Symposium | Security Policy Is Economic Policy

Security Policy Is Economic Policy

By Heather Hurlburt

Tagged national securitytrade

Post-Cold War U.S. security thinking has rested on two truisms about trade liberalization: first, that countries more able to trade with us would become more politically like us; and second, that the overall consequences at home of deals abroad would be to strengthen our own society. Confident of those two theses, security planners felt free to ignore both the specific content of trade deals and any worries about their domestic impacts.

But as it turns out, the arrow of cause and effect points both ways. By ushering in a surge of globalization, international economic policies have helped reshape our society domestically over the last two decades. Perceiving international economic policy as the cause of economic and cultural changes they dislike, nationalist forces in our society have pushed back to reshape international economic policy. At the same time, one would be hard-pressed to deny that the nationalist response has had security consequences, introducing new complexities into U.S. relations both with allies and competitors, from the stresses on our alliance with South Korea to the awkwardness of Angela Merkel explaining to President Trump that no, Germany would not be ditching its EU commitments to “renegotiate” trade with the U.S.

The fundamental link around which American security policy was built in the Cold War years was simple—the flourishing of a capitalist economy meant the survival of American democracy. Weakening of a capitalist economy meant opportunity for its communist rival, and weakness for democracy in the United States and elsewhere.

As Americans stopped perceiving the United States as a contestant in a global ideological competition after the Cold War, this idea slowly lost its relevance. Much contemporary security thought simply stopped making connections to domestic economic concerns at all.

That kind of thinking was a luxury, born of the idea that we were in a unipolar moment or had reached the “end of history” with the permanent triumph of liberal democracy. This should no longer be acceptable in national security strategy.

Right now, many U.S. national security leaders are trying to shore up the system that served us well for 60 years against both shifts in global power and explicit attacks from inside our borders and beyond them. But retooling our understanding of how our physical security is connected to that of our democratic institutions and our way of life is equally urgent. It is the vital first step in proposing policies that will work in the world the Trump Administration leaves us.

Rather than see the realms of security and economics, foreign and domestic policy as separate, such an approach will recognize that our security and our institutions can be undercut by inequality or stagnation, as well as by terror attacks; and that international policy must be drawn to address these domestic problems, in addition to global ones.

This special section of Democracy, supported by a grant from the Open Society Foundations, address four of the key needs a plan to promote national and community well-being must meet.

Bruce Jentleson challenges us to think about not just defending but remaking or, where needed, even replacing the institutions that have formed the core of the postwar liberal international order now so threatened by Brexit, Putin, and Trumpism.
Todd Tucker looks at reforms that would make international economic institutions—the core of the trade system—better able to address inequality and absolute deprivation.

Jennifer Harris makes the case for a new international economic agenda that can address inequality and wage stagnation at home.

Meanwhile, the remainder of this essay reconsiders the construct of national security—how we plan for it and how we talk about it. Paradoxically, those of us who have spent recent decades telling America that the world is interconnected now must go study what those connections look like to our fellow citizens.

Security and Economic Policies Are Interlinked. But How?

Two generations of policymakers and pundits—and elites more broadly—learned that a few particular interconnections were permanent fixtures of U.S. interests and U.S. domestic politics:

  • The economic system we built was a weapon against a rival system—communism—whose success threatened not just U.S. economic interests, but American security, institutions, and our way of life.
  • U.S. international economic policies were an effective tool to strengthen the governments of American partners and allies, and their success was considered important enough that any negative economic impact at home—which economics said would be limited by sector and time, in any case—was deemed worth it. One can’t imagine the United States standing up to North Korea and competing with China, for example, without the economic strength and solid institutions of our Japanese and South Korean allies, both built on the backs of economic growth that came with easy export of heavy industrial goods to the United States.
  • What we popularly call “trade”—the freer movement of goods and services but also exchange rate policies, rules and practices on a host of economic issues, and the web of international economic institutions that governs disputes and sometimes constrains American options—is a net blessing for U.S. security and for the lives of the overwhelming majority of our citizens.
  • Sectoral or regional objections to any given trade deal could always be overcome by invoking the security threat to the U.S. if partner economies didn’t thrive and fell to communism. The loss of sedan manufacturing jobs in Flint, for example, was understood as a temporary price for maintaining global order, not as one among several major death blows to city infrastructure.

