America's Foreign Economic Policy: Is The Old-Time Religion Good Enough?

Abstract

IN only fifteen years a revolution has occurred in the relationship of the United States with its principal allies. Despite concern over trends in the strategic and conventional military balances (expressed more persistently in the United States than in Europe or Japan), and renewed alarm evoked by Soviet intervention in Afghanistan, and now the revolution in Iran, the great strategic debates of the 1960s have faded. In the economic sphere, on the other hand, the once unchallenged predominance of the United States has come increasingly into question. To many, the United States seems a faltering giant diminished in stature when compared to Europe or Japan. Critics abroad complain loudly that the United States seems incapable of managing both its internal economic affairs and its external economic relations to the benefit of its partners and associates in the world economy. Reaching a crescendo under the Carter administration, these criticisms must be taken into account in evaluating that administration's record in foreign economic policy. But the harshest critics ignore the constraints imposed upon the American government by the changes that have occurred in the international economy over the past decade. Not only have the European and Japanese economies assumed greater importance, but the devolution of economic influence has extended to new actors as well-in particular the dynamic Asian industrialisers in trade and the members of OPEC in international finance and energy. The United States has found it more and more difficult to shape its economic environment, either alone or in concert with Europe. With these shifts in relative economic weight has come a growing sensitivity on the part of the American economy to events outside the borders of the United States. For more than a century America, as a continental economy with a relatively small external sector, was not accustomed to taking account of its economic surroundings to ensure internal prosperity. Now the political consequences of this growing external sensitivity have increasingly complicated the task of the administration in managing American foreign policy. America's relative decline in international economic importance and the increasing international exposure of its economy have both caused and