The Next Cold War?: American Alternatives for the Twenty-First Century

THE NEXT COLD WAR?

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THE NEXT COLD WAR? AMERICAN ALTERNATIVES FOR THE TWENTY-FIRST CENTURY

Jim Hanson

PRAEGER

Westport, Connectiout London

Library of Congress Cataloging-in-Publication Data Hanson, Jim M. The next cold war? : American alternatives for the twenty-first century / Jim Hanson, p. cm. Includes bibliographical references and index. ISBN 0-275-95473-0 (alk. paper) 1. World politics—1989- 2. United States —Foreign relations—1989- 3. Cold War. 4. Twenty-first century—Forecasts. I. Title. D860.H365 1996 327'.09'04-dc20 95-40581 British Library Cataloguing in Publication Data is available. Copyright © 1996 by Jim Hanson All rights reserved. No portion of this book may be reproduced, by any process or technique, without the express written consent of the publisher. Library of Congress Catalog Card Number: 95-40581 ISBN: 0-275-95473-0 First published in 1996 Praeger Publishers, 88 Post Road West, Westport, CT 06881 An imprint of Greenwood Publishing Group, Inc. Printed in the United States of America

The paper used in this book complies with the Permanent Paper Standard issued by the National Information Standards Organization (Z39.48-1984). 10 9 8 7 6 5 4 3 2 1

Contents PREFACE

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PART I: WORLD ORDER

1

1. Reconsiderations

3

2. Old Imperial Order

13

3. New Economic Order

27

PART II: WORLD REGIONS

43

4. The United States as a Region

45

5. Other Developed Regions

57

6. The Socialist Developing Regions

69

7. The Developing Peripheries

81

8. The Underdeveloped Areas

91

9. The Next Cold War?

105

PART III: AMERICAN ALTERNATIVES

119

10. Alternatives to Economic War

121

11. Political and Military Alternatives

133

vi

Contents

12. Ideological Alternatives

145

13. World Alternatives

159

NOTES

171

SELECTED BIBLIOGRAPHY

183

INDEX

187

Preface Americans live in a problematic time. We no longer can act according to our cold-war past and assumptions about the world, but neither do we know how to act in a post-cold-war future. Should we contain Russia and China as coldwar adversaries of the past, or should we embrace them as partners in a new era of international cooperation? Should we intercede in Bosnia, Cambodia, and other troubled areas as we did when leading the free world, or should we defer to the United Nations? Should we subsidize developing nations with trade and aid, or should we compete to acquire their assets and win their markets? Should we withdraw from world commitments and pay more money and attention to our domestic problems? Few Americans want to return to a cold-war era of superpower confrontation and geopolitical power plays. We would rather befriend the Russians and Chinese to the point of providing billions of dollars of aid and overlooking their totalitarian tendencies. We would rather turn over the role of global cop to the United Nations. We would prefer to abide by international law and agreements such as the World Trade Organization (WTO, formerly known as the General Agreement on Tariffs and Trade [GATT]). We would like to forget about most world problems and concentrate our attention and resources on the domestic problems related to economy, health, environment, and crime. Yet the cold-war impulse remains in the recesses of our political and economic policies. A faint but reverberating national consciousness calls us to continue our geopolitical power strategies—to expand alliances such as the North Atlantic Treaty Organization, to provide armaments to dozens of countries, and to maintain the world's most expensive military force. Almost by habit, we pursue similar geoeconomic power strategies —to build competitive regions such as the North American Free Trade Agreement (NAFTA), to nego-

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Preface

tiate bilateral trade deals to the point of starting trade wars, and to impose development policies on the less developed nations. In sum, by failing to respond to the post-cold-war era, we may be living in our past and bringing about the next cold war. While most Americans appear to be aware of the political policies and choices that threaten another cold war, they appear to be comparatively naive about the economic policies and choices that have the same effect. They do not regard NAFTA as a protectionist regional strategy to compete against other regions, or bilateral trade deals as a repudiation of WTO, or development policies as harmful to the less developed countries. This is not to say that everything about NAFTA is protectionist, that all bilateral trade repudiates WTO, or that our development policies are completely exploitive. But the potential is there to provoke conflict rather than cooperation, to undermine rather than support international order, and eventually to bring about the next cold war. I approached this problematic time by considering our cold-war past and exploring alternatives that would unite rather than divide the world. In The Decline of the American Empire (1993), I explored American behavior in early history and through the cold-war years as that of an informal empire.1 However, empires even of the informal variety probably cannot survive in the postcold-war world of the twenty-first century. The European colonial empires failed to survive the twentieth century. The Soviet empire crumbled because of imperial overstretch and the exhaustion of its economy. The United States survived the cold war as a de facto empire, but at the cost of enormous debt and loss of competitive capability in the world economy. As a world power if not an empire, the United States may be inclined to continue to pursue a strategy of naked national interests and balance of power as urged by Henry Kissinger.2 It may pursue such a strategy both in its exercise of geopolitical power and in its less familiar exercise of geoeconomic power. To compete head to head with Europe, Japan, and other economic powers, the United States is forming NAFTA to defeat its competitors. It seems just as sensible to want to win the global economic war as to win the cold war. But troublesome questions remain, and new questions emerge about American geopolitical and geoeconomic power and its exercise in a post-cold-war world when global survival requires new levels of cooperation. This book attempts to address these questions and to propose some American alternatives for the twenty-first century. Economic questions include the following: Will the United States extend NAFTA beyond Canada, Mexico, and its territories? How would the proposed Western Hemispheric Free Trade Agreement relate to other economic regions in Latin America? How would it relate to the European Union, Asia-Pacific Economic Cooperation, and other economic regions? How would it relate to international organizations such as WTO, the World Bank, and the United Nations? Larger strategic questions arise: Will the United States be a world leader

Preface

IX

that promotes cooperation and world unity, or will it be a regional leader that provokes competition and world division? Will it continue to serve the interests of the developed countries primarily in the North at the expense of the less developed countries primarily in the South? Will its imperial instincts and habits of two hundred years continue to drive it to exercise control over the Caribbean, Middle East, and Pacific? Will it continue to act as the world's peacekeeper in "peripheries" or "fringes" as far-flung as Bosnia, Korea, and Iraq? Will it contribute positively to solutions for the more determinate causes of world problems, which are not about financial markets, political stability, or military power but about overpopulation, environmental deterioration, and economic development? Will it lead the world to an unprecedented era of international cooperation and peace, or will it contribute to the coming of the next "cold war"? While the questions and answers are my own, I want to thank my good friend and colleague, Paul Sultan, for reading the draft and guiding me, especially with the economic answers. Also, I would like to thank my fellow members of the St. Louis Economic Conversion Task Force for their stimulating discussions over the past three years.

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Parti WORLD ORDER

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Reconsiderations Nothing in history is inevitable. There can and will be a Second American Century if Americans want it, if they are again stirred by the "blood of purpose and enterprise and high resolve." — Henry Grunwald "The Second American Century," 1990

THE NUMBER l'ERs The cry still echoes: The cold war is over! The Soviet Union lost! The United States is number one! The afterglow still warms our national pride. For most of the number Ters and optimists —except Fukuyamians forlorn about loss of the good old days (more about them later) —it is a happy time. While it marks the demise of ideology and history, it caps the triumph of American-style capitalism and democracy. It seems Henry Luce was right all along: The twentieth century is the American century; the twenty-first century will be another American century; America, winner of the cold war; America, number one! Joining Henry Grunwald in leading the cheers is the effervescent Ben Wattenberg: We won the cold war. It didn't just end. We won it because we stayed strong, because we rallied our allies, and because we were right. We ought to understand that and say it. It was probably the most titanic ideological struggle in the history of this planet, surely the most expensive, and we won it. No more of that panty-waist stuff about how one day it just ended. . . .

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World Order

We are the first universal nation. "First" as in the first one, "first" as in "number one." And "universal" as within our borders and globally.1 The euphoria about winning and boasting of being number one evoke a sense of historic deja vu. As the great war to end all wars, World War I was to mark the beginning of a new world order based on the Fourteen Points of Woodrow Wilson and headed by the League of Nations. As a triumph of democracy over tyranny in Asia as well as Europe, World War II was to stabilize a world of universal democracy governed by the United Nations and universal prosperity established through the Bretton Woods economic agreements. It evoked Arnold Toynbee's conclusion that Western civilization alone was prevailing over the remaining civilizations in the world. 2 Like their predecessors after other wars, the number Fers are fueling the flames of nationalism, regionalism, and divisiveness; their jingoism is undermining their own belief in the universal nation or an America-led universal system. As regenerationists (a political identity drawn from the Reagan presidency), they are causing the goodwill that could be generated after the cold war to degenerate. Their bragging is alienating the Russians, who took it upon themselves to dismantle the Soviet empire and who now are insulted as losers and spongers of Western aid. Their nationalism is inciting the Japanese, who are characterized as greedy and provincial money-grubbers, imitators or thieves of technologies, freeloaders on American defense, sycophants in foreign policy, and work animals having no soul and living in rabbit hutches. Some of this is raw racism, which is applied to the Chinese as well. Their cultural superiority is insulting the Muslims and encouraging Muslim-Confucian cooperation in military as well as economic trade. What are being regenerated are a return of regional hostility and the possibility of another cold war. Number Fers and regenerationists proclaim the world triumph of Americanstyle democratic industrial civilization. But glory is fleeting, and the triumph is fading into history as the post cold war future becomes increasingly problematic for victors as well as vanquished. DECLINE RECONSIDERED With the collapse of the Soviet empire, American power seems to be number one in the world. Russian officials now stand outside and beg for assistance at the end of Group of Seven (G-7) meetings, and they submit to the austerity measures of the International Monetary Fund. Bereft of Marxist ideology or material assistance from rival states, leftist guerrilla groups are unable to contest American power; Cuba is the most notable, and most pitiable, holdout. The Eastern European countries and the former Soviet republics are seeking American and European goodwill and assistance. Even China, the last major communist state and traditional holdout against Western influence, is encouraging free markets and signing free trade agreements. Since the Persian Gulf

Reconsiderations

5

War, American dominance has brought Kuwait and Saudi Arabia into its sphere, which already includes Egypt and Israel. Believers in expanding American power are not confined to number Fers and regenerationists who extol American democracy and capitalism. A critic of American power, Susan Strange, argues that American economic expansion is continuing. The expansion is difficult to tabulate because it is occurring in less-developed economies which lie beyond formal territories but which are dominated by American corporations. She concludes, "What is happening is that the American empire is spilling out beyond the frontier and that the very insubstantial nature of frontiers where production is concerned just shows the consolidation of an entirely new kind of non-territorial empire." 3 The issue of growth versus decline is sensationalized by hortatory optimists and pessimists. On the extreme growth side are Pollyannas such as John Naisbitt and Patricia Aburdene who pronounce unlimited growth and good times. 4 On the extreme decline side are Jeremiahs such as Raveendra Batra who foretell economic apocalypse. 5 In the aftermath of the post-cold-war euphoria, the optimists carry the day. As a nervous optimist, Samuel P. Huntington has made a more serious attempt to refute the "declinists." Many things are in decline, he admits —trade deficits, budget deficits, American ownership of American assets, manufacturing in most industries, worker productivity, savings, and investment. These indicators appeared in the 1980s, he argues, because of the misguided policies of the Reagan administration; therefore, they will disappear in the 1990s.6 But most indicators continue to register decline in the 1990s; the trends are established; prosperity for the next generation already is affected; even if the trends ended next year, the case for decline is made. If decline is temporary, it is temporary on a long-term basis. The issue is not a unidimensional question of how much growth or decline. It is a complex of trends and conditions that must be analyzed from the standpoint of relative time and point of reference. One may be optimistic in the short or intermediate term by the upturn in the business cycle but pessimistic for twenty years or more when business cycles even out and yield to long-term trends. Identifying a point of reference is even more important. One may be optimistic about most trends which point upward even when adjusted for population growth and inflation, but pessimistic about the same trends which show declining shares of world economic performance and resources. The relevant reference point here is that most long-term trends are up relative to past American performance, but are down as a percentage of world performance. The other question of reference is the scale of performance being sought. Resources are at hand to achieve domestic objectives, but they are no longer at hand to achieve most worldwide objectives. If domestic objectives are the reference, one may talk about growth and be optimistic; if world objectives are the reference, one must talk about decline and be pessimistic. Henry Nau makes a similar point: "The key question for America in the future is not

6

World Order

whether its power has declined but what purposes it seeks to achieve in the world community and what specific economic policies it intends to follow."7 What is disturbing is the American habit of thinking and acting as an empire, which is acquired from its past of being a rather typical empire throughout the nineteenth century and an informal empire during the cold war. It is continuing to behave, if not as an informal empire, then as a superpower, mostly because of its superior military technology and power. Yet its comparative size measured in commercial technology and economic power is very different. It is commonplace to say that the world gets smaller; modern transportation and communication reduce its geography to jet-propelled time and electronic space. But from the standpoint of the United States as an empire or superpower, the world is getting larger. The postwar economic growth of Western Europe and Japan is a familiar success story. Most Asian and Middle Eastern economies are growing at rates greater than that of American economic growth —especially the Asian rim countries, China, and oil-rich Arab countries. American economic power is declining relative to that of the other developed and developing nations of the world. These postwar rivals are not American enemies but friends who press their challenge to what was once American hegemony in world economic markets. And not all the indicators of decline are relative. Federal debt alone exceeds $4 trillion, which is more than half of the gross national product each year and which is $16,000 per capita. During the last fifteen to twenty years, bankruptcies have increased, the poverty rate is up, and workers7 real earnings are down. The American decline seems to be occurring more quickly than that of most large empires, more than that of the Roman empire and parallel to that of the recent British empire. This is typical of modern empires, whose developmental stages of growth and decline are more amorphous and more accelerated—more amorphous in the sense of intertwining with other countries, international institutions, and a global economy; more accelerated in the sense of changing economic fortunes in a global economy, as evidenced by the United States's swing from being the largest creditor nation to the largest debtor nation in the single decade of the 1980s. Number Fers may brag about winning the cold war, but the reality is that no one won. While the Soviet Union lost, the United States only survived. It is burdened with huge corporate as well as federal debt, large trade deficits, weakening currency, bad loans and investments in the less-developed countries, high foreign investment and low saving in its domestic economy, stagnant domestic manufacturing, and insufficient research and development for commercial uses. Handicapped during the cold war, many American corporations may be unable to compete in the current "corp war." American assets and revenues are becoming a smaller part of a larger world. Another test of American power is its capability for solving world problems.

Reconsiderations

7

The geopolitical problem of world order appears to emanate from the current transition between the cold-war order maintained by the United States and Soviet Union as world superpowers and some yet-to-be-established post-coldwar order. And sheer physical problems emerge, the solutions for which are now beyond the capacity of American resources. About half of the nations of the world are experiencing negative or stagnant economic growth, and 100 million people are added to the world population each year. The ozone layer is deteriorating, and the global atmosphere is warming, both aggravated more by the United States than by any other single nation. It is often said that the nineteenth century was the British century and that, with Henry Luce's proclamation, the twentieth century is the American century. Many say that the twenty-first century will be the European century; others that it will be the Asian century. With the exception of the number Fers and optimists, few see it as another American century. It will take at least a full generation for the United States to lick and heal its cold-war wounds —to pay for the costs, debts, and lost opportunities incurred during the cold war and to rebuild American education, technology, infrastructure, finance, and industry. The twenty-first century may become the first world century. This may be a welcome wash for all the rivals concerned and a step forward for the world at large. This may reflect the nationalist optimism not of number Fers but of world joiners. Then again, the twenty-first century may be a century of regenerated cold war and world conflict. This may reflect the pessimism of realists who see the continued exercise of self-interested geopolitical and geoeconomic power of the United States and its rivals, all struggling for world dominance. RESPONSE TO DECLINE Empires or great powers in their stage of growth tend to exercise control that is direct and informal. They tend to rely directly on their own resources rather than on the resources of allies or dominions, and they expand through the informal actions of their citizens and private organizations. Empires or great powers in their stage of decline, experiencing imperial overstretch and shrinking resources, tend to rely indirectly on their allies and the indigenous governments of their dominions; when confronted with crises, they tend to rely formally upon central government policies and edicts.8 By habit, it seems, American policymakers continue to seek hegemonic control after the Soviet collapse and into the 1990s —whether as a world empire, superpower, great power, or leader of the free world, now described as the world community. More than forty years of cold war thinking is a difficult habit to break, especially when encouraged by the boast of being number one. Three suppositions propelled the United States's ascension as a world empire and leader of the free world: The free world was endangered; the United States

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World Order

was needed as its protector; American resources were sufficient for the task. Most American policymakers continue to suppose that the world is a place so dangerous that American leadership and resources still are required. However, the popular American response to decline was the election of Bill Clinton as president. Since no politician gets elected by acknowledging decline, Clinton constructed political consciousness around the themes of gridlock, debt, and neglect of domestic problems such as health care. Above all, he advocated change, which was a code word to stop the decline and alleviate the anxiety brought about by forty years of cold war and its threat of thermonuclear destruction, wars in faraway places, and hundreds of billions of dollars spent for military weapons and foreign assistance. He personified what George Bush failed to project—a kinder and gentler society, a more casual Athenian democracy rather than a calloused Spartan autocracy. The Clinton administration is exercising control that is more indirect, as is evident in the Balkan crisis that began in 1992. The Balkan crisis of 1947 provoked the aggressive and direct response of the Truman Doctrine, that asserted that the United States would directly intervene to save the Greek government. The present crisis evoked a cautious and indirect response that deferred to the more passive policies of the European allies and United Nations. Although under pressure primarily from liberal interventionists of his own party and although endorsing intervention in the Balkans in the 1992 presidential campaign, Clinton had to delay intervention until after a truce. Faced with an annual budget deficit exceeding $300 billion and a debt of $4 trillion, the Clinton administration avoided what appeared to be a prolonged and costly military venture. For a world troubled by civil wars and ethnic antagonisms, this abandoning of direct and unilateral military intervention was a landmark foreign policy, possibly the most important since the Truman Doctrine. It signaled an end of unilateral American action throughout the world, despite atrocities and humanitarian concerns. This may come to be recognized as the Clinton Doctrine, which will be of comparable importance to the Truman Doctrine, which it revokes. As the Truman Doctrine projected the expansionist impulses at the height of American power, the Clinton Doctrine reflects the consolidating tendencies in its decline. The Clinton administration is exercising control that appears to be more formal. Even before taking office, Clinton urged more restrictions on the North American Free Trade Agreement. While directed primarily at Mexico, the environmental and employment strictures also applied to American corporations and the flow of free trade. The Clinton administration is proposing and enforcing stricter environmental restrictions, as indicated by its signing of the international biodiversity treaty. It is restricting international aid, trade, and investment, emphasizing that commerce must be fair as well free. It is bargaining harder with developing countries whose economic growth once resulted from American trade deficits. It is working with and through international agencies and multinational treaties to regulate the actions of transna-

Reconsiderations

9

tional corporations, from issues of saving the whales and rain forests to those of avoiding the warming of the atmosphere and the destruction of the ozone layer. During the cold-war passion to stop communism at any cost, corporations and banks were free to exercise their informal deals, so long as they did not aid communist governments; this included risky loans to the lessdeveloped countries, disinvestment costing American jobs, environmental onslaughts to extract raw materials, and admission of foreign competition destructive to domestic industries. In the name of the free-market system, the informal dealings of free commerce were not only unrestrained but subsidized by formal federal actions, mostly in the form of commercial treaties and of incentives offered by Exim Bank and other federal agencies (and indirectly by the World Bank, International Monetary Fund, and other international agencies). This shift to control that is more indirect and formal is more than the liberal response of meddling in the activities of private enterprise, although it is that, too. It is a response to the crises of decline —to the costs no longer affordable, competition no longer beatable, allies no longer dependable, dominions and peripheries no longer governable, and domestic problems no longer avoidable. For the commercial classes (especially domestic corporations) and their conservative supporters, it is big government that overtaxes and overregulates and eventually kills the goose that lays the golden eggs. Yet the commercial classes (especially multinational corporations) also need big government to provide military security, embassies, favorable treaties, stable markets, investment capital and insurance, and international cooperation. How can the United States respond best to its inevitable decline? There are three types of responses, varying from destructive to constructive. The first is the fatalistic response of empire and aggression whereby dominions are tenaciously held until the costs of suppressing local resistance clearly outweigh the benefits, which was the reaction of most European empires as late as the 1960s. The second is a partly positive response of abandoning formal empire and geopolitical dominance but of continuing informal control primarily through economic domination of less developed economies (by controlling investment and trade, which characterized American cold war policies). The third and most creative response is the abandoning of both formal and informal empire. Most empires have reacted to decline by expending their energies and resources against their enemies; hence they have hastened their decline. The British response to the decline of its empire provides a positive alternative. In the nineteenth century, the British empire dominated world affairs; this included the United States, which Britain founded, invaded during the War of 1812, and after the Civil War helped to build with substantial capital investment. In the twentieth century, the relationship reversed as American power bolstered the British empire, threatened twice by Germany and by the Soviet Union during the cold war. The British empire, whose decline was obvious by the 1920s, made an unusually constructive response immediately after World

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World Order

War II. Unlike the other European colonial powers, Britain voluntarily effected a peaceful and nondestructive transition from empire to what it called commonwealth. While other European empires were self-destructing in the 1950s and 1960s, the British empire was being peacefully transformed into a commonwealth of voluntary participation of autonomous nations that maintain their political and economic ties. The American and British empires have shared many commonalities. Both are democracies; both are capitalist and are driven by profit-seeking corporations and consumption-hungry middle classes. Both began as sea-based empires and grew to the stature of world empires with far-flung dominions. Both ascended in the modern era of gas combustion and electronic technologies that allowed instant communication, transportation, and the geophysical means of worldwide contact and control. Both experienced increasing economic competition and relative economic decline on a worldwide basis. Both struggled against powerful adversaries in Eurasia, which strained their economies and hastened their decline. Both earlier and modern history have shown that those empires that respond in constructive ways enjoy long and peaceful retirements; those that react in destructive ways suffer painful and violent deaths. OVERVIEW

The American agenda for the twenty-first century must move beyond world empire, protector, great power, or superpower. The United States cannot—to secure its future prosperity, it must not—continue to think and act as it did during the cold-war era. The twenty-first century demands an alternative strategy and agenda to the policies of the cold war—to the policies that doomed the Soviet republics and satellites to a generation of food lines and uncertainty, and to the policies that still threaten the economic prosperity and political democracy of the American republic. It requires a new politics, economics, and ideology for the fast changing post-cold-war era. The first three chapters address the old and new world order and the current transition from geopolitics to geoeconomics. This transition is discussed more particularly in the next six chapters, which discuss the major economic regions and which predict the possibility of an economic cold war. The last four chapters discuss the alternatives for the United States, including its role as a world leader. The subject of old and new world orders, introduced in Chapter 1, is discussed further in Chapter 2, which outlines the shifting world orders of European colonialism and of the American-dominated free world order after World War II and which points to the opportunity to create a stable international order. Chapter 3 examines the growing importance of post cold war economic strategies, regions, and multinational corporations, and it warns of the possibility of economic rivalries and a breakdown in world order.

Reconsiderations

11

Part II examines each of the nations/regions that make up the present world order. Because of their influence upon neighboring and smaller nations, the economically powerful nations may be considered as regions. Chapter 4 examines the United States as leader of NAFTA and as a world competitor. Chapter 5 discusses other developed regions—the expanding European Union, financially powerful Japan, and Australia/New Zealand. Chapter 6 moves to the socialist developing regions of Russia, whose economic future is uncertain, and China, the fastest growing major economy in the world. Chapter 7 takes up the subject of developing peripheries, both resource peripheries and buffer peripheries along civilizational fault lines, which are concentrated in Eastern Europe, the Middle East, Central Asia, and Latin America. Many less-developed nations are not developing at all; rather they are underdeveloped and considered fringes; Chapter 8 examines these fringes and the capital scarcities and constraints that seem to condemn them to underdevelopment. Chapter 9 explores the tensions between the regions, between North and South, East and West. Because of the limits of GATT and infirmities of G-7, world order may be breaking down into rival superregions and the coming of an economicsinitiated cold war. American alternatives are economic, political/military, ideological, and international. Chapter 10 sets out economic and national planning alternatives to the present course of geoeconomic power pursued through NAFTA. Chapter 11 considers American political and military costs and options, particularly in light of the Balkan crisis. Chapter 12 examines the cold war ideological principles derived from Machiavellianism and sets forth alternative principles. Chapter 13 presents the urgency of solving world problems, overcoming Malthusian doom, abandoning geopolitical/geoeconomic power strategies, and supporting international programs and government. The United States has the historic opportunity to create an effective world order and a world government that can resolve the critical problems of overpopulation, environmental deterioration, economic development, and collective violence. By pursuing the alternatives of morality for power and of longterm international order for short-term national/regional advantage, it can assure a prosperous and stable twenty-first century.

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z Old Imperial Order We must remember that the only time in history that we have had any extended periods of peace is when there has been a balance of power. — President Richard Nixon Interview, Time, January 3, 1972

EUROPEAN COLONIAL ORDER The modern conception of world order begins with the Congress of Vienna and its assorted meetings and social outings among Europe's monarchs and ministers over a ten-month period during 1814-15. Like the Peace of Westphalia after the Thirty Years' War in 1648 and the Treaty of Paris after the Seven Years' War in 1763, the Congress of Vienna reestablished monarchical order in Europe. Its mechanism was the Quintuple Alliance of France, Austria, England, Prussia, and Russia. The Congress of Vienna and the resulting Congress System were the first institutionalized attempts to aim beyond Europe and establish a world order. One of its first ventures was to restore Spanish rule in Latin America, which failed and precipitated the Monroe Doctrine. It coordinated the responses to the revolutions of 1820 and 1830 but failed. France withdrew in 1930, following Britain's earlier withdrawal. The alliance was dead, and the Congress System was little more than diplomatic protocol. In its place was a fragile network of shifting and secretive alliances by which each of the European powers maneuvered to carry out its expansionist and imperialist policies. Behind the facade of the Congress System and its world order evolved the geopolitical power strategies known to strategists today as the Metternichian hegemonic strategy and the Bismarckian balance-of-power strategy. Europe re-

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World Order

mained relatively peaceful for one hundred years after the Napoleonic Wars, so the strategists believe, because nations calculated the use of power, initially under the hegemonic leadership of Austria and then through a balance among aligning and realigning nations. Alliances were justified to preserve the balance against enemies. France sought alliances against Prussia; Prussia sought alliances against France; Russia sought allies against Turkey and Britain. A unified Germany under Bismarck succeeded, but in a poisonous atmosphere where common interest gave way to national interest and moral restraint bowed to imperial ambition. Unchecked by morality or legality, the balance merely escalated the war-making preparations and capabilities that led to World War I. After World War I, world order seemed reestablished through the Versailles Treaty, the League of Nations, and a moral vision articulated best by Woodrow Wilson. But the League of Nations was no more successful than the Congress System and Quintuple Alliance. The United States withdrew, and the British empire was in economic decline. The newly created democracies in Germany and elsewhere floundered. What reemerged by the beginning of the 1930s were the same power strategies of hegemony and balance. The latter was used to excuse the pacification that allowed the rearmament of Nazi Germany prior to World War II, especially by anti-Bolsheviks. At the conclusion of World War II, the British empire proposed American hegemony. It called for an indefinite American presence in Europe and European affairs and for an abandoning of both the continental and colonial orders under the protection of American power. During the year of 1948, shortly after the Truman Doctrine was announced, the British empire began dismantling its colonies. Other European empires hesitated, then negotiated whatever they could get; France fought two bitter and bloody wars in Vietnam and Algeria. By the start of the 1950s, the European continental order was gone. By the end of the 1960s, after some four hundred years of world domination, the European colonial order also was gone.

AMERICAN FREE WORLD ORDER In the place of the failed European orders was the equally dangerous and precarious American-Russian balance of power, which justified forty years of cold war between the United States and the Soviet Union. The only European powers remaining intact after World War II were the Soviet Union and Britain, an obvious imbalance favoring the Soviet Union. Less than a year after the war and in contrast to the hopeful attitude of the Roosevelt administration, the Truman administration began worrying about Soviet aggression. In an embassy report of February 1946, George Kennan first warned of Soviet aggression and argued that further negotiation and compromise were futile. The policy later popularized as "containment" was the nonofficial modus operandi by the end of the year.1 When Soviet ambitions exceeded existing agreements in 1947, the Truman

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Doctrine was quickly promulgated. It asserted that "the free peoples of the world look to us for support in maintaining their freedom. If we falter in our leadership, we may endanger the peace of the world."2 The United States was committed to the defense of the Mediterranean and Europe, or, as Clark Clifford counseled, to the defense of "all democratic countries which are in any way menaced by the Soviet Union."3 As third-world countries rebelled against European colonial empires and often received support from the Soviet Union or China, the American mandate was extended to defend all countries threatened by Soviet/Sino communism. The balance-of-power doctrine was extended beyond Europe to a global basis. A National Security Council document of November 24, 1948, spoke to the collapse of five empires —the Ottoman, German, Austrian, Italian, and Japanese—as well as the "drastic decline" of the British and French empires. It called for the United States to fill the power vacuum and create a new world order. This required the destruction of the Soviet Union. The United Sates must take the initiative and "foster the seeds of destruction within the Soviet system," "foment and support unrest and revolt in selected strategic satellite countries," and "reduce the power and influence of the Kremlin inside the Soviet Union." It must use all means fair or foul: "any means, overt or covert, violent or non-violent," including "overt psychological warfare" and covert "economic" means.4 Even if no Soviet threat existed, the United States must fill the power void left by the expected demise of Britain, France, Portugal, and other European empires faced with third-world unrest and nationalism. It concluded: "Even if there were no Soviet Union we would face a great problem. . . . The absence of order among nations is becoming less and less tolerable."5 Thus arose the American mission to be the leader of the "free world." In fact, both American and Soviet empires sought not balance but hegemony. The aim of the Truman Doctrine and of containment sharpened by the National Security Council was to establish American hegemony and to reestablish the control being lost in the third world by the failing European colonies. The cold war was on. Idealists had envisioned a world order different from one of balance or hegemonic power strategies. Woodrow Wilson proposed his "new world order" in which nations would abide by his Fourteen Points and over which the League of Nations would preside. Franklin Roosevelt propounded a similar mission for the United Nations, one which would "spell the end of a system of unilateral action, the exclusive alliances, the spheres of influences, the balances of power." 6 A new world economic order was planned as early as 1944 at Bretton Woods, New Hampshire. The mentor of Bretton Woods was John Maynard Keynes, who revealed as early as 1920 the decadence of the new world order fashioned at Versailles.7 Aimed at establishing an economic-based international order that would prevail over the power strategies of individual nations, the

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World Order

Bretton Woods agreements established the International Monetary Fund and World Bank, also what came to be the General Agreement on Tariffs and Trade (GATT). The political and economic ideals of the United Nations and Bretton Woods soon yielded to the realpolitik aims of the cold war, especially with the advent of the Berlin crisis and the Korean War. Another recurring problem was the anticolonialist and nationalist uprisings that threatened the colonies of the European empires. The United States was somewhat ambivalent. Once a colony, it was embarrassed by European colonial practices. But now the protector of the free world, it was eager to support its allies and suppress uprisings perceived as a Soviet-Sino plot to impose world communism in Asia, Africa, and Latin America. The cold-war politics of hegemony prevailed. There were a war to be won and an enemy to be defeated. However, by the mid-1970s, worldwide American hegemony or dominance was no longer possible, a fact apparent even without the lesson of the Vietnam War. Balance of power, which was the diplomatic modus operandi of Henry Kissinger, became the new doctrine. President Nixon elaborated the doctrine in 1971: We must remember that the only time in history that we have had any extended periods of peace is when there has been a balance of power. . . . I think it will be a safer and better world if we have a stronger, healthy United States, Europe, Soviet Union, China, Japan, each balancing the other, not playing against the other, an even balance.8 First indicated in November 1969 during the Vietnam War, the Nixon Doctrine indicated limits on American involvement. National interest, not missionary ideals, would be the primary consideration. Furthermore, nations not threatened directly by Soviet power must provide the manpower for their own defense. 9 The cold war would be waged not necessarily by the direct and exclusive use of American military power but by employment of economic and other resources in conjunction with other nations and centers of power. The strategy of worldwide dominance first articulated in the Truman Doctrine underwent four modifications making up the new balance strategy, which remained in place through three successive administrations and guided the "new world order" of the Bush administration: 1. increased use of economic rather than military power; 2. recognition of fringes to curtail American involvement and cost; 3. support of regional power centers to maintain regional hegemony or balance in peripheries; 4. increased reliance upon international organizations or alliances such as the Group of Seven. The Vietnam War demonstrated the limits to military power. It pointed to lessons already learned primarily in Latin America —namely that investment

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and trade were more cost-effective ways of winning the cold war. As the European empires learned after World War II, formal territorial possession generally was a losing proposition; costs, most of which were military, outweighed benefits. Americans concluded that economic possession was a less costly and risky way to assert control. A cornerstone of American-Soviet detente was providing "most favored nation" trade status to the Soviet Union in 1972. Regarding the third world, commerce served to establish economic dependence and to secure exclusive access to materials and markets in the less developed areas. By the beginning of the 1980s, a strategy of "low-intensity conflict" evolved, especially in Latin America; under unified administrative control in each country, it integrated American trade and investment projects, aid programs, and military assistance. 10 The term imperial overstretch became increasingly common by the end of the 1970s, often used by military leaders such as Harold Brown, secretary of defense for the Carter administration, and the chairman of the Joint Chiefs of Staff.11 By recognizing fringes or nonstrategic areas, the United States narrowed the scope of its involvement. Much of the Asian and African world was written off as not worthy of direct American attention. An example was Kissinger's disregard of India, at least until Soviet intervention loomed through its assistance to Pakistan. Already practiced by the developed countries, the American fringe strategy reflected a new calculus, one of cost-benefit which questioned whether the benefits of American intervention or assistance exceeded the costs. There thus emerged a global red-lining that reduced cold-war tensions but that also reduced aid and development assistance needed by the underdeveloped countries of Africa and south Asia. Other cost-cutting and risk-reducing strategies placed reliance upon other countries and international organizations. While of no consequence in the event of an American/Soviet global war, key countries could be used indirectly to maintain hegemony or balance in their respective regions. By arming and supporting friendly but regional centers, American interests could be protected with less cost and involvement. If hegemony could not be maintained, a regional center could at least thwart popular uprisings and fend off Soviet-sponsored incursions in neighboring countries. The last strategy relied upon world organizations or alliances to gather in allies and their resources. Use of the United Nations was not always convenient. It was too public, inclusive, and noisy; the large majority of its members were newly formed third-world countries who were unhappy with American hegemonic leadership. Regional geopolitical alliances such as NATO, the Southeast Asia Treaty Organization (SEATO), and the Organization of American States (OAS) were more manageable and more effective for authorizing and supporting American initiatives. The free-world strategy with its modifications all were wrapped into the "new world order" heralded by the Bush administration. The genesis of the new world order was the Persian Gulf War. The war was started not just because of Iraqi aggression, the Bush administration admitted, but because of the

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importance of Kuwaiti oil. The implication was that such a war would not be waged in the resourceless fringes where costs outweighed benefits. The establishment of Saudi Arabia as a regional power center became an objective, especially after the war, through the American sale of F-15 fighters and M-l tanks. The war itself was a test of worldwide support through United Nations resolutions and the military-economic alliance to wage the war, which included an eventual allied contribution of more than $40 billion. Although the Persian Gulf War was a military triumph, the new world order fell on deaf political ears at home. In his State of the Union Address for 1991, George Bush announced the notion, "It is a big idea: a new world order, where diverse nations are drawn together in common cause to achieve universal aspirations of mankind —peace and security, freedom, and the rule of law."12 For the simple-thinking Bush, it was another "vision thing," which was his complaint about notions that seemed too idealistic or intellectual. Lack of the vision thing was Bush's campaign failure in 1992, which his critics attributed to his lack of intelligence and compassion. But substance was involved as well. While never figuring to overwhelm his critics with a vision of domestic America, Bush failed to capitalize on a vision of the peaceful, post-Soviet world order to which he and James Baker undoubtedly contributed. Bush failed politically because his new world order was simply the old world orders fashioned after the Napoleonic Wars, World War I, and World War II. His administration never saw beyond the cold-war vision of maintaining American hegemony and exercising Machiavellian interventions. It stopped American armor advancing over the moon-lit desert sands of southern Iraq to spare the Republican Guard divisions and to leave Saddam Hussein with enough military force to suppress popular revolts by the Kurds and Shi'ites; the goal was to maintain Iraq as a nation state to accommodate an American equation for balance of power among Middle East nations. Despite the brutal 1990 massacre of demonstrators in Tiananmen square, China retained its "most favored nation" trade status, for the purpose of counterbalancing Russian influence in the East. These were the realpolitik actions of American realists dedicated to a cold-war policy preoccupied with military alliances, economic power, and the geopolitics of regional and world control. The power strategy of geopolitics continues in the dogged American pursuit of NATO. Cold war warriors such as Henry Kissinger and Zbigniew Brzezinski want to expand NATO to contain Russia. Now is the time to extend NATO protection to Eastern European countries, and perhaps former Soviet republics such as the Baltic states and Ukraine. Draw the line now, they argue, for Russian nationalists to respect and for Russian reformers to support. The Russian people will respect the American/NATO commitment to declare war upon them on behalf of Eastern as well as Western European countries; they will accept an expansionist NATO as a neighborly successor to the cold war and Warsaw Pact; they will thank the United States for ensuring their own containment. The Clinton administration dressed up the policy as the "Part-

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nership for Peace," which was a political boon for Russian nationalists, communists, and hard-liners. Benjamin Disraeli once said, "A practical man is one who persistently repeats the mistakes of his ancestors." Ever heeding his cold war instincts, George Bush remained the Metternichian strategist and Machiavellian realist who refused to adopt the vision of an idealistic or moralistic world order. POLITICAL REGIONS

During the cold war the American emphasis was on political-military alliances—the Australia, New Zealand, and United States defense agreement (ANZUS), Central Treaty Organization (CENTO), NATO, OAS, and SEATO. The Soviet Union, which relied upon the oppressive apparat of the Communist party, was outorganized. Western Europe had been a model power center, which not only contained Soviet expansionism but eventually destroyed the Soviet system, first in Eastern Europe and then altogether. Based on the advice of Morton Halperin and Henry Kissinger, the "Nixon Doctrine" articulated a strategy of supporting centers in most regions of the world, especially in peripheral or nonaligned regions considered to be strategic or vital. The painful lesson of the Vietnam War was that the direct use of American power was neither very effective nor efficient. Therefore, the United States no longer would assume primary or direct responsibility for the security of all its allies. In Nixon's words to the press on July 25, 1969, it would "avoid the kind of policy that will make countries in Asia so dependent upon us that we are dragged into conflicts such as the one we have in Vietnam."14 During the early 1970s military and economic aid was beefed up for several nations selected to be regional power centers. The choices of Japan for the east Asian rim countries and of Brazil for South America worked satisfactorily. The choices of Indonesia, Iran, and Zaire were less satisfactory. The Carter administration devised the term regional influentials and added India, Nigeria, and Saudi Arabia (to replace Iran). These regional influentials or power centers were supplied by American economic and military aid and encouraged to form regional alliances with their neighbors. Where possible, hegemony was imposed; where necessary, balance of power was accepted. The Nixon administration attempted hegemony for Brazil during the early 1970s. Concerned about political movements in Chile and elsewhere, the administration invited the Brazilian president to Washington, and Richard Nixon flatly stated, "We know that as Brazil goes so will go the rest of that Latin American continent."15 The United States increased both economic and military aid, and it acceded to a number of Brazilian requests, such as recognizing its claim to a two-hundred-mile water limit (while ignoring similar claims by other countries). In exchange, Brazil adopted the foreign policy statement: "If any government should adopt communistic positions, especially in Chile or Uruguay, this is to be regarded as a threat against the United States and Bra-

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zil." Consequently the Brazilian military intervened in civil strife in Bolivia, threatened to invade Uruguay, and forced Paraguay to make territorial concessions.16 A regional power center was built to establish balance in the Middle East to offset anti-Western and militant Arab nations. Gone were the imperialist days of direct intervention, as in 1956 when Britain and France seized the Suez Canal from Egypt. To achieve parity in the Near East, apart from maintaining Israel as an armed fortress, the Carter administration supported Egypt. The Bush administration added Saudi Arabia, which received approval in 1992 (reapproved by the Clinton administration in 1993) to buy seventy-five F-15 fighter planes and up to seven hundred M-1A2 tanks. Given the power and opposition of Iraq, Iran, Syria, and the larger Sunni-Shi'ite schism, the Bismarckian strategy of balance of power was more realistic than the Metternichian strategy of hegemony. The Near East configuration of contending nations and secretive alliances resembled the situation in nineteenth-century Europe, including its own traditional Catholic-Protestant schism. The political purposes of defeating communism and winning the cold war prevailed over the economic purposes of competing against other economies and winning markets. American consumption was intended to stimulate the economies of countries that were wrecked by World War II. The heralded Marshall Plan and subsequent aid were soon dwarfed by the billions of dollars spent worldwide for trade imports and investments. Little mind was given to the trade deficits and shaky investments that lost billions of dollars, to wasted economic and military aid, or to the domestic diversion of financial and technological resources from private sectors to military and security programs. The American dollar was used to build a free-world economy, which continued as a purposive policy into the 1980s. Lester Thurow points out the international importance of the tax cuts and deficit spending by the Reagan administration: "The tax cuts and the expenditure increases provided a Keynesian locomotive for the American and world economies."17 No matter what the cost, if it defeated communism, it was worth every capitalist dollar.

TRANSITION BETWEEN WORLD ORDERS Transitions between world orders occurred twice in the twentieth century. The first was the transition from the monarchical/imperial order forged by the Congress of Vienna to the democratic/imperial order beginning with World War I. Delayed by the fascist reaction in Europe, the transition required World War II and American intervention. This occurred not only in Europe to defeat Nazi fascism but then around the world to replace the faltering European empires and contain Stalinist fascism. The second transition now appears to be occurring—from the American-led free-world order to some kind of democratic/international order. But the outcome is still doubtful; the direction is still unclear. A viable international order

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may occur progressively and smoothly; or, because of a return of cold war antagonisms, it may occur only gradually and painfully through an interregnum; or, if history is a determining precedent, it may occur cyclically through recurring order and disorder. For both transitions, a critical pressure point has been the Balkans, which were a buffer periphery for two thousand years between West and East. Balkan ethnic populations fought with and against the encroaching Roman and Holy Roman empires in the West and the Asian caliphates and Byzantine and Ottoman empires in the East. After 1815, the Austrian empire and then the Russian empire staked their claims in the Balkans vis-a-vis the standing Ottoman empire. All of these feudal empires were undermined, economically and politically, by the industrial democratic transformation occurring in Western Europe. Balkan wars occurred in 1912 and in 1913, the first initiated by a Serbian-led coalition that drove out the Turks and the second by the Serbs to suppress ethnic minorities. The Austrian and Russian empires failed to cooperate to maintain order; violence escalated in the name of nationalism; World War I was triggered. Described by John Strachey as "the first war of the empires," World War I resulted in the downfall of the Austrian, German, Russian, and Ottoman empires. As an American-led free-world order replaced the European imperial/colonial order after World War II and contested a Soviet-Sino communist world order, the Balkans again were the center stage for world conflict. The struggle between Soviet-supported communists and the Western-supported government in Greece evoked the Monroe Doctrine and started the cold war. Even under Soviet dominance during the cold war, the Balkans were something of a Soviet periphery. Stalin and his successors allowed autonomy for Yugoslavia that was unthinkable for other satellite states. Soviet hesitancy indicated awareness of the Austrian/Russian failure to control Serbia prior to World War I, the Italian failure to invade tiny Albania in 1941, and the guerrilla action that raged during the Nazi German occupation. After the Soviet collapse, Yugoslavia disintegrated into civil war, fueled by centuries of fighting and ethnic/racial conflicts. As in 1913-14. Serbian-initiated "ethnic cleansing" began in 1992 and continued into 1995. Despite the possibility of hostilities involving neighboring Albania, Greece, Romania, and Turkey, none of the larger powers was willing to stop Serbian atrocities and ensure the peace —not the European Union, NATO, the United States, or the United Nations. No longer considering itself to be the guardian of Europe or obliged by the Truman Doctrine of another era, the United States finally intervened through NATO after three years of war and ethnic cleansing and after the warring sides arrived at an exhausting stalemate. The outcome of the Persian Gulf War was proclaimed as proof of a "new world order." But it was really a two-day oil war, and with Saddam Hussein being allowed to stay in power, it resulted in balance-of-power politics as usual. The advent of the war demonstrated the failure of world power during transi-

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tion. In the past Saddam Hussein probably would have been constrained by his Russian allies, and in the future he probably would be deterred by a standing multilateral or international force. T h e Balkan tragedy occurs at a time of transition between world orders. No empire or world power such as the United States in 1947 is able and willing to intervene in the Balkans, or places such as Angola, Azerbaijan, Cambodia, Chechnya, Rwanda, and Somalia. The European empires are gone; the Soviet Union is nonexistent and the Russian-led Commonwealth of Independent States is ineffectual; the United States is withdrawing from Europe and other world areas. The European Union, Western European Union, and NATO falter even though the Balkans are part of Europe. Edward Luttwak has commented: Not only groups of secessionists and aggressive small powers, such as Serbia, but even mere armed bands can now impose their will or simply rampage, unchecked by any greater force from without. Today there is neither the danger of great power wars nor the relative tranquility once imposed by each great power within its own sphere of influence.18 The transition be similar to the past, or will it be question remains

to a new world order still is in the unknown future. Will it imperial orders and their geopolitical power strategies of the a true international order based on a moralistic strategy? The open.

BEYOND GEOPOLITICAL STRATEGY For the first time in more than fifty years, the United States is positioned to abandon the informal imperial policies encouraged by the cold war. Having emerged from under the shadow of the Soviet menace, it is free to respond in the light of a long-term world peace and development strategy. And, because of cold-war debts and imperial overstretch, it is compelled to reduce its worldwide economic and military presence. Whether seeking hegemony or balance, world powers and empires adhere to the Machiavellian thesis that order is the political virtue supreme to all other virtues, whether justice, truth, beauty, or happiness. It is an issue as old as political philosophy, dating back to Aristotle's politics of necessity and his contempt for Plato's republic of virtue. It is an issue as bold as the American republic when Thomas Jefferson asserted that revolution may be necessary every twenty years or so to revitalize the political system and suggested that suppression may in fact prolong and intensify tensions to the point of provoking disorder. Transcending the practical question of how best to reduce tensions and resolve conflicts is the moral question of whether order is to be maintained at the expense of virtue. With the downfall of world communism, the practical question of main-

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taining world order is again presented: How can the United States withdraw as a world leader, without jeopardizing world peace, prosperity, and order? This begs a second question: How can the United States play a positive role that conserves its resources yet promotes the long-term interests of world peace and prosperity? The conventional answer is to continue to pursue the status quo political order, but at less cost. Hegemony and direct control are given over to balance and indirect control, as explicitly attempted by Henry Kissinger and the Nixon administration. Regional alliances are encouraged to exert indirect control, and control may be altogether relinquished in "fringe" areas where the costs exceed the benefits. For the Roman empire this meant withdrawing from fringes and staying south and east of the Danube and Rhine rivers, but it also meant endless political entanglements and fighting in the remaining occupied peripheries that inevitably destroyed not only the Roman empire but the state and city itself. Unique among the European colonial empires, the British empire abandoned its strategy of world hegemony after World War I. It was a tactical response to the debt of World War I and to the cost of empire that became prohibitive during the 1920s. To the world, it was further admission that Britain was abandoning hegemony for balance, which first was apparent by the partition of Africa in 1875. George Liska sees the British predicament as analogous to the American options existing today: The United States would then equal turn-of-the-century Britain as an overextended and declining imperial power, beset by the rise of rival powers in the central balance of power and facing, in addition to a deteriorating economic situation, the problem of proliferation in the "ultimate" weapon of the age (nuclear versus naval), acceleration of disruptive tendencies in peripheral regions (the third world in general versus Egypt and South Africa), and increasingly centrifugal tendencies among principal associates (America's major allies versus Britain's white dominions). In such a situation, the embarrassed power will legitimately look to easing its burdens while hoping to preserve the vital assets. The British formula was to combine accommodation with the principal challenger for succession and wider devolution of responsibilities and capacities onto other major powers. The all-important question concerned then, as it does now, the choice of the principal partner in accommodation and the assortment and synchronization of the accommodational with the devolutionary strategy.19 Britain's choice of principal partner and successor, the United States, became a matter of necessity during and after World War II. By 1947, Britain pleaded with the United States to relieve the British presence in Greece and Turkey, which led to the Truman Doctrine. Liska asks: "Accommodation for what? If accommodation with the principal challenger is a policy of retreat from empire, its result may be transfer of primacy to the aspirant." Ideally, this accommodation "avoids transfer of imperial primacy for transformation of the international system." 20

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While responding to the colonial problem in a largely positive and farsighted manner, Britain erred in its accommodational policy of the 1930s. The transfer of imperial primacy to an isolationist-minded United States did not occur; nor did effective primacy transfer to the international system, as evidenced by the ineptitude of the League of Nations. What occurred was the relinquishing of primacy to Nazi Germany as the aspirant. Had the accommodating Neville Chamberlain substituted for the truculent Lloyd George to negotiate more liberal terms for the Versailles Treaty, Nazi Germany and World War II might not have occurred. Or had Lloyd George substituted for Neville Chamberlain during the appeasement of Nazi Germany, World War II might have been aborted as early as 1936 in the Rhine or even as late as 1938 in Czechoslovakia. While the declining British empire sought accommodation and trust in a balance of power, fascist-threatened Europe required hegemonic leadership and imperial strength, which it got in the personage of Winston Churchill and intervention of the United States, but only after World War II was well under way. Historic second-guessing aside, the point is that the retreat from empire and accommodation to other powers is most likely to bring about a transition of a stable and workable international system when done from a position of strength rather than weakness. The British and French tragically missed the moment of their transitional opportunity in 1919, after the fall of the Eastern European empires. The American moment is now, after the fall of the Soviet empire. Liska points out that a moment of transformational opportunity, although less in scope and degree, was available to the Nixon administration in the mid1970s. Henry Kissinger failed to move far and fast enough to consolidate a more viable new system of alignments. He lost thus a rare occasion, offered by the exceptional post-Vietnam latitude within the United States and receptiveness outside it, for re-orienting American foreign policy from empire to equilibrium while retaining for it a leadership role.21 Blinded by geopolitical power, Kissinger and Nixon saw fit merely to modify a Metternichian strategy of American hegemony into a Bismarckian strategy of balance of power. The new world order strategy of the Bush administration continued to pursue balance of power in a post-cold-war era. Considering that the Bush administration presided over the fall of the Soviet empire and the winning of the cold war, its election defeat seemed astounding. Yet an analogous political defeat was suffered by the British Conservative party and Winston Churchill immediately after World War II. In both cases, victorious imperial leaders failed to redirect attention and resources to the pressing domestic problems which were aggravated by continued efforts to dominate foreign affairs. Liska presented in 1975 his alternatives of "devolutionary power strategies"

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and "transformation of the international system" against the backdrop title Beyond Kissinger. Twenty years later, Henry Kissinger is still extolling geopolitical power strategies in his magnum opus, Diplomacy. Kissinger equates international systems with Wilsonian idealism, which he denigrates as the polar extreme and opposite of isolationism, both being the mistakes of American "exceptionalism." He warns that "the dictates of Wilsonian foreign policy— collective security, the conversion of one's competitors to the American way, an international system that adjudicates disputes in a legal fashion, and unqualified support for ethnic self-determination —are becoming less practicable."22 To counterbalance such impracticable notions as collective security and international law, Kissinger argues, the United States must pursue its own security and negotiate its own laws, and it does this by recognizing that its "interest is served —in Europe and in Asia (other areas don't matter) —by the maintenance of the balance of power." His inspiration is Cardinal Richelieu, whose foreign policy was based upon raison d'Etat, understood as "the interests of the state justify the means to pursue them."23 It is this Machiavellian understanding of national interests and the means to pursue them that must uproot past idealism and ground American diplomacy in the post-cold-war era. Kissinger ends his book by stating, "The Wilsonian goals of America's past—peace, stability, progress, and freedom for mankind —will have to be sought in a journey that has no end."24 It is with this Machiavellian skepticism, often cynicism, that America's most celebrated diplomat points to the future. It is well suited for the cold war geopolitical strategies that Kissinger himself formulated. It is even better suited for the geoeconomic strategies being proposed for the post-cold-war world — where economic interests are considered virtuous in themselves and where the developed nations and regions compete unabashedly for economic balance or hegemony in the global economy. While political ideals must be addressed, economic ideals may be dropped with a Machiavellian shrug.

