Election Economics: The Economics of Foreign Policy
Although tonight’s presidential debate is about foreign policy, perhaps the real focus is the economy.
More than 200 years ago, Alexander Hamilton created the connection between economic policy and foreign policy. By funding the Revolutionary War debt, he established public credit and US borrowing power. By supporting manufacturing, he fueled economic growth. With a plan for a National Bank, he initiated a financial infrastructure. Together, his ideas formed a development plan that ultimately built US power at home and abroad.
Or, as Secretary of State Hillary Clinton said, “Simply put, America’s economic strength and our global leadership are a package deal. A strong economy has been a pillar of American power in the world. It gives us the leverage we need to exert influence and advance our interests.”
So, let’s say that tonight, moderator Bob Schieffer asks the candidates this question suggested by a Bloomberg journalist:
“The Duchy of Grand Fenwick has just invaded Freedonia, a stalwart U.S. ally. Do you seek United Nations Security Council permission before intervening, do you build a coalition of the willing to strike back, or do you call for an immediate cease- fire?”
To demonstrate funding flexibility and worldwide leadership, a realistic response involves debt and deficits, trade partners and trade policy, energy and GDP growth.
It takes the candidates to talking about:
- a US debt that is 73% of GDP (the highest share since 1950).
- China, Japan and other countries who purchase our debt by buying treasuries.
- trading partners that include eurozone countries and emerging economies.
- domestic and foreign oil, natural gas, coal and energy independence.
- propelling US economic growth.
As former World Bank president Robert Zoellick said in Foreign Policy, we need to realize that the economics of foreign policy is about much more than sanctions and financing wars. “Today, the power of deficits, debt, and economic trend lines to shape security is staring the United States in the face.”
A final fact: Even war involves economics. When President Roosevelt mobilized the US to fight WW II, he had to gather an economic team to calculate how many tanks, planes, ships we could produce. The economic group used national income accounting, recently developed by Simon Kuznets during the 1930s, to determine how much land, labor and capital could be shifted from elsewhere like making pots and pans to wartime production.
So, yes, when President Obama and Governor Romney refer to Afghanistan or the Arab Spring or the UN, yes, they will probably discuss the military and political freedom and worldwide alliances. But economic issues are a central consideration.
Sources and Resources: Here, Republican Robert Zoellick and here Democrat, Hillary Clinton each discuss, with detail and insight, the above quotations and the crucial connection between the economy and foreign policy. And, the hypothetical question for the candidates came from this Bloomberg article.
Election Economics Topics:
- Too Much or Not Enough Stimulus Spending: 10/15
- Social Security: 10/8
- Facts for the First Debate: 10/1
- How Sick is the Economy? 9/24
- Keynesian Economics: 9/17
- Tax Matters: 9/10
- More of the Jobs Story: 9/3
- Aging Challenges: 8/27
- A Healthcare Overview: 8/20
- Paul Ryan and economist Friedrich von Hayek: 8/13
- Unemployment: 8/6
- Minimum Wage: 7/30
- Dodd-Frank: 7/23
- Outsourcing: 7/16
Please note that this post was slightly edited in the final fact and the paragraph that follows it.