Making the Grade

Is there really a way to judge if a foreign policy is successful?

Over the past couple weeks, the punditocracy has been preoccupied with post-mortems of 2013 and predictions for 2014; my own contribution was a reflection on events that didn't happen over the past year. Instead of another list, however, I want to offer up a template for judging foreign policy, more generally. Those of us who write about foreign policy and international affairs spend a lot of time passing judgment and offering advice; indeed, the whole enterprise depends on our capacity to provide critical commentary on what various international actors are up to.

But exactly how should we judge a country's foreign policy? How do we decide whether it is smart, foolish, shrewd, lucky, successful, or disastrous? What criteria can help us determine when government officials are performing poorly or skillfully in their dealings with the rest of the world?

Determining whether a country's foreign policy is working or not isn't a straightforward exercise. Foreign policy outcomes are partly the result of each country's own decisions -- especially for great powers like the United States -- but they are also shaped by what other many actors (including non-state actors) decide to do. Even in the best of circumstances, foreign policymakers must wrestle with considerable uncertainty: they cannot know for certain how others will respond, how a particular initiative will proceed, or how their actions will be perceived by other societies.

As a result, we cannot judge foreign policy performance solely looking by whether specific goals were achieved or not. Good fortune sometimes rescues poor judgment or inept implementation; at other moments, a well-intentioned and well-planned initiative goes badly. Even the wisest and most far-sighted leaders sometimes fail, and fools sometimes get lucky.

We also have to take the "degree of difficulty" into account. Leaders facing grave challenges may work very hard, pay a big price and accomplish relatively little, but we might still judge them to have performed well in difficult circumstances. The leader of a relatively weak state may do very well to retain their independence in the face of an serious external challenges; while the leader of a powerful and secure country would have to do more to be judged a great success. Indeed, states that achieve only modest results despite many advantages should be judged harshly, because it should have been easier for them to do better. And then there's the question of timing: what might appear to be a great success at one point in time (see under: "Mission Accomplished") may turn out to be a catastrophic blunder later on. But the reverse is also true: a decision that looks like a costly misstep at one moment may in fact yield significant long-term benefits. All of these factors make it hard to grade a country's foreign policy in a convincing and objective manner.

Instead of focusing solely on outcomes, we could also look at the policymaking process itself. Did national leaders select their goals based on solid evidence and careful reasoning, or did they pursue risky or irresponsible policies based on myths, misplaced analogies, or gut instincts? Were alternative courses of action thoroughly explored, and the merits of different options openly debated? Did the people in charge have a "Plan B" to turn to when their initial efforts went awry, or did they blindly assume that everything would go their way? Were policy choices based on clear-eyed analysis of the best available information, or on questionable data, dubious reasoning, and wishful thinking? Did a well-conceived policy fail because opponents turned out to be extremely clever and/or lucky, or did failure emerge from multiple self-inflicted wounds? Once decisions were made, were they carried out as intended or derailed by bureaucratic incompetence? This approach allows us to look beyond "success" or "failure" and decide whether the outcomes we observe reflect skill or mere dumb luck.

Lastly, because no country's foreign policy is ever 100 percent successful, we can also judge the quality of a nation's foreign policymakers by examining how well they learn and adapt over time. When failures occurred, did politicians, their advisors, and the public at large draw the right lessons and make intelligent adjustments, or did the country tend to repeat the same mistakes over and over? Were successful policymakers rewarded for their accomplishments while the architects of disaster were held accountable, or did the same people keep making the same mistakes and getting the same bleak results?

Unfortunately, there is no precise algorithm or formula for judging foreign policy "success," which is one reason why political rivals can wage endless partisan warfare over these issues. The problem is even more pronounced for a mostly invulnerable great power such as the United States, simply because so much of what it does in international affairs has no direct or immediate impact on the lives of most Americans back home. If the United States mishandles the violence in South Sudan, most Americans won't notice or care. A truly colossal failure like the invasion of Iraq eventually registers, but even there the impact is somewhat muted.

So how are we to judge U.S. foreign policy, or the foreign policy of any other country? Here's a rough guide, subject to revision.

