Rogue Nation: American Unilateralism and the Failure of Good Intentions (2003) (7 page)

Jihad even resonates, in a peculiar but significant way, in the heartland of the empire. Home schooling has become a booming business in the United States, with 1.5 million students currently in various programs and increasing by 7 to 15 percent annually.
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The cause of this rise is primarily the desire of religious parents to avoid having their children imbibe the materialistic values of globalization. The conundrum was framed perfectly, if unwittingly, by President Bush when he told Americans they were now at war, and it was their patriotic duty to keep the economy running by consuming more. Thomas Friedman has suggested that ‘the emerging global order needs an enforcer,’ and that this is ‘America’s new burden.’
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But he never says what exactly America will be enforcing and how. Will the United States use force to sell
Baywatchl
Will it do so alone, or with allies?

Presumably, the answer is that it will enforce the non-negotiable, universal demands with the help of ‘coalitions of the willing.’ But here arises the question of the true universality of those demands. Bush’s demands are almost a perfect match for those of Woodrow Wilson in 1917, with one striking addition – respect for women. This new universal value Americans discovered only recently. Is the American definition of respect for women in fact a universal value whose fulfillment is non-negotiable? Or take limits on the power of the state. Virtually every country in the world disagrees with how the United States sets these limits. They would increase the state’s powers in many instances – for example, by strictly regulating guns – and make them more humane in others – for example, by abolishing the death penalty. If we are looking for coalitions of the willing, the evidence suggests that many countries don’t accept the universality of our values and are becoming increasingly unwilling.

SENTIMENT IN THE EMPIRE

I
n the cold winter of 1948, one of the first major confrontations of the Cold War took place in West Berlin. Located in the heart of the Soviet zone of occupation, West Berlin was an enclave of freedom occupied by U.S., British, and French troops in the midst of the Soviet armies. Not wishing to attack directly but intent on taking over all of Berlin, the Soviet authorities imposed a blockade. They would not supply the enclave, nor would they allow supplies to be trucked in from the west through the territory they occupied. In a desperate improvisation, U.S. forces launched the now legendary Berlin airlift, flying thousands of tons of supplies daily into Tempelhof airport, while daring the Soviets to stop them. It worked, and West Berlin remained a beacon of freedom for forty years, until the fall of the Berlin Wall finally reunited the two halves of the city. Berliners and American presidents have always had a special relationship. It was in 1963 that President Kennedy told the city ‘
Icb bin ein Berliner
’ (I am a Berliner) to uproarious cheers, and it was in 1987 that President Reagan heard the same cheers when he called on the Soviet leader Gorbachev to ‘tear down this wall.’ But when President Bush visited the city in May 2002 he was met with jeers, not cheers. What had happened?

To find out, the Pew Research Center for The People and The Press undertook a massive survey of global public opinion on the United States, interviewing more than 38,000 people in 44 countries during the spring and summer of 2002. For an American, the results are both positive and disquieting. On the one hand, they demonstrate a vast store of good will toward and admiration of the United States from around the globe. At the same time, they reveal that these sentiments are declining, while mistrust and dislike of the United States are rising. Perhaps most significantly, in a number of areas the views of Americans are dramatically divergent from those of virtually all other peoples, and those who know us best are showing the steepest declines in positive sentiment. In every country surveyed, except Argentina and those in the Middle East, people having an overall favorable view of the United States account for well over half of respondents. At the same time, the favorable percentage has declined virtually across the board. For example, in 1999, 78 percent of Germans said they had a favorable view, while in 2002 that percentage had declined to 61 percent. In Great Britain, the percentages were 83 favorable, falling to 75 percent. In Indonesia, it was 75 percent, falling to 61 percent; Japan,
77
, falling to 72; Argentina, 50 percent, falling to 34. A few went the other way. France, interestingly, climbed from 62 to 63 percent while Russian went from 37 to 61 and Nigeria from 46 to 77. But the overall trend was down, and in countries like Turkey, Pakistan, Jordan, Egypt, and Lebanon, the United States was rated unfavorably by about 70 percent of respondents. As shown in Chapter 1, many respondents have a much more favorable rating of our people than of our country. Thus, for example, only 25 percent of Jordanians rated America favorably, but 53 percent rated Americans favorably.

