Festschrift for Helmut Schmidt

In the period in which Helmut Schmidt and I each started our political apprenticeship--in the Fifties--the necessity for American leadership was axiomatic. There was an all-encompassing threat: much of Europe was suffering the effects of war and various forms of foreign occupation. Asia was just emerging as a significant factor. And major achievements in constructing the post-World War II international system are to America's credit: the recovery of Japan; the reintegration of defeated enemies into the community of nations; the global nature of the world economy, among others.

America, abandoning isolation, found its dominant position a heady experience. But the world, and with it America, is now in dramatically different circumstances in the post-Cold War period. And America must come to grips with them on the basis of historical experiences which are in fact unique. Populated almost exclusively by immigrants, the United States is the only country that has never experienced a powerful neighbor along its borders, and therefore has never had to face the security issues confronted by less favored nations. The Americans' perception of foreign policy was always one of nearly limitless choice and, above all, of having the ability to participate or to withdraw from international engagements at will. Every American initiative of the postwar period was presented to the American public as having a terminal date, after which America could again withdraw, allowing the postulated underlying harmonious pattern of the world to reassert itself.

Much of America's foreign policy has traditionally been presented in alternately psychiatric and theological terms: either as a means by which relations among nations could be conducted as they might be if they were relations among individuals, or when that did not seem possible, as a crusade to destroy or, even better, to convert antagonists to the American perception of international affairs. In that sense, the Cold War and victory in the Cold War were a culmination of America's perception of the special mission of international affairs.

How many historical examples, if any, can be recalled where a nation's leaders stated goals that, some forty years later, were practically all achieved? That is the position in which America finds itself at the end of the Cold War. But what Americans have not sufficiently understood is that the patterns of the Cold War are no longer applicable to the

world ahead of us. The classic maxim of American foreign policy--the invocation of an overwhelming crisis transmuted into large-scale enterprises--does not apply.

There is no historical precedent for the post-Cold War world. Never before has every part of the world participated simultaneously in international affairs. Either they lived in ignorance of each other--in the same sense that, in the 16th century, China and Europe in effect lived in different worlds--or they had no significant capacity to interact with each other. In the 18th and 19th centuries, world history, indeed, until the middle of the 20th century, was dominated from Europe and then from the north Atlantic. Today, every part of the world participates in international affairs. Major powers are emerging in different regions, and this presents new challenges. How does one now define a major power under present conditions? And how do we manage their interaction? For the first time in history, events can be observed as they occur. Communications straddle the globe in real time. The world is linked integrally, not only by communications, but by economics. A few years ago, the collapse of one of 2,500 hedge funds was believed to have the capacity to undermine the entire financial system and sparked the intervention of the Federal Reserve Bank.

This globalization is one of the fundamental challenges to American leadership. Free-market capitalism remains the most effective instrument for economic growth and for raising the standard of living of most people. But just as the reckless laissez-faire capitalism of the 19th century spawned Marxism, so the indiscriminate globalism of the 1990s may generate a worldwide assault on the very concept of free financial markets. Globalism views the entire world as one market in which the most efficient and competitive prosper. It accepts--and even welcomes--that the free market will relentlessly sift the efficient from the inefficient, even at the cost of periodic economic and social dislocation.

But the extreme version of globalism neglects the inevitable mismatch between the world's political and economic organization. Unlike economics, politics divides the world into national units. And while political leaders may accept a certain degree of suffering for the sake of stabilizing their economies, they cannot survive as advocates of near-permanent austerity on the basis of directives imposed from abroad. The temptation to seek to reverse--or at least to buffer--austerity by political means becomes overwhelming. Protectionism may well prove

2

ineffective in the long term but, for better or worse, political leaders respond to more short-term cycles.

Even well-established free-market democracies do not accept limitless suffering in the name of the market, and have taken measures to provide a social safety net and to curb market excesses by regulation. The international financial system does not as yet have these firebreaks. Nor is there much of a recognition that it needs them. There is no more important task than to relate the economic to the political order and to give globalization a humane dimension.

Paradoxically this occurs while the United States is the only remaining military superpower. But military power by itself represents a simplistic assessment of the emerging international reality. For the issues susceptible to solution by military action are in decline. The kind of power in which the United States excels is less and less relevant to most foreseeable international crises. The current world contains six or seven major global players whose ability to affect nonmilitary decisions is essentially comparable. In such an international order, there are only two roads to stability: one is hegemony based on a country's dominance; the other is equilibrium, which is another way of describing the notorious balance of power.

