Samantha Power

Volume 55, Number 13 · August 14, 2008
The Democrats & National Security
By Samantha Power
Us vs. Them: How a Half Century of Conservatism Has Undermined America's Security
by J. Peter Scoblic

Viking, 350 pp., $25.95
Heads in the Sand: How the Republicans Screw Up Foreign Policy and Foreign Policy Screws Up the Democrats
by Matthew Yglesias

Wiley, 251 pp., $25.95
1.

Since the Vietnam War the Republican Party has developed a reputation for having a superior approach to national security. Americans have long trusted the views of Democrats on the environment, the economy, education, and health care, but national security is the one matter about which Republicans have maintained what political scientists call "issue ownership."

Partly, this is for particular historical reasons. President Eisenhower initiated US involvement in Vietnam, and President Nixon escalated the war in 1969 and kept US troops on the ground in a manifestly unwinnable mission until 1975. But John Kennedy and Lyndon Johnson were tagged as the primary culprits. President Carter was widely seen as having bungled the Iran hostage rescue mission and having responded ineffectually to the Soviet invasion of Afghanistan. Although he substantially increased US military spending, he was never forgiven for his claim that Americans had "an inordinate fear of communism."

President Reagan of course did more than any other person to entrench the Republican reputation for toughness on national security. He ran his election campaign against Carter's apparent softness, brought the Iran hostages home upon taking over the White House, nearly doubled the US military budget, invaded tiny Grenada, and staged covert operations throughout Latin America and beyond. Many "Reagan Democrats" crossed party lines precisely because they saw him as more able to confront Communist threats, and the fall of the Berlin wall confirmed their view.
Harvard / Financial Crisis Books

President Clinton, elected just after the cold war ended at a time when national security was not a dominant concern, never really recovered from having been branded a draft-dodger, alienating the military by his botched effort to integrate gays into the armed services, or presiding over the 1993 fiasco in Somalia. Even though US military operations in Bosnia in 1995 and in Kosovo in 1999 cost no casualties and largely ended ethnic cleansing in both regions, they were not traditional conflicts; NATO's intervention was not seen as promoting vital national interests, and thus made little dent in the public understanding of Democrats' competence in managing national security. Throughout the 1990s, the Democratic Party made only small progress in chipping away at what by 1999 was a thirty-point edge for Republicans on national security in public opinion surveys.

In the 2000 election George W. Bush, who had shirked military service, succeeded in presenting himself as more reliable on national security than Al Gore. This was despite Gore's service in Vietnam, his seven years on the Senate Armed Services Committee, his four years on the House Intelligence Committee, his help in brokering a deal to dismantle the nuclear arsenal of former Soviet republics, and his creation of binational commissions with Russia, South Africa, Egypt, Kazakhstan, and Ukraine to deal with issues ranging from AIDS to disarmament. In 2004, too, even before the Swift Boat campaign, John Kerry, a decorated Vietnam veteran, had an uphill climb convincing voters that Democrats made reliable commanders in chief during wartime—even though a majority of Americans had already come to regret that the sitting commander in chief had chosen to wage war in the first place.

In the 2004 election, exit polls showed that Bush led John Kerry by nearly 20 percent on the question of which man would better protect the nation against terrorist attacks. The images of John Kerry as a hunter were greeted with greater ridicule than that of George W. Bush wearing a flight suit and staging a landing on the USS Abraham Lincoln aircraft carrier off the coast of California. To paraphrase President Clinton's 2002 remark, American voters generally seem to prefer strong and wrong to smart and right.[1]

The performance and perception of recent presidents have had the greatest impact in shaping the public trust on national security. But other factors have given Republicans the edge over Democrats. The demographics of the US military are such that the officer corps and rank-and-file have traditionally leaned to the Republican side. Many US service members are observant Christians. During the last few years Democrats in political life have begun to embrace faith unselfconsciously, refusing to allow the Republican political establishment to usurp this terrain. Still, the military will likely continue to recruit a greater percentage of soldiers from red states in the South and middle America than from the coasts or major urban areas. With so many soldiers and officers counting themselves as Republicans, voters naturally associate the party with the country's primary symbol of security, those in uniform.

The Republican domestic agenda may also influence voters' perceptions about national security. The party that opposes strict gun control laws, seeks to crack down on illegal immigrants, wages a "war" on drugs, extols the "three strikes and you're out" approach to criminal sentencing, and has few qualms about capital punishment has been seen as "tougher," regardless of the effectiveness of these policies.

This faith in Republican toughness has had profound electoral consequences. Since 1968, with the single exception of the election of George W. Bush in 2000, Americans have chosen Republican presidents in times of perceived danger and Democrats in times of relative calm.

The last eight years of Republican-run foreign policy, however, have undermined US security and global stability in highly visible ways. Since a Republican president took over in 2001, the United States has invaded two countries. In Afghanistan, after swift success ousting the Taliban, the administration made the inexplicable initial decision to reject NATO's help, insisting that the international military presence not extend beyond Kabul. It spent a pittance on reconstruction—$737 million in 2003 as compared with $10 billion in 2007. Further, with al-Qaeda on the run, the administration spent 2002 mobilizing support for its March 2003 invasion of Iraq, which required it to divert precious units from eastern Afghanistan. According to many observers, this allowed the Taliban and the al-Qaeda leadership to snatch survival from the jaws of defeat. Violence has spread to once-peaceful pockets of territory, and the number of suicide attacks has increased from two in 2003 to 137 in 2007. In June 2008, forty-six American and allied forces died in Afghanistan, more than during any other month since the war began nearly seven years ago, and more than the thirty-one Americans who died in Iraq that month.

As for Iraq, the war has taken the lives of more than four thousand American soldiers, created another front for US forces in combating al-Qaeda, and eroded US army readiness to such an extent that US commanders concede that the army is at its "breaking point." Since 2001, Congress has appropriated about $640 billion for the "Global War on Terror," most of this for operations in Iraq. A Government Accountability Office (GAO) report published in June found that the United States still lacked a strategy for meeting its goals in Iraq. The GAO found that violence had diminished somewhat; but according to the Pentagon, the number of Iraqi units capable of carrying out operations without US assistance continued to hover around 10 percent.

While the Iraqi authorities passed legislation readmitting some lower- level Baathists to the parliament, legislation was stalled on oil-sharing and the holding of provincial elections. Between 2005 and 2007, the GAO report found, the Iraq government spent less than a quarter of the $27 billion it budgeted for its own reconstruction efforts. And when it came to essential services, water supplies had improved, but electricity shortages persisted, meeting only about half of Iraqi demand by early May 2008.[2] Peter Bergen and Paul Cruickshank found in 2007 that the Iraq war had brought about a 600 percent increase in the average number of annual jihadist terrorist attacks throughout the world. Even if one didn't count attacks in Iraq and Afghanistan, the incidence of terrorism increased 35 percent worldwide.[3]

By now, it is clear that "enhanced interrogation techniques"—in fact, torture—were authorized from the top of the Bush administration and were widely used from Afghanistan to Guantánamo to Iraq to "black sites" such as covert prison facilities or off-shore aircraft carriers. Al-Qaeda has made use of these excesses as recruitment propaganda. Donald Rumsfeld may be remembered for his policy failures, but he should also be remembered for the question he posed in a leaked memo in 2003: "Are we capturing, killing or deterring and dissuading more terrorists every day than the madrassas and the radical clerics are recruiting, training and deploying against us?" Many press reports and National Intelligence Estimates offer a resounding "no" to that question. According to polls, many voters are persuaded by the administration that torture can be justified. They probably have not heard from terror specialists who say that useful intelligence comes less from detainees than from informants, communities, and familiar sources. US agents have found that these sources began drying up as American mistreatment of prisoners became known.

"Based on my experience in talking to al-Qaeda members," John Cloonan, an FBI counterterrorism specialist testified to Congress recently,

I am persuaded that revenge, in the form of a catastrophic attack on the homeland, is coming, that a new generation of jihadist martyrs, motivated in part by the images from Abu Ghraib, is, as we speak, planning to kill Americans and that nothing gleaned from the use of coercive interrogation techniques will be of any significant use in forestalling this calamitous eventuality.[4]

The effect of the Bush administration's policies is that, notwithstanding the towering US military budget, which drastically exceeds that of its rivals, America's global influence has plummeted. This is evident in the administration's failure to curb Iran's nuclear ambitions. According to the IAEA, Iran now has 3,300 centrifuges to enrich uranium, as compared to the 160 the IAEA confirmed during a visit to Iran in 2003. Iran's political influence, whether in Iraq, Lebanon, or Gaza, has been dramatically expanded as a result of the US quagmire in Iraq and the crude strategies the US used to eliminate Iran's two greatest enemies—the Baathist and Taliban regimes.

Since the greatest potential risk to American lives comes from nuclear terrorism, and since the Bush administration leaders infamously invoked "mushroom clouds" as grounds for invading Iraq, one would have expected them to work zealously to retrieve or secure loose nuclear material. Instead, President Bush attempted to cut funding for the Nunn-Lugar program to secure such material in the former Soviet Union. In declaring an openness to using nuclear weapons for tactical purposes and in discarding the longstanding nuclear doctrine of "no first use," the administration weakened the nonproliferation regime and created additional incentives for nonnuclear countries to acquire nuclear weapons. The President also maintained uncritical support for the Pakistani dictator Pervez Musharraf despite the fact that Musharraf sheltered Pakistani scientist A.Q. Khan, who was caught selling nuclear secrets to North Korea and Iran.

Bush's stated goals were to strengthen the US military, bring stability to Iraq and Afghanistan, combat terrorism, prevent rogue states and militants from acquiring nuclear weapons, and promote democracy around the world. In each case, two terms of Republican rule have been disastrous for US national security. The question is: Have American voters noticed?
2.

