The Back Room President

The White House has been managing its relationship with Musharraf according to the logic of a specific class of economic game, which economists call the "Principal-Agent Problem." You give your money to someone; how do you know they will manage it with your interests in mind? The answer is to make sure the incentives of the principle and the agents are aligned.

On Pakistan

For seven years, our lame-duck President has rejected the idea that mere civilians—historians, armchair experts, American voters—have any right to criticize his foreign policy maneuvers. Not only is he the “decider,” but his decisions are based on criteria conveniently beyond our scrutiny, and thus unavailable for second-guessing. We may study the news reports and policy papers he doesn’t read, we may scrutinize the leaked and perhaps faulty CIA intelligence he ignores—but we can’t do the one thing that, according to President Bush, really matters: we can’t look foreign leaders in the eye.

It’s been argued that some of the most glaring failures of the Bush administration are rooted in this idiosyncratic, almost mystical style of policy-making. “One big reason the U.S. finds itself at an impasse [in Pakistan],” opined the Wall Street Journal recently, “is the foreign policy style of the president. . . . Mr. Bush built his Pakistan policy around a relationship with Musharaff, in much the same way his relationships with Russian president Vladimir Putin and Afghan leader Hamid Karzai shaped his policy toward their countries.”

One President’s emphasis on eye contact does not make a policy, however, much less a doctrine. Accordingly, the administration has tried to paper over this hole with a succession of foreign policy metaphors, culminating in the “return to realism” so giddily announced in the media last year. Strategic talk has since replaced the imperialist language of the neo-cons as the dominant metaphor for American power. We were, no doubt, supposed to take heart that such “realism” would prevent another ill-conceived and poorly executed adventure like the American attack of Iraq.

Yet as the situation in Pakistan makes clear, our born-again realism hasn’t produced much change on the ground. Our backing of “friendly” authoritarian regimes has remained consistent and generous throughout, governed by the misapplication of rationalist models and fueled by antiquated cold-war assumptions.

Speaking from the op-ed page of the Baltimore Sun last November 12, Joe Biden, one of the most informed-sounding politicians on the subject, characterized bilateral relations between the US and Pakistan as “largely transactional—and this transaction isn’t working for either party.”

The transaction is almost entirely financial. The Bush administration has handed the Musharraf regime $11 billion for its assistance in the war on terror, and it is no small secret that they’ve been displeased with the results. As Syed Saleem Shahzad has reported in the Asia Times, the Bush administration handed over an “operational plan” to Musharraf and Co. in July, which established “benchmarks” for progress in stopping the cross-border infiltration of the Taliban and al Qaeda into Afghanistan from Pakistan’s tribal areas—benchmarks that were pegged to the continued delivery of American military and economic aid to Pakistan.

In other words, the White House has been attempting to manage its relationship with Musharraf according to the logic of a specific class of economic game, which economists call the “Principal-Agent Problem.” You give your money to someone; how do you know they will manage it with your interests in mind? The answer, according to economic theory, is to make sure the incentives of the principle and the agents are aligned. Though elegant in concept, this game-theoretical approach proves thorny, because aligning the interests of independent actors is not all that straightforward. Among other things, there is the problem of information: How does one measure an agent’s performance? Quantitatively? Qualitatively? Over what length of time? The choice of the wrong benchmark or time frame can lead to all sorts of perverse outcomes.

Take Merrill Lynch. The financial giant recently let former CEO Stan O’Neal walk away with $250 million in compensation based upon short-term measurements of its stock price, which rallied in part due to the $25 billion in pretax profits O’Neal helped generate during his tenure as CEO. The problem, and the reason O’Neal was shown the door, is that the $25 billion was illusory. Though not alone in suffering credit-related losses, the write-offs Merrill Lynch will be forced to take this year—a direct result of strategies O’Neal aggressively pursued—may amount to $16 billion or more. If Merrill had made only $9 billion in pretax profits over the same period, the stock’s performance would have been less spectacular, and O’Neal’s compensation less spectacular as well. Put another way, if Merrill had measured O’Neal’s performance over the proper time frame, he would have earned much less.