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New Economic Order For the remainder of this century and on into the next, geopolitics must yield to geoeconomics. —Thomas A. Stewart "The New Face of American Power," Fortune, 1993

FROM GEOPOLITICS TO GEOECONOMICS The most critical issues for world order are no longer geopolitical. The diplomatic art of geopolitics belongs to an era when political diplomacy produced treaties and alliances regarding national boundaries and state prerogatives. It still flourished during the cold-war years in the form of American-Soviet negotiations and of political-military alliances such as the North Atlantic Treaty Organization, Southeast Asia Treaty Organization, and Warsaw Pact. The more critical issues today are geoeconomic and market-specific, whereby the diplomatic art of geopolitics is rivaled by the calculative science of market economics and whereby agreements over national boundaries and state rights are less important than those over markets and entrepreneurial rights. Whereas computers in the Department of Defense once operated twenty-four hours a day and computed the results of war games and scenarios, computers in the Department of Commerce now compute the results of economic transactions and strategies. The simulated military penetration of air spaces and defenses now takes on the economic penetration of market opportunities and commercial barriers. The same metaphors prevail, whereby geoeconomics is a game or war involving the calculation of gains and losses for winners and losers. As politics creates its geography in the form of national boundaries, modern

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economics creates its own geography in the form of market boundaries. Geoeconomic boundaries vary, depending upon what is being exchanged. Currencies and securities are exchanged irrespective of particular places or nations. Markets for most products, whether sugar or shoes, usually involve thousands of places and numerous nations, and a product as complicated as an automobile can consist of parts made in more than a dozen countries. Markets for more value-added products and specialized services, such as microchips or electronic engineering, are supplied usually by multinational corporations whose operations are spread across the national boundaries of numerous countries. Geoeconomic market boundaries are transcending, even transforming, geopolitical state boundaries. Geoeconomic strategies are conceived at three geoeconomic levels—world, regional, and bilateral. World geoeconomic strategies encompass trade, investment, and currency policies and actions aimed at extending American economic power in the global economy, as effected through American-led international organizations such as the United Nations, World Bank, and World Trade Organization (WTO). Regional strategies center on North America as effected through the North American Free Trade Agreement (NAFTA) and, with its possible extension, the entire Western Hemisphere. They are complicated by lingering concern over the American informal empire of the cold-war years — its territories in the Caribbean and Pacific and dominance of nations in these areas —and they now must take into account rival economic regions. Bilateral strategies are directed at problems of commerce with individual countries, such as the trade deficit with Japan or the question of most favored nation status with China. The United States is realizing that its chief foreign adversaries are not political but economic; to compete against foreign economic competition, geopolitical strategies must serve geoeconomic strategies, not vice versa, as during the cold war. That realization was apparent in 1993 in dealings with the Japanese. Peter Drucker observes, "The first pillar of Japanese policy was the belief that Japan was sufficiently important as a bulwark against Soviet (and Chinese) communism that the U.S. would subordinate economic interests to the maintenance of Tokyo's political stability and to the U.S.-Japanese strategic alliance." This is no longer so; now, "the United States will increasingly exact a substantial economic price for this political support."* As the most valued power game in Washington, geoeconomics may be superseding geopolitics. As did all the cold-war administrations, the Clinton administration may continue to assume that the United States and its chosen allies can determine world events. To some extent through NATO and other cold-war alliances it can sustain international (often even intranational) peace and continue to police the world; and through G-7, international development agencies, and economic regional alliances it can maintain the world economy and control development in the less-developed countries including Russia and China.

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If geopower strategies persist, the political cold war of the past can be reenacted as the economic cold war of the future. Geoeconomic rivalry can tear asunder existing international cooperation and dismantle WTO, the world banking system, and other economic institutions. It can reverse the international cooperation and organization now in place and reenact the past rivalry among national and regional economies. The world of the twenty-first century can regress to the national/imperial rivalry that carried into the twentieth century. ECONOMIC REGIONS

The outline of economic regions is taking shape as the new global economy comes into focus. The most developed regions include the United Statesled NAFTA, the European Union (EU), the Russian-led Commonwealth of Independent States, the Islamic Economic Cooperation Organization and Organization of Petroleum Exporting Countries (OPEC), and the inchoate AsiaPacific Economic Cooperation (APEC) led by Japan and China. In response to the intrusions of a growing global economy, regions function primarily to consolidate the economic resources of their members and to compete on more favorable terms with the more powerful nations or regions. Regions pursue the same economic goals pursued by nations and world organizations—to increase production and to raise living standards. But regions pursue very different strategies. They attempt to reduce or remove trade barriers only among the members of the region; to stabilize prices by fixing currency rates within the region; to increase productivity by keeping savings and sharing investment within the region; to bargain collectively and aggressively with other nations, regions, and world organizations. Economic regions originate as a defensive adaptation. Their overall purpose is economic security with respect to the world economy outside the region. Because the world economy is increasingly intrusive, national economies alone cannot defend their interests. Robert Gilpin links the formation of economic regions to the worldwide trends toward neomercantilism and protectionism.2 Even the United States, the most powerful economy, is enlarging NAFTA because of threats from other economic regions and powers. The United States's largest regional threat is the EU, whose looming potential to control world markets has encouraged the formation of economic regions throughout the world. Rival regions in Latin America include the Andean Pact, Caribbean Community and Common Market, Central American Common Market, and Mercosur. The United States warily watches other emerging regions, such as the Association of Southeast Asian Nations and the possible expansion of its membership to include Australia, China, and Japan under the banner of APEC. Chile, a member of the Andean Pact, already is joining APEC. NAFTA is touted as a historic step toward free trade and world economy.

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But it also extends American protectionism from a national to a regional level. National tariffs and protectionism, prevalent in American economic policy since the early nineteenth century, are applied to the larger NAFTA area. Jagdish Bhagwati states: "Today the enthusiasm for regional free trade is dressed up as a great free trade move. But it is evident that the main motivation is protectionist."3 How is it protectionist? It gives American firms, no longer paying Mexican tariffs, an advantage over other foreign firms in selling to Mexican consumers. In his debate with H. Ross Perot on November 9, 1993, Vice President Albert Gore argued that if the United States will not reduce trade barriers and sell to the Mexicans, the Europeans and Japanese will. By establishing free trade with Mexico and dominating Mexican domestic markets, the United States can keep out other economic powers. At stake is more than the Mexican consumer market, much more. NAFTA provides a manufacturing environment for American corporations to compete in world markets where cheap labor matters. As American corporations want exclusive access to the Mexican labor market to produce goods for sale in American and other markets, European and Japanese corporations want this same access, especially to produce goods for export to American consumers. Regional protectionism covets investment as well as trade. The same strategy logically extends NAFTA to the larger South American countries. Strong partners like Canada, who can buy American goods and services and who can contribute to a regional productive sector that is world competitive, are preferred. Mexico is less preferred, but offers cheap labor for Mexican-based manufactured exports, if not for the United States, then for its competitors. As members of other regions such as the Andean Pact and Mercosur, other Latin countries are potential competitors and adversaries, especially the stronger economies of Argentina, Brazil, or Venezuela. They also could become the staging area for the EU, Japanese, or Asian-controlled APEC. As Americans worry about the EU as Fortress Europe, an extended NAFTA could build an economic fortress around the Western Hemisphere. By extending NAFTA into South America, the Clinton administration could create an economic version of the Monroe Doctrine. The EU was formed from the same defensiveness it evokes from the rest of the world. After World War II, European nations realized that alone they were no match for the American economy. Each European nation negotiated with a vastly larger American economy that could take or leave its proposals at little or no cost to itself; if the French wanted too much for their wine, Americans could bargain with the Germans. Also, during the 1950s and 1960s American corporations were buying up Europe, or so it seemed to most Europeans, particularly the French, who have never liked American culture. Now with a united twelve-member EU, commerce is all or nothing. In 1993 with the United States alone, EU exported merchandise valued at $97 billion and im-

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ported $98 billion. While EU exports to the United States approximated those of Japan, EU imports doubled those of Japan, constituting 25 percent of American exports. Because of this size, access to EU markets is critical for American exports, and EU exports compete with American products in other markets including American markets.4 The less developed countries form economic regions to compete against American products and to reduce dependence upon outside markets, currencies, and investments. Although lacking capital and production for self-sufficiency, less-developed regions still provide some measure of independence from the terms of trade or investment imposed by the EU, NAFTA, or Japan, or by the three working together through the Group of Seven. Both developedand less-developed countries create economic regions for the same reason that businesses organize cartels or workers form unions—to consolidate resources and thereby enhance their independence and to control markets and thereby enhance their competitors' dependence. REGIONAL ACTIVITIES

Economic regions usually are occupied with four major concerns—trade, currency, capital, and investment. Regions of less-developed nations find them to be especially critical. Trade

World trade increased from $300 billion at the start of the 1970s to $4 trillion by the mid-1990s. Most economic regions address this phenomenon by creating trade blocs to reduce trade barriers among their members—tariffs, quotas, duties, subsidies, and the like. Reductions begin on selected products, but the goal usually is the removal of all trade barriers on all products and services. Countries eventually negotiate other factors affecting trade: market access, pricing/dumping, patent protection, licensing, antitrust laws, currency exchange rates, financing and capital restrictions, government subsidies, and labor and environmental regulations. As countries negotiate to achieve balance between surpluses and deficits and competitive fairness, trade blocs expand into economic regions. Because WTO is limited, nations continue to form trade agreements on a bilateral or regional basis. Countries as economically isolated as Kazakhstan and Uzbekistan abolished tariffs with each other in early 1994. NAFTA, EU, and APEC continue to expand as free trade regions. The United States endorsed GATT/WTO after World War II, to establish universal trade terms giving no apparent advantage to the most powerful countries and prohibiting retaliatory trade restrictions. Despite its support of GATT, the United States continued to negotiate bilaterally with most favored na-

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tions—and least favored nations, to correct trade deficits with Japan, to assure human rights in China, to combat terrorism in Iraq or Iran, or to isolate Cuba. It imposed barriers, even boycotts, in disregard of the GATT regulations. Less-developed countries are ambivalent about WTO. Except for the developing countries that have been able to export, the others resist exposing their industries to the exports of better developed foreign industries. They resist internationalists and free traders who urge them to eliminate protection of their domestic infant industries through the bland assurance that their cheapened goods and currencies encourage other economies to buy. Lester Thurow states: "The theory (of free trade) assumes that the winners will compensate the losers, so that everyone in each country has an incentive to move toward free trade, but in fact such compensation is almost never paid." He identifies several reasons why less-developed countries and areas will continue to lose and decline. The cheapness of their products, while attractive economically, is detrimental politically: Cheap labor threatens labor in the developed countries; cheap products threaten manufacturers in developed countries; and cheap imports drive up trade deficits, especially in the United States. And less-developed countries cannot afford the cost of shifting production to exportable products, the labor related costs, and the costs of tearing up human communities.5 As the United States adopted protective tariffs in the nineteenth century to allow its infant industries to mature and eventually compete, less-developed countries now only want similar protection for their infant industries. As the Japanese have demonstrated, protection can be provided by other means as well —closed bidding, licensing, long-term contracting, interlocking directorates, and supplier-integrated ownership. Committed to the cold-war objective of building economies and allies among the less developed nations, the United States once allowed the newly industrialized countries to restrict their imports and protect their industries. Threatened by Japan and other developing countries, it now seeks protection through bilateral negotiations, NAFTA, and WTO. Currency As the world's trading currency, the dollar tends to operate as the standard around which other currencies rise and fall. Assuming a stable dollar, Americans are slow to realize that currency values themselves partly determine supply, demand, and investment. But investors now fully realize that, as the dollar declines in value in relation to some of the stronger currencies such as the yen and the mark, the value of their dollar investment also declines. Currency rates are critical to most of the less developed countries that experience undervalued currencies and overheated inflation. The resulting higher cost of consumer imports reduces their living standard; it also drains their

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purchasing power to obtain domestically produced goods and services, thereby retarding local production. The resulting higher cost of producer imports discourages investment and modernization, or, if investment occurs, increases production costs and puts local producers at a market disadvantage. Whether purchasing from foreign or domestic producers, domestic consumers and producers get less for their weak currency. 6 The less-developed countries, especially underdeveloped countries, tend to have two distinct economies —one based on a dominant foreign currency and the other based on the domestic currency. The latter is a subsistence economy involving those without access to foreign currency and consisting of transactions conducted as much through primitive barter as through use of the domestic currency. Through regions, the less-developed countries attempt to fix currency exchange rates and stabilize the value of their currencies vis-a-vis the dollar and other strong currencies. Since the strongest economies and currencies attract most of the money and resources, regions give weaker economies a better chance to maintain their currencies. However, the less-developed currency bloc walks the fine line: having an abundant but near-worthless currency by remaining independent of outside currencies or having a very scarce but valued currency by pegging its value to a strong outside currency. The less-developed countries can have large amounts of a floating currency that is undervalued and inflated or small amounts of a fixed currency that is overvalued and deflated. Russia floated the ruble partly because of its traditional distrust of Western countries and currencies, as evidenced by the Soviet Union's refusal even to exchange, much less to fix, the ruble in any Western or capitalist markets. The ruble promptly hyperinflated to a rate of 2,500 percent by 1992. The old currency was abandoned, and a new ruble was issued in 1993, but the rate of inflation continued high at 20 percent per month. The Russians pressed forward to make the Commonwealth of Independent States into a ruble bloc; only five former republics joined, more to obtain Russian-controlled oil and gas than to benefit from using rubles. For the immediate term, the problem of the floating ruble can be expressed by George Gershwin's song title "I got plenty o' nothin'." The problem of currency exchange undermines the classical theory justifying free trade. The less-developed countries can and do export more goods because of undervalued currencies, but they also import fewer goods, and their enrichment and development opportunities are lost because of the degradation of their currencies. Paul Davidson concludes: During our great neoclassical experiment of floating rates, the world has experienced more global stagnation plus periodic bouts of inflation dampened by increasing worldwide rates of unemployment, and a horrendous growth of international debt obligations

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accompanied by a growing inequitable international distribution of global income—as many of the rich nations got richer, while most of poor nations got poorer on a per capita basis and suffered huge "capital flight" losses to the wealthy.7 Capital Overvalued currencies attract capital, as nectar attracts bees. Being overvalued, they are in demand; being in demand, they are overvalued. They attract other currencies and encourage savings. The reverse happens to undervalued currencies. For many less-developed countries domestic savings actually become negative quantities as inflation rates exceed interest rates. Even when an earnings spread exists, larger savers prefer to convert into the stronger foreign currencies, which means their savings are unavailable for domestic investment. This is the phenomenon of capital flight, which means more than the occasional dumping of illicit funds or "hot money" in a Swiss bank account. William Darity considers it to be part of the economic structure in less-developed economies, which involves the expatriating of savings to lower risks and stable returns.8 Morgan Guaranty Trust Company estimates that, even before the pesos crisis in early 1995, Mexicans deposited $85 billion dollars in non-Mexican banks.9 According to a World Bank official, capital flight from Russia amounted to about 15 percent of its gross domestic product in 1993 (close to $15 billion); this figure exceeded the funds that Western countries were putting into Russia to alleviate its desperate capital shortage.10 Capital flight reinforces the disparate health of strong and weak currencies and deprives economies with weak currencies of sorely needed investment. It cripples domestic ownership and production already operating under the handicap of the high cost of imported purchases and credit for the purchases. Darity estimates that during the 1980s the loss of domestic savings in many less-developed economies exceeded the foreign investments going into those economies; if the savings had been retained, most of the debt would have been prevented, including the back-breaking debt service that then wrecked most of the economies.11

Investment International investment usually involves the purchase of government bonds and other securities, which are issued less for economic than for financial reasons. While the United States government issues bonds to satisfy its addiction to budget deficits, most governments issue bonds to finance economic development. The governments of less-developed countries usually are required to guarantee industrial bonds to be purchased in international bond markets mostly by and through large brokers such as Morgan Stanley (United States) or Rothschild (Europe).

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Direct foreign investment is made in actual enterprises that are foreign owned or domestic enterprises that are at least partly foreign capitalized and controlled. While providing less capital than bonds, stock investment is the simplest. Virtually all of it is done by multinational corporations that number about 35,000 and that have about 170,000 affiliates. About 75 percent is done by multinationals of the developed countries, and most of the rest by those of oil-producing countries.12 By forming investment regions, less-developed countries depend less upon investment by the developed countries. Regional banks usually provide loans at lower interest rates and more accessible terms, and if controlled by the region, they are less likely to impose the same austerity measures as the International Monetary Fund. Regional banks can leverage capital from the developed countries—by selling stock, creating joint ventures, or backing bonds. Such dealing introduces the usual trappings of owing debt to the developed countries, but the regional banks often can mitigate the terms. They also help keep capital closer to home, and they help stabilize currency rates and values. As agents of collective bargaining, less-developed regions can negotiate better prices for their raw materials, and other terms routinely imposed by the developed countries. These include requirements that multinational corporations pay minimum wages and benefits to workers, provide education, training and managerial opportunities for workers, contract with and provide assistance to local suppliers, share technology, allow joint ventures or partnerships with a minimum of local investment, observe environmental laws, and pay taxes, usually in the form of percentage of investment or "registered capital." In sum, economic regions are being formed to enable countries to cope with the concerns of trade, currency value, capital, and investment that they could not address by themselves alone. Since the sixteenth century, nations have begotten nations, especially on a worldwide basis in the nineteenth and twentieth centuries. The power of the modern nation extinguished the kingdom, the tribe, and the city-state. Regions are now begetting regions, and by the end of the twenty-first century, the region may condemn the nation to the history of obsolescent political organization. MULTINATIONAL CORPORATIONS

The global economy is characterized by three developments—the prevalence of the geoeconomic strategies of trade and investment (best exemplified by the Japanese), of economic regions (best exemplified by the EU), and of multinational corporations (best exemplified by the United States). Multinationals now account for most foreign trade and direct private investment. As cold war inspired geopolitical strategies now diminish, they influence heavily the geoeconomic and regional strategies of their home nations. Any one of the larger multinationals has more assets than most nations of the world. There are about 35,000 multinationals that control about 170,000

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affiliates. Four of the largest five are American —Ford, General Motors, Exxon, and International Business Machines (IBM). The hundred largest multinationals (excluding banks and financial houses) account for $3.1 trillion assets in 1990, $1.2 trillion being outside the home nation. They account for 40-50 percent of all cross-border assets.13 The relation between the multinationals and nations has changed. Still in the 1960s, multinationals were closely aligned with the nation of their origin. Typically, one corporate board and executive headquarters ruled over the corporation through a vertical chain of command. The parent corporation owned and controlled its subsidiaries in other nations. Except for extraction of raw materials or trade outlets, investment was concentrated in the home nation, usually in the city where the headquarters was located. Now in the 1990s, multinationals are diversifying and decentralizing. The board and executive office of the parent corporation do not rule over subsidiaries. Ownership and investment are more diffuse through the formation of longterm contracts, corporate conglomerates, or joint venture partnerships that involve investors and lenders of many nations. Multinationals operate less through a vertical chain of command and more through a horizontal net of coordination. Subsidiaries are corporations, each with its multiple owners, executive organization, and lenders. Subsidiaries no longer are confined to extracting or buying raw materials given over to the parent corporation for value-added processing; rather they are vertically integrated and capable of extracting, manufacturing, and marketing their own products in their own locations. The complexity of multinationals is due to the many requirements of the nations and economies they enter. Trade restrictions, investment restrictions, consumer preferences and markets, taxes, wage levels, labor laws, patents and copyrights, environmental regulations vary widely among nations and economies. To adapt, multinationals follow the edict "Think globally, act locally." They have become increasingly complex, even obscure. William Holstein has commented, "These world corporations are developing chameleon-like abilities to resemble insiders no matter where they operate."14 The relationship of multinationals and their home nations is correspondingly complex. Multinationals often circumvent national requirements by disinvesting and moving operations to another country to get around labor unions, environmental regulations, tariffs, taxes, and so forth. Because of their ability to operate beyond the jurisdiction of any one nation, they are often called "transnational" corporations. To study the role of large corporations in world development, the United Nations organized its Commission on Transnational Corporations. While becoming more diffuse, multinationals still seek protection and assistance from their home nations. Replacing the national geopolitical strategies of the cold war are the corporate geoeconomic strategies of the "corp war," a desperate struggle among multinationals to thrive, or at least survive, in the

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cutthroat competition for world markets. Multinationals always have looked to their nation-states to provide market advantages. British corporations flourished under the protection of the British empire well into the twentieth century. The United States acted as an informal empire by pushing economic and business development throughout most of the world during the cold war. Japan has been called a "financial empire," with reference to the aggressive trade and investment practices of its state-supported businesses that seek market control in other countries. 15 For American multinationals, an extended NAFTA offers the best of both worlds. It opens the markets of the member countries, which usually means more business for American corporations, as shown in Canada. Domestic businesses usually cannot compete with the more popular and better products of American corporations, especially when the latter set up domestic manufacturing facilities and market products according to domestic consumer preference. At the same time, NAFTA maintains market barriers against multinationals outside the region. Multinationals and their home nations are developing a symbiotic relationship. While receiving assistance and protection from their home nations, multinationals provide benefits by extending the political influence of those nations. In their struggle for world markets and against world competitors, multinationals turn to their national governments for trade advantages, loans and guarantees, monetary stability, military and police security, and political protection. In return, home nations attempt to retain and develop domestic resources and look to multinationals for tax revenue, investment and business creation, job creation and security, and environmental protection. Thus the corp war is not just an economic war among multinationals: it is a political war among home nations on behalf of their multinationals. According to Lester Thurow, multinationals "offer the best opportunity for empire building." Nations are obsolescent vehicles for exercising imperial power: "The days of colonial empires are over, expanding one's national borders by conquest is rare, and nuclear weapons make conquering the world not worth pursuing." However, the days of conquering world markets and building economic empires have just begun, and multinationals are the ideal vehicles. Thurow argues: The modern industrial leader is not a general who can shoot deserters, but he is a leader who can hand out real punishments and rewards. Individuals can be demoted or fired, banished from the group, deprived of security, belongingness, and the esteem of others. . . . Together, individuals can build something bigger than they could ever dream of building themselves. Men and women can conquer markets much as they used to conquer neighboring clans.16 Susan Strange makes a similar point. She agrees with Thurow about the imperial power of corporations:

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America's "legions" in the integrated financial and production economy of today's world, are not military but economic. . . . The American empire in sociological terms therefore could be described as a "corporation empire" in which the culture and interests of the corporations are sustained by an imperial bureaucracy.17 Great nations and empires once sought to achieve their world aims through geopolitical power backed by their armies and navies. They now do so increasingly through the geoeconomic power of their multinationals, upon whom they depend and whom they serve. NEW ECONOMIC RIVALRIES Most observers regard regionalism to be a step toward a more workable and desirable world order. It strengthens nations and promotes international cooperation. Not necessarily so, for two reasons. First, like ethnic rivalries, economic regionalism can be intranational and contribute to national breakdown. Neal Peirce writes about "the age of the citistate" whereby metropolitan regions are world commercial centers somewhat apart from their particular nation-state.18 Kenichi Ohmae describes the appearance of the "region state," whose economic ties are stronger with areas of other nations than with other areas of their own nation. Because "regional states are natural economic zones," he contends, "the national state is dysfunctional."19 He writes elsewhere about the emergence of the "borderless economy."20 Unlike ethnic divisions, which reflect inward-looking and chauvinistic movements, economic divisions reflect desires that are outward-looking, free trading, and internationalist. Industrialized northern Italy conducts more commerce with contiguous areas in France and Switzerland than with southern Italy; rural Slovakia separated from the industrialized Czech Republic because the latter had stronger economic ties with Saxony in Germany and Silesia in Poland. Second, and more important, regions can contribute to international breakdown. Admittedly, their overall political thrust is international. As nations and their multinationals jostle with one another to form their own trading and economic blocs, this would seem to promote world economic interdependence and order. Lester Thurow regards regionalism to be a first step toward an integrated world economy: "Regionalism may well be a positive development for the world. Jumping in one big leap from national economies to a world economy is simply too big a leap to make. It is necessary to take smaller intermediate steps first."21 Neither Rome nor a world economy can be built in a day or a decade; as nations are the foundations, regions are the walls, for the building of the world economy in the twenty-first century. Thurow may be indulging in wishful thinking. Although decidedly international, regionalism may not be transnational in the sense of creating a unified

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world economy. Indeed, it may be injecting interregional rivalry and tearing down the world economy. Thurow himself writes about the cutthroat competition and confrontations occurring in world markets, as suggested by his title, Head to Head. His dominant metaphor is winning and losing the economic game. The United States is losing the game of economic competition with the Europeans and Japanese, he says, because they are playing by more fast-paced rules as in the game of soccer rather than the methodical, time-interrupted game of American football. In another passage, his metaphor is war, as when speaking of transnational corporations and their conquest of world markets. In another passage, the new economic blocs are called "economic wolf packs."22 Thurow fails to see the implications of his own insights about the forming of economic blocs and regions and of his metaphors about them. Head to Head rallies Americans to play one-on-one in a triangular contest versus the Japanese and Europeans, one which intensifies the rivalries and conflicts of the past. Through competitive/combative metaphors, he envisions competition among economic blocs as zero-sum propositions for international commerce: What markets are gained for nations within the bloc are lost for nations outside the bloc. The lowering of trade and investment barriers for nations within the region puts at a disadvantage the nations and their industries outside. The desire for protection increases both within and outside the region. To compete with the industries once outside their national economy but now within the regional economy, domestic industries want extra protection. As infant industries, they often receive it in the form of licensing, subsidies, antidumping laws, and so forth. The excluded nations and their industries form alternative regions. These are mostly the less-developed countries that prefer to trade in the lucrative markets of the developed countries but necessarily turn to trade with one another. So it goes; as one group of nations forms an economic region, so excluded nations must compensate for lost markets by forming their own regions and protecting their own markets. A metaphor for better understanding the impact of regionalism derives from nuclear physics: The world economy can become atomized as a chain reaction occurs from the imploding of one economic bloc to the next. The breakdown of WTO, which provides the control rods, can result in the meltdown of the world economic system. While publicly extolling WTO and free trade, nations frequently circumvent WTO through licensing, subsidies, antidumping duties, and special taxes. Others may repudiate unpopular provisions, ignore panel rulings, and chance retaliation. This is likely to weaken other worldwide economic institutions —stable currency rates, open financial markets, and lending institutions. The occurrence of regionalism can be understood through the principle of "countervailing power," formulated by John Galbraith to analyze the intranational organization of the American economy. Observing the formation of monopolies or oligopolies to control market supply or demand, Galbraith noted that prices no longer are determined by competition, as classical economists

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assumed. Nonetheless, monopolies (or regions) and their power to dictate prices are challenged —not by the free market but by the tendency of suppliers and buyers to organize a collective response. Their success depends on several factors: the availability of substitute products, the economic strength of suppliers relative to buyers, and the ability to organize cartels or buyer/seller blocs. This organizing of countervailing power is a "self-generating force": it occurs quite naturally when "power on one side of a market creates both the need for, and the prospect of reward to, the exercise of countervailing power from the other side."23 Countervailing power occurs most frequently in the world markets where supply and/or demand is being manipulated. Oil-producing countries formed the Organization of Petroleum Exporting Countries (OPEC) in response to price manipulations by American and European buyers. OPEC succeeded in doubling the price of oil to $8 a barrel in 1975, then tripling it to more than $25 a barrel by the start of the 1980s. Other suppliers have attempted to control the supply and price for other commodities —metals, rubber, spices, sugar and other tropical foods, timbers, or diamonds. Developed countries and their multinational corporations have been able to control demand more than lessdeveloped countries have been able to control supply. As regions become better organized, the less-developed countries may better exercise countervailing power, producing some unexpected regional and interregional alignments in the twenty-first century. Economic regions may be a positive development and intermediate step to a world economy. But Paul Volcker provides the reminder, "By their nature, free trade areas and common markets are Janus-like."24 While presented as a friendly and progressive accommodation, they are also a defensive adaptation to the immediate threats of national economies, which may destroy rather than build the world economy of the future. REGIONALISM AND WORLD ORDER

History repeats itself—as is evident in the emergence of empires and world orders. History follows a cyclical pattern of buildup and breakdown, of growth and decline of empires and world orders. The European empires built up their colonies in the sixteenth, seventeenth, and most of the eighteenth centuries; they conquered most of the world and, despite frequent wars, established worldwide trading routes and relationships. Some breakdown occurred at the end of the eighteenth century and the beginning of the nineteenth century, as Britain and France lost most of their colonies in North America, and Spain lost its colonies in South America. The colonial world was built up again during the nineteenth century and seemed to be intact after World War I and the establishment of the League of Nations. But World War I was devastating. In The Decline of the West, published in 1918, Oswald Spengler saw a European-imposed world order crumbling, and

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not just with the advent of fascism in Europe. The world colonial system was being increasingly challenged during the 1920s and 1930s by independence movements throughout Asia and Africa. The remnants of the colonial system crumbled in the 1960s, and the division of the world continued to the present day with the formation of more than 170 sovereign nations. The cold-war era was complicated by the simultaneous occurrence of breakdown and buildup. On one hand, the old colonial system disintegrated, and new nations proliferated after World War II and up to the present time. On the other hand, the American and Soviet empires were forging their free world and communist global alliances; also, international organizations such as the United Nations and World Bank gained stability. More breakdown resulted with the collapse of the Soviet empire and with the decline of the American empire. Both trends still are apparent in the 1990s. The formal empires are gone (with the possible exception of China); the days of informal empire are numbered, as the American empire reduces its commitments and as the Russianpromoted Commonwealth of Independent States stumbles backward into the future. While imperial power disintegrates and nations proliferate, the world community appears to grow whether viewed by neo-Marxists such as Immanuel Wallerstein, naive internationalists such as Richard Rosecrance, or the International Monetary Fund. The emergence of economic regionalism has the potential for both buildup and breakdown. Regions bring nations and areas together, but they also threaten national sovereignty and encourage interregional rivalry. Regions could be an intermediate step, forward toward world cooperation and unity or backward toward world competition and conflict.

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Part II WORLD REGIONS

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The United States as a Region We will be able to move to similar agreements with countries even farther from us but in our region —in Latin America—like Argentina and Venezuela and other countries. — President Bill Clinton Interview, Wall Street Journal, June 15, 1993

GEOECONOMICS The United States expanded through the typical imperial practice of acquiring territories and then annexing most as states. Other territories were granted independence; Puerto Rico, Virgin Islands, and several Pacific islands remain as territories or commonwealths. During the cold war it operated largely as an informal empire that exerted mostly economic control over Canada, the Caribbean, Pacific, and Middle East. As the leader of the free world, the United States resurrected Europe and Japan, sponsored the United Nations and Bretton Woods economic accords, armed and defended not only its areas of vital interest but all of the free world, and supported regional power centers throughout the globe. Even prior to World War II, it had emerged as a world leader: It acquired overseas dominions; it was the world's leading industrial power after World War I; by the 1930s it was the world's largest creditor and granted "most favored nation" status in trade with its political allies and dominions. Preoccupied with the geopolitical concerns of the cold war, the United States responded slowly to the challenge of the European Union and economic regionalism. It concluded the North American Free Trade Agreement (NAFTA) with Canada only in 1991 and with Mexico in 1993.

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The quest for an enlarged economic region goes on mostly at the urging of American multinational corporations, which with their foreign-based subsidiaries account for about half of American foreign trade. Their aim is, today Mexico, tomorrow the Western Hemisphere! The multinationals regard the natural resources and cheap labor of all Latin America as the leverage to compete worldwide with other economies, not just compete but beat down the competition, especially the Asians. It is our turn, they say, to have cheap natural resources and labor at our disposal to hit back at the Asian corporations. As Asian multinationals penetrated American markets and threatened (also embarrassed) American businesses, an extended NAFTA will enable American multinationals to defend their domestic markets and penetrate Asian markets. The multinationals convinced the Bush administration to propose a free trade zone throughout the Western Hemisphere called "Enterprise for the Americas." President George Bush revealed a vision unusually bold when beginning the NAFTA talks with Mexico: "We look forward to the day when not only are the Americas the first full, free, democratic hemisphere, but all are equal partners in a free trade zone stretching from the port of Anchorage to Tierra Del Fuego."] President Bill Clinton presented the same hemispheric vision as George Bush; Mexico was just a beginning: "If we can work out an agreement with them (the Mexicans), we will then be able to move to similar agreements with countries even farther from us but in our region —in Latin America—like Argentina and Venezuela and other countries."2 This led to the Summit of the Americas in late 1994 and the agreement to have hemispherewide free trade by the year 2005. This grand economic strategy bypasses world latitudes in one policy swoop, leapfrogging from the Tropic of Cancer to below the Tropic of Capricorn. Teddy Roosevelt would have admired its sheer panache. A hemispheric NAFTA is not the only regional option. An American-Japanese region (Amjap) is another possibility. Like a latinized NAFTA, an Amjap region extends existing American dominance in the west Pacific that includes the Philippines and South Korea. An advantage of the Amjap region is that Japanese labor costs are the same as American labor costs in manufacturing; although somewhat less in other industries, Japanese wages are not going to encourage substantial disinvestment and undercut American earnings or employment. However, Japan is an economic rival, as it was a military rival during the first half of the century. The increasing Amjap economic interdependence seems to be fomenting, not subduing, rivalry. And the Japanese and other Asians are of a different race, language, and culture —differences much more pronounced than those between North and Latin Americans. Yet another possibility is an American-European Union (AmEU) region. Here all the major factors appear to be positive. The AmEU economies already are intertwined. Because wages and living standards are similar, net disinvestment and loss of employment will be insignificant for either side. Compared to the American-Japanese rivalry over China, twentieth-century rivalries with

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European countries have been sporadic and short-lived. The prevailing American-European relationship has been cooperation, not competition. Finally, Americans (at least the white majority) are ancestors of Europeans and share the same Christian heritage, Western culture, and democratic industrial civilization. An AmEU region, which would be the most powerful economic region in the world, appears to be very possible. A last possibility is that the United States will avoid any region apart from the contiguous countries of Canada and Mexico. Being an informal empire and prone to exceptionalism, the United States will resist joining a larger economic region. For similar reasons, Britain clung to empire and commonwealth and resisted participation in the European Union into the 1990s. Since the opening of commonwealth status to all its formal colonies in the 1960s, Britain also has been an informal empire, although a pound-broke one experiencing demise. Whatever it wishes, American geoeconomic strategy must take into account other emerging regions—the Association of Southeast Asian Nations, Central American Common Market, Caribbean Community and Common Market, Economic Cooperation Organization (Middle East). Admittedly, these regions do not measure up to the power of NAFTA or EU; they consist largely of less-developed countries that lack economic clout. Who knows what regional alignments and challenges to world economic power might develop during the twenty-first century? NAFTA AS A GEOECONOMIC STRATEGY More than other contemporary issues —regional wars, Soviet reform, budget deficits, health care —NAFTA presents the choices that will determine the American twenty-first century. The basic choices are three: Return to the cold war past of informal empire and geopolitical power; stay the present course of economic regionalism and geoeconomic power; turn to the future of world economy and international cooperation as an alternative to seeking geopolitical and geoeconomic power. As promoted by the Bush administration during the cold war, NAFTA was part of a geopolitical strategy to maintain informal empire. It was to be used to build Mexico further as a regional power center in the Caribbean dominion, as was done with Brazil and other regional power centers. Imperial control in the Western Hemisphere was an American aim since the Spanish American War at the start of the twentieth century, and regional political strategies became prominent from the 1970s. As the 1990s unfold, even conservatives regard informal empire to be a relic of the past that is too risky and costly. The strategy of the present is to organize regional economic power and compete with other economic regions and powers such as the EU and Japan. It is an expedient response, seemingly appropriate to the challenges of a more competitive multiregional and world econ-

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omy. Even the most liberal and thoughtful national leaders see NAFTA as a realpolitik response to the worldwide struggle for geoeconomic power. Senator Bill Bradley comments: Economic competition in the year 2020 won't consist of scattered countries nibbling at each other, but major regions operating as economic units on the global playing field. The biggest threat does not come from Mexico but from Europe, Japan and China. With NAFTA, we will be better able to save American jobs from those threats. Unless we in North America work as partners in this game, we are going to be at a severe disadvantage in competition with these large economic centers. Europe is rapidly moving toward a single, integrated economy, while Japan has been building economic bridges throughout Southeast Asia.3 Now a reality from the Yukon to Yucatan, a Mexican NAFTA creates a region of 370 million people. It produces the largest regional product and conducts the largest international trade. With unrestricted access to cheap Mexican labor, American firms can compete worldwide with Asia and other areas that currently have an advantage because of relatively high American labor costs. To stem the flood of illegal immigration into the United States, NAFTA is supposed to keep Mexicans in Mexico by creating jobs in Mexico. As former Mexican president Carlos Salinas promised, if Mexico cannot export its goods, it will export its people. The United States already possesses the Western Hemisphere's third largest Latin population, behind only Mexico and Brazil. And illegal immigration is enormous; since the early 1980s a yearly average of 1 million illegal aliens were deported and 11 million were convicted. 4 Not all are Mexicans; many come from Central America through Mexico. El Salvador generates more dollars from its American emigrants sending or taking their money back home than from its imports. Once accepting legal immigration in the spirit of the national melting pot, most Americans now reject it. In responding to a national poll in July 1993, while 59 percent of the respondents thought that immigration was a good (not bad) thing in the past, 60 percent thought it was a bad (not good) thing for the present. 5 The American frustration with Mexican aliens is accented by refugees from Haiti and other Caribbean countries. The American-Mexican border is like a neutral war zone, patrolled by armed guards day and night. The Clinton administration feels obliged to shut down illegal immigration — by increasing border control efforts, restricting the right of political asylum, and even rehiring Doris Meissner, the Immigration and Naturalization Service commissioner appointed by the Reagan administration. The state of California in November 1994 adopted Proposition 187, which denies public services to undocumented workers, including education and welfare benefits for their children. NAFTA also is to uphold labor standards pertaining to child labor, mini-

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mum wage, safety rules, and collective bargaining. But the Mexican government is not enforcing the standards. The U.S. Labor Department National Administrative Office, set up to enforce the NAFTA labor agreement, cannot compel enforcement. In fact, it has excused company firings connected with labor organizing in Chihuahua by the Teamsters and in Juarez by the United Electrical, Radio and Machine Workers of America. NAFTA also is to help enforce Mexican environmental laws. Air, water, and land pollution occur on a massive scale not only in the maquiladora SLYCSL but on the American side. Mexican-based firms reduce costs and gain the advantage over American-based firms that must abide by tougher environmental laws. Water is scarce on both sides of the border and is no longer sufficient to supply both the increasing firms and the expanding population. It is complicated by an American promise in 1944 to supply surface water to Mexico. The Rio Grande River is drying up, and below-surface water levels are falling. Expensive desalination plants may have to be constructed, most likely with the American taxpayer footing the bill, which may be as bottomless as the plunging water levels. As the debate continues about NAFTA and further extensions, the larger geoeconomic and regional strategies become increasingly evident. The inclusion of Mexico is not just a weighing of demographic, environmental, and employment gains and losses, or an economic accommodation between two bordering states. An extended NAFTA conforms to the worldwide trend of forming and enlarging economic regions for competitive and protectionist purposes. The inclusion of Mexico is an isolated maneuver and the extension of NAFTA an overall strategy undertaken to win the economic world war. COMMERCE AS A WEAPON Put in its best light, the industrial development south of the American-Mexican border represents the open and venturesome American acceptance of free commerce with all nationalities, foreign and/or impoverished. For years American firms located in the Southwest sent materials to Mexico duty free for assembling, then paid duty on the value added when the assembled products were shipped back to the United States and sold in domestic markets. Foreign trade zones encouraged the practice. Prior to the 1980s, most of the industry was labor-intensive and dirty; it was located on the south side of the border and Rio Grande River, as industry was located on the off-side of American river cities such as Council Bluffs across from Omaha, West Memphis across from Memphis, or East St. Louis across from St. Louis. Now modern and automated plants also are operating to manufacture Chrysler, Ford, and General Motors auto engines, AT&T telephone answering machines, Zenith television sets, and Whirlpool appliances. American-owned industry proliferated in northern Mexico after 1982, when the peso lost 82 percent of its value against the dollar. Decreased wages in

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Mexico more than compensated for American tariffs, transportation, and other added costs of manufacturing in Mexico. What has evolved is the location of American firms in an industrial belt known as maquiladora; it is south of the border that is nineteen hundred miles long across the states of Tamaulipas, Nuevo Leon, Coahuila, Chihuahua, and Sonora and that is about three hundred miles wide, extending to cities such as Hermosillo, Monterrey, and Chihuahua. At the start of the 1990s, maquiladora firms numbered more than 1,000 and employed more than 500,000 workers. They accounted for most of the $17 billion in Mexican export trade to the United States in 1992.6 In addition to NAFTA, the Clinton administration is continuing the old programs of Exim Bank loans and insurance guarantees for American businesses, negotiating techniques of trade reciprocity or retaliation, and advocating trade liberalization (primarily for less developed countries). It has devised its own "tied aid" program that requires recipients of American federal aid to buy from American businesses. It is lobbying countries for trade deals, as when President Clinton personally urged King Fahd to buy American Boeing/ McDonnell-Douglas airliners in February 1994. The Clinton administration has devised a new strategy, a marketing plan that targets high-growth economies devised by the newly created Advocacy Center of the Department of Commerce and known to its staff as "our economic war room." It targets the ten countries expected to account for 75 percent of the world's total trade and double their share of global production by 2010, according to Undersecretary Jeffrey Garten. They are not the developed countries of Japan or EU. "The vision I once had of a tri-polar global economy begins to fade," says Garten. They are the developing countries: Argentina, Brazil, Mexico, Poland, South Africa, India, Turkey, South Korea, Indonesia, and China with Hong Kong and Taiwan. Others may emerge, such as Russia, Thailand, or Vietnam. Because these countries will account for a disproportionate share of world trade in the future, American trade policy will be directed at them. "This is where the efforts of government will pay off the most," Garten claims.7 Less controversial than free trade, free or unregulated investment was not disputed until the 1992 presidential election. Presidents Ronald Reagan and George Bush promoted American investment abroad and foreign investment in America. Bush was able to downplay foreign investment in America in 1992, but American investment abroad became a major campaign issue. The Democratic Congress had imposed over presidential veto an early warning requirement for plant shutdowns or layoffs to curb corporate disinvestment. The role of federal assistance and tax breaks for corporations to disinvest and move abroad was discussed. But the big issue was NAFTA. H. Ross Perot, the independent presidential candidate and self-made billionaire whose pro-business views were beyond reproach, condemned NAFTA and warned that free trade with Mexico would level the wages of American workers to those of Mexican

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workers. Bill Clinton criticized NAFTA for not addressing the problems of employment and environment. The real issue is not just American investment in Mexico and other lessdeveloped countries. It is the persisting cold-war issue of expending domestic resources to exercise American geopolitical/geoeconomic power around the world. Writing in Fortune, Thomas Stewart speaks of American investment for the purpose of promoting international "integration" and "forging links among nations." More effective than trade, which brings nations together more or less voluntarily, investment forces nations together. Investment injects a permanent American economic presence, which locates servicing capabilities in support of trade and which takes advantage of foreign domestic supplies, services, and labor. Moreover, Stewart concludes: "What is relevant is investment (as) the great strategic weapon of geo-economics."8 Stewart is adopting the two-pronged geoeconomic strategy of the Japanese. The first part is to establish access to lucrative foreign consumer markets. Recognizing that trade is transitory and subject to eventual regulation, the Japanese invest in foreign domestic economies to maintain access to domestic markets—by establishing their own subsidiaries, directly investing in domestic corporations, or creating joint ventures. Losses are accepted during the short and intermediate terms in order to extend horizontal and vertical control and penetrate domestic markets. Once production occurs within the domestic economy, trade negotiation and retaliation are more easily avoided. The second part of the strategy is access to cheap foreign production resources—labor, raw materials, and so on. Japan has the advantage in the fastgrowing and labor-cheap Asian region, where American investment is relatively slight. Stewart quotes the warning of a Deutsche Bank representative in Tokyo: "Corporate Japan will lever that Asian investment against you in North American and European markets. They will get tremendous volume increases that will allow them to keep going down the cost curve."9 Beyond Mexico, Stewart contends, the United States should extend NAFTA-enabled investment throughout Latin America to compete with Japanese investment in Asia and the west Pacific. Furthermore, the United States should attack foreign barriers to investment including restrictions on capital movements, repatriation of profits, and equity ownership requirements. Thus, the United States should seek "a GATT-based investment regime."10 Stewart regards the strong dollar as the strategic weapon in an economic war decided by investment. He scorns the weak dollar preferred by free traders to reduce the trade deficit. He adopts the Japanese conviction that with investment abroad encouraged by a strong currency, foreign markets can be dominated and trade increased by a strong currency. If losses are incurred in the short and intermediate terms, the American taxpayer should compensate, just as the taxpayer did through the cold war policies of a strong dollar to encourage exports by allies and programs supporting foreign investment. Free invest-

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ors were especially critical of the Clinton administration for not getting support for the sagging dollar at the G-7 summit meeting of July 1994, which in light of the devaluations in early 1995 was futile. What they got was better—repeated increases in interest rates during 1994-95 to the point of risking recession. Investment is really a regenerated cold-war strategy applied not just to the free world but to the world community including former socialist states. Stewart pushes the parallel. Just as George Kennan propagated a policy of "containment" to start the cold war, Stewart now proposes a policy of "integration" for the new economic struggle ahead. He reminds us that whether in the form of guns or of butter, power still is the name of the game: "The cold war ended, America commands a plain of world power broader than any nation has surveyed before. Insofar as that power was attained by guns, it must, ironically, be preserved by butter." 11 Similarly, Felix Rohatyn emphasizes American investment abroad. "In formulating U.S. economic policy," he argues, "direct investment in foreign countries—now of relatively small official concern—should be at least as important as trade balances." 12 He complains that trade disputes have disrupted financial markets and pushed officials into a weak dollar policy. Instead, the United States should be negotiating open investment as a priority to open trade, and it should be pursuing a strong dollar policy to maximize its investment clout. While Stewart is a nationalist who treats investment like war, Rohatyn is an internationalist who calls for international regulation of investment. What they share is the advance recognition that American policy must adopt a power strategy of controlling international investment and financial markets. SAVINGS AS MUNITIONS The call to reduce consumption and increase savings is now heard from across the political spectrum. Conservatives and supply-siders extolled savings and passed the 1981 income tax cut to stimulate savings and investment. Liberal economists like Lester Thurow now promote the regressive value-added tax to discourage consumption and to encourage savings and investment. 13 They complain that self-indulgent Americans are selling America to feed their consumption needs. "Economic competitiveness" is the code word for the national austerity being planned by the Clinton administration. It means national economic and industrial planning and provides public subsidies to "strategic industries" and "critical technologies." Most are the same that were considered strategic and critical to fight the cold war; the only difference is reference to commercial rather than military power. But for the public reaction, the Clinton administration would have included a value-added tax (VAT) in the 1993 deficit reduction legislation. In cooperation with the Federal Reserve Board, the administra-

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tion pursues the same strong dollar policies of the cold war, which prescribe high interest rates to attract foreign investment in the United States and maximize American investment abroad. The assumption is that if investment is to be increased without further dependence upon foreign investors, consumption must be decreased and savings increased. Stewart admonishes the United States "to increase its own arsenal of capital by raising its savings through consumption taxes and federal spending cuts."14 How a consumption or value-added tax could be enacted remains a mystery. Congress barely passed a watered-down deficit reduction act in 1993 and rejected altogether a consumption tax limited to energy. The problem is that most economists assume that savings is an intrinsic virtue. They fail to ask the pragmatic question, of what use is savings, and what are its practical results? The proof of the pudding is productive investment, as distinguished from nonproductive investment such as money and security market speculation, corporate buyouts, and bad loans and investments—which encompass hundreds of billions of dollars each year. By definition, this kind of investing and lending results in no added production. The problem is theoretical as well as practical. By definition, investment equals saving; it is the product of a double-entry accounting tautology, as in debits equals credits. To infer the causal relationship that saving causes investment involves the fallacy of definitional causation. It seems sensible to point out that without adequate savings, wealth will not be available for investment. But it is just as sensible to point out that without adequate consumption, capital will not be ventured for investment. Savings/investment requires both the supply of capital and the demand for its product. In a study of the investment behavior of four thousand companies between 1970 and 1990, Steven Fazzari found that investment was driven more by the firm's sales growth and cash flow than by its access to capital as determined by interest rates.15 Americans very well may be too consumption-oriented and indebted; more savings and less debt possibly could assure more economic prosperity. On the other hand, if firms experience demand for their products, they will find capital to invest. They will create savings by retaining their earnings, attracting investment, or borrowing from lenders. In the latter case, interest rates will tend to rise, encouraging more savings. Demand-driven investment occurs because the free market works to provide the needed capital, which is an agreeable proposition even to conservative economists. Not imposing a national policy upon free investment and money markets is also an agreeable proposition. Post-cold-war strategists indulge in the fallacy of savings as a primal cause because of their compulsive agenda to fashion an American economy to continue the cold war practice of dominating the rest of the world. Commerce is their weapon, and savings are the munitions needed to wage their economic war.

