Post–cold War Policy - Fostering globalization

The makers of post–Cold War American foreign policy believed that by fostering globalization, the growth of both the U.S. and the world economy would be increased. Globalization was not a wholly new phenomenon, but it did attain unprecedented prominence in the public discourse during the 1990s. Indeed, one of its chief articulators, the journalist Thomas L. Friedman, suggested that the post–Cold War world be dubbed "the age of globalization." Although difficult to define precisely, scholars and policymakers appeared to understand globalization as the integration of markets, finance, and technologies in a way that shrunk space and time. Some observers even predicted that the ultimate consequence of this process would be the elimination of all national borders and, thus, the nation-state.

That was clearly not the aim of U.S. foreign policy officials. Rather, they saw globalization as an economic tool that could be managed to open foreign markets, stimulate American exports in goods and services, and bring economic growth and prosperity to large portions of the world. The Clinton administration had a strategy for accomplishing these goals—the "big, emerging markets" (BEM) strategy—though its origins can be traced to Robert Zoellick, a senior policymaker in both Bush administrations. From Zoellick's perspective, the United States could best serve its economic interests by acting as the primary catalyst for a series of integrative economic structures that would substantially increase global prosperity. First, it would deepen the institutionalized economic and security relations with western Europe and Japan. Second, the United States would reach out to a second tier of potential partners in Latin America, East Asia, and Eastern Europe to develop dense institutional linkages such as the North American Free Trade Association (NAFTA) and the Asia-Pacific Economic Cooperation Forum (APEC). And third, even farther on the periphery loomed Russia, China, and the Middle East, areas that in the more distant future might be brought into this global economic system too. This foreign economic strategy asserted the indispensability of American global leadership, for it strongly supported the creation of a host of regional economic institutions in which the United States would function as the common linchpin.

By elaborating and refining Zoellick's ideas, the Clinton administration developed the BEM strategy that lay at the core of its foreign policy. The strategy identified ten regional economic drivers supposedly committed to trade-led economic growth and reasonably cordial relations with the United States. The "Big Ten," as they were called, included China (plus Taiwan and Hong Kong), India, Indonesia, South Korea, Mexico, Brazil, Argentina, Poland, Turkey, and South Africa—states whose expansion could benefit neighboring markets as well. Clinton officials projected that by 2010 American trade with these countries would be greater than combined trade with the European Union and Japan. Jeffrey E. Garten, undersecretary of commerce for international trade and a chief architect of this strategy, argued that the BEMs possessed enormous potential for the expansion of U.S. trade in goods and services, because they purchased heavily in economic sectors dominated by the United States: information technology, health and medical equipment, telecommunications, financial services, environmental technology, transportation, and power generation.

To achieve these goals the Clinton administration launched a global effort to persuade the BEMs to open their markets to both trade and investment. The push for financial liberalization was directed at East Asia and Southeast Asia, in particular, largely because it was seen as especially fertile ground for American banks, brokerage houses, and insurance companies. To further this strategy, Secretary of the Treasury Robert Rubin persuaded the G-7 nations (the world's leading industrial democracies) in April 1997 to issue a statement "promoting freedom of capital flows" and urging the International Monetary Fund to amend its charter so it could press countries for capital account liberalization. But other Clinton economic officials like Laura D'Andrea Tyson and Joseph Stieglitz, successive chairs of the president's Council of Economic Advisers, warned of the dangers of opening these capital markets too rapidly, and soon Rubin and Deputy Secretary of the Treasury Lawrence H. Summers began to publicly caution that financial liberalization in the BEMs must be accompanied by banking and other fundamental economic reforms. Yet, convinced that the International Monetary Fund would bail them out of any trouble (as the United States had done in Mexico in 1994), the leaders of many of these states ignored this advice.

