The Joint Ventured Nation: Why America Needs a New Foreign Policy

By Edward Goldberg

Moving America from the Troubled Superpower to the Indispensable Partner

What a ride the world has been on over the last thirty years: the fall of the Berlin Wall, China’s reemergence as a major power, the wishful creation of the BRICS, technological innovations, 9/11, conflicts in Iraq, Afghanistan, and Syria, terrorism, the market crash of 2008, the Arab Spring, the Eurozone crisis, America’s reemergence as an energy giant, and the rebirth of czarist Russia, and now the election of Donald Trump. The most important change, thoughand the key to America’s future, despite Trump’s campaign rhetoricis globalization.

Our fate is now interconnected to other major industrial countries, yet our foreign policy has not adapted to this reality. In today’s world, the term ally” is becoming rapidly irrelevant. The United Kingdom is an old ally of America, but as a result of economic codependencies, China is now much more important to the United States. Instead of thinking in terms of allies, think of US policy regarding other twenty-first-century nations as a set of concurrent joint venture agreements.

In The Joint Ventured Nation, author Edward Goldberg argues that American foreign policy is too focused on a world that no longer exists, one in which political power is measured by military strength or fervent ideology. He details how our fate is now intertwined with our economic partners, and looks at how we should deal with states such as Russia and the various Middle Eastern nations that refuse to join the globalized world. Most importantly, he shows how America can remain first among equals in a joint ventured world.

• Language: English
• Publisher: Skyhorse
• Release date: Oct 18, 2016
• ISBN: 9781510712232

Edward Goldberg

Edward Goldberg is an adjunct professor at the New York University Center for Global Affairs specializing in international political economy and is a scholarly practitioner at the Zicklin School of Business, Baruch College, City University of New York. Goldberg has commented about the issues of globalization on Bloomberg radio and TV, PBS, and NPR’s Marketplace. He also writes a regular column on international economics and politics for Salon and is a frequent commentator to the Hill. He is the author of The Joint Ventured Nation: Why America Needs a New Foreign Policy.

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Introduction

What a ride the world has been on for the last thirty years—the fall of the Berlin Wall, globalization, China’s reemergence as a major power, the wishful creation of the BRICS, technological innovations, 9/11, conflicts in Iraq, Afghanistan, and Syria, the stock market crash of 2008, the Arab Spring, the Eurozone crisis, America’s reemergence as an energy giant, the rebirth of czarist Russia, and Brexit.

These global shocks have given rise to a new phenomenon that redefines how countries relate to each other: Foreign policy is no longer solely in the hands of governments and diplomats. It is now a mixture stirred and shared by governments, markets, central banks, and citizens. And we are now in an era without precedent where a country’s rivals can also be a country’s joint venture (JV) partners.

JVs are commonly found in the business world, where companies join with each other to enter new markets. In business, JVs are legal entities that take the form of pragmatic partnerships in which the parties jointly undertake an investment for mutual profit, each contributing assets and sharing risks.

America’s JV partners include North America, Europe, Japan, and China, as well as other economically aspirational countries whose economies have become connected. As demonstrated in this book, the joint ventured world springs from economic interdependence, redefining the traditional concept of sovereignty.

In business it is not unusual for companies that are competitors to join together to form joint ventures for a particular market, while still competing in other markets. A recent example is the video streaming site Hulu, which is a joint venture between News Corp, Disney, and Comcast.

These three companies, which all compete with each other on various TV and cable shows, realized that if they combined their programming for an online video service, it would be more profitable than having distinct online services competing with each other.

Joint ventured countries today do the same. They have moved way beyond the ideas of great nineteenth-century German historian Leopold von Ranke, who argued that the position of the state in the world depends on the degree of independence it has obtained. In fact, quite the opposite has happened. In giving up some of their traditional independence, such as the power to regulate portions of their economies, the world’s joint ventured countries have gained or maintained power in international affairs, not lost it.

Ranke’s statement does hold true, however, for countries that remain in the imperialistic nineteenth century, refusenik states such as Russia. These countries still firmly believe in spheres of influence, a term that directly conflicts with complex dynamics of the globalized world. And then there are the twelfth-century states, the fundamentalist nations, such as some of the Middle Eastern countries.

