If Nixon was disinclined toward geoeconomic approaches to begin with, the 1973–1974 oil crisis and the general onset of economic insecurity in the mid-1970s only further lessened his enthusiasm, especially when it came to trading economic concessions for geopolitical objectives. By the mid-1970s, the domestic commercial constituencies for East–West trade had fully awoken to the possibilities of more liberalized flows. These constituencies, Dobson recounts, “became more influential, and although they still backed détente, they were primarily concerned with sales and profits; exchanging economic advantages for foreign policy gains had little appeal.”72 Soon Congress mobilized to their cause, and there were concurrent reviews of the issue. The final report by the Committee on International Economic Policy, in marked contrast to the Miller Report four years earlier, recommended reductions in U.S. lists to COCOM levels and less onerous licensing—not so much on national security grounds but in order to make U.S. companies more competitive. In an indication of the deteriorating environment for geoeconomics, the new report not only suggested that the administration should seek most-favored-nation (MFN) status with the Soviets but also cautioned that “we should not seek to use MFN as a political tool.”73
In addition, the bureaucratic reorganizations that followed Watergate, coming as they did at the height of U.S. economic insecurity, served to shift geoeconomic responsibility and capacity away from the State Department and administration foreign policy leaders. During this period, no fewer than three reports touched on the making of U.S. foreign policy and what Dobson calls “the issue of economic statecraft toward NMEs” (nonmarket economies).74 The Economic Policy Board, created by President Ford in September 1974, was to be chaired by the secretary of the Treasury and was to “provide advice to the President concerning all aspects of national and international economic policy … oversee the formulation, coordination and implementation of all economic policy of the United States and serve as the focal point for economic policy decision-making.”75
Another important plot point in the steady shift away from geoeconomics came in Ford’s rejection of détente, which carried with it a certain hardening of views on the moral superiority of capitalism and a remilitarization of the Cold War. After being overruled in the Great Grain Robbery, Kissinger seemingly lost interest in seeking out geoeconomic approaches to the Cold War and mainly occupied himself with the SALT II limitations on nuclear weapons instead. Next came the crisis in Angola, when the Soviets airlifted Cuban troops to fight in Angola’s civil war. Not only was the move seen as a serious escalation by the Soviets, spurring Kissinger to authorize CIA support for anti-Communist forces there, but it also further trained policy makers’ attention on the military aspects of the East-West conflict rather than its geoeconomic dimensions.
President Carter came into office wary of his predecessor’s remilitarized anti-Communist stance. But by late summer 1977, before the end of Carter’s first year in office, outgoing CIA director George H. W. Bush painted a worrying picture of U.S. military decline. So began a major push toward military modernization. NATO embarked on a modernization drive in 1978; Carter and Brezhnev scheduled SALT II talks for 1979; in 1980, the Rapid Deployment Force was established. That July, a subsequent White House directive, known as PD-59, marked the culmination of the Carter administration’s shift toward a more political military posture. It ordered “mobilization of defense command and control for a long conflict,” complete “with flexible uses of air forces, strategic and general purpose, on behalf of war aims that we would select as we engaged in conflict.”76
It was around this time that Samuel Huntington, then a young staffer at the National Security Council, tried to reassert a role for geoeconomics in the U.S. Cold War policies of the late 1970s (Huntington would go on to become one of the great international political theorists of the 20th century). His frustrations paint a striking picture of just how sharply things had changed in the fifteen years since the early 1960s.77 Huntington rejected the notion that economic instruments should not be subordinated to U.S. foreign policy aims, urging instead that “economic capabilities and economic relations must serve the basic U.S. foreign policy objectives of encouraging East-West cooperation, containing Soviet expansion, and promoting American values.”78 For Huntington, the failure to take a more proactive stance to counter the planned aspects of the Soviet centralized economy had led to a situation where the Soviets “had clearly benefitted more … than has the United States … What is needed is a new approach of conditioned flexibility in which changes in the scope and character of US-Soviet economic relations are linked to and conditioned by progress in the achievement of US political and security objectives.… [D]étente must be comprehensive and reciprocal.”79
But both Huntington and Carter had inherited a situation where few economic carrots and sticks were available. “Harnessing economic power to foreign policy goals,” Huntington wrote, “presents formidable obstacles: bureaucratic pluralism and inertia; Congressional interest and group politics; the conflicting pulls of alliance diplomacy; and most important, in dramatic contrast to military power, a pervasive ideology that sanctifies the independence, rather than the subordination, of economic power to government.”80 He summed up his wish list thus: “I am saying that we should be prepared to engage in economic diplomacy.”81
If Huntington ever did have a shot to reassert geoeconomics, events would intervene to make that impossible. The 1978–1981 Iranian hostage crisis, followed by the oil spikes and then the Soviet invasion of Afghanistan, concentrated the U.S. gaze in a decidedly political-military direction. Despite all of the troubles between the United States and the Soviet Union during the Carter years, the fact that East-West trade flourished throughout these crises and escalations is itself indicative that America had struck a new balance when it came to commercial and geopolitical interests.