Bipartisan elites held onto those core beliefs to a remarkable degree, even as the goal of policymaking shifted from containing communism to harnessing and riding globalization and several core assumptions of the Cold War era ceased to be true. The greatest threat to workers was no longer the competing economic system of communism, but competitors within the system America had built. Security threats, too, seemed to emanate from countries that were important economic partners, like China and Saudi Arabia. And however much politicians insisted that the United States remained indispensable and a superpower, the multilateral system it had built produced less reliable returns.

Yet public opinion has always been more complex and unsettled than the elite view. Observers were surprised to see support for trade rebound in 2017 among both Democrats and Republicans. Gallup Editor-in-Chief Frank Newport has noted that public attitudes swing depending on the question asked: the more abstract “trade” or the more immediate “jobs,” the “opportunity” of exports versus the “threat” of imports. CNBC recently noted, “At any given time, as much as 10 to 30 percent of respondents have no opinion about open trade, regardless of their party affiliation, and those voters can swing one way or the other . . . ” Unusual, for our polarized times.

But now we’re in a new era. As such, it is worth summarizing the four declarative principles of international economic policy in the Trump era, working from the Administration’s national security strategy and major foreign policy speeches—because, if daily life in the West Wing is a pitched battle between the business-friendly conservative end of the American establishment and the sovereigntist wing of the GOP, those are the truce documents.

Elites are going to have to give up on the idea that there is some security argument that will save them from having to argue about trade.

Economic prowess is national security. Where previous presidents pointed to education and innovation as key to our future security, Trump narrows in on raw growth numbers, the return of manufacturing, and an as-yet undefined “National Security Innovation Base.”

Even U.S. allies must prove that trade relations benefit the United States, and the best trade negotiations are one-on-one. Deals that aim to set broader standards for groups of countries, or globally, are off the table.

Economic pressure can be applied independent of security cooperation—for example, pressuring South Korea to renegotiate its trade deal as the crisis with the North loomed, or demanding China do more to pressure Pyongyang even while threatening unprecedented trade retaliation. Typically, presidents don’t do this—and neither of these examples has produced results on trade thus far.

A winning coalition of American voters can be assembled to support this model: those for whom demonstrations of U.S. might are paramount; those with significant economic and cultural grievances against the globalist model; and those who are loyal to the GOP for other reasons.

Some of these principles were thoroughly contradicted in Trump’s first year, as the Administration seemed to raise, then put aside, trade issues with China and South Korea as concerns over North Korea’s nuclear program escalated. The Administration’s preference for bilateral deals also produced no outcomes, as Japan pointedly declined to engage, and it had to be explained to the President that Germany’s EU membership precludes bilateral arrangements.

Others will be put to the test vigorously in 2018 and beyond. The Administration faces choices about the future of Nafta and next steps on a number of trade complaints, from washing machines to intellectual property (in late January, it announced a phase in of tariffs on washing machines and solar panels). Hidden beneath the significant economic consequences are equally weighty questions about security institutions and arrangements: Can U.S.-Chinese cooperation on North Korea be sustained if we edge closer to a tariff war? What theory does the Administration have of how security and economic factors interact in our relationship with Mexico? Will the results of bilateral tariffs and retaliation against China be worth abandoning the multilateral trade institutions like the World Trade Organization whose rules such measures violate?

This likely incoherence is one of a number of obstacles facing those who would propose a better alternative—a foundation on which to rebuild U.S. international policies after the Trump Administration. Amid the attacks on institutions, policy reversals, and rhetorical bombast, the shape of our options can be hard to discern.

Yet discern we must. I propose a two-part initial framework for evaluating a strategy for the security of Americans—our livelihoods, communities, and institutions. First, we need a reconsideration of our security goals, and how they fit with our economic development —the kind of comprehensive re-think that happened in the wake of World War II but hasn’t happened since. Second, we must take a hard look at whether the words we use with our fellow Americans mean what we think they mean, and whether the tools available to us do what we think they do.

What Is Security Policy For, Again?

First the question of goals. The fundamental goal of American national security policy is obvious—defending American safety, institutions, and way of life. With illiberal models on the rise globally and our own institutions under attack and losing popular support, it’s time to consider how our international economic choices are affecting our institutions’ ability to provide security. If sustaining and restoring the institutions of liberal democracy is a security goal, we are going to need economics to do the job.

Social science has brought forward strong evidence that economic arrangements that heighten inequality and limit middle-class mobility are bad for public confidence in liberal institutions—and good for authoritarian and populist competitors. Rising economic inequality hands more political power to the small group at the top, as political scientist Larry Bartels and others have demonstrated. It also increases lower-earners’ sense of alienation and, paradoxically, increases higher earners’ feelings of anger and disdain for the system as well, because they perceive themselves as “makers” whose taxes, innovation, and entrepreneurial energy support the “takers” who seem to contribute much less. And whether you believe economic anxieties spawn or merely reinforce racial and gender cleavages, they surely do not help a diverse society function.