America and its neighbors differ widely in their views of the world’s gravest dangers. For Americans, number one is nuclear weapons. Except for, understandably, Japan, no other country has this at the top of its list. Pollution and the environment rank lowest among U.S. concerns but high everywhere else, particularly in Asia. AIDS and infectious disease are also major concerns elsewhere but not so much in the United States. Religious and ethnic hatred is the leading candidate in Europe, the Middle East, and much of Southeast Asia and Africa, but again not in the United States.

America is most admired for its technology and science, with large majorities in every country scoring a favorable impression here. With a few exceptions such as India, Bangladesh, and several Middle Eastern countries, American pop culture is also a big winner, with two-thirds of Europeans and Latin Americans and more than half of Asians saying they like it. In a seeming contradiction, however, no one seems to approve of the spread of American customs and ideas. More than half of Canadians, two-thirds of Europeans and Asians, and more than three fourths of those in the Middle East viewed these unfavorably. American ideas on democracy received a more mixed, but in some ways more disturbing reaction.

In Africa and Asia outside of India, these ideas are received quite favorably, but opinion in Latin America and Europe is divided fairly evenly. In Britain, for example, 43 percent like U.S. ideas on democracy while 42 percent dislike them. In Canada it is 50-40 against.

Three key questions were: Does the United States fail to solve problems and increase the gap between rich and poor? Does the United States take the views of others into consideration when making international policies? And would the world be better off with a second superpower? On the first, the response was overwhelming that the United States does not solve problems; and that with important exceptions such as Egypt, Pakistan, and most of Africa, it increases the rich-poor gap. On the second, as noted in Chapter 1, large majorities everywhere say that America doesn’t pay attention to the views of others – except in the United States, where 75 percent of respondents say that America pays significant attention to the concerns of others. This gap is in some ways to be expected, but its size and universality are telling. At the same time, large majorities in most countries say the world would be a more dangerous place if there were a second country equal to the United States in military power. While that is comforting, it should not obscure the significance of the disaffection. In particular, a final disturbing point is that those who know the United States best – the Canadians, the Brits, and other West Europeans – are often the ones who rate it most poorly or who show the biggest decline in favorable ratings.
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These statistics merely quantify both what the subjects in the empire are screaming at Americans and what I have heard in thousands of conversations around the world. The Bilderberg Meeting is an annual gathering of U.S. and European government, business, academic, and media leaders who discuss trans-Atlantic relations, off the record, over a long spring weekend. The 2002 meeting took place in Washington over the weekend of the president’s West Point address. The Europeans at the meeting expressed emotions ranging from disbelief to anger to disappointment and a sense of betrayal and insult. As one former French representative to NATO noted, the United States was effectively saying it would ‘chaperon Europe’ in a kind of protectorate relationship. A former European Commissioner emphasized that ‘if the United States sees consensus as optional, that will be deeply corrosive to the world order we have struggled to create for the past fifty years. This idea is not only antiglobalization, it is actually contrary to the American model itself.’ Added one of the world’s richest financiers, ‘Optional unilateralism undermines all that the United States stands for by negating checks and balances and the rule of law. Whether consciously or not, the United States is essentially saying might is right.’ The Washington-based ambassador of a leading ally of the United States emphasized that the pre-emptive war doctrine sets a dangerous precedent. ‘What will you do when a nuclear armed India or Pakistan decide they too must adopt this strategy?’ he asked.