Is it worthwhile, then, to think about the US relationship with an autocrat like Musharraf in terms of the Principal-Agent problem? Probably not, even though the Bush administration has attempted it. On 9/12, Richard Armitage told Lieutenant General Mahmood Ahmed, Pakistan’s intelligence chief, “You are either 100% with us, or 100% against us.” In return for being “with us,” the US showered the Musharraf regime with money. But measuring the return on the US investment in Musharraf depends on your time frame. Over the short run, the US did “oust” the Taliban and install Karzai. But Musharraf has been a lackluster terrorist-fighter. Most of the money has been spent equipping the Pakistani army (exacerbating the arms race with India), money spent to bolster the general’s support among the only constituency that really matters to him—the Pakistani military. Only lately, once it became clear that the general was not acting in good faith, did the Bush administration start trying to manage the president of Pakistan like an employee.

The “war on terror,” then, isn’t a policy at all, but a corporate strategy. This explains why the Bush administration, though avowedly faith-based, is so decidedly agnostic when it comes to foreign policy ideology—despite the fervid attempts to link current policy to Leo Strauss’s work on Plato. Wilsonian idealists, hard-nosed realists—what does it matter? Mission statements are just so much PR to the backroom president. And military aid is employee compensation. One imagines, however, that the highly compensated Musharraf has fallen a few rungs on the president’s organizational chart. Only after it appeared the general was losing his grip on power did the US express any interest in Pakistani democracy. So now it’s out with Mushharraf, in with General Kiani. This is another feature of the backroom presidency: democracy is a management tool for wayward employees.

Our relationship with Musharraf, though certainly more expensive, is not materially different from longstanding US-Pakistan relations, formed at the height of the Cold War, when the country served as the staging area for our covert support of the mujahideen in Afghanistan. This continuity of policy is not limited to Pakistan. In practice, the war on terror differs surprisingly little from the cold war paradigm. One need only take Jeanne Kirkpatrick’s infamous article for Commentary, “Dictatorships and Double Standards,” which legendarily prompted Ronald Reagan to hire her as UN Ambassador. Substitute “Islamo-fascists” for “Marxist revolutionaries” in her formula, and her description of policy seems to have endured pretty much unchanged.

It bears pointing out, however, that the Kirkpatrick approach hinged upon a lot of questionable cold war assumptions, assumptions which seem ill-suited to confrontation with a violent Islamist threat. In essence, Ms. Kirkpatrick advocated the unstinting support of right-wing dictatorships, arguing that a country on the verge of overthrow by violent revolutionaries is not an auspicious environment for near-term democratization. Of course, the Achilles heel of the Kirkpatrick approach was that it provided a ripcord for any autocrat who wished to forestall democratic liberalization; he needed only conjure the specter of a “violent Marxist opposition” to secure unconditional American support. Savvy autocrats across the Middle East and South Asia have stoked fears of the sudden breakout of Iranian-style revolution to similar effect. The presence of nuclear weapons, as Musharraf and company well know, only raise the stakes.

This is why America’s unfailing support for dictators like Musharraf is so misplaced. The Bush administration overlooks the failings of such “friends” because it is still subscribing to the outmoded logic of the anti-communist proxy war. Yet Iraq, Pakistan—these are not proxy wars. They have become the war itself. And how the US acquits itself in these conflicts will bear directly on its ultimate success in stemming the growth of radical anti-American Islamism. A victory scored through unsavory and potentially politically embarrassing means does not, therefore, translate into a “victory against al Qaeda,” however often this meaningless claim is made by the administration.

Such foreign policy gamesmanship begs the question of whether America can ever reliably envision the outcomes of its realpolitik interventions, which backfire as often as they succeed; when successful (as in the case of the Mujahadeen in Afghanistan), they are frequently short-lived and don’t look much like success over a longer time span. Despite its financial largesse, America holds little sway over dictators.

The evidence suggests that the same is not true when democracies deal with other democracies. Though it’s not clear why, democracies are much more likely to avoid conflict with one another. There is no shortage of essentialist and normative theories that purport to explain this “democratic peace”; one of the most compelling comes from the game-theoretical approach of economists Gilat Levy and Ronny Razin.

Levy and Razin’s model suggests that one critical difference between democracies and autocracies is the unequal flow of information between them, which increases the probability they will fight one another. Democratic leaders face consequences for the policies they pursue, and are less likely to engage in cheap talk, unlike autocrats who are “unable to credibly share information with other countries . . . [and] have reason to fool the rival side.” Levy and Razin demonstrate that relationships between democracies are more stable, as are relationships between autocracies. They even take into account the (very familiar-sounding) possibility of a democracy with a war-mongering leadership whose interests diverge from those of the electorate. This kind of war-mongering, according to Levy and Razin, works only when a democratic regime faces an autocratic one.