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CASUALTIES OF COMMERCE Corporate multinationals, including their suppliers, subsidiaries, partners, stockholders, financiers, and workers, will benefit from NAFTA. They will disinvest (or simply noninvest) in the domestic economy to locate plants in Mexico and take advantage of the cheap Mexican labor and lack of Mexican regulation. By merely threatening to move, multinationals succeed in reducing worker wages and humbling labor organizations. Prior to the 1980s, a few did move, usually from the Northeast and Midwest to the South, where wages were somewhat lower and labor organizations were weaker, but most stayed put. However, given the huge cost differentials available in Mexico and other less-developed countries by the 1980s, hundreds of firms moved out of the country, by disinvesting or by targeting expansion operations abroad. Consumers also should benefit from buying these cheaper Mexican-made products. And if NAFTA side agreements are kept, progress can be made on environmental pollution, labor standards, and illegal immigration. However, there will be casualties. On the American side, domestic companies competing against Mexican-made products will lose revenue; some will go out of business. Lower labor costs are only part of the picture. Unlike their foreign-based competitors, smaller domestic firms do not receive favorable lending terms or the assistance of the American Export-Import Bank and Foreign Credit and Insurance Corporation, Agency for International Development, International Trade Administration, and other foreign assistance agencies (although limited domestic counterparts do exist, such as the Small Business Administration and the Economic Development Administration). Nor do domestic firms have an advocacy counterpart such as the U.S. State Department to strong-arm foreign governments to permit exploitation of raw materials, higher levels of pollution, favorable contractual and tort laws, lenient zoning and code ordinances, black market currency exchange rates, minimal worker wages and benefits, minimal worker health and safety protection, union busting—and other advantages less prominent now than in the days of informal empire but still significant in the aggregate. Many American workers will lose their jobs, both from disinvestment as large firms relocate and from the competition faced by domestic businesses. American workers simply cannot compete with Mexican workers, still less with workers of other large Latin countries. Mexican workers earn 15-20 percent of what American workers earn, and Mexican workers are the highest paid in Latin America. Wages are the main attraction, according to H. Ross Perot, that will result in the "giant sucking sound" of American firms moving to Mexico once NAFTA eliminates trade barriers. On this, the American billionaire and unions agree: No to NAFTA, we don't hafta. The United Auto Workers is especially adamant because the big three automakers all have large plants in Mexico. The Ford engine plant in Chihuahua pays assembly line workers $1.55 an hour compared to an average $11 an hour in the United States. As

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NAFTA expands to other Latin countries, wage discrepancies will increase even more. Many American workers also will gain jobs. Before the end of 1994, Secretary of Commerce Ronald Brown already was extolling NAFTA: "It's working. It has created a dramatic increase in United States exports to both Canada and Mexico. It has created economic growth in the United States." Brown claimed that NAFTA created 130,000 jobs and eliminated less than one tenth of that number.16 The larger problem is that even the best trained American workers cannot increase productivity to compensate for the Mexican standard labor cost of $1.50 an hour, or to compensate for and compete with the lower Mexican taxes and lower environmental costs. To offset just the labor cost savings, the Ford American workers would have to be seven times more productive than their Mexican counterparts; lower-paid American workers still would have to be at least four times more productive. This sevenfold multiple in productivity increasingly must occur in modern Mexican plants that are as automated and technologically advanced as American plants. In the 1980s, most conservative economists complained about American workers' low productivity and argued they were overcoddled and overpaid; now, to excuse investment overseas, most conservatives attempt to reassure American workers that they can increase productivity and enjoy rising wage levels. In the long run, directly or indirectly, sooner or later, most American workers will suffer from the law of "factor price equalization," according to which the price of labor will tend to equalize whenever and wherever subjected to free markets. When labor is exchangeable between two economies, high wages will fall and low wages will rise until they eventually equalize each other.17 The trend of falling American wages began with increasing foreign imports; average weekly wages (in real 1982 dollars) decreased from $298 in 1980 to $255 in 1992, according to the U.S. Bureau of Labor Standards.18 Factor price equalization simply is the more specific case of labor as an exchangeable/ accessible commodity susceptible to the supply-demand forces of a free market international economy. After just one year of NAFTA, the Mexicans lost big. NAFTA proponents, attempting to calm American fears about lost jobs, pointed out that the American tariff was only 4 percent, the Mexican tariff 10 percent. Therefore the Mexicans would import more, and the United States would be the winner. Bill Bradley noted that Mexican consumers already supported hundreds of thousands of American jobs: "NAFTA will lock these gains in and create hundreds of thousands of new jobs by further opening the Mexican economy."19 Unhappily for Mexico, the proponents were right. At $5 billion per year before NAFTA, the Mexican trade deficit almost doubled by the end of 1994. At $100 billion before NAFTA, the Mexican debt mounted to $140 billion by the end of 1994. Financial panic occurred, and during the last two months of 1994 the peso devalued more than 50 percent from 3.4 pesos to 5.2 pesos per

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dollar. When the peso approached 6.0 in February 1995, the United States put in place a $52 billion rescue package, $20 billion of its own and $32 billion from the International Monetary Fund and other sources. Extreme austerity measures are now imposed, inflation was expected to exceed 40 percent during 1995, and Mexican businesses still must repay or refinance $10 billion by the end of 1995. In shambles, the Mexican economy will take years to recover. Unable to compete, the economy is without its own currency or capital. In an all-toocommon scenario for less-developed countries, Mexican wealth vanished in the form of flight capital, which devastated Mexican businesses and impoverished Mexican workers. Proponents of NAFTA and WTO argue that free trade is win-win. In the short run, it is an American win and a Mexican loss. In the long run, as American domestic businesses and workers experience downward pressure on profits and wages, it may become an American net loss as well.

5 Other Developed Regions The importance of regional economic blocs is likely to increase in the future. — Samuel P. Huntington "The Clash of Civilizations?" Foreign Affairs, 1993

TRILATERAL DOMINANCE

During the cold war, world power was largely bilateral, composed of the United States and the Soviet Union as military superpowers. In the post-coldwar era, world power is considered trilateral, composed of the United States and Canada, the European Community (especially Britain, France, Germany, and Italy), and Japan. This trilateral apex interacts through the vehicle of the Group of Seven (G-7). Below the apex are the tiers of less developed countries that make up the body of the power pyramid. The G-7 nations shape the world economy and control world commerce — trade, investment, and currency values. Accounting for about two thirds of the world's gross national product, their combined economic clout exceeds that of all other economies. Their influence is magnified through world financial and development agencies that they largely control, such as WTO, the World Bank and regional banks, and the International Monetary Fund. G-7 is a kind of coalitional region looking out for its own interests. The G7 nations consider the less-developed nations to be less desirable as partners in international commerce or as members of an economic region. They do not want to open their domestic markets and populations to the cheap labor and immigration of the less-developed countries, nor undertake the costs of safeguarding their citizens and securing their investments in unstable countries. As

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empires, they took on the risks of governing colonies and developing the less developed areas—for profit, of course, but also for civilization and God, a missionary responsibility accepted as the "white man's burden." They learned that the costs often exceeded the benefits. Now in the postwar era, they consider commerce with the less developed countries as a business proposition. They require bottom line answers to self-interested economic questions: What are the cost and the risk? What is the benefit? What can be obtained elsewhere more cheaply? The developed nations assess the less-developed nations in several categories—newly developed, socialist developed, developing, and underdeveloped.1 The first category is that of the newly developed and industrialized countries — the Pacific Rim countries of Hong Kong, Singapore, South Korea, and Taiwan, known as the little dragons; also Australia and New Zealand; perhaps China and the Persian Gulf states. They no longer can be ignored as trading competitors, especially if the Asian economies are consolidated through APEC. The second category is that of the socialist developed countries —namely, Russia and China, also Belarus, Ukraine, the Baltic states, and the Eastern European states. Whatever might be the actual state of their economic development, Russia (overrated in the past) and China (underrated at the present) are huge nations, actually empires. They are, respectively, the first and second largest countries in the world, they are the third and first most populated countries, and they have the largest armies in the world. The third category is the developing peripheries, both quasi-socialist and capitalist. These countries are important either as buffers between larger powers or as holders of resources. They include most countries in the Middle East, Central Asia, and Latin America. The last category is the underdeveloped countries of Africa, south and southeast Asia, Indonesia, and parts of Latin America. These are considered to be fringes. Of little or no economic interest to the developed countries, underdeveloped countries barely experience even the benefit of exploitation. By definition, they have failed to increase their per capita national production or living standard during the postcolonial era. They have failed to provide for their rapidly growing populations. EUROPEAN UNION "Future historians will record that the twenty-first century belonged to the House of Europe," predicts America's most widely read economist, Lester Thurow.2 Never in its long and internecine history has Europe been unified. Not even the Roman empire succeeded north of the Danube or east of the Rhine river. The most successful attempt after the fall of the Roman empire was by Charlemagne, who nonetheless stayed out of Iberia, failed to defeat the Slavs and Avars in the east, and accepted Byzantine control in the Balkans and southern

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Italy. The Catholic church sanctified the Holy Roman empire, which was neither holy, nor Roman, nor really an empire. The French, including Napoleon Bonaparte, tried to unify Europe but failed; the Germans, including Adolf Hitler, also tried but failed. The unity now developing began with the American-Soviet partition of Europe after World War II. Whereas the Eastern Europeans failed to unify under Soviet domination, the Western Europeans proceeded to organize the European Community, now known as the European Union (EU). It was established in 1957 by the Treaty of Rome as a customs union in Western Europe, but even then with the purpose of a unified Europe in mind. In 1967, the EU consolidated into one structure: the European Commission to act as the planning executive and a Council of Ministers as an administrative/regulatory body; the European Parliament or Assembly (the EU's only elected body, consisting of 567 elected representatives from each of the member nations) to legislate for the commission and council; and the European Court of Justice to adjudicate EU law and agreements. All the rudiments of a sovereign government were put in place, including recent plans to form a single EU military force. The EU currently consists of fifteen full members—Austria, Belgium, Britain, Denmark, Finland, France, Greece, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, and Sweden. The EU now includes 380 million people. Its gross national product is about $7 trillion in 1994, the largest in the world. It accounts for more than 25 percent of American exports and 40 percent of American direct foreign investment. The EU continues to grow. Liechtenstein, Norway, and Switzerland probably will obtain EU membership in the near future. The Czech Republic, Hungary, and Poland were accepted as associate members in 1991 and are scheduled to have full access to the EU free trade area in 1999. Estonia, Latvia, and Lithuania signed free-trade agreements effective from 1995. Bulgaria, Romania, Slovakia, and other Eastern European countries may be added. Eventual membership is possible for Cyprus, Malta, and Turkey. The EU makes sense. It enables the densely populated Europeans to get along with one another in a rather small place—to avoid multiple passports, customs, currencies, work permits, licenses, legal transactions, and so forth. Most European countries are smaller than American states yet include more people in less than half the American geographic area (excluding Alaska); the prerogatives of national sovereignty are no less vexing to Europeans than state prerogatives were to Americans living under the Articles of Confederation in the 1780s. Most European countries depend upon one another for raw materials, foodstuffs, various manufactured goods, and services. Free and unrestricted commerce allows more efficiency and ease in what already is an highly interdependent European economy. While making life easier and more cooperative among Europeans, the EU has another purpose —a defensive purpose at least to hold its own with the United States and other economic powers. Jean-Jacques Servan-Schreiber

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sounded the call for "Fortress Europe" in 1967 and warned of American corporations buying up Europe and controlling its economies.3 By the 1980s, Fortress Europe was competing with its economic rivals, especially the United States and Japan. Its growth followed the realization that a single European country has little chance of negotiating favorable trade or investment terms with the United States, which is at least ten times more powerful and less dependent upon what one European country can provide or withhold. Twelve or more European countries acting together can negotiate favorable economic terms. The EU now functions partly to defend Europe as an economic fortress against the exchange value of its currency, quotas or other restrictions threatening its trade surpluses, and investment/loan balances. Referring to the Japanese, Fiat president Umberto Agnelli has stated: "To leave Europe wide open to extra-European competition during this period would produce the mistake that the Americans made and for which they are now suffering the consequences."4 By relying upon one another, the Europeans gain new strength in negotiating with outsiders. If outsiders want to sell in the EU markets, they also will have to buy, all according to EU terms. Lester Thurow thinks the EU will thrive, both achieving internal efficiency and meeting external threats: The formation of the House of Europe is now unstoppable. First, the opportunities to create an integrated House of Europe are just too good to pass up. An opportunity as good as this one hasn't existed since the fall of the Roman Empire. Second, the need to compete against the Americans and Japanese in a global economy almost demands that the House of Europe be built. 5

The EU purpose is not just economic; political and demographic goals are becoming increasingly important. EU leaders seek to achieve political stability and unification across the continent—from the Atlantic to the Black Sea, from Finland to Turkey. The internal purpose is to avert civil wars such as occurred in Bosnia; the external purpose is deter interference from countries such as Russia. The demographic purpose is to control the rush of unwanted immigrants from Africa, Asia, and Eastern Europe. In the past, foreign workers were somewhat welcome: Germany and other highly industrialized economies needed extra labor for their expanding domestic production and exports; this included even unskilled, nonwhite foreign workers who freed indigent workers from menial jobs, expanded the labor force, and restrained wage levels. Never very welcome among European working classes and unions, immigrants now encounter growing entry restrictions, for three reasons. First, the numbers of migrants are multiplying throughout the world; the United Nations 1993 population report estimates that more than 100 million people, or 2 percent of the world's population, have left their native countries, doubling the total just four years prior. Second, restrictions are prompted by an economic slowdown; in

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fact, the EU experienced a recession beginning in 1992, which included an unemployment rate of more than 10 percent. The era of labor shortages appears to be gone; Germany, the most prosperous EU country, has its own problem of distributing employment and commerce in East Germany. Third, EU countries that need labor are committed to hiring the migrants from other EU countries such as Spain and Ireland, whose poor and uprooted workers are swelling the labor forces of the other EU countries. Illegal immigration in Europe poses a greater problem than in the United States, and a greater reaction. The French passed highly restrictive legislation in 1993; according to the French interior minister, it aimed at achieving "zero immigration." Also during 1993, the Germans restricted immigration, and EU immigration ministers agreed to tighten immigration controls throughout the EU. George Melloan concludes: "Some Europeans fear that they may some day face a North-South confrontation as dangerous as the former East-West standoff."6 The Europeans are concerned about inciting fundamentalist Islam in Turkey and other Arab countries to the south and antagonizing oil-rich Arab countries. The EU is not yet an economic monolith. The Maastricht Treaty called for economic unification in 1993, but only after ratification by all twelve members. What occurred in 1993 were a recession and political frustration. Starting in 1992, the recession resulted in 0.5 percent negative growth in 1993 for the twelve-nation economy, the first since the oil crisis of 1975. Unemployment was 11 percent, affecting nearly 25 million workers. While increased by the recession, unemployment has followed an upward trend since the beginning of the 1970s, when it was only 3 percent, and virtually no net jobs have been created in the private sector in the last twenty years. EU economic problems result from both external and internal factors. Terrence Roth points to foreign competition —"new competition from the Pacific Rim, a revitalized U.S. industry, and cheaper producers in work-hungry eastern Europe are cutting into European producers' profits." He also points to Europe's high social and labor costs: "European labor is as much as fifty percent more expensive than its major competitors; not because wages are that much higher, but because the social benefits paid by employers have exploded."7 Signed in December 1991 at the peak of "Europhoria," the Maastricht Treaty simply did not allow sufficient time, particularly when second thoughts set in. French voters approved the treaty by a narrow 51 to 49 percent margin in a bitter election. Danish voters voted against it, then for it, as unemployed youths rioted in the streets of Copenhagen. Fearful of putting it to a popular vote, the British Conservative party initially failed to get the approval of Parliament in July 1993, largely because of opposition from Thatcherite conservatives. Only after tying the treaty to a vote of confidence and threatening new elections was Prime Minister John Major able to get approval by a 339-299 vote. Europhoria dissipated in 1993 as EU members jockeyed with one another

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over trade restrictions and currency values. Nerves clearly were frayed at the EU summit meeting in June 1993. France and Germany, the two leaders of the EU since its beginning, differed on trade; dependent upon exports, Germany wanted to expedite the 1993 GATT agreement, while France wanted to negotiate further protection. The EU Commission president presented an eight-point plan to overcome "Eurosclerosis," a self-perception that sharply contrasted with the Europhoria just two years before. The plan was rejected by the British, who wanted to reduce labor costs and increase employment, and challenged by the Union of Industrial and Employers' Confederations of Europe. Denmark argued against cuts in social welfare; Germany advocated more open markets and longer working hours; France wanted more protection from foreign competitors, especially in agriculture. Most trade restrictions did fall by 1993, but the exchange rate mechanism (ERM) was almost abandoned because of different economic priorities. Allowing EU members to make only small adjustments in the exchange rate of their currencies, the ERM would virtually fix the exchange rates among all members and in 1999 culminate in the adoption of a single EU currency. However, the German Bundesbank maintained high interest rates to prevent inflation from shortages in East Germany. This attracted non-German EU currencies and drove down their values, particularly those of Britain, France, and other EU countries that lowered interest rates and sought an expansive monetary policy to counteract their recession and high unemployment. Britain rejected the ERM exchange limits and devalued the pound. Italy followed Britain. EU finance ministers met in May 1993 to try to reestablish the ERM, but Britain refused to abide by it. In August of 1993, the ERM adjustment limits were raised more than fivefold, from an allowable range of 2.5 percent to 15 percent. The incident cast doubt on the acceptance of a single currency by 1999. The modified Maastricht Treaty also calls for unified economic, political, and defense policies by 1999. A central banking system is planned for 1997; it was preceded in 1994 by the European Investment Fund, initially capitalized for $2.34 billion by the EU and fifty-eight banks. The Uniform European Currency Unit may be implemented by 1997, following the completion of a single currency plan in 1994. Also, despite the failure to handle the Balkan crisis, some version of a unified foreign policy and military force through the Western European Union probably will occur. It must deal first with its cumbersome system of governance, which is typical of confederations. The parliament, the only democratically elected EU body, lacks the power to legislate; the commission is too large; lines of authority are blurred and overlapping among the parliament, commission, and council. Since 1957, Europe is much more unified despite missing 1993 as the target year for unification. Change continues incrementally, the net effect moving closer to unification in the 1990s, just as it did in the 1960s, 1970s, and 1980s. European unification is the economic necessity that is driving the rest of the

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world toward the global regionalizing of the twenty-first century. Interdependent trade and investment require additional economic measures—dependable exchange rates, controlled inflation, leveling of wage rates, similar environmental protection, nonrestrictive taxes, common contractual and legal systems, and so forth. Thurow concludes: "Political integration will lag economic integration, but economic integration inevitably forces political integration. . . . [T]he House of Europe will be built."8 JAPAN

Next to the United States and the European Union, the most economically powerful entity is thought to be Japan, which Americans tend to think of as dominating East Asia. Throughout the twentieth century, Americans have been obsessed with Japan as their chief rival in the Pacific and East Asia. Chalmers Johnson and the so-called revisionists still today tout Japan as the world's most formidable economic power. Japan's reputation as a world power was exaggerated by American politicians, journalists, and historians in order to vilify Japan, a trend which has persisted throughout most of the twentieth century. While the Chinese were tricky and inscrutable, the Japanese were downright treacherous and dangerous. Anti-Japanese sentiments surfaced after the American acquisition of the Philippines in 1899, the Japanese-British alliance in 1902, the Russo-Japanese War in 1904, Japanese annexation of Korea in 1910 (quietly sanctioned by the United States in exchange for the Japanese recognition of American sovereignty in the Philippines), with the threat of war the unsatisfactory Root-Takahira Agreement in 1908, and the equally unsatisfactory Lansing-Ishii Agreement of 1917. AntiJapanese sentiments reached a fever pitch on the issue of immigration; Congress passed the Japanese Exclusion Act of 1924, so reactionary that it was vetoed by Calvin Coolidge, who was never known for his libertarian sentiments. This provoked anti-American sentiments in Japan, which in turn had its own imperial ambitions and reasons for vilifying Americans. The Japan bashing and public debate about foreign policy that existed in the 1920s ring in the background of the debate now in the 1990s. Japan was never more than a second-rate military power that American leaders were spoiling to squash. When Japan displayed the impertinence to occupy Manchuria and parts of China (at the same time Westerners controlled trade in port cities and American and British gunboats patrolled up and down the Yellow and Yangtze rivers), well, upstart empires must be put in their place. Americans demanded that Japanese troops be withdrawn from China, all of them and immediately; that was of course unacceptable. Some time after the Japanese attack on Pearl Harbor, Secretary of War Henry Stimson revealed, "The question was how should we maneuver them into the position of firing the first shot without allowing too much danger to ourselves."9 Once into the war, the Roosevelt administration discounted the Pacific and

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sent the bulk of its war machine across the Atlantic. The American naval victory at Midway in May 1942 allowed this strategy; the loss of just four carriers doomed Japanese chances, which were nil to none at the start. Apart from their initial losses in the Philippines, American troops under Douglas MacArthur took fewer than thirty thousand casualties through his entire campaign. Although a patsy war, this did not deter use of atomic bombs, explained as necessary because Japan would not agree to unconditional surrender; yet the only real condition was maintaining Hirohito as emperor, which the Americans then permitted. Japan was maneuvered not only into war but into destruction of near-millennarian proportions designed to destroy forever its power in the Pacific. Immediately after World War II Americans ignored Japan; still in the 1970s Americans belittled Japan's economic success. But bad history keeps repeating itself. Bill Emmott notes how Americans eventually came to vilify Japan as their all-powerful economic rival: "At first dismissed as a defeated nation, Japan became a flash in the pan, then a copycat, even a political minnow. . . . But now the terms most commonly used to describe Japan have changed: 'mammoth,' 'economic giant,' 'unstoppable machine,' 'financial empire.' " 10 Predictably, as Japan reappeared as a rival, Japan bashing and insulting reappeared. Michael Crichton's best-selling novel Rising Sun (1992), was Japan bashing unabashed and became a popular movie. In addition to humiliating the Japanese during the war and savaging them with nuclear bombs, Americans insult Japanese for their racism, claims to being number one, and tactless complaints about unfairness. European countries sneer at the Japanese as provincial, classless upstarts and jeer at them as greedy would-be conquerors. Charles de Gaulle once referred to the visiting Japanese prime minister as a "transistor salesman." The French prime minister, Edith Cresson, stated, "Japan is an adversary that doesn't play by the rules and has an absolute desire to conquer the world."11 Japan is a world economic power that cannot be ignored. A beneficiary of profligate dollar spending, Japan has the world's largest banks and investment houses. Since the 1980s, the yen has more than doubled in value against the dollar. This is due to Japan's extraordinary trading advantage, which in 1994 yielded a record $66 billion surplus with the United States. Its trade is due to its investment and high-quality production. The Japanese investment rate is twice the American, and its savings rate is three times as large. Despite high living costs, Japanese families save. The Japanese economy is skewed to the extreme in favor of production at the expense of consumption.12 High production/savings is instituted by the peculiar complex of Japanese economic/financial/political institutions. Industrial groupings known as keiretsus integrate manufacturers, financial institutions, and trading companies into single holding companies; the six largest keiretsus control twelve-hundred companies and account for one-fourth of the gross national product. They control vendors, share capital, collude on contract bids, suppress labor, and regulate

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prices for domestic consumption. Their foreign ventures are coordinated through the Ministry of International Trade and Industry; their foreign investment strategy is not profit maximization but market domination, in which investments are made and goods priced to the point of incurring losses for the short term but obtaining market advantages for the long term. Their aim is to eliminate competition, take no prisoners.13 Japan is only a paper dollar dragon; its financial empire was built on the American consumer dollar. However, as trade surpluses with the United States continue, the yen grows stronger. Right now the little dragons of Hong Kong, Singapore, South Korea, and Taiwan all peg the exchange value of their currencies to the dollar; in the future they may be attracted to the yen, especially if the dollar continues to lose value and threatens their own currencies with inflation. Analysts like David Hale are now asking, "Will the yen displace the dollar as the Pacific Rim's currency?"14 James C. Abegglen considers "Japan, Inc." to be the financial center of "Pacific Asia as the new world industrial center."15 Nonetheless, the Japanese economy is vulnerable. It is experiencing a severe recession, starting in 1992 and lingering into 1995. Commercial land prices plunged to less than half of what they were earlier, and office vacancies soared. The Nikkei stock index dropped more than 20 percent during the last four months of 1993 and dropped 60 percent from its high of 37,270 in 1989; it remained around 20,000 in 1994 but fell below 18,000 in 1995. The stock plunge was aggravated by banks' selling off corporate stock to write off bad loans; the twenty-one largest banks reported in early 1993 nonperforming loans totaling $120 billion, which was about half of their total paid-in capital. In May 1994, the major banks wrote off $28 billion in bad debts, with more write-offs likely. Many corporations are seeking more favorable terms provided by foreign banks and by the Japanese government, whose financial system now exceeds $1.5 trillion in deposits. The exporting of manufactured products, Japan's strongest suit in the past, declined in 1993 and 1994. As the dollar dropped to below ninety yen in 1995, the trade surpluses of the past seem unlikely. If deprived of the American trade surplus, the Japanese economy could become second-rate. Japan is the most densely populated nation; its land area is about the size of California, but its population is 124 million compared to 30 million in California. Most of its land is mountainous and nonarable. Lacking natural resources, it imports about 80 percent of its coal, 90 percent of its minerals, and 98 percent of its oil and gas. It had to import rice in 1994. It desperately needs a continued flow of surplus trade and dollars to import raw materials and food. Reflecting growth rates now typical of advanced industrial economies, the Japanese economy at the start of the 1990s was becoming more like that of an older industrial economy. It is saving less, consuming more, and importing more; paying more for labor (Japanese manufacturing labor costs first exceeded

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American costs in 1993), suffering from financial downturns and recessions, and carrying a postwar baby-boom population that is becoming an aging and nonproductive population. Bill Emmott states: Japan is becoming a nation of consumers, of pleasure seekers, of importers, of investors and of speculators. Abundant money and free financial markets risk turning this new nation of speculators into one of boom and bust. More certainly, time and the maturing of the baby-boom generation will make Japan a nation of pensioners.16 The tight Japanese political fabric is becoming frayed. The Liberal Democratic party lost its majority in parliament in 1993 after twenty-eight years of governance without challenge. Opposition leaders speak contemptuously of the corruption of the "iron triangle" of politicians, bureaucrats, and big business. The reform coalition government failed with the resignation of Morihiro Hosokawa as prime minister, and Japan was attempting its fourth government within the year. In foreign affairs, Japan defers to American wishes—whether it is the embargo on South Africa lifted in 1991 following American actions, providing cash support for the Persian Gulf War, sending peacekeeping troops to Cambodia, or quietly accepting the American refusal to grant voting power to Japan on the World Bank and Asian Development Bank proportionate to its contributions (as stated in both banks' bylaws). Japanese deference in foreign affairs originates from World War II. Most Asians dislike and distrust the Japanese, attitudes reinforced by the International Commission of Jurists' recommendation that Japan compensate women and other victims of war crimes and demands by various Asian groups for a United Nations (UN) investigation of war crimes. Both Prime Minister Tomiichi Murayama, and Morihiro Hosokawa before him, formally acknowledged that Japan was wrong for its aggression and expressed "deep remorse."17 World War II remains a painful issue among Japanese, as evidenced by the emotional debate over sending troops to Cambodia to join the United Nations peacekeeping force. The atrocities of World War II notwithstanding, Japan still seeks through economic means to dominate East Asia. Japan attempts to head the little dragons of Hong Kong, Singapore, South Korea, and Taiwan by touting the Greater East Asian Co-Prosperity Sphere, which was the same organizational name hated by most Asians living under Japanese occupation during the war. As at the start of the century, it also concentrates economic control over the land and resources of the Asian mainland powers, particularly Manchuria and Siberia. The Japanese also bash Americans, as evidenced in a book entitled The Japan That Can Say No. Not the fantasy of a novelist like Michael Crichton, this is a nonfictional call to arms written by Akio Morita, board chairman of Sony Corporation, and Shintaro Ishihara, a former minister and influential

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political figure. The book is so rabidly anti-American that Morita withdrew his authorship and the English translation was rewritten to prevent controversy. Ishihara proceeded with a sequel that has not been translated, Still the Japan That Can Say No. Both books were best sellers in Japan. Japan's sensitivity is understandable. The United States squeezes Japan from the west, and China squeezes it from the east, to say nothing of the international market power of the EU. Japan probably has little more chance of winning the economic war of the twenty-first century than it did of winning the military war of the twentieth century. But the samurai spirit lives on. AUSTRALIA Prior to World War II, Australia and New Zealand were steadfast dominions of the British Commonwealth, and proud of it. Australians remained aloof from their Pacific and southeast Asian neighbors and adopted apartheid-type policies toward the native population. Most of the aborigines were killed by a combination of violence, starvation, and European diseases. Technically, Australia is an empire; it possesses the Northern Territory, where aborigines live an autonomous but impoverished existence, as well as some small island territories and a piece of Antarctica. Australia began significant trade with Japan and other Asian countries in the 1970s, which accelerated upon the election of the Labor government in 1983. Two-thirds of its exports now go to Asian countries. It exports more merchandise to Japan than to the United States and EU combined. It frequently acts as an intermediary in the trade haggling between the United States and Japan. In the 1990s it encouraged more foreign investment by reducing tariffs, adding tax incentives, floating exchange rates, and deregulating banking. International trade and investment also have increased for New Zealand.18 The Australian and New Zealand economies are integrated through their "Closer Economic Relationship." But living standards actually declined before Australia and New Zealand began trading with Japan and other Asian economies. Their relationships now are complicated by increasing commerce with Asia and limited Asian immigration. Both are members of Asia-Pacific Economic Cooperation (APEC), which includes Indonesia, Japan, and east and southeast Asian countries. As the prospect of an APEC free trade area is being pursued, Australia is pushing APEC to form a superregion with the North American Free Trade Agreement. More important than their population of 21 million, Australia and New Zealand provide agricultural products, along with oil and minerals. They have become a major Asian economy, but their population and culture remain European. As the only continent-country separated from a world of emerging regions and superregions, they are positioned to seek whatever is best from all regions.

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The Socialist Developing Regions The country that is more developed industrially only shows, to the less developed, the image of its own future. — Karl Marx Capital, 1867

SOCIALIST DEVELOPMENT Karl Marx's statement that industrial development is inevitable was one of his few prophetic ideas. References to the statement were invariably reviled as revisionist by Leninists and Stalinists. Now the former socialist countries are racing to catch up and secure their future in a capitalist developed industrial world. With the collapse of the Soviet empire in 1990-91, free-market economics has become the wind of economic reform blowing from west to east across the globe, penetrating even the great wall of Chinese communist praxis. Free-market ideas now guide the economic policies of most Eastern Europe countries and former Soviet republics. Hand in hand with free elections and democratic political institutions, free markets are expected to create viable economic institutions and transform the economic ruin of the socialist past. Enthusiastic Western consultants go forth into the socialist developed economies to apply the therapy of free enterprise and markets. To kick the habit of state dependency, they counsel, do it "cold turkey" and abandon not only stateoperated industries but state-provided housing, food, and health care. Unmentioned is the fact that in the United States government provides many of these benefits and that the American people would never tolerate losing them even though the American private sector economy is the most successful provider

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in the world. Admittedly, much of the Russian population may be unable to start businesses or find jobs. However, some initial suffering may be necessary for eventual Utopia: no pain, no gain. It is now clear that the political transformation of the former Soviet republics and satellite countries, which once loomed as immovable mountains of oppression, is easily accomplished compared to their economic transformation. Unlike underdeveloped ecqnomies, socialist developed economies do have a skilled and educated work force. But the physical infrastructure, shops, factories, and equipment of the socialist past are inefficient and noncompetitive by modern world standards. And there was no institutional infrastructure. Thus local production lags; corruption prevails; unemployment is rife; poverty is widespread. Most enterprises do not have the capital to provide inventory and working capital, let alone that needed to rebuild production facilities, modernize equipment, and train workers. And, currency-based domestic demand is lacking. Western investors and traders are not rushing over the crumbled debris of the iron curtain to establish enterprises and create wealth; nor even to purchase materials and support existing enterprises. Seasoned from their dealings with other less developed countries, investors and lenders understand better than ideologues and politicians that the functioning of free markets requires more than a hospitable political climate. To provide capital for competitive and profitable production, investors and lenders require trained and disciplined labor, financial and legal institutions, government services, stable currency, transportation, and physical infrastructure. To provide capital for production directed at domestic demand, investors and lenders also require viable domestic markets based on currency-based purchasing power. Some investors express optimism; one such is Michael Conelius, who says that "Russia is the mother of all emerging countries" and that the next "big play" among less-developed countries can be Russia.1 But all investors worry about the debt and the heavy burden of paying that debt with reliable currencies. They complain about the hyperinflation of the ruble and the low production relative to debt, also about the lack of property and contract law. Investors are more inclined to buy the debt of countries like the Czech Republic and Poland, usually at enticing discount rates because of debt service failures in the past. European investors also are tempted to buy discounted Russian debt, but not for a while. One comments about Russian bonds: "They could be very attractive at these levels, (but) is eighteen percent worth the risk?"2 The European Bank for Reconstruction and Development, capitalized in 1991 by Western governments, estimates that it will take thirty-five years for living standards in Eastern Europe and the former Soviet republics to reach even half those of developed countries. Its annual report for 1993 cites numerous obstacles for economic growth — inadequate bankruptcy or property laws, slow privatization of state industries, currency instability, and corruption.3

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RUSSIA The Soviet empire collapsed because the Soviet economic system collapsed. The communist regimes failed to invest capital and create productive means oriented to investor/consumer demand; instead, capital and its productive/technological capacities were commandeered for military production and limited to consumption needs of a party elite. Apart from being prohibited by decree, markets never emerged because the supply never has been sufficient or widespread enough to create a money-based income and allow a demand response. What emerged in the later years were the pitiable black markets, amounting to little more than flea markets or barter exchanges for pittances in the face of gulag imprisonment. Can there be a viable Russian-led region without a viable Russian economy? The inflation rate was 2500 percent in 1992, and Russia's Central Bank was making loans at the interest rate of 120 percent per year. The rate continued to exceed 500 percent during 1993, requiring the issuance of a new ruble. The rate was reduced to about 100 percent in 1994. Most trade was conducted through barter and foreign currencies, but the latter was banned at the beginning of 1994 to force dependence upon the ruble. Local "investment" occurred only because the government gave vouchers or coupons to workers to "capitalize" business organizations; indeed, it gave them to every man, woman, and child, as if the vouchers would somehow create wealth that rubles fail to create. Cold turkey capitalism is still in the deep freeze. A G-7 courtier, Boris Yeltsin has tied his political future to Western-fashioned commerce and assistance. At the end of the G-7 meetings in 1992 and 1993 he stood outside the door with hat in hand to get the G-7 assistance; by 1994 he had gained limited admittance to discuss political issues. He attempted to reduce existing Russian debt and to reduce Western tariffs on Russian exports and Western attempts to prohibit the sale of Russian military products, Russia's most developed and competitive industry. In return, he pushed legislation to grant tax exemptions for foreign investors, reduce Russian tariffs, and permit foreign acquisition of land. Russia is responsible for Soviet debts to the West of nearly $90 billion, according to the Paris Club; no more than $70 billion, according to the Russians. This includes portions of debt charged to the other former republics that gave in exchange their shares of Soviet assets such as gold reserves and property abroad. The Russians took on more liabilities than assets, and they got stuck with paying the interest. The Russians were able to pay down $3.6 billion to foreign lenders in 1993. But they were required to pay more than $15 billion, prompting them to ask the Paris Club of government lenders to reschedule most of the payments. Meanwhile, Yeltsin obtained a G-7 commitment of $28 billion in assistance. About $14 billion was credits made available for the Russian purchase of goods and services from Western firms, and $9 billion came

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from G-7 and the International Monetary Fund (IMF) for a ruble "stabilization" fund. An additional $3 billion was to help privatized state businesses succeed. In exchange, Russia must come to Western terms. It must adhere to the usual IMF austerity measures —reducing inflation, cutting government spending, eliminating or reducing government subsidies to industries, and privatizing most industries. To receive its credits, it must buy overpriced Western goods and services. It must admit Western investors and acquire foreign currencies; this means hocking many of its natural assets, mostly oil and mineral resources. The Wall Street Journal advises the Russians to concede even more: "Their best chance for entry into the world community is to encourage foreign investment through stronger legal protections of foreign rights and property. When the West has a stronger stake in Russia, the Russians will have better access to the West."4 Western states talk about trade, if it does not intrude upon their markets. Still in 1992 American trade with Russia was exceeded by that of thirty-eight other nations, falling between trade with Denmark and Costa Rica. Russia's largest exports are armaments, oil, uranium, and aluminum. The United States opposes armaments sales, justifiably, and it complains about the low and destabilizing prices of Russian oil, uranium, and aluminum. It imposed antidumping penalties on uranium and forced the Russians to accede to a "voluntary export restraint" agreement. In concert with other producers and threatening retaliation, it forced an agreement limiting the production of aluminum, even though the Russians are not selling below their cost or selling below their own market prices. Free trade apparently means to buy American; to buy Russian does not extend beyond caviar and cheap vodka. The Russians responded by invoking a 60 percent tariff on both imported and exported goods, including more stringent regulations. It reflects local concerns about protecting the products of infant Russian industries, which cannot compete with Western-produced goods. This scenario of weak currency, heavy debt, unfair trade, and austerity, all Western imposed, plays out in Mexico and countless other less developed countries. In Russia, it is understandably justified as reform. The Soviet apparat lingers on, known in the West as the Russian mafia. For example, the Russian Central Bank still operates similarly to its predecessor, the Soviet Gosbank. It is the only currency-issuing bank in Russia, with about forty-five thousand employees in eighty-four branches. Transfers of money often take months and usually are targeted to state-owned enterprises that are corrupt and inefficient. The bank itself is corrupt; its officials commonly receive bribe payments up to 15 percent of the transaction. Still by 1994, it had failed to create any short-term money markets, interbank deposit markets, letters of credit, checks, or normal clearing procedures. It served the political interests and favorites of the parliament, drawing public criticism from Boris Fyodorov, the Russian finance minister.5

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Reform moved ahead when more than 100,000 state companies were purchased by 1994 by Russian citizens, but grudgingly. In 1993, the parliament passed a resolution that revoked the privatization that Yeltsin instated by decree, not once but three times, provoking a constitutional issue. Yeltsin disbanded the parliament after the attempted coup of the "Old Believers" in October 1993. As part of the second phase of privatization, Russian assets were put on the selling block for Western investors and lenders. The Duma rejected the measure; Yeltsin waited until the Duma adjourned in July 1994 and invoked the measure by presidential decree. This act further stirred nationalist sentiments and hardened divisions between Russian internationalists and nationalists. Apart from the issue of infant industry protection is the issue of long-term development potential stymied by foreign ownership of oil fields, mineral rights, and manufacturing enterprises; and the highly emotional issue of political autonomy. Western-imposed reform and deal making appear to be under increasing attack. On May Day 1994, ten thousand marched through the streets of Moscow to denounce the Yeltsin government and the American "dollar empire." Most Russians think that the West should stop intruding and forgive (or at least defer payments on) most of the debt, as the United States has done with many less-developed countries. This would allow the Russians to develop more in their own way, rather than to develop by purchasing goods and services from Western firms, forcing privatization, and paying fat fees and rates to foreign intermediary traders and financiers. Despite the failed coup, nationalists, conservatives, communists, and reactionary populists are more popular than ever. Yeltsin could have used the parliaments of the republics and regions as campaign forums for the December 1993 elections; instead, he disbanded them. Yeltsin's proreform bloc obtained only 94 seats in the 450-seat Duma. In the December 1995 elections, Yeltsin's reorganized party (Our Home Is Russia) obtained just 64 seats; the Communist Party of Gennady Zyuganov led all parties and won 158 seats (up from 64 seats in 1993), which was followed by the Liberal Democratic Party of Vladimir Zhirinovsky with 51 seats (down from 78 seats in 1993). Communist and nationalist parties now control the Duma and Federation Council and can turn back most of the reformist legislation enacted by the Yeltsin administration. The two leading economic reformers —Boris Fyodorov, minister of finance, and Yegor Gaidar, vice premier—resigned from the more conservative cabinet assembled under Prime Minister Viktor Chernomyrdin. The most dangerous anti-reform opponent appears to be Zhirinovsky—a flamboyant personality, street-wise comedian, and political demagogue, who talks of "Russia for the Russians" and of restoration of the Soviet Union. He reviles the Baltic states and advises Russia's Muslims to relocate in the newly formed Muslim states. His campaign tactics are frequently compared to those of Adolf Hitler; both men have spoken to nationalism and their country's past

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power, to restoration of military power, to repudiation of Western-imposed debt payments or reparations, and to general dissatisfaction over economic conditions. The most formidable presidential candidate in 1996 may be Zyuganov, who is reputed to be a pragmatist but who remains a Soviet-supporting and staunchly anti-Western communist. In March of 1996, he led the parliament to adopt, by a 250-98 vote, a resolution calling for the restoration of the Soviet Union and nullification of its breakup authorized in December 1991. Time may be running out for the Western-style government of Boris Yeltsin, just as it did for Alexander Kerensky, who, like Yeltsin in October 1993, appeared to be viable by putting down the communist-led rebellion of July 1917. Yeltsin was reelected over Zyuganov, although not receiving a majority vote in the general election. Despite a popularly approved constitution, cracks remain in the structure of the Russian state. Some of Russia's eighty-eight regions declared themselves new republics and claimed the rights now held by the twenty republics, which occurred in the face of Yeltsin disbanding the regional council in October 1993. It is no small distinction; for example, most of the regions pay about half of their taxes to Moscow while republics pay as little as 10 percent and are allowed to keep partial profits. The constitution was amended to grant the same rights to both republics and regions, but it leaves the door open for republics to write their own constitutions and negotiate statutory deals with Moscow. Some republics talk about "autonomy." Novgorod enacted sovereign republic laws; central government laws no longer are recognized to rule the land. Diamond-rich Yakutia-Sakha, the largest of the republics, could align itself with other Siberian republics, and possibly Mongolia, China, or even Japan. The small Caucasian region of Chechnya seceded in late 1991; spurning negotiations with the Russians, it reasserted its independence in August 1994 and provoked Russian military occupation. Former security adviser Yuri Skokov warns, "There is a real potential for a Russian break-up."6 Despite its internal economic and political problems, Russia continues to be an imposing geopolitical entity. Russia is the world's largest geographic nation and the world's third most populated nation. It remains something of an empire; included within its boundaries still in 1994 were eighty-eight regions and republics, most of which have ethnic minorities. Through the Commonwealth of Independent States (CIS), Russia exercises informal economic control over other former Soviet republics. It supplies them with oil, metals, and manufactured goods, and the ruble is still used as currency by Armenia, Belarus, Kazakhstan, Tajikistan, and Uzbekistan. Russia is negotiating the formation of an economic region with Belarus and Ukraine. With the new ruble and economic agreements, the Central Bank of Russia could provide an economic center for commonwealth states. The CIS also maintains most of the military and political relationships of

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the old communist apparat. Russian troops are "peacekeeping" as far away as Tajikistan and Turkmenistan, ostensibly to protect the borders against Afghan rebels. In the case of Tajikistan, fifteen thousand Russian troops entered in 1993, not to thwart Afghan threats but to reinforce the Popular Front government which the Russians armed and supplied during a civil war. Russian troops are stationed in Azerbaijan, which, like Tajikistan, shares no common border with Russia and requires concurrence of other states. They are stationed also in Moldova, and most recently in Georgia at the invitation of Eduard Shevardnadze. They linger in Estonia and Latvia, a policy which the Russians regard as an "internal affair" in response to Western complaints. After crushing the parliamentary coup in October 1993, Defense Minister Pavel Grachev announced the military policy of using troops in the "near abroad" (meaning the former republics of the Soviet Union), abandoning "no first use" of nuclear weapons (primarily directed at Ukraine), and removing the law that limits the army to 1 percent of the population.7 Russia maintains its near abroad policy because of the presence of some 25 million Russians living in the former Soviet republics. The central Russian government will protect these Russians regardless of the former Soviet republics' hatred of the old Soviet system or desire for autonomy. Foreign Minister Andrei Kozyrev, considered to be a liberal, nonetheless has warned that Russia intends to "toughly uphold the interests of the Russian-speaking populations and stand up for them wherever that might be."8 This demographic link of Russia with Russians in the former republics, who usually dominate leadership, contributes to CIS and ultranationalist aims of reviving the Soviet empire. In the emerging order of regional pluralism, Russia has four possible alignments. The first is to strengthen the all-inclusive CIS, by one means or another. Without a stable ruble, Moscow may not be able to hold all of the commonwealth in its orbit. It may not have the centripetal economic pull to hold the former republics at the same time they are being attracted by the centrifugal forces of other centers of power. Its near abroad military policy is complicated by the Americans' negotiating assurances to the nuclear powers of Belarus, Ukraine, and Kazakhstan, which includes an assurance already established that the United States would defend Kazakhstan against any attack. The second is to join with the new Muslim states. The great oil and mineral rush is on, similar to the land rushes in nineteenth-century America. Only in central Asia in the 1990s, it is being led not by horses and wagons but by geologists, lawyers, and diplomats. American and British oil companies obtained the oil rights in the Caspian Sea from Azerbaijan and Kazakhstan. The Russians responded by extorting (in Western eyes) part of the oil reserves but were unable to stop the deals. The Russians, themselves desperate for reliable currency, are negotiating mineral rights in the Urals with Western corporations. Common geography requires an accord with Kazakhstan, one of the twenty largest nations in the world. However, Kazakhstan, Uzbekistan, and most other central Asian countries concluded a common market agreement at

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the start of 1994. The cultural and religious affinities of the former Soviet republics of central Asian lie to the south and with the other Muslim states of the Economic Cooperation Organization. To keep open this option, the Russians are willing to provide a nuclear plant to Iran despite American objections. The third is to align westward with Ukraine, Belarus, and possibly some East European or Balkan states. The problem, of course, is that today's Russians are the same Soviets who brutalized these countries under the Stalinist regime extended through the rule of Leonid Brezhnev. Russians are despised in the Ukraine, which was added to the empire in the eighteenth century and considered by Russians to be part of Russia. During the Ukrainian national referendum of December 1991, 90 percent voted for independence. These two countries, currently the second and third largest nuclear powers in the world, continue to dispute common boundaries and issues related to control in Crimea as a Ukrainian region and the Black Sea controlled by Russia. Anti-Russian sentiment exists throughout Eastern Europe and the Baltic states, most of whom are pleading for membership in the North Atlantic Treaty Organization. A fourth alignment could involve China. The two countries share a border more than three thousand miles long. They share a common twentieth-century history as communist powers who were allies during the 1950s. They continue to have quasi-socialist economies that are searching for a balance with private enterprise. As former communist leaders and struggling mixed economies today, they share a traditional suspicion of Western powers. Finally, they share a mixing of Asian and Aryan races in the south and west of the former Soviet empire. They negotiated a nonagression pact and began trade talks in 1996. A Russian-Chinese combination would be very formidable if supported by Japanese capital and technology. Through CIS, the Soviet-turned-Russian empire lives on. The Russian empire is smaller and mostly informal. The Eastern European states and most other dominions of the Soviet empire are gone. Russian dominions now consist of former Soviet republics—the Baltic states, Belarus, Ukraine, the Caucasus states, and the Muslim states in the south. Their future is unclear, especially given a resurgence of Russian-led imperialism or regionalism. CHINA Napoleon Bonaparte revealed a keen sense of history by saying, "Let China sleep; when she wakes, the world will be sorry."9 The historic fact is that for most of the five-thousand years of known political history, China was the most powerful and civilized nation and empire in the world. Its empire begins, if not with the Chou dynasty in 1122 B.C., certainly with the Han dynasty in 200 B.C., its only world rival the relatively short-lived Roman empire. While Europe suffered through the Dark Ages, China enjoyed the Golden Age of the T'ang dynasty, succeeded by the Sung dynasty. The empire survived the Mon-

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golian occupation in the north during 1270-1370, and Han control and prosperity were restored through the Ming dynasty. At the beginning of the sixteenth century, China still was the most powerful empire in the world, having developed an iron industry, gunpowder, huge irrigation system, extensive international trade, libraries, and well-educated Confucian elites to administer the empire. The empire survived until 1911, followed by a brief republic and nearly forty years of civil war. Only in the nineteenth and twentieth centuries did China have serious outside rivals to its traditional dominance of East Asia. In contrast to Japan as a rival, China is seen by Americans as a victim of European and Japanese imperialism, then of Maoist communism. American paternalism in China provoked Japan to war in 1941. At the start of the cold war, Japan and China were largely instruments of the two superpowers, Japan of the United States and China of the Soviet Union. Both superpowers experienced setbacks. The Sino/Soviet split occurred in 1960; the United States lost Vietnam, Laos, and Cambodia in 1975. Americans and Europeans continued to experience economic setbacks thereafter. Contrary to its misfortunes in the nineteenth and twentieth centuries and its lingering image as an underdeveloped country, China is positioning itself in the twenty-first century to dominate the Orient again. Isolated from the West under Mao Tse-tung, China developed a rural economy and communal industries by the 1960s. While not enjoying the spectacular industrial development and trade of Japan and the little dragon economies, China avoided dependency upon foreign commerce and built a self-sufficient economy. It avoided foreign credit and the heavy debt and currency debasement experienced by most of the less developed countries. China today is the most rapidly growing large economic power in the world. During the 1980s, its annual gross domestic product increased in constant dollars from $275 billion to $604 billion: a 12 percent per annum increase. After the political strife of 1989, it showed a double-digit growth rate again in the 1990s, a rate of 13 percent in 1992 and again in 1993 and 1994. This far exceeds the annual growth of national product in the 1980s for Japan, the United States, or the European Union, none of which exceeded 5 percent. According to the measure of currency price parity (which discounts currency exchange rates) recently adopted by the International Monetary Fund, China already has the world's third largest gross domestic product. Using updates of 1990 data, The Economist puts China ahead of Japan.10 Nicholas Kristoff goes on to predict that by the year 2002 China's gross domestic product will be just under $10 billion and surpass that of the United States.11 After abandoning control of foreign trade by state trading corporations at the end of the 1980s, China now is among the world's top economic producers. And, unlike Japan, China does not depend largely on foreign sources of raw materials or food. In contrast to the caution about Russia, foreign investment and loans are flooding into China. Investment amounted to $11.3 billion in 1992, more than double the investment of $4.1 billion in 1991. An additional $8 billion was

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loaned in 1992. The largest foreign investor during 1985-92 was Hong Kong/ Macao, amounting to $21.4 billion. Japanese investors were next with $3.7 billion, followed by the United States with $2.8 billion.12 Most of the investment during the past fifteen years was made by foreign Chinese through Hong Kong and concentrated in the adjacent Guangdong, a province the size of France with 65 million people. It is the fastest growing province in China, bustling over with construction and inflation. Its exports approximate those for all of India, and they contribute to the Chinese 1994 trade surplus of $30 billion with the United States and $120 billion trade with the world. Inflation continues primarily because of both foreign and domestic speculation in Guangdong and other coastal areas; also because of consumer buying of imported goods and creation of an overall trade deficit of near $10 billion in 1993. Inflation was 25 percent at the end of 1994, a challenge to the policies of Vice Premier Zhu Rongji, who fired the chief of the Central Bank in 1993 and took over the post himself. To help maintain the value of the yuan, Zhu introduced a sixteen-point development plan. The overall purpose was to contain inflation and assure an annual growth rate between 8 and 9 percent by 1995.13 Another goal was to stabilize the exchange rate of the yuan, which is set at 5.77 yuan to the dollar. As a result of a shortage of dollars and other foreign currencies caused by inflation and trade deficits, the government allows higher exchanges in so-called swap markets. When the government attempts to control these rates, which soared up to 11 yuan to the dollar, currency trading simply seeks out black markets.14 The rate had to be raised in 1994 to 8.7 yuan to the dollar. The Chinese Communist party is effecting this amazing transition, a party which did not hesitate to kill demonstrators in Tiananmen Square as recently as 1989 and which continues to keep political prisoners. Once the dictatorship of the proletariat under Mao Tse-tung, the party now constitutes the dictatorship of the bourgeoisie under Deng Xiaoping and Zhu Rongji. The other equally unlikely institution of change is the People's Liberation Army (PLA). Always self-sufficient since its founding in 1927, the PLA developed industries, built irrigation systems, even harvested rice, beginning in the 1950s. It is described today as "a loose federation of more than 20,000 enterprises in everything from telecommunications and transport to mining and massage parlors"; according to some estimates, "military-run enterprises generate revenue rivaling the defense budget."15 Following other rapidly developing Asian economies such as Japan (prior to 1993), South Korea, and Taiwan, the Chinese economy reflects a blend of command and market policies, and a rejection of Western-style democracy, with its free elections, oppositional political parties, and observance of human rights. Hegemony in East Asia will depend partly upon who succeeds in aligning with the other growing economies in the west Pacific. China is a leader in the

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Asia-Pacific Economic Cooperation, partly because of the demographic fact that Chinese traders—known as "the Jews of the Orient" —are found throughout the East whether in India, Singapore, Philippines, Indonesia, or Korea. It is estimated that Chinese companies in Indonesia, Malaysia, Philippines, and Thailand account for about 70 percent of the private sector investment in these countries.16 Samuel Huntington believes that a Chinese-centered East Asian economic bloc is already coming into existence.17 China continues as the last of the large formal empires; its control continues over the independence-minded, autonomous provinces of Buddhist Tibet and Muslim Xinjang, and soon over Hong Kong/Macao; and it extends to countries such as Mongolia, North Korea, and Taiwan. As American dominance in Asia diminishes, as indicated by the threat of trade wars between the United States and Japan in 1995 and the United States and China in 1996. The region is moving toward a balance of power between Japan and China. Rivalry between the two powers in the twenty-first century would probably yield results very different from those of the twentieth century, when Japan prevailed.