Nor was this a purely European reaction. Shortly after the Bilderberg Meeting, I had dinner in New York with the ambassadors to the UN from Mexico, Brazil, France, Switzerland, the EU, Singapore, Japan, Egypt, and Nigeria. They actually arrived well past the rendezvous hour of 8 P.M. because they had all been delayed in a Security Council debate over American demands for special treatment of U.S. citizens as a condition for U.S. agreement to creation of an International Criminal Court, a body the United States had itself originally proposed. They were still seething when they reached our host’s apartment on the Upper West Side. Having already agreed to what they considered elaborate safeguards against politically motivated prosecution of Americans, they found further U.S. demands for exceptional treatment insulting and unconscionable. Said one Latin American ambassador, ‘The United States mistrusts the whole world. It relies only on military force and has no vision of itself working with others. Everything is always only about itself.’ One of the European ambassadors captured the overall feeling when he said, ‘In the past the United States has been a beacon to the world, but more and more it seems to be acting not only without regard for others, but also without regard for the very principles that made it a beacon. This is terribly depressing and disappointing for all of us.’ To a man they expressed personal opposition to and even disgust with the U.S. position. Yet most admitted that their governments would probably direct them to accommodate the Americans. Why? Because the United States had many ways to make life unpleasant for these countries, and none wanted to offend the world’s greatest power over any but the most critical of matters. So when the American proposal for special treatment under the treaty came up for a vote on the Security Council, they would all hold their noses and vote ‘aye.’ But they wouldn’t forget the indignity.

Similar resentment is also found in broader circles. At the APEC meeting in Los Cabos, in October 2002, the CEO summit featured an instant polling system that provided a rapid visual projection of the audience response to various questions posed by the program moderator. Two such responses were of particular interest. In one instance, it was noted that 100,000 U.S. troops have been deployed in Japan, Korea, and the rest of Asia for more than fifty years. The audience was asked to say whether it expected those troops to remain for another ten, twenty-five, or fifty years. Nearly two-thirds of the respondents chose twenty-five or fifty. Later, the audience was asked to vote on the most dangerous threat to regional security, whether terrorism, the rising power of China, the remilitarization of Japan, mass movement of people across borders, water shortages, AIDS, or American hegemony. While nearly 60 percent of the audience chose terrorism, American hegemony was in second place with 30 percent, far outdistancing all other choices.
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This wasn’t a group of left-wing radicals. These were eight hundred top business leaders from around the Asia-Pacific region saying they were more afraid of American hegemony than anything else except terrorism.

What the world is longing for is what Michael Hirsh calls an American vision of ‘inclusive idealism,’
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a United States that, in Thomas Friedman’s words, is interested in what the real problems are and in what it is doing wrong. Instead, as one Chinese diplomat put it, ‘the United States imposes its way and does so without knowing what it is doing.’ A vivid example is the
New York Times
story of December 22, 2002, about the oil riches of Nigeria. The story notes the contrast between the richness of the homes of the Chevron⁄Texaco terminal managers in Ugborodo, Nigeria, and the shacks of the oil field workers on the other side of the creek who seized and occupied the rich houses as part of a peaceful protest. The situation is complex and has much to do with the corruption and ineffectiveness of the Nigerian government. But the sentiment was best expressed by Victor Omunu, a local municipal official, who said: ‘Yes, the Nigerian government has failed, but we know the Americans influence the policies of this government. If they have the interests of the community at heart why is it they can’t draw the attention of the Nigerian government?…The Americans who claim to be freedom fighters, the Americans who claim to want to better mankind – for us they are the devil. Can you tell me they are not worse than Saddam Hussein or Osama bin Laden? They come, take, and leave without putting back.’

A longtime State Department official and former ambassador to Saudi Arabia Chas Freeman put it a bit more diplomatically, saying that ‘the United States is a City on a Hill, but it is increasingly fogged in.’ He added, ‘We need a war on arrogance as well as a war on terror.’

3

America’s Game

‘
It doesn ‘t seem fair that the financial markets should make Brazil pay an economic price for having a democratic election.
’

—Rubens Barbosa, Brazil’s ambassador to Washington, D.C.

