In nine weeks, Joe Biden will be the president of the United States.

Edward Lotterman

There will be much to do in terms of re-establishing security, diplomatic and economic relationships with the rest of the world. This all would be much on the plate of anyone replacing President Donald Trump, but Democrat Biden faces a Republican Senate focused on ensuring that any Democratic president will fail. So any changes in our international relationships requiring ratification of a treaty will be difficult.

Yet it is vital that a coherent order be reestablished.

Moreover, we all must realize that while a Biden administration may seek to restore existing institutions such as the World Trade Organization and NATO, you can’t glue Humpty Dumpty back together perfectly. This isn’t all bad. These two organizations, and others, needed restructuring from their original post-World War II design even before Trump tried to sweep them aside. The world has changed greatly since the era in which most modern institutions were established.

Africa, Asia and Latin America all are larger economies now, with greater weight and role in the world. The USSR broke up 30 years ago, but Vladimir Putin’s Russia now has the resolve, public support and military power to claim a place on the world stage. And Putin is determined not only to make Russia a major player in world affairs, but to make the United States pay for what he rightly perceives as having gone back on promises that then-President George H.W. Bush made at the time the USSR split apart.

The European Union emerged and grew, but now faces serious challenges, especially for the subset that adopted the common currency.

The 2007-2010 financial debacle not only exposed serious flaws in our own domestic capital markets and banking systems, but also ones permeating the entire global economy. These flaws have not been fixed, domestically nor internationally. Like a rusted WWII bomb in a German neighborhood, they might explode at any future disturbance.

Americans also need to understand that there are key correlations between our diplomatic and military relations with other countries and our own domestic economy. These links include our federal government finances, the value of the dollar against other currencies, imports, exports, the U.S. share of world financial markets and more.

So, deciding to pursue any particular defense or foreign relations policies also means accepting the impacts those policies will have, not only on our international trade and financial flows, but on U.S. domestic output, employment and prices.

We also need to understand that U.S. economic and military strength relative to other major nations has changed.

China is a much larger factor than it was at the end of WWII or even at the start of the new millennium. Its 2000 economy was only a 12th of what it is now. And dreams that China would follow the model of Taiwan or South Korea in slowly moving toward democracy as incomes and education grew, turned out to be delusions. China is moving back to the centralized, Communist Party dictatorship that it was before 1978, albeit with a state-capitalistic bent toward dominating global markets. Premier Xi Jinping has more power there than anyone since Mao Tse Tung, and more power than Mao had globally, and he is prepared to use it.

The Chinese see this as their rightful time to dominate world affairs, to repay the centuries of humiliations they suffered from the west during its weakest centuries. They are moving aggressively to expand their influence in Africa, Latin America and most areas of Asia. And they are fully prepared to show their military strength if threatened.

The United States military is large and powerful, but also highly dependent on two technologies, the main battle tank and the aircraft carrier, that are a century-old and on their way out. Nuclear mutually-assured-destruction still is the fallback for our defense, but is even more complicated than before, especially because the outgoing administration seemed hell-bent on throwing away the forward placement of U.S. forces in allied nations that served as an immediate deterrent against aggression.

We must understand that as we withdraw military forces and repudiate long-standing agreements with other democracies and friendly regional powers, we create vacuums into which the Chinese are eager to step. Our withdrawal from the World Health Organization or WTO will certainly make China the dominant power in their operations.

Thus, before we reject, as now much-despised “internationalism,” the multi-lateral, internationally engaged posture both U.S. political parties have supported through the 11 presidencies prior to 2017, we need to think about where a return to isolationism will leave us, especially our economy.

The approach that our nation long followed was forged by lessons learned from both world wars, that a lack of alliances between countries with similar interests and values not only left each individual nation more vulnerable, it made for a whole world more vulnerable to war. Lack of commonly agreed-on rules for international trade and finance meant that economic crises in one major country could spread to all others in a matter of months.

Pushed home by the Cold War fear of Josef Stalin’s USSR, western democracies agreed on coherent approaches to defense and to economic relations. The USSR’s military capabilities and intent proved overblown after its collapse, but now we are erring in the other direction of dismissing the economic and military power of totalitarian power as irrelevant. It is not.

All this adjustment must now take place in the middle of the worst health crisis the world has had in a century. It must begin as the United States and many European nations are more deeply and bitterly divided on politics and culture than at any time since 1940. And where many leaders, feigning “populism,” appear in fact to be at war with their own people.

Much more must be said. But pondering these realities is a good place to start.

St. Paul economist and writer Edward Lotterman can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

Original Link:

https://www.twincities.com/2020/11/15/real-world-economics-biden-now-steps-into-a-global-vacuum/

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