Category Archives: Global Economics

The Left Is So Wrong On Trade

flag USMy Comments: When I first heard about the TPP (Trans-Pacific Partnership) and understood the broad outlines of the idea, I had no problem with it. Then along came Robert Reich, someone whose intellect I respect, saying it was terrible and should be scuttled. So I started looking a little closer, mindful I didn’t have access to the actual language.

The issue has now given the GOP another imaginary arrow to put down the White House. To my mind, Elizabeth Warren and Bernie Sanders are a breath of fresh air, but are pandering to their base just like Ted Cruz is pandering to his base. I’ve concluded, as an economist and financial professional, that it will be, on balance, a good thing. Does it have flaws? Most certainly. Should they be fixed? Maybe.

The 21st Century is evolving rapidly, and there will be unintended consequences, but to argue that not advancing the TPP will somehow miraculously result in jobs returning the US is nuts. Maybe some CEOs will make hundreds of millions; so what? My professional gut tells me the left has overlooked the benefits and the real chance to boost economic growth in this country, in a way that has to happen. They are just as fixated on their personal bias as are those on the right.

May 14, 2015 / Froma Harrop

The left’s success in denying President Obama fast-track authority to negotiate the Trans-Pacific Partnership is ugly to behold. The case put forth by a showboating Sen. Elizabeth Warren — that Obama cannot be trusted to make a deal in the interests of American workers — is almost worse than wrong. It is irrelevant.

The Senate Democrats who turned on Obama are playing a 78 rpm record in the age of digital downloads.

Did you hear their ally, AFL-CIO head Richard Trumka, the day after the Senate vote? He denounced TPP for being “patterned after CAFTA and NAFTA.” That’s not so, but never mind.

There’s this skip on the vinyl record that the North American Free Trade Agreement destroyed American manufacturing. To see how wrong that is, simply walk through any Walmart or Target and look for all those “made in Mexico” labels. You won’t find many. But you’ll see “made in China” everywhere.

Many of the jobs that did go to Mexico would have otherwise left for low-wage Asian countries. Even Mexico lost manufacturing work to China.

And what can you say about the close-to-insane obsession with CAFTA? The partners in the 2005 Central American Free Trade Agreement — five mostly impoverished Central American countries plus the Dominican Republic — had a combined economy equal to that of New Haven, Connecticut.

(By the way, less than 10 percent of the AFL-CIO’s membership is now in manufacturing.)

It’s undeniable that American manufacturing workers have suffered terrible job losses. We could never compete with pennies-an-hour wages. Those low-skilled jobs are not coming back. But we have other things to sell in the global marketplace.

In Washington state, for example, exports of everything from apples to airplanes have soared 40 percent over four years, to total nearly $91 billion in 2014, according to The Seattle Times. About 2 in 5 jobs there are now tied to trade.

Small wonder that Sen. Ron Wyden, a liberal Democrat from neighboring Oregon, has strongly supported fast-track authority.

Some liberals oddly complain that American efforts to strengthen intellectual property laws in trade deals protect the profits of U.S. entertainment and tech companies. What’s wrong with that? Should the fruits of America’s creativity (that’s labor, too) be open to plundering and piracy?

One of TPP’s main goals is to help the higher-wage partners compete with China. (The 12 countries taking part include the likes of Japan, Australia, Canada, Chile, Mexico, and New Zealand.) In any case, Congress would get to vote the finished product up or down, so it isn’t as if the public wouldn’t get a say.

But then we have Warren stating with a straight face that handing negotiating authority to Obama would “give Republicans the very tool they need to dismantle Dodd-Frank.”

Huh? Obama swatted down the remark as wild, hypothetical speculation, noting he engaged in a “massive” fight with Wall Street to get the reforms passed. “And then I sign a provision that would unravel it?” he told political writer Matt Bai.

“This is not a partisan issue,” Warren insisted. Yes, in a twisted way, the hard left’s fixation over big corporations has joined the right’s determination to undermine Obama at every pass.

Trade agreements have a thousand moving parts. The U.S. can’t negotiate with the other countries if various domestic interests are pouncing on the details. That’s why every president has been given fast-track authority over the past 80 years or so.