In fact our world today is like a science-fiction time warp, where various regions have the geopolitical views of the twenty-first, the nineteenth, and the twelfth centuries. The economic, cultural, and historical perceptions that distinguish these periods have given rise for an urgent need for a new American foreign policy, a tripartite policy. This policy must recognize the nineteenth- and twelfth-century worlds, but focus on the globalized twenty-first-century nations, where America’s true interests lie. Globalization has made America less independent. Our fate is now interconnected to the other major industrial countries, yet our foreign policy has not adapted to this reality.

For twenty-first-century nations, the term ally is becoming rapidly irrelevant. The United Kingdom is an old ally of America, but due to economic codependencies, China is now much more important to the United States. So instead of thinking in terms of allies, think of US policy with the twenty-first-century nations as a set of concurrent joint venture agreements.

Old-fashioned realpolitik, the idea that countries mainly act for their own practical self-interest, has now been confronted by globalization and with it the concept that a country’s economic well-being is now directly tied to the economic health of its largest trading partners. States might be rivals, but today they are also each other’s economic partners. Just look at the fact that General Motors’ major market is now China, or that almost 50 percent of the revenues for the companies listed on the S&P 500 come from outside the US markets.

Foreign policy can no longer simply be a Churchillian game of big power politics, or an idealistic belief that America can make the world safe for democracy. It is now a multilayered game of power politics wrapped inside the enigma of globalization, which is then stirred and shaken by markets, central banks, and social media.

On the eve of World War I, France, England, Russia, Germany, and Austria did not consider destabilization of their currency, the equity position of their leading banks, negative growth, and capital outflows as part of their decision-making process. Now Vladimir Putin threatens Ukraine and as a result, $70 billion of capital flees Russia in just one quarter. And on account of the global financial markets’ reaction to Putin’s threats, the Russian central bank in March 2014 was forced to raise Russian interest rates from 5.5 percent to 7 percent, an increase of almost 27 percent.

Economics was never a part of the decision matrix in Nixon and Kissinger’s historic trip to China in 1972. Rumors now can come out of Beijing that China might consider stimulating its economy, and the New York Stock Exchange immediately bumps up, as if Janet Yellen announced further monetary easing.

Joseph Nye, dean of the John F. Kennedy School of Government, noted that during the Cold War, American military power was balanced by the Soviet Union and thus America’s political actions abroad were constrained, even though the United States had disproportionate power in the world economy. How the world has changed. Now it is economic power that is the new throw weight.

Among the globalized nations, the tethering of one nation to another by financial strings and trade links has created something entirely new: an economic and technological dependency among states, limiting the freedom of action of individual countries. At the same time, this same tethering has raised the risk of global economic contagion and has opened a road for populist resentment as old-fashioned sovereignty has become more diffused.

Globalization has turned on its head former Speaker of the House of Representatives Tip O’Neill’s old dictum that all politics is local. Today all politics are global. If the president of the United States, the president of China, the chancellor of Germany, or a candidate for any high office utters something intended for domestic politics, it no longer remains local but can instantaneously move world markets, sometimes with dangerous global ramifications. In today’s world the Bavarian voter’s displeasure with the idea of a European bond fund directly affects the 401(k) savings account of an American who is soon to retire.

But has American foreign policy and most importantly the American people—who are both the recipients and originators of its foreign policy—kept up with these changes? Or are we still trapped in the old-fashioned good guy/bad guy view of the world?

This book is about why America needs a new foreign policy that concentrates on the future—the joint ventured twenty-first-century world. A world where because of the rapid changes both in America and across the globe, precedents and understanding are lacking.

The precedents for reacting to nineteenth-century imperialist Putin-like concepts of state power have been around for hundreds of years. And the clashes and their ensuing spillovers that the fundamentalist countries are going through in trying to build nation-states are as old as the religious wars in Europe between Protestants and Roman Catholics during the sixteenth century.

Dissimilarities in the world have always existed, but leading powers could simply ignore, destroy, or engage in battles to mitigate them. Dealing in the globalized world, however, presents a totally new problem: it is not building a country or increasing a state’s perceived power, it is in fact the opposite. It involves political decisions dramatically influenced by markets and economics while balancing how much traditional power the state should give away.

Culturally, America, with its concept of exceptionalism, its history imbued with such concepts as George Washington’s warning against foreign entanglements, is very uncomfortable with the idea of ceding power to maintain power internationally. But that is exactly what globalization and markets have forced on the United States since the 1970s.

