They speak French!

Beaumarchais

When he ran for president in 2004 John Kerry was mocked by opponents for his ability to speak French, with ‘Monsieur Kerry”, “Jean Chéri”, or “Jean-François Kerry” amongst the favourite catcalls of Republicans. Imagine the fun they will have with the new Biden administration – not only Kerry speaks French, but Anthony Blinken was educated in France and Michele Flournoy is a Francophile too.

Mike Pompeo has conjured up images of highly educated, high minded members of the Biden cabinet jaunting around European capitals debating the finer points of diplomacy with Europeans, while Marco Rubio – who has found his voice given Donald Trump is on the way out of the White House – paints the Biden team as elegantly presiding over American decline. It’s an interesting image of Biden’s team – effete, be-wigged and decked in frock coats, conversing in French. But then, so did Beaumarchais and Lafayette and they saved America.

The ‘French speaking men and women in frock coats’ are a key part of Joe Biden’s Restoration (https://thelevelling.blog/2020/07/18/the-restoration/). They will restore order, harmony and morale to institutions like the State Department, and I would not be surprised to see a senior diplomat be given the specific role of rebuilding it from the inside out.

However, if the Biden team, many of whom worked in the Obama administration, think they will find the world as they left it four years ago with America effortlessly slipping into the top seat in world affairs, they are mistaken. China has grown much more powerful and assertive (note the way it treats Australia), Turkey is an engine of geopolitical chaos (as we noted last week), and even Europe is striking out on its own path. What’s worse is that like half of the American population, the rest of the world worries that Trump (or someone like him) might be back in four years’ time.

This should impart some urgency to the Biden team. Integrating climate problems into foreign policy is a welcome start, as there is common ground with both China and the EU here, but given the need to restart economies, it is hard to envisage what meaningful measures can be introduced to curb climate damage in the near term.

The bringing together of climate policy with foreign affairs is a sign of things to come, specifically that many issues will intersect. For instance, a key part of Janet Yellen’s role will be the international diplomacy associated with the Treasury, and in particular trying to align economic policies in Europe, America and parts of Asia so that they all move in the same direction. 

A much bigger challenge is the integration of indebtedness into the strategic rivalry between the US, China and Europe. Each region, in different ways, has run up record levels of debt such that the sum total of world debt (per GDP) is pushing levels not seen since the Napoleonic Wars. The Chancellor of the Exchequer’s spending review last week underlined this. If we accept that overindebtedness can act like a financial handbrake then, whichever region can most quickly reduce its debt burden will have a head start in the strategic race to lead the 21st century.

The lesson for Blinken and colleagues is that balance sheets rather than space wars are the most important tools in the diplomatic contest. They should study the role the Bank of England played during and after the Napoleonic Wars and the financial reforms that were made in the UK in the early nineteenth century that contributed to Britain’s rise as a world power.

One implication as far as the economic debate in the Democratic party is concerned is that there may soon be a sharp divide between foreign policy aware policymakers who wish to curb debt issuance (and keep a steady dollar), versus those (MMT – Modern Monetary Theorists amongst them) who believe that the USA can and should issue debt ad nauseum.

The same focus on the mixture of finance and diplomacy is relevant with respect to American policy towards Russia, a subject where nearly all the Biden team are united in their distrust of the Putin administration. I suspect that policy towards Russia will initially at least, focus on money flows (Catherine Belton’s book ‘Putin’s People’ is very good on this).

Even if American foreign policy becomes more foreign policy driven, I do not expect a mothballing of expensive fighter jets and aircraft carriers, not least as there are some conflicts internationally where America may re-engage.

In general, I have Africa in mind and specifically Ethiopia, which like many other countries is falling into the investment orbit of China. The contentious lesson from the Obama era is that a lack of aggressive action by the United States across the world has opened up theatres like Africa to Russia (now building a naval base in Sudan) and China. To that end American foreign policy may take on a more activist stance and, historians will look back on Donald trump as the ‘Pacifist President’.

Have a great week ahead,

Mike

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