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7

The Developing Peripheries The fault lines between civilizations are replacing the political and ideological boundaries of the cold war asflashpoints for crisis and bloodshed. — Samuel P. Huntington "The Clash of Civilizations?" Foreign Affairs, 1993 PERIPHERIES Like drifting continents, the civilizations of West and East and North and South push against each other, producing peripheries along their smoldering, volatile fault lines. The peripheries are unstable and less developed, although, unlike fringes, they have value or strategic importance of two types. Resource peripheries have materials wanted by powerful countries, usually natural resources such as oil or metals. Buffer peripheries have the geopolitical and strategic importance of being located between rival powers. Examples are the Balkans as a buffer between Russia and the European Union (in the past, between the Austrian, Ottoman, and Russian empires), or central Asia as a buffer between Russia and China (in the past between Mongol and Arab empires). Buffer peripheries are found to exist between civilizations where natural boundaries such as oceans or mountains do not exist. They occur especially between the civilizations of Eurasia, the largest continent with the most divergent civilizations. Most are along two major geopolitical fault lines that divide North/South and West/East. The North/South fault line starts in the Balkans; proceeds east across the Black Sea and Crimea, to Armenia, Azerbaijan, and Georgia; then continues to central Asia, which represents the conjunction of a Y. Its northern arm

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continues northeastward through the former Soviet Muslim states and to Mongolia, Manchuria, and Korea; its southern arm proceeds southeastward between China and India and ends in southeast Asia. Pushing against each other from north and south over the centuries are powerful nations, regions, and empires that represent not only themselves and their immediate political ambitions but distinct civilizations. In the North is the orthodox Christian civilization transformed only recently in the twentieth century into the Soviet-forged communist industrial civilization. In the South is the Islamic civilization conflicting as it moves northward with Christian Russia and eastward with Hindi civilization and southeast Asian cultures. In between is Chinese civilization protected by Chinese empires for three millennia. Through the ages, violence and death routinely occur throughout the peripheries that make up this Y-shaped fault line. The larger wars are like the major earthquakes that occur on the physical fault lines of continents. The Balkans need no detail as a troubled periphery. Crimea, the object of a war between the West and Russia during 1853-56, may be the object of a RussianUkrainian war in the 1990s. On the other side of the Black Sea, Christian Armenians have been persecuted for centuries, especially by the Turks and the Muslims of what is now Azerbaijan. Always resistent to the north, Afghanistan concluded a savage conflict with the powerful Soviet army. The nations of central Asia are Muslim, but a periphery for other more powerful nations of the West, plus Russia and China. Along the northern fork of the Y, Mongolia and Korea have been peripheries between China and Japan. Mongol tribes have long been peripheries to China, except in the beginning of the thirteenth century, when they conquered all of Asia including China. Along the southern fork are found the Himalayan mountain peoples, wanting peace but getting continuous occupation, as exemplified by the brutal Chinese occupation of Tibet. The fault line disperses into the mountainous jungles of southeast Asia, where Buddhist, Chinese, Islamic, Indie, and local cultures and religions divide and redivide. The other East-West geopolitical fault line begins at Finland and goes south through the Baltic countries, Poland, the Slavic countries, and again the Balkans. These countries represent a geographic band about fifteen hundred miles long (north to south) and about five hundred miles wide (east to west). Most are Eastern European countries that for centuries have buffered three antagonistic civilizations—feudal-monarchical Christendom, Orthodox-czarist Christendom, and Islam, represented mostly by the Ottoman empire. A long history of violence accompanies this line, like the volcanoes and earthquakes of a physical fault line.1 In other parts of the world, three additional peripheries constitute areas that are important, not because they serve as buffers between civilizations and hostile empires but because they possess resources. The largest of these is South America, which is at the edge of the American informal empire and its presence in the Caribbean and Central America.

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The second important periphery is the Middle East, considered critical primarily because of its petroleum reserves. It extends beyond the American-dominated countries of Israel, Egypt, Kuwait, and Saudi Arabia to the adjoining Muslim countries not controlled by the United States or its allies. The third is southeast Asia, which once included China as a periphery and frontier for European colonial empires, also for American expansion into the west Pacific after its acquisition of the Philippines and other dominions from Spain in 1899. After the Maoist revolution of 1949, China became independent of Western intervention, and after 1960 of Soviet intervention. Southeast Asia and Indonesia are someplace between being a periphery and an economic regional power. The Japanese, British, French, and Americans all learned that it is an unpredictable periphery in which the costs of domination can outweigh the benefits of exploitation. Its main value traditionally derives from natural resources —rubber, tin, oil, lumber, and food —more recently from manufactured goods available through Singapore and other seaports. As geopolitical strategies become subordinated to the geoeconomic strategies of the twenty-first century, buffer peripheries assume less importance and resource peripheries assume more. To survive, all peripheries (and fringes) have the challenge of coping with the geoeconomic strategies of the G-7 and economic regions, just as they coped with the geopolitical strategies of the United States and Soviet Union during the cold war. As less-developed countries with limited resources, they must either realign with one of the developed regions or consolidate with one another. The newly developed, industrialized countries will have some opportunity to join a developed region. The lesser-developed and underdeveloped peripheries will have to consolidate and try to maintain market access, obtain capital, and preserve their own currencies and economies. Competing with the developed regions will not be easy. Even labor at five dollars per day is not likely to overcome the high productivity, trade barriers, advanced technologies, and strong currencies of developed countries. EASTERN EUROPE

Eastern Europe constitutes the middle of the geopolitical fault line between Europe and Asia. For centuries, it has been the staging area for the wars and conflicts between West and East, between Catholic Christian empires and Orthodox Christian empires. Armies from the East and West have passed back and forth through this easily accessed buffer, especially through the open plains of Poland —plundering and killing people not regarded as their own. The Czech Republic, Slovakia, and Hungary have been easily accessed from up or down the Danube, their only barrier the narrow Carpathian Mountains to the northwest. The last occupation was by Soviet armies and officials, by Russians bent upon establishing a buffer between Russia and Western armies. Although established after World War I, Estonia, Latvia, and Lithuania were annexed as

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Soviet republics. Albania, Bulgaria, East Germany, Czechoslovakia, Hungary, Poland, Romania, and Yugoslavia were occupied as satellite countries. Only Finland, which fought savagely against Soviet troops during World War II, was left alone. Eastern Europe maintains the appearance of an autonomous economic region through the old Soviet-imposed Council for Mutual Assistance and more recently through the European Bank of Reconstruction and Development, which was set up after the Soviet collapse to channel funds into Eastern Europe. The bank was capitalized with $10 billion by more than two dozen Western governments; the United States controls 10 percent of its shares. However, scandals in 1993 hindered the bank's effectiveness. Eastern Europe is rapidly becoming Westernized. Western companies invested more than $15 billion in petroleum in 1992 and increased their investment in other industries from $8.5 billion for the six months ending September 1992 to $11.2 billion for the six months ending March 1993, according to East European Investment magazine. American firms account for about one third of the investment, Western European firms account for most of the rest.2 The most likely future for Eastern Europe is not as a separate economic region but as part of EU. The Central European Free Trade Zone formed in 1992 by the Czech Republic, Hungary, Poland, and Slovakia is intended as a preliminary step to merger into the EU. Alignments with Western Europe are evident. Eastern Germany now is part of Germany. The Czech Republic is the most Western, the most industrialized, and its work force the most productive compared to cost. Poland is the next most industrialized and in early 1994 gained large reductions in principal and interest payments on almost half of its $33 billion debt owed to Western banks. The Czech Republic, Poland, and Hungary are associate members of the European Union and may be full members by 1999. All three want to join the North Atlantic Treaty Organization. Being a buffer area on the East-West fault line, also at the beginning of the North-South fault line (the Balkans), Eastern Europe never has been unified and probably never will be. And it is politically diverse, as indicated by the election in 1995 of a communist president in Poland. Donald Snow comments: "There really is no single entity called Eastern Europe. Rather, there are a whole series of distinct nationalities with differing, often conflicting, histories and cultures."3 Having no identity of its own, Eastern Europe remains part of the East, part of the West, ideally where never the twain will meet in future conflict. By default, it probably will be an EU appendage. MIDDLE EAST Potentially, a Muslim-unified Middle East region could cover an area larger than the NAFTA or European Union region. It could include the entire religious and cultural region that has persevered since its political union in the

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seventh century under the Ommiad caliphate. It could extend eastward from Nigeria and Morocco to Pakistan and Kazakhstan. Once a vast empire ruled by the Ottoman dynasties that survived into the twentieth century, it could reemerge as a powerful region of the twenty-first century. The main internal problems are the internecine hatred and conflict between Sunnites and Shi'ites. Up to 1990, the schism was perpetrated politically between Tehran and Baghdad. With Iraq neutralized, it is now between Tehran and Riyadh. Tehran is the spiritual leader of the Shfite Moslem world because of the charismatic and far-reaching influence of Ayatollah Khomeini. Even the highly organized Shi'ites argued about the selection of the next marja and the establishment of the site of the holy city of Q u m in Iran or Najaf in Iraq. Converging with this split is the social division between the traditional caste system upheld by Muslim clerics and the modern class system molded by commercial interests, or the mullahs versus the merchants. Such antagonisms and struggles are evident in most Middle Eastern countries. In Iran the struggle is between Ayatollah Ali Khamenei, the orthodox and totalitarian ruler and Muslim spiritual leader, and Iranian president Hashemi Rafsanjani, the leader of the Bazaris, commercial interests and progressive elements wanting cooperation with the West. A unifying force is the Economic Cooperation Organization (ECO), which was founded in 1963 by Iran, Pakistan, and Turkey and which in early 1992 admitted the former Soviet republics of Azerbaijan, Kazakhstan, Tajikistan, Turkmenistan, and Uzbekistan. Rafsanjani refers to the E C O as "a large Islamic family" and plans to model it after the European Union. 4 An all-embracing Islamic family that could set oil production and prices is not desired by the oil-dependent developed countries. The United States and its allies prefer no family, or as a second choice a separated Sunni/Shute family. Discord currently prevails within the more moderate Sunni family because of antagonism to the West led by Libya and Syria. When devising its regional power center strategy in the 1970s, the United States turned initially to Egypt, the traditional balance to Persian and Middle Eastern empires beginning with the Hittite empire more than three thousand years ago. The Camp David Accords between Egypt and Israel in 1978 signaled a new era in Middle East peace and regional leadership. Since the Camp David Accords, the United States has poured $30 billion in aid into Egypt, second only to $40 billion for Israel. This included the location of Factory 200 near Cairo to assemble M1A1 Abrams tanks; the largest industrial installation in the Middle East, its purpose was to franchise the Egyptians as the tank dealers for the Middle East. However, the factory was — and continues to be—poorly managed and expensive to operate; in 1993 it produced only a fraction of the 524 tanks for the Egyptian army and failed to obtain orders from other countries. Its disappointing performance reflects the growing problems of political corruption and economic decline in Egypt. To counteract the possibility of a united Middle East region, especially one

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under nationalist or fundamentalist leadership offered by Iran, the United States relies increasingly upon Saudi Arabia. Through the Saudis, it pushes the newly organized Gulf Cooperation Council to consist of Saudi Arabia and five other Gulf States. It is providing F-15 fighters and Abrams tanks directly to the Saudis. More Western arms and funds are going also into the so-called Peninsula Shield consisting of forces from Saudi Arabia and five other Gulf States. Although these forces remained idle during the Persian Gulf War, continued Iraqi claims to Kuwait prompt the expansion. The greater threat is Iranian hegemony that would limit market access to oil. For most practical purposes the Gulf States, Egypt, and of course Israel are American dependents. Aid to Egypt and Israel has been between $2 and $3 billion apiece per year. The levels of investment have been about $2.5 billion in Saudi Arabia, $1.5 billion in Egypt, and almost $1 billion in Israel (plus a multibillion-dollar housing loan guarantee). All three maintain bilateral treaties with the United States and, at American insistence, treaties with each other. All three depend upon American military aid and assistance, as do Kuwait and most other Gulf States. As illustrated during the Persian Gulf War, all three conduct foreign policy in accordance with the wishes of Washington. Apart from investment, aid, and other quantitative indicators, a number of shady and risky deals reveal the compulsive American involvement in the Middle East. The arms-for-hostages deal with the Iranians (also involving the Israelis) prompted a near-fatal scandal for the Reagan and Bush administrations. The federal shutdown in 1991 of the Bank of Credit and Commerce International was a multibillion-dollar scandal and continued to raise ethical and legal questions for those involved with its affiliate, the First American Corporation, which included Washington illuminati Robert Altman, Clark Clifford, William Isaac, and Nicholas de B. Katzenbach. More recently, Arab extremist politics washed upon American shores in the personage of Sheik Omar AbdelRahman, who styled himself as the future Ayatollah Khomeini of Sunni Moslems. The main natural and organizational resource of the Muslim Middle East continues to be oil, which has procured both wealth and organization. While not restricted to Muslim political and cultural aims, the Organization of Petroleum Exporting Countries (OPEC) is a powerful international force consisting primarily of Muslim states. Precisely because of what it is and is not, OPEC is currently the most effective Muslim regional organization. As a collective bargaining unit formed to market oil to the outside world, OPEC promotes a level of economic unity that traditional cultural differences could not tolerate. The spirit of Allah eventually may be at one with the reality of economics. CENTRAL ASIA According to a Persian verse, "Samarqand seikeli rui zemin est": Samarqand is the center of the world. Located in western Uzbekistan, a former Soviet

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republic, Samarqand is midway between China, Persia, and the Indus River Valley, each being within five hundred miles. During the thirteenth century, it was the jump-off point for Genghis Khan's invasion of south Russia and Persia and the administrative center for the Djagatai empire of Kublai Khan. It was best known in the fourteenth and fifteenth centuries as the capital of the empire of Tamburlaine, a Muslim and a descendant of Genghis Khan, who created at that time the largest empire in the world, stretching from Delhi to Damascus to the Caspian Sea. During the Middle Ages, Samarqand and the surrounding central Asian area were quite literally the center of the known Eurasian world, a condition that prevailed until European sea exploits expanded the map and changed the course of trade routes and empires. Once again, central Asia becomes a strategic periphery for contending superpowers positioning themselves for the twenty-first century. At stake are the oilrich Caspian Sea and the mineral-rich Ural Mountains. Western corporations already are negotiating oil rights in the Caspian and mineral rights throughout the area. Kazakhstan and other former Soviet republics are negotiating with a motley group of Asians, Russians, Europeans, and Americans. While a periphery, central Asia is by no means assured as a Western dominion. Islamic states like Turkmenistan, which maintain a Soviet-style government and dictatorship, resist Western influence. Operating through the CIS, the Russians attempt to discourage responsiveness to Western offers. Despite the CIS, Kazakhstan, Uzbekistan, and most of the other former Soviet republics in central Asia formed a trading bloc at the start of 1994. They abolished all tariffs and border customs and moved to allow free movement of goods, services, capital, and labor. Being Muslim, most of the central Asian states affiliated with the ECO in 1992 just months after gaining independence. Yet, apart from oil- and mineralseeking Westerners, they are subject to influence also from Russia and China, all representing different cultures and religions and different civilizations throughout most of their past. No longer the center of the world, central Asia still is a central periphery. It is the epicenter of the Y-shaped Eurasian North-South fault line and of the conflicting forces from all directions. LATIN AMERICA

Until around the beginning of the nineteenth century, the European empires regarded the entire Western Hemisphere as a colony or as a periphery to be colonized. By the 1830s, most of the Western Hemisphere was free of European colonization: The United States forced out the British; Brazil, the Portuguese; and most of Central and South America, the Spanish. The United States supported the Latin American revolutions by issuing the Monroe Doctrine in 1823, which stated that the American continents were "henceforth not to be considered as subjects for future colonization by any European powers."

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After the Spanish American War, the United States became more than a protector. Acting like any European power, it intervened throughout the Caribbean area—invading and occupying countries, setting up governments, and controlling commerce. Its primary objective was building the Panama Canal. When Colombia balked at American terms for acquiring rights over the isthmus, the United States promptly incited a coup and created the Republic of Panama. American troops occupied Panama from 1903 to 1914 as the canal was being constructed. American troops occupied several other Caribbean countries—Dominican Republic, 1916-24; Haiti, 1915-34; Nicaragua, 191225; Cuba, 1906-09 and 1917-19—and intervened militarily in most of the others.5 After World War II, American intervention continued. A coup was effected in Guatemala in 1954 to displace an elected reform government; the Bay of Pigs invasion was attempted in Cuba in 1961; U.S. troops invaded the Dominican Republic in 1965, Grenada in 1983, and Panama in 1989. The Central Intelligence Agency attempted to overthrow several governments and coordinated the overthrow of the elected socialist government and Salvador Allende in Chile in 1973. Most of the American-supported governments were dictatorships that subverted aid and development projects to benefit a ruling elite and that violated human rights; this included drug traffickers such as Panama's Manuel Noriega, whom America later seized and jailed. Reform movements usually were interpreted by Washington as communist revolutions. Various administrations have dressed up their aggressive Latin policies with a programmatic garb. The Truman administration set the pattern of large-scale aid with the Point Four Program. The Kennedy administration called its policy the Alliance for Progress, a ten-step program which addressed political reform and economic development to combat Cuban-exported Marxism and which became increasingly concerned with security and military questions. With modifications by Nelson Rockefeller and Henry Kissinger, the Nixon administration operated under the aegis of the Alliance for Progress. The Reagan administration created the Caribbean Basin Initiative, as well as the Central American Development Organization at the recommendation of the National Bipartisan Commission of Central America headed by Henry Kissinger; both programs rechanneled aid to private corporations, some indigenous but most American. The Bush administration emphasized hemispheric commerce under the Enterprise for the Americas Initiative. As established by the Monroe Doctrine, security remained the primary concern, security against Europeans, communists, or any power that challenged the hemispheric hegemony of the United States. The Caribbean (except Cuba) and Central America are the informal dominions of the United States. The U.S. Virgin Islands and Puerto Rico are actual territories. The United States is the unchallenged military and economic power and controls most of the major political events, as when it prevailed in the civil war of Santo Domingo and forced a political compromise in Nicara-

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gua. While sitting upon the Caribbean countries as a dominion, the United States treats the South American countries more like peripheries, which are allowed more autonomy. Chile was an exception, and Colombia continues to be controlled because of its cocaine production, but most South American countries carry on without direct American involvement. Bolivia and Paraguay, the interior countries, are ignored as fringes. Even if the United States abandons a policy of political and military intervention, its economic dominance establishes an informal imperial relationship of homeland over dominion. This is especially evident in the Caribbean, as Bonham C. Richardson points out: Insular economies of the Caribbean are tied more closely to the United States in the 1990s than ever before. Minor changes in the huge U.S. market (an upbeat tourist season, the invention of artificial sweeteners) can create feast or famine in tiny Caribbean states. And, early in the 1980s, the U.S. took a diplomatic initiative to use the power of its marketplace (the Caribbean Basin Initiative) to thwart further Grenadastyle developments in the region.6 The United States dominates the trade of most Latin nations, and it is by far the single largest foreign investor. It accounts for most of the export/import trade in the Caribbean and is the largest buyer of goods from South America. Its private direct investment amounted to $102 billion in 1993.7 American banks alone loaned $400 billion to Latin American countries at the end of the 1980s. Most of the debt was nonperforming, as a result of the 1980-83 worldwide recession and overlending. Costa Rica was the first to default in 1981. Mexico defaulted in August 1982 on $100 billion. Other Latin countries quickly followed, including Brazil, the largest debtor of less developed countries. Having borrowed on the potential to sell exports, Latin debtors faced lower commodity prices and interest rates of 15 percent. Under the so-called Brady plan, much of the Latin debt eventually was written off, then restructured with involvement from the International Monetary Fund. The Brazilian debt, still at $120 billion in 1994, was the largest reduction. Part of it was underwritten by "Brady bonds," which are thirty-year, zerocoupon U.S. Treasury bonds. American banks and investors are buying "assetbacked," which are bonds tied not to the paper value of business assets but to large-scale income sources such as road tolls, car payments, residential mortgages, and credit card purchases. In 1993, Latin American economies showed an aggregate real growth rate of 3.2 percent and inflation rate of just below 15 percent, a marked improvement over the economic disarray of the 1980s. Because of the economic/political/military dominance of the United States, no viable or independent economic regions yet exist. The Organization of American States (OAS) was an American-controlled organization since its beginning, founded in 1889-90 in Washington as the International Union of American Republics. Its name changed in 1910 to the Pan American Union,

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which was incorporated into the OAS. The OAS was organized in 1948 out of the protective impulse that founded the Monroe Doctrine; in this case, however, suspect foreign powers included the United Nations. Its current members number thirty-five and its headquarters continues to be in Washington. In addition to the OAS, United States administrations talk about the extension of the North American Free Trade Agreement to numerous Latin American countries. Referring to the Enterprise for the Americas Initiative, George Bush spoke of establishing free trade throughout the Western Hemisphere. Bill Clinton mentioned as candidates for NAFTA other countries such as Argentina and Venezuela. Extending NAFTA into Latin America is being prompted by the possibility of other economic regions. The most visible regional organization in the Caribbean is the Caribbean Community and Common Market (CARICOM), which was founded in 1973 and succeeded the Caribbean Free Trade Association, organized in 1968. Its purpose is to promote free trade among its members and to support development activity. However, agreement even about tariffs is sporadic. While CARICOM created the Caribbean Development Bank, the bank is capitalized largely by the United States and European countries, and it lends primarily to exporters doing business with the developed countries. Division occurred within CARICOM in 1981 when several of the states in the Lesser Antilles formed their own Organization of Eastern Caribbean States and when they disagreed over the American invasion of Grenada. Richardson summarizes the difficulty of regional cooperation: "Even in their attempts to join together in order to present a united front to the outside world, small states of the Caribbean have thus been divided by the same kinds of external forces that seem always to have defined the geopolitics of the region."8 The possibility of regions in South America is more threatening. The Andean Pact nations of Bolivia, Chile, Colombia, Ecuador, Peru, and Venezuela began discussing trade agreements in mid-1992. Argentina, Brazil, Paraguay, and Uruguay are negotiating a trade agreement called "Mercosur." Both regions expect to establish common markets before the end of the decade. NAFTA thus has a special urgency and purpose—to counteract the organization of regions in the South American peripheries, maintain North American access to their markets, and exclude the Europeans and Japanese from access to these same markets.

8

The Underdeveloped Areas Economic development over the next decade or two cannot substantially better the lots of the world's miserables. — Robert Heilbroner The Great Ascent, 1963 UNDERDEVELOPED AREAS The inevitable progress of economic development is one of the most extraordinary beliefs of modern Western thought. Upon it, Adam Smith, Karl Marx, and the classical economists (excepting Thomas Malthus) agreed, as have most Leninists, neo-Marxists, Keynesians, imperialists, neoimperialists, and free traders and investors. Yet they are wrong, as is now apparent throughout most of the underdeveloped world. While the colonial powers justified their involvement in the less-developed world as the "white man's burden" and the Western democracies did the same during the cold war to protect the "free world," no such moral imperatives exist for what now is called the "world community." The developed countries now pursue profit, openly and nakedly, to advance themselves and their economic interests. Their overriding imperative is to thrive, or at least to survive in the raw competition in the economic jungle of the global economy— whether at the level of multinational corporations, national economies, or now regional economies. The once prominent Keynesian vision of world economic cooperation fades before the Darwinian reality of world economic competition. The broad struggle no longer is political, between West and East; rather it is economic, primarily between the developed North and underdeveloped South. The 1993 GATT/WTO agreement not only enhanced market accessi-

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bility, it also intensified competition. Developed countries are automating and reducing their labor costs with draconian measures. The developing countries, including socialist economies built upon forced industrialization and educated but low-wage work forces, are rushing into world markets and competing even in high-tech industries. Handicapped by weak currencies and lack of capital, most of the less-developed countries cannot compete. Compared to the northern regions organized around the United States, Western Europe, and Japan, regions in the South are much weaker. Two exceptions are the Closer Economic Relationship, which is limited to Australia and New Zealand, and the Association of Southeast Asian Nations (ASEAN), which includes the southeast nations of Brunei, Indonesia, Malaysia, Philippines, Singapore, and Thailand. Many southeast Asian locations are known for their wealth and trade, such as Singapore. Its sister city on the Strait of Malacca is Kuala Lumpur, which is the site of the two largest office buildings in the world (exceeding the Sears Tower in Chicago). The weaker regions are found in Africa and Latin America. African nations belong to the Organization of Unity; French-speaking African countries have the Union Douaniere et Economique de FAfrique Centrale. Most Latin American countries belong to the Organization of American States; they are also forming specific economic regions—the Andean Pact (Bolivia, Chile, Colombia, Ecuador, Peru, Venezuela), Mercosur (Argentina, Brazil, Paraguay, Uruguay), the Central American Common Market, and the Caribbean Community and Common Market (CARICOM) consisting of Caribbean countries. The Central American and Caribbean organizations are preoccupied with the United States. For example, CARICOM was organized in 1973 as a free trade association, which has attempted unsuccessfully to negotiate prices for sugar and other local commodities. It later organized the Caribbean Development Bank, which was capitalized mostly by American dollars and made loans primarily to firms that trade with the United States. It is not developing indigenous industry or local economies. For most practical purposes, the weaker southern regions and underdeveloped countries may be described as (unorganized) areas. Being the least fortunate of the less-developed countries, the underdeveloped countries, by definition, experience negative or stagnant economic growth and fall further behind the per capita production and income of most other countries. Now at the end of the twentieth century, Robert Heilbroner's prophecy for the world's miserables is realized. The per capita growth rates (indicated in real dollars) of the gross products of as many as forty national economies were negative during 1965-90, according to the World Bank. Most were African countries; others were Argentina, Bolivia, El Salvador, Jamaica, Nicaragua, Peru, and Uruguay.1 Twenty-one of sixty-four low- and low-middle-income economies showed negative growth, and thirty-four of sixty-four showed growth of less than 1 percent per annum, which was well below the 2.6 percent rate for upper middle and high income economies. Reliable figures were unavail-

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able for another nineteen low- and low-middle-income economies, but most would have negative growth rates. Also, overall production decreased in the 1980s. Comparing 1965-80 to the 1980s, the gross domestic product was down for forty-seven of sixty-two low- and low-middle-income economies.2 Another study of per capita national growth rates found that the overall disparity between rich and poor countries remained about the same during 1960-85, but that the gap widened for just over half of the countries.3 The southern regions attempt to accomplish the goals of the northern regions—to promote commerce among their members, to coordinate the resources of their members, and to negotiate collectively with other economic regions and powers including international financial and economic organizations. But most do not have the economic resources and financial stability to succeed; they are playing a game they cannot win. UNDERDEVELOPED CONSTRAINTS The failure of the underdeveloped areas results from several constraints — the most prominent the lack of capital. Like every other commodity, capital follows markets and flows to the buyers of its products and services. Concentrated in the financial centers of the developed countries and controlled by multinational corporations, multibillion-dollar banks and investment houses, and international financial institutions, capital is increasingly distant and remote for most nations and populations. It may be accessed through a Swiss bank account, Wall Street stock listing, or investment house claim in Tokyo. The money-based supply and demand forces of particular markets may be located next door across the street or next shore across the ocean. All markets are wispy, like clouds that appear on one horizon, disappear, and reappear on another horizon. As markets form and move with the flow of demand around the globe, capital follows. Capital comes from everywhere, including the less-developed countries, in the form of flight capital. Indifferent to human need, capital is amoral. As Felix Rohatyn describes it, "Capital is both nervous and greedy."4 If its products and profits are in the midst of wretched poverty, no matter. Even local capital may not respond to local need, regardless of how desperate local inhabitants may be. The amorality of wealth was demonstrated by the starving of several million people in Somalia in 1992. Because they had no money (or even barter items), no market existed despite the agonizing fact that food in Mogadishu was stocked behind walls within an arm's reach of the starving population. No demand; no supply. Yet another cruel irony emerged in October 1993 when the United States announced plans to send large supplies of food: Local merchants immediately reduced the price of their food by one third. Increased supply meant lower prices, which meant that if people would have food to eat, merchant profits would suffer. No economic contradictions inhere in free-market economics because mar-

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ket demand has nothing to do with human need. Whether the free-market economy should address human needs, whether it could address human needs, are moral or political questions for which there are no economic answers. The starvation of Somalians within an arm's reach of food is no more pertinent to economics than is the killing of caribou by hyenas to biology. The storekeepers in Mogadishu are no less virtuous than are the transnational agribusinesses that also ignored the starving Somalians; the production of food incurs costs in Somalia as well as in Kansas. Capital-based cost requires currency-based demand; otherwise, capital flows elsewhere. In addition to the amoral flow of capital in the free markets of the global economy, specific institutional constraints operate to handicap all less-developed countries and to condemn the underdeveloped countries to poverty. The first constraint is the free-trade disadvantage of underdeveloped countries. Free trade is not necessarily fair trade, especially between the economies of developed and underdeveloped countries. Whereas the developed economies do not depend upon trade with underdeveloped economies, the latter usually depend upon the developed economies to provide equipment and technology, currency, and debt relief. A loss of trade, or even a drop of prices, can mean economic ruin for the latter. A second constraint is the dependence of the underdeveloped countries upon the currencies of the developed countries. While the currencies of the less-developed countries tend to be undervalued, those of the developed countries tend to be overvalued. This is so simply because of the demand and supply economics for strong currencies. To carry on their daily business, international banks and investors seek dollars, yen, or marks; they avoid, even discount, pesos, rupees, or dinars. The issue is not the state of the economy of the country issuing the currency, which may be very good; it is the relative stability of exchange rates among major currencies. Theorists say that underdeveloped countries should be happy that their currencies are undervalued; that means good deals for foreign buyers and investors who will swarm into their markets, bid for their resources, and drive up the value of their currencies—the free-market nirvana arrives! But the reality is that underdeveloped countries also must pay more for imports, much more, and they must pay much more for loans. Underdeveloped countries never hold strong currencies for long; after receiving foreign currencies for (usually underpriced) materials and labor, the underdeveloped countries must return the currencies as debt service, leaving them still impoverished and indebted. Thus the currencies of the underdeveloped countries remain undervalued, not only in international economies but in their domestic economies. As their own producers and workers prefer other currencies, their own currencies suffer from domestic inflation. A third constraint is the accumulation of debt. As leader of the free world, the American government provided most of the aid to the less-developed countries, and American firms and banks provided most of the capital. By the

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1980s, the largest source of hard currency was high interest loans by American banks joined by European and Japanese banks and by American-supported international lenders such as the World Bank, IMF, and regional banks. By the start of the 1990s, total debt of less developed countries was $1.2 trillion; $520 was owed to commercial banks.5 As more of the less-developed countries supplied world markets and prices for their commodities went down, double-digit interest rates prevailed through most of the 1980s. Countries borrowed to pay debt service, and by 1984 many borrowed money just to pay interest on preexisting debt.6 For most Latin American countries, debt payments accounted for about 3 percent of the gross domestic product, which was twice the rate of their economic growth.7 Their debt soared to over $400 billion by the end of the 1980s, threatening the entire international fiscal and financial system. The results were still higher interest rates, flight capital, overproduction, local inflation, and commodity dumping. Some were able to increase exports and make payments; they emerged as the developing countries. Most fell behind as the underdeveloped countries. The IMF came to the rescue, not of the underdeveloped countries but of the developed countries whose lenders and investors were facing financial ruin. To receive hard currency and operating capital, the underdeveloped countries were compelled to accept IMF austerity measures, euphemistically known as "trade liberalization." These included devaluation of currency, lessening of government regulation, reduction of government expenditures, lowering of wages, and restriction of local credit—all aimed at encouraging exports to service foreign debt. The outcome was the transformation of self-sufficient economies into international dependent economies no longer capable of providing for the basic needs of their citizens. A fourth constraint is the lack of domestic markets or purchasing power. Beyond the creation of a small middle class, the people of underdeveloped countries have gained very little income or purchasing power. Exposed to more efficient foreign competition, domestic businesses have failed. Theoretically, local businesses that supplied foreign businesses would thrive and provide a basis for building the local economy. In reality, most foreign and multinational corporations prefer to supply one another and form surprisingly few supply linkages with local businesses, as demonstrated in a study of the maquiladoras in northern Mexico.8 Consumer markets do not exist, partly because of IMF austerity measures and what the American government calls "macroeconomic stabilization." According to plan, local government services have been drastically cut; taxes have been increased; wages have been reduced; and all products of value, including food, have been exported to pay off the debt. Local consumer power is reduced largely to those with access to foreign currency. The rest must survive in the local economy using the local currency. If lucky, they will be able to work for five dollars per day and lunch (no minimum wages or fringe benefits, health and safety protection, or labor organizations). A fifth constraint is the emergence of a dual economy and an isolated and

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corrupted middle class. Its commercial survival depends upon commerce with the developed countries, which isolates it from commerce with the developed countries, which isolates it from commerce with the lower classes and from rural areas. Paul Kennedy notes that even within the United States there is an "upper stratum . . . catering to the transnational demand for their services, while the lower four-fifths of society is increasingly at the mercy of multinational companies moving production in and out of regions for the sake of comparative advantages."9 This isolation occurs in spades in the underdeveloped countries, where the middle class is seen as exploitive. It ignores the needs of the working poor and rural areas, pays few taxes, consumes lavishly, and invests overseas in the form of flight capital. Added to the perception of economic corruption is political corruption, which benefits the middle class even if it is uneasy about dictatorships and repressive regimes. A last constraint is demographic. In most of the underdeveloped countries, population has grown faster than real national or domestic product. Their annual rate of population growth has been about 2 percent, which means the population doubles every thirty-five years. Just to maintain their present standard of living, most underdeveloped economies must double within a generation the number of houses, schools, health services, infrastructure, food production, businesses, and jobs. Yet their annual growth rate of national product is stagnant. IRON CAGE OF UNEQUAL DEVELOPMENT Because of the amorality of capital and the constraints, the underdeveloped countries are condemned to survive in an iron cage of inescapable poverty. Some of the less-developed economies, mostly Asian or oil-rich Arab economies, have narrowed the development gap and demonstrated progress. In contrast, the underdeveloped countries have experienced more of a widening of the gap between their productivity and standard of living than those of both developing and developed countries. They have been captives in the iron cage of the law of unequal development. This world tendency of increasing unequal development and income was analyzed in the 1960s by Gunnar Myrdal.10 Between developed and underdeveloped nations, between rich and poor people within a national economy, the benefits for impoverished nations and people have been limited to a "backwash" effect of isolated economic sectors. The factors contributing to economic isolation have been increasing—population growth, mechanization, rural impoverishment, rural-to-urban migration, automated manufacturing. The free movement of wealth in and out of the underdeveloped countries has created no significant local income or local markets attractive to wealth.11 Writing in 1994, Tim Carrington acknowledges in the Wall Street Journal that "the gap between the fast developers and the laggards is likely to widen." This is so because "the fastest-growing source of funds flowing to the developing world is private investment capital, which seeks out the turnaround

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economies and avoids the backsliders." The future is not promising because "the poorer countries ignored by the multinationals and investors are left to rely on aid mills in the industrial nations, which face new demands around the world and budget constraints at home."12 The gap is recognized by Boutros Boutros-Ghali, secretary-general of the United Nations, who states that 1.3 billion people live in extreme poverty. He says that the global economy "has marginalized entire countries and regions" and that "the gap between rich and poor is getting wider."13 For countries able to compete, free commerce and the global economy offer the promise of opportunity and freedom. For countries unable to compete, it reinforces the reality of deprivation and imprisonment. And regionalization widens the gap still further. Robert Gilpin has concluded that it leads to increasing marginalization of most of the less developed countries: "This tendency toward greater regionalization means that large segments of the human race will undoubtedly be excluded from the world economy."14 As underdeveloped countries respond in the short term to foreign investment and demand to develop diversified and self-sufficient economies, they actually experience less diversification and self-sufficiency. The long-term benefits give way, indefinitely in many cases, to the short-term burdens of using export revenue to pay foreign creditors, submitting to foreign-imposed austerity measures that increase dependence, and somehow providing for an urbanized and impoverished population unable to provide for itself. For the Indians of the Mexican state of Chiapas, the 1993 WTO and NAFTA agreements confirmed the grim realization that their land and way of life were lost. The Zapatista-led rebellion was a futile and bloody attempt to save their land from the coffee and sugar growers and other agribusinesses intent upon seizing land and growing cash crops for international markets. Those who fought and died may be precursors to the millions of rural poor dispossessed each year in the name of free trade and global economy. There is the need to ask hard political and policy questions about the amorality of capital, about institutional constraints, and about the many social as well as economic factors involved in development. While free traders and internationalists extol free-market capitalism and WTO trade agreements, the gap between developed and underdeveloped countries widens. Lester Thurow writes that it is difficult for less developed countries to become rich and, by implication, virtually impossible for the underdeveloped countries. He concludes: "Capitalism . . . is a wonderful machine for producing goods and services, but it is hard to get started. Third world failures outnumber first world successes." 15 FRINGES DEFINED As the developed countries become more intent upon pursuing self-interested geoeconomic strategies, they differentiate more between those countries and areas that are developing and those that are underdeveloped. By targeting

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high-growth economies for trade, the Clinton administration recognizes the gap is closing between developed and developing countries. By implication, it also recognizes the gap is widening between the developing and underdeveloped countries. As a geoeconomic strategy, the American efforts in underdeveloped countries will pay off least, and payoff is what is important. Because of the widening gap between developing countries and underdeveloped countries and because of the growing indifference of the newly developed and developing countries to the latter, a new geoeconomic category has emerged—the "fringes." They provide both intranational and international reference points. Within imperial or national domains, they are the unwanted areas set aside usually for indigent populations—the American reservations, the Australian Northern Territory, or the South African bantustans. Intranational fringes are known by other terms—the backlands, borderlands, hinterlands; the "bush," "brush," or "sticks"; the frontiers, marginal areas, open spaces, or free zones. More important, fringes provide an international reference point for developed countries and regions. Fringes are the nations or areas that fail to attract the attention of the developed countries; specifically, they fail to contribute to world markets or affect geoeconomic strategies. If Africa suddenly slid into a geological fault and disappeared under the Atlantic and Indian oceans, the global economy and the economies of the developed world would continue virtually unaffected; the world financial markets would recover within a matter of days. Thus fringes are increasingly prominent not because of what they are but what they are not—namely, geoeconomic nonentities to the developed countries and regions. Fringes have few if any markets for businesses interested in consumers and few if any resources for businesses interested in production. Developed countries do not encourage their businesses, investors, or lenders to be interested in fringes, because they consider them politically unstable, underdeveloped, overpopulated, and lacking in natural resources. What small economic benefit may be derived from exploiting or developing fringes is likely to entail a still greater cost of controlling or protecting them. Apart from token aid programs and temporary humanitarian ventures, fringes are left alone. Once exploited as the white man's burden, fringes now are excluded by the white man's neglect. What may be called the "in-fringe-ment" of the underdeveloped countries is especially prominent among conservatives who once attended to fringes to stop world communism and win the cold war. They now complain of the attention given by international do-gooders, federationists, and human rights advocates. Stephen John Stedman complains about the "new interventionists" who have unrealistic notions of securing human rights in countries such as Somalia or Bosnia.16 Former secretary of defense James Schlesinger warns the United States against "that heady feeling, induced by its triumph in the cold war, that all things are now possible."17 Realistically, it is possible to encourage very little, including the adoption of democracy, observance of human rights,

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cessation of biological and chemical weapons, capitalism, or free trade. Schlesinger concludes: "With the end of the cold war, U.S. foreign policy has lost its focus. A collection of well-meaning goals is not a satisfactory substitute."18 Conservatives want continued economic and political influence in the strategic areas of Europe, Russia, Japan, and the oil-rich Middle East and in the Caribbean and Pacific dominions, but they counsel against the commitment of American resources to marginal or fringe areas. Three factors determine in-fringe-ment: natural resources, accessibility, and climate. Where oil, minerals, and other scarce materials are absent, accessibility is largely limited to shipping and seaports; construction and maintenance of infrastructure are more difficult in the terrain and heat of equatorial zones. From these, a fourth determining factor has developed —the institutional structure needed to support commerce (communication, organization, living amenities, political order, and economic stability). The latter gives the developing nations a decided and growing advantage over the underdeveloped nations. FRINGE AREAS Africa consists largely of fringes. Exceptions are its Mediterranean coast and oil reserves, the Nile River basin and Suez Canal area, and South Africa, which has natural resources and which now is more temperate politically as well as climatically. Called the third world's third world, most of Africa is a demographic/economic/environmental disaster area. The gross national product per capita in Africa declined 25 percent in the 1980s. During the last twenty or so years, African farmers have produced 20 percent less food, yet the population has almost doubled. Direct private investment in Africa constitutes less than 2 percent of the world total. The United States provides only token aid, which was about $800 million in 1992 for all of sub-Saharan Africa: less than one half the amount given to Israel.19 War and starvation are rampant in central Africa, from Senegal to Somalia, and they extend southward to include civil strife in Angola, Burundi, and Rwanda. Nigeria, the most populous African nation and an American-supported regional power center during the cold war, has experienced political dictatorship and instability since the Biafran war. Rich in oil reserves, it has lost oil revenues because Shell and other oil companies withdrew their investment in 1993, and its banking system collapsed in 1995. It drew international condemnation for executing playwright Ken Saro-Wiwa and eight other political activists in 1995. Throughout West Africa, Robert Kaplan reports that national authority and organization have mostly collapsed. "Criminal anarchy" prevails, as the population doubles every thirty years, economy and polity collapse, and environment disintegrates. "Thomas Malthus . . . is now the prophet of West Africa's future," Kaplan states.20 There is little political or popular interest in the tragedies of Africans. Citing the existence of "compassion fatigue," the news media ignore the events or put

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them in the back pages. An article in the conservative journal Freedom Review acknowledged: African crises are treated by America's national political leadership and the media as a low priority. The current drought in the Horn of Africa, for instance, received hardly any significant coverage until the summer (of 1992). And with a few laudable exceptions, the foreign policy establishment seems to approach Africa's hardships without creativity, energy, or urgency—and often with a certain amount of cynicism. Still, with the American political and media elites, there exists a largely unspoken opinion that Africa is a dying horse that cannot be saved—and that even if it can be saved, doing so is not worth the effort.21 About half of South America consists of fringes. Excluded are its coastal areas and the temperate zone countries of Argentina, Chile, and Uruguay. Bolivia is the poorest country in South America, unable to provide potable water to most of its 6.3 million residents. Paraguay is a close second. Most of the fringe area is the Amazon River basin. The interior of South America is not considered worth developing, or in the case of the Amazon rain forest worth conserving. Much of south Asia is a fringe, even in the cold-war years as an area of nonaligned nations. American businesses conduct limited commerce and citizens visit India and its neighboring states of Bangladesh, Burma, and Pakistan, but the American government does little to encourage an American presence. It does still less for south Asians themselves. The United States ignored the genocidal actions of the Pakistani government in 1971, actions that erupted into a war between Pakistan and India and the emergence of an independent Bangladesh by the end of the year. Henry Kissinger visited New Delhi in July 1971, but only as a cover for his secret trip to China to arrange for Richard Nixon's eventual visit there. Prime Minister Indira Gandhi visited Washington in November 1971 but was insulted and turned away. Only when India was defeating Pakistan in December did Washington take an interest in the matter, in the form of warning the Soviet Union not to intercede on behalf of Pakistan. 22 Interest in India has increased recently. American firms invested more than $1 billion in 1993, more than they did in the previous forty-seven years. As a result of British influence, English is widespread, and educational, political, and economic institutions are similar. However, India's economic growth was less than 4 percent in 1993. As a subcontinent surrounded largely by ocean and isolated by the Himalayas, India and its neighboring states are of little use even as a buffer. They are impoverished, overpopulated, and bereft of natural resources. Along with most of Africa and South America, the subcontinent is one of the red-lined ghetto areas of the world. Other fringes exist. No longer needed as supply stops for modern transportation, most ocean islands now are fringes. The "cargo cults" of many Pacific

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islands contrast their past as a useful periphery with their present as a bypassed fringe. Isolated and virtually uninhabited because of climate, Antarctica is another fringe. A continent of five million square miles, it is as large as the United States (including Alaska) and Central America, and it has valuable minerals. An international treaty signed finally in 1991 banned mineral extraction for fifty years and provided some environmental safeguards. The treaty represented a compromise between nations that wanted an indefinite ban and the United States, but conflicting territorial claims remain. Both Argentina and Chile claim large tracts not recognized by the United States and most of its allies. Such claims would not be tolerated in the Arctic, which is an American-Canadian dominion established to detect foreign missile attacks. Unlike peripheries, fringes have no value or strategic importance even as buffers between rival powers. With the passing of the cold war, American involvement in such areas is considered to be too costly. And the involvement entails risks, possibly from rivals and competitors but now most likely from the collapse of order and anarchy within. As a geopolitical and geoeconomic strategy, fringes reduce costs and risks in areas where benefits are minimal, or reduce what geopolitical analysts often call "imperial overstretch." As economic competitiveness increases among the developed and developing countries and as the gap increases between the developing and underdeveloped countries, fringes will become more evident in the future. It is likely be a bleak future, brought about in part by the deliberate and self-interested policies of countries that might otherwise have made a difference. FRINGE DEVELOPMENT For most of the less developed countries since World War II, commerce with the developed countries has resulted in unequal development: indeed from the standpoint of self-sufficiency, antidevelopment. Taking advantage of Western (especially American) markets, some became developing countries and prospered. Others remained underdeveloped countries and failed. Most developing countries escape underdevelopment by producing and exporting products to the United States and other consumer-driven and importoriented economies. Led by Japan, they took advantage of that unique period beginning in the 1950s when, as part of its cold-war policy, American dollars fueled a world economy, American trade deficits created a worldwide industrial complex, and few countries were competing in international markets. Other developing countries relied on oil production and their ability in the 1970s to bargain collectively with the oil-dependent developed countries. Export opportunities now are fewer. The eventual spread of industrialization and oversupply of most commodities drive down prices and profits. American dollars are spread further among the developing and less-developed economies. With the cold war over, the United States no longer feels obligated to incur

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trade deficits and to build the economies of the less-developed countries to resist communism. And the United States and most other developed countries tend to limit their markets to their own regions. Except for the limited tariff reductions of the 1993 GATTAVTO agreement, outsiders to regions lack access to the markets with the regions. Lester Thurow warns, "As the world breaks up into quasi trading blocks, all of the developing world is going to face a common problem of market access."23 An alternative to exporting is some form of import substitution. The most extreme form is "autonomous development." Rather than rely upon developed countries to provide needed goods and services, many less-developed countries attempt to provide their own goods and services and to provide their own capital. Outside assistance is accepted only on the basis of no strings attached and only if it does not retard the development of "infant industries." It is what Daniel Chirot once called "closed development."24 During the cold war, it was attempted by some of the nonaligned countries, who were suspicious of both the free and communist worlds and of outsiders in general. It was also attempted, with some success, by China after breaking from the Soviet Union in 1960. Largely Utopian in its assumptions about political as well as economic power, it mostly results in failure, as Aldous Huxley dramatized in his doomed utopia, Island. A modification is "linkage development." Import substitution begins with industries that supply multinational corporations located in the country. Lessdeveloped governments require multinationals to buy goods and services produced locally and to include domestic personnel and corporate partners in their enterprises. However, few of these schemes produce viable domestic industries. Lester Thurow overstates the case only slightly: "Import substitution did not work out anywhere it was tried."25 He mentions that local industries cannot compete with international suppliers. Other factors also are involved. Operating under their own currencies, which are undervalued and subject to inflation, local industries cannot overcome disadvantageous exchange rates. Nor can they service the debt to supply multinationals. A third and more workable form of import substitution is "vertical development," which evolves through sustained negotiations between the less developed governments and the developed countries and their multinational corporations. Once the provider of only raw materials, less-developed countries gradually undertake value-added operations on their materials, as they become more knowledgeable about production and more involved in management and ownership. Also, multinationals often find it more profitable to undertake value-added activities at the source point, whether it be growing grains and foods, harvesting lumber, or extracting minerals. McCormick and Company, the leading American spice manufacturer, prefers to call it "global sourcing." McCormick not only buys from local growers, but relies upon them to clean and process spices.26 Most multinationals now rely more upon domestic providers or joint partnerships negotiated with the government.

