by Obama Barack
That international order was still in place in the spring of 2009 when I touched down in London. But faith in American leadership had been shaken—not by the 9/11 attacks but by the handling of Iraq, by images of corpses floating down the streets of New Orleans after Hurricane Katrina, and, most of all, by the Wall Street meltdown. A series of smaller financial crises in the 1990s had hinted at structural weaknesses in the global system: the way that trillions of dollars in private capital moving at the speed of light, unchecked by significant international regulation or oversight, could take an economic disturbance in one country and quickly produce a tsunami in markets around the world. Because many of those tremors had started on what was considered capitalism’s periphery—places like Thailand, Mexico, and a still-weak Russia—and with the United States and other advanced economies at that point booming, it had been easy to think of these problems as one-offs, attributable to bad decision-making by inexperienced governments. In nearly every instance, the United States had stepped in to save the day, but in exchange for emergency financing and continued access to global capital markets, folks like Bob Rubin and Alan Greenspan (not to mention Rubin’s aides at the time, Larry Summers and Tim Geithner) had pushed ailing countries to accept tough medicine, including currency devaluations, deep cuts in public spending, and a number of other austerity measures that shored up their international credit ratings but visited enormous hardship on their people.
Imagine, then, the consternation of these same countries when they learned that even as America lectured them on prudential regulations and responsible fiscal stewardship, our own high priests of finance had been asleep at the switch, tolerating asset bubbles and speculative frenzies on Wall Street that were as reckless as anything happening in Latin America or Asia. The only differences were the amounts of money involved and the potential damage done. After all, having assumed that U.S. regulators knew what they were doing, investors from Shanghai to Dubai had poured massive sums into subprime securities and other U.S. assets. Exporters as big as China and as small as Lesotho had premised their own growth on a stable and expanding U.S. economy. In other words, we had beckoned the world to follow us into a paradisiacal land of free markets, global supply chains, internet connections, easy credit, and democratic governance. And for the moment, at least, it felt to them like they might have followed us over a cliff.
PART FOUR
THE GOOD FIGHT
CHAPTER 14
IT TURNS OUT THAT THERE’S a standard design to every international summit. Leaders pull up one by one in their limos to the entrance of a large convention center and then walk past a phalanx of photographers—a bit like a Hollywood red carpet without the fancy gowns and beautiful people. A protocol officer meets you at the door and leads you into a hall where the host leader is waiting: a smile and a handshake for the cameras, whispered small talk. Then on to the leader’s lounge for more handshakes and small talk, until all the presidents, prime ministers, chancellors, and kings head into an impressively large conference room with a massive circular table. At your seat, you find a small nameplate, your national flag, a microphone with operating instructions, a commemorative writing pad and pen of varying quality, a headset for the simultaneous translation, a glass and bottles of water or juice, and maybe a plate of snacks or bowl of mints. Your delegation is seated behind you to take notes and pass along messages.
The host calls the meeting to order. He or she makes opening remarks. And then, for the next day and a half—with scheduled breaks for one-on-one meetings with other leaders (known as “bilaterals” or “bilats”), a “family photo” (all the leaders lined up and smiling awkwardly, not unlike a third-grade class picture), and just enough time in the late afternoon to go back to your suite and change clothes before dinner and sometimes an evening session—you sit there, fighting off jet lag and doing your best to look interested, as everyone around the table, including yourself, takes turns reading a set of carefully scripted, anodyne, and invariably much-longer-than-the-time-allotted remarks about whatever topic happens to be on the agenda.
Later, after I had a few summits under my belt, I would adopt the survival tactics of more experienced attendees—making sure I always carried paperwork to do or something to read, or discreetly pulling other leaders aside to do a bit of secondary business while others commanded the mic. But for that first G20 summit in London, I stayed in my seat and listened intently to every speaker. Like the new kid at school, I was aware that others in the room were taking the measure of me, and I figured a bit of rookie humility might go a long way toward rallying people around the economic measures I was there to propose.
