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July 16, 2002

Bush Foreign Policy and the Failing Stock Market


by Jon Basil Utley

Unending war, sacrificing free trade, breaking with Europe and telling allies to shove it, spending his time on planning a new war, neglecting domestic issues, making America the enemy of the whole Moslem world, disaffecting his Republican base, fumbling the battle against terrorism, and more. No wonder the stock market is afraid. World prosperity is necessary for American prosperity and history teaches that wars always drive the market lower.

A former Reaganaut warns, "The way things are going, it will soon be the United States against the world." That comment, by a top political leader in Kuala Lumpur, was just one of hundreds of expressions of a new and disturbing alienation from America that I heard during a recent swing through 14 Asian, European and Latin American capitals.

What a contrast to the supportive attitudes abroad immediately after Sept. 11! Then, the sometimes anti-American French journal Le Monde captured the world's sentiment with a headline proclaiming: "We are all Americans." Ten months later, sympathy for the victims of the terror attacks remains. However, the American image is increasingly perceived as ugly, and support abroad for U.S. policies is plummeting.

Bush's speech at West Point that threatened dozens of nations with American bombing attacks totally ignores what such threats mean to world trade. This threat could make American civilians overseas counter targets of terrorists all over the world. Already the jokes are beginning about President Bush appalling ignorance of the world. He allegedly told Tony Blair that he now knew the reason the French economy did not do better: the French language lacks a word for "entrepreneur."

Moreover, columnist Paul Craig Roberts warns, "It is absurd for the Bush Administration to spend so much time on Afghanistan, Palestine and Iraq when its position in the world rests much more on its stock market than on its armaments….Today, Washington is focused on wasting resources on wars…."

New enemies are being created. Foreign Affairs (July-August 2002 – "Is Southeast Asia the Second Front?" by John Gershman) warns that a military approach to the region's problems could weaken local democracies and turn neutral forces into new enemies. This is further reinforced by Washington's foreign policy, which appears to parallel the interests of the Arms Lobby and Christian Right Armageddonites. Meanwhile China is on notice that it may be our next target under the Wolfowitz Doctrine. The Defense Department Deputy Secretary, who now appears as the main spokesman for Bush foreign policy, argues that no other major regional power may be permitted to arise. Thus, we are on the verge of making China into an enemy as well as much of the Muslim world.

Fortune Magazine warns that the market is nervous about a Bush attack on Iraq, specifically because there is no rational thinking or discussion in Washington about the consequences post-"victory". For Bush's worldly advisor Dick Cheney that is nothing new. Twelve years ago, before the first attack on Iraq he was asked, "What will we do after we win?" His answer – "Well, I don't know, we haven't thought much about that." Well the stock market is thinking about it. The unknowns include possible destruction of oil production, further alienation of other Muslims by killing tens of thousands more Iraqis, possible overthrow of the Saudi government and other chaos.

The greatest threat is the collapsing consensus in Washington for free trade. Bush steel tariffs and his complementary caving in to new agricultural subsidies are serious threats against international trade. These policies weaken the pro free trade constituency. In response to these policies, Europeans have threatened reprisal tariffs. Supply sider Jude Wanniski made his first mark as a young economist researching how the stock market crash of 1929 came about the day after the coalition to block the Smoot Hawley tariff fell apart in Congress. Interestingly, like today, in 1929 the newspapers failed at first to recognize that the crash was for foreign policy reasons.

The President, like his father before him, is so preoccupied with war and foreign interventions that he and his top staff are neglecting vital domestic policy battles, and scaring the American public in the process. Fortune Magazine foresaw that threat last October:

"A Fortress America mentality in security matters could spill into economic ones...a short hop from nationalism to protectionism...all sorts of parochial interests in the U.S. are much more likely to get the upper hand."

Bush's call for a Homeland Defense reorganization of tens of thousands of government workers may bring chaos to the functioning of many government bureaus; a fear of many businesses which depend upon smooth functioning, e.g. customs procedures. This impending dilemma is analyzed in the Washington Post.

The Bush White House is noted for its "go it alone" foreign policy with no considerations for our Allies on issues such as trade, attacking Iraq, the World Court and so on. Powell, the only Administration counter weight, has caved in to the Neo-conservative "empire hawks." World markets have responded by selling off dollars and buying Euros, another major reason for declining stocks. Every time Bush makes a speech on the stock market, stocks drop further. Monday's big crash was the final warning. War is bad for the stock market and unending war is worse. But making war can be exciting and almost addictive for those who don't suffer from it. Bush is so keen to launch a new war (on Iraq) that he ignores what is vital here at home. Markets can recover from an Enron or a WorldCom, but not from catastrophic foreign policies.


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  • Jon Basil Utley is associate publisher of The American Conservative and Robert A. Taft Fellow at the Ludwig von Mises Institute. A former correspondent for Knight Ridder in South America, Utley has written for the Harvard Business Review on foreign nationalism and was for 17 years a commentator on the Voice of America. He is director of Americans Against World Empire.

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