The question of which economic arrangements—and specifically, which of the international policies the public lumps together under the rubric “trade”—worsen or ameliorate inequality is more complicated. It is clear, for example, that in recent decades, trade-driven growth reduced income inequality between countries—and lifted hundreds of millions of people out of extreme poverty, particularly in China and elsewhere in Asia.

However, critics on both the left and right have suggested that it is time to throw out the idea that international economic tools can be used to improve lives and stabilize societies that are key partners. That would be a mistake, but it is nonetheless time for small-r realism about security and trade. Trade policies have worked to strengthen governments and help societies build strong democratic institutions. When those societies also had autonomy to make important economic decisions, they made broad-based prosperity a goal, and permitted the evolution of democratic forms of governance. In the 1990s, policymakers believed that global norms would allow the market to promote broad-based economic growth and inevitably overwhelm national opposition to democracy. But the experiences of China and the Middle East in combining more open economies and autocracy, and Central America and South Asia in failing to spread the benefits of openness broadly, in some cases spurring more inequality, have proven that argument wrong.

Perhaps the simplest way to write the epitaph for the post-Cold War effort to use trade liberalization to build democratic capitalism across the globe was offered by Peterson Institute economist Chad Bone: “Legal instruments don’t change systems . . . we either need to redesign the [trade enforcement] system to recognize that China is not like us, or develop new carrots to encourage China to choose to become more like us.”

While trade and associated policies were having these mixed effects on the economies of our partners, their effects on the United States were more complicated than the “net positive” story all political science majors learned in college economics. Over the period of intense globalization, inequality within societies increased—and the incomes of middle-class people in the United States (and Europe) stagnated. More and more economists now point to China’s entry into the World Trade Organization in 2001, for example, as playing a key role in the loss not just of 5 million U.S. manufacturing jobs over the next 15 years, but to the collapse of manufacturing wages in the Midwest. Even as investment returns soared and salaries took off for a new class of global managers, geographically targeted groups of workers and communities lost bargaining power. Those domestic outcomes of our international policies had social and political consequences that are still playing out—including consequences for U.S. international economic policy and who conducts it.

Much contemporary security thought has simply stopped making any connections to citizens’ domestic economic concerns at all.

National security professionals have often looked at trade deals as an end in and of themselves: another deliverable, another tie to solidify a relationship, no matter what the content. Security analysts—and the elected officials who oversee our work—shouldn’t be shy about asking what the political and institutional implications will be of any particular plank, and insisting they pass policy tests before negotiations are launched, not after. That’s a level of sophistication we expect in our analyses of other countries’ policies. Leaders who make national security arguments for trade deals must expect to be challenged on how particular initiatives will affect middle-class incomes and social cohesion here at home as well. All too many national security professionals—including this author—believed deeply in the security rationale behind the Trans-Pacific Partnership (TPP) but couldn’t have offered a summary of its key provisions, let alone a prediction of its positive and negative effects on different sectors of the U.S. economy.

The same goes for other security interests that intersect with trade. If countering climate change is really fundamental to U.S. security policy, why sign on to trade regimes that promote high-carbon outputs or inhibit environmental regulation? If we are concerned about Islamist extremism gaining a foothold in a swath of countries in Africa and Southeast Asia, shouldn’t we insist on economic arrangements that promote dignified livelihoods for young men in those societies? Strategists worry about the U.S. military’s ability to retain key manufacturing technologies and access to key minerals and other raw materials. If manufacturing jobs are no longer the key to sustaining some fraction of American communities, figuring out what else can be also counts as a security worry.

These questions aren’t rhetorical, and they don’t represent a blanket attack on trade agreements. What is called for, as a first step, is re-integrating international economic decision-making into security thinking—and learning from the last decade of politics that security is about what affects us as a nation.

After Trump, What Will We Have to Work With?,

Internationalists have been largely paralyzed on international economics since mid-2016, with many seeming to hope that an anti-Trump Resistance would sweep away not just the President’s calls for tariff wars and zero-sum bargaining, but also the activist antipathy that led both parties to reject the TPP. And while trade’s favorability has gone up among rank-and-file Democrats and the public at large since the election, that is not true of two other groups. The coveted Midwestern white working-class voters both parties are chasing remain as skeptical as ever. And major activist blocs of Democrats, from MoveOn to the AFL-CIO, who will be critical to the elections in 2018 and 2020, believe that the results of 2016 should push policy their way.

