The burdensome costs of 'victory'

...Like the fossil record of a dead organism, the details of the cold war lie spread out before us: The still-present reasons for its extinction are those trends which will shape the future...

...Unfortunately, all signs now indicate that the present leadership of the U.S...

...THE BURDENSOME COSTS PATRICK BARNARD OF 'VICTORY' THE WORLD THAT CAME IN FROM THE COLD WAR AIthough political communities have experienced tension throughout history, the very largest structures of world power only change infrequently...

...Today, the United States, the victor in the cold war, must make the same kind of adjustment with Japan and Europe...

...economic development in the nineteenth century, had collapsed...

...Professor Paul Samuelson's immediate public reaction was typical: "Can any informed person expect that a market, even so large a one as the American, would be capable of absorbing the tremendous increment of exports which the Japanese miracle has been spewing forth on the world...

...The bipolar logic of Cold War I took on an altogether new intensity in 1950, when Paul Nitze, the chief of the Policy Planning Staff at the State Department, drew up the ultrasecret document, NSC-68--National Security Memorandum No...

...The stark answer is the condition which the strategic analyst Edward Luttwak calls the "third worldization" of the United States...

...Cold War II, the third phase of the post-1945 period, began with the election of Ronald Reagan, who had been partly sponsored by the Committee on the Present Danger headed by such veteran figures as Paul Nitze...

...With the eclipse of power in the Kremlin, the United States does stand alone, the "first among equals," for the time being empowered to undertake unimpeded initiatives...

...possessed twice, perhaps even three times, the GNP of the USSR, every percentage point rise in American defense expenditure forced the Soviets—if they wished to match the outlay with an absolute dollar equivalent of their production—to devote at least double the proportion of their total output to the military...

...Most economists applauded...

...Today it is Japan which spends 1 percent of its GNP on its armed forces, while the United States remains stuck in the job of global policeman...

...Meanwhile, the Japanese, devoting 1 percent of their yen GNP to defense in recent times, have enjoyed a 5 percent advantage over the U.S...

...By this measure, the trade problem described years before by Samuelson had amplified, allowing for inflation, by a factor of at least ten...

...To anticipate the future is hazardous, but the dramatic conclusion of the cold war does yield clues about what lies ahead...

...There is also a broader context to these difficulties...

...Why then does the announcement of a "new world order" seem tenuous, even hollow...

...Nixon's 1971 trade deficit of $2.3 billion had exploded and under Reagan lodged itself permanently at over $100 billion...

...What has fallen apart has been a symbiotic system of power-sharing exercised by two players, and although only one of the contestants is mortally wounded at present, Washington too will ultimately be affected by the erosion of the previous structure...

...In the long run, the country cannot afford to play the role of the single superpower as Britain did at the end of the nineteenth century, when the British Navy patrolled the waters of the Western Hemisphere, allowing the U.S...

...Moreover, finding a geopolitical balance with Asia and Europe becomes immensely more complicated with Soviet fragmentation...

...have provided the dominant, but hopelessly mediocre, leadership of the world economy, encouraging the universal use of induced unemployment as the principal weapon against inflation...

...Two months after the submission of NSC-68, the Korean War broke out...

...for the last decade have always been unremittingly hostile to such forums as the UN, until recent circumstances made internationalism more convenient...

...The United States more than doubled its defense expediture, from more than 4 percent to above 10 percent of GNP (and an eventual high of 13.4 percent in 1953), while the USSR increased its military budget in dollar terms by a third...

...It is doubtful that the president's speech-writers were thinking of Virgil or even the greenback...

...We recognize the phrase today because it appears on the dollar bill, in the motto of the Great Seal of the United States which describes 1776 as Novus ordo seculorum, "A New Order of the Ages...

...And, in the Western tradition, a sure sign of momentous transition is the millennial language which invariably accompanies it...

...Because civilian investment creates a much higher multiplier effect in a national economy than does military expenditure, the more the United States acts as the world's military specialist, the further it stands to lose the economic weight underlying its leadership...

...Among ordinary people, global shifts of authority inspire a sense of anxiety...

...Since the U.S...

...At a more abstract level, Bush's explicitly millennial proclamation of a "new age" attempted to encapsulate the massive change sweeping the globe and to put the United States in the position of actively leading this historical transformation...

...In practice, the Soviets did not invariably respond in this way...

...The overall effect was to shift huge amounts of money from the civil to the military side of the public sector, to redistribute income upwards, and to severely weaken aggregate demand over the long haul...