Joe Biden has. In an interview with MSNBC, Senator Biden, the chairman of the Senate Foreign Relations Committee, was asked whether Democrats could be trusted on national security. He erupted:

I refuse to sit back like we did in 2000 and 2004. This administration is the worst administration in American foreign policy in modern history—maybe ever. The idea that they are competent to continue to conduct our foreign policy, to make us more secure and make Israel secure, is preposterous.... Every single thing they've touched has been a near disaster.[5]

Poll data show that voters are in fact beginning to share Biden's view and at last question Republicans' reliability on national security. On Election Day in 2004 exit polls showed that a majority of voters (49–44 percent) believed that the war in Iraq had made the country less safe. Yet those same exit polls gave Bush an 18-percent edge in handling national security.[6] Between 2003 and 2006 the Republicans had as high as a thirty-point advantage over Democrats on the question of which party could best deal with Iraq. But in the summer of 2006 in a Wall Street Journal/NBC News poll, the Democrats were given their first lead in handling Iraq—a three-point edge. This has since been expanded to double digits—an advantage that helps explain the Democrats' strong showing in the 2006 midterm elections. On handling international terrorism, too, the substantial Republican lead had dwindled by 2006; last year, for the first time, a majority of Americans (47–42 percent) said that the Democratic Party would do a better job protecting the country from security threats. President Bush did Republicans a disservice by wrongly conflating the invasion of Iraq and the "war on terror." The setbacks in Iraq have undermined public perceptions of Republicans' performance in combating terrorism more generally.

But the poll data raise three important questions. First, which voters have changed their minds? Interestingly, Democrats have improved their showing on security principally by convincing Democratic voters that their own party is more trustworthy than their opponents'. Independent voters still have slightly more faith that Republicans would better protect the country from terrorist attack. A June 2008 Rasmussen survey found unaffiliated voters still favored Republicans on national security by six points.

Second, will voters identify Senator McCain closely with the Republican Party, whose policies he has championed, or will he succeed in decoupling himself from a party whose national security credentials have been tarnished? Thus far, probably because of his record of personal heroism and his occasional criticisms of the Bush administration, many polls have judged him more suited to keeping the country safe than the faceless "Republican Party."

Third, and most important for the future of US security and the Democratic Party, can Democrats do more than exploit Bush's foreign policy blunders to gain a tactical electoral edge? Can they take advantage of the increased public confidence in their judgment to advance a distinct twenty-first-century foreign policy that voters will prefer and trust them to execute?

The first step toward undoing Republican dominance on foreign policy entails debunking the myth that conservative ideology enhances US national security. Here Peter Scoblic, the executive editor at The New Republic and former editor of Arms Control Today, does a great service in Us vs. Them: How a Half Century of Conservatism Has Undermined America's Security. He considers five decades of arms control efforts in order to illuminate the common themes underlying hard-line conservative ideology on national security. He shows, most usefully, the continuity in conservative intellectual leadership across the years. John Foster Dulles wrote the Republicans' foreign policy platform in 1952, denouncing the Democrats' "futile and immoral policy of 'containment,' which abandons countless human beings to a despotism and godless terrorism." Barry Goldwater denounced the nuclear nonproliferation treaty, which William Buckley's National Review termed a "nuclear Yalta." And during his first term, Ronald Reagan and the Reaganauts appeared to argue that doing away with an evil regime was more important than preventing nuclear war.

Scoblic shows that these men had in common several core premises. One cannot coexist with evil-doers, who are irreparably "fallen," and thus rollback is required. Negotiation is not merely pointless, it is costly "appeasement." And the United States should participate in only those international institutions that are servants of American power; those that constrain American power are enemies of the national interest.

Scoblic's book offers a terrifying glimpse of the persistent tendency of one militant strand of conservatism to pursue conflict over peace, arms races over arms control, and ideology over pragmatism. His analytic history is particularly strong in revealing how, in a world of uncontrolled forces, conservatives sought to impose complete control, whether by pursuing technological fixes (like the nuclear missile shield) or treating US security as if it were something that could simply be willed. Because many conservatives presume exceptional American virtue—and believe that this virtue is self-evident to others—they have also consistently failed to see how aggressive US actions can appear abroad, and how the fear they generate can give rise to threatening behavior by others, who believe they are acting in self-defense. Scoblic, who sympathetically describes Reagan's shift from denunciation to negotiation with Gorbachev over nuclear arms reduction, writes that it had not previously "even occurred" to Reagan

that adopting a war-fighting strategy, beginning a widespread civil defense program, researching a missile shield, while increasing the military budget by 35 percent, starting a new bomber program, deploying a new ICBM, and deploying missiles in Europe could be construed as threatening.

Scoblic's account becomes most chilling at the end, when the same conservative voices that had long preferred confrontation to cooperation—such as Dick Cheney and Donald Rumsfeld—actually become dominant players in George W. Bush's executive branch. On January 21, 2000, a year before he would move into the White House, Bush said:

When I was coming up, it was a dangerous world. And we knew exactly who the "they" were. It was us versus them, and it was clear who "them" was. Today we're not sure who the "they" are but we know they're there.

Having suffered through what one diplomat called the "enemy deprivation syndrome of the 1990s," September 11 gave hard-line conservatives an opportunity to apply their pre-hatched theories; and from the start they sought to unshackle the United States from international agreements and to reduce reliance on diplomatic engagement. When the Bush administration scored a rare recent diplomatic success, convincing North Korea to open up some of its nuclear records, Vice President Cheney was so disgusted by his own administration's pragmatic decision to take Pyongyang off the US terrorist blacklist that he snapped at reporters, "I'm not going to be the one to announce this decision. You need to address your interest in this to the State Department." He then abruptly ended the press encounter, and left the room.

What is striking about Scoblic's account of the hard-line conservatives' disdain for diplomacy and pragmatism is the resilience of the central tenets of their ideology. As they ridicule Senator Barack Obama's willingness to engage in negotiations with America's enemies, they seem unchastened by recent history. In 2003, for instance, when the reporter Jeffrey Goldberg told Douglas Feith, undersecretary of defense, that US troops in Iraq had not been greeted with flowers, Feith said that the Iraqis had been too spooked by the presence of Saddam supporters to show their true emotions. "But," he said, "they had flowers in their minds."

Unfortunately, the Democrats have too often failed to contest such dangerous conservative fantasies. This is is the subject of Matthew Yglesias's briskly written, provocative book entitled Heads in the Sand. Yglesias draws on the last decade of US foreign policy to build his case that the Democratic Party's position on national security "has mostly been to play Charlie Brown perennially falling down as Lucy yanks away the football, swearing not to be fooled again...." In 2000 and 2004 Democrats did their best to move away from national security issues to other problems, such as Medicare, where they felt more at home, but they never put forward a strong foreign policy alternative. "Democrats," he writes,

have tended to approach security debates from a reflexive posture of fear, preemptively assuming a defensive crouch from which it is impossible to practice politics effectively.

Charlie Brown, he writes, "needs a football of his own."

Yglesias is persuasive in showing how mainstream Democrats, in the run-up to the war in Iraq, caricatured the antiwar left as a way of flaunting their national security bona fides. The intraparty squabble inhibited the creation of a pluralistic coalition united against the administration's unilateralism and militarism. Yglesias also gives an important account of the different positions that led to Democratic acquiescence in the war in Iraq—an acquiescence that neutered or delayed many Democrats' criticisms of the President. For some Democrats the Iraq war was the natural culmination of the thinking that earlier gave rise to President Clinton's intervention in Kosovo. It is true that Clinton bypassed the UN Security Council in the war of 1999, but to charge, as Yglesias does, that there was "no difference" between the two wars procedurally or substantively is to ignore the coordination of the Kosovo war with UN Secretary General Kofi Annan. The basic attitude of the Bush administration was described by one of its officials quoted in Strobe Talbott's recent book, The Great Experiment:

Your type agonizes, ours seizes opportunities. You see our interests in Iraq and in the UN as in tension with each other; we see an opportunity to kill two birds with one stone.

We don't know how events in 2003 would have progressed without the Kosovo war, but it is hard to imagine that President Bush—a man who repudiated five treaties in his first year in office[7] and has consistently ridiculed the UN—would have been deterred in any way by the absence of past precedent.

Moreover, while some prominent "liberal hawks" favored the Iraq war, plenty of those who had supported NATO action in Kosovo for humanitarian reasons opposed the war in Iraq on those or other grounds. Yglesias wrongly implies that support for one war inevitably entailed support for the other; he also unfortunately lends credence to the surprisingly prevalent fiction that Bush invaded Iraq for humanitarian purposes.

Still, NATO action in Kosovo did make UN Security Council authorization seem more optional than it had in the past. Also, the Kosovo war helped build support for the invasion of Iraq by contributing to the false impression that the US military was invincible. The mistaken recollection that the US victory over the Serbs was nearly effortless, combined with the Bush administration's quick initial overthrow of the Taliban, caused many Democrats to agree with the Republican claim that the war in Iraq would in fact be the "cakewalk" that Undersecretary of Defense Paul Wolfowitz promised.

Yglesias is most convincing when he discusses the other two factors behind the rush to war—an international security hawkishness among Democrats, who accepted Kenneth Pollack's argument that Iraq was indeed a "gathering storm"; and domestic political opportunism rooted in the belief that Washington careers would be ruined by the failure to support a war that proved successful (the so-called "Sam Nunn effect," after the Georgia senator whose presidential hopes were widely seen to have been dashed by his opposition to the first Gulf War).

Yglesias shows how, for the last five years, Democrats have allowed themselves to be hemmed in by the conservative mind-set about Iraq—arguing over tactics such as whether international support could be acquired, whether enough troops had been sent, or whether the surge has caused a drop in violence. They have neglected, meanwhile, to confront the Bush administration directly for its pursuit of global hegemony and seeming contempt for a rule-based liberal order. It wasn't only Bush's particular policies that happened to be foolish, Yglesias notes:

Conservative Republicans have not merely made some mistakes on Iraq, and some other mistakes on Iran, and some other mistakes on North Korea, plus some mistakes on Syria, while mishandling the Israeli-Palestinian conflict and, by coincidence, damaging our relationships with formerly close allies. Rather, they are making one big mistake in seeking to transform the United States' role in the world... to that of an imperial superpower that seeks to use its national strength to dominate the world and needlessly heighten conflicts.

A believer in international institutions and international law, Yglesias rightly dismisses the proposal to replace the UN with a group of like-minded countries, such as the League of Democracies favored by McCain. "An action opposed by Russia and China will not suddenly gain new legitimacy in Russian or Chinese eyes simply because a group from which they are excluded says so," he writes.

Having criticized the Democrats for failing to put forward an alternative strategy, Yglesias devotes fewer than ten pages at the end of his book to sketching one of his own. His brevity is partly justified by his basic argument—that the alternative is not "new" (he is irked by liberals' tendency to "fetishize novelty"). Democrats, he writes, should turn back to the same "reciprocity, rules, institutions and cooperation" that in his view prevented major conflict in the second half of the twentieth century.
3.

In a June interview with Fortune magazine, Charles Black, one of John McCain's top campaign advisers, credited the assassination of Benazir Bhutto with improving McCain's appeal in New Hampshire just ahead of the primary (a claim Jon Stewart termed the "Bhutto Bump"). "His knowledge and ability to talk about it reemphasized that this is the guy who's ready to be commander-in-chief," Black said. "And it helped us." He then went on to predict the effect of another terrorist attack on US soil on McCain's presidential bid: "Certainly it would be a big advantage for him," Black said. McCain had to dissociate himself from this remark but it seemed to lay bare Republican thinking.

McCain has tried to turn the 2008 election into a vote on national security. He believes that he has an edge in presenting himself as a natural commander in chief and in describing Obama as a rookie who is simply too naive to know how to deal with a deadly world. At a town hall meeting in June the Arizona senator read aloud a recent statement by Iranian president Mahmoud Ahmadinejad, in which the Iranian leader again suggested Israel should "disappear." "It's a very clear choice, and whether it be on Iran, or whether it be on Iraq, or whether it be on other national security issues," McCain said, "Senator Obama does not have the experience and the knowledge and clearly the judgment, my friends."

McCain has pledged to continue many of Bush's national security policies. He backed Bush's invasion of Iraq, he raised the possibility of military action against Iran, and he deplored granting the right of habeas corpus to detainees. He has three main tactics for seizing public trust in the area of national security. The first is to invoke, however implicitly, his own military service. When Obama criticized McCain for his refusal to support Senator Jim Webb's proposal to increase college tuition benefits for recent veterans, McCain lashed out: "I will not accept from Senator Obama, who did not feel it was his responsibility to serve our country in uniform, any lectures on my regard for those who did."

McCain's second tactic is to evoke what he claims will be the costs of "embracing defeat" in Iraq—an al-Qaeda base, a genocide that will make Srebrenica "look like a Sunday-school picnic," and a regional war that will undermine US interests in the Middle East. Since voters have seen the debacles of the Republican-led status quo, McCain has to paint an even grimmer imagined picture of the costs of Democratic national security leadership.

His third tactic is to try to impose on Obama the conservative caricature of "liberals"—as weak, naive, elitist, and unfit to lead in a time of existential threats. Here McCain follows the example of Karl Rove at a conservative Republican gathering in New York in 2004: "Liberals saw the savagery of the 9/11 attacks and wanted to prepare indictments and offer therapy and understanding for our attackers."

How can Obama and his Democratic colleagues expose once and for all the fallacies in the conservative approach to national security, while putting forward a convincing alternative? They must start by not shying from the security debate or relying, with quiet relief, on polls showing that (unlike in 2004) only 4 percent of Americans today view terrorism as their top concern. Democrats must instead seize the advantage the polls show they could have on security issues. This means talking early and often about national security and going on the offensive by strongly presenting the foreign policy plans already devised, whether by members of Congress or by the Obama campaign.[8] It also means explaining how each plan—whether for retrieving loose nuclear material in the former Soviet Union or for assisting Iraqi refugees in Syria—advances the central goal of keeping Americans safe. Democrats can break with their reputation for squeamishness about national security issues by showing their ease and confidence in dealing with these topics. Instead of changing the subject when national security issues arise, they should look forward to taking part in detailed foreign policy discussions that allow them to show their new strength.

They must also answer McCain's apocalyptic claims about the effects of a US withdrawal from Iraq. Too often on Capitol Hill or in the primary battle, Democrats have confidently suggested that since the US-led invasion brought savage sectarian killing to Iraq, a US departure will rid the country of much of its violence. Critics of President Bush have seemed to imply that no serious harm will flow from a US withdrawal. But American voters realize that the effects of a US drawdown are in fact unknowable. The failure to acknowledge any possible humanitarian or strategic risks of leaving makes Democrats sound less sophisticated than they are, and deprives them of the chance to describe their plans to draw down troops in a careful and strategically sound way. McCain's alarmist forecast thus goes unchallenged.

Prominent Democrats must drive home the continuing costs of remaining in Iraq—costs to Iraq, the region, Afghanistan,[9] US military readiness, and national security as a whole—while describing the specific ways an Obama administration would limit the harmful consequences of withdrawal. (In fact, Obama outlined such plans in a speech last year but it got little attention and needs reinforcement from the Democratic echo chamber.)

Obama has long stated his intention to retain a Quick-Reaction Force in the region to carry out counterterrorism operations against al-Qaeda and other such networks. He has made clear his concern for Iraqi civilians in mixed neighborhoods who might be more vulnerable following a withdrawal of US combat brigades. He would offer these civilians fair notice of US plans and would be open to relocating those who would feel more secure if they moved. He has promised $2 billion to assist the two million Iraqi refugees in neighboring countries. He would establish a war crimes commission to gather the testimony of survivors and put militia leaders on notice that they may eventually be prosecuted. Obama's plan to meet with the region's heads of state is the first of many steps that will be required to prevent regional conflict.

Since Vietnam there has never been a more auspicious time for the Democratic Party to establish close relations with the US military. Building on Obama's October 2002 speech explaining his opposition to the war in Iraq, Democrats can continue to argue that Obama and his party will never do what the Republicans have done: send US service members to fight unnecessary wars. He will not stretch the US military and military families to their breaking points by extending tours of duty beyond what is tolerable. He will not order young cadets and reservists to carry out cruel and inhuman acts against foreign detainees and then abandon them when it becomes politically inconvenient, allowing them to be court-martialed while those who authorized the practices take up high-paying jobs at corporate law firms or prestigious teaching posts at top-flight law schools.

Democrats should make it clear that they will listen to the military's pleas to make major improvements in the civilian components of the government that work with the military on policing, governance, and reconstruction. Republicans have had eight years to respond to the appeals of US generals like David Petraeus who have begged for more and better-equipped civilian partners to join US soldiers; yet more US personnel still serve in US military marching bands than in the foreign service.

With their grossly inadequate veterans' care, moreover, the Bush administration and the Republican-controlled Congress badly failed many of those returning from Iraq and Afghanistan. It is Democrats in Congress such as Jim Webb and Obama who have put forth the health care and college tuition plans that treat American veterans with the respect and dignity they deserve during their difficult transitions to civilian life. The Republicans' failure to support first-class care for returning service members is not only immoral; it is contributing to the difficulty the armed forces are now having in recruiting and retaining volunteers.

Democrats must also help voters see—and reject once and for all—the false choice that George W. Bush and now McCain offer between militarism and "appeasement." When John F. Kennedy was ridiculed by the right for his plans to negotiate with Communist countries, he rejected outright the idea that "we have only two choices: appeasement or war, suicide or surrender, humiliation or holocaust, to be either Red or dead." Obama and the Democrats today can show that while the United States refused to talk to America's adversaries, Iran and North Korea both advanced much further in their nuclear development.

And finally Democrats must play up the sharp differences that exist between the two parties on national security. Here the voters seem to be accepting in larger numbers the principles of the Democratic foreign policy platform, but Democrats have not yet locked in their advantages. Three framing themes seem particularly worth emphasizing:

• The New versus the Old. Democrats should argue that their foreign policy is particularly well suited to meeting today's unconventional threats—those that cross borders. Meeting such threats will sometimes entail using military force, but it will almost always require mustering global cooperation. Here the Democrats must point to the security consequences of the loss of respect for the United States around the world: the US requires the assistance of others to aid it in combating terrorism, halting nuclear proliferation, and reversing global warming. In scorning international law and public opinion abroad, Republicans have alienated those the US needs to share the burden of neutralizing threats that Americans deem the most pressing. Democrats for instance, will be more effective in securing the cooperation of intelligence and law enforcement officials in the eighty countries in which al-Qaeda is now active.

• Deeds versus Words. In his National Security Strategy for 2002, Bush used the words "liberty" eleven times, "freedom" forty-six times, and "dignity" nine times; yet people who live under oppression around the world have seen few benefits from President Bush's freedom doctrine. Richard Armitage, former deputy secretary of state under Bush, put it best when he said, "Since 9/11 our principal export to the world has been our fear." The gulf between America's rights rhetoric and the abuses carried out against detainees in American custody has been fatal to American credibility. Obama needs to restore that credibility by ending those excesses, and by following through on his pledge to launch a foreign aid initiative rooted in Franklin Roosevelt's core democratic value: freedom from fear. The United States should invest in a long-term "rule of law" initiative that takes up the burden of helping other countries and international organizations to build workable legal systems in the developing world.

• Law versus Lawlessness. In arguing for closing down Guantánamo, ending extraordinary rendition, and returning to the Geneva Conventions, Democrats must remind voters of the national security consequences of being perceived as a lawbreaker. More terrorists take up arms against the United States, while fewer countries take up arms along with the United States. In stressing the importance of law, Democrats should also repudiate the extraordinary and illegitimate presidential power seized by Bush (and generally supported by McCain). As a constitutional lawyer, Obama is in a unique position to argue that as commander in chief, he will never hold himself or his advisers above the law.

For the first time in sixteen years, the Democrats in 2008 could end up in control of the House, Senate, and White House. This could enable them to scale back the ballooning budget deficit, put in place a universal health care plan, move the country along the path to energy independence, and commit the United States to combating climate change. Although few have focused on this, the Democratic Party today is also in a strong position to show that it will be more reliable in keeping Americans safe during the twenty-first century. If the party succeeds in doing this, it will not only wake up the United States and the world from a long eight-year nightmare; it will also lay to rest the enduring myth that strong and wrong is preferable to smart and right.