Although foreign policy naturally must be domestically based, in a joint ventured world it has additional constituents—global corporations, markets, and the ever-present global Greek chorus we know as social media. For American foreign policy to work for these new constituents, it must be much both more subtle, and more shrewd. Of course the problem here is that subtlety directly confronts the world that we live in, with a twenty-four-hour news cycle, politicians who thrive in a sound-bite environment, and the instantaneousness of the social media quip. Joint ventured issues are much harder to explain in an instant news flash. Try explaining international debt refinancing in 140 characters.

This book explores how America became the model of a joint ventured global economy, and why America must now redefine its role among allies and adversaries. How quietly the world has become tripolar, not in the old-fashioned military sense where the United States still more than dominates, but in an economic sense led by the three major market states: the US, Germany, and China, with the United States in the role of more than first among equals. This book examines how markets have become dominant forces in foreign policy and how, since 2008, the world’s leading central banks, the US Federal Reserve and the European Central Bank, have stepped into the political void with new expansion of scope and powers.

To do this, however, it is first important to explain, as I do in chapter one, how global economic, financial, and political forces have tugged at and radically changed America over the past forty-five years. How, in an almost stealthlike manner, America went from being the largest continental marketplace in the world—almost isolationist—to becoming the inventor and protector of globalization, the joint ventured nation.

It is also very important for the creation of a new foreign policy, where precedents are few, to understand the global historic, political, and economic patterns that have created a need for such policy. In chapter two, I look at these patterns, concentrating on how the meaning of the word sovereignty has evolved. I examine how the concept of sovereignty has changed for the joint ventured states over time, from implying a supreme and independent authority to something much more constrained. What historically were the economic, political, and cultural forces that enabled globalization? And since a prime premise of this book is that globalization is both economic and political, how have economic views shifted over the centuries from mercantilism, to Ricardo’s Comparative Advantages, to Krugman’s New Economic Geography, all of which are linked to the concept of sovereignty prevalent during their respective times?

In chapter three, I discuss the paradox of authority, an underlying reason why there is a need for a new foreign policy based on joint ventured states. In the paradox of authority, a country gives up some power, some sovereignty, in order to gain power internationally. Using China, Germany, and France as examples, I review the history and effects of this contradiction and how it has changed the world.

Every good story needs an antagonist to demonstrate the validity of the hero’s approach, or in this case theory. For this book it was easy to identify the antagonist: it is Russia, or as I label it in chapter four, the refusenik state. Although I said previously that the book is not about countries living in a nineteenth-century imperialistic world or a twelfth-century fundamentalist world, it is important to use Russia, a major nation, as an example of how the world has changed. Russia’s culture, recent history, and sadly its leadership’s inability to take constructive risks are in direct contrast to the modern German and Chinese experience.

For a nation to be globalized, to be part of the joint venture, it is not necessary for it to be a democracy in the Jeffersonian sense of the word. Both little Singapore and giant China demonstrate this. What is important is how a particular country’s system employs its capital: whether it is for the well-being of the majority of its citizens or primarily to enrich and empower various vested interests and elites.

Globalized countries, the states that are the most economically interlinked with the rest of the world, are committed to at least a semi-open market where the legitimacy of the government is not based on an overt protection of the elites and vested interests, or a nineteenth-century nationalist view, but on the increased living standard of the population as a whole.

Chapter five is about the Middle East.

Beginning in 1990 with Desert Storm, America’s preeminent foreign policy concentration has been on the Middle East. Obviously as both a matter of national defense and economic well-being, there was often if not always a rational reason for this concentration, a political and cultural need to respond, especially after 9/11. But should America’s foreign policy concentration still be in the Middle East?

In a globalized world, does the Middle East still have geopolitical relevance, or does its significance reside solely in essentially police actions preventing terrorism from causing harm to the United States and to our joint venture partners? And of course, can we truly have a discussion about why America needs a new foreign policy without first discussing why America’s foreign policy should begin to de-emphasize and move away from its intense focus on the Middle East?

Chapter six covers the Federal Reserve.

If a hegemon is a single country above other countries indirectly or directly empowered to make the rules of the game, then what do you call an institution that is politically independent yet part of a sovereign government that does the same thing—a central bank, or more precisely the Federal Reserve System of the United States, commonly known as the Fed.

The Fed’s ability to have a substantial influence on economies outside the United States represents another major fault line where globalization has confronted sovereignty and where no established rules apply.

Few American governmental institutions have as much power over the individual lives of people in other countries as the Fed. The Fed’s power overseas is almost sub rosa in its nature; it has no drones, no boots on the ground or aircraft carriers on the sea. In fact by law it has no overseas offices. But in its power to impact geopolitical events and its ability to affect the lives of so many people, the Fed’s foreign influence is in many ways as great as the military prowess of the United States, except in times of total war.

