The Strategic Significance of Global Inequality

While the United States enjoyed rapid economic growth during the past 20 years, many poor countries, including some of the world's poorest in sub-Saharan Africa, had a generation experiencing an outright decline in living standards. Private consumption spending per capita rose by 1.9 percent per year during 1980-1998 in the United States while declining on average by 1.2 percent per year in sub-Saharan Africa. ¹ Is there a "strategic significance" to global inequalities in income levels and economic growth, and, if so, which policies might the United States pursue to address those strategic concerns? Focusing on the scope and limitations of U.S. foreign assistance as a policy instrument to address global income inequalities is illuminating.

The economic success of developing countries enhances the well-being of the United States, which has and should more actively deploy policy instruments to help support economic success abroad. National interests in successful economic growth abroad are multifaceted. Some of these interests are basically economic: the economic success or failure of developing countries determines the gains from trade and investment that the United States reaps in its economic relations with those countries. The ramifications for the United States, however, of good or bad economic performance among the poor countries go beyond direct economic returns. As a general proposition, economic failure abroad raises the risk of state failure as well. When foreign states malfunction, in the sense that they fail to provide basic public goods for their populations, their societies are likely to experience steeply escalating problems that spill over to the rest of the world, including the United States. Failed states are seedbeds of violence, terrorism, international criminality, mass migration and refugee movements, drug trafficking, and disease.

If poor countries had reliably stable and functional state institutions, global poverty would remain a powerful humanitarian concern but would probably not be a strategic priority of the United States. Alas, poor economic performance abroad has the potential to translate into state failure that, in turn, jeopardizes significant U.S. interests. If the United States wants to spend less time responding to failed states, as the Bush administration has stated, it will have to spend more time helping them achieve economic success to avert state failure. The United States has certain, albeit limited, economic policy instruments at its disposal to help prevent state failure abroad. Foreign assistance can play an important role, in certain contexts, but the United States has not used it well for decades.

Foreign Economic Performance and U.S. Strategic Interests

Americans would dearly love to believe that the United States can be an island of stability and prosperity in a global sea of poverty and unrest. History, however, continues to prove otherwise. One common occurrence has been an economic crisis abroad that leads to a collapse of state authority abroad, which in turn has adverse consequences for the United States. The examples are legion. The rise of the Bolsheviks to power in 1917 took place in the wake of an economic collapse of wartime czarist Russia. The rise of Hitler in 1933 occurred in the midst of the Great Depression that affected Germany especially hard because of its large foreign debt. More recently, Yugoslavia disintegrated into regional war not only because of interethnic conflicts, but also because of an economic collapse and the descent of the former federal state into hyperinflation in the late 1980s. Political adventurers such as Slobodan Milosevic in turn used the economic collapse to grab power. Iraq's declining economic fortunes and rising debt burdens following the Iran-Iraq War of the 1980s prompted, at least in part, Saddam Hussein's invasion of Kuwait in 1990. In the 1990s, most of the world's violent conflicts, which have been related in one form or another to deep economic crises and their attendant state failures, have occurred in Africa. ²

I do not want to commit the elementary fallacy of attributing all political failures to economic crises...