—July 17, 2008

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Notes

[1] Clinton's actual quote: "When people feel uncertain, they'd rather have somebody who's strong and wrong than somebody who's weak and right." From a speech to the Democratic Leadership Council, 2002.

[2] "Securing, Stabilizing, and Rebuilding Iraq: Progress Report: Some Gains Made, Updated Strategy Needed," June 23, 2008. See www.gao.gov/docsearch/abstract.php?rptno=GAO-08-837.

[3] Peter Bergen and Paul Cruickshank, "The Iraq Effect: War Has Increased Terrorism Sevenfold Worldwide," Mother Jones, March/April 2007.

[4] John E. Cloonan, June 10, 2008. "Coercive Interrogation Techniques: Do They Work, Are They Reliable, and What did the FBI Know About Them?" Opening Comments by John E. Cloonan, Retired FBI Special Agent, available at http://judiciary.senate.gov/testimony.cfm?id=3399&wit_id=7228.

[5] Interview with Senator Joe Biden on MSNBC, "Morning Joe," May 23, 2008.

[6] ABC News Polling Unit and Stanford Institute for Research in the Social Sciences at Stanford University, November 9, 2004.

[7] ABM, Kyoto, Small Arms, ICC, and Biological Weapons.

[8] Obama has assembled several hundred high-level experts grouped into two dozen working groups, each of which has developed plans on issues as diverse as "reform of international financial institutions" and "sub-Saharan African food policy."

[9] In early July Admiral Mike Mullen, chairman of the US Joint Chiefs of Staff, said, "I don't have troops I can reach for, brigades I can reach, to send into Afghanistan until I have a reduced requirement in Iraq." He continued, "Afghanistan has been and remains an economy-of-force campaign, which by definition means we need more forces there."

Georgia and the Balance of Power

Volume 55, Number 14 · September 25, 2008

By George Friedman

The Russian invasion of Georgia has not changed the balance of power in Eurasia. It has simply announced that the balance of power had already shifted. The United States has been absorbed in its wars in Iraq and Afghanistan, as well as potential conflict with Iran and a destabilizing situation in Pakistan. It has no strategic ground forces in reserve and is in no position to intervene on the Russian periphery. This has opened an opportunity for the Russians to reassert their influence in the former Soviet sphere. Moscow did not have to concern itself with the potential response of the United States or Europe; hence, the balance of power had already shifted, and it was up to the Russians when to make this public. They did that on August 8.

Let's begin simply by reviewing recent events. On the night of Thursday, August 7, forces of the Republic of Georgia moved across the border of South Ossetia, a secessionist region of Georgia that has functioned as an independent entity since the fall of the Soviet Union (see map).

Map

They drove on to the capital, Tskhinvali, which is close to the border. Georgian forces got bogged down while trying to take the city. In spite of heavy fighting, they never fully secured it, nor the rest of South Ossetia.

On the morning of August 8, Russian forces entered South Ossetia, using armored and motorized infantry forces along with air power. South Ossetia was informally aligned with Russia, and Russia acted to prevent the region's absorption by Georgia. In view of the speed with which the Russians responded—within hours of the Georgian attack—they had been expecting it and were themselves at their jumping-off points. The counterattack was carefully planned and competently executed, and over the next forty-eight hours the Russians succeeded in defeating the main Georgian force and compelling a retreat. By Sunday, August 10, they had consolidated their position in South Ossetia.
Univ. of Chicago / Manual of Style

On Monday, August 11, the Russians extended their offensive into Georgia proper, attacking on two axes. One was south from South Ossetia to the Georgian city of Gori. The other was from Abkhazia, another secessionist region of Georgia aligned with the Russians. (On August 26, Russia recognized South Ossetian and Abkhazian independence, turning the de facto situation of the last sixteen years into a de jure one.) This drive was designed to cut the road between the Georgian capital of Tbilisi and its Black Sea ports, Poti and Batumi. By this point, the Russians had bombed the Georgian military airfields at Marneuli and Vaziani and appeared to have disabled radars at the international airport in Tbilisi. These moves brought Russian forces to within forty miles of the Georgian capital, while making outside re-inforcement and resupply of Georgian forces extremely difficult should anyone wish to undertake it.

The Mystery Behind the Georgian Invasion

In this simple chronicle, there is something quite mysterious: Why did the Georgians choose to invade South Ossetia on August 7? There had been a great deal of shelling by the South Ossetians of Georgian villages for the previous three nights, but while possibly more intense than usual, such artillery exchanges were routine. The Georgians might not have fought well, but they committed fairly substantial forces that must have taken at the very least several days to deploy and supply. Georgia's move was deliberate.

The United States is Georgia's closest ally. It maintained about 130 military advisers in Georgia, along with civilian advisers, contractors involved in all aspects of the Georgian government, and people doing business there. (The United States conducted joint exercises with Georgian troops in July, with over a thousand US troops deployed. The Russians carried out parallel exercises in response. US troops withdrew. The Russian maneuver force remained in position and formed the core of the invading force.) It is inconceivable that the Americans were unaware of Georgia's mobilization and intentions. It is also inconceivable that the Americans were unaware that the Russians had deployed substantial forces on the South Ossetian border. US technical intelligence, from satellite imagery and signals intelligence to unmanned aerial vehicles, could not miss the fact that thousands of Russian troops were moving to forward positions. The Russians clearly knew that the Georgians were ready to move. How could the United States not be aware of the Russians? Indeed, given the deployments of Russian troops, how could intelligence analysts have missed the possibility that Russia had laid a trap, hoping for a Georgian invasion to justify its own counterattack?

It is difficult to imagine that the Georgians launched their attack against US wishes. The Georgians rely on the United States, and they were in no position to defy it. This leaves two possibilities. The first is a huge breakdown in intelligence, in which the United States either was unaware of the deployments of Russian forces or knew of them but—along with the Georgians—miscalculated Russia's intentions. The second is that the United States, along with other countries, has viewed Russia through the prism of the 1990s, when its military was in shambles and its government was paralyzed. The United States has not seen Russia make a decisive military move beyond its borders since the Afghan war of the 1970s and 1980s. The Russians had systematically avoided such moves for years. The United States had assumed that they would not risk the consequences of an invasion.

If that was the case, then it points to the central reality of this situation: the Russians had changed dramatically, along with the balance of power in the region. They welcomed the opportunity to drive home the new reality, which was that they could invade Georgia, and the United States and Europe could not meaningfully respond. They did not view the invasion as risky. Militarily, there was no force to counter them. Economically, Russia is an energy exporter doing quite well—indeed, the Europeans need Russian energy even more than the Russians need to sell it to them. Politically, as we shall see, the Americans need the Russians more than the Russians need the Americans. Moscow's calculus was that this was the moment to strike. The Russians had been building up to it for months, and they struck.

Western Encirclement of Russia

To understand Russian thinking, we need to look at two events. The first is the Orange Revolution in Ukraine. From the US and European points of view, the Orange Revolution repre-sented a triumph of democracy and Western influence. From the Russian point of view, as Moscow made clear, the Orange Revolution was a CIA-funded intrusion into the internal affairs of Ukraine, designed to draw Ukraine into NATO and add to the encirclement of Russia. US Presidents George H.W. Bush and Bill Clinton had promised the Russians that NATO would not expand into the former Soviet empire.

That promise had already been broken in 1998 by NATO's expansion to Poland, Hungary, and the Czech Republic—and again in the 2004 expansion, which included not only the rest of the former Soviet satellites in what is now Central Europe, but also the three Baltic states, which had been components of the Soviet Union.

The Russians had tolerated all that, but the discussion of including Ukraine in NATO represented to them a fundamental threat to Russia's national security. It would, in their calculations, have rendered Russia indefensible and threatened to destabilize the Russian Federation itself. When the United States went so far as to suggest that Georgia be included as well, bringing NATO deeper into the Caucasus, the Russian conclusion—publicly stated—was that the United States in particular intended to encircle and break Russia.

The second and lesser event was the decision by Europe and the United States to back Kosovo's separation from Serbia. The Russians were friendly with Serbia, but the deeper issue for Russia was this: the principle accepted in Europe since World War II was that, to prevent conflict, national borders would not be changed. If that principle were violated in Kosovo, other border shifts—including demands by various regions for independence from Russia—might follow. The Russians publicly and privately asked that Kosovo not be given formal independence, but instead continue its informal autonomy, which was the same thing in practical terms. Russia's requests were ignored.

From the Ukrainian experience, the Russians became convinced that the United States was engaged in a plan of strategic encirclement and strangulation of Russia. From the Kosovo experience, they concluded that the United States and Europe were not prepared to consider Russian wishes even in fairly minor affairs. That was the breaking point. If Russian desires could not be accommodated even in a minor matter like this, then clearly Russia and the West were in conflict. For the Russians, as we said, the question was how to respond. Having declined to respond in Kosovo, they decided to respond where they had all the cards: in South Ossetia.

Moscow had two motives, the lesser of which was as a tit-for-tat over Kosovo. If Kosovo could be declared independent under Western sponsorship, then South Ossetia and Abkhazia, the two breakaway regions of Georgia, could be declared independent under Russian sponsorship. Any objections from the United States and Europe would simply confirm their hypocrisy. This was important for internal Russian political reasons, but the second motive was far more important.

Russian Prime Minister Vladimir Putin once said that the fall of the Soviet Union was a geopolitical disaster. This didn't mean that he wanted to retain the Soviet state; rather, it meant that the disintegration of the Soviet Union had created a situation in which Russian national security was threatened by Western interests. As an example, consider that during the cold war, St. Petersburg was about 1,200 miles away from a NATO country. Today it is less than a hundred miles away from Estonia, a NATO member. The disintegration of the Soviet Union had left Russia surrounded by a group of countries that it sees as hostile to its interests in various degrees and heavily influenced by the United States, Europe, and, in some cases, China.

Resurrecting the Russian Sphere

Putin did not want to reestablish the Soviet Union, but he did want to re- establish the Russian sphere of influence in the former Soviet region. To accomplish that, he had to do two things. First, he had to reestablish the credibility of the Russian army as a fighting force, at least in its own region. Second, he had to establish that Western guarantees, including NATO membership, meant nothing in the face of Russian power. He did not want to confront NATO directly, but he did want to confront and defeat a power that was closely aligned with the United States, had US support, aid, and advisers, and was widely seen as being under American protection. Georgia was the perfect choice.

