stores. In some states, such as Florida, lax laws encouraged so-called
pill mills, where doctors prescribed—and sometimes also dispensed—
opioids to anyone willing to pay. The pills were less frightening than
heroin and therefore more appealing. They came in measured doses
in pill bottles, not as white powders of unknown composition in
glassine bags. They were typically swallowed like normal medicines,

Mark A. R. Kleiman
rather than snorted or injected. And they were available at a drugstore,

or from an acquaintance who had a prescription, instead of from a
dealer in a back alley.
But the two markets did not remain separate for long. A person
addicted to prescription opioids whose need for the drug outstrips
his or her budget may trade down to heroin—which costs about a
quarter the dose-equivalent price of prescription opioids on the
m
black market—or to the even cheaper, more potent, and more dan-
gerous synthetics of the fentanyl class. Law enforcement efforts
can have the unwanted side effect of accelerating the transition:
hi
when the police shut down a local pill mill, they rarely identify the
users and help them get treatment, and heroin and fentanyl dealers
ha
are quick to move in to exploit the new business opportunity. On
the other hand, if the police don’t shut down pill mills, they risk
swelling the number of prescription-opioid users who may later
graduate to heroin or fentanyl.
iT
PRESCRIPTION FOR CHANGE
Policymakers and health-care providers have several options to tackle
the opioid crisis. None offers a miracle cure, and each involves either
Al
spending money or imposing and enforcing regulations.

The quickest way to save lives is probably to expand access to
“antagonist” drugs, which can bring overdose victims back from the
od
brink of death. These drugs, such as naloxone (sold as Narcan),

save thousands of lives every year. Naloxone is now available as a
nasal spray, and it requires no medical training on the part of the
person administering it. Changes in policy have made antagonists
so
easier to obtain legally and have put them in the hands of police and
emergency medical technicians, and aggressive public information
campaigns have spread the word that an overdose is reversible if
Ma
first responders (or the opioid user him- or herself, a friend, or a

passerby) can administer an antagonist quickly.
But reversing an overdose is only a start; many users overdose more
than once. Last April, for instance, naloxone was used to revive the
music icon Prince; one week later, he overdosed again, with no one
around this time to administer the antidote.
Getting opioid users into treatment and keeping them there requires
hard work. Substitute drugs, such as methadone and buprenorphine,
can relieve withdrawal symptoms and prevent overdoses, but regulatory
High Stakes
barriers and a lack of trained clinicians have made them hard to obtain.
Methadone clinics, for example, are mostly located in big cities, where
they sprang up in response to the last heroin epidemic; today, however,
most users live in the suburbs, exurbs,
small towns, or rural areas, far from the
nearest clinic. Too much of the criminal
Prescription opioids have
justice system still insists on strict absti- penetrated populations left
m
nence and rejects substitution therapy, largely untouched by heroin.
despite overwhelming scientific evidence
that it works. Many drug courts and
hi
probation and parole agencies, and most prisons and jails, refuse to let
their clients and inmates use substitute drugs. And the substitutes alone
ha
aren’t nearly as effective as substitution accompanied by high-quality
psychosocial treatment, which not every prescriber of the substitutes is
able or willing to provide.
Recent advances in substitution therapy, such as implants that
iT
avoid the need for daily dosing, are promising but expensive, and
expanded access to treatment would have to be paid for. The same
antagonist drugs that reverse overdoses can also be administered in
long-acting formulations; a monthly injection can prevent a user
Al
from getting high even if he or she relapses, greatly reducing the risk
of relapse. But these drugs, like the long-acting substitutes, cost more
than $1,000 per month.
od
Under the Affordable Care Act, drug treatment is one of the “es-
sential health benefits” that public and private insurers are required to
cover. Subsidies for private insurance through the ACA exchanges and
the expansion of Medicaid have provided health coverage, including
so
drug treatment, to about 20 million people who had previously been

without it. Keith Humphreys, a professor of psychiatry at Stanford
University, has called the ACA “the largest expansion of drug treat-
Ma
ment in U.S. history,” and the official estimate is that it has improved
access for 60 million people.
Trump and congressional Republicans have pledged to “repeal
and replace” Obamacare. Last year, Representative Tom Price of
Georgia, Trump’s nominee for secretary of health and human services,
put forward an alternative that removed the requirement for insurers
to cover a specific set of benefits. Since people with drug problems
are expensive to insure, under such a plan, insurers would presumably

Mark A. R. Kleiman
revert to their previous practice of driving them away by offering no

coverage, or inadequate coverage, for drug treatment. In addition,
Price proposed cutting federal funding to subsidize private insur-
ance and reversing the Medicaid expansion. That approach would
make it hard to expand access to high-quality opioid treatment.
While objections to public spending are one barrier to expand-
ing treatment, objections to government regulation—embodied in
m
the Trump campaign’s promise to repeal two old regulations for
every new one adopted—are a barrier to reducing the supply of
diverted prescription pills. The current crisis is partly the result of
hi
inadequate regulation.
Much of the necessary power lies at the state, rather than the federal,
ha
level. State medical boards should be more aggressive in revoking the
licenses of pill-peddling practitioners, instead of leaving the problem
for the police to handle. Databases of opioid prescriptions (called
Prescription Drug Monitoring Programs, or PDMPs), which states are
iT
increasingly using, can help physicians and pharmacists spot pill-seeking
patients, shrinking the supply of pills on the illicit market. But those
databases are full of personal information that needs protecting;
designing databases that are both secure and easy to use is difficult
Al
and expensive. Consulting a state’s PDMP also takes up clinicians’

scarce time, and without regulations or incentives to encourage their
use, PDMPs won’t work.
od
None of these moves would address the availability of heroin and

fentanyl. Indeed, if physicians deny users opioids, or if the price of
illicit prescription opioids begins to rise as the supply falls, demand
for heroin and fentanyl will rise, possibly raising death rates, at least
so
in the short run. In 2014, deaths from overdosing on prescription opioids

fell, but deaths from fentanyl overdoses almost doubled.
As long as there is demand, preventing those cheaper drugs from
Ma
entering the country will be almost impossible. More than a million

cargo containers cross the United States’ borders every month; any one
of them could hold enough heroin to supply the country for that month
or enough fentanyl to supply it for a year. Cracking down on the retail
supply has become much harder since drug dealers started connecting
with customers by cell phone rather than by loitering on street corners.
Policing is expensive: annual police budgets nationwide total more
than $100 billion. Ramping up operations against opioids would re-
quire either spending more money or doing less of something else:
High Stakes
enforcing other drug laws or suppressing predatory crime, for example.

Imprisoning more dealers would require letting other offenders out or
reversing the widely desired decrease in the U.S. prison population,
which now stands at five times its historical level and seven times the
average rate of other rich democracies.
Cracking down on opioid prescribing could also make it much
harder for people in genuine pain to receive relief. Opioids are often
m
not the best way to manage pain, especially chronic, nonterminal pain:
patients often need help changing patterns of work, stress, exercise,
and diet. But too few health-care providers understand these approaches,
hi
and many insurers will not pay for them. Prescribing some pills is
much cheaper than providing physical therapy.
ha
A long-term solution would require better clinical practice and new
drugs on the market both for pain relief and for opioid-dependency
treatment. Buprenorphine, for example, a fairly cheap generic drug
used in substitution therapy, can also relieve pain, and it carries a very
iT
low risk of overdose. But it is currently packaged and marketed
primarily for treating opioid addiction and severe chronic pain; inter-
nists are more likely to prescribe the more dangerous hydrocodone
or oxycodone. A drug company that wanted to make buprenorphine
Al
a routine pain drug would have to put a new formulation through a

long, expensive regulatory process at the Food and Drug Administration,
with no guarantee of regulatory success or sufficient clinical acceptance
od
to recoup its investment.

The same is true of several promising drugs and formulations for
drug treatment: someone has to pay to develop them, and right now
there isn’t enough financial reward to justify the gamble. The federal
so
government could fill that gap, funding not only basic research (as it
currently does) but also the clinical-trial process for drugs with high
social value but limited profit potential.
Ma
Ultimately, the opioid epidemic, like all epidemics, will burn itself
out: as the grim joke shared among medical residents goes, “All bleeding
stops, eventually.” But how many lives the epidemic takes, and how
many it ruins, will depend on choices made today and tomorrow. The
worst of the problem is almost certainly still to come.∂

An Internet Whole
and Free
m
Why Washington Was Right to Give
Up Control
hi
Kal Raustiala
W ha
ho should control the Internet? That was the question the
Obama administration sought to answer last fall, when the
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U.S. Department of Commerce ended its long-standing
contract with the Internet Corporation for Assigned Names and Num-
bers. ICANN is the nonprofit that performs the small but significant
function of governing the Internet’s system of website and domain
Al
names—managing its address book, so to speak. The Internet began as

a project of the U.S. Department of Defense in the 1960s, and since its
creation in the late 1990s, ICANN had remained under U.S. supervision.
od
By bringing the contract to a close, President Barack Obama freed

ICANN to act autonomously.
The Republican response was apoplectic. “Like Jimmy Carter gave
away the Panama Canal, Obama is giving away the Internet,” Senator
so
Ted Cruz of Texas said. John Bolton, a former U.S. ambassador to the
UN, characterized it as “a mistake of such colossal proportions that you
would have thought we’d have a huge debate about it in this country.”
Ma
Stephen Miller, a campaign aide to Donald Trump, lamented, “Internet

freedom will be lost for good, since there will be no way to make it great
again once it is lost.”
Such criticism was not just hyperbolic; it was also fundamentally
misplaced. The Obama administration did not give away the Internet;
what it did was relinquish a vestige of U.S. control over a domain that
had long since expanded beyond the mastery of any one entity. And
KAL RAUSTIALA is Professor of Law and Director of the Burkle Center at the University of
California, Los Angeles.
An Internet Whole and Free
by reducing its oversight, the United States made a savvy decision that
will protect the very features of the Internet nearly everyone cares
about most: its openness, diversity, and fundamental resilience.
What Obama’s critics miss is that as the Internet grew into a truly
global resource, so did pushback against the United States’ relationship
with ICANN. In the view of many governments around the world, it
was well past time not just for the United States to cede its role as
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steward of the address book but also, more broadly, for a multilateral
group of states to assume greater control over the Internet.
That is a dangerous aspiration, however, for it could undo the stability
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and openness that make the Internet so valuable—which is why the
Obama administration sought to prevent it. Rather than weaken U.S.
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influence over the Internet, permanently severing ties with ICANN
has diminished the specter of greater state control, helping protect an
essential forum for global politics, culture, and economics from those
who wish to change its very nature.
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THE DARK AGES OF THE INTERNET
To understand the merits of devolving more power to ICANN, and
what it portends for the future of the digital realm, it’s necessary to
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take a brief dive into the history of the Internet. The world’s largest
and most spectacular communications technology began in the 1960s
as a Defense Department project called the ARPANET. A tiny system
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with only a few nodes, the ARPANET was designed neither for mass use
nor for commercial application. The first message was sent from the
University of California, Los Angeles, to Stanford University in the
fall of 1969. (It was “lo”—the programmers had been typing “login”
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when the system crashed.)

Five decades later, the Internet reaches around the globe and boasts
some 3.5 billion users and counting. Ensuring that all of them can
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reliably find what they are looking for requires a method of stan-
dardizing and organizing Internet Protocol, or IP, addresses—the
labels that allow someone who types into his or her browser, say,
“foreignaffairs.com” to reach the website of Foreign Affairs. Without
allowing this ability, the Internet would be not a comprehensive, globe-
encircling web but an unreliable series of Balkanized, and perhaps
censored, mini-networks. As arcane as it may seem, the responsi-
bility for creating and organizing this address book comes with
substantial political and legal powers, such as the authority to create

Kal Raustiala
new national domain suffixes (think “.tibet,” “.isis,” or “.california”)

and the power to enforce intellectual property rights online.
Well into the 1980s, few people had the ability or the desire to go
online—it was mostly just a small coterie of engineers, academics, and
hobbyists who did—and so the Internet’s address book remained thin. In
fact, the early Internet was so small that one man, the computer scientist
Jon Postel, essentially ran the address book from his office in Los Ange-
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les. But in the early 1990s, the Internet began to change rapidly. Spurred
by the creation of webpages, user-friendly browsers, and dial-up service
providers, the Internet transformed into a mainstream commercial and
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social space. Domain names and websites skyrocketed in value; owner-
ship disputes followed close behind. These disputes centered not only
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on the question of who had the right to use a given domain name but
also, and most important, on who controlled the right to award one.
Because the Internet evolved organically, with little thought that it
would become a major economic and social resource, basic questions
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such as these were surprisingly hard to answer. In 1995, the National
Science Foundation, which had developed its own ARPANET-like net-
work, called a conference to get to the bottom of the matter. Who, if
anyone, really controlled the Internet? Military officials argued that
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because the Defense Department had funded the original ARPANET, it

owned the Internet, too, and, therefore, the address book.
Other officials were skeptical. The modern Internet had many of the
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same technical features as the ARPANET, but in its scale, scope, and social
utility, it bore almost no resemblance. The federal government had never
previously asserted that its initial funding should give it legal ownership
over the Internet. Moreover, it possessed no statutory authority over the
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awarding of domain names. No one disputed that the Internet had been
launched in the United States with federal funding. But the precise
scope of the government’s legal authority was extremely hazy.
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THE BIRTH OF ICANN

By the late 1990s, Internet use was growing explosively, and such un-
certainty had become untenable. The administration of President Bill
Clinton argued that the solution was simple: the Internet should be
run by the private sector. U.S. adversaries such as China, Iran, and
Russia disagreed. Keen to control this novel communications system,
they began to argue that it ought to be governed by them, or at least
by the UN in a multilateral fashion.
One UN agency, the Geneva-based International Telecommuni-

cation Union, which manages the radio frequency spectrum and
establishes standards for communications services, viewed the
Internet as a natural part of its portfolio. Having seen its powers
diminished by the deregulation of the telephone industry, the ITU
was searching for a new raison d’être. It found one in the Internet.
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As a global resource, the ITU contended,
the Internet ought to be governed glob-
ally, not by one country.
The Obama administration
But when, in 1997, the ITU sought did not give away the
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to insert itself into Internet governance Internet.
by hosting a “signing ceremony” for
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an agreement on domain names negotiated among several nongov-
ernmental organizations, it generated substantial pushback from
the United States. Secretary of State Madeleine Albright blasted
the ITU for holding “a global meeting involving an unauthorized
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expenditure of resources and concluding with a quote international
agreement unquote.”
The Clinton administration feared that if the Internet were governed
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by a multilateral body such as the ITU—one that states firmly controlled—
its best features could be lost. It would become more vulnerable to
censorship and control by governments with weak track records on
freedom of expression and little tolerance for political dissent. And it
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might ultimately splinter into a series of regional or national networks

rather than remain one global Internet.
To try to thwart the increasing attempts to assert multilateral con-
trol, in 1998, Clinton set in motion a new policy. Rather than increase
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federal control over the Internet, he sought to devolve authority to the

private sector. And so he instructed the Commerce Department to
issue a call for proposals for a new body to which the U.S. government
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could transfer day-to-day management of the address book.

The result was ICANN. The organization operated under a contract
issued by the Commerce Department, which delegated to the group
the responsibility for managing the domain name system and, more
broadly, required it to keep the Internet running smoothly. ICANN
could not alter existing policies without federal approval; the initial
contract even specified which individuals at ICANN would have
responsibility for various tasks. Over time, the contract granted
ICANN more autonomy, and by the end, the U.S. government’s role

Kal Raustiala
had become largely symbolic. But it never backed down on one con-
straint: ICANN had to remain headquartered in the United States.
ICANN’s governance structure is Byzantine, but it succeeds in
gathering together a strikingly wide range of voices. A nonprofit
incorporated under California law, ICANN is financially self-sufficient,
having earned nearly $200 million in revenue from user fees and
domain name auctions during the last fiscal year alone. It is led by a
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board of directors—currently chaired by Steve Crocker, a computer
scientist who helped develop the ARPANET—and a CEO. Representatives
of various interest groups, such as intellectual property owners and
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noncommercial Internet users, help select and advise members of the
board and, in some cases, develop policies. Separate advisory committees
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also guide policy. The most significant of these is the Governmental
Advisory Committee, which includes state representatives and an array
of international organizations. Further broadening the scope of input,
all of ICANN’s policy proposals are open for public comment.
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By creating ICANN, the Clinton administration chose to embrace
even more firmly the existing, if somewhat ad hoc, tradition of “multi-
stakeholder” Internet governance. Unlike traditional multilateral gov-
ernance, this method is not state-driven; instead, it includes a diverse
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mix of businesses, nongovernmental organizations, and academics

working alongside governments. The White House found the approach
attractive because U.S. technology companies, academics, and nonprofits
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already dominated Internet governance, and it fit with the privatizing

spirit of the times. But above all, the administration recognized that an
Internet run by a wide range of public and private actors was more
likely to be managed well, and more likely to remain open, global, and
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free, than one run simply by governments. Indeed, the Obama admin-
istration’s choice to end what remained of direct U.S. oversight over
ICANN represented the culmination of Clinton’s earlier decision.
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ICANN has its critics, and over time, it has tweaked its bylaws to im-
prove its accountability and transparency and to rein in what some have
seen as an overly powerful and insular board. But much like what Winston
Churchill said about democracy, ICANN’s convoluted approach is prob-
ably the worst form of Internet governance—except for all the others.
THE PERILS OF MULTILATERAL CONTROL

Without question, the Internet has thrived since ICANN’s creation.
The last two decades have witnessed spectacular growth in the digital
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The Internet with Chinese characteristics: at the Wuzhen summit, November 2016
domain. But despite ICANN’s success, the United States’ continuing
special role only intensified the desire of other states to gain more
control. At a 2012 conference facilitated by the ITU in Dubai, for in-
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stance, China, Russia, and other countries sought to negotiate an ac-

cord that would introduce rules requiring parties sending digital
information to pay to reach users and that would generally enhance
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the ability of governments to filter and throttle content. The United

States, along with 54 other countries, including Australia, India, Japan,
and most of Europe, refused to sign it. But it was clear that calls for
multilateral governance were mounting.
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Multilateral control may seem an equitable arrangement, but it would

risk ending the Internet as we know it. Many governments around the
world fear the free flow of information that the Internet fosters, and
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they would have an easier time censoring content on a multilaterally

governed Internet. Invoking sovereignty, they could block services,
disable websites, and thwart political opposition. At the Dubai confer-
ence, for instance, governments proposed innocuous-sounding rules
over spam that the United States and its allies feared would provide
A LY S O N G / R E U T E R S
governments with new ways to control mass social mobilization.

As the campaign for multilateral governance gained momentum, the
Obama administration faced a choice: Should it extend its relationship
with ICANN in an attempt to maintain the United States’ traditional

Kal Raustiala
role as steward of the Internet, and thereby risk encouraging greater

efforts to establish multilateral control? Or should it set the organiza-
tion free? The administration chose the latter option and accelerated
what had been planned since the Clinton years: a handoff to ICANN
that would further embed multistakeholder governance and preserve
the fundamental structure that so many value in the digital domain.
Adding to the sense of urgency, in 2013, Edward Snowden, a former
m
National Security Agency contractor, released classified documents
revealing the NSA’s widespread surveillance of Americans and foreign-
ers, sometimes undertaken with the participation of U.S. technology
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and communications firms. The NSA’s programs had no direct connection
to ICANN, but their disclosure raised hard questions about how much
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foreigners could trust the U.S. government and U.S. technologies,
which dominate the digital domain. In April 2014, Brazil hosted a
conference on Internet governance known as NETmundial, at which
the country’s then president, Dilma Rousseff—who, as Snowden re-
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vealed, had herself been a target of NSA surveillance—gave a forceful
opening address in which she declared a “one-sided, unilateral Inter-
net” untenable and called for all governments to participate in Internet
policy on an equal footing. Many participants shared her sense of
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anger, but their outrage had been softened by a well-timed state-

ment by the U.S. government. Just a month before the meeting, the
Commerce Department had announced that it would soon allow
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ICANN to operate independently.
SETTING THE INTERNET FREE

On October 1, 2016, the Obama administration fulfilled that promise
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when it allowed the Commerce Department contract to expire—

although not without a flurry of last-minute court filings by Republicans
aimed at stopping the transition. For many in the Internet commu-
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nity, the transfer marked the triumph of an Internet whole and free
over one fractured and controlled.
Despite Republican claims to the contrary, the move also repre-
sented a win for the United States. Since ICANN’s inception, U.S.
interests have been well served by the organization’s inclusive approach
to Internet governance. ICANN has many flaws, to be sure, and it does
not always side with the U.S. government. (The George W. Bush
administration fought the creation of an .xxx domain, for example,
but ultimately failed to block it.) That is all to the good: if ICANN
consistently favored U.S. interests, it would lose legitimacy and stop

serving as an effective check on the ambitions of many states, such as
China and Russia, to assert greater state control.
This threat has not abated. In November 2016, China held its own
global summit on Internet governance, which President Xi Jinping
attended. Xi declared that China would continue to promote “equitable
global Internet governance” and repeated his call for “cyber-sovereignty”:
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code for greater government control over all things digital.
This is the alternative vision for the Internet that the Obama
administration sought to neuter. At the end of the day, the Internet
hi
is not virtual but quite physical. It relies on cables, routers, and
servers overseen by a panoply of firms—all of which are subject to the
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jurisdiction of the country in which they reside or operate. Ultimately,
the people who make the machinery of the Internet hum are vulner-
able to state action. They would be all the more so if like-minded
states were able to work in concert to put an end to an open and
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global Internet.
That was one risk of insisting that the U.S. government preserve its
special role. Another was that some kind of multilateral system of
management could arise without U.S. consent. These risks are hard to
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quantify, but they are also hard to dismiss. Far better for the United
States to keep the Internet relatively free and unfettered, and let go of
the steering wheel.
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Indeed, in many respects, the U.S. government’s strategy of embrac-

ing a multistakeholder framework to lock in its basic preferences on
Internet governance contains parallels to U.S. grand strategy after
World War II. U.S. leaders in that era understood that the United States
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could best sustain its newfound superpower status by creating a global

order that provided public goods, reduced some of its policy autonomy,
and offered participation to weaker states. The result was a raft of coop-
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erative international institutions, from the UN to the World Bank.

For the Internet, likewise, devolving power to a diverse group of
actors that share the United States’ basic values furthers U.S. inter-
ests. It does so by ensuring that the existing online order becomes
self-sustaining, kept alive not through U.S. power but through the
shared effort of the unique mix of corporations, technical wizards,
digital evangelists, and government regulators who have run the In-
ternet for over two decades—and who will work to safeguard it for
generations to come.∂

ESSAYS
The result of recent
financial reforms is that
the U.S. economy is less
vulnerable to a modest
crisis but more vulnerable
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to an extreme one.
—Timothy Geithner
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A Conversation With The Opening of the North

Fatou Bensouda 48 Korean Mind
so
Jieun Baek 104

Are We Safe Yet?
Timothy F. Geithner 54 Make America Make Again
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Katherine S. Newman and

BREN DAN MCD E RMI D / REUT E RS
How to Build Middle East Peace Hella Winston 114

Moshe Yaalon 73
Getting Out of the Gulf
Europe After Brexit Charles L. Glaser and
Matthias Matthijs 85 Rosemary A. Kelanic 122
Advice for Young Muslims Congress and War
Omar Saif Ghobash 96 Stephen R. Weissman 132
The International Criminal

Court on Trial
A Conversation With Fatou Bensouda
m
he quest for a permanent global matters, that those who commit these
court to try perpetrators of the crimes should be held to account.
world’s worst crimes began as The ICC is also the first permanent
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early as 1872. But it was only in 2002 institution at the international level
that the International Criminal Court, looking towards the victims. This is the
a standing tribunal now backed by 124 promise of the ICC: that the victims of
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states, finally came into being. Ten years
later, in 2012, Fatou Bensouda was sworn
in as the ICC’s second chief prosecutor. A
atrocity crimes will see that justice is done.
What are the ICC’s greatest

former deputy prosecutor at the court, accomplishments?
Bensouda had also served as minister of First, the existence of the court itself as
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justice in her home country of Gambia an independent and impartial institution
and worked at the International Criminal is an important achievement. But also, just
Tribunal for Rwanda. In November, she recently, [the Malian jihadist Ahmad al-
spoke with Foreign Affairs’ deputy manag- Faqi] al-Mahdi was tried for the destruc-
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ing editor Stuart Reid in New York. tion of cultural property in Timbuktu.
He has pled guilty and been sentenced.
Seven decades after Nuremberg, how This is the first time that any perma-
far has the world really come in terms of nent institution has been able to do this.
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prosecuting crimes against humanity? A lot of work is also being done at the
Very far. After those trials, you’ve seen the court with regard to sexual and gender-
establishment of the ad hoc tribunals of based crimes. In most of the cases that
Rwanda, the former Yugoslavia, Sierra are before the ICC judges now, we have
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Leone, and East Timor to try atrocity brought charges for sexual and gender-
crimes. But one of humanity’s proudest based crimes. My office wanted to lend
moments should be the creation of the ICC. emphasis to this very serious crime. In
It is not an ad hoc tribunal. It’s a perma- the coming weeks or so, I’m going to
MICHAEL KOO REN / REUT E RS
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nent international judicial institution with launch another policy, on children

the mandate to try war crimes, crimes affected by armed conflict. All atrocity
against humanity, and genocide. This really crimes are serious. But for some, we need
shows the resolve of the international to show that wherever they occur and we
community to say that accountability have jurisdiction, we will highlight them.
Also, just recently, Jean-Pierre
This interview has been edited and condensed. Bemba, a former vice president of the
The International Criminal Court on Trial
Democratic Republic of Congo, has been investigate very complex situations. It

charged as a military commander for the has even sometimes investigated ongoing
crimes committed by his troops [in the conflicts, which requires us to take extra
Central African Republic in 2002–3]. precautions and ensure that the investiga-
The judges found him guilty. It sends a tion is done in a fair, impartial, and effec-
very strong message that commanders tive way. I don’t agree that the court is an
can be held liable for failing to give the expensive venture. We’re just investing
right orders to their troops and allowing as much resources as are needed to do
these crimes to happen, even if they are the work we have been set up to do.
not [on the battlefield] themselves.
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The ICC has indicted 32 people for
What are the biggest disappointments? genocide, crimes against humanity, or war
First, the court is still in its infancy. But crimes but secured just four convictions.
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perhaps one of the things that I regret Why the low success rate?
about the court—and I don’t even know I would not call it low. Given the length
whether I want to call it a regret—is the of time the court has existed, the results it
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various challenges that it is being subjected
to with respect to cooperation, witness
interference, and attempts to politicize the
has produced so far are fair. We have had
our setbacks. We have had our challenges
in prosecuting these cases. Consider the
court. Also, there is the issue of not having very complex nature of the investigations.
the resources we need. My office, which is Even proceedings at trial take time. Still,
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the engine of the court, has had to stay we have been investing a lot in how to
some cases and deprioritize some cases. make the proceedings more efficient.
Côte d’Ivoire is an example I like to Sometimes, it’s completely beyond our
give. I have wanted to start the case on the control. For instance, in the Kenya cases
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other side of the investigation. [In investi- [concerning post-election violence in

gating the post-election violence that the 2007–8], there are issues of interfering
country experienced in 2010–11, the ICC with witnesses, issues of cooperation,
has brought charges against the former issues of obstructionism, in particular.
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president, Laurent Gbagbo, and his allies

but not against supporters of the incum- How serious a problem is witness tam-
bent president, Alassane Ouattara.] But pering, and what can be done about it?
mainly because of resources, I have had to In almost all the cases that we’re han-
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put it on the back burner. We’ve of course dling now, we see this phenomenon
started our investigation into the other rearing its ugly head. We have been
side, but it could have happened earlier. taking steps to ensure that it doesn’t
happen. We have been able to secure
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Some have put the amount of money the conviction of five people in the
that the court has spent since its cre- Bemba case for witness tampering.
ation at $1 billion. Why is it so expen- In the Kenya cases, three people have
sive? And is there anything that can be already been indicted for interfering with
done to make it more efficient? witnesses. Arrest warrants have been
When investing in justice, nothing is too issued against them. But Kenya, which
expensive. The court has been set up to has the obligation to surrender them, is
not doing that. In the Kenya situation, that the ICC should have a police force. But
what we have seen was really unprec- even if we created an international force,
edented. The level of witness tampering it could not just go into any sovereign
and obstructing the court has resulted in state and say, “I’m arresting this person.”
either having to withdraw the case, as I
did in the Kenyatta case [against Kenya’s Syria is one of the world’s most tragic
president, Uhuru Kenyatta], or one of human rights disasters at the moment,
the judges declaring a mistrial, as in the but the ICC seems unable to touch it
Ruto case [against Kenya’s deputy because the permanent members of the
president, William Ruto]. UN Security Council will never agree to
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We are doing what we can. We have refer the case to the court. Is there
been able to bring these [witness- anything the ICC can do in Syria?
tampering] charges. But for that, you need To understand the jurisdiction of the
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extra resources, because the resources ICC, know that we investigate when
we have are really to do our core these crimes happen on the territory of
business: investigate and prosecute. a state party or are committed by a
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One criticism of the ICC is that it relies
heavily on the cooperation of states. As a
national of a state party. In the case of
Syria, we don’t have territorial jurisdic-
tion because Syria is not a state party.
result, incumbent politicians who commit What I have been looking at closely
crimes have little chance of facing justice are nationals of states parties who are
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if they stay in power, creating a sense of among the ranks of ISIS [also called the
victor’s justice and giving incentives for Islamic State] and are involved in the
leaders to cling to power. Is this a legiti- commission of these crimes. I have been
mate problem? Can it be overcome? requesting more information from states
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States have decided to create this inde- whose nationals are part of ISIS. I’m
pendent institution to stand for account- asking whether they are investigating,
ability and to push back against impunity whether they are prosecuting, and what
for atrocity crimes. It is a voluntary act. information can be shared with us so we
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This institution is a court. But it’s also a can take the next steps. This is pretty
system that we have decided to create. much the only way in which the ICC can
The institution does the judicial work, look at Syria. What we have seen so far,
but each of the states that have ratified though, is that among the top echelons
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the Rome Statute has given an obligation of ISIS, it’s nationals of Syria or Iraq,
to cooperate with the court. and both states are not parties to the
This institution was created without Rome Statute.
an army or police. But the army and the
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police of all the states parties to the Rome Because a UN Security Council referral
Statute have the obligation to assist the requires all five permanent members to
court. This demonstrates the resolve of the vote in favor, doesn’t that mean that the
international community, because giving court will inevitably focus on smaller
this institution the mandate to investigate cases and countries, undermining both
and prosecute is almost like giving up part its scope and its legitimacy?
of your sovereignty. Some people argue First, under the Rome Statute, there is

The International Criminal Court on Trial
a provision that the UN Security Council the ICC do more to seek out non-African
can refer cases to the ICC, but a referral cases? Are you worried about the
does not automatically mean that the ICC perception of an Africa bias among
will take the case. In all situations where African people and governments?
we’re intervening, I do an independent This accusation is not backed by the
assessment as prosecutor of whether or relevant facts. Much time and money has
not to move forward with the case. And been spent to have that rhetoric all over
the same criteria that we apply to those that the ICC is only concentrated on Africa.
situations also apply to a referral from This is not correct. We have been conduct-
the UN Security Council. ing preliminary examinations outside of
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Recall the reason why the UN Security Africa for some time now, in Afghanistan,
Council has this power under the Rome in Colombia, in Palestine, in Ukraine.
Statute. I believe that the wise negotiators You also have to look at how the cases
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of the Rome Statute wanted to allow in Africa got to the ICC. In most cases,
referrals in situations where a particular it is African states that have sought out
state is not a party to the Rome Statute the ICC to get it to investigate atrocity
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and these crimes are taking place. Even
though a state is not a party, the UN
Security Council can, in the interest of
crimes that they claim they are not able
to. It has not been the prosecutor using
proprio motu powers [to investigate on
peace and justice under Chapter VII of the his or her own volition]. In fact, last
UN Charter, refer this situation to the ICC. month, we had a referral from Gabon.
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With respect to [the fact that a referral So the narrative that the ICC is biased
from the UN Security Council requires the against Africa is not matched by what is
support of the five permanent members], actually happening on the ground.
the ICC’s net can be cast much wider than Unfortunately, this narrative is gaining
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just among its state party members. In traction because some people are very
instances where crimes have been commit- much interested in it, and they have spent
ted on the territory of a state party by time and money to ensure that it looks
nationals of non-ICC-member states, we do like the ICC is only going after African
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have jurisdiction. A case in point is Georgia leaders. But I bring it back to the victims.
[where the ICC has opened investigations In the situations where we are investigat-
into the 2008 war with Russia, which has ing and prosecuting in Africa, the victims
withdrawn its signature from the Rome are African. They deserve justice.
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Statute]. I’ve already said that we’re going

to look at the conduct of all the parties who One of the people making arguments
were involved in that conflict. Likewise, in about the ICC’s supposed Africa bias
Afghanistan, we can look at the conduct of is Yahya Jammeh, the authoritarian
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the Taliban and the national government, president of Gambia. You served as
but also of the international forces. So this his justice minister. Do you regret your
net can be cast much wider than just among time in his government?
states that have ratified the Rome Statute. Not at all. It was a call to duty from my
state, and I rose to the challenge. I don’t
So far, however, the ICC has cast its net have any regrets that I served my people
exclusively in Africa. Can and should first and foremost. My record is clear. I
tried to give it my best, to contribute to saying they’re renewing their commit-

the rule of law and justice in my coun- ment to the ICC. It demonstrates that
try, and I think I did. there are still many countries on the
continent that are committed to the
But his government is highly repressive, rule of law.
and by the time you served, he had
already taken power in an illegal coup. Do you think there’s anything that you or
Did none of that give you pause? the court can do to stop the exodus?
Well, look, I remember that when Presi- Definitely. I believe we need to talk to
dent Jammeh took power, the military one another, have a dialogue. But we
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government was allowed after two years also have to realize that the court is not
to become a civilian government and go all about the prosecutor. It is states that
through elections. We elected a consti- have created this institution, and it is
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tutional government, and I served in states that should step up to ensure that
that government. I also served in the the court is supported.
previous government—maybe not in
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that high a position, but I served.
Along with Gambia, Burundi and South

How important is it that the United States
ratify the Rome Statute and join the ICC?
Do you think that will ever happen?
Africa have announced their intention to I think that every state should be part
withdraw from the court. Why are they of the ICC. I believe that we should
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doing this? Do you fear more defections? increasingly aim for universality. States
When I speak about this, I like to talk that are already in should try to bring
about it as an African—as an African who, more and more states to join the Rome
like many other Africans, cares about Statute, because this idea of a double
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justice and accountability. Something standard would be much reduced if the

like this is setting the continent back. ICC had more members. Notwithstand-
We have seen the role that the ing, I believe the court is working and
African continent played in establishing will continue to work.
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the ICC. African states were also the first

to refer cases to the ICC. Those acts were What’s your hope for what the court will
demonstrations of leadership by Africa. look like, say, 15 years from now?
At this moment, when the continent is I envisage that the ICC will have demon-
so
so plagued with conflicts and wars, we strated a strong, independent, and impar-
should be looking for ways to strengthen tial court system. I envisage an institution
our stance on the rule of law, on justice, that is very well respected in all corners of
on accountability. To not do anything, the globe. I envisage an institution that
Ma
that is taking away from that strong the victims can look at with hope, as an
position that Africa has always had. institution that will stand by us, that will
Despite these withdrawals, I con- ensure that we have justice and account-
tinue to maintain that we are receiving ability when we suffer.∂
a lot of support and commitment from
African states. I really welcome the
statements from some African leaders

Are We Safe Yet?

How to Manage Financial Crises
Timothy F. Geithner
m
T
he 2008 financial crisis was the most damaging economic event
since the Great Depression, for both the United States
hi
and much of the global economy. Although the U.S. economy
emerged from it more quickly and in better shape than many other
economies did, the crisis imposed tragically high costs and left deep
ha
economic and political scars. To help prevent another crisis, Congress
passed the Dodd-Frank Wall Street Reform and Consumer Protection
Act in 2010. These and other reforms have added a considerable margin
iT
of safety to the U.S. financial system.
But how safe is that system today? The answer is important, because
although the United States may not face a major crisis anytime soon, it
is certain to at some point. The choices policymakers make in advance
Al
of that event and in the moment will have a major impact in determining
the magnitude of the economic damage. Indeed, the U.S. financial
system’s vulnerability to a crisis depends not only on the strength of the
od
regulation designed to prevent one but also on how much freedom

policymakers have to respond when prevention fails. It’s just as in med-
icine, where the public’s health depends not just on immunizations, nu-
trition, and checkups but also on hospitals, surgery, and emergency care.
so
Determining whether the system is now safer requires looking at

three different dimensions of the question. The first involves trying to
assess the underlying fragility of the system today. How much dry tinder,
so to speak, is there in terms of short-term liabilities, and how much
Ma
privately owned capital is available to absorb losses in an economic down-

turn? The second involves the ability to limit the intensity of a crisis.
How much fiscal capacity does the government have to cushion a fall
TIMOTHY F. GEITHNER is President of Warburg Pincus and was U.S. Treasury Secretary
from 2009 to 2013. This essay is adapted from his Per Jacobsson Lecture, which he delivered
at the 2016 Annual Meetings of the International Monetary Fund and the World Bank Group.
Are We Safe Yet?
in private demand, and how much monetary scope does the Federal
Reserve have to lower interest rates? The third dimension has to do with
the other powers necessary to prevent a financial crisis from spiraling
out of control. What emergency firefighting tools can policymakers use
in the midst of a crisis?
Taken together, these three dimensions of safety offer reason to worry.
Although regulations have reined in banks’ risk-taking behavior, they
can go only so far. Fiscal and monetary policy are more constrained
than they have been for decades. And the government enjoys even less
m
emergency authority than it did before the crisis. The result is that the
U.S. economy is less vulnerable to a modest crisis but more vulnerable
to an extreme one.
hi
INHERENTLY FRAGILE
It’s important to understand why financial systems are so vulnerable
ha
to crises. First, and most important, they are inherently prone to
panics and runs. This results from a core function of banks called
“maturity transformation,” in which they accept deposits and lend
iT
those deposits out for long periods of time to finance homes and busi-
nesses. Maturity transformation is a valuable feature of the financial
system, but it’s also what makes it vulnerable to runs.
The danger is particularly acute in periods that see both large in-
Al
creases in wealth and optimistic beliefs about the economy—that the

economy is safe, that risky assets will rise in value, that liquidity is
freely available, and so on. This dynamic fuels demand for money-like
od
short-term liabilities, such as bank deposits, and lowers the perceived

risk of financing long-dated illiquid assets, such as bank loans. These
short-term liabilities are dangerous because they are runnable, mean-
ing that creditors can demand their money back at a moment’s notice.
so
And they account for trillions of dollars in modern economies. Runs

present a sadly familiar set of perils when they happen to regulated
and protected banks. They create more complicated perils when they
happen to other types of financial institutions that are less regulated,
Ma
as was the case in the United States before the 2008 crisis.
The second thing to understand is that systemic financial shocks,
ones involving panics and runs, are fundamentally more dangerous
than other types of financial shocks, such as the one-off failure of a
single large bank, a stock market crash that is not accompanied by a
broader fall in the value of risky assets, or the financial losses that

Timothy F. Geithner
stem from a modest recession. Panics and runs are dangerous not so
much because of the damage they do to individual financial institutions
but because of their capacity to lead to a vicious spiral of fire sales and
a contraction in credit that threatens the stability of the entire financial
system and can push the economy into recession. The policies required
to break panics and runs are fundamentally different from the ones
that are appropriate in response to a typical idiosyncratic financial
shock or a modest recession.
Panics, although scary and dangerous, don’t inevitably end in economic
m
crashes. Much of what determines the severity of the outcome is the
quality of the policy choices made in the moment. When expected
losses to the value of assets appear very
hi
large, there will be uncertainty about
Financial systems are which party will bear those losses. This
inherently prone to panics uncertainty can lead to a general reduc-
ha
and runs. tion in funding for a broad range of
financial institutions. That, in turn, can
force those institutions to liquidate assets at fire-sale prices, which, if
iT
used to measure the riskiness of assets across the system, will make large
parts of the financial system appear to be insolvent. This dynamic is
not self-correcting. Left unchecked, it will simply accelerate.
Nor are the dynamics of contagion fully knowable in advance. To
Al
paraphrase Ernest Hemingway, runs happen gradually, then suddenly.

Their characteristics and severity depend on how things evolve in the
event and on what policymakers do in response. What matters most
od
are not the first-round effects of direct losses from the defaults of the
weakest firms or even the linkages among those firms. Rather, what
drives contagion is an increase in the perceived risk that a large number
of firms could fail. Although the degree of exposure varies across
so
financial institutions, all are exposed to the risk of runs and to the
perils of losses in a deep recession. This is why fiscal and monetary
policy, and actions by the government to provide or guarantee funding,
are so important. Once a run starts and the risk of financial collapse
Ma
grows, the challenge is to break the panic by reducing the incentives

for individuals to run from financial institutions and for financial
institutions to run from one another. Otherwise, a broader collapse in
the financial system becomes almost inevitable.
The third thing worth knowing about crises is that there is no way to
protect the economy from a failing financial system without deploying
Are We Safe Yet?
m
hi
ha
Geithner and Obama with financial leaders at the White House, December 2009
iT
public resources—in other words, without temporarily substituting
sovereign credit for private credit. No financial institution can insure
itself against the equivalent of a 100-year flood: the collapse of the
financial system or a great depression. When the system is in the midst
Al
of a panic, no private source of funding can match the cost or the scale
of what the state can provide.
Policymakers can choose to let the panic play out, the financial sys-
od
tem collapse, and the economy fall into depression. But if they want
to avoid that outcome, they must recognize that only the government
has the ability to offset the drop in private demand and preserve the
functioning of the credit system necessary for economic recovery.
so
Policymakers can wish this were not so. They can reduce the proba-
bility that a rescue is ultimately necessary. But they cannot eliminate
the inherent fragility of the financial system, and they cannot escape the
reality that its survival requires extraordinary intervention on the part
Ma
L A R RY D O W N I N G / R E U T E R S
of the state.
The inevitability of government intervention, of course, creates a
moral hazard, whereby firms may take excessive risks, knowing that
the government will bail them out if anything goes wrong. That’s
why regulations exist to constrain risk. And it’s why it is so hard to
find a balance between establishing a credible backstop in case of

Timothy F. Geithner
emergency and avoiding the expectation that investors will be fully

protected against loss.
The inherent fragility of the system does not mean that it cannot
be made safer. A lot can be done, has been done, and can still be
done. But in designing reforms, it’s important to choose the objective
carefully. The goal should not be to eliminate the risk of the failure
of individual banks or large institutions. Failure has its merits. It’s
important for creating the right incentives, spurring innovation, and
promoting efficiency. Rather, policymakers should strive to enhance
m
the resilience of the broader financial system. Even when the system
is under extreme stress, it needs to remain able to perform its basic
functions of providing payment, clearing, and settlement services;
hi
offering credit; and transferring risk.
In other words, policymakers should try to build a system in which
an idiosyncratic event does not turn into a systemic crisis. This means
ha
seeking not only to reduce the probability of financial distress but
also to increase the probability that the real economy remains insu-
lated from it. Against that standard, how resilient is the U.S. financial
iT
system today?
THE DRY TINDER

There is no way to accurately measure the fragility of the financial sys-
Al
tem at any given time, but the history of financial crises suggests that the
risks are greatest after long periods of optimism in which credit has
grown rapidly relative to income and banks have taken on more risk.
od
Given the role of manias in sowing the seeds of crises, it is worth starting
with the reality that today, the memory of the global financial crisis still
looms large. In a way, this should be reassuring. A world worried about
the approaching abyss is safer than a more sanguine one, such as in 2006.
so
A combination of scars from the crisis and new regulation has dimin-
ished the threat of runnable liabilities, reducing the amount of dry
tinder in the U.S. financial system. These days, a greater share of
banks’ assets is funded by deposits, which the federal government
Ma
insures, thus reassuring people that they won’t lose their savings if
their bank collapses, and a smaller share is funded by unsecured debt:
deposits now represent 86 percent of U.S. banks’ total liabilities, up
from 72 percent in 2008, and the Federal Reserve estimates that run-
nable liabilities in the United States have fallen by roughly 20 percent
of GDP since 2008.
Are We Safe Yet?
Moreover, the duration of the liabilities that banks hold is longer.

When it comes to repurchase agreements, or repos—whereby dealers
sell government securities to investors and agree to buy them back
after a short time—the size of the market is smaller, the collateral
much safer, and the amount financed overnight much smaller. Whole
classes of risky funding vehicles were washed out in the crisis and
have not reemerged.
Further reducing the risk of catastrophe, the postcrisis reforms have
produced much stricter requirements for how much capital banks must
m
have on hand and more conservative approaches to measuring the risk
of a bank’s assets. Capital requirements
in the United States have risen to five to
Financial crises cannot be
hi
ten times their amount before the crisis.
The quality of the capital that banks forecast. They happen
hold, now predominantly common stock, because of inevitable
ha
has improved greatly in terms of its abil- failures of imagination and
ity to absorb losses. Under a new Federal
Reserve rule, the major global banks face memory.
iT
additional capital requirements, in effect
forcing them to themselves take on more of the greater risk they pose to
the rest of the system in the event of their failure. As a result of such
requirements, U.S. banks have raised roughly $500 billion in common
Al
stock since the end of 2008, bringing the total amount of equity capital
in the banking system to about $1.7 trillion. Today, the major U.S. banks
could probably sustain losses greater than those experienced in the Great
od
Depression and still have enough capital to operate.

Perhaps as important as the fact that capital requirements have grown
in size is that they now apply more widely. Before the crisis, limits on
leverage applied only to banks and, somewhat less effectively, their
so
affiliates, which together accounted for about 40 percent of credit to

the household and corporate sectors. No effective limits on leverage
applied to the rest of the financial system, including investment banks;
government-sponsored entities, such as Fannie Mae and Freddie Mac;
Ma
money-market funds; and other financial institutions, such as the

insurance corporation AIG.
Today, the largest investment banks are regulated as bank holding
companies, subjecting entire institutions to higher capital requirements.
Fewer financial firms fall outside that regulatory framework. The
government now fully backstops the government-sponsored entities.

Timothy F. Geithner
Money-market funds are subject to more exacting regulatory require-

ments. And major insurance companies that sold protection to the
financial system as a whole and required bailouts in the crisis are
smaller now and subject to some form of supervision.
Finally, the government enjoys new powers that can help it contain
sources of systemic risk that arise outside of banks. These include the
authority to extend regulation to nonbank financial institutions by
designating them as systemically important, to regulate additional
classes of financial activities that might give rise to systemic risk, and to
m
impose requirements that reduce risk in derivatives, repos, and securi-
ties lending. Together, these stronger shock absorbers have enhanced
the ability of major financial institutions to absorb losses, thus reducing
hi
the risk of contagious runs.
THE LIMITS OF REGULATION ha

There are, however, less reassuring features of the financial world
today. Although the new capital requirements seem large relative
to the losses experienced in the 2008 crisis, those losses were lim-
iT
ited by the scale of the fiscal and monetary response and by the
government’s success in breaking the panic relatively early. Had
policymakers not had as much room to maneuver, the losses would
have been much higher.
Al
Over time, the new capital requirements and other limitations on

banks have caused some financial transactions to shift away from
banks and toward less regulated institutions. So far, this process is not
od
that advanced in the United States. But it is inevitable that capital

requirements, when they exceed what the market considers a prudent
level, will push more risk outside the regulated financial system. Banks
are dangerous, of course, but they are easier to stabilize in a crisis, so
so
shrinking the market share of banks through regulation can leave the
financial system more fragile in an extreme event. It’s worth remem-
bering how much financial activity migrated away from banks in the
United States in the decades before the 2008 crisis, even with much
Ma
lower capital requirements in place then. In periods of relative eco-

nomic calm, even small differences between the amount of capital
that regulations require and the amount that the market believes is
necessary can incentivize financial service providers to move into less
regulated sectors. Regulation can adapt, but it will always be behind
the curve.
Are We Safe Yet?
History also offers little reassurance about the value of capital

requirements alone as protection against panics. In the five or so
decades before the Great Depression, U.S. banks possessed much
higher levels of capital, and yet the United States still experienced
an appalling number of enormously damaging banking panics. These
predated the modern Federal Reserve and deposit insurance, but
they still serve as a reminder that creditors to banks can run, even
when capital cushions seem large.
One final note of caution: there is no reason to be more confident
m
about policymakers’ ability to defuse financial booms or head off finan-
cial shocks preemptively. Central banks and international financial
institutions have made huge investments in producing sophisticated
hi
charts aimed at identifying early warning indicators of systemic
risks. But financial crises cannot be forecast. They happen because
of inevitable failures of imagination and memory. Financial reforms
ha
cannot protect against every conceivable bad event. So it is important
to recognize that the overall safety of the financial system—and the
health of the broader economy—hinges on more than just the strength
iT
of financial regulation.
THE SHRINKING SPACE FOR POLICY

A country’s ability to limit the intensity of a financial crisis also
Al
depends on how much room for maneuver its fiscal- and monetary-
policy makers enjoy. Today, that room has shrunk in most of the
major developed economies. Public debt as a share of GDP has
od
soared. The overnight rates at which central banks lend money have
fallen close to zero, and in some countries, they have dipped into
the negative. The costs of long-term government borrowing have also
fallen to record lows. And credit spreads—the difference between
so
government and corporate borrowing costs—have narrowed. In terms

of their ability to raise spending and lower interest rates, governments
have less ammunition.
As far as monetary policy goes, the experience with negative rates
Ma
so far is not that promising. Many central banks fear that negative
rates have hurt rather than helped the economy, and even those that
believe they have helped worry that rates cannot fall much further
before they start to backfire. On the fiscal side, almost all the major
economies have less room for stimulus than before the crisis. And
where there is still room, the political constraints on using it may

Timothy F. Geithner
prove hard to overcome. The only remaining untried tactic is the more
coordinated deployment of expansionary fiscal and monetary policy.
Perhaps that will prove possible, and if so, perhaps the impact will be
powerful. But it’s hard to say.
The Federal Reserve, for its part, still has more room for maneuver
in terms of monetary policy than other major central banks do. It
could push long-term interest rates lower in a crisis. But even in mild
recessions, the Fed has typically had to lower borrowing rates by three
to five percentage points, and it does not have that room today.
m
The United States also has less fiscal capacity than it did before the
crisis. From 2007 to the end of 2009, the debt-to-GDP ratio increased
from roughly 35 percent to 75 percent, where it remains today. Most
hi
of this increase owed to lower tax rev-
enues caused by the recession and to
Recent reforms in the the jump in spending that occurred
United States have
substantially weakened
ha as automatic fiscal stabilizers, such as
unemployment benefits, took effect.
policymakers’ emergency These costs would have soared even
iT
higher in the absence of the stimulus
authorities. package and the financial rescue. In fact,
rather than costing the five to ten per-
cent of GDP that many expected, the rescue earned a modest positive
Al
financial return for the public. The stimulus was designed to be

temporary and was quickly wound down. The federal deficit fell
from its peak of ten percent of GDP in 2009 to around three percent,
od
where it has stayed since 2014. Still, the debt-to-GDP ratio remains
close to its postcrisis peak, and absent changes in policy, it will rise
in the coming years.
The bottom line is that even though policymakers still have some
so
remaining room to maneuver, they have much less than they did on
the eve of previous economic downturns. There is no reassuring prec-
edent for the present diminished state of the U.S. fiscal and monetary
arsenal. The Fed has no experience navigating through a substantial
Ma
shock to private demand without the ability to lower interest rates

substantially and quickly. Most of the burden in responding to a crisis
would therefore fall on fiscal policy, where the political constraints
on action still seem daunting. The same story has played out in most
advanced economies, and the implications are troubling. A shock could
cause greater damage, last longer, and spread wider.
Are We Safe Yet?
IN CASE OF EMERGENCY
During the 2008 crisis, governments undertook innovative emergency
measures to prevent the collapse of their financial systems and protect
their economies. In the United States, as in many other countries, the
government acted well beyond the frontiers of historical precedent.
The Fed expanded its role as the lender of last resort and provided
huge currency swaps to foreign central banks. It purchased a broad
range of mortgage-backed securities from government-sponsored
entities. The government effectively guaranteed the liabilities of banks,
m
bank holding companies, and government-sponsored entities, as well
as the value of a large share of money-market funds. It helped boost
the resources available to the International Monetary Fund and the
hi
multilateral development banks. The Federal Deposit Insurance
Corporation (FDIC) closed hundreds of banks and helped restructure
a number of large, complex financial institutions. The government
ha
provided a range of different types of capital and financial insurance
to banks and other institutions.
A key lesson emerged: breaking the panic and preventing financial
iT
collapse ultimately required the government and the Fed not only to
take on the role of lender of last resort but also to guarantee funding
and inject capital into banks. The conventional arsenal, including the
full use of the Fed’s ability to lend against collateral and the FDIC’s
Al
ability to wind down failing banks, was not enough.

To update the government’s tool kit for the modern age, policy-
makers need broad powers. They need the ability to provide funding
od
across the financial system, wherever there are runnable liabilities on a

scale that matters. They need the ability to guarantee liabilities at the
core of the financial system and to recapitalize that system if necessary.
They need the ability to manage the failure of large, complex financial
so
institutions. And they need the ability to provide dollars to the world’s
central banks and lend to foreign financial firms that have large dollar-
denominated liabilities. With this mix of authorities in place, policy-
makers would have more freedom to allow bank failures without
Ma
precipitating a panic, and they could recapitalize the core of the system
before it was too late, at which point the only alternatives would be
nationalization or financial collapse.
Recent reforms in the United States have substantially weakened
policymakers’ emergency authorities. Many of those that proved so crit-
ical in 2008 and 2009 Congress has let lapse, taken away, or subjected

Timothy F. Geithner
to new constraints. Dodd-Frank included reforms designed to limit

the discretion available to the Fed, the FDIC, and the Treasury to act
without congressional approval. In particular, Congress has restricted
the government’s ability to act as a lender of last resort, guarantee
liabilities, and safely unwind failing firms. Together, these constraints
threaten to leave the United States even less prepared to deal with a
crisis than it was in 2007.
THE FED UNDER FIRE
m
The Fed has retained some of the instruments and authority that allow
it to act as a lender of last resort, including the traditional discount
window, where banks can borrow money from the Fed to cover tem-
hi
porary liquidity shortages. But because banks play a limited role in
the U.S. financial system relative to other financial institutions, these
conventional, bank-centric tools give the Fed less power compared with
ha
its counterparts in countries where banks play a larger role.
The result is that the U.S. financial system suffers from a large
mismatch between the distribution of the risk of runnable liabilities
iT
and the reach of the accompanying safety net—deposit insurance,
the discount window, and the Federal Home Loan Banks (a group of
government-sponsored banks that provide lending facilities to banks
similar to the discount window). The government’s lender-of-last-
Al
resort facilities cover only banks, even though there are relatively
important nonbank institutions that would need such help in a crisis.
Part of the problem is that although the Federal Reserve can lend
od
freely to a solvent bank against essentially everything the bank has, it

has very limited power to buy financial assets. It is allowed to purchase
only U.S. Treasuries and securities issued by government-sponsored
enterprises, whereas other central banks can typically buy a broader
so
class of assets.
What’s more, although the Federal Reserve has the authority to
lend to nonbank financial institutions during a crisis, it can do so
only when they are close to or past the point of no return. The Fed is
Ma
required to find not only that the stability of the financial system is
at risk but also that no alternative private source of funding is avail-
able. That requirement existed before the reforms, but new reforms
restrict the Fed even further: the Fed is no longer allowed to lend to
individual institutions and can instead lend only to a general class of
institutions. The goal was to make it hard, if not impossible, for the
Are We Safe Yet?
Fed to take the types of actions it did when it rescued AIG and helped
JPMorgan Chase acquire Bear Stearns.
In addition, the reforms require the Fed to report to Congress if any
individual institution is borrowing from it. Because banks rightly fear
that this information could leak out and thus exacerbate any funding
problems they face, they will likely be dissuaded from taking advantage
of the Fed’s lending facilities, at least in the early stages of a liquidity
crisis. Although the stigma might diminish as a crisis intensifies and
starts to affect a broad class of institutions, these disclosure requirements
m
still limit the preemptive value of the Fed’s lending tools.
Finally, the Fed is now subject to new limits on how much risk it can
assume in its lending operations. In general, the Fed is allowed to lend
hi
only to solvent institutions, not insolvent ones. The Fed’s emergency
authority has long given it the power to judge which category an insti-
tution falls into, but new statutory language limits its discretion. Many
ha
within the Fed today believe that in a future crisis, these limits would
deter, and perhaps prevent, the Fed from providing some of the most
valuable lending facilities it offered in 2008 and 2009.
iT
NO GUARANTEE
In addition to these limitations on the Federal Reserve’s authorities,
the U.S. government faces other constraints on its ability to act in a
Al
crisis. Congress has left in place the expansions to deposit insurance

(from $100,000 to $250,000) that were put in place in the fall of 2008,
but it took away the FDIC’s power to guarantee the broader liabilities
od
of banks and bank holding companies. During the crisis, this authority
proved critical to limiting the run on the U.S. banking system that
accelerated with the failures of Lehman Brothers, the Reserve Primary
Fund, and Washington Mutual. At that point in the crisis, even the
so
exceptionally aggressive use of the Fed’s discount window and other

emergency authorities was not sufficient to arrest the run.
The problem was that when calculating the amount of collateral
that borrowers had to put up to receive discount-window loans, the
Ma
Fed, to protect itself against losses, had to apply so-called haircuts to

the collateral, meaning that the value of the collateral had to exceed
that of the loan. Creditors recognized that this lending ability was not
the equivalent of a full guarantee on the part of the Fed and behaved
accordingly. The fear of default was too great and collateral values too
uncertain for them to continue lending to many banks.

Timothy F. Geithner
The result was a dramatic intensification of the fire-sale dynamics in

most asset markets, which pushed down the prices of financial assets and
exacerbated concerns about the solvency of the entire system. In the case
of Lehman Brothers and Washington Mutual, the losses experienced by
their creditors caused the run to escalate dramatically in scope and inten-
sity, ultimately requiring a much wider use of sovereign guarantees, a
much larger fiscal stimulus, and a much more aggressive monetary policy.
The expanded guarantees amplified the power of the initial capital
that the U.S. government injected into the financial system, which,
m
although substantial, was not sufficient to fully address the fear of
insolvency. Over the course of the fall of 2008 and into early 2009, the
government provided more clarity about how it would treat various
hi
layers of the banks’ liabilities and what conditions would accompany
future injections of public capital. This proved critical in attracting
private capital back into the U.S. financial system.
ha
Ultimately, the government induced a greater restructuring and a
more aggressive recapitalization of the financial system because it could
make credible guarantees of the financial system’s liabilities. With a pow-
iT
erful mix of funding and guarantees in place, it was able to recapitalize
the U.S. financial system with just a fraction of the trillion-plus dollars
that many had estimated would be necessary.
Al
UNWINDING FAILING FIRMS

At the same time as Congress imposed these limits on the government’s
emergency powers, it also expanded the FDIC’s mandate to handle the
od
failure of large, complex financial institutions. This so-called resolution

authority used to apply only to banks, which is why in 2008 and 2009,
the government had to adopt a messy patchwork of approaches for
rescuing AIG and preventing the collapse of Citibank and Bank of
so
America. But this power now extends beyond banks.

The FDIC has designed a framework for using this authority to wind
down an individual major financial institution in an orderly manner.
The approach is to impose losses on creditors (excluding depositors) up
Ma
to a level that would be sufficient to cover a conservative estimate of

the bank’s potential losses, protect taxpayers from losses, and leave the
entity with enough capital that it can be sold quickly.
This is a promising approach in the event that an individual firm
faces a funding challenge for idiosyncratic reasons, such as massive
fraud or an outsize exposure to a single risk. But it is not designed to
Are We Safe Yet?
deal with a systemic crisis. In fact, if used as intended, this authority

could make the crisis worse, intensifying the run on both individual
institutions and the system as a whole.
Why is this so? If the government imposes losses on a broad class of
creditors, then it risks exacerbating a run on a broader range of institu-
tions, as investors rationally act to protect themselves against the possibil-
ity of incurring losses at other weak institutions. The risk of such a spiral
is low when a single institution is vulnerable for idiosyncratic reasons and
the overall economy is strong. But when there is widespread concern, this
m
approach to winding down troubled firms could heighten the panic.
If the FDIC’s resolution authority were combined with a standing abil-
ity to extend broad guarantees to the core of the financial system, then
hi
using it would be less likely to cause a collapse. But that ability does not
exist today. And even if it did, it would be better to build more discretion
into the resolution process itself, so that a failing institution could be un-
ha
wound more safely. As things stand now, a strategy designed to reduce
taxpayers’ exposure to losses and limit moral hazard could end up exacer-
bating both risks. Since few governments will ultimately choose to let the
iT
entire system collapse, a strategy of applying haircuts in conditions vul-
nerable to panic can end up causing greater economic damage and costing
taxpayers more.
Al
THE POLITICS OF BAILOUTS

The limits imposed on the government’s emergency authorities reflect
the tragic cycle of crisis intervention and political reaction. The cycle
od
works like this: The crisis starts. Policymakers are initially slow to react.
The crisis intensifies, exceeding the capacity of the existing arsenal. Leg-
islatures grant greater authority to put out the fire. Policymakers use that
authority for bailouts. The bailouts have unappealing direct beneficiaries,
so
enraging the public, and it’s hard for anyone to appreciate why the alterna-
tive would be worse. To make matters worse, the bailouts to the financial
system tend to come well ahead of the trough in economic activity. Asset
prices might recover as the systemic risk recedes, but the loss of wealth and
Ma
the damage to confidence continue to hurt the real economy. As the econ-
omy appears to worsen despite the bailouts, the public’s outrage at policy-
makers intensifies. Politicians then rescind the government and the central
bank’s discretion and promise never to grant it again. The cycle repeats.
Policymakers thus face a dilemma: if they use the authority they
are given, it will likely be taken away, but if they don’t use it, they will

Timothy F. Geithner
be justly blamed for the ensuing damage. In the United States, Con-
gress granted broad powers to the government during the crisis. The
government used these necessary tools, and then Congress not only
revoked them but also weakened the government’s power further.
Elected legislators have made themselves the arbiters of whether to
deploy the measures necessary to arrest a panic. As a result, the emer-
gency response is more likely to be late and badly designed, and it
will impose greater fiscal and economic costs, since runs happen
faster than legislatures can act. A better model is town councils, which
m
control overall spending but don’t oversee how first responders react in
an emergency. They try to ensure that the fire department has enough
trucks and hoses at all times, rather than require it to seek approval to
hi
buy equipment after a fire starts.
Those who contend that the financial system should operate with lim-
ited emergency authority on the part of the government make two argu-
ha
ments: that such limits reduce moral hazard and that they are necessary
for democratic accountability. Both arguments have merit, but there are
better ways of addressing them that don’t leave the country so vulnerable.
iT
On the moral hazard concern, a paradox of financial crisis manage-
ment is that if the government does not act swiftly to break a panic,
then it might end up having to take on more risk and guarantee more
liabilities, moves that create an even greater moral hazard. It’s hard to
Al
solve a moral hazard problem in the midst of a crisis without dramati-

cally intensifying it.
A more practical approach to limiting moral hazard involves a mix
od
of things. To begin with, regulators have to bear most of the burden.

If given the authority, they can decide how much leverage to permit
and thus how much to force the financial system to insure itself. Such
regulation will never protect against every eventuality, but it can offset
so
much of the adverse effect that the safety net has on incentives.
Moreover, the emergency arsenal can be designed to achieve the
right mix of incentives and reassurance. Preserving some uncer-
tainty about how fast a government will escalate its support in a
Ma
crisis and how far that support will extend should leave investors in
and creditors of financial institutions with a healthy sense of fear,
at least up to the edge of the abyss. That, in turn, should lessen the
harmful incentives that a strong backstop creates.
The interventions themselves can also be designed to limit moral
hazard. In order to reduce the risk of prolonged dependence, the
Are We Safe Yet?
government can lend at rates that are below what prevails on the
market in a panic but well above normal levels. It can limit this assis-
tance to those institutions that fall within the scope of regulation and
impose tougher conditions on access to emergency support for those
on the outside. Politicians, for their part, can pass reforms after the
crisis to widen the scope of regulation and force the system to operate
with more insurance against future risk.
These efforts would limit the moral hazard created by a strong
arsenal of standing emergency authorities, but they have to be done
m
in advance. In the midst of a crisis, there is no way to resolve the
fundamental conflict between the im-
perative of mitigating immediate damage
Legislatures should act
hi
and that of improving future incentives,
because actions that seem sensible in like town councils: they
terms of the latter tend to exacerbate control overall spending,
ha
the former. The alternative approach but they don’t oversee
of severely restricting emergency au-
thorities—in effect, locking the doors how first responders react
of the fire station—is dangerous if the in an emergency.
iT
limits to those authorities are credibly
inviolable. And since they usually are not, it leaves policymakers with
the worst of both worlds. In short, governments can’t kill the moral
Al
hazard inherent in trying to run a functioning financial system, but

they can wound it.
Compared with moral hazard arguments for limiting discretion,
od
those that invoke accountability are more compelling. Financial res-

cues raise complicated questions of fairness in determining how losses
are allocated and which institutions get saved. With such questions at
play, it is only natural that the legislature has a say. But that involve-
so
ment should come ahead of a crisis, in designing the framework for

how the government responds, not during a crisis, in choosing how
to act. The revealed, and perhaps rational, preference of a legislator
during a crisis is to vote against a rescue as long as possible, until his
Ma
or her vote is essential for passage—and then to blame someone else

for the choices made in the moment.
There are many ways to constrain the government’s discretion in a
crisis without compromising speed and flexibility. Many democracies
have required that committees’ decisions pass by supermajorities, that
emergency actions gain separate approval from both the central bank

Timothy F. Geithner
and the finance ministry, that the government disclose the terms of its
rescues, and that actions get reviewed after the fact. Many have passed
laws that distinguish what is expected in normal conditions from what
might be possible in extreme ones and that define broad goals policy-
makers must pursue. Central banks, for example, are mandated to
pursue broad objectives on monetary policy yet can choose how best
to achieve them.
The right regime should recognize that successful crisis manage-
ment requires allowing the government and the central bank to take
m
risks that the market will not take and absorb losses that the market
cannot absorb. It should allow the government to act early, before a
panic gains momentum. And it should establish an overarching
hi
goal of preserving the stability of the whole system and restoring its
capacity to function—not avoiding the failure of individual firms.
The regime that exists in the United States today has an awkward
ha
asymmetry when it comes to discretion. The government enjoys more
freedom in monetary policy than it does in fiscal policy, both in terms
of the taxing and spending tools that remain in the hands of legisla-
iT
tures almost everywhere and in terms of emergency measures, such as
guarantees and capital injections. The result is an excessive reliance
on monetary policy. Policymakers may turn to fiscal policy later than
is ideal and face greater constraints on the size and composition of
Al
a stimulus. Solvency problems become more likely to be treated as

liquidity problems. The government delays action until the only
remaining options are even less politically appealing. The United
od
States can and should do better.
THE CRAFT OF CRISIS MANAGEMENT

Just as important as the design of the tools and the authority that
so
governs their use is the state of knowledge about how they should be
employed. As a walk through the graveyard of past financial crises
reveals, the variation in choices and outcomes is appallingly high.
Given the amount of experience available among practitioners across
Ma
the world, and the diversity of mistakes they have all made, govern-
ments should make the effort to learn what works and what doesn’t.
Yet policymakers tend to underinvest in this process. In finance,
there is no body akin to the National Transportation Safety Board,
which investigates airplane crashes. Nor is there a standardized approach
to looking at mistakes, such as the morbidity and mortality reviews
Are We Safe Yet?
commonplace in medicine. And nor is there anything like the U.S.

Army War College, where experts study how the military fought pre-
vious wars and make recommendations about how to fight future ones.
In the field of financial stability, all the excitement surrounds preven-
tion, driven by the idealistic impulse that policymakers can eliminate
systemic risk. No one wants to be engaged in the business of planning
for what could go wrong and how to clean up the mess. Some even
fear that planning for disaster will make disaster more likely.
Policymakers accumulated a lot of valuable experience in the 2008
m
crisis. Compared with the early stages of the Great Depression, the
recent shock caused a greater initial loss of wealth and a higher rise in
the risk of default, but because of the forceful policy response, the
hi
outcomes proved much better. Unemployment peaked at ten percent,
not 25 percent, and the economy started growing again in six months,
rather than the years and years it took during the Great Depression.
ha
The various elements of the financial rescue yielded a substantial
positive direct financial return; in effect, the government forced the
financial system to pay for its own protection. The emergency supports
iT
were removed quickly. The government allowed a healthy amount of
failure: compared with other major economies, the United States saw
a much smaller fraction of its financial institutions emerge from the
crisis as independent entities. For those entities that survived, the
Al
government forced more restructuring, and it recapitalized the financial

system rapidly and largely with private capital. The government’s
more aggressive fiscal and monetary policy reinforced the power of the
od
financial rescue, making both that policy and the rescue more powerful
than either would have been on its own.
In a crisis, policymakers tend to follow one of two paths: either the
liquidation of failing firms, ending in the collapse of the entire financial
so
system, or the partial nationalization of that system. The U.S. govern-

ment chose a third way, allowing a substantial amount of failure while
rapidly recapitalizing the core of the system. And as a result, the United
States suffered much less acute economic and fiscal costs. Still, had
Ma
policymakers been granted more flexibility in advance, those costs

would have been even lower. Congress ultimately provided the authority
for the government to do what only it can do in a crisis, but that
authority came late.
Financial crises are inevitable, and although governments can reduce
their frequency and intensity through tighter regulation, they cannot

Timothy F. Geithner
limit their damage without a powerful emergency arsenal. It is perhaps

inevitable that governments and central banks will act late, partly
because they will wish to inflict some pain and allow some adjust-
ment. Sometimes, then, they will fall behind the curve of an evolving
panic and end up having to act with greater force to prevent the whole
system from collapsing. If legislation limits their capacity to escalate
quickly, the risk of economic calamity will grow.
ARE WE SAFER?
m
The postcrisis reforms have produced a more resilient financial system.
Banks hold more capital and can thus absorb far more loss. They hold
a smaller share of short-term liabilities and are thus less prone to runs.
hi
This better-capitalized financial system means that a given dose of
fiscal and monetary policy will prove more powerful.
But these achievements need to be considered in the context of a
ha
weaker fiscal and monetary arsenal and weaker emergency powers.
The former means that future economic shocks will likely do more
damage. Although the overall reduction in financial leverage since the
iT
crisis should make the U.S. economy less fragile, it still faces many
potential adverse shocks. The limitations on fiscal and monetary policy
will likely make the economy less resilient to those shocks.
The new restrictions on emergency authorities make this challenge
Al
more acute. The reforms were designed for the wrong type of crisis—
for idiosyncratic crises, rather than systemic ones. By limiting the
ability of the government and the central bank to respond to panics,
od
they leave the economy more vulnerable to the most dangerous type
of crisis. And by forcing the government to impose losses on creditors
when managing the failure of institutions, the new regime risks inten-
sifying an ongoing crisis.
so
At some point, policymakers will have to revisit and refine the finan-
cial reforms. When they do, it will be important to restore room for
discretion to the emergency tool kit, and keep that in reserve—not as
a substitute for strong safeguards against risk but as a complement to
Ma
them. Financial crises carry tragic economic costs. There is all the
reason in the world to make sure policymakers have the freedom they
need to manage them.∂
How to Build Middle

East Peace
Why Bottom-Up Is Better Than Top-Down
m
Moshe Yaalon
L
hi
ast May, I resigned from the Israeli government and parliament.
I did so largely for reasons of domestic policy, including differ-
ences with Prime Minister Benjamin Netanyahu on issues
ha
such as respect for the rule of law and the independence of the Su-
preme Court. National policy toward the Palestinians was not central
to my resignation, but it is no secret that I differed on that front as
iT
well with some in the government and the Knesset in which I served.
There are voices in Israel that favor a large-scale annexation of the West
Bank and Gaza, perhaps even the dismantling of the current “political
separation” between the two communities and the extension of Israeli
Al
citizenship to current Palestinian Authority (PA) voters. I believe such an

approach would be a grave mistake, one that would needlessly imperil
Israel’s Jewish and democratic character. Although I do not think the prime
od
minister personally subscribes to these views, the mixed signals from

within his government only encourage third parties to pursue problematic
policies that harm Israel’s interests. On this issue—Israel’s unshakable
commitment to the preservation of the country’s Jewish and democratic
so
character—the government and its ministers should speak with one voice.
On a broader level, many in Israel and beyond remain convinced that
the traditional model of the Middle East peace process has come very
close to success in recent decades and that with some tweaks or twists, still
Ma
further efforts along these lines might yield an acceptable outcome—if

only both sides would make a few additional concessions. I disagree. The
model of change embodied in the Oslo Accords failed, and if tried again,
MOSHE YAALON is Rosenblatt Distinguished Visiting Fellow at the Washington Institute
for Near East Policy. He served as Israel’s Minister of Defense from 2013 to 2016 and as
Chief of the General Staff of the Israel Defense Forces from 2002 to 2005.

Moshe Yaalon
it will fail again. Only a fundamentally different approach to change—call

it bottom-up rather than top-down—can end the underlying conflict.
When news first broke about the Oslo Accords, I supported the
agreement and the “land for peace” formula on which it was based,
because, both then and now, I revere the preservation of life more
than the acquisition of land. Like many Israelis, I believed in the idea
that territorial concessions might be the key to achieving peace. But
over time, I became disillusioned.
My awakening came after I was appointed the head of Israel’s military
m
intelligence in 1995, shortly before the signing of the Oslo II agreement.
In that position, I had the opportunity to see all aspects of Palestinian
politics up close. What I learned was shocking—and I learned it not by
hi
uncovering secret Palestine Liberation Organization (PLO) decisions
but just by following Palestinian media, Palestinian educational curricula,
and Palestinian leadership statements. The evidence was overwhelming:
ha
rather than preparing the younger generations of his community for a
historic reconciliation with Israel, Palestinian leader Yasir Arafat was
feeding his people a steady diet of hatred and vitriol toward Israel.
iT
I remember the day I held one of my regular working meetings
with Prime Minister Yitzhak Rabin, who served simultaneously as
defense minister. In the course of that briefing, I gave him what I called
“strategic early warning” that, in my view, the PLO leadership was
Al
planning to maintain the conflict against Israel regardless of Arafat’s

signature on the White House lawn. Regrettably, more than two decades
later, my assessment has not changed. From reading Palestinian
od
schoolbooks, watching Palestinian television, and listening to speeches

by Palestinian officials, it is clear that the leadership of the PA still fills
the minds of Palestinian youth with talk of Israel as an alien cancer in
the Middle East that must be replaced “from the river to the sea.” The
so
vitriol from Gaza—what I call “Hamastan”—is even worse.

So long as the bulk of the Palestinian population remains unwilling
to accept the reality of Israel’s permanent existence as a secure Jewish,
democratic state, it will be difficult, if not impossible, to have a true
Ma
peace. Rather than being imposed from the top down, in other words,
the desire and the choice for peace have to rise from the bottom up,
from the Palestinian people themselves. Until that happens, contin-
ued negotiations along traditional lines will never live up to the hopes
many place in them. A bottom-up approach lacks the drama and romance
of high-level summitry that many in the international community
How to Build Middle East Peace
prefer. It demands persistence, hard work, and a focus on details. And

it offers little hope for a final resolution of the conflict in the near
future. I am convinced, however, that it is the only way to avoid a
strategic abyss and the only path to real progress toward eventual
peace in the Middle East.
WHY OSLO FAILED

Since the signing of the Oslo Accords just over 23 years ago, the
international community—led by the United States—has repeatedly
m
tried to facilitate a final-status agreement that would end the Israeli-
Palestinian conflict. Every effort has ended in failure. The conven-
tional wisdom attributes that failure to a lack of willingness by the
hi
local parties to make some relatively small concessions. If only this
behavior were adjusted or that policy paused, the argument runs, things
could have worked out in the past—and might still work out in the
ha
future, even absent dramatic movement on either side.
I think this conventional reading of recent history is naive and that
the real reason for the failure of negotiations has been Palestinian
iT
reluctance to recognize Israel’s right to exist as the nation-state of the
Jewish people—in any boundaries. When that reluctance dissipates,
peace will be possible; until then, it will not be. Israeli policy, and that
of the international community, should thus be focused on trying to
Al
help Palestinians realize that the choice for peace lies in their hands.
The conventional wisdom is wrong because it is based on four mis-
conceptions about the nature of the conflict—the first being that the
od
core problem is Israel’s occupation of territories gained in the Six-

Day War, and so the key to peace must be an Israeli withdrawal to
boundaries close to the pre–June 1967 lines.
In fact, a reluctance to accept Israel has been a consistent feature of
so
Palestinian strategy from even before there was a state of Israel. It was
reflected in the Arab rejection of the United Kingdom’s 1937 Peel
Commission proposal and the United Nation’s 1947 partition plan, as
well as the Palestinians’ rejection of Israeli Prime Minister Ehud
Ma
Barak’s proposal at Camp David in 2000, U.S. President Bill Clinton’s

parameters later that same year, and Israeli Prime Minister Ehud
Olmert’s 2008 proposal. Most recently, the current Palestinian leadership
continued this policy of rejection by failing even to respond to U.S.
President Barack Obama’s call to negotiate on the basis of U.S.-mediated
terms in March 2014. Throughout this series of rejections, the Palestinian

Moshe Yaalon
leadership never stated that any particular Israeli territorial concession,

even a full withdrawal to the 1967 lines, would end the conflict and
terminate all claims the Palestinians had against the state of Israel.
It is true that the PLO recognized Israel in the Oslo Accords. But
recognizing the fact of Israel’s existence is not the same as recognizing
its right to exist as the nation-state of the Jewish people. Rabin was
aware of this hole in the agreement and
refused to proceed with the Oslo signing
Only a fundamentally until he received a side letter from Arafat
m
different approach—call committing the PLO to change its char-
it bottom-up rather than ter to reflect the recognition of Israel.
top-down—can end the Yet despite a lot of smoke and mirrors,
hi
including maneuvers that duped many
underlying conflict. in the international community, Arafat
ha never did change the charter. One proof
of this is the impossibility of finding any amended charter ever pub-
lished by the PLO since its alleged removal of the offending articles in
1996: a “cleansed” document simply does not exist.
iT
Arafat’s successor, Mahmoud Abbas, has maintained this policy,
repeatedly refusing to accept the idea that the Jewish people have a right
to statehood. Some say this is only a tactical maneuver by Abbas, who is
described as holding back this card now so that he can play it later in
Al
exchange for a major Israeli concession. However, we heard the same

about Arafat; it was wishful thinking then, just as it is now. The fact is that
when Abbas says, “We will never recognize the Jewishness of the state of
od
Israel,” as he did in November 2014, we should take him at his word.

It is true that Israel did not ask for this kind of recognition from Egypt
and Jordan when it signed peace treaties with those countries in 1979 and
1994, respectively. But the Israeli-Palestinian conflict—which is, at its
so
heart, a conflict over national identity, not a real estate dispute—is very
different from those interstate conflicts. At no time did Egypt or Jordan
ever make a claim to “all of Palestine,” as the PLO does. With those two
states, peace was achieved with an exchange of territories and the restora-
Ma
tion of recognized international borders. Neither Egypt nor Jordan con-

sidered the idea of carrying on the conflict with Israel after peace. In
contrast, the Palestinians have chosen to resume hostilities against Israel—
whether by launching rockets or launching terrorist attacks—precisely
from territories they received from Israel. That was the case after both
the signing of the Oslo Accords and Israel’s disengagement from Gaza.
m
hi
ha
No end in sight? A Palestinian protester in the West Bank, October 2015
iT
There are corollaries to the principle of refusing to recognize Israel
as the nation-state of the Jewish people. Palestinian leaders also reject
the slogan “two states for two peoples,” because the PLO doesn’t rec-
ognize the existence of a Jewish “people.” Its charter states: “Claims
Al
of historical or religious ties of Jews with Palestine are incompatible

with the facts of history and the true conception of what constitutes
statehood. Judaism, being a religion, is not an independent national-
od
ity. Nor do Jews constitute a single nation with an identity of its own;
they are citizens of the states to which they belong.”
Rejecting Israel as the nation-state of the Jewish people means
that the conflict is not about borders but about Israel’s very existence.
so
As strange as it sounds, history has shown that the Palestinians have

repeatedly refused to accept statehood and the responsibilities that
would go with it—because their chief objective has been not to
MOHAMAD TO ROKMAN / REUTE RS
achieve their own national community but to deny Jews theirs.

Ma
Palestinian leaders rejected partition proposals made by the British

colonial power and the United Nations before the establishment of
Israel, took no steps toward independence when Egypt and Jordan
ruled the territory in which the Palestinians lived, and have squan-
dered the opportunity to build the institutions of statehood over the
past two decades. With the exception of the two promising years from

Moshe Yaalon
2010 to 2012 under the leadership of Prime Minister Salam Fayyad,

when the Palestinians began to build the infrastructure of a state, the
Palestinians have regrettably preferred to concentrate on harming the
state of Israel rather than establishing their own state.
In 2005, for example, Israel withdrew completely from the Gaza
Strip, evacuating every Israeli civilian and soldier. The Palestinian
leadership in Gaza—which, after 2006, was the Islamic Resistance
Movement, or Hamas—had the opportunity to establish a statelike
entity, to develop the strip for the benefit of its own people, and to
m
prove to Israel and the international community that the formula
“land for peace” really works. Indeed, nothing would have incentivized
Israeli withdrawal from the West Bank (which many Israelis call Judea
hi
and Samaria) more than the emergence of a peaceful and successful
Palestinian-governed entity in Gaza. Sadly, the opposite happened.
Hamas turned Gaza into a terrorist base and a rocket-launching pad,
ha
in the process destroying the lives of millions of Palestinians.
WHY SETTLEMENTS AREN’T THE PROBLEM

iT
The second misconception underpinning the conventional wisdom is
that Israeli settlements in the territories are a crucial obstacle to peace
and that the removal of those settlements would pave the way for a
resolution of the conflict. Once again, however, history has shown
Al
that this is simply not the case. The persistence of the Arab-Jewish
conflict for more than 150 years is not because Jews have settled in a
particular part of the land of Israel but because Arabs have rejected
od
the Jewish right to settle anywhere in the land of Israel.

Gaza is a useful test case. If settlements were the main problem block-
ing peace, then the evacuation of all settlers from Gaza should have im-
proved matters and led to further negotiations. In fact, it produced more
so
terrorism. If there has been any quiet for Israeli communities near the
Gaza border in the last two years, it is only because the punishment in-
flicted on Hamas by the Israel Defense Forces in Operation Protective
Edge in 2014 has temporarily deterred it from launching further attacks.
Ma
The existence of Israeli settlements in the territories has never pre-

vented the Israelis and the Palestinians from negotiating with each
other or even reaching agreements. Since 1993, Israel and the PLO have
reached numerous political, economic, and technical accords, even as
Israeli governments—left, right, and center—continued investing in
settlements in the territories.
Since 1967, no government of Israel, across the political spectrum,

has questioned the legality of Jewish settlement in territories won
during the war. Governments have taken different views on whether to
build certain settlements, but all have recognized the fundamental right
of Jews to live in the West Bank. (Of course, settlement activities must
always be done lawfully, solely with the endorsement of the govern-
ment of Israel. No government can turn a blind eye to illegal action and
should use the tools of the state to prevent violations and correct them if
they occur.) Even so, as part of the political process in the Oslo Accords,
m
the government of Israel made a major concession by committing itself
to negotiate the issue of settlements with the Palestinians.
Some argue that this commitment was disingenuous, given that the
hi
expansion of settlements prevents the establishment of a Palestinian
state. However, the total combined land area of Israeli settlements in
the West Bank is less than ten percent of the territory—hardly so much
ha
as to prevent the emergence of a Palestinian state. And although the
Obama administration unilaterally renounced Washington’s commit-
ment to an April 2004 agreement between U.S. President George W.
iT
Bush and Israeli Prime Minister Ariel Sharon on settlement activity,
the government of Israel has kept its part of that deal. Specifically,
Israel has limited its construction in the West Bank to areas within the
geographic boundaries of existing settlements in such a way as to allow
Al
for the natural growth of those communities.

Regrettably, for internal political reasons, the Israeli government
has been shy about publicly affirming its continued commitment to
od
this policy—a commitment that it has kept despite Washington’s

breaking its end of the deal. Israel should be clear about its policy, in
the hope that the new administration in Washington might return to
a more realistic approach to the issue of settlements and their connec-
so
tion to the broader dispute between Israel and the Palestinians.
WHY FULL SEPARATION WON’T WORK

The third misconception underlying the conventional approach to the
Ma
peace process is that until a diplomatic agreement resolving the con-

flict is reached, separation between the Israelis and the Palestinians is
the best way to keep things peaceful and tranquil. Separation appeals
to the idea that Israelis should not be captive to the Palestinian refusal
to make peace, that they can be masters of their own fate. It also feeds
on a certain paternalistic notion that if the Palestinians aren’t going to

Moshe Yaalon
be responsible actors, the Israelis will have to be responsible for both

parties. But a close examination shows that this is a mirage. Full sepa-
ration now would be a disaster—most of all for the Palestinians.
No Palestinian entity could survive, for example, without a close con-
nection to the Israeli economy. The center of gravity of the Palestinian
economy is not Ramallah; it is Tel Aviv. About 100,000 Palestinians are
employed inside pre-1967 Israel, both legally and in the gray economy.
Another 60,000 are employed inside the West Bank in the settlements
and in Israeli industrial zones. Thousands more are employed in the
m
territories by Palestinian subcontractors of Israeli enterprises. More
than 80 percent of Palestinian exports go to the Israeli market. Full sep-
aration between Israel and the Palestinians would trigger an economic
hi
and humanitarian crisis in the West Bank that would threaten the PA
and pose a significant security risk to both Israel and Jordan.
Moreover, separating the Palestinians’ critical infrastructure from Is-
ha
rael would lead immediately to a massive crisis. Even with Israel’s disen-
gagement from Gaza, Gazans still rely for their survival on Israeli-supplied
water and electricity. For the Palestinians in the West Bank, the level of
iT
dependence is even greater. For Israel even to consider a policy that
would deprive Palestinians of the basic necessities of life is inhumane and
unthinkable. In theory, the Palestinians have the ability to develop their
own desalination plants, power stations, and other infrastructural needs.
Al
But they have had this ability since the signing of the Oslo Accords, and,
despite generous international funding, none of this has happened. It
would be the victory of hope over experience to believe this situation
od
would change in the event that Israel separated from the territories.
As for security, the limitations that would accompany full separation
on the current freedom of the Israeli army and other Israeli agencies
to operate in the territories would deprive Israel of assets needed to
so
fight terrorism. But the most immediate impact of separation in the

security realm would be on the survival of the PA.
From the implementation of the Oslo Accords in 1994 until Operation
Defensive Shield in 2002, Israeli security forces did not operate in Area
Ma
A in the West Bank, those urban areas defined by Israeli-Palestinian

agreement as under full Palestinian security control. When Palestinians
launched a wave of suicide bombings against Israeli cities in 2000, in what
became known as “the second intifada,” or “al Aqsa intifada,” most of the
perpetrators came from Area A. To suppress the uprising and bring
an end to the terrorist attacks, Israel changed its rules of engagement
and began operating throughout all of the West Bank, which has
remained the case ever since. Without this freedom of action, Israel has
high confidence that it would again be faced with the kind of violence
and terrorism of 2000–2002.
But terrorist organizations do not focus their energies only against
Israel. Hamas, Palestinian Islamic Jihad, and the Islamic State (also
known as ISIS) also view the PA and its ruling party, Fatah, as enemies.
The resulting convergence of interests
between Israel and the PA in fighting
No Palestinian entity
m
Palestinian terrorism is the basis for the
security coordination between Israel could survive without
and Palestinian security institutions. a close connection to
hi
Such cooperation, originally enshrined the Israeli economy.
in the Oslo II agreement, has become
essential to PA security; although Pales-
ha
tinians do their part, the fact is that Israeli security forces are respon-
sible for the majority of counterterrorism activities in the West Bank.
Without Israeli military and security activity, the PA would collapse
iT
and Hamas would take control.
Of course, not all aspects of separation are bad for Israel and the Pales-
tinians. Political separation, for example, serves the interests of both sides.
Indeed, it is the one positive outcome of the Oslo process. Thanks to the
Al
agreements, the Palestinians enjoy substantial political independence,

voting for their own parliament, president, and municipalities. This also
benefits Israel, whose Jewish and democratic character would be threat-
od
ened if Palestinians in the West Bank had no option but to vote within
the Israeli political system. (On their own, the Palestinians decided to
maintain two political entities—one ruled by Hamas, the other by the
PA—but this was a Palestinian choice, not one imposed on them by Israel.)
so
Those of us who believe in political separation recognize that there

needs to be an eventual agreement between the parties regarding the
status of the territory in the West Bank—part of which will be under
Palestinian sovereignty and part of which will be under Israeli sover-
Ma
eignty. This issue should be negotiated and resolved between the two
sides, when the circumstances are ripe for agreement on critical and
sensitive issues. In the meantime, pursuing other forms of separation
would only worsen the situation.
The fourth misconception embodied in the conventional approach,
finally, is that the Israeli-Palestinian conflict drives conflict in the Middle

Moshe Yaalon
East more generally and thus that regional stability depends on the con-
flict’s resolution. No idea has done more damage to the modern Middle
East than this false concept of linkage. For decades, it has freed Arab
leaders from responsibility to their own peoples and has given Palestin-
ians a stranglehold on the political fate of other, unrelated communities.
The reality is that the region’s chronic instability was caused by the
mistakes made by colonial powers a century ago in forcing a Western-
inspired nation-state model on a local patchwork of competing reli-
gious, ethnic, and tribal loyalties. For decades, the region’s dictators and
m
autocrats were happy to resist change while hiding their sins behind the
cover of the Israeli-Palestinian conflict, but the chaos spreading through
the region over the last five years has given the game away. Nobody can
hi
say with a straight face that the civil war in Syria, the sectarian strife in
Iraq, the tribal conflict in Libya, the state collapse in Yemen, or the
revolution and counterrevolution in Egypt have anything to do with
ha
Israel or the Palestinians, so this canard might finally have been put to
rest. (The irony is that, in its own modest way, Israel has played an im-
portant role over the years in support of regional stability, steadying the
iT
situation along its borders and maintaining security in the West Bank.)
WHAT IS TO BE DONE?
Together, these misconceptions have yielded a fundamental misun-
Al
derstanding of the nature of the Israeli-Palestinian conflict, the steps

that need to be taken to solve it, and the consequences of alternative
courses of action. A stubborn myth persists about how a final settle-
od
ment of the conflict is almost within reach; everyone supposedly

knows what it looks like and believes that the only thing required to
get there is to press both parties for a few more concessions that would
push the negotiations across the finish line.
so
But people have been kidding themselves. The gap between the
two sides is not about a few square kilometers on a map, several dozen
Israeli communities in the West Bank, or a few billion dollars in inter-
national funds to develop the Palestinian state. Sadly, it is more pro-
Ma
found than that, and much more impervious to resolution.

Israel has no interest in governing Palestinians who are not already
Israeli citizens and should do everything in its power to continue the
process of political separation. But there is little chance of reaching a
negotiated solution to the other aspects of the conflict in the foreseeable
future, until Palestinian attitudes evolve. Nor is full separation an
Moshe Yaalon
Such a bottom-up approach should have a diplomatic component as

well, ideally a regional initiative that would bring in Arab states inter-
ested in helping to manage and eventually solve the Israeli-Palestinian
conflict—whether or not those states have formal relations with Israel.
Over time, these efforts could lay the groundwork for a true peace
rooted in mutual recognition and responsible cooperation. The specific
shape of plausible final settlements will become clear eventually, but
only after both the Israelis and the Palestinians have learned to accept
and work with each other over years of gradual, incremental develop-
m
ment. The Palestinians can, should, and eventually will have their own
political entity, but at least for the foreseeable future, it will lack certain
attributes of full sovereignty, such as armed forces. Rabin put the mat-
hi
ter well in the last speech he gave to the Knesset, presenting the Oslo II
agreement for approval just a month before his tragic assassination:
ha
We view the permanent solution [of the conflict] in the framework of
the State of Israel, which will include most of the area of the Land of
Israel as it was under the rule of the British Mandate, and alongside
it a Palestinian entity which will be a home to most of the Palestinian
iT
residents living in the Gaza Strip and the West Bank. We would
like this to be an entity which is less than a state and which will inde-
pendently run the lives of the Palestinians under its authority. The
borders of the State of Israel, during the permanent solution, will be
Al
beyond the lines which existed before the Six Day War. We will not
return to the 4 June 1967 lines.
od
He went on to call for preserving a “united Jerusalem . . . under Israeli

sovereignty,” establishing Israel’s “security border” in the Jordan
Valley, and extending Israeli sovereignty to include large blocs of
Jewish settlements across the Green Line, all of which continue to make
so
sense today.
Achieving even this result will take patience, persistence, and years
of practical effort. But it offers the chance for a real peace somewhere
down the road, something that the conventional top-down approach
Ma
will never produce. Any attempt by the new administration in Wash-

ington to plow the old furrows once again is destined to fail, just as
such attempts by its predecessors did—with the costs borne by the
local communities that will find themselves trapped in still more vio-
lence and misery, still further from the peace they deserve and may
one day be able to share.∂
Europe After Brexit

A Less Perfect Union
Matthias Matthijs
m
T
he United Kingdom’s vote to leave the European Union has
triggered the worst political crisis the EU has ever faced. Since
hi
the early 1950s, the EU has steadily expanded, but on June 23,
52 percent of British voters ignored the experts’ warnings of economic
misery and opted to leave the bloc. At the annual British Conservative
ha
Party conference in October, Prime Minister Theresa May promised
to invoke Article 50, which formally begins negotiations and sets a
two-year deadline for leaving the EU, by March 2017. Now, given her
iT
determination to regain control of immigration and the stiffening
resolve of other EU leaders to make an example of the United Kingdom,
a so-called hard Brexit—an exit from both the single market and the
customs union—is looking increasingly likely. This prospect should
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lay to rest the once dominant idea that European integration is an

irreversible process.
When the United Kingdom leaves, as it almost certainly will, the EU
od
will lose its largest military power, one of its two nuclear weapons states,
one of its two veto-wielding members of the UN Security Council, its
second-largest economy (representing 18 percent of its GDP and 13 per-
cent of its population), and its only truly global financial center. The
so
United Kingdom stands to lose even more. Forty-four percent of

British exports go to EU countries; just eight percent of the EU’s exports
head to the United Kingdom. The United Kingdom will also face much
less favorable terms with the rest of the world when negotiating future
Ma
trade and investment deals on its own, and British citizens will lose
their automatic right to study, live, work, and retire in the 27 other EU
member states. What’s more, the process of disentangling the country
MATTHIAS MATTHIJS is Assistant Professor of International Political Economy at Johns
Hopkins University’s School of Advanced International Studies and the editor (with Mark
Blyth) of The Future of the Euro. Follow him on Twitter @m2matthijs.

Matthias Matthijs
from 44 years of membership will consume a mind-boggling amount of

human and financial resources. But the British people have made their
decision, and it would be hard, if not impossible, to reverse course.
For the EU, the timing could not be worse. More than seven years
after the eurozone debt crisis hit, Europe’s economies remain fragile.
Russia continues its saber rattling on the eastern periphery. Two of
the EU’s member states, Hungary and Poland, are rapidly sliding toward
illiberal democracy. The refugee crisis has exposed deep divisions
across the continent over immigration. Europe seems to be in a per-
m
petual state of crisis. Antiestablishment parties on both the right and
the left that question the value of the EU have gained ground, mainly
at the expense of centrist Christian democratic and social democratic
hi
parties, which have never wavered in their support for further European
integration. In the 1957 Treaty of Rome, which established the EU’s
predecessor, Europe’s leaders envisioned “an ever closer union among
ha
the peoples of Europe.” Six decades on, that notion has never seemed
more distant.
The roots of the EU’s current crisis can be traced to the 1980s. In
iT
the first four decades after World War II, leaders saw the European
project primarily as a means of restoring the political legitimacy of their
war-torn nation-states. In the 1980s, however, Europe’s elites set their
sights on a loftier goal: forging a supranational economic regional
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order over which an enlightened technocracy would reign supreme.

The creation of the single market in 1986 and then the introduction of
a single currency a decade later seemed to herald a glorious new era
od
of economic growth and political integration.

In reality, however, these steps sowed the seeds of Europe’s current
crisis. Leaders on the continent failed to set up the institutions that
would be necessary to make both the single market and the single cur-
so
rency function properly. They brought about monetary union without

fiscal and financial union, leaving countries such as Greece and Italy
vulnerable after the Great Recession struck in 2008. Today, Greece’s
economy is 26 percent smaller than it was in 2007 and remains mired
Ma
in debt. Youth unemployment there stands at just below 50 percent;

in Spain, it remains above 45 percent, and in Italy, it hovers around
40 percent. Europe’s leaders always assumed, incorrectly, that future
shocks would lead to further integration. But the economic crisis,
followed closely by an ongoing political crisis over immigration, has
brought the EU to the brink of disintegration.
Europe After Brexit
m
hi
ha
Goodbye to all that: Theresa May at an EU summit in Brussels, October 2016
iT
If the EU is to survive, it must restore the original division of labor
between Brussels and Europe’s capitals, in which national governments
retained discretion over key areas of economic policy, such as the
ability to conduct fiscal stimulus and defend national champions. The
Al
nation-state is here to stay, and national policies still have far more
democratic legitimacy than those imposed by technocrats in Brussels
or Frankfurt. The EU needs to give Europe’s national governments
od
more, not less, freedom to act.
FROM THE ASHES

The founders of the EU would be disheartened to see what their
so
creation has morphed into. As the British historian Alan Milward

argued in his 1992 book The European Rescue of the Nation-State, Europe’s
ruling elites established the European Economic Community (EEC)
in the 1950s not to build a new supranational power but to rehabilitate
Ma
the system of European nation-states after the horrors of World War II.
Y VES H E RMAN / REUTE RS
They realized that if their countries were to survive, they would need
some degree of continental coordination to help provide economic
prosperity and political stability.
Milward argued that increased European cooperation required some
surrender of sovereignty, but not the wholesale replacement of the

Matthias Matthijs
nation-state with a new form of supranational governance. Instead, the

EEC was designed in keeping with the idea of “embedded liberalism”: the
postwar consensus that sovereign countries would gradually liberalize
their economies but maintain enough discretion over their economic
policies to cope with hard domestic times. The EEC’s founding fathers
left most political and economic powers with national governments,
leaving the EEC to coordinate coal and steel production, agricultural
support, and nuclear research, as well as internal trade relations and
common foreign economic policies.
m
This political bargain ushered in three decades of successful European
integration by guaranteeing peace and stability and fostering increased
trade and prosperity. In the early 1990s, when Milward published his
hi
book, European integration had reached its zenith. In 1991, according
to Eurobarometer polls, a record 71 percent of EU citizens considered
their country’s membership in the union “a good thing”; just seven
ha
percent thought it was “a bad thing.”
Yet no sooner had Milward’s thesis appeared than it became outdated.
Starting in the mid-1980s, Europe’s elites had begun to transform
iT
the nature of the European political project. Led by Jacques Delors,
the president of the European Commission, and backed by French
President François Mitterrand and German Chancellor Helmut
Kohl, they set out to create a new form of supranational governance,
Al
rather than using European integration to strengthen the continent’s

old system of nation-states. Pan-European rules would take prece-
dence over national policy discretion. Economic integration would
od
trump domestic democratic politics. Europe’s leaders would turn

their countries “from nation-states to member states,” as the political
scientist Chris Bickerton has put it, as they progressively dismantled
the postwar national corporatist state. Delors’ federalist vision required
so
the EU’s member states to surrender ever more sovereignty and gradu-
ally weaken the privileged bonds that had existed between national
governments and their people. Membership in the EU would no longer
entail reinvigorating the nation-state; it would mean caging it.
Ma
THE GREAT EXPERIMENT

The first landmark in the transformation of the European political proj-
ect came in 1986, when French socialists such as Delors and Mitterrand
joined forces with conservatives such as Kohl and British Prime
Minister Margaret Thatcher to sign the Single European Act. The
Europe After Brexit
SEA represented a response to the “Eurosclerosis” of the 1970s and 1980s,

Europe’s protracted disease of low growth, labor unrest, and high
unemployment and inflation. The Treaty
of Rome had already established a
common market and enshrined “four
The roots of the EU’s
freedoms” into European law: the free current crisis can be traced
movement of people, services, goods, to the 1980s.
and capital. But countless national reg-
ulations still held back cross-border trade. Only through more deregu-
m
lation and liberalization, European policymakers argued, could
Europe escape its economic doldrums. And indeed, by 1992, the EEC
would become a genuine single market.
hi
But as the Hungarian economic sociologist Karl Polanyi warned
in the mid-twentieth century, there is nothing natural about the
creation of markets. They require major acts of state power, so that
ha
activities that were once “embedded” in local social and political
relationships become tradable commodities among anonymous
participants. Exchanges need to become “disembedded” from their
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social context to become market transactions. The SEA was a major
exercise in disembedding countries’ markets from their national
protections, regulations, and traditions.
The SEA was extraordinarily ambitious. Most countries require peo-
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ple to hold national licenses when they provide services, whether they
are designing a house, performing surgery, or offering financial advice.
Many governments still monitor and restrict capital and financial flows
od
into and out of their national jurisdictions. All kinds of nontariff barriers,
such as national health, safety, and environmental standards, still hold
back international trade in goods. But after the SEA, European citizens
could move easily among national labor markets, capital could flow
so
freely across European borders, and manufacturers no longer had to deal

with a raft of conflicting product standards. A Portuguese pilot could fly
for Air France, a Belgian bank could now invest in Greece, and a German
driver could buy an Italian Lamborghini without having to worry if
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it complied with Germany’s technical and safety standards. Intra-EEC

trade in goods soared. The single market remained incomplete—fatally,
it lacked a unified system for supervising and resolving Europe’s most
important banks and monitoring mechanisms to warn of sudden in-
terruptions to international capital flows—but it went much further
than any similar exercise in modern history.

Matthias Matthijs
Indeed, the political scientists Leif Hoffmann and Craig Parsons

have observed that in many instances, the United States’ single mar-
ket has more rules than Europe’s. In public procurement, for example,
the state of California or the city of
Chicago can give preference to state or
The EU’s experiment in local service providers. Member states of
creating a truly free market the EU cannot favor national companies.
has come at a price. Similarly, the regulation of many services
in the United States takes place at the
m
state, rather than the federal, level. A licensed hairdresser who moves
from Ohio to Pennsylvania must undergo 2,100 hours of training and
pass written and practical exams to obtain a new license. A barber from
hi
Berlin, on the other hand, can set up shop in Paris the very next day.
But the EU’s experiment in creating a truly free market has come at
a price. The increased market competition that the SEA introduced
ha
brought widespread benefits, but it also created winners and losers,
such as the local producers and service providers in France or the
United Kingdom who now faced stronger competition from cheaper
iT
Slovakian manufacturers, Polish plumbers, and Romanian contractors.
In the boom years, Europe’s economies generated enough wealth to
compensate the losers. As growth has stagnated, however, large swaths
of national electorates have begun to clamor for more protection from
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the market that the EU built.

Yet because the SEA uprooted European markets from their nationally
based democratic politics and social institutions, Europe’s governments
od
have given up much of their power to intervene in their countries’

economies. To some extent, this process has happened everywhere
due to globalization, but European countries embraced the primacy of
international markets over domestic politics to a much greater extent
so
than countries anywhere else in the advanced industrial world. As a

result, they have found themselves with much less control over their
domestic economies than any of their Western peers. And because
regulations concerning the EU’s single market require only a qualified
Ma
majority of member states, rather than unanimity, to become law, they

can sometimes directly conflict with national interests. For instance, in
August 2016, the EU ordered the Irish government to collect $14.5 bil-
lion in unpaid taxes from Apple, despite protestations by the Irish
government that low corporate taxes were a key component of its
economic model and a “fundamental matter of sovereignty.”
Europe After Brexit
“SOMEDAY THERE WILL BE A CRISIS”

The creation of the euro in the Treaty of Maastricht in 1992 represented
an even more serious loss of power for Europe’s national governments.
Elites introduced the euro because they believed that a single market
would function properly only with a single currency. They also argued
that countries as open and integrated as the EU member states would
benefit from ending exchange-rate fluctuations with one another.
More quietly, they dreamed of building a common currency that could
challenge the global supremacy of the U.S. dollar.
m
Federalists hailed the euro as another great leap forward toward
European unification, but it took Europe even further away from the
postwar embedded liberalism that had underpinned Milward’s grand
hi
bargain. That bargain had left nation-states in control of European
integration and had presupposed that democracies needed leeway
when times were tough to rebalance their economies toward higher
ha
growth or lower unemployment, even if that meant temporarily pausing
further liberalization.
Yet the design of the euro gave Europe’s democracies no such free-
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dom. The introduction of the common currency and the European
Central Bank, which has a sole mandate to maintain price stability,
prevented member states from pursuing their own monetary policies.
Austere fiscal requirements, meanwhile, which Germany insisted on,
Al
made it much harder for governments to stimulate economic growth by

boosting spending during a downturn. The 1997 Stability and Growth
Pact mandated low public deficits and declining sovereign debt ratios,
od
but the agreement’s name is a misnomer: the pact has undermined social
stability and generated little growth. Although national governments
often ignored the pact, especially in the early years of the single cur-
rency, the EU, at Germany’s behest, tightened the rules in response to
so
the euro crisis and rendered any activist fiscal policy all but illegal.
Germany has been the biggest winner from the euro. Because
Germany’s currency can’t appreciate in relation to the currencies of its
European trading partners, Germany has held down the real cost of
Ma
its exports, resulting in a massive trade surplus. But the euro has been a
disaster for the rest of Europe. When they created the currency, Europe’s
elites removed the economic shock absorbers that their countries
had traditionally relied on without creating any new adjustment
mechanisms. Europe’s leaders thought it unwise to establish a genuine
fiscal, financial, and political union to complement the monetary

Matthias Matthijs
union. They rightly judged that their electorates would not accept it,
and they assumed that future crises would propel the EU toward further
integration. As Romano Prodi, a former prime minister of Italy and
then president of the European Commission, observed in 2001, on
the eve of the launch of the euro notes and coins, “I am sure the euro
will oblige us to introduce a new set of economic policy instruments.
It is politically impossible to propose that now. But someday there
will be a crisis and new instruments will be created.”
But when the crisis struck, the European Central Bank initially
m
refused to ease monetary policy and in fact raised interest rates; mean-
while, national governments could no longer devalue their currencies
in relation to those of their main trading partners to boost exports,
hi
nor launch fiscal stimulus programs. That left harsh austerity measures
as their only option. In the short term, this response only worsened the
crisis. Since then, the EU has created some new instruments, including
ha
a banking union and a new fiscal compact, which have transferred
responsibility for supervising the eurozone’s biggest banks from
national authorities to the European Central Bank, created a single
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resolution board to wind up failing banks, and established more in-
trusive monitoring of national budgets. But the logic of European
integration has remained the same: more supranational rules, less
national discretion. The German government, for example, could not
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step in to rescue Deutsche Bank, once a symbol of Germany’s finan-

cial prowess, if Berlin judged it to be in the national interest to do so,
nor can the Italian government run larger fiscal deficits to counter its
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chronic lack of economic growth.
INS AND OUTS

It is the crisis over immigration, however, that threatens to trigger the
so
union’s demise. The free movement of people within the single market
used to be a minor political issue. Most people saw it as a chance for
the young to study abroad through the EU’s Erasmus and Socrates
programs and for the educated and upwardly mobile to get work
Ma
experience in a different European country. Until the early years of

this century, EU-wide migration remained very low.
But when the EU expanded its membership in 2004 to include the
former communist countries of central and eastern Europe, intra-EU
migration started to grow. EU enlargement to the east created “a
Europe whole and free,” as U.S. President George H. W. Bush phrased
Europe After Brexit
it in 1989, but it also made the union’s membership much more

economically unequal. In 2004, when Poland joined the EU, its GDP
per capita stood at around $6,600; in the United Kingdom, the figure
was $38,300. These vast differences in income levels encouraged
millions of eastern Europeans to head westward. Between 2004 and
2014, for example, over two million people moved from Poland to
Germany and the United Kingdom, and almost another two million
moved from Romania to Italy and Spain. Such large movements of
people have put pressure on the public services and safety nets of the
m
countries receiving them.
Then, in 2015, more than one million migrants and refugees from
Afghanistan, Iraq, Syria, and sub-Saharan Africa poured across
hi
Europe’s borders. The single market had no mechanism to deal with
sudden movements of people within it, nor did the EU have any
common external migration policy to help absorb a large influx of
ha
refugees. National governments, constrained by EU rules over fiscal
spending and unable to agree on how to share the burden, have
struggled to respond. True, the overall migration numbers remain
iT
relatively low, and the net contribution of migrants to their host
countries is mainly positive. But many citizens feel that their own
governments are powerless and that the EU fails to represent their
interests, and so anti-immigrant parties have surged across Europe.
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For the first time, the EU’s commitment to the free movement of
people has begun to waver.
Eastern European governments, such as those of Viktor Orban in
od
Hungary and Beata Szydlo in Poland, have ferociously defended

their citizens’ rights to live and work across the EU while refusing EU
requests to take in a quota of refugees. Many western European gov-
ernments are prepared to begrudgingly accept EU quotas on refugees
so
but increasingly question the unlimited nature of migration within

the EU. Fears of unlimited emigration from countries such as Turkey,
a candidate for EU membership, played a major role in the United
Kingdom’s decision to leave the EU, and the desire to regain control
Ma
over immigration to the United Kingdom will likely result in that

country’s departure from the single market altogether.
TAKING BACK CONTROL

So where does the EU go from here? Since the United Kingdom has
always been its most reluctant member state, many Europhiles will be

Matthias Matthijs
tempted to argue that Brussels can now finally push forward with
further integration. But that would be a misreading of the current mood
in Europe’s capitals and a misdiagnosis of Europe’s ailment. More
Europe is not the answer to the EU’s problems.
Instead, Europe’s leaders need to return to Milward’s basic idea
that Europe was meant not to cage its nation-states but to rescue them.
Democratic legitimacy, for better or
The EU does not need any worse, remains with Europe’s national
governments. There are no technocratic
m
more rules; it needs solutions to Europe’s political problems.
political leadership. “I don’t wish to suggest that there is
something inherently superior about
hi
national institutions over others,” the historian Tony Judt observed in
1996. “But we should recognize the reality of nations and states, and
note the risk that, when neglected, they become an electoral resource
ha
of virulent nationalists.”
European integration has taken so many policy levers away from
governments that many citizens have started to wonder what their
iT
governments are still there for. As the political economist Mark Blyth
and I argue in The Future of the Euro, “Without developing a political
process to legitimately embed [the eurozone’s] economic and financial
institutions, the future of the euro will be fragile at best.” Restoring
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growth in the eurozone, fighting youth unemployment, and champi-

oning EU political reforms that return some economic power to member
states should take precedence over austerity and one-size-fits-all
od
structural reforms.
Distributive policies that create winners and losers need to be
legitimized democratically through regular elections and should
therefore remain the sole preserve of national governments. Such
so
policies include setting budgetary priorities, determining the gen-

erosity of the welfare state, regulating labor markets, controlling
immigration, and directing industrial policy. Permitting countries
to occasionally break the rules of both the single market and the
Ma
single currency—by temporarily letting them protect and financially

support key industries, for instance, or institute an emergency
break on immigration under certain strict conditions—would empower
national elites to deal with specific national problems and respond
to voters’ legitimate concerns by giving them a democratic choice
over policy.
Europe After Brexit
The EU, meanwhile, should focus on the things that member states
cannot do efficiently on their own and that create mutual gains: negoti-
ating international trade deals, supervising systemically important
banks and other financial institutions, responding to global warming,
and coordinating foreign and security policy. In Eurobarometer
polls, about two-thirds of European citizens surveyed consistently
say that they support a common foreign policy for the EU. National
governments could start with a much more effective pooling of their
military resources to conduct joint peacekeeping and humanitarian
m
missions overseas.
The EU does not need any more rules; it needs political leadership.
Germany must give up its opposition to eurobonds, or jointly guar-
hi
anteed eurozone debt instruments, and common deposit insurance,
which would go a long way toward providing long-term financial
stability in the eurozone by preventing future sovereign bond market
ha
contagion and bank runs. It must relax its insistence on tough fiscal
rules to allow countries such as Italy and Portugal to engage in aggre-
gate demand stimulus. And it must take the lead in setting up new
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mechanisms for promoting solidarity within the EU, such as a joint
refugee and migration fund, which could make up the difference in
temporary shortfalls in local funding and help member states more
effectively share the burden of integrating new migrants across Europe.
Al
Germany needs to finally embrace its leadership role. If Germany

can overcome its parochialism and recognize that it is in its long-term
interest to act as a benign hegemon for Europe—not unlike the role
od
the United States played in the Western world after World War II—
there is no reason why the EU cannot emerge stronger from its current
malaise. The leaders of the other remaining large member states—
especially France, Italy, Poland, and Spain—must reassure Berlin that
so
they are committed to reforming their economies once growth returns,

pledge to actively contribute to EU-wide solidarity, and reaffirm that
the European project is in their national interests. Collectively,
Europe’s leaders need to reimagine what Europe is for and regain
Ma
control of the process of European integration. Sixty years on from

the signing of the foundational Treaty of Rome, Europe needs a new
grand bargain, now more than ever.∂

Advice for Young Muslims

How to Survive in an Age of Extremism
and Islamophobia
Omar Saif Ghobash
m
S
aif, the elder of my two sons, was born in December 2000. In the
hi
summer of 2001, my wife and I brought him with us on a visit
to New York City. I remember carrying him around town in a
sling on my chest. A few days after we got back home to Dubai, we
ha
watched the terrible events of 9/11 unfold on CNN. As it became clear
that the attacks had been carried out by jihadist terrorists, I came to
feel a new sense of responsibility toward my son, beyond the already
iT
intense demands of parenthood. I wanted to open up areas of thought,
language, and imagination in order to show him—and to show myself
and all my fellow Muslims—that the world offers so much more than
the twisted fantasies of extremists. I’ve tried to do this for the past
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15 years. The urgency of the task has seemed only to grow, as the
world has become ever more enmeshed in a cycle of jihadist violence
and Islamophobia.
od
Today, I am the ambassador of the United Arab Emirates to Russia,

and I try to bring to my work an attitude of openness to ideas and
possibilities. In that spirit, I have written a series of letters to Saif, with
the intention of opening his eyes to some of the questions he is likely to
so
face as he grow ups, and to a range of possible answers. I want my sons

and their generation of Muslims to understand how to be faithful to
Islam and its deepest values while charting a course through a complex
world. I want them to discover through observation and thought that
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there need be no conflict between Islam and the rest of the world. I want
them to understand that even in matters of religion, there are many
choices that we must make. I want my sons’ generation of Muslims to
OMAR SAIF GHOBASH is Ambassador of the United Arab Emirates to Russia. He is the
author of Letters to a Young Muslim (Picador, 2017), from which this essay is adapted.
Copyright © 2017 by Omar Saif Ghobash. All rights reserved.
realize that they have the right—and the obligation—to think about and
to decide what is right and what is wrong, what is Islamic and what is
peripheral to the faith.
RESPONSIBILITY
Dear Saif,
How should you and I take responsibility for our lives as Muslims?
Surely, the most important thing is to be a good person. And if we are
good people, then what connection could there be between us and those
m
who commit acts of terrorism, claiming to act in the name of Islam?
Many Muslims protest against and publicly condemn such crimes.
Others say that the violent extremists who belong to groups such as the
hi
Islamic State (or ISIS) are not true Muslims. “Those people have nothing
to do with Islam,” is their refrain. To my ears, this statement does
not sound right. It seems like an easy way of not thinking through some
ha
difficult questions.
Although I loathe what the terrorists do, I realize that according to the
minimal entry requirements for Islam, they are Muslims. Islam demands
iT
only that a believer affirm that there is no God but Allah and that
Muhammad is his messenger. Violent jihadists certainly believe this.
That is why major religious institutions in the Islamic world have
rightly refused to label them as non-Muslims, even while condemning
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their actions. It is too easy to say that jihadist extremists have nothing to
do with us. Even if their readings of Islamic Scripture seem warped and
out of date, they have gained traction. What worries me is that as the
od
extremists’ ideas have spread, the circle of Muslims clinging to other

conceptions of Islam has begun to shrink. And as it has shrunk, it has
become quieter and quieter, until only the extremists seem to speak and
act in the name of Islam.
so
We need to speak out, but it is not enough to declare in public that

Islam is not violent or radical or angry, that Islam is a religion of
peace. We need to take responsibility for the Islam of peace. We need
to demonstrate how it is expressed in our lives and the lives of those
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in our community.
I am not saying that Muslims such as you and I should accept blame
for what terrorists do. I am saying that we can take responsibility by
demanding a different understanding of Islam. We can make clear, to
Muslims and non-Muslims, that another reading of Islam is possible
and necessary. And we need to act in ways that make clear how we

Omar Saif Ghobash
understand Islam and its operation in our lives. I believe we owe that
to all the innocent people, both Muslim and non-Muslim, who have
suffered at the hands of our coreligionists in their misguided extremism.
Taking that sort of responsibility is hard, especially when many
people outside the Muslim world have become committed Islamo-
phobes, fearing and even hating people like you and me, sometimes
with the encouragement of political
leaders. When you feel unjustly singled
As extremist ideas have out and attacked, it is not easy to look at
m
spread, the circle of your beliefs and think them through,
Muslims clinging to other especially in a public way. Words and
conceptions of Islam has ideas are slippery and can easily slide
hi
out of your control. You may be certain
begun to shrink. of your beliefs about something today,
ha only to wake up with doubts tomorrow.
To admit this in today’s environment is risky; many Muslims are leery
of acknowledging any qualms about their own beliefs. But trust me: it
is entirely normal to wonder whether you really got something right.
iT
Some of the greatest scholars of Islam went through periods of
confusion and doubt. Consider the philosopher and theologian Abu
Hamid al-Ghazali, who was born in Persia in the eleventh century
and has been hugely influential in Islamic thought. His works are
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treasured today, but during his own lifetime, he was so doubtful about
many things that he withdrew from society for a decade. He seemed
to have experienced a spiritual crisis. Although we don’t know much
od
about what troubled him, it’s clear that he was unsure and even fearful.
But the outcome of his period of doubt and self-imposed isolation
was positive: Ghazali, who until then had been esteemed as a scholar
of orthodox Islam, brought Sufism, a spiritual strain of Islam, into
so
the mainstream. He opened up Islamic religious experience to spiri-

tualism and poetry, which at that time many considered foreign to
the faith.
Today, some of our fellow Muslims demand that we accept only ideas
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that are Muslim in origin—namely, ideas that appear in the Koran, the
early dictionaries of the Arabic language, the sayings of the Prophet, and
the biographies of the Prophet and his Companions. Meanwhile, we
must reject foreign ideas such as democracy, they maintain. Confronted
with more liberal views, which present discussion, debate, and consensus
building as ancient Islamic traditions, they contend that democracy is a
m
hi
ha
Keeping the faith: a schoolgirl in Sanaa, Yemen, July 2015
iT
sin against Allah’s power, against his will, and against his sovereignty.
Some extremists are even willing to kill in defense of that position.
But do such people even know what democracy is? I don’t think so.
In fact, from reading many of their statements, it is clear that they have
Al
little understanding of how people can come together to make communal

decisions. The government that I represent is a monarchy, but I feel no
need to condemn proponents of democratic reform as heretics. I might
od
not always agree with them, but their ideas are not necessarily un-Islamic.
Another “foreign” practice that causes a great deal of concern to
Muslims is the mixing of the sexes. Some Muslim-majority countries
mandate the separation of the sexes in schools, universities, and the
so
workplace. (In our own country, most public primary and secondary
schools are single sex, as are some universities.) Authorities in these
countries present such rules as being “truly Islamic” and argue that
M O H A M E D A L - S AYA G H I / R E U T E R S
they solve the problem of illicit relationships outside of marriage.

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Perhaps that’s true. But research and study of such issues—which is

often forbidden—might show that no such effect exists.
And even if rigorous sex separation has some benefits, what are the
costs? Could it be that it leads to psychological confusion and turmoil for
men and women alike? Could it lead to an inability to understand mem-
bers of the opposite sex when one is finally allowed to interact with

Omar Saif Ghobash
them? Governments in much of the Muslim world have no satisfactory

answers to those questions, because they often don’t bother to ask them.
MEN AND WOMEN

Dear Saif,
You have been brought up in a household where women—including
your mother—are strong, educated, focused, and hard-working. If some-
one suggested to you that men are somehow more valuable or more
talented than women, you would scratch your head. But when I was your
m
age, the sermons that I heard at mosque taught that women were inher-
ently inferior. Men were strong, intelligent, and emotionally stable—
natural breadwinners. Women were appendages: objects to be cared for
hi
but not to be taken seriously.
That view of women persists in parts of the Muslim world—and, in
fairness, in many other places, as well. It is certainly not the only possible
ha
view of women afforded by Islam, but it is a powerful belief, and one that
enjoys a great deal of political, legal, and financial support.
I am proud that your mother and your aunts are all educated and work
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in professions that they chose. Doing so has hardly stopped any of them
from raising families and taking care of their husbands—the roles
demanded by conservative readings of Islamic texts. The women in your
life defy the strict traditionalist view, which presents women as funda-
Al
mentally passive creatures whom men must protect from the ravages of
the world. That belief is sometimes self-fulfilling: in many Muslims
communities, men insist that women are unable to face the big, wild
od
world, all the while depriving women of the basic rights and skills they
would need in order to do so.
Other traditionalists base their position on women on a different
argument, one that is rarely discussed openly, especially in front of
so
non-Muslims, because it is a bit of a taboo. It boils down to this: if

women were mobile, and independent, and working with men who
were not family members, then they might develop illicit romantic or
even sexual relationships. Of course, that is a possibility. But such rela-
Ma
tionships also develop when a woman lives in a home where she is

given little love and self-respect. And all too often, women are punished
for such relationships, whereas the men involved escape censure—an
unacceptable inconsistency.
This traditionalist position is based, ultimately, on a desire to control
women. But women do not need to be controlled; they need to be trusted
and respected. We trust and respect our sisters, our mothers, our daugh-
ters, and our aunts; we must provide the same trust and respect to other
women. If we did, perhaps we would not witness so many cases of sexual
harassment and exploitation in the Muslim world.
Saif, I want you to see that there is nothing written in stone that places
Muslim women below Muslim men. Treating women as inferior is not a
religious duty; it is simply a practice of patriarchal societies. Within the
Islamic tradition, there are many models of how Muslim women can live
and be true to their faith. There are Muslim women, for example, who
m
have looked into the origins of the hijab (the traditional veil that covers
the head and hair) and have concluded that there is no hard-and-fast rule
requiring them to wear it—let alone a rule requiring them to wear a
hi
burqa or a niqab, which both cover far more. Many men have come to the
same conclusion. Islam calls on women to be modest in their appearance,
but veiling is actually a pre-Islamic tradition.
ha
The limits placed on women in conservative Muslim societies, such
as mandatory veiling, or rules limiting their mobility, or restrictions on
work and education, have their roots not in Islamic doctrine but rather
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in men’s fear that they will not be able to control women—and their
fear that women, if left uncontrolled, will overtake men by being more
disciplined, more focused, more hard-working.
Al
ISLAM AND THE STATE

Dear Saif,
You will inevitably come across Muslims who shake their heads at the
od
state of affairs in the Islamic world and mutter, “If only people were proper
Muslims, then none of this would be happening.” I have heard this lament
so many times. People say it when criticizing official corruption in Muslim
countries and when pointing out the alleged spread of immorality. Others
so
say it when promoting various forms of Islamic rule. The most famous
iteration of this expression is the slogan “Islam Is the Solution,” which has
been used by the Muslim Brotherhood and many other Islamist groups.
It’s a brilliant slogan. Lots of people believe in it. (When I was younger,
Ma
I believed in it wholeheartedly.) The slogan is a shorthand for the

argument that all the most glorious achievements in Islamic history—
the conquests, the empires, the knowledge production, the wealth—
occurred under some system of religious rule. Therefore, if we want
to revive this past glory in the modern era, we must reimpose such a
system. This argument holds that if a little Islam is good, then more

Omar Saif Ghobash
Islam must be even better. And if more Islam is better, then complete
Islam must be best.
The most influential proponent of that position today is ISIS, with
its unbridled enthusiasm for an all-encompassing religious state, or
caliphate. It can be difficult to argue against that position without seem-
ing to dispute the nature of Islam’s origins: the Prophet Muhammad was,
after all, not only a religious leader but a political one, too. And the
Islamist argument rests on the inexorable logic of extreme faith: if we
declare that we are acting in Allah’s name, and if we impose the laws of
m
Islam, and if we ensure the correct mental state of the Muslim popula-
tion living in a chosen territory, then Allah will intervene to solve all our
problems. The genius of this proposition—whether it is articulated by
hi
the fanatical jihadists of ISIS or the more subtle theocrats of the Muslim
Brotherhood—is that any difficulties or failures can be attributed to the
people’s lack of faith and piety. Leaders need not fault themselves or
ha
their policies; citizens need not question their values or customs.
But piety will take us only so far, and relying entirely on Allah to
provide for us, to solve our problems, to feed and educate and clothe our
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children, is to take Allah for granted. The only way we can improve the
lot of the Muslim world is by doing what people elsewhere have done,
and what Muslims in earlier eras did, in order to succeed: educate our-
selves and work hard and engage with life’s difficult questions rather
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than retreat into religious obscurantism.
THE MUSLIM INDIVIDUAL

od
Dear Saif,
At school, at the mosque, and in the news, you have probably heard a
lot about the Arab nation, the Arab street, the rightly guided people, and
the Islamic ummah. But have you ever heard people talk about the Muslim
so
individual or about Muslim individualism? Probably not—and that is

a problem.
The Prophet spoke about the ummah, or the Muslim community. In
the seventh century, that made sense. Out of nothing, Muhammad had
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built a large group of followers; at some stage, it became big enough to

be referred to as a distinct entity. But the concept of the ummah has
allowed self-appointed religious authorities to speak in the name of all
Muslims without ever asking the rest of us what we think. The idea of an
ummah also makes it easier for extremists to depict Islam—and all of the
world’s Muslims—as standing in opposition to the West, or to capitalism,
or to any number of other things. In that conception of the Muslim

world, the individual’s voice comes second to the group’s voice.
We have been trained over the years to put community ahead of in-
dividuality. That is why it sounds odd to even speak of “the Muslim
individual.” The phrase itself sounds almost unnatural to me, as though
it refers to a category that doesn’t exist—at least in the worldview that
Muslims have long been encouraged to embrace.
I don’t want that to be the case for you and your generation. Dialogue
and public debate about what it means to be an individual in the Muslim
m
world would allow us to think more clearly about personal responsibility,
ethical choices, and the respect and dignity that attaches to people rather
than to families, tribes, or sects. It might lead us to stop insisting solely
hi
on our responsibilities to the ummah and start considering our responsi-
bilities to ourselves and to others, whom we might come to see not as
members of groups allegedly opposed to Islam but rather as individuals.
ha
Instead of asking one another about family names and bloodlines and
sects, we might decide to respect one another as individuals regardless of
our backgrounds. We might begin to more deeply acknowledge the out-
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rageous number of people killed in the Muslim world in civil wars and
in terrorist attacks carried out not by outsiders but by other Muslims. We
might memorialize these people not as a group but as individuals with
names and faces and life stories—not to deify the dead but rather to
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recognize our responsibility to preserve their honor and dignity, and the
honor and dignity of those who survive them.
In this way, the idea of the Muslim individual might help us improve
od
how we discuss politics, economics, and security. If you and other mem-
bers of your generation start looking at yourselves as individuals first and
foremost, perhaps you will build better societies. You might take hold of
your fates and take hold of your lives in the here and now, recognizing
so
that there is no need to return to a glorious past in order to build a glori-

ous future. Our personal, individual interests might not align with those
of the patriarch, the family, the tribe, the community, or the state. But
the embrace of each Muslim’s individuality will lead to a rebalancing in
Ma
the Islamic world in favor of more compassion, more understanding, and

more empathy. If you accept the individual diversity of your fellow Mus-
lims, you are more likely to do the same for those of other faiths, as well.
Muslims can and should live in harmony with the diversity of human-
ity that exists outside of our faith. But we will struggle to do so until we
truly embrace ourselves as individuals.∂

The Opening of the North

Korean Mind
Pyongyang Versus the Digital Underground
m
Jieun Baek
O
hi
n a cold, clear night in September 2014, a man I’ll call Ahn
walked up to the edge of the Tumen River on the Chinese
side of the heavily guarded border between China and North
ha
Korea. At its narrowest points, the Tumen measures a little over 150
feet wide, and Ahn could easily see the North Korean side from where
he stood. In two bags, he was carrying 100 USB drives filled with films,
iT
television shows, music, and e-books from around the world.
Almost anywhere else, such material would be considered completely
innocuous. At this border, however, it constitutes highly illicit, danger-
ous contraband. In the totalitarian state of North Korea, citizens are
Al
allowed to see and hear only those media products created or sanctioned
by the government. Pyongyang considers foreign information of any
kind a threat and expends great effort keeping it out. The regime’s
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primary fear is that exposure to words, images, and sounds from the
outside world could make North Koreans disillusioned with the state
of affairs in their own country, which could lead them to desire—or
even demand—change.
so
Ahn is a defector who escaped from North Korea in 2004 and

now lives in the South Korean capital, Seoul, where he runs a non-
governmental organization that sends information into North Korea.
He is one of the dozens of defectors from North Korea whom I have
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interviewed in the past ten years. Defectors’ testimony is not always

reliable, nor is it enough to piece together an accurate portrait of life
JIEUN BAEK is the author of North Korea’s Hidden Revolution: How the Information
Underground Is Transforming a Closed Society (Yale University Press, 2016), from which this
essay is adapted. From 2014 to 2016, she was a Fellow at the Belfer Center for Science and
International Affairs at Harvard University. Follow her on Twitter @JieunBaek1.
m
hi
ha
iT
Al
od
so
inside the opaque and secretive country. But when combined with
Ma
other information, defectors’ stories offer invaluable insights.

At the edge of the river that night, Ahn knew precisely what to do;
he had made this kind of trip to the border many times before. With
his senses on high alert, he scanned the area for guards. Once he felt
certain that he wasn’t being watched, he placed his USB drives into a
plastic bin, which he wrapped in a thick plastic bag. He then tied the

Jieun Baek
package to a sturdy wire, grabbed one end, and hurled the bin into the
air. It landed in the water, close to the North Korean bank of the river.
There, a North Korean man whom I will call Ku stealthily waded in
and grabbed the bin.
Of the two men, Ku had the far more dangerous job: taking the
goods into North Korea. Ahn’s organization was paying him the
equivalent of approximately $100 to retrieve the USB drives, a sizable
fee that would allow Ku to provide for his household for a month or
two. But Ku was taking a huge risk: if
m
North Korean border guards caught him,
Many cracks have he could be beaten, sent to a prison
appeared in the wall that camp, or even executed. Ku climbed
hi
North Korea has built out of the river and shed his incrimi-
around its people. nating wet clothes. He changed into a
ha dry outfit and made his way back into
the city where he lives. (I’m withholding
the location at the request of Ahn’s organization.) There, Ku sold each
drive for about $1 on the black market to fellow citizens eager to get a
iT
glimpse of life on the outside.
Although North Korea is often referred to as “the hermit kingdom,”
over the past two decades, many cracks have appeared in the wall that
the state has built around its people. Rudimentary media-smuggling
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operations such as Ahn’s have helped North Koreans learn more about
their country and the outside world, often at great risk to themselves.
Despite the threat of punishment by North Korea’s brutal security
od
forces, distributing foreign information has become a profitable business

in North Korea. This is partly due to the ways in which the country’s
traditionally closed economy has changed in the past 20 years. From
1994 until 1998, an extraordinary famine swept North Korea, killing
so
hundreds of thousands—perhaps even millions—of people. In response

to its failure to feed its people, the government allowed small markets
known as jangmadang to open so that people could buy basic goods from
one another or barter. The jangmadang represented a rudimentary
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form of capitalism profoundly at odds with the hard-line communism

and state control of the economy that the government had enforced for
decades. But when the famine finally subsided, the regime decided to
continue tolerating most of the jangmadang, possibly out of a recognition
that the state alone could not reliably provide for the majority of its
people. Since then, the small, informal markets have evolved into
The Opening of the North Korean Mind
sophisticated, large-scale operations, some of which feature hundreds of

stalls selling a wide range of goods. The most reliable estimates put the
number of large markets in the country at somewhere between 380 and
730. There are many more smaller ones. According to the most reliable
estimates, around three-quarters of the North Korean population
depends partly or solely on private market activity in order to survive.
In addition to these so-called gray markets, which have made it
easier to distribute banned technologies and media, the more con-
ventional black market has also aided the influx of outside informa-
m
tion. North Korea currently derives much of its GDP from drug
production and trafficking, currency counterfeiting, and money laun-
dering. The illicit networks that support such activities have also
hi
created distribution opportunities for foreign media. Today, a motley
crew of foreign nongovernmental organizations, defectors, smugglers,
middlemen, businessmen, and bribable North Korean soldiers and
ha
officials have cobbled together a surprisingly robust network that
links ordinary citizens to the outside world through contraband cell
phones, laptops, tablet computers, and data drives.
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These digital goods have come to play an important (although
often invisible) role in North Korean society. Thanks to smuggled
media, more North Koreans than ever before now fully perceive the
gap between the rosy picture that the regime paints of their country
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and its leaders and the far grimmer reality. Just as important, many
have come to understand that the outside world hardly resembles the
wasteland of deprivation, immorality, and criminality that official
od
propaganda depicts.
This burgeoning awareness poses little short-term danger for the
regime of Kim Jong Un, which remains highly capable of repressing
its people. But in a totalitarian society where the authorities’ legitimacy
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and power depend to a large extent on their ability to delude the

population, a growing digital underground might represent a long-term
existential threat.
With its expanding nuclear arsenal and penchant for provocation,
Ma
North Korea is sure to remain a potential source of regional (and even

global) instability for a long time to come no matter what outsiders
do. But governments, organizations, and individuals seeking ways to
make North Korea a less repressive place and a less dangerous inter-
national actor should take heed of the power of information to change
the country from the inside.

Jieun Baek
COMBATING JUCHE
On June 11, 2012, a flash flood hit Sinhung County, in the North
Korean province of South Hamgyong. A 14-year-old schoolgirl named
Han Hyon Gyong desperately tried to keep her family’s portraits
of the country’s founder, Kim Il Sung, and his son and successor,
Kim Jong Il, above the floodwaters. She drowned trying to save the
sacred images.
For her efforts, the government posthumously granted her the Kim
Jong Il Youth Prize. Her parents, teacher, and Youth League leaders
m
also received awards, for helping foster her patriotism. Han’s school
was renamed after her, and the country’s official newspaper, Rodong
Sinmun, praised the system that “nurtures such children.”
hi
Such extreme devotion to the regime reflects the power of juche,
North Korean’s official ideology, which emphasizes the country’s
self-sufficiency and venerates the rulers of the Kim dynasty as quasi
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deities whose judgment and wisdom may never be questioned. In
1974, Kim Jong Il sought to systematize juche by issuing a list called
“Ten Principles for the Establishment of the One-Ideology System”;
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most of the principles involved acknowledging the absolute authority
of the supreme leader and pledging total obedience to the state. Kim
demanded that all North Korean citizens memorize the principles and
adhere to them in their daily lives, an order enforced through weekly
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“self-criticism” sessions and peer surveillance. This practice continues

today. During weekly meetings in classrooms, offices, and factories,
citizens recite the ten principles and are called on to criticize them-
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selves and one another for failing to live in perfect accordance with
juche. North Koreans begin participating in these sessions around the
time they enter first grade.
Having inculcated juche into its citizens from a very young age, the
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state does everything it can to ensure that as they grow older, they are
exposed to as little contradictory information as possible. One of the
most serious crimes that a North Korean can commit is to consume
banned media. According to Freedom House, “listening to unauthorized
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foreign broadcasts and possessing dissident publications are considered

‘crimes against the state’” in North Korea and “carry serious punish-
ments, including hard labor, prison sentences, and the death penalty.”
On a single day in 2013, according to JoongAng Ilbo, a major South
Korean newspaper, the government executed 80 people in seven cities
for violating such laws.
Every North Korean household has a state-sanctioned radio that

broadcasts official propaganda throughout the day. The volume of these
radios can be adjusted, but they cannot be turned off entirely. The
tuners are disabled. All news reports and
broadcasts go through several rounds of
internal censorship before they appear.
Families huddle close
Kim Jong Il’s book Guidance for Journalists together to watch illicit
instructs reporters and editors “to carry movies and TV shows.
articles in which they unfailingly hold
m
the president in high esteem, adore him and praise him as the great
revolutionary leader”—instructions that they faithfully follow.
With the exception of a few hundred or perhaps a few thousand
hi
elites, North Koreans have no Internet access. Schools, public librar-
ies, and offices are served by a hived-off intranet system known as
Kwangmyong. Trusted officials are tasked with scouring the Internet
ha
for material that they deem safe enough to add to the closed network,
such as select scientific articles and health-related information.
All households have to register their electronic media equipment
iT
with local authorities. Occasionally, inspectors go door-to-door to
see what’s inside people’s media players. If they find illegal content,
they make arrests and seize the contraband, which they send to their
superiors in Pyongyang. Prior to the spread of USB drives, forbidden
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movies and TV shows were often smuggled into the country on DVDs.
To prevent people from quickly ejecting and hiding banned DVDs
when a raid began, inspectors would shut off the electricity for an
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entire apartment building before entering it, trapping discs inside

players. The inspectors would then confiscate all the DVD players,
turn the electricity back on, plug them in, and press the eject buttons
to find out what the residents had been watching.
so
Such efforts highlight just how nervous digital technologies make

the regime. But they are a double-edged sword that also gives the
government a tool to better surveil its people and inundate them with
still more propaganda. Take mobile phones. North Korea, with an
Ma
estimated population of around 25 million, now has around three million

cell phone users. Almost all of them are limited to the state-run
Koryolink provider and network and can make only domestic calls,
which are subject to frequent monitoring. But some people now have
illegal phones that have been smuggled into North Korea for use near
the border, where they can connect to Chinese cellular networks. The

Jieun Baek
security services use detectors that can track down illicit calls that last
longer than five minutes. So to avoid detection, one must make a brief
call, relocate, then call again to continue the conversation.
Cell phones can carry content that authorities don’t want people to
see, but they are also easier to track than other conduits of illegal
information. Data transfers are monitored tightly and can alert author-
ities to anyone who might be accessing banned material. Police officers
often stop mobile phone users on the street to inspect their devices
for sensitive content; the officers sometimes seize phones and mete
m
out punishments on the spot. Koryolink has incrementally added fea-
tures such as cameras to its devices and has slowly rolled out services
such as text messaging and video calling. Users are now able to access
hi
approved intranet sites, including that of Rodong Sinmun; they can
also receive text messages from the ruling Korean Workers’ Party.
More problematic from the regime’s perspective are portable media
ha
players, since they are harder to track than cell phones. Many North
Koreans can now purchase black-market Chinese-made MP4 devices
that play videos stored on smuggled memory cards. MP4 players are
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small, and their rechargeable batteries last for about two hours at a time,
allowing people to watch movies without needing to plug in—a crucial
feature, since most North Korean households lack uninterrupted access
to electricity.
Al
North Koreans have also embraced the Notetel, a portable device

that can access media like a computer does—via USB drives, memory
cards, and DVDs—but also functions like a television and a radio. These
od
Chinese-made devices began appearing on the black market around

2005 and cost the equivalent of $30–$50, depending on the model. The
regime cracked down on them at first but then legalized the popular
devices in 2014 after requiring that all Notetels be registered with local
so
authorities. Since last summer, however, defector-led news organiza-

tions have reported that the regime has reversed course and is back to
prohibiting the possession of these devices.
Inspectors sometimes burst into a home and check to see if any
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media players are warm from use. To prepare for that event, many
Notetel users keep a legal North Korean DVD in their device at all times
so that during a raid they can pull out the USB drive holding the illegal
media that they’ve actually been watching, conceal it, and pretend
they’d been using the legal DVD all along. The power, and danger, of
Notetels is that they overcome “the twin barriers to foreign media
consumption—surveillance and power outages,” Sokeel Park of Liberty

in North Korea, a nongovernmental organization based in California,
told Reuters in March 2015. “If you were to design the perfect device
for North Koreans, it would be this.”
Of course, North Koreans don’t just have to worry about the authori-
ties: their neighbors could also report them for suspicious activity.
So North Koreans have developed various security protocols for watch-
ing banned media. Doors are locked, windows are closed, curtains are
drawn. Some people hide under blankets with their devices. Families
m
huddle close together to watch illicit movies and TV shows, sometimes
sharing earbud headphones—which, if held in just the right position,
produce enough sound for a few people to hear but not enough to
hi
leak through the walls.
THE JANGMADANG GENERATION ha

The North Koreans most affected by the influx of digital technology are
young people. They enjoy historically unprecedented access to foreign
information—which, according to many defectors, is undermining the
iT
grip that juche has traditionally held on young North Korean minds.
Every young defector I have met had watched foreign films and
shows, had read foreign books, and knew a decent amount about the
world outside North Korea before escaping the country. Defectors say
Al
that they are not unrepresentative in this respect and that many young
North Koreans with no interest in leaving their country nevertheless
take the risk of obtaining and consuming foreign media. As Min Jun,
od
a recent defector in his early 20s, told me, “In our generation, young
people get together quietly in each other’s homes, put on South Korean
K-pop, and have a little dance party. We have no idea if we’re doing it
right, but we dance with the music on low.”
so
On its own, such exposure to foreign culture probably wouldn’t mean

much. But a number of other factors also set young North Koreans
apart from older generations and increase the salience of their access
to outside media and digital technology. First, those younger than
Ma
35—about a quarter of the population—are known as the jangmadang

generation because they came of age buying food and other goods at
those small, semilegal markets. They have rarely, if ever, stood in lines
to collect state-allotted rations, as their parents and grandparents did
for decades. As a result, they are more capitalistic, more individualistic,
and more likely to take risks. Black and gray markets offer young people

Jieun Baek
a very particular kind of education, and participating in them leads to

a certain kind of savvy: in a society obsessed with rules, young North
Koreans have learned how to skirt some of them.
Second, younger North Koreans see themselves as more self-reliant
than their parents, because they don’t feel as though they’ve received
much of value from their government. Partly for this reason, some
North Korea experts see this younger generation as far less loyal to the
state and its leadership. “These people are, compared to their parents,
much more pragmatic; they are cynical, individualistic; they do not
m
believe in the official ideology,” noted Andrei Lankov, a leading expert
on North Korea, in a 2015 interview with the South Korean program
Arirang News. “They mistrust the government. They are less fearful of
hi
the government compared to their parents.” Although young North
Koreans continue to obey the laws and publicly respect the regime,
young defectors frequently claim that behind closed doors, their friends
ha
back home frequently mock the country’s leadership.
SMUGGLING IN THE TRUTH

iT
As North Koreans have developed a more accurate perception of their
country and the world, many have begun to feel a profound sense of
betrayal. That feeling, in turn, has fed a sense of distrust—one that
could prove corrosive in a totalitarian state built around a fanatical
Al
cult of personality.
For any real political change to take place, however, such distrust
would need to spur collective action—a big challenge, given the gov-
od
ernment’s ruthless prohibition of any group activity not expressly

sanctioned by the authorities. The regime forbids the formation of un-
official student groups and sports teams. Without express permission,
North Koreans are not allowed to host a social gathering late at night
so
or stay overnight away from their hometown in another person’s home.

The regime has also made it extremely difficult for North Koreans to
trust one another by developing a massive network of neighborhood-
level informants and offering rewards for exposing anyone who criticizes
Ma
the government. Finally, the authorities have vastly improved their

ability to monitor digital communications, making it extraordinarily
difficult to send sensitive messages, much less organize.
Despite these challenges, anyone with an interest in reducing the
threat that the Kim regime poses to its own people and to the rest of
the world should find ways to support the distribution of foreign
information and media in North Korea. Traditional diplomacy and

sanctions have failed to push Kim toward political and economic
reform and away from saber rattling and defiance. For decades, some
of the world’s most persistent and skilled negotiators have sought to
engage, entice, and coerce him, his father, and his grandfather. But
nothing has worked. If major powers have undertaken covert actions
to encourage a coup, those too have failed. Meanwhile, Pyongyang’s
nuclear weapons now deter any overt attempts at regime change and
the use of major military force.
m
If North Korea is going to change, it will have to change from
within. Boosting the flow of outside information and cultural products
may well be the single most sustainable and cost-effective way to
hi
encourage that. Governments, philanthropic groups, and individual
donors interested in the future of North Korea should consider fund-
ing nongovernmental organizations in South Korea, the United States,
ha
and elsewhere that work to get digital technology and foreign media
into the country. Especially important are efforts to get outside infor-
mation into the hands of North Korean military officers, intellectuals,
iT
and political elites. Also of great value are projects by nongovernmental
organizations to train North Korean defectors—who know the target
audience quite well—to assist in collecting media products and getting
them across the border.
Al
Critics of such efforts claim that North Korean authorities will

have little trouble cracking down if they come to believe that a line
has been crossed and that too much illicit information is reaching the
od
public. But this position is too dismissive of the intense thirst for
foreign media that North Koreans have displayed. It is difficult to
envision how the regime could sustainably ramp up its repression: if
its harsh measures have not deterred people from seeking out and
so
consuming banned media, it’s hard to imagine what would. North

Koreans have tasted forbidden fruit and have made it clear that they
want more, risking severe punishment just to steal a glimpse of the
outside world while hiding under the covers in a dark, locked room,
Ma
hoping no one will find out.∂

Make America Make Again

Training Workers for the New Economy
Katherine S. Newman and Hella Winston
m
D
espite their many differences, the major candidates in the
2016 U.S. presidential election managed to agree on at least
hi
one thing: manufacturing jobs must return to the United States.
Last April, the Democratic contender Hillary Clinton told a crowd in
Michigan, “We are builders, and we need to get back to building!”
ha
Her opponent in the Democratic primaries, Senator Bernie Sanders,
said the manufacturing sector “must be rebuilt to expand the middle
class.” And the Republican candidate Donald Trump bemoaned bad
iT
trade deals that he said had robbed the country of good jobs. “‘Made
in America,’ remember?” he asked a rally in New Hampshire in Sep-
tember. “You’re seeing it less and less; we’re gonna bring it back.”
It’s true that many manufacturing jobs have left the United States,
Al
with the total number falling by about a third since 1980. But the news
isn’t all bad. After decades of offshoring, U.S. manufacturing is under-
going something of a renaissance. Rising wages in developing countries,
od
especially China, and increasing U.S. productivity have begun to

make the United States much more attractive to manufacturers, who
have added nearly half a million jobs since 2010.
But these jobs are not the same as the millions that have disappeared
so
from the United States over the past four decades. Workers in contem-
porary manufacturing jobs are more likely to spend hours in front of a
computer screen than in front of a hot furnace. To do so, they need to
know simple programming, electrical engineering, and robotics. These
Ma
KATHERINE S. NEWMAN is Provost and Torrey Little Professor of Sociology at the

University of Massachusetts, Amherst.
HELLA WINSTON is a Senior Fellow at the Schuster Institute for Investigative Journalism
at Brandeis University.
They are the authors of Reskilling America: Learning to Labor in the Twenty-first Century
(Metropolitan Books, 2016), from which this essay is adapted.
are well-paying, middle-skill jobs that require technical qualifications—

but not necessarily a four-year college degree. Between 2012 and 2022,
these will account for half of all the new jobs created in the United States.
Yet the U.S. work force is woefully unprepared to take advantage
of this opportunity. In New York State, for example, almost 25 percent
of these jobs will likely go unfilled. According to a 2015 survey by the
consulting firm Deloitte, 82 percent of manufacturing executives expect
that they will be unable to hire enough people. The situation is all
the more troubling when so many young people in the United States
m
desperately need work.
There is a better way. In Germany, a “dual system” of vocational
training that mixes classroom learning with work experience has helped
hi
drive the youth unemployment rate down to historic lows. The United
States used to take a similar approach, but its commitment waned
after decades of federal neglect and cultural antipathy to manual labor.
ha
It’s long past time to resurrect it.
NOT WHAT IT USED TO BE

iT
In the years following World War II, the United States embraced
vocational education. High schools prepared students for highly sought-
after blue-collar work by training them to become aircraft mechanics
or automotive repair technicians. The United States had hundreds of
Al
vocational schools where students studied welding, construction, and

electrical engineering alongside a standard high school curriculum.
These schools helped create a thriving blue-collar middle class.
od
But by the 1960s, white-collar positions had started to outstrip

blue-collar jobs in number and prestige as the service sector came to
dominate the economy. In 1963, Congress passed the Vocational
Education Act, which provided federal funds to train students who
so
were at an academic or socioeconomic disadvantage. The legislation

was well intentioned but had the unintended consequence of encour-
aging the public to associate vocational education with troubled youth.
A decade later, in 1972, the sociologist Richard Sennett found that
Ma
many young people were embarrassed by their parents’ working-class

origins and that older people felt at an increasing distance from their
children as those children entered more prestigious jobs than their
own. The stigma has stuck: parents in even very poor neighborhoods
today believe that attending college is essential for a well-paying
career and that middle-skill jobs are an inferior choice for their children.

As a result, over the past four decades, the quality of technical education
declined as investment in equipment and teacher training fell off, and
private-sector interest has waned.
The move away from vocational education accelerated in the 1980s,
when a 14-month-long recession triggered a crisis of confidence in
U.S. education more generally. President Ronald Reagan’s National
Commission on Excellence in Education warned that the United
States was falling behind countries such as Germany and Japan on
international academic tests. Although the government enacted few
m
concrete reforms at the time, the commission’s emphasis on stan-
dardized assessment has endured. In 2001, it was formalized when, as
part of the No Child Left Behind Act,
hi
Congress made school participation in
Vocational schools once nationally recognized tests a condition
helped create a thriving ha of some federal education funding. The
blue-collar middle class. effects of this focus on academic results
have been mixed. Although high school
graduation rates have risen over the past
iT
three decades, along with the proportion of students taking more
rigorous math and science courses, the United States continues to
lag on international tests. In the most recent rankings, published by
the Organization for Economic Cooperation and Development in
Al
2012, U.S. students came in 24th in reading, 28th in science, and

36th in mathematics.
At the same time as worries about academic results were coming to
od
national prominence, scholars were also raising concerns about the

nearly three-quarters of the nation’s youth who entered the work force
straight after high school. As their employment options shrank and
their wages fell, they threatened to morph into an “urban underclass,”
so
in the words of the sociologist William Julius Wilson, of jobless, idle

men plagued by social problems: single parenthood, unstable house-
holds, and children doomed to follow their parents into poverty.
Although the decreasing investment in vocational education was a
Ma
natural reaction to an increasingly white-collar economy, policymakers

went too far. In 1988, the William T. Grant Foundation, a nonprofit
focused on youth development, pointed out that other advanced
industrialized countries, such as Austria, Germany, and Switzerland,
had maintained their vocational educational systems; U.S. high schools,
on the other hand, were simply ignoring the subject.
m
hi
ha
Vocation nation: an apprentice at a training center in Berlin, August 2012
iT
In 1994, concerned about the effects this neglect was having on poor
children, U.S. President Bill Clinton and his labor secretary, Robert
Reich, decided to take action. The administration proposed legislation,
which Congress passed as the School-to-Work Opportunities Act,
Al
that provided federal funds to encourage states and counties to design

joint programs between businesses and high schools and businesses
and community colleges to allow students to add on-the-job experience
od
to their classroom learning.

As with most large interventions, some elements of the program
worked and some didn’t. Among students less interested in academic
study, school-to-work (as the programs fostered by the act came to be
so
known) increased positive attitudes toward school, improved atten-

dance, and decreased dropout rates. But the program failed to achieve
its main goal: raising employment rates and wages for young people
who didn’t attend college. This failure was largely due to the fact that
Ma
THOMAS PETE R / REUTE RS
managers did not think of internships as serious tryouts for permanent

employment. A 1997 survey of participating employers in Wisconsin
found that the most common reason for taking part was a sense of civic
duty to contribute to the community; only a small percentage said
they thought the program would help them fill vacancies. When the
act expired in 2001, neither President George W. Bush nor anyone in

Congress suggested extending it. Indeed, between 2006 and 2008, the
Bush administration proposed reducing federal spending on vocational
education by $1.2 billion, claiming there was “little to no evidence of
improved outcomes for students.” Although in the end Congress
blocked the cut, that it was even proposed reveals how little faith the
administration had in the potential of vocational education.
Today, thanks in part to these shortsighted decisions, millions of
young Americans face a bleak future. Seven years after the end of the
Great Recession, the national unemployment rate among Americans
m
between the ages of 16 and 24 still stands above ten percent. And the
problem is far worse in some areas than others. The Southeast has been
particularly hard hit: in 2015, youth unemployment was a staggering
hi
17.4 percent in West Virgina, 16.2 percent in South Carolina, and
14.6 percent in Georgia.
LEARN FROM THE MEISTER

ha
Unlike the United States, Germany never abandoned vocational educa-
tion. About 55 percent of German students still choose to attend tech-
iT
nical schools, where they pursue three years of paid apprenticeship and
classroom learning simultaneously. Students then take national exami-
nations in one of 350 occupations, from manufacturing to services, to
certify their mastery of a specific set of technical skills. Once fully
Al
qualified, these students are able to walk into steady, well-paying jobs,
often at the firms that trained them. As a consequence, Germany’s
youth unemployment rate currently stands at just 6.9 percent, the lowest
od
in the industrialized world. The system creates a labor force that is the
envy of the world, enabling German firms to dominate the advanced
manufacturing market in Asia and Europe.
German companies own more than 3,000 manufacturing subsidiaries
so
based in the United States, but when they open production facilities
there, they are often surprised by the dearth of talent they encounter.
In a 2015 survey of these firms conducted by the German American
Chambers of Commerce, 69 percent said that they faced worse skill
Ma
shortages in the United States than in Germany.

Some of these companies have already taken matters into their own
hands. For example, MTU, a subsidiary of Rolls-Royce Power Systems,
opened a diesel engine factory in Aiken, South Carolina, in 2010. After
an initial wave of hiring, the company found that it had exhausted the
supply of nearby labor that was skilled enough to meet its requirements.
In Germany, MTU’s managers would have had a large pool of apprentices

to choose from. In Aiken, they had none. So they decided to start an ap-
prenticeship program modeled on the German system. The firm intended
not only to teach young people to build diesel engines but also to pre-
pare them to pass the same rigorous tests as their German counterparts.
MTU had originally hoped to replicate the German examinations in
the United States, but it found that South Carolina state law did not
allow students to spend enough time in the factory to bring them up
to the necessary standards. As a result,
m
the company adopted a curriculum that
was less in-depth than the German one.
Unlike the United States,
Nonetheless, MTU is happy with the Germany never abandoned
hi
workers it has hired and has continued vocational education.
the program, working closely with local
high schools to recruit new apprentices
ha
each year. Other employers in the state have copied the MTU program,
and South Carolina’s legislature has created a system of tax breaks for
companies that set up similar schemes.
iT
Although Germany may have led the way on vocational education, it
is not the only country to emphasize such training. Nearly 50 percent of
high school graduates in the EU are currently enrolled in programs that
are at least 25 percent vocational. Even in South Korea, which has a
Al
strong tradition of academically oriented schools, about a fifth of high

school students take their largest share of courses in vocational education
that meets international standards set by the Organization for Economic
od
Cooperation and Development. In contrast, the proportion of U.S.

students who take a large number of such high-standard courses has
fallen from 18 percent in the early 1980s to just six percent today.
Despite the success of vocational education in Germany and else-
so
where, it faces strong opposition from progressives in the United

States who insist that every student should earn a college degree.
Some critics, such as the National Education Policy Center, a research
group, argue that it locks students into a lower-status track. Vocational
Ma
education, they charge, reinforces class divisions, since poor children

are disproportionately likely to attend technical schools. “Dead-end
vocational classes,” according to the National Education Policy Center,
“prepare [students] for neither college nor a career.”
But children from poor households are already trapped by educa-
tional and social disadvantages from an early age. And the legacy of

racial discrimination, highly unequal funding for schools, low teacher

pay, and large class sizes in deprived areas are to blame for these
disadvantages—not vocational education. As for the college-for-all
movement, it pushes all students toward higher education despite
the fact that many are unlikely to ever get there, or to prosper if they
do. If instead they could take advantage of the kind of demanding
technical education and state-of-the-art training that young people
receive in other countries, it might set many of them up for reliable,
stable incomes in the future.
m
It’s also important to remember that the United States, unlike
Germany, has a highly flexible educational system, which allows young
people and adults multiple chances to enter college. So improving
hi
vocational options need not come at the expense of academic ones.
WORK TO BE DONE ha
Over the past few decades, the U.S. government’s approach to voca-
tional education has been haphazard and confused. The government
has pursued many initiatives halfheartedly and then abandoned them;
iT
policymakers often prefer to walk away from the entire problem.
But it would be foolish to give up on something that the country
has not made a sustained attempt to do well. There have been some
small efforts to replicate the success of companies such as MTU, but
Al
nothing on a scale that would create a chance of meaningful success. In

2015, for example, the U.S. Department of Labor awarded $175 mil-
lion to employers to train more than 34,000 new apprentices. This
od
was a step in the right direction, but the investment was woefully small
relative to the size of the U.S. labor market. In total, less than five
percent of young Americans are currently training as apprentices, mostly
in the construction industry. Yet hundreds of thousands more could ben-
so
efit from such programs.

To have a real impact, the federal government needs to significantly
boost its investment in vocational training. At the same time, states
should increase tax credits to encourage firms to create apprenticeship
Ma
programs like the one at MTU. South Carolina has taken the lead. There,
employers primarily fund apprenticeships, but to encourage sustained
investment in training, eligible businesses receive a $1,000 annual state
tax credit for up to four years for each apprentice they hire.
Doing these things nationwide would help, but it will not be enough.
For technical education to work, the government must provide more
than funding. Well-defined standards, assistance—and respect—for

teachers, and genuine cooperation between government and industry
are necessary. Since teachers cannot prepare a work force at arm’s length
from the firms that will employ their students, state governments should
pay teachers to get updated industry experience during summer holi-
days and reward them with promotions when their students succeed.
Community colleges also need to be part of the solution, since they
can provide expensive equipment to more students than any individ-
ual high school can. Springfield Technical Community College, in
m
Massachusetts, shows what can be done. In 2016, the state provided
grants so that the college could train students and workers to craft
computer-aided designs and to use high-speed lathes and computer-
hi
controlled machine tools. To teach these courses, the college hired
staffers from major manufacturing firms, such as Pratt & Whitney, so
that students could learn from experienced professionals and develop
ha
personal connections that would help during their job searches.
Manufacturing may be the most obvious candidate for training schemes,
but there is no reason why it should be the only one. As in Germany,
iT
students should apprentice with nurses, plumbers, pipe fitters, steam-
fitters, and medical and clinical laboratory technicians—professionals
whose median annual salaries range from $55,000 to $80,000.
The benefits of such education extend beyond the chance to earn
Al
higher salaries. Serious, well-designed, and well-implemented training

has been shown to improve not just students’ career prospects but
also their ability to diagnose, analyze, and solve complex problems.
od
According to the sociologist Nicole Deterding, those who attend

institutions such as Aviation High School, in New York City, score
higher on standardized tests, on average, and perform better on
measures of persistence than their counterparts in ordinary schools.
so
For too long, the profile of vocational education has picked up during
downturns, only to fall when the economy recovers. The result has
been schools with inadequate equipment, teachers without high-level
experience, and few shared standards to measure students’ skills. Fixing
Ma
these problems will require investing public money over a sustained

period, breaking down the barriers between businesses and schools,
and setting rigorous national and state-level standards. Building a real
system of technical education will restore Americans’ belief in the
dignity of blue-collar labor and give young people in the United States
the same opportunities their counterparts abroad enjoy.∂


Oil and U.S. Military Strategy
Charles L. Glaser and Rosemary A. Kelanic
m
I
n January 1980, U.S. President Jimmy Carter used his State of the
Union address to announce that in order to protect “the free
hi
movement of Middle East oil,” the United States would repel “an
attempt by any outside force to gain control of the Persian Gulf.”
Carter and his successors made good on that pledge, ramping up U.S.
ha
military capabilities in the region and even fighting the Gulf War
to prevent Saddam Hussein’s Iraq from dominating the region’s oil
supplies. Although Washington has had a number of interests in the
iT
Persian Gulf over the years, including preventing nuclear proliferation,
fighting terrorism, and spreading democracy, the main rationale for its
involvement has always been to keep the oil flowing.
For decades, this commitment has stirred remarkably little contro-
Al
versy. Even those who criticize U.S. alliances in Europe and Asia as
too costly usually concede that Washington must defend the Persian
Gulf, given that it accounts for roughly a third of global oil production.
od
But the world has changed dramatically since the United States adopted
this posture in the region. During the Cold War, the biggest threat to
U.S. interests there was the Soviet Union. U.S. policymakers worried
that if Moscow cut off the flow of oil, the gas-guzzling U.S. military
so
might not be able to win a major war in Europe. But since the demise
of the Soviet Union, the nature of U.S. interests in the reliable flow
of oil has shifted. Where once both national security and prosperity
were at stake, now only prosperity is.
Ma
CHARLES L. GLASER is Professor of Political Science and International Affairs at George

Washington University and Director of the Institute for Security and Conflict Studies at
George Washington University’s Elliott School of International Affairs.
ROSEMARY A. KELANIC is Assistant Professor of Political Science at Williams College.
This article is adapted from their contributions to Crude Strategy: Rethinking the US
Military Commitment to Defend Persian Gulf Oil (Georgetown University Press, 2016), which
they co-edited.
That has stark implications for U.S. policy. For one thing, the lack
of a national security imperative raises the threshold for military
involvement in the Persian Gulf, since most Americans would find it
less palatable to put U.S. soldiers in harm’s way to defend economic
interests. For another thing, since it is hard to put a value on security,
it becomes easier to assess the tradeoffs of a U.S. military commit-
ment to the Persian Gulf when only economic risks are at play. So one
must ask: Is Persian Gulf oil still worth defending with American
military might?
m
Answering that question requires grappling with four others. First,
if the United States ended its commitment, how much likelier would
a major disruption of Gulf oil be? Second, how much damage would
hi
such a disruption inflict on the U.S. economy? Third, how much does
the United States currently spend on defending the flow of Gulf
oil with its military? Finally, what nonmilitary alternatives exist to
ha
safeguard against a disruption, and at what price? Answering these
questions reveals that the costs of preventing a major disruption of
Gulf oil are, at the very least, coming close to exceeding the expected
iT
benefits of the policy. So it’s time for the United States to give itself
the option of ending its military commitment to protecting Gulf oil,
by increasing its investment in measures that would further cushion
the U.S. economy from major oil disruptions. And in a decade or so,
Al
unless the region becomes far more dangerous, the United States should
be in a position to actually end its commitment.
od
THREATS TO GULF OIL

Before one can accurately assess the current policy, a common mis-
conception must be put to rest. Politicians and pundits often contend
that in order to reduce its vulnerability to oil disruptions, the United
so
States needs to escape its reliance on imported oil by producing more

domestically, thus becoming “energy independent.” But this argument
fundamentally misunderstands how the global oil market works. In fact,
independence is a meaningless concept when it comes to a fungible
Ma
commodity. Because oil is sold on a global market, its price in the

United States is inextricably linked to its price everywhere else. Picture
the global oil market as a bathtub with many spigots (producers) and
many drains (consumers). It doesn’t matter how much oil from a
particular spigot flows into a particular drain. What matters is the
global oil price, which depends on worldwide supply and demand.

Any disruption that sharply reduces supply—lowers the level in the

bathtub—hurts all consumers drawing from the tub. So even if U.S.
oil imports from the Persian Gulf fell to zero, the United States would
still be affected by disruptions there that influenced the global price
of oil.
If the United States withdrew from the region, it’s possible to
imagine how such a disruption might occur, but none of the scenarios
seems likely. Consider the prospect that a Gulf country might con-
solidate control over enough of the region’s oil to manipulate the
m
global price, perhaps by conquering its neighbors. Theoretically, doing
so could give a hostile power enough
leverage to coerce oil consumers such
Is Persian Gulf oil still
hi
as the United States and its allies. The
worth defending with problem with this scenario is that there
American military might? is no such regional hegemon on the
ha horizon. Iraq has been devastated by
the U.S. invasion and the ensuing chaos. Iran has been weakened by
Western sanctions, and its leaders remain fixated on internal threats.
iT
Saudi Arabia, for all its meddling in Yemen’s civil war, has shown no
interest in territorial conquest.
A second hypothetical risk is that an extended war for regional
dominance could disrupt the supply of oil by damaging the Gulf’s oil
Al
infrastructure and making shipping too risky, even if no hegemon

emerged. But many of the factors that make the previous scenario
unlikely also apply to this one. Because none of the region’s powers
od
has a reasonable shot at establishing hegemony, all are likely to be

reluctant to start a large war with the goal of dominating the region.
One of them might try to conquer another major power, but even that
would prove difficult. Iran and Saudi Arabia do not make easy targets
so
for each other, separated as they are by the Gulf. Iraq is more vulner-
able, given its internal divisions and border with Iran, but Iran faces
its own challenges and has likely learned from the American example
how difficult conquering Iraq would be. Besides, the region’s oil infra-
Ma
structure might survive even a massive war in reasonably good shape;

the combatants continued to export oil all through the bloody Iran-
Iraq War in the 1980s, for example, albeit at reduced levels. After a
brief spike at the war’s onset, prices returned to prewar levels, and the
war didn’t prevent an oil glut in the mid-1980s that generated a dramatic
drop in prices.
m
hi
ha
No blood for oil: a U.S. soldier walks toward a burning oil well in Iraq, March 2003
iT
A third possible danger is that Iran might disrupt the flow of oil
through the Strait of Hormuz in order to coerce the United States
and its allies. Just 21 miles wide at its narrowest point, the strait is a
critical chokepoint through which 17 million barrels of oil pass every
Al
day—roughly 20 percent of global production. Although Iran almost

certainly lacks the military capabilities to close the strait completely,
it does have some ability to interrupt tanker traffic through the strait—
od
by laying mines and firing antiship missiles, for example—although

experts disagree on how much.
What’s far less clear is whether Iran would actually choose to
close the strait. After all, doing so would damage its own oil revenues
so
and generate fierce opposition from neighboring states. Indeed,

Iran has shown little inclination in the past to make such a move—
even during its war with Iraq. Admittedly, terminating the U.S.
military commitment would so upend the regional environment
Ma
that Tehran might rethink its past reluctance. It is conceivable that,

in a post-American Gulf, Iran might violate the nuclear deal and
then, if the West attacked or reimposed sanctions, try to cut the
flow of tanker traffic through the strait. Such a scenario is not likely,
REUTERS
but its probability would increase if the United States abandoned

its pledge to protect the strait.

The final major risk to the flow of oil from the Gulf is that a major
oil-exporting country might fall victim to massive internal instability
that interfered with its oil production. Saudi Arabia represents the
nightmare scenario. Not only does the country produce more than ten
percent of global output, but it also possesses spare capacity that could
be used to offset disruptions elsewhere. For the time being, however,
Saudi exports appear safe. Saudi security forces protect critical nodes
in the country’s oil infrastructure, and the other components of the
system can be repaired quickly, so sabotage by a terrorist group would
m
likely fail. Although Saudi Arabia faces many difficulties, there is little
prospect of the types of events that would cause massive disruptions for
an extended period, such as a civil war or a revolution. The Saudi royal
hi
family is widely perceived as legitimate, much of the population bene-
fits from the country’s oil wealth, and the regime’s security forces are
highly capable—all of which explains why Saudi Arabia managed to
ha
skate through the Arab Spring. Moreover, in the unlikely event of a civil
war or revolution, any new regime would almost certainly continue to
sell the country’s oil, given how heavily the economy depends on it.
iT
And even if the United States did end its direct military commitment
to the Gulf, it could still continue to discreetly shore up Saudi domestic
security, by training the country’s internal security forces, sharing intel-
ligence, and selling the government weapons and equipment.
Al
In short, if the United States did decide to abandon its military

commitment to the Gulf, the probability of a major disruption of
oil from the region would increase somewhat, chiefly in the Strait
od
of Hormuz, but would remain small. But how costly would such a
disruption prove?
THE COST OF A CUTOFF

so
Experts’ predictions about the economic losses an oil disruption

would cause vary widely, but the best current estimates suggest that a
one percent reduction in supply would result in an eight percent
increase in the global price of oil. Using that math, a disruption on the
Ma
magnitude of roughly ten million barrels per day—which would rep-

resent a complete loss of Saudi exports or about a 60 percent drop in
exports through the Strait of Hormuz—would cause the price of oil
to roughly double. The world has never experienced such a massive
disruption, however, so the actual impact on prices from such an event
is difficult to gauge, and there is the risk it could be larger.
Assessments of the U.S. economy’s sensitivity to oil prices also

vary widely, but a reasonable estimate is that a doubling of the price
of oil would shrink U.S. GDP by three percent—or approximately
$550 billion. Of course, smaller disruptions would result in smaller
economic losses, and the most catastrophic disruption—a long, com-
plete closing of the Strait of Hormuz—would cause larger ones.
But the actual costs to the United States would be far smaller,
because Washington could draw on the Strategic Petroleum Reserve,
its emergency underground oil stockpile, to relieve the pressure on
m
prices. The roughly 700 million barrels currently stored in the SPR
form part of the more than four billion barrels held by members of
the International Energy Agency (IEA), an organization founded in
hi
1974 to coordinate collective responses to major oil disruptions.
Those four billion barrels are enough to replace the oil that would be
lost during a complete, eight-month-long closure of the Strait of
ha
Hormuz. During the first months of a crisis, the United States could
release some 4.4 million barrels per day from the SPR, and the other
countries in the IEA could release an additional 8.5 million barrels
iT
per day from their reserves. China, which is not a member of the
IEA, could tap into the strategic petroleum reserve that it is building,
which is expected to have the capacity to replace 90 days’ worth of
China’s oil imports.
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What all of this means is that if the world experienced a massive

disruption of oil from the Persian Gulf, a coordinated international
release of various reserves could initially replace the vast majority of
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the daily loss. In all but the worst-case scenarios—far more severe
than anything seen before—the impact of a severe disruption would
be greatly cushioned.
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CARRYING COSTS
To complete the economic cost-benefit calculation of ending the
U.S. military commitment to protect Persian Gulf oil, one must
also tally the costs of keeping it. Much of those costs come from
Ma
buying and operating the forces that support U.S. war plans. Since
the end of the Cold War, Pentagon force requirements have called
for the U.S. military to have the ability to deter, defeat, and deny
two regional aggressors in different theaters at nearly the same time,
one of which is typically planned as the Persian Gulf. The idea behind
the two-war standard is to rule out the possibility that the United

States could become so tied up fighting a war in one region that it

could not confront an opportunistic aggressor in a second.
If the United States stopped preparing for a war in the Gulf, it
would have two broad options. The first would be to maintain its cur-
rent approach, continuing to plan to prevail against two aggressors
but elevating a new regional theater to replace the Gulf. The second
would be to shift to a one-war requirement. Given that for now, no
other region poses a sufficient threat to dislodge the Persian Gulf
from the two-war construct, the United States should find itself able
m
to adopt the latter option if it ended its commitment to protecting the
flow of Gulf oil.
Estimating the cost of meeting U.S. military requirements for the
hi
Persian Gulf is complicated because many of the forces that would be
used for contingencies there can also be used elsewhere. Although
experts have offered a range of figures, the best estimate—arrived at
ha
by considering the forces the United States deployed in the Gulf
War and changes in regional powers’ militaries since then—is that if
the United States moved to a one-war requirement, it would save
iT
roughly $75 billion a year, or about 15 percent of the U.S. defense
budget. The savings would be achieved by moving toward a smaller
force, down by two aircraft carrier strike groups, two army divisions,
and a few hundred air force fighter jets and bombers.
Al
But the costs of the commitment to the Persian Gulf go beyond

mere force requirements; the United States has also fought expensive
wars that were either directly or indirectly related to protecting U.S.
od
oil interests in the region. The United States launched the Gulf War
primarily to protect the flow of oil. And although the 2003 Iraq war
wasn’t fought for oil, the presence of oil explains why policymakers
thought it was so important to bring stability and democracy to the
so
region and why they worried so much about a nuclear-armed Iraq.

Ending the military commitment to the Gulf would thus yield still
larger savings, in both dollars and American lives.
Ma
A BETTER WAY?
Finally, it’s worth asking what alternatives to relying on the mili-
tary to protect Gulf oil are available. If a military commitment to
the Persian Gulf were the only way to reduce the economic risks of
an oil disruption, then there would be a stronger case for maintain-
ing the current policy. In reality, however, the United States could
pursue a wide range of nonmilitary options for increasing supply

and reducing demand, which would enhance its ability to weather a
major disruption.
On the supply side, the United States could improve its ability to
replace blocked oil by increasing the size of the SPR. If, for example,
the United States expanded the SPR by 50 percent, it would be able
to offset its share of global demand during a major oil disruption for
several more months. Assuming prices stayed in the range they have
been in during the past decade, from $35 to $115 per barrel, this expan-
m
sion would cost anywhere between $10 billion and $40 billion.
On the demand side, the key is to further reduce how much oil
the U.S. economy consumes, thereby insulating it from price in-
hi
creases. The transportation sector accounts for roughly 70 percent
of U.S. oil consumption, so this is the natural place to look for reduc-
tions. Dating back to George W. Bush’s
ha
presidency and continuing through
Barack Obama’s, the U.S. government
The United States should
has repeatedly raised fuel-efficiency position itself to end its
iT
standards for cars and light trucks, but military commitment to
it could do more to reduce consump- the Gulf eventually.
tion. Increasing taxes on gasoline would
encourage people to drive less and spur
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manufacturers to develop still more efficient vehicles. The govern-

ment could also offer additional incentives for consumers to purchase
vehicles powered by electricity or natural gas and subsidize the
od
construction of the infrastructure for fueling them. And it could

invest more in research and development in such areas as hydrogen-
powered cars.
Some of these demand-side investments—especially those in research
so
and development—offer uncertain returns, but taken together, they

would do much to reduce the damage inflicted by a large disruption of
Gulf oil supplies. If the United States spent between $100 billion and
$200 billion on a mix of these efforts, it could cut its oil consumption
Ma
in half by 2035. An investment at the upper end of this range—roughly

$10 billion per year—although certainly a great deal of money, would
represent just a fraction of the approximately $75 billion that Wash-
ington spends annually to defend the Gulf.
The United States could also pursue a variety of international efforts
to further reduce the economic effects of oil disruptions. In addition

to expanding the SPR, the country should work to convince its IEA
partners and other major oil-consuming countries to make compa-
rable increases in their reserves. Otherwise, in the event of a massive
disruption in supply, the United States would be left trying to provide
more than its fair share of the cushion, reducing the effectiveness of
its own investments. Washington should also pressure Gulf states—
above all, Saudi Arabia—to reduce their vulnerability to a closure of
the Strait of Hormuz by increasing the capacity of their pipelines
bypassing the strait. Although some such capacity already exists, these
m
states can afford to add more.
THE BEGINNING OF THE END
hi
An accounting of the costs and benefits of the U.S. military commit-
ment to the Persian Gulf shows that the current policy is not drastically
misguided: it is often appropriate to hedge against low-probability,
ha
high-cost events. Nevertheless, the case for ending that commitment is
far stronger than the conventional wisdom assumes. In terms of national
security, a cutoff of Gulf oil no longer poses a serious threat to the
iT
United States. And economically speaking, the country is well cushioned
against all but the worst oil disruptions and has options for further
reducing its vulnerability.
For now, therefore, the United States should maintain its mili-
Al
tary commitment to the Gulf but take steps to position itself to end
that commitment eventually. Over the next couple of decades, the
United States should invest in further reducing its vulnerability to
od
oil shocks on both the supply and the demand side. Taken together,
some combination of a larger SPR, improvements in fuel efficiency,
and additional pipelines that bypass the Strait of Hormuz would
yield substantial gains within a decade.
so
Once its greater resilience to oil disruptions is in place, the United

States should be prepared to adjust its commitment to the Gulf in
accordance with the threats in the region, particularly those posed by
Iran. The nuclear deal raises the possibility that the Iranian threat will
Ma
diminish down the road. With sanctions on its oil exports lifted, Iran
has more reason not to act aggressively and to keep Gulf oil flowing,
since it has more revenue to lose from a disruption. Moreover, be-
cause the country is now less likely to acquire a nuclear deterrent, the
prospect that it would feel emboldened to menace the Strait of Hormuz
has diminished. If Iran indeed becomes less threatening, and if U.S.
investments in nonmilitary alternatives significantly reduce the U.S.

economy’s vulnerability to an oil disruption, then Washington will
be well positioned to end its military commitment to protect the flow
of Gulf oil.
But if Iran grows more threatening, or if another significant danger
in the region emerges, then the United States will face a harder choice.
On the one hand, it could decide to end its military commitment
despite the increased probability of oil disruptions, taking comfort in
its improved resilience and directing the savings toward other priorities.
m
On the other hand, it might decide that its best option is to maintain
its military commitment to the Gulf, benefiting from a reduced sen-
sitivity to large disruptions but nevertheless continuing to spend large
hi
sums to protect the flow of Gulf oil. Of course, the decision would
also depend on the other factors behind the U.S. military commitment
to the Gulf, nuclear proliferation chief among them.
ha
What is striking, however, is that decision-makers have for decades
refused to question the necessity of protecting Persian Gulf oil, even
as the foundation for this commitment has weakened considerably.
iT
Failing to make further investments in resilience and failing to rethink
that commitment would be serious mistakes, guaranteeing that the
United States will forgo hundreds of billions of dollars in potential
savings and run the risk of sending its forces into the region for an
Al
unnecessary fight.∂
od
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Ma

Congress and War

How the House and the Senate Can
Reclaim Their Role
Stephen R. Weissman
m
I
t is easy to conclude that the U.S. Congress is simply incapable of
hi
playing a constructive role in matters of war and peace. Paralyzed
by gridlock, the hyperpartisan body regularly betrays its constitu-
tional responsibility to act as a serious check on the executive branch,
ha
often preferring instead to launch ideological crusades aimed at scoring
political points. Congress has spent thousands of hours on deeply
partisan investigations of the murders of four U.S. officials and con-
iT
tractors in Benghazi, Libya, but refrained from making any decision
on the military intervention that brought them to that chaotic city in
the first place. Although the Obama administration began arming and
training rebels in Syria over three years ago, neither chamber of
Al
Congress has held a debate over the U.S. policy in the civil war there.
And two years after the administration started sending U.S. forces
into Iraq and Syria to fight the Islamic State, or ISIS, Congress hasn’t
od
bothered to hold a vote on whether to authorize the use of force for

the campaign.
It doesn’t have to be this way, and indeed, it wasn’t always. Most
recently, from the late 1960s to the early 1990s, Congress weighed in
so
responsibly on conflicts in Southeast Asia, Central America, the Middle

East, and southern Africa. Sometimes, it blocked arguably misguided
action on the part of the executive branch, while at other times, it
partnered with it to improve outcomes. The congressional foreign affairs
Ma
committees took steps to develop independent perspectives on U.S.

policy, and party leaders assembled political coalitions to process clear,
binding legislation on the use of force. When Congress encountered
STEPHEN R. WEISSMAN is former Staff Director of the U.S. House of Representatives’
Subcommittee on Africa and the author of A Culture of Deference: Congress’s Failure of
Leadership in Foreign Policy.
Congress and War
large, formally covert CIA paramilitary operations, it subjected them

to the same open debate and legislative supervision as other war policies.
All these tools remain available today. The arrival of President
Donald Trump could revive Congress’ political will to use them. Trump
lacks diplomatic experience, possesses ill-defined views on military
intervention, and confronts a public disillusioned with recent engage-
ments. It’s the perfect time for congressional leaders to breathe new
life into an essential component of American democracy.
m
FROM INFLUENCE TO IRRELEVANCE
The U.S. Constitution gives Congress the power to declare war, while
assigning no such responsibility to the president. In terms of military
hi
authority, it refers only to the president’s “executive Power” and position
as “Commander in Chief of the Army and Navy.” As records from the
1787 Constitutional Convention show, the authors of the Constitution
ha
envisioned that the president would act alone only in emergencies, to
repel sudden attacks. Overall, the document calls for the legislative
and executive branches to share power, and when it comes to authorizing
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hostilities against foreign nations, it envisions Congress playing a major,
if not dominant, role.
During the country’s first century, practice largely conformed to
this principle. To be sure, presidents sometimes acted alone to dispatch
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the military to deal with Native Americans, pirates, and smugglers.

But these operations fell under the powers of the executive because
they were motivated principally by a desire to protect U.S. citizens from
od
enemies that were deemed to be nongovernmental groups, and they

never lasted long. Things began to change after 1900, when presidents
unilaterally dispatched forces to China, Central America, and the
Caribbean for broader foreign policy objectives, such as fostering U.S.
so
economic interests and preventing European countries from gaining

footholds in the Western Hemisphere. Yet Congress remained a vital
actor in foreign policy, debating and deciding on the United States’
entry into World War I, passing extensive legislation on neutrality in
Ma
the 1930s in a vain effort to avoid a new war, backing military aid to the
United Kingdom under the lend-lease policy to fight Nazi Germany,
and declaring war against Japan after it attacked Pearl Harbor.
Then came the Cold War. As worldwide conflict between the West-
ern and Soviet blocs took shape, presidents managed to acquire greater
military, diplomatic, and intelligence resources and invoked the need

Stephen R. Weissman
to act quickly in a dangerous world. From Korea to the Dominican

Republic to Vietnam, Congress yielded the decision to use force to
the executive branch. Out of public view, meanwhile, the CIA launched
major covert paramilitary operations in Cuba, Congo, and Laos.
Congress looked the other way.
But as the casualties piled up in Vietnam, leading members of
Congress and much of the public began to question the competence of
“the best and the brightest” in the executive branch who were running
the war. From 1969 to 1973, Congress
m
passed a series of laws banning the in-
As with Libya, Congress troduction or reintroduction of U.S.
has largely absented itself forces into Southeast Asia. It halted
hi
from the debate over CIA paramilitary aid to rebels in Angola
intervention in Syria. in 1976, repeatedly limited or blocked
ha similar aid to the contras in Nicaragua
throughout the 1980s, and imposed con-
ditions on renewed support for the Angolan rebels and counterinsur-
gency assistance to El Salvador’s military in the early 1990s. In 1991, it
iT
debated and voted in favor of the Persian Gulf War. When a nation-
building mission in Somalia went bad in 1993, killing 18 U.S. soldiers,
Congress voted to withdraw U.S. forces.
These initiatives usually had a partisan frame. Often, it was one or
Al
two Democratic-controlled chambers challenging a Republican presi-

dent. Yet partisanship was never decisive: efforts tended to succeed
only when one party could win over allies on the opposite side of the
od
aisle. Sometimes, Congress partnered with the administration or

some of its key officials. In 1989, for example, it struck a bipartisan
accord on Nicaragua policy with the George H. W. Bush administra-
tion, a deal in which the governing junta would agree to hold elections
so
in return for the phasing out of U.S. military aid to the contra rebels.
Legislation on Angola and El Salvador helped empower those in the
same administration who were trying to move those conflicts to
the negotiating table.
Ma
Congress started backsliding in the early 1990s, when the Clinton

administration sent forces to Haiti, Bosnia, and Kosovo without congres-
sional authorization. But after 9/11, it abdicated responsibility almost
entirely. In 2002, it granted President George W. Bush’s request
for authorization to use force in Iraq in a rushed process. Within a
week, three of the four party leaders in Congress signed on; moreover,
Congress and War
members ignored a crucial, late-arriving National Intelligence Estimate

on Iraq’s supposed weapons of mass destruction program. In 2009,
Congress declined to vote on Barack Obama’s decision to double the
number of U.S. forces in Afghanistan. Instead, members accepted
the administration’s argument that the eight-year-old law authorizing
force against those who “planned, authorized, committed or aided”
the 9/11 attacks somehow permitted the president to send tens of
thousands more troops to Afghanistan on a nation-building mission.
Most recently, it has been on Libya and Syria that Congress has
m
failed most egregiously to play its constitutional role. The interventions
in both countries have had disappointing, if not disastrous, results,
underlining the need for broader and deeper deliberation. By looking
hi
closely at what Congress did and didn’t do in these difficult cases, one
can understand how it can improve its performance in the future.
ABSENT IN LIBYA
ha
In late February 2011, as the Obama administration contemplated a
response to the uprising against Muammar al-Qaddafi’s regime in
iT
Libya, Congress failed to weigh in. Part of the blame lies with the
White House: it held substantial discussions with its NATO and Arab
partners, rebel leaders, and outside foreign policy experts, but not
with members of Congress. Yet leaders of the Republican-controlled
Al
House and the Democratic-controlled Senate made no attempts to

participate in the policymaking.
The passivity continued after the conflict began. On March 17, as
od
Qaddafi’s troops advanced toward the city of Benghazi, the UN Security

Council passed Resolution 1973, which authorized the use of force to
“protect civilians . . . threatened with attack.” Two days later, the
Americans, the British, and the French launched what would rapidly
so
become a NATO-led air war against the Qaddafi regime. Yet it was not
until March 31 that the Senate Foreign Relations Committee and the
House Foreign Affairs Committee held their first hearings on the
crisis. For the House committee, this would be its only hearing on
Ma
the intervention.
Over the seven months of the operation, the Senate committee,
chaired by the Democrat John Kerry, held just four substantive hearings.
Only one of them featured witnesses who were not administration
officials. Not once did the committee hear public testimony from
Defense Department officials or outside military analysts, who might

Stephen R. Weissman
have offered insights into the administration’s military strategy and

its likely consequences. The committee’s less public efforts to
seek information proved equally unbalanced. Members met
with Mahmoud Jibril, the leader of the rebel government, but
not with officials from the Libyan government or the African
Union, the regional organization that was conducting a
serious effort to mediate the conflict.
Most troubling was the committee’s failure to
penetrate the administration’s deceptive descrip-
m
tion of its goals in Libya. Obama avowed
that the campaign was “narrowly focused
on saving lives” and that “broadening
hi
our military mission to include
regime change would be a mis-
take.” In reality, however, from its
ha
early days, the intervention went
beyond humanitarian protection
and contravened Resolution
iT
1973, which backed UN and
African Union negotiations
among the warring parties
to achieve a cease-fire and a
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democratic political transition.

Leon Panetta later admitted that
in July 2011, just after he suc-
od
ceeded Robert Gates as secre-

tary of defense, he had “said
what everyone in Washington
knew but we couldn’t officially
so
acknowledge: that our goal in

Libya was regime change.”
During the Senate committee’s hearings, some Republicans evinced
concern about mission creep. But no one pursued Gates’ little-noticed
Ma
testimony during a March 31 hearing of the Senate Armed Services

Committee, that the operation might “degrade” the Libyan military
to the point where Qaddafi might be overthrown. Nor did any member
follow up on press reports in which Western officials acknowledged
that the mission was designed to compel Qaddafi to step down. The
Senate committee did not explore the implications of NATO’s strategy
Congress and War
m
hi
ha
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Al
od
so
of targeting all of the regime’s military assets or question its concen-

tration of firepower on the Tripoli area—including Qaddafi’s offices
Ma
and residence—which the regime controlled and where civilians faced

little threat.
Senators also failed to raise questions about the United States’ and
NATO’s nonnegotiable demands that Qaddafi unilaterally suspend
hostilities and turn contested areas containing up to one million people
over to the rebels. These demands were also at odds with Resolution

Stephen R. Weissman
1973, which encouraged a mutual cease-fire and did not mention uni-
lateral government withdrawals. Nor did anyone bring up the incon-
sistency between the declared mission of protecting civilians and the
military aid that U.S. partners were supplying to the rebels. And since
it largely ignored the elephant in the room—violent regime change—
the committee expressed little sense of urgency about how a country
with little civic or democratic tradition might fare after its strongman
was ousted.
It was not until the end of June that the committee passed an
m
authorization for use of force, which mainly repeated the administra-
tion’s public rationale. Democrats voted in favor, while Republicans
were split. No matter: Harry Reid of Nevada, the leader of the
hi
Democrats in the Senate, declined to take up the bill. The committee
did not publicly complain.
The House also failed to act on Libya, but at least it finally debated
ha
the war, for more than six hours, in June and July. It did so, however,
only after Dennis Kucinich, an Ohio Democrat, invoked a procedure
under the War Powers Act to force John Boehner, the Republican
iT
Speaker of the House, also from Ohio, to take up the issue. Boehner
arranged votes on three very different resolutions: one that would
authorize the use of force in Libya, one that would defund U.S.
drones’ participation in the operation while leaving other U.S. air as-
Al
sets in place, and one (Kucinich’s) that would mandate an immediate

U.S. withdrawal. None passed, leaving the impression that the House
had no coherent position on the intervention. But it’s conceivable
od
that a more carefully crafted compromise would have garnered a

majority. As some members pointed out, the House Foreign Affairs
Committee’s failure to bring a piece of bipartisan legislation to the
floor left them to choose among unsatisfactory alternatives. More-
so
over, many felt constricted by the lateness of the debate: with the
mission in Libya begun long ago, legislators feared that congres-
sional action might jeopardize the United States’ relationship with
its NATO partners.
Ma
The intervention ended on October 20, when rebels murdered

Qaddafi after a U.S. drone and two French jets struck his convoy. But
the costs continue to this day. Hundreds of lawless militias vie for
power in Libya. A new branch of ISIS has arisen there. Arms and
extremists have spread beyond the country’s borders, destabilizing
Mali and bolstering jihadists across Africa and the Middle East. The
Congress and War
chaos has collapsed coastal controls over migration into Europe. U.S.
relations with the African Union and Russia have suffered.
Given this outcome, it is useful to explore a counterfactual: what
would have happened if Congress had engaged early in the decision-
making process on Libya, exposed the inconsistency between U.S. aims
and Resolution 1973, and raised concerns about postwar chaos? Most
likely, energetic congressional probing would have weakened both inter-
national and domestic support for the intervention. Even support within
Obama’s party would likely have dropped, given that in the absence of
m
such inquests, a full third of House Democrats voted for Kucinich’s reso-
lution. So internally divided was the administration that it might well
have reconsidered its options. Perhaps it would have pursued its avowed
hi
policy of protecting civilians through limited military means while apply-
ing only political and economic pressure to bolster the rebels’ position.
Or maybe it would have combined humanitarian protection with support
ha
for the African Union’s credible negotiations to end the conflict. Argu-
ably, either option would have served the underlying U.S. policy of align-
ing the United States with the Arab Spring and preventing mass atrocities,
iT
while alleviating the destabilizing consequences of the intervention.
ASLEEP IN SYRIA
As with Libya, Congress has largely absented itself from the debate
Al
over intervention in Syria. Since March 2011, when the revolt against
President Bashar al-Assad’s government began, neither chamber of
Congress has passed any legislation dealing with the conflict. That has
od
remained the case even as the U.S. government has steadily increased
its involvement, furnishing rebels first with nonlethal aid and then
with arms and training.
Over the course of 2012 and 2013, both congressional foreign affairs
so
committees did hold a number of public hearings on Syria featuring

administration figures and outside experts. But the latter constituted
a rather narrow group; they tended to be former officials from
Washington-based think tanks, nearly all of whom called for greater
Ma
U.S. military support for the rebels. Moreover, although committee

members journeyed to Syria’s borders to visit refugee camps and
meet with rebel leaders and officials from neighboring countries such
as Jordan and Turkey, they never appear to have arranged similar
meetings with representatives of the Syrian government or its principal
backers, Iran and Russia.

Stephen R. Weissman
When Congress did attempt to shape U.S. policy toward the Syrian
civil war, it acted meekly and quickly retreated. In May 2013, the
Senate Foreign Relations Committee overwhelmingly adopted the
Syria Transition Support Act, which authorized economic sanctions
against the regime, support for democratic structures, humanitarian
assistance to the Syrian people, and military aid to rigorously vetted
rebels. But the bipartisan senators who voted for it appeared strik-
ingly uncertain about the adequacy of the weapons that would be
provided and the trustworthiness of the rebels receiving them. One
m
of the backers of the legislation, Barbara Boxer, a California Democrat,
tepidly endorsed it, saying, “we’re trying to shape [the conflict] just
a little bit.” “We all have trepidation,” she confessed, but the bill “gives
hi
the administration the wind at their back if they want to move forward.”
This was hardly the kind of congressional leadership the founders had
in mind. ha
Less than a month later, the administration effectively preempted
the committee’s proposal for overt, controlled military aid by rolling
out a program of its own, a covert CIA effort to arm and train the rebels.
iT
Reid never brought the committee’s bill to the floor for a vote, and the
committee never pressed him to. Bob Corker of Tennessee, its rank-
ing Republican, complained that the administration’s resort to covert
methods was “leaving the public and most of Congress in the dark”
Al
and “effectively prevents any real debate about U.S. policy.” He

was right.
There was one exception to this pattern, a fleeting moment of bi-
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partisan congressional influence. In August 2013, Assad’s regime

attacked civilians with chemical weapons, thus crossing what Obama
had called a “redline” a year earlier. After preparing to unleash retal-
iatory air strikes, the administration made an about-face and sought
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congressional approval for an attack. Leaders of both parties indi-

cated that they would support one, and the Senate Foreign Relations
Committee held a hearing on the question that exclusively featured
administration witnesses. But the public was not on board, and over
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the course of two weeks, constituents deluged their representatives

with phone calls and letters opposing the attack. Then, just as the
Republican-led House appeared on the verge of rejecting the presi-
dent’s plan (possibly along with the Democratic-led Senate), Russia
swooped in with a diplomatic initiative for the disposal of Syria’s
chemical arsenal, and the administration accepted the offer.
Congress and War
Yet this episode was not an unambiguous assertion of congressional

power. It was the president who kicked the decision about intervention
to Congress, forcing it to take a stand. Obama’s reluctance to act
alone stemmed in part from his awareness that, unlike in Libya,
there was no UN or NATO backing, and no imminent massacres. And
Congress was following the public’s fear of a wider war more than
leading an informed public debate.
Since then, Congress has reverted to acting as a bystander. As the
CIA ramped up its covert program—by June 2015, the agency had armed
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and trained 10,000 rebels at a cost approaching $1 billion a year—
Congress confined its discussion of the program to secret sessions of
the intelligence committees, which have a history of getting co-opted
hi
by presidents undertaking covert action. To this day, the House and
the Senate have held no public debate over the CIA program. Nor have
they held any such debate on other policy options, even as the admin-
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istration has flitted between contemplating the establishment of
no-fly zones and safe zones and launching negotiations for a political
settlement that would eventually displace Assad. The foreign affairs
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committees, meanwhile, have paid declining attention to the civil war
as their attention has shifted to the separate but related fight against
ISIS in Iraq and Syria.
What could a more energetic Congress have done? Above all, it
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could have made clear, through public discussion and serious legislative
proposals, that incremental doses of aid to Syria’s fractious insurgents
were unlikely to break the military stalemate. They would inevitably
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be counterbalanced by additional support to Assad by his foreign backers.

Congress could have debated the two basic options that the United
States and its allies have in Syria: use overwhelming military force to
occupy the country and install supposed moderates in Damascus or
so
employ diplomacy to push most of the Syrian parties and their foreign
allies toward a gradual political transition. The former course appears
politically infeasible, leaving patient diplomacy (perhaps buttressed by
limited, temporary military operations that do not derail negotiations)
Ma
to de-escalate a damaging civil war.
A TO-DO LIST FOR CONGRESS

Congress can do better. It possesses a number of proven instruments it
can employ to handle tough foreign policy questions. First, it should use
its foreign affairs committees to lead the way in formulating independent

Stephen R. Weissman
assessments of vexing policy choices. Public hearings should be timely,

balanced, and aimed at promoting dialogue. The classic model is the
Fulbright Hearings, the Senate Foreign Relations Committee’s rigor-
ous inquiries into the Vietnam War policies of the Johnson and Nixon
administrations, convened by its chair, William Fulbright. The most
formidable non-administration witnesses were of the type that rarely
appears in today’s hearings: the master Cold War strategist George
Kennan, the dissenting lieutenant general James Gavin, the renowned
Asia correspondent Robert Shaplen, the world-class Vietnam expert
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John Lewis, and a young Kerry, then a navy lieutenant representing a
new constituency, Vietnam Veterans Against the War. Fulbright’s
hearings, well covered by the media, galvanized the antiwar movement
hi
and spurred legislation to limit American involvement in Vietnam.
Today’s committees need to modernize to maintain the interest of
their busy members and a distracted public. It boggles the mind that
ha
despite technology that can bring relevant foreign voices and scenes
into the room in real time, the panels hear almost exclusively from
Washington insiders. It’s also disturbing that members allot so much
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time to introductory posturing at the expense of genuine questioning.
Congress’ committees and ad hoc entities can also learn from well-
focused international travel. In 1984, as the longtime Philippine dictator
Ferdinand Marcos refused to undertake reforms amid rising demo-
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cratic opposition and a communist insurgency, Richard Lugar, the

Indiana Republican who chaired the Senate Foreign Relations
Committee, dispatched a bipartisan staff study team to the country
od
for three weeks. Their public analysis of the political crisis helped
convince Congress to promote a democratic transition. In 1989, a
special House task force headed by Joe Moakley, a Massachusetts
Democrat, undertook an on-the-ground investigation of the mur-
so
der of six Jesuit priests in El Salvador. The group not only solved
the crime—fingering top officials in the Salvadoran military—but
also proved instrumental in getting Congress to limit U.S. military
assistance to the country and thus helped bring about a political
Ma
settlement ending the long civil war there.

Given the value of congressional travel, it was disappointing when,
in 2009, legislators meekly accepted stringent Defense Department
restrictions on congressional delegations in Afghanistan just as the
administration was contemplating a troop surge there. Limited to a
single overnight stay in the country per trip, congressional members
Congress and War
and staff tended to spend one day meeting with U.S. and Afghan
officials in Kabul and a second with U.S. troops outside the capital.
Virtually no time was left to hear from anyone who could have offered
competing perspectives: Afghans who didn’t work for the government,
journalists, or researchers.
Second, foreign policy leaders in Congress should take advantage
of their positions to fight back against deception on the part of the
executive branch. These days, legislators often sense that the admin-
istration is not telling them the whole truth but do nothing to call it
m
out—except in stirring postmortems.
In contrast, back in 1975, Dick Clark,
the Iowa Democrat who chaired the
Legislators often sense
hi
Senate Foreign Relations Subcommittee that the administration
on Africa, juxtaposed conflicting closed- is not telling them the
door testimony by State Department and whole truth but do nothing
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CIA witnesses over the Ford administra-
tion’s covert aid to paramilitary groups to call it out.
in Angola to convince his colleagues that
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the State Department was concealing from them an unsavory opera-
tion that the CIA was conducting alongside South Africa. As a result,
Congress killed the program.
In 2002, the congressional foreign relations and intelligence com-
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mittees muffed a golden opportunity to raise questions about the

administration’s dubious case for war in Iraq. After receiving the
National Intelligence Estimate on Iraq’s weapons of mass destruction,
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including a declassified version, they failed to point out the yawning

gap between the document’s conclusions and the evidence adduced
to support them.
The committees have powerful legal tools to help them fight back
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against the executive branch’s penchant for secrecy, but they almost
never use them. In 1990, Moakley’s task force looking into the murders
in El Salvador dangled the threat of a subpoena to persuade the Defense
Department to allow it to interview a U.S. major who possessed critical
Ma
information about the Salvadoran military’s involvement.

Third, party leaders should take the initiative to build political coali-
tions that enable Congress to speak with one voice. A good illustration
comes from Congress’ struggle with the Reagan administration over
aid to the contra rebels in Nicaragua: a leading role was played by
Jim Wright, a Texas Democrat who was then Speaker of the House.

Stephen R. Weissman
Tapping into his deep knowledge of Central America, this powerful

leader was often able to strike compromises among both liberal and
conservative Democrats and moderate Republicans to limit aid to
the contras. Another example comes from 1995, when Bob Dole, the
Senate majority leader and a Kansas Republican, co-authored a mea-
sure lifting a UN-sanctioned arms embargo against Bosnia, which
was under attack from separatists. Partly because the measure passed
both houses with veto-proof margins, President Bill Clinton became
more engaged in ending the war.
m
Finally, Congress must make clear and binding law. The ultimate
test of Congress’ determination to live up to its constitutional role is
whether it enacts such legislation to authorize or regulate a war—a
hi
standard Congress often met from the late 1960s to the early 1990s.
There is thus no good reason why large CIA paramilitary ventures—
which inevitably become public—should be sheltered from congressio-
ha
nal debate. These can and do lead to larger military interventions, which
is why Congress subjected the CIA programs in Angola and Nicaragua to
public votes. It should do the same for the Syrian program today.
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CONGRESS’ CHALLENGE
None of this will happen, of course, without the requisite political
will. It is encouraging, then, that members of both parties have
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increasingly expressed their dissatisfaction with Congress’ post-9/11

deference to the executive branch. Foreign policy luminaries in the
Senate—such as Corker and the Virginia Democrats Tim Kaine and
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Jim Webb—have called for reforms. During the House debate on

Libya in 2011, politicians from both sides of the aisle rebuked the
Obama administration for evading the time limits that the War Pow-
ers Act imposes on the president’s deployment of U.S. forces. The
so
Democratic-controlled Senate Foreign Relations Committee even

formally repudiated the Democratic administration’s legal rationale.
And in 2013, as the Obama administration contemplated striking
Syria, 192 House members (119 Republicans and 73 Democrats) de-
Ma
manded that Congress vote on the use of force.

Politically, the current era echoes the post–Vietnam War one, the
last period of congressional activism. Opinion polls confirm the
public’s widespread disillusionment with the wars in Afghanistan as
Iraq, as well as its fear that limited interventions, as in Syria, could
metastasize into major ones. Now, as before, partisan divisions help
Congress and War
frame the issues, but the boundaries have become much more fluid.
Opposition to intervention in both Libya and Syria made strange
bedfellows, with left-wing Democrats such as Kucinich voting the
same way as libertarian Republicans such as Justin Amash, a represen-
tative from Michigan. It would be wrong to assume that the new
Congress will remain passive because it is controlled by the president’s
party. Trump’s reluctance to pursue regime change in the Middle East,
for example, may create conflict with Republican hawks and earn
support from Democratic doves.
m
The missing ingredient from the previous era is leadership. In
the decades during and after Vietnam, the committee chairs, party
leaders, and other members who upheld the Constitution were not
hi
reflexively following opinion polls. They were thoughtful, committed,
sometimes courageous individuals who took real political risks to
better U.S. foreign policy. Their actions energized the rest of Con-
ha
gress, galvanized political constituencies, and cajoled presidents into
unexpected partnerships.
Today, a new generation of congressional foreign policy leaders has
iT
the opportunity to make its own mark. Some of them may find it
tempting to remain passive, whether because they remain more inter-
ested in tearing down their political opponents or because they fear
looking weak in the face of a foreign adversary. But they owe it to
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their country to take a more active role. As the great historian Arthur
Schlesinger, Jr., wrote, looking back in 1973, “History had shown that
neither the Presidency nor the Congress was infallible, and that each
od
needed the other—which may well be what the Founding Fathers

were trying to tell us.”∂
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Ma

ESSAYS
If we shut ourselves off
from the world, believe me,
there are plenty of people
waiting to fill our shoes.
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—John Kerry
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A Conversation With John Kerry 56 The Cruise That Changed China

Julian Baird Gewirtz 101
The Rebalance and Asia-Pacific Security
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Ash Carter 65 Egypt’s Nightmare

Steven A. Cook 110
How to Succeed in the Networked World
Anne-Marie Slaughter 76 Erdogan’s Journey
Halil Karaveli 121
Salvaging Brexit
Swati Dhingra 90
The Envoy
A Conversation With John Kerry
A
fter serving five terms in the U.S. reduced violence. That would be a
Senate—including four years confidence-builder.
m
heading the Foreign Relations As an incentive for them to do that,
Committee—and surviving one unsuc- they can’t get what they want—the
cessful run for president, John Kerry cooperation of the United States in
hi
became President Barack Obama’s going after Nusra [the al-Nusra Front]
secretary of state in February 2013. Since and isil [also known as the Islamic
then, Kerry, a decorated Vietnam veteran, State, or isis]—without that seven days.
ha
has been in near-constant motion, logging
more miles than any of his predecessors
(1,281,744 at last count). On September 13,
And unless we get our [allies in the]
opposition to comply, we don’t get the
establishment of the Joint Implementa-
Kerry met with Foreign Affairs’ managing tion Center, which would lead to the
editor, Jonathan Tepperman, in Washing- first [joint] targeting, which would be
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ton to discuss his tenure and his plans for the trigger for [Syrian President] Assad
his last months in office. to not fly in the agreed-upon zone.
There’s also a mechanism here for
You just negotiated a deal with the dealing with the most significant confu-
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Russians on Syria. How is it different sion exploited in [earlier negotiations],

from the last one, and what gives which was Nusra being integrated with
you the confidence that this one some of the opposition. That gave Assad
might work? cover to lump everybody together. Hope-
od
I can’t sit here and tell you with confi- fully, that will now be diminished
dence that it will work. What I’m saying significantly.
with confidence is that this is an oppor-
tunity, and it carries hope. But it depends How are you getting the word out to the
so
on a lot of moving parts. It’s very, opposition groups to separate them-

very complicated. selves from al-Nusra?
What makes it different, and the We’re reaching out through all of our
LEONHARD FO EG E R / REUTE RS
reason I have hope, is that it imposes a contacts to the armed groups on the
Ma
series of actions and responsibilities on ground and speaking with them very
the players in ways that will encourage directly and encouraging them to live
them to conform. For instance, Russia by this [agreement]. It’s not as if they’ve
has to meet our mistrust and skepticism been winning enormous amounts of
by providing seven consecutive days of territory in the last months or growing
in strength. So there are real reasons for
This interview has been edited and condensed. them to try to get to the table in Geneva.
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Kerry at the UN in Vienna,

January 2016
The Envoy
If we can get something moving there, one side completely happy and the
then there’s a prayer. other completely unhappy. You’ve both
People say, “Oh, my gosh, this can’t got to get something out of it, enough
work.” Maybe they’re right. But the that you’re prepared to go fight for [the
alternative is to throw up your hands deal] at home.
and add to the 450,000 people who
have already been killed—a spectacle Best-case scenario, where does this
that would put the world to shame. deal take Syria a year or two from now?
And I don’t think that’s acceptable. Best-case scenario is that you actually
achieve a political transition, a plebi-
m
A week ago, President Obama said that scite where the people choose their new
one of the things preventing an agree- leadership. You have a secular, constitu-
ment was the gap of trust between the tional, democratic Syria that is able to
hi
United States and Russia. What changed? stay united and embraces the rights of
We sat at a table and worked through a its minorities.
methodology that gave us each confi-
something. That could conceivably

ha
dence. Both of us are required to do
build some confidence that both sides

And how do you get there with someone
as intransigent as President Assad, who
just a few days ago said he’s still plan-
are serious about making this happen. ning to reconquer all of Syria?
People say things. Some of the opposition
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Do you see a model there for other areas still says Assad has to go tomorrow; I
of U.S.-Russian friction? don’t put a lot of stock in that [either].
Sure. We’re already doing it. When we Let’s see what kind of song Assad sings
were in Hangzhou, China last week for if Russia and Iran and others view it as in
Al
the G-20 meeting, President Obama their interest to keep the peace and find
put to President Putin a new way to a way forward. If you provide stability,
try to resolve the challenge of Ukraine and people begin to come home, and the
more rapidly. And we have a group dynamics begin to change, the politics of
od
working on it right now. Our hope is the negotiation will also change. You can’t
that we can get [Ukrainian] President predict every piece of that, but I’d rather
Poroshenko and Russia to a place where get to that problem than see the contin-
we’re simultaneously teeing up both ued disintegration of the country.
so
security and political measures that

will give each side confidence that the Don’t you think that has already
other is actually going to deliver. happened?
No. It’s close. But I think the country
Ma
So that’s the lesson from this Syria deal: can still be unified.
structure agreements with sufficient
incentives for both sides to comply? Can you envision a deal that the United
That’s the trick in any negotiation. States, Iran, and Russia can all live with?
Getting to yes means getting the other I can envision it. Whether they’re pre-
party satisfied that its interests are pared to compromise is up for grabs, and
being met sufficiently. You rarely have no one is going to telegraph his bottom

line at this point. But better to be at the We’ve limited the number of troops
table trying to test that through negotia- coming in. They’ve lost major battles
tions than witness the utter destruction in Iraq and Syria. We’ve taken back
of Aleppo and of Syria. communities and are bringing the
You’re choosing between very population back. I went out at the
difficult options here. If you decide—as president’s direction and put together
Americans seem to be pretty overwhelm- a coalition of 66 countries, and we’re
ingly disposed—not to put American working very effectively in a unified,
forces on the ground and go in and fight multilateral effort to get rid of this
another war in the region, then that’s scourge.
m
the bottom line. We’re also very involved in the
Colombia peace process. I want to see
You have only a few more months on the that come to fruition.
hi
job. What’s the one thing you’d most like Tpp [the Trans-Pacific Partnership]
to accomplish? is another key priority. We’ve got to
It probably will come as no surprise to get that done. It’s critical for business
ha
you, but there is not just one thing.
We are pushing extremely hard right
now to get the Paris agreement [on
and for the future of the region. It
would underpin the [administration’s]
rebalance [to Asia], and it’s also critical
climate change] ratified and in force. to important relationships, like with
The president and I want to see that Vietnam, where there are huge transi-
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brought to fruition. tions in the labor market as a result of
I would like very much, obviously, what we’ve done.
to see if we can put Syria in a better place. I can say with some confidence that
I’m working very hard on a Yemen resolu- our agenda is going to remain very
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tion right now with the Saudis and the full until the last day, including, I
Omanis and the Houthis and so forth. might add, the Oceans Conference,
We may even be able to get a cease-fire which we are sponsoring. We will
in the next few days. have some 35 foreign ministers here,
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We’re working very hard to try to 25 environment ministers, over 100

put Libya in better shape, working countries represented. We will have
with the Emiratis, the Egyptians, and 120 different initiatives. A dozen coun-
the [Libyan] Government of National tries will announce marine protected
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Accord, and I think we’re making some areas. We’re going to establish a new,
progress. It’s a little slower than I would global Safe Ocean Network that will
like, but we’re pushing on that very, help to protect sustainable fisheries
very hard. and put a new focus on the oceans.
Ma
The number one priority is making

sure that when we leave office, Daesh, When you look over your tenure, what’s
isil, is in extremis to the greatest degree the big one that got away?
possible. We’ve put a real dent in isil’s It’s obvious to everybody that the
capacity. They haven’t gained any terri- constant elusiveness of peace between
tory in almost 18 months. The leader- Israel and Palestine stands out as a
ship has been significantly diminished. continuing challenge.

The Envoy
What prevented progress? It seems trying to get the parties back to a place
that you’ve applied the same dogged where the next administration can pick
approach to a lot of different issues. things up.
That paid off on issues such as Iran but
didn’t work here. Why is that? You mentioned the TPP. One of the
Because you had intervening events extraordinary things about the TPP is
that just got in the way, frankly. the enormous gap between how the
professional foreign policy community
Events or personalities? sees it—as an essential good for the
A combination. You have to have United States and much of the world—
m
willing partners to complete an agree- and how much of the American public
ment. People have to want to get to and Congress sees it. What accounts
yes. And there are serious questions for that?
hi
about whether either side wanted to This is well-trod territory, but America
get there at that moment. has a growing gap between the haves
You also really did have external and the have-nots. Increasingly, people
ha
events. For instance, to hear on the
radio, while you’re in the middle of
negotiations, that a reconciliation is
perceive that they are not sharing in the
benefits of globalization. Anger has built
up over the unwillingness or inability of
taking place between Hamas and Congress to deliver on campaign prom-
Fatah—that was a kind of disruption ises. So people are angry. Their lives are
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that took a while to get over. not what they were before. Their purchas-
If we had more time, we could get ing power has gone down. In many cases,
back to the table. We have laid out a their income has gone down even if they
superb road map. We have a very clear have a job. Some people have lost jobs at
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sense of what has to be done. We did an age in life when it’s really hard to get
more work than any administration in another one. So these [anti-trade] forces
history on the security issues. General have been unleashed. But they don’t
[John] Allen and I worked extremely have to be—there are answers to all of
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hard in developing something that would those problems.

provide absolutely and unequivocally for
Israel’s physical security on its borders But what can we do about it now?
and so forth. And then there was a plan We have to make sure that people
so
for the internal security in terms of the understand that the problem is not
management of the [Palestinian] state trade per se. You have to make certain
that went way beyond anything that had that people get the things that they
been previously developed. It was really need, are paid a decent salary, get the
Ma
very precise, and I think people will benefits that they deserve. But don’t
come back to that. We have five more throw the baby out with the bath water.
months in which we will continue, as we You can’t give up trade when 95 percent
are right now, having a dialogue with of the customers are in other countries.
these parties. We’re not finished. We’re There’s a mistrust now, because the
not in the same kind of visible, day-to- political system has let people down. I
day direct-engagement effort, but we’re understand that. But I also understand

that we will not be better off as a country
if we do not get tpp passed and have
rules of the road for business that create
a race to the top rather than the bottom, The MIT Press
rules that increase rights for people
around the world, protect the environ-
ment, establish labor standards, and open
up markets. If we shut ourselves off from
the world, believe me, there are plenty
of people waiting to fill our shoes.
m
But this isn’t just a policy problem now;
it’s a political one. How do you overcome
hi
the fact that there’s so much political
hay to be made from opposing trade?
Well, I’m not in politics now. I’m in the
ha
job of trying to strengthen America’s
position in the world and make sure we
protect our interests and our values. I
believe that our interests lie in passing
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tpp, and I think we will cause a terrible
self-inflicted wound if we don’t succeed
in passing and ratifying it.
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There’s a growing sense both abroad

Ecologies of Power
and at home that the United States is Countermapping the Logistical Landscapes
retrenching. Perhaps as a consequence, and Military Geographies of the U.S. Department
of Defense
there’s also a growing sense that the Pierre Bélanger and Alexander Arroyo
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United States can be pushed around “A graphical masterpiece, Ecologies of Power

without consequences. You see this in is essential reading for anyone interested in how
the world is being made.”
various ways, whether it’s Russia buzz- —Charlie Hailey, author of Camps: A Guide
ing U.S. airplanes, Iran harassing U.S. to 21st-Century Space
ships in the Persian Gulf, or the Chinese

so
Drone
offering Obama a rude welcome on his Remote Control Warfare
recent visit. Meanwhile, U.S. allies are Hugh Gusterson
complaining about feeling unsupported. “The most intelligent analysis of drone warfare
currently available—and the most probing cri-
Does all of this make your job harder?
Ma
tique of how the United States is using drones

in places like Pakistan and Yemen.”
And what can be done about it?
—Michael Walzer, author of Just and
The nature of conflict today makes the Unjust Wars
job much harder. And the levels of
corruption and the number of failed
or failing states, coupled with massive mitpress.mit.edu
increases in population, lack of oppor-
tunity, an increase in radical religious
61
The Envoy
extremism, and the clash of modernity others, who gave materials—we took
with cultural conservatism—all of these that on. And we succeeded.
forces and more are creating a much more Look at aids in Africa today. Because
complex set of choices for American of our work, our leadership, and pepfar
foreign policy. [a Bush administration program], which
A lot of people react to this situation we continued and upped in many ways,
by throwing up their hands and saying, we’re on the cusp of seeing the first gen-
“America is not doing what it used to eration of children born aids free.
do.” But that’s just false. It could not be We’ve been engaged in Power Africa.
more incorrect. We’ve just put $3.4 billion We’re engaged in Nigeria. We helped
m
on the table for reassurance plans for [President] Buhari and the government
frontline states in Europe. Nato stands have a clean election. And we’re fighting
strong. Putin is not in Kiev; he’s wres- Boko Haram.
hi
tling with the eastern part of Ukraine— We’ve done the same thing in Soma-
and our sanctions have worked. lia, where we’ve put al Shabab on its
You know, buzzing an aircraft is not heels. We’ve strengthened amisom [the
ha
a casus belli. It’s a stupid activity. It’s
provocative. But it’s not the first time
in history it’s happened. And the fact
African Union peacekeeping mission
there]. We’re leading and have led
those efforts. You can look at what we’ve
is, our military is the strongest in the done with respect to Yemen, Libya, Syria,
world. Everybody knows that. I don’t the coalition we put together in Syria
iT
think anybody is going challenge our to fight Daesh.
military in some sort of overt way. Remember what was happening there
The United tates has made it crystal recently. Isil was sweeping across Iraq.
S
clear to President Putin and other would- Mosul fell. It didn’t fall because Ameri-
Al
be challengers that we’re going to take cans weren’t there; it fell because the
them on. Witness the strengthening of Shia army that had been built by [Iraqi
our alliances in the Mideast, the proactive Prime Minister] Maliki as a personal
strengthening of the Gulf Cooperation army didn’t have any investment in
od
Council, the work we’re doing on a standing and fighting in Mosul, which
missile defense system for the Gulf, is Sunni. They backed out on a sectarian
our continued leadership in Afghanistan basis and folded. And so in came isil.
(where we helped put this unity gov- And what happened? The president of
so
ernment together, which has kept the the United States made the decision to
country from imploding). send U.S. warplanes in, started attack-
Our leadership has been critical to ing isil, pushed them back, protected
keeping Ebola from moving around Baghdad, helped build the army, and we
Ma
the world. When people said a few have methodically taken back Tikrit,
years ago that there were going to be Ramadi, Fallujah, and are moving up
a million people dead by Christmas, now, surrounding Mosul, and have put
President Obama deployed 3,000 isil on its heels in Syria as well.
troops, and we—joining with the Then there’s American leadership on
French and the British, who did an climate change, on the oceans. Every-
amazing job, and the Japanese and where you look, things are happening,

and they’re happening with important and if you don’t meet those aspirations,
American input and leadership. the result will not be good.
My point is, we know what we can do
So why is this not recognized? Why is and how to do it. Helping would be an
the message not getting out? investment in America’s security. There’s
Because there are still these places of no “over there” anymore; “over there”
conflict and turmoil. People think it is everywhere. If we’re not engaged in
only takes an American decision to helping countries meet their challenges,
solve this or that problem. There is a then really dangerous, nihilistic ideologies
lack of awareness about the degree to can fill people’s heads, and you wind up
m
which the United States is already with conflict.
leading and working.
Look at what we’re doing on North Do you think we have a Congress and a
hi
Korea, on the sanctions in the un. Look public that would get behind such efforts?
at what we’ve done with the South China Not yet. But you have to ask for it. You
Sea. Look at what we’ve done with our have to educate. You have to talk about
ha
allies in Korea and in Japan. We are front
and center on Arctic issues, on Antarctic
issues. We’re leading on each one of
it. That’s why I’m laying it out for you
right now. At some point, people are
going to realize that this has to happen.
these things. We need to plus-up the budget of the
The United States is more engaged, State Department, increase the amount of
iT
involved and leading in more places, aid we give, and help the world through
and making a greater difference with this difficult moment. That is the price of
respect to global security than at any leadership. But in the end, it’s far cheaper
other time in American history. than spending the trillions of bucks that
Al
we spent on Afghanistan and Iraq and

Are your hands and the president’s other misadventures.
hands tied by the lack of appetite
among the public for direct U.S. inter- Do you think your administration is mak-
od
vention abroad? ing that case adequately?

Yes, yes. Of course. There is some I think we’re making the case. You’ll hear
restraint as a result of that. But we’re the president in the course of the cam-
also restrained by the fact that this is a paign make the case for why America
so
moment when the world needs a new needs to lead and be engaged. But we have
Marshall Plan. The world desperately a Congress that is not ready to embrace it.
needs the United States and other coun-
tries to contribute significantly to provid- By the administration’s account, the
Ma
ing education and jobs and opportunity nuclear deal with Iran is working well in
now. You have about 1.5 billion kids in achieving its narrow objective, which is
the world who are 15 years old or under. pausing work on Iran’s nuclear program. Is
They have smartphones or watch tv. there any reason to hope that Iran will
They know how the rest of the world is moderate its behavior in other areas, any-

living. They know what other people have thing that can be done to encourage it?
and they don’t. That drives aspirations, Well, the most important thing we can

The Envoy
do is make sure that we live up to our safe to say that I thought this might be
side of the bargain. a good job for four years.
I’m not going to give advice to the
Are we doing that? next secretary through an interview. I’d
Yes. We’ve even gone beyond it in rather deliver that advice personally.
efforts to try to make sure that banks But I will say, generally speaking, to
that are reluctant to do business [in anybody who wants to do this job or
Iran] for various reasons will do busi- another like it: it’s really important to
ness. We’ve lifted all the sanctions that make sure that the entire policymaking
we agreed to lift. But there are other establishment understands the country
m
problems. We need to help Iran recog- they’re making policy about and sees it
nize that it has some challenges inter- through the eyes of the people in it, not
nally it has to deal with relative to its just through our eyes. We don’t always
hi
own banking system, to its own busi- do that. We’ve gotten ourselves into
ness practices, its transparency. some real pickles because of it. The Iraq
war, the Vietnam War—things like that.
Can we really help Iran with those
problems?
ha
Yes. We could help on technology and
And you have to move fast in today’s
world. You don’t get a lot of latitude [for
mistakes]. There are too many things
certain other things. But it’s very diffi- coming at you too frequently. So you need
cult when Iran is engaged in Yemen a capacity for multitasking and intensity.
iT
and supporting Assad and supporting But I would say to anybody, you’re
Hezbollah and firing missiles that about to come into what is probably the
people deem to be threatening and so best job in the world—in many ways,
forth. That hugely complicates efforts better than being president, because
Al
to move forward rapidly. you’re not distracted as much by politics.

I think the supreme leader is, unfor- You’re focused on policy, diplomacy,
tunately, extremely suspicious of the particular negotiations. You can really
West and us. And that puts internal bear down, and you have the luxury of
od
pressures on the political system. That’s picking and choosing where to bear
unfortunate. But over time, my hope is down—something the president doesn’t
that Iran will rejoin the community of get to do.∂
nations in constructive ways to try to
so
make the region more stable and bring

peace to places that need it.
It’s no secret that you wanted this job for

Ma
a long time. Has it turned out to be what

you expected? And what’s your advice
for your successor, whoever it is?
Actually, I didn’t want this job for a
long time. I wanted to be president of
the United States, and ran and tried
and it didn’t work out. So I think it’s

The Rebalance and Asia-

Pacific Security
Building a Principled Security Network
m
Ash Carter
I
hi
n April, I laid a wreath at the Manila American Cemetery, in the
Philippines, where some 17,000 Americans are buried. Looking
up at the mosaic maps of battles whose names still echo throughout
ha
the U.S. Department of Defense—Guadalcanal, Midway, Leyte Gulf,
and more—it is hard not to appreciate the essential role that the
U.S. military has long played in the Asia-Pacific. Many of the individu-
iT
als buried in the cemetery helped win World War II. For the people
and nations of the region, they also won the opportunity to realize a
brighter future.
Since World War II, America’s men and women in uniform have
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worked day in and day out to help ensure the security of the Asia-
Pacific. Forward-deployed U.S. personnel in the region—serving at
Camp Humphreys and Osan Air Base in South Korea, at the Yokosuka
od
naval base and Yokota Air Base in Japan, and elsewhere—have helped
the United States deter aggression and develop deeper relationships
with regional militaries. The thousands upon thousands of sailors and
marines aboard the USS John C. Stennis, the USS Blue Ridge, the USS
so
Lassen, and other ships have sailed millions of miles, made countless
port calls, and helped secure the world’s sea-lanes, including in the South
China Sea. And American personnel have assisted with training for
decades, including holding increasingly complex exercises with the
Ma
Philippines over more than 30 years.

Every port call, flight hour, exercise, and operation has added a stitch
to the fabric of the Asia-Pacific’s stability. And every soldier, sailor,
airman, and marine has helped defend important principles—such as
ASH CARTER is U.S. Secretary of Defense.

Ash Carter
the peaceful resolution of disputes, the right of countries to make

their own security and economic choices free from coercion, and the
freedom of overflight and navigation guaranteed by international law.
Ensuring security and upholding these principles has long been
U.S. policy. During Democratic and Republican administrations, in
times of surplus and deficit, and in war and peace, the United States
has played a part in the region’s economic, diplomatic, and security
affairs. This engagement has persisted despite frequent predictions
that the United States would cede its role as the main underwriter of
m
security in the Asia-Pacific.
The results have been extraordinary: the Asia-Pacific has long been
a region where every nation has the opportunity to thrive. Indeed,
hi
economic miracle after economic miracle has occurred there. Japan,
South Korea, Taiwan, and the countries of Southeast Asia have all risen
and prospered, and China and India are now doing the same. Human
ha
progress has produced enormous gains, as education has improved
and democracy has taken hold. And compared with many other regions
in recent decades, the Asia-Pacific has experienced more stability
iT
and peace.
In light of the Asia-Pacific’s progress and all the economic, political,
and military changes it has produced, U.S. President Barack Obama
announced in 2011 that he had “made a deliberate and strategic
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decision—as a Pacific nation, the United States will play a larger and
long-term role in shaping this region and its future.” The so-called
rebalance to the Asia-Pacific sought to reenergize the United States’
od
economic, diplomatic, and military engagement there. After a decade

of counterterrorism and wars in the greater Middle East, the United
States—and the Department of Defense—would shift its investments,
commitments, and operations to the Asia-Pacific. Five years on, as the
so
Defense Department operationalizes the latest phase of the rebalance,

it is important to review the progress we have made as the United
States works to ensure that the Asia-Pacific remains a region where
everyone can rise and prosper.
Ma
A CHANGING REGION
The Asia-Pacific is increasingly becoming the world’s economic, politi-
cal, and military center of gravity. The population changes alone are
staggering: already, more than half of humanity lives in the region,
and by 2050, four Asian countries—India, Indonesia, the Philippines,

The Rebalance and Asia-Paciﬁc Security
m
hi
ha
Carter in the Philippines, April 2016
and Vietnam—are expected to have grown by approximately 500 mil-
iT
lion people in total. Despite some recent projections of reduced
growth, the Asia-Pacific remains a key driver of the global economy
and an indispensable market for American goods. The region is already
home to some of the world’s largest militaries, and defense spending
Al
there is on the rise. Preserving security amid all this change is a priority
for the United States and many other nations, since these dynamics
are producing opportunities not only for greater growth and progress
od
but also for greater competition and confrontation. And so the rebalance
was designed to ensure the continued stability and progress of this
unique region at a time of change.
To do so, Washington is strengthening economic ties with the
so
region because the economic destinies of the United States and the
Asia-Pacific are intertwined. As Asian economies continue to grow,
the United States wants to reinforce the open and inclusive approach
that has benefited so many in the region. Thus, one of the most
Ma
important initiatives of the rebalance is the Trans-Pacific Partner-

E Z R A A C AYA N / R E U T E R S
ship, or tpp, which aims to bind the United States more closely
together with 11 other economies, guarantee a trading system with
high standards, and support American exports and higher-paying
American jobs. The tpp is an opportunity that the United States—
and Congress—should not miss.
Ash Carter
Through the rebalance, the United States has also reenergized its
diplomacy in the region. In addition to increased visits to the region
by the president and his cabinet, the United States is playing a critical
role in the conversations that are helping determine the Asia-Pacific’s
economic, political, and security future. And in many cases, the United
States has hosted these talks. For example, in February, Obama hosted
the first-ever U.S.-based leaders’ summit of the Association of
Southeast Asian Nations (at Sunnylands, in California), and in Sep-
tember, I hosted the ten defense ministers of asean in Hawaii to
m
discuss regional security challenges.
The Pentagon is operationalizing the military part of the rebalance to
ensure that the United States remains the primary provider of regional
hi
security for decades to come. The first phase of the rebalance sought to
enhance the U.S. military’s force posture
ha so that the United States continues play-
The Asia-Pacific is ing a pivotal role from the sea, in the air,
increasingly becoming and underwater. It also sought to make
the world’s economic, our posture in this vast region more
iT
political, and military geographically distributed, operationally
resilient, and politically sustainable. The
center of gravity. Defense Department has committed to
homeporting 60 percent of its naval and
Al
overseas air assets in the region. It has also announced plans to modernize
its existing footprint in Japan and South Korea. And while maintaining
a robust presence in Okinawa, Japan, it began to realign U.S. marines
od
from a highly centralized posture there to additional locations, including

Australia, Guam, and Hawaii (with Guam serving as a strategic hub).
In the rebalance’s second phase, which I launched last year, the
Pentagon is continuing to place some of our best military personnel
so
in the region and deploying some of our most advanced capabili-

ties there. Those capabilities include F-22 and F-35 stealth fighter
jets, P-8A Poseidon maritime patrol aircraft, V-22 Ospreys, B-2
bombers, and our newest surface warfare ships. The Defense Depart-
Ma
ment is also devoting resources to new capabilities critical to the

rebalance. We are increasing the number of surface ships and mak-
ing each of them more lethal, and we are investing in Virginia-class
submarines, advanced undersea drones, the new B-21 long-range
strike bomber, and state-of-the-art tools for cyberspace, electronic
warfare, and space.

The Defense Department is also developing innovative strategies

and operational concepts and practicing these new ideas in training
exercises, both on our own and with partners. For example, this past
summer’s Rim of the Pacific (rimpac) multilateral maritime exercise—
which occurs every two years and is the largest of its kind in the world—
brought together 26 countries to work to promote open sea-lanes.
In a remarkable show of cooperation, the United States and China
even sailed together from Guam to Hawaii for the exercise, conducting
several practice events along the way, including one to enhance search-
m
and-rescue capabilities.
STRENGTHENING DEFENSE RELATIONSHIPS
hi
As rimpac demonstrates, the United States’ defense relationships
with allies and partners form the foundation of its engagement in the
Asia-Pacific. These ties have been nurtured over decades, tested in crisis,
ha
and built on shared interests, values, and sacrifice. Under the rebalance,
the Defense Department is modernizing these alliances and partner-
ships to ensure that they will continue to serve as the bedrock of the
iT
region’s stability and prosperity.
In East Asia, the U.S.-Japanese alliance remains the cornerstone of
Asia-Pacific security. And with the new defense guidelines that Washing-
ton and Tokyo signed last year, the alliance has never been stronger or
Al
more capable of contributing to security around the region and beyond.

Updated for the first time since 1997, the guidelines take new trends
and technologies into account and enable U.S. and Japanese forces to
od
work together more closely and on a wider range of contingencies—

including those below the threshold of conflict and those in space
and cyberspace.
The U.S.–South Korean alliance took a major step forward in
so
2014, when the two countries agreed to a conditions-based, rather

than timeline-based, approach to determining when South Korea
would obtain operational control of alliance forces in the event of a
war. And in July of this year, as part of an effort to defend against
Ma
North Korean ballistic missiles, our two countries decided to deploy

an advanced missile defense battery, called thaad (Terminal High
Altitude Area Defense), in South Korea at the earliest possible date.
The U.S.-Australian alliance, for its part, is becoming more and more
a global one. The two countries are continuing their close defense
cooperation not only across the region, including through a bilateral

Ash Carter
force posture initiative, but also outside the region, in the fight to
accelerate the defeat of the Islamic State, or isis.
As Obama has made clear, the U.S. commitment to the Philippines
is ironclad. Under the rebalance, the alliance has made great strides.
U.S. and Philippine personnel regularly train together, and thanks to
the landmark Enhanced Defense Cooperation Agreement, signed in
2014, the U.S. military will help modernize the Philippine armed
forces. Meanwhile, through the U.S.-Thai alliance—one of the United
States’ oldest in the region—the United States is helping Thailand
m
better defend itself.
Beyond alliances, the United States is also deepening its partner-
ships with friends across the region. For example, the U.S.-Indian
hi
relationship is destined to be one of the most significant partnerships
of the twenty-first century. The United
ha States and India are two great nations
China’s model is out of that share much in common: democratic
step with where the Asia- governments; multiethnic and multi-
Pacific wants to go. cultural societies with a commitment
iT
to individual freedom and inclusivity;
and growing, innovative, and open economies. In June, the White House
recognized India as a “major defense partner,” a designation that will
facilitate defense trade and technology sharing with the country on a
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level that the United States reserves for its closest friends and allies.
As part of what I have called a “strategic handshake”—with the United
States reaching west in its rebalance and India reaching east in its Act
od
East policy—the two countries are undertaking military exercises

and strengthening the bilateral security relationship to face common
challenges. There’s also a technological handshake between the two
countries’ militaries. Four years ago, the United States and India cre-
so
ated the Defense Technology and Trade Initiative to take advantage

of both countries’ industrial and technological capabilities, a program
that dovetails with Prime Minister Narendra Modi’s “Make in India”
campaign, which is aimed at boosting domestic production. As a result,
Ma
the two countries are starting to jointly develop and produce a wider
range of defense projects.
The rebalance has also helped the United States develop deeper
partnerships across Southeast Asia. Obama’s historic visit to Hanoi in
May was just the latest demonstration of how dramatically the U.S.-
Vietnamese partnership has been strengthened: the United States has

lifted the ban on lethal weapons sales to Vietnam, which will help the
country’s military get the equipment it needs. The U.S.-Singaporean
relationship also continues to grow. In December 2015, the two countries
signed the Enhanced Defense Cooperation Agreement. In addition,
the U.S. Navy sent P-8A Poseidon maritime patrol aircraft on their
inaugural rotation to Singapore, where we will also deploy up to four
U.S. littoral combat ships on a rotating basis. Meanwhile, the United
States is working with Indonesia and Malaysia to help them even better
meet their own security challenges and to promote regional security.
m
The rise of China, of course, is also having a profound impact on the
Asia-Pacific. The United States welcomes the emergence of a peace-
ful, stable, and prosperous China that plays a responsible role in and
hi
contributes to the region’s security network. Many countries seek
beneficial and productive relationships with China, but concerns are
growing about some of its actions and its willingness to accept regional
ha
friction as it pursues its self-interest. Although China has long benefited
from the regional principles and systems that others, including the
United States, have worked to establish and uphold, with its actions on
iT
the seas, in cyberspace, in the global economy, and elsewhere, Beijing
sometimes plays by its own rules and undercuts those principles.
China’s model is out of step with where the Asia-Pacific wants to
go; it reflects the region’s distant past, rather than the principled
Al
future the United States and many others want, and its approach is
proving counterproductive. China’s actions are excluding it from the
rest of the Asia-Pacific—erecting a Great Wall of self-isolation—at a
od
time when the region is coming together economically, politically, and

militarily to promote shared interests and a principled order. As a
result, countries across the region are voicing concerns—publicly and
privately, at the highest levels, in regional meetings, and in global
so
forums—about China’s actions.

