Chrystia Freeland

We need an economics-based foreign policy

Chrystia Freeland
Dec 3, 2010 14:39 UTC

It is impossible not to be fascinated by the WikiLeaks release of U.S. State Department cables this week. It is a story that has everything, ranging from insight into the U.S.-Russia relationship, to salacious tidbits like Ghaddafi’s predilection for buxom Ukrainian nurses, to raising the meaty issues of free speech, the internet and a government’s need for privacy.

But the most significant revelation isn’t what is in the documents—it is what is missing from them. The financial crisis of 2008, and its agonizing aftermath, changed the world profoundly. We now know it didn’t change the State Department. The most important take-away from the WikiLeaks data dump is that America needs a new foreign policy paradigm to deal with the post-crisis world.

The starting point for that paradigm must be to put the economy at the heart of foreign policy. Some of America’s savviest wise men are already making that point, most notably in the latest issue of Foreign Affairs, with two seminal essays on the importance of the economy for statecraft.

But these pieces, which argued that America’s troubled fiscal position is a major constraint on its ability to act in the world and that growing GDP should be a central goal of U.S .foreign policy, are just a start. The U.S. needs to reframe its foreign policy from the bottom up, and build its new approach around both national and international economic issues.

America needs a new paradigm not just because it has run out of money to be the world’s policeman, or because the recession at home requires everyone—including diplomats—to pitch in to put the country back to work. The country needs a new way of thinking about its foreign policy goals because national security and international relations—the classic concerns of diplomacy—are now largely driven by economic concerns.

What’s good for the world is bad for the U.S. and China

Chrystia Freeland
Nov 12, 2010 15:12 UTC

This fall, much of the United States seemed to have settled on a narrative for the country’s struggle to adapt, after a debilitating financial crisis, to a post-industrial and post-unipolar global economy: China and its undervalued currency are largely to blame.

Proof that this was a nationally compelling storyline came during the acrimonious midterm election campaign. U.S. politics have rarely been more polarized, but complaining about China was something both parties could agree on.

John Boehner, the presumptive new Republican Speaker of the House, attacked the Democrats for “a stimulus that shipped jobs overseas to China instead of creating jobs here at home.” Harry Reid, the Nevada Democrat who hung on to his Senate seat and his job as Majority Leader, accused his Tea Party opponent Sharron Angle of being “a foreign worker’s best friend” for supporting corporate tax breaks that helped businesses outsource jobs to China and India.

Bread and circuses—but real issues, too

Chrystia Freeland
Oct 15, 2010 14:03 UTC

As the U.S. mid-term elections approach, it is easy to despair about the quality of this country’s political debate. Christine O’Donnell, the surprise Tea Party-backed Republican candidate for the Senate seat in Delaware, has captured the nation’s attention with her opposition to masturbation and a campaign ad in which she assures voters that she is neither a witch nor a graduate of Yale University. Here in New York, Buffalo businessman Carl Paladino, running for the governor’s office, has made his contribution to the carnival atmosphere by discussing his rival’s “prowess” and urging reporters to investigate whether he was a faithful husband.

Part of my job at the moment is appearing as a commentator on other people’s TV shows. Viewed from the green room or the studio, America’s political discourse can look particularly grim. I sometimes find myself in the role of finger-wagging, middle-aged scold calling for a discussion of global financial imbalances, rather than the latest juicy scandal or mockable example of political foot-in-mouth disease. TV producers, I’m afraid, find this schoolmarmish persona as unappealing as my kids do — and given the juicy alternatives available it is hard for me to blame them.

But the campaign trail has always been as much about providing a circus as it is about bread and butter issues. And, dipping just below the froth of the cable sound bites and the blogosphere, I’ve realized this campaign is actually revealing a country that is struggling seriously and passionately to come to grips with the very big issues it faces.

Inflation is inevitable counters Wolfensohn

Chrystia Freeland
Oct 12, 2010 23:08 UTC

While Laura Tyson thinks America has no intention to inflate away its debt, former World Bank President Jim Wolfensohn said in an interview today he believes inflation and a devaluation of the dollar are “inevitable”:

Countries that get into heavy debt find that other countries realize that their currency isn’t as valuable as it was because they owe so much money. So the currency devalues. As it devalues, you have an inflation. And it is my judgment that that is likely to be a very important element in how we unwind this whole issue of debt to income levels in the United States.

Wolfensohn has a similarly gloomy outlook for Africa, a continent whose development he championed during his tenure at the World Bank. African institutions and governance are less efficient and effective than their counterparts in India and China, he says, and growth will suffer as a result:

Summers says currency interventions rarely end well

Chrystia Freeland
Oct 7, 2010 18:28 UTC

“When governments seek to manipulate exchange rates for competitive advantage, it rarely ends well,”  White House economic adviser Larry Summers said at the Yalta European Strategy Annual Meeting this past weekend.

Summers stressed the need for reducing global imbalances, which require both smaller surpluses in surplus countries and smaller deficits in deficit countries. Regarding the U.S. economy, Summers reiterated President Obama’s pledge to double exports in the next five years. He added that growth, “while still clearly unsatisfactory, is positive. The economy is growing. The process of recovery is underway.”

When I asked Summers if he is worried about America’s budget deficit, he said only in the long term. In the short term, Summers says the focus must be on growth: