I rarely delve into issues of geopolitics although the seismic shifts witnessed globally in the last week have been sufficient to warrant a change of tack. In scarcely a week, aware of a stated policy of US disengagement in Afghanistan, the Taliban managed to seize an entire country. I glibly tweeted ‘How to lose a country in 7 days’.
This blog is about markets, money and macro. But of what consequence is the US disengagement or less politely put, abandonment of Afghanistan to the rest of the world? In this piece, I will not opine on the legitimacy of the wars and policy moves. I will consider what the tectonic shifts of global power and influence imply? Let’s dig in.
Isolationism is part of the US DNA
Much like we sometimes inherit genes we don’t like from parents, isolationism, while periodically nascent, is part of the US DNA. The US was largely founded on prying itself away from its European overlords. Its geographical disposition has made the US an ‘island’ with its Eastern and Western borders buffered by massive ocean. To the North, its neighbor and friend, Canada stands on watch. To the South, small land exposures lead to a relatively well defensible position.
Furthermore, aside from ideology, in practice, the US has been down the isolationist road a few times. Most notably, following WW1 and the Great Depression, the US resorted to a period of self reflection, self focus and ‘isolationism’. This arguably created the space for fascism in Europe and the culmination of WW2 which drew the US out of its isolationist shell into an era of interventionism. The US took on the mantle of Global Superpower.
The road since WW2
WW2 left the world with 2 major superpowers. The US and USSR. The Cold War and eventual collapse of the Soviet Union, resulted in a unipolar world. The US, with its considerable military (and importantly Naval) hegemony coupled with Economic superiority over the period meant that the US took on the unenviable role of ‘Global Policeman’.
This was to much resentment in non-US aligned regions and to the complacency of US allies content to sit back and rebuild their countries while the US stood guard. The US, subscribing to a ‘balance of powers’ doctrine expanded its influence into regional bases dotting the globe, all with the intent of preserving a ‘balance’ in each region so as to ensure that no other power could or would emerge to challenge US leadership. It was a neat plan… but nothing lasts forever.
The last 2 decades, initiated by the devastating and earth shattering events of 9/11 fractured the perception of the sanctity of ‘island USA’. An attack on home soil spurred the US into hyper interventionist mode.
One could argue that the Gulf War predated this and was a manifestation of an interventionist USA. The Iraq War and ‘Forever War’ as the Afghanistan debacle has come to be known were mere extensions thereof.
That said, when looking at the data, even the ‘surge’ in US interventionism of the 2000’s resulted in troop counts just shy of 400 000 personnel, well below the Cold War and Vietnam peaks of over 1.2 million souls. The Obama era ushered in a US which slowly began deconstructing the military presence built up in the preceding decade. The Trump era doubled down on this and highlighted the narrative a lot more and while different in approach, was potentially an extension of a policy that was already prevalent. Biden has inherited this legacy and potentially accelerated its implementation as more pressing domestic concerns beckon.
Uneasy lies the head that wears the crown
With almost 200 000 troops stationed globally, roughly 7% of US active personnel (we won’t get into the technicalities of reservists, etc.), US global presence is still widespread but not ubiquitous. The resentment of other rising powers like China and Russia present challenges to a US that arguably needs to scale back but maintain favorable standings in each of the identified spheres of influence.
Yes, technological advancement does mean that the time series of troop presence masks the fact that US capabilities, even with lower troop numbers, remains impressive. Think of satellite technology replacing reconnaissance flights. Think of drones and ballistic missiles replacing troops on the ground. The US remains the word’s most powerful nation by quite some margin albeit a position that is looking increasingly threatened as ‘pretenders to the throne’ build out their own capabilities and reach. In this context, the current phase of US isolationism comes at an inopportune time with many corollaries to the 1930’s.
Spheres of influence – wither the allies
Current data from the DMDC indicate that the ‘sphere’s of influence’ stratagem remains in play. When sorting active troop deployments for any numbers above 1000, we can see where the US remains highly active. Europe, Asia and the Middle East all seem to provide the nexus of the US focus.
The relative interplay between the regions is dictated by fluid geopolitical developments and longer term priorities. It must also be noted that highly volatile situations like Afghanistan and Syria are excluded from this data. The result is that troop numbers may be higher and the delta in specific countries is excluded for strategic and intelligence reasons.
So, the question begs, should US allies be concerned that the US withdrawal from Afghanistan may signify two things:
A weaker US exhibiting intelligence failures and policy missteps
A more isolationist US bringing into question the value of the ‘US put’ on military engagement should an ally be threatened.
What’s my read?
I am not a geopolitical analyst although I am an enthusiast and read widely on the subject. Geopolitics has a massive bearing on macro analysis and themes. I have similarly written about my concern of a more ‘recessionary’ US in the context of a growing China and referred to this in several pieces on China as well as its growing influence both globally and in Africa.
The recent developments in Afghanistan are an extension of re-aligning US priorities and in my view does not explicitly threaten the standing of allies in other regions and spheres of influence. The overwhelming presence in Asia illustrates the heightened alert in Washington toward a growing China.
Yes, I do believe that the execution of the withdrawal from Afghanistan was massively botched and has resulted in a potential humanitarian crisis of epic proportions. That said, I also acknowledge the narrative that the US needs to have an exit strategy and that self-determination and building capacity in regional powers is vital. The US cannot be the backstop for poor institutional development and implementation of domestic (sovereign) matters in recipient countries.
It can however shoulder the responsibility for a flawed ‘training and upskilling’ process. This is the Saigon of this generation. The loss of life and a $2trn bill is serious ‘egg on the face’. Not just of the Biden administration but of Washington over the last 2 decades. This isn’t Biden’s to own solely, but his less visible approach (what I call Biden Hidin’) has done little to inspire confidence domestically and abroad.
Back to markets, what does an isolationist US mean? Well, the world is increasingly more isolationist. De-globalization may well result in much more ‘on-shoring’ of production and is potentially inflationary in the long term as well.
Key technological bottlenecks witnessed recently are a manifestation of these trends albeit at an early stage. To the extent that the US succeeds in the process of bringing more US capability on shore, resulting in more investment, it could prove growth supportive.
The massive cost of US global military operations can be redirected to new investment and R&D domestically. Yes, the military industrial complex has been a large catalyst to technological advancement for the world as a whole. Not many know, but your GPS is largely dependent on the largesse of the US Department of Defense’s massive satellite coverage (Thank you Uncle Sam).
As such, any withdrawal from this ‘sharp end of the sword’ tactic will need to be actively countered by a commensurate investment in R&D by the private sector. There will also be an impact on trade relations and the flow of goods. I believe that the US’s engagement globally is inextricably linked to global stability. I do not expect it to disappear overnight rather than morph and shift based on changing US imperatives.
That said, many in Afghanistan may have held the same belief. A belief that civil liberties, freedom and democracy were there to stay. Their lives have been shattered highlighting the fragility of a US centric ‘safety-net’.
The implication is two-fold and present opportunities and risks for both developed and emerging markets. Building of security capacity in individual sovereigns well likely require significant investment. Secondly, nothing happens in a vacuum. An isolationist US merely creates the space for other players to extend their own assurances and influence. These often hold wide reaching long term consequences.
These blog posts are commentary. There is ALOT more beneath the surface.
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