The United States remains committed to working with China to
ensure a principled future for the region. The two countries have a
long-standing military-to-military relationship. The U.S. and Chinese
Ma
militaries recently completed two confidence-building measures, one

on maritime rules of behavior and another on crisis communications,
and we regularly participate together in multilateral exercises. Through
these actions, our two countries have made great strides in forging
more and better communication channels and reducing the risk of
miscalculations that could lead to crises.

Ash Carter
DEVELOPING A PRINCIPLED SECURITY NETWORK

The rebalance to the Asia-Pacific will also help the United States play
a critical role in the region’s developing security network. This in itself
is another change for such a dynamic region: unlike elsewhere in the
world, in the Asia-Pacific, a formal regionwide structure, akin to nato
in Europe, has never taken responsibility for promoting peace and
stability. That has made sense given the Asia-Pacific’s unique history,
geography, and politics. Yet as the region becomes more politically
and economically interconnected, its militaries are also coming to-
m
gether to plan together, train together, and operate together more than
ever before.
The growing Asia-Pacific security network weaves every state’s
hi
relationships together to help their militaries do more, over greater
distances, more efficiently. It allows countries to take coordinated action
in response to humanitarian crises and natural disasters, address common
ha
challenges such as terrorism, and ensure the security of and equal access
to the commons, including vital waterways. Recent examples of this
networked approach can be seen in collective responses to Typhoon
iT
Haiyan in 2013 and the Nepalese earthquake of 2015.
Most important, this is what I call a “principled and inclusive security
network.” It is inclusive, because any nation and any military—no matter
its capabilities, budget, or experience—can contribute. Everyone gets
Al
a voice and no one is excluded, and hopefully no one chooses not to

participate. As this security network reflects the principles that its
members have upheld for decades, it will help them realize the prin-
od
cipled future that many in the region have chosen.

By sharing the burden for regional stability, this network represents
the next wave in Asia-Pacific security. To help lead it, the United
States is bringing its unique capabilities, experience, and influence to
so
bear. For example, the Defense Department is implementing the South-

east Asia Maritime Security Initiative, an initial $425 million, five-year
U.S. commitment to build maritime domain awareness and security
in Southeast Asia. More than simply providing money or hardware,
Ma
this initiative will help Indonesia, Malaysia, the Philippines, Thailand,

and Vietnam work with one another and with the United States so that
everyone can see more, share more, and do more to ensure maritime
security in the region’s vital waters.
The Asia-Pacific security network is developing in three additional
ways. First, some pioneering trilateral mechanisms are bringing together

like-minded countries that previously cooperated only bilaterally. The

U.S.–Japanese–South Korean partnership helps coordinate responses
to North Korea’s nuclear and missile provocations, and earlier this
year, the trio conducted its first-ever
trilateral ballistic missile warning exer-
cise. For the past three years, the United
We plan to do more, not less,
States, India, and Japan have conducted in the Asia-Pacific for
the Malabar naval exercise together, decades to come.
showcasing how yet another trilateral
m
relationship is starting to provide practical security cooperation that
spans the region. And starting last November, the United States and
Thailand brought Laos into a successful program on the disposal of
hi
explosive ordnance, and now the three are training together to eliminate
this danger.
Second, many Asia-Pacific countries are cooperating on their own,
ha
without the United States. India has ramped up its military’s training
with Vietnam’s military and coast guard. Australia, India, and Japan
held a trilateral dialogue last year, marking a welcome addition to the
iT
region’s security network. Japan is also working to build the capacity
of the Philippine maritime forces. And this year, Indonesia, Malaysia,
and the Philippines agreed to conduct joint counterpiracy patrols.
Third, and even more broadly, many countries in the region are
Al
creating a multilateral security architecture through the asean Defense

Ministers Meeting–Plus. This initiative, which convenes the defense
ministers of all ten asean members plus those of eight other countries,
od
fills the growing need for an action-oriented, asean-centric institution

that builds trust and facilitates practical security cooperation.
The principled security network is not developing in response to
any particular country. Rather, it demonstrates that the region
so
wants cooperation, not coercion, and a continuation of, not an end

to, decades of peace and progress. More important, since this network
is not closed, nations can more easily work together. For example,
although the United States and other nations have some disagree-
Ma
ments with China, they are committed to working through these

problems, bilaterally and through the network, in ways that do not
destabilize the region.
The network will also help ensure stability amid a number of se-
curity challenges. North Korea continues its provocative behavior.
Violent extremism has been no stranger to the Asia-Pacific over the

Ash Carter
past several decades, and terrorist organizations, including isis, continue

to operate in countries throughout the region. The heavily traveled
Asia-Pacific sea-lanes make attractive targets for pirates seeking to
steal goods or hold ships and crews for ransom. And already prone to
earthquakes and volcanoes as part of the Ring of Fire, the Asia-Pacific
also regularly suffers from devastating storms, worsened by accelerating
climate change.
And then there are the challenges unique to this region, including
those resulting from its changing economic, political, and military
m
dynamics. Thanks to coercive actions by some states, most notably
China, contentious and long-running regional disputes, particularly
at sea, have grown more tense in recent years. Indeed, in the South
hi
China Sea, a transit route for approximately 30 percent of the world’s
maritime trade last year, including about $1.2 trillion in ship-borne
trade bound for the United States, there is a growing risk to the region’s
ha
prosperous future.
The United States is not a claimant in the current maritime disputes
in the Asia-Pacific, and it takes no position on which party has the
iT
superior sovereignty claim over the disputed land features. But Wash-
ington supports the peaceful resolution of disputes, especially through
mechanisms such as international arbitration. It sees the July ruling by
the Permanent Court of Arbitration on maritime claims and activities
Al
in the South China Sea as an opportunity for the region to recommit

to a principled future, to renewed diplomacy, and to lowering and
resolving tensions rather than raising them. The U.S. military will
od
also continue to fly, sail, and operate wherever international law allows,
will continue to stand with its allies and partners in upholding core
principles such as freedom of navigation and overflight, and will
continue to ensure that these core principles apply equally in the
so
South China Sea as they do everywhere else. Only if everyone plays

by the same rules can the region avoid the mistakes of the past,
when countries challenged one another in contests of strength and
will, with disastrous consequences for humanity.
Ma
SUPPLYING THE OXYGEN

The rebalance made sense for the United States when it was announced
in 2011, but what has become clear since then, especially to U.S.
officials traveling in the Asia-Pacific, is that it makes as much sense
for the region’s people, militaries, and nations. On each of my trips

to the region as secretary of defense, one thing has remained con-

stant: requests from defense counterparts and national leaders for
the United States to do more, not less, in the region. As has long
been said of the Asia-Pacific, security is like oxygen: when you have
enough of it, you pay no attention to it, but when you don’t have
enough, you can think of nothing else. For more than 70 years, U.S.
service members have helped provide the oxygen—the security
that allows hundreds of millions of people around the world to feel
safe, raise their children, dream their dreams, and live full lives.
m
Thanks to the investments and planning of the first two phases of
the rebalance, the United States will have the tools it needs to continue
playing this role in the Asia-Pacific. And in the next phase, the Defense
hi
Department will work to strengthen the region’s emerging principled
security network through more frequent and more complex training
and exercises. The Defense Department will also continue to qualita-
ha
tively upgrade the United States’ force posture in the region and
prioritize “big bet” investments in advanced technologies. By working
within the region’s principled security network and on its own, the
iT
United States will continue to demonstrate to its allies, its partners,
and the region at large that it plans to do more, not less, in the Asia-
Pacific for decades to come.
With the rebalance, the United States is ensuring that its military
Al
is well positioned to help transform an era of historic change into one

of historic progress. By operationalizing the rebalance, and by support-
ing the region’s growing principled security network, the Defense
od
Department can help ensure that the next 70 years in the region are
as secure, stable, and prosperous as the last.∂
so
Ma

How to Succeed in the

Networked World
A Grand Strategy for the Digital Age
m
Anne-Marie Slaughter
F
hi
oreign policy experts have long been taught to see the world as
a chessboard, analyzing the decisions of great powers and antici-
pating rival states’ reactions in a continual game of strategic
ha
advantage. Nineteenth-century British statesmen openly embraced
this metaphor, calling their contest with Russia in Central Asia “the
Great Game.” Today, the tv show Game of Thrones offers a particularly
iT
gory and irresistible version of geopolitics as a continual competition
among contending kingdoms.
Think of a standard map of the world, showing the borders and
capitals of the world’s 190-odd countries. That is the chessboard view.
Al
Now think of a map of the world at night, with the lit-up bursts of
cities and the dark swaths of wilderness. Those corridors of light mark
roads, cars, houses, and offices; they mark the networks of human rela-
od
tionships, where families and workers and travelers come together.

That is the web view. It is a map not of separation, marking off bound-
aries of sovereign power, but of connection.
To see the international system as a web is to see a world not of states
so
but of networks. It is the world of terrorism; of drug, arms, and human

trafficking; of climate change and declining biodiversity; of water wars
and food insecurity; of corruption, money laundering, and tax evasion;
of pandemic disease carried by air, sea, and land. In short, it is the world
Ma
of many of the most pressing twenty-first-century global threats.

In this world, problems and threats arise because people are too
connected, not connected enough, or connected in the wrong ways to
ANNE-MARIE SLAUGHTER is President and CEO of New America. This essay is adapted
from her forthcoming book, The Chessboard and the Web: Strategies of Connection in a
Networked World (Yale University Press, 2017). Follow her on Twitter @SlaughterAM.

m
hi
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Nothing but net: Asia at night from the Suomi NPP satellite, 2012
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the wrong people or things. The Islamic State, or isis, can motivate
so-called lone wolves to massacre their officemates. A deadly virus can
spread across the globe in a week. Meanwhile, the disconnection of
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millions of young people from the possibility of a decent education, a

job, and a fulfilling life fuels violence that spills across borders.
Despite this new reality, most foreign-policy makers reflexively act
od
as chess players, seeing the world as if they lived in the seventeenth

century, when the Peace of Westphalia created a framework of sover-
eign and equal states. They understand the reality of networked
threats but lack strategies befitting the world of web actors. It is time
so
to develop those strategies and to integrate statecraft with webcraft,

the art of designing, building, and managing networks. The United
States, for its part, needs a grand strategy that pursues American
interests and values in the web as well as on the chessboard.
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The next U.S. president should adopt a grand strategy of building

and maintaining an open international order based on three pillars:
open societies, open governments, and an open international system.
The essential fault line of the digital age is not between capitalism and
communism or democracy and autocracy but between open and
NASA
closed. Alec Ross, a technology expert and former State Department
official, lines up countries on an “open-closed axis.” As he argues, “the

societies that embrace openness will be those that compete and succeed
most effectively.”
Openness encapsulates the distinctive logic of networks. They are
open in the sense of being participatory: networks accommodate the
participation of the many rather than the few and derive power from
that participation. They are open in
the sense of transparency: they thwart
The essential fault line of efforts to control information, just as
m
the digital age is between the July 2016 coup attempt in Turkey
open and closed. was defeated by the ability of President
Recep Tayyip Erdogan and his sup-
hi
porters to use FaceTime, Facebook Live, and Twitter to circumvent
the army’s domination of the television networks. And they are open
in the sense of autonomy: unlike rule-governed hierarchies, networks
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encourage self-organization.
This is not the only view of networks, however. In his book The Seventh
Sense, Joshua Ramo recognizes that a “new age of constant connection”
iT
has arrived, but he sees the openness of those networks as dangerous
to the United States. He articulates a grand strategy of “hard gate-
keeping,” based on the power to grant or deny access to closed networks
he calls “gatelands.” Under this approach, the United States must con-
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struct physical and virtual “communities to manage everything from

trade to cyber-information to scientific research.” Hard gatekeeping is
a strategy of connection, but it calls for division, replacing the physical
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barriers of the twentieth century with digital ones of the twenty-first.

The historical debate over the essential nature of U.S. foreign
policy thus continues into the digital age. On one side are the adherents
of Nixon- and Kissinger-style realism, who see the championing of
so
universal values as a recipe for harmful foreign entanglements. On the

other are adherents of Wilson- and Roosevelt–style (both Franklin
and Eleanor) liberal internationalism, who have a healthy respect for
power but see standing for universal values as part of the United
Ma
States’ national identity and as a source of power.

Open order building comes down squarely on the side of liberal
internationalism, but updated for the digital age. It marries the worlds
of the chessboard and the web, recognizing states as powerful while
acknowledging individuals, groups, businesses, and institutions as
actors in their own right. And it affirms the vision of a United States

strengthened by deep international ties based on common values

rooted in universal human rights.
A RESILIENT SOCIETY
The top priority of any U.S. grand strategy must be to protect the
American people and safeguard U.S. allies. It is impossible, however,
to guarantee security in a constantly connected age. The very promise
of safety is an irresistible temptation to hackers, the invading hordes
of the twenty-first century. So, too, with lone-wolf terrorists. Dicta-
m
torships fare little better than democracies at stopping such attacks,
and at a far higher cost to civil liberties.
Better, then, to embrace openness and strive for resilience and self-
hi
reliance. People should expect their governments to develop webs of
surveillance and protection but still uphold citizens’ civil rights.
(Accordingly, much of the civil rights work of this century will entail
ha
championing digital rights.) And people must accept that their gov-
ernments cannot guarantee absolute safety. A measure of insecurity
is the price of liberty and democracy. It’s a price worth paying.
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In this world, as Juliette Kayyem, a former assistant secretary at the
Department of Homeland Security, argues in her book Security Mom,
citizens can and should do much more to provide for their own safety.
“No government,” she writes, “ought to guarantee perfect security,
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because no government can provide it.” The government’s role is to

“invest in creating a more resilient nation,” which includes briefing
and empowering the public, but more as a partner than a protector.
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The government also benefits from this approach. Stephen Flynn, an

expert on resilience, has pointed out all the ways that Americans
armed with more information from the government, rather than less,
would have been able to help stop or at least mitigate disasters.
so
What would have happened, Flynn asks, had U.S. authorities given
a press conference in August 2001 apprising the public of intelligence
about the threat from al Qaeda and the known risk of hijackers blow-
ing up a plane or using one as a missile? Many would have called such
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a briefing alarmist. But some of the passengers on the planes that hit
their targets in New York and Washington would have suspected that
the hijackers were lying when they said they were returning to the
airport. Perhaps some would have taken action, as did the passengers
of Flight 93, who, because they took off later, had heard that other
planes had been flown into the World Trade Center and the Pentagon.

The self-reliance necessary for open security depends on the ability

to self-organize and take action. Society-wide, this approach requires
limiting power, both public and private. Overly concentrated power,
whether in public, private, or even civic hands, is an invitation to abuse.
Ramo argues that the winner-take-all nature of network effects means
that the current platform monopolies are here to stay. Nine of the 12
most popular mobile apps, he points out, are connected to American-
owned companies, such as Apple, Google, and Microsoft. Facebook,
WhatsApp, and YouTube all have more than one billion users.
m
But the strain of democratic republicanism that runs from President
Thomas Jefferson to the Supreme Court justice Louis Brandeis is
reemerging in American politics, chal-
hi
lenging concentrations of economic
Open-government power on the grounds that competition
experiments are hais good for its own sake, no matter how
reenvisioning government well intentioned or beneficial monop-
with the people rather than olies may be. In a democracy, data
about the people belong to the people.
merely for the people.
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Users currently sign away their rights
to that data in return for the wonderful
free goods and services that big technology companies provide. Even-
tually, however, the people will insist on receiving a slice of the value
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of their data.
Smaller, more distributed hubs have many advantages. Over time,
as Apple and Microsoft have come to realize, the key to competitive
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success will shift from dominating a platform to ensuring the interop-

erability of many platforms. Currently, competition functions through
the intense rivalry of multiple start-ups all seeking to be bought by
one of the big players. Those start-ups should instead be growing into
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midsize and large companies on their own, creating more competition

and jobs along the way.
The United States and other powers will gradually find the golden
mean of network power: not too concentrated and not too distributed.
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Paradoxically, strengthening Asian and European competitors in

American-dominated industries will advance long-term U.S. inter-
ests—just as the Marshall Plan did, even as it rebuilt former enemies.
Better to have robust competition on one Internet, for example, than
multiple national internets, which would become the twenty-first-
century equivalent of autarky.

The United States was famously founded as a government of

limited powers; suspicion of concentrated private power has surged in
periodic waves throughout its history. Size ultimately becomes oppres-
sive, even to the big. Buildings and empires really do topple under
their own weight. Moreover, the masters of new technologies cannot
master the power of politics, even if they are right to challenge the
current deep dysfunction of the U.S. political system. Washington
and Silicon Valley, right and left, populists and elitists—all will
have to find a way to forge a new social and political contract, one
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that marries new technologies with the principles of limited power.
The international order of 1945 was based on the principle of
“embedded liberalism,” meaning that the insecurity of open money
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and trade was cushioned by domestic safety nets. Similarly, an open
international order of the twenty-first century should be anchored in
secure and self-reliant societies, in which citizens can participate
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actively in their own protection and prosperity. The first building
block is open societies; the second is open governments.
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GOVERNMENTS AND THE GOVERNED
In 2011, U.S. President Barack Obama launched the Open Government
Partnership with seven other countries: Brazil, Indonesia, Mexico,
Norway, the Philippines, South Africa, and the United Kingdom. By
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2016, the group had grown to include 70 countries. All participants

must sign the Open Government Declaration, a set of principles that
they pledge to implement through a national action plan. So far, par-
od
ticipants have made more than 2,250 specific commitments.

The declaration’s three major principles are transparency, civic
participation, and accountability. Transparency means increasing the
availability of information about government activities and making
so
those activities open to as many people as possible, a commitment

that is likely to lead to open data standards. It does not mean abolish-
ing secrecy in all government deliberations, a step that would quickly
bring a government (or any other organization) to a halt, but it does
Ma
mean making information about what the government knows and does
visible and usable.
The second principle, civic participation, follows from transparency:
signatories to the declaration commit to “creating and using channels
to solicit public feedback” on policymaking and “deepening public
participation in developing, monitoring and evaluating government

activities.” Making this commitment real will require a regulatory, as

much as a technological, revolution. Instead of antiquated “notice and
comment” procedures—in which legislatures and regulators deliberate
for months or years about the text of proposed rules, taking input from
vested interests and then ultimately passing what political forces will
allow—governments must move to methods that alert all affected citizens
in real time. In many countries, legislatures and government agencies
have begun publishing draft legislation on open-source platforms such as
GitHub, enabling their publics to contribute to the revision process.
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The third major principle of the declaration is accountability,
defined in large part as professional integrity. Participating countries
commit to having “robust anti-corruption policies, mechanisms and
hi
practices”; transparent public finances and government procurement
processes; and programs to strengthen the rule of law. In practice,
governments must have a legal framework that requires the disclosure
ha
of the income and assets of all high government officials and must put
in place a set of deterrents against bribery.
Taken together, these principles entail a much more horizontal
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relationship between a government and its people than the traditional
vertical relationship of either democracy or autocracy. Open-government
experiments currently under way around the world are reenvisioning
government with the people rather than merely for the people. The
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result is a side-by-side relationship between officials and citizens that

offers a template for how chessboard and web actors can coexist in the
international system.
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Writing about “connexity” 20 years ago, the British author and

political adviser Geoff Mulgan argued that in adapting to permanent
interdependence, governments and societies would have to rethink
their policies, organizational structures, and conceptions of morality.
so
Constant connectedness, he wrote, would place a premium on “reci-

procity, the idea of give and take,” and a spirit of openness, trust, and
transparency would underpin a “different way of governing.” Govern-
ments would “provide a framework of predictability, but leave space
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for people to organise themselves in flatter, more reciprocal structures.”

Mulgan was prescient: in many ways, the Open Government
Partnership and similar initiatives are operationalizing the new social
contract he envisioned. But people are not only organizing themselves;
they are also working directly with government officials to coproduce
government services. Coproduction embodies a philosophy of self-

government that is very different from the republican form of repre-

sentative democracy that the American founders envisaged. Instead of
governing themselves through those who represent them, citizens can
partner directly with the government to solve public problems.
Networks of citizens are already participating in contests over how
best to use open data in cities around the world; they are assisting
with crisis communications in disasters; and they are helping draft
government budgets, legislation, and
even constitutions. That domestic role
If the current international
m
for citizens in open government will
penetrate the international system, as order proves too brittle to
well. As foreign, finance, justice, devel- change, it will simply
hi
opment, environment, interior, and other crumble.
ministers—not to mention mayors—
take a greater role on the global stage,
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they will bring with them the corporate and civic networks they are
accustomed to engaging with as coproducers of government services
at home.
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The evolution of open governments illustrates the ways in which
common values give rise to common structures, aided by the enormous
potential of digital platforms. Nations willing to join the Open Gov-
ernment Partnership are embracing values and developing structures
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that will allow them to knit their societies and economies closely to-
gether. A strategy of open order building starts from a community of
allies and partners woven together by many different government,
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corporate, and civic relationships. Imagine a set of school friends on

Facebook who stay connected to one another and add connections
to their life partners, their business associates, the parents of their
children’s friends, their fellow churchgoers and volunteers, fellow sports
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fans and hobbyists, spreading out but also binding the most connected
members ever more closely together.
The United States should thus maintain and deepen relationships
with its current allies, assuming that they are willing to embrace the
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principles of both open societies and open governments. The alliances

that the United States built in the second half of the twentieth cen-
tury were not just bulwarks against the Soviet Union; they were also
anchored in a common commitment to the values enshrined in the
Universal Declaration of Human Rights. Neither the United States
nor any of its allies has fully lived up to those values, but they struggle

to do so openly, through a free press and freedom of expression, along

with a willingness to respond to citizens’ demands, even when those
demands include changing the government.
The United States should not serenely contemplate Japan’s or Europe’s
creation of its own gated communities for finance, industry, services,
communications, education, medicine, or other vital economic and
social transactions. Washington should of course recognize its allies’
desire for autonomy and self-protection, but it should encourage
integrated networks and work to ensure that interoperability ripens
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into community.
More fundamentally, U.S. policymakers should think in terms of
translating chessboard alliances into hubs of connectedness and capa-
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bility. Many of the world’s most farsighted leaders are already doing
just that. Nato, as Anders Fogh Rasmussen, then the organization’s
secretary-general, explained in 2010, has sought to transform itself
ha
into “the hub of a network of security partnerships and a center for
consultation on international security issues.” In Asia, which is much
less connected in security and economic terms than Europe, U.S.
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Secretary of Defense Ashton Carter has proposed a “principled secu-
rity network” that is designed to deepen the connections between
nations on the periphery of a security web and those at its core.
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THE NEW NEW WORLD ORDER

The final pillar of open order building is the maintenance and expansion
of an open international system. It must be open to both chessboard
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and web actors and to shifting power relationships among them.

According to systems theory, the level of organization in a closed sys-
tem can only stay the same or decrease. In open systems, by contrast,
the level of organization can increase in response to new inputs and
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disruptions. That means that such a system should be able to ride out
the volatility caused by changing power relationships and incorporate
new kinds of global networks.
The current international system, however, is fixed and hierarchical.
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Some nations are more equal than others. The permanent members of
the un Security Council, the founding members of the World Bank
and the International Monetary Fund—these nations, which ruled the
world in 1945, designed an international order to preserve peace and
prosperity and to secure their own interests. Although they had a far
more universalistic understanding of international order than many of

their predecessors, they created a set of inevitably self-interested

arrangements for a world of what was then just 73 recognized sover-
eign states, including empires with scores of colonies.
It is time for reform. The institutions built after World War II
remain important repositories of legitimacy and authority. But they
need to become the hubs of a flatter, faster, more flexible system, one
that operates at the level of citizens as well as states. That means finally
tackling the job of opening up the postwar institutions to newer actors.
It also means flattening the hierarchy between the un and regional
m
organizations, so that the latter can act more autonomously, with either
advance or subsequent Security Council approval of their actions.
Revising the un Charter would open Pandora’s box. Substantive
hi
changes in the past have required a cataclysm, which the world cannot
afford. But rising powers will not wait forever. They will simply create
their own orders, with their own regional institutions and security
ha
networks. If the current international order proves too brittle to
change, it will simply crumble. Like the once great European duke-
doms, it will keep the buildings and the pageantry, but the power will
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have moved on.
A power shift must take place between twentieth- and twenty-first-
century states, accommodating the rise of Africa and Asia and giving
voice to countries that existed only as colonies (or not at all) in 1945.
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But as the scholar Jessica Mathews wrote presciently in these pages in

1997, it also must take place between states and nonstate actors—the
people and organizations that should be thought of as web actors.
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Networks of bad web actors threaten global security and well-being

on a daily basis; the best response to them is to create integrated
networks of good web actors, corporate, civic, and public.
Some of the existing networks link only national government
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officials, and they should thus be reformed. The Proliferation Security

Initiative, for instance, enables its more than 100 endorsing nations to
interdict weapons of mass destruction and related materials going to
and from states, groups, and individuals that present a high risk of
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proliferation. An updated version of the institution should retain its

voluntary character and its decision-making rules but be docked with
some part of the un—a change that would help counter criticism from
India and other nations that the initiative is illegitimate. Many other
regulatory, judicial, and legislative networks should likewise be for-
mally anchored to global or regional institutions. To that end, among

the most promising new developments are networks of mayors, men and
women who have both the authority and the ability to make policies
that affect 54 percent of the world’s population.
Moving beyond government officials, networks of global charitable
organizations already enjoy close connections to international institu-
tions. The Office of the un High Commissioner for Refugees works
with more than 900 nongovernmental and un organizations. The
vaccine network Gavi relies on funding from industrialized states and
helps developing countries secure predictable, self-sustaining financ-
m
ing for immunization programs. And Bloomberg Philanthropies has
funded international climate change networks, most notably the
Global Covenant of Mayors for Climate and Energy, which connects
hi
governmental and nongovernmental actors in more than 7,100 cities
worldwide in efforts to combat global warming.
These examples are only the beginning. For every nongovernmental
ha
organization that has been granted hard-won observer status at a un
meeting, thousands more have been shut out by the state gatekeepers
of the current international system. The chess players are still firmly
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in control. For networks to nest within or have formal connections to
traditional hierarchical organizations, those organizations must flatten.
They have to open up their hierarchies and formalized routines to
allow for more flexible arrangements among their members and to
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allow for interactions with a mix of citizen, corporate, and civic net-
works. After all, if Facebook—at 1.7 billion members, more populous
than any country in the world—can function as a network of networks
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by providing a platform for individuals to connect spontaneously to

one another, then networks connected deliberately and strategically
can certainly contribute as decisively to global order as a group of
often weak member states can.
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To see the difference between the twentieth-century international

system and a twenty-first-century open system, consider the negotia-
tions for the Trans-Pacific Partnership and those for the Paris agree-
ment on climate change. The tpp negotiations were conducted in
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private and involved only national trade representatives. This secrecy

generated mistrust among U.S. citizens and lawmakers and cast an
elitist pall over the tpp that has contributed to the intense opposition
to its ratification it now faces. The Paris negotiators, on the other
hand, recognized that business, academia, civil society, and ordinary
people all have a role to play in tackling climate change. And so the

talks, as sprawling and messy as they were, involved everyone from cor-
porate leaders to activists to billionaire philanthropists. Although the
resulting agreement does not set binding targets under international law,
it will do far more than a state-centric agreement would to save the planet,
since states will be joined by many different actors in implementing it.
Over time, the shells of twentieth-century interstate organiza-
tions can become global and regional platforms for multiple types of
associations among both chessboard and web actors. The un, the
International Monetary Fund, the World Bank, the World Trade
m
Organization, the European Union, the Organization of American
States, the African Union, the Association of Southeast Asian
Nations, and a host of other organizations can all build on and per-
hi
haps even transcend their original functions.
PROTECTING STATES AND CITIZENS

ha
A U.S. grand strategy along these lines would advance U.S. interests
by building an open global order composed of open societies, open
governments, and an open international system. The goal is a world
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in which both American citizens and their foreign counterparts are
safe, prosperous, and endowed with opportunities to live full and
productive lives. That is a world in which Americans can protect and
advance themselves as Americans but also pursue the universal values
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that define the United States.

That open global order must be anchored in an international legal
order that recognizes and protects both states and people. The legal
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order of the chessboard recognizes only sovereign states as both the

agents and the subjects of international law, with a separate and
untouchable sphere for domestic law. The legal order of the twenty-
first century must be a double order, acknowledging the existence of
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domestic and international spheres of action and law but seeing the
boundary between them as permeable.
In this order, states must be waves and particles at the same time.
They must continue to serve as the principal actors when it comes to
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dealing with interstate war, weapons proliferation, state-sponsored

terrorism, criminal networks, ethnic and religious conflict, boundary
disputes, and many other issues. But states must also be viewed as
the places where web actors reside, reaching across boundaries as they
engage in commercial, civic, political, and criminal pursuits that
reverberate in global affairs just as much as state actions do. It is

impossible to say what form that double order will ultimately take.
Astonishingly enough, however, it is emerging before our eyes—slowly,
painfully, but inexorably.
The origins of this shift lie in the human rights movement of the
twentieth century, beginning with the Hague Conventions of 1899
and 1907, which laid down rules of war for both soldiers and civilians.
But human rights themselves became politically polarized during the
Cold War, with the West championing civil and political rights; the
East championing economic, social, and cultural rights; and both sides
m
tending to ignore violations in their client states. When many frozen
conflicts thawed and then exploded in the 1990s, the world turned
once again to the urgent question of what is owed to citizens who are
hi
suffering atrociously at the hands of their own governments.
The first step was the development of international criminal law,
moving from the victors’ justice of the postwar Nuremberg trials to
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a fast-growing body of law and courts holding individual officials
accountable for their actions. Then came a sea change in the law of
humanitarian intervention.
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In 2000, responding to an appeal from un Secretary-General Kofi
Annan, the Canadian government gathered a group of distinguished
foreign policy practitioners and international lawyers to determine
when states could and should take military action to protect at-risk
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people in another state. The group, the International Commission on

Intervention and State Sovereignty, came up with what it termed
“the responsibility to protect,” later shortened to “R2P.” In its final
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report, the commission argued that signatories to the un Charter

had accepted certain “responsibilities of membership.” Specifically,
when a state abrogated its responsibility to protect the basic rights
of its people, other states had a responsibility to protect those citizens,
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if necessary through military intervention.

In 2005, the un General Assembly adopted a watered-down version
of the R2P doctrine. The resulting resolution declared that “each indi-
vidual state has the responsibility to protect its populations from
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genocide, war crimes, ethnic cleansing and crimes against humanity.”

Should states fail to do this, the responsibility shifts to the international
community, which should employ “peaceful means” to protect a popula-
tion and, if necessary, “take collective action . . . through the Security
Council.” Since then, the doctrine’s application has proved controversial,
most acutely in regard to the un-sanctioned intervention in Libya in 2011.

The wheels of international law grind slowly. The principle of sov-

ereign equality enshrined in the Peace of Westphalia took hundreds
of years to implement. Yet R2P has managed to take hold remarkably
fast: the un Security Council has already invoked the doctrine 50 times
in the past decade. Today, as the Obama administration nears its end,
R2P has gone deeply out of fashion, but that is surely temporary.
What is important is that 68 years after the adoption of the revolu-
tionary Universal Declaration of Human Rights, the relationship of a
sovereign to its subjects is receiving yet another level of international
m
scrutiny. International law is recognizing states and citizens at the same
time. The double order is emerging, as the masters of the chessboard,
willy-nilly, make room for the web.
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PEOPLE POWER
The logic of that shift is inexorable. Even the chess master Henry
ha
Kissinger might agree. In World Order, he points out that the Peace of
Westphalia, which ended the Thirty Years’ War—a holocaust that killed
perhaps one-third of the people in the German lands—was meant
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above all to create a better system that would protect people from
“forced expulsions and conversions and general war consuming civil-
ian populations.” Furthermore, although “the right of each signatory
to choose its own domestic structure and religious orientation” was
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affirmed, “novel clauses ensured that minority sects could practice

their faith in peace and be free from the prospect of forced conversion.”
In other words, the Westphalian world order mandated the sovereign
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equality of states not as an end in itself but as a means to protect the

subjects of those states—the people.
The people must come first. Where they do not, sooner or later,
they will overthrow their governments. The technology that is fueling
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the transformation of the social and economic order within nations—

from hierarchies to networks—gives the people more power to destabi-
lize politics than ever before. Their governments also have more power
than ever before, but borders and walls, whether physical or digital,
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cannot ultimately contain the power of a connected citizenry. Open

societies, open governments, and an open international system are
risky propositions. But they are humankind’s best hope for harnessing
the power not only of states but also of businesses, universities, civic
organizations, and citizens to address the planetary problems that
now touch us all.∂

Salvaging Brexit
The Right Way to Leave the EU
Swati Dhingra
m
O
n June 30, a week after the British public voted to leave the
eu, Theresa May gave a speech launching her candidacy for
hi
prime minister in which she declared, “Brexit means Brexit.”
Her message was straightforward: even though she herself had sup-
ported remaining in the eu, she would not hesitate to implement the
ha
will of the voters. Yet months after assuming office, May has yet to
answer crucial questions about what a British exit, or Brexit, would
mean for trade, immigration, and financial services. It is still not at all
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obvious what Brexit will actually look like.
That’s because the referendum has confronted the government with
two distinct but related problems: how to leave the eu as painlessly as
possible and how to reverse the years of economic neglect that have
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divided the country. Solving each will require hard choices, and what-
ever the politicians decide, some of their supporters will feel let down.
With this in mind, they should prioritize prosperity over politics and
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defy radicals on both sides of the debate. Simply ignoring the referen-
dum result would be politically untenable. But abruptly abandoning
the single market, which guarantees the free movement of goods, ser-
vices, and people, would cause widespread economic hardship.
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The best path forward, then, is to strike a temporary deal to keep

the United Kingdom in the single market—a deal similar to that which
Norway enjoys. Such an arrangement would remove uncertainty
among businesses over the United Kingdom’s future relations with
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its biggest trade and investment partner and would buy time to
work out a permanent settlement. Assuming it can be sold politi-
cally at home, such an interim solution should also prove palatable
to the eu.
SWATI DHINGRA is Assistant Professor of Economics at the London School of Economics.
Follow her on Twitter @swatdhingraLSE.

Salvaging Brexit
But trade policy can achieve only so much. In order to respond to

the grievances that led to the Brexit vote in the first place, the British
government also needs to take big and immediate steps to restore
economic equality and raise the country’s potential for future growth.
To that end, it should rebuild its creaking infrastructure and overstressed
public health and educational systems. Only by targeting the underlying
sources of economic anxiety can policymakers finally begin to heal a
broken nation.
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IT’S NOT EU, IT’S ME
In order to understand why the British people chose to leave the eu,
it’s necessary to understand what has happened to the British economy
hi
in the four decades since the country voted for membership in the
European Economic Community. In 1975, two years after it acceded
to the eec, the United Kingdom held a referendum on continued
ha
membership. As in this year’s vote, those who wanted to leave in 1975
claimed that doing so would lower prices, boost wages, and create jobs
for British workers. A majority of the public rejected these claims,
iT
and 67 percent of voters chose to remain in the eec. This time around,
obviously, the result was different; only 48 percent opted to stay.
The shift in public opinion can be explained by the intervening
increase in economic stress. Although the “leave” campaign’s message
Al
in 2016 centered on the need to regain British sovereignty, curtail

immigration, and stop contributing to the eu budget, many Britons used
their votes to express anger at the country’s political establishment
od
and its failed economic policies instead. That shouldn’t be surprising:

even as the economy has grown, the gap between the top and the bot-
tom has stretched wider and wider. In 1980, the top ten percent earned
2.7 times as much as the bottom ten percent; in 2013, the top ten
so
percent took home 3.7 times as much. This is because, for decades,
median wage growth has lagged behind average wage growth. In other
words, the pie has grown, but workers have seen their slices grow far
slower. The financial crisis only made things worse. From 2003 to
Ma
2014, all workers suffered as average weekly earnings shrank by

1.8 percent, but the poorest did the worst, as median earnings slid by
2.8 percent over that period. It’s not enough to just blame the crisis,
however. As far back as 2000, the share of working-age men without
qualifications (having left school before the age of 16) who were not
Swati Dhingra
active in the labor force had reached 30 percent, compared with less
than four percent two decades earlier. By April 2016, that figure stood
at over 43 percent.
The state bears most of the blame for these problems. For years, it
has underinvested in public services, eroded the power of trade unions,
and failed to promote employment or raise wages. The national min-
imum wage remained low by international standards for decades, until
a Labour government raised it in 1998. The result has been that for
many in the United Kingdom, having a job is no guarantee of financial
m
security. Half of poor children in the country have parents who work
but are nevertheless below the poverty line.
In recent years, one of the worst examples of government under-
hi
investment has been in health care. In 2010, the new coalition govern

ment of Prime Minister David Cameron pledged to protect the National
Health Service from austerity. Despite this guarantee, however,
ha
health-care spending has grown by just 1.2 percent per year since 2010,
compared with 3.7 percent between 1949
and 1979 and over 6.7 percent from
The British state bears
iT
2007 to 2009, during the financial cri-
most of the blame for the sis. The United Kingdom now ranks
economic malaise. 13th among the 15 original members
of the eu in the percentage of gdp spent
Al
on health care. Cuts to the nhs’ budget made in the name of efficiency
have led to perverse policies, such as hiring expensive temporary
staff to meet the shortfall in permanent employees. Remaining staff
od
feel underpaid and overworked.

And it’s not just health care where the government has failed. In
2010, the coalition government also reduced child benefits, a policy
that researchers at the Institute for Fiscal Studies estimated would
so
push an extra 200,000 children into poverty by 2016. Sure enough, the
share of children living in relative poverty ticked up from 27 percent
in 2011 to 29 percent in 2015, an increase of 300,000 children, even as
the economy recovered.
Ma
The imposition of fiscal austerity after 2010 was the coup de grâce for
many of the country’s most deprived regions. London’s poorer bor-
oughs, England’s forgotten seaside towns, and the declining industrial
areas of northern England, the South Wales Valleys, and Glasgow have
experienced the biggest declines in welfare payments over the last six
years. In contrast, the more prosperous south and east of England have

Salvaging Brexit
m
hi
ha
England expects: in Portsmouth, once a major shipbuilding port, November 2013
seen only small spending reductions, since many of the cuts were to
iT
public spending that mostly benefited poor individuals. Reductions
in disability benefits, housing-support payments, and unemployment
assistance hurt most those areas that already had the highest shares
of claimants.
Al
DIDN’T WE ALMOST HAVE IT ALL

Real as the anger is, scapegoating the eu for British economic hardship
od
is unfair. In fact, it’s doubly so: not only is the British government
responsible for the problem, but the eu has actually mitigated its
impact. Forty years of data point to the overwhelming conclusion
that eu membership reduced the price of goods, increased real wages,
so
and helped fund British public services.

The eu did all this by reducing barriers to trade, which increased
competition among firms and caused them to slash the markups they
charged consumers. According to a study by the economist Harald
ST E FAN WE RMUTH / REUT E RS
Ma
Badinger, for example, markups for manufacturing goods across ten

eu states fell from 38 percent to 28 percent of costs between 1981 and
1999. What’s more, as markets integrated, consumers could more
easily purchase products from other countries, which harmonized
prices across borders. The economist John Rogers has shown that the
local prices of dozens of household goods—from bread to wine to
Swati Dhingra
sweaters—converged dramatically between 1990 and 2001. By the end

of that period, prices varied within the eu about as much as they did
within the United States.
At the same time as the eu lowered prices, it also raised British
workers’ job prospects, since British businesses expanded production
as they obtained cheaper access to European markets. According to
researchers at the Institute for Fiscal Studies, this helped raise real
wages in the United Kingdom and caused unemployment to fall by
0.7 percentage points between 1988 and 1999. Firms also intensified
m
their research and development to respond to increased competition,
which in turn increased overall economic productivity.
Another pillar of the eu, the free movement of people, has driven
hi
both economic growth and economic fear. Over the past four decades,
workers from the poorer countries of
ha Europe have flocked to the relatively
Economic hardship, prosperous United Kingdom—over a
inequality, and political third of the 8.5 million immigrants
alienation are not unique currently in the country hail from else-
iT
to the United Kingdom. where in the eu. Ever since the United
Kingdom’s accession to the eec, many
voters have feared that these immigrants
would displace British workers. This concern played an important
Al
role in the June referendum: the higher an area’s share of immigrants

or the larger its recent increases in immigration, the more likely it
was to vote to leave.
od
Yet immigration from other eu states has not actually harmed

British citizens. Even after the eu expanded in the first decade of this
century to include much of eastern Europe, there is no evidence that
British-born workers experienced higher unemployment or lower wages
so
in counties with above-average numbers of eu immigrants. Nor has eu

immigration exacerbated inequality by harming less skilled workers,
the segment most vulnerable to competition from immigrants. Changes
in wages and joblessness for this group show little correlation with
Ma
changes in eu immigration.
European immigrants have even been a boon to public finances,
because they pay more in taxes than they consume in government
services. Euroskeptics often accuse immigrants of robbing British
citizens of places in schools and hospitals, but given immigrants’ net
contributions to such services, these deprivations are more accurately

Salvaging Brexit
characterized as the result of chronic government underinvestment.

Nor have immigrants from the eu undermined social stability: in
2013, researchers at the London School of Economics and University
College London found that the large wave of economic immigrants
from eastern Europe after the enlargement of the eu in 2004 did not
lead to more violent crime or theft.
BREAKING UP IS HARD TO DO
Despite the benefits of staying in the eu, of course, voters chose to
m
leave it, and now the government must respect their decision. But
there are several different forms that the departure could take. The
most sensible option would be a deal similar to Norway’s, whereby the
hi
United Kingdom would remain a member of the single market by
joining the European Economic Area, a group of all the eu members
and three nonmember countries (Iceland, Liechtenstein, and Norway)
ha
that trade freely with the eu but do not participate in its political
institutions. Under this arrangement, the costs of trade would still rise,
since the United Kingdom would face some nontariff barriers that
iT
currently apply to the non-eu members of the eea. To avoid duties,
manufacturers would have to prove that their goods qualified as
made in the United Kingdom, for example, a costly process thanks to
increasingly complex global supply chains. The European Commission
Al
might also impose tariffs on British exports if it ruled that they

were being sold to the eu below market price. In 2006, for example,
Norwegian salmon exporters who received financial support from the
od
Norwegian government incurred a 16 percent tariff. The United King-

dom would also lose the ability to influence future reductions in trade
barriers, such as those the eu is considering in the service sector,
which makes up a large part of the British economy. But by preserving
so
access to the single market, this approach would minimize the losses
from reduced trade and investment.
Obtaining a Norwegian-style deal wouldn’t be easy, however. For
one thing, it would require joining the European Free Trade Associa-
Ma
tion—composed of the three non-eu members of the eea plus

Switzerland—which might be unwilling to let the United Kingdom
in. Norway has already said it might block British participation, as
the relevant agreements have evolved over 20 years to reflect the needs
of the association’s current members. But Norway’s opposition is
not certain, and such a deal should prove more palatable to the eu

Swati Dhingra
than any other option, since if it were framed as a temporary measure, it

would give the union time to think about how it will deal with emerging
threats to the European project. The economic hardship, inequality,
and political alienation that led to the Brexit vote are not unique to
the United Kingdom; they are also present in France, Italy, and the
Netherlands, any of which could soon face a similar campaign to leave.
The eu must walk a fine line: if it is too soft on the United Kingdom,
a host of other countries will want to renegotiate their positions in
the eu, but if it is too harsh, it will further alienate anti-eu voters.
m
Perhaps a greater challenge would be getting the British public to
accept the continued free movement of eu citizens, sure to be part
of any Norwegian-style deal but a redline for many Britons in the
hi
leave camp. As a result, some prominent figures, including Rupert
Harrison, former chair of the Council of Economic Advisers, have
floated the idea of an “eea minus” option. Such a deal would involve
ha a comprehensive British-eu free-trade
Free movement of labor is agreement similar to the Swiss-eu deal
but, crucially, also restrictions on immi-
the sine qua non of the EU. gration. From the eu’s perspective, how-
iT
ever, this would be a nonstarter. Free
movement of labor is the sine qua non of the eu, and the Swiss had
to accept it in order to get deep access to the single market. Even
Al
after a referendum in 2014 in which the Swiss people voted to limit

immigration from the eu, Brussels refused to let the country impose
any limits on movement without losing all of its eu financial and
od
trading rights. Besides, Switzerland’s deals with the eu took over

20 years to negotiate, time the United Kingdom can ill afford. And
to keep the club together, the eu cannot make leaving too easy.
The only path that would allow the United Kingdom to control
so
immigration and free it from eu regulations and trade policy would

be to exit the single market entirely, leaving the country with no
comprehensive free-trade agreement with the rest of Europe. Were
it to take this route, the United Kingdom would face harsh external
Ma
tariffs, which, in an ironic twist, would hit hardest some of the areas
that voted to leave.
To understand what’s at stake, consider the northern industrial
city of Sunderland, which voted for Brexit by a 22 percent margin.
Sunderland is home to one of Nissan’s most cost-efficient manufactur-
ing plants, and last year, it began producing the company’s newest luxury

Salvaging Brexit
car, the Infiniti Q30. About half of British car exports currently go to the
eu, which they can enter duty free. Should the United Kingdom leave
the eu without a trade deal, it would be treated just like any other
non-European trading partner, subject to the default World Trade
Organization rules, under which the eu would charge its usual ten per-
cent import tax on cars. No longer so attractive to Nissan, Sunderland
could turn into Detroit.
Nissan isn’t the only company facing this problem. In a 2014 survey,
the Society of Motor Manufacturers and Traders, a British industry
m
group, found that 70 percent of its members expected that leaving the
eu would hurt their business in the medium or long term, and three-
quarters felt that it would reduce foreign investment in the United
hi
Kingdom. History suggests that they’re right: the British car industry
spent a decade stuck in the slow lane until the country merged with
the single market in 1973, allowing British manufacturers to get the
ha
same access as French and German ones.
To counter such gloomy predictions, the leave campaign set out
grand visions of resuscitating trade within the Commonwealth or
iT
reorienting trade toward China or the United States. On the surface,
these sound like great ideas, but nothing currently stops the United
Kingdom from trading with those countries as a member of the single
market. (Indeed, Germany does exactly that, and with great success.)
Al
Making up for the loss of membership in the single market would

prove difficult, moreover, no matter how ambitious the new trade
deals outside the eu were. For one thing, economists have long known
od
that countries trade most with large, rich, nearby markets—and in the
case of the United Kingdom, that’s the eu. For another thing, trade
agreements take many years to negotiate. And without the clout of
the eu, British trade negotiators would find it far harder to defend the
so
United Kingdom’s interests against those of large countries such as

China and the United States.
Besides, with tariffs at record lows, these deals have become less
about reducing import duties and more about harmonizing regula-
Ma
tions. Many countries outside the eu still lag far behind the United
Kingdom in product and labor standards, and so bringing British
rules in line with less stringent countries would prove politically
difficult and often undesirable. In short, despite what the Brexiteers
promised, abandoning the single market would do grave damage to
the British economy.

Swati Dhingra
LONDON BRIDGE IS FALLING DOWN

Not only would striking a trade arrangement with the eu soften the
blow of leaving; it would also give the United Kingdom the time and
resources to get its own house in order. Over the past two decades, the
fortunes of the wealthiest Britons have risen, while the poorest have
been stuck in a cycle of falling wages and unfulfilling work. Geography
has become destiny: London and the prosperous south and east of
England feel increasingly like a different country from the declining
industrial north. In the referendum, the latter voted as though it were
m
seeking revenge on an elite it felt had forgotten it. Indeed, the lower
the wage growth in a given region, the more likely its people were to
vote to leave. Unfortunately, such votes were masochistic. The same
hi
regions that voted to leave are those that depend the most heavily on
eu trade, investment, and transfers. Leave voters were also poorer
and less educated than the average—the very group that will suffer
ha
more than most if the United Kingdom leaves the eu.
There are promising signs that May and her allies within the
Conservative Party have recognized the scale of the problem. Since
iT
the vote, they have proposed a number of progressive policies, such
as transferring funds from richer regions to poorer ones and giving
workers representation on company boards. Although they would help,
however, such changes would not go far enough. The United Kingdom
Al
needs to make a more fundamental shift away from its neoliberal

ideology, which presumes that government efforts to promote growth
never work and that balanced budgets are next to godliness, back to its
od
earlier tradition of investing heavily in assets that raise long-term growth.

Even the most ardent believers in the free market, including Germany
and the United States, support their domestic industries—through
public investment in research and development, for example—because
so
they recognize that this kind of spending promotes future growth

and economic equality.
Nothing illustrates what has gone wrong with the United Kingdom
better than education. Today, poor British children perform worse in
Ma
school than their richer classmates, and the correlation between socio-
economic background and school performance, although present in
every rich country, is stronger in the United Kingdom than in many
others, including countries as varied as Greece, Russia, and Spain. This
broken educational system not only stifles social mobility but also
depresses labor productivity. To fix it, the government needs to find

Salvaging Brexit
ways to recruit the best teachers and invest more in training them. At
the same time, policymakers should make sure they are using the right
yardstick when measuring success. Past attempts at educational reform
have failed to improve social mobility, so the government should judge
new proposals by how much they will improve the performance of
children from disadvantaged backgrounds and not just based on average
attainment. The silver lining of the referendum result is that, by high-
lighting the many places where social mobility is lowest, it appears to
have created the political will for such policies.
m
Public investment in health care would also spur economic activity.
Such moves have worked before: government regulation of prices in
the nhs forced drug firms to innovate
hi
and encouraged competition from low-
cost producers; support for biomedical
Unfortunately, the vote to
research in public universities in the leave was masochistic.
ha
postwar era helped build a world-class
pharmaceutical industry in the United Kingdom. Stepping up health-
care spending would not only improve public health but also generate
iT
jobs in industries linked to health care and improve corporate bottom
lines by creating a healthier work force.
The United Kingdom’s problems aren’t limited to education and
health care, however; the country also spends less on infrastructure
Al
than most other rich nations. Many of its roads, houses, and power
grids were built in the 1960s and 1970s and are now coming to the ends
of their useful lives. The electrical system has deteriorated to the point
od
that earlier this year, the country’s energy regulator warned that power
shortages could be coming. Investing in infrastructure now would create
jobs and lay the foundations for future growth, just as it did for the
United States during the Great Depression, when such spending
so
put millions of Americans to work improving the roads and laying

the sewer pipes and other equipment that enabled the country’s
subsequent recovery.
Finally, the British government should ramp up its investments
Ma
in innovation, focusing on firms that have high growth potential.

Innovation produces social benefits—technological advances that
can be used in other sectors, for example—beyond the returns to
private investors, so it deserves government support. Yet the British
government spends much less on promoting innovation than do the
governments of France, Germany, and the United States. Since such

Swati Dhingra
spending makes workers more efficient, it’s no surprise that labor

productivity in the United Kingdom is seven to 39 percent lower than
it is in those countries.
The British government also does too little to encourage investment
in small and medium-sized enterprises, diverting private investments
away from young businesses and toward safer activities such as real
estate. Smaller companies form the backbone of the British economy,
providing 60 percent of private-sector jobs and generating high returns
relative to the support they receive. Yet private commercial investors
m
tend to think in the short term and are reluctant to support such busi-
nesses, especially during recessions. It wasn’t until 2012 that the gov-
ernment attempted to help by setting up the British Business Bank to
hi
lend to these firms. And even now, the bank’s total lending remains
small compared with that of similar facilities in the United States.
The government should dramatically scale up the bank’s operations.
ha
None of these ideas are radical. But for them to work, politicians must
be willing to spend dramatically more than in the past; a few percent
of national income will not do the trick.
iT
The Brexit vote has handed the country a gargantuan challenge,
and no response to it will satisfy everyone. But if the British govern-
ment can maintain access to the single market and invest in education,
public health, infrastructure, and innovation, then it will contain the
Al
immediate damage and may even begin restoring prosperity and hope
in the country’s forgotten places.∂
od
so
Ma

The Cruise That

Changed China
What Zhao Could Teach Xi
m
Julian Baird Gewirtz
O
hi
n September 2, 1985, the SS Bashan cruised through the green-
leaved gorges of the Yangtze River, its prow breaking the
waters along its 259-foot length. Inside, the river’s shifting
ha
light played off the hallways, staterooms, and modish decorations, and
air conditioning kept the late-summer heat at bay. The luxurious cruise
ship had entered service earlier that year, with room for nearly 150 pas-
iT
sengers curious to see sights advertised as “inspir[ing] romantic poets
and painters with [a] sense of timelessness, awesome beauty, and end-
less energy.” But the spacious decks of the Bashan were strangely empty.
Nearly everyone onboard was massed in the main hall, where a world
Al
of accents resounded: American, Chinese, German, Hungarian, Polish,

Scottish. All eyes were fixed on a man with elfin features behind thick-
rimmed glasses, wearing a long-sleeved white shirt and no jacket:
od
the Hungarian economist Janos Kornai. Behind him was an incon-

gruous prop for a river cruise, a blackboard on which he had sketched
out economic models. On his left, Ma Hong, one of China’s leading
policymakers, listened attentively, and a few seats away, Xue Muqiao,
so
China’s most famous economist, sat smoking. The American economist

and Nobel laureate James Tobin and the Scottish economist Sir Alec
Cairncross were also in attendance. Elsewhere in the room sat two
young Chinese scholars: Lou Jiwei, now China’s finance minister,
Ma
and Guo Shuqing, who currently governs Shandong, one of China’s

richest provinces.
JULIAN BAIRD GEWIRTZ is a doctoral candidate in history at Oxford University and the
author of the forthcoming book Unlikely Partners: Chinese Reformers, Western Economists,
and the Making of Global China (Harvard University Press, 2017), from which this essay is
adapted. Copyright © 2017 by the President and Fellows of Harvard College. Used by
permission. All rights reserved.

The cruise ship was hosting a weeklong meeting of some of the

world’s most brilliant economists, who had assembled to figure out a
plan for China’s troubled economy. The gathering came at the zenith
of an era when officials under Deng Xiaoping were scouring the globe
for fresh ideas that would set China on the path to prosperity and
global economic power.
The orders to gather the group onboard the Bashan had come directly
from the top official in charge of the economic reforms already under
way, Premier Zhao Ziyang. Zhao believed that China should “make up
m
for [its] weak points through international exchange” and use foreign
ideas to reform its failed socialist economy. So China’s rulers sought ad-
vice from abroad. Western experts offered ideas about how to introduce
hi
more market-based elements into the Chinese system and modernize the
government’s role in the economy. The secluded Bashan was the setting
of the single most important of these many exchanges. The ideas dis-
ha
cussed there would propel a shift in China to the mixed “socialist mar-
ket economy” that exists today and has powered China’s economic boom.
“It seems to be a most unusually interesting opportunity,” wrote
iT
Tobin in a letter to his Yale department chair, asking permission to
miss the first week of classes to attend the conference. “The idea
seems to be to detach the high officials from their desks and phones
so they can concentrate on learning some of the unpleasant facts about
Al
managing decentralized economies.”

Although it began only 40 years ago, China’s age of openness now
seems to be slipping away. Chinese President Xi Jinping is presiding
od
over a turn toward intellectual isolation and distrust of the outside

world. Leading Chinese officials and publications regularly decry what
the party calls “hostile foreign forces.” Beijing has introduced new rules
designed to eliminate “Western values” from the educational system,
so
promote Internet sovereignty, and control the media. And in April 2016,
the Communist Party cracked down on foreign nongovernmental
organizations, passing a law that created demanding new registration
requirements, increased government monitoring, and limited their
Ma
contact with Chinese entities; The New York Times called it “the latest
in a series of actions taken by Mr. Xi against the kind of Western
influences and ideas that he and other leaders view as a threat to the
survival of the Communist Party.”
What Deng knew, and Xi seems to ignore, is that China succeeds
not by limiting its connections to the outside world but by opening

The Cruise That Changed China
m
hi
ha
iT
Al
od
I’m on a boat: Kornai (front) and Xue (behind him), September 1985
so
itself up to new ideas wherever they may originate. Today, China’s

economy is teetering. Growth is slowing, investor confidence is
falling, and debt is rising. According to The Economist, the govern-
ment spent approximately $200 billion to support the stock market
Ma
between May 2015 and May 2016; around 40 percent of China’s

C OU RT ESY JA NOS KO R NAI
new debt goes to pay interest on its existing loans. If Xi thinks he

can make the breakthroughs necessary to save the Chinese economy
without drawing on the best ideas from around the world, he faces
long odds. It is far smarter to bet China’s future on openness than
on isolation.

“THE OLD IDEAS WON’T DO”

China in the 1980s was still a country of drab gray buildings—a place
where bicycles, not cars, clogged the roads. When Mao Zedong died
in 1976 and the Cultural Revolution ended, China’s centrally planned
economy was in a shambles. Mao had despised capitalism: in 1950, he
had trumpeted, “The Soviet Union’s today will be our tomorrow.”
But millions had died from famines and violent campaigns under
Mao’s leadership, and his death allowed for a sweeping reassessment
of China’s path.
m
Beginning almost the moment that Mao died, the government invited
foreign economists—from Czechoslovakia, Poland, the United Kingdom,
the United States, and beyond—to China to provide advice, and
hi
China’s new leaders under Deng traveled abroad to study other sys-
tems. Visiting Japan, the United States, and Western Europe, they
were stunned at how backward China’s economy had become. When
ha
Deng visited the United States in 1979, China’s per capita gdp was
still well under $200—less than one-50th of that of the United States.
So Deng and his colleagues set out to make China rich. The transfor-
iT
mation of the economy began in the countryside. The key reforms
provided incentives for farmers to produce more than the state-set
amount and sell the surplus at whatever price they could get. The reforms
soon moved into the cities, but by 1985, the new urban and industrial
Al
policies had run into immense difficulties. State-owned enterprises, which

produced the majority of China’s industrial output, resisted market-
oriented change. Growth was soaring uncontrollably, wildly surpassing
od
expectations, but inflation was rising with it. Conservatives within the
party made clear that they were ready to put the reforms on hold, and
perhaps even toss Zhao out. China’s rulers wanted the country to get
rich, but not at the cost of control. It was Zhao’s job to square the circle.
so
With the stakes this high, Zhao needed as many options as he could
get. “The old ideas won’t do,” he was fond of saying. The delegation
of international economists who came to China in the summer of 1985
for the cruise offered the possibility of new ideas that could help save
Ma
China’s reforms.
On August 31, 1985, Zhao, with his oversized black-rimmed glasses
and graying, swept-back hair, met with the visitors at Zhongnanhai, the
imperial compound in Beijing that serves as the central headquarters of
the government and the Communist Party. The premier asked the group’s
advice on how to improve China’s economy and handle urban economic

reform. He singled out the problems of overheated growth: factories

were churning out products without clear demand, inflation was rising,
and consumers, who were used to stability, were growing anxious.
“All this came out with [a] directness, simplicity, and frankness that
seemed quite natural until one stopped to think that the speaker was the
Prime Minister of the largest country on earth, canvassing advice from
an assorted group of foreign economists,” Cairncross, the founding
director of the World Bank’s Economic Development Institute (now
called the World Bank Institute), wrote in his diary. “Where else,” he
m
added, “would one find a Prime Minister inviting advice from abroad?”
The group then flew south to Chongqing, where they boarded the
ship for the weeklong conference, organized primarily by the World
hi
Bank official Edwin Lim. They gathered in the boat’s main hall for
the opening remarks by the octogenarian Xue. A party stalwart, Xue
declared to the company of foreigners, whose presence would have
ha
been unthinkable only a decade before, “We are investing great hopes
in this conference.”
Excitement ran high when Tobin took the floor for his presentation.
iT
Tobin was a genial, soft-spoken figure with a crooked grin—and a natural
teacher, whether at Yale or on the Yangtze. The Chinese listened atten-
tively as he delivered a crash course on monetary policy, outlining how
governments manage aggregate de-
Al
mand and describing how they could

make stable fiscal and monetary policy.
China’s rulers wanted the
In the middle of his lecture, Tobin pulled country to get rich, but not
out a sheet of statistics. China’s economy at the cost of control.
od
was indeed overheating, Tobin said, and

inflation had to be brought below seven
percent as soon as possible. The Chinese were astonished at the speed
so
with which Tobin came up with such a concrete recommendation.

As the ship chugged along, Kornai moved to the presenter’s seat.
The Hungarian had won international fame for his critique of socialist
economics in Economics of Shortage, published in 1980, a book that
Ma
began with the simple facts of life in socialist countries around the
world: empty grocery shelves, just a few styles of clothing, and lengthy
queues at every store. Kornai argued that chronic shortages were the
inevitable result of economic planning under traditional socialism.
Chinese economists recognized what they saw in the Hungarian
scholar’s prose and equations: these were China’s miseries, too.

Kornai’s topic was “Could Western policy instruments . . . be effective

in socialist economies?” But hearing the Chinese say that they did not
yet have a goal in mind for their reforms, he decided to answer a far
larger question: What path should China take? Kornai argued that
the experiences of failed transitions from socialism around the world
suggested that China should pursue market coordination with macro-
economic control. He sketched out this model and its alternatives on
a blackboard. Instead of seeking only to please cadres who had the
authority to set quotas, forgive bad investments, and write off wasteful
m
production, he argued, enterprises should respond to market pressures—
competition would force them to improve their performance—but
the state could still manage macroeconomic policy and regulate the
hi
economic and legal parameters of the market.
The other visiting economists agreed vigorously with the charismatic
Hungarian, but the Chinese response was muted. Behind this compo-
ha
sure, however, Kornai’s words resonated. One prominent Chinese
economist, Wu Jinglian, later wrote that he had concluded that “a market
with macroeconomic management should be the primary objective of
iT
China’s economic reforms.” That night, a group of Chinese economists
excitedly approached Kornai and told him that they were determined
to initiate an official Chinese translation of Economics of Shortage. Kornai
spent the night sleepless in his cabin, exhilarated by the reception he
Al
had received.
THE YANGTZE CONSENSUS

od
On September 7, the Bashan pulled into the harbor at Wuhan, a port

city in eastern China. Most of the group flew back to Beijing, and
the Western economists returned home. Cairncross wrote in his diary,
“I have no doubt that they consider what to do very carefully before
so
deciding and do not necessarily accept advice.”

The Chinese participants prepared an internal report on the con-
ference and sent it to Zhao and other top leaders. Zhao liked what he
saw. Transcripts of internal party meetings show that later that month,
Ma
he discussed the foreign experts’ suggestion that China focus on its

inefficient enterprises as the key next step in the reforms. He even
used Kornai’s analysis to highlight the problems of rapidly expanding
investment in these enterprises.
As winter came to Beijing, the public report on the conference
appeared in full. With detailed analyses of the ideas presented by Tobin,

Kornai, and the others, the report revealed a group of Chinese

reformers who were open to outside influence but understood the
importance of reconciling foreign advice with the situation on the
ground in China—and a Chinese leadership, with Zhao at the helm, that
believed in the value of intellectual exchanges with the outside world.
Yet not everyone was pleased. Party elders, aging but still filled
with revolutionary zeal, lambasted the reformers in both internal
meetings and public writings for “fawning on foreign theories,” in
the words of a widely read editorial titled “Marxist Economics Has
m
Great Vitality.” Zhao defended them, as party records leaked in the
summer of 2016 show. Chastising a leading ideologue in 1986, he
said, “You should be cautious when criticizing the liberalization of
hi
economic theory.”
Despite the attacks on his agenda, Zhao led reformers in a new
drive to define the goal of China’s reforms as a system in which “the
ha
state manages the market, and the market guides the enterprises.” In
1987, with a series of policy documents released at the historic 13th
Party Congress, Zhao succeeded, enshrining a central role for the
iT
once forbidden market in China’s future.
LET A HUNDRED FLOWERS BLOOM

Less than two years later, however, Zhao’s leadership came to a
Al
rapid end. In the spring of 1989, angry about pervasive corruption,

persistent inequality, the lack of political reform, and skyrocketing
inflation, students launched protests centered in Beijing’s Tiananmen
od
Square. Zhao opposed the government’s crackdown on the demon-

strators, but this time, his views would lose out. Deng removed him
from power in late May and placed him under house arrest. Sitting
in the courtyard of what had become both his home and his prison,
so
Zhao listened helplessly to the gunfire of the People’s Liberation

Army as its soldiers fired on Chinese citizens on June 4, 1989.
Later that month, with order restored across the country, party
leaders denounced Zhao. They pointed to his engagement with
Ma
foreign economists as evidence of his alleged mission to push China

to abandon socialism. Eliminating this pernicious influence would
from then on require omitting any mention of both Zhao himself and
the role of his many Western advisers. Today, his name almost never
appears in print in China; the party takes credit for his achievements
or attributes them to Deng.

In the 1990s, under the savvy technocrat Zhu Rongji, reforms took
off and the economy boomed. The system that China built, a “socialist
market economy,” was enshrined in the Chinese constitution in 1993,
cementing the enduring mix of state and market that Zhao had embraced
and developed. Zhu allowed the rapid growth of the private sector while
maintaining state-owned enterprises, particularly in key industries
such as energy, banking, and telecommunications, but he made Bashan-
style reforms to those enterprises, downsizing them, eliminating some
government subsidies, and limiting easy bank credit to failing firms,
m
to force them to be more responsive to the market. He developed
China’s financial system, created state-dominated stock markets, and
overhauled the tax system. He increased the authority of China’s
hi
central bank so that it could conduct monetary policy as Tobin had
encouraged in 1985. And Zhu led China’s accession to the World Trade
Organization in 2001, a major milestone in China’s integration into
ha
the global economic system—and a powerful example of the influence
of foreign economic ideas, since accession to the wto required China
to embrace a set of established international norms and practices.
iT
Indeed, Zhu used the pressure of these external norms to force much-
needed domestic changes that had previously been politically untenable,
such as increasing market competition with state-owned behemoths
and opening up new sectors of the economy (from telecommunications
Al
to banking) to foreign financing.

As skyscrapers sprouted up across Chinese cities and wealthy busi-
nessmen motored through the busy streets in sleek Audis and bmws,
od
China became an economic power with few equals. By 2010, China

had overtaken Japan as the world’s second-largest economy in terms
of gdp. China’s transformation consistently drew on ideas from far
beyond its shores.
so
But the Chinese Communist Party tells a different story, one in which
the system of economic organization that Zhao developed is stripped
of his name and its international influences. Instead, the party de-
scribes China’s rise as a product of the party’s leadership and ingenuity,
Ma
“grown out of the soil of China” (in the words of Foreign Minister
Wang Yi). According to this narrative, only a self-reliant China can
succeed in the face of a domineering West; the party’s narrative leaves
little room for the truer story of a collaborative partnership.
Indeed, Xi has referred to “the competition with capitalism” and
“the protracted nature of contest over the international order.” A party

communiqué leaked as Xi came to power in 2013 warned that “the

contest between infiltration and anti-infiltration efforts in the ideo-
logical sphere is as severe as ever, and . . . Western anti-China forces
[will] continue to point the spearhead of Westernizing” China. In the
economic sphere, this struggle is particularly acute, aiming “to change
[the] country’s basic economic infrastructure and weaken the govern-
ment’s control of the national economy.” This is not the language of a
country that sees itself as happily integrated into the international
economic order.
m
Western leaders should make clear that their Chinese counterparts
risk more than they gain by shutting the door to outside influences.
Western policymakers rightly criticize Xi’s militarism, mercantilism,
hi
and neglect of human rights and international norms. But people both
outside and inside China should also tell a positive story of the rewards
of openness, exemplified by the Bashan conference 30 years ago.
ha
Deng knew that instead of simply copying, China could adapt the
best economic ideas from around the world to fit China’s distinctive
context. The engagement of the 1980s was not a sign of failure or
iT
submission to foreign hegemony but a signal achievement that pow-
ered China’s record-breaking economic growth. It helps explain why
China’s transition from socialism, at least until now, has succeeded
when so many other countries’ similar attempts have stumbled. And
Al
so it is all the more regrettable that China’s leaders today neither

acknowledge nor seek to replicate the benefits of that era’s openness.
As a result, China risks missing out on the confidence-building
od
effects of sustained, probing interactions about new ideas to solve

China’s problems. Worst of all, by limiting the range of ideas from
abroad that are permissible, it risks intensifying the chilling effect on
economic thinking and policymaking at home, discouraging experi-
so
mentation and innovation when it is most urgently needed to confront

slowing growth, high debt levels, environmental deterioration, public
disquiet, and a major demographic transition, among other challenges.
Much of China’s future will turn on whether its leaders once again
Ma
allow domestic and foreign ideas to mix freely.∂

Egypt’s Nightmare
Sisi’s Dangerous War on Terror
Steven A. Cook
m
O
n January 25, 2011, tens of thousands of Egyptians took to the
streets, demanding an end to the nearly 30-year rule of Presi-
hi
dent Hosni Mubarak. Eighteen days later, Mubarak stepped
down. In Tahrir Square, the crowds cried, “Lift your head high,
you’re an Egyptian.” “We can breathe fresh air, we can feel our
ha
freedom,” Gamal Heshmat, a former member of parliament, told The
New York Times. “After 30 years of absence from the world, Egypt
is back.”
iT
Today, such pride and hope are a distant memory. Once again, a
former military official turned dictator rules the country. But President
Abdel Fattah el-Sisi has established an even more harshly authoritarian
regime than the one Mubarak oversaw. By almost every measure, condi-
Al
tions in Egypt are worse now than prior to the revolution. Economic
growth remains stagnant. Egypt’s reserves of foreign currency have
dwindled to perilous levels: in July they dropped beneath $16 billion,
od
their lowest level in almost a year and a half and barely enough to
cover three months of imports. The Egyptian pound has collapsed,
and the government has begun rationing dollars.
Egypt’s tourism industry, a vital source of hard currency and
so
investment, has also withered. In 2010, more than one million tourists,
on average, visited Egypt every month; in May 2016 (the last month
for which statistics are available), fewer than half that number did
so. Egypt’s infrastructure is crumbling, and its education and pub-
Ma
lic health systems are deteriorating. And more than a quarter of all
Egyptians—about 22.5 million people—live in poverty, while youth
unemployment exceeds 40 percent.
STEVEN A. COOK is Eni Enrico Mattei Senior Fellow for Middle East and Africa Studies at
the Council on Foreign Relations and the author of the forthcoming book False Dawn: Protest,
Democracy, and Violence in the New Middle East. Follow him on Twitter @stevenacook.

m
hi
ha
iT
Al
od
so
Yet Egypt’s rulers have done little to revive the economy. Instead,
they continue to focus on the one thing they do well: repressing their
Ma
citizens. Since Sisi seized power in July 2013, his security forces have
arrested more than 40,000 people, killed more than 3,000 (including
between 800 and 1,000 on a single day in August 2013), “disappeared”
hundreds more, placed thousands in continuously renewable pretrial
detention, and injured countless others. More than three years after
Sisi ousted President Mohamed Morsi in a military coup, the Egyptian

Steven A. Cook
state has reduced itself to a single function: destroying the organi-

zation to which Morsi belonged, the Muslim Brotherhood. Egypt’s
leaders have paid little heed to the consequences for ordinary Egyptians
of their obsessive quest. Yet Egyptians are suffering mightily. And
not only them: Gazans, Syrians, and Libyans have also begun paying
the price, as Cairo’s single-minded pursuit of the Brotherhood—
and of any Islamist group that bears the slightest resemblance to the
Brotherhood—has become the guiding principle of Egypt’s foreign,
as well as domestic, policy.
m
For now, there is little that the United States—Egypt’s most important
foreign benefactor—can do to change the country’s trajectory; Egypt
will have to solve its problems on its own. So far, however, Sisi has
hi
shown few signs that he is willing or able to implement reform.
“THE ORIGIN OF IT ALL” ha

Cairo’s suspicion and fear of the Muslim Brotherhood predate Sisi’s
rise by many years. All the way back in 1948, the Egyptian govern-
ment dissolved the group for allegedly planning a revolution, and
iT
the Egyptian leader Gamal Abdel Nasser imprisoned thousands of
its members after surviving an assassination attempt in 1954. Nasser’s
successor, President Anwar al-Sadat, fashioned himself “the believing
president” and tried a different tack, tolerating the organization for
Al
a period, until his relationship with the group soured after he signed
a peace treaty with Israel in 1979. Sadat’s successor, Mubarak, also
showed the group leniency at first, hoping that the Brotherhood’s more
od
moderate brand of Islamism would undermine the appeal of violent

alternatives. He allowed the group to operate on university campuses,
for example, and he never sought to disrupt the organization’s well-
developed network of social services, although his government did
so
try to control it. Yet when Mubarak sensed that the Brotherhood
had accumulated too much power, he cracked down: after candidates
linked to the organization won an unprecedented 20 percent of the
seats in a parliamentary election in 2005, for example, he jailed
Ma
hundreds of Brothers.
Today, Sisi and his allies want to crush the Muslim Brotherhood once
and for all. To them, there is no difference between the Brotherhood
and the self-proclaimed Islamic State (also known as isis)—even
though isis has characterized the Brotherhood as an “apostate” organi-
zation. “They both share the same ideology,” Sisi told Der Spiegel in

Egypt’s Nightmare
early 2015. “The Muslim Brotherhood is the origin of it all. All these
other extremists emanated from them.” In December 2013, his govern-
ment declared the group a terrorist organization. Since then, on top
of the mass arrests, it has forced the group’s leaders and any midlevel
figures who have escaped the crackdown to flee to Doha, London, or
Istanbul, and it has shut down almost 500 nongovernmental organi-
zations, many allegedly connected to the group.
Many Egyptians have good reason to be angry with the Brothers,
who, in their brief time in power, proved themselves to be alternately
m
incompetent, authoritarian, and sectarian. Yet the Brotherhood has
deep roots in Egyptian society. Since
Hasan al-Banna founded the group in
Sisi has shown few signs
hi
1928, the Brothers have offered a vision
of authenticity, nationalism, and reli- that he is willing or able
gious reform that many Egyptians have to implement reform.
ha
found appealing. The group attracted
followers for its opposition to Zionism in the 1930s, the monarchy in
the 1940s, the British in the 1950s, and, more recently, the United
iT
States, and its provision of social services to thousands of Egyptians
in need has been a critical source of political support.
All of that makes it unlikely that any president will ever manage to
eradicate the group entirely. What Sisi has managed to do, however,
Al
is further polarize Egypt and escalate the violence that has become
commonplace since Mubarak’s fall. Sisi’s war on the Brothers has
made a mockery of the calls for unity, decency, and tolerance that
od
filled Tahrir Square in the winter of 2011 and again in late June 2013.
To be clear, Morsi was no angel: his blundering and belligerence
threatened Egypt’s social fabric, and the generals may have been justi-
fied in overthrowing him. Yet the military’s fixation on wiping out his
so
followers has only made matters worse, profoundly destabilizing the

nation and raising the chances that it will collapse entirely.
So far, Sisi seems not to care. Backed by compliant media, his cam-
paign against the Brotherhood has kept the country on a war footing.
Ma
By describing the group as un-Egyptian and exaggerating the threat

it poses, he has mobilized popular support for his government.
But he has more important things to focus on. Corruption and
bureaucratic inertia are crippling economic growth. Sisi has pursued
grandiose megaprojects—he spent more than $8 billion expanding
the Suez Canal, yet revenues have not picked up because the expected

Steven A. Cook
increase in shipping traffic has not materialized—instead of infrastruc-

ture improvements that would boost the economy, such as upgrading
the country’s transportation network. Egypt’s educational system is
underfunded, and its health care is barely adequate: the government
still struggles to provide clean drinking water everywhere, hepatitis C
is rampant, and recurrent outbreaks of avian flu and foot-and-
mouth disease have swept the country. In August, the International
Monetary Fund offered Egypt a $12 billion bailout, and Sisi promised
reform in return. So far, however, it remains unclear whether he will
m
follow through.
FEAR AND LOATHING
hi
The sorry state of Egypt today is worrisome enough in its own right.
Yet the havoc wreaked by Sisi’s obsession extends far beyond Egypt’s
borders and has helped destabilize the entire region.
ha
Take Gaza. As president, Morsi offered Hamas (a group founded
in the 1980s as an offshoot of the Palestinian branch of the Muslim
Brotherhood) symbolic support, but he made few actual policy changes,
iT
maintaining the blockade that Mubarak began in June 2007, after Hamas
seized control of the territory. Since Sisi took over, however, Cairo
has sought the destruction of the group. During Israel’s 2014 military
campaign against Hamas, the Egyptian government went so far as to
Al
encourage the Israelis to reoccupy Gaza and deal Hamas a fatal blow.
The Israelis refused to oblige. So since then, Sisi has taken matters
into his own hands, doing all he can to suffocate Gaza. His govern-
od
ment has slashed the number of Palestinians permitted to enter Egypt

and destroyed many of the tunnels running under the Egyptian
border wall that have long been a critical source of Gaza’s food,
construction materials, tools, luxury goods, and weapons. In late 2014,
so
the Egyptian military created a quarter-mile buffer zone along Egypt’s

border with Gaza, destroying around 800 homes in the process. The
army later expanded the buffer zone to a half mile, demolishing an
additional 500 homes. By mid-2016, the military had cleared the entire
Ma
border town of Rafah and established a three- to five-mile security

belt—which even incorporates a moat in some places—along Egypt’s
border with Gaza.
Hamas is indeed an Islamist organization with links to the Muslim
Brotherhood; there is no question that the group wants to govern
society in line with its own interpretation of Islam. Hamas is also a

Egypt’s Nightmare
terrorist group, responsible for the deaths of Americans, Israelis,

and Palestinians, and Sisi claims that Hamas has killed numerous
Egyptians, although there the truth is less clear.
Even if the Egyptian president is right about the violence, however,
he has ignored a number of crucial differences between Hamas and
Egypt’s Muslim Brotherhood. For starters, the two groups have differ-
ent leaders. They also diverge on tactics, strategies, and goals. Hamas
wants to liberate Palestine through violence. The Muslim Brotherhood,
by contrast, has for decades sought political power primarily through
m
nonviolent means. No doubt there is solidarity between the two groups.
But there is scant evidence that Hamas and the Brotherhood have
worked together to undermine the Egyptian regime.
hi
Yet such distinctions are lost on Sisi, whose attempts to destroy
Hamas have significantly worsened the already miserable plight of
Gaza’s 1.8 million residents. Almost 40 percent of Gaza’s population
ha
lives in poverty, real per capita income is 31 percent lower than it was
in the mid-1990s, and access to basic necessities such as water and
electricity is unreliable. According to the World Bank, in 2015, Gaza’s
iT
economic performance was 250 percent worse than that of the West
Bank. Only the Israelis, who allow 800–1,000 truckloads of supplies
to enter Gaza every day, have prevented Egypt’s blockade from
successfully strangling Hamas—and all of Gaza with it. As support for
Al
Hamas wanes, the group may well lash out once again at Israel, risking
yet another round of fighting that will only compound the misery of
Gaza’s Palestinians.
od
SISI’S PIVOT
Cairo’s unhealthy obsession with the Muslim Brotherhood has also
determined its policy several hundred miles north—in Syria. After
so
Mubarak’s fall, Egypt’s military rulers showed little interest in Syria’s

civil war: they had far more pressing challenges to deal with at home.
Things changed under Morsi, who was far more sympathetic to Syria’s
rebels. During his tenure, Egypt welcomed large numbers of Syrian
Ma
refugees and, in September 2012, held a conference with envoys from

Iran, Saudi Arabia, and Turkey to explore ways to resolve the conflict.
Then, in 2013, Morsi took things further, with a step that may have
sealed his fate. On June 15, he told a packed crowd of supporters at
Cairo International Stadium that he was committed to “the liberation
of the Syrian population,” implicitly signaling his sympathy with the

Steven A. Cook
jihadist groups fighting the regime of Syrian President Bashar al-Assad.

This pronouncement instantly raised alarm bells within Egypt’s
Ministry of Defense. Just a few weeks later, after massive protests against
the president, Sisi, at the time the defense minister, launched his coup
and deposed Morsi.
These days, Egypt’s government carefully eschews such language
on Syria. Instead, in late September 2015, Sisi—echoing Assad’s own
rhetoric—told cnn’s Wolf Blitzer that the priority in Syria should
be fighting terrorists, who, for Sisi, include the Muslim Brotherhood.
m
Egyptians, of course, have reason to worry about terrorism. The war
in Syria may be 400 miles away, but isis has already established an affiliate
in the Sinai, and Egyptians worry that fighters will migrate from the
hi
Syrian battlefields to Egypt. Egypt also faces a jihadist threat on its
border with Libya.
But in Syria, as in Gaza, Sisi has willfully conflated the Muslim Brother
ha

hood with violent extremists. Syria has its own chapter of the Brother-
hood, and Sisi fears that if the Brothers were to play a constructive role
in a new Syrian government, it would demonstrate that the Brotherhood
iT
could once again be a viable alternative political force in Egypt.
The idea that Syria’s Muslim Brotherhood might play a role in a
future government is not far-fetched. Although Bashar’s father, Hafez al-
Assad, crushed the Brothers after protests in Hama in 1982, Bashar
Al
allowed the group to recover. When the

Sisi has willfully conflated Syrian uprising began in March 2011,
the Brothers were initially cautious, but
the Muslim Brotherhood
od
the following fall, they helped found

with violent extremists. the Syrian National Council, an alliance
of opposition groups. And they have a
powerful ally in Turkish President Recep Tayyip Erdogan, who would
so
surely seek to protect Turkey’s interests in a post-Assad Syria by

expanding the Brotherhood’s role.
But Cairo dramatically overstates the influence of the Syrian Brother

hood today. The group has never wielded the kind of cultural, social,
Ma
and political influence in Syria that it has in Egypt. Since the Hama
massacre, the Brotherhood’s leadership has been in exile and out of
touch with most Syrians. Yet once again, Sisi has ignored such nuances
in his irrational fear that a chapter of the Brotherhood could wield
power in Damascus and shape events in Cairo. To prevent that from
happening, Sisi has broken from his Emirati, Saudi, and U.S. allies to

Egypt’s Nightmare
support Assad—alongside Russia, Iran, and Hezbollah—despite the

fact that Assad’s coalition is collectively responsible for the deaths of
hundreds of thousands and the displacement of millions. The Egyptians
have not sent Assad any money, weapons, or soldiers. But their
rhetorical support is nevertheless symbolically important. Mubarak
and his successors may have debased Egypt’s power and influence,
but Egyptian words still carry weight in the region. By supporting
Assad in the name of counterterrorism, Sisi has divided the major
Arab powers and provided political and diplomatic cover to Assad’s
m
Arab and non-Arab allies.
BETTER THE GENERAL YOU KNOW?
hi
Egypt’s pursuit of the Brotherhood has also contributed to the destabi-
lization of Libya, a country that has been mired in chaos since its long-
time leader Muammar al-Qaddafi was deposed and killed in 2011.
ha
In June 2014, Libya held elections in which a coalition of liberals,
secularists, and federalists beat out a host of Islamist and Muslim
Brotherhood–related candidates, as well as tribal figures based in the
iT
city of Misurata. The losers disputed the outcome and refused to cede
their seats. This produced two parliaments: an Islamist-dominated
body in the capital, Tripoli, and an internationally recognized House
of Representatives in Tobruk, in the east.
Al
By the time of the split, militia violence had already been racking
Libya for years, but things soon descended into a full-fledged civil
war. This unfolding crisis alarmed Sisi. It posed a real threat that armed
od
extremists would take power on Egypt’s western border. But even

more troubling, Sisi believed that if the forces in the west prevailed,
it would strengthen the Islamist-dominated parliament in Tripoli. So
he threw his support behind General Khalifa Haftar. A former senior
so
officer in Qaddafi’s military who turned against the Libyan leader in

the late 1980s, Haftar had spent the better part of two decades living
in the United States before returning to Libya soon after the revolution
there began. Frustrated by the political chaos that persisted three years
Ma
later, he raised an army without the government noticing and, in 2014,

launched a brutal campaign against extremists and Islamists.
Haftar is violently anti-Islamist and views military force as critical
to achieving order—a worldview he shares with Sisi. Egypt, accord-
ingly, has provided him with weapons, money, and diplomatic support
(as have France and the United Arab Emirates). In doing so, Egypt

Steven A. Cook
has only helped deepen the divisions in an already badly fractured

country. Egypt’s backing has allowed Haftar to dismiss the idea of
national reconciliation; the general would rather install himself and
his allies in Tripoli or, failing that, establish an autonomous region in
Cyrenaica, his power base in the east. Haftar has rejected un efforts to
end the conflict through a negotiated settlement and the establishment
in 2015 of a unity government, known as the Government of National
Accord, and he has prevented members of the House of Representatives
from supporting the new unity government.
m
The Egyptians insist that supporting Haftar is the best way to
stabilize Libya. After all, they argue, the Government of National
Accord is unwieldy and essentially powerless; it cannot serve as a
hi
bulwark against extremism or the Islamism that Egypt’s leaders revile.
And Egypt’s leaders are right to worry. Libya poses the gravest threat
to Egypt’s security; people and weapons flow easily across the two
ha
countries’ 700-mile border. But Egypt’s actions in Libya are motivated
more by Sisi’s obsessions than by any legitimate security threat.
By helping undermine the Government of National Accord, the
iT
Egyptians have accelerated Libya’s fragmentation and sabotaged
efforts to restore some semblance of stability—the best and only
real guarantor of Egypt’s security.
Al
THE GREAT MIDDLE EASTERN STABILIZER

Egypt’s current policies leave Washington with few good options.
Without aid from Washington, the International Monetary Fund, or
od
the Gulf states, Egypt may well collapse. Its failure would have a
devastating effect on a region already confronting the fragmentation of
four other states—Iraq, Libya, Syria, and Yemen—and unprecedented
violence. For now at least, the United States cannot cut Egypt loose.
so
Yet the United States will also struggle to dissuade Egypt’s leaders
from maintaining their current approach, because they regard their
fight against the Muslim Brotherhood as an existential struggle.
They also invariably interpret U.S. criticisms of their domestic
Ma
repression as advocacy for the Brothers. Sisi and his supporters

have not forgotten that in mid-2012, Washington welcomed Morsi’s
election and thus, at least tacitly, seemed to endorse the Brother-
hood. And many U.S. officials did make the mistake of putting too
much stock in the Brothers’ reformist rhetoric while overlooking
their anti-Americanism and authoritarian leanings.

Egypt’s Nightmare
Still, the United States could help in small ways—or at least avoid
making things worse. Congress is currently considering whether to
designate the Muslim Brotherhood a terrorist organization. Doing so
would be a mistake. It would embroil the United States in Egypt’s
domestic political drama and further harm the United States’ position
in a country in which almost every political actor already mistrusts
U.S. intentions. Declaring the Brothers a terrorist group might help
mend ties with Sisi, but it would be tantamount to condoning Cairo’s
brutal repression.
m
As for Gaza, U.S. diplomats need to encourage the Turks and the
Qataris, who can play an important role in the area’s reconstruction,
to coordinate their efforts to relieve the
hi
pressure created by the Egyptian and
Israeli siege, so as to prevent Gaza’s
The Egyptians have
further descent into chaos. The Israelis accelerated Libya’s
ha
seem to have realized that immiserating fragmentation and sabotaged
Gaza’s Palestinians has achieved little efforts to restore stability.
and so have eased their blockade. If
iT
Washington can convince the Turks and
the Qataris to work together, while encouraging Israel to continue
to allow goods into Gaza, life there will improve despite Egypt’s
ill-considered meddling.
Al
In Syria, Washington is less likely to succeed in counterbalancing

Cairo’s support for Assad. For years now, U.S. policy toward Syria
has been indecisive and timorous, allowing pro-Assad forces to
od
gain ground. Unless the United States intervenes more forcefully,

it will have few means for undermining or reversing Sisi’s support
for Assad.
When it comes to Libya, finally, the United States, along with the
so
Europeans and the un, need to provide the new government in Tripoli
with economic assistance, security, and legitimacy. Propping up the
unity government might force the Egyptians to change tack, weaken-
ing Haftar. The Egyptians are susceptible to international pressure
Ma
in Libya: they went along with the rest of the un Security Council
and recognized the Government of National Accord in 2015, although
Sisi still maintains that the best way to fight terrorism is to support
Haftar’s army. Yet absent far more dramatic changes, which don’t
seem likely, Libya’s unity government is unlikely to survive in the
long term.

Steven A. Cook
Egypt’s failures are all its own, but the country’s plight also reveals
the bankruptcy of U.S. policy toward Egypt over the past 40 years.
The United States has spent almost $80 billion to support Egypt’s
economic development, national security, and civil society. For
decades, U.S. policymakers assumed that Egypt was the great Mid-
dle Eastern stabilizer. It’s true that under Mubarak in particular,
Egypt scrupulously maintained the 1979 peace treaty with Israel,
routinely accommodated U.S. requests to support military operations
in the region, and repressed violent Islamists. Today, however, the
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United States needs to reconsider the idea that Egypt is a force for
stability. Egypt’s foreign policy has changed. Egypt is not a rogue
state, but it is exporting its central domestic political conflict—the
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repression of the Muslim Brotherhood—to its neighbors, with
devastating effect.∂
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Erdogan’s Journey
Conservatism and Authoritarianism
in Turkey
Halil Karaveli
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W
hat happened to Recep Tayyip Erdogan? The Turkish
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president came to power in 2003 promising economic
and political liberalization. But under his rule, Turkey has
instead moved in a profoundly illiberal, authoritarian direction—
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although not toward repressive Islamism, which some feared was
Erdogan’s true agenda, given his background in Islamist politics. Rather,
Erdogan has become something more akin to a traditional Middle
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Eastern strongman: consolidating personal power, purging rivals,
and suppressing dissent.
Over the summer, it briefly appeared as if Erdogan might have over-
reached, when a group of military officers attempted to topple him—at
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the direction, Erdogan has insisted, of his erstwhile ally turned bitter
foe Fethullah Gulen, an influential Turkish cleric based in the United
States. But when the plotters struck, Erdogan was able to quickly rally
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support inside the armed forces and among the broader public and
managed to put down the coup attempt with surprising ease. A subse-
quent crackdown has been swift and merciless: the government has
jailed tens of thousands of alleged Gulenists, conducted a sweeping
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purge of the army and the state bureaucracy, shut down media outlets,
and suspended thousands of academics. Erdogan’s response to the coup
attempt has demonstrated that the president’s grip on power remains
stronger than even many of his fiercest critics had assumed.
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No one could have foreseen the coup or its aftermath. But even long
before those events, it should have come as no surprise that Erdogan
had failed to live up to the expectations of many liberals in Turkey and
elsewhere who had initially hailed his ascent as a sign of progress.
HALIL KARAVELI is a Senior Fellow at the Turkey Center of the Central Asia–Caucasus
Institute and Silk Road Studies Program Joint Center and Editor of The Turkey Analyst.

Halil Karaveli
Erdogan never really aimed to make Turkey an Islamic state, but he

also never wanted to liberalize it. His grand project, rather, has been to
preserve a conservative social order while mending the long-standing
rifts between the Turkish state and the country’s minority ethnic and
cultural groups, especially the Kurds. He believed that he could harness
Sunni Islam, a creed shared by a majority of Turkey’s citizens, as a
unifying force. But as demonstrated by the divisiveness and instability
of the past few years, this approach has been a thorough failure.
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ISLAMIST? LIBERAL? AUTHORITARIAN?
Turkey has never had a liberal leader. Since Kemal Ataturk founded
the modern state out of the rubble of the Ottoman Empire in the
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1920s, authoritarianism has held sway. No Turkish government has
ever respected freedom of expression or minority rights. The corner-
stones of the illiberal order in Turkey—held up by military juntas
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and popularly elected governments alike—have always been statism,
nationalism, religious conservatism, and the protection of powerful
business interests.
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When he came to power, Erdogan seemed poised to break with that
tradition. Early in his career, he had made a name for himself as an
unorthodox Islamist. He earned his antisecularist stripes as a young
participant in city politics in Istanbul in the late 1980s and 1990s,
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famously refusing an employer’s demand that he shave off his

mustache and quitting his job instead. But he also disregarded some
traditional Islamist sensitivities, especially those concerning gender.
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When he ran for mayor of Istanbul’s Beyoglu district in 1989, he

encouraged women—including those who did not wear headscarves—
to become involved in his campaign and to join the Welfare Party, the
Islamist group to which he belonged. And he exhorted his campaign
so
workers not to get into discussions about religion with voters. “You
must absolutely build relations with people outside your community,”
he advised them. “Salute even the customers in places where alcohol
is served.”
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But when Erdogan was elected mayor of Istanbul, in 1994, he hewed

to a more conventional Islamist line. He said that he was in favor of
imposing sharia and oversaw the prohibition of alcohol sales in all
municipally owned facilities. By that time, Turkey was experiencing
an Islamist moment—one that would soon prove short-lived, how-
ever. In national elections in 1995, the Welfare Party won the highest

Erdogan’s Journey
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Survivor: Erdogan during the attempted coup, July 2016
share of the vote, and the party’s leader, Necmettin Erbakan, became
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prime minister in a coalition government the following year. But in
1997, the military and its allies in the government pressured Erbakan
to step down. At a rally later that year, Erdogan quoted a poem that
read, in part, “The mosques are our barracks, the domes our helmets,
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the minarets our bayonets, and the faithful our soldiers.” For this, he
was charged with “inciting the people to religious hatred.” He was
convicted and spent 120 days in prison.
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After his release, he recast himself as a “conservative democrat” and

aligned himself with a group of post-Islamist conservative reformers
who had broken with Islamism’s traditional anti-Western posture and
advocated that Turkey orient itself more firmly in a pro-European, pro-
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American direction. Erdogan now said that he did not “take seriously
people who talked about a state founded on sharia.” He didn’t elaborate
much on this apparent change in his thinking; it seemed to be mostly
a concession to pragmatism. “We are not going to get anywhere with
HUS EYIN ALD EMI R / REUTE RS
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radicalism,” he remarked at a dinner with business leaders in Istanbul

in 1999.
In 2001, the reformers, led by Erdogan, founded the Justice and
Development Party (akp), and the party triumphed in national elections
the following year. (Erdogan was unable to assume office until 2003,
when the government, now led by his party, changed a law that had

Halil Karaveli
prevented him from holding office owing to his conviction.) The akp’s
victory was fueled by support from a new middle class made up of
conservative, religious small-business owners in Anatolia, the heartland
of Turkey, who were enjoying unprecedented prosperity and influence
thanks to Turkey’s slow but growing in-
Erdogan has moved Turkey tegration into global markets. Anatolia
had long been a backwater. In 1980, there
backward, not forward. was not a single company from the ma-
jor Anatolian cities of Gaziantep and
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Konya among the top 500 companies in Turkey; by 2012, the two cities
together boasted 32 of them. But during their rise to prominence,
devout business leaders in Anatolia had shunned the established, secular-
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minded trade organizations and had instead formed their own associa-
tions, which soon become the basis of a support network for the akp.
As prime minister, Erdogan promised a “new social contract” between
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the state and society and called for a series of liberal reforms that
would enhance the separation of powers, the independence of the
judiciary, the freedom of the press, and the rule of law. He wanted to
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make Turkey more hospitable to foreign investment and turn the
country into a place that would be “more cooperative with the world,
at peace with it, and . . . easier for the world to enter.” He pledged to
reduce the state’s role in the economy, lift stifling regulations, and
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“save the country from a plethoric bureaucracy.”

Erdogan also promised a break with tradition on another crucial issue:
the troubled relationship between the central state and Turkey’s large
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Kurdish minority, which has bred a decades-long violent conflict between

the Turkish army and the militant Kurdish separatists of the Kurdistan
Workers’ Party (pkk). He moved slowly, but in 2013, Erdogan announced
a set of reforms intended to address Kurdish demands for civil rights
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and more autonomy: for example, permitting towns to refer to them-

selves by Kurdish-language names and allowing private schools to
offer classes in Kurdish. He also briefly considered a constitutional
change that would have lowered the threshold at which a political party
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could win representation in parliament. That same year, Erdogan’s

government embarked on a “solution process” in coordination with
Abdullah Ocalan, the imprisoned Kurdish militant leader.
But on economic and political reform and on relations with the Kurds,
Erdogan has failed to deliver the kind of change hoped for by liberals in
Turkey and elsewhere: in fact, on both fronts, Erdogan has moved

Erdogan’s Journey
backward, not forward. Talks with the Kurds fell apart, and war is once
again raging in Turkey’s predominantly Kurdish southeast. And far
from shoring up liberal democracy in Turkey, Erdogan has instead
sapped the country’s institutions of their independence and subverted
the rule of law. This process began in earnest as early as 2007, when
Erdogan orchestrated a series of prosecutions of his political opponents,
some of whom were charged with plotting coups; the trials reeked of
judicial impropriety. In 2012, Erdogan complained about the separation
of powers, which he described as “an obstacle” to be overcome. “You find
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yourself confronted by judges in places where you least expect it,” he
complained. His solution has been to hollow out the judiciary. Turkish
courts have always acted in the service of state power, but Erdogan has
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eliminated even the pretense of prosecutorial or judicial independence.
The Erdogan government also toughened the country’s already
draconian antiterrorism laws in order to crush all opposition. By 2012,
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9,000 people—including university students, journalists, lawyers, and
trade-union activists—were serving prison sentences for “terrorist
activities,” meted out by courts that had fallen under Erdogan’s control.
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Today, more journalists are imprisoned in Turkey than in China or
Iran. (Last year, Erdogan personally instructed prosecutors to indict
the chief editor of a newspaper that had been critical of him.) And
Erdogan has made it clear that he will not tolerate public displays of
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dissent. In 2013, he authorized police to use force against peaceful

protesters in Istanbul’s Gezi Park. According to the most reliable
estimates, 11 were killed, and hundreds were injured.
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MISREADING HISTORY
What accounts for the gap between the Turkey that so many hoped
Erdogan would usher in and the Turkey that exists today? One common
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answer is to blame it all on Erdogan’s thirst for personal power. Murat

Belge, a liberal Turkish intellectual who supported Erdogan until the
crackdown on protests in 2013, captured this line of thought when he
wrote earlier this year that “all of the problems that haunt Turkey
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emanate from the personality and goals of Erdogan.” According to

this view, Erdogan never really believed in anything other than himself
and never had any goal other than self-aggrandizement.
But that explanation misses the structural factors that have allowed
him—even encouraged him—to chart an authoritarian course. It also
reveals how the liberals who initially embraced Erdogan fundamentally

Halil Karaveli
misread modern Turkish history. They perceived his rise as the next
chapter in a grand conflict between the state and the religiously con-
servative masses that has been raging in the country since the founding
of the republic by the staunch secularist Ataturk. There was, of course,
such a struggle. But it ended long ago. After Ataturk died in 1938, the
state abandoned radical secularism and allowed for the gradual and
partial restoration of Islam’s influence
Erdogan’s original political in public life, especially in education.
The Turkish state continued to be wary
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identity was that of a of underground Islamic movements that
religiously devout Cold it could not control, but Islam was not
Warrior. its enemy. On the contrary, Turkey’s
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ruling elites saw religion as an asset for
the state, especially during the Cold War,
when leaders in Turkey—a nato member and U.S. ally—suppressed
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leftists, using a broad brush to tar many of them as Soviet sympathizers
in thrall to godless communism. Kenan Evren, the military officer who
took power in a coup in 1980 and under whose rule Turkey’s present
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constitution was drafted, warned that it would “unthinkable” for
Turkey to become irreligious. “We must firmly embrace our religion,”
he declared in 1981.
Erdogan’s formative years overlapped with the apex of these anti-
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leftist campaigns in the 1960s and 1970s, and as a result, his original
political identity was that of a religiously devout Cold Warrior. In high
school, he joined the leading youth organization of the Turkish right,
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the National Turkish Student Association (mttb), which played a

crucial role in mobilizing students from conservative and lower-middle-
class backgrounds. “The only force that can destroy communism is
Islam,” was one of its slogans; “Fighting against communism is as
so
beneficial as praying,” went another.

The mttb was the ideological breeding ground for the generation
of Islamist cadres that went on to found the akp. All of the party’s
leading figures had belonged to the mttb during their high school or
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university years, including Abdullah Gul, who served as president

from 2007 to 2014, and Bulent Arinc, who was Erdogan’s deputy
prime minister from 2009 to 2015. As a young man, Ismail Kahraman,
the current Speaker of the Turkish parliament, served as the president
of the mttb. These men’s worldviews had been forged in a tradition-
alist Turkish middle class in which political values were shaped not by

Erdogan’s Journey
a commitment to liberalism but by a combination of hard-line anti-

communism and aggrieved religious nationalism.
When Erdogan and the akp came to power, some of the Western
observers who issued optimistic forecasts seemed wholly unaware of
this history, and some pro-Erdogan Turkish liberals seemed to have
forgotten it. They celebrated the akp’s rise as the victory of capitalism
over an authoritarian, bureaucratic, militarized state. Turkish liberal
intellectuals rejoiced; finally, a real bourgeois revolution had taken place
in Turkey. In their eyes, the conservative, religious middle classes
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behind the akp were an “authentic” bourgeoisie because they owed their
prosperity to free markets and Turkey’s participation in the global
economy—unlike the older, secular middle class, which had been nursed
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by the state behind the walls of a protected, closed-off economy and had
therefore been uninterested in economic or political reforms. Turkish
liberals believed that Erdogan and the akp would have no alternative but
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to pursue such reforms because their supporters’ newfound prosperity
relied on continued economic growth. But in short order, it became
clear that in the Erdogan era, statism would trump capitalism.
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LESSONS NOT LEARNED
Historically, a fear of fitna (anarchy) has haunted political thinking in
Turkey, as it has in many parts of the Muslim world. Turks have long
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revered, even sanctified, the state as the ultimate defense against

internal strife and dissolution in a heterogeneous society. Mustafa
Erdogan, a liberal Turkish academic (no relation to the president), has
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written that “the cultural code of our people dictates that the state’s
authority must be obeyed even if it is tyrannical and evil.” This deep-
rooted statism, he argues, is “the foundation on which the akp rests.”
Erdogan’s hunger for order is colored by the fate of Adnan Menderes,
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his political hero. Menderes took office as Turkey’s first democratically

elected prime minister in 1950. He was popular but also strikingly
intolerant of dissent. As his time in office progressed, he resorted to
increasingly authoritarian measures: clamping down on protests,
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imprisoning journalists, and indicting members of the opposition. “Is

it possible to tolerate the state order being undermined from morning
until night because doing so is supposedly a democratic obligation?”
Menderes responded when questioned about such measures by mem-
bers of the opposition during a parliamentary session in 1960. His
repressive tactics created enemies in many quarters, including the

Halil Karaveli
military, and later that year, he was toppled by a coup led by a group of
military officers acting outside the chain of command. The following
year, he was executed.
Erdogan has frequently described Menderes’ death as a “tragedy”
for his family and has said that he was deeply moved by news photo-
graphs showing Menderes being led to the gallows. “I experienced the
extreme emotions of my father and my mother at home,” Erdogan
recalled in an interview in the Turkish daily Tercuman in 2009. In
Erdogan’s view, Menderes had been fighting against the forces of
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fitna. But the real lesson of his hero’s tragic fate was lost on Erdogan:
in his quest for order, Menderes had gone too far toward authoritari-
anism. Menderes had himself fomented fitna.
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This past summer, Erdogan’s failure to understand that history
almost led to his meeting the same end as his hero. The insurgent
officers who tried to topple Erdogan in July seem to have been inspired
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by the 1960 coup, justifying their putsch as a reaction to Erdogan’s
overstepping his authority and threatening Turkish democracy.
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MINORITY REPORT
Just as Erdogan’s approach to governing reflects his Cold War–era
political upbringing, his efforts to address the Kurdish question show
the influence of trends in social thought that were shaping Turkey when
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the president was a young man. Erdogan was born at a time when a
new, more overtly Islamic version of Turkish nationalism was gradually
replacing Kemalism, the staunch secularist thinking of Ataturk. Propo-
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nents of Kemalism maintained that it was an inclusive ideology. But in

reality, its conception of national identity relied heavily on Turkish
ethnicity, and thus Kemalism demanded cultural surrender on the part
of the country’s many minority groups. By the 1950s, Kemalism’s limits
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had become clear, and many conservative Turkish intellectuals were

exploring the possibility that shared religious bonds might prove
stronger than those yielded by an enforced civic secularism.
As a young man, Erdogan was an avid reader of conservative intel-
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lectuals such as Necip Fazil Kisakurek, who celebrated Turkey’s Muslim

heritage. But Erdogan was never a xenophobe: a Greek soccer player from
Istanbul was his childhood hero. As prime minister, Erdogan has con-
demned the ethnic-cleansing campaigns that banished the last remaining
Greeks from Turkey in the 1950s and 1960s, blaming them on “a fascist
mentality.” Erdogan is the first Turkish leader to have publicly displayed

Erdogan’s Journey
a relaxed attitude about his own ethnic identity. According to some

reports, he has openly referred to his mother’s Georgian origins and has
suggested that his father’s ethnic heritage was a bit murky. Erdogan has
recalled that he once asked his father, “Are we Laz, or are we Turks?”
(The Laz people hail from the Black Sea coastal regions of Georgia and
Turkey and speak a language distinct from Turkish.) Erdogan’s father
replied that he had asked his own father the very same question. The
issue was ultimately settled by Erdogan’s great-grandfather, a mullah,
who declared: “God is not going to ask us to which tribe we belong. Just
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say, thank God we are Muslims, and let it be.”
In the 1980s, the issue of how Turkey should cope with its ethnic
diversity caused a sharp division within the Islamist movement: one
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faction urged for the enforcement of a
pan-Turkish identity; another sought to
accommodate ethnic difference. Perhaps
Erdogan’s attempt to bring
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owing in part to his own background, the Kurdish conflict to an
Erdogan belonged to the second camp. end was sincere but
He argued that the Koran demanded re- unrealistic.
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spect for all “tribal” identities and that
imposing restrictions on minority cul-
tures and languages was theologically dubious. In 1991, he commissioned
an internal report for the Welfare Party on the Kurdish question. The
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report’s recommendations were radical compared with the conventional

thinking of the time, proposing to officially recognize not only the Kurds
but also other minority groups—the Laz, the Circassians, and the
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Arabs—and to grant them the right to receive education in their own

languages. It was no surprise, then, that the akp came to power with strong
support from Turkey’s Kurds, many of whom are religious conservatives.
Erdogan’s attempt to bring the conflict with the Kurdish militants
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to a peaceful resolution was sincere. But it was also unrealistic. Erdogan

believed that he could achieve peace without making any significant
political concessions simply by appealing to the Sunni Muslim iden-
tity that Kurds and Turks shared. The Turkish government persuaded
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the imprisoned Kurdish rebel leader Ocalan to evoke that theme in a

2013 message to his followers, in which he stressed that the two peoples
had together “been marching under the banner of Islam for a thou-
sand years.” But in the Kurdish areas in the southeast of Turkey, the
pkk had entrenched its control, and the militants demanded official
devolution of power to the Kurdish provinces. The Kurds were not

Halil Karaveli
interested in religious bonding; they wanted autonomy and rights.

Erdogan was prepared to accept cultural diversity, but not self-rule,
for the Kurds: self-rule would have amounted to political suicide for
him. The “solution process” with the Kurds finally fell apart last year,
undermined in part by the emergence of Kurdish forces as leading
players in the international coalition fighting the jihadist group the
Islamic State (or isis) in Iraq and Syria—a development that Erdogan
and the Turkish state have found profoundly threatening. In the past
year, the Turkish military has reduced Kurdish cities to rubble for the
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first time since Ataturk’s rule.
NO WAY OUT
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Erdogan wants to be the new “father of Turkey.” But waging war against
his own citizens is hardly how he wanted to walk in Ataturk’s footsteps.
His failure to achieve peace with the Kurds is ultimately a demonstra-
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tion of the fact that the chief sources of his appeal—Turkish capitalism
and Sunni Islam—have proved insufficient to the task of creating a
unifying, twenty-first-century Turkish identity capable of fostering a
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sustainable political order. In the end, Erdogan has been left with little
choice but to revert to traditional authoritarian nationalism.
That failure transcends the question of Erdogan’s personal legacy:
it signals that Turkish conservatism—whether in its religious or its
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statist form—has run its course. It has brought neither liberty nor
order to Turkey. The prospects for a more liberal Turkey appear dim,
but it has rarely been clearer that liberalization is likely the only path
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to sustainable stability and prosperity.

Erdogan has expunged virtually every trace of liberal advocacy from
the mainstream, so any future movement toward reform would likely
emerge from below, among the victims of Turkey’s conservative
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order, especially the country’s ethnic and religious minorities. The Kurds,
for example, could catalyze wider liberal change if they managed to
transform their appeals to Kurdish ethnic nationalism into a broader
plea for civil and political rights for all Turks. Even without such a shift,
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the escalating costs of the state’s war against the Kurds might at some
point lead the Turkish middle class to question Erdogan’s leadership;
a more liberal, reformist vision might then appear more attractive.
Neither of those scenarios, however, seems particularly likely at the
moment. For the foreseeable future, all Turks will be living in a country
that has indisputably become Erdogan’s Turkey.∂

ESSAYS
No country is better
positioned than the United
States to lead in the
twenty-first century. But it
is worth remembering that
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our indispensable role in
the world is not inevitable.
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—Joseph Biden
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Building on Success The Return of Europe’s Nation-States

Joseph R. Biden, Jr. 46 Jakub Grygiel 94
From Political Islam to How to Fix Brazil

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Muslim Democracy Eduardo Mello and Matias Spektor 102

Rached Ghannouchi 58
America’s Brewing Debt Crisis
China’s Infrastructure Play Robert Litan 111
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Gal Luft 68
INTS KALNINS / REUTERS
The Strategic Costs of Torture

Parting the South China Sea Douglas A. Johnson, Alberto Mora,
Mira Rapp-Hooper 76 and Averell Schmidt 121
Keeping Europe Safe Venezuela on the Brink

David Omand 83 Lisa Viscidi 133
Building on Success
Opportunities for the Next Administration
Joseph R. Biden, Jr.
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he next administration will take the reins of American foreign
policy in a world that is more complex than at any point in our
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modern history, including the twilight of the Cold War and the
years that followed the 9/11 attacks. But it is also the case that despite
the proliferation of threats and challenges—some old, some new—by
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almost any measure, we are stronger and more secure today than when
President Barack Obama and I took office in January 2009. Because of
our investments at home and engagement overseas, the United States is
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primed to remain the world’s preeminent power for decades to come.
In more than 40 years of public service, I have never been more optimistic
about America’s future—if only we continue to lead.
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THE FOUNDATIONS OF POWER

From the outset, our administration has been guided by the belief that
the foundations of U.S. global leadership reside first and foremost in
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our dynamic economy, peerless military, and universal values. We have

built on these core strengths by expanding and modernizing the United
States’ unrivaled network of alliances and partnerships and embedding
them within a wider international order of rules and institutions.
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Having inherited a deep economic recession, our administration

first sought to steer an economy in collapse through an arduous recovery.
In doing so, we have reestablished our standing as the world’s strongest
and most innovative major economy, undergirded by the rule of law,
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the finest research universities, and an unparalleled culture of entrepreneur

ship. Smart investments coupled with American ingenuity have also
made the United States the epicenter of a global energy revolution,
both in renewables and in fossil fuels.
JOSEPH R. BIDEN, JR., is Vice President of the United States.

Building on Success
And we are seeing the results of a revitalized economy—in sustained

job growth, a shift from outsourcing to insourcing, and a renewed
consensus that the United States is once again the best place for
businesses to invest worldwide, with the consulting firm A. T. Kearney
ranking it now four years running as the top destination for foreign
direct investment.
This vibrant economy is essential to sustaining our unrivaled mili
tary. We continue to outpace our competitors, spending more on our
overall defense than the next eight countries combined. We have the
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most capable ground forces in the history of the world and an unmatched
ability to project naval and air power to any corner of the globe. And
thanks in no small part to our efforts to bolster U.S. special operations
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forces, enhance our cyberspace and space capabilities, and invest in
unmanned systems and other game changing technologies, we’re well
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positioned to maintain our qualitative edge for years to come.
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This is part of a layered defense that has only grown stronger with our
laser focus on homeland security, making our borders safer, improving
security and inspections at ports, and strengthening screening procedures
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at airports. Our intelligence and law enforcement professionals are
coordinating at an unprecedented level among themselves and with
partners around the world, foiling countless would be attackers. And
-
with U.S. assistance, our partners are now reciprocating by sharing
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more information, such as passenger records, enhancing security while

protecting civil liberties.
This speaks to another reality: America’s greatest strength is not
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the example of our power but the power of our example. More than
anything, it is our adherence to our values and our commitment to
tolerance that sets us apart from other great powers. I have no doubt
that future generations of Americans will be proud of the way we have
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doubled down over the last seven and a half years to uphold basic human
dignity by banning torture, calling for a more enlightened immigration
system, expanding opportunities for women, and defending the rights
of the lgbt community at home and abroad.
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This is not only the right thing to do; it is also the right strategy,
because our commitment to defend what is best in us inspires others
to stand with us. That’s vital, since our unrivaled network of allies
and partners—from our core democratic alliances in Europe and Asia
to our growing partnerships in Africa, Latin America, and the Middle
East—multiplies our ability to lead. It’s how we mobilize collective

action to address just about every major challenge, from the Islamic
State (or isis) to Ebola to climate change.
Equally critical has been our commitment to strengthening the
open international system, embracing the time tested approach that
-
spurred America’s rise in the previous century. The United States built
the basic architecture of the international order after the devastation
of World War II, and it has served us and the world well ever since.
That’s why we have invested so much energy to defend and extend the
rules of the road, signing historic arms control and nonproliferation
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agreements and leading worldwide efforts to lock down nuclear materials,
expand trade, protect the environment, and promote new norms to
address emergent challenges at sea and in cyberspace.
hi
As a result, no country is better positioned than the United States
to lead in the twenty first century. But it is worth remembering that our
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indispensable role in the world is not inevitable. If the next administration
ha
chooses to turn inward, it could very well squander the hard earned
-
progress we’ve made not just over the past seven and a half years but
also over the past seven decades.
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Although the next president will be confronted with innumerable
issues, four tasks loom large: seizing transformative opportunities on
both sides of the Pacific, managing relations with regional powers,
leading the world to address complex transnational challenges, and
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defeating violent extremism.
PACIFIC OPPORTUNITIES
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The next president should deepen U.S. engagement with the most
dynamic regions of the world by seizing possibilities on both sides
of the Pacific, starting right here in the Western Hemisphere.
Canada, Latin America, and the Caribbean have an outsize impact on
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our domestic security and prosperity, and in the twenty first

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century, the Western Hemisphere should figure prominently among
our top foreign policy priorities.
We’re already seeing the returns of a renewed focus on the region.
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Because of the way President Obama and I have prioritized improving

relations with our neighbors, including the opening to Cuba, the United
States’ standing in the hemisphere has never been higher. The next
administration should build on this momentum to strengthen the security
and prosperity of people throughout the Americas. The table is set to
deepen cooperation with Canada and Mexico, capitalize on renewed

Building on Success
ties with Argentina, sustain unprecedented engagement with Central

America, and expand our partnerships with regional leaders such as
Brazil, Chile, and Colombia.
Challenges surely remain, including undocumented immigration,
drug trafficking, widespread corruption, and fragile democratic insti
tutions, but today the region is defined more by opportunities than
crises. The opportunities include the
possibilities for stronger trade and in
vestment, greater energy integration,
America’s greatest strength
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and a more peaceful hemisphere in which is not the example of our
the United States helps end long running power but the power of our
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conflicts, as we have done in Colombia. example.
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Indeed, for the first time in history, it’s
possible to imagine a hemisphere that
is middle class, democratic, and secure from the northern reaches of
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Canada to the southern tip of Chile.
On the other side of the Pacific, we’ve recharged our engagement
with Asia. The next administration will inherit treaty alliances with
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Australia, Japan, the Philippines, and South Korea that are the strongest
they’ve ever been. It isn’t always easy to explain on a bumper sticker, but
it’s common sense that the United States is wealthier and safer because
the world’s advanced democracies are in our corner. It’s also true that
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being the principal security provider in Asia doesn’t come for free. But
we should never underestimate the extraordinary economic costs to the
American people if Asia devolved into conflict—something that is far
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more likely to occur in the absence of sustained U.S. leadership there.

The next administration will be charged with continuing to expand
our network of relationships beyond our core alliances, building on
the historic opportunities we’ve created to support the democratic
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transition in Burma (also called Myanmar), deepen ties with Vietnam,

manage relations with China, expand the strategic partnership with
India, and work with the Association of Southeast Asian Nations to
advance a rules based order.
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And because Asia is home to half the world’s population and many
of the world’s fastest growing markets, we simply cannot afford to
-
ignore the economic opportunities there. That’s why securing the
Trans Pacific Partnership remains a top priority for our administration.
-
The 12 economies of the tpp account for 30 percent of global trade,
40 percent of global gdp, and 50 percent of projected global economic

growth. Thanks to U.S. leadership, the deal includes provisions that

will raise international standards for the protection of workers’ rights,
the environment, and intellectual property. Absent these rules, the
region will likely witness a race to the bottom in the form of weak,
low standard regional trade agreements that exclude the United States.
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This deal is as much about geopolitics as economics: when it comes to
trade, maritime security in the South China Sea, or nuclear nonpro
liferation in Northeast Asia, the United States has to take the lead in
writing and enforcing the rules of the road, or else we will leave a
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vacuum that our competitors will surely rush to fill.
MANAGING REGIONAL POWERS
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Indeed, in nearly every part of the world, the United States contends
with regional powers that have an enormous capacity to contribute to
the international order—or to undermine it. Much will rest on how
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America chooses to lead.
Nowhere is this truer than in our relationship with China. The
United States and China are the world’s two largest economies, so
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our fates are inescapably intertwined. President Obama and I have
sought to define this relationship through enhanced cooperation and
responsible competition. We have found common ground with Beijing
and made historic progress to address such global challenges as climate
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change, pandemic disease, poverty, and nuclear proliferation. At the

same time, we have stood firm on such issues as human rights,
intellectual property, and freedom of navigation.
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This balancing act will only grow more difficult in the context of
China’s economic slowdown and the worrying steps Beijing is taking
to reverse course on more than three decades of economic reform and
opening up to the world. As a result, the next administration will have
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to steer a relationship with China that encompasses both breakthrough

cooperation and, potentially, intensified competition. And sometimes,
as when facing the mounting threat from North Korea, cooperation
and competition with China will coexist. The notion that it will be all
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one or the other is shortsighted and self defeating.

-
The same is true with regard to Russia, with which the United States
should continue to pursue a policy that combines the urgent need for
deterrence, on the one hand, with the prudent pursuit of tactical
cooperation and strategic stability, on the other. Russia’s illegal attempt
to annex Crimea and its continued aggression in eastern Ukraine violate

Building on Success
foundational principles of the post–Cold War order: sovereignty and

the inviolability of borders in Europe. In response, we have rallied our
allies in Europe and elsewhere to impose real costs on Moscow, making
clear that this pressure will continue until Russia upholds its commitments
under the agreements reached in Minsk aimed at ending the conflict.
Meanwhile, the combination of our $3.4 billion European Reassurance
Initiative and nato’s new forward deployments in Poland and the
Baltics will strengthen our European allies and provide a bulwark
against further Russian aggression. For
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years, we’ve also encouraged Europe
to spend more on defense and to diversify
Sometimes, cooperation
its energy supplies in order to reduce and competition with
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its susceptibility to coercion. Now we’re China will coexist.
starting to see progress on these fronts.
And the next administration should redouble the United States’
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commitment to strengthening nato and our partnership with the
eu, even as London and Brussels negotiate their ongoing relationship.
Investing in the core institutions of the West does not require
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reverting back to simplistic Cold War thinking, however. The United
States should remain open to cooperation with Russia where our
interests overlap, as we demonstrated with the Iran nuclear deal, as
well as with the New start agreement on nuclear weapons. It is also
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difficult to envision how the war in Syria will ultimately end without
some modus vivendi between Washington and Moscow. And as new
military technologies raise the stakes of miscalculation and escalation,
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we will need functional and stable channels with Russia to clearly

communicate our intentions and maintain strategic stability.
There’s an appealing moral clarity in dividing the world into friend
and foe. But in reality, progress in international affairs so often demands
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working with those with whom we do not see eye to eye. That’s why
our administration seized the possibility to move beyond three decades
of conflict with Iran to lock in a nuclear agreement. Tehran is neither
a friend nor a partner. But our willingness to break taboos and engage
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the regime directly, combined with our success in mobilizing unprece

dented international pressure on Iran to negotiate, peacefully removed
one of the greatest threats to global security: the specter of Iran gaining
a nuclear weapon.
One year on, the deal speaks for itself: the agreement is working.
Iran has verifiably removed two thirds of its centrifuges, shipped out
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of the country 98 percent of its low enriched uranium (enough for
-
about ten nuclear weapons), removed the core of its plutonium reactor
at Arak and filled it with cement, and provided international inspectors
unprecedented access to its entire nuclear supply chain to ensure
compliance. The deal blocks every pathway through which Iran might
seek to develop nuclear weapons, while opening up the possibility for
further engagement with Tehran down the road if the regime moderates
its behavior. Tearing up the deal now, as some have proposed, would
leave Iran’s nuclear program unconstrained, increase the threat to
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Israel and our partners in the Gulf, turn the international community
against the United States, and sharply raise the prospect of another
major war in the Middle East.
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Critics of engagement should remember that the nuclear deal was
never meant to resolve all our problems with Tehran. Engaging Iran
need not come at the expense of our ironclad commitments to our allies
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and partners in the Middle East, including Israel. The United States has
retained all the means necessary, including targeted sanctions, to hold
Iran accountable for its ballistic missile activities, support for terrorism,
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and human rights violations, and we are committed to working with our
allies and partners to push back against Iran’s destabilizing behavior.
TACKLING TRANSNATIONAL CHALLENGES

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Transnational threats such as pathogens, environmental disruptions,

computer viruses, and malicious ideologies don’t respect borders. Even
in simpler times, isolationism never offered more than a false sense of
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security. And now, more than ever, we cannot wall ourselves off from
these dangers or sit back and wait for others to solve the world’s
problems for us. As the columnist Thomas Friedman aptly wrote, “If
you don’t visit a bad neighborhood, it might visit you.”
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We’ve learned that true security requires finding solutions that span
borders, as when we rallied the world to address the Ebola epidemic in
West Africa in 2014. In the face of a terrifying disease, we resisted
hysterical calls for quarantines and travel bans and instead followed the
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science. We drew on all our strengths, from our military to our health
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care and development professionals. And with tireless diplomacy, we
brought the world along with us to provide urgent, coordinated
assistance that ultimately saved hundreds of thousands of lives.
Beyond Ebola, we have made significant investments and built new
partnerships to fight hiv/aids, turn the tide against malaria, and improve

Building on Success
the health of women and children across Africa. And through our Global
Health Security Agenda, a partnership between the United States and
some 50 other countries that our administration launched in 2014, we
are strengthening the capacity of vulnerable countries in Africa and
around the world to combat future outbreaks. Improving health security
represents just one facet of our growing relationship with Africa.
Through such forums as the U.S. Africa Leaders Summit and the Young
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African Leaders Initiative, we have engaged with African leaders on all
levels, from heads of state to civil society, expanding and deepening
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partnerships that contribute to the continent’s increasingly bright future.
American leadership has also proved decisive in addressing climate
change. Our administration’s landmark investments at home have
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tripled the amount of electricity we harness from the wind and
increased our solar power 20 fold since 2008. We’ve put in place rules
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that will double the fuel efficiency of our cars by 2025, and we’ve set
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forth an unprecedented plan to reduce the amount of carbon dioxide
that our power plants emit. These are the most significant steps the
United States has ever taken domestically to combat climate change,
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and because our actions proved that we take this threat seriously, we
were able to rally other countries to make concrete commitments of their
own—starting with China, the world’s leading emitter. That’s how we
achieved last year’s historic Paris agreement to combat climate change.
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At the same time, we’re working to increase the resilience of com

munities that are already being affected by rising temperatures and
extreme weather, at home and around the world. We’re implementing
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strategies to address the increased risk of flooding in coastal

communities and improving our national resilience in the face of long
-
term droughts. We’re also building climate considerations into all our
efforts to promote sustainable development around the world, including
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aid programs such as Feed the Future, which supports climate smart
-
agriculture. Our $3 billion pledge to the un’s Green Climate Fund
will help the poorest and most vulnerable nations become more
resilient to climate change. And through a bold initiative called Power
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Africa, we’ve set a goal of doubling access to electricity on the continent

through clean and sustainable methods.
Through all these efforts, we’ve laid the groundwork to protect our
planet. But the resulting opportunities can be seized only if the next
president follows the science, recognizes the dangers of doing nothing,
and musters the political will to address the threat.

Other transnational threats are only a keystroke away, whether it be

state actors pilfering commercial or government data or North Korean,
Iranian, or anonymous criminal hackers perpetrating cyberattacks
against American companies. That is why we’ve fortified our cyber
defenses, expanded partnerships with the private sector and with other
governments, authorized the Treasury Department to impose sanctions
against malicious hackers, enhanced our technical and attributional
capabilities, and worked to improve our ability to respond to and
recover from cyberattacks.
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Meanwhile, we have secured a number of important commitments
from China on its actions online, including an agreement not to
conduct cyber enabled economic espionage for commercial gain, and
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a number of other states are following our lead and securing similar
commitments of their own. We continue to support an open, trans
parent, and interoperable Internet as an engine of economic growth
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and civil society. Finally, we are building a growing coalition of like
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minded states around a set of voluntary norms of responsible state
behavior in peacetime, an important effort to enhance stability in
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cyberspace, which has been endorsed by leaders from a number of the
most capable countries, including those of the G 7 and the G 20.
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The next administration should pick up this baton and run with it,
further refining principles to guide the digital revolution as part of a
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broader effort to shape new rules of the road for space, the sea, and the
other critical domains that will define commerce and competition in
the decades ahead.
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DEFEATING VIOLENT EXTREMISM

Terrorism and violent extremism provide perhaps the most vexing
example of a virulent transnational danger that demands sustained
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U.S. leadership. Al Qaeda, isis, and their offshoots represent real

threats, and the attacks in Paris, San Bernardino, Brussels, Orlando,
Istanbul, and elsewhere have reminded us over and over again that
terrorism can happen anywhere. At the same time, even amid a climate
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of fear and uncertainty, we must remember that terrorists cannot

destroy the United States or our civilization. They are significant, but
not existential, threats—and we should never underestimate the
strength and resilience of the American people.
Terrorism must—and will—be defeated. But more than a decade of
war in Afghanistan and Iraq has taught us some hard lessons about

Building on Success
when and how to deploy military power to address this danger. Even
as we have removed more than 165,000 U.S. troops from combat in
Afghanistan and Iraq, President Obama has never hesitated to use
force to defend the American people when necessary. Just ask
Osama bin Laden and al Qaeda’s top operatives in Afghanistan and
Pakistan, the leaders of al Qaeda’s affiliates in Somalia and Yemen,
and more than 120 of isis’ top leaders
and commanders. Our administration
has not been hamstrung by an ideology
If the next administration
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of restraint, as our most vocal critics chooses to turn inward, it
allege. Rather, we carefully consider could very well squander
the use of force because we understand the hard-earned progress
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the tremendous human costs and unfore
seen consequences of war. We must we’ve made.
ensure that when we do use force, it is
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effective. Accordingly, we have taken precise and proportional military
actions, guided by a clear mission that advances U.S. interests. When
ever possible, we have acted alongside allies and partners so that they
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will share the burden and become invested in the mission’s success.
And perhaps most important, we have used force in a manner that is
sustainable. We’ve learned in no uncertain terms that success on the
battlefield will not endure if U.S. military involvement outpaces
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political developments on the ground or the ability of local partners to

control their own territory. Lasting victory against al Qaeda and isis
will therefore require viable indigenous forces to hold liberated areas,
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rebuild shattered communities, and govern effectively. That’s why we’ve

worked with more than three dozen nations to train Afghan forces to
hunt down al Qaeda and other terrorist groups. And that’s why we’ve
invested so much in building a partnership with the Government of
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National Accord in Libya and with other African governments—from

Nigeria to Somalia to Tunisia—to go after al Qaeda and isis affiliates.
In Iraq and Syria, we’ve built a 66 member coalition to train local
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forces, and we’ve provided afflicted communities with critical humani
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tarian and stabilization assistance. We’ve deployed special operations

forces, and as of July 2016, our coalition has carried out more than
13,000 air strikes in support of local ground forces. With enhanced
intelligence sharing and law enforcement cooperation, we have worked
with our partners to improve their border security, reduce the flow of
foreign fighters into Iraq and Syria by 50 percent, and strangle isis’

finances. The result: isis is losing. Over the past two years, the group
has been under siege from western Iraq to northern Syria, losing approx
imately 50 percent of the populated territory it once held in Iraq and
more than 20 percent in Syria. We’ve taken thousands of isis’ frontline
fighters off the battlefield, and the group has lost a quarter of its overall
manpower. Its morale is plummeting, and its hold over local populations
is loosening.
Meanwhile, we’re working with the international community to provide
billions of dollars in humanitarian aid to displaced people in Iraq and
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Syria and refugees across the region and billions more to stabilize and
rebuild communities liberated from isis. To address the grievances that
give such groups oxygen, we are engaged at the highest levels in Iraq to
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encourage greater political inclusivity and reconciliation across that
country’s ethnosectarian divide. And we are aggressively pursuing
a diplomatic settlement to produce a political transition in Syria—
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because not only is there no military solution to the conflict; there is
also no way to end it so long as Bashar al Assad remains in power.
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It is worth recalling that what initially set isis apart in 2014 was the
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group’s attempt to carve out both a state and a self described caliphate
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in the heart of the Arab world. This risked creating a territorial
platform for attacks on the West. This is the threat we are systematically
dismantling in Iraq and Syria, and the one we are making progress in
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undoing in Libya.
But even when isis’ would be caliphate is destroyed, the jihadist
-
challenge will continue. Other violent jihadist movements with localized
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agendas—some that are distinct from isis and others that have appro
priated its brand—will likely continue to exploit ungoverned spaces
and threaten stability in key countries. Boko Haram was a threat to
Nigeria long before it renamed itself the Islamic State’s West African
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Province, for example, and it will still have to be addressed even if

isis’ core is destroyed. More broadly, the Salafi jihadist ideology that
underpins such groups does not require territory to radicalize lone
wolves to carry out attacks like those in San Bernardino, Orlando, and
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Nice. And foreign fighters returning home from the front may con
tinue to attempt attacks like those in Paris and Brussels.
The next administration will have to continue to address this
challenge in a smart, sustainable, and holistic manner. This will require
the disciplined application of military force, alongside the best efforts
of our intelligence and law enforcement communities, diplomats, and

Building on Success
development professionals. It will require working with local partners

and the international community to improve governance in fragile and
failing states. And it will involve countering toxic ideologies online.
But this comprehensive campaign against violent extremism will
succeed only if it is carried out in a manner that is consistent with our
values and keeps the world’s 1.5 billion Muslims—the vast majority of
whom reject Salafi jihadist views—on our side. We know that al Qaeda,
isis, and their ilk want to manufacture a clash of civilizations in which
Americans think of Muslims in us versus them terms. Last year, isis’
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-
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top leader, Abu Bakr al Baghdadi, revealed the goal of his group’s at
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tacks: “Compel the crusaders to actively destroy the gray zone them
selves. Muslims in the West will quickly find themselves between one
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of two choices: either apostatize or emigrate to the Islamic State and
thereby escape persecution.”
We should never let these groups win by giving in to the religious
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war they want. This only raises the premium on adhering to our values
and spurning the tactics of our enemies: torture, indiscriminate
violence, and religious intolerance. Doing otherwise not only violates
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our values but also deeply damages our security.
AN ENDURING AGENDA
The next administration will have a lot on its plate: uniting the
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Western Hemisphere, deepening our alliances and partnerships in

Asia, managing complex relationships with regional powers, and
addressing severe transnational challenges such as climate change
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and terrorism. But because of the actions we’ve taken and the
boundless energy and resilience of the American people, I’ve never
been more optimistic about our capacity to guide the international
community to a more peaceful and prosperous future. It bears under
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scoring, however, that U.S. leadership has never sprung from some
inherent American magic. Instead, we have earned it over and over
again through hard work, discipline, and sacrifice.
There is simply too much at stake for the United States to draw
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back from our responsibilities now. The choices we make today will
steer the future of our planet. In the face of enormous challenges and
unprecedented opportunities, the world needs steady American
leadership more than ever.∂

From Political Islam to

Muslim Democracy
The Ennahda Party and the Future
of Tunisia
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Rached Ghannouchi
E hi
nnahda, one of the most influential political parties in the Arab
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world and a major force in Tunisia’s emergence as a democracy,
recently announced a historic transition. Ennahda has moved
beyond its origins as an Islamist party and has fully embraced a new
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identity as a party of Muslim democrats. The organization, which I
co founded in the 1980s, is no longer both a political party and a social
-
movement. It has ended all of its cultural and religious activities and
now focuses only on politics.
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Ennahda’s evolution mirrors Tunisia’s broader social and political

trajectory. The party first emerged as an Islamist movement in response
to repression at the hands of a secularist, authoritarian regime that
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denied citizens religious freedom and the rights of free expression and
association. For decades, Tunisian dictators shut down all political dis
course in the country, forcing movements with political aims to operate
exclusively as social and cultural organizations. But the revolution of
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2010–11 brought an end to authoritarian rule and opened up space for

open, free, and fair political competition.
Tunisia’s new constitution, which Ennahda members of parliament
helped draft and which was ratified in 2014, enshrines democracy and
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protects political and religious freedoms. Under the new constitution, the
rights of Tunisians to worship freely, express their convictions and beliefs,
and embrace an Arab Muslim identity are guaranteed, and so Ennahda
no longer needs to focus its energies on fighting for such protections.
RACHED GHANNOUCHI is a co-founder of the Ennahda Party.

From Political Islam to Muslim Democracy
m
hi
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Ghannouchi in Tunis, January 2011
Therefore, the party no longer accepts the label of “Islamism”—a
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concept that has been disfigured in recent years by radical extremists—as
a description of its approach. In this new democratic stage of Tunisian
history, the question is no longer one of secularism versus religion:
the state no longer imposes secularism through repression, and so
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there is no longer a need for Ennahda or any other actor to defend or

protect religion as a core part of its political activity.
Of course, as Muslims, the values of Islam still guide our actions.
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However, we no longer consider the old ideological debates about the

Islamization or secularization of society to be necessary or even relevant.
Today, Tunisians are less concerned about the role of religion than
about building a governance system that is democratic and inclusive
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and that meets their aspirations for a better life. As the junior partner
in Tunisia’s coalition government, Ennahda aims to find solutions to
matters of concern to all of the country’s citizens and residents.
Ennahda’s evolution is a result of 35 years of constant self-evaluation
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ZOUBEIR SOUISSI / REUTERS
and more than two years of intense introspection and discussion at

the grass-roots level. At an Ennahda Party congress held in May, more
than 80 percent of the delegates voted in favor of this formal shift,
which represents not so much a sea change as a ratification of long-
held beliefs. Our values were already aligned with democratic ideals,
and our core convictions have not changed. What has changed, rather,
Rached Ghannouchi
is the environment in which we operate. Tunisia is finally a democracy

rather than a dictatorship; that means that Ennahda can finally be a
political party focusing on its practical agenda and economic vision
rather than a social movement fighting against repression and dictator
ship. As the entire Middle East grapples with instability and violence—
often complicated by conflicts over the proper relationship between
religion and politics—Ennahda’s evolution should serve as evidence
that Islam is indeed compatible with democracy and that Islamic
movements can play a vital, constructive role in fostering successful
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democratic transitions.
RESISTANCE AND RENAISSANCE
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Abdelfattah Mourou and I established the Islamic Tendency Move
ment (mti), which later became Ennahda, in the 1970s. We were both
graduates of Ez Zitouna, the first Islamic university in the world,
ha
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which was founded in 737 and has long fostered a vision of Islam
as dynamic and responsive to the changing needs of society. Our
approach was shaped by our contact with a variety of reformist Islamic
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thinkers. Early on, we were influenced by thinkers in Egypt and Syria
linked to the Muslim Brotherhood, such as the movement’s Egyptian
founder, Hasan al Banna, and Mustafa al Sibai, the leader of its Syrian
-
-
branch. But as the mti developed, we increasingly drew inspiration
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from thinkers in the Maghreb region, such as the Algerian philosopher

Malek Bennabi and Ez Zitouna University’s own Mohamed Tahar
-
Ben Achour, one of the fathers of the rationalistic approach to Koranic
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exegesis, which emphasizes the importance of maqasid al-sharia: the

objectives, or ends, of Islamic law.
At the time, Tunisia was experiencing increasing social and political
unrest due to widespread dissatisfaction with the authoritarian regime
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of President Habib Bourguiba and its crackdown on civil and political

liberties, as well as with the slow pace of economic growth, the spread
of corruption, and the persistence of social inequality. Discontent
boiled over in a series of strikes between 1976 and 1978 that culminated
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in a general strike on January 26, 1978—a day that came to be known

in Tunisia as Black Thursday, when the regime killed dozens of protesters,
wounded hundreds more, and arrested more than 1,000 people on
charges of sedition.
In light of a growing consensus about the need for democratic reforms,
the mti brought together Tunisians who opposed the Bourguiba regime

and felt excluded from the political system, especially owing to the
state’s repression of any expression of religiosity, whether in public or
private. Mti members set up discussion groups, published journals,
and organized students on university campuses.
In April 1981, the Bourguiba regime consented to the registration
of other political parties. The mti submitted a request to form a party
committed to democracy, political pluralism, the peaceful sharing and
alternation of power, free and fair elections as the sole source of
political legitimacy, the protection of moderate religious scholar
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ship, and the promotion of a form of modernization that would be in

harmony with Tunisia’s values and cultural heritage. But the application
was ignored by authorities.
hi
Faced with rising calls for reform, the regime instead expanded
its crackdown, arresting around 500 mti members, myself included.
Between 1981 and 1984, I was imprisoned along with many of my
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colleagues. Shortly after our release, many of us were rearrested,
accused of inciting violence and “seeking to change the nature of
the state.” Many Ennahda members were sentenced to life in prison
iT
after sham trials, as the regime deepened its descent into repression
and despotism.
The rise to power of Zine el Abidine Ben Ali, who deposed Bourguiba
-
in a 1987 coup d’état, seemed to signal a potential political opening.
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The following year, Ben Ali granted an amnesty to all political prisoners
and announced the beginning of a new
era of multiparty democracy. The mti
Ennahda’s evolution proves
od
again applied for recognition as a poli

tical party, changing its name to Hizb that Islamist movements can
Ennahda (the Renaissance Party). How play a vital role in successful
ever, the application was again ignored, democratic transitions.
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and the hoped for opening soon proved

-
to be a mirage, as the Ben Ali regime
reverted to the repressive tactics of the Bourguiba era. After the
1989 national elections, in which independent candidates linked to
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Ennahda won 13 percent of the overall vote and, according to some

sources, as much as 30 percent in some major urban areas, the
regime moved to crush the party. Tens of thousands of members
were arrested, imprisoned, tortured, blacklisted from employment
and educational opportunities, and subjected to police harassment.
Many others, including me, were forced into exile.

Rached Ghannouchi
For the next two decades, Tunisia languished under repression, and
Ennahda struggled to survive as a banned underground movement. A
turning point finally came in December 2010, when a young Tunisian
street vendor named Mohamed Bouazizi set himself on fire in front of
a local government office to protest the
harassment he had suffered at the hands
The Ennahda-led of officials. Bouazizi’s action captured
government did something the public imagination, and in less than
never before seen in the a month, massive protests around the
m
region: it willingly stepped country had forced Ben Ali to flee and
had sparked a series of revolts across
down. the Arab world. Ennahda members
hi
participated in the protests alongside
other Tunisians, but not under the party banner, partly to avoid giving
the regime an excuse to paint the demonstrations as the work of an
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opposition group seeking to take power.
In the country’s first free and fair elections, in October 2011,
Ennahda’s grass roots networks and track record of opposing the dicta
-
iT
torship helped it win the largest share of the vote, by a wide margin.
Seeking a national unity government, Ennahda entered into a pio
neering coalition with two secular parties, setting an important precedent
in contemporary Arab politics.
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In Tunisia’s postrevolutionary era, when tensions have threatened

to overwhelm the country’s fragile democratic structures, Ennahda
has pushed for compromise and reconciliation rather than exclusion
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or revenge. During negotiations over a new constitution, Ennahda’s

parliamentarians made a series of crucial concessions, consenting to a
mixed presidential parliamentary system (Ennahda had originally
-
called for an exclusively parliamentary system) and agreeing that the
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constitution would not cite sharia as one of the sources of legislation.

As a result of Ennahda’s willingness to compromise and work within
the system, the new constitution enshrines democratic mechanisms,
the rule of law, and a full range of religious, civil, political, social,
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economic, cultural, and environmental rights.

In 2013, violent Salafi extremists carried out a series of attacks and
political assassinations, setting off a period of instability and protest.
Seeking to tar Ennahda by falsely associating the party with these
crimes, a number of parliamentarians suspended their participation in
the drafting of the constitution. In response, Ennahda and its coalition

partners sought to forge a compromise rather than force the document

through in the midst of turmoil. To preserve the legitimacy of the
process, the Ennahda led government did something never before
-
seen in the region: it willingly stepped down and handed over power
to a neutral, technocratic government. Our priority was not to remain
in control but to ensure that the National Constituent Assembly,
the supreme representative body, could complete the work of drafting
a constitution that would establish the political foundations of a
democratic Tunisia.
m
Following elections in 2014, Ennahda gracefully conceded its
loss—even before the official results were announced—to Nidaa
Tounes, a center right party founded in 2012. Ever since, Ennahda
hi
-
has worked with Nidaa Tounes as the junior partner in a coalition
government. Although the two parties do not see eye to eye on every
issue, the coalition has held steady, and the combination of a well
ha
-
constructed constitution and political cooperation has produced the
right conditions for Ennahda to take the next step in its journey
toward Muslim democracy.
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THE SEPARATION OF MOSQUE AND STATE
At its tenth party congress, in May, Ennahda announced a series of
changes that formalized its decision to focus exclusively on politics and
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to leave behind social, educational, cultural, and religious activities.

In recent years, the party has gradually abandoned those pursuits,
recognizing that they should be the purview of independent civil
od
society organizations and not of the party or any entity related to

it. The motion to enact this change stipulated, among other things,
that the party’s cadres can no longer preach in mosques and cannot
take leadership positions in civil society groups, such as religious or
so
charitable associations.
Our objective is to separate the political and religious fields. We
believe that no political party can or should claim to represent reli
gion and that the religious sphere should be managed by independent
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and neutral institutions. Put simply, religion should be nonpartisan.

We want the mosque to be a space for people to come together, not a
site of division. Imams should not hold positions in any political party
and should be trained as specialists in their field in order to gain the
skills and credibility required of religious leaders; currently, only
seven percent of Tunisian imams have undergone such training.

Rached Ghannouchi
The party congress also approved a comprehensive strategy to

overcome the major challenges Tunisia faces, focusing on consolidating
constitutional procedures, pursuing transitional justice, reforming
state institutions, enacting economic reforms to spur growth, creating
a multidimensional approach to the fight against terrorism, and pro
moting good governance in religious institutions.
Ennahda is now best understood not as an Islamist movement but
as a party of Muslim democrats. We seek to create solutions to the
day to day problems that Tunisians face rather than preach about the
m
-
-
hereafter. To be clear, the principles of Islam have always inspired
Ennahda, and our values will continue to guide us. But it is no longer
necessary for Ennahda (or any other party) to struggle for religious
hi
freedoms: under the new constitution, all Tunisians enjoy the same
rights, whether they are believers, agnostics, or atheists. The separation
of religion and politics will prevent officials from using faith based
ha
-
appeals to manipulate the public. It will also restore the independence
of religious institutions: religion will no longer be hostage to politics,
as it was before the revolution, when the state interfered in and
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repressed religious activities.
This separation will also help better equip Tunisia to combat
extremism. When religion was repressed and religious institutions
forcefully closed and restricted for decades, Tunisian youth were left
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with no reference point for mainstream, moderate Islamic thought;

many succumbed to distorted interpretations of Islam that they
encountered on the Internet. Confronting violent extremism requires
od
an understanding of the true teachings of Islam, which reject black

-
and white views and allow for interpretations that accommodate
-
the needs of modern life. The genuine separation of mosque and state
and the effective governance of religious institutions will facilitate
so
better religious education and reintroduce moderate Islamic thinking

to Tunisia.
A REBUKE TO TYRANTS AND EXTREMISTS

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Tunisia has made significant political progress over the last five years.
To consolidate these gains, the government must prioritize social and
economic development. It must go beyond democratic institution
building and carry out economic reforms that will meet the urgent
need for jobs and growth. To this end, Ennahda has called for a com
prehensive national economic dialogue and a participatory approach

to reforms based on a vision of “compassionate capitalism”—an

approach that balances the freedom of enterprise with the ideals of
social justice and equal opportunity.
To boost growth, the government needs to pave the way for the
resumption of production in several strategic sectors, such as the
phosphate industry, which has slowed down since the revolution
due to disagreements between labor unions and producers over pay
and working conditions. Ennahda also strongly supports reforms to
the banking sector that will make it
m
easier for firms and individuals to get
access to financing. These reforms will
Tunisia’s democratic
bring much of the informal economy development depends on
hi
into the mainstream. The party has removing the obstacles that
also successfully pushed for increases women face in all fields.
in government assistance to small busi
ha
nesses and farmers. In addition, the
government must diversify Tunisia’s trading relations and increase
Tunisia’s exports to neighboring countries by opening up new
iT
opportunities in Africa, Asia, and Latin America and advancing the
ongoing negotiations over a free trade agreement with the eu.
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Creating a culture of entrepreneurship is particularly critical for
Tunisia’s success. Tunisians have grown accustomed to thinking of the
Al
state as the country’s main employer, and corruption under the former
regime placed many barriers in the way of would be entrepreneurs.
-
Ennahda wants to encourage a shift away from this dependence, which
od
has historically allowed the state to monopolize resources and distribute

them in an opaque and clientelistic manner. Ennahda supports the
government’s ongoing efforts to encourage entrepreneurship among
the younger generations; the minister of vocational training and employ
so
ment, the Ennahda member Zied Ladhari, has introduced ambitious

and much needed reforms, launching a new program to train more
-
than 600,000 unemployed Tunisians, renovating job training centers,
-
and creating a national authority for career guidance.
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Ennahda also backs reforms that will make it easier to establish

public private partnerships and to start new businesses. The Ennahda
-
-
led government of 2011–14 introduced a new law governing such
partnerships, which has recently been adopted. And a new program

proposed by Ladhari would promote new businesses by creating
mentoring programs for start ups and by supporting entrepreneurs
-

Rached Ghannouchi
through training, flexible funding systems, and a one stop shop for
-
administrative procedures, to reduce bureaucracy.
Economic development cannot progress, however, without significant
changes in the educational system, which has become divorced from
the realities of the labor market in Tunisia, where the overall unem
ployment rate currently hovers around 15 percent. Education must be
a path to work, not a bridge to joblessness. Ennahda is pushing for
reforms that will help educational institutions meet the needs of the
market, including by focusing more on soft skills, providing a larger
m
range of technical training schemes, and connecting students to
opportunities and internships in the public and private sectors.
Consolidating Tunisia’s dramatic political transformation and
hi
making progress on economic development will also require social
change, especially when it comes to the role of women in government
and business. The participation and leadership of Tunisian women—
ha
in politics, the judiciary, and civil society—were crucial to the country’s
democratic transition. Today, 60 percent of all Tunisian university
graduates are female, yet women still face higher unemployment than
iT
men (21.5 percent compared with 12.7 percent in 2014). The country’s
democratic development depends on removing the obstacles that
women face in all fields, promoting equal participation, and protecting
women’s rights. To that end, Ennahda supports mandating equal
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gender representation on all party lists in the local elections that will
be held in March 2017. Ennahda members of parliament have also
proposed stronger maternity leave rights to protect women against
-
od
discrimination and to give them greater career flexibility.

Overshadowing all these issues, of course, is the question of
security. The challenge of keeping Tunisians safe in an unstable
region is testing the resilience of the country’s new democratic
so
system. The state must protect citizens while ensuring respect for
individual rights and the rule of law. Ennahda has successfully
pushed for amendments to counterterrorism laws that ensure
suspects’ access to legal advice. We have also called for a compre
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hensive national security strategy that addresses the complex causes

of extremism. Smart counterterrorism avoids counterproductive
reactions and will require a cultural shift on the part of Tunisia’s
security institutions, toward respecting the supremacy of the law
and protecting the freedoms of individuals, civil society groups,
and the media. Newly enacted provisions to protect the rights of

detainees, as well as the establishment of the National Anti Torture
-
Commission, represent a step in the right direction.
The only way to conclusively defeat extremist groups such as the
self proclaimed Islamic State (also known as isis) is to offer a
-
hopeful alternative to millions of young Muslims around the world.
In the Arab world, people have faced increasing social exclusion,
fewer opportunities, and repression at the hands of autocrats. Their
frustration has been exploited by extremist groups such as isis,
which aim to sow chaos and disorder and impose their own form of
m
tyranny on the region. By showing that Muslim democracy can
respect individual rights, promote social and economic opportunities,
and protect Arab Islamic values and identities, the successful con
hi
solidation of democracy in Tunisia will serve as a rebuke to secular
tyrants and violent extremists alike.
Ennahda’s recent transition will make that kind of success more
ha
likely. We hope it will also inspire more debate in the Muslim world
about the compatibility of Islam and democracy, what it means to be
an inclusive political party, and how to build democratic systems that
iT
promote pluralism and respect the right to difference. Of course,
Tunisia’s political environment is different from that in the rest of the
region. Other Arab countries, such as Egypt, Iraq, and Syria, are still
suffering under dictatorship and military rule or remain mired in ethnic
Al
and sectarian conflicts. The more complicated a country’s internal

situation, the higher the price of change will be and the longer it will
take. But change is coming, whether as a result of civil war, peaceful
od
revolution, or gradual reform. And when it comes, Tunisia—and

Ennahda—will hopefully serve as a valuable model.∂
so
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China’s Infrastructure Play

Why Washington Should Accept the
New Silk Road
Gal Luft
m
O
ver the past three millennia, China has made three attempts
hi
to project its economic power westward. The first began in
the second century bc, during the Han dynasty, when China’s
imperial rulers developed the ancient Silk Road to trade with the far off
ha
-
residents of Central Asia and the Mediterranean basin; the fall of the
Mongol empire and the rise of European maritime trading eventually
rendered that route obsolete. In the fifteenth century ad, the maritime
iT
expeditions of Admiral Zheng He connected Ming dynasty China to -
the littoral states of the Indian Ocean. But China’s rulers recalled Zheng’s
fleet less than three decades after it set out, and for the rest of imperial
history, they devoted most of their attention to China’s neighbors to the
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east and south.

Today, China is undertaking a third turn to the west—its most
ambitious one yet. In 2013, Beijing unveiled a plan to connect dozens
od
of economies across Eurasia and East Africa through a series of infra

structure investments known as the Belt and Road Initiative. The
goal of the B&R, Chinese officials say, is to bring prosperity to the
many developing Asian countries that lack the capacity to undertake
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major infrastructure projects on their own by connecting them

through a web of airports, deep water ports, fiber optic networks,
-
-
highways, railways, and oil and gas pipelines. The B&R’s unstated
goal is equally ambitious: to save China from the economic decline that
Ma
its slowing growth rate and high debt levels seem to portend. The
infrastructure initiative, China’s leaders believe, could create new mar
kets for Chinese companies and at the same time provide a shot in
the arm to the struggling banks and state owned enterprises whose
-
GAL LUFT is Co-Director of the Institute for the Analysis of Global Security and a Senior
Adviser to the United States Energy Security Council.

disgruntled bosses might otherwise trouble the current leadership of

the Chinese Communist Party.
Also called One Belt, One Road, the B&R is a massive undertaking
that will shape Eurasia’s future. It will extend from the Pacific to the
heart of Europe, stimulate some $4 trillion in investment over the next
three decades, and draw in countries that account for 70 percent of the
world’s energy reserves. So far, however, the United States has either
fruitlessly attempted to undermine the initiative or avoided engaging
with it altogether. That is the wrong course. Washington should in
m
stead cautiously back the many aspects of the B&R that advance U.S.
interests and oppose those that don’t. The United States does not
have to choose between securing its global position and supporting
hi
economic growth in Asia: selectively backing the B&R would help
achieve both goals.
SILK ROAD TRIP

ha
The B&R comprises two main parts: a series of land based economic
-
corridors that China refers to collectively as the Silk Road Economic
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Belt, and the Twenty First Century Maritime Silk Road, which will
-
-
traverse the South China Sea, the Indian Ocean, and the Mediterranean
Sea. The first of the Silk Road Economic Belt’s corridors will connect
northeastern China to energy rich Mongolia and Siberia by means of
Al -
a modernized rail network. The second, the China Pakistan Economic
-
Corridor, will link China’s western region of Xinjiang to the Pakistani
deep water port of Gwadar, on the Arabian Sea. Beijing will open up
-
od
China’s southwestern provinces to the Indian Ocean by investing in

rail, highways, ports, pipelines, and canals in India, Bangladesh, and
Myanmar (also called Burma). To the south, China is developing what
it has termed the China–Indochina Peninsula Economic Corridor,
so
connecting Southeast Asia’s 600 million inhabitants to China’s economy

through investments in ports and high speed rail. Beijing also aims to
-
complete two major rail projects: one will likely link Henan Province,
Sichuan Province, and the Xinjiang region to hubs in Poland, Germany,
Ma
and the Netherlands by way of Central Asia, Iran, and Turkey; the
other, the New Eurasian Land Bridge, will connect China to Europe
by way of Russia. Finally, Beijing is developing a corridor that will
connect ports in Djibouti (where China is building a naval base), Kenya,
Tanzania, and Mozambique to the Red Sea, the eastern Mediterranean,
and central and southeastern Europe. (Although Beijing has not

Gal Luft
publicly identified that corridor as part of the B&R, it has taken steps—
such as purchasing a controlling stake in the Greek port of Piraeus
and announcing a plan to back a high speed railway connecting it to
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Serbia, Hungary, and Germany—that make its intentions fairly clear.)
So far, state owned Chinese construction and engineering firms
-
have taken on most of the projects generated by the B&R. Backed by
the deep pockets and political clout of the Chinese government, these
corporate giants are hard to outbid; that will remain the case for the
foreseeable future. As for financing, China has developed dedicated
m
institutions to back the projects. The Asian Infrastructure Investment
Bank, which opened for business in January, is perhaps the best known
of these. Together with the Silk Road Fund, a B&R focused Chinese
hi -
government fund, and the New Development Bank, a multilateral
development organization formerly known as the brics Development
Bank, the aiib will lend nearly $200 billion to infrastructure projects
ha
over the coming decade.
Most important, China has retooled its foreign policy in service of
the Belt and Road Initiative. To encourage their support for the B&R,
iT
Beijing welcomed India and Pakistan into the Shanghai Cooperation
Organization, a regional bloc; it is likely pushing for Iran to join, too.
In Europe, China has upgraded its relations with the Czech Republic,
turning Prague into the hub of its ventures on the continent. During a
Al
state visit in March, Chinese President Xi Jinping finalized business

and investment deals worth some $4 billion with the Czechs. Driven
by the belief that the B&R’s success depends on stability in the Middle
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East, meanwhile, China has recently taken an activist approach in the

region that contrasts starkly with its historical reluctance to get involved
there. In January, Xi became the first foreign leader to visit Iran after
the lifting of international sanctions on that country; on the same trip,
so
he met with the leaders of Egypt and Saudi Arabia. China has also
attempted to mediate between the rival factions in Syria’s civil war; has
supported Saudi Arabia’s efforts to defeat the Houthi rebels in Yemen;
and, in December 2015, passed a law that will allow the People’s
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Liberation Army to participate in counterterrorism missions abroad.

WASHINGTON’S SNUB
The B&R will guide China’s economic and foreign policy for the fore
seeable future. Yet many China watchers in the United States have
downplayed the initiative’s importance, suggesting that it is a public


m
hi
ha
Roadwork: a map of the Belt and Road Initiative in Hong Kong, January 2016
ity stunt meant to portray China as a benevolent power, a vanity proj-
iT
ect intended to secure Xi’s legacy, or an unwieldy boondoggle that
China, which has struggled with some development initiatives in the
past, will fail to execute.
Nowhere is this underappreciation more apparent than in Wash-
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ington. Congress has not held a single hearing dedicated to the B&R;
neither has the U.S.-China Economic and Security Review Commis-
sion, a body that Congress created in 2000 to monitor bilateral trade
od
and security issues. At both the 2015 and the 2016 meetings of the
U.S.-China Strategic and Economic Dialogue, the highest-level annual
summit held between the two countries, U.S. and Chinese officials
detailed more than 100 areas of potential cooperation without mention-
so
ing the B&R once, and in their public statements, U.S. officials tend
to refer to the initiative in vague terms. Washington has not only
refused to acknowledge the importance of the B&R; in some cases,
the Americans have attempted to undermine it, as when the United
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States futilely opposed the creation of the aiib.

B O B BY Y I P / R EU T E R S
This passive-aggressive approach is misguided: it allows China to

shape Eurasia’s economic and political future without U.S. input; it
denies American investors opportunities to profit from major infra-
structure projects; and, insofar as it seeks to weaken the initiative, it
could stifle a source of much-needed growth for Asia’s developing econ-
Gal Luft
omies and Europe’s stagnating ones. As the failed U.S. attempt to pre
vent its allies from joining the aiib shows, resisting China’s regional
economic initiatives puts Washington in an uncomfortable position
with some of its closest partners, many of which see the B&R as a useful
tool for pulling the global economy out of the doldrums. U.S. officials
should also be mindful of history: transnational infrastructure projects
have often bred hostility among great powers when not managed
collaboratively, as the grandiose rail projects of France, Germany,
and the United Kingdom did in the years leading up to World War I.
m
The United States’ failure to properly respond to the B&R is espe
cially striking given that Washington inadvertently helped precipitate
Beijing’s interest in the project. The “rebalance,” or “pivot,” to Asia
hi
that U.S. President Barack Obama initiated in 2011 has proved hollow,
but it has nevertheless reinforced China’s sense of encirclement by the
United States and its allies, as has the Obama administration’s de facto
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exclusion of China from the Trans Pacific Partnership. Those actions
-
killed many of China’s ambitions in the Pacific, leading Beijing to seek
strategic opportunities to its west. In addition, by opposing China’s
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calls for a larger voting share at the International Monetary Fund in
the first decade of this century, the United States pushed Beijing to
establish a multilateral lender of its own. And by backing restrictions
on projects that violated American environmental standards at the
Al
World Bank—where, in 2013, the United States supported a ban on

funding for most new coal fired power plants—the United States
-
made room for Beijing to develop alternative institutions with the
od
knowledge that it could find customers among its less scrupulous

neighbors. Even the United States’ unsustainable federal debt played
a role in the creation of the B&R: as it ballooned in the years after the
2008 financial crisis, the yield on U.S. Treasury bonds plummeted,
so
pushing China, the world’s largest foreign holder of U.S. debt, to di
rect more of its massive savings to infrastructure instead.
BACKING THE BIG DIG

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Over the course of the next four years, Asian countries will need around
$800 billion annually to build the transport, energy, and communica
tions networks that they require to achieve their development goals.
The investment provided by today’s development banks meets less
than ten percent of that need—and even if the aiib and China’s other
funding outfits live up to their promise, the money will still fall short.

The United States should not allow its concerns about great power
-
rivalry to distract it from the challenges this deficit poses to global
prosperity. Above all, Washington should not attempt to leverage its
relationships with the Asian countries where China plans to back
infrastructure projects to stymie the initiative’s progress. Such a
course would grant countries such as Kazakhstan, Myanmar, and Sri
Lanka inordinate power, creating new flash points between Beijing
and Washington.
Instead, Washington should approach the B&R with an open mind.
m
U.S. officials should publicly acknowledge China’s initiative and the
potential benefits it offers, provided that Beijing leads the effort trans
parently and ensures that it works largely in the service of international
hi

development rather than China’s own
gain. The two countries should then The B&R could become
find a bilateral forum—the Strategic either a source of great-
ha
and Economic Dialogue is just one op
tion—in which to discuss a joint eco power competition or a
nomic development agenda and come force for stability.
iT
up with a role for the United States
that plays to its strengths. American defense contractors, for example,
could provide physical security and cybersecurity services to B&R proj
ects, and the U.S. military could help secure some of the more volatile
Al
regions where Washington already has military assets, such as the Horn
of Africa. That would spare China the need to increase its overseas military
presence and bolster the legitimacy of the U.S. forces working in those
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areas. The United States should reassure some of its allies, particularly
those in Southeast Asia, where anxiety about China’s ascendance runs
deep, that the B&R is largely a force for economic development rather
than Chinese expansionism. And U.S. officials should seek a role for
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Washington in the aiib, either as a member of the bank or as an observer.

Such a course would have a number of benefits. By cautiously em
bracing the B&R, the United States could ensure that American firms
and investors are not excluded from the opportunities offered by what
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might become the biggest economic development project in history.

Washington’s engagement could also encourage some of the Euro
pean, Japanese, and South Korean investors who have been reluctant
to fund Chinese led infrastructure projects to change their tune—
-
which would have a broadly positive impact on global growth and, by
extension, on the U.S. economy. And by becoming a more active par

Gal Luft
ticipant in the B&R’s various related institutions, the United States

would be better positioned to ensure that China’s projects adhere to
international labor and environmental standards.
Together, China and the United States are responsible for half of
the world’s economic growth. At a time when the world economy is
facing a potentially prolonged stagnation, Beijing and Washington
would be better off harmonizing their development agendas than
stepping on each other’s toes.
m
DON’T SELL THE ROPE
The United States, however, should not give the B&R its blanket sup
port, since doing so would pose serious risks. First, it would feed Russia’s
hi
fears of U.S. Chinese collusion, triggering paranoia in the Kremlin,
-
where there is already concern about China’s push into former Soviet
states, and Moscow could lash out in response. India poses a similar
ha
challenge. It recognizes the B&R’s economic promise, but like Russia, it
is wary of China’s motives; specifically, New Delhi is troubled by the
commitments Beijing has made to Pakistan and by China’s growing pres
iT
ence in the Indian Ocean and the neighboring countries of Bangladesh,
the Maldives, and Sri Lanka. Any perception that China and the United
States are attempting to change the status quo in the region might feed
New Delhi’s anxiety and accelerate an arms race between China and
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India. In both cases, Washington should tread carefully, doing every

thing it can to avoid creating the appearance of unwanted collaboration
between China and the United States. As for the Middle East, the Gulf
od
states will chafe at the prominent role the B&R could give Iran as a land
bridge between Central Asia and Europe. So Washington should make
clear that its support for China’s infrastructure push will depend on Bei
jing’s commitment to preserving the delicate balance of power in the
so
Persian Gulf, and it should try to ensure that projects that provide eco
nomic boons for Iran are balanced by investments of similar benefit to
the Gulf states. And to ensure that it is seen as a leader on global infra
structure itself, Washington should launch and promote its own infra
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structure projects, such as the New Silk Road initiative proposed in 2011
by then Secretary of State Hillary Clinton to connect Turkmenistan,
Afghanistan, Pakistan, and India with roads and pipelines.
The greatest risk that the United States would face by supporting the
B&R wholesale is that China could use American goodwill to advance its
own ascendance to the United States’ detriment—above all, by attempt

ing to change the delicate status quo in Southeast Asia and the South
China Sea. If China is indeed pursuing a long term strategy to supplant
-
the United States as the world’s dominant power, as some China watchers
contend, then giving it the chance to take such a course would be a grave
mistake. In response to the recent rejection of China’s historical claims to
most of the South China Sea by an international tribunal, for example,
Beijing might try to build dual use infrastructure that would further mil
-
itarize the region and intimidate its rivals there. That is something the
United States should not tolerate, as no degree of economic integration
m
can justify compromising the United States’ Pacific alliances.
Chinese officials would likely recognize that U.S. involvement in the
B&R would place some limits on Beijing’s ability to redraw the lines of
hi
the Eurasian economy. But for reasons of self interest, they should still
-
welcome American cooperation. Infrastructure projects tend to carry a
high risk and produce only modest returns on investment; the B&R is
ha
too vast and expensive to rest on one country’s shoulders. American en
gagement would clear the way for co investments by U.S. , European ,
-
-
-
and Japanese led institutions, such as the World Bank, the Asian
-
iT
Development Bank, and the European Bank for Reconstruction and

Development; it would attract private capital to China’s projects, as well.
The Belt and Road Initiative could become either a source of great
-
power competition or a force for stability and collaboration. Beijing and
Al
Washington can ensure that the latter possibility wins out. In general, the
best course for the United States will be one of selective buy in: it should
-
participate in projects that advance its interests, such as infrastructure
od
investments aimed at improving intraregional trade in Southeast Asia,

while avoiding or resisting those that undermine them. For its part, Bei
jing should prioritize projects that benefit both China and the United
States, and it should put vanity projects on the back burner.
so
It will take a great deal of magnanimity for the United States to resist
the urge to oppose such a grand strategic initiative as the B&R, espe
cially since China’s westward push comes at a time when Washington is
increasingly confused about its own role in the world. But the United
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States must remember that its response to the project will help deter
mine the future of U.S. Chinese relations and of the international or
-
der. And as the global economy slows down and hundreds of millions of
Asians languish with few hopes of escaping poverty, the United States
must recognize that its fate is linked to that of the developing world—
and that it should give its blessing to initiatives that will lift all boats.∂

Parting the South

China Sea
How to Uphold the Rule of Law
m
Mira Rapp-Hooper
hi
J
uly 12, 2016, marked a turning point in the long standing disputes
-
over the South China Sea. After more than three years of proceed
ings at the Permanent Court of Arbitration, an international body
ha
in The Hague, a tribunal constituted under the un Convention on the
Law of the Sea (unclos) issued a widely anticipated decision in a
case the Philippines brought in 2013 to challenge China’s maritime
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claims to most of the contested waterway.
Many observers had expected the tribunal to rule in Manila’s favor.
They’d also expected China to reject the tribunal’s decision, since
Beijing, a signatory to the convention, has long opposed the pro
Al
ceedings and had warned that it would not abide by the judgment. But
few anticipated a ruling as definitive as the one ultimately handed
down. The tribunal ruled in favor of the Philippines on almost every
od
count, declaring nearly all of China’s maritime claims in the region

invalid under international law.
In so doing, the tribunal has brought a substantial amount of new
clarity to a number of contentious legal issues and has set precedents
so
that will affect the law of the sea for years to come. But it has also
created an immediate problem: China’s defeat was so crushing that it
has left Beijing few ways to save face. Chinese officials may feel that
the tribunal has backed them into a corner—and respond by lashing out.
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That’s especially problematic because international law has no simple

enforcement mechanism, so if China decides to defy the tribunal,
neither it, nor the Philippines, nor any other interested states will be
able to do much to induce China to cooperate. Washington and its
MIRA RAPP-HOOPER is a Senior Fellow in the Asia-Pacific Security Program at the
Center for a New American Security. Follow her on Twitter @MiraRappHooper.

Parting the South China Sea
local partners can still avoid a dangerous escalation, but only if they
encourage China to abide by the ruling while making clear to Beijing
that it has not been trapped by it.
ENCLAVED
The tribunal’s ruling was striking for several important reasons. First,
in a surprising move, the tribunal held that all the territories in the
contested Spratly Islands are reefs or rocks, not islands. That distinc
tion matters, because under unclos, reefs cannot generate a claim
m
to the surrounding waters or airspace, and rocks can serve as the
basis for only a small maritime claim of 12 nautical miles. Islands, on
the other hand, generate a 200 nautical mile exclusive economic
hi
-
-
zone; states can also assert additional rights based on the extent of
the continental shelves that underlie them. China insists that it has
sovereignty over the Spratly Islands, and the tribunal did not rule
ha
on their rightful ownership. But by declaring all of the Spratlys’
features to be reefs or rocks, it significantly limited the claims
China can make to the surrounding water and airspace. Under in
iT
ternational law, China’s outposts in the (now misnamed) Spratly
Islands should be considered isolated enclaves floating in a part of
the ocean that is in the Philippines’ exclusive economic zone, since
they lie within 200 nautical miles of that country’s territory. And
Al
Beijing cannot use the Spratlys to justify any claims to the sur
rounding waters.
Next, the tribunal found that China had conducted illegal activities
od
inside the Philippines’ exclusive economic zone. Chinese vessels, the

tribunal ruled, had fished where they shouldn’t have, had dangerously
approached some Philippine boats, and had prevented others from
fishing and extracting petroleum within the zone. Nor was this all: the
so
tribunal also censured China’s construction of artificial islands in the

region, which it determined had caused severe environmental damage
and heightened geopolitical tensions.
Finally, the tribunal completely invalidated China’s claim that it
Ma
holds historic rights to the South China Sea through its “nine dash
-
line,” a sweeping cartographic projection that encompasses as much as
90 percent of the waterway. The line was first unveiled by the Republic
of China in 1947 and was adopted by China’s Communist rulers after
they took power in 1949. Chinese officials have never explained the
nine dash line’s precise legal meaning, but they have repeatedly claimed
-

Mira Rapp-Hooper
that it demarcates an area from which China can extract resources. The
tribunal found that there was no basis for the rights that Beijing said
underpinned the line, and that even if there had been at some point,
unclos superseded those rights when China ratified it in 1996.
The tribunal’s decrees decimated China’s maritime claims in the
South China Sea and handed a great victory to the Philippines in the
process. But this victory could prove a Pyrrhic one if China responds
with increased belligerence.
m
NO EXIT?
As noted, most observers expected the tribunal to issue a ruling that
generally favored the Philippines. But most also thought that it would
hi
leave China some room to maneuver. One way the tribunal could have
done that would have been by implicitly invalidating the nine dash
-
line without definitively striking down China’s argument that it has
ha
historic rights in the region—by, for example, pointing out the line’s
ambiguity and indicating that all of Beijing’s maritime claims must
comply with unclos.
iT
Had the tribunal opted for such a “soft” repudiation, it would have
given China a valuable opportunity to save face. In the wake of the
ruling, Beijing could have formally defined the nine dash line for the
-
first time, reframing it as a narrow assertion of its enclaved territories
Al
and their maritime entitlements rather than an undifferentiated claim

to the entire South China Sea. That would have brought China’s
position in line with unclos while allowing Beijing to suggest to its
od
domestic audience that it was not backing down. But since the tribunal
rejected China’s claims to historic rights in the waterway entirely,
Beijing now must either continue to reject the tribunal’s ruling
wholesale or offer the Chinese public a fresh explanation of why its
so
rights still stand—a tough approach, since Chinese leaders have long
stuck to exactly the narrative that the tribunal rejected.
The tribunal’s ruling that the Spratlys do not constitute islands
under unclos closed off another opportunity for Beijing to save face.
Ma
Before the decision was handed down, it seemed probable that the
tribunal was going to forgo issuing any kind of ruling on Itu Aba, a
Taiwanese held feature that seemed more likely than any other part of
-
the Spratlys to be a candidate for the legal status of an island. If the
tribunal had indeed avoided this question, it would have given China
another off ramp: since China maintains a claim to Itu Aba through
-

m
hi
ha
Repo men: Chinese soldiers standing guard in the Spratly Islands, February 2016
its professed sovereignty over Taiwan, Beijing could have argued, at
iT
least to the Chinese public, that the reunification of China and Taiwan
would eventually entitle it to Itu Aba and therefore to a large swath of
the South China Sea. Indeed, the exclusive economic zone that would
have extended from Itu Aba under such a scenario would have covered
Al
many of the Spratlys’ other contested features. By ruling that Itu Aba,
like all the other features in the Spratlys, is not an island, the tribunal
eliminated that possibility and destroyed China’s ability to justify its
od
expansive claims to the South China Sea in legal terms.
DON’T FLOUT IT
China has rejected the legitimacy of the Philippines’ case and the
so
tribunal’s jurisdiction to hear it since Manila first brought its complaint

in January 2013. Beijing has decried the tribunal’s decision as illegiti-
mate, and it will certainly not abandon its outposts in the Spratlys or
return the sand it used to manufacture them to the seabed. In fact, in
Ma
the wake of the ruling, China landed civilian aircraft on some of those
STRINGER / REUTERS
outposts, presumably to demonstrate that possession is nine-tenths of

the law.
China might now choose to flout the decision more explicitly by
deepening its de facto control of the area. It could, for example,
declare an air defense identification zone in the South China Sea, as
Mira Rapp-Hooper
it did in the East China Sea in 2013, unsettling many of its neighbors
in Southeast Asia. It could also start to reclaim land at Scarborough
Shoal, which it wrested from the Philippines in 2012. (Former U.S.
officials have suggested that China might be preparing to do exactly
that later this year.) Chinese forces
could attempt to intercept a U.S. ship
Washington and its or plane as it conducts a freedom of
partners can still avoid a
-
-
navigation operation, raising tensions
dangerous escalation. between Beijing and Washington. Or
m
China could take actions that are less
dramatic but nevertheless destabilizing. It could attempt to apply new
domestic laws to the areas it controls. Or it could declare base lines, the
hi
formal points from which states measure maritime zones, around the
Spratlys, suggesting another effort to administer the surrounding waters.
Any of those actions would be deeply worrisome for China’s neigh
ha
bors and would demonstrate that Beijing is uninterested in playing by
the rules of the international order. Even more troubling, however,
would be if a defiant and defeated China chose to withdraw from
iT
unclos completely. It is possible for a country that is not a party to
the convention to observe its provisions—the United States is the
prime example. But if China withdrew, it would almost certainly
portend Beijing’s rejection of the prevailing maritime order, setting
Al
the stage for further escalation of the many disputes regarding the
South China Sea. China’s withdrawal from the convention would
suggest not only that Beijing intends to ignore the tribunal’s ruling
od
but also that it does not want to be bound by the many other maritime
rights and provisions that unclos enshrines and that govern the free
use of the global commons.
There are good reasons for China not to take such a course. First,
so
although the tribunal dealt a blow to China’s maritime claims—its rights

to water and airspace and its authority to conduct certain activities
there—it did not rule on China’s claims to sovereignty over territory in
the South China Sea, which are beyond the scope of unclos. For that
Ma
reason, Beijing can rightly argue that its sovereignty over the contested
reefs and rocks it occupies has not been affected. It cannot legally continue
to declare military zones in the water or airspace around the reefs it
occupies, nor can it do so more than 12 nautical miles from the rocks it
controls. But if Beijing emphasizes sovereignty claims instead of maritime
ones, it could draw public attention away from its legal defeat.

Second, after several years of vigorous island building, Beijing has

good reasons to avoid further alienating its neighbors. Many of those
states—most notably the members of the Association of Southeast Asian
Nations (asean)—have become increasingly wary of Beijing in recent
years and have clearly supported resolving the region’s disputes through
the mechanisms of international law. Were China to make aggressive
new moves, it would deepen their sense of alienation, encouraging them
to strengthen their militaries to further balance against Beijing.
One other path could mitigate the sting of China’s defeat. The
m
Philippines’ new president, Rodrigo Duterte, has signaled that he is
interested in pursuing a more conciliatory approach to Beijing and has
held out the possibility of resuming negotiations with China over
hi
resource sharing in the South China Sea. If Chinese President Xi
Jinping accepts Duterte’s offer, he might be able to reach a deal with
Manila that allows China to continue to claim some rights to resources
ha
in the far corners of the South China Sea.
HOW TO TAKE THE EDGE OFF

iT
Satisfying as the tribunal’s decision may be for Manila, all parties now
have a strong stake in ensuring that the situation doesn’t escalate. The
judgment sets a significant legal precedent: the principles that guided
the tribunal’s decision are now part of international law, and countries
Al
must embrace and reinforce them if they want others to uphold them
in the future. The case concerned just a few of Asia’s many maritime
disputes. Other countries, from Japan to Vietnam, are considering cases
od
of their own, and the tribunal’s judgment must produce some positive
change if they are to pursue their own arbitrations with confidence.
And although the South China Sea disputes have deep historical roots,
they have flared up in recent years because China’s growing military
so
capabilities have meaningfully improved Beijing’s ability to press its

claims. If China goes further by deliberately flouting the ruling or
withdrawing from unclos, it could destroy the maritime order it has
already damaged.
Ma
There are several steps that the United States and its partners can
take to reinforce the recent ruling without getting China’s back up.
For starters, the United States and like minded countries around the
-
world should continue to declare their support for the legal process,
calling on China and the Philippines to abide by it without taking a
position on the underlying sovereignty disputes. The U.S. State

Mira Rapp-Hooper
Department should work closely but quietly with other claimants that
are considering bringing cases of their own to help them ascertain
how this ruling might affect their efforts. And the United States should
make clear that it will investigate the implications of the decision for
its own island claims.
The U.S. Department of Defense, for its part, should resume freedom
-
of navigation operations that reinforce the decision after a pause of
-
several weeks to allow tensions to cool. It should conduct those operations
without pomp or fanfare: their message should be legal rather than
m
military, and their audience should be Beijing.
Finally, U.S. officials should work closely with their Chinese coun
terparts, encouraging them to negotiate with the South China Sea’s
hi
other claimants, particularly the Philippines, and to make progress on
a binding code of conduct with asean, a long sought multilateral
-
agreement that would create a strict set of guidelines for behavior in
ha
the South China Sea. A code of conduct would likely also freeze the
waterway’s political and territorial status quo, helping China reassure
its neighbors that its long term intentions are not threatening. U.S.
-
iT
officials should remind their counterparts in Beijing that these
remaining avenues to negotiation will close if China makes another
assertive move, such as beginning construction at Scarborough Shoal,
but that if it does not, there will be ample room for cooperation
Al
between China and its neighbors and between Beijing and Washington.
The United States and China should also press ahead with the
confidence building measures they agreed to at June’s U.S. China
-
-
od
Strategic and Economic Dialogue, to reduce the risk of an accidental

clash between them. That would help each demonstrate to the other
and to the region that neither wants to see a great power conflict over
-
the South China Sea or any other maritime issue and that both are
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committed to acting responsibly. More generally, U.S. officials should

make clear that the arbitration decision has brought China to a legal
crossroads, but that Beijing still has reasonable options available to it.
Resolving the current showdown peacefully and legally would be in
Ma
everyone’s interests—including, and especially, China’s.∂

Keeping Europe Safe

Counterterrorism for the Continent
David Omand
m
J
ust before 11 pm on Thursday, July 14, a 19 ton truck turned onto
-
a seaside promenade in Nice, France, where crowds had gathered
hi
to watch Bastille Day fireworks. The truck sped up, plowing into
the people on the promenade. By the time French police shot the
driver, the truck had traveled 1.1 miles, killing 84 people and injuring
ha
hundreds more. That attack came less than four months after three
terrorists killed 32 people in explosions in the departure hall of Brussels
Airport and a metro car near Brussels’ Maelbeek subway station. And
iT
it came eight months after a group of young men killed 130 people
in Paris, in the deadliest attack on France since World War II. The
self proclaimed Islamic State, or isis, claimed responsibility for all
-
three attacks.
Al
These attacks have exposed deep flaws in continental Europe’s

approach to counterterrorism. European intelligence agencies do not
share information with one another fast enough. Europe’s porous
od
borders allow terrorists to cross the continent with ease. Other European
governments have lagged behind the United Kingdom in developing
capabilities and legal frameworks for digital intelligence gathering
and in cultivating effective cooperation between their many agencies.
so
In the aftermath of the attacks, continental Europe now has a unique

opportunity to reform its intelligence infrastructure. Its leaders
recognize the need for action. After the Paris attacks, French President
François Hollande imposed a state of emergency, declaring that
Ma
“France is at war.” A French parliamentary commission of inquiry

into the Paris attack concluded that Europe was not up to the task of
fighting terrorism, identifying failures in French intelligence and in
DAVID OMAND is a Visiting Professor in the Department of War Studies at King’s College
London and at Sciences Po, in Paris. He served as the United Kingdom’s Security and
Intelligence Coordinator from 2002 to 2005.

David Omand
the communication between intelligence and law enforcement bodies.

Belgian authorities have accepted that their counterterrorism policies
are inadequate: the Belgian interior and justice ministers offered their
resignations over the evident failures in Belgian intelligence.
European governments must now commit to lasting reforms,
ramping up investment and breaking down barriers to information
sharing. The United Kingdom’s vote to leave the eu will not make
things easier. Yet it also creates an opportunity to create other,
stronger networks for international cooperation across the continent
m
and beyond.
As they respond to isis’ threat, governments would do well to heed
four main lessons from history. Governments must not forget the
hi
importance of understanding the enemy, formulating realistic goals
that are consistent with democratic values, remaining flexible in the
face of a threat that is unlikely to remain static, and, above all, forging
ha
partnerships based on earned trust.
UNDERSTAND THE ENEMY

iT
Episodes from the 1990s and early years of this century illustrate the
first key lesson of successful counterterrorism: the importance of
understanding the nature of the threat. When intelligence agencies
misdiagnose the danger after a plot is uncovered or after an attack,
Al
governments are less likely to invest to preempt future threats.

Throughout the 1990s, despite several warning signs, British and
U.S. intelligence agencies failed to grasp the potential significance of
od
the threat from Islamist terrorist groups. In 2000, the British Security
Service uncovered the first cell of Islamist bomb makers in the
-
United Kingdom. But it treated the discovery as a one off event,
-
since at the time it did not seem similar to other threats that the
so
intelligence agency had encountered. Later that year, the Security

Service arrested a Pakistani microbiologist who was seeking pathogen
samples and equipment suspected to be suitable for making biological
weapons. Once again, however, the intelligence agency viewed the
Ma
episode as an isolated incident. In fact, British and U.S. intelligence

agencies later discovered that it was part of an al Qaeda plan to
develop biological weapons. It would not be until after 9/11 that the
British intelligence and security community would grasp the potential
scale of the threat from radicalized extremists and would invest
enough resources in response.

Keeping Europe Safe
m
hi
ha
En garde! Near the Eiffel Tower, Paris, March 2016
The U.S. intelligence community was similarly slow to understand
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the extent of the danger al Qaeda posed. In January 1993, Mir Aimal
Kansi, a Pakistani jihadist, shot two cia employees outside the agency’s
headquarters, in Langley, Virginia. The cia responded by fortifying
its perimeter security, but its assessment of its counterterrorism
Al
strategy did not change. Just one month later, an al Qaeda truck bomb
exploded under the North Tower of the World Trade Center, killing
six but failing to topple the building. Intelligence agencies tend not to
od
examine the causes of a near miss as seriously as they do the causes of

an actual disaster. (Airlines, by contrast, routinely scour close calls for
lessons.) Thus, after the 1993 attacks, they learned valuable tactical
lessons—how to protect a building from attack, for example—but
so
missed the larger message: that al Qaeda was actively plotting to cause
mass casualties on U.S. soil.
Five years later, al Qaeda blew up the U.S. embassies in Kenya and
PHILI PPE WOJAZE R / REUTE RS
Tanzania, killing more than 200 people. Within weeks, U.S. President
Ma
Bill Clinton ordered cruise missile strikes on targets in Afghanistan

and Sudan. Osama bin Laden became a highpriority intelligence
target. But the U.S. government still massively underestimated the
risk of a terrorist attack on the United States itself and did little to
strengthen homeland security; the subsequent attacks on 9/11 came as
all the more of a shock.
David Omand
When intelligence agencies understand the threat they face, they’re

more likely to adopt prudent reforms. In April 1993, the Provisional
Irish Republican Army detonated a massive truck bomb in the City of
London, inflicting more than $700 million worth of damage, killing
one, and injuring 44. The British authorities, who understood the
nature of the threat after decades spent fighting the ira, assessed that
the group had the explosives, personnel, and funds to continue to
pose a danger. The case for boosting investment in security was clear.
Within a few months, the British government had set up the “ring of
m
steel,” a security cordon of checkpoints and surveillance cameras around
the City of London that covered every entry point and major building.
The police, local government, and private companies worked together
hi
to make London’s infrastructure more resilient.
France also successfully adapted its counterterrorism strategy after
the Armed Islamic Group launched a series of attacks in the 1990s,
ha
hoping to deter France from intervening in the group’s struggle to seize
power in Algeria. The French authorities understood the group’s motives
and the methods it was likely to use and rapidly strengthened France’s
iT
security apparatus. The government made it a crime to associate with
terrorists, by providing them with a vehicle, for instance, and intro
duced flexible pretrial procedures led by specialized counterterrorism
magistrates and trials in dedicated courts. These moves made it easier
Al
to convict terrorists and deprived them of local support.

Today, however, many European intelligence agencies have been
slow to recognize the threat that isis poses. They have largely failed to
od
combine the work of their domestic and external intelligence services

and have failed to integrate the work of the police with that of their
security and intelligence agencies. For too long, they have ignored the
risks inherent in the Schengen system of open borders, which leaves
so
their security dependent on the effective intelligence of their neighbors.

As a result, networks of terrorists, hardened by fighting in Iraq and
Syria, in possession of European passports, and hiding among Europe’s
many undocumented refugees, now reach across the continent.
Ma
KEEP CALM
The second lesson is the importance of setting a clear and realistic
strategic aim, one that European governments can meet while staying
true to their democratic values. After 9/11, U.S. President George W.
Bush declared that his administration would do whatever it took to

Keeping Europe Safe
destroy al Qaeda. He authorized measures unheard of in peacetime,

including extraordinary rendition, detention without trial, torture,
and the targeted killing of enemy combatants far from any recog
nized battlefield.
Yet much of the United States’ response to 9/11 has proved counter
productive. The rhetoric of the so called war on terror expressed
-
resolve, but it led policymakers to overreact in their desperation to
secure “wins.” Prevailing in a long war is not the same as winning
tactical engagements or even a battle or two, and many of the extra
m
ordinary measures the United States implemented, such as the use
of torture, helped reinforce extremist
narratives and damaged the United
Many European
hi
States’ standing in the world. The
invasion and occupation of Iraq helped intelligence agencies have
produce a new generation of terrorists. been slow to recognize the
ha
The Bush era drone program, which threat that ISIS poses.
-
President Barack Obama has since
expanded, has killed much of al Qaeda’s
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senior leadership and disrupted its ability to mount organized attacks.
But the organization still represents a significant threat through its
links to the al Nusra Front in Syria, and the inevitable accidental
-
killings of civilians in drone strikes have provided ready material for
Al
extremist propaganda.
The 9/11 attacks also shocked the British government. (Sixty seven
-
British citizens died that day, the largest single loss of British life in a
od
terrorist attack.) At first, the United Kingdom responded in a similar

fashion to the United States; by October, U.S. and British armed
forces were fighting alongside each other in Afghanistan. But their
counterterrorism strategies soon diverged. As the United States
so
pressed on with its “war on terror,” the British government adopted a

counterterrorism strategy known as contest, which aimed to “reduce
the risk to the uk and its interests overseas from terrorism, so that people
can go about their lives freely and with confidence.” The government
Ma
sought to reassure tourists, encourage investment, and stabilize markets.

This approach emphasized the continuation and resumption of ordinary
life. In contrast, the United States, in adopting extreme measures,
preserved an abnormal situation, playing into the terrorists’ narrative.
So far, the British approach has worked. Since 9/11, there has been
only one major successful attack in the United Kingdom: the bombings

David Omand
on London’s public transport on July 7, 2005, which killed 52 people.

But the threat remains severe. British intelligence has thwarted several
major al Qaeda attacks, including a sophisticated attempt to down U.S.
airliners over the Atlantic in 2006. In
February, the British security minister
Investing more in said that at least seven attacks had been
digital intelligence stopped in the previous 18 months alone.
should be a priority. Through tight cooperation between
the Security Service and the police, sup
m
ported by the other British intelligence
agencies, the government has successfully identified and prosecuted
hundreds of terrorists (there were 255 terrorism related arrests in just
hi -
one year, between March 2015 and March 2016) without significantly
infringing civil liberties.
This lesson is an important one for Europe’s current leaders. Since
ha
the attacks in Paris and Brussels, governments have ramped up
protection at crowded public events. But there are limits to what they
can do. A combination of effective intelligence and protective security
iT
measures can almost eliminate the risk of attack for a small number of
high value targets, such as a world leader or a nuclear power station.
-
(Isis may well be considering such targets; last November, investigators
found video footage at the apartment of a militant linked to the Paris
Al
terrorist attack of a senior official at a Belgian nuclear facility.)

Yet there will always be a risk that terrorists will instead focus on
softer targets—subway stations, cultural centers, concert venues—as they
od
have recently done in Denmark, Belgium, and France. In response,

authorities should do what they can to ensure that people feel safe
when they use public transportation or congregate in public spaces,
even if the government cannot eliminate the risk. They should deploy
so
more armed police officers to areas of high risk and train rapid response
-
units to react to the sorts of attacks that have hit Mumbai, Nairobi,
Copenhagen, Paris, and Brussels, where small groups of armed men
have rampaged across the city.
Ma
States of emergency, such as the one France imposed, can empower

authorities to take sensible immediate steps to protect the public. But
they do not represent a long term answer. If measures such as the
-
widespread deployment of soldiers on the streets persist for too long,
authorities risk creating a new normal—one that the public will think
terrorists have imposed on them.

David Omand
When officials communicate with the public about the risk of

terrorism, they should temper expectations. It is difficult to stop

those who are prepared to use extreme violence in the pursuit of
an ideological end, especially if they are willing to die for their
cause. Statements that pledge to eliminate the risk of a future
attack may promise too much—and they may convince publics to
accept weaker protections of their human rights in the pursuit of
absolute security. Instead, governments should provide a truthful
and convincing narrative to explain the causes of the attacks and
m
lay out a clear road map for what the public can expect next.
ADAPT AND EVOLVE
hi
A third lesson is that policymakers must remain open to adapting
their strategies and methods as the jihadist threat evolves. To become
more flexible, intelligence agencies should adopt a joint approach to
ha
counterterrorism, just as modern armed forces rely on joint mission
planning and command. In 2003, for example, the United Kingdom
created the Joint Terrorism Analysis Centre, in which staff from the
iT
intelligence agencies, the police, the military, and other government
agencies analyze and process information together. One year later,

the U.S. government launched a similar organization, the National
Counterterrorism Center. The French parliamentary commission of
Al

inquiry set up after the 2015 Paris attack has called for the French
government to establish a similar joint organization in Paris to
overcome coordination problems between the many French police
od
services and security agencies.

The British Security Service provides a case study in how an
intelligence agency can become more flexible. After the July
2005 attack in London, the agency set up eight regional counter
so
terrorism hubs, based alongside police counterterrorism units,

outside the city in the places it considered most vulnerable to
radicalization. By decentralizing its investigations and cooper
ating closely with regional police departments, the Security
Ma
Service could better understand local communities. Other coun

tries affected by jihadist radicalization should consider this model.
In a promising first step, France has already announced the cre
ation of a dozen regional “reinsertion and citizenship centers” to
help identify potential jihadists and prevent extremists from rad
icalizing them.

Keeping Europe Safe
LEARN TO TRUST
The final and most important lesson is that countries must build
partnerships based on earned trust. On the national level, policymakers
should reexamine the relationships between police and intelligence
agencies, between external and internal security and intelligence
services, between civilian and military services, and between govern
ment agencies and the private sector, looking to build trust wherever
possible, by arranging more cross postings, for example.
-
On the international level, European governments need to earn
m
the trust of partners inside and outside the eu to protect sensitive
intelligence that can lead to shared leads and joint operations. And
they need to establish good relationships with the U.S. technology
hi
companies that may hold data vital to stopping future attacks. To do
so, they should negotiate bilateral agreements with the United States
that provide the necessary legal safeguards for companies to respond
ha
to legitimate requests without breaking U.S. law. Eu governments
should also consider revising their data retention laws. An insistence,
-
for privacy reasons, on short data retention periods has hindered
-
iT
prosecutions in the past.
Investing more in digital intelligence should be a priority.
Intelligence professionals understand the value of having bulk
access to Internet communications (between Syria and Europe, for
Al
example), being able to hack the devices used by terrorists and

criminals, and using data mining techniques to identify suspects.
-
In 2010, for example, British authorities foiled the plans of a group
od
of jihadists to bomb the London Stock Exchange by uncovering

their electronic communications. But the revelations of U.S. and
British government electronic surveillance programs by the former
National Security Agency contractor Edward Snowden have
so
diminished public trust in the use of such techniques. It is essential

to rebuild confidence across Europe in the use of these methods—
under strict legal safeguards and with independent oversight.
Leaders should acknowledge the important role that intelligence
Ma
agencies play and defend their methods as essential to public

safety. To get smaller states on board, the larger powers, such as
the United Kingdom and France, should reach out to them to offer
support and training. The Club de Berne, a non eu body where
-
the heads of the internal intelligence services of the eu countries,
Norway, and Switzerland meet regularly and oversee the Counter

David Omand
Terrorist Group, which liaises with the eu, would be a good forum
for coordinating such efforts.
BREXIT BLUES?
The United Kingdom’s vote to leave the eu, or Brexit, has introduced
great uncertainty for at least the next two years over the United
Kingdom’s relationship with Europe. The United Kingdom is Europe’s
major intelligence power and has long benefited from its close
coordination with the United States on security and intelligence
m
gathering. It remains at the cutting edge of digital intelligence—it
has around 5,500 people working in this area, compared with
France’s 2,800 and Germany’s 1,000. At the moment, the United
hi
Kingdom enjoys excellent bilateral and multilateral relationships
with other European intelligence services. That should continue,
but politicians will need to show steady nerves to ensure that the
ha
security needs of Europe as a whole are placed above the political
interests of its individual leaders.
Policymakers must be prepared to cooperate internationally through
iT
informal networks, rather than waste time dreaming of new eu
institutions, such as a European cia or fbi. An effective international
network could develop among counterterrorism centers, for example,
especially to share threat assessments (preferably based on an agreed
Al
set of warning levels). The various European national intelligence

coordinators, working with the U.S. director of national intelligence,
could form another such network. And the United Kingdom will
od
remain a major player in the Club de Berne. Intelligence and security

professionals across Europe sincerely hope that the United Kingdom
will remain fully engaged, even as they understandably regret the
wider disruption that Brexit will cause.
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The eu has done much to foster police and judicial cooperation

while safeguarding fundamental rights. The common European Arrest
Warrant speeds up the extradition of suspects between eu member
states, a mechanism the United Kingdom used to return a suspected
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terrorist to Italy to face trial after the second wave of attempted attacks
on London in 2005. Europol provides a valuable avenue through
which police can liaise with one another. The Schengen Information
System II allows police to share information about suspects, and the
Schengen III information sharing arrangements provide a network
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for sharing dna, fingerprints, and vehicle registration databases (the

Keeping Europe Safe
United Kingdom had recently joined this network, but after Brexit, it
will have to negotiate a new agreement). Policymakers will now need
to put in place arrangements to ensure continued cooperation on law
enforcement once the United Kingdom withdraws from the eu.
Close British eu cooperation should not get in the way of creating
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a wider network of states, including the United Kingdom, to improve
intelligence gathering on terrorist and criminal organizations within
and outside Europe’s borders. But it will take good statesmanship on
all sides to navigate the tough negotiations over the United Kingdom’s
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new relationship with the eu, while creating more powerful, mutually
beneficial networks for intelligence sharing and security cooperation
across Europe and beyond.
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European countries were slow to respond to the rise of isis. But
they now have the opportunity to override old prejudices, reexamine
their counterterrorism strategies, and invest in modern intelligence
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methods. Even those states that justifiably pride themselves on their
police and their ability to access and analyze intelligence can learn
from recent events.
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Above all, the goal should be to maintain normality—and to
increase the ability to swiftly restore it when necessary. This will
deprive terrorists of what they seek most: to stoke public fear and
disrupt the everyday life of free and democratic societies. They must
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not be allowed to succeed.∂

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The Return of Europe’s

Nation-States
The Upside to the EU’s Crisis
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Jakub Grygiel
E
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urope currently finds itself in the throes of its worst political
crisis since World War II. Across the continent, traditional
political parties have lost their appeal as populist, Euroskeptical
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movements have attracted widespread support. Hopes for European
unity seem to grow dimmer by the day. The euro crisis has exposed
deep fault lines between Germany and debt ridden southern European
-
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states, including Greece and Portugal. Germany and Italy have clashed
on issues such as border controls and banking regulations. And on
June 23, the United Kingdom became the first country in history to
vote to leave the eu—a stunning blow to the bloc.
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At the same time as its internal politics have gone off the rails,
Europe now faces new external dangers. In the east, a revanchist Russia—
having invaded Ukraine and annexed Crimea—looms ominously. To
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Europe’s south, the collapse of numerous states has driven millions of

migrants northward and created a breeding ground for Islamist terrorists.
Recent attacks in Paris and Brussels have shown that these extremists
can strike at the continent’s heart.
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Such mayhem has underscored the price of ignoring the geopoliti

cal struggles that surround Europe. Yet the eu, crippled by the euro
crisis and divisions over how to apportion refugees, no longer seems
strong or united enough to address its domestic turmoil or the
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security threats on its borders. National leaders across the continent

are already turning inward, concluding that the best way to protect
their countries is through more sovereignty, not less. Many voters
seem to agree.
JAKUB GRYGIEL is a Senior Fellow at the Center for European Policy Analysis.

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hi
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As Europe’s history makes painfully clear, a return to aggressive

nationalism could be dangerous, not just for the continent but also for
the world. Yet a Europe of newly assertive nation states would be
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preferable to the disjointed, ineffectual, and unpopular eu of today.
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There’s good reason to believe that European countries would do a

better job of checking Russia, managing the migrant crisis, and com
bating terrorism on their own than they have done under the aus
pices of the eu.
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EVER-FARTHER UNION
In the years after World War II, numerous European leaders made a
convincing argument that only through unity could the continent es
cape its bloody past and guarantee prosperity. Accordingly, in 1951,
Belgium, France, Italy, Luxembourg, the Netherlands, and West Ger

Jakub Grygiel
many created the European Coal and Steel Community. Over the next
several decades, that organization morphed into the European Eco
nomic Community and, eventually, the European Union, and its
membership grew from six countries to 28. Along the way, as the fear
of war receded, European leaders began to talk about integration not
merely as a force for peace but also as a way to allow Europe to stand
alongside China, Russia, and the United States as a great power.
The eu’s boosters argued that the benefits of membership—an inte
grated market, shared borders, and a transnational legal system—were
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self evident. By this logic, expanding the
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A Europe of nation-states union eastward wouldn’t require force
or political coercion; it would simply
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would be preferable to the take patience, since nonmember states
disjointed, ineffectual EU would soon recognize the upsides of
of today. ha membership and join as soon as they
could. And for many years, this logic
held, as central and eastern European
countries raced to join the union after the collapse of the Soviet Union.
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Eight countries—the Czech Republic, Estonia, Hungary, Latvia,
Lithuania, Poland, Slovakia, and Slovenia—became members in 2004;
Bulgaria and Romania followed in 2007.
Then came the Ukraine crisis. In 2014, the Ukrainian people took to
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the streets and overthrew their corrupt president, Viktor Yanukovych,

after he abruptly canceled a new economic deal with the eu. Immediately
afterward, Russia invaded and annexed Crimea, and it soon sent
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soldiers and artillery into eastern Ukraine, too. The eu’s leaders had
hoped that economic inducements would inevitably increase the union’s
membership and bring peace and prosperity to an ever larger public.
-
But that dream proved no match for Russia’s tanks and so called little
so
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green men.
Moscow’s gambit was not, on its own, enough to cripple the eu.
But soon, another crisis hit, and this one nearly pushed the union to
its breaking point. In 2015, more than a million refugees—nearly half
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of them fleeing the civil war in Syria—entered Europe, and since

then, many more have followed. Early on, several countries, especially
Germany and Sweden, proved especially welcoming, and leaders in
those states angrily criticized those of their neighbors that tried to
keep the migrants out. Last year, after Hungary built a razor wire
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fence along its border with Croatia, German Chancellor Angela

The Return of Europe’s Nation-States
Merkel condemned the move as reminiscent of the Cold War, and

French Foreign Minister Laurent Fabius said it did “not respect Eu
rope’s common values.” But early this year, many of these same leaders
changed their tune and began pressuring Europe’s border countries to
increase their security measures. In January, several European govern
ments warned Greece that if it did not find a way to stanch the flow
of refugees, they would expel it from the Schengen area, a passport
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free zone within the eu.
Consciously or not, the European politicians advocating open
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borders have failed to prioritize their own citizens over foreigners.
These leaders’ intentions may be noble, but if a state fails to limit its
protection to a particular group of people—its nationals—its govern
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ment risks losing legitimacy. Indeed, the main measure of a country’s
success is how well it can secure its people and borders from external
threats, be they hostile neighbors, terrorism, or mass migration. On
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this score, the eu and its proponents are failing. And voters have
noticed. The British people issued a strong rebuke to the bloc in June
when they voted to leave the eu by a margin of 52 percent to 48 percent,
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ignoring warnings from the International Monetary Fund, the Bank
of England, and the United Kingdom’s Treasury that doing so would
wreak economic disaster. In France, according to a recent Pew survey,
61 percent of the population holds unfavorable views of the eu; in
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Greece, 71 percent of the population shares these views.

Back when Europe faced no pressing security threats—as was the
case for most of the last two decades—eu members could afford to
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pursue more high minded objectives, such as dissolving borders within

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the union. Now that dangers have returned, however, and the eu has
shown that it is incapable of dealing with them, Europe’s national
leaders must fulfill their most basic duty: defending their own.
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BACK TO BASICS
The eu’s architects created a head without a body: they built a unified
political and administrative bureaucracy but not a united European
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nation. The eu aspired to transcend nation states, but its fatal flaw
-
has been its consistent failure to recognize the persistence of national
differences and the importance of addressing threats on its frontiers.
One consequence of this oversight has been the rise of political
parties that aim to restore national autonomy, often by appealing to
far right, populist, and sometimes xenophobic sentiments. In 2014,
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Jakub Grygiel
the uk Independence Party won the popular vote in an election

for the European Parliament—the first time since 1906 that any party
in the United Kingdom had bested Labour and the Conservatives
in a nationwide vote. Last December
Individual countries will in France, Marine Le Pen’s far right
-
National Front won the first round of
provide the kind of safety the country’s regional elections; then,
that Brussels can’t. in March in Germany, a right wing
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Euroskeptical party, Alternative for
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Germany, won almost 25 percent of the vote in Saxony Anhalt. And
-
in May, Norbert Hofer, a candidate from the far right Freedom Party,
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narrowly lost Austria’s presidential election. (Austria’s Constitu
hi
tional Court later annulled that result, forcing a rerun of the elec
tion that will be held in October.)
Some of these parties have benefited from the enthusiastic support
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of Russia, as part of its campaign to buy influence in Europe. Until
recently, Moscow could rely on European leaders who were friendly
to Russia, including former German Chancellor Gerhard Schröder
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and former Italian Prime Minister Silvio Berlusconi. But now, as new
parties take the place of established ones, the Kremlin needs fresh
partners. It has given money to the National Front, and the U.S.
Congress has asked James Clapper, the U.S. director of national intel
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ligence, to investigate the Kremlin’s ties to other fringe parties,

including Greece’s Golden Dawn and Hungary’s Jobbik. Yet such
parties would be surging even without Russian backing. Many
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Europeans are disenchanted with politicians who have supported

eu integration, open borders, and the gradual dissolution of national
sovereignty; they have a deep and lasting desire to reassert the
supremacy of their nation state.
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Of course, most of Europe’s Euroskeptical politicians don’t seek to
disband the union entirely; in fact, many of them continue to see its
creation as a historic victory for the West. They do, however, want
greater national autonomy on social, economic, and foreign policy,
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especially in response to overreaching eu mandates on migration and

the demand for controversial continent wide laws on issues such as
-
abortion and marriage. Many in the United Kingdom, for example,
pushed for a British exit from the eu, or Brexit, out of frustration
with the number of British laws that have come from Brussels rather
than Westminster.

The bet against sovereignty has failed. But sovereignty’s resurgence

has conjured up many dark memories of the nationalism that twice
brought the continent to the brink of annihilation. Many observers
now worry that European politics are coming to resemble those of the
1930s, when populist leaders spewed hate to whip up support. Such
fears are not wholly unfounded. The strident xenophobia of Austria’s
Freedom Party recalls the early days of fascism. Anti Semitism has
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risen across Europe, sprouting up in parties that span the ideological
spectrum, from the United Kingdom’s Labour Party to Hungary’s
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Jobbik. And in Greece, some members of the radical left wing party
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Syriza have advocated Greek withdrawal from nato, a prime example
of a growing anti Americanism that could undermine the foundation
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of European security.
Yet affirming national sovereignty does not require virulent nation
alism. The support for Brexit in the United Kingdom, for instance,
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was less an expression of hostility toward other European countries
than it was an assertion of the United Kingdom’s right to self govern.
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A return to nation states entails not nationalism but patriotism, or
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what George Orwell called “devotion to a particular place and a
particular way of life.” It’s also worth noting that one of the greatest
threats Europe faced in the twentieth century was transnational in
nature: communism, which divided the continent for 45 years and
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led to the deaths of millions.
BEYOND THE EU
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A renationalization of Europe may be the continent’s best hope for

security. The eu’s founders believed that the body would guarantee a
stable and prosperous Europe—and for a while, it seemed to. But today,
although the eu has generated wealth through its common market, it is
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increasingly a source of instability. The euro crisis has exposed the

union’s inability to resolve conflicts among its members: German leaders
have had little incentive to address Greek concerns, and vice versa. The
eu also suffers from what the German Federal Constitutional Court has
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called a “structural democratic deficit.” Of its seven institutions, just

one—the European Parliament—is directly elected by the people, and
it cannot initiate legislation. Finally, the recent dominance of Germany
within the eu has alienated smaller states, including Greece and Italy.
Meanwhile, the eu has failed to keep Europe safe. Since 1949,
Europe has relied on nato—and, in particular, the United States—to

Jakub Grygiel
secure its borders. The anemic defense spending of most European

countries has only increased their dependence on the United States’
physical presence in Europe. The eu is unlikely to create its own army,
at least in the near future, as its members have different strategic
priorities and little desire to cede military sovereignty to Brussels.
Many of the eu’s backers still insist that in its absence, anarchy will
engulf the continent. In 2011, the French minister for European
affairs, Jean Leonetti, warned that the failure of the euro could lead
Europe to “unravel.” In May, British Prime Minister David Cameron
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claimed that a British exit from the eu would raise the risk of war. But
as the American theologian Reinhold Niebuhr wrote in the 1940s,
“the fear of anarchy is less potent than the fear of a concrete foe.”
hi
Today, the identifiable enemies that have arisen around Europe, from
Russia to the self proclaimed Islamic State (also known as isis), seem
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far more worrying to most people than the potential chaos arising
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from the dissolution of the eu. Their hope is that individual countries
will provide the kind of safety that Brussels can’t.
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SPECIAL RELATIONSHIPS
From the United States’ perspective, the fraying of the eu presents a
serious challenge—but not an insurmountable one. In the decades after
World War II, Washington sought to contain the Soviet Union not just
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through nuclear deterrence and a sizable military presence in Europe

but also by promoting European integration. A united continent, the
thinking went, would pacify Europe, strengthen the economies of U.S.
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allies, and encourage them to cooperate with Washington to ward off

the Soviet menace. Today, however, the United States needs a new
strategy. Because the eu no longer seems up to the task of protecting
its borders or competing geopolitically, more American pressure
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for Europe to integrate will simply alienate the growing number of

Europeans who have turned their backs on the eu.
Washington need not fear the dissolution of the eu. Fully sovereign
European states may prove more adept than the union at warding off
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the various threats on its frontiers. When Russia invaded Ukraine, the
eu had no answer besides sanctions and vague calls for more dialogue.
The European states that border Russia have found little reassurance
in the union, which explains why they have sought the help of nato
and U.S. forces. Yet where the eu has failed, individual countries may
fare better. Only patriotism has the kind of powerful and popular appeal

that can mobilize Europe’s citizens to rearm against their threatening

neighbors. People are far more willing to fight for their country—for
their history, their soil, their common religious identity—than they
are for an abstract regional body created by fiat. A 2015 Pew poll
found that in the case of a Russian attack, more than half of French,
Germans, and Italians would not want to come to the defense of a
nato—and thus likely an eu—ally.
The return of nation states need not lead Europe to revert to an
-
anarchic jumble of quarreling governments. Increased autonomy
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won’t stop Europe’s states from trading or negotiating with one another.
Just as supranationalism does not guarantee harmony, sovereignty
does not require hostility among nations.
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In a Europe of revived nation states, countries will continue to
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form alliances based on common interests and security concerns.
Recognizing the weakness of the eu, some states have already done so.
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The Czech Republic, Hungary, Poland, and Slovakia, for example—
normally a disjointed group—have joined forces to oppose eu plans
that would force them to accept thousands of refugees.
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The United States, for its part, needs a better partner in Europe
than the eu. As the union dissolves, nato’s function in maintaining
stability and deterring external threats will increase—strengthening
Washington’s role on the continent. Without the eu, many European
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countries, threatened by Russia and overwhelmed by mass migration,

will likely invest more heavily in nato, the only security alliance
backed up by force and thus capable of protecting its members.
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It’s time for U.S. leaders and Europe’s political class to recognize
that a return to nation states in Europe does not have to end in tragedy.
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On the contrary, Europe will be able to meet its most pressing security
challenges only when it abandons the fantasy of continental unity and
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embraces its geopolitical pluralism.∂

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Building MEXICO’S MUSCLE
Latin America’s
REVEALING
THE STRENGTH
in partnership with
Logistics Platform
The much awaited Telecoms and to replace the existing Benito Juarez
Broadcasting Reform was followed by the International Airport which was announced
announcement of significant budget cuts to the by Mexican President Peña, who allocated
2013-18 National Infrastructure Program in $9.2bn for its construction in September
early 2015. Today Mexican infrastructure projects 2014. It is one of the world’s biggest airport
are benefiting from public-private partnerships infrastructure projects and is expected to
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(PPPs) as the Aztec nation finds formulas to fund be the biggest airport in Latin America.
its ambitious infrastructure conduit in line with What stage is it at today?
market ailments. Gerardo Ruiz Esparza, Mexico’s Air activity had been growing in Mexico
Minister of Communications and Transport, more than the economy. While GDP growth
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shares with us how this administration is further was 3.5 % between 2009 and 2013, the annual
connecting Mexico to the world. growth of passengers reached 5.4% during
President Peña’s speech projected that same period. In line with the OCDE the
impact achieved.
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Mexico as the Logistics Platform of Latin
America. Strides taken to this end and
From the start our priority has been to

New International Airport responds to a need
that goes back 20 years – to expand the airport’s
capacity proportionately to the country’s growth.
Since the airport’s growth reached its
transform Mexico into a leading logistics platform maximum operational capacity, passengers and
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with high added value as part of the National trade have been connecting via other airports
Infrastructure Plan 2013-18 aimed at providing postponing the opportunity for Mexico City
the infrastructure and modern logistic platforms to become Latin America’s leading passenger
that will unclench added value activities and and cargo hub.
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promote balanced regional development. As a result and to overcome this, President

To achieve that we have built and modernized Peña publicly announced the construction of
more roads, rural and feeder roads as well as the new airport on September 3rd 2014. When
drawdowns and bridges that will reinforce the completed and in full development it will boast
trunk road network to the longitudinal runners six runways and will transport approximately
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that link the North to the South, the Pacific 120 million passengers yearly – quadruplicating
Ocean to the Gulf of Mexico. Additionally we its current capacity. The go-ahead decision was
are developing infrastructure that will be linked based on technical studies carried out by experts
to the other transport networks such as rail, from renowned world organizations such as
ports and airports that will provide value to the the MITRE Corporation, the International Air
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supply chain and will purvey global markets with Transport Association (IATA) and the Civil
multimodal logistic platforms. Aviation Organization (OACI).
In mass transport systems we have boosted We have already moved from planning and
projects that aim to improve transfer times design to execution. Therefore today the most
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to reduce time/person and environmental important project of this administration is

costs, e.g. passenger trains which are efficient meeting is going to plan. So far the project has
environmental alternatives and they facilitate concluded leveling and cleaning of 1143 hectares;
transfers between cities.We are also modernizing the removal of 2 million cubic meters of waste
and expanding maritime terminals so they offer material; the construction of 48 kilometers
the required conditions to enable ports to be of internal ways and the construction of the
more competitive in line with fomenting tourism perimeter bard to be finalized before the end
and foreign trade. of 2016. By the end of June 292.7 million dollars
The Mexico City New International have been invested.
Airport (NAICM) is a new greenfield Additionally six of the 21 bidding packages were
airport being built in the city of Mexico, announced including runways 2 & 3, the foundation
Sponsored Section
of the Terminal building and the Control Tower. We expect the benefits of these works to
Environmentally, the process for the catapult a golden era in passenger and cargo
certification of the Leadership in Energy and rail, in turn generating innovative train proposals
Environmental Design (LEED) was developed and across the nation raising quality of life and
a commissioning company was hired to ensure complimenting existing connectivity in line with
the criteria for the ecological sustainability of the the President’s announcement that Mexico will
building is met. once again count on trains to connect its cities.
The Ministry of Environment is conducting Does Mexico qualify as the Regional
reforestation activities in approximately 2,000 Logistics and Innovation Platform of Latin
hectares and is contemplating the construction America?
of a metropolitan forest of 670 hectares. The relevance of the National Infrastructure
Works on Texcoco’s Lake Hydraulic System Plan from its inception was to transform the
(Hydraulic Master Plan) will represent an country into a value added global logistics platform
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investment of US$1.157 billion out of which profiting from our competitive advantages such
28 works have been already contracted for as: geographic location – between the US, the
more than US$491 million. Twenty out of 28 of largest market in the world and Europe and Asia-
these works have concluded and represent ; more that 11,000 km coastline, demographic
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US$125 million. bonus and specialized workforce, participation
Next steps include further leveling of the in 11 commercial treaties with 46 countries, in
ground and storm drain. Further bids of 16 addition to the recent adherence to the Trans
projects are expected for this year.
Will the international community
view the Mexico City - Toluca train as
a springboard for future passenger rail
ha Pacific Partnership (TPP) integrated by 12
nations. Important international recognitions
confirm that we are on the right track - in only
three and a half years competitiveness conditions
development? have improved and set the foundations for a
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During the first half of the 20th century prosperous, inclusive country.
the passenger train was a symbol of modernity, For instance: the aeronautic industry has been
progress and future. Railways that connected driven towards growth. Proof of it is the sustained
several parts of the city had a considerable increase in the number of transported passengers
expansion and by 1964 there was a network of year-on-year by 12%. Our participation in
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23,000 kilometers. But their development was world aviation has been further strengthened
neglected in recent decades and rail use declined through the new Aerial Transport Agreement
to become obsolete despite being a friendly and with the US providing better services, promoting
efficient mean of transport. This administration regional development through more routes,
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seized the advantages rail transport provides flight frequencies and better prices. Additionally
as modern, safe, fast and price accessible with bilateral agreements of aerial transport have
the objective to create a new paradigm in mass been signed with Saudi Arabia and Kuwait.
urban mobilization. Within the Communications We have achieved more agreements than ever
and Transport Sectorial Program 2013-2018 it before reaching 302 new national and 259
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was recognized that trains provide a substantial international routes.

advantage by using efficient and clean energy In port development we have increased our
sources helping reduce emissions causing climate capacity by 40 percent and by 2018 we will have
change. duplicated it. With regards to rail cargo we have
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Following this criteria, current projects attracted more than double the investment. Given
underway are: its importance for the logistic development of
1) The Interurban Mexico City - Toluca train: Mexico we have prioritized port infrastructure
a modern, efficient and safe rail service to modernization in addition to the implementation
connect the Toluca Valley with the Northern of better technology for an updated rail system.
part of Mexico City in approximately 39 minutes Road infrastructure is the nation’s main mean
reducing actual time by 50%. of transport for which we are constructing
2) Guadalajara Light Rail: aims to efficiently and modernizing eight trunk axes, building
link the municipalities of Guadalajara, Zapopan 52 new highways and 80 federal roadways having
and Tlaquepaque with 18 stations, in 33 minutes delivered already 17,000 km of highways, roads
allowing a reduction of 40 minutes. and rural ways.
Sponsored Section
Financing infrastructure – What measures 2. Two road sections: from the states
is the government putting in place to of Queretaro to San Luis Potosí and from
safeguard infrastructure investments and Coatzacoalcos in Veracruz to Villahermosa in
provide transparency and legal certainty to Tabasco.
investors? 3. Development of shared network which
Firstly a responsible spending policy has been will provide coverage to more than double
implemented for the Ministry’s entire program. the number of Mexicans using 4G by using
In a bid to ensure transparency, for the first time, an innovative PPP scheme for the design,
the Ministry of Communications and Transport installation, deployment, operation, maintenance,
has electronic proof of all of the processes on upgrade and commercialization of the
its major requests for bids that allows anyone wholesaler’s telecoms services. An investment
to check, through the internet web site, all the of approximately US$10 billion over a 10 year
different procedures, from the initial bid request period is expected through a PPP.
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to the final contract issued. Bidding processes PPPs have proven to be an ideal mechanism
are streamlined with the participation of public to ensure financing for different essential
notaries to provide testimonies of the content of infrastructure projects within an adverse
proposals submitted by the companies. economic scenario.
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We have conducted 9,695 bidding processes Given the huge economic potential of
and granted contracts to more than 5,055 the Trans- Pacific Partnership, what plans
companies and there has not been a single legal are there to develop a port infrastructure
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nonconformity and all the projects have been
contracted by public biddings under the principle
of a “Social Witness”, appointed by the Public
Function Secretary. Prestigious international
on Mexico’s Pacific coast, along with arterial
roads to transport goods to the Atlantic?
The Trans-Pacific Partnership is an exciting
project because of the potential spread in the
specialized entities have been invited to certify maritime trade flows between Mexican, Asian
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the legality, the law observance and the technical and American Ports in the Pacific Ocean. It
validity of the bidding process. will open a fresh window to 200 million new
The Secretariat and the Organization for potential clients. Mexican companies will enter
Economic Cooperation and Development new markets and will consolidate their presence
(OECD) signed an agreement in 2015 to in Latin America and North America.
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promote the integrity, transparency and public Mexico’s monopolized telecommunications

biddings good practices, for the construction sector desperately needed to be liberalized
of the Mexico City’s New International Airport. with provider Telmex charging some of the
Additionally a legal protocol was signed with highest tariffs in the world. How has the
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the National Construction Chamber to further Telecommunications Reform benefitted

promote this between builders and civil servants. users?
Mexico’s Public Private Partnerships Providing benefits for the end-user was
(PPPs) seem to be blossoming to fund the top priority for the Telecommunications
infrastructure projects such as rail, road and Reform. It delivered direct and immediate savings
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port operations. Private sector investment to Mexican families of up to 23%, due to the
is expected to reach as much as US$11.1bn elimination of charges in telecommunication
(MXN200bn) in the country’s ongoing services. Since January 2015 costs for domestic
projects. Will PPPs compensate for a lack long distance calls on wireline and wireless
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of resources due to recent budget cuts? telephones were eliminated representing annual
Objectives within the Sectorial savings for users US$1 billion.
Communications & Transport Program Together with price reduction, consumers
2013-2018 established the promotion of will also experience improvements in
the PPP schemes to attract larger private telecommunication services. Regarding mobile
sector participation. Works being financed telephony, for instance, connection in all Mexican
in this way include: territory is guaranteed regardless of the service
1. The design, construction, operation, provider. Additionally, prepaid service users are
exploitation, conservation and maintenance now be able to consult their balance. Regarding
of the Viaduct La Raza – Indios Verdes- Santa internet, there was an increase from 42 million
Clara in Mexico City. users to 62 million users; subscriptions to
Sponsored Section
mobile bandwidth increased from 21 to 54 per The Program Connected Mexico further aims
100 inhabitants considerably reducing the digital to reduce the digital gap by connecting schools,
gap. By the end of 2015 the transition to Digital hospitals, libraries, community centers and other
Terrestrial TV was completed and the analog public places free-of-charge via broadband. To
blackout took place. More than 10 million digital date more than 100,000 establishments and
TVs were granted to homes with scarce resources public areas have been connected benefitting
– benefitting one in three homes nationwide. millions of people in urban and rural areas of
Now families spend less in electricity and have difficult access. Furthermore the digital inclusion
access to double the number of digital channels. network Puntos Mexico Conectado has been
On the broadcasting sector, the Reform has launched and consists of 32 centers across the
set ground rules for the “must carry and must country to educate and train people in I.T. Today
offer” procedure that allows broadcasters to the network counts with 221,000 members.
retransmit pay TV signals with no cost for viewers, Finally, the Federal Institute of
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while pay TV providers are allowed to transmit Telecommunications was created, a
broadcasted signals on their systems with no body committed to efficiently develop
charge for the consumer, thus allowing access to telecommunications and broadcasting for user
the same contents for all TV viewers. and audience benefit.
hi
The above-mentioned benefits did not come How would you characterize the
about by chance; they were the result of better response from foreign telecoms/internet
competition conditions originated by the Reform. providers to the reform so far?
ha
This fact is acknowledged by the Organization
for Economic Cooperation and Development
(OECD). In its 2015 OECD Economic Survey of
Mexico it praises Mexican regulation for being in
As one of the first major steps to enhance
effective competition in the industry, the new
regulation allows foreign direct investment up
to a 100 per cent ceiling in telecommunications
accordance with competition, and it even places and satellite sectors, while in the broadcasting
iT
the Mexican regulation index from number 93 area is capped at 49 per cent. As envisioned
to number 4 in the World Economic Forum this has attracted private investment in telecom
connectivity accessibility. infrastructure to grow 35% in 2015 compared
According to the sign of the times and to 2014, while accounting for more than
aligned with its strategic intent of boosting US$8.72 billion over the past three years. FDI
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telecommunications as development and digital in the telecom sector has also grown significantly
inclusion tools, the Federal administration is after the reform and now it represents
responsible of bringing this to fruition by fostering 10% of the total..
infrastructure development, creating conditions For example, in January 2014, Eutelsat, leading
od
for accessibility and connectivity, and promoting global provider of satellite communications,
the use of the Information and Communications purchased Satmex, Mexican satellite services
Technologies (ITC). It is also in charge of provider in an operation worth more than 800
providing suitable conditions for the development million dollars. AT&T followed with the purchase
of digital skills among the population. With of Iusacell, a Mexican carrier with more than
so
this, it is intended that at least 70 per cent of 4 million subscribers and NII Holdings,
households and 85 per cent of micro, small Nextel Mexico. Both operations involved nearly
and medium sized companies can benefit from US$4 billion.
high-speed internet access at world class The new competition environment and the
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standards and affordable pricing. more flexible regulation within the sector also
These connectivity goals will be reached by prompted the entrance of new players to the
embracing an ambitious infrastructure plan that Mexican mobile market. Mobile Virtual Network
guarantees greater coverage for more Mexicans. Operators (MVNO’s) with global presence, like
To meet the challenge, actions are being taken to Virgin Mobile and Tuenti, from Telefónica, have
expand and strengthen the backbone broadband started operations in the Mexican market by
fiber optic network owned by the Federal Electricity offering low cost service packages to pre-paid
Commission (CFE, by its initials in Spanish), and mobile users.
deploy a Shared Wholesaler Network that will
provide services for both, Mobile Virtual Network Full report: https://www.foreignaffairs.com/country-focus
Information: info@nationroadshow.com
Operators (MVNO’s) and concessionaires.
Sponsored Section
How to Fix Brazil

Breaking an Addiction to Bad Government
Eduardo Mello and Matias Spektor
m
razil has rarely had it so bad. The country’s economy has col
lapsed: since 2013, its unemployment rate has nearly doubled, to
more than 11 percent, and last year its gdp shrank by 3.8 per
hi
cent, the largest contraction in a quarter century. Petrobras, Brazil’s
semipublic oil giant, has lost around 85 percent of its value since 2008,
thanks to declining commodity prices and its role in a massive corruption
ha
scandal. The Zika virus has infected thousands of Brazilians, exposing
the frailty of the country’s health system. And despite the billions of
dollars Brasília poured into the 2014 World Cup and this year’s Olympic
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Games, those events have done little to improve the national mood
or upgrade the country’s urban infrastructure. Meanwhile, many of
Brazil’s long standing problems have proved stubbornly persistent:
-
half of all Brazilians still lack access to basic sanitation, 35 million of
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them lack access to clean water, and in 2014, the country suffered
nearly 60,000 homicides.
But Brazil’s biggest problems today are political. Things first came
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to a boil in the summer of 2013, when the police clashed with students
protesting bus and subway fare hikes in São Paulo. Within days, some
1.5 million people took to the streets of Brazil’s big cities to protest a
wider set of problems, including the government’s wasteful spending
so
(to the tune of some $3.6 billion) on the construction and refurbishment
of a dozen stadiums for the World Cup. In the months that followed,
when Brazilian President Dilma Rousseff appeared on television to
soothe the unrest, Brazilians across the country drowned out her voice
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by rattling pots and pans from their balconies. In October 2014, after
EDUARDO MELLO is a Ph.D. candidate at the London School of Economics. Follow him on
Twitter @ejamello.
MATIAS SPEKTOR is Associate Professor of International Relations at Fundação Getulio
Vargas, in Brazil. Follow him on Twitter @MatiasSpektor.

How to Fix Brazil
promising to increase public spending and bring down unemployment,

Rousseff managed to win reelection by a thin margin. But she quickly
backtracked on her major pledges, announcing a plan to cut state spend
ing and rein in inflation. The public’s anger mounted.
The deathblow to Rousseff’s government came from another source,
however: a corruption investigation that had been brewing even as
she campaigned for reelection. In March 2014, Brazilian prosecutors
exposed a scheme under which business leaders and government officials
had been colluding to generate kickbacks worth some $2 billion since
m
2004—one of the largest corruption scandals in history. Operation
Car Wash, as the investigation has come to be known, found that private
companies had been sending politicians cash through intermediaries
hi
at Petrobras in exchange for juicy contracts with the oil giant, the
board of which Rousseff had led before becoming president. As new
revelations involving high ranking officials hit the Brazilian media
ha
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over the course of 2015, Rousseff ’s reputation suffered irreparable
damage; in August of that year, her approval rating sank to eight
percent—a historic low. Even Luiz Inácio Lula da Silva (known as
iT
Lula), Rousseff ’s once wildly popular predecessor, was drawn into the
vortex: in March 2016, prosecutors began investigating his ownership
of an undeclared property in the beachside city of Guarujá that had
been renovated by a construction firm implicated in the Petrobras
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scheme, among other possible offenses.

In May, as the congressional coalition led by Rousseff ’s Workers’
Party crumbled, legislators voted to suspend her from office and
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began impeachment proceedings on the charge that she had manip

ulated the budget to hide a gaping deficit. (No one has suggested that
she personally profited from the graft at Petrobras.) Her vice president,
Michel Temer—a savvy operator who cut his teeth in the Chamber of
so
Deputies (the lower house of the National Congress, Brazil’s legislature)—

took over as acting president, despite the fact that he, too, was the
target of an investigation. Just a week before Temer stepped in on
May 12, Eduardo Cunha, a lawmaker in Temer’s Brazilian Democratic
Ma
Movement Party (pmdb), was removed from his duties as the Speaker
of the Chamber of Deputies on charges of obstructing justice, lying to
prosecutors, and hiding millions of dollars in a Swiss bank account.
(Cunha formally resigned from the speakership in early July but kept
his seat in Congress.) Temer soon lost three members of his cabinet
to Operation Car Wash; in the coming months, as the judiciary’s

investigation of pmdb operatives moves forward, he might end up

facing charges himself.
All these revelations seem to suggest that Brazil’s current crisis is
the product of widespread criminal behavior by its leading politicians.
But the real source of the trouble goes deeper. The chaos roiling the
country is the product not of individual malfeasance but of flawed
political engineering. At the heart of Brazil’s problems with corrup
tion and inefficiency lie the rules that govern the relationship between
the country’s executive and legislative branches, which encourage ex
m
actly the kind of graft that the Petrobras scandal has revealed. To re
turn their country to political solvency, Brazilians must take on a
mighty task: they must make sweeping electoral and political reforms
hi
to eliminate the incentives that lead so many officials to break the law
in the first place.
A GREASY WHEEL
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In many presidential systems, including the United States’, clashes
between the chief executive and the legislature are common. Brazil’s
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1988 constitution addresses that problem by granting the president
extraordinary powers to break gridlock. Brazilian presidents can issue
provisional legislation by decree (although all laws must eventually be
approved by Congress), dislodge pending legislation from congres
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sional committees, force Congress to vote on urgent measures, and

veto bills in part or in whole. Those powers have long helped Brazil’s
presidents avoid deadlock and pass many needed reforms.
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It would be a mistake, however, to assume that Brazilian presidents

are all powerful. To the contrary: their ability to avoid gridlock comes
-
at a high price.
Because Brazil’s Congress has more than two dozen political parties,
so
it’s nearly impossible for a single one to win a majority. That forces
Brazil’s presidents to form coalitions in order to govern effectively.
And that’s where the problems start. Brazil’s political parties lack coherent
ideological agendas; instead, they are loosely knit alliances whose
Ma
members have no qualms about forming or dissolving coalitions at any

time. As a result, members of Congress constantly renegotiate their
political loyalties, based largely on the parochial interests of the con
stituencies they represent.
Making matters worse, Brazil’s electoral rules allow candidates to
switch parties relatively easily, undermining any chance of ideological

How to Fix Brazil
m
hi
ha
Game over: Dilma Rousseff after being suspended by the Senate, Brasília, June 2016
unity within coalitions. And candidates are elected to Congress based
iT
not on the number of votes they receive individually but on the total
number their party pulls in. That creates an incentive for politicians
to change allegiances on a regular basis: jumping ship for a party led
by a popular candidate can often boost less popular aspirants to office
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(or keep them there). Brazilian politicians thus tend to ride on the coattails
of powerful allies instead of focusing on party loyalty, ideological
consistency, or the details of policy. All of that makes it hard for most
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voters to know what ideas individual candidates—or parties—stand

for. As a result, Brazilians tend to pick their leaders based on their
personal appeal rather than the quality of their platforms.
These problems are all intensified by the fact that once Brazilian
so
lawmakers take office, few rules enforce loyalty. Not only can they
switch parties; legislators can also vote as they wish, even if it means
voting against their own party or the presidential administration their
U ESLEI MARCELINO / REUTE RS
party ostensibly supports. Few pay a price for breaking ranks in this
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fashion. Members of Congress seldom get booted out of their party—

and parties seldom get kicked out of their coalition—for disobeying
party whips. Since those whips can’t control their own members of
Congress, presidents must bargain with lawmakers on an individual
basis in order to pass legislation. The need to win over so many
individual allies—who all have their own interests and constituencies

to please—has led Brazilian presidents to pump vast amounts of pork,

patronage, and protection into the system. This year, for example, the
federal government granted tax subsidies to well connected families
-
in the state of Goiás to help them pay to hire local musicians to play
at their relatives’ weddings. And in recent years, the Brazilian press
has reported on the construction of several roads and bridges that
seem to lead to nowhere.
In many democracies, of course, logrolling is neither rare nor
necessarily bad. But in Brazil, the practice has proved deeply counter
m
productive. For one thing, it has led to inefficient government spending.
In 2015, tax revenues accounted for some 35 percent of gdp—more
than they do in a number of wealthier nations, including South Korea
hi
and Switzerland. Yet despite this income, the country’s public goods
are in dire shape. Take education: in an
ha assessment of 65 countries completed by
Brazil’s inefficiencies the Organization for Economic Coop
stem directly from its eration and Development in 2012 (the
dysfunctional political most recent year for which such data
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process. are available), Brazilian high school
students ranked near the bottom in
mathematics and reading—below their
peers in Kazakhstan and Thailand. Or consider infrastructure: since
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spending money on expensive public goods doesn’t bring in many votes,

the Brazilian government tends to favor investing in cheap roads
designed for private cars rather than costly public transportation systems.
od
As a result, Rio de Janeiro, a metropolis of 12 million people, has fewer

miles of subway track than Lisbon, which is home to just 530,000.
Such inefficiencies stem directly from Brazil’s dysfunctional
political process. Legislators and the president alike regularly
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raise taxes not so they can invest in better public services but so
they can replenish the war chests they use to please the special
interest groups that help them stay in power. With government
spending benefiting thin slices of the electorate rather than the
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majority of Brazilians, the discrepancy between revenue and the

quality and extent of public services is enormous. To be sure,
many governments experience tugs of war between narrow interests
and the public good, but the extent to which the electoral rules in
Brazil favor the former over the latter has made the situation there
particularly egregious.

