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Wednesday, January 11, 2012

An American Foreign Policy suggestion

One generation past the global economy was dominated by America. In 1980 China, India and Brazil were too small to be significant in the big picture of the global GDP. In 1980 America was 30% of the global economy, second was Germany at 8.2% then Brittan at 5.6%, China and India were about 1% each. The price of eggs in China had no impact on Americans; the price of anything in China had no impact on Americans. In 2010 America was 28.87% of world GDP, the EU at 25.9% and China 7.75% with India 2.51%. In 30 years we moved from the dominant nation to an important nation. Now the price of eggs in China does affect Americans. Decisions by European political leaders move our markets, Angela Merkel, the German Chancellor, can make a decision that could collapse our banking system.

There is no global institution guiding this process. Currently the largest international institutions lack authority and have no real power. If the German Chancellor makes a decision that she feels is best for Germany or the EU but is terrible for America there is no politic that can make her reconsider. This is true for China, India, Japan, Australia and Brazil; all can make national choices that hurt America.

This global economic system has great potential, great potential for good or great potential for bad. Which will come to pass is still largely an American choice, America may no longer be the dominant power, but America is still very important. We do not have the hard (military) power to force a response by any major power. We need American soft power leading new international institutions.

Our choice will play out over decades; one election will not decide the issue. 

The rest of the world is adapting and continuing the global economy. The European Union has been working on unification for 60 years. China started its globalization march with the economic reforms of 1987 and India followed about 10 years later. They are not going to stop now. The benefits of a global economy are too great for the successful players.We can decide not to play, but the game will continue.

America’s best future foreign policy is to stop trying to be the world’s only policeman and work jointly with those economic powers that already equal us. We have to be adaptive, explore the possibilities, improve what is working and correct what is not working. We need to be involved in the development of valid international economic institutions. This is the path that the Europeans, Chinese, Brazilians and Indians have chosen. We can join the club or be left behind.

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