...economy, 10: 17 January 1992 Commonweal arguing that the United States, in an emergency, could even afford to increase defense expenditure up to a level of 20 percent of GNP...

...Cold War I began in 1947, when Dean Acheson (then undersecretary, later secretary of state) led the team of policy managers who built the strategy for American participation in the superpower competition...

...During February and March of that year, Acheson forcefully outlined the following argument to President Harry S. Truman and the leaders of Congress: After 1945, Acheson asserted, the world had arrived at a situation not experienced since Rome and Carthage struggled with each other in antiquity, an unprecedented polarization of world power between the United States and the Soviet Union...

...But the heralding of a "new world order" promotes a misleading interCommonweal 17 January 1992: 9 pretation of events...

...This fickle and opportunistic attitude to bodies like the World Court is a sure recipe for future problems...

...Quite simply, because Woodrow Wilson's campaign for the New Diplomacy—to take the most obvious comparison—occurred when the United States was becoming the world's economic powerhouse after a period of unprecedented commercial development in the nineteenth century...

...He called it "polycentrism" which he thought was transforming the structure of the world...

...There was a common logic to the arms race that clearly tied the policies of the superpowers together...

...For Acheson and his colleagues, as he later wrote, the fundamental assumption was "that the whole world structure and order that we inherited from the nineteenth century was gone and that the struggle to replace it would be directed from two bitterly opposed and ideologically irreconcilable power centers...

...the British Empire, which sheltered U.S...

...Commonweal 17 January 1992: 11...

...Nixon's bold, de facto devaluation of the dollar was meant to deal with problems posed particularly by the Japanese economic success and a 1971 U.S...

...Reaganism also created enormous twin deficits, making the U.S...

...and the bipolar regime of the cold war, characterized by U.S...

...in funds channeled to civilian investment, an edge which has accumulated with the speed of compound interest...

...The most evident shared characteristic derived from the cold war was the militarization of the two economies...

...economic pre-eminence...

...In 40 B.C., the poet Virgil, sensing that Rome was building a renewed empire from the chaos of civil war, wrote the famous lines of his Fourth Eclogue: "Now comes the last epoch of prophecy/Now the great order of the ages is born anew...

...and the initiation of Cold War II under Ronald Reagan...

...Policymakers who wrote the document combined the case for rearmament with Keynesian economics, pointing out that increased public spending on the military would boost aggregate demand and make up for unused industrial capacity...

...Since such an outcome would involve considerable hardship, and is extremely unlikely, domestic economic problems will undoubtedly persist...

...Tradingbloc rivalries, for example, may well become intensified through competition for the loyalties of new, unstable polities in the heart of Eurasia...

...What the Republic needs is a radical reversal of the Reagan-Bush agenda, a new New Deal...

...Internationally, reorientation demands a profound change in attitude...

...The list of indicators is painfully long: harsh poverty for the bottom 20 percent of the population, miserable public health care, inadequate education, an ailing infrastructure, regressive taxation, and inevitable divisions in civil society...

...The recent collapse of the Soviet bloc, and now of the USSR itself, clearly indicates that we are living at just such a singular time...

...But quite apart from the stresses on Moscow, the cold-war strategy of continually raising the ante permanently distorted the U.S...

...The more somber truth, however, is that the cold war was part of a global network of dual power, shared by both Washington and Moscow...

...After World War I, the principal problem which the world confronted was to find an appropriate role for the United States and Germany, commensurate with their economic influence...

...Both superpowers have been fundamentally changed by the diffusion of economic and political influence, the Soviet Union drastically so, and the United States in a far more subtle way...

...In 1992, however, the United States finds itself in a radically different economic position from the one which it occupied in either 1920 or 1950...

...Washington's triumphalism assumes that the cold war resembled a boxing match: The Soviet opponent passed out, leaving the surviving winner in indisputable possession of the prize...

...Over the last generation, the U.S...

...This system of controlled antagonism fell apart because multipolarity—in communications, education, in the diffusion of technique and capital—made the monopolization of authority, especially by the Soviet Union, a practical impossibility...

...should build "superior aggregate military strength" at its end of the "opposite poles of power" in the world, in order to "foster the seeds of destruction within the Soviet system...

...For that reason, the new interregnum promises to be long and difficult...

...For the American side of the story, the post-1945 period divides into three distinct phases: Cold War I; the end of dollar supremacy in 1971...

...is to move from the increasingly artificial assumptions of dominance to a real and workable multilateralism...

...We are now in the fourth period of great change, and so far it has all the characteristics of an interregnum, rather than a really new era...

...merchandise trade deficit of $2.3 billion...