Except Obama.

It sure is hard to be an intelligent leader in this country.

David Cameron’s ‘Little England’ is a Myth

My Thoughts: As you know, I have a bias toward England and a bias away from right wing politics. The re-election of Cameron as Prime Minister at first caused me to envision woe and gloom as the next few years rolled by. It still may, but harsh reality from time to time results in a shift toward rational thinking. I hope this proves to be the case for the land of my birth.

Gideon Rachman May 11, 2015

When Angela Merkel won re-election in 2013, the outside world saw her success as a sign that things were going well in Germany. But David Cameron’s decisive victory in the UK’s election last week is receiving a much more sceptical press overseas. A Washington Post headline proclaimed: “Election may set Britain on a path to becoming Little England”. A New York Times columnist upped the ante by announcing: “The Suicide of Britain”.

Many Europeans, meanwhile, are incredulous and angry that the new Cameron government is now certain to hold a referendum on whether Britain should leave the EU. And the surge of the Scottish National party, and the potential implications for the unity of Britain, is attracting attention across the world.

As one Indian analyst harrumphed to me: “How can the UK still claim to be a major power, when the country is on the brink of falling apart?”

Some British leftwingers share this disillusionment, interpreting their side’s electoral defeat as a sure sign of a deep national malaise. The argument that the UK election has revealed a badly troubled country is easy to make. But it is also wrong.

Of course, a British exit from the EU (Brexit) and a Scottish exit from Britain (Scexit?) are both possibilities. But it is much more likely that in five years’ time, when this new government leaves office, the United Kingdom will still be a united country and will still be a member of the EU. The UK will also continue to be one of the most outward-looking countries in the world and is likely to remain among the fastest-growing economies in the west.

The EU referendum to which Mr Cameron is now committed is certainly a mighty gamble, and one that he has taken largely to appease his own party. The renegotiation of Britain’s terms of membership is unlikely to yield more than a fig leaf to allow the government to campaign to stay in the EU.

The strong likelihood is that the Brits will then vote to stay in Europe. There have been four opinion polls on the subject in the past month and they have all shown big majorities for remaining a member of the EU.

Of course, the tortuous process of renegotiation, further chaos in the eurozone, and the referendum campaign itself, could all change minds. Some analysts point out that, in recent years, referendums on the EU have been unexpectedly lost in countries such as France, Ireland and the Netherlands. But those were all decisions on changes to European treaties, which limited the risk of a protest vote. Brexit would be a much more fundamental choice — and the Brits are unlikely to take the risk.

If Britain votes to remain a member of the EU, that will remove a potential trigger that the SNP might pull: to demand another referendum on independence for Scotland.

Last week’s general election results, in which the SNP won all but three of Scotland’s 59 seats, has created the impression of an irresistible surge of support for independence. But, even now, only about half of Scots actually voted for the party.

Expressing nationalist sentiment in a general election is a risk-free way of venting emotion. Voting for independence would be quite another matter since it would raise — once again — difficult questions about currency unions and tax revenues.

The economic case for an independent Scotland has, in fact, taken a bad blow in the past year as the oil price has plunged. Such tiresome considerations would come back into focus, if and when Scots were asked to vote for independence. In the next five years, some of the gloss is also likely to come off the SNP since all dominant parties eventually generate an opposition.

One legitimate foreign anxiety about the UK is that, even if the country does not actually break up, it is likely to go through a period of acute introspection as it tackles difficult questions about national identity, the constitution and economic austerity.

The notion, common in Washington, that Mr Cameron’s Britain is a smaller actor on the world political stage is hard to argue with. The House of Commons vote in 2013 to reject military action in Syria increasingly looks like the moment when Britain decided that it was going to turn in its deputy sheriff’s badge and leave the US to play the role of world policeman alone. The Iraq and Afghan wars have sapped Britain’s will for foreign wars and that is reflected in declining defence budgets.

But a willingness to drop bombs on the Middle East is not the only measure of internationalism. And the idea that Mr Cameron’s Britain is turning into a sleepy and cramped Little England is very wide of the mark.

