US: Political-Economic Tension Internally, Economical Pragmatism Externally

The U.S. is one of relatively few countries in whose developments outsiders take special interest. This heightened interest reflects the exceptionally large degree of influence that the U.S. has on the world economy and politics. In my opinion, it will continue in the long run, despite the increased competition from new powerful centers of influence. America’s position in the world and its ability to impact the international community’s agenda are strongly affected by the complex and quite painful processes occurring within the country.

This is especially true of the economy. In spite of the cautiously optimistic forecasts, 2011 was not a “breakthrough” year: The pace of the U.S. economy remained quite weak, the unemployment rate stayed unusually high and the housing market was stagnant. The vast majority of analysts see no reason to anticipate a radical improvement in the coming year. Of course, the expected continued economic growth and the improved key performance indicators of U.S. companies are going to contrast well with the eurozone’s turbulence. But obviously, the rate of economic progress will be insufficient to take America out of the risk zone. Instability in international financial markets will be America’s main threat. The financial crisis in the euro area may trigger a new recession, or at least dramatically slow economic recovery, primarily by affecting the banking sector and by limiting opportunities for U.S. exports.

Returning the economy to a path of sustainable development is complicated by the American political elites’ progressive opposition, which hinders the implementation of effective fiscal policy. In 2012, politics will intensify: With the first primaries in January, the country will enter its full-scale campaign phase, which promises to be extremely tough. The Republican candidate will not be the only one leading a frontal attack on Obama. We can expect that the current president’s electoral strategy will also be built mainly on criticizing his opponent, and trying to prove Republican ideology’s incompatibility with the interests of the middle class.

The main battlefield, no doubt, will be the economy and its main problem: unemployment. It’s critical for Obama to keep the unemployment rate below 9 percent, which would require the U.S. to create at least 150,000 jobs per month. Considering that American businesses have sufficient financial resources to expand production, this increase is not impossible. However, it’s counteracted by the business community’s uncertainty that the worst is already over.

At this stage, Obama’s chances for being re-elected are good, especially due to the vulnerability of his potential rivals. On the other hand, this fall Republicans have a chance to maintain their majority in the House of Representatives and gain control of the Senate. If this scenario plays out, the political situation in Washington will remain tense even after the election.

Although competition for votes is at the center of the inter-party conflict, the currently aggravated political rivalry is essentially a manifestation of the “society’s general welfare” crisis in the U.S. and other “industrial democracies.” In the U.S., the really important issues which will be the focus of the electoral debates and political struggles in 2012-13 are these: the government’s place in modern society, the optimal size of government and its role in regulating the economy and social processes and the proper balance between the individual citizen’s responsibilities versus social benefit programs. The answers to these questions will largely determine the future development of American society, its ability to effectively confront the challenges of globalization, tectonic demographic changes within the country and structural changes in its economy.

The U.S. will face similarly serious challenges in the international arena. It will be forced to deal with those challenges despite substantial budget cuts for military and foreign policy agencies, as well as decreased foreign aid spending. This economizing mode, along with American society’s fatigue from protracted and very expensive campaigns in Iraq and Afghanistan, will significantly influence the adoption and maintenance of defense and international policies. We saw an example of this last year in Libya, where the U.S. “delegated” the military operations leadership role to France and the United Kingdom.

Even without financial problems, next year will be fairly difficult for U.S. diplomacy. Afghanistan, where U.S. military presence will be further reduced, will need constant attention. In this respect, America’s experience in Iraq, where the initial events after the troops left do not give grounds for optimism, will be important. Peaceful developments in Afghanistan are impossible without Pakistan being stable and ready to cooperate with the U.S. and NATO. But recently, relations between Washington and Islamabad have noticeably deteriorated. Attempts to neutralize the influence of Iran in the region and stop it from creating its own nuclear weapons are at an impasse. None of the U.S. administration’s approaches have had a lasting effect. America’s option to use force appears unreliable, and probably would be counterproductive.

Obama’s foreign policy team was not prepared for the magnitude of the Arab Spring events. It gave a powerful impetus to the democratic processes in countries of the broader Middle East, and at the same time destabilized the system of relations created by the U.S. that allowed it to maintain some stability in this volatile region. It seems that the U.S. is still at the stage of determining the best course of action in the new conditions, which are particularly characterized by the increasing influence of Islamist parties. Success (or lack thereof) in achieving this goal will affect the prospects for counterterrorism and unlock the process of stabilizing the Middle East.

In any case, recently Washington’s focus has shifted to the Asia-Pacific region. As the most dynamic region in the world, it attracts the U.S. with opportunities for trade and economic cooperation (the U.S. proposed a trade-free area there). China’s growing political and military ambitions are a rising concern. North Korea’s change in leadership could encourage the U.S. to make new attempts to appease Pyongyang’s nuclear ambitions.

Despite the undeniable importance of these issues, we are particularly interested in the fate of the “reset” of Russia’s relations with the U.S., which is one of Obama’s most hyped foreign policy initiatives. At the end of this year, the negative emotions that have collected for some time in the bilateral relations (particularly due to the missile defense in Europe and the Iranian dossier) have surfaced, causing a sharp exchange of statements. The prospects of overcoming the rapid cooling of Russian-American relations do not look very promising, not only from the standpoint of solving disputes, but also in view of the election campaigns in both countries. Russian leaders are unlikely to abandon proven methods of energizing the electorate with power rhetoric, and Obama is unlikely to want to give his opponents an extra reason to accuse him of being weak for making “concessions” to the authoritarian tandem.

No significant changes should be expected in U.S. policy toward Ukraine. Unfortunately, our country was on the periphery of U.S. foreign policy priorities. Our American partners will continue to pragmatically focus on specific issues of bilateral relations, which are important to them, and may be presented to the American voter as significant achievements of the current administration (such as the set of agreements in the field of nuclear safety). As the number of such significant projects increases, Washington’s cooperation with Ukraine will become more meaningful, and vice versa. Business cooperation, particularly in the energy sector, may still play a significant role in this sense, but qualitative changes are possible only if there is a real improvement in the investment climate. Strategically, the U.S. will continue to support Ukraine’s European integration, while keeping in mind that the main role will be played by its European allies. The following year, both sides of the Atlantic will carefully monitor the preparation and conduct of Ukrainian elections. The electoral process’s quality, transparency and its compliance with international standards will be the moment of truth that determines the nature of our future relations with the community of democratic nations.

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