Washington is stupidly focused on domestic problems while the economy slows

Washington is stupidly focused on domestic problems while the economy slows
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Trump’s Syria snafu — although made with “great and unmatched wisdom” — cannot be viewed in isolation. The reputation of the U.S. has been considerably dented over the last three years. Partners are unsure as to whether they can still rely on Washington; opponents see fissures appearing in the Western bloc and take advantage of the chaos in the U.S.; and international institutions that largely rely on the U.S. are experiencing major difficulties.

Pax Americana expired?

The leader of the West is faltering when Western political and economic model is sorely in need of support. Of course, America still has virtually immeasurable military and economic power, but legitimacy and authority are required to use this power as effectively and efficiently as possible.

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Trump and his supporters have caused serious damage to America's legitimacy and authority as world leader with inconsistent, confused, short-sighted and sometimes entirely irrational actions that sometimes seem to have no purpose other than to boost the ego and settle personal accounts — as opposed to serving the nation’s interests.

Under the post-1945 Pax Americana, American political authority and legitimacy generally coincided with the economic and military (super) power of the U.S. Many countries accepted the leadership role of the U.S. Not because they were forced to do so by Washington, but also because, in their view, America rightly claimed this role and was willing to let others share in the proceeds of the U.S.-led system. Other countries were less willing, but simply could not ignore the dominance of Washington.

The former group of countries increasingly wonders whether America is still entitled to and can be trusted with this position on the throne. The latter group eagerly uses the weakening power of the U.S. to its advantage.

This is actually easier because China, for example, is already the largest economy in the world according to some criteria and also because new ways of waging war work out to the advantage of the challengers and underdogs (for example, Russia has taken over Crimea and parts of the Ukraine using hybrid warfare).

Clash of giants

These developments — including the enormous economic and military advances that China in particular has achieved over the past few decades — mean that the trade war between Washington and Beijing is far more than just an argument about access to each other’s markets. The trade war is part of the race for global political, economic, technological, financial and military leadership this century. This battle has only just begun. A partial trade agreement will therefore certainly not bring lasting peace between the two giants.     

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This is also because international institutions that might have been able to keep things under control are becoming increasingly paralyzed. The UN is struggling with massive deficits because many members fail to pay their “contribution.” The U.S. has by far the largest outstanding bill. Trump has made it clear several times that he does not care much about the UN. The UN secretary general has sounded the alarm, stating he will no longer is able to pay all the salaries by the end of this year.

The White House also has little sympathy for NATO, WTO and other international partnerships. Because of a U.S. veto the WTO is also at risk of becoming paralyzed at the end of the year.

In addition to weakening international organizations that were previously considered to support U.S. power on balance, Trump has also torpedoed a number of international trades, security and other treaties.

A web torn apart

Previous governments went to great lengths to weave a web of overwhelming political, economic and military power that was reinforced by alliances, partnerships, treaties and international organizations. This web is now slowly but surely being pulled apart by the U.S. and other players who eagerly capitalize on areas where the U.S. trips up.

In the area of free trade, for example, it looks as though the whole world is engaged in a trade war. However, many countries are quietly continuing to conclude trade agreements while sidestepping the U.S.

The American weakening is also reflected in countries increasingly hedging their bets on Washington by getting into the good graces of China and/or Russia. For example, NATO member Turkey has decided to buy missile systems from Russia defying the U.S. The same phenomenon is evident in Asia where loyal U.S. partners increasingly tend to balance their relations with the U.S. and China. A case in point was the Filipino president explicitly announcing a pivot from the U.S. to China.

And even in Europe, countries are wondering how much loyalty they should bestow upon the transatlantic alliance and to what extent they should accept Chinese capital and influence. For instance, the U.S. is putting considerable pressure on European governments to keep Huawei out when it comes to the ICT projects of governments. This pressure is certainly not always successful.

Even in the U.S., there are countless examples of behavior being adjusted so as not to offend China. Marriott, Apple, the NBA and many more kowtowed to China; an authoritarian regime located thousands of miles away increasingly exerts censorship on the U.S.

Impeachment fever

These examples show the extent to which the position of the U.S. in the world is weakening. This will be reinforced now that Washington has impeachment fever. Trump has opted for a battle plan that comes down to an attack on the constitutional state by refusing to cooperate in investigations by Congress, keeping witnesses away and basically claiming that the president is all-powerful, can do as he pleases and is above the law. A constitutional crisis looms. All this while the elections is approaching fast.

In other words, Washington will be far more preoccupied with domestic problems in the period ahead — and far less with coming up with robust and coherent foreign and economic policies that also take into account the interests of allies.

From growth engine to brake

All the resulting uncertainty for businesses will be irrevocably reflected in not-too-favorable economic data. Businesses are faced with enormous uncertainty concerning international production chains and the cheapest production locations; new tariffs could easily throw a spanner into the works. As a result, companies will become more reluctant to invest and to hire new people.

The outlook for the U.S. economy is fairly poor from a political point of view. This occurs in a climate in which the U.S. has largely supported the global economy in recent years. Other major economies are also faltering discernibly and the weakness of the U.S. will only accelerate this slowdown. In short, growth prospects for the global economy are not getting any better due to domestic U.S. political developments and the international policies of Washington.

Andy Langenkamp is a senior political analyst at ECR Research and political commentator, who specializes in assessing the repercussions for the financial markets of economic and geopolitical events.