Dollar Diplomacy

Dollar Diplomacy

To speak of a geopolitical power balance is to speak of a political system wherein nations can only command a finite amount of authority. Preeminence is rendered impossible by any arrangement wherein natural sovereignty grants to each actor the same rights afforded to all others. Global politics, therefore, does not rest on any natural power structure, but invents one and imposes rules upon international actors. It assigns to most nations an influence in international affairs proportional to their standing in the world. This standing, increasingly, is a function of each actor’s domestic economic capacity.

But giving economic concerns a place of primacy in geopolitical affairs bodes ill for the peoples of the world. The principles around which political and economic affairs are oriented are fundamentally at odds. Conflating the two and making international affairs an extension of domestic economic concerns roots and geopolitics in a disastrously distorted power dynamic. Even as punitive actions are taken in the name of wronged constituency groups, agency is taken away from those supposedly served by trade protectionism. The pernicious consequences of this are currently being played out in the ongoing trade dispute between the United States and China.


The Relative Openness of Political Systems


Domestic and international political affairs are two wholly different animals. The geopolitical stage is bounded. This is, in part, a consequence of the centralization innate to anything considered on a global scale. Nations act as a proxy representative for the millions of people who live within their borders, assigning to their interests and opinions a uniformity that is not only wholly unnatural but would be considered contrary to democracy if conducted domestically. To give each resident of the earth the full sovereignty natural law affords them would lead to a multiplicity of factions that would stand as an impediment to any useful action.

Politics, after all, involves managing those things which are held in common. Affording to all men the full power of natural society would create an open and decentralized power structure. Power would ultimately devolve to the individual. Any determination of what percentage of the global power constituted a plurality, carrying with its opinions the force of law, would be rendered impossible by the vast number of divisors that exist within the globally polity. The scope of global politics, therefore, requires some kind of closed system, wherein a finite number of officials have the representative authority to speak on behalf of their respective constituencies. At least since the Westphalian accords, the sovereignty presumed to nation-states is the driving metric for defining global constituencies. The sovereign state, according to Council on Foreign Relations president Richard Haass, is “one that enjoys supreme political authority and a monopoly over the legitimate use of force within its territory. Second, it is capable of regulating movements across its borders.

Third, it can make its foreign policy choices freely. Finally, it is recognized by other governments as an independent entity entitled to freedom from external intervention.” (Haass, 2003) But this presumption of sovereignty, the post-Westphalian inference of which is debated by scholars of international affairs, winnows the natural sovereignty of those whose interests it purports to represent, particularly when economics is accentuated in foreign policy debates. National sovereignty creates a dichotomy between internal and external political affairs. Those issues that affect only the national welfare of citizens are beyond the scope of global political bodies. Issues that affect the geopolitical community, such as defense compacts and trade treaties, are not a perfunctory matter of national sovereignty. They involve multiple sovereign actors and are therefore subject to the censure of external political bodies.

The increasing focus given to economic issues in geopolitical boundaries distorts this internal-external dichotomy. It curtails national sovereignty and gives to nations with preeminent global status an exaggerated sense of domestic importance.


The quasi-mercantilist rhetoric of the Trump administration’s trade policies is rife with such distortions. In the past, the President has complained about import taxes levied by Canada against imported dairy products, claiming these tariffs put American farmers out of business. But despite complaining about the unfair condition this creates for American dairy farmers, the president has been doggedly determined in levying protectionist measures rooted in the same principle against a host of imported goods from China. (Diamond, 2017) This kind of action, justified in the name of the protection of American workers, connotes a sense of superiority, which negates national sovereignty. It suggests America’s domestic concerns trump the domestic concerns of other nations. Whilst America, according to this logic, has the right to meddle in the affairs of other nations if they touch upon its domestic security, other nations are not afforded the same right of self-defense.

