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Don't Blame Obama for His 'Ineffectual' Foreign Policy -- America's Creditors Now Call the Tune
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President Barack Obama’s luck in foreign policy seems to be even worse than in domestic policy.

As the Syrian civil war intensified last year, he wanted to intervene but was promptly cut off at the knees by the international community. As the Ukrainian crisis has unfolded more recently, his impotence has again been on display. Certainly Russian President Vladimir Putin has so far laughed off Obama’s feeble attempts at sanctions.

Now to add insult to injury, Obama has been memorably dissed on a visit to Japan.

It is all part of a pattern in which America’s international influence is rapidly ebbing. At the back of it is money – America is bankrupt and its creditors know it. Not only are they becoming ever more reluctant to fund U.S. military interventions abroad, but they have assumed the whip hand in dealing with Washington on everything from environmental policy to trade barriers.

Obama’s visit last week to Japan was a particularly sobering reminder of how times have changed. At least where outward appearances are concerned, Japanese Prime Ministers used to feign exaggerated obeisance to American Presidents. Not any more. On the first leg of a presidential sweep through East Asia, Obama was repeatedly taken down a peg. For a start, in speaking to a press conference, Japanese Prime Minister Shinzo Abe referred, on at least six occasions, to Obama as “Barack.” Although this might not seem like a terrible case of lèse-majesté in American eyes, from a Japanese point of view it is an unmistakable signal that Japanese officials don’t place American Presidents on a pedestal anymore. (Of course you might think that this reckons without the famous Ron-Yasu relationship of Ronald Reagan and Yasuhiro Nakasone in the 1980s. Not at all. As I remember it, Nakasone never used “Ron” in a third party context in speaking to the press.)

Then there have been Obama’s efforts to achieve concessions on Japan’s auto and agricultural trade policies. Officially last week the two leaders claimed to have made “some progress” but, as neither side gave any details, it seems safe to assume that Obama received even less than the usual token promises that Japanese Prime Ministers traditionally dole out on such occasions.

The coup de grace came on Saturday. No sooner had Obama boarded Air Force One for Seoul – the second stop on his Asian tour – than the Japanese government announced that it was resuming whaling. It is hard to imagine a more disrespectful gesture.

After all, one of Obama’s more memorable campaign promises was to end whaling. This is how he put it: “As President, I will ensure that the U.S. provides leadership in enforcing international wildlife protection agreements, including strengthening the international moratorium on commercial whaling. Allowing Japan to continue commercial whaling is unacceptable.”

ORDER IT NOW

It is not as if whaling is an important business in Japan. It is actually tiny and the only reason it survives is because of large government subsidies. To close it down would entail only a small fraction of the job cuts imposed on, for instance, Japan’s vast steel industry in the 1980s, or the cotton cloth industry in the 1970s.

Meanwhile, virtually no one in Japan these days eats whale, which actually has a terrible image as the cheapest and least appetizing form of protein. (I may have led a sheltered existence but in 27 years of living in Japan I have never seen whale on a restaurant menu, let alone witnessed anyone eating it.)

What is going on here? Though the American press rarely seems to notice, the fact is that the United States is proportionately now the most indebted great power in history – more indebted even than the Ottoman Empire in that empire’s highly dysfunctional last years a century ago.

On the U.S. Treasury’s figures, America’s net foreign liabilities at last count totaled a stunning $3,863 billion. This is up nearly 16 times on a figure of $246 billion in 1989, the year the Berlin Wall fell. (You can see the full story by clicking here and then checking out the Excel table headed “International Investment Position, 1976-2013″.)

It seems hard to believe now but the United States was once the world’s largest creditor nation. Actually its net foreign assets peaked as recently as 1980 (at $360 billion). With mounting trade deficits under Ronald Reagan, however, the net figure rapidly dwindled and by 1986 America recorded its first net foreign liability figure of modern times.

The trend was massively exacerbated by George W. Bush’s wars and under his presidency, net foreign liabilities soared from $731 billion to $1,699 billion. Under Barack Obama they have already more than doubled.

How does all this affect U.S. foreign policy? One obvious consequence is that when the United States wants to intervene in a place like Syria, it has to make sure its creditors are on board. If not, U.S. interest rates could soar, with unfortunate consequences for the U.S. domestic economy. In the case of the proposed Syrian intervention, a major stumbling block was the opposition of China, which just happens to be America’s largest creditor.

As for Japan, it runs close behind China as the world’s second largest creditor, which means it no longer need pay even perfunctory attention to unwelcome requests from Washington. Then there is Russia. It is outranked as a U.S. creditor by such tax havens as Hong Kong and Switzerland but when all the adjustments are made it is probably America’s sixth biggest creditor. This is enough to give it considerable leverage over U.S. interest rates. Barack Obama knows that even if the American press doesn’t.

The U.S. Treasury’s list of America’s largest creditors can be viewed here.

(Republished from Forbes by permission of author or representative)
 
• Category: Economics • Tags: National Debt 
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