How to Fix Brazil
And yet, bad as they are, these inefficiencies pale in comparison to

the other big problem engendered by Brazil’s flawed political rules:
endemic corruption. In many cases, the pork and patronage doled out
by presidents prove insufficient to win Congress’ support; presidents
therefore often sweeten the pot by allowing legislators to appoint
their allies to plum jobs in Brazil’s powerful state owned companies
-
and regulatory agencies. Once in these posts, the new officials gain a
say over which companies will receive lucrative government contracts.
And many of them have proved all too happy to make those decisions
m
based on bribes, which they then share with their patrons in Congress.
Operation Car Wash has exposed just how widespread this kind of
corruption has become. According to prosecutors, numerous Petrobras
hi
executives were political cronies who saw their main job as charging
illegal fees on deals with private sector contractors—and then channeling
-
those fees to their backers in government (after pocketing a portion
ha
for themselves). As for the contractors in question, they included many
of Brazil’s mightiest corporations, including the construction giant
Odebrecht and the multinational conglomerate Andrade Gutierrez.
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Estimates released by the attorney general’s office suggest that since
1997, the companies involved in the graft secured some $20 billion in
subsidized credit from the Brazilian Development Bank, which is
underwritten by taxpayers. To ensure continued access to this gold mine,
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the companies lavished gifts and other favors on cooperative politicians

and contributed large sums, both on and off the books, to their reelection
campaigns. Corruption was the rule, and Congress had strong incentives
od
to ensure that public spending remained high and poorly regulated.
THE BETTER OLD DAYS

The state of Brazilian politics has not always seemed so bleak. From
so
1995 to 2010, two social democratic presidents, Fernando Henrique

Cardoso and Lula, managed to cut inflation, grow the economy, and lift
millions of people out of poverty. But even though both leaders brought
about a good deal of reform, neither set out to transform Brazilian
Ma
politics. Rather than tackle the system’s structural problems, Cardoso

and Lula cleverly worked around them, enacting policies that benefited
most Brazilians while allowing the wheels of the patronage system to
turn undisturbed. For a time, this tactic worked well, since both Cardoso
and Lula were careful to insulate their pet economic and social policies
from pressure from interest groups and their representatives in Congress.

In order to deal with Brazil’s corrupt and inefficient public health
-
care system, for example, Cardoso expanded the parallel Family Health
Strategy, sending doctors into poor neighborhoods to provide preventive
care and reduce the pressure on Brazil’s public hospitals. For his part,
Lula launched Bolsa Família, a conditional
The chaos roiling Brazil is cash transfer program that cut poverty in
-
Brazil by 28 percent and cost a mere 0.8
the product of flawed percent of the country’s gdp. The program
political engineering. was so cheap, and its benefits so obvious, that
m
it eventually won widespread public support—
even from Brazil’s conservatives, who initially opposed it. Both Cardoso
and Lula also protected Brazil’s Central Bank and Finance Ministry
hi
from political pressure, giving them a free hand to pursue policies
that helped the economy stabilize and then grow.
Cardoso and Lula weathered their fair share of corruption scandals,
ha
but their public oriented policies and the strong economic growth
-
the country enjoyed during their tenures convinced voters to look the
other way. At their peak, these presidents were popular enough that
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lawmakers found it hard to openly oppose them or to extract fat
concessions from them in exchange for their support. But Lula and
Cardoso also benefited from the fact that when they entered office,
Brazil was, by many measures, in far worse shape than it is today. That
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meant there was a lot of low hanging fruit to be picked, and both
-
leaders could bring about major improvements by making relatively
small changes to the existing system. As things improved and Brazilians
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became more demanding of their politicians, new gains proved harder

and harder to engineer—as Rousseff learned the hard way when she
became president in 2011.
Having never held elected office before, Rousseff had a difficult
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time navigating the give and take of Brazilian coalition building. She
-
-
also had to weather the difficult aftermath of the global financial crisis
and preside over an economy that was shrinking, due in part to falling
commodity prices. Wedded to mercantilist and interventionist economic
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theories, Rousseff tried to stimulate Brazil’s sagging economy by

increasing public spending. But this turned out to be a bad bet, since
the flood of cash encouraged members of Congress to chase more
pork and kickbacks. The combustible mix of rising unemployment,
public frustration, and growing scandal that resulted would eventually
seal her fate.

How to Fix Brazil
DON’T HATE THE PLAYER . . .

Unlikely as it may seem, Brazil’s current troubles might just have a
silver lining: business as usual has become so costly that many Brazilians
have finally accepted that the system has to change. Operation Car Wash
has laid bare the misdeeds of the country’s political class, and for the
first time, dozens of politicians and business leaders have gone to jail.
In the past, officials were able to shrug off corruption investigations
by relying on a lenient justice system, a weak congressional ethics
committee, and a public that seemed inured to graft. That is no longer
m
possible. The judges, investigators, and prosecutors running Operation
Car Wash represent a new generation of civil servants, with new
values, and they are using a new set of rules and tactics, including
hi
the threat of serious sentences and the carrot of leniency deals, to
break the silence that politicians and businesspeople have maintained
for decades. Just as important, according to public opinion research
ha
by the polling group Datafolha, most Brazilians now believe that
corruption is their country’s biggest problem. And whereas the
protests in 2013 were mostly about irrational government spending,
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more recently, Brazilians have taken to the streets specifically to
protest official corruption.
For all his shortcomings, Temer seems to understand the need for
change. He is pushing for Brazil’s first ever cap on public spending, a
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-
measure that would limit government expenditures to current levels
for the next 20 years, thereby forcing interest groups to compete for a
fixed amount of resources instead of pushing for tax hikes or bigger
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deficits. He has introduced measures that will allow the government

to reward efficient bureaucrats across the vast expanse of the Brazilian
state. And crucially, he has raised the possibility of constitutional
reforms that would reduce the number of political parties and restrict
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their ability to merge their electoral lists. Both measures would make
it easier to get things done in Congress without graft.
Getting Brazil back on track, however, will take even more sweep
ing reforms. In short, lawmakers must rewrite the rules of the game
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so that elected officials stop working only for their backers and start
focusing on good governance for the majority of the population. Ac
ademics, policymakers, and pundits have offered a number of ideas
for how they might do so. One radical proposal would have Brazil
drop its presidential system in favor of a parliamentary one akin to
the United Kingdom’s. By fusing Congress and the executive, that

change would make legislators directly responsible for the success or

failure of the government, and since lawmakers would be threatened
with fresh elections if they challenged the government’s major deci
sions, such a reform might reduce corrupt dealmaking and encourage
the development of stronger political parties. Other experts have ar
gued for a semi presidential system, in which a prime minister ac
-
countable to the legislature conducts day to day politics and a
-
-
president retains the power to dissolve parliament and call new elec
tions. Shifting to such a system could make lawmakers more account
m
able for the results of policy decisions while preserving the president’s
status as a national figurehead. Yet another proposal would keep Bra
zil’s current presidential system intact but reduce the number of exist
hi
ing parties to between six and eight and push them to commit to
coherent policy platforms, in part by abandoning the open list pro
-
portional representation that defines today’s electoral system.
ha
It is too early to say which of these proposals would be most
effective. What is certain, however, is that Brazil’s political system
will remain dysfunctional until the country’s president and legislators
iT
can work together effectively—in the name of party platforms, not
clientelistic bargains. To get there, Brazil must reduce the number of
parties in Congress and empower them to discipline their own members.
Operation Car Wash, Rousseff ’s impeachment, and the overall
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economic decline have created an opportunity for Brazil to pursue

just this kind of reform. Now the country’s politicians must seize the
rare opening these cascading crises have afforded them.∂
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so
Ma

America’s Brewing
Debt Crisis
What Dodd Frank Didn’t Fix
-
m
Robert Litan
A
hi
lmost as soon as the financial crisis struck in late 2007, policy
makers began working to prevent another one. The roots of
the crisis, they contended, lay in reckless lending and excess
ha
debt. Banks had made massive loans to “subprime” borrowers, who
had little ability to repay them, and the banks funded these investments
with borrowed money. When the U.S. housing bubble burst, millions
iT
of Americans defaulted on their mortgages, and the overleveraged
banks collapsed. The government had to bail them out, and U.S.
taxpayers picked up the bill.
In July 2010, U.S. President Barack Obama signed the Dodd Frank
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-
Wall Street Reform and Consumer Protection Act. Reformers hoped
that the act—known as Dodd Frank, after its Democratic co sponsors,
-
-
Senator Chris Dodd of Connecticut and Congressman Barney Frank
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of Massachusetts—would make another financial crisis less likely.

And to some extent, Dodd Frank has succeeded. During the crisis,
-
too many financial institutions lacked enough capital to withstand
losses on their loans. But now, thanks in part to the act, banks have to
so
fund themselves with more capital and less debt, which equips them
to absorb more losses in a future downturn. And banks have largely
stopped making subprime loans, since Dodd Frank rules require those
-
who give loans and securitize them to bear some losses in the event
Ma
they sour.
Nevertheless, during the 2016 presidential campaign, Dodd Frank
-
has come under attack from both sides of the aisle. In the Democratic
primary, Senator Bernie Sanders of Vermont argued that its reforms
ROBERT LITAN is an Adjunct Senior Fellow at the Council on Foreign Relations and a
partner at Korein Tillery.

Robert Litan
did not go far enough. He called for the government to break up the
largest U.S. banks and reinstate Glass Steagall, the 1933 act that separated
-
commercial from investment banking, until Congress repealed it in 1999.
Republicans, meanwhile, including the presidential candidate Donald
Trump, believe Dodd Frank went too far, and Republican legislators
-
have sought to repeal it at every opportunity, arguing that its regula
tions are crippling U.S. banks and stifling growth.
Both criticisms distract from the real problem with the act, which is
that it left some key problems unaddressed. In dealing with reckless
m
lending and excess leverage, it misses one of the most important causes
of the crisis: “runnable liabilities,” or short term debt that the govern
-
ment does not insure. The U.S. financial sector holds trillions of dollars
hi
of such debt, including uninsured bank deposits and the short term
-
liabilities of other financial institutions, such as overnight loans. What
makes this kind of debt so dangerous is that during a crisis, short term
ha
-
lenders, unlike long term ones, can demand their money back imme
-
diately, leaving borrowers unable to pay all their creditors quickly. The
financial sector stops lending money, credit dries up for consumers and
iT
businesses, and the economy grinds to a halt. This is what happened in
2007 and 2008, when massive runs on short term debt spread panic
-
throughout the financial sector and helped trigger the Great Recession.
Although short term debt poses one of the greatest threats to the
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-
financial stability of the United States, Dodd Frank has done little to
-
mitigate it. Fortunately, several experts have proposed ambitious ways
of dealing with the problem, including expanding federal insurance of
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bank deposits, allowing the Federal Reserve to lend money to more

firms in the case of a panic, and banning unregulated financial institu
tions from issuing runnable liabilities. These are good ideas, and if
Congress passed any of them into law, the odds of a future financial
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crisis would be significantly lowered.
AFTER DODD-FRANK
The Dodd Frank Act set out to solve one of the central problems with
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-
the U.S. financial system: that some banks, such as Citigroup and J.P.
Morgan, were “too big to fail.” When those banks were faced with
collapse, the government had to come to the rescue, or else risk allow
ing the whole economy to go down with them.
Dodd Frank was supposed to solve this problem in two ways. First,
-
the act raised the minimum capital requirements for all banks and

imposed especially strict requirements for those with $50 billion or

more in assets—the “systemically important financial institutions”
(sifis). Dodd Frank also requires banks to hold more liquid assets,
-
money they can use to pay back depositors during a sudden panic.
And the act gives a new body, the Financial Stability Oversight Council
(fsoc), the authority to designate certain large financial institutions
as sifis, which the Fed can then regulate more stringently.
Second, Dodd Frank gave Washington new powers to preemptively
-
shut down large, complex banks and other financial institutions,
m
making bailouts unnecessary. The act gave the Federal Deposit Insurance
Corporation (fdic) powers to close sifis without taxpayers’ bearing
the cost; instead, shareholders, creditors, and managers would lose
hi
out without causing wider damage to the financial system. Banks must
now prepare “living wills,” plans that detail how regulators can shut them
down in case of emergency.
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The act also took aim at financial derivatives, which many politicians
blamed for the crisis. Derivatives are contracts whose payout depends
on the performance of another asset, such as oil or a foreign currency.
iT
One particular type of derivative, credit default swaps, which allow
buyers to insure against the failure of a company to pay back its loans,
has been especially controversial. The insurance giant aig issued far
too many of these contracts without insisting on enough collateral, and
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when the mortgage market collapsed, aig collapsed as well, prompting

a massive rescue by the Federal Reserve. What’s more, before the crisis,
the market for derivatives was opaque: instead of trading derivatives on
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formal, transparent exchanges, individual firms bought and sold them

privately with little oversight. Dodd Frank requires many derivatives to
-
be settled through central clearing houses, where regulators can more
-
easily monitor them.
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BORN TO RUN
These measures to rein in subprime loans and excessive leverage have
no doubt strengthened the U.S. financial system. But the problem is
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that these factors, although they contributed to the Great Recession, did
not lie at the heart of the financial panic; runs on short term debt did.
-
In 1933, after roughly 9,000 banks collapsed as savers rushed to
withdraw their money during the Great Depression, Congress created
the fdic to insure deposits up to a certain amount (initially $2,500,
but by 2007, the number had reached $100,000). The move helped

Robert Litan
prevent bank runs, since people no longer worried that they might
lose all their savings if their bank collapsed.
Then, in 2008, as the financial crisis spread panic throughout the
economy, Congress raised the amount of the deposits that the fdic
would insure from $100,000 to $250,000, covering roughly half of the
$12 trillion that the country now holds in bank deposits. Bank runs
have thus become even less likely, although not impossible.
But for other financial institutions, for which the government has
not stepped in to provide insurance, the risk of runs remains high.
m
“Shadow banks” are financial institutions that are similar to banks, in
that they also issue very short term
-
Massive runs on short-term liabilities, but are not regulated as such.
hi
These include investment banks, money
debt helped trigger the
-
market mutual funds (a low risk, low
-
-
Great Recession. ha yield investment option), and various
financial firms. These shadow banks and
other issuers of short term debt collectively account for roughly
-
$16 trillion in short term debt (dwarfing the $6 trillion of insured
-
iT
bank deposits), and no equivalent of the fdic exists to prevent the
holders of these instruments from running on the institutions that
carry this debt. Meanwhile, even in banks, deposits above $250,000
are still at risk of a run, as are Eurodollar deposits (dollar denominated
Al
-
accounts in foreign banks), which the fdic does not protect.
In the years leading up to the financial crisis, shadow banks relied
increasingly on runnable debt. Until the mid 1990s, such debt was
-
od
equivalent to around 40 percent of U.S. gdp, but by 2008, the figure

had reached 80 percent. This debt carried lower interest rates than
longer term debt and was thus a cheaper source of funding. It took a
-
number of forms, including commercial paper, a kind of short term
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-
debt issued by corporations; money market mutual funds; and
-
repurchase agreements, or repos, a type of short term loan that allows
-
a borrower to sell a bond and promise to buy it back within a few days.
In a crisis, lenders could run on all these financial instruments.
Ma
In 2008, they did. The investment banks Bear Stearns and Lehman
Brothers experienced runs on their short term debt. Investors also
-
began to flee money market mutual funds, which started to collapse;
-
the Treasury Department had to step in and issue an unprecedented
blanket guarantee of all of them. And federal regulators, afraid that
there would be a run on bank deposits above $250,000, merged failing

m
hi
ha
Cash back? Depositors crowding a bank, Cleveland, Ohio, 1933
banks with stronger ones and temporarily guaranteed all accounts. All
iT
of this happened in just six months, and mostly in September 2008.
PROBLEM SOLVED?
Today, runnable debt remains a major problem. Dodd-Frank focused
Al
on reforming the banks, but shadow banks remain out of the regulators’
reach. The act did create the fsoc to eliminate debt bubbles before
they burst. But the fsoc will not spot every emerging bubble. After
od
all, almost every economist missed the signs of the last financial crisis.
The fsoc also barely mitigates the risk of a run on uninsured deposits.
Its power to designate certain banks as “systemically important” may
indirectly address the problem, by signaling that the government
so
would be more likely to bail out these institutions than others. So

might a Dodd-Frank provision that enables the fdic to borrow from
the Treasury to pay short-term creditors who might otherwise pull
F R A N K L I N D. R O O S E V E LT L I B R A R Y
their money out of a failing financial institution. But a fair amount of

Ma
uncertainty remains; it isn’t clear how willing a future government will

be to take such action, given the backlash against the bailouts of “too
big to fail” banks and the forced mergers during the last crisis.
Compelling large banks to hold more capital reduces their risk of
failure, but as the last financial crisis demonstrated, during a wide

spread panic, investors and lenders lose all faith in the values banks

Robert Litan
have assigned to their assets, and many mistrust banks that claim to
have enough capital. Depositors with more than $250,000 may still
run on their bank at the first hint of trouble.
Regulators have also forced banks and other financial institutions
to hold more liquid assets, which they can use to pay back depositors
who want their money back immediately. But even this measure
may not do enough to meet the demands of creditors in a full scale
-
panic, since no bank can have all its assets in liquid form and still
turn a profit.
m
As inadequate as the existing measures are, however, the popular
ideas for bolder reform would do little more to reduce the risk of a run
by uninsured depositors or short term debt holders. Consider Sanders’
hi
-
proposal to break up the “too big to fail” banks. Turning one $2 trillion
-
-
asset bank into four or five smaller banks would not make uninsured
depositors any less likely to withdraw their money if one of the smaller
ha
banks faced difficulties, since their large deposits would still be unin
sured. Such depositors would rationally conclude that if one of the
smaller banks was in trouble, theirs might also be, potentially triggering
iT
a run. Nor would reinstating Glass Steagall prevent runs if panic
-
caught on, because separating commercial from investment banking
would do nothing to stop uninsured depositors from running on com
mercial banks or repo lenders from refusing to roll over their loans to
Al
the investment banks.

Republican proposals, meanwhile, could exacerbate the risks posed
by short term debt. Conservative academics at Stanford University’s
-
od
Hoover Institution, for example, have suggested designating a special

district court to expedite bankruptcy cases. But making it easier for a
financial firm to declare bankruptcy could make it more likely that
lenders would lose their money if the firm collapsed, which might make
so
them quicker to pull their money out. The special bankruptcy court
could lessen this risk if it asked the Federal Reserve to act as the lender
of last resort for short term creditors to prevent them from panicking,
-
but this would offer little improvement over the current system.
Ma
FIXING FINANCE
Yet the problem of runnable debt has solutions. One idea comes from
Morgan Ricks, a former official in the Obama administration’s Treasury
Department. In his new book, The Money Problem, Ricks argues that
the government should drop the pretense that its insurance extends

only to $250,000 worth of deposits. In fact, the government implicitly

insures more than that, but only if depositors place their money in
the big banks that governments have a strong incentive to protect for
the sake of financial stability. Indeed, since the crisis, Americans have
concentrated their assets in the largest banks. If the fdic formally

abolished the insurance ceiling and thus promised to insure all accounts,
regardless of size, it would eliminate the risk of runs on banks. It would
also put smaller banks on a level playing field with bigger ones, since
people would no longer eschew the former for fear that the government
m
would bail out only the latter. The move would make the financial
sector less concentrated, which could introduce more competition.
Critics of this proposal argue that it would create a moral hazard.
hi
If the government insured everyone’s deposits, the logic goes, banks
might feel emboldened to take greater risks, for example, by lending
to riskier borrowers at higher interest
ha
rates. But this problem already exists
today: customers with large accounts
Republican proposals could
have moved their deposits to the biggest exacerbate the risks posed
iT
banks, gambling on future government by short-term debt.
protection in the event of a crisis, pro
tection that the banks themselves are gambling on. The best way to
limit this moral hazard is through the stiff capital requirements that
Al
regulators have imposed on large banks, measures that provide

cushions for the banks in case of losses from bad decisions. But
regulators need to enforce these standards more effectively than they
od
have in the past.

Ricks has an even more controversial solution for the risks that
shadow banks pose. He proposes banning any financial institution
that isn’t a bank from issuing runnable liabilities—in other words, he
so
calls for the end of shadow banking. Under his plan, the government
would essentially outlaw money market mutual funds, repos, short
-
-
term commercial debt, and Eurodollar deposits. To cushion the blow
to financial institutions, which would find it costlier to raise money,
Ma
Ricks also suggests eliminating Dodd Frank—something many banks

-
have been advocating since Congress first passed the act. To put it
mildly, this would be a big deal.
Hal Scott, a professor of international finance at Harvard Law
School, has put forward a more traditional approach to mitigating the
risks of short term debt. In his new book, Connectedness and Contagion,
-

Robert Litan
he argues that the government should expand the Fed’s authority to

step in as the lender of last resort. By setting clear ground rules for
emergency lending in advance, rather
than acting in an ad hoc fashion in the
Among all the potential heat of a crisis, the Fed would remove
causes of the next crisis, uncertainty about when institutions are
the massive amount of eligible to receive liquidity support. This,
short-term debt ranks as Scott claims, would leave creditors with
no reason to run on the debt. It would
m
the most probable. put an end to the concept of “too big to
fail” and give regulators time to reor

ganize and close failing financial firms, wiping out shareholders’ equity
hi

in the process but preserving the stability of the system as a whole.
As effective as Ricks’ and Scott’s proposals may prove, however,
they would face major political problems. Ricks’ plan to outlaw shadow
ha
banking would surely invite fierce opposition from the firms in
question. And his proposal to repeal Dodd Frank—which he envisions
-
as a bipartisan compromise in which Democrats agree to get rid of the
iT
legislation they support in exchange for measures that eliminate the
possibility of future financial panics—seems unlikely to get very far
in Congress. Scott’s idea to expand the Fed’s ability to lend to troubled
firms runs counter to a rule the Fed adopted in 2016 to limit lending
Al
of last resort to specific institutions. It’s hard to imagine such a quick

reversal of policy happening at a time when much of Congress is
openly hostile toward the Fed.
od
Jeremy Stein, a former member of the Board of Governors of the

Federal Reserve, and Robin Greenwood and Samuel Hanson, both
professors at Harvard Business School, have offered a more practical,
but also more limited, plan. They argue that the government should
so
increase the supply of public, or government, short term debt to

-
accommodate investors’ demand for safe financial instruments and
so that investors do not have to rely on privately issued short term
-
debt. They suggest that the Treasury could unilaterally and gradually
Ma
replace longer term Treasuries with these shorter term government

-
-
obligations, which are immune from runs because investors view
them as safe assets.
Their solution is not as far reaching as either Ricks’ or Scott’s,
-
but at least it does not require congressional approval, since the
tactic would amount merely to a change in Treasury Department

policy. The problem, however, is that issuing short term government
-
debt would expose Washington to swings in short term interest rates,
-
introducing more volatility into the federal budget. In the end, then,
the strategy might prove more expensive than other approaches.
Long term interest rates have fallen to their lowest levels since the
-
early 1950s, and the government could save money by issuing longer
-
term, rather than shorter term, debt.
-
But perhaps the boldest proposal comes from Mervyn King, who
was governor of the Bank of England during the financial crisis. In his
m
book The End of Alchemy, King argues for even higher capital and
liquidity standards for both traditional banks and shadow banks. King
would phase in these tougher requirements over a period as long as
hi
20 years. And like Scott, King wants clearer policies from central
banks on when they will act as a lender of last resort. He argues that
central banks should lend to almost anyone with sufficient collateral,
ha
and not just to banks—a significant expansion of central banks’ lender
-
of last resort role, but one that would help provide liquidity when it
-
-
is most needed.
iT
King’s idea is clear and logical. Yet it is likely to face as much
hostility as Ricks’—if not more, since King is tougher on banks. And
Congress would likely have the same reaction to King’s plan as it
would to Scott’s, since it also expands the role of central banks.
Al
ONE STEP AT A TIME

Most of the reforms that politicians have advocated have neglected
od
the problem of runnable debt, and the academics’ proposals are

currently politically impractical. But there is a way forward: regula
tors should focus on more moderate reforms that reduce the role of
short term and other uninsured debt in the financial system. Some of
so
-
these reforms would be possible under existing law, while others
would probably require new legislation.
The Federal Reserve has already suggested one useful reform: man
dating that issuers of repos back those instruments with extra collateral.
Ma
The requirement should discourage investment banks from using repos

for funding and, in a crisis, reassure those lending through repos that
their loans are sound and will be repaid.
Regulators could also discourage investment banks from issuing
short term debt by requiring them to hold capital in an amount that
-
increases in proportion to their short term liabilities (an idea similar
-

Robert Litan
to the “risk fee” that the Democratic presidential candidate, Hillary

Clinton, has proposed for banks and sifis that rely on short term
-
debt). U.S. regulators could take this step on their own now,
although it would make the global banking system safer if they
could persuade regulators in other developed economies to adopt a
similar system.
Meanwhile, Congress could downsize money market funds, stopping
-
short of outlawing them altogether. To do so, it should eliminate the
current $250,000 ceiling on insured bank deposits. The change would
m
make money market funds less attractive to large investors, since they
-
could invest in banks with full protection without having to take on
extra risk.
hi
Among all the potential causes of the next financial crisis, the
massive amount of runnable debt ranks as the most probable. Yet
so far, policymakers have overlooked this problem, perhaps believing
ha
that all will be fine if they simply cut big banks down to size or
promise never to protect any of their large depositors. This is
wishful thinking. The financial system will never be immune from
iT
crises, but solutions exist that may go a long way toward reducing
the risk.∂
Al
od
so
Ma

The Strategic Costs

of Torture
How “Enhanced Interrogation” Hurt America
m
Douglas A. Johnson, Alberto Mora, and
Averell Schmidt
I hi
t has been more than seven years since U.S. President Barack Obama
ha
issued Executive Order 13491, banning the U.S. government’s use
of torture. Obama’s directive was a powerful rebuke to the Bush
administration, which had, in the years after the 9/11 attacks, authorized
iT
the cia and the U.S. military to use “enhanced interrogation tech
niques” in questioning suspected terrorists. Some detainees were shackled
in painful positions, locked in boxes the size of coffins, kept awake for over
100 hours at a time, and forced to inhale water in a process known as water
Al
boarding. Interrogators sometimes went far beyond what Washington

had authorized, sodomizing detainees with blunt objects, threatening
to sexually abuse their family members, and, on at least one occasion,
od
freezing a suspect to death by chaining him to an ice cold floor overnight.

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By the time Obama came to office, the cia had apparently abandoned
the most coercive forms of torture. Obama sought to ensure that the
United States had truly turned the page. Today, however, many Americans
so
are considering electing a president who wants to bring such abuses back.
During a February debate among the Republican presidential candidates,
Donald Trump vowed to reinstate torture, including treatment that
would be “a hell of a lot worse than waterboarding.” Asked in a subsequent
Ma
talk show if he stood by his proposal, Trump replied, “It wouldn’t bother
DOUGLAS A. JOHNSON is Director of the Carr Center for Human Rights Policy at the
John F. Kennedy School of Government at Harvard University.
ALBERTO MORA is a Senior Fellow at the Carr Center. From 2001 to 2006, he served as
General Counsel of the Department of the Navy.
AVERELL SCHMIDT is a Fellow at the Carr Center.

Douglas A. Johnson, Alberto Mora, and Averell Schmidt
me even a little bit.” And this is hardly a fringe view: according to a 2014
Washington Post–abc News poll, a majority of Americans now think that
the cia’s use of torture was justified.
In 2014, the U.S. Senate Select Committee on Intelligence released
a series of reports as part of a five year investigation into the cia’s
-
detention and interrogation program. The committee’s Democratic
majority, joined by the Republican senator Susan Collins, argued that
the use of torture had not produced unique intelligence. The Republican
minority claimed that it had. Meanwhile, several former senior cia
m
officials launched a website, cia Saved Lives, on which they declared
that the agency’s interrogation program had disrupted terrorist plots
and helped the United States find and capture al Qaeda leaders.
hi
Despite their disagreements, all these perspectives share one key
assumption: that whether the torture was good or bad depends on
whether or not it “worked”—that is, whether it produced lifesaving
ha
results. Leaving aside the very real human and legal consequences of
torture, a truly comprehensive assessment would also explore the policy’s
broader implications, including how it shaped the trajectory of the so
-
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called war on terror, altered the relationship between the United States
and its allies, and affected Washington’s pursuit of other key goals, such
as the promotion of democracy and human rights abroad. To assess the
overall effect of torture on U.S. national security, one should consider
Al
not only its supposed tactical benefits but also its strategic impact.
Our team of researchers at the Carr Center for Human Rights Policy
at the Harvard Kennedy School has begun the first such review, and
od
we’ve found that Washington’s use of torture greatly damaged national

security. It incited extremism in the Middle East, hindered cooperation
with U.S. allies, exposed American officials to legal repercussions,
undermined U.S. diplomacy, and offered a convenient justification
so
for other governments to commit human rights abuses. The takeaway

is clear: reinstating torture would be a costly mistake.
“THE GREATEST RECRUITING TOOL”

Ma
In 2004, reports surfaced that U.S. soldiers had tortured and humiliated
prisoners at Abu Ghraib, a prison 20 miles west of Baghdad that held as
many as 3,800 detainees. Our preliminary analysis has found that these
revelations, alongside allegations of torture at the U.S. detention center
in Guantánamo Bay, Cuba, spurred foreign extremists to join insurgents
in Afghanistan and Iraq, contributing to the violence in both places.

m
hi
ha
The human toll: at Guantánamo Bay, January 2002
According to State Department cables made public by WikiLeaks,
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in the spring of 2006, a group of senior U.S. officials gathered in
Kuwait to discuss how to stem the flow of foreign fighters into Iraq.
Their conclusion was startling: that the mistreatment of detainees at
Abu Ghraib and Guantánamo Bay was “the single most important
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motivating factor” in persuading foreign jihadists to join the war. U.S.

Senator John McCain reached a similar conclusion in 2008, when he
asked a captured senior al Qaeda leader what had allowed the group to
od
establish a foothold in Iraq. “Two things,” the prisoner replied, according

to a State Department cable. “The chaos after the success of the initial
invasion, and the greatest recruiting tool: Abu Ghraib.” Of course, the
claims of a captured terrorist are easy to discount. But in 2009, a Saudi
so
official echoed this sentiment, when, according to another cable, he

concurred with the Obama administration’s decision not to release any
more photos of Abu Ghraib, alleging that when the scandal first broke,
Saudi authorities arrested 250 people attempting to leave the country
Ma
to join extremist groups. And Robert Pape, a political scientist at the

STRINGER / REUTERS
University of Chicago, has lent further credence to this assertion by

identifying 26 martyrdom videos in which the suicide bombers cite
torture at Abu Ghraib as the motivation for their attacks.
Even though the total number of foreign fighters in Iraq remained
relatively low throughout the war—less than ten percent of all insur-

gents were foreigners, based on a 2007 estimate by the director of the

U.S. Defense Intelligence Agency—their brutality gave them dispro
portionate influence on the character of the conflict. According to U.S.
and Iraqi officials, foreign fighters conducted more than 90 percent of the
suicide bombings in Iraq between 2003 and 2005, killing thousands.
The revelations about mistreatment at Abu Ghraib and Guantánamo
Bay made it easier for Sunni jihadists in Iraq to paint the United States
as a villain. Images of Americans torturing prisoners became a motif in
their propaganda, used to justify the targeting, kidnapping, and behead
m
ing of Shiites, Kurds, and anyone else
suspected of cooperating with the United
Images of Americans States and its allies. When, in 2004, Abu
hi
torturing prisoners Musab al Zarqawi, then the leader of
-
became a motif in al Qaeda in Iraq, beheaded an American
jihadist propaganda. ha contractor named Nicholas Berg—the
first beheading of the conflict—his group
claimed that it had acted in retaliation
for the abuses at Abu Ghraib. Even today, U.S. torture plays an impor
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tant role in the propaganda of the descendant of al Qaeda in Iraq, the

self proclaimed Islamic State (also known as isis). Isis fighters regularly
-
force prisoners to wear orange jumpsuits similar to the ones the detain
ees wear at Guantánamo Bay, and they have reportedly waterboarded
Al
captives. Of course, jihadists in Iraq likely would have adopted cruel

tactics even if the United States had not tortured prisoners. Yet the
United States nevertheless helped legitimize such tactics by allowing
od
terrorists to cast them as justified forms of vengeance. In lowering the

bar for acceptable behavior, the United States signaled that in the war on
terrorism, standards of humane treatment did not bind either side.
The torture revelations also made it harder for the United States’ to
so
recruit potential Iraqi allies. Part of the U.S. Army’s strategy in Iraq
included persuading locals that they would be better off siding with U.S.
soldiers than with insurgents. After the photographs of detainee abuse
at Abu Ghraib emerged, however, many Iraqis no longer saw the United
Ma
States as trustworthy, and they rejected requests for help. As General

Stanley McChrystal, the former head of the U.S. Joint Special Operations
Command, acknowledged in a 2013 interview with this magazine, “The
thing that hurt us more than anything else in the war in Iraq was Abu
Ghraib.” He continued: “The Iraqi people . . . felt it was proof positive
that the Americans were doing exactly what Saddam Hussein had

done—that it was proof [that] everything they thought bad about the
Americans was true.” Without much cooperation from local populations,
coalition forces found it difficult to develop the kind of intelligence
sources necessary to identify and target insurgents.
A PARIAH STATE
At the same time that the United States’ use of torture was inspiring
extremists in the Middle East, it was also undermining counterterror
ism cooperation between Washington and its allies. Consider the case
m
of the Netherlands. According to U.S. State Department cables from
2003, the Dutch army’s leadership wanted to contribute troops to the
U.S. led effort in Afghanistan. But intense public opposition to
hi
-
torture led Dutch political leaders to fear they would face domestic
backlash if their army helped apprehend al Qaeda or Taliban members
who then ended up at Guantánamo Bay. These concerns helped delay
ha
parliamentary approval for the deployment of Dutch troops until
early 2006. Speaking before the Dutch legislature in November 2005,
Foreign Minister Bernard Bot warned that if Washington was not
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forthcoming about its torture policies, the Dutch might not deploy
troops to Afghanistan. It was only after the United States provided
additional assurances concerning the treatment of Afghan prisoners
that the Dutch parliament voted to deploy troops.
Al
Similar concerns impeded cooperation among the coalition forces. In

2005, a U.S. military attorney told one of us (Alberto Mora, then general
counsel to the U.S. Navy) that the British army had captured an enemy
od
combatant in Basra, Iraq, but released him because it did not have
adequate detention facilities and did not trust U.S. or Iraqi forces to
treat him humanely (aiding and abetting torture is a crime under British
law). Later, in 2005, Australian, British, Canadian, and New Zealand
so
military lawyers approached Mora at a military conference sponsored by

U.S. Pacific Command in Singapore and advised him that their countries’
cooperation with the United States “across the range of military,
intelligence, and law enforcement activities in the war on terror would
Ma
continue to decline” so long as Washington persisted in using torture.

The problems went far beyond Afghanistan and Iraq. The Finnish
parliament delayed ratifying a U.S. eu treaty on extradition and legal
-
cooperation from late 2005 until 2007 over concerns that the United
States’ use of torture and extraordinary rendition—the government
-
sponsored practice of abducting and transporting terrorist suspects from

one country to another for detention and interrogation without judicial

oversight—might violate Section 7 of Finland’s constitution, which
prohibits torture and specifies that the “deprivation of liberty may be
imposed only by a court of law.” In 2008, British authorities, fearing that
the United States was transporting suspects to secret prisons through
British airports, began requiring the U.S. embassy in London to request
permission before landing military planes in the United Kingdom.
Around the same time, the United States’ use of torture endangered
its access to Shannon Airport, in Ireland, a vital stop for transatlantic
m
military flights. “For segments of the Irish public,” a WikiLeaks
cable reads, “the visibility of U.S. troops at Shannon . . . made the
airport a symbol of Irish complicity in
hi
Governments that assisted perceived U.S. wrongdoing in the
Gulf/Middle East.” These concerns led
the CIA’s detention and ha the Irish government to impose new
interrogation program paid “cumbersome notification requirements”

a legal price. on U.S. military aircraft to prevent tor
ture victims from crossing Irish ter
iT
ritory, prohibit the United States from
shipping munitions to Israel through Shannon during the 2006 Israeli
conflict with Lebanon, and bar U.S. deportations through Shannon,
lest there be any confusion over the prisoners’ legal status.
Al
The United States’ treatment of detainees also antagonized foreign

courts. Overriding the opposition of their countries’ leaders, who did
not want to undermine intelligence cooperation with the United States,
od
judges in Canada and the United Kingdom ordered their governments

to release classified information relating to the interrogation of their
countries’ citizens in U.S. custody. In 2010, the British government
reportedly paid a large (and classified) settlement to several victims of
so
extraordinary rendition rather than risk airing details of British com

plicity in U.S. torture in court proceedings.
Meanwhile, the Spanish Supreme Court annulled a six year prison
-
sentence of a convicted terrorist, Hamed Abderrahaman Ahmed, because
Ma
some of the evidence presented by Spanish prosecutors in the case had

been obtained while Ahmed was at Guantánamo. That information was
inadmissible, the court ruled, because it had been attained under
circumstances “impossible to explain, much less justify.” And in 2010, in
a demonstration of how the use of torture jeopardizes the prosecution
of defendants, Ahmed Khalfan Ghailani was acquitted of 284 out of 285

charges of conspiracy and murder in the 1998 terrorist bombings of the

U.S. embassies in Nairobi, Kenya, and Dar es Salaam, Tanzania, after a
U.S. federal judge barred prosecutors from using a key witness whom the
government had learned of during Ghailani’s interrogations while in cia
custody—interrogations that Ghailani’s lawyers argued constituted torture.
HOW TO LOSE FRIENDS AND ALIENATE PEOPLE

Worldwide, the scandals involving Abu Ghraib, cia secret prisons,
and Guantánamo Bay also soured attitudes toward the United States
m
more generally, compounding the damage done by the 2003 invasion of
Iraq. A 2006 Pew poll found that even after controlling for respondents’
views of the Iraq war, people in Jordan, Pakistan, Spain, and the
hi
United Kingdom—all U.S. allies in the war on terrorism—reported
less favorable views of the United States if they were aware of U.S.
abuses at Abu Ghraib, Guantánamo, and elsewhere.
ha
Governments that assisted the cia’s detention and interrogation
program paid a legal price. Shortly after the human rights violations at
Abu Ghraib became public knowledge, Canadian and European officials
iT
launched investigations into the complicity of their governments in the

torture of U.S. detainees. These included public inquiries launched in
Canada, Germany, Italy, Spain, and the United Kingdom, as well as by
the European Parliament and the Council of Europe. At the European
Al
Court of Human Rights, torture victims brought cases against Italy,

Lithuania, Macedonia, Poland, and Romania, charging that by hosting
cia secret prisons, the governments of those countries had violated
od
Article 3 of the European Convention on Human Rights, which prohibits

torture. In 2012, the court ruled against Macedonia, ordering it to pay
60,000 euros in damages to Khalid el Masri, a German and Lebanese
-
citizen whom the Macedonian police had abducted and handed over to
so
the cia; two years later, it ruled against Poland, which had to pay the
suspected terrorists Abu Zubaydah and Abd al Rahim al Nashiri, who
-
-
had been held at cia “black sites” in Poland, 130,000 and 10,000 euros,
respectively. And in 2016, the court ruled against Italy, making it pay
Ma
115,000 euros to the Egyptian cleric Hassan Mustafa Osama Nasr (also
known as Abu Omar) and his wife, Nabila Ghali. The cases against
Lithuania and Romania are still pending, but the rulings so far have sent
a clear message to U.S. allies: complicity carries consequences.
By the end of the Bush administration, Washington’s international
credibility had fallen so low that even its closest allies appeared to distrust

the United States. According to leaked cables, for example, in a 2004

meeting with U.S. Republican Senators McCain and Lindsey Graham,
Irish Prime Minister Bertie Ahern voiced his fear that the United States
was transporting prisoners through Ireland, even though U.S. officials
had said they weren’t. He told McCain
Even if torture may have and Graham that he did not want to ap
pear foolish after defending the U.S.
sometimes produced helpful military’s use of Ireland as a transit hub
intelligence, it also led U.S. to his parliament on the basis of “U.S.
m
policymakers astray. assurances that enemy combatants have
not transited Shannon [Airport] en route
to Guantánamo or elsewhere.” “Am I all
hi
right on this?” he asked them. McCain pledged to relay Ahern’s concerns
to the Bush administration and to underscore “how very important it is
that the U.S. not ever be caught in a lie to a close friend and ally.” (Al
ha
though there is no evidence that detainees were onboard flights traveling
through Shannon, several flights that stopped there did later pick up
detainees and transport them elsewhere.)
iT
It was only a matter of time before the United States itself became the
target of foreign legal proceedings. In 2005, Swiss prosecutors opened a
criminal investigation into the United States’ use of Swiss airspace
for extraordinary renditions. Between 2004 and 2009, the Center for
Al
Constitutional Rights and the European Center for Constitutional and

Human Rights filed cases in France, Germany, and Spain against Donald
Rumsfeld, who was U.S. secretary of defense until the end of 2006, and
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other senior U.S. officials for war crimes committed at Abu Ghraib and
Guantánamo Bay. Cases were also filed against Rumsfeld in Argentina
in 2005 and in Sweden in 2007. Just this year, a French court summoned
Geoffrey Miller, the U.S. general who ran the Guantánamo Bay detention
so
facility, for questioning as part of an investigation into his role in the

torture of three French citizens. (Miller did not show up.)
Although not every case has led to formal charges, a few have. In
2005, Italy launched an investigation into the cia’s kidnapping and
Ma
extradition of a Muslim cleric in Milan in 2003. The subsequent criminal

proceedings led to the conviction of 23 U.S. officials in absentia. Even
though the United States continues to refuse Italy’s extradition requests,
the case has restricted the movement of the implicated officials. In 2013,
at the request of Italian authorities, police in Panama briefly detained
one of them, the former cia station chief in Milan, Robert Seldon Lady.

In April, authorities in Portugal arrested another former cia official

charged in the case, Sabrina De Sousa, and are in the process of extraditing
her to Italy. Similar legal risks continue to limit the mobility of several
former high ranking U.S. officials, including former President
-
George W. Bush, former Vice President Dick Cheney, Rumsfeld, and
John Yoo, a key legal adviser to the Bush administration. Once in command
of the world’s most powerful country, today they cannot travel to states
that assert universal jurisdiction for acts of torture, such as France,
Germany, Spain, and Switzerland, without risking detention and prose
m
cution. Likely due to such concerns, Rumsfeld cut short a trip to France
in 2007 and Bush canceled a trip to Switzerland in 2011. Adding insult
to injury, Russia has repeatedly imposed travel restrictions on former
hi
Bush administration officials for their participation in “medieval torture.”
LEADING BY EXAMPLE ha
U.S. foreign policy has long supported the advancement of international
law and human rights, since doing so promotes peace, security, and the
rule of law overseas; encourages the spread of democracy; and shores
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up popular support for American values. The use of torture demonstrably
undermined these objectives, making the United States both less influ
ential and less secure.
Even before news of U.S. abuses first broke, other governments began
Al
citing U.S. practices to justify their own human rights abuses in the war
on terrorism. As early as January 2002, according to cables released on
the WikiLeaks website, the State Department received intelligence that
od
Russia was “carefully studying U.S. treatment of detainees in search

of useful precedents to justify its treatment of Chechnya prisoners.”
In 2003, Colombian President Álvaro Uribe adopted the U.S. concept
of “illegal combatants” to suggest that certain Colombian rebels were
so
ineligible for protection under international law.

U.S. torture of detainees did more than merely provide other gov
ernments with a convenient way to justify their own bad behavior: it
also presented countries with a specific set of practices to emulate. Our
Ma
research shows that of the 54 governments that assisted the cia in

kidnapping, extraditing, and torturing suspected terrorists, many began
to adopt similar policies at home, subjecting their citizens to worsening
human rights abuses. In 2008, Human Rights Watch reported that
Ethiopia and Kenya had adopted a policy of extraordinary rendition for
Somali militants. And following the Abu Ghraib revelations, several

Egyptian human rights groups found that Egyptian police had adopted
tactics of sexual humiliation similar to those the United States had used.
Gambia provides another case in point. In 2002, the Gambian govern
ment helped U.S. officials extraordinarily render two suspected terrorists,
Bisher al Rawi and Jamil el Banna, to a secret cia prison in Afghanistan.
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Four years later, in the aftermath of an alleged coup attempt, the Gambian
government arrested at least 28 people, detaining them in secret prisons
and subjecting some to torture. In July 2006, according to leaked State
Department cables, Linda Thomas Greenfield, then the U.S. deputy
m
-
assistant secretary for African affairs, met with Belinda Bidwell, Speaker
of the Gambian National Assembly, and raised objections to Gambia’s
human rights record. Bidwell responded that “the world is different since
hi
9/11 and al Qaeda, and when it comes to matters of national security and
the safety of the population, extraordinary measures must occasionally be
taken.” She then compared those detained in Gambia to the suspects held
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at Guantánamo Bay, pointing out, according to the cable, that “such things
even happen in developed countries.”
U.S. interrogation policies also provided an easy pretext for states to
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disregard multilateral institutions that safeguard human rights, such as
the un. Sudanese President Omar al Bashir cited U.S. behavior in
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justifying his refusal to allow un peacekeepers into Darfur in 2006:
“We don’t want another Abu Ghraib in Darfur; we don’t want our
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country to go to Guantánamo,” he said. According to European diplomats,

the United States’ refusal to grant un special rapporteurs full access to
Guantánamo “strengthened the hand” of other countries that sought to
od
deny them access as well.

U.S. policies have also allowed chronic human rights abusers, such as
China, Cuba, Iran, and North Korea, to dismiss Western condemnations
as hypocritical. After the Senate released its torture reports in 2014, for
so
example, China’s state news agency, Xinhua, ran a story headlined “How
long can the US pretend to be a human rights champion?” In 2006,
when U.S. officials expressed concern over a lack of accountability for
Hindu Muslim riots in the Indian state of Gujarat four years prior,
Ma
-
Narendra Modi, then the state’s chief minister, fired back that the United
States “was guilty of horrific human rights violations and thus had no
moral basis to speak on such matters.”
In December 2007, then U.S. Republican Senator Arlen Specter
and then Democratic Representative Patrick Kennedy visited Damascus
to meet with Syria’s president, Bashar al Assad, and its foreign minister,
-

Walid Muallem. In both meetings, Kennedy raised concerns about the

Syrian government’s jailing of opposition figures. When Kennedy
threatened to issue a public démarche protesting the regime’s political
detentions, Muallem responded by suggesting that he would pen one
of his own criticizing the United States for its actions in Abu Ghraib
and Guantánamo Bay. At a time when U.S. officials were actively
courting Assad, who appeared to be more democratic and reform
-
minded than his father, the torture allegations damaged Washington’s
credibility and influence in the region. In China, India, and Syria,
m
accusations of U.S. hypocrisy were not just cheap talk: they signaled
the waning influence of U.S. diplomacy.
hi
AN UNTENABLE DEFENSE
In the years since the details of the cia’s rendition, detention, and
interrogation program became public, the agency has vigorously
ha
defended its conduct. In its response to the Senate’s torture reports,
the cia claimed that “information obtained from cia interrogations
produced unique intelligence that helped the [United States] disrupt
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plots, capture terrorists, better understand the enemy, prevent another
mass casualty attack, and save lives.” At the same time, however, the
cia took no position on the question of “whether intelligence obtained
from detainees subjected to enhanced interrogation techniques could
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have been obtained through other means or from other individuals. . . .

The answer to this question is, and will remain, unknowable.”
By insisting on this uncertainty, the cia has obscured the long standing
-
od
consensus among interrogation professionals that rapport building

-
methods are both more humane and more effective, even when dealing
with hardened terrorists. This was the experience of former fbi Special
Agent Ali Soufan, who successfully used such methods to interrogate
so
the suspected terrorist Zubaydah in Thailand before Zubaydah entered

cia custody. These methods are also a chief recommendation of two
multiyear studies by the Intelligence Science Board. This emphasis on
uncertainty is also a distraction; it draws attention to the tactical effi
Ma
cacy of torture, rather than to its strategic consequences, and places the
burden of proof on those who oppose torture, rather than on those who
advocate breaking U.S. and international law.
And even if torture may have sometimes produced helpful intelligence,
it also led U.S. policymakers astray. In November 2001, Pakistani
authorities captured Ibn al Shaykh al Libi, a suspected leader of an
-
-

al Qaeda training camp, as he fled Afghanistan. U.S. officials moved

him to Egypt, where, after local interrogators tortured him, he claimed
that Iraq had trained al Qaeda members to use chemical and biological
weapons. Although the cia ultimately renounced Libi’s testimony, the
Bush administration cited it as evidence of the link between Saddam
Hussein and al Qaeda in the months leading up to the U.S. invasion of
Iraq. Trained interrogators often warn that false confessions waste time
and resources. In this case, a false confession played a critical role in the
disastrous decision to invade Iraq, a choice that cost the United States
m
over $3 trillion and thousands of American and Iraqi lives.
“LAZY, STUPID, AND PSEUDO-TOUGH”
hi
During crises, leaders often find themselves under incredible pressure to
craft policies that will safeguard those they’re tasked to protect. American
officials have talked about how, in the terrifying months after 9/11, they
ha
greatly feared another attack and felt an enormous responsibility to
prevent one from happening. Such fear can easily tempt politicians
to put even the most odious options on the table—as it did in this case.
iT
Yet it is precisely at such moments that leaders must exercise the
greatest restraint. As policymakers decide whether or not to use torture,
they should not simply consider whether it will yield helpful intelligence;
they should also assess the likely consequences of the policy beyond the
Al
interrogation chamber. By all accounts, the Bush administration, the

cia, and the Department of Defense failed to think through the costs of
abusing detainees and then refused to acknowledge those drawbacks
od
once they began to become manifest.

How little we’ve learned since then. In June, after suicide bombers
killed 41 people at an airport in Istanbul, Trump reiterated his support
for the very methods that got the United States into so much trouble
so
a decade ago. “You have to fight fire with fire,” he said at a rally in
Ohio, adding, of waterboarding, “I like it a lot. I don’t think it’s tough
enough.” Yet torture is not the answer. Far from being a weapon of
strength, it has proved to be a strategic liability, a careless shortcut
Ma
used by those too hasty to conduct a proper analysis and too shortsighted
to anticipate its consequences. In the words of John Hutson, a retired
U.S. Navy rear admiral, “Torture is the technique of choice of the lazy,
stupid, and pseudo tough.” We can—we must—do better.∂
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Venezuela on the Brink

How the State Wrecked the Oil Sector—
and How to Save It
Lisa Viscidi
m
V
enezuela is in the throes of its most tumultuous political and
hi
economic period in decades. The collapse of global energy
prices has wreaked havoc on the country’s economy. Estimates
vary, but oil production has fallen from a peak of around 3.2 million
ha
barrels per day in 1997 to somewhere between 2.2 million and 2.5 million
barrels per day today. Oil and gas account for more than 95 percent of
Venezuela’s revenues from exports, and the country produces few other
iT
goods. Without the money it makes from exporting energy products,
Venezuela has struggled to import everything else its people need. As
a result, Venezuelans are facing widespread shortages of food, medicine,
and other basic supplies. Citizens wait in line for hours at supermarkets
Al
to buy staples such as rice; many have resorted to sifting through trash
to find food. Military forces have been dispatched to oversee food
production and distribution. Last year, a group of Venezuelan researchers
od
estimated that, in contrast to relatively rosy official statistics, more

than three quarters of Venezuelans are living in poverty. And there is
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no relief in sight: by the end of the year, the economy will probably
have contracted by eight percent and the inflation rate will likely reach
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720 percent, according to the International Monetary Fund.

For a country that boasts the world’s largest proven oil reserves, this is
an extraordinary state of affairs. Venezuela’s leaders desperately need
to take action to save the country’s sole economic engine. But political
Ma
instability, bordering on chaos, has stood in the way. The president,

Nicolás Maduro, took office in 2013 as the handpicked successor of
Hugo Chávez. Maduro is now the head of the United Socialist Party
of Venezuela and the standard bearer of “Chavismo,” which is the
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LISA VISCIDI is Director of the Energy, Climate Change, and Extractive Industries
Program at the Inter-American Dialogue.

Lisa Viscidi
term Venezuelans use to describe Chávez’s mix of populism, socialism,

and cult of personality strongman leadership. But Maduro does not
-
-
enjoy the fierce loyalty that Chávez inspired among working class and
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lower middle class voters, and he is now fighting for his political
-
-
survival. For the past two years, anti Maduro protests and riots have
-
rocked Venezuela’s cities. In response to his slipping support, Maduro
has cracked down on dissent, even jailing prominent critics. In July, he
reorganized the state bureaucracy, putting the defense minister directly
in charge of all economic affairs. Maduro has clung to power only by
m
maneuvering to prevent the opposition from holding a national recall
referendum that would remove him from office.
With his leadership under assault and his support in doubt, Maduro
hi
might not complete his term in office. But if he, or whoever might
succeed him, wants to stop the economy’s free fall, there are some
relatively simple, modest steps he could take to stabilize the oil sector.
ha
Doing so would insulate global oil markets from the shock they would
endure if chaos in Venezuela further reduced its ability to produce
oil. More important, rescuing the country’s oil industry would spare
iT
Venezuelans from even worse deprivations and would help pull the
country back from the brink.
CRUDE MANAGEMENT
Al
Venezuela’s oil production has been steadily declining for years, and
its exports are now at historic lows. In recent months, output has
begun to drop precipitously. Multiple sources have reported record
od
declines in production this year: according to the International Energy

Agency, output fell by 190,000 barrels per day between January and
June. As Venezuela’s aging fields produce less light oil, the country
has become increasingly dependent on fields producing heavy, less
so
valuable grades of oil and has been forced to import light crude, which
it needs to mix with its heavier output in order to make it transportable
through pipelines and able to reach the market.
These problems stem not just from the drop in global oil prices but
Ma
also from flawed policies. For years, the Venezuelan government has
relied on the state oil company, Petróleos de Venezuela (pdvsa), to
finance social programs, such as free housing and health care, which
has strained the company’s finances. In 2014, pdvsa spent $26 billion
on social programs, more than double its $12 billion profit. In 2015, as
the effects of the sustained oil price collapse began to take hold, social
-

m
hi
ha
No más: at a drugstore in Caracas, Venezuela, February 2016
spending fell along with oil export revenue but still exceeded pdvsa’s
iT
profits by $5.8 billion, according to Venezuela’s oil ministry. Every year
for the past decade, except for 2009 and 2010, pdvsa has spent more
on social programs than on exploration and production.
Making matters worse is a government policy that has frozen do
Al
mestic gasoline prices at about one cent per liter for almost two dec
ades, costing pdvsa billions every year. The lower oil price has forced
the company to operate some fields at a loss, contributing to a critical
od
lack of cash flow, according to multiple Venezuelan sources and news

reports, and pdvsa is reportedly not investing in basic maintenance
of its equipment and facilities, such as pipelines and refineries. In a
recent sign of pdvsa’s weakness, four tankers destined for Venezuela
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and carrying more than two million barrels of U.S. light crude were
held up at sea for a number of weeks beginning in May, unable to
unload at a Caribbean terminal. According to Reuters, the supplier,
bp, had halted the delivery because Venezuela had not paid for the
Ma
cargo. In late June, bp released one shipment after receiving a partial

MARCO BELLO / REUTE RS
payment, but the other three remain at sea.

Having run up massive debts during a global oil boom that lasted
from 2010 to 2014, both the Venezuelan government and pdvsa now
face challenging payment schedules, with combined payments due in
the fourth quarter of this year totaling $4.3 billion. The country will

Lisa Viscidi
not be out of the woods in 2017, either: a $7.3 billion payment will be
due in the second quarter, according to an analysis published by the
investment bank hsbc. The cash strapped government has been issu
-
ing bonds through the oil company to
obtain new loans at lower interest rates,
Venezuela’s state oil but pdvsa has run out of money to pay
company routinely spends its debts. Venezuela is also struggling

more on social programs to pay back billions of dollars in oil
-
than on exploration and backed loans from China that have
m
helped keep it afloat for the past decade.
production. Although China has already extended
the repayment deadline for some of
hi
those loans, Maduro is seeking additional flexibility. The Chinese
government has yet to respond to his request.
With less cash to repay these mounting debts, both the Venezuelan
ha
government and pdvsa are at risk of defaulting, although the state
appears determined to make its payments this year by aggressively
drawing down its foreign reserves, delaying vital investments in the
iT
energy industry, and cutting back on imports—even as warehouses
and store shelves sit empty. If pdvsa defaults, it will not be able to
borrow, and unpaid creditors could seize its global assets, including
fuel shipments, tankers, and refineries abroad. The company’s ability
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to sell oil to the United States, its largest export market, would be
restricted because bondholders could take possession of shipments in
lieu of payment. And Venezuela would struggle to sell leftover oil to
od
other buyers because, in an already oversupplied global crude market,

other exporters are fiercely protecting their existing market shares by
pumping as much oil as possible and offering discounts to buyers.
As pdvsa struggles to maintain its dominant role in the country’s
so
oil industry, private players are increasingly reluctant to fill the gap.
The state company has held majority stakes in most oil projects since
the industry was nationalized under Chávez in 2007. Pdvsa is not
making payments to its private partners or suppliers, focusing instead
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on meeting its operating expenses in order to simply stay afloat.

Controls on foreign exchange in the country also pose a major obstacle
to foreign operators. Although the unofficial exchange rate has risen
to more than 1,000 Venezuelan bolivars per U.S. dollar, the government
forces international oil companies to adhere to the absurdly low official
rate of ten bolivars per dollar for some of their oil sales. In Venezuela,

private energy firms pay an average of 70 percent of their project costs

in the local currency, so they have seen their expenses soar as inflation
has run rampant.
Venezuela’s crisis has rattled the Western Hemisphere. As one of the
largest economies in South America, Venezuela has long been a major
trading partner for a number of countries, especially Colombia. Since
2005, many Central American and Caribbean countries have relied
on Venezuelan aid through the Petrocaribe alliance, through which
Venezuela provides them with oil on favorable terms, including low
m
interest rates and a long payback period. As a result, many Petrocaribe
members have accrued substantial debts with Venezuela, giving the
country political leverage over some of its neighbors. But in recent
hi
years, Petrocaribe shipments have declined, and they will likely cease
completely if Venezuela’s crisis worsens. Venezuela has also tradition
ally been an important political power in the region, and its economic
ha
woes have undermined regional cooperation through the Organization
of American States and other international institutions, dividing the
region between Venezuelan allies, such as Argentina, Bolivia, and
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Jamaica, which have declined to denounce the Maduro government’s
inaction, and a few critics, such as the United States, which have
received little backing from other countries in the area.
Beyond the Western Hemisphere, what happens in Venezuela also
Al
matters for global oil markets, which have been volatile ever since
November 2014, when Saudi Arabia announced that it would no
longer curtail its production to keep a floor under prices. Although
od
prices have recovered from the extreme lows they reached earlier this
year, supply has continued to outstrip demand. Production disruptions
in Venezuela, as well as in Canada, Nigeria, and elsewhere, have
helped support an oil price recovery in recent months and have moved
so -
the market toward a supply demand balance. A more extensive pro
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duction drop in Venezuela could tip the market into a supply deficit,
leading prices to rise further.
Ma
RUNNING ON FUMES
Venezuela’s economic collapse is directly linked to its political upheaval;
together, the two developments form a damaging feedback loop, each
one contributing to the other in a seemingly endless downward spiral
of bad news. It seems increasingly unlikely that Maduro will be able
to hold on to power—at least not without resorting to extraordinary

Lisa Viscidi
measures. In national elections held last December, the opposition

coalition, the United Democratic Roundtable (mud), won a majority of
the seats in the National Assembly, promising to fight inflation, en
courage private investment, and decentralize the economy by lifting
price controls and gradually moving toward a free floating exchange
-
rate. The opposition has not put forth many specific energy policies,
but its leaders have pledged to increase transparency in the oil sector
and end the Petrocaribe aid program, which they claim Venezuela can
no longer afford.
m
The mud also promised to oust Maduro within six months by pro
posing a recall referendum. The opposition has gathered almost ten
times the number of signatures required to hold a referendum, and
hi
recent polls show that around 75 percent of Venezuelans would vote
to remove Maduro from office. But the National Electoral Council,
which is controlled by Maduro allies, has delayed validating the signa
ha
tures, stoking fears that Maduro and his supporters will manage to
push the referendum off until next year. Under that scenario, a
successful recall would replace Maduro with his more moderate but
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still loyal vice president, Aristóbulo Istúriz, instead of requiring new
elections. (By law, when a president has less than two years left in
power, as Maduro will next year, the vice president takes over after a
successful recall referendum.)
Al
As the economic crisis has deepened and threatened Maduro’s grip

on power, the president has not seemed willing or able to take the
measures necessary to stem the decline in oil production. Maduro
od
relies heavily on a small group of advisers, but his inner circle is itself
divided, with some calling for a more pragmatic approach that would
boost foreign investment and others taking a harder, nationalist line.
The government has made some concessions: for example, agreeing
so
to give more control over oil project operations to some of its private
partners. But these changes have either stalled or not gone far enough.
Maduro is facing some internal pressure to step down. Many of his
fellow Chavistas blame him for failing to “carry on the revolution.” A
Ma
more competent and decisive Chavista leader could move forward

quickly with reforms to stabilize oil production that would not require
any legislative changes. But in order to encourage a significant
increase, a new leader would need to signal that he intended to improve
conditions for private investment, and this is unlikely to happen
unless an opposition led government takes over.
-

Maduro’s intransigence has a tragic quality to it, because Venezuela’s

economic predicament, although difficult, is not irreparable. A set of
relatively simple regulatory and macroeconomic reforms could stabi
lize production within two years. To incentivize private investment in
the energy sector, the government could allow oil and gas companies
access to a more competitive exchange rate. (The Venezuelan govern
ment fixes exchange rates for different sectors of the economy.) Ideally,
the government would allow companies access to a floating rate. But
even the semi floating dicom rate, which is currently at about 600
m
-
bolivars per dollar, would significantly help energy companies.
Venezuela charges energy companies one of the highest tax rates in
the world: royalties of up to 33.3 percent of the oil they extract, plus an
hi
additional income tax of 50 percent of net profits and a host of other
taxes. Altogether, the state winds up taking about 90 percent of the
total revenues the firms collect from their oil and gas operations. The
ha
state could lower these taxes and fees so that the government’s take
would be closer to that in most energy producing countries, where the
-
state typically collects between 50 and 80 percent of energy revenues.
iT
A new administration could also opt to give more financial and
operational control to pdvsa’s private partners in joint ventures, for
example, by allowing them to choose which suppliers to use. Addition

ally, the government could establish independently managed escrow
Al
accounts for oil revenues to ensure that joint venture partners receive
their rightful share of earnings. Authorities have already taken this
step for Chevron and a few other companies, but they could extend it
od
to other private partners. The government could also gradually raise

domestic gasoline prices to shore up pdvsa’s finances. Even Maduro
has shown some willingness to do this: in February, his administration
announced the first gasoline price increase in 17 years, from around
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one cent per liter to around ten cents per liter for lower grade fuel and
-
60 cents per liter for premium fuel. The move has saved pdvsa about
$800 million, but that represents only a small fraction of the yearly
cost of maintaining the government’s massive fuel subsidies. Mean
Ma
while, domestic oil consumption remains very high, diverting oil that
could be sold at much higher prices on international markets.
CLEANING UP MADURO’S MESS

Many members of Maduro’s party understand that moderate adjustments
would stabilize the oil sector. But none of them would openly advocate

Lisa Viscidi
a complete reversal of the Chavista approach to socialist economic

management. In contrast, the opposition has stated its intention to
move toward more market friendly policies. Influential academics
-
and experts close to the mud have proposed more far reaching, longer
-
-
term reforms of the oil sector, and the opposition would hope to
implement such reforms if it succeeds in ousting Maduro.
Looking past the immediate crisis, Venezuela will ultimately need
to transform its energy sector if it hopes to avoid a repeat of the current
disaster. The necessary reforms include creating an independent
m
regulator to oversee the sector and separating the oil ministry and
pdvsa: currently, the head of pdvsa negotiates directly with foreign
companies rather than structuring competitive bid rounds run by an
hi
oil regulator, which is standard industry practice and ensures trans
parency and stability for investors. Venezuela also must stop relying
on pdvsa’s revenues to fund massive social programs. Although the
ha
government can continue to use oil revenues for social spending, as all
oil producing countries do, pdvsa would operate more efficiently and
-
profitably if it focused solely on its oil business.
iT
Broader economic reforms would also include gradually dismantling
foreign exchange controls and eliminating the system of multiple foreign
exchange rates. Eventually, the government will have to drastically
reduce fuel subsidies, or even eliminate them altogether. Finally, pdvsa
Al
will have to improve its human capital, or it will face a critical shortage
of skilled labor and management.
With the right reforms, oil production could return to pre crisis
-
od
levels within five years, allowing Venezuela to begin importing enough

basic goods again and ameliorating the country’s intense shortages.
In the long term, the Venezuelan government should look to diversify
its economy to end its unhealthy reliance on oil and gas. However,
so
none of that will be possible without dramatic political change in the

short term. As long as Maduro or his allies remain in office, there will
be little progress; someone else will have to step up.∂
Ma

ESSAYS
Voters have risen up
against what they see as a
corrupt, self-dealing
Establishment, turning to
radical outsiders in the
m
hopes of a purifying cleanse.
—Francis Fukuyama
hi
ha
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Al
od
American Political Decay or Renewal? The Future of U.S.-Saudi Relations

Francis Fukuyama 58 F. Gregory Gause III 114
The Case for Offshore Balancing The Truth About American

so
John J. Mearsheimer and Stephen M. Walt 70 Unemployment

Jason Furman 127
The Truth About Trade
Douglas A. Irwin 84 Human Work in the Robotic Future
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Andrew McAfee and Erik Brynjolfsson 139

NATO’s Next Act
Philip M. Breedlove 96 Democracy in Decline
JIM YOUNG / REUTERS
Larry Diamond 151

Germany’s New Global Role
Frank-Walter Steinmeier 106 The Innovative Finance Revolution
Georgia Levenson Keohane and
Saadia Madsbjerg 161
American Political Decay

or Renewal?
The Meaning of the 2016 Election
m
Francis Fukuyama
T
hi
wo years ago, I argued in these pages that America was
suffering from political decay. The country’s constitutional
system of checks and balances, combined with partisan
ha
polarization and the rise of well-financed interest groups, had com-
bined to yield what I labeled “vetocracy,” a situation in which it was
easier to stop government from doing things than it was to use govern-
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ment to promote the common good. Recurrent budgetary crises,
stagnating bureaucracy, and a lack of policy innovation were the hall-
marks of a political system in disarray.
On the surface, the 2016 presidential election seems to be bearing
Al
out this analysis. The once proud Republican Party lost control of its
nominating process to Donald Trump’s hostile takeover and is riven
with deep internal contradictions. On the Democratic side, mean-
od
while, the ultra-insider Hillary Clinton has faced surprisingly strong

competition from Bernie Sanders, a 74-year-old self-proclaimed demo-
cratic socialist. Whatever the issue—from immigration to financial
reform to trade to stagnating incomes—large numbers of voters on
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both sides of the spectrum have risen up against what they see as a
corrupt, self-dealing Establishment, turning to radical outsiders in
the hopes of a purifying cleanse.
In fact, however, the turbulent campaign has shown that American
Ma
democracy is in some ways in better working order than expected.

Whatever one might think of their choices, voters have flocked to the
polls in state after state and wrested control of the political narrative
FRANCIS FUKUYAMA is a Senior Fellow at the Freeman Spogli Institute for International
Studies and Director of FSI’s Center on Democracy, Development, and the Rule of Law at
Stanford University. Follow him on Twitter @FukuyamaFrancis.
American Political Decay or Renewal?
from organized interest groups and oligarchs. Jeb Bush, the son and
brother of presidents who once seemed the inevitable Republican
choice, ignominiously withdrew from the race in February after
having blown through more than $130 million (together with his
super PAC). Sanders, meanwhile, limiting himself to small donations
and pledging to disempower the financial elite that supports his
opponent, has raised even more than Bush and nipped at Clinton’s
heels throughout.
The real story of this election is that after several decades, American
m
democracy is finally responding to the rise of inequality and the
economic stagnation experienced by most of the population. Social
class is now back at the heart of American politics, trumping other
hi
cleavages—race, ethnicity, gender, sexual orientation, geography—that
had dominated discussion in recent elections.
The gap between the fortunes of elites and those of the rest of the
ha
public has been growing for two generations, but only now is it
coming to dominate national politics. What really needs to be explained
is not why populists have been able to make such gains this cycle but
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why it took them so long to do so. Moreover, although it is good to
know that the U.S. political system is less ossified and less in thrall
to monied elites than many assumed, the nostrums being hawked by
the populist crusaders are nearly entirely unhelpful, and if embraced,
Al
they would stifle growth, exacerbate malaise, and make the situation
worse rather than better. So now that the elites have been shocked
out of their smug complacency, the time has come for them to devise
od
more workable solutions to the problems they can no longer deny

or ignore.
THE SOCIAL BASIS OF POPULISM

so
In recent years, it has become ever harder to deny that incomes have
been stagnating for most U.S. citizens even as elites have done better
than ever, generating rising inequality throughout American society.
Certain basic facts, such as the enormously increased share of
Ma
national wealth taken by the top one percent, and indeed the top
0.1 percent, are increasingly uncontested. What is new this political
cycle is that attention has started to turn from the excesses of the
oligarchy to the straitened circumstances of those left behind.
Two recent books—Charles Murray’s Coming Apart and Robert
Putnam’s Our Kids—lay out the new social reality in painful detail.
July/August 2016 59
Francis Fukuyama
Murray and Putnam are at opposite ends of the political spectrum,

one a libertarian conservative and the other a mainstream liberal, yet
the data they report are virtually identical. Working-class incomes
have declined over the past generation, most dramatically for white
men with a high school education or less. For this group, Trump’s
slogan, “Make America Great Again!” has real meaning. But the
pathologies they suffer from go much deeper and are revealed in
data on crime, drug use, and single-parent families.
Back in the 1980s, there was a broad national conversation about
m
the emergence of an African American underclass—that is, a mass of
underemployed and underskilled people whose poverty seemed self-
replicating because it led to broken families that were unable to
hi
transmit the kinds of social norms and behaviors required to compete
in the job market. Today, the white working class is in virtually the
same position as the black underclass was back then.
ha
During the run-up to the primary in New Hampshire—a state
that is about as white and rural as any in the country—many Americans
were likely surprised to learn that voters’ most important concern
iT
there was heroin addiction. In fact, opioid and methamphetamine
addiction have become as epidemic in rural white communities in
states such as Indiana and Kentucky as crack was in the inner city a
generation ago. A recent paper by the economists Anne Case and
Al
Angus Deaton showed that the death rates for white non-Hispanic
middle-aged men in the United States rose between 1999 and 2013,
even as they fell for virtually every other population group and in
od
every other rich country. The causes of this increase appear to have
been suicide, drugs, and alcohol—nearly half a million excess deaths
over what would have been expected. And crime rates for this group
have skyrocketed as well.
so
This increasingly bleak reality, however, scarcely registered with

American elites—not least because over the same period, they
themselves were doing quite well. People with at least a college
education have seen their fortunes rise over the decades. Rates of
Ma
divorce and single-parent families have decreased among this group,

neighborhood crime has fallen steadily, cities have been reclaimed
for young urbanites, and technologies such as the Internet and social
media have powered social trust and new forms of community en-
gagement. For this group, helicopter parents are a bigger problem
than latchkey children.
m
hi
ha
iT
Al
THE FAILURE OF POLITICS

Given the enormity of the social shift that has occurred, the real
question is not why the United States has populism in 2016 but why
od
the explosion did not occur much earlier. And here there has indeed
been a problem of representation in American institutions: neither
political party has served the declining group well.
In recent decades, the Republican Party has been an uneasy coalition
so
of business elites and social conservatives, the former providing

money, and the latter primary votes. The business elites, represented
by the editorial page of The Wall Street Journal, have been principled
advocates of economic liberalism: free markets, free trade, and open
Ma
immigration. It was Republicans who provided the votes to pass

trade legislation such as the North American Free Trade Agreement
and the recent trade promotion authority (more commonly known as
“fast track”). Their business backers clearly benefit from both the
import of foreign labor, skilled and unskilled, and a global trading
system that allows them to export and invest around the globe. Re-
July/August 2016 61
Francis Fukuyama
publicans pushed for the dismantling of the Depression-era system

of bank regulation that laid the groundwork for the subprime melt-
down and the resulting financial crisis of 2008. And they have been
ideologically committed to cutting taxes on wealthy Americans, un-
dermining the power of labor unions, and reducing social services
that stood to benefit the less well-off.
This agenda ran directly counter to the interests of the working
class. The causes of the working class’ decline are complex, having to
do as much with technological change as with factors touched by
m
public policy. And yet it is undeniable that the pro-market shift
promoted by Republican elites in recent decades has exerted
downward pressure on working-class
hi
incomes, both by exposing workers to
American democracy is more ruthless technological and global
finally responding to the ha competition and by paring back various
economic stagnation of protections and social benefits left
most of the population. over from the New Deal. (Countries
such as Germany and the Netherlands,
iT
which have done more to protect their
workers, have not seen comparable increases in inequality.) It should
not be surprising, therefore, that the biggest and most emotional
fight this year is the one taking place within the Republican Party, as
Al
its working-class base expresses a clear preference for more nationalist

economic policies.
The Democrats, for their part, have traditionally seen themselves
od
as champions of the common man and can still count on a shrinking

base of trade union members to help get out the vote. But they have
also failed this constituency. Since the rise of Bill Clinton’s “third
way,” elites in the Democratic Party have embraced the post-Reagan
so
consensus on the benefits of free trade and immigration. They were

complicit in the dismantling of bank regulation in the 1990s and have
tried to buy off, rather than support, the labor movement over its
objections to trade agreements.
Ma
But the more important problem with the Democrats is that the
party has embraced identity politics as its core value. The party has
won recent elections by mobilizing a coalition of population segments:
women, African Americans, young urbanites, gays, and environ-
mentalists. The one group it has completely lost touch with is the
same white working class that was the bedrock of Franklin Roosevelt’s
New Deal coalition. The white working class began voting Republi-
can in the 1980s over cultural issues such as patriotism, gun rights,
abortion, and religion. Clinton won back enough of them in the
1990s to be elected twice (with pluralities each time), but since
then, they have been a more reliable constituency for the Republican
Party, despite the fact that elite Republican economic policies are
at odds with their economic interests. This is why, in a Quinnipiac
University survey released in April, 80 percent of Trump’s sup-
porters polled said they felt that “the government has gone too far
m
in assisting minority groups,” and 85 percent agreed that “America
has lost its identity.”
The Democrats’ fixation with identity explains one of the great
hi
mysteries of contemporary American politics—why rural working-
class whites, particularly in southern states with limited social ser-
vices, have flocked to the banner of the Republicans even though they
ha
have been among the greatest beneficiaries of Republican-opposed
programs, such as Barack Obama’s Affordable Care Act. One reason
is their perception that Obamacare was designed to benefit people
iT
other than themselves—in part because Democrats have lost their
ability to speak to such voters (in contrast to in the 1930s, when
southern rural whites were key supporters of Democratic Party wel-
fare state initiatives such as the Tennessee Valley Authority).
Al
THE END OF AN ERA?

Trump’s policy pronouncements are confused and contradictory,
od
coming as they do from a narcissistic media manipulator with no

clear underlying ideology. But the common theme that has made him
attractive to so many Republican primary voters is one that he shares
to some extent with Sanders: an economic nationalist agenda de-
so
signed to protect and restore the jobs of American workers. This

explains both his opposition to immigration—not just illegal immi-
gration but also skilled workers coming in on H1B visas—and his
condemnation of American companies that move plants abroad to
Ma
save on labor costs. He has criticized not only China for its currency
manipulation but also friendly countries such as Japan and South
Korea for undermining the United States’ manufacturing base. And
of course he is dead set against further trade liberalization, such as
the Trans-Pacific Partnership in Asia and the Transatlantic Trade and
Investment Partnership with Europe.
July/August 2016 63
Francis Fukuyama
All of this sounds like total heresy to anyone who has taken a basic
college-level course in trade theory, where models from the Ricardian
one of comparative advantage to the Heckscher-Ohlin factor endow-
ment theory tell you that free trade is a
win-win for trading partners, increasing
The American political all countries’ aggregate incomes. And
system will not be fixed indeed, global output has exploded over
unless popular anger is the past two generations, as world trade
linked to good policies. and investment have been liberalized
m
under the broad framework of the Gen-
eral Agreement on Tariffs and Trade and
then the World Trade Organization, increasing fourfold between 1970
hi
and 2008. Globalization has been responsible for lifting hundreds of
millions of people out of poverty in countries such as China and India
and has generated unfathomable amounts of wealth in the United States.
ha
Yet this consensus on the benefits of economic liberalization, shared
by elites in both political parties, is not immune from criticism. Built
into all the existing trade models is the conclusion that trade
iT
liberalization, while boosting aggregate income, will have potentially
adverse distributional consequences—it will, in other words, create
winners and losers. One recent study estimated that import competition
from China was responsible for the loss of between two million and
Al
2.4 million U.S. jobs from 1999 to 2011.

The standard response from trade economists is to argue that the
gains from trade are sufficient to more than adequately compensate
od
the losers, ideally through job training that will equip them with new
skills. And thus, every major piece of trade legislation has been
accompanied by a host of worker-retraining measures, as well as a
phasing in of new rules to allow workers time to adjust.
so
In practice, however, this adjustment has often failed to materialize.

The U.S. government has run 47 uncoordinated federal job-retraining
programs (since consolidated into about a dozen), in addition to
countless state-level ones. These have collectively failed to move
Ma
large numbers of workers into higher-skilled positions. This is partly

a failure of implementation, but it is also a failure of concept: it is not
clear what kind of training can transform a 55-year-old assembly-line
worker into a computer programmer or a Web designer. Nor does
standard trade theory take account of the political economy of
investment. Capital has always had collective-action advantages over
labor, because it is more concentrated and easier to coordinate. This

was one of the early arguments in favor of trade unionism, which has
been severely eroded in the United States since the 1980s. And capi-
tal’s advantages only increase with the high degree of capital mobility
that has arisen in today’s globalized world. Labor has become more
mobile as well, but it is far more constrained. The bargaining advan-
tages of unions are quickly undermined by employers who can
threaten to relocate not just to a right-to-work state but also to a
completely different country.
m
Labor-cost differentials between the United States and many de-
veloping countries are so great that it is hard to imagine what sorts
of policies could ultimately have protected the mass of low-skilled
hi
jobs. Perhaps not even Trump believes that shoes and shirts should
still be made in America. Every industrialized nation in the world,
including those that are much more committed to protecting their
ha
manufacturing bases, such as Germany and Japan, has seen a decline
in the relative share of manufacturing over the past few decades. And
even China itself is beginning to lose jobs to automation and to
iT
lower-cost producers in places such as Bangladesh and Vietnam.
And yet the experience of a country such as Germany suggests that
the path followed by the United States was not inevitable. German
business elites never sought to undermine the power of their trade
Al
unions; to this day, wages are set across the German economy through
government-sponsored negotiations between employers and unions.
As a result, German labor costs are about 25 percent higher than their
od
American counterparts. And yet Germany remains the third-largest

exporter in the world, and the share of manufacturing employment in
Germany, although declining, has remained consistently higher than
that in the United States. Unlike the French and the Italians, the
so
Germans have not sought to protect existing jobs through a thicket of

labor laws; under Chancellor Gerhard Schröder’s Agenda 2010 reforms,
it became easier to lay off redundant workers. And yet the country
has invested heavily in improving working-class skills through its
Ma
apprenticeship program and other active labor-market interventions.

The Germans also sought to protect more of the country’s supply
chain from endless outsourcing, connecting its fabled Mittelstand,
that is, its small and medium-size businesses, to its large employers.
In the United States, in contrast, economists and public intellectuals
portrayed the shift from a manufacturing economy to a postindustrial
July/August 2016 65
Francis Fukuyama
service-based one as inevitable, even something to be welcomed and

hastened. Like the buggy whip makers of old, supposedly, manufac-
turing workers would retool themselves, becoming knowledge work-
ers in a flexible, outsourced, part-time new economy, where their new
skills would earn them higher wages. Despite occasional gestures,
however, neither political party took the retooling agenda seriously,
as the centerpiece of a necessary adjustment process, nor did they
invest in social programs designed to cushion the working class as it
tried to adjust. And so white workers, like African Americans in ear-
m
lier decades, were on their own.
The first decade of the century could have played out very differently.
The Chinese today are not manipulating their currency to boost exports;
hi
if anything, they have been trying recently to support the value of the
yuan in order to prevent capital flight. But they certainly did manipulate
their currency in the years following the Asian financial crisis of 1997–98
ha
and the dot-com crash of 2000–2001. It would have been entirely fea-
sible for Washington to have threatened, or actually imposed, tariffs
against Chinese imports back then in response. This would have en-
iT
tailed risks: consumer prices would have increased, and interest rates
would have risen had the Chinese responded by not buying U.S. debt.
Yet this possibility was not taken seriously by U.S. elites, for fear that it
would start a slide down the slippery slope of protectionism. As a re-
Al
sult, more than two million jobs were lost in the ensuing decade.
A WAY FORWARD?
od
Trump may have fastened onto something real in American society,

but he is a singularly inappropriate instrument for taking advantage
of the reform moment that this electoral upheaval represents. You
cannot unwind 50 years of trade liberalization by imposing unilateral
so
tariffs or filing criminal indictments against American multinationals

that outsource jobs. At this point, the United States’ economy is so
interconnected with that of the rest of the world that the dangers of
a global retreat into protectionism are all too real. Trump’s proposals
Ma
to abolish Obamacare would throw millions of working-class Americans

off health insurance, and his proposed tax cuts would add more than
$10 trillion to the deficit over the next decade while benefiting only
the rich. The country does need strong leadership, but by an
institutional reformer who can make government truly effective, not
by a personalistic demagogue who is willing to flout established rules.
Nonetheless, if elites profess to be genuinely concerned about

inequality and the declining working class, they need to rethink some
of their long-standing positions on immigration, trade, and investment.
The intellectual challenge is to see whether it is possible to back away
from globalization without cratering both the national and the global
economy, with the goal of trading a little aggregate national income
for greater domestic income equality.
Clearly, some changes are more workable than others, with immigra-
tion being at the top of the theoretically doable list. Comprehensive
m
immigration reform has been in the works for more than a decade
now and has failed for two reasons. First, opponents are opposed to
“amnesty,” that is, giving existing undocumented immigrants a path
hi
to citizenship. But the second reason has to do with enforcement:
critics point out that existing laws are not enforced and that earlier
promises to enforce them have not been kept.
ha
The idea that the government could deport 11 million people from
the country, many of them with children who are U.S. citizens, seems
highly implausible. So some form of amnesty appears inevitable.
iT
Immigration critics are right, however, that the United States has been
very lax in enforcement. Doing this properly would require not a
wall but something like a national biometric ID card, heavy investment
in courts and police, and, above all, the political will to sanction
Al
employers who violate the rules. Moving to a much more restrictive

policy on legal immigration, in which some form of amnesty for existing
immigrants is exchanged for genuine efforts to enforce new and
od
tougher rules, would not be economically disastrous. When the country

did this before, in 1924, the way was paved, in certain respects, for
the golden age of U.S. equality in the 1940s and 1950s.
It is harder to see a way forward on trade and investment, other than
so
not ratifying existing deals such as the Trans-Pacific Partnership—which

would not be extremely risky. The world is increasingly populated
with economic nationalists, and a course reversal by Washington—which
has built and sustained the current liberal international system—
Ma
could well trigger a tidal wave of reprisals. Perhaps one place to start
is to figure out a way to persuade U.S. multinationals, which currently
are sitting on more than $2 trillion in cash outside the United States, to
bring their money home for domestic investment. U.S. corporate tax
rates are among the highest in the Organization for Economic Cooperation
and Development; reducing them sharply while eliminating the myriad
July/August 2016 67
Francis Fukuyama
tax subsidies and exemptions that corporations have negotiated for

themselves is a policy that could find support in both parties.
Another initiative would be a massive campaign to rebuild
American infrastructure. The American Society of Civil Engineers
estimates that it would take $3.6 trillion to adequately upgrade the
country’s infrastructure by 2020. The United States could borrow
$1 trillion while interest rates are low and use it to fund a massive
infrastructure initiative that would create huge numbers of jobs while
raising U.S. productivity in the long run. Hillary Clinton has pro-
m
posed spending $275 billion, but that number is too modest.
But attempts to accomplish either goal would bump into the more
routine dysfunctions of the American political system, where vetocracy
hi
prevents either tax reform or infrastructure investment. The American
system makes it too easy for well-organized interest groups to block
legislation and to “capture” new initiatives for their own purposes. So
ha
fixing the system to reduce veto points and streamline decision-
making would have to be part of the reform agenda itself. Necessary
changes should include eliminating both senatorial holds and the
iT
routine use of the filibuster and delegating budgeting and the
formulation of complex legislation to smaller, more expert groups
that can present coherent packages to Congress for up-or-down votes.
This is why the unexpected emergence of Trump and Sanders may
Al
signal a big opportunity. For all his faults, Trump has broken with the
Republican orthodoxy that has prevailed since Ronald Reagan, a
low-tax, small-safety-net orthodoxy that benefits corporations much
od
more than their workers. Sanders similarly has mobilized the back-
lash from the left that has been so conspicuously missing since 2008.
“Populism” is the label that political elites attach to policies sup-
ported by ordinary citizens that they don’t like. There is of course no
so
reason why democratic voters should always choose wisely, particu-

larly in an age when globalization makes policy choices so complex.
But elites don’t always choose correctly either, and their dismissal of
the popular choice often masks the nakedness of their own positions.
Ma
Popular mobilizations are neither inherently bad nor inherently

good; they can do great things, as during the Progressive era and the
New Deal, but also terrible ones, as in Europe during the 1930s. The
American political system has in fact suffered from substantial decay,
and it will not be fixed unless popular anger is linked to wise leader-
ship and good policies. It is still not too late for this to emerge.∂
The Case for Offshore

Balancing
A Superior U.S. Grand Strategy
m
John J. Mearsheimer and Stephen M. Walt
F
hi
or the first time in recent memory, large numbers of Americans
are openly questioning their country’s grand strategy. An April
2016 Pew poll found that 57 percent of Americans agree that
ha
the United States should “deal with its own problems and let others
deal with theirs the best they can.” On the campaign trail, both the
Democrat Bernie Sanders and the Republican Donald Trump found
iT
receptive audiences whenever they questioned the United States’
penchant for promoting democracy, subsidizing allies’ defense, and
intervening militarily—leaving only the likely Democratic nominee
Hillary Clinton to defend the status quo.
Al
Americans’ distaste for the prevailing grand strategy should come

as no surprise, given its abysmal record over the past quarter century.
In Asia, India, Pakistan, and North Korea are expanding their nuclear
od
arsenals, and China is challenging the status quo in regional waters. In

Europe, Russia has annexed Crimea, and U.S. relations with Moscow
have sunk to new lows since the Cold War. U.S. forces are still fight-
ing in Afghanistan and Iraq, with no victory in sight. Despite losing
so
most of its original leaders, al Qaeda has metastasized across the re-
gion. The Arab world has fallen into turmoil—in good part due to the
United States’ decisions to effect regime change in Iraq and Libya and
its modest efforts to do the same in Syria—and the Islamic State, or
Ma
ISIS, has emerged out of the chaos. Repeated U.S. attempts to broker
Israeli-Palestinian peace have failed, leaving a two-state solution further
JOHN J. MEARSHEIMER is R. Wendell Harrison Distinguished Service Professor of
Political Science at the University of Chicago.
STEPHEN M. WALT is Robert and Renée Belfer Professor of International Affairs at the
Harvard Kennedy School. Follow him on Twitter @StephenWalt.
away than ever. Meanwhile, democracy
has been in retreat worldwide, and the
United States’ use of torture, targeted
killings, and other morally dubious practices
has tarnished its image as a defender of human
rights and international law.
The United States does not bear sole responsibility for
all these costly debacles, but it has had a hand in most of them. The
setbacks are the natural consequence of the misguided grand strategy
m
of liberal hegemony that Democrats and Republicans have pursued
for years. This approach holds that the United States must use its
power not only to solve global problems but also to promote a world
hi
order based on international institutions, representative governments,
open markets, and respect for human rights. As “the indispensable
nation,” the logic goes, the United States has the right, responsibility,
ha
and wisdom to manage local politics almost everywhere. At its core,
liberal hegemony is a revisionist grand strategy: instead of calling on
the United States to merely uphold the balance of power in key regions,
iT
it commits American might to promoting democracy everywhere and
defending human rights whenever they are threatened.
There is a better way. By pursuing a strategy of “offshore
balancing,” Washington would forgo ambitious efforts to remake
Al
other societies and concentrate on what really matters: pre-

serving U.S. dominance in the Western Hemisphere
and countering potential hegemons in Europe,
od
Northeast Asia, and the Persian Gulf. Instead of

policing the world, the United States would
encourage other countries to take the lead in
checking rising powers, intervening
so
itself only when necessary. This does

Ma
July/August 2016 71
not mean abandoning the United States’ position as the world’s sole
superpower or retreating to “Fortress America.” Rather, by husbanding
U.S. strength, offshore balancing would preserve U.S. primacy far
into the future and safeguard liberty at home.
SETTING THE RIGHT GOALS

The United States is the luckiest great power in modern history. Other
leading states have had to live with threatening adversaries in their
own backyards—even the United Kingdom faced the prospect of an
m
invasion from across the English Channel on several occasions—but
for more than two centuries, the United States has not. Nor do distant
powers pose much of a threat, because two giant oceans are in the way.
hi
As Jean-Jules Jusserand, the French ambassador to the United States
from 1902 to 1924, once put it, “On the north, she has a weak neighbor;
on the south, another weak neighbor; on the east, fish, and the west,
ha
fish.” Furthermore, the United States boasts an abundance of land
and natural resources and a large and energetic population, which have
enabled it to develop the world’s biggest economy and most capable
iT
military. It also has thousands of nuclear weapons, which makes an
attack on the American homeland even less likely.
These geopolitical blessings give the United States enormous latitude
for error; indeed, only a country as secure as it would have the temerity
Al
to try to remake the world in its own image. But they also allow it to
remain powerful and secure without pursuing a costly and expansive
grand strategy. Offshore balancing would do just that. Its principal
od
concern would be to keep the United States as powerful as possible—

ideally, the dominant state on the planet. Above all, that means main-
taining hegemony in the Western Hemisphere.
Unlike isolationists, however, offshore balancers believe that there
so
are regions outside the Western Hemisphere that are worth expending
American blood and treasure to defend. Today, three other areas
matter to the United States: Europe, Northeast Asia, and the Persian
Gulf. The first two are key centers of industrial power and home to
Ma
the world’s other great powers, and the third produces roughly 30 percent
of the world’s oil.
In Europe and Northeast Asia, the chief concern is the rise of a
regional hegemon that would dominate its region, much as the United
States dominates the Western Hemisphere. Such a state would have
abundant economic clout, the ability to develop sophisticated weaponry,
The Case for Offshore Balancing
the potential to project power around the globe, and perhaps even the
wherewithal to outspend the United States in an arms race. Such a
state might even ally with countries in the Western Hemisphere and
interfere close to U.S. soil. Thus, the United States’ principal aim in
Europe and Northeast Asia should be to maintain the regional balance
of power so that the most powerful state in each region—for now,
Russia and China, respectively—remains too worried about its neighbors
to roam into the Western Hemisphere. In the Gulf, meanwhile, the
United States has an interest in blocking the rise of a hegemon that
m
could interfere with the flow of oil from that region, thereby damaging
the world economy and threatening U.S. prosperity.
Offshore balancing is a realist grand strategy, and its aims are limited.
hi
Promoting peace, although desirable, is not among them. This is not
to say that Washington should welcome conflict anywhere in the
world, or that it cannot use diplomatic or economic means to discourage
ha
war. But it should not commit U.S. military forces for that purpose
alone. Nor is it a goal of offshore balancing to halt genocides, such as
the one that befell Rwanda in 1994. Adopting this strategy would not
iT
preclude such operations, however, provided the need is clear, the
mission is feasible, and U.S. leaders are confident that intervention
will not make matters worse.
Al
HOW WOULD IT WORK?

Under offshore balancing, the United States would calibrate its military
posture according to the distribution of power in the three key regions.
od
If there is no potential hegemon in sight in Europe, Northeast Asia,

or the Gulf, then there is no reason to deploy ground or air forces
there and little need for a large military establishment at home. And
because it takes many years for any country to acquire the capacity to
so
dominate its region, Washington would see it coming and have time
to respond.
In that event, the United States should turn to regional forces as
the first line of defense, letting them uphold the balance of power in
Ma
their own neighborhood. Although Washington could provide assistance

to allies and pledge to support them if they were in danger of being
conquered, it should refrain from deploying large numbers of U.S.
forces abroad. It may occasionally make sense to keep certain assets
overseas, such as small military contingents, intelligence-gathering
facilities, or prepositioned equipment, but in general, Washington
July/August 2016 73
should pass the buck to regional powers, as they have a far greater
interest in preventing any state from dominating them.
If those powers cannot contain a potential hegemon on their own,
however, the United States must help get the job done, deploying
enough firepower to the region to shift the balance in its favor.
Sometimes, that may mean sending in forces before war breaks out.
During the Cold War, for example, the
United States kept large numbers of
By husbanding U.S. ground and air forces in Europe out of
m
strength, an offshore- the belief that Western European
balancing strategy would countries could not contain the Soviet
preserve U.S. primacy far Union on their own. At other times, the
hi
United States might wait to intervene
into the future. after a war starts, if one side seems
ha likely to emerge as a regional hegemon.
Such was the case during both world wars: the United States came in
only after Germany seemed likely to dominate Europe.
In essence, the aim is to remain offshore as long as possible, while
iT
recognizing that it is sometimes necessary to come onshore. If that
happens, however, the United States should make its allies do as
much of the heavy lifting as possible and remove its own forces as
soon as it can.
Al
Offshore balancing has many virtues. By limiting the areas the

U.S. military was committed to defending and forcing other states
to pull their own weight, it would reduce the resources Washington
od
must devote to defense, allow for greater investment and consump-

tion at home, and put fewer American lives in harm’s way. Today,
allies routinely free-ride on American protection, a problem that
has only grown since the Cold War ended. Within NATO, for
so
example, the United States accounts for 46 percent of the alliance’s

aggregate GDP yet contributes about 75 percent of its military
spending. As the political scientist Barry Posen has quipped, “This
is welfare for the rich.”
Ma
Offshore balancing would also reduce the risk of terrorism. Liberal

hegemony commits the United States to spreading democracy in
unfamiliar places, which sometimes requires military occupation and
always involves interfering with local political arrangements. Such
efforts invariably foster nationalist resentment, and because the
opponents are too weak to confront the United States directly, they
sometimes turn to terrorism. (It is worth remembering that Osama

bin Laden was motivated in good part by the presence of U.S. troops
in his homeland of Saudi Arabia.) In addition to inspiring terrorists,
liberal hegemony facilitates their operations: using regime change to
spread American values undermines local institutions and creates
ungoverned spaces where violent extremists can flourish.
Offshore balancing would alleviate this problem by eschewing
social engineering and minimizing the United States’ military foot-
print. U.S. troops would be stationed on foreign soil only when a
m
country was in a vital region and threatened by a would-be hegemon.
In that case, the potential victim would view the United States as a
savior rather than an occupier. And once the threat had been dealt
hi
with, U.S. military forces could go back over the horizon and not stay
behind to meddle in local politics. By respecting the sovereignty of
other states, offshore balancing would be less likely to foster anti-
ha
American terrorism.
A REASSURING HISTORY
iT
Offshore balancing may seem like a radical strategy today, but it
provided the guiding logic of U.S. foreign policy for many decades
and served the country well. During the nineteenth century, the
United States was preoccupied with expanding across North America,
Al
building a powerful state, and establishing hegemony in the Western

Hemisphere. After it completed these tasks at the end of the century,
it soon became interested in preserving the balance of power in
od
Europe and Northeast Asia. Nonetheless, it let the great powers in

those regions check one another, intervening militarily only when the
balance of power broke down, as during both world wars.
During the Cold War, the United States had no choice but to
so
go onshore in Europe and Northeast Asia, as its allies in those

regions could not contain the Soviet Union by themselves. So
Washington forged alliances and stationed military forces in both
regions, and it fought the Korean War to contain Soviet influence
Ma
in Northeast Asia.
In the Persian Gulf, however, the United States stayed offshore,
letting the United Kingdom take the lead in preventing any state from
dominating that oil-rich region. After the British announced their
withdrawal from the Gulf in 1968, the United States turned to the
shah of Iran and the Saudi monarchy to do the job. When the shah
July/August 2016 75
fell in 1979, the Carter administration began building the Rapid

Deployment Force, an offshore military capability designed to prevent
Iran or the Soviet Union from dominating the region. The Reagan
administration aided Iraq during that country’s 1980–88 war with
Iran for similar reasons. The U.S. military stayed offshore until 1990,
when Saddam Hussein’s seizure of Kuwait threatened to enhance
Iraq’s power and place Saudi Arabia
and other Gulf oil producers at risk.
The aim is to remain To restore the regional balance of
m
offshore as long as possible, power, the George H. W. Bush admin-
while recognizing that it is istration sent an expeditionary force to
sometimes necessary to liberate Kuwait and smash Saddam’s
hi
military machine.
come onshore. For nearly a century, in short, offshore
ha balancing prevented the emergence of
dangerous regional hegemons and preserved a global balance of power
that enhanced American security. Tellingly, when U.S. policymakers
deviated from that strategy—as they did in Vietnam, where the United
iT
States had no vital interests—the result was a costly failure.
Events since the end of the Cold War teach the same lesson. In
Europe, once the Soviet Union collapsed, the region no longer had a
dominant power. The United States should have steadily reduced its
Al
military presence, cultivated amicable relations with Russia, and

turned European security over to the Europeans. Instead, it expanded
NATO and ignored Russian interests, helping spark the conflict over
od
Ukraine and driving Moscow closer to China.

In the Middle East, likewise, the United States should have moved
back offshore after the Gulf War and let Iran and Iraq balance each
other. Instead, the Clinton administration adopted the policy of “dual
so
containment,” which required keeping ground and air forces in Saudi

Arabia to check Iran and Iraq simultaneously. The George W. Bush
administration then adopted an even more ambitious strategy, dubbed
“regional transformation,” which produced costly failures in Afghani-
Ma
stan and Iraq. The Obama administration repeated the error when it
helped topple Muammar al-Qaddafi in Libya and when it exacerbated
the chaos in Syria by insisting that Bashar al-Assad “must go” and
backing some of his opponents. Abandoning offshore balancing after
the Cold War has been a recipe for failure.
HEGEMONY’S HOLLOW HOPES

Defenders of liberal hegemony marshal a number of unpersuasive
arguments to make their case. One familiar claim is that only vigorous
U.S. leadership can keep order around the globe. But global leader-
ship is not an end in itself; it is desirable only insofar as it benefits the
United States directly.
One might further argue that U.S. leadership is necessary to over-
come the collective-action problem of local actors failing to balance
against a potential hegemon. Offshore balancing recognizes this danger,
m
however, and calls for Washington to step in if needed. Nor does it
prohibit Washington from giving friendly states in the key regions
advice or material aid.
hi
Other defenders of liberal hegemony argue that U.S. leadership is
necessary to deal with new, transnational threats that arise from failed
states, terrorism, criminal networks, refugee flows, and the like. Not
ha
only do the Atlantic and Pacific Oceans offer inadequate protection
against these dangers, they claim, but modern military technology
also makes it easier for the United States to project power around the
iT
world and address them. Today’s “global village,” in short, is more dan-
gerous yet easier to manage.
This view exaggerates these threats and overstates Washington’s
ability to eliminate them. Crime, terrorism, and similar problems can
Al
be a nuisance, but they are hardly existential threats and rarely lend
themselves to military solutions. Indeed, constant interference in the
affairs of other states—and especially repeated military interventions—
od
generates local resentment and fosters corruption, thereby making

these transnational dangers worse. The long-term solution to the
problems can only be competent local governance, not heavy-handed
U.S. efforts to police the world.
so
Nor is policing the world as cheap as defenders of liberal hegemony

contend, either in dollars spent or in lives lost. The wars in Afghani-
stan and Iraq cost between $4 trillion and $6 trillion and killed nearly
7,000 U.S. soldiers and wounded more than 50,000. Veterans of these
Ma
conflicts exhibit high rates of depression and suicide, yet the United
States has little to show for their sacrifices.
Defenders of the status quo also fear that offshore balancing would
allow other states to replace the United States at the pinnacle of global
power. On the contrary, the strategy would prolong the country’s domi-
nance by refocusing its efforts on core goals. Unlike liberal hegemony,
July/August 2016 77
offshore balancing avoids squandering resources on costly and

counterproductive crusades, which would allow the government to
invest more in the long-term ingredients of power and prosperity:
education, infrastructure, and research and development. Remember,
the United States became a great power by staying out of foreign wars
and building a world-class economy, which is the same strategy China
has pursued over the past three decades. Meanwhile, the United States
has wasted trillions of dollars and put its long-term primacy at risk.
Another argument holds that the U.S. military must garrison the
m
world to keep the peace and preserve an open world economy.
Retrenchment, the logic goes, would renew great-power competition,
invite ruinous economic rivalries, and eventually spark a major war
hi
from which the United States could not remain aloof. Better to keep
playing global policeman than risk a repeat of the 1930s.
Such fears are unconvincing. For starters, this argument assumes
ha
that deeper U.S. engagement in Europe would have prevented World
War II, a claim hard to square with
Adolf Hitler’s unshakable desire for
Offshore balancing may
iT
war. Regional conflicts will sometimes
seem like a radical strategy occur no matter what Washington does,
today, but it provided the but it need not get involved unless vital
guiding logic of U.S. foreign U.S. interests are at stake. Indeed, the
Al
United States has sometimes stayed

policy for many decades. out of regional conflicts—such as the
Russo-Japanese War, the Iran-Iraq
od
War, and the current war in Ukraine—belying the claim that it

inevitably gets dragged in. And if the country is forced to fight another
great power, better to arrive late and let other countries bear the brunt
of the costs. As the last major power to enter both world wars, the
so
United States emerged stronger from each for having waited.

Furthermore, recent history casts doubt on the claim that U.S.
leadership preserves peace. Over the past 25 years, Washington has
caused or supported several wars in the Middle East and fueled minor
Ma
conflicts elsewhere. If liberal hegemony is supposed to enhance global

stability, it has done a poor job.
Nor has the strategy produced much in the way of economic
benefits. Given its protected position in the Western Hemisphere, the
United States is free to trade and invest wherever profitable opportu-
nities exist. Because all countries have a shared interest in such activity,
Washington does not need to play global policeman in order to remain

economically engaged with others. In fact, the U.S. economy would
be in better shape today if the government were not spending so much
money trying to run the world.
Proponents of liberal hegemony also claim that the United States
must remain committed all over the world to prevent nuclear prolif-
eration. If it reduces its role in key regions or withdraws entirely, the
argument runs, countries accustomed to U.S. protection will have no
choice but to protect themselves by obtaining nuclear weapons.
m
No grand strategy is likely to prove wholly successful at preventing
proliferation, but offshore balancing would do a better job than liberal
hegemony. After all, that strategy failed to stop India and Pakistan
hi
from ramping up their nuclear capabilities, North Korea from becom-
ing the newest member of the nuclear club, and Iran from making
major progress with its nuclear program. Countries usually seek the
ha
bomb because they fear being attacked, and U.S. efforts at regime
change only heighten such concerns. By eschewing regime change
and reducing the United States’ military footprint, offshore balancing
iT
would give potential proliferators less reason to go nuclear.
Moreover, military action cannot prevent a determined country
from eventually obtaining nuclear weapons; it can only buy time.
The recent deal with Iran serves as a reminder that coordinated multi-
Al
lateral pressure and tough economic sanctions are a better way to

discourage proliferation than preventive war or regime change.
To be sure, if the United States did scale back its security guarantees,
od
a few vulnerable states might seek their own nuclear deterrents. That
outcome is not desirable, but all-out efforts to prevent it would almost
certainly be costly and probably be unsuccessful. Besides, the down-
sides may not be as grave as pessimists fear. Getting the bomb does
so
not transform weak countries into great powers or enable them to

blackmail rival states. Ten states have crossed the nuclear threshold
since 1945, and the world has not turned upside down. Nuclear prolif-
eration will remain a concern no matter what the United States does,
Ma
but offshore balancing provides the best strategy for dealing with it.
THE DEMOCRACY DELUSION

Other critics reject offshore balancing because they believe the United
States has a moral and strategic imperative to promote freedom and
protect human rights. As they see it, spreading democracy will largely
July/August 2016 79
rid the world of war and atrocities, keeping the United States secure
and alleviating suffering.
No one knows if a world composed solely of liberal democracies
would in fact prove peaceful, but spreading democracy at the point of
a gun rarely works, and fledgling democracies are especially prone to
conflict. Instead of promoting peace, the United States just ends up
fighting endless wars. Even worse, force-feeding liberal values abroad
can compromise them at home. The global war on terrorism and the
related effort to implant democracy in Afghanistan and Iraq have led
m
to tortured prisoners, targeted killings, and vast electronic surveillance
of U.S. citizens.
Some defenders of liberal hegemony hold that a subtler version
hi
of the strategy could avoid the sorts of disasters that occurred in
Afghanistan, Iraq, and Libya. They are deluding themselves. Democracy
promotion requires large-scale social engineering in foreign societies
ha
that Americans understand poorly, which helps explain why Washing-
ton’s efforts usually fail. Dismantling and replacing existing political
institutions inevitably creates winners and losers, and the latter often
iT
take up arms in opposition. When that happens, U.S. officials,
believing their country’s credibility is now at stake, are tempted to use
the United States’ awesome military might to fix the problem, thus
drawing the country into more conflicts.
Al
If the American people want to encourage the spread of liberal

democracy, the best way to do so is to set a good example. Other
countries will more likely emulate the United States if they see it as a
od
just, prosperous, and open society. And that means doing more to
improve conditions at home and less to manipulate politics abroad.
THE PROBLEMATIC PACIFIER

so
Then there are those who believe that Washington should reject liberal
hegemony but keep sizable U.S. forces in Europe, Northeast Asia, and
the Persian Gulf solely to prevent trouble from breaking out. This
low-cost insurance policy, they argue, would save lives and money in
Ma
the long run, because the United States wouldn’t have to ride to the
rescue after a conflict broke out. This approach—sometimes called
“selective engagement”—sounds appealing but would not work either.
For starters, it would likely revert back to liberal hegemony. Once
committed to preserving peace in key regions, U.S. leaders would be
sorely tempted to spread democracy, too, based on the widespread
belief that democracies don’t fight one another. This was the main
rationale for expanding NATO after the Cold War, with the stated goal
of “a Europe whole and free.” In the real world, the line separating
selective engagement from liberal hegemony is easily erased.
Advocates of selective engagement also assume that the mere
presence of U.S. forces in various regions will guarantee peace, and
so Americans need not worry about being dragged into distant conflicts.
In other words, extending security commitments far and wide poses
few risks, because they will never have to be honored.
m
But this assumption is overly optimistic: allies may act recklessly,
and the United States may provoke conflicts itself. Indeed, in Europe,
the American pacifier failed to prevent the Balkan wars of the 1990s,
hi
the Russo-Georgian war in 2008, and the current conflict in Ukraine.
In the Middle East, Washington is largely responsible for several recent
wars. And in the South China Sea, conflict is now a real possibility
ha
despite the U.S. Navy’s substantial regional role. Stationing U.S. forces
around the world does not automatically ensure peace.
Nor does selective engagement address the problem of buck-
iT
passing. Consider that the United Kingdom is now withdrawing its
army from continental Europe, at a time when NATO faces what it
considers a growing threat from Russia. Once again, Washington is
expected to deal with the problem, even though peace in Europe
Al
should matter far more to the region’s own powers.
THE STRATEGY IN ACTION

od
What would offshore balancing look like in today’s world? The good
news is that it is hard to foresee a serious challenge to American
hegemony in the Western Hemisphere, and for now, no potential
hegemon lurks in Europe or the Persian Gulf. Now for the bad news:
so
if China continues its impressive rise, it is likely to seek hegemony in

Asia. The United States should undertake a major effort to prevent it
from succeeding.
Ideally, Washington would rely on local powers to contain China,
Ma
but that strategy might not work. Not only is China likely to be much
more powerful than its neighbors, but these states are also located far
from one another, making it harder to form an effective balancing
coalition. The United States will have to coordinate their efforts and
may have to throw its considerable weight behind them. In Asia, the
United States may indeed be the indispensable nation.
July/August 2016 81
In Europe, the United States should end its military presence and
turn NATO over to the Europeans. There is no good reason to keep
U.S. forces in Europe, as no country there has the capability to
dominate that region. The top con-
There is no good reason to tenders, Germany and Russia, will both
lose relative power as their populations
keep U.S. forces in Europe, shrink in size, and no other potential
as no country there has hegemon is in sight. Admittedly, leaving
the capability to dominate European security to the Europeans
m
could increase the potential for trouble
that region. there. If a conflict did arise, however, it
would not threaten vital U.S. interests.
hi
Thus, there is no reason for the United States to spend billions of
dollars each year (and pledge its own citizens’ lives) to prevent one.
In the Gulf, the United States should return to the offshore-
ha
balancing strategy that served it so well until the advent of dual contain-
ment. No local power is now in a position to dominate the region, so
the United States can move most of its forces back over the horizon.
iT
With respect to ISIS, the United States should let the regional
powers deal with that group and limit its own efforts to providing
arms, intelligence, and military training. ISIS represents a serious
threat to them but a minor problem for the United States, and the
Al
only long-term solution to it is better local institutions, something

Washington cannot provide.
In Syria, the United States should let Russia take the lead. A Syria
od
stabilized under Assad’s control, or divided into competing ministates,

would pose little danger to U.S. interests. Both Democratic and
Republican presidents have a rich history of working with the Assad
regime, and a divided and weak Syria would not threaten the regional
so
balance of power. If the civil war continues, it will be largely Moscow’s

problem, although Washington should be willing to help broker a
political settlement.
For now, the United States should pursue better relations with
Ma
Iran. It is not in Washington’s interest for Tehran to abandon the

nuclear agreement and race for the bomb, an outcome that would
become more likely if it feared a U.S. attack—hence the rationale for
mending fences. Moreover, as its ambitions grow, China will want
allies in the Gulf, and Iran will likely top its list. (In a harbinger of
things to come, this past January, Chinese President Xi Jinping visited
Tehran and signed 17 different agreements.) The United States has an

obvious interest in discouraging Chinese-Iranian security cooperation,
and that requires reaching out to Iran.
Iran has a significantly larger population and greater economic
potential than its Arab neighbors, and it may eventually be in a
position to dominate the Gulf. If it begins to move in this direction,
the United States should help the other Gulf states balance against
Tehran, calibrating its own efforts and regional military presence to
the magnitude of the danger.
m
THE BOTTOM LINE
Taken together, these steps would allow the United States to markedly
hi
reduce its defense spending. Although U.S. forces would remain in
Asia, the withdrawals from Europe and the Persian Gulf would free
up billions of dollars, as would reductions in counterterrorism spending
ha
and an end to the war in Afghanistan and other overseas interventions.
The United States would maintain substantial naval and air assets and
modest but capable ground forces, and it would stand ready to expand
iT
its capabilities should circumstances require. But for the foreseeable
future, the U.S. government could spend more money on domestic
needs or leave it in taxpayers’ pockets.
Offshore balancing is a grand strategy born of confidence in the
Al
United States’ core traditions and a recognition of its enduring advan-

tages. It exploits the country’s providential geographic position and
recognizes the powerful incentives other states have to balance against
od
overly powerful or ambitious neighbors. It respects the power of

nationalism, does not try to impose American values on foreign
societies, and focuses on setting an example that others will want to
emulate. As in the past, offshore balancing is not only the strategy
so
that hews closest to U.S. interests; it is also the one that aligns best
with Americans’ preferences.∂
Ma
July/August 2016 83

What Critics Get Wrong About the
Global Economy
Douglas A. Irwin
m
J
ust because a U.S. presidential candidate bashes free trade on the
hi
campaign trail does not mean that he or she cannot embrace it
once elected. After all, Barack Obama voted against the Central
American Free Trade Agreement as a U.S. senator and disparaged the
ha
North American Free Trade Agreement (NAFTA) as a presidential
candidate. In office, however, he came to champion the Trans-Pacific
Partnership (TPP), a giant trade deal with 11 other Pacific Rim countries.
iT
Yet in the current election cycle, the rhetorical attacks on U.S.
trade policy have grown so fiery that it is difficult to imagine similar
transformations. The Democratic candidate Bernie Sanders has railed
against “disastrous” trade agreements, which he claims have cost jobs
Al
and hurt the middle class. The Republican Donald Trump complains
that China, Japan, and Mexico are “killing” the United States on trade
thanks to the bad deals struck by “stupid” negotiators. Even Hillary
od
Clinton, the expected Democratic nominee, who favored the TPP as

secretary of state, has been forced to join the chorus and now says she
opposes that agreement.
Blaming other countries for the United States’ economic woes is an
so
age-old tradition in American politics; if truth is the first casualty of

war, then support for free trade is often an early casualty of an elec-
tion campaign. But the bipartisan bombardment has been so intense
this time, and has been so unopposed, that it raises real questions
Ma
about the future of U.S. global economic leadership.

The anti-trade rhetoric paints a grossly distorted picture of trade’s
role in the U.S. economy. Trade still benefits the United States
DOUGLAS A. IRWIN is John Sloan Dickey Third Century Professor in the Social Sciences
in the Department of Economics at Dartmouth College and the author of Free Trade Under
Fire. Follow him on Twitter @D_A_Irwin.
enormously, and striking back at other countries by imposing new

barriers or ripping up existing agreements would be self-destructive.
The badmouthing of trade agreements has even jeopardized the
ratification of the TPP in Congress. Backing out of that deal would
signal a major U.S. retreat from Asia and mark a historic error.
Still, it would be a mistake to dismiss all of the anti-trade talk as ill-
informed bombast. Today’s electorate harbors legitimate, deep-seated
frustrations about the state of the U.S. economy and labor markets in
particular, and addressing these complaints will require changing
m
government policies. The solution, however, lies not in turning away
from trade promotion but in strengthening worker protections.
By and large, the United States has no major difficulties with
hi
respect to trade, nor does it suffer from problems that could be solved
by trade barriers. What it does face, however, is a much larger prob-
lem, one that lies at the root of anxieties over trade: the economic
ha
ladder that allowed previous generations of lower-skilled Americans
to reach the middle class is broken.
iT
SCAPEGOATING TRADE
Campaign attacks on trade leave an unfortunate impression on the
American public and the world at large. In saying that some countries
“win” and other countries “lose” as a result of trade, for example,
Al
Trump portrays it as a zero-sum game. That’s an understandable per-

spective for a casino owner and businessman: gambling is the quin-
tessential zero-sum game, and competition is a win-lose proposition
od
for firms (if not for their customers). But it is dead wrong as a way to
think about the role of trade in an economy. Trade is actually a two-
way street—the exchange of exports for imports—that makes efficient
use of a country’s resources to increase its material welfare. The
so
United States sells to other countries the goods and services that it
produces relatively efficiently (from aircraft to soybeans to legal
advice) and buys those goods and services that other countries produce
relatively efficiently (from T-shirts to bananas to electronics assembly).
Ma
In the aggregate, both sides benefit.

To make their case that trade isn’t working for the United States,
critics invoke long-discredited indicators, such as the country’s nega-
tive balance of trade. “Our trade deficit with China is like having a
business that continues to lose money every single year,” Trump once
said. “Who would do business like that?” In fact, a nation’s trade
July/August 2016 85
Douglas A. Irwin
balance is nothing like a firm’s bottom line. Whereas a company cannot

lose money indefinitely, a country—particularly one, such as the
United States, with a reserve currency—can run a trade deficit
indefinitely without compromising its well-being. Australia has run
current account deficits even longer than the United States has, and
its economy is flourishing.
One way to define a country’s trade balance is the difference be-
tween its domestic savings and its domestic investment. The United
States has run a deficit in its current account—the broadest measure
m
of trade in goods and services—every year except one since 1981.
Why? Because as a low-saving, high-consuming country, the United
States has long been the recipient of capital inflows from abroad.
hi
Reducing the current account deficit would require foreigners to pur-
chase fewer U.S assets. That, in turn, would require increasing domes-
tic savings or, to put it in less popular terms, reducing consumption.
ha
One way to accomplish that would be to change the tax system—for
example, by instituting a consumption tax. But discouraging spending
and rewarding savings is not easy, and critics of the trade deficit do
iT
not fully appreciate the difficulty involved in reversing it. (And if a
current account surplus were to appear, critics would no doubt com-
plain, as they did in the 1960s, that the United States was investing
too much abroad and not enough at home.)
Al
Critics also point to the trade deficit to suggest that the United
States is losing more jobs as a result of imports than it gains due to
exports. In fact, the trade deficit usually increases when the economy
od
is growing and creating jobs and decreases when it is contracting and

losing jobs. The U.S. current account deficit shrank from 5.8 percent
of GDP in 2006 to 2.7 percent in 2009, but that didn’t stop the economy
from hemorrhaging jobs. And if there is any doubt that a current
so
account surplus is no economic panacea, one need only look at Japan,

which has endured three decades of economic stagnation despite
running consistent current account surpluses.
And yet these basic fallacies—many of which Adam Smith
Ma
debunked more than two centuries ago—have found a new life in

contemporary American politics. In some ways, it is odd that anti-
trade sentiment has blossomed in 2016, of all years. For one thing,
although the post-recession recovery has been disappointing, it has
hardly been awful: the U.S. economy has experienced seven years of
slow but steady growth, and the unemployment rate has fallen to just
m
hi
ha
Nice work if you can get it: at a Ford plant in Michigan, November 2012
five percent. For another thing, imports have not swamped the country
iT
and caused problems for domestic producers and their workers; over
the past seven years, the current account deficit has remained roughly
unchanged at about two to three percent of GDP, much lower than its
level from 2000 to 2007. The pace of globalization, meanwhile, has
Al
slowed in recent years. The World Trade Organization (WTO)

forecasts that the volume of world trade will grow by just 2.8 percent
in 2016, the fifth consecutive year that it has grown by less than three
od
percent, down significantly from previous decades.

What’s more, despite what one might infer from the crowds at
campaign rallies, Americans actually support foreign trade in general
and even trade agreements such as the TPP in particular. After a
so
decade of viewing trade with skepticism, since 2013, Americans have

seen it positively. A February 2016 Gallup poll found that 58 percent
of Americans consider foreign trade an opportunity for economic
growth, and only 34 percent viewed it as a threat.
Ma
R E B E C CA C O O K / R E U T E R S
THE VIEW FROM THE BOTTOM

So why has trade come under such strident attack now? The most
important reason is that workers are still suffering from the aftermath
of the Great Recession, which left many unemployed and indebted.
Between 2007 and 2009, the United States lost nearly nine million
July/August 2016 87
Douglas A. Irwin
jobs, pushing the unemployment rate up to ten percent. Seven years

later, the economy is still recovering from this devastating blow.
Many workers have left the labor force, reducing the employment-to-
population ratio sharply. Real wages have remained flat. For many
Americans, the recession isn’t over.
Thus, even as trade commands broad public support, a significant
minority of the electorate—about a third, according to various polls—
decidedly opposes it. These critics come from both sides of the polit-
ical divide, but they tend to be lower-income, blue-collar workers, who
m
are the most vulnerable to economic
change. They believe that economic
Trade still benefits the elites and the political establishment
hi
United States enormously. have looked out only for themselves
over the past few decades. As they see
it, the government bailed out banks during the financial crisis, but
ha
no one came to their aid.
For these workers, neither political party has taken their concerns
seriously, and both parties have struck trade deals that the workers
iT
think have cost jobs. Labor unions that support the Democrats still
feel betrayed by President Bill Clinton, who, over their strong objec-
tions, secured congressional passage of NAFTA in 1993 and normal-
ized trade relations with China in 2000. Blue-collar Republican
Al
voters, for their part, supported the anti-NAFTA presidential cam-

paigns of Pat Buchanan and Ross Perot in 1992. They felt betrayed
by President George W. Bush, who pushed Congress to pass many
od
bilateral trade agreements. Today, they back Trump.

Among this demographic, a narrative has taken hold that trade has
cost Americans their jobs, squeezed the middle class, and kept wages low.
The truth is more complicated. Although imports have put some people
so
out of work, trade is far from the most important factor behind the loss
of manufacturing jobs. The main culprit is technology. Automation and
other technologies have enabled vast productivity and efficiency
improvements, but they have also made many blue-collar jobs obsolete.
Ma
One representative study, by the Center for Business and Economic

Research at Ball State University, found that productivity growth
accounted for more than 85 percent of the job loss in manufacturing
between 2000 and 2010, a period when employment in that sector fell by
5.6 million. Just 13 percent of the overall job loss resulted from trade,
although in two sectors, apparel and furniture, it accounted for 40 percent.
This finding is consistent with research by the economists David

Autor, David Dorn, and Gordon Hanson, who have estimated that
imports from China displaced as many as 982,000 workers in manu-
facturing from 2000 to 2007. These layoffs also depressed local labor
markets in communities that produced goods facing Chinese compe-
tition, such as textiles, apparel, and furniture. The number of jobs lost
is large, but it should be put in perspective: while Chinese imports
may have cost nearly one million manufacturing jobs over almost a
decade, the normal churn of U.S. labor markets results in roughly
m
1.7 million layoffs every month.
Research into the effect of Chinese imports on U.S. employment
has been widely misinterpreted to imply that the United States has
hi
gotten a raw deal from trade with China. In fact, such studies do not
evaluate the gains from trade, since they make no attempt to quantify
the benefits to consumers from lower-priced goods. Rather, they serve
ha
as a reminder that a rapid increase in imports can harm communities
that produce substitute goods—as happened in the U.S. automotive
and steel sectors in the 1980s.
iT
Furthermore, the shock of Chinese goods was a one-time event that
occurred under special circumstances. Imports from China increased
from 1.0 percent of U.S. GDP in 2000 to 2.6 percent in 2011, but for
the past five years, the share has stayed roughly constant. There is no
Al
reason to believe it will rise further. China’s once-rapid economic

growth has slowed. Its working-age population has begun to shrink,
and the migration of its rural workers to coastal urban manufacturing
od
areas has largely run its course.

The influx of Chinese imports was also unusual in that much of it
occurred from 2001 to 2007, when China’s current account surplus
soared, reaching ten percent of GDP in 2007. The country’s export
so
boom was partly facilitated by China’s policy of preventing the

appreciation of the yuan, which lowered the price of Chinese goods.
Beginning around 2000, the Chinese central bank engaged in a large-
scale, persistent, and one-way intervention in the foreign exchange
Ma
market—buying dollars and selling yuan. As a result, its foreign

exchange reserves rose from less than $300 million in 2000 to $3.25 tril-
lion in 2011. Critics rightly groused that this effort constituted
currency manipulation and violated International Monetary Fund
rules. Yet such complaints are now moot: over the past year, China’s
foreign exchange reserves have fallen rapidly as its central bank has
July/August 2016 89
Douglas A. Irwin
sought to prop up the value of the yuan. Punishing China for past
bad behavior would accomplish nothing.
THE RIGHT—AND WRONG—SOLUTIONS

The real problem is not trade but diminished domestic opportunity
and social mobility. Although the United States boasts a highly
skilled work force and a solid technological base, it is still the case
that only one in three American adults has a college education. In
past decades, the two-thirds of Americans with no postsecondary
m
degree often found work in manufacturing, construction, or the
armed forces. These parts of the economy stood ready to absorb
large numbers of people with limited education, give them
hi
productive work, and help them build skills. Over time, however,
these opportunities have disappeared. Technology has shrunk
manufacturing as a source of large-scale employment: even though
ha
U.S. manufacturing output continues to grow, it does so with
many fewer workers than in the past. Construction work has not
recovered from the bursting of the housing bubble. And the
iT
military turns away 80 percent of applicants due to stringent fitness
and intelligence requirements. There are no comparable sectors of
the economy that can employ large numbers of high-school-
educated workers.
Al
This is a deep problem for American society. The unemployment

rate for college-educated workers is 2.4 percent, but it is more than
7.4 percent for those without a high school diploma—and even higher
od
when counting discouraged workers who have left the labor force but
wish to work. These are the people who have been left behind in the
twenty-first-century economy—again, not primarily because of trade
but because of structural changes in the economy. Helping these
so
workers and ensuring that the economy delivers benefits to everyone

should rank as urgent priorities.
But here is where the focus on trade is a diversion. Since trade is
not the underlying problem in terms of job loss, neither is protectionism
Ma
a solution. While the gains from trade can seem abstract, the costs of
trade restrictions are concrete. For example, the United States has
some 135,000 workers employed in the apparel industry, but there are
more than 45 million Americans who live below the poverty line,
stretching every dollar they have. Can one really justify increasing the
price of clothing for 45 million low-income Americans (and everyone
else as well) in an effort to save the jobs of just some of the 135,000
low-wage workers in the apparel industry?
Like undoing trade agreements, imposing selective import duties
to punish specific countries would also fail. If the United States were
to slap 45 percent tariffs on imports from China, as Trump has pro-
posed, U.S. companies would not start
producing more apparel and footwear
in the United States, nor would they
For many Americans, the
start assembling consumer electronics recession isn’t over.
m
domestically. Instead, production would
shift from China to other low-wage developing countries in Asia, such
as Vietnam. That’s the lesson of past trade sanctions directed against
hi
China alone: in 2009, when the Obama administration imposed duties
on automobile tires from China in an effort to save American jobs,
other suppliers, principally Indonesia and Thailand, filled the void,
ha
resulting in little impact on U.S. production or jobs.
And if restrictions were levied against all foreign imports to prevent
such trade diversion, those barriers would hit innocent bystanders:
iT
Canada, Japan, Mexico, the EU, and many others. Any number of
these would use WTO procedures to retaliate against the United States,
threatening the livelihoods of the millions of Americans with jobs that
depend on exports of manufactured goods. Trade wars produce no win-
Al
ners. There are good reasons why the very mention of the 1930 Smoot-
Hawley Tariff Act still conjures up memories of the Great Depression.
If protectionism is an ineffectual and counterproductive response
od
to the economic problems of much of the work force, so, too, are
existing programs designed to help workers displaced by trade.
The standard package of Trade Adjustment Assistance, a federal
program begun in the 1960s, consists of extended unemployment
so
compensation and retraining programs. But because these benefits

are limited to workers who lost their jobs due to trade, they miss
the millions more who are unemployed on account of technological
change. Furthermore, the program is fraught with bad incentives.
Ma
Extended unemployment compensation pays workers for prolonged

periods of joblessness, but their job prospects usually deteriorate
the longer they stay out of the labor force, since they have lost
experience in the interim.
And although the idea behind retraining is a good one—helping
laid-off textile or steel workers become nurses or technicians—the
July/August 2016 91
Douglas A. Irwin
actual program is a failure. A 2012 external review commissioned

by the Department of Labor found that the government retraining
programs were a net loss for society, to the tune of about $54,000
per participant. Half of that fell on the participants themselves,
who, on average, earned $27,000 less over the four years of the
study than similar workers who did not find jobs through the
program, and half fell on the government, which footed the bill
for the program. Sadly, these programs appear to do more harm
than good.
m
A better way to help all low-income workers would be to expand
the Earned Income Tax Credit. The EITC supplements the incomes
of workers in all low-income households, not just those the Depart-
hi
ment of Labor designates as having been adversely affected by trade.
What’s more, the EITC is tied to employment, thereby rewarding
work and keeping people in the labor market, where they can gain
ha
experience and build skills. A large enough EITC could ensure that
every American was able to earn the equivalent of $15 or more per
hour. And it could do so without any of the job loss that a minimum-
iT
wage hike can cause. Of all the potential assistance programs, the
EITC also enjoys the most bipartisan support, having been endorsed
by both the Obama administration and Paul Ryan, the Republican
Speaker of the House. A higher EITC would not be a cure-all, but it
Al
would provide income security for those seeking to climb the ladder
to the middle class.
The main complaint about expanding the EITC concerns the cost.
od
Yet taxpayers are already bearing the burden of supporting workers

who leave the labor force, many of whom start receiving disability
payments. On disability, people are paid—permanently—to drop out
of the labor force and not work. In lieu of this federal program, the
so
cost of which has surged in recent years, it would be better to help

people remain in the work force through the EITC, in the hope that
they can eventually become taxpayers themselves.
Ma
THE FUTURE OF FREE TRADE

Despite all the evidence of the benefits of trade, many of this year’s
crop of presidential candidates have still invoked it as a bogeyman.
Sanders deplores past agreements but has yet to clarify whether he
believes that better ones could have been negotiated or no such agree-
ments should be reached at all. His vote against the U.S.-Australian
free-trade agreement in 2004 suggests that he opposes all trade deals,

even one with a country that has high labor standards and with which
the United States runs a sizable balance of trade surplus. Trump
professes to believe in free trade, but he insists that the United States
has been outnegotiated by its trade partners, hence his threat to
impose 45 percent tariffs on imports from China to get “a better
deal”—whatever that means. He has attacked Japan’s barriers against
imports of U.S. agricultural goods, even
though that is exactly the type of pro-
The anti-trade rhetoric of
m
tectionism the TPP has tried to undo.
Meanwhile, Clinton’s position against the campaign has made it
the TPP has hardened as the campaign difficult for even pro-trade
hi
has gone on. members of Congress to
The response from economists has
tended to be either meek defenses of support new agreements.
ha
trade or outright silence, with some
even criticizing parts of the TPP. It’s time for supporters of free trade
to engage in a full-throated championing of the many achievements
iT
of U.S. trade agreements. Indeed, because other countries’ trade bar-
riers tend to be higher than those of the United States, trade agree-
ments open foreign markets to U.S. exports more than they open the
U.S. market to foreign imports.
Al
That was true of NAFTA, which remains a favored punching bag on

the campaign trail. In fact, NAFTA has been a big economic and foreign
policy success. Since the agreement entered into force in 1994, bilateral
od
trade between the United States and Mexico has boomed. For all the
fear about Mexican imports flooding the U.S. market, it is worth
noting that about 40 percent of the value of imports from Mexico
consists of content originally made in the United States—for example,
so
auto parts produced in the United States but assembled in Mexico. It

is precisely such trade in component parts that makes standard
measures of bilateral trade balances so misleading.
NAFTA has also furthered the United States’ long-term political,
Ma
diplomatic, and economic interest in a flourishing, democratic Mexico,

which not only reduces immigration pressures on border states but
also increases Mexican demand for U.S. goods and services. Far from
exploiting Third World labor, as critics have charged, NAFTA has
promoted the growth of a middle class in Mexico that now includes
nearly half of all households. And since 2009, more Mexicans have
July/August 2016 93
Douglas A. Irwin
left the United States than have come in. In the two decades since
NAFTA went into effect, Mexico has been transformed from a clien-
telistic one-party state with widespread anti-American sentiment into
a functional multiparty democracy with a generally pro-American
public. Although it has suffered from drug wars in recent years (a
spillover effect from problems that are largely made in America), the
overall story is one of rising prosperity thanks in part to NAFTA.
Ripping up NAFTA would do immense damage. In its foreign
relations, the United States would prove itself to be an unreliable
m
partner. And economically, getting rid of the agreement would
disrupt production chains across North America, harming both
Mexico and the United States. It would add to border tensions while
hi
shifting trade to Asia without bringing back any U.S. manufacturing
jobs. The American public seems to understand this: in an October
2015 Gallup poll, only 18 percent of respondents agreed that leaving
ha
NAFTA or the Central American Free Trade Agreement would be very
effective in helping the economy.
A more moderate option would be for the United States to take a
iT
pause and simply stop negotiating any more trade agreements, as
Obama did during his first term. The problem with this approach,
however, is that the rest of the world would continue to reach trade
agreements without the United States, and so U.S. exporters would
Al
find themselves at a disadvantage compared with their foreign

competitors. Glimpses of that future can already be seen. In 2012, the
car manufacturer Audi chose southeastern Mexico over Tennessee for
od
the site of a new plant because it could save thousands of dollars per
car exported thanks to Mexico’s many more free-trade agreements,
including one with the EU. Australia has reached trade deals with
China and Japan that give Australian farmers preferential access in
so
those markets, cutting into U.S. beef exports.

If Washington opted out of the TPP, it would forgo an opportunity
to shape the rules of international trade in the twenty-first century.
The Uruguay Round, the last round of international trade negotia-
Ma
tions completed by the General Agreement on Tariffs and Trade,

ended in 1994, before the Internet had fully emerged. Now, the United
States’ high-tech firms and other exporters face foreign regulations
that are not transparent and impede market access. Meanwhile, other
countries are already moving ahead with their own trade agreements,
increasingly taking market share from U.S. exporters in the dynamic
Asia-Pacific region. Staying out of the TPP would not lead to the
creation of good jobs in the United States. And despite populist claims
to the contrary, the TPP’s provisions for settling disputes between in-
vestors and governments and dealing with intellectual property rights
are reasonable. (In the early 1990s, similar fears about such provisions
in the WTO were just as exaggerated and ultimately proved baseless.)
The United States should proceed with passage of the TPP and
continue to negotiate other deals with its trading partners. So-called
plurilateral trade agreements, that is, deals among relatively small
m
numbers of like-minded countries, offer the only viable way to pick
up more gains from reducing trade barriers. The current climate on
Capitol Hill means that the era of small bilateral agreements, such as
hi
those pursued during the George W. Bush administration, has ended.
And the collapse of the Doha Round at the WTO likely marks the end
of giant multilateral trade negotiations.
ha
Free trade has always been a hard sell. But the anti-trade rhetoric
of the 2016 campaign has made it difficult for even pro-trade members
of Congress to support new agreements. Past experience suggests that
iT
Washington will lead the charge for reducing trade barriers only when
there is a major trade problem to be solved—namely, when U.S.
exporters face severe discrimination in foreign markets. Such was
the case when the United States helped form the General Agreement
Al
on Tariffs and Trade in 1947, when it started the Kennedy Round

of trade negotiations in the 1960s, and when it initiated the Uruguay
Round in the 1980s. Until the United States feels the pain of getting cut
od
out of major foreign markets, its leadership on global trade may wane.
That would represent just one casualty of the current campaign.∂
so
Ma
July/August 2016 95
NATO’s Next Act

How to Handle Russia and Other Threats
Philip M. Breedlove
m
I
n May 2013, when I became commander of U.S. European Com-
mand and NATO’s supreme allied commander for Europe, I found
hi
U.S. and NATO forces well suited for their requirements at the
time but ill prepared for the challenges that lay ahead. The United
States’ military presence in Europe, which had shrunk significantly
ha
since the 1990s, was not oriented toward a specific threat. NATO, for
its part, was mostly involved in operations outside the continent,
primarily in Afghanistan.
iT
Now that I have completed my tenure, I have the chance to
reflect on how U.S. European Command and NATO have evolved
since I took up my positions. Over the past three years, the United
States and the alliance have shifted their focus to threats closer to
Al
the heart of Europe—namely, Russian aggression and the vexing

challenges associated with the ongoing instability in the Middle
East and North Africa. These threats are of a breadth and complexity
od
that the continent has not seen since the end of World War II.
Although the United States and NATO are better prepared to
confront them today than they were in early 2014, when Russia
illegally annexed Crimea and conducted a de facto invasion of
so
eastern Ukraine, there is much more that the United States and its
allies must do—above all, improve their abilities to deter the Russian
threat and to deal with the problems associated with regional
instability on Europe’s borders, namely, international displacement
Ma
and transnational terrorism. To better prepare for these challenges,

the United States should increase the resources available to its
forces in Europe and recognize Russia as the enduring, global threat
it really represents.
PHILIP M. BREEDLOVE was Commander of U.S. European Command and NATO’s
Supreme Allied Commander, Europe, from 2013 to 2016. Follow him on Twitter @PMBreedlove.
NATO’s Next Act
THE ROAD TO THE PRESENT

To appreciate the position the United States and its allies found
themselves in when Russia began its intervention in Ukraine, it is
helpful to look back to the Cold War. In the final years of that conflict,
NATO’s forces and those of the Warsaw Pact enjoyed relative parity.
NATO had approximately 2.3 million men under arms in Europe; the
nations of the Warsaw Pact had about 2.1 million. Although the
Warsaw Pact countries had more tanks, artillery pieces, and fighter
jets than NATO, the alliance managed to counter this numerical
m
advantage through its advanced military equipment. NATO’s mission
at the time was hardly easy, but it was relatively clear-cut. The West
knew how to deal with a potential invasion launched by the Warsaw
hi
Pact, and the relative parity between NATO and the communist bloc,
along with the doctrine of mutual assured destruction, ensured that
such an invasion was unlikely.
ha
When the Warsaw Pact and the Soviet Union dissolved in 1991,
NATO was already developing a strategic vision for Europe’s new secu-
rity environment that placed less emphasis on nuclear deterrence and
iT
the forward deployment of allied forces. The United States and most
of its NATO allies dramatically decreased the size of their forces in
Europe. Meanwhile, the sudden collapse of Soviet power, which in
eastern Europe had held nationalism and instability in check for
Al
decades, allowed democratization to begin in newly independent

states, but it also led to civil strife, most notably in the Balkans. NATO,
then the world’s only capable multinational force, sent peacekeepers
od
there, tipping the balance toward a political resolution of the conflict.

Then, in the years after 9/11, the alliance intervened in Afghanistan,
and subsequently in Libya, where it also faced challengers without the
advanced military capabilities of a near-peer competitor. In other words,
so
in the decades after the Cold War, NATO found a new raison d’être in
stability operations and confronting low-end threats. It adjusted its
force structure accordingly.
All the while, neither the United States nor NATO was paying
Ma
enough attention to its old nemesis to the east: Russia, which was
working to reassert its influence in many of the areas the Soviet Union
had once dominated. In every year after 1998, Russia increased its
military spending; at the same time, it was increasingly meddling in
the affairs of its neighbors, for example, by suspending gas supplies to
Ukraine several times in the years after the Orange Revolution of
July/August 2016 97
Philip M. Breedlove
2004–5. It was Russia’s invasion of Georgia in 2008, however, that

showed just how far Moscow was willing to go to punish states on its
periphery for moving closer to the West. The speed with which the
invading Russian forces moved into Georgia left no doubt that the
operation had been planned far in advance. The United States was
focused on the wars in Afghanistan and Iraq and on fighting global
terrorism, and Russia saw an opportunity.
Russia’s operation in Georgia formed part of the blueprint for its
actions in Ukraine. By seizing Crimea, backing separatist rebels in the
m
Donbas, and sponsoring protests against the pro-Western government
in Kiev, Russia showed once again that it was willing to undermine
established norms of international behavior to achieve its goals.
hi
When the West responded by levying sanctions against Russia that,
compounded by low oil prices, resulted in a rapid economic decline,
Moscow doubled down, increasing its provocations against NATO ships
ha
and planes operating in international territory, intervening in Syria
in support of President Bashar al-Assad, and further militarizing
the Arctic.
iT
Moscow is determined to reestablish what it considers its rightful
sphere of influence, undermine NATO, and reclaim its great-power
status. That desire has been evident since 2005, when Russian
President Vladimir Putin called the collapse of the Soviet Union “the
Al
greatest geopolitical catastrophe of the [twentieth] century”—a prepos-

terous claim in light of that century’s two world wars. It is through
this prism that the West must view Russian aggression.
od
COMPOUNDING PROBLEMS
Despite Russia’s growing belligerence, neither the United States’
military nor those of its allies are adequately prepared to rapidly
so
respond to overt military aggression. Nor are they sufficiently ready to

counter the kind of hybrid warfare that Moscow has waged in eastern
Ukraine. At the height of the Cold War, the United States had more
than 400,000 soldiers assigned to Europe; today, there are fewer than
Ma
100,000 soldiers assigned to the continent, and 35,000 of them are on

rotational deployments. Indeed, even when combined with the forces
of NATO, the United States’ military presence on the continent would
be hard-pressed to deter a determined Russia. By rapidly invading a
NATO ally, Russia could present a fait accompli that would be brutally
expensive and difficult for the United States and its allies to reverse.
NATO’s Next Act
m
hi
ha
Under our wing: a NATO air-policing mission over Lithuania, May 2015
The imposition of compulsory budget cuts in the United States has
iT
compounded these challenges by limiting the Department of Defense’s
ability to plan for the future and by mandating risky drawdowns in
both the capacity and the capabilities of the U.S. military. Adding to
the challenge, the U.S. defense budget has declined in real terms since
Al
2010, even as the country’s international requirements have increased.

The United States’ operations in Africa and the Middle East, mean-
while, have increased the burden on the country’s assets in Europe,
od
which are frequently used to support U.S. missions in those regions. And
an increased focus on the Asia-Pacific as a result of the “rebalance” means
that there are fewer resources available for U.S. operations elsewhere.
Other NATO members face similar problems. Only a handful of NATO
so
nations are capable of conducting full-spectrum combat operations,

and none can do so for a prolonged period. Although a number of
NATO members have halted their slide in defense spending, most are
still failing to achieve the alliance-wide target for defense expenditures
Ma
of two percent of GDP. What is more, although NATO has gained

INTS KALNINS / REUTERS
12 new members since 1990, its total military spending, excluding that
of the United States, has decreased: from some $332 billion in 1990 to
$303 billion in 2014 in constant 2011 dollars, according to the Stockholm
International Peace Research Institute. And the alliance remains
responsible for some of the missions it took on after the end of the
July/August 2016 99
Philip M. Breedlove
Cold War: in Kosovo, where it has stationed some 4,800 soldiers, and
in Afghanistan, where NATO will likely remain engaged in some form
until 2020.
The Syrian civil war and persistent instability throughout the Middle
East and in North Africa have further complicated matters by encour-
aging the largest refugee crisis in Europe since World War II. The
resources that NATO members array against these challenges and
against the threat of domestic terrorism are simply not available for
the alliance’s use elsewhere.
m
Indeed, as members attempt to cut back on their military spending
amid slow economic growth, they must pick and choose where to con-
centrate their efforts. Countries on the eastern and northern flanks of
hi
NATO, such as Poland and the Baltic states, tend to see Russia as the
most immediate threat to their security, whereas states closer to the
turmoil in the Middle East and North Africa, such as France, Greece,
ha
Italy, and Turkey, tend to view the migrant crisis as a more pressing
challenge. Facing such challenges, along with the high costs of
developing and acquiring the advanced weapons systems that might
iT
deter Russia, many NATO countries are instead investing in forces
designed for limited territorial defense and internal security. And
because adjusting NATO’s broader military posture requires the
unanimous agreement of all 28 member states, reforming the force
Al
is a slow process.
EARLY STEPS
od
The good news is that the United States and NATO recognize that the
European neighborhood has changed and have begun to act. In June
2014, U.S. President Barack Obama announced the European
Reassurance Initiative, an effort to demonstrate the United States’
so
commitment to the security and territorial integrity of its European

allies in the wake of Russia’s intervention in Ukraine. With a budget
of $985 million in fiscal year 2015 and an additional $789 million in
fiscal year 2016, the initiative has funded new bilateral and multi-
Ma
lateral military exercises and greater deployments of U.S. forces to

the continent, supported by the placement of more U.S. military
equipment, including artillery, tanks, and other armored fighting
vehicles, in central and eastern Europe. These moves not only are
increasing the United States’ combat readiness but also will save the
country millions of dollars relative to what it would have cost to
NATO’s Next Act
repeatedly send similar assets to Europe. The increased funding that

Obama has requested for the initiative in fiscal year 2017, of some
$3.4 billion, will do even more to improve the United States’ and
NATO’s ability to deter Russia, in part
by allowing the United States to Despite Russia’s growing
ramp up training programs with its
allies, preposition even more military belligerence, the United
equipment in Europe, build up the States’ military is not
military capacities of U.S. partners, and adequately prepared to
m
invest in the infrastructure needed to
support all these measures. It will also respond.
support the development of Army
hi
Prepositioned Stocks, which are complete prepositioned sets of
supplies and equipment for armored and mechanized brigades;
these will allow the United States and its allies to rapidly deploy
ha
reinforcements in the event of a crisis.
Meanwhile, in the summer of 2014, U.S. European Command
began Operation Atlantic Resolve, a broad program of action in
iT
support of the European Reassurance Initiative. U.S. forces have
maintained successive rotational deployments in Poland and the
Baltic states for almost two years. In the Mediterranean and the
Black Sea region, the U.S. Marine Corps has kept up the nearly
Al
continuous rotational presence that it began in 2010, and the U.S.

Navy has increased its presence in the Bosporus. The U.S. Air
Force, for its part, has significantly ramped up so-called micro-
od
deployments of small teams of fighter and attack aircraft to other

NATO countries, where they work with their hosts to exchange
tactics and improve interoperability.
NATO, too, is changing. In 2014, the alliance agreed to the Readiness
so
Action Plan to ensure that it can react swiftly to security challenges

on its eastern and southern frontiers. The plan includes a number of
immediate measures, such as ramped-up military exercises and aerial
patrols over the Baltic states, which are aimed at reassuring the popu-
Ma
lations of NATO countries, deterring Russian aggression, and improving

interoperability among national forces. More significant are the long-
term reforms that aim to improve the readiness and responsiveness
of the alliance’s forces. To begin with, NATO created the Very High
Readiness Joint Task Force, a brigade that can respond to crises on
extremely short notice. Then, last summer, NATO announced that

Philip M. Breedlove
it would triple the size of that contingent’s parent force, a land,

sea, and air group known as the NATO Response Force, to around
40,000 soldiers.
The alliance has also improved its command-and-control structures.
In six vulnerable central and eastern European member states, NATO
has established small headquarters, known as Force Integration Units,
which will help incorporate allied forces into the defense structures of
the host countries, ensuring that when NATO troops are deployed to a
conflict involving one of its members, they will be able to work
m
seamlessly with forces already in the fight. And in 2015, NATO established
two new tactical headquarters in Poland and Romania. Improvements
such as these will upgrade the readiness of NATO’s forces, serve as an
hi
effective deterrent against would-be foes, and help the alliance better
monitor the ongoing instability in the Middle East and North Africa.
Taken together, the measures pursued under NATO’s Readiness Action
ha
Plan represent the most significant reinforcement of the alliance’s
capacity for collective defense since the end of the Cold War.
iT
WHAT THE FUTURE HOLDS
These actions are a strong start, but they are not enough. The foundation
of any strategy in Europe must be the recognition that Russia poses
an enduring existential threat to the United States, its allies, and the
Al
international order. Russia is determined to once again become a global

power—an ambition it has demonstrated by, for example, conducting
confrontational mock attacks on U.S. forces, as Russian warplanes
od
did to the USS Donald Cook in the Baltic Sea in April, and resuming
Cold War–era strategic bomber flights along the U.S. coastline. What
is more, as Russia’s intervention in Syria has demonstrated, Moscow
will seek out all opportunities to expand its influence abroad. Because
so
the Kremlin views the United States and other NATO members as its
primary adversaries, it considers its relationship with the West a zero-
sum game. It will continue to do so for the foreseeable future.
The Putin government will not allow any nation over which it has
Ma
sufficient leverage to develop closer ties with the West—namely, by

moving toward membership in the EU or NATO—and it will do every-
thing in its power to sow instability in countries such as Georgia,
Moldova, and Ukraine. Putin no doubt knows that the EU and NATO
will be reluctant to accept a nation as a member if it is caught up in a
so-called frozen conflict.
NATO’s Next Act
At the same time, Russia will continue to improve its military’s ability
to offset the technological advantages currently enjoyed by NATO.
Although Russia’s fighter aircraft do not currently match the West’s, the
country’s advanced air defenses, coastal
cruise missiles, antiship capabilities, and
air-launched cruise missiles are increas-
The United States
ingly capable. If Moscow managed to should seek to change
keep U.S. reinforcements out of a Russia’s calculus before
potential conflict between Russia and Moscow acts aggressively.
m
NATO while preventing Western war-
planes from hitting their targets, it would
seriously degrade the advantages of the United States and its allies. To
hi
this end, Russia is establishing “anti-access/area-denial” zones across its
periphery, including in the Baltic and Black Seas, the Arctic, and the
Russian Far East. What is more, Russia’s growing footprint in Syria
ha
offers Moscow the capability, if it chooses, to threaten U.S. and allied
forces operating in the eastern Mediterranean and in the skies over Syria.
Russia has shown that it can cause Washington and its allies significant
iT
political and military angst with minimal effort and at relatively little
cost. So far, the United States and NATO have consistently reacted to
Russia’s provocations rather than preempting them. Instead, the United
States and its allies should take a proactive stance that seeks to change
Al
Russia’s calculus before Moscow acts aggressively. Under such a strat-

egy, the United States and its allies would determine in advance and
then clearly articulate when they will counter Russia’s moves, when they
od
will ignore them, and when they will seek cooperation.

There are certainly opportunities to work with Russia, as Washington
and Moscow’s mutual effort to bring Iran to the negotiating table
through economic sanctions has shown. In dealing with North Korea,
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managing drug trafficking in Central Asia, policing the fisheries in

the North Pacific, and undertaking search-and-rescue operations in
the Arctic, to name only a few, there are further potential opportunities
for the two countries to work together on shared interests.
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Even as the United States works with Russia on issues such as these,
however, it must not allow its stance against Moscow’s transgressions
to soften. The Kremlin respects only strength and sees opportunity in
the weakness and inattention of others, so the United States and NATO
must stand firm, especially with respect to Russia’s nefarious and
coercive attempts to prevent countries on its periphery from choosing

Philip M. Breedlove
to align with the EU and NATO. Washington’s strategy should reassure

U.S. allies and ensure that the Kremlin understands the specific
consequences that a confrontation would bring.
In order for such a strategy to be effective, the United States and
its allies must demonstrate that their forces in Europe represent a
credible deterrent. After two decades of shrinking resources, this will
require more work. Although U.S. personnel represent the United
States’ most important asset, the country must work to balance its
military personnel costs with the need to develop and deploy more
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advanced and capable weapons. The Department of Defense, which
cannot afford cost overruns and inefficiencies, should continue to re-
form its acquisition processes. More broadly, the United States must
hi
end the crippling effects of sequestration and prevent the gap be-
tween the requirements of the military and the resources available to
it from widening further. Other NATO countries must bear some of
ha
the burden, too. They must round out the knowledge of counterinsur-
gency and stability operations that they have developed in Afghani-
stan with stronger war-fighting and counterterrorism capabilities.
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Even as the United States invests in new technologies to offset the
strengths of its potential adversaries in the longer term, it must take
additional concrete steps. Developing an effective mix of permanently
forward-deployed and rotational forces, along with prepositioned
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equipment and the capacity to rapidly reinforce U.S. forces in Europe

with troops from the continental United States, will deter Russia and
reassure U.S. allies of Washington’s commitment to do so. General
od
James Amos, the former commandant of the Marine Corps, said it

best when he noted, “Forward presence builds trust that cannot be surged
when a conflict looms.” As for what form this ramped-up presence
should take, the United States should preposition the equipment for
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two or three additional armored brigades in eastern Europe, along

with the supplies to sustain those forces through at least two months
of intense conflict. The United States’ nuclear forces remain an
essential deterrent, too, so the country should maintain them,
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enhancing the nuclear exercises that U.S. forces carry out with its
NATO allies to demonstrate their resolve and capability to Russia.
A WAY AHEAD
Even as the United States and its NATO allies focus on countering
Russia, they must not lose sight of the challenges of Islamist terrorism
NATO’s Next Act
and population displacement, which are rooted in instability and poor

governance in the Middle East and North Africa. The United States
should be prepared to continue the fight against the Islamic State (also
known as ISIS), al Qaeda, and other terrorist groups for some time to
come. In this effort, however, U.S. forces should play a supporting
role: the main strategy should be to invest in institution building and
education, among other measures, to stabilize the poorly governed
spaces that give rise to terrorism and displaced populations. The
United States, in particular, must consider cooperating with foreign
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governments whose democratic bona fides are less than perfect. At
the end of the day, the United States’ discomfort with some of the
governments in the Middle East should not hold back its efforts to
hi
meet these challenges.
Of course, just as important as what the United States and its allies
should do is what they should not do. To let Russia know that its
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illegal annexation of Crimea and invasion of the Donbas cannot stand,
the United States should not allow the sanctions regime to soften. It
should not choose the middle ground in Syria, in Iraq, in Libya, and
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in other ungoverned spaces. The United States must lead: it should do
more to build up the defenses and civil societies of its most vulnerable
partners, and it must be willing to make the difficult choice to use
force when necessary.
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Inaction and indecision on the part of the United States will have
consequences far beyond the immediate problems it seeks to address.
Unless the country demonstrates its resolve and makes the necessary
od
investments, its adversaries will continue to undermine U.S. interests,

and others around the world will lose respect for U.S. power. The cost
in blood and treasure to defend the United States and to come to the
aid of U.S. allies whose trust has been built up through decades of
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shared sacrifice will be much greater in the future if the United States
fails to act now.∂
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Germany’s New Global

Role
Berlin Steps Up
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Frank-Walter Steinmeier
O
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ver the past two decades, Germany’s global role has undergone
a remarkable transformation. Following its peaceful reunifica-
tion in 1990, Germany was on track to become an economic
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giant that had little in the way of foreign policy. Today, however, the
country is a major European power that attracts praise and criticism
in equal measure. This holds true both for Germany’s response to the
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recent surge of refugees—it welcomed more than one million people
last year—and for its handling of the euro crisis.
As Germany’s power has grown, so, too, has the need for the country
to explain its foreign policy more clearly. Germany’s recent history is
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the key to understanding how it sees its place in the world. Since
1998, I have served my country as a member of four cabinets and as
the leader of the parliamentary opposition. Over that time, Germany
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did not seek its new role on the international stage. Rather, it emerged
as a central player by remaining stable as the world around it changed.
As the United States reeled from the effects of the Iraq war and the
EU struggled through a series of crises, Germany held its ground. It
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fought its way back from economic difficulty, and it is now taking on
the responsibilities befitting the biggest economy in Europe. Germany
is also contributing diplomatically to the peaceful resolution of mul-
tiple conflicts around the globe: most obviously with Iran and in
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Ukraine, but also in Colombia, Iraq, Libya, Mali, Syria, and the
Balkans. Such actions are forcing Germany to reinterpret the principles
that have guided its foreign policy for over half a century. But Germany
is a reflective power: even as it adapts, a belief in the importance of
FRANK-WALTER STEINMEIER is Foreign Minister of Germany.
restraint, deliberation, and peaceful negotiation will continue to guide

its interactions with the rest of the world.
THE STRONG MAN OF EUROPE

Today both the United States and Europe are struggling to provide
global leadership. The 2003 invasion of Iraq damaged the United
States’ standing in the world. After the ouster of Saddam Hussein,
sectarian violence ripped Iraq apart, and U.S. power in the region
began to weaken. Not only did the George W. Bush administration
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fail to reorder the region through force, but the political, economic,
and soft-power costs of this adventure undermined the United States’
overall position. The illusion of a unipolar world faded.
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When U.S. President Barack Obama assumed office in 2009, he
began to rethink the United States’ commitment to the Middle East
and to global engagements more broadly. His critics say that the pres-
ha
ident has created power vacuums that other actors, including Iran and
Russia, are only too willing to fill. His supporters, of which I am one,
counter that Obama is wisely responding to a changing world order
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and the changing nature of U.S. power. He is adapting the means and
goals of U.S. foreign policy to the nation’s capabilities and the new
challenges it faces.
Meanwhile, the EU has run into struggles of its own. In 2004, the
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union accepted ten new member states, finally welcoming the former
communist countries of eastern Europe. But even as the EU expanded,
it lost momentum in its efforts to deepen the foundations of its political
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union. That same year, the union presented its members with an
ambitious draft constitution, created by a team led by former French
President Valéry Giscard d’Estaing. But when voters in France and the
Netherlands, two of the EU’s founding nations, rejected the document,
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the ensuing crisis emboldened those Europeans who questioned the

need for an “ever-closer union.” This group has grown steadily stronger
in the years since, while the integrationists have retreated.
Now, the international order that the United States and Europe helped
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create and sustain after World War II—an order that generated freedom,
peace, and prosperity in much of the world—is under pressure. The
increasing fragility of various states—and, in some cases, their complete
collapse—has destabilized entire regions, especially Africa and the Middle
East, sparked violent conflicts, and provoked ever-greater waves of mass
migration. At the same time, state and nonstate actors are increasingly

defying the multilateral rules-based system that has preserved peace and
stability for so long. The rise of China and India has created new centers
of power that are changing the shape of international relations. Russia’s
annexation of Crimea has produced a serious rift with Europe and the
United States. The rivalry between Iran and Saudi Arabia increasingly
dominates the Middle East, as the state order in the region erodes and
the Islamic State, or ISIS, attempts to obliterate borders entirely.
Against this backdrop, Germany has remained remarkably stable.
This is no small achievement, considering the country’s position in
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2003, when the troubles of the United States and the EU were just
beginning. At the time, many called Germany “the sick man of Europe”:
unemployment had peaked at above 12 percent, the economy had
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stagnated, social systems were overburdened, and Germany’s opposition
to the U.S.-led war in Iraq had tested the nation’s resolve and provoked
outrage in Washington. In March of that year, German Chancellor
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Gerhard Schröder delivered a speech in Germany’s parliament, the
Bundestag, titled “Courage for Peace and Courage for Change,” in
which he called for major economic reforms. Although his fellow Social
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Democrats had had the courage to reject the Iraq war, they had little
appetite for change. Schröder’s reforms to the labor market and the
social security system passed the Bundestag, but at a high political
price for Schröder himself: he lost early elections in 2005.
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But those reforms laid the foundation for Germany’s return to

economic strength, a strength that has lasted to the present day. And
Germany’s reaction to the 2008 financial crisis only bolstered its
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economic position. German businesses focused on their advantages in

manufacturing and were quick to exploit the huge opportunities in
emerging markets, especially China. German workers wisely supported
the model of export-led growth.
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But Germans should not exaggerate their country’s progress. Ger-

many has not become an economic superpower, and its share of world
exports was lower in 2014 than in 2004—and lower than at the time
of German reunification. Germany has merely held its ground better
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than most of its peers in the face of rising competition.
EUROPE’S PEACEFUL POWER

Germany’s relative economic power is an unambiguous strength. But
some critics see the country’s military restraint as a weakness. During
Schröder’s chancellorship, Germany fought in two wars (in Kosovo
m
hi
ha
Steinmeier at a meeting of EU foreign ministers in Brussels, July 2014
and Afghanistan) and adamantly opposed the unleashing of a third (in
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Iraq). The military engagements in Kosovo and Afghanistan marked
a historic step for a nation that had previously sought to ban the word
“war” from its vocabulary entirely. Yet Germany stepped up because
it took its responsibility for the stability of Europe and its alliance
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with the United States seriously. Then as now, German officials shared
a deep conviction that the country’s security was inextricably linked
to that of the United States. Nevertheless, most of them opposed the
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invasion of Iraq, because they saw it as a war of choice that had dubious
legitimacy and the clear potential to spark further conflict. In Germany,
this opposition is still widely considered a major achievement—even
by the few who supported U.S. policy at the time.
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In the years since, Germany’s leaders have carefully deliberated

whether to get involved in subsequent conflicts, subjecting these
T HOMAS KO EHLE R / G ET TY IMAG ES
decisions to a level of scrutiny that has often exasperated the country’s

allies. In the summer of 2006, for example, I helped broker a cease-
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fire in Lebanon to end the war between Israel and Hezbollah. I believed
Germany had to support this agreement with military force if neces-
sary, even though I knew that our past as perpetrators of the Holo-
caust made the deployment of German soldiers on Israel’s borders a
particularly delicate matter. Before embracing the military option, I
invited my three immediate predecessors as foreign minister to Berlin

for advice. Together they brought 31 years of experience in office to

the table. Germany’s history weighed most heavily on the eldest among
us, Hans-Dietrich Genscher, a World War II veteran, who argued
against the proposal. My younger two predecessors agreed with me,
however, and to this day, German warships patrol the Mediterranean
coast to control arms shipments to Lebanon as part of the United
Nations Interim Force in Lebanon—an arrangement accepted and
supported by Israel.
Germany’s path to greater military assertiveness has not been linear,
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and it never will be. Germans do not believe that talking at roundtables
solves every problem, but neither do they think that shooting does.
The mixed track record of foreign military interventions over the past
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20 years is only one reason for caution. Above all, Germans share a
deeply held, historically rooted conviction that their country should
use its political energy and resources to strengthen the rule of law in
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international affairs. Our historical experience has destroyed any
belief in national exceptionalism—for any nation. Whenever possible,
we choose Recht (law) over Macht (power). As a result, Germany
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emphasizes the need for legitimacy in supranational decision-making
and invests in UN-led multilateralism.
Every German military deployment faces intense public scrutiny
and must receive approval from the Bundestag. Germans always seek
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to balance the responsibility to protect the weak with the responsibility

of restraint. If Germany’s partners and allies walk an extra mile for
diplomacy and negotiations, Germans want their government to walk
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one mile further, sometimes to our partners’ chagrin. That does not
mean Germany is overcompensating for its belligerent past. Rather,
as a reflective power, Germany struggles to reconcile the lessons of
history with the challenges of today. Germany will continue to frame
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its international posture primarily in civilian and diplomatic terms

and will resort to military engagement only after weighing every risk
and every possible alternative.
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EMBRACING A GLOBAL ROLE

Germany’s relative economic strength and its cautious approach to
the use of force have persisted as the regional and global environment
has undergone radical change. Germany’s partnership with the
United States and its integration into the EU have been the main
pillars of its foreign policy. But as the United States and the EU
have stumbled, Germany has held its ground and emerged as a

major power, largely by default.
In this role, Germany has come to realize that it cannot escape its
responsibilities. Since Germany sits at the center of Europe, neither
isolation nor confrontation is a prudent policy option. Instead, Germany
tries to use dialogue and cooperation to promote peace and end conflict.
Consider Germany’s new role in the Middle East. For decades, the
Arab-Israeli conflict dominated the region’s political landscape. In the
decades after World War II, Germany deliberately avoided a role at
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the forefront of diplomatic efforts to resolve the standoff. But today,
as conflicts have spread, Germany is engaging more broadly across the
region. Since 2003, when multilateral efforts to dissuade Iran from
hi
building a nuclear bomb began, Germany has played a central role,
and it was one of the signatories to the agreement reached in 2015.
Germany is also deeply involved in finding a diplomatic solution to
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the conflict in Syria.
Nor is Germany shying away from the responsibility to help
construct a new security architecture in the region—a process for
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which the Iran deal may have paved the way. Europe’s history offers
some useful lessons here. The 1975 Helsinki conference helped
overcome the continent’s Cold War–era divisions through the cre-
ation of the Organization for Security and Cooperation in Europe. If
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regional players choose to look at that example, they will find useful
lessons that might assist them in addressing their current conflicts.
Sometimes Germans need others to remind us of the usefulness of
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our own history. Last year, for example, I had an inspiring conversa-
tion with a small group of intellectuals in Jeddah, Saudi Arabia. One
of them remarked, “We need a Westphalian peace for our region.”
The deal that diplomats in Münster and Osnabrück hammered out in
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1648 to separate religion from military power inspires thinkers in the

Middle East to this day; for a native Westphalian like me, there could
be no better reminder of the instructive power of the past.
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RISING TO THE CHALLENGE

Closer to home, the Ukraine crisis has tested Germany’s leadership
and diplomatic skills. Since the collapse of Viktor Yanukovych’s
regime and the Russian annexation of Crimea in early 2014, Germany
and France have led international efforts to contain and ultimately solve
the military and political crisis. As the U.S. government has focused

on other challenges, Germany and France have assumed the role of

Russia’s main interlocutors on questions concerning European security
and the survival of the Ukrainian state.
Germany did not elbow its way into that position, nor did anyone
else appoint it to that role. Its long-standing economic and political
ties to both Russia and Ukraine made it a natural go-between for both
sides, despite Berlin’s obvious support for the victims of Moscow’s
aggression. The intense political debate
Perhaps no other European that played out within Germany over
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how to respond to the challenge only
nation’s fate is so closely enhanced Berlin’s credibility, by showing
connected to the existence the world that the government did not
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and success of the EU. take its decisions lightly. The Minsk
agreement that Germany and France
ha brokered in February 2015 to halt hostil-
ities is far from perfect, but one thing is certain: without it, the conflict
would have long ago spun out of control and extended beyond the
Donbas region of Ukraine. Going forward, Germany will continue
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to do what it can to prevent the tensions from escalating into a new
Cold War.
During the euro crisis, meanwhile, Germany was forced to confront
the danger posed by the excessive debt levels of some Mediterranean EU
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states. The overwhelming majority of the eurozone’s members and the

International Monetary Fund supported plans to demand that countries
such as Greece impose budgetary controls and hard but unavoidable
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economic and social reforms to ensure the eventual convergence of the

economies of the eurozone. But rather than placing the responsibility
for such changes in the hands of these countries’ national elites, many
in Europe preferred to blame Germany for allegedly driving parts of
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southern European into poverty, submission, and collapse.

Germany has come under similar criticism during the ongoing
refugee crisis. Last autumn, Germany opened the country’s borders
to refugees, mainly from Iraq and Syria. The governments of the
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Czech Republic, Hungary, and Slovakia worried that this move would
worsen the crisis by encouraging more refugees to enter their countries
in the hope of eventually crossing into Germany. So far, however,
such fears have proved unfounded.
How and when Europe will resolve this crisis remains unclear.
What is clear, however, is that even a relatively strong country such as
Germany cannot do it alone. We cannot give in to the rising desire of

certain groups of the electorate to respond on a solely national level,
by setting arbitrary limits on the acceptance of refugees, for example.
Germany cannot and will not base its foreign policy on solutions that
promise quick fixes but in reality are counterproductive, be they walls
or wars.
A reflective foreign policy requires constant deliberation over hard
choices. It also requires flexibility. Consider the recent refugee deal
Germany helped the EU strike with Turkey. Under this agreement,
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the EU will return to Turkey any migrant who arrives illegally in
Greece and in return will open a legal path for Syrians to come to the
EU directly from Turkey. The agreement also contains provisions for
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much deeper cooperation between the EU and Turkey. Despite
controversial developments within Turkey, such as the escalation of
violence in the Kurdish regions and the increasing harassment of the
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media and the opposition, Germany recognized that Turkey had a
critical role to play in the crisis and that no sustainable progress could
be made without it. No one can tell today whether the new relationship
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will be constructive in the long term. But there can hardly be progress
or humane management of the EU’s external border unless European
leaders engage seriously with their Turkish counterparts.
Some politicians, such as the former Polish foreign minister Radek
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Sikorski, have described Germany as Europe’s “indispensable nation.”

Germany has not aspired to this status. But circumstances have forced
it into a central role. Perhaps no other European nation’s fate is so
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closely connected to the existence and success of the EU. For the first
time in its history, Germany is living in peace and friendship with
France, Poland, and the rest of the continent. This is largely due to
the renunciation of complete sovereignty and the sharing of resources
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that the EU has encouraged for almost 60 years now. As a result,

preserving that union and sharing the burden of leadership are
Germany’s top priorities. Until the EU develops the ability to play a
stronger role on the world stage, Germany will try its best to hold as
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much ground as possible—in the interests of all of Europe. Germany

will be a responsible, restrained, and reflective leader, guided in chief
by its European instincts.∂

The Future of U.S.-Saudi

Relations
The Kingdom and the Power
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he relationship between the United States and Saudi Arabia
has come under unprecedented strains in recent years. U.S.
President Barack Obama has openly questioned Riyadh’s
ha
value as an ally, accusing it of provoking sectarian conflict in the
region. According to The Atlantic’s Jeffrey Goldberg, when Malcolm
Turnbull, Australia’s prime minister, asked Obama whether he saw
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the Saudis as friends, the president responded, “It’s complicated.”
Many Americans continue to believe that the Saudi government was
involved in the September 11, 2001, attacks, although the 9/11 Com-
mission found no evidence of institutional or senior-level Saudi
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support. The Senate has even passed a bill that would allow Americans
to sue the Saudi government in U.S. courts for its alleged support
of terrorism.
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The Saudis have been equally intemperate in their recent

comments. The kingdom’s officials have threatened to sell off
hundreds of billions of dollars of U.S. assets if Congress passes the
bill, even though such a move would hurt Saudi Arabia much more
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than it would the United States. And they have made little effort to
hide their contempt for Obama, whom they see as too willing to
jettison old friends in order to cozy up to enemies. Prince Turki al-
Faisal—the most outspoken senior member of the ruling family
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and a former head of Saudi foreign intelligence and former

ambassador to the United States—has accused Obama of “throw[ing
Saudi Arabia] a curve ball” because he has “pivoted to Iran.” The
prince went on to say that the Saudis would “continue to hold the
F. GREGORY GAUSE III is Professor of International Affairs and John H. Lindsey ‘44 Chair
at the Bush School of Government and Public Service at Texas A&M University.
The Future of U.S.-Saudi Relations
American people as [an] ally”—but implied that they no longer

view the American president as one.
Several pillars of the two countries’ relationship, built after World
War II, have started to fracture. The Cold War, which once united the
unlikely allies against the Soviets, has long since ended. With Saddam
Hussein’s downfall in Iraq, the threat of an overt military attack on
Saudi Arabia or its smaller Gulf neighbors has faded. And the upsurge
in domestic U.S. oil production has revived dreams of American
energy independence.
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As the foundations of the relationship have weakened, its American
critics have grown bolder. They point out that Wahhabism, the
ultraconservative form of Islam that Saudi Arabia promotes,
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directly contradicts American values and that Saudi Arabia stands
near the bottom of any world ranking on democracy, religious
freedom, human rights, and women’s rights. They argue that the
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Saudi regime, an absolute monarchy in a democratic age, is so anach-
ronistic that it will not survive much longer. And they emphasize
the fact that the Saudis share few priorities with the United States
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in the Middle East. As Washington is attempting to develop a new
relationship with Tehran, the Saudis continue to fear Iranian
encirclement; they refuse to concentrate their resources on the fight
against the Islamic State (also known as ISIS) and al Qaeda and
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have instead demanded that the United States support their parochial
military adventures in Yemen and elsewhere.
To these critics’ dismay, however, both countries continue to work
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together closely. Obama, for all his public misgivings, went to Riyadh
in April to attend the Gulf Cooperation Council summit, where
he reiterated his commitment to the security of Saudi Arabia and
the other Gulf states. Washington continues to sell vast quantities of
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arms to Riyadh. The Saudis, for their part, have held their noses and
publicly endorsed the Iran nuclear deal. And intelligence sharing
continues apace.
While such cooperation may cause critics to gnash their teeth, it
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serves both countries well. The United States has a crucial interest in
maintaining a clear-eyed but close relationship with Saudi Arabia. As
political authority collapses throughout the Middle East, Washington
needs a good working relationship with one of the few countries that
can govern its territory and exert some influence in those areas where
real governance no longer exists. Although their strategic visions may

diverge, the two countries still share many goals. Both see ISIS and
al Qaeda as direct threats. Neither wants Iran to dominate the region.
Both want to avoid any disruption to the vast energy supplies that
flow through the Persian Gulf. And both would like to see a negotiated
solution to the Israeli-Palestinian conflict. More still unites Washington
and Riyadh than divides them.
GROWING APART
The United States and Saudi Arabia came together in the aftermath
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of World War II, the first war in which oil was a strategic commodity.
U.S. military planners worried about access to oil in any future
conflict. The Saudis had lots of it, and U.S. companies had begun
hi
to develop the Saudi oil industry. Access to cheap energy was also
essential for U.S. plans to rebuild the destroyed economies of Western
Europe and Japan. For their part, the Saudis recognized that British
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power, which had shaped the post–World War I Middle East, was
receding and that they had more in common with Washington than
with Moscow in the emerging Cold War. They had already thrown
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in their lot with U.S. oil companies; joining the U.S. side in the
emerging bipolar world made perfect sense, even though the two
countries disagreed profoundly on Arab-Israeli issues: the biggest
crisis in U.S.-Saudi relations before the 9/11 attacks was the Saudi oil
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embargo during the 1973 Arab-Israeli war. But common geopolitical

and economic interests were enough to sustain the relationship,
despite the differences over Israel.
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Today, however, the situation has changed. The two countries still
share interests, but they have different priorities. And they disagree
on how to respond to Iran’s growing power.
The Obama administration’s top priority in the region is rolling
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back and ultimately destroying Salafi jihadist groups—above all, ISIS

and al Qaeda. These groups may not represent an existential threat to
the United States, but they do pose an immediate danger to the coun-
try and its allies. The Obama administration’s other major goal is to
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limit Iran’s ability to develop a nuclear weapon, an objective that the

recent international agreement has achieved. After the deal, Washing-
ton hoped to engage Tehran in regional diplomacy, particularly over
Syria, and perhaps even to normalize relations. The administration
has not yet realized those hopes, but Obama clearly wants to cooper-
ate with Iran even as he seeks to limit its influence.
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hi
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Grin and bear it: Barack Obama and King Salman in Riyadh, April 2016
Washington cares much less about other regional goals. Ever since
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the administration’s early efforts to jump-start the Israeli-Palestinian
peace process foundered, the U.S. government has moved the issue to
the back burner. And in Syria, although the Obama administration
has repeatedly said that President Bashar al-Assad must step down as
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part of a negotiated settlement to the civil war, it has done little to

make that happen. The United States has provided scant support to
the Syrian opposition, and ever since August 2013, when Obama
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backed down from the redline he had drawn over the use of chemical
weapons, it has stopped threatening to attack Assad directly. ISIS, not
the Assad regime, now finds itself in Washington’s cross hairs.
Saudi Arabia’s priorities are almost exactly the opposite. Saudi kings
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rarely set out their foreign policy priorities in speeches or published

national security strategies. But the regime’s actions make clear that
its top priority is to roll back Iranian influence across the region. Thus, in
Syria, the Saudis are directing their financial, intelligence, and diplo-
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matic resources not primarily against ISIS but against the Assad regime.
And the Saudi air force, which had initially joined the U.S.-led cam-
paign against ISIS in 2014, has turned its attention to Iranian-backed
rebels in Yemen.
The Saudis see all regional politics through the lens of Iranian
advances and, in their more honest moments, through the lens of their

own failure to counter such moves earlier. Even before the Arab Spring,
the Saudis were on a losing streak. In Iraq, which had previously
helped block Iranian access to the Arab world, Tehran’s influence grew
to unprecedented levels after the 2003
U.S.-led invasion. In Lebanon, after
The United States has Syrian forces withdrew from the coun-
a crucial interest in try in 2005, the Saudis supported a
maintaining a clear-eyed coalition of political parties known as
but close relationship the March 14 alliance, which competed
m
against Iran’s ally Hezbollah and vari-
with Saudi Arabia. ous pro-Syrian politicians. But even
though the March 14 alliance won the
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2005 and 2009 parliamentary elections, Hezbollah continued to dom-
inate Lebanese politics, conducting its own foreign policy and defy-
ing the government at will. As for the Palestinian territories, after
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Hamas won the 2006 parliamentary elections there, the Saudis bro-
kered a deal between it and the Palestinian Authority, but the pact
soon collapsed, and Hamas moved even closer to Iran.
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The Arab Spring only heightened Riyadh’s sense of encirclement.
When protesters toppled Egyptian President Hosni Mubarak, the
Saudis lost one of their most reliable partners. And they blamed the
United States, which they saw as having abandoned a loyal ally. They
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reacted by shoring up states in their own backyard, sending troops

into Bahrain to support the Sunni ruling family against a popular
uprising by its Shiite-majority population. Although an independent
od
inquiry sponsored by the Bahraini government found no evidence of

direct Iranian involvement in the protests, the Saudis continue to
blame Tehran for instigating unrest among Shiites in the Gulf
monarchies, including Saudi Arabia itself.
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The Saudis see the Syrian uprising against Assad as their best
chance to reverse Iran’s geopolitical gains. They are not happy about
the prominent role that ISIS and al Qaeda are playing in the civil war,
but they argue that the first step in reducing these extremists’ appeal
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among Sunnis in Syria and elsewhere should be getting rid of Assad.

The Saudis also question why the Obama administration has proved
so reluctant to support them in this conflict, despite its public position
that Assad must go. Many Saudis doubt Obama’s credibility; some
even wonder if he has secretly decided to support Shiite Iran over the
United States’ traditional Sunni allies.
The Saudis’ fixation on Iran also explains their intervention in

Yemen, which they have long seen as within their sphere of influence.
After the 2011 Arab Spring uprising there, Saudi Arabia led a diplo-
matic effort that secured the resignation of President Ali Abdullah
Saleh and the formation of a national unity government. Then, in
2014, a rebel militia captured the capital, Sanaa. The Houthis, as the
rebel group is known, draw their support from the country’s Shiite
north. Yemen’s Shiites belong to the Zaydi sect, which practices a dif-
ferent form of Shiism from the form that Iranians practice; histori-
m
cally, tribalism and regional identity, not sectarianism, have dominated
Yemeni politics. Nonetheless, since the Houthis emerged in the first
decade of this century, they have adopted the rhetoric of the Iranian
hi
Revolution and looked to Tehran for aid. By all accounts, Iran had no
role in the movement’s origins, and the Iranians have provided the
group with only limited support ever since. Yet the Saudis still see the
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growth of Houthi power in Yemen as part of an Iranian effort to
dominate the Arab world and surround the kingdom. This perception
explains why when the Houthis moved to capture the port city of
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Aden in March 2015, Saudi Arabia responded by launching air strikes
and the United Arab Emirates, which also seeks to contain Iran, sent
troops to Yemen to check the Houthi advance.
The chaos in Yemen encapsulates the common interests and
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differing priorities that define the U.S.-Saudi relationship. The Obama

administration has focused on fighting al Qaeda and has launched
frequent drone strikes against the militants in Yemen. But the Saudi
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campaign against the Houthis has opened up territory, particularly in

Yemen’s south, where ISIS and al Qaeda now operate freely. Even
though the United States has no particular quarrel with the Houthis,
it has provided logistical support for the Saudi-led campaign against
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them. Washington’s desire to mend fences with Riyadh after the Iran
nuclear deal, and to sustain a cooperative relationship more generally,
has prevailed over its misgivings.
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IT’S COMPLICATED
Critics in the U.S. foreign policy establishment point to such
strategic contradictions when making the case that the United States
should dump Saudi Arabia as an ally. But their strongest argument
concerns Saudi support for the fundamentalist Wahhabi, or Salafi,
interpretation of Islam. As Chris Murphy, a Democratic senator

from Connecticut, argued in a January 2016 speech, “Though ISIS

has perverted Islam . . . the seeds of this perversion are rooted in a
much more mainstream version of the faith that derives, in sub-
stantial part, from the teachings of Wahhabism.” He went on to
demand that Washington end its “effective acquiescence to the Saudi
export of intolerant Islam.”
Much of Murphy’s case against the kingdom was well founded.
Wahhabism is indeed intolerant, puritanical, and xenophobic, and
Saudi Arabia has spent billions of dollars promoting it since the oil
m
boom of the 1970s. Furthermore, ISIS and al Qaeda do share many
elements of the Wahhabi worldview, especially regarding the role of
Islam in public life.
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Yet Murphy’s argument missed a critical detail: the fact that Saudi
Arabia has not controlled the global Salafi-Wahhabi movement since
the 1980s and that since the 1990s that movement has turned its sights
ha on the Saudi regime itself. The Salafism
The Saudis see all regional that Saudi Arabia started exporting to
the Muslim world in the 1970s was, like
politics through the lens of the version the Saudis practice at home,
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Iranian advances. politically passive. It enjoined believers
to accept their governments as long as
they were at least nominally Muslim.
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During the jihad against the Soviet Union in Afghanistan, however—

which both the United States and Saudi Arabia supported—
international Salafism morphed into a revolutionary movement.
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Al Qaeda grew out of that movement, as did ISIS. Yet both groups
despise the Saudis, in part because of their ties to the United States
and in part because official Saudi clerics regularly condemn the groups
for their “deviations” from the true path.
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What all of this means is that no amount of U.S. pressure on Saudi

Arabia will alter the trajectory of Salafi jihadism, for that ideological
movement is now independent of Saudi control. It is true that some
young Saudis, schooled in conservative Wahhabism, have gone on to
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join the terrorist groups. But Saudi Arabia is hardly the main supplier
of ISIS recruits today; that dubious distinction goes to Tunisia, the one
democratic success to emerge from the Arab Spring and among the
most secular of Arab societies. As for the many Westerners who have
also joined the group, it is hard to see how Saudi Wahhabism is
responsible for their choices.
For all of these reasons, working with the Saudis to fight ISIS,
al Qaeda, and similar organizations is more effective than ostracizing
the kingdom would be. U.S. intelligence agencies already cooperate
with Riyadh extensively, and the results have been impressive. In
2010, a Saudi intelligence tip led to the foiling of a plot to send
explosives from Yemen to the United States by courier. Last August,
collaboration among the intelligence agencies of Lebanon, Saudi
Arabia, and the United States led to the arrest in Beirut of Ahmed al-
Mughassil, who is accused of masterminding the 1996 Khobar
m
Towers bombing in Saudi Arabia that killed 19 U.S. airmen. Many
other successes have never become public. And although individual
Saudis continue to send money to Salafi jihadist organizations, Da-
hi
vid Cohen, until February 2015 the U.S. undersecretary of the trea-
sury for terrorism and financial intelligence (now deputy director of
the CIA), has said that the Saudi government is “deeply committed
ha
to ensuring that no money goes to ISIL [as U.S. government officials
refer to ISIS], al Qaeda, or the Nusra Front”—the last al Qaeda’s
official affiliate in Syria.
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On the ideological battlefield, efforts by Saudi clerics to delegitimize
Salafi jihadism might seem hypocritical to Westerners, given the
benighted views these clerics themselves hold. But attacking the
jihadist message from within its own worldview works much better
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than Western-led propaganda efforts. Washington should do what it

can to encourage the development of liberal and tolerant interpretations
of Islam. But since it will always be an outsider in these debates, it
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needs to encourage the insiders—including the Saudis—who are already

fighting this battle.
HERE TO STAY
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Critics also point to the rise in U.S. oil production as evidence that
the U.S.-Saudi alliance has outlived its purpose. But the ties between
the two countries have never been about American access to Saudi
hydrocarbons. In fact, when the relationship began in the early decades
Ma
of the Cold War, the United States did not import a drop of oil from
the Arabian Peninsula. What has always undergirded the relationship
is the importance of Saudi (and the rest of the region’s) oil to the
global market. The Persian Gulf still produces about 30 percent of the
world’s oil, with Saudi Arabia accounting for over a third of that output.
Disruptions in the Gulf thus continue to reverberate worldwide.

To see how important a role Saudi policy still plays in the global
market, just ask shale oil producers in North Dakota and Texas how
the recent collapse in global prices has affected their business. Although
that collapse was largely the result of a surge in supply caused by those
same drillers, Saudi Arabia’s decision not to cut its production in response
to that glut also played a huge role. Put simply, no other country wields
more influence in the global oil market—yet another reason why
Washington still needs Riyadh.
The last argument frequently made against preserving U.S. ties
m
with the Saudi government has to do with the regime’s supposed
fragility, which some experts argue makes Riyadh too fragile to serve
as a reliable long-term partner. Very few analysts predict that the
hi
House of Saud is likely to fall sometime
soon. But many point to the myriad
The regime has survived, problems within the kingdom and ask
again and again. It will ha whether the United States should at
probably continue to do so least take the prospect of the regime
for some time. crumbling more seriously. Last October,
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John Hannah, who was Vice President
Dick Cheney’s national security adviser,
described how the combination of falling oil prices, tensions in the
Saudi ruling family, and regional crises “could eventually coalesce into
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a perfect storm that significantly increases the risk of instability within

the kingdom.”
There is no doubt that Saudi Arabia faces some serious problems.
od
First among them, the country remains utterly dependent on oil at a

time when prices have crashed. Yet this argument overlooks Riyadh’s
substantial cash reserves, which total more than $550 billion and have
helped the government cushion the blow so far. If prices stay low and
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the kingdom keeps spending money at its current rate, it could run
through those reserves in about five years. It does not, however, face
an immediate fiscal crisis, and it can easily borrow against its petroleum
reserves. When oil prices collapsed in the 1980s, the Saudis sustained
Ma
budget deficits for more than 20 years by running down their financial
reserves and by borrowing domestically and, to a lesser extent, on
international markets. By the end of the 1990s, Saudi government
debt had risen to over 100 percent of GDP. Today, that number is less
than ten percent. The wolf might be in the neighborhood, but it is not
yet at the door.
It is also true, as the doomsayers point out, that the monarchy is

going through a tumultuous leadership transition. Ever since 1953,
the country has been led by sons of the kingdom’s founder, Abd al-
Aziz ibn Saud. But the current king, Salman, who is 80 years old, will
be the last monarch from that generation. For years, palace watchers
have speculated about how leadership would be transferred to the
next generation. King Salman has since settled that question, at least
for now, by placing enormous power in the hands of his nephew
Prince Muhammad bin Nayif and his son Prince Muhammad bin
m
Salman. The former, a veteran Saudi politician in his mid-50s, is a
familiar figure; the latter is relatively new to the political scene. Only
30 years old, Muhammad bin Salman has been put in charge not only
hi
of the Defense Ministry but also of economic and oil policy, making
him the second most powerful person in the country. And he has not
hesitated to use that power. He announced plans to privatize part of
ha
Saudi Aramco, the state oil company, has made himself the public
face of the kingdom’s controversial campaign in Yemen, and recently
unveiled an ambitious plan, “Saudi Vision 2030,” to reduce the
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country’s dependence on oil. The Saudis have made some preliminary
moves to implement the plan—they have reduced subsidies on water
and electricity, and in May, Salman replaced the country’s long-
serving oil minister and reorganized a number of government
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departments—but it remains unclear whether they will meet their

ambitious targets.
Salman’s decision to concentrate so much authority in the hands of
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just two family members has caused grumbling among the other
powerful royal cousins, many of whom expected to inherit at least
some of the influence their fathers wielded in the old, more consensual
days. This grumbling has given rise to plenty of rumors—a common
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feature of court politics—but so far, no signs of a serious feud have

materialized. The jousting today is nothing like what occurred in the
late 1950s and early 1960s, when King Saud and Crown Prince Faisal
openly struggled for power, leading to frequent changes in top officials,
Ma
long absences from the country by senior princes, the strategic deploy-
ment of military units loyal to different princes, and the intervention
of the religious establishment into family politics.
Then as now, many Middle East watchers predicted that such
conflict would spell the end of the Saudi regime. They also pointed to
external forces: first the republican Arab nationalism of Gamal Abdel

Nasser and then the Iranian Revolution of 1979. In 2003, Robert Baer,
a well-informed former U.S. intelligence official, writing in The
Atlantic, said that “signs of impending disaster are everywhere” and
that “sometime soon, one way or another, the House of Saud is coming
down.” In 2011, Karen Elliott House, a respected journalist, warned in
The Wall Street Journal that the Arab Spring would soon wash over
Saudi Arabia as well. Yet the regime has survived, again and again.
And it will probably continue to do so for some time.
m
FRIENDS WITH BENEFITS
Washington’s relationship with Riyadh will never find many enthusiastic
defenders in the United States. Saudi Arabia’s human rights abuses,
hi
its promotion of religious fundamentalism, its obsession with Iran,
and its refusal to focus on fighting U.S. enemies—all raise the question
of whether the Saudis are worth the trouble.
ha
They are. Intelligence cooperation against Salafi jihadist groups
benefits both the United States and Saudi Arabia, and efforts to reduce
the financial resources available to terrorists have proved particularly
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successful. On energy, sustaining a working relationship will not mean
that the Saudis will always do what Washington wants when it comes
to adjusting production levels, but it does mean that they will at least
listen to U.S. arguments. Then there are the tens of thousands of
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U.S.-educated Saudis, many of whom are working to bring about

gradual reform and want to maintain a strong relationship with the
United States. If Washington initiated a public divorce, it would cut
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this influential community off at the knees.

More important, the United States should not distance itself from
one of the few Arab countries still able to govern itself and influence
events in the region. Weak and failed states lie at the root of today’s
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crises in the Middle East. From Libya to Iraq and Syria to Yemen,
political vacuums have created civil wars, drawn in regional powers,
and provided safe havens for terrorists and extremists.
The Obama administration’s overtures toward Iran make enormous
Ma
geopolitical sense in this context. Iran governs its territory fairly

effectively and wields influence over many of these civil wars. Unlike
ISIS and al Qaeda, it also has an address and a phone number.
Americans can talk to the Iranians and deal with them using normal
diplomatic tools: incentives and deterrents, carrots and sticks—just
what led to the nuclear deal.
The same is true of Saudi Arabia. It maintains relative domestic

stability in a chaotic region, and it helps shape the political fights that
are determining the future of that region. Compared with the Iranian
regime, however, Riyadh shares more foreign policy goals with Wash-
ington and is far more eager to cooperate.
Washington should thus maintain the relationship for now, while
acknowledging its limits. The two countries’ differences in priorities
will not disappear anytime soon. The next U.S. president will probably
not take stronger action against the Assad regime and will inevitably
m
focus more on ISIS and al Qaeda than on Iran and its allies. But
strengthening U.S.-Saudi ties will not require grand gestures. It
simply needs better management. Washington should reaffirm the
hi
importance of the security relationship, nurture daily cooperation
on important issues such as counterterrorism, and encourage some
honesty, from both sides, about their different goals, so that neither
ha
will surprise the other. The reason the Syrian redline incident alarmed
the Saudis so much is because Obama’s decisions caught them
completely unawares.
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In Yemen, the United States can use its influence over Saudi
Arabia to help it find an exit ramp. A Houthi delegation visited
Riyadh in April 2016, suggesting that the Saudis aren’t opposed to a
political solution to the crisis. Yemen has suffered from instability
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for years, and no new deal will change that. But an agreement that
restored a mutually acceptable government in Sanaa and limited the
military reach of the Houthis to their natural base in Yemen’s north
od
would represent an improvement over the current situation. It might

also allow a new Yemeni government to concentrate its resources on
the ISIS and al Qaeda presence in the country. There are encouraging
signs that the Saudis and the Emiratis are now concentrating some
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of their military efforts in Yemen against al Qaeda.

The Saudis still need U.S. arms and military training. Washington
should provide both, but it should do so in a way that nudges the
Saudis toward a more accommodating relationship with the Iraqi
Ma
government. Although the Saudis have finally reestablished their

embassy in Baghdad, they have refused to offer tangible political,
diplomatic, or financial support to Iraqi Prime Minister Haider al-
Abadi, which has weakened his efforts to build an Iraqi government
that is less reliant on Iran. Were the Saudis to change course, it
could pay long-term dividends, both in the fight against ISIS and in

helping reduce the animosity between Sunni Iraqis and the central
government. The United States and Saudi Arabia would both ben-
efit, and Iran would lose its exclusive influence in Baghdad.
What Washington should not do, however, is encourage the Saudis
to “share” the region with Iran, as Obama has expressed an interest in
doing. The Saudis would interpret any U.S. effort to mediate between
Riyadh and Tehran, or even any calls for Saudi Arabia to come to
terms with Iran, as an effort to consolidate Iranian gains at the expense
of the Saudis and their allies. Washington should simply continue its
m
own cautious effort to improve its relations with Tehran. The Saudi
leadership is made up of supreme realists—that is how they have
stayed in power for so long—and should U.S.-Iranian ties improve,
hi
the Saudis will read the tea leaves and adjust to the new reality on
their own. Furthermore, the collapse of oil prices might do more to
bring Riyadh and Tehran to the table in the next year than anything
ha
that Washington could do or say.
Such arguments for sustaining a positive but transactional alliance
with Saudi Arabia have little emotional appeal. Relationships based
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on common interests rather than common values rarely do. But in a
Middle East that shows no signs of stabilizing anytime soon, it would
be foolish for Washington to ignore how much it benefits from a close
relationship with Riyadh.∂
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The Truth About

American Unemployment
How to Grow the Country’s Labor Force
m
Jason Furman
I
hi
n the wake of the financial crisis of 2008 and the Great Recession
that followed, many economists worried that even if the U.S.
economy improved, unemployment would remain high for years
ha
to come. Some warned darkly of a “jobless recovery.” Those fears have
proved unfounded: since peaking at ten percent in October 2009, the
U.S. unemployment rate has fallen by half and is now lower than it
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was in the years leading up to the crisis. Beyond the basic unemployment
rate, a broad range of evidence shows that the labor market has largely
returned to good health. Compared with earlier in the recovery, far
fewer workers are underemployed or underutilized. Long-term
Al
unemployment has fallen steadily, from an all-time high of four percent

of the labor force in early 2010 to just over one percent today. And
adjusting for inflation, average hourly wages have been increasing for
od
more than three years.

Yet one aspect of the labor market has stubbornly refused to
improve: the labor-force participation rate. The share of Americans at
least 16 years old who are working or looking for work remains three
so
percentage points lower today than it was prior to the onset of the
recession in December 2007. This is the case even though the unemploy-
ment rate has improved, because the unemployment figure does not
include those who have left the work force altogether.
Ma
Most of the decline in the labor-force participation rate has resulted

from a large retirement increase that began in 2008. That year, the
oldest baby boomers turned 62 and became eligible for Social Security.
An aging population, however, cannot fully account for the drop:
JASON FURMAN is Chair of the White House’s Council of Economic Advisers, the chief
economist to the U.S. president. Follow him on Twitter @CEAChair.

Jason Furman
labor-force participation is down even among prime-age adults—those

between the ages of 25 and 54.
That decline is not unique to this particular economic recovery.
Instead, it is the continuation of a troubling pattern that began among
men more than 60 years ago and among women about 15 years ago. In
1953, 97 percent of prime-age American
men participated in the labor force;
In 1953, 97 percent of today, that figure is down to 88 percent.
prime-age American men In 1999, after decades during which
m
participated in the labor millions of women began to work out-
force; today, that figure is side the home, 77 percent of prime-age
American women participated in the
hi
down to 88 percent. labor force. Today, that figure has fallen
to 74 percent. During both time periods,
ha the United States experienced larger
drops in labor-force participation rates and lower overall participation
than most other advanced economies.
It is possible to view a drop in overall labor-force participation
iT
rates as a sign of progress: more people can now support themselves
in retirement without having to continue working into old age, and
many others are opting to stay in school longer, or raise families, or
simply work less and enjoy more leisure time. But the evidence is
Al
mounting that the decline in prime-age participation represents a

genuine problem for the U.S. economy and for American society.
First, it poses a challenge to sustainable long-term economic growth,
od
as a larger share of the population becomes more dependent on the

economic output of a relatively smaller group of workers. Second, and
even more important, is the human toll of involuntary joblessness.
The loss of earnings from workers who move out of the labor force
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puts enormous strain on households, affecting not only workers them-

selves but also their spouses, children, and other dependents. Many
people who stay out of work for long periods find that their incomes
remain lower even when they ultimately manage to find new jobs.
Ma
The effects of joblessness also reach far beyond household finances.

For decades, researchers have found that long-lasting unemployment
can have severe consequences for mental health, physical health, and
even mortality. Recent years have seen a massive increase in opioid
drug abuse and an associated rise in overdose deaths and suicides
among Americans without college degrees—the same group that has
The Truth About American Unemployment
m
hi
ha
Skills to pay the bills: iron-working apprentices training in West Virginia, March 2012
seen its labor-force participation decline most precipitously over the
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past five decades. In other words, a lack of work doesn’t simply mean
less income. It can lead to more profound losses as well.
The good news is that there are a number of things that the govern-
ment can do to help address the problem; indeed, the fact that the
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widespread decline in labor-force participation has played out

differently in different countries only underscores the extent to which
economic policy can make a difference. U.S. President Barack Obama
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has outlined a set of bold policies—many of which depart from

simplistic orthodox prescriptions—that would significantly improve
how the U.S. labor market functions and help more Americans obtain
higher-paying jobs.
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FROM FOOTNOTE TO HEADLINE

Labor-force participation tends to decline in recessions, as more
people exit the work force and fewer people enter it. That short-term
Ma
effect tends to fade away as the economy recovers. But in recent decades,
JASON COHN / REUTE RS
longer-term trends have drowned out those short-term cycles. For

example, after recovering from the recession of 1990–91, the U.S.
economy enjoyed an almost unprecedented boom during the rest of
the 1990s. Yet by 2000, neither the labor-force participation rate
for prime-age men nor their employment-population ratio (a related

Jason Furman
measure that includes only those who are actively working and excludes
those looking for work) had returned to its pre-recession peak.
That outcome—a recovery in the labor market but with fewer
prime-age men in the work force—was not unique to the boom years
of the 1990s. In all but one period of recovery since the mid-1950s,
the employment-population ratio for prime-age men failed to reach
the peak it had achieved before the previous recession. But few
observers took note. As long as overall participation in the labor
force was increasing—which it was from the end of World War II
m
until 2000, as millions of women entered the work force and the
baby boomers entered their prime working years—the decline in
the labor-force participation rate for prime-age men remained at
hi
most a footnote.
But around 2000, women’s participation rates also began to fall.
And around 2008, the first cohort of baby boomers began to retire.
ha
When the worst recession since the Great Depression hit at the same
time, all three phenomena converged to form a perfect storm: the
number of Americans either leaving the work force or failing to enter
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it exceeded the number who were joining it.
Since then, older Americans (those 55 and up) have seen their
labor-force participation rates rise. This is at least in part because
today, older people tend to work at jobs that are less physically
Al
demanding than the ones that older workers held in the past. Mean-
while, younger people have experienced large drops in labor-force
participation but have also begun to attend college at far higher rates
od
than in previous decades. Consequently, the share of “idle” younger

people (those neither in school nor working) has not risen over the
long run, and although many Americans have delayed entering the
work force, many more of them will have better skills when they
so
eventually do.
SUPPLY OR DEMAND?
Because men’s participation in the labor force has been declining for
Ma
decades, it makes sense to focus on that segment of the population

when trying to understand what lies behind the overall long-term
trend. All groups of prime-age men have experienced a drop in
participation, but the less educated have suffered disproportionately.
Those with at most a high school education saw their participation
rate fall from 97 percent in 1964 to 83 percent in 2015. In contrast, the
decrease over the same period for those with a college degree was far
smaller: from 98 percent to 94 percent. (More recently, prime-age
women have seen a similar pattern.)
One possible explanation for these declines is that the supply curve
of labor has shifted—that is, more men simply do not want to work.
In this vein, some have speculated that as more married women have
entered the labor force, more of their husbands have decided to not
work or have opted to take a substantial amount of time off to pursue
job training or education or to care for children. But the data suggest
m
that is not what is happening: in fact, less than a fifth of prime-age
men who are not in the labor force have a working spouse, and that
figure has actually decreased during that last 50 years, notwithstanding
hi
the large overall increase in the number of women who work. This
owes, in part, to an increase in what economists call “assortative
mating”: men and women who are successfully employed are increas-
ha
ingly coupling up with others who are successfully employed, rather
than with partners who do not want to work.
Other proponents of supply-based explanations claim that govern-
iT
ment programs—disability insurance, in particular—have made staying
out of the labor force more attractive today than in the past. Here
again the data suggest otherwise: from 1967 until 2014, the percentage
of prime-age men receiving disability insurance rose very little, from
Al
one percent to three percent, which accounts for only a small share of
the eight-percentage-point rise in nonparticipation over this period.
So disability insurance explains at most one-quarter of the fall in
od
participation rates since 1967. But even that is likely an overestimate,

because at least some of the increase in the number of men receiving
disability insurance payments is probably a consequence of men who
are unable to work leaving the labor force rather than a cause of it.
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What is more, over the same period, other government assistance

programs became increasingly hard to access. This was particularly
true for people who were out of work, as many state governments
established stricter eligibility standards for unemployment insurance
Ma
and the federal government cut spending on traditional cash welfare

payments. Meanwhile, few nonworking, able-bodied adult men without
children are now eligible to receive nutritional assistance. Government
aid thus explains at most only a small fraction of the drop in prime-age
male labor-force participation, casting doubt on another set of supply-
side theories.

Jason Furman
The most significant weakness of labor supply explanations is that

they account for only one piece of data: the drop in the quantity of
labor supplied. By itself, that decline would tend to lead to rising wages
as workers became more scarce. Yet in recent decades, less educated
Americans have actually suffered a reduction in their relative wages
(the amount they earn compared to
what other groups do). From 1975 until
A lack of work doesn’t 2014, those with a high school degree
simply mean less income. It or less watched their relative wages
m
can lead to more profound fall from more than 80 percent of the
losses as well. amount earned by full-time, full-year
workers with at least a college degree
hi
to less than 60 percent. This fall would
not have happened if a large swath of less educated men had simply
chosen to stop working and to rely on their partners’ incomes, disability
ha
insurance, or something else—a shift that, all things being equal,
would have led to an increase in their relative wages and not a decrease.
The inability of supply-side explanations to account for both falling
iT
labor-force participation and lower relative wages suggests that
something else is going on: the demand curve for labor has shifted, or
has at least shifted more than the supply curve. In other words, falling
demand for less skilled workers has simultaneously reduced their
Al
employment and lowered their wages.

Economists do not have a clear answer for why the demand for
lower-skilled labor is falling. One possible cause is the long-term
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drop in manufacturing jobs that has resulted from technological

advances and the globalization of markets. This decline has elimi-
nated millions of U.S. manufacturing jobs over the past several
decades, leaving many people—mostly men—unable to find new
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jobs. Another potential factor is what economists call “skill-biased

technological change”: advances that benefit workers with certain
skill sets more than others. Such changes have increased the demand
for more skilled workers while hollowing out jobs in the middle to
Ma
lower end of the skill distribution.

Another possible reason that the demand for workers has fallen is
the increase in the number of previously incarcerated people in the
population—a byproduct of the massive growth in recent decades in
the number of Americans behind bars. The vast majority of those who
have served time in prison are men, and they tend to face substantially
lower demand for their labor once they are released. In many states,
the formerly incarcerated are legally barred from a significant number
of jobs by occupational licensing rules or other restrictions on the
hiring of those who have been incarcerated.
FLEXIBLE VS. SUPPORTIVE

A wide range of developed countries have experienced changes in
labor demand similar to those in the United States, with increasing
demand for skilled labor and a reduced share of manufacturing jobs.
m
But judging from the available data, between around 1980 and around
2010, the United States underwent both a larger decline in prime-age
male participation and a more significant increase in economic inequality
hi
than nearly any other member of the Organization for Economic
Cooperation and Development (OECD). This suggests that government
policies and institutions play a large role in shaping how an economy
ha
responds to such changes.
To understand that role, it is helpful to compare the United States
to France, a country with a very different set of institutions and rules.
iT
Economists describe the United States’ labor market as being far
more “flexible” than France’s. In the United States, governments and
institutions such as labor unions place relatively few barriers in the
way of employers who want to change whom they employ and what
Al
they pay. In France, on the other hand, “supportive” labor-market

policies are intended to prop up both employment levels and wages.
In the United States, 12 percent of employees are covered by collective-
od
bargaining agreements, and it is relatively easy for private-sector firms

to hire and fire workers. In France, by contrast, more than 90 percent
of workers are covered by collective-bargaining agreements, and most
employees enjoy a substantial set of protections, including generous
so
severance payments and restrictions on dismissal. Furthermore, the

minimum wage for adults in France is around 50 percent higher than
the federal minimum wage in the United States.
Some argue that the American-style labor market makes it easier
Ma
for everyone who wants a job to get one, whereas policies such as a
minimum wage introduce inefficiencies and inflexibilities into the
economy. By that logic, the U.S. labor market should easily outperform
the French labor market in terms of employment. And yet, the proportion
of prime-age men in the labor force is five percent lower in the United
States than it is in France. Even taking into account France’s higher

Jason Furman
unemployment rate, France still has had a higher percentage of prime-

age men in jobs than the United States has in every year since 2001.
The U.S.-French comparison is not an isolated example. The
United States has the lowest level of labor-market regulation, the
fewest employment protections, and the third-lowest minimum cost
of labor among the OECD countries—attributes that should encourage
better labor-force participation, according to conventional economic
wisdom. But the United States ranks toward the bottom of OECD
countries in terms of the percentage of prime-age men actively
m
working, and most of the countries that rank lower—such as Greece,
Italy, Portugal, and Spain—are currently suffering from historically
high overall unemployment rates. This poor U.S. performance
hi
reflects a long-term trend: since 1990, the United States has had the
second-largest increase in prime-age male nonparticipation among
OECD members. The gap between theory and reality results partly
ha
from the fact that the U.S. government does far less than other
countries to support workers. The United States spends just 0.1
percent of GDP on so-called active labor-market policies, such as
iT
job-search assistance and job training, much less than the OECD
average of 0.6 percent of GDP and less than every other OECD
country, except Chile and Mexico, spends.
The picture is no better when it comes to the labor-force participation
Al
rates of American women. The proportion of prime-age American

women currently working places the United States at 26 out of the 34
OECD countries. The OECD countries that fare worse than the United
od
States on this measure either have unusually high overall unemployment

rates (the peripheral European economies, for instance) or tend to
have different cultural norms relating to women taking part in formal
employment (Mexico and Turkey, for example). Moreover, for the past
so
quarter century, most other OECD countries have seen the participation
of prime-age women increase, whereas in the United States, it has
moved in the opposite direction.
This, too, stems partly from the way that the greater degree of flex-
Ma
ibility for employers in the U.S. labor market discourages participation,

particularly for women. Women everywhere bear a disproportionate
burden when it comes to childcare and housework. But the United States
is the only OECD country that does not guarantee paid leave for family
reasons, such as the birth of a child, or for illness. And while the gross
cost of U.S. childcare is close to the OECD average, subsidies for childcare
in the United States are considerably lower than the OECD average, which
means that the net cost of childcare in the United States is among the
highest of any advanced economy. Moreover, although the United States
generally has low tax rates, the U.S. tax system imposes a relatively high
rate on secondary earners, which creates a disincentive for stay-at-home
parents to enter (or reenter) the work force.
Many other advanced economies have serious problems in their
labor markets, especially when it comes to their youngest and oldest
workers and women’s representation in management positions. But
m
the difference in prime-age labor-force participation between the
United States and OECD countries with less flexible labor markets
suggests that Americans might have something to learn about
hi
creating the conditions for meaningful employment. It also reveals
a flaw in the standard view about the tradeoffs between flexibility
and supportive labor policies. Contrary to the conventional wisdom,
ha
it is necessary to make labor markets more supportive of workers in
order to make those markets more efficient in ways that would
benefit employees and businesses alike. But to do so, the United
iT
States will need to move beyond outdated prescriptions for boosting
employment and participation in the work force.
WORK TO DO
Al
Just as there is no single cause for the decline in the labor-force par-
ticipation rate, there is no single way to address it. And the problems
and solutions associated with the decline vary from country to country.
od
But in the United States, Obama has decided to tackle the issue with
a set of proposals that would create meaningful work opportunities
for more Americans.
As the past eight years have made clear, the effect of recessions
so
on the labor market is becoming only more pronounced. One way to

prevent worse outcomes in the future would be for the federal govern-
ment to take steps that would increase aggregate demand in the
economy. Investing more in public infrastructure, for example, can
Ma
create well-paying employment opportunities for workers without

higher education. To this end, Obama has proposed ambitious new
investments in clean infrastructure that would help build a twenty-
first-century national transportation system.
To protect the unemployed during future economic downturns,
Obama has also proposed establishing an automatic extension of the

Jason Furman
amount of time that people can claim unemployment insurance

during a recession, providing up to 52 additional weeks of benefits in
states suffering from rapid increases in unemployment (for a total
of up to 78 weeks in most states). The government can also help
deepen the “connective tissue” in the labor market by reforming
community colleges and training systems to help place people in jobs,
providing recipients of unemployment insurance with more help in
finding new jobs, and broadening the eligibility requirements for
unemployment insurance.
m
Other reforms to the unemployment insurance system would also
help more people find work. Right now, workers receive unemployment
insurance when they are laid off, but most do not get assistance when
hi
their hours are reduced. That discour-
Obama is pushing for bold ages employers from avoiding layoffs
by temporarily reducing hours across
policies that depart from
economic orthodoxy and
ha the board when demand for their
products or services falls and also
would significantly improve discourages workers from accepting
iT
lighter schedules. One solution to this
the U.S. labor market. dilemma would be to arrange the
unemployment insurance system to
promote work sharing by allowing groups of workers whose hours
Al
were temporarily reduced to receive unemployment benefits to make

up for some of their lost earnings. Obama’s most recent budget provides
grants and additional incentives to create work-sharing programs
od
for states that haven’t already done so. By removing the incentives
for firms to slash jobs rather than merely cut back on hours, these
programs would help prevent job losses during an economic downturn,
as a similar program did in Germany during the most recent recession.
so
In addition to his plan to promote work sharing, Obama has also

proposed a system of wage insurance that would replace up to 50 percent
of lost wages (up to a limit of $10,000) for two years for unemployed
workers who take new, lower-paying jobs. Such a system would offer
Ma
protection against reduced earnings and create an incentive for the

unemployed to get back into employment quickly and to remain in
the work force.
Since the labor-force participation gap between the less educated
and the more educated has grown over the past several decades, strength-
ening the U.S. educational system and helping more Americans finish
high school and college have become more important than ever. The
Obama administration has sought to do this by expanding high-quality
early education, maintaining rigorous standards for students, sup-
porting successful teachers, making college more affordable, and holding
institutions of higher education accountable to their students.
There are also a number of changes to federal tax policy that would
make it easier for people who want to work to do so. For instance,
secondary earners are more responsive to tax rates than primary earners,
and they face higher rates in the United States than in most advanced
m
countries because the U.S. tax system is largely based on household
income rather than individual income. Obama has proposed creating a
new tax credit that would reduce the effective penalty imposed on
hi
secondary earners. In addition, boosting the Earned Income Tax Credit
for childless workers and noncustodial parents—a move supported not
only by Obama but also by the Republican Speaker of the House, Paul
ha
Ryan—would make work more rewarding for lower-skilled individuals
and thus encourage participation in the work force.
Federal policy can also help ensure that flexibility in the U.S. labor
iT
market benefits employers and employees alike. Improving flexibility in
the labor market doesn’t just mean making it easier for the unemployed
to find work; it also involves assisting people who are currently employed.
Some important steps along those lines would be to require the provision
Al
of paid family leave and guaranteed sick days and to provide more
government subsidies for childcare and early learning programs—both
proposals that Obama has supported. In fact, a recent study by the
od
economists Francine Blau and Lawrence Kahn found that the labor-force
participation rate for American women would be around four percentage
points higher if the United States adopted family-friendly labor-market
policies comparable to those of other OECD countries.
so
Another obstacle to improving the U.S. labor market is the fact

that around a quarter of jobs now require an occupational license,
up from just five percent in the 1950s. In some states, one must
obtain an occupational license to work as a florist or an interior
Ma
decorator, for example, even though it is highly unlikely that licensing

in such professions meaningfully protects consumers. State-level
reforms of occupational licensing would help make it easier for
people who lose one job to move to a new one, possibly in a new
location, and a number of states have begun to take action in this
area. And repealing burdensome local land-use restrictions would

Jason Furman
increase the supply of housing, making it easier for workers to move

to pursue better opportunities.
A number of far-reaching initiatives in other areas would also have a
profound positive effect on the U.S. work force. Reforms to the criminal
justice system would mitigate the negative effects of mass incarceration
on labor-force participation. The most important steps supported by
Obama include reducing mandatory minimum sentences (especially for
nonviolent offenders), improving inmates’ prospects for reentry into
the labor force by providing them with better educational and training
m
opportunities while in prison, and placing fewer restraints on hiring
ex-offenders. Comprehensive immigration reform would also help.
Although it would not directly boost the labor-force participation rate
hi
of native-born workers, immigration reform would raise the overall rate
by bringing in new workers of prime working age, offsetting some of the
larger economic challenges associated with a shrinking work force.
ha
Finally, despite the claims of some economists, growing inequality
is neither a necessary cause nor an inevitable consequence of better
economic performance, and some evidence suggests that steps to
iT
reduce inequality (or to at least slow its growth) would also improve
labor-force participation. To that end, the federal government must
raise the minimum wage and help ensure that workers have a strong
voice in the labor market by supporting collective-bargaining rights.
Al
These policies would help level the playing field for employees,
increasing the incentives to work.
The long-term decline in labor-force participation is a serious
od
challenge, one that the United States must tackle as it moves farther
away from the shadow of the Great Recession. The decline calls into
question economic orthodoxy and provides an opening for less traditional
policies that would benefit American firms, families, and workers alike
so
by stemming the drop in the size of the U.S. work force. Such policies
are not, in the long run, zero-sum: by strengthening incentives to
participate in the labor market, they would increase the efficiency
and performance of the U.S. economy, benefiting everyone.
Ma
The next half century will not offer the favorable demographics
and mass entry of women into the labor force that the last half century
supplied. So to promote a stronger, larger U.S. work force, policymakers
must take action and recognize that adherence to simplistic traditional
policy prescriptions would leave the United States facing a weaker
economic outlook for decades to come.∂
Human Work in the

Robotic Future
Policy for the Age of Automation
m
Andrew McAfee and Erik Brynjolfsson
T
hi
he promises of science fiction are quickly becoming workaday
realities. Cars and trucks are starting to drive themselves in
normal traffic. Machines have begun to understand our
ha
speech, figure out what we want, and satisfy our requests. They have
learned to write clean prose, generate novel scientific hypotheses (that
are supported by later research), compose evocative music, and beat
iT
us, quite literally, at our own games: chess, poker, and even go.
This technological surge is just getting started, and there’s much
more to come. For one thing, the fundamental building blocks that
launched it will continue to improve rapidly. The costs of processing,
Al
memory, bandwidth, sensors, and storage continue to fall exponentially.

Cloud computing will make all these resources available on demand
across the world. Digital data will become only more pervasive, letting
od
us run experiments, test theories, and learn at an ever-greater scale.

And the billions of humans around the world are growing increasingly
connected; they’re not only tapping into the world’s knowledge (much
of which is available for free) but also expanding and remixing it. This
so
means that the global population of innovators, entrepreneurs, and

geeks is growing quickly and, with it, the potential for breakthroughs.
Most important, humanity has recently become much better at
building machines that can figure things out on their own. By studying
Ma
ANDREW M C AFEE is Principal Research Scientist at the MIT Sloan School of Manage-
ment and Co-Founder of MIT’s Initiative on the Digital Economy.
ERIK BRYNJOLFSSON is Schussel Family Professor of Management Science at the MIT
Sloan School of Management, Co-Founder of MIT’s Initiative on the Digital Economy, and
Chair of the MIT Sloan Management Review.
They are the authors of The Second Machine Age: Work, Progress, and Prosperity in a Time
of Brilliant Technologies.

lots of examples, identifying relevant patterns, and applying them to

new examples, computers have been able to achieve human and super-
human levels of performance in a range of tasks: recognizing street
signs, parsing human speech, identifying credit fraud, modeling how
materials will behave under different conditions, and more.
Building machines that can learn on their own is critical, because
when it comes to accomplishing many tasks, we humans “know more
than we can tell,” as the scientist and philosopher Michael Polanyi put
it. Historically, this served as a hard barrier to digitizing much work:
m
after all, if no human could explain all the steps followed when com-
pleting a task, then no programmer could embed those rules in soft-
ware. Recent advances mean that “Polanyi’s paradox” is not the barrier
hi
it once was; machines can learn even when humans can’t teach them.
As a result, jobs that involve matching patterns, in particular, from
customer service to medical diagnosis, will increasingly be performed
ha
by machines. Because U.S. companies are both the world’s most
prolific producers and the world’s most enthusiastic consumers of
technology, many of the effects of the digital revolution will likely be
iT
seen first in the United States. Low-wage jobs are especially at risk:
in its 2016 report to the president, the U.S. Council of Economic
Advisers estimated that 83 percent of jobs paying less than $20 per
hour could be automated.
Al
Such a radical reshaping of work will call for new policies to protect
the vulnerable while reaping the gains of the new age. The choices
made now will prove particularly consequential. The wrong interven-
od
tions will hurt the economic prospects of millions of people around

the world and leave them losing a race against the machines, while the
right ones will give them the best chance of keeping up as technology
speeds forward.
so
How to tell the difference? Two basic principles should guide

decisions: allow flexibility and experimentation instead of imposing
constraints, and directly encourage work instead of planning for its
obsolescence.
Ma
A MORE FLEXIBLE ECONOMY

In times of rapid change, when the world is even less predictable than
usual, people and organizations need to be given greater freedom to
experiment and innovate. In other words, when one aspect of the
capitalist dynamic of creative destruction is speeding up—in this case,
Human Work in the Robotic Future
the substitution of digital technologies for cognitive work—the right

response is to encourage the other elements of the system to also
move faster. Everything from individual tasks to entire industries is
being disrupted, so it’s foolish to try to lock in place select elements
of the existing order. Yet often, the temptation to try to preserve the
status quo has proved irresistible.
Even though the times call for flexibility, policymakers seem to be
moving in the opposite direction. In recent decades in the United
States, business dynamism and labor-market fluidity have in fact
m
decreased. Entrepreneurship, job growth within young companies,
worker moves from one job or city to another—these and other
similar phenomena have all shown steady declines that predate the
hi
Great Recession.
The decay of business dynamism appears to be the result of what
the economist John Haltiwanger has characterized as “death by a
ha
thousand cuts.” Many of these cuts are restrictions placed on some
kinds of work. According to the economist Morris Kleiner, whereas
only around five percent of American workers in the 1950s were
iT
required to have a state license to do their jobs, by 2008, the figure
had climbed to almost 30 percent. Some of the requirements are
plainly absurd: in Tennessee, a hair shampooer must complete 70 days
of training and two exams, whereas the average emergency medical
Al
technician needs just 33 days of training. As Jason Furman, chair of

the Council of Economic Advisers, said in 2015, “Licensing may be
contributing to a range of challenges facing labor markets, including
od
reduced labor force participation, higher long-term unemployment,

and higher part-time employment.”
Some states are already taking action. In early 2016, legislators
in North Carolina proposed eliminating 15 licensing boards, in-
so
cluding those for irrigation contractors and pastoral counselors.

Such efforts should be expanded. It is far from clear how large the
gains from easing excessive requirements would be, but it’s well
worth finding out.
Ma
LEVELING THE PLAYING FIELD

Some of the barriers facing young, fast-growing, technology-centric
companies today illustrate another kind of inflexibility: entrenched
interests working to preserve their positions. Tesla sells its popular
electric cars at fixed prices with no haggling, but laws preventing

automakers from acting as retailers bar the company from doing so at

its own facilities in six states, which together account for 18 percent of
the U.S. new-car market. The ride-hailing company Uber has had to
fight taxi regulators in city after city,
Even though the times call even though customers clearly value its
convenience and safety and drivers
for flexibility, policymakers value its income and flexibility. These
seem to be moving in the battles provide strong evidence of “reg-
opposite direction. ulatory capture,” a phenomenon in
m
which agencies act on behalf of special
interests instead of the public. Start-
ups should certainly pay their fair share of taxes and operate safely,
hi
but they shouldn’t be kept out of markets by incumbents’ machinations.
In the regulatory wars between start-ups and incumbents, defenders
of the status quo often claim to be fighting to maintain a level playing
ha
field. But today’s playing fields are far from level; they’re often tilted
toward established companies. More fundamentally, many decades-old
regulations designed to protect consumers from so-called information
iT
asymmetries no longer make sense in the information age. When it
comes to many goods and services, consumers now know more than ever,
from the exact route a Lyft driver took to the previous guests’ ratings
of an Airbnb host.
Al
The ability to rate Uber and Lyft drivers after every trip goes a
long way toward explaining why they often take such care to keep
their cars clean, and it provides an efficient way to weed out drivers
od
who are less customer-oriented. Even the most diligent taxi cab
regulator would find it impossible to conduct meaningful observations
that frequently. As Eric Spiegelman, the president of the Los Angeles
Taxicab Commission, has admitted, “Uber’s method is better for
so
passengers.” In more and more markets, as digital technologies make

relevant information widely available, the need for centralized regu-
lation should go down, not up.
Similar breakthroughs in transparency have transformed other
Ma
parts of the economy, from ski resorts that cannot exaggerate their
snowfall to airlines that cannot hide their record of on-time arrivals.
There is little need for lemon laws, after all, when everyone knows
which cars are the lemons. As technology races ahead, there will be
substantial opportunities to relevel the playing fields on which busi-
nesses compete. The innovation surge that is under way now will
highlight the stark differences between actual capitalism, where com-

petition among companies yields great gains for people, and crony
capitalism, in which incumbents and their allies in government strive
to avoid disruptions. It’s clear which is the better type, and so policy
should promote it.
Flexibility will also require better data, since experimenting works
only if one knows whether a given effort is having the desired effect.
It is unfortunate, then, that the U.S. Congress cut the budget for the
Bureau of Labor Statistics by 11 percent in real terms between 2010
m
and 2015. Businesses, policymakers, and academics all make heavy
use of the evidence collected by the federal government about the
U.S. work force.
hi
A much more encouraging development is President Barack Obama’s
Open Government Initiative. In 2013, Obama signed an executive
order making open and machine-readable data “the new default for
ha
government information.” At all levels of the government, the United
States needs more such efforts, which would prove helpful to all sorts
of decision-makers. As more and more digital data become available,
iT
there will be even more opportunities for sharing information to
improve policy, and the government should play a key role in this
process. As Larry Summers, a former secretary of the treasury,
recently put it, “Data is the ultimate public good.”
Al
REDEFINING EMPLOYMENT
The relationship between employers and the people who work for
od
them is another area where the United States faces choices between
rigidity and flexibility. Today, companies must designate their workers
as either employees or contractors. This classification, which is over-
seen by the Internal Revenue Service, affects whether workers receive
so
overtime pay, are eligible for compensation for on-the-job injuries,

and have the right to organize into unions.
The last decade has seen a substantial rise in various forms of con-
tracting. According to the economists Lawrence Katz and Alan
Ma
Krueger, the percentage of American workers in “alternative arrange-

ments,” including temporary staffing, contracting, and on-call work,
increased from ten percent in 2005 to 16 percent in 2015. This trend
should accelerate with the continued growth of the “on-demand
economy,” epitomized by Uber and Lyft and the freelancer marketplaces
TaskRabbit and Upwork. Although only about 0.4 percent of the U.S.

work force (about 600,000
people) currently earns a
primary living through
these digital intermedi-
aries, this figure will likely
grow rapidly.
These significant shifts
in the nature of employ-
ment have prompted calls
m
for rethinking the way
workers are classified.
Krueger and Seth Harris,
hi
a former deputy secretary
of labor, have proposed
the creation of a new “in-
ha
dependent worker” des-
ignation. These workers
would not be eligible for
iT
overtime pay or unem-
ployment insurance. But they would enjoy the protection of federal
antidiscrimination statutes and have the right to organize, and their
employers, whether online or offline, would withhold taxes and make
Al
payroll tax contributions. Proposals such as this deserve serious consid-

eration, including of how to implement them without making deci-
sions about worker classification more difficult. In fact, a more flexible
od
approach might be to eliminate as many arbitrary distinctions between

employees and independent workers as possible by making benefits
portable rather than tightly linked to any particular employer.
It is tempting to protect the kinds of full-time salaried jobs that gave
so
rise to the United States’ large and prosperous middle class. But policy-
makers should keep two things in mind. First, not everyone wants a classic
industrial-era job. Second, it simply isn’t possible to regulate the postwar
middle class back into existence. Attempts to do so—for example, by mak-
Ma
ing it more difficult for companies to hire anyone except full-time salaried
employees—will only result in a protected community of jobholders that
shrinks over time and an ever-growing group excluded from participation.
More broadly, as technology transforms the economy, policymakers
will face all manner of new and unpredicted choices. In making them, they
should return to the basics: remove rigidities, provide flexibility, and
boost resilience. Should
schools have greater
freedom to reward
their best-performing
teachers and remove
their worst? Yes, espe-
cially in light of re-
search showing how
much teacher quality
m
influences lifetime stu-
dent earnings. Should
entry-level workers
hi
have to sign restrictive
noncompete agree-
ha ments? No. Should
the federal govern-
ment experiment with
extending student loan
iT
guarantees to nontra-
ditional job-preparation programs, such as “nanodegree”
courses and “coding boot camps,” even if they’re offered
by unaccredited institutions? Yes.
Al
Of course, flexibility and dynamism do not trump all

other goals. Workplace health and safety are essential, as
are clear property rights and legal protections that make
od
it possible to assign responsibility for harms. The key is to distinguish

legitimate protections from those that are designed primarily to pro-
tect incumbents and impede change.
so
MONEY FOR NOTHING?

The second principle, that policy should directly encourage labor,
has a straightforward justification: work’s value both for individ-
uals and for communities goes well beyond its financial role. As
Ma
Voltaire put it, “Work saves us from three great evils: boredom,
vice, and need.” But isn’t work itself becoming passé, thanks to
automation? A 2013 study by Carl Benedikt Frey and Michael
Osborne of Oxford University, which predicted the automation of
nearly half of U.S. jobs, would certainly seem to call for radical
policy changes.

The most widely discussed of these nowadays is the provision of a

universal basic income: a cash award given by the government to all
citizens, regardless of need. A universal basic income has attracted
broad support in the past—from Martin Luther King, Jr., to President
Richard Nixon—and its popularity is once more on the rise. The
governments of Finland and Switzerland, as well as several Dutch
cities, have made moves toward rolling out a universal basic income.
In the United States, the idea boasts a diverse group of champions,
including the libertarian social scientist Charles Murray, the technology
m
entrepreneur Sam Altman, and the former service employees’ union
president Andy Stern.
A universal basic income has obvious appeal in a job-light future
hi
where a great many people can’t earn a living from their labor, but it
would be prohibitively expensive to provide even a small universal
income to a population as large as that of the United States. In 2014,
ha
there were about 134 million households in the country, averaging
2.6 people each. The federal poverty level that year for a household of
that size was approximately $18,000 per year. A universal basic income
iT
of that amount, then, would cost about $2.4 trillion per year, or more
than 75 percent of all federal tax receipts in 2014.
At current levels of national income, this kind of universal basic
income is unworkable. As a result, most realistic proposals for one
Al
today are far more modest and often not truly universal, since they
would extend the cash award only to low-income groups. It is hard to
see how less ambitious versions of the policy would mitigate the ef-
od
fects of large-scale, technology-induced joblessness.
BACK TO WORK
Fortunately, there is no need for policies for a jobless economy yet, for
so
the simple reason that the era of mass technological unemployment is

not imminent. The Frey and Osborne study and the analysis in the
Council of Economic Advisers’ report offered no time horizon for
their job-loss forecasts. And as the authors of the underlying research
Ma
acknowledge, its methodology relies on subjective judgments about

jobs’ susceptibility to automation and makes no attempt to estimate
any technology-enabled job gains. Nor is there any sign that the
United States is currently approaching “peak jobs.” From the end
of the recession in July 2009 to March 2016, the country saw net
gains of, on average, more than 160,000 jobs per month. Over
that time, the unemployment rate fell from a high of ten percent
to five percent.
Despite this strong and consistent job growth, however, there are
clear signs that this is an atypical recovery and that significant weak-
nesses remain in the labor market. The
headline unemployment rate is so low
in part because it is calculated based on
It simply isn’t possible to
the number of people who are actually regulate the postwar middle
participating in the labor force (that class back into existence.
m
is, working or looking for work), and
labor-force participation fell sharply during the recession and has
been very slow to recover afterward. Since 2011, less than 82 percent
hi
of working-age Americans have participated in the labor force, a level
last seen more than 30 years ago, when women had not yet begun
working outside the home in large numbers. Unsurprisingly, wage
ha
growth has also remained anemic since the end of the recession.
Declining work-force participation is troubling not only because
work provides income but also because it gives people meaning. The
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sociologist William Julius Wilson has argued that “the consequences
of high neighborhood joblessness are more devastating than those of
high neighborhood poverty,” and a great deal of research supports his
view. As employment prospects have dimmed in recent years for
Al
the United States’ least educated workers, Robert Putnam, Murray,

and other social scientists have documented troubling results: declines
in social cohesion and civic participation and increases in divorce
od
rates, absentee parenting, drug use, and crime. In 2015, the econ-
omists Anne Case and Angus Deaton published the alarming finding
that although death rates in the United States have fallen steadily
for most demographic groups, they have risen for middle-aged whites,
so
and especially for those with less than a high school education (a group
facing particularly sharp employment challenges). The increased
mortality among this group was almost entirely due to three factors:
suicide, cirrhosis and other chronic liver diseases, and acute alcohol
Ma
and drug poisoning.

Of course, these social woes stem from many sources. But unem-
ployment and underemployment no doubt contribute, and troubled
communities would certainly benefit from more opportunities and
incentives for work. As President Franklin Roosevelt once said,
“Providing useful work is superior to any and every kind of dole.”

EARNING IT
Because work provides benefits to individuals, households, and com-
munities that go far beyond the money earned, policy should encour-
age employment. Unlike a universal basic income, wage subsidies do
just that. In the United States, the Earned Income Tax Credit, which
is administered through annual tax returns, offers a maximum yearly
benefit of $6,242 for a family with three or more children. Whereas a
universal basic income would be given unconditionally, the EITC is
available only to people with wage income and therefore provides a
m
direct incentive to work.
An experiment from the late 1960s and early 1970s offered clear
evidence of the importance of such an incentive. Thousands of
hi
households in Denver and Seattle received differing combinations of
a relatively generous basic income and a wage subsidy. The results
were clear and consistent: in both cities, once the assistance started,
ha
both men and women worked fewer hours, and their marriages were
more likely to dissolve. These declines were significantly associated
with the basic income, but not with the wage subsidy, suggesting that
iT
it was the arrival of income without work that made things worse.
Wage subsidies, by contrast, encourage people to work more hours
(and increase their tax credit), as the economists Raj Chetty, John
Friedman, and Emmanuel Saez have found of the EITC.
Al
But for now, efforts to raise the minimum wage enjoy more popular
momentum. At a time when the federal minimum wage stands at
$7.25 per hour and no state has one higher than $10 per hour, many
od
states and localities are facing loud calls to raise the minimum wage
all the way to $15. Some of these efforts have been successful; New
York and California are slated to raise their minimum wages to $15
in 2018 and 2022, respectively.
so
Raising the rewards for work is a laudable goal, but significantly

higher minimum wages are not the best way to accomplish it. When
labor becomes more expensive, companies tend to use less of it, all
else being equal. It is true that across the large amount of research on
Ma
minimum-wage hikes, the average finding is that they at most reduce

total employment only slightly. But it is also true that estimates of the
effects vary widely and that most of this research has examined only
modest increases.
There is reason to believe that minimum-wage increases of 50 per-
cent or more, even if phased in gradually, would worsen job prospects
for the least affluent and least skilled workers—an especially unde-
sirable outcome at a time of low work-force participation. As
Arindrajit Dube, an economist who has studied previous minimum-
wage hikes, has put it, “If you’re risk-averse, this would not be the
scale at which to try things.” The safest combination of policies,
therefore, is a moderate minimum wage together with a substantially
expanded EITC or similar wage subsidy. Just as individuals should be
encouraged to seek work, employers should be encouraged to provide
it, and much higher minimum wages have the opposite effect.
m
PEOPLE POWER
Ever-smarter machines will prove transformative, just as electrification,
hi
internal combustion, and steam power were in earlier eras. New tech-
nology will create opportunities for vastly greater productivity and
wealth but will also upend the labor market.
ha
In times of disruption, it is impossible to predict exactly how the
work force will be affected. The best strategy is not to try to slow the
technology but to strive for flexibility, so that people, organizations,
iT
and institutions can learn and grow their way into a healthy future.
Furthermore, given the importance of work beyond the income it
generates, policy should encourage work rather than assuming we live
in a world without the need for it.
Al
It’s easy to be pessimistic about whether any of the proposed

policies will be enacted. Polarization in Congress is at a postwar
high, the 2016 presidential candidates have largely dodged funda-
od
mental questions about the challenges facing the economy, and the
forces of inertia, as ever, remain strong. Policymaking will no doubt
lag behind the technology.
But there are a few hopeful signs. One is that the EITC enjoys bipar-
so
tisan support, with both Obama and Paul Ryan, the Republican Speaker
of the House, in favor of making it more generous and extending it
to younger workers. Both sides of the aisle appear to support policies
that directly encourage work, perhaps because it comports well with
Ma
the American preference for industriousness that has struck observers

from Alexis de Tocqueville onward. It’s worth undertaking more experi-
mentation in this area, in order to better understand the tradeoffs and
incentive effects of variations of these policies.
The other principle—that policy should promote flexibility—is also
gaining traction, albeit in a more piecemeal way. Some cities and states

are working to ease job licensing restrictions and other rigidities

and are growing more receptive to the companies and practices of
the on-demand economy. Because regulations and policies exist at
multiple independent levels—federal, state, and local—advocates
of flexibility should probably not expect that fast and systematic
action will bring it about. They can, however, continue to highlight
its importance and conduct research to better understand why
business dynamism is declining.
The rise of intelligent computers can and should be good news for
m
the economy. It will bring great material prosperity, better health, and
other benefits that can’t be foreseen. But a broadly shared prosperity
is not automatic or inevitable. In the new age of machines, it will take
hi
humans to achieve that.∂
ha
iT
Al
od
so
Ma
Democracy in Decline
How Washington Can Reverse the Tide
Larry Diamond
m
I
n the decade following the Cold War, democracy flourished around
the world as never before. In recent years, however, much of this
hi
progress has steadily eroded. Between 2000 and 2015, democracy
broke down in 27 countries, among them Kenya, Russia, Thailand,
and Turkey. Around the same time, several other global “swing states”—
ha
countries that, thanks to their large populations and economies, could
have an outsize impact on the future of global democracy—also took
a turn for the worse. In nearly half of them, political liberties, as
iT
measured by the U.S. nonprofit Freedom House, contracted.
Meanwhile, many existing authoritarian regimes have become even
less open, transparent, and responsive to their citizens. They are
silencing online dissent by censoring, regulating, and arresting those
Al
they perceive as threats. Many of them are attempting to control the

Internet by passing laws, for example, that require foreign companies
to store citizens’ data within the home country’s borders. Offline,
od
states are also constraining civil society by restricting the ability of

organizations to operate, communicate, and fundraise. Since 2012,
governments across the globe have proposed or enacted more than
90 laws restricting freedom of association or assembly.
so
Adding to the problem, democracy itself seems to have lost its

appeal. Many emerging democracies have failed to meet their
citizens’ hopes for freedom, security, and economic growth, just as
the world’s established democracies, including the United States,
Ma
have grown increasingly dysfunctional. In China, meanwhile, decades

of economic growth have proved that a state need not liberalize to
generate prosperity.
LARRY DIAMOND is a Senior Fellow at the Hoover Institution and at the Freeman
Spogli Institute for International Studies at Stanford University. Follow him on
Twitter @LarryDiamond.