Economic and Political Globalism

The muddling of domestic and international issues that materializes as a result of global protectionism is, in part, a result of the contradictory principles that underlie political and economic globalism. Political globalism and economic globalism rest on principles that are at odds with each other. Political globalism is inherently centralized, an effect of the scale on which international affairs are conducted. Economic globalism, however, uses an entirely different lexicon. Economic globalism rests on decentralizing principles, empowering private, individual actors to seek and pursue those exchanges in which the parties involved see something that is to their mutual benefit. Decentralization in political and economic structures works towards the same purpose: empowerment of individual actors. Limited governments and free markets work hand-in-hand to create an open space wherein pluralistic values compete side by side: actors are free to choose and pursue values, using their vote either at the cash register or ballot box as an endorsement of products in which they find something of merit. This is an “open” system, wherein there is no finite amount of available; action is not zero-sum. The choice one actor makes is not at the expense of another. An individual’s private, conscious-driven decision to support one candidate does not impede the ability of his neighbor to support the opposing candidate. The decision to patronize the big-box grocery store does not take money from the corner market. Taken in a geopolitical sense, economics is a powerful tool for liberating individuals from oppression. The individual is the basic economic component and the actions he takes are made in consideration of his own needs and desires; they are divorced from any formal power structure. In the words of Milton Friedman,

“Viewed as a means to the end of political freedom, economic arrangements are important because of their effect on the concentration or dispersion of power. The kind of economic organization that provides economic freedom directly, namely, competitive capitalism, also promotes political freedom because it separates economic power from political power and in this way enables the one to offset the other.” (Friedman, 9)

Freedom can exist only in decentralized systems. When authoritative bodies have sweeping powers to regulate societal behaviors and use public policy to program desired outcomes, this same ability is precluded other actors. Sovereignty is stripped from lower-level actors and grafted into the benevolently extended hand of the authority, which watches shepherd-like over its too-easily-led-astray flock. But liberty is downstream of property: if an individual does not have mastery over himself, he cannot hold any other exercisable form of freedom. When geopolitics arbitrates economic issues, it grafts the principles of a decentralized system into an inherently centralized system.


Dollar Diplomacy


This surgical malpractice has real and pernicious effects on the global balance of power. It not only truncates the sovereignty of domestic constituencies within their borders but creates a false sense of hostility between nations. Dollar diplomacy—the tendency to view diplomatic relations through the lens of economics—warps national borders, pitting nations’ domestic policies against each other and removing from individuals the ability to make their own informed economic decisions. It does this in part by warping the sense of value in currency. Money is a tool: a means to a broader end. Economic analysis, particularly conducted at a macro level, offers an incomplete picture of the broader political landscape, for the motives that catalyze individuals to take economic actions are often rooted in some more exigent or personal desire: the need to feed one’s family, the desire to purchase goods that promote leisure and pleasure. In the words of F.A. Hayek, “What in ordinary language is misleadingly called the “economic motive” means merely the desire for general opportunity, the desire for power to achieve unspecified ends. If we strive for money, it is because it offers us the widest choice in enjoying the fruits of our efforts.” (Hayek, 124) But dollar diplomacy sees money as a means to itself. The United States has a net trade deficit with China. By definition, a trade definition occurs when a country’s imports exceed its exports. Effectively, this means the United States receives cheaper consumer goods from China than China receives from the United States, which is a net positive for citizens with limited means. This trade relationship means the domestic American dollar stretches further. Effectively, this is an efficiency metric for the purchasing power of the average American consumer. Yet, political leaders, including President Trump and his economic advisers Peter Navarro and Larry Kudlow, paint this as a negative because they have a wholly numerical concept of value. This is, in part, because the president sees trade as an extension of America’s domestic economy. Any impediment to

American trade is not a missed opportunity, disappointing but a condition to which American officials must reconcile themselves because economics is a decentralized arrangement that requires the volitional participation of interested parties, but an assault on national sovereignty. Punitive retaliatory action is a matter of the security of the nation. The independent actions taken by other nations are not seen as a component part of their national sovereignty, but an act of aggression. This rather suspect rationale is implicit in Trump’s tariffs against imports of Chinese steel and aluminum:

“This relief will help our domestic steel industry to revive idled facilities, open closed mills, preserve necessary skills by hiring new steel workers, and maintain or increase production, which will reduce our Nation’s need to rely on foreign producers for steel and ensure that domestic producers can continue to supply all the steel necessary for critical industries and national defense. Under current circumstances, this tariff is necessary and appropriate to address the threat that imports of steel articles pose to the national security.” (Trump, 2018)