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Another more recent reason for global sourcing is that the sources develop their own domestic markets. Multinationals once located to take advantage of natural resources and labor; they now sell their products to local markets. Vertical development in a less developed country requires an import substitution strategy that is dynamic and long term. While indigenous production may have to depend in the short term on foreign-supplied capital and outsourcing of foreign-located industries, the long-term goals are self-generation of capital and self-sufficient development. Significant capital must be locally or regionally generated to avoid onerous debt service and capital flight. This requires the transformation of industries from dependence upon foreign capitalists and manufacturers to independence in value-added production of consumer-finished products. As industries become capable of producing finished products, domestic income will increase, generating local consumption and savings for investment. The result is the self-sufficiency to build and operate supply-linked industries, to cultivate a capable work force and managerial ability, to accumulate domestically owned or controlled capital, and to create domestic demand and markets. Not an overnight occurrence, vertical development requires sustained activity over ten to twenty years or more. Cultivation of indigenous technical and professional expertise usually takes two generations, as the new nations of the world have realized. The accumulation of both human and financial capital is incremental at best. Because self-sufficient industries, capital, and markets are slow in developing, the shift away from dependence upon the developed economies and the global economy they control must be both gradual and sustained. It involves shifting from supplying global demand to domestic demand, from developing export industries to import substitution industries, from developing concentrated industries to diversified industries, from growing cash crops to domestically consumed food, and from relying upon foreign manufacturers to domestic manufacturers to produce finished goods. Successful import substitution recognizes the pitfalls along the way from short-term to long-term development, from economic dependence to self-sufficiency. It recognizes that the benefits of attracting capital from the developed countries have been oversold. Attracted to a particular resource or product, such capital can make the less-developed economies single-industry concentrated, export-oriented, and dependent upon foreign demand and markets. The economy is made vulnerable by the neglect of developing supply capacity for local demand and by the dislocation of the population in response to the opportunities of export industries. Well-intended import substitution strategies by foreign firms only have accentuated dependence on both foreign production and demand. Successful import substitution resists the temptation to attract foreign capital through complete liberalization of investment and trade policies. While more capital will be obtained in the short term, it will be foreign controlled, including the profits. Over the long term, the less-developed economies experience

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only the trickle-down or backwash benefits of development. Whether intended or not, quasi-colonial control is reinstated by the developed countries over the less-developed countries, the North over the South, and virtually the same first world over the same third world of the cold war era. Vertical development recognizes that domestic self-sufficiency begins with regional self-sufficiency. A regional economy stands a better chance of negotiating more favorable trade, currency, and investment terms with developed countries. Economies joined together, even underdeveloped economies, are better able to support their local currencies and generate their own capital and trade. The overall goal is to develop a self-sufficient economy that provides for the needs of its population. More than Keynesian, the tasks are Herculean.

9

The Next Cold War? The worry is that (free trade) agreements can easily lead to the dreaded protectionist trading blocs —defensive pacts that set up barriers around regions and prevent the flow of goods from one region to another. — "Blocking Trade?" Wall Street Journal, September 21, 1990

LIMITS OF WTO Free traders breathed a sigh of relief when the Uruguay round of the General Agreement on Tariffs and Trade (GATT) was concluded December 15, 1993. With bipartisan congressional support, American ratification occurred in November 1994 and propelled GATT into 1995 as the World Trade Organization (WTO). Starting with the Geneva round in 1947, GATTAVTO was the eighth and most lengthy round of negotiations, beginning in 1986. It went far beyond the tariffs on manufactured goods which preoccupied the previous seven agreements. The 1993 agreement included within its purview agriculture, services, intellectual property, and trade-related investment. And it addressed not only tariffs but subsidies, antidumping duties, proprietary losses, and other trade barriers. The agreement was heralded as a breakthrough in world cooperation and peace. President Bill Clinton stated that it "writes new rules of the road for world trade well into the next century." 1 Donald Sutherland, then director general of GATT, predicted that the results of the agreement will mean more trade, more investment, more jobs, and larger income growth for all. Economic operators across the globe will benefit; producers and consumers, investors

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and traders everywhere will gain. . . . Today the world has chosen openness and cooperation instead of uncertainty and conflict. I am convinced that today will be seen as a defining moment in modern economic and political history.2 Some economists predict that WTO will expand global output by $6 trillion over the next ten years, including $1 trillion by the United States. The gross domestic product for the world was $22.3 trillion in 1990; for the United States, $5.4 trillion. By the end often years when the provisions become fully effective, the agreement presumably will add about 2 percent to the world and American products.3 Negotiations were precarious through most of the eight years. They were abandoned in 1990, resumed in 1991, and almost abandoned again in 1993. Negotiators pressed on, their efforts likened to the act of riding a bicycle that must be pedaled forward to avoid crashing to the ground. The United States Congress decreed that an agreement must be reached by December 15, 1993, and the world dutifully responded. Like the GATT negotiation, WTO implementation will be another precarious bicycle ride. Currently, 124 cyclists, each with a set direction, must coordinate their maneuvers without stopping. Given its limits, WTO may fall by the wayside. The first limit is the lack of WTO membership. About one-third of the nations of the world are not participants. Excluded are the former communist countries, East European countries as well as former Soviet republics. Still excluded in 1994 was China, the world's most populated country and fastest growing major economy. Some are likely to join in the future, but some of the current members may withdraw, which WTO allows within a six-month period. Less-developed countries (Brazil, Egypt, India, Pakistan, among others) complained about the agreement. One issue was the protection given to agriculture in France, but not to agriculture of other nations. None of the latter were involved in the dramatic eleventh hour negotiations to conclude the 1993 agreement. They watched while the United States and European Union (EU) haggled over the terms that all would have to accept. India, the most populated signatory, was allowed to quibble about textiles, and that was it. The less developed countries had to take it or leave it. Some may decide eventually to leave it. Without doubt, WTO will increase trade among the developed and developing countries, which has been growing at the expense of the underdeveloped countries. WTO will continue to accentuate the differences between the developed and developing countries who can compete in world trade and the lessdeveloped countries who cannot. By cutting agricultural subsidies for American and European producers, WTO will drive up the price of food staples imported by most underdeveloped consumers, yet more competition among underdeveloped producers will drive down prices for cash crops such as coffee,

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cocoa, and sugar. The Organization for Economic Cooperation and Development estimates that WTO will cause Africa to suffer trade losses of $2.6 billion during the first ten years. WTO will worsen the economic marginalizing and unequal development of the less-developed —especially the underdeveloped — countries. Other limits are the tentativeness and incompleteness of WTO rules. Negotiators failed to reach agreement regarding the commercial aircraft industry, maritime industry, financial services, or movie and television production. This unfinished business calls for a second WTO agreement. But no future U.S. Congress is likely to approve an agreement on the fast-track, no-amendment basis that allowed passage of the present WTO. For the foreseeable future, American agreements will be limited to bilateral, specific provisions with specific countries that preclude an additional WTO round. Another limit is the partial reduction of tariffs. WTO eliminates tariffs only for pharmaceuticals, construction equipment, medical equipment, paper, and steel. The controversial reduction of American tariffs on textiles is only 25 percent. Worldwide tariffs are reduced an average of only 38 percent, leaving tariffs 62 percent effective. Furthermore, government subsidies are mostly unaffected. For example, subsidized agricultural exports will be reduced only 21 percent. Subsidies are allowed for 50 percent of the cost of applied research and 75 percent of the cost of basic research. Finally, WTO administration is limited. An enforcement agency was proposed in the first GATT round as the International Trade Organization. The United States Congress, intent upon enforcing its own trade terms and "most favored nation" policies, struck down the agency. The United States consented to WTO in the 1993 agreement, which, unlike past GATT panels, will make rulings that cannot be vetoed with impunity by other countries. Despite the more empowered WTO panels, the United States will maintain its authority to retaliate as provided by key provisions of American trade laws, especially the Trade Act of 1974. Section 201 of the act still permits the United States to restrict expanding foreign imports that are found to injure domestic workers or industries, and Section 301 (known as "Super 301" after Congress allowed 100 percent punitive tariffs in 1988) still permits retaliation against foreign governments deemed to engage in dumping or other acts of unfair trade. "Most favored nation" status, denial of which is retaliatory since it is given to virtually every country including Libya and Iran, still is permitted. Considering WTO to be an infringement upon U.S. sovereignty, Congress is attempting to strengthen Super 301 and antidumping laws, and about forty other nations are rewriting their own laws against foreign, primarily American, competition. WTO lacks enforcement power because the developed countries do not want strong, universal enforcement. The issue determined the selection as the first WTO director-general of Renato Ruggiero, who upon receiving U.S. backing appointed an appellate body to review WTO arbitration decisions. The

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developed countries have violated GATT in the past and no doubt will violate WTO in the future. In 1992 the United States raised import duties on white wine, rapeseed oil, and wheat gluten from the EU, which was accused of subsidizing its oilseed exports. The American action violated GATT Article 24, which forbids the raising of tariffs and other trade restrictions on manufactured products. Both Japan and EU publish annual reports of American trade violations and barriers. The 1994 EU Report on U.S. Barriers to Trade and Investment was especially critical of Super 301. A survey conducted by the Financial Times found that international business leaders consider the United States to be the world's most unfair trading country behind only Japan and Korea.4 Always mindful that its economy nurtured the growth of most other economies during the years immediately following World War II, the United States displays an exceptionalist attitude toward world trade. Like other administrations, Bill Clinton's continues to negotiate trade terms bilaterally and separately—with the EU and Japanese, Latin American countries regarding NAFTA, most favored nations, and other countries who behave in objectionable ways. It threatens trade wars with Japan and China. It maintains its own "priority watch list" and threatens various nations with Super 301 retaliation. The EU displays a similar disregard for WTO rules, by negotiating preferential trade terms with the United States and with its "associate members." The regional tendency to impose preferential and advantageous trade terms runs counter to both the rules and the spirit of WTO, which is to establish universal trade terms of no apparent advantage to the more powerful and developed countries. When the United States and EU cut trade deals on the side with other nations, no more can be expected of countries that are less developed and under far greater pressure to make preferential trade deals. In practice, WTO ceases to exist. As the dominant economic power in the nineteenth century, Great Britain more or less dictated terms of trade with the rest of the world. The United States did it during most of the twentieth century. An Asian region may do it in the twenty-first century. WTO must overcome the historic craving for trade hegemony.

GOING OF G-7 By 1990, the Wall Street Journal was warning that the emerging giant trading blocs could disrupt world trade.5 For international businesses and traders, it was prompted by the hoary issue of protectionism advanced from a national to a regional level. It reflected growing anxiety about the formation of separate regions led by the United States and Europe. Each was regionalizing in its own way—the United States through the North American Free Trade Agreement, Europe through the European Union, and other countries through

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various trade and currency blocs and assorted regions. Each was ambivalent about the other, regarding it as both a trading partner and a trading rival. The Non-Aligned Movement of less-developed nations sounded a similar warning in 1995. The group of 113 nations defined its post-cold-war mission as gaining access to the economies of NAFTA and EU. A movement spokesman warned, "A dangerous neoprotectionist tendency is spreading over the world like a shadow." 6 Most economists prefer to believe that economic regions are building up an integrated world economy and administrative system: As nations are the foundations for regions, regions are the walls for the edifice of world economy. As free traders and investors, they prefer to ignore how regions are being formed to pursue their narrow national/ethnocentric interests and to compete with one another for advantages in the international markets. Conventional wisdom holds that the Group of Seven (the United States, Canada, Britain, France, Germany, Italy, Japan, known as G-7) will run the world until the regions build up a world economy and international institutions are better able to do the job. After all, the leading capitalist and democratic nations of G-7 won the cold-war. G-7 certainly can look after the postcold-war peace until the United Nations and other institutions work better. G-7 was formed in 1975 following the abandoning of the gold standard and the raising of petroleum prices by the Organization of Petroleum Exporting Countries. It began as an informal occasion for government leaders to discuss mutual problems. The operations of the International Monetary Fund and the negotiations of the General Agreement on Tariffs and Trade became routine topics at annual meetings. But not much was accomplished, and by the 1980s not much was expected. Most annual summit meetings were little more than media events to reassure the world that the leading industrial nations were united and capable of managing the free-world economy. Enroute to the 1983 meeting, President Reagan set aside his briefing books to watch the movie The Sound of Music.7 Attending his first meeting in 1993, President Clinton turned to an adviser and asked, "This is it?" 8 Kenichi Ohmae rebuked the meeting as "the vampire summit" and called for a stake to be driven into the heart of G-7. 9 More recently, W T O head Peter Sutherland stated that G-7 was too self-interested to lead the rest of the developing and underdeveloped world. 10 In the post-cold-war era, G-7 is coping with problems well beyond its ability to coordinate economic policy. Financing the Persian Gulf War, controlling the Balkans war, or delivering aid and development assistance to Russia —these make up the post-cold-war agenda of G-7. Such problems once were solved bilaterally by the United States and the Soviet Union; even the matter of German unification was restricted to the two superpowers. As an institution for worldwide problem solving, G-7 is stumbling badly. While able to agree on aid to Russia and stave off trade retaliation between

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the United States and Japan, the 1993 meeting was unable to solve the Balkans war and other problems. Even less productive, the 1994 meeting failed to strengthen the exchange value of the dollar, or to adopt Clinton's new trade initiative called "Open Markets 2000," or to provide more than $200 million for closing down the Chernobyl nuclear plant, which cost $1.5 billion. The G-7 superpowers are failing to hold themselves together, much less the world. Its three factions (Europe, North America, Japan) are competing and arguing among themselves. To reduce its trade deficits, the United States is threatening Japan with trade sanctions. During his first direct meeting with Japanese officials, President Clinton violated all protocol—and simple politeness—by criticizing the Japanese at the concluding news conference. The Japanese Ministry of International Trade and Industry listed the United States in 1993 (also in 1992) as the worst offender in terms of unfair trade practices among the major trading nations. When Morihiro Hosokawa, the newly elected prime minister, asked G-7 to help stabilize the rising value of the yen, he was ignored.11 While more divisive, G-7 is more diffusive at the same time. By 1994, to confer about the volatility of international financial markets, G-7 became known as G-10, although with the addition of Belgium, Netherlands, Sweden, and Switzerland it was actually G-ll. At the 1994 summit meeting, Russia participated, but only partially, said regular members, which made it G-7i G-7 cannot begin to affect the transition of world orders, as discussed in Chapter 2. It is a convenient forum for the developed countries to coordinate their policies and actions vis-a-vis the rest of the world. It is gradually breaking down; less and less is accomplished; annual meetings become more ritualistic. World order may break down in the process. COMING OF SUPERREGIONS If the trilateral powers drift further apart in the 1990s, interregional conflict probably will increase. As the twentieth century began with the confrontations of colonial empires, the twenty-first could begin with confrontations of economic regions. As these confrontations occur, interregional alliances could form and the world could experience the rise of superregions. Superregions already are forming. An expanded NAFTA would include the more industrially advanced economies in the Western Hemisphere—particularly Argentina, Brazil, Chile, Colombia, and Venezuela. Already faced with rival economic regions in Latin America, both the Bush and Clinton administrations expressed interest in a super or hemispheric NAFTA. At the "Summit of the Americas" held in late 1994, the Clinton administration announced its intention to extend NAFTA over both Central and South America. Back at the old continent, the EU began 1995 by adding Austria, Finland, and Sweden, increasing its membership to fifteen nations and population to 370 million people. Iceland and Norway may soon follow. Full membership is

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scheduled in 1999 for its associate members of Bulgaria, Czech Republic, Hungary, and Poland, Romania, and Slovakia. By extending into Scandinavia and Central Europe, the EU approaches superregion status. The American and EU regions might merge into one superregion, an American-European Union (AmEU) superregion. According to Secretary of State Warren Christopher in June 1995, such a merger represents "common destiny."12 Close American-European cooperation was indicated by the 1993 GATTAVTO negotiations, also by coordinating currency rates, consolidating investment, and permitting bids on government contracts. The substance of their cooperation indicates the coming of an AmEU superregion, with the form to follow. It would dominate world markets and dictate exchange rates, prices, and commerce throughout the world. The Pacific and east Asian nations have formed an inchoate superregion called Asia-Pacific Economic Cooperation (APEC). In addition to Australia and New Zealand, China, Japan, Brunei, Hong Kong, Indonesia, Malaysia, Philippines, Singapore, Taiwan, South Korea, and Taiwan, the group includes the United States, Canada, and Mexico, and probably Chile in the future. Tensions were evident when EU representation was disallowed at the 1993 APEC meeting in Seattle; unwittingly rubbing salt in wounded European pride, Secretary of State Christopher stated, "No region is more important to the United States and its future than is Asia."13 This testimonial accords with the findings of a World Bank report published in 1993, The East Asian Miracle; the leading eight Asian countries (Hong Kong, Indonesia, Japan, Malaysia, Singapore, South Korea, Taiwan, and Thailand) displayed during 1965-90 an annual economic growth rate of 5.5 percent, excluding China, which in recent years had a growth rate exceeding 10 percent.14 With a population several times that of NAFTA or the EU, the east and southeast Asian countries alone will outproduce the West. Gus Hooke predicts that by 2050 Asia (excluding Japan) will account for 57 percent of the world's economy, while the United States, Japan, and most of Europe will account for only 12 percent (in 1990 the relationship was only 9 percent of the East and 74 percent for the West).15 If APEC joined with NAFTA, as proposed by Australia, such a supersuperregion would combine the economies of two billion people and account for half of the world's economic production and 40 percent of its exports. How would an AmEU superregion play with APEC members, particularly in Tokyo or Beijing, or in Moscow? Asian economic powers would have to react, probably within the existing APEC framework. They may have to react even to an enlarged NAFTA and EU. As mentioned earlier, their reaction would conform to John Galbraith's theory of "countervailing power." Deriving from Isaac Newton's third law of motion, the theory assumes every action generates an opposite and equal reaction. Their opposite reaction would be to oppose any AmEU gains in their own markets and holdings; their equal reaction would be to organize as much economic clout as AmEU possessed. Given

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AmEU, an Asian superregion is not just a fanciful possibility but a strategic necessity. 16 Assimilation between West and East is not likely. Americans and Europeans distrust Japan's intentions as an economic conqueror. Especially after the 1993 and 1995 elections, they distrust Russia regarding its use of the Commonwealth of Independent States to restore a Soviet empire, foreign marketing of arms, and intentions to develop capitalism and pay back loans. Americans and Europeans also distrust Chinese politics and intentions in south Asia, particularly Cambodia and Tibet, and marketing of arms to Islamic states. They distrust both Russia and China because of their communist legacies. Japan especially bothers Americans and Europeans. It is the powerful but misfit yellow sheep of the G-7 family—for many reasons, including cultural nuances and old-fashioned racism. But the main reason is its political economy. The Liberal Democratic party continues to be the largest party, and the emperor remains, although largely ceremonial. It is a self-described oligarchic "triangle" of politicians, bureaucrats, and businesses. Chalmers Johnson points out that the Japanese economy is not really a free-market, capitalist economy. Government ministries plan and regulate; the supply of money and credit is highly restricted; imports/exports are determined; the monopolistic structure of keiretsu consists of interlocking corporate ownership with banks and investment houses as principals. As a "capitalist developmental state," it is midway between a market economy and a command economy. 17 Both American-Japanese and American-Chinese trade relations are strained by the constant threat of a trade war. A big reason is the huge American trade good deficits —in 1994 $65.7 billion with Japan and $29.5 billion with China, which accounts for 57 percent of the total American deficit. American-Japanese trade relations almost broke down in 1993 and in 1994, primarily over closed Japanese government contracting and the overall lack of accessibility of Japanese private markets. A trade war was barely averted in 1995 over autos. An American-Chinese trade war loomed in early 1995 over Chinese reproduction of American computer equipment and its pirating of other "intellectual property rights." Relations had been strained about the earlier American reluctance to grant "most favored trade" status and its opposition to Chinese W T O membership. At the Pacific Rim summit meeting at the end of 1994, the Chinese openly complained about American meddling in Asian political affairs and linked it to a history of Western imperialism. Shortly before the meeting, Chinese president Jiang Zemin said: "It is time to meet the challenges posed by the West, which has always had things its own way." He added: "World peace can best be maintained if the United States has a strong sparring partner." 18 Japan and China represent the new "Asian mode of commerce." Its most distinguishing feature is an autocratic government that controls and protects their domestic economies and that leads trading and investment initiatives against the American and European economies. The Asian mode has brought

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about the "Asian miracle" recognized by the World Bank. It also has brought on the Asian menace recognized by the West. With Japan in mind, the philosophical Robert Gilpin asks, "Can a liberal international economy long survive if it is not composed primarily of liberal societies as defined in the West, that is, societies with an emphasis on the price system markets open to all, and limited interventionism on the part of the state?" He answers, "The advent of industrial policy, new modes of state interventionism, and the existence of domestic institutions that act in themselves as nontariff barriers have become formidable challenges to the liberal international economic order." 19 In return, the Japanese, Chinese, and many other Asians share a growing resentment of American demands about domestic policies, which reminds them of Western imperialist interventions of the past. The Japanese rejected the American insistence upon guaranteed share percentages of domestic markets, upon tax cuts and other antirecessionary economic policies, and upon changes in government purchasing policies. The Chinese flouted American threats to withdraw most-favored-nation status because of domestic political policies and risked a trade war in 1996. Ignoring President Clinton's appeal for leniency, authorities severely flogged a young American in Singapore. When the British press wrote about corruption in its government, Malaysia promptly barred all British companies from received government contracts. Malaysia boycotted the 1993 APEC meeting in Seattle to protest American influence. Asian countries banded together just before the signing of the W T O agreement in April 1994 and forced the United States to postpone its linking of employment issues to W T O . Asian countries take pride in their economic success, which they believe will overtake that of Western economies. William Bodde, director of APEC, boasts that the twenty-first century will be an Asian century. They speak of an "Asian Renaissance." They also speak to each other of "Look East," an economic slogan which encourages Asians to support Asians and become independent of American or European influence. 20 The joining of Japan and China with Russia (CJR) would be a powerful combination of north Asian powers. The CJR figures to have greater overall economic production than does the AmEU, and affinities among the three are pronounced. China has the mass labor (that, unlike India, is self-sufficient); Japan has the capital and technology; Russia has the raw materials and technology. A Chinese-Russian combination is likely, as demonstrated in the 1950s, in the union not just of communist states but of Asia's two great land powers. China purchased Su-27 fighters from Russia in 1993. They share a communist legacy that endures today, and they now have a nonagression pact and freetrade talks. Despite World War II, Japan and China share a geographic and historic proximity of imperial intervention from Europeans and Americans, and Japan is the largest provider of Chinese aid and the largest trader and investor in China. Japan and Russia share the north Pacific, and each has what the other desperately needs: Japan has capital; Russia has raw materials. Japa-

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nese-initiated trade and investment in China and Russia already are increasing their economic interdependence. The world may have to endure another all-too-familiar bilateral confrontation between two global powers. As a result of economic threats, other nations and regions again may have to choose sides. Economic choices will be made regarding trade, investment, and currency rates. Political choices will accompany them —the regions, the alliances and pacts, and the power plays in the forums and assemblies of international bodies. The competition will engulf the less-developed countries; indeed, there it may be most intense, as the developed countries and their superregions yield carrots and wield sticks. It will extend to the now neglected fringes and underdeveloped countries—the poor and overpopulated countries and areas, where politics are most instable and human rights most jeopardized. What will be extended is not just commerce, but military arms and aid, which have not abated even during these relatively agreeable years of the early post-cold-war era. NEXT COLD WAR

Whereas the former cold war began as a battle between political systems over ideologies, the next cold war probably will begin as a battle between economic systems over markets. The cold war of the twenty-first century will begin as economic battles occur over markets as battlegrounds. Politics will soon enter in, as heads of state blame each other for economic troubles at home. Differences eventually will be reified in the form of hostile ideologies. The racial, ethnic, and cultural proclivities of the past will encourage the new cold-war politics and ideology and in turn be furthered by the rhetoric. Given its limits and the growing split between Western and Asian modes of commerce, WTO will be hard pressed to maintain trade disputes and worldwide participation. Allegations of dumping, illegal subsidies, and other unfair practices will begin over specific products, then entire industries. Aggrieved participants will renounce not only WTO rules and procedures but WTO itself, most likely in concert with other nations in the same region. As actions provoke reactions and reactions provoke counteractions, WTO will break down. The carefully woven fabric of a worldwide WTO (already excluding one-third of the nations) could unravel into a patchwork of contending nations, regions, and superregions, each claiming to uphold free and fair trade. Similarly, investment restrictions will begin with limits on foreign investment in domestic economies, on direct investment that is industry or product specific, and with simultaneous limits on domestic direct investment in foreign economies. The restrictions will widen to include limits on loans by national banks. Creditor nations will most likely initiate the restrictions. Unhappy about foreign trade sanctions, Japan could retaliate by withholding its indirect investment of other countries' government bonds and securities. In fact, Japan

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threatened to withhold purchase of American bonds in the past over such a relatively trivial issue as obtaining "primary dealerships" for two of its investment houses (to allow their purchase of American bonds directly from the Federal Reserve Bank in New York); yet another time in response to an American tariff hike. The mere threat momentarily drove up bond rates and affected every securities market. If the Japanese threat to withdraw investment were made good in the future, Americans would retaliate. American consumers already are being asked to boycott foreign-made goods and to restrict their purchases to products stamped "Made in USA," and even in the WTO era Congress continues to attach "buy American" provisions to legislation. A major trade incident would galvanize American consumers and further provoke Congress. As a demonstration of patriotism and dedication to the national interest, American banks, investment houses, and corporations would volunteer to restrict their investments abroad. As the cold war has ended, the corp war already has begun, as multinational corporations struggle for supremacy in the industries of aerospace, maritime, autos and trucks, computer chips and semiconductors, bio-tech and medical products, communications, unfinished metals, and innumerable other products being supplied and demanded in world markets. Increasingly, multinationals turn to their home nations for patent recognition, market protection, subsidies, research and development, and especially advantages in the economies of other nations that make up regions and superregions. The commercial war among multinationals inevitably becomes a legal-political war among nations and regions. As the commercial war intensifies with Japan, the most immediate but not the exclusive American adversary, the United States will seek allies to win the war. It already has enlisted Canada and Mexico through NAFTA and has initiated discussions with other potential allies in Latin America. It continues to compete in the Philippines, North Korea, and the Pacific Rim. As this war intensifies and as Japan moves closer to China and/or Russia to form a superregion, the United States will enlist the economic clout of its traditional EU allies. Why Europe? First, despite the attention paid to Japanese investments in the United States, EU investments are much greater, accounting for 59 percent of the direct foreign investment compared to 26 percent by Asians; Europeans also invested more funds in R&D, in 1991 amounting to $7.7 billion compared to $1.5 billion by Asians.21 Second, unlike the Japanese and Chinese who accounted for most of the record U.S. trade deficit of $120 billion in 1995, the EU and U.S. trade is even. In addition, race, ethnicity, language, custom, religion, culture —the aspects of common civilization —matter. Most being the children of Europeans, Americans fought the great wars of the twentieth century to protect Europeans —more precisely to preserve democratic industrial civilization in Europe and to protect it from fascist and communist barbarism. Progressive Americans and Europeans shared democratic industrial

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civilization, which during the nineteenth century was evolving out of monarchical Christian civilization, and they succeeded in preserving it in the twentieth century. This heritage continues to bind Americans and Europeans. ' If nations chain-react to one another, they will identify allies and enemies, a process already under way. Allies will close ranks and consolidate their economic regions. The war will not necessarily be total; few wars are. Negotiations will be ongoing; some truces, perhaps even reconciliations, will be likely. As the truces break down, the hostilities will resume. What will start as a war of economics may evolve ideologically as a war of civilizations. This is an old and largely disregarded notion introduced in the 1930s by Arnold Toynbee. Samuel P. Huntington has revived the idea: "The principal conflicts in global politics will occur between nations and groups of different civilizations." 22 This will occur because civilizations are basic to culture, the world is becoming smaller, social identities are threatened, the power of the West is causing reactions in non-Western nations, cultural differences are less mutable, and "economic regionalism is increasing." Huntington sees a world in which both cultural identities and economic commerce are imploding within regions and civilizations. He further predicts: The importance of regional economic blocs is likely to continue to increase in the future. On the one hand, successful economic regionalism will reinforce civilizationconsciousness. On the other hand, economic regionalism may succeed only when it is rooted in a common civilization.23 Following Toynbee, Huntington identifies eight civilizations—Western, Confucian, Japanese, Islamic, Hindu, Slavic Orthodox, and possibly African. Commerce is expanding not so much among the civilizations as within them. Western civilization obviously links NAFTA and EU. The rejuvenated China and Confucian culture brings together Hong Kong, Taiwan, Singapore, and other communities of the Chinese diaspora. Islamic culture and religion unite Arab and non-Arab countries in the Economic Cooperation Organization. The Andean Pact, Caribbean Community and Common Market, Central American C o m m o n Market, and Mercosur also share a culture and distinct civilization. 24 Huntington argues that his civilizational paradigm best explains the conflicts of the post-cold-war world and relegates economic paradigms to his own. 25 For the future, this is arguable. Increasing international commerce is weakening cultural identities and reshaping civilizational contours as nations realign through economic interdependencies and as powerful economic classes emerge with their own international identities and affinities. Already and clearly, there is a universal economic structure of international corporations, organizations, and classes, and it is more unified than any cultural or civilizational structure. Huntington predicts a civilizational confrontation between "the West and

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the Rest," particularly "the Confucian-Islamic states" that are uniting with other "orthodox countries" and possibly Russia: Differences between civilizations are real and important; civilization-consciousness is increasing; conflict between civilizations will supplant ideological and other forms of conflict as the dominant global form of conflict; . . . a central focus of conflict for the immediate future will be between the West and several Islamic-Confucian states.26 Similarly, Joel Kotkin analyzes racial/ethnic identities, or what he calls "global tribes." These identities always have promoted economic solidarity among the Japanese, Chinese, Jews, British, or Indians. 27 In a narrower vein, Mark Juergensmeyer surveys the apparent increase of "religious nationalism" as a reaction to the secular nationalism of Western civilization. It is apparent among Muslims in the Middle East, Hindus and Sikhs in south Asia, and religious movements in Sri Lanka, Mongolia, and other countries. 28 As economic alliances form into regions and superregions and as the lines sharpen among adversaries, the psychology and politics of the war will sharpen into ideological differences. The psychology will take the form of "them vs. us," such as the American vilifying of Japan which includes racial and cultural stereotypes, a process already established as Japan bashing. Every national emotion has its opposite: Pride will include insecurity; boldness, fear; solidarity, suspicion. From the psychology and identity of "us" will arise an ideology that extols the American way of life and democratic industrial civilization and that vilifies "them," those countries and cultures that represent the non-American way, the anti-American way. The confrontations will be head to head between the principals, as Lester Thurow already describes. 29 But the point missed by Thurow is that most wars begin in peripheries, in the less-developed areas and countries. Just as the early twentieth-century empires clashed over colonies and peripheries such as the Balkans, the regions and superregions of the twenty-first century will clash over access to the raw materials and supplies provided by the less-developed economies and regions, particularly those that are not within an imperial or regional domain and therefore appear ripe for the picking. As empires competed for less-developed countries at the start of the twentieth century, superregions may be competing for less-developed markets at the start of the twenty-first century. Nationalism will be called forth, probably multinationalism that extols regionalism. The ease with which friends and enemies can be created is illustrated by the films made during World War II of the heroic Soviet armies led by wise "Uncle Joe" Stalin and fighting to save the Russian motherland before Moscow, Stalingrad, and Leningrad. The image of the Soviet military and Stalin was very different after the Berlin blockade just five years later. As always, race will matter. White versus yellow will polarize a world already

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divided by economic conflict and trade blocs. Race matters, especially to the proud Japanese and to people who historically have considered themselves to be the guardians of their race and civilization and who are inclined to believe that Americans would never have dropped atomic bombs on white Europe. Race, tradition, and the feeling of Asian solidarity will be pulling at the Japanese to shrug off their Western institutions and to limit their commercial agreements with white Westerners. Under a banner of Asians for Asia, the Japanese and Chinese and possibly the Russians may consummate the superregion of CJR. Immigration is a race-related issue, primarily between the North and South, the developed and underdeveloped countries, and between people of white and nonwhite color. The white developed countries in the North are shutting their doors to the nonwhite immigrants of the less-developed countries in the South. Race, demographics, and economics are interacting in a synergistic way. The global migration of hundreds of millions of people of color and poverty threatens the populations and living standards of the United States, EU, and all developed and homogeneous countries. Since just over half of the world's population still lives in rural areas, migration to urban centers and to developed countries will increase even more in the future. The foreseeable future is not likely to bring universal peace and union. It is more likely to conform to the known history of past international agreements and alliances. Motivated by past wars, well-intended attempts to establish worldwide cooperation are momentary—lasting a few years, perhaps a generation. The cycle of breaking down and building up world order then repeats itself. The very real possibility of economic superregions resurrects the cold war madness from which the world was just released. It is far from ending history and actualizing the Hegelian absolute proclaimed by Francis Fukuyama.30 More disturbingly, it reverses the prospect of progress at the end of the twentieth century. It is a regression that takes the world back to the ignorant and combative world orders structured in 1950, 1920, or 1815. It reactivates H. G. Wells's nightmare fantasies of perpetual warfare among Oceania, Eurasia, and Eastasia in 1984. History may repeat itself, as West versus East, or as the new Orwellian combinations of AmEU versus CJR!

Part III AMERICAN ALTERNATIVES

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Alternatives to Economic War No one at the end of the twentieth century is less prepared (than the United States) for the competition that lies ahead in the twenty-first century. — Lester Thurow Head to Head, 1992

THE PYRRHIC VICTORY No wars are won. Games are won and lost. Wars are survived. Trying to muster American voters in the 1992 presidential campaign, George Bush bragged about winning the cold war, portraying himself as a frontier Davy Crockett who killed the Soviet bear. Most voters were not impressed. The cold-war casualties were primarily economic. The costs of military preparedness alone amounted to several trillion dollars, leaving, as all wars do, huge and disabling national debts. To a large extent, the cold war was a bidding contest of dollars versus rubles. Both bidders paid the price, which for the Soviet empire was economic ruination and collapse. To maintain its informal empire in defense of the free world, the United States was spending $1 trillion per year by the end of the 1980s. The federal debt hit $4 trillion by 1992, and trade deficits continued. All empires or great powers incur great cost. As early as 1852, Benjamin Disraeli complained, "These wretched colonies are millstones around our necks." 1 His complaint was reinforced by the finding of the Committee of Commons in 1865 that British holdings were unprofitable but for one in West Africa and that they should be abandoned. 2 In 1902, John Hobson concluded: "A completely socialist state which kept good books and presented regular bal-

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ance sheets of expenditure and assets would soon discard imperialism; an intelligent laissez faire' democracy which gave duly proportionate weight in its policy to all economic interests alike would do the same."3 And, four years after Hobson's book, the current British prime minister, Joseph Chamberlain, grimly acknowledged: "You cannot go on watching with indifference the disappearance of your principal industries."4 Fifty years later, world empires still were not reading their balance sheets. Only the British were withdrawing under the cover of the commonwealth. The other European colonial empires still were attempting to hold on. The Soviet and American empires were facing off in a contest of world domination. Now almost one hundred years later, the United States is noticing the red figures on the bottom line. The costs, deficits, and debts finally made the political agenda beginning with the presidential campaign of 1992. The deficit reduction act of 1993 was a step, but denial lingers on. The act, which still permits federal deficits in the hundreds of billions during the remainder of the 1990s, required the vice president to vote and break a fifty-fifty deadlock in the Senate. Like the previous administrations, the Clinton administration then attacked the problem by announcing plans to eliminate government waste and bureaucracy, which were grossly ambitious. It had to propose a FY1994-95 federal budget deficit exceeding $200 billion. Most analysts expect annual federal deficits to continue at $200 billion throughout the 1990s, pushing the federal debt up to $6 trillion. As much the result of necessity as of deliberation, the American economy is changing—from an imperial economy to a regional economy and from an economy of world dominance to one of participation. How its regional/participative economy will relate to a world economy is yet unclear. Alternatives visible on the horizon range from the possibility of engaging in an economic cold war to that of joining in a cooperative world economy and community. FREE COMMERCE Contrary to all its talk about free trade in the 1980s, the United States maintained substantial barriers. It first imposed duties in 1805 and adopted protective tariffs in 1816, then slowly lowered them during 1832-65. It raised tariffs again in 1875 and maintained them until the 1930s. The modern era of preferential trade began with the Trade Agreements Act of 1934, which authorized the president to negotiate trade restrictions on a "most favored nation" basis. This became a major cold-war policy: free world allies received most favored nation status; others did not. The United States has portrayed itself as the free world champion of free trade and laissez-faire economics. It emerged in the twentieth century as the world's most powerful economy as a result of very different policies. At the end of World War II, its average tariff was 9 percent. Still in the 1970s, its tariffs were substantial, over 5 percent. For 150 years, the United States protected its

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industries from foreign competition—by encouraging industrial monopolies, driving up consumer prices, and dividing the country between the industrial East, which wanted high tariffs, and the agricultural South and West, which did not. During the eighteenth century and half of the nineteenth, Britain followed the same protectionist policies of industrial development; it adopted free trade only after becoming the "workshop of the world" and dominating world trade. Protective tariffs allowed industrial development of both the British and American economies, as James Fallows points out: America's economic history follows the same pattern. While American industry was developing, the country had no time for laissez faire. After it had grown strong, the United States began preaching laissez faire to the rest of the world—and began to kid itself about its own history, believing its slogans about laissez faire as the secret to its success.5 By the 1980s, as the average tariff was reduced to 4 percent, cheap foreignproduced products were flooding American domestic markets. About half of the products came from foreign-based American firms or their subsidiaries — firms that set up production in the less developed countries and reintroduced brand name products into the domestic economy. American consumers happily bought them. American exports also rose. Most of the growth in manufacturing employment was due to exporting, which increased to the point now that about 15 million jobs are related to exports. Little attention was paid to the nonexporting domestic businesses that went bankrupt, or to the American workers who lost their jobs or suffered wage and benefit reductions. Where the casualties were recognized, the rationale was that foreign competition was a good challenge to toughen American industry and keep down the consumer price index. While consumers benefited from free trade, domestic manufacturing stagnated, and earned income dwindled. Americans found that their savings from lower prices were offset by their reductions in earned incomes. The resulting dynamic was that reduced purchasing power further debilitated domestic production, resulting in further loss of employment and earned income. The recession of 1990-91 resulted partly from this steady loss of domestic worker and business income that accumulated in the 1980s in response to foreign competition. Average weekly wages (in real 1982 dollars) decreased from $298 in 1980 to $256 in 1994, according to the U.S. Bureau of Labor Standards.6 At the start of the 1980s, the number of bankruptcies filed each year was less than 300,000; at the end of 1993, bankruptcies were over 900,000.7 The macroeconomic effect has been a loss of purchasing power to obtain goods and services. Financial institutions were closed in record numbers. Losses were no longer confined to a few marginal industries and blue collar jobs. Entire industries were decimated. Blue chip firms such as IBM

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and Xerox were on the financial chopping block. Professional and white collar jobs were being eliminated. Free trade, which went unquestioned during the 1980s, became a major political issue in the 1992 presidential campaign. The inclusion of Mexico in NAFTA, which was negotiated in 1992 by the Bush administration, was criticized by Bill Clinton and condemned by H. Ross Perot. The negative side of free trade came out: its consequences that the earnings and benefits of most working men and women were under siege by Mexican workers who worked for ten dollars a day with lunch as the only fringe benefit. Mexico was added only after a close vote by the House of Representatives and the negotiation of environmental and employment concerns. T h e rest of the world watched NAFTA apprehensively, especially the Asian countries dependent upon American markets. The weekend after congressional approval of Mexico's inclusion in NAFTA, Clinton met with the leaders of Pacific Asian Economic Cooperation (APEC) in Seattle and assured them that NAFTA was not regional protectionism. His assurance included support for the 1993 GATTAVTO agreement. While pleasing to the developing APEC countries, the 1993 GATTAVTO agreement was not popular among those less developed. Free trade was a mixed blessing—a boom for those able to develop and compete in world markets and a bust for those left behind as the underdeveloped countries. While the original goal of the Bretton Woods agreements was to promote economic development and self-sufficiency, particularly in the less-developed countries, the opposite had occurred. The export-skewed economies of most of the lessdeveloped countries were failing to provide for the needs of their own populations. The import-happy economies of the developed countries were creating deficits and accumulating alarming debt, both for themselves and for the lessdeveloped countries, whose economies were retarded by onerous debt service. American consumers benefited; American producers suffered, except footloose multinational corporations that invested in the less-developed countries to exploit cheap labor and materials. ECONOMIC ALTERNATIVES The international economic and financial institutions planned at Bretton Woods fifty years ago no longer can address the world situation at the beginning of the twenty-first century. The Keynesian ideal of a world economy to benefit both rich and poor nations was abandoned. Instead, a world economy was imposed to fight world communism and instate American-led world hegemony, which lingers on as G-7. The 1990s offer an extraordinary opportunity to redirect attention away from the political/economic power strategies of the cold war and toward the moralistic agenda of Bretton Woods. The international institutions are at hand —the United Nations, International Monetary Fund, World Bank, W T O , and other

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international banks, organizations, and agencies—to coordinate a world economic system. O n the other hand, world order still is in transition, nations are forming divisive economic regions, and economic disparity is increasing between the developed and less-developed countries, with the underdeveloped economies falling below their own income and productive levels of two decades ago. Positive alternatives are needed, to be conceived in the spirit of Bretton Woods and directed at the development problems of the twenty-first century. Such alternatives must be tempered by the realization that the American economy no longer can be the engine that pulls along the world economy; rather it must be part of a multilateral or international engine representative of the world polity. Ten alternatives present themselves. 1. World commerce should be planned and administered from the standpoint of what is good for world commerce, not for the individual advantage of a nation or region or G-7. What is needed is an integrated world economy, not a Kissingerian balance of contending economies. Led by Lester Thurow, Robert Reich, and Thomas Stewart, most economists conceive of free-trade policies and strategies through the use of game and war metaphors; to wit, the United States must win by enhanced worker productivity, increased industrial efficiency, more aggressive investment and saving, and shrewder trade deals. Accepted with little debate are the measures of international "competitiveness" adopted by the Clinton administration, but at a price. Paul Krugman points out that the policy of competitiveness overemphasizes the relatively small impact of foreign commerce on the domestic economy. Yet competitiveness brings about measures that are questionable if not undesirable—measures including downward pressures on worker wages and benefits, environmental deregulation, relaxation of antitrust laws, and tax breaks for investors and lenders. The overall effect is fomenting nationalist/regionalist rivalry to the point of protectionism. 8 The issue is not how the United States can act as a single nation, empire, or region to make economic war most effectively and defeat its rivals. Rather, it is how the United States can exert its economic power and world leadership to further the creation of a global economy. Unavoidably, this requires abandoning exceptionalism and accepting international authority, as exemplified by W T O panels. Only worldwide authority can oversee world commerce not as a game or a war to be won but as a creative and cooperative act envisioned as world community or family. 2. Full employment should be adopted. The Full Employment and Balanced Growth Act of 1978 adopted full employment as a goal, but it lacked necessary funds and programs. Even in the high-tech industries of the 1990s, labor continues to be the most costly means of production, which provides earned income to the working population and purchasing power to fuel the economy. A full employment plan must go beyond the warped notion that

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the American economy can be more competitive only if its workers are more industrious and productive. Workers are not to blame, and the billions of dollars spent each year for worker training and education probably has reached diminishing returns relative to the returns of investment in job creation. Workers only fill jobs; businesses create jobs. A well-balanced employment plan should stress financing employers, not training employees. It should address microlevel issues of financing, marketing, and managing businesses and promoting industrial development. At the macrolevel, policy should go beyond interest rate adjustments and address the issues of disinvestment and loss of purchasing power. 3. Disinvestment should be curtailed, and the American domestic production base should be maintained. While American businesses should be free to expand abroad, they should be penalized for disinvesting and transferring existing operations from the United States to a foreign country. At a minimum, they should pay for retraining, lost tax revenue, and other costs resulting from closing down their plants, costs that are now externalized at the expense of taxpayers. Disinvestment has adverse consequences for businesses that remain in the American economy. American firms that make their products abroad but sell them in American domestic markets should not be given any more advantages than are available to American firms that keep their operations at home. Indeed, the question is whether foreign-based American businesses should be allowed to sell back home at all. The Japanese disallow entry into their domestic markets of most products made by their firms abroad. The United States should consider restricting such products and services that are readily available from its domestic firms. 4. Foreign acquisitions and operations in the United States should be curtailed. Because of trade deficits, American dollars are coming back in the form of foreign purchases of American securities, industries, even natural resources and farmland. In the hands of Europeans, Japanese, and other foreigners, returning dollars are invested often in accordance with a geoeconomic strategy to dominate American markets; in the hands of individuals and firms of less developed countries, the returning dollars represent flight capital. Neither activity should be encouraged. Foreign-based businesses in the United States should pay more income tax, as candidate Bill Clinton proposed in the 1992 presidential elections, and perhaps pay a surtax on excessive profits. They should comply fully and immediately with environmental and labor laws. Where collective bargaining exists, their work forces should be unionized. They should not benefit from business development assistance such as income tax credits, nontaxable industrial revenue bonds, or low interest government loans and loan guarantees. They should be required to purchase materials from American suppliers, perhaps through set-aside formulas similar (but with higher quotas) to those governing the contracting of minority businesses on federally funded projects. Foreign affiliates should be required to list their stock on public exchanges.