Larry Diamond
Not all the trends are bad. Optimists can point to Nigeria, which
in May 2015 experienced the first truly democratic transfer of
power—from a defeated ruling party to the opposition—in its his-
tory, or to Sri Lanka, which returned to electoral democracy in
January 2015 after five years of electoral autocracy. The first Arab
democracy in decades has emerged in Tunisia, and in Myanmar
(also called Burma), a democratically elected government now
shares significant power with the military. The authoritarian model
of capitalism has also lost some of its shine, as China’s growth has
m
slowed markedly and the plunge in oil prices has weakened Russia
and other petrostates.
Proponents of democracy should act energetically to capitalize on
hi
these and other opportunities. The right kind of support from the
United States and its allies could unleash a new wave of freedom across
the globe, particularly in Asia’s swing states. Without that support,
ha
however, autocracies will continue to proliferate, leading to more
instability and less freedom.
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TURNING INWARD
One of the biggest challenges facing democracy today is that its
biggest champion—the United States—has lost interest in promoting
it. In a 2013 Pew survey, 80 percent of Americans polled agreed with
Al
the idea that their country should “not think so much in international
terms” and instead “concentrate more on [its] national problems.” Just
18 percent expressed the belief that democracy promotion should be a
od
top foreign policy priority. It should thus come as no surprise that

none of the current presidential candidates has made democracy
promotion a cornerstone of his or her campaign.
Washington has continued to support some nongovernmental
so
efforts. Congress increased its appropriation for the National

Endowment for Democracy, a nonprofit that funds pro-democracy
groups abroad, from $115 million in 2009 to $170 million in 2016. For
the most part, however, as public support for democracy promotion
Ma
has declined, funding for it has stagnated. During this same period,
U.S. government spending on democracy, human rights, and gover-
nance programs (mainly through the U.S. Agency for International
Development, or USAID) fell by nearly $400 million. Even excluding
the decline in funding for Afghanistan and Iraq, funding for such
programs in other countries stayed flat.
As the United States has lagged behind, few other countries have
stepped in. The most ambitious intergovernmental attempt to promote
democracy—the Community of Democracies, a coalition established
in 2000—lacks the resources and visibility to have much impact.
Regional organizations are not doing much better. The EU, for example,
has largely stood by as Hungarian Prime Minister Viktor Orban has
flouted democratic norms. And the union was so desperate to secure
Turkey’s help in stemming the flow of Syrian refugees that it agreed to
revive membership talks with Ankara, even as Turkish President Recep
m
Tayyip Erdogan has accelerated his efforts to suppress dissent.
Although some European countries, such as Sweden and the United
Kingdom, have continued to support significant bilateral programs to
hi
promote democracy and improve governance, the budget of the
European Endowment for Democracy, established in 2013, reached
just over $11 million last year. The United Kingdom’s Westminster
ha
Foundation for Democracy currently has a public budget of just $5 mil-
lion. Canada’s International Centre for Human Rights and Democratic
Development shut down in 2012. And developing democracies such
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as Brazil, India, and Indonesia have hesitated to contribute much,
focusing instead on their own many problems.
Authoritarian leaders have capitalized on this vacuum by exporting
their illiberal values and repressive technologies. Iran has been using
Al
its financial, political, and military influence to shape or destabilize

governments in Iraq, Lebanon, Syria, and Yemen. Russia has used
violence and intimidation and has funneled money to support separatist
od
movements and to prop up pro-Russian, antireform political forces

in Georgia and Ukraine. Moreover, Russia has built what the Internet
freedom organization Access Now has termed a “commonwealth of
surveillance states,” exporting sophisticated electronic surveillance
so
technologies throughout Central Asia. China, too, has reportedly

supplied Ethiopia, Iran, and several Central Asian dictatorships—
Tajikistan, Turkmenistan, and Uzbekistan—with Internet and tele-
communications surveillance technology to help them repress and
Ma
spy on their citizens.
THE BEST FORM OF GOVERNMENT

Although democracy promotion may have fallen out of favor with the
U.S. public, such efforts very much remain in the national interest.
Democracies are less violent toward their citizens and more protective

Larry Diamond
of human rights. They do not go to war with one another. They are
more likely to develop market economies, and those economies are
more likely to be stable and prosperous. Their citizens enjoy higher
life expectancies and lower levels of infant and maternal mortality than
people living under other forms of government. Democracies also
make good allies. As Michael McFaul, the former U.S. ambassador to
Russia, has written, “Not every democracy in the world was or is a
close ally of the United States, but no democracy in the world has been
or is an American enemy. And all of America’s most enduring allies
m
have been and remain democracies.”
Authoritarian regimes, by contrast, are inherently unstable, since
they face a central dilemma. If an autocracy is successful—if it produces
hi
a wealthy and educated population—that population will construct a
civil society that will sooner or later demand political change. But if
an autocracy is unsuccessful—if it fails to generate economic growth
ha
and raise living standards—it is liable to collapse.
The United States still has the tools to promote democracy, even if
it lacks the will. As Thomas Carothers, a vice president at the Carnegie
iT
Endowment for International Peace, has shown, over the past quarter
century, U.S. electoral assistance has evolved from superficial, in-and-
out jobs to deeper partnerships with domestic organizations. Support
for civil society has spread beyond simply aiding elites in national
Al
capitals. Efforts to promote the rule of law have expanded beyond the
short-term technical training of judges and lawyers to focus on broader
issues of accountability and human rights.
od
These efforts appear to have paid off. A 2006 study of the effects
of U.S. foreign assistance on democracy found that $10 million of
additional USAID spending produced a roughly fivefold increase in
the amount of democratic change a country could be expected to
so
achieve based on the Freedom House scale.
LET FREEDOM RING

But the United States can and should do more. The next president
Ma
should make democracy promotion a pillar of his or her foreign policy.

Washington could do so peacefully, multilaterally, and without signifi-
cant new spending.
Pursuing such a policy requires, first of all, taking care to avoid
legitimizing authoritarian rule. President Barack Obama did just the
opposite during a July 2015 visit to Ethiopia, when he twice called its
m
hi
ha
A heavy hand: Turkish President Recep Tayyip Erdogan in France, October 2015
government “democratically elected,” even though it had held sham
iT
elections earlier that same year. When he visited Kenya on the same
trip, Obama expressed the hope that its corrupt and semiauthoritarian
regime would keep “continuing down the path of a strong, more inclusive,
more accountable and transparent democracy.” Regimes pounce on
Al
such language, using implicit U.S. endorsements to stifle free speech

and activism at home. In 1981, George H. W. Bush, then vice president,
visited Manila and said to the country’s dictator, Ferdinand Marcos,
od
“We love your adherence to democratic principle.” Within the next

few years, Marcos’ abuses intensified, and his principal rival in the
democratic opposition, Benigno Aquino, Jr., was assassinated.
Washington should also seize opportunities to reaffirm the country’s
so
commitment to democracy abroad. In 2015, the United States assumed

leadership of the Community of Democracies, which will hold its
next biennial meeting in Washington in 2017, a few months after the
next president is inaugurated. He or she should speak at the meeting
VINCENT KESSLER / REUTERS
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to emphasize the organization’s importance and to endorse the values

for which it stands.
The next president should also increase financial support to fragile
democracies. States undergoing political transitions—such as Myanmar,
Tunisia, and Ukraine—are particularly vulnerable to outside influence.
So U.S. support can have an outsize impact in such places. Congress

Larry Diamond
has already increased assistance to Tunisia, from $61 million in 2015

to $142 million this year, and to Ukraine, from $88 million in 2014 to
$659 million today. It could and should do still more for these coun-
tries, and for other emerging and fragile democracies both small (Sen-
egal, for example) and large (such as Indonesia). But part of the
bargain for increased economic aid has to be a serious commitment by
the leaders of those countries to fight corruption and improve the
quality of governance.
Countries bordered by democracies tend to evolve in a democratic
m
direction, while those bordered by authoritarian regimes tend toward
autocracy. Washington should thus develop a comprehensive strategy
for targeting states where democratic progress could affect the entire
hi
region. Populous countries tend to be more influential, so the next
president should find ways to nudge states such as Bangladesh, Indonesia,
Myanmar, Nigeria, Pakistan, the Philippines, and South Africa toward
ha
more effective, accountable, and democratic governance. At the same
time, he or she should not neglect smaller democracies such as Georgia,
Senegal, and Tunisia. In the post-Soviet sphere, in West Africa, and
iT
in the Arab world, civic and political actors are closely watching these
three high-profile experiments. In each case, success could generate
significant spillover effects. The United States should also focus on
places on the cusp of a breakthrough. Venezuela, for instance, has
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been poised for a democratic transition since late 2015, when the
opposition trounced the governing party in legislative elections,
undermining roughly two decades of socialist rule. And Vietnam
od
represents an intriguing opportunity, due to its emerging civil society,

membership in the Trans-Pacific Partnership, and clear desire to draw
closer to the United States in order to counter the threat from China.
Any policy to promote democracy must include bolder, smarter
so
efforts to fight corruption, which sustains most authoritarian regimes.

In the past decade, Washington has made progress in identifying,
tracking, and seizing ill-gotten wealth—a crucial step in the wars
against terrorism and drug trafficking that can also advance democracy
Ma
and human rights. But the United States must do more to identify the
international assets of venal dictators and their cronies, prosecute
them for money laundering, and return their vast fortunes to their
neglected citizens. The next administration should direct USAID to
prioritize programs that help countries build professional bureaucracies
and autonomous agencies capable of auditing government accounts
and prosecuting corruption. And it should aid civil society groups

and the media in their efforts to track stolen funds and hold public
servants accountable.
As part of a push to discourage corruption, the next president
should accelerate the use of legal strategies and tools to seize the U.S.-
based assets of venal dictators. Since the United States launched the
Kleptocracy Asset Recovery Initiative
in 2010, lawyers and investigators from
the Justice Department, the Department
Between 2000 and 2015,
m
of Homeland Security, and the FBI democracy broke down in
have brought 25 legal cases against 20 27 countries.
foreign officials, seeking to recover
hi
$1.5 billion in ill-gotten gains, including
from the estate of the late Nigerian dictator Sani Abacha and from
Gulnara Karimova, daughter of the Uzbek president. Washington has
ha
also been stepping up efforts to halt the flow of illicit money into U.S.
banks. The next president should dramatically increase the resources
and political capital for such efforts, both nationally and globally, to
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ensure that kleptocrats can find no safe haven.
He or she should also encourage U.S. diplomats to make support for
democracy a major priority in their work on the ground. These envoys
can use their diplomatic immunity to shield activists from arrest or to
Al
make it more difficult for a regime to target them, as has been the case
with U.S. and European diplomatic support for Las Damas de Blanco
(the Ladies in White), the opposition movement that wives of jailed
od
dissidents and other women founded in Cuba. In extreme circumstances,

they can and should shelter dissidents in their embassies and consulates,
as the U.S. embassy did for the Chinese scientist and dissident Fang
Lizhi after the 1989 crackdown on the Tiananmen Square protesters.
so
Diplomats also have unparalleled access to local leaders, which gives

them a unique opportunity to nudge autocrats toward reform. In a
country transitioning to democracy, such as South Africa in the late
1980s and early 1990s, or Myanmar today, such engagement can help
Ma
foster and sustain the resolve for democratic change. Where an

authoritarian regime is powerful, confident, and sitting tight, as in
China today, it may seem as though such efforts are hopeless. But most
authoritarian regimes have moderate and pragmatic elements who may
see the need for political opening. China is no different. The marginal
moderates of today could well become the rulers of tomorrow.

Larry Diamond
Meanwhile, the next administration ought to support Internet

freedom and digital rights—an especially important effort in light of
what the Edward Snowden leaks revealing U.S. government surveil-
lance of Internet and phone communications did to U.S. credibility.
In this vein, the government should start by refining its economic
sanctions. In 2014, Washington exempted the export of software
for “personal communications over the Internet, such as instant
messaging, chat and email, social networking, sharing of photos and
movies, web browsing, and blogging” from its sanctions against Iran.
m
Such exemptions, as well as the free distribution of software to
circumvent Internet censorship and allow dissidents to communicate
securely, should become a standard part of any U.S. sanctions effort,
hi
including that against North Korea. Authoritarian regimes need to
filter information and control communications to sustain their rule,
and undermining that control is one of the best ways the United States
ha
can foster democratic change.
The next president can also use trade agreements to advance
democracy. Academic studies confirm that when free-trade agreements
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are conditional on governments taking specific measures to protect
human rights, meaningful improvements follow. The White House
has reported that the mere process of negotiating the Trans-Pacific
Partnership induced Brunei to sign and Vietnam to ratify the UN
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Convention Against Torture, while also encouraging other human

rights improvements in these two countries and in Malaysia. Embedding
strong guarantees for human rights (including labor rights) into future
od
trade agreements offers a dual benefit: it can nurture democratic

reform in partner countries and help undermine the charge that U.S.
trade pacts establish an unfair playing field for American workers and
companies. Needless to say, the success of such provisions will depend
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on whether Washington is willing to bring legal action against member

states that violate them.
YES WE CAN
Ma
Above all, any push for democracy abroad should begin at home. The
sad fact is that American democracy no longer inspires admiration or
emulation. The U.S. presidential election has revealed deep currents
of alienation and anger among the public—currents Washington
appears unable to calm. The gerrymandering of congressional districts,
the flood of so-called dark money into election campaigns, and the
ever-growing power of special-interest lobbies have polarized politics

to an unprecedented degree, resulting in the passing of fewer bills, a
breakdown in bipartisan foreign-policy making, and regular govern-
ment shutdowns.
These political failings have given ammunition to democracy’s
enemies. Russian President Vladimir Putin, for instance, has claimed
that “there is no true democracy” in the United States, and Mahmoud
Ahmadinejad, the former president of Iran, has criticized U.S. elections
as “a battleground for capitalists.”
m
The next administration could take a number of steps to counter
such charges and restore people’s confidence in American democracy.
Working with Congress, it should reform campaign finance laws
hi
and require the rapid and full disclosure of all campaign contri-
butions, even to so-called independent committees. It should also
encourage state governments to invigorate political competition—
ha
for example, by ending gerrymandering, introducing ranked-choice
voting for Congress and state offices, and removing sore-loser laws,
which prevent defeated primary candidates from running as indepen-
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dents in the general election.
Together, these steps could improve democracy in the United
States and abroad at little to no financial cost. They could help restore
the United States’ leadership role in the world. And they could tip the
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world out of its persistent democratic recession and into a new period
of progress.∂
od
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The Innovative
Finance Revolution
Private Capital for the Public Good
m
Georgia Levenson Keohane and Saadia Madsbjerg
A
hi
ssessments of how governments and international organiza-
tions have dealt with global challenges often feature a familiar
refrain: when it comes to funding, there was too little, too late.
ha
The costs of economic, social, and environmental problems compound
over time, whether it’s an Ebola outbreak that escalates to an epidemic,
a flood of refugees that tests the strength of the EU, or the rise of
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social inequalities that reinforce poverty. And yet governments and
aid groups rarely prove able to act before such costs explode: indeed,
according to some estimates, they spend 40 times as much money
responding to crises as they do trying to prevent them.
Al
One reason for this is that complex international problems tend to

be dealt with almost exclusively by governments and nonprofit organi-
zations, with the private sector typically relegated to a secondary
od
role—and with the financial sector playing a particularly limited part.

Stymied by budgetary constraints and political gridlock, the traditional,
primarily public-financed system often breaks down. Government
funds fall short of what was promised, they arrive slowly, and the
so
problem festers.
In recent years, however, a new model has emerged, as collaborations
among the private sector, nonprofit organizations, and governments
have resulted in innovative new approaches to a variety of global chal-
Ma
lenges, including public health, disaster response, and poverty reduction.

Instead of merely reacting to crises and relying solely on traditional
GEORGIA LEVENSON KEOHANE is a Senior Fellow at New America and the author of
the forthcoming book Capital and the Common Good: How Innovative Finance Is Tackling
the World’s Most Urgent Problems.
SAADIA MADSBJERG is Managing Director of the Rockefeller Foundation.

funding, financiers—working closely with governments and nongovern-

mental organizations—are merging private capital markets with public
systems in ways that promote the common good and make money for
investors as well. By relying on financial tools such as pooled insurance
and securitized debt, these efforts—which have come to be known as
“innovative finance”—can unlock new resources and lead to cost-
effective interventions. At the same time, such solutions generate
profits and give investors an opportunity to diversify their holdings
with financial products whose performance isn’t tied to that of the
m
overall economy or financial markets.
Technological advances and creative thinking have led to a boom in
innovative finance. To realize its full potential, however, solving
hi
public problems by leveraging private capital requires more attention
from policymakers, who should consider a series of steps to encourage
even more progress in this area.
ha
A SHOT IN THE ARM
A wide range of players have begun to embrace innovative finance,
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including treasury departments, multilateral development agencies,
nonprofit financial firms, and traditional investment banks. In most
cases, philanthropic foundations have stepped up with seed money.
Government aid agencies have then put new concepts into practice by
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providing funds to create new financial vehicles.

The term “innovative finance” suggests complexity, but it’s less com-
plicated than it sounds. Three recent examples help demonstrate what
od
it means—and what it can do.

In the summer of 2002, the United Kingdom’s Treasury concluded
that the government’s budget had not provided enough funding to
honor the country’s commitment to the Millennium Development
so
Goals, a set of ambitious global efforts to tackle poverty and its many
effects. The British were hardly alone in this conundrum: in many of
the 189 countries that had agreed to the MDGs, officials had realized
that good intentions and bold aid pledges would not yield enough
Ma
money to make good on their promises. Gordon Brown, then the

British chancellor of the exchequer, believed that private-sector
expertise and capital markets might be able to help, and he approached
the investment bank Goldman Sachs. The firm’s bankers turned to the
tool kit of so-called structured finance to transform pledges for future
aid spending into immediate funding for MDG projects.
The Innovative Finance Revolution
In essence, Goldman Sachs’ plan was one that would be familiar to

people who hold home mortgages, and who thus borrow from their
future selves to pay for the housing they need today. Although at that
moment, governments in the United
Kingdom and elsewhere were short of
cash for their MDG spending, they had
Innovative finance leads to
pledged to devote substantial amounts cost-effective international
to MDG projects over the course of the aid, generates profits, and
next 15 years. That promised future lets investors diversify their
m
spending represented a kind of under-
lying asset—similar to a mortgage holdings.
holder’s home—which Goldman Sachs
hi
wagered investors would find attractive. The innovation was to
conceive of a new type of financial product: a bond whose yields
would be furnished by future government development aid rather
ha
than by the proceeds of a specific project, such as road tolls or
water-usage fees.
The British government and its banking partners also identified
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what they believed to be the best way to spend the money they would
raise by selling such bonds: on immunization campaigns that would
help reach the MDGs’ public health targets. In 2006, they founded the
International Finance Facility for Immunisation (IFFIm) and
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developed the world’s first “vaccine bonds.” Fitch Ratings, Moody’s

Investors Service, and Standard & Poor’s gave the bonds a AAA (or
equivalent) rating, and IFFIm conducted its first bond issue in
od
November 2006, raising $1 billion. Institutional investors such as

pension funds and central banks, as well as retail investors, purchased
bonds that matured after five years and that offered an annual yield of
five percent—31 basis points above the benchmark rate offered at
so
that time by the five-year U.S. Treasury bond. In the years since,
IFFIm has issued 30 bonds in a range of currencies and term lengths
for a variety of investors, from institutions to private individuals,
and has raised $5.25 billion. IFFIm recently further expanded its
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investor base by issuing $700 million worth of sukuk, or Islamic

bonds, which adhere to Islamic lending rules by eschewing interest
charges or payments.
To help ensure that this money would be spent in the most cost-
effective way, IFFIm partnered with Gavi, the Vaccine Alliance, a
nonprofit that is funded in part by the Bill & Melinda Gates Foundation

and that specializes in large-scale immunization programs and creative

ways to fund them. IFFIm’s bond issues helped Gavi increase its
annual budget from $227 million in 2006 to $1.5 billion in 2015 and
expand programs such as a polio eradication initiative that has financed
the development and testing of new vaccines and the stockpiling of
proven ones in places such as the Democratic Republic of the Congo
and India.
A 2011 evaluation of IFFIm conducted by the health-care consulting
company HLSP (now part of Mott MacDonald) credited IFFIm with
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saving at least 2.75 million lives and improving the quality of millions
more. All the while, IFFIm has allowed the United Kingdom and
other donor countries to make good on their MDG commitments and
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has provided investors with healthy, reliable returns. Two representative
examples include a three-year, floating-rate sukuk that IFFIm issued
in 2015, which received a AA rating, offered investors a quarterly
ha
coupon payment that was 14 basis points higher than the benchmark
three-month U.S. dollar LIBOR rate, and raised $200 million, and a
five-year “kangaroo bond” (denominated in Australian dollars and
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subject to Australian laws and regulations) that IFFIm issued in 2010,
which received a AAA rating, offered investors a 5.75 percent fixed rate
(76 basis points over the benchmark Australian Government Bond
rate), and raised $400 million in Australian dollars.
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MAKE IT RAIN
The semi-arid Sahel region, which stretches across northern Africa, is
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no stranger to droughts—nor to the famines that can follow in their

wake. There have been three major droughts in the area in the last ten
years, which have reduced the food security of millions of people.
The traditional response to such emergencies consists of a UN appeal
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to donor countries for financial aid, which usually arrives too late to
prevent the worst effects of a drought. But last year, something dif-
ferent happened.
In January 2015, soon after a drought struck the region, three
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countries—Mauritania, Niger, and Senegal—received an unusual

set of payments totaling $26 million. Rather than aid donations,
they were payments resulting from claims the countries made on
drought insurance policies they had purchased the previous year.
The total dollar amount might seem modest, but the money’s effects
were magnified by the speed with which it arrived: the countries
m
hi
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Liquidity crisis: a woman in a dry riverbed in Mauritania, June 2007
received their payments even before the UN had managed to issue
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an appeal for aid. Mauritania used the money to make timely food
deliveries to those most in need in the Aleg area, preventing many
families from deserting their homes in a desperate attempt to
survive. Authorities in Niger used the money to fund work programs
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for farmers in the Tillabéri region who could no longer afford to

feed their families after their crops failed. Senegal used its funds to
distribute food to the hardest-hit households and also to give
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subsidies to ranchers who otherwise might have lost their livestock.

These payouts were made possible by the African Risk Capacity
(ARC), a specialized agency of the African Union, and its financial
affiliate, the ARC Insurance Company, which is jointly owned by the
P A L L AVA B A G L A / C O R B I S V I A G E T T Y I M A G E S
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union’s member states. Launched in 2012 with funding from the

Rockefeller Foundation and other organizations, and born out of
frustration with the inefficiencies of the international emergency aid
system, ARC was established to help African countries build up their
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resilience to natural disasters. Capitalized with development assistance

from the Kf W Development Bank, which is owned by the German
government, and from the United Kingdom’s Department for Inter-
national Development, the ARC Insurance Company was established
in 2014. Kenya, Mauritania, Niger, and Senegal were the first African
countries to sign up for a so-called pooled risk insurance product. For

annual drought coverage of up to $60 million, each country paid an

annual premium of between $1.4 million and $9 million: around half
the amount that any one country would have had to pay on its own
for a similar level of coverage. ARC has since been backed by some of
the world’s largest reinsurance companies, including Swiss Re and
Munich Re.
In addition to providing access to insurance, ARC encourages pre-
paredness. Before countries can purchase a policy, they must produce
detailed plans demonstrating that they will use any payments they
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receive in a timely and effective manner. The planning relies heavily
on Africa RiskView, a software platform that was initially developed
by the UN World Food Program with funding from the Rockefeller
hi
Foundation and that projects crop losses and the cost of weather-
related difficulties using advanced satellite data and detailed records
of past droughts and subsequent emergency-response operations.
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ARC has the potential to transform the way developing countries
manage the costs of natural disasters, demonstrating that it is possible
to shift the burden from governments (and poor and vulnerable popu-
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lations) to global financial markets, which are much better equipped
to handle risk. To date, ARC has issued $500 million in drought insur-
ance to ten countries, and by 2020, ARC aims to provide $1.5 billion in
coverage to approximately 30 countries, helping protect some 150 million
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Africans against a variety of environmental risks, including extreme

heat, droughts, floods, cyclones, and even pandemics.
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PAYING FOR SUCCESS

Innovative finance is not just a developing-world phenomenon. In
wealthier economies, new financial tools have been brought to bear on
a wide range of challenges, including public health, an area in which
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traditional approaches often fail to meet the urgent need for preven-
tion and early intervention. Consider the case of the Nurse-Family
Partnership, a nonprofit organization in the United States that sends
nurses to make home visits to low-income, first-time-mothers, working
Ma
with them from pregnancy until their child is two years old. The NFP
has an impressive track record of improving maternal and child health
and supporting self-sufficiency. Indeed, it is one of the most rigorously
tested antipoverty interventions in U.S. history; 30 independent eval-
uations have measured its effects. A 1997 study published by researchers
at three American universities found that 15 years after participating
in the NFP’s first-time-mother program, children were 79 percent less

likely to have suffered state-verified abuse or neglect, and mothers
spent 30 fewer months on welfare, on average. In 2013, the Pacific
Institute for Research and Evaluation found that the program had a
pronounced positive impact, contributing to healthy birth outcomes,
child health and development, and even crime prevention, and
estimated that for each family served, the government saved $40,000
in spending on things such as criminal justice systems, special
education, and Medicaid.
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Yet despite this track record, the NFP, like so many effective social
programs, has had trouble securing the public dollars it needs to serve
more families in the 37 states in which
hi
it operates. So the NFP has begun to
explore partnerships to secure new
Innovative finance has the
sources of private funds in some of the potential to transform the
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states with the most need, including way developing countries
South Carolina, where 27 percent of manage the costs of natural
the state’s children live in poverty. In
February 2016, the NFP, the South disasters.
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Carolina Department of Health and
Human Services, and the Children’s Trust of South Carolina entered
into a groundbreaking “pay for success” contract structured and
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overseen by a nonprofit financial organization called Social Finance.

(As part of the initiative, the state has also received technical support
from experts at the Harvard Kennedy School’s Government
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Performance Lab.) The contract calls for private investors to provide

the NFP with $17 million—money that, along with around $13 million
in federal Medicaid reimbursements, the group will use to expand its
services to 3,200 mothers in South Carolina. If the NFP’s interventions
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succeed in demonstrably improving the lives of the participants by

hitting specific targets—reducing the number of pre-term births,
decreasing child hospitalizations and emergency-room use, promoting
healthy spacing between births, and serving more first-time mothers
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in the lowest-income communities—the investors can be repaid with

money set aside by South Carolina and can expect to receive a return
of somewhere between five and 13 percent, assuming a performance
similar to those of previous pay-for-success arrangements. If the NFP
fails to meet the goals, the investors will lose their principal and the
government will owe them nothing. The outcomes will be measured

against a randomized control trial, and the evaluation will be overseen

by the Abdul Latif Jameel Poverty Action Lab at the Massachusetts
Institute of Technology.
Such arrangements—of which the NFP’s is one of the largest, but
not the first—are sometimes called “social-impact bonds.” That is a bit
of misnomer: a contract such as this is less like a bond and more like
an equity investment, since its returns depend on performance and
investors share in both the potential upside and the risk. In the past
five years, public-private coalitions have entered into more than 50 of
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these kinds of pay-for-success agreements in Asia, Europe, the Mid-
dle East, and North America, addressing a variety of issues, including
public health, work-force development, foster care, military veteran
hi
reentry, housing, education, and criminal justice. Current estimates
place the global market for such investments at around $150 million
and predict that it will grow to somewhere between $300 million and
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$500 million over the next few years.
MORE BANG FOR THE BUCK

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A number of factors favor the advance of innovative finance. First
among them are the exceptionally low interest rates in recent years,
which have whetted capital markets’ appetite for new kinds of invest-
ment vehicles, especially those whose performance doesn’t necessarily
Al
depend on broader economic or financial trends. Innovative finance

can provide value to investors even when more traditional equity and
bond markets falter. Even if interest rates begin to rise, as many
od
expect they will, innovative financial solutions have already proved

their value and will likely endure.
But to grow and expand, such products must reach a wider pool of
capital, moving beyond the institutional investors who currently
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represent the sector’s most active players. Some innovative financial

products are already available to retail investors, primarily through
specialized investment funds, such as the Goldman Sachs Urban
Investment Group, and through donor-advised funds that manage
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investments for major charities. And a growing number of products,

including vaccine bonds offered by IFFIm in Japan, have become
even more easily available to retail investors.
To achieve larger scale, the developers of innovative financial
products must continue to provide attractive yields and further
mitigate the risks—real or merely perceived—posed to investors who
want to enter this still unfamiliar terrain. Financial professionals who

design these products need to take better advantage of government
guarantees and government insurance, such as the Development
Credit Authority program run by the U.S. Agency for International
Development, which provides partial debt guarantees to investors
and is backed by the U.S. Treasury. Yet fostering greater participation
will require more than competitive returns. Investors also need
reliable data to assure them that innovative finance will help them do
well while doing good. Here, technological innovation is comple-
m
menting financial innovation. Consider, for example, recent advances
in remote sensors, which can measure the effects of complex processes
such as deforestation. The new availability of such data has made it
hi
possible to design pay-for-success contracts that depend on rigorous
monitoring. Meanwhile, more accurate and comprehensive satellite
imagery has also made it possible to better assess the threats posed
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by bad weather and natural disasters, allowing financiers to develop
more sophisticated insurance-based investment products, such as the
natural-disaster protection plans now spreading in Africa.
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Government policy is also beginning to shift in ways that will
encourage more innovative finance. For example, in October 2015,
the U.S. Department of Labor repealed restrictive rules that had
prevented U.S. pension funds from considering social, environmental,
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and good-governance factors when making investment decisions. This

“ERISA reform”—a reference to the Employee Retirement Income
Security Act—has the potential to catalyze investment in innovative
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financial products by pension funds that must follow ERISA guidelines:

a huge source of potential funding. Meanwhile, in 2015, at a summit at
Schloss Elmau, in Germany, the G-7 countries adopted the InsuResilience
Initiative, a collaboration between the G-7 and a number of countries
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that are particularly vulnerable to the effects of climate change; the

initiative seeks to extend insurance protection against climate disasters
to 400 million people. Further progress will require leadership from
donor countries and coordinated international policy efforts; one
Ma
good model is the Social Impact Investment Taskforce, a G-8 initiative

that was launched by British Prime Minister David Cameron in 2013
and that tracks and reports on global trends in impact investing.
Investor confidence in innovative finance would also improve if
there were clearer rules and norms regarding how financial analysts
should measure and assess environmental and social factors and integrate

their findings into their reporting. One important step in this direction
was the establishment, in 2011, of the Sustainability Accounting
Standards Board, a U.S.-based nonprofit that develops industry-specific
methods for addressing such factors in their accounting procedures
and financial filings.
In addition, governments must improve their ability to make long-
term decisions about spending on investment in social and economic
development, at home and abroad. Budgeting processes in most rich
countries do not allow for strategic commitments to long-term devel-
m
opment aid: the creation of IFFIm would have been impossible had
the participating countries not made exceptions to their own budgeting
rules. In the United States, Congress should pass legislation—such as
hi
the Social Impact Partnership Act, which was proposed in 2015 with
bipartisan sponsorship—that would direct federal funding to public-
private innovative financial initiatives at the state and local levels.
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CAPITALIZE ON CAPITAL
In February, international donors met in London and made an
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impressive pledge of roughly $11 billion in aid and another $40 billion
in loans to deal with the enormous costs of the Syrian civil war,
including the migrant flows currently overwhelming the Middle East
and Europe. “Never has the international community raised so much
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money on a single day for a single crisis,” boasted UN Secretary-

General Ban Ki-moon. But veterans of humanitarian aid and crisis
response watched the conference with a sinking feeling, knowing that
od
a great deal of promised funding fails to materialize and that even the
best-intentioned aid frequently falls short of achieving its goals.
Innovative finance can help improve the international community’s
response to some of the most costly aspects of such crises. Imagine,
so
for example, how pay-for-success contracts or approaches similar to

IFFIm’s could allow governments to raise funds quickly for the health-
care, housing, and educational needs of refugees by securitizing future
spending. Such proposals might once have seemed far-fetched;
Ma
not any longer. With continued philanthropic support and sustained

commitment from governments, innovative finance can put the power
of private capital markets to work for the public good.∂
ESSAYS
Economic cooperation makes
the American people and
others around the world more
prosperous and secure.
m
—Jacob Lew
hi
ha
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Al
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America and the Global Economy The Fed and the Great Recession
Jacob J. Lew 56 Scott Sumner 116
so
Making America Great Again The Fusion of Civilizations

Jacob S. Hacker and Paul Pierson 69 Kishore Mahbubani and Lawrence H.
Summers 126
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The Once and Future Superpower

Stephen G. Brooks and William C. The Age of Transparency
Wohlforth 91 Sean P. Larkin 136
The Fed’s Unconventional The Clean Energy Revolution

Monetary Policy Varun Sivaram and Teryn Norris 147
Martin Feldstein 105
America and the Global

Economy
The Case for U.S. Leadership
m
Jacob J. Lew
W
hi
hen U.S. President Barack Obama joined other global
leaders at the G-20 summit in Turkey in November 2015,
the United States was in the final stages of a multiyear
ha
effort to secure the approval of a set of important reforms to the
International Monetary Fund. The reforms, negotiated in 2010 with
strong U.S. leadership, were designed to double the organization’s
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core financial resources to combat financial crises and to modernize
its governance by increasing the voting shares of emerging-market
economies while maintaining a decisive U.S. voice. But their imple-
mentation had been on hold for several years, awaiting approval from
Al
Congress. Christine Lagarde, the IMF’s managing director, spoke for

many when she opened the meeting in Turkey by saying she prayed
that the United States would approve the reforms by the end of the
od
year. Obama responded with a mix of levity and seriousness. “You

don’t have to pray, Christine,” he said. “It will get done.”
Indeed, a few weeks later, Congress passed the necessary legislation,
and by February 2016, the reforms had gone into effect. Their imple-
so
mentation not only marked a financial and institutional watershed in

the IMF’s long history. It also illustrated a distinctive feature of how the
United States has exercised economic leadership by expanding the
number of nations with an ever-greater stake in the success of a rules-
Ma
based global system that benefits all.

Yet it is worth asking: Why was it so hard to win congressional
support that it led some to believe that divine intervention was required?
After all, the IMF has embodied U.S. leadership since its conception
JACOB J. LEW is U.S. Secretary of the Treasury.
America and the Global Economy
in 1944. Along with the World Bank and the General Agreement on
Tariffs and Trade (and its successor, the World Trade Organization),
the IMF has provided the underlying infrastructure of a global economic
system that has enabled economies to rise from the ashes of war,
created the jobs and rising incomes that have produced a global
middle class, and lifted hundreds of millions of people out of poverty.
But the difficulty in securing approval should not have been a com-
plete surprise. The historical ambivalence of the United States toward
global engagement is a thread that runs through American history—
m
from George Washington’s Farewell Address, to the Senate’s rejection
of the League of Nations after World War I, to the initial reluctance
of the United States to enter World War II, and to the difficult
hi
process of winning congressional support for the postwar economic
system itself. What’s more, Congress was considering the IMF reforms
at a time when decades of stagnating wages for lower-skilled workers
ha
and rising income inequality had heightened anxieties about trade
and the global economy. Making the case for global engagement
against this backdrop requires taking a long-term view of the nature
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of U.S. economic power in a rapidly changing world.
However, making this case is exactly what those who care about
U.S. leadership in the world must do. History has shown that U.S.
economic leadership is vital to the well-being of American workers
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and families, as well as to the ability of the United States to project its
values and achieve its larger foreign policy objectives. Sustaining
U.S. leadership and adapting it to the challenges of our time remain
od
indispensable. U.S. influence in a changing world will increase as the

United States shares with emerging economies such as China both
the benefits and the responsibilities of managing the global economic
and financial system.
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FOLLOW THE LEADER

The seven decades following World War II have produced the greatest
gains in living standards in history. Globally, real per capita income
Ma
has quadrupled since 1950, raising living standards for billions of

people, extending life expectancies, and expanding access to education.
The benefits of sustained growth have also been geopolitical. The
dynamism of economies in North America, Western Europe, and East
Asia was integral to the triumph of market-based democracies in the
Cold War.
May/June 2016 57
Jacob J. Lew
Clear rules for global economic relations create opportunities

and incentives to innovate, invest, and work—the critical drivers of
economic progress. History shows that the absence of a durable
framework not only squanders untapped potential during good times
but also creates grave risks during turbulent times. The breakdown
of international cooperation in the 1930s—when countries took
unilateral actions to secure short-term parochial advantages to the
detriment of others—perpetuated the Great Depression.
The Bretton Woods system of cooperation, which the United States
m
advanced in the postwar years, has evolved and endured by providing
a foundation for mutual economic gains that would not be achievable
by individual countries acting on their own. Such a system of rules
hi
and standards based on mutual responsibility does not automatically
enforce itself; it requires leadership, a role that has historically been
played by the United States. It also requires constant management
ha
and improvement, to raise standards and create better mechanisms
to ensure that countries keep their commitments, refrain from unfair
competitive behavior, and cooperate to confront new challenges.
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When the system is working, the stability and predictability it provides
encourage countries—even commercial and geopolitical competitors—
to adhere to a common set of norms and principles, because doing
so is in their long-run economic interests.
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The United States was present at the creation of this ambitious

system. And a long line of Republican and Democratic administrations
with bipartisan support from Congress have been integral to adapting
od
it to new challenges, as well as supplementing it with bilateral and

multilateral tools, such as the G-7 and the G-20, to advance its under-
lying goals. The United States has worked with its partners to promote
economic development, strengthen global financial regulation, and
so
combat financial crimes from money laundering to terrorist financing.

Using mechanisms such as the IMF and the G-20, in conjunction with
U.S. legislation such as the Trade Facilitation and Trade Enforcement
Act of 2015, this system has helped level the playing field in interna-
Ma
tional trade and prevent unfair currency practices aimed at gaining

commercial advantage.
International economic cooperation has delivered benefits to the
United States and other countries that would have been impossible to
attain otherwise. A major reason that the global financial crisis that
began in late 2007 never turned into a second Great Depression is that
the United States and other countries coordinated their efforts through
the IMF and the G-20. Avoiding the downward spiral of protectionism
and predatory macroeconomic policies that characterized previous
eras, the world’s major economies—the United States, the eurozone,
Japan, and China—launched simultaneous economic stimulus pro-
grams and mobilized financial assistance to help vulnerable parts of
the global system. The episode represented just one of many examples
of how economic cooperation makes the American people and others
around the world more prosperous and secure.
m
BENEFITS AND RESPONSIBILITIES
As the world’s leading economy, the United States has nurtured and
hi
strengthened this framework of economic cooperation. Over the past
few years alone, it has used this system to work with partners to marshal
billions of dollars in financial and technical assistance to advance impor-
ha
tant U.S. goals. The IMF, at the suggestion of the United States, was a
first responder to the fiscal stress caused by the Ebola epidemic in West
Africa in 2014. That same year, it was also the first responder in support-
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ing a reform-oriented government in Ukraine with $17 billion in urgent
support, the initial tranche of which was delivered within weeks of Rus-
sia’s aggression in Crimea. The scale and speed of this assistance simply
would not be possible if the United States had to act alone or stitch
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together donor contributions in an ad hoc manner. The international

financial institutions amplify U.S. influence on the global stage.
By working closely with partners to implement financial sanctions,
od
the United States has also demonstrated how to use the global financial
architecture to persuade disruptive actors to abandon behavior that
threatens peace and security. An unprecedented coalition imposed
sufficient financial pressure to win major nuclear concessions from
so
Iran, and the U.S. Treasury and other agencies are still working closely
with allies to impose costs on Russia for its actions in Ukraine and
to move against entities that are abetting North Korea’s nuclear viola-
tions. The effective use of these tools has given future U.S. presidents
Ma
and other leaders more and better options for confronting security
threats short of using military force.
The ability of the United States to mobilize the international com-
munity and sustain the commitment of other nations to the global
financial architecture requires the judicious exercise of power. In the
years after World War II, it was natural for the United States, which had
May/June 2016 59
Jacob J. Lew
the world’s largest economy and the only currency that could command
sufficient trust as a global reserve asset, to take on the mantle of global
economic leadership. And although today there is still no immediate
alternative, it would be a mistake to take this dominance for granted.
The durability of U.S. leadership depends not just on the economic heft
of the United States but also on the manner in which it wields power in
international institutions, forges key relationships, and manages those
occasions on which it must act unilaterally to protect its core interests.
It is important to keep in mind how the United States has main-
m
tained its preeminence even as so much has changed since World
War II. After the war, the United States accounted for the dominant
share of global GDP and nearly all of
hi
the world’s hard currency reserves.
The international Today, it accounts for less than a quar-
financial institutions ha ter of global GDP. Yet U.S. leadership
amplify U.S. influence has endured, in part because American
on the global stage. principles and values are embedded in
the international economic framework.
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The United States has encouraged
other countries to have a stake in the success of this system and a
voice in how it is managed, so that its institutions continue to meet
the needs of a transforming global economy.
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That is why the Obama administration has made it a priority to

modernize the IMF’s governance structure and to ensure the organiza-
tion has sufficient resources. And that is why since becoming treasury
od
secretary in 2013, I have held dozens of conversations with Republican

and Democratic leaders in both the House and the Senate to secure
congressional approval for these reforms. Key to making the case was
explaining how the reforms were critical to sustaining the leadership
so
of the United States on the global stage and its ability to pursue objec-
tives in such places as Ukraine. By underscoring the U.S. commitment
to an IMF that is evolving to reflect the changes in the global economy,
the United States promotes incentives for emerging countries to remain
Ma
committed to a system of norms that reflect American values.

As other countries gain greater voice in the international system,
they also must accept greater responsibilities. A major one is to engage
in responsible foreign exchange practices. Currency fluctuations are a
normal and even desirable attribute of the global economy. When the
values of currencies are allowed to move according to market forces,
the global economy can better adapt to changes in relative economic

performance among countries. What is unacceptable, however, is
intervention in foreign exchange markets in order to gain a competitive
advantage in trade or impede adjustments in the balance of payments.
Competitive devaluation represents a beggar-thy-neighbor fight for a
shrinking global pie, not a pathway to stronger global growth.
Strong multilateral institutions such as the IMF and the G-20 are
important vehicles for reinforcing norms against predatory currency
practices and for mobilizing multilateral pressure against countries
m
that engage in them. At the G-20 meeting in Shanghai this February,
members not only committed to using all tools of policy—monetary,
fiscal, and structural—to boost economic growth in a time of weak
hi
demand. They also committed to refrain from competitive devalua-
tion and, for the first time, to consult on foreign exchange markets to
avoid surprises that could threaten global financial stability.
ha
The manner in which the United States has discharged its own
responsibilities across the span of global obligations is reflected in the
ongoing preeminence of the U.S. dollar as the world’s reserve currency.
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By maintaining a capital market of unparalleled depth, transparency,
liquidity, and openness, the United States continues to provide the
safety net that global investors value most. It is incumbent on U.S. policy-
makers not to take for granted the reserve-currency status of the dollar
Al
but rather to ensure that the country’s economic policies and stewardship
of U.S. capital markets sustain this track record of trust and reliability.
This also entails using financial sanctions judiciously—as against Iran,
od
Russia, and North Korea—to support critical national security objectives

while designing such sanctions with care and precision to target hostile
actors and limit collateral damage to other countries and markets.
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THE DOMESTIC AGENDA

Sustaining U.S. leadership in the global economic system begins at
home. The United States must lead by example, as it did by bouncing
back from the financial crisis. During the crisis, many were questioning
Ma
the place of the United States in the global economy. But the U.S.
government’s forceful and prompt response—using all available tools—
ultimately demonstrated the underlying resilience of the American
economy. The U.S. Federal Reserve took aggressive action on the
monetary front, while the president and Congress adopted a powerful
fiscal stimulus that combined government spending with temporary
May/June 2016 61
Jacob J. Lew
payroll tax cuts that put money directly in the pockets of American
workers. The result has been the longest streak of uninterrupted
private-sector job growth in U.S. history; as of early 2016, the econ-
omy had experienced over 72 consecutive months of job growth, with
14 million jobs generated in the private sector and the unemployment
rate falling to 4.9 percent. Between 2009 and 2015, the budget deficit
declined from nearly ten percent of GDP to 2.5 percent. Meanwhile,
improved financial regulation has helped address the causes of the
crisis, producing a better-capitalized and more stable financial system.
m
But along the way, there were a number of moments when the world
wondered whether political conflict had rendered the American system
incapable of meeting the challenge. Government shutdowns and the
hi
threat of government default heightened global anxieties. U.S. Treasury
bonds define the risk-free rate of return around the world, and the chance
that political turmoil could lead to any form of default left lasting scars,
ha
wounds that would be reopened immediately at the first sign of a repeat
episode. Moreover, Washington’s inability to reach a consensus on
domestic issues such as rebuilding aging infrastructure, reforming the
iT
broken business tax code, and passing immigration reform—issues on
which there is in fact the potential for bipartisan consensus—raises ques-
tions about the country’s future economic strength. The United States
needs to address these issues for domestic reasons, and when it does, it
Al
will be more capable of achieving its international objectives, as well.

Last summer, when Congress approved legislation granting the presi-
dent trade promotion authority, it demonstrated yet again that, working
od
together, both sides of the aisle can tackle difficult issues. The move also
opened a pathway for the approval of the Trans-Pacific Partnership (TPP),
signed in February, which will level the global playing field for U.S. work-
ers and firms while getting other countries to meet a high bar on environ-
so
mental, labor, and intellectual property standards—yet another example

of the United States promoting its values in global economic institutions.
Similarly, when Congress reauthorized the Export-Import Bank last year,
it leveled the playing field for U.S. firms, including small businesses, and
Ma
gave the United States leverage to prevent other governments from

unfairly subsidizing their exporters through artificially cheap financing.
This February, the president signed the Trade Facilitation and
Trade Enforcement Act, which gives the U.S. Treasury new tools to
fight unfair currency practices. By enumerating objective criteria that
would automatically trigger enhanced scrutiny of a country’s currency
m
hi
ha
Lew testifies on Capitol Hill, February 2016
practices—such as a significant bilateral trade surplus with the United
States, a sizable current account surplus, and persistent one-sided
iT
intervention in foreign exchange markets—the legislation put govern-
ments on notice that such practices will be caught and subject to a
U.S. response. Just days after the act became law, the Treasury made
it clear to U.S. trading partners that the United States will vigorously
Al
apply these criteria, which—in tandem with existing multilateral mech-

anisms through the IMF and the G-20—will be a strong deterrent to
would-be currency manipulators.
od
Without congressional partnership, many of these important steps

would have been impossible. Likewise, it will take congressional action
to address the underlying concerns of many Americans that make in-
ternational commitments difficult. Congress and the executive branch
so
must work together on domestic policies that can assure anyone will-
ing to study and work that they will have the opportunity to advance
in a changing economy. And it is critical that Congress support poli-
cies to help workers dislocated by global competition, such as Trade
Ma
AP PHOTO / ALEX BRAN DON
Adjustment Assistance (a federal program for which the president

secured a six-year reauthorization last year), not only when trade agree-
ments are pending but also during the long periods in between, when
anxieties are no less pronounced but Washington is too often silent.
Although the power of American ideas and values remains a pillar of
the global system, the continuing financial commitment of the United
May/June 2016 63
Jacob J. Lew
States to the international financial institutions is also essential. This

includes having Congress appropriate the funds required to meet U.S.
pledges to the multilateral development banks. As director of the Office
of Management and Budget in the 1990s, I was personally involved in
the effort to clear unmet U.S. commitments to the UN at a moment
when that institution was addressing key U.S. security priorities in
southeastern Europe and Africa, as well as Iraq. Today, Washington is
again accruing unmet pledges to many organizations to which it will turn
at moments of crisis or to pursue other goals. To put it bluntly, the
m
United States must pay its bills. The return on investment in terms of
sustaining its influence and advancing its values is enormous. And if
the United States does not lead, others will act without it.
hi
The world’s future economic challenges will require the United
States to invest a great deal of effort, time, and financial resources.
Making the case for sustained U.S. leadership is not always easy.
ha
Unilateralism or isolationism often make for better sound bites.
So it is incumbent on everyone who believes in the benefits that
international cooperation has brought to the United States to be vocal
iT
in articulating the economic and geopolitical case for an ongoing
U.S. commitment to global economic engagement.
THE GLOBAL AGENDA

Al
The ongoing agenda for U.S. leadership encompasses a broad range of

global priorities, which will not end with the current administration.
First, the United States is working to further modernize the IMF’s
od
system of governance and improve its capacity to deal with evolving

challenges. Although the IMF must remain the world’s first responder
to financial crises, to advance its core mission of promoting the efficient
operation of the global economy, it must also intensify its analysis of
so
and raise its voice on such critical issues as exchange rates, current
account imbalances, and shortfalls in global aggregate demand. The
United States should also continue to press the IMF to promote greater
transparency among its members when it comes to economic and finan-
Ma
cial data, including data about foreign reserves. More information

means better policy cooperation, as well as more efficient functioning
of financial markets.
Second, the United States is acting to further strengthen the ability
of the World Bank and the regional development banks to support
sustainable and inclusive growth. This means ensuring that these
institutions have sufficient resources, policy expertise, and links to the

public and private sectors to help countries achieve the UN’s Sustainable
Development Goals for access to energy, food security, health and
education, gender equality, and infrastructure development. It also
means ensuring that they have the right tools to address challenges
such as state fragility, forced migration, natural disasters, and disease
epidemics. To mobilize resources to cut carbon emissions and build
societies resilient to climate change, the United States is already
helping existing institutions partner with the private sector and with
m
relatively new institutions such as the Green Climate Fund, an entity
that grew out of the UN Framework Convention on Climate Change.
In this effort and others, the World Bank’s social, environmental, and
hi
fiduciary standards will prove vital to promoting best practices. The
United States is also working closely with both the private and the
public sector to expand access to financial services for underserved
ha
and poor communities worldwide, since greater inclusion in the for-
mal financial sector helps reduce poverty and makes it harder for
people to engage in illicit or threatening financial activity.
iT
Third, the United States is continuing to modernize the global
trading system by pushing for innovative features in new trade agree-
ments that can eventually serve as global standards to meet the needs
of a complex and evolving world economy. The TPP not only prom-
Al
ises to open markets to U.S. firms and support higher-paying jobs for
American workers; it also offers innovative approaches to key global
issues, such as strengthened labor and environmental provisions, ro-
od
bust protections for trade in services, and controls on the behavior of

state-owned enterprises to ensure fair competition. Also, in a first-
of-its-kind declaration on macroeconomic policies, TPP countries
have committed to avoid manipulating exchange rates for competitive
so
purposes, to adhere to unprecedented transparency on their exchange-

rate policies, and to hold one another accountable for their commitments
through new bilateral and multilateral mechanisms. In addition to
securing congressional ratification of the TPP, U.S. trade priorities
Ma
include ongoing negotiations with the EU on the Transatlantic Trade

and Investment Partnership and working with a wide array of partners
on an agreement to liberalize trade in services.
Fourth, to prevent a repeat of the financial crisis, the United States
continues to advance efforts to reform the international financial
regulatory system. Starting at the G-20 summit in Pittsburgh in 2009,
May/June 2016 65
Jacob J. Lew
the United States led the call for more rigorous capital standards for
banks, greater transparency in the derivatives market, and stronger
tools for managing the failure of financial institutions. In the seven
years since, in each of these areas, U.S. leadership on the Financial
Stability Board (FSB), a G-20 body that monitors the global financial
system, has made that system more resilient. With many of the critical
standard-setting reforms in place, the focus now shifts to giving them
full effect, by implementing them comprehensively and consistently
in major financial centers across the world. Governments must also
m
be attentive to emerging threats, from cyberattacks to the growth of
nonbank financial companies that are systemically important yet not
subject to traditional oversight.
hi
Critics often mischaracterize the FSB, claiming that it will usurp U.S.
regulators. Such fears are unwarranted: U.S. regulators have final
responsibility and the independent authority to protect the integrity of
ha
the U.S. financial system. In executing their prudential responsibilities,
U.S. regulators apply rigorous standards that strive to be at the frontier
of best practices. The purpose of the FSB is to embed such high stan-
iT
dards into the international regulatory framework to safeguard the
global financial system and provide a level playing field on which firms
from various countries can compete. The last thing the global economy
needs in the wake of the financial crisis is for countries to run away
Al
from high standards in a regulatory race to the bottom.

Fifth, the United States is expanding efforts to combat terrorist
financing, corruption, money laundering, and other financial crimes.
od
The U.S. Treasury is strengthening its anti-money-laundering and

counterterrorist-financing rules at home and working through the
Financial Action Task Force, an intergovernmental body, to improve
their enforcement globally. In December 2015, I chaired a meeting
so
of my counterparts from the other members of the UN Security

Council—the first such meeting for finance ministers—where we
unanimously passed a resolution to bolster the international effort to
combat terrorist financing, specifically against the Islamic State, or
Ma
ISIS. This mission is never complete. As financial innovation reshapes

the international financial system, governments must stay a step ahead
by updating their regulatory regimes to combat abuse. At the same
time, they must make clear that such regulations are not intended
to impede the legitimate provision of financial services by global
banks—especially to the underserved. Combating abuse and promoting
financial inclusion are complementary goals, in that informal cash

economies stifle economic potential and foster illicit finance.
Finally, the Treasury is committed to building on the progress it has
made in cooperating with emerging-market partners such as Argentina,
Brazil, India, and Mexico on key priorities such as facilitating invest-
ment, improving the implementation of tax policies, promoting finan-
cial inclusion, and combating money laundering and terrorist financing.
These efforts, along with my discussions with counterparts from other
emerging economies, are crucial to aligning priorities on macroeco-
m
nomic policy and governance in the IMF, the World Bank, and the G-20.
The relationship between the United States and China, the world’s
two largest economies, is uniquely important to advancing shared
hi
prosperity, maintaining a constructive global economic order, and
making progress on existential challenges such as climate change. The
U.S.-China Strategic and Economic Dialogue has helped build the
ha
relationship among economic and diplomatic officials from the two
countries and has provided a platform for discussing with China its
continuing efforts to rebalance its economy toward household con-
iT
sumption and to give the market a decisive role in its economy, as well
as to embrace greater transparency and predictability in its policy-
making. The dialogue has also served as a critical venue for U.S. offi-
cials to impress on their Chinese counterparts the importance of
Al
making an orderly transition to a market-determined exchange rate.

At the 2013 meeting of the Strategic and Economic Dialogue, the
United States and China announced a milestone with the start of sub-
od
stantive negotiations on a U.S.-Chinese bilateral investment treaty.

The goal is to set ambitious standards for protecting investments that
would benefit not just U.S. firms abroad but also U.S. companies and
workers at home. This year, the United States is also working in-
so
tensely with China on an agreement within the World Trade Organi-

zation to lower tariffs on environmental goods such as wind turbines
and on guidelines concerning government-backed export financing.
This discussion has also focused on the importance of China taking
Ma
on the responsibilities that go along with its economic significance.

With the creation of institutions such as the Asian Infrastructure
Investment Bank, China is playing a greater role in the international
financial architecture. Some have suggested that the United States
opposed the creation of the AIIB because it posed a threat to U.S. influ-
ence in the international financial system. That is simply not the case.
May/June 2016 67
Jacob J. Lew
As a participant in the key discussions, I conveyed the same message

both to China directly and to countries considering joining the institu-
tion: namely, that it was paramount to incorporate in the AIIB’s policies
and procedures the high-quality standards and lessons learned from the
decades of experience of the World Bank and regional development
banks, so that the AIIB can reinforce the existing global financial archi-
tecture. To that end, during the visit of Chinese President Xi Jinping to
Washington in September 2015, China pledged that such new institu-
tions would operate in line with the high governance and environmental
m
standards of existing institutions such as the World Bank. And it is im-
portant that China keep this pledge. Significantly, Xi also committed to
meaningfully increase China’s financial contributions to the work of the
hi
World Bank and the regional development banks in the world’s poorest
countries. A successful AIIB that meets high standards and collaborates
effectively with the other international financial institutions would be
ha
a positive thing for the global economy, and the United States will
continue to advance the case for such standards and collaboration.
China’s rotation as president of the G-20 in 2016 further underscores
iT
the importance of the relationship between the two countries, offering
new opportunities to work together to strengthen the global economy.
ONWARD AND UPWARD

Al
The last year alone saw major progress in advancing U.S. leadership in
the global economy. The Obama administration worked with Congress
to secure IMF reform, trade promotion authority, and the reauthoriza-
od
tion of the Export-Import Bank. The United States reached agreement

with its international partners on the TPP, a landmark climate agree-
ment, the Iran nuclear deal, and an expanded strategy to stop terrorist
financing. But the United States cannot take its global role for granted.
so
It must continue to ask whether its actions—and inactions—enhance

its capacity to maintain this preeminent leadership role in the future.
The farsightedness of previous generations of Americans provided
a solid foundation on which to advance American values and build a
Ma
prosperous future for the United States and other countries. The task
now is to strengthen this architecture and adapt it to new challenges. In
doing so, the United States will not only address the urgent issues of
the present day; it will also ensure that the next generation of Americans
inherits an even stronger platform for navigating the economic and
financial landscape of the future.∂
Making America
Great Again
The Case for the Mixed Economy
m
Jacob S. Hacker and Paul Pierson
A
hi
t a debate among the Republican presidential candidates in
March, U.S. Senator Ted Cruz of Texas boiled down his cam-
paign message to its essentials: “Here’s my philosophy. The
ha
less government, the more freedom. The fewer bureaucrats, the more
prosperity. And there are bureaucrats in Washington right now who
are killing jobs and I’ll tell you, I know who they are. I will find them
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and I will fire them.”
What was remarkable about this statement was how unremarkable
it was. Cruz was not taking a radical position; he was expressing
his party’s orthodoxy, using boilerplate language to signal that he
Al
understood the conservative movement’s core concerns. For years,

his fellow Republicans have taken comparable stands. When Texas
Governor Rick Perry got into trouble while making a similar pledge
od
in a presidential candidate debate in 2011, for example, it was not

because he promised to eliminate several federal agencies—Cruz
wants to eliminate even more—but because he couldn’t remember all
the particular agencies he wanted to jettison.
so
Even if the candidates making them are elected, specific promises

about, say, closing major government agencies are bound to be broken,
for reasons of simple practicality. As a debate moderator had pointed
out to Cruz a few weeks earlier, for example, once he had eliminated
Ma
JACOB S. HACKER is Director of the Institution for Social and Policy Studies and Stanley B.
Resor Professor of Political Science at Yale University.
PAUL PIERSON is John Gross Professor of Political Science at the University of California
at Berkeley.
They are the authors of American Amnesia: How the War on Government Led Us to Forget
What Made America Prosper (Simon & Schuster, 2016), from which this essay is adapted.
Copyright © 2016 by Jacob S. Hacker and Paul Pierson. Printed by permission.
May/June 2016 69
the Internal Revenue Service, there would be nobody left to see that
taxes were collected, which would pose something of a problem for the
functioning of the government. But the spread of this sort of thinking
in recent decades has had important effects nonetheless, contribut-
ing to increased hostility to government and a major retrenchment in
government activities.
Many conservatives complain that this contraction has been too
limited and that cutting back even further would unleash powerful
forces in the U.S. economy and society that would help solve problems
m
such as slow growth, stagnating incomes, low labor-force participation,
and rising inequality. They tell a story about a bygone era of economic
dynamism when men and markets were free—a laissez-faire Eden
hi
that was lost when progressive politicians such as Woodrow Wilson
started using government power to try to “improve” things and ushered
in a century of increasingly tyrannical government meddling that has
ha
led to a host of terrible outcomes.
The truth is almost precisely the opposite. The spread of capitalism
in the eighteenth and nineteenth centuries triggered innovation,
iT
growth, and economic progress, but so long as markets were relatively
unconstrained, the scale and benefits of that economic dynamism
were often limited, inconsistently delivered, unequally distributed,
and too frequently unfairly captured by powerful private actors. It
Al
was the emergence in the first half of the twentieth century of a

robust U.S. government willing and able to act boldly on behalf of
the country as a whole that led to spectacular advances in national
od
well-being over many decades—and it has been the withering of

government capabilities, ambitions, and independence in the last
generation or two that has been a major cause of the drying up of
the good times.
so
There has been nothing inevitable about the trend toward weaker,
less functional government; it has been driven by a relentless campaign
over many decades to delegitimize the stronger U.S. government
that did so much good earlier in the century. So the trend can be
Ma
reversed. But it will take an equally persistent campaign in the oppo-

site direction, devoted to reminding Americans of what they once
understood so well: that a government capable of rising above narrow
private interests and supporting broader public concerns is part of
the solution, not the problem.
Making America Great Again
WHAT ADAM SMITH UNDERSTOOD

Like other advanced democratic nations, the United States has what
economists call a “mixed economy.” In this public-private arrange-
ment, markets play the dominant role in producing and allocating goods
and innovating to meet consumer demand. Visionaries such as Apple’s
Steve Jobs see untapped opportunities to make money by satisfying
human wants and then draw on the knowledge and technology around
them to produce goods and services for which people are willing to
pay. Alongside companies such as Apple, however, government plays
m
a dominant or vital role in the many areas where markets fall short. As
the economist Mariana Mazzucato has documented, if you look inside
that iPhone, you’ll find that most of its major components (GPS, lithium-
hi
ion batteries, cellular technology, touch-screen and LCD displays,
Internet connectivity) rest on research that was publicly funded or
even directly carried out by government agencies.
ha
Jobs and his creative team transformed all of this into something
uniquely valuable. But they couldn’t have done it without the U.S.
government’s huge investments in technical knowledge—knowledge
iT
that all companies can use and thus none has a strong incentive to
produce. That knowledge is embodied not just in science and technol-
ogy but also in a skilled work force that government fosters directly
and indirectly: through K–12 schools, loans for higher education, and
Al
the provision of social supports that encourage beneficial risk taking.

And even if government had played no role in seeding or enabling
Apple’s products, it would still be responsible for much of the economic
od
and physical infrastructure—from national monetary policy to local

roads—on which the California tech giant relies.
Of course, affluent democracies differ in the exact form that this
public-private mix takes, and not all mixes are equally effective. Public
so
policies don’t always foster prosperity. Those within government can

hurt, rather than harness, the market, distributing favors to narrow
interest groups or constraining economic dynamism in ways that stifle
growth. No less important (though more neglected), they can fail to
Ma
respond to problems in the market that could and should be addressed

by effective public action, hindering growth through omission rather
than commission. For all of this, however, no country has risen to
broad prosperity without complementing private markets with an exten-
sive array of core functions that rest on public authority—without,
that is, a mixed economy.
May/June 2016 71
That markets fall short under certain conditions has been known
for centuries. In the eighteenth century, Adam Smith wrote enthusi-
astically about the “invisible hand” of market allocation. Yet he also
identified many cases in which rational actors pursuing their own
self-interest produced bad outcomes: underinvestment in education,
financial instability, insufficient infrastructure, unchecked monopolies.
Economists have been building on these insights ever since to explain
when and why markets stumble and how the visible hand of govern-
ment can make the invisible hand more effective.
m
The visible hand is needed, for example, to provide collective goods
that markets won’t, such as education, infrastructure, courts, and basic
scientific research; to reduce negative
hi
Democracy and the market spillover costs that market participants
don’t bear fully, such as pollution; to
have to work together, but encourage positive spillover benefits that
ha
they also need to be partly such parties don’t take fully into account,
independent from each other. such as valuable shared knowledge;
to regulate the market to protect con-
iT
sumers and investors from corporate
predation and from their own myopic behavior; to provide or require
insurance against medical and retirement costs; and to soften the
business cycle and reduce the risk of financial crises.
Al
The political economist Charles Lindblom once described markets

as being like fingers: nimble and dexterous. Governments, with their
capacity to exercise authority, are like thumbs: powerful but lacking
od
subtlety and flexibility. The invisible hand is all fingers. The visible
hand is all thumbs. One wouldn’t want to be all thumbs, of course,
but one wouldn’t want to be all fingers, either. Thumbs provide counter-
vailing power, constraint, and adjustment to get the best out of those
so
nimble fingers.
To achieve this potential requires not just an appropriate division
of labor but also a healthy balance of power. Markets give rise to
resourceful economic actors who want government to favor them.
Ma
Absent measures to blunt their political edge, their demands will

drown out the voices of consumers, workers, and concerned citizens.
Today, most of the discussion of the political power of market
actors suggests that such “crony capitalism” can be avoided simply by
reducing governance to a bare minimum. As Smith clearly recognized,
however, the intermingling of markets and politics is inevitable: a
private sector completely free of government influence is just as myth-

ical (and undesirable) as a government completely free of private-
sector influence. And a government that doesn’t act in the face of
distorted markets is imposing costs on society as a whole that are just
as real as those imposed when a government acts in favor of narrow
claimants. Trying to reduce rent seeking by crippling active govern-
ment means embracing a cure far worse than the original disease.
The mixed economy, in short, solves a major dilemma. The private
markets that generally foster prosperity routinely fail, sometimes
m
spectacularly so. At the same time, the government policies that are
needed to respond to these failures are perpetually under siege from
the very market players that help fuel growth. Democracy and the
hi
market have to work together, but they also need to be partly indepen-
dent from each other, or the thumb will cease to apply effective counter-
pressure to the fingers. Smith recognized this dilemma, but it was never
ha
resolved adequately during his lifetime, in part because neither markets
nor democracies had achieved the scale and sophistication necessary to
make broad prosperity possible. In the twentieth century, that changed.
iT
CROSSING THE GREAT DIVIDE
The mixed economy is a social institution, a human solution to human
problems. Private capitalism and public coercion each predated modern
Al
prosperity. What was new was the marriage of large-scale profit-seeking

activity, active democratic governance, and a deepened understanding
of how markets work (and when they work poorly).
od
As in any marriage, the exact terms of the relationship changed

over time. In an evolving world, social institutions need to adapt if
they are to continue to serve their basic functions. Money, for example,
is still doing what it has always done: providing a common metric,
so
storing value, and facilitating exchange. But it’s now paper or plastic
rather than metal and more likely to pass from computer to computer
than hand to hand. Similarly, the mixed economy is defined not by the
specific forms it has taken but by the specific functions it has served:
Ma
overcoming market failures and translating economic growth into

broad advances in human well-being.
The effective performance of these functions has delivered truly
miraculous breakthroughs. Indeed, the mixed economy may well be
the greatest invention in history. It is also a strikingly recent invention.
Plot the growth of Western economies on an axis against the passage
May/June 2016 73
of time, and the line would be mostly flat for thousands of years. Even
the emergence of capitalism, momentous as it was, was not synony-
mous with the birth of mass prosperity. Trapped in a Malthusian race
between population and sustenance, societies remained on the brink of
destitution until well into the nineteenth century. Life expectancy rose
only modestly between the Neolithic Period, about 10,000 BC to 3500 BC,
and the Victorian era, 1837 to 1901. An American born in the late nine-
teenth century had an average life expectancy of around 45 years, and
a large share of Americans never made it past their first birthdays.
m
Then something remarkable happened. In countries on the frontier
of economic development, human health began to improve rapidly, edu-
cational levels shot up, and standards of living began to grow and grow.
hi
Within a century, life expectancies had increased by two-thirds, average
years of schooling had gone from single to double digits, and the produc-
tivity of workers and the pay they took home had doubled and doubled
ha
and then doubled again. With the United States leading the way, the rich
world crossed a great divide—a divide separating centuries of slow
growth, poor health, and anemic technical progress from one of hitherto
iT
undreamed-of material comfort and seemingly limitless economic
potential. For the first time, rich countries experienced economic devel-
opment that was both broad and deep, reaching all major segments of
society and producing not just greater material comfort but also funda-
Al
mental transformations in the health and life chances of those it touched.

The mixed economy lay at the heart of this success, in the United
States no less than in other Western nations. Capitalism played an
od
essential role, but it was not the new entrant on the economic stage;
effective governance was. Public health measures made cities engines
of innovation rather than incubators of illness. The meteoric expan-
sion of public education increased not only individual opportunity
so
but also the economic potential of entire societies. Investments in

science, higher education, and defense spearheaded breakthroughs in
medicine, transportation, and technology. Overarching rules and
institutions tamed unstable financial markets and turned boom-bust
Ma
cycles into more manageable ups and downs. Protections against

excessive insecurity and abject destitution encouraged the forward-
looking investments and social integration that sustained growth
required. The mixed economy was a spectacularly positive-sum
bargain: it redistributed power and resources, but as its impacts
broadened, virtually everyone was made massively better off.
m
hi
ha
Shovel ready: a federally funded road project in Colorado, May 2009
In nations where the mixed economy took hold, the economy under-
iT
went spectacular growth. Not coincidentally, government did too.
Indeed, it grew even more quickly. At the end of the nineteenth
century, government spending (at all levels) accounted for around
one in ten dollars of output in the wealthiest nations. By the end
Al
of the twentieth, it averaged over four in ten dollars, with the public
sector accounting for six in ten dollars of GDP in the highest-spending
rich nations. In some ways, these numbers overstate government’s
od
size, since much of government spending essentially shifts private

income from one person or household to another rather than financ-
ing goods or services directly. Yet standard measures also understate
the size of government, because they don’t include many of the ways
so
that government affects the economy: from regulation to protections

against risk to the provision of legal safeguards. Suffice it to say that
for all their imperfections and ambiguities, the numbers capture
JOHN MOO RE / G ET TY IMAG ES
something real: government has grown much bigger.

Ma
Before looking at statistics such as these, one might assume that

poor countries have large governments—at least compared with the
size of their puny economies—and rich countries, small governments.
After all, there are a couple of big tasks that governments have to do
just to remain governments: provide at least a modicum of protection
against internal violence and protect against external threats. These
May/June 2016 75
are pretty much fixed costs, or at least costs that vary with country
and population size far more than economic heft, so one might expect
that as the economy grows, the relative size of the state shrinks.
But that is not at all what happened. The richest countries expanded
their governments the most. They upped their public spending dra-
matically during the period in which they grew most quickly, issued
more regulations, expanded their legal systems, and offered implicit
and explicit guarantees to private actors that were costless on paper
but almost incalculably valuable in practice (such as serving as lenders
m
of last resort). Modern growth occurred where, and only where, activist
government emerged. And therein lies a big clue as to why the great
divide was crossed.
hi
Perhaps the most important thing that big states started doing was
educating their citizens. Modern growth commenced when people
rapidly increased their ability to do more with less. They were able to
ha do more because they knew more, and
they knew more, in part, because they
Government has unique were taught more. The beneficial forms
capacities that allow it to
iT
of what the economist Robert Solow
solve problems that markets famously called “technical change”—the
can’t solve on their own. ideas and innovations that allow people
to be more productive—rest on wide-
Al
spread public education that seeds

scientific advances and equips workers with new skills. Indeed, econo-
mists have concluded that roughly a third of rising productivity is tied
od
directly to increased education, with most of the rest due to general

advances in knowledge.
Government was no less crucial to another pillar of modern pros-
perity, the physical infrastructure that helped make the scientific
so
infrastructure possible and productive. Even before rich countries

came to depend on public investments in science and technology for
rapid growth, they depended on public investments in transportation
and communications networks that linked together producers and
Ma
their suppliers and consumers. Among other benefits, public infra-

structure facilitated the rapid flow of materials and people across long
distances, allowed manufacturers to benefit from economies of scale
that supported modern assembly-line techniques, permitted innova-
tions to diffuse and goods to reach far-flung consumers, and created
opportunities for workers to find jobs that matched their skills.
THE LOGIC OF GOVERNMENT INTERVENTION

Why does it take a lot of government to get and keep prosperity?
Because government has unique capacities—to enforce compliance,
constrain or encourage action, and protect citizens from private
predation—that allow it to solve problems that markets can’t solve
on their own. These problems are both economic and political; they
concern areas in which markets tend to fall short and areas where
market actors tend to distort democratic processes in pursuit of
private advantage. And even beyond correcting market failures, gov-
m
ernment can play an important role in helping markets do better at
serving human needs.
One important market failure comes in the underprovision of what
hi
economists call “public goods,” valuable things that must be provided
to everyone or no one. The classic example is a lighthouse. Its light is
available to all ships navigating a coastline. There is no cost-effective
ha
way to limit the lighthouse’s benefits to paying customers, so nobody
has a reason to pay. And if no one pays, markets won’t motivate any-
one to provide the good. Public goods of this kind are prevalent in
iT
modern life. The biggest, most obvious example is national security,
which consumes one-sixth of U.S. federal spending, but the same
logic applies to infrastructure and fundamental scientific research, the
latter of which is the cornerstone for technological innovation.
Al
Another kind of market failure involves the effects of market opera-

tions on people who are neither buyers nor sellers. Economists call
these effects “externalities,” and a classic example of a negative external-
od
ity is pollution. In an unregulated market, neither a factory owner nor a

firm’s customers have strong incentives to care about what happens to,
say, the noxious byproducts of the factory’s manufacturing processes.
So in an unregulated market, the factory can spew toxins into the air or
so
water with impunity. Where such externalities are present, the market
prices for the goods in question will not reflect the true social costs (or,
for positive externalities, the benefits) of the private transaction.
Externalities are always an issue, but they become a much bigger
Ma
issue as economies develop. In dense, complex modern societies, exter-

nalities are ubiquitous, and the associated costs (or untapped benefits)
of bad market signals, potentially momentous. They include the
dangers to the financial system of excessive risk taking among bankers,
the dangers to public health if children are not inoculated against dis-
ease or are exposed to brain-damaging levels of lead, and the forgone
May/June 2016 77
human potential (and squandered economic production) if children

are not given a quality education. Even the spiral of underconsumption
that follows a downturn can be seen as an externality: everyone retreat-
ing from consumer markets at once means more lost jobs and an econ-
omy that continues to underperform. What’s individually rational is
collectively destructive, and hence governments may need to step in to
reverse the slide with countercyclical policies.
In complex societies, failures caused by incomplete or asymmetri-
cally distributed information (when one party to a transaction knows
m
a lot more than another) also become more ubiquitous. Insurance
markets routinely fall short, for example, when buyers know more
about the risks they face than do sellers (who then figure out many
hi
ways to exclude or limit coverage for those they fear will be costly).
This is one reason why publicly provided or subsidized insurance has
proved a mainstay of all rich countries, protecting people against risks
ha
they cannot protect themselves against and encouraging investments
that entail such risk (such as investment in human capital that might
lose value in a dynamic economy where needed skills change rapidly).
iT
And it’s not just that information can be incomplete or unevenly dis-
tributed. Although even broaching the subject invites charges of pater-
nalism, the fact is that people can be very bad at making very important
decisions when those decisions are complex, confusing, or involve long-
Al
term costs and benefits. As behavioral economics has increasingly shown,

myopia and the difficulty of delaying gratification are important reasons
for such negative outcomes as insufficient retirement savings and prema-
od
ture death due to smoking. In this context, government “nudges” or even

more vigorous pushes—when informed by science and designed to pre-
serve individual autonomy—can be enormously prosperity enhancing.
Because governments have chosen to intervene to provide public goods,
so
counter negative externalities, and do some benign nudging, hundreds

of millions of lives are now healthier, safer, and better protected against
financial risk. In the United States and other rich democracies, the
majority of government spending goes to social programs related to
Ma
health care (Medicare and Medicaid) and retirement (Social Security),

and the majority of regulation involves protection of the public from the
operations of unscrupulous private actors. These programs are over-
whelmingly popular even though they are also, as a rule, coercive. That
is not a paradox; it’s the point—because government is doing things that
people need to get done but can’t or won’t do themselves.
FROM THE FOUNDERS TO THE PROGRESSIVES

The emergence of modern economies capable of generating un-
precedented affluence has coincided with the emergence of activist
government capable of extensive taxation, spending, regulation,
and macroeconomic management. The United States’ emergence as a
world economic power in the latter half of the nineteenth century
featured plenty of enterprising citizens seizing on the opportunities
for economic advancement that the U.S. Constitution protected. But
the role of the founders and their political heirs was much more
m
direct. They built a state with the power to tax, spend, enforce, defend,
and expand. Once in office, they often used the shrewd deployment
of vast public lands as a substitute for taxation but with similar effects.
hi
They and their colleagues helped create a continental nation linked by
infrastructure, governed by a federal legal system, and boasting the
most educated work force in the world.
ha
This trajectory was a reflection of the Constitution’s purpose and
design, not (as many charge today) a betrayal of them. The leading
statesmen who gathered in Philadelphia in 1787 were keenly aware of
iT
the need for effective government authority. Indeed, they had become
convinced that its absence was a mortal threat to the fledgling nation.
Perhaps the most influential of them all, James Madison, put the point
bluntly at the Virginia ratifying convention: “There never was a gov-
Al
ernment without force. What is the meaning of government? An

institution to make people do their duty. A government leaving it to
a man to do his duty, or not, as he pleases, would be a new species of
od
government, or rather no government at all.” In designing a substitute

for the loose Articles of Confederation, which had brought so much
instability and vulnerability, the authors of the Constitution also put
in place most of the basic instruments of governance that would
so
become the seeds of the United States’ economic flowering.

As the country reached its centenary, however, the sapling that had
grown faced stiff new winds from concentrated corporate power.
What came to be known as the Gilded Age is now sometimes portrayed
Ma
as a glorious time of unchecked individual initiative to which the

country should aspire to return. The lesson it actually teaches is very
different: that a modern industrial economy cannot function without
independent national authority. The business titans of the late nine-
teenth and early twentieth centuries were skillful in ways both laudable
and despicable, but as the economist J. Bradford DeLong has argued,
May/June 2016 79
they were also just plain lucky. They came along when national markets
were finally possible, they benefited from public land grants and loan
guarantees, they capitalized on economies of scale that allowed early
movers to bury rivals, and they then monetized future profits (likely
or imagined) through volatile and manipulable financial markets.
The monopolistic capitalism that emerged during this era was un-
sustainable—economically, politically, and, although few paid atten-
tion to it at the time, ecologically. Prior government policies had been
successful in promoting development. Without them, building the
m
railroads likely would have taken decades longer, with a huge eco-
nomic loss. But these policies fostered concentrated corporate power
that the federal government lacked the
hi
The Progressives set capacity to govern effectively, and the
costs to American society of that inca-
out to rescue capitalism, ha pacity were skyrocketing. Workplace
not replace it. accidents soared as industrial and rail
work expanded. The toxic financial
assets of the era caused repeated economic crises. The social and
iT
environmental costs of industrialization were devastating. Weak and
penetrated by private interests, courts provided little recourse,
whether to victims of fraud, monopolies, accidents, or tainted food or
medicine. And so long as government sat on the sidelines, the harms
Al
just kept multiplying. It was only a matter of time before a reaction

set in, and eventually it did, in the form of the Progressive movement.
Theodore and Franklin Roosevelt, two of the movement’s most
od
prominent figures, were distant cousins and very different men. But
they shared a conviction that government had to be strengthened to
rebalance American democracy and ensure broadly distributed gains.
Either could have said what Teddy declared in 1910: “The citizens of
so
the United States must effectively control the mighty commercial

forces which they have called into being.”
Theodore Roosevelt would not live to see that goal achieved during
his lifetime. The list of major reforms enacted in the first two decades
Ma
of the twentieth century, under Roosevelt and Wilson, is long: the

enfranchisement of women, the direct election of senators, the nation’s
first income tax, workers’ compensation, the Clayton Antitrust Act,
the establishment of the Federal Reserve, the first restrictions on
money in politics, the first serious attempts at environmental preserva-
tion, and extensive new national regulations, including the Pure Food
and Drug Act of 1906, which laid the foundation for the U.S. Food and
Drug Administration. Yet Roosevelt died in 1919, on the eve of another
decade of financial speculation and runaway inequality, during which
public authority decayed while problems festered—until, of course, an
economic crisis made continued inaction untenable once again.
Picking up where Theodore Roosevelt and Wilson had left off,
Franklin Roosevelt put in place a broad range of policies that inserted
government deeply into previously untouched areas of the U.S.
political economy. The New Deal brought tougher financial oversight,
m
including the creation of the Securities and Exchange Commission.
With the National Labor Relations Act, it brought organized labor
into the mixed economy’s emerging system of countervailing power.
hi
With the Social Security Act, it introduced a widely popular system
of social insurance that would protect the American middle class from
some of the risks associated with modern capitalism. And with the
ha
emerging national system of taxes and spending, the New Deal added
to the growing tool kit of macroeconomic management that would
prevent or moderate future economic downturns.
iT
Despite the interregnum of the 1920s, therefore, it makes sense to
think of the two Roosevelts as bookending a long Progressive era.
It was progressive because at crucial moments, nearly everyone in a
position of high public leadership came to believe that the U.S. social
Al
contract needed updating. It was long because challenging entrenched

elites proved difficult, and only persistent agitation and huge disrup-
tions to the U.S. political order allowed the translation of these new
od
beliefs into new governing arrangements.
THE HEYDAY OF THE MIXED ECONOMY

The Progressives set out to rescue capitalism, not replace it. The academic
so
who oversaw the development of the Social Security Act, Edwin

Witte, said of it, “Only to a very minor degree [did the act] modify
the distribution of wealth, and it does not alter at all the fundamentals
of our capitalistic and individualistic economy.” The welfare state
Ma
softened the sharp edges of capitalism without tight restrictions on

economic dynamism. At the core of the new system that emerged was
an exchange: the government would take much larger amounts of
money from citizens than ever before, and then it would turn around
and spend that money on various projects that benefited those same
citizens, both individually and collectively.
May/June 2016 81
Before the twentieth century, income taxes had barely existed in

the United States, and before World War II, they had brought in no
more than two percent of national income. By 1943, they raked in
11 percent, and the share of the population paying them skyrocketed
from seven percent to 64 percent.
At first, most of the money went to the war effort, of course. But
research in universities and industrial labs also benefited. And as scien-
tists flocked to U.S. universities to join in the action, young Americans
poured into college with funding from the GI Bill. Rivaling these in-
m
vestments in research and education, both in scale and in social return,
were vast government outlays for highways, airports, waterways, and
other forms of infrastructure. The interstate highway system began
hi
with Dwight Eisenhower’s 1956 National Interstate and Defense High-
ways Act, which dedicated over $200 billion (in current dollars) to the
cause and hiked the nationwide gas tax to provide highway financing.
ha
New Deal programs devoted to economic security expanded as
well. With Eisenhower’s strong support, Congress extended Social
Security to cover almost all Americans and made it generous enough
iT
to pull more of the elderly out of poverty, even as disability protec-
tions were added. National health insurance—proposed by President
Harry Truman but opposed by the growing private health industry—
never made it to the floor of Congress, but wartime wage and price
Al
controls that permitted supplemental benefits, the spread of collective

bargaining, and tax breaks for health insurance helped push private
coverage up to an eventual peak of around three-quarters of Ameri-
od
cans by the mid-1970s. The federal government also subsidized and

regulated private pensions that built on top of Social Security.
As these tax breaks suggest, the new U.S. state was no unchecked
Leviathan. It commingled public and private spending, direct outlays
so
and indirect subsidies, central direction and decentralized implemen-

tation. It fostered pluralistic competition for funds among researchers,
contractors, and private intermediaries, as well as among states and
localities. But it was enormously active and enormously successful—
Ma
and soon its rewards would extend to groups that had yet to feel the
warm sun of American prosperity.
In expanding rights for women and minorities—through statutes,
judicial action, and the government’s own example (most profoundly,
in the armed services)—the nation was finding money on the table.
Government policies also boosted the skills and opportunities of the
least advantaged, where the returns on such investments were highest.

As the federal government expanded, it did not merely extend oppor-
tunities to individuals on the periphery of prosperity. It also extended
opportunities to places on the periphery, especially the South, inject-
ing assistance and employment, housing and highways, development
projects and defense jobs into regions previously left behind by
modern economic growth.
As the postwar period wore on, U.S. leaders made another vital con-
tribution to the country’s rising prosperity, pushing to address market
m
failures associated with an increasingly dense, interconnected, and com-
plex commercial society. The most obvious breakthroughs concerned
pollution, which rapidly came to be seen as a fundamental threat to qual-
hi
ity of life requiring vigorous regulation. The federal government also
improved protections for worker safety, and in response to the growing
profile of activists such as Ralph Nader, it paid much more attention to
ha
vulnerable consumers in areas as diverse as tobacco and automobiles,
using the power of the state to protect citizens from the predation of
others and to limit the potential damage from their own myopic choices
iT
(such as smoking cigarettes or failing to wear a seat belt).
The story of the United States’ rise to richness is a story of an
ongoing rebalancing of political institutions and economic realities,
of public policies, social knowledge, and democratic demands. But
Al
the arc of that history bends toward a more extensive role for govern-
ment, and for good reason: As the United States changed from an
agricultural society into an industrial society and then a postindus-
od
trial society, the scale of economic activity and the interdependence

and complexity of that activity grew, and so did the resulting damage.
As the nation’s leaders responded to these challenges and to pressures
for action and inclusion from below, they came to recognize that
so
making Americans healthier, better educated, and freer to pursue

their own dreams—regardless of race, gender, and ethnicity, whatever
the circumstances of their birth—made America richer, too.
Ma
THE BEGINNING OF THE BACKLASH

For roughly 30 years, from the early 1940s to the mid-1970s, the mixed
economy of U.S. capitalism achieved unprecedented success, nurturing
innovation, sustaining stability, and generating opportunity and pros-
perity. This successful model rested on a series of social and political
understandings, compromises, and accommodations. Given their power
May/June 2016 83
in U.S. society, leading business figures were necessarily key partici-

pants in this success. Prominent Republicans became believers as well.
The most famous GOP convert was the general turned politician
Eisenhower. He understood that the Republican Party needed to
make its peace with most of the policy achievements of the previous
two decades. In 1954, for example, Eisenhower privately ridiculed the
desire of conservatives to roll back the New Deal: “Should any politi-
cal party attempt to abolish social security, unemployment insurance,
and eliminate labor laws and farm programs, you would not hear of
m
that party again in our political history. There is a tiny splinter group,
of course, that believes you can do these things. . . . Their number is
negligible and they are stupid.” Eisenhower’s point was that the mixed
hi
economy was an established reality and there was no going back.
Eisenhower’s domestic policy agenda focused on economic growth,
and Democrats would criticize him for his reluctance to rely on Keynesian
ha
policy to prime the economy. Yet his administration devoted substantial
energy to policies designed to improve the country’s long-term eco-
nomic performance. And on economic issues, the moderate consensus
iT
continued after Eisenhower left office. Although John F. Kennedy
famously adopted a more Keynesian stance on the budget (built around
business-friendly tax cuts), in most respects his economic policies fol-
lowed the tracks laid down in the 1950s. When the GOP veered right
Al
with Barry Goldwater’s candidacy, and Lyndon Johnson tacked left

with the inclusionary policies of the Civil Rights Act and the War on
Poverty, much of the business establishment went with Johnson.
od
Richard Nixon was one of the last Republican leaders to embrace

the mixed economy, and embrace it he did. Nixon’s efforts to fashion a
new majority involved positioning himself to the right of Democrats
on issues of race and crime, but he was willing to be a moderate, even
so
an activist, on matters related to the economy. He supported major

extensions of the regulatory state, including big new initiatives for
environmental and consumer protection. He favored a guaranteed annual
income, a huge expansion of Social Security, and health-care reforms
Ma
way to the left of what Bill Clinton or Barack Obama ever proposed.
Nixon’s moderation was driven in part by political calculations.
Encouraged by Daniel Patrick Moynihan, one of his leading advisers
on domestic policy, he took the nineteenth-century British prime
minister Benjamin Disraeli’s “liberal Tory” stance as a model and
sought to appeal to working-class and middle-class whites with his
support for social insurance and his cautious backing of many of the
new regulatory measures coming out of a Democratic Congress. But
it wasn’t all politics. Nixon accepted the notion that in a large and
complex society, government had a fundamental role to play in fostering
economic growth and social prosperity. This went beyond the macro-
economic management of boom-and-bust cycles and incorporated
support for collective bargaining, extensive social insurance and a
reasonable social safety net, the provision of crucial public goods, and
interventions to tackle thorny market failures.
m
As the 1970s continued, however, the mixed economy came under
concerted attack by a more powerful and more radical economic elite.
At first, the economic and ideological components of this challenge
hi
were largely independent of each other. But over time they fused, as
the increasing dominance of market-
fundamentalist thinking on the right
ha
encouraged shifts in corporate behavior
Once the door opened to the
and public policy that exacerbated the new antigovernment stance,
intellectual and economic distinctive- policy and profit seeking
iT
ness of the United States’ new economic reinforced each other.
elite: the deregulation of finance, the
slashing of top federal tax rates, growing
links between the financial and the corporate sectors, an upward spiral
Al
of executive pay. An industry of enablers sprang up, with journalists

and think tanks and professional associations and lobbyists all helping
push the new line, and eventually the movement captured its biggest
od
prize, the Republican Party.

Ideas were crucial, especially in the initial right turn. Within con-
servative political and intellectual circles and in corporate board-
rooms, elements of the fringe libertarian views of the novelist and
so
philosopher Ayn Rand gained prominence. Randian thinking came in

both soft and hard forms (an obsession with deficits, say, versus
die-hard opposition to taxes and government spending), but in both
forms, it had important implications for U.S. understandings of
Ma
shared prosperity. The valorization of shareholders (even if it was

often a cover for the acquisitive aims of top executives or investors
planning hostile takeovers) challenged the notion that wealth was a
social creation that rested on the efforts of multiple stakeholders,
including labor and government. Instead, it implied that prosperity
was generated solely by entrepreneurs and investors, thanks to their
May/June 2016 85
creativity and daring. In its radical manifestation, it even became some-

thing of a conspiracy theory, dividing the world into a persecuted
minority that heroically generates prosperity and a freeloading majority
that uses government to steal from this small, creative elite.
These ideas began to gain credence with the emergence of “stagfla-
tion,” a stubborn combination of high inflation and economic stagnation
that plagued the country in the second half of the 1970s and seemed to
rebut the notion that government could manage the economy effectively.
But what occurred was not simply an
m
ideological shift; opposition to the mixed
The conservative elite’s economy took off because it intersected
turn against the mixed with and guided powerful economic in-
hi
economy just kept going terests that were themselves gaining po-
and going. litical influence. Facing meager profits
ha and depressed stock prices, business
leaders mobilized to lobby Washington
as never before. They accepted the diagnosis offered by the new market
fundamentalists that the source of their woes was not foreign competi-
iT
tion or deindustrialization or hostile financial players but rather unions
and government intervention in the economy.
Once the door opened to the new antigovernment stance, policy and
profit seeking reinforced each other. The free-market movement advo-
Al
cated financial deregulation and tax cuts, and these policies helped fuel a
rapid and sweeping shift in corporate America. Companies faced intense
pressure to become better integrated into an expanding global economy.
od
Even more important, they faced intense pressure to become better

integrated into an expanding financial sector. As corporate America
orbited ever closer to Wall Street, it adopted Wall Street’s priorities as
its own: immediate stock returns, corporate financial engineering, and
so
extremely high executive pay closely tied to share prices. Meanwhile, the
constraint on top management created by organized labor was rapidly
weakening, as unions struggled in an increasingly hostile climate.
The result was not just enormous fortunes going to a narrower and
Ma
narrower slice of executives. It was also an enormous shift in power toward

a new corporate elite that was much more hostile to the mixed economy,
much less constrained by moderates in government or by organized labor,
and much more in tune with the new celebration of the market.
In retrospect, the economic tumult of the 1970s looks less baffling
than it did at the time. The surge of inflation reflected both singular
shocks (notably, the 1973–74 OPEC oil embargo) and obvious policy mis-
takes (Johnson’s guns-and-butter spending and Nixon’s urging of loose
monetary policy to secure his reelection). Productivity growth slowed as
the burst of economic activity after World War II gave way to the more
normal expansion of rich countries at the edge of the technological fron-
tier. And the United States faced greater competition from its affluent
trading partners as they recovered from wartime devastation.
But inflation captured the public’s attention and drove the increasingly
panicked national debate, eventually leading Jimmy Carter to appoint the
m
prominent inflation hawk Paul Volcker to head the Federal Reserve. As
expected, he raised interest rates sharply, triggering the worst economic
downturn since the 1930s. Not only did the recession probably cost Carter
hi
the 1980 election; it battered the economic reputation of the Democratic
Party. The episode paved the way for Ronald Reagan to pursue a very
different vision of government’s relationship to the economy.
ha
But however sobering the economic challenges of the 1970s might
have been, they did not need to tarnish the entire edifice of the mixed
economy. Getting macroeconomic policy on a sounder track and con-
iT
fronting heightened foreign competition did not require unwinding
government’s constructive role in ensuring broad prosperity. The
social institution of the mixed economy could have been updated; the
balance between effective public authority and dynamic private
Al
markets could have been recalibrated rather than rejected. Nor did
popular pressures demand radical change. Voters may have turned
right as inflation increased, but the conservative shift in public opinion
od
was short lived. It was the conservative elite’s turn against the mixed
economy that just kept going and going, even intensifying over time,
and it was that which ended up bankrolling and driving the ideological
warfare that ensued.
so
BACK TO THE FUTURE

When Eisenhower delivered his first State of the Union address, he
drew on a broad reservoir of support for the mixed economy. He
Ma
took for granted that government made fundamental contributions

to shared prosperity. Those within his party who thought other-
wise were marginalized. Business leaders, too, recognized that they
had to engage with government and labor as partners. Many genu-
inely accepted the partnership, but all understood that they had to
accommodate it.
May/June 2016 87
Forty years later, when Clinton took the podium to deliver his inaugu-
ral address, the world looked different. The reservoir of enthusiasm for
government was dry, baked away by the relentless attacks on government
that politicians of both parties had found were the surest way to gain
national office. Declining public trust eroded support for active govern-
ment and created a political vacuum that powerful private interests filled.
A revitalized Republican Party led the assault. Yet even the party of gov-
ernment—and those, such as Clinton, who led it—found the spiral of
anti-Washington sentiment hard to escape, especially as those powerful
m
private interests became increasingly central sources of financial support.
The corporate world had changed as well. The financial restructuring
that had begun in the 1980s had reshaped the character, leadership, and
hi
culture of American business. Among those favored by these changes,
older understandings of what produced prosperity had given way to
new conceptions of the relationship between business and government,
ha
the process of wealth creation, and the contribution of managers versus
workers—conceptions sharply at odds with those supporting the mixed
economy. In the new corporate world, business leaders who praised the
iT
active role of government or were willing to engage with political lead-
ers to pursue broad prosperity were harder to find.
In this new climate, the excesses and inadequacies of government
loomed larger than its benefits. Some of this frustration was, and
Al
continues to be, entirely legitimate. American government has indeed

become less effective. The lawmaking process has become dysfunc-
tional. Public policy is more beholden to narrow and deep-pocketed
od
interests. Political attacks and pervasive public distrust make govern-

ment less capable, which in turn provides fodder for more attacks and
greater distrust. That this vicious cycle has been pushed along by
smear attacks and sabotage campaigns does not make it any less real.
so
But just because government often performs tasks less well than it
could or should doesn’t mean that we would be better off without it,
or even with less of it. The net benefits of modern government are
enormous—at the level of major programs and, even more clearly, at
Ma
the level of governance as a whole.

The mixed economy remains a spectacular achievement. Over the
past century, the United States and other advanced democratic coun-
tries leapt across the Great Divide. They broke from the entirety of
prior human existence, in which life was nasty, brutish, and short for
almost everyone, and entered an era in which most citizens could look
forward to long lives, a real education, and previously unimaginable

material comfort. By combining the power of markets with a strong
dose of public authority, they achieved unprecedented affluence.
The good news, moreover, is that these positive-sum achievements
don’t have to stop coming. Despite today’s pessimism, many oppor-
tunities to make society better off still beckon, in part because for
decades Washington has not been using government to best effect.
But the bad news is that for this to happen, the nation’s ideological
and political climate must begin to shift, and the great American
m
amnesia must finally lift.
Many changes have swept the U.S. economy since the 1970s. Yet
the country’s biggest problem is not a lack of attractive policy options.
hi
The United States’ biggest problem is its politics. Roads, bridges, and
transportation networks can be rebuilt, scientific research can flourish,
and educational funding can be provided from early childhood through
ha
college—if only there were a renewed commitment to using activist
government on behalf of the public good. The growth of health-care
spending could be slowed, pollution could be diminished further,
iT
renewable energy could be sped toward feasibility. It is possible for
Americans to live in a society that is not just fairer and more con-
tented but richer as well. There may not be a free lunch, but there are
lots of cheap, delicious, and highly nutritional lunches just waiting to
Al
be eaten, simply by returning to the mixed-economy playbook of a

couple of generations ago, with appropriate updating for what has
been learned since then.
od
In many specific areas, of course, Americans still believe that the

public sector has a vital role. They support government regulation of
the environment and government funding of education. They strongly
endorse Social Security, Medicare, and most other social programs.
so
They believe that political leaders have a responsibility to manage the

economy. What has changed is that voters have become profoundly
skeptical that government has the capacity or inclination to foster
broad prosperity, especially when doing so requires it to take on new
Ma
or newly intensified challenges or confront powerful entrenched

interests. To build a mixed economy for the twenty-first century, a
critical mass of citizens—and their leaders—has to believe once again
that government can address their most pressing concerns.
The framing of “government versus the market” has become so
ubiquitous in modern culture that most Americans now take it for
May/June 2016 89
granted. The hostility of the right is unceasing and mostly unan-

swered. Eloquent leaders often defend individual programs but too
rarely defend the vital need for effective governance. Politicians facing
electoral pressures participate in a spiral of silence. Chastened by gov-
ernment’s low standing, they reinforce rather than try to reverse it.
Rhetoric is only one part of the problem. Cowed policymakers also
design programs that send much the same message. The political
scientist Suzanne Mettler has documented the increasing tendency to
“submerge” policies so that the role of government is hidden from
m
those who receive benefits. These subterranean policies include tax
breaks for private savings for education and retirement and a reliance
on private companies and contractors even when these proxies are less
hi
efficient than public provision. These submerged benefits are usually
bad policies. More important, they are even worse politics. Voters who
don’t recognize government in action are not likely to appreciate what
ha
government does. Nor are they likely to form an accurate picture of
government’s role, seeing only its visible redistribution and not the
vast number of ways in which it enables prosperity.
iT
To get to that more realistic starting point will require a serious
and prolonged investment in ideas. The crisis of public authority is a
consequence of orchestrated, persistent efforts to tear down govern-
ment and a long spiral of silence in response. To shake free of the
Al
amnesia about the benefits of a mixed economy and rebalance the

national conversation will take many years of leadership and activism.
The intellectual and organizational foundations of effective public
od
authority will have to be rebuilt. Reform must be a multifront, inter-

dependent effort in which robust but realistic steps steadily build
trust and momentum toward a revitalized mixed economy.
The specific arrangements that enabled the U.S. economic model
so
of the last century are dead and buried. But it is possible to build a
new model for economic success, on new political foundations, to deepen
prosperity in the twenty-first century. And today’s complex and inter-
dependent knowledge economy offers tremendous opportunities for
Ma
positive-sum bargains that will strengthen both U.S. capitalism and

the health of U.S. society. Grasping these opportunities, however,
requires a mixed economy—the strong thumb of government as well
as the nimble fingers of the market. This is the truth that both history
and economic theory confirm: the government that governs best needs
to govern quite a bit.∂
The Once and Future

Superpower
Why China Won’t Overtake the United States
m
Stephen G. Brooks and William C. Wohlforth
A
hi
fter two and a half decades, is the United States’ run as the
world’s sole superpower coming to an end? Many say yes,
seeing a rising China ready to catch up to or even surpass the
ha
United States in the near future. By many measures, after all, China’s
economy is on track to become the world’s biggest, and even if its
growth slows, it will still outpace that of the United States for many
iT
years. Its coffers overflowing, Beijing has used its new wealth to attract
friends, deter enemies, modernize its military, and aggressively assert
sovereignty claims in its periphery. For many, therefore, the question
is not whether China will become a superpower but just how soon.
Al
But this is wishful, or fearful, thinking. Economic growth no longer

translates as directly into military power as it did in the past, which
means that it is now harder than ever for rising powers to rise and
od
established ones to fall. And China—the only country with the raw
potential to become a true global peer of the United States—also faces
a more daunting challenge than previous rising states because of how
far it lags behind technologically. Even though the United States’
so
economic dominance has eroded from its peak, the country’s military
superiority is not going anywhere, nor is the globe-spanning alliance
structure that constitutes the core of the existing liberal international
order (unless Washington unwisely decides to throw it away). Rather
Ma
than expecting a power transition in international politics, everyone

STEPHEN G. BROOKS is Associate Professor of Government at Dartmouth College.
WILLIAM C. WOHLFORTH is Daniel Webster Professor of Government at Dartmouth
College.
This article is adapted from their forthcoming book America Abroad: The United States’
Global Role in the 21st Century (Oxford University Press, 2016).
May/June 2016 91
should start getting used to a world in
which the United States remains the
sole superpower for
decades to come.
Lasting preeminence will
help the United States ward off the
greatest traditional international danger,
war between the world’s major powers. And it
will give Washington options for dealing with non-
m
state threats such as terrorism and transnational challenges
such as climate change. But it will also impose burdens of
leadership and force choices among competing priorities,
hi
particularly as finances grow more straitened. With great power
comes great responsibility, as the saying goes, and playing its leading
role successfully will require Washington to display a maturity that
ha
U.S. foreign policy has all too often lacked.
THE WEALTH OF NATIONS

iT
In forecasts of China’s future power position, much has been made of the
country’s pressing domestic challenges: its slowing economy, polluted
environment, widespread corruption, perilous financial markets, non-
existent social safety net, rapidly aging population, and restive middle
Al
class. But as harmful as these problems are, China’s true Achilles’ heel
on the world stage is something else: its low level of technological
expertise compared with the United States’. Relative to past rising
od
powers, China has a much wider technological gap to close with the
leading power. China may export container after container of high-
tech goods, but in a world of globalized production, that doesn’t reveal
much. Half of all Chinese exports consist of what economists call
so
“processing trade,” meaning that parts are imported into China for
assembly and then exported afterward. And the vast majority of these
Chinese exports are directed not by Chinese firms but by corporations
from more developed countries.
Ma
When looking at measures of technological prowess that better

reflect the national origin of the expertise, China’s true position
becomes clear. World Bank data on payments for the use of intellectual
property, for example, indicate that the United States is far and away
the leading source of innovative technologies, boasting $128 billion in
receipts in 2013—more than four times as much as the country in
second place, Japan. China, by contrast, imports technologies on a

massive scale yet received less than $1 billion in receipts in 2013 for
the use of its intellectual property. Another good indicator of the
technological gap is the number of so-called triadic patents, those
registered in the United States, Europe, and Japan. In 2012, nearly
14,000 such patents originated in the United States, compared with
just under 2,000 in China. The distribution of highly influential
articles in science and engineering—those in the top one percent of
citations, as measured by the National Science Foundation—tells the
m
same story, with the United States accounting for almost half of these
articles, more than eight times China’s share. So does the breakdown
of Nobel Prizes in Physics, Chemistry, and Physiology or Medicine.
hi
Since 1990, 114 have gone to U.S.-based researchers. China-based
researchers have received two.
Precisely because the Chinese economy is so unlike the U.S. econ-
ha
omy, the measure fueling expectations of a power shift, GDP, greatly
underestimates the true economic gap between the two countries. For
one thing, the immense destruction that China is now wreaking on its
iT
environment counts favorably toward its GDP, even though it will reduce
economic capacity over time by shortening life spans and raising
cleanup and health-care costs. For another thing,
GDP was originally designed to measure mid-
Al
twentieth-century manufacturing economies,

and so the more knowledge-based and global-
ized a country’s production is, the more its
od
GDP underestimates its economy’s

true size.
A new statistic developed by
the UN suggests the degree to
so
which GDP inflates China’s rel-

ative power. Called “inclusive
wealth,” this measure represents
economists’ most systematic effort
Ma
to date to calculate a state’s wealth.

As a UN report explained, it counts a
country’s stock of assets in three areas: “(i)
manufactured capital (roads, buildings, machines,
and equipment), (ii) human capital (skills, education,
health), and (iii) natural capital (sub-soil resources,
May/June 2016 93
ecosystems, the atmosphere).” Added up, the United States’ inclusive

wealth comes to almost $144 trillion—4.5 times China’s $32 trillion.
The true size of China’s economy relative to the United States’ may
lie somewhere in between the numbers provided by GDP and inclusive
wealth, and admittedly, the latter measure has yet to receive the same
level of scrutiny as GDP. The problem with GDP, however, is that it
measures a flow (typically, the value of goods and services produced
in a year), whereas inclusive wealth measures a stock. As The Economist
put it, “Gauging an economy by its GDP is like judging a company by
m
its quarterly profits, without ever peeking at its balance-sheet.” Because
inclusive wealth measures the pool of resources a government can
conceivably draw on to achieve its strategic objectives, it is the more
hi
useful metric when thinking about geopolitical competition.
But no matter how one compares the size of the U.S. and Chinese
economies, it is clear that the United States is far more capable of
ha
converting its resources into military might. In the past, rising states
had levels of technological prowess similar to those of leading ones.
During the late nineteenth and early twentieth centuries, for example,
iT
the United States didn’t lag far behind the United Kingdom in terms
of technology, nor did Germany lag far behind the erstwhile Allies
during the interwar years, nor was the Soviet Union backward techno-
logically compared with the United States during the early Cold War.
Al
This meant that when these challengers rose economically, they could
soon mount a serious military challenge to the dominant power.
China’s relative technological backwardness today, however, means
od
that even if its economy continues to gain ground, it will not be easy
for it to catch up militarily and become a true global strategic peer, as
opposed to a merely a major player in its own neighborhood.
so
BARRIERS TO ENTRY
The technological and economic differences between China and the
United States wouldn’t matter much if all it took to gain superpower
status were the ability to use force locally. But what makes the United
Ma
States a superpower is its ability to operate globally, and the bar for
that capability is high. It means having what the political scientist Barry
Posen has called “command of the commons”—that is, control over
the air, space, and the open sea, along with the necessary infrastructure
for managing these domains. When one measures the 14 categories
of systems that create this capability (everything from nuclear attack
submarines to satellites to transport aircraft), what emerges is an

overwhelming U.S. advantage in each area, the result of decades of
advances on multiple fronts. It would take a very long time for China
to approach U.S. power on any of these fronts, let alone all of them.
For one thing, the United States has built up a massive scientific
and industrial base. China is rapidly enhancing its technological inputs,
increasing its R & D spending and its
numbers of graduates with degrees in
science and engineering. But there are
A giant economy alone
m
limits to how fast any country can leap won’t make China the
forward in such matters, and there are world’s second superpower.
various obstacles in China’s way—such
hi
as a lack of effective intellectual property protections and inefficient
methods of allocating capital—that will be extremely hard to change
given its rigid political system. Adding to the difficulty, China is chasing
ha
a moving target. In 2012, the United States spent $79 billion on military
R & D, more than 13 times as much as China’s estimated amount, so
even rapid Chinese advances might be insufficient to close the gap.
iT
Then there are the decades the United States has spent procuring
advanced weapons systems, which have grown only more complex
over time. In the 1960s, aircraft took about five years to develop, but
by the 1990s, as the number of parts and lines of code ballooned, the
Al
figure reached ten years. Today, it takes 15 to 20 years to design and

build the most advanced fighter aircraft, and military satellites can
take even longer. So even if another country managed to build the
od
scientific and industrial base to develop the many types of weapons

that give the United States command of the commons, there would
be a lengthy lag before it could actually possess them. Even Chinese
defense planners recognize the scale of the challenge.
so
Command of the commons also requires the ability to supervise a

wide range of giant defense projects. For all the hullabaloo over the
evils of the military-industrial complex and the “waste, fraud, and
abuse” in the Pentagon, in the United States, research labs, contractors,
Ma
and bureaucrats have painstakingly acquired this expertise over many

decades, and their Chinese counterparts do not yet have it. This kind
of “learning by doing” experience resides in organizations, not in
individuals. It can be transferred only through demonstration and
instruction, so cybertheft or other forms of espionage are not an
effective shortcut for acquiring it.
May/June 2016 95
China’s defense industry is still in its infancy, and as the scholar

Richard Bitzinger and his colleagues have concluded, “Aside from a
few pockets of excellence such as ballistic missiles, the Chinese military-
industrial complex has appeared to demonstrate few capacities for
designing and producing relatively advanced conventional weapon sys-
tems.” For example, China still cannot mass-produce high-performance
aircraft engines, despite the immense resources it has thrown at the
effort, and relies instead on second-rate Russian models. In other
areas, Beijing has not even bothered competing. Take undersea
m
warfare. China is poorly equipped for antisubmarine warfare and is
doing very little to improve. And only now is the country capable of
producing nuclear-powered attack submarines that are comparable in
hi
quietness to the kinds that the U.S. Navy commissioned in the 1950s.
Since then, however, the U.S. government has invested hundreds
of billions of dollars and six decades of effort in its current generation
ha
of Virginia-class submarines, which have achieved absolute levels
of silencing.
Finally, it takes a very particular set of skills and infrastructure to
iT
actually use all these weapons. Employing them is difficult not just
because the weapons themselves tend to be so complex but also be-
cause they typically need to be used in a coordinated manner. It is an
incredibly complicated endeavor, for example, to deploy a carrier bat-
Al
tle group; the many associated ships and aircraft must work together
in real time. Even systems that may seem simple require a complex
surrounding architecture in order to be truly effective. Drones, for
od
example, work best when a military has the highly trained personnel
to operate them and the technological and organizational capacity to
rapidly gather, process, and act on information collected from them.
Developing the necessary infrastructure to seek command of the
so
commons would take any military a very long time. And since the task
places a high premium on flexibility and delegation, China’s cen-
tralized and hierarchical forces are particularly ill suited for it.
Ma
THIS TIME IS DIFFERENT

In the 1930s alone, Japan escaped the depths of depression and
morphed into a rampaging military machine, Germany transformed
from the disarmed loser of World War I into a juggernaut capable of
conquering Europe, and the Soviet Union recovered from war and
revolution to become a formidable land power. The next decade saw
the United States’ own sprint from military also-ran to global super-
power, with a nuclear Soviet Union close on its heels. Today, few
seriously anticipate another world war, or even another cold war, but
many observers argue that these past experiences reveal just how quickly
countries can become dangerous once they try to extract military capa-
bilities from their economies.
But what is taking place now is not your grandfather’s power transi-
tion. One can debate whether China will soon reach the first major
milestone on the journey from great power to superpower: having the
m
requisite economic resources. But a giant
economy alone won’t make China the
world’s second superpower, nor would
This is not your grandfather’s
hi
overcoming the next big hurdle, attain- power transition.
ing the requisite technological capacity.
After that lies the challenge of transforming all this latent power into
ha
the full range of systems needed for global power projection and
learning how to use them. Each of these steps is time consuming and
fraught with difficulty. As a result, China will, for a long time, continue
iT
to hover somewhere between a great power and a superpower. You might
call it “an emerging potential superpower”: thanks to its economic
growth, China has broken free from the great-power pack, but it still has
a long way to go before it might gain the economic and technological
Al
capacity to become a superpower.

China’s quest for superpower status is undermined by something
else, too: weak incentives to make the sacrifices required. The United
od
States owes its far-reaching military capabilities to the existential

imperatives of the Cold War. The country would never have borne the
burden it did had policymakers not faced the challenge of balancing
the Soviet Union, a superpower with the potential to dominate
so
Eurasia. (Indeed, it is no surprise that two and a half decades after the
Soviet Union collapsed, it is Russia that possesses the second-greatest
military capability in the world.) Today, China faces nothing like the
Cold War pressures that led the United States to invest so much in its
Ma
military. The United States is a far less threatening superpower than

the Soviet Union was: however aggravating Chinese policymakers
find U.S. foreign policy, it is unlikely to engender the level of fear
that motivated Washington during the Cold War.
Stacking the odds against China even more, the United States has
few incentives to give up power, thanks to the web of alliances it
May/June 2016 97
has long boasted. A list of U.S. allies reads as a who’s who of the
world’s most advanced economies, and these partners have lowered
the price of maintaining the United States’ superpower status. U.S.
defense spending stood at around three percent of GDP at the end of
the 1990s, rose to around five percent in the next decade on account
of the wars in Afghanistan and Iraq, and has now fallen back to close
to three percent. Washington has been able to sustain a global mili-
tary capacity with relatively little effort thanks in part to the bases
its allies host and the top-end weapons they help develop. China’s
m
only steadfast ally is North Korea, which is often more trouble than
it is worth.
Given the barriers thwarting China’s path to superpower status,
hi
as well as the low incentives for trying to overcome them, the future
of the international system hinges most on whether the United
ha States continues to bear the much
A world of lasting U.S. lower burden of sustaining what we
and others have called “deep engage-
military preeminence and ment,” the globe-girdling grand strat-
declining U.S. economic
iT
egy it has followed for some 70 years.
dominance will test the And barring some odd change of heart
that results in a true abnegation of its
United States’ capacity global role (as opposed to overwrought,
Al
for restraint. politicized charges sometimes made

about its already having done so),
Washington will be well positioned for decades to maintain the core
od
military capabilities, alliances, and commitments that secure key

regions, backstop the global economy, and foster cooperation on trans-
national problems.
The benefits of this grand strategy can be difficult to discern, especially
so
in light of the United States’ foreign misadventures in recent years.

Fiascos such as the invasion of Iraq stand as stark reminders of the
difficulty of using force to alter domestic politics abroad. But power is
as much about preventing unfavorable outcomes as it is about causing
Ma
favorable ones, and here Washington has done a much better job than
most Americans appreciate.
For a largely satisfied power leading the international system, having
enough strength to deter or block challengers is in fact more valuable
than having the ability to improve one’s position further on the margins.
A crucial objective of U.S. grand strategy over the decades has been
to prevent a much more dangerous world from emerging, and its success
in this endeavor can be measured largely by the absence of outcomes
common to history: important regions destabilized by severe security
dilemmas, tattered alliances unable to contain breakout challengers,
rapid weapons proliferation, great-power arms races, and a descent
into competitive economic or military blocs.
Were Washington to truly pull back from the world, more of these
challenges would emerge, and transnational threats would likely loom
even larger than they do today. Even if such threats did not grow, the
m
task of addressing them would become immeasurably harder if the
United States had to grapple with a much less stable global order at
the same time. And as difficult as it sometimes is today for the United
hi
States to pull together coalitions to address transnational challenges,
it would be even harder to do so if the country abdicated its leader-
ship role and retreated to tend its garden, as a growing number of
ha
analysts and policymakers—and a large swath of the public—are now
calling for.
iT
LEAD US NOT INTO TEMPTATION
Ever since the Soviet Union’s demise, the United States’ dramatic
power advantage over other states has been accompanied by the risk
of self-inflicted wounds, as occurred in Iraq. But the slippage in the
Al
United States’ economic position may have the beneficial effect of

forcing U.S. leaders to focus more on the core mission of the coun-
try’s grand strategy rather than being sucked into messy peripheral
od
conflicts. Indeed, that has been the guiding logic behind President
Barack Obama’s foreign policy. Nonetheless, a world of lasting U.S.
military preeminence and declining U.S. economic dominance will
continue to test the United States’ capacity for restraint, in four
so
main ways.
First is the temptation to bully or exploit American allies in the
pursuit of self-interested gain. U.S. allies are dependent on Washington
in many ways, and leaning on them to provide favors in return—
Ma
whether approving of controversial U.S. policies, refraining from

activities the United States opposes, or agreeing to lopsided terms in
mutually beneficial deals—seems like something only a chump would
forgo. (Think of the Republican presidential candidate Donald Trump’s
frequent claims that the United States always loses in its dealings
with foreigners, including crucial allies, and that he would restore the
May/June 2016 99
country’s ability to win.) But the basic contract at the heart of the
contemporary international order is that if its members put aside the
quest for relative military advantage, join a dense web of institutional
networks, and agree to play by common rules, then the United States
will not take advantage of its dominance to extract undue returns
from its allies. It would be asking too much to expect Washington
to never use its leverage to seek better deals, and a wide range of
presidents—including John F. Kennedy, Ronald Reagan, George
W. Bush, and Obama—have done so at various times. But if
m
Washington too often uses its power to achieve narrowly self-
interested gains, rather than to protect and advance the system as
a whole, it will run a real risk of eroding the legitimacy of both its
hi
leadership and the existing order.
Second, the United States will be increasingly tempted to overreact
when other states—namely, China—use their growing economic
ha
clout on the world stage. Most of the recent rising powers of note,
including Germany, Japan, and the Soviet Union, were stronger
militarily than economically. China, by contrast, will for decades
iT
be stronger economically than militarily. This is a good thing, since
military challenges to global order can turn ugly quickly. But it
means that China will mount economic challenges instead, and
these will need to be handled wisely. Most of China’s efforts along
Al
these lines will likely involve only minor or cosmetic alterations to

the existing order, important for burnishing Beijing’s prestige but
not threatening to the order’s basic arrangements or principles.
od
Washington should respond to these gracefully and with forbear-

ance, recognizing that paying a modest price for including Beijing
within the order is preferable to risking provoking a more fundamental
challenge to the structure in general.
so
The recent fracas over the Asian Infrastructure Investment Bank is

a good example of how not to behave. China proposed the AIIB in
2013 as a means to bolster its status and provide investment in infra-
structure in Asia. Although its criteria for loans might turn out to be
Ma
less constructive than desired, it is not likely to do major harm to the

region or undermine the structure of the global economy. And yet the
United States responded by launching a public diplomatic campaign
to dissuade its allies from joining. They balked at U.S. opposition and
signed up eagerly. By its reflexive opposition both to a relatively
constructive Chinese initiative and to its allies’ participation in it,
Washington created an unnecessary zero-sum battle that ended in a

humiliating diplomatic defeat. (A failure by the U.S. Congress to pass
the Trans-Pacific Partnership as negotiated, meanwhile, would be an
even greater fiasco, leading to serious questions abroad about U.S.
global leadership.)
Third, the United States will still face the temptation that always
accompanies power, to intervene in places where its core national
interests are not in play (or to expand the definition of its core national
interests so much as to hollow out the concept). That temptation can
m
exist in the midst of a superpower struggle—the United States got
bogged down in Vietnam during the Cold War, as did the Soviet
Union in Afghanistan—and it clearly exists today, at a time when the
hi
United States has no peer rivals. Obama has carefully guarded against
this temptation. He attracted much criticism for elevating “Don’t do
stupid stuff ” to a grand-strategic maxim. But if doing stupid stuff
ha
threatens the United States’ ability to sustain its grand strategy and
associated global presence, then he had a point. Missing, though, was
a corollary: “Keep your eye on the ball.” And for nearly seven decades,
iT
that has meant continuing Washington’s core mission of fostering
stability in key regions and keeping the global economy and wider
order humming.
Finally, Washington will need to avoid adopting overly aggressive
Al
military postures even when core interests are at stake, such as with
China’s increasingly assertive stance in its periphery. It is true that
Beijing’s “anti-access/area-denial” capabilities have greatly raised the
od
costs and risks of operating U.S. aircraft and surface ships (but
not submarines) near China. How Washington should respond to
Beijing’s newfound local military capability, however, depends on
what Washington’s strategic goals are. To regain all the military free-
so
dom of action the United States enjoyed during its extraordinary

dominance throughout the 1990s would indeed be difficult, and the
actions necessary would increase the risk of future confrontations. Yet
if Washington’s goals are more limited—securing regional allies and
Ma
sustaining a favorable institutional and economic order—then the

challenge should be manageable.
By adopting its own area-denial strategy, for example, the United
States could still deter Chinese aggression and protect U.S. allies
despite China’s rising military power. Unlike the much-discussed
Air-Sea Battle doctrine for a Pacific conflict, this approach would not
May/June 2016 101

envision hostilities rapidly escalating to strikes on the Chinese main-

land. Rather, it would be designed to curtail China’s ability during
a conflict to operate within what is
By adopting its own area- commonly known as “the first island
chain,” encompassing parts of Japan,
denial strategy, the United the Philippines, and Taiwan. Under
States could still deter this strategy, the United States and
Chinese aggression and its allies would employ the same mix
of capabilities—such as mines and
m
protect U.S. allies. mobile antiship missiles—that China
itself has used to push U.S. surface
ships and aircraft away from its coast. And it could turn the tables
hi
and force China to compete in areas where it remains very weak,
most notably, undersea warfare.
The premise of such a strategy is that even if China were able to
ha
deny U.S. surface forces and aircraft access to the area near its coast,
it would not be able to use that space as a launching pad for project-
ing military power farther during a conflict. China’s coastal waters,
iT
in this scenario, would turn into a sort of no man’s sea, in which nei-
ther state could make much use of surface ships or aircraft. This
would be a far cry from the situation that prevailed during the 1990s,
when China could not stop the world’s leading military power from
Al
enjoying unfettered access to its airspace and ocean right up to its

territorial border. But the change needs to be put in perspective: it
is only natural that after spending tens of billions of dollars over
od
decades, China has begun to reverse this unusual vulnerability, one

the United States would never accept for itself.
While this area-denial strategy would help solve a long-term prob-
lem, it would do little to address the most immediate challenge from
so
China: the military facilities it is steadily building on artificial islands

in the South China Sea. There is no easy answer, but Washington
should avoid too aggressive a reaction, which could spark a conflict.
After all, these small, exposed islands arguably leave the overall
Ma
military balance unchanged, since they would be all but impossible

to defend in a conflict. China’s assertiveness may even be backfiring.
Last year, the Philippines—real islands with extremely valuable
basing facilities—welcomed U.S. forces back onto its shores after a
24-year absence. And the United States is now in talks to base long-
range bombers in Australia.
To date, the Obama administration has chosen to conduct so-called

freedom-of-navigation operations in order to contest China’s mar-
itime claims. But as the leader of the order it largely shaped, the
United States has many other arrows in its quiver. To place the burden
of escalation on China, the United States—or, even better, its allies—
could take a page from China’s playbook and ramp up quasi-official
research voyages in the area. Another asset Washington has is inter-
national law. Pressure is mounting on China to submit its territorial
disputes to arbitration in international courts, and if Beijing continues
m
to resist doing so, it will lose legitimacy and could find itself a target
of sanctions and other diplomatic punishments. And if Beijing tried
to extract economic gains from contested regions, Washington could
hi
facilitate a process along the lines of the proportional punishment
strategy it helped make part of the World Trade Organization: let the
Permanent Court of Arbitration, in The Hague, determine the gains
ha
of China’s illegal actions, place a temporary tariff on Chinese exports
to collect exactly that much revenue while the sovereignty claims are
being adjudicated, and then distribute them once the matter is settled
iT
before the International Court of Justice. Whatever approach is adopted,
what matters for U.S. global interests is not the islands themselves
or the nature of the claims per se but what these provocations do to
the wider order.
Al
Although China can “pose problems without catching up,” in the

words of the political scientist Thomas Christensen, the bottom line
is that the United States’ global position gives it room to maneuver.
od
The key is to exploit the advantages of standing on the defensive: as

a raft of strategic thinkers have pointed out, challenging a settled status
quo is very hard to do.
so
KNOW THYSELF
Despite China’s ascent, the United States’ superpower position is
more secure than recent commentary would have one believe—so
secure, in fact, that the chief threat to the world’s preeminent power
Ma
arguably lies within. As U.S. dominance ebbs slightly from its peak
two decades ago, Washington may be tempted to overreact to the set-
backs inherent in an admittedly frustrating and hard-to-manage world
by either lashing out or coming home—either way abandoning the
patient and constructive approach that has been the core of its grand
strategy for many decades. This would be a grave mistake. That
May/June 2016 103

grand strategy has been far more successful and beneficial than most
people realize, since they take for granted its chief accomplishment—
preventing the emergence of a much less congenial world.
One sure way to generate a wrong-headed push for retrench-
ment would be to undertake another misadventure like the war in
Iraq. That America has so far weathered that disaster with its global
position intact is a testament to just how robust its superpower
status is. But that does not mean that policymakers can make per-
petual blunders with impunity. In a world in which the United
m
States retains its overwhelming military preeminence as its eco-
nomic dominance slips, the temptation to overreact to perceived
threats will grow—even as the margin of error for absorbing the
hi
costs of the resulting mistakes will shrink. Despite what is being
said on the campaign trail these days, the United States is hardly in
an unusually perilous global situation. But nor is its standing so
ha
secure that irresponsible policies by the next president won’t take
their toll.∂
iT
Al
od
so
Ma
The Fed’s Unconventional

Monetary Policy
Why Danger Lies Ahead
m
Martin Feldstein
N
hi
ow, almost a decade after the Great Recession hit, the story of
its origins and course has become familiar. It began in December
2007, soon after the U.S. housing bubble burst, triggering
ha
the widespread collapse of the U.S. financial system. Credit dried up,
as banks lost confidence in the value of their assets and stopped lending
to one another. Consumer spending plummeted. At first, the U.S.
iT
Federal Reserve tried to boost spending through traditional monetary
policy, by reducing short-term interest rates. Yet this proved ineffective,
even though short-term interest rates fell close to zero. The government
then turned to fiscal stimulus, with Congress passing a package of tax
Al
cuts and spending increases in 2009, but this, too, proved ineffectual.
After both standard monetary and fiscal policy had failed, the Federal
Reserve turned to what it calls “unconventional monetary policy,”
od
aiming to lower long-term interest rates by purchasing long-term

financial assets and promising to keep short-term rates close to zero
for a long period of time. This policy paid off, and the U.S. economy
has at last rebounded. Today, the overall unemployment rate has dropped
so
below five percent, and unemployment among college graduates

stands at just 2.5 percent. The European Central Bank (ECB) followed
the United States’ lead with massive bond purchases and extremely
low interest rates (short-term interest rates are actually negative in
Ma
many of the eurozone countries). Europe thus also began to dig itself
out of recession, but its policy is not proving nearly as effective as
similar moves did in the United States.
MARTIN FELDSTEIN is George F. Baker Professor of Economics at Harvard University
and President Emeritus of the National Bureau of Economic Research. He was Chair of the
Council of Economic Advisers from 1982 to 1984.
May/June 2016 105

Martin Feldstein
What is now clear, however, is that unconventional monetary policy

and extremely low interest rates have also created major financial risks
that could hurt the European and U.S. economies in the years ahead.
These policies have driven up the prices of stocks, low-quality bonds,
and commercial real estate, potentially setting the stage for another
asset price collapse—the very phenomenon that led to the Great
Recession in the first place. Unconventional monetary policy does
represent a powerful weapon in a central bank’s arsenal. But it is a
dangerous strategy, one that policymakers should try to avoid when
m
the next recession hits.
THE BIG SHORT
hi
Economic downturns in the United States generally occur when the
Federal Reserve raises interest rates to keep inflation in check. When
the Fed’s Federal Open Market Committee believes that it has brought
ha
inflation under control, it can start to lower rates and reverse the down-
turn. But the recession that began in the United States at the end of 2007
was unusual: since the Fed did not cause that downturn by tightening
iT
monetary policy, it could not reverse it by lowering short-term interest
rates. The downturn was the result of the market mispricing assets,
including financial assets such as equities and mortgage-backed securities
and real assets such as housing.
Al
Between 2000 and 2006, house prices in the United States increased
by nearly 60 percent above the long-term trend, driven by very low
mortgage interest rates and by lenders who were willing to make loans
od
to “subprime” borrowers. Lenders bundled together many of these

subprime mortgage loans and then created investments, or tranches,
of varying degrees of risk.
For instance, a bank could take 1,000 subprime mortgage loans
so
(issued to people with low credit scores and a limited capacity to repay)
and create separate investment tranches. The riskiest tranche would
require the buyer of that investment to bear the losses of the first 100
mortgages to default. If a borrower defaulted, the creditor would seize
Ma
the house and sell it for a price that was generally much less than the
amount owed on the mortgage. That tranche was risky enough that
investors would regard it as a junk bond, bearing a high yield.
The second-riskiest investment would require the buyer of that tranche
to bear losses only after 100 mortgages had defaulted, up to a total of
200 defaults. Since the probability that more than ten percent of the
The Fed’s Unconventional Monetary Policy
m
hi
ha
Not on my watch: Janet Yellen in Washington, D.C., February 2016
original 1,000 mortgages would default seemed low, investors considered
iT
this second tranche to be safer and gave it a higher rating; as a result,
the second tranche had a lower expected rate of return. Banks created
additional tranches, each one apparently safer than the last. Investors
in the fifth tranche, for example, would bear a loss only if more than
Al
400 of the original 1,000 mortgages defaulted. The probability that

more than 40 percent of the mortgages would default seemed so low
that rating agencies could assign this tranche a triple-A rating.
od
When the housing bubble burst, of course, these ratings proved far
too optimistic. Widespread defaults on subprime mortgages caused
the prices of the seemingly safe mortgage tranches to fall sharply.
O L I V I E R D O U L I E RY / A B A CA ( S I PA V I A A P I M A G E S )
That drop sent a signal to investors in other, very different securities

so
that investors had underestimated risk, and the prices of many types
of assets fell rapidly as a result. The S&P 500 dropped by nearly
20 percent in the 12 months after July 2007 and had lost half its value
by March 2009.
Ma
Banks and other financial institutions found that it was often impos-
sible to obtain market prices for mortgage-backed securities and other
risky assets. Not knowing the value of their own portfolios, they could
not judge the solvency and liquidity of other financial institutions either.
As a result, they were unwilling to lend to them, and the financial system
ground to a halt.
May/June 2016 107

Martin Feldstein
UNCONVENTIONAL WISDOM
As the financial collapse reverberated throughout the economy, the
Fed responded in the traditional way. It gradually lowered the short-
term federal funds interest rate, the rate at which banks lend money
to one another, from 5.3 percent in September 2007 to 4.3 percent in
December 2007 (when the downturn officially began). By October
2008, the Fed had pushed the rate below one percent.
In most economic downturns, traditional monetary policy of this
kind is enough to bring about a recovery. Those downturns tend to be
m
relatively short—the average time from peak to trough in U.S. busi-
ness cycles is just ten months—and relatively shallow. To bring about
a recovery from these dips, the Fed employs conventional monetary
hi
policy, or “open-market operations”—essentially, buying short-term
government notes. This policy works by lowering the short-term
interest rate and temporarily lowering some longer-term rates as well.
ha
Spending that is sensitive to interest rates, such as housing construction,
usually picks up. So there is no need to drive down long-term rates
by buying bonds and committing to a long period of low rates.
iT
Nor, in a typical downturn, is there any need for fiscal policy, which
is both unnecessary and likely to destabilize the economy. Because it
can take months for Congress to pass legislation, there are long lags
between the start of a downturn and the potential launch of an effective
Al
fiscal stimulus. This timing problem means that a fiscal package aimed
at ending a short downturn may hit too late, once the economy is already
expanding, leading to economic overheating and rising inflation.
od
But not all downturns are created equal. In the dysfunctional financial
environment that prevailed from the end of 2007 onward, traditional
open-market operations to reduce short-term rates proved ineffective.
Working with the U.S. Treasury, the Fed took a series of additional
so
measures, such as guaranteeing money market funds and buying assets

from investors, to prevent widespread financial failures and protect
mutual funds. It also bought a large amount of mortgage-backed
securities before the end of 2008 to lower mortgage rates and stimu-
Ma
late home buying. But these actions were not sufficient to revive
the economy: in 2008, there was still a $700 billion annual shortfall
in demand.
Because it soon became clear that this recession was going to be deeper
and longer than usual, there was less risk that the government would
mistime fiscal policy. So an expansionary fiscal policy was appropriate,
and in 2009, U.S. President Barack Obama asked Congress for about
$300 billion a year in spending increases and tax cuts for three years. But
the collapse of consumer spending and home building had created a hole
in demand that was much larger than the
$300 billion that Congress provided.
The administration also designed the
Unconventional monetary
stimulus poorly, spending most of it on policy and extremely low
temporary tax cuts and transfers to states interest rates have created
rather than on real government spend- major financial risks.
m
ing that would add to demand, such as
infrastructure projects and the repair and
replacement of government military and civilian equipment. A better-
hi
designed fiscal stimulus might have been able to raise aggregate demand
and kick-start a true recovery, but the 2009 Obama plan probably added
more to the national debt than it did to economic activity.
ha
After declining for 18 months, the U.S. economy finally began to
grow in June 2009, but only very slowly. And so the Fed concluded
that neither traditional monetary policy nor the fiscal policy of the
iT
Obama administration was going to achieve an adequate recovery. It
responded with the unconventional policy of quantitative easing: buy-
ing billions of dollars’ worth of long-term bonds and promising to
keep short-term rates close to zero for a long period of time.
Al
As Ben Bernanke, then chair of the Federal Reserve, explained, the

purpose of this new policy was to lower long-term interest rates so
that investors would buy more equities and other riskier assets.
od
The Fed also hoped that the unprecedentedly low interest rate on
mortgages would boost house prices. The resulting uptick in house-
hold net worth, it expected, would increase consumer spending, thus
speeding the recovery. By targeting net worth, quantitative easing
so
would be very different from the traditional monetary policy the Fed
had already employed, which aimed to encourage investment and other
spending that is sensitive to interest rates.
The strategy worked well. House prices rose by 13 percent from
Ma
December 2012 to December 2013. The Standard & Poor’s measure of

equity prices rose by 30 percent during those same 12 months, and the
net worth of households grew by $10 trillion. As a result, consumers
spent more, which raised the profits and wages of the firms that sold
the goods and services they bought. Those higher incomes then led to
further increases in consumer spending, lifting overall GDP. In 2013,
May/June 2016 109

Martin Feldstein
GDP rose by 2.5 percent, and the unemployment rate fell from 8.0
percent to 6.7 percent.
The impact of quantitative easing on asset prices also proved sur-
prisingly large, because investors acted as if the decline in interest
rates was not just temporary but would last more or less indefinitely.
This suspension of disbelief was necessary to drive down the interest
rate on very long-term bonds and increase the prices of equities. If
investors had thought that interest rates would return to normal only
a few years later, long-term rates would not have fallen so low, nor
m
would equity prices have risen so much. But as it was, unprecedentedly
low interest rates and the rise in equity prices helped end the Great
Recession in the United States.
hi
EURO-STAGNATION
Across the Atlantic, the same strategy was not working as well. Like
ha
the Fed, the ECB was following a strategy of large-scale asset purchases
and extremely low (even negative) short-term interest rates. But the
purpose of the ECB’s quantitative easing was very different from what
iT
the Fed was trying to do. Since the eurozone lacks the widespread
stock ownership that exists in the United States, quantitative easing
could not stimulate consumer spending by raising household wealth.
Instead, a major unspoken reason for the ECB to lower interest rates
Al
was to depress the value of the euro and thus stimulate net exports.
Financial investors in Europe sold euros and bought dollars to take
advantage of the higher yield on securities denominated in dollars.
od
The euro’s value fell from almost $1.40 in the summer of 2014 to $1.06
by the fall of 2015, before rising slightly to $1.12 in early 2016.
But even though a weaker euro has stimulated exports and discour-
aged imports, it has done little to raise the eurozone’s total exports
so
and combined GDP. Most eurozone exports go to fellow members of

the monetary union, which use the same currency. Nor have exports
to the United States increased much, because European exporters
generally invoice their exports in dollars and adjust their dollar prices
Ma
very slowly. The overall effect has been disappointing: between Sep-
tember 2014 and September 2015, total net exports from the eurozone
budged upward only slightly, rising from 17.4 billion euros to 20.2
billion euros in an economy with a GDP of more than 13 trillion euros.
Nor has the ECB’s strategy of purchasing bonds to increase the
amount of cash banks have to lend seen much success. In contrast to
banks in the United States, which are paid a positive interest rate on
reserves by the Fed, commercial banks in the eurozone actually lose
money when they deposit funds at the ECB. Not surprisingly, then,
they do not deposit the funds they acquire from the sale of bonds to
the ECB at the central bank. The ECB hopes that the banks will use
their cash to increase lending to businesses and consumers. So far,
however, bank lending has barely increased, perhaps because of a
lack of demand from borrowers and the weakness of the banks’ own
capital positions.
m
The eurozone is also having trouble when it comes to inflation,
with the rate now sitting at just 0.4 percent. The ECB, fearing a defla-
tionary spiral of declining prices and wages, is eager to raise the euro-
hi
zone inflation rate to its target of just under two percent. The Federal
Reserve also wants to increase the rate of inflation (in addition to
achieving maximum employment). The Fed expects its quantitative
ha
easing will lift U.S. inflation back to two percent: by increasing real
demand and reducing the unemployment rate until employers have to
start raising wages to hire new workers, the policy will accelerate in-
iT
flation. But the ECB, by contrast, will likely struggle to raise the over-
all inflation rate in the eurozone so long as unemployment remains at
more than ten percent, about three percentage points above where it
stood before the recession. The ECB’s quantitative easing can probably
Al
achieve higher inflation only through the decline in the value of the
euro and the resulting increase in import prices—a limited process
that still leaves core inflation below one percent. The bottom line is
od
that quantitative easing in the eurozone is likely to raise employment

and inflation far less than it did in the United States.
THE BUBBLE NEXT TIME

so
Both the United States and Europe, however, may well eventually pay
for their use of unconventional monetary policy. Although the Fed
succeeded in boosting wealth and stimulating economic activity, it
also increased several risks in financial markets—risks that may create
Ma
instability when interest rates return to normal.

In the United States, very low interest rates and the Fed’s asset
purchases drove down the yield on government bonds. In response,
investors sought higher returns by buying other, riskier assets, and
lenders did the same by issuing more speculative loans. The Fed wanted
to promote such risk taking. But as investors have bought up these
May/June 2016 111

Martin Feldstein
riskier assets, their prices have risen and their yields fallen—even
though the risk of default remains the same. In other words, investors
may have overpaid for these assets. And once interest rates return to
normal, that mispricing could cause problems such as a stock market
decline, as investors sell these riskier stocks and their prices fall.
One sign that investors have mispriced assets can be found by
looking at the price-earnings ratios of companies in the S&P 500.
The ratios have grown higher than they
were before the downturn, and about
Both the United States
m
30 percent higher than their historic
and Europe may well averages, suggesting that considering
eventually pay for their companies’ incomes, their stocks are
hi
use of unconventional overvalued. These very high share prices
might make sense if interest rates
monetary policy. ha stayed at today’s low level forever. But
when interest rates rise, as they even-
tually must, the high price-earnings ratios will no longer be justified,
and the stock market will have to correct.
iT
Investors may be mispricing not only stocks but also commercial
real estate. Commercial real estate prices are very high relative to the
yields provided by the rents on those properties. When interest rates
rise, those yields will be less competitive, causing the value of those
Al
properties to fall. And because those investments are financed with

borrowed funds, the investors could lose a very large share of their
net equity.
od
Banks and other lenders are also seeking higher returns by lending
to riskier borrowers. U.S. Treasury bonds are much safer than low-
quality corporate debt, so investors should demand much higher
yields on low-quality debt. The large demand for investment in
so
junk debt has for the most part driven its price up and its yield
down, so that the spread between the yields on essentially risk-free
U.S. Treasury bonds and the yields on low-quality corporate debt
has been quite narrow. Banks are also making more loans to less
Ma
reliable borrowers and more loans that entail few restrictions for
the borrowers. If there is an economic downturn, many of these high-
risk loans will fail.
Low interest rates have also led to increased lending from the United
States to corporate borrowers in emerging markets. Companies in those
countries have been tempted by the opportunity to borrow in dollars
at historically low rates. Lenders and investors in the United States,

meanwhile, like the higher yields available on loans to emerging-
market borrowers.
These loans are risky for two reasons. First, rising interest rates
will hurt the profits and even the viability of the borrowers. The
prospect of rising interest rates in the United States has already caused
U.S. creditors to raise interest rates on loans to borrowers in emerg-
ing markets. And the prospect of rising U.S. rates is strengthening
the dollar relative to the currencies of those other countries, making
m
it harder for companies whose earnings are denominated in their local
currency to repay their loans.
In the eurozone, too, risk has increased. Italy’s ten-year sovereign
hi
debt yields investors just 1.4 percent, even though the country’s debt
equals more than 100 percent of its GDP. When interest rates return to
normal, these investors will lose money. In the eurozone’s private debt
ha
market, loans with few requirements for borrowers now constitute
nearly half of all institutional loans.
Investors and lenders have clearly taken substantial risks. But
iT
whether this puts the entire financial system in jeopardy remains
unclear. Nor is it clear whether the normalizing of interest rates by
the Fed will trigger a systemic downturn. Still, there is no doubt
that unconventional monetary policy has increased the risk of such
Al
systemic instability.
Unfortunately, the Fed seems oblivious to this possibility. In
December 2015, it finally began the process of raising the overnight
od
federal funds interest rate. The minutes of the Federal Open Market
Committee meeting showed that members had little interest in tak-
ing financial stability risks into account when setting interest rates in
the future. The committee said nothing suggesting that it would raise
so
rates more rapidly to discourage the mispricing of assets. Instead, it

stressed that the federal funds rate will rise only very slowly to increase
aggregate demand and will remain low even after the economy has
achieved full employment and the target rate of inflation.
Ma
BUILT ON SAND
Despite the close link between quantitative easing and financial insta-
bility, the Fed continues to downplay the connection. In a 2014 speech,
Janet Yellen, Bernanke’s successor as chair of the Federal Reserve,
explicitly limited the goals of monetary policy to the two congressional
May/June 2016 113

Martin Feldstein
mandates of maximum employment and price stability, saying that

financial stability should be left to “macroprudential policies,” or
measures the government can take that limit the risks of instability
across the whole financial system. But it is not clear what those macro-
prudential policies should be, in the United States or the eurozone.
The one clear example of a potentially useful macroprudential
policy in the United States is the increased capital requirements that
the Fed has imposed on commercial banks. Because banks now
hold more capital, they are capable of absorbing greater losses. The
m
dysfunction that afflicted the banking system in 2007 and 2008 is less
likely to recur. But since the high capital requirements force banks
to have more capital relative to their total portfolios, they are less
hi
likely to hold bonds, which will make interest rates more volatile when
investors want to sell their bonds.
Although the Fed has subjected banks’ portfolios to stress tests to
ha
measure the effect of rising interest rates and investment losses, the
results might not have shown the whole picture: U.S. banks, particularly
small and medium-sized ones, may not have enough capital to main-
iT
tain solvency and liquidity should their risky loans and investments
fail in large numbers. The same is true of the stress tests that the ECB
has performed in Europe, especially because it is hard to be confident
of the value of the sovereign bonds of some of the peripheral countries,
Al
such as Portugal and Spain. In both Europe and the United States,
therefore, macroprudential policy has done little to mitigate the grow-
ing risk of financial instability that unconventional monetary policy
od
has caused.
LESSONS LEARNED
In the future, central banks should respond to normal downturns with
so
the best tool available: traditional monetary policy alone. But in the
face of a more severe downturn, a combination of fiscal policy
and traditional monetary policy will likely prove better than the more
extreme option of relying on unconventional monetary policy, given
Ma
the accompanying risks of financial instability.

Ideally, if countercyclical fiscal policy is needed to deal with a future
downturn, it should combine a short-term fiscal stimulus with changes
in entitlement programs to stabilize the long-term level of national
debt. Otherwise, financial markets may fear sustained future deficits
and rising government debt, a worry that could raise long-term rates
to the point where they offset some or all of the favorable effect of a
fiscal stimulus. Unfortunately, it may not be politically feasible to
touch entitlement programs. But it is possible to design a fiscal policy
that provides a net stimulus to the economy without increasing the
size of the national debt—something that is particularly important
now in the eurozone, where debt levels are already very high.
The key to such a revenue-neutral stimulus strategy is to recognize
that there are two possible types of fiscal stimulus policies. The first
entails cutting taxes and increasing government spending, which raise
m
fiscal deficits and boost demand through the traditional Keynesian
channels. The second includes specific investment incentives, such as
the investment tax credit, that make new investments more profitable
hi
and thereby encourage firms to invest.
This second type of fiscal stimulus can raise aggregate demand
without expanding the national debt, if the government also enacts a
ha
temporary increase in the corporate tax rate. An investment tax credit
would make new investments more profitable, and a higher corporate
tax rate would apply only to existing capital. Businesses would have
iT
more incentive to invest during the years when the investment tax
credit was available.
A similar revenue-neutral strategy could stimulate consumer spend-
ing in countries that have value-added taxes, as is common in the
Al
eurozone. The government in a given country could commit to

raising the value-added tax rate each year for the next several years,
balancing the higher tax burden with reductions in the personal
od
income tax. Individuals would have an incentive to spend sooner to

avoid paying more in the future. In the eurozone, such revenue-
neutral fiscal policies have the additional advantage that, unlike mon-
etary policy there, they can be tailored to suit individual countries.
so
These revenue-neutral fiscal policies might not be enough to

deal with a crash as large as the one that hit the United States and
Europe in 2007. But they would serve as a useful supplement to
conventional monetary policy, limiting the need for unconventional
Ma
monetary policy, which causes investors and lenders to misprice assets

and increases the risk of financial instability.∂
May/June 2016 115

The Fed and the Great

Recession
How Better Monetary Policy Can Avert
the Next Crisis
m
Scott Sumner
T hi
oday, there is essentially one accepted narrative of the economic
ha
crisis that began in late 2007. Overly optimistic homebuyers
and reckless lenders in the United States created a housing
price bubble. Regulators were asleep at the switch. When the bubble
iT
inevitably popped, the government had to bail out the banks, and the
United States suffered its deepest and longest slump since the 1930s. For
anyone who has seen or read The Big Short, this story will be familiar.
Yet it is also wrong. The real cause of the Great Recession lay not
Al
in the housing market but in the misguided monetary policy of the

Federal Reserve. As the economy began to collapse in 2008, the Fed
focused on solving the housing crisis. Yet the housing crisis was a
od
distraction. On its own, it might have caused a weak recession, but

little more. As the Fed bailed out the banks at risk from innumerable
bad mortgages, it ignored the root cause of serious recessions: a fall in
nominal GDP, or NGDP, which counts the total value of all goods and
so
services produced in the United States, not adjusted for inflation.

Such a fall began unimpeded in mid-2008, and once that happened,
much of the damage had been done.
The Fed can control NGDP through its monetary policy, and as
Ma
NGDP fell in 2008, the Fed should have lowered interest rates rap-
idly. If that proved insufficient, it should have increased the money
supply through quantitative easing. Instead, the Fed, terrified of
SCOTT SUMNER is Ralph G. Hawtrey Chair of Monetary Policy at the Mercatus Center at
George Mason University and Professor of Economics at Bentley University. Follow him on
Twitter @MoneyIllusion.
The Fed and the Great Recession
inflation, kept interest rates too high for too long—causing NGDP to
fall even further.
To prevent such errors in the future, the Fed should switch from
targeting inflation to targeting the level of NGDP. When a recession
hits, NGDP tends to fall before inflation, which means that a central
bank focused on targeting inflation will be too slow to respond.
Throughout mid-2008, U.S. inflation remained positive, as NGDP
began falling. Had the Fed targeted NGDP, it might have acted much
sooner to boost growth—staving off the Great Recession and the
m
suffering that came with it.
SUBPRIME LOGIC
hi
Most pundits blame the housing market for the Great Recession. But
their argument doesn’t hold up to scrutiny. For one thing, the United
States was not the only country to experience a housing boom;
ha
Australia, Canada, New Zealand, and the United Kingdom also did.
In all four countries, house prices rose sharply in the first decade of
this century, just as they did in the United States, but in all four, they
iT
have yet to fall. In fact, for a decade now, real house prices in these
countries have remained close to 2006 levels, or even moved higher.
For another thing, theories connecting the Great Recession to the
housing bust have a timing problem. Between January 2006 and April
Al
2008, housing construction in the United States plunged by more

than 50 percent. Yet unemployment moved only from 4.7 percent to
5.0 percent. The big problem occurred later, as unemployment doubled,
od
to ten percent, by October 2009. During the first 27 months of the

housing slump, capital and labor were reallocated to other growing
industries, such as commercial construction, exports, and services, mit-
igating the worst effects of the housing collapse.
so
This makes sense: classical economic theory predicts that when one
sector declines, capital and labor will shift to other sectors. Contrary to
popular belief, real shocks—such as the bursting of a housing bubble,
a devastating natural disaster, a stock market crash, or a terrorist
Ma
attack—do not cause deep recessions. The stock market crash of 1987,
comparable to the 1929 crash, had no effect whatsoever on U.S.
unemployment. The earthquake and tsunami that struck Japan in 2011,
devastating part of the country and shutting down the entire nuclear
industry for almost two years, caused a temporary dip in industrial
output but were barely noticeable in unemployment figures.
May/June 2016 117

Scott Sumner
Instead, major recessions are caused by monetary policy failures. In

order for capital and labor to shift easily from a declining sector to a
growing sector, the total spending in an economy must continue to
rise at a reasonable pace. The best measure of total spending is NGDP,
since it measures changes in the total amount of money spent on all
goods and services.
Central banks can control this flow of money through monetary
policy. They can expand the supply of money by purchasing small
quantities of government bonds in order to lower short-term interest
m
rates, or, if rates fall to zero, by quantitative easing: the purchase of
large quantities of government bonds. And they can contract the supply
of money by selling bonds, which will raise short-term interest rates.
hi
What triggers recessions are abrupt drops in NGDP. If NGDP grows
too quickly, monetary policy is too loose. With too much money chasing
each transaction, prices rise, and the result is inflation. If NGDP falls
ha
abruptly, on the other hand, monetary policy is too tight—there is no
longer enough money to pay everyone who wants to work or to fund
all the transactions that would otherwise take place, and the economy
iT
starts to contract.
Drops in NGDP are particularly damaging for two reasons. First, wages
are what economists describe as “sticky downward”: when spending
throughout the economy rises, employees are able to negotiate pay
Al
increases, but when spending falls, employers would rather fire a few
people than negotiate pay cuts with all
Major recessions are caused their employees. Drops in NGDP kick
od
off something akin to a game of musical

by monetary policy failures. chairs. Just as removing several chairs
will leave some players sitting on the
floor when the music stops, removing several percentage points of
so
expected NGDP growth will leave too little revenue to employ the
existing work force at the wages they have negotiated. The result:
rising unemployment.
Consider what happened in the U.S. labor market in the 1970s.
Ma
From 1971 to 1981, NGDP grew at an average of 11 percent per year, and
workers negotiated large pay increases. But in 1982, after Paul Volcker,
then chair of the Federal Reserve, had tightened the Fed’s monetary
policy to fight inflation, NGDP growth fell to less than five percent,
and unemployment soared. Companies had committed to pay workers
based on revenue forecasts that proved inaccurate.
A similar problem occurs in the credit market. Even sophisticated

Wall Street firms issue long-term contracts in nominal terms, such
as 30-year bonds with fixed nominal interest rates. Such contractual
obligations are more difficult to meet when monetary policy allows
NGDP growth to slow sharply.
This leads to the second major problem associated with NGDP shocks:
financial market instability. When NGDP growth falls sharply relative
to expectations, economies tend to suffer financial crises. A decrease
in nominal income means there is less money to pay back loans, so
m
defaults become more common and banks come under increasing
strain. This is a familiar phenomenon. NGDP in the United States fell
by half during the early 1930s, and there were debt crises all over the
hi
world. NGDP growth fell to roughly zero in Japan after 1993, triggering
severe banking problems, and it plunged in the late 1990s in Argentina,
leading to a serious financial crisis in 2001. And something similar hap-
ha
pened in the United States and the eurozone during the Great Recession.
THE ROAD TO RECESSION

iT
When the housing crisis hit at the end of 2007, defaults on reckless
subprime mortgages put the U.S. banking sector under stress. The
Fed stepped in to rescue the financial system, bailing out the invest-
ment bank Bear Stearns and lending money to banks. Such actions
Al
might have been sufficient if the problem had been contained to turmoil
in the financial sector.
But in mid-2008, two years after the housing market began to col-
od
lapse, a much more serious problem emerged. The Fed did not cut
interests rates quickly enough to offset the drag caused by the housing
crisis, perhaps out of fear of high inflation resulting from rising oil
prices. As a result, NGDP fell sharply. Until 2008, NGDP growth had
so
averaged about five percent per year. Starting in June 2008, however,
NGDP fell by roughly three percent in 12 months, to about eight percent-
age points below the pre-recession trend line.
As NGDP fell, unemployment rose and spread from the housing
Ma
sector to almost every part of the economy. And the financial crisis,
initially triggered by the housing slump, became much worse. As a
result, what had initially been just a financial crisis turned into a full-
blown macroeconomic crisis.
Yet policymakers initially ignored the fall in NGDP growth. Through-
out 2008, they continued to assume that the problem was banking
May/June 2016 119

Scott Sumner
distress, rather than a contraction in nominal spending. Worse, they

thought that the risk of inflation was just as great as the risk of a reces-
sion, even after Lehman Brothers failed in September. It is true that
inflation had been quite high for the previous 12 months, thanks to
high oil prices. But the markets thought inflation would fall sharply over
the next few years. The Fed chose to ignore those market forecasts.
Instead of expanding the supply of money to boost NGDP, it refused to
touch interest rates between April and October 2008, keeping them
at two percent. Even on September 16, 2008, the day after Lehman
m
Brothers filed for bankruptcy, the Federal Reserve Board voted not to
cut interest rates, a decision that Ben Bernanke, at the time the Fed’s
chair, now concedes was an error.
hi
Normally, the Fed’s aggressive moves to inject money into the
banking system would have immediately pushed interest rates to zero.
But because the Fed did not want to boost nominal spending, in early
ha
October, it introduced a new policy: it started to pay interest on
reserves that banks hold with the Fed. The move prevented interest
rates from falling to zero and encouraged banks to keep their money at
iT
the Fed rather than move it out into the wider economy: a contractionary
move at a time when monetary stimulus was essential.
A cynic might say the Fed was trying to rescue Wall Street without
rescuing Main Street: it was saving the banks but not allowing the
Al
interest rates that affect the wider economy to fall enough to boost NGDP.
A more likely explanation, however, is that the Fed made a misdiag-
nosis. There were two distinct problems: banking distress caused
od
by defaults on subprime mortgages and a much more serious macro-

economic crisis caused by the shortfall in spending. The Fed recognized
the first but missed the second.
Even worse, the problem that the Fed ignored exacerbated the
so
banking crisis—as NGDP fell, people and businesses across the economy
had less money than they had anticipated to pay back debts. The
financial crisis worsened, the housing market collapsed further, and
unemployment soared. Only in December 2008 did the Fed cut rates
Ma
close to zero. But by then, the damage had been done: a mild down-
turn had turned into the Great Recession.
OUT OF AMMO?
In late 2008, the Fed finally sought to reverse the shortfall in nominal
spending through programs such as quantitative easing. This was
m
hi
ha
Fed up: waiting in line to enter a job fair in New York, December 2009
better late than never. Still, throughout the crisis and the ongoing
iT
weak recovery, the Fed has been too tentative and its monetary policy
too contractionary. This view flies in the face of accepted wisdom.
Most pundits still think the Fed’s post-2008 policy was expansionary
because it ultimately brought short-term interest rates close to zero.
Al
But they misunderstand how monetary policy really works.

A low nominal interest rate in itself does not constitute an expan-
sionary monetary policy; what matters is its value relative to the
od
“natural interest rate,” the rate at which inflation and NGDP remain on
target. If the nominal rate is above the natural rate, monetary policy
is contractionary. And if the natural rate falls, as it did in 2008 when
spending slowed down and inflation decreased, then a fixed nominal
so
interest rate will effectively rise relative to the natural rate, causing
monetary policy to tighten. The supply of money will no longer be
growing quickly enough to pay everyone’s wages. If nominal spending
S HA N NO N STAP L E T O N / R E U T E R S
has fallen to such an extent that the natural rate is below zero, then an
Ma
interest rate just above zero, although low in absolute terms, may in
fact still represent a tight monetary policy.
So even though interest rates fell close to zero from December
2008 onward and many assumed that the Fed’s monetary policy was
expansionary, in reality it was not. Between July and December 2008,
a number of things happened that point to a contractionary monetary
May/June 2016 121

Scott Sumner
policy. Commodity prices fell by roughly half. Stock prices crashed.

The dollar strengthened against other currencies. Real estate prices fell
in states all over the country, not just in places where subprime mort-
gages had been common. And the financial markets expected inflation
to turn negative.
The so-called zero lower bound, when interest rates are at or near
zero, provides no excuse for the Fed’s refusal to employ an expansionary
monetary policy when such a policy was needed. Contrary to the
claims of many pundits, it is not true that central banks are out of
m
ammunition when interest rates approach or hit zero. They can always
increase the supply of money if they choose, by creating money through
“unconventional” measures such as quantitative easing.
hi
From the end of 2008 until 2014, the Fed launched several rounds
of quantitative easing to boost NGDP. Although it should have made
these moves sooner and more aggressively, they did help end the
ha
recession in the United States. Some argue that quantitative easing
and extremely low interest rates have
increased the risks of another financial
Had the Fed acted
iT
crisis by creating asset price bubbles as
decisively back in 2008, investors search for higher returns
the crisis would have been from riskier assets, but these fears are
far less severe. exaggerated: the low interest rates of
Al
recent years do not reflect a loose mon-

etary policy; rather, they indicate a new
normal of slow growth in the developed world. Asset prices should in
od
fact be higher when interest rates are low. Market indicators suggest
that relatively low rates are here to stay, and so current asset prices are
not necessarily a bubble waiting to burst.
The European Central Bank, in contrast to the Fed, avoided quanti-
so
tative easing until much later and did even less to boost spending. As
a result, the eurozone slid into a double-dip recession in 2011, as the
U.S. economy continued to recover. This was thanks to monetary
policy, not fiscal policy: after 2011, there was actually more fiscal
Ma
austerity in the United States than in the eurozone thanks to seques-

tration, the automatic budget cuts agreed to by Congress that year.
A good example of the power of monetary policy came in early 2013.
Taxes increased sharply at the beginning of 2013, and a few months
later, U.S. government spending tightened because of sequestration.
Several months earlier, the Fed had launched a round of quantitative
easing, purchasing trillions of dollars of assets in the following two

years to expand the money supply. Three hundred and fifty Keynesian
economists signed an open letter warning that the budget cuts could
push the U.S. economy back into recession in 2013. The economist
Paul Krugman argued that an expansionary monetary policy would
not be able to offset the fiscal austerity. They were wrong: the U.S.
economy grew faster in 2013 than in 2012. The budget deficit fell by
almost half, or $500 billion, in one year with no discernible effect on
growth. This showed not only that monetary policy remained effective
m
when interest rates were at zero but also that it was much more powerful
than fiscal policy. And it suggested that had the Fed acted so decisively
back in 2008, the crisis would have been far less severe.
hi
BEYOND INFLATION
If monetary policy, not the housing market or the banking system,
ha
was the root of the Great Recession, then well-intentioned financial
regulation, such as the Dodd-Frank Act, won’t solve the problem.
Instead, the Fed should reform the way it conducts monetary policy
iT
and stop targeting inflation.
As things work now, the Fed aims to hit two percent inflation each
year, and if it misses that target, it simply tries again the following
year. It doesn’t try to get back on track and make up for lost ground.
Al
If prices fall one year, as they did in 2009, for instance, then instead
of trying to make up the difference by raising inflation above two
percent the following year, the Fed just tries once again to hit two
od
percent. But this means that if inflation is less than two percent
two years in a row, as it was from 2009 to 2010, monetary policy will
have become tighter: goods will cost less than they would have had
the Fed hit its target each year, and the risk of a recession brought on
so
by such a fall will be high.

One way to avoid this would be for the Fed to switch from setting
a target for inflation to setting a target path for what goods should
cost over the next few years. This practice is known as “price-level
Ma
targeting.” Imagine a piece of graph paper showing the price level

rising along a two percent trend line from its current position. Under
price-level targeting, a central bank promises to move the price level
back to that trend line anytime it falls below or rises above it. Next year,
the target cost of living is two percent higher than today; the follow-
ing year, it is four percent higher; and in three years’ time, it is roughly
May/June 2016 123

Scott Sumner
six percent higher. In contrast to the current system, in this system, if

prices fall one year, the next year the Fed would have to aim for a period
of above two percent inflation to catch up to the trend line. Krugman
has described such a strategy as “promis[ing] to be irresponsible.”
To see the advantages of price-level targeting, consider the situation
in late 2008, when it was clear that the economy was entering a deep
recession in which prices would fall. If investors knew that the Fed
would eventually print as much money as necessary to bring prices
back up to the pre-recession trend line, asset prices such as stocks,
m
commodities, and real estate would have fallen by much less. As a
result, fewer people would have defaulted on their loans, and banks
such as Lehman Brothers would have been less likely to fail. That
hi
doesn’t mean that no banks would have failed, but it does mean that
the crisis would have been milder.
Bernanke himself recommended that the Bank of Japan consider
ha
price-level targeting in 2003. Yet he discovered that there was a great
deal of institutional resistance at the Fed to the practice, and his sug-
gestions were dismissed at a meeting of the Federal Open Market
iT
Committee that he attended that same year. By all accounts, Bernanke
governed by consensus during his term as Fed chair, and so the Fed’s
actual policy might not have reflected his ideal policy.
The main benefit of price-level targeting is that it assures markets
Al
that the price level will remain predictable in the long run. The markets
know that the Fed will expand the supply of money if it undershoots its
target one year and contract it if it overshoots it the next. The more
od
predictable the monetary policy, the more stable the economy.
CHANGING TARGET
Yet an even better policy would be to target the level of NGDP directly,
so
because changes in NGDP tend to track changes in unemployment

more closely than do changes in inflation. Under this approach, the
Fed would commit to increase total nominal spending by four or five
percent every year. Any decline in NGDP growth would be quickly
Ma
reversed. Everyone would know that whatever happened, enough

money would flow through the economy to generate the sort of growth
in national income that was expected when wage and debt contracts
were signed. Individual sectors would still have their ups and downs,
and financial institutions would still collapse from time to time. But
total nominal spending would rise at a slow yet predictable rate.
This approach has another appealing feature: it would send a clear

and credible signal to the markets that the Fed would do what it took
to get NGDP back on its long-term trend line. Because the Fed would
target the level of NGDP, if spending were too low one year, interest
rates would fall to boost spending, and investors would know that
NGDP growth the following year would be higher to make up the lost
ground. Their bullish expectations would themselves lead to increased
current spending. A collapse in confidence like the one that accompa-
nied the start of the Great Recession would be much less likely if
m
central banks focused on keeping NGDP growing steadily. Australia
has not had a recession since 1991 because it has kept NGDP growing
along a relatively stable path.
hi
Economists of all stripes (and not just “market monetarists,” who
initially supported the policy) are increasingly starting to back
NGDP-level targeting. In the aftermath of the Great Recession, the
ha
practice has racked up endorsements from some of the most respected
macroeconomists in the United States, including Michael Woodford,
a professor at Columbia; Christina Romer, a former chair of the
iT
Council of Economic Advisers; and Jeffrey Frankel, a former member
of the same council. Many other top economists, such as Krugman
and former U.S. Treasury Secretary Larry Summers, have suggested
that it’s worth examining closely.
Al
Central banks are conservative institutions and will no doubt be

slow to embrace this new way of thinking. Yet perhaps their conserva-
tism will not prevent them from learning at least some of the lessons
od
of this painful past decade.∂

so
Ma
May/June 2016 125

The Fusion of Civilizations

The Case for Global Optimism
Kishore Mahbubani and Lawrence H. Summers
m
he mood of much of the world is grim these days. Turmoil
in the Middle East, causing hundreds of thousands of deaths
and millions of refugees; random terrorist attacks across the
hi
globe; geopolitical tensions in eastern Europe and Asia; the end of
the commodity supercycle; slowing growth in China; and economic
stagnation in many countries—all have combined to feed a deep
ha
pessimism about the present and, worse, the future.
Historians looking back on this age from the vantage point of later
generations, however, are likely to be puzzled by the widespread
iT
contemporary feelings of gloom and doom. By most objective
measures of human well-being, the past three decades have been
the best in history. More and more people in more and more places
are enjoying better lives than ever before. Nor is this an accident—
Al
because despite Samuel Huntington’s foreboding, what has occurred

over recent generations is not a clash of civilizations but a fusion
of civilizations.
od
To put it simply, the great world civilizations, which used to have

detached and separate identities, now have increasingly overlapping
areas of commonality. Most people around the world now have the
same aspirations as the Western middle classes: they want their
so
children to get good educations, land good jobs, and live happy, pro-
ductive lives as members of stable, peaceful communities. Instead of
feeling depressed, the West should be celebrating its phenomenal
success at injecting the key elements of its worldview into other
Ma
great civilizations.
KISHORE MAHBUBANI is Dean of the Lee Kuan Yew School of Public Policy at the
National University of Singapore and the author of The Great Convergence: Asia, the West,
and the Logic of One World.
LAWRENCE H. SUMMERS is President Emeritus and Charles W. Eliot University Profes-
sor of Economics at Harvard University. He served as U.S. Secretary of the Treasury from
1999 to 2001 and Director of the National Economic Council from 2009 to 2010.
The march of reason, triggered in the West by the Enlightenment,

is spreading globally, leading to the emergence of pragmatic problem-
solving cultures in every region and making it possible to envisage the
emergence of a stable and sustainable rules-based order. There is every
reason to believe, moreover, that the next few decades can be even
better for humanity than the last few—so long as the West does not
lose confidence in its core values and retreat from global engagement.
The greatest danger of the current pessimism, therefore, is that it might
become a self-fulfilling prophecy, leading to fear and withdrawal rather
m
than attempts to reinvigorate the existing global system.
The origins of the contemporary era lie in the West’s transforma-
tion during the Renaissance, the Enlightenment, and the Industrial
hi
Revolution. No other civilization can take credit for giving birth to
modernity. This was not done with some benign intent to uplift
humanity in general; there were many problems along the way, and
ha
the explosion of Western power across the globe had some terrible
consequences for other cultures and regions. Yet the ultimate result
was the diffusion of a modern outlook that relies on science and
iT
rationality to solve problems, much to the ultimate benefit of the
planet’s population.
As recently as half a century ago, for example, there was a global
clash of economic ideologies. Nikita Khrushchev, the former leader
Al
of the Soviet Union, could claim that the state was better at deliv-
ering basic goods to citizens than free markets were, but today such
a view would be laughed at. The market economy has made Chinese
od
and Indian workers today far more productive than they were under
Mao Zedong or Jawaharlal Nehru, India’s first prime minister.
Societies now accept the simple fact that workers need material
incentives to be productive, which has led to increased dignity and
so
self-worth. The vast majority of humanity is literate, is at least some-

what mobile, and has access to the world’s store of existing knowl-
edge. Around half of the adults in the world own a smartphone, and
there are now more connected mobile devices in total than there
Ma
are people on the planet.

The spread of science and technology, meanwhile, has also improved
human dignity and well-being. Most people used to experience
lives that were nasty, brutish, and short. Today, life expectancy has
increased by leaps and bounds virtually everywhere. Infant and
maternal mortality have dropped sharply, thanks in part to the spread
May/June 2016 127

of clear hygiene standards and the construction of modern hospitals.

According to the Bill & Melinda Gates Foundation, as recently as
1988, polio was rampant in 125 countries; today that number is
down to two. Aside from among the Taliban and a few pockets of
upscale communities in the United States, the virtues of vaccines
are accepted by all, part of a general consensus on the virtues of
Western science and technology.
And reason is replacing superstition more generally. People around
the world now routinely do basic cost-benefit analyses when looking
m
for solutions to problems, leading to a gradual improvement in out-
comes everywhere, from agriculture and construction to social and
political life. This helps explain the dramatic long-term decline in the
hi
rates of most kinds of conflict and violence that the Harvard scholar
Steven Pinker has documented.
After slavery and imprisonment, the most degrading condition a
ha
human being can experience is poverty. In 2000, UN Secretary-General
Kofi Annan announced as one of the ambitious Millennium Develop-
ment Goals halving extreme global poverty by 2015. That goal was far
iT
exceeded, and the U.S. National Intelligence Council has predicted
that extreme poverty will be reduced even further by 2030—which
would constitute one of the most remarkable developments in human
history. The global middle class, meanwhile, is projected to rise from
Al
1.8 billion in 2009 to 3.2 billion in 2020 and 4.9 billion in 2030. The
world’s infant mortality rate decreased from an estimated 63 deaths
per 1,000 live births in 1990 to 32 in 2015. This translates into more
od
than four million fewer infant deaths each year.

Instead of optimism based on this recent progress, however, these
days in the West, one more often encounters pessimism related to
three current challenges: turbulence in the Islamic world, the rise of
so
China, and intra-Western economic and political sclerosis. But the

pessimism is unwarranted, because none of these three challenges is
insurmountable.
Ma
MODERNIZING MUSLIMS
The Islamic world, from Morocco to Indonesia, comprises 1.6 billion
citizens—more than one in five people on the planet. The vast majority
of them share the common global aspirations to modernize their
societies, achieve middle-class living standards, and lead peaceful,
productive, and fulfilling lives.
m
hi
ha
It gets better: vaccinating against polio near Jalalabad, Afghanistan, January 2014
iT
Contrary to what some assert, Islam is fully compatible with mod-
ernization. When Malaysia built the Petronas Towers and Dubai built
Burj Khalifa, they were not just erecting physical structures but also
sending a metaphysical message: we want to be part of the modern
Al
world in all dimensions. Many Islamic societies have educated their

women. In Malaysian universities, the women outnumber the men
65 percent to 35 percent. Even some Islamic countries that were ini-
od
tially reluctant to embrace modernization have begun to do so. For

example, Qatar, Saudi Arabia, and the United Arab Emirates now
feature satellite campuses of major Western universities. One reason
for the shift is that the experience of other regions, such as Asia, has
so
shown that modernization does not simply equal westernization—

that it is possible to pursue, say, economic and social development
while still retaining distinctive cultural characteristics.
It is true that a certain number of young Muslims will continue to
Ma
choose rebellion against the modern world rather than integration

into it, joining radical Islamist groups and trying to wreak havoc
PARW I Z / R E U T E R S
where they can. About 30,000 Muslim fighters from all over the
world, including the West, have joined the Islamic State (also known
as ISIS). But however much they constitute a major global security
problem, they are dwarfed by, say, the 200 million nonradical Muslims
May/June 2016 129

who live peacefully in Indonesia alone. Indonesia has elected two

consecutive leaders committed to integrating the country into the
modern world, and its largest Muslim organization, the 50-million-
plus-member Nahdlatul Ulama, has publicly challenged ISIS’ actions
and ideology.
The real challenge, therefore, is not the Islamic world per se but
figuring out how to bolster the pro-modernization trends in that
world while containing the radical trend. In retrospect, it was a
mistake for the West to have remained silent when Saudi funding
m
dramatically increased the number of radical madrasahs around the
world. A comparable investment today in building a good modern
school next to each radical one would create a contest for legitimacy
hi
that would likely spread Enlightenment values far and wide. Such
a program could be undertaken by the UN agencies UNESCO and
UNICEF at relatively modest cost, and it is only one of many possi-
ha
ble lines of advance in attacking the problem.
CHALLENGING CHINESE
iT
The second great challenge many worry about is the rise of China.
China’s success, however, can also be seen as the ultimate triumph of
the West. The emperor Qianlong famously wrote to Great Britain’s
King George III in 1793 saying, “Our Celestial Empire possesses all
Al
things in prolific abundance and lacks no product within its own

borders. There [is] therefore no need to import the manufactures of
outside barbarians in exchange for our own produce.” Two centuries
od
later, the Chinese understand that absorbing Western modernity

into their society has been crucial to their country’s reemergence. It
has led to rapid economic growth, new and gleaming infrastructure,
triumphs in space exploration, the spectacular 2008 Olympic Games
so
in Beijing, and much more.

Even as Chinese society has accepted modernity with great enthu-
siasm, however, it has not abandoned its Chinese cultural roots. The
Chinese look at their modern Chinese civilization and emphasize its
Ma
Chineseness, seeing no contradiction. Indeed, China is now experi-

encing its own cultural renaissance, fueled by its new affluence.
The duality of the Chinese story is reflected in the West’s schizo-
phrenic response to it. The Nixon administration eagerly sought
better relations with China under Mao, and when Deng Xiaoping
doubled down by opening up the country, the West applauded the
change. The United States generously accepted Chinese products

into its markets, allowed massive trade surpluses, welcomed China
into the World Trade Organization in 2001, and kept global sea-
lanes open so that China could trade freely. All of this enabled
China to emerge as the world’s number one trading power by 2013.
The United States also generously allowed more than a million
Chinese students to study in its universities.
Yet the rise of China has also led to deep fears. China continues
to be run by a communist party that has no desire to embrace liberal
m
democracy. China has displayed a belligerent side in some of its
dealings with Japan and some members of the Association of South-
east Asian Nations over territorial disputes in the East China and
hi
South China Seas. The possibility of an aggressive, militaristic China
cannot be ruled out.
But we have come a vast distance since the days when Mao openly
ha
talked about the possibility of winning a nuclear war, and Chinese
history suggests that Beijing will ultimately prefer to join, rather than
replace or reject, the current rules-based
iT
order that the West has created. As the Contrary to what some
world’s number one trading power, China
has the most to lose from a breakdown assert, Islam is fully
of the global economic system. Histor- compatible with
Al
ically, moreover, what the Chinese modernization.

have feared most is luan (chaos). This
might lead to heavy-handed efforts to
od
preserve order domestically, but it should lead Beijing to support a

rules-based order at the global level as well. Undoubtedly, as China
grows more powerful, it will become more assertive. This has happened.
But since China needs a few more decades of peace to complete its
so
modernization, it has strong reasons to restrain itself militarily and

avoid a conflict.
Chinese society will never become a replica of Western society.
China’s own culture is too rich to be absorbed into any other cultural
Ma
universe. Yet a modernizing China will feature overlapping aspira-

tions in many areas, as, for example, with the rapid spread of Western
classical music. In 2008, 36 million Chinese children were studying
the piano (six times the number of U.S. children doing so), and
another 50 million were studying the violin. Some Chinese cities can
fill the halls of 15 opera houses in one evening.
May/June 2016 131

A modern China with thriving Western classical orchestras and

Western-style universities provides a powerful demonstration of
the fusion of civilizations. Western statesmen should allow this
dynamic to gain momentum while remaining patient on other areas
of change, such as in the political realm. China’s development will
not necessarily be linear, but in the long run, it should continue in
a positive direction.
PESSIMISTIC POPULISTS
m
The third challenge today is a widespread loss of confidence in the West
about its own systems and future potential. Sluggish growth across
the developed world, stagnant incomes for much of the population,
hi
rising economic inequality, political gridlock, and the emergence
of populist insurgencies on both sides of the political spectrum have
fueled a widespread sense that Western models of governance and
ha
economic management are floundering.
Many of these problems are real and important. But they are not
beyond the capacity of determined leadership to solve, nor do they
iT
represent fundamental weaknesses of the Western model. So the
pessimism strikes us as dramatically overdone, like previous bouts
of declinism and worry that the West’s best days were past. The
greatest danger, in fact, is that the widespread pessimism will become
Al
a self-fulfilling prophecy. Gloomy Western policymakers and publics

are more likely to see threats than opportunities and to turn away
from the world rather than continue to lead it successfully.
od
This is notable in the rising opposition, for example, to the Trans-

Pacific Partnership, a major trade deal that would help extend and
deepen the liberal order across a broad swath of the globe. It is evident
in the increasing suspicion of immigrants and refugees and in the
so
growing support for closing borders. And it can be seen in the fraying
and potential unraveling of international institutions such as the Euro-
pean Union, formerly a model of progressive international integration.
It would be a terrible shame if the West walked away from the very
Ma
international order that it created after World War II and that has
facilitated so much security, prosperity, and development over the
decades. Instead, it should try to reinvigorate that order, with three
moves in particular: working with China and India, bolstering inter-
national rules, and accentuating the positive global trends that get lost
in all the hysteria about the negative ones.
Why China and India? Because they have the largest populations
and economies in the developing world, are led by strong, reform-minded
leaders, and are approaching the future with dynamism, optimism, and
hope. Both understand that they need to take on greater responsibilities
in confronting global problems, and as last fall’s Paris climate agree-
ment demonstrates, they are already starting to do so.
Although China’s rise has been one of the universally acknowledged
wonders of the age, India’s recent rise has been impressive as well, as
India, too, has embraced modernization, globalization, and Enlight-
m
enment rationalism. Along the way, India has maintained the world’s
largest democracy, successfully accommodated an amazingly diverse
cultural and demographic mosaic, and kept its head and its values
hi
even under repeated terrorist attacks.
Although both are Asian powers, they differ so much that devel-
oping the capacity to work closely with both, and learning from
ha
each, would be a major step forward
in mastering the management of a
truly global order. The rapid spread
The greatest danger
of Western-style universities and or- is that widespread
iT
chestras in China will provide new pessimism will become a
bridges between China and the West. self-fulfilling prophecy.
The exceptionally successful ethnic
Al
Indian community in the United

States will provide bridges with India. And all this cooperation
will accentuate the process of civilizational fusion.
od
In contrast to China and India, Russia has held back from thor-
oughly embracing modernity, even though the Soviet Union started
modernizing before China and India. Russia hesitated to join the
World Trade Organization and has not yet accepted that ungrudging
so
participation in the current rules-based order can facilitate its own

progress. The more Beijing and New Delhi prosper, however, the
more persuasive will be the case for Moscow to follow their lead.
As it works closely with the major developing powers, the West
Ma
should also step up its efforts to construct a robust rules-based

world in general. In 2003, former U.S. President Bill Clinton said
that Americans should try “to create a world with rules and part-
nerships and habits of behavior that we would like to live in when
we’re no longer the military, political, economic superpower in the
world.” If Clinton’s fellow citizens could accept such advice, the
May/June 2016 133

citizens of most other countries would be willing to do the same.

And this might be easier to achieve than many believe.
Much of today’s global multilateral architecture was a valuable
gift from the West to the world. Yet the major Western powers have
also made sure that these institutions have never grown strong enough
or independent enough to make real trouble for their creators. UN
secretary-generals have been creatures of the permanent members
of the Security Council, the leaders of the World Bank and the In-
ternational Monetary Fund have been drawn exclusively from the
m
United States and Europe, and dominance in these financial institu-
tions has occasionally been exploited to achieve extra-financial goals.
These policies should be reconsidered, for the legitimacy of the
hi
system depends on the perception that its rules are developed by
and applied fairly and equally to all, rather than that they cater to
the narrow interests of a few. Picking strong leaders for the major
ha
international institutions and keeping those institutions’ operations
from being undermined or politicized would be a major step forward.
Western policymakers, finally, should work to highlight the good
iT
things that are happening around the world rather than harp on the
bad things. Hundreds of millions of people have emerged from
poverty in recent decades even as military conflicts have decreased.
The convergence of global aspirations means that a vast majority of
Al
countries want to see evolution trump revolution in the reshaping of

the global architecture. The appearance of pressing transnational
problems should drive a convergence of interests toward cooperation
od
in finding common solutions. And the presence of large, well-educated

middle classes in countries around the globe will help keep govern-
ments on the right track.
There is every reason to be confident that the condition of the
so
world will continue to improve as pragmatism and the use of reason

become universal. Western universities have been a crucial driver
of this trend. It is not just that their curricula have been copied
around the world; the entire ecosystem of a modern research univer-
Ma
sity is being replicated, and it is the graduates of these Western-

style universities who have in turn introduced modern methods
into education, public health, economic management, and public
policy more generally. Global management consulting firms have
also contributed to progress, spreading best practices and good ideas
from the West to “the rest,” and increasingly from the rest back to
the West. As a result, even formerly desperate and dysfunctional

countries, such as Bangladesh and Ethiopia, are now confidently
entering the modern universe.
In short, despite the daily headlines that scream doom and gloom,
the world is actually coming together, not falling apart. So far, the
fusion of civilizations has been driven primarily by the injection of
Western DNA into other civilizations. Over time, the flow of cul-
ture and ideas is likely to go in both directions. This has already
happened in cuisine, where global influences have thoroughly pen-
m
etrated Western kitchens, and something similar should happen
across cultural sectors.
There will be challenges. There could even be major setbacks. The
hi
fusion of civilizations and the social and economic changes associ-
ated with it can seem threatening to some, creating opportunities
for demagogues to exploit popular fears, even in the heart of the
ha
advanced industrial world. But increasingly open and enlightened
societies are likely to avoid this danger. In the twenty-first century,
the world will be governed more by the authority of ideas than by
iT
the idea of authority. In short, the progressive direction of human
history, which has lifted the human condition to heights never seen
before, is set to continue.∂
Al
od
so
Ma
May/June 2016 135

The Age of Transparency

International Relations Without Secrets
Sean P. Larkin
m
T
ransparency has long been a rare commodity in international
affairs. But today, the forces of technology are ushering in a
hi
new age of openness that would have been unthinkable just
a few decades ago. Governments, journalists, and nongovernmental organ-
izations (NGOs) can now harness a flood of open-source information,
ha
drawn from commercial surveillance satellites, drones, smartphones,
and computers, to reveal hidden activities in contested areas—from
Ukraine to Syria to the South China Sea.
iT
Over the next decade, the market-driven explosion of surveillance
sensors and data analytics will bring an unprecedented level of trans-
parency to global affairs. Commercial satellites will capture daily
images of the entire globe, offering inexpensive and automated reports
Al
on everything from crop yields to military activity. Journalists, NGOs,

and bloggers will increasingly use crowdsourced data to uncover
wartime atrocities and expose government hypocrisy. Private secu-
od
rity companies will discover the sources of cyberattacks and data

theft. Biometric systems will expose the identities of clandestine
operatives, and government agencies will struggle to contain leakers
and whistleblowers.
so
Although some secrets will likely remain hidden, ubiquitous sur-

veillance will subject the vast majority of states’ actions to observa-
tion. And although governments will also benefit from improved
access to information, increased transparency will allow people at
Ma
home and abroad to better observe and critique what governments

do and to hold leaders accountable for their decisions. As a result,
SEAN P. LARKIN is a Military Fellow at the Council on Foreign Relations. He is a Colonel in

the U.S. Air Force and previously served as Director of Staff for the Deputy Chief of Staff for
Intelligence, Surveillance, and Reconnaissance at U.S. Air Force Headquarters. The views
expressed here are his own.
governments will find it harder to adopt strategies that require

secrecy or violate international norms.
OPEN SECRETS
World leaders frequently pay lip service to the ideal of transpar-
ency, but diplomatic efforts toward greater openness have yielded
limited results. Transparency agreements typically take years to
negotiate, lack effective enforcement mechanisms, and focus on
narrow issues, such as arms control, where the parties see an advan-
m
tage, or at least little risk, in trading secrecy for stability. It took the
United Nations three years, for example, to negotiate the Register
of Conventional Arms, which tracks annual weapons transfers
hi
among participating countries. Since the agreement relies exclusively
on states’ voluntary disclosures, the transparency it provides is
beneficial but incomplete.ha
Global transparency has been a goal of U.S. foreign policy since at
least 1918, when U.S. President Woodrow Wilson called for an end to
secret diplomatic agreements in his Fourteen Points. Yet Wilson
iT
ultimately conceded to British and French demands that the Allied
powers honor existing secret pacts, such as the infamous Sykes-Picot
Agreement, and consented to conduct the Paris Peace Conference
negotiations behind closed doors. Wilson’s ideal of international trans-
Al
parency—“open covenants of peace, openly arrived at”—appeared in

the 1919 League of Nations Covenant but remained unfulfilled.
During the Cold War, U.S. President Harry Truman advocated
od
“the free and open interchange of information across national bor-

ders” as a prerequisite for U.S. disarmament talks with the Soviet
Union. The administration of U.S. President Dwight Eisenhower
likewise sought to reduce mutual fears of a surprise nuclear attack
so
through the exchange of military information. Yet the Soviet Union

rejected proposals for information sharing, as well as Washington’s
insistence on mutual aerial reconnaissance, an idea known as the
“Open Skies” plan.
Ma
Mutual suspicions limited information sharing throughout the

Cold War. Early U.S.-Soviet arms control agreements, such as the 1972
SALT I accords, did not require information sharing or nuclear inspec-
tions; the parties were expected to monitor treaty compliance with
their own intelligence capabilities. In the 1980s, Mikhail Gorbachev’s
glasnost enabled the negotiation of more intrusive transparency
May/June 2016 137

Sean P. Larkin
measures to reduce tensions with the West. The 1987 Intermediate-

Range Nuclear Forces Treaty, for example, required detailed data
exchanges and weapons facility inspections on U.S. and Soviet
territory, establishing precedents for subsequent nuclear arms con-
trol treaties. Still, realpolitik considerations continued to limit U.S.-
Soviet cooperation; transparency was a means to security, not an
end in itself.
A final push for transparency in the Cold War era came in 1989, with
U.S. President George H. W. Bush’s attempt to resurrect Eisenhower’s
m
Open Skies initiative with a formal
agreement to allow unarmed aerial sur-
In the coming years, veillance flights over the territory of
hi
breakthroughs in participating countries. Yet even in the
transparency will come age of glasnost, it took more than two
from Silicon Valley rather years to resolve divergent positions on
ha the scope and technical details of the
than Geneva. treaty, to the point where the negotia-
tions outlived both the Cold War and
iT
the Soviet Union. Twenty-five NATO and former Warsaw Pact countries
signed the treaty in 1992; it took another ten years before it entered
into force.
Although Washington has hailed the Treaty on Open Skies as a
Al
force for increased transparency, the treaty’s primary success has

been to increase military cooperation among its now 34 signatories
rather than to shed light on each country’s defense activities. Open
od
Skies surveillance flights are limited in frequency and must be sched-

uled in advance, and the aircraft involved operate sensors whose
capabilities are confined by the terms of the treaty. It is thus rela-
tively easy for participants to conceal sensitive activities or simply
so
deny access to flights.

Russia, for example, has restricted observation flights over Moscow
and Kaliningrad, and the United States has been unable to conduct
flights over the Russian-Ukrainian border area since the July 2014
Ma
shootdown of Malaysia Airlines Flight 17. Russia’s recent request to

fly an aircraft equipped with treaty-compliant digital cameras over
the United States has raised concerns in Washington that Moscow
will exploit the treaty to gain an intelligence advantage. It remains to
be seen if Washington will restrict Russian overflights or stay the
course on Bush’s vision for Open Skies.
Nearly a century of diplomatic efforts have incrementally advanced

openness in international relations, but states still pick and choose
which agreements they sign and don’t necessarily comply with the
ones they do accept. In the coming years, diplomacy will continue to
play its part in encouraging states to be open about their activities, but
true breakthroughs will come from Silicon Valley rather than Geneva.
I SPY
In the past two decades, rapid advances in information technology
m
have fueled an explosion of commercial surveillance capabilities that
will make it much harder for states to conceal their actions. Venture
capitalists are pouring billions of dollars into commercial surveillance
hi
satellites, unmanned aerial vehicles, social media analytics, biometric
technologies, and cyberdefenses to meet surging market demand.
Heavy competition is driving down the cost of and improving the
ha
information available to individuals, businesses, and governments.
Consider the rapidly expanding market for commercial satellite
imagery. Earth-observation satellites have been a potent force for
iT
transparency for over 40 years, revealing environmental degradation,
highlighting the impacts of natural disasters, and providing evidence
of mass graves and illicit nuclear facilities. High-resolution satellite
imagery—detailed enough to see cars but not people—became com-
Al
mercially available in 2000. In 2015, U.S. regulators approved the sale

of even more detailed imagery, clear enough to see objects only a foot
long from almost 400 miles aboveground.
od
Despite its capabilities, today’s commercial satellite imagery indus-

try is ripe for disruption. Industry leaders, such as DigitalGlobe and
Airbus Defence and Space, operate small fleets of huge satellites that
cost hundreds of millions of dollars to build and launch. Yet neither
so
company’s small fleet of high-resolution satellites can cover more

than five percent of the earth’s landmass a day, nor can they revisit
a specific area more than once or twice daily. Start-ups in Silicon
Valley and abroad are already racing to fill this void with hundreds of
Ma
inexpensive miniature satellites.

The global satellite imaging market is projected to grow from
$2.5 billion in 2014 to $6.5 billion by 2023. The San Francisco–based
Planet Labs, for example, has 37 satellites in orbit and plans to launch
over 100 more this year, allowing the company to begin imaging the
earth’s entire landmass, in medium resolution, every day. Google’s
May/June 2016 139

Sean P. Larkin
Terra Bella has launched two high-resolution satellites (out of a

planned 24) to collect both photographs and the first commercial
high-definition video clips from space. BlackSky Global, another
firm, will begin launching its 60-satellite constellation this year, which
will take images of the earth’s most populated areas 40 to 70 times a
day. Urthecast and XpressSAR each plan to launch radar-imaging
satellites, designed to collect data in any weather, day or night.
By 2021, over 600 commercial imagery satellites will likely peer
down at the planet, an astonishing sevenfold increase over today.
m
Customers will be able to quickly and inexpensively observe events
around the world. BlackSky, for example, intends to offer high-
resolution images on demand for less than $100 each, ten percent
hi
of today’s average price. Since humans cannot hope to analyze the
flood of inexpensive imagery manually, the industry is turning to
artificial intelligence. Data analysis companies, such as Orbital
ha
Insight and Descartes Labs, have already automated tasks such as
counting cars in retail parking lots and determining the health of
cornfields in order to make lucrative market predictions.
iT
The surge of satellite surveillance will benefit even those who cannot
pay for it directly. Already, journalists, bloggers, and think tanks use
satellite imagery to contextualize events, such as Russia’s military
deployments to Syria. Soon, increased coverage, lower prices, and
Al
automated processing will allow the press to closely monitor areas of

interest to routinely discover new events or to provide the public with
frequent updates on a natural disaster or an armed conflict. The com-
od
mercial satellite industry is also expanding the free services it provides

to NGOs and the UN for environmental, humanitarian, and disaster-
relief purposes.
Commercial satellite imagery has proved particularly effective in
so
empowering groups to monitor and publicize developments in areas

where access is otherwise denied. The Asia Maritime Transparency
Initiative, a project of the Center for Strategic and International
Studies, for example, has used satellite imagery to catalog China’s
Ma
controversial reclamation of over 3,000 acres of land on seven dis-

puted reefs (or reef-like formations) in the Spratly Islands, including
the construction of three airstrips capable of supporting military
aircraft. Major news organizations, such as the Financial Times and
The Washington Post, regularly cite AMTI’s analysis and immediately
reported its sighting of what appears to be a new Chinese high-
m
hi
ha
Secrets don’t make friends: Edward Snowden appearing from Moscow, September 2015
frequency radar installation on Cuarteron Reef. Senators John
iT
McCain and Jack Reed specifically cited AMTI’s discoveries in their
questions to Admiral Harry Harris, commander of U.S. Pacific
Command, in a subsequent congressional hearing. Harris confirmed
the reports and pledged to continue U.S. freedom-of-navigation
Al
operations in the South China Sea.

Commercial satellite imagery has also enabled 38 North, a website
maintained by the U.S.-Korea Institute at Johns Hopkins University’s
od
Paul H. Nitze School of Advanced International Studies, to, among

other things, track North Korea’s preparations for nuclear tests and
space launches. In January, 38 North detected and reported North
Korea’s early preparations to launch a satellite in violation of UN
so
Security Council resolutions. The website’s analysts monitored the

preparations leading up to the launch in February in great technical
detail, using high-resolution imagery that in the past would have been
the sole purview of intelligence agencies.
Ma
A N D R E W K E L LY / R E U T E R S
Of course, commercial satellites cannot usher in a new age of trans-

parency on their own. Most commercial imagery satellites require clear
weather and daylight, and their sensors cannot identify or track small
objects, nor can they see inside buildings or underground. Addition-
ally, Washington maintains some export restrictions on American-
licensed satellite companies to mitigate risks to national security. But
May/June 2016 141

Sean P. Larkin
regulators have loosened these rules over time to avoid disadvantaging

U.S. companies in the international imagery marketplace.
NOWHERE TO HIDE
Drones are another rapidly growing technology feeding ubiquitous sur-
veillance. Satellites take photographs of large areas as they fly by, but
drones, with their increasingly capable sensors, can provide real-time
video or paparazzi-style close-ups of their targets. Hobbyists and
businesses bought nearly a million drones in the United States last
m
year, and the Federal Aviation Administration approved over 3,000
companies to use unmanned aerial vehicles commercially. With the
worldwide military and commercial market for drones projected to
hi
triple in a decade, states will have more ways to collect intelligence,
and so, too, will citizens.
In 2015, for example, a pro-Ukrainian volunteer regiment used drone
ha
footage to expose what it claimed was a large Russian base in Ukrainian
territory, providing additional evidence to Western audiences of
Moscow’s continued, direct involvement in the conflict in Ukraine.
iT
After Nepal’s devastating earthquakes in April and May of that year,
NGOs such as the Humanitarian UAV Network, or UAViators, and
GlobalMedic used drones to create detailed maps and 3-D models of
the damage, aiding disaster-relief and reconstruction efforts. In Decem-
Al
ber, several media outlets published private drone footage of the

aftermath of China’s Shenzhen landslide, documenting the destruction
of an industrial park and the frantic search for survivors. Faced with
od
this evidence, as well as with cell phone videos and social media reports,
Beijing had little choice but to acknowledge the negligence at the
heart of the tragedy.
The Shenzhen disaster was just one example of the power of social
so
media to provide raw information. In 2013, a British blogger named

Eliot Higgins painstakingly analyzed YouTube videos to determine what
type of rockets Syria had used in its deadly gas attacks on civilians
in two Damascus suburbs. Human Rights Watch included Higgins’
Ma
detailed findings in its investigative report, which determined that the

Syrian government was almost certainly responsible for the atrocities.
Higgins’ analysis also provided vital documentation for any future
prosecution of these attacks as war crimes. In 2014, journalists and
think tanks used photos and videos from social media to contradict
Russia’s official narrative of the conflict in eastern Ukraine, naming
individual Russian soldiers and identifying specific armored vehicles

that had crossed the international border to support the separatists.
The massive volume of social media content has created a market
for companies to analyze it. Dataminr, one of the most prominent
firms in this field, runs powerful algorithms on Twitter content to
provide real-time alerts of business news and crises. Dataminr for
News, a product the firm created for journalists, routinely supplies
the first indications of a breaking story. In 2015, Dataminr alerted
clients five minutes after the first explosion of the Paris terrorist attacks,
m
45 minutes before the Associated Press sent out its first tweet. Other
firms are unleashing their own algorithms on social media to gauge
investor sentiments, predict market performance, and monitor news
hi
on specific people, places, and events. The ability to inexpensively and
quickly exploit Internet data will empower weaker actors to observe
state actions, and even to identify their clandestine agents.
ha
Existing technologies have already made it more difficult for anyone
to remain anonymous, thanks to the digital fingerprints people leave
behind. In 2010, for example, Dubai authorities used security camera
iT
footage and credit card records to quickly identify a team of alleged
Israeli operatives who had killed a senior Hamas leader, Mahmoud
al-Mabhouh, in his hotel room. Since then, market-driven advances in
biometric technology have created additional hazards for undercover
Al
agents. Facial recognition software is now integrated into a variety of

security systems: some casinos and high-end retailers use the technology
to identify important customers. Additionally, iris and fingerprint
od
scans have become more common at border control facilities. Such

surveillance systems will benefit law enforcement and counterterrorism
efforts, but the proliferation of these same technologies will also under-
mine the ability of states to employ spies or saboteurs with anonymity.
so
States will also have trouble acting anonymously in cyberspace,

as private companies are increasingly willing and able to identify the
sources of cyberattacks. The cybersecurity firm Mandiant made head-
lines in 2013 when it exposed a covert Chinese military cyberunit
Ma
responsible for stealing massive amounts of data from U.S. govern-

ment and corporate networks. In February 2015, the Russian security
software firm Kaspersky Lab claimed to have identified spyware from
an unnamed Western government on computers in 30 countries. And
in January 2016, the cyber-intelligence firm iSIGHT Partners deter-
mined that a Russian group was probably behind a successful attack
May/June 2016 143

Sean P. Larkin
on the Ukrainian power grid. Despite these growing private-sector

capabilities, the persistent difficulty of precisely identifying hackers
will probably leave states with more freedom to act anonymously in
cyberspace than in the physical world.
Nevertheless, governments contemplating cyber-espionage or cyber-
attacks will be forced to consider the consequences of being caught. In
2015, Washington was ready to impose sanctions on Chinese firms
and individuals for stealing trade secrets and intellectual property
from U.S. companies. Instead, Beijing
m
and Washington reached a landmark
The new era of agreement, announced during Chinese
transparency will expose President Xi Jinping’s September 2015
hi
gaps between governments’ visit to the United States, that both
rhetoric and reality. countries would refrain from intellec-
ha tual property theft for commercial gain
in cyberspace. Although private security
firms and U.S. intelligence agencies are still assessing the effectiveness
of this agreement, it is clear that China had to change its behavior—if
iT
only publicly—once its actions were exposed.
The emerging age of transparency will not end the competition be-
tween hiders and seekers, as states will still have options to protect their
most sensitive activities from prying eyes. Anyone can track commercial
Al
satellites online or with mobile apps such as SpyMeSat, so savvy govern-

ments will know when imagery satellites are overhead and can attempt
to conceal their activity. The threat of drone surveillance, midair col-
od
lisions, and even terrorist attacks has created a new market for systems
that can detect and disrupt drones. Wealthy states will protect their most
critical infrastructure with such systems, but they will be unable to
defend themselves everywhere or to maintain constant vigilance against
so
unmanned interlopers. On the social media front, governments may

attempt to monitor and repress citizens’ postings or discredit incriminat-
ing reports with misinformation, but such efforts buck technological
trends that are empowering consumers, such as strong encryption.
Ma
Even states that mitigate risks of technological surveillance can

still have their secrets divulged by insiders. The persistent threat of
massive, Edward Snowden–style data theft will encourage govern-
ments to strengthen their personnel screening and safeguard their
networks. Yet whether they are motivated by ideology, fame, or profit,
insiders will continue to leak secrets into the public domain.
THE BEST DISINFECTANT

The new era of transparency will increasingly expose gaps between
governments’ rhetoric and reality, empowering domestic and inter-
national audiences to hold leaders more accountable for their decisions.
Of course, governments that typically comply with their own laws
and with international norms are more likely to address their trans-
gressions when confronted. But leaders of all stripes may still attempt
to spin an alternate narrative rather than change their behavior. In
either case, transparency will undermine strategies that rely on secrecy
m
and strengthen adherence to international norms.
In the early years of this century, for example, public revelations
forced the CIA to close most of its post-9/11 overseas detention facili-
hi
ties, even before President George W. Bush revealed the existence of
these facilities in 2006, according to the Senate Select Committee on
Intelligence’s 2014 report on the CIA program. Later, press revela-
ha
tions, government disclosures, and public pressure led Washington to
investigate and debate the efficacy and morality of the CIA’s “enhanced
interrogation techniques,” including waterboarding. Ultimately,
iT
President Barack Obama banned such techniques via executive order
in 2009, and the U.S. Congress outlawed them in 2015.
After the former NSA contractor Snowden leaked U.S. classified
information in 2013 that revealed details of U.S. and British govern-
Al
ment electronic surveillance programs, privacy advocates accused

the United Kingdom of monitoring Internet communications ille-
gally. The British Parliament’s Intelligence and Security Committee
od
conducted a detailed investigation into these allegations. Although

the committee concluded that the nation’s intelligence agencies had
done nothing illegal, it also found that existing British law provided
insufficient oversight and transparency. The committee’s report, in
so
addition to a separate ruling by the United Kingdom’s Investigatory

Powers Tribunal, revealed unprecedented details about the govern-
ment’s surveillance policies and capabilities. The public debate that
followed forced London’s Home Office to revise a draft surveillance
Ma
reform bill to strengthen privacy protections.

In contrast, authoritarian regimes in countries with weak, uninformed,
or repressed civil societies will be less susceptible to transparency’s
pressures. Russian authorities have falsely asserted that the Ukrainian
military, rather than Russian-backed militants, shot down Malaysia
Airlines Flight 17 and that Russian air strikes in Syria primarily targeted
May/June 2016 145

Sean P. Larkin
the self-proclaimed Islamic State (or ISIS). Despite overwhelming

publicly available evidence contradicting those claims, in both cases
the Russian public has generally accepted the Kremlin’s version of
events. Russia’s state-sponsored media have been decisive in discred-
iting critics and shaping domestic opinion, even if Moscow’s stories
fall flat internationally. Moscow cleverly goes through the motions of
openness—issuing press statements and releasing selected portions of
cockpit video of its air strikes in Syria, for example—without actually
revealing the truth.
m
Ultimately, transparency will weaken strategies that rely on secrecy,
even if they are legitimate. It will become riskier for states to dis-
patch military forces, spies, or diplomats in secret. Earlier this year, for
hi
example, commercial imagery revealed the expansion of a Kurdish-
controlled runway in northeastern Syria, appearing to validate press
reports that U.S. special operations forces were planning to operate
ha
in the area. In the future, such developments could be exposed in
days or hours rather than weeks, threatening the safety and success
of forward-deployed forces. Transparency may also spoil sensitive
iT
diplomatic negotiations or intelligence relationships that cannot survive
in the open.
The trend toward ubiquitous surveillance will therefore provide an
unprecedented level of transparency in global affairs. Yet transparency
Al
will change only the nature of the struggle between international

actors, not the unending contest itself. Powerful and pariah states will
still violate norms in pursuit of their interests, but they will have to do
od
so primarily in the light of day, rather than in the shadows.∂

so
Ma
The Clean Energy

Revolution
Fighting Climate Change With Innovation
m
Varun Sivaram and Teryn Norris
A
hi
s the UN Climate Change Conference in Paris came to a close
in December 2015, foreign ministers from around the world
raised their arms in triumph. Indeed, there was more to cele-
ha
brate in Paris than at any prior climate summit. Before the conference,
over 180 countries had submitted detailed plans to curb their green-
house gas emissions. And after two weeks of intense negotiation, 195
iT
countries agreed to submit new, stronger plans every five years.
But without major advances in clean energy technology, the Paris
agreement might lead countries to offer only modest improvements
in their future climate plans. That will not be enough. Even if they
Al
fulfill their existing pledges, the earth will likely warm by some 2.7 to
3.5 degrees Celsius—risking planetary catastrophe. And cutting emis-
sions much more is a political nonstarter, especially in developing
od
countries such as India, where policymakers must choose between

powering economic growth and phasing out dirty fossil fuels. As long
as this tradeoff persists, diplomats will come to climate conferences
with their hands tied.
so
It was only on the sidelines of the summit, in fact, that Paris delivered
good news on the technology front. Bill Gates unveiled the Break-
through Energy Coalition, a group of more than two dozen wealthy
sponsors that plan to pool investments in early stage clean energy
Ma
technology companies. And U.S. President Barack Obama announced

Mission Innovation, an agreement among 20 countries—including
the world’s top three emitters, China, the United States, and India—
VARUN SIVARAM is Douglas Dillon Fellow at the Council on Foreign Relations.

TERYN NORRIS is a former Special Adviser at the U.S. Department of Energy.
May/June 2016 147

to double public funding for clean energy R & D to $20 billion annually
by 2020. Washington will make or break this pledge, since over half of
the target will come from doubling the U.S. government’s current
$6.4 billion yearly budget.
Fighting climate change successfully will certainly require sensible
government policies to level the economic playing field between clean
and dirty energy, such as putting a price on carbon dioxide emissions.
But it will also require policies that encourage investment in new clean
energy technology, which even a level playing field may not generate
m
on its own. That will take leadership from the United States, the only
country with the requisite innovative capacity. In the past, the United
States has seen investment in clean energy innovation surge forward,
hi
only to collapse afterward. To prevent this from happening again, the
government should dramatically ramp up its support for private and
public R & D at home and abroad. The task is daunting, to be sure,
ha
but so are the risks of inaction.
DON’T STOP THINKING ABOUT TOMORROW

iT
The key to a low-carbon future lies in electric power. Improvements
in that sector are important not just because electric power accounts
for the largest share of carbon dioxide emissions but also because
reaping the benefits of innovations downstream—such as electric
Al
vehicles—requires a clean electricity supply upstream. Fossil-fueled

power plants now account for nearly 70 percent of electricity globally.
But by 2050, the International Energy Agency has warned, this figure
od
must plummet to seven percent just to give the world a 50 percent

chance of limiting global warming to two degrees Celsius. More
fossil-fueled power is acceptable only if the carbon emissions can be
captured and stored underground. And zero-carbon power sources,
so
such as solar, wind, hydroelectric, and nuclear power, will need to

grow rapidly, to the point where they supply most of the world’s
electricity by the middle of the century.
The problem, however, is that the clean technologies now making
Ma
progress on the margins of the fossil-fueled world may not suffice in

a world dominated by clean energy. The costs of solar and wind power,
for example, are falling closer to those of natural gas and coal in the
United States, but this has been possible because of flexible fossil fuel
generators, which smooth out the highly variable power produced by
the sun and wind. Ramping up the supply of these intermittent sources
The Clean Energy Revolution
will oversupply the electrical grid at certain times, making renewable

power less valuable and requiring extreme swings in the dwindling
output of fossil fuel generators. Nuclear and hydroelectric power, for
their part, are more reliable, but both have run into stiff environ-
mental opposition. As a result, trying to create a zero-carbon power
grid with only existing technologies would be expensive, compli-
cated, and unpopular.
Similarly, cleaning up the transportation sector will require great
technological leaps forward. Alternative fuels are barely competitive
m
when oil prices are high, and in the coming decades, if climate policies
succeed in reducing the demand for oil, its price will fall, making it
even harder for alternative fuels to compete. The recent plunge in oil
hi
prices may offer a mere foretaste of problems to come: it has already
put biofuel companies out of business and lured consumers away from
electric vehicles. ha
All of this means that a clean, affordable, and reliable global energy
system will require a diverse portfolio of low-carbon technologies supe-
rior to existing options. Nuclear, coal,
iT
and natural-gas generators will still be
necessary to supply predictable power.
Trying to create a zero-
But new reactor designs could make carbon power grid with
nuclear meltdowns physically impossi- only existing technologies
Al
ble, and nanoengineered membranes would be expensive,

could block carbon emissions in fossil-
fueled power plants. Solar coatings as complicated, and unpopular.
od
cheap as wallpaper could enable build-

ings to generate more power than they consume. And advanced storage
technologies—from energy-dense batteries to catalysts that harness sun-
light to split water and create hydrogen fuel—could stabilize grids and
so
power vehicles. The wish list goes on: new ways to tap previously inac-
cessible reservoirs of geothermal energy, biofuels that don’t compete with
food crops, and ultra-efficient equipment to heat and cool buildings.
Every one of those advances is possible, but most need a fundamen-
Ma
tal breakthrough in the lab or a first-of-its-kind demonstration project

in the field. For example, the quest for the ideal catalyst to use sunlight
to split water still hasn’t produced a winning chemical, and an efficient
solar power coating called “perovskite” still isn’t ready for widespread
use. So it is alarming that from 2007 to 2014, even as global financial
flows to deploy mature clean energy doubled to $288 billion, private
May/June 2016 149

m
hi
ha
iT
Al
od
investment in early stage companies sank by nearly 50 percent, to less

than $2.6 billion. But the United States can reverse that trend.
so
THIRD TIME’S THE CHARM?

Since the development of civilian nuclear power after World War II,
the United States has experienced two booms in clean energy innova-
Ma
tion, followed by two busts. The first boom, a response to the oil shocks
of the 1970s, was driven by public investment. From 1973 to 1980, the
federal government quadrupled investment in energy R & D, funding
major improvements in both renewable and fossil fuel energy sources.
But when the price of oil collapsed in the 1980s, the administration
of President Ronald Reagan urged Congress to leave energy investment
decisions to market forces. Congress

acquiesced, slashing energy R & D
funding by more than 50 percent over
Reagan’s two terms.
The second wave of investment in
clean energy innovation began with
the private sector. Soon after the turn
of the millennium, venture capital
investors began pumping money into
m
U.S. clean energy start-ups. Venture
capital investment in the sector grew
tenfold, from roughly $460 million per
hi
year in 2001 to over $5 billion by 2010.
Thanks to Obama’s stimulus package,
ha federal funding soon followed, and
from 2009 to 2011, the government
plowed over $100 billion into the sec-
tor through a mix of grants, loans, and
iT
tax incentives (although most of this
influx subsidized the deployment of
existing technologies). Some of the
start-ups from this period became
Al
successful publicly traded companies,

including the electric-car maker Tesla,
the solar-panel installer SolarCity,
od
and the software provider Opower.

But the vast majority failed, and the
surviving ones returned too little to make up for the losses. Indeed, of
the $36 billion that venture capital firms invested from 2004 to 2014,
so
up to half may ultimately be lost. The gold rush ended abruptly: from
2010 to 2014, venture capital firms cut their clean energy investment
portfolios by 75 percent. And the federal government, reeling from
political blowback over the bankruptcies of some recipients of federal
Ma
loan guarantees (most famously, the solar-panel manufacturer Solyndra),

pared back its support for risky ventures, too.
Yet all was not lost, for the failures of these two waves offer lessons
for how to make sure the next one proves more enduring. First, they
revealed just how important government funding is: after the drop in
federal energy R & D in the 1980s, patent filings involving solar, wind,
May/June 2016 151

and nuclear power plunged. Today, although the United States is the
largest funder of energy R & D in the world, it chronically underspends
compared with its investments in other national research priorities.
Its $6.4 billion clean energy R & D budget is just a fraction of the
amount spent on space exploration ($13 billion), medicine ($31 billion),
and defense ($78 billion). Given the gap, Congress should follow
through on the Mission Innovation pledge and at least double funding
for clean energy R & D. Already, Congress increased spending on
applied energy R & D by ten percent in its 2016 budget, more than it
m
increased spending on any other major R & D agency or program. But
starting in 2017, doubling the budget in five years will require annual
increases of at least 15 percent.
hi
The second lesson is that the government should fund not only basic
research but applied research and demonstration projects, too. Washing-
ton’s bias goes back decades. In his seminal 1945 report, Science, the End-
ha
less Frontier, Vannevar Bush, President Franklin Roosevelt’s top science
adviser, urged the government to focus on basic research, which would
generate insights that the private sector was supposed to translate into
iT
commercial technologies. Successive administrations mostly heeded his
advice, and Reagan doubled down on it, slashing nearly all funding for
applied energy R & D. By the late 1990s, basic research would account
for 60 percent of all federal spending on energy R & D. Instead of creat-
Al
ing space for the private sector to pick up where the government left off,
however, the budget cuts scared it away. Private investment shrank by
half from 1985 to 1995, stranding public investments in alternative fuels,
od
solar photovoltaic panels, and advanced nuclear reactors.

A similar story unfolded at the end of the second boom in clean
energy innovation. When one-time stimulus funding expired after 2011,
public funding for demonstration projects—which prove whether new
so
technologies work in real-world conditions—fell by over 90 percent.

Private investors had expected to share the risk of such projects with
the federal government, but when government funding evaporated,
investors pulled their money out—canceling, among others, several proj-
Ma
ects to capture and store carbon emissions from coal power plants.
Thus, policymakers should increase the kind of public investment
that attracts private capital. To that end, the first priority should be to
restore public funding for demonstration projects. The last redoubt of
support for these projects can be found in the Department of Energy’s
politically embattled loan guarantee program. To insulate funding
from political caprice, the American Energy Innovation Council, a

group of business leaders, has proposed an independent, federally
chartered corporation that would finance demonstration projects.
Others have proposed empowering states or regions to fund their own
projects, with matching federal grants. If they make it past Congress,
both proposals could unlock considerable private investment.
The Department of Energy has made more progress in supporting
technologies not yet mature enough for demonstration. In 2009, with
inspiration from the Defense Advanced Research Projects Agency, or
m
DARPA, the U.S. military’s incubator for high-risk technologies, it
created the Advanced Research Projects Agency–Energy, or ARPA-E.
Several ARPA-E projects have already attracted follow-on investment
hi
from the private sector. In 2013, for example, Google acquired Makani
Power, a start-up that is developing a kite that converts high-altitude
wind energy into power. The department has also curated public-private
ha
partnerships among the government, academics, and companies—dubbed
“innovation hubs”—to develop advanced technologies. Obama has
advocated tripling ARPA-E’s budget to $1 billion by 2021 and creating
iT
ten new public-private research centers around the country. Congress
should approve these proposals.
The Department of Energy should expand its support for one type
of public-private partnership in particular: industrial consortia that
Al
pool resources to pursue shared research priorities. Once again, DARPA

provides a model. In the 1980s, it helped fund a consortium of
computer chip manufacturers called SEMATECH, through which the
od
industry invested in shared R & D and technical standards. By the

next decade, the United States had regained market leadership from
Japan. Clean energy innovation, by contrast, suffers from corporate
apathy. From 2006 to 2014, U.S. firms spent a paltry $3 billion per
so
year on in-house clean energy R & D. They were also reluctant to

outsource their energy R & D, acquiring clean energy start-ups only
half as often as they did biomedical start-ups.
Public-private partnerships should help diversify the set of private
Ma
investors funding clean energy innovation. Indeed, venture capitalists

alone are insufficient, since clean energy investments require capital
for periods longer than venture capitalists generally favor. The Break-
through Energy Coalition may help solve that problem by infusing
the sector with more patient capital. Gates has explained that he and
his fellow investors would be willing to wait for years, even decades,
May/June 2016 153

for returns on their investments. But his vision depends on the gov-
ernment also ramping up support.
Past failures offer a third and final lesson for policymakers: the
need to level the playing field on which emerging clean energy tech-
nologies compete against existing ones. In the electricity sector in
particular, innovative start-ups are at a disadvantage, since they lack
early adopters willing to pay a premium for new products. The big-
gest customers, electric utilities, tend to be highly regulated territorial
monopolies that have little tolerance for risk and spend extremely
m
little on R & D (usually 0.1 percent of total revenues). New York and
California are reforming their regulations to encourage utilities to
adopt new technologies faster; the federal government should support
hi
these efforts financially or, at the very least, get out of the way.
Indeed, government intervention can sometimes be counterproduc-
tive. Many current clean energy policies, such as state mandates for
ha
utilities to obtain a certain percentage of their power from renewable
energy and federal tax credits for solar and wind power installations,
implicitly support already-mature technologies. Better policies might
iT
carve out allotments or offer prizes for emerging technologies that cost
more now but could deliver lower costs and higher performance later.
The government could even become a customer itself. The military,
for example, might buy early stage technologies such as flexible solar
Al
panels, energy-dense batteries, or small modular nuclear reactors.
INNOVATING ABROAD
od
Clean energy innovation at the international level suffers from similar

problems. Like Washington, other governments spend too little on
R & D, with the share of all publicly funded R & D in clean energy
falling from 11 percent in the early 1980s to four percent in 2015. Thanks
so
to Mission Innovation, that trend could soon be reversed. But if

spending rises in an uncoordinated way, governments may duplicate
some areas of research and omit others.
Since governments prize their autonomy, the wrong way to solve this
Ma
problem would be through a centralized, top-down process to direct

each country’s research priorities. Instead, an existing institution should
coordinate spending through a bottom-up approach. The most logical
body for that task is the Clean Energy Ministerial, a global forum
conceived by the Obama administration that brings together energy
officials from nearly every Mission Innovation country. Yet the CEM
has no permanent staff, and without support from the next U.S. admin-
istration, it might disband. The Obama administration should there-
fore act quickly to convince its Mission Innovation partners to help
fund a permanent secretariat and operating budget for the CEM. Once
that happens, the body could issue an annual report of each member’s
R & D expenditures, which countries could use to hold their peers
accountable for their pledges to double funding. The CEM could also
convene officials to share trends about the frontiers of applied research,
gleaned from grant applications submitted to national funding bodies.
m
Then there is the problem of foreign companies’ aversion to invest-
ing in innovation. Producers of everything from solar panels to bat-
teries, mostly in Asia, have focused instead on ruthless cost cutting
hi
and in many cases have taken advantage of government assistance to
build up massive manufacturing capacity to churn out well-understood
technologies. Today, over two-thirds of solar panels are produced in
ha
China, where most firms spend less than one percent of their revenue
on R & D. (In fact, it was largely the influx of cheap, cookie-cutter
solar panels from China that caused U.S. solar start-ups to go bankrupt
iT
at the beginning of this decade.)
Not only does this global race to the bottom stunt clean energy
innovation; it also matches up poorly with the United States’ competi-
tive strengths. In other industries, leading U.S. firms generate economic
Al
gains both at home and abroad by investing heavily in R & D. In the

electronics, semiconductor, and biomedical industries, for instance,
U.S. companies reinvest up to 20 percent of their revenues in R & D.
od
To encourage foreign companies to invest more in clean energy R & D,

the United States should embrace public-private collaboration. A good
model is the U.S.-China Clean Energy Research Center, or CERC,
which was set up in 2009 and is funded by the U.S. and Chinese gov-
so
ernments, academic institutions, and private corporations. Notably,

CERC removes a major obstacle to international collaboration: intellec-
tual property theft. Participants are bound by clear rules about the
ownership and licensing of technologies invented through CERC. And
Ma
unless they agree otherwise, they must submit disputes to international

arbitration governed by UN rules. More than 100 firms have signed on,
and in 2014, China and the United States enthusiastically extended the
partnership. It’s time for the United States to apply CERC’s intellectual
property framework to collaborations with other countries, such as
India, with which it has no such agreement.
May/June 2016 155

THE NEXT REVOLUTION

By investing at home and leading a technology push abroad, the
United States would give clean energy innovation a badly needed
boost. Energy executives would at last rub elbows with top academics
at technology conferences. Industrial consortia would offer road maps
for dramatic technological improvements that forecast future break-
throughs. And institutional investors would bet on start-ups and agree
to wait a decade or more before seeing a return.
To many in Washington, this sounds like an expensive fantasy.
m
And indeed, transforming the energy sector into an innovative power-
house would prove even harder and costlier than the Manhattan
Project or the Apollo mission. In both cases, the government spent
hi
billions of dollars on a specific goal, whereas success in clean energy
innovation requires both public and private investment in a wide
range of technologies. ha
Yet the United States has achieved similar transformations before.
Take the biomedical industry. Like clean energy start-ups, biomedical
start-ups endured boom-and-bust investment cycles in the 1980s and
iT
1990s. But today, partly thanks to high and sustained public funding,
the private sector invests extensively in biomedical innovation. One
might object that the biomedical industry’s high profit margins, in
contrast to the slim ones that characterize the clean energy industry,
Al
allow it to invest more in R & D. But the clean energy sector need not
be condemned to permanently small profits: innovative firms could
earn higher margins than today’s commodity producers by developing
od
new products that serve unmet demands.

With clean energy, the stakes could hardly be higher. If the world
is to avoid climate calamity, it needs to reduce its carbon emissions by
80 percent by the middle of this century—a target that is simply out
so
of reach with existing technology. But armed with a more potent

low-carbon arsenal, countries could make pledges to cut emissions
that were both ambitious and realistic. Emerging economies would no
longer face tradeoffs between curbing noxious fossil fuels and lifting
Ma
their populations out of energy poverty. And the United States would
place itself at the forefront of the next technological revolution.∂
ESSAYS
Not since the Mongol
invasions of the thirteenth
century has the Middle
East seen so much chaos.
m
—Kenneth Pollack
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ha
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Al
od
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Fight or Flight The Study-Abroad Solution

Kenneth M. Pollack 62 Sanford J. Ungar 111
ISIS Goes Global Japan’s New Realism

Ma
Daniel Byman 76 Michael Auslin 125

REUTE RS / LEONHARD FO EG E R
Can China’s Companies Conquer The Next Front on Climate Change

the World? Veerabhadran Ramanathan, Jessica
Pankaj Ghemawat and Thomas Hout 86 Seddon, and David G. Victor 135
The Lost Art of Economic Statecraft

Robert D. Blackwill and Jennifer M.
Harris 99
Fight or Flight
America’s Choice in the Middle East
Kenneth M. Pollack
m
T
he modern Middle East has rarely been tranquil, but it has
never been this bad. Full-blown civil wars rage in Iraq, Libya,
hi
Syria, and Yemen. Nascent conflicts simmer in Egypt, South
Sudan, and Turkey. Various forms of spillover from these civil wars
threaten the stability of Algeria, Jordan, Lebanon, Saudi Arabia, and
ha
Tunisia. Tensions between Iran and Saudi Arabia have risen to new
heights, raising the specter of a regionwide religious war. Israel and
the Palestinians have experienced a resurgence of low-level violence.
iT
Kuwait, Morocco, Oman, Qatar, and the United Arab Emirates have
weathered the storm so far, but even they are terrified of what is going
on around them. Not since the Mongol invasions of the thirteenth
century has the Middle East seen so much chaos.
Al
Moreover, it is unlikely to abate anytime soon. No matter how

many times Americans insist that the people of the Middle East will
come to their senses and resolve their differences if left to their own
od
devices, they never do. Absent external involvement, the region’s lead-
ers consistently opt for strategies that exacerbate conflict and feed
perpetual instability. Civil wars are particularly stubborn problems,
and without decisive outside intervention, they usually last decades.
so
The Congolese civil war is entering its 22nd year, the Peruvian its
36th, and the Afghan its 37th. There is no reason to expect the Middle
East’s conflicts to burn out on their own either.
As a consequence, the next U.S. president is going to face a choice in
Ma
the Middle East: do much more to stabilize it, or disengage from it much
more. But given how tempestuous the region has become, both options—
stepping up and stepping back—will cost the United States far more
than is typically imagined. Stabilizing the region would almost certainly
KENNETH M. POLLACK is a Senior Fellow at the Brookings Institution.

m
hi
ha
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Al
od
so
require more resources, energy, attention, and political capital than most
advocates of a forward-leaning U.S. posture recognize. Similarly, giving
up more control and abandoning more commitments in the region would
require accepting much greater risks than most in this camp acknowl-
Ma
edge. The costs of stepping up are more manageable than the risks of
stepping back, but either option would be better than muddling through.
MAN, THE STATE, AND CIVIL WAR

Grasping the real choices that the United States faces in the Middle
East requires an honest understanding of what is going on there.
March/April 2016 63

Kenneth M. Pollack
Although it is fashionable to blame the region’s travails on ancient

hatreds or the poor cartography of Mr. Sykes and Monsieur Picot, the
real problems began with the modern Arab state system. After World
War II, the Arab states came into their own. Most shed their Euro-
pean colonial masters, and all adopted more modern political systems,
whether secular republics (read: dictatorships) or new monarchies.
None of these states worked very well. For one thing, their economies
depended heavily on oil, either directly, by pumping it themselves,
or indirectly, via trade, aid, and worker remittances. These rentier
m
economies produced too few jobs and too much wealth that their
civilian populations neither controlled
The Middle East’s travails nor generated, encouraging the ruling
hi
elites to treat their citizenries as (mostly
began with the modern unwanted) dependents. The oil money
Arab state system. habred massive corruption, along with
bloated public sectors uninterested in
the needs or aspirations of the wider populace. To make matters worse,
the Arab states had emerged from Ottoman and European colonialism
iT
with their traditional sociocultural systems intact, which oil wealth
and autocracy made it possible to preserve and even indulge.
This model clunked along for several decades, before it started
falling apart in the late twentieth century. The oil market became
Al
more volatile, with long periods of low prices, which created economic
hardship even in oil-rich states such as Algeria, Iraq, and Saudi
Arabia. Globalization brought to the region new ideas about the rela-
od
tionship between government and the governed, as well as foreign

cultural influences. Arabs (and Iranians, for that matter) increasingly
demanded that their governments help fix their problems. But all they
got in response was malign neglect.
so
By the 1990s, popular discontent had risen throughout the Middle

East. The Muslim Brotherhood and its many franchises grew quickly
as a political opposition to the regimes. Others turned to violence—
rioters in the Nejd region of Saudi Arabia, Islamist insurgents in
Ma
Egypt, and various terrorist groups elsewhere—all seeking to over-

throw their governments. Eventually, some of these groups would
decide that they first had to drive away the foreign backers of those
governments, starting with the United States.
The pent-up frustrations and desire for political change finally
exploded in the Arab Spring of 2011, with large-scale protests breaking

Fight or Flight
out in nearly all Arab countries and the toppling or crippling of the
regime in five of them. But revolutions are always tricky things to get
right. That has proved especially true in the Arab world, where the
autocrats in each country had done a superb job of eliminating any
charismatic opposition leader who might have unified the country after
the fall of the regime and where there were no popular alternative
ideas about how to organize a new Arab state. And so in Libya, Syria,
and Yemen, the result has been state failure, a security vacuum, and
civil war.
m
If the first-order problem of the Middle East is the failure of the
postwar Arab state system, the outbreak of civil wars has become an
equally important second-order problem. These conflicts have taken
hi
on lives of their own, becoming engines of instability that now pose
the greatest immediate threat to both the people of the region and the
rest of the world. ha
For one thing, civil wars have a bad habit of spilling over into their
neighbors. Vast numbers of refugees cross borders, as do smaller, but
no less problematic, numbers of terrorists and other armed combatants.
iT
So do ideas promoting militancy, revolution, and secession. In this
way, neighboring states can themselves succumb to instability or even
internal conflict. Indeed, scholars have found that the strongest pre-
dictor that a state will experience a civil war is whether it borders a
Al
country already embroiled in one.

Civil wars also have a bad habit of sucking in neighboring coun-
tries. Seeking to protect their interests and prevent spillover, states
od
typically choose particular combatants to back. But that brings them

into conflict with other neighboring states that have picked their own
favorites. Even if this competition remains a proxy fight, it can still be
economically and politically draining, even ruinous. At worst, the
so
conflict can lead to a regional war, when a state, convinced its proxy is
not doing the job, sends in its own armed forces. For evidence of this
dynamic, one need look no further than the Saudi-led intervention in
Yemen, or Iranian and Russian military operations in Iraq and Syria.
Ma
WITHDRAWAL SYMPTOMS
As if the failure of the postwar Arab state system and the outbreak of
four civil wars weren’t bad enough, in the midst of all of this, the
United States has distanced itself from the region. The Middle East
has not been without a great-power overseer of one kind or another
March/April 2016 65

Kenneth M. Pollack
since the Ottoman conquests of the sixteenth century. This is not to

suggest that the external hegemon was always an unalloyed good;
it wasn’t. But it often played the constructive role of mitigating con-
flict. Good or bad, the states of the region have grown accustomed to
interacting with one another with a dominating third party in the
room, figuratively and often literally.
Disengagement has been most damaging in Iraq. The U.S. with-
drawal from the country was the most important of a range of factors
that pulled it back into civil war. Scholars have long recognized that
m
shepherding a nation out of a civil war requires some internal or exter-
nal peacekeeper to guarantee the terms of a new power-sharing arrange-
ment among the warring parties. Over time, that role can become
hi
increasingly symbolic, as was the case with nato in Bosnia. The alli-
ance’s presence there dwindled to a militarily insignificant force within
about five years, but it still played a crucial political and psychological
ha
role in reassuring the rival factions that none of them would return to
violence. In the case of Iraq, the United States played that role, and its
disengagement in 2010 and 2011 led to exactly what history predicted.
iT
This phenomenon has played out more broadly across the Middle
East. The withdrawal of the United States has forced governments
there to interact in a novel way, without the hope that Washington
will provide a cooperative path out of the security dilemmas that litter
Al
the region. U.S. disengagement has made many states fear that others
will become more aggressive without the United States to restrain
them. That fear has caused them to act more aggressively themselves,
od
which in turn has sparked more severe countermoves, again in the

expectation that the United States will not check either the original
move or the riposte. This dynamic has grown most acute between Iran
and Saudi Arabia, whose tit-for-tat exchange is growing ever more
so
vituperative and violent. The Saudis have taken the stunning step of
directly intervening in Yemen’s civil war against the country’s Houthi
minority, which they consider to be an Iranian proxy that threatens
their southern flank.
Ma
Even as the Middle East careens out of control, help is not on the
way. The Obama administration’s policies toward the region are not
designed to mitigate, let alone end, its real problems. That is why the
region has gotten worse since President Barack Obama entered office,
and why there is no reason to believe that it will get any better before
he leaves office.