It helped that I already knew a number of leaders in the room, starting with our host, British prime minister Gordon Brown, who had traveled to Washington for a meeting with me just a few weeks earlier. A former chancellor of the exchequer in Tony Blair’s Labour government, Brown lacked the sparkly political gifts of his predecessor (it seemed as if every media mention of Brown included the term “dour”), and he’d suffered the misfortune of finally getting his turn at the prime ministership just as Britain’s economy was collapsing and its public was tiring of the Labour Party’s decade-long run. But he was thoughtful, responsible, and understood global finance, and although his time in office would prove short-lived, I was fortunate to have him as a partner during those early months of the crisis.
Along with Brown, the most consequential Europeans—not just at the London summit but throughout my first term—were German chancellor Angela Merkel and French president Nicolas Sarkozy. The rivalry between the continent’s two most powerful countries had caused nearly two centuries of bloody, on-and-off war. Their reconciliation following World War II became the cornerstone of the European Union (E.U.) and its unprecedented run of peace and prosperity. Accordingly, Europe’s ability to move as a bloc—and to serve as America’s wingman on the world stage—depended largely on Merkel’s and Sarkozy’s willingness to work well together.
For the most part they did, despite the fact that temperamentally the two leaders couldn’t have been more different. Merkel, the daughter of a Lutheran pastor, had grown up in Communist East Germany, keeping her head down and earning a PhD in quantum chemistry. Only after the Iron Curtain fell did she enter politics, methodically moving up the ranks of the center-right Christian Democratic Union party with a combination of organizational skill, strategic acumen, and unwavering patience. Merkel’s eyes were big and bright blue and could be touched by turns with frustration, amusement, or hints of sorrow. Otherwise, her stolid appearance reflected her no-nonsense, analytical sensibility. She was famously suspicious of emotional outbursts or overblown rhetoric, and her team would later confess that she’d been initially skeptical of me precisely because of my oratorical skills. I took no offense, figuring that in a German leader, an aversion to possible demagoguery was probably a healthy thing.
Sarkozy, on the other hand, was all emotional outbursts and overblown rhetoric. With his dark, expressive, vaguely Mediterranean features (he was half Hungarian and a quarter Greek Jew) and small stature (he was about five foot five but wore lifts in his shoes to make himself taller), he looked like a figure out of a Toulouse-Lautrec painting. Despite coming from a wealthy family, he readily admitted that his ambitions were fueled in part by a lifelong sense of being an outsider. Like Merkel, Sarkozy had made his name as a leader of the center right, winning the presidency on a platform of laissez-faire economics, looser labor regulations, lower taxes, and a less pervasive welfare state. But unlike Merkel, he lurched all over the map when it came to policy, often driven by headlines or political expedience. By the time we arrived in London for the G20, he was already vocally denouncing the excesses of global capitalism. What Sarkozy lacked in ideological consistency, he made up for in boldness, charm, and manic energy. Indeed, conversations with Sarkozy were by turns amusing and exasperating, his hands in perpetual motion, his chest thrust out like a bantam cock’s
, his personal translator (unlike Merkel, he spoke limited English) always beside him to frantically mirror his every gesture and intonation as the conversation swooped from flattery to bluster to genuine insight, never straying far from his primary, barely disguised interest, which was to be at the center of the action and take credit for whatever it was that might be worth taking credit for.
As much as I appreciated the fact that Sarkozy had embraced my campaign early on (all but endorsing me in an effusive press conference during my preelection visit to Paris), it wasn’t hard to tell which of the two European leaders would prove to be the more reliable partner. I came, though, to see Merkel and Sarkozy as useful complements to each other: Sarkozy respectful of Merkel’s innate caution but often pushing her to act, Merkel willing to overlook Sarkozy’s idiosyncrasies but deft at reining in his more impulsive proposals. They also reinforced each other’s pro-American instincts—instincts that, in 2009, were not always shared by their constituents.
