Recklessness & Contempt – Should President Obama Learn from President Reagan?

 

Never get into a war where your adversary’s stake in the war is much much greater than yours – this is an old maxim of strategy. And it is more true for an empire or the reigning superpower than it is for insurgent regimes. Insurgent regimes can end their conflicts with a dominant empire quickly because there is no shame in accepting the inevitable. But the dominant empire cannot because losing even a small war may damage the franchise of the empire and tempt others to rise against the empire. That is how empires tend to get bogged down in small or local conflicts that have no bearing on their macro policy or franchise. 

That, unfortunately, has been the story of US foreign policy since World War II. Vietnam is a prime example. The Vietnamese had a far far greater stake in that war than US did. They were fighting to unite their land against foreign invaders & occupiers, first the French and then Americans. The Vietnamese would have kept fighting for as long as it took because their stake was existentially paramount. Eventually, American leadership understood it and withdrew from Vietnam. It is still the worst and most significant defeat of US foreign policy. To this day, even after 40 years, America is unable to rise above that defeat or forget it. As a result, America remains wounded in its efforts to re-pivot to Asia. 

The Afghan conflict is another and current example. It is now obvious to all that the Taleban would keep fighting for another decade if necessary. And NonPakistan would keep supporting the Taleban while professing solidarity with America and taking America’s billions in the process. In contrast, the US has far less at stake in this war, a war that America simply cannot win without acting as Genghis Khan did. 

America recklessly ignored the timeless maxim of war in Vietnam & Afghanistan. Suck recklessness tends to spring from contempt. No one can deny that America had contempt for both Vietnam and Afghanistan at the beginning of those two two wars.  

We see the same recklessness and contempt today in American foreign policy. And we see it in the most dangerous conflict that America has entered, a conflict in which the adversary has far far more at stake than America has. Every sensible US strategist has stated publicly that Ukraine is THE No. 1 issue for Russia and Putin. In contrast, America has very little at stake in Ukraine. This is the reverse of Cuba. America had a paramount stake in ensuring Cuba doesn’t get a Soviet presence while the Soviets had little at stake there. That is just as true today. Cuba remains of paramount importance to America and of negligible importance to Russia or China. Any attempt from either to seriously enter into Cuba would be met with America’s undivided attention.

That brings us to Taiwan. China has made it clear that they will go to war with America if the status of Taiwan changes materially. America respects China and understands the challenge China poses to America. So America is very careful in how and where America engages China. America had serious respect for the capabilities of the USSR and the damage USSR could do to America. So America managed that relationship with great care and patience. That is why America did not get involved in Hungary in 1958 or in Czechoslovakia in 1968, two acts of of naked brutal imperial power by USSR. By playing a carefully managed game, the American triad of superiority military-economic-media won that long conflict of attrition. 

In contrast, the American establishment has nothing but contempt for today’s Russia and Putin. That is why the Obama Administration is being utterly reckless in its actions against Russia. A small foray in Ukraine to force Putin to concentrate on Ukraine and back away from the Middle East might have been sensible. But it has now become a thoroughly dangerous conflict in which Russia’s future is at stake. It has become so because America has begun using its ultimate strategic nuclear weapon of this era – access to the US Dollar based global financial system. 

This week, Russia began to retaliate and the global financial markets shuddered. And Russia hasn’t done anything real yet. Everyone understands that Putin wants to play a “long game” in Ukraine but will act physically if compelled by events to do so. Russia has already served notice by its first set of sanctions that Eastern Europe and Germany will pay heavily for supporting American sanctions.

The financial markets are signalling that deflation, that dreaded d-word, is settling in Europe. Italy seems to be falling into its triple recession and German GDP is expected to contract this quarter according to Germany’s Commerzbank. The best indicator of Europe’s economic health is the 10-year Bund, the German Government Bond. It’s yield fell this week to 1.05%, its lowest level in history. And Europe cannot contract without impacting the US Economy and US interest rates fell sharply this week. 

This economic and financial damage is bad and could end up creating a global slowdown. But that damage will not last for more than a few years – serious but not materially so. After all, the US economy has been in a slowdown for six years already. So another 6-7 years may not matter in the long run. No, we are not being cute, blase, or uncaring. 

We are simply focusing on the paramount threat to long term American prosperity. Russia is already taking steps to reduce the use of the U.S. Dollar. It’s landmark energy deal with China was the first step. It is talking about signing deals with Brazil denominated in Russian Rubles & Brazilian Real. It has initiated talks with India to do deals denominated in Rubles-Rupees, a practice that helped India in 1960s & 1970s. Listen to what Sergei Glazyev, economic adviser to Putin, said this week:

• “What could serve as our chief response is the implementation of a plan for fast-track development of the Russian economy on the basis of a new technological order, … This plan includes a transition to a sovereign monetary system underpinned by internal sources of credit, an active policy of innovation and support for progress in science and technology.”

This is exactly what China has tried to do for the past 6 years and what Xi Jin Ping wants to achieve in his tenure. This is exactly the longer term plan of Prime Minister Narendra Modi of India. And this will be exactly what the next leader of Brazil would plan to do. If they are successful, even partially successful, it will reduce the role of the US Dollar in global trade. 

America’s unique stature in the world is not because of its military or its economy. America stands tall and towers above the rest of the world because the world’s financial system is based on the U.S. Dollar, the reserve currency of the world. This is what President Obama is risking. Sergei Glazyev said this week,

• “If a country aspires to reserve status for its currency, it should behave properly, and that isn’t the case today,”

The real danger for America is that China, Brazil and India are beginning to feel that way too. If they start taking steps to reduce the role of the US Dollar in their economies and in their trade with each other, the long term damage to American prosperity would be significant and permanent.

Only a great & supremely confident leader can back away from a reckless conflict. President Reagan was both. He joined the conflict in Lebanon in August 1982 by sending American troops. Then in October 1983, a group called “Islamic Jihad” killed 299 American & French servicemen by truck-bombing U.S. Marine barracks. Instead of getting in deeper, President Reagan ordered the withdrawal of all U.S. troops from Lebanon. As General Colin Powell described later, “Beirut wasn’t sensible and it never did serve a purpose. It was goofy from the beginning“. Some derided Reagan for cutting and running. But history judges Reagan’s decision as CFR’s Micah Zenko did earlier this year:

• “Thirty years ago … President Ronald Reagan made perhaps the most purposeful and consequential foreign-policy decision of his presidency. Though he never said so explicitly, he ended America’s military commitment to a strategic mistake that was peripheral to America’s interests“.

Ukraine is peripheral to America’s interests. And President Obama admires President Reagan as a transformational president. So we urge him to act like Reagan and end the ginormous strategic mistake of using the U.S. Dollar as a weapon of foreign policy against Russia and others. Otherwise, he would be regarded by history as the President who undermined the reserve currency role of the U. S. Dollar. And that would mark him as a truly transformational president, but of the wrong kind. 

 

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