In Defense of America (8 page)

Take, for example, the restriction on banking across state borders —or even on banks having branches within one state —which has been in place for most of American history, relaxed only in the last twenty years. The United States, in contrast to most countries, spawned tens of thousands of banks, many of them tiny community ones, but has been slow to develop customer services such as nationwide networks of ATMs and debit cards. Until recently, it was a painful experience to try to persuade a shopkeeper in one state to accept a check from a bank in another.

These regulations, reinforced after the 1929 crash with the 1933 Banking Act, put the ability of even national banks to expand in the hands of state governments. At the same time, the 1933 Glass-Steagall Act separated commercial and investment banking. It was only in 1999 that Congress, after eleven failed attempts at reform in twenty years, finally managed to shed the antiquated laws and take the United States closer to the modern banking regulation it needed.

Banking is the starkest example —given the United States’ image as the pinnacle of capitalism —of where America’s history and federal structure hamper its economy. But it has handicapped itself in the same way in telecommunications and electricity, two services whose costs affect everyone and every business in the country, and whose regulators have struggled to foster an efficient and competitive industry, and have still partly failed.

In 2001 the world looked on, astonished, as California, whose name is synonymous with sunshine and the good life, imposed the first mandatory power cuts since the Second World War, after households had suffered months of soaring electricity bills. That was the result of deregulating electricity without having increased the supply.

Across the country, more than a decade after the hugely ambitious 1996 Telecommunications Act, which tried to set the terms on which long-distance and local phone companies should deal with each other, competition between telephone companies is still patchy. The United States may have driven the rise of the Internet, but was slow to develop networks of cellular phones and, now, broadband.

The hidden cost of federalism was a theme thoughtfully developed by John Donahue, an associate professor at Harvard University’s John F. Kennedy School of Government, in his book
Disunited States,
which argued that competition between the states often hurt the American economy overall. Donahue pointed to the huge amounts of money that states were using to lure businesses —and jobs —across state borders, including, famously, Alabama’s successful courtship of Mercedes, counterbidding against almost every state in the South. Alabama’s package of subsidies and tax breaks eventually approached $300 million, a cost per job approaching three times the previous record.

In February 2008 the Supreme Court ruled that federal laws should prevail over often tougher state laws aimed at protecting consumers’ health and safety, when it barred a suit from a man injured by a heart catheter which had been approved by the Food and Drug Administration. The Court “showed its appreciation for the problem of the Balkanization of the economy by state laws and the difficulties of having to comply with inconsistent state laws in a national economy,” said Robin Conrad, executive vice president of the National Chamber Litigation Center, the legal arm of the U.S. Chamber of Commerce.
¹⁶

I don’t cite these examples to show that American capitalism does not work; manifestly, it does. But they do show that the United States has often, in industries that are at the heart of its economy, put that pursuit of profit below the principle of states’ independence.

Wounded Giant?

Even before the sudden slowing of the American economy in early 2008, the United States’ share of the world economy was beginning to shrink. The contribution it makes to the world’s overall economic growth is dropping —from 19 percent to just 12 percent in the past decade. The International Monetary Fund expects the world’s economic growth to be 4.8 percent in 2008, but within that, the United States will be expanding at less than 2 percent, and the rest of the world together almost three times as quickly. The United States will lose its claim to some of the superlatives (and that was on the cards even before the slowdown of early 2008). It is indeed set to be overtaken by China as the world’s biggest economy, although that depends on how you measure size and translate Chinese figures —and as I discuss in chapter 9, those projections rely on a lot of questionable assumptions about China’s ability to manage its own growth. Germany is already the world’s biggest exporter, despite having an economy less than a quarter the size of the United States’.

But for America, that is neither a source for humiliation nor a reason for gloom. It is easy to exaggerate the potential of China, India, and indeed Asia. For all the uncertainties of the sudden slump in 2008, the proved success of the United States’ economic engine is not about suddenly to dissolve. Rather, the quick reaction of the Federal Reserve, in using taxpayers’ money to rescue Bear Stearns, Wall Street’s fifth-largest bank, shows the poverty of the usual caricature of American capitalism as unbridled, unaided, and unregulated. America is the heart of capitalism, but woven through it is a long, messy history of intervention and regulation.

The pity of critics’ resentment of American economic strength is that they regard it as a zero-sum game: as if America’s gain is their loss. But it isn’t. They do not comfortably acknowledge that the United States could be better off for its innovation, or for the success of its companies, or for its trade —and so could they. That is the hopefulness of American society; it is a shame that this is not one of its more successful exports. The United States has, however, found capital markets easier to promote than its own version of democracy. The next chapter argues that in American foreign policy, the pursuit of democracy is also an admirable goal.

Chapter 5

THE PURSUIT OF DEMOCRACY

I was in the Karachi villa of a well-connected Pakistani couple on the night of October 19, 2007, just after Benazir Bhutto had returned from exile and a suicide bomber had killed 140 in her homecoming rally. The hosts were unsurpassably cosmopolitan, with museum-quality Islamic and European art on the walls (“Mummy picked it up over the years”), a sophistication compromised only by an impossible request for names of bargain restaurants in Mayfair, London’s district of ambassadors and hedge funds.

For all their Western tastes, they maintained an absolute conviction that America had been the perpetrator of the attack, through its agent President Pervez Musharraf and his intelligence services. There was no sense that these accusations might be proved or disproved by forensic analysis (and indeed, the police made little attempt to collect it —then or when Bhutto was later assassinated). It was preferable to assume an obscure purpose; there always had been one, in America’s manipulations of Afghanistan and Pakistan, they said.