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NONE OF THIS meant that they and the other Europeans were pushovers. Guarding the interests of their countries, both Merkel and Sarkozy strongly favored the declaration against protectionism that we were proposing in London—Germany’s economy was especially reliant on exports—and recognized the utility of an international emergency fund. But as Tim Geithner had predicted, neither had any enthusiasm for fiscal stimulus: Merkel was worried about deficit spending; Sarkozy preferred a universal tax on stock market transactions and wanted to crack down on tax havens. It took most of the summit for me and Tim to convince the two of them to join us in promoting more immediate ways to address the crisis, calling on each G20 country to implement policies that increased aggregate demand. They would do so, they told me, only if I could convince the rest of the G20 leaders—particularly a group of influential non-Western countries that came to be collectively known as the BRICS—to stop blocking proposals that were important to them.
Economically, the five countries that made up the BRICS—Brazil, Russia, India, China, and South Africa—had little in common, and it wasn’t until later that they would actually formalize the group. (South Africa wouldn’t formally join until 2010.) But even at the London G20, the animating spirit behind the association was clear. These were big, proud nations that in one way or another had emerged from long slumbers. They were no longer satisfied with being relegated to the margins of history or seeing their status reduced to that of regional powers. They chafed at the West’s outsized role in managing the global economy. And with the current crisis, they saw a chance to start flipping the script.
In theory, at least, I could sympathize with their point of view. Together, the BRICS represented just over 40 percent of the world’s population but about a quarter of the world’s GDP and only a fraction of its wealth. Decisions made in the corporate boardrooms of New York, London, or Paris often had more impact on their economies than the policy choices of their own governments. Their influence within the World Bank and the IMF remained limited, despite the remarkable economic transformations that had taken place in China, India, and Brazil. If the United States wanted to preserve the global system that had long served us, it made sense for us to give these emerging powers a greater say in how it operated—while also insisting that they take more responsibility for the costs of its maintenance.
And yet as I glanced around the table on the summit’s second day, I couldn’t help but wonder how a larger role for the BRICS in global governance might play out. Brazil’s president, Luiz Inácio Lula da Silva, for example, had visited the Oval Office in March, and I’d found him impressive. A grizzled, engaging former labor leader who’d been jailed for protesting the previous military government and then elected in 2002, he had initiated a series of pragmatic reforms that sent Brazil’s growth rate soaring, expanded its middle class, and provided housing and education to millions of its poorest citizens. He also reportedly had the scruples of a Tammany Hall boss, and rumors swirled about government cronyism, sweetheart deals, and kickbacks that ran into the billions.
President Dmitry Medvedev, meanwhile, appeared to be a poster child for the new Russia: young, trim, and clothed in hip, European-tailored suits. Except that he wasn’t the real power in Russia. That spot was occupied by his patron, Vladimir Putin: a former KGB officer, two-term president and now the country’s prime minister, and the leader of what resembled a criminal syndicate as much as it did a traditional government—a syndicate that had its tentacles wrapped around every aspect of the country’s economy.
South Africa at the time was in a transition, with interim president Kgalema Motlanthe soon to be replaced by Jacob Zuma, the leader of Nelson Mandela’s party, the African National Congress, which controlled the country’s parliament. In subsequent meetings, Zuma struck me as amiable enough. He spoke eloquently of the need for fair trade, human development, infrastructure, and more equitable distributions of wealth and opportunity on the African continent. By all accounts, though, much of the goodwill built up through Mandela’s heroic struggle was being squandered by corruption and incompetence under ANC leadership, leaving large swaths of the country’s black population still mired in poverty and despair.