Fight or Flight
In his 2009 speech in Cairo, Obama did claim that the United
States would try to help the region shift to a new Arab state system,
but he never backed his speech up with an actual policy, let alone
resources. Then, in 2011, the administration failed to put in place a
coherent strategy to deal with the Arab Spring, one that might have
assisted a transition to more stable, pluralistic systems of government.
Having missed its best opportunities, Washington now barely pays lip
service to the need for gradual, long-term reform.
As for the civil wars, the administration has focused on addressing
m
only their symptoms—trying to contain the spillover—by attacking the
Islamic State, or isis; accepting some refugees; and working to prevent
terrorist attacks back home. But the history of civil wars demonstrates
hi
that it is extremely hard to contain the
spillover, and the Middle East today is
proving no exception. Spillover from
Even as the Middle East
ha
Syria helped push Iraq back into civil careens out of control, help
war. In turn, spillover from the Iraqi and is not on the way.
Syrian civil wars has generated a low-
iT
level civil war in Turkey and threatens to do the same in Jordan and
Lebanon. Spillover from Libya is destabilizing Egypt, Mali, and Tuni-
sia. The Iraqi, Syrian, and Yemeni civil wars have sucked Iran and the
Gulf states into a vicious proxy war fought across all three battlefields.
Al
And refugees, terrorists, and radicalization spilling over from all these
wars have created new dilemmas for Europe and North America.
In fact, it is effectively impossible to eradicate the symptoms of civil
od
wars without treating the underlying maladies. No matter how many

thousands of refugees the West accepts, as long as the civil wars grind
on, millions more will flee. And no matter how many terrorists the
United States kills, without an end to the civil wars, more young men
so
will keep turning to terrorism. Over the past 15 years, the threat from
Salafi jihadism has grown by orders of magnitude despite the damage
that the United States has inflicted on al Qaeda’s core in Afghanistan.
In places racked by civil war, the group’s offshoots, including isis, are
Ma
finding new recruits, new sanctuaries, and new fields of jihad. But where
order prevails, they dissipate. Neither al Qaeda nor isis has found much
purchase in any of the remaining strong states of the region. And when
the United States brought stability to Iraq beginning in 2007, al Qaeda’s
franchise there was pushed to the brink of extinction, only to find
salvation in 2011, when civil war broke out next door in Syria.
March/April 2016 67

Kenneth M. Pollack
Contrary to the conventional wisdom, moreover, it is possible for a

third party to settle a civil war long before it might end on its own.
Scholars of civil wars have found that in about 20 percent of the cases
since 1945, and roughly 40 percent of the cases since 1995, an external
actor was able to engineer just such an outcome. Doing so is not easy,
of course, but it need not be as ruinously expensive as the United
States’ painful experience in Iraq.
Ending a civil war requires the intervening power to accomplish
three objectives. First, it must change the military dynamics such that
m
none of the warring parties believes that it can win a military victory
and none fears that its fighters will be slaughtered once they lay down
their arms. Second, it must forge a power-sharing agreement among
hi
the various groups so that they all have an equitable stake in a new
government. And third, it must put in place institutions that reassure
all the parties that the first two conditions will endure. To some
ha
extent unknowingly, that is precisely the path nato followed in
Bosnia in 1994–95 and the United States followed in Iraq in 2007–10.
History also shows that when outside powers stray from this
iT
approach or commit inadequate resources to it, their interventions
inevitably fail and typically make the conflicts bloodier, longer,
and less contained. No wonder U.S. policy toward Iraq and Syria
(let alone Libya and Yemen) has failed since 2011. And as long as the
Al
United States continues to avoid pursuing the one approach that can
work, there is no reason to expect anything else. At most, the U.S.
military’s current campaign against isis in Iraq and Syria will engineer
od
the same outcome as its earlier one against al Qaeda in Afghanistan:

the United States may badly damage isis, but unless it ends the con-
flicts that sustain it, the group will morph and spread and eventually
be succeeded by the son of isis, just as isis is the son of al Qaeda.
so
STEPPING UP
Stabilizing the Middle East will require a new approach—one that
attacks the root causes of the region’s troubles and is backed up by
Ma
adequate resources. The first priority should be to shut down the

current civil wars. In every case, that will require first changing the
battlefield dynamics to convince all the warring factions that military
victory is impossible. In an ideal world, that would entail sending
at least small numbers of U.S. combat forces to Iraq (perhaps
10,000) and potentially Syria. But if the political will for even a

Fight or Flight
modest commitment of forces does not exist, then more advisers,

airpower, intelligence sharing, and logistical support could suffice,
albeit with a lower likelihood of success.
Regardless, the United States and its allies will also have to build
new indigenous militaries able to first defeat the terrorists, militias,
and extremists and then serve as the foundation for a new state. In
Iraq, that means retraining and reforming the Iraqi security forces to
a much greater degree than current U.S. policy envisions. In Libya,
Syria, and Yemen, it would mean creating new indigenous, conven-
m
tional militaries that (with considerable American support) would be
able to defeat any potential rival, secure the civilian populaces, and
enforce the terms of permanent cease-fires.
hi
In all four civil wars, the United States and its allies will also have
to undertake major political efforts aimed at forging equitable power-
sharing arrangements. In Iraq, the United States should take the lead in
ha
defining both the minimal needs and the potential areas of agreement
among the various Shiite and Sunni factions, just as Ryan Crocker,
the U.S. ambassador to Iraq in 2007–9, and his team accomplished as
iT
part of the U.S. surge strategy. That, plus giving material resources to
various moderate Iraqi political leaders and their constituencies
among both the Shiites and the Sunnis, should allow the United States
to hammer out a new power-sharing deal. Such an arrangement should
Al
end the alienation of the Sunni population, which lies at the heart of
Iraq’s current problems. This, in turn, would make it much easier for
the Abadi government and the United States to stand up Sunni military
od
formations to help liberate the Sunni-majority areas of the country from

isis and help diminish the power of the Iranian-backed Shiite militias.
In Syria, the ongoing peace talks in Vienna provide a starting point
for a political solution. But they offer little more than that, because
so
the military conditions are not conducive to a real political compro-

mise, let alone a permanent cessation of hostilities. Neither the Assad
regime nor the Western-backed opposition believes that it can afford
to stop fighting, and each of the three strongest rebel groups—Ahrar
Ma
al-Sham, Jabhat al-Nusra, and isis—remains convinced that it can

achieve total victory. So until the reality on the battlefield shifts, little
can be achieved at the negotiating table. If the military situation
changes, then Western diplomats should help Syria’s communities
fashion an arrangement that distributes political power and economic
benefits equitably. The deal would have to include the Alawites, but
March/April 2016 69

Kenneth M. Pollack
not necessarily President Bashar al-Assad himself, and it would need to

assure each faction that the new government would not oppress it, the
way the Alawite minority oppressed the Sunni majority in the past.
The turmoil in Libya mirrors that in Syria, except that it is receiving
far less international attention. Thus, the first step there is for the
United States to convince its partners to take on a more constructive
role. If the United States should lead
If the next U.S. president is in Iraq and Syria, then Europe needs to
lead in Libya. By dint of its economic ties
m
unwilling to commit to and proximity to Europe, Libya threatens
stepping up to stabilize the European interests far more directly
Middle East, the only real than it does American ones, and nato’s
hi
role in the 2011 intervention in Libya
alternative is to step back. can serve as a precedent for European
ha leadership. Of course, the Europeans
will not take on the challenge if they are not convinced that the United
States intends to do its part to quell the Middle East’s civil wars,
further underscoring the importance of a coherent, properly resourced
iT
U.S. strategy. To aid Europe’s fight in Libya, Washington will
undoubtedly have to commit assistance related to logistics, command
and control, and intelligence, and possibly even combat advisers.
In Yemen, the Gulf states’ air campaign has achieved little, but the
Al
intervention by a small ground force led by the United Arab Emirates

has set back the rebel coalition, creating a real opportunity to negotiate
an end to the conflict. Unfortunately, the Gulf states seem unwilling
od
to offer Yemen’s opposition terms that would equitably divide political

power and economic benefits, and they seem equally unwilling to
offer security guarantees. To draw the conflict to a close, the United
States and its allies will have to encourage their partners in the Gulf
so
to make meaningful concessions. If that doesn’t work, then the most

useful thing they can do is try to convince the Gulf states to minimize
their involvement in Yemen before the strain of intervention threatens
their own internal cohesion.
Ma
After ending the current civil wars, the next priority of a stepped-
up U.S. strategy in the Middle East will be to shore up the states in
the greatest danger of sliding into future civil wars: Egypt, Jordan,
Tunisia, and Turkey. It is state failure—not external attack by isis,
al Qaeda, or Iranian proxies—that represents the true source of the
conflicts roiling the Middle East today. These four at-risk countries

Fight or Flight
are all badly in need of economic assistance and infrastructure devel-

opment. But above all, they need political reform to avoid state failure.
Consequently, the United States and its allies should offer a range of
trade benefits, financial incentives, and economic aid in return for
gradual but concrete steps toward political reform. Here, the aim need
not be democratization per se (although Tunisia should be strongly
encouraged to continue down that path), but it should be good gover-
nance, in the form of justice and the rule of law, transparency, and a
fair distribution of public goods and services.
m
The final piece of the puzzle is to press for reform more broadly
across the Middle East—economic, social, and political. Even if the
United States and its allies succeed in resolving today’s civil wars, un-
hi
less a new state system takes the place of the failed postwar one, the
same old problems will recur. Reform will be a hard sell for the
region’s leaders, who have long resisted it out of a fear that it would
ha
strip them of their power and positions. Paradoxically, however, the
civil wars may furnish a solution to this conundrum. All the states of
the region are terrified of the spillover from these conflicts, and they
iT
are desperate for U.S. help in eliminating the threat. In particular,
many of the United States’ Arab allies have grown frustrated by the
gains that Iran has made by exploiting power vacuums. Just as the
United States and its allies should offer the region’s fragile states eco-
Al
nomic assistance in return for reform, so they should condition their

efforts to end the civil wars on the willingness of the region’s stronger
states to embrace similar reforms.
od
STEPPING BACK
If the next U.S. president is unwilling to commit to stepping up to
stabilize the Middle East, the only real alternative is to step back from
so
it. Because civil wars do not lend themselves to anything but the right
strategy with the right resources, trying the wrong one means throwing
U.S. resources away on a lost cause. It probably also means making
the situation worse, not better. Under a policy of real disengagement,
Ma
the United States would abstain from involvement in the civil wars
altogether. It would instead try to contain their spillover, difficult as
that is, and if that were to fail, it would fall back on defending only
core U.S. interests in the Middle East.
The Obama administration has done a creditable job of bolstering
Jordan against chaos from Iraq and Syria so far, and stepping back
March/April 2016 71

Kenneth M. Pollack
from the region could still entail beefing up U.S. support to Jordan
and other at-risk neighbors of the civil wars, such as Egypt, Lebanon,
Tunisia, and Turkey. All these countries want and need Western eco-
nomic, diplomatic, technical, and military assistance. But because
spillover has historically proved so difficult to contain, there is a high
risk that one or more of them could still slide into civil war them-
selves, generating yet more spillover.
For that reason, stepping back would also require Washington to
make a ruthless assessment of what is the least the United States can
m
do to secure its vital interests in the Middle East. And although it
may be a gross exaggeration to say so, in large part, U.S. interests in
the region do ultimately come down to Israel, terrorism, and oil.
hi
As poll after poll has found, a majority of Americans continue to
see the safety of Israel as important to them and to the United States.
Yet Israel today is as safe as the United States can make it. Israeli forces
ha
can defeat any conventional foe and deter any deterrable unconven-
tional threat. The United States has defended Israel diplomatically
and militarily countless times, including implicitly threatening the
iT
Soviet Union with nuclear war during the 1973 Yom Kippur War. The
United States has even taken an Iranian nuclear threat off the table for
at least the next decade, thanks to the deal it brokered last year. The
only threat the United States cannot save Israel from is its own chronic
Al
civil war with the Palestinians, but the best solution to that conflict is
a peace settlement that neither the Israelis nor the Palestinians have
demonstrated much interest in. In short, there is little more that
od
Israel needs from the United States for its own direct security, and
what it does need (such as arms sales) the United States could easily
provide even if it stepped back from the Middle East.
Perhaps the greatest advantage of a reduced U.S. presence in the Mid-
so
dle East is that it should mitigate the threat from terrorism. Terrorists
from the region attack Americans largely because they feel aggrieved by
U.S. policies, just as they attack France and the United Kingdom because
those countries are staunch U.S. allies (and former colonial powers) and
Ma
have started to attack Russia because it has intervened in Syria. The less
the United States is involved in the Middle East, the less its people are
likely to be attacked by terrorists from the region. It is no accident that
Switzerland does not suffer from Middle Eastern terrorism.
Of course, even if Washington disengaged from the region as much
as possible, Americans would not be entirely immune from Middle

Fight or Flight
Eastern terrorism. The region’s conspiracy-mongers endlessly blame

the United States for things it didn’t do, as well as for what it did, and
so terrorists could still find reasons to target Americans. Besides, even
under this minimalist approach, the United States would maintain its
support for Israel and Saudi Arabia, both of which a range of terrorist
groups detest.
If U.S. interests concerning Israel and terrorism would largely take
care of themselves in the event that Washington further diminished
its role in the Middle East, the same cannot be said for the flow of oil.
m
The idea that fracking has granted the United States energy indepen-
dence is a myth; as long as the global economy relies on fossil fuels,
the United States will be vulnerable to major disruptions in the
hi
supply of oil, regardless of how much it produces. Since neither global
dependence on oil nor the Middle East’s contribution to the share of
global production is expected to abate over the next 25 years, the
ha
United States will continue to have a critical interest in keeping Middle
Eastern oil flowing.
Yet the United States need not defend every last barrel of oil in
iT
the region. The question is, how much is enough? This is where
things get complicated. Many countries possess strategic reserves of
oil that can mitigate a sudden, unexpected drop in production. And
some, particularly Saudi Arabia, have enough excess capacity to
Al
pump and export more oil if need be. Fracking, likewise, allows
North American producers of shale oil to partly compensate for
shortfalls. Even though oil production in Libya has dropped by over
od
80 percent since 2011 as a result of its civil war, other producers have
been able to make up for the loss.
Saudi Arabia, however, is in a category of its own. The country
produces over ten percent of all the oil used in the world and contains
so
the vast majority of excess capacity; even if every country emptied its
strategic oil reserves and fracked like crazy, that would still not com-
pensate for the loss of Saudi oil production. Thus, the United States
will have to continue to protect its Saudi allies. But against what? No
Ma
Middle Eastern state (even Iran) has the capacity to conquer Saudi
Arabia, and the modest U.S. air and naval force currently in the
Persian Gulf is more than adequate to defeat an Iranian attack on the
country’s oil infrastructure.
The kingdom’s principal threats are internal. Although no one has ever
made money betting against the House of Saud, the monarchy rules over
March/April 2016 73

Kenneth M. Pollack
a quintessentially dysfunctional postwar Arab state, one that faces daunt-

ing political, economic, and social stresses. The Shiites who make up the
majority of Saudi Arabia’s oil-rich Eastern Province have rioted and
resisted government oppression for decades, and their unhappiness has
grown with the widening Shiite-Sunni rift across the region. The king-
dom skated through the Arab Spring primarily thanks to the far-reaching
(if gradual) reform program of King
Abdullah, coupled with massive cash
Stepping back from the payoffs to the people. But Abdullah died
m
Middle East means risking in January 2015, and his successor, King
the near-term collapse of Salman, has yet to demonstrate a similar
Egypt, Jordan, Lebanon, commitment to reform. Even as oil prices
hi
remain low, Salman is spending profli-
Tunisia, and Turkey. gately at home and abroad (including on
ha the expensive intervention in Yemen),
burning through the kingdom’s sovereign wealth fund at $12–$14 bil-
lion per month. At that rate, the fund will be empty in about four years,
but the king will probably face domestic challenges long before then.
iT
How can the United States protect Saudi Arabia from itself? It is
impossible to imagine any U.S. president deploying troops there to
suppress a popular revolution or to hold together a failing monarchy.
Moreover, the longer that civil wars burn on Saudi Arabia’s northern
Al
border, in Iraq, and southern border, in Yemen, the more likely these
conflicts will destabilize the kingdom—to say nothing of the possibility
of a Jordanian civil war. But a strategy of stepping back from the
od
region means the United States will not try to shut down the nearby
civil wars, and Washington has little leverage it can use to convince
the Saudis to reform. It would have especially little leverage if it swore
off the only thing that the Saudis truly want: greater U.S. involve-
so
ment to end the civil wars and prevent Iran from exploiting them. In
these circumstances, the United States would have virtually no ability
to save Saudi Arabia from itself if its rulers were to insist on following
a ruinous path. Yet in the context of greater U.S. disengagement, that
Ma
is the most likely course the Saudis would take.
NO EXIT
Ultimately, the greatest challenge for the United States if it steps back
from the Middle East is this: figuring out how to defend U.S. interests
when they are threatened by problems the United States is ill equipped

Fight or Flight
to solve. Because containing the spillover from civil wars is so difficult,

stepping back means risking the near-term collapse of Egypt, Jordan,
Lebanon, Tunisia, and Turkey. Although none of these countries
produces much oil itself, their instability could spread to the oil pro-
ducers, too, over the longer term. The world might be able to survive
the loss of Iranian, Iraqi, Kuwaiti, or Algerian oil production, but at a
certain point, the instability would affect Saudi Arabia. And even if it
never does, it is not clear that the world can afford to lose several
lesser oil producers, either.
m
The great benefit of a policy of stepping back is that it would
drastically reduce the burden that the United States would have to
bear to stabilize the Middle East. The great danger, however, is that
hi
it would entail enormous risks. Once the United States started writ-
ing off countries—shortening the list of those it would defend against
threats—it is unclear where it would be able to stop, and retreat could
ha
turn into rout. If Jordan or Kuwait slid into civil war, would the
United States deploy 100,000 troops to occupy and stabilize either
country to protect Saudi Arabia (and in the case of civil war in Jordan,
iT
to protect Israel)? Could the United States do so in time to prevent
the spillover from destabilizing the kingdom? If not, are there other ways
to keep the kingdom itself from falling? Given all these uncertain-
ties, the most prudent course is for Americans to steel themselves
Al
against the costs and step up to stabilize the region.

That said, what the United States should certainly not do is refuse
to choose between stepping up and stepping back and instead waffle
od
somewhere in the middle, committing enough resources to enlarge its

burden without increasing the likelihood that its moves will make
anything better. Civil wars do not lend themselves to half measures.
An outside power has to do the right thing and pay the attendant
so
costs, or else its intervention will only make the situation worse
for everyone involved, including itself. The tragedy is that given the
U.S. political system’s tendency to avoid decisive moves, the next
administration will almost inevitably opt to muddle through. Given
Ma
the extent of the chaos in the Middle East today, refusing to choose
would likely prove to be the worst choice of all.∂
March/April 2016 75

ISIS Goes Global

Fight the Islamic State by Targeting
Its Affiliates
Daniel Byman
m
T
he downing of a Russian passenger plane over Egypt’s Sinai
hi
Peninsula last October, for which the Islamic State (also
known as isis) claimed responsibility, may ultimately prove
more consequential than the horrific attacks in Paris and San Ber-
ha
nardino, California, that followed. Western security officials had long
worried that their countries’ own citizens would conduct attacks after
returning home from Iraq or Syria or strike out as “lone wolf” terror-
iT
ists. But the Russian plane crash, which killed 224 people, was caused
by a different beast: neither lone wolves nor isis itself but an isis
affiliate that had pledged its loyalty to Abu Bakr al-Baghdadi, isis’
self-declared caliph. Isis calls these groups wilayat, Arabic for
Al
“provinces.” (The term is borrowed from the seventh century, when

the armies of Islam burst out of the Arabian Peninsula and established
regional governors who ruled in the name of the caliph; isis also uses
od
wilayat to refer to administrative divisions within Iraq and Syria.) If,

as recent events suggest, isis’ far-flung provinces have begun closely
aligning their actions with those of the group’s core leadership in Iraq
and Syria, then isis’ geographic scope has expanded vastly.
so
Although alarming, such expansion is not unprecedented. After 9/11,

several of al Qaeda’s affiliates eclipsed that group’s central command in
both size and importance. One of them, al Qaeda in the Arabian Pen-
insula (aqap), has repeatedly tried to down U.S. airplanes and remains
Ma
a deadly threat today. Aqap claimed responsibility for the January 2015
Charlie Hebdo attack in Paris, and last May, Michael Morell, a former
DANIEL BYMAN is a Professor at Georgetown University’s Edmund A. Walsh School of

Foreign Service and Director of Research at the Center for Middle East Policy at the
Brookings Institution. He is the author of Al Qaeda, the Islamic State, and the Global Jihadist
Movement: What Everyone Needs to Know. Follow him on Twitter @dbyman.

ISIS Goes Global
deputy director of the cia, said that aqap retained “the ability to bring
down an airliner in the United States of America tomorrow.”
Isis itself also began as an al Qaeda franchise. Following the U.S.
invasion of Iraq in 2003, Abu Musab al-Zarqawi emerged as a leader
of jihadist forces in Iraq. In 2004, he pledged allegiance to Osama bin
Laden and changed his organization’s name from the Organization of
Monotheism and Jihad to al Qaeda in Iraq (aqi). After Zarqawi’s
death, in 2006, the group took on other names, including the Islamic
State of Iraq. When Baghdadi took over in 2010, the organization was
m
on its last legs. Local Sunnis had turned against it, undermining its
operations. When U.S. forces pulled out of the country in 2011, the
Iraqi government they left behind seemed ascendant.
hi
But Baghdadi’s group rose from the ashes, exploiting the marginal-
ization of Iraqi Sunnis and the Syrian civil war. In 2013, Baghdadi
changed his group’s name yet again, to the Islamic State of Iraq and
ha
al-Sham. In 2014, after his fighters captured the Iraqi city of Mosul,
his ambitions grew further: he declared a caliphate over the Muslim
world, shortening the group’s name to the Islamic State. Now, isis has
iT
eclipsed al Qaeda in size and strength; it has also outpaced its former
master in spawning affiliates, establishing ever-larger numbers of
franchises and supporters throughout the Muslim world.
The provinces pose a serious threat to Western interests: they en-
Al
able isis to expand its reach and make local groups more deadly in
their regional conflicts. Hotbeds of jihad that have not yet exported
terrorism to the West may do so in the future if local groups strengthen
od
their ties to isis.

Yet the United States and its allies are only just beginning to factor
the provinces into their counterterrorism strategy. In his last major
address on isis, in December, U.S. President Barack Obama focused
so
on the terrorist threat that the group’s core in Iraq and Syria posed to
the United States, without even mentioning the group’s provinces.
The Pentagon has been taking the danger more seriously and has
considered establishing additional military bases in Africa, Asia, and
Ma
the Middle East partly in response. But the United States and its allies
must go further, developing a comprehensive strategy to weaken isis’
various franchises. They should start by taking advantage of the tensions
that will probably arise between isis’ leadership in Iraq and Syria and
its more remote branches. Al Qaeda’s affiliates eventually became a
burden for its core, demanding resources, ignoring its directives, and
March/April 2016 77

Daniel Byman
tarring its name by conducting unpopular attacks. Isis will likely

encounter similar problems. To ensure that it does, the United States
should aim to disrupt communication between the main group and its
provinces and work with allies new and old to target the latter directly.
If the West is ever to defeat isis, it will have to work against the group
as a whole, not just against its most visible part.
GOING BIG
As is well known, the heart of isis lies in the Sunni-populated parts
m
of Iraq and Syria, and the organization’s core splits its headquarters
between Mosul and Raqqa. Yet isis claims to be the legitimate ruler
of all Muslims, and it operates throughout the Muslim world. It has
hi
already declared wilayat in parts of Afghanistan, Algeria, Egypt, Libya,
Nigeria, Pakistan, Saudi Arabia, Yemen, and the Caucasus. Terrorists
or fighters operating in isis’ name have also conducted attacks in
ha
Bangladesh and Kuwait.
So far, the most worrisome provinces are those in Egypt and Libya.
The Egyptian affiliate, Sinai Province, which used to call itself Ansar
iT
Beit al-Maqdis, pledged loyalty to Baghdadi in 2014. At first, this oath
seemed to mean little, and the group’s fighters continued to focus
their attacks on Egypt’s military and police. But they soon began to
raise their ambitions, going after un targets, beheading a Croatian
Al
expatriate (supposedly in revenge for Croatia’s participation in the

international anti-isis coalition), and attacking the Italian consulate
in Cairo. And then they downed the Russian airliner.
od
The Libyan province emerged from the strife that followed the
overthrow of the Libyan dictator Muammar al-Qaddafi in 2011. Qaddafi
had faced a jihadist threat for years, and as countrywide unrest turned
to outright conflict, local jihadists became more powerful. As isis
so
began to grab headlines, its brand became more compelling to local

fighters; a courtship blossomed, and Libyan fighters pledged their
loyalty to Baghdadi in 2014.
Today, the Libyan affiliate poses a particularly serious threat to
Ma
Western interests because its fighters, unlike their counterparts in Egypt,

do not face strong government opposition. The group has as many as
3,000 active members, and its fighters have beheaded Ethiopian Coptic
workers and attacked the Moroccan and South Korean embassies.
Although the group’s fighters have not yet mounted an international
attack, they hold the Mediterranean city of Sirte and adjacent towns

ISIS Goes Global
m
hi
ha
When local goes global: in Paris after the Charlie Hebdo attack, January 2015
along the Libyan coast, where they’ve created a mini-caliphate, dispens-
iT
ing brutal justice and enforcing social codes as the core organization
does in its Iraqi and Syrian heartlands.
Figuring out where exactly isis has established a formal presence and
where local fighters are merely emulating the group can be difficult. In
Al
Bangladesh, isis has claimed responsibility for bombings, stabbings,

and shootings of Shiite and Western targets, but it is unclear if these
attacks are directly linked to the core group. Nigeria’s Boko Haram has
od
endorsed and sworn loyalty to isis, but the Nigerian extremist group
has multiple commanders, and these claims have not been matched by
any significant change in operations, suggesting that the relationship
between the two groups remains more distant than it may seem.
so
In places where isis does have a more formal presence, foreign fight-
ers play an important role creating and maintaining ties between the
local group and the core. More than any other modern terrorist group,
REUTERS / GONZALO FU ENTES
isis relies on volunteers from abroad: by the end of 2015, roughly 25,000
Ma
foreigners from Arab countries and 5,000 from Western states had
fought with it in Iraq and Syria, and the ranks of outsiders keep grow-
ing. These fighters act as communication channels, bringing local
concerns to isis and Baghdadi’s vision back to their countries of origin
when they return. When the so-called Afghan Arabs, who had fought
with the mujahideen against the Soviet Union in the 1980s, returned
March/April 2016 79
Daniel Byman
home, they spread their ideology to local groups, giving al Qaeda infor-
mal networks throughout the Muslim world. Today, isis is engaged in
similar activity, but more rapidly and on a far more massive scale, even
winning over groups formerly linked to al Qaeda. Many of these groups,
particularly those in North Africa, worked frequently with isis when it
was still an al Qaeda affiliate.
Accepting the isis label often leads local groups to shift their tactics
and ideology. In addition to fighting local government forces and rival
groups as they did before, many affiliates begin making sectarian attacks
m
and targeting Westerners in the region. In a particularly brutal but
effective form of violent propaganda, they often behead their victims
and carefully choreograph and videotape the executions for broad dis-
hi
semination. When possible, as in parts of Libya, provinces also adopt an
isis-style governance structure, complete with police, courts, and taxes.
Unlike some of al Qaeda’s affiliates, they do not try to form lasting alli-
ha
ances with other rebel groups, and they tend to have little respect for
local authority figures, with tribal leaders an important exception.
So far, however, no isis province has attacked targets in the West.
iT
YOU BELONG WITH ME
Local groups are attracted to isis for many reasons. One of the most
important is the most obvious: genuine conviction. As nauseating as isis
Al
is to most Muslims, it has tapped into the beliefs of an important subset

of Sunni Muslims, particularly young men. Isis trumpets sectarianism,
portraying itself as the defender and avenger of Sunnis worldwide.
od
Moreover, the group’s slick videos and social media campaigns attract
even young Sunnis who lack real religious knowledge or conviction by
playing into their desires for adventure and a sense of purpose. As
General David Rodriguez, the commander of U.S. Africa Command,
so
has noted, groups affiliate themselves with isis “to elevate their cause.”
Of course, some groups join isis for more practical purposes, such
as access to financial or technical aid. According to The New York
Times, in Afghanistan, isis offered Taliban fighters several hundred
Ma
thousand dollars for their support to gain more territory and recruits.
Isis also helps local groups improve the quality of their propaganda:
after strengthening ties with isis in 2014, for example, Boko Haram
was able to elevate its outreach from grainy videos taken on hand-held
cameras to more polished productions distributed via Twitter. Isis
offers its provinces access to experienced fighters and has sent hun-

ISIS Goes Global
dreds of its troops to Libya (some of whom originally hailed from

there) to help its supporters. Finally, taking on the isis brand allows
local commanders to split from al Qaeda or other existing groups
without provoking a backlash from their followers. It allows aspiring
leaders to mask their power grabs with claims of doctrinal purity.
The provinces offer benefits to the core, too. Adding new affiliates
bolsters isis’ self-image by making the organization seem more pow-
erful and attractive. Shortly after pro-
claiming a caliphate in 2014, Baghdadi
If the West is to defeat ISIS,
m
declared all local jihadist groups and
emirates subservient to isis. When it will have to target the
new provinces sign up, they appear to group as a whole.
hi
fulfill that vision. They also give isis
strategic reach, allowing it to tap into fighters and networks around
the Middle East. Libya, for example, offers a base for striking nearby
ha
Egypt and Tunisia.
Charles Lister, a fellow at the Middle East Institute, has described
the provinces as part of isis’ “ink spot” strategy. The provinces
iT
themselves are mini Islamic states that will expand through prosely-
tizing and war. As the ink spots expand, the borders will meet up,
forming a larger entity. And as more and more provinces pledge
allegiance to isis, they may encourage other independent groups to
Al
do the same.
The affiliates also give the core group fallback options, creating
potential refuges for its leaders in case isis is defeated or crippled in
od
Iraq or Syria. In The New York Times, one U.S. Defense Department
official called isis’ heavy involvement in Libya “contingency planning.”
After the death of bin Laden, local al Qaeda affiliates, especially in
Yemen, offered al Qaeda a way to keep itself in the news even as the
so
core organization found itself on the run; isis’ provinces may serve a
similar function. Although isis today seems unstoppable to many
Westerners, it has lost around 40 percent of its Iraqi territory since
2014, in addition to much of its oil infrastructure and heavy forces.
Ma
One resident of Raqqa told The New York Times that isis’ popularity
has diminished because it has “lost its brilliant victories.” Although
isis has hardly been defeated, local setbacks have demoralized some of
its followers. By expanding into new territories, the group continues
to create headlines, allowing it to attract more foreign fighters to its
core organization.
March/April 2016 81

Daniel Byman
GOING TO EXTREMES
As isis grows beyond Iraq and Syria, so, too, does it spread its harsh
brand of religious intolerance. In 2015, the group’s followers attacked
Shiite mosques in Kuwait, Saudi Arabia, and Yemen; beheaded Egyp-
tian and Ethiopian Christians in Libya; and attacked security forces
and Sunni Muslims deemed insufficiently devout. Not only are such
attacks tragic in their own right; they also risk setting in motion a
cycle of retaliation, as has already happened in Yemen. Such cycles,
which lead to revenge attacks against Sunnis, only bolster the group’s
m
claim to being a defender of the faithful.
Growing sectarianism also threatens the legitimacy of the govern-
ments of Bahrain, Kuwait, Saudi Arabia, and other religiously divided
hi
countries. In Saudi Arabia, for example, the government currently
finds itself in a dilemma: if it fails to stop isis from bombing Saudi
Shiite mosques, it will embolden the extremists and show that it can-
ha
not protect its own people; yet if it cracks down on isis, it will risk
looking like the champion of the country’s unloved Shiite minority,
which could hurt its legitimacy among Sunni chauvinists.
iT
The spread of isis will also worsen the region’s refugee crisis. The group
embraces barbarism as strategy; beheadings, rape, and other grotesque acts
are not byproducts of its wars but deliberate tools to intimidate enemies
and reward supporters. In retaliation for a tribal revolt in Libya in August
Al
2015, isis fighters killed dozens of members of the tribe, crucifying several
of them in a traffic circle—a punishment familiar to anyone following the
group’s parade of horrors in Iraq and Syria. If the provinces expand, many
od
Muslims and religious minorities will flee rather than endure their rule.
From the West’s perspective, however, the bigger concern is that as isis
grows, it will develop new staging grounds and operatives to use for
international terrorist attacks. Baghdadi has called on Muslims abroad to
so
travel to Iraq and Syria or to the provinces, if they can; if they cannot, he
has said they should focus on local attacks. Gone are the days when West-
ern governments had to worry about only the foreign fighters traveling
to Iraq and Syria; increasingly, they have to worry about would-be jihadists
Ma
traveling to and from other isis bases around the region and beyond.
DOUBLE TROUBLE
Despite all the benefits provinces offer isis, they also come with their
share of trouble. For one thing, they can weaken the jihadist movement
as a whole. Many of them exist because of local rivalries: members of

ISIS Goes Global
rival groups spend their time killing one another rather than fighting
their supposed enemies. In Afghanistan, for example, the Taliban and
a renegade faction that has pledged loyalty to isis have warred for
control of Helmand Province, weakening both of them in their fight
against the Afghan government.
Just as al Qaeda did, isis may soon learn that not all affiliates are
obedient servants. When local groups, particularly strong ones, take on
the isis label, they retain their own command structure, personnel, and
parochial goals, and these often fit uneasily with those of the core
m
group. Time and again, al Qaeda found that many of its regional fran-
chises retained their traditional agendas, continuing to fight the local
fights they always had (although perhaps adding some local Western
hi
targets to the mix). Al Qaeda’s leaders
had particular difficulty controlling aqi, Just as al Qaeda did, ISIS
which they thought spent too much en-
ha
ergy killing ordinary Shiites and Sunni may soon learn that not all
imams and other leaders who opposed affiliates are obedient
the group. When aqi bombed three servants.
iT
hotels in Amman, Jordan, in 2005, kill-
ing some 60 people, roughly 200 Islamic
scholars from 50 countries condemned the group, calling the killing of
noncombatants “among the gravest of sins.” The ferocious criticism
Al
tarnished al Qaeda’s brand among many of its Muslim constituents.

As isis absorbs local groups, it will also take on the enemies they
make. Western officials told The New York Times that when the lead-
od
ers of Sinai Province decided to bomb the Russian plane, they did so
without consulting isis. The move provoked Russia, which until
then had limited its air strikes in Syria to attacks on the moderate
opposition, to launch cruise missiles at isis’ forces and infrastructure
so
in Deir ez-Zor and Raqqa, among other targets.

This process works both ways; local groups that link up with isis can
also get themselves into trouble, painting bull’s-eyes on their backs.
Again, the experience of al Qaeda is instructive. In 2010, bin Laden
Ma
discouraged the Somali militant group al Shabab from declaring alle-

giance to his organization because doing so would give “enemies” an
excuse to mobilize against al Shabab. Something similar is happening
now. Before the extremist groups in Egypt and Libya pledged allegiance
to isis, the United States cared little about them. Now it has zeroed in
on them. In November 2015, for example, a U.S. air strike near the port
March/April 2016 83

Daniel Byman
city of Darnah, Libya, killed an Iraqi who may have been the leader of
isis’ affiliate there. By attacking local governments, the provinces also
risk pushing local regimes into the arms of the anti-isis coalition.
Joining up with isis can also cost affiliates local support. Outside ter-
rorist groups tend to be less in tune with conditions on the ground than
their native-born associates are. In 2003, for example, the al Qaeda
core pushed its Saudi affiliate to launch an insurgency prematurely,
despite local leaders’ warnings that they were not prepared. The result
was a disaster: after the group conducted several terrorist attacks
m
against Western targets in the kingdom and strikes on Saudi security
forces, the Saudi government cracked down, killing or arresting most
of the group’s members. Because foreign fighters lack grass-roots con-
hi
nections, they also have few incentives to exercise restraint. When isis
tried to set up shop in Darnah in 2014, for example, its brutal behavior
alienated residents, who worked with rival groups to expel it. The
ha
most successful terrorist groups, such as Hamas and Hezbollah, enjoy
close ties with their local populations. They use violence, but they also
carefully moderate their brutality. Isis has yet to learn that lesson.
iT
A NEW STRATEGY
Last year, it did not seem to matter that the United States and its allies
had no clear strategy for dealing with isis’ provinces. Neither Wash-
Al
ington nor its friends were eager to take on yet another messy fight in
the Middle East. Indeed, targeting the provinces appeared counter-
productive: if the groups were locally focused, then bombing them
od
might just provoke them to attack the West. Yet the attack on the
Russian plane exposed the danger of this line of thinking. Ignoring the
provinces risks allowing isis to grow stronger and more dangerous.
Any strategy aimed at weakening the provinces must include two parts:
so
severing the link between the core group and the affiliates and attempt-
ing to contain, weaken, and defeat the affiliates themselves. To that end,
the United States and its allies should target provincial command-and-
control centers and locals who have personal relationships with top isis
Ma
leaders in Iraq and Syria. Deprived of instruction from headquarters, the

provinces will be forced to go their own way, which could create a world
of new problems for isis’ core, costing them local allies.
To fight isis as it spreads, the United States will need military
bases in many remote parts of the world. Flexibility will be vital, since
it is hard to predict which provinces will expand and demand the

ISIS Goes Global
most attention. (Yemen, for example, was not a major concern for
U.S. counterterrorism officials until 2009, when the so-called under-
wear bomber, who had been based there, nearly downed an airplane
over Detroit.) To gain the right geographic reach and to ease the burden,
the United States should also work with its allies. France, for instance,
is committed to the anti-isis coalition and has a strong military presence
in North Africa. The United States should divvy up responsibilities
and coordinate operations with France there.
The United States and its allies should also seek to weaken the prov-
m
inces by portraying the core group as out of touch with local grievances
in the news and on social media. This tactic is more likely to work in
countries where anti-foreign sentiment is particularly strong, such as
hi
Somalia, than in places where national identity is weaker, such as Libya.
Washington also needs to strengthen the states where isis affili-
ates have set up shop. It should provide aid and training to military,
ha
police, and intelligence forces in such places. It should also offer to
help these countries improve their administrative capacity through
judicial reform and social service provision and assist them in securing
iT
their borders by building barriers, improving surveillance, and train-
ing border troops. In countries without a functioning government,
such as Libya, the United States may have to work with local militias
and tribes.
Al
Diasporas that are involved in civil wars in their homelands, such

as the Somali diaspora, are also a counterterrorist concern. Until now,
such struggles have been primarily local, and so if a member of the
od
diaspora felt compelled to take up arms, he often posed little threat to

his host country. If groups such as al Shabab embrace isis, however,
the threat may grow. But diasporas can also provide an opportunity,
since it is far easier to gather intelligence from the members of a diaspora
so
community than from their brethren back home. In many cases, the
best way to gain leads is to work with the communities themselves;
the less they feel alienated, the more likely they will be to report any
troublemakers in their midst.
Ma
In all these ways, Washington must integrate isis’ many provinces

into the overall U.S. strategy against the group. Left unchecked, these
regional affiliates will increasingly threaten the Middle East and the
rest of the world. But with the right policies, the United States and its
allies can do serious damage to both the provinces and their masters,
turning a mutually beneficial relationship into a disaster for both.∂
March/April 2016 85

Can China’s Companies

Conquer the World?
The Overlooked Importance of
Corporate Power
m
Pankaj Ghemawat and Thomas Hout
D hi
espite China’s recent economic struggles, many economists
ha
and analysts argue that the country remains on course to
overtake the United States and become the world’s leading
economic power someday soon. Indeed, this has become a mainstream
iT
view—if not quite a consensus belief—on both sides of the Pacific.
But proponents of this position often neglect to take into account an
important truth: economic power is closely related to business power,
an area in which China still lags far behind the United States.
Al
To understand how that might affect China’s future prospects, it’s

important to first grasp the reasons why many remain bullish on
China—to review the evidence that supports the case for future Chi-
od
nese dominance. At first glance, the numbers are impressive. China’s

gdp is likely to surpass that of the United States—although probably
not until at least 2028, which is five to ten years later than most
analysts were predicting before China’s current slowdown began in
so
2014. After all, China is already the world’s largest market for hun-
dreds of products, from cars to power stations to diapers. The Chinese
government has over $3 trillion in foreign exchange reserves, which is
easily the world’s largest such holding. And China overshadows the
Ma
PANKAJ GHEMAWAT is Global Professor of Management and Strategy at New York

University’s Stern School of Business and Anselmo Rubiralta Chair of Strategy and
Globalization at the University of Navarra’s IESE Business School. Follow him on Twitter
@PankajGhemawat.
THOMAS HOUT teaches strategy at the Middlebury Institute of International Studies at
Monterey, the Fletcher School of Law and Diplomacy at Tufts University, and the University
of Hong Kong’s School of Business.

Can China’s Companies Conquer the World?
United States in trade volume: of the 180 nations with which the two
countries both trade, China is the larger trading partner with 124,
including some important U.S. political and military allies. Finally,
China has made steady progress toward its goal of becoming the
investor, infrastructure builder, equipment supplier, and banker of
choice in the developing world. Much of Asia, Africa, and Latin
America now depends on China economically and politically.
Since Chinese share prices tumbled last summer and then again
earlier this year, investors have grown wary of the country’s stock mar-
m
ket. But that market has been largely irrelevant to China’s economic
growth: from 1990 to 2013, as Chinese gdp grew at roughly ten per-
cent annually, the stock market barely moved. Its recent gyrations
hi
are no more indicative of China’s overall economic well-being than
was its long stagnation. China will likely recover from its current eco-
nomic setbacks just as the United States recuperated after wild stock
ha
market swings and a major depression in the first half of the twentieth
century.
But strong macroeconomic data don’t tell the whole story, and
iT
China’s likely short-term recovery will mean little in the longer run.
The fact is that China’s success to date doesn’t necessarily mean that
it will surpass the United States as the world’s leading economic
power. Metrics such as gdp, trade volume, and financial reserves
Al
all reflect economic power. But they don’t entirely encompass it, for
underneath those numbers lies the real world of corporations and
industries that actually create growth and wealth. And a close look at
od
the performance and prospects of Chinese firms reveals the obstacles

the country still faces.
In both China and the United States, corporations account for roughly
three-quarters of gdp. More generally, multinational corporations
so
and their supply chains control 80 percent of global exports and for-
eign direct investment. In other words, economic power rests heavily
on business power.
China’s economy exploded during the last three decades thanks to
Ma
the extraordinary performance of its low-cost manufacturers—reliable,

responsive companies that make the apparel and household items that
fill Walmart’s shelves. The Chinese state created the conditions for
such firms to thrive by upgrading China’s infrastructure, attracting
foreign investment, and keeping the value of China’s currency relatively
low. But to succeed, Chinese manufacturers still had to outperform
March/April 2016 87

competitors elsewhere—which they did, turning China into a crucial

player on the global economic stage.
If China is ever going to become the world’s most powerful econ-
omy, however, its businesses will have to learn to excel in the much
more competitive capital-goods and high-tech sectors, creating and
marketing sophisticated products such as semiconductors, medical
imaging equipment, and jet aircraft. Those who believe that China
will become dominant often assume that Chinese firms will perform
as well in those second-generation sectors as they have in far less
m
complex first-generation ones, such as textiles and consumer electronics.
But there are many reasons to question that assumption.
China’s initial economic boom relied on labor outsourcing by U.S.
hi
and European firms and revolved around hundreds of similar com-
panies, many of them foreign-owned, that exported low-tech products.
In contrast, to succeed in capital goods (goods that are used to produce
ha
other goods) and high technology, companies must develop unique
capabilities suited to a small number of clients, master a broad range
of technologies, acquire deep customer knowledge, and manage a
iT
global supply chain. And unlike in the low-cost manufacturing sector,
where Chinese firms have competed primarily with companies in
developing countries, the capital-goods and high-tech industries are
dominated by large, deep-pocketed multinational corporations based
Al
in Japan, South Korea, the United States, and Europe.

Moreover, some of the advantages that China enjoyed during the
past three decades, such as a large labor force, matter less in determin-
od
ing whether a country succeeds in capital goods and high technology.

For example, jet aircraft production and Internet search are led by
two companies—Boeing and Google, respectively—that are based in
a large country, the United States. But the leading companies in
so
high-precision bearings (skf) and semiconductor memory chips

(Samsung) are based in much smaller countries: Sweden and South
Korea, respectively. The roots of those companies’ success lie mostly
inside the firms themselves rather than in advantages conferred by
Ma
their host countries.

The future of China’s economic power will depend less on when
the country’s gdp passes that of the United States and more on the
progress that Chinese corporations make in manufacturing and selling
capital goods and high technology. Foreign multinationals still domi-
nate China’s home market in advanced capital goods, and China

m
hi
ha
But can you make a semiconductor? A factory in Anhui Province, China, May 2015
remains broadly dependent on Western technology. In the areas that
iT
will matter most in the twenty-first century, Chinese companies have
a long way to go, which should give pause to anyone confidently
predicting a not-too-distant era of Chinese economic dominance.
Al
DOWNSTREAM VS. UPSTREAM

Although it is still playing catch-up, China has made some significant
progress in its quest to move into capital goods and high-tech products,
od
which now account for 25 percent of its exports. Chinese producers

currently control between 50 and 75 percent of the global markets
(including China) for shipping containers, port cranes, and coal power
generation equipment and between 15 and 30 percent of the global mar-
so
kets for telecommunications equipment, onshore wind turbines, and

high-speed rail systems. Despite rising wages and energy costs, Chinese
firms have used their ability to simplify manufacturing processes to
maintain a ten to 30 percent cost advantage over Western competitors
Ma
STR / AF P / G ET TY IMAG ES
in capital goods—even before the recent devaluation of the yuan.

The Chinese government’s trillion-dollar “One Belt, One Road”
strategy, which aims to cover the Eurasia with Chinese-built roads,
rail, and port facilities, gives Chinese producers additional advantages
far from home. The government has also aided local firms by limiting
the amounts of capital goods and services that major Western compa-
March/April 2016 89
nies can sell in China and by requiring them to transfer technologies

to Chinese companies. Still, China has yet to become a real player
in the markets for more expensive and complex products, such as
offshore wind turbines, nuclear reactor cores, and large jet aircraft. As
the head of a large Western aviation manufacturer remarked to us
recently, it is one thing to reverse engineer the components of a jet
engine and figure out how to make and sell them, but quite another
to develop the knowledge and skills to make sure those components
actually work together.
m
Chinese capabilities tend to be oriented “downstream”: absorbing
imported technologies, simplifying manufacturing, and adapting
advanced designs to more basic products at a lower cost. Such tinkering
hi
and innovation at the margins has proved hugely beneficial for busi-
nesses that rely on mature technologies, such as shipping containers
and port equipment. But Western multinationals tend to focus their
ha
energies “upstream”: on developing deep knowledge of customers’
technical needs, designing high-performing products that incorporate
new technologies, and mastering software development and the
iT
efficient management of global supply chains. Those qualities have
allowed Western companies to dominate the markets for nuclear power
reactors, industrial automation systems, and jet aircraft. Chinese com-
panies have been slow to develop upstream skills, which partly explains
Al
why their success in capital-goods and high-tech markets has been

uneven and why it’s unclear how soon they will be able to move from
the lower end to the higher end of those sectors.
od
Competition from Western firms has slowed the growth in exports

of Chinese-made telecommunications equipment from 25 percent
in 2010 to ten percent in 2014. Meanwhile, China accounts for only
around 15 percent of global exports in infrastructure contractor
so
services—a number that hasn’t grown in five years. Its overall export
growth slowed from an average annual increase of 17 percent between
2004 and 2011 to an average annual increase of five percent between
2011 and 2015, and the share of exports accounted for by capital goods
Ma
has leveled off at 25 percent. China is not transitioning from low-end,

first-generation exports to high-end, second-generation exports as
quickly as Japan or South Korea did. When those countries’ gdps per
capita were at China’s current level, capital goods made up more than
25 percent of their exports, and their performance on capital-goods
exports continued to improve, rather than leveling off as China’s has.

In addition to their relative lack of upstream skills, Chinese firms

also face challenges when it comes to managing global supply chains.
Chinese companies have typically tried to reduce costs by learning to
manufacture critical components, such as hydraulics for construction
equipment or avionics for jet aircraft, so that they can avoid importing
them. Most Western companies take a different approach, turning to
multiple sources for such parts: suppliers from all over Asia and
Europe provide components for Apple iPhones and Boeing 787s, for
example. These contrasting sourcing patterns reflect different views
m
of how to create business power and also demonstrate China’s his-
torical preoccupation with self-sufficiency. Chinese authorities invite
more advanced foreign companies into China, learn from them, and
hi
try to replace them, whereas Western multinationals prefer to find
the best available components no matter where they originate. The
difference will allow China to develop a larger production scale,
ha
but its foreign competitors will be able to draw from a bigger, more
competitive pool of partners.
iT
INSPECT THEIR GADGETS
China is a particularly interesting place to look at the head-to-head
competition between Chinese companies and foreign multinationals,
both because it’s the world’s largest market for most products and
Al
because nearly every major company in the world operates there.

Unsurprisingly, out of a representative sample of 44 industries among
those that are open to foreign corporations in China, Chinese com-
od
panies dominate 25, including solar panels, construction equipment,

and mobile port cranes. But in all of the 19 sectors led by foreign
multinationals, technology or marketing is disproportionately critical
to success. Foreign multinationals operating in China lead in ten of the
so
13 industries in which R & D costs are greater than six percent of

revenue, including jet aircraft, packaged software, and semiconductors.
And foreign firms lead in four of the six industries in which advertising
costs exceed six percent of revenue, including carbonated beverages,
Ma
patented pharmaceuticals, and personal-care and beauty products.

Another striking thing about the Chinese market is how little the
industry leaders have changed over the last decade. During this
period, Chinese companies displaced foreign firms as leaders in only
two of the 44 industries in question: Internet hardware (including a
portion of the wireless telecommunications sector) and wind turbines.
March/April 2016 91

And in the latter case, China’s industrial policy tilted the playing field
by limiting foreign producers’ access to the market and by requiring
them to use many Chinese-manufactured parts.
Meanwhile, little evidence supports the widespread notion that
China is the world’s leading exporter of high-tech gadgets. Although
China does lead the world in the export of smartphones and personal
computers, it accounts for only 15 percent of those products’ value
at most. That’s because Chinese companies typically just assemble
and package semiconductors, software, cameras, and other advanced
m
high-tech components fabricated abroad. Consider the Tianhe-2,
for example. This supercomputer, built by the Chinese firm Inspur
in collaboration with the National University of Defense Technol-
hi
ogy, is the fastest in the world. But it is only Chinese in a very
limited sense, since it is actually composed of thousands of U.S.-
made microprocessors. ha
PLAYING CATCH-UP
The dominance of Western multinationals in capital goods and
iT
high technology rests on two pillars: open systems of innovation
that result in superior high-performance products and direct foreign
investment in operations that are global in scale but responsive to
local conditions and needs. If they ever hope to challenge the in-
Al
dustry leaders, Chinese firms will have to develop their own versions
of those qualities. Some have taken steps in that direction, but
their lack of experience in designing advanced systems and managing
od
international supply chains will likely limit what they can do for
many years.
The superior commercial technology currently enjoyed by for-
eign incumbents will be one of the major obstacles China faces. In
so
2014, China spent $218 billion to import semiconductors, far more

than it spent on crude oil. It also paid $21 billion in royalties for the
use of foreign-owned technologies, a number that has doubled since
2008 and that rankles Beijing. (It hardly helps that the government’s
Ma
own information systems are dependent on technology made by

ibm, Oracle, emc, Qualcomm, and other non-Chinese firms, which
many Chinese officials see as a security problem.)
Last year, Beijing launched a serious drive, called “Made in China
2025,” to transform the country into an innovative and environmen-
tally responsible “world manufacturing power” within ten years. The

program aims to create 40 innovation centers in ten sectors, including

smart transportation, information technology, and aerospace. If the
government follows through, China’s total public and private spending
on R & D may well surpass that of the United States sometime in
the next ten years—a significant milestone even if one takes into
account the high levels of fraud in
Chinese research and the fact that
Chinese government research funds
Barring major errors by
are frequently misallocated to serve Washington, there is no
m
political agendas. The increase in reason to think the United
funding has already had one easily ob- States will lose its edge in
servable effect: papers published by
hi
Chinese researchers are gaining more technology.
international respect. China’s share of
the papers recognized in Thomson Reuters’ authoritative Science
ha
Citation Index rose from near zero in 2001 to 9.5 percent in 2011,
putting the country second only to the United States.
But R & D spending is far from the only factor that matters.
iT
Succeeding in capital goods and high-tech equipment results from
a long chain of institutional, social, and legal supports. At the front
end of the chain lie high-quality graduate-degree programs, an
open flow of information through peer-reviewed journals, and reliable
Al
protections for intellectual property; at the back end are advanced

product design, innovative engineering, and frequent collaboration
with important customers. The United States excels at each part of
od
that chain. It boasts superior graduate programs in stem subjects

(science, technology, engineering, and math) that attract the best
students from all over the world, with China and India by far the
largest sources. (Despite all the attention paid to the fact that many
so
Chinese students return home after getting their U.S. degrees,

stem students from China are actually more likely to stay in the
United States than stem grads from anywhere else.) U.S. federal
nondefense spending on research has been flat for the last ten years,
Ma
but American corporations—which fund nearly three-quarters of

total U.S. R & D—increased their research spending by an average
of 3.5 percent annually during the same period. U.S. science journals
produce a steady flow of peer-reviewed findings, and American
scientists—unlike their Chinese counterparts—can profit from the
intellectual property they produce during state-funded research. Many
March/April 2016 93

European and Japanese multinationals invest in research facilities in

China, but the high degree of intellectual property protections in the
United States lead them to base their most promising projects there.
To catch up, China is developing innovation and entrepreneurial
hubs in Shenzhen and in Beijing’s Zhongguancun Science Park.
Shenzhen is home to a number of inventive companies, such as Huawei,
Xiaomi, and dji (China’s leading drone manufacturer). But most of
the firms clustered there focus on fast-turnaround, incremental inno-
vations, not on big-ticket capital goods or high-tech products.
m
Barring major errors by Washington—for example, a failure to
increase U.S. federal research funding—there is no reason to think the
United States will lose its edge in technology. But if U.S. technology
hi
does stop advancing and Chinese competitors catch up, China’s lower
costs could allow it to gain market share. That’s what happened in the
case of equipment used in coal power generation: Chinese firms
ha
began to match their Western competitors in terms of quality and
exploited their lower costs to become leaders in the global market.
And even if Chinese wages continue to rise and the yuan begins to
iT
appreciate at some point, it’s not likely that China will lose its cost
advantage anytime soon. So if the United States wants to stay ahead,
it has to keep winning in technology.
Al
A LONELY POWER
One of the keys to the United States’ economic dominance is its huge
investment in foreign markets. American corporations put $337 billion
od
into overseas markets in 2014, a full ten percent of what they committed
at home. All told, U.S. firms have directly invested $6.3 trillion over-
seas, which helps explain why the companies listed on the S&P 500 earn
roughly 40 percent of their profits outside the United States. Despite
so
slow growth at home, companies based in the United States and the
eu have increased their foreign direct investment at an average annual
rate of seven percent over the last ten years, and Japanese firms have
increased theirs at an even faster rate.
Ma
After a late start, Chinese multinationals are now following this

model. By the end of 2014, they had cumulatively invested $730 billion,
and that number is projected to nearly triple, to $2 trillion, in the next
five years—an impressive gain, although a figure that would still equal
less than one-third of current U.S. foreign direct investment. Nearly
all of China’s early overseas investments were in oil fields and mines,

but recently, Chinese corporations have begun moving up the value

ladder by acquiring established Western companies or by purchasing
and turning around struggling factories, some of them in the U.S.
rust belt. China has made 141 overseas deals worth over $1 billion and
is now home to more multinational enterprises than any country other
than the United States.
But as a late globalizer, China has pursued a riskier foreign invest-
ment strategy than Western countries. Although Australia and the
United States are the top two recipients of Chinese investment, over
m
half of all Chinese foreign direct investment goes to developing
countries in Asia, Africa, Latin America, and the Middle East. The
riskier the country, the more willing the Chinese seem to be to put
hi
their money there. China is easily the largest foreign investor in
Afghanistan, Angola, and Ecuador, for example—all places where
wars or debt defaults have scared off most Westerners. The political
ha
scientist David Shambaugh has dubbed China “a lonely power,” with-
out close allies, and these investments, along with aid-financed public
works projects and the much-touted Asian Infrastructure Investment
iT
Bank, are part of Beijing’s strategy for changing that picture.
This approach might work. But in the meantime, Western multina-
tionals are the primary investors in stable developing economies with
stronger credit ratings and more democratic regimes, and they are
Al
profiting as a consequence. In 2014, the eu and Japan both invested

more than China in Southeast Asia, and U.S. corporations alone
invested $114 billion just in Asia (excluding Japan) and Latin America.
od
The result of this strategy is that although China’s bold investments

attract considerable attention, Western and Japanese capital-goods
and high-tech multinationals continue, with less fanfare, to expand
their larger and more powerful global positions. China is a classic “late
so
follower,” investing in riskier assets and buying up second-tier Western

technology companies. That might be a good way to play catch-up,
but it is not a path to dominance.
Ma
A CHINA MODEL?
Those who predict that China will dominate the future often point to
two economic concepts to bolster their case: the product life cycle,
which posits that a product originates in advanced economies but
ends up being made in lower-cost developing economies, and dis-
ruptive innovation, the process by which leading products lose their
March/April 2016 95

position to initially inferior, lower-priced products that get better

over time. But emphasizing these two trends overlooks the fact that
incumbent multinationals can prevent those outcomes in capital goods
and high technology by developing a range of products and supply
chains in different regions and then mixing and matching them to
serve different sets of customers around the globe.
Take, for example, Cummins, an Indiana-based U.S. diesel engine
manufacturer that develops and manufactures product families with
varying prices and different features in China, India, Europe, and North
m
America. Cummins shares the lead in China’s high-performance diesel
engine sector, but its globally distributed production and R & D net-
works allow it to ship more engines into China than it ships out. Such
hi
global operations require cross-border coordination, technical depth in
many locations, and middle managers with international experience.
Few Chinese firms enjoy those advantages. Most Chinese companies
ha
prefer to keep their production at home, use simple lines of organiza-
tion, and maintain autonomy for the heads of individual businesses.
That more stripped-down multinational model worked extremely well
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during China’s first-generation boom. But in more recent years, many
Chinese firms have struggled to adapt to globalization. There are excep-
tions, however: Lenovo, for example, passed Hewlett-Packard and Dell
to become the world’s largest personal computer manufacturer in 2013
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by relying on an unusual international distribution of responsibilities,

which involves forgoing a traditional global headquarters while central-
izing the company’s marketing operations in Bangalore, India.
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Corporate China’s uneven efforts to adapt to the global market

will probably continue into the foreseeable future. In time, China
will produce its share of great companies, just as other major econo-
mies have, but a unique “China model” seems unlikely to emerge,
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and it does not appear that the country’s success rate will improve
dramatically anytime soon.
A LONG CLIMB FOR CHINA

Ma
Advocates of the view that China will inevitably dominate the global
economy tend to see the United States as strong but slow moving,
owing to its messy free markets and political gridlock, and tend to see
China as a rising power on the march, thanks to its clear planning
and clever strategy. But this simplistic view fails to account for how
corporations and markets change in response to external factors.

U.S. business power flows from the restless competitiveness of

American culture, the political influence of U.S. corporations, the
research productivity of U.S. universities and government labora-
tories, a U.S. financial system that directs investment to new tech-
nologies and ventures, immigration that brings in talent, laws and
tax codes that reward entrepreneurial activity, the United States’
status as the sole superpower, and the dollar’s role as the world’s
reserve currency.
There are internal factors that can threaten U.S. business power,
m
of course—for example, right-wing opposition to federal science
spending and activist shareholders’ focus on the short-term profits of
blue-chip firms instead of long-term investment in innovation. But
hi
30 years ago, when some observers believed that Japan was poised
to overtake the United States in terms of economic power, few
predicted the role that tech entrepreneurs and innovative state and
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municipal governments would play in creating an era of unrivaled
American dominance.
Chinese business power has different but also strong foundations,
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such as farsighted policies favoring investment over consumption,
government encouragement of foreign investment to jump-start
local industries, intrepid entrepreneurs who succeed despite a state-
enterprise system designed to thwart them, a shift in the world’s
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center of economic gravity toward Asia, and a massive domestic mar-

ket. Many factors hold China back, too, including a low-performing
state-owned sector that stifles market forces, mounting internal debt
od
burdens, and a crackdown on the free flow of information.

It’s difficult to predict how external factors might influence the
growth of Chinese economic power. Not many inside or outside China
foresaw the limitations of state-owned enterprises or the rise of
so
impressive independent firms such as Huawei, Lenovo, and Alibaba.

Looking ahead, it’s hard to know what effect China’s slowing growth
will have on the global competitiveness of its companies: it could
prove deeply damaging, but it could also precipitate bankruptcies and
Ma
industry shakeouts that would concentrate power in the hands of

fewer, more capable companies, which could make them a stronger
force in world markets.
More broadly, it’s difficult to know how the rest of the world will
respond to China as it grows. When China became a huge buyer
of natural resources, many analysts fearfully predicted permanent
March/April 2016 97

increases in commodity prices. What happened instead was that

prospectors found new ways to increase supply and governments
and companies found new ways to conserve and improve efficiency.
The global system adapted, and commodity prices overall are lower
today in real terms than they were 20 years ago. In a similar vein,
as Chinese multinationals fight their way into global markets,
Western incumbents will innovate, consolidate, and develop new
sources of demand.
Moreover, the futures of the U.S. and Chinese political systems
m
are not fixed. Both have experienced remarkable adaptability as
well as self-inflicted wounds, and there is no reason to think that
will change.
hi
Confidence in the inevitability of Chinese economic dominance is
unfounded. China is gaining strength but faces a long climb. The
outcome of the U.S.-Chinese contest is far from clear and depends at
ha
least as much on how well Western multinationals and governments
exploit their existing advantages as on China’s ability to up its game
when it comes to the kinds of products and services that will define
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the twenty-first-century economy.∂
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od
so
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The Lost Art of Economic

Statecraft
Restoring an American Tradition
m
Robert D. Blackwill and Jennifer M. Harris
D
hi
espite boasting the most powerful economy on earth, the
United States too often reaches for the gun instead of the
purse in its foreign policy. The country has hardly outgrown
ha
its need for military force, but over the past several decades, it has
increasingly forgotten a tradition that stretches back to the nation’s
founding: the use of economic instruments to accomplish geopolitical
iT
objectives, a practice we term “geoeconomics.”
It wasn’t always this way. For the country’s first 200 years, U.S.
policymakers regularly employed economic means to achieve strategic
interests. But somewhere along the way, the United States began to
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tell itself a different story about geoeconomics. Around the time of

the Vietnam War, and on through the later stages of the Cold War,
policymakers began to see economics as a realm with an authority and
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logic all its own, no longer subjugated to state power—and best kept
protected from unseemly geopolitical incursions. International economic
policymaking emerged as the near-exclusive province of economists
and like-minded policymakers. No longer was it readily available to
so
foreign policy practitioners as a means of working the United States’

geopolitical will in the world.
The consequences have been profound. At the very time that
economic statecraft has become a lost art in the United States, U.S.
Ma
adversaries are embracing it. China, Russia, and other countries now
ROBERT D. BLACKWILL is Henry A. Kissinger Senior Fellow for U.S. Foreign Policy at
the Council on Foreign Relations.
JENNIFER M. HARRIS is a Senior Fellow at the Council on Foreign Relations.
They are the authors of War by Other Means: Geoeconomics and Statecraft (Harvard
University Press, 2016), from which this essay is adapted.
March/April 2016 99

routinely look to geoeconomics as a means of first resort, often to

undermine U.S. power and influence. The United States’ reluctance
to play that game weakens the confidence of U.S. allies in Asia and
Europe. It encourages China to coerce neighbors and lessens their
ability to resist and gives Beijing free rein in vulnerable states in
Africa and Latin America. It allows Russia to bend much of the former
Soviet space to its will. It reduces U.S. influence in friendly Arab
capitals. It allows poverty to flourish in the Middle East, nourishing
Islamic radicalism. These costs weigh on specific U.S. aims, but they
m
also risk accumulating over time into a structural disadvantage that
Washington may find hard to reverse. It is long past time for the
United States to restore geoeconomics to its rightful role.
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SURVIVAL FIRST
In the years following the American Revolution, the Founding Fathers
ha
understood that the United States could never achieve true indepen-
dence unless it became economically self-sufficient. But more than that,
these early leaders, facing predatory European nations and possessing
iT
little ability to project power abroad, instinctively reached for economics
as their preferred—at times their only—means to protect their young
and vulnerable country. Keenly aware that European states were the
most likely source of threats, Benjamin Franklin suggested that the
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United States offer its commerce in exchange for their goodwill. In

Common Sense, Thomas Paine explained how the United States could
insulate itself from Europe’s eighteenth-century power struggles by
od
turning to geoeconomics: “Our plan is commerce, and that, well

attended to, will secure us the peace and friendship of all Europe;
because it is the interest of all Europe to have America a free port. Her
trade will always be a protection.”
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In a rare point of agreement between them, Alexander Hamilton

and Thomas Jefferson shared a basic enthusiasm for economic tools of
foreign policy. Hamilton, the father of American capitalism, stressed
the value of commerce as a weapon, a proposition that few trade policy-
Ma
makers would agree with today. Jefferson scored one of the country’s
greatest geoeconomic successes in its history when he oversaw the 1803
purchase of the Louisiana Territory from France, which doubled the
size of the United States for four cents an acre. As much as Jefferson
liked a good deal, his fundamental motivation was geopolitical. In
1801, while the territory was still under Spanish control, he confided

m
hi
ha
Mergers and acquisitions: negotiating the Louisiana Purchase, 1803
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his fears about its future to James Monroe, writing, “We have great
reason to fear that Spain is to cede Louisiana and the Floridas to
France.” Jefferson knew that if France acquired and held on to these
territories, it would be emboldened to expand its holdings, setting the
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United States up for a military confrontation that it almost certainly

could not win.
During the Civil War, the North persuaded the United Kingdom
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to stop supporting the South in part through economic intimidation:

it threatened to confiscate British investments in U.S. securities and to
cease all trade, including grain shipments. Later, as the task turned from
war fighting to reconstruction, U.S. leaders pursued geoeconomic
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openings that would not merely restore their newly unified country
but also strengthen it beyond its prewar position. Secretary of State
William Seward negotiated the purchase of Alaska from Russia in
1867, increasing the country’s size by nearly 600,000 square miles.
Ma
Despite a bargain price of two cents an acre, the deal was derided in
Congress and the press. History would vindicate the purchase Seward
M PI / G ET TY IMAG ES
secured, since it helped propel the United States from a continental

power to an international empire. Indeed, had it not been for “Seward’s
Folly,” his successors would have had a far more claustrophobic Cold
War on their hands.

TOTAL WAR
World War I profoundly shifted the United States’ relationship with
geoeconomics. At the beginning, the United States clung to its pol-
icy of neutrality in trade. But once Washington entered the war, in 1917,
it enacted draconian economic embargoes. Within months, the United
States pivoted to full cooperation with the Allies’ food blockade of
Germany and then embargoed all exports to the Scandinavian countries
and the Netherlands, all of which had stayed neutral.
The United States’ early geoeconomic pursuits were not without
m
controversy, but disagreements turned mainly on how, not whether, to
use economic influence. President Woodrow Wilson entered office deeply
opposed to “dollar diplomacy,” his predecessors’ policy of encouraging
hi
overseas investment to further U.S. interests. Yet Wilson took issue
with the ends, not the means. He said he remained “willing to get
anything for an American that money and enterprise can obtain, except
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the suppression of the rights of other men.” Sure enough, by 1919, as
the country’s main object in Europe shifted from winning the war to
securing the peace, Wilson advanced a largely geoeconomic solution.
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He persuaded the new League of Nations that its best hope of pre-
venting another war was an “absolute” boycott on aggressor countries.
“Apply this economic, peaceful, silent, deadly remedy and there will
be no need for force,” Wilson urged.
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Even as isolationist sentiment swelled in the United States after

World War I, the country was still honing its geoeconomic reflexes
around the world. As the United States grew tired of Europe’s military
od
dilemmas, it turned to facilitating private investment overseas in an

effort to expand U.S. influence. In 1924, for instance, it spearheaded
the Dawes Plan, which allowed U.S. banks to lend Germany enough
money to pay war reparations to France and the United Kingdom.
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After President Franklin Roosevelt took office in 1933, his administra-

tion embraced geoeconomics to preempt German encroachment in the
Western Hemisphere. Between 1934 and 1945, the United States signed
29 reciprocal trade agreements with various Latin American countries.
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And in Asia, the administration tried to use the Export-Import Bank

to blunt the rise of Japan. Citing a “bare chance we may still keep a
democratic form of government in the Pacific,” Treasury Secretary
Henry Morgenthau, Jr., arranged a $25 million loan to China in 1938.
Then World War II broke out, and Washington’s geoeconomic
policies went into overdrive. In 1941, Congress passed the Lend-Lease

Act, under which the United States supplied Allied nations with some
$50 billion worth of military supplies (equivalent to about $660 billion
worth today). If the lend-lease policy was, in the words of Secretary
of War Henry Stimson, “a declaration of economic war,” many British
felt that it was directed as much at London as Berlin. Their complaints
were not entirely unfounded: under lend-lease, Washington meddled
in British economic affairs to a degree that is almost unimaginable
today, managing British exports, seeking unilateral control over levels
of British gold and dollar reserves, and extracting British concessions
m
concerning the terms of the postwar order.
In 1943, the U.S. government even established the Office of
Economic Warfare, an agency charged with safeguarding the U.S.
hi
dollar. Its more than 200 market analysts around the world and nearly
3,000 experts in Washington did so by helping U.S. producers increase
exports and securing vital imports at favorable terms. A year later,
ha
delegates from the Allied countries signed the Bretton Woods agree-
ment. The goal was not trade for trade’s sake but, as Secretary of State
Cordell Hull explained, “a freer flow of trade . . . so that the living
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standards of all countries might rise, thereby eliminating the economic
dissatisfaction that breeds war” and imparting “a reasonable chance of
lasting peace.” That goal, of course, would go on to usher in a lasting
peace on the United States’ terms.
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THE GOLDEN AGE OF GEOECONOMICS

The United States’ geoeconomic instinct survived World War II,
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abetted by U.S. economic dominance and the Soviet Union’s economic

isolation. As a consensus emerged that it was economic crisis that had
led to the rise of aggressive dictatorships and the subsequent war,
U.S. policymakers reached for economic tools to promote peace.
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Perhaps the best-known example is the Marshall Plan, for rebuilding

postwar Europe. Although Secretary of State George Marshall never
mentioned communism or the Soviet Union in his 1947 speech out-
lining the policy, its architects were candid about its geopolitical
Ma
objectives. As the diplomat George Kennan explained, the plan would

combat “the economic maladjustment which makes European society
vulnerable to . . . totalitarian movements and which Russian com-
munism is now exploiting.” President Harry Truman himself admitted
that “the military assistance program and the European recovery
program are part and parcel of the same policy.” Had Truman failed

to persuade Congress to spend the $13 billion it ultimately did on the

economic recovery half of his equation, the Cold War could well have
cost the United States far more in blood and treasure than it did.
The first successful Soviet nuclear test, in 1949, and the outbreak
of the Korean War, in 1950, marked the opening scenes of the Cold
War and pulled Washington toward a more assertive strategy of con-
tainment. But the turn did not mark
Once Washington entered any shift away from geoeconomics, at
least not initially. To the contrary, the
m
World War I, it pivoted to United States overcame stiff Euro-
full cooperation with the pean reluctance to expand the West’s
Allies’ food blockade of embargo on China. In 1953, President
hi
Dwight Eisenhower came into office
Germany. committed to the idea of achieving
haboth absolute and relative economic
gains through East-West trade, which required easing the embargo
that the United States had levied on the Soviet Union. Like Wilson,
however, Eisenhower did not object to the use of embargoes for
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geopolitical ends; rather, he doubted that this particular one would
best serve those ends.
Presidents John F. Kennedy and Lyndon Johnson thought likewise.
For Kennedy, further easing the U.S. embargoes against communist
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countries made sense not because they were having no real economic
impact (as many at the time thought) but because doing so might elicit
quid pro quos from the Soviets. In that vein, Johnson seized on a split
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between the Soviet Union and Romania, normalizing trade relations

with Romania in 1964 and supplying it with a package of commercial
incentives the following year.
Even as Washington trained much of its attention on Europe
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during the early Cold War, it never lost sight of Asia. After the
Korean War, the United States guarded against the risk of collapse or
a communist takeover in South Korea by showering the country with
grants and loans. Absent this aid, the United States would almost
Ma
certainly face a much tougher geopolitical landscape on the Korean

Peninsula today; at a minimum, Seoul would not be the highly
capable ally it is. The dynamic with Japan was different, since Tokyo
resisted pressure to open its economy and clung to mercantilist trade
and monetary policies that Washington saw as distinctly unhelpful to
U.S. interests. But even in this relationship, geopolitical concerns

trumped narrow economic interests, with the United States unwilling

to risk an outright trade war with Japan for fear of pushing it toward the
Soviet Union.
FALLING OUT OF FASHION

Over the course of the Cold War, the United States increasingly
construed its policy of containment in military terms. The Vietnam
War was partly to blame; it was perhaps inevitable that armed conflict
involving U.S. troops in Southeast Asia would cause policymakers to
m
look more toward military force. But that is only part of the story.
During the 1960s, commercial interests gained greater influence in
Washington and complained that the State Department failed to
hi
appreciate U.S. economic concerns. In 1962, congressional leaders even
refused to launch a new round of trade negotiations unless Kennedy
set up a White House office to promote trade.
ha
It was not until Richard Nixon’s presidency, however, that geo-
economics began to fall off the radar. Although Nixon dangled economic
incentives when pursuing the opening to China, he and his advisers
iT
viewed these as secondary in importance. Likewise, they saw détente
with the Soviets as a largely geopolitical exercise with very little
economic content. At that time, the dollar-based system of fixed
exchange rates established at Bretton Woods was eroding, thus under-
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mining the anti-Soviet coalition; as the writer Walter Russell Mead

has argued, a more economically inclined administration would have
viewed the threat as “far greater than anything Ho Chi Minh could
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ever assemble in the far-off jungles of Indochina.” For Nixon, however,

monetary coordination was hardly the stuff of first-order foreign policy.
“I don’t give a shit about the lira!” he once told his chief of staff.
He underscored the point in 1971, when he abandoned the dollar’s
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convertibility into gold, ending the accommodating monetary policy

that the United States had extended to its allies since 1945.
Nixon was not alone in his disdain for geoeconomics. Slowly but
surely, the U.S. government grew less enamored of the practice.
Ma
Congress intensified its skepticism of trade as a foreign policy tool,

convening several committees to scrutinize U.S. trade restrictions
against the Soviet bloc and, in 1969, passing a bill liberalizing East-
West trade that went beyond what Nixon and his national security
adviser, Henry Kissinger, wanted. In 1972, U.S. farmers successfully
opposed the hotly debated proposal to hold grain sales to the Soviets

hostage to political concessions. When the issue came up again a few

years later, Kissinger was not happy about opposition to the policy.
For him, exchanging grain merely for money was “very painful,” since
the asset could have been used instead to extract substantive changes
in Soviet behavior. From that moment on, Washington’s foreign policy
mandarins were put on notice: purely economic interests would pre-
vail over geopolitical ones.
President Jimmy Carter made intermittent shows of geoeconomic
strategy. In the early days of the Iran hostage crisis, in 1979, the U.S.
m
government froze Iranian assets because, as Carter later wrote about
Iran’s leaders, “I thought that depriving
them of about twelve billion dollars in
In the 1960s, commercial
hi
ready assets was a good way to get their
interests complained that attention.” The next year, Carter initi-
the State Department haated a grain embargo against the Soviet
failed to appreciate U.S. Union as punishment for its invasion
of Afghanistan. But the public viewed
economic concerns. the policy as a failure—feeding the view
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of economic statecraft as ineffectual—
and President Ronald Reagan repealed it. When the United States
negotiated a new grain agreement with the Soviets in 1983, it explic-
itly forbade the United States from banning exports for reasons of
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foreign policy.
After the Soviet Union collapsed, U.S. diplomats occupied
themselves with transitioning the former Soviet countries toward
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democratic capitalism, and the economic components of the plan

focused squarely on economic outcomes. Washington pushed for
trade and investment reforms for the sake of deeper, faster, more
efficient, and better-integrated markets. Economists would coin
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the term “the Washington consensus” as a shorthand for the mix of

economic measures all market economies in good standing would
have to accept; critics would dub it “the Golden Straitjacket” for the
way it constrained policymakers from deviating from the prescription
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even for domestic economic reasons, let alone geopolitical ones.

Even though President Bill Clinton’s first formal articulation of
U.S. national security strategy identified a central goal as “to bolster
America’s economic revitalization,” economic instruments figured
little in U.S. foreign policy during his tenure. The notable exception
was sanctions, which grew in scope and sophistication under Clinton.

But for the most part, the administration reached first for political
and military tools as it sought to assert U.S. leadership throughout
the world. It was also during this period that U.S. and European gov-
ernments did very little economically to shape the direction of Russia
under Boris Yeltsin—a profound omission that, since it enabled the
rise of Vladimir Putin’s neoimperialism, haunts the world today.
Then came 9/11, which arguably made the shift to an even more
militarized national security strategy inevitable. Although the George
W. Bush administration tried to curtail terrorist financing, al Qaeda
m
and its affiliates were hardly vulnerable to economic coercion; the war
on terrorism would have to be fought by ground forces, combat aircraft,
and armed drones.
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WHAT CHANGED?
Given how adept at economic statecraft the United States once was,
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why have policymakers largely forgotten the practice? Part of the
answer lies in the Cold War’s military dimension, which must have
weighed heavily on the minds of decision-makers who faced crisis
iT
after crisis. Material factors were important, too: the onset of eco-
nomic insecurity in the United States in the 1970s and the rise of the
multinational corporation (and, with it, an organized political lobby
for trade). Institutional factors played a role, as well. From the 1980s
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onward, bureaucratic momentum shifted from the State Department

to the Pentagon, and the trade office that Kennedy had established in
the White House ballooned into the much larger and more powerful
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Office of the U.S. Trade Representative.

But the main reason the United States abandoned geoeconomics
may have less to do with evolving foreign policy habits than with
evolving economic beliefs—in particular, economists’ growing reluc-
so
tance to see themselves and their discipline as embedded in larger

realities of state power. The standard-bearers of economic thought
during the nineteenth and early twentieth centuries had little problem
using economics as an instrument of state power, whereas their neo-
Ma
classical successors thought that markets were best kept free from
geopolitical interference. Their worldview happened to fit the Cold
War well: with the Soviet Union opposed to free trade, a gain for free
trade anywhere was a gain for the West.
The neoclassical economic orthodoxy survived the Cold War, as did
the resulting divide between economists and foreign policy thinkers.

For two decades, none of this mattered, since the United States faced
no serious strategic challenge and thus had no reason to revisit whether
neoclassical ideas still aligned with the country’s foreign policy goals.
Today, however, tensions between neoclassical economics and U.S.
foreign policy have arisen. Many states now appear entirely comfort-
able employing economic tools to advance their power, often at the
expense of Washington’s. China, for instance, curtails the import of
Japanese cars to signal its disapproval of Japan’s security policies. It
lets Philippine bananas rot on China’s wharfs to protest Manila’s stance
m
on territorial disputes in the South China Sea. It rewards Taiwanese
companies that march to Beijing’s cadence, and punishes those that do
not. Russia, meanwhile, bans imports of Moldovan wine as Moldova
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weighs deeper cooperation with the eu, and Moscow periodically
reduces energy supplies to its neighbors during political disagree-
ments. It dangles the prospect of an economic bailout to Cyprus in
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return for access to its ports and airfields, forcing eu leaders to choose
between coming through with a sufficiently attractive bailout of their
own and living with a Russian military presence inside the eu.
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Such moves can sit uncomfortably with the tenets of neoclassical
economics, which has difficulty accounting for the geopolitical aims of
adversaries’ economic policies. For U.S. policymakers, recognizing
the geopolitical motivations behind such economic power plays need
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not necessarily mean responding in kind. Still, they should recall the
advice of John Maynard Keynes and other economists who saw them-
selves as guided by the prevailing realities of state power—and who
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saw a danger in illusions to the contrary.
A NEW BRAND OF STATECRAFT

The time has come for the U.S. foreign policy establishment to rethink
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some of its most basic premises about power and economics. Although
reasonable minds can differ on the specifics of a geoeconomic vision,
it is worth ensuring that it derives from the right framework. Four
features are essential.
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First, strategists need to think about new tools. A clearer reading of

U.S. history no doubt offers insights into geoeconomics’ rightful role
today, but the world has changed too much for policymakers to revert
to earlier playbooks. Many of Jefferson’s and Marshall’s geoeconomic
feats would be unthinkable today, and some of today’s favored geo-
economic tools, such as state-sponsored cyber-warriors who hack

foreign companies’ networks, have become available only recently.

Others, such as sanctions or energy politics, although nothing new,
now operate in such vastly different landscapes as to render them
good as new. Any effort to put geoeconomics back in foreign policy
needs to begin with ascertaining what its modern instruments are,
how they work, and what factors make them more or less effective.
That will have to entail a set of debates—stretching across U.S.
universities and think tanks, Congress, and the executive branch—
that begin to set geoeconomics apart as a distinct discipline, endowed
m
with its own principles that can guide action in specific cases.
Second, the United States needs to figure out its own norms for the
acceptable use of geoeconomics. With the largest economy in the
hi
world, a shale boom that is remaking geopolitical realities around the
world, and a financial sector through which the vast majority of global
transactions must pass, the country still has a lot to work with. But
ha
before choosing to use its economic heft, Washington has to decide
just how comfortable it is doing so.
The task is not easy, since many geoeconomic approaches carry real
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tradeoffs. But this is true of every foreign policy option. Too often,
geoeconomic approaches are considered in isolation, unlike those
involving military statecraft, which tend to be debated within the
logic of best-known alternatives. The criticism that a given sanctions
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program is misguided because its costs outweigh its benefits, for

example, misses the real question of how these tradeoffs compare to
those of other political or military options. Policymakers also tend to
od
measure geoeconomic plans by the wrong standards—judging them

by their economic, rather than their geopolitical, impacts.
But even when assessed more logically, certain geoeconomic tools
may simply be out of the question for the United States. This is partly
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a result of the country’s beginnings as an experiment in the deliberate

curtailing of state power; democratic constraints prevent a U.S.
president from, for example, suspending private contracts with foreign
governments to gain leverage in a geopolitical dispute. Moreover, as
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the world’s leading supplier of public goods—underwriting the world’s

deepest capital markets, issuing the world’s leading reserve currency,
securing maritime trade routes—the United States has a genuine geo-
political interest in keeping shows of economic coercion to a minimum.
For now, however, it is hardly clear that Washington’s discomfort with
geoeconomics reflects anything more than the residual workings of a

set of assumptions honed in the past several decades. There are no

doubt legitimate debates to be had about the wisdom of various geo-
economic approaches. But these are debates worth having.
Third, the United States needs to work geoeconomics into the
bloodstream of its foreign policy. At a minimum, that will require U.S.
leaders to explain in detail to the American public and U.S. allies what
today’s brand of geoeconomics consists of. When U.S. diplomats meet
with their foreign counterparts, they should devote time to forging a
common understanding about the rightful role of geoeconomic power
m
in grand strategy. Leaders will also need to call out geoeconomic coer-
cion when it takes place, so as to put countries on notice that it will not
go unanswered, and develop responses to it with like-minded partners.
hi
Fourth, policymakers need to grapple with important questions
about how to allocate resources within the realm of foreign policy,
whatever one thinks of overall spending levels. They need to ask, for
ha
example, what the United States is getting for its post-9/11 military
spending. The answer is, less and less: although military power is of
course still vital, it is yielding diminishing returns. So Congress
iT
should shift the Pentagon’s resources toward the application of economic
instruments to advance U.S. national interests—say, foreign aid or
investment promotion.
In making these policy shifts, the United States would regain its
Al
status as a powerful geoeconomic actor on the world stage. It would

acquire the ability to counter the growing economic coercion prac-
ticed by authoritarian governments in Asia and Europe against their
od
neighbors and beyond. The leading democracies would gain new tools
for shaping geopolitics in positive ways. And the United States’ system
of alliances would grow stronger, thereby reinforcing regional orders
and the global balance of power.
so
Of course, none of these measures can be implemented in a day,

and many will take years to be put in practice. Indeed, adopting them
will require a fundamental shift in how the United States defines
foreign policy—an intellectual shift that can come about only with
Ma
presidential leadership and sustained congressional support. And so

whether the next administration and Congress digests this compelling
reality will rank among the most important questions of American
grand strategy.∂

The Study-Abroad Solution

How to Open the American Mind
Sanford J. Ungar
m
I
n the Internet age, the world feels far smaller than it used to. But
many Americans still know little about the rest of the world and
hi
may be more detached from it than ever. Such a lack of awareness
is, in certain respects, understandable. Once the Cold War ended,
some 25 years ago, Congress, perhaps out of a false sense of security,
ha
cut the foreign affairs budget, which led to the closing of some U.S.
overseas posts. The news media, especially the commercial television
networks, took their cue and began to reduce overseas coverage—
iT
responding, they said, to the decline of public interest in such matters,
which conveniently coincided with their own economic woes. Although
the 9/11 attacks and the subsequent wars in Afghanistan and Iraq
stimulated renewed attention to international events, that phenomenon
Al
proved short-lived. Consequently, as new global challenges have arisen

in recent years, American discourse on world affairs has lacked historical
context or deeper understanding. It has become difficult to stir thought-
od
ful, informed debate on foreign policy issues during congressional—

or even presidential—campaigns. Many politicians who aspire to lead
the country seem not to understand what constitutes a foreign policy
issue, let alone the complexity of dealing with one. A candidate who
so
speaks a foreign language appears almost suspect.

One symptom of Americans’ new isolation is a sharp contrast
between the positive, even zealous views they hold of the United States
and its role in the world and the anti-Americanism and negative
Ma
perceptions of U.S. foreign policy that flourish almost everywhere

else. This gap persists in part because relatively few Americans look
SANFORD J. UNGAR, President Emeritus of Goucher College, teaches at Harvard

University and Georgetown University and is a Fellow at the Lumina Foundation. His work
on this article was made possible, in part, by a residency at the Bellagio Center of the
Rockefeller Foundation. Follow him on Twitter @SanfordUngar.

Sanford J. Ungar
beyond, or step outside, their own borders for a reality check. Less
than 40 percent of Americans hold passports. Compare that figure
with the numbers from other English-speaking countries that are
geographically isolated: 50 percent of Australian citizens hold pass-
ports, as do more than 60 percent of Canadians and 75 percent of
New Zealanders. In the United Kingdom, which is admittedly
much closer to foreign destinations, some 80 percent of citizens
carry passports.
Given the United States’ determination to project its hard and soft
m
power and preserve its influence in a restless but interconnected
world, the almost universal failure of the broader U.S. public to know
and understand others, except through a military lens, is not just
hi
unfortunate but also dangerous. It severely hinders the creation and
implementation of a rational, consistent, and nuanced foreign policy
that reflects American values and enjoys public support.
ha
Luckily, there exists a disarmingly simple way to help address this
problem and to produce future generations of Americans who will
know more and care more about the rest of the world: massively in-
iT
crease the number of U.S. college and university students who go
abroad for some part of their education and bring home essential
knowledge and new perspectives. The federal government should pass
ambitious legislation, akin in scope and impact to the transformative
Al
National Defense Education Act (ndea) of 1958, that would directly

fund more study-abroad opportunities and create incentives for colleges
and universities to put them in place and for students to pursue them.
od
Such action would help democratize study abroad by making it more

affordable and accessible, spreading its benefits beyond the relatively
narrow cohort of mostly white and well-off students at a relatively
small number of institutions who tend to take advantage of it today.
so
To realize the tremendous potential of study abroad to improve

American society and U.S. foreign policy, many more Americans—
and more kinds of Americans—need to take part.
Ma
THE BENEFITS OF WORLDLINESS

It is hardly a new discovery that sending young Americans abroad pro-
motes better understanding of global affairs and has other profoundly
positive impacts at home. Many current and past leaders in U.S. busi-
ness, government, science, education, the nonprofit and foundation
sectors, and the arts participated in overseas study, service, or work

experiences at an impressionable stage in their lives. Their time spent

in other countries broadened their perspectives and deepened their
appreciation for the many different ways that other societies approach
common problems. Traditionally, Americans have tended to gravitate
to western European destinations, but many have also spent forma-
tive months and years in Africa, Asia, and Latin America, where they
came to see how the world does not always correspond to American
preconceptions.
The benefits of an overseas experience are difficult to quantify, but
m
there is little doubt that studying abroad can be beneficial for all
students, regardless of their income level, background, or the school
they attend. Two public institutions that have examined the issue,
hi
Indiana University and the University
System of Georgia, found concrete
results that contradict common misper-
The United States must
ha
ceptions: higher four-year graduation massively increase the
rates among those who studied abroad. number of Americans who
And international education, especially study abroad.
iT
if enhanced by language training, can
open doors and confer lifelong contacts
and interests that a student might not have developed otherwise. Now
that every academic field, profession, and industry has taken on an
Al
international dimension, study abroad increasingly appears to be an

essential element of success, a requirement to compete in the global
marketplace. And there is some evidence that obtaining part of one’s
od
education overseas likely increases one’s lifetime earning potential—a

further bonus on top of the extra $1 million or so that experts believe
results from an undergraduate degree, on average, depending on the
field of study.
so
In 2001, when I became president of Goucher College, in Baltimore,

about a third of the college’s undergraduates were already studying
abroad, some in traditional semester- or year-long programs and others
in intensive short-term courses led by Goucher faculty and staff mem-
Ma
bers. It was easy to see that the participants returned with new ideas,
stronger personalities, and a better sense of who they were as indi-
viduals and as Americans. They described transformative adventures
that allowed them to see their own country, with all its strengths and
weaknesses, more clearly. They spoke of things they had observed and
experienced abroad that the United States might be able to learn

Sanford J. Ungar
from: the ways that other societies organized urban housing and trans-
portation for the poor, conducted immunization and literacy campaigns,
made cultural events accessible to a broad audience, and—one of the
most frequently mentioned—honored and cared for older generations.
It became clear that if Goucher could dramatically and quickly
increase participation in study abroad, the college would become a dif-
ferent, indeed distinctive, place—a great advantage in the competitive
liberal arts college market. Within a few years, after some gut-wrenching
internal deliberations, Goucher made study abroad mandatory for
m
undergraduates, provided a stipend to make it more affordable for all,
and turned its little corner of the world alongside the Baltimore Belt-
way into a laboratory for international exploration. Enrollments grew,
hi
horizons broadened, and opportunities beckoned. In every possible
venue, including in the residence halls and over meals, returning
students regaled one another, and those yet to go, with stories of
ha
where they had been and what they had learned. Instructors soon
accommodated these new perspectives, and the campus became a more
welcoming environment for international students, who often found
iT
people at Goucher already aware of their countries and cultures.
INFREQUENT FLIERS
The trouble is that relatively few Americans currently enjoy this kind
Al
of life-changing overseas experience. According to the most reliable

estimates, some 304,000 U.S. students studied abroad for credit during
the 2013–14 academic year, which represented about 1.5 percent of all
od
American students enrolled in institutions of higher education that

year. The number of Americans studying abroad seems especially low
compared with the flow in the other direction. International students,
for whom the United States has become the top destination of choice,
so
now make up almost five percent of the total enrollment in U.S. higher
education, split roughly evenly between undergraduate and graduate
programs. According to the Institute of International Education (iie),
the foreign population in U.S. colleges and universities increased by ten
Ma
percent in the 2014–15 academic year, to a record high of nearly 975,000

students, over 30 percent of whom were from China. Put simply, that
means that there are more than three times as many foreigners studying
at U.S. colleges and universities as there are Americans studying abroad
altogether, and about the same number of Chinese students matriculate
in the United States as do Americans anywhere in the world.

m
hi
ha
iT
Al
od
A number of significant obstacles have long stood in the way of

so
more Americans heading overseas during college. First, students at

institutions with a core curriculum may find it difficult to complete all
their requirements on schedule if they go away for a substantial period
of time, and few of those colleges and universities have been inclined
Ma
to offer core courses or approve their equivalents overseas. Some

advisers to premedical students counsel against education abroad, on
the theory that it could somehow make those students less competitive
for admission to the top U.S. medical schools. Other tightly structured
courses of study, such as teacher-training programs, may also discourage
students from straying down international paths.

Sanford J. Ungar
Believing that any season could become a championship season, the

coaches of highly competitive athletic teams (especially men’s teams)
have been known to warn players that they might miss a once-in-a-
lifetime experience if they go abroad at the wrong time. Students in-
volved in other absorbing extracurricular activities, such as student
government or newspapers and radio stations, may also risk losing their
chance to compete for top positions while away. A lack of advanced
foreign-language skills may make students hesitant to enroll in overseas
programs. And some elite universities, while not explicitly discour-
m
aging study abroad, perpetuate the subtle message that students could
not possibly learn enough elsewhere to justify sacrificing important
intellectual and practical opportunities on their home campuses (al-
hi
though some of those institutions are now scrambling to get their
study-abroad percentages up). Finally, many colleges and universities
treat overseas education as essentially “pass/fail,” with grades obtained
ha
overseas not appearing on a transcript, and that may make it seem less
important and less desirable.
Another major obstacle to study abroad is cost: concern about
iT
affordability is the number one reason cited in surveys that explore
Americans’ reluctance to study abroad. At public institutions, which
are less likely to have endowed funds to support overseas education,
the concern is often justified; if a public university does not offer its
Al
own international programs or otherwise underwrite the expense of

studying abroad, a student’s semester or year away could add signifi-
cantly to his or her family’s financial burden. And even intensive short
od
programs, if they are organized outside the standard curriculum

and require additional tuition, can be out of reach for those with
scant resources.
A growing number of study-abroad programs, however, now cost
so
no more—or even less—than ordinary enrollment, and some colleges

permit students to take financial aid overseas with them for a semester
or two. Cooperative arrangements are emerging, especially among
liberal arts colleges, that should eventually produce economies of scale
Ma
and lower costs. Many European countries with excellent universities,

including Finland and Germany, provide students from other nations
the same tuition-free opportunities their own citizens enjoy—and
often in English. U.S. undergraduates of limited financial means who
already qualify for federal Pell Grants may also apply for Gilman
International Scholarships for overseas education; if they are studying a

language on the State Department’s “critical need” list—such as

Arabic, Chinese, or Russian—they may be eligible for a further addi-
tional stipend. Many scholarly associations and foreign governments
also offer grants for language study overseas. And a slowly increasing
number of students are figuring out that they can save money by
enrolling directly in language and other programs overseas, rather than
going through their home institutions.
A BROADER STUDY ABROAD
m
In addition to the relative paucity of U.S. students who study abroad
and the obstacles that stand in the way of increasing that number,
there exists another problem: a lack of curricular and socioeconomic
hi
diversity among those who do go overseas. According to the iie,
for many years, two-thirds of American students who went abroad
majored in the traditional social sciences, the humanities, or business
ha
and management. Only recently has there been a surge of study
abroad by those in the so-called stem disciplines (science, technology,
engineering, and math), to the point where they now represent 23 per-
iT
cent of the total—an improvement, but still an underrepresentation,
given that 36 percent of all U.S. undergraduates major in stem fields.
Knowledge of the world and of different cultural perspectives is, of
course, important in all fields.
Al
More troubling are gaps that exist when it comes to class, ethnicity,
and gender. “The majority of study-abroad students are white, female
liberal arts majors,” notes Marlene Johnson, executive director and ceo
od
of the Association of International Educators (commonly referred to

as nafsa). Minority students, particularly African Americans and
Hispanics, tend to study abroad at lower rates than whites, who now
compose less than 60 percent of the overall undergraduate student
so
population but still make up almost 75 percent of U.S. students over-

seas. In recent years, Johnson says, there has been “some progress on
diversity [in study abroad], but it’s very small.” She blames higher
education administrators for failing to deal adequately with this issue
Ma
and for often quietly discouraging study abroad.

If overseas education remains overwhelmingly a pursuit of the
white elite, it cannot realize its potential to stimulate a broad-based
shift in American perceptions of, and dealings with, the larger world.
American elites, especially on the coasts and in major interior cities,
already tend to have broader, more cosmopolitan views on global affairs

Sanford J. Ungar
than other citizens, and studying and traveling overseas no doubt affirms
those attitudes. But if study abroad were to become a more wide-
spread, mainstream experience, it would have far more profound
effects on American society. One of the most basic promises and pur-
poses of U.S. higher education is to broaden elite circles and make
it possible for anyone to aspire to any position, regardless of his or
her background or ethnicity. Expanding participation in study abroad
will be an important part of realizing that ideal.
As it stands, however, many first-generation college students and
m
children of immigrants likely see study abroad as a luxury or a rite of
passage intended mostly for those from wealthy white families, and
they may consider it more a form of tourism than a serious academic
hi
endeavor. That stereotype is often reinforced in the news media
and in literature and films. But at Goucher, we found that as study-
abroad participation expanded quickly, students from inner-city,
ha
rural, or multicultural backgrounds were among the greatest enthusi-
asts, often adapting far more readily to new environments than their
peers from upper-middle-class suburban families, who might never
iT
even have shared a bathroom as they were growing up. Coincidentally,
studying overseas together sometimes improved relations among
members of different ethnic, social, and religious groups on campus
when they returned.
Al
STEPS IN THE RIGHT DIRECTION

In a tacit recognition of the dangers of isolation from and ignorance
od
of the rest of the world, since the 9/11 attacks, the U.S. government
has stepped up efforts to encourage young Americans to study over-
seas. Few people contributed as much to that goal as the late U.S.
senator Paul Simon, Democrat of Illinois. For decades, he advocated
so
federal challenge grants to encourage making overseas experience part

of the academic preparation of every U.S. college student. After
Simon died, in 2003, federal legislators proposed bills in his memory
that would have set an annual goal of enrolling one million U.S.
Ma
undergraduate participants in credit-bearing study abroad by the year

2020. At the time, that figure represented about half the total number
of people receiving bachelor’s or associate’s degrees every year. The
Senator Paul Simon Study Abroad Foundation Act—which was never
signed into law—also emphasized the importance of diversifying
the gender, ethnicity, income level, and academic major of those

who study abroad; the variety of institutions sending them; and the
geographic range of their destinations.
Senator Dick Durbin, the Democrat from Illinois who succeeded
Simon, now champions Simon’s cause. In 2005, with the support of
President George W. Bush, Durbin introduced a bill creating the
nonpartisan Commission on the Abraham Lincoln Study Abroad
Fellowship Program, with the long-term goal of building an interna-
tionally educated citizenry. The commission’s report, issued later that
year, urged the establishment of what Johnson, of nafsa, called “a
m
bold, visionary study abroad program
that will serve our national interests.”
Although the commission recommended
If overseas education
hi
a relatively small federal investment in remains overwhelmingly a
need-based study-abroad scholarships, pursuit of the white elite, it
it issued a clarion call: “Our national cannot realize its potential.
ha
security and domestic prosperity depend
upon a citizenry that understands Amer-
ica’s place in the world, the security challenges it faces, and the opportu-
iT
nities and perils confronting Americans around the world. Responding
to these realities requires a massive increase in the global literacy of
the typical college graduate.”
More than ten years later, the goals of the Lincoln Commission
Al
remain unfulfilled, but new, narrower ones have emerged. In 2010,

Secretary of State Hillary Clinton established the “100,000 Strong”
initiative to increase to that level the number of U.S. students in
od
China. The Chinese government, supportive of the effort and recog-

nizing that a vast number of Chinese students receive financial aid in
the United States, pitched in with 10,000 scholarships for Americans
who study in China. The goal of increasing the number of U.S.
so
students in China has proved elusive, however. In fact, the number

has been slowly declining: in the 2013–14 academic year, there were
fewer than 14,000 Americans studying there.
In 2011, U.S. President Barack Obama launched a drive to increase
Ma
the number of Americans studying in Latin America (then about

40,000) and the number of Latin Americans studying in the United
States (then about 60,000) to 100,000 annually in each direction.
Progress toward that goal has also been slow, but in the 2013–14
academic year, there was an 8.4 percent increase in the number of
U.S. students in Latin America compared with the prior year. First

Sanford J. Ungar
Lady Michelle Obama got on the bandwagon in 2014 during a trip to

China and in speeches back home, in which she urged that study
abroad be regarded as a key element of U.S. foreign policy and that
more college students participate as “citizen diplomat[s].” She revived
attention to an often-neglected advantage of overseas education: it
helps other societies develop a more favorable view of Americans than
they might otherwise have if all they know of the United States are its
television programs and movies, military interventions, and tourists,
not to mention the anti-American propaganda prevalent in some parts
m
of the world. Last year, the State Department established the U.S.
Study Abroad Office to facilitate overseas arrangements for students
from all backgrounds; this was mostly a symbolic gesture, but it laid
hi
the groundwork for more official, high-level attention to the matter.
The iie, meanwhile, has inaugurated Generation Study Abroad,
which invokes a five-year plan to double the number of American stu-
ha
dents going overseas through cooperation among colleges and univer-
sities, employers, governments, and civic and professional associations.
As a McKinsey Global Institute report noted in 2012, 40 percent of new
iT
jobs in advanced economies around the world now go to foreign-born
workers because of their superior language skills and cross-cultural
competency. In a 2014 paper outlining its goals, the iie concluded
that study abroad amounts to “basic training for the 21st century.”
Al
MAKE IT HAPPEN
So far, efforts to increase the number of Americans studying abroad
od
have been piecemeal and only partially successful. The time has come
to establish a clear and forthright U.S. national education policy that
recognizes the importance of international literacy and global aware-
ness for the future of the United States. This will be essential in the
so
years ahead to ensure U.S. competence and competitiveness in a

rapidly evolving world. It will not be easy to eliminate from U.S.
political discourse the routine invocations of American superiority
and invulnerability, complete with divine blessings, which no longer
Ma
have credibility beyond U.S. borders. But at a minimum, it must

become acceptable for presidents and other politicians to acknowl-
edge openly that Americans may find ideas and inspiration abroad.
The United States will need many more civil servants, congressional
staff members, leaders of business and science, and journalists with
international exposure. This is a long-term process that has nothing to

do with partisan rivalries or political posturing, and it will take a

generation or more to see progress. But it is essential to begin, and a
good place to start is in U.S. institutions of higher learning.
There are other ways for Americans to learn about the world, of
course. Many who serve overseas in the military come back commit-
ted to global understanding, and a growing number of academics now
frequently conduct joint online courses
and other online exchanges with students
from other countries. Many nontradi-
Within a decade, at least a
m
tional students simply cannot go abroad third of all American
due to obligations and responsibilities undergraduates should
at home; institutions must find other have access to an affordable
hi
ways to deepen their understanding of
the world. But only through a national study-abroad program.
commitment to encouraging and financ-
ha
ing a dramatic long-term expansion of overseas study by American
students can the United States begin to build a more healthy relationship
with the rest of the planet.
iT
The goal must be ambitious: within a decade, at least a third of all
Americans pursuing an undergraduate education should have access,
without financial hardship, to an academically rigorous study-abroad
experience ranging in duration from a few weeks to a full academic
Al
year. Longer programs are preferable to shorter ones, and opportuni-

ties for immersion in host cultures are better than “bubble” programs,
where Americans are exposed almost exclusively to one another. But
od
given the degree of most Americans’ ignorance of international issues

and sensibilities, the crucial first step is to cross the threshold of
awareness. Any study-abroad experience is better than none at all.
After 2026, participation in overseas education should continue to
so
expand annually, with an ultimate goal by midcentury of universal

access among undergraduates and a concerted effort along the way to
include many more students from graduate and professional schools.
To achieve such objectives, study abroad will need significant finan-
Ma
cial support from both the public and the private sectors. Congress
should enact a new, modern counterpart to the ndea, providing
federal funding for study abroad as a critical investment in the national
security of the United States, just as the 1958 law was intended by
President Dwight Eisenhower to advance the country’s technological
sophistication. Key officials from the executive and legislative branches,

Sanford J. Ungar
along with respected leaders of business and higher education, will

have to use their bully pulpits to promote this cause, with major corpo-
rations providing supplemental funds through fellowships, incentive
grants, and research opportunities. Models for such support already
exist: the initiative to increase study-abroad exchanges between the
United States and Latin American countries features the 100,000
Strong in the Americas Innovation Fund, whose contributors include
Santander Bank and the Coca-Cola and ExxonMobil Foundations.
Educators and advocates should also encourage states and cities that
m
rely on international ties to participate politically and financially, send-
ing their students overseas and inviting their counterparts to the
United States. Existing programs sponsored by the Rotary Foundation
hi
and other service organizations may be another useful model.
To address the immediate obstacles posed by the cost of studying
abroad, the federal government should amend its student loan program
ha
to provide forgiveness of a percentage of a student’s debt if he or she
has had a credit-bearing international experience that meets certain
quality criteria—just as some teachers, law enforcement officers, and
iT
other public service professionals now benefit from such provisions.
Any costs associated with that experience overseas, up to $10,000 a
year, should also be deductible on federal (and perhaps some state and
local) income tax returns; legislators could create a means test for this
Al
deduction, as they have done in other areas.

To increase the diversity of the Americans who study abroad,
municipal and state governments, backed by philanthropic foundations,
od
should help colleges and universities recruit more of their minority

and lower-income students to go overseas. Pell Grants and Gilman
Scholarships offer useful precedents and guidelines. Institutions of
higher education should also go out of their way—as McDaniel
so
College, in Maryland, has done, for example—to provide study-

abroad experiences for learning-disabled students who might other-
wise be denied the opportunity. It is not difficult to foresee a day
when colleges and universities compete on the basis of how many of
Ma
their students go abroad, as they do now on the percentage of Pell

Grant recipients they enroll and the number of recent alumni who
go on to graduate education.
To give students an extra incentive to study abroad and to increase
the chances that doing so will represent not just a valuable experience
but also a good investment, the federal government, and possibly

some state and local governments, should provide those who have
studied abroad with an affirmative hiring preference for jobs that deal
with international matters, much like the advantages that benefit
military veterans. Meanwhile, the faculties of U.S. colleges and uni-
versities also need to improve their international awareness. The U.S.
Departments of State and Education, working together, should estab-
lish a program of competitive grants to provide for and reward inter-
national experiences for faculty members in all academic fields and
for certain staff members, as well. (Nafsa is already conducting
m
“global learning colloquia” for faculty, which focus on strategies to help
students develop the knowledge and skills they need to engage with
the wider world.)
hi
The recent paralysis in Congress and the vigorous antipathy of
conservatives toward any proposals for increased government
spending might lead seasoned observers to be skeptical of the pros-
ha
pects for a comprehensive national policy supporting study abroad
and greater international awareness. But both political parties include
an internationalist wing, and a focus on the importance of this issue
iT
to national security could bring them together to support a significant
bipartisan effort.
To defeat violent extremism and surmount other formidable
political and economic challenges in the international arena, Ameri-
Al
cans will have to stop preening and begin trying to understand how
the world looks through others’ eyes—and how determinedly the
rest of the world resists U.S. supervision and dominance. The only
od
prospect for beginning that transformation lies in broadening the

basic definition of an excellent higher education to include direct
exposure to other cultures and their ways of dealing with shared
problems. As successive generations emerge with this perspective,
so
their impact will grow; change will become inevitable. The interna-
tional scene will still be full of tyrants petty and grand, and the need
to defend the United States and help others defend themselves will
hardly disappear overnight. But the United States would be able to
Ma
function far more effectively if its people and its leaders felt more
comfortable in the world.∂

Japan’s New Realism

Abe Gets Tough
Michael Auslin
m
L
ast September, tens of thousands of opponents of Japanese
Prime Minister Shinzo Abe gathered outside the National
hi
Diet building in Tokyo, often in torrential rain, holding placards
and shouting antiwar slogans. They were there to protest the imminent
passage of legislation designed to allow Japan’s military to mobilize
ha
overseas for the first time in 70 years—a shift they feared would
undermine Japan’s pacifistic constitution and encourage adventurism.
On September 17, Japan’s normally sedate parliament dissolved into
iT
scuffles as opposition politicians tried and failed to prevent a vote on
the bills, which ultimately passed.
They and the protesters may have failed in their objective, but
they got something right: Japan’s foreign policy is indeed chang-
Al
ing. Since returning to power in September 2012, Abe has pushed

through a series of institutional, legal, diplomatic, and military
reforms that are reshaping Japan’s national security posture and
od
that promise to enhance Japan’s regional role over the coming decade.
Responding to rapid changes in the region, particularly the dramatic
increase in China’s power, Japan’s prime minister has distanced
his country from its postwar pacifism—which was predicated on a
so
benign view of the international system—and unveiled a new, more

realist foreign policy.
Japan’s pacifism, which many Japanese see as key to their country’s
postwar identity, dates to 1946. That year, the country, still occupied
Ma
by the United States, accepted a U.S.-drafted constitution forbidding

Japan from maintaining a military with the potential to wage war. When
the U.S. occupation ended, in 1952, Tokyo essentially outsourced its
MICHAEL AUSLIN is a Resident Scholar and Director of Japan Studies at the American
Enterprise Institute. He is the author of a forthcoming book on geopolitical risk in Asia.
Follow him on Twitter @michaelauslin.

Michael Auslin
defense to its new ally, Washington. In the decades that followed,

Japanese leaders also put their faith in the liberal international institu-
tions, such as the un, that defined the postwar world.
In recent years, however, Abe has increased the defense budget
and loosened the constitutional restrictions on Japan’s military,
passing laws that allow it to cooperate with partners in limited security
operations. Bidding for a larger leadership role in Asia, he has deep-
ened the country’s engagement with regional groups, such as the
Asia-Pacific Economic Cooperation forum and the Association of
m
Southeast Asian Nations, and he has strengthened the U.S.-Japanese
alliance. He has also built military ties with other democracies in
Asia, including Australia and India.
hi
Taken together, Abe’s actions, and those of some of his predecessors,
will enable Japan to play a larger role in defending its interests and
contributing to regional stability. Although controversial both at
ha
home and abroad, changes in Tokyo’s foreign and security policies
are a positive step, moving Japan toward a regional posture more
commensurate with its economic strength. They enhance the U.S.-
iT
Japanese alliance and serve as a liberal counterweight to China’s
increasingly assertive challenge to Asia’s rules-based order.
JAPAN GETS REAL

Al
Since the end of the Cold War, Tokyo has expanded the primary goal
of its defense policy from defending the Japanese home islands to
also protecting its far-flung maritime possessions—small, largely
od
defenseless islands, such as Yonaguni, located just off Taiwan, more

than 1,200 miles from Tokyo. To that end, it has sought to uphold
freedom of navigation and an open, rules-based order in Asia. It
has stepped up its military preparedness and strengthened security
so
cooperation with an expanding set of partners.

These shifts in Japanese policy can be traced to the uncertainty that
followed the collapse of the Soviet Union in 1991. Almost overnight,
the original rationale for the long-standing U.S.-Japanese alliance
Ma
disappeared, and the future of East Asia’s security order—not to

mention the future of the U.S. presence in the western Pacific—
became uncertain. As the United States struggled to craft a post–
Cold War global strategy, the U.S.-Japanese alliance entered a period
of drift, tied in part to questions about Washington’s commitment to
the region in the new era.

m
hi
ha
Seeing red: Shinzo Abe at the Defense Ministry in Tokyo, December 2015
In August 1990, less than a year after the fall of the Berlin Wall,
iT
Iraq’s Saddam Hussein invaded Kuwait. Washington assembled a
huge military coalition to oust him, but Tokyo refused to send troops,
paying $13 billion instead to help defray the costs. The move failed
to win Japan much credit, however. Critics in the United States and
Al
elsewhere widely derided it, and the episode, which raised new ques-
tions about Japan’s ability to translate its economic might into strategic
clout, tarnished the country’s image as a leading global power.
od
Then, in 1998, North Korea launched a ballistic missile over the

island of Honshu. This was Tokyo’s “Sputnik moment”: raising Japan’s
sense of insecurity and fears that its key ally might not be able to protect
it from new threats. And Japan suddenly realized that it was facing
so
what could become an existential threat from a rogue regime known

to be pursuing nuclear weapons.
A final, ongoing reason for Japan’s strategic evolution has been the
steady rise of China as a political, economic, and military power.
Ma
Long accustomed to being the major player in Asia, Tokyo has recently
I S S E I K AT O / R E U T E R S
been forced to contemplate a future in which Beijing will dominate

the region.
Together, these shifts have helped erode Tokyo’s commitment to
pacifism and have undermined its leaders’ belief that international
institutions alone can be trusted to shape the future. In response,

Michael Auslin
Japanese leaders have embraced a sort of classical realism, predicated

on the belief that nations seek power above all else and that the only
way to defend Japan is to forge stronger security partnerships and
pursue a more activist foreign policy.
This new worldview has led Japan to seek closer security coopera-
tion with the United States. After 9/11, then Prime Minister Junichiro
Koizumi surprised many Japanese by agreeing to support the U.S.-led
“war on terror.” Unable to send combat troops, since that would have
violated Japan’s constitutional ban on “the threat or use of force
m
as means of settling international dis-
Seven decades after World putes,” Koizumi dispatched Japan’s
Maritime Self-Defense Force to the
hi
War II, Japan is once again Indian Ocean to support allied combat
becoming a player of some operations in the region. He also sent
significance in Asia. ha Japanese reconstruction troops to Iraq
in February 2004 and deployed an Air
Self-Defense Force team to transport
supplies between Kuwait and Iraq. Finally, between 2002 and 2009,
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Tokyo pledged $1.4 billion in aid to Afghanistan.
When Abe first became prime minister—he succeeded Koizumi
in 2006—he pushed through a number of laws to allow for greater
security cooperation with Japan’s partners. He also conducted a review
Al
of Japan’s ban on sending troops overseas and proposed the creation

of a national security council and a centralized intelligence organization
to modernize planning.
od
But just one year into the job, Abe resigned when his ruling Liberal
Democratic Party lost control of the upper house of the Diet. And
when the Democratic Party of Japan (dpj) took over the lower house
in 2009, Yukio Hatoyama, the new prime minister, shelved Abe’s
so
ambitious security reforms. Hatoyama, who felt that Japan’s future lay
with Asia, not the United States, drove a wedge between Washington
and Tokyo by fighting a plan to relocate a U.S. Marine Corps base on
Okinawa and attempted to reorient Japan toward China and South
Ma
Korea. Like Abe, however, Hatoyama lasted only about a year in

office. His successor, Naoto Kan, scarcely did better: overwhelmed by
the 2011 tsunami and the subsequent Fukushima nuclear crisis, he was
forced to resign in September 2011.
The next dpj prime minister, Yoshihiko Noda, adopted a more
conservative foreign policy, reemphasizing close ties with the United

States and taking a harsh tone toward China, which he identified (along
with North Korea) as Japan’s main strategic threat. Noda agreed to
purchase the F-35 stealth fighter jet and eased a 1960s-era de facto ban
on exporting weapons. Noda also joined negotiations over the Trans-
Pacific Partnership, supporting Washington in its attempt to establish
a free-trade bloc of largely liberal nations that excluded Beijing.
Perhaps most significant, Noda nationalized three islands in the
Senkaku chain (known as the Diaoyu chain in China) also claimed by
China and Taiwan. Since the return of Okinawa to Japanese control in
m
1972, Japan had administered these privately owned islands, but in
September 2012, to prevent their purchase by the right-wing gover-
nor of Tokyo, Noda had the Japanese government buy them instead.
hi
Although Noda’s move was meant to block an even sharper provoca-
tion, it dramatically worsened Japan’s relationship with China.
Beijing responded by sending private fishing boats and maritime
ha
patrol vessels into the waters around the islands on a regular basis,
and Noda began warning that China sought to undermine Japan’s
administrative control of the Senkakus as a first step toward chal-
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lenging its territorial claim. Beijing’s actions raised alarms in Japan
about China’s growing military strength, its presence in the East
China Sea, and the threat China posed to Japan’s southwestern island
chain (which stretches from the southernmost island of Kyushu to
Al
just off Taiwan). The defense of these islands and the seas around
them thus became the focus of Japan’s new strategic vision, which it
would be under Abe as well, when he returned as prime minister in
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December 2012.
ABE’S GRAND STRATEGY

Before Abe could set his new policies in motion, however, he had to
so
dismantle the various postwar restrictions that blocked Japan from

using force abroad. His first move was to get the Diet to approve the
creation of a national security council in November 2013, dusting off
plans from his first term. Abe picked his close adviser Shotaro Yachi
Ma
to run the new body and staffed it with personnel from the Foreign
and Defense Ministries. He then directed the council to draw up a
new national security strategy and approve the formal five-year guide-
lines that inform Japan’s defense procurement plans. The National
Security Council also coordinates Japan’s security policy and serves as
a central body for crisis planning and response.

Michael Auslin
Abe was able to make these institutional changes with relatively

little fanfare. His broader reforms to Japan’s security policies sparked
far more controversy, however—especially his efforts to ease the arms
export ban. The prohibition had long cut off Japan’s defense industry,
whose ten largest companies had only
about $7.25 billion in domestic contracts
Japan will need to play a in 2012, from the global market and the
global role commensurate international research-and-development
with its size and economic community, thus forcing it to produce
m
strength. products that were often one and a half
times as expensive as comparable for-
eign models, and sometimes more. In
hi
2014, Abe received Diet approval to expand the types of arms Japan
could export and allow Japan to cooperate more closely with the
United States and other partners on defense technology.
ha
Abe’s next move—pushing through laws to allow Japan’s military to
mobilize abroad—sparked even more public outcry. Japan’s constitu-
tional prohibition on collective self-defense had created various
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awkward problems for the country over the years; among other things,
it required the Diet to pass a special law every time Japan wanted to
deploy its forces overseas. Now, under Abe’s reform (which was passed
by parliament last September), the government has the right to assist
Al
allies whose forces or territory are under attack and provide logistical
support to countries engaged in military operations that do not directly
concern Japan’s security.
od
Abe has also begun to boost Japan’s military capabilities. After a decade
of military stagnation, he has gradually increased the defense budget: by
2.9 percent in 2014 and 2.8 percent in 2015. In December 2015, the Diet
passed an increase of 1.5 percent for 2016, which would bring Japan’s total
so
annual defense spending to a record $42.4 billion. These additions pale

in comparison to China’s $132 billion defense tab in 2014 and double-digit
budget hikes in recent years. Yet they are nonetheless significant. Abe has
reaffirmed Noda’s plan to buy 42 F-35 fighters and has announced his in-
Ma
tention to purchase 17 Osprey tilt-rotor aircraft and 52 amphibious assault

vehicles. He has also pledged to build two new destroyers and to increase
Japan’s submarine force to 22 modern diesel boats. Japan’s Ministry of
Defense also intends to buy three top-of-the-line surveillance drones and
around 20 new maritime patrol planes to replace old models, as well as
to upgrade Japan’s ballistic missile warning systems and satellites.

Tokyo has already bolstered its defenses in the southwestern island

chain, building radar sites on Yonaguni Island, near Taiwan, and
constructing bases on three more key islands in the area. By 2020,
Abe intends to place up to 550 troops on Amami Oshima, the largest
island between Kyushu and Okinawa; he has also started setting up
bases on Ishigaki and Miyako, near the Senkaku chain, to facilitate the
quick deployment of military personnel in a crisis. All told, nearly
10,000 Japanese troops will be stationed on islands in the East China
Sea, along with a network of antiship and antiaircraft missiles there.
m
And in August 2015, Abe launched the country’s second Izumo-class
helicopter carrier, which has dramatically strengthened Japan’s ability
to project force in its territorial seas.
hi
GOOD FENCES MAKE GOOD NEIGHBORS
As significant as Abe’s domestic security reforms have been, it is his
ha
foreign initiatives that have revealed the true scope of his ambition. Not
content for Japan to keep acting as a sort of international bystander,
Abe has made more than 40 trips abroad since 2013 and has used
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visits to Canberra, Singapore, and Washington, D.C., to lay out his
foreign policy vision.
Abe has also attempted to reassure critics that Japan will never
again engage in offensive war. To drive home this message, he has
Al
made nonmilitary diplomacy a large part of his foreign outreach.

His government has raised Japan’s profile in various multilateral
institutions, such as the East Asia Summit and the Association of
od
Southeast Asian Nations, by raising questions of maritime security,

and in October 2015, it signed the Trans-Pacific Partnership treaty.
Underscoring his growing regional influence, in 2015, Abe also suc-
ceeded in getting a reference to stability in the South China Sea
so
added to the final communiqué issued by the East Asia Summit,

despite Chinese opposition.
Throughout the Cold War, Japan remained largely isolated in
Asia, with the United States as its only ally. In part because Japanese
Ma
relations with China and South Korea have become strained, Abe
has built new relationships with Australia and India and strengthened
ties with Southeast Asia. Abe has also resurrected the political and
security dialogue he began in 2007 with Australia, India, and the
United States, part of an initiative to create a community of liberal
interests in Asia. And unlike his predecessors, who maintained primarily

Michael Auslin
diplomatic relations with those countries, he has made security coop-

eration a key element of his diplomatic and economic outreach.
Japan’s closest relationship in Asia may be with Australia; Japanese
officials have described it as a “quasi alliance.” In 2014, the two coun-
tries signed an agreement that enhanced the sharing of information and
defense technology. Last November, Tokyo submitted a formal offer to
build advanced submarines for the Royal Australian Navy, which would
allow the two countries’ navies to work together more closely.
Nearly as high on Abe’s list of partners is India. Abe enjoys good
m
relations with Prime Minister Narendra Modi and has declared a
“special strategic and global partnership” with New Delhi. He also
joined the United States in participating in the Malabar naval exercise
hi
hosted by India in 2015, and India and Japan have discussed the pos-
sibility that New Delhi might purchase Japanese submarines and
search-and-rescue planes, which would help the Indian navy patrol
ha
the eastern Indian Ocean, where Chinese ships increasingly roam.
Tokyo is seeking to play a similar role in Southeast Asia, where a
number of other countries are increasingly finding themselves targeted
iT
by China’s territorial claims. Abe has championed Japan’s role in
maintaining maritime security and freedom of navigation, position-
ing his country as the defender of a liberal, rules-based order in the
region. In 2015, Tokyo signed strategic partnership agreements with
Al
Indonesia, Malaysia, the Philippines, and Vietnam. Abe has also

agreed to give six maritime patrol vessels to Vietnam and sell three to
Indonesia, has loaned Manila the money to purchase ten maritime
od
patrol vessels, and has announced plans to loan used surveillance

aircraft to the Philippine navy. Last May, Japan and the Philippines
conducted their first joint military exercises, and Vietnam agreed to
joint naval exercises last November.
so
Abe has also reached out to Europe, attempting to position Japan as

the continent’s main Asian partner. In 2014, he formalized Japan’s ties
to nato by concluding an “individual partnership and cooperation
program” and signaled his interest in joining a nato missile-building
Ma
consortium. Abe has also deepened Japan’s bilateral defense ties with
France and the United Kingdom by signing a military equipment
and technology transfer agreement with the former and a defense
equipment cooperation agreement with the latter.
Above all, Abe has taken several moves to strengthen Japan’s most
important strategic relationship: its alliance with the United States.

In April 2015, Tokyo and Washington upgraded their ties for the first
time since 1997, announcing that they would start cooperating more
closely on maritime security and regional stability. The two nations
also agreed to work together to deal with ambiguous security situa-
tions that fall short of formal conflict and to jointly respond to threats
in space and cyberthreats.
REMAKING ASIA
By slowly eliminating its restraints on security cooperation, by deep-
m
ening its relationship with the United States, and by emphasizing
more muscular, liberal rhetoric, Abe’s Japan has positioned itself as a
sort of anti-China in Asia and beyond. Yet many of the other restrictions
hi
on Japan’s military remain in place, and these will not be revoked
anytime soon. Japan’s society would not allow its military to play a
more normal role in dealing with foreign crises; the Japanese also
ha
remain highly wary of entangling alliances.
Yet many of Japan’s elites—who are worried about the threats
from China and North Korea and who fear that the United States is
iT
distracted by crises in the Middle East and Ukraine—have embraced
the country’s new realism. Leading thinkers, including the journalist
Yoichi Funabashi, the former diplomat Kuni Miyake, the political
scientist Koji Murata, and the former defense minister Satoshi
Al
Morimoto, are among those writing and speaking about the need for
a more muscular Japanese posture. Indeed, there is a growing com-
munity of academics, policy analysts, and politicians who believe
od
that Japan must do more to ensure its own security, as well as to help
support the global system that has protected it since the end of
World War II.
As Abe expands Japan’s global role, his policies will include new
so
activities abroad and entail deeper security cooperation with existing

partners. The more unstable the global environment becomes, the more
Japan will need to play a global role commensurate with its size and
economic strength. That role should take advantage of multilateral
Ma
organizations, but it will, realistically, privilege Japan’s security.

After decades of stagnation in Japan’s foreign and security policies,
the new posture will contribute to the maintenance of Asia’s liberal
post–World War II order over the coming decade and beyond.
Abe’s policies, which build on some of those of his predecessors,
are a series of small yet interlinked steps that will enhance Japan’s

Michael Auslin
security, diplomacy, and economy. In focusing primarily on stemming

the growing threat from China, Abe is attempting a tricky balance:
to prevent the souring of relations between Beijing and Tokyo but
also to keep Asia’s balance of power from tilting too far toward China.
Abe’s plans are controversial, but a healthy democratic tension
between a largely pacifistic populace and an elite that worries about
emerging threats to Japan’s security will likely help Tokyo avoid the
extremes of isolation, on the one hand, and intervention, on the
other. In openly advocating liberal values, Abe is making clear that
m
he recognizes Japan’s responsibility to preserve stability. Japan’s new
policies are particularly important in ensuring that the U.S.-Japanese
alliance, which remains perhaps the key guarantor of regional peace,
hi
will remain a credible and robust instrument in the coming decades.
Seven decades after the end of World War II, Japan is once again
becoming a military player of some significance in Asia, as well as a
ha
political force. Yet unlike during the 1930s, when ultranationalism
propelled Japan onto a disastrous path of invasion and war against its
neighbors, today Japan is shedding old restraints so as to strengthen
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and defend the open, liberal system that has enriched Asia and led
to decades of general stability. In a world where resurgent author-
itarian powers threaten global peace, Japan’s new realism will help
shape the next decade in the Pacific and ensure that no one power
Al
dominates Asia.∂
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so
Ma

The Next Front on

Climate Change
How to Avoid a Dimmer, Drier World
m
Veerabhadran Ramanathan, Jessica Seddon,
and David G. Victor
A hi
fter dithering for decades, governments finally seem to be pay-
ha
ing serious attention to the problem of global climate change.
Late last year, at the Paris climate conference, they adopted a
major new agreement to limit global warming, beginning a process to
iT
strengthen commitments to reduce greenhouse gas emissions over time.
For many observers, the promises of the Paris conference offer too little,
too late, because emissions are high and still rising and because there will
be major disruptions to the climate even if countries meet their emissions-
Al
reduction pledges. Nevertheless, it had been 18 years since the world’s

governments left a major climate summit with an agreement in hand, so
just getting to yes in Paris has offered climate diplomacy fresh credibility.
od
Until now, governments have focused on limiting the greenhouse

gases that cause global warming and its attendant hazards, such as rising
sea levels and stronger storms. But there is more to climate change than
higher temperatures. Many of the activities that cause greenhouse gas
so
emissions—burning coal for power, diesel for transport, and wood for
cooking, for example—also yield ultra-small particles known as aerosols,
Ma
VEERABHADRAN RAMANATHAN is Distinguished Professor of Atmospheric and

Climate Sciences at the Scripps Institution of Oceanography at the University of California,
San Diego.
JESSICA SEDDON is Founder and Managing Director of Okapi Research and Advisory
and a Senior Fellow at the Centre for Technology and Policy at the Indian Institute of
Technology Madras.
DAVID G. VICTOR is a Professor at the School of Global Policy and Strategy at the
University of California, San Diego, and the author of Global Warming Gridlock: Creating
More Effective Strategies for Protecting the Planet.

Veerabhadran Ramanathan, Jessica Seddon, and David G. Victor
which blanket vast areas in a haze that blocks and scatters sunlight. By
reducing the solar energy that reaches the earth’s surface, aerosols
reduce evaporation and slow the water cycle that governs where, when,
and how much rain falls.
For years, climate scientists have believed that a warmer world would
be wetter, because higher temperatures hasten evaporation and increase
rainfall. But even when these higher temperatures are accounted for, a
world dimmed by aerosols will in fact be drier in many places—including
some areas, such as the Sahel and other regions in sub-Saharan Africa,
m
that have long suffered from drought because they rely on rainfall to
sustain subsistence agriculture. According to many of the most reliable
models, such as those produced by the National Center for Atmospheric
hi
Research and Princeton University’s Geophysical Fluid Dynamics
Laboratory, China, North America, and South Asia are also in danger
of more frequent and severe droughts owing to aerosols. Indeed, for
ha
much of the world, aerosol-induced dimming and drying are among the
most immediate dangers posed by pollution.
The good news is that swift action on aerosols is possible, with huge
iT
potential benefits. Many of the tools needed to make rapid cuts to aero-
sol emissions are already available, and policymakers around the world—
notably in Europe and the United States, and also in East Asia—have
shown how to use them. Since aerosols have a short atmospheric life
Al
span, the climatic benefits of emissions cuts would appear quickly, within
only a couple of decades. What is more, speedy action on aerosols would
bring huge global health benefits: roughly seven million people die each
od
year from causes related to particulate pollution, and cutting down on

aerosols would dramatically reduce the death toll. In light of these
potential benefits, governments around the world should ensure that
aerosols play a central role in their environmental policies by encouraging
so
the development and deployment of cleaner technologies for power gen-

eration, transportation, and household cooking, heating, and lighting.
Measures to limit aerosol pollution tend to receive less public attention
than the broader campaign against greenhouse gases, but they, too, should
Ma
be an essential component of global action against climate change.
DIMMER AND DRIER

Climate scientists have known about the dimming effect of aerosols
since at least the 1970s, but most research has focused on their effects
on temperature. Darker aerosols, such as diesel soot and other kinds

The Next Front on Climate Change
m
hi
ha
Throwing shade: a farmer burns paddy husks in Chandigarh, India, October 2003
of black carbon, absorb sunlight and accelerate warming. But lighter
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aerosols, such as the sulfates and nitrates formed from coal, gasoline,
and other fuel emissions, cool the planet by reflecting sunlight back
into space. That explains, in part, why the world hasn’t seen more of a
temperature increase from the greenhouse gases already present in
Al
the atmosphere. (This masking effect is powerful enough that some

advocates of geoengineering have proposed injecting more reflective
aerosol particles into the atmosphere in order to cool the earth.)
od
Focusing on how aerosols affect temperature, however, has distracted

policymakers from the important and distinct effects that aerosols
have on the water cycle. These effects are most pronounced in the
Northern Hemisphere, which is the source of most of the world’s
so
aerosols and thus suffers the most dimming from these pollutants.
But because air currents tend to carry pollution, water droplets, and
water vapor far from their origins, aerosols produced in one region
can also affect rainfall far afield.
Ma
REUTE RS / KAMAL KISHO RE
Since the 1880s, when reliable record keeping began, global tempera-
tures have increased by about 0.9 degrees Celsius. And as the planet
has warmed, rainfall at latitudes above 45 degrees has generally
increased. But twice since the mid-twentieth century, surges in aerosol
emissions have significantly disrupted this pattern, reducing rainfall
in a number of regions.

The first disruption was the result of the sulfur dioxide emissions
produced by the massive combustion of coal and other fuels across
Europe and North America in the mid-twentieth century, driven by
rapid industrial growth after World War II. From the 1950s to the late
1980s, global emissions of sulfur dioxide
In 2010, China and India (which in the atmosphere becomes
sulfate, a reflective aerosol) nearly dou-
received between ten and bled, reducing the amount of sunlight
15 percent less sunlight than reaching the earth’s surface by about
m
they did in 1970. two percent, on average. As a direct
result of this dimming, average rainfall
in the Northern Hemisphere declined by
hi
between three and four percent over the same period. Indeed, there is
strong evidence that sulfur dioxide emissions in the United States and
western Europe contributed to the Sahelian megadroughts that began
ha
in the 1960s and continued through the 1990s, a period during which
precipitation in the Sahel and some other parts of sub-Saharan Africa
fell by between 25 and 50 percent relative to twentieth-century averages.
iT
Thanks to stringent air pollution laws introduced in the 1970s and
strengthened steadily in the following years, the blanket of aerosols
over Europe and North America has thinned since the 1980s. From 1980
to 2000, the average amount of sunlight that reached the earth’s surface
Al
in these regions increased by about four percent—enough to lift average

annual precipitation on land areas in the Northern Hemisphere by a
similar magnitude.
od
A second surge in aerosols is now playing out in East Asia and

South Asia. These regions, which have rapidly industrialized over the
past four decades, have seen a two- to fourfold increase in sulfur dioxide
and black carbon emissions since the 1970s. As a result, in 2010, China
so
and India received somewhere between ten and 15 percent less sunlight
than they did in 1970. As the wind has carried sulfates and black carbon
over thousands of miles, the dimming effect has extended to the atmos

phere over the Indian Ocean, reducing the evaporation of seawater and
Ma
thus weakening the monsoons that bring much-needed water to East

Asia and South Asia every year. From 1950 to 2002, the most recent pe-
riod for which estimates are available, there was a seven percent decrease
in average annual rainfall over the Indo-Gangetic Plain, the fertile belt
of land crossing eastern Pakistan, northern India, and Bangladesh that
is home to more than one billion people, many of them dependent on

rain-fed agriculture. Over the same period, summer monsoon rainfall

in parts of northern China decreased by more than ten percent.
The desiccation of China’s north and the region’s recent drought, in
2010 and 2011, have affected not only agriculture but also other water-
dependent activities, such as hydroelectric power generation. The
consequences have worried Chinese authorities to such a degree that
they are building canals and pipelines that will eventually divert some
1.6 trillion cubic feet of water to the region each year. Some of China’s
repressive policies toward water-rich Tibet are motivated by the
m
Chinese government’s desire to maintain control over the nation’s
fragile water supplies and their hydropower potential.
China has the capacity and the financial means to protect itself from
hi
erratic precipitation by investing in water infrastructure. So do other
relatively wealthy countries, which can also respond to droughts by
importing more water-intensive products and refocusing domestic eco-
ha
nomic activity on crops and industries that are less dependent on
precipitation. Strategies such as these, along with aggressive measures
to improve water-use efficiency, have allowed California, for example, to
iT
grow its economy even as it suffers its worst drought in modern history.
But things are different in much of the developing world, where
water infrastructure and state capacity are more limited and a higher
proportion of the population depends on locally sourced food pro-
Al
duced on rain-fed land. In South Asia, for example, 60 percent of the

agricultural land is rain-fed. That proportion reaches 90 percent in
Latin America and 95 percent in sub-Saharan Africa. Many countries
od
in these regions can’t easily turn to infrastructure and trade to solve

their food production problems because of limited budgets and
because they lack the capacity to rapidly shift production to new crops
and industries. And many of these countries are particularly dependent
so
on agriculture: nearly half of all employment in India is in farming,

and even in richer Brazil, agricultural laborers account for 15 percent
of the work force. All told, more than 400 million farmers, along with
their dependents, count on rain-fed agriculture for their livelihoods.
Ma
Countries such as Brazil, Colombia, Sudan, and Zimbabwe, which

rely on hydropower for between 60 and 80 percent of their electricity
generation, face additional risks from the dimming.
Forty percent of the world’s population is already expected to live
under severe water stress by 2050. That proportion will likely increase
as aerosol-induced dimming further disrupts the water cycle. And as

governments around the world are beginning to realize, water scarcity

is not only an economic and humanitarian challenge but also a geopo-
litical one: as supplies of fresh water dwindle, states will begin to
jockey for access to them, as they already have, for example, in north-
eastern Africa, where Egypt has squabbled with Ethiopia over its
construction of a massive hydroelectric dam on the Blue Nile.
CLEANING THE AIR

Although the costs of aerosol-induced dimming are high, the policies
m
needed to reduce the pollution that causes it are relatively clear. Cutting
aerosols will require action in three main sectors: electric power gen-
eration, transportation, and household energy services for the poor.
hi
With regard to electric power generation, most of the concern
about aerosols centers on burning coal, which is responsible for more
than 70 percent of the world’s sulfur dioxide emissions. Given its
ha
environmental and health impacts, conventional coal power is in-
creasingly hard to justify. So if coal is to remain part of the global
energy mix in the coming decades, coal-fired power plants will need
iT
to become more efficient and include equipment to remove sulfur
dioxide and other pollutants from their emissions. As the technology
to do so improves, new coal plants will also need to capture and store
carbon dioxide emissions—an expensive prospect. At the same time,
Al
governments and firms will have to invest more in other energy

sources. Natural gas, which emits much lower levels of most pollutants
(including aerosols) than coal does, is one option, and in North
od
America, the shale boom has dramatically cut the cost of supplying
it. Making gas friendlier for the climate and the water cycle will
require more work to plug leaks in the natural gas supply and trans-
mission system (since those leaks release methane, a potent green-
so
house gas), and it will require greater frugality in the use of water to
drill and frack shale gas wells. Of course, there are also many options
beyond natural gas, such as nuclear, solar, and wind power.
Regulators in California and the European Union, meanwhile, have
Ma
already pioneered policies that cut aerosol emissions from transporta-

tion. They have mandated cleaner fuels and combustion technologies,
such as low-sulfur diesel and exhaust systems equipped with efficient
particulate filters and catalytic converters. Officials elsewhere should
follow their lead, and they should pair these regulations with rigorous
compliance regimes, which are currently lacking in many countries.

Eliminating combustion altogether, perhaps through electric vehicles,

could be a next step. In the meantime, subsidy reforms can help limit
the use of some of the dirtiest fuels. Changes to India’s fuel-pricing
regime, for example, have encouraged car buyers there to shift from
diesel to gasoline engines, which emit far fewer aerosols. Transition-
ing large commercial and public-transportation vehicles to natural
gas could also help.
Cutting aerosol emissions produced by burning dirty fuels in the
world’s poorest households is another way to reduce global dimming.
m
Just over one billion people, most of them in the developing world,
rely on kerosene to light their homes, and three billion use solid fuels,
such as crop residue and dung, for cooking and heating. Burning these
hi
fuels with traditional technologies generates aerosols that damage
lungs along with the climate: the particulates emitted by biomass-
based cooking and heating are responsible for about a third of the
ha
dimming in South Asia. Cleaner technologies for cooking, heating,
and lighting, such as energy-efficient cookstoves and solar lanterns,
are readily available, and making them universally accessible would
iT
offer huge health and environmental benefits to the world’s poor. En-
suring such access by 2030 would cost up to $50 billion per year—a
high price, but one that should be manageable if it is shared among a
number of states, including rich countries, which would themselves
Al
benefit from lower aerosol emissions in the developing world.

Since aerosols have a short atmospheric life span, pursuing policies
such as these could significantly reduce global dimming within ten
od
or 20 years. That would dramatically limit the risk of droughts and

irregular monsoons. It would also heat up the planet by reducing the
atmosphere’s reflective aerosol “mask,” however, so any effort to reduce
global dimming must be accompanied by significant cuts to carbon
so
dioxide and other greenhouse gas emissions.
ACT FAST
As governments build on what they achieved at the Paris climate confer-
Ma
ence, they must set politically feasible targets for future action. Focusing
on aerosols could help. Whereas greenhouse gas emissions will bring
about relatively distant and diffuse dangers, aerosols cause immediate
and localized harm. That should raise the incentives for governments to
act against them, and it should raise the willingness of their constituen-
cies to accept such action. Indeed, in the case of aerosol reductions, the

parochial interests that have so often stymied broader climate diplo-

macy need not hinder progress. That is why some countries that have
long been reluctant to do much about global pollution—from China and
India to Brazil and the United States—have pursued bolder policies
when it comes to pollutants that have localized effects, such as aerosols.
As states sharpen their pledges to reduce greenhouse gas emissions
in the coming years, they should also make distinct pledges to cut
aerosols. (So far, few states have done so: of the 186 emissions-reduction
pledges submitted before the Paris climate conference, only a handful,
m
including Chile’s and Mexico’s, mentioned aerosols.) And they should
broadcast the promise of these reductions to build public support for
the policies needed to achieve them. As such policies take hold, they
hi
will generate rapid, tangible benefits, encouraging even more progress
on the changing climate’s other challenges.
Unfortunately, even the most effective climate diplomacy will leave
ha
the world’s poorest states exposed to the higher temperatures, rising
sea levels, and disruptions in rainfall caused by industrial pollution. As
a result, governments will have to work to adapt. Today, the countries
iT
with the highest emissions—among them, China, Japan, the United
States, and the members of the European Union—are on track to raise
around $100 billion per year by 2020, much of which will be used to
help vulnerable states adjust to the dangers of a changing climate.
Al
As for how to spend these funds, a variety of efforts will be needed,

and states should be willing to experiment to determine which programs
work best, sharing the know-how they gain with one another. As
od
they do so, they should invest in infrastructure and technologies that

address the effects of both warming and dimming, such as irrigation
methods that can better protect farmers from erratic rainfall and
new kinds of drought-resistant crops. Indeed, innovation in water-
so
conservation technologies remains massively underfunded, despite

their huge promise. Finally, governments should remove protectionist
policies in their countries’ agricultural sectors, which limit the ability
of consumers to access foreign sources of food when erratic rainfall
Ma
and higher temperatures harm local production.

The dimming caused by aerosols has already made the world’s water
supplies less secure. It is both economically and technologically feasi-
ble to reverse this process. Doing so will require a concerted global
effort, but failing to do so will compound the risks of drought and
poverty already in store as a result of the world’s changing climate.∂

ESSAYS
For the most part,
Obama has kept sight
of the big picture as
others have gotten
lost in the shrubs.
m
—Fred Kaplan
hi
ha
iT
Al
od
Obama’s Way Putin’s Power Play in Syria

so
Fred Kaplan 46 Angela Stent 106
Time to Get Tough on Tehran Not-So-Smart Sanctions

Eliot Cohen, Eric Edelman, and Ray Takeyh 64
Ma
Emma Ashford 114
When Congress Gets Mad The Transatlantic Data War

REUT E RS / KEVIN LAMARQU E
Steven Casey 76 Henry Farrell and Abraham Newman 124
Prosperity Rising Getting to Democracy

Steven Radelet 85 Abraham F. Lowenthal and Sergio Bitar 134
How China Sees Russia Latin Americans Stand Up To Corruption

Fu Ying 96 Jorge G. Castañeda 145
Obama’s Way
The President in Practice
Fred Kaplan
m
O
n January 28, 2009, barely a week into his presidency, Barack
Obama met with the U.S. military’s top generals and admirals
hi
on their own turf, inside “the tank,” the Joint Chiefs of Staff ’s
conference room on the second floor of the Pentagon. A senior official
recalled the new president as “remarkably confident—composed, relaxed,
ha
but also deferential, not trying to act too much the commander in
chief.” Obama walked around the room, introducing himself to every-
one; he thanked them and the entire armed forces for their service
iT
and sacrifice; then he sat down for a freewheeling discussion of the
world’s challenges, region by region, crisis by crisis. He was “the man
in full,” the official said, fluent on every issue, but more than that—a
surprise to the officers, who had been leery of this young, inexperienced
Al
Democrat—he displayed a deep streak of realism.

At one point, Obama remarked that he was not the sort of person
who drives down a street wishing he could park wherever he likes.
od
If he saw an open spot, even one that required some tricky parallel
parking, he would be fine with squeezing into it. Obama’s meaning
was clear: he had been dealt a bad hand (two unpopular wars, alienated
allies, the deepest recession in decades), but he would find a way to
so
deal with the world as it was.

Seven years later, many officers and defense officials, including some
who were so impressed with Obama at the start, look back at his presi-
dency as following a different style of governing. They laud the historic
Ma
accomplishments—the Iran nuclear deal, the opening to Cuba, the

Trans-Pacific Partnership, the prevention (so far) of another terrorist
attack on American soil—and they acknowledge that he has often tried
to make the best of bad choices. But too often, they say, he has avoided
FRED KAPLAN is the “War Stories” columnist for Slate and the author of the forthcoming
book Dark Territory: The Secret History of Cyber War. Follow him on Twitter @fmkaplan.

Obama’s Way
taking action, waiting for conditions to get better—circling the block

and, in his own metaphor, waiting for a better parking spot to open up.
This is a common critique of Obama’s foreign policy: that he
evades hard decisions, that he is allergic to military force if it risks
American casualties or escalation, that there is often a mismatch between
his words and his deeds. “This is a pattern,” one retired four-star
general said. “He issues stern warnings, then does nothing. It damages
American credibility.”
Is the charge true? And to the extent that it has some validity, how
m
much can be laid at Obama’s feet, and how much should be attributed
to the intractability of the problems he has faced? Would a different
sort of president have handled the decade’s challenges better, and if
hi
so, how?
The following examination of key crises and decisions is based on
conversations I have had with dozens of officials across the span of
ha
Obama’s presidency and with 20 mid- to senior-level officials (past
and present, almost all on a background basis) interviewed specifically
for this article.
iT
THE LESSON OF LIBYA
In December 2009, Obama journeyed to Oslo to receive the Nobel
Peace Prize. The award was premature, to say the least, but he used
Al
his acceptance speech to lay down the principles of a foreign policy he

hoped to follow—a sophisticated grappling with the tensions between
idealism and realism. It was a daring speech for a Peace Prize recipient.
od
“To say that force may sometimes be necessary is not a call to cynicism,”
he said. “It is a recognition of history, the imperfection of man, and
the limits of reason.” Nations must “adhere to standards that govern the
use of force,” and a just, lasting peace must be “based on the inherent
so
rights and dignity of every individual.” Still, “America cannot act

alone,” except on matters of vital national interest, and mere lofty
rhetoric about human rights only sustains “a crippling status quo.”
Engagement with repressive regimes may lack “the satisfying purity
Ma
of indignation,” but “no repressive regime can move down a new path
unless it has the choice of an open door.”
Benjamin Rhodes, Obama’s deputy national security adviser for
strategic communications, said, “When people ask me to summarize
[Obama’s] foreign policy, I tell them to take a close look at that speech.”
Another former top White House official called it “a template to how

Fred Kaplan
he approaches problems,” a “framework for how he thinks about U.S.

power.” Whether he followed the template—how he grappled in action
with the tensions he recognized in theory—would be, by his own
standard, the measure of his presidency.
The early years of Obama’s term were taken up with challenges
inherited from the Bush administration, especially the wars in Afghan-
istan and Iraq. At the start of 2011, how-
Obama has, at times, ever, a string of new problems emerged,
as domestic protests against authoritar-
m
talked more boldly than ian leaders broke out across the Middle
he has acted, creating a East. The Ben Ali regime in Tunisia
needless gap between fell in January, and the Mubarak regime
hi
in Egypt followed in early February.
words and deeds. By late February, rebels opposed to the
ha Libyan dictator Muammar al-Qaddafi
had seized control in cities such as Benghazi, and the dictator’s days
seemed numbered. But then the tide of war reversed, and Qaddafi’s
forces moved to crush the uprising.
iT
With tens of thousands of civilian lives at risk, the Obama admin-
istration, which had come out in support of the rebels, faced a difficult
choice. The members of the Arab League were unanimously imploring
the United States to get involved. Nato allies were keen to intervene
Al
in support of the armed rebels, and a un Security Council resolution

was in the works. At a National Security Council meeting called to
discuss the crisis, Secretary of State Hillary Clinton, U.S. Ambassa-
od
dor to the un Susan Rice, and some of Obama’s nsc staff argued for
action, citing moral imperatives and the prospect of a truly multi-
lateral force. But according to several people present at the meeting,
Pentagon officials opposed intervening, pointing out that the United
so
States had no vital interests in Libya and that any serious commitment
would get Washington bogged down, possibly for years.
Two options were set before the president: go in all the way as the
leader of an alliance, or don’t go in at all. Obama’s response was to
Ma
come up with a third way, which emerged as he thought through the

problem out loud. Early on, he articulated the principles that would
underlie whatever course he chose: no U.S. boots on the ground, no
military action at all unless it had a legal basis and a decent chance of
succeeding, and, finally, an appropriate division of labor with allies—
the U.S. military would provide its unique capabilities (among them

Obama’s Way
precision bombing and intelligence sharing), but U.S. allies, who had
a far greater interest in the conflict’s outcome, would assume the brunt
of protecting Libyan civilians and restoring order after the fighting.
In an interview at the time with The New Yorker, an Obama adviser
(whose identity remains unknown) dubbed this approach “leading
from behind,” a term that would come in for much derision. But in
context, it made sense, and it fit Obama’s outlook on the role and limits
of military force, the distinction between interests and vital interests,
and the need to align the instruments of power with the intensity of
m
those interests.
The first phase of the resulting operation was ultimately a success.
The combination of U.S. air strikes and intelligence, nato air support,
hi
and rebel movements on the ground led to the defeat of Qaddafi’s
forces and (although this was not an explicit aim of the campaign) the
killing of the Libyan leader himself. But the second phase was a failure:
ha
a new government was never fully formed, the rebel factions’ squabbles
degenerated into civil war, and the country’s social order (such as it
was) collapsed.
iT
The problem was that the nato allies that had promised to lead the
stabilization phase of a post-Qaddafi Libya did not follow through, in
part because this phase turned out to be much more violent than they
had anticipated. Restoring (or, really, creating) order would have required
Al
armed intervention—and possibly serious combat—on the ground, a

mission for which European states had little capacity and less appetite.
Obama recognized the failure, acknowledging in his September
od
2015 speech to the un General Assembly, “Even as we helped the

Libyan people bring an end to the reign of a tyrant, our coalition
could have and should have done more to fill a vacuum left behind.”
And the lesson weighed on him when considering how to handle a
so
similar crisis in Syria.
THE SYRIAN SINKHOLE

As the Arab Spring evolved, demonstrations broke out in Damascus
Ma
against Syrian President Bashar al-Assad. Assad struck back with

extreme force, killing protesters first by the hundreds, then by the
thousands. Gradually, a rebel force arose, and the country plunged
into civil war. With the United States having already intervened in
Libya under similar circumstances, the question naturally arose
whether it would intervene in Syria as well.

Fred Kaplan
In an nsc meeting, Obama spelled out the differences between the

two conflicts. Libya’s fighting had taken place on an open desert,
which allowed for clear targeting; Syria was enmeshed in urban
warfare, with civilians, rebels, and soldiers intermingled. The Libyan
rebels had had a chance at forming a cohesive government; there were
no such possibilities in Syria. No other
outside power was calling on the United
Syria is where Obama’s States to intervene this time around.
tools for dealing with crises Finally, the conflict was cascading into
m
proved inadequate. a proxy war for the regionwide Sunni-
Shiite confrontation. Not only did the
United States have little at stake in this
hi
fight, but it also had little ability to influence its direction or outcome.
According to several attendees of the meeting, nobody really disagreed
with these points. ha
And yet the administration had aligned itself with the season’s popu-
lar uprisings. In May, in a speech of uncharacteristic exuberance,
Obama likened the turmoil to previous eras of democratic revolution.
iT
He spoke with particular urgency about Syria, proclaiming that Assad
“must” stop shooting his own people and allow human rights monitors
to enter the country. In August, Obama joined with the leaders of
France, Germany, and the United Kingdom in calling on Assad to step
Al
down. Syria’s ruler was “on the wrong side of history,” Obama said,
declaring that “the time has come for President Assad to step aside.”
Such rhetoric was driven by two factors. First, the aides in Obama’s
od
inner circle—few of whom knew anything about Middle Eastern

politics—really did think Assad’s regime was nearing collapse. Second,
given that apparent fact, they felt it was best to put the administration
publicly on “the right side of history,” especially since allied nations
so
were calling on Obama to show “leadership.”

The rhetoric was not entirely empty. Obama did ask his military
and intelligence chiefs to come up with plans to speed history along,
and in the summer of 2012, cia Director David Petraeus laid out a
Ma
scheme to arm a group of “moderate” Syrian rebels. The plan, which

Petraeus had formulated with Saudi Prince Bandar bin Sultan and a
few other Arab security chiefs, called for shipping small arms, mainly
rifles, to a small, select group of the Syrian opposition. Petraeus did
not promise the moon; he explicitly said that these rebels could not
oust Assad right away and that the goal was to put “pressure” on Assad.

Obama’s Way
If you’re saying Assad must go, he was telling the president, here’s how
the cia can help. The plan had the backing of Clinton, Secretary of
Defense Leon Panetta, and the Joint Chiefs of Staff. But the president
rejected it.
Obama was not opposed to taking action; he had asked Petraeus
and Panetta for options. But he was opposed to doing something
merely for the sake of doing something, and the Petraeus plan seemed
to fall into that category. Who were these rebels, he asked? Could the
United States really distinguish the good ones from the bad ones?
m
(Petraeus insisted that he could, but Obama was unconvinced.) If
these rebels did emerge as a threat to the regime, would Iran, which
had invested heavily in Assad, simply stand by, or would it intervene
hi
(as Obama thought more likely)?
In nsc meetings, several attendees recall, Petraeus acknowledged
that it might take years for the rebels to mount an effective challenge
ha
to Assad’s rule. Meanwhile, the cia’s plan might throw Assad psycho-
logically and give Washington “skin in the game,” a path to influence
over the long haul. This was not a winning argument with Obama: he
iT
was looking for something that had a chance of succeeding in the near
term, and he did not want skin in a game played in the quagmire of a
sectarian civil war. While Petraeus was working up the plan, Obama
asked the cia to produce a paper on how often in the past U.S. arms
Al
had succeeded in helping rebels oust hostile governments. The answer:

not very often. That sealed the case.
Although grounded in logic and history, the rejection of interven-
od
tion in Syria set off the first waves of discontent over Obama’s foreign
policy in general—the notion that he did not want to use force, that
he was always on the lookout for arguments that rationalized this
disinclination, that he talked bold but failed to follow through, which
so
made all his commitments ring hollow.

Later on, as the self-proclaimed Islamic State (also known as isis)
took control of vast swaths of Iraq and Syria, Obama’s critics argued
that if only the president had accepted Petraeus’ plan, isis might not
Ma
have found a foothold. But the claim seems far-fetched—even though

a few of Obama’s close advisers allow, in retrospect, that it might have
been worth giving Petraeus’ option a chance. In any case, two years later,
Obama approved a similar plan. However, when the American-backed
rebels started racking up victories on the battlefield and appeared to
be closing in on Assad, Obama’s prediction of what would happen

Fred Kaplan
next came true: the Iranians redoubled their support for Assad, sending
Quds Force soldiers to fight the rebels. And Russian President Vladimir
Putin, fearing the loss of Moscow’s sole outpost outside the former Soviet
Union, sent tanks, planes, and missiles to support the Syrian army.
REDLINE, RED FACE

Syria is where Obama’s foreign policy met its most brutal challenge,
and where his tools for dealing with crises—words, logic, persistent
questions, and sequential problem solving—proved inadequate.
m
At least five times in the eight-month span between August 2012
and April 2013, Obama or administration officials publicly warned
Assad that using chemical weapons against rebels and protesters would
hi
cross a “redline.” It would mark “a game changer from our perspective,”
Obama elaborated on one occasion. “There would be enormous conse-
quences,” he said on another. It would be “totally unacceptable,” and
ha
Assad would be “held accountable.” Yet despite such utterances, say
close aides and officials, the president never ordered up a plan for
what to do if Assad crossed the line.
iT
Then, on August 21, 2013, rocket shells containing sarin gas slammed
rebel-controlled areas in the Damascus suburbs, killing an estimated
1,500 people. The redline had been crossed. Obama swiftly decided
to retaliate. Attack plans were drawn up, most of them designed to
Al
destroy not the chemical stockpiles themselves (explosions of which

might spread the gas far and wide) but rather the munitions and
facilities required to launch them into battle. Assad’s regime was not
od
the explicit target in any of these plans, but some White House aides
thought, or hoped, that his strength might erode as a side effect.
Obama seemed to be serious about launching the strikes. His aides
were instructed to phone legislators and journalists to make sure they
so
had read an unclassified intelligence report that the White House had
just released proving that Assad was behind the chemical attacks. A
un resolution backing the use of force in Syria was unlikely; Russia
and possibly China would veto it. So Obama rallied Arab and nato
Ma
nations to join in the attack, or at least to endorse it. He got no such

support, except from France and the United Kingdom—but then
British Prime Minister David Cameron requested authorization for
an attack from Parliament, which voted it down.
On August 31, the nsc met for more than two hours. Everyone
around the table agreed that the United Kingdom’s backpedaling,

Obama’s Way
m
hi
The Decider: Obama and other U.S. officials in New York, September 2014
although regrettable, should not affect the president’s decision and that
ha
he should proceed with the air strikes. Kathryn Ruemmler, the White
House counsel, suggested seeking a congressional resolution for the
strikes, especially given the lack of support elsewhere, but she also said
iT
that Obama had the legal authority to order the strikes on his own. The
meeting broke up, with everyone agreeing to proceed with the bomb-
ing. Then, Obama took a walk on the White House lawn with chief of
staff Denis McDonough, returned to the Situation Room, and an-
Al
nounced he would put the issue to Congress for a vote. Aides say
Ruemmler’s suggestion hadn’t tilted his thinking; rather, it had re-
flected his views on the use of force generally.
od
In any case, everyone in the room was surprised by his reversal.

Obama explained that he needed some institutional backing for such a
risky move. What if, after the air strikes, Assad launched more chemical
attacks? If the United States dropped more bombs, it would risk getting
so
sucked into a civil war, and if it did nothing, that would be worse: the
United States would look weaker, and Assad stronger. Some White
House aides viewed air strikes as a one-time action, but Pentagon offi-
cials had warned that if the president proceeded with the bombing
Ma
(which they supported), he should be prepared for escalation. Obama

POOL / G ET TY IMAG ES
suspected they were right. Whatever he did, his actions (or inaction)
would trigger criticism and disunity; without a prior vote, his support,
slim from the outset, would rapidly erode. In discussions before the
meeting, some of his aides had worried that if he bombed Syria on his
own and the mission fell apart, he might even face impeachment.

Fred Kaplan
To many senior officials, each separate piece of Obama’s argu-

ment made sense, but the overall logic did not. Maybe it was a bad
idea to proceed with air strikes, but in that case, Obama should not
have drawn those redlines: he should not have recited the rationale for
air strikes to so many diplomats, journalists, and legislators; he should
not have told Secretary of State John Kerry to make a case for the
bombings (in a powerful speech just hours before he changed course);
and after making this new decision, he certainly should not have gone
ahead with a scheduled prime-time television address in which he
m
detailed Assad’s perfidy, laid out the national security concerns, claimed
he had the legal authority to respond with unilateral air strikes—and
then announced that he was sending the matter to Congress.
hi
One nsc official who was relieved that the strikes did not take place
nevertheless said, “We paid a price for pulling back. The perception
among people in the region was that they couldn’t rely on Obama to
ha
pull the trigger.” A former top White House official said, “When
people—serious people—say Obama is indecisive and uncertain,
they’re talking about this episode with Syria.”
iT
The White House lobbied Congress to pass a resolution authorizing
the use of force, but the task was clearly futile: most Republicans did not
want to do any favors for Obama, and many Democrats were leery of
military action. In the end, Russia came to the rescue. At a press confer-
Al
ence on September 9, Kerry was asked if Assad could do anything to

avoid air strikes. Kerry replied, “Sure, he could turn over every bit of his
[chemical] weapons to the international community within the next
od
week, without delay,” adding, “but he isn’t about to.” To everyone’s

astonishment, Russian Foreign Minister Sergey Lavrov replied that he
could make that happen—and he did. Under Russian pressure, Assad
surrendered very nearly all of his chemical weapons for destruction.
so
Obama and his aides declared victory, noting that this diplomatic
solution was more effective than military strikes would have been and
that the threat of those strikes was what had driven Russia to pressure
Assad. The first claim was probably true; the second probably was
Ma
not. The fact is Congress seemed certain to defeat Obama’s motion

before Russia stepped in. It is possible that Putin never believed that
Obama would feel bound by Congress, that he would find some way
to launch the strikes anyway. But more pertinent, Russian leaders have
always taken pains to keep weapons of mass destruction—biological,
chemical, or nuclear—out of their allies’ hands: not so much because

Obama’s Way
they abhor those weapons as because they abhor the loss of control.
Moscow had its own interests in stripping the loose cannon Assad of
these ghastly weapons, and since the redline crisis had forced Obama
to focus on the chemicals and not on Assad’s regime, the diplomatic
save would serve one of Russia’s vital interests—the preservation of
Moscow’s only foothold in the Middle East.
THE ISIS CRISIS

The redline fiasco was a low point in the administration’s foreign policy,
m
but the troubles in Syria were hardly over. Less than a year after
the chemical weapons settlement, isis—which Obama had recently
dismissed as a “jv” version of al Qaeda—stormed Mosul, the second-
hi
largest city in Iraq. The U.S.-trained Iraqi soldiers fled at first contact,
and the armed jihadists barreled on to Ramadi and Fallujah and, for a
while, came perilously close to Baghdad.
ha
The jihadists had started out and were largely based in Syria, but
Obama focused his anti-isis strategy on Iraq because that’s where it
might have some effect; the United States, after all, had resources,
iT
air bases, and a partnership of sorts with a functioning government
in the country—and it had none of those things in Syria, where
Obama remained properly wary of diving into a sectarian civil war.
Even by September 2014, when Obama realized that Syria couldn’t
Al
be ignored (it was, after all, the headquarters of isis’ operations, and
he knew very well that the Iraqi-Syrian border was porous to the
point of meaningless), he stuck to what his aides called an “Iraq
od
first” strategy. American air strikes, which had long begun against
isis forces in Iraq, would be extended to Syria, but only over the
paths that isis used to travel between the two countries. Obama
also announced a program to train and equip “moderate” Syrian
so
rebels on bases in Saudi Arabia but noted that they wouldn’t be

ready to fight isis for many months; clearly, Syria was on the back
burner, at best.
Days after Obama’s announcement, isis laid siege to Kobani, a
Ma
mainly Kurdish town on the Syrian-Turkish border. The town had

no strategic significance, but a massacre was in the making. More
than that, isis was sending thousands of jihadists into the town—
forming an easy concentrated target, which neither the Pentagon
nor Obama could resist. Obama ordered massive air strikes, which
killed an estimated 2,000 to 3,000 isis fighters.

Fred Kaplan
In another unexpected feature of the battle, Kurdish fighters gath-

ered to stave off isis, fought very capably, and recaptured the town.
Obama had not been opposed to going after isis inside Syria; he just
had not seen a suitable partner that could carry out the fight on the
ground. In the Syrian Kurds, he found one, and U.S. air strikes con-
tinued, often in tandem with Kurdish
ground assaults. At the same time, the
Obama’s keen legal mind cia started covertly assisting a group of
allows him to rationalize rebels in southern Syria whose main
m
his own porous positions. aim was to overthrow Assad. Again,
Obama had opposed Petraeus’ plan to
arm some rebels not because he was against arming rebels but because
hi
he did not see how that particular plan or those particular rebels would
succeed. The new plan seemed more plausible, in part because the cia
and the U.S. military had gathered a lot more intelligence and scoped
ha
out reliable forces over the previous year. (A separate $500 million
Pentagon program to train and equip a small group of northern Syrian
rebels to fight isis proved publicly disastrous: the rebels turned out to
iT
be more interested in fighting Assad’s army than isis, taking them out
of the fight to train in Saudi Arabia only disoriented them, and more
militant rebels killed almost all of them on their reentry into Syria.)
Viewed piece by piece, tactical move by tactical move, Obama’s
Al
operations appeared to be making progress. But foreign fighters kept

flooding the region, isis was barely budged aside, and although Assad’s
army seemed imperiled, it was still quite large (at around 125,000
od
troops) and recovered much of its strength after Russia sent in tanks
and jet fighters in September 2015. Russia’s move raised the hackles of
some of Obama’s critics, who saw Putin as trying to revive the Soviet
empire. Obama didn’t bite, and wisely so. At an nsc meeting, he
so
cautioned against viewing Russia’s intervention through a Cold War

prism. We are not at war with Russia over Syria, he said, according to
officials who were at the meeting. Putin’s vital interest in this had
much to do with his own domestic politics, and an alarmed American
Ma
response would play into his game. Finally, Obama doubted that the
Russian military campaign would have much impact on the battle.
Nonetheless, Obama was still receptive to attractive options for his own
military posture. The Syrian Kurds were racking up more successes (and
requiring more protection from Turkey, which was pounding them with
air strikes while claiming to be going after isis), and so Obama approved

Obama’s Way
plans to send the Kurds more ammunition—and to deploy U.S. Special

Forces to join them in raids on isis strongholds, secret missions that
resulted in six fatalities before Obama announced the actions publicly.
Obama has a keen legal mind, which serves him and the country well
when he pokes holes in specious arguments for risky policies. But it also
enables him to rationalize his own porous positions: for instance, that
conducting joint raids falls in the category of “advise and assist,” not
“boots on the ground.” He can also make firm assurances that he will
not push these ground forces any further, ignoring that he has laid the
m
groundwork and set the logic for his successor in the White House to
escalate the fight, if he or she is so inclined. (Not to draw precise parallels,
but in a similar vein, President John F. Kennedy firmly resisted pressure
hi
from the Joint Chiefs of Staff to deploy “combat troops” to Vietnam yet
expanded the scope and numbers of “advisers” there, leaving President
Lyndon Johnson to believe he was following in his predecessor’s foot-
ha
steps when he poured 500,000 U.S. troops into the fight.)
THE SEARCH FOR ORDER

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What has been missing in Obama’s Syria policy, in all its phases, is a
coherent strategy. His two aims—defeating isis and pressuring Assad
to step down—are in some ways contradictory. Assad’s continued
reign has been a magnet for foreign Sunni fighters to join isis. But in
Al
the short run, Assad’s army, if properly directed, could be the most
potent anti-isis force—second perhaps only to Iran, which has been
sending members of its elite Quds Force to protect Assad’s regime.
od
Obama has been constrained from forming an overt alliance with

Assad or Iran, in part because he has needed Sunni allies—Egypt,
Turkey, and the Gulf states—to delegitimize and defeat the Sunni
radicals of isis; if he bonded with Shiite Iran or its client Assad, those
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countries might drop out of the coalition.

Therein lies the heart of the problem not only with Obama’s
strategy against isis but with any U.S. president’s stab at such a
strategy. If all the countries that feared and loathed isis—which is
Ma
to say, almost all the countries in the region—joined forces, isis

would crumble in short order. But each of those countries has more
fear and loathing for at least one of its potential allies (Turkey for the
Kurds and Saudi Arabia for Iran, for example). Forming an effective
coalition has therefore been all but impossible—a fact that isis
commanders have shrewdly exploited.

Fred Kaplan
As many of Obama’s critics contend, a coherent regional strat-

egy—not just a series of piecemeal responses to crises—is needed to
solve this problem. But what is this regional strategy? Who should
lead it? What incentives might lure the potential coalition’s players to
subordinate their individual interests to the larger goal? (In October,
Obama dropped his reluctance and invited Iran and Russia to join
talks in Vienna to discuss a political solution to the Syrian crisis and
a joint fight against isis. The prospects seemed dim, until—on the
very eve of the conference—isis agents mounted coordinated terrorist
m
attacks in Paris. Although the odds remain long, a plausible path to a
settlement opened up. Obama seems to have recognized, along with
others, that transcending the sectarian divide rather than accommo-
hi
dating it—and forming alliances with rivals against larger, common
threats—is the only way toward a peaceful transition.)
These complexities are symptomatic of a larger phenomenon that
ha
accounts for the surge of violence throughout the Middle East: the
breakdown of the colonial order imposed at the end of World War I.
This order, with its artificial borders designed to split or suppress
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tribal identities, would have collapsed after World War II (along with
the British and French colonies) but for the deep freeze imposed by
the Cold War. When the Soviet Union imploded, the Cold War too
dissolved, along with the international security system that it had
Al
created and sustained for nearly half a century. With the subsequent
diffusion of global power and fragmentation of power blocs, the
collapse of the Middle East’s borders and authorities resumed—a
od
process accelerated by President George W. Bush’s 2003 invasion of

Iraq, which disrupted the balance of power among nations, sects, and
tribes that had kept an uneasy peace between Shiites and Sunnis, not
only within Iraq but across the region, as the disruption’s ripples spread.
so
Some of Obama’s critics claim that if he had found a way to keep

10,000 American troops in Iraq instead of going through with a
complete withdrawal in 2011, the renewal of sectarian violence and
the rise of isis to fill the subsequent power vacuum would never have
Ma
happened. But this is extremely unlikely, given that in an earlier era it

took close to 170,000 U.S. combat troops using extraordinary measures
to stem a similar tide, and even then they were able to do so only
temporarily. In any case, Obama had no choice in the matter. The
status-of-forces agreement (sofa) that Bush signed in 2008 demanded,
“All the United States Forces shall withdraw from all Iraqi territory

Obama’s Way
no later than December 31, 2011.” Obama was, in fact, amenable to

keeping 5,000 troops in Iraq for the long haul and sent emissaries
to Baghdad to see if an extension could be negotiated, but revisions to
the sofa, including a U.S. demand that American troops enjoy immu-
nity from Iraqi law, required parliamentary approval, and no factions
in the Iraqi parliament, except perhaps the Kurds, would vote for the
Americans to stay. (Obama has been able to send military forces back
to Iraq only because the sofa expired after three years.)
As for Afghanistan, the other war that Obama promised and tried to
m
end, it keeps raging as well. In October 2015, reversing an earlier policy
to withdraw all U.S. troops from the country by the end of his term,
Obama announced that 5,500 would remain there to continue training
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and equipping Afghan forces and to conduct counterterrorist operations.
Obama announced this change soon after Taliban fighters took over
the northern city of Kunduz, but he had made the decision a few months
ha
earlier, according to a senior counterterrorism official. The new Afghan
president, Ashraf Ghani, had asked Obama not to withdraw all U.S.
troops, signed a bilateral security agreement giving U.S. forces legal
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protections (an accord that his predecessor, Hamid Karzai, had refused
to consider), and promised reforms to broaden inclusivity and crack
down on corruption. Meanwhile, terrorist groups still flourished across
the border with Pakistan. No one in the nsc opposed sustaining a
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counterterrorist force on some base in the region; here was Ghani

offering three existing bases. An interagency study conducted by
General Martin Dempsey, then the chairman of the Joint Chiefs of
od
Staff, concluded that the mission could be supported with 5,500 troops.
And so the decision was made. Kunduz (which Afghan soldiers quickly
recaptured) was the news peg that preempted political objections.
The tragedy of Obama’s presidency is that, from the beginning, he
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has wanted to shift away from the stagnant battlefields in and around
the Middle East and devote more attention to the Asia-Pacific region,
with its prospects for dynamic growth, trade, and, in the form of
China, an expansionist power that needs to be at once contained
Ma
militarily and lured into the global economy. This focus on Asia came
to be called the “pivot,” or “rebalancing,” but Obama had recognized
its appeal and discussed it as far back as his 2008 presidential
campaign. He understood, and still does, that this is where the United
States’ future interests lie—but the never-ending crises of the ancient
world keep pulling him back in.

Fred Kaplan
LIMITED INTERESTS, LIMITED RISKS

As the isis imbroglio widened, yet another crisis erupted, this time in
Ukraine. After Putin bribed Ukrainian President Viktor Yanukovych
with an aid package to stop him from signing an association agree-
ment with the European Union, popular protests broke out in Kiev.
When Yanukovych cracked down, the protests widened, and he was
ultimately forced to flee. Putin responded by sending Russian forces
to seize the Crimean Peninsula and support a secessionist rebellion in
eastern Ukraine.
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In nsc meetings held to decide how to respond to Russia’s move,
Obama quickly approved a script of denunciation, reinforcements of
U.S. military exercises in and around eastern Europe’s nato allies
hi
(especially the Baltic states), and a string of economic sanctions.
Some Pentagon officials wanted to go further and supply the
Ukrainian army with “lethal defensive weapons,” especially tow anti-
ha
tank missiles. According to nsc officials, Vice President Joe Biden
strongly endorsed this position, saying that the United States had a
moral obligation to help the Ukrainians defend themselves, as well
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as a strategic interest in making Putin pay for his land grab and in
deterring him from going further. (No one in any nsc meeting, how-
ever, advocated sending Ukraine offensive weapons or deploying U.S.
troops to the country.)
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In the end, Obama approved the provision of nonlethal military

assistance, such as night-vision and radar equipment, and training for
Ukraine’s National Guard. Beyond that, he was opposed. The United
od
States had interests in Ukraine, but not vital interests. There were
reasons two previous presidents had considered, then decided against,
inviting Kiev’s leaders to join nato. First, polls had suggested that
less than half of Ukrainians wanted membership. Second, Russia’s
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interests in Ukraine, unlike the United States’, were vital: Russia and
Ukraine shared a border and a long history of trade, cultural exchange,
and even common statehood. No Russian leader would stand by as
Ukraine drifted too far from Moscow’s orbit.
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Obama likes to look ahead two or three steps. (His critics have seen
this as a technique for avoiding the use of force; others see it as a
method of rational decision-making.) Moscow could and would match
or surpass any lethal weapons that the West supplied to Kiev. Then
what? If Washington sent still more arms, it would risk getting sucked
into an arms race, and the violence would intensify. If the United

Obama’s Way
States did not respond in kind, the West would have lost the contest;
Obama would look weaker, and Russia stronger, than if he had not
sent any arms in the first place.
This was Obama’s first principle in all discussions about the crisis:
he was not going to risk a war with Russia for the sake of Ukraine. At
one meeting, he said, “If I wanted to invade Canada or Mexico, no one
could do much about it.” The same was true of Putin and Ukraine.
Still, Obama put a high value on enforcing international norms,
one of which was the inviolability of borders. He felt it necessary to
m
make Russia pay for its violation; the question was how. Military
escalation, in this context, was a game Russia would win, but escala-
tion of sanctions was one the United States could win, if Obama could
hi
keep European states on board. This was a challenge, for many Euro-
pean countries were more reliant on Russian energy supplies than the
United States was and therefore more vulnerable to economic reprisals
ha
from Russia. They were also dead set against risking war over Ukraine.
If Obama went up the military ladder, he knew they would drop out
of the sanctions regime.
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At least through the fall of 2015, Obama’s policy has worked.
Despite Putin’s efforts to split the transatlantic alliance, its mem-
bers have held tight on the sanctions, and the cease-fire negotiated
in Minsk in February has held, too. Putin’s likely goal in Ukraine
Al
was to weaken the country’s central government and keep it from

moving closer to the West. At that, he has succeeded. If Obama and
the western European nations had wanted to strike back on that
od
front, tens of billions of dollars in economic aid would have meant a

lot more than a few hundred antitank missiles. But beyond a relatively
paltry International Monetary Fund grant, no one seemed to want to
go down that road.
so
PATIENCE AND PRAGMATISM

So how does Obama’s record stack up? The president has been besieged
by foreign policy crises, constrained by diminished American power,
Ma
and pressured by opponents at home and allies abroad to take action

and show leadership, even when dealing with intractable problems.
He has learned on the job, with his instincts for caution reinforced
by the ill-fated Libyan intervention. And he has, at times, talked
more boldly than he has acted, creating a needless gap between words
and deeds.

Fred Kaplan
And yet for the most part, he has stayed true to the template of his
Nobel address, keeping sight of the big picture as others have gotten
lost in the shrubs. His caution about embarking on unnecessary mili-
tary adventures and desire to avoid escalatory military spirals seem
wise. Obama has also proved remarkably patient with drawn-out dip-
lomatic negotiations, even those unlikely to bear fruit. Some of these,
such as the Israeli-Palestinian peace talks, have predictably gone
nowhere, but others, such as the opening to Cuba and the nuclear deal
with Iran, have been strikingly successful. These successes and failures
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stem, in part, from the dogged optimism of Obama’s second-term
secretary of state, Kerry. It is doubtful that Kerry’s more cautious pre-
decessor, Clinton, or most other past secretaries of state, would have
hi
stuck with the nuclear talks with Iran for as long as Kerry did—but
neither would she have spent so much time and effort trying to jump-
start a moribund Middle East peace process.
ha
One downside to Kerry’s vision of his job, as special envoy to the
world’s most hopeless logjams, is that it leaves much of the rest of
the world a bit anxious. This has been especially true of the United
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States’ allies in Asia—most of all Japan, whose leaders demand con-
stant handholding. During Obama’s first term, Kurt Campbell, the
assistant secretary of state for East Asian and Pacific affairs, phoned
his counterpart in Tokyo every day and met face-to-face with the
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Japanese ambassador three times a week. Officials who deal with

Asian affairs say that after Campbell left, and Kerry turned the State
Department’s focus almost exclusively to high-profile peace missions,
od
Tokyo felt abandoned.

Still, this hardly amounted to a crisis. First, when Beijing started
flexing its naval muscles in the South China Sea, Japan (and Australia
and South Korea) clung ever closer to Washington, however frus-
so
trated it felt at times. Second, another big part of the United States’
relations with Asia involves simply showing up—and although the
assistant secretary may not be calling as often, Obama and Kerry show
up at all the Asian security and economic summits. Anxiety about
Ma
abandonment remains; it has been a factor for decades, at least since

the United States pulled out of Vietnam and secretly reached out to
China during the presidency of Richard Nixon. But Obama’s mis-
steps, which have bothered allies in the Middle East, have not weighed
at all on those in East Asia. Daniel Sneider, the associate director for
research at the Walter H. Shorenstein Asia-Pacific Research Center

Obama’s Way
at Stanford University, has met privately with dozens of political and

military leaders from Japan and South Korea. He says, “I’ve never
heard any of them say a word about the ‘redline’ in Syria.”
On April 5, 2015, the president delivered a spirited speech at Amer-
ican University defending the nuclear deal that he and five other world
powers had negotiated with Iran. Several times, he quoted Kennedy’s
famous American University speech in 1963 calling for an end to the
Cold War mindset and a new strategy based on a “practical” and
“attainable peace,” one based “not on a sudden revolution in human
m
nature but on a gradual evolution in human institutions—on a series
of concrete actions and effective agreements.”
Later that day, Obama held an on-the-record roundtable discussion
hi
with ten columnists in the White House. When my turn came to ask
a question, I noted that Kennedy had delivered his speech after sev-
eral crises in which he realized that his advisers were often wrong and
ha
that he should place more trust in his own instincts. What lessons,
I asked Obama, had he learned in his crises? What decisions might
he have made differently, had he known then what he knows now?
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He answered:
I would say that I have been consistent in my broad view of how
American power should be deployed and the view that we underesti-
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mate our power when we restrict it to just our military power. . . .

There’s no doubt that, after six and a half years, I am that much more
confident in the assessments I make and can probably see around the
corners faster than I did when I first came into office. The map isn’t
od
always the territory, and you have to kind of walk through it to get a
feel for it.
In terms of decisions I make, I do think that I have a better sense
of how military action can result in unintended consequences. And I
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am confirmed in my belief that much of the time, we are making

judgments based on percentages, and . . . there are always going to be
some complications.
And so maybe at the same time as I’m more confident today, I’m
Ma
also more humble. And that’s part of the reason why, when I see a
situation like this one [the possibility of a nuclear deal with Iran],
where we can achieve an objective with a unified world behind us and
we preserve our hedge against its not working out, I think it would be
foolish—even tragic—for us to pass up on that opportunity.∂

Time to Get Tough

on Tehran
Iran Policy After the Deal
m
Eliot Cohen, Eric Edelman, and Ray Takeyh
T
hi
he nuclear deal that the United States and five other great
powers signed with Iran in July 2015 is the final product of
a decadelong effort at arms control. That effort included
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sanctions in an attempt to impede Iran’s quest for a nuclear weapons
capability. The Joint Comprehensive Plan of Action, or jcpoa, ranks
as one of the most deficient arms control agreements in history. But
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U.S. President Barack Obama has pledged to spend the remainder
of his tenure fending off congressional pressure to adjust its terms.
An even larger issue, however, is Washington’s lack of a compre-
hensive Iran policy. For decades, the United States has refused to deal
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with the crucial subject that makes the nuclear issue so important,
which is the nature of the Iranian regime. Any Iran policy worthy of
the name must start from the fact that the Islamic Republic is not a
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conventional state making pragmatic estimates of its national interests

but a revolutionary regime.
U.S. policymakers since the days of President Ronald Reagan have
failed to understand that there can be no rapprochement between the
so
two governments, because, as Iran’s leaders understand, that would undo

the very existence of the Iranian regime. They have overlooked the fact
that Iran is an exceptionally dangerous state—to its neighbors, to close
U.S. allies such as Israel, and to the broader stability of the Middle East.
Ma
ELIOT COHEN is Robert E. Osgood Professor of Strategic Studies at the Johns Hopkins
School of Advanced International Studies. Follow him on Twitter @cohen_eliot.
ERIC EDELMAN is Roger Hertog Distinguished Practitioner-in-Residence at the Philip Merrill
Center for Strategic Studies at the Johns Hopkins School of Advanced International Studies.
RAY TAKEYH is a Senior Fellow at the Council on Foreign Relations and the author, with
Steven Simon, of the forthcoming book The Pragmatic Superpower: Winning the Cold War
in the Middle East.

Time to Get Tough on Tehran
Given the serious challenge Iran poses to U.S. interests, Washington

should seek to roll back the country’s growing influence in the Middle
East while systematically eroding the foundations of its power. In the
long term, the Islamic Republic will join the Soviet Union and other
ideological relics of the twentieth century in eventual collapse. Until then,
however, there can be no real peace between Washington and Tehran.
A RAW DEAL
No sensible Iran policy can coexist with the jcpoa as it stands today.
m
The agreement recognizes Iran’s right to enrich uranium and eventually
industrialize that capacity. It concedes that Iran can construct an
elaborate nuclear infrastructure for research and development. It
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establishes a verification system that gives Iran far too much advance
notice of inspections and does not meaningfully limit the develop-
ment of ballistic missiles, a pillar of any nuclear weapons program.
ha
It does not provide adequate access to the facilities and scientists
involved in Iran’s past work on nuclear weapons, thus denying inspec-
tors the knowledge they need to assess the scope of Iran’s current
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program. And after 15 years, once the agreement expires, Iran will be
free to build as many nuclear installations as it wants, accumulate as
much enriched uranium as it wishes, and enrich that uranium to
whatever level it deems necessary. In essence, the jcpoa establishes
Al
Iran as a threshold nuclear power today and paves the way for an
eventual Iranian bomb.
The agreement will also encourage Iran’s regional rivals to go
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nuclear. Iran’s Sunni competitors for power, particularly Saudi Arabia,

are unlikely to stand idly by as Iran looks forward to a near future in
which it faces no nuclear restraints. The United Arab Emirates,
which had renounced uranium enrichment as part of its civilian nu-
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clear agreement with the United States, is now reconsidering its

pledge. Ironically, the Obama administration will likely provoke the
very nuclear arms race it hoped to avoid.
Supporters of the deal point to the economic exigencies that com-
Ma
pelled Tehran to agree to it, but Tehran was also motivated by the
scientific imperatives of building nuclear weapons. For much of its
existence, Iran’s nuclear program was subject to sabotage and sanctions
and relied on primitive centrifuges. As Hamid Baeidinejad, one of Iran’s
lead negotiators, has admitted, the Iranian scientific establishment
appreciated that a reliable industrial-size nuclear program required

advanced centrifuges, ones that operated as much as 20 times as fast

as the primitive ones. And Iranian officials understood the need to shield
their program from sabotage and possible military retribution. The prob-
lem was that it would take approximately eight to ten years to introduce
the new generation of centrifuges. So the challenge for Iran’s diplomats
was to legitimize the nuclear program while negotiating a research-and-
development schedule that fulfilled the scientists’ requirements.
The final agreement met these needs. The jcpoa allows Iran to
develop advanced centrifuges and begin installing them in the eighth
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year of the agreement. Thus, not only did Iran get the sanctions
removed and its nuclear program legitimized; it also obtained the
timeline it needed for the mass production of advanced centrifuges.
hi
Indeed, in highlighting the achievements of his negotiators, Iranian
President Hassan Rouhani emphasized “the development of new
centrifuges—from concept to mass production.” So fast and efficient
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are the new generation of centrifuges that Iran could easily build a
small facility producing weapons-grade uranium that would evade
detection. And once Iran is in possession of weapons-grade uranium,
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it will also have a fleet of reliable ballistic missiles at hand.
REVISE AND RESUBMIT

Given the many disturbing aspects of the jcpoa, the next U.S. president
Al
must revise it. Even Secretary of State John Kerry has acknowledged
that a future administration might want to find “some way to strengthen
it.” Indeed, there are a number of ways to do so.
od
Most important, the United States should undo the sunset clause,
which lifts some of the most essential restrictions on Iran’s program
within as little as eight years. Instead of having an arbitrary timeline
determine the longevity of the accord, U.S. officials should insist that
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when the deal expires, the United States, the five other great powers
that signed the deal, and Iran hold a majority vote on whether to
extend the agreement’s restrictions for an additional five years—and
that such a vote be held every five years thereafter. The precedent for
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such a move is the Nuclear Nonproliferation Treaty: after that treaty

expired, the vast majority of the member states voted to extend it
in perpetuity.
The United States should also call on Iran to ship all its enriched
uranium out of the country for good. After all, the jcpoa itself stipu-
lates that Iran’s spent fuel from its plutonium production will be sent

out permanently; a similar process should be put in place for its en-
riched uranium. And given that the new generation of centrifuges
would dramatically expand Iran’s enrich-
ment capacity and shorten its nuclear-
breakout time, the United States should
No sensible Iran policy can
insist that Iran’s centrifuge stock be coexist with the nuclear
limited to the rudimentary centrifuges. deal as it stands today.
As for Iran’s ballistic missiles, they have
no legitimate function other than delivering a nuclear payload, and so
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the international community should continue to demand that Iran
permanently forgo the development of such missiles.
The United States should also press for more intrusive inspections.
hi
The current plan gives Iran 24 days to admit inspectors to certain
sites—a far cry from the “anytime, anywhere” inspections that the
White House had promised. A revised deal should draw on the expe-
ha
rience of South Africa, which dismantled its nuclear weapons around
1990. It provided the International Atomic Energy Agency a full
accounting of its previous nuclear history and allowed inspectors to
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visit military installations with as little as a day’s notice. Since it was
determined to disarm, South Africa had no qualms about such require-
ments. If Iran is committed to proving its goodwill, it should accept a
similar verification system.
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According to the Obama administration, any attempt to revisit the

jcpoa’s procedures would spark an international outcry, isolating the
United States from its allies. Such overwrought claims ignore the fact
od
that the jcpoa is not a legally binding treaty but a voluntary political
agreement. Moreover, the jcpoa commands the support of neither
the American public nor its elected representatives in Congress. A new
president can and should reconsider it.
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Admittedly, U.S. allies might not be so eager to revise the jcpoa.

The product of a painstaking multilateral effort, the agreement has the
unanimous support of the un Security Council. Still, most of Wash-
ington’s Middle Eastern allies would welcome changes. Israel opposes
Ma
the deal, and Gulf states such as Saudi Arabia have made it clear that
their support for the jcpoa is tepid at best and largely an effort to
please the Obama administration.
France, Germany, and the United Kingdom will prove harder to
convince. The next president should make it clear to these allies that
he or she is prepared to negotiate with Iran but intends to prevent Iran

from getting a nuclear capability. In private, U.S. diplomats should

convey the message that the way that European countries react to
amendments to the jcpoa will affect their relations with the United
States. A determined president could mobilize the international
community behind a set of demands that would measurably strengthen
the agreement and broaden its bipartisan appeal at home.
Supporters of the jcpoa suggest that Iran will never agree to such
revisions. But nations do end up negotiating agreements that once
seemed impossible. During arms control negotiations with the Soviets
m
in the early 1980s, the commentariat blasted Reagan as naive for
insisting that the Soviet Union remove all its intermediate-range
missiles from Europe. And yet in 1987, Moscow did exactly that. Facing
hi
grave internal problems, the Soviets had little choice but to negotiate;
the same should hold true for Iran today, especially with greater pres-
sure from and patience on the part of the United States.
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ISOLATE AND COERCE
In addition to revising the nuclear agreement, the United States
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should punish Iran for its regional aggression, sponsorship of terrorism,
and human rights abuses. To do so, it should segregate Iran from the
global economy by restoring as much of the sanctions architecture as
possible. (As Kerry has conceded, even with the deal in place, any
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Iranian entity that participates in terrorism or human rights abuses

could still face sanctions.) And it should launch a campaign of political
warfare to intensify the Iranian public’s disenchantment with the regime
od
and deepen dissension within the ruling circle.

The Obama administration has shown a curious reluctance to criti-
cize the Islamic Republic for its domestic abuses. The White House
appears to have wanted a nuclear deal so desperately that it declined
so
to pass judgment on Iran’s rulers, even as the Islamist regime jailed

dissidents, rigged elections, censored the media, and set records for
executions of prisoners. The United States has a moral obligation to
speak out against such transgressions. And no strategy of pressure can
Ma
succeed without a concerted attempt to stress Iran at home.

Future historians will look back at 2009 as the year modern Iran
changed decisively. That June, a placid presidential race featuring lack-
luster candidates suddenly turned into an intense contest for political
power as Iranians took to the streets to protest the fraudulent results.
The episode delegitimized theocratic rule and severed the bonds

between the state and society. Since then, the political space in Iran
has narrowed, as the hard-liners have eviscerated the left wing of the
body politic. The country’s most popular politicians have been either
excluded from the corridors of power or thrown in prison.
The election of Rouhani in 2013 did not, as some in the West
naively believed, signal the advent of a newly reformist regime. Rouhani
has demonstrated no interest in pursuing democratic or human rights
reforms; his charge was merely to stabilize the nuclear file. Today, the
guardians of the revolution preside over
m
a state that has been systematically hol-
lowed out and increasingly relies on fear
The United States made a
to perpetuate its rule. tragic mistake in staying
hi
To delegitimize the Islamic Repub- silent during Iran’s 2009
lic, U.S. officials must begin by sharply protests.
challenging the regime’s values and
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viability. They should castigate Iran as a
remnant of twentieth-century totalitarianism that will inevitably go
extinct. No one has a greater power to mobilize dissent abroad than
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a U.S. president. Reagan’s denunciations of the Soviet Union did
much to galvanize the forces of change behind the Iron Curtain. It is
unfortunate that Obama, a gifted speaker, has declined to embrace
the Iranian people’s struggle for freedom. The next president should.
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Meanwhile, the U.S. government should take to television, radio,

and social media with the message that clerical misrule has resulted
only in economic deprivation and political disenfranchisement. It
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should showcase Iran’s costly imperial ventures and the diversion of

its scarce resources to terrorist organizations such as Hezbollah in
Lebanon and despots such as Bashar al-Assad in Syria. It should con-
trast life in Iran as it is with what it could be under more responsible
so
rulers. At the same time, the United States should encourage and pub-
licize defections from inside the regime. These could sow confusion
and distrust within an already paranoid government.
To add to the pressure, the United States should target some of its
Ma
sanctions on the part of the regime most responsible for repression,

terrorism, and regional aggression: the Islamic Revolutionary Guard
Corps. That group boasts substantial business holdings in a range of
areas, including the automotive sector, telecommunications, energy,
construction, engineering, shipping, and air transportation. Washington
should subject these interests to secondary sanctions in addition to

primary ones, meaning that any firms dealing with the entities would
lose their access to the U.S. market. To facilitate such a step, the
State Department should designate Iran’s Revolutionary Guard
Corps as a foreign terrorist organization. And the U.S. government
should designate a greater number of officials within the group as
human rights abusers.
Washington should also keep in place sanctions against Iran’s fi-
nancial institutions. These restrictions have succeeded in prevent-
ing Iran from conducting normal transactions through the global
m
financial system. And with good reason: as the U.S. Treasury has
repeatedly found, the country’s leading banks have been implicated
in a range of crimes, including nuclear proliferation, terrorism, and
hi
money laundering.
The United States made a tragic mistake in staying silent during
Iran’s 2009 protests, but the Islamic Republic remains vulnerable to
ha
popular revolt. Indeed, since its inception, the theocracy has battled
protest movements demanding accountability and freedom. In the early
years of the revolution, the mullahs had to repress a range of secular
iT
forces that wanted to steer the nation in a more liberal direction. In the
1990s, reformers insisted on an Islamic government that nonetheless
accommodated democratic norms. And in 2009, the Green Movement
rocked the foundations of the system. The only certainty about Iran’s
Al
future is that another protest movement will eventually emerge. And

at that time, the United States must be ready to stand with it.
od
REGIONAL ROLLBACK
For Iran’s recalcitrant mullahs to yield to international norms, all the
walls around them have to close in. So as it stresses Iran’s economy and
divides its society, the United States should also push back against
so
its influence around the Middle East. By contesting Tehran’s gains,

Washington can impose additional costs on the regime and contribute
to regional stability.
That means helping the region reconstitute its failed states and end
Ma
its many civil wars, since Iran thrives on chaos. At the moment, Iran
seems to have reached the zenith of its power. Its clients dominate three
Arab capitals—Damascus, Baghdad, and Sanaa—and are highly influ-
ential in a fourth, Beirut. Hundreds, if not thousands, of its agents and
soldiers have entered Syria to fight for the Assad regime. In Hezbollah,
it has an obedient force of guerrillas, light infantry, and terrorists.

Yet these activities carry the risk of overextension. Already, Iran

has suffered battlefield casualties among the officer corps of its elite
Quds Force, part of the Revolutionary Guard, and as it sends more
fighters to Syria, it may be making itself a bigger target. In the
meantime, Iran has to bear the costs of sustaining the myriad of
militias and terrorist organizations that it subsidizes across the region.
Imperialism may be tempting, but it is also financially draining.
As the United States confronts Iran, it will need regional actors to bear
their own measure of responsibility. None of these players wishes to suc-
m
cumb to Iran’s imperial pretensions, but as the United States has retreated,
they have hedged their bets between the two adversaries. Those days
must end. Iraqi politicians, Gulf princes, Syrian rebels—all must play a
hi
role in pushing back against Iran. U.S. officials should make it clear that
in exchange for American guardianship, Arab allies will have to curtail
their commercial links to and lessen their diplomatic representation in
ha
Tehran. As Iran’s leaders look over the horizon, they should see an Arab
world coalescing against them under the auspices of the United States.
The creation of a new anti-Iran coalition will require something that
iT
the Obama administration has lacked: a strategy that tightens the con-
straints on Tehran and consolidates Washington’s relationships with its
traditional allies. That won’t be easy. American passivity has allowed
the region to devolve into a vortex of conflicting groups and interests,
Al
and the American public understandably worries about any policy that
requires large numbers of American boots on the ground. The recent
addition of Russian military power into the equation only heightens
od
the degree of difficulty.

Of course, many of these problems could have been avoided had
the United States provided effective aid to the reasonable elements of
the Syrian opposition back in 2011. Doing the same today would be
so
difficult, if not impossible, as the Syrian population has become more

radicalized and extremist groups have seized more territory. Nonethe-
less, the United States can still train and equip surrogates who are
capable of inflicting greater losses on the regime—chief among them
Ma
the Kurds, Arab tribal fighters, and the Druze. But these groups will
achieve meaningful battlefield gains only if the United States allows
them to attack the Assad regime. Previous training programs failed in
part because they required the rebels to limit their attacks to the
Islamic State, or isis, and so they faced difficulties with recruiting.
Greater support and leeway for the opposition would no doubt ease

these problems, as would the presence of more U.S. Special Forces

personnel, including forward air controllers, inside Syrian borders.
Tipping the balance of forces against the Assad regime will also require
convincing Turkey to reorder its priorities in Syria. To date, the Turks
have focused first on fighting the Kurds and second on fighting Assad,
with the battle against isis a distant third. Bringing Ankara into closer
alignment with U.S. policy will require a real exchange of views, rather
than the dialogue of the deaf that has gone on since 2011. U.S. diplomats
will have to demonstrate that they share Turkey’s desire to rid Syria of the
m
Assad regime. The Turks, in turn, will have to abandon their fixation on
waging war on the Kurds and agree to make the fight against Assad and
isis their top priorities. Turkey needs to be convinced that the best way to
hi
improve relations with the Kurds is for President Recep Tayyip Erdogan
to return to his earlier policy of improving their plight within Turkey.
Washington also needs to back a safe zone for refugees, which would
ha
almost certainly require a no-fly zone. (Turkey has long wanted the
United States to establish a safe zone, but its request has been meet
with indifference and disdain.) A safe zone that protected the Syrian
iT
populace from Assad’s barrel bombs and chlorine gas attacks would
help stanch the flow of refugees and manage the tragic humanitarian
consequences of the Syrian civil war. Properly administered, it would
also provide a visible alternative to the cruelties of life under isis rule
Al
and help create the space in which a moderate Sunni Arab opposition
to Assad could grow.
Critics of a U.S.-enforced no-fly zone object that given the presence
od
of Russian aircraft, the risks of an accidental conflict are too high. For
that reason, the Obama administration seems to have taken a no-fly
zone off the table. But Russian President Vladimir Putin no doubt
shares U.S. concerns about an unintended confrontation and would
so
have every reason to refrain from challenging a no-fly zone. And the
ongoing discussions between Moscow and Washington to “deconflict”
their air campaigns over Syria ought to limit the chances of a clash.
When it comes to the Syrian civil war, the Obama administration
Ma
appears to have taken the position that there is no military solution and
that a diplomatic solution requires a political settlement that only Iran and
Russia can broker. Unfortunately, it is not at all clear that those two coun-
tries are open to such a settlement, but in the event that they are, they will
do everything they can beforehand to advantage their client Assad. In that
case, anti-Assad forces will still have to make gains on the ground in order

to create the conditions for an acceptable settlement. Otherwise, the

result will be capitulation to an Iranian-Russian condominium.
BANDING TOGETHER
Washington should also seek to reduce Iran’s influence in Baghdad—a
difficult task, but one made easier by the fact that most Iraqi Arabs,
Shiites included, have no interest in serving Iran. The main goal should
be to destroy isis, thereby diminishing the Iraqi government’s reliance
on Iranian support. If the United States built on its relationships with
m
the Iraqi Kurds, moderate Iraqi Shiites, and Iraqi Sunnis, Iran would at
least have a harder time using Iraq as a base for its larger schemes.
At a practical level, Washington should push Baghdad to govern
hi
more inclusively, so that the central government is seen as benefiting
Sunnis and Kurds, and not just Shiites. It should make an outreach to
the Sunni tribes on a scale equivalent to what took place during the
ha
2007 surge of U.S. troops. And it should ramp up its military assistance
to the Kurds and Sunni tribal forces, intensify the air campaign against
isis in both Iraq and Syria, and embed U.S. personnel in the Iraqi
iT
military at lower levels than it currently does. A heightened U.S. pres-
ence in Iraq need not entail a massive combat force there, but it would
mean a larger troop presence and thus a greater risk of casualties. Again,
the price for greater U.S. involvement should be a commitment on the
Al
part of local actors to press back against Tehran and its enablers.
Iran’s influence in the Middle East extends beyond Syria and Iraq.
In Yemen, it stems from the success of the Houthi rebels, a Shiite
od
group that now controls large swaths of the country. The Gulf states
have taken the lead in pushing back the Houthis. If those states need
help with, say, maintaining a blockade to prevent Iranian ships from
resupplying their clients, then the United States should offer it. Only
so
Washington can provide the capabilities for patrolling the global

commons, including intelligence, surveillance, and reconnaissance.
As Washington attempts to weaken Iran’s hand in the region, it will
need to earn back the trust of Israel and the Gulf states. It cannot sim-
Ma
ply buy these countries off with more arms sales, although those will
be necessary. Rather, U.S. officials will have to consult with them reg-
ularly and in depth about the nature of the Iranian problem. The goal
should be to generate an overall strategy that builds on the tacit under-
standing that Israel and the Gulf states are in the same strategic pre-
dicament regarding Iran. Once that is done, Iran’s regional opponents

will have an easier time coordinating policy, as well as covert activity,

and the United States will have an easier time publicly defending mea-
sures aimed at countering Iranian influence.
Getting the Gulf states to agree to take common action has always
been hard, but after years of neglect from the Obama administration,
they are now more likely to be receptive to a new U.S. strategy against
Iran. The United States should help the Gulf states not only as they
battle Iranian proxies in Syria, Iraq, and Yemen but also as they deal
with a range of other challenges. These include protecting themselves
m
against Iran’s efforts to undermine their internal security, defending
their economic infrastructure (such as oil and gas platforms, water-
desalinization plants, and tourist sites), and preventing Iran from
hi
interdicting their energy exports along key transit routes.
To confront Iran, the Gulf states will need capabilities commensu-
rate with the challenge. In particular, the United States should consider
ha
supplying them with systems that defend against guided rockets and
mortars, such as the Centurion c-ram. The United States could also
broker cooperation with Israel aimed at giving the Gulf states their own
iT
version of the Iron Dome defense system, which they could use to defend
their vital economic and tourist infrastructure against Iranian missiles.
And in the long run, the Gulf states have the financial resources, even
at current oil prices, to invest in the next generation of missile defense
Al
technologies, such as directed-energy weapons, which would diminish

Iran’s ability to attack them.
The countries in the region with formidable special-forces capabili-
od
ties, such as Jordan and the United Arab Emirates, should use that
advantage to help some of the more vulnerable countries, such as
Bahrain, deal with their internal security problems—arrangements that
Washington could help broker. Iran’s adversaries could even develop
so
a subset of special forces capable of operating inside Iran to exploit

the grievances of various ethnic minorities. The goal would be to
make Iran think twice about its campaign of regional subversion by
demonstrating that two can play that game.
Ma
Finally, the Gulf states need to further reduce Iran’s ability to choke off
oil exports by blocking the Strait of Hormuz. Although they have already
built pipelines to bypass the strait, they should also take steps to increase
those pipelines’ capacity. The Gulf states should invest in capabilities such
as advanced air-to-air missiles to take down Iran’s aircraft and land-attack
cruise missiles to destroy its antiship cruise missiles. And they should

augment that effort with the undersea capabilities needed for a campaign
against Iran’s surface naval assets, including its many small boats.
This agenda would represent a tall order for U.S. diplomats and
military officials, yet even merely consulting allies about efforts to roll
back Iranian influence would immediately get Tehran’s attention. As
big an effort as it might represent, a plan on this scale will be necessary
to awaken Iranian leaders to the costs they will suffer if they continue
to destabilized the Middle East. If properly executed, such a strategy
might even bring about a change of course—or a fatal increase in the
m
contradictions that beset an already overstretched regime.
NO NEED TO SETTLE
hi
A regime as dangerous to U.S. interests as Tehran requires a compre-
hensive strategy to counter it. That means exploiting all of Iran’s
vulnerabilities: increasing the costs of its foreign adventures, weakening
ha
its economy, and backing its domestic discontents. Pursuing that
strategy will take time, but eventually, it will put the United States in
a position to impose terms on Iran, including in the nuclear realm.
iT
Washington should strive for a stringent arms control agreement, not
one that presages an Iranian bomb. It should compel Iran to cease much
of its regional subversion, not create power vacuums that encourage it.
And it should move human rights up the agenda, not look the other
Al
way as Iran’s leaders oppress their people.

Some in Washington believe that the Iran problem is of secondary
importance to the United States compared with violent jihadist groups
od
such as isis. Not so. For all their achievements in the chaotic lands of
Syria and western Iraq, those radical movements do not yet possess
the resources and capabilities of a large, sophisticated state. Iran does.
Remember, the Iranian regime was the original Islamic revolutionary
so
state. Its successes inspired a wave of radicals across the Middle East.
At its most basic level, the confrontation between the United States
and Iran is a conflict between the world’s sole superpower and a
second-rate autocracy. Washington does not need to settle for a disas-
Ma
trously flawed arms control agreement and hope that theocrats with
no interest in relaxing their grip will somehow become moderates. A
determined policy of pressure would speed the day when the Iranian
people replace a regime that has made their lives miserable. And in
the interim, it would reduce the threat that a triumphant, nuclear-
armed regime would pose to the Middle East and the world beyond.∂

When Congress Gets Mad

Foreign Policy Battles in the 1950s and Today
Steven Casey
m
T
he scholar Edward Corwin famously described the separation
of powers between the executive and the legislative branches
hi
set out in the U.S. Constitution as “an invitation to struggle
for the privilege of directing American foreign policy.” With different
parties controlling different branches of government, partisan politics
ha
tends to intensify this struggle, and the consequences can be ugly.
These days, for example, hardly a week seems to go by without vicious
sniping between the Obama administration and Republicans in
iT
Congress over one issue or another—from China to Russia, Iran to
Syria, Cuba to Israel. And on most issues, process as well as discourse
has broken down, with each side openly trying to thwart or bypass
the other.
Al
This is not the first time things have descended to such a level.
What the current situation most resembles, in fact, is the early Cold
War era, when Republicans in Congress made foreign policy central to
od
their attacks on President Harry Truman. Then, as now, the gop

condemned a Democratic president for being too soft, letting
down key allies, and leaving the nation ill equipped to deal with its
adversaries. And then, as now, congressional hard-liners sought greater
so
control over foreign policy, proposing all manner of resolutions and

hearings to rein in and embarrass the president.
The historical parallel is not exact—they never are—but a look
back at the earlier strife offers useful context for evaluating today’s
Ma
bitter divisions and their likely outcome. The main takeaway is not
comforting to contemporary Republicans: trying to fight a no-holds-
barred war over foreign policy against a determined White House
STEVEN CASEY is Professor of International History at the London School of Economics
and the author of When Soldiers Fall: How Americans Have Confronted Combat Losses From
World War I to Afghanistan.

can limit the effectiveness of U.S. efforts abroad and discredit those
who launch what can come to be seen as obstructionist assaults.
THE GOOD OLD DAYS

Ironically, the Republican challenge of the late 1940s and early 1950s
followed one of the most productive periods of bipartisan cooperation
in congressional history. Between 1947 and 1949, the Truman adminis-
tration worked closely with the Republican-dominated 80th Congress
to pass some of the central components of containment. Just weeks
m
after Truman laid out a vision for an interventionist foreign policy
against Soviet influence in March 1947, Congress appropriated $400
million so that Greece and Turkey could confront internal communist
hi
threats. After the Truman Doctrine came the Marshall Plan, an even
more ambitious initiative that provided $13 billion for the reconstruc-
tion of Western European economies devastated by World War II.
ha
Many Republicans, including Senator Arthur Vandenberg of Mich-
igan (who wielded impressive power over his party’s rank and file),
supported these measures because they had become committed inter-
iT
nationalists in the wake of Pearl Harbor. Truman’s sweeping rhetoric
on the Soviet threat also helped. The story that Vandenberg instructed
Truman to “scare the hell out of America” to win Republican support
might be apocryphal, but it contains a kernel of truth: Truman did use
Al
hyperbolic language to sell containment, and he conspicuously failed

to place geographic limits on where such a strategy would apply.
Still, Truman’s Republican outreach worked only up to a point. The
od
Truman Doctrine mobilized Republican support, but it also gave the

president’s opponents the opportunity to attack him when he failed to
live up to its principles. Both Democrats and Republicans agreed that
Western Europe had to be protected from Soviet influence, for example,
so
but when the Cold War spread to Asia, Truman proved more reluctant to
aid regimes that he considered corrupt, such as the Chinese Nationalist
government of Chiang Kai-shek. Republicans took advantage of Truman’s
perceived failure to act on his word to contain communism on every
Ma
front: Senators Styles Bridges, William Knowland, and Kenneth Wherry,

for example, claimed in a memorandum inserted in the Congressional
Record that the president was pursuing a “wishful, do-nothing policy
which has succeeded only in placing Asia in danger of Soviet conquest.”
For his part, the intensely partisan Truman never grew comfortable
working with Republicans, especially those in the party’s nationalist

Steven Casey
m
hi
ha
iT
Al
wing, who hoped to limit both the size of the U.S. government and its
long-term global commitments. Indeed, he invited Robert Taft—an
Ohio senator who so epitomized gop conservatism that he was dubbed
od
“Mr. Republican”—to the White House only twice during his presi-
dency. And rather than negotiate privately with his critics, Truman
chose to attack them publicly, culminating in the “whistle-stop tour”
of his 1948 reelection campaign, when he traveled the country by train
so
and relentlessly lambasted the “do-nothing” Republican Congress.

Republicans were initially unconcerned by the criticism, since they
considered Truman an accidental president who lacked the charisma
and gravitas for the top job. New York Governor Thomas Dewey,
Ma
their candidate for the presidency, was so confident of victory in the

1948 election that he scarcely challenged Truman’s foreign policy during
the campaign season. Then the votes were counted, and Dewey lost in
the Republicans’ fifth straight defeat.
So the Republicans returned to Washington in 1949 in a surly mood.
Many in the gop concluded that their cooperation with the Democratic

White House on foreign policy had

consigned their party to the political
margins. With Vandenberg sick with
cancer, leadership on Capitol Hill
passed to senators in the party’s nation-
alist wing, such as Taft, Bridges, and
Wherry. And the days of bipartisan
cooperation shuddered to a halt.
m
SCARE TACTICS
In the years after 1949, Republicans
made a concerted effort to depict
hi
Truman and the Democrats as weak,
especially on communism in Asia—a
ha charge that both the nationalist and
the internationalist wings of the party
initially embraced. Truman, Republi-
cans insisted, had “lost” China to Mao
iT
Zedong by refusing to provide suffi-
cient help to Chiang in the Chinese
Civil War. Even worse, they claimed,
Secretary of State Dean Acheson had
Al
given the “green light” for North Korea to invade South Korea in
June 1950 by publicly excluding South Korea from the U.S. defense
perimeter earlier in the year.
od
When Truman responded to the North Korean attack by deploying

four U.S. divisions to the peninsula, Republicans hardly rallied around
the flag. Taft began by claiming that the administration’s weak Asia
policy had effectively “invited” the invasion. Then, as U.S. troops re-
so
treated south in disarray, Republican lawmakers charged that Truman

had wasted taxpayers’ dollars on domestic projects while so neglecting
the nation’s defenses that the U.S. military could not even halt the
North Korean army. The name-calling often got ugly. Wherry declared
Ma
that “the blood of our boys in Korea” was on Acheson’s “shoulders, and
no one else”—a statement Truman considered “contemptible.”
In November, after the Inchon landing and then China’s entry had
whipsawed the course of the war back and forth, this name-calling
turned into something more sinister. Some Republicans went so
far as to portray the partisan tensions as a contest between loyal

Steven Casey
Americans and actual and potential traitors. Senior Republicans

began to consider the possibility of impeaching both Truman and
Acheson for treasonable actions, and South Dakota Senator Francis
Case even introduced a bill to abolish the State Department.
A year earlier, Wisconsin Senator Joseph McCarthy had already
begun escalating policy disputes to ones of character and patriotism,
alleging that card-carrying Communists had infiltrated the State
Department. As the Korean War ground on, McCarthy widened his
sights. He dubbed Acheson a tool of Moscow and encouraged him to
m
flee to Russia. He also accused George Marshall, the U.S. secretary
of defense, of selling out American interests to the Communists.
The virulence of McCarthy’s indictments worried many Republi-
hi
cans, including Taft, who privately described his colleague as a “hard
man for anybody to work with, or restrain.” Yet when trying to forge
a Republican position on McCarthy’s allegations, Taft and other
ha
gop leaders allowed partisanship to override their private qualms.
McCarthy, Taft believed, should “keep talking, and if one case doesn’t
work out, he should proceed with another,” until he eventually succeeded
iT
in tarnishing the reputation of Truman and the Democrats.
In the midst of an increasingly unpopular and eventually stale-
mated war, it was easy for the Republicans to attack the Democrats
as weak. But it was far harder to develop a coherent alternative policy.
Al
The logic of the Republican critique pointed in the direction of military

escalation—going big seemed marginally preferable to going home—
and many in the party’s nationalist wing found an icon in General
od
Douglas MacArthur, who had rejected his commander in chief’s relative

restraint, had called for taking the war to China in pursuit of victory,
and was ultimately fired by Truman in April 1951. After MacArthur’s
passionate farewell address to Congress, Republican Representative
so
Dewey Short from Missouri remarked, “We saw a great hunk of God in
the flesh, and we heard the voice of God.”
Yet when Republicans began to analyze MacArthur’s actual policy
advice, its appeal faded. As a rhetorical device, accusing the president
Ma
of weakness had its merits, but as the basis for a new policy, it presented
obvious problems. Republicans from both wings of the party were
already indicting Truman for the growing death toll of his limited war,
and many nationalists were convinced that the war in Korea was con-
suming too many tax dollars. Did they really want to escalate a conflict
that Taft, in July 1951, described as a “useless and expensive waste”?

Truman aimed to limit American involvement in Korea partly be-

cause he thought Europe was the most important Cold War battle-
ground. But he also wanted time to implement nsc-68, the secret
policy document produced by the State Department that outlined a
stepped-up containment plan. Taft and his conservative allies balked
at the cost of this program, which Truman had candidly indicated
would be funded in part by increased taxes. And as the implications
of nsc-68 became clearer, some Republicans recoiled from what they
saw as an emerging “garrison state,” one that proposed not only to
m
force young men into a system of universal military training but also
to impose wage and price controls.
Along with an overweening state, many Republicans feared a high-
hi
handed president they saw as bent on bypassing constitutional checks on
his authority. When Truman decided to send U.S. forces to Korea with-
out asking Congress for a declaration
ha
of war, for example, Taft charged,
“There is no legal authority for what he
As the basis for a new
has done.” And in December 1950, when policy, accusing the
iT
the president decided to send four ad- president of weakness had
ditional divisions to bolster nato in obvious problems.
Europe rather than confront the Chi-
nese intervention in Korea, many Re-
Al
publicans challenged his authority to do so without their consent. Their

cause quickly gathered support across the aisle, and in early 1951, a bi-
partisan coalition passed a nonbinding resolution opposing the deploy-
od
ment of further U.S. troops to Europe “without further congressional

approval.” By then, the charge that Truman’s foreign policy threat-
ened the letter and spirit of the Constitution had become a central
feature of the Republican challenge to the president.
so
Increasingly frustrated by their inability to effect changes in U.S.

policy through persuasion, moreover, hard-line anti-interventionists
in Congress decided to try establishing procedural restraints on the
White House instead. The most famous of these was the so-called
Ma
Bricker Amendment, a series of measures designed to bring the White

House to heel by placing explicit restrictions on the scope and ratifi-
cation processes of treaties and executive agreements. Named after
their sponsor, Ohio Senator John Bricker—a staunch conservative
who had been Dewey’s running mate in 1944—the measures were
intended as protection against the supposedly sneaky attempts of

Steven Casey
executive-branch globalists to abandon their country’s age-old freedoms.

Their text included language such as “a provision of a treaty which
conflicts with this Constitution shall not be of any force or effect” and
“Congress shall have power to regulate all executive and other agree-
ments with any foreign power or international organization.” A version
Bricker introduced in February 1952 got 58 cosponsors in the Senate,
including every Republican but one.
THE PARTY OF YES
m
By the 1952 presidential election, however, the nationalist challenge
had begun to fizzle. Truman had managed to get his way on most
foreign policy questions, waging a limited war in Korea without
hi
congressional approval and using the war to mobilize U.S. power for
a long-haul struggle to contain the Soviet challenge. And the election
of Dwight Eisenhower—a quintessential internationalist and avatar
ha
of the Republican Party’s establishment wing—was a victory for the
gop but a defeat for its nationalist faction. Increasingly concerned
about the prospect of a Taft candidacy, mainstream Republicans had
iT
flocked to Eisenhower as a moderate with bipartisan appeal.
During the campaign, Eisenhower promised only modest changes
to Truman’s foreign policies, both on Korea and on containment more
generally, pledging merely to bring more competence and frugality to
Al
their implementation. Once in office, moreover, he viewed a major

task of his administration to be teaching his party to govern after 20
years in the presidential wilderness. Republicans in Congress, he
od
observed, had become so used to dealing with a Democratic president

that their instinct was to automatically oppose any policy proposed by
the White House. “Now that we have a Republican Congress their job
is to hold up the hands of the executive departments,” Eisenhower
so
told his cabinet in early 1953, “but they have not learned that yet. . . .
Their automatic thinking is to tear them down.”
Fortunately for Eisenhower, because the gop had been out of power
for so long, even its nationalist leaders were prepared to mute their
Ma
instinctive oppositional traits, not to mention their deep-seated aver-

sion to key elements of Eisenhower’s foreign policy agenda. Taft himself
performed a valuable service shortly before his death in July 1953 by
helping bottle up the Bricker Amendment in committee. And other
influential Republicans reluctantly agreed to support an armistice
agreement that ratified the stalemate in Korea, something many in the

party had initially opposed because it fell short of an outright U.S. victory.
By 1954, cooperation between Democrats and Republicans was
returning to Washington. When McCarthy continued with his increas-
ingly wild efforts to root out supposed Communists throughout the
government and armed services, his own party finally decided to
repudiate him. And by the time the Democrats regained control of
Congress in the 1954 midterm elections, Eisenhower had not only
quelled the worst excesses in the Republican ranks but also forged
a constructive working relationship with the Democratic leadership,
m
led by powerful southerners such as Texas Senator Lyndon Johnson.
The bipartisan consensus that followed would prevail until the
Vietnam War.
hi
BACK TO THE FUTURE
The constructive cooperation between a moderate Republican president
ha
and southern Democrats in Congress during the mid-1950s shows how
much U.S. politics has changed over the generations. Back then, both
parties were internally divided along ideological and regional lines; to-
iT
day, they are much more homogeneous. President Barack Obama, like
Truman before him, has shown little aptitude for reaching across the
aisle, yet given the distance between the parties on so many issues, it is
doubtful that any president could bridge the contemporary chasm. Still,
Al
there are some lessons to be learned from the earlier era, chief among
which is that perceived partisanship on foreign policy can backfire and
criticism from the sidelines is easier than policymaking in power.
od
During the 1950s, nationalist Republicans ended up getting minimal

political payoffs for their attacks on the Truman administration, with
Taft himself emerging as the biggest loser: he desperately sought the
presidency for years, but his aggressive politicking on foreign policy
so
became an insurmountable obstacle. Taft’s willingness to hammer the

administration at every opportunity and in every way—including the
use of the particularly blunt instrument of McCarthy—worried many
in his party, who in turn worked to block his presidential nomination
Ma
in 1952. And the more that Taft and his allies condemned Truman for
his weakness, the more they raised the stakes for themselves to offer
a plausible alternative, which they never really had.
Indeed, however unappetizing a limited war in Korea was, the pros-
pect of either abandoning the peninsula to the Communists or fighting a
full-scale war with China was much worse. And although the Truman

Steven Casey
administration’s apparently passive policy toward communist advances

in Asia became an easy target, the notion of aggressively pursuing “roll-
back” contained obvious risks. The American public certainly had little
stomach for increased belligerence or adventurism in the wake of a long,
stalemated war fought halfway around the world. And so Republicans
desperate to win back the White House gradually dropped their confron-
tational approach and eventually sided with Eisenhower’s moderation.
A belligerent foreign policy stance, moreover, fit uncomfortably
with the Republican Party’s advocacy of smaller government, lower
m
taxes, and fiscal responsibility. A muscular posture abroad, after all,
would require a higher budget, which in turn would require either
higher taxes or higher deficits, both of which were anathemas to many
hi
in the gop. Taft’s railings against Democratic weakness, for example,
lost much of their force when, in 1951, he began pledging to cut U.S.
defense spending by half and claimed that Truman’s proposals for a
ha
3.5-million-man army would wreck the economy. (The Eisenhower
administration eventually tried to square this circle by promulgating
its “New Look” policies, including massive retaliation, which suppos-
iT
edly promised more bang for the defensive buck, but the actual
changes to U.S. national security policy came only at the margins.)
Nationalist Republicans’ policy proposals, finally, tended to provoke
fear and loathing from major U.S. allies. Truman’s domestic critics regu-
Al
larly accused him of selling out the country’s friends abroad, but the
friends the critics had in mind tended to be small, weak countries with
high political salience back home, such as Taiwan and South Korea. What
od
the critics generally ignored was that Truman’s efforts to put in place a
robust, well-resourced containment of the Soviet Union without trigger-
ing an actual war were supported and appreciated by the country’s larger
and more strategically important allies, such as France, Japan, the United
so
Kingdom, and West Germany. Nationalist Republicans’ rash rhetoric

often spooked Washington’s truly indispensable partners, who feared the
prospect of escalation in Korea, looked askance at McCarthy’s campaign
to root out internal Communists, and fretted about the consequences of
Ma
excessive congressional control over U.S. foreign policy.

If the 1950s are any guide, therefore, one might expect to see the
punches that come thick and fast in the midst of a partisan campaign
over foreign policy land far from their intended targets and quite
possibly end up hurting those who throw them in the first place.∂

Prosperity Rising
The Success of Global Development—and
How to Keep It Going
Steven Radelet
m
S
ince the early 1990s, daily life in poor countries has been chang-
hi
ing profoundly for the better: one billion people have escaped
extreme poverty, average incomes have doubled, infant death
rates have plummeted, millions more girls have enrolled in school,
ha
chronic hunger has been cut almost in half, deaths from malaria and
other diseases have declined dramatically, democracy has spread
far and wide, and the incidence of war—even with Syria and other
iT
conflicts—has fallen by half. This unprecedented progress goes way
beyond China and India and has touched hundreds of millions of
people in dozens of developing countries across the globe, from
Mongolia to Mozambique, Bangladesh to Brazil.
Al
Yet few people are aware of these achievements, even though, in

aggregate, they rank among the most important in human history.
In 2013, the Swedish survey organization Novus Group International
od
asked Americans how they thought the share of the world’s population
living in extreme poverty had changed over the last two decades.
Sixty-six percent of respondents said that they thought it had doubled,
and another 29 percent said that it hadn’t changed. Only five percent
so
knew (or guessed) the truth: that the share of people living in extreme
poverty had fallen by half.
Perhaps that ignorance explains why Washington has done so little
to take advantage of these promising trends, giving only tepid support
Ma
to nascent democracies, making limited investments in economic devel-

opment and in new health and agricultural technologies, and failing to
STEVEN RADELET holds the Donald F. McHenry Chair in Global Human Development at
Georgetown University and is a Nonresident Senior Fellow at the Brookings Institution. He is
the author of The Great Surge: The Ascent of the Developing World (Simon & Schuster, 2015),
from which this essay is adapted.

Steven Radelet
take the lead in building more effective international institutions. What-

ever the reason, many developing countries are now responding
to what they perceive as the United States’ indifference by looking
elsewhere—especially toward China—for deeper engagement and
advice on how to keep growing. At the same time, climate change, the
slowdown in global growth, and rising tensions in the Middle East and
beyond have begun to threaten further progress. As a result, the United
States now risks missing out on a historic chance to strengthen its
global leadership and help create a safer, more prosperous, and more
m
democratic world—just at the moment when it could help the most.
ONE GIANT LEAP
hi
Global poverty is falling faster today than at any time in human history.
In 1993, about two billion people were trapped in extreme poverty
(defined by the World Bank as living on less than $1.90 per day); by
ha
2012, that number had dropped to less than one billion. The industri-
alization of China is a big part of the story, of course, but even excluding
that country, the number of extreme poor has fallen by more than 400
iT
million. Since the 1980s, more than 60 countries have reduced the
number of their citizens who are impoverished, even as their overall
populations have grown.
This decline in poverty has gone hand in hand with much faster
Al
economic growth. Between 1977 and 1994, the growth in per capita
gdp across the developing countries averaged zero; since 1995, that
figure has shot up to three percent. Again, the change is widespread:
od
between 1977 and 1994, only 21 developing countries (out of 109 with
populations greater than one million) exceeded two percent annual
per capita growth, but between 1995 and 2013, 71 such countries did
so. And going backward has become much less common: in the earlier
so
period, more than 50 developing countries recorded negative growth,

but in the later one, just ten did.
The improvements in health have been even bigger. In 1960, 22 per-
cent of children in developing countries died before their fifth birth-
Ma
day, but by 2013, only five percent did. Diarrhea killed five million
children a year in 1990 but claimed fewer than one million in 2014.
Half as many people now die from malaria as did in 2000, and deaths
from tuberculosis and aids have both dropped by a third. The share
of people living with chronic hunger has fallen by almost half since
the mid-1990s. Life expectancy at birth in developing countries has

Prosperity Rising
m
hi
ha
Live long and prosper: administering a polio vaccine in Karachi, Pakistan, October 2014
lengthened by nearly one-third, from 50 years in 1960 to 65 years to-
iT
day. These improvements in health have left no country untouched,
even the worst-governed ones. Consider this: the rate of child death
has declined in every single country (at least those where data are
available) since 1980.
Al
Meanwhile, far more children are enrolling in and completing

school. In the late 1980s, only 72 percent of all primary-school-age
children attended school; now, the figure exceeds 87 percent. Girls in
od
developing countries have enjoyed the biggest gains. In 1980, only

half of them finished primary school, whereas four out of five do so
today. These leaps in education are beginning to translate into better-
skilled workers.
so
Then there is the shift to democracy. Prior to the 1980s, most

developing countries were run by left- or right-wing dictators. Coups
and countercoups, violence and assassinations, human rights abuses—
all formed part of regular political life. But starting in the 1980s, dic-
Ma
R E U T E R S / AK H TAR S O O M RO
tators began to fall, a process that accelerated after the Cold War. In
1983, only 17 of 109 developing countries qualified as democracies,
based on data from Freedom House and the Center for Systemic
Peace; by 2013, the number had more than tripled, to 56 (and that’s
not counting the many more developing countries with populations
of less than one million).

Steven Radelet
As those numbers suggest, power today is far more likely to be

transferred through the ballot box than through violence, and elections
in most countries have become fairer and more transparent. Twenty
years ago, few Indonesians could have imagined that a furniture maker
from central Java would beat one of Suharto’s relatives in a free and
fair election, as Joko Widodo did in 2014. Nor would many have
predicted that Nigeria, then still under
military rule, would in 2015 mark its
Global poverty is falling first peaceful transfer of power between
m
faster today than at any parties, or that Myanmar (also called
time in human history. Burma) would hold its most success-
ful democratic election the same year.
hi
Across the developing world, individual freedoms and rights are
honored to a much greater degree, human rights abuses are rarer,
and legislative bodies have more power.
ha
Yes, many of these new democracies have problems. And yes, the
march toward democracy has slowed since 2005—and even reversed
in some countries, such as Thailand and Venezuela. But in many
iT
more—from Brazil to Mongolia to Senegal—democracy has deep-
ened. Never before in history have so many developing countries
been so democratic.
As states have become wealthier and more democratic, conflict and
Al
violence within them have declined. Those who think otherwise

should remember that as recently as the 1980s and early 1990s, much
of the world was aflame, from Central America to Southeast Asia to
od
West Africa. There were half as many civil wars in the last decade as
there were in the 1980s, and the number of people killed in armed
conflicts has fallen by three-quarters.
Three major forces sparked this great surge in development progress.
so
First, the end of the Cold War brought an end to the superpowers’
support for some of the world’s nastiest dictators and reduced the
frequency of conflict. As ideas about economic and political gover-
nance began to change, developing countries introduced more market-
Ma
based economic systems and more democracy. Second, globalization

created vast new opportunities for economic growth. Increased flows
of trade, investment, information, and technology created more
jobs and improved living standards. Third, new and more effective
leaders—in politics, business, religion, and civil society—began to
forge deep change. Where courageous figures, such as Nelson Mandela

Prosperity Rising
in South Africa, stepped forward, countries progressed; where old-

style dictators, such as Robert Mugabe in Zimbabwe, remained in
power, countries languished.
This incredibly wide-ranging progress should not obscure the
considerable work that remains: progress has not reached everyone,
everywhere. One billion people still live in extreme poverty, six mil-
lion children die every year from preventable diseases, too few girls
get the education they deserve, and too many people suffer under
dictatorships. Countries such as Haiti, North Korea, Uzbekistan,
m
and Zimbabwe lag far behind. But the fact remains that an enormous
transformation is under way—one that has already substantially
improved the lives of hundreds of millions of people.
hi
WIN-WIN
The United States should welcome and encourage this progress. For
ha
starters, broad-based development enhances global security. It is not
true that poverty necessarily breeds terrorism, as some argue—after
all, most poor people are not terrorists, and many terrorists are not
iT
poor. But it is true that poor states tend to be weak states unable to
prevent terrorist and criminal networks from operating on their soil.
Sustained development strengthens government institutions and
reduces the need for outside intervention. As former U.S. Secretary
Al
of Defense Robert Gates put it, “Development is a lot cheaper than

sending soldiers.”
Development also builds states’ capacities to fight pandemic disease.
od
Guinea, Liberia, and Sierra Leone were overwhelmed by Ebola in 2014

largely because they all had weak health systems. The same was true in
many of the countries hit hardest by the hiv/aids epidemic decades ago.
As poor countries grow wealthier, however, they become better equipped
so
to fight diseases that can spread quickly beyond their borders.

A more prosperous developing world also benefits the U.S. economy.
The spread of economic growth creates new markets for American
businesses not just in China but also in Brazil, Indonesia, South Africa,
Ma
and beyond. Developing countries are buying more and more aircraft,
automobiles, semiconductors, medical equipment, pharmaceuticals,
consultancy services, and entertainment. Although the growth in
trade with developing countries has slowed during the last year, their
economies will no doubt remain major market opportunities for U.S.
companies. In 1990, such states accounted for one-third of the global

Steven Radelet
economy; today, their share is half, and they purchase more than half
of U.S. exports. In 2011, Walmart spent $2.4 billion to acquire a con-
trolling share of a holding company that operates more than 350 retail
stores in South Africa and 11 other African countries, signaling a level
of interest in African consumers that would have been unimaginable
two decades ago.
To be sure, emerging markets also create competition for U.S. busi-
nesses and hardship for American workers who lose their jobs as a
result. But they also create many new jobs, as American firms expand
m
abroad and as companies in the developing world send more capital to
the West. Moreover, developing countries are increasingly coming up
with their own innovations and technologies, in medicine, agriculture,
hi
energy, and more. The United States should respond to this growing
competition not with protectionism but by strengthening its own
capacities: rebuilding its infrastructure, improving its educational
ha
system, and investing in new technologies.
Finally, development helps spread and deepen the values that
Americans hold dear: openness, economic opportunity, democracy,
iT
and freedom. These values tend to go hand in hand with growing
prosperity: as incomes rise, citizens demand greater freedoms.
History suggests that even governments that do not welcome these
ideas eventually embrace them or are replaced by those that do.
Al
And as more developing countries achieve progress under market-

based economic systems and democracy, other countries seek to
emulate the model. The United States and Europe have a strong self-
od
interest in encouraging this process, since it will enhance global

stability and add to the number of like-minded partners that can
help address future challenges.
so
SUSTAINING THE SURGE

What makes all this progress especially impressive is that it has
continued despite a number of major shocks that in an earlier age
could well have stopped it: the outbreak of the hiv/aids pandemic
Ma
in the 1980s, the Asian financial crisis in 1997–98, the 9/11 attacks,
the global food crisis of 2007–8, and the global financial crisis of
2008. In each case, pundits predicted that the disaster of the day
would set back progress. Yet in each case, the gains continued.
There are good reasons to believe they can continue well into the
future. The forces that sparked these changes were fundamental, not

Prosperity Rising
transitory. Governments have learned from their mistakes and gotten

much better at managing inevitable downturns. Global integration
has made critical technologies available to more and more people.
State institutions have become more effective, with improved (if
imperfect) legal systems, clearer property rights, and greater respect
for individual liberties. Democratic rules and norms governing the
transfer of political power, free speech, and accountability have become
more deeply entrenched. Civil society groups are more active.
These deep-seated changes have put enormous additional gains
m
well within reach. If economic growth proceeds along the lines of most
projections over the next two decades, some 700 million more people
will escape extreme poverty. Per capita incomes in poor countries will
hi
double again, millions of childhood deaths will be avoided, tens of
millions of children will get the education they deserve, hunger will
decline, and basic rights and freedoms will spread further.
ha
At least, that’s what should happen—but none of these future gains
is guaranteed. Growth has slowed markedly since 2008 in emerging
economies such as Brazil and China and throughout the developing
iT
world. Russia, Thailand, and Venezuela
have turned less democratic, and South
Africa and Turkey seem to be headed
Continued progress isn’t
in that direction as well. The Middle automatic or guaranteed.
Al
East has seen the return of conflict and But with smart choices,
authoritarian rule. China’s aggressive it is within reach.
actions in the South China Sea could
od
spark a major conflict that could kill

tens of thousands of people and devastate the region’s economies.
Outbreaks of sars and the H1N1 and Ebola viruses underscore
humanity’s vulnerability to disease, and many doctors worry that
so
growing resistance to antibiotics could reverse some of the hard-

fought gains in health. Meanwhile, global population is on track to
exceed nine billion by 2050, and the combination of more people,
higher incomes, and warmer climates will place enormous strains on
Ma
the world’s supplies of fresh water, food, and energy.

Although there are ample grounds for pessimism, the doomsayers
continue to underestimate humanity’s growing ability to cooperate in
the face of new challenges. In the eighteenth century, when Thomas
Malthus looked at population growth and foresaw catastrophic fam-
ine, he failed to appreciate the advances in agriculture, health, and

Steven Radelet
governance that human ingenuity could create. The same was true
for those that predicted a population disaster in Asia in the 1960s and
1970s. Today, the problems facing developing countries are plain to
see, while the new ideas and innovations that will overcome them are
harder to picture. Continued progress isn’t automatic or guaranteed.
But with smart choices, it is within reach.
LEADING BY EXAMPLE
Most of the key choices will be made in developing countries them-
m
selves. Sustaining progress will require leaders there to reduce their
countries’ dependence on natural resources, make their economies
more inclusive, invest more in health and education, expand opportu-
hi
nities for women, and strengthen democracy and the rule of law.
Yet the future of development will also depend on the actions of
the world’s leading countries, since poorer countries can prosper only
ha
in a strong global system. The United States must do its part by
regaining its economic leadership through major investments in infra-
structure, education, and technological advances in health, agriculture,
iT
and alternative fuels. It must act to fix its long-term budget problems
by improving the solvency of Social Security, Medicare, and Medicaid
and strengthen the financial system through better regulation.
The country must also do a much better job of leading by example
Al
on democracy. Deep political polarization, the lack of substantive

debate, the unwillingness to compromise, misguided foreign policy
adventurism, and the Great Recession have made liberal democracy
od
look unattractive and ineffective.

That malaise matters, because many developing countries are now
engaged in a battle of ideas over which economic and political model
they should follow. On the one side stands the model that has
so
prevailed in the West since World War II: market capitalism coupled
with liberal democracy. On the other is the model practiced by China,
Vietnam, Ethiopia, and, increasingly, Russia, among others: state
capitalism coupled with authoritarian rule. And there’s yet one more
Ma
option, with a smaller but more dangerous following: religious funda-

mentalism, as promulgated by Iran and Saudi Arabia and groups such
as the Islamic State (or isis) and Boko Haram in Nigeria.
As the Western countries struggle and China continues to rise,
authoritarian capitalism is becoming more appealing. Consider Beijing’s
ties to Africa. China purchased $26 billion in imports from the continent

Prosperity Rising
in 2013; the United States purchased $9 billion. Chinese investment

in Africa has been growing by 50 percent per year since 2000, whereas
U.S. investment is growing by 14 percent per year. Make no mistake:
many Africans still prefer to follow the American model and view
China with suspicion. But those attitudes are beginning to shift, and
Beijing’s apparent ability to get things done will only enhance China’s
appeal, especially if Washington seems to talk big but deliver little.
THE NEXT SURGE FORWARD
m
Aside from the broader task of getting their own houses in order, the
United States and other Western powers should also assert leadership
in several specific areas to keep the progress going. The first is climate
hi
change, which presents one of the greatest threats to poverty reduc-
tion. Most of the world’s poor countries had little to do with creating
the problem, yet they will bear the brunt of the damage. Rising sea
ha
levels, changing rainfall patterns, higher temperatures, and dwindling
water supplies will derail progress, will undermine global food pro-
duction, and could engender major conflict. Developing countries
iT
have an important role to play in curbing emissions, but they will not
switch to low-carbon fuels and other clean technologies if their developed-
world counterparts do not. Washington has taken important first steps
to reduce power-plant emissions and raise automotive fuel-efficiency
Al
standards, but there is a very long way to go.

Second, leading countries—especially the United States—should
invest more in technological innovation. Much of the credit for recent
od
improvements in living standards goes to vaccines, medicines, high-

yielding seed varieties, cell phones, and the Internet. These new
technologies (alongside old ones such as electricity and paved roads)
have not yet reached everywhere, so simply making them more
so
widely available would do wonders. But sustaining progress for the

next several decades will also require significant investments in new
vaccines, more powerful drugs, drought- and heat-resistant seeds,
desalination techniques, and clean energy.
Ma
Third, Western powers need to upgrade the current system of

global governance. The set of institutions that emerged after World
War II were innovative for their time. For all their faults, the United
Nations, the International Monetary Fund, the World Bank, the World
Trade Organization, and the World Health Organization contributed
significantly to global peace and prosperity. But these organizations

Steven Radelet
are losing legitimacy and becoming less effective, in part because

developing countries feel that they are inadequately represented in
them. It is time for these bodies to give developing countries more
opportunities for leadership, larger voting shares, and a bigger voice
in decisions.
In 2014, the U.S. Congress failed to pass legislation that would
have approved giving developing countries larger voting shares in the
International Monetary Fund—a change with which all other member
countries (and the Obama administration) had agreed. Almost
m
immediately, China accelerated its push to establish a new develop-
ment bank for Asia, and the brics countries (Brazil, Russia, India,
China, and South Africa) followed suit by proposing a similar institu-
hi
tion of their own. Washington then compounded its first error by
trying to undermine the new institutions, reinforcing the view that it
was just trying to keep developing countries in their place. The lesson
ha
was clear: when Washington fails to lead, developing countries will go
their own way.
Fourth, the world’s leading countries should do more on trade.
iT
Although the United States is generally open to trade, its policies
toward poor countries are strikingly protectionist: it charges high
tariffs on many products from developing countries (such as textiles,
shoes, and apparel) and tightly restricts the imports of a range of
Al
agricultural products (including dairy, peanuts, and sugar). Although

free-trade programs, such as the African Growth and Opportunity
Act, help, they are insufficient. Washington should extend duty-free
od
and quota-free access to the world’s poorest countries—the 48 countries

designated by the un as the least developed. It should also push to
formally end the Doha Round of multilateral trade talks, which remain
on life support, and open a new round of negotiations that center on
so
the issues developing countries care about, such as food security.

Finally, the United States and other leading countries should
expand their foreign aid programs, both to solidify the nascent turn-
arounds in the surging countries and to support people in the states
Ma
that remain stuck. In the past, such aid has helped lengthen life spans,
increase agricultural productivity, alleviate humanitarian crises, and
rebuild war-torn countries around the world. Most studies show that
despite its shortcomings, aid has accelerated economic growth and
helped support transitions to democracy, especially since the end of
the Cold War.