S
upachai Panitchpakdi is a pleasant, round-faced man with the academic air of the professor he once was. Having swapped the university for politics, he became Deputy Prime Minister of Thailand in the mid-1990
s
and is now director general of the World Trade Organization (WTO). In October 2001, before he had taken up his position at the WTO, we shared lunch at the Shangri-la Hotel in Shanghai where we were both attending the meetings of the Asia Pacific Economic Cooperation forum. As we looked down over the bustling ship traffic passing the Bund on the Huangpoo River, we enjoyed an unexpected reminiscence. It seemed that we had both been living in the city of Rotterdam in the 1960
s
without, of course, having had the opportunity to meet. We tried our rusty Dutch on each other (his was better than mine) and I learned he had been sent by Thailand to study economics under the renowned Jan Tinbergen at the University of Rotterdam and had stayed on as a professor for ten years before returning to Thailand. I had been the Vice Consul at the U.S. Consulate in Rotterdam from 1966 to 1968.

Our discussion turned from the distant past to the more recent past. We switched back to speaking English, and he suddenly turned very serious and said of recent economic developments: ‘The impact of the Asian financial crisis was devastating to Thailand and Southeast Asia, and caused many to question whether the U.S. and the IMF had a good understanding of how globalization affected Asia’s economies.’

THE CRASH OF ‘97

S
upachai was referring to events that began unfolding in Bangkok in the autumn of 1996. During the 1990
s
, the economic miracle that had begun in the 1960
s
in Japan, and spread through Korea, Taiwan, Hong Kong, Singapore, and Malaysia, finally came to Thailand. For Southeast Asia it was the best of times. With the end of the Cold War, democratic capitalism was the sole surviving economic system and master of all it surveyed. In the race to create wealth, it had simply outrun communism. ‘Globalization’ – the integration of national economies and corporate entities through trade and cross-border investment on a worldwide basis was the new watchword. Best-selling books by authors such as Japan’s Kenichi Ohmae sang the praises of the new ‘borderless world’ in which the national frontiers marked on maps had become meaningless, and the best thing governments could do was to persuade the corporate masters of the universe to invest in their countries and then get out of the way. Among the high priests of the global economy at the U.S. Treasury, the IMF, the World Bank and the elite universities, a general view developed with regard to the path to the future that became known as the ‘Washington Consensus.’ Popularized by Tom Friedman under the rubric ‘the golden straitjacket,’ the formula called for balanced budgets; low taxes; free flows of capital, goods, and services; privatization; deregulation; protection of property rights, particularly of intellectual property rights; small government; and liberalization of interest rates. Implementation of these measures, it was argued, would bring prosperity and narrow the gap between rich and poor, which in turn would bring democratization, which in turn would bring stability and peace. Friedman further explained that a main mechanism by which all this would happen was the ‘Electronic Herd,’ that group of faceless gnomes who stare at computer screens in the hushed aeries of Wall Street, Kabuto-Cho, The City, and elsewhere, and send trillions of dollars coursing around the globe with the click of a mouse.

In the 1990
s
, the Electronic Herd discovered Southeast Asia and it developed a special liking for Thailand. What later came to be seen as one of history’s great financial bubbles was meanwhile gathering steam in the United States. Low interest rates and a booming economy released a tidal wave of money looking for high returns. Investors from the slow-growth economies of Europe and Japan were also looking for greener pastures, and with its high growth, high interest rates, and low risk by dint of currencies pegged to the dollar, Southeast Asia looked like a gnome’s nirvana. Between 1993 and 1996, European, Japanese, and American banks lent over $700 billion in the region. Short-term foreign loans to Thailand alone amounted to nearly 10 percent of GDP in each of those years.
 1 
Foreign direct investment (FDI) also poured in, with General Motors, Ford, Toyota, and Daimler Chrysler all announcing new auto plants in Thailand while new skyscrapers darkened the skies. In 1994 the leaders of the Asia-Pacific nations, meeting in Indonesia, embraced the globalization doctrine by announcing formation of the Asia Pacific Economic Cooperation forum and its commitment to achieving complete free trade in the region by 2020. At the conferences of the global glitterati in Singapore, Davos, and Washington, learned professors, hardened bankers, and savvy political leaders all pointed to Southeast Asia as the most dynamic part of a global economy that was leading the way to Utopia.