By invading Georgia as Russia did (competently if not brilliantly), Putin reestablished the credibility of the Russian army. (It was no surprise that its operations would render thousands of people homeless and cause civilian casualties.) But far more importantly, Putin's invasion revealed an open secret. While the United States is tied down in the Middle East, American guarantees have no value. This lesson is not for American consumption. It is something that, from the Russian point of view, the Ukrainians, the Balts, and the Central Asians need to digest. Indeed, it is a lesson Putin wants to transmit to Poland and the Czech Republic as well. In July, the Czech government signed an agreement with the United States to set up a ballistic missile defense installation in the Czech Republic, and in August, days after the conflict in Georgia began, the Polish government announced that it has agreed to allow the Americans to build an anti-missile base in Poland. The US–Polish agreement was hurriedly signed as a gesture of defiance to the Russians. The Russians responded with threats that Condoleezza Rice dismissed as "bizarre."

The Russians knew that the United States would denounce their attack. This actually plays into Russian hands. The more vocal senior US leaders are, the greater the contrast with their inaction, and the Russians wanted to drive home the idea that American guarantees are empty talk. The Russians also know something else that is of vital importance. For the United States, the Middle East is far more important than the Caucasus, and Iran is particularly important. The United States wants the Russians to participate in sanctions against Iran. Even more importantly, it does not want the Russians to sell weapons to Iran, particularly the highly effective S-300 air defense system. Georgia is a marginal issue to the United States; Iran is a central issue. The Russians are in a position to pose serious problems for the United States not only in Iran, but also with weapons sales to other countries, like Syria.

Therefore, the United States has a problem—either it must reorient its strategy away from the Middle East and toward the Caucasus, or it has to seriously limit its response to Georgia to avoid a Russian counter in Iran. Even if the United States had an appetite for war in Georgia at this time, it would have to calculate the Russian response in Iran—and possibly in Afghanistan (even though Moscow's interests there are currently aligned with those of Washington).

In other words, the Russians have backed the Americans into a corner. The Europeans, who for the most part lack expeditionary military forces and are dependent upon Russian energy exports, have even fewer options. If nothing else happens, the Russians will have demonstrated that though they are not a global power by any means, they have resumed their role as a significant regional power with lots of nuclear weapons and an economy that is less shabby now than in the past. Russia has also compelled every state on its periphery to reevaluate its position relative to Moscow. That is what the Russians wanted to demonstrate, and they have demonstrated it.

The war in Georgia, therefore, is Russia's public return to great power status. This is not something that just happened—it has been unfolding ever since Putin took power, and with growing intensity in the past five years. Part of it has to do with the increase in Russian power, but a great deal of it has to do with the fact that the Middle Eastern wars in Iraq and Afghanistan have left the United States off-balance and short on resources. This conflict created a window of opportunity. The Russian goal is to use that window to assert a new reality throughout the region while the Americans are tied down elsewhere and dependent on Russian cooperation. The war was far from a surprise; it has been building for months. But the geopolitical foundations of the war have been building since 1992. Russia has been an empire for centuries. The last fifteen years or so were not the new reality, but simply an aberration that would be rectified. And now it is being rectified. Whether the US and its allies can mount a coherent response has now become a central question of Western foreign policy.

—August 27, 2008

George Friedman is Founder and CEO of Stratfor, a private intelligence company publishing geopolitical and security analysis at www.stratfor.com. He is author of America's Secret War . His new book, The Next Hundred Years , will be published in January 2009.

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Letters

October 23, 2008: Daniel Fried, Georgia, the US, and the Balance of Power: An Exchange

New York Review of Books

Volume 55, Number 16 · October 23, 2008
He Foresaw the End of an Era
By John Cassidy
The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means
by George Soros

PublicAffairs, 162 pp.,$22.95

George Soros has been an active investor for more than half a century. In the mid-1980s, when I started writing about Wall Street, he was already a leading hedge fund manager. Not many people understood hedge funds back then, but for those in the know Soros's Quantum Fund, which he founded in 1973, was the model: year after year, it had achieved returns in excess of the broader market. After weathering the 1987 stock market crash, Quantum, since 1989 under the day-to-day management of Stanley Druckenmiller, racked up more big gains, culminating in a huge bet against the pound sterling in 1992, which reportedly netted more than a billion dollars. (Soros has never publicly confirmed the exact figure. The British newspapers put it at $1.1 billion.)

Thereafter, Soros spent an increasing amount of his time on philanthropic activities throughout the world, including many laudable efforts to promote the spread of democracy in his native Eastern Europe. (He was born in Budapest in 1930.) After 2001, he also involved himself in domestic politics. A vocal critic of the Bush administration, in the run-up to the 2004 election he donated considerable sums to MoveOn.org, the liberal Internet organization. More recently, he and his family have contributed to Barack Obama's presidential campaign.

But Soros remains first and foremost a speculator. In 2007, after the subprime crisis erupted, he returned, at the age of seventy-seven, to directing Quantum's investments, with results suggesting he hadn't lost his touch. Alpha magazine, a glossy publication that covers hedge funds, estimates that he made $2.9 billion in 2007, placing him second on its list of mega-speculators, behind only John Paulson, of Paulson & Co., who raked in an even more astonishing $3.7 billion.
Harvard / Financial Crisis Books

At the start of this year, Soros, convinced (correctly) that the financial crisis was far from over, adopted a bearish investment strategy, which he describes thus: "short US and European stocks, US ten-year government bonds, and the US dollar; long Chinese, Indian, and Gulf States stocks and non-US currencies." Initially, some of these positions didn't pay off. Between January and March, US bonds rallied and Indian stocks tumbled, wiping out gains in other parts of Quantum's portfolio. Just how Soros has fared in the past few months of market turmoil may be known only to investors in Quantum, but it would be foolhardy to bet against him.

Forbes magazine recently estimated Soros's net worth at $9 billion. For all his worldly success, though, he still has an unfulfilled ambition: to be taken seriously not just as a financial practitioner but also as a theoretician. In 1987, Simon and Schuster published his first book, The Alchemy of Finance, in which he revisited some of his investments and expounded his theory of "reflexivity," which claims that major market movements, such as the recent rise in commodity prices, sometimes take on lives of their own, entrapping investors in illusions and imparting a fundamental instability to the economic system.

The book proved popular with other investors. Paul Tudor Jones II writes: "When I enter the inevitable losing streak that befalls every investor, I pick up The Alchemy and revisit Mr. Soros's campaigns." But many professional economists, who tend to take a more sanguine view of financial markets, dismissed it out of hand. Writing in The New Republic, MIT's Robert Solow, one of the most respected macroeconomists of the twentieth century, doubted that Soros understood "simultaneous" equations, i.e., systems of equations that involve more than one dependent variable. (For those unfamiliar with economics, this was a bit like accusing a carpenter of not knowing how to use a chisel.)

Solow had a point—he usually does. Soros's presentation of his ideas was a bit garbled. The suspicion lingers, however, that his principal offense was challenging professional economists on their own ground. Now he is at it again—in a much shorter and more digestible book entitled The New Paradigm for Financial Markets—and this time around he and his pet theory cannot be so easily dismissed. Since the publication of The Alchemy of Finance, the global economy has witnessed a long and geographically dispersed series of boom-and-bust cycles, the latest of which is currently ravaging the US economy. While episodes such as these would be perfectly recognizable to Victorian economists such as John Stuart Mill or Alfred Marshall, who referred to them as "trade cycles," they defy modern orthodoxy, which depicts the economy in general, and financial markets in particular, as effective, stable, and self-correcting mechanisms.

As of mid-September, the credit crunch was showing no sign of letting up, indeed it was getting more severe. One big Wall Street investment bank, Lehman Brothers, went bankrupt; another, Merrill Lynch, averted a similar fate by merging with a big commercial bank, Bank of America; AIG, the biggest insurance company in the country, got into such a perilous state that the Federal Reserve, fearful its collapse would bring down a number of other financial institutions, agreed to lend the firm $85 billion, while acquiring 80 percent ownership of the company. Finally, amid signs that despite the AIG bailout the markets were on the verge of a complete breakdown, Treasury Secretary Hank Paulson unveiled a plan for the federal government to buy from the banks up to $700 billion in distressed mortgage securities.

It hardly needs saying that these events were without precedent in postwar history, although students of the Great Depression, such as Fed chairman Ben Bernanke, saw much that was frighteningly familiar. And yet, despite all this, the economists who promulgated the reassuring orthodoxy about financial markets and force-fed it to generations of graduate students have been notably quiet about what went wrong with their theories.

Soros doesn't have all the answers, not by any means. But unlike some of the professors who dismissed him as an overremunerated gadfly, he has something to say. (In recent years, it should be noted, a number of theorists, some rallying under the banner of "behavioral finance," have created more realistic models in which financial markets can depart from economic fundamentals, speculation can be destabilizing, and boom-and-bust cycles can persist. Until very recently, however, these new theories had little or no impact on economic policymaking.[*])

Financial markets perform two essential roles in the economy: (1) they take money from those with no immediate use for it, such as people saving for retirement and the hereditary rich, and put it into the hands of firms and entrepreneurial individuals with productive investment ideas but a shortage of cash to finance them; (2) they allow individuals and institutions to reapportion risk to those more willing to bear it. If Wall Street didn't exist, another method of allocating savings and risks would have to be found. One alternative is diktat, but the history of the Soviet Union and other Communist countries amply demonstrated the difficulties involved in centralizing economic decisions.

The great advantage of a market system is that it draws on information from throughout the economy and translates it into public signals—prices—that investors and firms can react to. Earlier this year, investors woke up to the fact that Detroit had ignored the threat of dwindling oil stocks and had bet its future on gas-guzzling SUVs: the stock prices of American car companies plummeted, making it much more expensive for them to sell equity in their corporations. Toyota and Honda, which had invested heavily in smaller, more fuel-efficient vehicles, have seen their stocks hold up much better, enabling them to raise funds cheaply. Nobody planned it, but in this instance the market rewarded foresight and innovation.