Prosperity Rising
But the answer is not just more money; the United States must also
rethink how it provides assistance. For starters, aid agencies should
develop innovative ways to promote private investment. They can
encourage local banks to provide loans to promising entrepreneurs, as
does the Development Credit Authority, a small program within the
U.S. Agency for International Development that should be expanded
significantly. They can foster investment in developing countries by
working with local suppliers to improve the quality of the goods and
services they sell or by financing private investors’ due diligence and
m
environmental impact assessments.
At the same time, aid agencies should invest more in disseminating
new technologies, working closely with universities, foundations,
hi
private companies, and local entrepreneurs. Doing so will require new
types of relationships, incentive structures, and knowledge sharing,
along with a greater willingness to take risks. Aid agencies should also
ha
invest far more in programs to support girls and women, since moun-
tains of evidence show that doing so dramatically improves the health,
education, and economic opportunities of poor families. Above all,
iT
they should provide much more funding to the poorest countries,
and especially democracies, since progress on development in these
countries will have the knock-on effect of improving governance. The
Obama administration has taken important steps on this front, build-
Al
ing on the Bush administration’s health programs and unveiling new

initiatives on food security and electricity, but the next administration
should scale up these programs to meet new challenges.
od
The future of the United States increasingly depends on growing

prosperity, peace, and progress in the developing world. The last two
decades have given humanity a tremendous start in what ultimately
may rank as one of the greatest transformations in world history.
so
Today, the United States has a rare opportunity to stand with the
people and leaders of developing countries to ensure that this progress
continues for decades to come.∂
Ma

How China Sees Russia

Beijing and Moscow Are Close, but
Not Allies
Fu Ying
m
A
t a time when Russian relations with the United States and
hi
western European countries are growing cold, the relatively
warm ties between China and Russia have attracted renewed
interest. Scholars and journalists in the West find themselves debating
ha
the nature of the Chinese-Russian partnership and wondering whether
it will evolve into an alliance.
Since the end of the Cold War, two main views have tended to define
iT
Western assessments of the Chinese-Russian relationship and pre-
dictions of its future. The first view holds that the link between Beijing
and Moscow is vulnerable, contingent, and marked by uncertainties—
a “marriage of convenience,” to use the phrase favored by many
Al
advocates of this argument, who see it as unlikely that the two

countries will grow much closer and quite possible that they will
begin to drift apart. The other view posits that strategic and even
od
ideological factors form the basis of Chinese-Russian ties and predicts

that the two countries—both of which see the United States as a
possible obstacle to their objectives—will eventually form an anti-
U.S., anti-Western alliance.
so
Neither view accurately captures the true nature of the relationship.

The Chinese-Russian relationship is a stable strategic partnership and
by no means a marriage of convenience: it is complex, sturdy, and
deeply rooted. Changes in international relations since the end of the
Ma
Cold War have only brought the two countries closer together. Some
Western analysts and officials have speculated (and perhaps even hoped)
that the ongoing conflicts in Syria and Ukraine, in which Russia has
FU YING is Chair of the Foreign Affairs Committee of the National People’s Congress of the
People’s Republic of China and a Specially Invited Vice Chair of the China Center for
International Economic Exchanges.

become heavily involved, would lead to tensions between Beijing and

Moscow—or even a rupture. But that has not happened.
Nevertheless, China has no interest in a formal alliance with Russia,
nor in forming an anti-U.S. or anti-Western bloc of any kind. Rather,
Beijing hopes that China and Russia can maintain their relationship
in a way that will provide a safe environment for the two big neighbors
to achieve their development goals and to support each other through
mutually beneficial cooperation, offering a model for how major coun-
tries can manage their differences and cooperate in ways that strengthen
m
the international system.
TIES THAT BIND
hi
On several occasions between the end of the nineteenth century and
the middle of the twentieth century, China entered into an alliance
with the Russian empire and its successor, the Soviet Union. But every
ha
time, the arrangement proved short-lived, as each amounted to nothing
more than an expediency between countries of unequal strength. In
the decades that followed, the two powerful communist-led countries
iT
muddled through, occasionally cooperating but often riven by rivalry
and mistrust. In 1989, in the waning years of Soviet rule, they finally
restored normalcy to their relations. They jointly declared that
they would develop bilateral relations based on “mutual respect for
Al
sovereignty and territorial integrity, mutual nonaggression, non-

interference in each other’s internal affairs, equality and mutual benefit,
and peaceful coexistence.” Two years later, the Soviet Union disinte-
od
grated, but Chinese-Russian relations carried on with the principle of

“no alliance, no conflict, and no targeting any third country.”
Soon thereafter, the newborn Russian Federation embraced the
so-called Atlanticist approach. To win the trust and help of the West,
so
Russia not only followed Western prescriptions for economic reform

but also made concessions on major security issues, including reducing
its stockpile of strategic nuclear weapons. However, things didn’t turn
out the way the Russians had hoped, as the country’s economy tanked
Ma
and its regional influence waned. In 1992, disappointed with what

they saw as unfulfilled pledges of American and European assistance
and irritated by talk of nato’s eastward expansion, the Russians began
to pay more attention to Asia. That year, China and Russia announced
that each would regard the other as a “friendly country” and issued a
joint political statement stipulating that “the freedom of people to

Fu Ying
choose their own development paths should be respected, while differ-

ences in social systems and ideologies should not hamper the normal
progress of relations.”
Ever since, Chinese-Russian relations have gradually improved
and deepened. During the past 20 years or so, bilateral trade and
investment have expanded on a massive scale. In 2011, China became
Russia’s largest trading partner. In 2014 alone, China’s investment in
Russia grew by 80 percent—and the
China has no interest in trend toward more investment remains
m
strong. To get a sense of the growth in
a formal alliance with economic ties, consider that in the early
Russia, nor in forming an 1990s, annual bilateral trade between
hi
anti-U.S. or anti-Western China and Russia amounted to around
$5 billion; by 2014, it came close to
bloc of any kind. ha $100 billion. That year, Beijing and
Moscow signed a landmark agreement
to construct a pipeline that, by 2018, will bring as much as 38 billion
cubic meters of Russian natural gas to China every year. The two
iT
countries are also planning significant deals involving nuclear power
generation, aerospace manufacturing, high-speed rail, and infrastructure
development. Furthermore, they are cooperating on new multinational
financial institutions, such as the Asian Infrastructure Investment Bank,
Al
the New Development Bank brics, and the brics foreign exchange
reserve pool.
Meanwhile, security ties have improved as well. China has become
od
one of the largest importers of Russian arms, and the two countries are
discussing a number of joint arms research-and-development projects.
Extensive Chinese-Russian defense cooperation involves consulta-
tions between high-level military personnel and joint training and
so
exercises, including more than a dozen joint counterterrorism exer-

cises during the past decade or so, carried out either bilaterally or
under the auspices of the Shanghai Cooperation Organization. In the
past 20 years, thousands of Chinese military personnel have studied
Ma
in Russia, and many Russian military officials have received short-

term training at the National Defense University of China.
As economic and military links have strengthened, so, too, have
political ones. In 2008, China and Russia were able to peacefully
resolve territorial disputes that had troubled relations for decades,
formally demarcating their 2,600-mile-plus border and thus eliminat-

ing their single largest source of tension—a rare achievement for big
neighbors. In recent years, the two countries have held regular annual
meetings between their heads of states, prime ministers, top legislators,
and foreign ministers. Since 2013, when Xi Jinping became president
of China, he has paid five visits to Russia, and Russian President
Vladimir Putin has traveled three times to China in the same time
period. All told, Xi and Putin have met 12 times, making Putin the
foreign head of state whom Xi has met most frequently since assuming
the presidency.
m
MANAGING DIFFERENCES
For all this progress, differences still exist between the two neighbors,
hi
and they don’t always share the same focus when it comes to foreign
policy. Russia is traditionally oriented toward Europe, whereas China
is more concerned with Asia. The two countries’ diplomatic styles
ha
differ as well. Russia is more experienced on the global theater, and it
tends to favor strong, active, and often surprising diplomatic maneuvers.
Chinese diplomacy, in contrast, is more reactive and cautious.
iT
China’s rise has produced discomfort among some in Russia, where
some people have had difficulty adjusting to the shift in relative power
between China and Russia. There is still talk in Russia of “the China
threat,” a holdover expression from past eras. A poll conducted in
Al
2008 by Russia’s Public Opinion Foundation showed that around

60 percent of Russians were concerned that Chinese migration to Far
Eastern border areas would threaten Russia’s territorial integrity;
od
41 percent believed that a stronger China would harm Russian interests.

And as China’s quest for new investment and trade opportunities
abroad has led to increased Chinese cooperation with former Soviet
states, Russians have worried that China is competing for influence in
so
their neighborhood. Partly as a result, Moscow initially hesitated to

support Beijing’s Silk Road Economic Belt initiative before ultimately
embracing it in 2014. Meanwhile, some Chinese continue to nurse
historical grievances regarding Russia. Despite the resolution of the
Ma
border issue, Chinese commentators sometimes make critical references

to the nearly 600,000 square miles of Chinese territory that tsarist
Russia annexed in the late nineteenth century.
However, these differences hardly support speculation in the West
that Beijing and Moscow are drifting apart. This theory has occasionally
appeared in Western commentary in the past two years, as Russia’s

Fu Ying
relations with the United States and the eu have deteriorated owing
to the crises in Syria and Ukraine. Despite some differences, how-
ever, China and Russia share a desire to firmly develop their bilat-
eral relations and understand that they
must join hands to achieve national
The Chinese-Russian security and development. Their co-
relationship represents operation is conducive to balance in
a possible model for the international system and can facili-
other states to follow. tate the solution of some international
m
problems. Sometimes they agree; some-
times they do not. But they are able to
acknowledge and manage their disagreements while continuing to
hi
expand areas of consensus. As Chinese Foreign Minister Wang Yi
has noted, the Chinese-Russian relationship offers a new approach
for conducting external relations and represents a possible model
ha
for other states to follow.
The crises in Syria and Ukraine illuminate the ways in which China
and Russia have effectively managed their partnership. Many in the
iT
United States see China’s attitude toward the conflict in Ukraine as
unclear or suspect that China has sided with Russia. In fact, after
the Russian annexation of Crimea in 2014, the spokesperson for the
Chinese Ministry of Foreign Affairs stated unequivocally that Ukraine’s
Al
independence, sovereignty, and territorial integrity should be respected.

China emphasized that all the parties involved in the Ukrainian
conflict should resolve their differences through dialogue, establish
od
coordinating mechanisms, refrain from activities that could worsen the

situation, and assist Ukraine in maintaining its economic and financial
stability. China did not take any side: fairness and objectivity serve as
guiding principles for Beijing when addressing international affairs.
so
But Chinese diplomats and leaders are also mindful of what led to
the crisis, including the series of Western-supported “color revolu-
tions” in post-Soviet states and the pressure on Russia that resulted
from nato’s eastward expansion. It is also worth noting that there
Ma
have long been complicated historical, ethnic, religious, and terri-

torial issues between Russia and the former Soviet republics. The
Ukraine crisis is a result of all these factors. As Xi put it, the crisis
is “not coming from nowhere.”
On Syria, the view in Beijing is that Russia launched its military
intervention at the request of the Syrian government in order to combat

terrorist and extremist forces. Although Washington has called for

Syrian President Bashar al-Assad to step down, it shares Russia’s goal of
taking on the Islamic State (also known as isis). So on the one hand, the
United States has criticized the Russian intervention, but on the other
hand, it has expressed willingness to work with Russia on counterterror-
ism. The Russian move, then, was not exactly what the United States
wanted to see but was not an entirely bad thing for U.S. interests,
either. From China’s perspective, Russia and the United States share an
interest in confronting the brutal terrorists of isis. The hope in China
m
is that talks among Russia, the United States, Iran, and a number of
other regional powers will make progress in resolving the conflict.
But it is difficult to know how far U.S.-Russian cooperation in
hi
Syria can go without a common understanding about what will lead to
peace and order. And many in China find it perplexing that U.S. and
Russian perceptions are still so heavily influenced by the Cold War.
ha
U.S. politicians and commentators tend to talk about Russia as if it
were still the failed Cold War rival. Meanwhile, Russian officials and
observers frequently criticize Washington’s behavior as arrogant
iT
or imperial. Some analysts on both sides have suggested that the
standoff between Moscow and Washington over Syria and Ukraine
could lead to a new Cold War. But from China’s point of view, the
current confrontations seem more like a prolonged ending of the
Al
original Cold War. It remains unclear if Moscow and Washington

will take this opportunity to finally put old enmities to rest.
od
GETTING PAST ZERO-SUM

Given the way that relations among China, Russia, and the United
States are intertwined, no analysis of Chinese-Russian ties would be
complete without a consideration of where things stand between
so
China and the United States. Compared with the Chinese-Russian

relationship, the one between Beijing and Washington is wider and
more complicated. Combined, China and the United States account
for one-third of global gdp. In 2014, U.S.-Chinese trade reached
Ma
nearly $600 billion, and accumulated mutual investment exceeded

$120 billion. Thirty-seven years ago, when the People’s Republic of
China established diplomatic relations with the United States, no one
expected such a strong partnership to emerge.
But there is no denying the structural difficulties in the relationship.
Significant differences remain between Chinese and U.S. political

Fu Ying
values and between the governing systems in the two countries. And
many Americans perceive China’s growing economic strength and its
correspondingly higher international influence as a potential threat to
Washington’s global leadership. China has quickly grown into the
world’s second-largest economy. When U.S. troops invaded Iraq in
2003, China’s gdp was roughly one-eighth that of the United States.
By the time the Americans pulled out
of Iraq eight years later, China’s gdp
Many in China find it had grown to half that of the United
m
perplexing that U.S. and States. According to many estimates,
Russian perceptions are China’s gdp will approach the United
still so heavily influenced States’ by 2020. These changes have
hi
provoked fears in Washington that
by the Cold War. China and the United States are on a
ha collision course. Disputes over China’s
construction activities in the Spratly Islands, in the South China Sea,
have fueled a heated debate about how the United States should re-
spond to what some American scholars and commentators see as ex-
iT
pansionism. Meanwhile, Beijing regards the presence of U.S. military
vessels near Chinese territory in the South China Sea as an act of
provocation. Some argue that U.S. policy toward China may shift from
constructive engagement to containment.
Al
These debates provided the backdrop for Xi’s state visit to Washing-
ton last September. In remarks during the visit, Xi directly addressed
the idea that China’s development presents a challenge to the United
od
States’ global leadership. “The path China follows is one of peaceful

development, and China does not pose a threat to other countries,” Xi
said. Later, he added, “People should give up the old concepts of ‘you
lose, I win,’ or zero-sum game, and establish a new concept of peaceful
so
development and win-win cooperation. If China develops well, it will

benefit the whole world and benefit the United States. If the United
States develops well, it will also benefit the world and China.”
Chinese leaders attribute much of their country’s rapid ascent to
Ma
China’s successful integration into the world economy. They see China
as a beneficiary of the international order, with the un at its core, and
as a strong advocate of principles such as sovereign equality and non-
intervention in the internal affairs of states, which the un Charter
enshrines. China expects that it will have to focus on its own do-
mestic economic and social development for a long time to come and

m
hi
ha
It’s complicated: Xi Jinping and Vladimir Putin in Moscow, May 2015
thus highly values the maintenance of a stable and peaceful external
iT
environment. Although China is determined to protect its own
interests and would respond firmly to provocations, encroachments
on its territorial sovereignty, or threats to its rights and interests, its
main goal is still to ensure that peace and stability prevail. And
Al
China is committed to safeguarding the international order and the

Asia-Pacific regional order, as well as further integrating into the
globalized world.
od
Improving U.S.-Chinese relations represents an important part of

China’s diplomatic effort. Last September marked Xi’s first state
visit to Washington, but he and U.S. President Barack Obama had
previously met five times since 2013 and had spoken over the phone
so
on three occasions. In June 2013, when the two leaders met at the
Sunnylands summit, in California, they talked for more than seven
hours. After the meeting, Xi announced that China and the United
REUTE RS / S E RG EI KARPUKHIN
States would pursue a “new model of major-country relationship,” which

Ma
he defined as a relationship based on nonconflict, nonconfrontation,

mutual respect, and win-win cooperation. The two leaders have since
continued their conversations on that theme: in November 2014 in
Beijing, they held the “Yingtai dialogue,” which lasted for nearly five
hours. And during Xi’s state visit, he and Obama spent around nine
hours talking to each other and attending events together. These long

Fu Ying
meetings between the two leaders have helped them build understand-
ing and ward off the confrontation that some U.S. analysts believe
is inevitable.
The state visit, in particular, was very productive. The two sides
reached agreement on a wide range of issues, including macroeconomic
policy coordination, climate change, global health, counterterrorism,
and nuclear nonproliferation. Xi and Obama also spoke candidly
about the cybersecurity issues that have represented a serious point
of contention between Beijing and Washington; the two leaders clar-
m
ified their countries’ intentions, agreed to form a high-level joint
dialogue on the subject, and committed to work together to establish
an international cybersecurity code of conduct. This is a strong
hi
demonstration that the two countries can promote global cooperation
on important issues.
Of course, Beijing and Washington may continue to have disagree-
ha
ments over the South China Sea, Taiwan, human rights, trade policy,
and other matters. The intentions of the U.S. military alliances in
the Asia-Pacific remain a particular source of concern for China,
iT
especially since Washington announced its “pivot” to Asia in 2011.
Some U.S. allies in the region have made claims on China’s sovereign
territory and infringed on Chinese maritime rights, hoping that by
cozying up to Washington, they could involve the United States in
Al
their disputes with Beijing. This is a dangerous path, reminiscent of

the “bloc politics” of the Cold War.
Some scholars in China and elsewhere have suggested that if the
od
United States insists on imposing bloc politics on the region, China

and Russia should consider responding by forming a bloc of their
own. But the Chinese leadership does not approve of such arguments.
China does not pursue blocs or alliances, nor do such arrangements fit
so
comfortably with Chinese political culture. Russia does not intend to

form such an bloc, either. China and Russia should stick to the principle
of partnership rather than build an alliance. As for China and the
United States, they should continue pursuing a new model of major-
Ma
country relations and allow dialogue, cooperation, and management

of differences to prevail.
THREE SIDES TO EVERY STORY

Relations among China, Russia, and the United States currently resemble
a scalene triangle, in which the greatest distance between the three

points lies between Moscow and Washington. Within this triangle,

Chinese-Russian relations are the most positive and stable. The U.S.-
Chinese relationship has frequent ups and downs, and U.S.-Russian
relations have become very tense, especially because Russia now has
to contend with significant U.S. sanctions. Meanwhile, both Beijing
and Moscow object to Washington’s use of force against and imposition
of sanctions on other countries and to the double standards the
United States applies in its foreign policies.
The United States and its allies might interpret closer ties between
m
China and Russia as evidence of a proto-alliance that intends to disrupt
or challenge the U.S.-led world order. But from the Chinese perspec-
tive, the tripartite relationship should not be considered a game in
hi
which two players ally against a third. The sound development of
Chinese-Russian relations is not intended to harm the United States,
nor should Washington seek to influence it. Likewise, China’s coop-
ha
eration with the United States will not be affected by Russia, nor by
tensions between Moscow and Washington. China should neither form
an alliance based on bloc politics nor allow itself to be recruited as
iT
an ally by other countries.
The current international order is the cornerstone of global stability—
but it is not perfect. In 2005, China and Russia issued a joint state-
ment on “the international order in the twenty-first century,” which
Al
called for the international system to become more just, drawing its
legitimacy from the principles and norms of international law. The
statement made clear that Beijing and Moscow see the evolution of
od
their relations—from mistrust and competition to partnership and

cooperation—as a model for how countries can manage their differ-
ences and work together on areas of agreement in a way that supports
global order and decreases the chance that the world will descend into
so
great-power conflict and war.∂

Ma

Putin’s Power Play in Syria

How to Respond to Russia’s Intervention
Angela Stent
m
A
t the end of September, Russia began conducting air strikes
in Syria, ostensibly to combat terrorist groups. The strikes
hi
constitute Russia’s biggest intervention in the Middle East in
decades. Its unanticipated military foray into Syria has transformed
the civil war there into a proxy U.S.-Russian conflict and has raised
ha
the stakes in the ongoing standoff between Moscow and Washington.
It has also succeeded in diverting attention away from Russia’s desta-
bilization of Ukraine, making it impossible for the West to continue
iT
to isolate the Kremlin. Russia is now a player in the Syrian crisis, and
the United States will have to find a way to deal with it.
Once again, Washington has been caught off-guard, just as it was in
March 2014, when Russia annexed Crimea and began supporting
Al
pro-Russian separatists fighting Ukrainian forces in eastern Ukraine.

For all of Russia’s domestic problems—a shrinking economy, a declining
population, and high rates of capital flight and brain drain—it has
od
projected a surprising amount of power not only in its neighborhood

but also beyond. U.S. President Barack Obama may refer to Russia
as a regional power, but Russia’s military intervention in Syria
demonstrates that it once again intends to be accepted as a global
so
actor and play a part in every major international decision. This will
be a vexing challenge not only for Obama during his remaining time
in office but also for the next occupant of the White House.
Why has Washington been so slow to grasp the new Russian reality?
Ma
Russian President Vladimir Putin has not kept his agenda a secret. In
February 2007, for example, he delivered a scathing critique of U.S.
ANGELA STENT is Director of the Center for Eurasian, Russian, and East European
Studies at Georgetown University, a Senior Fellow at the Transatlantic Academy, and the
author of The Limits of Partnership: U.S.-Russian Relations in the Twenty-first Century.
Follow her on Twitter @AngelaStent.

foreign policy at the Munich Security Conference. “One state and, of

course, first and foremost the United States, has overstepped its
national borders in every way,” he warned. Countless times since,
Russia has vowed to replace what it sees as a coercive U.S.-led global
order with one in which the West respects Russia’s interests. In
retrospect, Russia’s war with Georgia in August 2008 signaled
Moscow’s willingness to use force to prevent its neighbors from drifting
toward the West and to reassert its influence in areas that were for-
merly part of the Soviet Union. But the United States and its allies
m
have repeatedly underestimated Russia’s determination to revise the
global order that Moscow feels the West has imposed on Russia since
the fall of the Soviet Union.
hi
As the United States gears up for the 2016 presidential election, it
faces two central challenges in deciding how to deal with Russia.
First, it needs to determine the nature of Russia’s objectives in Syria
ha
and Ukraine. Second, because Russia depends on a highly personalized
political system, Obama and his would-be successors need to decide
how to manage relations with Putin, an especially difficult task given
iT
the overwhelming pressure on the campaign trail to look tough.
The evidence suggests that if the next president wants to engage
with the Kremlin in a way that is consistent with U.S. interests,
he or she should focus on concrete areas where the two countries
Al
can and must work together—particularly nuclear and conventional

military issues. Continuing to isolate Russia is not likely to work.
Instead, the next U.S. administration should clearly communicate to the
od
Kremlin what American interests and values are and join with U.S.
allies in resisting further Russian attempts to unravel the post–
Cold War order.
so
INFERIORITY COMPLEX
Over the past quarter century, Moscow and Washington have worked
together most successfully when Moscow has felt that it has been
treated as an equal. This explains the success, for example, of U.S.-
Ma
Russian arms control treaties, such as New start, which were designed
to deal with the nuclear legacy of the Cold War. Similarly, although
the negotiations were arduous and drawn out, Russia and the United
States successfully worked together, alongside four other world powers,
to reach a nuclear deal with Iran. Indeed, Putin earned rare praise
from Obama for his role in securing the agreement.

Angela Stent
Moscow and Washington have also been able to work together in

instances in which they shared narrowly defined common interests.
In the fall of 2001, for example, Russia aided the United States in
its initial military campaign in Afghanistan, providing information
and intelligence that contributed to the U.S. defeat of the Taliban. As
Russia’s former foreign minister, Igor Ivanov, subsequently explained,
“We wanted an antiterrorist international coalition like the anti-Nazi
coalition. This would be the basis for a new world order.”
That rather lofty goal has remained predictably out of reach. And
m
in fact, Russia and the United States have had difficulty maintaining
their counterterrorist cooperation, largely because they often disagree
on which groups to designate as terrorist organizations—a problem
hi
that has cropped up most recently in regard to the various Syrian
opposition groups. Nevertheless, Russia and the United States have
been able to cooperate on other security issues, working together
ha
in 2013, for example, to eliminate the Assad regime’s stockpile of
chemical weapons. In that instance, Russia took the initiative after the
United States proved reluctant to act.
iT
Cooperation has been least successful on issues involving Russia’s
neighboring states and the nato alliance. It has become clear that
despite the West’s numerous efforts in the 1990s to reassure Russia
that an enlarged nato would not represent a threat to Moscow, the
Al
United States and its allies have been unable to create a post–Cold
War security architecture in which Russia feels that it has a stake.
Perhaps doing so would have been impossible, especially given Russia’s
od
belief in its right to a sphere of “privileged interests” in the post-

Soviet space and its desire to limit its neighbors’ sovereignty. The
wars in Georgia and Ukraine and the annexation of Crimea have rep-
resented, in part, Russia’s answer to its perceived exclusion from the
so
post–Cold War European security order. The same sense of grievance

explains Putin’s ongoing push to establish a new arrangement among
the great powers that would give Russia more leverage on matters of
European security. Specifically, Putin seeks an agreement that would
Ma
ensure that no additional post-Soviet states will join nato.
PUTIN’S BIG MOVE

Putin’s decision to intervene militarily in Syria is rooted in similar
concerns about Russian power and influence. Russia has justified its
foray into Syria as part of an effort to reduce terrorism by shoring up

the Assad regime, which by the summer of 2015 was facing military
setbacks. As Putin said in October, “The collapse of Syria’s official
authorities will only mobilize terrorists. Right now, instead of under-
mining them, we must revive them, strengthening state institutions
in the conflict zone.” Although Moscow may not be wedded to Syrian
President Bashar al-Assad in the long run, it is adamantly opposed to
anything that would weaken the rule of
secular strongmen in the Middle East—
hence Putin’s repeated denunciations
The next U.S. president
m
of U.S. support for opposition forces should not attempt another
during the Arab revolts of 2011 and his “reset” with Russia.
anger over the nato military action
hi
against Libya that year, which led to the
ouster of Libyan dictator Muammar al-Qaddafi. In Putin’s eyes, the
disorder in Iraq, Syria, and North Africa, combined with the rise of
ha
the self-proclaimed Islamic State (also known as isis), demonstrates
the failure of the West to think through the consequences of undermin-
ing the authoritarian states in the region. Putin fears that chaos in the
iT
Middle East will strengthen Islamic extremism on Russia’s borders,
in the neighboring states of the former Soviet Union, and potentially
in Russia itself.
At the same time, Russia’s actions are designed to guarantee that
Al
Moscow will have a decisive say in who rules Syria, even in a hypo-
thetical post-Assad future. By using military force in Syria, Moscow
is sending a message to other regional players: unlike the United States,
od
Russia will support leaders and governments against popular uprisings

and will not desert them when opposition groups attempt to seize
control, as the United States abandoned Egyptian President Hosni
Mubarak in 2011.
so
The Syrian gambit is thus part of a broader move to recoup Russian

influence in the Middle East. In the second half of 2015, the leaders
of Egypt, Israel, Jordan, Kuwait, Saudi Arabia, and the United Arab
Emirates all visited Moscow, and some have signed agreements to
Ma
purchase arms from Russia. In July, Saudi Arabia pledged to invest up

to $10 billion in Russia, mostly in agricultural projects; if Riyadh
delivers on that promise, it will be the single largest foreign invest-
ment in the country. Israel and Russia have maintained a steady dia-
logue as the crisis has progressed in Syria, partly to ensure that Russian
aircraft don’t clash with the Israeli jets that have occasionally struck

Angela Stent
targets in Syria, including those associated with the Lebanon-based

militant group Hezbollah, which has sent thousands of fighters to
Syria to aid the Assad regime. Although the Israelis have no particular
affection for Assad, they seem to share Russia’s preference that his
regime stay in place, because what comes after Assad could be more
detrimental to Israel’s security: Israeli officials have quietly pointed
out that under Assad’s rule, Israel’s border with Syria has been calm.
Domestic political factors also contribute to Putin’s calculations.
The sanctions that the United States and the eu levied against Russia
m
after its annexation of Crimea have hit hard, especially when combined
with the global fall in oil prices and
The United States has been preexisting structural problems in the
hi
Russian economy. The Kremlin has
unable to create a post– sought relief by “freezing” the conflict
Cold War security ha in the Donbas region of Ukraine—a
architecture in which cease-fire between Ukrainian forces and
Russian-backed separatists has been in
Russia feels it has a stake. force since early September, and both
iT
sides have pulled back some of their
heavy weaponry, although sporadic reports of fighting have surfaced
since then. Putin has calculated that the cease-fire and the decision by
pro-Russian separatists to postpone local elections in eastern Ukraine
Al
may lead to the partial lifting of eu sanctions. Moreover, by making the

Ukraine crisis appear to be headed toward resolution, Russia intends
to shift the focus from its role as an instigator of conflict to its new role
od
in Syria as a responsible leader in the global campaign against terrorism.

Russia has presented its intervention in Syria as a counterterrorist
operation that will reduce the number of refugees leaving Syria for
Europe. But Moscow’s policy could have the opposite effect. In fact,
so
by November, there had already been a 26 percent increase in the

number of Syrian refugees, according to the Office of the un High
Commissioner for Refugees, further exacerbating Europe’s migrant
crisis. The Russian bombing campaign may have contributed to the
Ma
upsurge in refugees. Moreover, Russian air strikes in support of

the Alawite-led Assad government—which Sunni extremists consider
to be an apostate regime—may both encourage more Russians to join
isis (more than 4,000 people from Russia and Central Asia have al-
ready done so) and further alienate Russia’s own Sunni population,
which numbers about 20 million. Putin has insisted that Russia has no

m
hi
From Russia with love: after a Russian air strike in Aleppo, November 2015
ha
interest in taking sides in a sectarian dispute and is merely fighting
extremism, but this may be a hard sell domestically, as some Russian
Muslims question Russia’s support of a regime that bombs its Sunni
iT
population. And Russia has not acknowledged that the Assad regime’s
brutal treatment of its own population is a recruiting tool for isis.
Putin’s intervention in Syria has sent a mixed message. On the one
hand, he has blamed the United States for creating the conditions that
Al
allowed isis to emerge; on the other, he has offered to join the United
States in an anti-isis coalition. In remarks last October, Putin said,
“Syria can become a model for partnership in the name of common
od
interests, resolving problems that affect everyone, and developing an

effective risk-management system.” Yet unlike in Afghanistan in 2001,
BEHA EL HALE BI / ANADOLU AG ENCY / G ET TY IMAG ES
Moscow and Washington do not agree on the identity of the enemy.

Although they both see isis as a major threat, Russia has bombed
so
Syrian opposition groups that the United States has supported, and
Washington sees Assad’s rule as a major part of the country’s prob-
lems. Thanks to these differences, it will be difficult for Russia and the
United States to work together in Syria.
Ma
Until recently, Washington’s preferred policy was to avoid clashes in

Syrian airspace, cautiously increase the presence of the U.S. military
on the ground, observe Russian actions from the sidelines, and wait to
see whether Russia would get pulled into a quagmire. But the Novem-
ber 13 terrorist attacks in Paris may have changed Washington’s calcu-
lations and given new impetus to joint U.S.-Russian efforts to deal with

Angela Stent
Syria and isis. At the G-20 summit in Turkey soon after the attacks,
Obama and Putin agreed to support a cease-fire in Syria and intensify
diplomatic attempts to end the civil war. At the very least, Putin has
succeeded in getting Washington to engage more closely with Russia
and abandon policies aimed at isolating it.
If part of Putin’s main goal in Syria is to force Washington to rec-
ognize Russia’s importance in the Middle East, it is worth asking
whether Putin sees that recognition as an end in itself or as an initial
step toward a tripolar world in which China, Russia, and the United
m
States make the major decisions—a cherished aspiration of some
Russian pundits. On the other hand, although it is tempting to search
for a broader strategy behind Russian military activity in Syria, it’s
hi
quite possible that Putin charged into the conflict without thinking
through the endgame.
GETTING REAL ABOUT RUSSIA

ha
For the remainder of Obama’s second term, tensions over Syria and
Ukraine will dominate U.S.-Russian relations. The best that can be
iT
achieved in Ukraine in the near term is a “frozen conflict” in which
the cease-fire holds even though Kiev remains unable to control the
Donbas region and Russia continues to exercise influence there through
its proxies. The most the United States is likely to do is continue its
Al
modest economic and political support for the Ukrainian government,

which is struggling to address systemic problems of corruption and
economic disorder. Although some in the U.S. government have argued
od
for more economic and military assistance to Ukraine—including the

provision of lethal defensive weapons—the White House has consis-
tently refused to do this for fear of further provoking Russia, and it
is unlikely to change its policy in 2016.
so
Meanwhile, it will be a continuing challenge for Moscow and Wash-

ington to work together in Syria to combat isis. But short of more
robust and direct U.S. military engagement—for which there is little
domestic support after the wars in Afghanistan and Iraq—Washington
Ma
has limited options. U.S. Secretary of State John Kerry has spear-
headed discussions with Russia and other key players, including Iran
and Saudi Arabia, on how to end the Syrian civil war and transition
away from an Assad-led government. Russia and the United States will
continue to work together in this way, but securing agreement on a
post-Assad Syria will be a major challenge. Direct military cooperation

in Syria is highly unlikely, meaning that there are few prospects for
Russia and the United States to work together other than on making
sure their respective military operations stay out of the other’s way.
Even if the United States finds an effective way to respond to Russia’s
moves in Syria, or even cooperate with the Russians there, there is no
guarantee that Putin won’t try to assert Russia’s military presence
elsewhere: he has surprised the West twice in recent years and may
yet have other ambitions. Iraq has hinted that it may ask Russia for
help in fighting isis. When asked in October about whether Russia
m
would intervene in Iraq, Putin replied that Russia had not yet received
a request from Baghdad. Russia has also indicated that it will not
stand by if the situation in Afghanistan deteriorates further, as this
hi
would threaten Russia’s neighborhood by destabilizing Central Asia.
The next occupant of the White House will have to define U.S.
interests in Syria and Ukraine; determine the extent to which Wash-
ha
ington should counter destabilizing Russian moves in those countries
and elsewhere; decide when and where the United States should
cooperate with Russia; and consider, as U.S. options become more
iT
limited because of shrinking resources and public opinion, whether
the West is ready to acknowledge that Moscow has in fact succeeded in
modifying the rules of the game in its favor in both Syria and Ukraine.
Since the collapse of the Soviet Union, four U.S. presidents have
Al
tried to “reset” relations with Russia and find a more productive way
to interact with Moscow, and each attempt has ultimately failed. Russia
has not evolved in the way the West believed it would in the 1990s: the
od
United States has to deal with the Russia that exists, not the one
Americans might wish for. Indeed, for the foreseeable future, Wash-
ington should expect the U.S.-Russian relationship to be defined by
tension and antagonism rather than cooperation.
so
The next U.S. president should not attempt another reset. He

or she should work with Russia on issues on which Moscow and
Washington share clearly delineated common goals, in Syria and else-
where. Issues the two countries can work on together include keeping
Ma
nuclear weapons from Iran and North Korea and managing emerging
resource and security issues in the Arctic. But the next president
should also clearly define and defend U.S. interests and accept that so
long as the Kremlin continues to portray the United States as its main
enemy, dedicated to weakening Russia and the primary source of all its
troubles, common action on shared goals will be shaky and elusive.∂

Not-So-Smart Sanctions
The Failure of Western Restrictions
Against Russia
Emma Ashford
m
A
fter Russia seized Crimea from Ukraine in March 2014, the
hi
Obama administration responded with what has become
the go-to foreign policy tool these days: targeted sanctions.
The United States placed asset freezes and travel bans on more than
ha
one hundred people, mostly cronies of Russian President Vladimir
Putin, and the eu targeted almost a hundred more. The amounts
involved have been massive: Bank Rossiya, the Kremlin’s preferred
iT
bank, had $572 million frozen in the months after the sanctions were
rolled out. Then, in July 2014, when Malaysia Airlines Flight 17 was
shot down over eastern Ukraine allegedly by Russian-backed forces,
Washington responded with more severe sanctions aimed at key
Al
sectors of the Russian economy, including arms manufacturers, banks,

and state firms. In an effort to hit the Kremlin where it hurts, the
measures inhibit financing and technology transfers to Russian oil
od
and gas companies, which supply over half of state revenues.

Considering the dire state of Russia’s economy, these sanctions
might appear to be working. The value of the ruble has fallen by
76 percent against the dollar since the restrictions were imposed, and
so
inflation for consumer goods hit 16 percent in 2015. That same year,
the International Monetary Fund estimated, Russia’s gdp was to shrink
by more than three percent.
In fact, however, Western policymakers got lucky: the sanctions
Ma
coincided with the collapse of global oil prices, worsening, but not
causing, Russia’s economic decline. The ruble’s exchange rate has tracked
global oil prices more closely than any new sanctions, and many of the
actions taken by the Russian government, including the slashing of
EMMA ASHFORD is a Visiting Research Fellow at the Cato Institute. Follow her on Twitter
@EmmaMAshford.

the state budget, are similar to those it took when oil prices fell during
the 2008 financial crisis. The sanctions have inhibited access to West-
ern financing, forcing Russian banks to turn to the government for
help. This has run down the Kremlin’s foreign reserves and led the
government to engage in various unorthodox financial maneuvers,
such as allowing the state-owned oil company Rosneft to recapitalize
itself from state coffers. Yet the Russian government has been able to
weather the crisis by providing emergency capital to wobbling banks,
allowing the ruble to float freely, and making targeted cuts to the state
m
budget while providing fiscal stimulus through increased spending
on pensions. Even with continued low oil prices, the International
Monetary Fund expects that growth will return to the Russian economy
hi
in 2016, albeit at a sluggish 1.5 percent.
Nor are the sanctions inflicting much pain on Russia’s elites. Although
Prada and Tiffany are doing less business in Moscow, the luxury housing
ha
market is anemic, and travel bans rule out weekend jaunts to Manhattan,
these restrictions are hardly unbearable. One target, the close Putin
adviser Vladislav Surkov, has dismissed them as harmless. “The only
iT
things that interest me in the U.S. are Tupac Shakur, Allen Ginsberg,
and Jackson Pollock,” he said. “I don’t need a visa to access their work.”
And when the sanctions are judged by the most relevant metric—
whether they are producing a policy change—they have been an
Al
outright failure. Since the United States imposed the sanctions, Russia
has not backed down in Ukraine, and there is no reason to believe that
they will force it to do so anytime soon. In the meantime, however, the
od
sanctions are harming U.S. economic and geopolitical interests. If

Western leaders want to resolve the Ukraine crisis and meaningfully
constrain Russia’s bad behavior, they should abandon their failed
sanctions-centric policy and focus on other measures instead, such as
so
efforts to aid Ukraine economically, obstruct Russia’s military modern-

ization, and increase European energy independence.
UNINTENDED CONSEQUENCES
Ma
Whatever punishment the sanctions have inflicted on Russia, it has not

translated into coercion. The Obama administration appears to have
expected that it would have by now: in February 2015, for example,
Christine Wormuth, the U.S. undersecretary of defense for policy,
admitted that the sanctions had “not changed so far what Russia has
been doing on the ground, and that is the great concern.”

Emma Ashford
Indeed, after the initial round of sanctions, the Kremlin’s aggression

only grew: Russia formally absorbed Crimea and upped its financial
and military support for pro-Russian rebels in eastern Ukraine (includ-
ing those who most likely shot down the Malaysia Airlines flight).
It is possible that the sanctions may
Whatever punishment the have deterred Russia from even greater
aggression in Ukraine, but it is equally
sanctions have inflicted on possible that all Russia ever wanted to
Russia, it has not translated do there was create a slow-burning in-
m
into coercion. surgency. And at any rate, the sanctions
have failed to force Russia to withdraw
from Crimea and stop meddling in
hi
eastern Ukraine. This should not be surprising: as the most compre-
hensive study of sanctions found, they fail to achieve their goals in
66 percent of cases, and they fail 79 percent of the time when designed
ha
to discourage military misadventurism.
The Kremlin’s aggression has persisted in large part because the
West’s targeted sanctions have succumbed to the same problem
iT
that plagues traditional comprehensive sanctions: the targeted regime
shelters its cronies, while the rest of the population suffers. It wasn’t
supposed to be this way. Modern sanctions are designed to avoid
replicating the flaws of the comprehensive embargo placed on Iraq
Al
during the 1990s, which served only to enrich Saddam Hussein’s

regime and impoverish the Iraqi people. With Russia, the U.S. gov-
ernment made sure not to bar overall trade and instead imposed
od
asset freezes and financing restrictions on individual politicians

and companies. In theory, members of Putin’s inner circle would use
their influence to convince the president to reconsider his bellicose
Ukraine policy.
so
In practice, however, the sanctions have had the unintended conse-

quence of inflicting widespread punishment on the Russian economy
and population. By restricting access to international financing during
a recession, the sanctions have compounded the fall in oil prices,
Ma
requiring Moscow to slash spending on health care, infrastructure,

and government salaries, which has created economic hardship for
ordinary Russians. The crash of the ruble, meanwhile, has not only
destroyed savings but also increased the monthly payments of those
who hold mortgages denominated in foreign currencies. The govern-
ment, in turn, has pressured struggling Russian banks to convert such

debt into rubles and absorb the losses, which has rescued homeowners
from default but run down banks’ capital reserves.
Adding to the pain was the Russian government’s decision to issue
its own set of sanctions, which have barred the import of Western
foodstuffs. Although the move has hurt eastern European farmers
and exporters, it has also created shortages and increased food prices
inside Russia. Then there was the unforeseen credit crunch among
ordinary consumers. Fearful of a legal backlash, many U.S. and Euro-
pean banks cut off not only billionaire bank owners but also many of
m
their customers. In March 2014, for example, Visa and MasterCard
suspended all transactions from four Russian banks in response to
sanctions placed on its owners, effectively canceling the credit cards
hi
of ordinary Russian consumers. The U.S. government had to intervene
to convince the companies to start processing payments again.
At the same time that the sanctions have punished the population
ha
at large, the Kremlin has sheltered key supporters from their impact.
For example, from March to December 2014, companies linked to the
Putin cronies Arkady Rotenberg and Gennady Timchenko received
iT
12 percent more in government contracts than they had during the
entire previous year. The government also stripped Russia’s largest
private bank, Alfa-Bank, of a lucrative contract to service the country’s
electricity market, awarding it instead to Bank Rossiya.
Al
The Kremlin has also managed to circumvent the sanctions, partly

by turning to China. In May 2014, Putin visited the country to seal a
30-year, $400 billion gas deal with it, demonstrating that Russia has
od
alternatives to European gas markets. That October, Moscow and

Beijing also agreed to a 150 billion yuan currency swap, allowing
companies such as Gazprom to trade commodities in rubles and
yuan—and thus steer clear of U.S. financial regulations. Even in
so
Europe, Russia has been able to find loopholes to avoid the sanctions:
in order to obtain access to Arctic drilling equipment and expertise,
Rosneft acquired 30 percent of the North Atlantic drilling projects
belonging to the Norwegian company Statoil.
Ma
It is tempting to believe that the sanctions will eventually work—

say, after a few more years—but that is wishful thinking. U.S. and
European negotiations with Russia have focused on the near future,
including the implementation of the Minsk II agreement, an armistice
with a deadline of December 2015, and with good reason: a drawn-out
insurgency is the worst-case scenario for Ukraine and its Western

Emma Ashford
backers. The sanctions were intended to compel Russia to cooperate

with this international diplomatic process and withdraw from Crimea;
if it doesn’t do so before the Minsk deadline, it is unlikely to in the
future. Indeed, as academic studies suggest, the longer sanctions are
in place, the less likely they are to produce a policy change. And in the
case of Russia, if the price of oil rises again in the next few years, as is
likely, their impact will diminish further.
THE COSTS OF CONTAINMENT
m
It is true that the sanctions have allowed the Obama administration to
claim that it is doing something about Russian aggression. From the
White House’s perspective, that might be an acceptable rationale for
hi
the policy, so long as there were no downsides. In fact, however, the
sanctions carry major economic and political costs for the United States
and its European allies. ha
The brunt is being borne by Europe, where the European Commis-
sion has estimated that the sanctions cut growth by 0.3 percent of gdp
in 2015. According to the Austrian Institute of Economic Research,
iT
continuing the sanctions on Russia could cost over 90 billion euros
in export revenue and more than two million jobs over the next
few years. The sanctions are proving especially painful for countries
with strong trade ties to Russia. Germany, Russia’s largest European
Al
partner, stands to lose almost 400,000 jobs. Meanwhile, a number of

European banks, including Société Générale in France and Raiffeisen
Zentralbank in Austria, have made large loans to Russian companies,
od
raising the worrying possibility that the banks may become unstable,
or even require bailouts if the borrowers default.
In the United States, banks are taking much of the impact. U.S.
financial institutions have been required by law to freeze and manage
so
tens of millions of dollars in assets of sanctioned individuals. As a

result, the banks have had to hire additional legal and technical staff
to not only monitor their own accounts but also review any financing
arrangements with Russian entities. Failure to comply with the sanc-
Ma
tions can be extremely costly: just one error, such as processing a

single payment from an interdicted individual, can carry a penalty of
up to $250,000, and the penalties can quickly multiply. In 2010, the
Dutch bank abn amro was fined $500 million for violating U.S. sanc-
tions against Cuba, Iran, Libya, and Sudan.
U.S. energy companies, for their part, have had to abandon various

m
hi
ha
iT
Forbidden fruit: destroying Western food imports in Novozybkov, Russia, August 2015
joint ventures in Russia, losing access to billions of dollars of invest-
ments. Thanks to prohibitions on the provision of technology and
Al
services to Russian companies, Western firms have been kept out of

unconventional drilling projects in the Arctic and elsewhere. Exxon-
Mobil, for example, has been forced to withdraw from all ten of its
od
joint ventures with Rosneft, including a $3.2 billion project in the

Kara Sea. Because that project was in its early stages, the cancellation
will not cost ExxonMobil in immediate profits. But it will cut access to
upstream development projects inside Russia, putting the company’s
so
future profits and stock valuation at risk and raising the possibility
that the money already invested will be permanently lost.
A similar dynamic may harm European energy security, too. Because
the sanctions prohibit Western companies from financing Russia’s
Ma
largest energy firms, the Russian companies have cut back on upstream
exploration and development. In this, the sanctions may achieve their
AF P / G ET TY IMAG ES
intended goal of reducing state revenue, but that will come as a result
of shortfalls in supply. The energy consultancy ihs Cambridge Energy
Research Associates has predicted that if the sanctions persist, Russian
oil production could decrease from 10.5 million barrels per day now to

Emma Ashford
7.6 million barrels per day by 2025—bad news for European states,
which receive one-third of their oil from Russia. They are even more
dependent on Russian gas, which, since it relies more on fixed pipelines,
is harder to replace.
But it is in the realm of Russian politics that the sanctions have
been most counterproductive. The sanctions have had a “rally round
the flag” effect as the Russian people blame their ills on the West.
According to the Levada Center, a
The sanctions allow Putin Russian research organization, Putin’s
m
approval rating increased from 63 per-
to deflect blame away cent during the invasion of Crimea to
from his own economic 88 percent by October 2015. In another
hi
mismanagement. poll, more than two-thirds of respon-
dents said they thought the primary
ha goal of the sanctions was to weaken and
humiliate Russia. State propaganda is of course playing a role, but the
sanctions have made it easier for Putin to sell his anti-Western narra-
tive. They allow him to deflect blame away from his own economic
iT
mismanagement and toward what he has called “external factors.”
The sanctions are also having the perverse effect of enabling Putin
to further consolidate his power, because he has rewarded his closest
cronies at the expense of other elites. According to data from Forbes’
Al
list of billionaires, Russia’s 15 richest citizens lost an average of 20 per-

cent of their wealth in 2014, before regaining 12 percent in the next six
months as the market stabilized. These fluctuations track the broader
od
Russian economy, but after one breaks down the data, some telling
disparities emerge. On average, those billionaires who held stakes in
sanctioned companies lost less than three percent of their wealth
between January 2014 and June 2015, whereas those who did not lost
so
nine percent. It requires no great leap of logic to see that the Kremlin
has shielded those with connections to the ruling circle from the pain of
the sanctions, thereby shifting the burden to those without such ties.
The sanctions have also encouraged Russia to create its own financial
Ma
institutions, which, in the long run, will chip away at the United
States’ economic influence. After U.S. senators and some European
governments suggested that the United States might cut off Russia’s
access to the Society for Worldwide Interbank Financial Telecommu-
nication (swift) payment system, the Russian Central Bank announced
that it was going to start negotiations with the other brics states—

Brazil, India, China, and South Africa—to create an alternative. To

lessen its dependence on Visa and MasterCard, Russia has made moves
toward setting up its own credit-card clearing-house. And it has moved
ahead with the proposed brics development bank, which is designed
to replicate the functions of the World Bank and the International
Monetary Fund.
Although none of these initiatives has come to fruition yet, they
raise the worrying possibility that the United States will someday
have a harder time employing economic statecraft. Even though
m
sanctions have failed with Russia, they can work against smaller states,
which, since they lack the cash reserves and ability to ramp up domestic
production, cannot so easily compensate for the cutoff of foreign trade
hi
and investment. But in a world where more institutions fall outside
the reach of the United States and its allies, those targets can more
easily circumvent U.S. sanctions. The recent measures directed at
ha
Iran for its nuclear program, for example, would have been less likely
to drive the regime toward the bargaining table had it been able to
turn to alternative organizations for transaction and financing support.
iT
Likewise, Russia’s shift away from trading in the dollar could make
future U.S. sanctions less effective, since transactions structured as
currency swaps do not require access to the U.S. financial system.
Al
ACCEPTING FAILURE
If the United States continues to insist that the sanctions against
Russia need more time to work, then the costs will continue to add up,
od
while the likelihood of changing the Kremlin’s behavior will get even
slimmer. The West does indeed need to respond to Moscow’s adven-
turism, but it should do so largely through other means.
To start, the Obama administration should make one final at-
so
tempt to obtain some benefit from the sanctions, offering to lift the
most onerous restrictions on Russia’s financial and energy sectors in
exchange for Russia’s implementation of the Minsk agreement. If the
offer were accepted, it would constitute at best a minor success for
Ma
U.S. sanctions policy: the Minsk agreement has been primarily the
result of persistent diplomacy by French and German leaders, and
U.S. sanctions were aimed at securing not just peace in eastern
Ukraine but also unconditional Russian withdrawal from Crimea.
Given the Kremlin’s past unwillingness to compromise, however, such
an offer would most likely be rejected. In that case, the United States

Emma Ashford
should cut its losses and unilaterally lift the majority of the sanctions
on Russia.
As for the lower-cost sanctions aimed at specific, narrow goals,
those may as well be kept in place. Travel bans on individual elites
should last for several more years. These restrictions carry low costs—
the burden of which falls primarily on governments, not businesses—
and will continue to inconvenience elites close to Putin, hopefully
deterring future aggressive actions to some extent. Sanctions on entities
directly involved in the annexation of Crimea should also be retained,
m
since they are aimed not at coercion but at preventing Russia from
profiting from the seizure, a goal that is far more likely to succeed.
Sanctions that impede Russia’s military modernization have a role
hi
to play, too. Not only should the United States and Europe expand the
long-term asset freezes and financing bans on Russian weapons manu-
facturers; they should also enact new bans on the import of arms from
ha
western Europe, particularly on major purchases, such as the Mistral
helicopter carriers that Russia ordered from France before the deal was
canceled in August 2015. None of these measures is likely to coerce
iT
Russian leaders into changing course in Ukraine, but they could make
it trickier for Russia to engage in future military misadventures.
After winnowing the sanctions, U.S. diplomats should seek to work
with their Russian counterparts on issues unrelated to the Ukraine
Al
crisis. The United States and Russia collaborated on the Iran nuclear
deal, and despite Russia’s recent intervention in Syria, there is still
room for cooperation on ending the civil war there. Although Wash-
od
ington and Moscow disagree about the future of the Assad regime,
they both have an interest in preventing the growth of the Islamic
State, or isis, and there is good reason for the two powers to try to
craft a multilateral political solution to Syria’s crisis. Engaging Russia
so
on this and other non-Ukrainian issues would avoid isolating it diplo-

matically and thus discourage it from creating or joining alternative
international institutions.
The United States should also give additional economic aid to
Ma
Ukraine. Although any aid program must grapple with Kiev’s long-
running corruption and governance problems, increased assistance
would help the Ukrainian government address its economic woes,
rebuild from conflict, and ultimately become less economically
dependent on Russia.
Finally, to starve the Russian state of revenue in the long term,

Washington should try to provide Europe with an alternative source

of energy. Even though the United States is the world’s biggest
producer of oil and natural gas, U.S. federal law currently bans the
export of crude oil, and the Department of Energy requires a special
waiver for the export of liquefied natural gas. In October, the House
of Representatives voted to lift these restrictions, but the president
threatened to veto the bill. That’s a shame, since the move would not
only benefit U.S. companies and consumers but also allow European
states to wean themselves off Russian oil and gas. As Russian energy
m
companies lost customers, the state’s revenues would decline. And
unlike the sanctions, this policy would help, not hurt, European
energy security.
hi
It is difficult to accept when a policy does not work. To its credit,
the Obama administration has done so in Cuba, by resuming dip-
lomatic relations, and in Iran, by choosing to negotiate. It is time
ha
to admit failure in Russia, too. Because the high costs of Western
sanctions cannot be justified by their limited impact, the United
States would be better off trying a policy with fewer downsides,
iT
and with greater odds of success.∂
Al
od
so
Ma

The Transatlantic Data War

Europe Fights Back Against the NSA
Henry Farrell and Abraham Newman
m
L
ast October, the European Court of Justice struck down the
Safe Harbor agreement, a 15-year-old transatlantic arrange-
hi
ment that permitted U.S. companies to transfer data, such
as people’s Google-search histories, outside the eu. In invalidating
the agreement, the ecj found that the blurry relationship between
ha
private-sector data collection and national security in the United
States violates the privacy rights of eu citizens whose data travel over-
seas. The decision leaves U.S. technology companies with extensive
iT
international operations on shaky legal ground.
Although some informed American observers anticipated the
decision, most were caught flat-footed; some seemed downright
bewildered. Myron Brilliant, the executive vice president of the
Al
U.S. Chamber of Commerce, said, “It is particularly alarming that

this long-standing agreement has been invalidated with no discus-
sion of a transition period or guidance regarding how companies
od
should comply with the law.” Critics of the decision, including

U.S. Commerce Secretary Penny Pritzker, argue that it will jeop-
ardize the transatlantic digital economy, costing U.S. firms billions
of dollars. Without a new agreement, there is a significant risk
so
that personal data will have to be quarantined within Europe, creating

what Eric Schmidt, the executive chair of Alphabet (previously
Google), called “per-country Internets.” If that occurred, he con-
tinued, it could risk destroying “one of the greatest achievements
Ma
of humanity.” Critics also charge that the eu is acting unilaterally
HENRY FARRELL is Associate Professor of Political Science and International Affairs at

George Washington University’s Elliott School of International Affairs. Follow him on
Twitter @henryfarrell.
ABRAHAM NEWMAN is an Associate Professor in the Edmund A. Walsh School of
Foreign Service and the Government Department at Georgetown University.

to protect its businesses against foreign competition, damaging

the open, democratic nature of the Internet.
But the main reason that U.S. companies and officials are flustered
is that they are used to being the ones who make the rules. Over the
past 70 years, the United States has built a global system in which
information, investment, and trade move quickly and easily across
borders. That openness has created an interdependent world in which
the national rules and preferences of one country can shape the rules
and preferences of others. The outsized power of the U.S. economy
m
usually gives that role to the United States.
In the aftermath of the 9/11 attacks, the United States began to
exploit interdependence, deliberately using its economic power as
hi
an instrument of national security. Despite advocating the free
flow of capital, it has systematically used sanctions to obligate for-
eign banks and financial actors to isolate businesses, people, and
ha
states from the global financial system. Despite publicly promot-
ing an open and secure Internet, it has privately undermined the
encryption of online communications and surreptitiously created
iT
vast international surveillance systems in cooperation with close
allies, including the United Kingdom. In short, the United States
has leveraged the world’s reliance on its economy to influence and
spy on foreigners.
Al
This strategy is reaching its limits, and the Safe Harbor deci-
sion powerfully demonstrates that Washington needs to wake up
to the strategy’s costs. When the United States uses its global
od
economic heft to bolster its national security, it rigs the game,

making it nearly impossible for other states to push back and in-
spiring ill will abroad. It is difficult for eu countries to fight back
directly, both because of the sheer might of the U.S. security ap-
so
paratus and because eu member states free-ride on U.S. intelli-

gence, military, and technological capabilities. Yet the eu may
have found a way to force the United States to pay a price for its
dominance. Although the ecj has no jurisdiction over the U.S.
Ma
National Security Agency (nsa), it does have jurisdiction over

the European operations of American firms. Its ruling demon-
strates that the more Washington tries to leverage the interde-
pendence of the global system for its own security goals, the more
other states and their courts will actively resist a U.S.-centered
global economy.

WEAPONIZING INTERDEPENDENCE
One of the great luxuries of hegemony is the ability to take the world
for granted. U.S.-led globalization has removed barriers to the free
flow of money, goods, and information. Removing these barriers has
come with political costs, but these have been borne primarily by
other states, which have been obliged to adjust their domestic rules so
that they may benefit from the open, integrated world economy.
A more integrated world economy benefits U.S. companies, allow-
ing them to find new markets and build complex international supply
m
chains that lower their costs. Businesses such as Facebook, Google,
and Uber have exploited economic openness to replicate their
business models throughout the advanced industrialized world, often
hi
deliberately challenging local and national rules in other countries. At
the same time, the explosion of cross-border exchange has increased
the importance of the U.S. dollar and the U.S. market as foreign
ha
firms seek access to American banks and consumers to raise money
and sell goods.
In the past decade and a half, Washington has increasingly wielded
iT
this power as a weapon, shaping the decisions of foreign governments
and firms that depend on access to the United States’ currency, in-
formation sector, and markets. Rather than spread U.S. norms and
preferences through indirect market mechanisms, the United States
Al
has directly harnessed the coercive might of its markets and informa-
tion networks to achieve its own security and foreign policy goals—
most notably combating transnational terrorism and confronting
od
rogue states.
Great powers have regularly used blockades, export restrictions,
and sanctions to manipulate countries that depend on trade in physical
goods. But the United States now has the power to manipulate financial
so
and informational flows as well. Foreign financial institutions are

crucially dependent on U.S.-dollar-based transactions, making them
vulnerable to U.S. regulators, who can threaten them with dire conse-
quences if they do not comply with U.S. rules. In an effort dubbed
Ma
“Treasury’s War” by one of its chief architects, Juan Zarate, who served
during the George W. Bush administration as assistant secretary of the
U.S. Treasury for terrorist financing and financial crimes, the United
States has pressed foreign financial institutions into service as agents
of Washington. Under Section 311 of the U.S.A. Patriot Act, the U.S.
Treasury Department has the ability to classify a foreign financial

institution as a “primary money laundering concern.” This classification

can affect a bank’s ability to operate in the United States and allows
Washington to pressure other financial institutions affiliated with it
that rely on U.S. markets.
Some of the United States’ targets, among them Iran and North
Korea, have few sympathizers. But the United States has also under-
cut its friends. In the service of counterterrorism, for example, it
forced a Belgium-based financial-processing entity to provide it with
a trove of information on worldwide electronic fund transfers, sys-
m
tematically breaking eu privacy law. It has also exploited global inter-
dependence to push foreign governments to change their domestic
rules and practices on issues seemingly unrelated to security, such as
hi
bank secrecy, foreign bribery, and money laundering. Swiss banks,
which have long made it their business model to help the world’s
wealthy avoid paying taxes, now find themselves in the cross hairs of
ha
U.S. national security policy. As U.S. officials have woken up to the
importance of the financial flows that fund terrorist networks, they
have begun to target illicit banking practices.
iT
THE END OF THE LINE
Too often, policymakers in Washington mistakenly assume that the
narrow self-interests of the United States and its businesses should
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automatically go hand in hand with the global order they have helped
create. When foreign regulators have sought to apply national rules to
U.S. technology companies, the United States has accused them of
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having ulterior motives. U.S. President Barack Obama, for example,

has interpreted foreign governments’ efforts to protect their citizens’
rights against U.S. companies as protectionism in disguise. Speaking
in a February 2015 interview about European investigations into
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Facebook and Google, he said, “Our companies have created [the

Internet], expanded it, perfected it in ways they [Europeans] can’t
compete [with]. And oftentimes what is portrayed as high-minded
positions on issues sometimes is just designed to carve out some of
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their commercial interests.”

Such claims are both wrong and politically unsustainable; soon
enough, major states and jurisdictions will stop tolerating U.S.
coercion. When the United States targets states or individuals that
are perceived as breaking the rules, such as Iran or Russia, it can
usually persuade enough other states to join in, giving its actions

a veneer of legitimacy. But when the United States breaks the

rules itself in ways that undermine the basic constitutional guide-
lines of other countries, it should expect a backlash. The more the
United States seeks to exploit the system it has created, the more
foreign states and businesses will challenge it.
Interdependence has already begun to work against the United
States rather than for it. As U.S. businesses have entered interna-
tional markets, they have become more vulnerable to other countries’
rules and more anxious about U.S. policies and actions that irritate
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other governments. This is an especially big problem for technology
companies, whose insatiable hunger for detailed personal information
indirectly feeds the U.S. surveillance state. Since foreign countries
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cannot directly indict the nsa, they tend to turn to the targets whose
behavior they can affect—U.S. businesses—to force the U.S. govern-
ment to change its rules.ha
FOR EU EYES ONLY
Thanks to the revelations of the American privacy activist and former
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nsa contractor Edward Snowden, resentment toward the U.S. security
state has grown into active opposition. Snowden’s files showed that
the United States, together with key allies, had systematically exploited
technical vulnerabilities to spy on the world, gathering vast amounts
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of data on the personal communications of hundreds of millions of

people and combing them for relevant security information. This
meant that even as Washington had spent years advocating an open
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Internet and condemning digital surveillance by countries ranging from

China to Russia, it had simultaneously been exploiting the open In-
ternet on the sly. The United States had publicly proselytized for the
free flow of information while secretly diverting these flows into nsa
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server farms. It had vigorously supported the global expansion of

technology companies, championing the use of Twitter, for example,
in pro-democratic movements such as those of the Arab Spring, while
quietly requiring some of those firms to turn over troves of data and
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tapping into their servers overseas.

Of course, the United States is not alone in its cynicism. Some
politicians who have publicly expressed fury at the Snowden revela-
tions, including German Interior Minister Thomas de Maizière, have
hypocritically tried to impose similar surveillance schemes on their
countries’ own civilians, and foreign intelligence agencies that depend

m
hi
ha
Unfriended: a 3-D-printed Facebook logo in Zenica, Bosnia and Herzegovina, May 2015
on the cia have minimized the scandal for fear of being cut off from
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U.S. intelligence-sharing programs. However, as U.S. actions have
interfered with the basic rights of citizens abroad, they have drawn
the ire of a different set of actors who are less easily cowed than poli-
ticians: judges, who often see their role as protecting fundamental
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constitutional protections rather than striking international compro-

mises. The ecj has already struck down a measure requiring European
communications firms to keep customer data for up to two years, in
od
part because it feared that this information might leave the eu. Now
the court has gone one step further, challenging the basis of the transfer
of personal information from the eu to the United States.
The Safe Harbor dispute stems from the fact that the eu and the
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United States have fundamentally different understandings of

how privacy should work in the digital age. Beginning in the 1990s,
European countries developed comprehensive rules governing the
collection and processing of personal information, overseen by inde-
Ma
pendent regulatory agencies called “data protection authorities.” This

REUT E RS / DADO RU VIC
approach to privacy was elevated to a fundamental constitutional

right when the eu adopted its Charter of Fundamental Rights in
2009. The United States, in contrast, lacks a comprehensive approach
to privacy, relying instead on an idiosyncratic patchwork of specific—
and, in some cases, dated—rules governing sectors as diverse as health

care and video rentals. The problem for the United States is that
European regulations have long prohibited the transfer of data to
countries that the eu considers to have weak privacy protections,
among them the United States.
Given the economic benefits of data exchange, the eu and the
United States negotiated the Safe Harbor agreement in 2000 to work
through these differences. As part of the arrangement, U.S. firms
agreed to comply with a set of basic privacy principles overseen and
enforced by the U.S. Federal Trade Commission. In the past 15 years,
m
more than 4,000 U.S. firms have come to rely on Safe Harbor to
facilitate transatlantic e-commerce and to transfer data across jurisdic-
tions. The ecj’s ruling jeopardizes all of that.
hi
In the wake of the Snowden revelations, privacy activists in Europe
began exploring legal channels to curtail U.S. surveillance. In 2013,
Max Schrems, an Austrian law student, brought a case in Ireland
ha
against the Safe Harbor agreement based on information revealed in
the Snowden files. He argued that the
By transforming technology nsa’s spying showed that there was no
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effective data protection regime in the
companies into tools of United States and that the Safe Harbor
national intelligence, agreement could not protect European
Washington has damaged citizens from mass surveillance. Ire-
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land’s High Court appeared to agree,

their reputations. finding that “the Snowden revelations
demonstrate a massive overreach on
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the part of the security authorities, with an almost studied indifference

to the privacy interests of ordinary citizens. Their data protection
rights have been seriously compromised by mass and largely unsu-
pervised surveillance programmes.” The ecj, in its ruling, cited the
so
Irish High Court’s findings on the Snowden documents and directly

tied the fate of the Safe Harbor program to the blurring of private-
sector data collection and public surveillance in the United States,
concluding that
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national security, public interest, and law enforcement requirements

of the United States prevail over the safe harbour scheme, so that
United States undertakings are bound to disregard, without limitation,
the protective rules laid down by that scheme where they conflict with
such requirements. The United States safe harbour scheme thus enables

interference, by United States public authorities, with the fundamental

rights of persons.
NO SILVER LINING
By transforming U.S. technology companies into tools of national
intelligence, Washington has badly damaged their corporate reputations
and exposed them to foreign sanctions. Their international profits—
not to mention a substantial chunk of the U.S. economy—depend on
the free flow of information across borders. Foreign officials, political
m
activists, and judges who limit these flows to protect their citizens
from U.S. surveillance strike at the heart of these companies’ business
models. The ecj’s Safe Harbor ruling has now forced Washington to
hi
decide whether it values its unrestricted ability to spy on Europeans
more than an open Internet and the economic well-being of powerful
U.S. businesses. The eu has, in effect, used the United States’ own
ha
tactics against it.
Meanwhile, U.S. firms have few attractive long-term options if
they want to transfer data across the Atlantic. In the short term, eu
iT
rules still allow businesses to use contracts, for example, to transfer
personal data to the United States. But such transfers are no better
protected against U.S. state surveillance than Safe Harbor transfers
were. Hamburg’s data commissioner has bluntly advised firms not to
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rely on these mechanisms and instead to simply keep their data on

European servers.
European data protection authorities have given Washington a
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few months’ reprieve to shape up but have threatened to take action

if the United States has not reformed its privacy rules by the end
of January 2016. They are demanding that the eu and the United
States agree on a binding legal arrangement, such as a treaty, that
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guarantees European privacy rights by keeping data from U.S. intel-

ligence agencies. If the United States does not amend its laws to
protect Europeans, U.S. firms will likely need to Balkanize their
data flows by quarantining European data in European data centers;
Ma
otherwise, they will face sanctions from European data protection

authorities. Microsoft’s president, Brad Smith, warns that such
fragmentation of the Internet risks a “digital dark ages” that could
disrupt everything from credit-card payment systems to airline
reservations, costing companies billions of dollars and threatening
their global ambitions. U.S. efforts to exploit interdependence will

have led Europe to cut valuable personal data out of global networks
and markets.
A NEW WORLD ORDER

By its very nature, interdependence can be a weakness as well as a
weapon. As the Safe Harbor case illustrates, when the security prefer-
ences of the United States are at odds with the fundamental rights of
citizens in other major jurisdictions, it is likely to face backlash. The
United States needs global cooperation on a host of sensitive issues,
m
ranging from money laundering and sanctions to the multilateral
exchange of data. Yet it continues to insist on unilateralism, even when
this damages the ability of U.S. firms to operate across jurisdictions.
hi
In the context of a criminal investigation, for example, the United
States is now demanding that Microsoft hand over personal data
housed in its data center in Ireland. Rather than requesting the data
ha
through the ordinary processes of intergovernmental exchange, in
which the U.S. government would make a request to law enforcement
officials in Ireland, the United States is using the global reach of its
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legal system to demand the data even in the face of opposition from
both the Irish government and Silicon Valley companies that fear this
move will further blacken their corporate reputations. A group of
powerful technology giants, including Apple and Cisco Systems, has
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filed a “friends of the court” brief in support of Microsoft and against

the U.S. government’s position. If this type of behavior on the part
of the U.S. government continues, it will critically damage the aspirations
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of U.S. firms to build global cloud computing. Instead of a common

cloud, firms will have to make use of segmented national data spaces
hidden behind thickets of regulations and mutually incompatible
cryptographic protection schemes. This will both threaten cloud pro-
so
viders’ economies of scale and hurt U.S. providers that are seen,
rightly or not, as more vulnerable to U.S. surveillance and the govern-
ment’s demands for information.
But such an outcome can still be avoided. The eu and the United
Ma
States share broadly similar values and have figured out how to cooperate
on the exchange of law enforcement data. They have reached the
so-called Umbrella Agreement, under which the United States has
committed to introducing laws that will give the citizens of eu states
certain privacy rights in U.S. courts. The United States could likely
resolve the Safe Harbor controversy by extending such protections to

cover surveillance and eliminating loopholes that allow both American

and European intelligence agencies to exchange information without
democratic oversight. Disputes such as the Microsoft case could be
resolved through a more efficient system of multilateral exchange,
with accompanying privacy protections. Many of the problems of
interdependence could be solved by making civil rights interde-
pendent as well, so that they are recognized and protected across
multiple jurisdictions.
The United States faces a profound choice. It can continue to work
m
in a world of blurred lines and unilateral demands, making no conces-
sions on surveillance and denouncing privacy rights as protectionism
in disguise. Yet if it does so, it is U.S. companies that will suffer.
hi
Alternatively, it can recognize that globalization comes in different
flavors and that Europeans have real and legitimate problems with
ubiquitous U.S. surveillance and unilateralism. An ambitious strategy
ha
would seek to reform eu and U.S. privacy rules so as to put in place a
comprehensive institutional infrastructure that could protect the
privacy rights of European and U.S. citizens alike, creating rules and
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institutions to restrict general surveillance to uses that are genuinely
in the security interests of all the countries.
More broadly, the United States needs to disentangle the power of
a U.S.-led order from the temptations of manipulating that order to
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its national security advantage. If it wants globalization to continue

working as it has in the past, the United States is going to have to stop
thinking of flows of goods and information as weapons and start
od
seeing them as public goods that need to be maintained and nurtured.

Ultimately, it is U.S. firms and the American economy that stand to
benefit most.∂
so
Ma

Getting to Democracy
Lessons From Successful Transitions
Abraham F. Lowenthal and Sergio Bitar
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A
lmost five years ago, mass protests swept the Egyptian auto-
hi
crat Hosni Mubarak from power. Most local and foreign
observers believed that Egypt was on the path to a demo-
cratic future; some even proclaimed that democracy had arrived.
ha
But the election of Mohamed Morsi and the Muslim Brotherhood’s
Freedom and Justice Party led to polarization and violence, and in
2013, after more mass protests, General Abdel Fattah el-Sisi seized
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power in a military coup. Since then, Sisi’s regime has killed more
than 1,000 civilians, imprisoned tens of thousands more, and cracked
down on media and civil society.
Nearby Tunisia has fared better. The wave of Arab uprisings began
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there in 2010, and the democratic government that Tunisia’s revolu-

tion ushered in has survived. It succeeded at one of a transition’s crit-
ical tasks: agreeing on a new constitution, an achievement recognized
od
by the Nobel Committee when it awarded its Peace Prize to a quartet

of civil society organizations active in Tunisia’s transition. But Tuni-
sia’s democracy remains fragile, threatened by political violence, a
crackdown on dissidents, and human rights violations. In Cuba, too,
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there are finally hopes for a democratic future, as aging authoritarian

rulers begin to introduce reforms. And in Myanmar (also known as
Burma), a slow and uneven transition from military rule to inclusive
governance may be under way, but it remains fraught with difficulties.
Ma
ABRAHAM F. LOWENTHAL is a Nonresident Senior Fellow at the Brookings Institution

and Founding Director of the Inter-American Dialogue.
SERGIO BITAR is President of Chile’s Foundation for Democracy and a Nonresident Senior
Fellow at the Inter-American Dialogue. He was a Chilean Senator from 1994 to 2002.
They are the co-editors of Democratic Transitions: Conversations With World Leaders (Johns
Hopkins University Press and International IDEA, 2015), from which this essay is adapted.

What determines whether attempts at democratic transitions will

be successful? Past experience offers some insights. We conducted
extended interviews with 12 former presidents and one former prime
minister who played vital roles in the successful democratic transi-
tions of Brazil, Chile, Ghana, Indonesia, Mexico, the Philippines,
Poland, South Africa, and Spain. Some were leaders in authoritarian
regimes who nevertheless helped steer their countries toward effec-
tive democracy. F. W. de Klerk, as president of South Africa, negoti-
ated with Nelson Mandela and the African National Congress (anc)
m
to bring an end to apartheid. B. J. Habibie, vice president under
Indonesia’s long-ruling dictator, Suharto, became president after
Suharto’s resignation in the face of massive protests. Habibie then freed
hi
political prisoners, legalized trade unions, ended press censorship,
allowed the formation of new political parties, and transformed the
rules of Indonesian politics, paving the way to constitutional democracy.
ha
Other leaders were prominent in opposition movements that
brought an end to authoritarian rule and subsequently helped build
stable democracies. Patricio Aylwin, a leader of the opposition to
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General Augusto Pinochet, Chile’s long-ruling dictator, became his
country’s first elected president after the restoration of democracy
in 1990. Tadeusz Mazowiecki, a Catholic intellectual and a leader of
the trade union Solidarity, became the first prime minister of post-
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communist Poland.
We also interviewed bridge figures: leaders who straddled autocracy
and democracy, such as Aleksander Kwasniewski, a cabinet minister in
od
Poland’s communist government who was involved in the Round

Table discussions that led to Poland’s democratic opening. Later,
as president, he helped build Poland’s democratic institutions. Fidel
Ramos, a high-ranking military official in the Philippines under the
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autocratic regime of Ferdinand Marcos, joined the opposition during

the massive People Power demonstrations in 1986. He later served
as defense minister and then as the second president of the post-
Marcos democracy.
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Although broader social, civil, and political forces played important

roles, these leaders were key to their countries’ successful transitions.
They helped bring authoritarian regimes to an end and built constitu-
tional democracies in their place, institutionalized through regular,
reasonably fair elections, combined with meaningful restraints on
executive power and practical guarantees of essential political rights—

and none of these transformations has been reversed. Democracy remains

a work in progress in some of these countries, but the transitions funda-
mentally changed the distribution of power and the practice of politics.
Of course, there is no one-size-fits-all model for democratic
change. Yet past transitions do offer some broadly applicable lessons.
Democratic reformers must be ready to compromise as they prioritize
incremental progress over comprehensive solutions. They must build
coalitions, reach out to some within the regimes they seek to over-
throw, and grapple with questions of justice and retribution. And
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they must bring the military under civilian control. Those interested
in building democracies from the ruins of dictatorships can improve
their odds by following these best practices.
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PREPARING THE GROUND
A successful democratic transition begins long before elected politicians
ha
take office. The opposition must first gain enough public support to
challenge the regime’s capacity to govern and position itself as a plau-
sible contender for power. Opposition leaders have to mobilize protests;
iT
denounce the imprisonment, torture, and expulsion of dissidents; and
erode the regime’s national and international legitimacy.
This often requires bridging deep disagreements among the opposi-
tion about aims, leadership, strategies, and tactics. Most of the transition
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leaders we interviewed worked assiduously over time to overcome such

divisions and build broad coalitions of opposition forces, uniting political
parties, social movements, workers, students, religious institutions, and
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key business interests around a common agenda. In Poland, the trade

union Solidarity worked closely with student organizations, intellectuals,
and elements of the Catholic Church. Brazil’s opposition movement
convinced industrialists in São Paulo to back its cause. In Spain, opposition
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groups resolved many of their differences in the negotiations leading up

to the Moncloa Pacts of 1977, where they agreed on how to run the
economy during the transition.
By contrast, wherever the opposition fails to unite, the prospects
Ma
for democracy suffer. In Venezuela, serious divisions over how con-

frontational to be toward the government have thus far prevented the
opposition from taking full advantage of the regime’s economic mis-
management. In Serbia, Slobodan Milosevic was able to rule in an
increasingly authoritarian manner after taking power in 1989 thanks
in part to the inability of the Serbian opposition to present a unified

m
hi
ha
Demanding democracy: an opposition protest in Santiago, Chile, November 1983
front. In Ukraine, the Orange Revolution of 2004–5 overturned an
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election result widely considered to have been rigged. But divisions
among reformers then held back the further development of demo-
cratic institutions and the rule of law, leading to another decade of
oligarchic rule and political corruption.
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Democratic opposition movements also need to build bridges with

those who cooperated in the past with the regime but who may now
be ready to support democratization. Focusing on past grievances
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tends to be counterproductive, so democratic reformers should instead

consistently project a positive and forward-looking vision of the
transition to counter the pervasive fear that authoritarian regimes
instill. At the same time, they should marginalize those who refuse to
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renounce violence or who insist on uncompromising demands for

regional, ethnic, or sectarian autonomy.
But uniting the opposition is not enough; democratic forces must
also understand and exploit divisions within the incumbent regime.
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To persuade elements within the regime to be open to change, reformers

© BET TMANN / CO RBIS
must make credible assurances that they will not seek revenge or
confiscate the assets of regime insiders. Opposition movements should
work hard to become viable interlocutors for those within the authori-
tarian regime who desire an exit strategy, while isolating those who
remain intransigent. For example, the Brazilian reformer Fernando

Henrique Cardoso’s core strategy was to induce elements of the military

to reach out in search of an exit.
Incumbents who recognize the need to turn away from authoritarian
rule, in turn, must find ways to maintain the support of their core
constituencies while negotiating with opposition groups. The “bush
retreats” de Klerk held with members of his cabinet in 1989 and 1990
are a model for this. At these talks, he built a secret consensus within
his cabinet for the dramatic steps he would announce: legalizing the anc,
freeing Mandela and other political prisoners, and opening formal
m
negotiations.
Direct contact between the opposition and the regime can take
place secretly at first, if necessary, as was the case with the initial
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contacts between government officials
and anc representatives, which were
Uniting the opposition is held outside South Africa in the mid-
not enough; democratic
forces must also exploit
ha 1980s. Informal dialogues, such as the
Round Table discussions in Poland, can
divisions within the regime. help members of the regime and the
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democratic opposition understand each
other, overcome stereotypes, and build
working relationships. As de Klerk observed, “You cannot resolve a
conflict without the parties involved talking to each other. . . . In
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order to succeed with negotiations, you have to put yourself in the other
party’s shoes. One must think through their case and determine . . .
[the other party’s] minimum requirements in order to ensure their
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cooperative, constructive participation in the negotiation process.”

Throughout this process, reformers must exert pressure on the regime
and take risks to achieve continuous progress, even if it is only gradual
and incremental. They must be prepared to make compromises, even
so
if these leave some vital aims only partially achieved and some important
supporters frustrated. Dismissing maximalist positions often calls
for more political courage than hewing to attractive but impractical
principles. Transition-making is not a task for the dogmatic.
Ma
In Ghana, for instance, John Kufuor, the leader of the New Patriotic
Party, rejected his party’s boycott of the 1992 election, arguing that
the party should participate in the 1996 election, even though it might
lose. Kufuor’s subsequent victory in the 2000 election led to a peace-
ful transfer of power through the ballot box, a pattern that has continued
for 15 years. And in Mexico, Ernesto Zedillo, although a prominent

member of the long-ruling Institutional Revolutionary Party (pri),

supported incremental reforms in electoral procedures negotiated
with the opposition at a time when the pri seemed unlikely, after seven
decades in power, ever to cede control. Later, as president, he agreed
to further changes regarding campaign finance and supported a reform
to strengthen the electoral authorities that helped open the way, in 2000,
for the unprecedented transfer of power from the pri to the opposition.
The dangers that lie in a refusal to compromise were clear in the
case of Egypt. During the Muslim Brotherhood’s brief reign, the
m
group insisted on an Islamist agenda as it drafted a new constitu-
tion, and this alienated large swaths of the population. In Chile,
extreme leftist members of the opposition espoused “all forms of
hi
struggle,” including violence, against the Pinochet regime. By 1986,
a majority of the opposition movement understood that they could
not unseat the dictatorship by force and that association with the
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extreme left tarnished the opposition. They turned instead to
peaceful contestation and pledged to build a “homeland for all.”
This approach helped the opposition triumph over Augusto Pinochet
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in the 1988 plebiscite, an election that many in the opposition had
initially wanted to boycott.
CIVILIANS AND SECURITY

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Toppling an authoritarian regime is one thing; governing is quite

another. Transition leaders often face pressure to clean house entirely
and start anew, but they should resist: governing requires perspec-
od
tives, personnel, and skills that are quite different from those needed
for opposition. Once the opposition takes power, the most important
step is to end violence and restore order while ensuring that all
security forces act within the law. Our interviews provided fascinating
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accounts of the protracted challenges that civil-military relations pose.

Reformers have to bring all the security services under democratic
civilian control as soon as possible, at the same time as recognizing
and respecting the legitimate roles of these services, providing them
Ma
with sufficient resources, and protecting their leaders from sweeping

reprisals for past repression.
To accomplish this, the police and the domestic intelligence services
should be separated from the armed forces. Leaders should inculcate
new attitudes among the police toward the general population by
emphasizing the responsibility of the security forces to protect civilians

rather than repress them, without reducing the forces’ capacity to

dismantle violent groups. Reformers should remove top officers re-
sponsible for torture and brutal repression, place senior military
commanders under the direct authority of civilian ministers of defense,
and insist that active-duty military officers refrain entirely from
political involvement.
Such steps are easier to prescribe than to enact, and implement-
ing them requires keen political judgment and courage. In some
circumstances, they can be addressed early on; in others, they will
m
take considerable time. But they should receive high priority from
the start, as well as sustained vigilance. As Habibie explained,
discussing civil-military relations in
hi
Indonesia, “Those who lead a transi-
Reformers must make tion . . . have to show, not by talking or
compromises, even if these writing, but by action, the importance
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leave some vital aims only of civilian control.”
partially achieved. Senior civilian officials charged with
overseeing security forces should be
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knowledgeable about security matters
and respectful of their peers in the military, the police, and the
intelligence services. This can be difficult where democratic move-
ments have clashed violently with the security services, where
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mutual distrust persists, and where there is little respect for civilian
expertise in military affairs.
Transition leaders also have to balance the desire to hold the
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previous regime accountable with the need to preserve the discipline

and morale of the security forces. They have to foster peaceful mutual
acceptance among formerly bitter enemies—no easy matter. Only
then will citizens begin to trust a state that many understandably
so
have rejected as illegitimate and hostile, and only then will security
forces cooperate fully with citizens they have previously regarded
as subversive.
Subjecting the security services to civilian control is one of the
Ma
most protracted challenges new democracies face. The continued

supremacy that the Egyptian military enjoys over any elected insti-
tution lies at the heart of Egypt’s failed democratic transition. And
in countries as diverse as Gambia, Myanmar, and Thailand, the absence
of civilian authority over the security forces remains the most important
obstacle to a successful democratic transition.

THE CONSTITUTIONAL CHALLENGE

Bringing the military under civilian control can help transition leaders
inspire domestic trust and international legitimacy. So, too, can the
development of electoral procedures that reflect the will of the majority
and that reassure those who lose elections that their core concerns will
be respected under the rule of law. In most countries, drafting a new
constitution is essential, although Indonesia retained its 1945 consti-
tution with some altered provisions and Poland did not adopt a full
new constitution until several years after the end of communism.
m
A wide range of participants should be involved in drafting a con-
stitution that addresses the central concerns of key sectors, even when
this means accepting, at least temporarily, procedures that restrict
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democracy. Consider the biased electoral systems maintained in Chile
for 25 years after the end of the Pinochet regime to placate the military
and conservative groups and the granting of the post of deputy president
ha
to the opposition leader in South Africa. Building broad support for
a new constitution may also require incorporating lofty aspirations
that need to be scaled back later or else implemented gradually, such
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as the ambitious socioeconomic provisions of Brazil’s 1988 constitution,
which called for expansive labor rights, agrarian reform, and universal
health care.
Although the exact wording of a constitution matters, it may matter
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more how, when, and by whom the constitution is adopted. Its framers
must achieve broad buy-in and make sure that it is neither too easy
nor practically impossible to amend the constitution when conditions
od
warrant. Many criticized Aylwin’s formulation that the truth commission

in Chile could provide justice only “as far as possible”—but what was
possible expanded over the years. The key aim should be to establish
broad acceptance of the basic rules of democratic engagement. As
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Thabo Mbeki, South Africa’s second postapartheid president, observed,

“It was important that the constitution be owned by the people of
South Africa as a whole and therefore that the process of drawing up
the constitution be inclusive.”
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The process must include supporters of the former regime, who

will need assurances that their rights will be respected under the rule
of law. The wholesale prosecution of former officials is unwise. The
new leaders should instead establish transparent legal processes to
seek the truth about past abuses, provide recognition and perhaps
reparation to victims, and, when feasible, bring major culprits to justice.

Although full reconciliation may be impossible, mutual tolerance is an

essential goal. Compromises, once again, are vital.
BALANCING ACTS
As democratic transitions take hold, the public often blames democratic
leaders—and sometimes democracy itself—for failing to meet economic
or political expectations. The new authorities typically inherit
deep-rooted patterns of corruption and inefficiency. Movements
that united in opposing the authoritarian regime may fragment.
m
Civil society organizations that contributed to anti-authoritarian
opposition movements sometimes decay or adopt disruptive positions,
especially after many of their most talented leaders enter govern-
hi
ment or party politics.
Building constructive relations between a new government and a
new opposition is an ongoing challenge. Competition between a
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government and its opposition is healthy for democracy, but complete
obstruction by the opposition or the suppression of all criticism by the
government can quickly destroy it. An independent judiciary that
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holds the executive accountable without blocking too many new
initiatives and free and responsible media can help entrench a sustain-
able democracy.
Political parties also play an important role, so long as they do not
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become merely the vehicles of particular individuals and their cronies.

Well-organized and programmatic democratic parties provide the
best way to engage people of all classes, mobilize effective pressure,
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organize sustainable support for policies, channel public demands,

and identify and promote skilled leaders. The development of strong
parties requires careful attention to procedures and safeguards regard-
ing candidate selection, campaign finance, and access to the media.
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Continuing challenges to democratic governance in Ghana, Indonesia,

and the Philippines are due in part to weak political parties.
Although transitions are usually triggered by political, rather than
economic, causes, economic challenges soon become a priority for
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new governments. Reducing poverty and unemployment may conflict

with the economic reforms needed to promote long-term growth and
macroeconomic stability. Before strong popular support erodes, the
government should implement social measures that mitigate the hard-
ships endured by the most vulnerable, but it also needs to exercise
fiscal responsibility. The leaders of all the transitions we studied

adopted market-oriented approaches and prudent macroeconomic

monetary and fiscal policies, but most did so cautiously to avoid
fueling popular fears that public interests were being sold out to
the privileged. Even those who were initially hostile to free markets
accepted that markets were necessary in an increasingly globalized
economy, alongside strong social policies that could produce more
equitable economic development.
As the recent history of Western interventions in the Middle East
amply demonstrates, democracy is not an export commodity. But
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external actors, governmental and nongovernmental, can effectively
support democratic transitions if they respect local forces and become
involved at their invitation. Sometimes, they can provide the condi-
hi
tions necessary for quiet dialogue among opposition leaders and
between the opposition and representatives of the regime. They can
offer advice on many practical issues, from how to conduct a campaign
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to how to make effective use of the media, and eventually how to
monitor elections. Economic sanctions can help curb repression, as
they did in Poland and South Africa. And foreign countries can offer
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aid and investment to support democratic transitions, as they did in
Ghana, the Philippines, and Poland. International economic assistance
during a transition can provide room for political reform when deliv-
ered in response to local priorities and in cooperation with local actors.
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International intervention cannot take the place of domestic initia-

tives, however. External actors are most likely to be effective when
they listen, raise questions that arise from their experience of similar
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challenges, and encourage local participants to consider issues from

various perspectives.
A CHANGING WORLD
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New actors, technologies, economic pressures, and geopolitical dynamics

have transformed the context in which today’s democratic transitions
will take place. Anyone with a mobile phone can now spark mass protests
by recording police violence. Social media can rapidly reshape public
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opinion and allow organizers to assemble large numbers of followers.

But these new technologies cannot substitute for the hard work of
building institutions. As Cardoso, the Brazilian reformer turned
president, observed, “The problem is that it is easy to mobilize to
destroy but much more difficult to rebuild. The new technologies are
not sufficient by themselves to take the next step forward. Institutions

are needed, along with the capacity to understand, process, and exercise
leadership that is sustained over time.” As Kufuor put it: “The masses
cannot construct institutions. That’s why leadership is important.”
In the years ahead, social movements and civil society organizations,
enhanced by digital networking, will perhaps pressure autocratic
regimes more often and more effectively than in the past. Yet these
movements cannot replace political parties and leaders. It is these
actors that must ultimately build institutions, construct electoral and
governing coalitions, win public support, prepare and implement
m
policies, elicit sacrifices for the common good, inspire people to believe
that democracy is possible, and govern effectively.
It is hard to build functioning and sustainable democracies in
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countries where there is no recent experience of self-government,
where social and civic organizations are fragile, and where weak state
institutions are incapable of providing adequate services and secu-
ha
rity. Democracy may also be difficult to establish in countries with
strong ethnic, sectarian, or regional divisions. And democratically
elected governments can nonetheless rule autocratically by ignoring,
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weakening, or paying mere lip service to the legislative and judicial
restraints that democratic governance requires. Yet it is precisely
all these countries that need democratic change most urgently. The
examples of Ghana, Indonesia, the Philippines, South Africa, and
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Spain show that these challenges can be met under many different
conditions, even in profoundly divided countries.
More educated young people than ever can be mobilized today to
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demonstrate in public squares for democracy, especially where employ-

ment is scarce. The challenge, however, is to engage them on an
ongoing basis in constructing durable political parties and other
institutions. Democracy does not emerge directly or inevitably from
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crowds in the street. Building democracies requires vision, negotia-

tion and compromise, hard work, persistence, skill, leadership—and
some luck. Despite all the obstacles, however, democratic transitions
have succeeded in the past. Learning and applying the lessons of
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these successful experiences can help end autocracies and forge sustain-
able democracies in their place.∂

Latin Americans Stand Up

To Corruption
The Silver Lining in a Spate of Scandals
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Jorge G. Castañeda
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J
ust a few years ago, Latin America was on a roll. Its economies,
riding on the back of the Chinese juggernaut, were flourishing.
A boom in commodity prices and huge volumes of foreign di-
ha
rect investment in agriculture and natural resources generated a
golden decade. Ambitious government programs began to reduce
inequality. And relations with the United States, long a source of
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friction, were improving—even as they became less important to
the region’s success.
Today the picture looks very different. Latin America’s economies
are grinding to a halt: in 2015, average gdp growth slipped below one
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percent. Inequality is still declining, but more slowly. And according

to the annual Latinobarómetro poll, satisfaction with democracy in
Latin America is lower than it is in any other region and is at its lowest
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point in almost a decade, at 37 percent. In Brazil and Mexico, it has

descended to just 21 percent and 19 percent, respectively.
Yet on one count at least, the lands south of the Rio Grande are
faring better than ever: Latin Americans are denouncing corruption
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as never before. In decades past, residents of the region seemed

resigned to the problem, treating it as an ordinary, if lamentable, part
of everyday life. In 1973, for example, Argentines elected Juan Perón
to a third term as president despite his infamous criminality; as a
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popular saying put it, “Mujeriego y ladrón, pero queremos a Perón”

(Philanderer and thief, we still want Perón).
JORGE G. CASTAÑEDA is Global Distinguished Professor of Politics and Latin American

and Caribbean Studies at New York University. He served as Mexico’s Foreign Minister from
2000 to 2003. Follow him on Twitter @JorgeGCastaneda. This article draws on columns he
wrote for Project Syndicate last year.

Jorge G. Castañeda
Such tolerance is now a thing of the past. According to the same

Latinobarómetro poll, the region’s inhabitants identify corruption as
their third most important problem, behind crime and unemployment
but above inflation and poverty. Latin Americans have also started
judging their politicians based on their perceived trustworthiness.
Of the five most unpopular chief executives in Latin America today—
Brazil’s Dilma Rousseff, Mexico’s Enrique Peña Nieto, Paraguay’s
Horacio Cartes, Peru’s Ollanta Humala, and Venezuela’s Nicolás
Maduro—three come from the countries with the worst ratings for
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government transparency (Brazil, Mexico, and Peru).
Several factors explain this change in attitude. First, the eco-
nomic growth of the last 15 years has created a large middle class
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(now estimated at almost a third of
Of all the region’s recent the region’s population, according to
the World Bank, up from around 20
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uprisings against corruption, percent a decade ago, although higher
the most dramatic have been in Brazil, Chile, Mexico, and Uruguay)
in Brazil. with high expectations. Second, the
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region has grown more democratic. As
the recent economic downturn has high-
lighted the damage corruption causes, this newly enlarged middle class
has used its new freedoms to vent its frustration with those in charge.
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Foreigners have also played a role. As Latin America has become

more integrated into the world economy, international media and civil
society organizations have begun to direct intense opprobrium at cor-
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rupt leaders and to lavish praise on reformers. Outside forces have

also helped the region’s more independent judiciaries and media out-
lets expose official malfeasance.
Together, all these forces have created a combustible mix, and
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when cases of graft have come to light in recent years, they have
sparked major scandals in one country after another. High-level
Latin American officials and business leaders have found them-
selves denounced by the media. Prosecutors and courts have issued
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indictments, and protesters have taken to the streets. Although

few of the governments implicated in the scandals have actually
fallen—and few others are likely to—the sheer scale of the social
and political protest has been astonishing and represents an im-
portant positive trend in a part of the world with an otherwise
gloomy forecast.

Latin Americans Stand Up To Corruption
BRAZILIAN BRIBES
Of all the region’s recent uprisings against corruption, the most
dramatic has unfolded in Brazil. The problems began in late 2013, a
time when popular discontent with the government was already
running high. The previous president, Luis Inácio Lula da Silva (known
as Lula), had been tarnished by a corruption scandal years earlier.
Now the economy was stagnating, and protests had begun to erupt
over Brazil’s lavish spending on the coming World Cup. Then, in late
2014, shortly after Rousseff narrowly won reelection, the so-called
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petrolâo scandal hit.
The scale of the revelations was unprecedented. In November
2014, federal police arrested 18 people, including senior executives
hi
of Petrobras, Brazil’s state oil company, for corruption in the first
raid of the investigation. Numerous firms had paid high-ranking
government officials, including members of Rousseff ’s Workers’ Party,
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enormous sums of money to obtain contracts from Petrobras. The
bribes were thought to have totaled around $3 billion. Prosecutors
charged executives from more than a dozen of the country’s largest
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construction companies with corruption and money laundering. As
several Petrobras executives turned state’s witness, the police investi-
gation, known as Operation Car Wash, continued to expand. Before
long, many Brazilians concluded that Rousseff, who served as chair of
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Petrobras’ board from 2003 to 2010, must be guilty herself. Although

she has not been charged, Brazil’s supreme court has ruled that her
predecessor, Lula, can be called in for questioning, and on September 1,
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his former chief of staff was charged with racketeering, receiving

bribes, fraud, and money laundering.
Lula was already under intense official scrutiny at the time: just a
few months earlier, prosecutors had concluded that they had enough
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evidence to launch a full investigation into allegations that Brazil’s

biggest building company had paid Lula to lobby overseas on the firm’s
behalf. In yet another case, Rousseff has been accused by Brazil’s Con-
troller General’s Office of illegally using funds earmarked for social
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programs and development to cover up budget deficits. Taken together,

all these charges have helped push Rousseff’s approval ratings down
into the single digits; talk of her impeachment is now in the air. As
demonstrations continue and the economy languishes—Brazil is now
in its worst recession in decades—it’s looking increasingly likely that
Rousseff will not manage to serve out her term, which ends in 2018.

Jorge G. Castañeda
Bad as all these revelations have been for Brazil, the public reckoning
that has followed can also be read as a sign of progress. The fact that the
police, prosecutors, and judges have been willing to investigate the
country’s most powerful politicians and business leaders has highlighted
the independence of Brazil’s judicial system. And the unprecedented
level of anger suggests that business as usual will no longer satisfy a
Brazilian public increasingly intolerant of high-level corruption.
Another country north of Brazil has also recently turned a corner.
In early 2015, after it emerged that officials had siphoned off millions
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of dollars in customs revenue, thousands of Guatemalans took to the
streets, gathering every Saturday for weeks in the central square of
the capital. In May, they forced the resignation of the country’s vice
hi
president and several cabinet ministers. But the protests continued,
and on September 1, legislators from President Otto Pérez Molina’s
own party stripped him of his immunity. On September 2, he resigned
ha
and within hours was jailed on corruption charges—an extraordinary
event in a country where politicians have long enjoyed great impunity.
The fight against corruption in Guatemala has benefited from
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outside support. That help has come in the form of the International
Commission against Impunity in Guatemala (cicig), which was
created in 2006 as part of a larger agreement between the un and
Guatemala. The body, which was initially intended to investigate
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crimes committed during the civil war, is financed by the European

Union, supported by the U.S. embassy, and led by a Colombian; it now
numbers more than 200 foreign officials. It has become one of the most
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powerful instruments in the campaign against corruption. As a high

government official told me in August, “It hurts to admit that we are
unable to clean up our own house, but it is better that someone else
does it than that nobody does.”
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Guatemala’s example has sparked similar protests across Central

America, in neighboring Honduras and to a lesser extent in El Salvador.
In Tegucigalpa, the capital of Honduras, thousands of protesters gather
every Friday in a marcha de las antorchas, or “march of the torches,” to
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demand an investigation into the defrauding of the Honduran Institute

of Social Security by the governing party. President Juan Orlando
Hernández has attempted to placate the demonstrators by creating a
commission similar to the cicig, although without prosecutorial
powers, but so far, these attempts have failed. As long as it lacks the
teeth of its Guatemalan counterpart, such a commission is unlikely to

m
hi
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satisfy the protesters, and if more scandals come to light, calls for
Hernández’s resignation will mount. And in El Salvador, there are
calls for an external investigation into Alba Petróleos, the subsidized
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energy venture set up by then Venezuelan President Hugo Chávez

several years ago, which is suspected of making financial contributions
to El Salvador’s ruling party.
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NO MÁS
Foreign influence has played a crucial role in Mexico as well. The
American press is responsible for unveiling three of the most impor-
tant corruption cases in recent history: Walmart’s bribing of Mexican
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municipal officials (which The New York Times reported on in 2012); the
revelation that Luis Videgaray, the country’s finance minister, had
acquired property under suspicious circumstances (a story The Wall
Street Journal broke in 2014); and the concealed purchase of multimillion-
dollar condos in Manhattan and elsewhere by a former governor (another
story broken by the Times, this one in 2015).

Jorge G. Castañeda
Yet Mexico’s domestic media have also done their part. The radio
reporter Carmen Aristegui, the newsweekly Proceso, and the daily
Reforma have helped expose numerous scandals. Aristegui revealed
that the $7 million modernist mansion in Mexico City built for the
Peña Nieto family was in fact owned by
a company to which the president had
Latin Americans are awarded hundreds of millions of dollars
denouncing corruption in public contracts and that was headed
as never before. by a personal friend of his. A govern-
m
ment investigation has since exonerated
Peña Nieto, but many in Mexico have
dismissed the inquiry as a cover-up. Other accusations have been
hi
leveled at the interior minister and several governors. These scandals
have all generated a great deal of anger and unhappiness in Mexican
society. But so far, not much more has come of them.
ha
Yet public opinion has come to matter more and more in today’s
democratic Mexico. Online social networks now provide the new mid-
dle class with an outlet halfway between public protest and private
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complaint: Mexicans use Facebook and Twitter to vent their anger
and share information (not all of it accurate) about high-level corruption.
This allows for a measure of catharsis but has yet to produce actual
change: although many think that Peña Nieto’s government is Mexico’s
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most corrupt since the late 1980s, so far calls for the president’s resig-
nation have foundered.
A major corruption scandal is causing a similar reaction in Chile. It
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began in February 2015 with accusations of influence peddling against

the son and daughter-in-law of President Michelle Bachelet. Other
scandals soon emerged, involving tax fraud and campaign finance crimes
on the part of opposition leaders and members of the governing coali-
so
tion, several of whom were jailed. As of May, most had been released,
but some were under house arrest. Even Marco Enríquez-Ominami,
a former independent candidate for president and one of Chile’s most
popular politicians, has been caught up in a controversy regarding
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campaign finance, according to Chilean media reports. Large financial

and mining conglomerates—one of them led by the ex-son-in-law of
Chile’s former dictator, Augusto Pinochet—have been accused of fraud-
ulently contributing to electoral campaigns.
Yet as in Mexico, the scandals have prompted only muted protests
so far. That may be a consequence of their relatively small scale.

Latin Americans Stand Up To Corruption
Historically, Chile’s has ranked as one of the more honest governments

in Latin America, and the amounts at stake in the country’s recent scan-
dals pale in comparison to those in Brazil and Mexico: the most serious
charge against a Chilean official involves a loan of $10 million.
Yet the allegations still represent the most serious challenge Bach-
elet has faced in her two terms in power. Although she tried to show
that she takes the issue seriously by asking for the resignation of her
entire cabinet in May and by calling for a new constitution, by August
her approval rating had dropped by 30 percentage points in one
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year. Popular protests are likely to become louder unless Chile’s elites
take genuine steps to reduce corruption, especially if the country’s
copper-dependent economy doesn’t pick up soon. But once again,
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this represents good news as well as bad. Chile’s independent and
honest judiciary and its free press were central to uncovering the
corruption scandals—an important sign of the growing effectiveness
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of Chile’s democratic institutions.
Even in Venezuela, where flagrant corruption is still the norm,
there are signs that the public’s patience is running out. According to
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Latinobarómetro, Venezuela is the region’s second least transparent
country, and at the end of 2015, Maduro was its third most unpopular
president. The United States recently leaked accusations that many of
the country’s leaders—including Diosdado Cabello, the head of the
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National Assembly and Maduro’s closest aide—have used illegal

means to enrich themselves immensely, partly through links with
Colombian drug cartels. In June, the deterioration of Venezuela’s
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economy and the increase in violence and human rights violations

forced Maduro to call elections for December. Although candidates
and voters mostly focused on the economy, violence, and repression,
more and more of them raised corruption as well.
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A GLASS HALF FULL

Yet there are exceptions to this trend. In Argentina, there are few
positive developments in the fight against corruption. The outgoing vice
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president, Amado Boudou, is awaiting trial for corruption, but many

suspect the charges will be dismissed. Allegations also surround outgoing
President Cristina Fernández de Kirchner, whose net wealth surged to
a reported $6 million over the 13 years she and her late husband ruled
the country, but the chances of a prosecution are slim. Outsiders have
less influence in Argentina than in many of its neighbors—the country’s

Jorge G. Castañeda
tradition of Peronist nationalism makes it hostile to perceived med-

dling. And the public seems resigned to the status quo: although
hundreds of thousands of Argentines joined demonstrations when the
prosecutor Alberto Nisman died under mysterious circumstances—
as he was investigating Kirchner in connection with the 1994 bombing
of a Buenos Aires Jewish community center—they have remained
stubbornly passive when it comes to corruption.
The people of Nicaragua, meanwhile, seem even more complacent.
President Daniel Ortega is currently focused on an enormous under-
m
taking: an attempt to build a second interoceanic canal just north of
the existing Panama Canal. A Chinese businessman has agreed to
underwrite the cost, which could reach up to $100 billion. Some
hi
Nicaraguans think that the businessman is working for the Chinese
government, but given China’s economic problems, it is in no position
to foot the bill, and more than two years after the project was an-
ha
nounced, excavation has yet to begin. Many Nicaraguans believe that
the whole venture is nothing more than an elaborate scheme designed
to enrich the Ortega family and that no canal will ever be built. Yet
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Nicaraguans have done little to register their displeasure: there have
been no massive protests, for example.
As all these stories suggest, corruption remains deeply embedded
in Latin American political and social life. Some countries have
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seen little improvement from the bad old days decades ago. Yet the
outraged reactions to the wave of scandals currently sweeping the
continent may be the first sign that Latin American publics are no
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longer prepared to tolerate systemic dishonesty in their governments.

The region’s new middle classes, aided by pressure from abroad and
by increasingly confident and independent domestic institutions,
have begun demanding better governance.
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The outcome of all these movements is still uncertain. Some may

generate new institutions: autonomous controller’s offices, more
powerful and independent judiciaries, greater transparency, and
more active and conscious civil societies. Others may take a populist
Ma
turn, as candidates for office run on anti-elite platforms. And in some

countries, the movements will subside. But in all cases, something
will have changed in Latin America, and much for the better.∂

ESSAYS
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The WHO performed

so poorly during the
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Ebola crisis that there is

a question of whether the
world actually needs it.
S E RG EY P ONO MAR EV / T H E N EW YO R K T I M ES / R E DU X
so
—Laurie Garrett
Ebola’s Lessons The Meaning of Kissinger
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Laurie Garrett 80 Niall Ferguson 134
Restoring America’s Strength Autopsy of a Cambodian Election

Marco Rubio 108 Stéphanie Giry 144
City Century An Unworthy Ally

Michael Bloomberg 116 C. Christine Fair and Sumit Ganguly 160
Withholding Judgment
José A. Cabranes 125
Ebola’s Lessons
How the WHO Mishandled the Crisis
Laurie Garrett
m
I
n a biological sense, last year’s Ebola epidemic, which struck West
Africa, spilled over into the United States and Europe, and has to
hi
date led to more than 27,000 infections and more than 11,000
deaths, was a great surprise. Local health and political leaders did not
know of the presence of the hemorrhagic fever virus in the
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35,000-square-mile Guinea Forest Region, and no human cases had
ever been identified in the region prior to the outbreak. Its appear-
ance in the tiny Guinean village of Meliandou in December 2013
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went unnoticed, save as a domestic tragedy for the Ouamouno family,
who lost their toddler son Emile to a mysterious fever. Practically
all the nonbiological aspects of the crisis, however, were entirely
unsurprising, as the epidemic itself and the fumbling response to it
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played out with deeply frustrating predictability. The world has seen
these mistakes before.
Humanity’s first known encounter with Ebola occurred in 1976, with
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an outbreak in the village of Yambuku, Zaire (now the Democratic

Republic of the Congo), and surrounding areas. A horrible unknown
disease suddenly started causing internal bleeding, high fevers, some-
times hallucinations and deranged behavior, and often death; it was
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eventually named Ebola after a nearby river. Back then, science lacked
today’s tool kit for the rapid identification and genetic analysis of
viruses, not to mention meaningful antivirus treatments, biotechnology,
sophisticated hazmat suits, and cell phones. Considerable courage,
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combined with a fair amount of swagger and medical savvy, was the key
trait of the couple of dozen foreigners who swooped in to assist the local
disease fighters. Most were veterans of battles against other microbes,
such as smallpox or yellow fever, but had not previously worked
LAURIE GARRETT is Senior Fellow for Global Health at the Council on Foreign Relations.

Ebola’s Lessons
together. Karl Johnson, a virologist at the U.S. Centers for Disease

Control and Prevention (cdc), took charge, and the multinational
group operated as a team of rivals, jockeying for their respective insti-
tutional or national stature in the loosely governed investigation.
Conducting its work under the brutal dictatorship of Mobutu Sese
Seko, the group’s every small achievement, from corralling air transport to
communicating with the cdc’s headquarters in Atlanta, was a near miracle.
But within a few months, the virus was identified, the Belgian Catholic
mission hospital at the center of the outbreak was closed, quarantines
m
were enacted, and the epidemic ended. Almost 300 people had died.
The world’s second serious confrontation with Ebola came 19 years
later, in 1995, when the disease again broke out in Zaire—this time in
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Kikwit, a community of nearly half a million people spread out along
the edges of a vast rainforest in what amounted to a giant village of mud
roads, with no running water, no electricity, no phones, no media of any
ha
kind, and only the crudest of medical facilities. I took up temporary
residence in Kikwit during the epidemic, reporting on how it played
out. There was (and still is) only one paved road out of town, the N1,
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heading around 300 miles due west to Kinshasa and 550 miles southeast
to Mwene-Ditu. At the time, Mobutu held Zaire in his clutches and
used its national treasury as his family’s personal account; he would die
two years later, and the nation would discover its bank vaults were empty.
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When the mysterious disease plaguing the community was finally

confirmed as Ebola, the despot had his military cut off access to the
highway, leaving the people of Kikwit to suffer on their own.
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The global response boiled down to the Zairean doctor Jean-Jacques

Muyembe-Tamfun and his medical team; three physicians from
Médecins Sans Frontières (msf, or Doctors Without Borders); three
World Health Organization (who) officials; and about two dozen
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clinicians and scientists from the cdc, France’s Institut Pasteur, Belgium’s
Institute of Tropical Medicine, South Africa’s National Institute for
Virology (now the National Institute for Communicable Diseases), and
other Western agencies and academic centers. Supplies and funds were
Ma
scarce, electricity was available only by using generators, and there were
no rapid diagnostic tools, medicines, or vaccines available.
The Kikwit epidemic ended after around nine months, having killed
250 people. Afterward, the leader of the global response, David
Heymann, an American employed by the cdc but temporarily working
at the who’s headquarters in Geneva, returned to Switzerland with a

Laurie Garrett
list of frustrations. Some of his concerns mirrored those of Johnson in

fighting Ebola 19 years earlier: there was still no vaccine, no treatment,
no field diagnostic tools, limited supplies of protective gear, nearly non-
existent local health-care systems and trained medical personnel, no
clear lines of national and global authority for epidemic response, few
qualified scientists capable of and interested in being deployed, no
international law governing actions inside countries lacking the capacity
to stop epidemics on their own, and no money. Heymann had scoured
Europe looking for funds to get his team and supplies to Kikwit. The
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who had not been able to help much, and in the end, the German airline
Lufthansa provided free travel and logistical support.
Yet another 19 years on, when I visited Liberia in late 2014, I found
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that little had improved. Although there had been at least 16 more
Ebola outbreaks across the Congo basin and Uganda in the interim,
the world had not developed any new technical or medical tools for
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addressing the virus. Treatment was only incrementally more sophisti-
cated than it had been back in 1995, it was still impossible to rapidly
diagnose infections, and there was still no vaccine.
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SAME OLD STORY
The 1976 Yambuku outbreak came at a time of tremendous optimism in
the fields of global health and Western medicine. The previous decades
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had seen the development and widespread use of a host of remarkably

effective vaccines. They had brought horrors such as diphtheria, measles,
pertussis, polio, rubella, and tetanus down to insignificant levels in rich
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countries, offering the hope that immunization campaigns in poor coun-

tries could eliminate the diseases entirely. New antibiotics kept appear-
ing on the market, pushing the prices of older stalwarts, such as penicillin
and tetracycline, further down toward affordability in poor countries.
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The medical establishment in the United States was growing in size and
sophistication, producing specialists offering treatments for rare forms
of cancer, obscure inherited disorders, and deep psychiatric afflictions.
The pharmaceutical industry was at the beginning of an enormous boom.
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And the who was successfully straddling both sides of the Cold War,
garnering support from the Soviet Union and the United States.
But 1976 was also a year of harbingers of bad things to come. There
was not just Ebola’s emergence in Yambuku. The United States struggled
with two strange new outbreaks of its own, of swine flu and Legionnaires’
disease. In addition, the sexual revolution was spreading across Europe

Ebola’s Lessons
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The human cost: the body of an Ebola victim in Sierra Leone, December 2014
and North America, with increases in unprotected sex leading to a rising
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incidence of sexually transmitted diseases such as gonorrhea, herpes, and
syphilis. Within five years, physicians in the United States would note
a set of new, fatal symptoms among hemophiliacs, gay men, and intrave-
nous drug users; the disease would eventually be called acquired immune
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deficiency syndrome, or aids, caused by the human immunodeficiency

virus, or hiv.
In what became known as the swine flu fiasco, the Ford administration
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and the American public health establishment overreacted to the death

of a U.S. Army private from the disease. The fatality was isolated, but it
led to a panic and a national immunization campaign. Convinced that a
massive pandemic was on the way, Congress indemnified the vaccine in-
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dustry. Immunizations were hastily rushed into production; amid claims

of contamination and side effects, years of lawsuits followed. The episode
left policymakers skeptical about trusting their health-care professionals
and determined never again to indemnify drug makers; manufacturers,
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in turn, ran for cover, and some drug companies shed their vaccine pro-
R E U T E R S / BA Z R AT N E R
duction lines entirely. An infuriated Congress convened hearings to rake

the cdc over the coals, forcing the resignation of the agency’s director.
Six months after the death of the army private, 34 hotel guests
attending an American Legion convention in Philadelphia died from a
mysterious illness (later dubbed Legionnaires’ disease). The inability
Laurie Garrett
of the cdc and Pennsylvania health authorities to rapidly determine

what had happened further undermined policymakers’ confidence, and
when the cause of the disease turned out to be a previously unknown
species of bacteria lurking in the air-conditioning system, the public
was shocked. If the age of infectious diseases was past, how could a new
bacterial ailment appear, go undiagnosed for months, and prove tough
to treat with antibiotics?
Aids would, of course, prove the greatest challenge—to human hubris,
the pharmaceutical and research communities, and international global
m
health governance. Shortly after his first visit to Liberia to see the Ebola
epidemic firsthand last August, the cdc’s current director, Thomas
Frieden, told reporters, “I will say that in
hi
The global response to new the 30 years I’ve been working in public
health, the only thing like this has been
pathogens continues to be ha aids. And we have to work now so that
limited, uncoordinated, this is not the world’s next aids.” Frieden
and dysfunctional. was referring not to the disease itself but
to the world’s disastrous response to it.
iT
For two decades, as the aids pandemic
unfolded in country after country, governments and general populations
almost always proved more interested in attacking the subpopulations at
greatest risk for the disease than in fighting the virus itself. Children
Al
infected by hiv-contaminated blood transfusions were banned from

schools, the homes of hemophiliacs were burned, masses of gay men died
with little attention from the heterosexual communities around them,
od
intravenous drug users were denied sterile syringes, female prostitutes

were imprisoned or denied access to health care, and many medical and
dental providers refused to allow hiv-positive individuals access to care
unrelated to their infections.
so
From the perspective of hiv prevention, in nearly every country in

the world, the 1980s and 1990s were long, ugly decades during which
the virus spread relentlessly, with aids eventually ranking as the third-
largest pandemic in world history (after the Black Death and the 1918
Ma
influenza pandemic). In comparing Ebola and aids, Frieden was not

forecasting that Ebola would infect 60 million people, as hiv has; rather,
he was indicating that the ignorant, inept, and cruel response to aids was
being mirrored by events unfolding in West Africa in 2014.
During the 1980s, the who failed to recognize the importance of hiv
and aids. Inside its Geneva headquarters, some experts exhibited as

Ebola’s Lessons
much prejudice against the populations at great risk for aids—especially

homosexuals—as did the general public. For a brief time in the mid-1980s,
its Global Program on aids (gpa) thrived, led by the epidemiologist
Jonathan Mann. But who insiders grumbled and complained about the
millions of dollars in aids funds Mann was raising and about the dire
(and, in retrospect, mostly accurate) forecasts his group was issuing. A
common refrain among insider critics was, “Since more people die of
diarrhea—or cancer, or hypertension, or malaria, or whatever—than of
aids, why is it getting so much money and media attention?” Heeding the
m
grousing, the who’s director general, Hiroshi Nakajima, forced Mann’s
resignation, slashed the aids budget, and eventually shut down the gpa,
essentially walking away from the largest pandemic in modern history.
hi
Since then, the global response to the rise of new pathogens has con-
tinued to be limited, uncoordinated, and dysfunctional. From sars to
mers, H5N1 to H1N1 to H7N9, the story has been similar. Poor nations
ha
are unable to detect new diseases quickly and bring them swiftly under
control. Rich nations generally show only marginal interest in outbreaks
until the microbes seem to directly threaten their citizens, at which
iT
point they hysterically overreact. Governments look after their own
interests, cover up outbreaks, hoard scarce pharmaceutical supplies,
prevent exports of life-saving medicines, shut borders, and bar travel.
The global health infrastructure has shown itself to be weak, fractured,
Al
prone to infighting, and more interested in searching for technological

silver bullets than engaging in the hard slog of social mobilization and
classic local public health work. And through it all, the who has struggled
od
to remain credible, as its financial resources have shrunk, tensions have

grown between its Geneva headquarters and its regional offices, and
rival multilateral organizations have taken control over much of the
global health action and agenda.
so
“I THOUGHT I KNEW FEAR”

By now, in mid 2015, the nation of Liberia is returning to its normal,
pre-Ebola life. This is in sharp contrast to the horrors of last fall, when
Ma
every nook and cranny of the country was in the grip of the disease and
people were literally dying in the streets of Monrovia for lack of hospital
beds and treatment centers. Nearly 500 new cases a week were detected
in the country during late September and early October. Toward the
end of the year, Liberia seemed to have its epidemic under control, with
fewer than five new cases found each day, and it seemed reasonable to

Laurie Garrett
think, as Liberian President Ellen Johnson Sirleaf publicly did, that the
epidemic might end before Christmas. Sadly, the virus skirted that final
elimination, stubbornly spreading inside Monrovia. By mid-March 2015,
Liberia once again seemed poised to declare victory, having gone more
than 21 days without a new case anywhere in the nation. But on
March 27, a 44-year-old woman living in Monrovia died of the disease.
Authorities determined that her boyfriend, an Ebola survivor, had the
virus in his semen, and a shocked nation learned that Ebola could be
transmitted sexually by a man some six months after he was healed. The
m
who officially declared Liberia free of Ebola on May 9, and the country
began to focus on economic recovery while remaining on alert for Ebola
reentry from neighboring Guinea and Sierra Leone, where control over
hi
the disease has proved substantially more elusive. (Ominously, in late
June, the cadaver of a 17-year-old Liberian boy tested positive for Ebola,
and since then, a handful of other cases have come to light.)
ha
Charts of the rates of infection and fatalities show that Liberia’s
plague was on its downward course before the world mobilized to
help. With heroic assistance from msf, the International Committee
iT
of the Red Cross, a few other foreign humanitarian and religious
organizations, and small teams of foreign scientists and public health
experts, Liberia was able to turn the tide of its epidemic largely
without the un Mission for Ebola Emergency Response (unmeer),
Al
the U.S. military, or the promised hundreds of millions of dollars’

worth of World Bank and multinational aid. As late as the end of
February 2015, after the worst of the crisis had passed, less than half
od
of the finances, personnel, and supplies promised by the global commu-

nity had actually materialized on the ground. If the aid had arrived
earlier, the epidemic would undoubtedly have been contained faster
and with fewer fatalities.
so
There was no good reason to believe that Liberia would be able to

acquit itself so well in managing its catastrophe. When the crisis struck,
Liberia, one of the poorest nations on earth, barely had a health-care and
hospital system or even a method for processing public-sector payrolls.
Ma
It ranked 175 out of 187 countries in the un’s Human Development

Index, had an official unemployment rate of more than 80 percent, and
a total gdp of only $1.95 billion. Less than half of the population was
functionally literate, a third of the country’s women had never set foot in
a classroom, and fewer than five percent of households could, by African
Development Bank standards, be labeled middle class. And in fact, if not

Ebola’s Lessons
for a smattering of dedicated officials and medical personnel, together

with the good sense of local villagers, Liberia might still be in crisis.
Miatta Zenabu Gbanya is a perfect example of the expertise that came
to Liberia’s rescue. Smart, hard-working, and resilient, Gbanya, a nurse,
returned to her Liberian home in mid-2013 after nearly a decade of gruel-
ing relief work in such hellholes as Darfur, South Sudan, and contested
zones of the Democratic Republic of the Congo. Like most Liberians,
Gbanya had toughened up at an early age as a matter of survival through
her country’s civil wars, which began in 1989 and spanned the 1990s and
m
beyond, and she had seen rough times since. While she was working in
Darfur for a British medical relief group in 2007, for example, members
of her team were carjacked by Khartoum-backed Janjaweed militants, and
hi
in subsequent months, Gbanya “spent many nights—night after night—
laying in fear.” She said, “I thought I knew fear very well.” Until, that is,
she faced the Ebola epidemic. “I thought fear in Darfur was the worst
ha
feeling,” she told me when I spoke with her recently. “But no—it’s Ebola.”
Given her years of relief work, Gbanya was assigned by Sirleaf to
head up a new entity called the Health Sector Pool Fund, a health-care-
iT
financing scheme that combined resources from about a dozen donors into
a single pot of carefully monitored funds for the nation’s desperate gov-
ernment health-care system. Liberia had few doctors, horribly rundown
medical facilities, few supplies, and no money. Like its neighbors Guinea
Al
and Sierra Leone, moreover, Liberia had seen what institutions it did
have collapse during the civil war years, to be replaced by a smattering of
disconnected clinics and hospitals funded and operated by foreign mis-
od
sionaries and aid organizations. But Sirleaf felt Liberians should control
and provide for their health themselves, and so after coming to power in
2006, her government had negotiated with donors, Gbanya said, and got-
ten them to agree to pool the funds they spent in the country into a single
so
account. (The U.S. Congress will not permit the pooling of American
financial resources, and so U.S. agencies operate in parallel to the fund,
with the United States having a seat at the fund’s boardroom table.) By the
time Gbanya took the helm in late 2013, the organization was ready to roll.
Ma
When she arrived, the Health Sector Pool Fund had about $65 million
in the bank, she told me, enough to support the payroll and supplies
for only a quarter of the country’s health establishment. Even when
this money was combined with support from the U.S. government and
the Global Fund to Fight aids, Tuberculosis and Malaria, Gbanya said
she had no more than a third of the money needed to make full payroll,

Laurie Garrett
and she had to root out corruption inside Liberia’s Ministry of Finance
to ensure that even those funds were properly allocated. From distant
rural clinics to the top tiers of the Ministry of Health, many employees
were going unpaid. Remarkably, the unpaid staff kept coming to work,
and throughout the system, paid health-care workers shared their salaries
with the unpaid, on the assumption that someday their clinical comrades
would finally earn enough money to reimburse them.
By the most generous estimates, when Ebola struck, there were fewer
than 250 physicians in Liberia, or fewer than two doctors for every
m
100,000 Liberians; the United States, in contrast, enjoys roughly
245 doctors for every 100,000 Americans. Nurses and midwives were
similarly burdened, with three of them per every 10,000 Liberians. And
hi
the country had a hospital bed ratio of 0.8 beds per 1,000 Liberians. All
of this meant long waits for treatments and exhausting hours of work
for health-care providers. “We were dealing with a tough work force
ha
that was dissatisfied, from top to bottom,” Gbanya told me. She set to
work searching for cost efficiencies, begging donors for more resources,
and sniffing out corruption. But as the end of 2013 approached, Gbanya
iT
knew that tensions were rising inside the Liberian health-care system,
and she simply didn’t have the money to do much about it.
POROUS BORDERS
Al
Meanwhile, hundreds of miles away from the Liberian capital of

Monrovia, at the edge of a great rainforest where Guinea, Liberia,
and Sierra Leone meet, a two-year-old boy named Emile crawled
od
about a water-soaked tree stump with other toddlers and discovered a

bunch of little, furry winged creatures. Grabbing at them and poking
them with a stick, Emile reportedly played with the nest of lolibelo—
the name locals use to describe musk-smelling, dark gray bats with
so
bodies about the size of a child’s open hand. Many months later, a
team of German anthropologists and biologists would visit the Guinean
village of Meliandou and determine that Emile’s lolibelo were Angolan
free-tailed bats or perhaps members of a similar species of mammal
Ma
found across most of sub-Saharan Africa. Surviving children in the

village told visiting scientists and reporters that youngsters had
smoked lolibelo out of the tree, filled up sacks with the flying mammals,
and eaten them. The men in the village often hunted larger fruit bats
with roughly foot-long wingspans, called little collared fruit bats—
one of only three bat species thought to carry the Ebola virus.

Ebola’s Lessons
Whether he caught something from a tiny lolibelo or from a bigger

fruit bat, on December 26, 2013, Emile came down with a soaring fever,
bloody diarrhea, and nausea, and soon others in the village got sick, too.
Emile died on December 28, and over the following six weeks, at least
ten other villagers succumbed. Before
dying, a Meliandou midwife went to
seek help from her family in the nearby
People across the region
village of Dandou Pombo, passing the whispered that they were
strange disease on. She then died in a more afraid of angering
m
hospital in the town of Guéckédou, after their ancestors than they
infecting one of her attending traditional
healers. That ailing health-care worker were of the disease.
hi
went to a government clinic in the town
of Macenta; after he died, four members of his family who had prepared
his body for burial brought the disease home with them to a fourth area,
ha
Guinea’s Farako District. Back in Meliandou, baby Emile’s grandmother
died of the disease on January 11, 2014. Relatives from Dawa village
attended her funeral, returning home before dying themselves. Soon, a
iT
primary chain of transmission was spreading the still-unidentified disease
throughout Guinea and into Sierra Leone.
By February, terrified villagers were pouring into medical facilities
across the region, including an msf malaria clinic in Guéckédou, close
Al
to the Liberian border, where the 36-year-old Guinean physician

Marie-Claire Lamah and her colleagues struggled to figure out what
was wrong. “When I arrived the mortality toll was between 80 and 90
od
percent,” Lamah told Le Nouvel Observateur. Villagers and health-care

workers could already see a pattern emerging, with the people who
cared for their ailing loved ones and prepared their bodies for burial being
the most likely to contract the mysterious disease. But the villagers con-
so
tinued to wash the cadavers, dress them in finery, ritually kiss and caress
the deceased to wish them well in the afterlife, and bury the dead, all
according to ancient traditions meant to ensure that angry spirits would
not return to haunt the families of the dead for failing to provide proper
Ma
entry for them to heaven. (People across the region later whispered to
me that they were more afraid of angering their ancestors than they
were of the disease.)
Meanwhile, near Guéckédou, a second line of transmission went un-
traced by health officials for weeks. It began, according to an investigation
by The New York Times, with a woman named Sia Wanda Koniono, who

Laurie Garrett
visited the Guéckédou area and died after returning to her home across
the border in Sierra Leone, on March 3. Although Guinean authorities
knew about Koniono’s death, they apparently made no attempt to
notify their Sierra Leonean counterparts. The second line of transmission
spread, unobserved, from Koniono’s funeral across a broad swath of
Sierra Leone and eventually into Liberia.
At this point, Gbanya knew nothing about Meliandou, the deaths in
Guinea, or the strange outbreak that had crossed into Sierra Leone.
What she did know was that all the doctors and nurses in Liberia were
m
demanding that she somehow raise enough funds to put everybody on
the payroll. Negotiations with health-care workers and their unions
broke down when Gbanya tried to explain how the pool fund worked
hi
and why she had enough money to pay only a quarter of them. “We
had many discussions with health workers,” Gbanya recalled. “But it’s
complex. They don’t get it.” So Liberia’s government health work force
ha
went on strike. Gbanya pleaded for understanding, and eventually the
disgruntled doctors, nurses, midwives, lab technicians, ambulance
drivers, hospital managers, and Ministry of Health personnel returned
iT
to work, tentatively accepting vague promises of future payment. But it
was a challenge. “I’m used to coping,” Gbanya told me last December,
shaking her head. “But from the moment of that health-care worker
crisis in February, we haven’t stopped. Not for one minute.”
Al
On March 12, 2014, Liberia’s traditional Decoration Day, Gbanya

joined thousands of fellow citizens to honor ancestors by festooning
their graves with flowers and memorabilia—not realizing the epidemic
od
had now crossed into Liberia, striking Foya, a town of 20,000 people in
Lofa County. A week later, Guinea’s top health officials released their
first official statement on the mysterious Meliandou outbreak, with the
Ministry of Health saying that 35 cases of a hemorrhagic ailment had
so
been confirmed. The statement made no mention of the Koniono case

or of evidence that infected individuals were crossing back and forth
across the porous borders between Guinea, Liberia, and Sierra Leone,
giving rise to the first multinational Ebola epidemic in history. A Health
Ma
Ministry spokesperson, Sakoba Keita, told local reporters that most

of Guinea’s victims had been in contact with dead bodies and suffered
“diarrhea and vomiting, with a very high fever. Some cases showed
relatively heavy bleeding.” He went on: “We thought it was Lassa fever
or another form of cholera but this disease seems to strike like lightning.
We are looking at all possibilities, including Ebola.”

Ebola’s Lessons
m
hi
ha
Handle with care: a health-care worker in Sierra Leone, December 2014
Finally, on March 23, the who announced that the cause of the
iT
outbreak had been conclusively identified as Ebola by France’s Institut
Pasteur. By then, the epidemic had already sickened many people in
Guinea’s capital city, Conakry, marking the first time in history that the
disease had spread to a metropolitan center with an international airport.
Al
On March 24, in Guéckédou, msf opened the first of what would

become several Ebola treatment centers and began calling for interna-
tional help to find and isolate infected individuals so as to stop the
od
outbreak. Because it had carried out such actions in Kikwit in 1995 and
for a dozen other Congo basin Ebola outbreaks since, the organization
was able to mobilize quickly. But little help was forthcoming. The who
reported that two suspected Ebola patients in Conakry had tested neg-
so
ative for the virus. But the next day, the organization acknowledged that
86 cases of the disease, including 59 deaths, had occurred in Guinea; that
labs in Europe had confirmed the presence of the Ebola virus in 13
samples; and that it was investigating rumored cases in Liberia and Sierra
Ma
Leone. At the same time, the Liberian Ministry of Health confirmed

R E U T E R S / BA Z R AT N E R
the country’s first Ebola cases. The next day, a who field investigator
sent a memo, later obtained by the Associated Press, to the who’s African
regional office, in Brazzaville, Congo, calling for urgent help, as “there is
evidence of cross-border transmission.” Then, on March 27, the who
issued health alerts for all of Guinea, Liberia, and Sierra Leone, as panic
Laurie Garrett
took hold in Conakry. On the last day of March, Senegal closed its bor-
ders with all three countries, foreign businesses began withdrawing their
expatriate employees, commercial air carriers started negotiations that
would lead to a cessation of services, and the eu made the first pledge of
international funds in response to the Ebola outbreak: $690,000.
By April 1, the number of cases in Guinea had jumped by almost
50 percent, to 122, with 80 deaths. Liberia now had eight confirmed
cases. The who mobilized protective equipment for health-care workers
in Conakry, but local health-care providers complained that what
m
they really needed was water, electricity, basic medical equipment, and
sanitation supplies, none of which were available. Air France began
quarantining flights from the region, and a mob attacked an msf treat-
hi
ment center in Macenta, Guinea, accusing the foreign doctors and nurses
of bringing the disease to Africa and forcing msf to abandon the clinic.
By mid-April, the who’s Global Outbreak Alert and Response
ha
Network (goarn) was overseeing 65 foreign epidemic experts working
in Guinea and Liberia, with some 220 cases of Ebola identified and 135
deaths. According to the Associated Press, in a frightening e-mail to the
iT
who’s headquarters in Geneva, a field investigator in Guinea called for
“a drastic . . . change [of] course,” warning that health-care workers were
“gripped by fear and panic. . . . We need to change strategy urgently.”
The who focused the international efforts on educating the Guinean
Al
population and rapidly isolating known cases, and by April 27, experts
both in Geneva and at the cdc’s headquarters in Atlanta were convinced
that the tide had been turned: case loads were falling, and the situation
od
appeared to be under control. The foreigners, with the exception of msf

and the missionary aid group Samaritan’s Purse, began to withdraw.
In Monrovia, Gbanya sighed with relief. She knew that some of the
health-care workers fighting the relatively few cases in Lofa County
so
were unpaid, and her pool fund budget had no flexibility to allow for an
unexpected catastrophe such as an epidemic. Sirleaf, who told me that
by that point she had been assured that the Ebola threat had passed, left
the country to attend international finance meetings, and officials inside
Ma
the Ministry of Health returned to business as usual. Retrospective

charts of Ebola cases in the spring of 2014 show a mid-March uptick,
followed by a plummet in early April, which the who and the cdc both
misinterpreted as the beginning of the end of the outbreak; in fact, it
was just a lull. The virus was lurking far from the watchful eyes of
health authorities, poised to precipitate the worst Ebola crisis in history.

Ebola’s Lessons
UNDER CONTROL
In Geneva, meanwhile, the who leadership was fixated on the organi-
zation’s annual World Health Assembly, coming up in May. The wha
is a one-country, one-vote legislature that governs the who, deciding
its budgets and key policy initiatives. Wha gatherings are typically
grueling affairs that everybody dreads, with delegates bickering over
obscure paragraphs in proposed resolutions at 3 am, as tiny nations
such as Kiribati or Paraguay have the same say as behemoths such as
China, India, and the organization’s major donors, the eu countries
m
and the United States. Weeks of preparation, including advance private
negotiations with key countries, are necessary to make sure anything
gets done, and there is even recurrent debate about the fundamental
hi
mission and role of the who.
Since its creation as part of the United Nations system in 1948, the
who has served as a clearinghouse for technical advice, providing mem-
ha
ber nations with guidance and expertise on everything from the dangers
of smoking and the safety of measles vaccines to health-care-financing
mechanisms and the sociopolitical determinants of heart disease. That
iT
alone would be more than enough for any entity to handle, but over the
years, the wha has pushed the organization to take on tough policy
positions as well. Countries in trouble want the who to mobilize the
world’s top technical expertise to vaccinate Syrian refugees, stop cholera
Al
in post-earthquake Haiti, erect emergency trauma centers across Typhoon

Haiyan–devastated Philippine islands, and so forth. But wha delegates

also insist on introducing countless resolutions on issues such as inter-
od
national recognition of Palestine and Taiwan, the banning of tobacco

and fast-food company employees from public health meetings, and sex
education, gay rights, and family planning.
Every wha has had political surprises, and the list of mandates is
so
always far in excess of the budgetary authority conferred to accomplish

them. The 2013 wha, for example, was sidetracked by an unexpected
outburst from the delegation from Saudi Arabia, which complained
about the patenting by a Dutch scientist of a sample of a new virus (mers).
Ma
The assembly descended into a frenzy of oration denouncing the pat-

enting of viruses, even though the issue, however ethically dubious, was
entirely irrelevant to the actual course of the virus’ spread inside Saudi
Arabia, which the kingdom’s scientists had done little to counter. Mean-
while, assembly delegates declined to raise revenues in order to address
a massive budget crisis, accelerating the who’s decline as a player on the

Laurie Garrett
global health stage relative to better-funded, more effective, and less po-
liticized institutions, such as the Global Fund; Gavi, the Vaccine Alliance;
the U.S. President’s Emergency Plan for aids Relief; and the Bill and
Melinda Gates Foundation. And they dramatically rearranged the who’s
priorities, shifting resources away from combating infectious diseases.
A year later, as staffers prepared for the 2014 wha, they were still
grappling with the consequences of the previous one, trying to fight a
raging Ebola epidemic in West Africa with a meager budget and scarce
personnel. More than 130 people had lost their jobs in goarn, leaving
m
the who with a skeleton crew of fewer than 35 outbreak fighters and
clerical support personnel. In Saudi Arabia, meanwhile, mers was
spreading out of control inside the country’s largest public hospital, its
hi
animal origins remained unclear, no point-of-care diagnostics existed to
quickly determine whom the virus had infected, and there were no cures
or vaccines available. And the virulent H7N9 bird flu was moving
ha
rapidly across mainland China, Hong Kong, and Taiwan.
Further compounding the organization’s problems were two internal
policy matters. Margaret Chan, the who’s director general, had recently
iT
won reelection, and to many observers, she seemed to defer too much
to national governments’ wishes and agendas, even when they were in
conflict with the organization’s primary mission. During Chan’s tenure,
which began in 2006, the who’s regional offices had gained power and
Al
autonomy at the expense of the organization’s central headquarters.

This was fine for those parts of the world with strong regional health-
care institutions, such as the Americas. But it was a disaster for a continent
od
such as Africa, whose regional who office had scant resources and a
poor reputation. Throughout the spring of 2014, as msf was trying to
draw attention to the worsening situation, reports from the who office
in Brazzaville were downright cheery. On April 25, for example, the
so
office reported that “overall, the epidemiological situation in Guinea

has improved significantly over the last few weeks.” A few weeks later,
the office issued a similar assessment: “The overall Ebola outbreak
in Guinea continues to improve.” These rosy views were echoed by
Ma
Guinean President Alpha Condé, who, during a visit to Geneva in early

May, vaguely commented to reporters that “there haven’t been any new
cases.” Owing in part to such reassurances, who and cdc officials
in Geneva and Washington concluded that the West African Ebola
epidemic was coming to an end.
Unfortunately, it wasn’t.

Ebola’s Lessons
OUT OF CONTROL
Msf officials were convinced that the decline in reported cases was a
product not of a fading epidemic but of a reluctance by local villagers
to engage with foreigners or national institutions. After the msf clinic
in Macenta was attacked by a mob on April 4, msf officials tried in
vain to get the who to change its mind about withdrawing. When
the 2014 wha convened in Geneva in late May, the Ebola epidemic
garnered only a smattering of references in speeches. It was not on the
agenda, and no resolutions were passed concerning it. As the delegates
m
conversed, however, the virus was continuing to spread across Guinea,
Liberia, and Sierra Leone, undetected by authorities for precisely the
reasons msf had identified: locals were not reporting their illnesses,
hi
and families were burying their dead in secret.
According to internal who documents obtained and published by
the Associated Press, a June 2 meeting of goarn team members in
ha
Geneva revealed a radically increased sense of urgency; one scientist on
the team noted that the West African countries were “overwhelmed
with outbreaks” and that “outbreak vigilance [was] down to a minimum.”
iT
Two days later, a who scientist suggested internally that it was time to
declare a public health emergency under the International Health
Regulations, an international legal framework that provides guidelines
to prevent the spread of infectious diseases. But in response, Sylvie
Al
Briand, the head of the Pandemic and Epidemic Diseases Department

at the who, said that the invocation of the ihr should be considered
only as “a last resort.” And a June 10 memo prepared for Chan by senior
od
who officials warned that invoking the ihr “could be seen as a hostile
act in the current context and may hamper collaboration between who
and the affected countries.” In contrast, in mid-June, the leaders of msf
declared the Ebola situation “out of control” and begged the world to
so
pay heed. According to a report that msf later published, some who
officials responded to those entreaties by accusing msf of exaggerating
the risk and encouraging panic.
In Liberia, Luke Bawo was heading up a small team in the Ministry
Ma
of Health tracking Ebola. “We thought we were down to zero back in

April—we couldn’t find any cases—but then the epidemic surged and
overwhelmed us,” he told me.
There was a lull, 21 days with no cases. Everybody let their guard down.
Then a Ugandan physician at Redemption Hospital [in Monrovia] got

Laurie Garrett
infected, and the minister of health called me and said, “We need your
help to manage data.” I had no idea what I was getting into. I read and
studied about Ebola, and I thought in 40 days it will go away. But that
did not happen with Ebola here—not like [in the past] in Uganda. And
then this Liberian guy [Patrick Sawyer] exported the virus to Nigeria,
and that woke the whole world up. Since then, I have been working
seven days a week, no holidays. I start calling all the counties at 8 pm,
until 10, maybe midnight. Catch a couple hours of sleep. And then up
at 5 am to prepare the [daily] situation report and have it ready to present
m
at 9 am. It’s never-ending.
Sirleaf took charge of her country’s response to the epidemic in

early June; she began, she told me, by begging for the cdc and the
hi
who to return. But the cdc’s leadership was preoccupied with a
succession of scandals back home involving inappropriately handled
samples of dangerous pathogens; Congress was investigating, and in
ha
July, the cdc temporarily shut down some of the labs where work on
the Ebola virus could have been carried out. Then came the long
European summer holidays and the monsoons in West Africa.
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With the rains came tremendous logistical challenges, as the coun-
tries in question have few paved roads outside of their capital cities.
On average, Monrovia gets 202 inches of rainfall annually, most of it
pouring down between June and October. (In contrast, moist Bangkok
Al
averages 55 inches, and Seattle, 33.) Many of Liberia’s poor roads are
transformed by rain into seas of mud, bringing transport to a near
standstill. Scattered reports from the hinterlands came into Monrovia
od
indicating that Ebola was spreading out of control, and by mid-July,

its presence in the capital itself was undeniable as patients turned up
in local hospitals and beloved doctors and nurses perished. Their
losses, in a country of so few skilled health-care workers, “felt like a
so
stab in our hearts,” Gbanya told me. “July, August, September—hoo!

We lost the best we had. We spent a lot of nights crying and a lot of
mornings saying, ‘We must go ahead.’ Even at the ministry, there
were days when we were just too worried. There were dead bodies
Ma
everywhere! Our phones never stopped ringing. Ambulances all

night! For eight months, none of us has slept.”
Ministry of Health Ebola meetings, usually attended by the president
herself, became deeply emotional. “There were days we used to sit
around the table and couldn’t find a way out,” Gbanya said. At one such
meeting, on July 22, a young man shouted at Sirleaf, accusing her of

Ebola’s Lessons
running a government that had denied hospital care to his dying relative.
The next day, the man returned and set off a firebomb inside the confer-
ence room, destroying computers that stored valuable information and
sending terrified staff scrambling. It would be one of many violent
episodes in Monrovia—and Conakry and Freetown—spawned by fear
and rage among populations unable to comprehend why their govern-
ments could not stop the plague.
NOTHING TO SEE HERE
m
On July 20, an American financial consultant to the Liberian govern-
ment, Patrick Sawyer, flew from Monrovia to Lagos, unintentionally
taking Ebola to Nigeria. In response, Sirleaf ordered most of the
hi
country’s borders sealed and banned its diplomats from traveling
abroad. The Sawyer case elevated the Ebola crisis on the international
agenda, prompting some major airlines to cancel flights to Guinea,
ha
Liberia, and Sierra Leone and leading a number of countries, including
France, Germany, and the United States, to issue travel warnings
advising their citizens to stay away. The Ebola-hit countries descended
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into a period of almost complete economic and political isolation from
the rest of the world, one that continues today.
Still, the who declined to declare an emergency. An expert panel of
advisers told the Geneva headquarters in July that it would be wrong to
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divert scarce medical resources in the three impoverished countries to

the Ebola crisis. “If you want to blame somebody for this epidemic,
blame me. It was my mistake,” the statistician and doctor Hans Rosling
od
later told me, speaking so earnestly that his voice broke. A leading
analyst of global health trends at Sweden’s Karolinska Institute and a
member of the expert panel, Rosling argued in July that a diversion of
scarce national health talent in the three nations to address the “small
so
problem” of Ebola would doom a far larger number of people in the

countries to die of the greater threats of malaria, pregnancy complications,
diarrheal diseases, and bacterial infections. Rosling was persuasive—
although hardly alone in making an argument that echoed claims made
Ma
by the who in the 1980s regarding the relative importance of aids versus
other diseases. (Unlike others who offered the same advice, Rosling later
recognized his terrible mistake as the number of Ebola cases skyrocketed
throughout the summer and volunteered to do penance, working beside
Bawo, the Liberian Health Ministry official, for three months, counting
Liberia’s sick and dead.)

Laurie Garrett
By the first week of August, overstuffed hospitals were turning away

patients and corpses were being left unattended on the streets of
Monrovia. On August 6, Sirleaf declared a national state of emergency,
calling on her people to fast and pray
from 6 am to 6 pm for three days: “Rely-
“If you want to blame ing on his divine guidance for our sur-
somebody for this epidemic, vival as a nation,” she said, “I call on
blame me. It was my all Liberians to observe three days of
mistake,” the statistician national fast and prayer to seek God’s
m
face, to have mercy on us and forgive
Hans Rosling said. our sins and heal our land.” Given the
dire situation, Sirleaf decided not to
hi
attend U.S. President Barack Obama’s U.S.-Africa Leaders Summit
later that month in Washington, sending in her place Liberian Vice
President Joseph Boakai and relying to some extent on the U.S. ambas-
ha
sador to Liberia, Deborah Malac, to be an advocate for her views. Malac
told me that she tried to raise alarms within the Obama administration
and Congress about the crisis. But despite her efforts, the subject took
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a back seat to economic development during the summit—this despite
the fact that two American aid workers had contracted the disease in
Liberia and were undergoing experimental treatments in the United
States, causing considerable American media hysteria.
Al
It was not until August 8 that the who declared the Ebola situation
a “public health emergency of international concern,” an official desig-
nation previously invoked in 2009 in reference to the H1N1 swine flu.
od
But by then, Rosling’s fears had ironically been borne out: routine
health care had collapsed in all three affected countries, and even minor
medical complications, in childbirth, car accidents, and simple falls,
were proving lethal.
so
By that point, the epidemic was of such staggering proportions, and

the panic it was producing so great, that Guinea, Liberia, and Sierra
Leone seemed on the edge of collapse. Riots broke out, bodies were
hidden, health-care workers were attacked, and food supplies dwindled.
Ma
In an interview with National Public Radio, Lindis Hurum, msf’s

emergency coordinator in Liberia, said, “We’ve reached our limit. . . .
We certainly have the motivation, but I don’t have enough people to
deal with this.”
Un Secretary-General Ban Ki-moon, seeming to have lost faith in
the who, appointed David Nabarro as the un’s special envoy on Ebola

Ebola’s Lessons
and sent him to assess the situation in the Ebola-stricken region.

Nabarro later told me it was one of the gravest situations he had
ever witnessed. He set to work mobilizing resources and institutions
to stop the epidemic. He initially reckoned that a successful effort
would cost at least $600 million.
Frieden, the cdc’s director, also visited the region, in late August,
telling Obama on his return that the epidemic was even worse than he’d
feared. On September 1, Sirleaf went on cnn, pleading for help: “Our
health delivery system is under stress. . . . It could easily become a
m
global crisis. . . . We need that hope; we need that assistance. We need
for the Liberians to know that this war can be won.” The next day,
Liberian health-care workers went on strike again, this time arguing
hi
that physicians, nurses, ambulance drivers, and other health-care
employees should be receiving extra hazard and overtime pay. Msf’s
international president, Joanne Liu, spoke at a un briefing that day and
ha
placed the situation in stark relief. “To curb the epidemic, it is impera-
tive that states immediately deploy civilian and military assets with
expertise in biohazard containment,” she said. “We cannot cut off the
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affected countries and hope this epidemic will simply burn out. To put
out this fire, we must run into the burning building.”
Gbanya turned to her donors, she told me, and begged them to
increase their support for the Health Sector Pool Fund, pleading in
Al
vain with the World Bank and the who. There were murmurs that
Monrovia’s large soccer stadium ought to simply be filled with cots
and all those suspected of being infected with Ebola loaded inside.
od
Distraught Ministry of Health staff members worked relentlessly,

took catnaps in their offices, and attended funerals. “I was so sad; every-
body was so sad,” Gbanya recalled. “We just cried and cried every day
and then tried to go on working. Just cry, and push on, cry, and push
so
on.” Soon, the very people leading Liberia’s Ebola fight were suffering
losses in their own families and among their staffs, and a sort of mass-
scale traumatic shock hit the nation’s leadership.
In the middle of all of this, Sirleaf summoned Gbanya and told her
Ma
that the whole country was listening to the striking workers’ complaints
about corruption and conspiracies, and so she needed to explain to the
public just how the pool fund worked. After hearing an hour of
details about its operations and shortfall, Gbanya recalls, the president
shook her head sadly and said that the situation was too complex
and depressing for people to accept. So Sirleaf dropped the idea of

Laurie Garrett
mass public education about the fund and instead went to hospitals
and Ebola treatment centers herself and begged medical workers to
stay on the job for the good of the nation.
NOT IN MY BACKYARD
On September 16, Obama announced his decision to deploy around
3,000 U.S. military personnel to West Africa to fight the epidemic
and committed $750 million to the effort. On a visit to the cdc’s
headquarters, Obama pledged a series of additional commitments
m
from Washington, pointedly adding, “But this is a global threat, and
it demands a truly global response. International organizations just
have to move faster than they have up until this point. More nations
hi
need to contribute experienced personnel, supplies, and funding
that’s needed, and they need to deliver on what they pledge quickly.
Charities and individual philanthropists have given generously, and
ha
they can make a big difference.”
It was the middle of September when the world finally began to
reckon with the reality of what was happening in West Africa. The un
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Security Council declared Ebola an international threat, the General
Assembly echoed the cry the next day, and the cdc released a forecast
predicting exponential growth to more than a million cases by February
absent major international intervention. The World Bank and the White
Al
House pressured countries around the world to pony up resources; the

un estimated the costs of stopping the epidemic at just under $1 billion
and created a new Ebola task force, unmeer; and according to a report
od
in The New York Times, the World Bank’s president, Jim Yong Kim,
chastised Chan for the who’s failed response during a meeting of
international health officials at the bank’s headquarters. (Through a
who spokesperson, Chan declined a request to be interviewed for
so
this article.)
The first small U.S. Army team arrived in Liberia on September 17
to assess the situation; hundreds more U.S. military personnel would
arrive in October, and a field hospital dedicated to the care of health-
Ma
care workers themselves would open in early November. In Sierra

Leone, the British military mobilized, deploying at about the same time
as the U.S. Army did in Liberia. Both built elite-care Ebola treatment
facilities. But the U.S. Army’s facilities went operational only after
Liberia’s epidemic had started winding down, and most received no
patients. The Sierra Leone epidemic, in contrast, lagged months behind

Ebola’s Lessons
Liberia’s, and British forces saw many Ebola patients, including at least
one from their own ranks. Unmeer, meanwhile, put its first official
boots on the ground in the region on September 29, coordinating
humanitarian activities akin to those executed by un agencies during
famines and after natural disasters.
While all of this was happening, however, attention in the West
shifted away from Africa and toward the enemy within. On September
24, a Liberian man named Thomas Duncan came down with Ebola
while visiting his fiancée in Dallas, Texas, and soon two of Duncan’s
m
attending nurses were infected. (Duncan died on October 8; both
nurses were eventually cured.) A nurse in Spain, meanwhile, contracted
the disease from a patient who had been brought home from Africa for
hi
treatment, showing that both the United States and Europe were
potentially at risk. The reaction was swift and hysterical, with a host of
prominent Americans issuing calls to ban travelers from the three Ebola-
ha
afflicted countries and self-proclaimed experts warning about the
possibility that the virus might be able to spread through the air. Ebola
coverage became a staple of cable television and talk radio and even
iT
figured prominently in the U.S. midterm elections (as a telling sign of
the global chaos supposedly sparked by Obama’s foreign policy failures).
African observers hardly knew what to think. “We were saddened
by the reaction in America,” Sirleaf later told me. “We understand
Al
the fear. We live with fear. But the risk was minimal [for Ameri-
cans].” To put the world reaction in perspective, on September 28,
when the Liberian epidemic was at what later proved to be its peak,
od
Twitter users were posting Ebola-related messages at the rate of

about a few dozen per minute. In the days after Duncan was officially
diagnosed, on September 30, the rate rose to around 6,300 messages
per minute.
so
Ironically, it was during just this period that Liberia’s epidemic started
to abate. Many factors played a role in defeating it, including a remark-
able U.S. mobilization; great improvements in laboratory testing and
diagnostic speed; the construction of Ebola treatment units, which
Ma
allowed infected individuals to be isolated; and the virtual elimination

of unsafe burials and the imposition of mandatory cremations. But
officials in the Sirleaf government repeatedly acknowledged actions taken
by the Liberian citizenry at large. “We need to give credit to the public
for what has been done,” one of Sirleaf’s political advisers, Emmanuel
Dolo, told me. “And we have to say that we cannot let that go.”

Laurie Garrett
For example, rural communities realized that Ebola was coming from
outsiders, especially villagers returning from Monrovia and other big
cities. So without any push from the government, communities took
matters into their own hands, setting up temporary isolation places
(usually designated houses or sheds), in which they ordered visitors and
returnees from the cities to be quarantined. After months of struggling
with traditional burial practices, rural residents began bringing their
dead to authorities. And the Liberian Ministry of Health deployed an
army of thousands of contact tracers—young men and women hired
m
temporarily to track down all known associates of confirmed Ebola
patients and fatalities. In local villages, I found village chiefs taking
control: ordering families to bring out their sick and dead, commanding
hi
safe burials, and searching for ways to feed quarantined households.
When I visited the Liberian town of Jene-Wonde, nestled along the
border with Sierra Leone, the chief was ordering young men to dig a
ha
well and build a fence to enclose a newly refurbished clinic, made of
wattle and thatch. Chebe Sano, a middle-aged woman with a quiet,
commanding presence, was the chief of the roughly 700 residents and
iT
led the creation of a three-room Ebola community care center, designed
to house a dozen people in quarantine. Sano didn’t wait for the Liberian
government or a group of nonexistent doctors to take action. She knew
that her people’s plague could be stopped only if the infected were
Al
separated from the rest of the population. With advice from a handful
of the cdc’s Epidemic Intelligence Service officers, Sano simply took
tough quarantine steps that eventually stopped Jene-Wonde’s horror.
od
“It is the communities in Liberia that turned this around. The thing
that kept us going,” Gbanya explained to the wha in Geneva in May 2015,
“is we knew, we need to do the best we can to save Mama Liberia.” But
she admonished the delegates from 194 nations to maintain international
so
vigilance. “It’s not over until it’s over in our sister countries, Guinea and
Sierra Leone,” she said. “When a disease hits your neighbor’s front
door, be aware that it can come to your backdoor.”
Ma
WHO NEEDS THE WHO?

The who performed so poorly during the crisis that there is a question
of whether the world actually needs it. The answer is yes, it does—but
in a revised form, with a clearer mandate, better funding, more com-
petent staff, and less politicization. The agency should be clearly at
the apex of the global health architecture, not jockeying for command

Ebola’s Lessons
of epidemic response with other organizations, as happened last year.

But with power comes responsibility, and the who needs to merit its
position, not simply assume it. If the who is going to remain the
world’s central authority on global health issues—which it should,
because there needs to be one, and it
has the most legitimate claim to per-
form such a role—it needs to concen-
The WHO performed so
trate on its core competencies and be poorly during the crisis that
freed from the vast array of unrealistic, there is a question of
m
unprioritized, and highly politicized whether the world actually
mandates that its member states have
imposed. Rather than wasting resources needs it.
hi
duplicating the responsibilities and
expertise of other agencies, it should scale back to providing technical
expertise and advice in areas such as tuberculosis, malaria, hiv/aids,
ha
and child immunizations. And although the World Bank offers finan-
cial backing and advice on many programs having to do with health,
its own expertise is primarily about money: it should not be competing
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with the who on providing guidance for handling outbreaks of infec-
tious diseases but rather be helping finance the measures a competent
who argues are necessary. Ban, the un secretary-general, should
convene private meetings with the leaders of the World Bank, the who,
Al
and several dozen other relevant agencies and institutions to develop

plans for a more coherent and efficient response to future epidemics.
This year’s wha was obsessed with trying to learn lessons from the
od
crisis and featured a great deal of questioning of the who’s basic credibil-
ity, given the organization’s inadequate response. It may not represent
an existential crisis, but as the former Oxfam chief executive Barbara
Stocking told the gathering, it is surely the who’s “defining moment.”
so
Stocking is chair of the Ebola Interim Assessment Panel, which Chan

created to offer an objective appraisal of the organization’s response to
the outbreak. If the director general had hoped for a mild rebuke, she
must have been sorely disappointed. In July, the panel published its final
Ma
report; it was devastating.

The Ebola outbreak revealed, Stocking’s panel concluded, that the
who was incapable of responding to emergencies in a timely fashion
and lacked the credibility to enforce the ihr, its own instrument. The
who’s leadership was alarmingly slow to respond to the unfolding crisis,
the panel reported, because the organization “does not have a culture of

Laurie Garrett
rapid decision-making and tends to adopt a reactive, rather than a pro-

active, approach to emergencies.” The panel lamented that senior who
officials failed to adequately react to warnings of the outbreak’s growing
seriousness that they received from within the organization and from
outside sources, especially msf. “Who must re-establish its pre-eminence
as the guardian of global public health; this will require significant changes
throughout who,” the panel’s report stated. It went on to recommend 21
major reforms, affecting nearly every aspect of the organization, including
strengthening goarn, significantly increasing funding to improve the
m
ability of member countries to respond to disease emergencies, and
placing all of the who’s disparate emergency-response units into a single
chain of command.
hi
The who’s executive board, meanwhile, had delivered its own harsh
critique of the agency back in January. There is a “clear gap in the who’s
mission and structure,” it stated, with “no clear lines of decision-making
ha
or dedicated funding in place [leading to] a slow, uncoordinated
response to the Ebola outbreak.” Not only did the who fail to implement
the ihr in a timely fashion, the executive board concluded, but it also
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did too little to prevent nations from taking steps in violation of the ihr
that isolated and stigmatized the affected countries. At the height of the
crisis, most other African countries banned people from and trade with
Guinea, Liberia, and Sierra Leone; Australia and Canada declined all
Al
visa requests from the region; all but two commercial air carriers and all
airfreight services ceased flights to the area; and insurance companies
declined to pay for air rescue services. All such actions were in violation
od
of the ihr, yet the who appeared powerless and inept in response, unable
to enforce its own regulations.
The executive board’s and the assessment panel’s reports both insist
that epidemic prevention should be the core function of the who: if the
so
agency cannot credibly lead in a disease crisis, it might not merit donor
support. But as msf’s Liu said on the sidelines of an Ebola meeting in
Dakar in June, “The reality today is if Ebola were to hit on the scale it
did in August and September, we would hardly do much better than we
Ma
did the last time around.”

In response to the assessment panel’s report, the who issued a
statement claiming that it was “already moving forward on some of
the panel’s recommendations.” A few days later, I spoke with Bruce
Aylward, a who assistant director general who was deeply involved
in the Ebola response and who distinguished himself as one of the

Ebola’s Lessons
first members of the senior leadership to realize that the organiza-

tion’s response was lagging. Aylward acknowledged the validity of
many of the complaints lodged by the executive board and the assessment
panel but argued that many of the who’s critics fail to appreciate
just how difficult a position the who is in and underestimate how
much the organization relies on buy-in and consensus from its
member states. “I think the issue is, what is the purpose [of the
who]? And are the member states in agreement on that purpose?
Where do they want the organization to land?” he said. “We’re in an
m
extremely dangerous position, being pressured to make incremental
changes until member states are assuaged, but not so much change
that the organization, internally, revolts.” But he conceded that the
hi
who “has got to evolve, to be more than a mere technical organiza-
tion. It must be a health emergency manager.”
That idea is now the subject of heated debate among global health
ha
experts and policymakers. Some argue that the who cannot credibly
fulfill its role as an emergency manager. But no one has identified an
alternative agency that could realistically take on the job. The only way
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the who can hope to do so is by enlarging goarn and expanding its
mandate, allowing it to operate as a semiautonomous unit that controls
its own budget, overseen by an independent governing board and
protected by a firewall separating its science-based decisions from the
Al
vagaries of international politics.

Another important step the who should take is to plan for a
competent, quickly deployable, international volunteer medical corps.
od
Composed of doctors, nurses, lab technicians, epidemiologists, and

other professionals necessary for handling a humanitarian crisis,
such a corps should be voluntary and multinational, with thousands
of trained and registered people ready to be summoned into service
so
on short notice when the next emergency arises. When crises are so
obviously recurring and predictable, there is simply no reason that
each one should be met with a similarly ad hoc, uncoordinated,
amateurish response, sluggish when it matters most and panicked
Ma
when problems have already escalated.

Even were such a corps to exist, however, it would still need to get to
the crisis quickly, something that is a much greater problem than most
people realize. As soon as the Ebola epidemic was confirmed, the only
air travel of any kind between the affected countries was provided by
the un Humanitarian Assistance Service, which was available only to

Laurie Garrett
un agencies and authorized others. Under the 1944 Convention on

International Civil Aviation, sovereign states may close their airspace
due to adverse conditions such as bad weather or conflict, and airlines
may cancel flights for their own marketing or risk-assessment ration

ales. The convention offers no means for a sovereign state to compel
airlines to service it, nor for an airline to override an airspace closure.
The International Civil Aviation Organization should revisit these
issues, paying special attention to encouraging airlines to maintain
reasonable services to countries facing health crises.
m
As a result of these difficulties with air travel, it was hard for people
and supplies to get to the epidemic and practically impossible to coor-
dinate responses across all three countries. Medical volunteers from the
hi
developed world who tried to help out, meanwhile, found themselves
discriminated against by airlines or subject to mandatory quarantines
when they tried to come home, which was not only unfair but also a
ha
clear deterrent to such help, rather than the facilitation and support of
it that the situation required.
The who and the U.S. State Department, accordingly, should figure
iT
out how to ensure that such problems do not arise in future crises. Among
other things, this will mean scrutinizing the air transport agreements the
cdc has with commercial carriers for the emergency transport of per-
sonnel, supplies, and dangerous microbe samples. The world cannot rely
Al
on standard market operations to proceed as usual during a crisis, and

so authorities need to lock in appropriate arrangements beforehand.
Another area requiring advance attention is the availability and use
od
of experimental medicines, vaccines, and rapid diagnostic tools. All

three were lacking during the recent crisis, even though promising
drugs, immunizations, and point-of-care instant diagnostics are in vari-
ous stages of development. The who’s innovation team has been bogged
so
down for months in ethics debates and arguments over how vaccine
trials might be properly executed, and with the epidemic waning, it
is possible that nothing will actually get into field trials in time to be
tested against actually existing Ebola. Together with the pharmaceutical,
Ma
scientific, medical ethics, and biotechnology communities, the who

should create policy templates for future rapid action—now, before the
next crisis hits, rather than being forced to deal with such matters in the
heat of the moment.
In the end, the world must come to grips with the fact that future
epidemics are not just likely but also inevitable and prepare to deal with

Ebola’s Lessons
them more effectively. As Nabarro, the un’s special envoy on Ebola,

recently put it to me, “There will be more: one, because people are
moving around more; two, because the contact between humans and
the wild is on the increase; and maybe because of climate change. The
worry we always have is that there will be a really infectious and beastly
bug that comes along.”
Some major authorities have argued that the real problem is
less epidemic response than the availability of basic public health
programs—that the Ebola crisis would never have developed to
m
catastrophic proportions if Guinea, Liberia, and Sierra Leone had
universally accessible health-care systems. This is simply not true.
Good health care should indeed be considered a basic human right,
hi
but even if it were available everywhere, outbreaks of strange new
diseases and viruses would still occur—just look at sars in Toronto
and Singapore in 2003, mrsa and other drug-resistant bacterial
ha
diseases in hospitals across the United States today, and mers in
Saudi Arabia, to name a few.
On the other hand, there is simply no question that the problems
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Gbanya and her colleagues have had to grapple with go well beyond
crisis response. The health-care systems of Guinea, Liberia, and Sierra
Leone were in terrible shape before the Ebola epidemic struck, and
they will be in worse shape after the epidemic has passed, having lost a
Al
significant number of health-care professionals to the disease. Across

Liberia now stand empty Ebola treatment units that are little more
than tented wooden platforms wrapped in plastic sheets. With the
od
return of the rainy season this summer, those expensive emergency

isolation facilities will be washed away, leaving no permanent improve-
ment in local medical systems.
“A weak health system was struggling before Ebola,” Gbanya told
so
me. “After Ebola, health-care service delivery will be difficult. And the
costs will be three times as high. Why? Because of all the protective
equipment, all the training, the emergency-response system. At this
stage, we have the opportunity to think what sort of investment can
Ma
equal medium-term improvement in Liberia. We’re not going to have

a country anymore if we keep getting Ebola.” And so it comes back to
money. The world will get what it pays for—and right now, that is not
very much.∂

Restoring America’s
Strength
My Vision for U.S. Foreign Policy
m
Marco Rubio
A
hi
merica’s status as the greatest and most influential nation on
earth comes with certain inescapable realities. Among these are
an abundance of enemies wishing to undermine us, numerous
ha
allies dependent on our strength and constancy, and the burden of
knowing that every choice we make in exercising our power—even
when we choose not to exercise it at all—has tremendous human and
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geopolitical consequences.
This has been true for at least 70 years, but never more so than
today. As the world has grown more interconnected, American
leadership has grown more critical to maintaining global order and
Al
defending our people’s interests, and as our economy has turned

from national to international, domestic policy and foreign policy
have become inseparable.
od
President Barack Obama has failed to recognize this. He entered

office believing the United States was too engaged in too many places
and that globalization had diminished the need for American power. He
set to work peeling back the protective cover of American influence,
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stranding our allies, and deferring to the whims of nefarious regional

powers. He has vacillated between leading recklessly and not leading
at all, which has left the world more dangerous and America’s interests
less secure.
Ma
It will take years for our next president to confront the residual
effects of President Obama’s foreign and defense policies. Countering
the spread of the self-declared Islamic State, for example, will require
a broadened coalition of regional partners, increased U.S. involvement
MARCO RUBIO is a Republican Senator from Florida and a candidate for the Republican
presidential nomination.
Restoring America’s Strength
m
hi
ha
Marco Rubio in Athens, Georgia, May 2015
in the fight, and steady action to prevent the group’s expansion to
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other failed and failing states. Halting Iran’s regional expansionism
and preventing its acquisition of a nuclear weapon will demand equal
urgency and care.
The Middle East, however, is far from the only region with crises.
Al
Russia’s invasion of Ukraine, Beijing’s attempts to dominate the South

China Sea, resurgent despotism in South America, and the rise of
new threats—from devastating cyberattacks to challenges in space—
od
will all require the careful attention of America’s next president.

Each challenge will be made more difficult by President Obama’s
slashing of hundreds of billions of dollars from the defense budget,
which has left the U.S. Army on track to be at pre–World War II
so
levels, the U.S. Navy at pre–World War I levels, and the U.S. Air Force
with the smallest and oldest combat force in its history. Our next
president must act immediately on entering office to begin rebuilding
these capabilities.
Ma
Physical strength and an active foreign policy to back it up are a

D AV I D G O L D M A N / A P
means of preserving peace, not promoting conflict. Foreign involve-

ment has never been a binary choice between perpetual war and passive
indifference. The president has many tools to advance U.S. interests,
and when used in proper balance, they will make it less likely that force
will ever be required and will thus save lives rather than cost them.

Marco Rubio
My foreign policy would restore the post-1945 bipartisan presidential

tradition of a strong and engaged America while adjusting it to
meet the new realities of a globalized world. The foreign policy
I propose has three pillars. Each can be best described through an
example of a challenge we face in this new century, but they all
reveal the need for all elements of American power—for a dynamic
foreign policy that restores strength, promotes prosperity, and
steers the world toward freedom.
m
A STRATEGY OF STRENGTH
The first and most important pillar of my foreign policy will be a
renewal of American strength. This is an idea based on a simple truth:
hi
the world is at its safest when America is at its strongest. When
America’s armed forces and intelligence professionals, aided by our
civilian diplomatic and foreign assistance programs, are able to send
ha
a forceful message without firing a shot, the result is more peace, not
more conflict. Yet when the United States fails to build or display such
strength, it weakens our global hand by casting doubt on our ability
iT
and willingness to act. This doubt only encourages our adversaries to
test us.
The Obama administration’s handling of Iran has demonstrated this
with alarming clarity. Tehran exploited the president’s lack of strength
Al
throughout the negotiations over its nuclear program by wringing

a series of dangerous concessions from the United States and its
partners, including the ability to enrich uranium, keep the Arak and
od
Fordow nuclear facilities open, avoid admitting its past transgressions,

and ensure a limited timeline for the agreement.
How did a nation with as little intrinsic leverage as Iran win so
many concessions? Part of the answer is that President Obama took
so
off the table the largest advantage our nation had entering into the
negotiations: military strength. Although the president frequently
said that “all options are on the table” with regard to Iran, his admin-
istration consistently signaled otherwise. Several senior officials openly
Ma
criticized the notion of a military strike, and the president himself

publicly said that there could be no military solution to the Iranian
nuclear program. This was underscored by a historic reluctance to
engage throughout the Middle East, from pulling troops out of Iraq
at all costs to retreating from the stated redline on the use of chemical
weapons in Syria.

President Obama became so publicly opposed to military action

that he sacrificed any option that could have conceivably raised the
stakes and forced the mullahs into making major concessions. Iran
recognized that it could push for greater compromise without fear
that the United States would break off the talks. The president’s drive
for a deal caused him to forsake a basic principle of diplomacy with
rogue regimes: it must be backed by the threat of force. As president,
I would have altered the basic environment of the talks. I would have
maneuvered forces in the region to signal readiness; linked the nuclear
m
talks to Iran’s broader conduct, from its human rights abuses to its
support for terrorism and its existential threats against Israel; and
pressured Tehran on all fronts, from Syria to Yemen.
hi
It is true that Iran, in response to these displays of strength, may
have broken off negotiations or even lashed out in the region. History,
however, suggests that even if Iran had created more trouble in the
ha
near term, increased pressure would have eventually forced it to back
down. That is exactly what happened in 1988, when Iran ended its war
with Iraq and its attacks on oil tankers in the Persian Gulf after the
iT
Reagan administration sent in the U.S. Navy. More recently, after
the 2003 U.S. invasion of Iraq, Iran halted a key component of its
nuclear program.
It’s not too late to mitigate the damage of the administration’s
Al
mishandling of Iran. By rescinding the flawed deal concluded by

President Obama and reasserting our presence in the Middle East,
we can reverse Iran’s malign influence in this vitally important region
od
and prevent Iran from developing nuclear weapons. The security of

the region, the safety of Israel, and the interests of the entire world
require an American approach toward Tehran marked by strength
and leadership rather than weakness and concession.
so
OPEN FOR BUSINESS

The second pillar of my foreign policy is the protection of an open
international economy in an increasingly globalized world. Millions
Ma
of the best jobs in this century will depend on international trade that
will be possible only when global sea-lanes are open and sovereign
nations are protected from the aggression of larger neighbors. Thus,
the prosperity of American families is tied to the safety and stability
of regions on the other side of the world, from Asia to the Middle
East to Europe.

Marco Rubio
That is why Russia’s violation of Ukrainian sovereignty is much

more than a question of where lines are drawn on the maps of eastern
Europe. Russia’s annexation of Crimea and efforts to sow instability
in eastern Ukraine were sparked, in no small part, by the decision of a
sovereign Ukrainian government to seek closer political and economic
ties with the European Union and the West.
Russia’s actions are a historic affront to the post–World War II
global order on which the global economy depends, and they set a dis-
turbing precedent in a world of rising powers with surging ambitions.
m
Our halting and meager response sends a message to other countries
that borders can be violated and countries invaded without serious
consequences. The threat of this precedent is profound. America
hi
should never have to ask permission from a regional power to con-
duct commerce with any nation. We cannot allow the world to be-
come a place where countries become off-limits to us as markets and
ha
trading partners because of violence, uncertainty, or the blustering
threats of an autocratic ruler.
Russia’s actions are emblematic of a larger global trend. From the
iT
Strait of Hormuz to the South China Sea, authoritarian states
increasingly threaten recognized borders and international waters,
airspace, cyberspace, and outer space as a means of gaining leverage
over their neighbors and over the United States. Since the end of World
Al
War II, the United States has prospered in part because it guarded
those critical pathways, and U.S. engagement has a distinguished re-
cord of increasing the well-being of other countries, from Germany
od
and Japan to South Korea and Colombia. By failing to maintain this

devotion to protecting the lanes of commerce, the Obama administra-
tion has exposed international markets to exploitation and chaos.
As president, I will seek to restore Ukrainian sovereignty by
so
providing greater military assistance to Kiev, including weapons, and

by expanding the training of Ukrainian troops. While the president’s
sanctions to date have been a good first step, I will also work closely
with our European allies to impose additional sanctions on Russian
Ma
entities, including the Russian oil giant Gazprom and its senior lead-
ership, and to restrict Russian access to the Society for Worldwide
Interbank Financial Telecommunication, or swift, payment system.
I will also isolate Russia diplomatically, expanding visa bans and
asset freezes on high-level Russian officials and pausing cooperation
with Moscow on global strategic challenges. The United States should

also station U.S. combat troops in eastern Europe to make clear that
we will honor our commitments to our nato allies and to discourage
further Russian aggression.
If that support is coupled with more robust support for the
Transatlantic Trade and Investment Partnership and a willingness
to leverage America’s newly gained status as a leader in oil and natural
gas by lifting the ban on U.S. exports, we can help guard our European
allies from Russia’s attempts to use trade and energy dependence as
a weapon. This will also assist our efforts to help Ukraine’s leaders
m
modernize and reform their economy and ultimately consolidate
their independence from Moscow.
By preserving Ukraine’s freedom and demonstrating that the
hi
United States will not tolerate such threats to the global economy,
the United States can begin to deter other potential aggressors from
bullying their neighbors, including an increasingly ambitious China.
ha
DEFENDING FREEDOM
Our approach to China in this century relates to the last pillar of
iT
my foreign policy: the need for moral clarity regarding America’s
core values. Our devotion to the spread of human rights and liberal
democratic principles has been a part of the fabric of our country
since its founding and a beacon of hope for so many oppressed
Al
peoples around the globe. It is also a strategic imperative that requires

pragmatism and idealism in equal measure.
Members of the Obama administration have signaled a disturbing
od
willingness to ignore human rights violations in the hope of appeas-

ing the Chinese leadership. In the administration’s early days in 2009,
Secretary of State Hillary Clinton warned that human rights “can’t
interfere” with other ostensibly more important bilateral issues, and
so
in the months before Xi Jinping ascended to China’s top leadership

post in 2012, Vice President Joe Biden told him that U.S. support for
human rights was merely a matter of domestic political posturing.
As we have fallen silent about the true nature of the Chinese Com-
Ma
munist Party, the Chinese government has stymied democratic efforts in

Hong Kong, raided the offices of human rights organizations, arrested
scores of activists, redoubled its efforts to monitor and control the
Internet, and continued repressive policies in Tibet and other Chinese
regions, all while rapidly expanding its military, threatening its neigh-
bors, establishing military installations on disputed islands, and carrying

Marco Rubio
out unprecedented cyberattacks against America. China’s actions reveal

a basic truth: the manner in which governments treat their own citizens
is indicative of the manner in which they will treat other nations.
Beijing’s repression at home and its aggressiveness abroad are two
branches of the same tree. If the United States hopes to restore stability
in East Asia, it has to speak with clarity and strength regarding the
universal rights and values that America represents.
The best way for the United States to counter China’s expansion
in East Asia is through support for liberty. The “rebalance” to Asia
m
needs to be about more than just physical posturing. We must stand for
the principles that have allowed Asian economies to grow so rapidly
and for democracy to take root in the region. Only American lead-
hi
ership can show the Chinese government that its increasingly
aggressive regional expansionism will be countered by a reinforce-
ment of cooperation among like-minded nations in the region.
ha
As president, I will strengthen ties with Asia’s democracies,
from India to Taiwan. Bolstering liberty on China’s periphery can
galvanize the region against Beijing’s hostility and change China’s
iT
political future. I will also back the Chinese people’s demands for
unrestricted Internet access and their appeals for the basic human
right of free speech. I will engage with dissidents, reformers, and
religious rights activists, and I will reject Beijing’s attempts to
Al
block our contacts with these champions of freedom. I will also

redouble U.S. support for the Trans-Pacific Partnership and ensure
that, once the trade deal is concluded, additional countries are able
od
to join, expanding the creation of what will be millions of jobs here

at home as well as abroad.
China will likely resist these efforts, but it is dependent on its
economic relationship with the United States and, despite angry
so
outbursts, will have no choice but to preserve it. President Ronald

Reagan proved through his diplomacy with the Soviet Union that
having a productive relationship with a great power and insisting
on that power’s improvement of human rights are not conflicting
Ma
aims. If the United States can pursue this agenda with China even
as it continues its economic engagement, it will demonstrate that
America remains committed to the cause of freedom in our time. I
believe that when true freedom for the 1.3 billion people of China
is finally attained, the impact will fundamentally change the course
of human history.

FROM DISENGAGEMENT TO LEADERSHIP

These are only three examples of the challenges the United States
will face in this century. They are all examples of problems that will
require deft, multifaceted leadership. In addition to existing and
emerging threats, we undoubtedly will be confronted with unexpected
crises in the years ahead. These unknowns highlight the importance of
establishing a fixed set of principles and objectives to guide American
leadership. After years of strategic disengagement, this is the only way
to restore global certainty regarding American commitments.
m
By making retrenchment his primary objective, President Obama
has put the international system at the mercy of the most ruthless
aggressors. They are constantly seeking to undermine the basic
hi
principles of the post-1945 world by challenging American military
primacy, threatening the global commons, and undermining liberal
values. That Iran, Russia, and China are each challenging the United
ha
States in these spheres at the same time demonstrates their mutual
desire for a departure from the postwar order.
The authoritarian rulers of these nations find an open interna-
iT
tional system deeply threatening to their exclusive grip on domestic
political power. They cannot simply be reassured or persuaded, and
they will push their agendas with whatever tools we give them the
latitude to use. We cannot assume that these states will negotiate in
Al
good faith or see it in their interest to come to an agreement. If we allow

the continued erosion of our military, economic, and moral strength,
we will see a further breakdown in global order cast a lengthening
od
shadow across our domestic prosperity and safety.

Retrenchment and retreat are not our destiny. The United States,
by its presence alone, has the ability to alter balances, realign regional
powers, promote stability, and enhance liberty. Only we can form
so
coalitions based on mutual investment and mutual sacrifice. Our sole

goal has never been to remain the world’s preeminent power. We will
encourage and assist the rise of more powers when their rise is benign
or noble. We wish to be a fraternal force rather than a paternal one.
Ma
This principle has marked the bipartisan tradition of U.S. foreign

policy for the last 70 years. Our recent departure from this tradition
has brought only violence, chaos, and discord. By advancing the three
pillars of my foreign policy, I intend to restore American leadership
to a world badly in need of it and defend our interests in what I’m
confident will be another American century.∂

City Century
Why Municipalities Are the Key to Fighting
Climate Change
Michael Bloomberg
m
A
lthough history is not usually taught this way, one could
hi
argue that cities have played a more important role in shaping
the world than empires. From Athens and Rome to Paris and
Venice to Baghdad and Beijing, urban ideas and innovators have left
ha
indelible marks on human life. By concentrating the brainpower of
humanity in relatively small geographic areas, cities have promoted the
kinds of interactions that nurture creativity and technological advances.
iT
They have been the drivers of progress throughout history, and now—
as the knowledge economy takes full flight—they are poised to play a
leading role in addressing the challenges of the twenty-first century.
One hundred years ago, some two out of every ten people on the
Al
planet lived in urban areas. By 1990, some four in ten did. Today,
more than half of the world’s population dwells in urban areas, and by
the time a child now entering primary school turns 40, nearly 70 per-
od
cent will. That means that in the next few decades, about 2.5 billion
more people will become metropolitan residents.
The world’s first Metropolitan Generation is coming of age, and as
a result, the world will be shaped increasingly by metropolitan values:
so
industriousness, creativity, entrepreneurialism, and, most important,

liberty and diversity. That is a hopeful development for humanity,
and an overpowering counterweight to the forces of repression and
intolerance that arise out of religious fanaticism and that now pose a
Ma
grave threat to the security of democratic nations.

As those in the Metropolitan Generation assume leadership positions,
cities will become not just more culturally significant but also more
politically powerful. Influence will shift gradually away from national
MICHAEL BLOOMBERG is Founder and CEO of Bloomberg LP. From 2002 to 2013, he
was Mayor of New York City. Follow him on Twitter @MikeBloomberg.

City Century
governments and toward cities, especially in countries that suffer from

bureaucratic paralysis and political gridlock.
This trend has already emerged, and it is most pronounced in the
United States. Congress began reducing funding for infrastructure in
the late 1960s, a mistake that, coupled with the loss of manufacturing
jobs, dealt a devastating blow to cities. Nevertheless, federal divestment
also produced an important benefit: cities eventually recognized that
the best replacement for lost federal funding was local policy innovation.
Cities across the globe have come to the same conclusion. As a result,
m
many of the most important new initiatives of this century—from the
smoking ban adopted in New York City to the bus rapid transit system
pioneered in Bogotá—have emerged from cities. Mayors are turning
hi
their city halls into policy labs, conducting experiments on a grand scale
and implementing large-scale ideas to address problems, such as climate
change, that often divide and paralyze national governments.
ha
The same qualities that make cities dynamic catalysts for policy
change also, paradoxically, make them sources of political stability.
As Nassim Taleb and Gregory Treverton wrote in these pages earlier
iT
this year, fragility in nations stems from “a centralized governing
system, an undiversified economy, excessive debt and leverage, a lack
of political variability, and no history of surviving past shocks.” Cities
can counterbalance each of these weaknesses. They are, by definition,
Al
a decentralizing force, and the strongest of them have diversified

economies, healthy balance sheets, a tradition of pragmatic problem
solving free from excessive partisanship, and the resilience to survive
od
external shocks, whether in the form of a financial crisis, an environ-

mental disaster, or a terrorist attack.
Cities are also collaborating across national borders more than
ever before: sharing ideas; forming coalitions; and challenging their
so
national governments to adopt policies, such as the experiments in

urban waste management and education in Curitiba, Brazil, that are
proving effective at the local level. The new urban age will see more
steps taken to reduce poverty, improve health, raise living standards,
Ma
and promote peace. But with it also come serious challenges that cities
must begin to confront, including climate change.
A COMPETITIVE ADVANTAGE
Cities account for at least 70 percent of total worldwide greenhouse gas
emissions. They also face the worst risks from the ultimate consequences

Michael Bloomberg
of those emissions, as 90 per-

cent of cities were built on
coastal lands. It is fitting, then,
that cities, the primary drivers
and likeliest victims of climate
change, hold the antidote as well.
Climate change calls on soci-
eties to act quickly, and cities
tend to be more nimble than na-
m
tional governments, which are
more likely to be captured or neu-
tralized by special interest groups
hi
and which tend to view problems
through an ideological, rather
than a pragmatic, lens. ha
The need for swift action
and the risks associated with climate
change are well documented. The
iT
rise in sea levels is indisputable, as
is the warming of the oceans. Both
can multiply the intensity of
storms and the damage done to
Al
coastal cities, as New York

City experienced in 2012 with
Hurricane Sandy. In addition,
od
the scientific consensus holds

that hotter temperatures are
likely to produce major disrup-
tions in agriculture and increase
so
disease, displacing communities

and threatening the survival of
species that play integral roles
in both the ecosystem and the
Ma
food chain.
Ignoring these threats would merely pass the true costs of today’s
economic progress onto the next generation. Throughout U.S. his-
tory, successive generations have made sacrifices so that their children
might enjoy a higher standard of living. Today, the whole world is
confronted with the need to put future generations first, but this time,

City Century
m
hi
ha
iT
Al
od
so
Ma
no sacrifice is necessary. In fact, the most effective methods of fight-

ing climate change are also the best means of improving public health
and raising standards of living.
Traditionally, urban economic development has focused on retain-
ing industries and luring new businesses with incentive packages.

Michael Bloomberg
But in the new century, a different and far more effective model has
emerged: focusing first and foremost on creating the conditions
that attract people. As cities are increasingly demonstrating, talent
attracts capital more effectively than capital attracts talent. People
want to live in communities that offer healthy and family-friendly
lifestyles: not only good schools and safe streets but also clean air,
beautiful parks, and extensive mass transit systems. And where peo-
ple want to live, businesses want to invest.
For mayors, reducing carbon pollution is not an economic cost; it is
m
a competitive necessity. Earlier this year, Beijing announced that it
would close its coal-fired power plants because any marginal financial
benefit they offered was swamped by
hi
Cities have played a more their net costs, including those of
health care and forgone economic in-
important role in shaping vestment. Dirty air is a major liability
ha
the world than empires. for a city’s business environment.
Beijing is just the latest city to reduce
its carbon footprint for economic rea-
iT
sons. In fact, one of the biggest changes in urban governance in this
century has been mayors’ recognition that promoting private invest-
ment requires protecting public health. The congruence between health
and economic goals is also the biggest development in the fight against
Al
climate change.
No longer do mayors see the economy and the environment primarily
as conflicting priorities. Instead, they view them as two sides of the same
od
coin. That is why mayors have so enthusiastically embraced the challenge

of tackling climate change as a means to economic growth, and they have
many tools at their disposal for doing so. For instance, the simple act of
planting trees can help cool neighborhoods and clean the air. In New York
so
City, in 2007, we created a public-private partnership with nonprofit

organizations and businesses to plant one million trees across the city.
Modernizing transportation networks offers the clearest—and, in
many cases, biggest—environmental and economic benefits to cities.
Ma
From the introduction of steam engines in New York City to cable

cars in San Francisco, cities have always been innovators when it
comes to transportation. In recent years, bike-sharing programs have
given cities entirely new mass transit networks, and more cities are
investing in electric buses, fuel-efficient taxi fleets, and electronic
vehicle charging stations.

City Century
Buildings offer another important opportunity for progress. From

London to Seoul, major cities have begun wide-scale retrofits of their
existing buildings, installing everything from led lighting to heating
and cooling systems that draw their energy from the earth beneath the
buildings. In New York, we encouraged building owners to paint their
roofs white to save on cooling costs, which, together with many other
steps, helped the city reduce its carbon footprint by 19 percent in just
eight years.
Cities are also playing a leading role in adapting to climate change.
m
For example, the Lower Ninth Ward in New Orleans, the area hardest
hit by Hurricane Katrina, has become a national leader in rooftop
solar power adoption. Mumbai, recognizing the storm surge protec-
hi
tion provided by mangroves, has moved effectively to protect and
nurture them. And in New York City, after Hurricane Sandy, we
developed and began implementing a comprehensive long-term plan
ha
for mitigating the effects of major storms.
Urban leadership on climate change has also led to an unprecedented
level of cooperation among cities. The C40 Cities Climate Leader-
iT
ship Group, for which I serve as president of the board, has brought
together more than 75 cities committed to sharing best practices and
spreading proven solutions. The evidence is clear that this network-
ing strategy is working, as many carbon-reduction projects have
Al
spread to cities across the globe. For instance, only six C40 cities had
bike-sharing programs in 2011. By 2013, 36 had them. As London’s
mayor, Boris Johnson, said in 2013, “By sharing best practice through
od
C40—and shamelessly appropriating other cities’ best ideas—we

can take action on climate change and improve the quality of life for
our residents.”
Cities are also working together through the Compact of Mayors,
so
an initiative developed by C40 and other city networks to help cities

demonstrate measurable progress toward reducing greenhouse
gases and hold themselves accountable for their results. It also gives
national governments more reason to set ambitious environmental
Ma
goals and to empower cities to lead the way in reaching them.
CLIMATE-PROOFING
A 2014 study by Bloomberg Philanthropies and the C40 Cities Climate
Leadership Group, in conjunction with the Stockholm Environment
Institute, found that if cities act aggressively, they could reduce their

Michael Bloomberg
annual carbon emissions by roughly four billion tons beyond what

national governments are currently on track to do, in just 15 years.
That would be equivalent to eliminating around a quarter of today’s
carbon emissions from coal.
In fact, climate change may be the first global problem where suc-
cess will depend on how municipal services such as energy, water, and
transportation are delivered to citizens. Cities have only just begun to
seize the opportunities they have to make changes that can produce
both local and global benefits. The amount of infrastructure that
m
will be built by midcentury is about four times as much as the total
available today.
Modernizing infrastructure networks is costly, but it need not be
hi
cost prohibitive. City governments are increasingly turning to private
investors to help finance such projects, and it is a natural partnership.
After all, most businesses are in cities, and most cities are on coastal
ha
waters. Both mayors and ceos have an incentive to mitigate the worst
effects of climate change. The incremental costs of making infrastruc-
ture low carbon and resilient are modest relative to the economic ben-
iT
efits, as more countries and companies are recognizing.
Companies are becoming more eager to provide capital for infra-
structure projects for a share of the resulting revenue. Public-private
partnerships make this possible, and they are helping finance major
Al
projects around the world, from the construction of a new tunnel in

Miami that allows port traffic to bypass downtown streets to the
construction of virtually a new city by the municipal government in
od
Shantou, China.
In other cases, companies are asking only that governments clear
away the regulatory hurdles that block them from investing and
profiting. In the United States, for instance, a number of states,
so
including Florida, have laws that prevent solar power companies from
leasing solar panels to homeowners, even though that model has proved
successful in California and elsewhere. Many other states, such as
New Hampshire, prevent their utilities from entering the market for
Ma
distributed renewable energy. These artificial market barriers hurt

consumers and hinder climate change efforts, and cities can help lead
the way in pushing for their removal.
Just like companies, city governments can also face barriers that
prevent sustainable investments. To borrow money in the capital
markets, for instance, cities need a credit rating; outside the United

City Century
States and Europe, however, many lack them. The World Bank esti-
mates that only four percent of the developing world’s 500 largest
cities have internationally recognized credit ratings, and only 20 per-
cent have a domestic rating. Yet these cities have about $700 billion in
annual demand for infrastructure projects in transportation, energy,
waste treatment, and water supply. Providing them with access to
credit could become one of the most effective ways to fight climate
change, drive economic growth, and improve public health.
Fixing the problem should be relatively easy. In Peru, for instance,
m
the World Bank helped the city of Lima secure a credit rating so that
it could raise $130 million to upgrade its bus rapid transit system.
The new bus system will dramatically cut carbon pollution, and it will
hi
help reduce traffic congestion, saving companies money and improving
productivity. The project represents yet another example of the natural
alignment of economic, environmental, and health goals.
ha
Countries can also empower their cities to achieve such goals by
freeing them to regulate their own power supplies. Mayors in
some cities, including Chicago, Seattle, Helsinki, and Toronto,
iT
enjoy various forms of leverage over
their energy supplies. Some own No longer do mayors see
their own power, others own the dis-
tribution system, and still others have the economy and the
Al
the authority to sign contracts with environment primarily

any independent power generator they as conflicting priorities.
select. The Chinese government has
od
given major cities, such as Shenzhen,

expanded powers to swap out coal for cleaner forms of energy. In
Denmark, the national government decided to grant independent
regulatory powers to Copenhagen. The city is now on the path to
so
full carbon neutrality, aiming to reach zero net emissions within

a decade.
Central governments are not quick to devolve power, but they are
doing so with greater frequency as they recognize the national benefits
Ma
that can come with local control. That trend will only accelerate as the
world becomes increasingly urbanized and cities become increasingly
connected to one another, promoting the spread of best practices across
national borders.
It will be no small challenge for nations to accommodate the swell
of urban dwellers. In most cases, urban populations are expanding

Michael Bloomberg
atop antiquated infrastructure or no infrastructure at all. Yet advances

in technology are making transformational advances in infrastructure
possible, and that will allow cities in the developing world to catch up
to—and even leapfrog—established cities in constructing modern
metropolises.
There is no better example of this than solar energy, which can
save governments the expense of building costly new energy trans-
mission networks. The traditional model of a centralized energy
plant feeding power to a region entails enormous costs. Solar-powered
m
microgrids and other distributed renewable energy can deliver energy
far more efficiently.
Nations and cities that fail to prepare for the urban population
hi
explosion risk creating, or worsening, slum conditions that frighten
investors, perpetuate a permanent underclass, and impede national
progress. The best way to prepare is not by implementing top-down,
ha
one-size-fits-all centralized programs but by empowering cities them-
selves to solve problems, invest in their futures, and harness the
potential of their residents.
iT
The challenge facing the Metropolitan Generation—to build
modern cities for a new urban civilization—is as monumental as it is
essential. Success will spread prosperity globally, and innovation in
cities will help break down the differences between the developed and
Al
the developing world. City leaders must be strong enough to welcome—

and treat as equals, not second-class citizens—all those who come seek-
ing opportunity and farsighted enough to invest in infrastructure that
od
generates maximum economic, environmental, and health benefits.

The city cannot replace the nation-state in pursuing climate
solutions or policies to reduce poverty, improve security, fight disease,
and expand trade. City leaders seek not to displace their national
so
counterparts but rather to be full partners in their work—an arrange-

ment that national leaders increasingly view as not just beneficial
but also necessary.∂
Ma

Why U.S. Courts Shouldn’t Make
Foreign Policy
José A. Cabranes
m
A
s the United States grew from a small set of colonies into a
hi
global hegemon, so did the geographic reach of its laws. From
civil law to criminal law to human rights law, U.S. statutes now
govern activity in every corner of the globe. Indeed, as recent news at-
ha
tests, soccer officials in Europe, cybercriminals in China, and multina-
tional corporations operating in Africa are well within the United States’
legal cross hairs. As a result, the judges charged with interpreting U.S.
iT
laws have become crucial players in the exercise of American power.
Some legal scholars and human rights activists have applauded this
development, urging U.S. courts to police distant lands. In their view,
U.S. judges are well situated—perhaps uniquely situated—to decide
Al
matters of international justice, international commerce, and even inter-

national relations. They want judges in San Francisco to weigh in on
securities transactions in Scotland; judges in Tampa to issue opinions
od
about torture allegations in Tanzania. To this group, laws transcend land.

But applying domestic laws in foreign lands is a tricky business.
Indeed, as the world has become more interdependent and multipolar,
the limits of the United States’ legal reach—as well as the limited
so
competence of its courts to resolve geopolitical questions—have

become more apparent. The tension is especially notable when it
comes to the Alien Tort Statute (ats), which was enacted by the First
Congress in 1789 and promptly forgotten for nearly 200 years. In
Ma
1980, the court on which I sit, the U.S. Court of Appeals for the
Second Circuit, revived the ats, allowing federal courts to decide
cases brought by foreigners—although not by U.S. citizens—against
JOSÉ A. CABRANES is a judge of the U.S. Court of Appeals for the Second Circuit. This
article is adapted from the 2015 Leslie H. Arps Memorial Lecture, which was delivered at
the New York City Bar Association.

José A. Cabranes
foreign defendants for violations of “the law of nations” committed

on foreign soil. The decision was widely celebrated by human rights
lawyers who now hoped to seek justice for the victims of heinous
crimes and dissuade would-be perpe-
As a general rule, U.S. laws trators from committing future ones.
Its true impact, unfortunately, was far
belong within U.S. borders. less momentous. It is doubtful that
ats litigation ever prevented a single
human rights violation; few evildoers are deterred by the distant
m
threat of monetary damages in civil litigation. Instead, the ats con-
tributed to a perception of American judicial imperialism. The fact
that the United States is the only country in the world to entertain
hi
such suits has only increased foreign resentment.
Within the past five years, the tide once again has turned. Recog-
nizing that federal courts may have gone too far in adjudicating cases
ha
with little, if any, connection to the United States, the U.S. Supreme
Court has reaffirmed that U.S. legislation applies only within the
United States, unless Congress says otherwise. The most notable shift
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came in 2013, when the Court handed down its decision in Kiobel v.
Royal Dutch Petroleum, a case concerning an oil conglomerate’s alleged
role in abuses committed by the Nigerian military in the 1990s. In its
decision, the Court limited the global reach of the ats in order to
Al
prevent “foreign policy consequences not clearly intended by the

political branches”—that is, the executive and legislative branches of
the U.S. government.
od
The Kiobel case was met with outrage in the human rights community.
The advocacy group Human Rights First lamented that the Supreme
Court had extinguished “a beacon of hope for victims of gross human
rights violations.” The New York Times’ editorial board called the ruling a
so
“giant setback for human rights.” And legal scholars in the United States
and around the world bemoaned the shuttering of U.S. courts to claims
of global injustice. According to these critics, American courts must play
a pivotal role in the projection of American power.
Ma
Not so. When it comes to managing international relations, the

bench should follow the lead of the executive and legislative branches.
Indeed, this is the one area of U.S. foreign policy where “leading from
behind” actually makes sense. The executive and legislative branches
are far better situated to project global power, so judges should play a
constrained, but not invisible, role in foreign affairs. As a general

rule—absent an express congressional directive otherwise—U.S. laws

belong within U.S. borders.
THE REACH OF THE LAW

Ever since George Washington’s presidency, isolationists and interna-
tionalists have engaged in a tug of war over the proper role of the
federal courts in foreign policy. In 1793, Thomas Jefferson, then
Washington’s secretary of state, sent 29 separate questions to the
Supreme Court, formally requesting its advice on matters threaten-
m
ing U.S. neutrality in the ongoing war between France and Great
Britain. The Supreme Court, uninterested in being a prime actor in
foreign policy, politely declined to answer. Over two centuries later,
hi
this exchange is still cited as a precedent for the idea that there are
certain cases that federal courts simply should not hear.
In a maritime case in 1812, the principle of judicial limitations in
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international matters was enshrined into law when the Supreme Court
limited its own jurisdiction in issues involving the sovereignty of
foreign nations. In its opinion, the Court introduced a critical legal
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term of art: “extraterritorial,” which means that a law has force abroad.
Generally, the founders—and U.S. jurists up until the twentieth cen-
tury—subscribed to what was known as the “Westphalian” tradition of
territoriality, named after the 1648 treaty that created the modern state
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system. The concept links land and law, holding that a country’s courts
have jurisdiction only where its flag flies.
This was a doctrine of legal nonintervention, and it was perfectly
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suited to a young and relatively weak republic. The United States had
more to lose by abandoning this stance than it stood to gain by flexing
its legal muscles globally. Although territoriality constrained the
country’s ability to impose its law on others, it also ensured that others,
so
particularly European powers, did not impose their laws on the United
States. But as the United States expanded westward, it faced vexing
challenges to this Westphalian conception of law. Were the territories
that were conquered in the late 1840s during the Mexican War but not
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yet part of the union subject to U.S. laws? Did the state-granted
“property rights” of a slave owner have extraterritorial effect if a slave
escaped to a free state or territory? Far from being a mere philosophical
inquiry, this last question sparked the Civil War.
Even as the United States began its economic and military ascent
at the turn of the century, the judiciary continued to take a modest

José A. Cabranes
m
hi
ha
Judge not: Supreme Court Justice Oliver Wendell Holmes, 1908
view of how far U.S. laws could reach. In 1909, the Supreme Court
turned a preference against applying U.S. law abroad into a harder
T I M E L I F E P I C T U R E S / L I B R A RY O F C O N G R E S S / L I F E P I C T U R E C O L L E C T I O N / G E T T Y I M A G E S
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legal rule. Delivering the opinion in a case involving a dispute be-
tween two fruit companies operating in Latin America, Justice Oliver
Wendell Holmes, Jr., formulated what came to be known as “the pre-
sumption against extraterritoriality.” The idea, as Holmes put it, was
Al
that “all legislation is prima facie territorial in nature.” Judges now had
a default rule against applying U.S. statutes outside U.S. territory.
But as the United States emerged from World War II a global su-
od
perpower, the pendulum swung in the other direction. Federal

courts, busy interpreting the many New Deal regulations, were now
more willing to exert authority over activities taking place overseas.
Holmes’ presumption against extraterritoriality started down a path
so
to obsolescence in 1945, when the Second Circuit introduced a com-

peting doctrine—what came to be known as the “effects theory” of
extraterritoriality. The concept was concerned primarily with
whether the conduct of foreigners abroad caused harmful effects
Ma
within the United States, and it led federal courts to dramatically

expand the reach of U.S. law in areas of dispute as diverse as anti-
trust, securities, and employment. Foreigners who obeyed the law in
their home countries now faced liability for violating U.S. statutes,
even if all the relevant conduct was committed abroad. American
laws had gone global.

Not surprisingly, U.S. allies and trading partners were not enthused.
After all, one of the most frequently invoked justifications for the old
Westphalian system of territoriality had been that it minimized con-
flicts between nations. Foreigners resented the rise of what one con-
tributor to The Yale Law Journal called “Yankee jurisdictional jingoism.”
For instance, in 2004, when the Supreme Court considered a case
involving alleged anticompetitive practices in the vitamin industry,
several of the United States’ closest trading partners—including
Belgium, Canada, Germany, Japan, Ireland, the Netherlands, and the
m
United Kingdom—submitted briefs expressing concern that U.S. judges
had become the global arbiters of antitrust law, even when claims had
little or no connection to the United States. Similar tensions arose in
hi
the context of the ats. In 2007, after some South African citizens
brought an ats suit in New York federal court regarding conduct
committed in their country under apartheid, Thabo Mbeki, then South
ha
Africa’s president, decried the United States’ “judicial imperialism.”
Recognizing these complaints, the Supreme Court has recently
revived Holmes’ presumption against extraterritoriality, in both secu-
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rities law and human rights law. In Kiobel, it held that the ats does not
apply extraterritorially, unless the alleged human rights violations
“touch and concern the territory of the United States” with “sufficient
force to displace the presumption against extraterritorial application.”
Al
The Court worried that extending the reach of U.S. law abroad could
result in “clashes between our laws and those of other nations” and lead
to “international discord.” In light of the substantial risk—and, indeed,
od
the documented instances—of diplomatic strife, the Court held that if

Congress wants the courts to apply the ats or any other statute abroad,
then it must say so. In so many words, the Court declared that when it
comes to foreign policy, judges are simply out of their depth.
so
JUDGES AND THE WORLD

The Supreme Court was right. Compared with the judiciary, the ex-
ecutive and legislative branches of the U.S. government are far better
Ma
suited to handle questions affecting foreign policy. For one thing, the
Constitution suggests as much. Although the phrases “foreign policy,”
“foreign affairs,” and “international relations” appear nowhere in the
Constitution, the founders prescribed a division of labor when it came
to how the United States would interact with its peers. The president
is the commander in chief and has the power to receive and appoint

José A. Cabranes
ambassadors and to make treaties. Congress, for its part, has the power
to declare war, make rules governing the armed forces, and withhold
funding for foreign policy ventures, with the Senate required to sign
off on treaties and ambassadorial appointments. The courts, by contrast,
have no specific powers related to foreign policy.
Moreover, courts are structurally ill suited to make foreign policy.
In the United States’ adversarial legal system, they are limited to the
arguments and facts before them. They do not, and often cannot,
consider the many facets of a compli-
m
cated foreign policy problem. Nor are
When it comes to foreign judges equipped to weigh how a given
policy, judges are simply decision will affect another nation’s
hi
out of their depth. sovereignty or whether it might come
into conflict with foreign laws or foreign
governments. Judges interpret the law, not the law’s effects on diplo-
ha
macy, and they usually lack the expertise needed to balance delicate
foreign policy considerations, particularly when it comes to conduct
occurring overseas.
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In the same vein, U.S. judges are constrained by the information on
which they can rely—information that is far more limited than that
available to the other branches. Jurists must rely exclusively on the
arguments and evidence presented by the parties in a given case, and
Al
there is no guarantee that these presentations will contain all the rele-
vant information. But political actors can rely on any source they like,
including hearsay and other types of evidence not allowed in court.
od
In any event, judging is a somewhat monastic process, focused on

interpreting the law through the myopic lens of a particular case. Over
time, this creates a risk of outcomes that are inconsistent both between
different judges and between different branches of government, as
so
each judge tends to be the lord of his or her own fiefdom. By contrast,
the policymaking process in the other branches is a deliberative and
collaborative endeavor intended to produce a coherent national stance.
Such unity is vital in international relations, which, as the Supreme
Ma
Court pointed out in a 1962 decision, demand a “single-voiced state-

ment of the Government’s views.”
Finally, judges’ prevailing posture is backward-facing. Their job is to
resolve disputes after they have occurred. Those charged with managing
foreign policy, on the other hand, confront situations in real time. They
must strive to anticipate and solve problems before they materialize.

These structural disadvantages make it imperative for courts to

tread cautiously in cases touching on foreign affairs. The sovereignty of
another nation is not something to be disregarded casually. When the
United States decides to act in ways that may offend foreign sovereigns,
the executive and legislative branches should take the lead. This is so for
a simple reason: applying U.S. law to foreign people in foreign places
generates understandable irritation. The U.S. legal regime is an out-
growth of the United States’ distinct legal tradition. The people of other
countries had no stake in its creation and therefore understandably resist
m
having it imposed on them. In fact, the application of U.S. laws extra-
territorially directly contradicts the principles of self-governance and
self-determination that the United States rightly advances in the world.
hi
Moreover, law is just one tool in the United States’ foreign policy
toolbox, and it is usually not the one best suited to achieving national
aims. Diplomatic, economic, and military tools, which are more squarely
ha
in the hands of the executive and legislative branches, allow the govern-
ment to pursue calibrated responses to situations as they unfold. They
leave room for subtlety and fluidity, horse-trading and compromise.
iT
They allow for informal discussions and interpersonal relations:
foreign ministers, finance ministers, and defense ministers can achieve
levels of candor that opposing lawyers cannot. Presidents, unlike
judges, can pick up the phone. And whereas litigation picks winners
Al
and losers, international disputes are rarely zero-sum propositions.

There is one final reason judges should be particularly cautious in
adjudicating cases that may affect foreign relations: the very real pros-
od
pect that other countries will reciprocate through what some have
called “lawfare.” A Chinese court could allow a lawsuit against a U.S.
company for transactions conducted in the United States that were
perfectly legal under U.S. law. A European court might permit a law-
so
suit against a former U.S. president for ordering a drone strike on a

target abroad, or a lawsuit against a secretary of defense or a law pro-
fessor who advised that president to use the drone. That may be where
things are heading. And the more U.S. courts are willing to entertain
Ma
claims that have no express extraterritorial grounding in a statute, the

more they are encouraging the courts of other countries to do the same.
THE RIGHT ROLE

What, then, should be the foreign policy of the judiciary? First, do no
harm. When deploying law globally, even in the service of a good cause,

José A. Cabranes
judges should tread lightly. Of course, courts should not reflexively

retreat from a case touching on international relations, nor should such
issues be automatically immune from judicial review. But as the Supreme
Court has instructed, before they act, judges must consider whether
the decision at hand is one historically left to the political branches,
whether it is amenable to judicial management, and what possible con-
sequences judicial action risks. In matters touching on foreign policy,
courts should recognize that they play a limited, but not an invisible,
role. That means returning to the principles underlying the founders’
m
Westphalian doctrine of territoriality. To be sure, that default rule is
formalistic. But to paraphrase Winston Churchill, it may be the worst
possible rule of jurisdiction, except for all the others.
hi
Second, when in doubt, defer. By rigorously applying the presump-
tion against extraterritoriality, judges can force the executive and
legislative branches to decide whether to extend a given law to cover
ha
acts that take place abroad, thus spurring those branches to correct
inconsistencies or gaps in U.S. law.
The Second Circuit did just that in 2000, when it faced the ques-
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tion of whether Milton Gatlin, the civilian husband of a U.S. Army
sergeant, could be prosecuted in federal court for sexually abusing his
13-year-old stepdaughter while on a U.S. military base in Germany.
The case was tricky because Gatlin fell right into a jurisdictional gap:
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the Supreme Court had previously ruled that it was unconstitutional

to prosecute civilians in a military court (where he would have been tried
had he been a service member), but there was no express congressional
od
authorization to try a civilian in a regular federal court for crimes

committed on an overseas military installation. The Second Circuit
concluded that Congress did not intend for the federal sexual abuse
statute to apply to military bases abroad. Despite the heinous nature
so
of Gatlin’s crime, the Second Circuit held that the trial court lacked
jurisdiction over his case, reversing the conviction.
Unlike with most cases, however, the story did not end there.
Because the court believed that Congress ought to know about this
Ma
jurisdictional gap, the ruling directed that a copy of the decision be

sent to the chairs of the Armed Services and Judiciary Committees of
both houses of Congress. Within five months, and in direct response to
the decision, Congress closed the gap with the Military Extraterritorial
Jurisdiction Act of 2000, which gave federal courts jurisdiction to
prosecute civilians who commit crimes on overseas military installations.

The court was playing a constrained role, by refusing to extend a U.S.

law overseas, but also an important one, by encouraging another
branch to consider doing so.
Third, judges should lead by example. The U.S. judiciary is one of
the oldest and most distinguished judiciaries in the world, and other
countries continue to look to it as a model. So U.S. judges need to
guard against the perception that U.S. courts are a tool of American
overreach. Rather, they should strive to make the U.S. judiciary an
exemplar of the important role courts can play in ensuring that the
m
law is faithfully interpreted, not stretched beyond its meaning to
achieve particular policy goals. In other words, judges should stick
to their constitutional and historical role.
hi
THE POWER OF MODESTY
A return to a more territorial judicial landscape has many opponents,
ha
but perhaps the most vocal ones are those who want U.S. courts to
provide justice for victims of human rights abuses around the world.
Some even say that closing U.S. courts to foreign human rights law-
iT
suits would signal U.S. apathy to atrocities committed abroad.
They are wrong. Serious breaches of the peace, including genocide,
are indeed the business of the United States and its allies. But the courts
are not particularly competent to handle these matters. Upholding
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the liberal world order is not something that well-intentioned lawyers,

academics, and judges can do on their own. Protecting innocent
people from the predations of others requires U.S. global leadership,
od
and that leadership can come only from the vigorous efforts of the
executive and legislative branches of the government.
The history of the U.S. judiciary’s involvement in foreign policy
matters demonstrates not that the United States should evade respon-
so
sibility for the protection of human rights abroad but, rather, that the
courts should not be at the tip of the country’s spear. In The Federalist
Papers, Alexander Hamilton called the judiciary the “least dangerous”
branch of the new government that was in gestation. “It may truly be
Ma
said to have neither force nor will, but merely judgment,” he wrote.
Hamilton was right. All we judges really have is our judgment.
And when it comes to foreign policy, our reach is necessarily limited.
The U.S. judiciary can never be a sheriff unto the nations, but by
showing proper restraint, it can be a light unto the nations.∂

The Meaning of Kissinger
A Realist Reconsidered
Niall Ferguson
m
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here are reasons other than his longevity why so many world
leaders—among them the Chinese President Xi Jinping—
hi
continue to seek the counsel of Henry Kissinger, who stepped
down as U.S. secretary of state close to four decades ago. In this respect,
Barack Obama is unusual. He is the first U.S. president since Dwight
ha
Eisenhower not to seek Kissinger’s advice. Periodically, commentators
urge Obama to be more “Kissingerian.” Others argue that he is Kissinger
ian in practice, if not in rhetoric. But what exactly does the term mean?
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The conventional answer equates Kissinger with realism, a philosophy
characterized by the cool assessment of foreign policy in the stark light
of national self interest, or, in the journalist Anthony Lewis’ phrase, “an
-
obsession with order and power at the expense of humanity.” Writing in
Al
1983, Kissinger’s former Harvard colleague Stanley Hoffmann depicted

Kissinger as a Machiavellian “who believe[s] that the preservation of
the state . . . requires both ruthlessness and deceit at the expense of
od
foreign and internal adversaries.” Many writers have simply assumed

that Kissinger modeled himself on his supposed heroes, the Austrian
statesman Klemens von Metternich and the Prussian leader Otto von
Bismarck, the standard bearers of classical European realpolitik.
so
-
Yet the international relations scholar Hans Morgenthau, who truly
was a realist, once memorably described Kissinger as, like Odysseus,
“many sided.” In the early 1960s, for example, when the agonizing
-
question arose of how much the United States should shore up the
Ma
government of South Vietnam, Kissinger initially believed that South

Vietnam’s right to self determination was worth U.S. lives. Morgenthau,
-
the authentic realist, vehemently disagreed.
NIALL FERGUSON is Laurence A. Tisch Professor of History at Harvard University, a
Senior Fellow at the Hoover Institution, and the author of the forthcoming book Kissinger,
1923–1968: The Idealist. Follow him on Twitter @nfergus.

m
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Ideal type: Henry Kissinger at Harvard, July 1969
In the 1950s and 1960s, Kissinger did indeed write about Metter-
nich and Bismarck. But only someone who has not read (or who has
Al
willfully misread) what he wrote could seriously argue that he set out
in the 1970s to replicate their approaches to foreign policy. Far from
AL F R E D E I S E N STAE D T / L I F E P I C T U R E C O L L E C T I O N / G E T T Y I MAG ES
being a Machiavellian, Kissinger was from the outset of his career an

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idealist in at least three senses of the word.

First, even if Kissinger was never an idealist in the tradition of U.S.
President Woodrow Wilson, who sought universal peace through inter-
national law and collective security, he was not a realist. Kissinger
so
rejected Wilsonian idealism because he felt that its high-mindedness

was a recipe for policy paralysis. As he put it to his friend the historian
Stephen Graubard in 1956, “The insistence on pure morality is in itself
the most immoral of postures,” if only because it often led to inaction. But
Ma
Kissinger knew that realism could also be paralyzing. As a refugee from

Hitler’s Germany who returned in 1944 in an American uniform to play
his part in the final defeat of Nazism, Kissinger had paid a personal price
for the diplomatic failures of the 1930s. And yet, as he pointed out in a
1957 interview, the British architects of appeasement, Stanley Baldwin
and Neville Chamberlain, had “thought of themselves as tough realists.”

Niall Ferguson
Second, having immersed himself as an undergraduate at Harvard

in the work of Immanuel Kant, Kissinger was an idealist in the philo-
sophical sense. His unpublished senior thesis, “The Meaning of
History,” was an admiring critique of Kant’s philosophy of history.
Kissinger’s central argument was that “freedom is . . . an inner experience
of life as a process of deciding meaningful alternatives.” “Perpetual
peace” might indeed be the ultimate,
Kissinger’s own intellectual ineluctable goal of history, as Kant
argued, but from the point of view of
m
capital has been the individual, that inevitability was not
insufficiently studied. a constraint on freedom. As Kissinger
wrote in his thesis, “Whatever one’s
hi
conception about the necessity of events, at the moment of their
performance their inevitability could offer no guide to action. . . .
However we may explain actions in retrospect, their accomplishment
ha
occurred with the inner conviction of choice.”
Third, from an early stage in his career, Kissinger was a convinced
antimaterialist, as hostile to capitalist forms of economic determinism
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as he was to Marxism-Leninism. It was dangerous, he argued in his
senior thesis, to allow “an argument about democracy [to] become a
discussion of the efficiency of economic systems, which is on the plane
of objective necessity and therefore debatable.” By contrast, “the
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inward intuition of freedom . . . would reject totalitarianism even if it

were economically more efficient.” This attitude contrasted starkly
with that of his contemporaries, such as the economist and political
od
theorist Walt Rostow, for whom the Cold War could be won so long
as capitalist growth rates were higher than communist ones. “Unless
we are able to make the concepts of freedom and respect for human
dignity meaningful to the new nations,” Kissinger wrote in The Necessity
so
for Choice, “the much-vaunted economic competition between us and

Communism . . . will be without meaning.” In other words, liberal
democratic ideals had to be defended for their own sake, without relying
on the material success of capitalism to make the case for them. This was
Ma
a theme to which Kissinger returned repeatedly in the 1960s as an adviser

and speechwriter to Nelson Rockefeller, whose three unsuccessful
bids for the Republican presidential nomination he supported.
As Kissinger observed in the first volume of his memoirs, “High
office teaches decision-making, not substance. . . . On the whole, a
period in high office consumes intellectual capital; it does not create

it.” Since nearly all scholarly attention has been focused on Kissinger’s
time in office, his own intellectual capital—the ideas he developed
between the early 1950s and the late 1960s at Harvard, at the Council
on Foreign Relations, and for Rockefeller—has been insufficiently
studied. Properly understood as an innovative critique of realpolitik,
his ideas offer at least four key insights into foreign policy that Obama,
not to mention his successor, would be well advised to study: history
is the key to understanding rivals and allies; one must confront the
problem of conjecture, with its asymmetric payoffs; many foreign
m
policy decisions are choices between evils; and leaders should be wary
of the perils of a morally vacuous realism.
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HISTORY IS THE MEMORY OF STATES
After the philosophy of idealism, the most important thing Kissinger
learned at Harvard was the centrality of history to understanding
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problems of national security. “No significant conclusions are possible
in the study of foreign affairs—the study of states acting as units—
without an awareness of the historical context,” he wrote in his
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doctoral dissertation, published in 1957 as A World Restored: “The
memory of states is the test of truth of their policy. The more elementary
the experience, the more profound its impact on a nation’s interpreta-
tion of the present in the light of the past.” After all, Kissinger asked,
Al
“Who is to quarrel with a people’s interpretation of its past? It is its

only means of facing the future, and what ‘really’ happened is often
less important than what is thought to have happened.” To the politi-
od
cal scientist, states might “appear . . . as factors in a security arrange-

ment.” To the lawyer, they might seem like interchangeable parties in
an endless succession of international lawsuits. In fact, Kissinger wrote,
all states “consider themselves as expressions of historical forces. It is
so
not the equilibrium as an end that concerns them . . . but as a means

towards realizing their historical aspirations.”
A recurrent theme in Kissinger’s early writing is the historical
ignorance of the typical American decision-maker. Lawyers, he remarked
Ma
in 1968, are the “single most important group in Government, but

they do have this drawback—a deficiency in history.” For Kissinger,
history was doubly important: as a source of illuminating analogies
and as the defining factor in national self-understanding. Americans
might doubt history’s importance, but, as Kissinger wrote, “Europeans,
living on a continent covered with ruins testifying to the fallibility of

Niall Ferguson
human foresight, feel in their bones that history is more complicated

than systems analysis.”
UNKNOWN UNKNOWNS
Unlike most academics, Kissinger discerned early in his career that
high-stakes policy decisions often must be taken before all the facts
are in. “The choice between . . . policies did not reside in the ‘facts,’
but in their interpretation,” he argued in A World Restored. “It involved
what was essentially a moral act: an estimate which depended for its
m
validity on a conception of goals as much as on an understanding of
the available material.”
This was an idea Kissinger later formulated as “the problem of con-
hi
jecture in foreign policy.” Decision-making, he argued in a 1963 lecture,
requires [the] ability to project beyond the known. And when one is
ha
in the realm of the new, then one reaches the dilemma that there’s
really very little to guide the policy-maker except what convictions he
brings to it. . . . Every statesman must choose at some point between
whether he wishes certainty or whether he wishes to rely on his
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assessment of the situation. . . . If one wants demonstrable proof one
in a sense becomes a prisoner of events.
If the democracies had moved against the Nazis in 1936, Kissinger

Al
argued, “we wouldn’t know today whether Hitler was a misunder-

stood nationalist, whether he had only limited objectives, or whether
he was in fact a maniac. The democracies learned that he was in fact a
od
maniac. They had certainty but they had to pay for that with a few
million lives.”
This insight had profound implications for the nuclear age, when
the potential casualties of a world war could number in the hundreds
so
of millions. Also in 1963, in an unpublished paper entitled “Decision

Making in a Nuclear World,” Kissinger summed up what he called the
“terrible dilemma” confronting the Cold War decision-maker:
Ma
Each political leader has the choice between making the assessment
which requires the least effort or making an assessment which requires
more effort. If he makes the assessment that requires least effort, then
as time goes on it may turn out that he was wrong and then he will
have to pay a heavy price. If he acts on the basis of a guess, he will
never be able to prove that his effort was necessary, but he may save

himself a great deal of grief later on. . . . If he acts early, he cannot

know whether it was necessary. If he waits, he may be lucky or he may
be unlucky.
The key point about the problem of conjecture is in the asymmetry of

the payoffs. A successful preemptive action is not rewarded in proportion
to its benefits because, as Kissinger wrote, “it is in the nature of successful
policies that posterity forgets how easily things might have been other-
wise.” The preemptive statesman is more likely to be condemned for the
m
up-front costs of preemption than to be praised for averting calamity. By
contrast, playing for time—the essence of the appeasement policy of the
1930s—is not certain to lead to disaster. And making the least effort is
hi
usually also the line of least domestic resistance.
THE LESSER OF EVILS ha

“There is not only right or wrong but many shades in between,” the
young Kissinger wrote in 1948, in a revelatory letter to his parents.
“The real tragedies in life are not in choices between right and wrong,”
iT
he argued, because “only the most callous of persons choose what they
know to be wrong. . . . Real dilemmas are difficulties of the soul,
provoking agonies.” Put simply, the most difficult choices in foreign
policy are certain to be between evils, and so the truly moral act is to
Al
choose the lesser evil (even if it is politically the harder choice).

In 1957, in Nuclear Weapons and Foreign Policy, for example, Kissinger
argued that maintaining an equilibrium of power in the Cold War
od
would require such difficult choices:

We are certain to be confronted with situations of extraordinary
ambiguity, such as civil wars or domestic coups. . . . There can be no
doubt that we should seek to forestall such occurrences. But once they
so
have occurred, we must find the will to act and to run risks in a situa-
tion which permits only a choice among evils. While we should never
give up our principles, we must also realize that we cannot maintain
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our principles unless we survive.
The philosophical underpinning of the book is that an apparently

abhorrent thing, such as a limited nuclear war, may be the lesser evil
if the alternatives are capitulation or annihilation. In his final chapter,
Kissinger spells out a general theory of lesser evils that may be read
as a kind of credo:

Niall Ferguson
It would be comforting if we could confine our actions to situations in

which our moral, legal and military positions are completely in har-
mony and where legitimacy is most in accord with the requirements
of survival. But as the strongest power in the world, we will probably
never again be afforded the simple moral choices on which we could
insist in our more secure past. . . . To deal with problems of such
ambiguity presupposes above all a moral act: a willingness to run risks
on partial knowledge and for a less than perfect application of one’s
principles. The insistence on absolutes . . . is a prescription for inaction.
m
Later, in 1966, Kissinger made a similar argument about Vietnam:
“We do not have the privilege of deciding to meet only those challenges
which most flatter our moral preconceptions.” But by then, he had
hi
already realized that the war against North Vietnam could be ended
only by negotiation. The United States, he had seen for himself,
“lacked any overall concept for the conduct of military operations
ha
against the guerrillas, and for the building of a nation.” Its stock recipe
of copious resources and complex bureaucracy was inappropriate. A
negotiated peace was a lesser evil compared with a hasty abandon-
iT
ment of South Vietnam or a further escalation of the U.S. military
effort against the North.
THE ILLUSION OF REALISM

Al
In his writing about Metternich and Bismarck—most explicitly in the

unfinished book manuscript he wrote about the latter—Kissinger
made clear that he regarded pure realism in foreign policy as poten-
od
tially pernicious. “Societies are incapable of the courage of cynicism,”

he wrote in an unpublished chapter on Bismarck. “The insistence on
men as atoms, on societies as forces has always led to a tour de force
eroding all self-restraint. Because societies operate by approximations
so
and because they are incapable of fine distinctions, a doctrine of power

as a means may end up by making power an end.”
To be sure, there was much in Bismarck’s strategy that Kissinger
admired. It was through studying Bismarck that he came to see the
Ma
crucial importance of playing rivals off one another. According to

Kissinger, after German unification, Bismarck’s new European order
hinged on his ability to “manipulate the commitments of the other
powers so that Prussia would always be closer to any of the contending
parties than they were to each other.” In particular, Kissinger came to
admire the elegant ambiguity of Bismarck’s 1887 Reinsurance Treaty—

a secret agreement whereby Germany and Russia would observe neu-

trality should the other become involved in a war with a third country,
unless Germany attacked France or Russia attacked Germany’s ally
Austria-Hungary—the abandonment of which by Bismarck’s successors
introduced a fatal rigidity into European diplomacy. Yet in his essay
“The White Revolutionary,” Kissinger argued that Bismarck, with his
essentially Darwinian view of international relations as an amoral
struggle for survival, was bound to fail to institutionalize his geopo-
litical achievement.
m
A central problem of the democratic age, as Kissinger saw it, was
that people tended to prefer charismatic leaders to crafty statesmen.
“The claims of the prophet,” Kissinger wrote in A World Restored, “are
hi
a counsel of perfection. . . . [But] utopias are not achieved except by
a process of leveling and dislocation which must erode all patterns
of obligation . . . [while] to rely entirely on the moral purity of an
ha
individual is to abandon the possibility of restraint.” Against the
prophet, Kissinger sided with the statesman, who “must remain forever
suspicious of these efforts, not because he enjoys the pettiness of
iT
manipulation, but because he must be prepared for the worst contin-
gency.” Part of the statesman’s tragedy is that he must always be in
the minority, for “it is not balance which inspires men but universality,
not security but immortality.”
Al
THAT ’70s SHOW

In many ways, Kissinger’s experience in government illustrated this
od
last point only too well. Although initially hyped in the press as
“Super K,” he later became the target of vitriolic attacks from both the
left and the right, the former accusing him of war crimes in the Third
World, the latter accusing him of kowtowing to the Kremlin. Perhaps
so
as a result, there is little evidence that Kissinger’s insights into foreign

policy have been institutionalized or even memorized.
“There is no such thing as an American foreign policy,” Kissinger
wrote in an essay published in 1968. There is only “a series of moves
Ma
that have produced a certain result” that they “may not have been
planned to produce” and to which “research and intelligence organi-
zations, either foreign or national, attempt to give a rationality and
consistency . . . which it simply does not have.” That could equally
well be said today, more than 40 years later. Kissinger’s explanation
for the lack of strategic coherence stemmed from the pathologies of

Niall Ferguson
modern democracy. Unlike the leaders of the nineteenth century, he

explained, “the typical political leader of the contemporary manage-
rial society is a man with a strong will, a high capacity to get himself
elected, but no very great conception of what he is going to do when
he gets into office.” Again, the same could be said today.
Obama and his advisers are not historically inclined. In one of the
most memorable one-liners of the 2012 presidential election cam-
paign, Obama mocked his Republican
People tend to prefer opponent, Mitt Romney: “The 1980s
m
are now calling to ask for their foreign
charismatic leaders to policy back, because the Cold War’s been
crafty statesmen. over for 20 years.” He was deriding
hi
Romney’s description of Russia as “our
number one geopolitical foe.” Yet only
17 months later, Russia annexed Crimea, flouting international law.
ha
Obama’s boast, in January 2014, that he didn’t “really even need
George Kennan right now” soon rang hollow.
Perhaps, however, it was not the 1980s that were calling but the
iT
1970s. Then, as now, the American economy experienced a severe shock,
which left a lasting hangover. The oil shock of 1973 has its analogue in
the banking crisis of 2008. Like Richard Nixon, Obama inherited a
war that was not lost in military terms but that had become deeply
Al
unpopular at home. Iraq was this generation’s Vietnam, except that,

thanks to the surge led by commanders such as David Petraeus and
Stanley McChrystal, Obama inherited a war that was being won.
od
Like Nixon, too, Obama faces a Russia that is much less interested
in cordial relations than it sometimes pretends to be: it is easy to
forget that Soviet leader Leonid Brezhnev, in his prime, was a Putin-
like figure, intent on wielding power not just in Russia’s backyard but
so
all over the world. And like Nixon, Obama finds both his European
and his Asian allies exceedingly difficult to manage. Today’s western
Europeans spend even less on defense as a share of their national
incomes than they did in the 1970s. They have forgotten Kissinger’s
Ma
old adage that “whenever peace—conceived as the avoidance of

war—has been the primary objective of a power or a group of powers,
the international system has been at the mercy of the most ruthless
member of the international community.” Meanwhile, the Asians are
going in the opposite direction, developing their own military strategies
for coping with the rise of China in the belief that Obama’s so-called

pivot to Asia is a sham. And the Middle East is at least as big a powder
keg now as it was when Kissinger was in office.
Whatever else one might argue about the foreign policies of the
Nixon and Ford administrations, it is undeniable that by the outset of
his career as U.S. national security adviser, Kissinger had at least
developed a strategic framework within which to address the challenges
the United States faced and that each component of the strategy was
based on the four principles outlined here.
The strategy Kissinger began to devise in the mid-1960s had three
m
distinct components. First, he sought to revive the transatlantic alliance
with Western Europe. To counteract the powerful but introspective
forces of Western European integration and West German Ostpolitik, he
hi
tried to revivify bilateral relations between the United States and the
three major European powers: France, Germany, and the United King-
dom. Second, he sought to put flesh on the concept of détente by seeking
ha
opportunities for cooperation between the United States and the Soviet
Union, not least in strategic arms control, without jettisoning the funda-
mental principle that Soviet expansion should be resisted and Soviet
iT
power contained. Finally, and most important, he began to discern that
despite its obviously revolutionary character, the People’s Republic of
China might be brought into the balance of power and that Sino-Soviet
antagonism could be exploited by drawing the United States closer to
Al
each of the contending parties than they were to each other. Kissinger’s
critics have long found fault with the tactics he employed in executing
this strategy, particularly in countries he considered of secondary impor-
od
tance. They have not been able to deny that there was a strategic concept.
Today, we see the fruits of nearly seven years without such a concept.
American policymakers (and not only in the current administra-
tion) have for too long underestimated the importance of history
so
to the self-understanding of nations. In decision after decision, they

have failed to grasp the significance of the problem of conjecture, some-
times underestimating the benefits of preemption, sometimes under-
estimating the costs of inaction. They have ducked difficult choices
Ma
between incommensurate evils and, behind a veil of highfalutin

speeches, practiced a cynical realism that will always lack legitimacy
both at home and abroad. For all these reasons, the United States finds
itself in almost as great a strategic mess as it was in at the end of 1968.
A Kissingerian approach is badly needed. But first policymakers—and
the public—need to understand the meaning of Kissinger.∂

Autopsy of a Cambodian
Election
How Hun Sen Rules
m
Stéphanie Giry
K
hi
hmer New Year is the closest thing Cambodia has to a High
Holiday, and in April, Prime Minister Hun Sen celebrated it
in style with his fiercest opponent. During a festival at the
ha
ancient temples of Angkor, he and Sam Rainsy ate together from a
gigantic cake of sticky rice weighing more than four metric tons—a
Guinness World Record. It was an uncanny scene, not least because
iT
the last time Sam Rainsy had made a major public appearance at
Cambodia’s most glorious site, in September 2013, it was to call Hun
Sen a cheat and a usurper.
On that day, Sam Rainsy and 55 members-elect of the opposition
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Cambodia National Rescue Party were boycotting the inaugural

session of the new National Assembly to protest alleged fraud in the
recent general election, which the cnrp had officially lost by a small
od
margin. With the ancestral temples bearing witness in the back-

ground, they called for an investigation, vowing “not to betray the
will of the people.”
Cambodian politics appeared to be at an inflection point then,
so
after years of civil war, military repression, totalitarianism, for-

eign occupation, an international trusteeship, and de facto one-
party rule. By the government’s own tally of the votes, Hun Sen’s
Cambodian People’s Party (cpp) had lost about one-quarter of its
Ma
seats in the National Assembly. For months afterward, tens of

thousands of Cambodians, led by the cnrp, took to the streets to
pillory Hun Sen and ask him to resign. Yet today, the opposition
cannot seem to get enough of rapprochement, touting a “culture
STÉPHANIE GIRY is an editor on the opinion pages of the International New York Times.

Autopsy of a Cambodian Election
of dialogue”—a phrase it repeats like a mantra—so far with little

to show for it.
Has Hun Sen done it again? He has been Cambodia’s prime
minister for 30 years, in spite of his unseemly political origins. A
one-time Khmer Rouge commander who defected, he was put in
power in 1979 by Vietnam, Cambodia’s historical enemy, after it
toppled Pol Pot’s regime. Hun Sen has remained in place after the
advent of electoral democracy in 1993, even though his party has
never won a majority of the popular vote in a general election,
m
except in 2008, maybe—but the results of that election, like those
of all the others, are disputed. Over the years, Hun Sen has coaxed
or cowed, corrupted or co-opted, defanged, sidelined, or otherwise
hi
neutralized a large cast of adversaries, far and near.
Hun Sen has perfected the art of electoral authoritarianism with-
out alienating Western donors ostensibly dedicated to the rule of
ha
law, while offsetting their influence by welcoming more and more
investment from China. At once crass and deft, salt of the earth and
grandiloquent, he is a remarkable political animal. But his longevity
iT
also reflects a distinct political culture—inspired by stories and
folktales about mighty, wily kings and hares outwitting greater
creatures—that rewards and glorifies the ambitious and the sly, the
ruthless and the adaptable.
Al
An autopsy of the 2013 election and its fallout suggests that even
Hun Sen’s opponents cannot entirely escape this conception of
power. At the same time that Sam Rainsy and the cnrp pressed for
od
multiparty democracy, liberalism, and human rights, they seemed

to unwittingly adopt some of Hun Sen’s ways. The opposition
claimed to represent the people’s will and the people’s interests,
but it sometimes treated its supporters with a paternalist instru-
so
mentalism that evoked manipulation more than emancipation. The

cnrp practiced a half-baked form of nonviolent resistance that, instead
of shaming the government for abusing its monopoly on force,
wound up bowing to it. The party’s appeals to nationalism and flirta-
Ma
tions with anti-Vietnamese xenophobia were a gambit designed to

contest Hun Sen’s legitimacy, but in addition to courting real danger,
they may have indirectly confirmed certain features of Hun Sen’s
self-mythology.
Perhaps it could hardly have been otherwise, given the cpp’s lock
on state resources. And the cnrp may have nudged along some overdue

Stéphanie Giry
reforms. But the opposition’s tactics also seem to have confirmed that
democratic contestation in Cambodia remains, at bottom, a struggle
for power, and that serves Hun Sen above all.
THE PRIME MINISTER WHO WOULD BE KING

The promise of multiparty democracy returned to Cambodia with
elections in 1993, after the withdrawal of Vietnamese troops and a
un-brokered peace accord that ended a long-running civil war.
Immediately, however, the notion was trampled. Although the cpp
m
lost the election to Funcinpec, a royalist party, Hun Sen wrangled a
position as second prime minister, and in 1997, he staged a coup.
By then, the Khmer Rouge was still waging a guerrilla war but
hi
falling apart as a movement. Hun Sen hastened the group’s disin-
tegration with military strikes and offers to protect leaders who
defected. This was a ploy not only to eliminate opponents but also
ha
to create for himself the persona of a grand pacifier and mastermind
of national reconciliation.
Over the next decade, Hun Sen consolidated his power. He cor-
iT
doned off rival factions within the cpp. He brought the royalists
into a coalition and then cannibalized them. He maneuvered around
the royal family—especially after 2004, when the formidable king,
Norodom Sihanouk, aging and ailing, abdicated in favor of his feckless
Al
son Norodom Sihamoni.

