Obama Poised to Show Europe Why it's Dangerous to Get What You Want

When Barack Obama was elected President of the US in November, Europe got what it wanted. At the G20 summit in London on Thursday, and at the NATO 60th anniversary summit on Friday, Europe will have to deal with the consequences. The results of both occasions will be disappointing to Obama's most fervent supporters and believers in the transatlantic alliance alike.

The precedent for summits in London to deal with global financial crises is not encouraging. The last such affair, the World Economic Conference, was held in 1933, in the depths of the Great Depression. Franklin Roosevelt eventually brought the conference to an end with a stunning, shrilly-phrased message.

FDR argued that it was nonsense to try to fix the crisis by restoring the Gold Standard. Instead of falling in with an international plan that merely treated the symptoms of the disease, the US would act on its own.

Roosevelt's message was tactless, though John Maynard Keynes described it as "magnificently right". The real pity was not that Roosevelt torpedoed the Conference, but that his New Deal drained resources from the productive economy and delayed the recovery that did not finally come until the Second World War.

That precedent looks like it might be about to repeat itself. Together with Gordon Brown, Obama has been campaigning vigorously for the G20 summit to endorse a replay of the New Deal, with huge government borrowing increases and spending plans all around.

In an article published around the world last week, Obama called for fiscal stimulus to be "sustained until demand is restored". Given that the non-partisan Congressional Budget Office predicts Obama's spending plans would leave a deficit of $672bn by the end of 2013, it's clear that he has no intention of spending less when the economy recovers. His call for stimulus packages, like FDR's New Deal, is not about economic recovery: it is about using the economic emergency to restructure American society.

But it's not just Obama who is using the crisis. For their part, the Europeans are weighing in with a different set of priorities. Amazingly, they're the ones playing the financial responsibility card. The EU's leaders insist that the solution to our ills is not spending, but more supranational regulations. The only surprising thing is how open the EU has been about it.

After a meeting on February 22, German Chancellor Angela Merkel called for the creation of a "global governance structure" that would "prevent excess" in all financial markets. This is a staggeringly bad idea.

A market that never had excess would not be a market, because it would not be free. And given that Europe's existing governance structures entirely failed to address -- or even spot -- Europe's own problems, it takes a huge leap of faith to believe that a global structure would do better.

What this is really all about is simple: the European model has been under increasing pressure from more competitive economies in the US and Asia. Europe is now trying to use the financial crisis to protect this model by forcing it onto everyone else in the name of economic recovery. A global regulator with a mandate to ensure stability and balance would be a tremendous step towards this. It's not likely that Obama will pull an FDR and simply sink the G20 summit. For one thing, he doesn't need to do that to get what he wants: he's already proven that the US has the right to pass as many so-called stimulus acts as it likes. For another, there is, from his point of view, a perfectly good deal ready for the taking: the summit should endorse both fiscal stimulus and global regulation, but do both weakly.

That will give everyone what they want. Obama will claim that the world calls for more US government spending, while the Europeans will ignore that part of the deal and get on with the serious business of imposing new job-killing rules on the US. Obama himself is hardly hostile to global governance, but he knows that Congress and the American people are. By playing it long, he'll get the benefits of the agreement now, while the cost of the new rules will take years to bite.

Neither his supporters - who want it all now -- nor his critics will be happy with this. And Obama might drop the ball: his administration has not shown much in the way of competence or patience yet. But unless they demand a stronger endorsement of stimulus than the Europeans are willing to concede, they're likely to get their way.

But there's that competence problem. Obama's diplomacy has so far been remarkably undiplomatic. In two months, he's insulted Gordon Brown with his infamous gift of America's 25 greatest DVDs, tried to talk the Russians into "resetting" the relationship -- only to have "reset" translated as "overcharge" -- and dismissed the Poles when they pleaded with the US not to give up on missile defence.

George W Bush's administration came in for a lot of criticism on this score too. But many of Bush's offences consisted of untimely truth-telling: Donald Rumsfeld may have been outspoken when he highlighted the differences between Old and New Europe, but he was on to something. Obama's errors have either been simply crass, or have come at the expense of America's friends.

That's why the NATO summit poses such a challenge. All of the issues at stake -- from Afghanistan, to NATO enlargement, to missile defence - require the US and Britain to stand strong and united against pressure from states inside and outside NATO that are opposed to doing anything.

To win through, the US will need the support of all its allies. But those are precisely the states that the Obama administration has gone out of its way to alienate: Iran gets a message of good cheer, while Poland and Georgia are sold down the river and Gordon Brown is sent packing without a press conference and with insulting State Department dismissals of Britain ringing in his ears.

The precedent of FDR looms ever larger: under Obama, the US is embarking on a New Deal that is condemned by most of the rest of the world, and, in the realm of diplomacy, is proceeding with the kind of offensive unilateralism that marked the start of Roosevelt's tenure in office. Europe had high hopes for FDR, just as it does for Obama. But in politics, it can sometimes be that the most destructive thing is to get exactly what you want.

Ted Bromund is a senior research fellow in The Margaret Thatcher Centre for Freedom at the Washington-based Heritage Foundation.

About the Author

Theodore R. Bromund, Ph.D. Senior Research Fellow in Anglo-American Relations
The Margaret Thatcher Center for Freedom

First appeared in the Yorkshire Post (UK)