London is now probably the most globalised city in the world. Some 37 per cent of its residents were born overseas. It is a hub for finance, transport, culture, tourism and a host of other industries. And while London is a unique place, Britain as a whole remains a trading nation by instinct, and a magnet for people and capital from all over the world.

Politics may be pushing the country to look inwards. But the more powerful social, technological, demographic and economic forces will continue to put Mr Cameron’s Britain at the forefront of globalisation.

Scarce Skills, Not Scarce Jobs

My Comments: To some extent, this is an extension of the post I had last week about the riots in Baltimore. I’m convinced they happened more for economic reasons than for racial reasons. I accept both are present, but instead of focusing on race relations to effect a solution going forward, the emphasis should be economic.

This is not rocket science; Henry Ford set this in motion about a century ago, yet our politicians, both on left and right, are just now discovering it. To me the rallying cry of some on the right to “Take Back America” suggests that perhaps slavery was good. I’d much rather see Washington spend my tax dollars on education and rebuilding our roads and bridges than worrying what ISIS might or might not do. Time for that once we have our society back on track.

I doubt that few, if any, of the many who rioted in Baltimore would be hired to work in Saudi Arabia, especially without the job skills this ad requires. We complain about lack of jobs in this country and at the same time minimize the money spent on education. Someone is an idiot. Maybe several idiots.

What follows came from Atlantic Magazine and was written by James Bessen Apr 27, 2015

At a large distribution center located north of Boston, a robot lifts a shelf holding merchandise and navigates it through the warehouse to the workstation of an employee who then picks the item needed for an order and places it in a shipping box. Incoming orders are processed by a computer that sends picking requests to sixty-nine robots. Then, the robots deliver storage units to roughly a hundred workers, saving the workers the task of walking through the warehouse to find the items. In other distribution centers, this is work that warehouse workers do.

The distribution center, run by Quiet Logistics—a company that fills orders for sellers of premium-branded apparel, is featured in the 60 Minutes episode “Are Robots Hurting Job Growth?” In the segment, Steve Kroft poses the following question to Bruce Welty, the CEO of Quiet Logistics: “If you had to replace the robots with people, how many people would you have to hire?” Welty estimates that he would have to hire one and a half people for every robot, and that the robots are saving him a lot of money.

Robots have long been a staple of science fiction. “Now they’re finally here,” Kroft tells us, “but instead of serving us, we found that they are competing for our jobs. . . . If you’ve lost your white-collar job to downsizing, or to a worker in India or China, you’re most likely a victim of what economists have called technological unemployment. There is a lot of it going around, with more to come.”

The robots perform tasks that humans previously performed. The fear is that they are replacing human jobs, eliminating work in distribution centers and elsewhere in the economy. It is not hard to imagine that technology might be a major factor causing persistent unemployment today and threatening “more to come.”

Surprisingly, the managers of distribution centers and supply chains see things rather differently: in surveys they report that they can’t hire enough workers, at least not enough workers who have the necessary skills to deal with new technology. “Supply chain” is the term for the systems used to move products from suppliers to customers. Warehouse robots are not the first technology taking over some of the tasks of supply chain workers, nor are they even seen as the most important technology affecting the industry today.

Information technology has been transforming supply chains for decades, often taking over tasks previously performed by shipping clerks and other workers. Systems track items from source to customer, keeping inventories at optimal levels and minimizing shipping time and cost. RFID (radio frequency identification) tags allow items to be tracked automatically, eliminating much clerical work. These technologies allow today’s retail stores to offer a far more varied selection than in the past, often at lower prices, and to respond quickly to changes in demand. They have changed the retail landscape, for example, powering the growth of Walmart, a pioneer in adopting some of these technologies.