This relatively new market-created international power of the Fed begs the question: If an American government institution has a substantial influence overseas, should that be a part of a coordinated American foreign policy? And is the traditional definition of American foreign policy too narrow in the joint ventured world and just not applicable anymore?

Chapter seven is about the changes that are needed in American foreign policy to ensure that America remains first among economic equals in a joint ventured world. It describes what the new policies should be, and what changes should be made to enact a new set of rules. Since World War II, America’s foreign policy has been based on threats, either implicit or explicit. Now we need a policy designed to ensure America’s position in a world where globalization has limited America’s freedom to exert power. We need a policy that uses the paradox of authority to America’s advantage.

I conclude in Chapter eight with probably the most important question of all: Is America up to the task of leading a joint ventured world? Are politicians and the public even aware of the new world that we live in? Democracies tend to need specific threats in order to organize themselves for change. The threat of Soviet communism was a catalyst that united the American nation into actions as diverse as funding the Marshall Plan, huge increases in military spending, the space program, and even appropriations for the interstate highway system, as well as a policy that encouraged former enemies such as Germany and Japan to grow and boom. But the threats in a joint ventured world are more diffuse, less easily definable, and frankly more conflicting than the threats of the Cold War. Can American democracy rise to this task?

As Thomas Friedman wrote in 1999, in his introduction to The Lexus and the Olive Tree:

Under the globalization system you will find both clashes of civilization and the homogenization of civilizations … both the triumph of liberal, free-market capitalism and a backlash against it, both the durability of nation-states and the rise of enormously powerful nonstate actors.

Friedman’s seventeen-year-old description of a globalized world has not only been realized beyond anyone’s imagination, but through globalization’s handmaidens—technology and social media—it has changed our lives and changed how America fits into the world more than any other force since the American Industrial Revolution.

I explain in this book why American foreign policy needs to change so that America can continue to lead and prosper in the joint ventured world. We are in a period not too dissimilar from the immediate post–World War II years, during which America had been victorious but had to grapple to develop a plan of action for a world it did not fully understand. Now, over seventy years later, America must once again dramatically reorient its foreign policy, this time for a world more diffuse and yet at the same time much more connected.

Chapter One

Invasion: America Becomes a Joint Ventured Nation

In the spring of 2012 during the Republican presidential primaries in the United States, Mitt Romney campaigned as if Europe, if not specifically an enemy of the United States, was a very unfriendly place. Europe in the eyes of Romney seemed to have taken over from China as America’s leading punching bag. In fact Romney mentioned Europe so often during that time that you couldn’t blame someone not familiar with American politics from thinking that Europe was the name of one of Romney’s opponents in the primaries.

Romney stated on January 10, 2012, at Southern New Hampshire University in Manchester, New Hampshire, I want you to remember when our White House reflected the best of who we are, not the worst of what Europe has become. Governor Romney then continued this theme throughout the spring. Interviewed on CBS’s Face the Nation on June 17, 2012, he said, We are not going to send checks to Europe. We are not going to bail out the European banks.

This was most probably a rehearsed comment, because a question about European bailouts was never even asked by the moderator. Not to mention the fact that a European bank bailout by the United States was not even on the mind of any European leaders.

Soon after that Face the Nation remark, the Romney campaign suddenly switched gears and stopped talking about Europe. It is clear that it became apparent to the campaign that these statements were not developing any traction. Europe bashing, which Secretary of Defense Donald Rumsfeld last used in 2003 when he branded Germany and France old Europe, seemed to no longer resonate with the majority of Republican primary voters.

What is apparent is that the Romney campaign failed to notice how our economy was so integrated with Europe’s and how globalization now affected almost every segment of American life, how America now exists in a globalized world, a joint ventured world. A world where major companies had interlocking or joint venture relationships with other companies around the world and where foreign companies, especially European companies, employed a substantial amount of people in the United States. Anti-Europe baiting did not work because many voters, on the most practical level, knew people who worked directly or indirectly for European companies or had investments that made them dependent on foreign markets. Even the ubiquitous french fry had become joint ventured in American life. ConAgra, the American agriculture giant, had along with Netherlands-based Meijer Frozen Food formed a joint venture company called Lamb Weston / Meijer to globally produce and sell frozen potatoes to be used for manufacturing french fries.

The number of Americans now directly employed in the United States by foreign-owned subsidiaries or indirectly linked to such investment, such