There were intermittent shows of geoeconomics under President Carter. In the early days of the Iranian hostage crisis, the United States froze Iranian assets because, as President Carter put it, the Iranian leaders needed to be brought “to their senses … I thought depriving them of about twelve billion dollars in ready assets was a good way to get their attention.”82 But the most significant exception to the waning use of American geoeconomic power under Carter was the grain embargo leveled against the USSR in retaliation for the Soviet invasion of Afghanistan. Telling of the difficult climate for geoeconomic measures at the time, however, Stu Eizenstat, then a close advisor to Carter, argued against the grain embargo on the belief that if it were couched as a foreign policy imperative, Congress would veto. It would also put the United States in breach of contract, leaving it vulnerable to accusations of commercial unreliability. Carter was unpersuaded. The embargo was seen largely as a failure—feeding skeptical views of geoeconomic statecraft as often ineffectual—and Reagan repealed it. The United States negotiated a new grain agreement with the Soviets in August 1983, “which included the humiliating provision that the United States would not impose export controls for foreign policy reasons.”83
By the end of Carter’s presidency, ideological opposition to Communism (provoked by the USSR’s abysmal human rights record) together with principled opposition to Soviet aggression in Afghanistan had combined to push the administration to return to moral anti-Communism as the guiding assumption of American foreign policy.84 “Morality and economics were back as driving forces in American policy,” Walter Russell Mead wrote of Carter’s foreign policy evolution.85 But this was still the Cold War. And like all things during the Cold War, this moral and economic bent to U.S. foreign policy still demanded a stark contrast from the Soviet Union. The American capitalist system thus became portrayed not just as different from or irreconcilable with Communism, as in Truman and Eisenhower’s day, nor merely as in the self-interest of the United States, as in Kissinger’s realism, but as morally superior. What is striking about this period is the way in which economics and geoeconomics still sat in tension—but the national
understanding became less that the United States could simply no longer afford to engage in geoeconomics, even though domestic economic insecurity still exerted a pull away from geoeconomics, and more that, insofar as repurposing economic tools for geopolitical rather than economic goals became seen as an intrusion onto laissez-faire liberal capitalism, geoeconomics itself became morally suspect.86
This admixture of morality and economics continued into Reagan’s term. As Henry Bienen and Robert Gilpin, writing in 1980, summarized the national mood concerning geoeconomics at that time, “While this separation of international economics and politics (that is, of diplomacy and the market) has frequently been violated by the United States itself, this ideal has correctly remained a goal of American foreign policy.… The American goal of depoliticized and non-discriminatory trade not only fostered an unprecedented era of world commerce but it greatly reinforced the harmony of interest among the United States and its allies.”87 Domestic economic insecurity continued to do its part to suppress any appetite for geoeconomics, and concern over U.S. export performance in particular came sharply into focus. Between 1989 and 1991, the United States effectively wound down its embargo; it would waste little time filling the void, pioneering new assistance ventures with Russia and former Eastern Bloc countries. In 1992, COCOM was repurposed into a vehicle to help Russia and the Eastern European countries develop economically.
After the Soviet Union collapsed, U.S. policy planners and preeminent intellectuals focused on sustaining what some called a “unipolar moment.”88 As the post-Soviet reality became more fully absorbed, this newfound American primacy did little to change Washington’s thinking that the United States had prevailed in the Cold War not because of decades of savvy tactics—more of them geoeconomic than often appreciated—but because of the correctness of its political and economic ideas and the intrinsic superiority of its system of democratic capitalism. To hear Presidents Carter, Reagan, and George H. W. Bush tell it, it was as if the U.S. victory could not have been otherwise. President Bush’s call for a “new world order” and President Bill Clinton’s emphasis on the expansion of free markets and free governments made clear that economic liberalization and expansion of human freedom were now top Washington priorities.89
As U.S. diplomacy occupied itself with transitioning the former Soviet Union countries toward democratic capitalism, the economic components of this remained squarely focused on economic outcomes. It was trade for trade’s sake; financial and investment reform for the sake of deeper, faster, more efficient, better-integrated markets. The so-called Washington Consensus emerged as shorthand for the mix of economic measures all good market economies would go by—earning the term “golden straitjacket” for its constraining effect on government choice to deviate from the prescription even for domestic economic reasons, let alone geopolitical ones. Certainly at the time there was a general belief that economic liberalization would, in fostering peace and stability, redound to the geostrategic benefit of the United States. Yet even when it appeared these economic reforms were too much, too fast—straining the politics of these countries beyond what they could handle—there was not much willingness in Washington to deviate from the economic prescriptions for the sake of geopolitical aims.