Yet although these technologies eliminated some jobs for clerks and warehouse laborers, they also created new jobs by creating new capabilities. However, these new jobs require specialized skills among both the managers and technicians, who typically have college degrees, as well as among the less educated operational occupations. Workers who have these skills, often learned on the job, are actually in short supply.
Moreover, industry experts see the need for skilled workers increasing in the short run and persisting for at least another decade. Working with industry trade associations, academic experts issued a “U.S. Roadmap for Material Handling and Logistics,” arguing that:
Despite the potential of dramatically improved processes and technology for material handling and logistics systems in the coming years, much of the work in the industry will continue to be done by a human workforce in the year 2025. Moreover, other aspects of this [technology], such as mass personalization, will require levels of operational flexibility that can only be handled by a skilled and creative workforce. In other words, people will continue to be vital to the industry in 2025.

As with weaving and other nineteenth-century technologies, automation of some tasks increases the value of the remaining tasks, even as new or deeper skills are needed. But workers with those skills are not readily available, nor do robust labor markets initially provide the right incentives for workers to acquire those skills. The supply chain industry experts contributing to the U.S. Roadmap report say that a key challenge is to “overcome a perception that joining [the industry] might not result in a career with suitable rewards.”

The Middle East, Iraq, and the United States

OK, you’re sick and tired of this issue and want it to go away. But it never does and it may never, at least not in our lifetimes. So I challenge and urge you to read a recent interview and the comments made.

As someone who started life amid bombs raining down from time to time, I’ve been conscious and fearful of armed conflict since my earliest days. As a three year old, I can remember waking up one morning under the dining room table next to my mother. She had decided the table might provide at least some protection if a bomb hit nearby.

As an American citizen since 1959, I’ve been here as VietNam engulfed us and evolved, along with Somalia and Iraq and Afghanistan and all the many “little” conflicts along the way. I didn’t want to go to VietNam but received notice in the fall of 1960 to appear for my draft physicial. I remember driving to Ocala, getting on a bus with a bunch of other 19 year olds and we drove to Jacksonville. But I failed my physical and was given a 1-Y status instead of 1-A. So I’ve not served in the military.

Today we have a bunch of neocons and other ‘conservatives’ pushing for us to go to war with Iran. None of them will see a minute of combat like will the current crop of recruits. They seem to think dropping a few bombs on Iran and sending several hundred special operations troops will cause Irans’ national ambitions to suddenly change and conform to our version of democracy and lifestyle.

The map above is a link to the interview sent to me by my son. It is a compelling summary of how we got to where we are now, who the players are, and how we might move this whole idea forward to benefit all of us.  I urge you to read it, think about what is said and the implications, and not overlook the comments section that follows. Click the map above or click HERE NOW.

Obama Welcomes Kissinger Realism

My Comments: Regular readers of these posts know I’m not a fan of the GOP and many of the people who call it home these days. I find them un-Christian, narrow minded, selfish, and living in the past instead of developing the future. They are not providing the leadership needed to secure the future for my grandchildren.

A generation or so ago, in the days of Nixon-Ford, a champion of the Republican Party was Henry Kissinger. While he’s now an old fart like me, he’s not drifted into dementia as have many of his cohorts, people like Dick Cheney.

I well remember the days when we became “friends” with China and the storm of derision it unleashed across the media. Today, people simply shrug as it has become a fact of life and normal. I believe this will happen with Cuba and possibly with Iran. As it should. Unless you plan to kill every last one of them, you might as well work for normal relations and let them become pseudo friends or enemies, take your pick.

By Edward Luce, April 19, 2015

The essence of diplomacy: when adversaries come to terms, neither gets everything they want.

The biggest rap against Barack Obama’s foreign policy is that he is naive. Yet, as his presidency matures, Mr Obama is showing qualities one would normally associate with Henry Kissinger — the arch-realist of US diplomacy. Neoconservatives and liberals alike care about the internal character of regimes with which the US does business. Mr Kissinger stands apart from that tradition. The less Mr Obama preaches morality to foreigners, the more he distances himself from the exceptionalists — the more opportunities he creates. It is a welcome sign of a president with a learning curve.

The chief example is Mr Obama’s evolution on the Middle East. In 2009, he went to Cairo to offer a new chapter in relations between the west and the Muslim world. His felicitous words went down well in the region but were quickly forgotten. Today Mr Obama gives fewer speeches but has a bigger appetite for deeds. The best measure is his recent framework nuclear deal with Iran. Much to the chagrin of his critics, the agreement is silent on Iran’s sponsorship of terrorism abroad and repression at home. Its focus is on curtailing Iran’s nuclear ambitions.

