The limits of economic determinism in foreign policy analysis

Recently, I heard a talk by David Stockman. At age 77, Stockman looks like an old man. But once he starts talking, he begins to resemble the boy wonder who took Washington by such a storm in the early years of the Reagan administration.

Stockman spoke insightfully about economics, finance, and budgets. His knowledge and understanding of these matters remain impressive. However, when he turned to foreign policy/national security, his analysis seemed problematic.

Stockman focused on “endless wars” and the two “war parties” that control Washington. But the U.S. isn’t currently fighting any war. Moreover, the number of annual deaths of U.S. service members due to hostile action hasn’t exceeded 100 since 2012 and hasn’t exceeded 500 since 2007.

On the other hand, the U.S. spends enormous amounts of money on the military and substantial amounts helping allies fight wars. Maybe that’s where Stockman, the budget hawk, was coming from.

As to the major war effort the U.S. currently helps fund, Stockman ridiculed the Russia’s attempt to conquer Ukraine. He mocked the notion that Russia, with its weak economy and modest GDP, poses a real threat.

During the Q&A, I considered asking Stockman what ISIS’s GDP was when it conquered substantial chunks of Syria and Iraq and established a “caliphate” said by some to be the size of Great Britain.

That caliphate fell, of course. But it didn’t fall for lack of GDP. It fell because our two “war parties” — first the Democrats, then the Republicans — waged war against it.

The point is that although a nation’s economic strength certainly is relevant during a war, it’s far from be-all-and-end-all that Stockman seemed to suppose. A country with a relatively small GDP can conquer other countries (1) if the aggressor has a vast amount of manpower it can conscript, (2) if it has a formidable arsenal, including weapons supplied by allies, and (3) if the nation under attack run low on weapons and ammunition.

Russia meets the first two conditions. Ukraine will eventually meet the third, if the U.S. stops supplying it.

Although Marxism has been discredited, there’s still much to be said for economic determinism. Up to a point. I thought Stockman went past that point.

Now let’s turn to China. Its economy is struggling. The ascendency of an ideologically-driven communist regime that has turned away from the less statist policies of its predecessor is a significant drag on the Chinese economy, and will likely remain so.

Thus, it’s tempting to believe that we shouldn’t be very concerned — “inordinately fearful,” to use Jimmy Carter’s phrase — about the threat China poses to America and its interest.

There’s insight in this belief, but it goes too far. Yes, a China weakened by its adherence to failed economic principles and policies will pose less of a long-run threat to the U.S. and our interests (although we, too, are likely to be weakened by adherence to bad economic policies).

But in the short term, let’s say the next decade, Xi’s China might well pose a greater threat than would a more pragmatic regime. Almost certainly, it will pose a threat that’s substantial.

The Taiwanese should take no comfort from China’s economic woes. China remains capable of attacking Taiwan or cutting it off from the rest of the world. And an increasingly desperate China seems at least as likely as a more prosperous one to undertake such adventurism.

Indeed, if Xi feels he’s losing his grip due to economic problems, he might perceive war as the best way to rally the population and tighten his grip. And if the U.S. abandons Ukraine and it falls to Russia, Xi might be all the more inclined to take military action against Taiwan.

Now, there’s a good counter-example with which to rebut the speculation I’ve just presented. In the 1980s, the Soviet Union was in economic decline. It did not respond with military adventurism. To the contrary, it countenanced the disintegration of its mini-empire in Eastern Europe.

This happy course of events has caused some historians to view Ronald Reagan as altogether dispensable to the fall of the Soviet Union. The claim is that the Soviet Union’s demise was inevitable and Reagan was just lucky to have been president when the chickens came home to roost.

This view overlooks much. It overlooks the likelihood that the pressure Reagan applied hastened the fall of the Soviet Union. It also overlooks the way Reagan, and then Bush, managed that fall.

Maybe the fall was inevitable (though I dislike that word). But it wasn’t inevitable that the fall would occur as soon as it did. Nor was it inevitable that the fall would be so non-disruptive internationally (though luck factors in here; Reagan and Bush were lucky that Gorbachev was in power to preside over the fall).

But the Soviet counter-example only goes so far. Let’s not forget that in the 1970s, an economically weak Soviet Union did resort to military adventurism in Afghanistan. Chinese weakness could have a similar effect in the next ten year.

It’s true that Soviet adventurism in Afghanistan only made things worse for the Soviets. It might very well have hastened the fall.

But Chinese adventurism in the Pacific might well succeed. In any case, the cost to America of opposing it (and that’s the only way the adventurism might fail) would be enormous — nothing like the resources we gave to the Afghan resistance (though part of that resistance movement came back to haunt us on 9/11).

What conclusions do I reach about China from the foregoing discussion? First, I’m glad, on balance, that the Chinese economy is faltering, though I regret what I take to be the cause of the faltering — the ascendency of a latter-day Mao and the ensuing loss of liberty in China. But second, I don’t see China’s economic woes as making China less of a threat to U.S. security interests in the short term.

Third, and more generally, one cannot understand geo-politics and national security issues without understanding the economic forces at play. But fourth, there are limits to what can be understood in purely, or even largely, economic terms.