First and foremost, a country's foreign policy should help secure the nation against external threats. In the broadest sense, governments engage with each other in the hope of isolating, deterring, defeating, or in some other way reducing external dangers, and states use a variety of tools -- diplomacy, military and economic instruments, etc. -- to pursue this basic goal.

Accordingly, U.S. foreign policy succeeds when it makes American citizens safer from external harm. For instance, if specific policy initiatives help shift the balance of power in Washington's favor then Americans will be safer and less concerned about foreign dangers. If U.S. leaders act in ways that attract useful support from others, for example, then Americans will face fewer enemies and be more secure here at home. By the same logic, policies that weaken individual adversaries or divide opposing coalitions can be equally effective, because they reduce the amount of power that might be arrayed against us. U.S. security is also enhanced by resolving conflicts that generate anti-Americanism and might conceivably drag us in (see under: Israel-Palestine) or by reaching agreements that might limit an adversary's power, reduce its animosity, and open the door for a broader rapprochement at some later date (see under: Iran).

By contrast, U.S. foreign policy fails when it squanders resources without improving relative power position. It fails when it makes other states less willing or able to help us achieve shared goals. And it certainly fails when it multiplies the number of adversaries Americans face, increases the number of places Washington feels obliged to defend, or encourages existing adversaries to join forces.

Second, democratic governments are also supposed to help their citizens lead more comfortable and happier lives. Accordingly, we may judge U.S. foreign policy by asking whether it has contributed directly or indirectly to national prosperity. If U.S. foreign policy helps foster greater economic growth, then most Americans will have more money to spend and the capacity to live more comfortably. Similarly, if it reduces foreign dangers and allows the country to spend less on defense, then more wealth can be devoted to other tasks or left in the hands of taxpayers. Similarly, if U.S. leaders manage global financial arrangements in ways that encourage stability and productive investment and avoid punishing crises, that too would be a sign of success.

But if key foreign policy decisions end up squandering national wealth or undermining the U.S. economy, then we can rightly judge them more harshly. If U.S. leaders exaggerate foreign dangers, waste money on dubious overseas projects, or mismanage our economic ties with others, then Americans as a whole will live less well and foreign policy failures would be at least partly responsible.

Third, we also evaluate a country's foreign policy by whether it is consistent with accepted moral standards and effective at promoting broader political values. For democracies, this criterion normally means supporting individual freedom, democratic government and basic human rights. To be sure, there are sometimes sharp tradeoffs between these moral commitments and the goals of security and prosperity, but other things being equal, we rate foreign policy performance more highly when it adheres to and promotes the values Americans hold most dear.

So if U.S. foreign policy creates new dangers and leads the government to restrict civil liberties here at home, you might reasonably ask whether it was successful. Similarly, if leaders in Washington claim to be trying to promote democracy and freedom but end up fomenting civil wars and empowering authoritarian extremists, you might reasonably ask if they knew what they were doing.

So that's my simple template for judging foreign policy performance: do key officials have a coherent strategy for making the country more secure and/or more prosperous, and in ways that do not violate our basic moral values (or at least not too often and by too much)? As I watch 2014 unfold, that's the scorecard I'm going to use. Feel free to plagiarize it, or better still, come up with one of your own.



9 Economic Trends to Watch in 2014

From the rise of rich, stupid people to the death of peak oil, here's what's trending in the global economy.

Predicting trends is no easy task, especially in the short term. Most people who can do it accurately in the world of economics and finance are millionaires, or they should be. But if you don't have a crystal ball, at least you can watch some short-term trends with long-term implications. Here are nine of my favorites for the coming year -- and beyond.

1. East Asia's declining share of world output

Washington's strategic pivot to Asia seems to have fizzled -- but has the world's economic pivot as well? In 2013, East Asia's share of global output was expected to drop, relative to those of the United States and the European Union. For years, investors have been borrowing cheaply in the United States and elsewhere to capture high rates of return in East Asia. But a midyear signal from the Federal Reserve that the days of easy money are numbered has sent the East Asia's emerging markets tumbling, while manufacturing looks to be returning to Western shores. With China possibly cooling as well during its process of economic and financial reform, will other regions take the lead in growth?