My Pakistani acquaintances are hardly alone in that preference for conspiracy as the prime technique of explanation. It is suffocatingly common in societies where people cannot readily establish the truth. This is a view of the world which finds incredible the innocence of politics in the West: those wide-eyed speeches in which Tony Blair professed his convictions; Gordon Brown’s invocation of his “moral compass”; George W. Bush’s declarations that Arabs want democracy, too; or even that disarming technique of State Department officials of explaining their country’s foreign policy by projecting a neat list of American aims onto the wall before their audience, the PowerPoint file carried with them in their pockets on a computer thumb drive.

To call America naive in its foreign policy and particularly in its promotion of democracy, as so many have done after Iraq, is not wrong. But it captures only one reason for the gulf between the United States’ own vision of its mission to improve the world and the suspicion of critics that America’s actions are determined by its own interests and are only coincidentally benign. That is an unfair judgment. This chapter makes three points in defending the broad thrust of American foreign policy, particularly in the last century.

First, America’s actions abroad, from its origins up to the Iraq invasion, have been inspired by a complex mixture of imperialism and idealism —a belief in its special mission to export its own values. That can be heavy-handed, but it is also admirable in many ways. Second, it has oscillated between introversion and engagement, and the rest of the world should overwhelmingly prefer America’s engagement, through which the United States has helped write international laws and arms control treaties. Third, the promotion of democracy, now mocked for its unforeseen consequences, is the idealistic essence of American policy. The United States’ best defense in its recent actions abroad is that it was acting in that honorable cause, and this goal should be salvaged from the icy bath of “realism” that has followed the Iraq debacle.

A Moral Mission

American foreign policy represents a long debate about whether it should intervene abroad or not. In two centuries, it has tried out both answers. In one of the earliest descriptions of the country’s intent, John Quincy Adams, then the secretary of state and later the sixth president, in a speech to the House of Representatives, declared, “Wherever the standard of freedom and independence has been or shall be unfurled, there will her heart, her benedictions, and her prayers be. But she goes not abroad, in search of monsters to destroy. She is the well-wisher to the freedom and independence of all. She is the champion and vindicator only of her own.”
¹

That is hardly an expression of imperial design. It is easier to find that later, in the 1880s, when America began to emerge as the world’s largest economic power. The Spanish-American War of 1898, in which the United States seized Spanish colonies in the Caribbean and the Pacific, marked America’s emergence as a world power. In his October 1898 decision to annex all of the Philippines, President William McKinley is reported to have said that God Almighty had ordered him to make the territory an American colony. Senator Albert J. Beveridge of Indiana echoed this in 1900, declaring, “God has not been preparing the English-speaking and Teutonic peoples for a thousand years for nothing but vain and idle self-contemplation and self-admiration. . . . He has made us adept in government that we may administer government among savage and senile peoples.”
²

America’s endeavors abroad have long produced a steady supply of such proclamations, although put as baldly as that, they carry an antique air no politician these days would venture. Many critics have argued that this instinct reflects America’s Puritan origins —its sense of being divinely anointed to redeem humanity —a case made particularly well by George McKenna, author of
The Puritan Origins of American Patriotism.
McKenna, professor emeritus at the City College of the City University of New York, argues that these convictions have threaded through American foreign policy all the way to the present, and that they inspired America’s response to 9/11.
³

The American exercise of muscle in the Philippines did not go without opposition; it gave rise, among other critics, to the New England Anti-Imperialist League, established in Boston, whose members included Mark Twain and Andrew Carnegie. Rudyard Kipling, in “The White Man’s Burden,” in 1899, warned that America would not be thanked by the people it had taken on itself to improve.
⁴
But many others agreed that the United States had all but a duty to press ahead.

Conviction of moral purpose does not guarantee morally admirable behavior, of course; indeed it may convince leaders that they are licensed to suspend such standards in pursuit of their goals. The Philippine-American War is now compared to Iraq, given the United States’ difficulty in putting down a guerrilla movement supported by much of the population, and its resort to torture and burning down villages to do so. Nor does conviction guarantee success: with echoes of President Bush’s “Mission Accomplished,” President Theodore Roosevelt declared that the Philippine war was over on July 4, 1902, when fighting did not stop for years.

But to deny that this guiding inspiration exists is to misrepresent one of the dominant impulses of American policy. There is much that is admirable about it, including the belief that everyone is entitled to liberty. Those who rush to say that America’s foreign intervention is “all about oil” or some other tangible self-interest miss the deep strain of idealism in its motives.

Isolation After the First World War, Engagement After the Second

Having said that, America’s willingness to engage with problems outside its borders has ebbed and flowed, the two strongest tides being toward isolation after the First World War and toward deep and painstaking engagement after the Second. There has been much intricate debate about whether America’s isolation after the calamity of the Great War contributed to the Great Depression and permitted the rise of fascism. But at least part of the lesson the United States drew from the Second World War was that it would do what it could to prevent a repetition.

That determination gave rise not just to the Marshall Plan, the laborious and expensive reconstruction of Europe, but to the great cornerstones of international institutions, aiming to bring order to international security as well as to the world economy. In those postwar years, America was the driving force behind the creation of the United Nations, the International Monetary Fund, and the World Bank, all in 1945; the North Atlantic Treaty Organization four years later; and the Japanese-American Security Treaty soon after, which helped bring stability to East Asia. It helped draw up the 1970 Nuclear Non-Proliferation Treaty, perhaps the most important of the arms treaties. While the pact has not had complete success in preventing the spread of nuclear weapons, it has been a central reason why the world has managed, for more than sixty years after the American strikes on Nagasaki and Hiroshima, to avoid another use of a nuclear weapon in conflict.