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5. The purpose of developmental assistance abroad should be to develop self-sufficient economies. Instead, the U.S. Agency for International Development, International Monetary Fund, and World Bank are restructuring the economies of the less developed nations to be export-oriented in order to pay off international debt. Development policy cannot succeed if its aim is to collect debt; indeed, its austerity measures tend to destroy domestic businesses, exploit labor, degrade currency, reduce consumption, and drive down living standards. By requiring the cultivation of "cash" crops, assistance subverts land reform and disrupts agriculture and other industries by which domestic populations once provided for themselves. Losing their land to export-oriented agribusinesses, workers migrate to cities in search of non-existent jobs. Half of the world population still lives in rural areas, and if land is not returned to local control, hundreds of millions of people will migrate to cities already reduced to shantytowns. 6. Much of the support for multinationals investing and operating in the less developed economies should be withdrawn, to promote American public interests as well as to encourage self-sufficiency in the less developed countries. Billions of tax dollars has been spent or put at risk to support multinational ventures and projects, externalizing costs that should be borne by the multinationals (not taxpayers). Any one of the larger multinationals own more assets than do most countries. They can do their own deals. The financial transactions of multinationals should be taxed at a rate of 0.5 percent, as proposed by James Tobin, winner of the 1981 Nobel Prize for economics. 9 This would discourage international speculation, and the proceeds would finance the operations of United Nations agencies in charge of commercial regulation and international development. 7. Because long term debt results in less (not more) development, lending to less developed countries should be done as a last resort. International developers such as David Korten want to close down the World Bank: Creating indebtedness is not a useful function, and it is time to acknowledge that the World Bank was a bad idea. Closing it is an essential step toward reassuring that as international debts are eliminated, they are not instantly recreated. The same is true for the regional multilateral development banks, which should be closed as well.10 To reduce the effects of debt payment, the Clinton administration should expand the Brady plan, a principal reduction plan applied primarily to Latin debtors by Nicholas F. Brady, Treasury secretary for the Bush administration. Evidence of the plan in action is the restructuring of debt in 1994 for Poland and for Brazil. One mechanism is the Federal Reserve Bank, which could buy up bad foreign loans at a discounted rate of 80 percent or less, which would be feasible if banks were required to write off bad loans. The Fed should then cancel debt certificates, if not totally, then in accordance with a debt loan formula that would allow some opportunity for the country to finance worth-

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while projects. Another mechanism is the issuance of so-called Brady bonds to reduce debt by underwriting debt, as occurred with Brazil. The Federal Reserve system should tighten reserve requirements and loan solvency definitions for American banks. Billions of dollars of foreign loans gone bad after the recession of the 1980s still is being carried as assets. Because of the lowering of the federal discount rate to 3 percent, most American banks are enjoying record profits when they should be writing off their bad loans and stabilizing the American financial system. 8. Abandon policies of a strong dollar. Adopted during the cold war to encourage American imports and American foreign investments and thereby extend American control especially over less-developed countries, strong dollar policies continued in 1995 through higher interest rates by the Federal Reserve Board and dollar purchasing tactics (often at great taxpayer expense) led by the Treasury Department. The strong dollar policies advocated by free investors such as Thomas Stewart are producing record trade deficits and risking recession for the home economy. Because monetary markets have become so vast, market manipulation of the dollar's value is futile. A weaker dollar is a long-term and inevitable market adjustment process to uneven trade. It will discourage imports and reduce the trade deficit. While American foreign investment and disinvestment will be discouraged, foreign investment in the United States also will be discouraged. The outcome will be increased availability of domestic capital and restoration of American control and ownership over its own economy, and it will be reduced economic competitiveness and market rivalries in the world economy. 9. Currency exchange rates should be controlled by international authority to assure adequate capital to all national and regional economies. Variable or floating currency exchange rates do not work as neoclassical economists propose. As less-developed economies falter, their currencies and assets are cheaper, presumably attracting investors and buyers of the developed economies. In reality devalued currencies usually cause buyers to hesitate; what occur first are increased domestic inflation and still lower exchange rates. There is no restoration of a demand-supply equilibrium. Most currencies are at rock bottom; they are worth only what foreigners will buy to conduct domestic business, and indigents routinely convert their funds in foreign currencies. Without the benefit of the experience of the last fifty years, John Maynard Keynes observed that laissez-faire world money markets and exchanges work to exacerbate disparities among nations and hardships within less developed economies. He commented in 1941: It is characteristic of a freely convertible international standard that it throws the main burden of adjustment on the country which is the debtor position on the international balance of payments —that is, on the country which is by hypothesis the weaker and above all the smaller in comparison with the other side of the scales which is the rest of the world.11

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In the spirit of Keynes's original proposals, Paul Davidson has proposed a "unionized monetary system" and an "international money clearing unit" to operate the system. The system initially would uphold a fixed exchange rate on a national or regional basis but eventually would provide a universal currency worldwide. The system would rely on double-entry bookkeeping to keep accounts of payments among debtor and creditor nations and would function to put all monetary reserves to work, to correct trade imbalances, to prevent disinvestment or capital flight to the wealthy nations, and to expand capital movement as global capacity warrants. The clearing units would operate for a world economy much as the American Federal Reserve operates for its regional banks and their multistate regions. 12 It is an idea whose time may be coming. Paul Volcker, former chairman of the Federal Reserve Board, now proposes on behalf of a renewed Bretton Woods Commission an international system that will confine changing currency exchange rates to ranges. The IMF and G-7 already are attempting to control exchange rates, but with limited success. EU plans to adopt a single European currency by 1999. 10. Most research and development should be conducted for commercial, not military, uses. Federal funds should be directed at commercial contractors, not misdirected at military contractors under the ruse of dual use or spin-off benefits. Bereft of R&D funds directed at military applications during the cold war, American manufacturers have been unable to compete with foreign competitors that had the benefit of commercial R&D. Lack of commercial R&D has contributed to trade deficits of more than $100 billion per year. These ten alternatives should not be considered separately. They should be conceived and implemented as part of a national plan and as a national initiative to prepare the United States for the twenty-first century. ECONOMIC AND INDUSTRIAL PLANNING The lesson of the 1990s to be learned is that the exercise of geoeconomic power requires national economic and industrial planning. In the early postwar years, American multinationals relied upon their own strategies and resources to trade, invest, and compete successfully in world commerce. With the industrialized world devastated by World War II, their success was a no-brainer. During the cold war, the American commerce continued unchallenged in most of the less developed countries. What opposition existed usually was political, not economic. American multinationals no longer can muscle or muddle through the international competition and global economy of the 1990s. They face formidable opposition in every industry—in agriculture and low-tech industries such as garments, and in industries requiring high finance and technology such as Europe's Airbus Industries in the manufacture of commercial aircraft or Japan's

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Hitachi in the manufacture of computer chips and semiconductors. Airbus is a consortium owned by the British, French, German, and Spanish governments to challenge American dominance in aircraft manufacturing; beginning in 1986, it took early losses but now competes evenly with Boeing and threatens to drive McDonnell Douglas out of the industry. The Japanese Ministry of International Trade and Industry financed the research and development and coordinated an industrywide effort to take over the computer chip and semiconductor industry which resulted in the ruination of Silicon Valley in the late 1980s. The strength of this opposition derives from fully planned and financed public-private ventures aimed at dominating global industries and markets. The United States met the Japanese semiconductor challenge by federal intervention. Silicon Valley languished in the 1980s because the classic market situation of small firms engaged in pure competition did not work; none of the American firms was large enough to finance research and development, control market supply, and plan for a future outcome. The Japanese government, firms, and banks coordinated their resources and worked together under a single-minded plan. The Ministry of International Trade and Industry designated the semiconductor industry as a very large-scale integration (VLSI) project. The DRAM chip was a product both superior to and cheaper than the chips produced by American companies. American firms tried to work together to build an advanced chip-making facility called U.S. Memories, but they failed. Alarmed that its cybernated weapons technology had to depend upon the Japanese, the U.S. Department of Defense supported Sematech as a chip-making consortium; it invested $100 million each year starting in 1987, matched by $100 million from private firms. The federal effort included negotiation of a Semiconductor Trade Arrangement that permitted American firms to supply 20 percent of the semiconductors bought in Japan. The plan was put in place and resources committed, and by 1992 the goal was achieved.13 The idea of national planning is not new. It has been bandied around since the 1930s and the Roosevelt administration. In fact, in 1920 Herbert Hoover urged the formulation of "a definite national program in the development of our great engineering problems" and later organized the National Bureau of Economic Research and recommended the creation of a National Advisory Council.14 Adolph Berle, John Galbraith, and Rexford Tugwell were among the New Dealers who urged national economic planning, which was attempted by the ill-fated National Recovery Administration and later by the National Resources Planning Board. National planning became associated with communism and Soviet five-year plans in the 1950s and 1960s. It was discussed again in the 1970s and faded again in the 1980s. Yet a good deal of sector-specific planning occurred throughout the cold-war years. Federal housing assistance required planning through Title VII of the Housing Act of 1954. It was followed by required planning in land use, transportation, personnel, economic development, and other sectors. The Housing and Urban Development Act of 1970 required the president to make a biennial report on National Growth and Development in

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the 1970s, and the Full Employment and National Growth Act required the adoption of national employment goals in 1978. The largest sector of federal planning has been defense, which extends to the industrial sectors considered necessary to defense. The development and use of nuclear power required joint military-civilian planning, currently involving the Departments of Defense and Energy. The interstate highway system was planned and initiated in the 1950s as a military project, officially called the National System of Interstate and Defense Highways. A system of federally funded laboratories operates to achieve military research and development goals. For needed capabilities and materials, the military usually undertakes long-term and comprehensive planning. Conventional economic wisdom asserts that only the interplay of demand and supply forces in free markets should allocate resources and determine prices. However, most industrialists do not really believe or practice this. The free market would not have created nuclear energy, interstate highways, space exploration, DNA research, or most high-tech industries. Government usually is needed to absorb initial costs, coordinate research and experimental efforts, disseminate data and knowledge, set forth standards, and finance development. The question of industrial planning was never whether it should be done, but rather who should do it. With or without government, corporations plan their industries to assure a steady flow of materials, adequate amounts of capital, and market demand. Of course, every firm plans for its own future investments, revenues, and expenditures. Large corporations plan also for the investments, revenues, and expenditures of their industries, plus procurement of materials, research, trained personnel, and so forth, as evidenced by the National Society for Corporate Planning. Professions also plan. Their primary concern is the supply of newly certified persons entering the professions every year. The source of that supply is the university-based degree program, which the professionals teach, plan, and evaluate. The tendency has been to control supply and therefore increase incomes (given elasticity of demand) and, if possible, prohibit other professionals or nonprofessionals from supplying the service by control over state licensing boards and standards. Some professions are more successful than others. None succeeds as well as the American Medical Association, which turns away thousands of highly qualified and motivated students each year to limit supply and prohibit the entry of vocations and other professions to maintain a monopoly on demand. As Randall Collins has demonstrated, educational requirements for positions have been rising over the years; when once a high school education sufficed, now an associate or bachelor's degree is required, and for professional positions, postgraduate work or graduate degrees are required. Apart from sheer time, the standards have been increasing, becoming more difficult and more specialized, as applicants have been increasing. Even when applicants have not been readily available, organizations rarely have lowered requirements.15 National economic planning in the 1970s has been confined to achieving

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macroeconomic results. Overall monetary and fiscal policy has been carried out by the president, Office of Management and Budget, Treasury Department, Council of Economic Advisers, Federal Reserve Board, congressional committees, and other federal agencies. The tendency has been to resort to macroeconomic policies to correct problems that often are concentrated in one or two industries. The tendency to kill flies with sledge hammers has contributed to the huge federal budget deficits. The Clinton administration has initiated broad industry-specific planning to affect automakers (who are to build the environmentally sound "green car"); telephone companies (who are to build the information "superhighway"); the health industry, through the administration's national insurance program; research and development activity; technological initiatives, especially in computer chips and biotechnology. This planning includes an augmented National Institute of Standards and Technology, a sleepy backwater agency formerly known as the National Bureau of Standards. The administration avoids any mention of industrial planning or policy. It refers to these industry-specific initiatives as its "competitiveness policy." The 1994 Economic Report of the President approaches national planning; it advocates "targeted microeconomic policies" as a response to "correct such 'market failures' (as being monopolistic, pollution-prone or lacking investment in research and development), and thereby improve the ability of private markets to serve social goals." 16 What is needed is national industrial planning. International competition is industry-specific. Foreign firms intrude upon industries usually targeted by their industrial and government leaders working together. Whether the industry is semiconductors, steel, or garments, American firms often cannot compete; they lack the resources to sell at below-cost levels to hold their market share, and they receive little assistance from their government. Lacking an industry-specific plan, American firms and government cannot respond. Government lacks both statutory sticks and fiscal carrots needed to address the problems of the specific industries under pressure. The question is not whether to plan —government and industry already plan —but how to plan and for what purpose. Planning must be interactive among all parties concerned —not just firms to maximize profits or professions to maximize salaries and fees, but government representing the public interest as well. And planning must be industry- and problem-specific. For international commerce that is free and fair, planning must be interactive among the multinationals, nations, and international organizations. It must not be imposed upon the rest of the world by G-7 or the International Monetary Fund; nor must it be for the purpose of allowing one nation or region to exercise geoeconomic power and win out over another.

//

Political and Military Alternatives America stands where it never stood before: as the undisputed victor of a two-generation-long war of attrition, as the world's only super-power and — increasingly, it seems, its only arbiter. —John Le Carre In the Wake of the Cold War, 1993

A CLINTON DOCTRINE? The Clinton administration has the historic moment to plan the devolution of American world hegemony from a position of strength. The devolution of hegemony and accommodation to other powers, particularly international organizations, is necessary before American economic strength and political/ideological prestige decline further and before new interregional and international rivalries emerge. Doing nothing poses three dangers. First, in the absence of new and deliberated policies, old policies reassert themselves, just by being there in the past. These include the old neoimperialist policies of geopolitics and of conceptions of adversaries and allies, dominions and peripheries; the old economic policies of investment and trade to exercise political control; the old ideological outlook that justifies force and fraud. The cold-war policies can be regenerated by regionalists (neoimperialists), ultraconservatives, and Machiavellians who know the importance of creating archenemies. Second, provoked by the lingering old policies of confrontation, foreign adversaries eventually will emerge and inevitably will react. Political and military reactions, mostly by Asian nations, already are apparent, as demonstrated by escalated armaments in China and Japan. Economic adversaries organize rival

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economic regions, in accordance with John Galbraith's theory of countervailing power. The dialectic of action and reaction, thesis and antithesis, grinds on. The third danger is overreaction because of a combination of post-cold-war idealism and lingering cold-war realism. Curiously, internationalist-minded liberals and conservatives have reached a new post-cold-war consensus. Both believe in what they call the "new world order"; for liberals it is that of Woodrow Wilson; for conservatives, that of George Bush. Both feel compelled to intervene in foreign affairs and to use American power to actualize their view of world order, whether self-interested or altruistic. Both are impatient with the United Nations and the building of international agreements, and both condone unilateral action. According to Stephen Stedman, the new interventionism "reunites divided strains of American foreign policy liberalism: traditional Wilsonian liberalism, defined by support for international organizations and self-determination of peoples; and its cold war cousin, defined by anticommunism." l Stedman identifies these new liberals as "the new interventionists (who) seek to end civil wars and stop governments from abusing the rights of their peoples. . . . They believe that active international intervention is necessary to bring a semblance of order to the post-cold war." 2 Such liberals support the doctrine of human rights expounded by the Carter administration and deliberated at the World Conference on Human Rights in 1993 (although it failed to overcome the difference between the economic rights and development assistance emphasized by the South and the political rights emphasized by the North). In June 1993, the Clinton administration obtained Senate approval of four human rights treaties signed by Jimmy Carter but unratified during his presidency. To create this new world order of human rights, liberals are urging economic aid to Russia, denial of most favored nation trading status for China, military intervention in Bosnia, and other policies. Unlike the more pragmatic conservatives, who calculate costs against benefits and who weigh imperial overstretch, the liberals ask, Who should quibble about a few billion dollars when democracy is at stake in Russia and people are being murdered in Bosnia? More recently, the issue of interventionism versus isolationism has split both liberals and conservatives. Liberals split on the issue of NAFTA. The old liberals opposed NAFTA on behalf of American labor; the new interventionist liberals supported NAFTA as a means of reforming Mexico. Through NAFTA, the United States can push Mexico into economic and political reform. The extension of NAFTA into Latin America can help establish human rights throughout the Western Hemisphere. Congress approved the extension of NAFTA to Mexico, again as a result of the coalition of new liberals and profit-minded conservatives. Foreign policy differences between old and new conservatives are especially apparent in the Republican-controlled 104th Congress. Most new members

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are not occupied by cold-war concerns, and they remember the election defeat of George Bush, who "won the cold war." The new conservatives are coming full circle to the pre-cold-war era when anti-Wilsonian Republicans adopted isolationist policies during the 1920s. They are especially skeptical about American participation in international agencies and American involvement in fringe areas. As the 104th Congress began, Senate majority leader Robert Dole and President Clinton debated foreign policy. Dole spoke of "new realities" that should limit American attention to military issues with Russia and other military powers and to economic issues involving the Japanese and economic powers; the rest of the world, including the United Nations, can fend for itself. Clinton chastised Dole and the new conservatives as the "new American isolationists" who would "eliminate any meaningful role for the United Nations . . . would deny resources to peacekeepers and even to our troops, and squander them on Star Wars. And they would refuse aid to fledgling democracies."3 Yet the trend is toward isolationism, as demonstrated by the Clinton administration's policy toward the Balkans. Candidate Clinton pushed intervention in the Balkans as an issue in the 1992 presidential campaign, only to retract it as president. Faced with an annual budget deficit exceeding $300 billion and a debt of $4 trillion, President Clinton could not afford costly military ventures, financially or politically. Despite continuing Serbian atrocities and pleas for intervention by Democratic liberals, the Clinton administration deferred to the more passive policies of the United Nations and European allies until both sides were exhausted with the stalemate. For a world troubled by civil and ethnic wars and begging for deliverance, nonintervention in Bosnia was a landmark foreign policy, possibly the most important since the Truman Doctrine. It is consistent with the withdrawal from Somalia and the refusal to become involved in Rwanda. Intervention finally occurred in Haiti, but only after United Nations approval. It was the first time since the Monroe administration and doctrine that American action was subjected to review from outside the hemisphere. This new restraint signals a curtailment of American intervention in the world, regardless of atrocities, humanitarian concerns, even American interests. It was articulated as a general policy through Presidential Decision Directive Number 25, which was issued in May 1994 well before the congressional election of the new conservatives and isolationists. It may be recognized as the Clinton Doctrine, which may have importance comparable to that of the Truman Doctrine, which it revokes. While generally considered to have worldwide application, the Truman Doctrine also was evoked by a civil war in the Balkans, particularly Greece (although with a communist component similar to that of the Spanish civil war ten years earlier). Like the Truman Doctrine, which coincided with expansionist impulses of a great power at the height of its growth and power, the Clinton Doctrine coincides with the consolidating tendencies of a great power now in decline.

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The question is whether this consolidation will be against the world to protect narrow national and regional interests or with the world to achieve international requisites for peace and order. REDIRECTING FOREIGN AID Foreign aid always has been a political issue. It is a microcosm of differences between conservatives and liberals on the question of the role of government. Conservatives oppose aid, except military aid, which they consider to be a federal priority. Liberals support aid for humanitarian and developmental purposes as a federal priority. Modern foreign aid first occurred in the form of the Marshall Plan for Europe. The Truman administration applied it worldwide through the Point Four Program, then curtailed it because of the Korean War. Thereafter, aid was used as a tool to fight the cold war, and its political and military purposes determined humanitarian and developmental assistance. During the cold-war era of 1946-89, federal foreign aid totaled $374 billion, which included $233 billion for economic ends and $141 billion for military purposes. Aid from private corporate and other sources in recent years approximated federal economic aid. In the 1950s and 1960s economic aid exceeded military aid. In the 1970s economic aid was $27 billion compared to military aid of $39 billion. Even with the military buildup during the Reagan administration, the proportion of aid was restored in the 1980s: $103 billion in economic and $53 billion in military aid.4 Modern military aid includes more than weapons and munitions. It includes surveillance, communications, transportation, and other logistics systems. With technologically sophisticated systems, it requires training, lots of it. The U.S. Army's School of the Americas has trained more than fifty-six thousand Latin American officers and soldiers in combat and counterinsurgency capabilities. Also known as the "School for Dictators," it has included among its graduates Manuel Noriega of Panama, Humberto Regalado of Colombia, and Hugo Banzer Suarez of Bolivia. Nineteen of the twenty-seven Salvadorean officers implicated in the killing of six Jesuit priests in 1989 were graduates of the school.5 In the 1980s, economic and military aid were integrated under a strategy called "low intensity conflict." The U.S. Army devised the strategy to pacify popular uprisings and political movements that did not require a conventional military response; it combined under a unified command all forms of assistance—humanitarian, educational, developmental, political, as well as military/police measures. As Tom Barry and Deb Preusch observed, it was the central strategy for the new "soft war," especially that waged in Central America.6 In the post-cold-war era, wars are less distinct and more pervasive at the same time. Most are not international but intranational, not military but civil-

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ian, not political but economic, not national but communal and ethnic. The Bosnian war may look neat and sanitary, as compared to the disintegrating ability of many governments in underdeveloped countries to maintain law and order in the face of millions of uprooted people without adequate shelter or food. Robert Kaplan observes that "criminal anarchy" now prevails in West Africa and threatens most of the less developed countries. Bands of marauders roam the countryside and city streets, presenting a condition in which "crime and war become indistinguishable." 7 Citing the warnings of Martin Van Creveld, who has contended that such wars will resemble those of medieval times in Europe, Kaplan states: Future wars will be those of communal survival, aggravated or, in many cases, caused by environmental scarcity. These wars will be subnational, meaning that it will be hard for states and local governments to protect their own citizens physically.8 The problem of intranational and international order is aggravated by the increasing proliferation of weapons. It is estimated that Saddam Hussein was two years away from developing a nuclear bomb and that North Korea actually has a nuclear bomb. On the low-tech end, Americans see starving, ninetypound Somalians toting expensive AK-47s. Conventional arms production probably is the fastest growing industry in the world, and the American corporations are the world's major arms suppliers. The problem is compounded by "offset" deals that enable foreign corporations and governments to manufacture arms worth more than $10 billion each year in their own countries. During the 1980s, annual worldwide arms production doubled from $0.6 trillion to $1.2 trillion and remained at $.9 trillion in 1993. 9 Boutros Boutros-Ghali, the secretary-general of the United Nations, has stated: "Everywhere there is an evil and uncontrolled proliferation of arms." 10 Desperate for foreign currency, Russia continues to produce and sell massive amounts of armaments and missile technologies. Oil-rich Middle East countries continue to lead in the purchase of foreign-made armaments. Countries like Indonesia, Singapore, and Thailand also are buying American F-16s. In cooperation with General Dynamics, Japan, South Korea, and Taiwan are making F-16s, and Japan is making F-15s with McDonnell-Douglas. China, North Korea, India, and Pakistan are developing weapons of mass destruction and missile technologies. These and other countries may soon have nuclear weapons, despite the efforts of the Missile Technology Control Regime. Several former Soviet republics have nuclear arms and missiles; the Ukraine, with about eighteen hundred warheads, is the third largest nuclear power in the world; the disposition of the former Soviet arsenal is uncertain and will take years. Enforcement is so ineffective that American officials now speak of "counterproliferation," in reference to containing rather than stopping the spread of missiles and nuclear weapons. The threat posed by North Korea is relatively local and isolated.

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The policy of the Clinton administration for worldwide arms production and distribution remains unclear, including American arms producers who promote foreign sales to offset spending reductions by the Department of Defense. In October of 1993, the United States created a world event by intercepting a Chinese ship that appeared to be carrying chemical arms materials to Iran (although the materials were never found). At the same time, the United States was selling, indeed offsetting, F-16 fighters to Indonesia, Singapore, Taiwan, and Thailand, while China was buying Su-27 fighters from Russia. One wonders about the American response if China also had been buying F-16s. One also wonders whether military aid would have been denied if the Bosnian Muslims had money to buy arms from McDonnell-Douglas and General Dynamics. The purpose of foreign aid now is being reconsidered. The Clinton administration emphasizes economic development, financial assistance, population control and environmental protection, democratic processes and human rights, and humanitarian assistance. How this multipurposive agenda will mesh with geomilitary concerns remains unclear. How foreign aid will mesh with geoeconomic concerns is more clear. To achieve its goal of exporting $1 trillion annually by the year 2000, the Clinton administration is proposing "tied aid," which requires countries to purchase certain American products in order to receive economic aid, a policy not practiced since 1973. Opposed by the State Department, the Export-Import Bank nonetheless is "to counter the tied aid practices of our competitors." Particularly, Japan has tied its aid to China to the purchase of products by Japanese companies, a policy American computer and other companies claim puts them at a disadvantage. As aid was used to achieve the geopolitical purposes of the cold war, it now is being used for the coming geoeconomic struggle.11 Americans still are ambivalent about foreign aid and are raising sundry expectations in order to achieve political consensus. Adlai Stevenson once remarked about foreign aid, "We are damned if we do and damned if we don't."12 On one hand, the United States is among the least generous of nonmilitary aid donors, as measured by percentage of gross national product, compared to that of other developed nations. On the other hand, it expects to use aid to reduce suffering, control population, reduce environmental deterioration, fight communism or tyranny, foster democracy, build infrastructure, spark economic development, buy allies, increase American exports, and solve most of the other problems of the less-developed countries. All things to all people aid is doomed to fail. Aid must enable its recipients to provide for themselves and achieve selfsufficiency. To a large extent this goal can be achieved in cooperation with international aid and development agencies and implemented in coordination with the "Global Plan of Action" set forth in Rome in 1992. It is as much in the American interest to assist countries to become economically self-sufficient as it is to assist a welfare family in East St. Louis to be self-sufficient. If it can

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be divorced from geopolitical and geoeconomic strategies and be allowed to succeed, federal costs can be decreased and federal revenues increased. Everyone gains. RETROFITTING THE MILITARY The purpose of the American military during the cold war was broad but clear—to deter aggression by Soviet nuclear or conventional forces and to turn back communist-inspired aggression throughout the world, usually by indirect forces whereby such aggression is waged by the forces indigenous to the country or region. Deprived of the Soviet threat and the cold war, the military is experiencing its largest reduction of spending and personnel since World War II. Some experts expect military spending to be reduced from $300 billion in 1992 to near $200 billion in 1998, which would be a 33 percent cut in actual dollars and 50 percent cut in real dollars. Similarly, the U.S. Bureau of Labor Statistics projects that military-related personnel may be reduced from 7.3 million to nearly 4.5 million in 1998, a cut of 41 percent.13 More recent statements and the 1995 defense budget of the Clinton administration impose smaller cuts. The cognitive process of change usually goes through four stages: reality denial, reality trivialization, reality complication, reality recognition and change. Still in 1992, the military indulged in reality denial: it planned as if the cold war never ended, as revealed in a classified draft plan leaked to the press, "Defense Planning Guidance for the Fiscal Years 1994-1999."14 Only after the 1992 elections did the military and its supporters begin to address the post-cold-war world. The main argument in 1993 was to trivialize the significance of the cold war's end. Ergo, military threats have changed very little; Soviet missiles still are operational; regional unrest is increasing; the world remains a very dangerous place that requires a dominant American military presence. Robert Gates, the former director of the Central Intelligence Agency (CIA), portrayed an endangered world in turmoil —the collapse of the Soviet empire and vast power void it leaves, uncontrolled nationalist and religious and ethnic conflicts, decadence of other socialist states, weapons proliferation, and environmental problems.15 James Woolsey, the CIA director of the Clinton administration, warned, "We have slain a large dragon, but we live now in a jungle filled with a bewildering variety of poisonous snakes."16 After reality denial and trivialization comes reality complication. Several technical arguments defend the status quo proposals of the first Clinton administration military budget. Stopping and starting weapons research and development projects is almost as expensive as continuing them. Aligned with this is the argument that ground will be lost in innovation and quality of weapons.

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Like the March of Dimes looking for another cause after the cure of polio, the military seeks further complication by searching out new purposes. Most frequently mentioned are the purposes of provider and peacekeeper. The military functioned well as a provider in Somalia in early 1993 when food was delivered and the continuation of massive starvation was averted; it functioned less successfully as a peacekeeper that set about under United Nations auspices to check the activities of warlords. As part of a NATO force, the American military is functioning now as a peacekeeper in Bosnia, as it did successfully in Haiti. Conventional warfare presumably requires increasing special capabilities. The Navy and Marine Corps issued a white paper in September 1992 that outlined the familiar mission of "forward deployment" not out across the blue water of oceans but in on the brown water of coastal areas; it has been presented as "littoral" warfare to secure the harbors and coastal areas of the world.17 Other proposals retrofit the military as an educational institution or quasipolice institution to operate in urban ghetto areas with social problems or high crime. Such proposals abounded during its early success in Somalia, suggesting parallels between Mogadishu and Detroit (suburbs excluded). Joseph Romm redefined "national security" to include environmental, energy, and economic threats, the implication being that somehow the military can help meet them.18 An environmentalist and militarist in the same stroke of the pen, Stewart Brand commented, "Suppose our military took on the long term role of protecting the global ecostructure; then it would be compelled to stop those who would harm the ecostructure. Sending in troops to save the Amazon rain forest seems unthinkable now. A few years from now it may seem unthinkable not to take action."19 Another complication is economic. Defensively, military cutbacks are presented as damaging to the economy, especially to local or area economies where base closings or plant closings occur. The Clinton administration now spends money for "adjustment" and "conversion," which include business development or redevelopment of closed facilities, worker retraining, and adaptation of technologies for commercial use. Offensively, the military increasingly couches its worldwide peacekeeping not in geopolitical strategies, as done during the cold war, but in geoeconomic strategies. The former director of the Central Intelligence Agency, Robert Gates speaks of the "economic realities" of a global economic and growing foreign trade. Someone must patrol the sea lanes and guard the ports. American exports require dependable commerce and a stable world that can be achieved only by a strong American military.20 The CIA also seeks new ways to be useful in the age of geoeconomic power. Apparently inspired by Michael Crichton's novel Rising Sun, which depicts the Japanese eavesdropping on American businessmen while negotiating a financial transaction, the CIA turned fiction into fact by eavesdropping on the

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Japanese negotiating with Americans about luxury car imports in the summer of 1995. The spirit of G. Gordon Liddy lives on. The final phase of reality recognition and change is itself uncertain. Military commanders and planners are thinking the unthinkable. Charles A. Horner, an Air Force general heading the Space Command, startled his colleagues by stating "the nuclear weapon is obsolete" and adding, "I want to get rid of them all."21 Andrew Marshall, a Pentagon strategist, argues that ships, planes, and tanks can be made obsolete by long-range missiles directed by satellite and computer technologies.22 Like any institutional sector, the military attempts to preserve itself and expand its interests. It is exceptionally capable of defining reality, and it does so by portraying powerful and insidious enemies. The Department of Defense and Central Intelligence Agency convinced most Americans that the Soviet Union was a capable and monolithic military power right up to its collapse in 1991. By trivializing the possibilities for peace, by portraying the world as a dangerous place with powerful enemies, by expanding its purposes, and by actually changing its technologies and strategies for waging war, the military contributes to international hostilities and the next cold war. After all, preparation for war is its job. The problem is that military warnings and preparations can be self-fulfilling prophecies. The world is made dangerous by forty-five years of an unprecedented arms race that introduced modern weapons to every corner of the world, usually involving massive American or Soviet aid. Worldwide military expenditures soared to more than $1 trillion per year by the end of the 1980s, which was twice the annual expenditure at the end of the 1970s and quadruple the expenditure at the end of the 1960s. The United States set the pace since the 1980s, accounting for 24.9 percent of world expenditures in 1980, 29.4 percent in 1989, and 34.2 percent in 1993. Worldwide arms trade hit a high of $63 billion in 1987, which tripled the annual trade at the end of the 1970s.23 MILITARY AND ECONOMY The future of the military will depend upon its ability to contribute to the geoeconomic strategies of the twenty-first century. Military power can contribute to more stable markets and world economy (although its abuse can provoke reactions and have the opposite effect). But at what cost? While sounding new, the basic question is the same for all declining powers that experience increasing debt and other strains of imperial overstretch. During the nineteenth- and early-twentieth centuries, Britain maintained the greatest navy known to the world at that time. Britain also sustained the highest military costs in the world. Lance Davis and Robert Huttenback conclude that during the later-nineteenth and early-twentieth centuries, even while most European countries were preparing for World War I, British de-

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fense costs per capita were two and one-half times higher than German or French costs. During the last twenty years of the nineteenth century, British homeland citizens were the most heavily taxed in the world, and Britain continued to experience heavy imperial losses in the twentieth century. Of military costs during 1900-1912, Davis and Huttenback conclude: In the absence of empire, tax loads on the British taxpayer could have been reduced, or resources made available for more productive investment with no decline in the level of consumption. . . . If Britain had possessed no empire and had spent at the level of France and Germany on the military establishment, the savings would have been £63 per capita per year or about 12 percent of savings.24 Both geopolitical and geoeconomic arguments by the British military, particularly the Admiralty, won out over complaints that the cost was ruining the British economy. Britain carried on and won World War I; then its economy went down the drain. Britain changed from a creditor nation to a debtor nation, mainly because it was obliged, according to Eric Hobsbaum, "to liquidate perhaps 70 percent of its assets in the United States . . . and in turn became heavily indebted to the United States." 25 Prior to the war, Britain's gross investment was up to about 9 percent of its national income; after the war it was never more than 5 percent. By the 1930s, production, trade, finance, employment, all declined from their prewar levels. Throughout 1921-1938 unemployment was 10-15 percent. Britain abandoned the gold standard by 1931 and created a "sterling bloc" among commonwealth members to hold badly needed foreign currencies. For Hobsbaum, the conclusion was inescapable: "After 1931 Britain ceased to be the hub of international economy." 26 In his history of the "great powers" during the last five centuries, Paul Kennedy demonstrates that economic decline was followed by military decline and that economic decline was brought about by excessive military spending. The latter contributed to the decline of Spain in the seventeenth century, France at the end of the eighteenth century, Britain by the start of the twentieth century, and the Soviet Union toward the end of the twentieth century. Kennedy states, "The United States now runs the risk, so familiar to historians of the rise and fall of previous great powers, of what might be called 'imperial overstretch'." 27 When is military spending excessive? Kennedy estimates it at 10 percent of gross national product (GNP) over the long term and, if the economy is weak, 5 percent. 28 He warns that military expenditures can effect short-term political benefit but long-term economic harm. For the United States, the critical question might soon be: "Whose economy will decline fastest, relative to such expanding states as Japan, China, etc.?" A low investment in armaments may, for a globally overstretched power like the United States, leave it feeling vulnerable everywhere; but a very heavy investment in armaments, while bringing greater security in the short term, may so erode the commercial competitiveness of the American economy that the nation will be less secure in the long term.29

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Writing in 1988-89, Geir Lundestad concluded that, contrary to CIA reports, Soviet military spending exceeded 20 percent of its gross national product and that the Soviet economy was in shambles. He went on to estimate the American percentage to be 8 percent. This might be acceptable but for the military expropriation of research and development (R&D). "To have around one-third of all engineers and scientists working for the military," as does the United States, "could have rather negative consequences for the civilian economy." This is especially so when both the Europeans and Japanese spend under 5 percent of their GNP and outspend Americans on R&D commercial applications.30 Throughout the cold war, the military grudgingly acknowledged that military R&D (including basic research) expenditures made up about 50 percent of the total R&D expenditures during the 1950s. It dropped to 33 percent during the 1960s as a result of increases in the space program and to 25 percent at the end of the 1970s. Military R&D surged ahead and reached 30 percent of the total at the end of the 1980s, which was about $40 billion per year. In 1994 R&D expenditures were an estimated $173 billion. The federal government spent $62 billion, $35 billion or 20 percent for military R&D.31 These expenditures support a huge complex of most of the nation's bestequipped and best-endowed research laboratories and one third of its scientific and engineering talent. While less of the total than in the past, military R&D still constitutes a substantial part of the R&D industry, and to the extent of producing any "spin-off" or "dual-use," military R&D contributes to a still larger part of total R&D. "Dual-use" is the latest buzzword for selling the commercial benefits of military R&D. The federal government appropriated $574 million for technologyrelated conversion programs in FY93; more is expected in FY94. The dual military-civilian use of R&D has the allurement of developing civilian technology to make American products more competitive, especially with Japanese and European products that have benefited from national funding and support. If Yankee ingenuity can produce military products that dazzled the world during the Persian Gulf War, it surely can produce equally dazzling civilian products to compete in world markets. In the 1960s, when criticism was raised about spending 80 percent of federal R&D funds for military or space uses, the same idea was sold as "spin-off" technology. For example, space exploration was justified because perfect ball bearings could be manufactured in the weightlessness of space. By the 1990s, ball bearing factories would be orbiting the earth. Little thought was given to the cost of transportation, or to plant construction costs, or to whether a perfect ball bearing really was needed. Some critics pointed out at the time that American manufacturers of commercial products also might need R&D funds to keep pace with the large commercial R&D expenditures of the Japanese and Germans, a prophetic remark for the 1990s when annual trade deficits of more than $100 billion are draining the economy. In fact, dual-use or spin-off technology is an inefficient, supply-driven strat-

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egy in search of a rainbow market. Military technology is uniquely devised to meet military specifications and uses, which usually compete in commercial markets with products only slightly inferior but far less costly. For example, the military-industrial complex produces metal alloys that permit planes to fly at the edge of the atmosphere at Mach 3 and faster, and no doubt in the future McDonnell-Douglas will develop and test a still better alloy. In the name of dual-use technology and military-commercial conversion, millions of dollars will be happily spent in the belief that such an alloy also has commercial uses and markets, perhaps for bored corporate executives who enjoy flying their corporate jets in and out of the atmosphere at Mach 3. Most economists, liberal and conservative, agree that dual use is a very expensive undertaking mostly of mythical promise. Lester Thurow states: "None of the new consumer products in the 1970s and 1980s could be traced to military research."32 Paul Kennedy agrees because "the armaments industry is increasingly divergent from commercial, free-market manufacturing."33 Murray Weidenbaum, chairman of the Council of Economic Advisors in the Reagan administration, reinforces the point that military contractors are incapable of converting their technologies and competing in commercial markets.34 A Harvard study group concedes that spin-off is not a natural occurrence in commercial production. The commercial use of military R&D will require a great deal of attention and money devoted to its research, planning, adaptation, and marketing. The group states that the best use applies to basic research. Whether funded by the military or civilian sector, basic research has significant effects on total private productivity, according to the Harvard research group. However, only about 3 percent of the military R&D budget goes to basic research.35 While military spending reductions have local impacts and temporarily affect employment, military diversion of national funds and resources has a far greater strategic impact. Large military outlays already have weakened investment, infrastructure, technology, and solvency in both public and private sectors. In contrast to the late 1940s, today the productive sector faces intense foreign competition. If left unmitigated, military diversions could drive an already vulnerable economy into severe recession, which cannot be remedied by an already indebted and fiscally stricken federal government. In conclusion, the habit of relying upon military force as a strategy and way of coping with the outside world is difficult to break. Alternatives are never quite explored when a superior and anxious-to-be-used military force is available. Dwight Eisenhower warned about the "military-industrial complex" in his farewell address as president. Plutarch recognized the problem centuries before: "Peace is only too apt to lower the reputation of men that have grown great by arms, who naturally find difficulty in adapting themselves to the habits of civil equality."36

12

Ideological Alternatives The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. —John Maynard Keynes The General Theory of Employment, Interest and Money, 1935

THE FUKUYAMIANS In George Orwell's antiutopia J984, the existence of a powerful rival to the world empire of Oceania was necessary to maintain order. History was rewritten when the war with Eastasia ended and the war with Eurasia started. One rival or the other was needed to maintain Big Brother's authority and control. 1 Written in the 1940s, 1984 was prophetic of the cold war to follow. Had Orwell lived to experience the cold war, he surely would have refined the governing techniques of Big Brother. The portrayal of the Soviet Union as a powerful and evil rival contributed to the making of the American informal empire during the cold war, starting from the McCarthyite anticommunist hysteria of the late 1940s and continuing with the Reaganite visions of the evil Soviet empire and Bush's vision of a new world order at the end of the 1980s. The power of the Soviet empire was exaggerated to fantasy-land proportions by the U.S. Department of Defense and Central Intelligence Agency. While Stalinism was undoubtedly evil, Soviet power was exhausted by the 1980s by the demands of military spending and formal empire. While the American empire was largely informal, its conduct in world affairs, especially in the less developed world, was also self-interested and self-serving. Both rivals poured economic and military aid into their dominion states and peripheries to establish

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and uphold friendly regimes, build worldwide political alliances, and undertake propaganda campaigns that were rabidly negative and ideological. Now the cold war is over. The free and communist world rivalry is gone. The Western free world is triumphant. Indeed, the Western world is now the world! Ideology is ended! History is ended! Thus spake the Zarathustrian politicians and intellectuals of the triumphant West, the harbingers of democratic industrial civilization. Never mind the history of history. Never mind that West and East have confronted one another almost since the recording of history, when Homer recounted the Trojan War of more than three thousand years ago. Never mind the confrontation that has continued through the ages between Greeks and Persians, Macedonians and Persians, Romans and Parthians, Byzantine and Islamic empires, Holy Roman and Ottoman empires, Austrian and Ottoman empires. The confrontation widened in the thirteenth century as the Mongols pillaged westward as far as the Balkans and Teutonic Knights charged eastward into Russia. Swedes, French, and Germans followed into Russia. By the eighteenth century, ocean-bound Europeans started to conquer and colonize the East—India, Australia, and the west Pacific. At the start of the twentieth century, Americans joined Europeans to colonize China, and finally Japan in 1945. Never mind history, Francis Fukuyama argues, because history has ended. Now that the Soviet Union has succumbed to the West, the struggle has ended between West and East, indeed between the West and the Rest. The pitched battle is over; all that remains is mopping up —settling down Russia, straightening out China, and cleaning up the dirtier regimes of the third world. All this is rather boring, Fukuyama laments. Gone is the excitement of millenarian struggles between heroes and villains, ideologies representing good and evil, moral searching and doubt, and anxiety about change.2 The end-of-history thesis is an extremist variation of the end-of-ideology thesis raised in the late 1950s. Daniel Bell and Seymour Lipset first talked about the end of ideology in the 1955 meeting of the Congress of Cultural Freedom in Milan, Italy. On the international scene, it was intended to discredit communism, which then was accepted widely among third world nations rebelling against European colonialism. It served also to inoculate American intellectuals against the scourge of McCarthyism, disingenuously so since the congress was revealed later to be a covert operation of the CIA. In his book The End of Ideology, Bell welcomed, with relief, "an end to chiliastic hopes, to millenarianism, to apocalyptic thinking—and to ideology. For ideology, which was once the road to action, has come to be a dead end."3 Fukuyama reintroduced the thesis with the ending of the cold war and Soviet empire. But this time, as communism becomes universally discredited, Western intellectuals are on the winning side of ideology. Instead of heralding the end of ideology, they are bemoaning its end. The post-cold-war era will end not only ideology, Fukuyama laments, but

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history itself! As a deputy director for policy planning of the State Department during the Bush administration and analyst for the RAND Corporation, he speaks to the post-cold-war anxieties of most intellectuals with a stake in the military-industrial complex. There is no need for ideological contests — argumentative books and articles, international conferences, television appearances, strategy seminars, defense think tanks, and consulting contracts. Alas, there is no more need for ideologues. Ideology and history are ending, according to Fukuyama, because the Western liberal democratic state has no ideological rivals of worldwide or historical stature. In the Hegelian world of dialectical idealism, the Western state has become the absolute idea and the universal homogeneous state. For Hegel, history ended in 1806 when Napoleon defeated the Prussians at Jena and displayed the French First Republic as the dialectical conclusion of history. The French proceeded to shut down the University of Heidelberg and the academic career of Hegel, who saw in his own fortunes those of the history of humankind. With all this, Fukuyama agrees: "(T)he present world seems to confirm that the fundamental principles of socio-political organization have not advanced terribly far since 1806."4 For Fukuyama, the fall of the Soviet Union represents "the total exhaustion of viable alternatives to Western liberalism."5 Of course, not all nations have conformed; ignorant of history, many less-developed countries continue to resist Western influence and control and to speak of world conflict between South and North. But this is considered small scale: "Large-scale conflict must involve large states still caught in the grip of history, and they are what appear to be passing from the scene."6 Furthermore, liberalism remains the unchallenged universal state: "(T)his conflict does not arise from liberalism itself so much as from the fact that the liberalism in question is incomplete," only because "the third world remains very much mired in history."7 And, if Russia refuses to adopt a Western state, it, too, will "remain stuck in history."8 All the other great powers have adopted liberalism, the most serious challenge in the past being French "Gaulism"[sic!]. Once the universal, homogeneous state is actualized, history merely reflects the world adjusting to its absolute order, to the universal, fixed, eternal, perfect, timeless, historyless order given to us in 1806. Events now are predictable; change moves linearly toward further perfection; conflict eventually winds down; cycles and anomalies deviate insignificantly from the linear line toward the absolute. Not even Fukuyama's admirers take seriously his airy Hegelian notion of the absolute state, the grand synthesis that resolves all theses and antitheses. Fukuyama introduced his thesis in an article written in The Public Interest, which was followed by "responses" by Irving Kristol, Daniel Patrick Moynihan, Stephen Sestanovich, and others.9 It was more of the order of the congregation reciting the liturgy and exalting in Hegelian philosophy. Moynihan admits,

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probably as the group Diogenes, to never having studied Hegel, but to Pat it sounds splendid anyway. Fukuyama himself glibly ends his article by stating that perhaps the "boredom at the end of history will get history started once again." 10 The great Hegelian absolute at the end of all human consciousness and history will be negated simply by boredom! Fukuyama elaborates the end-of-history themes in The End of History and the Last Man. He buttresses Hegelian arguments by pointing out the universalism of Western science and technology and the unprecedented power of capitalist-driven material productivity and prosperity. He also analyzes recent geopolitical trends that seem to confirm the triumph of Western civilization and universal state. 11 Fukuyama's more serious and elaborated arguments still lack a larger sense of history that encompasses the life stages of empires and civilizations and does so from a non-Western perspective. This is not the first time that a triumphant great power or empire considered its civilization to be the last and concluding phase of world change and history. A Hegelian offshoot, Marxism predicted a communist industrial order that would end class struggle and dialectical materialism. German Nazis believed they had created a one-thousand-year Reich. When empires were in their service, both Christianity and Islam emphasized eschatologies of an ahistoric time when the kingdom of God or Allah would be actualized on earth. The Roman empire believed that history was at an end two thousand years ago. Still earlier and for a period of about two thousand years, ancient Egyptians considered their pharaohs to be gods and their civilization to be eternal. Also for about two thousand years, Confucian rulers believed that China had achieved the perfectly ordered society based upon cultivated intellect, virtue, and ancestral piety; still, in the nineteenth century, the Chinese emperor was considered to be "ruler of all under Heaven." What is at stake is not just Western ideology but an AmericanAVesterncreated complex of world institutions, initially set forth to uphold the "free world" and now the "world community." If Western ideology ends, Westernheld organizations and institutions lose legitimacy and end as well. If Western dominance ends, history itself will be very different. In a disingenuous way, Fukuyama has arrived at an insight about how most dominant empires and civilizations view themselves and history at the stage of late growth. Yes, some history is at an end, namely that history written by the makers of history and their self-conceptions. The history at an end is their history. Consoling all cold warrior intellectuals, Fukuyama predicts that "the end of history will be a very sad time." 1 2 He looks back on the cold war with selfconfessed nostalgia and to the future with boredom (perhaps anticipating unemployment at RAND?). Clearly, this is the sentiment not only of an idealist about ideologies but of the chiliasm attributed by Bell to a romantic. At an emotional level, Fukuyama and Dr. Strangelove seem to share the same fascination with international conflict and its ultimate culmination in world war. It is easy to dismiss Fukuyamians, but this is not just the idle nostalgia of a

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few unattached intellectuals. It is the driving sentiment to create another archrival and great struggle, a process already under way for the Fukuyamians and their more aggressive allies, the number Fers. Islamic fundamentalism, Japanese economism, and Russian nationalism all are being demonized as powerful and evil. Probably the most dangerous rival, the ghost of Soviet imperialism, is kept alive by the distrust of the current Russian empire, deliberately by conservatives and unwittingly by liberals who speak of a political regression in Russia to justify aid and financial assistance. The danger lies in the provocation of Russian nationalism, as is clearly enacted by Vladimir Zhirinovsky; the danger is seen by social psychological labeling theory that predicts that the labeling or name calling of persons or groups encourages them to act out the expected behavior. The danger is that Fukuyamians will begin rewriting history to convince us that our next great rival was always our rival, just as in 1984 Big Brother rewrote history to assert that the enemy always had been Eurasia; furthermore our rival will believe us. The cold war may be over, but only for now and perhaps only briefly. The world remains unstable and subject to change more than ever before, as the socialist countries face the depressing prospect of becoming underdeveloped countries and underdeveloped countries struggle for survival and as the developed countries compete with one another and redivide the world according to market boundaries. Fukuyamians prefer to disregard such changes as loose ends to wrap up in order to actualize the worldwide utopia of Western capitalism and democracy. Can American-led Western civilization maintain world order? Even at its height in the years immediately following World War II, American leadership was powerless to prevent the cold war. Now heavily indebted, it can do little to prevent the fragmentation of the world into competing regions and superregions. No longer a universal protector or arbiter, it is one of the competitors, trying to hold its own in an increasingly larger and more competitive world and trying to find the most effective combination of economic and political allies. Even if all the world were Westernized and made capitalist and democratic, conflict would prevail. After all, capitalism is competitive; democracy is contestive. Sides compete for economic wealth and contest for political power. This choosing of sides necessitates combative ideologies. Given such conflict, can military threats and ventures be far behind, especially in a world of diminishing resources and growing populations? Most of the world is hungry, desperate, and envious. The Russian people, who once believed they were the most powerful nation in the world, now are also hungry, desperate, and envious. Most of the world suffers from matters more material than the boredom of thinking that ideology and history have ended. Fukuyamians need not despair about being bored in the twenty-first century. It will not be the end of ideology and history. It will be the beginning of a more sweeping and dramatic worldwide ideology and history.