Hun Sen also fought off the democratic opposition, by way of
intimidation and lawsuits. His chief target was Sam Rainsy, a former
od
financier trained in France who had served as Funcinpec’s finance

minister from 1993 to 1994 and then went on to head his own party,
calling for clean government, workers’ rights, and the rule of law. Sam
Rainsy had earned an aura of half martyrdom by surviving a grenade
so
attack in 1997 that killed more than a dozen people; Hun Sen saw him
as an irritant.
By 2009, the prime minister was riding high. After the 2008 elec-
tion, the cpp had a commanding majority in the National Assembly.
Ma
A new un-backed court was starting to try major Khmer Rouge

figures but without troubling the former Khmer Rouge cadres now
serving in Hun Sen’s government. And then, Sam Rainsy did Hun Sen
a favor. On a visit to the Vietnamese border, Sam Rainsy uprooted a
post that he claimed violated the official boundary between Cambodia
and Vietnam, a public relations stunt that earned him a prison

sentence for “racial incitement” and sent him into self-imposed

exile. In 2010 came another, longer jail sentence—for falsifying
maps and spreading disinformation—which ensured that he would
have to stay away.
Over the next few years, Hun Sen grew only more secure, partly
on the back of a brisk economy. Between 1993 and 2013, Cambodia’s
average annual growth rate was 7.7 per-
cent, the sixth-highest in the world.
And during that period, the country’s
Hun Sen has constructed
m
poverty rate dropped. But growth also an implausible composite
meant more concentrated wealth and regime, a kind of political
opportunities for corporate plunder. A chimera.
hi
number of nongovernmental organiza-
tions (ngos) claim that some 700,000
Cambodians have been adversely affected—many of them displaced
ha
and dispossessed—by the vast land concessions the government has
granted to large companies.
Human rights groups criticize the Hun Sen government for this
iT
practice, as well as other abuses—justifiably, but also sometimes with
inexplicable ferocity, and disproportionately, it seems, compared with
the way they treat the governments of Laos, Thailand, and Vietnam.
This happens precisely because Cambodia is more open than its
Al
neighbors: the un’s presence in the 1990s spawned a slew of ngos,

and foreign-language media (although not Khmer-language outlets)
work largely unmolested. Call it the peril of partial toleration—and of
od
having created a system that defies ready definitions.

Hun Sen has constructed an implausible composite regime, a kind
of political chimera, that is part vestigial communism, part crony
capitalism, part neofeudal paternalism, and part divine-right monar-
so
chism. The cpp, like other communist holdovers from the Cold War,
conflates its own apparatus with the state. It oversees a top-to-bottom
system of control over the bureaucracy, the judiciary, the security
forces, and traditional media. It is secretive, opaque, and paranoid.
Ma
The party runs the economy on an exploitative, clientelistic basis, at

once predatory and patrimonial. The state delivers (or withholds)
schools, hospitals, and roads to the population as though they were
favors rather than public goods.
At the same time, Hun Sen has exalted the monarchy—the better,
it seems, to bask in its mystique and usurp its symbolism. He especially

Stéphanie Giry
likes to compare himself to the sixteenth-century hero Sdech Kan, a

commoner who became king after killing a king who wanted to kill
him; he has had several statues of Sdech Kan built around the country,
some in his own likeness. During Sihanouk’s cremation in February
2013, King Sihamoni, the queen mother, and senior monks took turns
trying to ignite the funeral pyre, but they all failed. When Hun Sen
tried, it lit up immediately. A miracle, he said later, and a sign that he
had “inherit[ed] the task of protecting the monarchy.”
m
FROM SUBJECTS TO CITIZENS
The prime minister who would be king entered the 2013 election
season in full form. “If you love Hun Sen, if you pity Hun Sen, if you
hi
are satisfied with Hun Sen, if you believe in Hun Sen,” he enjoined
Cambodians, then “vote for the cpp.” As in past elections, he cam-
paigned on generalities about stability and progress and invoked the
ha
specter of the Khmer Rouge. He announced some populist measures:
the monthly minimum wage of garment workers was increased; a
new road was unveiled here, a new bridge there. He also issued
iT
threats. A land-titling campaign would end if the cpp were not reelected.
Civil war might break out. “Change is not a game,” Hun Sen said a
month before the election.
Of the seven other parties in the race, the cnrp was the most
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important. But it was a fledgling party, and its standard-bearer was

in self-imposed exile. It had been created just the year before, in the
wake of the 2012 local elections, after the Sam Rainsy Party and the
od
Human Rights Party, which had been rivals, realized they could
have outperformed the cpp in some areas if they had run under a
single banner.
The cnrp presented a platform that was more a wish list than a
so
program, pledging, among other things, higher wages for factory

workers and civil servants, lower gas prices, and free health care for
the poor. All of this would somehow be funded with money recov-
ered by ending government graft—another crowd-pleasing promise.
Ma
While Sam Rainsy was away, it was Kem Sokha, a veteran human
rights advocate, who did most of the campaigning, while fending off
a slew of dubious lawsuits meant to derail him.
In light of the cnrp’s challenges, Hun Sen had good reason to feel
secure—which may explain why, a couple of weeks before the election,
he allowed Sam Rainsy to come home, as several Western governments

m
hi
ha
Loyal opposition: Sam Rainsy with lawmakers in Phnom Penh, August 2014
had been urging, by obtaining a royal pardon annulling Sam Rainsy’s
iT
prior convictions. After four years in self-imposed exile, Sam Rainsy,
the opposition leader in dark-rimmed glasses, with the look of a
dreamy, distracted professor, returned to Cambodia without fear of
arrest—although too late to run in the election himself, or to even
Al
cast a ballot.
Sam Rainsy arrived on July 19, and despite the blackout on state
media that day, he was greeted by a huge, ecstatic crowd. Tens of
od
thousands of people lined the road all the way from the airport to
the center of Phnom Penh, chanting, “B’do!”—“Change!” The last
night of the campaign, there were competing party concerts: the
cpp’s featured famous stars, smoke effects, portable toilets, and
so
boxed meals; the cnrp’s featured a rickety platform, with a single

spotlight, and half baguettes. This election would be a contest between
entitlement and enthusiasm.
It was a very close call. On the evening of July 28, 2013, after an
Ma
REUTE RS / SAM RANG PRING
election day unusually light on violence, the cpp promptly announced

that it had won 68 seats and that the cnrp had taken 55. (No other
party in the running won any.) Almost as promptly, the cnrp claimed
to have won 63 seats—and thus the election itself. Even going by the
government’s figures, this was a searing rejection of Hun Sen: the
cpp had lost 22 seats.

Stéphanie Giry
There were several reasons for the setback. Some 1.5 million voters
were first-timers, and being young, they had little memory of major
unrest; Hun Sen’s pledge to maintain stability had little traction
with them. Although Cambodia had become less poor, to many voters,
it seemed more unfair. Urbanization, coupled with the explosion
of social media, had heightened the awareness of inequality and of
impunity for the rich.
Sam Rainsy had also cleverly exploited widespread anti-Vietnamese
sentiment. The cpp’s common characterization of Vietnam as
m
Cambodia’s savior from the Khmer Rouge runs against the widely
shared view among Cambodians that their neighbor is an invader
and pilferer. Sam Rainsy had raged against abusive land conces-
hi
sions by claiming that they favored Vietnamese companies. This
was true, if incomplete—Chinese companies may benefit even
more—but the claim was a half argument that turned prejudice
ha
into righteousness.
Sihanouk’s death in October 2012 may also have boosted the
anti-cpp vote. Over the lengthy mourning period that followed,
iT
thousands of Cambodians of all ages, all classes, and all parts of the
country had gathered in front of the royal palace to pay homage to
the king. A French reporter based in Cambodia since 1999 told me
that period was the first time she had heard so many people seem
Al
so disaffected, and say so openly—and now, they lamented, Sihanouk,

the only real counterweight to Hun Sen, was gone. Footage broadcast
to commemorate Sihanouk’s heyday in the 1960s—images of large
od
factories, immaculate schools, and all-girl rock bands—also made

an impression: life under the cpp was better than it had been under
the Khmer Rouge, but it could be better still.
The political analyst Lao Mong Hay, who is in his 70s, almost
so
choked up when he told me after the election that he had never seen
Cambodians so fearless and free. At long last, he said, they had gone
from “being subjects” to “becoming citizens.”
Ma
MOST FREE AND LEAST FAIR

With the cnrp claiming fraud, it was invested with a double mandate:
not only had Cambodians voted for the party in unprecedented
numbers, but then they had been cheated of the real results. Nation-
wide, the difference between the cpp and the cnrp was only about
290,000 votes, out of approximately 6.6 million cast, and before the

election, ngos had warned of major structural problems affecting

many more people than that. The names of more than one million
eligible voters seemed to be missing from the official rosters. Yet the
lists contained 250,000 exact duplicates. And local authorities, most of
whom were cpp members, had distrib-
uted some 290,000 temporary voting
cards after the registration period.
Hun Sen is often called
The National Democratic Institute later “the strongman of
reported that an inordinately high Cambodia,” but that label
m
number of votes were cast for the cpp undersells his government’s
by voters using temporary cards. Koul
Panha, head of the Committee for skill at calibrating violence.
hi
Free and Fair Elections in Cambodia,
a watchdog group that sent out 11,000 monitors on voting day, told
me that if the 2013 election had been “the most free” in Cambodia’s
ha
history, it had also been “the least fair.”
But fraud is a tricky thing to prove or even identify. The name of
one of Kem Sokha’s daughters appeared on the registries of two
iT
districts—yet if the cpp had had a master plan, presumably it would
not have involved her voting twice. The supposedly indelible ink
used to identify voters could be washed off with a five-minute bleach
treatment. But that was the case also for the ink at the polling sta-
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tion used by Kem Sokha, and if there was one place in the entire
country where any election riggers would have made sure to use
good ink, it was there.
od
The difficulties of proving wrongdoing seemed like yet another

major hurdle for the cnrp’s leaders—but then again, if you can’t mea-
sure it, you might as well exaggerate it. After all, while getting in-
censed over cheating in general terms would help them rally their
so
supporters, not dwelling on the details would leave them room to

negotiate with the cpp. About a month after the election, Sam Rainsy
told me that at first, the cnrp’s leaders claimed to have won because
they were “on hot coals.” Now he preferred to say, “The spirit that
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truly reflects the situation is that there are two winners on an equal
footing.” The cnrp was still calling for an investigation, but only into
irregularities on election day and during ballot counting. This would
redistribute a few seats at most—allowing both the cpp to stay in
power and the cnrp to enter the National Assembly without looking
like a sellout.

Stéphanie Giry
One could call this a victory of pragmatism over principle and laud
the realism of the cnrp’s leaders for looking ahead rather than risk
stalling on a lost cause. But the move reeked of petty politicking. The
cnrp wasn’t openly explaining its strategy to the people whose votes
had brought it this far and whose will it claimed to represent.
PEOPLE POWER?
Aside from a couple of speeches, Hun Sen was mostly quiet in the
weeks after the election. Rumors circulated of stunned confusion
m
among the cpp’s leaders (how could voters be so ungrateful?) and of
growing rifts within the party. Officially, however, the cpp was pro-
ceeding with its new mandate in all formality, insisting that any
hi
complaints about the election should be addressed to the relevant
authorities—none with a reputation for independence. The cnrp
countered by announcing that it would boycott the National Assem-
ha
bly until an investigation was conducted. And in September, it
started staging mass rallies in Freedom Park, an awkward expanse
of tiled concrete in Phnom Penh designated by the government as
iT
an appropriate venue for free expression.
At times, the gatherings felt like town-hall meetings; at other
times, like country fairs. While onstage politicians made speeches
and ordinary people shared their grievances, hawkers waded through
Al
the crowd selling steamed clams and cubes of sugar cane. As the
occasional daytime rallies turned into overnight sit-ins, the country-
side seemed to take over the city. The students and young office
od
workers who had dominated pre-election gatherings gave way to

peasants with brittle bodies and pruned faces.
The rallies were small and civil compared to the ones that toppled
governments in Egypt and Ukraine in recent years, but for Cambodia,
so
they were without precedent in scale and daring. How long would
Hun Sen put up with such defiance? The cnrp was scrupulous about
stating its commitment to nonviolence. At the same time, it tolerated,
and sometimes seemed to stoke, anti-Vietnamese sentiment. Comedi-
Ma
ans were allowed to perform incendiary skits on the stage at Freedom

Park. Considering that the most serious brawls reported on election
day—near lynchings—had targeted people suspected of being Viet-
namese, this smacked of easy populism and seemed irresponsible.
It also seemed like an implicit admission of weakness. The cnrp
was up against the cpp’s vast machinery, with few means to match it.

Even the cnrp’s main asset, popular support, had a shortcoming: the
party was trying to ride a protest vote—a vote that hadn’t endorsed it
so much as rejected Hun Sen. And in its attempt to leverage some-
thing that wasn’t entirely its to claim, at times the cnrp betrayed a
view of the masses that was not only instrumentalist and patronizing
but also almost feudal in its assumptions about the relationship
between people and power.
One day in late September, the opposition dispatched support-
ers to ask the king to rescind a letter formally convening the new
m
National Assembly. A dozen women sat by barricades a couple of
blocks away from the royal palace guarding boxes with petitions
stamped with 265,788 thumbprint marks, they claimed. They were
hi
waiting for a representative of the palace to accept the delivery.
Clouds gathered, a drizzle threatening, and a blue tarp was thrown
over the boxes. Finally, someone came out to say that the king
ha
would hear the people’s plea. A rickshaw was commissioned, the
heavy boxes were stacked high onto the single seat, and the scrawny
driver rode off toward the royal gate, his charge teetering.
iT
A few days later, the National Assembly met as planned, without
the opposition. Yet in late October, the cnrp again sent out support-
ers bearing petitions to appeal to a higher authority. Hundreds of
demonstrators marched to the un’s human rights office to deliver a
Al
truckful of papers demanding an investigation into the July election:

two million thumbprints, allegedly, representing almost 13 percent
of the country’s total population. The boxes sat in a storage room for
od
weeks, awaiting a bill of lading from un headquarters in New York.

So much for Lao Mong Hay’s hope that Cambodia’s subjects had
finally become citizens; on those occasions, they were cast in the role
of supplicants—and to little effect. As the fall wore on, more and
so
more states formally recognized Hun Sen’s new government. Their

diplomats in Phnom Penh were growing frustrated with the cnrp’s
antics, wishing the party would just take its seats in parliament and
get down to the hard work of being an opposition party. The crowd in
Ma
Freedom Park was starting to thin.
PRISONER’S DILEMMA
The cpp, for its part, was regrouping. A few of the party’s more
worldly and dynamic members were brought into the government.
The Commerce Ministry announced a campaign to cut back on

Stéphanie Giry
unofficial payments by automating the filings that all businesses

have to make. The education budget was increased. One cabinet
member told me then that the election results had been “a wake-up
call”; the party’s survival depended on accelerating reform.
But there were obstacles. Tackling large-scale corruption would
unsettle the patronage networks that prop up cpp elites. Going after
small-time graft might please Cambodians fed up with petty shake-
downs, but it could alienate bureaucrats, who are underpaid and
need the extra cash. There was also
m
the knock-on effect of rising expecta-
Today, as ever, the most tions: when garment workers asked
explosive issue for for a wage increase to more than $150
hi
Cambodians is Vietnam. per month, teachers asked for $250,
and civil servants for $500. Some
weeks earlier, I had asked Sam Rainsy if he worried that the cpp
ha
might undermine the cnrp by getting ahead of its program. He
had answered: “The problem is more complicated. Hun Sen isn’t
just the head of a system; he is its prisoner.”
iT
By late fall, it looked like Sam Rainsy was a prisoner of that system,
too. The cnrp was making little headway on negotiations with the
cpp, even after downgrading its conditions for taking its seats in the
National Assembly—now, basically, it was demanding only to receive
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a television license and the presidency of some parliamentary commis-

sions. If the cnrp ever came to power, given its limited experience in
government, it would have to rely on bureaucrats loyal to the cpp.
od
Even the opposition’s policy of nonviolence was held hostage to its

assumption, widely shared, that at any moment the government might
still resort to force.
Hun Sen is often called “the strongman of Cambodia,” but that
so
label undersells his government’s skill at calibrating violence. After

an initial display of troops, water cannons, and barricades with razor
wire in response to the postelection protests, state security forces had
pulled back to a remarkable extent. But there were a few brutish
Ma
crackdowns on small protests far from Freedom Park—just a reminder.

And Hun Sen would occasionally warn of the mysterious “third hand,”
code for thugs, infiltrators, and agents provocateurs, who might cause
trouble for the demonstrators.
Yet in late December, the cnrp doubled down, announcing that it
would hold regular marches until Hun Sen resigned and early elections

were scheduled. Around then, the garment workers’ movement stirred.

A group of independent unions announced a mass strike until the
minimum wage was raised from $80 per month to $160—the govern-
ment’s own estimate, roughly, of a living wage. Since the industry
accounts for around 80 percent of Cambodia’s export revenues, that
could mean a major economic disruption. Sam Rainsy went to a
factory area by the Vietnamese border and encouraged workers to
strike: “We have to be together. I support all of you until you reach
success. And I’ll be with you and protect you all.”
m
The cnrp’s parade on December 29 through the heart of Phnom
Penh was its largest demonstration yet, perhaps 100,000 strong, and
it was the first time garment workers joined en masse. The Ministry
hi
of Labor, which had just announced an increase in the workers’
minimum wage, to $95 per month, now raised it to $100, while demand-
ing that the striking workers return to their factories no later than
ha
January 2. That day, a protest at a plant on the outskirts of Phnom
Penh was repressed by an elite paramilitary unit. Another protest
at a nearby plant degenerated—with bonfires and looting—and the
iT
next day, security forces quashed it by shooting into the crowd,
killing five people.
The day after that, bullet casings, allegedly from the factory shooting,
were put on display at the cnrp’s headquarters. Sam Rainsy condemned
Al
the killings and reaffirmed the party’s commitment to nonviolence. But

he also made a lengthy, coldly mathematical case demonstrating that
the minimum wage could be raised to $160 per month without under-
od
cutting Cambodia’s competitiveness. The cnrp, he said, backed the

cause of garment workers by offering them “arguments” and “intellec-
tual support.” Considering the deadly events of the day before, it was
a kind of support that sounded a lot like distancing.
so
If Sam Rainsy’s message was intended as a gesture of conciliation

to Hun Sen, it was too subtle or it came too late. Just hours after he
delivered it, state security forces and masked thugs wielding batons
and metal pipes raced into Freedom Park and forcibly flushed it of
Ma
opposition supporters. The authorities issued a ban on any assemblies

of more than ten people.
The raid on Freedom Park stripped the opposition of its greatest
showcase. But it also exposed the government’s ruthless defensive-
ness. The result was a draw of sorts. Sam Rainsy had the people on his
side, and Hun Sen had state force, but neither was decisive.

Stéphanie Giry
THE COSTS OF COMPROMISE

The spring of 2014 was quiet, predictably. Some activists were arrested.
Security forces were congratulated. While Sam Rainsy toured foreign
capitals, Mu Sochua, a former minister of women’s and veterans
affairs and a cnrp member who had won a seat in parliament,
started a one-woman campaign to reclaim Freedom Park, staging
repeat solo sit-ins there. On July 15, she went with reinforcements.
There was a clash and arrests. Sam Rainsy flew back from abroad, and
within days struck a bargain with Hun Sen: the government would
m
release the cnrp members who had been arrested, and everyone
would finally take their seats in the National Assembly. The “culture
of dialogue” was born.
hi
For the cpp, the benefits were obvious: an end to this crisis, a
sop to foreign investors, and a chance to co-opt the cnrp. For the
opposition, the results were more mixed. Kem Sokha would become
ha
the vice president of the National Assembly. The cnrp would head
five parliamentary commissions, including a new one devoted to
anticorruption. A new election commission, tasked with drawing
iT
up entirely new voter lists, would be set up. But many of these gains
were symbolic, and the more significant ones hinged on details of
implementation that were to be determined later.
The deal also exposed the cnrp’s weaknesses. Senior members and
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party advisers complained that Sam Rainsy had struck the deal with
Hun Sen without consulting them enough. The new election commis-
sion would not include members from any political parties other than
od
the cpp and the cnrp. Mu Sochua later justified this to me by saying
that no other party had won any seats in the 2013 election—never
mind the idea that smaller actors should have a say in shaping the
system. The cnrp’s objective wasn’t pluralism, or even leveling the
so
playing field; it was securing power.

A year later, the cnrp has obtained a license to operate a televi-
sion station, but the permit is up for renewal annually. Although
all the cnrp activists who were jailed have been released, the cases
Ma
against them are “frozen,” as Sam Rainsy put it, meaning that
they could be reactivated. The new election commission must re-
register an estimated ten million eligible voters in time for local
elections in early 2017. As of July, however, its next secretary-
general—the person in charge of the administration that will
oversee the actual registration—had not been selected. For the time

being, the incumbent from the old, suspect commission remained

in the post.
The National Assembly has passed a raft of laws that many ngos
have decried for reining in civil society and trade unions. The cnrp
has objected to these bills, sometimes with vehemence. But its com-
mitment to the “culture of dialogue” acts as a cap on such criticism.
After a legislator from the cnrp questioned the administration of
the Red Cross, which is headed by Hun Sen’s wife, the prime minister
challenged Sam Rainsy to take an oath at a famous shrine and vow
m
to “die through bullets, lightning and everything” if that accusa-
tion—or the ones about the 2013 election being rigged—turned out
to be wrong.
hi
The cnrp’s leaders seem to have tied their own hands, and this is
alienating some supporters, most visibly on social media and among
Cambodians in the United States, a significant source of funding.
ha
When I spoke to him in late June, Kem Sokha estimated that the
cnrp’s rapprochement with Hun Sen may have cost the party ten
percent of its backers and that another 50 percent were skeptical, wait-
iT
ing to see concrete results.
Mu Sochua, however, was crediting the “culture of dialogue” with
enabling the cnrp to “penetrate the base” and start building up sup-
port for the local elections in 2017 and the general election in 2018.
Al
With détente now an official policy of the government, she explained,

cpp agents were no longer intimidating opposition supporters.
For Sam Rainsy, the cnrp has time on its side: the population of
od
Cambodia is getting younger, and that demographic shift, he believes,

can only serve his party. But his talk of happy inevitability suggests a
different kind of resignation. In an interview in late June, he invoked
the end of apartheid in South Africa, amnesties, and truth and recon-
so
ciliation commissions to argue that Hun Sen needed assurances that

he would not be prosecuted after leaving power. And the more Sam
Rainsy talked about ways to encourage Hun Sen to step down, the
more he seemed to be at the man’s mercy.
Ma
VIETNAM SYNDROME
Hun Sen has shown little sign of wanting to go. During the cpp’s
congress in June, his candidacy for 2018 was announced and he was
elected party president, in place of his longtime rival Chea Sim, who
had recently died. The interior minister, a protégé and brother-in-law

Stéphanie Giry
of Chea Sim, was promoted to vice president—as was a longtime

cpp operative with detailed knowledge of the party apparatus. The
cpp was closing ranks. Already, it had promoted the children of
some party bigwigs and vastly expanded its Central Committee to
include many officers and officials with command authority over
security forces.
It was also continuing to undertake reforms, especially in areas
readily visible to ordinary people, such as education. The minimum
wage for garment workers had gone up to $128 per month, and David
m
Welsh, a labor rights activist, forecast other increases—although
probably no significant ones until just before the next election. Accord-
ing to the political scientist Kheang Un, the cpp dispatched working
hi
groups after the 2013 election to sound out constituents regardless
of their political affiliation. The party finally seemed to understand
that it must be more responsive to the needs of more people, not
ha
just its supporters.
Whether or not these measures can win back Cambodians who
voted for the cnrp in 2013, they are reminders of the stark disparity
iT
in resources available to the two parties—a vast gap that may explain
why the cnrp often winds up having to play Hun Sen’s game and,
perhaps inevitably, adopts confused views and shoddy tactics. When,
for example, Sam Rainsy says that the cnrp is committed to nonvio-
Al
lence, he doesn’t just mean that the party won’t resort to violence; he
also means that it doesn’t want its supporters to suffer any violence
themselves. But how strong is a nonviolent movement that refuses to
od
take a hit? And so at the same time that Sam Rainsy repeatedly called
for calm, he also seemed to be playing with fire, coyly. He embraced
the workers’ movement and appealed to anti-Vietnamese sentiment
as though he wouldn’t mind sparking a revolution, but only with
so
plausible deniability. (An uprising? Who, me?)

Today, as ever, the most explosive issue for Cambodians is
Vietnam—in particular, its alleged encroachment on Cambodian
territory and the illegal immigration of Vietnamese to Cambodia.
Ma
It is also, of course, the most embarrassing issue for Hun Sen: an

awkward reminder that he was first installed in office by the enemy.
In June, the cnrp was busy trying to exploit this, with some of its
legislators leading groups of supporters to areas of the border
that were being demarcated and clashing with Vietnamese officials
and residents there.

Yet getting Cambodians riled up over sovereignty issues also plays

into Hun Sen’s hands. In response to the cnrp’s border visits, the
Cambodian government promptly sent formal notes of complaint to
Vietnam and started cracking down on undocumented immigrants,
with unprecedented sweeps, roundups, and deportations. Hun Sen
also asked un Secretary-General Ban Ki-moon for access to authori-
tative colonial-era maps of Cambodia that the un possesses. They
were needed, Hun Sen claimed, in order to monitor the boundary’s
delimitation, as well as curb the “incitement of extreme nationalism”
m
in “some quarters.” As ever, Hun Sen was portraying himself as a
guarantor of stability.
During my last interview with Sam Rainsy, in late June, I asked
hi
him about the cpp’s apparent attempts to get ahead of the cnrp
again—this time on the Vietnam question. “All the better,” he
answered; were the cpp to implement the cnrp’s policies, it would be
ha
a “political and moral victory” for the party and an “ultimate victory”
for the Cambodian people. But it would also be a personal victory for
Hun Sen: finally taking a stand against Vietnam is his best chance to
iT
redeem his legitimacy as well as burnish his legacy.∂
Al
od
so
Ma

An Unworthy Ally
Time for Washington to Cut Pakistan Loose
C. Christine Fair and Sumit Ganguly
m
ver since 9/11, the United States has provided Pakistan with a
steady supply of security and nonsecurity assistance. U.S. officials
have justified these generous transfers—worth more than $30
hi
billion since 2002—on the grounds that they secure Pakistan’s ongoing
cooperation in Afghanistan, bolster Pakistan’s ability to fight terrorism,
and give the U.S. government influence over the country’s ever-
ha
expanding nuclear weapons program. Failing to deliver this support,
the argument runs, could dramatically weaken the will and capacity
of Pakistan’s security forces and possibly even lead to the collapse of
iT
the Pakistani state. In that event, Pakistan’s nuclear know-how, material,
or weapons could well fall into the hands of nefarious actors.
Yet that logic is fundamentally flawed. Many of the weapons Wash-
ington gives Islamabad are ill suited to fighting terrorism, and continued
Al
transfers will do nothing to convince the Pakistani government to end its

long-standing support for terrorist groups. In fact, U.S. assistance gives
Pakistan an incentive to foster a sense of insecurity concerning its
od
nuclear arsenal and expanding ranks of jihadists.

Since the current approach has little chance of aligning Pakistan’s
interests with those of the United States, the time has come for Wash-
ington to change course. If Washington cannot end Pakistan’s noxious
so
behaviors, it should at least stop sponsoring them.
OLD HABITS DIE HARD

Pakistan’s reliance on militant proxies is as old as its very existence as
Ma
an independent state. As early as 1947, when Pakistan was emerging

C. CHRISTINE FAIR is Associate Professor in the Security Studies Program at Georgetown
University’s Edmund A. Walsh School of Foreign Service and the author of Fighting to the End:
The Pakistan Army’s Way of War. Follow her on Twitter @CChristineFair.
SUMIT GANGULY is Professor of Political Science and Rabindranath Tagore Chair in
Indian Cultures and Civilizations at Indiana University, Bloomington. He is the author of the
forthcoming book Deadly Impasse: India and Pakistan at the Dawn of a New Century.

An Unworthy Ally
m
hi
ha
iT
Al
od
from the collapse of the British Raj, the new government was backing
so
anti-Indian tribal militias in the disputed territory of Kashmir. In

Afghanistan, meanwhile, by 1950, Islamabad was promoting a Pakistan-
based Islamist party known as Jamaat-e-Islami. Members of that party
would later become prominent mujahideen who, with the backing of
Ma
Pakistan’s intelligence agency, the Inter-Services Intelligence (isi),

would go on to fight both Afghanistan’s pro-Soviet leaders and Soviet
troops in Afghanistan in the 1970s and 1980s. After 1989, Pakistan
redeployed these battle-hardened fighters to Indian Kashmir, where
they displaced indigenous secular nationalist insurgents in their battle
against Indian rule in the province.

Pakistan’s support for nonstate actors has not been limited to

Islamist groups. From the late 1970s until the mid-1990s, the Pakistani
government funded and trained Sikh separatists in their bloody
campaign of terror in India’s Punjab region. It also sponsored various
ethnonationalist rebels in northeastern India until the 1970s, when
East Pakistan achieved independence as Bangladesh and China cut off
its support for the insurgents. Pakistan’s support for these groups
attests to its strategic compulsion to work against India, beyond its
more commonly appreciated Islamist ideological objectives.
m
Pakistan has come to rely on nonstate actors in Afghanistan and
India because they are relatively inexpensive and disproportionately
effective. They shield the state from the risks of deploying regular
hi
forces while affording its officials a degree of plausible deniability.
Pakistan’s nuclear capacity, meanwhile, has allowed Islamabad to use
these actors with the knowledge that its neighbors, particularly
ha
India, will hesitate to retaliate. That Pakistan can request foreign
assistance to contain the menace of its wayward proxies compounds
their appeal. Jihadist organizations are integral to Pakistan’s regional
iT
strategy. For the country’s security establishment, the notion of cut-
ting them off is anathema.
PUNISHED BY REWARDS
Al
Even as they support terrorist groups that threaten U.S. interests,

Pakistani officials are wont to claim that Washington has been a
perfidious ally. They note, for example, that the United States failed
od
to come to Pakistan’s aid during its 1965 and 1971 wars with India,
despite a bilateral defense pact signed in 1954 and shared commit-
ments under the Central Treaty Organization and the Southeast Asia
Treaty Organization. They claim that the United States drew Pakistan
so
into an anti-Soviet jihad in Afghanistan in the 1980s and then aban-

doned Islamabad, leaving it to deal with the aftermath of the conflict
once U.S. objectives had been achieved. And they claim that Washington
unjustly withheld an order of F-16 fighter jets that Pakistan had agreed
Ma
to purchase, because of sanctions imposed in 1990.

Yet in all these instances, Pakistan’s historical retelling is either a
distortion of reality or an outright fiction. For starters, the United
States was not obligated to help Pakistan in its 1965 war with India, both
because Pakistan had initiated that conflict and because Washington’s
various agreements with Islamabad pertained only to communist

An Unworthy Ally
threats. In fact, even though sanctions imposed on both India and

Pakistan after the 1965 war legally prohibited the United States
from helping Pakistan when conflict with India reignited over East
Pakistan in 1971, the Nixon administration nonetheless came to
Islamabad’s assistance. Indeed, President Richard Nixon bent
U.S. law to authorize military aid even as American officials under-
stood that Pakistan was committing genocide against ethnic Bengalis
in East Pakistan.
Over the next decade, Washington would repeatedly compromise
m
its commitment to nuclear nonproliferation to the benefit of Pakistan’s
military rulers. When Afghanistan became mired in Soviet-backed chaos
in December 1979, for example, the ad-
hi
ministration of U.S. President Jimmy
Carter decided to drop the nuclear-
Nixon bent the law to
related sanctions it had imposed on Pak- authorize military aid
ha
istan earlier that year and instead sponsor even as Pakistan was
Pakistan’s efforts to oust Soviet forces committing genocide.
from Afghanistan. Yet Pakistani Presi-
iT
dent Muhammad Zia-ul-Haq rebuffed
Carter’s offer of some $325 million in aid as “peanuts,” betting that a
Republican president would offer Pakistan a better deal after the 1980
election. He was right. After assuming office in January 1981, Ronald
Al
Reagan secured a waiver of the 1979 sanctions, and by 1982, the United
States had initiated a six-year aid package worth some $3.2 billion.
As for the claim that Islamabad was drawn into Washington’s Afghan
od
jihad, the chronology suggests otherwise. Seeking leverage against

the government in Kabul, Pakistan had been supporting Islamist mili-
tants in Afghanistan at its own expense since 1974—five years before
Soviet troops crossed into the country. In other words, Pakistan
so
brought the United States, and its wallet, into a campaign it had been
pursuing on its own for years.
Then there is the myth about the F-16 fighter jets. By 1984, cia
staff working on nonproliferation issues, along with some members of
Ma
Congress, had become concerned that Pakistan was advancing its nu-
clear weapons program on the United States’ dime. Others in the
White House and Congress, as well as those running the cia’s covert
operations in Afghanistan, maintained that Washington should continue
to set aside its nonproliferation goals in favor of countering the Soviet
threat in Afghanistan.

The Pressler Amendment, passed in 1985, attempted to resolve

these conflicting sentiments by moving the nuclear redline that would
trigger the cessation of U.S. aid: from the achievement of technical
advances in Pakistan’s nuclear program
Bush administration officials to the possession of a nuclear weapon.
(Many Pakistanis mistakenly believe
believed they had to right that Congress passed the amendment
the wrongs of a past they specifically to harm Pakistan, but the
seem to have misunderstood. Pakistani Ministry of Foreign Affairs
m
was in fact actively involved in getting
the legislation passed.) The amendment
simply required the president to certify that Pakistan did not have a
hi
nuclear device for U.S. aid to continue. And the many discrepancies
among interagency assessments of Pakistan’s nuclear status allowed
him to do so without perjuring himself.
ha
But over the next five years, as Pakistan continued to advance its
nuclear program, it became increasingly difficult to certify that
Pakistan had not built a nuclear weapon. Finally, in 1990, President
iT
George H. W. Bush declined to do so, and the sanctions that Carter
had enacted in 1979 came back into force.
The renewed sanctions prevented Pakistan from taking possession
of 28 American F-16s it had agreed to buy in the early 1980s. The
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planes sat unused in the Arizona desert, accruing storage fees for
Pakistan. Although the Clinton administration eventually resolved
the dispute by finding a third-party buyer and then reimbursing the
od
Pakistani government, Pakistan would later exploit the F-16 imbroglio

to its own benefit. In 2005, after four years of Pakistani lobbying, the
George W. Bush administration agreed to sell Pakistan as many F-16s
as it cared to purchase. A 2009 State Department cable would later
so
reveal that the F-16 sales were meant, in part, to exorcise the “bitter
legacy” of the Pressler Amendment. Yet the Pressler Amendment
was hardly an instance of American perfidy, and the F-16 sales
thus validated a key Pakistani myth about American behavior. Bush
Ma
administration officials believed they had to right the wrongs of a

past they seem to have misunderstood.
The 36 updated F-16s the U.S. government eventually sold to
Pakistan would lay the cornerstone of its future relationship with
Islamabad. The planes were only part of a broader provision of
weaponry: in the years since 9/11, the United States has also supplied

An Unworthy Ally
the country with 15 reconnaissance drones, 20 Cobra attack heli-

copters, six C-130 Hercules transport aircraft, a Perry-class missile
frigate, and many other armaments.
The weapons systems were accompanied by direct financial assistance.
The Bush administration used the Coalition Support Fund, initially
intended to reimburse Pakistan for the costs of assisting the U.S. military
in Afghanistan, to secure Pakistani cooperation on the maintenance of
transit corridors into Afghanistan and to encourage Pakistan’s army to
confront militants in the country’s tribal areas. Although these policies
m
began during the Bush years, they have continued, with some modifi-
cations, under the Obama administration. And despite Barack
Obama’s understanding of Pakistan’s misdeeds—demonstrated, for
hi
example, in a 2009 white paper on U.S. policy toward the country—
his administration, like his predecessor’s, has failed to develop policies
that limit American complicity in them. As a result, Washington has
ha
continued to pay Pakistan to do what any sovereign state should do:
eliminate terrorists exploiting its territory.
All the while, the United States has not required Pakistan to stop
iT
backing militant groups, such as the Afghan Taliban and Lashkar-e-
Taiba, even as Islamabad battles those militants who have turned
against the state. Indeed, Islamabad has created a permanent revenue
stream by arguing that so long as it is fighting militants, it should be
Al
entitled to U.S. aid. The United States has been willing to comply
because it considers the security of Pakistan’s nuclear weapons a core
national interest.
od
The strategic demands of today’s South Asia are distinct from those
of the Cold War era, but the central dynamic of U.S.-Pakistani relations
remains constant. The United States turns a blind eye to Pakistan’s
misdeeds because it depends on the country’s leaders to counter U.S.
so
enemies in the region—first the Soviets, now the mélange of militant

groups active in Afghanistan and Pakistan. As a result, the United
States has subsidized both the expansion of Pakistan’s nuclear arsenal
and its stable of Islamist terrorists through programs ostensibly created
Ma
to manage those same concerns.
NO MORE CARROTS
Past attempts to induce Pakistan to change its behavior have largely
failed, and there is little reason to believe that a change in course is
imminent. Indeed, what little convergence of interests existed between

Washington and Islamabad during the Cold War has long since disap-
peared. After six decades of policy predicated on Pakistani blackmail,
it should be possible to achieve U.S. interests with a different approach.
A strategy of containment is the United States’ best option.
Above all, U.S. relations with Pakistan should be premised on the
understanding that Pakistan is a hostile state, rather than an ally or
a partner. To be sure, accepting that reality does not mean aban-
doning Pakistan altogether. The United States should maintain its
diplomatic relations with Pakistan, and it should address a long-
m
standing Pakistani complaint by providing Pakistani products
greater access to American markets, signaling that Washington
takes Islamabad’s legitimate concerns seriously enough to risk the
hi
ire of domestic business interests. It should also continue training
Pakistanis in critical capacities such as peacekeeping, disaster relief,
and civil-military relations through the U.S. government’s Interna-
ha
tional Military Education and Training program. And it should
continue to provide Pakistan with modest assistance in such areas
as basic health care, gender equality, and primary and occupational
iT
education. Yet it must delink that help from the failed counter-
terrorism programs with which many such human development
programs are currently bundled. And above all, Washington must
end its support for the country’s turgid military establishment, which
Al
sustains a perverse strategic culture that has ill served Pakistani

and U.S. interests for decades.
To that end, the United States should stop supplying Pakistan
od
with strategic weapons systems, and it should prevent Pakistan

from replacing and repairing those pieces of equipment that it has
already received. The provision of U.S. weapons cannot reshape
Pakistan’s will to maintain its militant proxies, but those weapons
so
do equip Pakistan to challenge India. Indeed, the vast majority of

the weapons systems provided to Pakistan since 2001 are better
suited for a conventional conflict with its neighbor than for internal
security operations. These transfers undermine U.S. efforts to cultivate
Ma
a relationship with India, an important democratic partner on a range

of crucial issues, from securing regional sea-lanes to managing
China’s rise.
Washington should also reconsider its approach to Pakistani civil
society. In the past, it has reached out to some of Pakistan’s illiberal
groups, including members of the Islamist political parties Jamaat-e-

An Unworthy Ally
Islami and Jamiat Ulema-e-Islam, because it was eager to demon-

strate goodwill toward Muslim organizations amid the tensions of
the so-called war on terror. But this policy gave such organizations
credibility they did not deserve. Both Jamaat-e-Islami and Jamiat
Ulema-e-Islam, for example, have long-standing ties to militant
groups. Powerless to reform such or-
ganizations, the United States should
instead direct its resources toward
Only when Pakistan’s tax
those groups whose values and goals base is broadened will
m
align most closely with U.S. interests. citizens begin to hold their
To this end, Washington should sup- government accountable.
port those elements of Pakistani civil
hi
society—locally operating anticorrup-
tion and human rights groups, for example—that seek a democratic,
pluralistic, and stable country. Doing so effectively will require
ha
better social intelligence on Pakistan and, in turn, American personnel
with deeper in-country experience.
Repairing Pakistan’s civil-military relations, on the other hand,
iT
will require reforming the country’s tax system. Today, less than
one percent of Pakistanis pay income taxes, and the country’s tax-
to-gdp ratio is among the world’s lowest. Only when Pakistan’s
tax base is broadened will citizens begin to hold their government
Al
accountable for its overinvestment in defense and underinvestment

in human development. Washington should therefore encourage
the International Monetary Fund to condition new agreements
od
with Pakistan on the completion of promised economic reforms,

including an overhaul of its tax system. In the past, Pakistan’s con-
fidence that it was too dangerous to fail has allowed it to renege on
its promises to international lenders. Allowing Pakistan to face the
so
consequences of its failures may force it to fix its economic policy

in the future.
Should Pakistan continue to back nonstate actors, the United States
should aggressively use every tool available to sanction Pakistanis—
Ma
ordinary citizens, military and civilian officials, and militant leaders—

who engage in or sponsor terrorism. Many of Pakistan’s elite travel to
the United States for medical treatment or to visit family members;
Washington should deny visas to those Pakistanis linked to terrorist
activity by credible intelligence.

In a related vein, the United States should curb the ability of militant
groups based in Pakistan to project power internationally. All the
major Pakistan-based and Pakistan-backed militant groups—including
Lashkar-e-Taiba, the Pakistani and Afghan Taliban, and Jaish-e-
Mohammed—raise funds, spread propaganda, or recruit fighters
abroad. The United States should work with the relevant countries to
detain and charge people involved in such activities. And in consultation
with foreign governments, Washington should also consider expanding
the Joint Special Operations Command’s targeting program to capture
m
and kill high-value militants, in South and Southeast Asia and in
those European and Middle Eastern countries where militant groups
have extensive infrastructure.
hi
Finally, the United States should remove itself from Pakistan’s
nuclear coercion loop. It is questionable whether the billions of
dollars in aid sent to Islamabad over the past six decades has bought
ha
the United States actionable information on the Pakistani nuclear
program. What is evident, however, is that Pakistan uses its nuclear
arsenal to extract rents from the United States and to deter India
iT
from retaliating against attacks by its militant proxies. With this in
mind, the United States should make two points clear to Pakistan.
First, Washington should tell Islamabad that it will be held accountable
if any of its nuclear material is found in the hands of another state or
Al
nonstate actors. Punitive measures could well include air strikes on

Pakistan’s nuclear facilities. And second, although in the past the
United States has pushed India to de-escalate the situation in the
od
aftermath of Pakistani-sponsored terrorist attacks, Washington should

tell Pakistan that it will not intervene in any future crises. How New
Delhi decides to respond to Pakistani provocations should be its
decision, not Washington’s.
so
Without a doubt, ending Washington’s deference to the Pakistani

military would be a dramatic shock to Pakistan’s political system. But
if such a strategy is implemented with care and vigor, it will offer a
feasible alternative to ongoing attempts to conciliate Pakistan’s generals
Ma
in the false hope that they might somehow develop interests aligned
with those of the United States.
FROM RESILIENCE TO REFORM

Critics of radically reorienting U.S. policy toward Pakistan argue that
cutting the country off would be ineffective at best and dangerously

An Unworthy Ally
destabilizing at worst. They claim, for example, that U.S. sanctions in

the 1990s failed to prevent Pakistan from acquiring a nuclear weapon
and testing it in 1998 and that a punitive approach would be similarly
fruitless today. But the chronology of this argument is confused:
although Pakistan tested its first nuclear weapon in 1998, the country
had assembled the materials for a bomb by the late 1980s, well before
U.S. sanctions came into force.
Nor did the cutoff of aid in 1990 lead to the Taliban’s takeover
of Afghanistan and 9/11, as proponents of continued support for
m
Pakistan contend. To the contrary, the emergence of the Taliban
had everything to do with the United States’ withdrawal of support
for reconstruction in Afghanistan and its willingness to let Pakistan
hi
orchestrate events there after the Soviets left. These decisions had
nothing to do with the cutoff of aid to Pakistan per se. Indeed,
Pakistan worked relentlessly to install an Islamist government in
ha
Afghanistan after the Soviet retreat, first under Gulbuddin Hekmatyar
and later under the Taliban, in an attempt to keep Indian influence
out of Kabul.
iT
The collapse of Afghanistan in the wake of the Soviet withdrawal
nevertheless offers a number of cautionary tales for policymakers
managing the drawdown of the U.S. presence there. To begin with,
U.S. diplomats should recognize that a negotiated settlement between
Al
Kabul and the Afghan Taliban, facilitated by Pakistan, would advance

Pakistan’s interests, not those of the United States. Any such agree-
ment would install Taliban commanders in posts that they did not
od
have to earn at the ballot box, undermining the country’s democratic

gains and providing renewed safe havens for Islamist militants
supported by Pakistan.
Americans must also understand the risks of diminishing their
so
financial support for the Afghan government. After the Soviet Union
cut off aid to Afghanistan in 1991, Islamist militants managed to wrest
control of the country from Mohammad Najibullah, the Afghan
president who had been backed by Moscow. When the last American
Ma
check is cashed, the Afghan government will become ever more

vulnerable to Pakistani depredations.
Advocates of continued aid to Islamabad often argue that Washington
needs Pakistan’s cooperation to bring supplies to Afghanistan via
Pakistani routes. But this is not the case. When Pakistan restricted
U.S. access to supply routes in 2011, the United States managed to

transport goods to Afghanistan by air and through Central Asia. That

policy may have been temporarily expensive, but as the United States
diminishes its presence in Afghanistan, it should likewise be able to
do so without relying on Pakistan.
Perhaps the greatest concern raised by advocates of the status quo
is that discontinuing aid would lead to the collapse of the Pakistani
state and the arrival of Islamist terrorists at the nuclear gates. Yet
Pakistan is far more resilient than most analysts appreciate, and state
failure is not in the offing. When Pakistan became independent, in
m
1947, it faced a daunting set of challenges. It lacked a functioning
national democratic party. Its ministries and armed forces were short-
staffed and dysfunctional. Large portions of its population were
hi
resentful of Islamabad’s rule. And it was ill equipped to police the
dangerous border with Afghanistan that it had inherited from the Raj.
At the time, British and some Indian leaders expected the country to
ha
collapse and merge with its neighbor.
It never did, of course, and over the next nearly seven decades,
equally difficult challenges would arise, the loss of East Pakistan and
iT
massive natural disasters among them. Through them all, Pakistan has
managed to persist—in large part due to the competence of the country’s
armed forces and the strength of its civil society groups, which remain
effective despite their frequently illiberal goals.
Al
Pakistan will not fail. Under U.S. pressure, it is more likely to

undertake crucial political and fiscal reforms. If it does, the result
will be better for Pakistanis, better for U.S. interests in South Asia,
od
and better for anyone interested in a Pakistan at peace with itself and
its neighbors.∂
so
Ma

essays
The Ukraine crisis

has forced Europeans to
face up to the fact that
their political model is not
m
attractive to everyone.
—Ivan Krastev and
hi
Mark Leonard
ha
iT
Al
od
so
Europe’s Shattered Dream of Order From Calvin to the Caliphate

Ivan Krastev and Mark Leonard 48 John M. Owen IV 77
Ma
Protecting America’s Competitive Drone On

ReuteRs / F Rancois LenoiR
Advantage Gretchen West 90

Fred P. Hochberg 59
The Democratization of Space
In Defense of Financial Innovation Dave Baiocchi and William Welser IV 98
Andrew Palmer 66
The Precision Agriculture Revolution
Jess Lowenberg-DeBoer 105
Europe’s Shattered Dream

of Order
How Putin Is Disrupting the
Atlantic Alliance
m
Ivan Krastev and Mark Leonard
U hi
ntil recently, most Europeans believed that their post–Cold
ha
War security order held universal appeal and could be a model
for the rest of the world. This conviction was hardly surprising,
since Europe has often played a central role in global affairs. For much
iT
of the last three centuries, European order was world order—a product
of the interests, ambitions, and rivalries of the continent’s empires.
And even during the Cold War, when the new superpowers stood on
opposite sides of the continent, the central struggle was between two
Al
European ideologies, democratic capitalism and communism, and

over control of the European lands in between.
Still, it was not until 1989 that a distinctly European model of inter
od
national conduct emerged, one that represented a radical departure

from the assumptions and practices that still held elsewhere. In June
1989, communist authoritarians in China crushed that country’s
nascent pro democracy movement; that same year, communist author
so -
itarians in Europe gave way without a fight as the Berlin Wall fell. For
Europe’s leading intellectuals, this moment signified more than the
conclusion of the Cold War; it marked the beginning of a new kind of
peace. “What came to an end in 1989,” the British diplomat Robert
Ma
Cooper wrote some years later, “was not just the Cold War or even, in
IVAN KRASTEV is Chair of the Centre for Liberal Strategies, in Sofia, and Permanent
Fellow at the Institute for Human Sciences, in Vienna.
MARK LEONARD is Co-Founder and Director of the European Council on Foreign
Relations. Follow him on Twitter @markleonard.

Europe’s Shattered Dream of Order
a formal sense, the Second World War” but “the political systems of
three centuries: the balance of power and the imperial urge.”
Indeed, the Cold War ended without a peace treaty or a parade—it
seemed at the time a victory for both sides—and Europe’s new system
washed its hands of old notions of sovereignty. Continental leaders
were not interested in creating new states, as they had been after
World War I. Nor did they move people around to secure existing
ones, as they had done following World War II. Instead, they sought
to change the nature of borders themselves, encouraging the free flow
m
of capital, people, goods, and ideas. Political maps fell out of fashion;
economic graphs took their place. Diplomats in Brussels came to see
economic interdependence, international legal institutions, and mutual
hi
interference in one another’s domestic politics as their primary source
of security. And later, in the wake of U.S. failures in Afghanistan and
Iraq, military force lost its luster.
ha
Europeans were aware that this order was distinctive but also
believed that it could expand well beyond the European Union—to
Turkey, to Russia, and to the postcommunist countries of eastern
iT
Europe. They expected that their model would spread naturally,
whether through the enlargement of nato, the extension of eu ties to
states on the union’s periphery, or the ascent of global institutions that
enshrined European norms, such as the International Criminal Court
Al
and the World Trade Organization. So long as citizens could choose

freely, the thinking went, governments would eventually embrace the
European way.
od
Russia shattered that assumption last year when it invaded Crimea.

In the face of Moscow’s determination to preserve its influence in the
post Soviet space through the use of force, the eu’s soft power proved
-
to be very soft indeed. Turkey, along with three of the world’s largest
so
democracies—Brazil, India, and Indonesia—refused to join the eu

and the United States in placing sanctions on Russia. China preferred
to see Russia’s annexation of Crimea as a natural adjustment of borders
rather than a challenge to international order. Brussels and Washington,
Ma
meanwhile, did level significant sanctions. But these measures have

done little to dissuade Moscow from holding its line.
The Ukraine crisis has forced Europeans to face up to the fact that
their political model is not attractive to everyone—and certainly not
to everyone in their own neighborhood. Their shock recalls that felt
by Japanese technology executives at the end of the last decade, when
May/June 2015 49

they realized that although they manufactured the world’s most advanced
cell phones, they could not sell them abroad. Consumers elsewhere
simply weren’t ready, since Japanese devices relied on advanced tech
nologies, such as third generation e commerce platforms, that were
-
-
not widely used in other countries. Japanese cell phones, in other words,
were too perfect to succeed.
Some dubbed this phenomenon Japan’s “Galápagos syndrome,”
referring to Charles Darwin’s observation that animals living in the
remote Galápagos Islands, with their unique flora and fauna, had devel
m
oped special characteristics not replicable elsewhere. Much the same
could be said of Europe’s order today, which evolved in an ecosystem
shielded from the wider world’s rougher realities—and has consequently
hi
become too advanced and too particular for others to follow.
As the Ukraine crisis drags on, Europeans must abandon their
dreams of transforming foreign habitats and focus instead on protecting
ha
their own increasingly endangered one. The task won’t be easy. It
will require a de escalation of tensions with Moscow and calculated
-
compromises, such as accepting Russia’s own regional integration
iT
efforts as legitimate. Acknowledging that the European order has
limits, however, is far preferable to seeing it weaken—or to seeing
another authoritarian power take advantage of the impasse.
Al
fault lines
Although the immediate effect of the Ukraine crisis was to bring Europe
and the United States closer together, the process of formulating a
od
response has exposed deep divisions between them. There are persistent
questions, for example, about U.S. guarantees of European security,
despite repeated assurances from U.S. President Barack Obama. Were
Russia to support rebel forces in a nato member—Latvia, say—how
so
would Washington respond? There are also doubts about Washington’s

attention span. At the 2015 Munich Security Conference, a senior
German official complained to us that the United States is unreliable:
“Because the stakes are so low for [the Americans], we never know
Ma
where Washington will end up. It could escalate the sanctions and arm
Ukraine now. But in a few years, it could reset the relationship to secure
Russia’s cooperation on an unconnected issue, such as Islamic State.”
Underlying this uncertainty is a sense among Europeans that their
security is no longer central to U.S. strategy, as it was during the
Cold War. Europe, after all, is only one of many theaters in which

m
hi
ha
Europe in the cross hairs: wielding a pistol at a protest in Odessa, May 2014
iT
Washington has interests, and it is probably not the most important
one. U.S. officials, for their part, increasingly fear that European
countries will gradually lose their military capabilities and political
will, abandoning their alliance with the United States in order to
Al
pacify the bully next door. Americans were especially shocked, for
example, to see that even in the wake of Russia’s invasion of Crimea,
many European governments—including those of Germany and the
od
United Kingdom—still chose to make further cuts to their military

budgets. And a 2014 win/Gallup International survey only rein-
forced U.S. doubts about European publics; just 29 percent of French
citizens polled, 27 percent of British citizens, and 18 percent of German
so
citizens said that they were willing to fight for their country. (Sixty-
eight percent of Italians said they would outright refuse.) As then
U.S. Secretary of Defense Robert Gates put it in 2010, “The demili-
R EU T E R S / Y EvG E n Y vo l o K I n
tarization of Europe—where large swaths of the general public and

Ma
political class are averse to military force and the risks that go with
it—has gone from a blessing in the 20th century to an impediment
to achieving real security and lasting peace in the 21st.”
Such attitudes reflect an even deeper philosophical split over two
competing narratives about the end of the Cold War. For most
Americans, it was the military and economic superiority of the West
May/June 2015 51
that made victory inevitable and the 1980s arms race that pushed the
Soviet system over the edge. But for many Europeans, it was Europe’s
liberal values that ultimately won the day and West Germany’s Ostpolitik,
a policy of improved relations with the Soviet Union and its allies,
that hastened the conflict’s end.
These divisions color today’s policy discussions in predictable ways.
Take the question of whether Europe and the United States should
arm Ukraine in the ongoing fight against Russian backed rebels in
-
the east of the country. If the primary goal is to increase the price of
m
Russian revisionism, then the move makes sense, even if the conflict
escalates as a result. But if the chief aim is to protect the eu’s distinctive
mode of conduct and preserve the eu’s unity in the face of Russia, then
hi
anything fueling further violence would stand in the way of the only
acceptable outcome: an orderly political settlement. That explains
why many members of the U.S. foreign policy establishment support
ha
arming the Ukrainian military, whereas most of their European coun
terparts oppose it. Even in Poland, where most citizens think that the
Ukraine crisis presents a clear and present danger to their security, a
iT
majority do not favor arming Ukraine, according to a survey conducted
by Warsaw’s Institute of Public Affairs this past February.
It was always unrealistic to expect the Ukraine crisis to alter Europe’s
dna, at least in the short term. Neither European publics nor eu elites
Al
are ready to abandon the hope that economic interdependence remains

the most viable source of European security. Although U.S. security
guarantees are critical to ensuring that the European order survives,
od
they also threaten its integrity. Were the eu to collaborate with the
United States in arming Ukraine, it would suggest that peaceful
mediation had failed.
so
eurotripping
Europe finds itself in this predicament for a simple reason: in the years
leading up to the Ukraine crisis, Western governments fundamentally
misread Russia. They mistook Moscow’s failure to block the post–
Ma
Cold War order as support for it, assumed that Russia’s integration
into the world economy would invest the country in the status quo, and
failed to see that although few Russians longed for a return to Soviet
communism, most were nostalgic for superpower status.
They also missed the importance of Ukraine’s so called Orange
-
Revolution in 2004, which saw mass street protests help bring a

pro Western leader to power. Russian President Vladimir Putin, con

-
vinced that Western governments incited the demonstrations in order
to carry out regime change, has since come to see street protests as a
significant threat to his rule. In this context, resistance to Western
liberalism and to Washington’s democracy promotion now defines his
understanding of sovereignty.
For over a decade, Putin’s regime has been searching for a new
order, one that can ensure its long term survival. In 1943, Joseph Stalin
-
dissolved the Communist International (also known as the Comintern),
m
an organization dedicated to spreading communism internationally,
in order to convince Franklin Roosevelt and Winston Churchill that
his priority was the defeat of Nazi
hi
Germany, not global revolution. Putin
hoped that the West would make a
Western governments
similar overture by halting its pro fundamentally misread
ha
motion of democracy. He wanted a Russia.
guarantee that the remlin would not
K
confront Western backed protests on the
-
iT
streets of Minsk or Moscow. But Brussels and Washington could not
dissolve what did not exist; regardless of what Putin and his advisers
might believe, the wave of global protests that has swept the world
in recent years is the result of cultural, political, and technological
Al
changes. What former U.S. National Security Adviser Zbigniew

Brzezinski has called “the global political awakening” is a real trend,
not the code name of a cia operation.
od
Western powers also misjudged their ability to coerce Putin through

sanctions and diplomatic isolation. Sanctions have not altered Russia’s
behavior in eastern Ukraine, and few experts think that any financial
penalty could be great enough to convince Moscow to hand back
so
Crimea. Although the sanctions have contributed to Russia’s current

financial woes, there is little evidence that they have weakened Putin’s
grip on power. And even if they did, a post Putin Russia would
-
unlikely be a pro Western democracy. “It is impossible to say when
Ma
-
the system will fall,” the former Putin adviser Gleb Pavlovsky told
The New Republic in 2013, “but when it falls . . . the one to replace it
will be a copy of this one.”
To be sure, the sanctions have proved critically important in uniting
Western countries against Putin’s aggression. But damaging the Russian
economy has also undermined Europe’s longer term goals. Moscow’s
-
May/June 2015 53

policy in Ukraine does not represent a revival of Russian imperialism;

it is an expression of the remlin’s isolationism. By cutting off the
K
Russian economy, the sanctions have served Putin’s effort to limit
Russia’s exposure to the West, giving his regime cover to restrict the
Internet, curb foreign ownership of the media, repatriate Russian
money from Western banks, and limit travel abroad. They have also
obscured his failure to grow the economy.
Worst of all, the sanctions have encouraged Russia to compete with
the West for military dominance rather than on economic terms, an
m
arena in which the eu’s advantage is far greater. One of the union’s
great successes of the last decade was its European Neighborhood
Policy, which aimed to draw in the states on its periphery through
hi
economic and political agreements. Although the policy hardly
transformed those countries in any fundamental way, it did influence
Russian foreign policy. After the Orange Revolution, Russia tried to
ha
vie for influence in Ukraine and other postcommunist countries by
offering similar incentives, such as trade agreements and aid packages.
Even in the fall of 2013, Moscow did not move to occupy Ukraine
iT
before attempting to buy it, offering the government of then President
Viktor Yanukovych a multibillion dollar loan. But now that Russia’s
-
economy is even less competitive, owing to low oil prices and new
sanctions, Moscow will be more inclined to expand its influence
Al
through military adventurism.
the road taken

od
In defining its Russia policy, Europe faces only hard choices. It is

unrealistic to expect that in the coming year the eu will transform
itself into a great military power. It is also unlikely that sanctions
alone can change the remlin’s policy in the short term, or that unan
so
K
imous support for comprehensive sanctions can be sustained over the
long term, especially if the conflict in Ukraine somehow subsides. Mov
ing forward, Europe must find a policy that doesn’t attempt to turn
Russia into a Western style democracy but that forces the country
Ma
-
into a position the West can live with. Cold War–style containment,
however, is insufficient. Russia poses a threat to not only the territorial
integrity of the eu member states but also the union’s very existence.
Already, it has begun infiltrating European politics in order to undermine
European unity, principally by supporting political leaders friendly
to Russia and hostile to the union.

Guarding against this threat will require Europeans to make a clear

distinction between two different kinds of institutions. The first are
those, such as the Council of Europe and the eu, that embody Euro-
pean values and therefore have no place for authoritarian regimes
such as Putin’s. The second are those, such as the Organization for
Security and Cooperation in Europe and the United Nations, that can
bridge Europe’s divide with illiberal governments. European leaders
need to make the former more disciplined and rigid and the latter
more flexible and accommodating.
m
Take the Council of Europe. Moscow’s membership, a privilege
theoretically reserved for democracies—the body is tasked with pro-
moting human rights and the rule of law—has done little to liberalize
hi
Russia and has undermined the council’s credibility. Handing out
membership to other countries with
repressive regimes, such as Azerbaijan,
ha
has similarly failed to hasten their
The West needs a Russia
democratic transitions. After Azerbai- strategy that allows for
jan’s 2010 parliamentary elections, for cooperation without shying
iT
instance, the council failed to even issue away from confrontation.
a critical statement in response to reports
of widespread violations of due process.
The organization now serves as a convenient vehicle that allows
Al
authoritarian regimes to appear democratic abroad while suppressing

human rights at home. Only by kicking out its illiberal members can
the council truly stand up for its founding values once again.
od
Decontaminating values-based institutions by removing Russian

influence is all the more urgent given the growing popularity of
Putin’s governing model in some eastern European eu member states
and the Kremlin’s efforts to support Euroskeptical parties—including
so
both those on the left, such as Syriza in Greece, and those on the right,
such the National Front in France. These moves, designed to mirror
Western support for opposition movements and election monitoring
in Russia, initially functioned as a kind of slap in the face. But now
Ma
they are in danger of seriously fraying eu unity. Last year, Hungarian

Prime Minister Viktor Orban spoke publicly of “parting ways with
western European dogmas, making ourselves independent from them.”
He went on to state his intention to turn Hungary into an “illiberal
state,” listing Russia as an example of a country that, like China and
Turkey, has a governing system that is neither Western nor liberal but
May/June 2015 55

is “capable of making us competitive.” Orban, in an effort to cozy up

to his role model, has since opposed plans for a European energy
union, an eu flagship policy designed to reduce member states’ depen
dence on Russian gas. In return, Putin has ensured that Russian gas
will flow to Hungary for at least the next four to five years.
To prevent other fragile eu states, such as Cyprus and Greece,
from falling prey to Russian bribes or blackmail, the union needs to
help them deal with their economic crises by continuing to provide
loans and other forms of financial support. It must also push member
m
states to realize that in the growing conflict between Brussels and
Moscow, they have to choose sides. At present, illiberal regimes such
as Hungary’s have the best of both worlds: eu funds sustain them
hi
even as they benefit from anti eu rhetoric at home and special rela
-
tions with Moscow, and so they have little incentive to change course.
another union
ha
Europe and the United States can never recognize Russia’s annexation
of Crimea, just as they could not recognize the Soviet occupation of
iT
the Baltic states during the Cold War. They will need to keep sanctions
in place, since they remain the only available instrument capable of
maintaining European unity and taming Moscow’s willingness to spread
the current conflict to other parts of Ukraine. But sanctions alone—
Al
guided by a misplaced hope that Russia will one day reverse course
and return Crimea to Ukraine—are not enough.
The West needs a long term Russia strategy that allows for coop
-
od
eration but does not shy away from confrontation. The crisis began
because of a tussle over whether Ukraine would participate in the
Eastern Partnership, a European program aimed at integrating eastern
European countries into the eu economy, or the Eurasian Economic
so
Union (eeu), a competing trade bloc that Moscow established with

Belarus and azakhstan this past January. Ironically, the best way of
K
establishing a new working relationship with Russia will be through
this very Russian project—an approach that top European officials,
Ma
including German Chancellor Angela Merkel and French President

François Hollande, have publicly backed.
Most Europeans agree that the eeu is a flawed economic project
that will do more to serve Russia’s geostrategic ambitions than to bring
prosperity to such places as Armenia and yrgyzstan. They also find it
K
hard to believe that any country would choose a repressive Russian

model of development over an enlightened European one. That choice,

however, belongs to sovereign governments. And if the eu recognizes
the right of Belarus and azakhstan to join a Russian integration proj
K
ect, Brussels can more credibly insist that Moscow should recognize
the right of Georgia and Moldova, for example, to chose not to join.
Europe has failed to recognize what the eeu actually represents. To
be sure, Moscow established the union in order to pose a geopolitical
challenge to Brussels, but it sought to do so by engaging with other
countries on the eu’s terms—through
m
economic links rather than military
competition. What’s more, the eeu is
Europe has failed to
inclusive, largely devoid of Russian recognize what the
hi
assertions of ethnic nationalism, and Eurasian Economic Union
overtly committed to the concept of actually represents.
economic interdependence. And by
ha
virtue of their value in propping up a
signature Russian initiative, the union’s members have Moscow’s ear.
In fact, Belarus and azakhstan, owing to their veto power, may have
K
iT
the best shot at taming Russia’s aggression in eastern Ukraine.
In short, the eeu is precisely the sort of project that Brussels might
have invented itself. It is the only institution capable of reducing
Moscow’s reliance on military pressure and nationalist rhetoric. But
Al
instead of recognizing its own influence on the eeu, Brussels has

interpreted Moscow’s imitation as an affront, missing a critical oppor
tunity to moderate the conflict in Ukraine.
od
Engaging with Russia over its plans for the eeu would have been
easier before the Ukraine crisis, but it is far from impossible now. An
eu overture to the eeu, such as an invitation to establish formal
diplomatic relations between the two organizations, would send a
so
clear signal that Brussels recognizes Moscow’s right to an integration

process of its own but firmly opposes Russia’s right to a sphere of
influence. It would suggest that going forward, the European order
will not be built only around the enlargement of the eu and nato, which
Ma
Russia bitterly opposes. Instead, it would set the stage for a peaceful
competition between two integration projects, based on different phi
losophies but at least nominally aimed at pursuing similar goals.
Legitimizing the eeu would also drive a wedge between the world’s
two largest authoritarian powers, China and Russia, who have grown
dangerously close in recent years, with an outcome likely to strengthen
May/June 2015 57

the declining partner at the expense of the rising one. Indeed, Beijing’s
expanded role in eastern Europe has been one of the least noticed and
most consequential outcomes of the Ukraine crisis. As Brussels and
Washington sanctioned Moscow over Crimea, Chinese President Xi
Jinping launched two ambitious initiatives designed to restructure the
Eurasian economy: the so called Silk Road Economic Belt, a program
-
of infrastructure and trade investments that will stretch from Bangkok
to Budapest, and the Twenty First Century Maritime Silk Road, a
-
-
similar program focused on the waterways between the South China
m
Sea and the Mediterranean. The two projects, which Chinese officials
have touted under the slogan “one belt, one road,” essentially aim to
-
-
draw all the countries of Central Asia into China’s gravitational field,
hi
which would provide Beijing with a much needed source of natural
-
resources, foreign markets, and economic diversification.
But China’s approach to regional integration differs markedly from
ha
both Russian style spheres of influence and eu style regionalism. As
-
-
the scholar David Arase has argued, rather than use multilateral trea
ties to liberalize markets or offer generous payoffs, China promises to
iT
give other countries access to its continuing growth primarily through
investments in infrastructure, such as railways, highways, ports, pipe
lines, customs facilities, and so on. Beijing is setting itself up as an
independent hub for global trade, operating through an overlapping
Al
series of bilateral ties. At present, little stands in the way of this plan;
because its economy is so much larger than those in Central Asia,
China can relegate its partners to a peripheral zone, where they have
od
no formal processes for resolving disagreements and few ways of re

sisting China’s pull. If Western countries remain narrowly focused on
combating Russia and undermining the eeu, China could emerge as
the preeminent regional power—much in the same way that the
so
United States came to dominate Europe after World War I.

Neither Europe nor the United States can afford to allow Xi’s gran
diose vision to materialize. And so they must allow Russia to compete
with China for influence in its own backyard. Of course, Brussels and
Ma
Washington should not have any illusions about the remlin’s dream to
K
divide and weaken the eu—but that is precisely why they should estab
lish formal relations with the eeu rather than ignore it. A prolonged
standoff with Russia will only put Europe’s distinctive order at further
risk and allow Beijing to step in while Brussels and Moscow squabble.
This least bad option isn’t perfect, but the others are far worse.∂


Protecting America’s
Competitive Advantage
Why the Export Import Bank Matters
-
m
Fred P. Hochberg
T
hi
wo months from now, the U.S. Congress may shutter a gov
ernment agency that, in the past six years, has supported more
than 1.3 million American jobs and generated more than
ha
$2 billion in deficit reducing profits. The Export Import Bank of the
-
-
United States empowers American exporters by equipping those that
cannot access private financing with credit insurance and working
iT
capital, among other tools.
For more than 80 years, the bank has operated largely without
controversy. With overwhelming bipartisan majorities, Congress has
reauthorized the bank 16 times. But last September, with its congres
Al
sional authorization set to expire, the bank found itself the subject of
fierce ideological debate. Ignoring the bank’s long record of supporting
jobs, safeguarding taxpayer dollars, and maintaining a low default
od
rate, a small minority of conservative Republicans began expressing

opposition to the bank on ideological grounds. The U.S. government,
they argued, has no role to play in global finance and should not
interfere in the export sector in ways that might give some companies
so
an advantage over others. Of course, this argument ignores the fact

that government backed export financing does not pick winners and
-
losers—on the contrary, it is entirely demand driven. Despite such
-
criticism, and thanks to a broad bipartisan coalition, the bank was
Ma
granted a nine month reprieve in September. If some in Congress

-
have their way, this may well be its last stand.
Opponents of the bank hold views of the world economy that do not
reflect the reality of global competition. If Congress opts to eliminate
fred p. hochberg is Chair and President of the Export-Import Bank of the United
States. Follow him on Twitter @FredHochberg.
May/June 2015 59

Fred P. Hochberg
or curtail the bank, the United States will find itself going danger
ously against the grain. In the past two decades, the nature of export
competition has fundamentally changed: as an increasing number of
countries operate with little regard for established international guide
lines, export competition has come to resemble the Wild West. To keep
up with countries, such as China, that are willing to shell out billions
of dollars to help their exporters close a deal, other governments have
given their own versions of the Export Import Bank more flexibility
-
and authority. There are 60 such export credit agencies around the
m
world, but the United States is the only country in which there is a
raging political debate being waged by a small but potent minority
over whether to actually weaken its bank’s financing capacity. The U.S.
hi
stance is reminiscent of the joke about an elderly man who is driving
down the highway when he gets a call from his wife. “Honey,” she says,
“be careful! I just saw on the news that there’s a car going the wrong
ha
way on Route 95!” And the husband says, “Are you kidding? It’s not just
one car—there are hundreds of them!” Ideological opposition to the
Export Import Bank is not only shortsighted; it could also have devas
-
iT
tating consequences for the thousands of U.S. businesses and workers
who rely on the bank’s financing to secure overseas sales. No doubt
China, Russia, and other competitors are salivating at the prospect.
Al
no sheriff in town
For decades, government backed export support fell under the aegis
-
of the Organization for Economic Cooperation and Development, an
od
international body that sets responsible standards for export lending

for its members. As recently as 1999, nearly 100 percent of export
credit was governed by its rules. By 2004, with the rise of Chinese
exports, the share of export support governed by the oecd had fallen
so
to roughly two thirds. By 2013, the share had plummeted to one third.
-
-
If this trend continues, and countries are allowed to finance export
deals without limit, the United States will lose out. During its eight
decades of operation, the U.S. Export Import Bank has financed a
Ma
-
total of roughly $590 billion worth of U.S. exports. By contrast, over
the past two years alone, China has financed at least $670 billion worth
of exports. The actual sum, which is difficult to ascertain given China’s
lack of transparency, may well be close to $1 trillion.
As exports have become more powerful drivers of growth, the
stakes have increased. The Mc insey Global Institute projects that
K

Protecting America’s Competitive Advantage
the world will need $60 trillion in infrastructure investments by 2030.

The United States’ foreign competitors are uniform in their recog
nition of what this means: in markets such as India, Latin America,
the Middle East, and sub Saharan Africa, there is an enormous
-
opportunity for exports to spur economic growth and employment,
available to any nation—not just any company—that is willing to do
what it takes to win deals. Frequently, that means operating outside
of any rules based, transparent system.
-
As chair of the Export Import Bank, I have seen this race to the
m
-
bottom firsthand. Last June, I met with officials from Transnet, the
South African rail company, to discuss a locomotive manufacturing
order that General Electric had split with a Chinese competitor. Since
hi
U.S. locomotives are globally recognized as being the highest in quality,
I did not want financing to present an
obstacle to securing the deal; after all,
ha
more locomotives made in the United
As countries disregard
States means more well paying jobs in international guidelines,
-
Erie, Pennsylvania, instead of China. export competition has
iT
Like any good businessman, I wanted to come to resemble the
know what terms our competitors were
offering. An official from Transnet told Wild West.
me that when Chinese firms come to
Al
the table, government financing is virtually always part of the package.

In fact, the typical questions are, “Do you want a ten year, 15 year, or
-
-
20 year loan?” “How about a grace period?” More and more, U.S.
-
od
businesses are competing not against their Chinese counterparts but

against China, Inc. In South Africa, it was clear to me that Transnet had
judged General Electric not solely on the quality of its locomotives
but also on its ability to offer competitive financing.
so
Of course, export credit agencies are no replacement for the private

sector, but with the push to implement major global banking reforms
and the rising scale of global infrastructure projects, they are increasingly
a vital supplement. As commercial banks oscillate in their willingness
Ma
to extend credit, as they did most recently in the wake of the global
financial crisis, the Export Import Bank provides a dependable
-
backstop for U.S. exporters. The reluctance of private banks to hold
long term debt for large export projects—such as the solar installations,
-
nuclear power plants, and bridges that soon will be in high demand
throughout the developing world—has created a gap that the Export
-
May/June 2015 61

Fred P. Hochberg
Import Bank was designed to fill. As private lenders have shied away
from projects in developing markets, export credit agencies have
stepped in: last year, 68 percent of the Export Import Bank’s financing
-
served projects in developing markets.
The Export Import Bank also supports small businesses whose
-
razor thin margins often deter private financers. The bank provides
-
the backing necessary for smaller firms to tackle global markets until
they grow large enough to become attractive to private lenders. In
2014, nearly 90 percent of the Export Import Bank’s transactions
m
-
directly served small U.S. businesses.
new players, new rules
hi
As the United States engages in an internal political debate over the
Export Import Bank, it risks missing the larger picture: global trade
-
competition is evolving under the influence of new multilateral lending
ha
institutions, backed primarily by China. The New Development Bank,
a joint venture of the brics countries (Brazil, Russia, India, China,
and South Africa), and the Asian Infrastructure Investment Bank,
iT
spearheaded by China and set to begin operating by the end of this
year, will play a growing role in financing large scale projects in
-
developing countries.
Questions remain about these new institutions: Will bidding for
Al
projects be fair and open? Can the banks be counted on to implement

responsible environmental and labor standards? How these institutions
choose to conduct themselves will dictate the tenor of the next era of
od
global export finance, one that will shape the lives of millions of people
the world over. The United States, the United ingdom, and other
K
trading partners are working to influence the charters of these banks
to make them more transparent and fair to borrowers and bidders alike.
so
But the new banks are as concerned with garnering global influence as
they are with financing infrastructure responsibly.
It is in the best interests of developing markets, global stability, and
the brics countries themselves that new financing institutions embrace
Ma
competitive bidding rules and prudent transparency requirements. When

importing countries are forced to make sourcing decisions based on ag
gressive financing rather than value and quality, the consequences are
negative for everyone. Buyer nations are liable to end up with inferior
products that can hamstring long term growth, and exporting nations,
-
relying heavily on the easy wins that come from cut rate financing, may
-

m
hi
ha
The shipping news: off the coast of Los Angeles, February 2015
iT
discourage quality and innovation in their own private sectors. When
Ethiopia sought to expand its cellular service in 2013, for example, it opted
for a network built by two Chinese firms that were offering a combined
$1.6 billion in financing—more than enough to edge out Western com
Al
petitors. But an attractive financing package masked bargainbasement

quality, and today Ethiopia’s cell service remains notoriously unreliable,
with many Ethiopians forced to walk for miles just to pick up a signal.
od
For the brics, committing to transparency would bolster their credi

bility as they seek to build trust throughout the developing world. Trans
parency signals to prospective buyers that countries stand behind the
quality of the goods and services they bring to market—that the compa
so
nies that operate on their shores can deliver on the merits. Responsible
lending rules of the sort championed by the oecd may not be palatable to
every nation, but there is plenty of room between adhering to those stan
dards and adhering to no standards at all. Countries, such as China, that
Ma
have eschewed transparency in the past have little to lose from disclosing
REUTE RS / BO B RIHA, J R.
the extent of their governmentbacked export support, and competitors

would finally get the chance to see what they are up against. Releasing
details on important lending terms—subsidies, risk structures, and the
like—would also impart a sense of integrity to the new banks. The goal of
a transparent export landscape is not to ensure that U.S. firms sew up
May/June 2015 63
Fred P. Hochberg
every infrastructure project that comes along. It is, instead, to empower

developing nations to decide for themselves how their futures will be
built, free from the disorienting influence of opaque financing.
united we stand
If fair global competition is to become more than an ideal, the United
States and China will have to work together. Here there is cause for
optimism. Beijing’s willingness to partner with Washington on a his
toric climate agreement in 2014 would have been unthinkable not so
m
long ago. When discussions to expand the proposed Trans Pacific
-
Partnership were in their infancy a few years back, China was skeptical.
Today, China is publicly acknowledging that it may one day sign on
hi
to the trade agreement. More and more, China is signaling a desire
to grow responsibly into its role as a global economic leader, a trend
that should be received as heartening news the world over.
ha
Whether China’s willingness to work with the United States will
extend to export finance remains to be seen. In 2012, U.S. President
Barack Obama and then Chinese Vice President Xi Jinping announced
iT
the International Working Group on Export Credits, an initiative
designed to arrive at a set of responsible international guidelines. The
iwg, which now includes 16 other nations, has made limited progress.
The original goal was to develop comprehensive regulations by the
Al
end of 2014, a deadline that has now passed. Some of the slow pace
can be attributed to the fact that transparent, rules based financing is
-
a foreign concept to much of the world. Additionally, many other na
od
tions are seeking to do whatever it takes to maximize their export

coffers; unlike the United States, their interest in export credit agen
cies extends beyond merely filling in private sector gaps. Interna
-
tional agreements take time to negotiate, but markets around the
so
world cannot afford to wait for a stable, uniform regulatory regime to

take shape—nor, for that matter, can the U.S. exporters that wish to
compete with overseas rivals solely on the merits of their goods and
services. Until a broader agreement emerges, Washington should do
Ma
everything in its power to give American exporters the support they

need: ensuring the presence of a robust and capable Export Import
-
Bank and ratifying the Trans Pacific Partnership, among other steps.
-
In the new global economy, Washington’s failure to forcefully advocate
on behalf of U.S. companies will mean ceding well paying jobs—and
-
the power to write the rules of the road—to other nations.

Competition, unlike war, doesn’t need to be a struggle between

enemies. At its best, it is a race among challengers, a shared engage
ment that spurs everyone to innovate and to act not simply as rivals
but also as partners in responsible global growth. The competition ahead
will be an export race of unprecedented scope, one that holds the
potential to touch more lives than any invention, conflict, or initiative
in recent history. Someone will be bringing electricity to the 600 mil
lion people in sub Saharan Africa who today live without it. Someone
-
will be providing the technology that will help the industrialized world
m
move toward climate resilience. Someone will be building the airports,
highways, railroads, power plants, cell towers, and hospitals that will
serve the needs of generations to come on every continent.
hi
The rules that will govern that race are important; if the field is
skewed, the results will be, too. Arriving at the best possible playing
field will require an acknowledgment that there is no single ideal
ha
export credit agency to which all countries should aspire, that the best
possible version of a Chinese agency may look very different from the
best possible version of an American one. The United States, for its
iT
part, must resolve within its own borders to reckon with the world as
it is: a web of competing governments, competing values, and markets
that have for a long time been less than fully free.
The best version of the U.S. Export Import Bank is one that,
Al
-
although bound by the world’s most stringent financial, transparency,
and environmental rules, nevertheless maintains the capacity to fill
the fluctuating gaps in the United States’ private sector, freeing U.S.
od
exporters from the shackles of uncertainty forged by antiquated ideo

logical debates. China, too, must do its part to move the world away
from the Wild West mentality that it has developed over the last
15 years. The best version of China’s export credit agency would be
so
one that places China’s own long term interests and the interests of
-
global growth ahead of fleeting gains. The United States and China
need not be identical to be partners in encouraging above board com
-
petition and sustainable growth. But as the new global age brings
Ma
countries closer together, deepening their economic interdependence,

it is in everyone’s interest to encourage export competition that is as
clear and free as possible. For the United States, a reauthorized,
robust Export Import Bank is the best way to ensure that future.∂
-
May/June 2015 65

In Defense of Financial
Innovation
Creative Finance Helps Everyone—Not
Just the Rich
m
Andrew Palmer
A hi
t a 2013 conference held by The Economist in New York, business
and policy leaders debated whether talented university gradu
ha
ates should join Google or Goldman Sachs. Vivek Wadhwa,
a serial entrepreneur, spoke up for Google. “Would you rather have
your children engineering the financial system [and] creating more
iT
problems for us, or having a chance of saving the world?” he asked.
He had a much easier time pitching his case than Robert Shiller, the
Nobel Prize–winning economist who advocated for Goldman Sachs
by arguing that every human activity, even saving the world, had to
Al
be financed. No use; in the end, the audience voted heavily in favor

of Mountain View and against Wall Street.
Such bias reflects the profound shift in public attitudes toward
od
Wall Street that followed the 2008 financial crisis. In the decade
before the meltdown, bankers were lionized. Policymakers applauded
the efficiency of financial markets, and widespread praise for financial
innovation drowned out any criticism. But when the crisis hit, the
so
pendulum swung too far in the opposite direction. The new consensus
now portrays bankers as villains whose irresponsible practices and
shady techniques unleashed disaster. This view holds that only a small
part of the financial industry actually benefits society—the one that
Ma
doles out loans to individuals and businesses. The rest constitutes

dangerous, unnecessary gambling, and so financial ingenuity of all
kinds is highly suspect.
andrew palmer is Business Affairs Editor at The Economist and the author of Smart
Money: How High-Stakes Financial Innovation Is Reshaping Our World—for the Better (Basic
Books, 2015), from which this essay is adapted. Follow him on Twitter @palmerandrew.

In Defense of Financial Innovation
Such anger is well founded; finance certainly did a bad job of

applying itself to big problems in the run up to the crisis, and the
-
popular myth of the industry’s invincibility contributed to this
failure. Eliminating this misperception was entirely for the best.
But demonizing finance is also a mistake, and restricting the sector
to its most familiar elements would do nothing to mend its flaws.
Worse, such a course could wreak damage outside the banking
industry, because financial ingenuity reaches far beyond Wall
Street. Innovative financiers are currently helping solve an array of
m
socioeconomic problems—including those related to the strength
of social safety nets, the poor’s ability to save, and the capacity of the
elderly to support themselves—that weigh heavily on governments
hi
around the world. Instead of fearing such innovation, policymakers
and the public should welcome it, with prudent oversight.
ha
REALITY
CHECK
For critics of Wall Street, the financial crisis served as a warning
against experimentation. Financial innovation, they argue, has
iT
approached a point of diminishing returns. If only finance could
turn back the clock, all would be well. Gone would be toxic practices
such as securitization, the banks’ way of bundling mortgages, credit
-
card loans, and other financial assets into bonds that they resell to
Al
investors—a technique seen as having triggered the crisis. The out -

of control financial wizardry that generated skyrocketing amounts of
-
consumer debt would come to an end. And stock exchanges would
od
stop serving as the playthings of algorithms.

Some skeptics go so far as to argue that “banking should be
boring”—a slogan adopted by Elizabeth Warren, the senior Democratic
senator from Massachusetts, who has demanded tighter restrictions
so
on finance. In 2013, Warren launched a campaign to separate U.S.

banks into two distinct groups. The first would include the com
fortingly familiar retail businesses that accept deposits and provide
mortgages. The second would contain investment firms that raise
Ma
money and manage risks through obscure capital market practices,

-
and they would be barred from taking insured deposits to fund
themselves. Although the bill that Warren introduced has stalled
on Capitol Hill, it counts plenty of sympathizers.
Going one step further, a few prominent observers have suggested
that financial creativity has reached the limits of its utility. They
May/June 2015 67

Andrew Palmer
point to a host of seemingly out of control pre crisis financial forces,
-
-
-
from the blinding speed of high frequency traders to the exploding
-
volume of credit default swaps, a type of insurance policy written
against borrowers going bust. In 2009, for example, Paul Volcker,
the former Federal Reserve chair, said that no financial innovation
of the pre crisis period was as useful as the simple automatic teller
-
machine. Similarly, the economist Paul rugman admitted in a 2009
K
New York Times column that he had trouble thinking of a single
recent financial breakthrough that had aided society. Rather, he
m
wrote, “overpaid bankers taking big risks with other people’s money
brought the world economy to its knees.”
To be fair, the motives behind many new financial products are
hi
far from pure, and greater scrutiny would help stave off crises in the
future. But widespread criticism of particular Wall Street innovations
has had the effect of unfairly smearing the reputation of finance as
ha
a whole, and it has given rise to proposed solutions that could do
more harm than good. Calling a halt to financial inventiveness—
freezing finance in place; no bright ideas allowed—would not solve
iT
the problems associated with the industry. In fact, the greatest dangers
to economic stability often lurk in the most familiar parts of the
financial system.
After all, retail and commercial banks accounted for some of the
Al
most massive write downs recorded during the crisis. The biggest
-
bank failure in U.S. history was that of Washington Mutual, which
collapsed in 2008 with $307 billion in assets and a pile of rotting
od
mortgages on its books. The largest quarterly loss for a bank was
suffered in 2008 by Wachovia, which was brought down by bad
loans. And the product that caused the most damage during the
financial crisis was mortgages, the most familiar instrument of all.
so
The amount of mortgage debt in the United States had roughly

doubled between 2001 and 2007, to $10.5 trillion. Real estate
was by far the biggest asset held by U.S. households, reaching
$22.7 trillion in value in 2006, when house prices were at their peak.
Ma
The United States was not alone in this vulnerability; wide holdings
of residential and commercial property were the common denominator
across the countries most affected by the crisis, including Ireland,
Spain, and the United ingdom.
K
Part of the reason is that property has inherently destabilizing
characteristics. This asset thrives on debt: in many housing markets,

m
hi
ha
iT
Al
od
buyers routinely take out loans worth more than 90 percent of the
so
property’s value. Virtually the entire worldwide rise in the ratio of

private sector debt to gdp in the past four decades has been caused
-
by rising levels of mortgage lending. Yet banks tend to see this type
of secured lending as safe, even though it could involve decisions made
Ma
solely on the basis of collateral offered by the borrower (say, a house)

rather than the borrower’s creditworthiness.
Indeed, the great irony of the property bubble was that many
banks and investors had thought that concentrating on housing was
a prudent bet. Although the financial sector has since been criticized
for recklessness, it was its pursuit of safe returns that brought
May/June 2015 69

Andrew Palmer
trouble. An insightful study by the economists Nicola Gennaioli,

Andrei Shleifer, and Robert Vishny revealed that much financial
-
sector creativity—from the invention of money market funds to
-
the pre crisis surge in mortgage backed securities—is rooted in a
-
-
search for safety as well as profit. The reason investors sought out
mortgage backed securities was that these instruments offered
-
slightly higher returns than more traditional assets (such as U.S.
Treasury bonds) while also appearing to be low risk. This pattern
holds across a wide range of other financial products; the siren song
m
of safety is a recurring theme in finance.
The property market thus offers a lesson for the financial industry
more broadly: studying the ways in which people and companies
hi
manage money and risk—and harnessing these behaviors for more
constructive ends—could help address the dangers that still lurk in
plain sight. Rather than being a warning against innovation, the
ha
crisis was a clarion call for creative thinking of a different kind. Indeed,
when it comes to property, finance is already demonstrating how using
new techniques could forestall future shocks.
iT
Some entrepreneurs, for example, are exploring ways to temper
the adverse effects that fluctuations in housing prices carry for
both borrowers and lenders. A housing downturn can reduce the
price of a property to less than the value of the mortgage holder’s
Al
outstanding loan, triggering a loan default that hurts both the

buyer and the bank. One answer is to offer borrowers no interest
on their mortgages in return for allowing the lenders to share in
od
the gains or losses from movements in house prices. If prices fall,

owners are more protected; if they rise, lenders reap some of the
rewards. As for the adverse effects that market downturns can have
on lenders, one firm, London based Castle Trust, has found a
so
-
clever solution: tying its funding to the national house price index
in a way that makes assets and liabilities on its balance sheet rise
and fall in unison. The Castle Trust model is a radical break from
the norm—but one that is entirely welcome.
Ma THE
IDEAS
MACHINE
Even the most ardent critics of Wall Street do not dispute the value
of financial innovation over the long sweep of human history. The
invention of money, the use of derivative contracts, and the creation of
stock exchanges all represent smart responses to real world problems.
-

These advances helped foster trade, create companies, and build infra
structure. The modern world needed finance to come into being.
But this world is still evolving, and the demand for financial
creativity is as strong today as ever. Fortunately, despite all the
recent criticism, the financial sector has been evolving as well.
Today, this industry is home to not only big banks skimming fat
fees but also visionary innovators that are rethinking the ways in
which money, livelihoods, and technology relate to one another.
To take just one example, many countries, including the United
m
States, face unprecedented pressure to trim their budgets by cutting
public spending. As a result, social programs—say, rehabilitating
prisoners and training the unemployed—can fall by the wayside.
hi
Even where such initiatives do continue,
they often end up wasting taxpayers’
money, because they either fail to tie
Financial creativity
ha
spending to desired outcomes or focus reaches far beyond Wall
on the wrong outcomes altogether. Many Street.
job training programs, for example,
-
iT
focus on the number of people they enroll and graduate rather than
the number of participants who subsequently find jobs. Flaws of
this kind are common across state funded initiatives. According to
-
the Brookings Institution, out of ten rigorous evaluations of social
Al
programs run by the U.S. federal government in 1990–2010, nine

found that the programs either produced weak positive results or
had no impact at all.
od
Finance has stepped in with answers to both the funding problem

and the shortfalls of planning and monitoring. One innovative
tool, known as a social impact bond, channels private investment
-
to programs that track measurable social benefits. For instance, a
so
social impact bond focused on rehabilitating prisoners might monitor

-
the number of new convictions of former inmates one year after
they were released from prison. Fewer repeat convictions means
less spending by the government, which can then use the cash it saves
Ma
to pay back investors. The first initiative of this kind was intro
duced in 2010 by the city of Peterborough in the United ingdom,
K
and that program has already reduced reoffending rates vis à vis
-
-
the national control group. Other countries, including the United
States, have introduced similar programs of their own. New York
City launched a social impact bond in 2012 focused on adolescents
-
May/June 2015 71

Andrew Palmer
incarcerated at Rikers Island; the program counts Goldman Sachs

as an investor. And Massachusetts has announced two social impact
-
bonds, one of which will fund a seven year effort to reduce prisoner
-
recidivism with a budget of $27 million.
The reason finance has a shot at solving problems of such complexity
is its ability to align the incentives of diverse market participants—in
this case, governments that commission services, social organizations
that provide them, and investors that supply capital. Governments
are attracted to social impact bonds because they require payouts
m
-
only when the programs they fund achieve results. Social organizations
come on board because these initiatives involve private investment with
longer time frames than federal contracts usually offer. And investors
hi
benefit from detailed data on how well the programs are performing.
Social impact bonds will never be the only answer to the shrinking
-
state. But they are an extremely promising avenue to explore.
ha
THE
NEXT
FRONTIER
Governments are not alone in facing an enormous financial squeeze;
iT
individuals must grapple with similar challenges. Today, ordinary peo
ple in developed economies expect to live longer than any generation
did before them, yet they generally do not save nearly enough for
retirement. Too many of these people put far too little money aside as
Al
protection against unexpected shocks. And a large share have trouble

accessing credit, especially if they find themselves on the periphery
of the economic system.
od
Finance has been providing ingenious answers to these kinds of

problems by drawing on the insights of behavioral economics.
Recent years have given rise to the birth of a subfield known as
behavioral finance, which studies the different prompts and nudges
so
that help people achieve more financially efficient outcomes. This field
already counts one remarkable achievement: getting more Ameri
cans to save for retirement by enrolling them in 401(k) pension
plans automatically. People have a tendency to dither, so requiring
Ma
them to opt out of a scheme, rather than make the effort to opt in,
draws in scores of new customers. U.S. companies that have intro
duced auto enrollment mechanisms have reported sharp rises—of
-
as much as 60 percent—in average 401(k) participation rates.
A more recent application of behavioral economics has allowed
society’s least creditworthy people to build up their savings accounts.

Millions of people in developed economies lack any sort of financial

cushion. A 2012 survey by the Financial Industry Regulatory Authority
asked Americans whether they’d be able
to come up with $2,000 if an unforeseen
need arose; almost 40 percent said no or
Finance is home to not
probably not. Nearly two thirds did not only big banks skimming
-
have three months’ worth of emergency fat fees but also visionary
funds on which they could draw if they innovators.
fell ill or became unemployed. And
m
whereas the housing boom had once
disguised these problems—as long as prices kept climbing, people in
distress could refinance or sell their homes—today, average Americans
hi
have no choice but to save more.
When money is tight, of course, saving is difficult. To make matters
worse, new regulations discourage mainstream banks from reaching
ha
low income households by capping the credit card penalties and
-
-
overdraft fees that banks can levy. Once again, innovative financial
players have moved in to fill the gap. Some, such as the Massachusetts
-
iT
based Doorways to Dreams (D2D) Fund, have managed to motivate
savers via a simple trick: offering prizes for putting money aside.
After all, humans love lotteries, and the prospect of winning awards
instantly makes saving seem more attractive.
Al
In 2009, the D2D Fund launched a prize linked savings program

-
in Michigan (one of the few places that permits private lotteries)
called Save to Win. For each $25 in deposits, savers earn raffle
od
tickets that give them a chance to win quarterly prizes of as much

as $5,000, as well as smaller monthly rewards. Nebraska, North
Carolina, and Washington State have since introduced versions of
the program, and D2D hopes to eventually tap into state lottery
so
systems directly in order to reach more people. Meanwhile, in

Michigan, its strategy has helped customers set up more than
50,000 accounts and put away over $94 million in new savings—a
small amount by the financial industry’s standards but a significant
Ma
achievement for scores of low income families.

-
It’s not just the poor who have trouble accessing credit. At all
levels, potential borrowers get turned away by banks; other people
get deterred by high interest rates on bank offered loans. One
-
solution involves peer to peer lending, which allows suppliers and
-
-
consumers of credit to connect directly rather than rely on a bank
May/June 2015 73

Andrew Palmer
to intermediate. Leading the charge is a San Francisco–based firm

named Lending Club, which was launched in 2007; many others
are following its example.
Lending Club invites borrowers to make a pitch for loans and then
allows lenders to choose those individuals they would like to fund.
Both parties get a better deal than they
One fund has motivated would at an established bank. Peer-to-
peer lending does not carry the heavy
savers via a simple trick: costs of the legacy information tech-
m
offering prizes for putting nology systems and branch networks
money aside. that weigh down established banks, so
it can offer borrowers lower interest rates
hi
than a bank can provide. The average
rate that Lending Club borrowers paid on loans in 2013, for example,
was 14 percent—well below typical credit-card rates. Allowing for a
ha
default rate of four percent and Lending Club’s service fees, the
returns to investors were nine to ten percent—not bad given how low
interest rates have been.
iT
Peer-to-peer platforms are designed to address some of the flaws
of mainstream finance. A firm such as Lending Club is inherently
more resilient than a bank because it does not run a balance sheet
on which it incurs debts in order to fund lending of its own. If
Al
there are defaults on a bank’s loan book, its creditors still expect to
be paid back. But when a customer defaults on a Lending Club
loan, the investors absorb the costs. Moreover, Lending Club locks
od
up lenders’ money for the duration of the loan. After investors

fund a three-year consumer loan, for example, they can’t demand
the money back one month later in the way that bank depositors
can. The borrower, therefore, will not face a sudden call for cash
so
and the scramble to raise money that it entails.

Admittedly, the numbers involved in this new sector remain tiny.
Lending Club had facilitated loans totaling more than $7 billion by
the end of 2014—an amount that pales in comparison to the out-
Ma
standing credit-card debt of roughly $700 billion in the United

States that same year. Nevertheless, peer-to-peer lending is gaining
wide credibility. Lending Club was valued at $5.4 billion when it
went public in 2014, and institutional investors now account for
more than two-thirds of its loan volume. Some insurers and sovereign
wealth funds have made allocations of as much as $100 million.

The success of these new lending platforms, of course, does not

mean that mainstream banks are about to disappear. Banks may be
slower to innovate, but they can mobilize an awful lot of money
and operate across borders. They also offer their customers many
unique advantages, such as the ability to access savings instantly,
that make them hard to dislodge.
But banks have good reason to worry. For one thing, regulators
are pushing them to reduce their leverage—their ratios of debt to
equity, a rough proxy for financial fragility—which means that
m
banks must find other ways to increase returns to their investors.
To do so, they could try cutting expenses, but it is hard to imagine
that they could ever run leaner ships than the innovators compet
hi
ing with them. Banks could also increase the cost of credit, but that
measure would simply create more opportunities for the likes of
Lending Club to exploit. ha
In the end, the two groups will probably drift closer. Financial
innovators will gradually eat away at the banks’ activities, and the
banks will slowly evolve to become more efficient. Some peer to
-
-
iT
peer platforms are already collaborating with mainstream lenders;
others will end up being bought by them.
anking on reati ity

Al
B
C
v
Anyone who defends the financial industry must recognize its inherent
failings. There is a destructive logic to the way that the seething brains
of finance innovate, experiment, and standardize. Even a banking sector
od
populated by saints would tend toward excess, and modern finance is

rather short of halos. The words that finance immediately conjures
up—“bonuses,” “recklessness,” “greed,” “bastards,” “greedy bastards”—
are all part of the industry’s narrative.
so
The banking industry has certainly not lost its destructive ten
dencies in the wake of the crisis. Beyond a certain scale and beyond
a certain point in their evolution, good ideas have a tendency to
run wild. But suppressing financial innovation is the wrong answer to
Ma
the problems facing Western societies. Instead, regulators and financiers

must strike a careful balance between watchfulness for the risks that
can cause economic damage and tolerance for creativity that can
yield real benefits.
Two warning signs, in particular, ought to cause alarm among
regulators. The first is rapid growth. When a financial technology or
May/June 2015 75

Andrew Palmer
product truly takes off, the surrounding infrastructure often fails

to keep pace. This pattern manifests itself in many different ways,
from the ability of high speed traders to outrun the stock exchanges
-
on which they operate to the opacity of the credit default swap
market in the run up to the financial crisis. During periods of quick
-
growth, the front offices of financial firms often sell at a breakneck
pace, while the back offices struggle to cope and the rapid flow of
money relies on jerry built plumbing. Regulators must be wary
-
of market overheating of this sort and seek to ensure that the infra
m
structure of finance keeps pace with its innovators.
The second pitfall is the assumption of safety. Policymakers
should remember that the false comfort of the familiar helped
hi
precipitate the crisis in the first place. In the United States, home
buyers and lenders fell for the faulty notion that property prices
couldn’t crash nationwide and that aaa credit ratings represented a
ha
gold plated promise of creditworthiness. Such misconceptions are
-
hard to uproot; after all, the Western financial system remains
heavily skewed in favor of providing supposedly safe mortgages to
iT
affluent households. Introducing higher capital requirements even
for those assets that appear to be low risk could be one answer.
For all the problem solving power of finance, growth and greed
-
can distort any good idea. But when the next financial crisis hits, its
Al
triggers will likely come from an established market, such as property,

in which mainstream investors and profit maximizing institutions
-
have once again gotten carried away. The true innovators of finance
od
will not be the ones to blame. They are the reason the world should
look at finance with a clear eye.∂
so
Ma

From Calvin to the

Caliphate
What Europe’s Wars of Religion Tell Us
About the Modern Middle East
m
John M. Owen IV
N hi
early a century after it first emerged in Egypt, political Islam
ha
is redefining the Muslim world. Also called Islamism, this
potent ideology holds that the billion strong global Muslim
-
community would be free and great if only it were pious—that is, if
iT
Muslims lived under state enforced Islamic law, or sharia, as they
-
have done for most of Islamic history. Islamists have long been
confronted by Muslims who reject sharia and by non Muslims who
-
try to get them to reject it. At times benign and at times violent, these
Al
confrontations have fueled the revolutions in Egypt in 1952 and Iran

in 1979, the al Qaeda attacks in 2001, the Arab Spring of 2011, and the
rise of radical Islamist groups such as the self proclaimed Islamic
-
od
State (also known as isis).

It is not Islam the religion that is generating discord. Rather, the
problem is a deep disagreement among Muslims over the degree to
which Islam ought to shape the laws and institutions of society.
so
Most Muslims, Islamist or otherwise, are, of course, not jihadists or

revolutionaries. But the ongoing competition over what constitutes
good public order has polarized them, creating vicious enmities that
resist compromise. The result is a self tightening knot of problems
Ma
-
in which each aggravates the others.
Western scholars and policymakers have long struggled to understand
the nature of this conflict, but so far, their efforts have fallen short.
John M. wen IV is Ambassador Henry J. Taylor and Mrs. Marion R. Taylor Professor of
O
Politics at the University of Virginia. This essay is adapted from his book Confronting
Political Islam: Six Lessons From the West’s Past (Princeton University Press, 2015).
May/June 2015 77

John M. Owen IV
Although experts on Islamic jurisprudence, theology, and history have

produced rich scholarship on Islamism, they have tended to treat it as
if it were unique. What they forget is that Islamism is not only Islamic
but also an “ism”—an ideology and a plan for ordering common life
that should be analyzed alongside other ideologies. No part of the
world has generated as many isms as the West itself, and so to aid
clear thinking about the contemporary Middle East, it is useful to
look back at the West’s own history of ideological strife.
Parts of the Muslim world today, in fact, bear an uncanny resemblance
m
to northwestern Europe 450 years ago, during the so called Wars of
-
Religion. Then, as now, a wave of reli
gious insurrection rolled across a vast
Parts of the modern
hi
region, engulfing several countries and
Muslim world resemble threatening to break over more. In the
Europe during the Wars of 1560s alone, France, the Netherlands,
ha
Religion 450 years ago. and Scotland each faced revolts led by
adherents of a new branch of Protes
tantism called Calvinism. Theirs was
iT
not the Calvinism of the Presbyterians of the twenty first century or
-
even the nineteenth. Early modern Calvinism—like Catholicism,
Lutheranism, and other Christian isms of the time—was a political
ideology as much as a set of religious doctrines. It emerged in an era
Al
when Europe’s socioeconomic order was built around, and partly by,
the Roman Catholic Church, and it defined itself in opposition to
that order. Choosing an ideology was as much a political commitment
od
as a religious one; the Wars of Religion were also wars of politics.

The revolts came in the middle of a 150 year long contest over
-
-
which form of Christianity the state should favor—and today, that
story has a familiar ring. As ideologues vied for influence, dissent was
so
brutally suppressed, religious massacres broke out periodically, and

outside powers intervened on behalf of the rival parties. The turmoil
ultimately led to the miserable Thirty Years’ War, which killed at least
a quarter of the population of Germany (then the center of the Holy
Ma
Roman Empire). And when that crisis ended, two other ideological
battles followed: between monarchism and constitutionalism in the
eighteenth century and between liberalism and communism in
the twentieth.
These three long periods of ideological strife, in which Western
countries were divided over the best way to order society, offer crucial

From Calvin to the Caliphate
lessons for the present. At the broadest level, Western history shows
that the current legitimacy crisis in the Middle East is neither unprec
edented in its gravity nor likely to resolve itself in any straightforward
way. Political Islam, as did many ascendant ideologies of the past, has
drawn new strength from the regional conflict it helped fuel, and it is
here to stay. Moreover, ideological contests of the kind experienced by
the Middle East rarely conclude in a winner take all fashion; they
-
-
often rage until the competing doctrines either evolve or converge.
Often this occurs only after the crisis has embroiled outside powers
m
and redefined the regional order. These lessons yield no clear silver
bullet for solving today’s challenges in the Middle East, but they do
at least show that the region’s problems are not unique—and that
hi
leaders and countries can take steps to reduce the violence and create
conditions more conducive to human flourishing.
rom al in in
ha
urope to obbes in the iddle ast
F
C
v
E
H
M
E
“History doesn’t repeat itself,” the saying goes, “but it does rhyme.”
Although the rise of Islamism in the Middle East is a uniquely
iT
modern phenomenon, the path it has followed and the crisis it has
spurred echo parts of the West’s own past. What began as a simple
contest between Islamism and secularism in the Muslim world has
evolved into a complex struggle, but the nub of the question is who or
Al
what is sovereign in society, and the flashpoint is the source and

content of law. Islamists insist that it must be sharia, meaning that it
would be derived from the sacred texts of Islam: the direct revelations
od
from Allah to the Prophet Muhammad, which make up the oran,

K
and the sayings of the Prophet (or hadith). Secularists counter that
law should derive from human reason and experience, not from Islam—
or, for moderate secularists, not from Islam alone.
so
Secularism came to the Middle East with European colonialism.

Many Muslim elites adopted it following independence precisely
because the powerful European states had surpassed and humiliated the
Ottoman Empire, generally regarded as the caliphate, or the dominant
Ma
Islamic polity. But secularism was met with pushback: Islamism.

Although Islamists present their ideology not as an ism but as simply
Islam, the pristine religion of the Prophet, their belief system has
more modern origins. In the second quarter of the twentieth century,
early Islamists grew convinced that it was hard to live as a pious Muslim
under a secular regime and began organizing resistance movements.
May/June 2015 79

In the 1950s, Islamists became more radical and
began advocating for a return to state enforced
-
sharia. Secularism had the upper hand until
the 1960s, but key moments in subsequent
decades—the 1967 defeat of secularist Egypt
by Israel, the 1979 Islamic Revolution in Iran,
and the 1990–91 Gulf War—turned the
momentum in favor of Islamism.
In one sense, then, political Islam has already
m
triumphed. Although modern Muslims are nei
ther purely secularist nor purely Islamist, the
average Muslim in the Middle East and
hi
North Africa leans Islamist. A 2013 poll by
the Pew Research Center showed that large
hamajorities in Egypt, Iraq, Jordan, Morocco,
and the Palestinian territories wished to see
sharia as the law of the land. A 2012 Gallup poll
revealed that in five countries of the region—
iT
Egypt, Libya, Syria, Tunisia, and Yemen—women
were as likely as men to favor sharia. And although
deep internal divisions persist within the Islamist
camp—over the role of religion in public life and the
Al
role of the clergy in government, for example—even

secular rulers now embrace elements of Islamism.
Despite these successes, however, political Islam
od
still encounters skepticism about its ability to survive.

Early on, outside observers dismissed it as an idea that
was out of step with modernity. More recently, experts
have assured one another that rising violence in the Middle East,
so
including suicide terrorism and beheadings practiced by jihadist

groups such as isis, is a sign of a desperate movement on its last legs.
Yet if Europe’s own history of ideological strife provides one key
lesson for the Middle East, it is this: do not sell Islamism short.
Ma
Europe’s Wars of Religion illustrate why underestimating a seemingly

outdated ideology is so dangerous. At many points during those wars,
reason and progress appeared to dictate an end to hostilities, as the
Catholic Protestant rivalry was taking its toll on local populations and
-
economies. At several junctures—including in 1555, when leading
German principalities agreed to religious self determination, and in
-

the 1590s, when the French Wars of
Religion ended and the Protestant
Dutch Republic secured its inde
pendence from Catholic Spain—it
appeared that the crisis had passed.
Princes, nobles, city councils, and
their subjects seemed to have set
tled on a practical peace. Pragmatic
political rationality appeared to reign,
m
raising hopes of a new Europe in which
states would look after their material
interests and not their ideological ones.
hi
But Europe was not finished with
ideological violence, because the legiti
macy crisis that had fueled it remained
ha
unresolved. Most Europeans continued to
believe that permanent political stability
required religious uniformity. So long as
iT
they thought so, the slightest spark could
repolarize them into radically opposed
groups—which is exactly what happened
when a Protestant revolt in Bohemia
Al
tipped Europe into the Thirty Years’ War

in 1618. It was not until Europeans
separated questions of faith from
od
those of politics, toward the end of

the century, that religious dogmas
lost their incendiary power.
A different kind of ideological short selling took place in a more
so
-
recent era: during the global contest between liberalism and com
munism in the twentieth century. In the 1930s, the travails of the
Great Depression convinced many leading Western intellectuals that
liberal democracy was an idea whose time had passed. For a while,
Ma
centralized, coercive states appeared to be better equipped to deal

with the new economic and social challenges, leading some thinkers
to buy into communism. A few visited and openly admired the
Soviet Union, where, under Joseph Stalin, industrialization proceeded
apace and workers never went on strike. The sentiment was captured
by the U.S. journalist Lincoln Steffens: “I have been over into the
May/June 2015 81

John M. Owen IV
future, and it works.” In the end, of course, liberal democracy rebounded

and won out.
The point is not that Islamism will necessarily win in the Middle
East but that smart people can underrate the viability of alternative
political systems, sometimes with grievous results. Indeed, one secret
of political Islam’s longevity is that outsiders have underestimated the
system all along. History also shows that an ideology’s life can be
extended when that ideology has state sponsors, as liberal democracy
did in the 1930s and as Islamism does today. Far from being on its way
m
out, political Islam may well be getting its second wind.
in god’s name?
hi
Political Islam, like many competing ideologies of old, is not monolithic.
Although Islamists share a general devotion to sharia, they come
in many stripes: Sunnis and Shiites; extremists and moderates;
ha
nationalists, internationalists, and even imperialists. This kind of
variance has led to a debate in the West over whether the United
States and its allies should accommodate moderate, pragmatic Islamism
iT
in places where it competes with more radical movements. Those
who say no generally depict Islamism as a single movement united
by its hatred of the West. Those who say yes portray Islamism as
internally divided.
Al
This debate is nothing new, and opponents of an ideology often try

to exploit ideological cleavages to tip a conflict in their favor. Through
out Western history, outside powers have periodically attempted to
od
use such divide and conquer tactics, although they have had mixed
-
-
results; at times, their efforts backfired. Take the Wars of Religion again.
The prolonged conflict led to the splintering of Europe’s dominant
ideologies, and some of the resulting mutations survived to compete
so
with the originals. Protestantism started out as Lutheranism but

quickly developed into Zwinglianism in Switzerland and Anabaptism
in Germany, before sprouting a Calvinist version in France and an
Anglican one in England. Calvinists and Lutherans often competed
Ma
for influence and could be worse enemies of each other than either
group was of the Catholics. The Catholic Habsburg dynasty that ruled
the Holy Roman Empire worked tirelessly to nurture these divisions.
In the end, however, this strategy failed to either weaken the Calvinists
or prevent them from forming a united front with the Lutherans in
the Thirty Years’ War.

John M. Owen IV
The trick for outsiders, therefore, is to ascertain whether some

ideologues are predisposed against radicalism and to know how to
cultivate them. It’s possible to do this successfully. In the post–World
War II effort to limit the Soviet Union’s influence in Europe, U.S.
President Harry Truman showed great dexterity in determining
which of the Western European leftist parties could become U.S. allies.
He correctly concluded that Italy’s Communists and Socialists were
monolithic: they were united in supporting the Soviet Union and op
posing the U.S. sponsored Marshall Plan. Truman instead cultivated
m
-
the Christian Democrats, helping them win a crucial election in 1948.
In France, however, Truman recognized that the Socialists opposed
communism and struck a deal with them, allowing France to become
hi
an ornery but genuine U.S. partner.
Such overt and covert interventions by outside powers are another
defining trait of prolonged legitimacy crises. The clash between
ha Islamism and secularism is just the lat
est contest in which a host of external
Early modern Calvinism actors have involved themselves in the
was a political ideology as internal affairs of other states, either by
iT
much as a set of religious working behind the scenes or by using
doctrines. military means. Some have criticized
many such outside interventions; in
Al
particular, critics have argued that the

U.S. campaigns in Afghanistan, Iraq, and, more recently, Libya repre
sented irrational bursts of crusading that fell outside the bounds of
od
prudent statecraft. In fact, however, it is normal practice for a great

power to use force to alter or preserve another country’s regime.
External interventions are not a separate, foolish, and avoidable
addition to ideological struggles; they are part and parcel of them.
so
More than 200 such interventions have occurred over the past 500 years,
the vast majority of them during regionwide legitimacy crises such
as the one racking the Middle East today.
The deep polarization produced by these kinds of struggles helps
Ma
explain why intervention is so common. Often, ideological conflicts

deepen social schisms so much that people become more loyal to
foreigners who share their principles than to their own countrymen
who do not. These clashes strongly predispose people and countries
toward either friendship or enmity with foreign actors, especially with
those that are powerful enough to give them or their opponents the

upper hand. And foreign actors, for their part, see these kinds of
crises as opportunities to make new friends or prevent the emergence
of new enemies.
Intervening powers need not have a religious stake in the conflict;
sometimes a material stake is enough. At other times, ideological and
material calculations combine to trigger an intervention. For example,
in 2011, during the Arab Spring, Sunni dominated Saudi Arabia sent
-
troops into Bahrain to help stop a Shiite rebellion, thereby containing
both the reach of Shiite Islam and the power of Shiite dominated
m -
Iran. A short while later, Iran intervened in Syria to prop up the Assad
regime against Sunni rebels who would likely align Syria with Saudi
Arabia if they won. Developments such as these have given rise to
hi
fears that the Middle East will see increasingly reckless, ideologically
driven states that are bent on destroying the regional order. Some
observers worry, for instance, that if Iran acquires nuclear weapons, it
ha
might use them to upset the precarious balance in the Middle East
and even provoke an apocalypse.
History does not offer a simple verdict on that fear, but it does
iT
show that a state can be at once ideological and rational. A regime
ruled by ideologues may have ideological ends, such as a radically
different regional order. To pursue those ends, it may employ rational
means, retreating when aggression becomes too costly. But it could
Al
also occasionally act in a way that belies the traditional cost benefit
-
logic of geopolitics.
The behavior of a leading German principality called the Palatinate
od
during the Wars of Religion illustrates both of those possibilities. The

principality’s rulers were militant Calvinists who strove to end Catholic
domination in the Holy Roman Empire and all of Europe. They
repeatedly tried to cobble together grand Protestant alliances against
so
the Catholic powers, sending troops on several occasions to help

Calvinists in France and the Netherlands. For much of the sixteenth
century, however, their calculus included a healthy mix of ideology
and rationality: when they encountered sufficient resistance from the
Ma
mighty Habsburgs and indifference from fellow Protestants, they

pulled back. But then, Calvinist rebels in Bohemia (another subject
of the empire, governed by Catholics) invited the Palatinate ruler
Frederick V to defy the Habsburgs and become their king. Frederick
accepted and, in 1619, claimed Bohemia for himself despite the
obvious risks of a Habsburg backlash and the fact that most Euro
May/June 2015 85

John M. Owen IV
pean Protestants refused to openly support him. Sure enough, the

Habsburgs crushed Frederick’s army and went on to ravage the
Palatinate and suppress Protestantism there. These were the opening
moves of the Thirty Years’ War.
V V
SUR
I
AL
OF
THE
FITTEST
Like all prolonged, regionwide ideological contests, the one between
Islamism and secularism will one day end. How that will happen,
however, and what prospects there are for democracy in the Middle
m
East are both open questions.
Western history shows that legitimacy crises usually resolve
themselves in one of three ways: a decisive victory by one side, a
hi
transcending of the conflict by the warring parties, or the emergence
of a hybrid regime that combines rival doctrines in ways that once
seemed impossible. Today, the first scenario, a straight out win by
ha
-
any single ideology, appears unlikely; given that Islamism is far
from monolithic, a triumph of Islamism in general would not settle
which of its many strands—Sunni or Shiite, moderate or extreme,
iT
monarchical or republican—would predominate. But the other two
scenarios are conceivable.
Although it may be difficult to imagine a Middle East that tran
scended its current legitimacy crisis, one of the West’s past crises
Al
indeed concluded in that way. Early modern Europe ultimately

overcame its religious strife with the emergence of new kinds of
regimes that rendered old ideological differences irrelevant. Catholics
od
and Protestants remained faithful to their religions, but they

stopped thinking of them in zero sum terms and gradually embraced
-
the separation between church and state. A similar kind of outcome
in the Middle East would require that Muslims, both elites and
so
mass publics, cease to see the question of Islam’s influence on laws

and the public order as a life and death matter. Given the deep
-
-
polarization that prevails, however, the prospect of such a transcen
dence appears remote.
Ma
Alternatively, competing ideologies could begin to converge, adopting

some of one another’s institutions and practices. Europe experienced
this development, too. From the 1770s until the 1850s, the continent was
torn between monarchists, who believed that rule must be inherited,
and republicans, who wanted governments to be elected. These two
ideas at first seemed mutually exclusive; monarchies repeatedly crushed

republican revolts. But after a period of repression, Europe’s monarchs

struck a new bargain with the middle classes. Following the lead of
the United Kingdom, a number of states—Austria, France, Italy, and
Prussia—constructed a new kind of regime. Sometimes called “liberal
conservatism,” it combined monarchy with parliamentary constraints
and greater civil liberties.
This story points to the final historical lesson: the ultimate success
of an ideology, or a hybrid of several ideologies, often depends on
whether it has a powerful state cham-
m
pion. The triumph of liberal conserva-
tism in Europe was partly caused by the
Like all prolonged
manifest success of the United King- ideological contests, the one
hi
dom, the state that best exemplified it. between Islamism and
That country had long had a hybrid secularism will one day end.
regime, a constitutional monarchy that
ha
merged tradition and reform. The
United Kingdom was also, without doubt, the world’s most successful
state of the time, boasting the largest economy, the most extensive
iT
empire, and a remarkably stable social order. The reason its hybrid
regime inspired imitation throughout the region was that it had
proved to work.
Across the Muslim world, a hybrid regime of a different sort has
Al
recently been showing signs of strength. That hybrid has sometimes

been called “Islamic democracy.” Although scholars have long thought
that democracy and Islamism are inherently incompatible, some
od
Islamists and democrats in different countries have been trying to

join these two systems in theory and practice. In 2011–13, for example,
Egypt’s Freedom and Justice Party (the political wing of the Muslim
Brotherhood) took pains to portray itself as a moderate force by
so
accepting religious and ideological pluralism. That effort ultimately

failed, as President Mohamed Morsi began to accumulate power and
Egypt’s military ousted him. Since then, Egypt appears to have
abandoned democracy altogether, but the country certainly has the
Ma
size and influence to become an exemplary state should it ever attempt

the experiment again.
Meanwhile, a more successful attempt to combine Islamism and
democracy was made by the political party Ennahda in Tunisia, which
conducted democratic elections in late 2014 despite openly embracing
Islamism. Tunisia is too small to become an exemplary state, but it
May/June 2015 87

John M. Owen IV
represents the brightest spot to emerge from the Arab Spring and, at
the very least, shows what is possible.
Much depends on the political choices of the two most powerful
Muslim majority countries in the region: Iran and Turkey. Although
-
neither is Arab, each has a long history of regional influence. Iran
exemplifies Islamism, having proclaimed itself the standard bearer
-
for the ideology in its 1979 revolution. Although the country is
formally a republic with semicompetitive elections, supreme power
rests in the hands of Ayatollah Ali hamenei. But Iran’s prospects as
m
K
an exemplary state have suffered during the Arab Spring and its after
math, as Tehran’s unstinting support for the Assad regime in Syria
has alienated the vast majority of Sunni Arabs. Moreover, the regime
hi
has been looking brittle since the suspicious election of 2009, raising
doubts that its neighbors would want to follow its example. So long
as Iran remains the role model for Islamism, therefore, Islamism is
ha
in trouble.
Turkey could be a different story. Although the country is formally
a secular republic, it has been drifting in the Islamist direction. For
iT
the past three years, Turkey has appeared well on its way to becoming
a model of a new, hybrid kind of Islamic democracy. Competitive
elections have repeatedly buoyed its ruling Justice and Development
Party, or akp, headed by President Recep Tayyip Erdogan, which
Al
has styled itself the vanguard of Islamic democracy (even though it

prefers to call this style of government “conservative” rather than
“Islamic”). The country enjoyed a burst of popularity among publics
od
in the region early in the Arab Spring and has continued to expand
its influence since. But when it comes to an Islamist democratic
-
hybrid, the bloom is off the rose, partly because Erdogan has instead
begun embracing an authoritarian style of rule. Turkey may yet
so
come to exemplify a hybrid regime, but that hybrid’s democratic

component is now being replaced by old fashioned autocracy.
-
why they fight
Ma
As with the many ideological contests before it, the crisis in the Middle
East has led some observers to question whether ideology is really its
root cause at all. Many critics trace the conflict to something else
altogether, claiming that Western imperialism—first European, now
American—has humiliated Muslims and severely limited their ability
to control their own future, both as individuals and as societies. In

this view, the United States’ military presence in the region and its
support for Israel are to blame for the rising violence. But argu
ments of this sort overlook a key fact: the world is full of powerless,
frustrated people and groups, and U.S. hegemony is nearly global.
Yet the peculiar knot of problems entangling the Middle East—serial
unrest and repression, terrorism and brutality, and recurring foreign
interventions—can hardly be found anywhere else.
Others blame poverty. If Muslims had more wealth and opportunity,
they maintain, the crisis would abate. But this argument, too, is coun
m
tered by the world’s numerous other poor societies, many of them much
worse off than the average Middle Eastern state, that have managed to
avoid turmoil. If poverty were what mattered most, then sub Saharan
hi
-
Africa would be experiencing many more acts of terrorism, revolutionary
waves, and foreign invasions. Evidence points to a different conclusion:
although both powerlessness and poverty are key factors, they can
ha
produce the kind of dysfunction that defines today’s Middle East only
when combined with a prolonged, regionwide legitimacy crisis.
The good news is that the United States may be able to encourage
iT
a more stable long term outcome by nurturing countries and parties
-
that exemplify a moderate system of government, even if that system
falls short of being entirely secular. The bad news, however, is that
this is all it can hope for: even the mighty United States cannot solve
Al
all of the region’s problems, since all sides would inevitably view its
interventions as partisan. The United States must, of course, protect
its interests—a duty that at certain times and places might again
od
require force. But just as the Ottoman Empire, the Muslim super
power at the time of the Wars of Religion, could not resolve the
strife among Christians in the sixteenth century, no outside actor can
pacify the Middle East today. Only Muslims themselves can settle
so
their ideological war.∂

Ma
May/June 2015 89

Drone On
The Sky’s the Limit—If the FAA Will
Get Out of the Way
Gretchen West
m
I
n the beginning, drones were almost exclusively the province of
hi
militaries. At first little more than remote controlled model
-
planes used in the World War I era, military drones advanced
steadily over the decades, eventually becoming sophisticated tools
ha
that could surveil battlefield enemies from the sky. Today, the terms
“drone” and “unmanned aircraft system” denote a vehicle that navi
gates through the air from point A to point B and is either remotely
iT
controlled or flies autonomously. While they vary in size and shape,
such vehicles all feature a communications link, intelligent soft
ware, sensors or cameras, a power source, and a method of mobility
(usually propellers).
Al
Inevitably, drone technology spilled out from the military and

into other parts of the public sector. In the United States over the
last decade, federal researchers turned to drones for monitoring
od
weather and land, the Department of Homeland Security started

relying on them to keep an eye on borders, and police adopted
them for search and rescue missions. Then came everyday consum
-
-
ers, who took to parks on the weekend with their often homemade
so
creations. Outside government, drones were mostly flown for fun,

not profit.
Until recently, that is. In the last several years, a new group of
actors has come to embrace drones: private companies. Inspired by
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the technological progress made in the military and in the massive

hobby market, these newcomers have realized that in everything
GRETCHEN WEST is Vice President of Business Development and Regulatory Affairs at

DroneDeploy, a provider of mapping and flight-management software for drones. From
2004 to 2014, she was Executive Vice President of the Association for Unmanned Vehicle
Systems International. Follow her on Twitter @gawherry.

Drone On
from farming to bridge inspection, drones offer a dramatic improve

ment over business as usual. The potential for the commercial use
of drones is nearly limitless. But in the United States, the growing
drone industry faces a major regulatory obstacle: the Federal Aviation
Administration (faa) has issued overly restrictive rules that threaten
to kill a promising new technology in the cradle.
serious business
As more and more actors have invested in drone research and devel
m
opment, the vehicles themselves have become cheaper, simpler, and
safer. Perhaps even more exciting are the changes in software, which
has advanced at lightning speed, getting smarter and more reliable by
hi
the day: now, for example, users can fly drones without any guidance
and set up so called geo fences to fix boundaries at certain altitudes
-
-
or around certain areas. The economics are now attractive enough that
ha
many industries are looking to drones to perform work traditionally
done by humans—or never before done at all.
Many applications involve inspection; it’s far cheaper and safer to
iT
send a drone with a camera into a remote or dangerous place than to
send a human. Oil and gas companies are using drones to monitor
pipelines, oil rigs, and gas flares. Utility companies can use them to
check electrical wires and towers. Engineers are beginning to use
Al
them to inspect bridges and buildings for damage and to survey land.
In agriculture, meanwhile, drones offer a bird’s eye view of farms,
-
without the cost of aircraft or satellites. Farmers are starting to rely
od
on drones to diagnose the health of their crops, assess damage after a

storm or flood, herd livestock, and eradicate pests. In Australia and
Japan, drones are fertilizing crops.
Drones could soon deliver light packages, too. Already, Amazon
so
and Google have spent millions of dollars developing drone delivery

programs, although much work remains to be done to make the services
practical. Some entrepreneurs have tried out drones to deliver beer
at concerts and champagne to hotel balconies. In Singapore, which
Ma
has more service jobs than available workers, one restaurant chain is
planning to replace waiters with drones. In remote parts of the world
with little transportation infrastructure, drones could be used for
humanitarian purposes, delivering medicine and other essentials. They
could also play a role in protecting endangered species by tracking
illegal poachers.
May/June 2015 91

Gretchen West
The list of potential uses goes on. Drones could help with mining
by mapping sites and tracking equipment, and they could help with
construction by measuring stockpiles of excavated soil and monitoring
the progress of projects. In the real estate industry, entrepreneurs are
using drones to photograph houses from previously unreachable vantage
points. As for filmmaking, drones are a safer, cheaper, and less labor
-
intensive alternative to renting a helicopter. Hollywood has rapidly
embraced drones: parts of the 2012 James Bond movie Skyfall were
shot by drones in Istanbul, and the Motion Picture Association of
m
America has helped get some of the first faa approvals for the use
of commercial drones in the United States. Likewise, news and sports
broadcasters find the portability and affordability of drones particularly
hi
attractive. Earlier this year, cnn got faa approval to explore their use
in reporting.
The potential size of the commercial drone market is hard to pin
ha
down, in part because in the United States, the shaky regulatory
environment is leading many companies to keep their plans private.
Still, forecasts are upbeat. In 2014, the firm Lux Research estimated
iT
that by 2025, the global market for commercial drones will reach
$1.7 billion, with drones used for agriculture generating $350 million
in annual revenue and those used in the oil and gas industry generating
$247 million. The drone industry is poised for greatness.
Al
- Z
NO
FLY
FLY
ONE
But in the hotbed of drone research—the United States—the faa is
od
impeding the sector’s growth. Charged with overseeing U.S. airspace

and the U.S. civil aviation industry, the faa began asserting its regu
latory authority over drones as they became more widespread. In the
early years of this century, the faa began allowing parts of government
so
outside the military—federal, state, and local agencies; public univer

sities; and police—to apply for permission to fly their own drones.
But in the face of a new and poorly understood technology, the faa
refused to allow anyone to fly a drone for commercial purposes. Those
Ma
who wished to do so had to go through a limited, expensive, and labor

-
intensive approval process.
Then, in February 2012, Congress passed the faa Modernization
and Reform Act, which was the first faa related bill to include language
-
about drones. The act gave the faa deadlines for devising new rules on
civil and commercial drones, setting an ultimate goal of safely integrating

Drone On
m
hi
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Blades of glory: at a trade fair in Hanover, Germany, March 2014
iT
them into the country’s tightly overseen airspace by September 2015.
Among the partial reforms, the bill required the faa to make exceptions
for first responders, create six test sites across the United States to
experiment with ways to accommodate drone traffic, and publish a
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final rule for small drones.

Although the faa missed most of the original deadlines for these
objectives, it has now met most of the provisions—but not always
od
in the most practical way. The provision for test sites amounted to an
unfunded congressional mandate, and the sites are struggling to
become operational. The exemption process for commercial drone
operators, which the faa announced in 2014 under Section 333 of the
so
bill, requires applicants to jump through far too many hoops; for
example, they must have a pilot’s license to operate drones and apply
for a special certificate each time they do so. Not surprisingly, given
its limited resources, the faa has granted only 37 approvals as of this
Ma
REUT E RS / FABRIZIO BENSCH
writing, and the backlog totals 536 applications.

But the bill did spur the faa to finally release proposed rules for
small commercial drones, which came out in February 2015. The
industry found much in the draft to celebrate. The faa proposed
relaxing the requirement that drone operators have a pilot’s license;
instead, they will need merely to get vetted by the Transportation
May/June 2015 93
Gretchen West
Security Administration, pass a knowledge test, and obtain a special

operator’s license. The drones themselves, meanwhile, will no longer
have to meet cumbersome airworthiness standards (such as having a
maintenance program and a manual); all one will need to do is register
the drone with the faa and conduct a simple safety inspection before
every flight.
Some of the faa’s proposals, however, are too restrictive. For
example, a drone will not be allowed to fly beyond its operator’s line of
sight. That is an extremely limiting constraint for farmers and sur
m
veyors trying to cover vast swaths of land, and it will make package
delivery by drone impossible. What’s more, the faa is not allowing
so called daisy chaining, whereby users would transfer the line of
hi
-
-
-
-
sight requirement from one operator to another in order to cover a
larger area. In traditional aircraft, pilots can fly under “instrument
flight rules,” which allow them to rely on sensors and signals to navigate
ha
when visibility is limited. There is no reason a similar exemption
cannot be applied to drones when they are flying beyond an operator’s
line of sight.
iT
Other restrictions are equally business unfriendly. Even though
-
technologies exist that allow operators to safely manage multiple
drones at once, the faa is planning to limit each user to flying just
one drone at a time, which is particularly problematic for companies
Al
that wish to survey vast areas. And although the faa has raised the
altitude ceiling for drones from 400 feet (under the old guidelines)
to 500 feet, many commercial operations, such as the inspection of
od
tall buildings, require higher altitudes. In addition, the faa’s rules

would allow only daytime flights, even though drones can easily
be equipped with lights that make them visible to the operator and
others in the airspace at nighttime. And by banning flights over people
so
who are “not directly involved in the operation,” the rules limit
commercial drones to unpopulated areas. Vacating all employees is
impractical at mines or construction sites, where employees are pro
tected by hardhats anyway. The faa still has a long way to go when it
Ma
comes to adopting a sensible, risk based approach to regulation.

-
safe skies
Other governments outside the United States have also had to grapple
with the rise of drones. Like the United States, some countries, such as
the Netherlands and South Africa, have opted for restrictive regulations.

Drone On
It hasn’t helped that the International Civil Aviation Organization,

the body that issues global standards and practices, has failed to provide
clear rules for small drones flying at low altitudes. Drone manufacturers,
which often sell their products in many different countries, are paying
the price for the lack of consistency.
But a number of countries have adopted sane drone regulations.
Some, such as Australia, Germany, New Zealand, Spain, and the
United Kingdom, are taking a risk-based approach, outlining dif-
ferent rules for different weight classes. Others have quickly and
m
aggressively opened their skies to commercial drones. Canada has
approved over 1,000 commercial operators, France has more than
1,200 of them, and Japan conducts more than 85 percent of its crop
hi
spraying by unmanned helicopter.
Not surprisingly, many U.S. companies, stymied by the faa, have
moved their drone operations overseas. Google has tested its delivery
ha
program in Australia; Amazon is researching its in the United Kingdom.
With the faa’s final rules at least a year
away from being released, U.S. firms In the face of a new and
iT
will likely continue to shift their work
elsewhere. The result: the United States poorly understood
could well miss out on an economic technology, the FAA
windfall. In 2013, the Association for refused to allow drones for
Al
Unmanned Vehicle Systems Interna-

tional, the drone advocacy group for commercial purposes.
which I recently served as executive
od
vice president, predicted that the economic impact of drones in the

United States over a ten-year period would total $82 billion—but
only once the proper regulation was in place.
The faa should take its cues from countries with a risk-based
so
approach to regulation. Small drones that weigh less than five pounds
don’t pose the same threats to people, aircraft, and buildings that
ones weighing 50 pounds do, and the rules should reflect that.
Ultimately, it will take Congress to influence the faa’s rules, along with
Ma
the right amount of pressure from the various industry associations

that have formed to lobby on behalf of drone use. No technology
is 100 percent safe, of course, but that doesn’t mean an outright ban
is in order. In the event that a negligent drone user does cause a
mishap, society can deal with the fallout the way it already handles
similar incidents: through civil and criminal law.
May/June 2015 95

Gretchen West
Some of the safety concerns can be addressed through technology.

To prevent collisions, companies are now developing “sense and
avoid” technology, whereby the drone automatically backs away from
nearby objects. The start up I work for now, DroneDeploy, has created
-
software that performs periodic safety checks and monitors the air
space for obstacles. Researchers are also tinkering with programs to
create a sort of air traffic control system for drones. Nasa, working
with the faa and partners in the private sector, has spearheaded the
Unmanned Traffic Management program, which is intended to create
m
infrastructure that organizes commercial drone flights at low altitudes.
Just as traditional aviation has used technology to improve safety, so
is drone aviation.
hi
Privacy is also a concern. After Congress passed the faa Modern
ization and Reform Act, privacy advocates started an anti drone
-
campaign, claiming that drones might spy on citizens. In Congress
ha
and state legislatures, politicians began proposing laws limiting the
use of drones, primarily by law enforcement. Privacy is a legitimate
issue when it comes to drones, but the conversation tends to miss
iT
the point. Many things can collect data—not just drones but also phones,
manned aircraft, surveillance cameras, and so on—and so laws should
focus on how the data are collected, used, and stored, not on the
devices themselves.
Al
Part of the problem goes back to drones’ military origins. Until

recently, the media often accompanied stories about commercial
drones with pictures of weaponized drones flying over Afghanistan.
od
(Lately, however, the proliferation of small drones by such manu

facturers as dji, 3D Robotics, and Parrot has shifted perceptions:
drones are no longer just military machines; they are toys, too.) Some
privacy groups have inaccurately alleged that commercial drones
so
could hover for hours to conduct persistent surveillance, ignoring

the fact that most drones used commercially today are lightweight
vehicles with limited carrying capacity and only around 30 minutes
of battery powered flight time. And they have claimed that drones
Ma
-
possess capabilities such as facial recognition and Gorgon Stare—a
high quality, wide area surveillance video feed—even though those
-
-
technologies are used primarily by the military and are of little interest
to the private sector.
Of course, all technologies get smaller and cheaper over time, and
businesses could someday start using those that concern privacy

Drone On
advocates. Again, however, the focus should be on the data, not the
device. Laws already exist to protect privacy; people using drones to
spy on neighbors, for example, could be prosecuted under peeping
Tom laws.
sweet dreams and flying machines

In a remarkably short period of time, the private sector has discov
ered a multitude of uses for drones, ones that benefit businesses,
their employees, and their customers. Real estate agents can show
m
case properties in ways that were never before possible. Farmers
can detect and fix crop blights faster than ever before. Inspection
companies can save lives by taking men and women off ladders.
hi
All that’s left to do is clear the obstacles to this burgeoning indus
try. Private companies, for their part, need to aggressively raise
awareness of drones’ potential, even demonstrating the technology
ha
directly to decision makers, and take advantage of facilities such as the
-
faa’s test sites to prove drones’ reliability with hard data. Hobbyists,
meanwhile, should fly safely and responsibly. And the faa should
iT
abandon technophobia in favor of sensible rules. Once all that has
been accomplished, commercial drones can at last take off.∂
Al
od
so
Ma
May/June 2015 97

The Democratization of
Space
New Actors Need New Rules
m
Dave Baiocchi and William Welser IV
S
hi
tarting with the Soviets’ launch of Sputnik in 1957, early space
missions were funded exclusively by national governments, and
for good reason: going to space was astronomically expensive.
ha
Setting up a successful space program meant making major investments
in expertise and infrastructure, along with tolerating a great deal of
risk—which only the superpowers could do. Nasa’s Apollo program,
iT
for instance, employed 400,000 people, cost more than $110 billion in
today’s dollars, and resulted in the death of three skilled astronauts.
Not surprisingly, then, the legal framework that developed as the
space race intensified was government centric. In 1967, the United
Al
-
States, the Soviet Union, and many other countries signed the Outer
Space Treaty, which set up a framework for managing activities in
space—usually defined as beginning 62 miles above sea level. The
od
treaty established national governments as the parties responsible for

governing space, a principle that remains in place today.
Half a century later, however, building a basic satellite is no longer
considered rocket science. Thanks to the availability of small, energy
so
-
efficient computers, innovative manufacturing processes, and new
business models for launching rockets, it has become easier than ever
to launch a space mission. These advances have opened up space to a
crowd of new actors, from developing countries to small start ups. In
Ma
-
other words, a new space race has begun, and in this one, nation states
-
are not the only participants. Unlike in the first space race, the challenge
DAVE BAIOCCHI is Senior Engineer at the RAND Corporation and a Professor at the
Pardee RAND Graduate School.
WILLIAM WELSER IV is Director of the Engineering and Applied Sciences Department at
the RAND Corporation and a Professor at the Pardee RAND Graduate School.

in this one will not be technical; it will be figuring out how to regulate
this welter of new activity.
- -
FREE
FOR
ALL
Computing gets much of the credit for lowering the barriers to entry
to space. The modern smartphone is the product of three plus decades
-
of advances in circuit design and fabrication techniques, and today’s
processors pack 1,000 times as many transistors as their predecessors
did 20 years ago. The iPhone 6 has as much computational power as a
m
supercomputer from the 1990s did. Smaller also means more energy
efficient: a typical cell phone will draw just 25 cents’ worth of electricity
in a year, compared with the $36 worth a typical desktop computer
hi
does. Small, powerful, and energy efficient hardware is perfectly
-
suited for satellites, which have a finite amount of electricity (from
solar panels) and volume. And thanks to new software development
ha
-
tools and customizable hardware, anyone with even a modest pro
gramming ability can assemble a highly capable computer that could
fit into a satellite.
iT
Changes in manufacturing are also making space missions cheaper.
The space community’s needs have always been at odds with tradi
tional fabrication techniques. Satellite payloads typically require parts
that are durable, extremely delicate, and specialized. And because the
Al
companies or governments that buy them rarely build more than two
or three of any particular type of satellite, they usually need only a few
copies of each part. As a result, space missions have never benefited
od
from the economies of scale offered by assembly lines.

Enter additive manufacturing techniques such as 3 D printing and
-
laser sintering. With a single $35,000 device, designers can quickly
build things that, in the past, would have required all the trappings of
so
a modern factory: custom molds, specialized robots, and conveyor

belts. Additive manufacturing slashes the cost of producing a handful
of parts by a factor of at least ten. Plus, no machine tooling expertise
-
is required.
Ma
Not only has it become much less expensive to construct a satellite;

it is also becoming much cheaper to send it into space. Companies
such as Orbital atk and SpaceX are working to lower the costs of
space launches, by modularizing their vehicles, modernizing their
design and fabrication workflows, and vertically integrating their
manufacturing processes. These companies are still primarily focused
May/June 2015 99

on traditional missions involving heavy payloads, such as launching

military satellites and resupplying the International Space Station.
Alongside these giants, a group of more obscure start ups is focusing
-
on smaller satellites. At least a dozen companies are now developing
small rockets designed to carry payloads of less than 1,000 pounds. In
the past, these small payloads—made up of such things as science
experiments or atmospheric sensors—had to wait for room on a larger,
state sponsored rocket, if they could get a ride at all. As technology
-
has made small payloads more viable and prolific, new companies
m
are looking to fill this niche by developing launch services that cost
between $1 million and $10 million, in lieu of the $50 million to
$250 million for traditional payloads.
hi
These advancements—in computing, manufacturing, and launching—
have made space more accessible than ever before, and entrepreneurs
are entering the fray. One characteristic newcomer is Tyvak Nano
ha
-
Satellite Systems, a small company that employs just two dozen
engineers and is headquartered in a modest office park in Irvine,
California. Its mission: to build satellites so inexpensive and easy to
iT
use that practically anyone can buy and launch them. The company has
developed a modular system—essentially, an Erector set for satellites—
that allows it to configure a satellite for a particular client’s needs, and
at a very low cost. While the average satellite in orbit costs around
Al
$100 million to build, Tyvak’s start at $45,000. Their clients range

from well funded high school science clubs to nasa.
-
Given the revolution in accessibility, it’s possible to imagine other
od
nonstate actors having a go at space as well. Nongovernmental organi

zations may start pursuing missions that undermine governments’
objectives. An activist billionaire wanting to promote transparency
could deploy a constellation of satellites to monitor and then tweet
so
the movements of troops worldwide. Criminal syndicates could use

satellites to monitor the patterns of law enforcement in order elude
capture, or a junta could use them to track rivals after a coup.
Ma
time to plan
The democratization of space will pose new challenges for policymakers,
given that for the most part the existing legal framework has effectively
applied to only a handful of states. The Outer Space Treaty outlined
four basic concepts: the parties agreed to keep space open for exploration
and use by all states, take responsibility for all activities conducted

m
hi
ha
Flying private: a SpaceX cargo ship, April 2014
from within their borders (whether carried out by governmental or
iT
nongovernmental entities), assume liability for damage caused by their
space objects, and cooperate with one another and provide mutual
assistance. Nearly all the international space agreements and national
space policies in place today are built on those principles.
Al
But much has changed in the nearly 50 years since the treaty was
signed. Today, 12 countries host a total of 26 public and private
launch facilities, and the pace of technological change is dizzying.
od
The diplomats and lawyers who drafted the treaty likely never envisioned
commercial space tourism or crowdfunded satellites. Nor could
they have imagined nongovernmental organizations, activists, or a
wave of entrepreneurs heading to space. And so they limited their
so
guidelines to what they knew: protecting basic science research and

prohibiting the use of nuclear weapons in space. Just as national
governments now have to deal with the rise of drones in their air
spaces, the international community, operating at a higher altitude,
Ma
will have to adapt to the proliferation of space missions.

So what are policymakers to do? The first step in the responsible
use of any resource is understanding and tracking how that resource
is used. For space, this means knowing where everything is located—
or, as it’s known in the industry, developing “space situational aware
NASA
ness.” The U.S. Space Surveillance Network, which is part of U.S.
May/June 2015 101

Strategic Command, currently tracks more than 17,000 objects in

space, from active satellites to old rocket bodies to small pieces of
debris. But these objects are not actively tracked 24 hours a day; in-
stead, they are tagged whenever they pass over a network of optical
and radar sites on the ground, after which their orbits are entered into
a catalog. When satellites suddenly alter their orbits—which they do
as part of regular maneuvers or for clandestine purposes—the net-
work has to search for these objects anew and update the catalog with
their latest positions.
m
As the number of players in space increases, situational aware-
ness will become all the more important. For one thing, tracking
satellites allows their owners to pre-
hi
vent them from accidentally colliding
Today, 53 countries are with one another. Today, this risk is
responsible for over 1,300 reasonably low, but debris-generating
ha
active satellites. collisions have occurred in the past,
and their frequency will only grow with
the number of space objects. For another
iT
thing, since countries are liable for their own space objects, when a
collision does occur, the victim needs to be able to attribute the cause
to a particular state—and doing that requires situational awareness.
When it comes to preventing accidental collisions, it is in everyone’s
Al
best interest to share all the data. Traditionally, the United States has
served as the de facto keeper of a global catalog, but other countries
and even private organizations have started maintaining their own.
od
It’s time to centralize all this information in one location, which will
require governments to agree to new policies and the use of new tech-
nologies that can make it easier to share data.
A second policy challenge has been around since the dawn of the space
so
age, but it is going to get worse. Satellites and space shuttles are often
referred to as “dual-use technologies” because they can be used for both
peaceful and military purposes. An imaging satellite, for example, can
monitor crop production as easily as it can spy on submarine bases. As
Ma
more private actors enter the space business, it may be more important to
distinguish between intended and unintended purposes. A fleet of small
camera-equipped satellites may be launched for the purpose of providing
more accurate weather data, but once the constellation of satellites enters
orbit, operators may discover that it is also capable of monitoring the po-
lice. It will be up to the operators whether to declare this use.

The current policies assume that all actors will state their intentions
and abide by them, but this is less likely to occur as smaller and more
private interests enter the market. These smaller, private entities
won’t necessarily recognize strong state ties, and, empowered by new
technologies, they may feel free to operate independent of national
policies. Indeed, the private sectors in the United States and Europe
may present a greater challenge than those in China and Russia, since
firms in the latter are so closely aligned with the state.
The final policy challenge concerns nonstate actors. During the
m
four decades when Washington and Moscow had space nearly all to
themselves, coordinating and attributing activities there was relatively
straightforward. But today, 53 countries are responsible for over 1,300
hi
active satellites; even Ghana has a space agency. Coordinating all their
missions is hard enough, but it will only get harder when nonstate
actors enter the picture. Although most large commercial missions
ha
today are still closely tied to governments, many of the smaller and
cheaper missions of tomorrow will be funded by cross national teams
-
and private interests. It will become harder to both assess the intent of
iT
a mission and assign liability to the right party in the event of a mishap,
putting at risk important capabilities such as weather forecasting, satellite
television, and navigation systems.
The Outer Space Treaty remains a solid foundation for international
Al
space policy, one to which governments will have to add new norms.
Although the treaty holds countries responsible for the nongovern
mental activities that initiate from within their borders, until recently,
od
technical barriers meant that governments never had to worry about

the prospect of such activities. As those barriers fall, policymakers
will need to establish norms for what to do when, for example, small
satellites are covertly moved close to large, state sponsored satellites
so
-
in order to spy on them.
the new space race

Given the abundance of challenges, policymakers will have to resort
Ma
to triage. Some problems are overdue for a solution, others are imminent,
and still others are merely emerging. The lack of situational awareness
should be classified as an urgent problem: when a satellite stops work
ing in orbit, operators need enough information to figure out whether
the problem is the result of natural causes (such as a solar storm) or a
collision with another man made object. The rise of nonstate actors is
-
May/June 2015 103

best thought of as an imminent challenge, because even though compa

nies have started developing new services, such as in orbit refueling
-
and robotic satellite repair, there isn’t yet enough demand to bring
these products to market. The advent of large scale space tourism, by
-
contrast, is still likely a decade or two away.
Regardless of whether governments get to work now on drafting
a new framework for space or kick the can down the road, the new
space race will continue to unfold. In many ways, this race is likely
to follow the path of the software industry. When Apple decided to
m
allow developers to design apps for the iPhone, it unleashed an explo
sion of unforeseen innovation that has transformed daily life and
put more technology in the hands of ordinary people. But because
hi
the revolution happened so quickly, it outpaced policymakers. To take
just one example of an unforeseen challenge, after an early morning
earthquake shook Napa, California, in 2014, the fitness tracker com
ha
pany Jawbone used data collected from its customers to generate
maps that showed who woke up. But had people ever agreed to this
explicit use of their sleep data? Only now are policymakers starting
iT
to wrestle with important questions of security and privacy that
such apps have raised.
The space community now finds itself in the same position that
software developers did at the beginning of the smartphone age: an
Al
exciting new platform is about to open up, but governments have barely
started to plan for how it will be used. They need to start thinking
about that now—before space fills up.∂
od
so
Ma

The Precision Agriculture

Revolution
Making the Modern Farmer
m
Jess Lowenberg-DeBoer
T
hi
housands of years ago, agriculture began as a highly site
-
specific activity. The first farmers were gardeners who nurtured
individual plants, and they sought out the microclimates and
ha
patches of soil that favored those plants. But as farmers acquired
scientific knowledge and mechanical expertise, they enlarged their
plots, using standardized approaches—plowing the soil, spreading
iT
animal manure as fertilizer, rotating the crops from year to year—to
boost crop yields. Over the years, they developed better methods of
preparing the soil and protecting plants from insects and, eventually,
machines to reduce the labor required. Starting in the nineteenth
Al
century, scientists invented chemical pesticides and used newly dis

covered genetic principles to select for more productive plants. Even
though these methods maximized overall productivity, they led some
od
areas within fields to underperform. Nonetheless, yields rose to once

-
unimaginable levels: for some crops, they increased tenfold from the
nineteenth century to the present.
Today, however, the trend toward ever more uniform practices is
so
starting to reverse, thanks to what is known as “precision agriculture.”

Taking advantage of information technology, farmers can now collect
precise data about their fields and use that knowledge to customize
how they cultivate each square foot.
Ma
One effect is on yields: precision agriculture allows farmers to

extract as much value as possible from every seed. That should help
feed a global population that the un projects will reach 9.6 billion by
2050. Precision agriculture also holds the promise of minimizing the
JESS LOWENBERG-D E BOER is Professor of Agricultural Economics at Purdue University.
May/June 2015 105

environmental impact of farming, since it reduces waste and uses

less energy. And its effects extend well beyond the production of
annual crops such as wheat and corn, with the potential to revolu
tionize the way humans monitor and manage vineyards, orchards,
livestock, and forests. Someday, it could even allow farmers to depend
on robots to evaluate, fertilize, and water each individual plant—
thus eliminating the drudgery that has characterized agriculture
since its invention.
m
acre by acre
The U.S. government laid the original foundations for precision
agriculture in 1983, when it announced the opening up of the Global
hi
Positioning System (gps), a satellite based navigation program de
-
veloped by the U.S. military, for civilian use. Soon after, companies
began developing what is known as “variable rate technology,” which
ha
allows farmers to apply fertilizers at different rates throughout a
field. After measuring and mapping such characteristics as acidity
level and phosphorous and potassium content, farmers match the
iT
quantity of fertilizer to the need. For the most part, even today,
fields are tested manually, with individual farmers or employees
collecting samples at predetermined points, packing the samples
into bags, and sending them to a lab for analysis. Then, an agronomist
Al
creates a corresponding map of recommended fertilizers for each

area designed to optimize production. After that, a gps linked fertilizer
-
spreader applies the selected amount of nutrients in each location.
od
Over 60 percent of U.S. agricultural input dealers offer some

-
kind of variable rate technology services, but data from the U.S.
-
-
Department of Agriculture indicate that in spite of years of subsi
dies and educational efforts, less than 20 percent of corn acreage is
so
managed using the technology. At the moment, a key constraint is

economic. Because manual soil testing is expensive, the farmers and
agribusinesses that do use variable rate technology tend to employ
sparse sampling strategies. Most farmers in the United States, for
Ma
example, collect one sample for every two and a half acres; in Brazil,
the figure is often just one sample for every 12 and a half acres. The
problem, however, is that soil can often vary greatly within a single
acre, and agricultural scientists agree that several tests per acre are
often required to capture the differences. In other words, because
of the high cost of gathering soil information, farmers are leaving

m
hi
ha
She thinks my tractor’s techy: fertilizing in Leesburg, Indiana, October 2014
iT
productivity gains on the table in some areas of the field and over-
applying fertilizer and other inputs in others.
Researchers are beginning to tackle the problem, developing cheap
sensors that could allow farmers to increase their sampling density.
Al
For example, one new acidity sensor plunges an electrode into the
soil every few feet to take a reading and records the gps coordinates;
manually sampling on that scale would be far too costly. Such sensors
od
have not yet arrived at most farms, however. Some haven’t proved
reliable enough, breaking after a few acres of use, whereas others
M i c hAE l K i R By S M i t h / t h E N Ew yo R K t i M ES / R E dU x
aren’t accurate enough. But several research groups around the world
are working on developing sturdier ones.
so
More practical are sensors that look at the color of plants to deter-
mine their nutritional needs. Plants with too little nitrogen, for
example, tend to turn pale green or yellow, whereas those with
enough appear dark green. Several U.S. and European companies
Ma
have developed sensors that detect greenness, generating measure-

ments that can be used to create a map recommending various
amounts of nitrogen to be applied later. Alternatively, the measure-
ments can be linked directly to the nitrogen applicator to change
the application rate on the go. A tractor may have a sensor mounted
on the front and an applicator on the back; by the time the applicator
May/June 2015 107

reaches a point that the sensor has just passed, an algorithm has
converted the readings into settings for how much fertilizer to apply.
Because research in this area has focused mainly on small grains,
such as wheat, barley, rye, and oats, the technology is mostly limited
to the parts of the United States and Europe that grow those crops.
According to a 2013 survey by Purdue University, only seven percent
of agricultural input dealers offer plant color sensors. Given the num
-
-
ber of start ups in this area, however, it is clear that many investors
-
see the technology as a potential gold mine.
m
fields and yields
The government’s gps decision also enabled another revolutionary
hi
technology to emerge: yield monitoring. Most harvesters in the
United States and Europe are outfitted with special sensors that
measure the flow rate of grain coming in. An algorithm specific to
ha
the crop then converts the resulting data into a commonly used vol
ume or weight, such as bushels per acre or kilograms per hectare.
That information is then turned into colorful maps that show the
iT
variation within fields.
These maps have become a staple of farming magazines and
trade shows, and for good reason: they have given farmers unprec
edented insight into the effects of various production techniques,
Al
weather conditions, and soil types. Such a map can help a farmer
arrive at yield numbers for the purpose of insurance or government
programs, measure the results of experiments that test the qualities
od
of genetically modified crops or the effectiveness of various cultivation

practices, and reveal which parts of a field aren’t living up to their
potential. In the eastern United States, it was only through yield
monitoring that farmers were able to convince landlords that flood
so
-
related crop losses were not limited to completely submerged parts
of the field; they also extended to a ring around those spots. In response,
farmers installed more subsurface drainage systems. In Argentina,
the technology has taken off because most managers of large farms
Ma
there, unlike their U.S. counterparts, rarely operate vehicles themselves

(a consequence of the peculiar history of landownership there). For
them, yield maps offered on the ground insight into productivity they
-
-
couldn’t otherwise get.
When it comes to the quality of the data, however, yield monitoring
-
technology still has a long way to go. In most cases, the algorithms

that convert data about flow into volume or weight measurements

must be calibrated annually for each crop and farm, and many farmers
don’t bother to do so. The data can also be affected by how fast a
harvester is driven and other idiosyncrasies. And although research
studies can rigorously analyze data from yield monitoring, farms and
agribusinesses typically lack the necessary statistical skills and soft
ware. The next step in yield monitoring is for agribusinesses to adopt
the statistical techniques now used mainly by researchers; since their
findings would be spread across millions of acres, they should be able
m
to justify the cost.
plow by wire
hi
The most common use of precision agriculture technology is for guid
-
ing tractors with gps. Manually steering farm equipment requires skilled
operators and is a tiring endeavor. And even the best drivers often
ha
overlap their passes by as much as ten percent to avoid skipping parts of
the ground. The late 1990s saw the introduction of led light bars, each
a series of led lights in a foot long plastic case that is mounted in front
-
iT
of the operator of a tractor, harvester, or other vehicle. If the lights in the
center are lit up, then the equipment is on track. If those on the left or
the right are illuminated, then the driver needs to correct the steering.
Increasingly, farmers are taking this technology to its next logical
Al
step, replacing the light bars with automatic guidance systems that
link gps data directly to a vehicle’s steering mechanism. Although
an operator still needs to sit on the equipment, for the most part, it
od
can be driven hands free. The technology first gained widespread

-
use in the 1990s in Australia, where clay rich soils—plus a lack of
-
freezing and thawing—make fields particularly vulnerable to compac
tion from wheeled vehicles. Australian farms used gps automated
so
guidance to concentrate equipment traffic on narrow paths, preventing

the rest of the soil from getting compacted. Today, about 40 percent
of fertilizer and other agricultural chemicals are applied with automated
guidance in the United States.
Ma
Such systems have led to numerous spinoffs. One category is

mechanisms that track the path of a tractor and automatically shut
off its seed planting and chemical spraying functions when it passes
-
-
over parts of the field that have already been covered or are environ
mentally sensitive. The technology is especially useful for irregularly
shaped fields, which are vulnerable to overplanting and overspraying.
May/June 2015 109

Geospatial data aren’t just for plowing straight lines, however. For
decades, nasa and some of its foreign counterparts have encouraged
farmers to use their satellite imagery. Along with aerial photography,
these images form the basis for “geographic information systems,”
which enable farmers to store and analyze spatial data. The technol
ogy has proved particularly useful in areas where multiyear data are
available, since it allows growers to divide large fields into zones that
receive different seeds, fertilizers, and herbicides.
Some managers of farms are even using gps to keep an eye on
m
their employees in the field, especially in the former Soviet Union
and particularly in Ukraine. Since the biggest farms there—many of
which cover over 100,000 acres—tend to rely on hired staff and not
hi
owner operators, farm managers like to track all field operations in
-
real time. If a tractor stops for more than a few minutes, for example,
the head office will notice and can call the driver to inquire about the
ha
problem. The tracking technology also allows managers to crack
down on employees who use company machines on their own farms.
iT
yield of dreams
Precision agriculture has already turned one of the oldest sectors into
one of the most high tech, but the best is yet to come. The next step
-
likely involves “big data.” Farmers and agribusinesses are increasingly
Al
considering how to best take advantage of their treasure troves of data

to boost profits and make agriculture more sustainable. In 2013,
for example, the agriculture giant Monsanto acquired the Climate
od
Corporation, a start up founded by two Google alumni to use weather

-
and soil data to create insurance plans for farmers and generate rec
ommendations for which crop varietals are best suited to a particular
plot of land. Another low hanging fruit for big data is research on
so
-
how to use equipment. For example, it’s not clear how fast a tractor
should be driven when planting corn: too slow makes for an inefficient
process, but too fast results in uneven planting, which hurts yields.
After collecting data on the tractor’s speed, the eventual yield of the
Ma
crop, and other factors, however, one could determine the optimal
speed for planting.
In order to harness big data’s power, companies will probably
have to pool information across farms. In the United States and
Europe, individual farms are too small to generate a meaningful
quantity of data, and even the very large farms in Latin America

and the former Soviet Union would benefit from combining data
with their neighbors. The problem, at the moment, is that farmers
have little incentive to collect quality data. In the United States,
some start ups have tried to pay farmers for data, without much success.
-
So far, it is the agricultural input suppliers and agricultural coopera
-
tives that have been able to collect the most data. But even their
data sets are relatively small.
Some of that big data may come from drones. With the United
States largely out of Afghanistan and Iraq, some suppliers of military
m
hardware have turned their attention
to the agricultural market. The move
might be smart: small, unmanned air
Someday, farms might be
hi
craft can capture regular images of filled with hundreds of
crops to guide irrigation, pesticide small autonomous robots.
application, and harvesting. And un
ha
like satellites, drones are largely unaf
fected by cloud cover. Given the operating expense and expertise
required, drones will most likely be used commercially at first only
iT
for high value crops, such as wine grapes. And in the United States,
-
the Federal Aviation Administration will first have to open up the
skies to commercial drones.
The technology that would truly transform agriculture as we know
Al
it is robotics. The rapid adoption of gps guidance has opened the

door to more autonomous farm equipment, and most major manu
facturers have already tested driverless versions of their tractors.
od
Once the driver is removed from the picture, the design criteria for
a piece of equipment change radically: it can become far smaller.
It’s possible to imagine farms someday filled with hundreds of small
autonomous robots, doing everything from planting to harvesting.
so
Robots could scout fields continuously and identify pest and disease
problems at the earliest possible stages. They could apply pesticides
in tiny doses, targeting individual insects or diseased plants. They
could efficiently manage small and oddly shaped fields, such as those
Ma
common in the eastern United States, which are hard to farm profit
ably with conventional equipment driven by humans. In the United
States, by reducing the need for Mexican laborers, robots might even
affect immigration policy.
When it comes to emerging technologies, it is a fool’s errand to
pick winners. But the history of farming in the twentieth century
May/June 2015 111

offers some clues to its future. Almost all the agricultural technolo
gies that were widely adopted in the twentieth century were char
acterized by what economists call “embodied knowledge,” meaning
that the scientific advancements were contained within them.
Farmers didn’t have to know how pesticides killed insects or how a
gasoline tractor worked; they just needed to know how to spray the
chemical or drive the vehicle.
Likewise, the tools of precision agriculture will gain wide
spread use only once they are sold in easy to use forms. That’s
m
-
-
why gps guidance has become so widespread: farmers don’t need
to understand it to use it. And so variable rate technology for
fertilizer, to take one example, will take off the day a farmer can
hi
trigger it with the mere push of a button. Eventually, precision
agriculture could take humans out of the loop entirely. Once that
happens, the world won’t just see huge gains in productivity. It
ha
will see a fundamental shift in the history of agriculture: farming
without farmers.∂
iT
Al
od
so
Ma

essays
The error in Libya was
not an inadequate post-
intervention effort; it was
the decision to intervene
in the first place.
m
—Alan Kuperman
hi
ha
iT
Al
od
so
Ma
AF P / G et ty ImAG es / strInG e r
A Conversation With ISIS Is Not a Terrorist Group

Bashar al-Assad 58 Audrey Kurth Cronin 87
Obama’s Libya Debacle Disrupting the

Alan J. Kuperman 66 Intelligence Community
Jane Harman 99
How to Deter China
Andrew F. Krepinevich, Jr. 78
Syria’s President Speaks

A Conversation With Bashar al-Assad
T
he civil war in Syria will soon to control some areas, but they move from
enter its fifth year, with no end one place to another—they are not stable,
m
in sight. On January 20, Foreign and there are no clear lines of separation
Affairs managing editor Jonathan between different forces. Sometimes they
Tepperman met with Syrian President mingle with each other and they move.
hi
Bashar al-Assad in Damascus to discuss But the main issue is about the popula-
the conflict in an exclusive interview. tion. The population still supports the
state regardless of whether they support it
ha
I would like to start by asking you about
the war. It has now been going on for
almost four years, and you know the
politically or not; I mean they support the
state as the representative of the unity of
Syria. So as long as you have the Syrian
statistics: more than 200,000 people people believing in unity, any government
have been killed, a million wounded, and and any official can unify Syria. If the
iT
more than three million Syrians have people are divided into two, three, or four
fled the country, according to the UN. groups, no one can unify this country.
Your forces have also suffered heavy That’s how we see it.
casualties. The war cannot go on
Al
forever. How do you see the war ending? You really think that the Sunnis and the
All wars anywhere in the world have Kurds still believe in a unified Syria?
ended with a political solution, because If you go to Damascus now, you can see
M e D IA A n D C O M M u n I CAT I O n S O F F I C e , P r eS I D e nC y O F Sy r IA
war itself is not the solution; war is one all the different, let’s say, colors of our
od
of the instruments of politics. So you society living together. So the divisions

end with a political solution. That’s how in Syria are not based on sectarian or
we see it. That is the headline. ethnic grounds. And even in the Kurdish
area you are talking about, we have two
so
Your country is increasingly divided into different colors: we have Arabs more
three ministates: one controlled by the than Kurds. So it’s not about the ethnic-
government, one controlled by ISIS and ity; it’s about the factions that control
Jabhat al-Nusra, and one controlled by certain areas militarily.
Ma
the more secular Sunni and Kurdish

opposition. How will you ever put Syria A year ago, both the opposition and
back together again? foreign governments were insisting that
First of all, this image is not accurate, you step down as a precondition to
because you cannot talk about ministates talks. They no longer are. Given the shift
without talking about the people who live in the Western attitude, are you now
within those states. The factions you refer more open to a negotiated solution to
m
hi
ha
iT
Al
od
so
Ma
Niss as ipsunt eum, omniet

veliquatet eos res ut doler
omnihiliquis abora dem eos
aut labore lorem sipim. The president in Damascus, January 2015
the conflict that leads to a political announced publicly, when they said many
transition? times that the opposition doesn’t repre-
From the very beginning, we were open. sent us—they have no influence. If you
When you have a dialogue, it’s not want to talk about fruitful dialogue, it’s
between the government and the opposi- going to be between the government
tion; it’s between the different Syrian and those rebels. There is another point.
parties and entities. That’s how we look at Opposition means national; it means
dialogue. This is first. Second, whatever working for the interests of the Syrian
solution you want to make, at the end you people. It cannot be an opposition if it’s
should go back to the people through a a puppet of Qatar or Saudi Arabia or any
m
referendum, because you’re talking about Western country, including the United
the constitution, changing the political States, paid from the outside. It should
system, whatever. You have to go back be Syrian. We have a national opposition.
hi
to the Syrian people. So engaging in a I’m not excluding it; I’m not saying every
dialogue is different from taking deci- opposition is not legitimate. But you
sions, which is not done by the govern- have to separate the national and the
ment or the opposition. ha
So you’re saying that you would not agree
puppets. Not every dialogue is fruitful.
Does that mean you would not want to

to any kind of political transition unless meet with opposition forces that are
there is a referendum that supports it? backed by outside countries?
iT
Exactly. The people should make the We are going to meet with everyone. We
decision, not anyone else. don’t have conditions.
Does that mean there’s no room for In the past, you insisted as a precondition
Al
negotiations? for a cease-fire that the rebels lay down

No, we will go to Russia, we will go to their weapons first, which obviously from
these negotiations, but there is another their perspective was a nonstarter. Is
question here: Who do you negotiate that still your precondition?
od
with? As a government, we have institu- We choose different scenarios or

tions, we have an army, and we have influ- different reconciliations. In some areas,
ence, positive or negative, in any direction, we allowed them to leave inhabited
at any time. Whereas the people we are areas in order to prevent casualties
so
going to negotiate with, who do they among civilians. They left these areas
represent? That’s the question. When you with their armaments. In other areas,
talk about the opposition, it has to have they gave up their armaments and they
meaning. The opposition in general has left. It depends on what they offer and
Ma
to have representatives in the local what you offer.

administration, in the parliament, in
institutions; they have to have grass roots I’m not clear on your answer. Would you
to represent on their behalf. In the insist that they lay down their weapons?
current crisis, you have to ask about the No, no. That’s not what I mean. In
opposition’s influence on the ground. some areas, they left the area with their
You have to go back to what the rebels armaments—that is what I mean.

Hezbollah, Iran’s Quds Force, and doesn’t have an air force? They have the
Iranian-trained Shiite militias are all Israeli air force.”
now playing significant roles in the fight
against rebels here in Syria. Given this You’ve said in past interviews that you
involvement, are you worried about and your government have made
Iran’s influence over the country? mistakes in the course of the war. What
Iran is an important country in this are those mistakes? Is there anything
region, and it was influential before the that you regret?
crisis. Its influence is not related to the Every government, every person, makes
crisis; it’s related to its role, its political mistakes, so that’s again self-evident; it’s a
m
position in general. When you talk about given. But if you want to talk about
influence, various factors make a certain political mistakes, you have to ask your-
country influential. In the Middle East, in self, what are the major decisions that you
hi
our region, you have the same society, the took since the crisis started? We took
same ideology, many similar things, the three main decisions: First of all, to be
same tribes, going across borders. So if open to all dialogue. Second, we changed
ha
you have influence on one factor, your
influence will be crossing the border. This
is part of our nature. It’s not related to the
the constitution and the law according to
what many in the opposition were saying,
allegedly, that this is the reason of the
conflict. Of course, when there is conflict crisis. Third, we took the decision to
and anarchy, another country will be defend our country, to defend ourself, to
iT
more influential in your country. When fight terrorists. So I don’t think those
you don’t have the will to have a sover- three decisions can be described as wrong
eign country, you will have that influence. or mistakes. If you want to talk about
Now, the answer to your question is, Iran practice, any official in any place can make
Al
doesn’t have any ambitions in Syria, and mistakes, but there’s a difference between
as a country, as Syria, we would never practice mistakes and policy mistakes.
allow any country to influence our
sovereignty. We wouldn’t accept it, and Can you describe some of the practical
od
the Iranians don’t want it either. We allow mistakes?

cooperation. But if you allowed any I would have to go back to officials on the
country to have influence, why not allow ground; there’s nothing in my mind. I
the Americans to have influence in Syria? would rather talk about policies.
so
That’s the problem with the Americans

and with the West: they want to have I’m just wondering if there’s anything
influence without cooperation. you did that you wish in retrospect you
had done differently.
Ma
What do you think Israel’s agenda is? Regarding these three main decisions,
They are supporting the rebels in Syria. they were correct, and I am confident
It’s very clear. Because whenever we about this.
make advances in some place, they make
an attack in order to undermine the army. In terms of lower-level practical mistakes,
It’s very clear. That’s why some in Syria are people being held accountable, say,
joke: “How can you say that al Qaeda for human rights abuses, for the excessive
March/April 2015 61

use of force, or the indiscriminate target- than three weeks. It means they’re not
ing of civilians, those kinds of things? serious about fighting terrorism.
Yes. Some people were detained because
they breached the law in that regard, and So are you saying you want greater U.S.
that happens of course in such circum- involvement in the war against ISIS?
stances. It’s not about greater involvement by the
military, because it’s not only about the
In terms of their treatment of civilians or military; it’s about politics. It’s about how
protesters, is that what you’re referring to? much the United States wants to influ-
Yes, during the protests at the very ence the Turks. Because if the terrorists
m
beginning, yes. can withstand the air strikes for this
period, it means that the Turks keep
Since the United States began its air sending them armaments and money. Did
hi
campaign against the Islamic State, the United States put any pressure on
Syria and the United States have Turkey to stop the support of al Qaeda?
become strange kinds of partners and They didn’t; they haven’t. So it’s not only
ha
are effectively cooperating in that
aspect of the fight. Do you see the
potential for increased cooperation with
about military involvement. This is first.
Second, if you want to talk about the
military involvement, American officials
the United States? publicly acknowledge that without troops
Yes, the potential is definitely always on the ground, they cannot achieve
iT
there, because we’ve been talking about or anything concrete. Which troops on the
asking for international cooperation grounds are you depending on?
against terrorism for 30 years. But this
potential needs will. The question that we So are you suggesting there should be
Al
have is, how much will does the United U.S. troops on the ground?
States have to really fight terrorism on Not U.S. troops. Definitely, it has to be
the ground? So far, we haven’t seen Syrian troops. This is our land; this is
anything concrete in spite of the attacks our country. We are responsible. We
od
on isis in northern Syria. There’s nothing don’t ask for American troops at all.
concrete. What we’ve seen so far is just,
let’s say, window-dressing, nothing real. So what would you like to see from the
Since the beginning of these attacks, isis United States? You mentioned more
so
has gained more land in Syria and Iraq. pressure on Turkey . . .

Pressure on Turkey, pressure on Saudi
What about the air strikes on Kobani? Arabia, pressure on Qatar to stop sup-
Those have been effective in slowing porting the rebels. Second, to make legal
Ma
down ISIS. cooperation with Syria and start by asking

Kobani is a small city, with about permission from our government to make
50,000 inhabitants. It’s been more than such attacks. They didn’t, so it’s illegal.
three months since the beginning of the
attacks, and they haven’t finished. Same I’m sorry, I’m not clear on that point. You
areas, same al Qaeda factions occupying want them to make legal . . . ?
them—the Syrian army liberated in less Of course, if you want to make any kind

of action in another country, you ask Part of what makes Washington so

their permission. reluctant to cooperate with you more
formally are the allegations of serious
I see. So a formal agreement between human rights abuses by your govern-
Washington and Damascus to allow for ment. They include denying access for
air strikes? relief groups to refugee camps, indis-
The format we can discuss later, but you criminate bombing of civilian targets,
start with permission. Is it an agreement? photo evidence provided by the defector
Is it a treaty? That’s another issue. code-named Caesar, who made a pre-
sentation to the U.S. Congress showing
m
And would you be willing to take steps to terrible torture and abuse in Syrian
make cooperation easier with Washington? prisons. Are you prepared to take action
With any country that is serious about on these issues in order to make coop-
hi
fighting terrorism, we are ready to make eration with the United States easier?
cooperation, if they’re serious. The funny thing about this administra-
tion is that it’s the first one in history to
ha
What steps would you be prepared to
make to show Washington that you’re
willing to cooperate?
build its evaluation and later decisions on
social media. We call it a social media
administration, which is not politics.
I think they are the ones who have to None of these allegations you men-
show the will. We are already fighting on tioned are concrete; all of them are
iT
the ground; we don’t have to show that. allegations. You can bring photos from
anyone and say this is torture. Who
The United States is currently training took the pictures? Who is he? Nobody
5,000 Syrian fighters who are sched- knows. There is no verification of any
Al
uled to enter Syria in May. Now, U.S. of this evidence, so it’s all allegations
General John Allen has been very without evidence.
careful to say that these troops will not
be directed at the Syrian government, But Caesar’s photos have been looked at
od
but will be focused on ISIS alone. What by independent European investigators.

will you do when these troops enter the No, no. It’s funded by Qatar, and they say
country? Will you allow them to enter? it’s an anonymous source. So nothing is
Will you attack them? clear or proven. The pictures are not clear
so
Any troops that don’t work in coopera- which person they show. They’re just
tion with the Syrian army are illegal pictures of a head, for example, with some
and should be fought. That’s very clear. skulls. Who said this is done by the
government, not by the rebels? Who said
Ma
Even if this brings you into conflict with this is a Syrian victim, not someone else?
the United States? For example, photos published at the
Without cooperation with Syrian beginning of the crisis were from Iraq and
troops, they are illegal, and are puppets Yemen. Second, the United States in
of another country, so they are going to particular and the West in general are in
be fought like any other illegal militia no position to talk about human rights.
fighting against the Syrian army. They are responsible for most of the kill-
March/April 2015 63

ings in the region, especially the you call guerrilla attacks. That is the
United States after getting into Iraq, and shape of this war, so you cannot look at
the United Kingdom after invading Libya, it as being about territory. Second,
and the situation in Yemen, and what hap- wherever the Syrian army has wanted to
pened in Egypt in supporting the Muslim go, it has succeeded. But the Syrian
Brotherhood, and terrorism in Tunisia. army cannot have a presence on every
kilometer of Syrian territory. That’s
That may or may not be true, but those are impossible. We made some advances in
separate issues, and that does not absolve the past two years. But if you want to
your government of responsibility. ask me, “Is it going well?” I say that
m
No, no. The United States accused, so every war is bad, because you always
we have to answer that part. I’m not lose, you always have destruction in a
saying if there’s any human rights war. The main question is, what have we
hi
breach or infringement, the government won in this war? What we won in this
has no responsibility. That is another war is that the Syrian people have
issue. The second part of your question rejected the terrorists; the Syrian people
ha
is about the allegations. They’re still
allegations. If you want me to answer, I
have to answer about something that is
support their government more; the
Syrian people support their army more.
Before talking about winning territory,
concrete, proved, and verified. talk about winning the hearts and minds
and the support of the Syrian people.
iT
Are you prepared to categorically deny That’s what we have won. What’s left is
that there’s torture and abuse of prison- logistical; it’s technical. That is a matter
ers in Syria? of time. The war is moving in a positive
If there’s any unbiased and fair way to way. But that doesn’t mean you’re not
Al
verify all those allegations, of course we losing on the national level. Because
are ready. That would be in our interest. you lose lives, you lose infrastructure;
the war itself has very bad social effects.
Describe whether you think the war is
od
going well from the government’s Do you think you will eventually defeat
perspective. Independent analysts have the rebels militarily?
suggested that your government If they don’t have external support, and
currently controls 45 to 50 percent of no, let’s say, supply and recruitment of
so
the territory of Syria. new terrorists within Syria, there will be

First of all, if you want to describe the no problem defeating them. Even today
arena—it’s not a war between two we don’t have a problem militarily. The
countries, between two armies where problem is that they still have this
Ma
you have an incursion and you lost some continuous supply, mainly from Turkey.
territory that you want to regain. It’s
not like this. We’re talking about rebels So Turkey seems to be the neighbor that
that infiltrate areas inhabited by civil- you’re most concerned about?
ians. You have Syrian terrorists that Exactly. Logistically, and about terrorist
support foreign terrorists to come and financing from Saudi Arabia and Qatar,
hide among civilians. They launch what but through Turkey.

Do you blame Erdogan personally? This official in the world is to work for the
is a man you once had a fairly good interests of his people. And the question
relationship with. I would ask any American is, what do you
Yes. Because he belongs to the Muslim get from supporting terrorists in our
Brotherhood ideology, which is the country, in our region? What did you get
base of al Qaeda; it was the first from supporting the Muslim Brotherhood
political Islamic organization that pro- a few years ago in Egypt and other
moted violent political Islam in the early countries? What did you get from
twentieth century. He belongs strongly supporting someone like Erdogan? You
and is a staunch believer in these values. are the greatest power in the world now;
m
He’s very fanatical, and that’s why he still you have too many things to disseminate
supports isis. He is personally respon- around the world: knowledge, innova-
sible for what happened. tion, it, with its positive repercussions.
hi
How can you be the best in these fields
Do you see any other potential partners yet the worst in the political field? This
in the region? For example, General is a contradiction. That is what I think
el-Sisi in Egypt? ha
I wouldn’t talk about him personally,
but as long as Egypt and the Egyptian
the American people should analyze and
question. Why do you fail in every war?
You can create war, you can create
army and the government are fighting problems, but you cannot solve any
the same kind of terrorists as in Iraq, of problem. Twenty years of the peace
iT
course, we can consider these countries process in Palestine and Israel, and you
eligible to cooperate with in fighting cannot do anything with this, in spite of
the same enemy. the fact that you are a great country.
Al
Can you imagine a scenario in which But in the context of Syria, what would a
Syria returns to the status quo as it was better policy look like?
before the fighting started almost four One that preserves stability in the
years ago—in the sense that Syria is Middle East. Syria is the heart of the
od
whole again, it is not divided, it controls Middle East. Everybody knows that. If
its borders, it starts to rebuild, and it is the Middle East is sick, the whole world
at peace and a predominantly secular will be unstable. In 1991, when we
country? started the peace process, we had a lot of
so
We all believe Syria should go back to hope. Now, after more than 20 years,
the way it was. We don’t have any other things are not at square one; they’re
option, because if it doesn’t go back to its much below that square. So the policy
previous position, that will affect every should be to help peace in the region, to
Ma
surrounding country. It’s one fabric—it’s fight terrorism, to promote secularism,

a domino effect that will have influence to support this area economically, to help
from the Atlantic to the Pacific. upgrade the mind and society, like you
did in your country. That is the supposed
If you were able to deliver a message to mission of the United States, not to
President Obama today, what would it be? launch wars. Launching war doesn’t make
I think the normal thing that you ask any you a great power.∂
March/April 2015 65

Obama’s Libya Debacle

How a Well-Meaning Intervention Ended
in Failure
Alan J. Kuperman
m
O
n March 17, 2011, the un Security Council passed Resolution
hi
1973, spearheaded by the administration of U.S. President
Barack Obama, authorizing military intervention in Libya.
The goal, Obama explained, was to save the lives of peaceful, pro-
ha
democracy protesters who found themselves the target of a crackdown
by Libyan dictator Muammar al-Qaddafi. Not only did Qaddafi
endanger the momentum of the nascent Arab Spring, which had
iT
recently swept away authoritarian regimes in Tunisia and Egypt, but
he also was poised to commit a bloodbath in the Libyan city where the
uprising had started, said the president. “We knew that if we waited
one more day, Benghazi—a city nearly the size of Charlotte—could
Al
suffer a massacre that would have reverberated across the region and
stained the conscience of the world,” Obama declared. Two days after
the un authorization, the United States and other nato countries
od
established a no-fly zone throughout Libya and started bombing

Qaddafi’s forces. Seven months later, in October 2011, after an extended
military campaign with sustained Western support, rebel forces
conquered the country and shot Qaddafi dead.
so
In the immediate wake of the military victory, U.S. officials were

triumphant. Writing in these pages in 2012, Ivo Daalder, then the
U.S. permanent representative to nato, and James Stavridis, then
supreme allied commander of Europe, declared, “Nato’s operation in
Ma
Libya has rightly been hailed as a model intervention.” In the Rose

Garden after Qaddafi’s death, Obama himself crowed, “Without
putting a single U.S. service member on the ground, we achieved our
Al n J. Kuperm n is an Associate Professor at the Lyndon B. Johnson School of Public
a
a
Affairs at the University of Texas at Austin and the editor of Constitutions and Conflict
Management in Africa: Preventing Civil War Through Institutional Design.

objectives.” Indeed, the United States seemed to have scored a hat

trick: nurturing the Arab Spring, averting a Rwanda-like genocide,
and eliminating Libya as a potential source of terrorism.
That verdict, however, turns out to have been premature. In retro-
spect, Obama’s intervention in Libya was an abject failure, judged
even by its own standards. Libya has not only failed to evolve into
a democracy; it has devolved into a failed state. Violent deaths and
other human rights abuses have increased severalfold. Rather than
helping the United States combat terrorism, as Qaddafi did during his
m
last decade in power, Libya now serves as a safe haven for militias
affiliated with both al Qaeda and the Islamic State of Iraq and al-Sham
(isis). The Libya intervention has harmed other U.S. interests as well:
hi
undermining nuclear nonproliferation, chilling Russian cooperation
at the un, and fueling Syria’s civil war.
Despite what defenders of the mission claim, there was a better
ha
policy available—not intervening at all, because peaceful Libyan
civilians were not actually being targeted. Had the United States
and its allies followed that course, they could have spared Libya
iT
from the resulting chaos and given it a chance of progress under
Qaddafi’s chosen successor: his relatively liberal, Western-educated
son Saif al-Islam. Instead, Libya today is riddled with vicious mili-
tias and anti-American terrorists—and thus serves as a cautionary
Al
tale of how humanitarian intervention can backfire for both the

intervener and those it is intended to help.
od
A FAILED STATE
Optimism about Libya reached its apogee in July 2012, when democratic
elections brought to power a moderate, secular coalition government—
a stark change from Qaddafi’s four decades of dictatorship. But the
so
country quickly slid downhill. Its first elected prime minister, Mustafa
Abu Shagour, lasted less than one month in office. His quick ouster fore-
shadowed the trouble to come: as of this writing, Libya has had seven
prime ministers in less than four years. Islamists came to dominate the
Ma
first postwar parliament, the General National Congress. Meanwhile,

the new government failed to disarm dozens of militias that had arisen
during nato’s seven-month intervention, especially Islamist ones, leading
to deadly turf battles between rival tribes and commanders, which con-
tinue to this day. In October 2013, secessionists in eastern Libya, where
most of the country’s oil is located, declared their own government. That
March/April 2015 67

Alan J. Kuperman
same month, Ali Zeidan, then the country’s prime minister, was kid-
napped and held hostage. In light of the growing Islamist influence
within Libya’s government, in the spring of 2014, the United States post-
poned a plan to train an armed force of 6,000–8,000 Libyan troops.
By May 2014, Libya had come to the brink of a new civil war—
between liberals and Islamists. That month, a renegade secular general
named Khalifa Hifter seized control of the air force to attack Islamist
militias in Benghazi, later expanding his targets to include the
Islamist-dominated legislature in Tripoli.
m
Elections last June did nothing to resolve
Obama’s intervention in the chaos. Most Libyans had already given
Libya was an abject failure, up on democracy, as voter turnout dropped
hi
judged even by its own from 1.7 million in the previous poll to just
standards. 630,000. Secular parties declared victory
and formed a new legislature, the House
ha
of Representatives, but the Islamists re-
fused to accept that outcome. The result was two competing parlia-
ments, each claiming to be the legitimate one.
iT
In July, an Islamist militia from the city of Misurata responded to
Hifter’s actions by attacking Tripoli, prompting Western embassies to
evacuate. After a six-week battle, the Islamists captured the capital
in August on behalf of the so-called Libya Dawn coalition, which,
Al
together with the defunct legislature, formed what they labeled a “na-
tional salvation government.” In October, the newly elected parliament,
led by the secular Operation Dignity coalition, fled to the eastern city
od
of Tobruk, where it established a competing interim government,

which Libya’s Supreme Court later declared unconstitutional. Libya
thus finds itself with two warring governments, each controlling only
a fraction of the country’s territory and militias.
so
As bad as Libya’s human rights situation was under Qaddafi, it has

gotten worse since nato ousted him. Immediately after taking power,
the rebels perpetrated scores of reprisal killings, in addition to torturing,
beating, and arbitrarily detaining thousands of suspected Qaddafi
Ma
supporters. The rebels also expelled 30,000 mostly black residents from
the town of Tawergha and burned or looted their homes and shops, on
the grounds that some of them supposedly had been mercenaries. Six
months after the war, Human Rights Watch declared that the abuses
“appear to be so widespread and systematic that they may amount to
crimes against humanity.”

Such massive violations persist. In October 2013, the un Office of

the High Commissioner for Human Rights reported that the “vast
majority of the estimated 8,000 conflict-related detainees are also
being held without due process.” More disturbing, Amnesty Interna-
tional issued a report last year that revealed their savage mistreatment:
“Detainees were subjected to prolonged beatings with plastic tubes,
sticks, metal bars or cables. In some cases, they were subjected to electric
shocks, suspended in contorted positions for hours, kept continuously
blindfolded and shackled with their hands tied behind their backs or
m
deprived of food and water.” The report also noted some 93 attacks on
Libyan journalists in just the first nine months of 2014, “including
abductions, arbitrary arrests, assassinations, assassination attempts
hi
and assaults.” Ongoing attacks in western Libya, the report concluded,
“amount to war crimes.” As a consequence of such pervasive violence,
the un estimates that roughly 400,000 Libyans have fled their homes,
ha
a quarter of whom have left the country altogether.
Libya’s quality of life has been sharply degraded by an economic
free fall. That is mainly because the country’s production of oil, its
iT
lifeblood, remains severely depressed by the protracted conflict. Prior
to the revolution, Libya produced 1.65 million barrels of oil a day, a
figure that dropped to zero during nato’s intervention. Although
production temporarily recovered to 85 percent of its previous rate,
Al
ever since secessionists seized eastern oil ports in August 2013, output
has averaged only 30 percent of the prewar level. Ongoing fighting
has closed airports and seaports in Libya’s two biggest cities, Tripoli
od
and Benghazi. In many cities, residents are subjected to massive power

outages—up to 18 hours a day in Tripoli. The recent privation repre-
sents a stark descent for a country that the un’s Human Development
Index traditionally had ranked as having the highest standard of living
so
in all of Africa.
THE HUMAN COST

Although the White House justified its mission in Libya on humani-
Ma
tarian grounds, the intervention in fact greatly magnified the death

toll there. To begin with, Qaddafi’s crackdown turns out to have been
much less lethal than media reports indicated at the time. In eastern
Libya, where the uprising began as a mix of peaceful and violent pro-
tests, Human Rights Watch documented only 233 deaths in the first
days of the fighting, not 10,000, as had been reported by the Saudi
March/April 2015 69

Alan J. Kuperman
news channel Al Arabiya. In fact, as I documented in a 2013 International

Security article, from mid-February 2011, when the rebellion started,
to mid-March 2011, when nato intervened, only about 1,000 Libyans
died, including soldiers and rebels.
Although an Al Jazeera article touted
NATO’s intervention by Western media in early 2011 alleged
appears to have increased that Qaddafi’s air force had strafed and
the violent death toll more bombed civilians in Benghazi and
than tenfold. Tripoli, “the story was untrue,” revealed
m
an exhaustive examination in the London
Review of Books by Hugh Roberts of
Tufts University. Indeed, striving to minimize civilian casualties,
hi
Qaddafi’s forces had refrained from indiscriminate violence.
The best statistical evidence of that comes from Misurata, Libya’s
third-largest city, where the initial fighting raged most intensely.
ha
Human Rights Watch found that of the 949 people wounded there in
the rebellion’s first seven weeks, only 30 (just over three percent)
were women or children, which indicates that Qaddafi’s forces had
iT
narrowly targeted combatants, who were virtually all male. During
that same period in Misurata, only 257 people were killed, a tiny
fraction of the city’s 400,000 residents.
The same pattern of restraint was evident in Tripoli, where the
Al
government used significant force for only two days prior to nato’s
intervention, to beat back violent protesters who were burning
government buildings. Libyan doctors subsequently told a un investi-
od
gative commission that they observed more than 200 corpses in the
city’s morgues on February 20–21 but that only two of them were
female. These statistics refute the notion that Qaddafi’s forces fired
indiscriminately at peaceful civilians.
so
Moreover, by the time nato intervened, Libya’s violence was on

the verge of ending. Qaddafi’s well-armed forces had routed the ragtag
rebels, who were retreating home. By mid-March 2011, government
forces were poised to recapture the last rebel stronghold of Benghazi,
Ma
thereby ending the one-month conflict at a total cost of just over

1,000 lives. Just then, however, Libyan expatriates in Switzerland
affiliated with the rebels issued warnings of an impending “blood-
bath” in Benghazi, which Western media duly reported but which in
retrospect appear to have been propaganda. In reality, on March 17,
Qaddafi pledged to protect the civilians of Benghazi, as he had those

of other recaptured cities, adding that his forces had “left the way
open” for the rebels to retreat to Egypt. Simply put, the militants
were about to lose the war, and so their overseas agents raised the
specter of genocide to attract a nato intervention—which worked
like a charm. There is no evidence or reason to believe that Qaddafi
had planned or intended to perpetrate a killing campaign.
Admittedly, the government did attempt to intimidate the rebels,
promising to pursue them relentlessly. But Qaddafi never translated
that rhetoric into targeting civilians. From March 5 to March 15, 2011,
m
government forces recaptured all but one of the major rebel-held cities,
and in none did they kill civilians in revenge, let alone commit a blood-
bath. Indeed, as his forces approached Benghazi, Qaddafi issued public
hi
reassurances that they would harm neither civilians nor rebels who
disarmed. On March 17, he directly addressed the rebels of Benghazi:
“Throw away your weapons, exactly like your brothers in Ajdabiya
ha
and other places did. They laid down their arms and they are safe. We
never pursued them at all.”
Two days later, however, the nato air campaign halted Qaddafi’s
iT
offensive. As a result, Benghazi did not return to government control,
the rebels did not flee, and the war did not end. Instead, the militants
reversed their retreat and went back on the offensive. Eventually, on
October 20, 2011, the rebels found Qaddafi, tortured him, and then
Al
summarily executed him. The regime’s last remnants fell three days
later. All told, the intervention extended Libya’s civil war from less
than six weeks to more than eight months.
od
Claims of the number killed during the war have varied wildly. At
a closed-door conference in November 2011 organized by the Brookings
Institution, one U.S. official characterized the final death toll as
“around 8,000.” By contrast, the rebels’ health minister asserted in
so
September 2011, before the war was even over, that 30,000 Libyans
had already died. However, the postwar government’s Ministry of
Martyrs and Missing Persons sharply reduced that figure to 4,700
civilians and rebels, plus an equal or lesser number of regime forces,
Ma
and 2,100 people missing on both sides—for a high-end death estimate

of 11,500.
Aggregate casualty statistics were not compiled during the subse-
quent two years of persistent low-level conflict, but reports did emerge
of several significant skirmishes, such as a March 2012 fight between
rival tribes in the southern city of Sabha that left 147 dead. In light of
March/April 2015 71

Alan J. Kuperman
such figures, it is reasonable to estimate that the conflict killed at least

500 people a year in 2012 and 2013. Better data are available for the
renewed civil war of 2014. The website Libya Body Count, which
documents casualties daily, reports that the total number of Libyans
killed last year was more than 2,750. Moreover, unlike Qaddafi’s forces
in 2011, the militias fighting in Libya today do use force indiscrimi-
nately. In August 2014, for example, the Tripoli Medical Center
reported that of the 100 killed in recent violence, 40 were women and
at least nine were children. The following month, in a blatant war
m
crime, militants fired a multiple-rocket launcher at a medical facility.
This grim math leads to a depressing but unavoidable conclusion.
Before nato’s intervention, Libya’s civil war was on the verge of
hi
ending, at the cost of barely 1,000 lives. Since then, however, Libya
has suffered at least 10,000 additional deaths from conflict. In other
words, nato’s intervention appears to have increased the violent
ha
death toll more than tenfold.
TERRITORY FOR TERRORISTS

iT
Another unintended consequence of the Libya intervention has been
to amplify the threat of terrorism from the country. Although Qaddafi
supported terrorism decades ago—as witnessed by his regime’s later
paying reparations for the Lockerbie airplane bombing of 1988—the
Al
Libyan leader had evolved into a U.S. ally against global terrorism
even before 9/11. He did so partly because he faced a domestic threat
from al Qaeda–affiliated militants, the Libyan Islamic Fighting Group.
od
Qaddafi’s external security chief, Moussa Koussa, met multiple times

with senior cia officials to provide intelligence about Libyan fighters
in Afghanistan and about the Pakistani nuclear peddler A. Q. Khan.
In 2009, General William Ward, who headed U.S. Africa Command,
so
praised Libya as “a top partner in combating transnational terrorism.”

Since nato’s intervention in 2011, however, Libya and its neighbor
Mali have turned into terrorist havens. Radical Islamist groups, which
Qaddafi had suppressed, emerged under nato air cover as some of the
Ma
most competent fighters of the rebellion. Supplied with weapons by

sympathetic countries such as Qatar, the militias refused to disarm
after Qaddafi fell. Their persistent threat was highlighted in Septem-
ber 2012 when jihadists, including from the group Ansar al-Sharia,
attacked the U.S. diplomatic compound in Benghazi, killing Christopher
Stevens, the U.S. ambassador to Libya, and three of his colleagues.

Last year, the un formally declared Ansar al-Sharia a terrorist organi-

zation because of its affiliation with al Qaeda in the Islamic Maghreb.
Libya’s Islamist militants are now fighting for control of the entire
country, and they are making headway. In April 2014, they captured a
secret military base near Tripoli that, ironically, U.S. special operations
forces had established in the summer of 2012 to train Libyan counter-
terrorist forces. Qatar and Sudan have flown weapons to the Islamists
as recently as September 2014. In response, the more secular govern-
ments of the United Arab Emirates and Egypt launched air strikes
m
against Islamist militants in Tripoli and Benghazi in August and
October of last year. Libya’s jihadists now include more than just
al Qaeda affiliates; as of January 2015, factions aligned with isis, also
hi
known as the Islamic State, have perpetrated killings or kidnappings
in all three of Libya’s traditional administrative zones.
Nato’s intervention also fostered Islamist terrorism elsewhere in
ha
the region. When Qaddafi fell, the ethnic Tuaregs of Mali within his
security forces fled home with their weapons to launch their own re-
bellion. That uprising was quickly hijacked by local Islamist forces
iT
and al Qaeda in the Islamic Maghreb, which declared an independent
Islamic state in Mali’s northern half. By December 2012, this zone of
Mali had become “the largest territory controlled by Islamic extrem-
ists in the world,” according to Senator Christopher Coons, chair of
Al
the U.S. Senate Subcommittee on Africa. The danger was elaborated

by The New York Times, which reported that “al Qaeda’s affiliate in
North Africa is operating terrorist training camps in northern Mali
od
and providing arms, explosives and financing to a militant Islamist

organization in northern Nigeria.” But the spillover from Libya did not
stop there, also spurring deadly ethnic conflict in Burkina Faso and the
growth of radical Islam in Niger. To contain this threat, in early 2013,
so
France was compelled to deploy thousands of troops to Mali, some of

whom continue to fight jihadists in the country’s north.
The terrorism problem was exacerbated by the leakage of sensitive
weapons from Qaddafi’s arsenal to radical Islamists across North
Ma
Africa and the Middle East. Peter Bouckaert of Human Rights Watch
estimates that ten times as many weapons went loose in Libya as
in Somalia, Afghanistan, or Iraq. Perhaps the greatest concern is
man-portable air defense systems, known as manpads, which in
capable hands can be used to shoot down both civilian airliners and
military aircraft. Up to 15,000 such missiles were unaccounted for as
March/April 2015 73

Alan J. Kuperman
of February 2012, according to a U.S. State Department official cited

in a Washington Post column; a $40 million buyback effort had secured
only 5,000 of them. The column added that hundreds of these weapons
were still on the loose, including in Niger, where some had been
obtained by Boko Haram, the radical Islamist group across the border
in northern Nigeria. Another few dozen have been found in Algeria
and Egypt.
The missiles have even made their way through Egypt to the Gaza
Strip. In October 2012, militants there fired one for the first time, just
m
missing an Israeli army helicopter, and Israeli officials said that the
weapons originated in Libya. More recently, in early 2014, Islamists
in Egypt used another such missile to shoot down a military helicop-
hi
ter. Libyan manpads and sea mines have even surfaced in West African
arms markets, where Somali buyers have snapped them up for Islamist
rebels and pirates far away in northeastern Africa.
ha
THE b ACKLASH
roader
B
The harm from the intervention in Libya extends well beyond the
iT
immediate neighborhood. For one thing, by helping overthrow Qaddafi,
the United States undercut its own nuclear nonproliferation objectives.
In 2003, Qaddafi had voluntarily halted his nuclear and chemical weap-
ons programs and surrendered his arsenals to the United States. His
Al
reward, eight years later, was a U.S.-led regime change that culminated
in his violent death. That experience has greatly complicated the task
of persuading other states to halt or reverse their nuclear programs.
od
Shortly after the air campaign began, North Korea released a statement
from an unnamed Foreign Ministry official saying that “the Libyan
crisis is teaching the international community a grave lesson” and that
North Korea would not fall for the same U.S. “tactic to disarm the
so
country.” Iran’s supreme leader, Ayatollah Ali Khamenei, likewise noted

that Qaddafi had “wrapped up all his nuclear facilities, packed them
on a ship, and delivered them to the West.” Another well-connected
Iranian, Abbas Abdi, observed: “When Qaddafi was faced with an
Ma
uprising, all Western leaders dropped him like a brick. Judging from
that, our leaders assess that compromise is not helpful.”
The intervention in Libya may also have fostered violence in Syria. In
March 2011, Syria’s uprising was still largely nonviolent, and the Assad
government’s response, although criminally disproportionate, was rela-
tively circumscribed, claiming the lives of fewer than 100 Syrians per

week. After nato gave Libya’s rebels the upper hand, however, Syria’s
revolutionaries turned to violence in the summer of 2011, perhaps
expecting to attract a similar intervention. “It’s similar to Benghazi,” a
Syrian rebel told The Washington Post at the time, adding, “We need a
no-fly zone.” The result was a massive escalation of the Syrian conflict,
leading to at least 1,500 deaths per week by early 2013, a 15-fold increase.
Nato’s mission in Libya also hindered peacemaking efforts in Syria
by greatly antagonizing Russia. With Moscow’s acquiescence, the un
Security Council had approved the establishment of a no-fly zone in
m
Libya and other measures to protect civilians. But nato exceeded that
mandate to pursue regime change. The coalition targeted Qaddafi’s
forces for seven months—even as they retreated, posing no threat to
hi
civilians—and armed and trained rebels who rejected peace talks. As
Russian President Vladimir Putin complained, nato forces “frankly
violated the un Security Council resolution on Libya, when instead
ha
of imposing the so-called no-fly zone over it they started bombing it
too.” His foreign minister, Sergey Lavrov, explained that as a result,
in Syria, Russia “would never allow the Security Council to authorize
iT
anything similar to what happened in Libya.”
Early in the Arab Spring, proponents of intervening in Libya
had claimed that this course would sustain the momentum of the
relatively peaceful uprisings in Tunisia and Egypt. In reality, nato’s
Al
action not only failed to spread peaceful revolution but also encouraged
the militarization of the uprising in Syria and impeded the prospect of
un intervention there. For Syria and its neighbors, the consequence
od
has been the tragic exacerbation of three pathologies: humanitarian

suffering, sectarianism, and radical Islam.
THE NOT TAKEN

so
road
Despite the massive turmoil caused by the intervention, some of its
unrepentant supporters claim that the alternative—leaving Qaddafi
in power—would have been even worse. But Qaddafi was not Libya’s
future in any case. Sixty-nine years old and in ill health, he was laying
Ma
the groundwork for a transition to his son Saif, who for many years
had been preparing a reform agenda. “I will not accept any position
unless there is a new constitution, new laws, and transparent elections,”
Saif declared in 2010. “Everyone should have access to public office.
We should not have a monopoly on power.” Saif also convinced his
father that the regime should admit culpability for a notorious 1996
March/April 2015 75

Alan J. Kuperman
prison massacre and pay compensation to the families of hundreds of

victims. In addition, in 2008, Saif published testimony from former
prisoners alleging torture by revolutionary committees—the regime’s
zealous but unofficial watchdogs—whom he demanded be disarmed.
From 2009 to 2010, Saif persuaded his father to release nearly all
of Libya’s political prisoners, creating a deradicalization program for
Islamists that Western experts cited as a model. He also advocated
abolishing Libya’s Information Ministry in favor of private media.
He even flew in renowned American scholars—including Francis
m
Fukuyama, Robert Putnam, and Cass Sunstein—to lecture on civil
society and democracy. Perhaps the clearest indication of Saif’s reform
credentials is that in 2011, the revolution’s top political leaders turned
hi
out to be officials whom he had brought into the government earlier.
Mahmoud Jibril, prime minister of the rebels’ National Transitional
Council during the war, had led Saif’s National Economic Development
ha
Board. Mustafa Abdel Jalil, chair of the National Transitional Council,
was selected by Saif in 2007 to promote judicial reform as Libya’s
justice minister, which he did until defecting to the rebels.
iT
Of course, it is impossible to know if Saif would have proved will-
ing or able to transform Libya. He faced opposition from entrenched
interests, as even his father did when attempting reform. In 2010,
conservatives temporarily closed the media outlets that Saif owned
Al
because one of his newspapers had published an op-ed critical of the

government. By late 2010, however, the elder Qaddafi had sacked his
more hard-line son Mutassim, a move that appeared to pave the way
od
for Saif and his reformist agenda. Although Saif was not going to turn
Libya into a Jeffersonian democracy overnight, he did appear intent
on eliminating the most egregious inefficiencies and inequities of his
father’s regime.
so
Even after the war began, respected observers voiced confidence in

Saif. In a New York Times op-ed, Curt Weldon, a former ten-term
Republican U.S. congressman from Pennsylvania, wrote that Saif
“could play a constructive role as a member of the committee to devise
Ma
a new government structure or Constitution.” Instead, nato-supported

militants captured and imprisoned Qaddafi’s son. In an October 2014
jailhouse interview with the journalist Franklin Lamb, Saif voiced his
regrets: “We were in the process of making broad reforms, and my father
gave me the responsibility to see them through. Unfortunately, the
revolt happened, and both sides made mistakes that are now allowing

extreme Islamist groups like Da’ish [isis] to pick up the pieces and turn
Libya into an extreme fundamentalist entity.”
LEARNING FROM LI YA
B
Obama also acknowledges regrets about Libya, but unfortunately,
he has drawn the wrong lesson. “I think we underestimated . . . the
need to come in full force,” the president told the New York Times
columnist Thomas Friedman in August 2014. “If you’re gonna do
this,” he elaborated, “there has to be a much more aggressive effort
m
to rebuild societies.”
But that is exactly the wrong take-away. The error in Libya was not
an inadequate post-intervention effort; it was the decision to intervene
hi
in the first place. In cases such as Libya, where a government is quashing
a rebellion, military intervention is very likely to backfire by fostering
violence, state failure, and terrorism. The prospect of intervention
ha
also creates perverse incentives for militants to provoke government
retaliation and then cry genocide to attract foreign assistance—the
moral hazard of humanitarian intervention.
iT
The real lesson of Libya is that when a state is narrowly targeting
rebels, the international community needs to refrain from launching
a military campaign on humanitarian grounds to help the militants.
Western audiences should also beware cynical rebels who exaggerate
Al
not only the state’s violence but their own popular support, too. Even
where a regime is highly flawed, as Qaddafi’s was, chances are that
intervention will only fuel civil war—destabilizing the country, endan-
od
gering civilians, and paving the way for extremists. The prudent path
is to promote peaceful reform of the type that Qaddafi’s son Saif
was pursuing.
Humanitarian intervention should be reserved for the rare instances
so
in which civilians are being targeted and military action can do more
good than harm, such as Rwanda in 1994, where I have estimated that
a timely operation could have saved over 100,000 lives. Of course, great
powers sometimes may want to use force abroad for other reasons—
Ma
to fight terrorism, avert nuclear proliferation, or overthrow a noxious

dictator. But they should not pretend the resulting war is humanitar-
ian, or be surprised when it gets a lot of innocent civilians killed.∂
March/April 2015 77

How to Deter China

The Case for Archipelagic Defense
Andrew F. Krepinevich, Jr.
m
I
n the U.S. military, at least, the “pivot” to Asia has begun. By 2020,
the navy and the air force plan to base 60 percent of their forces in the
hi
Asia-Pacific region. The Pentagon, meanwhile, is investing a growing
share of its shrinking resources in new long-range bombers and nuclear-
powered submarines designed to operate in high-threat environments.
ha
These changes are clearly meant to check an increasingly assertive
China. And with good reason: Beijing’s expanding territorial claims
threaten virtually every country along what is commonly known as “the
iT
first island chain,” encompassing parts of Japan, the Philippines, and
Taiwan—all of which Washington is obligated to protect. But to reliably
deter Chinese aggression, the Pentagon will have to go even further.
Emerging Chinese capabilities are intended to blunt Washington’s
Al
ability to provide military support to its allies and partners. Although

deterrence through the prospect of punishment, in the form of air
strikes and naval blockades, has a role to play in discouraging Chinese
od
adventurism, Washington’s goal, and that of its allies and partners,

should be to achieve deterrence through denial—to convince Beijing
that it simply cannot achieve its objectives with force.
Leveraging the latent potential of U.S., allied, and partner ground
so
forces, Washington can best achieve this objective by establishing a

series of linked defenses along the first island chain—an “Archipelagic
Defense”—and, in so doing, deny Beijing the ability to achieve its
revisionist aims through aggression or coercion.
Ma
the risks o revisionism

f
China claims that its rise is intended to be peaceful, but its actions tell
a different story: that of a revisionist power seeking to dominate the
ANDREW F. KREPINEVICH, JR., is President of the Center for Strategic and Budgetary
Assessments.

How to Deter China
western Pacific. Beijing has claimed sovereignty over not only Taiwan
but also Japan’s Senkaku Islands (known in China as the Diaoyu
Islands) and most of the 1.7 million square miles that make up the
East China and South China Seas, where six other countries maintain
various territorial and maritime claims. And it has been unapologetic
about pursuing those goals. In 2010, for example, China’s then foreign
minister, ang Jiechi, dismissed concerns over Beijing’s expansionism
Y
in a single breath, saying, “China is a big country, and other countries
are small countries, and that is just a fact.”
m
Consider Beijing’s recent bullying in the South China Sea. In
March 2014, Chinese coast guard boats blocked the Philippines from
accessing its outposts on the Spratly Islands. Two months later, China
hi
moved an oil rig into Vietnam’s exclusive economic zone, clashing
with Vietnamese fishing boats. The moves echoed earlier incidents in
the East China Sea. In September 2010, as punishment for detaining
ha
a Chinese fishing boat captain who had rammed two Japanese coast
guard vessels, China temporarily cut off its exports to Japan of rare-
earth elements, which are essential for manufacturing cell phones and
iT
computers. And in November 2013, China unilaterally declared an “air
defense identification zone,” subject to its own air traffic regulations,
over the disputed Senkaku Islands and other areas of the East China
Sea, warning that it would take military action against aircraft that
Al
refused to comply.
Some have suggested that as its military grows stronger and its
leaders feel more secure, China will moderate such behavior. But the
od
opposite seems far more likely. Indeed, Beijing’s provocations have

coincided with the dramatic growth of its military muscle. China is
now investing in a number of new capabilities that pose a direct chal-
lenge to regional stability. For example, China’s People’s Liberation
so
Army is bolstering its so-called anti-access/area-denial capabilities,

which aim to prevent other militaries from occupying or crossing vast
stretches of territory, with the express goal of making the western Pa-
cific a no-go zone for the U.S. military. That includes developing the
Ma
means to target the Pentagon’s command-and-control systems, which

rely heavily on satellites and the Internet to coordinate operations and
logistics. The pla has made substantial progress on this front in recent
years, testing an antisatellite missile, using lasers to blind U.S. satel-
lites, and waging sophisticated cyberattacks on U.S. defense networks.
China is also enhancing its capacity to target critical U.S. military
March/April 2015 79

assets and limit the U.S. Navy’s ability to maneuver in international

waters. The pla already has conventional ballistic and cruise missiles
that can strike major U.S. facilities in the region, such as the Kadena Air
Base, in Okinawa, Japan, and is developing stealth combat aircraft
capable of striking many targets along the first island chain. To detect
and target naval vessels at greater distances, the pla has deployed power-
ful radars and reconnaissance satellites, along with unmanned aerial
vehicles that can conduct long-range scouting missions. And to stalk U.S.
aircraft carriers, as well as the surface warships that protect them, the
m
Chinese navy is acquiring submarines armed with advanced torpedoes
and high-speed cruise missiles designed to strike ships at long distances.
Beijing’s actions cannot be explained away as a response to a U.S.
hi
arms buildup. For the last decade, Washington has focused its energy
and resources primarily on supporting its ground troops in Afghani-
stan and Iraq. The U.S. defense budget, which until recently stood at
ha
above four percent of the country’s gdp, is projected to decline to less
than three percent by the end of the decade. Simply put, the Pentagon
is shedding military capabilities while the pla is amassing them.
iT
et if the past is prologue, China will not seek to resolve its expan-
Y
sionist aims through overt aggression. Consistent with its strategic
culture, it wants to slowly but inexorably shift the regional military
balance in its favor, leaving the rest of the region with little choice
Al
but to submit to Chinese coercion. For the most part, China’s maritime
neighbors are convinced that diplomatic and economic engagement
will do little to alter this basic fact. Several of them, including Japan,
od
the Philippines, and Vietnam, are increasingly focusing their mili-

taries on the task of resisting Chinese ambitions. They know full
well, however, that individual action will be insufficient to prevent
Beijing from carrying its vision forward. Only with U.S. material
so
support can they form a collective front that deters China from acts
of aggression or coercion.
deterrence through denial

Ma
If Washington wants to change Beijing’s calculus, it must deny

China the ability to control the air and the sea around the first island
chain, since the pla would have to dominate both arenas to isolate
the archipelago. The United States must also integrate allied battle
networks and strengthen allied capabilities—both of which will help
offset the pla’s efforts to destabilize the region’s military balance. By

m
hi
ha
iT
and large, those goals can be achieved with ground forces, which would
not replace existing air and naval forces but complement them.
When it comes to air defenses, states along the first island chain
could buttress their ability to deny China access to airspace by em-
Al
ploying army units equipped with highly mobile and relatively simple
short-range interceptor missiles (such as the Evolved Sea Sparrow,
supported by giraffe radar systems to detect targets). The U.S.
od
Army, meanwhile, along with such allies as Japan, could operate more
sophisticated, longer-range systems capable of intercepting Chinese
cruise missiles and destroying advanced Chinese aircraft. Although
not part of the first island chain, Vietnam is already enhancing its
so
air-denial capabilities and could contribute to a larger defense effort.

Then there is the task of denying the pla the sea control it would
need to mount offensive operations against the islands. Senior members
of Congress have encouraged the U.S. Army to consider resurrecting
Ma
an artillery force for coastal defense, a mission it abandoned after

World War II. The idea is simple and compelling. Rather than risk
sending warships within range of pla defenses or diverting submarines
from higher-priority missions, the United States and its allies could
rely on ground forces, based along the first island chain and armed
with mobile launchers and antiship cruise missiles, to perform the
March/April 2015 81

same operations. Japan’s military has done exactly that, placing shore-
based antiship cruise missile units on some of the Ryukyu Islands
during military exercises. Vietnam has fielded similar systems. And
other frontline states could follow suit, either independently or with
U.S. funding, training, and technical assistance.
Another mission to which U.S. and allied ground forces could
contribute is naval mine warfare. Traditionally, naval ships lay and
clear mines to restrict or allow transit through narrow seas and straits.
Although clearing mines will remain an inherently naval function,
m
ground forces could play a larger role in laying them, particularly if
stationed near the key straits that link the East China and South
China Seas to the open oceans. Armed with the ability to emplace
hi
sea mines from land bases using short-range rockets, helicopters, or
barges, U.S. and allied ground forces
China wants to slowly but could ha make large stretches of sea off-
limits to the Chinese navy. Minefields
inexorably shift the regional at key chokepoints along the first is-
military balance in its favor. land chain would greatly complicate a
iT
Chinese naval offensive and hamper
China’s ability to harass allied naval
forces. Nearby coastal antiship missile batteries, meanwhile, could
make mine-clearing operations risky for pla ships.
Al
Over the long run, ground forces could also support operations
against the pla’s growing submarine force. A submarine relies heavily
on its stealth for defense; once noticed, it must evade contact or
od
assume a high risk of destruction. By placing low-frequency and

acoustic sensors in the water around the first island chain, U.S. and
allied forces could augment their ability to detect the presence of pla
submarines. Coastal artillery units could then use rocket-launched
so
torpedoes to induce oncoming submarines to abandon their missions

and retreat.
If China invaded a U.S. ally or partner, even a small number of
U.S. ground troops could help local forces mount a determined
Ma
resistance. Modern conflicts in Southeast Asia and the Middle East

have demonstrated what a modest irregular ground force can achieve
with the help of modern weapons and capable advisers. Thanks to
U.S. advisers and airpower, an overmatched South Vietnamese army
was able to withstand a full-scale assault by North Vietnamese forces
in 1972. Nearly three decades later, in 2001, a small contingent of

How to Deter China
U.S. Special Forces, backed by strike aircraft, helped Afghanistan’s

Northern Alliance defeat the Taliban. And in 2006, Hezbollah fight-
ers in Lebanon, with the assistance of Iranian advisers, fought the
Israeli Defense Forces to a standstill for a month. A similar effort by
U.S. ground forces in the Pacific could make seizing and occupying
territory an extremely costly proposition for China, especially if lo-
cal forces also had advanced training and equipment. Access to
short-range, precision-guided mortars, rockets, and shoulder-fired
antiaircraft missiles, for example, would maximize the lethality of
m
small guerrilla resistance units.
By shouldering greater responsibility for denying the pla the air
and sea control it needs to mount offensive operations, ground forces
hi
could liberate U.S. and allied air and naval forces to perform the mis-
sions only they can accomplish, such as long-range surveillance and
air strikes. Should deterrence fail, these air and naval assets would
ha
prove critical to defending the first island chain and offsetting pla
advantages. For example, the pla can concentrate forces at any point
along the first island chain far more
iT
rapidly than can the United States and
its allies, whose militaries are more
Washington must convince
widely distributed. And it doesn’t have Beijing that it simply
to reconcile conflicting national inter- cannot achieve its
Al
ests. (In the wake of a Chinese offen- objectives with force.

sive against a single island, countries
along the chain would likely want to
od
keep their forces in place to defend their homelands.) By reducing

the demands on U.S. air and naval forces for such missions as air and
sea denial, ground forces would enable these air and naval forces to
stand in reserve, ready to move quickly to defend a threatened link in
so
the chain.
To be successful, a policy of deterrence also needs to have a credible
threat of retaliation after the fact, and here, too, ground forces could
help. At present, the U.S. weapons that can launch a precise retalia-
Ma
tory strike are located on increasingly vulnerable forward air bases

and aircraft carriers. The Pentagon plans to address this problem in
part by building new submarines and long-range stealth bombers, but
the cost of such hardware is high, especially given their relatively
modest payloads. Ground forces, by comparison, may offer a cheaper
way to provide additional firepower. Unlike air and naval forces,
March/April 2015 83

ground forces do not need to return to distant bases in order to rearm.

They can store far more munitions than even the largest bomber or
warship, and they can place them in hardened bunkers that are better
shielded from attack.
Moreover, in the event of a conflict, the pla would benefit from
a particularly asymmetric advantage: its large force of land-based
intermediate- and medium-range ballistic missiles. The United States,
as a signatory to the Intermediate-Range Nuclear Forces Treaty,
cannot deploy these systems. et by equipping ground forces with
m
Y
comparatively inexpensive missiles that conform to the treaty’s range
limitations, and by positioning them forward along the first island
chain to reduce the cost associated with delivering missiles over extended
hi
ranges, Washington and its allies could go a long way toward fixing
the imbalance at a relatively low cost. And if ground troops could not
physically maneuver rapidly enough to respond to a breach in the island
ha
chain’s defenses, those nearby could quickly respond by concentrating
their missile fire on the threatened area.
Perhaps the first island chain’s greatest vulnerability is the U.S. battle
iT
network—the critical systems that handle everything from directing
and tracking troops and supplies to guiding weapons. This network
currently relies heavily on satellites and nonstealth unmanned aerial
vehicles, both of which the pla could target. The best way to reduce
Al
that risk would be to establish a communications network of fiber-

optic cables buried beneath the ground and the seabed along the chain,
allowing disparate forces to safely receive and transmit data from
od
hardened command centers on land. Island-based air defense and

sea-denial forces, as well as antiship minefields, could protect the cable
lines running between the islands.
so
art o the ossible

THE
f
p
As with any operational concept, Archipelagic Defense faces hurdles.
Two of the most prominent are fiscal and geopolitical: the prospec-
tive cost and the willingness of states along the first island chain to
Ma
cooperate. But despite the price tag of a new posture, the defense
community in the United States is beginning to realize that current
projected cuts in the Pentagon’s defense budget do not square with
today’s increasingly dangerous security environment. The National
Defense Panel, a bipartisan group of U.S. defense experts, recently
recommended that the Obama administration and Congress restore

How to Deter China
defense spending to the levels projected in the Pentagon’s original

budget for fiscal year 2012. Adopting that recommendation would
substantially increase the Pentagon’s resources over the next decade.
The Pentagon can also make the argument that investing in Archipe-
lagic Defense could yield future returns beyond the western Pacific. For
example, the so-called AirLand Battle concept, which was developed in
the 1970s and helped deter a Warsaw Pact attack on nato, succeeded
not only in central Europe; the United States and its allies also relied on
it, in modified form, during the 1990–91 Persian Gulf War. Similarly,
m
the Pentagon could employ many of the capabilities associated with
Archipelagic Defense to defend other critical regions, including allies
and partners near the Persian Gulf and the Baltic Sea.
hi
If the Defense Department cannot secure budget increases, it can
still make changes to better match its overall posture to the current
security environment. To cite but one example, the Pentagon still
ha
earmarks a significant number of ground forces to defend South Korea
from a North Korean attack. et a large-scale invasion is unlikely;
Y
the greater threat is that Pyongyang could launch a strike with missiles
iT
armed with nuclear or chemical warheads. In any event, South Korea
has a population that is twice as large as its enemy’s and a per capita
income that is more than 15 times as large. Seoul can and should
shoulder a greater portion of the burden of its own defense against a
Al
traditional ground invasion.

Even with the right resources, dealing with a welter of regional
allies and partners will undoubtedly prove challenging. U.S. ground
od
forces would have to play different roles depending on the country.

Japan, with formidable capabilities of its own, could bolster its
ground defenses without much U.S. support. By contrast, U.S.
ground forces would probably need to take on a larger role in the
so
Philippines. In both countries, a greater U.S. ground presence would

provide a level of assurance that air and maritime forces, which can
be quickly withdrawn, cannot. Taiwan, meanwhile, given the absence
of diplomatic relations with the United States, would have to act
Ma
with little or no assistance.

Several countries, Japan and Vietnam in particular, have already
suggested that they are serious about fielding the kind of robust defenses
that would be required for Archipelagic Defense. Other states beyond
the first island chain, including Australia and Singapore, appear inclined
to provide basing and logistical support. But just as it took nato well
March/April 2015 85

over a decade to establish a formidable conventional deterrent to the

Warsaw Pact, the United States and its allies cannot establish Archipe-
lagic Defense overnight.
Committing to the strategy now would have the advantage of
allowing Washington and its friends to spread the expense of fielding
such forces over time. In the meantime, given the region’s ongoing
military competition, the United States and its allies along the first
island chain must make a persistent, sustained effort to preserve
regional stability and prosperity. Of course, Archipelagic Defense
m
would provide no more of a panacea against all forms of Chinese
aggression than nato’s conventional deterrent solved the problems
once posed by Moscow’s wars of national liberation and nuclear
hi
buildup. But establishing such a posture would represent an essential—
and long-overdue—first step in counterbalancing China’s revision-
ist ambitions.∂ ha
iT
Al
od
so
Ma

ISIS Is Not a Terrorist

Group
Why Counterterrorism Won’t Stop the
Latest Jihadist Threat
m
Audrey Kurth Cronin
A hi
fter 9/11, many within the U.S. national security establish-
ha
ment worried that, following decades of preparation for
confronting conventional enemies, Washington was unready
for the challenge posed by an unconventional adversary such as al Qaeda.
iT
So over the next decade, the United States built an elaborate bureau-
cratic structure to fight the jihadist organization, adapting its military
and its intelligence and law enforcement agencies to the tasks of counter-
terrorism and counterinsurgency.
Al
Now, however, a different group, the Islamic State of Iraq and al-
Sham (isis), which also calls itself the Islamic State, has supplanted
al Qaeda as the jihadist threat of greatest concern. Isis’ ideology,
od
rhetoric, and long-term goals are similar to al Qaeda’s, and the two
groups were once formally allied. So many observers assume that the
current challenge is simply to refocus Washington’s now-formidable
counterterrorism apparatus on a new target.
so
But isis is not al Qaeda. It is not an outgrowth or a part of the older

radical Islamist organization, nor does it represent the next phase in its
evolution. Although al Qaeda remains dangerous—especially its
affiliates in North Africa and emen—isis is its successor. Isis repre-
Ma
Y
sents the post–al Qaeda jihadist threat.
In a nationally televised speech last September explaining his plan to
“degrade and ultimately destroy” isis, U.S. President Barack Obama
audrey kurth cronin is Distinguished Professor and Director of the International
Security Program at George Mason University and the author of How Terrorism Ends: Under-
standing the Decline and Demise of Terrorist Campaigns. Follow her on Twitter @akcronin.
March/April 2015 87

Audrey Kurth Cronin
drew a straight line between the group and al Qaeda and claimed that
isis is “a terrorist organization, pure and simple.” This was mistaken;
isis hardly fits that description, and indeed, although it uses terrorism
as a tactic, it is not really a terrorist organization at all. Terrorist net-
works, such as al Qaeda, generally have only dozens or hundreds of
members, attack civilians, do not hold territory, and cannot directly
confront military forces. Isis, on the other hand, boasts some 30,000
fighters, holds territory in both Iraq and Syria, maintains extensive
military capabilities, controls lines of communication, commands infra-
m
structure, funds itself, and engages in sophisticated military operations.
If isis is purely and simply anything, it is a pseudo-state led by a
conventional army. And that is why the counterterrorism and counter-
hi
insurgency strategies that greatly diminished the threat from al Qaeda
will not work against isis.
Washington has been slow to adapt its policies in Iraq and Syria to
ha
the true nature of the threat from isis. In Syria, U.S. counterterrorism
has mostly prioritized the bombing of al Qaeda affiliates, which has given
an edge to isis and has also provided the Assad regime with the oppor-
iT
tunity to crush U.S.-allied moderate Syrian rebels. In Iraq, Washington
continues to rely on a form of counterinsurgency, depending on the
central government in Baghdad to regain its lost legitimacy, unite the
country, and build indigenous forces to defeat isis. These approaches
Al
were developed to meet a different threat, and they have been overtaken
by events. What’s needed now is a strategy of “offensive containment”:
a combination of limited military tactics and a broad diplomatic strategy
od
to halt isis’ expansion, isolate the group, and degrade its capabilities.
i erent strokes
D
ff
The differences between al Qaeda and isis are partly rooted in their
so
histories. Al Qaeda came into being in the aftermath of the 1979 Soviet
invasion of Afghanistan. Its leaders’ worldviews and strategic thinking
were shaped by the ten-year war against Soviet occupation, when thou-
sands of Muslim militants, including Osama bin Laden, converged on
Ma
the country. As the organization coalesced, it took the form of a global

network focused on carrying out spectacular attacks against Western
or Western-allied targets, with the goal of rallying Muslims to join a
global confrontation with secular powers near and far.
Isis came into being thanks to the 2003 U.S. invasion of Iraq. In its
earliest incarnation, it was just one of a number of Sunni extremist

ISIS Is Not a Terrorist Group
groups fighting U.S. forces and attacking Shiite civilians in an attempt

to foment a sectarian civil war. At that time, it was called al Qaeda in
Iraq (aqi), and its leader, Abu Musab al-Zarqawi, had pledged allegiance
to bin Laden. Zarqawi was killed by a U.S. air strike in 2006, and soon
after, aqi was nearly wiped out when Sunni tribes decided to partner
with the Americans to confront the jihadists. But the defeat was tem-
porary; aqi renewed itself inside U.S.-run prisons in Iraq, where
insurgents and terrorist operatives connected and formed networks—
and where the group’s current chief and self-proclaimed caliph, Abu
m
Bakr al-Baghdadi, first distinguished himself as a leader.
In 2011, as a revolt against the Assad regime in Syria expanded into
a full-blown civil war, the group took advantage of the chaos, seizing
hi
territory in Syria’s northeast, establishing a base of operations, and re-
branding itself as isis. In Iraq, the group
continued to capitalize on the weakness
ha
of the central state and to exploit the
The strategies that greatly
country’s sectarian strife, which intensi- diminished the threat from
fied after U.S. combat forces withdrew. al Qaeda will not work
iT
With the Americans gone, Iraqi Prime against ISIS.
Minister Nouri al-Maliki pursued a
hard-line pro-Shiite agenda, further
alienating Sunni Arabs throughout the country. Isis now counts
Al
among its members Iraqi Sunni tribal leaders, former anti-U.S. in-
surgents, and even secular former Iraqi military officers who seek
to regain the power and security they enjoyed during the Saddam
od
Hussein era.
The group’s territorial conquest in Iraq came as a shock. When isis
captured Fallujah and Ramadi in January 2014, most analysts predicted
that the U.S.-trained Iraqi security forces would contain the threat. But
so
in June, amid mass desertions from the Iraqi army, isis moved toward
Baghdad, capturing Mosul, Tikrit, al-Qaim, and numerous other Iraqi
towns. By the end of the month, isis had renamed itself the Islamic
State and had proclaimed the territory under its control to be a new
Ma
caliphate. Meanwhile, according to U.S. intelligence estimates,

some 15,000 foreign fighters from 80 countries flocked to the region
to join isis, at the rate of around 1,000 per month. Although most
of these recruits came from Muslim-majority countries, such as Tunisia
and Saudi Arabia, some also hailed from Australia, China, Russia, and
western European countries. Isis has even managed to attract some
March/April 2015 89

Audrey Kurth Cronin
American teenagers, boys and girls alike, from ordinary middle-class

homes in Denver, Minneapolis, and the suburbs of Chicago.
As isis has grown, its goals and intentions have become clearer.
Al Qaeda conceived of itself as the vanguard of a global insurgency
mobilizing Muslim communities against secular rule. Isis, in contrast,
seeks to control territory and create a “pure” Sunni Islamist state gov-
erned by a brutal interpretation of sharia; to immediately obliterate the
political borders of the Middle East that were created by Western powers
in the twentieth century; and to position itself as the sole political, reli-
m
gious, and military authority over all of the world’s Muslims.
not the usual sus ects
hi
p
Since isis’ origins and goals differ markedly from al Qaeda’s, the two
groups operate in completely different ways. That is why a U.S. counter-
terrorism strategy custom-made to fight al Qaeda does not fit the
ha
struggle against isis.
In the post-9/11 era, the United States has built up a trillion-dollar
infrastructure of intelligence, law enforcement, and military operations
iT
aimed at al Qaeda and its affiliates. According to a 2010 investigation
by The Washington Post, some 263 U.S. government organizations were
created or reorganized in response to the 9/11 attacks, including the
Department of Homeland Security, the National Counterterrorism
Al
Center, and the Transportation Security Administration. Each year,

U.S. intelligence agencies produce some 50,000 reports on terrorism.
Fifty-one U.S. federal organizations and military commands track the
od
flow of money to and from terrorist networks. This structure has helped
make terrorist attacks on U.S. soil exceedingly rare. In that sense, the
system has worked. But it is not well suited for dealing with isis, which
presents a different sort of challenge.
so
Consider first the tremendous U.S. military and intelligence cam-

paign to capture or kill al Qaeda’s core leadership through drone strikes
and Special Forces raids. Some 75 percent of the leaders of the core
al Qaeda group have been killed by raids and armed drones, a technol-
Ma
ogy well suited to the task of going after targets hiding in rural areas,
where the risk of accidentally killing civilians is lower.
Such tactics, however, don’t hold much promise for combating isis.
The group’s fighters and leaders cluster in urban areas, where they are
well integrated into civilian populations and usually surrounded by
buildings, making drone strikes and raids much harder to carry out. And

simply killing isis’ leaders would not cripple the organization. They gov-
ern a functioning pseudo-state with a complex administrative structure.
At the top of the military command is the emirate, which consists of
Baghdadi and two deputies, both of whom formerly served as generals in
the Saddam-era Iraqi army: Abu Ali al-Anbari, who controls isis’ opera-
tions in Syria, and Abu Muslim al-Turkmani, who controls operations in
Iraq. Isis’ civilian bureaucracy is supervised by 12 administrators who
govern territories in Iraq and Syria, overseeing councils that handle mat-
ters such as finances, media, and religious affairs. Although it is hardly the
m
model government depicted in isis’ propaganda videos, this pseudo-state
would carry on quite ably without Baghdadi or his closest lieutenants.
Isis also poses a daunting challenge to traditional U.S. counter-
hi
terrorism tactics that take aim at jihadist financing, propaganda, and
recruitment. Cutting off al Qaeda’s funding has been one of U.S. counter-
terrorism’s most impressive success stories. Soon after the 9/11 attacks,
ha
the fbi and the cia began to coordinate closely on financial intelligence,
and they were soon joined by the Department of Defense. Fbi agents
embedded with U.S. military units during the 2003 invasion of Iraq and
iT
debriefed suspected terrorists detained at the U.S. facility at Guantá-
namo Bay, Cuba. In 2004, the U.S. Trea-
sury Department established the Office
of Terrorism and Financial Intelligence,
ISIS’ sales pitch to recruits
Al
which has cut deeply into al Qaeda’s abil- is conquest in all its forms,
ity to profit from money laundering and including the sexual kind.
receive funds under the cover of chari-
od
table giving. A global network for countering terrorist financing has also
emerged, backed by the un, the eu, and hundreds of cooperating gov-
ernments. The result has been a serious squeeze on al Qaeda’s financing;
by 2011, the Treasury Department reported that al Qaeda was “strug-
so
gling to secure steady financing to plan and execute terrorist attacks.”

But such tools contribute little to the fight against isis, because isis
does not need outside funding. Holding territory has allowed the group
to build a self-sustaining financial model unthinkable for most terrorist
Ma
groups. Beginning in 2012, isis gradually took over key oil assets in east-
ern Syria; it now controls an estimated 60 percent of the country’s oil
production capacity. Meanwhile, during its push into Iraq last summer,
isis also seized seven oil-producing operations in that country. The
group manages to sell some of this oil on the black market in Iraq and
Syria—including, according to some reports, to the Assad regime itself.
March/April 2015 91

Audrey Kurth Cronin
Isis also smuggles oil out of Iraq and Syria into Jordan and Turkey,
where it finds plenty of buyers happy to pay below-market prices for
illicit crude. All told, isis’ revenue from oil is estimated to be between
$1 million and $3 million per day.
And oil is only one element in the group’s financial portfolio. Last
June, when isis seized control of the northern Iraqi city of Mosul, it
looted the provincial central bank and other smaller banks and plun-
dered antiquities to sell on the black market. It steals jewelry, cars, ma-
chinery, and livestock from conquered residents. The group also controls
m
major transportation arteries in western Iraq, allowing it to tax the
movement of goods and charge tolls. It even earns revenue from cotton
and wheat grown in Raqqa, the breadbasket of Syria.
hi
Of course, like terrorist groups, isis also takes hostages, demanding
tens of millions of dollars in ransom payments. But more important to
the group’s finances is a wide-ranging extortion racket that targets own-
ha
ers and producers in isis territory, taxing everything from small family
farms to large enterprises such as cell-phone service providers, water
delivery companies, and electric utilities. The enterprise is so complex
iT
that the U.S. Treasury has declined to estimate isis’ total assets and
revenues, but isis is clearly a highly diversified enterprise whose wealth
dwarfs that of any terrorist organization. And there is little evidence that
Washington has succeeded in reducing the group’s coffers.
Al
sex and the single jihadist

Another aspect of U.S. counterterrorism that has worked well against
od
al Qaeda is the effort to delegitimize the group by publicizing its

targeting errors and violent excesses—or by helping U.S. allies do so.
Al Qaeda’s attacks frequently kill Muslims, and the group’s leaders
are highly sensitive to the risk this poses to their image as the van-
so
guard of a mass Muslim movement. Attacks in Morocco, Saudi Ara-

bia, and Turkey in 2003; Spain in 2004; and Jordan and the United
Kingdom in 2005 all resulted in Muslim casualties that outraged
members of Islamic communities everywhere and reduced support
Ma
for al Qaeda across the Muslim world. The group has steadily lost
popular support since around 2007; today, al Qaeda is widely reviled
in the Muslim world. The Pew Research Center surveyed nearly
9,000 Muslims in 11 countries in 2013 and found a high median
level of disapproval of al Qaeda: 57 percent. In many countries, the
number was far higher: 96 percent of Muslims polled in Lebanon,

m
hi
On a roll: an ISIS fighter in Raqqa, Syria, June 2014
81 percent in Jordan, 73 percent in Turkey, and 69 percent in Egypt

ha
held an unfavorable view of al Qaeda.
Isis, however, seems impervious to the risk of a backlash. In pro-
claiming himself the caliph, Baghdadi made a bold (if absurd) claim to
iT
religious authority. But isis’ core message is about raw power and re-
venge, not legitimacy. Its brutality—videotaped beheadings, mass exe-
cutions—is designed to intimidate foes and suppress dissent. Revulsion
among Muslims at such cruelty might eventually undermine isis. But
Al
for the time being, Washington’s focus on isis’ savagery only helps the
group augment its aura of strength.
For similar reasons, it has proved difficult for the United States and
od
its partners to combat the recruitment efforts that have attracted so

many young Muslims to isis’ ranks. The core al Qaeda group attracted
followers with religious arguments and a pseudo-scholarly message of
altruism for the sake of the ummah, the global Muslim community. Bin
so
Laden and his longtime second-in-command and successor, Ayman al-

Zawahiri, carefully constructed an image of religious legitimacy and pi-
ety. In their propaganda videos, the men appeared as ascetic warriors,
sitting on the ground in caves, studying in libraries, or taking refuge in
Ma
remote camps. Although some of al Qaeda’s affiliates have better recruit-

REUTERS / STRINGER
ing pitches, the core group cast the establishment of a caliphate as a

long-term, almost utopian goal: educating and mobilizing the ummah
came first. In al Qaeda, there is no place for alcohol or women. In this
sense, al Qaeda’s image is deeply unsexy; indeed, for the young al Qaeda
recruit, sex itself comes only after marriage—or martyrdom.
March/April 2015 93
Audrey Kurth Cronin
Even for the angriest young Muslim man, this might be a bit of a
hard sell. Al Qaeda’s leaders’ attempts to depict themselves as moral—
even moralistic—figures have limited their appeal. Successful deradi-
calization programs in places such as Indonesia and Singapore have
zeroed in on the mismatch between what al Qaeda offers and what
most young people are really interested in, encouraging militants to
reintegrate into society, where their more prosaic hopes and desires
might be fulfilled more readily.
Isis, in contrast, offers a very different message for young men, and
m
sometimes women. The group attracts followers yearning for not only
religious righteousness but also adventure, personal power, and a sense
of self and community. And, of course, some people just want to kill—
hi
and isis welcomes them, too. The group’s brutal violence attracts atten-
tion, demonstrates dominance, and draws people to the action.
Isis operates in urban settings and offers recruits immediate oppor-
ha
tunities to fight. It advertises by distributing exhilarating podcasts
produced by individual fighters on the frontlines. The group also
procures sexual partners for its male recruits; some of these women
iT
volunteer for this role, but most of them are coerced or even enslaved.
The group barely bothers to justify this behavior in religious terms; its
sales pitch is conquest in all its forms, including the sexual kind. And
it has already established a self-styled caliphate, with Baghdadi as the
Al
caliph, thus making present (if only in a limited way, for now) what
al Qaeda generally held out as something more akin to a utopian future.
In short, isis offers short-term, primitive gratification. It does not
od
radicalize people in ways that can be countered by appeals to logic.