The trouble is that the American body politic tends to reject both approaches. Hegemony will prove physically draining; the American public seems determined to reject the role of global policeman which hegemony implies, and the course runs counter to the moral convictions of the American people. But balance of power has been historically rejected by the American political and intellectual communities as a source of endless tensions--though at crucial periods, such as in deciding to enter the two world wars to preserve the global balance of power, Americans have been prepared to overcome their prejudice. Still, a call to rely on the national interest is considered by many a revolutionary, if not a reactionary, proposition. And even when an attempt is made to apply the concept, the national interest continues to be defined in sweeping, ideological terms.

But while post-Cold War foreign policy reflects some traditional patterns, there are important differences as well. For one thing, modern economics has changed the nature of incentives. Historically, nations could grow in influence primarily by conquest. In our day, technology permits quantum changes in a society's power by changes entirely within a nation's own territory. No conceivable

conquest could augment a nation's power like the acquisition
of nuclear weapons or the mastering of modern information
technology. Thus the paradox: proliferation is a permanent
temptation and a permanent danger while, at the same time,
the cost of war, at least among major powers, has risen to
near prohibitive levels.

Then, too, the elements of national strength are no
longer homogeneous. Many economic powerhouses--especially
in Asia and the Middle East--are politically fragile.
Communications are instantaneous, and economies are global.
Every day a trillion dollars moves in world financial
markets, only 5 percent of which is generated by commercial
transactions. Global well-being is becoming both
interconnected and precarious: a bank clerk in Singapore
managed to create $27 billion in derivatives in three days
and bring down a major international bank. But political
loyalties remain imprisoned in the nation state. And with
the breakup of old empires, conflicts have even shriveled to
the ethnic level where their intensity magnifies almost in
proportion as their global relevance is shrinking.

Not just the United States but every major nation finds
itself in a transitional stage. The traditional European
nation state lacks the scale to deal with the entire
spectrum of contemporary problems. Russia is living within
borders it has not known since Peter the Great. China is
emerging as a world power for the first time in several
centuries while its leadership is changing. Japan is
reversing a pattern of political withdrawal.

How is American foreign policy to be defined in such a
period? Theoretically, the United States could pursue a
pure interest policy in the manner of Britain throughout
most of the 19th century: a posture of "splendid isolation,"
maintaining good relations wherever possible but throwing
its weight to the side that confers certain advantages at a
specific moment (which, in the British case, was generally
the weaker side). This would be a latter-day version of the
European balance-of-power diplomacy.

There are, however, huge, probably insurmountable,
obstacles to such a strategy. The first is that, whereas
Britain conducted its policy primarily in Europe, we would
have to conduct it globally. Secondly, Britain had a
leadership group that had trained itself in the conduct of
public policy. America has neither such a leadership group
nor any similar tradition of hard-headed, purely interest-
oriented policy. Third, when communications are
instantaneous, economics global, and politics democratic, it

4

is probably not possible to conduct the same kind of cold-
bloodyd policy in every part of the world simultaneously.
Fourth, international stability is increasingly affected by
splinter groups with no interest in the global equilibrium
at all, usually ethnic groupings which, in fact, are using
the major powers' desire for global order to achieve their
own national objectives.

On the other hand, a nation founded by people who have
traditionally believed in the universal applicability of
their values cannot simply abandon the Wilsonianism that had
dominated 20th century American foreign policy.

Finding our way through this maze would be difficult
enough were Americans at one in assessing the international
situation. We are, however, divided, especially along
generational lines. The generation that won the Cold War
had its seminal experience in the Second World War and its
immediate aftermath. They believed in a constructive
American role and in the beneficent role of American power.
The generation whose seminal experience was the Vietnam War
holds a quite different view. They regard the Vietnam War
not only as a terrible mistake but as an indictment of
American power in general. Just as many who used the
outcome of America's role in World War I as rationale for
the nonintervention policy of the 1920s and 1930s, current
American policy debates--whether in the Balkans or the
Caribbean, in Africa or Asia--can best be understood in the
context of a generation that views the world through a lens
largely provided by a local and unsuccessful conflict.