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IDEOLOGY RECONSIDERED "Ideology" is a dirty business, used to throw mud at adversaries. "Capitalism," "communism," "nationalism"—these are the modern ideological call and cuss words used by the first, second, and third worlds to justify their actions against one another during most of the twentieth century and especially during the cold war. Ideology is a set of confrontational ideas, both valuative and programmatic, that rationalize the use of state power. Its valuative ideas set out goals, ideals, and Utopias. Its programmatic ideas extol certain institutions, methods, and programs by which utopia may be achieved. Ideologies rationalize the use of state power by claiming that everyone benefits, except state enemies who deserve their abuse. It is this claim—never wholly true because state power never benefits everyone —that makes ideologies specious and that links ideologies with false consciousness. There is always a Machiavellian backside to ideologies, one not made public. While the ideals and programs of ideologies are openly discussed in political campaigns, legislative assemblies, and public forums, realpolitik problems are discussed in closed hearings, staff meetings, and executive memos. Machiavellian principles are applied to the practical everyday problems of how to exercise power in the self-interest of the elites —of the leader, party, nation, empire, or region. Again, quite apart from enemies, not everybody benefits, although the nonelites are made to believe that they do. As provincialism is the self-interested calling for a province or locality and as nationalism is that for a nation, ideology calls for imperial, regional, international, or universal order. As provincialism and nationalism are defensive ideologies, the more powerful ideologies of the twentieth century are offensive calls for one national/imperial/regional/international state to dominate other states. Ideologies rationalize the four tendencies especially apparent in the conduct of world empires or powers —expansionist aggression, excessive spending, centralized power, and dominant control —usually in the name of upholding civilization (monarchical, communist, fascist, capitalist, internationalist) and universal values such as freedom, order, and justice.13 What Fukuyamians fail to recognize is the back and dark side of ideology— that is, the Machiavellian calculations of maintaining power and exercising control on behalf of one empire or region over another and of elites over nonelites. The history of dominance and subordination grinds on. When relatively unchallenged, as Western dominance is in the immediate post cold war era, ideology is less pronounced; when challenged and confronted, Western ideology becomes more pronounced vis-a-vis the ideology of the challenger. WESTERN THEMES To paraphrase John Maynard Keynes, every politician is the intellectual patsy of some defunct political philosopher—usually a collectivity of philoso-

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phers who have produced an ideology of Western civilization. The American version of democratic industrial civilization currently prevails. Every American president of the cold war era projected the version onto the world as the "free world," "new frontier," or "new world order." The major themes of Western ideology are salvation/order and progress/development. They accompany one another, comprising two sides of the same coin. Salvation and progress are the idealistic themes and the Utopian visions put forth; order and development refer to the practical institutions and programs devised to attain salvation and progress. The idealistic theme of salvation, which is as old as Christianity, became a driving force behind Western exploration and imperialism in the sixteenth century, whereby colonies were established to save souls and baptize heathens. The secularized version during the cold war compelled the free world to save peoples and nations from communism, which Christians noted was atheistic as well as totalitarian. The United States took up the calling with missionarylike zeal. As it intervened in the Near East to save the area from communism, it continues to intervene, now to save the Middle East from Arab extremists, Islamic Shntes, and tyrants such as Saddam Hussein. Less missionary than in the past, the "new interventionists" continue to urge the United States to protect human rights and democracy. The accompanying theme of salvation is order. Millenarian appeals are supplemented by realpolitik strategies to maintain world order—strategies conceived as hegemonic power, balance of power, regional power centers, and geopolitical categories of strategic areas, vital interests, allies, enemies, territories and dominions, peripheries to be held, and fringes to be disregarded. The missionary zeal of salvation, which risks being overly aggressive and dangerous, is tempered by the Machiavellian concern with order and conservation of the status quo. The second idealistic theme, progress, touts democratic industrial civilization to be inevitable, especially the American version of pluralist democracy and capitalist industrialism. Implied is the ahistorical and Utopian notion of perfectionism advanced by the Fukuyamians. Seeing itself as the greatest nation in the history of humankind, America is the manifest destiny of humankind. Ronald Reagan has stated: "I have always believed that this anointed land was set apart in an uncommon way, that a divine plan placed this great continent here between the oceans to be found by people from every corner of the earth who have a special love of faith and freedom."14 As expressed in the Broadway song, "Everything is up to date in Kansas City," and with this very thought for China, an American senator once proposed: "With God's help, we will lift Shanghai up and up, ever up, until it is just like Kansas City."15 The accompanying theme of progress is development, primarily political development as democracy and economic development as capitalism. American foreign aid, most favored nation status, and other assistance to less developed countries require them to hold elections, adopt constitutions, and observe human rights. Similarly, American economic development, reflected also in

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the development provided by American-influenced international agencies, is aimed at instituting private property, for-profit business, free pricing and markets, and capital movement. As those of the richest nation in the world, American development agencies, corporations, and banks enter into world commerce on the basis of "noblesse oblige." As Walter Rostow promised, Yankee ingenuity helps the economies of less developed nations by jump-starting them into their take-off phase, which leads to full development.16 American conceptions of progress involve other themes, which are both secular and sacred and which are not so much imposed as exposed through popular media as the good life. Social themes of urban middle-class life-styles spurn upper-class or aristocratic conventions and despise lower-class or rural living; style, fashion, and consumption are glamorized through advertising and popular culture. Religious missionaries propagate Christian notions of progress or providence, as was the calling of most empires prior to the twentieth century, and now of electronic evangelists. Fukuyamians have a point about emphasis. With the cold war over and less felt compulsion to police and control most of the world, American ideology may be receding. The problem is that ideology will not end overnight. Meanwhile, the dark and habitual urge to control and intervene rolls on through the republic under the night. Enemies and ideologies may be reconstructed for the dawn of another cold war.

MACHIAVELLIAN PRINCIPLES AMERICANIZED Machiavellian principles permeate contemporary American political thought and practice —in America the beautiful, land of the free, home of the brave. They permeate thought to such an extent that they are no more recognizable than the air we breathe. The self-interested motives of public leadership, the disregard for the rights and opportunities of others, the cynicism about politicians, the hucksterism and fraud, the law-and-order mentality and use of force—these notions are commonplace and casually regarded as politics. Behind the high-minded ideological themes of salvation/order and progress/ development are the realpolitik principles of management formulated by Niccolo Machiavelli almost five hundred years ago. The Prince is his most popular work, but The Discourses is his most profound and historically elaborated. His principles are rarely discussed except in reference to dictatorships. It is forgotten that Machiavelli was a republican and advocate of the republic and that his principles apply more to republics than to dictatorships. The following seven principles seem applicable to the American republic. 1. People are selfish, vengeful, and corrupt. They mistake humility for cowardice, love for weakness, and honesty for stupidity. Subjects must be restrained by force, by "law and order" measures including fewer rights of due process, tougher and mandatory sentencing, and capital

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punishment. Police rights of investigation prevail over citizen rights of privacy and against self-incrimination and other constitutional rights. More funds and facilities are provided for law enforcement, courts and legal prosecution, and corrections. Unschooled in Western values, foreign populations are even more venal and corrupt. Assistance to foreign countries requires strong and flexible American military forces, and adequate American military and police aid. 2. People are ignorant, emotional, and gullible. They are unable to distinguish between truth and fraud; fictionalized misinformation is more credible than factual information. Guided by passion rather than reason, they prefer to believe in religion, myth, and nationalism. Whether for realtors selling land in Florida or government promoting lotto gambling, people are the malleable objects of mass persuasion. Administrations extoll their deeds through public relations experts, press releases, and news conferences and cover their deeds through classified information and executive privilege. Foreign people are especially ignorant, requiring propaganda about the Americanized way of life perpetrated by the U.S. Information Agency but most successfully by American popular culture. 3. The state is unstable. Aristotle was correct in stating that democracy inevitably degenerates into anarchy. Because of the nature of people, the stable state must be preoccupied with the Hobbesian problem of maintaining order. States experience cycles. The peace, prosperity, and justice of the good state bring about license, indolence, and brutality, and in return these corrupt traits bring about reform to revitalize the state. It is vulnerable to conspiracies and coups, and to foreign states that will take advantage of its open and democratic institutions and sabotage them. 4. Leadership is the self-interested rule of the one and few. James Burnham has commented: "The Machiavellians are the only ones who have told us the full truth about power . . . the primary object, in practice, of all rulers is to serve their own interests, to maintain their own power and privilege." 17 A ruling elite seeks to obtain and maintain power, primarily through the one prince, dictator, or modern head of state. The few are necessary to help govern, and may be elected through a limited and constitutional democracy. However, direct democracy or government by the multitude is anarchy. This is a notion accepted by many political theorists —such as Samuel Huntington writing about "democratic distemper," William Kornhauser about "politics of mass society," or Seymour Martin Lipset about "working class authoritarianism." 18 5. Governance requires leadership that is aggressive and coercive. Force comes before freedom. The first order of governance is order, which is not serving the varied and conflicting interests of the nonelite many. 6. Expansion requires a citizenry that is armed and warlike and that interacts aggressively with foreign peoples and countries. Citizens bear arms as a constitutional right; they admire military prowess and support a standing and powerful military force. Citizens are outward-looking and restless rather than

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inward-looking and satisfied, and they seek new provinces, frontiers, and markets. 7. Virtu (nonmoral excellence) requires power, not moral platitudes but the power of military/police force and political dominance. Might makes right; morality cannot survive as an end without power as its means. Virtu requires power and the exercise of control. Plato was wrong; Thrasymachus was right: Justice is the will of the stronger. Or, as stated by the American student of Machiavelli, Henry Kissinger, "The management of a balance of power is a permanent undertaking, not an exertion that has a foreseeable end."19 MORALITY AND MACHIAVELLI

The Machiavellian principles raise the age-old questions of political philosophy. Are people corrupt or virtuous? Are they ignorant or intelligent? Are states stable or fragile? To the extent that people may be virtuous and intelligent and that states may be stable, is rule best achieved when exercised by the one or just the few, or by the many? Is the expansion of localities to city-states and city-states to nation-states and nation-states to empires or world government, is all this expansion of power and authority and higher jurisdictions really needed or desirable? The larger moral questions are, Is morality sufficient to maintain the virtuous state and civilized society? If not, what is required by way of force, fraud, or other methods? If such power is required, when and how do such means begin to corrupt the ends? Plato spoke unequivocally to the bright side, as did Jesus. Aristotle was not sure; neither was Dante. Machiavelli spoke unhesitatingly to the dark side. The United States was founded in ambiguity. To reduce abuses, its constitution established a balance of power and provided checks among the divisions of government. Like the ancient Romans, the founding fathers wanted an expansive empire and a virtuous republic at the same time. The emphasis was on empire by the parties of both Federalists and Republicans throughout the conquest of the North American continent in the nineteenth century. The emphasis changed somewhat in the twentieth century, as republican virtue was realized by the extension of full citizenship to women, minorities, and to an extent Indians. The American experience of the Augustan dilemma has never been resolved, as the emphasis shifts from one age to another, from the imperatives of empire to the virtues of the republic. Americans want more foreign markets and world dominance, yet they distrust big government and want to keep it off their backs. They want it both ways—an all-powerful government that maintains world order and provides for the homeland but a domestically decentralized and minimal government that does not overtax or overregulate. America's moral principles must be distinguished from its Machiavellian principles. A positive and encompassing morality must distinguish ideal politics from real politics and morality from expediency. In contrast to the seven Mach-

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iavellian principles just discussed are the following anti-Machiavellian principles. 1. People are altruistic, magnanimous, and virtuous. Law and justice will assure order. Given freedom, people are naturally virtuous, as is Rousseau's noble savage; they are corrupted by society. If individual rights and popular participation are assured, the state will function without the need for force or fraud. 2. People are intelligent, rational, and perceptive. Given a free society and a marketplace of competing ideas, people become well enough informed to make the most rational and effective decisions. They are perceptive; as Abraham Lincoln said, "You can fool all of the people some of the time and some of the people all of the time, but you can't fool all of the people all of the time."20 3. The state is stable. Virtue encourages more virtue (as corruption encourages more corruption). The virtuous state does not fear dissension or opposition. Rather than be pulled down by a Hobbesian war of all against all, the state is upheld by free people through Rousseauan "social contracts." While the state and civilization may have high and low periods, the trend follows the upward path of progress toward more democratic or workable government and humane civilization. 4. Leadership is the unselfish rule by the few on behalf of the many. It transcends elite interests or the special interests of particular nonelites or classes. The state is the cooperative whole, the sum of all of its contending parts. Elected officials uphold the sacred public trust to uphold the republic, law, and constitution. Effective leadership seeks out the will and support of the many. As Leo Tolstoy asserted, history is not made by great leaders; rather it is determined by the forces of tradition and the will of the multitude. Effective leadership derives not just from representative democracy (restricted to voting) but from participative democracy in which the many interact daily with their elected representatives and appointed officials. 5. Governance requires leadership that is compassionate and just. Freedom comes before force. The first order of governance is not order but justice. Rather than rule over the many by the exercise of fraud and force, it relies upon truth and justice. 6. The state and empire/region are transformed into a republic and commonwealth by a disarmed and peaceful people. As the American empire spread overseas, the principle was expressed in the Democratic party national platform of 1900, which stated: "We oppose militarism. It means conquest abroad and intimidation and oppression at home."21 Accordingly, arms are not shared with dominions and allies, nor used against rivals and enemies except in defense of the homeland. The state and empire/region are transformed into a republic and common-

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wealth by cooperative interaction with foreign peoples and countries, an arrangement which excludes the use of military force and economic exploitation. Rather than be the Trojan horse of imperialism that destroys cities and entire civilizations by the exchange of a trunk of beads for Manhattan Island, Western materialism and industrialism are given with no political or financial strings attached and used for self-determination of benefit to local populations rather than for international dependence of benefit to the developed countries. 7. Virtue requires morality and nonviolence. Martin Luther King said, "Nonviolence is the answer to the crucial questions of our time; the need for man to overcome oppression and violence without resorting to oppression and violence." 22 Unlike virtu, which regards morality as a means to serve the end of power, genuine virtue regards power as a means to serve the end of morality. Virtue recognizes that nonviolence and consensus achieve more enduring ends than do violence and coercion. Compared to the familiar Machiavellian principles, these alternative principles seem more remote, even Utopian, and perhaps a bit dangerous. They seem so because of a political culture of two hundred years of Machiavellian corruption of ideology and political philosophy and its cynicism about virtue, altruism, trust, participation, peace, and nonviolence. MORALITY AND POWER Reemphasized by the cold war, our Machiavellian intellectual heritage assumes that national and international governance is based upon political, economic, and military power. Despite their moral posturing during the cold war, the American and Soviet superpowers competed fiercely through their economic and military clout, albeit indirectly, maintaining a cold rather than a hot war. In acting indirectly, the superpowers pressured virtually every nation of the globe to participate in the struggle. The basic operating principles were force over morality, fraud over truth, and fear over respect. Furthermore, the exigencies of the cold war produced a cumulative assault upon democratic institutions and political virtues within the republic. The more prominent events were the following: • Public dangers of nuclear testing and biological experiments during the 1950s, accompanied by official denials and lies; • McCarthyism and its assault upon political and civil liberties; • Assassination of John F. Kennedy that at a minimum led to a cover-up about a single assassin and possibly to a national conspiracy; • Covert operations by the military and Central Intelligence Agency; • Vietnam War actions and misrepresentations including the continued denial about Agent Orange effects;

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• Watergate operations and cover-up; • Iran-Contra operations and deception. Most commentators agree that American morality has declined in recent years. The strain of fighting the cold war and maintaining the free world is one factor. James Q. Wilson points to the weakening capability of institutions such as family and religion to uphold moral values and beliefs. 23 Richard Stivers points to modern technology, which is manipulative, ephemeral, and compensatory and which is producing an antimorality of cynicism and nihilism. 24 The question for the post-cold-war era and international arena is whether the theme of order will evolve beyond the realpolitik strategies of Machiavelli and Kissinger. An alternative is Confucianism, which was adopted as official policy during the T'ang dynasty some seven hundred years after China's experience as an empire first under the Han dynasty. Whereas Occidental Machiavellianism posits order as an end and fraud as a means, Oriental Confucianism posits harmony as an end and virtue as a means. The Analects are peppered with Confucius's references to "goodness" and "moral force" as the basis for ruling and maintaining order. One saying goes, "A gentleman in his dealings with the world has neither enmities nor affections; but wherever he sees right he ranges himself beside it." Another saying is "A gentleman takes as much trouble to discover what is right as lesser men take to discover what will pay." 25 Where rulers act as gentlemen and rely upon moral force, Confucius refers to the art of "effortless ruling" and to "government by inaction." In the post-cold-war era, the reliance upon force over morality becomes increasingly questionable. The brutal Balkans war raised the question, and the European aversion to military force prevailed over the American preference to intervene with military force. The U.S./UN occupation of Somalia also raised the question by illustrating how the use of military force provoked popular and political reaction. Eschewing further use of its superior force, the Clinton administration chose to deescalate hostilities by negotiation and withdrawal from Somalia. More successful was the American occupation of Haiti, which followed a period of restraint, negotiations, and United Nations approval, which was the first such oversight of American intervention in the Western Hemisphere. Still in the modern world, morality itself can be a practical force. Thomas Frank points to the following possibility: The consistent advocacy and practice of our "moral" principles is defensible in purely strategic terms. Militarily weak nations have a strategic interest in the prohibition against the use of force, for example. Perhaps the U.S. has a comparable operationaltactical interest in the consistent pursuit of human dignity and freedom, not because

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that is the ethical position but because the persistent idea of freedom undermines the political authority of regimes which . . . are actual or potential enemies of the U.S.26 It is fashionable to be cynical about the power of morality, again revealing the pervasive decadence of Machiavellianism. Yet most of the world's greatest figures counseled against force and for morality—Gandhi, Tolstoy, Buddha, Confucius, and Jesus Christ to name a few. Their morality may not win converts or deter enemies in the short run. Reliance upon it may appear to excuse atrocities and ignore victims who beg for relief; just as readily, reliance upon force may intensify and prolong hostilities. But for another century, persisting morality may be the most practical means to enduring order and peace.

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WORLD PROBLEMS AND ALTERNATIVES After World War I, the United States chose to ignore world problems; its responses were largely isolationist. As guardian of the free world after World War II, it no longer had a choice, but its responses were heavy-handed. It became an informal empire that extended control on a world scale and that expended resources it no longer could afford. With the cold war over, the primary problems are not really the political, religious, and cultural divisions of the world. The chief problems of the twentyfirst century are economic, demographic, and environmental. In the absence of an immediate and worldwide response, the problems may not be solvable by the next generation. Also, the political opportunity of the post-cold-war moment may be lost. This is the third postwar period this century that offers the opportunity to realize the ideals of a postwar peace and hope for more a more secure future. After World War I, the Wilsonian ideals were thwarted by the victorious European allies and ignored by isolationist-minded Americans. After World War II, the ideals of the United Nations and Bretton Woods were jettisoned in the frantic American-Soviet cold-war struggle. History reveals that the window of opportunity and change is open only for a moment. While there are positive signs, the United States and other developed na-

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tions seem preoccupied with the geoeconomic strategies for their own shortterm gain—by forming economic regions to compete with one another and to subordinate the less developed nations in Asia, Eurasia, and the Middle East, and by writing off most of Africa and other underdeveloped areas as fringes. Their economic strategies are based on the conflict of game and war metaphors and the power models of balance and hegemony of the past. The world may be stumbling toward its next cold war. MALTHUSIAN PROBLEMS Time is running out. About one hundred million persons are added to the planet every year. The environment is deteriorating. National economies are stagnating, especially those of underdeveloped countries. Armaments are increasing, and local wars are breaking out. World problems and the industrial/ scientific/technological applications that produced them, whether adding to overpopulation through modern medicine or threatening lives through thermonuclear war, have jumped beyond the capacity of world institutions to solve them. If these complicated problems continue to intensify, incalculable damage may occur and reduce humankind to a miserable existence for untold generations. The problems are complicated because they are causally related. Among the four problems, overpopulation contributes most to the other three problems. It significantly affects environmental deterioration, economic stagnation, and collective violence. Environmental deterioration leads to economic stagnation and collective violence. Economic stagnation contributes to collective violence. Other causal relationships exist; for example, collective violence ruins economies, and the poverty of ruined economies encourages high birth rates. These causal-interactive problems can produce a downward spiral of catastrophe. The misery of West Africa reflects this causal interaction. Population density and growth rates are among the highest in the world. Joined with "desertification," overpopulation prevents any realistic chance of economic growth, and as an effect of these factors civil disorder prevails through most of the area. This complex of problems is emerging throughout the fringe areas of the world. Try as they may to ignore these areas, the United States and other developed countries cannot shut down the overflow of desperate migrants, areawide environmental disasters, and rampaging wars. The determining problems of overpopulation and environmental deterioration are well documented, as are the various solutions and programs. The concern here is how these determining problems affect geopolitical and geoeconomic strategies and contribute to the possibility of another cold war.

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Environmental Deterioration The environment is deteriorating at an exponential rate. Starting with the appearance of human agriculture about ten thousand years ago, human activity and industry had no noticeable environmental impact during the first ninety-five hundred years. During the past five hundred years, unprecedented increases in human population and industry had traumatic environmental impacts. The environment is deteriorating in three major respects. Nonrenewable resources are being depleted; air, water, and land are being polluted; the ecosystem is being destroyed or altered. Petroleum-effected deterioration illustrates all three respects —obvious depletion of petroleum reserves, pollution of the air and atmosphere, and destruction of thousands of species due to petroleumbased pesticides and fertilizers. While technology now allows use of solar and other renewable sources to produce most of the energy needed, the world follows the American reliance upon combustible fuels for vehicles, heating, appliances, machinery, and equipment; indeed the prosperity of both the world and American economies depends upon the trade of these fuels and their machines. Emissions from petro-driven vehicles alone are killing or afflicting much of the world's population, which now lives in cities where the air is unfit to breathe. In the United States, billions of dollars is needlessly spent upon air pollution control devices and technologies, money that would be better spent upon alternative energy sources which are both renewable and nonpolluting. In addition to pollution, petroleum consumption is destroying or altering the atmosphere, the most observable effect being global warming. Similarly, the depletion of forests and other vegetation is destroying top soil, killing flora and fauna up and down the food chain, and destroying the oxygen content in the air that flora produce. The depletion of many minerals is polluting air, water, and land. Atmospheric degradation includes global warming and destruction of the ozone layer. The chief resource user is the United States, which has a ravenous appetite for nonrenewable resources. Because of its petroleum-dependent industrial needs and the life-style of its homeland population, it devours resources far in excess of other countries. Its per capita energy consumption is exceeded only by that of Norway and Canada, which is due to climate; it is thirteen times that of China, nine times Turkey, four times Argentina, three times South Africa, three times Spain, three times Italy, and almost two times Australia.1 Americans are inclined to take a cowboy attitude about the environment, one that assumes unlimited resources and feigns scientific ignorance about possible damage. In a campaign speech in 1979, Ronald Reagan spoke of a study that "shows that 80 percent of air pollution comes not from chimneys and auto exhaust pipes, but from plants and trees." As president in 1980, he claimed to be referring to "oxides of nitrogen," compounding the error with his confusion of nitrous oxide, which vegetation emits, with nitrogen dioxide,

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which smokestacks emit. Undaunted, he still insisted a year later that "trees cause more pollution than automobiles."2 The Bush administration delegates worked to subvert the initiatives of the Earth Summit meeting in June 1992 at Rio de Janeiro, which was attended by all the major developed countries and most other nations. Two major treaties were signed, the climate change treaty and the biodiversity treaty. The American delegates bargained hard to weaken the enforcement provisions of the climate change treaty and refused to sign the biodiversity treaty. And, while Europe and Japan pledged several billion dollars to the less developed countries for environment-related programs, the United States committed only $25 million to reduce greenhouse-effect gas emissions and $150 million to protect forests.3 The Clinton administration finally signed the climate change and biodiversity treaties. However, preserving the world's ecosystems requires substantially more cash contributions and leadership from the world's most powerful nation. Overpopulation By the year 2000, human population will exceed six billion. Human population was only about five million ten thousand years ago; it was less than 500 million five hundred years ago. Human population will have multiplied ten times during the last five hundred years and will have added 4.5 billion of its 6 billion within the twentieth century. Population during the first half of the twenty-first century is expected to exceed 10 billion. Even allowing for a slowing of the current growth rate, most estimates expect 10-15 billion by the year 2150. Most of this growth will occur in less developed countries which already have high-density populations and widening impoverishment. They are experiencing their largest demographic gap between their low death rates resulting from use of modern medicine and health practices and their lingering high birth rates typical of rural and impoverished countries. Zero population growth (ZPG) is a frequently cited goal. But what is required is negative population growth (NPG), for two reasons. First, many areas are already overpopulated in relation to resources and geography, mostly the underdeveloped countries in Asia, Africa, and Latin America. Because of their debilitated growth capacity, underdeveloped areas cannot clean up and correct their environmental damage without depriving their population of food and other required necessities. To accomplish this, underdeveloped countries must adapt NPG. Second, ZPG actually requires fewer births each year to offset those who continue to live beyond the life expectancy of the year before. This is no small point. During the 1990s, worldwide life expectancy per capita is estimated to increase about three months each year, and each year about 100 million people die; therefore, 25 million extend their lives into the next year. In sum,

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increased life expectancy alone is adding 0.25 percent to the annual worldwide population increase. Massive birth control programs must be undertaken. All effective birth control devices must be made available to assure acceptance of at least one by everyone. This will include education, even indoctrination, programs. The devices and programs must be offered at no cost, since those having the highest birth rates usually have the lowest means. Birth control must be considered no less necessary than health and can be administered in connection with health clinics. Where population is now out of control and large portions of the population are uncared for, corrective as well as preventive measures must be taken; this includes encouraging voluntary sterilizations and abortions for those unable to provide for their children. Eventually, sooner rather than later, parenthood must be regarded, legally as well as morally, as a privilege and not a right. MALTHUSIAN ALTERNATIVES Thomas Malthus introduced the gloomy issue of overpopulation and its environment with his Essay on the Principle of Population as It Affects the Future Improvement of Society published in 1798. His central proposition was that starvation and poverty were destined because population increases geometrically (1, 2, 4, 8, 16) while production increases arithmetically (1, 2, 3, 4, 5). Malthus was mostly correct about world population during the nineteenth and twentieth centuries, which multiplied from just under one billion to six billion; he was mostly wrong about world production, which also multiplied geometrically because of the combustion-powered and electronic-powered industrial revolutions. The Maltusian question for the twenty-first century is more complicated: What will be the consequences of population increases considered against production increases, and also environmental deterioration? Projections for the developed and developing countries based on the declining rate of population increase and on economic growth rates are not immediately alarming. The great unknown is the environment—the finite amounts of natural resources and the virtually unknown effects of pollution and ecosystem destruction. Concerns of environment are ignored by today's anti-Malthusians—the number Ters, optimists, and regenerationists who want more of the same: more American dominance, more economic growth and markets, more demographic growth. As optimists, they believe more of the same is better. More people means more demand, which means more production and progress. As the world population increases to ten, fifteen, perhaps twenty billion people in the second half of the twenty-first century—wonderful!—think more consumers, workers, and markets.4 The leading neo-Malthusian is Paul Ehrlich. Initially influential after its publication in 1968, The Population Bomb eventually was discredited for reli-

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ance on linear population projections based on the high fertility rates of the 1960s. Ehrlich then delved in environmental studies, linking population growth as an independent variable to environmental deterioration as a dependent variable. Without alternatives to achieve both NPG and environmental restoration, the diagnosis remains gloomy.5 Workable alternatives still are lacking. Paul Kennedy examines the current worldwide developments and trends leading into the twenty-first century—including the problems of overpopulation, food production, economic trends, technology abuses, and environmental deterioration; also the politics of "transnational trends" and "nation-states." He discusses national and regional differences and responses to these trends specifically in Japan, China and India, the Pacific Rim and southeast Asia, Africa, Western Europe, Russia, and the United States, concluding with advice on how the United States can prepare for the twenty-first century. He concludes that the predictions of Thomas Malthus for the nineteenth century may come true for the twenty-first century.6 Kennedy describes nations coordinating trade and investment, regional markets and alliances being created, and international organizations and agencies attempting to manage the global economy and financial system. Yet he does not offer a clue about such transnational politics. A historian by training, he tends to focus upon events rather than subjects and objects, upon actions rather than actors, and upon description rather than analysis. His neo-Malthusian view of the twenty-first century is nonvisionary and deterministic. Things just happen—the wars and economic decline in The Rise and Fall of the Great Powers; the starvation and poverty, environmental deterioration, and overpopulation in Preparing for the Twenty-First Century. The failure to identify effective agents and workable solutions extends to other first-rate thinkers such as Lester Thurow. Not a people counter, Thurow is a bean counter, who writes persuasively in Head To Head about the increasingly endangered position of the United States in the world economy. He focuses on trade deficits and unfair foreign competition, federal and corporate budget deficits and debts, outward investment flows that destroy millions of domestic jobs and threaten the financial survival of the largest banks, deterioration of the dollar, disparity of wealth and income between nations and between classes in the United States. American economic decline is inevitable, and worldwide financial panics and probably depression also are likely. Thurow's only solution is to play harder and smarter to win the game and become more competitive with world economic powers.7 Ehrlich, Kennedy, and Thurow deserve their denigration as declinists and neo-Malthusians, but not because they are wrong about the problems, as the number Ters and regenerationists contend. They clearly document the problems of overpopulation, environmental deterioration, and economic stagnation and disparity; they convincingly reject the classical economic assurance that

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capital and wealth will flow to the less developed economies because doing business there is cheaper. Yet at this late point in the development of world government and institutionalized order, they still fail to provide a program to resolve the problems of decline. The failing of declinists and neo-Malthusians is their failure to propose solutions, perhaps to believe that solutions are possible. ZPG or NPG cannot be achieved simply by increasing family planning clinics. Economic growth and security cannot be achieved simply by competing harder and working more efficiently. The solutions must be political, and they must be international.

WORLD GOVERNMENT Two centuries ago our founding fathers pursued a vision of an American republic that would assure certain inalienable rights of life, liberty, and the pursuit of happiness, also of an American empire that would spread west of the Mississippi, north to include Canada, and south to the Floridas. They envisioned the United States of America to be the greatest democratic republic and most powerful world empire of its time. Only the early Roman republic and empire displayed such an extraordinary combination of justice and power, democracy and order. The twenty-first century requires another vision, not just of an American republic, but a world republic in which powerful nations, empires, and regions no longer seek their own power and order. Because a world republic is not an experience of the past, its vision is not very clear. By default, such a vision must begin with the United Nations, as first set forth in its charter and its "Universal Declaration of Human Rights." The United Nations and international forums are addressing with increasing urgency the issues of national sovereignty versus international control, political versus economic rights, enforcement of international law, and international military intervention. World problems are amassing beyond the resources and authority of the United States or any one nation to solve them —indeed of one region, the G-7, or the United Nations as presently constituted. Some time in the twentyfirst century, world government will emerge, simply because nothing less will do. It may be called the United Nations, "World Incorporated," or "League of Nations." The point is that an international entity must be created that has the authority to muster the resources and secure national compliance. The question of world government is not "if" but "when," and when is critical. The later world government comes, the more difficulties it will encounter. Apart from being less able to solve problems made more intransigent over time, world government will reflect the conditions which created it. If emerging after conditions have deteriorated in most of the world and a siege mentality has been adopted by the developed countries, international government is

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likely to be harsh, control-directed, even totalitarian. It is likely to be an instrument of control used by the developed countries against the rest of the world, probably along the familiar lines of North versus South or West versus the Rest. If it emerges within the next decade or two, it is more likely to be civilized, freedom-directed, and democratic. The longer nations and regions compete rather than cooperate, the longer economic conflict and cold war antagonism persist, the longer the United States indulges in exceptionalism, then the more difficult world government will be. And the more prone to despotism it will be. As democracy grows out of confidence and functioning institutions, despotism grows out of desperation and faltering institutions. As the most powerful nation in the world, the United States must lead, not by domination but by unselfish support and example. The choice is between pursuing a power strategy riveted upon the narrow foundation of national interest and reinforcing beliefs of imperialism/regionalism and exceptionalism or pursuing a moral strategy aimed at a transcending international ideal and supporting beliefs in globalism and universalism. The latter requires not only commitment of resources but submission of national sovereignty to the authority, law, and majority rule of international government. Of course, prudence must govern, and other powerful nations and regions must reciprocate. World government will not, and should not, occur overnight. Because time is both required and expiring, the United States must commit itself, now, to the idea of world government. It must commit itself in the years immediately ahead to transforming the idea into reality. World order now is in transition. The United States's presence in most parts of the world is decreasing, while the United Nations' presence is increasing. United Nations (not United States) forces are present in Cambodia; United Nations (not United States, but for a token presence in Macedonia) forces made peace in the former Yugoslavia; United Nations forces supplanted United States forces in Somalia. At the start of 1995, the United Nations maintained troops in seventeen countries. Over its history, it has carried out thirteen such operations during 1948-88, and yet added fourteen operations within the period 1988-93.8 United Nations Secretary-General Boutros Boutros-Ghali has proposed an expanded role for the United Nations in the post-cold-war era. He points out that humanitarian assistance in most crisis-stricken countries is futile without adequate security and without some form of government. "Peacekeeping" usually is not sufficient; the political process of "peacemaking" is required. While stopping short of proposing that the United Nations impose peacemaking and political solutions, Boutros-Ghali states that all nations should "rethink the question of sovereignty." National sovereignty should not be thought as "absolute and exclusive" in light of human rights that are universal and the inability of states to solve their problems singularly.9 Where settlements break down, Boutros-Ghali proposes "enforcement units"

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that are adequately financed and rapidly deployed: "The concept goes beyond peacekeeping to the extent that the operation would be deployed without the express consent of the two parties."10 Regarding social and economic development, he complains that "bilateral foreign aid programs were often an instrument of the cold war, and remain deeply affected by considerations of political power and national policy." He points out that "the promotion of social and economic progress is a specific task given to the United Nations by the charter."11 While pronouncing his grand vision of the United Nations, Boutros-Ghali must beg member nations to pay an outstanding debt that in 1996 totalled $2.3 billion, $1.2 billion of which was owed by the United States. Peacekeeping and other UN activities were suspended because the UN could not pay for military contributions, most being from less-developed countries that must demand cash. Its Department of Peacekeeping is unable to respond. The department was supposed to deliver eight thousand additional troops to Bosnia in May 1993 and four thousand additional troops to the Kuwait-Iraq border in July 1993, but still in 1994 was unable to do this. New requests were put on indefinite hold. To speed deployment, the department asked for $15 million to have equipment on hand, but member states refused. Referring to the possibility of a request for troops from Angola, the department's chief military adviser commented: "They'll say they want 20,000 peacekeepers in thirty days. We'll roll on the floor and start laughing."12 On top of declining to contribute to all UN operations, the Clinton administration cut back its dues to 25 percent of the UN budget, to accord with what it considered to be its smaller proportion of the world economy. While having called upon other nations to finance the Persian Gulf War and upon the UN to support its intervention in the Persian Gulf and Haiti, the United States is less enthusiastic when it is called upon to support United Nations activities. Most American leaders consider Boutros-Ghali to be power-hungry. They rankle at the idea of subordinating American national sovereignty to UN international sovereignty. They distrust the United Nations, particularly the General Assembly governed by the principle of one nation/one vote. Nor do they trust the World Court of Justice, whose jurisdiction in Central America was declared invalid by the Reagan administration. Ernest Lefever proposes "reining in the U.N." He considers Boutros-Ghali's statements to be "extravagant," to be crude Wilsonian idealism. The successful international rebuffs of tyranny have been unilateral, he argues, as exemplified by President Kennedy's stand on Cuba. And the United Nations is not a democratic community because it does not share "a common moral heritage and political culture."13 The American reaction to a more powerful United Nations is ambivalent, especially among conservatives. On one hand, Americans believe in universalism—at least their own universalism a la Ben Wattenberg's characterization of the United States as The First Universal Nation. The more cosmopolitan Fukuyamians sing their universal oratorio for Western civilization. On the

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other hand, Americans cling to the prerogatives of their national sovereignty, refusing to subordinate themselves, even a small detachment of troops in Somalia or Macedonia, to United Nations authority. The crux of the problem is American exceptionalism. Americans always have considered themselves to be an exceptional society—exceptional as a republic founded in a revolution that fired the shot heard around the world, as a precocious nation that expanded across the continent to include fifty states, as a democracy that assured equality and rights, as an economy that produced the highest standard of living ever, and as a world power that molded the twentieth century. The causes of success are attributed not to the historic, cultural, and material factors that enabled other nations to become great, but to unique American institutions and people—town hall democracy, Yankee ingenuity, hard work, fair play, neighborliness, business drive, to say nothing of American football and apple pie. As the exceptional example for two centuries and protector of the world during the past half century, Americans feel they have the right to mandate their rules for the world. The number l'ers point out that it was the United States who won the cold war and leads the world today; therefore, the world has no right to impose its rules upon the United States. This is reflected in grudging support for the United Nations, whereby funds are provided for some UN agencies and projects and not others. It is reflected in the persisting preference to solve problems bilaterally rather than through appropriate international organizations, as evidenced in American-Japanese trade negotiations in early 1994 when the United States (in contrast to Japan) eschewed any resort to GATTAVTO authority and rules. It is reflected in other, sundry policies: Other nations' troops should be put under United Nations command, but not American troops; other nations should pay all their United Nations dues, but not the United States; other nations should abide by WTO rules and not retaliate, but not the United States; other nations should enforce birth control, but not the United States; other nations should dismantle nuclear weapons and abandon weapons proliferation, but not the United States. "Exceptionalism" is rarely discussed. Henry Kissinger uses it to argue against the American diplomatic practice of requiring the world to meet American moral and political standards. It is "the belief in the universal application of American values."14 According to Kissinger, exceptionalism became prominent first in the foreign policy of Woodrow Wilson, who sought to reform the world according to American ideals of human rights and democratic government. He contrasts the missionary idealism of exceptionalism to the national interest realities of successful diplomacy, which he and President Richard Nixon pioneered in the early 1970s. Kissinger poses as a moderate between nationalists who would impose American ideals upon the world and internationalists who would submit American interests to international ideals. He subordinates all ideals to his own realpolitik belief in national interests and balance of power. Engrossed in a Metternichian past of nationalist power politics and committed to defending American na-

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tional interests, he unwittingly encourages American exceptionalism. Not believing in international government, he does not ask whether there can be universal or international human rights, democratic principles, morality, law, or codes of conduct. He is convinced that the United Nations has been, and is, a failure: During the cold war, "it failed to fulfill the underlying premise of collective security—the prevention of war and collective resistance to aggression." He adds, "This has been true of the United Nations even in the postcold war period."15 The question remains: Should the United States coordinate, even subordinate, its will and power to that of the United Nations? If the United States really wants to withdraw from enforcing world order, if it really wants a devolution of power and transfer of power to a successor as analyzed by George Liska, the moment has never been as propitious. While no rival power or primary aspirant appears able to take over the American role that dominated during the immediate postwar years, a functioning international system is available. Differences and conflicts can be mediated, even legislated, through the United Nations General Assembly, Security Council, Secretariat, and its various agencies, also through the World Bank and IMF, WTO agreements, and environmental treaties. The transition to a more effective world order is still problematic. Two orientations are possible. One invokes the past and the familiar concepts of hegemony and balance of power. For the United States, it means the seeking of offsetting alliances with other world powers —European Union, Russia, Japan, China —and by implication the avoidance of involvements with non-world powers, especially the underdeveloped world. According to Henry Kissinger, it is still evolving: "Both Bush and Clinton spoke of the new world order as if it were just around the corner. In fact, it is in a period of gestation, and its final form will not be visible until well into the next century."16 The alternative is an order built not upon power and international alliances but upon morality and world government. Being futuristic and unfamiliar as a model it is more indefinite. But certainly, the United Nations must lead an international effort to keep the peace and make the peace among traditional ethnic and nationalist rivalries, and among the modern economic blocs and emerging superregions. An international order does not guarantee a virtuous order. But it does supersede an imperialist order, either hegemony or the balance of power that prevailed during the cold war and that failed so tragically in Europe during the first half of the twentieth century. A nonimperialist, nonregionalist, enlightened American policy can help assure a virtuous and workable international order. Given the trend toward world economy and government, questions remain. Will the trend be toward world community with greater democracy among nations, or toward more world imperialism and regionalism with dominance among nations? Will the world community be governed on the basis of law and equity or of power and inequity? Will Americans abandon their own impe-

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rial and regional tendencies and contribute to the progressive building of world community and government in the twenty-first century?

NEXT COLD WAR AND BEYOND The historians of the future probably will look upon the twentieth century as the last century of the great empires. And they will see the ending of the twentieth century as the beginning of the economic regions. This much already is in view. Ideally those future historians will speak from the perspective of world government and from the experience of living in a world of international order and peace. They will be able to point out that the empires reflected the exhaustion of supranationalism and were too self-interested and ineffective to address world problems: political dinosaurs that were too large, too greedy, too stupid, to save themselves, much less save the world. And they will further point out that economic regions were transformed from competing and protectionist extensions of national economic rivalries to cooperative and tensionreducing intermediate steps to an integrated global economy. Finally, they will recognize that this was the most critical century for humankind; the necessary international resources and institutions were put to the task of preventing war, overpopulation, and environmental deterioration. The twenty-first century was not an American, Asian, or European Century; it was the first world century. A final thought is: What will happen will happen. The lessons of history and analyses of options and policies are mostly forgotten in the everyday conduct of national and international affairs. The apparent alternatives of the twenty-first century are mostly the imperatives already determined by the twentieth century. Yet, without doubt, this is a time of transition. That there is no set world order is both a vulnerability and an opportunity. The imperial orders are gone, as is the American/Soviet cold war order. This is one of the unique moments in history when wise policies and bold actions can matter. The United States is not condemned to continue to behave as an informal empire or to experience decline. It is not fated to carry out economic warfare by competing with the other developed countries and taking advantage of the less developed countries. It is not headed inexorably to the next cold war. Rather, it can renew the spirit of Bretton Woods and bring about a global economy that recognizes the importance of economic cooperation and independence for all national economies. Starting with the United Nations, it can organize a world community and international government to solve problems, including those of overpopulation and environmental deterioration. Will there be a cold war in which the world is divided by national, imperial, and regional strife, or will there be an enduring peace in which the world is united by the United States and other enlightened countries? These are the American alternatives for the twenty-first century.

Notes PREFACE 1. Jim Hanson, The Decline of the American Empire (Westport, C T : Praeger, 1993), p. 33. 2. Henry Kissinger, Diplomacy (New York: Simon and Schuster, 1994), p. 33. CHAPTER 1: RECONSIDERATIONS 1. Ben J. Wattenberg, The First Universal Nation: Leading Indicators and Ideas about the Surge of America in the 1990s (New York: Free Press, 1991), pp. 17, 24. 2. Arnold J. Toynbee, A Study of History: Abridgement of Volumes 1-10, ed. by D. C. Somervell (London: Oxford University Press), vol. 1, p. 245. Toynbee maintained his view of the dominance of Western civilization throughout his later writings. 3. Susan Strange, "The Future of the American Empire," Journal of International Affairs 42 (fall, 1988): 6. 4. John Naisbitt and Patricia Aburdene, Megatrends 2000: Ten New Directions for the 1990s (New York: William Morrow and Company, 1990). 5. Raveendra N. Batra, The Debt Crisis and Financial Stability: The Future, ed. by S. K. Kaushik (New York: Pace University, 1985). 6. Samuel P. Huntington, "The U.S. —Decline or Renewal?" Foreign Affairs 67, no. 2 (winter, 1988/89): 76-96. 7. Henry R. Nau, The Myth of America s Decline: Leading the World Economy into the 1990s (New York: Oxford University Press, 1990), p. 10. 8. Jim Hanson, The Decline of the American Empire (Westport, CT: Praeger, 1993), Ch. 7.

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CHAPTER 2: OLD IMPERIAL ORDER 1. Henry Kissinger, Diplomacy (New York: Simon and Schuster, 1994), pp. 447449. 2. Truman Doctrine cited in Henry Steele Commager, Ed., Documents of American History, 7th ed. (New York: Appleton-Century-Crofts, 1963), vol. 2, p. 526. 3. Clifford Clark quoted in Kissinger, p. 450. 4. The National Security Document is discussed in William A. Williams, Empire as a Way of Life (Oxford: Oxford University Press, 1980), pp. 189-90. 5. Ibid., p. 190. 6. Franklin D. Roosevelt quoted in Kissinger, p. 416. 7. John Maynard Keynes, Economic Consequences of the Peace (New York: Harcourt, Brace and Howe, 1920). 8. Nixon quoted in interview with Time, January 3, 1972, p. 15. 9. Kissinger, p. 708. 10. Tom Barry and Deb Preusch, The Soft War: The Uses and Abuses of U.S. Economic Aid in Central America (New York: Grove Press, 1988), pp. 3-5. 11. Harold Brown, "Choices for the 1990s: Preserving American Security Interests Through the Century's End," in Edward K. Hamilton, Ed., Americas Global Interests: A New Agenda (New York: W. W. Norton, 1989), pp. 162-163. Other references are presented in Paul Kennedy, Preparing for the Twenty-First Century (New York: Random House, 1993), p. 519. 12. George Bush, Address by the President on the State of the Union (Washington, DC: The White House Office of the Press Secretary, January 29, 1991), p. 1. 13. Quoted in John M. Swomley, Jr., American Empire: Political Ethics of Twentieth Century Conquest (London: Macmillan, 1970), p. 15. 14. Richard Nixon quoted in Seymour M. Hersh, The Price of Power: Kissinger in the Nixon White House (New York: Summit Books, 1983), p. 121. 15. Barry Bubin, "Brazil Grabs for Hegemony," Guardian, April 12, 1972, p. 11. 16. Ibid. 17. Lester Thurow, Head To Head: The Coming Economic Battle Among Japan, Europe, and America (New York: William Morrow, 1992), pp. 229-230. 18. Edward N. Luttwak, "Where Are the Great Powers?" Foreign Affairs 73, no. 4 (July/August, 1994): 23. 19. George Liska, Beyond Kissinger: Ways of Conservative Statecraft (Baltimore and London: Johns Hopkins University Press, 1975), pp. 103-104. 20. Ibid., pp. 105, 106. 21. Ibid., p. 129. 22. Henry Kissinger, p. 810. 23. Ibid. 24. Ibid., p. 835.

CHAPTER 3: NEW ECONOMIC ORDER 1. Peter F. Drucker, "The End of Japan, Inc.?" Foreign Affairs 72, no. 2 (spring, 1993): 10-15. 2. Robert Gilpin, The Political Economy of International Relations (Princeton, NJ: Princeton University Press, 1987), Ch. 10.

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3. Jagdish Bhagwati, "The Diminished Grant Syndrome: How Declinism Drives Trade Policy," Foreign Affairs 72, no. 2 (spring, 1993): 26. 4. The World Almanac and Book of Facts, 1995 (Mahwah, NJ: Funk and Wagnalls), p. 202. 5. Lester Thurow, Head To Head: The Coming Economic Battle Among Japan, Europe, and America (New York: William Morrow, 1992), pp. 82-83. 6. The effects of undervalued currencies on the economies of the less-developed countries are analyzed in Arjun Makhijani, From Global Capitalism to Economic Justice (New York: Apex Press, 1992). 7. Paul Davidson, "What International Payments Scheme Would Keynes Have Suggested for the Twenty-First Century?" in Davidson and J. A. Kregel, Eds., Economic Problems of the 1990s: Europe, the Developing Countries and the United States (Brookfield, VT: Edward Elgar, 1991), p. 87. 8. William Darity, Jr., "Banking on Capital Flight," in Davidson and Kregel. 9. Luis Pazos, "Mexico: Bring Flight Capital Home," Christian Science Monitor, October 5, 1989, p. 19. 10. Estimate by William Thalwitz, World Bank vice president; cited in Tim Carrington, "Russia Should Turn to Latin America for Advice as Capital Flight Worsens," Wall Street Journal, November 11, 1993, p. A8. 11. Darity, Ch. 2. 12. Malcolm Gillis, et al, Economics of Development, 2nd ed. (New York and London: W. W. Norton, 1987), p. 376. 13. Bill Emmott, "Multinationals," The Economist, March 27, 1993, pp. 5-6. 14. William Holstein, et al., "The Stateless Corporation," Business Week, May 14, 1990, p. 98. 15. Daniel Burstein, Yen! Japans New Financial Empire and Its Threat to America (New York: Simon and Schuster, 1988). 16. Thurow, pp. 120-121. 17. Susan Strange, "The Future of the American Empire," Journal of International Affairs 42 (fall, 1988): 10. 18. Neal R. Peirce, "The Age of the Citistate," Commentary (summer, 1993): 40-49. 19. Kenichi Ohmae, "The Rise of the Region State," Foreign Affairs 72, no. 2 (summer, 1993): 78-87. 20. Kenichi Ohmae, "Beyond Fiction to Fact: The Borderless Economy," New Perspectives Quarterly 7, no. 2 (spring, 1990): 20-21. 21. Thurow, p. 82. 22. Ibid. p. 122. 23. John Kenneth Galbraith, American Capitalism: The Concept of Countervailing Power (Boston: Houghton Mifflin, 1956), p. 113. 24. Paul Volker quoted in Thomas A. Stewart, "The New Face of American Power," Fortune, July 26, 1993, p. 8. CHAPTER 4: THE UNITED STATES AS A REGION 1. George Bush is quoted in Andrew Bilski, "Uniting the Americas," MacLeans, July 9, 1990, p. 21. 2. Bill Clinton, Press Conference of June 15, 1993, quoted in editorial "GoodLooking Clinton," Wall Street Journal, June 16, 1993, p. A17.

