The Global Economy

THE "new world order" seems to be conspiring against the Democratic Party. Recent events in the Soviet Union are one more in a series of foreign crises that have thwarted the Democrats' efforts to effectively focus voter attention on the Bush administration's "domestic" policy failings.Part of the Democrats' problem is that the odds are stacked against them. In the rapidly changing, conflict-prone world we live in, it is a safe bet that international crises will regularly capture headlines and intrude on United States politics. At the core, however, the Democrats suffer less from statistical inevitability or bad luck than from a fundamental conceptual error. It simply no longer makes sense to bifurcate the United States policy agenda into "domestic" and "international" issues. In an increasingly interdependent world, particularly one in which economics has moved center stage, our ability to resolve problems at home more often than not depends upon the policies and actions of other nations. And, at the same time, our capacity t o influence the policies of those nations - i.e., our ability to conduct an effective foreign policy - will hinge on how we deal with our ills at home. It has become almost conventional wisdom - echoed even by some who have made their careers in foreign policy - that the time has come for the US to turn its resources and energy inward to address long-ignored domestic needs. The "domesticists" have a point. Our national troubles are severe and worsening: stagnant real wages and growing economic inequality; collapsing bridges and crumbling highways; a failing educational system; a horrendously costly medical establishment; and rampant urban violence and d rug use. These and other problems surely demand greater national attention. That does not mean, however, that we can suddenly ignore the rest of the world. No matter how appealing, the "Come Home, America" slogan is basically wrong. With the end of the cold war and the dismantling of the Soviet Union, international relations have changed almost beyond recognition, but their importance has hardly been reduced. In fact, global economic issues now impinge upon the well-being of the average American more powerfully than the cold-war rivalry ever did. Few doubt that the US can and should now cut its defense budget and transfer the savings to social programs. Nor is there much argument that we should be most prudent before sending American youth into third-world conflicts. But where else can we retreat from foreign affairs? Should we ignore the crumbling of the Soviet Union - forgetting not only the huge Soviet nuclear arsenal but the potentially disruptive impact on Europe? Should we give up on peacekeeping efforts in the Middle East - despite our chronic dependence on Gulf oil? Should we turn our backs on Mexico - ignoring our 2,000-mile common border and the tightening economic, social, and cultural integration of our two societies? Should we leave to other countries the tasks of containing global warming, stopping ozone depletion, and preserving biological diversity? WHAT about the crucial international economic issues? We are not even close to shaping a global economic order that effectively serves US interests. Dramatic initiatives are required to stave off failure in the Uruguay Round of GATT negotiations with potentially dire consequences for world trade, US exporters, and our domestic economy. The group of seven industrial countries meet regularly but have yet to effectively coordinate their macroeconomic policies. The US and Japan, the world's two main economic powers, need to diminish the destructive aspects of their rivalry before they inflict serious damage on both societies. And enlightened self-interest calls for the US and other industrialized countries to invest more and better in promoting the development of the world's poorer countries. Which of these challenges should we abandon? The US faces something of a vicious policy circle. Our economic and social troubles at home reduce our influence over key international events and trends. The lack of international influence, in turn, threatens to diminish our ability to resolve our domestic troubles. The way to break that circle is not to downgrade either domestic or international issues, but rather to recognize that together they comprise a single integrated agenda. Creating a new world order and a new domestic order is a single enterprise.