That difference in perspective is sharpened by one of
the fundamental transformations of human consciousness
through which our period is living: the change of the
process of learning from books to pictures and from reading
to viewing, which roughly marks the borderline between the
generations I have described. To learn from books, one
requires concepts that relate seemingly disparate events to
each other; pictures, on the other hand, teach by
impressions which emphasize the mood of a moment. All this
foreshortens the policy perspective and makes it more
vulnerable to fluctuating sentiments and transitory
occurrences.

A larger vision is especially needed for European-
American relations. An extraordinary phenomenon is
occurring in Europe: the adoption of a common currency by a
group of nations that has not brought about, as yet, the
accompanying institutions by which this common currency is
going to operate; and the concept of a free-standing Central

5

Bank not related to any political organization. The common monetary policy is going to try to bring about coherence in interest rates, labor mobility, and even our regional disparities. A European currency will surely come into being. After that, the difficulties I have described will either cause it to implode or bring about strengthened common political institutions.

For anyone following European developments in the entire post war period, one can only hope that this project reaches the fruition its founders envision. And its failure would create an extraordinary crisis, since it is the only political project to which any really creative thought is being given in so many European capitals. But if it succeeds, the relationship between Europe and the United States in the political field would become a serious challenge. The conventional wisdom of the entire post-war period has been that the two pillars, Europe and the United States, can only benefit from the strengthening of each other and that cooperation will emerge automatically from this accumulation of power-as if transatlantic relations were a kind of joint stock company in which the various members vote in proportion to their shares in it. But in the real world, it is not going to happen this way. In the real world, if the common currency succeeds, there will be years during which the inevitable political companion organizations are elaborated.

When the United States had the dominant role in security and when there was only one visible international challenge, it made some sense to try to achieve European identity by trying to wrest it from the United States. In the current period, nothing is simpler than to convince Americans that they have no special interest in Europe. The tasks which Europe has before it now are so manifold that they don't have to be granted by the United States-such issues as the participation of the Central European countries in the European Union. There is no need for the United States to take a position or to involve itself. Whether Europe should follow a multiple geometry or be more closely integrated, it cannot and should not be affected significantly by American pronouncements. What we ultimately need is a dialogue between what has emerged in Europe and what is beginning to emerge in America similar to the one that had characterized the post-War period.

I served in government during the tragic period of the Vietnam War, in which America had engaged itself in a distant enterprise for what I believe were the noblest motives. But we did not understand the limitations of our

6

reach. We applied our principles to regions we had never studied on the basis of the belief that they had universal applicability. Having thus launched ourselves on the basis of universal principles, we found that universality is a dangerous claim. Those of us who wanted to extricate on the basis of the practicality of the situation were assaulted by others who wanted to turn extrication into a great moral issue on the failings of America.

Now, once again, there are many who believe that all we need to do is to restore the pristine innocence of our early period, when we were protected by two great oceans. But economics was not yet global then, and we could choose our involvements. Therefore, our political parties are now very split. In my day, difficult as it was, there was a coherent body of opinion which transcended parties and usually was able to achieve a great deal of support--whether the administration was Democrat or Republican. Today, every party is split into a radical and an extreme conservative wing. Neither administration nor opposition has found a clear intellectual foothold. Each is looking for some issue to turn foreign policy into an aspect of domestic politics.

What we must do is try to reestablish some national consensus. We must not be embarrassed to ask what our national interest is. Without it, we have no yardsticks. Of course, our national interests included the preservation of not just our well-being, but also of our values. All of life, including foreign policy, involves a balancing of various considerations, and it is important to have some convictions about one's society and its role in the world. The President and the Secretary of State get to deal with the 50.1% against the 49.9% cases, and they resolve them on the basis of assessments that cannot be proven at the time a decision is taken. Therefore statesmanship depends, in an ultimate sense, on moral convictions. A people can proclaim ultimate goals; a statesman, must achieve his goal gradually and in(?) stages. Every step is imperfect in relations to the absolute value; it is history that supplies the absolute. That is the dilemma. And that is what we now face. And therein will reside the ultimate test of leadership.

- Henry A. Kissinger

7

2

2

28

3

becomes overwhelming. Protectionism may well prove
ineffective in the long term but, for better or worse,
political leaders respond to more short-term cycles.

5

6

oriented policy. Third, when communications are
instantaneous, economics global, and politics democratic, it
is probably not possible to conduct the same kind of cold-
blooded policy in every part of the world simultaneously.
Fourth, international stability is increasingly affected by
splinter groups with no interest in the global equilibrium
at all, usually ethnic groupings which, in fact, are using
the major powers' desire for global order to achieve their
own national objectives.

