Radnor Inc

Radnor Geopolitical Report

Washington, November 2008



Strategic geopolitical intelligence for decision-makers





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Ken Feltman is Chairman of Radnor Inc. He is past-president of the International Association of Political Consultants and the American League of Lobbyists.







Is Uncle Sam ready?

by Ken Feltman

I know my country has not perfected itself. At times, we've struggled to keep the promise of liberty and equality for all of our people. We've made our share of mistakes, and there are times when our actions around the world have not lived up to our best intentions.

- Barack Obama

Last week, in the wake of the U.S. election, I attended a meeting of political consultants from all around the world. I have been a member of this group for two decades and consider many of my fellow members to be among my closest friends. The key officials from the Obama, McCain and Clinton campaigns shared the podium and mingled with those who wanted a personal word. These were friendly colleagues who respect each other and feel an obligation to respond to the inquiries of the young members who are just beginning to make their way in a demanding field.

Republicans did not encounter gloating from our Democratic colleagues. A little gentle teasing was the extent of it. Mostly, we shared ideas on new technologies and new realities. Our founders - one formerly advised French President de Gaulle and the other once advised U.S. President Kennedy - were gracious and humorous in accepting recognition and honors. They stressed not what they have given to the organization, but what they have received.

That is the mark of a good organization: No matter how much you give, you get more back. Through the years I have learned much from my fellow members. This year I learned that many of them believe that the election of Barack Obama gives the whole world a new chance. People everywhere have a stake in the results of U.S. elections. At this time in history, the United States is the most consequential country in the world, for better or for worse. What happens in the U.S. does not stay here. It ripples around the world.

"Americans...still believe in an America where anything's possible - they just don't think their leaders do."

- Barack Obama

The economic crisis that is spreading across the globe was no longer viewed as merely an American problem. The Europeans, especially, were more subdued than just a few weeks ago when European leaders and media blamed the U.S. and predicted that Europe or their particular country would be spared the collapse. Now, we all know that no country will be spared. The Russians were especially sobered and realistic. They understand that if conditions continue to deteriorate, their economy is likely to crumble while other major economies will suffer but survive, with the U.S. likely to be the last economy standing.

It seems unfair. The country that is so mindlessly careless and debt-addicted may have the best chance to come out on top. Certainly, the top will be far lower. But it will be the top.

The "deeper pockets" theory seems to apply: Because the U.S. has far larger financial resources, the U.S. is in a better position. The U.S. resources are not strictly monetary. Some are procedural or are based upon treaties, precedents and customs. For example, the summer rumblings out of Moscow about switching from the dollar and trading oil in rubles or Euro were early warnings that the Russians realized their peril.

With an extraction-based economy and oil prices plummeting, Russia is hurting and has precious little economic power to backstop the sliding Russian stock market and ruble. So long as oil trades in dollars, the U.S. has an advantage, even today as the ruble falls against the dollar.

"We need somebody who's got the heart, the empathy, to recognize what it's like to be a young teenage mom, the empathy to understand what it's like to be poor or African-American or gay or disabled or old - and that's the criterion by which I'll be selecting my judges."

- Barack Obama

China, too, is in critical condition. The Chinese gross domestic product, compared with the U.S., is not large enough to withstand the huge drain caused as shipping containers sit empty in port. Not so long ago, they sped across the Pacific Ocean filled with products that Americans eagerly consumed. But the American diet changed so quickly that China has announced a "restructuring" that is far larger as a percentage of GDP than anything announced or likely in the U.S. or Europe.

For its part, Europe has an organizational problem. As Ireland is realizing, when the EU economies spiral downward, it is difficult for any single country to take extraordinary steps to help itself. An EU-wide solution reduces the maneuvering room for each individual country. In fact, a European solution, directed by Brussels, almost guarantees that the formerly booming economies will cool more quickly and fall farther than their neighbors.

Into this crisis comes a man who has never managed such a calamity before. Barack Obama is not alone, of course, because no one has managed anything like this meltdown. But ultimately the world will look to Obama for solutions. The world will have to wait in part because Obama is not attending the summit on the global finance crisis that will be held in Washington this weekend. President Bush will take center stage. Obama will have a representative attend but will adopt a wait-and-see posture. He will need to act soon. No country other than the U.S. has the resources and the freedom to act.

Once again, like it or not, ready or not, Uncle Sam must exert leadership. This time, the need comes even before the new president takes office. The need comes after a campaign in which Obama gave every indication of wanting to withdraw from international duties and forays to concentrate on domestic issues. The need comes as current U.S. domestic programs demand more money and Obama's campaign promises call for even more spending. Obama, it seems, will have to adjust his promises to a new reality.

There will be posturing and hundreds of ideas, especially by current EU President Sarkozy of France, who will try to rally the countries of the EU behind a single solution. He hopes to prevent a breakdown into many smaller, competing solutions. He will be right to try to coordinate and mediate.

"What Washington needs is adult supervision."

- Barack Obama

The U.S. is inclined to appreciate the difficulty of Sarkozy's task and the directness of his approach. But Europe is skeptical of giving any one country too much authority for too long. France's half year of leadership will end soon. Sarkozy will be silenced. And the world will wait for Obama to take up the issue. It is clear now that without the U.S. on board, any solution is less likely to succeed. In fact, one thing must be abundantly clear: The concept that U.S. financial policymakers talk about - "too big to fail" - applies to countries as well as banks and companies.

Which countries are too big to fail? China, it turns out, is not - not yet, anyway. Russia is not, which is the reason for much of the posturing and clamoring that is coming out of Moscow. Their dream of parity with the U.S. may once again be frustrated. But Japan is too big to fail because Japan could take Europe, the U.S. and then the world with it.

India? Possibly, because India's trade relationships are deep and strong in much of the world - rivaling more developed economies and likely to outlast China's if the world descends into economic chaos. Despite the fact that Chinese businessmen and officials are busy on every continent, the Chinese have not been there long enough and have not sunk roots deep enough. In the wake of this financial upheaval, India may become the super-economy that many assumed China would become.

Europe is too big to fail - but no individual European country is. Surely, the Greeks, the Portuguese, the Irish and the newest EU countries worry that they may be thrown overboard to the sharks as the older EU nations fight to be eaten last. No South American country is too big to fail. Argentina is trying to use this crisis to nationalize the largest remaining pool of money not under government control - pension and welfare funds. Meantime, and shrewdly, Brazil is repositioning to benefit as the world rebounds - whenever that is.

"You know, my faith is one that admits some doubt."

- Barack Obama

So once again, the rest of the world must hope that the U.S. gets it right. Sometimes, the U.S. gets it wrong so there is reason for anxiety. The U.S. seems to go astray most often when Uncle Sam ignores the warning signs from others, such as the Japanese, the Europeans, the Latin Americans, the Africans and the Chinese, among others. But it is not just the U.S. that ignores the warning signs. Since World War II, the Japanese have learned how to deal with the U.S. for mutual benefit. But Europeans grow impatient too soon and raise the decibel level. That causes many Americans to go their own way. We can't have that this time.

We must all be patient with each other. Uncle Sam must appreciate just how critical a period this is. We must all roll up our sleeves. We must not sit back and complain. We must be as constructive as possible. Otherwise, we may all disintegrate.

While being patient, we should keep one other thing in mind:

Terrorists are less affected by difficult economic times than the rest of us. In fact, you can argue that terrorists thrive in difficult times.

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