There is no mention of Iran cutting off its support for the Houthi rebels in Yemen, or recognising Israel’s right to exist. That is just as well. Had Mr Obama insisted on either, there would have been no deal (there is still a way to go before reaching a final agreement). In pushing ahead anyway, Mr Obama is grasping the essence of diplomacy — when adversaries come to terms, neither achieves everything they want. Much the same would apply to Mr Obama’s recent deal with Cuba’s dictatorship. Although Mr Kissinger has criticised Mr Obama’s Iran deal as too weak, it is very much in line with his school of diplomacy. The perfect should not be the enemy of the good.

But it goes heavily against the grain of the debate in Washington. In 1972, Mr Kissinger shocked the world — and the “red scare” hawks back home — by pulling off a rapprochement with Mao Zedong’s China. The Shanghai Communiqué was scandalously amoral. It made no mention of Chairman Mao’s gulags. Nor did it call for China to end its third-world adventurism. But by splitting Beijing from the Soviet orbit, it dramatically served US interests and laid the foundations for the west’s victory in the cold war. Had Richard Nixon — Mr Kissinger’s boss — been hamstrung by ethical concerns, it would never have ¬happened.

Without acknowledging it, Mr Obama is taking a leaf from Mr Kissinger’s book in the Middle East. At the same time as pursuing a deal with Iran’s unsavoury regime, Mr Obama is stepping up support for its equally dubious counterparts in the Sunni world. In the same week Mr Obama’s Iran deal was signed, he restored $1.3bn in annual military aid to Egypt’s army, increased US support for Saudi Arabia’s strikes on Yemen’s Houthi rebels and gave his backing to the creation of an Arab (read Sunni) force. Next month he will host Arab leaders at his presidential retreat in Camp David.

It is a classic balance-of-power approach to the Middle East. Mr Obama is simultaneously giving succour to both sides of the region’s gaping Sunni-Shia divide. Rather than trying to convert the Middle East to our values, it seeks to limit the region’s ability to export its pathologies. In 2008, Mr Obama campaigned to restore the US’s moral auth¬ority in the world. Yet George W Bush’s blunders in the Middle East were driven by moral zeal. Many of Mr Bush’s advisers believed they could implant Jeffersonian democracy on the banks of the Tigris and Euphrates. Should Mr Obama develop his deftness of touch, he could stake a claim to restoring America’s intellectual authority in the world.

It is an approach that will ultimately be tested in the battle with the Islamic State of Iraq and the Levant. In Mr Obama’s first year in office, there were 1,600 terrorist attacks in the Middle East and north Africa, according to the US state department. That had almost tripled to nearly 4,650 by 2013. Far from cutting off al-Qaeda’s head with the death of Osama bin Laden, the Salafist threat has grown a hundred new ones — and poses a far more complex challenge. Sending troops to fight Isis would be to risk another quagmire. Yet betting on the competency of US-trained Iraqi army units and moderate Syrian rebels would be a triumph of hope over experience. As has been said when US-trained Afghan forces are defeated: “Who trained the Taliban?” The answer is no one. No one trained Isis, either.

If Mr Obama wants to defeat Isis without allowing the US army to be sucked into another destructive war, local strongmen must do the job for him. In some places, such as Iraq, that means relying on Iran-sponsored local Shia militias, and the Kurdish peshmerga. In others, such as Syria, it means Bashar al-Assad. Such an approach will attract a great deal of opprobrium. Mr Kissinger received a lot of that — sometimes deservedly (there was no possible justification for the US carpet bombing of Cambodia). But what matters in the negotiating chamber is the end result. US values are both admirable and universally desirable. Sometimes the best way of realising them in practice is to put them on the backburner.

Time US Leadership Woke Up To New Economic Era

CharityMy Comments: As many of you know, my professional life has revolved around financial issues and economics. The world I’ve lived and worked in was largely shaped by the global forces at work following World War II. That era has ended.