Few noticed, in late August 1996, the collapse of the Bangkok Bank of Commerce. Some eyebrows were raised in February 1997, when Som-prasong Land Company defaulted on its Euro bonds, sending the first signals that the real estate bubble might be about to burst. Later that month, Finance One, Thailand’s largest finance company, suddenly began seeking a merger partner. With that the Electronic Herd began a stampede out of the corral. Foreign bankers began calling their short-term loans while hedge funds sold the Thai baht short, anticipating that the peg to the dollar could not hold and that the currency would eventually have to be devalued. Fearing the same thing, Thai companies that had borrowed heavily abroad began dumping baht for dollars. In an all-out attempt to support the exchange rate, the Thai central bank poured its dollar reserves, $26 billion in all, into a desperate buying effort.

In the wee hours of the morning of July 2, 1997, central bank officials called the Minister of Finance, Thanong Bidaya, with a somber message: There would soon be no more dollar reserves. Thailand was effectively bankrupt. Well before dawn, Bangkok’s leading bankers were awakened by telephone calls from officials summoning them to an emergency meeting. At 6:30 A.M. they gathered in a low, squat building across from the ornate Bankhumprom Palace, which houses the Bank of Thailand. They were told the government was out of reserves and thus no longer had dollars with which to buy baht so as to keep its valued pegged at twenty-five to the dollar. The government had no choice but to abandon the fixed exchange rate and let the baht float – or sink – freely. At 9:00 A.M., the exchange market opened and the baht immediately fell 15 percent. It would eventually lose 60 percent of its value. By early December, the government had closed fifty-six of the country’s top fifty-eight financial institutions. Former tycoons could be seen selling sandwiches on the streets of Bangkok as unemployment rose to 20 percent. Cab drivers added a new wrinkle to the standard sightseeing tour: a drive down Asoke Street, Bangkok’s Wall Street, to see the dead banks. The party was over.

But hey, it was only Thailand. I remember speaking at a conference attended by leading U.S. officials and economists who emphasized that while the collapse of the Thai economy was a shame and painful for Thailand, we shouldn’t forget that the whole Thai economy amounted to only $185 billion dollars, less than the city of San Diego. Clearly it was no big deal. None other than President Bill Clinton seemed to agree, for as the international community, led by Japan, struggled to put together an emergency financial package for Thailand, Clinton declined to have the United States participate, saying the whole problem was just ‘a few glitches in the road’ to global prosperity.
 2 
But if it was a hiccup for Clinton, it was stomach cancer for the Thais, who remembered that when Mexico had had similar problems in 1994, Clinton had moved heaven and earth to put together a rescue package. The Thais also remembered their help for the United States in Vietnam, and that the United States had all along been pressuring them to convert to the gospel of free trade and open financial markets. As Supachai’s comment to me in Shanghai suggested, the Thais would not soon forget these ‘glitches in the road’ and the United States’ lack of response to them.

And then suddenly it wasn’t only Thailand. In July, shortly after the fall of the baht, Malaysia’s ringgit and Indonesia’s rupiah began to fall, while the IMF offered the Philippines $1.1 billion in a pre-emptive move. At the same time, the Korean car maker Kia sought emergency assistance. By October, the ringgit had lost 25 percent of its January value and the rupiah had lost 28 percent. Malaysian Prime Minister Mahathir stopped short sales of Malaysian stocks and imposed limited controls on money flows into and out of the country in an effort to prevent a collapse like that of Thailand. For this he was severely criticized by virtually the entire elite of international finance, including top officials in the U.S. government, who said that such a move would completely and permanently undermine international investor confidence in the Malaysian economy and condemn it to eternal slow growth. Never shy, Mahathir unleashed a diatribe against international speculators, calling financier George Soros a moron and sharply criticizing the United States and the IMF for policies that enabled speculative attacks and that undermined the ability of developing countries to catch up. Mahathir later told me that his cabinet officials and advisers wanted him to shut up because every time he opened his mouth the ringgit fell further. ‘But I must tell the truth,’ he said. At the IMF⁄World Bank annual meeting in Hong Kong in September, he told the world’s top bankers that currency trading is immoral and should be banned. Indonesia’s currency, which had been tracking the ringgit, fell in response to his comments, while unemployment rose inexorably.