Teenagers are attracted to the group without even understanding
what it is, and older fighters just want to be associated with isis’ suc-
cess. Compared with fighting al Qaeda’s relatively austere message,
so
Washington has found it much harder to counter isis’ more visceral

appeal, perhaps for a very simple reason: a desire for power, agency,
and instant results also pervades American culture.
Ma
2015 ≠ 2006
Counterterrorism wasn’t the only element of national security prac-
tice that Washington rediscovered and reinvigorated after 9/11; coun-
terinsurgency also enjoyed a renaissance. As chaos erupted in Iraq
in the aftermath of the U.S. invasion and occupation of 2003, the
U.S. military grudgingly starting thinking about counterinsurgency, a

subject that had fallen out of favor in the national security establish-
ment after the Vietnam War. The most successful application of U.S.
counterinsurgency doctrine was the 2007 “surge” in Iraq, overseen by
General David Petraeus. In 2006, as violence peaked in Sunni-
dominated Anbar Province, U.S. officials concluded that the United
States was losing the war. In response, President George W. Bush
decided to send an additional 20,000 U.S. troops to Iraq. General
John Allen, then serving as deputy commander of the multinational
forces in Anbar, cultivated relationships with local Sunni tribes and
m
nurtured the so-called Sunni Awakening, in which some 40 Sunni
tribes or subtribes essentially switched sides and decided to fight with
the newly augmented U.S. forces against aqi. By the summer of 2008,
hi
the number of insurgent attacks had fallen by more than 80 percent.
Looking at the extent of isis’ recent gains in Sunni areas of Iraq,
which have undone much of the progress made in the surge, some have
ha
argued that Washington should respond with a second application of the
Iraq war’s counterinsurgency strategy. And the White House seems at
least partly persuaded by this line of thinking: last year, Obama asked
iT
Allen to act as a special envoy for building an anti-isis coalition in the
region. There is a certain logic to this approach, since isis draws support
from many of the same insurgent groups that the surge and the Sunni
Awakening neutralized—groups that have reemerged as threats thanks
Al
to the vacuum created by the withdrawal of U.S. forces in 2011 and

Maliki’s sectarian rule in Baghdad.
But vast differences exist between the situation today and the one
od
that Washington faced in 2006, and the logic of U.S. counterinsurgency

does not suit the struggle against isis. The United States cannot win the
hearts and minds of Iraq’s Sunni Arabs, because the Maliki government
has already lost them. The Shiite-dominated Iraqi government has so
so
badly undercut its own political legitimacy that it might be impossible

to restore it. Moreover, the United States no longer occupies Iraq. Wash-
ington can send in more troops, but it cannot lend legitimacy to a
government it no longer controls. Isis is less an insurgent group fight-
Ma
ing against an established government than one party in a conventional

civil war between a breakaway territory and a weak central state.
divide and con uer?

q
The United States has relied on counterinsurgency strategy not only
to reverse Iraq’s slide into state failure but also to serve as a model for
March/April 2015 95

Audrey Kurth Cronin
how to combat the wider jihadist movement. Al Qaeda expanded by

persuading Muslim militant groups all over the world to turn their
more narrowly targeted nationalist campaigns into nodes in al Qaeda’s
global jihad—and, sometimes, to convert themselves into al Qaeda
affiliates. But there was little commonality in the visions pursued by
Chechen, Filipino, Indonesian, Kashmiri, Palestinian, and Uighur
militants, all of whom bin Laden tried to draw into al Qaeda’s tent,
and al Qaeda often had trouble fully reconciling its own goals with the
interests of its far-flung affiliates.
m
That created a vulnerability, and the United States and its allies sought
to exploit it. Governments in Indonesia and the Philippines won dra-
matic victories against al Qaeda affiliates in their countries by combining
hi
counterterrorism operations with relationship building in local commu-
nities, instituting deradicalization programs, providing religious training
in prisons, using rehabilitated former terrorist operatives as government
ha
spokespeople, and sometimes negotiating over local grievances.
Some observers have called for Washington to apply the same strategy
to isis by attempting to expose the fault lines between the group’s secular
iT
former Iraqi army officers, Sunni tribal leaders, and Sunni resistance
fighters, on the one hand, and its veteran jihadists, on the other. But it’s
too late for that approach to work. Isis is now led by well-trained, capable
former Iraqi military leaders who know U.S. techniques and habits
Al
because Washington helped train them. And after routing Iraqi army
units and taking their U.S.-supplied equipment, isis is now armed with
American tanks, artillery, armored Humvees, and mine-resistant vehicles.
od
Perhaps isis’ harsh religious fanaticism will eventually prove too much
for their secular former Baathist allies. But for now, the Saddam-era
officers are far from reluctant warriors for isis: rather, they are leading
the charge. In their hands, isis has developed a sophisticated light-
so
infantry army, brandishing American weapons.

Of course, this opens up a third possible approach to isis, besides
counterterrorism and counterinsurgency: a full-on conventional war
against the group, waged with the goal of completely destroying it. Such
Ma
a war would be folly. After experiencing more than a decade of continu-

ous war, the American public simply would not support the long-term
occupation and intense fighting that would be required to obliterate isis.
The pursuit of a full-fledged military campaign would exhaust U.S.
resources and offer little hope of obtaining the objective. Wars pursued
at odds with political reality cannot be won.

containing the threat

The sobering fact is that the United States has no good military op-
tions in its fight against isis. Neither counterterrorism, nor counter-
insurgency, nor conventional warfare is likely to afford Washington a
clear-cut victory against the group. For the time being, at least, the
policy that best matches ends and means and that has the best chance
of securing U.S. interests is one of offensive containment: combining
a limited military campaign with a major diplomatic and economic
effort to weaken isis and align the interests of the many countries that
m
are threatened by the group’s advance.
Isis is not merely an American problem. The wars in Iraq and Syria
involve not only regional players but also major global actors, such as
hi
Russia, Turkey, Iran, Saudi Arabia, and other Gulf states. Washington
must stop behaving as if it can fix the region’s problems with military
force and instead resurrect its role as a diplomatic superpower.
ha
Of course, U.S. military force would be an important part of an of-
fensive containment policy. Air strikes can pin isis down, and cutting off
its supply of technology, weapons, and ammunition by choking off
iT
smuggling routes would further weaken the group. Meanwhile, the
United States should continue to advise and support the Iraqi military,
assist regional forces such as the Kurdish Pesh Merga, and provide
humanitarian assistance to civilians fleeing isis’ territory. Washington
Al
should also expand its assistance to neighboring countries such as Jordan

and Lebanon, which are struggling to contend with the massive flow of
refugees from Syria. But putting more U.S. troops on the ground would
od
be counterproductive, entangling the United States in an unwinnable

war that could go on for decades. The United States cannot rebuild the
Iraqi state or determine the outcome of the Syrian civil war. Frustrating
as it might be to some, when it comes to military action, Washington
so
should stick to a realistic course that recognizes the limitations of U.S.

military force as a long-term solution.
The Obama administration’s recently convened “summit on counter-
ing violent extremism”—which brought world leaders to Washington to
Ma
discuss how to combat radical jihadism—was a valuable exercise. But

although it highlighted the existing threat posed by al Qaeda’s regional
affiliates, it also reinforced the idea that isis is primarily a counter-
terrorism challenge. In fact, isis poses a much greater risk: it seeks
to challenge the current international order, and, unlike the greatly
diminished core al Qaeda organization, it is coming closer to actually
March/April 2015 97

Audrey Kurth Cronin
achieving that goal. The United States cannot single-handedly defend

the region and the world from an aggressive revisionist theocratic state—
nor should it. The major powers must develop a common diplomatic,
economic, and military approach to ensure that this pseudo-state is
tightly contained and treated as a global pariah. The good news is
that no government supports isis; the group has managed to make
itself an enemy of every state in the region—and, indeed, the world.
To exploit that fact, Washington should pursue a more aggressive,
top-level diplomatic agenda with major powers and regional players,
m
including Iran, Saudi Arabia, France, Germany, the United Kingdom,
Russia, and even China, as well as Iraq’s and Syria’s neighbors, to
design a unified response to isis.
hi
That response must go beyond making a mutual commitment to
prevent the radicalization and recruitment of would-be jihadists and
beyond the regional military coalition that the United States has
ha
built. The major powers and regional players must agree to stiffen
the international arms embargo currently imposed on isis, enact
more vigorous sanctions against the group, conduct joint border
iT
patrols, provide more aid for displaced persons and refugees, and
strengthen un peacekeeping missions in countries that border Iraq and
Syria. Although some of these tools overlap with counterterrorism,
they should be put in the service of a strategy for fighting an enemy
Al
more akin to a state actor: isis is not a nuclear power, but the group
represents a threat to international stability equivalent to that posed
by North Korea. It should be treated no less seriously.
od
Given that political posturing over U.S. foreign policy will only
intensify as the 2016 U.S. presidential election approaches, the White
House would likely face numerous attacks on a containment approach
that would satisfy neither the hawkish nor the anti-interventionist
so
camp within the U.S. national security establishment. In the face of

such criticism, the United States must stay committed to fighting
isis over the long term in a manner that matches ends with means,
calibrating and improving U.S. efforts to contain the group by moving
Ma
past outmoded forms of counterterrorism and counterinsurgency

while also resisting pressure to cross the threshold into full-fledged
war. Over time, the successful containment of isis might open up
better policy options. But for the foreseeable future, containment is
the best policy that the United States can pursue.∂

Disrupting the
Intelligence Community
America’s Spy Agencies Need an Upgrade
m
Jane Harman
S
hi
ome 40 years have passed since the Church Committee’s sweep-
ing investigation of U.S. intelligence practices, fresh on the
heels of the Watergate scandal. And ten years have gone by since
ha
the last major reorganization of the country’s spy agencies, enacted in
the wake of 9/11. Both efforts led to a host of reforms—among them,
the creation of the Senate and House Intelligence Committees, the
iT
passage of the Foreign Intelligence Surveillance Act (fisa), and
the adoption of the Intelligence Reform and Terrorism Prevention
Act, which I helped shepherd through Congress.
New challenges have prompted talk of change once again. The U.S.
Al
government’s recently acknowledged drone program, the contractor

Edward Snowden’s leaks about the National Security Agency’s sur-
veillance activities, and the Senate Intelligence Committee’s recent
od
report on cia detention and interrogation practices have fanned public

anxieties about government overreach. Surprise developments, mean-
while, have blindsided U.S. officials. The disintegration of Syria, the
Boston Marathon bombing, the precipitous rise of the Islamic State
so
of Iraq and al-Sham (isis), the systematic hacking of U.S. computer

networks—in one way or another, all caught Washington flat-footed.
Last November, The Washington Post reported that cia Director John
Brennan was weighing a wholesale reorganization of the agency, one
Ma
that would combine operational and analytic divisions into “hybrid

units” dedicated to specific regions and threats. The paper’s sources
described the plans as “among the most ambitious in cia history.”
jane harman is Director, President, and CEO of the Woodrow Wilson International
Center for Scholars. She was a nine-term U.S. Representative from California and, from
2002 to 2006, the ranking Democrat on the U.S. House Intelligence Committee.
March/April 2015 99

Jane Harman
Yet rearranging the deck chairs will not be enough to prepare the
intelligence community for the challenges that lie ahead. Instead,
Washington must venture beyond the conventional wisdom and
reckon with an alternative vision of the future. Imagine this: Ten years
from now, the cia’s primary mission will be covert action, an arena in
which the agency can make a uniquely valuable contribution to national
security. The nsa, for its part, will move away from collecting per-
sonal data, since private-sector firms have the resources to do the same
task. And traditional espionage—the use of spies to gather human
m
intelligence—will become less valuable than open-source intelligence,
especially information gleaned from social media. In each case, change
will come rapidly. So rather than adapting slowly and haltingly, it may
hi
well be time to accept reality and steer into the skid.
license to drone ha
Since President George W. Bush declared a “war on terror” in 2001,
the cia has gotten extremely good at killing terrorists. The agency’s
talent for targeted killings has made more than a few people uneasy,
iT
however, both inside and outside Langley. As Elliot Ackerman, a for-
mer cia paramilitary officer, wrote in The New Yorker last November,
“The discomfort of my colleagues, where it existed, didn’t stem from
[targeted killing] itself. . . . The discomfort existed because it felt like
Al
we were doing something, on a large scale, that we’d sworn not to.
Most of us felt as though we were violating Executive Order 12333.”
That order, issued by President Ronald Reagan in 1981 in response
od
to the Church Committee’s extensively documented findings on illegal

domestic surveillance and plots to kill foreign leaders, banned the
U.S. government from planning or carrying out assassinations. But
government lawyers do not interpret “assassination” as a synonym for
so
“targeted killing” when it relates to terrorists, a distinction predating

Washington’s conflict with al Qaeda. Similar concerns about targeted
killings arose after the 1983 bombing of the U.S. embassy in Lebanon.
In that case, as the journalist Walter Pincus later reported for The
Ma
Washington Post, cia discussions produced “an informal agreement

with the congressional oversight committees that if a covert action
targeted a terrorist in his apartment plotting to blow up a building, he
had to be detained. But if the terrorist were found and known to be
on his way to blow up a building . . . he could be killed if that were the
only way to stop him.” And as the executive order notes, the intelligence

Disrupting the Intelligence Community
m
hi
ha
Cleaning house: CIA headquarters, March 2005
iT
community is charged with conducting “special activities” to protect
national security, a category under which the drone program falls.
Even so, senior officials remain uncomfortable with the cia’s growing
paramilitary role, which Brennan himself described during his February
Al
2013 confirmation hearing as an “aberration” from the agency’s tradi-

tional focus on espionage. In fact, soon after Brennan took the cia’s
helm, the White House looked poised to shift all drone warfare to
od
the Pentagon, which has its own drone program. yet the move never
happened, in part because the generals balked and Congress couldn’t
bypass its own committees’ stovepiping. The most important factor,
however, was the cia’s success. As Michael Hirsh, writing for the
so
National Journal, noted in February 2014, experts believe that the cia
“may simply be much better than the military at killing people in a
targeted, precise way—and, above all, at ensuring the bad guys they’re
getting are really bad guys.”
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No public data are available to compare the cia’s and the Pentagon’s
REUTE RS / JASON RE E D
drone programs, but the agency’s has earned high marks from senior
policymakers. Months before a Pentagon drone strike reportedly hit
a convoy that included innocent yemeni wedding guests in December
2013, Democratic Senator Dianne Feinstein of California, then chair
of the Senate Intelligence Committee, praised the cia’s “patience

Jane Harman
and discretion” and raised concerns that “the military program has
not done that nearly as well.”
Critics of keeping a drone program under the cia’s roof con-
tend that the agency’s primary mission should be espionage rather
than covert action. There’s no reason, the argument goes, that the
Defense Department could not develop its expertise in carrying
out secret drone strikes and other deniable operations over time.
Shifting all drone warfare from the cia to the Pentagon would also
be perfectly legal; the president could put pen to paper and authorize
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it tomorrow.
The problem, however, is that a central mission of the cia—
developing human intelligence—is getting much tougher to carry
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out. To some extent, that is due to the
Follow the money, and one makeup of the agency’s own work
force. Although the cia now selects
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arrives at a basic fact: the from a wider pool than it once did
CIA’s edge is paramilitary. (when its ranks were, as it was said,
mostly pale, male, and Yale), the gov-
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ernment’s clearance system still freezes out qualified applicants—
even those with critical language skills and cultural acumen—for
having a grandmother in Baghdad or an uncle in Tunis. Penetrating
tribal and nonstate groups in the Middle East is difficult enough as
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it is; doing so with few who understand Arab customs or speak a

variety of Arabic dialects only adds to the danger.
Another factor making human intelligence gathering a harder game
od
to play is the broader American political culture. Developing infor-

mants (let alone embedding assets) within terrorist groups is a dicey
proposition. And regardless of their personal courage or willingness
to serve, intelligence officers must now operate in a political climate
so
that discourages risk taking, because the American public reacts so

strongly to U.S. casualties—something the fallout from the 2012
attack on the U.S. compound in Benghazi, Libya, which killed two
Foreign Service officers and two security personnel, made clear. Of
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course, such political constraints and risk aversion affect the U.S. mil-
itary, too. This is partly why many U.S. policymakers are cool to the
idea of putting boots on the ground in the fight against isis. The irony
is that an effective air war relies on precise targeting, which requires
good intelligence collected on the ground, which itself exposes U.S.
personnel to the sorts of risks an air war is supposed to avoid.

Public controversy has also imperiled another source of human

intelligence: interrogations. The Senate Intelligence Committee’s
multiyear investigation into Bush-era interrogation and detention
programs has added fuel to the fire, challenging not only the legality
of so-called enhanced interrogation techniques but also their effec-
tiveness. (In 2003, as a member of Congress, I questioned the program’s
policy guidance and urged the cia not to destroy videotapes of
interrogations in a letter to the agency’s then general counsel, Scott
Muller.) For now, President Barack Obama’s efforts to close the U.S.
m
detention facility in Guantánamo Bay, Cuba, and move the terrorist
suspects to domestic prisons have been hamstrung by congressional
opposition to holding their trials in the United States. That said,
hi
the facility’s prison population has shrunk from over 600 in 2003 to
just 127 as of this writing. All eyes are on the next defense secretary
to finish the job before Obama’s term ends.
ha
If these trends continue, they will make it difficult for the cia to do
much of the human intelligence collection it did in the past. So what
should the intelligence community do? It could outsource some human
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collection to friendly foreign intelligence services that are less risk
averse and better culturally equipped, such as those in Israel, Jordan,
and the United Kingdom. The cia could also focus its own collection on
directly supporting covert operations. And it could continue to improve
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its security clearance process, making it easier, for example, to give tem-
porary or limited clearances to individuals with sorely needed expertise.
But in today’s environment, the cia’s main value added is reflected in
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its finances. According to a leaked copy of the intelligence communi-

ty’s “black,” or classified, budget for 2013, reported in The Washington
Post, funding for covert action programs ($2.6 billion) has outstripped
funding for human intelligence ($2.3 billion). Follow the money, and
so
one arrives at a basic fact: the cia’s edge is paramilitary.
data mine ield

f
The cia is not the only intelligence agency facing challenges. In the
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wake of the Snowden leaks, the media have depicted the nsa as an
all-powerful agency with a limitless appetite for personal data and few
barriers to getting it. In an ongoing debate, civil liberties advocates
have faced off against national security hawks, with both sides sharing
a single flawed assumption: that the nsa’s competitive advantage is in
the mass collection of data.

Jane Harman
In fact, the nsa’s digital dragnet has never been as sweeping as its
most vocal critics like to insinuate, and Congress amended fisa in
2008 to ensure that the agency’s data collection was carefully circum-
scribed and reviewed by the Foreign Intelligence Surveillance Court.
What’s more, new proposals to limit the nsa’s programs further are
gathering steam, and U.S. technology firms are taking increasingly
dramatic steps to protect their customers’ data.
Indeed, the nsa’s future will be shaped, more than anything else,
by its relationship with Silicon Valley—one in which the agency is
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fast becoming the junior partner. One can doubt the sincerity of
the technology community’s outrage
The “dip party,” where spies over the nsa’s surveillance practices—
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doubt, for example, that the Facebook
would eavesdrop over co-founder Mark Zuckerberg, whose
cocktails, has gone the way company reportedly stores petabytes’
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of the dodo. worth of data about its billion-plus
active monthly users, was shocked at
the thought of mass data collection.
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But Silicon Valley’s reaction has bite, and the outcome has been an
encryption drag race that has top government officials panicking.
Rather than fight surveillance policies in court, where the govern-
ment has an overwhelming edge, companies such as Apple, Face-
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book, and Google have responded in cyberspace. To satisfy a global

customer base with strict privacy expectations, they’ve developed
technical capabilities to put customer data under lock and key.
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Apple now dedicates a section of its website to “government infor-

mation requests,” which isn’t a page about how cheerily they comply.
“Our commitment to customer privacy doesn’t stop because of a gov-
ernment information request,” it reads. Apple iPhones running the
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latest operating system, iOS 8, have their data encrypted and hidden
behind a passcode that makes it, in Apple’s words, “not technically
feasible for [Apple] to respond to government warrants for the extrac-
tion of this data.” Google has followed suit, adding a similar function
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to Android phones. Other agencies are feeling the ripple effects. Last
October, James Comey, the director of the fbi, said that the bureau
was “struggling to . . . maintain [its] ability to actually collect the
communications [it is] authorized to collect.”
For years now, there has been a growing gap between the technical
capacity of the public sector and that of the private sector. Like the

cia, the nsa has a recruitment problem. The agency lies on the wrong
side of a generational divide on privacy; it also has no hope of match-
ing the stratospheric salaries that firms such as Facebook offer even
their interns. The security clearance system has made matters worse,
putting candidates through the wringer over marijuana use and illegal
music downloads. Some nsa hiring practices have improved, but no
one expects that the agency will be able to outcompete technology
firms for top talent anytime soon.
Over the long run, then, Washington won’t win a digital compe-
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tition with Silicon Valley. And now that the government needs the
private sector more than the private sector needs it, the most important
task is to rebuild trust between the two. True, the nsa could look
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for ways to get around technology companies’ defenses, but any
botched attempts would carry a high political cost. Instead, the
agency needs to keep serving warrants through the front door,
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abide by established legal procedures, and work to persuade the
public of its respect for privacy. As companies such as Facebook
and Google become more deeply integrated into global communi-
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cations infrastructure—both are reportedly looking into providing
Internet services to the developing world—they could become
partners with the government in open-source data collection. That
joint effort, if fisa-compliant and properly explained to the public,
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would be a gold mine for low-cost intelligence collection. But the

intelligence community needs to make a savvier, more respectful
pitch to the private sector, one that recognizes the digital balance
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of power. The goal should be to turn privacy and security into a

positive-sum game: to guarantee more of both.
What role does that leave for the nsa? Its top priorities should be
code-making, code-breaking, and cyberwarfare. Washington will
so
still need the capacity to penetrate secure state networks and pre-
vent its enemies, state and nonstate, from doing the same. Although
the nsa has demonstrated abilities in this sphere, it needs to focus
on keeping pace with talented Chinese, North Korean, Russian, and
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nonstate hackers.
in lain sight
p
The rising power of Internet companies has paralleled another
force upending the world of intelligence: the exponential growth of
open-source information. During the Cold War, nothing could match

Jane Harman
the value of a well-placed mole or a thoroughly bugged bedroom.

Today, the so-called dip party, where spies would eavesdrop over
cocktails, has gone the way of the dodo. That’s in large part because
much of the information policymakers seek is no longer secret. Although
complicated tradecraft remains useful in some contexts—advanced
cyberattacks rely on intimate knowledge of human beings, their
habits, and their software use—the cia doesn’t need an agent in the
Russian Ministry of Agriculture in order to follow developments in
Ukraine. Social media, in fact, has provided some of the best reports
m
from the ground, allowing bystanders to upload photographs and
videos as events unfold in real time. Intelligence agencies need to
take advantage of the technological revolution that allowed a Tunisian
hi
fruit vendor to spark the Arab Spring, that isis exploits by posting
barbaric videos designed to attract thousands of followers, and that
the State Department has begun to embrace on Twitter.
ha
Now that every smartphone user is a potential collector of intelli-
gence, the key is to skillfully sort the data. Although no structural
obstacle prevents the U.S. intelligence community from doing this
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work well, there remains a strong bias, bordering on elitism, against
using freely available information. Too often, the preference is to tap
terrorists’ phones and send spy satellites in search of hidden training
camps, not to read the tweets of a 19-year-old jihadist. But in an era
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of online radicalization, indoctrination often happens in plain sight.

As the intelligence community moves away from traditional espio-
nage and toward open-source analysis, one of the most important,
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enduring questions in the spy business will take center stage: how
to protect analysis from being biased by policy preferences. Intelli-
gence reform in 2004 was prompted in large part by just how badly
the intelligence process went wrong in the lead-up to the U.S.
so
invasion of Iraq in 2003 and before the 9/11 attacks in 2001. Policy-
makers rightly wanted—and still want—to ensure that the nation
never faces anything like those failures again.
The reforms that Congress enacted in 2004 were the right ones for
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their moment. But now the terrain has shifted. When one expands the
intelligence base to include the vast reams of raw information widely
available to anyone through open sources, there are infinite ways for
individual pieces of data to bias policymakers before analysts can
present the bigger picture. Of course, there have always been ways for
bias to creep into the briefing process: through analysis that has been

crafted with an eye toward specific policy prescriptions, for example,

or through insistent briefings on a single topic that the president
hasn’t solicited. Open-source information will make the problem
worse, but no reorganization or policy change will make it go away.
People bring prejudices to everything they do; in the end, intelligence
is only as good as the people who analyze it.
That basic fact won’t change anytime soon, but much else will. To
borrow from William Gibson, the novelist who gave cyberspace its
name: “The future is already here—it’s just not very evenly distributed.”
m
The trends shaping the intelligence community are detectable: in
budgets, in organizational charts, and in war zones. Policymakers have
been slow to notice, as their attention jumps from one crisis to the
hi
next. But if Washington wants to get ahead of the curve and anticipate
future flare-ups, that needs to change. As in the past, people are not
the problem; the country’s analysts and officers continue to serve with
ha
courage and distinction. The challenge lies instead with a system that
is less adaptable than the enemies it confronts, hobbled as it is by
conventional thinking.∂
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od
so
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energy’s hottest sector
O
ver the past several years, the in battery technology, driven in part by
shale revolution has upended electric-car companies such as Tesla, and
oil and gas markets in the envisions what’s next.
United States and the world at large. At Naturally, new methods of generating
first, shale development was dismissed and distributing electricity require a
as unworkable, then it was minimized modernized electrical grid. But the United
m
as unsustainable. Now, having helped States is stuck with a hundred-year-old
drive a massive drop in the global price grid that has proved vulnerable to natural
of oil, it is hailed as an economic and disasters and unable to cope with the
hi
geopolitical game changer. But shale rise of renewable power. Brian Warshay
isn’t the only energy story of interest, shines a light on the flaws in the U.S. grid,
nor even the only potentially revolution- the billions of dollars in improvements
ha
ary one. The electricity sector is quietly
undergoing its own transformation, and
it is likely to yield dramatic economic
under way, and the new technologies that
could transform the way electricity flows.
Meanwhile, some two billion people
and social benefits. So we decided to don’t have access to electricity to begin
take a closer look. with, a problem that has proved stub-
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Solar power has often been thought bornly persistent. yet for those still
to be on the verge of breaking out, but waiting for the electrical revolution to
the hopes surrounding it have just as arrive, help is on the way. Developed
often been dashed. This time will be countries, writes Morgan Bazilian, are
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different, write Dickon Pinner and beginning to realize that one of the
Matt Rogers. Thanks to technological best ways to fight poverty is to provide
innovation, smart government regulation, energy, since a lack of it lies at the root
Chinese industrialization, and creative of so many problems. The trick is getting
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financial engineering, solar panels are policymakers to focus not on small-scale

becoming cheaper and more accessible fixes but on what has made the biggest
than ever, and the consequences—for difference in the past: giant, government-
homeowners, electric utilities, and the led electrification projects.
so
environment—are likely to be profound. Taken together, these articles send a

Batteries, too, have the potential to clear message: for the first time since
change the world—just as much as shale the advent of fossil-fuel-generated
has, should the technology continue to power, electricity is beginning to be
Ma
improve. That’s because large-scale generated, stored, transmitted, and used

batteries, if used to store electricity for the in fundamentally new ways. yet they
grid, could unlock the potential of renew- also suggest that despite this massive
able power, which has been held back and unappreciated innovation, there is
by its intermittent nature. Steve LeVine still plenty of room for improvement.
takes stock of the remarkable cost reduc- —Gideon Rose, Editor
tions and technological improvements
Coal, natural gas, and nuclear
power are not about to disappear.
But solar power has begun to
shift the economics of electricity.
—Dickon Pinner and Matt Rogers
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so
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GETTy IMAGES / TIM GRIMSHAW
Solar Power Comes of Age Upgrading the Grid

Dickon Pinner and Matt Rogers 111 Brian Warshay 125
Battery Powered Power to the Poor

Steve LeVine 119 Morgan D. Bazilian 133
approach to evaluating solar power’s

Solar Power
ENERGY’S HOTTEST SECTOR

prospects, has projected that by 2050,
in the best-case scenario, solar energy
Comes of Age could be the single biggest source of
power, generating as much as 27 percent
of electricity worldwide.
How Harnessing the Sun If that happens, the consequences
Got Cheap and Practical will be profound. Electricity will reach
places that have never known what it
Dickon Pinner and Matt Rogers means to get light or heat on demand.
m
The price of electricity could fall, and
S
olar power has been declared a utilities will have to figure out how to
winner before, only to flounder. adapt. But the environmental gains, in
hi
It’s easy to remain skeptical today, terms of lower emissions of particu-
given that solar power accounts for less lates, sulphur, and greenhouse gases,
than one percent of the global energy would be profound.
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supply. But it is also expanding faster
than any other power source, with an
average growth rate of 50 percent a year
the Power oF PolicY
Four factors lie behind the rise of solar
for the past six years. Annual installations power. The first is regulatory support.
of photovoltaic panels increased from Around the world, governments have
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a capacity of less than 0.3 gigawatts in enacted a range of pro-solar policies,
2000 to 45 gigawatts in 2014—enough to including requirements that utilities
power more than 7.4 million American generate a given fraction of their elec-
homes. This time really is different: tricity from solar power, feed-in tariffs
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solar power is ready to compete on its (a guaranteed price per kilowatt of solar
own terms. power), and subsidies to manufacturers
The momentum behind solar power of solar panels and the households that
is a result of innovations in regulation, buy them. Policymakers have supported
od
industry, technology, and financing. In solar power for a number of reasons,

a number of markets, it no longer needs including a desire to reduce emissions,
public subsidies to compete on price diversify their countries’ energy supplies,
with conventional power sources, such and create jobs. Perhaps most important,
so
as coal, natural gas, and nuclear power. they recognized the long-term potential
The International Energy Agency, which of solar power and wanted to foster a
has historically taken a conservative market for it.
Germany, the country with among
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Dickon Pinner is a Director in McKinsey’s

San Francisco office, where he leads McKinsey’s
the most aggressive polices, added 35
Global Cleantech Practice. gigawatts of solar-panel power in the
Matt rogers is a Director in McKinsey’s last ten years, driving the majority of
San Francisco office. In 2009–10, he served as global demand for much of that time.
Senior Adviser to the U.S. Secretary of Energy. In the United States, a set of mandates
He is a co-author, with Stefan Heck, of Resource
Revolution: How to Capture the Biggest requiring utilities to produce a certain
Business Opportunity in a Century. amount of electricity from renewable

Dickon Pinner and Matt Rogers
sources and a federal tax credit that allows the cost of solar panels has fallen by
taxpayers to write off 30 percent of the 80 percent since 2005. Prices are still
cost of installing solar power systems have falling, by five to 12 percent in the first
helped the power source take off. From half of 2014, and there is room for them
2000 to 2013, solar-panel capacity in the to fall further. So-called soft costs—
country increased from 18 megawatts to meaning the cost of everything but the
more than 12,000 megawatts—enough to equipment, such as permits, installation,
power almost two million homes. and maintenance—account for almost
Not surprisingly, regulatory support two-thirds of the total price tag for
has not always been economically U.S. residential solar systems. Soft
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efficient, but it has been effective in costs are about one-third of the price
creating enough demand for a large tag in Germany, where, among other
solar-panel industry to take shape factors, national standards have simpli-
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and learn how to compete. Even as the fied installation and streamlined the
industry has endured painful shakeouts— permitting process.
in the middle years of the last decade, The third factor behind the rise of
manufacturing companies went bank-

ha
in particular, dozens of solar-panel
rupt—installations have continued to

solar power is technological innovation.
Slowly but steadily, solar panels have
become more efficient. Efficiency rates
soar, and the industry has become much have peaked at about 20 percent—
more competitive. Almost all solar meaning that a panel is able to generate
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installations in California, for example, two watts of electricity for every ten
took state subsidies in 2007. By the end watts of sunlight hitting it—but that
of 2013, less than 40 percent did. Federal figure could grow as the industry experi-
subsidies are still available, of course. ments with a number of new techniques
Al
The second factor is industrialization, and materials. If it does, the savings

chiefly in China. Beginning around could be significant: every percentage-
2005, manufacturers there entered the point increase in efficiency can translate
solar-panel market to chase growing into a five percent cost reduction on the
od
global demand, and they now account entire system. There is also room for
for nearly two-thirds of global produc- greater efficiency after the electricity is
tion of solar panels. Chinese competition generated, when power is lost as direct
squeezed profit margins and drove many current (produced from the panels) is
so
suppliers out of business, but it also led converted to alternating current (required
to improved production processes and for distribution by the electrical grid).
new economies of scale, cutting costs The fourth and final factor involves
substantially. financing. Setting up a solar system
Ma
The last decade has seen technologi- entails high up-front costs. It takes about
cal innovations in manufacturing, low $15,000 to $20,000 to install rooftop
interest rates, leaner supply chains, and panels on a typical house, and even
improved economies of scale; the price though the investment can pay off over
of polysilicon, the raw material used to time, many households and businesses
make solar panels, fell by 90 percent are wary of spending so much cash
over this period. The net result is that at once. New financing models are

Solar Power Comes of Age
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Sunrise: a solar farm in China’s Gansu Province, September 2013
addressing this problem. Under third- from 63 cents per watt in 2014 to about
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party ownership systems, homeowners 40 cents per watt in 2017. Utilities that
sign contracts with companies that install rely on coal and natural gas—commodities
and maintain the solar panels. In return, whose prices are subject to market
consumers pay either a set monthly rate swings—could never be so confident of
od
or a fixed price per unit of power—paying continuous year-on-year reductions.

no cash out of pocket but still getting The development of technologies to
lower electricity bills. In 2012 and 2013, store electricity—in particular, batteries—
more than two-thirds of the installations will also help solar power’s development.
so
in California used this financing approach, Without storage, solar power can be
one reason the state is leading the coun- harnessed only when the sun is shining;
try when it comes to solar power. with storage, it can be used when power
costs are highest. The costs of battery
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more For the moneY

R E U T E R S / CAR L O S BAR R IA
storage have declined by about 70 percent

Given these trends, it is not a stretch to over the last five years, and already,
assume that in many markets, the costs companies such as SolarCity are pack-
of solar power will continue to decline aging solar panels with batteries. The
by eight to 12 percent a year. First Solar, price could fall by another 70 percent in
an Arizona-based manufacturer, expects the next decade as the technology and
its solar-module production costs to fall manufacturing methods improve, thanks

in part to battery research conducted by will get stronger. Heeding that logic,
consumer electronics companies such as the Saudi government has unveiled
Panasonic and electric-vehicle companies plans for two gigawatts of solar power
such as Tesla. by 2015 and 41 gigawatts by 2032.
It’s not safe to bank on great leaps Japan is not as sunny, but it is also
forward in efficiency and storage. But betting big on solar power, as it seeks
even without such advances, solar power alternatives to the nuclear plants it
is making inroads into major markets. closed in the wake of the 2011 Fukushima
In the United States, rooftop solar panels disaster. It has established generous
are already competitive in places with feed-in tariffs for solar power and other
m
lots of sun and high power prices, such alternative sources. Japan installed more
as Hawaii and parts of California. As than eight gigawatts of solar power in
the cost of solar power continues to 2014 and has set an overall goal of having
hi
fall over the next decade, it could make renewables account for 20 percent of its
economic sense for consumers in a dozen power by 2030, about double the figure
U.S. states by 2020 and for specific before the disaster. There is also room
ha
customer segments—such as those with
high electricity consumption and well-
positioned rooftops—in more than
for more solar power in Asian countries,
such as China and South Korea, that rely
heavily on liquefied natural gas, the price
25 states by 2030, even without govern- of which is linked to oil and can there-
ment subsidies. In much of Australia fore swing up and down.
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and central and southern Europe, solar In places that are not yet electrified,
power is coming close to reaching an such as much of South Asia and Africa,
economic tipping point. And China, solar power is usually cheaper and easier
where many cities are so dirty that snow to access than conventional energy
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turns gray by the time it hits the ground, sources. In India, where about 100,000
is pushing hard, with a goal of installing villages lack access to electricity, solar
70 gigawatts of solar power by 2017. power is already less expensive than the
In the Middle East, solar power is likely alternatives, such as coal or diesel
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competing against oil-fired electricity (and often more reliable). Solar power
generation, which costs 12 cents per also eliminates the need to wait for
kilowatt-hour. In 2014, the Dubai Elec- transmission lines to reach a town.
tricity and Water Authority agreed to India’s new prime minister, Narendra
so
purchase solar power at half that price. Modi, appears to see the benefits,
Solar power now accounts for less than announcing in January the ambitious
100 megawatts of capacity in sunny goal of building 100 gigawatts of solar
Saudi Arabia, chiefly because oil- power by 2022, which could make India
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powered generation is so cheap, with the largest solar power producer

providers paying only a little more than in the world. For villages that aren’t
the cost of production per barrel (about connected to the electrical grid, the
$5). As oil-producing countries turn away combination of solar panels, efficient
from burning oil domestically in order lighting, cell-phone plugs, and electric
to sell it for higher prices on the inter- water pumps could improve the quality
national markets, the case for solar power of hundreds of millions of lives.

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master’s program in global affairs

Al
Jackson Institute for Global A≠airs at Yale University

od
so
Create your own path to global leadership.

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jackson.yale.edu
We recognize there is more than one way to enter a career in the global arena. 203.432.6253
Our program will allowyou to design your own path through an individualized
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within the complexity of today’s public, nonprofit and private sectors worldwide. january 2
THE COMING DISRUPTION threatening to hold back on access to

As the rates for solar power begin to the grid.
match the rates for traditional energy Utilities in parts of the United States
sources in more and more markets, the are beginning to face similar problems.
capacity of solar power installed each Traditionally, U.S. utilities stayed profit-
year could increase from about 45 giga- able by capturing all new demand for
watts today to more than 200 gigawatts electricity, but solar power is threatening
by 2025. That would fundamentally that reliable revenue stream. In the first
disrupt the electric power sector. half of 2014, solar power accounted for
In Europe, the proliferation of solar a quarter of new capacity, and a house
m
panels, wind turbines, and other renew- equipped with solar panels doesn’t buy
able sources is changing the composition as much power from the grid. The result-
of the electricity sector. The market ing drop in demand is shrinking the
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share of renewables there rose from six amount of new capital that utilities can
percent of the total in 2006 to 12 per- invest, meaning that even if solar power
cent by the end of 2013, and it has risen continues to generate a relatively small
much more in some countries. That ha
significant new supply, combined with
low growth (or even shrinkage) in
fraction of electricity in the United States,
it could have an outsized effect on the
industry’s future. In a 2014 survey by
demand due to efficiency gains and slow the consulting company Accenture, 61
economic growth, has helped push down percent of utility executives said that they
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the wholesale price of power. The price expected to see noticeable revenue losses
that consumers pay is still high, how- as a result of the spread of distributed
ever, due to the cost of infrastructure power sources, including solar power.
plus various taxes. European consumers Solar power could shake up other
Al
pay an average of roughly 26 cents per sectors, too. In the housing industry,
kilowatt-hour, compared with the 12 cents for example, the spread of rooftop
Americans pay. solar panels could transform construction
High prices in Europe have made and design practices. In manufacturing,
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it easier for renewables to compete, factories could relocate to areas with

as have requirements that utilities favorable conditions for low-cost solar
give priority to renewable power on power. In agriculture, hot countries that
the grid. But European utilities are lack fresh water could harness solar
so
suffering in part because of this growth power for desalinating and pumping
in renewables. From a peak of $1.3 water, enabling farmers to work previ-
trillion in 2008 to the end of 2013, their ously infertile land. History suggests
market value declined by half. In that when a commodity gets cheaper
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2014, Germany’s biggest utility, E.ON, and cheaper, it gets used in new,
announced a radical move: in order to unforeseen ways.
focus on renewable power, it will spin
off its nuclear and fossil fuel power RISKS AND RESILIENCY
plants into a separate company. Japan’s Amid all the optimism, it’s worth
utilities, too, have found themselves considering what might set back solar
unprepared for the solar surge, and are power. One possibility is that govern-

Solar Power Comes of Age
ments might dismantle or weaken their country after country will be one of
supportive policies. That could hurt, as the most important factors determining
it did when Spain cut subsidies in the how fast solar power will scale up and
wake of the financial crisis and when how much of it will be centralized (in
Germany lowered its feed-in tariffs. the form of large, faraway solar plants)
In both markets, the adoption of solar and how much decentralized (on
power slowed down, but the industry as rooftops). Both sides could take their
a whole kept rolling. Indeed, the solar cues from the telecommunications
industry has proved resilient, coming industry. When the monopoly in that
back leaner and stronger from its painful industry was broken up in the United
m
shakeout a decade ago. States in the 1980s, new market entrants
The biggest risk in many markets is were guaranteed access to the existing
not that government support will go infrastructure but had to pay reasonable
hi
away but that long-standing regulatory fees that compensated existing providers
issues will fester. In the United States, for their services, while also leaving room
for example, utilities are concerned that for new competition. And it is worth
ha
solar consumers get a nearly free ride,
since they rely on the grid on cloudy
days and when the sun goes down yet
remembering that an unprofitable utility
sector benefits no one; a reliable grid is
a national necessity. As SolarCity’s ceo,
no longer cover the grid’s fixed costs. Lyndon Rive, told the Financial Times,
And in some states, when consumers “It is important that there is a grid.”
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sell electricity back to the grid, they get Compared with the regulatory
paid the retail rate for it rather than dispute, other challenges look easy
the lower wholesale rate, a practice to deal with. One possible risk is the
known as “net metering.” inevitability of higher interest rates
Al
In response, some utilities want to (interest rates have nowhere to go but

charge households with rooftop panels up), which would raise the costs of
for access to the grid, imposing fees financing solar power. But there is strong
known as “demand,” or “capacity,” charges. demand among institutional investors
od
That would change the economics of for “yield cos”—publicly traded compa-
solar power substantially, depending on nies that package the cash flow from
how high the fees went. Some utilities renewable energy. These low-risk invest-
in the United States would like to recover ments should help moderate financing
so
the full fixed costs of distribution from costs. Besides, higher interest rates
solar customers and also end net meter- would also affect other capital-intensive
ing. Regulators may not go that far, alternatives for generating power.
however. In 2013, for example, Arizona Another risk is that lower-cost power
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allowed its largest utility to impose a sources, such as natural gas from shale
fixed charge on households with solar deposits, could undercut the economics
power, but the fee was much lower than of solar power. In the short term, that
what it wanted, and the state preserved may happen. In the long term, however,
net metering. natural gas is more friend than foe to solar
How and when the debate over power. Natural gas tends to be a cheap
recovering fixed costs is resolved in and reliable source of flexible power that

can complement solar-generated electricity The next ten years could see
by providing 24-hour backup. This reduces something similar with solar power,
the costs of integrating solar power into but on a global scale. It would not be
the grid. Indeed, solar power is going at all surprising, for example, if most
strong in the place with the world’s lowest new housing developments, particularly
natural gas prices: North America. in the sunnier parts of Europe and
A third possible risk is that nuclear the United States, came with solar
fusion or some other breakthrough will power, or if most of those 100,000
finally take hold. Perhaps, but that is a Indian villages without power were
hypothetical. Better to bet on a proven lit up at night thanks to solar energy.
m
technology that is seeing its sales boom- Even without a great leap forward
ing and its costs falling. in efficiency and batteries, and even
with halting and sometimes contra-
hi
here comes the sun dictory government policies, the
Coal, natural gas, and nuclear power, momentum behind solar power has
which today supply two-thirds or more become unstoppable.∂
ha
of global power, are not about to disap-
pear. But even at its currently low rates
of market penetration, solar power has
begun to shift the economics of electric-
ity. This is the dawn of the solar age.
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If that sounds overly optimistic,
consider another technology that went
from curiosity to commonplace in a
matter of decades: the automobile.
Al
When the first car hit the American

street in the 1890s, skeptics sneered
that the “horseless carriage” had no
future. In 1900, there was only one car
od
for every 10,000 Americans. In 1908,

however, the Model T hit the market,
making cars more affordable for many
more people. By 1920, there were
so
almost 900 cars per every 10,000

Americans. The global solar industry
is at an analogous stage to where the
auto industry was in 1920. Just as it
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was not yet the norm for Americans to

have a car in 1920, it was becoming
normal. And norms can change quickly.
Between 1920 and 1930, the rate of car
ownership shot up to 2,170 cars per
every 10,000 Americans. The United
States was now a car country.

energy storage, batteries that would

Battery Powered

allow consumers to draw on electricity
generated at an earlier time. If today’s
off-the-shelf lithium-ion batteries were
The Promise of Energy scaled up and used to store electricity
Storage for the grid, they could rival shale oil
in terms of their capacity to reshape
Steve LeVine the energy landscape.
For starters, they could eradicate some
four million barrels of global oil demand
m
he plunge in oil prices that a day, as countries that rely heavily on oil
began in mid-2014 has been for electricity generation, such as Japan
relentless. It has pushed a clutch and Saudi Arabia, slashed their con-
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of oil-exporting nations into deficit sumption and turned instead to solar or
spending, hobbled Russia’s ambitions, wind power stored in batteries. That
and altered the calculus behind Iran’s volume equals a whopping 4.5 percent of
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nuclear program. It has also given an
opportune boost to the U.S. economy
and other petroleum-consuming coun-
current global oil consumption—about
the same amount, counting new supply
and lost demand, as what triggered the
tries. No other force on earth packs oil-price plunge. On top of that, batteries
such latent capacity to move events. would represent an environmental boon,
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Apart from one, that is: batteries. since solar and wind power could finally
When it comes to energy, new tech- begin to substitute for coal and natural
nologies can upend the status quo almost gas as go-to sources of power. And as
overnight, surprising everyone. And with shale oil and gas, grid-scale batteries
Al
just as the shale revolution, unleashed would make a gargantuan commercial

by fracking, has largely triggered the splash. According to research by Citi, they
current oil upheaval, batteries could roil will account for more than $400 billion a
geopolitics and business. Renewable year in revenue by 2030.
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power has long been held back by the Such rosy projections would have
problem of electricity storage, because been unthinkable absent the massive cost
the hours when the sun is shining or improvements in the batteries used in
the wind is blowing do not necessarily electronic devices and electric vehicles.
so
match the hours when people use Batteries account for one-third of an
electricity most. The key to unlocking electric vehicle’s price tag, and steady
renewables’ potential is thus stationary technological progress is bringing that
cost down. As a result, over the next
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Steve L e vine is Washington Correspondent decade, the price of an electric car may
for Quartz and the author of The Powerhouse: well match that of gasoline-powered
Inside the Invention of a Battery to Save the
World, published February 5, 2015, from which cars—and could even fall below it,
this essay is adapted. Reprinted by arrange- given the expense involved in making
ment with Viking, an imprint of Penguin conventional cars comply with stringent
Publishing Group, a division of Penguin
Random House LLC. Copyright © 2015 by Steve emission standards. The technology
LeVine. Follow him on Twitter @stevelevine. research firm IDTechEx has predicted

Steve LeVine
that by 2024, sales of electric cars BUILDING A BETTER BATTERY

(including hybrids) could reach ten Lithium-ion batteries all work the same
million a year, tripling the size of the way. They have three basic parts: two
nascent industry, to $179 billion. It is electrodes (known as the cathode and
numbers like those that have convinced the anode) and, between them, a chemi-
China and the United States to compete cal compound called an electrolyte. A
with Japan and South Korea, which battery discharges power when lithium
control a combined 92 percent of the ions stored in the anode travel through
electric-vehicle battery market. the electrolyte to the cathode. When
With all their ifs and coulds, the the battery is connected to the grid for
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forecasts for electric cars have left many recharging, the electricity forces the
policy analysts and industry observers lithium ions to make the return journey
rightly wary. After all, less than five back to the anode, where they are stored
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years ago, the governments of China for their next use.
and the United States placed billions Compared with other important
of dollars behind an ambitious bet on technologies, such as computer processors
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the future of electric cars, with each
vowing to put one million electric cars
on the road by 2015. The goal proved
or medical-imaging devices, batteries
have progressed remarkably slowly. The
first battery was invented in 1800 by
too ambitious: as of the end of 2014, Alessandro Volta, and in 1859, Gaston
fewer than 350,000 electric cars had Planté invented the lead-acid battery,
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been sold in the two countries com- which is now ubiquitous in gasoline-
bined. For all the hoopla surrounding powered cars. It took until 1991 for
Elon Musk’s Tesla Motors, the com- Sony to produce the first commercial
pany had sold just 47,000 cars total as lithium-ion battery. Even today, the
Al
of September 2014. As for stationary search for a superbattery goes on.

batteries, the cost of solar and wind The problem is one of physics—
power has plunged, yet energy storage figuring out how to shuttle more lithium
remains inefficient and expensive. Low ions in a battery safely, quickly, and at a
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oil prices, which erode the competitive- reasonable cost. Consider the difficulties
ness of renewables, have taken the inherent in the proposed improvement
enthusiasm down another notch. of making anodes out of silicon, instead
Yet the scenario painted by battery of graphite (as they are currently usually
so
optimists—solar power companies, made). Doing that would triple the amount
environmentalists, Tesla employees of energy contained in a standard lithium-
and buyers, a small number of utility ion battery. But silicon expands consider-
executives, and a phalanx of Wall Street ably during the charge-discharge cycle,
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analysts—is not so far-fetched. It requires eventually cracking and destroying the

no momentous scientific advances. All battery. Similar problems have plagued
that is needed, at least for stationary all the other big proposed solutions
storage, is a commitment to implementing to date.
existing government policy, continued Most of the progress that has oc-
engineering work-arounds, and economies curred has come from manufacturers of
of scale. commodity batteries, such as Duracell,

Battery Powered
m
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Batteries included: the Tesla Gigafactory under construction in Nevada, November 2014
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and from the electric-vehicle sector, in precise cost-saving methods. But they
particular, Tesla. Successful batteries for include cutting out expensive safety
vehicles must clear a high bar: they features usually contained in each and
need to take a car far, accelerate quickly, every battery; instead, Tesla installs
Al
last a long time, never catch fire, and be safety components that simultaneously
reasonably priced. No current technol- service many or all of the thousands of
ogy meets all those criteria, despite batteries contained in its battery packs.
frequent claims by start-up battery Although many battery scientists still
od
companies (most of which do not do not consider Tesla’s cost goals realistic,
release peer-reviewed data). Tesla has given Musk’s record of success, Tesla’s
met all of them except for cost—and so rivals cannot ignore the possibility that
has been able to capture much of the the company will meet it.
so
luxury market. Even on that front, Such progress would not have occurred
however, Tesla has done well, thanks to without massive government investment.
a strategy of using off-the-shelf batteries In 2009, U.S. President Barack Obama
manufactured by Panasonic. Whereas pledged that the United States would
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REUT E RS / JAM ES G LOVE R II
its competitors pay about $500 a carve out a 40 percent share of the global
kilowatt-hour for their custom-made advanced-battery market by 2015, up
lithium-ion battery packs, Tesla says that from near zero when he took office. He
it pays around $225—and has promised pushed through $2.4 billion in spending
that it can get the price down to $150 by for battery and electric-car development
the end of the decade. Tesla and Panasonic as part of the stimulus package, up from
are understandably protective about their about $50 million a year that the Depart-

Steve LeVine
ment of Energy had been allocating lithium-ion batteries used for electronics
previously. And he introduced a $7,500 were also extremely expensive at first.
tax credit on electric-car purchases. In 1995, a battery with a capacity of one
Other governments have done the kilowatt-hour cost $3,000, compared
same. France, Norway, Spain, and the with about $200 today. To put that in
United Kingdom have offered even bigger perspective, a 6.9-watt-hour lithium-ion
tax credits for electric cars, and South battery for the iPhone 6 costs $1.40;
Korea leads the pack with a $13,500 in 1995, it would have cost $20. As for
subsidy per car. China has offered $5,000 electric-car batteries, they stood at
to $10,000, depending on the car’s range, $1,000 per kilowatt-hour in 2009 but
m
and the Japanese government, which now cost less than half as much. When
wants hybrids or fully electric cars to it comes to batteries for large-scale
account for half of all domestically storage, widely accepted forecasts see
hi
produced cars by 2020, exempts electric the cost of some lithium-ion battery
vehicles from all taxes. For now, such systems for the grid dropping by more
incentives are necessary to offset the than half by around 2020—from about
ha
cars’ considerable cost in comparison
with that of traditional vehicles: gaso-
line contains 50 times as much energy
$500 per kilowatt-hour to $230. At
that price, batteries will reach a tipping
point and begin to compete with coal,
per kilogram as a lithium-ion battery. oil, and natural gas on the grid, includ-
ing as a way to store power for times
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COST CUTS of peak electricity demand.
The numbers are brutal for grid-storage Regardless of the progress anyone
batteries, too. This year, Japan’s Tohoku expects in energy storage, a substantial
Electric Power is scheduled to bring on part of the global population will not
Al
line the largest battery in the world, a abandon fossil fuels for electricity genera-
40-megawatt facility in the city of Sendai tion anytime soon, if ever. On the other
that is intended to store solar and wind hand, there are already parts of the world
energy. Toshiba sold the battery to Tohoku that could come close to relying entirely
od
for about $5,000 per kilowatt-hour, 20 on renewables, provided the right energy
times the price most analysts consider storage became available. Solar power
necessary to make solar and wind power is already competitive without subsidies
competitive with traditional forms of in Australia, Germany, Italy, Portugal,
so
power generation. The high cost owes to Spain, and the southwestern United
its size. At that scale, batteries experience States. If solar installations in these
diminishing returns, whereas fossil fuels places were equipped with batteries,
and nuclear power enjoy a decided consumers would face higher up-front
Ma
economic advantage. Tohoku’s experience costs to pay for the storage but would
suggests that even if lithium-ion batteries save money over time, since they would
become competitive for small-scale use, it buy less power from the grid.
will be far harder to lower costs enough It does not take a leap of faith to
to compete with large electric plants. envision giant batteries becoming a
But it’s worth noting that like big standard feature of renewable energy
lithium-ion batteries today, the miniature systems within a decade. Navigant, an

Battery Powered
industry research firm, has forecast that Then there are the electric utilities.
Asia will experience a boom in grid- Last year, former U.S. Secretary of
storage batteries, in part because large Energy Steven Chu warned publicly
swaths of the continent are only just that utilities’ ownership of power lines
beginning to build out their electrical and fossil fuel generation plants was not
infrastructure. The United States is also going to continue to guarantee these
primed for a boom in battery-backed companies a profitable business. Such
renewable energy, thanks in large part to plants could soon be replaced, he said,
action by state governments. California by distributed generation: smaller, local
has mandated that its largest utilities sources of electricity, often at the home
m
install 1.3 gigawatts of battery capacity or building level, that rely on solar or
by 2022. Southern California Edison wind power. Chu predicted that within
has responded with a pilot project in a decade, the American homeowner would
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the city of Tehachapi that will store be able to pay $10,000 to $12,000 for a
32 megawatt-hours of power from the battery-backed solar power system and
area’s 5,000 wind turbines. be off the grid 80 percent of the time.
WINNERS AND LOSERS

ha Such distributed-generation systems
could save customers up to a quarter of
As with all energy revolutions, advances the charges they would ordinarily face
in battery storage would create winners during peak hours. Within five years,
and losers. Among the biggest victims such systems could become far more
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would be coal power, which would not widespread and pose a live and growing
be required nearly as much once renew- threat to electric utilities. As a matter
ables came on line. Big Oil also has a of survival, Chu warned, those utilities
great deal to lose, and it is betting that would have to conceive of a new business
Al
advances in the battery market are merely model that included installing grid-scale
an artificial outgrowth of subsidies. In batteries. Otherwise, they risked becom-
2014, ExxonMobil released a dim fore- ing relics, in the same way that “the Post
cast of batteries’ future, predicting that Office got FedExed.”
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renewables in 2040 will face the same But some companies have embraced
conundrum as today: batteries will be a future of battery-backed renewables.
too expensive and inadequate to store Given their expertise, electric-vehicle
what the sun and the wind generate. By makers are the obvious early movers that
so
then, the report contended, solar power, will scale up batteries for grid storage,
wind power, and biofuels together will and all eyes are on Tesla. One Model S,
supply less than four percent of the the company’s bestseller, can store enough
electricity generated globally, suggest- energy in its 85-kilowatt-hour battery
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ing that batteries will make almost no to power the average U.S. household
progress on the grid. (The U.S. Energy for three and a half days. A number of
Information Administration is more analysts think that’s precisely how the
upbeat, forecasting that solar and wind cars will be used: plugged into the walls
power will supply around five percent of garages, discharging during the hours
of the electricity in the United States when the grid is experiencing high
alone in 2015.) demand and charging when it isn’t. By

Steve LeVine
2028, Morgan Stanley predicts that there advising their clients to respond to what
will be 3.9 million Tesla vehicles on U.S. is in front of them; the fears of oil and
roads, a fleet that could provide an hour utility executives, apprehensive of being
of electricity per day for eight percent rendered obsolete; and the thrill of
of U.S. households. technology fanatics and automobile
Tesla is also racing ahead to build maniacs, hoping that they are getting
manufacturing capacity in anticipation in on the next big thing.
of demand for grid-storage batteries, At the same time, Chinese and U.S.
beginning construction on a $5 billion scientists, working in the programs
plant near Reno, Nevada. Dubbed the supported by their governments, could
m
Gigafactory, the plant is intended to come up with a big breakthrough that
double the world’s entire supply of overturns everything. Because of the
lithium-ion batteries by 2020. Echoing enormous geopolitical, economic, and
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much of Wall Street, a 2014 Morgan environmental gains to be had should
Stanley report took a favorable view that happen, governments should
of the ambitious plan: “We believe continue to devote serious amounts of
there is not sufficient appreciation of
the magnitude of [the] energy storage
cost reduction that Tesla has already
ha funding for advanced battery research.
Young, promising researchers should
understand that if they go into the
achieved, nor of the further cost reduc- field, they can count on long-term
tion magnitude that Tesla might be financial support. Yet even if private and
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able to achieve once the company has government-funded researchers in China
constructed its ‘gigafactory.’” and the United States merely continue
down the steady path of progress they
h p AND have been following, it will still lead to a
Al
c
arged
u
ready
to
go
In the late 1990s and first decade of fundamentally new era in energy. A big
this century, there seemed no hope for breakthrough would bring on this age
electric cars: General Motors gave up far faster. But it will arrive regardless.∂
on its EV1, and the most promising
od
product, the Toyota Prius, was only a

hybrid. How quickly things change: by
the end of 2014, Tesla had emerged as
a decided success and the Nissan Leaf
so
had broken through the 30,000-vehicle

sales mark. The naysayers’ pessimism
notwithstanding, batteries are on track
to follow the same pattern of progress.
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But it is as inane to predict a singular

technological leap as to predict no ad-
vancement at all. The optimistic forecasts
for the commercial success of battery-
backed renewable power and electric cars
are, in the end, just theories. They reflect
the linear thinking of equity analysts,

particular havoc, as utilities struggle to

Upgrading the

forecast and react to variable customer
electricity demand that, for the utilities,
Grid falls when the sun is shining and swells
when it is not.
But help is on the way. Utilities are
How to Modernize investing in a smarter grid that will
America’s Electrical provide unprecedented insight into
Infrastructure electricity distribution and consumption.
The resulting technological improve-
m
ments will enable grid operators to
Brian Warshay better manage the rise of renewable
power, resulting in a cleaner, cheaper,
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more reliable grid than Edison and
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he U.S. electrical grid has hardly Westinghouse could have ever imagined.
changed since the War of Cur- Much work remains to be done,
ha
rents, the 1880s fight that saw
George Westinghouse’s alternating
current triumph over Thomas Edison’s
however. The challenge is to convince
regulators that these investments not
only are necessary to make the grid more
direct current as the preferred method reliable and open to renewable power but
for generating and transmitting electricity. also can be cost effective. The struggle
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It remains a network of long-distance stems from a lack of forward thinking
transmission and distribution lines by both utilities and regulators; in many
designed to move electricity in one cases, the regulators responsible for
direction: from giant, lumbering fossil authorizing these investments are
Al
fuel plants to faraway households and content to maintain the status quo when
businesses. This system has endured it comes to improving the grid’s infra-
because it has proved safe, reliable, structure, 80 percent of which, in some
effective, and affordable. areas, has not been upgraded since the
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Until now, that is. Although the grid Kennedy administration. If the battle can
is still safe, its reliability, effectiveness, be won, the people running the grid will
and affordability are increasingly being have the data to manage it in a smarter,
brought into question. The culprits are cheaper, more reliable, and cleaner way.
so
twofold. First, recent natural disasters,

such as Hurricane Sandy, have revealed the geriatric grid
just how vulnerable the grid is, increas- It’s no secret that much of the U.S.
ing the political pressure to invest in power grid is decades old. The average
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making it more resilient. Second, the age of the country’s large power trans-
rise of distributed sources of renewable formers—critical pieces of equipment
power is adding new stresses to the that transfer electricity between circuits—
inflexible grid. Solar power is wreaking is around 40 years, and many have been
operating for more than 70 years.
Brian Warshay is an analyst at Bloomberg But the grid does not owe its vulner-
New Energy Finance. ability to age. Indeed, although the risk

Brian Warshay
that a piece of equipment will fail to their customers, as is typically done

increases with age, utilities counteract for utility expenditures. Con Edison,
this problem by regularly monitoring the utility serving most of New ork
Y
equipment and replacing it when there City and Westchester County, received
are signs of degradation. Instead, the approval for nearly $1 billion; the
vulnerability of the grid has to do with Public Service Electric and Gas Com-
other factors. Of transformer outages pany (PSE&G), which serves much
from 1991 to 2010 in which the cause of New Jersey, put forth a $3.9 billion
was known, 67 percent were attributed plan, of which $1.2 billion was approved
to external causes (such as lightning, in 2014.
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overload, or foreign objects) rather Both plans focus nearly 90 percent
than age-related ones (such as moisture of the funds on hardening the grid by
penetration or failing insulation). None installing stronger power poles and lines,
hi
of the largest outages in the last decade building flood-proof barriers, and bury-
in the United States occurred solely due ing cables underground. The other ten
to an age-related equipment failure. percent, some $200 million combined,
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What really keeps operators up at
night is natural disasters. Hurricane
Irene in 2011 and Hurricane Sandy in
is the exciting part. It will go toward
placing digital sensors throughout the
grid to detect risks and monitor power
2012 blew trees onto power lines and flows. Connected by software, these
flooded power stations, leaving millions devices will enable the utilities to pin-
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of customers without electricity for point outages, reroute electricity around
days. These storms were unusual in their them, and alert customers about future
size and strength, but they accounted repairs. Once these upgrades are in place,
for just two of the roughly 5,800 electri- operators will have real-time data about
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cal outages that occurred in those years, the status of the grid. And unlike grid-
according to the power company Eaton. hardening measures, these technologies
Natural disasters are the single largest will pay dividends during everyday opera-
cause of blackouts in the United States, tions, since the resulting data will make
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responsible for 32 percent of all unplanned it easier to match supply and demand.
outages in 2013. (The rest were caused While natural disasters gave a much-
by faulty equipment, human error, car needed boost to smart-grid spending,
crashes, and animals that damaged even more funding has come from the
so
equipment.) 2009 stimulus bill. It provided $3.4 billion

These storm clouds did have a silver for such investments and accounts for
lining: the hurricanes generated the a full 15 percent of all the money invested
political will to invest in strengthening in smart-grid projects since 2009. That
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the grid. Utilities in the Northeast spending paid off years later, providing
suffered $3.3 billion worth of damages the foundation on which many of the
from Hurricane Sandy alone. After post-Sandy grid improvements will take
they restored power and cleaned up the shape. As a result, many smart-grid
debris, the utilities asked state regula- technologies are no longer considered
tors to approve passing on the cost of science projects; they are just business
any needed repairs and improvements as usual.

Upgrading the Grid
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Power’s out: electrical lines after Hurricane Sandy in Massachusetts, October 2012
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the PitFalls oF Peak course of a year, becoming what is
A more recent threat to the grid has come known as a “net zero” household. But
from renewable sources of electricity— even a system of that size is nowhere
chiefly, solar power. The price of solar near large enough to allow a house to
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panels has plummeted in recent years, go completely off-grid, because the

making rooftop panels a cheaper energy house still needs power when the sky
source than the grid in many regions. is dark. Disconnecting entirely from
Over the past decade in the United the grid would require four times as
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States, the total capacity of residential many panels as a net-zero household

solar power has grown by a factor of has and tens of thousands of dollars in
nearly 18, to 3.8 gigawatts. It is expected batteries. As a result, many solar users
to reach nine gigawatts by 2017. get a free ride by taking advantage of
so
Even though rooftop solar panels the flexibility the grid provides without
may give the illusion of independence, paying anything additional in return.
they in fact rely heavily on the grid, Solar power complicates utilities’
which acts as a battery and spare power operations in another way: it makes the
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R E U T E R S / J ES S I CA R I NAL D I
plant. Customers still count on grid demand for electricity more variable.
electricity to fill in the gaps in their In the United States, a major govern-
supply—for example, when a cloud ment push for energy efficiency has
passes over their house. With enough succeeded in keeping average electricity
solar panels, a house can sell enough demand from ballooning over the past
power back to the grid such that it decade. But the gap between the hours of
zeroes out its electricity bill over the maximum energy use—peak demand—

Brian Warshay
and those of lower energy use has been The oversized grid requires more capital
growing. In 1990, peak demand in the to build and maintain, and these costs
United States was about 55 percent are borne by all customers, not just those
higher than average demand; today, that who use the most electricity at peak
figure has risen to 75 percent, and by time periods. To return to the highway
2030, it is expected to reach 90 percent. analogy, the pricing system is like charg-
A number of trends explain the rise ing car owners monthly minimums
in “peakiness.” First, the decline of the for gasoline even if they never drive
industrial sector and the growth in the their cars.
residential sector has replaced the steady When demand moves from average
m
electricity demand of factories with to peak, utilities tend to fill the gap in
the more variable demand from houses. an inefficient way. Managing peak
Second, the increasing popularity of air demand requires control over supply,
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conditioning has raised peak demand demand, or both. With little control
during the summer. And third, climate over customer demand and no control
change has made the weather more over the supply from rooftop solar panels,
volatile, and electricity demand isha
higher on extremely hot and cold days.
In regions with abundant solar
utilities are forced to fill the gap using
the one resource at their disposal: by
turning on centralized fossil fuel plants
power, the peakiness phenomenon gets called “peakers,” which get used just a
exacerbated in a more predictable pattern: few hundred hours per year. In fact, a
iT
solar panels generate the most electric- few hours before the system is expected
ity during the middle of the day, when to reach peak demand, utilities ramp up
the sun is highest, whereas customer peakers so that they can immediately
demand for electricity is highest at the be connected to the grid when needed,
Al
end of the workday, when people come meaning that during those hours, the
home and turn on lights and appliances. plants are burning costly fuel and gener-
In places where solar panels are wide- ating emissions yet powering nothing.
spread, such as parts of Germany, Due to their limited output, peakers
od
California, and Hawaii, utilities are can cost twice as much as the bigger,
faced with massive spikes in demand more efficient power plants that
as solar supply drops with the sun. generate base-load electricity—and
The problem with peakiness is that it generate 40 percent more emissions
so
makes for an inefficient grid. Electrical per kilowatt-hour.

infrastructure is sized for the few hours
a year when electricity demand is fore-
DEMAND
AND
CONTROL
cast to be at its absolute highest—those New technologies are rapidly changing
Ma
weekday afternoons in the summer when the way utilities react to peak demand.
every air conditioner is on. As a result, Grid operators are embracing what is
on an average day, less than 50 percent known as “demand response” to manage
of the U.S. grid’s capacity is used. It is the amount of electricity their customers
the equivalent of designing highways draw from the grid. Utilities are able to
wide enough to avoid traffic jams on reduce demand directly by remotely
even the busiest driving days of the year. controlling large loads such as industrial

equipment, pool pumps, water heaters,
and communicating thermostats. They
can also reduce demand indirectly, by
offering pricing incentives for customers
to use less electricity at certain times.
Several utilities have implemented
large-scale pilot programs that pay Global
residential customers to cut their
electricity use during peak periods, Environmental
offering rebates of around $10 per day.
m
Customers can use smartphone apps to
control lights, locks, thermostats, and
Politics
KATE O’NEILL AND STACY D. VANDEVEER, EDITORS
security systems even when away from
hi
Global Environmental Politics (GEP)
home—and often in response to a text examines the relationships between global
message or an e-mail from the utility political forces and environmental change,
alerting them that peak demand is with particular attention given to the
ha
occurring. But around the world, these
programs are few and far between.
Demand-response programs have been
implications of local-global interactions
for environmental management as well as
the implications of environmental change
and environmental governance for world
successful at managing the large electri- politics.
iT
cal loads of commercial and industrial
customers but for the most part have SPECIAL OFFER FOR FA READERS:
Subscribe to Global Environmental Politics
not tapped into the residential sector, at a special 25% discount. Enter code
which is what drives peak demand in GLEPFA15 at checkout to enjoy a full year
Al
of GEP, plus access to the complete online

most regions. archive of the journal, back to the first issue.
An alternative approach to managing Offer expires 04/30/2015; discount
peak demand involves charging customers applicable to individual subscriptions only.
“time-of-use” rates. Most households

od
pay the same regional price per kilowatt-

hour for electricity regardless of the
time of day it is consumed. Time-of-
use rates set higher rates for using
electricity at peak times and lower rates
so
for off-peak periods. These pricing

schemes encourage people to change
their behavior—for example, to set the
Ma
dishwasher to run in the middle of the

night or turn the air conditioner down
a notch. So far, however, only Ontario
and Italy mandate time-of-use rates.
(Spain and California are set to join
mitpressjournals.org/gep
them in 2018.) These programs have
demonstrably reduced peak demand,
but the difference between peak and
GLEP FA jan 2015.indd 1 129

1/8/2015 1:09:45 PM
Brian Warshay
off-peak prices has been relatively small, utilities to commit funds to smart-grid
sufficient to shift demand by only a few projects to improve reliability.
percentage points. In part, utilities are motivated by
Putting in place time-of-use pricing revenue. Most regulators specify a
in the United States won’t be easy. given profit margin that utilities are
Two utilities in Arizona, Arizona Public allowed to earn on investments, which is
Service and the Salt River Project, have calculated as a given return on equity—
stood out by getting a large group of usually around ten percent annually.
their customers to sign up voluntarily Once a proposed investment is approved,
for time-of-use rates. But to make it regulators allow the utility to add these
m
mandatory, utilities will have to cut costs to its total expenditures and raise
through a web of red tape. According to customers’ bills over a number of years.
the Edison Electric Institute, an industry In this way, building new infrastructure
hi
association, the regulatory process in the offers a major avenue for utilities to
United States for changing residential grow their revenue streams, which is
electricity rates takes an average of ten especially crucial for utilities that are
months and sometimes over two years.
As a case in point, California began the
process of allowing utilities to mandate
ha losing money as efficiency gains and
renewable power eat into their overall
sales. In 2014, to modernize the grid
residential time-of-use rates in 2013, but and relieve congestion, U.S. electric
the change won’t take effect until 2018. and gas utilities invested more than
iT
One of the most proactive approaches $31 billion—up by nearly seven percent
to managing demand has emerged in from 2013.
New ork. Through the 2014 initiative Regulators have proved willing to
Y
Reforming the Energy Vision, the state approve investments that promise higher
Al
is encouraging the integration of solar reliability, although they are not grant-
and other renewables using demand ing utilities a blank slate. After all, the
management and smart-grid technologies. New Jersey Board of Public Utilities cut
Although the state has yet to define PSE&G’s original post-Sandy plan by
od
the particular mechanism, the goal is almost 70 percent. Nonetheless, other

to bridge the gap between the costs that utilities in future dealings with regulators
utilities pay for the grid and the price may do well to point to the investments
customers pay for electricity. that the regulators of PSE&G and Con
so
Edison green-lighted to build their own

cases for smart-grid projects aimed at
TIME
TO
INVEST
Perhaps the most politically practical improving reliability. Regulators, for their
way to modernize the grid is to ride part, can look to replicate the successes
Ma
the wave of infrastructure investment, of stimulus-funded projects and other

especially by drawing on funds ear- recent investments rather than stick with
marked for storm recovery. In terms the conventional approach of hardening
of their scope and innovation, few of the grid.
the projects under way rival the billion- But not all investments in the grid
dollar plans of Con Edison and PSE&G, need to come from utilities; state gov-
but there is still an opportunity for other ernments can also play a role. Over the

Upgrading the Grid
last two years, state-level investments efficiency but also the more subtle
in projects aimed at making the grid impact of peak demand. Likewise,
more reliable have taken off. Most have incentives for installing solar panels
taken the form of microgrids, which are should be accompanied by standards—
buildings or campuses that are often and fees, if necessary—aimed at ensur-
connected to the main grid yet have ing that each new system does not save
enough on-site power generation to its owner money at the expense of the
disconnect (or “island”) from it in the neighborhood.
event of an outage. Since Sandy hit the Continued improvements by utilities
Northeast, Connecticut, Massachusetts, and policymakers could prove transfor-
m
New ork, New Jersey, and Maryland mational. California’s governor recently
Y
have together offered over $100 million proposed mandating that 50 percent of
in microgrid grants to provide reliable the state’s electricity come from renew-
hi
safe havens when the next storm hits. ables by 2030, a goal almost certainly
And in 2014, California announced unachievable without first modernizing
$26.5 million in grants for microgrid the grid. The modern grid operator
true grid
ha
projects that use renewable energy. will have foresight about supply and
demand throughout the grid. The result
will be improved reliability, increased
The electrical grid itself has evolved efficiency, and the seamless integration
little since its inception, yet what has of renewable power—not to mention
iT
changed dramatically is the way people more stable prices and lower emissions.
use it. Electricity has come to affect The technology to modernize the grid
every aspect of modern life, and society exists, but historical inertia is limiting
today is more reliant on it than ever. its adoption.
Al
That makes its absence all the more Electricity now faces a modern-day
painful. The White House estimated War of Currents. This time, however, the
in 2013 that grid outages cost the U.S. battle is not between one technology
economy $18 billion to $33 billion a and another. Rather, it is pitting the
od
year. While it’s hard to put a precise electrical architecture that was designed
value on reliability, whatever the num- 100 years ago against a vision of a
ber is, it’s big. A blackout can do more redesigned and modernized grid. It is
than just delay a nighttime football a vision that promises to at last make
so
game; it can ruin a shift at a factory or the U.S. grid, in a word, current.∂
put a patient on life support at risk.
That’s why a more nuanced approach
to upgrading the grid is needed. Invest-
Ma
ments in reliability, although they should

take advantage of the political will gener-
ated by recent natural disasters, must
also focus on the day-to-day benefits
of a modernized grid. And policies on
changing electricity demand must focus
on not just the benefits of energy

Saharan Africa. In Liberia, to take one of

Power to the Poor

the most extreme cases, just two percent
of the population has regular access to
electricity. And in Tanzania, nearly 50
Provide Energy to percent of firms say that poor electricity
Fight Poverty service is a major constraint for doing
business. They face an average of nearly
Morgan D. Bazilian nine power outages every month, leading
to lost sales and poor productivity. In this
I
magine life without electricity. With area, the disparity between the developing
m
no lights, electric stove, or water world and the developed world could
pump, you must travel miles to fetch hardly be greater: the average American
water and firewood, running a particular uses about 50 times as much power as the
hi
risk of attack if you are a girl or a woman. average Bangladeshi and about 100 times
At home, you cook over a smoky stove or as much as the average Nigerian.
an open fire, raising your odds of getting The problem has proved stubbornly
ha
lung and heart disease. If you are pregnant, persistent. Data from the World Bank
you may die in the dark, giving birth show that although 1.7 billion people
at a clinic that lacks air conditioning and acquired access to electricity from 1990 to
modern medical equipment. Without 2010, the gains barely outpaced popula-
vaccines, which require refrigeration, tion growth. They also accrued dispro-
iT
your children remain vulnerable to deadly portionately to cities: today, about 85
diseases. At night, they study by the light percent of those without electricity live
of a kerosene lamp, which causes burns in rural areas far from any infrastructure.
when the fuel spills. Earning a living In sub-Saharan Africa especially, the scale
Al
isn’t easy, either. No electricity means no of the challenge is daunting. Enabling

sewing machines or rice mills, no pumps people there to consume as much elec-
for irrigating crops, and no way to keep tricity as those in a middle-income region
drinks cold or keep a store open at night. would require an increase in power
od
The lack of power keeps away bigger generation of more than ten percent
companies that might have hired you. a year over two decades—an annual
Such is the plight of nearly half of the growth rate far greater than the historical
world’s population. Some two billion two to three percent. Small wonder,
so
people lack electricity outright or have then, that the International Energy
poor-quality service, and nearly three Agency has forecast that in 20 to 30
billion rely on dirty fuels, such as firewood years, the number of energy poor may
and animal dung, for cooking and heating. remain close to where it stands today.
Ma
Nearly 90 percent of those suffering from Although international donors have

energy poverty, as the problem is known, many compelling causes to choose from,
can be found in South Asia and sub- reducing energy poverty should rank
among the top. Energy is a precondition
Morgan D. Bazilian is Lead Energy to alleviating many other problems associ-
Specialist at the World Bank. Follow him on
Twitter @mbazilian. The views expressed here ated with poverty, from poor health to
are his own. lack of education to unemployment. The

Morgan D. Bazilian
issue also reaches beyond the bounds of lines takes years or decades. In the mean-
poverty to foreign policy, since a lack of time, small companies are stepping in
energy access can foster instability. The with much-needed services, the most
good news is that governments, develop- innovative of which often involve solar
ment agencies, and nonprofits have begun energy. Taking advantage of the recent
to ramp up spending on fighting energy plunge in the price of solar panels,
poverty and have unveiled a slew of new companies are working with local banks to
initiatives, many of which have produced provide financing and servicing arrange-
measurable improvements in the lives of ments that are appropriate for the rural
the poor. poor, which usually involve small up-front
m
At the same time, those groups have costs, modest monthly payments, and
tended to focus too much attention on reliable maintenance agreements.
small-scale fixes or incremental improve- More and more families can now afford
hi
ments. Such approaches can set ambitions low-power systems that can run a televi-
too low, implicitly condemning billions of sion or a few lights and take just a day or
people to meager levels of energy use that two to install. One Indian company,
ha
will do little to lift them out of poverty.
As Kandeh umkella, a senior un official,
selco, has sold and maintained more than
two million such systems, thanks largely
Y
has noted, “The provision of one light to a sales approach that is tailored to poor
does nothing more than shine a light on customers. A related success story comes
poverty; the poor then only see more from Bangladesh, which has seen the
iT
clearly that their floor is made of dirt.” fastest expansion of small-scale, off-grid
Donors need to aim instead for the solar power systems in the world. Over
heart of the problem: governments in poor three million such systems were installed
countries that are struggling to undertake by 2014, a figure that is on track to double
Al
effective and widespread energy programs. within the next three years. Credit goes
From the United States in the early principally to the Bangladeshi govern-
twentieth century to postwar Germany ment, which created a dedicated agency
and Japan to modern China, people have that provides nongovernmental organi-
od
gained access to electricity and modern zations and microfinance lenders with
fuels thanks to concerted government technical support and grants. Despite
leadership, massive public investments in these advances, in India, nearly 300
infrastructure, good planning, well-trained million people still go without electricity.
so
work forces, supportive regulations, and And in Bangladesh, over 60 percent of

financially viable institutions. There is no businesses rely on their own backup
reason to believe that these fundamental generators to keep the electricity flowing.
ingredients matter less today. Although small-scale systems have
Ma
helped millions of people take their first

P steps up the energy ladder, they suffer
SCALING
U
As governments in the developing world from a number of technical and eco-
come to grips with the sheer size of the nomic inefficiencies that larger systems
challenge before them, they quickly realize can avoid. So-called mini-grids are one
that building energy infrastructure such way to help make small-scale energy
as large power plants and transmission sources more practical. Originally

Power to the Poor
m
hi
ha
Let there be light: studying during a power outage in Pakistan, April 2013
iT
designed for communities not yet linked competing with centralized power
to the main electrical grid, mini-grids systems. Economies of scale explain
can aggregate a whole village’s infra- why centralized power systems became
structure and power sources, making the the norm around the world, replacing
Al
system more efficient and easier to smaller, isolated systems. Con Edison’s
maintain than a series of individual present-day network in New york City,
systems. Because they often rely on a with over 120,000 miles of electrical
number of different technologies and cables serving some three million cus-
od
can run independently from the main tomers, is a far more efficient way to
electrical grid, mini-grids are also meet modern demands than the lighting
resilient. As a result, the U.S. Depart- system that Thomas Edison established
ment of Defense has installed them on on Pearl Street in 1882. Energy systems
so
several military bases from Texas to in developing countries will no doubt

Hawaii, and hospitals, factories, and take different shapes from those in the
other sites that need reliable power are developed world, and that is likely a
starting to adopt them, too. Those same good thing. There will be a bigger role
REUT E RS / FAISAL MAHMOO D
Ma
features make them an attractive option for distributed electricity generation and
in fragile and conflict-ridden states, an opportunity to benefit from advances
where centralized systems can make in information and communications
easier targets for violence and are more technologies that make systems smarter.
likely to face long construction delays. Nevertheless, large-scale power plants
Still, mini-grids are best suited to will almost certainly remain an impor-
specific conditions and have difficulty tant part of the mix.

Morgan D. Bazilian
tieth century. And the Tennessee Valley

WHAT
IT
TAKES
Given the scale of the problem, tackling Authority exists to this day as one of
energy poverty requires bold government the country’s largest power providers
action. Historically, the process of ex- and is a self-funded corporation of the
panding rural access to electricity began U.S. government employing more than
with the public sector. Consider one of 12,000 people.
the most successful energy-poverty- Indeed, expanding energy access
alleviation programs in history: the U.S. works best when it is part of a broader
government’s efforts to extend electricity development plan. Beginning around
access during the Great Depression as 1980, both China and Thailand launched
m
part of President Franklin Roosevelt’s electricity programs that accompanied
New Deal. In 1930, roughly 65 percent economy-wide reforms and managed
of U.S. households had electricity. As in to achieve universal electrification in
hi
many poor countries today, most people two decades. In Vietnam, rural electri-
living in cities had electricity, but only fication formed part of the nationwide
around ten percent of those in the doi moi (renovation) reforms, which
ha
countryside did. Private utilities were not
delivering affordable power to farmers
and remained uninterested in building the
the government began in 1986. The
measures included a gradual move from
central planning to market mechanisms
expensive and low-return infrastructure and an opening of the economy to
necessary to reach rural communities. In trade and foreign investment, which
iT
the Tennessee River valley—a region that laid a foundation on which the country’s
encompasses parts of Alabama, Georgia, nascent energy sector could grow.
Kentucky, Mississippi, North Carolina, Only later did the private sector begin
Tennessee, and Virginia—farmers lived participating.
Al
without refrigerators and water heaters. Likewise, when Rwanda rolled out
With no modern water-management its energy-access efforts in 2009, it
systems, their crop yields suffered from used what it called a “sector-wide
relentless flooding. approach” that pooled aid from various
od
Then the federal government acted. sources together in a single program,

In 1933, Congress, invoking “the inter- one that was led by the Rwandan
est of the national defense,” created the government but involved a range of
Tennessee Valley Authority, which built stakeholders. The result: in just four
so
several large dams in the region that not years, the share of Rwanda’s population
only produced electricity but also helped with electricity roughly tripled. Every
improve flood control. And in 1935, year, the country gains 60,000 new
Roosevelt created the Rural Electrification electrical connections, up from 1,000
Ma
Administration, which within five years annually before the reforms. Crucially,
helped establish hundreds of rural both Vietnam and Rwanda, like China
electric cooperatives to serve hundreds and Thailand before them, recognized
of thousands of customers. The National that efforts to combat energy poverty
Academy of Engineering called the electri- must go beyond the needs of rural
fication of the United States the greatest households and aim to create wealth
engineering achievement in the twen- across the entire economy.

Power to the Poor
Africa is no panacea. It’s not clear whether

THE
GLOBAL
AGENDA
Most of the countries affected by energy it will outlast the Obama administration,
poverty have already begun reforming and its initial focus on the private sector
their energy sectors, have developed may be premature in some countries
targets and strategies, and have launched where the groundwork for public-private
dedicated agencies for expanding access partnerships has yet to be laid.
to electricity and modern fuels. Still, they Global goals also have a role, since
need some form of outside financial-risk they can help raise money, track prog-
mitigation and funding. Estimates for ress, and keep hold of the develop-
the price tag of expanding energy access ment community’s often wandering
m
globally range from $40 billion to $100 attention. In 2012, the un launched
billion per year—big numbers, to be sure, Sustainable Energy for All, an initia-
but just a fraction of the total amount of tive that aims to ensure universal
hi
capital spent in the energy sector. While access to modern energy services by
public funding is necessary initially, it will 2030. The un is also working on a new
ultimately be insufficient. In the long run, round of targets, called the Sustain-
ha
private investors will need to feel com-
fortable enough to dive into what are
now very high-risk markets, if they exist
able Development Goals, to replace
the Millennium Development Goals.
The old goals didn’t mention the
at all. But the enormous demand is clear: eradication of energy poverty, but the
a group of researchers led by Vijay Modi new ones include it among the ranks
iT
at Columbia University has shown that of such aspirations as ending hunger
villagers in Mali and Uganda are willing and providing for universal education.
to pay electricity rates that are nearly ten The inclusion of energy issues on the
times as high as the rates that prevail in list, which required no small feat of
Al
developed countries. It’s hard to overstate diplomacy, suggests that they are finally
the market opportunities that will arise becoming part of the canon of traditional
once an additional billion-plus people development economics.
gain access to energy. Glimpses of this are
od
already apparent in some of sub-Saharan P F

THE
GEO
OLITICS
O
GIGAWATTS
Africa’s vibrant technology centers and But goals alone won’t trigger govern-
in the explosive growth of the region’s ment action in the developing world;
economy, which has more than doubled only hardheaded policies can turn
so
in size since 2000. rhetoric into reality. Great powers such

In light of the gains to be had, in as the United States should consider the
2013, the Obama administration unveiled provision of energy not merely a matter
Power Africa, an initiative that provides of development but also a tool of geo-
Ma
funding and incentives for U.S. compa- politics. Energy poverty counts as what
nies to bring their technologies to the the U.S. military calls a “threat multi-
region. The U.S. government committed plier,” meaning that it can exacerbate
$7 billion initially, and the private sector existing challenges and contribute to
has since pledged about three times that instability. Providing electricity and
amount. (The World Bank has also come modern fuels in the poorest countries
on board, with $5 billion.) But Power can lower the risk of internal unrest and

Morgan D. Bazilian
reduce the movement of people across that can exist between addressing energy
borders. Indeed, some African govern- poverty and combating climate change.
ments have reacted to their increasingly Governments in poor countries tend
vocal and young populations by unveil- to focus on the former because of its
ing promising new ventures to expand immediacy, whereas wealthy govern-
energy access. Since 2010, the Kenyan ments are often more animated by the
government has improved the electricity latter, given its global implications.
supply in Kibera, the largest slum in Although clean energy technology has
Nairobi, as part of a program that targets made enormous strides and will certainly
the areas of greatest social inequality. play a very large role in the energy
m
Developed countries have all the systems of tomorrow, donors will have
more reason to act now in the wake of to accept that in some cases, progress
new discoveries of oil and gas in East in energy access might come at the
hi
and West Africa. These finds have boosted expense of the environment—as it did
government revenues, but the distribution during the United States’ electricity
of those revenues has, in some cases, drive. That said, they should minimize
ha
exacerbated deep social and political
problems. Take Nigeria, which is both
one of the world’s top oil exporters and
these impacts as much as possible and
make other concerns, such as food and
water security, part of their calculus.
home to one of the biggest populations The economist Amartya Sen has
without access to energy—90 million argued that economic development
iT
people. Decades of oil development in can be achieved only if the poor come
areas that still lack basic services have to enjoy a set of freedoms including
provided the social, economic, and political participation, safety, and eco-
environmental drivers of violent con- nomic opportunity. Access to energy
Al
flict. Just as the United States has long enables each of those fundamental rights,
been entangled in the energy security which is why efforts to eradicate poverty
of the Middle East, it must now pay cannot afford to ignore it. True, the
more attention to parts of sub-Saharan barriers that impede progress on ending
od
Africa. It should encourage countries energy poverty are formidable: scarce

there to govern the sector fairly and financial resources, competing priorities,
transparently and support efforts that weak institutions, and the sometimes
funnel natural resource bounties misguided interventions on the part of
so
toward addressing energy poverty. outsiders. But they are well within the
Well-intentioned outsiders should world’s ability to overcome, and they
remember that governments trying to are far less imposing than many of the
energize their territories need to take technical obstacles humanity has already
Ma
ownership of the efforts. The blue- vanquished. The laws of physics operate
prints governments draw up with donor the same in South Asia and sub-Saharan
support need to respond to the specific Africa as they do in Europe and North
national contexts and local needs; they America. The needed materials are simple
should not be force-fed from afar. That’s things, such as steel, concrete, copper,
especially true when trying to balance and glass.∂
the sometimes uncomfortable tradeoffs

IHS Energy Report
Turning Point: Energy’s New World

A special section examining the intersection between energy, the
global economy, and geopolitics. This section has been prepared
in conjunction with CERAWeek, the world’s premier conference on
the energy future, April 20-24, 2015, Hilton Americas - Houston.
For more information, see www.ceraweek.com.
m
hi
To Readers ha
The rapid drop in oil prices and continuing geopolitical
• the missing money problem—how flaws in market-
based pricing reforms can create instability in the elec-
tric power sector,
and economic uncertainty are buffeting the energy industry • and the impact of a slowing economy on energy in
iT
and many countries and will have a noticeable impact on China, the world’s largest energy consumer.
the world economy in 2015. We are pleased to collaborate with Foreign Affairs on
These developments raise critical questions. How will this special section in the run up to the 34th IHS Energy
the world economy, with the United States growing robust- CERAWeek conference, April 20-24 in Houston, Texas.
ly but a mixed outlook in Europe and China, shape energy CERAWeek is recognized as the preeminent gathering for
Al
demand? What will be the impact of geopolitical upheaval, the global energy industry. This year’s conference will fea-
on the one hand, and technological progress, on the other? ture presentations and interactive sessions by more than
Can the unconventional revolution, which has vaulted North 200 senior executives, government officials, thought lead-
America again to a leading role as an energy supplier, go ers, and IHS experts. We anticipate attendance by nearly
global? Will Africa become a major new energy power? And 2,800 participants from more than 55 countries.
od
what role will policy and regulation play, especially leading As we embark on our 34th CERAWeek conference, we
up to the Paris climate talks next December? invite you to gain new perspectives on the energy future
This special section, Turning Point: Energy’s New World, through the insights in these pages.
addresses several key issues at the heart of the current
energy picture:
Daniel Yergin
so
• how shifts in the supply-demand balance—rapid pro-

duction growth in North America and slowing demand IHS Vice Chairman and
growth—have driven a precipitous drop in oil prices, Chairman of IHS Energy
• who wins—and loses—from the current low oil prices, CERAWeek
Author of The Quest and The Prize
Ma
@Daniel Yergin
IHS (NYSE: IHS) is the leading source of insight, analytics and expertise in critical areas that shape
today’s business landscape. Businesses and governments in more than 150 countries around the globe
rely on the comprehensive content, expert independent analysis and flexible delivery methods of IHS to
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IHS is a registered trademark of IHS Inc. All other company and product names may be trademarks of
www.ihs.com their respective owners. © 2015 IHS Inc. All rights reserved.
This special section was prepared by IHS research staff.
Sponsored Section IHS Energy Report

Sponsored Section
Oil and the New Reality of Supply and Demand
by Daniel Yergin, James Burkhard, and Bhushan Bahree
Over recent years, the price of oil has stayed near $100 a we anticipate that OPEC crude production will actually rise next
barrel. That price reflected a balance between a massive surge year. Given that, unless there are new supply disruptions—al-
of new supply from North America and disruptions and geo- ways a possibility—non-OPEC producers will be the ones to
political tensions that curbed supply elsewhere. That balance bring market fundamentals back into equilibrium. While a good
was a precarious one, and in recent months, it has toppled— part of the short-term adjustment will fall on North American
and dramatically so. The oil price is now recalibrating to the supply, the effects will be felt around the world.
new reality of supply and demand. But in a break with decades Lower prices will force many operators to cut their spend-
of prior practice, this is occurring without a formal agreement ing on exploration and development, which will lead, over time,
among OPEC members to adjust supply. At the OPEC meeting to reductions in output. Production of U.S. tight oil—that is, oil
of last November, the exporting countries decided not to cut produced by hydraulic fracturing—will be affected more by
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production. This historic pivot removed the price support that lower prices than conventional production. The United States
has emerged—inadvertently—as the world’s new
swing producer.
U.S. oil output at the start of 2015 was more than
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1 mbd higher than one year ago, which represents
sensational growth. And growth will continue, due to
commitments already in place. But by late 2015 and
early 2016, reduced investment in exploration and
ha development will begin to have an impact on U.S.

production. Companies are already scaling back ac-
tivities to match their reduced cash flow; and highly
leveraged firms will face major challenges. According
to IHS’s Performance Evaluator, U.S. output will con-
tinue to grow until around the middle of this year, at
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which point output will flatten out. This development
will rebalance world oil supply and demand and pro-
vide a foundation for a potential oil price recovery.
While Canada will add about 450,000 barrels of
$ per barrel for West Texas Intermediate (WTI) new oil sands supply in 2015 and 2016, thereafter we
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Source: IHS ©IHS expect production growth there to slow as well. And
outside North America, cancellations and postpone-
had been fundamental to the global oil market for several de- ment of projects to maintain or enhance production will re-
cades. When OPEC handed over “responsibility” to the market, duce non-OPEC supply over time. In all, non-OPEC production,
the price decline turned into a rout. which grew by nearly 2 mbd in 2014, is expected to grow by
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The low oil price will have a significant impact on the oil only 1 mbd in 2015.
and natural gas industry, consumers, the world economy, and After being in shock for a few weeks, the global oil industry
the position of individual countries. World economic growth started to redo its budgets to reflect the new, more uncertain
will, on balance, get a sizeable boost. But oil and gas compa- pricing environment. Companies are cutting budgets by 15 to
nies, the service companies, and oil exporting nations will all 30 percent—or more. Service companies will be under great
feel the pain. pressure to reduce their costs. Companies will reevaluate new
so
Weakening fundamentals are at the root of falling oil projects, and many will be delayed or postponed. The lower
prices. Global supply growth was running ahead of demand prices for oil-indexed liquefied natural gas (LNG) will pose chal-
growth. Something had to give. We expect that lower prices lenges for new LNG projects.
will lead to only modest increases in demand due to struc- The new pricing environment will be especially difficult for
tural changes in the global market and pricing policies in many countries seeking investment to develop oil and gas resourc-
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countries. Growth in world oil demand is unlikely on its own to es. It’s no longer a seller’s market for nations with oil resources.
accelerate sharply enough over the next few years to reduce If countries want to attract investment, they will have to revise
the supply overhang. Importantly, the growth in Chinese oil their fiscal regimes and local content regulations to be more
consumption has slowed with the slowing of China’s economy. competitive. And that will require recalibration of expectations,
But we project that global GDP will grow steadily, though not not only for governments but for citizens as well.
spectacularly, and that will lead growth in world oil demand to
increase from 0.9 million barrels per day (mdb) in 2014 to 1.3 Daniel Yergin is Vice Chairman, IHS and author of The
mbd in 2016. Quest: Energy, Security, and the Remaking of the Modern
On the supply side, OPEC has said it will maintain group- World. James Burkhard is Vice President and Bhushan
wide crude production at 30 mbd, despite low prices. Indeed, Bahree is Senior Director at IHS.
Sponsored Section
Who Benefits and Who Suffers from
the Plunge in Oil Prices?
by Nariman Behravesh
The recent sharp drop in oil prices $100 billion tax cut. It also has the added benefit of boosting
represents a large transfer of wealth consumer confidence. Businesses that use a lot of oil (such as
from producers of oil to consumers of agriculture and transportation) will also see a significant re-
oil—roughly $1.5 trillion or 2 percent of duction in their costs. An early indication of the boost to the
world GDP. There are winners and losers, U.S. economy is the 5 percent growth rate in the third quarter
but there are two reasons to expect that of 2014. The positive impact of lower oil prices is the great-
such a transfer will, on balance, be posi- est in those countries (e.g. the United States) where both en-
tive for the global economy. First, oil consumers have a much ergy taxes and subsidies are low. Where fuel taxes are high
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bigger weight in global GDP than oil producers. Second, if re- (e.g. Europe) or where fuel subsidies are generous (numerous
cent history is a guide, oil-importing countries tend to spend emerging markets), the impact of an oil-price drop on consum-
a larger share of their “windfall” than oil-exporting countries. er and business incomes is proportionally smaller. While steep
Of course, some countries, such as Canada and the United declines in the price of oil and other commodities may exac-
States, are both producers and consumers of energy, and for erbate deflationary pressures in some economies (e.g. China,
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them the picture is more mixed. the Eurozone and Japan), it will also give many central banks
more room to maneuver, allowing them to either keep policy
very loose or to provide more stimulus.
Who is helped and who is hurt?
• A boost to consumers of oil.

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A drop in the prices of oil and products derived from oil (gas-
oline, diesel, jet fuel, heating oil, etc.) increases the purchas-
• A hit to producers of oil–some more than others.
Lower oil prices translate into lower revenues for oil compa-
nies and governments of oil-exporting countries. In the United
States, some of the positive gains for consumer spending
ing power of consumers and businesses. For example, the will be offset by the negative effects on capital spending in
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(roughly) $1.00-a-gallon drop in the pump price of gasoline in the energy sectors (including the postponement or cancella-
the United States in recent months is the annual equivalent of (continued)
Low oil prices will significantly reduct costs for

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the agriculture and transportation industries.

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IHS Energy Report

(continued from previous page) its government revenues, growth will likely be cut by 0.2 to
0.4 percentage point, despite the hedge on its oil production.
tion of large projects) due to depressed earnings. Given the
• Western Europe.
much greater importance of oil and gas production to the U.S.
The boost in European growth will be roughly in the same or-
economy as a result of the unconventional oil and gas revolu-
der of magnitude as the United States (up about 0.3 to 0.4
tion, this offset to consumer spending has increased in recent
percentage point). Not all countries will benefit, however. Spe-
years, but has not undermined the net positive effects of a
cifically, Norway, a major oil exporter, could see a drop in GDP
drop in oil prices. The negative ramifications for some other oil
growth of 0.2 to 0.4 percentage point.
producers are considerably bigger. Iran, Russia, and Venezuela
are particularly at risk. All three countries rely on high oil prices • Emerging Europe.
to balance their budgets. The so-called fiscal breakeven point Lower oil prices will help countries such as Poland and Tur-
for all three is much higher than current prices—and well over key, adding 0.5 to 0.7 percentage point to GDP growth. On the
$100. Iran and Venezuela have low financial reserves and es- other hand, it will hurt the major oil exporters of the region and
pecially profligate budgets. In the case of Venezuela, the risks will likely contribute to a deep recession in Russia.
of a sovereign default have risen. Russia, on the other hand,
• Asia.
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has a little more room to maneuver, given its higher foreign-
exchange reserves. Nevertheless, falling oil prices are only The net effect on Asia will be positive. Both China and Japan
adding to the pain of sanctions and capital flight, as evidenced could see a boost to their GDP growth rates of 0.5 to 0.6 per-
by the plunge of the ruble. centage point. The impact on India and Indonesia (both net
importers of oil) will be a little larger, at 0.5 to 0.7 point. The
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Overview of impacts by key regions magnitude will depend on what actions, if any, the govern-
and economies ments in these economies take on fuel subsidies.
Different regions of the world will see varied effects from • Central and South America.
lower petroleum prices. The following are the increases/de- The impact of falling oil prices on the Latin American econo-
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creases in 2015 economic growth, assuming that oil prices av-
erage $60 to $70 per barrel (for Dated Brent) during the year.
Impacts could be more pronounced if prices are even lower.
• North America.
mies will be mixed. Net oil importers—such as Brazil, Argentina,
Chile, and the Central American countries—could see a small
boost to growth of 0.2 to 0.3 percentage point. At the other
extreme, Venezuela’s economy will suffer a deep downturn.
U.S. real GDP growth will likely be boosted by 0.3 to 0.5 per- • Middle East and Africa.
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centage point, with a sizable contribution from consumer Countries in the region hurt by lower oil prices include Kuwait,
spending. The impact will be smaller (0.2 to 0.3 percentage Iran, Libya, Saudi Arabia, UAE, Angola, and Nigeria. The hit to
point) in Canada, given the bigger role played by energy. On GDP growth could be as much as 2.0 to 3.0 percentage points.
the other hand, because Mexico relies on oil for one-third of Countries benefiting from lower oil costs include Jordan, Leba-
non, Morocco, Tunisia, South Africa, and Zambia.
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Bottom line
Since the key beneficiaries of the recent oil-price declines
are the biggest economies in the world—the United States,
the European Union, China, and Japan—the net effect on glob-
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al growth will likely be positive and in the range of 0.3 to 0.5

percentage point in 2015.
Nariman Behravesh is Chief Economist at IHS.

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Low prices are expected to benefit the agriculture and

transportation industries, both big consumers of oil.
Sponsored Section
The Electric Power Industry’s
Missing Money Problem
by Lawrence Makovich
The restructuring of the electric

power industry that began twenty-five
years ago did not play out according to
plan. “Deregulation” of the North Ameri-
can power sector and “liberalization” in
Europe never reached the intended end
state because of the “missing money
problem.” The problem in short: competitive bidding drives
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market-clearing wholesale electricity prices too low to cover
the total cost of supplying power. The missing money prob-
lem has made underinvestment in power supply the Achilles
heel of restructuring plans. How power systems address this
problem will be one of the key factors shaping the future of the
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Source: IHS ©IHS
electricity sector.
The missing money problem arises because of the inher- pliers respond by bidding negative prices—effectively offering
ent characteristic of electric power production. Building a to pay customers to take their power—as long as the available
power generation facility of any kind requires large up front subsidies can more than cover sums paid to customers.
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expenditures, and these fixed costs cannot be altered in the
short run. Consequently, for electricity generated by conven-
tional technologies—which account for more than two-thirds
of the world’s supply—fuel is the only significant input that can
The missing money problem has three major conse-
quences. First, chronically low prices mean underinvestment
in power supply. Left unaddressed, this could lead to a reprise
in other regions of the power shortages that plagued Califor-
alter the amount of power generated in the short run. nia in 2000-01 and led to dramatic price spikes, brownouts,
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A modern natural gas-fired power plant, using fuel deliv- and rolling blackouts. Second, low prices cause many existing
ered at market prices, can produce electricity at an incremen- power plants to be retired early, even though their continued
tal cost of 4.5 cents per kilowatt-hour (kWh). When rival owners operation would be less costly than replacing the supply they
of plants like this bid in wholesale power markets, they will be now provide. Third, distorted market signals lead to an inef-
willing to provide additional electricity for any price above 4.5 ficient mix of fuels and technologies. IHS estimates such inef-
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cents per kWh. Competitive forces thus tend to drive market- ficiencies drive the variable cost of electricity produced in the
clearing prices to short run marginal costs. United States 9 percent higher than it should be.
It’s a different picture when you calculate overall costs. The There is no one-size-fits-all solution to the missing money
average total cost of that power—which takes into account all problem. Each regional power system has its own character-
costs, including upfront investment—is 14 cents per kWh at istics, and the best mix of solutions in any setting will depend
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low utilization rates and 7 cents per kWh at maximum utiliza- on the distinctive characteristics of that system. But IHS, in
tion. But here is the catch: the increased utilization of a power consultation with key industry stakeholders, has identified
plant narrows, but does not fully close, the gap between av- thirteen approaches currently being employed, or considered,
erage total costs and marginal costs (see chart). As a result, to address the problem. These approaches range from mar-
when power demand and supply are in balance—including the ket fixes to re-regulation or public ownership. An evaluation
needed reserve margin of capacity to insure electric system of these approaches has shown that some, alone or in com-
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reliability—the market-clearing price remains below average bination, can meaningfully address the missing money prob-
total costs. As the example above shows, the gap between lem. Conversely, others are not likely to be effective under any
the market-clearing price and average total cost is significant. circumstances.
The missing money problem surfaces in even starker relief Any solutions put forward to address the missing money
with technologies like hydro, wind, and solar. These resources problem should reflect the interests of all key power sector
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have no fuel costs, so the marginal cost of production is ef- stakeholders: electricity generators and operators of whole-
fectively zero. Suppliers of electricity from these sources thus sale markets, as well as consumers, elected representatives,
face incentives to offer their power at any price greater than and regulators. Implementing effective solutions will first re-
zero. As a result, when demand and supply conditions cause quire convincing all the key actors that a problem exists and
these sources of supply to compete, the market-clearing price forging agreement on its nature and causes. Only then will
tends to be driven toward zero. stakeholders be able to reach consensus on an effective suite
The missing money problem is exacerbated by policies of remedies.
that subsidize renewable power. When suppliers with renew-
able resources compete in wholesale power markets, they Lawrence Makovich is Vice President and Senior Advisor
recognize that losing a bid to supply electricity means losing for Global Power at IHS and lead author of the IHS Multiclient
the opportunity to collect subsidies. Consequently, such sup- Special Report, Bridging the Missing Money Gap.
IHS Energy Report

What is Happening to China’s Demand for Energy?
by Xizhou Zhou
With the “new normal” of slower eco- slowing substantially, overall growth was down to 7.4 percent
nomic expansion, energy consumption in 2014, lowest since 1990. But Beijing appears content with
in China is entering a period of deceler- this change in direction and has refrained from any large-scale
ating growth. This is after a decade of stimulus similar to the one issued in 2009. The prime minister
phenomenal increase. “Go to China” was has even modified the official growth rhetoric in public speech-
the mantra for many energy companies es from the decade-long motto of “relatively high growth” to
around the world as China furiously built “medium-high growth.” IHS Economics expects China’s growth
new supply projects and looked for new resources. to slow further to 6.5 percent in 2015 and 6.7 percent in 2016.
Many players are asking a very different question today:
“What happened to China’s insatiable appetite?” With oil de- Weakening oil demand excacerbating global
crude supply glut
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mand growing at half the rate of the past decade and electric
load increasing at the lowest rate since the turn of the century, Oil demand is responding to macroeconomic trends, with
many firms that have targeted China as a promised land—and fewer incremental barrels absorbed by China in recent years.
the key market—are feeling anxiety. By contrast, between 2001 and 2011, China’s oil demand dou-
A very much justified anxiety. bled to reach more than 9 million barrels per day (mbd). The
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The long lead time needed to complete many large en- growth was so massive that it accounted for over half of the
ergy supply projects—oil refineries, coal mines, power plants, incremental increase in global oil demand during that period.
and liquefied natural gas (LNG) facilities—means that some Oil producers around the world counted on growing demand
launched during the era of exuberance are just being com- from China, and China delivered—at least for a decade.
mentally changed.
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missioned now. The demand conditions under which these
projects had been planned, just a few years ago, have funda-
Since 2011, however, growth of oil demand has weakened
greatly, expanding at only 4 percent annually instead of the
average rate of 8 percent during the prior decade. Industrial
fuels (diesel, fuel oil, naphtha) were chiefly responsible, due to
Deceleration and structural adjustment of the deceleration in industrial and investment growth. Slower
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the Chinese economy growth in China’s oil demand is a key reason behind the pre-
Underpinning the deceleration of growth in energy de- cipitous fall in global crude prices. IHS Energy expects Chinese
mand is the economy. China’s previous investment-led mod- oil demand to grow at only 3-4 percent over the next few years.
el of growth is giving way to domestic consumption drivers.
Indeed, investment is no longer the main engine of China’s Record low power demand growth threaten-
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growth; consumption accounted for more than half of GDP ing power plant utilization
growth in 2014. The “growth at all cost” approach—often driv- To meet burgeoning demand that grew on average 12
en by government-led investment—is now being replaced by a percent annually between 2002 and 2011, China’s power
brand new “economic dashboard” for official assessment that generation capacity tripled, making the country’s electrical
includes 40 variables across eight fields, including economic system the largest in the world. Power consumption growth
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structure, the environment, and quality of life. since 2011, however, has averaged only 6 percent per year,
With two of the three GDP drivers, investment and exports, as economic growth slowed and industrial demand dramati-
cally decelerated. The investment-to-consumption shift
in China’s economy hits power demand especially hard,
as industry accounts for 70 percent of the electricity
consumed in the country. This relatively slow growth in
so
power demand will continue.

Meanwhile, substantial new capacity additions are
still coming online. In particular, so many new hydro
projects are under construction today that those slated
to enter service in the next four years alone would be
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sufficient to supply the electricity needs of the entire

country of Mexico.
The decisions to invest in these large projects were
made more than half a decade ago, when power con-
sumption in China was still growing at double-digit
rates. But approval and construction took 5-6 years.
These projects’ entrance into service is now expected
to lead to lower average utilization hours for China’s
power generation fleet, as overcapacity appears. The
Source: National Bureau of Statistics, China Customs, China Electricity Council, IHS implications for power producers, equipment manufac-
Note: 2014 Q4 numbers are estimated. ©IHS turers, and fuel suppliers will be significant.
Sponsored Section
The hydroelectric plant at China’s Three Gorges Dam is
one of many hydro projects that have recently come on
line. The electricity they provide and slowing growth in
power consumption have driven a slump in China’s coal
demand.
m
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Great turbulence in the coal market as
coastal demand and imports peak
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Nearly three-quarters of China’s electricity is generated
from coal, so it is no surprise that slowing growth in power
demand season, were reported to be less than $10 per million
BTU, from as high as $20 several years ago. The LNG industry
is shifting decidedly from a seller’s market to buyer’s market.
Yet even as LNG prices trend downward, coal remains the
demand spilled over into the coal sector. What was a surprise, cheapest fuel in China. Despite rising environmental concerns
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however, was the extent of the decline; 2014 was the third suc- and some coal-to-gas switching, end-user energy prices con-
cessive year of oversupply in the Chinese coal market and the tinue to be a concern for a government that is very sensitive
most serious to date. to social stability. These concerns may act as a ceiling on how
For the first time this century, Chinese coal consumption much China can take from the global LNG market even with a
and raw coal production both dropped in 2014. In light of a lower oil price.
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concerted policy drive to curb air pollution in coastal cities,

it appears that coastal China’s coal demand and the imports What’s life after the super cycle?
that serve it have both peaked and are now in long-term de- A full decade of robust demand growth and high commod-
cline. This was unthinkable only a few years ago and has sent ity prices made many forget the cycles the energy industry
shockwaves through the coal industry. is prone to in its history. The super cycle of the past decade
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Thousands of mines are facing cuts as prices have fallen propelled China to become one of the most important drivers
precipitously from a high of over RMB 840 ($130) per ton in in the global energy system. Because of that, China’s demand
2011 to less than RMB 500 ($80) today, a drop of more than deceleration and the associated energy oversupply in the
40 percent. IHS Energy expects prices to remain at this low country are of particular importance for the world. The outlook
level for several years, leading to more mine closures in and in China now is for slower growth in oil demand, decreased
outside China. coal-fired power plant utilization, overcapacity in coal mines,
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and reduced appetite and higher price sensitivity for imported

gas.
Natural gas: Can China absorb the upcoming While many of these trends pose investment risks, they
wave of LNG supply? also create potential opportunities, such as investment in
Back in 2010, China was in desperate need of more natural long-distance power transmission lines that could unlock
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gas, as demand outpaced domestic supply. China’s national cheap coal and hydro resources in western China, coal con-
oil companies thus went out and signed many long-term conversion technologies to turn cheap coal into methane or pet-
tracts for liquefied natural gas (LNG). Today, these commit- rochemicals, and the possibility of procuring cheaper gas in
ments are starting to deliver, with more than 20 million tons the global market by non-national oil companies. Furthermore,
per year of contracts scheduled to commence in 2015 and after a decade plus of rapid growth, China’s base of energy
2016. demand is many times bigger, so even a slower rate of growth
There are now questions whether China can indeed take nonetheless produces large increases in incremental demand.
up all this new gas supply as demand weakness starts to This means new supply will still very much be needed.
emerge for the first time. During the summer of 2014, for ex-
ample, spot LNG imports into China dried up, in an environ- Xizhou Zhou is Senior Director and Head of China Energy
ment of sinking prices. Spot prices this winter, usually a peak at IHS and a lead author of IHS’s China Energy Watch.
IHS Energy Report

34th Executive Conference and Related Events
April 20-24, 2015 • Hilton Americas-Houston, Texas
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Turning Point: Energy’s New World ha
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IHS CERAWeek is the premier gathering of government, industry
and thought leaders offering insight and dialogue on the energy
future. This executive conference offers a comprehensive and
integrated global framework for understanding what’s ahead
on the energy landscape – markets, geopolitics, technology,
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environment – and the implications for strategy, investment and

decision-making.
CERAWeek 2015 addresses the new world post oil price decline:
what are the risks, opportunities and lasting impact on the energy
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system and beyond. We also address the future of natural gas, coal,
renewables and nuclear – both globally and regionally.
Conference Topics Include: • What is the future of the

• Oil market collapse: tight oil revolution in North
What’s ahead for supply America?
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and demand? • Energy technology and

• What are the emerging innovation: How can success
investment strategies in a low be turned into value?
price environment? • What is the future for North
• Electric power strategies for American gas? How will oil
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a new era of regulation prices impact global LNG?

• Energy and environment: • Coal’s divergent paths: Asia vs
What is the Road to Paris? Europe and North America
April 20-24, 2015 • Hilton Americas-Houston, Texas
For more information, please visit www.

ceraweek.com or call +1 888 271 5313
Sponsored Section
essays
Syria’s calm façade
concealed deep structural
vulnerabilities. Lebanon’s
chaos, paradoxically,
signaled strength.
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– Nassim Nicholas Taleb
and Gregory Treverton
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The Calm Before the Storm Under the Sea

Nassim Nicholas Taleb and Gregory F. Robert Martinage 117
Treverton 86
R e u t e R s / R a m i Z aya t
Darkness Invisible
Europe Reborn Thomas R. Insel, Pamela Y. Collins,
Matthias Matthijs and R. Daniel Kelemen 96 and Steven E. Hyman 127
Leaving the West Behind The G-Word

Hans Kundnani 108 Thomas de Waal 136
The Calm Before the Storm

Why Volatility Signals Stability, and
Vice Versa
Nassim Nicholas Taleb and Gregory F. Treverton
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E
ven as protests spread across the Middle East in early 2011,
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the regime of Bashar al-Assad in Syria appeared immune from
the upheaval. Assad had ruled comfortably for over a decade,
having replaced his father, Hafez, who himself had held power for the
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previous three decades. Many pundits argued that Syria’s sturdy
police state, which exercised tight control over the country’s people
and economy, would survive the Arab Spring undisturbed. Compared
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with its neighbor Lebanon, Syria looked positively stable. Civil war
had torn through Lebanon throughout much of the 1970s and 1980s,
and the assassination of former Prime Minister Rafiq Hariri in 2005
had plunged the country into yet more chaos.
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But appearances were deceiving: today, Syria is in a shambles,

with the regime fighting for its very survival, whereas Lebanon has
withstood the influx of Syrian refugees and the other considerable
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pressures of the civil war next door. Surprising as it may seem, the
per capita death rate from violence in Lebanon in 2013 was lower
than that in Washington, D.C. That same year, the body count of the
Syrian conflict surpassed 100,000.
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Why has seemingly stable Syria turned out to be the fragile

regime, whereas always-in-turmoil Lebanon has so far proved robust?
The answer is that prior to its civil war, Syria was exhibiting only pseudo-
stability, its calm façade concealing deep structural vulnerabilities.
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Nassim Nicholas Taleb is Distinguished Professor of Risk Engineering at New York

University’s Polytechnic School of Engineering and the author of Antifragile: Things That
Gain From Disorder.
Gre ory F. Trever o is Chair of the U.S. National Intelligence Council. From 2009
g
t
n
to 2014, he was Director of the RAND Corporation’s Center for Global Risk and Security
(where he wrote this article).
This essay is adapted from a RAND risk-methodology report funded by the U.S. government.

Lebanon’s chaos, paradoxically, signaled

strength. Fifteen years of civil war had
served to decentralize the state and bring about
a more balanced sectarian power-sharing
structure. Along with Lebanon’s small size
as an administrative unit, these factors
added to its durability. So did the coun-
try’s free-market economy. In Syria,
the ruling Baath Party sought to
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control economic
variability, replacing
the lively chaos of the
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ancestral souk with the
top-down, Soviet-style structure of
ha the office building. This rigidity
made Syria (and the other Baathist
state, Iraq) much more vulnerable
to disruption than Lebanon.
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But Syria’s biggest vulnerability
was that it had no recent record of
recovering from turmoil. Countries
that have survived past bouts of
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chaos tend to be vaccinated

against future ones. Thus,
the best indicator of a
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country’s future stabil-

ity is not past stability
but moderate volatil-
ity in the relatively
so
recent past. As one

of us, Nassim Nicho-
las Taleb, wrote in
the 2007 book The
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Black Swan, “Dicta-

torships that do not
appear volatile, like,
say, Syria or Saudi
Arabia, face a larger
risk of chaos than, say,

Italy, as the latter has been in a state of continual political turmoil

since the second [world] war.”
The divergent tales of Syria and Lebanon demonstrate that the
best early warning signs of instability are found not in historical data
but in underlying structural properties. Past experience can be extremely
effective when it comes to detecting risks of cancer, crime, and earth-
quakes. But it is a bad bellwether of complex political and economic
events, particularly so-called tail risks—events, such as coups and
financial crises, that are highly unlikely but enormously consequential.
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For those, the evidence of risk comes too late to do anything about it,
and a more sophisticated approach is required.
Thus, instead of trying in vain to predict such “Black Swan” events,
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it’s much more fruitful to focus on how systems can handle disor-
der—in other words, to study how fragile they are. Although one
cannot predict what events will befall a country, one can predict how
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events will affect a country. Some political systems can sustain an
extraordinary amount of stress, while others fall apart at the onset of
the slightest trouble. The good news is that it’s possible to tell which
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are which by relying on the theory of fragility.
Simply put, fragility is aversion to disorder. Things that are fragile
do not like variability, volatility, stress, chaos, and random events, which
cause them to either gain little or suffer. A teacup, for example, will not
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benefit from any form of shock. It wants peace and predictability, some-
thing that is not possible in the long run, which is why time is an enemy
to the fragile. What’s more, things that are fragile respond to shock in a
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nonlinear fashion. With humans, for example, the harm from a ten-foot
fall in no way equals ten times as much harm as from a one-foot fall. In
political and economic terms, a $30 drop in the price of a barrel of oil is
much more than twice as harmful to Saudi Arabia as a $15 drop.
so
For countries, fragility has five principal sources: a centralized

governing system, an undiversified economy, excessive debt and lever-
age, a lack of political variability, and no history of surviving past
shocks. Applying these criteria, the world map looks a lot different.
Ma
Disorderly regimes come out as safer bets than commonly thought—

and seemingly placid states turn out to be ticking time bombs.
the
center
cannot
hold
The first marker of a fragile state is a concentrated decision-making
system. On its face, centralization seems to make governments more

efficient and thus more stable. But that stability is an illusion. Apart
from in the military—the only sector that needs to be unified into
a single structure—centralization contributes to fragility. Although
centralization reduces deviations from the norm, making things ap-
pear to run more smoothly, it magnifies the consequences of those
deviations that do occur. It concentrates turmoil in fewer but more
severe episodes, which are disproportionately more harmful than
cumulative small variations. In other words, centralization decreases
local risks, such as provincial barons pocketing public funds, at the
m
price of increasing systemic risks, such as disastrous national-level
reforms. Accordingly, highly centralized states, such as the Soviet
Union, are more fragile than decentralized ones, such as Switzerland,
hi
which is effectively composed of village-states.
States that centralize power often do so to suppress sectarian
tension. That inability to handle diversity, whether political or
ha
ethnoreligious, further adds to their fragility. Although countries
that allow their sectarian splits to remain out in the open may
seem to experience political turmoil, they are considerably more
iT
stable than those that artificially repress those splits, which creates
a discontented minority group that brews silently. Iraq, for exam-
ple, had a Sunni-minority-led regime under Saddam Hussein that
repressed the Shiites and the Kurds; the country overshot in the
Al
opposite direction after Prime inister Nouri al- aliki, a Shiite,

M
M
took office in 2006 and began excluding the Sunnis. Indeed, research
by the scholar aneer Bar- am has shown that states that have
Y
Y
od
well-defined boundaries separating various ethnic groups experience

less violence than those that attempt to integrate them. In other
words, people are better next-door neighbors than roommates.
Thus, in countries riven by sectarian divides, it makes more sense to
so
give various groups their own fiefdoms than to force them to live
under one roof, since the latter arrangement only serves to radicalize
the repressed minority.
oreover, centralization increases the odds of a military coup by
Ma M
making the levers of power easier to seize. Greece, for example, was
highly centralized when a group of colonels overthrew the government
in 1967. Italy might have appeared just as vulnerable around the same
time, given that it also suffered from widespread social unrest and
ideological conflict, but it was saved by its political decentralization
and narrow geography. The various economic and political centers

were both figuratively and literally far from one another, distance
that prevented any single military faction from seizing power.
Just as states composed of semiautonomous units have fared well
in the modern era, further back in history, the most resilient polities
were city-states that operated under
On its face, centralization empires that provided a measure of
protection, from Pax Romana to Pax
seems to make governments Ottomana. But at the tail end of their
more stable. But that existence, many empires began to cen-
m
stability is an illusion. tralize, including Pharaonic gypt
E
and the ing dynasty in China. In
M
both cases, the empires tightened the
hi
reins after, not before, they thrived, ruling out centralization as a
cause of their success and fingering it as an explanation for their
subsequent failure. ha
City-states both old and new—from enice to Dubai to Geneva to
V
Singapore—owe their success to their smallness. Those who com-
pare political systems by looking at their character without taking
iT
into account their size are thus making an analytic error: city-states
are remarkably diverse in terms of their political systems, from the
most democratic ( enice) to the most enlightened but autocratic
V
(Singapore). Just as an elephant is not a large mouse, China is not
Al
a bigger version of Singapore, even if the two share similar styles

of government.
Again, consider Lebanon. For much of history, the editerranean
M
od
was ringed by multilingual, religiously tolerant, and obsessively

mercantile city-states, which accommodated a variety of empires.
But most were eventually swallowed up by the modern nation-states.
Alexandria was consumed by gypt, Smyrna by Turkey, Thessaloniki
so
E
by Greece, and Aleppo by Syria. Luckily for Lebanon, however, it
was swallowed up by Beirut, not vice versa. After the collapse of the
Ottoman mpire, the state of Lebanon was small and weak enough
E
to get colonized by the city-state of Beirut. The result: over the past
Ma
half century, living standards in Lebanon have risen in comparison

to its peers. The country avoided the wave of statism that swept over
the region with Gamal Abdel Nasser in gypt and the Baath Party
E
in Iraq and Syria, a trend that concentrated decision-making power
and created dysfunctional bureaucracies, leading to many of the region’s
problems today.

-
unsteady
state
state
economy
The second soft spot is the absence of economic diversity. conomic
E
concentration can be even more harmful than political centralization.
conomists since David Ricardo have touted the gains in efficiency to
E
be had if countries specialize in the sectors in which they hold a com-
parative advantage. But specialization makes a state more vulnerable
in the face of random events.
For a state to be safe, the loss of a single source of income should
not dramatically damage its overall economic condition. Places that
m
depend on tourism, for example, are particularly susceptible to
perceived instability (as Greece discovered after its economic crisis
and gypt discovered after its revolution), as well as unrelated
hi
E
events (as Hawaii found out immediately after 9/11) and even just
the vagaries of fashion, as new hot spots replace older ones (as
Tangier, orocco, has come to recognize). Another common source
ha
M
of fragility is an economy built around a single commodity, such as
Botswana, with its reliance on diamonds, or a single industry that
accounts for the lion’s share of exports, such as Japan’s automobile
iT
sector. ven worse is when large state-sponsored or state-friendly
E
enterprises dominate the economy; these tend to not only reduce
competitiveness but also compound the downside risks of drops in
demand for a particular commodity or product by responding only
Al
slowly and awkwardly to market signals.

The third source of fragility is also economic in nature: being
highly indebted and highly leveraged. Debt is perhaps the single
od
most critical source of fragility. It makes an entity more sensitive to

shortfalls in revenue, and all the more so as those shortfalls acceler-
ate. As Lehman Brothers experienced when it collapsed in 2008, as
the confidence of investors wanes and requests for repayment grow,
so
losses mount at an increasing rate. Debt issued by a state itself is

perhaps the most vicious type of debt, because it doesn’t turn into
equity; instead, it becomes a permanent burden. Countries cannot
easily go bankrupt—which, ironically, is the main reason people
Ma
lend to them, believing that their investments are safe.

Leverage raises risks in much the same way. Dubai, for example,
has plowed money into aggressive real estate projects, increasing its
operating leverage and thus making any drops in revenue extremely
threatening. Profit margins there are so thin that shortfalls could easily
accelerate, which would rapidly push the emirate’s companies into

the red and drain state coffers. This means that Dubai, in spite of its
admirable structure and governance, can rapidly go insolvent—as the
world witnessed after the 2008 financial crisis, when Abu Dhabi had
to bail it out.
T f
he
virtue
o
volatility
The fourth source of fragility is a lack of political variability. Contrary
to conventional wisdom, genuinely stable countries experience
moderate political changes, continually switching governments
m
and reversing their political orientations. By responding to pressures
in the body politic, these changes promote stability, provided their
magnitude is not too large—more like the gap between the Labour
hi
Party and the Conservative Party in the contemporary United
Kingdom than that between the Jacobins and the royalists in rev-
olutionary France. oderate political variability also removes
ha
M
particular leaders from power, thus reducing cronyism in politics.
When a state is decentralized, the variations are smoother still,
since municipalities distribute decision-making power and allow
iT
for a plurality of political views.
It is political variability that makes democracies less fragile than
autocracies. Italy is resilient precisely because it has been able to
accommodate virtually constant political turmoil, training citizens
Al
for change and incubating institutions able to correct for mild insta-
bility. So far, perhaps predictably, none of the former dictatorships
touched by the Arab Spring has demonstrated any such capacity.
od
gypt has reverted to military rule, and the others have fallen into
E
varying degrees of chaos. Some states that emerged from autocratic
rule without devolving into turmoil were able to develop means of
accommodating change. Spain under Francisco Franco, for instance,
so
over time became more and more an autocratic façade behind which
the institutions of civil society could develop.
The fifth marker of fragility takes the proposition that there is
no stability without volatility a step further: it is the lack of a record
Ma
of surviving big shocks. States that have experienced a worst-case

scenario in the recent past (say, around the previous two decades)
and recovered from it are likely to be more stable than those that
haven’t. In part, this marker is simply providing information: countries
that sustain chaos without falling apart reveal something about their
strength that could not be discovered otherwise. But this marker

also involves the idea of “antifragility,” the property of gaining from

disorder. Shocks to a state are educational, causing them to experience
posttraumatic growth.
Look at Indonesia, alaysia, the Philippines, South Korea, and
M
Thailand. The fact that these countries weathered the 1997–98 Asian
financial crisis suggests that they were robust enough to survive—
and their impressive subsequent performance suggests that they
might even have been antifragile, adjusting their institutions and
practices based on the lessons of the crisis. Likewise, the fact that
m
the former Soviet states have recovered from the collapse of the
Soviet Union suggests that they are also relatively stable. The idea
is analogous to child rearing: parents want to protect their children
hi
from truly serious shocks that they might not survive but should
not want to shelter them from the challenges in life that make
them tougher. ha
f
the
beauti
ul
and
damned
These five markers function best as warning signals. They cannot
iT
indicate with high confidence whether a given country is stable—no
methodology can—but they certainly can reveal if a given country
should cause worry. Those countries that score poorly on multiple
criteria are particularly concerning, since these markers are com-
Al
pounding: qualifying as fragile on two counts is more than twice as

dangerous as doing so on one. When it comes to overall fragility,
countries can vary from exhibiting no signs of fragility to being
od
very fragile.
Saudi Arabia is an easy call: it is extremely dependent on oil,
has no political variability, and is highly centralized. Its oil wealth
and powerful government have papered over the splits between its
so
ethnoreligious units, with the Shiite minority living where the oil
is. For the same reason, Bahrain should be considered extremely
fragile, mainly on account of its repressed Shiite majority.
gypt should also be considered fragile, given its only slight and
Ma E
cosmetic recovery from the chaos of the revolution and its highly
centralized (and bureaucratic) government. So should enezuela,
V
which has a highly centralized political system, little political vari-
ability, an oil-based economy, and no record of surviving a massive
shock. Some of the same problems apply to Russia. It remains highly
dependent on oil and gas production and has a highly centralized

political system. Its one redeeming factor is that it surmounted the

difficult transition from the Soviet era. For that reason, it probably
lies somewhere between moderately fragile and fragile.
Some countries are best categorized as fragile but possibly doing
something about it. Greece holds enormous quantities of debt and
has an inflexible political system, but it has begun to undertake an
economic restructuring. (Time will
tell whether this is the beginning of
Italy is resilient precisely a new era of responsibility or a false
m
because it has been able to start.) Iran has an effectively central-
accommodate virtually ized government that exhibits little
constant political turmoil. variability and an economy tied to oil
hi
and gas production, yet the regime
has been tolerating (although only
implicitly) a measure of political dissent. And although Iran is
ha
nominally a theocracy, unlike Saudi Arabia, it appears to have an
extremely adaptive form of Islam that may accommodate modern-
ization. Greece and Iran could transform into more robust states or
iT
lapse into fragility.
oderately fragile states include Japan, given its highest-in-
M
the-world debt-to-gdp ratio, long-term dominance by a single party,
dependence on exports, and failure to fully recover from its “lost
Al
decade”; Brazil, which is growing increasingly centralized and

bureaucratized; Nigeria, which is highly centralized and dependent
on oil yet has rebounded from the economic and political turmoil
od
of the 1980s and proved somewhat adaptable in the face of new

threats, such as the Islamist insurgent group Boko Haram; and Turkey,
which is highly centralized and has no track record of recovery. (In
addition, Turkey’s dependence on foreign investment is incompat-
so
ible with its aggressive pro-Islamist foreign policy, which turns off
Western investors.) India is perhaps best considered slightly fragile.
Its political system is relatively decentralized and has adapted to
rapid population growth and uneven economic progress, and its
Ma
economy is somewhat reliant on exports.

Italy, paradoxically, shows no signs of fragility. It is effectively
decentralized and has bounced back from perennial political crises.
It also experiences a great deal of harmless political variability, cycling
through 14 prime ministerial terms in the past 25 years. France, by
contrast, is more fragile—centralized (in spite of the lip service it

pays to decentralization), indebted, and without a demonstrated

comeback. The country is at risk of economic trauma, which would
raise the danger of erratic political reactions. Those, in turn, would
likely enhance the appeal of right-wing factions and radicalize the
country’s significant uslim minority.
M
Then there is the China puzzle. China’s stunning economic
growth makes its future hard to assess. The country has recuperated
remarkably well from the major shocks of the aoist period. That
M
era, however, ended nearly four decades ago, and so the recovery is
m
hardly a recent comeback and thus less certain to protect against
future shocks. What’s more, China’s political system is highly cen-
tralized, its economy is dependent on exports to the West, and its
hi
government has been on a borrowing binge as of late, making the
country more vulnerable to slowdowns in both domestic and foreign
growth. Are the gains from past turmoil big enough to offset the
ha
weakness from debt and centralization? The most likely answer is
no—that what gains China has accrued by learning from trauma are
dwarfed by its burdens. With each passing year, those lessons recede
iT
further into the past, and the prospects of a Black Swan of Beijing
loom larger. But the sooner that event happens, the better China
will emerge in the long run.∂
Al
od
so
Ma

Europe Reborn
How to Save the uropean Union From
E
Irrelevance
Matthias Matthijs and R. Daniel Kelemen
m
I
n 1982, The Economist marked the 25th anniversary of the uropean
hi
E
conomic Community, the precursor to the uropean Union, by
E
E
featuring a tombstone dedicated to the organization on its cover.
“Born arch 25, 1957. oribund arch 25, 1982,” it read. Then came
ha
M
M
M
an epitaph courtesy of the ancient Roman historian Tacitus: Capax
imperii nisi imperasset, “It seemed capable of being a power, until it
tried to be one.” Inside, the magazine pilloried the community for its
iT
institutional weakness, bemoaned its citizens’ growing disenchantment
with uropean integration, and warned of a possible British exit.
E
et those dark hours marked the dawn of the uropean project, not
Y
E
its dusk. Just three years later, Jacques Delors, the former French
Al
finance minister, became the uropean Commission’s eighth president

E
and immediately injected a dose of vitality into the sluggish organiza-
tion. His campaign to create a single market in urope—an initiative
E
od
that enjoyed enthusiastic support from British Prime inister argaret

M
M
Thatcher—paved the way for the 1992 aastricht Treaty, which estab-
M
lished the eu. During Delors’ decadelong tenure, the union strength-
ened its institutions, extended its authority into new policy areas, and
so
welcomed five new member states. In the early 1990s, opinion polls
found that 70 percent of urope’s citizens favored eu membership
E
and less than ten percent opposed it. Within a decade, uropean inte-
E
gration had risen from the grave; the eu had proved itself to be far
Ma
more resilient than even many of its supporters had expected it to be.
Matthias Matthijs is Assistant Professor of International Political Economy at Johns

Hopkins University’s School of Advanced International Studies and a co-editor, with Mark
Blyth, of the forthcoming The Future of the Euro. Follow him on Twitter @m2matthijs.
R. Daniel Kele en is Professor of Political Science at Rutgers University and the editor
m
of Lessons From Europe? What Americans Can Learn From European Public Policies.

Europe Reborn
This is a curious bit of history to recall today, as critics ring the eu’s
death knell once again. They point to a familiar list of omens—institu-
tional impotence, voters’ disillusionment with Brussels, and the threat
of losing the United Kingdom—to suggest that the organization may
soon unravel. Doomsayers can be found across urope’s political
E
spectrum. They include uroskeptics on the far right, such as the
E
leader of France’s National Front party, arine Le Pen, who declared in
M
October 2013 that the eu would “collapse as the Soviet Union collapsed.”
They also include urophiles on the political left, such as Joschka
m
E
Fischer, Germany’s former foreign minister and longtime Green Party
leader, who recently warned that the eu was in danger of implosion.
This time around, the eu indeed has serious reasons for concern.
hi
Public trust in eu institutions has hit all-time lows, and uroskeptic par-
E
ties made record gains in elections for the uropean Parliament in ay
E
M
2014. And the eu’s economic challenges today far exceed those of 30
ha
years ago. Although the continent appears to have weathered the worst
of the eurozone crisis, which roiled urope between 2009 and 2012,
E
urope’s economy remains in dire straits. Some feeble signs of recovery
E
iT
aside, the eu continues to teeter on the brink of deflation and risks fall-
ing into a triple-dip recession, as growth languishes and unemployment
levels hover near record highs in southern urope. any citizens, espe-
E
M
cially the young, no longer associate the eu with greater freedom and
Al
opportunity; instead, they blame it for financial pain, prolonged jobless-

ness, and a lack of democratic choice. Compounding the problem, the
eu has appeared weak in the face of Russia’s aggression on its doorstep
od
and Hungary’s slide toward autocracy within its own borders.

Reversing the eu’s flagging fortunes will not be easy, but the relent-
less focus on its problems has obscured another reality. A convergence
of factors—including capable new leaders, the gradual emergence of
so
a new economic policy consensus, and, paradoxically, the mounting

threats to the eu’s territorial integrity from outside and within—
offers urope a window of opportunity in which to revive the union,
E
recast its policies, and win back public support. To pull off such a
Ma
turnaround, the eu will first have to get its economic house in order,
refocus on growth, and fix the governance institutions that stand
behind its common currency. uropean leaders must also adopt a
E
more resolute and unified stance on security in order to strengthen
the eu’s geopolitical role in its neighborhood. oreover, the eu must
M
reclaim its credibility as a bastion of economic and political freedom,

defending not only the integrity of the euro system but also the
shared democratic values that bind together its member states. All of
those steps are possible, however, and if they are taken, the union’s
future will be much brighter than critics expect.
The stakes could not be higher. A failure to act decisively would
lead to further stagnation and, ultimately, irrelevance. But taking
resolute steps could poise urope for another rebirth.
E
I
m
n
good
hands
A number of recent developments have converged to create a rare
political opening for the eu. First, the organization’s new crop of
leaders promises to be the strongest to head the organization since
hi
the Delors era. Foremost among them is Jean-Claude Juncker, the
uropean Commission’s new president. The cognac-sipping Lux-
E
embourger has faced criticism for belonging to the eu’s old guard
ha
and therefore being an unlikely candidate to rejuvenate urope.
E
But Juncker can turn this weakness into his main strength. His vast
institutional knowledge—he might have sat through more uropean
E
iT
Council meetings than anyone alive—makes him far better prepared
than his predecessor, José anuel Barroso, was to help urope’s
M
E
decision-makers break through logjams and seal deals.
Juncker also enjoys the respect and backing of most heads of uro-
Al
E
pean government, having helped them navigate past economic crises
as the former chair of the urogroup, a council of the eurozone’s fi-
E
nance ministers. And thanks to a change in the process through which
od
the president of the commission is elected, Juncker also has an explicit

mandate from the uropean Parliament. Prior presidents were ap-
E
pointed directly by the uropean Council, before the parliament en-
E
dorsed them. But in 2014, the parliament managed to link the president’s
so
selection directly to the outcome of the parliamentary elections: the

body’s party groups nominated candidates who then campaigned for
the post. When the center-right uropean People’s Party, which nom-
E
inated Juncker, emerged victorious in the ay 2014 elections, the par-
Ma
M
liament pressed national governments to select him. Juncker thus
became the first commission president to have been elected, albeit still
indirectly, by eu citizens—a position that equips him with greater au-
thority to shape eu policy than his predecessors had.
oreover, Juncker embodies the sensible centrist coalition that
M
has powered every previous successful grand bargain over uropean
E

Europe Reborn
m
hi
ha
Curtain call: hanging the EU flag in Barcelona, May 2008
integration. Indeed, he is probably “the most socialist Christian

iT
Democrat there is,” in the words of Daniel Cohn-Bendit, a left-wing
German member of the european Parliament. And in performing
his job, he will be backed by an impressive new team of european
commissioners (who together make up the eu’s executive arm and
Al
manage its policy portfolios). This set of incoming commissioners

includes more heavyweight political players than any preceding
group: nine former prime ministers or former deputy prime ministers
od
and 19 former cabinet ministers.

meanwhile, the european Council will be headed by former Polish
Prime minister Donald Tusk, a far stronger leader than his predecessor,
the inconspicuous Herman van Rompuy of Belgium (who was nick-
so
named the “gray mouse” of european politics for his unassuming lead-
ership style). Tusk is one of the few eu leaders who won reelection after
the global financial crisis. Following his victory, he went on to shepherd
Poland through three additional years of steady economic growth, even
Ma
as most of europe faltered. And his strong working relationship with

R eU T e R S / AL Be RT G eA
Chancellor Angela merkel of Germany has invited hope that the duo,
dubbed “Tuskel,” will prove more effective at holding europe together
than was the odd couple known as “merkozy”—merkel and former
French President Nicolas Sarkozy, whose often crackling partnership
defined the eu’s hesitant early response to the euro crisis.

These new leaders are taking charge at a time when a new economic
consensus has finally begun to take shape. Fearing deflation and yet
another recession, uropean policymakers have become wary of the
E
eu’s narrow focus on austerity. Supporters of austerity, led by erkel,
M
champion budget discipline as the only way to restore uropean financial
E
stability, but the policy has also produced adverse side effects, including
persistently high unemployment and dangerously low levels of inflation.
any uropean leaders have grown increasingly desperate to stimulate
M
E
economic growth. The most visible proponent of this emerging
m
consensus is the president of the uropean Central Bank, ario
E
M
Draghi, who last August told a group of the world’s central bankers that
uropean governments should work in concert with the bank to
hi
E
encourage lagging consumption and investment—a vision, dubbed
“Draghinomics” by some, that has been steadily gaining supporters.
C
ha
ircling
ircling
the
wagons
xternal and internal threats to uropean unity have also yielded a
E
E
renewed sense of solidarity. Nothing focuses the uropean mind quite E
iT
like the sight of Russian tanks rolling westward. In the two decades
preceding the Ukraine crisis, eu countries repeatedly promised to
integrate their security and defense policies but failed to deliver. et
Y
unions of states tend to pull together when their members confront
Al
a common external threat. Ironically, Russian President ladimir

V
Putin just might be the leader who will finally succeed in pushing
urope to cooperate on defense after all others failed.
E
od
Indeed, a resurgent Russia on urope’s doorstep has finally spurred

E
the eu to action. Although member states had initially been split in
their reactions to the Russian annexation of Crimea in arch 2014,
M
oscow’s continued intervention in eastern Ukraine and the downing
so
M
of alaysia Airlines Flight 17 over Ukraine in July (almost certainly by
M
Russian-backed separatists) have brought about a much-needed display
of unity. The eu has since responded by imposing retaliatory sanctions
on Russia and renewing its efforts to cut its reliance on Russian energy.
Ma
In another encouraging sign, this closing of the ranks enjoys whole-

hearted U.S. support—a marked change from 12 years ago. Back then,
during the transatlantic rift over the Iraq war, Washington’s policy
reinforced the division between old and new urope. The new U.S.
E
approach to uropean security, however, rests on two watchwords:
E
pooling resources and sharing the burden.

Europe Reborn
Just as Russian saber rattling has forced eu countries to draw

closer, so, too, could the threat of a British exit ultimately strengthen
the union. An attempt by the United Kingdom to leave the eu would
almost certainly spark a more pointed continent-wide conversation
about the benefits of uropean integration.
E
British Prime inister David Cameron has promised to hold an “in
M
or out” referendum on the country’s eu membership by the middle
of 2017 if his Conservative Party wins this year’s elections. But even
if a referendum does take place, an
m
“out” vote appears unlikely—in large
part because Cameron himself would
Many Europeans no longer
work to avoid it. An exit not only associate the EU with
hi
would damage the British economy freedom and opportunity;
but also could trigger a renewed push instead, they blame it for
for independence by Scotland, which
ha
remains more pro-eu than the rest of financial pain.
the United Kingdom. His bluster aside,
Cameron dreads this outcome. He would far prefer a different
iT
scenario: lobbying the eu for greater concessions before person-
ally campaigning for an “in” vote. For their part, Juncker, erkel,
M
and Tusk have all emphasized their willingness to work with the
United Kingdom to address its concerns, short of limiting the
Al
eu’s free movement of workers. In fact, during his presidential

campaign last spring, Juncker promised to work out a “fair deal”
with London.
od
If Cameron can win adequate concessions for the United Kingdom,

then a British referendum could actually end up strengthening the
union. The run-up to the vote would likely include a spirited cam-
paign in favor of the “in” option, during which Cameron would extol
so
the benefits of eu membership and other major uropean leaders

E
would implore the British people to remain in the uropean family. A
E
display of solidarity of this kind would represent a welcome change
from the routine hurling of blame at Brussels by uropean leaders
Ma
E
looking to deflect attention from their own policy shortfalls. It would
also remind urope’s citizens of the benefits the union affords them.
E
An “in” vote by the United Kingdom would put the issue to rest for
at least a generation, bolster public support for the eu across the
continent, and give eu policymakers the boost necessary to undertake
critical reforms.

rowing
pains
To seize the opening before them and reboot the uropean project, eu
E
leaders must pursue a new agenda. Taking bold, decisive action on a
number of fronts would revive the uropean economy, win back disen-
E
chanted voters, and reestablish the union’s authority on the world stage.
First, uropean policymakers must shift their economic focus
E
from austerity and fiscal rules to investment and growth. For too
many years, eu economic policy has been dictated by German fiscal
conservatives, imposing unsustainable demands on member states
m
on the eurozone’s periphery, such as Greece and Portugal. The
emphasis on austerity might have been politically necessary when
the euro crisis began, providing a dose of pain to discourage govern-
hi
ments from expecting future eu bailouts. But this policy has also
stunted growth, encouraged deflation, and fed resentment across the
continent. The time has come for uropean leaders to halt their single-
ha
E
minded and self-destructive pursuit of budget tightening.
New economic evidence shows unambiguously that too much aus-
terity can deepen economic downturns; fiscal stimulus, by contrast,
iT
can produce a far greater boost to growth when implemented during
severe recessions. ven the International onetary Fund, generally
E
M
a proponent of reining in government spending, criticized the eu’s
pursuit of austerity as too dogmatic in its 2012 World Economic Out-
Al
look. It also warned, in a 2013 analysis, that excessively low inflation

was aggravating income inequality in the eurozone by deepening un-
employment and stressing the poor. German resistance has so far
od
prevented a loosening of the rules, but Germany looks increasingly

isolated in its rigid stance. It appears likely that looming deflation
and flagging growth could strengthen Germany’s support for broader
investment initiatives—and even make the country more willing to
so
tolerate slight reinterpretations of fiscal rules.

To roll back austerity, eu leaders could borrow a page from Japanese
Prime inister Shinzo Abe’s “three arrows” playbook and combine
M
two short-term fixes—monetary expansion and fiscal stimulus—
Ma
with longer-term structural reforms. On the monetary front,

Draghi has already fired the first arrow, pledging in 2012 that the
uropean Central Bank would do “whatever it takes” to save the
E
euro. This past October, the bank began a round of private-sector
quantitative easing, purchasing bank assets to inject cash into the
economy. In this round, the bank committed itself to buying one

Europe Reborn
trillion euros in covered bonds (low-risk debt securities issued by

banks) and asset-backed securities (bundles of loans that banks
package and resell) in order to clean up the balance sheets of euro-
zone banks and spur private lending to businesses.
These initial measures disappointed some investors, who feared
that there were simply not enough such assets in the eu market and
had hoped that the uropean Central Bank would commit to buying
E
sovereign bonds—a more radical option that remains on the table.
But the purchases have demonstrated that the bank stands ready to
m
take decisive measures to stimulate the uropean economy.
E
uantitative easing alone is not enough to rekindle growth, how-
Q
ever. This policy must work in concert with the second arrow: fiscal
hi
measures that would directly stimulate lagging demand. The uro-
E
pean Commission looks set to do its part. A new 300 billion euro
investment fund proposed by Juncker would raise aggregate demand
ha
by channeling money into infrastructure projects and add firepower
to the uropean Investment Bank. But policymakers must take
E
more steps at the national level, where the real budgetary resources
iT
lie. urope’s stronger northern economies should stimulate demand
E
through fiscal measures. Germany, in particular, should allow its wages
at home to rise faster than in the rest of urope in order to boost
E
German citizens’ purchasing power.
Al
Finally, eu governments need to make more headway on the third

arrow by liberalizing their labor and services markets. These meas

ures would make it easier to hire and fire people and allow for more
od
competition. Policy shifts of this kind would cause inevitable pain to

vested interests and previously sheltered sectors, which explains why
they have been so hard to implement. Tough reforms, however, would
be easier to push through in the climate of growth that fiscal stimulus
so
could help generate.
S
horing
up
the
euro
u leaders must also restore confidence in the euro and the eu’s
Ma
E
monetary union. Perhaps miraculously, despite its travails, the single
currency remains popular with uropean voters. Over two-thirds of
E
the eurozone population supports the euro today—the same percentage
as before the crisis. uropean leaders should demonstrate that they,
E
too, continue to stand behind the euro and will ensure its stability in
the future.

From its inception, urope’s economic and monetary union was
E
incomplete in crucial respects. The introduction of the euro central-
ized monetary policy but left fiscal policy largely in the hands of
national governments. This dichotomy has made it difficult to adjust
to economic shocks that affect member states differently. oreover,
M
although the single market allowed banks to offer financial services
across borders, the responsibility for regulating these banks fell to
individual governments. The dangers inherent in that structure be-
came apparent as the eurozone crisis unfolded and cascading bank-
m
ing crises threatened the solvency of member states that lacked
adequate rescue mechanisms. To paraphrase ervyn King, former
M
governor of the Bank of ngland, eu banks were uropean in life
hi
E
E
but national in death.
u leaders reacted with a series of reforms that addressed defi-
E
ciencies in the eurozone’s governance and restored some measure of
ha
stability. But this work remains incomplete. In particular, the eu’s
banking union—encompassing a set of rules and institutions that
would supervise and regulate eurozone banks—remains half-baked
iT
and inherently vulnerable to future shocks. The eu should now bring
this project to completion.
As part of the effort, the eu should consider introducing common
deposit insurance and accelerating the establishment of an emergency
Al
credit line for failing banks. These measures would help transform the
public image of the eu from an enforcer of austerity to a protector of
wealth. Depositors visiting eurozone banks, for example, should see
od
clear placards (similar to the ubiquitous Federal Deposit Insurance

Corporation stickers displayed at U.S. banks) assuring them that the
eu guarantees their savings.
The eu has taken major steps toward the banking union over the
so
past three years: it has empowered the uropean Central Bank to

E
regulate urope’s largest banks and set up the Single Resolution
E
echanism, a central authority for handling bank failures. So far, how-
M
ever, it has not put in place a centralized system of deposit insurance.
Ma
oreover, the Single Resolution echanism remains incomplete, and

M
M
its policies remain far too convoluted to effectively deal with large
bank failures. Germany has led the opposition to these measures,
fearing that German savers might eventually be forced to bail out
depositors in Italy, Spain, and elsewhere. Defenders of the eurozone
should counter this narrative by stressing that a stable currency

Europe Reborn
union—which Germany favors—will eventually require a banking

union with common deposit insurance and a common fiscal backstop.
Finally, in the longer term, the eu should consider issuing limited
amounts of eurobonds, a common instrument that would pull together
the debts of the countries using the euro. erkel and German Finance
M
inister Wolfgang Schäuble have consistently opposed such a move,
M
out of fear of building what they call a “debt union.” Admittedly, even
a well-designed and limited eurobond scheme would create some moral
hazard. But advocates of this strategy must stress its many potential
m
benefits. urobonds would ensure financial-market stability, enhance
E
the euro’s standing as a global reserve currency, increase the liquidity
of the uropean bond market, and provide the eurozone with the
hi
E
common safe asset it so desperately needs in times of crisis. These
assured benefits far outweigh the potential costs.
AB f
ha
astion
astion
o
values
ven as uropean countries deepen their economic integration, they
E
E
must remember that uropean values are just as important to defend as
E
iT
financial stability. Russia’s aggression in Ukraine has provided a dramatic
reminder of the security risks uropean countries face—and of the eu’s
E
persistent failure to craft unified foreign and security policies. This
shortfall is not for lack of public support. According to urobarometer
Al
E
surveys (regular polls conducted by the uropean Commission), despite
E
the growing disillusionment with the eu, more than 70 percent of uro-
E
peans—including majorities in every member state—want the union to
od
develop a common security and defense policy. et national govern-

Y
ments have thus far ignored their publics’ wishes and remained loyal to
their countries’ powerful national defense industries.
Ironically, the United Kingdom’s quest to renegotiate the terms of
so
its eu membership might offer a rare opportunity to break the impasse.

As uropean leaders try to accommodate the United Kingdom’s
E
demands for reform in other areas, they should encourage the country
to take on a stronger leadership role on foreign and security matters.
Ma
As a start, the United Kingdom could lead efforts to press other member
states to live up to their previous commitments to pool defense resources
and share military capabilities. Although the notion that the United
Kingdom would approve a truly common uropean defense policy may
E
seem far-fetched today, it is not an impossible proposition. As its own
military budget shrinks and its risk of becoming a second-rank military

power grows, the United Kingdom could be tempted by the allure of

saving costs while enhancing its prestige to assume greater leadership.
M
ore fundamentally, there can be no credible uropean security
E
and defense policy without the United Kingdom, the country that
remains urope’s strongest military power (rivaled only by France).
E
Inviting London to take on more responsibilities in this area would go
some way toward offsetting its lesser involvement in other fields of
uropean integration and its absence from the monetary union.
E
The eu’s collective security would benefit from greater cooperation
m
in other fields as well. nergy policy is a case in point. A sure way to
E
counter Russia’s stranglehold on uropean energy supplies is to establish
E
a true uropean energy union—a path that Tusk advocated last
hi
E
spring. If created, this institution would jointly negotiate gas contracts
on behalf of all eu member states and coordinate their responses should
Russia interrupt its deliveries. An energy union would also help aug-
ha
ment infrastructure needed to import liquefied natural gas from other
suppliers, including the United States. ven though progress in this
E
arena has been slow—due to conflicts of interest and disagreements
iT
among countries on burden sharing—the threat to energy supplies
posed by Putin’s increased aggression may convince urope to unite.
E
Internal threats to the eu’s integrity might prove even more dangerous
than external ones, and the eu must act decisively to defend democracy
Al
and the rule of law inside its borders. A number of eu member states have
experienced democratic backsliding in recent years. Hungary, above all,
represents a critical test of the eu’s resolve. Since sweeping to power in
od
2010, iktor Orban, Hungary’s prime minister, has eliminated democratic

V
checks and balances, undermined judicial independence, hobbled inde-
pendent media, installed loyalists in nearly all key government positions,
and rigged election laws to favor his own party. In July, Orban publicly
so
declared his intention to abandon liberal democracy in favor of building

an “illiberal state,” citing China, Russia, Singapore, and Turkey as role
models. Despite these developments, however, Hungary has remained an
eu member state in good standing. The eu’s tentative response—issuing
Ma
critical reports and bringing legal actions before uropean courts—has

E
failed to deter Orban and has raised profound doubts about the union’s
political will to defend the very values it claims to represent.
The eu must take a much tougher line with the Orban regime. The
uropean Commission should launch the so-called Article 7 procedure,
E
which would allow the uropean Council to suspend Hungary’s voting
E

Europe Reborn
rights owing to serious and persistent breaches of the eu’s fundamental

values. And more important, eu leaders need to denounce Orban’s
actions. For far too long, leaders of the uropean People’s Party faction
E
in the uropean Parliament, a group that counts Orban’s own political
E
party as a member, have shielded Orban’s government from criticism in
the interest of partisan loyalty. These leaders—who include Juncker,
erkel, and Tusk—must now declare that Orban’s tactics betray the
M
principles for which they and the rest of urope stand.
E
To date, Orban has often succeeded in turning eu criticism to his
m
advantage with populist rhetoric that accuses Brussels of meddling in
Hungary’s internal affairs. But if center-right leaders from across
urope—members of Orban’s own political family—join eu officials
hi
E
in denouncing his actions, Orban will not be able to continue to spin
this tale.
The eu presents itself as a union of democratic values and has
ha
exerted a magnetic pull on neighboring countries undergoing demo-
cratic transitions. The recent pro-democracy protests in Ukraine, which
toppled the corrupt anukovych government in February 2014, were a
Y
iT
reminder that those struggling for democracy view the eu as a bastion
of freedom. But if the eu allows even one member state to slide into
autocracy, it will irreversibly diminish the meaning of eu membership.
Al
EURO-MO O
J
Skeptics have been planning the eu’s funeral for decades, but time and
again, the union has refused to die. During the eu’s latest and most pro-
od
found crisis, national governments once more chose to reaffirm and

deepen their commitments. This rapid growth of eu power, however, has
given rise to a number of misguided and counterproductive policies
that have undercut public support and left the eu in a deep malaise.
so
uropean citizens today largely ignore the eu’s many achievements or

E
take them for granted, instead equating the organization with economic
pain and feckless leadership. The union endures, but it has lost its mojo.
The eu has worn out its default strategy of muddling through cri-
Ma
ses. Lurching from one calamity to the next has damaged the credibil-
ity of Brussels and national governments alike. It is time for a bold
and far-reaching agenda. To see a urope truly reborn and fit for the
E
twenty-first century, eu leaders must reassert with confidence—on
the economy, on security, and on democracy—that urope is stronger
E
when it stands united.∂


Leaving the West Behind

Germany Looks ast
E
Hans Kundnani
m
R
ussia’s annexation of Crimea in arch 2014 was a strategic
M
shock for Germany. Suddenly, Russian aggression threatened
hi
the uropean security order that Germany had taken for
E
granted since the end of the Cold War. Berlin had spent two decades
trying to strengthen political and economic ties with oscow, but
ha
M
Russia’s actions in Ukraine suggested that the Kremlin was no longer
interested in a partnership with urope. Despite Germany’s depen-
E
dence on Russian gas and Russia’s importance to German exporters,
iT
German Chancellor Angela erkel ultimately agreed to impose
M
sanctions on Russia and helped persuade other eu member states to
do likewise.
Nevertheless, the Ukraine crisis has reopened old questions about
Al
Germany’s relationship to the rest of the West. In April, when the

German public-service broadcaster ard asked Germans what role
their country should play in the crisis, just 45 percent wanted Germany
od
to side with its partners and allies in the eu and nato; 49 percent
wanted Germany to mediate between Russia and the West. These
results led the weekly newsmagazine Der Spiegel, in an editorial
published last ay, to warn Germany against turning away from
so
M
the West.
Germany’s response to the Ukraine crisis can be understood
against the backdrop of a long-term weakening of the so-called West-
bindung, the country’s postwar integration into the West. The fall
Ma
of the Berlin Wall and the enlargement of the eu freed the country
from its reliance on the United States for protection against a power-
ful Soviet Union. At the same time, Germany’s export-dependent
economy has become increasingly reliant on demand from emerging
hans kundnani is Research Director at the European Council on Foreign Relations and
the author of The Paradox of German Power. Follow him on Twitter @hanskundnani.

markets such as China. Although Germany remains committed to

uropean integration, these factors have made it possible to imagine
E
a post-Western German foreign policy. Such a shift comes with high
stakes. Given Germany’s increased power within the eu, the country’s
relationship to the rest of the world will, to a large extent, determine
that of urope.
E
the
german
paradox
Germany has always had a complex relationship with the West. On
m
the one hand, many of the political and philosophical ideas that be-
came central to the West originated in Germany with nlighten-
E
ment thinkers such as Immanuel Kant. On the other hand, German
hi
intellectual history has included darker strains that have threatened
Western norms—such as the current of nationalism that emerged in
the early nineteenth century. Beginning in the latter half of the nine-
ha
teenth century, German nationalists increasingly sought to define
Germany’s identity in opposition to the liberal, rationalistic principles
of the French Revolution and the nlightenment. This version of
E
iT
German nationalism culminated in Nazism, which the German histo-
rian Heinrich August Winkler has called “the climax of the German
rejection of the Western world.” Germany, therefore, was a paradox:
it was part of the West yet produced the most radical challenge to it
Al
from within.
After World War II, West Germany took part in uropean inte-
E
gration, and in 1955, as the Cold War heated up, it joined nato. For
od
the next 40 years, the Westbindung, which led Germany to cooperate

and pursue joint security initiatives with its Western allies, became
an existential necessity that overrode other foreign policy objectives.
Germany continued to define itself as a Western power through the
so
1990s. Under Chancellor Helmut Kohl, a reunified Germany agreed

to adopt the euro. By the end of the decade, the country appeared to
have reconciled itself to the use of military force to fulfill its obligations
as a nato member. After 9/11, Chancellor Gerhard Schröder pledged
Ma
“unconditional solidarity” with the United States and committed

German troops to the nato mission in Afghanistan.
Over the past decade, however, Germany’s attitude toward the
rest of the West has changed. In the debate about the 2003 invasion
of Iraq, Schröder spoke of a “German way,” in contrast to the “American
way.” Since then, Germany has hardened its opposition to the use

Hans Kundnani
of military force. After its experience in Afghanistan, Germany

appears to have decided that the right lesson from its Nazi past is
not “never again Auschwitz,” the principle it invoked to justify its
participation in the 1999 nato military intervention in Kosovo,
but “never again war.” German politicians across the spectrum now
define their country as a Friedensmacht, a “force for peace.”
Germany’s commitment to peace has led the eu and the United
States to accuse Germany of free-riding within the Western alliance.
Speaking in Brussels in 2011, U.S. Defense Secretary Robert Gates
m
warned that nato was becoming “a two-tiered alliance . . . between
those willing and able to pay the price
and bear the burdens of alliance com-
Germany has produced
hi
mitments, and those who enjoy
the most radical challenge the benefits of nato membership, be
to the West from within. ha they security guarantees or head-
quarters billets, but don’t want to
share the risks and the costs.” He
singled out for particular criticism those nato members that spend less
iT
on defense than the agreed-on amount of two percent of gdp;
Germany spends just 1.3 percent. In the past few years, France has
similarly criticized Germany for its failure to provide sufficient support
for military interventions in ali and the Central African Republic.
Al M
One reason Germany has neglected its nato obligations is that the
Westbindung no longer appears to be a strategic necessity. After the
end of the Cold War, the eu and nato expanded to include some
od
central and eastern uropean countries, which meant that Germany

E
was “encircled by friends,” as the former German defense minister
olker Rühe put it, rather than by potential military aggressors, and
V
it was therefore no longer reliant on the United States for protection
so
from the Soviet Union.

At the same time, Germany’s economy has become more depen-
dent on exports, particularly to non-Western countries. In the first
decade of this century, as domestic demand remained low and Ger-
Ma
man manufacturers regained competitiveness, Germany became in-

creasingly dependent on exports. According to the World Bank, the
contribution of exports to Germany’s gdp jumped from 33 percent
in 2000 to 48 percent in 2010. Beginning with Schröder, Germany
began to base its foreign policy largely on its economic interests and,
in particular, on the needs of exporters.

m
hi
ha
It’s complicated: Putin and Merkel in Berlin, June 2012
iT
Increasing anti-american sentiment among ordinary Germans
has contributed to the foreign policy shift, too. If the Iraq war gave
Germans the confidence to split from the united states on issues of
Al
war and peace, the 2008 global financial meltdown gave it the confi-
dence to diverge on economic issues. For many Germans, the crisis
highlighted the failures of anglo-saxon capitalism and vindicated
od
Germany’s social market economy. the revelations in 2013 that the

u.s. National security agency had been conducting surveillance on
Germans and eavesdropping on merkel’s cell-phone calls further
strengthened anti-american sentiment. many Germans now say that
so
they no longer share values with the united states, and some say
that they never did.
to be sure, Germany’s liberal political culture, a result of its Western
integration, is here to stay. But it remains to be seen whether Germany
Ma
Reute Rs / thomas Pete R
will continue to align itself with its Western partners and stand up
for Western norms as it becomes more dependent on non-Western
countries for its economic growth. the most dramatic illustration of
what a post-Western German foreign policy might look like came in
2011, when Germany abstained in a vote in the un security Council
over military intervention in Libya—siding with China and Russia over

Hans Kundnani
France, the United Kingdom, and the United States. Some German
officials insist that this decision did not prefigure a larger trend. But a
poll conducted shortly after the vote by the foreign policy journal
Internationale Politik found Germans to be split three ways over whether
they should continue to cooperate primarily with Western partners;
with other countries, such as China, India, and Russia; or with both.
ostpolitik
the
new
Germany’s policy toward Russia has long been based on political
m
engagement and economic interdependence. When Willy Brandt
became chancellor of West Germany in 1969, he sought to balance
the Westbindung with a more open relationship with the Soviet Union
hi
and pursued a new approach that became known as the Ostpolitik,
or “ astern policy.” Brandt believed that increasing political and
E
economic ties between the two powers might eventually lead to
ha
German reunification, a strategy his adviser gon Bahr called Wandel
E
durch Annäherung, “change through rapprochement.”
Since the end of the Cold War, economic ties between Germany
iT
and Russia have expanded further. Invoking the memory of Brandt’s
Ostpolitik, Schröder began a policy of Wandel durch Handel, or “change
through trade.” German policymakers, and particularly the Social
Democrats, championed a “partnership for modernization,” in which
Al
Germany would supply Russia with technology to modernize its

economy—and, ideally, its politics.
These ties help explain Germany’s initial reluctance to impose
od
sanctions after the Russian incursion into Ukraine in 2014. In deciding

whether or not to follow the U.S. lead, erkel faced pressure from
M
powerful lobbyists for German industry, led by the Committee on
astern uropean conomic Relations, who argued that sanctions
so
E
E
E
would badly undermine the German economy. In a show of support
for Russian President ladimir Putin, Joe Kaeser, the ceo of Siemens,
V
visited the Russian leader at his residence outside oscow just after
M
the annexation of Crimea. Kaeser assured Putin that his company,
Ma
which had conducted business in Russia for roughly 160 years, would
not let “short-term turbulence”—his characterization of the crisis—
affect its relationship with the country. In an editorial in the Financial
Times in ay, the director general of the Federation of German
M
Industries, arkus Kerber, wrote that German businesses would
M
support sanctions but would do so “with a heavy heart.”

Germany’s heavy dependence on Russian energy also caused Berlin

to shy away from sanctions. After the 2011 Fukushima nuclear disaster
in Japan, Germany decided to phase out nuclear power sooner than
planned, which made the country increasingly dependent on Russian
gas. By 2013, Russian companies provided roughly 38 percent of
Germany’s oil and 36 percent of its gas. Although Germany could
diversify away from Russian gas by finding alternative sources of
energy, such a process would likely take decades. In the short term,
therefore, Germany has been reluctant to antagonize Russia.
m
For her support of sanctions, Merkel has faced pushback not just
from industry but also from the German public. Although some in
the United States and in other European countries have accused the
hi
German government of going too easy
on Russia, many within Germany have
felt that their government is acting too
Germans are split over
ha
aggressively. When the German jour- whether to cooperate
nalist Bernd Ulrich called for tougher with Western partners
action against Putin, for example, he or with countries such
iT
found himself inundated with hate mail
that accused him of warmongering. Even as Russia and China.
Frank-Walter Steinmeier, Germany’s
foreign minister, long perceived to be sympathetic to Russia, has
Al
faced similar accusations. The National Security Agency spying

revelations only increased sympathy for Russia. As Ulrich put it in
April 2014, “When the Russian president says he feels oppressed by
od
the West, many here think, ‘So do we.’”

That type of identification with Russia has deep historical roots. In
1918, the German writer Thomas Mann published a book, Reflections
of a Nonpolitical Man, in which he argued that German culture was
so
distinct from—and superior to—the cultures of other Western nations,

such as France and the United Kingdom. German culture, he argued,
fell somewhere between Russian culture and the cultures of the rest of
Europe. That idea has experienced a dramatic resurgence in recent
Ma
months. Writing in Der Spiegel in April 2014, Winkler, the historian,

criticized the so-called Russlandversteher, Germans who express support
for Russia, for repopularizing “the myth of a connection between the
souls of Russia and Germany.”
In crafting a response to Russia’s annexation of Crimea, then,
Merkel had to walk a fine line. She sought to keep open the possibility

Hans Kundnani
of a political solution for as long as possible, spending hours on the

phone with Putin and sending Steinmeier to help mediate between
oscow and Kiev. It was only after alaysia Airlines Flight 17 was
M
M
shot down on July 17, 2014, allegedly by pro-Russian separatists, that
German officials felt comfortable adopting a tougher stance. ven
E
then, public support for sanctions remained tepid. An August poll by
the ard found that 70 percent of Germans supported urope’s sec-
E
ond round of sanctions against Russia, which included banning visas
for and freezing the assets of a list of prominent Russian business-
m
people. But only 49 percent said that they would continue to back
sanctions even if they hurt the German economy—as the third round
of sanctions likely will.
hi
Popular support for sanctions could slip further if Germany goes
into recession, as many analysts say it might. Although German
businesses have reluctantly accepted the sanctions, they have contin-
ha
ued to lobby erkel to ease them. And even as its economic efforts
M
come under threat, Germany has made it clear that military options
are not on the table. Ahead of the nato summit in Wales in September,
iT
erkel opposed plans for the alliance to establish a permanent
M
presence in eastern urope, which she argued would violate the 1997
E
nato-Russia Founding Act. Put simply, Germany may not have the
stamina for a policy of containment toward Russia.
Al
pivot
to
china
Germany has also grown closer to China, an even more significant
od
harbinger of a post-Western German foreign policy. As it has with

Russia, Germany has benefited from increasingly close economic ties
with China. In the past decade, German exports there have grown
exponentially. By 2013, they added up to $84 billion, almost double
so
the value of German exports to Russia. Indeed, China has become the
second-largest market for German exports outside the eu, and it may
soon overtake the United States as the largest. China is already the
biggest market for olkswagen—Germany’s largest automaker—and
Ma
V
the ercedes-Benz S-Class.
M
The relationship between Germany and China grew only stronger
after the 2008 financial crisis, when the two countries found them-
selves on the same side in debates about the global economy. Both
have exerted deflationary pressure on their trading partners, criticized
the U.S. policy of quantitative easing, and resisted calls from the United

States to take action to rectify macroeconomic imbalances in the

global economy. Germany and China have, simultaneously, become
closer politically. In 2011, the two countries began holding an annual
government-to-government consultation—in effect, a joint cabinet
meeting. The event marked the first time that China had conducted
such a broad-based negotiation with another country.
For Germany, the relationship is primarily economic, but for China,
which wants a strong urope to counterbalance the United States,
E
it is also strategic. China may see Germany as the key to getting
m
the kind of urope it wants, partly because Germany appears to
E
be increasingly powerful within urope but perhaps also because
E
German preferences seem closer to its own than do those of other eu
hi
member states, such as France and the United Kingdom.
The tighter Berlin-Beijing nexus comes as the United States
adopts a tougher approach to China as part of its so-called pivot to
ha
Asia—and it could pose a major problem for the West. If the United
States found itself in conflict with China over economic or security
issues—if there were an Asian Crimea, for instance—there is a real
iT
possibility that Germany would remain neutral. Some German
diplomats in China have already begun to distance themselves from
the West. In 2012, for example, the German ambassador to China,
ichael Schaefer, said in an interview, “I don’t think there is such
Al
M
a thing as the West anymore.” Given their increasing dependence on
China as an export market, German businesses would be even more
opposed to the imposition of sanctions on China than on Russia.
od
The German government would likely be even more reluctant to

take tough action than it has been during the Ukraine crisis, which
would create even greater rifts within urope and between urope
E
E
and the United States.
so
AG
erman
europe
Fears of German neutrality are not new. In the early 1970s, Henry
Kissinger, then the U.S. national security adviser, warned that West
Ma
Germany’s Ostpolitik could play into the hands of the Soviet Union
and threaten transatlantic unity. He argued that closer economic
ties with the Soviet Union would increase urope’s dependence on
E
its eastern neighbor, thereby undermining the West. The danger
Kissinger foresaw was not so much that West Germany might leave
nato but, as he put it in his memoir, that it might “avoid controversies

Hans Kundnani
outside of urope even when they affected fundamental security
E
interests.” Fortunately for Washington, the Cold War kept such
impulses in check, as West Germany relied on the United States for
protection against the Soviet Union.
Now, however, Germany finds itself in a more central and stronger
position in urope. During the Cold War, West Germany was a
E
weak state on the fringes of what became the eu, but the reunified
Germany is now one of the strongest—if not the strongest—power
in the union. Given that position, a post-Western Germany could
m
take much of the rest of urope with it, particularly those central
E
and eastern uropean countries with economies that are deeply
E
intertwined with Germany’s. If the United Kingdom leaves the eu,
hi
as it is now debating, the union will be even more likely to follow
German preferences, especially as they pertain to Russia and China.
In that event, urope could find itself at odds with the United
ha
E
States—and the West could suffer a schism from which it might
never recover.∂
iT
Al
od
so
Ma

Under the Sea

The ulnerability of the Commons
V
Robert Martinage
m
I
n recent years, U.S. officials have grown increasingly fearful of a
massive cyberattack, one capable of crippling infrastructure and
hi
crashing markets. In 2010, William Lynn, then deputy secretary
of defense, wrote in these pages that cyberspace was “just as critical to
military operations as land, sea, air, and space.” As defense secretary,
ha
Leon Panetta warned of a “cyber–Pearl Harbor.” And in 2013, James
Clapper, the director of national intelligence, put cyberattacks at the
top of his annual list of transnational threats.
iT
et as Washington has poured billions of dollars into shoring up its
Y
defenses in the virtual world, it has largely ignored the physical infra-
structure that allows cyberspace to exist in the real one. Today, roughly
95 percent of intercontinental communications traffic—e-mails, phone
Al
calls, money transfers, and so on—travels not by air or through space

but underwater, as rays of light that traverse nearly 300 fiber-optic
cables with a combined length of over 600,000 miles. For the most
od
part, these critical lines of communication lack even basic defenses, both
on the seabed and at a small number of poorly guarded landing points.
And a mounting tally of small-scale breaches points to the potential
for large-scale damage.
so
Washington’s neglect of undersea infrastructure extends beyond

cables to an increasingly important source of global oil and gas sup-
ply: deep-water drilling. Today, offshore rigs in the Gulf of exico
M
account for some 25 percent of total U.S. oil and gas production—a
Ma
figure the Department of nergy predicts could reach 40 percent by

E
2040. Outside the United States, global production from deep-water
wells has risen from 1.5 million barrels per day in 2000 to over six
million barrels per day in 2014. As the infrastructure for offshore
robert martinage is a Senior Fellow at the Center for Strategic and Budgetary
Assessments. From 2010 to 2013, he served as Deputy Undersecretary of the U.S. Navy.

Robert Martinage
drilling grows more sophisticated and widespread, it is also becoming

more susceptible to attack, with the potential consequences exceeding
those of the giant 2010 oil spill in the Gulf of exico.
M
Although human activities underwater are regulated by numerous
international bodies, no single entity has both the authority and the
ability to take the lead. In the United States, the Coast Guard is
responsible for enforcing security plans at the largest offshore energy
platforms and protecting underwater structures at some ports. et no
Y
government agency or department has responsibility for the defense
m
of the country’s submerged energy and cable infrastructure. As a
consequence, two of the most critical sectors of the U.S. economy—
communications and energy—could easily fall prey to a well-organized
hi
terrorist plot or a foreign attack. Fortunately, Washington still has
time to correct course.
ha
what
lies
beneath
British engineers laid the first submarine telegraph line across the
nglish Channel in 1850. ight years later, an effort backed by the
E
E
iT
American financier Cyrus Field bridged the Atlantic, linking Ireland
to Newfoundland with a telegraph wire that eventually transmitted
almost seven words per minute. After Alexander Graham Bell invented
the telephone in 1876, the first underwater telephone cable soon
Al
followed, carrying conversations beneath the San Francisco Bay.

Although the number of cables proliferated, their speed and capacity
stagnated until the introduction of two key advances during the
od
1920s and 1930s: coaxial copper cores and polyethylene insulation,

which allowed individual cables to carry multiple voice channels
and provided improved durability. In subsequent decades, capacity
soared, rising from 36 voice channels per cable in the 1950s to around
so
4,000 in the 1970s. Nevertheless, installation and maintenance

costs remained high, making satellites decidedly more attractive for
carrying telephone traffic. Until the 1980s, satellites could provide
almost ten times as much capacity as submarine cables while requiring
Ma
only one-tenth as large an investment.

But then fiber-optic technology revolutionized global communica-
tions. In 1988, a consortium of British, French, and U.S. telecommuni-
cations firms laid the first fiber-optic cable across the Atlantic.
Tat-8, as the line was called, could carry 40,000 telephone calls
simultaneously—an order of magnitude greater than most existing

Under the Sea
coaxial cables could handle and at a fraction of the previous cost.

Today’s fiber-optic cables can transmit an amount of data equivalent
to the entire printed collection of the Library of Congress in about
20 seconds.
As a result, companies, governments, and individuals can send
and receive more data than ever before. In 1993, Internet users trans-
mitted around 100 terabits of data in a year; today, they send about
150 terabits every second. And this number is expected to exceed
1,000 terabits by 2020, fueled in large part by the expansion of cellular
m
networks in Africa, Asia, and the iddle ast.
M
E
Nearly all that data will travel along the seabed. Imagine, then,
how damaging a determined attack on undersea infrastructure could
hi
be. One need only consider the destruction possible from natural
causes and inadvertent interference.
In 2006, an undersea earthquake near
ha
Taiwan snapped nine cables. It took
Some 95 percent of
11 ships 49 days to finish repairs, intercontinental
while China, Japan, the Philippines, communications travel
iT
Singapore, Taiwan, and ietnam lost underwater.
V
critical communication links, disrupting
regional banking, markets, and trade.
In 2007, ietnamese fishermen seeking to salvage copper from a
Al
V
defunct coaxial cable pulled up active lines instead, disrupting
ietnam’s communications with Hong Kong and Thailand for
V
nearly three months and requiring repairs that cost millions. Given
od
the scarcity of equipment and personnel, it could take months, if not

years, for the United States to recover from a large-scale, coordinated
assault. Attackers wouldn’t even need to target U.S. assets, since
U.S. traffic flows through more than a dozen other countries that
so
serve as major hubs for the global undersea cable network.

uch of this infrastructure allows the global economy to function.
M
very day, swift, the Society for Worldwide Interbank Financial
E
Telecommunication, transmits some 20 million messages to more than
Ma
8,000 banking organizations, security institutions, and corporate

customers in nearly 200 countries, reconciling trillions of dollars’
worth of assets across global financial markets. Intercontinental
xchange, which operates a global network of currency exchanges
E
and clearing-houses, typically processes over ten million contracts each
day, covering the energy, commodity, financial, and equity derivatives

Robert Martinage
markets. Without the undersea fiber-optic network, this type of

electronic banking and commerce simply could not happen. And in
the event that the cable system shut down, millions of transactions
would be cut short.
Thanks to a number of factors, moreover, a major attack turns out
to be surprisingly feasible. For one, fiber-optic cables, which are
typically one to two inches thick, generally follow routes that avoid
high-traffic shipping lanes, fishing areas, and sensitive environmental
locations. Although that helps minimize the risk of accidental damage,
m
it means that cables tend to land at only about two dozen major sites
around the world. Of the roughly 40 major submarine cables that
connect the United States to the world’s global
hi
undersea communications network, nearly
all make landfall at narrow stretches of coast
in California, Florida, New Jersey, New ork,
ha
Y
and Oregon. On the ast Coast, nearly every
E
transatlantic cable comes ashore within only
tens of miles of one another in the New ork–
Y
iT
New Jersey area.
To make matters worse, maps of many cable
routes are easily accessible to the public. very
E
year, operators report around 100 to 150 cases of
Al
major damage, roughly 70 percent of which are the

result of human activities such as fishing and anchoring.
That’s why submarine cable locations appear on nautical
od
charts. Some cables even have acoustic beacons to make them

easier to find. Information about global cable routes, meanwhile, is
available on the Internet, making it easy to discern a given country’s
weak spots.
so
With detailed coordinates at their fingertips, foreign militaries

could target U.S. cables using remote-controlled submarines equipped
Ma

Under the Sea
with high-resolution sonar and loaded with explosives. The

barrier to entry for this type of undersea warfare is rela-
tively low, as several different companies now sell such tech-
nology on the consumer market. In fact, thousands of
undersea vehicles, operated semiautonomously or
remotely, are already in service worldwide. A well-
financed terrorist group could easily get
its hands on one in order to target key
cables and junction points. It could also
m
opt for brute force, using
fishing trawlers equipped with
deep-sea grappling hooks to
hi
maul cables in shallower waters.
The global undersea cable
network does have a good deal
ha
of spare capacity, enabling the
swift rerouting of global com-
munications traffic in the event
iT
of an emergency like the
2006 Taiwan earthquake.
et a well-planned attack
Y
could take this into account,
Al
targeting multiple intercontinental sub-

marine cables, shore-based terminals, and coastal connection points.
In the attack’s aftermath, service providers would likely struggle to
od
cooperate, scrambling to repair their own networks by hoarding

skilled personnel and scarce hardware.
so
crude
awakening
The first offshore oil rigs appeared in California in 1896, not long
after the first undersea telephone lines were put in place. But the
Ma

Robert Martinage
industry stalled for decades. In the late 1940s, drilling came to a

virtual standstill owing to disputes between state and federal au-
thorities over the power to issue leases for oil exploration. But in
1953, U.S. President Dwight isenhower, who had campaigned on
E
the issue, passed legislation empowering states to grant leases for
activity up to three (and in some cases nine) nautical miles from
the coastline and the U.S. Department of the Interior to sign off on
drilling in areas beyond state jurisdiction. At first, U.S. offshore oil
production rose steadily, from 133,000 barrels per day in 1954 to
m
1.7 million in 1971. Following a slew of new regulations in the 1970s
and a steep decline in oil prices in the 1980s, however, growth slowed
once again.
hi
As interest waned, a dramatic shift was quietly under way in the
Gulf of exico. New platform and drilling technologies were making
M
it affordable to tap rich reserves of oil and gas at greater depths.
ha
Whereas an average-performing well
in shallow water typically yielded a
Undersea cable cutting few thousand barrels of oil per day,
was once a regular part
iT
deep-water fields provided upward of
of warfare. 10,000 barrels. Shell’s Auger field,
which the firm discovered in 1987,
eventually reached a maximum output of over 100,000 barrels. Using
Al
newly available three-dimensional seismologic tools, other energy

companies, including Amoco, British Petroleum, Conoco, xxon,
E
and obil, also took part in the deep-water hunt.
M
od
Like the global undersea cable network, the United States’ deep-
water drilling infrastructure is rapidly expanding while remaining
almost entirely undefended. Drilling operations around the world,
whether in the Bay of Bengal or the South China Sea, face similar risks.
so
What’s more, as offshore energy infrastructure grows more complex,

it is also developing new weaknesses. Today, a single production plat-
form might draw on several undersea fields tens of miles apart. ach of
E
those fields might have multiple wells linked by remotely controlled
Ma
pipelines—potential targets for a hostile force. These mega-platforms

are becoming increasingly important sources of supply: although the
Gulf of exico is home to over 4,000 platforms, roughly one percent
M
of them produce nearly 75 percent of the region’s total output.
A major attack on deep-water drilling infrastructure could have
many immediate effects, but two stand out. First, the environmental

Under the Sea
damage could be devastating. Residents around the Gulf of exico
M
are still feeling the repercussions of the 2010 explosion on bp’s
Deepwater Horizon rig, and the cleanup costs have already reached
into the tens of billions. et Deepwater Horizon was only one of
Y
thousands of production platforms and drilling rigs in the Gulf of
exico, many of which belong to vast networks of undersea wells,
M
pumps, and valves connected by thousands of miles of pipeline.
Second, an attack could cause a major disruption in global energy
supplies. About one-third of global oil production now occurs off-
m
shore, with the largest fields in the Persian Gulf and the Caspian
Sea. Onshore facilities along the Gulf Coast that are connected to
sea-based ports by submarine pipelines account for over 40 per-
hi
cent of total U.S. oil-refining capacity and over 30 percent of U.S.
natural-gas-processing capacity. Both in the United States and
elsewhere, oil companies have increasingly ventured into deep and
ha
ultradeep water (greater than 1,000 and 5,000 feet, respectively).
Over the past decade, global investment in offshore oil and gas
infrastructure has steadily increased, from about $100 billion to over
iT
$300 billion annually. The estimated volume of newly discovered
oil and gas reserves in deep water now exceeds that onshore and
in shallow water. And by 2035, forecasts suggest, deep-water wells
will account for 11 percent of total global production, up from six
Al
percent in 2013.
drilling
down
od
Submarine infrastructure is already vulnerable to attack and will

become even more so in the coming years, especially as undersea
vehicles grow more advanced and accessible. Unprotected cables
and energy infrastructure could provide adversaries with all kinds
so
of opportunities to gain the upper hand. Hostile forces could, for

instance, plant explosive charges in sensitive locations and threaten
to pull the trigger. Or they could set off explosions without warning,
throwing markets into chaos and disrupting military command-and-
Ma
control systems. State and nonstate actors could conduct anonymous

attacks or act under a false flag. Attributing responsibility for a
covert attack would prove challenging, making deterrence extremely
difficult. Such moves wouldn’t be unprecedented, of course: before
undersea fiber optics dominated global communications, cable cutting
was a regular part of warfare. In 1914, the United Kingdom severed

Robert Martinage
all five of Germany’s undersea cables in the nglish Channel the day
E
after declaring war, and belligerents regularly snipped enemy cables
during World War II. But today, it would be more difficult to sever fiber-
optic lines without affecting a much larger and more interdependent
system—making a potential attack all the more damaging.
Washington, meanwhile, has been slow to protect this Achilles’
heel. The Coast Guard, a component of the U.S. Department of
Homeland Security, is responsible for maritime security, so protecting
undersea infrastructure would presumably fall under its brief. But
m
the agency remains narrowly focused on port security and, to a lesser
degree, surface platforms on the continental shelf. It has fielded
underwater surveillance systems to detect intruders and operates a
hi
small number of unmanned undersea vehicles—but mostly to protect
ports, as well as to inspect pier structures and ship hulls.
The United States must do better. Although no panacea exists
ha
for protecting undersea infrastructure, Washington can and should
adopt a number of concrete measures to reduce the likelihood of
an attack and the consequences if one occurs. Although it would
iT
make sense for the Coast Guard to take on this mission, the agency
currently lacks the manpower and expertise to do so effectively. The
U.S. Navy, by contrast, has the requisite personnel and know-how
but lacks law enforcement authority. Washington should therefore
Al
task the Coast Guard and the navy to work jointly, with new funding
specifically tied to securing undersea infrastructure.
As a first step, the United States could declare protection zones
od
within its existing exclusive economic zone—the maritime area in

which Washington has special exploration and resource-exploitation
rights—above critical undersea infrastructure, prohibiting unau-
thorized loitering and high-risk activities such as dredge fishing and
so
anchoring. Some countries, including Australia and New Zealand,

have already banned bottom trawling and anchoring near important
fiber-optic lines. Given the vast expanse of ocean that would need
to be monitored, enforcing such a ban would be difficult. But amending
Ma
existing regulations would help. U.S. laws currently require certain

types of large ships within “all navigable waters of the United States”
to publicly broadcast their speed and direction. Authorities can use
that information to monitor boats that are loitering too long in
waters above or near critical undersea infrastructure. But smaller ships
not covered by those rules can still operate huge winches capable of

Under the Sea
handling heavy grappling hooks or cranes that launch and retrieve

undersea vehicles. Accordingly, Washington should require all ships
with the capacity to mount an undersea assault to broadcast their
positions. Since attackers might conceal their positions, the Coast
Guard would also need to monitor the protected zones with coastal
radar, surveillance aircraft, unmanned aerial vehicles, and surface
patrols—a daunting and expensive proposition. To minimize costs,
the agency could prioritize undersea infrastructure of the highest
value, focusing on narrow fiber-optic cable corridors and a relatively
m
small number of mega-platforms and deep-water ports.
With the exception of crude, grappling-hook-style attacks on the
open sea and scuba-diver assaults in shallow water, nearly all other
hi
strikes on undersea infrastructure would require underwater vehicles.
Given how dark it gets at low depths, those vehicles typically use
high-frequency sonar to guide their course. Industry could be required
ha
to place relatively cheap sensors that detect sonar frequencies near
key undersea infrastructure and along cable routes. If the sensors were
tripped, they could alert nearby Coast Guard or navy vessels. To pro-
iT
vide additional early warning capabilities, Washington could place
acoustic sensors on the seabed or equip unmanned underwater vehicles
to tow them in high-risk areas.
In addition to interdicting hostile vehicles, the U.S. government
Al
could increase the physical barriers in their way. To some degree,

long stretches of submarine cables on the continental shelf already
enjoy physical protection: many are buried underneath three to ten
od
feet of seabed out to a water depth of about 5,000 feet. Although that
layer prevents damage from dredge fishing and anchoring, it does
not necessarily protect against explosives or physical attacks, so it
may make sense to bury the cables at even greater water depths. And
so
where pipelines from multiple deep-water oil fields come together,

even rudimentary fences—metal nets strung between posts secured
to the seabed—could do the trick. Since such barriers could stand
in the way of routine inspections and maintenance, they would need
Ma
to be used selectively.
Finally, Washington needs to prepare for the fallout if an attack
succeeds. Undersea equipment is difficult to replace, so building
redundant cable lines today could save billions of dollars in the
future. To minimize the risk that a single attack could trigger a
systemwide failure, the federal government could mandate new cable


Robert Martinage
landing sites and offer tax incentives to firms that invest in redundant
cable systems and backup hardware. Similarly, encouraging firms to
build more deep-water ports—currently, oil and natural gas tankers
rely on just a few—would make it more difficult for an attack on some
of them to disrupt energy markets. There are also ample opportunities
to cut red tape by streamlining the burdensome regulations that
govern construction on the seabed. At the federal level, the permitting
process can involve more than a half dozen agencies and take anywhere
from a few weeks to a few years to complete. And pursuing a new
m
global accord to monitor, protect, and repair transoceanic submarine
cables would allow Washington to share the burden of repairing those
cables in times of crisis.
hi
Such policies would not be foolproof, but they would make it
harder for an adversary to launch a successful attack. Their cost would
be relatively low in comparison to the potential losses that would
ha
result from a global communications traffic jam or a massive oil spill.
Yet the greatest barrier to reform is not funding; it is invisibility.
Fiber-optic cables and offshore oil rigs work well and out of sight,
iT
and consumers tend to treat such critical infrastructure like oxygen,
acknowledging its importance in theory but assuming its continued
presence. If taken away, however, the effects would surely prove suf-
focating; minimizing the chances of a worst-case scenario, however
Al
remote they might seem, would be well worth the investment.∂

od
so
Ma

Darkness Invisible
The Hidden Global Costs of Mental Illness
Thomas R. Insel, Pamela Y. Collins, and
Steven E. Hyman
m
F
our years ago, a team of scholars from the Harvard School
hi
of Public Health and the World Economic Forum prepared a
report on the current and future global economic burden of
disease. Science and medicine have made tremendous progress in
ha
combating infectious diseases during the past five decades, and the
group noted that noncommunicable diseases, such as heart disease
and diabetes, now pose a greater risk than contagious illnesses. In
iT
2010, the report’s authors found, noncommunicable diseases caused
63 percent of all deaths around the world, and 80 percent of those
fatalities occurred in countries that the World Bank characterizes as
low income or middle income. Noncommunicable diseases are partly
Al
rooted in lifestyle and diet, and their emergence as a major risk,

especially in the developing world, represents the dark side of the
economic advances that have also spurred increased longevity, urban-
od
ization, and population growth. The scale of the problem is only going
to grow: between 2010 and 2030, the report estimated, chronic non-
communicable diseases will reduce global gdp by $46.7 trillion.
These findings reflected a growing consensus among global health
so
experts and economists. But the report did contain one big surprise:
it predicted that the largest source of those tremendous future costs
would be mental disorders, which the report forecast would account
for more than a third of the global economic burden of noncommuni-
Ma
cable diseases by 2030. Taken together, the direct economic effects of

thomas r. insel is Director of the National Institute of Mental Health.
pamela y. collins is Director of the Office for Research on Disparities and Global
Mental Health at the National Institute of Mental Health.
steven e. hyman is Director of the Stanley Center for Psychiatric Research at the
Broad Institute of Harvard and MIT.

Thomas R. Insel, Pamela Y. Collins, and Steven E. Hyman
mental illness (such as spending on care) and the indirect effects (such
as lost productivity) already cost the global economy around $2.5 trillion
a year. By 2030, the team projected, that amount will increase to around
$6 trillion, in constant dollars—more than heart disease and more than
cancer, diabetes, and respiratory diseases combined.
These conclusions were dramatic and disturbing. Yet the report
had virtually no impact on debates about public health policy, mostly
because it did not manage to dislodge persistent and harmful misper-
ceptions about mental illness. In wealthy countries, most people
m
continue to view mental illness as a problem facing individuals and
families, rather than as a policy challenge with significant economic
and political implications. Meanwhile, in low-income and middle-
hi
income countries and within international organizations, officials tend
to view mental illness as a “First World problem”; according to that
view, worrying about mental health is a luxury that people living in
ha
severe poverty or amid violent conflict cannot afford.
In reality, in countries of all levels of wealth and development,
mental illness affects almost every aspect of society and the economy.
iT
And far from lacking relevance or urgency in poor and war-torn
countries, mental illness often contributes to the very dysfunctions
that plague such places. Moreover, breakthroughs in therapy and
treatment have significantly improved the efficacy—and lowered the
Al
cost—of caring for people who suffer from mental illness, even in
places that have traditionally lacked access to mental health services.
Policymakers, mental health professionals, and advocates for the
od
mentally ill should take advantage of this progress. To do so, they

first must change the way people—including they themselves—think
about and talk about mental illness.
so
brain drain
People underestimate the costs and significance of mental illness for
many reasons. At the most basic level, policymakers and public health
officials tend to view mental illness as fundamentally different from
Ma
other medical problems. But just like other diseases, mental illnesses
are disorders of a bodily organ: the brain. In this respect, they are no
different from other noncommunicable diseases.
Most people also do not realize just how common mental disorders
are, in part because such illnesses are stigmatized and thus often hidden.
The U.S. Department of Health and Human Services estimates that

Darkness Invisible
m
hi
ha
The hidden epidemic: in a mental hospital in Shanxi Province, China, October 2010
iT
in 2012, 43.7 million Americans over the age of 18 suffered from some
kind of mental disorder—18.6 percent of the country’s adult population.
Nearly ten million of those people, or 4.1 percent of adult Americans,
struggled with serious mental illnesses, such as psychotic disorders.
Al
Even in the United States, where treatment for such problems is

relatively accessible, many people do not seek or receive care until
their disorders have become chronic and disabling, a length of time
od
that one recent study found to be 11 years, on average.

Mental disorders are also far more disabling than most people real-
ize, often preventing the afflicted from working, studying, caring for
others, producing, and consuming. In a 2012 report on the global
so
economic burden of disease, the World Health Organization noted

that mental illnesses and behavioral disorders account for 26 percent
of the time lost to disability—more than any other kind of disease.
The impact of mental illnesses is magnified by the fact that such
Ma
disorders afflict mostly young people, in contrast to other chronic

REUTERS / STRINGER
noncommunicable diseases, such as heart disease or cancer, which

generally appear later in life. A 2005 study conducted by researchers
at Harvard Medical School, the University of Michigan, and the
National Institute of Mental Health found that 75 percent of adults
suffering from mental illness reported that their symptoms began

before they turned 25. The first signs of psychosis in people with
schizophrenia typically arrive between the ages of 18 and 23; autism
begins to affect people before the age of three. Such early onset explains
why mental disorders represent by far the largest source of disability—
and hence lost productivity—for people between the ages of 15 and
44, a crucial period in life during which people transition from school
to work, find partners, start families, and build careers.
Another little-understood aspect of mental disorders is that they
are not merely disabling; they are deadly. Although many factors lead
m
people to end their own lives, the American Foundation for Suicide
Prevention estimates that mental illness plays a role in 90 percent
of suicides. The World Health Organization estimates that some
hi
800,000 people commit suicide every year, 75 percent of them in
low-income and middle-income countries. Globally, more than twice
as many people die from suicide as die from homicide each year, and
ha
suicide is the second-largest source of mortality for people aged 15 to
29, topped only by traffic accidents.
Finally, mental disorders act as a gateway to a range of other costly
iT
public health problems. Suffering from a mental illness increases one’s
chances of contracting hiv and of developing heart disease, pulmonary
diseases, and diabetes; it also raises one’s risk of homelessness, poverty,
and institutionalization, including imprisonment—all of which
Al
represent further burdens on society.
attention deficit
od
Despite these profound costs, mental illness receives surprisingly

little attention and resources from governments and international
organizations. Globally, annual spending on mental health amounts
to less than $2 per person; on average, low-income countries spend
so
less than 25 cents per person. The median amount that countries
spend on mental health equals less than three percent of the
median amount that they spend on all health care, even though mental
illness accounts for over 20 percent of all health-care costs. And
Ma
the poorer the country, the worse the problem: the World Health
Organization estimates that the majority of countries at low and
lower-middle levels of income devote less than two percent of their
health budgets to treating mental disorders. In such countries, up
to 85 percent of people with severe mental illness receive no treat-
ment at all.

Darkness Invisible
Losing it
Top Ten Sources of Time Lost to Disability Globally From All Medical
Causes, by Percentage
Mental and behavioral disorders 26%
Musculoskeletal diseases 14%
Neurological and sense-

13%
organ conditions
Infectious diseases 8%
m
Nutritional deficiencies 7%
Respiratory diseases 7%
hi
Injuries 6%
Endocrine, blood, and
immune disorders; diabetes 4%
Cardiovascular diseases
Genitourinary diseases
ha
3%
3%
source: World Health Organization, 2012.

iT
Even wealthy countries devote few resources to mental disorders
relative to the economic costs they impose. According to the Centre
for Economic Performance at the London School of Economics,
Al
mental illness costs the British economy around 70 billion pounds

in lost productivity and health-care expenditures every year and
accounts for 23 percent of the burden that disease places on the
od
United Kingdom, and yet the National Health Service devotes only
13 percent of its expenditures to mental disorders. Nor are interna-
tional organizations any better attuned to the problem: mental illness
went completely unmentioned in the un’s Millennium Development
so
Goals (mdgs), and until recently, most of the major organizations

addressing global health and disaster relief paid little attention to the
mental health needs of the populations they served.
Owing to this lack of attention and awareness, the costs of treating
Ma
mental illness often fall outside health-care sectors. In the United

States, for instance, most states have almost completely dismantled
the system of mental hospitals that once oversaw care for the mentally
ill. As a result, Americans with serious mental illness are ten times
as likely to be imprisoned as to be in hospitals. In a sense, through
welfare programs, social services, and jails and prisons, many countries

wind up spending on the effects of mental illness—such as unemploy-

ment, homelessness, and incarceration—rather than the underlying
causes. In the United States, such indirect costs represent two-thirds
of the economic burden of mental health problems—a figure that
makes sense considering that 30 percent of the country’s chronically
homeless and more than 20 percent of the people incarcerated in the
United States suffer from a mental disorder.
a first wor d prob em?
m
l
l
Compared with wealthy countries, low-income and middle-income
countries face an even starker challenge when it comes to mental
health: a lack of expertise and a shortage of professionals. Residents of
hi
wealthy countries enjoy a relatively high concentration of mental health
specialists: high-income countries have, on average, nine psychiatrists
for every 100,000 people. But almost half of the world’s population
ha
lives in countries where, on average, there is only one psychiatrist for
every 200,000 people; in many African countries, there is only one
psychiatrist per every one million people.
iT
In the short term, these numbers are not likely to improve much.
But people suffering from mental illness in poorer places could benefit
from a relatively new trend in the field: the so-called task-sharing
approach, in which professionals train a range of providers—from
Al
nurses and social workers to peers and family members—to care for
those with mental illness. Controlled trials have already demonstrated
the promise this approach holds, even in places with few established
od
mental health resources. In a report published in The New England

Journal of Medicine in 2013, a team led by Judith Bass, a mental health
specialist at Johns Hopkins University, described a controlled trial
it had carried out in 2011 involving around 400 women in 16 villages
so
in the Democratic Republic of the Congo who had suffered sexual

violence and exhibited symptoms of posttraumatic stress disorder,
depression, or anxiety. To test the efficacy of a task-sharing ap-
proach to caring for these women, clinical experts from the United
Ma
States spent five or six days training local women in how to provide
cognitive-processing therapy, which focuses on helping people to
stop avoiding their problems and instead solve them by changing
their behavior.
The local assistants used that approach to treat one set of the
victims of violence, 70 percent of whom suffered from symptoms of

Darkness Invisible
depression and anxiety disorders before the trial began. A control

group of other victims, 83 percent of whom were experiencing such
symptoms, received only individual support from the assistants.
The results were remarkable: after six months, only ten percent of the
women who had received the cognitive-processing therapy still appeared
to be suffering from depression or anxiety disorders, compared with
42 percent of those who had received just individual support.
In a 2008 article in The Lancet, a team of researchers reported
similar results from a controlled trial in rural Pakistan, in which the
m
team trained community health workers to provide a form of treat-
ment resembling cognitive-behavioral therapy to women struggling
with prenatal or postpartum depression. Women in 20 rural areas
hi
received treatment from the trainees; a control group of women in
20 other areas received care from workers who had not been trained.
When the treatment period ended, only 23 percent of the women
ha
who had received care from the trained workers showed symptoms
consistent with prenatal or postpartum depression, compared with
53 percent of those in the control group.
iT
The results in Congo and Pakistan suggest that task-sharing
approaches can produce results equal to or even better than those
achieved by such treatments in wealthy countries, where they
have been used, to cite one example, to care for U.S. military vet-
Al
erans struggling with posttraumatic stress disorder. And in both

Congo and Pakistan, women who received psychotherapeutic
treatment showed not only substantial decreases in symptoms but
od
also improvements in overall health and well-being. Nor were

they the only beneficiaries: the women who received such treatments
in Pakistan were also more likely to obtain crucial vaccines for
their children.
so
paging bi gates
ll
Another obstacle hindering mental health care in the developing world
is that many donors, public health specialists, and government officials
Ma
believe that mental illness cannot be addressed with the kinds of

low-cost, simple interventions that have made such a difference in
the fight against other diseases in poor countries—think of polio
vaccines and bed nets to prevent the spread of malaria, for example.
In fact, similarly safe, effective, and inexpensive treatments exist for
the most prevalent mental disorders.

Medications that relieve the most disabling symptoms of depres-

sion, psychosis, anxiety, and bipolar disorder have been available
for five decades and now exist in relatively inexpensive generic for-
mulations. A 2012 World Health Organization study showed that
among 58 low- and middle-income countries, a typical course of such
psychiatric medications costs, on average, approximately four percent
of an individual’s daily income. Although such treatments must be
prescribed and managed by medical professionals, the paucity of
psychiatrists in poorer countries would not necessarily present an
m
obstacle to making psychiatric medications more widely available.
After all, even in the developed world, most antidepressants and
anti-anxiety medications are prescribed not by psychiatrists but by
hi
primary-care practitioners.
But perhaps the most promising new treatments for the most
common mood and anxiety disorders have emerged thanks to tech-
ha
nological innovation. As the Internet and mobile technology have
spread, psychological treatments are no longer limited to those who
can visit a psychotherapist’s office. More than five billion people all
iT
over the world now have access to mobile devices that could allow
them to receive psychotherapeutic interventions ranging from text
messages that provide self-help strategies to computer games that
incentivize positive changes in behavior. A group of psychiatric
Al
researchers in Australia recently found that a Web-based program

reduced depressive and anxiety symptoms by allowing users to
complete interactive modules on topics such as “managing fear and
od
anxiety” and “tackling unhelpful thinking.” And even in places

where few people have smartphones, the spread of basic cellular ser-
vice means that providers can still reach far more potential patients
by phone than ever before.
so
out of the shadows

Even if donors, international organizations, and governments came to
better understand the massive costs associated with mental illness and
Ma
the feasibility of treatments, genuine progress would still rely on a

number of systemic changes. First, there is a basic need for increased
awareness of the scope of the problem. In rich and poor countries
alike, mental health advocates must do a better job of explaining to
officials and the public the true costs of mental illness, encouraging
people to understand how the problem affects not only individuals and

Darkness Invisible
families but also entire communities and economies. “No health with-
out mental health” has become a rallying cry for reformers, but such
slogans frequently fall on deaf ears. Mental health advocates could
win more allies within the medical profession by drawing attention to
the fact that improved mental health leads to better overall health.
Second, countries at every economic level must better integrate
mental health care into their broader health-care systems. In wealthy
countries, two simple steps would help: preparing more primary-care
providers to treat mental disorders and creating incentives for mental
m
health specialists and general medical practitioners to share facilities
and establish partnerships, which would make it easier for people to
get psychiatric and psychological care. In poorer countries, one step
hi
toward better integration would be to give community health workers,
who already monitor basic health needs, the ability to screen for com-
mon mental disorders, as well. For example, nurses who help patients
ha
stick to their hiv medication regimens could incorporate mental
health screening into their routines.
Finally, the international community needs to make a formal com-
iT
mitment to reducing the global economic burden of mental illness.
Although mental illness affects the achievement of several of the
un’s mdgs, such as empowering women, reducing child mortality,
improving maternal health, and reversing the spread of hiv, the
Al
goals made no mention of mental health. Now, the process of drafting

successors to the mdgs, the so-called Sustainable Development
Goals, is well under way. Mental health advocates involved in the pro-
od
cess are pushing for the establishment of specific targets, including a

ten percent reduction in suicide by 2020 and a 20 percent increase in
treatment for severe mental disorders by the same date. These are
achievable goals, but meeting them will require political will, public
so
and private investment, and coordination among the health, financial,

social-service, and educational sectors.
Such steps will go a long way toward reducing the damage mental
disorders inflict on societies and economies all over the world. But for
Ma
such measures to succeed, policymakers and experts must first pull

mental illness out of the shadows and into the center of debates about
global public health.∂

The G-Word
The Armenian assacre and the Politics
M
of Genocide
Thomas de Waal
m
O
ne hundred years ago this April, the Ottoman mpire began
hi
E
a brutal campaign of deporting and destroying its ethnic
Armenian community, whom it accused of supporting Russia,
a World War I enemy. ore than a million Armenians died. As it
ha
M
commemorates the tragedy, the U.S. government, for its part, still
finds itself wriggling on the nail on which it has hung for three
decades: Should it use the term “genocide” to describe the Ottoman
iT
mpire’s actions toward the Armenians, or should it heed the warn-
E
ings of its ally, Turkey, which vehemently opposes using the term
and has threatened to recall its ambassador or even deny U.S. access
to its military bases if the word is applied in this way? The first
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course of action would fulfill the wishes of the one-million-strong

Armenian American community, as well as many historians, who
argue that Washington has a moral imperative to use the term. The
od
second would satisfy the strategists and officials who contend that
the history is complicated and advise against antagonizing Turkey,
a loyal strategic partner.
No other historical issue causes such anguish in Washington. One
so
former State Department official told me that in 1992, a group of top

U.S. policymakers sat in the office of Brent Scowcroft, then national
security adviser to President George H. W. Bush, and calculated that
resolutions related to the topic were consuming more hours of their
Ma
time with Congress than any other matter. Over the years, the debate
has come to center on a single word, “genocide,” a term that has acquired
such power that some refuse to utter it aloud, calling it “the G-word”
Thomas de Waal is a Senior Associate at the Carnegie Endowment for International
Peace and the author of the forthcoming Great Catastrophe: Armenians and Turks in the
Shadow of Genocide. Follow him on Twitter @TomdeWaalCEIP.

The G-Word
instead. For most Armenians, it seems that no other label could possibly
describe the suffering of their people. For the Turkish government,
almost any other word would be acceptable.
U.S. President Barack Obama has attempted to break this dead-
lock in statements he has made on April 24, the day when Armenians
traditionally commemorate the tragedy, by evoking the Armenian-
language phrase Meds Yeghern, or “Great Catastrophe.” In 2010, for
example, he declared, “1.5 million Armenians were massacred or
marched to their death in the final days of the Ottoman mpire. . . .
m E
The Meds Yeghern is a devastating chapter in the history of the
Armenian people, and we must keep its memory alive in honor of
those who were murdered and so that we do not repeat the grave
hi
mistakes of the past.”
Armenian descendants seeking recognition of their grandparents’
suffering could find everything they wanted to see there, except one
ha
thing: the word “genocide.” That omission led a prominent lobbying
group, the Armenian National Committee of America, to denounce the
president’s dignified statement as “yet another disgraceful capitulation
iT
to Turkey’s threats,” full of “euphemisms and evasive terminology.”
In a sense, Obama had only himself to blame for this over-the-top
rebuke. After all, during his presidential campaign, he had, like most
candidates before him, promised Armenian American voters that he
Al
would use the word “genocide” if elected, but once in office, he had
honored the relationship with Turkey and broken his vow. His 2010
address did go further than those of his predecessors and openly
od
hinted that he had the G-word in mind when he stated, “ y view of

M
that history has not changed.” But if he edged closer to the line, he
stopped short of crossing it.
so
history
as
battleground
Back in 1915, there was nothing controversial about the catastrophe
suffered by ethnic Armenians in the Ottoman mpire. The oung
E
Y
Turkish government, headed by ehmed Talat Pasha and two others,
Ma
M
which ruled what was left of the empire, had entered World War I the
year before on the side of Germany, fighting against its longtime foe
Russia. The leadership accused Christian Armenians—a population
of almost two million, most of whom lived in what is now eastern
Turkey—of sympathizing with Russia and thus representing a potential
fifth column. Talat ordered the deportation of almost the entire people

Thomas de Waal
to the arid deserts of Syria. In the process, at least half of the men
were killed by Turkish security forces or marauding Kurdish tribesmen.
Women and children survived in greater numbers but endured appalling
depredation, abductions, and rape on the long marches.
Leading statesmen of the time regarded the deportation and
massacre of the Armenians as the worst atrocity of World War I.
One of them, former U.S. President Theodore Roosevelt, argued in
a 1918 letter to the philanthropist Cleveland Dodge that the United
States should go to war with the Ottoman mpire “because the
m E
Armenian massacre was the greatest crime of the war, and failure to
act against Turkey is to condone it.”
Some of the best sources on the horrific events were American.
hi
Because the United States had remained neutral during the war’s
early years, dozens of its diplomatic officials and missionaries in the
Ottoman mpire had stayed on the ground and witnessed what
ha
E
happened. In ay 1915, Henry orgenthau, the U.S. ambassador
M
M
in Turkey, delivered a démarche from the Ottoman mpire’s three
E
main adversaries—France, Russia, and the United Kingdom—that
iT
denounced the deportation of the Armenians. The statement condemned
the Ottoman government for “crimes against humanity,” marking the
first known official usage of that term. In July 1915, orgenthau cabled
M
to Washington, “Reports from widely scattered districts indicate
Al
systematic attempts to uproot peaceful Armenian populations.” These

actions, he wrote, involved arbitrary arrests, torture, and large-scale
deportations of Armenians, “accompanied by frequent instances of
od
rape, pillage, and murder, turning into massacre.”

At the other corner of the Ottoman mpire, Jesse Jackson, the U.S.
E
consul in Aleppo, watched as pitiful convoys of emaciated Armenians
arrived in Syria. In September 1916, Jackson sent a cable to Washington
so
that described the burial grounds of nearly 60,000 Armenians near

askanah, a town in today’s northern Syria: “As far as the eye can reach
M
mounds are seen containing 200 to 300 corpses buried in the ground pele
mele, women, children and old people belonging to different families.”
Ma
By the end of World War I, according to most estimates of the

time, around one million Armenians had died. Barely one-tenth of
the original population remained in its native lands in the Ottoman
mpire. The rest had mostly scattered to Armenia, France, Lebanon,
E
and Syria. any, in ever-greater numbers over the years, headed to
M
the United States.

The G-Word
m
hi
ha
History boys: Armenians demonstrating against Turkey in Athens, April 2013
iT
From the 1920s on, the events of the Great Catastrophe became
more a matter of private grief than public record. Ordinary Armenians
concentrated on building new lives for themselves. The main political
party active in the Armenian diaspora, the Armenian Revolutionary
Al
Federation (which had briefly ruled an independent Armenia in 1918–

20, before it became a Soviet republic), expended most of its efforts
fighting the Soviet Union rather than Turkey. Only in the 1960s
od
did Armenians seriously revive the memory of their grandparents’

suffering as a public political issue. They drew inspiration from
“Holocaust consciousness,” the urge for collective remembrance
and action that brought together the Jewish people after the 1961
so
trial of Adolf Eichmann for Nazi war crimes.

The Republic of Turkey, founded by Mustafa Kemal in 1923, was a
state rooted in organized forgetting—not only of the crimes commit-
ted in the late Ottoman period against Armenians, Assyrians, and
Ma
R E U T E R S / YA N N I S B E H R A K I S
Greeks but also of the suffering of the Muslim population in a string

of wars in Anatolia and the Balkans prior to 1923. As the new Turkish
state developed, the vanishing of the Armenians became a political,
historical, and economic fait accompli. In Turkey, only one substan-
tial book addressing the issue was published between 1930 and the
mid-1970s.

Thomas de Waal
When Turkish historians finally returned to the topic in the late

1970s, they did so in response to a wave of terrorist attacks on Turkish
diplomats in Western urope, most of them carried out by Armenian
E
militants based in Beirut. The campaign set off a war among nation-
alist historians. A simplistic Armenian narrative told of Turkish per-
petrators, callous international bystanders, and innocent Armenian
victims, downplaying the role that radical Armenian political parties
had played in fueling the crackdown. Countering this story was an
even cruder narrative spun by some pro-Turkish scholars, several of
m
whom were receiving funding from the Turkish government. That
story line portrayed the Armenians as traitors and uslims as victims
M
of scheming Christian great powers that sought to break up the
hi
Ottoman mpire.
E
The United States served as the main arena for these assertions and
denials. In one book published in 1990, Heath Lowry, the head of the
ha
newly established Institute of Turkish Studies in Washington, D.C.,
pursued a common line of Turkish argument: casting doubt on the
authenticity of Westerners’ eyewitness testimonies. His account, The
iT
Story Behind “Ambassador Morgenthau’s Story,” alleged that orgenthau
M
was an unreliable witness. Others argued that U.S. missionaries were
untrustworthy sources because of their anti- uslim bias. Over
M
the years, efforts to discredit dozens of primary sources have grown
Al
increasingly tortuous. The U.S.-based Turkish website Tall Armenian

Tale, for example, laboriously tries to cast doubt on every single one
of the hundreds of eyewitness testimonies of the massacre.
od
A more legitimate line of historical inquiry has focused on the

hitherto overlooked tribulations of uslims in Anatolia and the
M
Caucasus during World War I. These accounts have pointed out that
the Armenians were not the only people to face persecution in eastern
so
Turkey. The Kurdish and Turkish populations, too, suffered grievously

at the hands of the Russian army, which contained several Armenian
regiments, when these forces occupied swaths of eastern Turkey not
long after the Armenian deportations. Later, in 1918–20, uslim
Ma
M
Azerbaijanis were deported from the briefly independent Republic of
Armenia before it was conquered by the Bolsheviks.
The wartime context of the Armenian massacre and the multiple actors
involved—in addition to Armenians and Turks: Assyrians, Azerbaijanis,
Greeks, Kurds, British, Germans, and Russians—make it harder to tell
the story in all its nuance. The history of the Armenian genocide lacks

The G-Word
the devastating simplicity of the Holocaust’s narrative. But a new gen-

eration of historians has finally taken up the challenge of explaining the
full context of the tragedy. Some of them, such as Raymond Kevorkian,
are Armenian, whereas others, including Donald Bloxham and rik-Jan
E
Zurcher, hail from urope. Several come from Turkey, including Fikret
E
Adanir, Taner Akcam, Halil Berktay, and Fuat Dundar.
At the heart of most of these histories lies a hard kernel of truth:
although uslims suffered enormously during World War I, in both
M
Anatolia and the Caucasus, the Armenian experience was of a different
m
order of pain. Along with the Assyrians, the Armenians were subjected
to a campaign of destruction that was more terrible for being organized
and systematic. And even though some Armenian nationalists helped
hi
precipitate the brutal Ottoman response, every single Armenian suffered
as a result. As Bloxham has written, “Nowhere else during the First
World War was the separatist nationalism of the few answered with
ha
the total destruction of the wider ethnic community from which the
nationalists hailed. That is the crux of the issue.”
iT
word
as
weapon
If the issue of the experience of the Armenians in World War I were
merely a matter of historical interpretation, a way forward would be
clear. The huge volume of primary source material, combined with
Al
Armenian oral histories, authenticates the veracity of what Armenians

recall—as does the plain fact that an entire people vanished from their
historical homeland. All that historians have to do, it would seem, is
od
fill out the context of the events and explain why the oung Turks
Y
treated the Armenians the way they did.
But what dominates the public discourse today is the word “genocide,”
which was devised almost three decades after the Armenian deportations
so
to designate the destruction not just of people but also of an entire

people. The term is closely associated with the man who invented it,
the Polish-born Jewish lawyer Raphael Lemkin. Lemkin barely escaped
the horror of the Holocaust, which wiped out most of his family in
Ma
Poland after he immigrated to the United States. As he would later

explain in a television interview, “I became interested in genocide
because it happened so many times. It happened to the Armenians,
and after the Armenians, Hitler took action.”
Lemkin had a morally courageous vision: to get the concept of geno-
cide enshrined in international law. His tireless lobbying soon paid off:

Thomas de Waal
in 1948, just four years after he invented the term, the United Nations
adopted the Genocide Convention, a treaty that made the act an inter-
national crime. But Lemkin was a more problematic personality than
the noble crusader depicted in modern accounts, such as Samantha
Power’s book A Problem From Hell. In his uncompromising pursuit of his
goal, Lemkin allowed the term “genocide” to be bent by other politi-
cal agendas. He opposed the Universal
Declaration of Human Rights, adopted a
The Armenian genocide week after the Genocide Convention,
m
lacks the devastating fearing that it would distract the interna-
simplicity of the Holocaust. tional community from preventing fu-
ture genocides—the goal that he thought
hi
should surpass all others in importance.
And he won the Soviet Union’s backing for the convention after
“political groups” were excluded from the classes of people it protected.
ha
The final definition of “genocide” adopted by the un had several
points of ambiguity, which gave countries and individuals accused of
this crime legal ammunition to resist the charge. For example, Article
iT
2 of the convention defines “genocide” as “acts committed with intent
to destroy, in whole or in part, a national, ethnical, racial or religious
group, as such.” The meaning of the words “as such” is far from clear.
And alleged perpetrators often deny that the destruction was “committed
Al
with intent”—an argument frequently made in Turkey.

Soon, however, only a careful few were bothering to refer to the un
convention in evoking the term. In the broader public’s mind, the
od
association with the Holocaust gave the word “genocide” totemic

power, making it the equivalent of absolute evil. After 1948, the legal
term that had initially been created to deter mass atrocities became an
insult traded between nations and peoples accusing each other of past
so
and present horrors. The United States and the Soviet Union each
freely accused the other of genocide during the Cold War.
The Armenian diaspora saw the word as a perfect fit to describe what
had happened to their parents and grandparents and began referring
Ma
to the Meds Yeghern as “the Armenian genocide.” The concept helped

activate a new political movement. The year 1965 marked both the
50th anniversary of the massacre and the moment when the Armenian
diaspora made seeking justice for the victims a political cause.
In the postwar United States, it was normal practice to put the
words “Armenian” and “genocide” together in the same sentence. This

The G-Word
usage came with the assumption that the un convention—one of its

first signatories was Turkey—had no retroactive force and therefore
could not provide the basis for legal action related to abuses committed
before 1948. For instance, in 1951, U.S. government lawyers submitted
an advisory opinion on the Genocide Convention to the International
Court of Justice, in The Hague, citing the Turkish massacre of the
Armenians as an instance of genocide. In April 1981, in a proclama-
tion on the Holocaust, U.S. President Ronald Reagan mentioned
“the genocide of the Armenians before it, and the genocide of the
m
Cambodians which followed it.”
Political circumstances changed this thinking in the 1980s. Reagan
himself performed an abrupt about-face following the 1982 assassi-
hi
nation of Kemal Arikan, the Turkish consul general to the United
States, by two young Armenian militants in Los Angeles. The death
of a diplomat of a close nato ally in Reagan’s own home state enraged
ha
and embarrassed the president. He and his team concluded that on
three of the foreign policy issues that concerned them the most—the
Soviet Union, Israel, and terrorism—Turkey was staunchly on the
iT
U.S. side. Armenians, by contrast, were not.
Seven months after the killing of Arikan, the State Department’s
official bulletin published a special issue on terrorism, which included
a piece titled “Armenian Terrorism: A Profile.” A note at the end of the
Al
article said, “Because the historical record of the 1915 events in Asia
inor is ambiguous, the Department of State does not endorse allega-
M
tions that the Turkish government committed a genocide against the
od
Armenian people. Armenian terrorists use this allegation to justify in

part their continuing attacks on Turkish diplomats and installations.”
In response to furious Armenian complaints, the bulletin ended up
publishing not one but two clarifications of that statement. But from
so
that point on, a new line had been drawn by the executive branch, and
the term “Armenian genocide” was outlawed in the White House.
D
Ma eadlock
on
the
hill
Congress, meanwhile, was plowing its own furrow. By the 1970s, one
million Armenians lived in the United States. ounger generations
Y
were no longer willing to limit the discussions of their ancestors’ deaths
to Sunday dinners, requiem services, and low-circulation newspapers.
any Armenian Americans who had political savvy and wealth, such
M
as the assachusetts businessman Stephen ugar, began to lobby
M
M

Thomas de Waal
Congress. They found an ally in the Speaker of the House of Rep-

resentatives, Tip O’Neill, whose congressional district included the
de facto capital of the Armenian American community: Watertown,
assachusetts. In early 1975, urged on by ugar and others, O’Neill
M
M
managed to get the House to pass a resolution authorizing the
president to designate April 24 of that year as the “National Day of
Remembrance of an’s Inhumanity to an” and observe it by hon-
M
M
oring all victims of genocide, “especially those of Armenian ancestry
who succumbed to the genocide perpetrated in 1915.”
m
That occasion marked the only time Congress has passed any kind
of resolution recognizing the Armenian genocide. In 1990, the Senate
spent two days in fierce debate over whether April 24 should again be
hi
officially designated as a national day of remembrance, this time of
the “Armenian Genocide of 1915–1923.” Kansas Senator Bob Dole led
the argument in favor of the motion, but opponents managed to block
ha
it. ver since, with the White House opposed to officially recognizing
E
the phrase “Armenian genocide,” resolutions of this kind have failed.
They have become an increasingly tired and predictable exercise:
iT
however much historical evidence the Armenian lobbyists produce to
support their case, the Turks play the trump card of national security,
lightly threatening that a yes vote would jeopardize the United States’
continued use of the Incirlik Air Base, which is on Turkish territory, a
Al
key supply hub for U.S. military operations in the region. In 2007,
when one genocide resolution appeared certain to pass the House, no
fewer than eight former secretaries of state intervened with a joint
od
letter advising Congress to drop the issue—which it ultimately did.

The fight for genocide recognition has now become the raison d’être
for the two dominant Armenian American organizations, the Armenian
Assembly of America and the Armenian National Committee of
so
America. They do not conceal that the campaign helps them preserve
a collective identity among the Armenian diaspora—an increasingly
assimilated group that is losing other common bonds, such as the
Armenian language and attendance at services of the Armenian
Ma
Apostolic Church. But they do not like to admit that the campaign
has also damaged their cause. For many Americans, the phrase
“Armenian genocide” now evokes not a story of terrible human
suffering but an exasperating, eye-roll-inducing tale of lobbying and
congressional bargaining. Inevitably, the need to secure votes for
any given resolution on the topic means that the memory of the

The G-Word
Ottoman Armenians is cheapened by being tied to other items of

congressional business. What results is routine horse-trading, as in,
“ ou vote for the farm bill, and I’ll back you on the genocide resolution.”
Y
A few thoughtful Armenians object to such genocide-recognition
lobbying campaigns on the grounds that they turn the deaths of their
grandparents into one big homicide case. They see that their fellow
Armenians are less interested in grieving for the dead than in demon-
strating outside the Turkish embassy with pictures of dead bodies—
the more gruesome, the better—and struggling to prove something
m
that they already know to be true. The obsession with genocide,
argues the French Armenian philosopher arc Nichanian, “forbids
M
mourning.”
hi
Armenian campaigners have a point when they contend that their
pursuit of genocide recognition has had the benefit of focusing Turkey’s
mind on an issue that the country would rather have forgotten. But
ha
their campaign has also heightened
Turkish passions, since their efforts have Turkish society has begun
indirectly strengthened the Turkish to revisit the dark pages of
iT
nationalist story line of World War I.
That partial, but not entirely inaccu- its past.
rate, account portrays the great powers
of the time as conspirators plotting to undermine the Ottoman
Al
mpire. Consequently, any resolution passed by a modern great

E
power condemning Turkey’s historical crimes would only inflame
a sore spot.
od
Fueling this paranoia, many Turkish policymakers have expressed

their suspicion that a genocide resolution would pave the way for ter-
ritorial concessions. These fears have little basis in reality. Although
some radical groups, such as the Armenian Revolutionary Federation,
so
continue to make territorial claims, the Republic of Armenia has all

but officially recognized Turkey’s current borders. Reestablishing full
diplomatic relations between the two countries, which have been on
hold since the Armenian-Azerbaijani war in the early 1990s, would
Ma
make this recognition formal. No statements made by a political party

that last ruled Armenia in 1920 can change that reality.
As for reparations, it is hard to see how Washington’s adoption of the
word “genocide” would make the case for them. ost international
M
legal opinions are clear that the un Genocide Convention carries no
retroactive force and therefore could not be invoked to bring claims

Thomas de Waal
on dispossessed property. Such a scenario is all the more difficult to

imagine because it would trigger a nightmarish relitigation of the whole
of World War I, during which not only Armenians but also Azerbaijanis,
Greeks, Kurds, and Turks were robbed of their possessions in Anatolia,
the Balkans, and the Caucasus. et the invocation of the controversial
Y
word still fills Turkey with dread.
A TURKISH THAW
The only good news in this bleak historical tale comes from Turkey
m
itself. Since the election in 2002 of the post-Kemalist government led by
the Justice and Development Party (known as the akp), in a process
largely unconnected to outside pressure, Turkish society has begun to
hi
revisit some of the dark pages of its past, including the oppression of the
non-Turkish populations of the late Ottoman mpire. This growing
E
openness has allowed the descendants of forcibly Islamized Armenians to
ha
come out of the shadows, and a few Armenian churches and schools have
reopened. Turkish historians have begun to write about the late Ottoman
period without fear of retribution. And they have finally started to chal-
iT
lenge the old dominant narrative, which the historian Berktay has called
“the theory of the immaculate conception of the Turkish Republic.”
From the Armenian standpoint, this opening has been too slow.
But it could hardly have proceeded at a faster pace. As one of the
Al
key figures behind the thaw, the late Istanbul-based Armenian jour-
nalist Hrant Dink, pointed out, Turkey had been a closed society for
three generations; it takes time and immense effort to change that.
od
“The problem Turkey faces today is neither a problem of ‘denial’ or

‘acknowledgement,’” Dink wrote in 2005. “Turkey’s main problem is
‘comprehension.’ And for the process of comprehension, Turkey seri-
ously needs an alternative study of history and for this, a democratic
so
environment. . . . The society is defending the truth it knows.”

In that spirit, Dink, a stalwart of the left and a confirmed anti-
imperialist, criticized genocide resolutions in foreign parliaments on
the grounds that they merely replicated previous great-power bullying
Ma
of Turkey. He saw his mission as helping Turks understand Armenians

and the trauma they have passed down over generations, while help-
ing Armenians recognize the sensitivities and legitimate interests of
the Turks. Dink’s stand broke both Turkish and Armenian taboos, and
he paid the highest price for his courage: in 2007, he was assassinated
by a young Turkish nationalist.

The G-Word
Dink’s insights suggest that the word “genocide” may be the correct
term but the wrong solution to the controversy. Simply put, the emotive
power of the word has overpowered Armenian-Turkish dialogue.
No one willingly admits to committing genocide. Faced with this accu-
sation, many Turks (and others in their position) believe that they
are being invited to compare their grandparents to the Nazis.
It may be that the word “genocide” has exhausted itself, and that
the success of Lemkin’s invention has also been its undoing. Lemkin
probably never anticipated that coining a new standard of awful-
m
ness would set off an unfortunate
global competition in which nations— The term “genocide” has
from Armenia’s neighbor Azerbaijan to
hi
Sudan and Tibet—vie to get the label grown emotionally fraught
applied to their own tragedies. As and overly legalistic.
the philosopher Tzvetan Todorov has
ha
observed, even though no one wants
to be a victim, the position does confer certain advantages. Groups
that gain recognition as victims of past injustices obtain “a bottom-
iT
less line of moral credit,” he has written. “The greater the crime in
the past, the more compelling the rights in the present—which are
gained merely through membership in the wronged group.” Con-
versely, the grandchildren of the alleged perpetrators aspire to absolve
Al
their ancestors of guilt and, by association, of a link to Adolf Hitler

and the Holocaust.
In A Problem From Hell, Power chastised the international community
od
for its timidity and failure to stop genocides even after this appalling
phenomenon had been named and outlawed. But the problem can be
posed the other way around: Could it be that international actors
hide behind the ambiguities of genocide terminology in order to do
so
nothing—and that the very power of the word “genocide” and the
responsibilities it invokes deter action? It may be no coincidence that
the first successful prosecution under the un Genocide Convention,
that of a Rwandan war criminal, came only in September 1998, nearly
Ma
50 years after the convention was adopted.

In the Armenian case, the phrase “Armenian genocide” has become
customary in the scholarly literature. Those who avoid it today risk
putting themselves in the company of skeptics who minimize the tragedy
or deny it outright. any progressive Turkish intellectuals, too, now use
M
the te

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ESSAYS

An excessive focus on terrorism

The Long Shadow of 9/11 Go Your Own Way

Robert Malley and Jon Finer 58 Tanisha M. Fazal 113

NATO’s Enemies Within The Myth of the Liberal Order

Celeste A. Wallander 70 Graham Allison 124

Russia as It Is Why Carbon Pricing Isn’t Working

Michael McFaul 82 Jeffrey Ball 134

The Long Shadow of 9/11

lance of U.S. citizens, and prolonged and costly military campaigns

Bush’s excesses. He was clear-eyed about the nature of the terrorist

against terrorists to new theaters, dramatically increased the use of

and then rode it to an unlikely electoral victory, vowing to ban Muslims

from entering the United States and to ruthlessly target terrorists

THE MORE THINGS CHANGE . . .

that guarding the safety of citizens should be any government’s

inventiveness with which terrorist organizations target Americans

their concerns. But politicians need to be responsive to the demands

worried about straining the U.S. military and causing counterproductive

The combination of these factors helps explain why such dissimilar

groups. And it explains why, by tacit consensus, American society has

become captive to a national security paradigm that ends up magnifying

DON’T BELIEVE THE HYPE

from the emotional and at times irrational fears of terrorism that he

Bernardino, California, took the lives of 14 people, he became all the

by people intentionally seeking bloodshed and working hard to achieve

willingness and ability to criticize or pressure the governments of

against terrorist groups or to allow U.S. forces to use their territory to

as internationally minded jihadists.

law. It is seldom easy for U.S. officials to press other governments to

tions before an ultimate decision is made.

process debated whether to kill or capture a particular militant leader

a major strike against ISIS leaders in Libya even as other officials

on American values when formulating foreign policy. Yet policymakers

forces would get bogged down in yet another military adventure in

sorties. Of course, when it comes to an organization such as ISIS, it is

such as a lack of education or employment opportunities, ethnic or

enough, and journalists revealed troubling disparities in the way casualties

tration officials have disparaged as Obama-era “micromanagement” of

the number of drone strikes has significantly grown as a result; in the

natural progression. They are an outgrowth of a discourse that pre-

in an open-ended war against an ever-growing number of groups.

politics and aggressive “revisionist” states, such as China and Russia.

polls, the U.S. public presently ranks international terrorism as only

recently broke with orthodoxy by condemning the war on terrorism as

aftermath of the 9/11 attacks, has tended to conflate the government’s

NATO’s Enemies Within

principles of liberal democratic governance. Although its cohesion

common character of its members. Nearly all were democratically

ening their free institutions.”

tions. Instead of disintegrating, NATO adapted to new challenges and

ries. To foster security within Europe, NATO required that new

the military in favor of apolitical professional defense forces, establish

capabilities. Few question NATO’s cohesion when Article 5 of its found-

NATO members quickly joined the U.S. campaign against Taliban-

different priorities that guide their cost-benefit calculations. In such

case during its 2011 intervention in Libya, which was backed by a UN

prevent military attacks on ethnic Albanians in Kosovo. In both

rity Council resolution. These interventions tested the alliance’s po-

protect” (or R2P). The alliance’s ability to prevent mass atrocities in

Iraq threatened global security by pursuing weapons of mass destruc-

ship requirements, the United States’ most important multilateral alli-

is no price for violating NATO’s liberal democratic standards, and some

ruption and collusion with the Soviet-era Communist Party by of-