2. Eurozone inflation worries

The European Central Bank's top officials like to say that they have a symmetric target for inflation. Too high is bad, but so is too low. Not surprisingly, inflation fell well under the target of "below, but close to, 2 percent" during the economic downturn of recent years. The question is why it has been allowed to do so again, during a more stable period in which other central banks have continued their aggressive attempts to bolster growth and employment. The officials say risks to prices are balanced right now, but are they really?

3. Slugging U.S. service sector productivity

For decades, manufacturing employment in the United States has dropped as the productivity of manufacturing workers has increased. Today, about 70 percent of American workers are in private service industries. Those among them who don't compete with foreign labor -- hair stylists, gardeners, doctors, and the like -- have slightly more bargaining power than their counterparts in manufacturing and agriculture. But if their productivity doesn't rise, they'll still have trouble obtaining higher wages.

4. The costs of America's staggering wealth inequality

As I've written before, wealth inequality is much more important than income inequality in determining access to opportunity. Severe wealth inequality raises the chance that an opportunity in the economy will go to a rich, stupid person rather than a poor, smart one. This misallocation of opportunities hurts economic efficiency and growth, making the pie smaller for everyone. Right now, the United States has some of the highest wealth inequality in the world; the net worth of the bottom half of families is equivalent to just 1.5 percent of the wealth of the top 10 percent. The results of the 2013 Survey of Consumer Finances will reveal whether this trend is getting even worse.

5. Oil, oil everywhere

Peak oil? That buzzword of the last several years seems nothing more than a silly catchphrase now. Since prices shot up roughly a decade ago, countries and companies have had a huge incentive to find new sources of the black sticky stuff. Rates of oil production have set new records annually since 2010, thanks to fracking and geological exploration around the world. With proved reserves having risen by half in only a decade, it's hard to imagine such a rapid increase continuing for long. Yet if it doesn't, rising demand from the growing global economy will push prices higher again.

6. Buy Japan

Remember Japan, the world's third-largest economy? It may be the perennial punching bag of the financial press, but it's still responsible for an important share of world output. Growth in Japan would give the global economic recovery a shot in the arm, and share prices tend to be a good indicator of future booms. Japan's recent shift to massively expansionary monetary policy could spark growth, but it could also lead to inflation. So far, expectations for inflation in the Bank of Japan's quarterly survey, which are consistently biased upward, haven't changed much since Shinzo Abe resumed the office of prime minister in December 2012 and launched the new "three arrows" policy regime. By contrast, stock prices have almost doubled, far exceeding the concurrent rise in the Standard and Poor's 500.

7. The price of rice

After an enormous spike in early 2008 that led to shortages, export bans, and even riots, the price of rice has finally dipped below its earlier trend. Indeed, stockpiling by governments and other policies intended to encourage production and exports have added plenty of slack to the market. Still, a return to strong and sustained growth in the economies where rice is a staple food could quickly lead these problems to recur. Next time, a global downturn might not arrive just in time to tame demand.

8. China's shadow-banking housing bubble

Given the lack of transparency in many Chinese companies, real estate is an especially popular investment in the world's second-biggest economy. Thanks to restrictions in the Chinese financial system, a huge "shadow" banking industry has arisen to finance these purchases. The industry may have been worth about $6 trillion this spring and has been growing fast. Beijing has started a combination of financial reforms that will pave the way for a crackdown on shadow banking, but any dislocations that result could cause havoc throughout the Chinese economy. Because new house prices depend in part on expectations about interest rates and the attractiveness of other assets, they could offer an early tipoff about trouble to come.

9. The rise of bitcoin

A successful currency serves three functions: as a unit of account, a store of value, and a medium of exchange. Bitcoin is making progress as a medium of exchange, with a growing number of vendors accepting it for payment through services like Bitpay. Yet the huge fluctuations in its exchange rate and the apparent ease of theft threaten its usefulness as a store of value and, by consequence, as a unit of account. Who cares how many bitcoins you have if you don’t know what they’re worth from one moment to the next? The adoption of bitcoin around the world is likely to continue in 2014, but it won’t last much longer if the currency fails to stabilize.

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