In 1997 and 1998 the dark side of globalization appeared in the form of a series of currency collapses in Thailand, Indonesia, South Korea, Malaysia, the Philippines, and Taiwan. Social unrest in Indonesia claimed one thousand lives and led to the forced resignation of its long-serving president. The so-called Asian dynamos fell like dominoes as currency speculators undermined their financial systems. Deeply shaken by these events and fearful that the crisis would spread to the United States, the Federal Reserve Bank cut short-term interest rates three times within six weeks, and President Clinton called on Rubin to devise ways to reform the global financial system in order to avert future disasters. The secretary responded with a series of speeches in which he called for the creation of a new global financial "architecture" that involved improving transparency and disclosure in emerging markets, giving the International Monetary Fund additional power, encouraging the private sector to share some of the economic burden in times of crisis, and strengthening the regulation of financial institutions in emerging economies. Rubin implicitly acknowledged what many economists had argued for years: any attempt to liberalize capital markets lacking the structures to support the subsequent inflow in foreign investment was dangerous.

In fact, the seemingly inexorable growth of globalization produced both academic debates and public protests. Globalization enthusiasts celebrated the unprecedented extent to which poorer economies had been incorporated into the international system of trade, finance, and production as partners and participants rather than colonial dependencies and believed that this condition had produced greater economic growth. But skeptics worried that since substantial numbers of nations were landlocked and isolated, they would find it extremely difficult to attract trade and investment. Furthermore, other countries, such as the Persian Gulf oil states, in possession of huge natural resource bases, found it impossible to establish competitive, and more sustainable, manufacturing sectors. Hence, the process of globalization was far from global. Second, while proponents of increased capital flows across borders argued that they gave to developing nations an enhanced ability to borrow and lend (and thus better control patterns of investment and consumption), others pointed to the destabilization and financial panics that these unfettered capital flows had allegedly caused in Latin America and Asia during the 1990s as worried investors hurriedly withdrew their assets at the first sign of weakening currencies. Third, economists disagreed about the impact that globalization had on domestic and international income distribution. Some suggested that since the United States exported high technology products to Asia in return for less expensive labor-intensive goods, American workers in certain industries had suffered a loss of income in the face of low-wage foreign competition, while, at the same time, skilled workers in Asia incurred similar dislocations. On the other hand, the number of U.S. workers directly competing with unskilled workers in emerging markets appeared to be too small to explain widening income disparities among Americans.

The age of globalization also produced contradictory political impulses. On the one hand, it fostered a host of new international organizations, including, most prominently, the World Trade Organization (WTO). Some observers feared that the proliferation of such institutions, accompanied by rules regulating the behavior of its members, posed a threat to national sovereignty. On the other hand, defenders of the nation-state also worried about the growing tendency of local governments, regions, and ethnic communities to pursue greater political and cultural autonomy as a way to ward off the demands of globalization. In his Farewell Address, President Clinton, while noting that the global economy was giving "more of our own people and billions around the world the chance to work and live and raise their families with dignity," acknowledged that integration processes "make us more subject to global forces of destruction—to terrorism, organized crime and narco-trafficking, the spread of deadly weapons and disease, the degradation of the global environment."

Indeed, concerns such as these and others triggered a series of public, sometimes violent demonstrations against the World Trade Organization, the International Monetary Fund, and the World Bank in Seattle (November 1999), Washington, D.C. (April 2000), Prague (September 2000), and several other locations. Loose coalitions of protesters made up of union members, animal rights advocates, environmentalists, anarchists, and senior citizens claimed that wealthy countries and their institutional tools—the International Monetary Fund and the World Bank—had incurred an "ecological debt" to the Third World by draining its natural resources, destroying the environment, and causing human rights violations. They believed that this ecological debt should wipe out the monetary debt that poor countries owed to these organizations. They wanted the World Bank to order a moratorium on foreign investments in oil, mining, and natural gas projects because of their environmental threats. Others argued that fledgling democracies should be forgiven the debts incurred by previous, repressive regimes. All were convinced that multinational corporations—most of them based in the United States—behaved more like robber barons than responsible global citizens.

In sum, the nature and consequences of globalization remained deeply contested in the post–Cold War world. The Clinton administration's initial desire to foster its spread had been tempered by foreign financial crises and public dissent. Yet it was not even clear whether globalization should be viewed as a conscious national policy or as an unstoppable force ultimately immune to either governmental management or control.