8

7

A larger vision is especially needed for European-
American relations. An extraordinary phenomenon is
occurring in Europe: the adoption of a common currency by a
group of nations that has not brought about, as yet, the
accompanying institutions by which this common currency is
going to operate; and the concept of a free-standing Central
Bank not related to any political organization. The common
monetary policy is going to try to bring about coherence in
interest rates, labor mobility, and even our regional
disparities. A European currency will surely come into
being. After that, the difficulties I have described will
either cause it to implode or bring about strengthened
common political institutions.

8

9

I served in government during the tragic period of the Vietnam War, in which America had engaged itself in a distant enterprise for what I believe were the noblest motives. But we did not understand the limitations of our reach. We applied our principles to regions we had never studied on the basis of the belief that they had universal applicability. Having thus launched ourselves on the basis of universal principles, we found that universality is a dangerous claim. Those of us who wanted to extricate on the basis of the practicality of the situation were assaulted by others who wanted to turn extrication into a great moral issue on the failings of America.

10

- Henry A. Kissinger -

11

10/7/98 - Draft 3

2

4

advocates of near-permanent austerity on the basis of
directives imposed from abroad. The temptation to seek to
reverse--or at least to buffer--austerity by political means
becomes overwhelming. Protectionism may well prove
ineffective in the long term but, for better or worse,
political leaders respond to more short-term cycles.

7

8

9

10

11

There are, however, huge, probably insurmountable, obstacles to such a strategy. The first is that, whereas Britain conducted its policy primarily in Europe, we would have to conduct it globally. Secondly, Britain had a leadership group that had trained itself in the conduct of public policy. America has neither such a leadership group nor any similar tradition of hard-headed, purely interest-oriented policy. Third, when communications are instantaneous, economics global, and politics democratic, it is probably not possible to conduct the same kind of cold-blooded policy in every part of the world simultaneously. Fourth, international stability is increasingly affected by splinter groups with no interest in the global equilibrium at all, usually ethnic groupings which, in fact, are using the major powers' desire for global order to achieve their own national objectives.

13

15

16

either cause it to impede or bring about strengthened
common political institutions.

17

18

19

20

21

22

10/6/98 - Draft 2

Asia was just emerging as a significant factor. And major
achievements are to America's credit: the recovery of
Japan; the reintegration of defeated enemies into the
community of nations; the global nature of the world
economy, among others.

America, abandoning isolation, found its dominant
position a heady experience. But the world, and with it
is now in America, finds itself in dramatically different

circumstances in the post-WW II period. And America does so on the basis of historical experiences which are in fact unique. Populated almost exclusively by immigrants, the United States is the only country that has never experienced a powerful neighbor along its borders, and therefore has never had to face the security issues confronted by less favored nations. The Americans' perception of foreign policy was always one of nearly limitless choice and, above all, of having the ability to participate or to withdraw from international engagements at will. Every American initiative of the postwar period was presented to the American public as having a terminal date, after which America could again withdraw, allowing the postulated underlying harmonious pattern of the world to reassert itself.

2

foreign policy knows no plateaus; even the greatest achievement--perhaps especially the greatest achievement-- leads to a decline if it is not the building block of a new advance. Above all, the patterns of the Cold War are no longer applicable to the world ahead of us.

Now for the first time in its history, America will be obliged to conduct a global foreign policy in the absence of an overwhelming ideological or strategic enemy, and in a world from which it can neither withdraw nor dominate.

Thus, the classic maxim of American foreign policy--the invocation of an overwhelming crisis transmuted into large-scale enterprises--does not apply.

Either they lived in ignorance of each other--in the same
sense that, in the 16th century, China and Europe in effect
lived in different worlds--or they had no significant
capacity to interact with each other. In the 18th and 19th
centuries, world history, indeed, until the middle of the
20th century, was dominated from Europe and then from the
north Atlantic. Today, every part of the world participates
in international affairs. Major powers are developing in
different regions and this presents new challenges. One way
does now define a major power under present conditions? And
secondly, how do we manage their interaction? Third, for the
first time in history, events can be observed as they occur.
Communications straddle the globe in real time. Fourth, the
world is linked integrally, not only by communications, but
by economics. A few years ago, an obscure bank clerk in
1900 hedge funds was believed to have the
capacity to undermine the entire financial

ξ

Singapore brought down one of the oldest banks in England
Federal Reserve Bank of St. Louis
and nearly sparked an international financial crisis.

