Another View

The run-up to the war in Iraq, along with the war itself, has exposed a surprisingly large number of cracks in the foundation of the post World War II institutional structure.   The UN, NATO and even EUROPE itself have crumbled like the Berlin Wall, that other artifact of the post WWII world, under the stress of the debate.  Like all bureaucracies, these institutions have struggled mightily to preserve their power long after their raison d’etre has expired.  Almost certainly they will continue to do so.  But their days of preeminence have passed, even if only the most powerful nation on earth is aware of it. 

What replaces these institutions is the subject of heated debate.  I see only two possible outcomes.  The most likely scenario is what I would call ROME.  The U.S. is the Rome of the 21^st century, like it or not.  Whether we choose to act like Rome is entirely up to us.  At the moment, it appears that we find Rome to our liking.  Our leaders are confident enough in themselves and our global position to act unilaterally.  That we will be a benevolent version of Rome, I have no doubt.   In many quarters of the world, however, there seems to be considerable concern over just that point.  A great deal of that alleged concern is probably just naked envy, but some of it is real.  How the war in Iraq is conducted, and more importantly, how the post war situation is handled can go a long way to relieve those doubts among those who are willing to be persuaded.  A successful campaign followed by the institution of a credible democratic government in Iraq and a swift conclusion to the Israeli-Palestinian conflict may be a long shot, but it would certainly legitimize the U.S. as Rome scenario throughout the world and garner it great support.  After all, Rome ran a very stable world and for a very long time.

The only other plausible scenario is the French vision of a pre-WWI Balance of Power world.  This political theory, fairly well debunked, one would think, by not one, but two, devastating world wars, holds that peace and stability can be maintained through a network of alliances that balances the power of one state or block of states with another.  The Franco-German-Russian alliance, which blocked a second UN resolution, was a perfect example.  Creating a counter balancing power bloc has been a stated goal of French foreign policy for some time. In promulgating this option, France is merely pursuing the only one available to them if they wish to maintain the pretense of power that the Security Council veto allowed them.  (And they do).  In the process, they not only gave voice to a long simmering resentment towards America in much of the world, they also uncovered a just below the surface animosity for the French by many Americans and Britons.  On a recent visit to Paris I was surprised by how little this is understood in France.  Debate, diplomacy and compromise being their méer, Frenchmen cannot understand why their latent and fashionable anti-Americanism would be greeted with such hostility.  In a recently published editorial in Forbes magazine, the celebrated British historian Paul Johnson said, “The Americans are still finding out [what] the British have learned over 1000 years of acrimonious history. France is not to be trusted at any time on any issue.  Any alliance with the French always has to be bought.”  Harsh, perhaps, but a good barometer of the current mood across the channel and across the pond.

In either scenario, an “inevitable return” or “unavoidable transition” to multilateralism, as envisioned by my partner and friend François Sicart in his most recent paper, strikes me as a quaint notion, particularly if, as he suggests, it is up to us Americans to lead the way.  Americans have never been enchanted with foreign entanglements or alliances and a large number of them have opposed the UN from its very inception.  For obvious reasons, those feelings are running high across the land, and it is not obvious why they should diminish any time soon.  Even a passing knowledge of the “Red State Americans”, the ones who voted for George Bush in 2000, would suggest that no multilateral framework that includes the French (and how could it not?) would be feasible for a very long time.  Rightly or wrongly, many Americans will blame France for the death of American servicemen.  Some will blame it for the war itself, arguing that a unified international front was the best way to avoid war.  Going it alone has great appeal among a substantial portion of the Red State electorate.   I cannot imagine any politician successfully campaigning on the issue of a return to multilateralism, particularly if the war goes as planned.  Only a disaster in Iraq could swing the pendulum in that direction.

From an investment point of view, we are left hoping for the Rome scenario, but it is too soon to place a bet on it.  A strong, respected and, even, in some quarters, popular United States can be a force of great good in the world.  One can envision a durable peace, greater stability and lower risk premiums as a result.  That would be extremely positive for world trade and economic growth as well as for stock prices.  Getting there from here is apt to be a formidable challenge, to say the least.  But the game is certainly worth the candle.  As we have learned from history, a Balance of Power world can be a highly unstable one.  Shifting alliances of convenience can be great fun for the diplomatic corps, but for the investor it is a potential nightmare.

March 28, 2003
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