Manmohan Singh, the prime minister of India, meanwhile, had engineered the modernization of his nation’s economy. A gentle, soft-spoken economist in his seventies, with a white beard and a turban that were the marks of his Sikh faith but to the Western eye lent him the air of a holy man, he had been India’s finance minister in the 1990s, managing to lift millions of people from poverty. For the duration of his tenure as prime minister, I would find Singh to be wise, thoughtful, and scrupulously honest. Despite its genuine economic progress, though, India remained a chaotic and impoverished place: largely divided by religion and caste, captive to the whims of corrupt local officials and power brokers, hamstrung by a parochial bureaucracy that was resistant to change.
And then there was China. Since the late 1970s, when Deng Xiaoping effectively abandoned Mao Zedong’s Marxist-Leninist vision in favor of an export-driven, state-managed form of capitalism, no nation in history had developed faster or moved more people out of abject poverty. Once little more than a hub of low-grade manufacturing and assembly for foreign companies looking to take advantage of its endless supply of low-wage workers, China now boasted topflight engineers and world-class companies working at the cutting edge of advanced technology. Its massive trade surplus made it a major investor on every continent; gleaming cities like Shanghai and Guangzhou had become sophisticated financial centers, home to a burgeoning consumer class. Given its growth rate and sheer size, China’s GDP was guaranteed at some point to surpass America’s. When you added this to the country’s powerful military, increasingly skilled workforce, shrewd and pragmatic government, and cohesive five-thousand-year-old culture, the conclusion felt obvious: If any country was likely to challenge U.S. preeminence on the world stage, it was China.
And yet watching the Chinese delegation operate at the G20, I was convinced that any such challenge was still decades away—and that if and when it came, it would most likely happen as a result of America’s strategic mistakes. By all accounts, Chinese president Hu Jintao—a nondescript man in his mid-sixties with a mane of jet-black hair (as far as I could tell, few Chinese leaders turned gray as they aged)—was not seen as a particularly strong leader, sharing authority as he did with other members of the Chinese Communist Party’s Central Committee. Sure enough, in our meeting at the margins of the summit, Hu appeared content to rely on pages of prepared talking points, with no apparent agenda beyond encouraging continued consultation and what he referred to as “win-win” cooperation. More impressive to me was China’s chief economic policy maker, Premier Wen Jiabao, a small, bespectacled figure who spoke without notes and displayed a sophisticated grasp of the current crisis; his affirmed commitment to a Chinese stimulus package on a scale mirroring that of the Recovery Act was probably t
he single best piece of news I would hear during my time at the G20. But even so, the Chinese were in no hurry to seize the reins of the international world order, viewing it as a headache they didn’t need. Wen had little to say about how to manage the financial crisis going forward. From his country’s standpoint, the onus was on us to figure it out.
This was the thing that would strike me not just during the London summit but at every international forum I attended while president: Even those who complained about America’s role in the world still relied on us to keep the system afloat. To varying degrees, other countries were willing to pitch in—contributing troops to U.N. peacekeeping efforts, say, or providing cash and logistical support for famine relief. Some, like the Scandinavian countries, consistently punched well above their weight. But otherwise, few nations felt obliged to act beyond narrow self-interest; and those that shared America’s basic commitment to the principles upon which a liberal, market-based system depended—individual freedom, the rule of law, strong enforcement of property rights and neutral arbitration of disputes, plus baseline levels of governmental accountability and competence—lacked the economic and political heft, not to mention the army of diplomats and policy experts, to promote those principles on a global scale.
China, Russia, and even genuine democracies like Brazil, India, and South Africa still operated on different principles. For the BRICS, responsible foreign policy meant tending to one’s own affairs. They abided by the established rules only insofar as their own interests were advanced, out of necessity rather than conviction, and they appeared happy to violate them when they thought they could get away with it. If they assisted another country, they preferred to do so on a bilateral basis, expecting some benefit in return. These nations certainly felt no obligation to underwrite the system as a whole. As far as they were concerned, that was a luxury only a fat and happy West could afford.