Despite the turmoil in Southeast Asia, the financial leaders at the Hong Kong meetings seemed to be in tune with Clinton. Even as the Electronic Herd was heading for the hills, the IMF’s leaders requested a change in the organization’s charter to allow it to put more pressure on developing countries to deregulate and open their financial markets to all global players. They did put together some rescue money for Thailand and Indonesia, but nothing, of course, for bad-boy Malaysia. That there really wasn’t much worry was made clear by the glowing IMF annual report on the Korean economy, which, according to the IMF authors, was doing just about as well as it is possible for an economy to do. Here, apparently, was a case of near-perfect execution.

The storm broke with full force as the masters of the universe were unpacking their bags at home after returning from Hong Kong. The Hong Kong dollar, with its firm peg to the U.S. dollar, became the target of one of history’s most aggressive speculative attacks. Huge global hedge funds developed their own version of Dungeons & Dragons. They would sell Hong Kong’s Hang Seng stock index short while also selling Hong Kong dollars. The dollar sale, they calculated, would force the government to raise interest rates to hold the peg to the U.S. dollar, but rising interest rates would drive stock prices down, thus making the short stock index positions profitable. In fact, they were extremely profitable. As Hong Kong reeled and Indonesia was forced to accept an IMF bailout package calling for domestic austerity that was certain to drive unemployment through the roof, Japan floated the idea of creating an Asian Monetary Fund, to be financed largely from Japan’s huge reserves and used to underpin the region’s sick economies. I was one of those to whom the Japanese explained the idea, but when I reported it to appropriate officials in Washington the response was strictly negative. The idea quietly died for lack of oxygen. While it was expiring, so too was that paragon of good performance, the Korean economy.

Throughout October, the Korean won had been declining. In November, a number of major Korean companies were forced to announce delays or suspensions of domestic and international investments. In 1996, the United States had championed Korea to become the newest member of the Organization for Economic Cooperation and Development, the club of developed countries. Although it was a way to have a second Asian member (after Japan) in an otherwise all-western fraternity, it also facilitated U.S. negotiators in pressuring Korea to open its financial markets. On joining, Korea was flooded with foreign money as a $13.1 billion increase in foreign bank loans came into the country. Now the foreign banks, including a number of major U.S. institutions, grew nervous and began to head for the door. It couldn’t have happened at a worse time. Korea was in the midst of a presidential election and no one was watching the store. In a desperate effort to hold up the value of its currency, Korea repeated the Thai experience until, in late December 1997, its officials had to tell its president there were hardly any reserves left.

At this point, a new mood overtook Washington. Korea, after all, is no glitch in the road. It is the world’s eleventh largest economy and a major strategic ally of the United States. You can’t let a country like that go down the tubes. In November 1997, Hong Kong had put an end to speculative attacks by having its Monetary Authority simply buy a large portion of the outstanding shares on the Hang Seng index. This was a complex maneuver, but in effect it was not too different from Mahathir’s control on money flows into and out of Malaysia. Because Hong Kong did it with an apology rather than with Mahathir’s defiance, American and international officials swallowed hard but gulped it down. So the U.S. embassy in Seoul, South Korea, and the U.S. Treasury in Washington began burning the phone lines to Wall Street with the message that Washington would really appreciate it if the U.S. banks would refrain from taking their money out of Korea, and in fact would be most grateful if the loans were rolled over. In the category of offers you can’t refuse this was a beauty. Of course, it amounted to the same kind of capital controls Mahathir had imposed, but Korea had a real economy and was a real ally.