We can shake our heads and whine about what might have been but it will serve little purpose to do so. The sooner we as a nation come to terms with all this and make the necessary adjustments, the sooner we, and here I imply ALL OF US, can get on with creating a framework that will allow our children and grandchildren an optimistic future.

Admittedly, Larry Summers is a Democrat with questionable management skills. But I can’t fault his analysis below and his thoughts about our collective future. And I will add that the aggressive stance of Israel re the Iran agreement underway, is a self-serving effort to maintain the post WWII status quo and avoid hard decisions about the future.

By Lawrence Summers, April 5, 2015

This past month may be remembered as the moment the United States lost its role as the underwriter of the global economic system. True, there have been any number of periods of frustration for the US before, and times when American behaviour was hardly multilateralist, such as the 1971 Nixon shock, ending the convertibility of the dollar into gold. But I can think of no event since Bretton Woods comparable to the combination of China’s effort to establish a major new institution and the failure of the US to persuade dozens of its traditional allies, starting with Britain, to stay out of it.

This failure of strategy and tactics was a long time coming, and it should lead to a comprehensive review of the US approach to global economics. With China’s economic size rivalling America’s and emerging markets accounting for at least half of world output, the global economic architecture needs substantial adjustment. Political pressures from all sides in the US have rendered it increasingly dysfunctional.

Largely because of resistance from the right, the US stands alone in the world in failing to approve the International Monetary Fund governance reforms that Washington itself pushed for in 2009. By supplementing IMF resources, this change would have bolstered confidence in the global economy. More important, it would come closer to giving countries such as China and India a share of IMF votes commensurate with their new economic heft.

Meanwhile, pressures from the left have led to pervasive restrictions on infrastructure projects financed through existing development banks, which consequently have receded as funders, even as many developing countries now see infrastructure finance as their principal external funding need.

With US commitments unhonoured and US-backed policies blocking the kinds of finance other countries want to provide or receive through the existing institutions, the way was clear for China to establish the Asian Infrastructure Investment Bank. There is room for argument about the tactical approach that should have been taken once the initiative was put forward. But the larger question now is one of strategy. Here are three precepts that US leaders should keep in mind.

First, American leadership must have a bipartisan foundation at home, be free from gross hypocrisy and be restrained in the pursuit of self-interest. As long as one of our major parties is opposed to essentially all trade agreements, and the other is resistant to funding international organisations, the US will not be in a position to shape the global economic system.

Other countries are legitimately frustrated when US officials ask them to adjust their policies — then insist that American state regulators, independent agencies and far-reaching judicial actions are beyond their control. This is especially true when many foreign businesses assert that US actions raise real rule of law problems.

The legitimacy of US leadership depends on our resisting the temptation to abuse it in pursuit of parochial interest, even when that interest appears compelling. We cannot expect to maintain the dollar’s primary role in the international system if we are too aggressive about limiting its use in pursuit of particular security objectives.

Second, in global as well as domestic politics, the middle class counts the most. It sometimes seems that the prevailing global agenda combines elite concerns about matters such as intellectual property, investment protection and regulatory harmonisation with moral concerns about global poverty and posterity, while offering little to those in the middle. Approaches that do not serve the working class in industrial countries (and rising urban populations in developing ones) are unlikely to work out well in the long run.

Third, we may be headed into a world where capital is abundant and deflationary pressures are substantial. Demand could be in short supply for some time. In no big industrialised country do markets expect real interest rates to be much above zero in 2020 or inflation targets to be achieved. In the future, the priority must be promoting investment, not imposing austerity. The present system places the onus of adjustment on “borrowing” countries. The world now requires a symmetric system, with pressure also placed on “surplus” countries.

These precepts are just a beginning, and many questions remain. There are questions about global public goods, about acting with the speed and clarity that the current era requires, about co-operation between governmental and non-governmental actors, and much more. What is crucial is that the events of the past month will be seen by future historians not as the end of an era, but as a salutary wake up call.

The writer is Charles W Eliot university professor at Harvard and a former US Treasury secretary

America Will Lose Patience With European Appeasement

My Comments: It is much easier to imagine a future as an extension of the past as seen in our minds than to visualize a future with totally new and different dynamics. This is where I have a problem with leaders like Israel’s Netanyahu, with the likes of Rand Paul and others on the right.

