The year 2009 was a modestly tolerable one for capitalism, but not at all for capitalist culture, or the advancement of free minds in freer markets. While the aftershocks of the financial crisis continued to be felt, the global financial system seemed more adept at absorbing bad news. The relative ease with which markets moved beyond the Dubai crisis of December, and news that the United States had shed a relatively low 11,000 jobs in November, were telltale signs of growing confidence.
You have to be careful not to overstate the point. Massive debt traps still exist, and the long-term costs of pumping so much liquidity into the markets will have negative consequences on the pace of future growth.
The past year, Barack Obama’s first as US president, also brought many questions about Washington’s future overseas policies, which will doubtlessly have a profound economic impact. Obama announced a “surge” in Afghanistan, officially estimated at $30 billion per year, though American commitments to the country are bound to cost more. The standoff with Iran persisted, raising the probability of military conflict, even if American financial constraints will push in the opposite direction.
However, one thing that went missing in this stew was any thought, specifically among the Western democracies, about enhancing political liberty. The notion of promoting free minds, never a high priority at the best of times, was banished to the lowest rungs of indifference.
This was not surprising. Political liberty, democracy and pluralism are concepts that the West has generally sought to advance in only a piecemeal way, and even then only when national interests created openings to do so. On top of that, three further phenomena inhibited such an agenda: First, the refusal of a majority of Western governments to echo a trope from the despised George W. Bush years (and yet so haphazardly implemented by the former US president); second, an understanding that encouraging free minds would create a negative backlash among undemocratic but appreciated providers of international liquidity — principally China and the Gulf states with their sovereign wealth funds.
And the third reason is that the Obama administration has made it clear, albeit without admitting so publicly, that it does not consider democratization and political liberty overly important. The president has always leaned toward more of a “realist” reading of political affairs, which, once you’ve cut away the fat, means a downgrading in a principles-based foreign policy. Principles were more of a Bush thing, while Obama always sought to demonstrate that he was different than his predecessor.
The president’s decision to send more troops to Afghanistan and seek a negotiated solution to Iran’s nuclear standoff opened a number of contradictory doors, which will have financial consequences. Obama, in a speech delivered in early December, affirmed that the US was not going to engage in a “nation building” project in Afghanistan; and it was always implicit that a democratic government in Kabul was less important to him than one that was not corrupt. We can believe Obama’s sincerity on the latter point, but as The New York Times columnist Thomas Friedman observed, if Afghanistan is not about nation building, then what is it about?
In other words, once the US falls into the logic of strengthening the Afghan government and state, its ability to limit spending will be severely reduced. The $30 billion Obama mentioned, which are estimates for maintaining 30,000 new troops per year, may soon be supplemented by a substantial amount of new funding. With money limited, where will cuts be made? Perhaps at home, but in an election year that can be fatal. No wonder the US Congress is so fearful of Obama’s plan.
As for Iran, a similar logic applies. If Tehran continues to stonewall on a nuclear deal, as appears likely, Washington will have one of two options: to move toward sanctions, which may not achieve much, or to consider a military operation against Iranian nuclear facilities. However, that could provoke regional wars and induce Iran to retaliate against the US and its allies in Iraq, the Gulf, and Afghanistan. Suddenly, Obama’s $30 billion estimate may be dwarfed by the costs of battle, direct and indirect.
In that uncertain context, we can expect the coming year to be one of political uncertainty, particularly in the broader Middle East, even if the prospect of war in places other than Afghanistan may be alleviated by a fear of the financial consequences on all sides.
The US and Western Europe will remain financially strained, but they will also be more reliant on authoritarian countries like China and Russia to help find a solution to the major Iran imbroglio. Don’t expect free minds to proliferate in such an inhospitable climate. But you knew that, didn’t you?