We're Poorer Because the Government Plays "World Cop"

The notion that global free trade today depends on U.S. hegemony is dubious.

Thanassis Cambanis argues in Politico that, contrary to what we may think, America’s role as global policeman, defender of more than 50 different countries, buyer of more than a third of worldwide military spending, etc. is not a costly burden compared to the benefits it yields. All this talk about how allies free ride off our security commitments and how the promiscuous use of U.S. military power imposes significant economic and geopolitical costs on the homeland are off base, according to Cambanis. Being the policeman of the world makes us richer, he says.

Since the United States is so extravagantly rich in relative international terms but also historically speaking, identifying even major costs can be difficult. But Cambanis misses the mark with some selective accounting. He makes his case with three main points. First:

[M]ost of America’s defense spending functions as a massive, job creating subsidy for the U.S. defense industry. According to a Deloitte study, the aerospace and defense sector directly employed 1.2 million workers in 2014, and another 3.2 million indirectly. Obama’s 2017 budget calls for $619 billion in defense spending, which is a direct giveback to the American economy…

Of course, a “giveback” to the American economy implies the real truth: that in order to create jobs by massively subsidizing the military industrial complex, the government has to first extract resources from the more productive sectors of the private economy. If the U.S. pared back its global role and initiated serious restraint-oriented cuts to the defense budget, it could produce something on the order of $150 billion in annual savings. That could serve as quite a stimulus if left in taxpayers’ pockets.

Second:

America’s steering role in numerous regions – NATO, Latin America, and the Arabian peninsula – gives it leverage to call the shots on matters of great important to American security and the bottom line. For all the friction with Saudi Arabia, for instance, the Gulf monarchy has propped up the American economy with massive Treasury bill purchases, and by adjusting oil production at America’s request to cushion the effect of policy priorities like the U.S. invasion of Iraq in 2003.

Active international engagement certainly gives a peerless superpower like the United States more leverage to secure its interests more efficiently, but Cambanis inadvertently draws attention to the benefit-outweighing costs of that “steering role” we’ve played in the world. The Iraq War is not synonymous with Liberal Hegemony, but if America had not been playing the role of global policeman, it’s hard to imagine the invasion of Iraq having happened in the first place. It served mostly as an achievable item on a pre-existing laundry list of errands that the Bush administration thought would serve as a useful show of force following the 9/11 attacks. It cost trillions of dollars and hundreds of thousands of lives and it destabilized the region in a way that continues to eat up lives and resources to this very day. And the U.S. relationship with the Saudi regime has hardly been a net positive for U.S. interests.  

Third:

America’s “global cop” role means that shipping lanes, free trade agreements, oil exploration deals, ad hoc military coalitions, and so on are maintained to the benefit of the U.S. government or U.S. corporations. The truth is that America puts its thumb on the scale to tilt the world’s not-entirely free markets to America’s benefit. Nobody would be more thrilled for America to pull back than its economic rivals, like China.

The notion that global free trade today depends on U.S. hegemony is dubious.

It’s not clear to me that America secures better oil exploration deals as a result of its expansive grand strategy. Nor am I convinced that the ability to organize ad hoc military coalitions always serves U.S. interests; too often they have been used as a veneer of international legitimacy for reckless interventions. It seems a good thing, for example, that the U.K. parliament refused to go along with Obama’s plan to bomb the Assad regime in 2013. According to Secretary of State John Kerry, that was the pivotal moment in derailing a war that was deeply unpopular with the American public and that Congress wouldn’t even formally approve.

More interesting is Cambanis’s argument that America’s “global cop” role keeps shipping lanes open and facilitates free trade agreements. I think America’s post-war and early Cold War role in setting up international institutions that liberalized economies and encouraged the lowering of trade barriers was important, but the notion that global free trade today depends on U.S. hegemony is dubious. Most countries have learned the lesson that freer trade and globalization is a net economic benefit; they don’t need U.S. military bases to continue to be convinced. And certainly America’s frequent “global cop” military interventions don’t help. Moreover, as Joshua Shifrinson and Sameer Lalwani write in a chapter for a Cato Institute book on threat perception and U.S. national security, “Although more actors are increasingly capable of disrupting American command [of the seas], none are capable of systematically undermining the maritime status quo.” Indeed, any state interested in gaining global power and influence will strive to keep shipping lanes open and engage in free trade. Just ask China.

And as for the argument that China would be “thrilled for America to pull back,” I seriously doubt it. China certainly prefers an American withdrawal from the South and East China Seas, but, as a recent RAND Corporation study found, China is all too eager to let the U.S. carry the burden for Middle East energy security, believing (erroneously) that American military presence there helps secure the free flow of oil out of the Persian Gulf, incidentally a region that China relies on for oil imports far more than the U.S. does.Economic interdependence creates incentives to keep the peace and get rich instead.

Much of this debate boils down to whether or not U.S. primacy deserves credit for the decline of interstate war, and thus for the increase in global economic productivity, since 1945. Many argue that it does, but there are competing arguments. Nuclear weapons and the destructive power of modern conventional militaries have created an environment of “defense dominance” in which war and conquest are either prohibitively costly or just plain infeasible. Economic interdependence, which developed long before America’s rise to superpower status, also creates incentives to keep the peace and get rich instead – so the cause-effect variable could very well be the reverse of what Cambanis and others claim. Cato’s own John Mueller has long argued that a normative shift in the way most societies see war, from a glorified practice to an abhorrent last resort, is the real reason for the decline of international conflict.

Cambanis predicts that, contrary to the prognostications of some fearful commentators, Trump will not reduce America’s role in the world because he will soon realize that it is a net benefit to the country’s interests and its bottom line. I agree Trump is unlikely to pare back U.S. predominance, but I think it will have more to do with his predilection for exercising immense power than anything else.

Republished from The Cato Institute.

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