For financial markets to allocate resources to their most productive uses on an ongoing basis, the price signals they send must be the right ones day after day after day. Is this a realistic goal? A typical investor following the Dow's gyrations on CNBC or Yahoo Finance might be tempted to say no, but then the typical investor doesn't have the benefit of an economics Ph.D. from the University of Chicago.

The benign view of markets owes much to three Chicago economists: Milton Friedman, Eugene Fama, and Robert Lucas. Although best known for his work on monetary theory and his enthusiastic espousal of capitalism, early in his career Friedman had played a key part in developing the "efficient markets hypothesis," which, together with its younger sibling the "rational expectation hypothesis"—see below—provided the intellectual underpinning for more than two decades of financial deregulation. Briefly put, the efficient markets hypothesis states that prices of stocks, bonds, and other speculative assets necessarily reflect everything that is known about economic fundamentals, such as inflation, exports, and corporate profitability. The proof proceeds by contradiction. Suppose stock prices have risen above levels justified by the fundamentals. Then clever speculators, such as Soros, will step in and sell them, thereby restoring prices to their proper levels. If stocks fall below their fundamental value, speculators will step in and buy them.

Friedman actually formulated the efficient markets hypothesis in an analysis of currencies. It was Fama, one of his students, who applied it to the stock market and pointed out an interesting corollary: if stock prices already reflect everything that is known and knowable, then investors can't hope to outperform the market using trading strategies based on publicly available information. Rather than wasting time and effort trying to pick individual stocks, they would be well advised to place their savings in a broadly diversified mutual fund that tracks the daily movement of the market. Largely thanks to Fama and his followers, so-called index funds today have a central part in many Americans' retirement planning.

Lucas, the third member of the Chicago triumvirate, was arguably more influential even than Friedman. In a series of ingenious papers published in the 1960s and 1970s, he and several colleagues extended the hyperrational methodology underpinning the efficient markets hypothesis to other parts of the economy, such as the job market, the output decisions of firms, and the formulation of economic policy. By the time they were done, Lucas et al. had invented a new way of doing macroeconomics, known as the rational expectations approach, which enshrined in higher mathematics the stabilizing properties of unfettered markets. You don't have to spend much time on Wall Street to recognize that expectations are what drive the markets. If investors anticipate good news, they buy; if they expect bad news, they sell.

Where, though, do these economic expectations come from? According to Lucas, they reflect a predefined, externally grounded, and commonly agreed upon reality. In his models, the economy's equations of motion are well defined and known to all—from Ph.D. economists at the University of Chicago to nurses and cab drivers. Utilizing this common knowledge, people form "rational expectations" of things like inflation and interest rates. They don't always get things right—a certain amount of randomness is allowed for—but they are precluded from making systematic errors. If in one period the economy gets out of sync, in the next period it jumps back to the "equilibrium" defined by the model.

Not content to create new models, Lucas also disparaged older theories that viewed financial capitalism more skeptically. Keynesianism wasn't merely wrong, he declared at one point: it was no longer intellectually respectable.

Soros had neither the inclination nor the technical ability to challenge the Chicago school's formal arguments. (In a charming passage, he reveals that he wasn't very good at math, and that he achieved poor grades at the London School of Economics, where he studied in the late 1940s.) What he does possess, however, is voluminous amounts of firsthand knowledge gained in the financial markets, together with a keen interest in formulating a theory on the basis of his observations. Academic criticism of The Alchemy of Finance didn't put him off that effort. "My conceptual framework remained something very important for me personally," he writes. "It guided me both in making money as a hedge fund manager and in spending it as a philanthropist: and it became an integral part of my identity."

Outside the idealized world of Lucas's theory, knowledge is imperfect, people stick to wrongheaded ideas, and there is no agreed version of how the economy works. In these circumstances, Soros rightly points out, economic expectations, even biased ones, can help to determine economic fundamentals. One way to grasp what Soros is getting at is to look at the diagram on this page, in which the arrows indicate the directions of causation. Soros doesn't refer to this diagram, which I drew up myself, but he spells out the relations it illustrates:

Reflexivity can be interpreted as a circularity, or two-way feedback loop, between the participants' views and the actual state of affairs. People base their decisions not on the actual situation that confronts them but on their perception or interpretation of that situation. Their decisions make an impact on the situation (the manipulative function), and changes in the situation are liable to change their perceptions (the cognitive function).

A simple hypothetical example—for which I also take responsibility—may help to illustrate what can happen in such a reflexive system.

Imagine that ABC Corp. makes profits of $W per share, pays dividends of $X a share, and is growing at Y percent per annum. If you assume that this rate of earnings growth will persist indefinitely, it is a matter of high school arithmetic to figure out what ABC Corp.'s stock is worth on a fundamental basis, an amount I will call $Z. In the world of the Chicago economists, well-informed investors bid the price up to $Z and stop there. If prices rise above that level, they step in and sell; if prices fall below $Z, they buy. All is rational: all is efficient.

Now imagine that a group of irrationally exuberant investors come to believe that ABC Corp.'s growth rate is about to accelerate to 2Y percent, and, as a result, they bid up its stock up $2Z and keep it there for a while. What happens next? One possibility is that ABC Corp. could issue more of its highly rated shares and use them to purchase a rival, DEF Corp., whose stock price has been lagging—hence presenting a relative bargain. Thanks to the magic of acquisition accounting, the mere act of ABC Corp. buying DEF Corp. would make it appear that its earnings per share were growing rapidly. Voilà, the inflated earnings expectations that drove up ABC Corp.'s stock would have turned out to be justified. Most likely, the stock would rise even further—for a while, anyway.

If the previous discussion seemed a bit abstract, don't lose heart. In the second half of his book, Soros applies his theoretical frame to events he has lived through, beginning with the conglomerates boom of the late 1960s and ending with today's credit crunch. Reflecting on the harsh reception afforded to his earlier book, he writes:

Many critics of reflexivity claimed that I was belaboring the obvious, namely that the participants' biased perceptions influence market prices. But the crux of reflexivity is not so obvious; it asserts that market prices can influence the fundamentals. The illusion that markets manage to be always right is caused by their ability to affect the fundamentals they are supposed to reflect. The change in the fundamentals may then reinforce the biased expectations in an initially self-reinforcing but eventually self-defeating process.

Of course, such boom-bust sequences do not happen all the time. More often the prevailing bias corrects itself before it can affect the fundamentals. But the fact that [such sequences] can occur invalidates the theory of rational expectations. When they occur, boom-bust processes can take on historic significance. That is what happened in the Great Depression, and that is what is unfolding now, although it is taking a very different shape.

One of Soros's earliest professional coups was investing in fast-growing industrial conglomerates, such as Textron, LTV, and Teledyne, which during the early days of the Nixon administration used their inflated stocks to buy out a succession of other companies. Just as in the example of ABC Corp., simply combining a lower-rated company with a higher-rated one boosted reported earnings per share for the lower-rated company. Even though investors such as Soros knew full well that much of this growth was an accounting illusion, they continued to bid up the conglomerates' stocks, thereby keeping the game going.

In order for it to continue indefinitely, however, the acquirers had to target bigger and bigger companies. Eventually, the Reliance Group, Saul Steinberg's outfit, launched a takeover bid for the venerable Chemical Bank that generated an establishment backlash. Steinberg's bid failed, and investors began to question the reported earnings growth of Reliance and other conglomerates. Knowing that the jig was almost up, Soros sold out and moved on to the next boom-bust cycle, which, in his case, turned out to be in real estate investment trusts.

Breaking up the narrative, Soros provides a handy eight-stage guide to the typical boom-bust cycle, together with a series of stock charts to help readers spot one in the making. Turning to the current situation, he says that, in large part, the recent housing bubble in the United States fit the historic pattern, except that in this case reflexivity was centered on the real estate rather than the stock market. As house prices shot up between 2001 and 2005, credit standards deteriorated sharply. Rather than restricting their lending, mortgage financiers deluded themselves into believing that the collateral for the loans they were making would continue to rise in value. The very act of extending more and more credit, on easier and easier terms, kept demand for real estate buoyant, which, in turn, ensured that for several years the lenders' optimistic expectations were validated. It was only when borrowers who had taken out loans they couldn't afford started to default in large numbers that the housing bubble finally burst.

What distinguishes this process from earlier downturns, and what makes it so dangerous, is the historical and international economic situation in which it is taking place, Soros says. "Superimposed on the US housing bubble," he writes, "is a much larger boom-bust sequence which has finally reached its inflection, or crossover, point." The housing slump is following the normal historical pattern, he suggests,

but, in addition, it has also set in motion a flight from the dollar and unwinding of the other excesses introduced into the financial system by recent innovations. That is how the housing bubble and super-bubble are connected.

As described by Soros, the "super-bubble" developed over the past quarter-century and is the result of three underlying trends: globalization, credit expansion, and deregulation. By globalization, he means not just expansion of trade in goods and services, and the rise of China and India, but the US's emergence as the world's biggest debtor. In the past couple of years, he reminds us, the United States has been running a current account deficit of more than 6 percent of GDP—a level usually associated with a developing country about to suffer a foreign exchange crisis.

The US has been able to avoid that fate because of the dollar's status as the main international reserve currency, and because foreign governments, particularly the one in Beijing, have proved willing to purchase enormous quantities of Treasury bonds. "There was a symbiotic relationship between the United States, which was happy to consume more than it produced, and China and other Asian exporters, which were happy to produce more than they consumed," Soros notes. "The United States accumulated external debt: China and the others accumulated currency reserves."

