George Kennan and Economic Partnership
I believe long term, patient diplomacy is in the best interest of America.
Should America lead economic activities worldwide?
The relationship of George Kennan and Paul Nitze is a model for America. Kennan and Nitze were lifelong friends with strong fundamental disagreements. It’s a model we needed then and need today—opposing viewpoints, both valid. (If you care to read more about the two giants of international relations, as well as their personal relationship, I recommend The Hawk and the Dove by Nicholas Thompson. Thompson describes Kennan as the dove, and Nitze as the hawk.)
Kennan, the more liberal of the two, believed a long-term, diplomatic approach to international relations was the prudent direction for America. Nitze, the more conservative, believed US military decisive action was the prudent direction. Neither were wholly against economic partnership, and neither were totally against military intervention.
Contemporary theorists; one liberal, one conservative, both pro-America.
More on Nitze next week.
In a 3-week period, Kennan outlined what would become the Marshall Plan, the plan for the economic recovery of Europe following World War II. This assistance greatly sped the recovery and rebuilding of Europe.
In today’s (2023) dollars, the Marshall Plan would cost $165 billion US dollars, given over 3 years. In fact, America has a long history of providing economic assistance to our partners.
Why do we invest in the stability and economy of other nations? Shouldn’t we direct those resources to Americans instead?
It’s a question we often debate. We hear some use terms like “America First,” even when the meaning of those sayings is manipulated from the original intent. We fight right now about how much we should assist Ukraine. Some think America gives too much to the rest of the world, even though foreign aid comprises less than 1% of our federal budget.
We might consider a couple lines of thought:
American economic leadership promotes American influence.
Economic partnership with allies produces stable markets. Stable markets promote global economic benefit. Increased economic capacity of smaller nations may increase the opportunity for self reliance, promoting trade beneficial to America.
This is not a straight forward premise, especially regarding foreign assistance.
While there are individual examples of foreign assistance destabilizing foreign nations, on the whole foreign assistance provides a stabilizing effect. This foreign assistance must be in the right form to be useful. Examples of the right form could include education, governance assistance, and technical assistance rather than financial projects such as building projects. [Note: this paper posits the US is not very good at giving money to the Middle East (destabilizing impact), or sub-Saharan Africa and South America (no significant improvement in stability).]
Promoting stability over the long term reduces the need for immediate intervention (military operations). When a nation can protect itself and ensure the rights and security of its own citizens, this benefits America in the long term. Further, this model gives America the opportunity to ensure ground rules that support our economy.
From the Office of the United States Trade Representative:
According to the Peterson Institute for International Economics, American real incomes are 9% higher than they would otherwise have been as a result of trade liberalizing efforts since the Second World War. In terms of the U.S. economy in 2013, that 9% represents $1.5 trillion in additional American income.
Over the long term, patient diplomacy and economic partnership are more decisive than military operations. To enable economic partnerships we need viable markets around the world. Further, these activities increase American influence. Does that mean we should abandon military effort around the world? No. But they should not be our main focus.
American economic leadership is good for business.
Some question whether trade agreements and other economic assistance really benefit America. To this I request—consider American agricultural exports. We dominate the world’s agriculture exports. Investopedia wrote in 2022 our agricultural exports amounted to $120B; the closest second is the Netherlands with $80B (of course per land mass the Netherlands puts us to shame). Also consider America is the top crude oil producer in the world, and consistently in the top three or four crude oil producers since 1980. Just two examples.
When we invest in our partners, our returns greatly outweigh our investment. These returns include both monetary and influence.
There is a better way to present the above data, by taking inflation and time into account. But the premise is sound—when we invest in our partners, we benefit from future exports significantly.
You can certainly get lost down a rabbit hole developing a theory for American business interests. Mercantilism. Free trade. Expansionist economics. Neoliberal economic policies.
When I start to get lost in rabbit holes I try and remind myself—what’s the objective we are trying to achieve here?
Here it is: How do we strengthen the rights and opportunity of all Americans?
For this answer we should go back to the beginnings of the Marshall Plan. One of the strong influencers of the plan, in addition to Kennan, was Will Clayton. Clayton was a self-made wealthy businessman, and he recognized the plan benefited America on the grounds of business interests.
Let us admit right off that our objective has as its background the needs and interests of the people of the United States. We need markets--big markets--in which to buy and sell. - Will Clayton 1947 telegram to George C. Marshall
Individual Americans benefit from American worldwide economic leadership. We need stable worldwide markets to promote individual American opportunity.
Certainly we need to make improvements to our economic policies. Globalization policies of the 1980s and 1990s disregarded the impact to job losses in industrial sectors of the economy, and we lost around five million manufacturing jobs as a result. We need to improve wages for young workers. We need more tech jobs in rural America, and we need to provide training for those opportunities. We need to improve our infrastructure (Congress passed a major infrastructure bill in 2022).
We can’t make these improvements isolated from the rest of the world.
As with any economic theory nothing is absolute. Experts debate America’s role in leading economic activities worldwide with different viewpoints and predictions for the future.
I believe long term, patient diplomacy is in the best interest of America.
American economic leadership promotes American influence.
American economic leadership is good for business.
Thanks for considering my perspective.
May God bless the United States of America.
Postscript.
What’s more profitable—owning a National Football League team, or a university owning a college football team?
If you are the University of Texas - Austin you might pick the Longhorns over a lot of NFL teams.
How is UT football more profitable than a lot of NFL teams? The rules are beneficial. They have their own TV network, they have lower operating costs…