They seem unwilling to recognize that the coming years will be dramatically different from those in the past and simply want to turn back the clock. You only need to look at the life of my grandparents as they grew up, married and had children in the late 1800’s and the lives their children lived in the 1920’s and ‘30s. Never mind my life in the 40’s and 50’s. The shifts in what they experienced as “normal” are almost like night and day as I look back.

The issues faced by my children and grandchildren to advance themselves in society will demand different skill sets, different rule sets, and a different mind set if they are going to be happy and productive citizens. The sooner we elect leaders who are sufficiently imaginative and willing to articulate this perspective, the more comfort I will have as my life ends.

( Some of you will note that I’ve been absent for a week or so. I’ve been trying to find a way to legitimately use this site to help promote my business activities without infringing on my ability to simply express ideas that I want to share. If any of you have any ideas about this, I’d like to hear from you. – TK )

Robert D Kaplan April 7, 2015

Why should Washington defend a continent that will not defend itself, writes Robert Kaplan

Appeasement is an age-old tactic of diplomacy. It can be a defensible one, but not as a frame of mind for an entire continent. Yet no word captures the general mood of Europe better than appeasement.

Europeans, it has been said, cherish freedom but do not want to sacrifice anything for it. Only about half a dozen of Nato’s 28 members spend 2 per cent of output on defence, the alliance’s guideline level. When Vladimir Putin’s Russia undermined the strategic state of Ukraine, they stood and watched.

This is of a piece with the EU’s inability to deal with its own economic difficulties. Whatever they may claim, each member follows its own national interest without asking what is best for Europe. Decades into the project, there is still no chill-up-your-spine loyalty to Europe. There is simply no larger purpose and nothing to fight for, other than providing for the good life under welfare state conditions.

Europe has been reduced over the decades to a regulatory regime. Yet a rules-based order, however much it protects the rights of the individual, is not a replacement for conviction: rather, it must evolve out of a healthy and determined national purpose. A supranational purpose might exists in Brussels but not on the European street.

Because of their anaemic sense of national purpose, European elites have in several countries ceded measurable ground to the far right or the far left, resulting in a lumpen and populist form of nationalism. Elites are often stranded in the middle, seeking ways to appease both Mr Putin and their own, homegrown extremists. Lumpen nationalism, defeatism and a latent anti-Semitism all flow together.

Europe’s elites are post-historical. Living in history means living in a world of constant threat where there is no nightwatchman to keep the peace among nations, so nations must keep the peace themselves by maintaining a balance of power. But for 70 years Europe has relied on the US to do exactly that: guarantee its security, so that Europe can spend relatively little on defence and relatively much on providing for the good life. Seventy years is much longer than the distance between the end of the Napoleonic Wars and the outbreak of the Franco-Prussian war; or between the end of that conflict and the outbreak of the first world war.
For 70 years Europe has relied on the US to guarantee its security, so it can spend less on defence and more on the good life.

This American security umbrella will not stay up for ever. Barack Obama’s alleged lack of resolve in dealing with Mr Putin may say less about the US president’s own foreign policy than about a gradual shift in US opinion. Why should America defend a continent that will not defend itself?

The last of America’s second world war veterans will soon be dead. The European-oriented elites that have influenced foreign and defence policy in Washington are gradually being replaced by bright young men and women — many of them the offspring of immigrants from Asia and Latin America — who bring with them different family histories and emotional priorities. This coincides with the security challenges and opportunities that America encounters outside Europe, particularly in Asia, where American allies are willing to maintain robust, deployable militaries.

Or take Israel, a country with which the American public has for more than half a century been stubbornly sympathetic, whatever its often-misguided politicians do to inconvenience US policy. This is (among other things) the result of Israel’s stiff national resolve and gutsy, demonstrated willingness to defend itself.

Gutsy is not a word one would use to describe Europe’s political class. And unless that changes, no US president will be as committed to Europe as his predecessors were during the cold war.

The writer is a senior fellow at the Center for a New American Security