Brands's 5th law (part 2 of 3)

Sooner or later, countries get the foreign policies they can afford

America’s empire took a different form than Britain’s and Rome’s. The United States possessed little in the way of formal colonies. The Philippines, the largest American colony, was seized in haste in the Spanish-American War, but the action was soon regretted and was undone in 1946. Elsewhere America’s empire was informal. Yet it extended farther than any empire before it, encompassing the Western Hemisphere (minus Cuba after 1959), Western Europe, parts of the Middle East, Japan, Taiwan, Vietnam for a time, arguably Indonesia after 1965, and various other countries to one degree or another.

Meanwhile American diplomats rewrote the rules of the international order. The United Nations, with American leadership, replaced the U.S.-less League of Nations. The International Monetary Fund and the World Bank enshrined the dollar as the linchpin of the global financial system and the fuel of economic development. The General Agreement on Tariffs and Trade reflected America’s conversion to free trade and bribed or cajoled other countries to take the pledge. The North Atlantic Treaty Organization put American muscle into a promise of common defense. Similar organizations did the same for Southeast and Central Asia. The Organization of American States was a U.S.-dominated mini-United Nations for the Western Hemisphere.

What made all this possible was the might of the American economy. In 1945 America’s industrial production was equal to that of the rest of the world combined. America’s new commitments were expensive, vastly outstripping anything deemed acceptable by most Americans merely a decade before. But Americans were willing to pay the premiums on the new insurance policies because they had discovered what some unfortunate homeowners discover when their houses burn down: that being without insurance can be more expensive than paying the premiums. World War II was by far the costliest enterprise in American history, burning through nearly $5 trillion (converted to 2020 dollars) and consuming more than a third of American GDP at the time. However expensive the premiums on the postwar policies, they were cheap by comparison with what another war would cost.

Yet it wasn’t only about dollars, and it wasn’t only about the United States. American leaders were sincere when they declared that their policies aimed at promoting freedom and prosperity in other countries. And their policies did promote freedom and prosperity. The Marshall Plan stabilized democracy in Western Europe and jump-started economies there. Controlled experiments are never possible in history; uncontrollable factors always intrude. But the side-by-side cases of West Germany and East Germany provided an approximation. As with identical twins separated at birth, their differential development after 1945 could reasonably be ascribed to the different environments they experienced. West Germany became a model of a free, prosperous society; East Germany, while better off economically than other countries of the communist bloc, lagged far behind in material standing of living, besides being a notoriously intrusive police state.

All the same, American policies weren’t uniformly beneficent. Where democracy was slow to emerge, American leaders sometimes settled for anticommunism in the regimes they sponsored. Where democratic elections produced leaders whose policies Washington didn’t like—in Iran and Guatemala in the 1950s, Chile in the 1970s—American diplomats and covert operatives helped overthrow them.

Much as rich people have been known to do, the United States sometimes bought too much insurance, or the wrong policies. Presidents from Harry Truman to Richard Nixon contended that South Vietnam must be kept out of the clutches of communism lest American security be gravely jeopardized. Lyndon Johnson put it most extravagantly in explaining that if America didn’t fight the communists in Southeast Asia, it would have to fight them in California. But despite sixty thousand American lives lost and many billions of dollars expended, the effort failed, and the communists captured South Vietnam.

And not much else happened. No communist tsunami swamped Indonesia, the Philippines and Taiwan. Japan was not shaken. No hostile landing craft were spotted near Malibu. Defenders of the war effort, led by alumni of the responsible administrations, argued that the decade of intense American involvement bought time for the rest of Southeast Asia to shore itself up, but to most students of the conflict this sounded like an ex post facto rationalization.

Whether the American-led order after 1945 was called an empire or the Free World, questions arose as to its sustainability. The hope of American leaders was that the institutions and values they nurtured would take root and become permanent. Democracy and capitalism sustained themselves in the United States; why not in other countries?

One answer as to why not was that democracy and capitalism had taken more than a century to develop in the United States, and had done so without pushy neighbors and seductively competing ideologies. The world of the Cold War was a very different, less forgiving place. 

Another answer, less commonly spoken aloud, was that American leaders might not really want other countries to be as successful as America itself had been. By the 1960s West Germany and Japan were already showing signs of becoming competitors to the United States. They remained firmly in the American sphere, protected by American alliances and weapons. And they appeared committed to democracy. But their booming economies, underwritten at first by American aid, produced exports that challenged American products in international markets and even in the American home market. Was this a good thing? Was this what American policies were supposed to accomplish?

Another line of skeptical thinking was historical in nature. No previous empire or hegemon had held the top spot forever. Sooner or later the commitments outstripped the ability to cover them. Was there any reason to think America was an exception to this rule?

Yes, said some: America was exceptional. It had always been exceptional. It would always be exceptional. History was linear, not cyclical. It advanced toward human freedom, exemplified in the political sphere by democracy and in the economic sphere by capitalism. As the world became more like America, the old rules no longer applied.

Here the burden of proof was on the exceptionalists. Every previous dominant power had considered itself exceptional; most considered themselves exempt from the forces that had brought the demise of their predecessors. And each had been proven wrong.

The economic numbers worked against perpetual American hegemony. The American economy grew steadily after 1945, but the economies of other countries grew faster. By 2020 America’s share of world industrial production had fallen from half in 1945 to a fifth. Put differently, where rest of the world only just equaled the United States in 1945, in 2020 the rest of the world overbalanced the United States by four to one.

Something else was happening. Rich countries buy insurance not simply against foreign troubles but for domestic reasons as well. In America these insurance policies are called entitlements and include, most importantly, Social Security and Medicare. Ordinary Americans, for natural reasons, are more attached to policies that benefit themselves directly than they are to policies that seem to benefit foreigners first and themselves only indirectly.

For the first half-century of the American era—that is, until about 2000—the premium payments on the domestic policies rarely crowded against payments on the foreign insurance policies, and never crowded them out. Moments of retrenchment on the foreign policy side occurred: after the defeat in Vietnam and after the American victory in the Cold War. But overall defense spending remained strong. On the domestic side the trend was exclusively upward. Americans had their guns and butter both.

Yet in the early twenty-first century a pinch became apparent. The financial crisis of 2008 and the recession that followed caused the federal budget deficit to balloon just at the moment that the Baby Boomers—the numerous generation born just after World War II—were beginning to collect Social Security and Medicare. For the first time a serious prospect arose that Americans would have to choose guns or butter.