How the Financial Crisis Has Undermined U.S. Power

How the financial crisis has undermined American power, despite the President's popularity abroad

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Chuck Kennedy / White House / CNP / Corbis

Last year, Obama projected himself as the global peacemaker in Cairo.

When the White House announced its National Security Strategy last month, it titled it A Blueprint for Pursuing the World That We Seek. A better title might have been The Fun Is Definitely Over. The document used the phrase "hard choices" three times, called for "a disciplined approach to setting priorities" and predicted "trade-offs among competing programs and activities." The nature of those trade-offs was never spelled out, but the implication was clear: America doesn't have as much money and power as we once thought. We can no longer conduct foreign policy on a blank check.

Call it Obama foreign policy 2.0. When the President and his national-security team came into office, broccoli was not on the menu. Instead, the talk was about boosting the nonmilitary aspects of American might. In her confirmation testimony, Hillary Clinton talked endlessly about "smart power," meaning power that does not come only from the barrel of a gun. She dispatched über-envoys like Richard Holbrooke, George Mitchell and Dennis Ross to supercharge American diplomacy in the greater Middle East. A little more than a year ago, Obama went to Cairo University and projected himself as a 21st century global peacemaker, promising to close Guantánamo Bay and repeatedly quoting the Koran.

At the time, all this made sense. Coming into office, Obama inherited a foreign policy in the red. The Bush Administration had staked out a series of commitments — vanquishing the Taliban, preventing a nuclear Iran, spreading democracy far and wide — that it lacked the power to fulfill. So like a debtor who decides that it's easier to ask for a raise than chop up his credit cards, Team Obama decided to focus on boosting American power, not reducing American obligations. The Bush Administration, they reasoned, had leveraged only military power. Obama would deploy "soft power" too, the power to attract rather than coerce.

The Obama Administration's charm offensive hasn't been a complete failure. Personally, Obama is far more popular overseas than was George W. Bush, and that popularity has brought the nastiness of adversaries like Mahmoud Ahmadinejad into sharper relief. But the very nastiness of those adversaries means that they don't get rattled by low favorability ratings. What's more, Obama's efforts to change America's image have been constrained by his inability to change certain U.S. policies at home. The best way for America to promote its values is "by living them," declares the National Security Strategy, but when it comes to closing Guantánamo Bay or dramatically reducing U.S. carbon emissions, Congress has shown little interest in making Washington a shining city on a hill.

These problems, however, pale before the overarching one: despite Obama's personal popularity, American soft power isn't going up; it's going down. The reason is the financial crisis. America's international allure has always been based less on the appeal of the man in the Oval Office than on the appeal of the American political and economic model. Regardless of what foreigners thought of Bill Clinton, in the 1990s America's brand of deregulated democracy seemed the only true path to prosperity. American economists, investment bankers and political consultants fanned out across the globe to preach the gospel of free elections and free markets. America represented, in Francis Fukuyama's famous words, "The End of History."

Now it is much less clear that history is marching our way. The financial crisis has undermined the prestige of America's economic model at the very moment that China's authoritarian capitalism is rising. A decade ago, poor governments hungry for trade and aid had no choice but to show up in Washington, where they received lectures about how to make their economies resemble America's. Now they can get twice the money and half the moralizing in Beijing. From Iran to Burma to Sudan, the Obama Administration's charm offensive has been undermined by China's cash offensive.

The result is that 18 months after it took over a foreign policy in the red, there are growing signs that Team Obama understands that no raise is on its way. The White House is starting to confront the "hard choices" that come from trying to pare down America's commitments overseas.

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