Indeed, for any student of economic affairs, there are two nightmares: that the systems break down because of different conceptions by different parts of the system. But even worse, that everybody comes to the same conclusion simultaneously and rushes to the same side of the boat and capsizes it.

This globalization is one of the fundamental challenges to American leadership. Free-market capitalism remains the most effective instrument for economic growth and for raising the standard of living of most people. But just as the reckless laissez-faire capitalism of the 19th century spawned Marxism, so the indiscriminate globalism of the 1990s may generate a worldwide assault on the very concept of the state.

[Y]

7

8

But while post-Cold War foreign policy reflects some
traditional patterns, there are important differences as
well. For one thing, modern economics has changed the
nature of incentives. Historically, nations could affect

changes in the balance of power only by conquest. In
科技革命使社会变革,社会变革在一定程度上改变
technology permits quantum changes in a society.
 changes entirely within its own territory. It
conquest could augment a nation's power like the acquisition
of nuclear weapons or the mastering of modern information
technology. Thus the paradox: proliferation is a permanent
temptation and a permanent danger while, at the same time,
the cost of war, at least among major powers, has risen to
near prohibitive levels.

11

technology permits quantum changes in a social

11

changes in the balance of power. In our day, technology permits quantum changes in a society's power by changes entirely within its own territory. No conceivable conquest could augment a nation's power like the acquisition of nuclear weapons or the mastering of modern information technology. Thus the paradox: proliferation is a permanent temptation and a permanent danger while, at the same time, the cost of war, at least among major powers, has risen to near prohibitive levels.

11

13

have to conduct it globally. Secondly, Britain had a
leadership group that had trained itself in the conduct of
public policy. America has neither such a leadership group
nor any similar tradition of hard-headed, purely interest-
oriented policy. Third, when communications are
instantaneous, economics global, and politics democratic, it
is probably not possible to conduct the same kind of cold-
blooded policy in every part of the world simultaneously.

own ~~parochial~~ objectives.

For the United States to practice its version of
"splendid isolation" on a global basis under these

14

circumstances would exhaust us physically and
~~psychologically.~~ A nation founded by people who have
traditionally believed in the universal applicability of
their values cannot simply abandon the Wilsonianism that had
dominated 20th century American foreign policy.

15

American power in general. Just as many who used the outcome of America's role in World War I as rationale for the nonintervention policy of the 1920s and 1930s, current American policy debates--whether in the Balkans or the Caribbean, in Africa or Asia--can best be understood in the context of a generation that views the world through a lens largely provided by a local and unsuccessful conflict. They do so by abdicating a foreign policy role by fleeing into either extreme multilateralism or extreme nationalism.

17

18

Two approaches to US-European relations dominated the
Cold War period: the Gaullist approach, for which reflected
the necessities of a country which had gone through
tremendous difficulties in the War and in the colonial
period and which thus needed to reaffirm its identity. The
second approach was the British, which reflected a nation

19

more secure in its identity and hence willing to define
cooperation as the merging of mutual interests.

21

What we must do is try to reestablish some national
consensus. We must not be embarrassed to ask what our
national interest is. Without it, we have no yardsticks.
Of course, our national interests included the preservation
of not just our well-being, but also of our values. All of
life, including foreign policy, involves a balancing of
various considerations, and it is important to have some
convictions about one's society and its role in the world.
The President and the Secretary of State get to deal with
the 50.1 against the 49.9 cases, and they resolve them on
the basis of assessments that cannot be proven at the time a
decision is taken. Therefore statesmanship depends, in an
ultimate sense, on moral convictions. A people can proclaim
ultimate goals; a statesman, must achieve his goal gradually
and in(?) stages. Every step is imperfect in relations to

23

10/6/98 - Draft 2

In the period in which Helmut Schmidt and I each
started our political apprenticeship--in the Fifties--the
necessity for American leadership was axiomatic. There was
an all-encompassing threat: much of Europe was suffering
the effects of war and various forms of foreign occupation.
Asia was just emerging as a significant factor. And major
achievements are to America's credit: the recovery of
Japan; the reintegration of defeated enemies into the
community of nations; the global nature of the world
economy, among others.