In the 1997 U.S. National Security Strategy, one can see just how much geoeconomics appears to take a backseat to more political-military methods for managing the post-Soviet order. Laying out five different areas in which the United States had a strategic interest—Europe, the Asia-Pacific, the global economy (especially in Asia and Latin America), the need for peace in areas ranging from the Middle East to Haiti, and countering “growing dangers to our security”—the Clinton administration asserted that the United States “must have the diplomatic and military tools to meet all these challenges. We must maintain a strong and ready military. We will achieve this by selectively increasing funding for weapons modernization and taking care of our men and women in uniform.”90
And while, from the 1994 National Security Strategy onward, one of the goals of the administration was to “bolster America’s economic revitalization,” geoeconomic instruments—except for the familiar use of economic sanctions and an abstract belief in free trade as a vehicle for political liberalization—were not explicitly seen as part of any strategy to achieve overall U.S. foreign policy objectives.91 Rather, political-military tools appeared to dominate U.S. understandings about how best to assert its power and leadership throughout the world.
This view stretched across partisan lines. In an influential 1996 essay that helped to bring neoconservative ideas into the foreground of U.S. foreign policy, William Kristol and Robert Kagan argued that the “first objective of U.S. foreign policy should be to preserve and enhance … the strategic and ideological preeminence” that it had inherited with the Soviet Union’s collapse. The United States must “make clear that it is futile to compete with American power, either in size of forces or in technological capabilities.” Noting that the United States spent more on defense than the next six major powers combined, they proposed that Americans “may even want to enshrine this disparity in U.S. defense strategy” so as to “preserve its military supremacy regardless of the near-term global threats.”92 And it was, of course, during this period that U.S. and European governments did very little economically to help shape the direction of Boris Yeltsin’s Russia (although there was plenty of bad private “shock therapy” advice)—a profound omission that haunts the world today.93
The events of 9/11 arguably made the shift to an even more militarized national-security strategy inevitable. Now the United States needed to prioritize the accretion of military power not only to preempt threats from states but also to counter nonstate actors displaying homicidal intentions and capacities. Although this period saw the beginning of U.S. efforts to curtail terrorist financing, al-Qa’ida and its affiliates were hardly vulnerable to geoeconomic coercion; in the wake of 9/11, it was primarily ground forces, fixed-wing aircraft, and drones that would have to do the job.94
The ongoing U.S. preoccupation with countering the threat of Islamic terrorism, while understandable after 9/11, has had opportunity costs. In 2010, one U.S. foreign policy commentator recalled a meeting he had had years earlier with the deputy director of the policy planning staff of China’s Foreign Ministry. The official said that China’s grand strategy was to “figure out how to keep you Americans distracted in small Middle Eastern countries.”95 No wonder, then, that former U.S. defense secretary Robert Gates warned that “any future defense secretary who advises the president to again send a big American land army into Asia or into the Middle East or Africa should ‘have his head examined.’ ”96
It is not as if there were no attempts or success stories for U.S. geoeconomic power since Vietnam. In the months after 9/11, President George W. Bush launched a new multilateral trade round, hosted in Doha, Qatar, as a means of showing to the world that the United States neither was retreating from the world nor intended to reduce its relationship with the Middle East to exclusively military and security issues, according to those involved.97 The United States under President Bush also successfully negotiated new trade agreements with Jordan, Morocco, and Bahrain partly as a way of rewarding their cooperation in the U.S. fight against al-Qa’ida.
There were also important strides around energy security, even if these were geared mainly toward shoring up newly apparent geoeconomic vulnerabilities. Just six months before the October 1973 Arab oil embargo was imposed on the West, President Nixon announced a package of new geoeconomic energy policies designed to alleviate fuel shortages that had broken out around the country and reduce U.S. strategic dependence on imported oil.98 On November 27, Nixon signed the Emergency Petroleum Allocation Act, authorizing price, production, allocation, and marketing controls. And in the context of an OPEC decision to use oil as a strategic weapon following the October 1973 Arab-Israeli war, a decision that resulted in a fourfold increase in oil prices, Henry Kissinger convened th
e Washington Energy Conference.99 Lastly, with the launch of his Project Independence, Nixon became first in a line of U.S. presidents and hopefuls, extending to the present day, to establish a national goal of making the United States energy independent.100
To be sure, the evolving integration of China into the global arena—begun during this period and still a work in progress—marks one of the most extensive, protracted uses of American geoeconomic instruments. But claims that are quick to cite China’s integration as a potent example of U.S. geoeconomics are also easily exaggerated. Certainly the historic 1972 opening to China contributed to Nixon’s objective of bringing China in from the cold, and Nixon’s original strategy involved geoeconomic incentives.101 But to hear Nixon and Kissinger tell it, most of these economic incentives were of secondary importance.102 And in any case, as the China opening and integration agenda was handed down to successive U.S. administrations, it largely became reduced to a general belief in free trade as a force for political liberalization. For much of Washington’s now forty-plus-year effort to integrate China into the international system, the benefits and motivations have been more economic and commercial.103
What Changed?
As this cursory sweep of U.S. history attests, there is much in the historical record to support the idea that this latter-day “separation of economics from U.S. foreign policy and security policy reflects a shift from earlier American experience,” as former U.S. trade representative and World Bank president Robert Zoellick has put it.104
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