Tuesday, December 19, 2006

Diplomatic Mercantilism

When I watch George W. Bush diplomatically flounder on the world stage, I wonder if his form of diplomatic mercantilism just isn't suited to the 21st century.

A econ reminder - Mercantilism is an economic theory that holds that the prosperity of a nation depends upon its supply of capital, and that the global volume of trade is "unchangeable." Capital, represented by bullion (gold or silver) held by the state, is best increased through a positive balance of trade with other nations (exports over imports). Mercantilism suggests that the ruling government should advance these goals by playing a protectionist role in the economy, by encouraging exports and discouraging imports, especially through the use of tariffs. The economic policy based upon these ideas is often called the mercantile system.

Mercantilism is generally rejected today by economists because "mercantilists failed to understand the notions of comparative advantage (although this idea was only fully fleshed out in 1817 by David Ricardo) and the benefits of trade. For instance, Portugal was a far more efficient producer of wine than England, while in England it was relatively cheaper to produce cloth. Thus if Portugal specialized in wine and England in cloth, both states would end up better off if they traded. In modern economic theory, trade is not a zero-sum game of cutthroat competition, as both sides could benefit. By imposing mercantilist import restrictions and tariffs instead, both nations ended up poorer."

On a diplomatic front, Bush assumes a mercantilist position. He assumes that if during talks, treaties or resolutions other countries prosper, then America must somehow be worse off. He acts as if diplomacy is a zero-sum game. Like mercantilists, he assumes that everyone works to further their own interests and if other countries are working for their own interests, then they can't be working toward ours. Like the mercantilist, Bush is unable to understand that a series of selfish decisions by multiple parties can actually end up enriching them all. Countries have a selfish interest in pursuing peace over war, security over instability and prosperity over poverty.

He won't talk to Iran or Syria about the Iraq fiasco because they would gain some legitimacy and therefore America would somehow be worse off. America won't talk with the elected leaders of Hamas or Hezbollah for similar reasons. We won't talk to Cuba or North Korea because they are communists and we don't want to encourage communism (China being the obvious hypocritical problem with that position).

Yet, not talking seems to be so fruitless. We shouldn't give in to North Korea or Iran's demands for nuclear weapons, Hezbollah's support for its terrorist activities, or Hamas attacks on innocent Israelis. However, what is the damage in talking?

What if we talked with Syria and Iran about cleaning up the Iraq fiasco? What if they agreed that an American pull-out is needed and they would help stabilize Iraq by reigning in Muqtada al-Sadr? Wouldn't the entire world be better off? Wouldn't all countries be 'richer' in security than previously?

What if we talked with the elected leadership of Palestine and came to an acceptable conclusion to a 2-state solution? Wouldn't that take the wind out of the sails of Al-Qaeda and other Muslim organizations that want to kill innocent Americans?

What if we talked with Cuba and North Korea and explained we didn't want to invade them? Maybe we could even say that we want to help them make the transition from a command economy to a liberalized economy along the lines of China and Vietnam. In return, they give up crushing dissidents, pursuing nukes and causing trouble.

I don't know if we could reach an acceptable conclusions with any of those countries, but it seems that working under the assumption that America gets weaker if other countries get stronger isn't working. We just look weaker now.

Isn't it time to drop the diplomatic mercantilism and establish a working relationship with every other country who has an interest in what we've got an interest in?