Unfortunately, the world is full of autocratic regimes, and thus full of opportunities for such manipulations. There are plenty of temptations to play foreign policy “games”; the adventurist tendency in American foreign policy seems resilient.

The mainstream media is complicit in the mythmaking, rarely acknowledging the blot the war on terror has left on America’s image abroad. One marvels, for example, at how long the New York Times persisted in calling the twice-deposed former prime minister of Pakistan “opposition leader” Bhutto, even as events had rendered her US-brokered power-sharing deal with Musharraf moot. The dubious ethics of that democratic sham are rarely mentioned. The deal’s poor timing and general ineptitude—and now tragic outcome—should come as no surprise, given this administration’s shoot-from-the-hip approach to foreign policy; no surprise that they attempted to parachute a pseudo-democratic solution into Pakistan precisely at the moment when an authentic, home-grown democratic movement was breaking out on the ground, and no surprise that it should have failed so miserably.

Perhaps we need a “hard-nosed” peace theory, based upon national interest, to wean us off this overreaching sense of our own power. Critics may contend that a stage-managed democracy is better than an Islamist theocracy. Yet such arguments misunderstand the power of the democratic peace. Relations between democracies can be chilly; still, they refrain from destroying one another. The power of such an argument, when put in terms a realist can understand, is that it negates the false choice between an “idealist” foreign policy that promotes democracy (through force, if necessary) and a “realist program” that seeks to maximize national power through defined goals. Fostering democracy through ethical means, by the non-aggressive promotion of liberal democratic institutions, is the only way the US will achieve its self-interested goals without trashing what is left of its reputation, and preserve whatever positive influence it has left.

It is important to not mistake the presence of elections for the civil liberties that make a free and open society possible. Fareed Zakaria warned nearly ten years ago of the rising tide of illiberal democracy around the world, and he sensibly pointed out that “the absence of free and fair elections should be viewed as one flaw, not the definition of tyranny.” Support for long-term liberalization does not mean a call for snap elections. We should keep this in mind as we approach the Pakistani elections now scheduled for February 18. Under Musharraf, the Pakistani military has squelched a decade of liberal reform. It has extirpated the newfound independence of the Pakistani judiciary and smothered the free press. Unless these actions are reversed, which seems unlikely, the presence of elections will hardly be occasion to trumpet a victory for democracy. One doubts the Bush administration will hesitate to boast otherwise.

The greatest hindrance to a change in policy is our vast military aid program, which cannot be ended overnight. What’s more, autocracies that receive our military aid cannot be given the boot; they must be made to understand that such aid is contingent on the gradual fostering of liberal institutions that engender a free and open society. There is no reason, for example, why the Pentagon couldn’t link economic, legal, and political transparency to its Foreign Military Finance program and arms sales relationships. Well, except for one major reason: it might result in fewer arms sales, thus undermining one of the side benefits of programs like FMF. As the Defense security cooperation agency website puts it: “Because FMF monies are used to purchase U.S. military equipment and training, FMF contributes to a strong U.S. defense industrial base, which benefits both America’s armed forces and American workers.”

Indeed, US economic investment in the military is the single greatest obstacle to dismantling America’s interventionist foreign policy. The vast public works program known as “national security” is 67 years old. Over that time, it has employed many, many Americans in the effort to thwart the expansionist aims of aggressive, autocratic superpowers. It succeeded. Yet preserving our commanding military lead over all present and future rivals has created some absurd and unsustainable numbers. As of 2007, the defense edifice required $700 billion per year in support, more than all other militaries in the world combined. Our current nuclear weapons budget alone exceeds the cold war average yearly expenditure by 50% in real terms. The opportunity cost of this investment is staggering. While the Chinese are spending their money on infrastructure and energy investment around the world, and the Europeans are spending theirs on social policy, we’re blowing ours on stacks of cruise missiles and squadrons of planes, which promise very little return on investment. But what of the internet: didn’t the military invent that? Well yes, initially, but the market capitalization of Google is a piddly $177 billion, which makes our investment in the military look about as fruitful as our investment in Pervez Mushharraf.

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