Thursday , November 14 2019
Home / EconLog Library / Credibility, predictability, consistency

Credibility, predictability, consistency

Summary:
The title of this post describes some of the characteristics of a sound monetary regime. Does the same apply to foreign policy? During the first 4 decades of the 20th century, the US foreign policy lacked consistency. At times we intervened in European affairs, and at times we were isolationist. One can make good arguments for either approach, but the lack of consistency was likely destabilizing. We were interventionist enough to help defeat Germany in WWI, but not involved enough to set up a peaceful balance of power after the war. In 1990, the Bush administration told Saddam Hussein that his border dispute with Kuwait was none of our business. After the Iraqi invasion, we set out to free Kuwait and defeat the Iraqi war machine. I’m not sure what level of US

Topics:
Scott Sumner considers the following as important: , , ,

This could be interesting, too:

David Henderson writes The Journal’s Muddled Reasoning on Illegal Drugs

David Henderson writes The Central Planning Myth

Thomas Firey writes Midnight Foreign Policy?

Scott Sumner writes Should presidents make policy?

The title of this post describes some of the characteristics of a sound monetary regime. Does the same apply to foreign policy?

During the first 4 decades of the 20th century, the US foreign policy lacked consistency. At times we intervened in European affairs, and at times we were isolationist. One can make good arguments for either approach, but the lack of consistency was likely destabilizing. We were interventionist enough to help defeat Germany in WWI, but not involved enough to set up a peaceful balance of power after the war.

In 1990, the Bush administration told Saddam Hussein that his border dispute with Kuwait was none of our business. After the Iraqi invasion, we set out to free Kuwait and defeat the Iraqi war machine. I’m not sure what level of US involvement in the Middle East is appropriate, but it seems likely that the indecisive policy that was actually followed was unhelpful. The optimal policy was likely something either consistently and predictably interventionist or consistently and predictably noninterventionist.

Foreign policy experts will argue that the sort of rules-based approach that I favor for monetary policy is not appropriate for foreign policy. A high degree of discretion is required because the world is so complex. We need to keep our intentions unclear to keep the bad guys guessing.

I’m not so sure. The parts of the world where our intentions are clear (such as the mutual defense pacts with NATO, Japan, Australia, etc.) have been notably peaceful since WWII. The areas where our intentions have been ambiguous (the Middle East, Ukraine, Vietnam, etc.) have been less stable.   (Admittedly, correlation doesn’t prove causation.)

In addition, those who advocate a discretionary regime have to account for the possibility that future decisions will not be made by a wise “philosopher king” that has immersed him or herself in studying the nuances of world trouble spots.

Consider the recent decision-making on Syria:

One day he was inviting Mr. Erdogan to visit the White House; the next he was threatening to “totally destroy and obliterate” Turkey’s economy if it crossed a line that he never defined.

Mr. Erdogan just kept going.

Mr. Trump’s error, some aides concede in off-the-record conversations, was entering the Oct. 6 call underprepared, and then failing to spell out for Mr. Erdogan the potential consequences — from economic sanctions to a dimunition of Turkey’s alliance with the United States and its standing in NATO. He has since threatened both, retroactively. But it is not clear Mr. Erdogan believes either is a real risk.

The term ‘retroactively’ caught my eye.  There are lots of good arguments on both sides of the new Trump policy, but I can’t see any good argument for making threats “retroactively”.

The NYT describes Trump’s approach as following his “gut”.  Here’s one consequence of the poor planning:

And over the weekend, State and Energy Department officials were quietly reviewing plans for evacuating roughly 50 tactical nuclear weapons that the United States had long stored, under American control, at Incirlik Air Base in Turkey, about 250 miles from the Syrian border, according to two American officials.

Those weapons, one senior official said, were now essentially Erdogan’s hostages. To fly them out of Incirlik would be to mark the de facto end of the Turkish-American alliance. To keep them there, though, is to perpetuate a nuclear vulnerability that should have been eliminated years ago.

“I think this is a first — a country with U.S. nuclear weapons stationed in it literally firing artillery at US forces,” Jeffrey Lewis of the James Martin Center for Nonproliferation Studies wrote last week.

For his part, Mr. Erdogan claims nuclear ambitions of his own: Only a month ago, speaking to supporters, he said, he said he “cannot accept” rules that keep Turkey from possessing nuclear weapons of its own.

File under:  “Eh, what could go wrong?”

Right now the US is heavily involved all over the world.  It’s quite possible (I’d say likely) that we’d be better off with a much smaller footprint.  However, we need to be very careful how we pull back from our commitments, as an unstable and unpredictable foreign policy can itself create global strife.  More importantly, we need to think much harder about making future commitments that we won’t be willing to keep.

PS.  In the past, Trump has had favorable views of Erdogan.  Both are elected leaders with nationalist policy preferences, authoritarian instincts, and a habit of pressuring the central bank to lower interest rates.  Both are distrusted by big city elites.  I’ve often argued that nationalism has an internal contradiction; if all countries become nationalistic, they will end up clashing with each other.  No such contradiction exists for neoliberalism.

Credibility, predictability, consistency

Scott Sumner
Scott B. Sumner is Research Fellow at the Independent Institute, the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University and an economist who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment". In May 2012, Chicago Fed President Charles L. Evans became the first sitting member of the Federal Open Market Committee (FOMC) to endorse the idea.

Leave a Reply

Your email address will not be published. Required fields are marked *