The lending boom extended far beyond the housing market. Over the past generation, the overall expansion of the US economy has increasingly become an asset-driven phenomenon. In 1980, the total amount of credit market debt outstanding in the United States was roughly the same as the GDP: by 2007, it had risen to about 350 percent of GDP. The bundling of residential mortgages into widely traded securities—"securitization"—played a significant role in this transformation, but so did increased federal lending resulting from large-scale budget deficits, the securitization of credit card debt and auto loans, and an expansion in corporate debt issuance. Soros isn't the first to point out these trends, but his description of the changes he has witnessed since starting out on Wall Street is instructive, nonetheless. In the years after World War II, he points out:

The total amount of credit outstanding in relation to the size of the economy was much less than it is today, and the amounts that could be borrowed against different types of collateral were also much smaller. Mortgages required at least 20 percent down payment, and borrowing against stocks was subject to statutory margin requirements that restricted loans to 50 percent or less of the value of the collateral. Auto loans, which required down payment, have been largely replaced by leases, which do not. There were no credit cards and very little unsecured credit. Financial institutions represented only a small percentage of the capitalization of US stocks. Very few financial stocks were listed on the New York Stock Exchange. Most banks were traded over the counter, and many of them traded only by appointment.

Until last summer, the US economy was awash in easy credit. In one way or another, the banking system played an important part in issuing many of these loans, which is hardly surprising since that is how banks make money. Rather than criticizing his fellow investors on Wall Street, who created many of the newfangled debt instruments—such as mortgage-backed securities and collateral debt obligations—that have now imploded, Soros puts the blame on the regulators and central bankers who aided and abetted the financiers' incendiary activities. Under the system of "self-regulation" adopted by American and European banking regulators, many big financial institutions, such as Citigroup, Barclays, and Union Bank of Switzerland, were allowed to rely on their internal risk-management systems. The only outside check on their activities came from commercial ratings agencies, such as Moody's and Standard & Poor's, which depended on the banks' fees for business.

"I find this the most shocking abdication of responsibility on the part of the regulators," Soros writes.

If they could not calculate the risk, they should not have allowed the institutions under their supervision to undertake them. The risk models of the banks were based on the assumption that the system is stable. But, contrary to market fundamentalist beliefs, the stability of financial markets is not assured; it has to be actively maintained by the authorities. By relying on the risk calculations of the market participants, the regulators pulled up the anchor and unleashed a period of uncontrolled credit expansion.

As long as credit was flowing freely, the three elements of the "super-bubble" reinforced one another. Now that the housing bubble has burst and economic growth has slowed dramatically, reflexivity is working in the opposite direction: market fundamentals are influencing investor perceptions. The global capital market that enabled the US to finance a huge trade deficit has proved equally adept at transferring the subprime shock to other parts of the world: after rushing in to capture the high yields offered by US subprime securities, big European banks have been forced to write off almost as much money as their American brethren. (Taking the United States and Europe together, banks and other financial institutions have, so far, written off roughly $450 billion in subprime-related charges. Many institutions are sitting on losses that they haven't yet declared. Estimates of the total losses that will eventually result range from $1 trillion to $2 trillion.)

As nerves fray and values of collateral plummet, many big financial institutions are desperately trying to eliminate the debt showing on their balance sheets. Individually, this may make sense. When banks do this collectively, it deprives worthwhile capital projects of funding and risks deepening the economic downturn, which, in turn, could well lead to more loans going bad. As Lawrence Summers, the Harvard economist and former Treasury secretary, recently noted in the Financial Times, this is but one of several vicious cycles operating simultaneously. Falling asset prices are forcing investors with heavy borrowings into distress sales, which is putting more downward pressure on prices. As GDP growth slows, firms are laying off workers. Higher unemployment leads households to cut back on their spending, which reduces economic growth. "Without active efforts to interfere with these mechanisms," Summers wrote in an article published on August 6, "there can be no basis for confidence that the American economy will recover even in the medium term."

Soros would surely agree with that statement. Finishing his manuscript earlier this year, he predicted that the economic slump would be prolonged, partly because problems in the financial system would make countercyclical policies—such as easing the money supply to stimulate investment—less effective than usual. During 2008, the Fed has cut short-term interest rates to 2 percent and established virtually unlimited borrowing lines to financial firms. Congress has voted through a refinancing scheme for many of the homeowners who fall behind on their mortgage payments.

In early September, in an effort to bring down mortgage rates and put an end to the housing slump, the Bush administration took the dramatic step of effectively nationalizing Fannie Mae and Freddie Mac, two giant mortgage lenders that the government originally set up but which had for many years operated as private companies. The federal takeover added more than $5 trillion to the national debt, and, especially coming from a Republican administration, it represented a historic extension of public intervention in the American economy; the Treasury Department then, without congressional approval, granted itself warrants to buy up to 80 percent of AIG's stock. (One Republican senator, Jim Bunning of Kentucky, lambasted the move as socialism and called on Treasury Secretary Hank Paulson to resign.) Yet despite all these moves, rates on jumbo mortgage loans—the type many home buyers have to take out if they live in places like New York, Boston, and Washington—remain close to 8 percent. Not surprisingly, house prices in most major markets are still falling.

Where will it end? Viewed from Soros's perspective, the dramatic events of mid-September demonstrated how reflexivity was working on the downside, to devastating effect: the slumping real estate market had wreaked havoc on banks and other financial institutions, which had reacted by tightening lending standards, and cutting back on the amount of credit, particularly mortgage finance, that they were willing to extend to households and firms. Tighter credit conditions, in turn, were hurting the economy and putting further downward pressure on property prices, shattering hopes that the credit markets would stabilize of their own accord, and that troubled firms would be able to recapitalize their balance sheets.

Some sort of recovery was what Richard S. Fuld, Lehman's former chief executive, and his colleagues had been hoping for. From the fall of 2007 onward, the firm, which was founded in 1850, was struggling to survive. Rather than selling out to a bigger, sounder institution, its managers gambled that the credit markets would rebound, arresting the fall in value of tens of billions of dubious real estate assets festering on the firm's balance sheet. The turnaround never came. By the time that Lehman was prepared to give up its independence, in mid-September, it was facing a funding crisis, and there were no purchasers interested. (The Treasury Department and the Federal Reserve didn't deem Lehman strategically important enough to save, so it went bust. AIG, on the other hand, was too big to be allowed to fail.)

History shows that ad hoc attempts to resolve banking crises seldom work. The only thing that puts an end to the downward spiral is government intervention on a grand scale, socializing the losses that have been incurred, and freeing up the surviving institutions to start lending again. With Hank Paulson's bailout plan, we have now reached that stage, where the taxpayer is called upon to rectify the bankers' mistakes. Although the plan comes with a $700 billion price tag, the eventual cost could be even larger. Some observers have compared what is happening now to the S&L crisis of the late 1980s, when the government set up the Resolution Trust Corporation to dispose of the assets of insolvent thrifts, but that was a relatively trivial exercise compared to what is ahead. A better analogy is the Japanese banking crisis of the 1990s, where the government initially refused to recognize the scale of the problem, but ended up, after almost a decade of economic stagnation, having to spend vast sums of public money on recapitalizing the country's financial sector. Even then, the Japanese economy failed to resume its previous growth rates: after a few years of modest expansion, it has once again slipped into near-recession.

It is to be hoped that the Paulson plan has a more invigorating effect on the US economy, but despite the recent celebrations on Wall Street a happy outcome is far from guaranteed. Critics have questioned the timing, ethics, politics, and efficacy of the proposal. The Treasury secretary is seeking absolute freedom to enact the plan as he sees fit. Under his proposed legislation, "decisions by the secretary pursuant to the authority of this act are nonreviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency"—a position rejected by members of the Senate Banking Committee who questioned Paulson on September 23. (Writing in the Financial Times on September 25, Soros proposed an alternative rescue plan, also suggested by Senator Charles Schumer and others, of injecting public money directly into the banks, through government purchases of preferred stock.)

From an economic perspective, what matters is whether the Paulson plan, or one close to it, will work: Are the planned purchases of assets big enough to make a difference? What about all the other increasingly toxic assets that financial institutions have on their books, including roughly $950 billion of securities linked to risky "alt-A" mortgages; hundreds of billions of dollars in securitized auto loans and credit card debts; and countless dubious credits that were extended during the boom to commercial real estate developers and leveraged buyout firms? Would it have been cheaper and more effective for the government to have recapitalized the big banks by taking equity stakes in many of them?

Even if the Paulson plan, or some variation of it, restores some degree of normalcy to the credit markets, it is far from certain that a modest fall in mortgage rates and a greater willingness to lend on the part of financial institutions will be sufficient to break the self-reinforcing impetus toward recession that has taken hold in other parts of the economy. Much depends on what happens to the housing market and to the global economy, which, in providing a ready market for US exports—and in providing cash by buying US government bonds—has helped to prevent a much sharper downturn in output and employment.

One of Soros's points is that the behavior in markets he defines as reflexivity adds a fundamental indeterminacy to economic events, which makes prediction very tricky. Still, given his taste for the grand philosophical statement, he couldn't resist imparting a few thoughts about the future. Writing well before the latest dramatic developments, he said:

Eventually, the US government will have to use taxpayers' money to arrest the decline in house prices. Until it does, the decline will be self-reinforcing, with people walking away from homes in which they have negative equity and more and more financial institutions becoming insolvent, thus reinforcing both the recession and the flight from the dollar. The Bush administration and most economic forecasters do not understand that markets can be self-reinforcing on the downside as well as the upside. They are waiting for the housing market to find a bottom on its own, but it is further away than they think.

Soros wasn't all gloom and doom. He said rapid growth in the developing world, particularly China, would continue, and he brushed aside fears that the international banking system would collapse, as it did in the 1930s. After observing the pathologies the financial system had exhibited since the summer of 2007, he called for more regulation, including stricter limits on leverage, the amounts borrowed for investment. But Soros's main conclusion went beyond specific forecasts of policy recommendations. The period of history that the elections of Margaret Thatcher and Ronald Reagan ushered in had come to an end, he said:

So what does the end of an era really mean? I contend that it means the end of a long period of relative stability based on the United States as the dominant power and the dollar as the main international reserve currency. I foresee a period of political and financial instability, hopefully to be followed by the emergence of a new world order.

Since 1971, when the Nixon administration abandoned the dollar's link to gold, many commentators have predicted the demise of the American currency and an end to US economic hegemony, only to be proved wrong, or, at least, premature. Soros could well end up joining this group—he freely admits he has been too pessimistic on previous occasions. (A decade ago, he underestimated the global economy's ability to rebound from the Asian financial crisis.) If the Paulson bailout succeeds in excising from the US banking system the distressed mortgage securities that have caused so much trouble; if there is a recovery of confidence on Wall Street; if the housing market stabilizes; if the recent fall in the oil price is sustained—then the US economy and currency could yet display their Houdini-like qualities one more time. Conversely, Soros's reading of the financial omens has enriched him oftentimes before: betting against him now could be unwise.