...The breaking up of the Soviet Union has really signaled the end of that old duopoly, and not merely the disappearance of Moscow's influence alone...

...The neoconservatives who have controlled the executive branch in the U.S...

...to spend less than 1 percent of its GNP on defense...

...Then the memorandum called for the massive militarization of the U.S...

...worse, its abuses gave public-sector activity a bad name...

...But by far the most important effect of NSC-68 was that military spending became the only form of public investment which had any legitimacy for the national political leadership of the U.S...

...The cold war was truly off and running...

...Despite enormous differences between the United States and the former Soviet Union, their geopolitical competition since 1945 had a serious impact on both countries...

...In these circumstances, the pressing challenge for the U.S...

...Military Keynesianism crushed rival claims for nonprivate investment...

...If Washington keeps a big military club in its hands, it will continue to be weakened economically...

...Consequently, many of the industrialized countries of the Organization for Economic Cooperation and Development group have very large numbers of chronically unemployed people, and the glitter of the 1980s actually constituted a recessionary boom within an overall pattern of longterm stagnation...

...The rhetoric of a "new world order" does not square with this domestic reality...

...More likely, they had Woodrow Wilson in mind, and his crusade earlier this century for a renewed international dispensation following World War I. President Bush certainly cannot be slighted for a lack of grandeur in his UN address, since the scale of the process now underway is enormous...

...The cold war coalesced around the idea, and the fact, of a bipolar world...

...a net debtor nation for the first time since the 1890s...

...Slowly but surely, over this period, a dollar-led world has split into the three rival centers of North America, Western Europe, and Japan and Southeast Asia...

...Since 1973, the Anglo-American countries (the U.S., Canada, the U.K...

...the U.S., said Acheson, had to assume the old British role of assuring stability by confronting the Soviet challenge in Europe, Asia, and Africa...

...economy, so that by the middle of the Reagan years Washington was spending more than 6 percent of its GNP on the military...

...Domestically, the adjustment means a very great shift of resources into the civilian sector of the U.S...

...An excess of dollars had flowed overseas unmatched by American goods for foreigners to purchase...

...the troubled interregnum of Europe's modem civil war which lasted from 1914 to 1945...

...On August 15, 1971, President Richard Nixon unilaterally ended the convertibility of the U.S...

...Two foreign wars occurred in this first phase of the cold war, and by the middle of the Vietnam conflict, U.S...

...At the end of the cold war, then, what economic reality looms large under the lofty clouds of geopolitics...

...Unemployment will be the main issue in the new interregnum which we now face, and this takes us back to the 1920s and 1930s, only on a much more complex and global scale...

...Within a very short time, "voodoo economics" (George Bush's description when he opposed the first Reagan nomination) had produced a bizarre mixture of policies: increased defense expenditure, severe reductions in public programs, tax cuts, and doses of monetarism...

...economy...

...We can now look back at the structures of the past to see how they cohered, to estimate the cost which the United States paid to win this competition, and to observe those influences, still ongoing today, which helped end the dual system of U.S.-Soviet power...

...By 1956, an Italian Communist, Palmiro Togliatti, had given a name to the multipolar tendency at work within the framework of the cold war...

...share of the world GNP has fallen from 40 percent to approximately 22 percent, and the country faces problems connected with an aging infrastructure, insufficient public investment, increased private and government debt, huge trade imbalances, declining real wages, and diminished expectations...

...so, the U.S...

...dollar into gold, and effectively initiated the era of floating exchange rates and intense trade friction in which we still live...

...One result is brutally clear: The cold war is finished between the United States and what was once the Soviet Union...

...NSC-68 began by echoing Acheson's view of the bipolar distribution of power following World War II...

...Furthermore, the differentiation, since 1973, has taken place against a background of stagnation rather than expansion...

...Since 1800, there have been three major periods which have been demarcated by shifts in the very largest structures of global power: the post-Napoleonic era dominated by Britain...

...Practically, the formula meant that the five permanent members of the Security Council would act together against Baghdad...

...economic competitiveness had begun to suffer...

...Dollar supremacy had come to a close...

...Internationally, an economically weakened United States, even if that slippage is relative, cannot turn back the clock a hundred years...

...is nowhere close to really and substantially redefining its role in the world...

...The aim, bluntly stated in NSC-68, was that the U.S...

...On October I , 1990, when President George Bush was constructing the international coalition which eventually fought Iraq, he went before the General Assembly of the United Nations to proclaim the emergence of a "new world order...

...must take the very real risks of short-term geopolitical flux in order to reach greater long-term stability...