Instead of hoping to turn back the clock, internationalists would be well-advised to begin shaping more durable policies that match the world they inherit in 2019, 2021, or thereafter.

The toolkit of effective international engagement contains some familiar elements—a strong military, political and commercial diplomacy, market and investment access—and some that we have let lapse, such as industrial policy and competition policy, pacts between government and private sector, as Jennifer Harris enumerates. After the Trump tax cuts, seven years of the Budget Control Act, and federal workforce declines, no such pacts can be consummated without some combination of realigning public and private sector functions, re-expanding the tax base, or shifting significant resources out of military spending. Some—like re-opening the tax code, or Harris’s proposal that the corporations that have benefited most from globalized trade contribute more to sustaining American communities—will cost political capital.

Thoughtful expenditures of political capital, even more scarce than in the past, will be required on the international stage as well. Bruce Jentleson raises important questions about how functional the multilateral institutions favored by internationalists are, and how they can be strengthened. Todd Tucker challenges us to rethink what the goals of economic multilateralism could be. Americans will have to come to terms with a world in which the United States is one arbiter but increasingly not the only one—and where more and more rules will have the same consequences for us as for others.

None of this is possible without assembling a domestic coalition that will support economic multilateralism—electing internationalist candidates, putting in place the domestic policies that will support Americans in a competitive global economy and then putting legislative support behind international economic policy. To make good policy, let alone good politics, elites are going to have to give up on the idea that there is some security argument that will save them from making the retail politics case for trade—and, more fundamentally, save them from the work of making economic policies that pay off visibly for key members of their political coalitions.

For decades, political professionals have made it a truism that “nobody votes on national security,” and produced reams of data to “prove” this. But in 2016 two subsets of Americans did vote on security in ways that are intimately bound up with globalization and trade—as well as with culture and race. While one subset of GOP voters ranked national security and or near the top of their concerns—making them dramatically different from Democratic voters—many other Americans seemed not to consciously focus on national security as elites define it but to link it to other forms of insecurity. During the Obama presidency, the polling firm GQRR repeatedly documented how voters with lower partisan identification linked economic greatness to national security. If voters’ personal economies weren’t secure, neither was the country.

We also need to recognize that the connection between perceptions of economic insecurity and what might politely be called cultural insecurity, or more bluntly racism, also has national security implications. For example, Edward Mansfield and Diana Mutz found that attitudes toward jobs moving overseas were shaped by “ethnocentrism and anti-foreign sentiment, rather than occupation or direct professional experience.” Americans who perceive their values and culture under threat perceive their communities as more vulnerable to economic and security threats than do other Americans. International economic and security policies can thus form a vicious cycle, where sensationalized media coverage of one undermines support for the other.

Given the economic and cultural resistance among key swaths of voters that either party needs to construct a winning post-Trump coalition, it’s not going to be possible to rebuild a constituency for trade liberalization alone.

We’ve just established that the public means something different by “security” than policy wonks do, and the same goes for “trade.” Pollsters and canvassers note that the public discourse expands and shrinks to include tariffs, outsourcing, foreign assistance, shareholder capitalism, foreign investment, and other topics. As we reach out to voters, we need to be sure we understand what their concerns actually are. Voters, even many who express opposition to trade deals, are not classically isolationist. Few want to pay higher costs for U.S.-assembled cellphones, or return to the days when grocery stores only contained fruits and vegetables grown in the United States. Everyone wants interaction with the outside world, they want opportunities to work and travel, to consume the best of what the world has to offer . . . and to earn the respect of other nations. Likewise, in many parts of the country, voters are well aware that their livelihoods depend on foreign investment and economic integration, but may or may not make the connection between those local outcomes and the way national politicians talk about “trade.”

Winning messages will acknowledge what voters already know—that economic openness helped some and hurt others, and that programs intended to mitigate negative effects failed. Winning programs will combat those failures comprehensively, and from the start, rather than as a later add-on.

Trump and his 2016 cohort set a precedent by dwelling heavily on the negative interactions between economics and security, and playing on fears and prejudices around dwelling in an interconnected world. Internationalists from both parties should not abandon international economic policy—indeed, they mustn’t. But a new internationalism will stand or fall based on how it addresses not just physical security, but the safety and well-being of Americans, as well as their institutions and communities.

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Heather Hurlburt directs the New Models of Policy Change Initiative at New America and has worked on foreign and national security policy in Congress, the State Department, and the White House.

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