—September 25, 2008

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Notes

[*] See Andrei Shleifer, Inefficient Markets: An Introduction to Behavioral Finance (Oxford University Press, 2000), and Advances in Behavioral Finance, Vol. 2, edited by Richard H. Thaler (Russell Sage Foundation/Princeton University Press, 2005).

Tariq Ramadan

02/09/2006 03:20 PM
INTERVIEW WITH MUSLIM LEADER TARIQ RAMADAN ON THE CARICATURE CONFLICT
"We Have to Turn Up the Volume of Reason"

With unrelenting Muslim anger over the Muhammad caricatures, sentiments between Islam and the West once again have all the delicacy of a powder keg. SPIEGEL ONLINE spoke with Tariq Ramadan, Europe's leading Muslim scholar, about the overreaction of the Muslim world, rampant anti-Semitism and the frustrations of Muslim immigrants in Europe.
Egyptian-Swiss philosopher and Islamic theoretician Tariq Ramadan.
AP

Egyptian-Swiss philosopher and Islamic theoretician Tariq Ramadan.
SPIEGEL ONLINE:

The Muslim world's reactions to the publishing of the Muhammad caricatures first in the Danish newspaper Jyllands-Posten and then in other European publications have not done much to improve the image of Islam in the West. Are Muslims overreacting?

Tariq Ramadan: Of course. The reaction has been way too severe. I traveled to Denmark back in October and I told Muslim leaders there not to react emotionally, because it would be the reactions and the emotions of the Muslims that would become the center of attention. The best thing would have been for us to take an emotional distance. But now, all you see is angry faces, crying and rage on the television. This is not the way forward for the Muslims.

SPIEGEL ONLINE: But clearly there are deeper reasons for this enormous outburst of emotions than just a handful of offensive cartoons. It's as though huge amounts of pent up frustration are finally being released. Is there something larger going on here?

Ramadan: Of course it started with a few people being hurt by the cartoons. But then a few people took the cartoons to the Middle East. Some governments there were very happy to present themselves as the great champions of Islam. One reason, of course, was to gain legitimacy in the eyes of their own people. But secondly, it was to direct the attention of the people, living under these dictatorial governments, toward the West and to provide their people with a vent for their own frustrations. And it worked -- it became Muslims against the West. All the first reactions from the Islamic majority countries came from those countries (and places) where there is a difficult relationship with the West: Syria, Lebanon, Saudi Arabia, Gaza, and then Iran. It's more than just the cartoons. It's part of a broader picture that we have to keep in mind.

SPIEGEL ONLINE: Where does this intense resentment against the West come from?

Ramadan: There are a number of countries, like Syria or Iran, in the Islamic world which are under tremendous pressure from the West. The governments present themselves as victims and turn their people against the West. In Gaza, to take another example, there is a perception that the West is speaking about democracy, but when the votes are tallied, it considers the result unacceptable. There is also a perception that Israel is supported to the disadvantage of the Palestinians. So there are many things that add up and the result is a perception that the war on terror isn't only against terror but it is also against Muslims. The cartoon showing the Prophet's turban as a bomb didn't help.

SPIEGEL ONLINE: None of this is terribly new. After all, burning American flags in the Middle East has become something of a tradition. But Muslims living in Europe also talk about an anti-Islam prejudice.

Ramadan: If you're living in Europe as a Muslim, it's in the atmosphere. There is the presence of far-right parties and their discourse -- even though such parties don't have much support. But even mainstream political parties have accepted and propagated a discourse which is perceived by Muslims to be a continuous and permanent attack.

SPIEGEL ONLINE: There are also plenty of people and political parties preaching tolerance and doing their best to help Muslims in Europe. Why focus on the negatives?

Ramadan: I have long been saying that we Muslims have to get rid of this victim mentality. But it's there. And it's hard to ignore the Islamophobia or racism that is present. Many allow themselves to be hurt and their emotional reaction spins out of control. Muslim leaders in Europe have a responsibility to help shape the response of the Muslims to the West and of the West to Islam. We have to somehow take the emotion out of the response.

SPIEGEL ONLINE: How is that possible when the Muslim world and some radical Muslim leaders here in Europe are constantly saying that the West is the source of all evil?

Ramadan: The great majority of Muslims in Europe feel they are Europeans. They may face troubles sometimes and may face negative perceptions, but the great majority of Muslims in Europe are demonstrating that they are citizens of Europe and want to change the image of Islam. We have to pay more attention to these people than to the vocal radicals on the margins who think that Europeans will never accept Muslims.

SPIEGEL ONLINE: But there are many who listen to these radical voices on the fringes.

Ramadan: But there are many who don't. The media should speak about these Muslims who are trying to become active and committed European citizens and who are accepting European culture. They need to be helped. Media pressure is undermining our work and we are regressing. Every six months you have some new event which ratchets up the pressure and focuses the attention on emotions, reactions and on Muslims committing violence. The latest event just happens to be the Muhammad caricatures. But these events really undermine the process of reform, the process of settling down and the process of dialogue. Today, there is no dialogue, there is no debate. It's a power struggle and it's very, very vicious.

Part II: "In a Clash of Civilizations, We Both Lose"

Disgruntled Muslim protesters gathered in central Copenhagen last Saturday.
AP

Disgruntled Muslim protesters gathered in central Copenhagen last Saturday.
SPIEGEL ONLINE: Which of course proves the point the radicals are trying to make -- namely that Islam and the West are incompatible.

Ramadan: Exactly. On the positive side, what we Muslims experience in Europe will have a tremendous impact on Islamic majority countries. We now have experience with living in democracy and living in free societies. But there is a danger. If Muslims and Europeans, as equal citizens living together in a democracy, are not able to trust each other, if we are not able to talk to each other, if we are not able to come to a reasonable agreement about how to live together, we are sending a signal to Islamic majority countries that there is no way for Muslims and Westerners to trust each other. We in Europe have a great, great, great responsibility. It's important that European citizens understand that if mutual knowledge and mutual respect are improved, then we are sending the signal that it is possible. Right now, though, we are sending exactly the opposite message.

SPIEGEL ONLINE: Not to be overly pessimistic, but that sounds like a pretty tall order.

Ramadan: It has to happen at the local level. It's up to each and every citizen to choose if they are ready to know more about their fellow citizens and the Muslims living around them. There is a lot of mistrust between the two groups. People need to break out of their intellectual ghettos, break out of their religious and cultural ghettos and come to some common, universal values. And these values do exist. We can't just wait for the next crisis and then react. This needs to be a pre-emptive strategy based on a true understanding of what pluralism requires.

SPIEGEL ONLINE: Outside of Europe, the Muslim world doesn't seem to have understood that Europe and the West really is committed to freedom of the press, freedom of opinion and other democratic values.

Ramadan: That's true. Many in the Muslim world think that European governments are responsible for the caricatures. They don't realize that it doesn't work like that. These people are living under regimes where the president controls both the government and the media. But that's not the only misconception of the West. There is a perception in the Muslim world that the West is a lost civilization with no moral standards and no ethics. But this is, of course, wrong. It's important that the Muslims living in Europe tell them that even in the West, there wasn't just one single response to the caricatures. Many Europeans and Westerners are arguing that the West has to be wise in the way it exercises its freedom of expression.

SPIEGEL ONLINE: So you're saying that a lot of people in the Muslim world don't understand that there is a debate going on?

Ramadan: The same thing works in reverse. In the West, when you look at the violent reactions in the Muslim world, you have the perception that these are the Muslims. But that's not right either. There are different trends in the Islamic world as there are here. Because the radical voices are loudest and are covered more by the media, they have the upper hand. We have to turn up the volume of reason and ensure that our discourse gets the upper hand.

SPIEGEL ONLINE: What different trends do you see emerging in the Islamic world?

Ramadan: There is a power struggle going on. The Muslim world is afraid of being self-critical because they feel that plays into the hands of the other side -- the West. If you ask too many critical questions, you are perceived as having switched sides and become a Westerner in Muslim dress. There is a perception that whereas yesterday it was political colonization from the West, today it is economic colonization and cultural imperialism. But you can't forget that the great majority of the Arab-Islamic countries are not democracies. Many people in Europe ask about the rights of Christians in Saudi Arabia, for example. What about the rights of Saudis in Saudi Arabia? What about the people. The reality is that it is a dictatorship. That's what makes it difficult to get some movement within the Islamic majority countries. We Muslims in Europe have to speak out, but the Islamic world as a whole also has to stop blaming the West and to ask ourselves, from within, what is wrong with us. The average discourse in the Islamic majority countries is that all our problems are imposed on us. No. They are a consequence. There is no freedom, there is no political will to solve the problems.

SPIEGEL ONLINE: What about the Iranian paper's idea to hold a contest to create Holocaust caricatures? Why is every perceived provocation from the West answered by anti-Semitism?

Ramadan: Muslims have to realize that double standards cannot be allowed. We are confusing the Israeli-Palestinian conflict -- a political conflict -- with all the Jews. We have to condemn something which is harmful and anti-Semitic. The Holocaust is a deep and hurtful part of the European conscience. Exploiting that, and exploiting a people who were hurt and suffered and treated in a horrific way -- which is what the Holocaust caricature campaign does -- is not acceptable. It is to be condemned.

SPIEGEL ONLINE: Is there a connection between the current cartoon conflict and Iran's potential quest for nuclear weapons?

Ramadan: Yes, there is. The cartoon conflict provides the Iranian government -- which postures as the defender of the Muslim world against the West -- with legitimacy. We as free citizens and democrats need to stand between the two extremist sides -- between the Iranians and those calling for war against Iran. We need to stand between the people who are prophets of a very dark tomorrow. If we end up with a clash of civilizations, we are both going to lose. If there is a dialogue of civilizations, then we are both going to win. We have to realize that whether we win or lose, we are going to do it together.

Interview conducted by Charles Hawley




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