America, abandoning isolation, found its dominant
position a heady experience. But the world, and with it
America, finds itself in dramatically different

circumstances from those of the Cold War period. And

reassert itself.

Now for the first time in its history, America will be
obliged to conduct a global foreign policy in the absence of
an overwhelming ideological or strategic enemy, and in a
world from which it can neither withdraw nor dominate.
Thus, the classic maxim of American foreign policy--the
invocation of an overwhelming crisis transmuted into large-
scale enterprises--does not apply.

Either they lived in ignorance of each other--in the same
sense that, in the 16th century, China and Europe in effect
lived in different worlds--or they had no significant
capacity to interact with each other. In the 18th and 19th
centuries, world history, indeed, until the middle of the
20th century, was dominated from Europe and then from the
north Atlantic. Today, every part of the world participates
in international affairs. Major powers are developing in
different regions and this presents new challenges. One-how
does now define a major power under present conditions? And
secondly-how do we manage their interaction? Third-for the
first time in history, events can be observed as they occur.

Communications straddle the globe in real time. Fourth--the
world is linked integrally, not only by communications, but
by economics. A few years ago, an obscure bank clerk in
2500 hedge funds was believed to have the
capacity to undermine the entire financial

ξ

System & sparked the intervention of the
Singapore brought down one of the oldest banks in England
and nearly sparked an international financial crisis.

8

But while post-Cold War foreign policy reflects some
traditional patterns, there are important differences as
well. For one thing, modern economics has changed the
nature of incentives. Historically, nations could effect

10

changes in the balance only by conquest. In our day,
technology permits quantum changes in a society's power by
changes entirely within its own territory. No conceivable
conquest could augment a nation's power like the acquisition
of nuclear weapons or the mastering of modern information
technology. Thus the paradox: proliferation is a permanent
temptation and a permanent danger while, at the same time,
the cost of war, at least among major powers, has risen to
near prohibitive levels.

11

12

13

have to conduct it globally. Secondly, Britain had a
leadership group that had trained itself in the conduct of
public policy. America has neither such a leadership group
nor any similar tradition of hard-headed, purely interest-
oriented policy. Third, when communications are
instantaneous, economics global, and politics democratic, it
is probably not possible to conduct the same kind of cold-
blooded policy in every part of the world simultaneously.
Fourth, international stability is increasingly affected by
splinter groups with no interest in the global equilibrium
at all, usually ethnic groupings which, in fact, are using
the major powers' desire for global order to achieve their
own parochial objectives.

14

circumstances would exhaust us physically and
psychologically. A nation founded by people who have
traditionally believed in the universal applicability of
their values cannot simply abandon the Wilsonianism that had
dominated 20th century American foreign policy.

16

17

18

19

20

21

22

23

2

Bertolt Brecht.

How many historical examples, if any, can be recalled
where a nation's leaders stated goals that, some forty years
later, were practically all achieved? That is the position
in which America finds itself at the end of the Cold War.
But what Americans have not sufficiently understood is that
foreign policy knows no plateaus; even the greatest
achievement--perhaps especially the greatest achievement--
leads to a decline if it is not the building block of a new
advance. Those all, the patterns of the Cold War
are no longer applicable to the world ahead of us.

3

20th century, was dominated from Europe and then from the
north Atlantic. Today, every part of the world participates
in international affairs. Major powers are developing in
different regions and this presents new challenges. One-how
does now define a major power under present conditions? And
secondly-how do we manage their interaction? Third-for the
first time in history, events can be observed as they occur.
Communications straddle the globe in real time. Fourth--the
world is linked integrally, not only by communications, but
by economics. A few years ago, an obscure bank clerk in
Singapore brought down one of the oldest banks in England
and nearly sparked an international financial crisis.
Indeed, for any student of economic affairs, there are two
nightmares: One--that the systems break down because of
different conceptions by different parts of the system. But
even worse, that everybody comes to the same conclusion

5

But the extreme version of globalism neglects the
inevitable mismatch between the world's political and
economic organization. Unlike economics, politics divides
the world into national units. And while political leaders
may accept a certain degree of suffering for the sake of
stabilizing their economies, they cannot survive as
advocates of near-permanent austerity on the basis of
directives imposed from abroad. The temptation to seek to
reverse--or at least to buffer--austerity by political means
becomes overwhelming. Protectionism may well prove
ineffective in the long term but, for better or worse,
political leaders respond to more short-term cycles.