Shadow Government

Giving Obama credit -- when he's followed Bush's footsteps

I would like to join, however belatedly, the lively debate about how to assess President Obama's foreign policy and whether this will be a campaign asset or liability. Some of FP's own worthies have contributed as well (see Drezner's take here and here and Walt's take here). Perhaps the most provocative assertion is Thomas Friedman's claim that "Barack Obama has turned out to be so much more adept at implementing George W. Bush's foreign policy than Bush was, but he is less adept at implementing his own."

I am persuaded by the larger claim that Obama has had more genuine successes in foreign-policy than in domestic policy and so when it comes to the 2012 election, his campaign boasts will resonate more in the former arena than in the latter. By "genuine success" I mean when a president accomplishes something that he sets out to do and that something is actually beneficial to the country. Obama has had many policy achievements in domestic policy (in the sense of getting a Democrat-controlled Congress to pass things he wanted them to pass) but they have turned out not to have the beneficial effect promised (cf. "jobs saved or created"), or at least not yet, and so do not (yet) count as "genuine successes." By contrast, there are some undeniable successes in the foreign policy arena, such as ramping up the drone strike program he inherited from the Bush administration and thereby decimating the al Qaeda leadership. There have been many foreign policy failures, too, but his batting average is better in foreign policy than it has been in domestic policy.

What explains the overall pattern? Friedman points to the correct answer: where Obama has continued along policy lines laid out by Bush, he has achieved success, but where he has sought to make dramatic changes, he has failed. The bigger the change, the bigger the failure. Not surprisingly, Friedman presents this as a critique of Bush ("Obama and his national security team have been so much smarter, tougher and cost-efficient in keeping the country safe than the "adults" they replaced. It isn't even close, which is why the G.O.P.'s elders have such a hard time admitting it."). Friedman's sneer about the "adults" is unmistakable and it causes him to miss the obvious: where Obama has embraced that "Bush adult" worldview, it has gone well for him and for America. Where he has not, it has not. Indeed, where he has listened to Friedman and other bien pensant types, it has gone very poorly indeed (cf. Israel-Palestine peace process). And where he attempted a major shift in American grand strategy (elevating climate change to be a national security threat co-equal with WMD proliferation and terrorism) he has made almost no progress whatsoever.

President Obama campaigned on a scorched earth critique of the foreign policy he inherited from President Bush. He promised to undo all of it. Some of those promises (withdrawing all combat troops from Iraq in 16 months) barely survived the first few days, while others (unconditional talks with Ahmadinejad or closing Gitmo) were only jettisoned after months of failed efforts. The correlation is almost perfect: the longer Obama hewed to his campaign critique, the less well it has gone in foreign-policy. And, by the way, the supposedly hyper-partisan Republican opposition actually has chalked up a record that compares very favorably with the recent past: where Obama has pursued a genuinely bipartisan policy, he has enjoyed strong bipartisan support.

Of course, Obama deserves credit for jettisoning foolish campaign promises. And in some cases he and his team have been able to build on the policies he inherited with effective innovations. Nor would it be fair to conclude that every point of overlap with the Bush administration is worth applauding (I will have more to say on this latter point with respect to his recent Iraq decision in a future post). Yet on balance the conclusion for fair-minded observers is obvious: perhaps it is worth reconsidering the policies that have not worked so as to borrow a few more from the stockpile that has produced the best results. 

Brendan Smialowski/Getty Images

Shadow Government

Argentina: The boom before the bust

Many of the news reports on Argentinean President Cristina Kirchner's landslide reelection victory this past weekend contained a healthy dose of skepticism on the sustainability of her populist economic model. The skepticism is well-founded. We've all seen this movie before, and know exactly how it ends.

Heavy state intervention in the economy, massive subsidies, and the redistribution of income -- the hallmarks of economic populism -- have a way of playing themselves out, proving time and time again that lasting prosperity can never be built on acquiring unlimited debt or just printing more money.

As UCLA economist Sebastian Edwards, a Chilean, writes in his brilliant takedown of Latin American populism, Left Behind: Latin America and the False Promise of Populism, all populist experiments begin with great euphoria and surges in economic growth, but invariably lead to rapid inflation, higher unemployment, and lower wages -- and soon thereafter, stagnation and crisis.

There is no question that right now times are good in Argentina. Since the country hit rock bottom in 2002, when it defaulted on $100 billion in debt, the largest sovereign debt default in history, the country has undergone a seemingly remarkable turnaround under the stewardship of the late Nestor Kirchner and now his widow, Cristina. The economy is expected to grow by 8 percent this year and unemployment is at a 20-year low.

But the problem is that Argentina's economic success has been built not on strong fundamentals, but on a tenuous foundation of heavy government spending, high commodity prices, and strong demand from China and Brazil for soy and other agricultural products. And what goes up in economics can always come down.

Other troubling signs are double-digit inflation, which private economists put at 25 to 30 percent; capital flight ($9.8 billion was pulled out of the economy in the first half of this year, compared with $11.4 billion in all of 2010); and plummeting foreign investment (down 30 percent in the first half of 2011).

The other elephant in the living room is the fact that Argentina has been shut out of credit markets since it left bondholders holding the bag in billions of dollars of unpaid debt from its 2002 default. Not only has there been no reconciliation, but the Kirchner government has gone out of its way to reject lawsuits and other claims from creditors. As a result, the Obama administration and multilateral lenders have refused further loans until Argentina begins to repay what it owes investors and settle with holders of defaulted debt, as well as adhere to its obligations with institutions such as the International Monetary Fund.

Yet despite warnings by economists that the government's profligate spending, coupled with a global economic slump, could spell disaster, the Kirchner administration soldiers on. Indeed, why wouldn't it see her overwhelming reelection victory as anything but a mandate to continue its unorthodox ways? "After a lifetime of pushing those ideas," she said after her victory, "We now see that they were not a mistake and that we are on the right path."

On the other side, former President Eduardo Duhalde, who unsuccessfully challenged Kirchner, said, "We're happily dancing on the Titanic."

Given the prevailing capital flight and declining investment in Argentina, the smart money is obviously on Duhalde. Fortunately, those players are in a position to avoid the risk; what's unfortunate are the millions of poor and middle-class Argentineans who will once again pay the price for Argentina's populist folly when the inevitable day of reckoning returns.