Ironically, the legislation Trump cited to justify this action was implemented for the purposes of fostering free trade. When John F Kennedy signed the 1962 Trade Expansion Act, he stated, “we cannot protect our economy by stagnating behind tariff walls, but that the best protection possible is a mutual lowering of tariff barriers among friendly nations so that all may benefit from a free flow of goods. Increased economic activity resulting from increased trade will provide more job opportunities for our workers.” (Kennedy, 1962) Implicit in both Kennedy’s liberality and Trump’s quasi-mercantilism, however, is the real problem of using global politics as a staging area for domestic political issues. Even Kennedy expresses a desire to use trade as a cudgel to bend the global political order to a shape he found more amenable.

Even economic openness, when adjudicated through global political channels, is coercive. This is because politics is inherently centralized. Economics, however, is inherently decentralized. Political machinations can only affect conditions; they can do nothing to affect the motives that cause disparately motivated individuals to seek out particular economic arrangements. When politicians make decisions about trade, particularly in the name of fostering domestic conditions, they cement the faux narrative that the government creates economic prosperity. By altering the on-the-ground economic realities with which individuals are confronted, they also truncate sovereignty. When political leaders promote certain economic conditions, they are doing so based on the supposition that those outcomes are in the interests of the citizens affected by them. But this takes away from those citizens the ability to make judgments about their own self-interest. The question of whether one nation’s place on the global stage is a threat to the standing of another nation’s place is inappropriate.

A nation is an amalgam of many different interests; it is up to the individuals who comprise the various constituency represented on a global stage by sovereign nations to make these determinations for themselves. And they must make these determinations in the context of their own lives. For it is only here that questions about welfare can be completely satisfied. The metrics used by global politics to gauge the health of the international stage are incomplete. Considerations like economics are not final ends; final ends are found in the personal motives that catalyze people to act. It is upon their decisions that nations are built. But, if this is to be the case, individuals must be free to treat with whomever they choose, regardless of their global citizenship status.

Paul Bennett (Socialism) vs. "Dollar Diplomacy"

It is unfortunate that this article says very little about China; moreover, it primarily argues on the basis of a wholly mythical view of the way that capitalism actually functions. Consider the statement: ‘A nation is an amalgam of many different interests’. There are two main interests in any nation, that of the one percent (or less) who own and control the means of production, and that of the rest of the population, who have to work for wages or depend on someone else who does so. Consider also: ‘dollar diplomacy sees money as a means to itself’. Whatever is meant here by 'dollar diplomacy' is a simple reflection of capitalism’s need for profit, and its need to place this end above everything else. Workers of course need to earn money to provide for their families, but this has nothing to do with diplomacy and power games indulged in by the elite and their representatives.

Works Cited

Diamond, Jeremy. “Trump: Canada’s dairy measures a ‘disgrace.’” CNN. April 20, 2017. Retrieved from: https://www.cnn.com/2017/04/20/politics/donald-trump-canada-dairy- farmers/index.htmlFriedman, Milton. Capitalism and Freedom. The University of Chicago Press: Chicago, IL, 2002.Haass, Richard N. “Remarks to the School of Foreign Service and the Mortrara Center for International Studies.” Speech given at Georgetown University, Washington, D.C. January 14, 2003. Transcript: https://2001-2009.state.gov/s/p/rem/2003/16648.htmHayek., F. A. The Road to Serfdom. Ed. Bruce Caldwell. The University of Chicago Press: Chicago, IL, 2007.Kennedy, John F. “Remarks Upon Signing the Trade Expansion Act.” Issued October 11, 1962. https://www.presidency.ucsb.edu/documents/remarks-upon-signing-the-trade-expansion- actTrump, Donald J. “Presidential Proclamation on Adjusting Imports of Steel into the United States.” Issued March 8, 2018. https://www.whitehouse.gov/presidential- actions/presidential-proclamation-adjusting-imports-steel-united-states/

© 2018 by Zink Publishing Inc.

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