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3. Bill Bradley, "NAFTA Opens More than a Trade Door," Wall Street Journal, September 16, 1993, p. A24. 4. Statistical Abstract of the United States, 1995 (Washington, DC: U.S. Bureau of the Census, 1995), Table 330. 5. Poll conducted by Newsweek and reported in issue of August 9, 1993, p. 19. 6. "America's New Industrial Belt: Northern Mexico," New York Times, March 21, 1993, pp. IF, 14F. 7. Jeffrey Garten quoted in Robert Keatley, "Commerce Department Changes Tune, Trumpets Investing in Top 10' Nations," Wall Street Journal, February 11, 1994, p. A6. 8. Thomas A. Stewart, "The New Face of American Power," Fortune, July 26, 1993, 72. 9. Ibid., p. 74. 10. Ibid. 11. Ibid., p. 85. 12. Felix Rohatyn, "World Capital: The Need and the Risks," The New York Review of Books, July 14, 1994, p. 49. 13. Lester Thurow, Head To Head: The Coming Economic Battle Among Japan, Europe, and America (New York: William Morrow, 1992), pp. 270-271. 14. Stewart, p. 74. 15. Steven Fazzari, paper presented to Economic Policy Institute, cited in David Nicklaus, "Interest Rates May Not Spur Firms to Invest," St Louis Post-Dispatch, June 20, 1993, p. El. 16. Ronald H. Brown quoted by Charlotte Grimes, " 'It's Working': NAFTA Exports Hailed by U.S.," St Louis Post-Dispatch, November 19, 1995, p. 3A. 17. Discussed in Thurow, pp. 52-53. 18. Statistical Abstract, Table 667. 19. Bradley, p. A24. CHAPTER 5: OTHER DEVELOPED REGIONS 1. Various geoeconomic or development categories have been devised, especially since the demise of the cold war geopolitical categories of first, second, and third worlds. The categories of developed countries and less developed countries compare to Donald Snow's classifications of first tier and second tier economies and resemble his economic subcategories of second tier economies—structurally developed, partially developed countries, potentially developable countries, and undevelopable countries. See Donald M. Snow, The Shape of the Future: The Post-Cold War World, Rev. ed. (Princeton, NJ: Princeton University Press, 1995). 2. Lester Thurow, Head to Head: The Coming Economic Battle Among Japan, Europe, and America (New York: William Morrow, 1992), p. 258. 3. Jean-Jacques Servan-Schreiber, Le Defi American (Paris: Editions Denoel, 1967), published as The American Challenge (London: Hamish Hamilton, 1968). 4. Umberto Agnelli quoted in Thurow, p. 79. 5. Ibid., pp. 69-70. 6. George Melloan, "Closing Europe's Doors Will Have a Cost," Wall Street Journal, June 7, 1993, p. Al5.

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7. Terrence Roth, "Europe's Safety Nets Begin to Tear," Wall Street Journal, July 1, 1993, p. A10. 8. Thurow, p. 71. 9. Henry Stimson quoted in John M. Swomley, Jr., American Empire: Political Ethics of Twentieth Century Conquest (London: Macmillan, 1970), p. 55. 10. Bill Emmott, The Sun Also Sets: The Limits to Japans Economic Power (New York: Touchstone Books, 1989), p. 135. 11. Edith Cresson quoted in Thurow, p. 81. 12. Paul E. Sultan, "From Cold Wars to Trade Wars: Battle Plans from the Pacific Bunkers," Unpublished Paper, Edwardsville, IL, 1992, pp. 4-5. 13. Ibid., pp. 7-8. 14. David Hale, "Will the Yen Displace the Dollar as the Pacific Rim's Currency?" referenced in Emmott, p. 192. 15. James C. Abegglen, Sea Change: Pacific Asia as the New World Industrial Center (New York: Free Press, 1994). 16. Emmott, p. 239. 17. Morihiro Hosokawa quoted in John Bussey and Michael Williams, "New Leadership Makes Japan Rethink War," Wall Street Journal, August 16, 1993, p. A10. 18. "Profile: Australia," Foreign Trade, June 1993, pp. 32-36.

CHAPTER 6: THE SOCIALIST DEVELOPING REGIONS 1. Robert McGough, "Mutual Funds Nibble at 'Emerging' Russia Debt," Wall Street Journal, August 3, 1993, p. Cl. 2. Ibid. 3. The 1993 annual report of the European Bank for Reconstruction and Development cited in "East Europe's Growth Hampered," Wall Street Journal, September 22, 1993, p. A16. 4. Editorial, Wall Street Journal, July 8, 1993, p. A12. 5. Claudia Rosett, "Rooted in Soviet Past, Russia's Central Bank Lacks Grasp of Basics," Wall Street Journal, September 23, 1993, p. Al. 6. Yuri Skokov quoted in Adi Agnatius, "Former Yeltsin Aide Believes Russia May Be Heading Toward Disintegration," Wall Street Journal, June 9, 1993, p. A9. 7. Pavel Grachev quoted in "Not So Big and Bad After All," Newsweek, November 15, 1993, p. 14. 8. Andrei Kozyrev quoted in Karen Elliott House, "The Second Cold War," Wall Street Journal, February 17, 1994, p. A18. 9. Napoleon Bonaparte quoted in Ronald Steel, Pax America (New York: Viking Press, 1970), p. 146. 10. "Chinese Puzzles," The Economist, May 15, 1993, p. 83. 11. Nicholas Kristoff, "The Rise of China," Foreign Affairs (November-December, 1993), p. 61. 12. "Cracking the China Market," Wall Street Journal, December 10, 1993, p. R3. 13. Karen Elliott House, "Beijing Vice Premier Vows to Press Reform of Nation's Economy," Wall Street Journal, December 12, 1993, p. Al. 14. "Change for a Dollar," Wall Street Journal, December 10, 1993, p. R8; James

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McGregor, "Reform in China Adds to Currency Woes," Wall Street Journal, June 2, 1993, p. A10. 15. Kathy Chen, "Chinese Army Fashions Major Role for Itself as a Business Empire," Wall Street Journal, May 24, 1994, pp. Al, A9. 16. Murray Weidenbaum, "Greater China: The Next Economic Superpower?" Center of the Study of American Business (February, 1993), p. 2. 17. Samuel P. Huntington, "The Clash of Civilizations?" Foreign Affairs 72, no. 2 (summer, 1993): p. 28. CHAPTER 7: THE DEVELOPING PERIPHERIES 1. The idea of an East-West fault line is advanced by William Wallace, The Transformation of Western Europe (London: Pinter, 1990). 2. Gautam Naik, "Western Firms Investing More in East Europe," Wall Street Journal, October 4, 1993, p. A5A. 3. Donald M. Snow, The Shape of the Future: The Post-Cold War World, Rev. ed. (Princeton, NJ: Princeton University Press, 1995), p. 133. 4. Hashemi Rafsanjani quoted in "The Month in Review," Current History 356 (April, 1992): 186. 5. William A. Williams, Empire as a Way of Life (Oxford: Oxford University Press, 1980). 6. Bonham C. Richardson, The Caribbean in the Wider World, 1492-1992 (Cambridge: Cambridge University Press, 1992), pp. 101-102. 7. Statistical Abstract of the United States (Washington, DC: U.S. Bureau of the Census, 1995), Table 1329. 8. Richardson, p. 199. CHAPTER 8: THE UNDERDEVELOPED AREAS 1. World Bank, World Development Report 1992: Development and the Environment (New York: Oxford University Press, 1992), Table 1, pp. 218-219. 2. Ibid., Table 2, pp. 220-221. 3. Stephen L. Parente and Edward C. Prescott, "Changes in the Wealth of Nations," Quarterly Review (spring, 1993): 3-14. 4. Felix Rohatyn, "World Capital: The Need and the Risks," The New York Review of Books, July 14, 1994, p. 50. 5. Cited in Partnership for Global Development: The Closing Horizon (New York: Carnegie Commission of Science, Technology, and Government, December 1992), p. 38. 6. Davita Silfen Glasberg and Kathryn B. Ward, "Foreign Debt and Economic Growth in the World System," Social Science Quarterly 74, no. 4 (December, 1993): 706. 7. "Latin America's Tost Decade,' " Newsweek, October 31, 1988, p. 54. 8. Patricia A. Wilson, Exports and Local Development: Mexico's New Maquiladoras (Austin: University of Texas Press), 1992. 9. Paul Kennedy, Preparing for the Twenty-First Century (New York: Random House, 1993), p. 284.

Notes

177

10. Robert L. Heilbroner, The Great Ascent, (New York: Harper & Row, 1963). 11. Gunnar Myrdal, The Challenge of World Poverty (New York: Pantheon Press, 1970), Ch. 13. The law of unequal development was first propounded by Lenin in his 1917 essay "Imperialism." 12. Tim Carrington, "Economic Disparities Vex Developing World," Wall Street Journal, September 27, 1993, p. Al. 13. Boutros Boutros-Ghali quoted in "U.N. Chief: Gap Grows Between 1.3 Billion Poorest, the Rest," St. Louis Post-Dispatch, March 7, 1995, p. 3A. 14. Robert Gilpin, The Political Economy of International Relations (Princeton, NJ: Princeton University Press, 1987), p. 400. 15. Lester Thurow, Head To Head: The Coming Economic Battle Among Japan, Europe, and America (New York: William Morrow, 1992), p. 17. 16. Stephen John Stedman, "The New Interventionists," Foreign Affairs 72, no. 1 (1992/93): 1-16. 17. James Schlesinger, "Quest for a Post-Cold War Foreign Policy," Foreign Affairs 72, no. 1 (1992/93): 17. 18. Ibid., p. 26. 19. David Aronson, "Why Africa Stays Poor, and Why It Doesn't Have To," The Humanist 53, no. 2 (March/April, 1993): 9-14. 20. Robert D. Kaplan, "The Coming Anarchy," The Atlantic Monthly (February 1994): 48. 21. Article excerpts reprinted in "Who Cares About Africa," Utne Reader (November/December 1992): 88. 22. Seymour M. Hersh, The Price of Power: Kissinger in the Nixon White House (New York: Summit Books, 1983), Ch. 32. 23. Thurow, pp. 208-209. 24. Daniel Chirot, Social Change in the Twentieth Century (New York: Harcourt Brace Jovanovich), 1977. 25. Thurow, p. 209. 26. George Clausen, Jr. (vice president of McCormick and Company), "Global Sourcing and Business Development," Global Business Strategies: Competition Vs. Alliances, Proceedings of the 1991 International Business Conference, St. Louis. St. Louis University Institute of International Business, July 1992, pp. 22-32. CHAPTER 9: THE NEXT COLD WAR? 1. "U.S., Europe End Haggling About Movies," St Louis Post-Dispatch, December 15, 1993, p. 6A. 2. "Gavel's Smack Cuts Tariffs, Opens Trade for 117 Nations," St. Louis Post-Dispatch, December 16, 1993, p. 1A. 3. Ibid. 4. Survey results reported in William Dullforce, "Japan Viewed as World's Most Unfair Trading Nation," Financial Times, March 13, 1990, p. 20. American unfair trade practices are identified in Report on United States Trade Barriers and Unfair Practices, 1994: Problems of Doing Business with the US (Washington, DC: European Union, 1994). 5. "Blocking Trade?" Wall Street Journal, September 21, 1990, p. R31.

178

Notes

6. Non-Aligned Movement spokesman Ernesto Samper quoted in: "Leaders Want a Stake in Global Market," St. Louis Post-Dispatch, October 19, 1995, p. 6A. 7. David Olive, Political Babble (New York: John Wiley and Sons, 1992), p. 223. 8. Bill Clinton quoted in "Washington Wire," Wall Street Journal, July 8, 1994, p. Al. 9. Kenichi Ohmae, "The Vampire Summit," St. Louis Post-Dispatch, July 7, 1993, p. A12. 10. WTO head Peter Sutherland quoted in William Pfaff, "U.S. Trade Push Has Global Fallout," St. Louis Post-Dispatch, February 2, 1995, p. 7B. 11. Alan Murray, "U.S. Is Unlikely to Act to Halt Surge of Yen," Wall Street Journal, August 17, 1993, p. A2. 12. Warren Christopher quoted in "U.S. Seeks to Include Europe in Trade Zone," St. Louis Post-Dispatch, June 3, 1995, p. 7A. 13. Warren Christopher quoted in Robert S. Greenberger and Laurence Zuckerman, "Asia-Pacific Group, at a Crossroads, May Determine How to Define Region," Wall Street Journal, November 11, 1993, p. A2. 14. The East Asian Miracle: Economic Growth and Public Policy. New York: International Bank for Reconstruction and Development, 1993. 15. Gus Hooke's findings discussed in Urban C. Lehner, "Belief in an Imminent Asian Century Is Gaining Sway," Wall Street Journal, May 17, 1993, p. A12. 16. John Kenneth Galbraith, American Capitalism: The Concept of Countervailing Power (Boston: Houghton Mifflin, 1956). 17. Chalmers Johnson, MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925-1975 (Stanford, CA: Stanford University Press, 1982). 18. Jiang Zemin quoted in "China Pledges to Block U.S. at Rim Meeting," St Louis Post-Dispatch, November 12, 1994, p. 2A. 19. Robert Gilpin, The Political Economy of International Relations (Princeton, NJ: Princeton University Press, 1987), p. 393. 20. Marcus W. Brauchli, "Asia, on the Ascent, Is Learning to Say No to Arrogant' West," Wall Street Journal, April 13, 1994, Al, A8. 21. Tim Carrington, "It Makes Cultural and Economic Sense for U.S. to Focus on Europe over Asia," Wall Street Journal, June 13, 1994, p. A12. 22. Samuel P. Huntington, "The Clash of Civilizations?" Foreign Affairs 72, no. 2 (summer, 1993): 22. 23. Ibid., p. 27. 24. Ibid., pp. 27-29. 25. Samuel P. Huntington, "Response: If Not Civilizations, What?" Foreign Affairs 72, no. 5 (November/December, 1993): 186-194. 26. Huntington, "The Clash of Civilizations?" p. 48. 27. Joel Kotkin, Tribes: How Race, Religion and Identity Determine Success in the Global Economy (New York: Random House, 1993). 28. Mark Juergensmeyer, The New Cold War? Religious Nationalism Confronts the Secular State (Berkeley: University of California Press, 1993). 29. Lester Thurow, Head To Head: The Coming Economic Battle Among Japan, Europe, and America (New York: William Morrow and Company, 1992). 30. Francis Fukuyama, The End of History and the Last Man (New York: Free Press, 1991).

Notes

179

CHAPTER 10: ALTERNATIVES TO ECONOMIC WAR 1. Benjamin Disraeli quoted in Robert L. Heilbroner, The Worldly Philosophers (New York: Time Incorporated, 1961), p. 197. 2. Ibid., p. 207. 3. John A. Hobson, Imperialism: A Study (London: Allen and Unwin, 1984), p. 47. 4. Joseph Chamberlain quoted in "Brussels' Unreal Dominions," The Economist, May 4, 1991, p. 19. 5. James Fallows, "How the World Works," Atlantic Monthly (December 1993): 79. 6. Statistical Abstract of the United States, 1994, Washington, DC: U.S. Bureau of the Census, 1993), Table 673. 7. Ibid., Table 864. 8. Paul Krugman, "Competitiveness: A Dangerous Obsession," Foreign Affairs 73, no. 2 (March/April, 1994): pp. 28-44; "Responses," Foreign Affairs 73, no. 4 (July/ August, 1994): 186-197. 9. James Tobin, "A Tax on International Currency Transactions," Human Development Report 1994 (New York: Oxford University Press, 1994), p. 70. 10. David C. Korten, When Corporations Rule the World (West Hartford, CT: Kumarian Press; San Francisco: Berrett-Koehler Publishers, 1995), p. 323. 11. John Maynard Keynes, The Collected Writings of John Maynard Keynes, vol. 25 (London: Macmillan, 1980), p. 27. 12. Paul Davidson, "What International Payments Scheme Would Keynes Have Suggested for the Twenty-First Century?" in Paul Davidson and J. A. Kregel, Eds., Economic Problems of the 1990s: Europe, the Developing Countries and the United States, (Brookfield, VT: Edward Elgar, 1991), Ch. 5. 13. James Fallows, "Looking at the Sun," Atlantic Monthly (November 1993): 69100. 14. Herbert Hoover quoted in W. H. G. Armytage, The Rise of the Technocrats: A Social History (London: Routledge and Kegan Paul, 1965), p. 248. 15. Randall Collins, The Credential Society: An Historical Sociology of Education and Stratification (New York: Academic Press, 1979). 16. Economic Report of the President, 1994 (Washington, DC: Government Printing Office, 1994), p. 169.

CHAPTER 11: POLITICAL AND MILITARY ALTERNATIVES 1. Stephen Stedman, "The New Interventionists," Foreign Affairs 72, no. 1 (1992/ 93): p. 4. 2. Ibid., p. 3. 3. Bill Clinton and Robert Dole quoted in Ann Devroy, "Clinton and Dole Trade Barbs on Foreign Policy," St. Louis Post-Dispatch, March 2, 1995, 5B. 4. Statistical Abstract of the United States, 1993 (Washington, DC: U.S. Bureau of the Census, 1993), Table 1341. 5. Douglas Waller, "Running a 'School for Dictators/ " Newsweek, August 9, 1993, pp. 34-37. 6. Tom Barry and Deb Preusch, The Soft War: The Uses and Abuses of U.S. Economic Aid in Central America (New York: Grove Press, 1988).

180

Notes

7. Robert D. Kaplan, "The Coming Anarchy," Atlantic Monthly (February 1994), p. 74. 8. Ibid. 9. Statistical Abstract of the United States, 1995 (Washington, DC: U.S. Bureau of the Census), Table 555. 10. Boutros-Ghali, "Empowering the United Nations," Foreign Affairs 71, no. 5 (winter, 1992/93): 91. 11. Michael K. Frisby, "Clinton Export Strategy to Allow Aid to Be Tied to Buying of U.S. Products," Wall Street Journal, September 30, 1993, p. A4. 12. Adlai Stevenson quoted in Gorton Carruth and Eugene Ehrlich, American Quotations (New York: Wings Books, 1992), Quotation 68: 60. 13. Greg Bischak, Conversion After the Cold War (Washington, DC: National Commission for Economic Conversion and Disarmament, November 19, 1992), pp. 1-6. 14. Discussed in Gene R. La Rocque, "The Pentagon's Expansion Plans," St Louis Post-Dispatch, April 6, 1992, p. 3B. 15. Robert M. Gates, "No Time to Disarm," Wall Street Journal, August 23, 1993, p. A10. 16. James Woolsey quoted in Jonathan Alter, "Not-So-Smart Intelligence," Newsweek, March 7, 1994, p. 31. 17. Discussed in Harry Levins, "From the Sea: Navy's New Look: Send in the Marines," St. Louis Post-Dispatch, November 29, 1992, p. Bl. 18. Joseph J. Romm, Defining National Security: The Nonmilitary Aspects (New York: Council on Foreign Relations, 1993). 19. Stewart Brand quoted in "Eco-Warriors" Utne Reader (January/February 1993), p. 17. 20. Gates, p. A10. 21. General Charles A. Horner quoted in "Scrap All Nuclear Weapons, General Says," St. Louis Post-Dispatch, July 16, 1994, p. 5A. 22. Andrew Marshall quoted in Thomas E. Ricks, "Warning Shot: How Wars Are Fought Will Change Radically, Pentagon Planner Says," Wall Street Journal, July 15, 1994, pp. Al, A4. 23. Statistical Abstract of the United States, 1995 (Washington, DC: U.S. Bureau of the Census), Tables 555 and 556. 24. Lance Davis and Robert Huttenback. Mommon and the Pursuit of Empire: The Political Economy of British Imperialism, 1860-1912 (Cambridge: Cambridge University Press, 1986), p. 163. 25. Eric J. Hobsbaum, Industry and Empire: An Economic History of Britain Since 1750 (London: Weidenfeld and Nicolson, 1968), p. 126 26. Ibid., p. 233. 27. Paul Kennedy, Preparing for the Twenty-First Century (New York: Random House, 1993), p. 155. Imperial overstretch also is discussed by Harold Brown, "Choices of the 1990s: Preserving American Security Interests Through the Century's End," in Edward K. Hamilton, Americas Global Interests: A New Agenda (New York: W. W. Norton, 1989), Ch. 3. 28. Paul Kennedy, The Rise and Fall of the Great Powers: Economic Change and Military Conflict from 1500 to 2000 (New York: Vintage Books, 1989), p. 609 n. 18. 29. Ibid., pp. 532-533. 30. Geir Lundestad, The American Empire and Other Studies of U.S. Foreign Policy in a Comparative Perspective (New York: Oxford University Press, 1990), p. 110.

Notes

181

31. Statistical Abstract, Table 979. 32. Lester Thurow, Head To Head: The Coming Economic Battle Among Japan, Europe, and America (New York: William Morrow, 1992), p. 167. 33. Kennedy, p. 44. 34. Murray L. Weidenbaum, Small Wars, Big Defense: Paying for the Military After the Cold War (New York: Oxford University Press, 1992). 35. John A. Alic, Lewis M. Branscomb, Harvey Brooks, Ashton B. Carter, and Gerald L. Epstein, Beyond Spinoff: Military and Commercial Technologies in a Changing World (Boston: Harvard Business School Press, 1992). 36. Plutarch quoted in Michael Jackman, Crowns Book of Political Quotations (New York: Crown Publishers, 1982), p. 141. CHAPTER 12: IDEOLOGICAL ALTERNATIVES 1. George Orwell, 1984 (New York: Harcourt, Brace and Company, 1949). 2. Francis Fukuyama, "The End of History?" The National Interest (summer, 1989): 5-18. 3. Daniel Bell, The End of Ideology (Glencoe, IL: Free Press, 1960), p. 370. 4. Fukuyama, p. 15. 5. Ibid., p. 5. 6. Ibid., p. 18. 7. Ibid., p. 15. 8. Ibid., p. 17. 9. Allan Bloom, Pierre Hassner, Gertrude Himmelfarb, Irving Kristol, Daniel Patrick Moynihan, and Stephen Sestanovich, "Responses to Fukuyama," The National Interest (summer 1989): 19-35. 10. Fukuyama, p. 18. 11. Francis Fukuyama, The End of History and the Last Man (New York: Free Press, 1991). 12. Fukuyama, "The End of History?" p. 18. 13. Jim Hanson, The Decline of the American Empire (Westport, CT: Praeger, 1993), pp. 183-185. 14. Ronald Reagan quoted in Arthur Schlesinger, Jr., The Cycles of American History (Boston: Houghton Mifflin Company, 1979), p. ii. 15. Robert Dallek, The American Style of Foreign Policy: Cultural Politics and Foreign Affairs (New York: New American Library, 1983), p. 117. 16. Walter W. Rostow, The Stages of Economic Growth: A Non-Communist Manifesto (Cambridge: Cambridge University Press, 1961). 17. James Burnham, The Machiavellians: Defenders of Freedom (New York: John Day, 1943), p. 246. 18. Samuel P. Huntington, et al., The Crisis of Democracy: Report on the Governability of Democracies to the Trilateral Commission (New York: New York University Press, 1975); William Kornhauser, The Politics of Mass Society (Glencoe, IL: Free Press, 1959); Seymour Martin Lipset, Political Man: The Social Bases of Politics (Garden City, NY: Doubleday, 1960). 19. Henry Kissinger quoted in Gorton Carruth and Eugene Ehrlich, American Quotations (New York: Wings Books, 1992), Quotation 190: 29. 20. Abraham Lincoln quoted in Carruth and Ehrlich, Quotation 137:32. 21. Democratic Party platform quoted in Carruth and Ehrlich, Quotation 152: 1.

182

Notes

22. Martin Luther King quoted in Carruth and Ehrlich, Quotation 181: 23. 23. James Q. Wilson, The Moral Sense (New York: Free Press, 1993). 24. Richard Stivers, The Culture of Cynicism: American Morality in Decline (Cambridge, MA: Blackwell, 1994). 25. Confucius, The Analects of Confucius, tr. by Arthur Waley (New York: Vintage Books, 1989), pp. 104, 105. 26. Thomas M. Frank, Nation Against Nation: What Happened to the U.N. and What Can the U.S. Do About It? (New York: Oxford University Press, 1985), p. 336. CHAPTER 13: WORLD ALTERNATIVES 1. International Bank for Reconstruction and Development, World Development Report 1992: Development and the Environment (New York: Oxford University Press, 1992), Table 5. 2. Ronald Reagan quoted in David Olive, Political Babble: The 1,000 Dumbest Things Ever Said by Politicians (New York: John Wiley and Sons, 1992), pp. 89-90. 3. "And Now, the Road from Rio," Newsweek, June 22, 1992, p. 46. 4. Number Fers addressing world problems of population and environment include: Jean Dreze, Hunger and Public Action (New York: Oxford University Press, 1990); Julian L. Simon, The Ultimate Resource (Princeton, NJ: Princeton University Press, 1981); John Naisbitt and Patricia Aburdene, Megatrends 2000: Ten New Directions for the 1990s (New York: William Morrow, 1990); Ben J. Wattenberg, The Birth Dearth (New York: Pharos, 1987). 5. Paul R. Ehrlich, The Population Bomb (New York: Random House, 1968); Paul R. Ehrlich and Anne H. Ehrlich, Population Resources Environment: Issues in Human Ecology (San Francisco: W. H. Freeman, 1970). 6. Paul Kennedy, Preparing for the Twenty-First Century (New York: Random House, 1993). 7. Lester Thurow, Head To Head: The Coming Economic Battle Among Japan, Europe, and America (New York: William Morrow, 1992). 8. Boutros Boutros-Ghali, "Empowering the United Nations," Foreign Affairs 71, no. 5 (winter, 1992/93): 90. 9. Ibid., p. 99. 10. Ibid., p. 94. 11. Ibid., pp. 97, 96. 12. Maurice Baril, chief military adviser to the United Nations Department of Peacekeeping Operations, is quoted in Geraldine Brooks, "Peacekeeping Missions of U.N. Are Pursued on a Wing and a Prayer," Wall Street Journal, December 12, 1993, p. Al. 13. Ernest W. Lefever, "Reining in the U.N." Foreign Affairs 72, no. 3 (summer 1993): p. 19. 14. Henry Kissinger, Diplomacy (New York: Simon and Schuster, 1994), p. 668. 15. Ibid., pp. 249-250. 16. Ibid., p. 806.

Selected Bibliography Barnet, Richard J., and John Cavanaugh. Global Dreams: Imperial Corporations and the New World Order. New York: Simon and Schuster, 1994. Blake, Robert. The Paladin History of England: The Decline of Power, 1915-1964. Oxford: Oxford University Press, 1985. "Blocking Trade?" Wall Street Journal^ September 21, 1990. Boutros-Ghali, Boutros. "Empowering the United Nations," Foreign Affairs 71, no. 5 (winter, 1992/93): 89-102. Bradley, Bill. "NAFTA Opens More than a Trade Door," Wall Street Journal, September 16, 1993, A24. Burnham, James. The Machiavellians: Defenders of Freedom. New York: John Day, 1943. Carruth, Gorton, and Eugene Ehrlich. American Quotations. New York: Wings Books, 1992. Commager, Henry Steele. Documents in American History, 7th ed. New York: Appleton-Century Crofts, 1962. Darity, William, Jr. "Banking on Capital Flight." In Economic Problems of the 1990s: Europe, the Developing Countries and the United States, edited by Paul Davidson and J. A. Kregel. Brookfield, VT: Edward Elgar, 1991. Davidson, Paul, and J. A. Kregel. Economic Problems of the 1990s: Europe, the Developing Countries and the United States. Brookfield, VT: Edward Elgar, 1991. Davis, Lance E., and Robert Huttenback. Mammon and the Pursuit of Empire: The Political Economy of British Imperialism, 1860-1912. Cambridge: Cambridge University Press, 1986. Drucker, Peter F. The New Realities. New York: Harper & Row, 1989. . "The End of Japan, Inc.?" Foreign Affairs 72, no. 2 (spring, 1993): 10-15. Emmott, Bill. The Sun Also Sets: The Limits to Japans Economic Power. New York: Touchstone Books, 1989. . "Multinationals." The Economist, March 27, 1993, 5-20.

184

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Emmott, Bill. Japanophobia: The Myth of the Invincible Japanese. New York: Times Books, 1994. Fallows, James. "Looking at the Sun." Atlantic Monthly, November 1993, 69-100. . "How the World Works." Atlantic Monthly, December 1993, 61-87. . Looking at the Sun. New York: Pantheon, 1994. Frank, Thomas M. Nation Against Nation: What Happened to the U.N. Dream and What Can the U.S. Do About It? New York: Oxford University Press, 1985. Frankel, Jeffrey A., and Miles Kahler, Eds. Regionalism and Rivalry: Japan and the U.S. in Pacific Asia. Chicago: University of Chicago Press, 1993. Fukuyama, Francis. "The End of History." The National Interest, summer, 1989, 5-18. . The End of History and the Last Man. New York: Free Press, 1991. Galbraith, John Kenneth. American Capitalism: The Concept of Countervailing Power. Boston: Houghton Mifflin, 1956. Gallagher, John, and Ronald Robinson. "The Imperialism of Free Trade." Economic History Review, 2d. ser., 6 (1953): 1-15. Gates, Robert. "No Time to Disarm." Wall Street Journal, August, 1993, A10. Gillis, Malcolm, et al. Economics of Development, 2d ed. New York and London: W. W. Norton, 1987. Gilpin, Robert. The Political Economy of International Relations. Princeton, NJ: Princeton University Press, 1987. "Good-Looking Clinton." Wall Street Journal, June 16, 1993. Grunwald, Henry. "The Second American Century." Time, October 8, 1990, 70-75. Hanson, Jim. The Decline of the American Empire. Westport, CT: Praeger, 1993. Headrick, Daniel R. The Tools of Empire: Technology and European Imperialism in the Twentieth Century. London: Oxford University Press, 1981. Hensman, C. R. Rich Against Poor: The Reality of Aid. London: Allen Lane, The Penguin Press, 1971. Heilbroner, Robert. The Great Ascent: The Struggle for Economic Development in Our Time. New York: Harper & Row, 1963. Hobsbawm, Eric J. Industry and Empire: An Economic History of Britain Since 1750. London: Weidenfeld and Nicolson, 1968. . The Age of Empire, 1875-1914. New York: Pantheon Books, 1987. Hobson, John A. Imperialism: A Study, Rev. ed. London: Allen and Unwin, 1948. Holstein, William J., et al. "The Stateless Corporation." Business Week, May 14, 1990, 98-106. Hormats, Robert D. "Making Regionalism Safe." Foreign Affairs 73, no. 2 (March/April, 1994): 97-108. House, Karen Elliott. "The Second Cold War." Wall Street Journal, February 17, 1994, A18. Huntington, Samuel P. "The Clash of Civilizations?" Foreign Affairs 72, no. 2 (summer, 1993): 22-49. . "The U.S.-Decline or Renewal?" Foreign Affairs 67, no. 5 (winter, 1988/89): 760-796. Interview with President Richard Nixon. Time, January 3, 1972. Juergensmeyer, Mark. The New Cold War? Religious Nationalism Confronts the Secular State. Berkeley: University of California Press, 1993. Kaplan, Robert D. "The Coming Anarchy." Atlantic Monthly, February 1994, 44-76.

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185

Karp, Walter. Liberty Under Siege: American Politics, 1976-1988. New York: Henry Holt, 1988. Kennedy, Paul. The Rise and Fall of the Great Powers: Economic Change and Military Conflict from 1500 to 2000. New York: Vintage Books, 1989. . Preparing for the Twenty-First Century. New York: Random House, 1993. Keynes, John Maynard. The General Theory of Employment, Interest and Money. New York: Harcourt, Brace and Company, 1935. Kissinger, Henry. Diplomacy. New York: Simon and Schuster, 1994. Korten, David C. When Corporations Rule the World. West Hartford, CT: Kumarian Press, 1995; San Francisco: Berrett-Koehler Publishers, 1995. Kotkin, Joel. Tribes: How Race, Religion and Identity Determine Success in the Global Economy. New York: Random House, 1993. Lefever, Ernest W. "Reining in the U.N." Foreign Affairs 72, no. 3 (summer, 1993): 17-20. Leone, Bruno. Internationalism: Opposing Viewpoints, Rev. ed. St. Paul, MN: Greenhaven Press, 1986. Liska, George. Beyond Kissinger: Ways of Conservative Statecraft. Baltimore: Johns Hopkins University Press, 1975. Lukacs, John. "The End of the Twentieth Century." Harper's Magazine, January 1993, 39-58. Lundestad, Geir. The American "Empire77 and Other Studies of U.S. Foreign Policy in a Comparative Perspective. Oxford: Oxford University Press, 1990. Luttwak, Edward N. "Where Are the Great Powers?" Foreign Affairs 73, no. 4 (July/ August, 1994): 23-28. Machiavelli, Niccolo. The Prince and The Discourses. New York: Modern Library, 1940. Marx, Karl. Capital London: George Allen and Umyin, 1949 (1867), 3 Vols. McClelland, David C. "The Achievement Motive in Economic Growth." In The Gap Between Rich and Poor, edited by Mitchell A. Seligson. Boulder, CO: Westview Press, 1984. Mclntyre, W. D. Colonies into Commonwealth. London: Blandford Press, 1966. McKeown, Timothy J. "The Foreign Policy of a Declining Power." International Organization 45, no. 2 (spring, 1991). Melloan, George. "Closing Europe's Doors Will Have a Cost." Wall Street Journal, June 7, 1993, Al 5. Myrdal, Gunnar. Against the Stream: Critical Essays in Economics. New York: Pantheon Books, 1973. Nau, Henry. The Myth of Americas Decline: Leading the World Economy into the 1990s. New York: Oxford University Press, 1990. Ohmae, Kenichi. "The Rise of the Region State." Foreign Affairs 72, no. 2 (summer, 1993): 78-87. Reich, Robert B. The Work of Nations. New York: Alfred A. Knopf, 1991. . "Trade With Mexico Is a Boon for U.S. Workers." Wall Street Journal, April 30, 1993, All. Reincourt, Amaury de. The American Empire. New York: Dial Press, 1968. Richardson, Bonham C. The Caribbean in the Wider World, 1492-1992. Cambridge: Cambridge University Press, 1992.

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Rohatyn, Felix. "World Capital: The Need and the Risks." The New York Review of Books, July 14, 1994, 48-53. Roth, Terrence. "Europe's Safety Nets Begin to Tear." Wall Street Journal, July 1, 1993, A10. Ryen, Dag. "The Forgotten U.S. States." State Government News, February, 1993, 1621, 26. Schlesinger, James. "Quest for a Post-Cold War Foreign Policy." Foreign Affairs 72, no. 1 (1992/93): 17-28. Smith, Tony. The Pattern of Imperialism: The United States, Great Britain and the Late Industrializing World Since 1915. Cambridge: Cambridge University Press, 1981. Snow, Donald M. The Shape of the Future: The Post-Cold War World, Rev. ed. Armonk, NY: M. E. Sharpe, 1995. Stedman, Stephen John. "The New Interventionists." Foreign Affairs 72, no. 1 (1992/ 93): 1-16. Stewart, Thomas A. "The New Face of American Power." Fortune, July 26, 1993, 7085. Strachey, John. The End of Empire. New York: Random House, 1960. Strange, Susan. "The Future of the American Empire." Journal of International Affairs 42 (fall, 1988): 1-17. Sultan, Paul. "From Cold Wars to Trade Wars." Unpublished Paper. Edwardsville, IL: 1992. Thurow, Lester. Head To Head: The Coming Economic Battle Among Japan, Europe, and America. New York: William Morrow, 1992. Wallerstein, Immanuel. Geopolitics and Geoculture: Essays on the Changing World System. Cambridge: Cambridge University Press, 1991. Wattenberg, Ben J. The First Universal Nation: Leading Indicators and Ideas About the Surge of America in the 1990s. New York: Free Press, 1991. Wesson, Robert G. The Imperial Order. Berkeley and Los Angeles: University of California Press, 1967. Williams, William A. The Roots of the Modern American Empire: A Study of the Growth and Shaping of Social Consciousness in a Marketplace Society. New York: Random House, 1969. . Empire as a Way of Life. Oxford: Oxford University Press, 1980.

Index Abdel-Rahman, Omar, 86 Aburdene, Patricia, 5 Agnelli, Umberto, 60 Allende, Salvador, 88 The Analects (Confucius), 157 Andean Pact, 29, 30, 90 ANZUS (Australia, New Zealand and United States defense agreement), 19 Aristotle, 22, 153, 154 Asia-Pacific Economic Cooperation (APEC), viii, 29, 30, 31, 58, 67, 78, 111, 124 Association of Southeast Asian Nations (ASEAN), 29, 47, 92 austerity, 72, 95, 127 Australia, 67 Ayatollah Ali Khamenei, 85 Ayatollah Khomeini, 85, 86 Baker, James, 18 Balkans, 22, 135 Barry, Tom, 136 Batra, Raveendra, 5 Bell, Daniel, 146, 148 Berle, Adolph, 130 Beyond Kissinger (Liska), 25 Bhagwati, Jagdish, 30 Bodde, William, 113

Bonaparte, Napoleon, 76 Boutros-Ghali, Boutros, 97, 137, 159, 166-167 Bradley, Bill, 48, 55 Brady, Nicholas, 127 Brand, Stewart, 140 Brazil, 19-20 Bretton Woods, 15-16, 124-125, 129 Britain, 23-24, 141-142 Brown, Harold, 17 Brzezinski, Zbigniew, 18 Buddha, 158 Burnham, James, 153 Bush, George, 8, 18, 19, 46, 47, 90, 110, 134, 135, 162, 169 capital, 34; flight, 93-94 Capital (Marx), 69 Caribbean Community and Common Market (CARICOM), 29, 47, 90, 92 Le Carre, John, 134 Carrington, Tim, 96-97 Carter, Jimmy, 134 Central American Common Market, 29, 47,92 Central European Free Trade Zone, 84 Central Treaty Organization (CENTO), 19

188

Index

Chamberlain, Joseph, 122 Chamberlain, Neville, 24 Chernomyrdin, Viktor, 73 China, 76-79 Chirot, Daniel, 102 Christopher, Warren, 111 Churchill, Winston, 24 civilization, 116-117 Clinton, Bill, 8, 45, 46, 50, 51, 90, 105, 108, 109, 110, 113, 124, 125, 132, 135, 157, 162, 167, 169 Closer Economic Relationship, 67, 92 Collins, Randall, 131 Commonwealth of Independent States (CIS), 29, 33, 41, 74-76, 87 competitiveness, 125, 152 Conelius, Michael, 70 Confucius, 157, 158 Coolidge, Calvin, 63 Council for Mutual Assistance, 84 Cresson, Edith, 64 Creveld, Martin Van, 137 Crichton, Michael, 64, 66, 140 currency rate/value, 32-34, 51, 93, 128— 129 Dante, Alighieri, 154 Darity, William, 35 Davidson, Paul, 33, 129 Davis, Lance, 141 debt, viii, 6, 8, 34, 71, 89, 94-95, 122 decline, 5-6, 165 The Decline of the American Empire (Hanson), viii, 6 The Decline of the West (Spengler), 40 Deng Xiaoping, 78 development, 35, 58; assistance in, 127; in developed countries, 11, 32, 35, 40, 91, 93, 97-98; in developing countries, 11, 69-70, 81-83; in less-developed countries, 31, 32-35, 39, 70, 101-104, 106, 117; in underdeveloped countries, 11, 33, 40, 91-99; unequal development, 96-97 Diplomacy (Kissinger), 25 The Discourses (Machiavelli), 152 Disraeli, Benjamin, 19, 121

Dole, Robert, 135 Drucker, Peter, 28 Economic Cooperation Organization, 29, 47, 76, 85, 87 Egypt, 85 Ehrlich, Paul, 163-165 Eisenhower, Dwight, 144 empire, 7, 40-41, 58, 140, 170; American, viii, 5, 7, 9-10, 23, 37, 41, 45, 47, 121-122, 145, 165; British, 9-10, 15, 23-24, 37, 121-122; Chinese, 76-77, 79; European, viii, 9-10, 15-16, 22; Soviet, viii, 21-22, 24, 41, 71, 76, 121, 145 The End of History and the Last Man (Fukuyama), 148 The End of Ideology, 146 environment, 7; deterioration of, 161— 162, 170 Emmott, Bill, 64, 66 Essay on the Principle of Population as It Affects the Future Improvement of Society (Malthus), 163 European Union (EU), 30-31, 58-63, 84, 110-111, 115 exceptionalism, 47, 108, 168 factor price equalization, 55 Fallows, James, 123 Fazzari, Steven, 53 The First Universal Nation (Wattenberg), 167 foreign aid, 136-139 Frank, Thomas, 157-158 fringes, ix, 11, 16, 17, 18, 23, 58, 98-101 Fukuyama, Francis, 118, 146-149; and Fukuyamians, 3, 148-149, 150, 151, 152, 167 Fyodorov, Boris, 72, 73 Gaidar, Yegor, 73 Galbraith, John, 39, 111, 130, 134 Gandhi, Indira, 100, 158 Garten, Jeffrey, 50 Gates, Robert, 139, 140 de Gaulle, Charles, 64

Index General Agreement on Tariffs and Trade (GATT), vii, 11, 16, 31-32, 105 Genghis Khan, 87 George, Lloyd, 24 Gershwin, George, 33 Gilpin, Robert, 29, 97, 113 Gore, Albert, 30 Grachev, Pavel, 75 The Great Ascent (Heilbroner), 91 Group of Seven (G-7), 4, 11, 16, 28, 31, 5 7 - 5 8 , 7 1 - 7 2 , 109-110 Grunwald, Henry, 3 Gulf Cooperation Council, 86 Hale, David, 65 Halperin, Morton, 19 Head to Head: The Coming Economic Battle Among Japan, Europe, and America (Thurow), 39, 164 Hegel, Georg Wilhelm Friedrich, 147 Heilbroner, Robert, 9 1 , 9 2 Hitler, Adolf, 73 Hobsbaum, Eric, 142 Hobson, John, 121-122 Holstein, William, 36 Hooke, Gus, 111 Hoover, Herbert, 130 Horner, Charles A., 141 Hosokawa, Morihiro, 66, 110 Huntington, Samuel P., 57, 79, 81, 116117, 153 Hussein, Saddam, 21-22, 137, 151 Huttenback, Robert, 141 Huxley, Aldous, 102 ideology, 150-152; end of, 146-149; Machiavellian, 152-154 immigration, 48, 6 0 - 6 1 , 63, 118 imperial overstretch, viii, 17 India, 100 International Monetary Fund (IMF), 4, 9, 16, 3 5 , 4 1 , 56, 5 7 , 7 1 , 7 7 , 8 9 , 9 5 , 127, 169 In the Wake of the Cold War (Le Carre), 133 investment, 30, 33, 34-35, 50-53, 70, 71,

189

77-78; disinvestment, 54, 126; investment war, 51-53, 114-115 Ishihara, Shintaro, 66-67 Island (Huxley), 102 Japan, 63-67, 112, 130 The Japan That Can Say No (Morita and Ishihara), 66 Jefferson, Thomas, 22 Jesus Christ, 154, 158 Jiang Zemin, 112 Johnson, Chalmers, 63, 112 Juergensmeyer, Mark, 117 Kaplan, Robert, 99, 137 Kenichi, O h m a e , 38, 109 Kennan, George, 14, 52 Kennedy, Paul, 96, 141, 144, 164-165 Kerensky, Alexander, 74 Keynes, John Maynard, 15, 128, 145, 150 King, Martin Luther, 156 Kissinger, Henry, viii, 16, 17, 18, 19, 23, 2 4 , 2 5 , 8 8 , 100, 154, 157, 168-169 Kornhauser, William, 153 Korten, David, 127 Kotkin, Joel, 117 Kozyrev, Andrei, 75 Kristoff, Nicholas, 77 Kristol, Irving, 147 Krugman, Paul, 125 Kublai Khan, 87 Lefever, Ernest, 167 Liddy, G. Gordon, 141 Lincoln, Abraham, 155 Lipset, Seymour Martin, 146, 153 Liska, George, 23, 24, 169 Luce, Henry, 3, 7 Lundestad, Geir, 143 Luttwak, Edward, 22 MacArthur, Douglas, 64 Machiavelli, Niccolo, 152-154, 157; antiMachiavellian principles, 155-156; Machiavellian principles, 152-154; Machiavellians, 11, 22, 25, 150, 151, 153, 158

190

Index

Malthus, Thomas, 91, 99, 163, 164; Malthusian problems, 160, 162-165 Mao Tse-tung, 77, 78 Marshall, Andrew, 141 Marx, Karl, 69, 91 McCormick and Company, 102 Meissner, Doris, 48 Melloan, George, 61 Mercusor, 29, 30, 90, 92 Mexico, 55-56 morality, 154, 156-158, 166; moral principles, 155-156 Morita, Akio, 66-67 Moynihan, Daniel Patrick, 147 multinational corporations, 35-38, 46, 54, 115, 127, 129-130 Murayama, Tomiichi, 66 Myrdal, Gunnar, 96 Naisbett, John, 5 nations, development and power of, 3538 Nau, Henry, 5 Newton, Isaac, 111 new world order, 15, 16, 17, 18, 22 New Zealand, 67 Nigeria, 99 1984 (Orwell), 145 Nixon, Richard, 13, 16, 19, 100, 168 Non-Aligned Movement, 109 Noriega, Manuel, 88 North American Free Trade Agreement (NAFTA), vii, viii, 8, 11, 29-31, 37, 45-49, 50-51, 54-56, 124; expansion of, 30,46-49, 110, 111, 134 North Atlantic Treaty Organization (NATO), vii, 17, 18, 19, 21, 22, 27, 28, 76, 84 number Fers, 3-4, 6 Organization of American States (OAS), 17, 19, 89-90, 92 Organization of Petroleum Exporting Countries (OPEC), 29, 40, 86 Organization of Unity, 92 Orwell, George, 145 peripheries, ix, 11, 16, 19, 21, 58, 81-83 Peirce, Neal, 38

Perot, H. Ross, 30, 50, 54, 124 planning (economic), 129-132 Plato, 22, 154 Plutarch, 144 population, 7; and overpopulation, 162165, 170 The Population Bomb (Ehrlich), 163 power: countervailing, 38-39, 111, 134; geoeconomic, viii, 25, 27-29, 35-38, 46-48, 51, 98, 140; geopolitical, vii, viii, 7, 18, 25, 27-28, 45 power strategies, 47, 51, 101-104, 151, 160, 166, 169-170; balance-of-power, 13-20, 23-25; hegemony, 7, 13-20, 23-25 Preparing for the Twenty-First Century (Kennedy), 164 Preusch, Deb, 136 The Prince (Machiavelli), 152 protectionism, 29, 30, 32, 39, 105, 108109

Rafsanjani, Hashemi, 85 Reagan, Ronald, 109, 151, 161-162 region (economic), 29-31, 33, 35, 38-41, 89-90, 92-93, 97, 104, 108, 116, 170; superregion, 46-47, 67, 110-118 regional power centers, 16-20, 47, 99 Reich, Robert, 125 Report on U.S. Barriers to Trade and Investment (EU report), 108 research and development, 129, 130, 143-144 Richardson, Bonham C., 89, 90 Richelieu, Cardinal, 25 The Rise and Fall of the Great Powers (Kennedy), 164 Rising Sun (Crichton), 64, 140 Rockefeller, Nelson, 88 Rohatyn, Felix, 52, 93 Romm, Joseph, 140 Rongji, Zhu, 78 Roosevelt, Franklin, 15 Roosevelt, Theodore, 46 Rosecrance, Richard, 41 Rostow, Walter, 152 Roth, Terrence, 61

Index Ruggiero, Renato, 107 Russia, 33, 71-76 Salinas, Carlos, 48 Saro-Wiwa, Ken, 99 Saudi Arabia, 86 savings, increase of, 34, 52-53 Schlesinger, James, 98-99 Servan-Schreiber, Jean-Jacques, 59-60 Sestanovich, Stephen, 147 Shevardnadze, Eduard, 75 Skokov, Yuri, 74 Smith, Adam, 91 Snow, Donald, 84 Somalia, 93-94 Southeast Asia Treaty Organization (SEATO), 17, 19, 27 Spengler, Oswald, 40-41 Stedman, Stephen John, 98, 134 Stevenson, Adlai, 138 Stewart, Thomas, 27, 51, 52, 53, 124, 128 Still the Japan That Can Say No (Ishihara), 67 Stimson, Henry, 63 Stivers, Richard, 157 Strachey, John, 21 Strange, Susan, 5, 37-38 Summit of the Americas, 46, 110 Sutherland, Donald, 105, 109 Tamburlaine, 87 Thrasymachus, 154 Thurow, Lester, 20, 31, 37, 38-39, 52, 58,60,63,97, 101, 102, 117, 121, 125, 144, 164-165 Tobin, James, 127 Tolstoy, Leo, 155, 158 Toynbee, Arnold, 4, 116 trade, 29-32, 33, 50; China, 78; free trade, 94, 122-124; Japan, 65; Russia,

191

71; trade bloc, 31, 105; trade war, 108, 112, 114 Trade Act of 1974, 107-108. See also World Trade Organization (WTO) Trade Agreements Act of 1934, 122. See also trade Tugwell, Rexford, 130 United Nations, vii, viii, 8, 15, 16, 18, 21, 28,41,60,66, 135, 165-170 United States, 31-32,45-56 Union Douaniere et Economique de TAfrique Centrale, 92 value-added tax (VAT), 52-53 Volcker, Paul, 40, 129 Wallerstein, Immanuel, 41 Wattenberg, Ben, 3, 167 Wells, H. G., 118 Western European Union, 22 Western Hemispheric Free Trade Agreement, viii Weidenbaum, Murray, 144 Wilson, James Q., 157 Wilson, Woodrow, 15, 134, 168 Woolsey, James, 139 World Bank, viii, 9, 16, 28, 41, 57, 66, 92, 95, 127, 169 world government, 165-170 world order: American free world order, 14-19; European order, 13-14; geopolitical strategy and, 22-25; transition, 20-22, 166, 169-170 World Trade Organization (WTO), vii, viii, 28, 31, 32, 39, 56, 57, 91-92, 97, 101, 105-108, 113, 114, 124, 169 Yeltsin, Boris, 71, 73, 74 Zhirinovsky, Vladimir, 73, 149 Zyuganov, Gennady, 73, 74

About the Author JIM HANSON is the author of The Decline of the American Empire (Praeger, 1993) and has contributed to publications such as the Journal of Applied Sociology, Humanity and Society, and Contemporary Sociology. He holds a Ph.D. from Southern Illinois University.